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Note 21 - Regulatory Capital

12 Months Ended

Dec. 31, 2022

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note 21 – 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 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 2022 and 2021, 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, 2022
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$	222,006		13.8	%	$	128,545		8.0	%		N/A		N/A
Common equity Tier 1 capital (to risk weighted assets)		177,916		11.1			72,307		4.5			N/A		N/A
Tier 1 capital (to risk weighted assets)		182,416		11.4			96,409		6.0			N/A		N/A
Tier 1 capital (to average assets)		182,416		7.9			92,558		4.0			N/A		N/A

ChoiceOne Bank
Total capital (to risk weighted assets)	$	208,696		13.0	%	$	128,294		8.0	%	$	160,367		10.0	%
Common equity Tier 1 capital (to risk weighted assets)		201,077		12.5			72,165		4.5			104,239		6.5
Tier 1 capital (to risk weighted assets)		201,077		12.5			96,220		6.0			128,294		8.0
Tier 1 capital (to average assets)		201,077		8.7			92,449		4.0			115,562		5.0

December 31, 2021
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$	204,353		14.4	%	$	113,604		8.0	%		N/A		N/A
Common equity Tier 1 capital (to risk weighted assets)		160,338		11.3			63,902		4.5			N/A		N/A
Tier 1 capital (to risk weighted assets)		164,838		11.6			85,203		6.0			N/A		N/A
Tier 1 capital (to average assets)		164,838		7.4			89,415		4.0			N/A		N/A

ChoiceOne Bank
Total capital (to risk weighted assets)	$	182,275		12.9	%	$	113,444		8.0	%	$	141,806		10.0	%
Common equity Tier 1 capital (to risk weighted assets)		174,587		12.3			63,813		4.5			92,174		6.5
Tier 1 capital (to risk weighted assets)		174,587		12.3			85,083		6.0			113,444		8.0
Tier 1 capital (to average assets)		174,587		7.8			89,289		4.0			111,611		5.0

Banking laws and 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, 2022, approximately $53.3 million was available for the Bank to pay dividends to ChoiceOne assuming regulatory approval of any amount in excess of the applicable capital conservation buffer. 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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