Regulatory Capital

12 Months Ended

Dec. 31, 2024

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 2024 and 2023, 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, 2024
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$	287,927		14.5	%	$	158,391		8.0	%	N/A		N/A
Common equity Tier 1 capital (to risk weighted assets)		237,152		12.0			89,095		4.5		N/A		N/A
Tier 1 capital (to risk weighted assets)		241,652		12.2			118,793		6.0		N/A		N/A
Tier 1 capital (to average assets)		241,652		9.1			106,485		4.0		N/A		N/A

ChoiceOne Bank
Total capital (to risk weighted assets)	$	250,494		12.7	%	$	158,197		8.0	%	$	197,746		10.0	%
Common equity Tier 1 capital (to risk weighted assets)		236,479		12.0			88,986		4.5			128,535		6.5
Tier 1 capital (to risk weighted assets)		236,479		12.0			118,647		6.0			158,197		8.0
Tier 1 capital (to average assets)		236,479		8.9			106,422		4.0			133,028		5.0

December 31, 2023
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$	233,840		13.0	%	$	144,441		8.0	%	N/A		N/A
Common equity Tier 1 capital (to risk weighted assets)		185,412		10.3			81,248		4.5		N/A		N/A
Tier 1 capital (to risk weighted assets)		189,912		10.5			108,331		6.0		N/A		N/A
Tier 1 capital (to average assets)		189,912		7.5			101,337		4.0		N/A		N/A

ChoiceOne Bank
Total capital (to risk weighted assets)	$	224,095		12.4	%	$	144,274		8.0	%	$	180,342		10.0	%
Common equity Tier 1 capital (to risk weighted assets)		212,283		11.8			81,154		4.5			117,223		6.5
Tier 1 capital (to risk weighted assets)		212,283		11.8			108,205		6.0			144,274		8.0
Tier 1 capital (to average assets)		212,283		8.4			101,244		4.0			126,555		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, 2024, approximately $48.7 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.

Note 22 – Segment Reporting

Segment Reporting

ChoiceOne Financial Services Inc. (the "Company") operates in one reportable segment, which is community banking. The Company provides a full range of financial services to individual and business customers through its network of branches and ATMs. The Company's products and services include deposit accounts, loans, mortgage banking, and other financial services.

At ChoiceOne Bank, the Chief Operating Decision Maker (CODM) is the Chairman and Chief Executive Officer. The CODM evaluates key metrics, such as consolidated net income and its major components, to develop strategies and allocate resources effectively. This analysis involves receiving comprehensive financial information on a consolidated basis, which includes actual and budgeted data, credit quality metrics, net income, earnings per share, loan originations, deposit growth, total non-interest income, and non-interest expense.

Entity-Wide Disclosures

Products and Services: The Company's revenues are derived from a variety of financial products and services, including interest income from loans and investments, fees from deposit accounts, and income from mortgage banking activities.

Geographic Areas: The Company operates primarily in the state of Michigan, with a significant portion of its revenues generated from customers located in this region. The Company does not have any significant operations outside of the United States.

Major Customers: The Company does not have any single customer that accounts for 10% or more of its total revenues.

Reconciliations: The following table reconciles the Company's total revenues, profit or loss, and assets to the consolidated financial statements:


	Years Ended December 31,
(Dollars in thousands)	2024		2023		2022
Total Revenues	$	139,099	$	113,886	$	89,132
Net Income	$	26,727	$	21,261	$	23,640
Total Assets	$	2,723,243	$	2,576,706	$	2,385,915

Note 23 - Subsequent Events:

Completion of Merger

On March 1, 2025, ChoiceOne Financial Services, Inc. ("ChoiceOne") completed its merger with Fentura Financial, Inc. ("Fentura"), with ChoiceOne continuing as the surviving corporation. The combined organization will be headquartered in Sparta, Michigan, and will operate under the ChoiceOne name and brand.

The consolidation of The State Bank, a wholly-owned subsidiary of Fentura, with and into ChoiceOne Bank, a wholly-owned subsidiary of ChoiceOne, is expected to be completed on March 14, 2025.

Under the terms of the merger agreement, each share of Fentura common stock outstanding immediately prior to the completion of the merger was converted into the right to receive 1.35 shares of ChoiceOne common stock. At the time of completion of the merger, Fentura had approximately 4,497,069 shares of common stock outstanding. Based on ChoiceOne's closing stock price of $31.79 as of February 28, 2025, the transaction is valued at approximately $193.0 million. As the initial accounting for the business combination is incomplete at the time of issuance of this 10-K, we will not be disclosing an opening balance sheet in accordance with ASC 805-10-50-4.

Sale of Interest Rate Swaps

On February 6, 2025, ChoiceOne sold $50 million of pay fixed receive floating interest rate swaps. The swaps have a fixed rate of 2.75% and a floating rate that will be determined periodically over the life of the swaps. This transaction resulted in a gain of approximately $3.6 million, which will be recognized over the 7 years remaining on the life of the swap. The sale of these swaps is part of ChoiceOne's ongoing strategy to manage interest rate risk and optimize its balance sheet.

- 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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