10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

☒	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended December 31, 2015
☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from__________________ to __________________

Commission File Number:  000-19202

ChoiceOne Financial Services, Inc.

(Exact Name of Registrant as Specified in its Charter)

Michigan (State or Other Jurisdiction of Incorporation or Organization)	38-2659066 (I.R.S. Employer Identification No.)
109 East Division Street, Sparta, Michigan (Address of Principal Executive Offices)	49345 (Zip Code)

(616) 887-7366
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:

Common Stock
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☐   No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ☐   No ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

Yes ☒  No ☐ 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒   

As of June 30, 2015, the aggregate market value of common stock held by non-affiliates of the Registrant was $68.0 million. This amount is based on an average bid price of $23.03 per share for the Registrant’s stock as of such date.

As of February 29, 2016, the Registrant had 3,296,443 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement of ChoiceOne Financial Services, Inc. for the Annual Meeting of Shareholders to be held on May 18, 2016 are incorporated by reference into Part III of this Form 10-K.

1

ChoiceOne Financial Services, Inc.

FORM 10-K ANNUAL REPORT

Contents

		Page
PART 1
Item 1:	Business	3
Item 1A:	Risk Factors	12
Item 1B:	Unresolved Staff Comments	15
Item 2:	Properties	16
Item 3:	Legal Proceedings	17
Item 4:	Mine Safety Disclosures	17
PART II
Item 5:	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
Item 6:	Selected Financial Data	19
Item 7:	Management’s Discussion and Analysis of Results of Operations and Financial Condition	20
Item 7A:	Quantitative and Qualitative Disclosures About Market Risk	30
Item 8:	Financial Statements and Supplementary Data	33
Item 9:	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	71
Item 9A:	Controls and Procedures	71
Item 9B:	Other Information	71
PART III
Item 10:	Directors, Executive Officers and Corporate Governance	71
Item 11:	Executive Compensation	72
Item 12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	72
Item 13:	Certain Relationships and Related Transactions, and Director Independence	72
Item 14:	Principal Accountant Fees and Services	72
PART IV
Item 15:	Exhibits and Financial Statement Schedules	73
SIGNATURES		75

2

FORWARD LOOKING STATEMENTS

This report and the documents incorporated into this report contain forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and ChoiceOne Financial Services, Inc. Words such as “anticipates,” “believes,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “may,” “could,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Management’s determination of the provision and allowance for loan losses, the carrying value of goodwill, loan servicing rights and other real estate owned, and the fair value of investment securities (including whether any impairment on any investment security is temporary or other than temporary and the amount of any impairment) and management’s assumptions concerning pension and other postretirement benefit plans involve judgments that are inherently forward-looking. All of the information concerning interest rate sensitivity is forward-looking. All statements with references to future time periods are forward-looking. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“risk factors”) that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed, implied or forecasted in such forward-looking statements. Furthermore, ChoiceOne Financial Services, Inc. undertakes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.

Risk factors include, but are not limited to, the risk factors disclosed in Item 1A of this report. These are representative of the risk factors that could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.

PART I

Item 1. Business

General

ChoiceOne Financial Services, Inc. (“ChoiceOne” or the “Company”) is a one-bank holding company registered under the Bank Holding Company Act of 1956, as amended. The Company was incorporated on February 24, 1986, as a Michigan corporation. The Company was formed to create a bank holding company for the purpose of acquiring all of the capital stock of ChoiceOne Bank (formerly Sparta State Bank), which became a wholly owned subsidiary of the Company on April 6, 1987. The Company’s only subsidiary and significant asset as of December 31, 2015, was ChoiceOne Bank (the “Bank”). Effective November 1, 2006, the Company merged with Valley Ridge Financial Corp. (“VRFC”), a one-bank holding company for Valley Ridge Bank (“VRB”). In the merger, the Company issued shares of its common stock in exchange for all outstanding shares of VRFC. In December 2006, VRB was consolidated into the Bank. The Bank owns all of the outstanding common stock of ChoiceOne Insurance Agencies, Inc., an independent insurance agency headquartered in Sparta, Michigan (the “Insurance Agency”) and a 25% interest in West Shore Computer Services, Inc., a data processing firm located in Scottville, Michigan.

The Company’s business is primarily concentrated in a single industry segment - banking. The Bank is a full-service banking institution that offers a variety of deposit, payment, credit and other financial services to all types of customers. These services include time, savings, and demand deposits, safe deposit services, and automated transaction machine services. Loans, both commercial and consumer, are extended primarily on a secured basis to corporations, partnerships and individuals. Commercial lending covers such categories as business, industry, agricultural, construction, inventory and real estate. The Bank’s consumer loan department makes direct and indirect loans to consumers and purchasers of residential and real property. No material part of the business of the Company or the Bank is dependent upon a single customer or very few customers, the loss of which would have a materially adverse effect on the Company.

The Bank’s primary market area lies within Kent, Muskegon, Newaygo, and Ottawa counties in Michigan in the communities where the Bank’s offices are located. Currently the Bank serves these markets through twelve full-service offices. The Company and the Bank have no foreign assets or income except for foreign debt securities.

At December 31, 2015, the Company had consolidated total assets of $567.7 million, net loans of $345.1 million, total deposits of $474.7 million and total shareholders’ equity of $69.8 million. For the year ended December 31, 2015, the Company recognized consolidated net income of $5.7 million. The principal source of revenue for the Company and the Bank is interest and fees on loans. On a consolidated basis, interest and fees on loans accounted for 59%, 61%, and 63% of total revenues in 2015, 2014, and 2013, respectively. Interest on securities accounted for 12%, 13%, and 13% of total revenues in 2015, 2014, and 2013, respectively. For more information about the Company’s financial condition and results of operations, see the consolidated financial statements and related notes included in Part II, Item 8 of this report.

3

Competition 

The Bank’s competition primarily comes from other financial institutions located within Kent, Muskegon, Newaygo, and Ottawa counties in western Michigan. There are a number of larger commercial banks within the Bank’s primary market area. The Bank also competes with a large number of other financial institutions, such as savings and loan associations, insurance companies, consumer finance companies, credit unions and commercial finance and leasing companies for deposits, loans and service business. Money market mutual funds, brokerage houses and nonfinancial institutions provide many of the financial services offered by the Bank. Many of these competitors have substantially greater resources than the Bank. The principal methods of competition for financial services are price (the rates of interest charged for loans, the rates of interest paid for deposits and the fees charged for services) and the convenience and quality of services rendered to customers.

Supervision and Regulation 

Banks and bank holding companies are extensively regulated. The Company is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The Company’s activities are generally limited to owning or controlling banks and engaging in such other activities as the Federal Reserve Board may determine to be closely related to banking. Prior approval of the Federal Reserve Board, and in some cases various other government agencies, is required for the Company to acquire control of any additional bank holding companies, banks or other operating subsidiaries. Under Federal Reserve Board policy, the Company is expected to act as a source of financial strength to the Bank and to commit resources to support it.

The Bank is chartered under state law and is subject to regulation by the Michigan Office of Financial and Insurance Regulation. State banking laws place restrictions on various aspects of banking, including permitted activities, loan interest rates, branching, payment of dividends and capital and surplus requirements. The Bank is a member of the Federal Reserve System and is also subject to regulation by the Federal Reserve Board. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”) to the maximum extent provided by law. The Bank is a member of the Federal Home Loan Bank system, which provides certain advantages to the Bank, including favorable borrowing rates for certain funds.

The Company is a legal entity separate and distinct from the Bank. The Company’s primary source of funds available to pay dividends to shareholders is dividends paid to it by the Bank. There are legal limitations on the extent to which the Bank can lend or otherwise supply funds to the Company. In addition, payment of dividends to the Company by the Bank is subject to various state and federal regulatory limitations.

The FDIC formed the Deposit Insurance Fund (“DIF”) in accordance with the Federal Deposit Insurance Reform Act of 2005 (“Reform Act”) to create a stronger and more stable insurance system. The FDIC maintains the insurance reserves of the DIF by assessing depository institutions an insurance premium. The DIF insures deposit accounts of the Bank up to a maximum amount of $250,000 per separately insured depositor. FDIC insured depository institutions are required to pay deposit insurance premiums based on the risk an institution poses to the DIF. In February 2011, the FDIC finalized rules, effective for assessments occurring after April 1, 2011, which redefined an institution’s assessment base as average consolidated total assets minus average Tier 1 capital. The new rules also established the general assessment rate for Risk Category 1 institutions, such as the Bank, at 5 to 9 basis points (annualized).

The Deposit Insurance Funds Act of 1996 authorized the Financing Corporation (“FICO”) to impose periodic assessments on all depository institutions. The purpose of these periodic assessments is to spread the cost of the interest payments on the outstanding FICO bonds issued to recapitalize the Savings Association Insurance Fund (“SAIF”) over a larger number of institutions.

The Company and the Bank are subject to regulatory “risk-based” capital guidelines. Failure to meet these capital guidelines could subject the Company or the Bank to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and other restrictions on its business. In addition, the Bank would generally not receive regulatory approval of any application that requires the consideration of capital adequacy, such as a branch or merger application, unless it could demonstrate a reasonable plan to meet the capital requirement within a reasonable period of time.

4

The Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) requires, among other things, federal banking agencies to take “prompt corrective action” in respect of depository institutions that do not meet minimum capital requirements. FDICIA sets forth the following five capital categories: “well-capitalized,” “adequately-capitalized,” “undercapitalized,” “significantly-undercapitalized” and “critically-undercapitalized.” A depository institution’s capital category will depend upon how its capital levels compare with various relevant capital measures as established by regulation, which include Tier 1 and total risk-based capital ratio measures and a leverage capital ratio measure.  Under certain circumstances, the appropriate banking agency may treat a well-capitalized, adequately-capitalized, or undercapitalized institution as if the institution were in the next lower capital category.

Federal banking regulators are required to take specified mandatory supervisory actions and are authorized to take other discretionary actions with respect to institutions in the three undercapitalized categories. The severity of the action depends upon the capital category in which the institution is placed. Subject to a narrow exception, the banking regulator must generally appoint a receiver or conservator for an institution that is critically undercapitalized. An institution in any of the undercapitalized categories is required to submit an acceptable capital restoration plan to its appropriate federal banking agency. An undercapitalized institution is also generally prohibited from paying any dividends, increasing its average total assets, making acquisitions, establishing any branches, accepting or renewing any brokered deposits or engaging in any new line of business, except under an accepted capital restoration plan or with FDIC approval.

On July 3, 2013, the FDIC Board of Directors approved the Regulatory Capital Interim Final Rule, implementing Basel III.  This rule redefines Tier 1 capital as two components (Common Equity Tier 1 and Additional Tier 1), creates a new capital ratio (Common Equity Tier 1 Risk-based Capital Ratio) and implements a capital conservation buffer.  It also revises the prompt corrective action thresholds and makes changes to risk weights for certain assets and off-balance-sheet exposures.  The Bank was required to transition into the new rule beginning on January 1, 2015.

Banks are subject to a number of federal and state laws and regulations, which have a material impact on their business. These include, among others, minimum capital requirements, state usury laws, state laws relating to fiduciaries, the Truth in Lending Act, the Truth in Savings Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Fair Credit Reporting Act, the Expedited Funds Availability Act, the Community Reinvestment Act, the Real Estate Settlement Procedures Act, the USA PATRIOT Act, the Bank Secrecy Act, Office of Foreign Assets Controls regulations, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, electronic funds transfer laws, redlining laws, predatory lending laws, antitrust laws, environmental laws, money laundering laws and privacy laws. The instruments of monetary policy of authorities, such as the Federal Reserve Board, may influence the growth and distribution of bank loans, investments and deposits, and may also affect interest rates on loans and deposits. These policies may have a significant effect on the operating results of banks.

Bank holding companies may acquire banks and other bank holding companies located in any state in the United States without regard to geographic restrictions or reciprocity requirements imposed by state banking law. Banks may also establish interstate branch networks through acquisitions of and mergers with other banks. The establishment of de novo interstate branches or the acquisition of individual branches of a bank in another state (rather than the acquisition of an out-of-state bank in its entirety) is allowed only if specifically authorized by state law.

Michigan banking laws do not significantly restrict interstate banking. The Michigan Banking Code permits, in appropriate circumstances and with the approval of the Department of Insurance and Financial Services, (1) acquisition of Michigan banks by FDIC-insured banks, savings banks or savings and loan associations located in other states, (2) sale by a Michigan bank of branches to an FDIC-insured bank, savings bank or savings and loan association located in a state in which a Michigan bank could purchase branches of the purchasing entity, (3) consolidation of Michigan banks and FDIC-insured banks, savings banks or savings and loan associations located in other states having laws permitting such consolidation, (4) establishment of branches in Michigan by FDIC-insured banks located in other states, the District of Columbia or U.S. territories or protectorates having laws permitting a Michigan bank to establish a branch in such jurisdiction, and (5) establishment by foreign banks of branches located in Michigan.

Effects of Compliance With Environmental Regulations

The nature of the business of the Bank is such that it holds title, on a temporary or permanent basis, to a number of parcels of real property. These include properties owned for branch offices and other business purposes as well as properties taken in or in lieu of foreclosure to satisfy loans in default. Under current state and federal laws, present and past owners of real property may be exposed to liability for the cost of clean up of environmental contamination on or originating from those properties, even if they are wholly innocent of the actions that caused the contamination. These liabilities can be material and can exceed the value of the contaminated property. Management is not presently aware of any instances where compliance with these provisions will have a material effect on the capital expenditures, earnings or competitive position of the Company or the Bank, or where compliance with these provisions will adversely affect a borrower’s ability to comply with the terms of loan contracts.

5

Employees

As of February 29, 2016, the Company, the Bank and the Insurance Agency employed 151 employees, of which 119 were full-time employees. The Company, the Bank, and the Insurance Agency believe their overall relations with their employees are good.

Statistical Information 

Additional statistical information describing the business of the Company appears on the following pages and in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Item 7 of this report and in the Consolidated Financial Statements and the notes thereto in Item 8 of this report. The following statistical information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and notes in this report.

Securities Portfolio

The carrying value of securities categorized by type at December 31 was as follows: 

(Dollars in thousands)	2015		2014		2013
U.S. Government and federal agency	$	57,207	$	44,503	$	43,722
U.S. Treasury notes and bonds		6,100		8,058		7,224
State and municipal		77,754		69,835		64,775
Mortgage-backed securities		6,970		8,942		8,470
Corporate		8,387		7,538		8,815
Foreign debt securities		995		994		990
Equity securities		2,453		2,275		1,603
Asset-backed securities		270		376		483
Total	$	160,136	$	142,521	$	136,082

The Company did not hold investment securities from any one issuer at December 31, 2015, that were greater than 10% of the Company’s shareholders’ equity, exclusive of U.S. Government and U.S. Government agency securities.

6

Presented below is the fair value of securities as of December 31, 2015 and 2014, a schedule of maturities of securities as of December 31, 2015, and the weighted average yields of securities as of December 31, 2015:

	Securities maturing within:
(Dollars in thousands)	Less than 1 Year		1 Year - 5 Years		5 Years - 10 Years		More than 10 Years		Fair Value at Dec. 31 2015		Fair Value at Dec. 31 2014
U.S. Government and federal agency	$	15,502	$	37,716	$	3,989	$	—	$	57,207	$	44,503
U.S. Treasury notes and bonds		—		6,100		—		—		6,100		8,058
State and municipal		7,259		36,270		31,251		2,974		77,754		69,835
Mortgage-backed securities		36		6,735		199		—		6,970		8,942
Corporate		1,106		6,889		392		—		8,387		7,538
Foreign debt securities		—		995		—		—		995		994
Asset-backed securities		270		—		—		—		270		376
Total debt securities		24,173		94,705		35,831		2,974		157,683		140,246
Equity securities (2)		—		—		—		2,453		2,453		2,275
Total	$	24,173	$	94,705	$	35,831	$	5,427	$	160,136	$	142,521

	Weighted average yields:
	Less than 1 Year			1 Year - 5 Years			5 Years - 10 Years			More than 10 Years			Total
U.S. Government and federal agency		1.53	%		1.44	%		2.10	%		—	%		1.51	%
U.S. Treasury notes and bonds		—			1.45			—			—			1.45
State and municipal (1)		3.54			3.61			3.80			4.58			3.72
Mortgage-backed securities		3.43			1.96			2.48			—			1.98
Corporate		1.50			1.75			2.70			—			1.76
Foreign debt securities		—			1.10			—			—			1.10
Asset-backed securities		0.85			—			—			—			0.85
Equity securities (2)		—			—			—			2.67			2.67

(1) The yield is computed for tax-exempt securities on a fully tax-equivalent basis at an incremental tax rate of 34%.

(2) Equity securities are preferred and common stock that may or may not have a stated maturity.

Loan Portfolio

The Bank’s loan portfolio categorized by loan type (excluding loans held for sale) as of December 31 is presented below:

(Dollars in thousands)
		2015		2014		2013		2012		2011
Agricultural	$	40,232	$	41,098	$	37,048	$	31,790	$	38,929
Commercial and industrial		94,347		88,062		68,530		67,365		58,685
Consumer		20,090		20,752		19,931		19,367		18,657
Real estate - commercial		97,736		99,807		96,987		93,312		106,250
Real estate - construction		5,390		2,691		890		1,056		1,169
Real estate - residential		91,509		93,703		92,580		98,578		96,437
Total loans, gross	$	349,304	$	346,113	$	315,966	$	311,468	$	320,127

7

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following schedule presents the maturities of loans (excluding residential real estate and consumer loans) as of December 31, 2015. All loans over one year in maturity (excluding residential real estate and consumer loans) are also presented classified according to the sensitivity to changes in interest rates as of December 31, 2015.

(Dollars in thousands)		Less than		1 Year -		More than
		1 Year		5 Years		5 Years		Total
Loan Type
Agricultural	$	12,387	$	13,259	$	14,586	$	40,232
Commercial and industrial		24,819		49,004		20,524		94,347
Real estate - commercial		14,528		58,338		24,870		97,736
Real estate - construction		5,390		—		—		5,390
Totals	$	57,124	$	120,601	$	59,980	$	237,705

(Dollars in thousands)
		Less than		1 Year -		More than
Loan Sensitivity to Changes in Interest Rates		1 Year		5 Years		5 Years		Total
Loans with fixed interest rates	$	12,573	$	97,938	$	44,809	$	155,320
Loans with floating or adjustable interest rates		44,551		22,663		15,171		82,385
Totals	$	57,124	$	120,601	$	59,980	$	237,705

Loan maturities are classified according to the contractual maturity date or the anticipated amortization period, whichever is appropriate. The anticipated amortization period is used in the case of loans where a balloon payment is due before the end of the loan’s normal amortization period. At the time the balloon payment is due, the loan can either be rewritten or payment in full can be requested. The decision regarding whether the loan will be rewritten or a payment in full will be requested will be based upon the loan’s payment history, the borrower’s current financial condition, and other relevant factors.

Risk Elements

The following loans were classified as nonperforming as of December 31:

(Dollars in thousands)
		2015		2014		2013		2012		2011
Loans accounted for on a nonaccrual basis	$	2,198	$	3,361	$	3,123	$	2,331	$	4,155
Accruing loans which are contractually past due 90 days or more as to principal or interest payments		29		58		11		30		70
Loans defined as “troubled debt restructurings”		3,271		3,175		4,523		4,405		2,448
Totals	$	5,498	$	6,594	$	7,657	$	6,766	$	6,673

A loan is placed on nonaccrual status at the point in time at which the collectability of principal or interest is considered doubtful.

The table below illustrates interest forgone and interest recorded on nonperforming loans for the years presented:

(Dollars in thousands)
		2015		2014		2013		2012		2011
Interest on non-performing loans which would have been earned had the loans been in an accrual or performing status	$	150	$	204	$	251	$	183	$	373
Interest on non-performing loans that was actually recorded when received	$	—	$	—	$	—	$	—	$	—

Potential Problem Loans

At December 31, 2015, there were $6.0 million of loans not disclosed above where some concern existed as to the borrowers’ abilities to comply with original loan terms. Specific loss allocations totaling $506,000 from the allowance for loan losses had been allocated for all nonperforming and potential problem loans as of December 31, 2015. However, the entire allowance for loan losses is also available for these potential problem loans.

8

Loan Concentrations

As of December 31, 2015, there was no concentration of loans exceeding 10% of total loans that is not otherwise disclosed as a category of loans pursuant to Item III.A. of Industry Guide 3.

Other Interest-Bearing Assets

As of December 31, 2015, there were no other interest-bearing assets requiring disclosure under Item III.C.1. or 2. of Industry Guide 3 if such assets were loans.

Summary of Loan Loss Experience

The following schedule presents a summary of activity in the allowance for loan losses for the periods shown and the percentage of net charge-offs during each period to average gross loans outstanding during the period:

(Dollars in thousands)		2015			2014			2013			2012			2011
Balance at January 1	$	4,173		$	4,735		$	5,852		$	5,213		$	4,729
Charge-offs:
Agricultural		—			—			88			—			45
Commercial and industrial		30			1			122			405			228
Consumer		291			273			351			338			361
Real estate - commercial		—			665			858			869			1,357
Real estate - construction		—			—			—			—			—
Real estate - residential		140			133			732			887			1,677
Total charge-offs		461			1,072			2,151			2,499			3,668
Recoveries:
Agricultural		1			20			6			5			10
Commercial and industrial		64			119			337			61			32
Consumer		121			179			175			214			217
Real estate - commercial		47			48			84			224			89
Real estate - construction		—			—			—			—			—
Real estate - residential		149			44			132			119			104
Total recoveries		382			410			734			623			452
Net charge-offs		79			662			1,417			1,876			3,216
Additions charged to operations (1)		100			100			300			2,515			3,700
Balance at December 31	$	4,194		$	4,173		$	4,735		$	5,852		$	5,213
Ratio of net charge-offs during the period to average loans outstanding during the period		0.02	%		0.21	%		0.45	%		0.61	%		1.01	%

(1) Additions to the allowance for loan losses charged to operations during the periods shown were based on management’s judgment after considering factors such as loan loss experience, evaluation of the loan portfolio, and prevailing and anticipated economic conditions. The evaluation of the loan portfolio is based upon various risk factors such as the financial condition of the borrower, the value of collateral and other considerations, which, in the opinion of management, deserve current recognition in estimating loan losses.

9

The following schedule presents an allocation of the allowance for loan losses to the various loan categories as of the years ended December 31:

(Dollars in thousands)
		2015		2014		2013		2012		2011
Agricultural	$	420	$	186	$	178	$	140	$	55
Commercial and industrial		586		527		562		381		609
Consumer		297		184		192		250		197
Real estate - commercial		1,030		1,641		1,842		2,596		2,299
Real estate - construction		46		9		12		15		34
Real estate - residential		1,388		1,193		1,626		1,923		1,847
Unallocated		427		433		323		547		172
Total allowance	$	4,194	$	4,173	$	4,735	$	5,852	$	5,213

The increase in the allowance allocation to agricultural loans was due to changes in assumptions regarding the industry and economic trends affecting it. The decrease in the allowance allocation to commercial real estate loans was due to a reduction in historical charge-off levels in this loan category. Fluctuations in allowance allocations in the other loan categories were primarily due to changes in historical charge-off levels and environmental factors affecting them.

Management periodically reviews the assumptions, loss ratios and delinquency trends in estimating the appropriate level of its allowance for loan losses and believes the unallocated portion of the total allowance was sufficient at December 31, 2015.

The following schedule presents the stratification of the loan portfolio by category, based on the amount of loans outstanding as a percentage of total loans for the respective years ended December 31:

	2015		2014		2012		2012		2011
Agricultural	12	%	12	%	12	%	10	%	12	%
Commercial and industrial	26		25		22		22		18
Consumer	6		6		6		6		6
Real estate - commercial	28		29		31		30		33
Real estate - construction	2		1		—		—		1
Real estate - residential	26		27		29		32		30
Total allowance	100	%	100	%	100	%	100	%	100	%

Deposits

The following schedule presents the average deposit balances by category and the average rates paid thereon for the respective years:

(Dollars in thousands)
		2015				2014				2013
Noninterest-bearing demand	$	115,488	—	%	$	109,556	—	%	$	93,853	—	%
Interest-bearing demand and money market deposits		165,767	0.14			137,924	0.16			132,053	0.20
Savings		67,826	0.04			67,869	0.06			65,484	0.06
Certificates of deposit		94,891	0.66			107,388	0.73			119,072	0.86
Total	$	443,972	0.20	%	$	422,737	0.25	%	$	410,462	0.32	%

The following table illustrates the maturities of certificates of deposits issued in denominations of $100,000 or more as of December 31, 2015:

(Dollars in thousands)
Maturing in less than 3 months	$	13,147
Maturing in 3 to 6 months		13,288
Maturing in 6 to 12 months		10,007
Maturing in more than 12 months		14,988
Total	$	51,430

At December 31, 2015, the Bank had no material foreign deposits.

10

Short-Term Borrowings

Federal funds purchased by the Company are unsecured overnight borrowings from correspondent banks. Federal funds purchased are due the next business day. The table below provides additional information regarding these short-term borrowings:

(Dollars in thousands)
		2015			2014			2013
Outstanding balance at December 31	$	—		$	—		$	—
Average interest rate at December 31		—	%		—	%		—	%
Average balance during the year	$	—		$	401		$	578
Average interest rate during the year		—	%		0.36	%		0.36	%
Maximum month end balance during the year	$	1,857		$	2,149		$	5,597

Repurchase agreements include advances by Bank customers that are not covered by federal deposit insurance. These agreements are direct obligations of the Company and are secured by securities held in safekeeping at a correspondent bank. The table below provides additional information regarding these short-term borrowings:

(Dollars in thousands)
		2015			2014			2013
Outstanding balance at December 31	$	9,460		$	26,743		$	26,033
Average interest rate at December 31		0.04	%		0.19	%		0.22	%
Average balance during the year	$	17,825		$	22,594		$	19,456
Average interest rate during the year		0.17	%		0.20	%		0.23	%
Maximum month end balance during the year	$	26,743		$	28,719		$	26,995

Advances from the Federal Home Loan Bank (“FHLB”) with original repayment terms less than one year are considered short-term borrowings for the Company. These advances are secured by residential real estate mortgage loans and U.S. government agency securities. The advances have maturities ranging from 1 month to 12 months from the date of issue.

The table below provides additional information regarding these short-term borrowings:

(Dollars in thousands)
		2015			2014			2013
Outstanding balance at December 31	$	—		$	—		$	6,000
Average interest rate at December 31		0.57	%		0.41	%		0.40	%
Average balance during the year	$	11,332		$	14,556		$	7,415
Average interest rate during the year		0.73	%		0.43	%		0.60	%
Maximum month end balance during the year	$	31,873		$	25,868		$	12,409

There were no other categories of short-term borrowings whose average balance outstanding exceeded 30% of shareholders’ equity in 2015, 2014 or 2013.

Return on Equity and Assets

The following schedule presents certain financial ratios of the Company for the years ended December 31:

	2015		2014		2013
Return on assets (net income divided by average total assets)	1.04	%	1.08	%	1.01	%
Return on equity (net income dividend by average equity)	8.39	%	8.88	%	8.31	%
Dividend payout ratio (dividends declared per share divided
by net income per share)	37.79	%	34.15	%	34.93	%
Equity to assets ratio (average equity divided by average total assets)	12.40	%	12.18	%	12.21	%

11

Item 1A. Risk Factors

The Company is subject to many risks and uncertainties. Although the Company seeks ways to manage these risks and develop programs to control risks to the extent that management can control them, the Company cannot predict the future. Actual results may differ materially from management’s expectations. Some of these significant risks and uncertainties are discussed below. The risks and uncertainties described below are not the only ones that the Company faces. Additional risks and uncertainties of which the Company is unaware, or that it currently does not consider to be material, also may become important factors that affect the Company and its business. If any of these risks were to occur, the Company’s business, financial condition or results of operations could be materially and adversely affected.

Investments in the Company’s common stock involve risk.

The market price of the Company’s common stock may fluctuate significantly in response to a number of factors, including:

· Variations in quarterly or annual operating results

· Changes in dividends per share

· Changes in interest rates

· New developments, laws or regulations in the banking industry

· Acquisitions or business combinations involving the Company or its competition

· Regulatory actions, including changes to regulatory capital levels, the components of regulatory capital and how regulatory capital is calculated

· Volatility of stock market prices and volumes

· Changes in market valuations of similar companies

· New litigation or contingencies or changes in existing litigation or contingencies

· Changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies

· Rumors or erroneous information

· Credit and capital availability

· Issuance of additional shares of common stock or other debt or equity securities of the Company

Asset quality could be less favorable than expected.

A significant source of risk for the Company arises from the possibility that losses will be sustained because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loan agreements. Most loans originated by the Company are secured, but some loans are unsecured depending on the nature of the loan. With respect to secured loans, the collateral securing the repayment of these loans includes a wide variety of real and personal property that may be insufficient to cover the obligations owed under such loans. Collateral values may be adversely affected by changes in prevailing economic, environmental and other conditions, including declines in the value of real estate, changes in interest rates, changes in monetary and fiscal policies of the federal government, terrorist activity, environmental contamination and other external events.

The Company’s allowance for loan losses may not be adequate to cover actual loan losses.

The risk of nonpayment of loans is inherent in all lending activities and nonpayment of loans may have a material adverse effect on the Company’s earnings and overall financial condition, and the value of its common stock. The Company makes various assumptions and judgments about the collectability of its loan portfolio and provides an allowance for potential losses based on a number of factors. If its assumptions are wrong, the allowance for loan losses may not be sufficient to cover losses, which could have an adverse effect on the Company’s operating results, and may cause it to increase the allowance in the future. The actual amount of future provisions for loan losses cannot now be determined and may exceed the amounts of past provisions for loan losses. Federal and state banking regulators, as an integral part of their supervisory function, periodically review the allowance for loan losses. These regulatory agencies may require the Company to increase its provision for loan losses or to recognize further loan charge-offs based upon their judgments, which may be different from the Company’s judgments. Any increase in the allowance for loan losses could have a negative effect on the Company’s regulatory capital ratios, net income, financial condition and results of operations.

12

General economic conditions in the state of Michigan could be less favorable than expected.

The Company is affected by general economic conditions in the United States, although most directly within Michigan. An economic downturn within Michigan could negatively impact household and corporate incomes. This impact may lead to decreased demand for both loan and deposit products and increase the number of customers who fail to pay interest or principal on their loans.

The Company could be adversely affected by the soundness of other financial institutions, including defaults by larger financial institutions.

The Company’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of credit, trading, clearing, counterparty or other relationships between financial institutions. The Company has exposure to multiple counterparties, and it routinely executes transactions with counterparties in the financial industry. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, could lead to market-wide liquidity problems and losses or defaults by the Company or by other institutions. This is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which the Company interacts on a daily basis, and therefore could adversely affect the Company.

If the Company does not adjust to changes in the financial services industry, its financial performance may suffer.

The Company’s ability to maintain its financial performance and return on investment to shareholders will depend in part on its ability to maintain and grow its core deposit customer base and expand its financial services to its existing customers. In addition to other banks, competitors include credit unions, securities dealers, brokers, mortgage bankers, investment advisors and finance and insurance companies. The increasingly competitive environment is, in part, a result of changes in the economic environment within the state of Michigan, regulation, changes in technology and product delivery systems and the accelerating pace of consolidation among financial service providers. New competitors may emerge to increase the degree of competition for the Company’s customers and services. Financial services and products are also constantly changing. The Company’s financial performance will also depend in part upon customer demand for the Company’s products and services and the Company’s ability to develop and offer competitive financial products and services.

Changes in interest rates could reduce the Company’s income and cash flow.

The Company’s income and cash flow depends, to a great extent, on the difference between the interest earned on loans and securities, and the interest paid on deposits and other borrowings. Market interest rates are beyond the Company’s control, and they fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies including, in particular, the Federal Reserve Board. Changes in monetary policy, including changes in interest rates and interest rate relationships, will influence the origination of loans, the purchase of investments, the generation of deposits and the rate received on loans and securities and paid on deposits and other borrowings.

The Company is subject to liquidity risk in its operations, which could adversely affect its ability to fund various obligations.

Liquidity risk is the possibility of being unable to meet obligations as they come due or capitalize on growth opportunities as they arise because of an inability to liquidate assets or obtain adequate funding on a timely basis, at a reasonable cost and within acceptable risk tolerances. Liquidity is required to fund various obligations, including credit obligations to borrowers, loan originations, withdrawals by depositors, repayment of debt, dividends to shareholders, operating expenses and capital expenditures. Liquidity is derived primarily from retail deposit growth and earnings retention, principal and interest payments on loans and investment securities, net cash provided from operations and access to other funding. If the Company is unable to maintain adequate liquidity, then its business, financial condition and results of operations would be negatively affected.

Legislative or regulatory changes or actions, or significant litigation, could adversely impact the Company or the businesses in which it is engaged.

The financial services industry is extensively regulated. The Company and the Bank are subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of their operations. Laws and regulations may change from time to time and are primarily intended for the protection of consumers, depositors and the deposit insurance fund, and not to benefit the Company’s shareholders. The impact of any changes to laws and regulations or other actions by regulatory agencies may negatively impact the Company or its ability to increase the value of its business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the 14 imposition of restrictions on the operation of an institution, the classification of assets by the institution and the adequacy of an institution’s allowance for loan losses. Future regulatory changes or accounting pronouncements may increase the Company’s regulatory capital requirements or adversely affect its regulatory capital levels. Additionally, actions by regulatory agencies or significant litigation against the Company or the Bank could require the Company to devote significant time and resources to defending its business and may lead to penalties that materially affect the Company.

13

The Company relies heavily on its management and other key personnel, and the loss of any of them may adversely affect its operations.

The Company is and will continue to be dependent upon the services of its management team and other key personnel. Losing the services of one or more key members of the Company’s management team could adversely affect its operations.

The Company may be a defendant in a variety of litigation and other actions, which may have a material adverse effect on the Company’s financial condition and results of operations.

The Company and the Bank are regularly involved in a variety of litigation arising out of the normal course of business. The Company’s insurance may not cover all claims that may be asserted against it, and any claims asserted against it, regardless of merit or eventual outcome, may harm its reputation or cause the Company to incur unexpected expenses, which could be material in amount. Should the ultimate expenses, judgments or settlements in any litigation exceed the Company’s insurance coverage, they could have a material adverse effect on the Company’s financial condition and results of operations. In addition, the Company may not be able to obtain appropriate types or levels of insurance in the future, nor may it be able to obtain adequate replacement policies with acceptable terms, if at all.

If the Company cannot raise additional capital when needed, its ability to further expand its operations through organic growth or acquisitions could be materially impaired.

The Company is required by federal and state regulatory authorities to maintain specified levels of capital to support its operations. The Company may need to raise additional capital to support its current level of assets or its growth. The Company’s ability to raise additional capital will depend on conditions in the capital markets at that time, which are outside its control, and on its financial performance. The Company cannot assure that it will be able to raise additional capital in the future on terms acceptable to it or at all. If the Company cannot raise additional capital when needed, its ability to maintain its current level of assets or to expand its operations through organic growth or acquisitions could be materially limited.

Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of computer systems or otherwise, could severely harm the Company’s business.

As part of its business, the Company collects, processes and retains sensitive and confidential client and customer information on behalf of itself and other third parties. Despite the security measures the Company has in place for its facilities and systems, and the security measures of its third party service providers, the Company may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors or other similar events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential customer information, whether by the Company or by its vendors, could severely damage the Company’s reputation, expose it to the risks of litigation and liability, disrupt the Company’s operations and have a material adverse effect on the Company’s business.

The Company’s information systems may experience an interruption or breach in security.

The Company relies heavily on communications and information systems to conduct its business and deliver its products. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Company’s customer relationship management, general ledger, deposit, loan and other systems. While the Company has policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of its information systems, there can be no assurance that any such failures, interruptions or security breaches of the Company’s information systems or its customers’ information or computer systems would not damage the Company’s reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny, or expose the Company to civil litigation and financial liability, any of which could have a material adverse effect on the Company’s financial condition and results of operations.

Environmental liability associated with commercial lending could result in losses.

In the course of its business, the Company may acquire, through foreclosure, properties securing loans it has originated or purchased that are in default. Particularly in commercial real estate lending, there is a risk that hazardous substances could be discovered on these properties. In this event, the Company might be required to remove these substances from the affected properties at the Company’s sole cost and expense. The cost of this removal could substantially exceed the value of affected properties. The Company may not have adequate remedies against the prior owner or other responsible parties and could find it difficult or impossible to sell the affected properties. These events could have an adverse effect on the Company’s business, results of operations and financial condition.

14

The Company depends upon the accuracy and completeness of information about customers.

In deciding whether to extend credit to customers, the Company relies on information provided to it by its customers, including financial statements and other financial information. The Company may also rely on representations of customers as to the accuracy and completeness of that information and on reports of independent auditors on financial statements. The Company’s financial condition and results of operations could be negatively impacted to the extent that the Company extends credit in reliance on financial statements that do not comply with generally accepted accounting principles or that are misleading or other information provided by customers that is false or misleading.

The Company operates in a highly competitive industry and market area.

The Company faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national and regional banks within the various markets where the Company operates, as well as internet banks. The Company also faces competition from many other types of financial institutions, including savings and loan associations, credit unions, finance companies, brokerage firms, insurance companies and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. The Company competes with these institutions both in attracting deposits and in making new loans. Technology has lowered barriers to entry into the market and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of the Company’s competitors have fewer regulatory constraints and may have lower cost structures, such as credit unions that are not subject to federal income tax. Due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Company can.

Severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact the Company’s business.

Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a significant impact on the Company’s ability to conduct business. Such events could affect the stability of the Company’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Company to incur additional expenses.

The Company relies on dividends from the Bank for most of its revenue.

The Company is a separate and distinct legal entity from the Bank. It receives substantially all of its revenue from dividends from the Bank. These dividends are the principal source of funds to pay cash dividends on the Company’s common stock. Various federal and/or state laws and regulations limit the amount of dividends that the Bank may pay to the Company. If the Bank is unable to pay dividends to the Company, the Company may not be able to pay cash dividends on its common stock. The earnings of the Bank have been the principal source of funds to pay cash dividends to shareholders. Over the long-term, cash dividends to shareholders are dependent upon earnings, as well as capital requirements, regulatory restraints and other factors affecting the Company and the Bank.

Additional risks and uncertainties could have a negative effect on financial performance.

Additional factors could have a negative effect on the financial performance of the Company and the Company’s common stock. Some of these factors are financial market conditions, changes in financial accounting and reporting standards, new litigation or changes in existing litigation, regulatory actions and losses.

Item 1B. Unresolved Staff Comments

None.

15

Item 2. Properties

The offices of the Company and Insurance Agency as of February 29, 2016, were as follows:

Company’s, Bank’s and Insurance Agency’s main office:

109 East Division, Sparta, Michigan
Office is owned by the Bank and comprises 24,000 square feet.

Bank’s branch office:

416 West Division, Sparta, Michigan
Office is leased by the Bank and comprises 3,000 square feet.

Bank’s branch office:

4170 - 17 Mile Road, Cedar Springs, Michigan
Office is owned by the Bank and comprises 3,000 square feet.

Bank’s branch office:

6795 Courtland Drive, Rockford, Michigan
Office is owned by the Bank and comprises 2,400 square feet.

Bank’s branch office:

5050 Alpine Avenue NW, Comstock Park, Michigan
Office is owned by the Bank and comprises 2,400 square feet.

Bank’s branch office:

450 West Muskegon, Kent City, Michigan
Office is owned by the Bank and comprises 27,300 square feet.

Bank’s branch office:

3069 Slocum Road, Ravenna, Michigan
Office is owned by the Bank and comprises 4,800 square feet.

Bank’s branch office:

5475 East Apple Avenue, Muskegon, Michigan
Office is owned by the Bank and comprises 4,800 square feet.

Bank’s branch office:

661 West Randall, Coopersville, Michigan
Office is owned by the Bank and comprises 2,700 square feet.

Bank’s branch office:

10 West Main Street, Grant, Michigan
Office is owned by the Bank and comprises 4,800 square feet.

Bank’s branch office:

246 West River Valley Drive, Newaygo, Michigan
Office is owned by the Bank and comprises 2,600 square feet.

Bank’s branch office:

1423 West Main Street, Fremont, Michigan
Office is owned by the Bank and comprises 1,600 square feet.

The Company, Bank and Insurance Agency believe that their offices are suitable and adequate for their future needs and are in good condition. The Company’s management believes all offices are adequately covered by property insurance.

16

Item 3. Legal Proceedings

As of December 31, 2015, there are no significant pending legal proceedings to which the Company or the Bank is a party or to which any of their properties are subject, except for legal proceedings arising in the ordinary course of business. In the opinion of management, pending legal proceedings will not have a material adverse effect on the consolidated financial condition of the Company.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Stock Information

Several brokers trade ChoiceOne’s common shares in the OTC Pink marketplace. There is no well-established public trading market for the shares and trading activity is infrequent. ChoiceOne’s trading volume and recent share price information can be viewed under the symbol ‘COFS’ on certain financial websites.

The range of high and low bid prices for shares of common stock for each quarterly period during the past two years is as follows:

	2015				2014
	Low		High		Low		High
First Quarter	$	22.30	$	24.25	$	16.50	$	18.00
Second Quarter		22.30		23.75		17.21		18.80
Third Quarter		22.25		23.79		18.25		22.00
Fourth Quarter		22.46		24.50		20.01		23.00

The prices listed above are over-the-counter market quotations reported to ChoiceOne by its market makers. The over-the-counter market quotations reflect inter-dealer prices without retail markup, markdown or commission and may not necessarily represent actual transactions. As of February 29, 2016, the average bid price for shares of ChoiceOne common stock was $22.85.

As of February 29, 2016, there were 732 shareholders of record of ChoiceOne Financial Services, Inc. common stock.

17

The following table summarizes the quarterly cash dividends declared per share of common stock during 2015 and 2014:

	2015		2014
First Quarter	$	0.15	$	0.14
Second Quarter		0.17		0.15
Third Quarter		0.17		0.15
Fourth Quarter		0.17		0.15
Total	$	0.66	$	0.59

ChoiceOne’s principal source of funds to pay cash dividends is the earnings and dividends paid by the Bank. The Bank is restricted in its ability to pay cash dividends under current banking regulations. See Note 20 to the consolidated financial statements for a description of these restrictions. Based on information presently available, management expects ChoiceOne to declare and pay regular quarterly cash dividends in 2016, although the amount of the quarterly dividends will be dependent on market conditions and ChoiceOne’s requirements for cash and capital, among other things.

On October 28, 2015, the Company issued 788 shares of common stock to its directors pursuant to the Directors’ Stock Purchase Plan for an aggregate cash price of $18,000. The Company relied on the exemption contained in Section 4(6) of the Securities Act of 1933 in connection with these sales.

ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s did not purchase any of its own common stock during the quarter ended December 31, 2015. As of December 31, 2015, there are 59,224 shares remaining that may yet be purchased under approved plans or programs. The repurchase plan was adopted and announced on July 26, 2007. There is no stated expiration date. The plan authorized the repurchase of up to 100,000 shares.

The information under Item 12 of this report regarding equity compensation plans is incorporated herein by reference.

18

Item 6.          Selected Financial Data

ChoiceOne Financial Services, Inc.
Selected Financial Data

(Dollars in thousands, except per share data)
		2015			2014			2013			2012			2011
For the year
Net interest income	$	18,362		$	17,863		$	17,596		$	17,675		$	17,922
Provision for loan losses		100			100			300			2,515			3,700
Noninterest income		7,702			6,802			6,245			6,889			6,139
Noninterest expense		18,276			16,794			16,664			16,444			15,788
Income before income taxes		7,688			7,771			6,877			5,605			4,573
Income tax expense		1,945			2,076			1,783			1,343			1,060
Net income		5,743			5,695			5,094			4,262			3,513
Cash dividends declared		2,170			1,945			1,780			1,648			1,578
Per share
Basic earnings	$	1.75		$	1.73		$	1.55		$	1.29		$	1.07
Diluted earnings		1.74			1.72			1.54			1.29			1.07
Cash dividends declared		0.66			0.59			0.54			0.50			0.48
Shareholders’ equity (at year end)		21.19			20.08			18.68			18.35			17.58
Average for the year
Securities	$	152,361		$	142,361		$	133,704		$	129,337		$	104,986
Gross loans		342,382			330,355			312,798			307,639			317,271
Deposits		443,972			422,737			410,462			408,895			396,474
Federal Home Loan Bank advances		19,989			14,555			7,415			6,130			8,461
Shareholders’ equity		68,439			64,143			61,317			59,431			56,098
Assets		551,762			526,669			502,333			500,636			486,478
At year end
Securities	$	163,323		$	145,706		$	139,832		$	138,242		$	118,025
Gross loans		349,304			346,113			315,966			311,468			320,127
Deposits		474,696			434,828			418,127			424,199			403,365
Federal Home Loan Bank advances		11,332			18,363			6,392			420			8,447
Shareholders’ equity		69,842			66,190			61,558			60,506			57,904
Assets		567,746			549,640			514,575			508,913			495,914
Selected financial ratios
Return on average assets		1.04	%		1.08	%		1.01	%		0.85	%		0.72	%
Return on average shareholders’ equity		8.39			8.88			8.31			7.17			6.26
Cash dividend payout as a percentage of net income		37.79			34.15			34.93			38.67			44.92
Shareholders’ equity to assets (at year end)		12.30			12.04			11.96			11.89			11.68

19

Item 7.           Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is designed to provide a review of the consolidated financial condition and results of operations of ChoiceOne, and its wholly-owned subsidiaries, the Bank and the Insurance Agency. This discussion should be read in conjunction with the consolidated financial statements and related footnotes.

RESULTS OF OPERATIONS

Summary

Net income for 2015 was $5,743,000, which represented a $48,000 or 1% increase from 2014. The growth in net income resulted primarily from lower interest expense and an increase in noninterest income in 2015 compared to 2014. Net charge-offs continued to be low in 2015, which allowed for a level provision for loan losses expense in 2015 compared to 2014. Net interest income increased $499,000 in 2015 compared to the prior year as a 16 basis point decrease in the rate earned on earning assets was applied to a larger dollar volume in addition to the 6 basis point reduction in the rate paid on interest-bearing liabilities. Growth in noninterest income of $900,000 in 2015 compared to 2014 was mainly caused by higher gains on sales of loans and a death benefit received from a life insurance policy. The increase in noninterest expense was due to higher salaries and benefits and data processing partially offset by lower FDIC insurance expense and loan and collection expense in 2015 compared to the prior year.

Net income for 2014 was $5,695,000, which represented a $601,000 or 12% increase from 2013. The growth in net income resulted primarily from lower interest expense, a lower provision for loan losses and an increase in noninterest income in 2014 compared to 2013. Net charge-offs were lower in 2014 than 2013, which caused the need for less provision for loan losses expense. Net interest income increased $267,000 in 2014 compared to the prior year as a 23 basis point decrease in the rate earned on earning assets was applied to a larger dollar volume in addition to the 8 basis point reduction in the rate paid on interest-bearing liabilities. Noninterest income grew $557,000 from 2013 to 2014 as a result of higher customer service charges, higher gains on sales of securities, and a lower level of losses on sales of other assets. The increase in noninterest expense was due to higher salaries and benefits and data processing partially offset by lower loan and collection expense in 2014 compared to the prior year.

Dividends

Cash dividends of $2,170,000 or $0.66 per common share were declared in 2015, compared to $1,945,000 or $0.59 per common share in 2014 and $1,780,000 or $0.54 per common share in 2013. Dividends declared were $0.17 per share for the last three quarters in 2015 and $0.15 per share for the first quarter in 2015. Dividends declared were $0.15 per share for the last three quarters of 2014 and $0.14 per share for the first quarter in 2014. Dividends declared were $0.14 per share for the last two quarters and $0.13 per share for the first two quarters in 2013. The dividend yield on ChoiceOne’s common stock was 2.77% in 2015, compared to 2.57% in 2014 and 3.16% in 2013. The cash dividend payout as a percentage of net income was 38% in 2015, compared to 34% in 2014 and 35% in 2013.

20

Table 1 – Average Balances and Tax-Equivalent Interest Rates

		Year ended December 31,
		2015							2014									2013
(Dollars in thousands)	Average Balance		Interest			Rate			Average Balance		Interest			Rate			Average Balance		Interest			Rate
Assets:
Loans (1) (2)	$	342,382	$	15,982			4.67	%	$	330,355	$	15,775			4.78	%	$	312,798	$	15,814			5.06	%
Taxable securities (3)		102,550		1,783			1.74			97,435		1,847			1.90			91,083		1,812			1.99
Nontaxable securities (1)		49,952		2,156			4.32			44,926		2,102			4.68			42,621		2,099			4.92
Other		5,753		14			0.25			4,165		9			0.22			4,817		12			0.25
Interest-earning assets		500,637		19,934			3.98			476,881		19,733			4.14			451,319		19,737			4.37
Noninterest-earning assets (4)		51,125								49,788								51,014
Total assets	$	551,762							$	526,669							$	502,333
Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits	$	165,767	$	226			0.14	%	$	137,924	$	220			0.16	%	$	132,053	$	261			0.20	%
Savings deposits		67,826		26			0.04			67,869		41			0.06			65,484		40			0.06
Certificates of deposit		94,891		625			0.66			107,388		780			0.73			119,072		1,027			0.86
Advances from Federal Home Loan Bank		19,989		83			0.41			14,555		63			0.43			7,415		45			0.61
Other		18,156		30			0.17			22,995		47			0.20			20,034		46			0.23
Interest-bearing liabilities		366,629		990			0.27			350,731		1,151			0.33			344,058		1,419			0.41
Demand deposits		115,488								109,556								93,853
Other noninterest-bearing liabilities		1,206								2,239								3,105
Total liabilities		483,323								462,526								441,016
Shareholders’ equity		68,439								64,143								61,317
Total liabilities and shareholders’ equity	$	551,762							$	526,669							$	502,333
Net interest income (tax-equivalent basis)- interest spread				18,944			3.71	%				18,582			3.81	%				18,318			3.96	%
Tax-equivalent adjustment (1)				(582	)							(719	)							(722	)
Net interest income			$	18,362							$	17,863							$	17,596
Net interest income as a percentage of earning assets (tax-equivalent basis)							3.78	%							3.90	%							4.06	%

(1) Interest on nontaxable securities and loans has been adjusted to a fully tax-equivalent basis to facilitate comparison to the taxable interest-earning assets. The adjustment uses an incremental tax rate of 34% for the years presented.

(2) Interest on loans included net origination fees charged on loans of approximately $957,000, $873,000, and $909,000 in 2015, 2014, and 2013, respectively.

(3) Interest on taxable securities includes dividends on Federal Home Loan Bank and Federal Reserve Bank stock.

(4) Noninterest-earning assets include loans on a nonaccrual status, which averaged approximately $2,145,000, $3,613,000, and $2,132,000 in 2015, 2014, and 2013, respectively.

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Table 2 – Changes in Tax-Equivalent Net Interest Income  

	Year ended December 31,
(Dollars in thousands)	2015 Over 2014									2014 Over 2013
	Total			Volume			Rate			Total			Volume			Rate
Increase (decrease) in interest income (1)
Loans (2)	$	207		$	566		$	(360	)	$	(39	)	$	863		$	(902	)
Taxable securities		(64	)		94			(158	)		35			124			(89	)
Nontaxable securities (2)		54			224			(171	)		3			111			(108	)
Other		5			4			2			(3	)		(2	)		(1	)
Net change in interest income		201			888			(687	)		(4	)		1,096			(1,100	)
Increase (decrease) in interest expense (1)
Interest-bearing demand deposits		6			40			(34	)		(41	)		11			(52	)
Savings deposits		(15	)		—			(15	)		1			1			—
Certificates of deposit		(155	)		(86	)		(69	)		(247	)		(95	)		(152	)
Advances from Federal Home Loan Bank		20			23			(3	)		18			34			(16	)
Other		(17	)		(9	)		(8	)		1			6			(5	)
Net change in interest expense		(161	)		(32	)		(129	)		(268	)		(43	)		(225	)
Net change in tax-equivalent net interest income	$	362		$	920		$	(558	)	$	264		$	1,139		$	(875	)

(1) The volume variance is computed as the change in volume (average balance) multiplied by the previous year’s interest rate. The rate variance is computed as the change in interest rate multiplied by the previous year’s volume (average balance). The change in interest due to both volume and rate has been allocated to the volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

(2) Interest on tax-exempt securities and loans has been adjusted to a fully tax-equivalent basis using an incremental tax rate of 34% for the years presented.

Net Interest Income

Tax-equivalent net interest income increased $362,000 in 2015 compared to 2014. The increase was attributed to $23.8 million in interest-earning assets and a decrease of 6 basis points on interest-bearing liabilities, partially offset by a 16 basis point decline in the average rate on interest-earning assets. ChoiceOne’s net interest spread declined 10 basis points in 2015 compared to 2014 as growth of average interest-earning assets was offset by the compression of net interest margin.

The average balance of loans increased $12.0 million in 2015 compared to 2014. $8.6 million of growth came from loans to businesses in ChoiceOne’s markets as calling efforts were emphasized in 2015. Residential mortgage loans increased $3.5 million due to a higher level of loan originations in 2015. Partially offsetting the loan growth with an 11 basis point decrease in the average rate earned on loans, interest income on loans increased $207,000 in 2015 compared to the prior year. The average balance of total securities increased by $10.1 million in 2015 compared to 2014 as securities were purchased to provide earning assets growth. This growth in the average balance was partially offset by a lower average rate earned on securities, which caused interest income from securities to decrease $10,000 in 2015 compared to the prior year. The average balance of other interest-earning assets increased $1.6 million as excess funds were deployed to purchase additional bank owned life insurance, resulting in an increase of $5,000 in interest income for 2015 compared to 2014.

The average balance of interest-bearing demand deposits increased $27.8 million in 2015 compared to 2014. The effect of this increase, partially offset by a 2 basis point decline in the average rate paid, caused interest expense to be $6,000 higher in 2015 than in the prior year. The effect of $43,000 of decline in average savings deposits along with a 2 basis point decline in average rate paid caused a $15,000 decrease in interest expense in 2015 compared to the prior year. The average balance of certificates of deposit was $12.5 million lower in 2015 than in the prior year. The average balance decrease plus the effect of a 7 basis point decline in the average rate paid caused interest expense on certificates of deposit to fall $155,000 in 2015 compared to 2014. A $5.4 million increase in the average balance of Federal Home Loan Bank advances, partially offset by a 2 basis point decrease in the average rate paid, caused interest expense to increase $20,000 in 2015 compared to the prior year. The growth experienced in non-interest bearing demand deposits and savings deposits was primarily due to depositors choosing the liquidity and safety afforded by this type of deposit as compared to certificates of deposit or nonbank investments.

ChoiceOne’s net interest income spread was 3.71% for 2015 and 3.81% for 2014. The average yield received on interest-earning assets in 2015 decreased 16 basis points to 3.98% while the average rate paid on interest-bearing liabilities in 2015 fell 6 basis points to 0.27%. The decline in general market interest rates in both 2014 and 2015 caused the reduction in rates for both assets and liabilities in the two time periods.

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Tax-equivalent net interest income increased $267,000 in 2014 compared to 2013. The increase was attributed to $25.6 million increase in interest-earning assets and a decrease of 8 basis points on interest-bearing liabilities, partially offset by a 23 basis point decline in the average rate on interest-earning assets. ChoiceOne’s net interest spread declined 15 basis points in 2014 compared to 2013 as growth of average interest-earning assets was offset by the compression of net interest margin.

The average balance of loans increased $17.6 million in 2014 compared to 2013. $19.9 million of growth came from loans to businesses in ChoiceOne’s markets as calling efforts were emphasized in 2014. Consumer loans increased $1.0 million due to marketing and ChoiceOne’s referral program. Residential mortgage loans declined $3.3 million as some loans held in portfolio were refinanced during 2014 and sold in the secondary market. Offsetting the loan growth with a 28 basis point decrease in the average rate earned on loans, interest income on loans declined $39,000 in 2014 compared to the prior year. The average balance of total securities increased by $8.7 million in 2014 compared to 2013 as securities were purchased to provide earning assets growth. This growth in the average balance was partially offset by a lower average rate earned on securities, which caused interest income from securities to increase $38,000 in 2014 compared to the prior year. The average balance of other interest-earning assets decreased $652,000 as excess funds were deployed toward loan and securities growth, resulting in a decrease of $3,000 in interest income for 2014 compared to 2013.

The average balance of interest-bearing demand deposits increased $5.9 million in 2014 compared to 2013. The effect of this increase, partially offset by a 4 basis point decline in the average rate paid, caused interest expense to be $40,000 lower in 2014 than in the prior year. The effect of $2.4 million of growth in average savings deposits caused a $1,000 increase in interest expense in 2014 compared to the prior year. The average balance of certificates of deposit was $11.7 million lower in 2014 than in the prior year. The average balance decrease plus the effect of a 13 basis point decline in the average rate paid caused interest expense on certificates of deposit to fall $247,000 in 2014 compared to 2013. A $7.1 million increase in the average balance of Federal Home Loan Bank advances, partially offset by an 18 basis point decrease in the average rate paid, caused interest expense to increase $18,000 in 2014 compared to the prior year. The growth experienced in non-interest bearing demand deposits and savings deposits was primarily due to depositors choosing the liquidity and safety afforded by this type of deposit as compared to certificates of deposit or nonbank investments.

ChoiceOne’s net interest income spread was 3.81% for 2014 and 3.96% for 2013. The average yield received on interest-earning assets in 2014 decreased 23 basis points to 4.14% while the average rate paid on interest-bearing liabilities in 2014 fell 8 basis points to 0.33%. The decline in general market interest rates in both 2013 and 2014 caused the reduction in rates for both assets and liabilities in the two time periods.

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Provision and Allowance For Loan Losses

Table 3 – Provision and Allowance For Loan Losses

(Dollars in thousands)
	2015			2014			2013			2012			2011
Allowance for loan losses at beginning of year	$	4,173		$	4,735		$	5,852		$	5,213		$	4,729
Charge-offs:
Agricultural		—			—			88			—			45
Commercial and industrial		30			1			122			405			228
Real estate - commercial		—			665			858			869			1,357
Real estate - construction		—			—			—			—			—
Real estate - residential		140			133			732			887			1,677
Consumer		291			273			351			338			361
Total		461			1,072			2,151			2,499			3,668
Recoveries:
Agricultural		1			20			6			5			10
Commercial and industrial		64			119			337			61			32
Real estate - commercial		47			48			84			224			89
Real estate - construction		—			—			—			—			—
Real estate - residential		149			44			132			119			104
Consumer		121			179			175			214			217
Total		382			410			734			623			452
Net charge-offs		79			662			1,417			1,876			3,216
Provision for loan losses		100			100			300			2,515			3,700
Allowance for loan losses at end of year	$	4,194		$	4,173		$	4,735		$	5,852		$	5,213
Allowance for loan losses as a percentage of:		1.20	%		1.21	%		1.50	%		1.88	%		1.63	%
Total loans as of year end
Nonaccrual loans, accrual loans past due 90 days or more and troubled debt restructurings		76	%		63	%		62	%		86	%		78	%
Ratio of net charge-offs to average total loans outstanding during the year		0.02	%		0.20	%		0.45	%		0.61	%		1.01	%
Loan recoveries as a percentage of prior year’s charge-offs		36	%		19	%		29	%		17	%		12	%

The provision for loan losses was flat in 2015 compared to 2014. The reduction of $583,000 in net charge-offs experienced in 2015 compared to 2014 allowed for the minimal provision for loan losses in 2015. All loan categories experienced net recoveries during 2015 except consumer loans, which had net charge offs of $172,000. Management believes that the lower net charge-off levels are due in part to the improving economy in the Bank’s market areas. The allowance for loan losses as a percentage of total loans decreased from 1.21% as of the end of 2015 to 1.20% as of the end of 2015. The coverage ratio of the allowance for loan losses to nonperforming loans increased from 63% as of December 31, 2014 to 76% as of December 31, 2015. The allowance balance was slightly increased while the balance of nonperforming loans decreased in 2015. ChoiceOne had $506,000 of specific allowance allocations for problem loans as of the end of 2015, compared to $1.1 million as of the prior year end. Special allowance amounts have been allocated where the fair values of loans were considered to be less than their carrying values. ChoiceOne obtains valuations on collateral dependent loans when the loan is considered by management to be impaired and uses the valuation amounts in the determination of fair value. Management believes the specific reserves allocated to certain problem loans at the end of 2015 and 2014 were reasonable based on the circumstances surrounding each particular borrower.

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The following schedule presents an allocation of the allowance for loan losses to the various loan categories as of the years ended December 31:

(Dollars in thousands)
	2015		2014		2013		2012		2011
Agricultural	$	420	$	186	$	178	$	140	$	55
Commercial and industrial		586		527		562		381		609
Real estate - commercial		1,030		1,641		1,842		2,596		2,299
Real estate - construction		46		9		12		15		34
Real estate - residential		1,388		1,193		1,626		1,923		1,847
Consumer		297		184		192		250		197
Unallocated		427		433		323		547		172
Total allowance for loan losses	$	4,194	$	4,173	$	4,735	$	5,852	$	5,213

The increase in the allowance allocation to agricultural loans was due to changes in assumptions regarding the industry and economic trends affecting it. The decrease in the allowance allocation to commercial real estate loans was due to a reduction in historical charge-off levels in this loan category. Fluctuations in allowance allocations in the other loan categories were primarily due to changes in historical charge-off levels and environmental factors affecting them.

Management maintains the allowance at a level that it believes adequately provides for losses inherent in the loan portfolio. Such losses are estimated by a variety of factors, including specific examination of certain borrowing relationships and consideration of historical losses incurred on certain types of credits. Current economic conditions and collateral values affect loss estimates. Management focuses on early identification of problem credits through ongoing reviews by management and the independent loan review function. Based on the current state of the economy and a recent review of the loan portfolio, management believes that the allowance for loan losses as of December 31, 2015 was adequate. As charge-offs, changes in the level of nonperforming loans, and changes within the composition of the loan portfolio occur, the provision and allowance for loan losses will be reviewed by the Bank’s management and adjusted as necessary.

Noninterest Income

Total noninterest income increased $900,000 in 2015 compared to 2014. Customer service charges increased $132,000 in 2015 compared to the prior year as a result of service charges on ChoiceOne’s new checking accounts and growth in debit card fee income. An increase in insurance and investment commissions of $154,000 in 2015 compared to 2014 was due to overall higher volumes including brokerage fees for investment transactions for customers. Gains on sales of loans increased $393,000 in 2015 compared to 2014 as longer-term mortgage rates declined causing a positive impact on mortgage volume. Net gains on sales of securities decreased $49,000 as opportunities to harvest gains on the security portfolio diminished. Net losses on sales of other assets were $14,000 lower in 2015 than in the prior year as write-downs of values of other real estate properties and losses on sales of properties were significantly lower in 2015 than in 2014. Earnings on life insurance policies were $349,000 higher in 2015 than 2014 as a death benefit was received on a former employee’s life insurance policy. Other noninterest income declined $92,000 in 2015 compared to 2014 as a result of losses experienced in the Company’s investments in its data processing subsidiary and a title insurance agency.

Total noninterest income increased $557,000 in 2014 compared to 2013. Customer service charges increased $274,000 in 2014 compared to the prior year as a result of service charges on ChoiceOne’s new checking accounts and growth in debit card fee income. An increase in insurance and investment commissions of $80,000 in 2014 compared to 2013 was due to overall higher volumes including brokerage fees for investment transactions for customers. Gains on sales of loans decreased $543,000 in 2014 compared to 2013 as increases in longer-term mortgage rates that occurred in the second half of 2013 and early 2014 caused a reduction in residential mortgage volume, while a decline in longer-term interest rates in the last quarter of 2014 had a positive impact on mortgage volume. Net gains on sales of securities increased $174,000 as rates stayed relatively flat during 2014, allowing for opportunities to harvest gains on the security portfolio. Net losses on sales of other assets were $687,000 lower in 2014 than in the prior year as write-downs of values of other real estate properties and losses on sales of properties were significantly lower in 2014 than in 2013. Other noninterest income declined $119,000 in 2014 compared to 2013 as a result of losses experienced in the Company’s investments in its data processing subsidiary and a title insurance agency.

Noninterest Expense

Total noninterest expense increased $1.5 million in 2015 compared to 2014. Salaries and benefits increased $817,000 in 2015 compared to the prior year as higher costs related to salaries, health insurance, retirement contributions and higher commission expenses. Data processing expense increased $463,000 as a result of higher costs related to electronic banking and software maintenance costs and the cost to upgrade the bank’s data processing and online banking software. Professional fees increased $82,000 as an increase of $101,000 in consulting expenses was partially offset by a decline in other professional fees. The $229,000 increase in other noninterest expense was partially due to an increase in recruiting expenses and loan origination costs.

25

Total noninterest expense increased $130,000 in 2014 compared to 2013. Salaries and benefits increased $216,000 in 2014 compared to the prior year as higher costs related to salaries, health insurance, and retirement contributions were partially offset by lower commission expenses. Data processing expense increased $182,000 as a result of higher costs related to electronic banking and software maintenance costs. The $255,000 decrease in loan and collection expense in 2014 compared to the prior year was caused by a lower level of other real estate properties and lower costs related to collection of nonperforming loans and maintenance of foreclosed properties.

Income Taxes

Income taxes decreased $131,000 in 2015 compared to 2014. The decrease in income tax expense in 2015 was caused by lower income before taxes and the effect of a nontaxable life insurance death benefit received in 2015. Income taxes increased $293,000 in 2014 compared to 2013. The increase in income tax expense was caused by higher income before taxes. The effective tax rate was 25% in 2015, compared to 27% in 2014. The decrease in the effective tax rate was primarily due to the nontaxable death benefit received in 2015. The effective tax rate was 27% in 2014 compared to 26% in 2013. The increase in the effective tax rate was caused by the portion of income before income tax comprised of nontaxable income declining.

Financial Condition

Summary

Total assets were $567.7 million as of December 31, 2015, which represented an increase of $18.1 million or 3.3% from the end of 2014. Securities available for sale increased $17.6 million during 2015 as management purchased securities to support asset growth. Loans increased $3.2 million in 2015, with most of the increase occurring in commercial and industrial loans. The allowance for loan losses increased $21,000 as the loan portfolio grew, but was offset by the quality of loans improving allowing for minimal provision expense. Net other real estate owned decreased $119,000 in 2015 with increased effort of the Bank to reduce this balance and therefore collection expenses. Total deposits increased $39.9 million in 2015 due to increases in checking deposits and savings deposits, which were partially offset by a decrease in local certificates of deposit.

Securities

The Bank’s securities available for sale balances as of December 31 were as follows:

(Dollars in thousands)
	2015		2014
U.S. Government and federal agency	$	57,207	$	44,503
U.S. Treasury notes and bonds		6,100		8,058
State and municipal		77,754		69,835
Mortgage-backed		6,970		8,942
Corporate		8,387		7,538
Foreign debt		995		994
Equity securities		2,453		2,275
Asset-backed securities		270		376
Total	$	160,136	$	142,521

The securities available for sale portfolio increased $17.6 million from December 31, 2014 to December 31, 2015. ChoiceOne purchased $71.2 million of securities during 2015 to replace securities that matured or were called and to provide growth in earning assets. Approximately $24.7 million in various securities were called or matured in 2015. Principal payments for municipal and mortgage-backed securities totaling $2.4 million were received during 2015. Various securities totaling approximately $25.9 million were sold during 2015 for net gains totaling $261,000. The Bank’s Investment Committee continues to monitor the portfolio and purchases securities as it considers prudent. Also, certain securities are sold under agreements to repurchase and management plans to continue this practice as a low-cost source of funding.

Equity securities included a money market preferred security (MMP) and a trust preferred security totaling $1.5 million, and common stock of $953,000 as of December 31, 2015. As of December 31, 2014, equity securities included an MMP of $1.5 million, and common stock of $775,000.

Management will continue to monitor its securities in 2016. Securities may be sold if believed prudent from a risk standpoint.

26

Loans

The Bank’s loan portfolio as of December 31 was as follows:

(Dollars in thousands)
	2015		2014
Agricultural	$	40,232	$	41,098
Commercial and industrial		94,347		88,062
Consumer		20,090		20,752
Real estate - commercial		97,736		99,807
Real estate - construction		5,390		2,691
Real estate - residential		91,509		93,703
Total loans	$	349,304	$	346,113

The loan portfolio (excluding loans held for sale) increased $3.2 million from December 31, 2014 to December 31, 2015. Economic factors in ChoiceOne’s market areas demonstrated signs of improvement, which affected loan demand in 2015. Growth experienced in the commercial and industrial and real estate – construction loan categories was due in part to calling efforts by ChoiceOne’s loan officers as well as continued low interest rates on residential real estate.

Information regarding impaired loans can be found in Note 3 to the consolidated financial statements included in this report. In addition to its review of the loan portfolio for impaired loans, management also monitors various nonperforming loans. Nonperforming loans are comprised of (1) loans accounted for on a nonaccrual basis; (2) loans, not included in nonaccrual loans, which are contractually past due 90 days or more as to interest or principal payments; and (3) loans, not included in nonaccrual or past due 90 days or more, which are considered troubled debt restructurings.

The balances of these nonperforming loans as of December 31 were as follows:

(Dollars in thousands)
	2015		2014
Loans accounted for on a nonaccrual basis	$	2,198	$	3,361
Loans contractually past due 90 days or more as to principal or interest payments		29		58
Loans considered troubled debt restructurings which are not included above		3,271		3,175
Total	$	5,498	$	6,594

Nonaccrual loans included $50,000 in agricultural loans, $77,000 in commercial and industrial loans, $1,640,000 in commercial real estate loans, and $431,000 in residential real estate loans as of December 31, 2015. Nonaccrual loans included $38,000 in commercial and industrial loans, $2,652,000 in commercial real estate loans, and $671,000 in residential real estate loans as of December 31, 2014. The primary reason for the decline in nonaccrual loans in 2015 was loan paydowns. Loans considered troubled debt restructurings which were not on a nonaccrual basis and were not 90 days or more past due as to principal or interest payments consisted of $1,149,000 in commercial real estate loans, $24,000 in consumer loans, and $2,098,000 in residential real estate loans at December 31, 2015, compared to $26,000 in consumer loans, $1.2 million in commercial real estate loans, and $1.9 million in residential real estate loans at December 31, 2014. Troubled debt restructurings consist of loans where the terms have been modified to assist the borrowers in making their payments. The modifications can include capitalization of interest onto the principal balance, reduction in interest rate, and extension of the loan term.

Management also maintains a list of loans that are not classified as nonperforming loans but where some concern exists as to the borrowers’ abilities to comply with the original loan terms. These loans totaled $6.0 million as of December 31, 2015, compared to $7.2 million as of December 31, 2014.

27

Deposits and Other Funding Sources

The Bank’s deposit balances as of December 31 were as follows:

(Dollars in thousands)
	2015		2014
Noninterest-bearing demand deposits	$	122,937	$	113,006
Interest-bearing demand deposits		106,883		71,651
Money market deposits		86,987		78,272
Savings deposits		70,946		67,035
Local certificates of deposit		86,944		104,864
Total deposits	$	474,697	$	434,828

Total deposits increased $39.9 million from December 31, 2014 to December 31, 2015. Local certificates of deposit fell $17.9 million during 2015. Management believes that the decline in local certificates of deposits is in part due to the customer base both reentering the stock market and wanting more liquid funds available as seen in the increase in demand deposits, savings deposits, and money market deposits of $57.8 million.

Securities sold under agreements to repurchase decreased $17.3 million during 2015. The decrease was due to the decline of sweep repurchase accounts used by the Bank’s local customers as many transitioned into other interest-bearing demand deposits. Advances from the Federal Home Loan Bank of Indianapolis decreased $7.0 million in 2015 due to advances paid off with deposit growth. A blanket collateral agreement covering agricultural real estate loans and residential real estate loans was pledged against all outstanding advances at the end of 2015. Approximately $61.2 million of additional advances were available as of December 31, 2015 based on the collateral pledged.

In 2016, management will continue to focus its marketing efforts toward growth in local deposits. If local deposit growth is insufficient to support asset growth, management believes that advances from the FHLB, repurchase agreements and brokered certificates of deposit can address corresponding funding needs.

Shareholders’ Equity

Total shareholders’ equity increased $3.7 million from December 31, 2014 to December 31, 2015. The growth in equity resulted from the retention of earnings in 2015 as net income exceeded dividends paid by $3.6 million. Other comprehensive income increased $130,000 in 2015 primarily due to declining interest rates affecting the unrealized gains on available for sale securities.

Note 20 to the consolidated financial statements presents regulatory capital information for the Bank at the end of 2015 and 2014. Management will monitor these capital ratios during 2016 as they relate to asset growth and earnings retention. ChoiceOne’s Board of Directors and management do not plan to allow capital to decrease below those levels necessary to be considered “well capitalized” by regulatory guidelines. At December 31, 2015, the Bank was categorized as “well-capitalized.” On July 3, 2013, the FDIC Board of Directors approved the Regulatory Capital Interim Final Rule, implementing Basel III. This rule redefines Tier 1 capital as two components (Common Equity Tier 1 and Additional Tier 1), creates a new capital ratio (Common Equity Tier 1 Risk-based Capital Ratio) and implements a capital conservation buffer. It also revises the prompt corrective action thresholds and makes changes to risk weights for certain assets and off-balance-sheet exposures. Banks were required to transition into the new rule beginning on January 1, 2015. Based on ChoiceOne’s capital levels and balance sheet composition at December 31, 2015, management believes implementation of the new rule will have no material impact on ChoiceOne’s capital needs.

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Table 4 – Contractual Obligations

The following table discloses information regarding the maturity of ChoiceOne’s contractual obligations at December 31, 2015:

		Payment Due by Period
(Dollars in thousands)		Total		Less than 1 year		1 - 3 Years		3 - 5 Years		More than 5 Years
Time deposits	$	86,944	$	54,241	$	25,178	$	7,232	$	293
Repurchase agreements		9,460		9,460		—		—		—
Advances from Federal Home Loan Bank		11,332		11,032		67		73		161
Operating leases		217		55		34		36		91
Other obligations		789		99		202		199		289
Total	$	108,742	$	74,886	$	25,481	$	7,540	$	834

Liquidity and Interest Rate Risk

Net cash from operating activities was $4.0 million for 2015 compared to $7.5 million for 2014. Lower net proceeds from loan sales was the main reason for the decrease. Cash used in investing activities was $22.7 million in 2015 compared to $38.9 million in 2014. The change was caused by a lower level of loan growth in 2015 than in 2014, offset by more net securities growth. Cash flows from financing activities were $11.2 million in 2015 compared to $16.7 million in the prior year. The effect of growth in deposits in 2015 partially offset by a lower level of net proceeds from Federal Home Loan Bank advances and a lower level of growth in repurchase agreements in 2015 than in the prior year.

ChoiceOne’s primary market risk exposure occurs in the form of interest rate risk. Liquidity risk also can have an impact but to a lesser extent. ChoiceOne’s business is transacted in U.S. dollars with no foreign exchange risk exposure. Agricultural loans comprise a relatively small portion of ChoiceOne’s total assets. Management believes that ChoiceOne’s exposure to changes in commodity prices is insignificant.

Management believes that the current level of liquidity is sufficient to meet the Bank’s normal operating needs. This belief is based upon the availability of deposits from both the local and national markets, maturities of securities, normal loan repayments, income retention, federal funds purchased lines of credit from correspondent banks, and advances available from the FHLB. Liquidity risk deals with ChoiceOne’s ability to meet its cash flow requirements. These requirements include depositors desiring to withdraw funds and borrowers seeking credit. Relatively short-term liquid funds exist in the form of lines of credit to purchase federal funds at four of the Bank’s correspondent banks. As of December 31, 2015, the amount of federal funds available for purchase from the Bank’s correspondent banks totaled approximately $44.0 million. ChoiceOne had no federal funds purchased at the end of 2015 or 2014. The Bank also has a line of credit secured by ChoiceOne’s commercial loans with the Federal Reserve Bank of Chicago for $69.8 million, which is designated for nonrecurring short-term liquidity needs. Longer-term liquidity needs may be met through local deposit growth, maturities of securities, normal loan repayments, advances from the FHLB, brokered certificates of deposit, and income retention. Approximately $61.2 million of borrowing capacity was available from the FHLB based on agricultural real estate loans and residential real estate loans pledged as collateral at year-end 2015. The acceptance of brokered certificates of deposit is not limited as long as the Bank is categorized as “well capitalized” under regulatory guidelines.

Critical Accounting Policies And Estimates

Management’s discussion and analysis of financial condition and results of operations as well as disclosures found elsewhere in this report are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the market value of securities, the amount of the allowance for loan losses, loan servicing rights, carrying value of goodwill, and income taxes. Actual results could differ from those estimates.

Securities

Securities available for sale may be sold prior to maturity due to changes in interest rates, prepayment risks, yield, availability of alternative investments, liquidity needs, credit rating changes, or other factors. Securities classified as available for sale are reported at their fair value. Declines in the fair value of securities below their cost that are considered to be “other than temporary” are recorded as losses in the income statement. In estimating whether a fair value decline is considered to be “other than temporary,” management considers the length of time and extent that the security’s fair value has been less than its carrying value, the financial condition and near-term prospects of the issuer, and the Bank’s ability and intent to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

29

Market values for securities available for sale are obtained from outside sources and applied to individual securities within the portfolio. The difference between the amortized cost and the fair value of securities is recorded as a valuation adjustment and reported net of tax effect in other comprehensive income.

Allowance for Loan Losses

The allowance for loan losses is maintained at a level believed adequate by management to absorb probable incurred losses inherent in the consolidated loan portfolio. Management’s evaluation of the adequacy of the allowance for loan losses is an estimate based on reviews of individual loans, assessments of the impact of current economic conditions on the portfolio and historical loss experience of seasoned loan portfolios.

Management believes the accounting estimate related to the allowance for loan losses is a “critical accounting estimate” because (1) the estimate is highly susceptible to change from period to period because of assumptions concerning the changes in the types and volumes of the portfolios and current economic conditions and (2) the impact of recognizing an impairment or loan loss could have a material effect on the Company’s assets reported on the balance sheet as well as its net income.

Loan Servicing Rights

Loan servicing rights represent the estimated value of servicing loans that are sold with servicing retained by ChoiceOne. Servicing rights are expensed in proportion to, and over the period of, estimated net servicing revenues. Management’s accounting treatment of loan servicing rights is estimated based on current prepayment speeds that are typically market driven.

Management believes the accounting estimate related to loan servicing rights is a “critical accounting estimate” because (1) the estimate is highly susceptible to change from period to period because of significant changes within long-term interest rates affecting the prepayment speeds for current loans being serviced and (2) the impact of recognizing an impairment loss could have a material effect on ChoiceOne’s net income. Management has obtained a third-party valuation of its loan servicing rights to corroborate its current carrying value at the end of each reporting period.

Goodwill

Generally accepted accounting principles require that the fair values of the assets and liabilities of an acquired entity be recorded at their fair value on the date of acquisition. The fair values are determined using both internal computations and information obtained from outside parties when deemed necessary. The net difference between the price paid for the acquired company and the net value of its balance sheet is recorded as goodwill. Accounting principles also require that goodwill be evaluated for impairment on an annual basis or more frequently whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Under recently issued accounting pronouncements, ChoiceOne is permitted to first perform a qualitative assessment to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of equity is less than its carrying value. If the conclusion is that it is more likely than not that the fair value of equity is more than its carrying value, no further testing in the form of a quantitative assessment is necessary. If the conclusion is that it is more likely than not that the fair value of equity is less than its carrying value, then a two-step quantitative assessment test is performed to identify any potential goodwill impairment.

Management performed a qualitative assessment of goodwill as of June 30, 2014 and 2015 and December 31, 2014 and 2015. The analysis was performed including evaluation of the share price, book value, and financial results of ChoiceOne as compared to the previous year. Additionally, industry and market conditions were evaluated and compared. Average deal prices in the Midwest of closed transactions have indicated increases in deal values to tangible common equity, deal values to earnings, and core deposit premiums when compared to the observed prices used in the last quantitative assessment of goodwill in 2012. Further, macro-economic trends have been on a positive trajectory recently and there have been no adverse legal, regulatory, contractual, political or other factors that have materially impacted ChoiceOne. Upon completion of the qualitative assessment, ChoiceOne believes that it is more likely than not that the fair value of ChoiceOne’s equity exceeds the carrying value at the assessment date and there is no further quantitative assessment necessary.

Taxes

Income taxes include both a current and deferred portion. Deferred tax assets and liabilities are recorded to account for differences in the timing of the recognition of revenues and expenses for financial reporting and tax purposes. Generally accepted accounting principles require that deferred tax assets be reviewed to determine whether a valuation allowance should be established using a “more likely than not” standard. Based on its review of ChoiceOne’s deferred tax assets as of December 31, 2015, management determined that no valuation allowance was necessary.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest rate risk is related to liquidity because each is affected by maturing assets and sources of funds. ChoiceOne’s Asset/Liability Management Committee (the “ALCO”) attempts to stabilize the interest rate spread and avoid possible adverse effects when unusual or rapid changes in interest rates occur. The ALCO uses a simulation model to measure the Bank’s interest rate risk. The model incorporates changes in interest rates on rate-sensitive assets and liabilities. The degree of rate sensitivity is affected by prepayment assumptions that exist in the assets and liabilities. One method the ALCO uses of measuring interest rate sensitivity is the ratio of rate-sensitive assets to rate-sensitive liabilities. An asset or liability is considered to be rate-sensitive if it matures or otherwise reprices within a given time frame.

30

Table 5 documents the maturity or repricing schedule for ChoiceOne’s rate-sensitive assets and liabilities for selected time periods:

Table 5 – Maturities and Repricing Schedule

	As of December 31, 2015
(Dollars in thousands)		0 - 3 Months			3 - 12 Months			1 - 5 Years		Over 5 Years		Total
Assets
Securities available for sale	$	15,103		$	19,371		$	89,792	$	35,871	$	160,136
Federal Home Loan Bank stock		1,614			—			—		—		1,614
Federal Reserve Bank stock		—			—			—		1,573		1,573
Loans held for sale		4,957			—			—		—		4,957
Loans		138,074			57,910			140,902		12,418		349,304
Cash surrender value of life insurance policies		—			—			—		12,261		12,261
Rate-sensitive assets	$	159,748		$	77,281		$	230,694	$	62,123	$	529,845
Liabilities
Interest-bearing demand deposits	$	106,882		$	—		$	—	$	—	$	106,882
Money market deposits		86,987			—			—		—		86,987
Savings deposits		70,946			—			—		—		70,946
Certificates of deposits		19,294			37,684			29,714		252		86,944
Repurchase agreements		9,460			—			—		—		9,460
Advances from FHLB		11,007			24			140		161		11,332
Rate-sensitive liabilities	$	304,576		$	37,708		$	29,854	$	413	$	372,551
Rate-sensitive assets less rate-sensitive liabilities:
Asset (liability) gap for the period	$	(144,828	)	$	39,574		$	200,840	$	61,709	$	157,294
Cumulative asset (liability) gap	$	(144,828	)	$	(105,255	)	$	95,585	$	157,294

Under this method, the ALCO measures interest rate sensitivity by focusing on the one-year repricing gap. ChoiceOne’s ratio of rate-sensitive assets to rate-sensitive liabilities that matured or repriced within a one-year time frame was 69% at December 31, 2015, compared to 69% at December 31, 2014. Table 5 above shows the entire balance of interest-bearing demand deposits, savings deposits, money market deposits, and overnight repurchase agreements in the shortest repricing term. Although these categories have the ability to reprice immediately, management has some control over the actual timing or extent of the changes in interest rates on these liabilities. The ALCO plans to continue to monitor the ratio of rate-sensitive assets to rate-sensitive liabilities on a quarterly basis in 2016. As interest rates change during 2016, the ALCO will attempt to match its maturing assets with corresponding liabilities to maximize ChoiceOne’s net interest income.

Another method the ALCO uses to monitor its interest rate sensitivity is to subject rate-sensitive assets and liabilities to interest rate shocks. At December 31, 2015, management used a simulation model to subject its assets and liabilities up to an immediate 400 basis point increase. The maturities of loans and mortgage-backed securities were affected by certain prepayment assumptions. Maturities for interest-bearing core deposits were based on an estimate of the period over which they would be outstanding. The maturities of advances from the FHLB were based on their contractual maturity dates. In the case of variable rate assets and liabilities, repricing dates were used to determine their values. The simulation model measures the effect of immediate interest rate changes on both net interest income and shareholders’ equity.

31

Table 6 provides an illustration of hypothetical interest rate changes as of December 31, 2015 and 2014:

Table 6 – Sensitivity to Changes in Interest Rates

	2015
(Dollars in thousands)		Net Interest Income	Percent Change			Market Value of Equity	Percent Change
Change in Interest Rate
400 basis point rise	$	18,284	-14	%	$	88,045	-18	%
300 basis point rise		18,571	-13	%		93,100	-13	%
200 basis point rise		18,802	-10	%		98,626	-8	%
100 basis point rise		19,015	-5	%		103,565	-4	%
Base rate scenario		19,380	-	%		107,525	-	%
100 basis point decline		18,444	-2	%		99,371	-8	%
200 basis point decline		17,503	-3	%		86,702	-19	%
300 basis point decline		16,956	-4	%		85,624	-20	%
400 basis point decline		16,739	-6	%		85,252	-21	%

	2014
		Net Interest Income	Percent Change			Market Value of Equity	Percent Change
Change in Interest Rate
400 basis point rise	$	17,153	-8	%	$	76,569	-25	%
300 basis point rise		17,243	-7	%		77,095	-24	%
200 basis point rise		17,633	-5	%		79,356	-22	%
100 basis point rise		18,171	-2	%		92,528	-9	%
Base rate scenario		18,627	-	%		101,715	-	%
100 basis point decline		18,046	-3	%		100,205	-1	%
200 basis point decline		17,670	-5	%		96,397	-5	%
300 basis point decline		17,278	-7	%		91,371	-10	%
400 basis point decline		16,862	-9	%		86,582	-15	%

As of both December 31, 2015 and December 31, 2014, the Bank was within its guidelines for immediate rate shocks up and down for both net interest income and the market value of shareholders’ equity. The ALCO plans to continue to monitor the effect of changes in interest rates on both net interest income and shareholders’ equity and will make changes in the duration of its rate-sensitive assets and rate-sensitive liabilities where necessary.

32

Item 8. Financial Statements and Supplementary Data

   

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
of ChoiceOne Financial Services, Inc.

We have audited the accompanying consolidated balance sheet of ChoiceOne Financial Services, Inc. (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each year in the three-year period ended December 31, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ChoiceOne Financial Services, Inc. as of December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each year in the three-year period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

	Plante & Moran, PLLC
Grand Rapids, Michigan
March 21, 2016

33

ChoiceOne Financial Services, Inc.

Consolidated balance sheets

(Dollars in thousands)	December 31,
	2015			2014
Assets
Cash and due from banks	$	11,187		$	16,650
Securities available for sale (Note 2)		160,136			142,521
Federal Home Loan Bank stock		1,614			1,913
Federal Reserve Bank stock		1,573			1,272
Loans held for sale		4,957			2,170
Loans (Note 3)		349,304			346,113
Allowance for loan losses (Note 3)		(4,194	)		(4,173	)
Loans, net		345,110			341,940
Premises and equipment, net (Note 5)		11,847			11,795
Other real estate owned, net (Note 7)		31			150
Cash value of life insurance policies		12,261			12,071
Intangible assets, net (Note 6)		379			827
Goodwill (Note 6)		13,728			13,728
Other assets		4,923			4,603
Total assets	$	567,746		$	549,640
Liabilities
Deposits – noninterest-bearing (Note 8)	$	122,937		$	113,006
Deposits – interest-bearing (Note 8)		351,759			321,822
Total deposits		474,696			434,828
Repurchase agreements (Note 9)		9,460			26,743
Advances from Federal Home Loan Bank (Note 10)		11,332			18,363
Other liabilities (Notes 11 and 13)		2,416			3,516
Total liabilities		497,904			483,450
Shareholders’ Equity (Note 20)
Preferred stock; shares authorized: 100,000; shares outstanding: none		—			—
Common stock and paid-in capital, no par value; shares authorized: 7,000,000; shares outstanding: 3,295,228 in 2015 and 3,295,834 in 2014 (Note 14)		46,501			46,552
Retained earnings		22,138			18,565
Accumulated other comprehensive income, net		1,203			1,073
Total shareholders’ equity		69,842			66,190
Total liabilities and shareholders’ equity	$	567,746		$	549,640

See accompanying notes to consolidated financial statements.

34

ChoiceOne Financial Services, Inc.

Consolidated statements of income

(Dollars in thousands, except per share data)	Years ended December 31,
	2015			2014			2013
Interest income
Loans, including fees	$	15,971		$	15,765		$	15,801
Securities:
Taxable		1,939			1,847			1,812
Tax exempt		1,428			1,393			1,390
Other		14			9			12
Total interest income		19,352			19,014			19,015
Interest expense
Deposits		877			1,042			1,328
Advances from Federal Home Loan Bank		83			63			45
Other		30			46			46
Total interest expense		990			1,151			1,419
Net interest income		18,362			17,863			17,596
Provision for loan losses (Note 3)		100			100			300
Net interest income after provision for loan losses		18,262			17,763			17,296
Noninterest income
Customer service charges		4,083			3,951			3,677
Insurance and investment commissions		1,060			906			826
Gains on sales of loans (Note 4)		1,416			1,023			1,566
Net gains on sales of securities (Note 2)		261			311			137
Net losses on sales and write-downs of other assets (Note 7)		(121	)		(135	)		(822	)
Earnings on life insurance policies		651			302			299
Other		352			444			562
Total noninterest income		7,702			6,802			6,245
Noninterest expense
Salaries and benefits (Notes 13 and 14)		9,273			8,456			8,240
Occupancy and equipment (Note 5)		2,396			2,389			2,341
Data processing		2,320			1,857			1,675
Professional fees		971			889			887
Supplies and postage		413			440			493
Advertising and promotional		253			275			239
Intangible amortization (Note 6)		448			448			448
Loan and collection expense		104			122			377
FDIC insurance		288			337			330
Other		1,810			1,581			1,634
Total noninterest expense		18,276			16,794			16,664
Income before income tax		7,688			7,771			6,877
Income tax expense (Note 11)		1,945			2,076			1,783
Net income	$	5,743		$	5,695		$	5,094
Basic earnings per share (Note 15)	$	1.75		$	1.73		$	1.55
Diluted earnings per share (Note 15)	$	1.74		$	1.72		$	1.54
Dividends declared per share	$	0.66		$	0.59		$	0.54

See accompanying notes to consolidated financial statements.

35

ChoiceOne Financial Services, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)	Years ended December 31,
	2015			2014			2013
Net income	$	5,743		$	5,695		$	5,094
Other comprehensive income:
Changes in net unrealized gains (losses) on investment securities available for sale, net of tax expense (benefit) of $168, $588, and $(1,096) for the years ended December 31, 2015, 2014, and 2013 respectively		324			1,141			(2,130	)
Reclassification adjustment for realized gain on sale of investment securities available for sale included in net income, net of tax benefit of $89, $106, and $47 for the years ended December 31, 2015, 2014, and 2013 respectively		(172	)		(205	)		(90	)
Change in adjustment for pension and other postretirement benefits, net of tax benefit (expense) of $11, $5, and $(7) for the years ended December 31, 2015, 2014, and 2013 respectively		(22	)		(11	)		12
Other comprehensive income/(loss), net of tax		130			925			(2,208	)
Comprehensive income	$	5,873		$	6,620		$	2,886

See accompanying notes to consolidated financial statements.

36

ChoiceOne Financial Services, Inc.

Consolidated statements of changes in shareholders’ equity

										Accumulated
				Common						Other
				Stock and						Comprehensive
	Number of			Paid in			Retained			Income/(Loss),
(Dollars in thousands, except per share data)	Shares			Capital			Earnings			Net			Total
Balance, December 31, 2012		3,298,081		$	46,649		$	11,501		$	2,356		$	60,506
Net income								5,094						5,094
Other comprehensive loss											(2,208	)		(2,208	)
Shares issued		8,850			130									130
Shares repurchased		(11,468	)		(192	)								(192	)
Change in ESOP repurchase obligation					(14	)								(14	)
Effect of employee stock purchases					11									11
Restricted stock units issued					11									11
Cash dividends declared ($0.54 per share)								(1,780	)					(1,780	)
Balance, December 31, 2013		3,295,463		$	46,595		$	14,815		$	148		$	61,558
Net income								5,695						5,695
Other comprehensive income											925			925
Shares issued		8,925			132									132
Shares repurchased		(9,496	)		(203	)								(203	)
Change in ESOP repurchase obligation					(32	)								(32	)
Effect of employee stock purchases					12									12
Restricted stock units issued		942			48									48
Cash dividends declared ($0.59 per share)								(1,945	)					(1,945	)
Balance, December 31, 2014		3,295,834		$	46,552		$	18,565		$	1,073		$	66,190
Net income								5,743						5,743
Other comprehensive income											130			130
Shares issued		13,310			206									206
Shares repurchased		(16,200	)		(371	)								(371	)
Change in ESOP repurchase obligation					(4	)								(4	)
Effect of employee stock purchases					15									15
Restricted stock units issued		2,284			103									103
Cash dividends declared ($0.66 per share)								(2,170	)					(2,170	)
Balance, December 31, 2015		3,295,228		$	46,501		$	22,138		$	1,203		$	69,842

See accompanying notes to consolidated financial statements.

37

ChoiceOne Financial Services, Inc.

Consolidated statements of cash flows

(Dollars in thousands)	Years ended December 31,
	2015			2014			2013
Cash flows from operating activities:
Net income	$	5,743		$	5,695		$	5,094
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses		100			100			300
Depreciation		986			986			927
Amortization		1,497			1,493			1,636
Compensation expense on employee stock purchases and restricted stock units		118			60			22
Net gains on sales of securities		(261	)		(311	)		(137	)
Gains on sales of loans		(1,416	)		(1,023	)		(1,566	)
Loans originated for sale		(47,498	)		(29,850	)		(42,906	)
Proceeds from loan sales		46,077			29,561			45,204
Earnings on bank-owned life insurance		(347	)		(302	)		(299	)
Earnings from death benefit		(304	)		—			—
Proceeds on bank-owned life insurance		461			—			—
(Gains)/losses on sales of other real estate owned		30			(24	)		(122	)
Write-downs of other real estate owned		91			154			926
Proceeds from sales of other real estate owned		406			789			1,604
Deferred federal income tax (benefit)/expense		(631	)		(460	)		59
Net change in:
Other assets		(503	)		(380	)		289
Other liabilities		(571	)		985			(667	)
Net cash from operating activities		3,978			7,473			10,364
Cash flows from investing activities:
Sales of securities available for sale		25,876			24,766			8,790
Maturities, prepayments and calls of securities available for sale		27,084			11,427			26,072
Purchases of securities available for sale		(70,902	)		(41,770	)		(40,687	)
Purchase of Federal Reserve Bank stock		(301	)		—			—
Calls of FHLB stock		299			565			—
Purchase of bank-owned life insurance policies		—			(1,500	)		—
Loan originations and payments, net		(3,678	)		(31,370	)		(6,812	)
Additions to premises and equipment		(1,038	)		(786	)		(801	)
Net cash from investing activities		(22,660	)		(38,668	)		(13,438	)
Cash flows from financing activities:
Net change in deposits		39,868			16,701			(6,072	)
Net change in repurchase agreements		(17,283	)		710			6,461
Proceeds from Federal Home Loan Bank advances		194,575			87,700			7,000
Payments on Federal Home Loan Bank advances		(201,606	)		(75,729	)		(1,028	)
Issuance of common stock		206			132			130
Repurchase of common stock		(371	)		(203	)		(192	)
Cash dividends		(2,170	)		(1,945	)		(1,780	)
Net cash from financing activities		13,219			27,366			4,519
Net change in cash and cash equivalents		(5,463	)		(3,829	)		1,445
Beginning cash and cash equivalents		16,650			20,479			19,034
Ending cash and cash equivalents	$	11,187		$	16,650		$	20,479
Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,005		$	1,161		$	1,456
Cash paid for income taxes		2,395			1,760			2,000
Loans transferred to other real estate owned		408			561			897

See accompanying notes to consolidated financial statements.

38

ChoiceOne Financial Services, Inc.
Notes to Consolidated Financial Statements

Note 1 – Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include ChoiceOne Financial Services, Inc., its wholly-owned subsidiary, ChoiceOne Bank, and ChoiceOne Bank’s wholly-owned subsidiary, ChoiceOne Insurance Agencies, Inc. (together referred to as “ChoiceOne”). Intercompany transactions and balances have been eliminated in consolidation.

Nature of Operations

The Bank is a full-service community bank that offers commercial, consumer, and real estate loans as well as traditional demand, savings and time deposits to both commercial and consumer clients in Kent, Muskegon, Newaygo, and Ottawa counties in Michigan. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and real estate. Commercial loans are expected to be repaid from the cash flows from operations of businesses. Real estate loans are collateralized by either residential or commercial real estate.

The Insurance Agency is a wholly-owned subsidiary of the Bank. The Insurance Agency sells insurance policies such as life and health for both commercial and consumer clients. The Insurance Agency also offers alternative investment products such as annuities and mutual funds through a registered broker.

Together, the Bank and the Insurance Agency account for substantially all of ChoiceOne’s assets, revenues and operating income.

Use of Estimates

To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, ChoiceOne’s management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided. Actual results may differ from these estimates. Estimates associated with securities available for sale, the allowance for loan losses, other real estate owned, core deposit intangible assets, loan servicing rights, goodwill, and fair values of certain financial instruments are particularly susceptible to change.

Cash and Cash Equivalents

Cash and cash equivalents are defined to include cash on hand, demand deposits with other banks, and federal funds sold. Cash flows are reported on a net basis for customer loan and deposit transactions, deposits with other financial institutions, and short-term borrowings with original terms of 90 days or less.

Securities

Securities are classified as available for sale because they might be sold before maturity. Securities classified as available for sale are carried at fair value, with unrealized holding gains and losses reported separately in the accumulated other comprehensive income or loss section of shareholders’ equity, net of tax effect. Restricted investments in Federal Reserve Bank stock and Federal Home Loan Bank stock are carried at cost. Equity securities consist of investments in preferred stock, trust-preferred securities, and investments in common stock of other financial institutions.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized using the level-yield method without anticipating prepayments. Gains or losses on sales are recorded on the trade date based on the amortized cost of the security sold.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The evaluation of securities includes consideration given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether ChoiceOne has the intent to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. In analyzing an issuer’s financial condition, management may consider whether the securities are issued by the federal government or its agencies, or U.S. Government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

39

ChoiceOne Financial Services, Inc.
Notes to Consolidated Financial Statements

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether ChoiceOne intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If ChoiceOne intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment. If a security is determined to be other-than-temporarily impaired, but ChoiceOne does not intend to sell the security, only the credit portion of the estimated loss is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses. Loans held for sale are reported at the lower of cost or market, on an aggregate basis.

Interest income on loans is reported on the interest method and includes amortization of net deferred loan fees and costs over the estimated loan term. Interest on loans is accrued based upon the principal balance outstanding. The accrual of interest is discontinued at the time at which commercial loans are 90 days past due unless the loan is secured by sufficient collateral and is in the process of collection. Interest on consumer or real estate secured loans is discontinued at the time at which the loan is 120 days past due unless the credit is secured by sufficient collateral and is in the process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed into nonaccrual status or charged off at an earlier date if collection of principal or interest is considered doubtful. Interest accrued but not received is reversed against interest income when the loans are placed into nonaccrual status. Interest received on such loans is applied to principal until qualifying for return to accrual. Loans are returned to accrual basis when all the principal and interest amounts contractually due are brought current and future payment is reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses. The allowance for loan losses is increased by the provision for loan losses and decreased by loans charged off less any recoveries of charged off loans. Management estimates the allowance for loan losses balance required based on past loan loss experience, the nature and volume of the loan portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance for loan losses may be made for specific loans, but the entire allowance for loan losses is available for any loan that, in management’s judgment, should be charged off. Loan losses are charged against the allowance for loan losses when management believes that collection of a loan balance is not possible.

The allowance for loan losses consists of general and specific components. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful.

A loan is impaired when full payment under the loan terms is not expected. Commercial loans are evaluated for impairment on an individual loan basis. If a loan is considered impaired, a portion of the allowance for loan losses is allocated to the loan so that it is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller-balance homogeneous loans such as consumer and residential real estate mortgage loans are collectively evaluated for impairment and, accordingly, they are not separately identified for impairment disclosures.

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation. Land is carried at cost. Land improvements are depreciated using the straight-line method with useful lives ranging from 7 to 15 years. Building and related components are depreciated using the straight-line method with useful lives ranging from 5 to 39 years. Leasehold improvements are depreciated over the shorter of the estimated life or the lease term. Furniture and equipment are depreciated using the straight-line method with useful lives ranging from 3 to 7 years. Fixed assets are periodically reviewed for impairment. If impaired, the assets are recorded at fair value.

Other Real Estate Owned

Real estate properties acquired in the collection of a loan are initially recorded at the lower of the Bank’s basis in the loans or fair value at acquisition establishing a new cost basis. Any reduction to fair value from the carrying value of the related loan is accounted for as a loan loss. After acquisition, a valuation allowance reduces the reported amount to the lower of the initial amount or fair value less costs to sell. Expenses to repair or maintain properties are included within other noninterest expenses. Gains and losses upon disposition and changes in the valuation allowance are reported net within noninterest income.

40

ChoiceOne Financial Services, Inc.
Notes to Consolidated Financial Statements

Loan Servicing Rights

Loan servicing rights represent the allocated value of servicing rights on loans sold with servicing retained. Servicing rights are expensed in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on the fair value of the rights, using groupings of the underlying loans as to interest rates and then, secondarily, as to geographic and prepayment characteristics. Fair value is determined using prices for similar assets with similar characteristics when available or based upon discounted cash flows using market-based assumptions. Any impairment of a grouping is reported as a valuation allowance.

Goodwill

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of the acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment and any such impairment will be recognized in the period identified.

Loan Commitments and Related Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet financing needs of customers. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Employee Benefit Plans

ChoiceOne’s 401(k) plan allows participants to make contributions to their individual accounts under the plan in amounts up to the IRS maximum. Employer matching contributions from ChoiceOne to its 401(k) plan are discretionary. ChoiceOne also allows retired employees to participate in its health insurance plan. Employees who have attained age 55 and completed at least ten years of service to ChoiceOne are eligible to participate as a retiree until they are eligible for Medicare. These post-retirement benefits are accrued during the years in which the employee provides service.

Employee Stock Ownership Plan

Dividends on Employee Stock Ownership Plan (the “ESOP”) shares are recorded as a reduction of retained earnings. Upon distribution of shares to a participant, the participant has the right to require the Company to purchase his or her shares at fair value in accordance with the terms and conditions of the ESOP. As such, these shares are not classified in shareholders’ equity as permanent equity.

Income Taxes

Income tax expense is the sum of the current year income tax due and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

Earnings Per Share

Basic earnings per common share (“EPS”) is based on weighted-average common shares outstanding. The weighted-average number of shares used in the computation of basic and diluted EPS includes shares allocated to the ESOP. Diluted EPS further assumes issue of any dilutive potential common shares issuable under stock options or restricted stock units granted.

41

ChoiceOne Financial Services, Inc.
Notes to Consolidated Financial Statements

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income or loss. Other comprehensive income or loss includes unrealized gains and losses on securities available for sale and changes in the funded status of post-retirement plans, net of tax, which are also recognized as a separate component of shareholders’ equity.

Accumulated other comprehensive income was as follows:

(Dollars in thousands)	Years ended December 31,
	2015			2014
Unrealized gains on available for sale securities		1,632			1,401
Unrecognized gains on post-retirement benefits		191			225
Tax effect		(620	)		(553	)
Accumulated other comprehensive income	$	1,203		$	1,073

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe that there are any such matters that may have a material effect on the financial statements as of December 31, 2015.

Cash Restrictions

Cash on hand or on deposit with the Federal Reserve Bank of $1.1 million and $409,000 was required to meet regulatory reserve and clearing requirements at December 31, 2015 and 2014, respectively. The balance in excess of the amount required was interest-bearing as of December 31, 2015 and December 31, 2014.

Stock-Based Compensation

The Company values share-based stock option awards granted using the Black-Scholes option-pricing model. The Company recognizes compensation expense for its awards on a straight-line basis over the requisite service period for the entire award (straight-line attribution method), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant-date fair value of the award that is vested at that time. Compensation costs related to stock options granted are disclosed in Note 14.

ChoiceOne has granted restricted stock units to a select group of employees under the Stock Incentive Plan of 2012. Restricted stock units vest in three annual installments on each of the next three anniversaries of the grant date. Certain additional vesting provisions apply. Each unit, once vested, is settled by delivery of one share of ChoiceOne common stock.

Dividend Restrictions

Banking regulations require the maintenance of certain capital levels and may limit the amount of dividends that may be paid by the Bank to ChoiceOne (see Note 20).

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, which are more fully documented in Note 18 to the consolidated financial statements. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Operating Segments

While ChoiceOne’s management monitors the revenue streams of various products and services for the Bank and Insurance Agency, operations and financial performance are evaluated on a company-wide basis. Accordingly, all of the financial service operations are considered by management to be aggregated into one reportable operating segment.

42

ChoiceOne Financial Services, Inc.
Notes to Consolidated Financial Statements

Recent Accounting Pronouncements

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU adopts a standardized approach for revenue recognition and was a joint effort with the International Accounting Standards Board (IASB). The new revenue recognition standard is based on a core principle of recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU does not apply to financial instruments. The ASU is effective for public entities for reporting periods beginning after December 15, 2017 (therefore, for the year ending December 31, 2018 for the Corporation). Early implementation is not allowed for public companies. Management is currently assessing the impact to the Corporation’s consolidated financial statements.

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU covers various changes to the accounting, measurement, and disclosure related to certain financial instruments. The most significant change included in the update is the requirement for certain equity investments (excluding investments that are consolidated or accounted for under the equity method) to be measured at fair value with changes in fair value recognized in net income. Alternatively, equity investments without readily determinable fair values can be recorded at cost, and periodically evaluated for impairment using a qualitative assessment. If the qualitative assessment indicates the investment is impaired, it is required to be measured at fair value. The update also eliminates the requirement for public business entities to disclose the methods and assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The new standard is effective for the year ending December 31, 2018 for the Corporation. Management is currently assessing the impact to the Corporation’s consolidated financial statements.

Reclassifications
Certain amounts presented in prior year consolidated financial statements have been reclassified to conform to the current year’s presentation.

43

ChoiceOne Financial Services, Inc.
Notes to Consolidated Financial Statements

Note 2 – Securities

The fair value of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) at December 31 were as follows:

	2015
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	57,406	$	30	$	(229	)	$	57,207
U.S. Treasury notes and bonds		6,133		—		(33	)		6,100
State and municipal		76,005		1,858		(109	)		77,754
Mortgage-backed		6,989		26		(45	)		6,970
Corporate		8,418		8		(39	)		8,387
Foreign debt		1,000		—		(5	)		995
Equity securities		2,279		174		—			2,453
Asset-backed securities		274		—		(4	)		270
Total	$	158,504	$	2,096	$	(464	)	$	160,136

	2014
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	44,584	$	77	$	(158	)	$	44,503
U.S. Treasury notes and bonds		8,077		11		(30	)		8,058
State and municipal		68,376		1,697		(238	)		69,835
Mortgage-backed		8,896		68		(22	)		8,942
Corporate		7,529		25		(16	)		7,538
Foreign debt		1,000		—		(6	)		994
Equity securities		2,280		—		(5	)		2,275
Asset-backed securities		378		—		(2	)		376
Total	$	141,120	$	1,878	$	(477	)	$	142,521

Information regarding sales of securities available for sale for the year ended December 31 follows:

(Dollars in thousands)
	2015		2014		2013
Proceeds from sales of securities	$	25,876	$	24,766	$	8,790
Gross realized gains		261		341		197
Gross realized losses		—		30		60

44

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Contractual maturities of securities available for sale at December 31, 2015 were as follows:

(Dollars in thousands)		Fair Value
Due within one year	$	24,173
Due after one year through five years		94,705
Due after five years through ten years		35,831
Due after ten years		2,974
Total debt securities		157,683
Equity securities		2,453
Total	$	160,136

Various securities were pledged as collateral for securities sold under agreements to repurchase, advances from the Federal Home Loan Bank, and participation in a program that provided Community Reinvestment Act credits. The carrying amount of securities pledged as collateral at December 31 was as follows:

(Dollars in thousands)
		2015		2014
Securities pledged for securities sold under agreements to repurchase	$	7,011	$	34,369
Securities pledged for advances from the Federal Home Loan Bank		24,199		—
Security pledged for Community Reinvestment Act credits		276		279
Total	$	31,486	$	34,648

The fair value of securities pledged to secure repurchase agreements may decline, and the Company may be required to provide additional collateral. The Company manages this risk by pledging securities with fair values in excess of the repurchase liability.

45

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Securities with unrealized losses at year-end 2015 and 2014, aggregated by investment category and length of time the individual securities have been in an unrealized loss position, were as follows:

	2015
	Less than 12 months					More than 12 months					Total
(Dollars in thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. Government and federal agency	$	38,567	$	(216	)	$	986	$	(13	)	$	39,553	$	(229	)
U.S. Treasury notes and bonds		6,101		(33	)		—		—			6,101		(33	)
State and municipal		10,382		(69	)		2,906		(40	)		13,288		(109	)
Mortgage-backed		4,459		(41	)		382		(4	)		4,841		(45	)
Corporate		4,284		(33	)		896		(6	)		5,180		(39	)
Foreign debt		995		(5	)		—		—			995		(5	)
Asset-backed securities		—		—			270		(4	)		270		(4	)
Total temporarily impaired	$	64,788	$	(397	)	$	5,440	$	(67	)	$	70,228	$	(464	)

	2014
	Less than 12 months					More than 12 months					Total
(Dollars in thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. Government and federal agency	$	11,323	$	(26	)	$	13,005	$	(132	)	$	24,328	$	(158	)
U.S. Treasury notes and bonds		—		—			2,089		(30	)		2,089		(30	)
State and municipal		8,463		(59	)		8,977		(179	)		17,440		(238	)
Mortgage-backed		989		(4	)		1,535		(18	)		2,524		(22	)
Corporate		2,054		(7	)		1,393		(9	)		3,447		(16	)
Foreign debt		—		—			994		(6	)		994		(6	)
Equity securities		1,000		(5	)		—		—			1,000		(5	)
Asset-backed securities		—		—			376		(2	)		376		(2	)
Total temporarily impaired	$	23,829	$	(101	)	$	28,369	$	(376	)	$	52,198	$	(477	)

ChoiceOne evaluates all securities on a quarterly basis to determine whether unrealized losses are temporary or other than temporary. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of ChoiceOne to retain its investment in the issue for a period of time sufficient to allow for any anticipated recovery in fair value of amortized cost basis. Management believed that unrealized losses as of December 31, 2015 were temporary in nature and were caused primarily by changes in interest rates, increased credit spreads, and reduced market liquidity and were not caused by the credit status of the issuer. No other than temporary impairments were recorded in 2015 or 2014.

At December 31, 2015, there were 82 securities with an unrealized loss, compared to 42 securities with an unrealized loss as of December 31, 2014. The increase in the number of securities in an unrealized loss position was caused by higher interest rates at the end of 2015 compared to the end of 2014.

46

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Note 3 – Loans and Allowance for Loan Losses

The Bank’s loan portfolio as of December 31 was as follows:

(Dollars in thousands)
		2015			2014
Agricultural	$	40,232		$	41,098
Commercial and industrial		94,347			88,062
Consumer		20,090			20,752
Real estate - commercial		97,736			99,807
Real estate - construction		5,390			2,691
Real estate - residential		91,509			93,703
Loans, gross		349,304			346,113
Allowance for loan losses		(4,194	)		(4,173	)
Loans, net	$	345,110		$	341,940

ChoiceOne manages its credit risk through the use of its loan policy and its loan approval process and by monitoring of loan credit performance. The loan approval process for commercial loans involves individual and group approval authorities. Individual authority levels are based on the experience of the lender. Group authority approval levels can consist of an internal loan committee that includes the Bank’s President or Senior Lender and other loan officers for loans that exceed individual approval levels, or a loan committee of the Board of Directors for larger commercial loans. Most consumer loans are approved by individual loan officers based on standardized underwriting criteria, with larger consumer loans subject to approval by the internal loan committee.

Ongoing credit review of commercial loans is the responsibility of the loan officers. ChoiceOne’s internal credit committee meets at least monthly and reviews loans with payment issues and loans with a risk rating of 5, 6, or 7. Risk ratings of commercial loans are reviewed periodically and adjusted if needed. ChoiceOne’s consumer loan portfolio is primarily monitored on an exception basis. Loans where payments are past due are turned over to the Bank’s collection department, which works with the borrower to bring payments current or take other actions when necessary. In addition to internal reviews of credit performance, ChoiceOne contracts with a third party for independent loan review that monitors the loan approval process and the credit quality of the loan portfolio.

Activity in the allowance for loan losses and balances in the loan portfolio were as follows:

(Dollars in thousands)	Agricultural		Commercial and Industrial			Consumer			Commercial Real Estate			Construction Real Estate		Residential Real Estate			Unallocated			Total
2015
Allowance for Loan Losses
Beginning balance	$	186	$	527		$	184		$	1,641		$	9	$	1,193		$	433		$	4,173
Charge-offs		—		(30	)		(291	)		—			—		(140	)		—			(461	)
Recoveries		1		64			121			47			—		149			—			382
Provision		233		25			283			(658	)		37		186			(6	)		100
Ending balance	$	420	$	586		$	297		$	1,030		$	46	$	1,388		$	427		$	4,194
Individually evaluated for impairment	$	3	$	15		$	1		$	191		$	—	$	296		$	—		$	506
Collectively evaluated for impairment	$	417	$	571		$	296		$	839		$	46	$	1,092		$	427		$	3,687
Loans
Individually evaluated for impairment	$	50	$	192		$	24		$	2,790		$	—	$	2,529					$	5,585
Collectively evaluated for impairment		40,182		94,155			20,066			94,946			5,390		88,980						343,719
Ending balance	$	40,232	$	94,347		$	20,090		$	97,736		$	5,390	$	91,509					$	349,304

47

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

(Dollars in thousands)	Agricultural			Commercial and Industrial			Consumer			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Unallocated		Total
2014
Allowance for Loan Losses
Beginning balance	$	178		$	562		$	192		$	1,842		$	12		$	1,626		$	323	$	4,735
Charge-offs		—			(1	)		(273	)		(665	)		—			(133	)		—		(1,072	)
Recoveries		20			119			179			48			—			44			—		410
Provision		(12	)		(153	)		86			416			(3	)		(344	)		110		100
Ending balance	$	186		$	527		$	184		$	1,641		$	9		$	1,193		$	433	$	4,173
Individually evaluated for impairment	$	—		$	—		$	4		$	745		$	—		$	365		$	—	$	1,114
Collectively evaluated for impairment	$	186		$	527		$	180		$	896		$	9		$	828		$	433	$	3,059
Loans
Individually evaluated for impairment	$	—		$	38		$	36		$	3,853		$	—		$	2,958				$	6,885
Collectively evaluated for impairment		41,098			88,024			20,716			95,954			2,691			90,745					339,228
Ending balance	$	41,098		$	88,062		$	20,752		$	99,807		$	2,691		$	93,703				$	346,113

The process to monitor the credit quality of ChoiceOne’s loan portfolio includes tracking (1) the risk ratings of business loans, (2) the level of classified business loans, and (3) delinquent and nonperforming consumer loans. Business loans are risk rated on a scale of 1 to 8. A description of the characteristics of the ratings follows:

Risk ratings 1 and 2: These loans are considered pass credits. They exhibit good to exceptional credit risk and demonstrate the ability to repay the loan from normal business operations.

Risk rating 3: These loans are considered pass credits. They exhibit acceptable credit risk and demonstrate the ability to repay the loan from normal business operations.

Risk rating 4: These loans are considered watch credits. They have potential developing weaknesses that, if not corrected, may cause deterioration in the ability of the borrower to repay the loan. While a loss is possible for a loan with this rating, it is not anticipated.

Risk rating 5: These loans are considered special mention credits. Loans in this risk rating are considered to be inadequately protected by the net worth and debt service coverage of the borrower or of any pledged collateral. These loans have well defined weaknesses that may jeopardize the borrower’s ability to repay the loan. If the weaknesses are not corrected, loss of principal and interest could be probable.

Risk rating 6: These loans are considered substandard credits. These loans have well defined weaknesses, the severity of which makes collection of principal and interest in full questionable. Loans in this category may be placed on nonaccrual status.

Risk rating 7: These loans are considered doubtful credits. Some loss of principal and interest has been determined to be probable. The estimate of the amount of loss could be affected by factors such as the borrower’s ability to provide additional capital or collateral. Loans in this category are on nonaccrual status.

Risk rating 8: These loans are considered loss credits. They are considered uncollectible and will be charged off against the allowance for loan losses.

48

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Information regarding the Bank’s credit exposure as of December 31 was as follows:

Corporate Credit Exposure - Credit Risk Profile By Creditworthiness Category

(Dollars in thousands)	Agricultural				Commercial and Industrial				Commercial Real Estate
	2015		2014		2015		2014		2015		2014
Risk ratings 1 and 2	$	10,416	$	9,596	$	10,480	$	11,590	$	3,875	$	3,576
Risk rating 3		25,189		24,294		66,921		59,470		57,540		58,600
Risk rating 4		3,086		6,462		16,169		15,764		29,826		28,557
Risk rating 5		1,491		683		574		976		3,776		4,490
Risk rating 6		50		63		129		262		2,719		4,584
Risk rating 7		—		—		74		—		—		—
	$	40,232	$	41,098	$	94,347	$	88,062	$	97,736	$	99,807

Consumer Credit Exposure - Credit Risk Profile Based On Payment Activity

(Dollars in thousands)	Consumer				Construction Real Estate				Residential Real Estate
	2015		2014		2015		2014		2015		2014
Performing	$	20,090	$	20,752	$	5,390	$	2,691	$	90,796	$	92,974
Nonperforming		—		—		—		—		282		58
Nonaccrual		—		—		—		—		431		671
	$	20,090	$	20,752	$	5,390	$	2,691	$	91,509	$	93,703

49

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

The following schedule provides information on loans that were considered troubled debt restructurings (“TDRs”) that were modified during the twelve months ended December 31, 2015 and December 31, 2014:

	December 31, 2015						December 31, 2014
(Dollars in thousands)		Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Agricultural		—	$	—	$	—	—	$	—	$	—
Commercial and industrial		—		—		—	1		32		32
Consumer		—		—		—	—		—		—
Commercial real estate		4		439		439	5		1,596		1,596
Residential real estate		2		195		195	2		281		281
		6	$	634	$	634	8	$	1,909	$	1,909

The pre-modification and post-modification outstanding recorded investment represents amounts as of the date of loan modification. If a difference exists between the pre-modification and post-modification outstanding recorded investment, it represents impairment recognized through the provision for loan losses computed based on a loan’s post-modification present value of expected future cash flows discounted at the loan’s original effective interest rate. If no difference exists, a loss is not expected to be incurred based on an assessment of the borrower’s expected cash flows.

The following schedule provides information on TDRs as of December 31, 2015 and December 31, 2014 where the borrower was past due with respect to principal and/or interest for 30 days or more during the twelve months ended December 31, 2015 and December 31, 2014 that had been modified during the 12-month period prior to the default:

	With Payment Defaults During the Following Periods
	December 31, 2015			December 31, 2014
(Dollars in thousands)	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
Agricultural	—	$	—		—	$	—
Commercial and industrial	—		—		—		—
Consumer	—		—		—		—
Commercial real estate	3		400		6		1,592
Residential real estate	—		—		2		110
	3	$	400		8	$	1,702

Loans are classified as performing when they are current as to principal and interest payments or are past due on payments less than 90 days. Loans are classified as nonperforming when they are past due 90 days or more as to principal and interest payments or are considered a troubled debt restructuring.

50

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Impaired loans by loan category as of December 31 were as follows: 

(Dollars in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2015
With no related allowance recorded
Agricultural	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		74		103		—		25		—
Consumer		—		—		—		2		—
Commercial real estate		1,540		1,540		—		1,061		11
Residential real estate		13		13		—		191		—
Subtotal		1,627		1,656		—		1,279		11
With an allowance recorded
Agricultural		50		50		3		62		(6	)
Commercial and industrial		118		118		15		44		1
Consumer		24		24		1		34		3
Commercial real estate		1,250		1,755		191		2,002		64
Residential real estate		2,516		2,516		296		2,425		86
Subtotal		3,958		4,463		506		4,567		148
Agricultural		50		50		3		62		(6	)
Commercial and industrial		192		221		15		69		1
Consumer		24		24		1		36		3
Commercial real estate		2,790		3,295		191		3,063		75
Residential real estate		2,529		2,529		296		2,616		86
Total	$	5,585	$	6,119	$	506	$	5,846	$	159

(Dollars in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2014
With no related allowance recorded
Agricultural	$	—	$	—	$	—	$	90	$	—
Commercial and industrial		38		43		—		81		—
Consumer		8		8		—		3		—
Commercial real estate		413		419		—		352		6
Residential real estate		502		502		—		492		9
Subtotal		961		972		—		1,018		15
With an allowance recorded
Agricultural		—		—		—		130		—
Commercial and industrial		—		—		—		292		4
Consumer		28		28		4		31		3
Commercial real estate		3,440		4,498		745		3,932		81
Residential real estate		2,456		2,474		365		2,323		91
Subtotal		5,924		7,000		1,114		6,708		179
Agricultural		—		—		—		220		—
Commercial and industrial		38		43		—		373		4
Consumer		36		36		4		34		3
Commercial real estate		3,853		4,917		745		4,284		87
Residential real estate		2,958		2,976		365		2,815		100
Total	$	6,885	$	7,972	$	1,114	$	7,726	$	194

51

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

An aging analysis of loans by loan category as of December 31 follows:

(Dollars in thousands)		Loans Past Due 30 to 59 Days (1)		Loans Past Due 60 to 89 Days (1)		Loans  Past Due Greater Than 90 Days (1)		Total (1)		Loans Not Past Due		Total Loans		Loans 90 Days Past Due and Accruing
2015
Agricultural	$	3	$	—	$	—	$	3	$	40,229	$	40,232	$	—
Commercial and industrial		90		322		77		489		93,858		94,347		—
Consumer		115		—		—		115		19,975		20,090		—
Commercial real estate		505		297		1,233		2,035		95,701		97,736		—
Construction real estate		299		—		—		299		5,091		5,390		—
Residential real estate		1,012		364		200		1,576		89,933		91,509		29
	$	2,024	$	983	$	1,510	$	4,517	$	344,787	$	349,304	$	29

2014
Agricultural	$	—	$	—	$	—	$	—	$	41,098	$	41,098	$	—
Commercial and industrial		33		260		—		293		87,769		88,062		—
Consumer		66		10		—		76		20,676		20,752		—
Commercial real estate		172		51		699		922		98,885		99,807		—
Construction real estate		—		—		—		—		2,691		2,691		—
Residential real estate		1,376		404		363		2,143		91,560		93,703		58
	$	1,647	$	725	$	1,062	$	3,434	$	342,679	$	346,113	$	58

(1) Includes nonaccrual loans

Nonaccrual loans by loan category as of December 31 follow:

(Dollars in thousands)		2015		2014
Agricultural	$	50	$	—
Commercial and industrial		77		38
Consumer		—		—
Commercial real estate		1,640		2,652
Construction real estate		—		—
Residential real estate		431		671
	$	2,198	$	3,361

Note 4 – Mortgage Banking

Activity in secondary market loans during the year was as follows:  

(Dollars in thousands)		2015		2014		2013
Loans originated for resale, net of principal payments	$	47,498	$	29,850	$	42,906
Proceeds from loan sales		46,077		29,561		45,204
Net gains on sales of loans held for sale		1,416		1,023		1,566
Loan servicing fees, net of amortization		113		166		167

Loans serviced for others are not reported as assets in the accompanying consolidated balance sheets. The unpaid principal balances of these loans were $79.4 million and $91.4 million at December 31, 2015 and 2014, respectively. The Bank maintains custodial escrow balances in connection with these serviced loans; however, such escrows were immaterial at December 31, 2015 and 2014.

52

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Activity for loan servicing rights (included in other assets) was as follows: 

(Dollars in thousands)		2015			2014			2013
Balance, beginning of year	$	489		$	544		$	473
Capitalized		49			73			211
Amortization		(161	)		(128	)		(140	)
Balance, end of year	$	378		$	489		$	544

The fair value of loan servicing rights was $739,000 and $942,000 as of December 31, 2015 and 2014, respectively. Consequently, a valuation allowance was not necessary at year-end 2015 or 2014. The fair value of servicing rights at December 31, 2015 was determined using a discount rate of 6.37% and prepayment speeds ranging from 9% to 13%. The fair value of servicing rights at December 31, 2014 was determined using a discount rate of 6.20% and prepayment speeds ranging from 7% to 13%.

Note 5 – Premises and Equipment

As of December 31, premises and equipment consisted of the following: 

(Dollars in thousands)		2015			2014
Land and land improvements	$	4,529		$	4,337
Leasehold improvements		38			38
Buildings		12,076			11,859
Furniture and equipment		5,322			4,844
Total cost		21,965			21,078
Accumulated depreciation		(10,118	)		(9,283	)
Premises and equipment, net	$	11,847		$	11,795

Depreciation expense was $986,000, $986,000, and $927,000 for 2015, 2014 and 2013, respectively.

The Bank leases certain branch properties and automated-teller machine locations in its normal course of business. Rent expense totaled $53,000, $52,000, and $56,000 for 2015, 2014 and 2013, respectively. Rent commitments under non-cancelable operating leases were as follows, before considering renewal options that generally are present (dollars in thousands):

2016	$	55
2017		17
2018		17
2019		18
2020		18
Thereafter		91
Total	$	216

53

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Note 6 - Goodwill and Intangible Assets

Goodwill

There were no changes in the goodwill balance in 2015 or 2014. ChoiceOne evaluates goodwill annually for impairment. Recently issued accounting pronouncements allow a company to first perform a qualitative assessment for goodwill prior to a quantitative assessment (Step 1 assessment). If the results of the qualitative assessment indicate that it is more likely than not that goodwill is impaired, then a quantitative assessment must be performed. If not, there is no further assessment required. Management performed a qualitative assessment of goodwill as of June 30, 2014 and 2015 and December 31, 2014 and 2015. The analysis was performed including evaluation of the share price, book value, and financial results of ChoiceOne as compared to the previous year. Additionally, industry and market conditions were evaluated. Average deal prices during 2015 in the Midwest of closed transactions have indicated increases in deal values to tangible common equity, deal values to earnings, and core deposit premiums when compared to the observed prices used in the last quantitative assessment of goodwill in 2012. Further, macro-economic trends have been on a positive trajectory recently and there have been no adverse legal, regulatory, contractual, political or other factors that have materially impacted ChoiceOne. Upon completion of the qualitative assessment, ChoiceOne believes that it is more likely than not that the fair value of ChoiceOne’s equity exceeds the carrying value at the assessment date and there is no further quantitative assessment necessary for either 2015 or 2014.

Acquired Intangible Assets

Information for acquired intangible assets at December 31 follows:

	2015				2014
(Dollars in thousands)		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Core deposit intangible	$	4,134	$	3,790	$	4,134	$	3,376
Other intangible assets		348		313		347		278
Totals	$	4,482	$	4,103	$	4,481	$	3,654

The core deposit intangible and other intangible assets are being amortized on a straight-line basis over ten years. Intangible assets are reviewed for impairment on a quarterly basis. No impairment was indicated as of December 31, 2015 or December 31, 2014. Aggregate amortization expense was $448,000 for each year 2015, 2014 and 2013. The estimated amortization expense for the next year ending December 31 is as follows:

(Dollars in thousands)		Core Deposit Intangible		Other Intangible Assets		Total
2016	$	345	$	35	$	379

Note 7 – Other Real Estate Owned

Other real estate owned represents residential and commercial properties primarily owned as a result of loan collection activities and is reported net of a valuation allowance. Activity within other real estate owned was as follows:

(Dollars in thousands)		2015			2014			2013
Balance, beginning of year	$	150		$	508		$	2,019
Transfers from loans		408			561			897
Proceeds from sales		(406	)		(789	)		(1,604	)
Gains/(losses) on sales		(30	)		24			122
Write-downs		(91	)		(154	)		(926	)
Balance, end of year	$	31		$	150		$	508

54

ChoiceOne Financial Services, Inc.
Notes to Consolidated Financial Statements

Note 8 – Deposits

Deposit balances as of December 31 consisted of the following:

(Dollars in thousands)	2015		2014
Noninterest-bearing demand deposits	$	122,937	$	113,006
Interest-bearing demand deposits		106,882		71,651
Money market deposits		86,987		78,272
Savings deposits		70,946		67,035
Local certificates of deposit		86,944		104,864
Total deposits	$	474,696	$	434,828

Scheduled maturities of certificates of deposit at December 31, 2015 were as follows:

(Dollars in thousands)
2016	$	54,241
2017		16,104
2018		9,074
2019		3,368
2020		3,864
2021		293
Total	$	86,944

The Bank had certificates of deposit issued in denominations of $250,000 or greater totaling $21.4 million and $27.2 million at December 31, 2015 and 2014, respectively. The Bank had no brokered certificates of deposit at either December 31, 2015 or December 31, 2014. In addition, the Bank had $2.1 million of certificates of deposit as of December 31, 2015 and $3.1 million as of December 31, 2014 that had been issued through the Certificate of Deposit Account Registry Service (CDARS). Although certificates of deposit issued through CDARS are issued to local customers, this type of deposit is classified as brokered deposits for regulatory purposes.

Note 9 – Repurchase Agreements

Securities sold under agreements to repurchase are advances to the Bank by customers or another bank. These agreements are direct obligations of the Bank and are secured by securities held in safekeeping at a correspondent bank. Repurchase agreements with Bank customers mature daily. Information regarding repurchase agreements follows:

(Dollars in thousands)	2015			2014
Outstanding balance at December 31	$	9,460		$	26,743
Average interest rate at December 31		0.04	%		0.19	%
Average balance during the year	$	17,825		$	22,594
Average interest rate during the year		0.17	%		0.20	%
Maximum month end balance during the year	$	26,743		$	28,719

55

ChoiceOne Financial Services, Inc.
Notes to Consolidated Financial Statements

Repurchase agreements accounted for as secured borrowings as of December 31, 2015 were as follows:

	Remaining Contractual Maturity of the Agreements
(Dollars in thousands)	Overnight and Continuous
U.S. Government agencies	$	7,011
Total securities		7,011
Unsecured borrowings		2,449
Total borrowings	$	9,460

Note 10 – Federal Home Loan Bank Advances

At December 31, advances from the FHLB were as follows:

(Dollars in thousands)		2015		2014
Maturity of November 2024 with fixed interest rate of 3.98%	$	332	$	363
Maturity of February 2016 with fixed interest rate of 0.47%		11,000		—
Maturities ranging from February 2015 to May 2015, fixed interest rates ranging from 0.39% to 0.41%, with an average of 0.40%		—		18,000
Total advances outstanding at year-end	$	11,332	$	18,363

Fees are charged on fixed rate advances that are paid prior to maturity. No fixed rate advances were paid prior to maturity in 2015 or 2014. Advances were secured by agricultural loans and residential real estate loans with a carrying value of approximately $107.6 million and $96.2 million at December 31, 2015 and December 31, 2014, respectively. Advances were also secured by $24.2 million of U.S. Government agency securities and U.S. Treasury securities at December 31, 2015. Based on this collateral, the Bank was eligible to borrow an additional $61.2 million at year-end 2015.

The scheduled maturities of advances from the FHLB at December 31, 2015 were as follows:

(Dollars in thousands)
2016	$	11,031
2017		33
2018		34
2019		36
2020		37
Thereafter		161
Total	$	11,332

56

ChoiceOne Financial Services, Inc.
Notes to Consolidated Financial Statements

Note 11 – Income Taxes

Information as of December 31 and for the year follows: 

(Dollars in thousands)		2015			2014			2013
Provision for Income Taxes
Current federal income tax expense	$	2,576		$	2,536		$	1,724
Deferred federal income tax expense/(benefit)		(631	)		(460	)		59
Income tax expense	$	1,945		$	2,076		$	1,783
Reconciliation of Income Tax Provision to Statutory Rate
Income tax computed at statutory federal rate of 34%	$	2,614		$	2,642		$	2,338
Tax exempt interest income		(488	)		(475	)		(476	)
Tax exempt earnings on bank-owned life insurance		(221	)		(103	)		(101	)
Other items		40			12			22
Income tax expense	$	1,945		$	2,076		$	1,783
Effective income tax rate		25	%		27	%		26	%

(Dollars in thousands)
Components of Deferred Tax Assets and Liabilities		2015		2014
Deferred tax assets:
Allowance for loan losses	$	1,426	$	1,151
Deferred compensation		269		295
Loan costs/fees deferred		86		84
Other		181		224
Total deferred tax assets		1,962		1,754
Deferred tax liabilities:
Depreciation		1,182		1,405
Unrealized gains on securities available for sale		555		476
Purchase accounting adjustments from merger		117		258
Loan servicing rights		129		166
Stock dividends received from Federal Home Loan Bank		54		64
Post-retirement benefits obligation		66		77
Other		62		75
Total deferred tax liabilities		2,165		2,521
Net deferred tax liabilities	$	203	$	767

57

ChoiceOne Financial Services, Inc.
Notes to Consolidated Financial Statements

Note 12 – Related Party Transactions

Loans to executive officers, directors and their affiliates were as follows at December 31:

(Dollars in thousands)		2015			2014
Balance, beginning of year	$	10,339		$	5,162
New loans and renewals		4,054			5,883
Repayments and renewals		(4,159	)		(3,022	)
Effect of changes in related parties		—			2,316
Balance, end of year	$	10,234		$	10,339

Deposits from executive officers, directors and their affiliates were $16.1 million and $14.1 million at December 31, 2015 and 2014, respectively.

Note 13 – Employee Benefit Plans

401(k) Plan:

The 401(k) plan allows employees to contribute to their individual accounts under the plan amounts up to the IRS maximum. Matching company contributions to the plan are discretionary. Expense for matching company contributions under the plan was $167,000, $140,000, and $91,000 in 2015, 2014, and 2013, respectively.

Employee Stock Ownership Plan:

Through December 31, 2015, employees participated in an Employee Stock Ownership Plan (“ESOP”). ChoiceOne could make discretionary contributions to the ESOP. Shares of ChoiceOne common stock were allocated to participants based on relative compensation earned and compensation expense was recorded when allocated. Dividends on allocated shares increased the participant accounts. Participants became fully vested upon completing six years of qualifying service. Participants received the shares at the end of employment. A participant could require stock received to be repurchased by ChoiceOne at any time. ChoiceOne did not contribute to the ESOP nor was any expense recorded in 2015, 2014, or 2013. Effective January 1, 2016, ChoiceOne terminated the ESOP and transferred shares held by the ESOP to the 401(k) plan.

Shares held by the ESOP as of December 31 were as follows:

(Dollars in thousands)		2015		2014		2013
Shares allocated to participants		5,355		5,355		5,355
Shares unallocated		—		—		—
Total shares of ChoiceOne stock held by ESOP		5,355		5,355		5,355
Fair value of allocated shares, subject to repurchase obligation, recorded in other liabilities	$	127	$	123	$	91

Post-retirement Benefits Plan:

ChoiceOne maintains an unfunded post-retirement health care plan, which permits employees (and their dependents) the ability to participate upon retirement from ChoiceOne. ChoiceOne does not pay any portion of the health care premiums charged to its retired participants. A liability has been accrued for the obligation under this plan. ChoiceOne incurred post-retirement benefit expense of $2,000 in 2015 and negative expense of $20,000 in 2014, and $11,000 in 2013. The post-retirement obligation liability was $127,000 as of December 31, 2015 and $149,000 as of December 31, 2014.

58

ChoiceOne Financial Services, Inc.
Notes to Consolidated Financial Statements

Deferred Compensation Plans:

A deferred director compensation plan covers former directors of VRB, which was acquired by ChoiceOne in 2006. Under the plan, ChoiceOne pays each former director the amount of director fees deferred plus interest at rates ranging from 5.50% to 5.84% over various periods as elected by each director. The payout periods range from one month to ten years beginning with the individual’s termination of service. A liability has been accrued for the obligation under this plan. ChoiceOne incurred deferred compensation plan expense of $12,000, $12,000, and $14,000 in 2015, 2014, and 2013, respectively. The deferred compensation liability was $173,000 as of December 31, 2015 and $203,000 as of December 31, 2014.

A supplemental executive retirement plan covers four former executive officers of VRB. Under the plan, ChoiceOne pays these individuals a specific amount of compensation plus interest at 7.50% over a 15-year period commencing upon early retirement age (as defined in the plan) or normal retirement age (as defined in the plan). A liability has been accrued for the obligation under this plan. The effective interest rate used for the accrual for the retirement liability is based on long-term interest rates. Flat long-term interest rates during 2015 caused a slight decrease in plan expense in 2015, while a decrease in long-term interest rates during 2014 caused an increase in plan expense in 2014. ChoiceOne incurred deferred compensation plan expense of $32,000 in 2015, negative expense of $42,000 in 2014 and expense of $1,000 in 2013. Liabilities related to the supplemental executive retirement plan of $618,000 and $664,000 were outstanding as of December 31, 2015 and December 31, 2014, respectively.

Note 14 - Stock Based Compensation

Options to buy stock have been granted to key employees under an incentive stock option plan to provide them with additional equity interests in ChoiceOne. Compensation expense in connection with stock options granted during 2015, 2014, or 2013 was considered to be insignificant. The Amended and Restated Executive Stock Incentive Plan under which the stock options were granted expired in 2012. The Stock Incentive Plan of 2012 was approved by the Company’s shareholders at the Annual Meeting held on April 25, 2012. The new plan provides for the issuance of up to 100,000 shares of common stock. At December 31, 2015, there were 51,150 shares available for future grants.

A summary of stock options activity is as follows:

	2015				2014				2013
	Shares		Weighted average exercise price		Shares		Weighted average exercise price		Shares		Weighted average exercise price
Options outstanding, beginning of year		20,250	$	16.65		38,625	$	17.29		40,725	$	16.99
Options granted		30,000		23.30		—		—		—		—
Options exercised		9,500		16.03		14,550		18.87		2,100		13.70
Options forfeited or expired		—		—		3,825		18.51		—		—
Options outstanding, end of year		40,750	$	21.69		20,250	$	16.65		38,625	$	17.29
Options exercisable at December 31		18,250	$	19.70		20,250	$	16.65		38,625	$	17.29

The exercise prices for options outstanding and exercisable at the end of 2015 ranged from $13.50 to $23.30 per share. The weighted average remaining contractual life of options outstanding and exercisable at the end of 2015 was approximately 4.79 years.

The intrinsic value of all outstanding in-the-money stock options and exercisable in-the-money stock options was $86,000 and $75,000, respectively, at December 31, 2015. The aggregate intrinsic values of outstanding and exercisable options at December 31, 2015 were calculated based on the closing market price of the Company’s common stock on December 31, 2015 of $23.80 per share less the exercise price.

59

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Information pertaining to options outstanding at December 31, 2015 is as follows:

		Number of	Number of	Average
		options	options	remaining
		outstanding	exercisable at	contractual
Exercise price of stock options:		at year-end	year-end	life (in years)
$	13.50	2,000	2,000	2.07
$	17.95	8,000	8,000	1.05
$	18.85	750	750	0.05
$	23.30	30,000	7,500	9.97

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. ChoiceOne uses historical data to estimate the volatility of the market price of ChoiceOne stock and employee terminations within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. A total of 30,000 options were granted in 2015 with an exercise price of $23.30 and vest over 3 years. No options were granted in 2014 or 2013.

The fair value of stock options granted during 2015 was determined using the following weighted-average assumptions as of the grant date.

	2015
Risk-free interest rate		2.28	%
Expected option life		5.75 years
Expected stock price volatility		22.95	%
Dividend yield		3.64	%
Fair value of options granted	$	3.54

ChoiceOne has granted restricted stock units to a select group of employees under the Stock Incentive Plan of 2012. Restricted stock units vest in three annual installments on each of the next three anniversaries of the grant date. Certain additional vesting provisions apply. Each restricted stock unit, once vested, is settled by delivery of one share of ChoiceOne common stock. ChoiceOne recognized compensation expense of $103,000 and $53,000 in 2015 and 2014, respectively, in connection with restricted stock units for current participants during these years. At December 31, 2015 there were 17,850 restricted stock units outstanding with an approximate stock value of $425,000. At December 31, 2014 there were 7,750 restricted stock units outstanding with an approximate stock value of $178,000. Unrecognized compensation expense as of December 31, 2015 is approximately $234,000 and will be allocated $119,000 to 2016, $93,000 to 2017, and $22,000 to 2018.

60

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Note 15 - Earnings Per Share

(Dollars in thousands, except per share data)

	2015		2014		2013
Basic
Net income	$	5,743	$	5,695	$	5,094
Weighted average common shares outstanding		3,289,296		3,298,177		3,296,408
Basic earnings per common shares	$	1.75	$	1.73	$	1.55
Diluted
Net income	$	5,743	$	5,695	$	5,094
Weighted average common shares outstanding		3,289,296		3,298,177		3,296,408
Plus dilutive stock options and restricted stock units		7,925		12,116		5,653
Weighted average common shares outstanding and potentially dilutive shares		3,297,221		3,310,293		3,302,061
Diluted earnings per common share	$	1.74	$	1.72	$	1.54

There were 30,000 stock options that were considered anti-dilutive to earnings per share as of December 31, 2015 and thus have been excluded from the calculations above. There were no stock options as of December 31, 2014 or 2013 considered to be anti-dilutive to earnings per share.

61

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Note 16 – Condensed Financial Statements of Parent Company

Condensed Balance Sheets

(Dollars in thousands)	December 31,
	2015		2014
Assets
Cash	$	1,145	$	808
Securities available for sale		2,263		1,059
Other assets		83		154
Investment in ChoiceOne Bank		66,539		64,298
Total assets	$	70,030	$	66,319
Liabilities
Mandatory redeemable shares under ESOP, at fair value	$	127	$	123
Other liabilities		61		6
Total liabilities		188		129
Shareholders’ equity		69,842		66,190
Total liabilities and shareholders’ equity	$	70,030	$	66,319

62

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Condensed Statements of Income

(Dollars in thousands)	Years Ended December 31,
	2015		2014		2013
Interest and dividends from ChoiceOne Bank	$	3,579	$	2,731	$	2,399
Interest and dividends from other securities		26		16		19
Other income		—		27		1
Total income		3,605		2,774		2,419
Other expenses		137		92		98
Income before income tax and equity in undistributed net income of subsidiary		3,468		2,682		2,321
Income tax benefit		44		21		31
Income before equity in undistributed net income of subsidiary		3,512		2,703		2,352
Equity in undistributed net income of subsidiary		2,231		2,992		2,742
Net income	$	5,743	$	5,695	$	5,094

Condensed Statements of Cash Flows
(Dollars in thousands)	Years Ended December 31,
	2015			2014			2013
Cash flows from operating activities:
Net income	$	5,743		$	5,695		$	5,094
Adjustments to reconcile net income to net cash from operating activities:
Equity in undistributed net income of subsidiary		(2,231	)		(2,992	)		(2,742	)
Amortization		11			3			2
Net expense of restricted stock units		103			48			11
Net gain on sale of securities		0			(26	)		(1	)
Changes in other assets		71			(125	)		(1	)
Changes in other liabilities		4			(35	)		36
Net cash from operating activities		3,701			2,568			2,399
Cash flows from investing activities:
Sales of securities		—			1,184			70
Purchases of securities		(1,029	)		(1,565	)		(125	)
Net cash from investing activities		(1,029	)		(381	)		(55	)
Cash flows from financing activities:
Issuance of common stock		206			132			130
Repurchase of common stock		(371	)		(203	)		(192	)
Cash dividends paid		(2,170	)		(1,945	)		(1,780	)
Net cash from financing activities		(2,335	)		(2,016	)		(1,842	)
Net change in cash		337			171			502
Beginning cash		808			637			135
Ending cash	$	1,145		$	808		$	637

63

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Note 17 – Financial Instruments

Financial instruments as of the dates indicated were as follows:

						Quoted Prices
						In Active		Significant
						Markets for		Other		Significant
						Identical		Observable		Unobservable
		Carrying		Estimated		Assets		Inputs		Inputs
(Dollars in thousands)		Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
December 31, 2015
Assets
Cash and due from banks	$	11,187	$	11,187	$	11,187	$	—	$	—
Securities available for sale		160,136		160,136		953		147,384		11,799
Federal Home Loan Bank and Federal Reserve Bank stock		3,187		3,187		—		3,187		—
Loans held for sale		4,957		5,109		—		5,109		—
Loans, net		345,110		349,875		—		—		349,875
Liabilities
Noninterest-bearing deposits		122,937		122,937		—		122,937		—
Interest-bearing deposits		351,759		353,113		—		353,113		—
Repurchase agreements		9,460		9,460		—		9,460		—
Federal Home Loan Bank advances		11,332		12,028		—		12,028		—
December 31, 2014
Assets
Cash and due from banks	$	16,650	$	16,650	$	16,650	$	—	$	—
Securities available for sale		142,521		142,521		775		130,104		11,642
Federal Home Loan Bank and Federal Reserve Bank stock		3,185		3,185		—		3,185		—
Loans held for sale		2,170		2,237		—		2,237		—
Loans, net		341,940		345,656		—		—		345,656
Liabilities
Noninterest-bearing deposits		113,006		113,006		—		113,006		—
Interest-bearing deposits		321,822		321,757		—		321,757		—
Repurchase agreements		26,743		26,743		—		26,743		—
Federal Home Loan Bank advances		18,363		18,402		—		18,402		—

The estimated fair values approximate the carrying amounts for all financial instruments except those described later in this paragraph. The methodology for determining the estimated fair value for securities available for sale is described in Note 18. The estimated fair value for loans is based on the rates charged at December 31 for new loans with similar maturities, applied until the loan is assumed to reprice or be paid. The allowance for loan losses is considered to be a reasonable estimate of discount for credit quality concerns. The estimated fair value of deposits is based on comparing the average rate paid on deposits compared to the three month Libor rate which is assumed to be the replacement value of these deposits. At December 31, 2015, all average rates were lower than the three month Libor rate causing fair values to be higher than carrying amounts. The estimated fair values for time deposits and FHLB advances are based on the rates paid at December 31 for new deposits or FHLB advances, applied until maturity. The estimated fair values for other financial instruments and off-balance sheet loan commitments are considered nominal.

64

ChoiceOne Financial Services, Inc. 

Notes to Consolidated Financial Statements

Note 18 – Fair Value Measurements

The following tables present information about the Bank’s assets and liabilities measured at fair value on a recurring basis at December 31, 2015 and December 31, 2014, and the valuation techniques used by the Bank to determine those fair values.

In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Bank has the ability to access.

Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Bank’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

There were no liabilities measured at fair value as of December 31, 2015 or December 31, 2014. Disclosures concerning assets measured at fair value are as follows:

65

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Assets Measured at Fair Value on a Recurring Basis

		Quoted Prices
		In Active		Significant
		Markets for		Other		Significant
		Identical		Observable		Unobservable		Balance at
		Assets		Inputs		Inputs		Date
(Dollars in thousands)		(Level 1)		(Level 2)		(Level 3)		Indicated
Investment Securities, Available for Sale - December 31, 2015
U. S. Government and federal agency	$	—	$	57,207	$	—	$	57,207
U. S. Treasury notes and bonds		—		6,100		—		6,100
State and municipal		—		67,852		9,902		77,754
Mortgage-backed		—		6,970		—		6,970
Corporate		—		7,990		397		8,387
Foreign debt		—		995		—		995
Equity securities		953		—		1,500		2,453
Asset backed securities		—		270		—		270
Total	$	953	$	147,384	$	11,799	$	160,136
Investment Securities, Available for Sale - December 31, 2014
U. S. Government and federal agency	$	—	$	44,503	$	—	$	44,503
U. S. Treasury notes and bonds		—		8,058		—		8,058
State and municipal		—		60,091		9,744		69,835
Mortgage-backed		—		8,942		—		8,942
Corporate		—		7,140		398		7,538
Foreign debt		—		994		—		994
Equity securities		775		—		1,500		2,275
Asset backed securities		—		376		—		376
Total	$	775	$	130,104	$	11,642	$	142,521

Securities classified as available for sale are generally reported at fair value utilizing Level 2 inputs. ChoiceOne’s external investment advisor obtained fair value measurements from an independent pricing service that uses matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value measurements considered observable data that may include dealer quotes, market spreads, cash flows and the bonds’ terms and conditions, among other things. Securities classified in Level 2 included U.S. Government and federal agency securities, U.S. Treasury notes and bonds, state and municipal securities, mortgage-backed securities, corporate bonds, foreign debt, and asset backed securities. The Company classified certain state and municipal securities and corporate bonds, and equity securities as Level 3. Based on the lack of observable market data, estimated fair values were based on the observable data available and reasonable unobservable market data.

66

 ChoiceOne Financial Services, Inc. 

Notes to Consolidated Financial Statements

Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis  

(Dollars in thousands)	2015			2014
Investment Securities, Available for Sale
Balance, January 1	$	11,642		$	11,328
Total realized and unrealized gains included in income		—			(11	)
Total unrealized gains/(losses) included in other comprehensive income		806			1,199
Net purchases, sales, calls, and maturities		(649	)		(948	)
Net transfers into Level 3		—			74
Balance, December 31	$	11,799		$	11,642

Of the Level 3 assets that were still held by the Bank at December 31, 2015, the net unrealized gain for the twelve months ended December 31, 2015 was $806,000 and a $9,000 unrealized loss as of December 31, 2014, which is recognized in other comprehensive income in the consolidated balance sheets. A total of $3.2 million and $3.5 million of Level 3 securities were purchased in 2015 and 2014, respectively.

Both observable and unobservable inputs may be used to determine the fair value of positions classified as Level 3 assets and liabilities. As a result, the unrealized gains and losses for these assets and liabilities presented in the tables above may include changes in fair value that were attributable to both observable and unobservable inputs.

Available for sale investment securities categorized as Level 3 assets consist of bonds issued by local municipalities and a trust-preferred security. The Bank estimates the fair value of these assets based on the present value of expected future cash flows using management’s best estimate of key assumptions, including forecasted interest yield and payment rates, credit quality and a discount rate commensurate with the current market and other risks involved.

The Bank also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets are not normally measured at fair value, but can be subject to fair value adjustments in certain circumstances, such as impairment. Disclosures concerning assets measured at fair value on a non-recurring basis are as follows:

Assets Measured at Fair Value on a Non-recurring Basis  

(Dollars in thousands)	Balances at Dates Indicated		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs  (Level 3)
Impaired Loans
December 31, 2015	$	5,585	$	—	$	—	$	5,585
December 31, 2014	$	6,885	$	—	$	—	$	6,885
Other Real Estate
December 31, 2015	$	31	$	—	$	—	$	31
December 31, 2014	$	150	$	—	$	—	$	150

Impaired loans categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Bank estimates the fair value of the loans based on the present value of expected future cash flows using management’s best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals). The changes in fair value consisted of charge-downs of impaired loans that were posted to the allowance for loan losses and write-downs of other real estate owned that were posted to a valuation account. The fair value of other real estate owned was based on appraisals or other reviews of property values, adjusted for estimated costs to sell.

67

 ChoiceOne Financial Services, Inc. 

Notes to Consolidated Financial Statements

Note 19 – Off-Balance Sheet Activities

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customers’ financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amount of financial instruments with off-balance sheet risk was as follows at December 31: 

	2015				2014
(Dollars in thousands)	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Unused lines of credit and letters of credit	$	14,445	$	77,089	$	7,076	$	60,476
Commitments to fund loans (at market rates)		18,654		1,740		3,116		1,050

Commitments to fund loans are generally made for periods of 180 days or less. The fixed rate loan commitments have interest rates ranging from 2.49% to 6.52% and maturities ranging from 3 years to 30 years.

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 2015 and 2014, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action.

68

ChoiceOne Financial Services, Inc. 

Notes to Consolidated Financial Statements

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

(Dollars in thousands)	Actual					Minimum Required for Capital Adequacy Purposes					Minimum Required to be Well  Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2015
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$	59,737		14.2	%	$	33,600		8.0	%		N/A		N/A
Common equity Tier 1 capital (to risk weighted assets)		54,532		13.0			18,900		4.5			N/A		N/A
Tier 1 capital (to risk weighted assets)		54,532		13.0			16,800		4.0			N/A		N/A
Tier 1 capital (to average assets)		54,532		9.7			22,434		4.0			N/A		N/A
ChoiceOne Bank
Total capital (to risk weighted assets)	$	55,723		13.3	%	$	33,470		8.0	%	$	41,837		10.0	%
Common equity Tier 1 capital (to risk weighted assets)		51,574		12.3			18,827		4.5			27,194		6.5
Tier 1 capital (to risk weighted assets)		51,574		12.3			16,735		4.0			25,102		6.0
Tier 1 capital (to average assets)		51,574		9.2			22,350		4.0			27,937		5.0
December 31, 2014
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$	55,223		14.3	%	$	30,948		8.0	%		N/A		N/A
Tier 1 capital (to risk weighted assets)		50,562		13.1			15,474		4.0			N/A		N/A
Tier 1 capital (to average assets)		50,562		9.6			21,016		4.0			N/A		N/A
ChoiceOne Bank
Total capital (to risk weighted assets)	$	52,664		13.6	%	$	30,881		8.0	%	$	38,601		10.0	%
Tier 1 capital (to risk weighted assets)		48,665		12.6			15,441		4.0			23,161		6.0
Tier 1 capital (to average assets)		48,665		9.3			20,971		4.0			26,214		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, 2015, approximately $9.8 million was available for ChoiceOne Bank to pay dividends to ChoiceOne Financial Services, Inc. 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.

On July 3, 2013, the FDIC Board of Directors approved the Regulatory Capital Interim Final Rule, implementing Basel III.  This rule redefines Tier 1 capital as two components (Common Equity Tier 1 and Additional Tier 1), creates a new capital ratio (Common Equity Tier 1 Risk-based Capital Ratio) and implements a capital conservation buffer.  It also revises the prompt corrective action thresholds and makes changes to risk weights for certain assets and off-balance-sheet exposures.  Banks were required to transition into the new rule beginning on January 1, 2015.

69

ChoiceOne Financial Services, Inc. 

Notes to Consolidated Financial Statements

Note 21 – Quarterly Financial Data (Unaudited) 

							Earnings Per Share
(Dollars in thousands)	Interest Income		Net Interest Income		Net Income		Basic		Fully Diluted
2015
First Quarter	$	4,746	$	4,490	$	1,642	$	0.50	$	0.49
Second Quarter		4,832		4,579		1,431		0.43		0.43
Third Quarter		4,871		4,625		1,450		0.44		0.44
Fourth Quarter		4,904		4,670		1,222		0.37		0.37
2014
First Quarter	$	4,656	$	4,353	$	1,248	$	0.38	$	0.38
Second Quarter		4,738		4,449		1,337		0.40		0.40
Third Quarter		4,817		4,535		1,554		0.47		0.47
Fourth Quarter		4,803		4,526		1,556		0.48		0.47

There were no significant fluctuations in the quarterly financial data in 2014 or 2015. The growth in net income that occurred in 2015 was due to a decrease in interest expense and an increase in noninterest income.

70

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on and as of the time of that evaluation, the Company’s management, including the Chief Executive Officer and principal financial officer, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods.

Management of ChoiceOne Financial Services, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting that is designed to produce reliable financial statements in conformity with United States generally accepted accounting principles. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Management assessed the effectiveness of the Company’s system of internal control over financial reporting as of December 31, 2015, as required by Section 404 of the Sarbanes-Oxley Act of 2002. Management’s assessment is based on the criteria for effective internal control over financial reporting as described in “Internal Control – Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 1992. Based on this assessment, management has concluded that, as of December 31, 2015, its system of internal control over financial reporting was effective and meets the criteria of the “Internal Control – Integrated Framework.” This annual report is not required to include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.

There was no change in the Company’s internal control over financial reporting that occurred during the three months ended December 31, 2015 that has materially affected, or that is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information under the captions “ChoiceOne’s Board of Directors and Executive Officers,” “Related Matters – Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance” in the Company’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 18, 2016, is incorporated herein by reference.

The Company has adopted a Code of Ethics for Executive Officers and Senior Financial Officers, which applies to the Chief Executive Officer and the Chief Financial Officer, as well as all other senior financial and accounting officers. The Code of Ethics is posted on the Company’s website at “www.choiceone.com.” The Company intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a provision of the Code of Ethics by posting such information on its website at “www.choiceone.com.”

71

Item 11. Executive Compensation

The information under the captions “Executive Compensation” in the Company’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 18, 2016, is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information under the caption “Ownership of ChoiceOne Common Stock” in the Company’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 18, 2016, is incorporated herein by reference.

The following table presents information regarding the equity compensation plans both approved and not approved by shareholders at December 31, 2015:

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
		(a)		(b)		(c)
Equity compensation plans approved by security holders		55,350	$	15.97		83,303
Equity compensation plans not approved by security holders		—		—		18,752
Total		55,350	$	15.97		102,055

Equity compensation plans approved by security holders include the Stock Incentive Plan of 2012, the Amended and Restated Executive Stock Incentive Plan and the Employee Stock Purchase Plan. 51,150 shares remain available for future issuance under the Stock Incentive Plan of 2012 and 32,124 shares remain available for future issuance under the Employee Stock Purchase Plan, in each case other than upon the exercise of outstanding stock options. No further future issuances of shares are permitted under the Amended and Restated Executive Stock Incentive Plan other than upon the exercise of outstanding stock options.

Equity compensation plans not approved by security holders consist of the Directors’ Stock Purchase Plan. The plan is designed to provide directors of the Company the option of receiving their fees in the Company’s common stock. Directors who elect to participate in the plan may elect to contribute to the plan twenty-five, fifty, seventy-five or one hundred percent of their board of director fees and one hundred percent of their director committee fees earned as directors of the Company. Contributions to the plan are made by the Company on behalf of each electing participant. Plan participants may terminate their participation in the plan at any time by written notice of withdrawal to the Company. Participants will cease to be eligible to participate in the plan when they cease to serve as directors of the Company. Shares are distributed to participants on a quarterly basis. The plan provides for a maximum of 100,000 shares of the Company’s common stock, subject to adjustments for certain changes in the capital structure of the Company. New issuances for up to 18,752 shares may be made under this plan. 

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information under the captions “Related Matters - Transactions with Related Persons” and “Corporate Governance” in the Company’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 18, 2016, is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information under the caption “Related Matters - Independent Certified Public Accountants” in the Company’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 18, 2016, is incorporated herein by reference.

72

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)	(1)	Financial Statements.  The following financial statements and independent auditors’ reports are filed as part of this report:
			Consolidated Balance Sheets at December 31, 2015 and 2014.
			Consolidated Statements of Income for the years ended December 31, 2015, 2014, and 2013.
			Consolidated Statement of Comprehensive Income for the years ended December 31, 2015, 2014, and 2013.
			Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2015, 2014, and 2013.
			Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014, and 2013.
			Notes to Consolidated Financial Statements.
			Report of Independent Registered Public Accounting Firm dated March 21, 2016.
	(2)	Financial Statement Schedules. None.

Exhibit	Document
3.1	Amended and Restated Articles of Incorporation.  Previously filed as an exhibit to ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2013.  Here incorporated by reference.
3.2	Bylaws of the Registrant as currently in effect and any amendments thereto.  Previously filed as an exhibit to ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2013.  Here incorporated by reference.
4	Advances, Pledge and Security Agreement between ChoiceOne Bank and the Federal Home Loan Bank of Indianapolis.  Previously filed as an exhibit to ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2013.  Here incorporated by reference.
10.1	Amended and Restated Employment Agreement with James A. Bosserd. (1)  Previously filed as an exhibit to ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2012.  Here incorporated by reference.
10.2	Stock Incentive Plan of 2012. (1)  Previously filed as an appendix to ChoiceOne Financial Services, Inc.’s definitive proxy statement filed with the commission on March 30, 2012.  Here incorporated by reference.
10.3	Amended and Restated Executive Stock Incentive Plan. (1)  Previously filed as an exhibit to ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2011.  Here incorporated by reference.
10.4	Directors’ Stock Purchase Plan. (1). Previously filed as an exhibit to ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2010.  Here incorporated by reference.
10.5	Former Valley Ridge Executive Employee Salary Continuation Agreements, as amended. (1)  Previously filed as an exhibit to ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2013.  Here incorporated by reference.
10.6	Former Valley Ridge Directors’ Deferred Compensation Plan and Agreement. (1)  Previously filed as an exhibit to the ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2013.  Here incorporated by reference.

73

10.7	Amended and Restated Employee Stock Purchase Plan. (1)  Previously filed as an exhibit to ChoiceOne Financial Services, Inc.’s definitive proxy statement filed with the commission on March 28, 2011.  Here incorporated by reference.
21	Subsidiaries of ChoiceOne Financial Services, Inc.
23	Consent of Independent Registered Public Accounting Firm.
24	Powers of Attorney.
31.1	Certification of Chief Executive Officer.
31.2	Certification of Treasurer.
32	Certification pursuant to 18 U.S.C. § 1350.
101.1	Interactive Data File.

(1) This agreement is a management contract or compensation plan or arrangement to be filed as an exhibit to this Form 10-K.

Copies of any exhibits will be furnished to shareholders upon written request. Requests should be directed to: Thomas L. Lampen, Treasurer, ChoiceOne Financial Services, Inc., 109 East Division, Sparta, Michigan, 49345.

74

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ChoiceOne Financial Services, Inc.
By:	/s/ James A. Bosserd	March 28, 2016
	James A. Bosserd Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ James A. Bosserd	Chief Executive Officer and Director (Principal Executive Officer)	March 28, 2016
James A. Bosserd
/s/ Thomas L. Lampen	Treasurer (Principal Financial and Accounting Officer)	March 28, 2016
Thomas L. Lampen
*/s/ Paul L. Johnson	Chairman of the Board and Director	March 28, 2016
Paul L. Johnson
*/s/ Frank G. Berris	Director	March 28, 2016
Frank G. Berris
*/s/ Keith D. Brophy	Director	March 28, 2016
Keith D. Brophy
*/s/ K. Timothy Bull	Director	March 28, 2016
K. Timothy Bull
*/s/ William F. Cutler, Jr.	Director	March 28, 2016
William F. Cutler, Jr.
*/s/ Jack G. Hendon	Director	March 28, 2016
Jack G. Hendon
*/s/ Raymond A. Lanning	Director	March 28, 2016
Raymond A. Lanning
*/s/ Dennis C. Nelson	Director	March 28, 2016
Dennis C. Nelson
*/s/ Nels W. Nyblad	Director	March 28, 2016
Nels W. Nyblad
*/s/ Roxanne M. Page	Director	March 28, 2016
Roxanne M. Page
*/s/ Kelly J. Potes	Director	March 28, 2016
Kelly J. Potes
*By /s/ Thomas L. Lampen
Attorney-in-Fact

75

EX-21

ChoiceOne Financial Services, Inc. 10-K

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

The following lists the subsidiaries of the Registrant and the state or jurisdiction of incorporation.

	Name and Address of Subsidiary	Incorporated
1.	ChoiceOne Bank 109 East Division Sparta, Michigan 49345	Michigan
2.	ChoiceOne Insurance Agencies, Inc. (1) 109 East Division Sparta, Michigan 49345	Michigan
3.	West Shore Computer Services, Inc. (2) 111 North Main Street Scottville, Michigan 49454	Michigan
4.	Valley Ridge Financial Services, Inc. (1) 450 West Muskegon Kent City, Michigan 49330	Michigan
5.	Valley Ridge Realty, Inc. (1) 450 West Muskegon Kent City, Michigan 49330	Michigan
6.	1423 West Main LLC (1) 450 West Muskegon Kent City, Michigan 49330	Michigan

(1)	These are wholly-owned subsidiaries of ChoiceOne Bank.
(2)	ChoiceOne Bank owns a 25% interest in West Shore Computer Services, Inc.

77

EX-23

ChoiceOne Financial Services, Inc. 10-K

EXHIBIT 23

   

CONSENT OF REGISTERED PUBLIC ACCOUNTINGFIRM

We consent to the incorporation by reference in the following Registration Statements of ChoiceOne Financial Services, Inc. on Form S-4 (333-136523); and S-3 (333- 44336); and S-8 (Registration No. 333- 91364); and Form S-8 (Registration No. 333- 91366) of our report dated March 21, 2016 on the consolidated financial statements of ChoiceOne Financial Services, Inc. for the years ended December 31, 2015, 2014 and 2013, which report is included in Item 8 of the Annual Report on Form 10-K for the fiscal year ended December 31,2015.

 

Grand Rapids, Michigan

March 21, 2016

EX-24

ChoiceOne Financial Services, Inc. 10-K

EXHIBIT 24

LIMITED POWER OF ATTORNEY

The undersigned, in his or her capacity as a director or officer, or both, of ChoiceOne Financial Services, Inc., does hereby appoint James A. Bosserd, Mary J. Johnson, Kelly J. Potes and Thomas L. Lampen, or any of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of ChoiceOne Financial Services, Inc. on Form 10-K for its fiscal year ended December 31, 2015, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.

Dated: January 28, 2016	/s/ Frank G. Berris
		(signature)
	Frank G. Berris
		(type or print name)

LIMITED POWER OF ATTORNEY

The undersigned, in his or her capacity as a director or officer, or both, of ChoiceOne Financial Services, Inc., does hereby appoint James A. Bosserd, Mary J. Johnson, Kelly J. Potes and Thomas L. Lampen, or any of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of ChoiceOne Financial Services, Inc. on Form 10-K for its fiscal year ended December 31, 2015, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.

Dated: January 20, 2016	/s/ Keith D. Brophy
		(signature)
	Keith D. Brophy
		(type or print name)

LIMITED POWER OF ATTORNEY

The undersigned, in his or her capacity as a director or officer, or both, of ChoiceOne Financial Services, Inc., does hereby appoint James A. Bosserd, Mary J. Johnson, Kelly J. Potes and Thomas L. Lampen, or any of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of ChoiceOne Financial Services, Inc. on Form 10-K for its fiscal year ended December 31, 2015, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.

Dated: January 26, 2016	/s/ K. Timothy Bull
		(signature)
	K. Timothy Bull
		(type or print name)

LIMITED POWER OF ATTORNEY

The undersigned, in his or her capacity as a director or officer, or both, of ChoiceOne Financial Services, Inc., does hereby appoint James A. Bosserd, Mary J. Johnson, Kelly J. Potes and Thomas L. Lampen, or any of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of ChoiceOne Financial Services, Inc. on Form 10-K for its fiscal year ended December 31, 2015, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.

Dated: January 22, 2016	/s/ William F. Cutler, Jr.
		(signature)
	William F. Cutler, Jr.
		(type or print name)

LIMITED POWER OF ATTORNEY

The undersigned, in his or her capacity as a director or officer, or both, of ChoiceOne Financial Services, Inc., does hereby appoint James A. Bosserd, Mary J. Johnson, Kelly J. Potes and Thomas L. Lampen, or any of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of ChoiceOne Financial Services, Inc. on Form 10-K for its fiscal year ended December 31, 2015, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.

Dated: January 21, 2016	/s/ Jack G. Hendon
		(signature)
	Jack G. Hendon
		(type or print name)

LIMITED POWER OF ATTORNEY

The undersigned, in his or her capacity as a director or officer, or both, of ChoiceOne Financial Services, Inc., does hereby appoint James A. Bosserd, Mary J. Johnson, Kelly J. Potes and Thomas L. Lampen, or any of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of ChoiceOne Financial Services, Inc. on Form 10-K for its fiscal year ended December 31, 2015, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.

Dated: January 26, 2016	/s/ Paul L. Johnson
		(signature)
	Paul L. Johnson
		(type or print name)

LIMITED POWER OF ATTORNEY

The undersigned, in his or her capacity as a director or officer, or both, of ChoiceOne Financial Services, Inc., does hereby appoint James A. Bosserd, Mary J. Johnson, Kelly J. Potes and Thomas L. Lampen, or any of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of ChoiceOne Financial Services, Inc. on Form 10-K for its fiscal year ended December 31, 2015, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.

Dated: January 25, 2016	/s/ Raymond A. Lanning
		(signature)
	Raymond A. Lanning
		(type or print name)

LIMITED POWER OF ATTORNEY

The undersigned, in his or her capacity as a director or officer, or both, of ChoiceOne Financial Services, Inc., does hereby appoint James A. Bosserd, Mary J. Johnson, Kelly J. Potes and Thomas L. Lampen, or any of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of ChoiceOne Financial Services, Inc. on Form 10-K for its fiscal year ended December 31, 2015, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.

Dated: January 25, 2016	/s/ Dennis C. Nelson
		(signature)
	Dennis C. Nelson
		(type or print name)

LIMITED POWER OF ATTORNEY

The undersigned, in his or her capacity as a director or officer, or both, of ChoiceOne Financial Services, Inc., does hereby appoint James A. Bosserd, Mary J. Johnson, Kelly J. Potes and Thomas L. Lampen, or any of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of ChoiceOne Financial Services, Inc. on Form 10-K for its fiscal year ended December 31, 2015, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.

Dated: January 26, 2016	/s/ Nels W. Nyblad
		(signature)
	Nels W. Nyblad
		(type or print name)

LIMITED POWER OF ATTORNEY

The undersigned, in his or her capacity as a director or officer, or both, of ChoiceOne Financial Services, Inc., does hereby appoint James A. Bosserd, Mary J. Johnson, Kelly J. Potes and Thomas L. Lampen, or any of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of ChoiceOne Financial Services, Inc. on Form 10-K for its fiscal year ended December 31, 2015, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.

Dated: January 26, 2016	/s/ Roxanne M. Page
		(signature)
	Roxanne M. Page
		(type or print name)

LIMITED POWER OF ATTORNEY

The undersigned, in his or her capacity as a director or officer, or both, of ChoiceOne Financial Services, Inc., does hereby appoint James A. Bosserd, Mary J. Johnson, Kelly J. Potes and Thomas L. Lampen, or any of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of ChoiceOne Financial Services, Inc. on Form 10-K for its fiscal year ended December 31, 2015, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.

Dated: January 26, 2016	/s/ Kelly J. Potes
		(signature)
	Kelly J. Potes
		(type or print name)

EX-31.1

ChoiceOne Financial Services, Inc. 10-K

EXHIBIT 31.1

CERTIFICATION

I, James A. Bosserd, certify that:

1.	I have reviewed this annual report on Form 10-K for the year ended December 31, 2015 of ChoiceOne Financial Services, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 28, 2016	/s/ James A. Bosserd
	James A. Bosserd Chief Executive Officer ChoiceOne Financial Services, Inc.

78

EX-31.2

ChoiceOne Financial Services, Inc. 10-K

EXHIBIT 31.2

CERTIFICATION

I, Thomas L. Lampen, certify that:

1.	I have reviewed this annual report on Form 10-K for the year ended December 31, 2015 of ChoiceOne Financial Services, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 28, 2016	/s/ Thomas L. Lampen
	Thomas L. Lampen Treasurer ChoiceOne Financial Services, Inc.

79

EX-32

ChoiceOne Financial Services, Inc. 10-K

EXHIBIT 32

CERTIFICATION

Pursuant to 18 U.S.C. § 1350, each of the undersigned hereby certifies in his capacity as an officer of ChoiceOne Financial Services, Inc. (the “Company”) that the Annual Report of the Company on Form 10-K for the accounting period ended December 31, 2015 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such period and the results of operations of the Company for such period.

Dated: March 28, 2016	/s/ James A. Bosserd
	James A. Bosserd Chief Executive Officer

Dated: March 28, 2016	/s/ Thomas L. Lampen
	Thomas L. Lampen Treasurer

A signed original of this written statement required by Section 906 has been provided to ChoiceOne Financial Services, Inc. and will be retained by ChoiceOne Financial Services, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

80

XML

Document and Entity Information - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2015	Feb. 29, 2016	Jun. 30, 2015
Document And Entity Information
Entity Registrant Name	CHOICEONE FINANCIAL SERVICES INC
Entity Central Index Key	0000803164
Document Type	10-K
Trading Symbol	COFS
Document Period End Date	Dec. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 68,000
Entity Common Stock, Shares Outstanding		3,296,443
Average bid price			$ 23.03
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2015

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Assets
Cash and due from banks	$ 11,187	$ 16,650
Securities available for sale (Note 2)	160,136	142,521
Federal Home Loan Bank stock	1,614	1,913
Federal Reserve Bank stock	1,573	1,272
Loans held for sale	4,957	2,170
Loans (Note 3)	349,304	346,113
Allowance for loan losses (Note 3)	(4,194)	(4,173)
Loans, net	345,110	341,940
Premises and equipment, net (Note 5)	11,847	11,795
Other real estate owned, net (Note 7)	31	150
Cash value of life insurance policies	12,261	12,071
Intangible assets, net (Note 6)	379	827
Goodwill (Note 6)	13,728	13,728
Other assets	4,923	4,603
Total assets	567,746	549,640
Liabilities
Deposits - noninterest-bearing (Note 8)	122,937	113,006
Deposits - interest-bearing (Note 8)	351,759	321,822
Total deposits	474,696	434,828
Repurchase agreements (Note 9)	9,460	26,743
Advances from Federal Home Loan Bank (Note 10)	11,332	18,363
Other liabilities (Notes 11 and 13)	2,416	3,516
Total liabilities	$ 497,904	$ 483,450
Shareholders' Equity (Note 20)
Preferred stock; shares authorized: 100,000; shares outstanding: none
Common stock and paid-in capital, no par value; shares authorized: 7,000,000; shares outstanding: 3,295,228 in 2015 and 3,295,834 in 2014 (Note 14)	$ 46,501	$ 46,552
Retained earnings	22,138	18,565
Accumulated other comprehensive income, net	1,203	1,073
Total shareholders' equity	69,842	66,190
Total liabilities and shareholders' equity	$ 567,746	$ 549,640

XML

CCONSOLIDATED BALANCE SHEETS (Parenthetical) - shares	Dec. 31, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Preferred stock, authorized	100,000	100,000
Common stock, shares authorized	7,000,000	7,000,000
Common stock, shares outstanding	3,295,228	3,295,834

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Interest income
Loans, including fees	$ 15,971	$ 15,765	$ 15,801
Securities:
Taxable	1,939	1,847	1,812
Tax exempt	1,428	1,393	1,390
Other	14	9	12
Total interest income	19,352	19,014	19,015
Interest expense
Deposits	877	1,042	1,328
Advances from Federal Home Loan Bank	83	63	45
Other	30	46	46
Total interest expense	990	1,151	1,419
Net interest income	18,362	17,863	17,596
Provision for loan losses (Note 3)	100	100	300
Net interest income after provision for loan losses	18,262	17,763	17,296
Noninterest income
Customer service charges	4,083	3,951	3,677
Insurance and investment commissions	1,060	906	826
Gains on sales of loans (Note 4)	1,416	1,023	1,566
Net gains on sales of securities (Note 2)	261	311	137
Net losses on sales and write-downs of other assets (Note 7)	(121)	(135)	(822)
Earnings on life insurance policies	651	302	299
Other	352	444	562
Total noninterest income	7,702	6,802	6,245
Noninterest expense
Salaries and benefits (Notes 13 and 14)	9,273	8,456	8,240
Occupancy and equipment (Note 5)	2,396	2,389	2,341
Data processing	2,320	1,857	1,675
Professional fees	971	889	887
Supplies and postage	413	440	493
Advertising and promotional	253	275	239
Intangible amortization (Note 6)	448	448	448
Loan and collection expense	104	122	377
FDIC insurance	288	337	330
Other	1,810	1,581	1,634
Total noninterest expense	18,276	16,794	16,664
Income before income tax	7,688	7,771	6,877
Income tax expense (Note 11)	1,945	2,076	1,783
Net income	$ 5,743	$ 5,695	$ 5,094
Basic earnings per share (Note 15) (in dollars per share)	$ 1.75	$ 1.73	$ 1.55
Diluted earnings per share (Note 15) (in dollars per share)	1.74	1.72	1.54
Dividends declared per share (in dollars per share)	$ .66	$ 0.59	$ 0.54

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Schedule of activity in secondar market loans
Net income	$ 5,743	$ 5,695	$ 5,094
Other comprehensive income:
Changes in net unrealized gains (losses) on investment securities available for sale, net of tax expense (benefit) of $168, $588, and $(1,096) for the years ended December 31, 2015, 2014, and 2013 respectively	324	1,141	(2,130)
Reclassification adjustment for realized gain on sale of investment securities available for sale included in net income, net of tax benefit of $89, $106, and $47 for the years ended December 31, 2015, 2014, and 2013 respectively.	(172)	(205)	(90)
Change in adjustment for pension and other postretirement benefits, net of tax benefit (expense) of $11, $5, and $(7) for the years ended December 31, 2015, 2014, and 2013 respectively	(22)	(11)	12
Other comprehensive income/(loss), net of tax	130	925	(2,208)
Comprehensive income	$ 5,873	$ 6,620	$ 2,886

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Schedule of activity in secondar market loans
Changes in net unrealized gains (losses) on investments securities available for sale, tax	$ 168	$ 588	$ (1,096)
Reclassification adjustments for realized gain on sale of investment securities available for sale included in net income, tax	89	106	47
Change in adjustment for pension and postretirement benefits, tax	$ 11	$ 5	$ (7)

XML

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock and Paid In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income/(Loss), Net [Member]	Total
Balance, beginning at Dec. 31, 2012	$ 46,649	$ 11,501	$ 2,356	$ 60,506
Balance, beginning (in shares) at Dec. 31, 2012	3,298,081
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		5,094		5,094
Other comprehensive loss			(2,208)	(2,208)
Shares issued	$ 130			130
Shares issued (shares)	8,850
Shares repurchased	$ (192)			(192)
Shares repurchased (in shares)	(11,468)
Change in ESOP repurchase obligation	$ (14)			(14)
Effect of employee stock purchases	11			11
Restricted stock units issued	11			11
Cash dividends declared		(1,780)		(1,780)
Balance, ending at Dec. 31, 2013	$ 46,595	14,815	148	61,558
Balance, ending (in shares) at Dec. 31, 2013	3,295,463
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		5,695		5,695
Other comprehensive loss			925	925
Shares issued	$ 132			132
Shares issued (shares)	8,925
Shares repurchased	$ (203)			(203)
Shares repurchased (in shares)	(9,496)
Change in ESOP repurchase obligation	$ (32)			(32)
Effect of employee stock purchases	12			12
Restricted stock units issued	$ 48			48
Restricted stock units issued (in shares)	942
Cash dividends declared		(1,945)		(1,945)
Balance, ending at Dec. 31, 2014	$ 46,552	18,565	1,073	$ 66,190
Balance, ending (in shares) at Dec. 31, 2014	3,295,834			3,295,834
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income		5,743		$ 5,743
Other comprehensive loss			130	130
Shares issued	$ 206			206
Shares issued (shares)	13,310
Shares repurchased	$ (371)			(371)
Shares repurchased (in shares)	(16,200)
Change in ESOP repurchase obligation	$ (4)			(4)
Effect of employee stock purchases	15			15
Restricted stock units issued	$ 103			103
Restricted stock units issued (in shares)	2,284
Cash dividends declared		(2,170)		(2,170)
Balance, ending at Dec. 31, 2015	$ 46,501	$ 22,138	$ 1,203	$ 69,842
Balance, ending (in shares) at Dec. 31, 2015	3,295,228			3,295,228

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Statement of Stockholders' Equity [Abstract]
Cash dividend declared, per share	$ .66	$ 0.59	$ 0.54

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Cash flows from operating activities:
Net income	$ 5,743	$ 5,695	$ 5,094
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses	100	100	300
Depreciation	986	986	927
Amortization	1,497	1,493	1,636
Compensation expense on employee stock purchases and restricted stock units	118	60	22
Net gains on sales of securities	(261)	(311)	(137)
Gains on sales of loans	(1,416)	(1,023)	(1,566)
Loans originated for sale	(47,498)	(29,850)	(42,906)
Proceeds from loan sales	46,077	29,561	45,204
Earnings on bank-owned life insurance	(347)	(302)	(299)
Earnings from death benefit	(304)
Proceeds on bank-owned life insurance	461
(Gains)/losses on sales of other real estate owned	30	(24)	(122)
Write-downs of other real estate owned	91	154	926
Proceeds from sales of other real estate owned	406	789	1,604
Deferred federal income tax (benefit)/expense	(631)	(460)	59
Net change in:
Other assets	(503)	(380)	289
Other liabilities	(571)	985	(667)
Net cash from operating activities	3,978	7,473	10,364
Cash flows from investing activities:
Sales of securities available for sale	25,876	24,766	8,790
Maturities, prepayments and calls of securities available for sale	27,084	11,427	26,072
Purchases of securities available for sale	(70,902)	(41,770)	(40,687)
Purchase of Federal Reserve Bank stock	(301)
Calls of FHLB stock	299	565
Purchase of bank-owned life insurance policies		(1,500)
Loan originations and payments, net	(3,678)	(31,370)	(6,812)
Additions to premises and equipment	(1,038)	(786)	(801)
Net cash from investing activities	(22,660)	(38,668)	(13,438)
Cash flows from financing activities:
Net change in deposits	39,868	16,701	(6,072)
Net change in repurchase agreements	(17,283)	710	6,461
Proceeds from Federal Home Loan Bank advances	194,575	87,700	7,000
Payments on Federal Home Loan Bank advances	(201,606)	(75,729)	(1,028)
Issuance of common stock	206	132	130
Repurchase of common stock	(371)	(203)	(192)
Cash dividends	(2,170)	(1,945)	(1,780)
Net cash from financing activities	13,219	27,366	4,519
Net change in cash and cash equivalents	(5,463)	(3,829)	1,445
Beginning cash and cash equivalents	16,650	20,479	19,034
Ending cash and cash equivalents	11,187	16,650	20,479
Supplemental disclosures of cash flow information:
Cash paid for interest	1,005	1,161	1,456
Cash paid for income taxes	2,395	1,760	2,000
Loans transferred to other real estate owned	$ 408	$ 561	$ 897

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 1 – Summary of Significant Accounting Policies

Principles of Consolidation 

 The consolidated financial statements include ChoiceOne Financial Services, Inc., its wholly-owned subsidiary, ChoiceOne Bank, and ChoiceOne Bank’s wholly-owned subsidiary, ChoiceOne Insurance Agencies, Inc. (together referred to as “ChoiceOne”). Intercompany transactions and balances have been eliminated in consolidation.

Nature of Operations

The Bank is a full-service community bank that offers commercial, consumer, and real estate loans as well as traditional demand, savings and time deposits to both commercial and consumer clients in Kent, Muskegon, Newaygo, and Ottawa counties in Michigan. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and real estate. Commercial loans are expected to be repaid from the cash flows from operations of businesses. Real estate loans are collateralized by either residential or commercial real estate.

The Insurance Agency is a wholly-owned subsidiary of the Bank. The Insurance Agency sells insurance policies such as life and health for both commercial and consumer clients. The Insurance Agency also offers alternative investment products such as annuities and mutual funds through a registered broker.

Together, the Bank and the Insurance Agency account for substantially all of ChoiceOne’s assets, revenues and operating income.

Use of Estimates 

To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, ChoiceOne’s management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided. Actual results may differ from these estimates. Estimates associated with securities available for sale, the allowance for loan losses, other real estate owned, core deposit intangible assets, loan servicing rights, goodwill, and fair values of certain financial instruments are particularly susceptible to change.

Cash and Cash Equivalents 

Cash and cash equivalents are defined to include cash on hand, demand deposits with other banks, and federal funds sold. Cash flows are reported on a net basis for customer loan and deposit transactions, deposits with other financial institutions, and short-term borrowings with original terms of 90 days or less.

Securities 

Securities are classified as available for sale because they might be sold before maturity. Securities classified as available for sale are carried at fair value, with unrealized holding gains and losses reported separately in the accumulated other comprehensive income or loss section of shareholders’ equity, net of tax effect. Restricted investments in Federal Reserve Bank stock and Federal Home Loan Bank stock are carried at cost. Equity securities consist of investments in preferred stock, trust-preferred securities, and investments in common stock of other financial institutions.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized using the level-yield method without anticipating prepayments. Gains or losses on sales are recorded on the trade date based on the amortized cost of the security sold.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The evaluation of securities includes consideration given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether ChoiceOne has the intent to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. In analyzing an issuer’s financial condition, management may consider whether the securities are issued by the federal government or its agencies, or U.S. Government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether ChoiceOne intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If ChoiceOne intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment. If a security is determined to be other-than-temporarily impaired, but ChoiceOne does not intend to sell the security, only the credit portion of the estimated loss is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

Loans 

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses. Loans held for sale are reported at the lower of cost or market, on an aggregate basis.

Interest income on loans is reported on the interest method and includes amortization of net deferred loan fees and costs over the estimated loan term. Interest on loans is accrued based upon the principal balance outstanding. The accrual of interest is discontinued at the time at which commercial loans are 90 days past due unless the loan is secured by sufficient collateral and is in the process of collection. Interest on consumer or real estate secured loans is discontinued at the time at which the loan is 120 days past due unless the credit is secured by sufficient collateral and is in the process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed into nonaccrual status or charged off at an earlier date if collection of principal or interest is considered doubtful. Interest accrued but not received is reversed against interest income when the loans are placed into nonaccrual status. Interest received on such loans is applied to principal until qualifying for return to accrual. Loans are returned to accrual basis when all the principal and interest amounts contractually due are brought current and future payment is reasonably assured.

Allowance for Loan Losses 

The allowance for loan losses is a valuation allowance for probable incurred credit losses. The allowance for loan losses is increased by the provision for loan losses and decreased by loans charged off less any recoveries of charged off loans. Management estimates the allowance for loan losses balance required based on past loan loss experience, the nature and volume of the loan portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance for loan losses may be made for specific loans, but the entire allowance for loan losses is available for any loan that, in management’s judgment, should be charged off. Loan losses are charged against the allowance for loan losses when management believes that collection of a loan balance is not possible.

The allowance for loan losses consists of general and specific components. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful.

A loan is impaired when full payment under the loan terms is not expected. Commercial loans are evaluated for impairment on an individual loan basis. If a loan is considered impaired, a portion of the allowance for loan losses is allocated to the loan so that it is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller-balance homogeneous loans such as consumer and residential real estate mortgage loans are collectively evaluated for impairment and, accordingly, they are not separately identified for impairment disclosures.

Premises and Equipment 

Premises and equipment are stated at cost less accumulated depreciation. Land is carried at cost. Land improvements are depreciated using the straight-line method with useful lives ranging from 7 to 15 years. Building and related components are depreciated using the straight-line method with useful lives ranging from 5 to 39 years. Leasehold improvements are depreciated over the shorter of the estimated life or the lease term. Furniture and equipment are depreciated using the straight-line method with useful lives ranging from 3 to 7 years. Fixed assets are periodically reviewed for impairment. If impaired, the assets are recorded at fair value.

Other Real Estate Owned 

Real estate properties acquired in the collection of a loan are initially recorded at the lower of the Bank’s basis in the loans or fair value at acquisition establishing a new cost basis. Any reduction to fair value from the carrying value of the related loan is accounted for as a loan loss. After acquisition, a valuation allowance reduces the reported amount to the lower of the initial amount or fair value less costs to sell. Expenses to repair or maintain properties are included within other noninterest expenses. Gains and losses upon disposition and changes in the valuation allowance are reported net within noninterest income.

Loan Servicing Rights 

Loan servicing rights represent the allocated value of servicing rights on loans sold with servicing retained. Servicing rights are expensed in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on the fair value of the rights, using groupings of the underlying loans as to interest rates and then, secondarily, as to geographic and prepayment characteristics. Fair value is determined using prices for similar assets with similar characteristics when available or based upon discounted cash flows using market-based assumptions. Any impairment of a grouping is reported as a valuation allowance.

Goodwill 

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of the acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment and any such impairment will be recognized in the period identified.

Loan Commitments and Related Financial Instruments 

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet financing needs of customers. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Employee Benefit Plans 

ChoiceOne’s 401(k) plan allows participants to make contributions to their individual accounts under the plan in amounts up to the IRS maximum. Employer matching contributions from ChoiceOne to its 401(k) plan are discretionary. ChoiceOne also allows retired employees to participate in its health insurance plan. Employees who have attained age 55 and completed at least ten years of service to ChoiceOne are eligible to participate as a retiree until they are eligible for Medicare. These post-retirement benefits are accrued during the years in which the employee provides service.

Employee Stock Ownership Plan 

Dividends on Employee Stock Ownership Plan (the “ESOP”) shares are recorded as a reduction of retained earnings. Upon distribution of shares to a participant, the participant has the right to require the Company to purchase his or her shares at fair value in accordance with the terms and conditions of the ESOP. As such, these shares are not classified in shareholders’ equity as permanent equity.

Income Taxes 

Income tax expense is the sum of the current year income tax due and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

Earnings Per Share 

Basic earnings per common share (“EPS”) is based on weighted-average common shares outstanding. The weighted-average number of shares used in the computation of basic and diluted EPS includes shares allocated to the ESOP. Diluted EPS further assumes issue of any dilutive potential common shares issuable under stock options or restricted stock units granted.

Comprehensive Income 

Comprehensive income consists of net income and other comprehensive income or loss. Other comprehensive income or loss includes unrealized gains and losses on securities available for sale and changes in the funded status of post-retirement plans, net of tax, which are also recognized as a separate component of shareholders’ equity.

Accumulated other comprehensive income was as follows:

(Dollars in thousands)	Years ended December 31,
	2015			2014
Unrealized gains on available for sale securities		1,632			1,401
Unrecognized gains on post-retirement benefits		191			225
Tax effect		(620	)		(553	)
Accumulated other comprehensive income	$	1,203		$	1,073

Loss Contingencies 

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe that there are any such matters that may have a material effect on the financial statements as of December 31, 2015.

Cash Restrictions 

Cash on hand or on deposit with the Federal Reserve Bank of $1.1 million and $409,000 was required to meet regulatory reserve and clearing requirements at December 31, 2015 and 2014, respectively. The balance in excess of the amount required was interest-bearing as of December 31, 2015 and December 31, 2014.

Stock-Based Compensation 

The Company values share-based stock option awards granted using the Black-Scholes option-pricing model. The Company recognizes compensation expense for its awards on a straight-line basis over the requisite service period for the entire award (straight-line attribution method), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant-date fair value of the award that is vested at that time. Compensation costs related to stock options granted are disclosed in Note 14.

ChoiceOne has granted restricted stock units to a select group of employees under the Stock Incentive Plan of 2012. Restricted stock units vest in three annual installments on each of the next three anniversaries of the grant date. Certain additional vesting provisions apply. Each unit, once vested, is settled by delivery of one share of ChoiceOne common stock.

Dividend Restrictions 

Banking regulations require the maintenance of certain capital levels and may limit the amount of dividends that may be paid by the Bank to ChoiceOne (see Note 20).

Fair Value of Financial Instruments 

Fair values of financial instruments are estimated using relevant market information and other assumptions, which are more fully documented in Note 18 to the consolidated financial statements. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Operating Segments 

While ChoiceOne’s management monitors the revenue streams of various products and services for the Bank and Insurance Agency, operations and financial performance are evaluated on a company-wide basis. Accordingly, all of the financial service operations are considered by management to be aggregated into one reportable operating segment.

Recent Accounting Pronouncements 

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU adopts a standardized approach for revenue recognition and was a joint effort with the International Accounting Standards Board (IASB). The new revenue recognition standard is based on a core principle of recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU does not apply to financial instruments. The ASU is effective for public entities for reporting periods beginning after December 15, 2017 (therefore, for the year ending December 31, 2018 for the Corporation). Early implementation is not allowed for public companies. Management is currently assessing the impact to the Corporation’s consolidated financial statements.

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU covers various changes to the accounting, measurement, and disclosure related to certain financial instruments. The most significant change included in the update is the requirement for certain equity investments (excluding investments that are consolidated or accounted for under the equity method) to be measured at fair value with changes in fair value recognized in net income. Alternatively, equity investments without readily determinable fair values can be recorded at cost, and periodically evaluated for impairment using a qualitative assessment. If the qualitative assessment indicates the investment is impaired, it is required to be measured at fair value. The update also eliminates the requirement for public business entities to disclose the methods and assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The new standard is effective for the year ending December 31, 2018 for the Corporation. Management is currently assessing the impact to the Corporation’s consolidated financial statements.

Reclassifications

Certain amounts presented in prior year consolidated financial statements have been reclassified to conform to the current year’s presentation.

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Securities

12 Months Ended

Dec. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Securities

Note 2 – Securities

The fair value of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) at December 31 were as follows:

	2015
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	57,406	$	30	$	(229	)	$	57,207
U.S. Treasury notes and bonds		6,133		—		(33	)		6,100
State and municipal		76,005		1,858		(109	)		77,754
Mortgage-backed		6,989		26		(45	)		6,970
Corporate		8,418		8		(39	)		8,387
Foreign debt		1,000		—		(5	)		995
Equity securities		2,279		174		—			2,453
Asset-backed securities		274		—		(4	)		270
Total	$	158,504	$	2,096	$	(464	)	$	160,136

	2014
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	44,584	$	77	$	(158	)	$	44,503
U.S. Treasury notes and bonds		8,077		11		(30	)		8,058
State and municipal		68,376		1,697		(238	)		69,835
Mortgage-backed		8,896		68		(22	)		8,942
Corporate		7,529		25		(16	)		7,538
Foreign debt		1,000		—		(6	)		994
Equity securities		2,280		—		(5	)		2,275
Asset-backed securities		378		—		(2	)		376
Total	$	141,120	$	1,878	$	(477	)	$	142,521

Information regarding sales of securities available for sale for the year ended December 31 follows:

(Dollars in thousands)
	2015		2014		2013
Proceeds from sales of securities	$	25,876	$	24,766	$	8,790
Gross realized gains		261		341		197
Gross realized losses		—		30		60

Contractual maturities of securities available for sale at December 31, 2015 were as follows:

(Dollars in thousands)		Fair Value
Due within one year	$	24,173
Due after one year through five years		94,705
Due after five years through ten years		35,831
Due after ten years		2,974
Total debt securities		157,683
Equity securities		2,453
Total	$	160,136

Various securities were pledged as collateral for securities sold under agreements to repurchase, advances from the Federal Home Loan Bank, and participation in a program that provided Community Reinvestment Act credits. The carrying amount of securities pledged as collateral at December 31 was as follows:

(Dollars in thousands)
		2015		2014
Securities pledged for securities sold under agreements to repurchase	$	7,011	$	34,369
Securities pledged for advances from the Federal Home Loan Bank		24,199		—
Security pledged for Community Reinvestment Act credits		276		279
Total	$	31,486	$	34,648

The fair value of securities pledged to secure repurchase agreements may decline, and the Company may be required to provide additional collateral. The Company manages this risk by pledging securities with fair values in excess of the repurchase liability.

Securities with unrealized losses at year-end 2015 and 2014, aggregated by investment category and length of time the individual securities have been in an unrealized loss position, were as follows:

	2015
	Less than 12 months					More than 12 months					Total
(Dollars in thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. Government and federal agency	$	38,567	$	(216	)	$	986	$	(13	)	$	39,553	$	(229	)
U.S. Treasury notes and bonds		6,101		(33	)		—		—			6,101		(33	)
State and municipal		10,382		(69	)		2,906		(40	)		13,288		(109	)
Mortgage-backed		4,459		(41	)		382		(4	)		4,841		(45	)
Corporate		4,284		(33	)		896		(6	)		5,180		(39	)
Foreign debt		995		(5	)		—		—			995		(5	)
Asset-backed securities		—		—			270		(4	)		270		(4	)
Total temporarily impaired	$	64,788	$	(397	)	$	5,440	$	(67	)	$	70,228	$	(464	)

	2014
	Less than 12 months					More than 12 months					Total
(Dollars in thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. Government and federal agency	$	11,323	$	(26	)	$	13,005	$	(132	)	$	24,328	$	(158	)
U.S. Treasury notes and bonds		—		—			2,089		(30	)		2,089		(30	)
State and municipal		8,463		(59	)		8,977		(179	)		17,440		(238	)
Mortgage-backed		989		(4	)		1,535		(18	)		2,524		(22	)
Corporate		2,054		(7	)		1,393		(9	)		3,447		(16	)
Foreign debt		—		—			994		(6	)		994		(6	)
Equity securities		1,000		(5	)		—		—			1,000		(5	)
Asset-backed securities		—		—			376		(2	)		376		(2	)
Total temporarily impaired	$	23,829	$	(101	)	$	28,369	$	(376	)	$	52,198	$	(477	)

ChoiceOne evaluates all securities on a quarterly basis to determine whether unrealized losses are temporary or other than temporary. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of ChoiceOne to retain its investment in the issue for a period of time sufficient to allow for any anticipated recovery in fair value of amortized cost basis. Management believed that unrealized losses as of December 31, 2015 were temporary in nature and were caused primarily by changes in interest rates, increased credit spreads, and reduced market liquidity and were not caused by the credit status of the issuer. No other than temporary impairments were recorded in 2015 or 2014.

At December 31, 2015, there were 82 securities with an unrealized loss, compared to 42 securities with an unrealized loss as of December 31, 2014. The increase in the number of securities in an unrealized loss position was caused by higher interest rates at the end of 2015 compared to the end of 2014.

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Loans and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2015

Receivables [Abstract]

Loans And Allowance For Loan Losses

Note 3 – Loans and Allowance for Loan Losses

The Bank’s loan portfolio as of December 31 was as follows:

(Dollars in thousands)
		2015			2014
Agricultural	$	40,232		$	41,098
Commercial and industrial		94,347			88,062
Consumer		20,090			20,752
Real estate - commercial		97,736			99,807
Real estate - construction		5,390			2,691
Real estate - residential		91,509			93,703
Loans, gross		349,304			346,113
Allowance for loan losses		(4,194	)		(4,173	)
Loans, net	$	345,110		$	341,940

ChoiceOne manages its credit risk through the use of its loan policy and its loan approval process and by monitoring of loan credit performance. The loan approval process for commercial loans involves individual and group approval authorities. Individual authority levels are based on the experience of the lender. Group authority approval levels can consist of an internal loan committee that includes the Bank’s President or Senior Lender and other loan officers for loans that exceed individual approval levels, or a loan committee of the Board of Directors for larger commercial loans. Most consumer loans are approved by individual loan officers based on standardized underwriting criteria, with larger consumer loans subject to approval by the internal loan committee.

Ongoing credit review of commercial loans is the responsibility of the loan officers. ChoiceOne’s internal credit committee meets at least monthly and reviews loans with payment issues and loans with a risk rating of 5, 6, or 7. Risk ratings of commercial loans are reviewed periodically and adjusted if needed. ChoiceOne’s consumer loan portfolio is primarily monitored on an exception basis. Loans where payments are past due are turned over to the Bank’s collection department, which works with the borrower to bring payments current or take other actions when necessary. In addition to internal reviews of credit performance, ChoiceOne contracts with a third party for independent loan review that monitors the loan approval process and the credit quality of the loan portfolio.

Activity in the allowance for loan losses and balances in the loan portfolio were as follows:

(Dollars in thousands)	Agricultural		Commercial and Industrial			Consumer			Commercial Real Estate			Construction Real Estate		Residential Real Estate			Unallocated			Total
2015
Allowance for Loan Losses
Beginning balance	$	186	$	527		$	184		$	1,641		$	9	$	1,193		$	433		$	4,173
Charge-offs		—		(30	)		(291	)		—			—		(140	)		—			(461	)
Recoveries		1		64			121			47			—		149			—			382
Provision		233		25			283			(658	)		37		186			(6	)		100
Ending balance	$	420	$	586		$	297		$	1,030		$	46	$	1,388		$	427		$	4,194
Individually evaluated for impairment	$	3	$	15		$	1		$	191		$	—	$	296		$	—		$	506
Collectively evaluated for impairment	$	417	$	571		$	296		$	839		$	46	$	1,092		$	427		$	3,687
Loans
Individually evaluated for impairment	$	50	$	192		$	24		$	2,790		$	—	$	2,529					$	5,585
Collectively evaluated for impairment		40,182		94,155			20,066			94,946			5,390		88,980						343,719
Ending balance	$	40,232	$	94,347		$	20,090		$	97,736		$	5,390	$	91,509					$	349,304

(Dollars in thousands)	Agricultural			Commercial and Industrial			Consumer			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Unallocated		Total
2014
Allowance for Loan Losses
Beginning balance	$	178		$	562		$	192		$	1,842		$	12		$	1,626		$	323	$	4,735
Charge-offs		—			(1	)		(273	)		(665	)		—			(133	)		—		(1,072	)
Recoveries		20			119			179			48			—			44			—		410
Provision		(12	)		(153	)		86			416			(3	)		(344	)		110		100
Ending balance	$	186		$	527		$	184		$	1,641		$	9		$	1,193		$	433	$	4,173
Individually evaluated for impairment	$	—		$	—		$	4		$	745		$	—		$	365		$	—	$	1,114
Collectively evaluated for impairment	$	186		$	527		$	180		$	896		$	9		$	828		$	433	$	3,059
Loans
Individually evaluated for impairment	$	—		$	38		$	36		$	3,853		$	—		$	2,958				$	6,885
Collectively evaluated for impairment		41,098			88,024			20,716			95,954			2,691			90,745					339,228
Ending balance	$	41,098		$	88,062		$	20,752		$	99,807		$	2,691		$	93,703				$	346,113

The process to monitor the credit quality of ChoiceOne’s loan portfolio includes tracking (1) the risk ratings of business loans, (2) the level of classified business loans, and (3) delinquent and nonperforming consumer loans. Business loans are risk rated on a scale of 1 to 8. A description of the characteristics of the ratings follows:

Risk ratings 1 and 2: These loans are considered pass credits. They exhibit good to exceptional credit risk and demonstrate the ability to repay the loan from normal business operations.

Risk rating 3: These loans are considered pass credits. They exhibit acceptable credit risk and demonstrate the ability to repay the loan from normal business operations.

Risk rating 4: These loans are considered watch credits. They have potential developing weaknesses that, if not corrected, may cause deterioration in the ability of the borrower to repay the loan. While a loss is possible for a loan with this rating, it is not anticipated.

Risk rating 5: These loans are considered special mention credits. Loans in this risk rating are considered to be inadequately protected by the net worth and debt service coverage of the borrower or of any pledged collateral. These loans have well defined weaknesses that may jeopardize the borrower’s ability to repay the loan. If the weaknesses are not corrected, loss of principal and interest could be probable.

Risk rating 6: These loans are considered substandard credits. These loans have well defined weaknesses, the severity of which makes collection of principal and interest in full questionable. Loans in this category may be placed on nonaccrual status.

Risk rating 7: These loans are considered doubtful credits. Some loss of principal and interest has been determined to be probable. The estimate of the amount of loss could be affected by factors such as the borrower’s ability to provide additional capital or collateral. Loans in this category are on nonaccrual status.

Risk rating 8: These loans are considered loss credits. They are considered uncollectible and will be charged off against the allowance for loan losses.

Information regarding the Bank’s credit exposure as of December 31 was as follows:

Corporate Credit Exposure - Credit Risk Profile By Creditworthiness Category 

(Dollars in thousands)	Agricultural				Commercial and Industrial				Commercial Real Estate
	2015		2014		2015		2014		2015		2014
Risk ratings 1 and 2	$	10,416	$	9,596	$	10,480	$	11,590	$	3,875	$	3,576
Risk rating 3		25,189		24,294		66,921		59,470		57,540		58,600
Risk rating 4		3,086		6,462		16,169		15,764		29,826		28,557
Risk rating 5		1,491		683		574		976		3,776		4,490
Risk rating 6		50		63		129		262		2,719		4,584
Risk rating 7		—		—		74		—		—		—
	$	40,232	$	41,098	$	94,347	$	88,062	$	97,736	$	99,807

Consumer Credit Exposure - Credit Risk Profile Based On Payment Activity 

(Dollars in thousands)	Consumer				Construction Real Estate				Residential Real Estate
	2015		2014		2015		2014		2015		2014
Performing	$	20,090	$	20,752	$	5,390	$	2,691	$	90,796	$	92,974
Nonperforming		—		—		—		—		282		58
Nonaccrual		—		—		—		—		431		671
	$	20,090	$	20,752	$	5,390	$	2,691	$	91,509	$	93,703

The following schedule provides information on loans that were considered troubled debt restructurings (“TDRs”) that were modified during the twelve months ended December 31, 2015 and December 31, 2014: 

	December 31, 2015						December 31, 2014
(Dollars in thousands)		Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Agricultural		—	$	—	$	—	—	$	—	$	—
Commercial and industrial		—		—		—	1		32		32
Consumer		—		—		—	—		—		—
Commercial real estate		4		439		439	5		1,596		1,596
Residential real estate		2		195		195	2		281		281
		6	$	634	$	634	8	$	1,909	$	1,909

The pre-modification and post-modification outstanding recorded investment represents amounts as of the date of loan modification. If a difference exists between the pre-modification and post-modification outstanding recorded investment, it represents impairment recognized through the provision for loan losses computed based on a loan’s post-modification present value of expected future cash flows discounted at the loan’s original effective interest rate. If no difference exists, a loss is not expected to be incurred based on an assessment of the borrower’s expected cash flows.

The following schedule provides information on TDRs as of December 31, 2015 and December 31, 2014 where the borrower was past due with respect to principal and/or interest for 30 days or more during the twelve months ended December 31, 2015 and December 31, 2014 that had been modified during the 12-month period prior to the default: 

	With Payment Defaults During the Following Periods
	December 31, 2015			December 31, 2014
(Dollars in thousands)	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
Agricultural	—	$	—		—	$	—
Commercial and industrial	—		—		—		—
Consumer	—		—		—		—
Commercial real estate	3		400		6		1,592
Residential real estate	—		—		2		110
	3	$	400		8	$	1,702

Loans are classified as performing when they are current as to principal and interest payments or are past due on payments less than 90 days. Loans are classified as nonperforming when they are past due 90 days or more as to principal and interest payments or are considered a troubled debt restructuring. 

Impaired loans by loan category as of December 31 were as follows:  

(Dollars in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2015
With no related allowance recorded
Agricultural	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		74		103		—		25		—
Consumer		—		—		—		2		—
Commercial real estate		1,540		1,540		—		1,061		11
Residential real estate		13		13		—		191		—
Subtotal		1,627		1,656		—		1,279		11
With an allowance recorded
Agricultural		50		50		3		62		(6	)
Commercial and industrial		118		118		15		44		1
Consumer		24		24		1		34		3
Commercial real estate		1,250		1,755		191		2,002		64
Residential real estate		2,516		2,516		296		2,425		86
Subtotal		3,958		4,463		506		4,567		148
Agricultural		50		50		3		62		(6	)
Commercial and industrial		192		221		15		69		1
Consumer		24		24		1		36		3
Commercial real estate		2,790		3,295		191		3,063		75
Residential real estate		2,529		2,529		296		2,616		86
Total	$	5,585	$	6,119	$	506	$	5,846	$	159

(Dollars in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2014
With no related allowance recorded
Agricultural	$	—	$	—	$	—	$	90	$	—
Commercial and industrial		38		43		—		81		—
Consumer		8		8		—		3		—
Commercial real estate		413		419		—		352		6
Residential real estate		502		502		—		492		9
Subtotal		961		972		—		1,018		15
With an allowance recorded
Agricultural		—		—		—		130		—
Commercial and industrial		—		—		—		292		4
Consumer		28		28		4		31		3
Commercial real estate		3,440		4,498		745		3,932		81
Residential real estate		2,456		2,474		365		2,323		91
Subtotal		5,924		7,000		1,114		6,708		179
Agricultural		—		—		—		220		—
Commercial and industrial		38		43		—		373		4
Consumer		36		36		4		34		3
Commercial real estate		3,853		4,917		745		4,284		87
Residential real estate		2,958		2,976		365		2,815		100
Total	$	6,885	$	7,972	$	1,114	$	7,726	$	194

An aging analysis of loans by loan category as of December 31 follows:

(Dollars in thousands)		Loans Past Due 30 to 59 Days (1)		Loans Past Due 60 to 89 Days (1)		Loans  Past Due Greater Than 90 Days (1)		Total (1)		Loans Not Past Due		Total Loans		Loans 90 Days Past Due and Accruing
2015
Agricultural	$	3	$	—	$	—	$	3	$	40,229	$	40,232	$	—
Commercial and industrial		90		322		77		489		93,858		94,347		—
Consumer		115		—		—		115		19,975		20,090		—
Commercial real estate		505		297		1,233		2,035		95,701		97,736		—
Construction real estate		299		—		—		299		5,091		5,390		—
Residential real estate		1,012		364		200		1,576		89,933		91,509		29
	$	2,024	$	983	$	1,510	$	4,517	$	344,787	$	349,304	$	29

2014
Agricultural	$	—	$	—	$	—	$	—	$	41,098	$	41,098	$	—
Commercial and industrial		33		260		—		293		87,769		88,062		—
Consumer		66		10		—		76		20,676		20,752		—
Commercial real estate		172		51		699		922		98,885		99,807		—
Construction real estate		—		—		—		—		2,691		2,691		—
Residential real estate		1,376		404		363		2,143		91,560		93,703		58
	$	1,647	$	725	$	1,062	$	3,434	$	342,679	$	346,113	$	58

(1) Includes nonaccrual loans

Nonaccrual loans by loan category as of December 31 follow: 

(Dollars in thousands)		2015		2014
Agricultural	$	50	$	—
Commercial and industrial		77		38
Consumer		—		—
Commercial real estate		1,640		2,652
Construction real estate		—		—
Residential real estate		431		671
	$	2,198	$	3,361

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Mortgage Banking

12 Months Ended

Dec. 31, 2015

Mortgage Banking [Abstract]

Mortgage Banking

Note 4 – Mortgage Banking

Activity in secondary market loans during the year was as follows:  

(Dollars in thousands)		2015		2014		2013
Loans originated for resale, net of principal payments	$	47,498	$	29,850	$	42,906
Proceeds from loan sales		46,077		29,561		45,204
Net gains on sales of loans held for sale		1,416		1,023		1,566
Loan servicing fees, net of amortization		113		166		167

Loans serviced for others are not reported as assets in the accompanying consolidated balance sheets. The unpaid principal balances of these loans were $79.4 million and $91.4 million at December 31, 2015 and 2014, respectively. The Bank maintains custodial escrow balances in connection with these serviced loans; however, such escrows were immaterial at December 31, 2015 and 2014.

Activity for loan servicing rights (included in other assets) was as follows:  

(Dollars in thousands)		2015			2014			2013
Balance, beginning of year	$	489		$	544		$	473
Capitalized		49			73			211
Amortization		(161	)		(128	)		(140	)
Balance, end of year	$	378		$	489		$	544

The fair value of loan servicing rights was $739,000 and $942,000 as of December 31, 2015 and 2014, respectively. Consequently, a valuation allowance was not necessary at year-end 2015 or 2014. The fair value of servicing rights at December 31, 2015 was determined using a discount rate of 6.37% and prepayment speeds ranging from 9% to 13%. The fair value of servicing rights at December 31, 2014 was determined using a discount rate of 6.20% and prepayment speeds ranging from 7% to 13%.

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Premises and Equipment

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Premises and Equipment

Note 5 – Premises and Equipment

As of December 31, premises and equipment consisted of the following: 

(Dollars in thousands)		2015			2014
Land and land improvements	$	4,529		$	4,337
Leasehold improvements		38			38
Buildings		12,076			11,859
Furniture and equipment		5,322			4,844
Total cost		21,965			21,078
Accumulated depreciation		(10,118	)		(9,283	)
Premises and equipment, net	$	11,847		$	11,795

Depreciation expense was $986,000, $986,000, and $927,000 for 2015, 2014 and 2013, respectively.

The Bank leases certain branch properties and automated-teller machine locations in its normal course of business. Rent expense totaled $53,000, $52,000, and $56,000 for 2015, 2014 and 2013, respectively. Rent commitments under non-cancelable operating leases were as follows, before considering renewal options that generally are present (dollars in thousands): 

2016	$	55
2017		17
2018		17
2019		18
2020		18
Thereafter		91
Total	$	216

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Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Note 6 - Goodwill and Intangible Assets

Goodwill

There were no changes in the goodwill balance in 2015 or 2014. ChoiceOne evaluates goodwill annually for impairment. Recently issued accounting pronouncements allow a company to first perform a qualitative assessment for goodwill prior to a quantitative assessment (Step 1 assessment). If the results of the qualitative assessment indicate that it is more likely than not that goodwill is impaired, then a quantitative assessment must be performed. If not, there is no further assessment required. Management performed a qualitative assessment of goodwill as of June 30, 2014 and 2015 and December 31, 2014 and 2015. The analysis was performed including evaluation of the share price, book value, and financial results of ChoiceOne as compared to the previous year. Additionally, industry and market conditions were evaluated. Average deal prices during 2015 in the Midwest of closed transactions have indicated increases in deal values to tangible common equity, deal values to earnings, and core deposit premiums when compared to the observed prices used in the last quantitative assessment of goodwill in 2012. Further, macro-economic trends have been on a positive trajectory recently and there have been no adverse legal, regulatory, contractual, political or other factors that have materially impacted ChoiceOne. Upon completion of the qualitative assessment, ChoiceOne believes that it is more likely than not that the fair value of ChoiceOne’s equity exceeds the carrying value at the assessment date and there is no further quantitative assessment necessary for either 2015 or 2014.

Acquired Intangible Assets

Information for acquired intangible assets at December 31 follows: 

	2015				2014
(Dollars in thousands)		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Core deposit intangible	$	4,134	$	3,790	$	4,134	$	3,376
Other intangible assets		348		313		347		278
Totals	$	4,482	$	4,103	$	4,481	$	3,654

The core deposit intangible and other intangible assets are being amortized on a straight-line basis over ten years. Intangible assets are reviewed for impairment on a quarterly basis. No impairment was indicated as of December 31, 2015 or December 31, 2014. Aggregate amortization expense was $448,000 for each year 2015, 2014 and 2013. The estimated amortization expense for the next year ending December 31 is as follows: 

(Dollars in thousands)		Core Deposit Intangible		Other Intangible Assets		Total
2016	$	345	$	35	$	379

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Other Real Estate Owned

12 Months Ended

Dec. 31, 2015

Other Real Estate [Abstract]

Other Real Estate Owned

Note 7 – Other Real Estate Owned

Other real estate owned represents residential and commercial properties primarily owned as a result of loan collection activities and is reported net of a valuation allowance. Activity within other real estate owned was as follows: 

(Dollars in thousands)		2015			2014			2013
Balance, beginning of year	$	150		$	508		$	2,019
Transfers from loans		408			561			897
Proceeds from sales		(406	)		(789	)		(1,604	)
Gains/(losses) on sales		(30	)		24			122
Write-downs		(91	)		(154	)		(926	)
Balance, end of year	$	31		$	150		$	508

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Deposits

12 Months Ended

Dec. 31, 2015

Deposits [Abstract]

Deposits

Note 8 – Deposits

Deposit balances as of December 31 consisted of the following:

(Dollars in thousands)	2015		2014
Noninterest-bearing demand deposits	$	122,937	$	113,006
Interest-bearing demand deposits		106,882		71,651
Money market deposits		86,987		78,272
Savings deposits		70,946		67,035
Local certificates of deposit		86,944		104,864
Total deposits	$	474,696	$	434,828

Scheduled maturities of certificates of deposit at December 31, 2015 were as follows:

(Dollars in thousands)
2016	$	54,241
2017		16,104
2018		9,074
2019		3,368
2020		3,864
2021		293
Total	$	86,944

The Bank had certificates of deposit issued in denominations of $250,000 or greater totaling $21.4 million and $27.2 million at December 31, 2015 and 2014, respectively. The Bank had no brokered certificates of deposit at either December 31, 2015 or December 31, 2014. In addition, the Bank had $2.1 million of certificates of deposit as of December 31, 2015 and $3.1 million as of December 31, 2014 that had been issued through the Certificate of Deposit Account Registry Service (CDARS). Although certificates of deposit issued through CDARS are issued to local customers, this type of deposit is classified as brokered deposits for regulatory purposes.

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Repurchase Agreements

12 Months Ended

Dec. 31, 2015

Disclosure of Repurchase Agreements [Abstract]

Repurchase Agreements

Note 9 – Repurchase Agreements

Securities sold under agreements to repurchase are advances to the Bank by customers or another bank. These agreements are direct obligations of the Bank and are secured by securities held in safekeeping at a correspondent bank. Repurchase agreements with Bank customers mature daily. Information regarding repurchase agreements follows:

(Dollars in thousands)	2015			2014
Outstanding balance at December 31	$	9,460		$	26,743
Average interest rate at December 31		0.04	%		0.19	%
Average balance during the year	$	17,825		$	22,594
Average interest rate during the year		0.17	%		0.20	%
Maximum month end balance during the year	$	26,743		$	28,719

Repurchase agreements accounted for as secured borrowings as of December 31, 2015 were as follows:

	Remaining Contractual Maturity of the Agreements
(Dollars in thousands)	Overnight and Continuous
U.S. Government agencies	$	7,011
Total securities		7,011
Unsecured borrowings		2,449
Total borrowings	$	9,460

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Federal Home Loan Bank Advances

12 Months Ended

Dec. 31, 2015

Advances from Federal Home Loan Banks [Abstract]

Federal Home Loan Bank Advances

Note 10 – Federal Home Loan Bank Advances 

At December 31, advances from the FHLB were as follows:

(Dollars in thousands)		2015		2014
Maturity of November 2024 with fixed interest rate of 3.98%	$	332	$	363
Maturity of February 2016 with fixed interest rate of 0.47%		11,000		—
Maturities ranging from February 2015 to May 2015, fixed interest rates ranging from 0.39% to 0.41%, with an average of 0.40%		—		18,000
Total advances outstanding at year-end	$	11,332	$	18,363

Fees are charged on fixed rate advances that are paid prior to maturity. No fixed rate advances were paid prior to maturity in 2015 or 2014. Advances were secured by agricultural loans and residential real estate loans with a carrying value of approximately $107.6 million and $96.2 million at December 31, 2015 and December 31, 2014, respectively. Advances were also secured by $24.2 million of U.S. Government agency securities and U.S. Treasury securities at December 31, 2015. Based on this collateral, the Bank was eligible to borrow an additional $61.2 million at year-end 2015.

The scheduled maturities of advances from the FHLB at December 31, 2015 were as follows:

(Dollars in thousands)
2016	$	11,031
2017		33
2018		34
2019		36
2020		37
Thereafter		161
Total	$	11,332

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Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Note 11 – Income Taxes

Information as of December 31 and for the year follows: 

(Dollars in thousands)		2015			2014			2013
Provision for Income Taxes
Current federal income tax expense	$	2,576		$	2,536		$	1,724
Deferred federal income tax expense/(benefit)		(631	)		(460	)		59
Income tax expense	$	1,945		$	2,076		$	1,783
Reconciliation of Income Tax Provision to Statutory Rate
Income tax computed at statutory federal rate of 34%	$	2,614		$	2,642		$	2,338
Tax exempt interest income		(488	)		(475	)		(476	)
Tax exempt earnings on bank-owned life insurance		(221	)		(103	)		(101	)
Other items		40			12			22
Income tax expense	$	1,945		$	2,076		$	1,783
Effective income tax rate		25	%		27	%		26	%

(Dollars in thousands)
Components of Deferred Tax Assets and Liabilities		2015		2014
Deferred tax assets:
Allowance for loan losses	$	1,426	$	1,151
Deferred compensation		269		295
Loan costs/fees deferred		86		84
Other		181		224
Total deferred tax assets		1,962		1,754
Deferred tax liabilities:
Depreciation		1,182		1,405
Unrealized gains on securities available for sale		555		476
Purchase accounting adjustments from merger		117		258
Loan servicing rights		129		166
Stock dividends received from Federal Home Loan Bank		54		64
Post-retirement benefits obligation		66		77
Other		62		75
Total deferred tax liabilities		2,165		2,521
Net deferred tax liabilities	$	203	$	767

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Related Party Transactions

12 Months Ended

Dec. 31, 2015

Related Party Transactions [Abstract]

Related Party Transactions

Note 12 – Related Party Transactions

Loans to executive officers, directors and their affiliates were as follows at December 31:

(Dollars in thousands)		2015			2014
Balance, beginning of year	$	10,339		$	5,162
New loans and renewals		4,054			5,883
Repayments and renewals		(4,159	)		(3,022	)
Effect of changes in related parties		—			2,316
Balance, end of year	$	10,234		$	10,339

Deposits from executive officers, directors and their affiliates were $16.1 million and $14.1 million at December 31, 2015 and 2014, respectively.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2015

Compensation and Retirement Disclosure [Abstract]

Employee Benefits Plan

Note 13 – Employee Benefit Plans

401(k) Plan:

The 401(k) plan allows employees to contribute to their individual accounts under the plan amounts up to the IRS maximum. Matching company contributions to the plan are discretionary. Expense for matching company contributions under the plan was $167,000, $140,000, and $91,000 in 2015, 2014, and 2013, respectively.

Employee Stock Ownership Plan:

Through December 31, 2015, employees participated in an Employee Stock Ownership Plan (“ESOP”). ChoiceOne could make discretionary contributions to the ESOP. Shares of ChoiceOne common stock were allocated to participants based on relative compensation earned and compensation expense was recorded when allocated. Dividends on allocated shares increased the participant accounts. Participants became fully vested upon completing six years of qualifying service. Participants received the shares at the end of employment. A participant could require stock received to be repurchased by ChoiceOne at any time. ChoiceOne did not contribute to the ESOP nor was any expense recorded in 2015, 2014, or 2013. Effective January 1, 2016, ChoiceOne terminated the ESOP and transferred shares held by the ESOP to the 401(k) plan.

Shares held by the ESOP as of December 31 were as follows:

(Dollars in thousands)		2015		2014		2013
Shares allocated to participants		5,355		5,355		5,355
Shares unallocated		—		—		—
Total shares of ChoiceOne stock held by ESOP		5,355		5,355		5,355
Fair value of allocated shares, subject to repurchase obligation, recorded in other liabilities	$	127	$	123	$	91

Post-retirement Benefits Plan:

ChoiceOne maintains an unfunded post-retirement health care plan, which permits employees (and their dependents) the ability to participate upon retirement from ChoiceOne. ChoiceOne does not pay any portion of the health care premiums charged to its retired participants. A liability has been accrued for the obligation under this plan. ChoiceOne incurred post-retirement benefit expense of $2,000 in 2015 and negative expense of $20,000 in 2014, and $11,000 in 2013. The post-retirement obligation liability was $127,000 as of December 31, 2015 and $149,000 as of December 31, 2014. 

Deferred Compensation Plans:

A deferred director compensation plan covers former directors of VRB, which was acquired by ChoiceOne in 2006. Under the plan, ChoiceOne pays each former director the amount of director fees deferred plus interest at rates ranging from 5.50% to 5.84% over various periods as elected by each director. The payout periods range from one month to ten years beginning with the individual’s termination of service. A liability has been accrued for the obligation under this plan. ChoiceOne incurred deferred compensation plan expense of $12,000, $12,000, and $14,000 in 2015, 2014, and 2013, respectively. The deferred compensation liability was $173,000 as of December 31, 2015 and $203,000 as of December 31, 2014.

A supplemental executive retirement plan covers four former executive officers of VRB. Under the plan, ChoiceOne pays these individuals a specific amount of compensation plus interest at 7.50% over a 15-year period commencing upon early retirement age (as defined in the plan) or normal retirement age (as defined in the plan). A liability has been accrued for the obligation under this plan. The effective interest rate used for the accrual for the retirement liability is based on long-term interest rates. Flat long-term interest rates during 2015 caused a slight decrease in plan expense in 2015, while a decrease in long-term interest rates during 2014 caused an increase in plan expense in 2014. ChoiceOne incurred deferred compensation plan expense of $32,000 in 2015, negative expense of $42,000 in 2014 and expense of $1,000 in 2013. Liabilities related to the supplemental executive retirement plan of $618,000 and $664,000 were outstanding as of December 31, 2015 and December 31, 2014, respectively.

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Stock Based Compensation

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based Compensation

Note 14 - Stock Based Compensation

Options to buy stock have been granted to key employees under an incentive stock option plan to provide them with additional equity interests in ChoiceOne. Compensation expense in connection with stock options granted during 2015, 2014, or 2013 was considered to be insignificant. The Amended and Restated Executive Stock Incentive Plan under which the stock options were granted expired in 2012. The Stock Incentive Plan of 2012 was approved by the Company’s shareholders at the Annual Meeting held on April 25, 2012. The new plan provides for the issuance of up to 100,000 shares of common stock. At December 31, 2015, there were 51,150 shares available for future grants.

A summary of stock options activity is as follows:

	2015				2014				2013
	Shares		Weighted average exercise price		Shares		Weighted average exercise price		Shares		Weighted average exercise price
Options outstanding, beginning of year		20,250	$	16.65		38,625	$	17.29		40,725	$	16.99
Options granted		30,000		23.30		—		—		—		—
Options exercised		9,500		16.03		14,550		18.87		2,100		13.70
Options forfeited or expired		—		—		3,825		18.51		—		—
Options outstanding, end of year		40,750	$	21.69		20,250	$	16.65		38,625	$	17.29
Options exercisable at December 31		18,250	$	19.70		20,250	$	16.65		38,625	$	17.29

The exercise prices for options outstanding and exercisable at the end of 2015 ranged from $13.50 to $23.30 per share. The weighted average remaining contractual life of options outstanding and exercisable at the end of 2015 was approximately 4.79 years.

The intrinsic value of all outstanding in-the-money stock options and exercisable in-the-money stock options was $86,000 and $75,000, respectively, at December 31, 2015. The aggregate intrinsic values of outstanding and exercisable options at December 31, 2015 were calculated based on the closing market price of the Company’s common stock on December 31, 2015 of $23.80 per share less the exercise price. 

Information pertaining to options outstanding at December 31, 2015 is as follows:

		Number of	Number of	Average
		options	options	remaining
		outstanding	exercisable at	contractual
Exercise price of stock options:		at year-end	year-end	life (in years)
$	13.50	2,000	2,000	2.07
$	17.95	8,000	8,000	1.05
$	18.85	750	750	0.05
$	23.30	30,000	7,500	9.97

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. ChoiceOne uses historical data to estimate the volatility of the market price of ChoiceOne stock and employee terminations within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. A total of 30,000 options were granted in 2015 with an exercise price of $23.30 and vest over 3 years. No options were granted in 2014 or 2013.

The fair value of stock options granted during 2015 was determined using the following weighted-average assumptions as of the grant date.

	2015
Risk-free interest rate		2.28	%
Expected option life		5.75 years
Expected stock price volatility		22.95	%
Dividend yield		3.64	%
Fair value of options granted	$	3.54

ChoiceOne has granted restricted stock units to a select group of employees under the Stock Incentive Plan of 2012. Restricted stock units vest in three annual installments on each of the next three anniversaries of the grant date. Certain additional vesting provisions apply. Each restricted stock unit, once vested, is settled by delivery of one share of ChoiceOne common stock. ChoiceOne recognized compensation expense of $103,000 and $53,000 in 2015 and 2014, respectively, in connection with restricted stock units for current participants during these years. At December 31, 2015 there were 17,850 restricted stock units outstanding with an approximate stock value of $425,000. At December 31, 2014 there were 7,750 restricted stock units outstanding with an approximate stock value of $178,000. Unrecognized compensation expense as of December 31, 2015 is approximately $234,000 and will be allocated $119,000 to 2016, $93,000 to 2017, and $22,000 to 2018.

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Earnings Per Share

12 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

Earnings Per Share

Note 15 - Earnings Per Share

(Dollars in thousands, except per share data)

	2015		2014		2013
Basic
Net income	$	5,743	$	5,695	$	5,094
Weighted average common shares outstanding		3,289,296		3,298,177		3,296,408
Basic earnings per common shares	$	1.75	$	1.73	$	1.55
Diluted
Net income	$	5,743	$	5,695	$	5,094
Weighted average common shares outstanding		3,289,296		3,298,177		3,296,408
Plus dilutive stock options and restricted stock units		7,925		12,116		5,653
Weighted average common shares outstanding and potentially dilutive shares		3,297,221		3,310,293		3,302,061
Diluted earnings per common share	$	1.74	$	1.72	$	1.54

There were 30,000 stock options that were considered anti-dilutive to earnings per share as of December 31, 2015 and thus have been excluded from the calculations above. There were no stock options as of December 31, 2014 or 2013 considered to be anti-dilutive to earnings per share.

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Condensed Financial Statements of Parent Company

12 Months Ended

Dec. 31, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Statements of Parent Company

Note 16 – Condensed Financial Statements of Parent Company

Condensed Balance Sheets

(Dollars in thousands)	December 31,
	2015		2014
Assets
Cash	$	1,145	$	808
Securities available for sale		2,263		1,059
Other assets		83		154
Investment in ChoiceOne Bank		66,539		64,298
Total assets	$	70,030	$	66,319
Liabilities
Mandatory redeemable shares under ESOP, at fair value	$	127	$	123
Other liabilities		61		6
Total liabilities		188		129
Shareholders’ equity		69,842		66,190
Total liabilities and shareholders’ equity	$	70,030	$	66,319

Condensed Statements of Income 

(Dollars in thousands)	Years Ended December 31,
	2015		2014		2013
Interest and dividends from ChoiceOne Bank	$	3,579	$	2,731	$	2,399
Interest and dividends from other securities		26		16		19
Other income		—		27		1
Total income		3,605		2,774		2,419
Other expenses		137		92		98
Income before income tax and equity in undistributed net income of subsidiary		3,468		2,682		2,321
Income tax benefit		44		21		31
Income before equity in undistributed net income of subsidiary		3,512		2,703		2,352
Equity in undistributed net income of subsidiary		2,231		2,992		2,742
Net income	$	5,743	$	5,695	$	5,094

Condensed Statements of Cash Flows
(Dollars in thousands)	Years Ended December 31,
	2015			2014			2013
Cash flows from operating activities:
Net income	$	5,743		$	5,695		$	5,094
Adjustments to reconcile net income to net cash from operating activities:
Equity in undistributed net income of subsidiary		(2,231	)		(2,992	)		(2,742	)
Amortization		11			3			2
Net expense of restricted stock units		103			48			11
Net gain on sale of securities		0			(26	)		(1	)
Changes in other assets		71			(125	)		(1	)
Changes in other liabilities		4			(35	)		36
Net cash from operating activities		3,701			2,568			2,399
Cash flows from investing activities:
Sales of securities		—			1,184			70
Purchases of securities		(1,029	)		(1,565	)		(125	)
Net cash from investing activities		(1,029	)		(381	)		(55	)
Cash flows from financing activities:
Issuance of common stock		206			132			130
Repurchase of common stock		(371	)		(203	)		(192	)
Cash dividends paid		(2,170	)		(1,945	)		(1,780	)
Net cash from financing activities		(2,335	)		(2,016	)		(1,842	)
Net change in cash		337			171			502
Beginning cash		808			637			135
Ending cash	$	1,145		$	808		$	637

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Financial Instruments

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Financial Instruments

Note 17 – Financial Instruments

Financial instruments as of the dates indicated were as follows: 

						Quoted Prices
						In Active		Significant
						Markets for		Other		Significant
						Identical		Observable		Unobservable
		Carrying		Estimated		Assets		Inputs		Inputs
(Dollars in thousands)		Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
December 31, 2015
Assets
Cash and due from banks	$	11,187	$	11,187	$	11,187	$	—	$	—
Securities available for sale		160,136		160,136		953		147,384		11,799
Federal Home Loan Bank and Federal Reserve Bank stock		3,187		3,187		—		3,187		—
Loans held for sale		4,957		5,109		—		5,109		—
Loans, net		345,110		349,875		—		—		349,875
Liabilities
Noninterest-bearing deposits		122,937		122,937		—		122,937		—
Interest-bearing deposits		351,759		353,113		—		353,113		—
Repurchase agreements		9,460		9,460		—		9,460		—
Federal Home Loan Bank advances		11,332		12,028		—		12,028		—
December 31, 2014
Assets
Cash and due from banks	$	16,650	$	16,650	$	16,650	$	—	$	—
Securities available for sale		142,521		142,521		775		130,104		11,642
Federal Home Loan Bank and Federal Reserve Bank stock		3,185		3,185		—		3,185		—
Loans held for sale		2,170		2,237		—		2,237		—
Loans, net		341,940		345,656		—		—		345,656
Liabilities
Noninterest-bearing deposits		113,006		113,006		—		113,006		—
Interest-bearing deposits		321,822		321,757		—		321,757		—
Repurchase agreements		26,743		26,743		—		26,743		—
Federal Home Loan Bank advances		18,363		18,402		—		18,402		—

The estimated fair values approximate the carrying amounts for all financial instruments except those described later in this paragraph. The methodology for determining the estimated fair value for securities available for sale is described in Note 18. The estimated fair value for loans is based on the rates charged at December 31 for new loans with similar maturities, applied until the loan is assumed to reprice or be paid. The allowance for loan losses is considered to be a reasonable estimate of discount for credit quality concerns. The estimated fair value of deposits is based on comparing the average rate paid on deposits compared to the three month Libor rate which is assumed to be the replacement value of these deposits. At December 31, 2015, all average rates were lower than the three month Libor rate causing fair values to be higher than carrying amounts. The estimated fair values for time deposits and FHLB advances are based on the rates paid at December 31 for new deposits or FHLB advances, applied until maturity. The estimated fair values for other financial instruments and off-balance sheet loan commitments are considered nominal.

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Fair Value Measurements

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 18 – Fair Value Measurements

The following tables present information about the Bank’s assets and liabilities measured at fair value on a recurring basis at December 31, 2015 and December 31, 2014, and the valuation techniques used by the Bank to determine those fair values.

In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Bank has the ability to access.

Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Bank’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

There were no liabilities measured at fair value as of December 31, 2015 or December 31, 2014. Disclosures concerning assets measured at fair value are as follows:

Assets Measured at Fair Value on a Recurring Basis

		Quoted Prices
		In Active		Significant
		Markets for		Other		Significant
		Identical		Observable		Unobservable
		Assets		Inputs		Inputs		Balance at
(Dollars in thousands)		(Level 1)		(Level 2)		(Level 3)		Date Indicated
Investment Securities, Available for Sale - December 31, 2015
U. S. Government and federal agency	$	—	$	57,207	$	—	$	57,207
U. S. Treasury notes and bonds		—		6,100		—		6,100
State and municipal		—		67,852		9,902		77,754
Mortgage-backed		—		6,970		—		6,970
Corporate		—		7,990		397		8,387
Foreign debt		—		995		—		995
Equity securities		953		—		1,500		2,453
Asset backed securities		—		270		—		270
Total	$	953	$	147,384	$	11,799	$	160,136
Investment Securities, Available for Sale - December 31, 2014
U. S. Government and federal agency	$	—	$	44,503	$	—	$	44,503
U. S. Treasury notes and bonds		—		8,058		—		8,058
State and municipal		—		60,091		9,744		69,835
Mortgage-backed		—		8,942		—		8,942
Corporate		—		7,140		398		7,538
Foreign debt		—		994		—		994
Equity securities		775		—		1,500		2,275
Asset backed securities		—		376		—		376
Total	$	775	$	130,104	$	11,642	$	142,521

Securities classified as available for sale are generally reported at fair value utilizing Level 2 inputs. ChoiceOne’s external investment advisor obtained fair value measurements from an independent pricing service that uses matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value measurements considered observable data that may include dealer quotes, market spreads, cash flows and the bonds’ terms and conditions, among other things. Securities classified in Level 2 included U.S. Government and federal agency securities, U.S. Treasury notes and bonds, state and municipal securities, mortgage-backed securities, corporate bonds, foreign debt, and asset backed securities. The Company classified certain state and municipal securities and corporate bonds, and equity securities as Level 3. Based on the lack of observable market data, estimated fair values were based on the observable data available and reasonable unobservable market data. 

Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis  

(Dollars in thousands)	2015			2014
Investment Securities, Available for Sale
Balance, January 1	$	11,642		$	11,328
Total realized and unrealized gains included in income		—			(11	)
Total unrealized gains/(losses) included in other comprehensive income		806			1,199
Net purchases, sales, calls, and maturities		(649	)		(948	)
Net transfers into Level 3		—			74
Balance, December 31	$	11,799		$	11,642

Of the Level 3 assets that were still held by the Bank at December 31, 2015, the net unrealized gain for the twelve months ended December 31, 2015 was $806,000 and a $9,000 unrealized loss as of December 31, 2014, which is recognized in other comprehensive income in the consolidated balance sheets. A total of $3.2 million and $3.5 million of Level 3 securities were purchased in 2015 and 2014, respectively.

Both observable and unobservable inputs may be used to determine the fair value of positions classified as Level 3 assets and liabilities. As a result, the unrealized gains and losses for these assets and liabilities presented in the tables above may include changes in fair value that were attributable to both observable and unobservable inputs.

Available for sale investment securities categorized as Level 3 assets consist of bonds issued by local municipalities and a trust-preferred security. The Bank estimates the fair value of these assets based on the present value of expected future cash flows using management’s best estimate of key assumptions, including forecasted interest yield and payment rates, credit quality and a discount rate commensurate with the current market and other risks involved.

The Bank also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets are not normally measured at fair value, but can be subject to fair value adjustments in certain circumstances, such as impairment. Disclosures concerning assets measured at fair value on a non-recurring basis are as follows:

Assets Measured at Fair Value on a Non-recurring Basis  

(Dollars in thousands)	Balances at Dates Indicated		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs  (Level 3)
Impaired Loans
December 31, 2015	$	5,585	$	—	$	—	$	5,585
December 31, 2014	$	6,885	$	—	$	—	$	6,885
Other Real Estate
December 31, 2015	$	31	$	—	$	—	$	31
December 31, 2014	$	150	$	—	$	—	$	150

Impaired loans categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Bank estimates the fair value of the loans based on the present value of expected future cash flows using management’s best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals). The changes in fair value consisted of charge-downs of impaired loans that were posted to the allowance for loan losses and write-downs of other real estate owned that were posted to a valuation account. The fair value of other real estate owned was based on appraisals or other reviews of property values, adjusted for estimated costs to sell.

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Off-Balance Sheet Activities

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Off-Balance Sheet Activities

Note 19 – Off-Balance Sheet Activities 

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customers’ financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amount of financial instruments with off-balance sheet risk was as follows at December 31:  

	2015				2014
(Dollars in thousands)	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Unused lines of credit and letters of credit	$	14,445	$	77,089	$	7,076	$	60,476
Commitments to fund loans (at market rates)		18,654		1,740		3,116		1,050

Commitments to fund loans are generally made for periods of 180 days or less. The fixed rate loan commitments have interest rates ranging from 2.49% to 6.52% and maturities ranging from 3 years to 30 years.

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Regulatory Capital

12 Months Ended

Dec. 31, 2015

Banking and Thrift [Abstract]

Regulatory Capital

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 2015 and 2014, 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:

(Dollars in thousands)	Actual					Minimum Required for Capital Adequacy Purposes					Minimum Required to be Well  Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2015
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$	59,737		14.2	%	$	33,600		8.0	%		N/A		N/A
Common equity Tier 1 capital (to risk weighted assets)		54,532		13.0			18,900		4.5			N/A		N/A
Tier 1 capital (to risk weighted assets)		54,532		13.0			16,800		4.0			N/A		N/A
Tier 1 capital (to average assets)		54,532		9.7			22,434		4.0			N/A		N/A
ChoiceOne Bank
Total capital (to risk weighted assets)	$	55,723		13.3	%	$	33,470		8.0	%	$	41,837		10.0	%
Common equity Tier 1 capital (to risk weighted assets)		51,574		12.3			18,827		4.5			27,194		6.5
Tier 1 capital (to risk weighted assets)		51,574		12.3			16,735		4.0			25,102		6.0
Tier 1 capital (to average assets)		51,574		9.2			22,350		4.0			27,937		5.0
December 31, 2014
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$	55,223		14.3	%	$	30,948		8.0	%		N/A		N/A
Tier 1 capital (to risk weighted assets)		50,562		13.1			15,474		4.0			N/A		N/A
Tier 1 capital (to average assets)		50,562		9.6			21,016		4.0			N/A		N/A
ChoiceOne Bank
Total capital (to risk weighted assets)	$	52,664		13.6	%	$	30,881		8.0	%	$	38,601		10.0	%
Tier 1 capital (to risk weighted assets)		48,665		12.6			15,441		4.0			23,161		6.0
Tier 1 capital (to average assets)		48,665		9.3			20,971		4.0			26,214		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, 2015, approximately $9.8 million was available for ChoiceOne Bank to pay dividends to ChoiceOne Financial Services, Inc. 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.

On July 3, 2013, the FDIC Board of Directors approved the Regulatory Capital Interim Final Rule, implementing Basel III.  This rule redefines Tier 1 capital as two components (Common Equity Tier 1 and Additional Tier 1), creates a new capital ratio (Common Equity Tier 1 Risk-based Capital Ratio) and implements a capital conservation buffer.  It also revises the prompt corrective action thresholds and makes changes to risk weights for certain assets and off-balance-sheet exposures.  Banks were required to transition into the new rule beginning on January 1, 2015.

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data (Unaudited)

Note 21 – Quarterly Financial Data (Unaudited) 

							Earnings Per Share
(Dollars in thousands)	Interest Income		Net Interest Income		Net Income		Basic		Fully Diluted
2015
First Quarter	$	4,746	$	4,490	$	1,642	$	0.50	$	0.49
Second Quarter		4,832		4,579		1,431		0.43		0.43
Third Quarter		4,871		4,625		1,450		0.44		0.44
Fourth Quarter		4,904		4,670		1,222		0.37		0.37
2014
First Quarter	$	4,656	$	4,353	$	1,248	$	0.38	$	0.38
Second Quarter		4,738		4,449		1,337		0.40		0.40
Third Quarter		4,817		4,535		1,554		0.47		0.47
Fourth Quarter		4,803		4,526		1,556		0.48		0.47

There were no significant fluctuations in the quarterly financial data in 2014 or 2015. The growth in net income that occurred in 2015 was due to a decrease in interest expense and an increase in noninterest income.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

 The consolidated financial statements include ChoiceOne Financial Services, Inc., its wholly-owned subsidiary, ChoiceOne Bank, and ChoiceOne Bank’s wholly-owned subsidiary, ChoiceOne Insurance Agencies, Inc. (together referred to as “ChoiceOne”). Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

Use of Estimates

To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, ChoiceOne’s management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided. Actual results may differ from these estimates. Estimates associated with securities available for sale, the allowance for loan losses, other real estate owned, core deposit intangible assets, loan servicing rights, goodwill, and fair values of certain financial instruments are particularly susceptible to change.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents are defined to include cash on hand, demand deposits with other banks, and federal funds sold. Cash flows are reported on a net basis for customer loan and deposit transactions, deposits with other financial institutions, and short-term borrowings with original terms of 90 days or less.

Securities

Securities

Securities are classified as available for sale because they might be sold before maturity. Securities classified as available for sale are carried at fair value, with unrealized holding gains and losses reported separately in the accumulated other comprehensive income or loss section of shareholders’ equity, net of tax effect. Restricted investments in Federal Reserve Bank stock and Federal Home Loan Bank stock are carried at cost. Equity securities consist of investments in preferred stock, trust-preferred securities, and investments in common stock of other financial institutions.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized using the level-yield method without anticipating prepayments. Gains or losses on sales are recorded on the trade date based on the amortized cost of the security sold.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The evaluation of securities includes consideration given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether ChoiceOne has the intent to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. In analyzing an issuer’s financial condition, management may consider whether the securities are issued by the federal government or its agencies, or U.S. Government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time. 

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether ChoiceOne intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If ChoiceOne intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment. If a security is determined to be other-than-temporarily impaired, but ChoiceOne does not intend to sell the security, only the credit portion of the estimated loss is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

Loans

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses. Loans held for sale are reported at the lower of cost or market, on an aggregate basis.

Interest income on loans is reported on the interest method and includes amortization of net deferred loan fees and costs over the estimated loan term. Interest on loans is accrued based upon the principal balance outstanding. The accrual of interest is discontinued at the time at which commercial loans are 90 days past due unless the loan is secured by sufficient collateral and is in the process of collection. Interest on consumer or real estate secured loans is discontinued at the time at which the loan is 120 days past due unless the credit is secured by sufficient collateral and is in the process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed into nonaccrual status or charged off at an earlier date if collection of principal or interest is considered doubtful. Interest accrued but not received is reversed against interest income when the loans are placed into nonaccrual status. Interest received on such loans is applied to principal until qualifying for return to accrual. Loans are returned to accrual basis when all the principal and interest amounts contractually due are brought current and future payment is reasonably assured.

Allowance for Loan Losses

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses. The allowance for loan losses is increased by the provision for loan losses and decreased by loans charged off less any recoveries of charged off loans. Management estimates the allowance for loan losses balance required based on past loan loss experience, the nature and volume of the loan portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance for loan losses may be made for specific loans, but the entire allowance for loan losses is available for any loan that, in management’s judgment, should be charged off. Loan losses are charged against the allowance for loan losses when management believes that collection of a loan balance is not possible.

The allowance for loan losses consists of general and specific components. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful.

A loan is impaired when full payment under the loan terms is not expected. Commercial loans are evaluated for impairment on an individual loan basis. If a loan is considered impaired, a portion of the allowance for loan losses is allocated to the loan so that it is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller-balance homogeneous loans such as consumer and residential real estate mortgage loans are collectively evaluated for impairment and, accordingly, they are not separately identified for impairment disclosures.

Premises and Equipment

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation. Land is carried at cost. Land improvements are depreciated using the straight-line method with useful lives ranging from 7 to 15 years. Building and related components are depreciated using the straight-line method with useful lives ranging from 5 to 39 years. Leasehold improvements are depreciated over the shorter of the estimated life or the lease term. Furniture and equipment are depreciated using the straight-line method with useful lives ranging from 3 to 7 years. Fixed assets are periodically reviewed for impairment. If impaired, the assets are recorded at fair value.

Other Real Estate Owned

Other Real Estate Owned

Real estate properties acquired in the collection of a loan are initially recorded at the lower of the Bank’s basis in the loans or fair value at acquisition establishing a new cost basis. Any reduction to fair value from the carrying value of the related loan is accounted for as a loan loss. After acquisition, a valuation allowance reduces the reported amount to the lower of the initial amount or fair value less costs to sell. Expenses to repair or maintain properties are included within other noninterest expenses. Gains and losses upon disposition and changes in the valuation allowance are reported net within noninterest income.

Loan Servicing Rights

Loan Servicing Rights

Loan servicing rights represent the allocated value of servicing rights on loans sold with servicing retained. Servicing rights are expensed in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on the fair value of the rights, using groupings of the underlying loans as to interest rates and then, secondarily, as to geographic and prepayment characteristics. Fair value is determined using prices for similar assets with similar characteristics when available or based upon discounted cash flows using market-based assumptions. Any impairment of a grouping is reported as a valuation allowance.

Goodwill

Goodwill

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of the acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment and any such impairment will be recognized in the period identified.

Loan Commitments and Related Financial Instruments

Loan Commitments and Related Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet financing needs of customers. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Employee Benefit Plans

Employee Benefit Plans

ChoiceOne’s 401(k) plan allows participants to make contributions to their individual accounts under the plan in amounts up to the IRS maximum. Employer matching contributions from ChoiceOne to its 401(k) plan are discretionary. ChoiceOne also allows retired employees to participate in its health insurance plan. Employees who have attained age 55 and completed at least ten years of service to ChoiceOne are eligible to participate as a retiree until they are eligible for Medicare. These post-retirement benefits are accrued during the years in which the employee provides service.

Employee Stock Ownership Plan

Employee Stock Ownership Plan

Dividends on Employee Stock Ownership Plan (the “ESOP”) shares are recorded as a reduction of retained earnings. Upon distribution of shares to a participant, the participant has the right to require the Company to purchase his or her shares at fair value in accordance with the terms and conditions of the ESOP. As such, these shares are not classified in shareholders’ equity as permanent equity.

Income Taxes

Income Taxes

Income tax expense is the sum of the current year income tax due and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

Earnings per share

Earnings Per Share

Basic earnings per common share (“EPS”) is based on weighted-average common shares outstanding. The weighted-average number of shares used in the computation of basic and diluted EPS includes shares allocated to the ESOP. Diluted EPS further assumes issue of any dilutive potential common shares issuable under stock options or restricted stock units granted.

Comprehensive Income

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income or loss. Other comprehensive income or loss includes unrealized gains and losses on securities available for sale and changes in the funded status of post-retirement plans, net of tax, which are also recognized as a separate component of shareholders’ equity.

Accumulated other comprehensive income was as follows:

(Dollars in thousands)	Years ended December 31,
	2015			2014
Unrealized gains on available for sale securities		1,632			1,401
Unrecognized gains on post-retirement benefits		191			225
Tax effect		(620	)		(553	)
Accumulated other comprehensive income	$	1,203		$	1,073

Loss Contingencies

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe that there are any such matters that may have a material effect on the financial statements as of December 31, 2015.

Cash Restrictions

Cash Restrictions

Cash on hand or on deposit with the Federal Reserve Bank of $1.1 million and $409,000 was required to meet regulatory reserve and clearing requirements at December 31, 2015 and 2014, respectively. The balance in excess of the amount required was interest-bearing as of December 31, 2015 and December 31, 2014.

Stock-Based Compensation

Stock-Based Compensation

The Company values share-based stock option awards granted using the Black-Scholes option-pricing model. The Company recognizes compensation expense for its awards on a straight-line basis over the requisite service period for the entire award (straight-line attribution method), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant-date fair value of the award that is vested at that time. Compensation costs related to stock options granted are disclosed in Note 14.

ChoiceOne has granted restricted stock units to a select group of employees under the Stock Incentive Plan of 2012. Restricted stock units vest in three annual installments on each of the next three anniversaries of the grant date. Certain additional vesting provisions apply. Each unit, once vested, is settled by delivery of one share of ChoiceOne common stock.

Dividend Restrictions

Dividend Restrictions

Banking regulations require the maintenance of certain capital levels and may limit the amount of dividends that may be paid by the Bank to ChoiceOne (see Note 20).

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, which are more fully documented in Note 18 to the consolidated financial statements. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Operating Segments

Operating Segments

While ChoiceOne’s management monitors the revenue streams of various products and services for the Bank and Insurance Agency, operations and financial performance are evaluated on a company-wide basis. Accordingly, all of the financial service operations are considered by management to be aggregated into one reportable operating segment.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU adopts a standardized approach for revenue recognition and was a joint effort with the International Accounting Standards Board (IASB). The new revenue recognition standard is based on a core principle of recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU does not apply to financial instruments. The ASU is effective for public entities for reporting periods beginning after December 15, 2017 (therefore, for the year ending December 31, 2018 for the Corporation). Early implementation is not allowed for public companies. Management is currently assessing the impact to the Corporation’s consolidated financial statements.

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU covers various changes to the accounting, measurement, and disclosure related to certain financial instruments. The most significant change included in the update is the requirement for certain equity investments (excluding investments that are consolidated or accounted for under the equity method) to be measured at fair value with changes in fair value recognized in net income. Alternatively, equity investments without readily determinable fair values can be recorded at cost, and periodically evaluated for impairment using a qualitative assessment. If the qualitative assessment indicates the investment is impaired, it is required to be measured at fair value. The update also eliminates the requirement for public business entities to disclose the methods and assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The new standard is effective for the year ending December 31, 2018 for the Corporation. Management is currently assessing the impact to the Corporation’s consolidated financial statements.

Reclassifications

Reclassifications

Certain amounts presented in prior year consolidated financial statements have been reclassified to conform to the current year’s presentation.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2015

Summary Of Significant Accounting Policies Tables

Schedule of accumulated other comprehensive income

Accumulated other comprehensive income was as follows:

(Dollars in thousands)	Years ended December 31,
	2015			2014
Unrealized gains on available for sale securities		1,632			1,401
Unrecognized gains on post-retirement benefits		191			225
Tax effect		(620	)		(553	)
Accumulated other comprehensive income	$	1,203		$	1,073

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Securities (Tables)

12 Months Ended

Dec. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Schedule of fair value of securities available for sale

The fair value of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) at December 31 were as follows: 

	2015
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	57,406	$	30	$	(229	)	$	57,207
U.S. Treasury notes and bonds		6,133		—		(33	)		6,100
State and municipal		76,005		1,858		(109	)		77,754
Mortgage-backed		6,989		26		(45	)		6,970
Corporate		8,418		8		(39	)		8,387
Foreign debt		1,000		—		(5	)		995
Equity securities		2,279		174		—			2,453
Asset-backed securities		274		—		(4	)		270
Total	$	158,504	$	2,096	$	(464	)	$	160,136

	2014
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	44,584	$	77	$	(158	)	$	44,503
U.S. Treasury notes and bonds		8,077		11		(30	)		8,058
State and municipal		68,376		1,697		(238	)		69,835
Mortgage-backed		8,896		68		(22	)		8,942
Corporate		7,529		25		(16	)		7,538
Foreign debt		1,000		—		(6	)		994
Equity securities		2,280		—		(5	)		2,275
Asset-backed securities		378		—		(2	)		376
Total	$	141,120	$	1,878	$	(477	)	$	142,521

Schedule of sales of securities available for sale

Information regarding sales of securities available for sale for the year ended December 31 follows:

(Dollars in thousands)
	2015		2014		2013
Proceeds from sales of securities	$	25,876	$	24,766	$	8,790
Gross realized gains		261		341		197
Gross realized losses		—		30		60

Schedule of expected maturities of available for sale securities

Contractual maturities of securities available for sale at December 31, 2015 were as follows:

(Dollars in thousands)		Fair Value
Due within one year	$	24,173
Due after one year through five years		94,705
Due after five years through ten years		35,831
Due after ten years		2,974
Total debt securities		157,683
Equity securities		2,453
Total	$	160,136

Schedule of securities pledged as collateral

The carrying amount of securities pledged as collateral at December 31 was as follows:

(Dollars in thousands)
		2015		2014
Securities pledged for securities sold under agreements to repurchase	$	7,011	$	34,369
Securities pledged for advances from the Federal Home Loan Bank		24,199		—
Security pledged for Community Reinvestment Act credits		276		279
Total	$	31,486	$	34,648

Schedule of securities in a continuous unrealized loss position

Securities with unrealized losses at year-end 2015 and 2014, aggregated by investment category and length of time the individual securities have been in an unrealized loss position, were as follows:

	2015
	Less than 12 months					More than 12 months					Total
(Dollars in thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. Government and federal agency	$	38,567	$	(216	)	$	986	$	(13	)	$	39,553	$	(229	)
U.S. Treasury notes and bonds		6,101		(33	)		—		—			6,101		(33	)
State and municipal		10,382		(69	)		2,906		(40	)		13,288		(109	)
Mortgage-backed		4,459		(41	)		382		(4	)		4,841		(45	)
Corporate		4,284		(33	)		896		(6	)		5,180		(39	)
Foreign debt		995		(5	)		—		—			995		(5	)
Asset-backed securities		—		—			270		(4	)		270		(4	)
Total temporarily impaired	$	64,788	$	(397	)	$	5,440	$	(67	)	$	70,228	$	(464	)

	2014
	Less than 12 months					More than 12 months					Total
(Dollars in thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. Government and federal agency	$	11,323	$	(26	)	$	13,005	$	(132	)	$	24,328	$	(158	)
U.S. Treasury notes and bonds		—		—			2,089		(30	)		2,089		(30	)
State and municipal		8,463		(59	)		8,977		(179	)		17,440		(238	)
Mortgage-backed		989		(4	)		1,535		(18	)		2,524		(22	)
Corporate		2,054		(7	)		1,393		(9	)		3,447		(16	)
Foreign debt		—		—			994		(6	)		994		(6	)
Equity securities		1,000		(5	)		—		—			1,000		(5	)
Asset-backed securities		—		—			376		(2	)		376		(2	)
Total temporarily impaired	$	23,829	$	(101	)	$	28,369	$	(376	)	$	52,198	$	(477	)

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Loans and Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2015

Receivables [Abstract]

Schedule of loan portfolio

The Bank’s loan portfolio as of December 31 was as follows:

(Dollars in thousands)
		2015			2014
Agricultural	$	40,232		$	41,098
Commercial and industrial		94,347			88,062
Consumer		20,090			20,752
Real estate - commercial		97,736			99,807
Real estate - construction		5,390			2,691
Real estate - residential		91,509			93,703
Loans, gross		349,304			346,113
Allowance for loan losses		(4,194	)		(4,173	)
Loans, net	$	345,110		$	341,940

Schedule of activity in the allowance for loan losses and balances in the loan portfolio

Activity in the allowance for loan losses and balances in the loan portfolio were as follows:

(Dollars in thousands)	Agricultural		Commercial and Industrial			Consumer			Commercial Real Estate			Construction Real Estate		Residential Real Estate			Unallocated			Total
2015
Allowance for Loan Losses
Beginning balance	$	186	$	527		$	184		$	1,641		$	9	$	1,193		$	433		$	4,173
Charge-offs		—		(30	)		(291	)		—			—		(140	)		—			(461	)
Recoveries		1		64			121			47			—		149			—			382
Provision		233		25			283			(658	)		37		186			(6	)		100
Ending balance	$	420	$	586		$	297		$	1,030		$	46	$	1,388		$	427		$	4,194
Individually evaluated for impairment	$	3	$	15		$	1		$	191		$	—	$	296		$	—		$	506
Collectively evaluated for impairment	$	417	$	571		$	296		$	839		$	46	$	1,092		$	427		$	3,687
Loans
Individually evaluated for impairment	$	50	$	192		$	24		$	2,790		$	—	$	2,529					$	5,585
Collectively evaluated for impairment		40,182		94,155			20,066			94,946			5,390		88,980						343,719
Ending balance	$	40,232	$	94,347		$	20,090		$	97,736		$	5,390	$	91,509					$	349,304

(Dollars in thousands)	Agricultural			Commercial and Industrial			Consumer			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Unallocated		Total
2014
Allowance for Loan Losses
Beginning balance	$	178		$	562		$	192		$	1,842		$	12		$	1,626		$	323	$	4,735
Charge-offs		—			(1	)		(273	)		(665	)		—			(133	)		—		(1,072	)
Recoveries		20			119			179			48			—			44			—		410
Provision		(12	)		(153	)		86			416			(3	)		(344	)		110		100
Ending balance	$	186		$	527		$	184		$	1,641		$	9		$	1,193		$	433	$	4,173
Individually evaluated for impairment	$	—		$	—		$	4		$	745		$	—		$	365		$	—	$	1,114
Collectively evaluated for impairment	$	186		$	527		$	180		$	896		$	9		$	828		$	433	$	3,059
Loans
Individually evaluated for impairment	$	—		$	38		$	36		$	3,853		$	—		$	2,958				$	6,885
Collectively evaluated for impairment		41,098			88,024			20,716			95,954			2,691			90,745					339,228
Ending balance	$	41,098		$	88,062		$	20,752		$	99,807		$	2,691		$	93,703				$	346,113

Schedule of the bank's credit exposure

Information regarding the Bank’s credit exposure as of December 31 was as follows:

Corporate Credit Exposure - Credit Risk Profile By Creditworthiness Category 

(Dollars in thousands)	Agricultural				Commercial and Industrial				Commercial Real Estate
	2015		2014		2015		2014		2015		2014
Risk ratings 1 and 2	$	10,416	$	9,596	$	10,480	$	11,590	$	3,875	$	3,576
Risk rating 3		25,189		24,294		66,921		59,470		57,540		58,600
Risk rating 4		3,086		6,462		16,169		15,764		29,826		28,557
Risk rating 5		1,491		683		574		976		3,776		4,490
Risk rating 6		50		63		129		262		2,719		4,584
Risk rating 7		—		—		74		—		—		—
	$	40,232	$	41,098	$	94,347	$	88,062	$	97,736	$	99,807

Consumer Credit Exposure - Credit Risk Profile Based On Payment Activity 

(Dollars in thousands)	Consumer				Construction Real Estate				Residential Real Estate
	2015		2014		2015		2014		2015		2014
Performing	$	20,090	$	20,752	$	5,390	$	2,691	$	90,796	$	92,974
Nonperforming		—		—		—		—		282		58
Nonaccrual		—		—		—		—		431		671
	$	20,090	$	20,752	$	5,390	$	2,691	$	91,509	$	93,703

Schedule of troubled debt restructurings

The following schedule provides information on loans that were considered troubled debt restructurings (“TDRs”) that were modified during the twelve months ended December 31, 2015 and December 31, 2014: 

	December 31, 2015						December 31, 2014
(Dollars in thousands)		Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Agricultural		—	$	—	$	—	—	$	—	$	—
Commercial and industrial		—		—		—	1		32		32
Consumer		—		—		—	—		—		—
Commercial real estate		4		439		439	5		1,596		1,596
Residential real estate		2		195		195	2		281		281
		6	$	634	$	634	8	$	1,909	$	1,909

The following schedule provides information on TDRs as of December 31, 2015 and December 31, 2014 where the borrower was past due with respect to principal and/or interest for 30 days or more during the twelve months ended December 31, 2015 and December 31, 2014 that had been modified during the 12-month period prior to the default: 

	With Payment Defaults During the Following Periods
	December 31, 2015			December 31, 2014
(Dollars in thousands)	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
Agricultural	—	$	—		—	$	—
Commercial and industrial	—		—		—		—
Consumer	—		—		—		—
Commercial real estate	3		400		6		1,592
Residential real estate	—		—		2		110
	3	$	400		8	$	1,702

Schedule of impaired loans

Impaired loans by loan category as of December 31 were as follows: 

(Dollars in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2015
With no related allowance recorded
Agricultural	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		74		103		—		25		—
Consumer		—		—		—		2		—
Commercial real estate		1,540		1,540		—		1,061		11
Residential real estate		13		13		—		191		—
Subtotal		1,627		1,656		—		1,279		11
With an allowance recorded
Agricultural		50		50		3		62		(6	)
Commercial and industrial		118		118		15		44		1
Consumer		24		24		1		34		3
Commercial real estate		1,250		1,755		191		2,002		64
Residential real estate		2,516		2,516		296		2,425		86
Subtotal		3,958		4,463		506		4,567		148
Agricultural		50		50		3		62		(6	)
Commercial and industrial		192		221		15		69		1
Consumer		24		24		1		36		3
Commercial real estate		2,790		3,295		191		3,063		75
Residential real estate		2,529		2,529		296		2,616		86
Total	$	5,585	$	6,119	$	506	$	5,846	$	159

(Dollars in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2014
With no related allowance recorded
Agricultural	$	—	$	—	$	—	$	90	$	—
Commercial and industrial		38		43		—		81		—
Consumer		8		8		—		3		—
Commercial real estate		413		419		—		352		6
Residential real estate		502		502		—		492		9
Subtotal		961		972		—		1,018		15
With an allowance recorded
Agricultural		—		—		—		130		—
Commercial and industrial		—		—		—		292		4
Consumer		28		28		4		31		3
Commercial real estate		3,440		4,498		745		3,932		81
Residential real estate		2,456		2,474		365		2,323		91
Subtotal		5,924		7,000		1,114		6,708		179
Agricultural		—		—		—		220		—
Commercial and industrial		38		43		—		373		4
Consumer		36		36		4		34		3
Commercial real estate		3,853		4,917		745		4,284		87
Residential real estate		2,958		2,976		365		2,815		100
Total	$	6,885	$	7,972	$	1,114	$	7,726	$	194

Schedule of aging analysis of loans by loan category

An aging analysis of loans by loan category as of December 31 follows:

(Dollars in thousands)		Loans Past Due 30 to 59 Days (1)		Loans Past Due 60 to 89 Days (1)		Loans  Past Due Greater Than 90 Days (1)		Total (1)		Loans Not Past Due		Total Loans		Loans 90 Days Past Due and Accruing
2015
Agricultural	$	3	$	—	$	—	$	3	$	40,229	$	40,232	$	—
Commercial and industrial		90		322		77		489		93,858		94,347		—
Consumer		115		—		—		115		19,975		20,090		—
Commercial real estate		505		297		1,233		2,035		95,701		97,736		—
Construction real estate		299		—		—		299		5,091		5,390		—
Residential real estate		1,012		364		200		1,576		89,933		91,509		29
	$	2,024	$	983	$	1,510	$	4,517	$	344,787	$	349,304	$	29

2014
Agricultural	$	—	$	—	$	—	$	—	$	41,098	$	41,098	$	—
Commercial and industrial		33		260		—		293		87,769		88,062		—
Consumer		66		10		—		76		20,676		20,752		—
Commercial real estate		172		51		699		922		98,885		99,807		—
Construction real estate		—		—		—		—		2,691		2,691		—
Residential real estate		1,376		404		363		2,143		91,560		93,703		58
	$	1,647	$	725	$	1,062	$	3,434	$	342,679	$	346,113	$	58

(1) Includes nonaccrual loans

Schedule of nonaccrual loans by loan category

Nonaccrual loans by loan category as of December 31 follow: 

(Dollars in thousands)		2015		2014
Agricultural	$	50	$	—
Commercial and industrial		77		38
Consumer		—		—
Commercial real estate		1,640		2,652
Construction real estate		—		—
Residential real estate		431		671
	$	2,198	$	3,361

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Mortgage Banking (Tables)

12 Months Ended

Dec. 31, 2015

Mortgage Banking [Abstract]

Schedule of activity in secondary market loans

Activity in secondary market loans during the year was as follows:  

(Dollars in thousands)		2015		2014		2013
Loans originated for resale, net of principal payments	$	47,498	$	29,850	$	42,906
Proceeds from loan sales		46,077		29,561		45,204
Net gains on sales of loans held for sale		1,416		1,023		1,566
Loan servicing fees, net of amortization		113		166		167

Schedule of activity for loan servicing rights (included in other assets)

Activity for loan servicing rights (included in other assets) was as follows:  

(Dollars in thousands)		2015			2014			2013
Balance, beginning of year	$	489		$	544		$	473
Capitalized		49			73			211
Amortization		(161	)		(128	)		(140	)
Balance, end of year	$	378		$	489		$	544

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Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Schedule of premises and equipment

As of December 31, premises and equipment consisted of the following:  

(Dollars in thousands)		2015			2014
Land and land improvements	$	4,529		$	4,337
Leasehold improvements		38			38
Buildings		12,076			11,859
Furniture and equipment		5,322			4,844
Total cost		21,965			21,078
Accumulated depreciation		(10,118	)		(9,283	)
Premises and equipment, net	$	11,847		$	11,795

Schedule of rent commitments under non-cancelable operating leases

Rent commitments under non-cancelable operating leases were as follows, before considering renewal options that generally are present (dollars in thousands): 

2016	$	55
2017		17
2018		17
2019		18
2020		18
Thereafter		91
Total	$	216

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of acquired intangible assets

Information for acquired intangible assets at December 31 follows: 

	2015				2014
(Dollars in thousands)		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Core deposit intangible	$	4,134	$	3,790	$	4,134	$	3,376
Other intangible assets		348		313		347		278
Totals	$	4,482	$	4,103	$	4,481	$	3,654

Schedule of estimated amortization expense for the next two years

The estimated amortization expense for the next year ending December 31 is as follows:

(Dollars in thousands)		Core Deposit Intangible		Other Intangible Assets		Total
2016	$	345	$	35	$	379

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Other Real Estate Owned (Tables)

12 Months Ended

Dec. 31, 2015

Other Real Estate [Abstract]

Schedule of other real estate owned

Other real estate owned represents residential and commercial properties primarily owned as a result of loan collection activities and is reported net of a valuation allowance. Activity within other real estate owned was as follows: 

(Dollars in thousands)		2015			2014			2013
Balance, beginning of year	$	150		$	508		$	2,019
Transfers from loans		408			561			897
Proceeds from sales		(406	)		(789	)		(1,604	)
Gains/(losses) on sales		(30	)		24			122
Write-downs		(91	)		(154	)		(926	)
Balance, end of year	$	31		$	150		$	508

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Deposits (Tables)

12 Months Ended

Dec. 31, 2015

Deposits [Abstract]

Schedule of deposits outstanding

Deposit balances as of December 31 consisted of the following:

(Dollars in thousands)	2015		2014
Noninterest-bearing demand deposits	$	122,937	$	113,006
Interest-bearing demand deposits		106,882		71,651
Money market deposits		86,987		78,272
Savings deposits		70,946		67,035
Local certificates of deposit		86,944		104,864
Total deposits	$	474,696	$	434,828

Schedule of maturities of time deposits

Scheduled maturities of certificates of deposit at December 31, 2015 were as follows:

(Dollars in thousands)
2016	$	54,241
2017		16,104
2018		9,074
2019		3,368
2020		3,864
2021		293
Total	$	86,944

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Repurchase Agreements (Tables)

12 Months Ended

Dec. 31, 2015

Disclosure of Repurchase Agreements [Abstract]

Schedule of securities sold under repurchase agreements

Information regarding repurchase agreements follows:

(Dollars in thousands)	2015			2014
Outstanding balance at December 31	$	9,460		$	26,743
Average interest rate at December 31		0.04	%		0.19	%
Average balance during the year	$	17,825		$	22,594
Average interest rate during the year		0.17	%		0.20	%
Maximum month end balance during the year	$	26,743		$	28,719

Schedule of repurchase agreements accounted for as secured borrowings

Repurchase agreements accounted for as secured borrowings as of December 31, 2015 were as follows:

	Remaining Contractual Maturity of the Agreements
(Dollars in thousands)	Overnight and Continuous
U.S. Government agencies	$	7,011
Total securities		7,011
Unsecured borrowings		2,449
Total borrowings	$	9,460

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Federal Home Loan Bank Advances (Tables)

12 Months Ended

Dec. 31, 2015

Advances from Federal Home Loan Banks [Abstract]

Schedule of outstanding advances from the Federal Home Loan Bank

At December 31, advances from the FHLB were as follows:

(Dollars in thousands)		2015		2014
Maturity of November 2024 with fixed interest rate of 3.98%	$	332	$	363
Maturity of February 2016 with fixed interest rate of 0.47%		11,000		—
Maturities ranging from February 2015 to May 2015, fixed interest rates ranging from 0.39% to 0.41%, with an average of 0.40%		—		18,000
Total advances outstanding at year-end	$	11,332	$	18,363

Schedule of maturities of FHLB Advances

The scheduled maturities of advances from the FHLB at December 31, 2015 were as follows:

(Dollars in thousands)
2016	$	11,031
2017		33
2018		34
2019		36
2020		37
Thereafter		161
Total	$	11,332

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense

Information as of December 31 and for the year follows: 

(Dollars in thousands)		2015			2014			2013
Provision for Income Taxes
Current federal income tax expense	$	2,576		$	2,536		$	1,724
Deferred federal income tax expense/(benefit)		(631	)		(460	)		59
Income tax expense	$	1,945		$	2,076		$	1,783

Schedule of Reconciliation of Income Tax Expense

Information as of December 31 and for the year follows: 

(Dollars in thousands)		2015			2014			2013
Reconciliation of Income Tax Provision to Statutory Rate
Income tax computed at statutory federal rate of 34%	$	2,614		$	2,642		$	2,338
Tax exempt interest income		(488	)		(475	)		(476	)
Tax exempt earnings on bank-owned life insurance		(221	)		(103	)		(101	)
Other items		40			12			22
Income tax expense	$	1,945		$	2,076		$	1,783
Effective income tax rate		25	%		27	%		26	%

Schedule of Deferred Tax Assets and Liabilities

(Dollars in thousands)
Components of Deferred Tax Assets and Liabilities		2015		2014
Deferred tax assets:
Allowance for loan losses	$	1,426	$	1,151
Deferred compensation		269		295
Loan costs/fees deferred		86		84
Other		181		224
Total deferred tax assets		1,962		1,754
Deferred tax liabilities:
Depreciation		1,182		1,405
Unrealized gains on securities available for sale		555		476
Purchase accounting adjustments from merger		117		258
Loan servicing rights		129		166
Stock dividends received from Federal Home Loan Bank		54		64
Post-retirement benefits obligation		66		77
Other		62		75
Total deferred tax liabilities		2,165		2,521
Net deferred tax liabilities	$	203	$	767

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2015

Related Party Transactions [Abstract]

Schedule of related party loans

Loans to executive officers, directors and their affiliates were as follows at December 31:

(Dollars in thousands)		2015			2014
Balance, beginning of year	$	10,339		$	5,162
New loans and renewals		4,054			5,883
Repayments and renewals		(4,159	)		(3,022	)
Effect of changes in related parties		—			2,316
Balance, end of year	$	10,234		$	10,339

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2015

Compensation and Retirement Disclosure [Abstract]

Schedule of shares in ESOP plan

Shares held by the ESOP as of December 31 were as follows:

(Dollars in thousands)		2015		2014		2013
Shares allocated to participants		5,355		5,355		5,355
Shares unallocated		—		—		—
Total shares of ChoiceOne stock held by ESOP		5,355		5,355		5,355
Fair value of allocated shares, subject to repurchase obligation, recorded in other liabilities	$	127	$	123	$	91

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Stock Based Compensation (Tables)

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of stock option activity

A summary of stock options activity is as follows:

	2015				2014				2013
	Shares		Weighted average exercise price		Shares		Weighted average exercise price		Shares		Weighted average exercise price
Options outstanding, beginning of year		20,250	$	16.65		38,625	$	17.29		40,725	$	16.99
Options granted		30,000		23.30		—		—		—		—
Options exercised		9,500		16.03		14,550		18.87		2,100		13.70
Options forfeited or expired		—		—		3,825		18.51		—		—
Options outstanding, end of year		40,750	$	21.69		20,250	$	16.65		38,625	$	17.29
Options exercisable at December 31		18,250	$	19.70		20,250	$	16.65		38,625	$	17.29

Schedule of outstanding stock options

Information pertaining to options outstanding at December 31, 2015 is as follows:

		Number of	Number of	Average
		options	options	remaining
		outstanding	exercisable at	contractual
Exercise price of stock options:		at year-end	year-end	life (in years)
$	13.50	2,000	2,000	2.07
$	17.95	8,000	8,000	1.05
$	18.85	750	750	0.05
$	23.30	30,000	7,500	9.97

Schedule of weighted-average assumptions as of the grant date

The fair value of stock options granted during 2015 was determined using the following weighted-average assumptions as of the grant date.

	2015
Risk-free interest rate		2.28	%
Expected option life		5.75 years
Expected stock price volatility		22.95	%
Dividend yield		3.64	%
Fair value of options granted	$	3.54

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

Schedule of basic earnings per share and diluted earnings per share

Dollars in thousands, except per share data)

	2015		2014		2013
Basic
Net income	$	5,743	$	5,695	$	5,094
Weighted average common shares outstanding		3,289,296		3,298,177		3,296,408
Basic earnings per common shares	$	1.75	$	1.73	$	1.55
Diluted
Net income	$	5,743	$	5,695	$	5,094
Weighted average common shares outstanding		3,289,296		3,298,177		3,296,408
Plus dilutive stock options and restricted stock units		7,925		12,116		5,653
Weighted average common shares outstanding and potentially dilutive shares		3,297,221		3,310,293		3,302,061
Diluted earnings per common share	$	1.74	$	1.72	$	1.54

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Condensed Financial Statements of Parent Company (Tables)

12 Months Ended

Dec. 31, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Schedule of condensed balance sheets

Condensed Balance Sheets

(Dollars in thousands)	December 31,
	2015		2014
Assets
Cash	$	1,145	$	808
Securities available for sale		2,263		1,059
Other assets		83		154
Investment in ChoiceOne Bank		66,539		64,298
Total assets	$	70,030	$	66,319
Liabilities
Mandatory redeemable shares under ESOP, at fair value	$	127	$	123
Other liabilities		61		6
Total liabilities		188		129
Shareholders’ equity		69,842		66,190
Total liabilities and shareholders’ equity	$	70,030	$	66,319

Schedule of condensed statements of income

Condensed Statements of Income

(Dollars in thousands)	Years Ended December 31,
	2015		2014		2013
Interest and dividends from ChoiceOne Bank	$	3,579	$	2,731	$	2,399
Interest and dividends from other securities		26		16		19
Other income		—		27		1
Total income		3,605		2,774		2,419
Other expenses		137		92		98
Income before income tax and equity in undistributed net income of subsidiary		3,468		2,682		2,321
Income tax benefit		44		21		31
Income before equity in undistributed net income of subsidiary		3,512		2,703		2,352
Equity in undistributed net income of subsidiary		2,231		2,992		2,742
Net income	$	5,743	$	5,695	$	5,094

Schedule of condensed statements of cash flows

Condensed Statements of Cash Flows
(Dollars in thousands)	Years Ended December 31,
	2015			2014			2013
Cash flows from operating activities:
Net income	$	5,743		$	5,695		$	5,094
Adjustments to reconcile net income to net cash from operating activities:
Equity in undistributed net income of subsidiary		(2,231	)		(2,992	)		(2,742	)
Amortization		11			3			2
Net expense of restricted stock units		103			48			11
Net gain on sale of securities		0			(26	)		(1	)
Changes in other assets		71			(125	)		(1	)
Changes in other liabilities		4			(35	)		36
Net cash from operating activities		3,701			2,568			2,399
Cash flows from investing activities:
Sales of securities		—			1,184			70
Purchases of securities		(1,029	)		(1,565	)		(125	)
Net cash from investing activities		(1,029	)		(381	)		(55	)
Cash flows from financing activities:
Issuance of common stock		206			132			130
Repurchase of common stock		(371	)		(203	)		(192	)
Cash dividends paid		(2,170	)		(1,945	)		(1,780	)
Net cash from financing activities		(2,335	)		(2,016	)		(1,842	)
Net change in cash		337			171			502
Beginning cash		808			637			135
Ending cash	$	1,145		$	808		$	637

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Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Schedule of carrying value and fair value of financial assets and liabilities

Financial instruments as of the dates indicated were as follows: 

						Quoted Prices
						In Active		Significant
						Markets for		Other		Significant
						Identical		Observable		Unobservable
		Carrying		Estimated		Assets		Inputs		Inputs
(Dollars in thousands)		Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
December 31, 2015
Assets
Cash and due from banks	$	11,187	$	11,187	$	11,187	$	—	$	—
Securities available for sale		160,136		160,136		953		147,384		11,799
Federal Home Loan Bank and Federal Reserve Bank stock		3,187		3,187		—		3,187		—
Loans held for sale		4,957		5,109		—		5,109		—
Loans, net		345,110		349,875		—		—		349,875
Liabilities
Noninterest-bearing deposits		122,937		122,937		—		122,937		—
Interest-bearing deposits		351,759		353,113		—		353,113		—
Repurchase agreements		9,460		9,460		—		9,460		—
Federal Home Loan Bank advances		11,332		12,028		—		12,028		—
December 31, 2014
Assets
Cash and due from banks	$	16,650	$	16,650	$	16,650	$	—	$	—
Securities available for sale		142,521		142,521		775		130,104		11,642
Federal Home Loan Bank and Federal Reserve Bank stock		3,185		3,185		—		3,185		—
Loans held for sale		2,170		2,237		—		2,237		—
Loans, net		341,940		345,656		—		—		345,656
Liabilities
Noninterest-bearing deposits		113,006		113,006		—		113,006		—
Interest-bearing deposits		321,822		321,757		—		321,757		—
Repurchase agreements		26,743		26,743		—		26,743		—
Federal Home Loan Bank advances		18,363		18,402		—		18,402		—

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Schedule of assets measured at fair value on a recurring basis

Assets Measured at Fair Value on a Recurring Basis

		Quoted Prices
		In Active		Significant
		Markets for		Other		Significant
		Identical		Observable		Unobservable
		Assets		Inputs		Inputs		Balance at
(Dollars in thousands)		(Level 1)		(Level 2)		(Level 3)		Date Indicated
Investment Securities, Available for Sale - December 31, 2015
U. S. Government and federal agency	$	—	$	57,207	$	—	$	57,207
U. S. Treasury notes and bonds		—		6,100		—		6,100
State and municipal		—		67,852		9,902		77,754
Mortgage-backed		—		6,970		—		6,970
Corporate		—		7,990		397		8,387
Foreign debt		—		995		—		995
Equity securities		953		—		1,500		2,453
Asset backed securities		—		270		—		270
Total	$	953	$	147,384	$	11,799	$	160,136
Investment Securities, Available for Sale - December 31, 2014
U. S. Government and federal agency	$	—	$	44,503	$	—	$	44,503
U. S. Treasury notes and bonds		—		8,058		—		8,058
State and municipal		—		60,091		9,744		69,835
Mortgage-backed		—		8,942		—		8,942
Corporate		—		7,140		398		7,538
Foreign debt		—		994		—		994
Equity securities		775		—		1,500		2,275
Asset backed securities		—		376		—		376
Total	$	775	$	130,104	$	11,642	$	142,521

Schedule of changes in Level 3 assets and liabilities measured at fair value on a recurring basis

Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis  

(Dollars in thousands)	2015			2014
Investment Securities, Available for Sale
Balance, January 1	$	11,642		$	11,328
Total realized and unrealized gains included in income		—			(11	)
Total unrealized gains/(losses) included in other comprehensive income		806			1,199
Net purchases, sales, calls, and maturities		(649	)		(948	)
Net transfers into Level 3		—			74
Balance, December 31	$	11,799		$	11,642

Schedule of assets measured at fair value on a nonrecurring basis

Assets Measured at Fair Value on a Non-recurring Basis  

(Dollars in thousands)	Balances at Dates Indicated		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs  (Level 3)
Impaired Loans
December 31, 2015	$	5,585	$	—	$	—	$	5,585
December 31, 2014	$	6,885	$	—	$	—	$	6,885
Other Real Estate
December 31, 2015	$	31	$	—	$	—	$	31
December 31, 2014	$	150	$	—	$	—	$	150

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Off-Balance Sheet Activities (Tables)

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Schedule of contractual amount of financial instruments with off-balance sheet risk

The contractual amount of financial instruments with off-balance sheet risk was as follows at December 31: 

	2015				2014
(Dollars in thousands)	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Unused lines of credit and letters of credit	$	14,445	$	77,089	$	7,076	$	60,476
Commitments to fund loans (at market rates)		18,654		1,740		3,116		1,050

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Regulatory Capital (Tables)

12 Months Ended

Dec. 31, 2015

Banking and Thrift [Abstract]

Schedule of actual capital and minimum required levels

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

(Dollars in thousands)	Actual					Minimum Required for Capital Adequacy Purposes					Minimum Required to be Well  Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2015
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$	59,737		14.2	%	$	33,600		8.0	%		N/A		N/A
Common equity Tier 1 capital (to risk weighted assets)		54,532		13.0			18,900		4.5			N/A		N/A
Tier 1 capital (to risk weighted assets)		54,532		13.0			16,800		4.0			N/A		N/A
Tier 1 capital (to average assets)		54,532		9.7			22,434		4.0			N/A		N/A
ChoiceOne Bank
Total capital (to risk weighted assets)	$	55,723		13.3	%	$	33,470		8.0	%	$	41,837		10.0	%
Common equity Tier 1 capital (to risk weighted assets)		51,574		12.3			18,827		4.5			27,194		6.5
Tier 1 capital (to risk weighted assets)		51,574		12.3			16,735		4.0			25,102		6.0
Tier 1 capital (to average assets)		51,574		9.2			22,350		4.0			27,937		5.0
December 31, 2014
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$	55,223		14.3	%	$	30,948		8.0	%		N/A		N/A
Tier 1 capital (to risk weighted assets)		50,562		13.1			15,474		4.0			N/A		N/A
Tier 1 capital (to average assets)		50,562		9.6			21,016		4.0			N/A		N/A
ChoiceOne Bank
Total capital (to risk weighted assets)	$	52,664		13.6	%	$	30,881		8.0	%	$	38,601		10.0	%
Tier 1 capital (to risk weighted assets)		48,665		12.6			15,441		4.0			23,161		6.0
Tier 1 capital (to average assets)		48,665		9.3			20,971		4.0			26,214		5.0

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Schedule of quarterly financial data (unaudited)

							Earnings Per Share
(Dollars in thousands)	Interest Income		Net Interest Income		Net Income		Basic		Fully Diluted
2015
First Quarter	$	4,746	$	4,490	$	1,642	$	0.50	$	0.49
Second Quarter		4,832		4,579		1,431		0.43		0.43
Third Quarter		4,871		4,625		1,450		0.44		0.44
Fourth Quarter		4,904		4,670		1,222		0.37		0.37
2014
First Quarter	$	4,656	$	4,353	$	1,248	$	0.38	$	0.38
Second Quarter		4,738		4,449		1,337		0.40		0.40
Third Quarter		4,817		4,535		1,554		0.47		0.47
Fourth Quarter		4,803		4,526		1,556		0.48		0.47

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Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Cash on deposit with Federal Reserve Bank	$ 1,100	$ 409
Land improvements [Member] | Lower Range [Member]
Property, Plant and Equipment [Line Items]
Useful lives	7 years
Land improvements [Member] | Upper Range [Member]
Property, Plant and Equipment [Line Items]
Useful lives	15 years
Building [Member] | Lower Range [Member]
Property, Plant and Equipment [Line Items]
Useful lives	5 years
Building [Member] | Upper Range [Member]
Property, Plant and Equipment [Line Items]
Useful lives	39 years
Furniture And Equipment [Member] | Lower Range [Member]
Property, Plant and Equipment [Line Items]
Useful lives	3 years
Furniture And Equipment [Member] | Upper Range [Member]
Property, Plant and Equipment [Line Items]
Useful lives	7 years

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Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Summary Of Significant Accounting Policies Details
Unrealized gains on available for sale securities	$ 1,632	$ 1,401
Unrealized gains on post-retirement benefits	191	225
Tax effect	(620)	(553)
Accumulated other comprehensive income	$ 1,203	$ 1,073

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Securities (Details Narrative) - N	Dec. 31, 2015	Dec. 31, 2014
Investments, Debt and Equity Securities [Abstract]
Number of securities with an unrealized loss positions	82	42

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Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 158,504	$ 141,120
Gross Unrealized Gains	2,096	1,878
Gross Unrealized Losses	(464)	(477)
Fair Value	160,136	142,521
U.S. Government and federal agency [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	57,406	44,584
Gross Unrealized Gains	30	77
Gross Unrealized Losses	(229)	(158)
Fair Value	57,207	44,503
U.S. Treasury notes and bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	6,133	8,077
Gross Unrealized Gains		11
Gross Unrealized Losses	(33)	(30)
Fair Value	6,100	8,058
State and municipal [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	76,005	68,376
Gross Unrealized Gains	1,858	1,697
Gross Unrealized Losses	(109)	(238)
Fair Value	77,754	69,835
Mortgage-backed [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	6,989	8,896
Gross Unrealized Gains	26	68
Gross Unrealized Losses	(45)	(22)
Fair Value	6,970	8,942
Corporate [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	8,418	7,529
Gross Unrealized Gains	8	25
Gross Unrealized Losses	(39)	(16)
Fair Value	8,387	7,538
Foreign Debt [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,000	1,000
Gross Unrealized Losses	(5)	(6)
Fair Value	995	994
Equity securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,279	2,280
Gross Unrealized Gains	174
Gross Unrealized Losses		(5)
Fair Value	2,453	2,275
Asset-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	274	378
Gross Unrealized Losses	(4)	(2)
Fair Value	$ 270	$ 376

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Securities (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Investments, Debt and Equity Securities [Abstract]
Proceeds from sales of securities	$ 25,876	$ 24,766	$ 8,790
Gross realized gains	$ 261	341	197
Gross realized losses		$ 30	$ 60

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Securities (Details 2) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Available for Sale Securities, Fair Values
Due within one year	$ 24,173
Due after one year through five years	94,705
Due after five years through ten years	35,831
Due after ten years	2,974
Total debt securities	157,683
Equity securities	2,453
Total	$ 160,136	$ 142,521

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Securities (Details 3) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Investments, Debt and Equity Securities [Abstract]
Securities pledged for securities sold under agreements to repurchase	$ 7,011	$ 34,369
Securities pledged for advance from the Federal Home Loan Bank	24,199
Securities pledged for Community Reinvesment Act Cedits	276	279
Total	$ 31,486	$ 34,648

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Securities (Details 4) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Securities with unrealized loss position
Less than 12 Months, Fair Value	$ 64,788	$ 23,829
Less than 12 Months, Unrealized Losses	(397)	(101)
12 Months or More, Fair Value	5,440	28,369
12 Months or More, Unrealized Losses	(67)	(376)
Total, Fair Value	70,228	52,198
Total, Unrealized Losses	(464)	(477)
U.S. Government and federal agency [Member]
Securities with unrealized loss position
Less than 12 Months, Fair Value	38,576	11,323
Less than 12 Months, Unrealized Losses	(216)	(26)
12 Months or More, Fair Value	986	13,005
12 Months or More, Unrealized Losses	(13)	(132)
Total, Fair Value	39,553	24,328
Total, Unrealized Losses	(229)	(158)
U.S. Treasury notes and bonds [Member]
Securities with unrealized loss position
Less than 12 Months, Fair Value	6,101
Less than 12 Months, Unrealized Losses	(33)
12 Months or More, Fair Value		2,089
12 Months or More, Unrealized Losses		(30)
Total, Fair Value	6,101	2,089
Total, Unrealized Losses	(33)	(30)
State and municipal [Member]
Securities with unrealized loss position
Less than 12 Months, Fair Value	10,382	8,463
Less than 12 Months, Unrealized Losses	(69)	(59)
12 Months or More, Fair Value	2,906	8,977
12 Months or More, Unrealized Losses	(40)	(179)
Total, Fair Value	13,288	17,440
Total, Unrealized Losses	(109)	(238)
Mortgage-backed [Member]
Securities with unrealized loss position
Less than 12 Months, Fair Value	4,459	989
Less than 12 Months, Unrealized Losses	(41)	(4)
12 Months or More, Fair Value	382	1,535
12 Months or More, Unrealized Losses	(4)	(18)
Total, Fair Value	4,841	2,524
Total, Unrealized Losses	(45)	(22)
Corporate [Member]
Securities with unrealized loss position
Less than 12 Months, Fair Value	4,284	2,054
Less than 12 Months, Unrealized Losses	(33)	(7)
12 Months or More, Fair Value	896	1,393
12 Months or More, Unrealized Losses	(6)	(9)
Total, Fair Value	5,180	3,447
Total, Unrealized Losses	(39)	(16)
Foreign Debt [Member]
Securities with unrealized loss position
Less than 12 Months, Fair Value	995
Less than 12 Months, Unrealized Losses	(5)
12 Months or More, Fair Value		994
12 Months or More, Unrealized Losses		(6)
Total, Fair Value	995	994
Total, Unrealized Losses	(5)	(6)
Equity securities [Member]
Securities with unrealized loss position
Less than 12 Months, Fair Value		1,000
Less than 12 Months, Unrealized Losses		(5)
Total, Fair Value		1,000
Total, Unrealized Losses		(5)
Asset-backed securities [Member]
Securities with unrealized loss position
12 Months or More, Fair Value	270	376
12 Months or More, Unrealized Losses	(4)	(2)
Total, Fair Value	270	376
Total, Unrealized Losses	$ (4)	$ (2)

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Loans and Allowance for Loan Losses (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Loans	$ 349,304	$ 346,113
Allowance for loan losses	(4,194)	(4,173)	$ (4,735)
Loans, net	345,110	341,940
Agricultural [Member]
Loans	40,232	41,098
Allowance for loan losses	(420)	(186)	(178)
Commercial and Industrial [Member]
Loans	94,347	88,062
Allowance for loan losses	(586)	(527)	(562)
Consumer [Member]
Loans	20,090	20,752
Allowance for loan losses	(297)	(184)	(192)
Commercial Real Estate [Member]
Loans	97,736	99,807
Allowance for loan losses	(1,030)	(1,641)	(1,842)
Construction Real Estate [Member]
Loans	5,390	2,691
Allowance for loan losses	(46)	(9)	(12)
Residential Real Estate [Member]
Loans	91,509	93,703
Allowance for loan losses	$ (1,388)	$ (1,193)	$ (1,626)

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Loans and Allowance for Loan Losses (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Allowance for Loan Losses
Beginning balance	$ 4,173	$ 4,735
Charge-offs	(461)	(1,072)
Recoveries	382	410
Provision	100	100
Ending balance	4,194	4,173
Individually evaluated for impairment	506	1,114
Collectively evaluated for impairment	3,687	3,059
Loans
Individually evaluated for impairment	5,585	6,885
Collectively evaluated for impairment	343,719	339,228
Ending balance	349,304	346,113
Agricultural [Member]
Allowance for Loan Losses
Beginning balance	186	178
Recoveries	1	20
Provision	233	(12)
Ending balance	420	186
Individually evaluated for impairment	3
Collectively evaluated for impairment	417	186
Loans
Individually evaluated for impairment	50
Collectively evaluated for impairment	40,182	41,098
Ending balance	40,232	41,098
Commercial and Industrial [Member]
Allowance for Loan Losses
Beginning balance	527	562
Charge-offs	(30)	(1)
Recoveries	64	119
Provision	25	(153)
Ending balance	586	527
Individually evaluated for impairment	15
Collectively evaluated for impairment	571	527
Loans
Individually evaluated for impairment	192	38
Collectively evaluated for impairment	94,155	88,024
Ending balance	94,347	88,062
Consumer [Member]
Allowance for Loan Losses
Beginning balance	184	192
Charge-offs	(291)	(273)
Recoveries	121	179
Provision	283	86
Ending balance	297	184
Individually evaluated for impairment	1	4
Collectively evaluated for impairment	296	180
Loans
Individually evaluated for impairment	24	36
Collectively evaluated for impairment	20,066	20,176
Ending balance	20,090	20,752
Commercial Real Estate [Member]
Allowance for Loan Losses
Beginning balance	1,641	1,842
Charge-offs		(665)
Recoveries	47	48
Provision	(658)	416
Ending balance	1,030	1,641
Individually evaluated for impairment	91	745
Collectively evaluated for impairment	839	896
Loans
Individually evaluated for impairment	2,790	3,853
Collectively evaluated for impairment	94,946	95,954
Ending balance	97,736	99,807
Construction Real Estate [Member]
Allowance for Loan Losses
Beginning balance	9	12
Provision	37	(3)
Ending balance	46	9
Collectively evaluated for impairment	46	9
Loans
Collectively evaluated for impairment	5,390	2,691
Ending balance	5,390	2,691
Residential Real Estate [Member]
Allowance for Loan Losses
Beginning balance	1,193	1,626
Charge-offs	(140)	(133)
Recoveries	149	44
Provision	186	(344)
Ending balance	1,388	1,193
Individually evaluated for impairment	296	365
Collectively evaluated for impairment	1,092	828
Loans
Individually evaluated for impairment	2,529	2,958
Collectively evaluated for impairment	88,980	90,745
Ending balance	91,509	93,703
Unallocated [Member]
Allowance for Loan Losses
Beginning balance	433	323
Provision	(6)	110
Ending balance	427	433
Collectively evaluated for impairment	$ 427	$ 433

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Loans and Allowance for Loan Losses (Details 2) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	$ 349,304	$ 346,113
Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	40,232	41,098
Agricultural [Member] | Risk ratings 1 and 2 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	10,416	9,596
Agricultural [Member] | Risk ratings 3 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	25,189	24,294
Agricultural [Member] | Risk ratings 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	3,086	6,462
Agricultural [Member] | Risk ratings 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	1,491	683
Agricultural [Member] | Risk ratings 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	50	63
Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	94,347	88,062
Commercial and Industrial [Member] | Risk ratings 1 and 2 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	10,480	11,590
Commercial and Industrial [Member] | Risk ratings 3 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	66,921	59,470
Commercial and Industrial [Member] | Risk ratings 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	16,169	15,764
Commercial and Industrial [Member] | Risk ratings 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	574	976
Commercial and Industrial [Member] | Risk ratings 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	129	262
Commercial and Industrial [Member] | Risk ratings 7 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	74
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	97,736	99,807
Commercial Real Estate [Member] | Risk ratings 1 and 2 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	3,875	3,576
Commercial Real Estate [Member] | Risk ratings 3 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	57,540	58,600
Commercial Real Estate [Member] | Risk ratings 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	29,826	28,557
Commercial Real Estate [Member] | Risk ratings 5 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	3,776	4,490
Commercial Real Estate [Member] | Risk ratings 6 [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	$ 2,719	$ 4,584

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Loans and Allowance for Loan Losses (Details 3) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	$ 349,304	$ 346,113
Nonaccrual past due loans	2,198	3,361
Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	20,090	20,752
Consumer [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	20,090	20,752
Construction Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	5,390	2,691
Construction Real Estate [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	5,390	2,691
Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	91,509	93,703
Nonaccrual past due loans	431	671
Residential Real Estate [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	90,796	92,974
Residential Real Estate [Member] | Nonperforming [Member]
Financing Receivable, Recorded Investment [Line Items]
Risk rated loans	$ 282	$ 58

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Loans and Allowance for Loan Losses (Details 4) $ in Thousands	12 Months Ended
	Dec. 31, 2015 USD ($) N	Dec. 31, 2014 USD ($) N
Financing Receivable, Modifications [Line Items]
Number of contracts | N	6	8
Pre-Modification Outstanding Recorded Investment	$ 634	$ 1,909
Post Modification Oustanding Recorded Investment	$ 634	$ 1,909
Number of Contracts | N	3	8
Post Modification Outstanding Recorded Investment - past due for 30 days or more	$ 400	$ 1,702
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts | N	4	5
Pre-Modification Outstanding Recorded Investment	$ 439	$ 1,596
Post Modification Oustanding Recorded Investment	$ 439	$ 1,596
Number of Contracts | N	3	6
Post Modification Outstanding Recorded Investment - past due for 30 days or more	$ 400	$ 1,592
Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts | N	2	2
Pre-Modification Outstanding Recorded Investment	$ 195	$ 281
Post Modification Oustanding Recorded Investment	$ 195	$ 281
Number of Contracts | N		2
Post Modification Outstanding Recorded Investment - past due for 30 days or more		$ 110
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of contracts | N		1
Pre-Modification Outstanding Recorded Investment		$ 32
Post Modification Oustanding Recorded Investment		$ 32

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Loans and Allowance for Loan Losses (Details 5) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Impaired and Restructured Loans with or with no related allowance recorded
Recorded Investment With no related allowance recorded	$ 1,627	$ 961
Unpaid Principal Balance With no related allowance recorded	1,656	972
Average Recorded Investment With no related allowance recorded	1,279	1,018
Interest Income Recognized With no related allowance recorded	11	15
Recorded Investment With an allowance recorded	3,958	5,924
Unpaid Principal Balance With an allowance recorded	4,463	7,000
Related Allowance	506	1,114
Average Recorded Investment With an allowance recorded	4,567	6,708
Interest Income Recognized With an allowance recorded	148	179
Recorded Investment	5,585	6,885
Unpaid Principal Balance	6,119	7,972
Average Recorded Investment	5,846	7,726
Interest Income Recognized	159	194
Agricultural [Member]
Impaired and Restructured Loans with or with no related allowance recorded
Average Recorded Investment With no related allowance recorded		90
Recorded Investment With an allowance recorded	50
Unpaid Principal Balance With an allowance recorded	50
Related Allowance	3
Average Recorded Investment With an allowance recorded	62	130
Interest Income Recognized With an allowance recorded	(6)
Recorded Investment	50
Unpaid Principal Balance	50
Average Recorded Investment	62	220
Interest Income Recognized	(6)
Commercial and Industrial [Member]
Impaired and Restructured Loans with or with no related allowance recorded
Recorded Investment With no related allowance recorded	74	38
Unpaid Principal Balance With no related allowance recorded	103	43
Average Recorded Investment With no related allowance recorded	25	81
Recorded Investment With an allowance recorded	118
Unpaid Principal Balance With an allowance recorded	118
Related Allowance	15
Average Recorded Investment With an allowance recorded	44	292
Interest Income Recognized With an allowance recorded	1	4
Recorded Investment	192	38
Unpaid Principal Balance	221	43
Average Recorded Investment	69	373
Interest Income Recognized	1	4
Consumer [Member]
Impaired and Restructured Loans with or with no related allowance recorded
Recorded Investment With no related allowance recorded		8
Unpaid Principal Balance With no related allowance recorded		8
Average Recorded Investment With no related allowance recorded	2	3
Recorded Investment With an allowance recorded	24	28
Unpaid Principal Balance With an allowance recorded	24	28
Related Allowance	1	4
Average Recorded Investment With an allowance recorded	34	31
Interest Income Recognized With an allowance recorded	3	3
Recorded Investment	24	36
Unpaid Principal Balance	24	36
Average Recorded Investment	36	34
Interest Income Recognized	3	3
Commercial Real Estate [Member]
Impaired and Restructured Loans with or with no related allowance recorded
Recorded Investment With no related allowance recorded	1,540	413
Unpaid Principal Balance With no related allowance recorded	1,540	419
Average Recorded Investment With no related allowance recorded	1,061	352
Interest Income Recognized With no related allowance recorded	11	6
Recorded Investment With an allowance recorded	1,250	3,440
Unpaid Principal Balance With an allowance recorded	1,755	4,498
Related Allowance	191	745
Average Recorded Investment With an allowance recorded	2,002	3,932
Interest Income Recognized With an allowance recorded	64	81
Recorded Investment	2,790	3,853
Unpaid Principal Balance	3,295	4,917
Average Recorded Investment	3,063	4,284
Interest Income Recognized	75	87
Residential Real Estate [Member]
Impaired and Restructured Loans with or with no related allowance recorded
Recorded Investment With no related allowance recorded	13	502
Unpaid Principal Balance With no related allowance recorded	13	502
Average Recorded Investment With no related allowance recorded	191	492
Interest Income Recognized With no related allowance recorded		9
Recorded Investment With an allowance recorded	2,516	2,456
Unpaid Principal Balance With an allowance recorded	2,516	2,474
Related Allowance	296	365
Average Recorded Investment With an allowance recorded	2,425	2,323
Interest Income Recognized With an allowance recorded	86	91
Recorded Investment	2,529	2,958
Unpaid Principal Balance	2,529	2,976
Average Recorded Investment	2,616	2,815
Interest Income Recognized	$ 86	$ 100

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Loans and Allowance for Loan Losses (Details 6) - USD ($) $ in Thousands		Dec. 31, 2015		Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total	[1]	$ 4,517		$ 3,434
Loans Not Past Due		344,787		342,679
Loans		349,304		346,113
90 Days Past Due and Accruing		29		58
30 to 59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total		2,024	[1]	1,647
60 to 89 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total		983	[1]	725
Than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total		1,510	[1]	1,062
Agricultural [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total	[1]	3
Loans Not Past Due		40,229		41,098
Loans		40,232		41,098
Agricultural [Member] | 30 to 59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total	[1]	3
Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total	[1]	489		293
Loans Not Past Due		93,858		87,769
Loans		94,347		88,062
Commercial and Industrial [Member] | 30 to 59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total		90	[1]	33
Commercial and Industrial [Member] | 60 to 89 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total		322	[1]	260
Commercial and Industrial [Member] | Than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total	[1]	77
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total	[1]	115		76
Loans Not Past Due		19,975		20,676
Loans		20,090		20,752
Consumer [Member] | 30 to 59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total		115	[1]	66
Consumer [Member] | 60 to 89 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total				10
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total	[1]	2,035		922
Loans Not Past Due		95,701		98,885
Loans		97,736		99,807
Commercial Real Estate [Member] | 30 to 59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total		505	[1]	172
Commercial Real Estate [Member] | 60 to 89 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total		297	[1]	51
Commercial Real Estate [Member] | Than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total		1,233	[1]	699
Construction Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total	[1]	299
Loans Not Past Due		5,091		2,691
Loans		5,390		2,691
Construction Real Estate [Member] | 30 to 59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total	[1]	299
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total	[1]	1,576		2,143
Loans Not Past Due		89,933		91,560
Loans		91,509		93,703
90 Days Past Due and Accruing		29		58
Residential Real Estate [Member] | 30 to 59 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total		1,012	[1]	1,376
Residential Real Estate [Member] | 60 to 89 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total		364	[1]	404
Residential Real Estate [Member] | Than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due Total		$ 200	[1]	$ 363

[1] Includes nonaccrual loans

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Loans and Allowance for Loan Losses (Details 7) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	$ 2,198	$ 3,361
Agricultural [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	50
Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	77	38
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	1,640	2,652
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	$ 431	$ 671

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Mortgage Banking (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Mortgage loans serviced for others, recorded off balance sheet	$ 79,400	$ 91,400
Fair value of loan servicing rights	$ 739	$ 942
Discount Rate	6.37%	6.20%
Lower Range [Member]
Prepayment Speed	9.00%	7.00%
Upper Range [Member]
Prepayment Speed	13.00%	13.00%

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Mortgage Banking (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Mortgage Banking [Abstract]
Loans originated for resale, net of principal payments	$ 47,498	$ 29,850	$ 42,906
Proceeds from loan sales	46,077	29,561	45,204
Net gains on sales of loans held for sale	1,416	1,023	1,566
Loan servicing fees, net of amortization	$ 113	$ 166	$ 167

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Mortgage Banking (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Servicing Asset at Amortized Cost, Balance [Roll Forward]
Balance, beginning of year	$ 489	$ 544	$ 473
Capitalized	49	73	211
Amortization	(161)	(128)	(140)
Balance, end of year	$ 378	$ 489	$ 544

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Premises and Equipment (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 986	$ 986	$ 927
Rent expense	$ 53	$ 52	$ 56

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Premises and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Premises and equipment, gross	$ 21,965	$ 21,078
Accumulated depreciation	(10,118)	(9,283)
Premises and equipment, net	11,847	11,795
Land And Land Improvements [Member]
Premises and equipment, gross	4,529	4,337
Leasehold Improvements [Member]
Premises and equipment, gross	38	38
Building [Member]
Premises and equipment, gross	12,076	11,859
Furniture And Equipment [Member]
Premises and equipment, gross	$ 5,322	$ 4,844

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Premises and Equipment (Details 1) $ in Thousands	Dec. 31, 2015 USD ($)
Minimum annual lease payaments for the fiscal year ended:
2016	$ 55
2017	17
2018	17
2019	18
2020	18
Thereafter	91
Total	$ 216

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Goodwill and Intangible Assets (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible asset amortization	$ 448	$ 448	$ 448

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Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Gross Carrying Amount	$ 4,482	$ 4,481
Accumulated Amortization	4,103	3,654
Core Deposit Intangible [Member]
Gross Carrying Amount	4,134	4,134
Accumulated Amortization	3,790	3,376
Other Intangible Assets [Member]
Gross Carrying Amount	348	347
Accumulated Amortization	$ 313	$ 278

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Goodwill and Intangible Assets (Details 1) $ in Thousands	Dec. 31, 2015 USD ($)
Estimated amortization expense:
2016	$ 379
Core Deposit Intangible [Member]
Estimated amortization expense:
2016	345
Other Intangible Assets [Member]
Estimated amortization expense:
2016	$ 35

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Other Real Estate Owned (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Other Real Estate [Abstract]
Balance, beginning of year	$ 150	$ 508	$ 2,019
Transfers from loans	408	561	897
Proceeds from sales	(406)	(789)	(1,604)
Gains/(losses) on sales	(30)	24	122
Write-downs	(91)	(154)	(926)
Balance, end of year	$ 31	$ 150	$ 508

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Deposits (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Deposits [Abstract]
Certificates of deposit $250,000 or greater	$ 21,400	$ 27,200
Certificates of Deposit issued through CDARS	$ 2,100	$ 3,100

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Deposits (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Deposits [Abstract]
Noninterest-bearing demand deposits	$ 122,937	$ 113,006
Interest-bearing demand deposits	106,882	71,651
Money market deposits	86,987	78,272
Savings deposits	70,946	67,035
Local certificates of deposit	86,944	104,864
Total deposits	$ 474,696	$ 434,828

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Deposits (Details 1) $ in Thousands	Dec. 31, 2015 USD ($)
Due during the year ending December 31,
2016	$ 54,241
2017	16,104
2018	9,074
2019	3,368
2020	3,864
2021	293
Total	$ 86,944

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Repurchase Agreements (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Disclosure of Repurchase Agreements [Abstract]
Outstanding balance at December 31	$ 9,460	$ 26,743
Average interest rate at December 31	0.04%	0.19%
Average balance during the year	$ 17,825	$ 22,594
Average interest rate during the year	0.17%	0.20%
Maximum month end balance during the year	$ 26,743	$ 28,719

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Repurchase Agreements (Details 1) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Total securities	$ 7,011	$ 34,369
Repurchase agreements	9,460	$ 26,743
Maturity of the Agreements Overnight and Continuous [Member]
Unsecured debt	2,449
Repurchase agreements	9,460
Maturity of the Agreements Overnight and Continuous [Member] | U.S Government Agencies [Member]
Total securities	$ 7,011

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Federal Home Loan Bank Advances (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Securities pledged for advance from the Federal Home Loan Bank	$ 24,199
Eligibilty to borrow from Federal Home Loan Bank based upon collateral	61,200
U.S. Government Agency Securities & U.S. Treasury Securities [Member]
Securities pledged for advance from the Federal Home Loan Bank	24,200
Agricultural [Member]
Collateral pledged	$ 107,600
Residential Real Estate [Member]
Collateral pledged		$ 96,200

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Federal Home Loan Bank Advances (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Advances from Federal Home Loan Bank	$ 11,332	$ 18,363
Short Term Federal Home Loan Bank Advances [Member]
Advances from Federal Home Loan Bank		18,000
Maturity date, lower range	2015-02
Maturity date, upper range	2015-05
Short Term Federal Home Loan Bank Advances [Member] | Weighted Average [Member]
Interest rate, range	0.40%
Short Term Federal Home Loan Bank Advances [Member] | Upper Range [Member]
Interest rate, range	0.41%
Short Term Federal Home Loan Bank Advances [Member] | Lower Range [Member]
Interest rate, range	0.39%
Long Term Federal Home Loan Bank Advances [Member]
Advances from Federal Home Loan Bank	$ 332	$ 363
Interest rate, range	3.98%	3.98%
Maturity date, lower range	2024-11
Short Term Federal Home Loan Bank Advances [Member]
Advances from Federal Home Loan Bank	$ 11
Interest rate, range	0.47%
Maturity date, lower range	2016-02

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Federal Home Loan Bank Advances (Details 1) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Maturities of Federal Home Loan Bank Advances
2016	$ 11,031
2017	33
2018	34
2019	36
2020	37
Thereafter	161
Total	$ 11,332	$ 18,363

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Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Current federal income tax expense	$ 2,576	$ 2,536	$ 1,724
Deferred federal income tax expense/(benefit)	(631)	(460)	59
Income tax expense	$ 1,945	$ 2,076	$ 1,783

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Income Taxes (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Income tax computed at statutory federal rate of 34%	$ 2,614	$ 2,642	$ 2,338
Tax exempt interest income	(488)	(475)	(476)
Tax exempt earnings on bank-owned life insurance	(221)	(103)	(101)
Other items	40	12	22
Income tax expense	$ 1,945	$ 2,076	$ 1,783
Effective income tax rate	25.00%	27.00%	26.00%

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Income Taxes (Details 2) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Deferred tax assets:
Allowance for loan losses	$ 1,426	$ 1,151
Deferred compensation	269	295
Loan costs/fees deferred	86	84
Other	181	224
Total deferred tax assets	1,962	1,754
Deferred tax liabilities:
Depreciation	1,182	1,405
Unrealized gains on securities available for sale	555	476
Purchase accounting adjustments from merger	117	258
Loan servicing rights	129	166
Stock dividends received from Federal Home Loan Bank	54	64
Post-retirement benefits obligation	66	77
Other	62	75
Total deferred tax liabilities	2,165	2,521
Net deferred tax liabilities	$ 203	$ 767

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Related Party Transactions (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Related Party Transactions [Abstract]
Related Party deposit liabilities	$ 16,100	$ 14,100

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Related Party Transactions (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Loans and Leases Receivable, Related Parties [Roll Forward]
Beginning Balance	$ 10,339	$ 5,162
New loans and renewals	4,054	5,883
Repayments and renewals	(4,159)	(3,022)
Effect of changes in related parties		2,316
Ending Balance	$ 10,234	$ 10,339

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Employee Benefit Plans (Details Narrative) - USD ($)
$ in Thousands

12 Months Ended

Dec. 31, 2015

Dec. 31, 2014

Dec. 31, 2013

Matching contributions to 401(k) plan cost

$ 167

$ 140

$ 91

Post-retirement Benefits Plan [Member]

Benefit expense

2

(20)

(11)

Benefit obligation

127

149

Deferred Compensation Plans - Directors [Member]

Benefit expense

12

12

14

Benefit obligation

$ 173

203

Description of benefit plan

A deferred director compensation plan covers former directors of VRB, which was acquired by ChoiceOne in 2006. Under the plan, ChoiceOne pays each former director the amount of director fees deferred plus interest at rates ranging from 5.50% to 5.84% over various periods as elected by each director. The payout periods range from one month to ten years beginning with the individual’s termination of service.

Deferred Compensation Plans - Executive Officers [Member]

Benefit expense

$ 32

(42)

$ 1

Benefit obligation

$ 618

$ 664

Description of benefit plan

A supplemental executive retirement plan covers four former executive officers of VRB. Under the plan, ChoiceOne pays these individuals a specific amount of compensation plus interest at 7.50% over a 15-year period commencing upon early retirement age (as defined in the plan) or normal retirement age (as defined in the plan).

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Employee Benefit Plans (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Compensation and Retirement Disclosure [Abstract]
Shares allocated to participants	5,355	5,355	5,355
Total shares of ChoiceOne stock held by ESOP	5,355	5,355	5,355
Fair value of allocated shares, subject to repurchase obligation, recorded in other liabilities	$ 127	$ 123	$ 91

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Stock Based Compensation (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Stock-based compensation expense	$ 118	$ 60	$ 22
Authorized number of awards	100,000
Shares available for future grants	51,150
Stock Options [Member]
Weighted average remaining contractual life of options outstanding and exercisable	4 years 9 months 14 days
Intrinsic value outstanding	$ 86
Intrinsic value exercisable	$ 75
Vesting period	3 years
Restricted stock [Member]
Stock-based compensation expense	$ 103	$ 53
Numbers units outstanding	17,850	7,750
Units outstanding, value	$ 425	$ 178
Unrecognized compensation expense	$ 234			$ 22	$ 93	$ 119

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Stock Based Compensation (Details) - Stock Options [Member] - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Number of options:
Number of Options outstanding, beginning	20,250	38,625	40,725
Number of Options granted	30,000
Number of Options exercised	9,500	14,550	2,100
Options forfeited or expired		3,825
Number of Options outstanding, ending	40,750	20,250	38,625
Number of Options exercisable	18,250	20,250	38,625
Weighted Average Exercise Price:
Weighted Average Exercise Price of Options outstanding, beginning	$ 16.65	$ 17.29	$ 16.99
Weighted Average Exercise Price of Options granted	23.30
Weighted Average Exercise Price of Options exercised	16.03	18.87	13.70
Weighted Average Exercise Price of Options forfeited or expired		18.51
Weighted Average Exercise Price of Options outstanding, ending	21.69	16.65	17.29
Weighted Average Exercise Price of Options exercisable	$ 19.70	$ 16.65	$ 17.29

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Stock Based Compensation (Details 1)	12 Months Ended
	Dec. 31, 2015 shares
Exercise Price $13.50 [Member]
Number of Options outstanding, ending	2,000
Number of Options exercisable	2,000
Weighted average remaining contractual life of options outstanding and exercisable	2 years 25 days
Exercise Price $17.95 [Member]
Number of Options outstanding, ending	8,000
Number of Options exercisable	8,000
Weighted average remaining contractual life of options outstanding and exercisable	1 year 18 days
Exercise Price $18.85 [Member]
Number of Options outstanding, ending	750
Number of Options exercisable	750
Weighted average remaining contractual life of options outstanding and exercisable	18 days
Exercise Price $23.30 [Member]
Number of Options outstanding, ending	30,000
Number of Options exercisable	7,500
Weighted average remaining contractual life of options outstanding and exercisable	9 years 11 months 19 days

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Stock Based Compensation (Details 2) - Stock Options [Member]	12 Months Ended
	Dec. 31, 2015 $ / shares
Risk-free interest rate	2.28%
Expected option life	5 years 9 months
Expected stock price volatility	22.95%
Dividend yield	3.64%
Fair value of options granted	$ 3.54

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Earnings Per Share (Details Narrative)	12 Months Ended
	Dec. 31, 2015 shares
Earnings Per Share [Abstract]
Stock options considered to be anti-dilutive to earnings per share	30,000

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Basic Earnings Per Share
Net income	$ 1,222	$ 1,450	$ 1,431	$ 1,642	$ 1,556	$ 1,554	$ 1,337	$ 1,248	$ 5,743	$ 5,695	$ 5,094
Weighted average common shares outstanding									3,289,296	3,298,177	3,296,408
Basic earnings per share	$ .37	$ .44	$ .43	$ .50	$ 0.48	$ 0.47	$ 0.40	$ 0.38	$ 1.75	$ 1.73	$ 1.55
Diluted Earnings Per Share
Plus dilutive stock options and restricted stock units									7,925	12,116	5,653
Weighted average common shares outstanding and potentially dilutive shares									3,297,221	3,310,293	3,302,061
Diluted earnings per share	$ 0.37	$ .44	$ .43	$ .49	$ 0.47	$ 0.47	$ 0.40	$ 0.38	$ 1.74	$ 1.72	$ 1.54

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Condensed Financial Statements of Parent Company (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Assets
Securities available for sale	$ 160,136	$ 142,521
Other assets	4,923	4,603
Total assets	567,746	549,640
Liabilities
Other liabilities	2,416	3,516
Total liabilities	497,904	483,450
Total shareholders' equity	69,842	66,190	$ 61,558	$ 60,506
Total liabilities and shareholders' equity	567,746	549,640
Parent Company [Member]
Assets
Cash	1,145	808
Securities available for sale	2,263	1,059
Other assets	83	154
Investment in ChoiceOne Bank	66,539	64,298
Total assets	70,030	66,319
Liabilities
Mandatory redeemable shares under ESOP, at fair value	127	123
Other liabilities	61	6
Total liabilities	188	129
Total shareholders' equity	69,842	66,190
Total liabilities and shareholders' equity	$ 70,030	$ 66,319

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Condensed Financial Statements of Parent Company (Details 1) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income tax benefit									$ (1,945)	$ (2,076)	$ (1,783)
Net income	$ 1,222	$ 1,450	$ 1,431	$ 1,642	$ 1,556	$ 1,554	$ 1,337	$ 1,248	5,743	5,695	5,094
Parent Company [Member]
Interest and dividends from ChoiceOne Bank									3,579	2,731	2,399
Interest and dividends from other securities									26	16	19
Other income										27	1
Total income									3,605	2,774	2,419
Other expenses									137	92	98
Income before income tax and equity in undistributed net income of subsidiary									3,468	2,682	2,321
Income tax benefit									44	21	31
Income before equity in undistributed net income of subsidiary									3,512	2,703	2,352
Equity in undistributed net income of subsidiary									2,231	2,992	2,742
Net income									$ 5,743	$ 5,695	$ 5,094

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Condensed Financial Statements of Parent Company (Details 2) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Cash flows from operating activities:
Net income	$ 1,222	$ 1,450	$ 1,431	$ 1,642	$ 1,556	$ 1,554	$ 1,337	$ 1,248	$ 5,743	$ 5,695	$ 5,094
Adjustments to reconcile net income to net cash from operating activities:
Amortization									1,497	1,493	1,636
Net gain on sale of securities									(261)	(311)	(137)
Changes in other assets									(503)	(380)	289
Changes in other liabilities									(571)	985	(667)
Cash flows from investing activities:
Sale of securities									25,876	24,766	8,790
Purchases of securities									(70,902)	(41,770)	(40,687)
Cash flows from financing activities:
Issuance of common stock									206	132	130
Repurchase of common stock									(371)	(203)	(192)
Cash dividends paid									(2,170)	(1,945)	(1,780)
Net change in cash									(5,463)	(3,829)	1,445
Beginning cash and cash equivalents				16,650				20,479	16,650	20,479	19,034
Ending cash and cash equivalents	11,187				16,650				11,187	16,650	20,479
Parent Company [Member]
Cash flows from operating activities:
Net income									5,743	5,695	5,094
Adjustments to reconcile net income to net cash from operating activities:
Equity in undistributed net income of subsidiary									(2,231)	(2,992)	(2,742)
Amortization									11	3	2
Net expense of restricted stock units									103	48	11
Net gain on sale of securities									0	(26)	(1)
Changes in other assets									71	(125)	(1)
Changes in other liabilities									4	(35)	36
Net cash from operating activities									3,701	2,568	2,399
Cash flows from investing activities:
Sale of securities										1,184	70
Purchases of securities									(1,029)	(1,565)	(125)
Net cash from investing activities									(1,029)	(381)	(55)
Cash flows from financing activities:
Issuance of common stock									206	132	130
Repurchase of common stock									(371)	(203)	(192)
Cash dividends paid									(2,170)	(1,945)	(1,780)
Net cash from financing activities									(2,335)	(2,016)	(1,842)
Net change in cash									337	171	502
Beginning cash and cash equivalents				$ 808				$ 637	808	637	135
Ending cash and cash equivalents	$ 1,145				$ 808				$ 1,145	$ 808	$ 637

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Financial Instruments (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Assets:
Securities available for sale	$ 160,136	$ 142,521
Liabilities:
Noninterest-bearing deposits	122,937	113,006
Interest-bearing deposits	351,759	321,822
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets:
Cash and due from banks	11,187	16,650
Securities available for sale	953	775
Significant Other Observable Inputs (Level 2) [Member]
Assets:
Securities available for sale	147,384	130,104
Federal Home Loan Bank and Federal Reserve Bank stock	3,187	3,185
Loans held for sale	5,109	2,237
Liabilities:
Noninterest-bearing deposits	122,937	113,006
Interest-bearing deposits	353,113	321,757
Repurchase agreements	9,460	26,743
Federal Home Loan Bank advances	12,028	18,402
Significant Unobservable Inputs (Level 3) [Member]
Assets:
Securities available for sale	11,799	11,642
Loans, net	349,875	345,656
Carrying Amount [Member]
Assets:
Cash and due from banks	11,187	16,650
Securities available for sale	160,136	142,521
Federal Home Loan Bank and Federal Reserve Bank stock	3,187	3,185
Loans held for sale	4,957	2,170
Loans, net	345,110	341,940
Liabilities:
Noninterest-bearing deposits	122,937	113,006
Interest-bearing deposits	351,759	321,822
Repurchase agreements	9,460	26,743
Federal Home Loan Bank advances	11,332	18,363
Estimated Fair Value [Member]
Assets:
Cash and due from banks	11,187	16,650
Securities available for sale	160,136	142,521
Federal Home Loan Bank and Federal Reserve Bank stock	3,187	3,185
Loans held for sale	5,109	2,237
Loans, net	349,875	345,656
Liabilities:
Noninterest-bearing deposits	122,937	113,006
Interest-bearing deposits	353,113	321,757
Repurchase agreements	9,460	26,743
Federal Home Loan Bank advances	$ 12,028	$ 18,402

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Fair Value Measurements (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Fair Value Disclosures [Abstract]
Total unrealized gains/(losses) included in other comprehensive income	$ 806	$ (9)
Level 3 securities purchased	$ 3,200	$ 3,500

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Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 160,136	$ 142,521
Equity securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	2,453	2,275
U.S. Treasury notes and bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	6,100	8,058
U.S. Government and federal agency [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	57,207	44,503
State and municipal [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	77,754	69,835
Mortgage-backed [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	6,970	8,942
Corporate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	8,387	7,538
Foreign Debt [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	995	994
Asset-backed securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	270	376
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	953	775
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	147,384	130,104
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	11,799	11,642
Fair Value Measured on a Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	160,136	142,521
Fair Value Measured on a Recurring Basis [Member] | Equity securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	2,453	2,275
Fair Value Measured on a Recurring Basis [Member] | U.S. Treasury notes and bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	6,100	8,058
Fair Value Measured on a Recurring Basis [Member] | U.S. Government and federal agency [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	57,207	44,503
Fair Value Measured on a Recurring Basis [Member] | State and municipal [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	77,754	69,835
Fair Value Measured on a Recurring Basis [Member] | Mortgage-backed [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	6,970	8,942
Fair Value Measured on a Recurring Basis [Member] | Corporate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	8,387	7,538
Fair Value Measured on a Recurring Basis [Member] | Foreign Debt [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	995	994
Fair Value Measured on a Recurring Basis [Member] | Asset-backed securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	270	376
Fair Value Measured on a Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	953	775
Fair Value Measured on a Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	953	775
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	147,384	130,104
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Treasury notes and bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	6,100	8,058
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Government and federal agency [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	57,207	44,503
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | State and municipal [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	67,852	60,091
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Mortgage-backed [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	6,970	8,942
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Corporate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	7,990	7,140
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Foreign Debt [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	995	994
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Asset-backed securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	270	376
Fair Value Measured on a Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	11,799	11,642
Fair Value Measured on a Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | Equity securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	1,500	1,500
Fair Value Measured on a Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | State and municipal [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	9,902	9,744
Fair Value Measured on a Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | Corporate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 397	$ 398

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Fair Value Measurements (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Changes in Level 3 Investment Securities, Available for Sale Measured at Fair Value on a Recurring Basis
Total unrealized gains /(losses) included in other comprehensive income	$ 806	$ (9)
Fair Value Measured on a Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member]
Changes in Level 3 Investment Securities, Available for Sale Measured at Fair Value on a Recurring Basis
Balance at the beginning of year	11,642	11,328
Total realized and unrealized gains included in income		(11)
Total unrealized gains /(losses) included in other comprehensive income	806	1,199
Net purchases, sales, calls, and maturities	(649)	(948)
Net transfers into Level 3		74
Balance at the end of year	$ 11,799	$ 11,642

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Fair Value Measurements (Details 2) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other real estate owned, net	$ 31	$ 150	$ 508	$ 2,019
Fair Value measured on a Non-Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	5,585	6,885
Other real estate owned, net	31	150
Fair Value measured on a Non-Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	5,585	6,885
Other real estate owned, net	$ 31	$ 150

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Off-Balance Sheet Activities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Unused lines of Credit - Fixed Rate [Member]
Contractual amount of financial instruments with off-balance sheet risk	$ 14,445	$ 7,076
Unused lines of Credit - Variable Rate [Member]
Contractual amount of financial instruments with off-balance sheet risk	77,089	60,476
Commitments to fund loans - Fixed Rate [Member]
Contractual amount of financial instruments with off-balance sheet risk	18,654	3,116
Commitments to fund loans - Variable Rate [Member]
Contractual amount of financial instruments with off-balance sheet risk	$ 1,740	$ 1,050
Lower Range [Member]
Interest rate of commitments	2.49%
Term of commitments	3 years
Upper Range [Member]
Interest rate of commitments	6.52%
Term of commitments	30 years

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Regulatory Capital (Details Narrative) $ in Thousands	Dec. 31, 2015 USD ($)
Banking and Thrift [Abstract]
Amount of undistributed net income available for dividends	$ 9,800

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Regulatory Capital (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Parent Company [Member]
Total Capital
Total Capital	$ 59,737	$ 55,223
Total Capital (to risk-weighted assets) ratio	14.20%	14.30%
Minimum amount of capital for adequacy purposes	$ 33,600	$ 30,948
Minimum amount of capital for adequacy purposes, ratio	8.00%	8.00%
Common equity Tier 1 capital (to risk weighted assets)
Common equity Capital	$ 54,532
Common equity Capital ratio	13.00%
Minimum amount of Common equity Capital for adequacy purposes	$ 18,900
Minimum amount of Common equity Capital for adequacy purposes, ratio	4.50%
Tier 1 Capital (to risk-weighted assets)
Tier 1 Capital	$ 54,532	$ 50,562
Tier 1 Capital (to risk-weighted assets) ratio	13.00%	13.10%
Minimum amount of Tier 1 Capital for adequacy purposes	$ 16,800	$ 21,016
Minimum amount of Tier 1 Capital for adequacy purposes, ratio	4.00%	4.00%
Tier 1 Leverage Capital (to average assets)
Tier 1 Capital	$ 54,532	$ 50,562
Tier 1 Capital (to average assets) ratio	9.70%	9.60%
Minimum amount of Tier 1 Capital for adequacy purposes	$ 22,434	$ 21,016
Minimum amount of Tier 1 Capital for adequacy purposes, ratio	4.00%	4.00%
ChoiceOne Bank [Member]
Total Capital
Total Capital	$ 55,723	$ 52,664
Total Capital (to risk-weighted assets) ratio	13.30%	13.60%
Minimum amount of capital for adequacy purposes	$ 33,470	$ 30,881
Minimum amount of capital for adequacy purposes, ratio	8.00%	8.00%
Minimum Capital required to be well-capitalized	$ 41,837	$ 38,601
Minimum Capital required to be well-capitalized, ratio	10.00%	10.00%
Common equity Tier 1 capital (to risk weighted assets)
Common equity Capital	$ 51,574
Common equity Capital ratio	12.30%
Minimum amount of Common equity Capital for adequacy purposes	$ 18,827
Minimum amount of Common equity Capital for adequacy purposes, ratio	4.50%
Minimum Common equity Capital required to be well-capitalized	$ 27,194
Minimum Common equity Capital required to be well-capitalized, ratio	6.50%
Tier 1 Capital (to risk-weighted assets)
Tier 1 Capital	$ 51,574	$ 48,665
Tier 1 Capital (to risk-weighted assets) ratio	12.30%	12.60%
Minimum amount of Tier 1 Capital for adequacy purposes	$ 16,735	$ 15,441
Minimum amount of Tier 1 Capital for adequacy purposes, ratio	4.00%	4.00%
Minimum Tier 1 Capital required to be well-capitalized	$ 25,102	$ 23,161
Minimum Tier 1 Capital required to be well-capitalized, ratio	6.00%	6.00%
Tier 1 Leverage Capital (to average assets)
Tier 1 Capital	$ 51,574	$ 48,665
Tier 1 Capital (to average assets) ratio	9.20%	9.30%
Minimum amount of Tier 1 Capital for adequacy purposes	$ 22,350	$ 20,971
Minimum amount of Tier 1 Capital for adequacy purposes, ratio	4.00%	4.00%
Minimum Tier 1 Capital required to be well-capitalized	$ 27,937	$ 26,214
Minimum Tier 1 Capital required to be well-capitalized, ratio	5.00%	5.00%

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Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Quarterly Financial Information Disclosure [Abstract]
Interest income	$ 4,904	$ 4,871	$ 4,832	$ 4,746	$ 4,803	$ 4,817	$ 4,738	$ 4,656	$ 19,352	$ 19,014	$ 19,015
Net interest income	4,670	4,625	4,579	4,490	4,526	4,535	4,449	4,353	18,362	17,863	17,596
Net income	$ 1,222	$ 1,450	$ 1,431	$ 1,642	$ 1,556	$ 1,554	$ 1,337	$ 1,248	$ 5,743	$ 5,695	$ 5,094
Basic earnings per common share	$ .37	$ .44	$ .43	$ .50	$ 0.48	$ 0.47	$ 0.40	$ 0.38	$ 1.75	$ 1.73	$ 1.55
Fully diluted earnings per common share	$ 0.37	$ .44	$ .43	$ .49	$ 0.47	$ 0.47	$ 0.40	$ 0.38	$ 1.74	$ 1.72	$ 1.54