10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

S	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended December 31, 2012
£	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	38-2659066
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
109 East Division Street, Sparta, Michigan	49345
(Address of Principal Executive Offices)	(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 S

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 S

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 S    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 S   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 S

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

As of June 30, 2012, the aggregate market value of common stock held by non-affiliates of the Registrant was $47.6 million. This amount is based on an average bid price of $14.44 per share for the Registrant’s stock as of such date.

As of March 15, 2013, the Registrant had 3,299,120 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part I, Item 1, and Part II, Items 5 through 9A incorporate by reference portions of the Registrant’s Annual Report to Shareholders for the year ended December 31, 2012.

Part III, Items 10 through 14 incorporate by reference portions of the Registrant’s Definitive Proxy Statement for the Registrant’s Annual Meeting of Shareholders to be held May 1, 2013.

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 the Registrant itself. Words such as “anticipates,” “believes,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “may,” “could,” “estimates,” 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 and loan servicing rights, and the fair value of investment securities (including whether any impairment on any investment security is temporary or other than temporary) 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. 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, the Registrant 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, changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking laws and regulations; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of pending and future litigation and contingencies; trends in customer behavior as well as their abilities to repay loans; changes in the local and national economies; changes in market conditions; the level and timing of asset growth; local and global uncertainties such as acts of terrorism and military actions; and current uncertainties and fluctuations in the financial markets and stocks of financial services providers due to concerns about credit availability and concerns about the Michigan economy in particular. 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. (the “Registrant”) is a one-bank holding company registered under the Bank Holding Company Act of 1956, as amended. The Registrant was incorporated on February 24, 1986, as a Michigan corporation. The Registrant 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 Registrant on April 6, 1987. The Registrant’s only subsidiary and significant asset as of December 31, 2012, was ChoiceOne Bank (the “Bank”). Effective January 1, 1996, the Bank acquired all of the outstanding common stock of ChoiceOne Insurance Agencies, Inc. (formerly Bradford Insurance Centre, Ltd.), an independent insurance agency headquartered in Sparta, Michigan (the “Insurance Agency”). Effective January 1, 2002, the Bank formed ChoiceOne Mortgage Company of Michigan (the “Mortgage Company”). In December 2008, the operations of the Mortgage Company were consolidated into the Bank and the Mortgage Company subsidiary was eliminated. The Bank also owns a 25% interest in a non-banking corporation, West Shore Computer Services, Inc., a data processing firm located in Scottville, Michigan. Effective November 1, 2006, the Registrant merged with Valley Ridge Financial Corp. (“VRFC”), a single-bank holding company for Valley Ridge Bank (“VRB”). In the merger, the Registrant issued shares of its common stock in exchange for all outstanding shares of VRFC. In December 2006, VRB was consolidated into the Bank.

2

The Registrant’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. The Mortgage Company originated and sold a full line of conventional type mortgage loans for 1-4 family and multi-family residential real estate properties. No material part of the business of the Registrant 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 Registrant.

The Bank’s primary market area lies within portions of 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 thirteen full-service offices. The Registrant and the Bank have no foreign assets or income.

The principal source of revenue for the Registrant and the Bank is interest and fees on loans. On a consolidated basis, interest and fees on loans accounted for 62%, 67%, and 69% of total revenues in 2012, 2011, and 2010, respectively. Interest on securities accounted for 12%, 11%, and 10% of total revenues in 2012, 2011, and 2010, respectively.

The Consolidated Financial Statements incorporated by reference in Part II, Item 8 contain information concerning the financial position and results of operations of the Registrant.

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 Registrant is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The Registrant’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 Registrant to acquire control of any additional bank holding companies, banks or other operating subsidiaries.

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 extent provided by law. The Bank became a member of the Federal Home Loan Bank system in March 1993. This provides certain advantages to the Bank, including favorable borrowing rates for certain funds.

The Registrant is a legal entity separate and distinct from the Bank. There are legal limitations on the extent to which the Bank can lend or otherwise supply funds to the Registrant. In addition, payment of dividends to the Registrant by the Bank is subject to various state and federal regulatory limitations.

3

Under Federal Reserve Board policy, the Registrant is expected to act as a source of financial strength to the Bank and to commit resources to support it. The FDIC formed the Deposit Insurance Fund (“DIF”) in accordance with the Federal Deposit Insurance Reform Act of 2005 (“Reform Act”). The FDIC will maintain the insurance reserves of the DIF by assessing depository institutions an insurance premium.

The FDIC adopted final regulations that implemented the Reform Act to create a stronger and more stable insurance system. The final regulations enable the FDIC to tie each depository institution’s DIF insurance premiums both to the balance of insured deposits, as well as to the degree of risk the institution poses to the DIF. In addition, the FDIC has new flexibility to manage the DIF’s reserve ratio within a range, which in turn may help prevent sharp swings in assessment rates that were possible under the design of the former system. Under the new risk-based assessment system, the FDIC will evaluate each depository institution’s risk based on three primary sources of information: supervisory ratings for all insured institutions, financial ratios for most institutions, and long-term debt issuer ratings for large institutions that have them. Neither the Registrant nor the Bank has a long-term debt issuer rating. The ability to differentiate on the basis of risk will improve incentives for effective risk management and will reduce the extent to which safer banks subsidize riskier ones.

The 2008 DIF rates for nearly all depository institutions varied between five and seven cents for every $100 of deposits. The 2009 rates were approximately double those of the prior year as depository institutions classified in the FDIC’s Risk Category I were assessed between 12 and 14 cents for every $100 of deposits. The rates could increase up to 50 cents for every $100 of deposits for riskier institutions. In addition, the FDIC imposed a special assessment of 5 basis points on each insured institution’s assets minus its Tier 1 capital on September 30, 2009. The FDIC passed a regulation in November 2010 that changed the deposit insurance assessment base from total domestic deposits to average total assets less average tangible equity.

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. Until the change in the law, only SAIF member institutions bore the cost of funding these interest payments.

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 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, 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 Office of Financial and Insurance Regulation, (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.

4

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 Registrant or the Bank, or where compliance with these provisions will adversely affect a borrower’s ability to comply with the terms of loan contracts.

Employees

As of February 28, 2013, the Registrant, the Bank and the Insurance Agency employed 147 employees, of which 119 were full-time employees. The Registrant, Bank, and Insurance Agency believe their relations with their employees are good.

Statistical Information

Additional statistical information describing the business of the Registrant appears on the following pages and in Management’s Discussion and Analysis of Financial Condition and Results of Operations incorporated by reference in Item 7 of this report and in the Consolidated Financial Statements and the notes thereto incorporated by reference 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 thereto incorporated by reference in this report.

Securities Portfolio

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

(Dollars in thousands)

	2012		2011		2010
U.S. Government and federal agency	$	40,268	$	40,413	$	29,066
U.S. Treasury notes and bonds		7,398		—		—
State and municipal		64,678		54,499		47,620
Mortgage-backed		12,526		9,780		7,599
Corporate		6,712		6,011		2,883
Foreign debt securities		1,001		—		—
Equity securities		1,909		1,535		1,599
FDIC-guaranteed financial institution debt		—		2,038		2,053
Total	$	134,492	$	114,276	$	90,820

The Registrant did not hold investment securities from any one issuer at December 31, 2012, that were greater than 10% of the Registrant’s shareholders’ equity, exclusive of U.S. Government and U.S. Government agency securities.

Presented below is the fair value of securities as of December 31, 2012 and 2011, a schedule of maturities of securities as of December 31, 2012, and the weighted average yields of securities as of December 31, 2012.

5

(Dollars in thousands)

	Securities maturing within:
	Less than 1 Year		1 Year - 5 Years		5 Years - 10 Years		More than 10 Years		Fair Value at Dec. 31, 2012		Fair Value at Dec. 31, 2011
U.S. Government and federal agency	$	22,081	$	16,190	$	1,997	$	—	$	40,268	$	40,413
U.S. Treasury		—		5,211		2,187		—		7,398		—
State and municipal		9,234		24,636		28,382		2,426		64,678		54,499
Mortgage-backed securities		1,435		8,449		2,216		426		12,526		9,780
Corporate		502		6,210		—		—		6,712		6,011
Foreign debt securities		—		1,001		—		—		1,001		—
FDIC-guaranteed financial institution debt		—		—		—		—		—		2,038
Total debt securities		34,252		61,697		34,782		2,852		132,583		112,741
Equity securities (1)		—		263		—		500		1,909		1,535
Total securities	$	34,252	$	61,960	$	34,782	$	3,352	$	134,492	$	114,276

	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		1.52	%		1.35	%		1.63	%		—	%		1.46	%
State and municipal (2)		5.31			4.35			4.12			4.73			4.40
Foreign debt securities		—			1.10			—			—			1.10
U.S. Treasury		—			0.83			0.67			—			0.78
Mortgage-backed securities		0.76			2.15			1.99			2.43			1.97
Corporate		2.05			1.75			—			—			1.77
Equity securities (2)		—			4.30			—			3.75			4.00

(1)	Equity securities are preferred stock that may or may not have a stated maturity.
(2)	The yield is computed for tax-exempt securities on a fully tax-equivalent basis at an incremental tax rate of 34%.

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)

	2012		2011		2010		2009		2008
Agricultural	$	31,790	$	38,929	$	29,681	$	31,322	$	23,408
Commercial and industrial		67,365		58,685		55,947		53,964		57,587
Consumer		19,367		18,657		16,709		16,285		16,047
Real estate – commercial		93,312		106,250		116,351		121,100		123,952
Real estate – construction		1,056		1,169		853		1,158		2,026
Real estate – residential		98,578		96,437		97,399		98,887		102,957
Total loans, gross	$	311,468	$	320,127	$	316,940	$	322,716	$	325,977

6

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, 2012. 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, 2012.

(Dollars in thousands)

Loan Type	Less than 1 Year		1 Year – 5 Years		More than 5 Years		Total
Agricultural	$	9,328	$	14,871	$	7,591	$	31,790
Commercial and industrial		15,584		38,167		13,614		67,365
Real estate – commercial		21,139		61,690		10,483		93,312
Real estate – construction		1,056		—		—		1,056
Totals	$	47,107	$	114,728	$	31,688	$	193,523

Loan Sensitivity to Changes in Interest Rates	Less than 1 Year		1 Year – 5 Years		More than 5 Years		Total
Loans with fixed interest rates	$	24,475	$	114,108	$	31,548	$	170,131
Loans with floating or adjustable interest rates		22,632		620		140		23,392
Totals	$	47,107	$	114,728	$	31,688	$	193,523

(1) 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)

	2012		2011		2010		2009		2008
Loans accounted for on a non-accrual basis	$	2,331	$	4,155	$	6,273	$	11,881	$	8,305
Accruing loans which are contractually past due 90 days or more as to principal or interest payments		30		70		23		202		333
Loans defined as “troubled debt restructurings”		4,405		2,448		2,141		1,919		605
Totals	$	6,766	$	6,673	$	8,437	$	14,002	$	9,243

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)

	2012		2011		2010		2009		2008
Interest on non-performing loans which would have been earned had the loans been in an accrual or performing status	$	183	$	373	$	492	$	567	$	442
Interest on non-performing loans that was actually recorded when received	$	—	$	—	$	2	$	—	$	—

Potential Problem Loans

At December 31, 2012, there were $14.2 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 $700,000 from the allowance for loan losses had been allocated for all nonperforming and potential problem loans as of December 31, 2012. However, the entire allowance for loan losses is also available for these potential problem loans.

7

Loan Concentrations

As of December 31, 2012, there was no concentration of loans exceeding 10% of total loans that is not otherwise disclosed as a category of loans in the loan portfolio listing in Note 3 to the Consolidated Financial Statements incorporated by reference in Item 8 of this report.

Other Interest-Bearing Assets

As of December 31, 2012, there were no other interest-bearing assets requiring disclosure.

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)	2012			2011			2010			2009			2008
Balance at January 1	$	5,213		$	4,729		$	4,322		$	3,600		$	3,600
Charge-offs:
Agricultural		—			45			—			—			—
Commercial and industrial		405			228			765			1,558			1,193
Consumer		338			361			444			535			567
Real estate – commercial		869			1,357			1,523			1,217			816
Real estate – construction		—			—			—			15			—
Real estate – residential		887			1,677			1,152			1,369			1,252
Total charge-offs		2,499			3,668			3,884			4,694			3,828
Recoveries:
Agricultural		5			10			—			—			—
Commercial and industrial		61			32			68			102			60
Consumer		214			217			230			246			252
Real estate – commercial		224			89			16			58			35
Real estate – construction		—			—			—			29			—
Real estate – residential		119			104			27			106			6
Total recoveries		623			452			341			541			353
Net charge-offs		1,876			3,216			3,543			4,153			3,475
Additions charged to operations (1)		2,515			3,700			3,950			4,875			3,475
Balance at December 31	$	5,852		$	5,213		$	4,729		$	4,322		$	3,600
Ratio of net charge-offs during the period to average loans outstanding during the period		0.61	%		1.01	%		1.12	%		1.30	%		1.06	%

(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.

8

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)

	2012		2011		2010		2009		2008
Agricultural	$	140	$	55	$	181	$	124	$	242
Commercial and industrial		381		609		641		735		616
Consumer		250		197		243		306		351
Real estate – commercial		2,596		2,299		1,729		1,546		996
Real estate – construction		15		34		2		3		5
Real estate – residential		1,923		1,847		1,554		1,590		1,124
Unallocated		547		172		379		18		266
Total allowance	$	5,852	$	5,213	$	4,729	$	4,322	$	3,600

The increase in the allowance allocation to agricultural loans was due in part to weather conditions that affected certain agricultural borrowers in 2012. The decrease in the allowance allocation to commercial and industrial loans and the increase in the allocation to commercial real estate loans were based on the perceived risk level in these loan categories.

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 is sufficient at December 31, 2012.

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.

	2012			2011			2010			2009			2008
Agricultural		10	%		12	%		9	%		10	%		7	%
Commercial and industrial		22			18			18			17			18
Consumer		6			6			5			5			5
Real estate – commercial		30			33			37			37			38
Real estate – construction		—			1			—			—			1
Real estate – residential		32			30			31			31			31
Total		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)

	2012				2011				2010
Noninterest-bearing demand	$	83,810	—		$	72,707	—		$	64,828	—
Interest-bearing demand and money market deposits		136,118	0.27	%		124,575	0.43	%		108,522	0.51	%
Savings		50,252	0.12	%		45,698	0.11	%		40,534	0.20	%
Certificates of deposit		138,805	1.20	%		153,494	1.54	%		160,390	2.05	%
Total	$	408,985	0.51	%	$	396,474	0.74	%	$	374,274	1.05	%

The following table illustrates the maturities of certificates of deposits issued in denominations of $100,000 or more as of December 31, 2012.

(Dollars in thousands)

Maturing in less than 3 months	$	25,322
Maturing in 3 to 6 months		8,821
Maturing in 6 to 12 months		16,307
Maturing in more than 12 months		16,481
Total	$	66,931

9

Short-Term Borrowings

Federal funds purchased by the Registrant 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)

	2012			2011			2010
Outstanding balance at December 31	$	—		$	—		$	—
Average interest rate at December 31		—	%		—	%		—	%
Average balance during the year	$	97		$	3		$	4
Average interest rate during the year		0.14	%		0.72	%		0.26	%
Maximum month end balance during the year	$	—		$	6,120		$	165

Repurchase agreements include advances by Bank customers that are not covered by federal deposit insurance. These agreements are direct obligations of the Registrant 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)

	2012			2011			2010
Outstanding balance at December 31	$	19,572		$	16,869		$	17,249
Average interest rate at December 31		0.25	%		0.30	%		0.40	%
Average balance during the year	$	19,289		$	15,815		$	14,269
Average interest rate during the year		0.27	%		0.36	%		0.51	%
Maximum month end balance during the year	$	22,984		$	17,249		$	17,249

Advances from the Federal Home Loan Bank (“FHLB”) with original repayment terms less than one year are considered short-term borrowings for the Registrant. These advances are secured by residential real estate mortgage loans and U.S. government agency securities. The advances have maturities ranging from 3 months to 11 months from the date of issue.

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

(Dollars in thousands)

	2012			2011			2010
Outstanding balance at December 31	$	—		$	—		$	—
Average interest rate at December 31		—	%		—	%		—	%
Average balance during the year	$	—		$	1		$	—
Average interest rate during the year		—	%		0.49	%		—	%
Maximum month end balance during the year	$	—		$	—		$	—

There were no other categories of short-term borrowings whose average balance outstanding exceeded 30% of shareholders’ equity in 2012, 2011, or 2010.

Return on Equity and Assets

The following schedule presents the Registrant’s ratios for the years ended December 31:

	2012			2011			2010
Return on assets (net income divided by average total assets)		0.85	%		0.72	%		0.58	%
Return on equity (net income divided by average equity)		7.17	%		6.26	%		5.02	%
Dividend payout ratio (dividends declared per share divided by net income per share)		38.67	%		44.92	%		57.99	%
Equity to assets ratio (average equity divided by average total assets)		11.87	%		11.53	%		11.50	%

10

Item 1A. Risk Factors

The Registrant is subject to many risks and uncertainties. Although the Registrant seeks ways to manage these risks and develop programs to control risks to the extent that management can control them, the Registrant 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 Registrant faces. Additional risks and uncertainties of which the Registrant is unaware, or that it currently does not consider to be material, also may become important factors that affect the Registrant and its business. If any of these risks were to occur, the Registrant’s business, financial condition or results of operations could be materially and adversely affected.

Investments in the Registrant’s common stock involve risk.

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

• Variations in quarterly or annual operating results

• Changes in interest rates

• New developments in the banking industry

• Regulatory actions

• 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

Asset quality could be less favorable than expected.

A significant source of risk for the Registrant 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 Registrant 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. In addition, collateral appraisals that are out of date or that do not meet industry recognized standards may create the impression that a loan is adequately collateralized when in fact it is not.

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

The Registrant is affected by general economic conditions in the United States, although most directly within Michigan. A further 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.

Volatility and disruptions in the functioning of the financial markets and related liquidity issues could continue or worsen and, therefore, may adversely impact the Registrant’s business, financial condition and results of operations.

The financial markets have been experiencing volatility and disruption in recent periods. The impact of this situation, together with concerns regarding the financial strength of financial institutions, has led to distress in financial markets and issues relating to liquidity among financial institutions. As a result of concern about the stability of the financial markets generally, the resulting credit availability issues, lack of confidence in the financial sector, increased volatility in the financial markets and reduced business activity could have a material adverse effect on the Registrant’s ability to access capital and manage liquidity. If current levels of financial market volatility and disruption continue or worsen, there can be no assurance that the Registrant’s business, financial condition and results of operations will not be materially and adversely impacted. There can be no assurances that legislation, such as the Emergency Economic Stabilization Act of 2008, and actions taken by the United States Department of the Treasury and the FDIC for the purpose of stabilizing the financial markets will achieve their intended effects.

11

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

The Registrant’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 Registrant’s customers and services. Financial services and products are also constantly changing. The Registrant’s financial performance will also depend in part upon customer demand for the Registrant’s products and services and the Registrant’s ability to develop and offer competitive financial products and services.

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

The Registrant’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 Registrant’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 Dodd-Frank Act may have a significant impact on the Registrant and results of its operations.

The Dodd-Frank Act was signed into law by President Obama on July 21, 2010. The Dodd-Frank Act represents a comprehensive overhaul of the financial services industry within the United States, established the new federal Consumer Financial Protection Bureau (CFPB), and requires the CFPB and other federal agencies to implement many new and significant rules and regulations. The CFPB has issued significant new regulations that impact consumer mortgage lending and servicing. Those regulations will become effective in January 2014. In addition, the CFPB is drafting regulations that will change the disclosure requirements and forms used under the Truth in Lending Act and Real Estate Settlement and Procedures Act. Compliance with these new laws and regulations and other regulations under consideration by the CFPB will likely result in additional costs and changes in the products and/or services that are currently being offered, which could be significant and could adversely impact the Registrant’s results of operations, financial condition or liquidity.

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

As part of its business, the Registrant collects, processes and retains sensitive and confidential client and customer information on behalf of itself and other third parties. Despite the security measures the Registrant has in place for its facilities and systems, and the security measures of its third party service providers, the Registrant 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 Registrant or by its vendors, could severely damage the Registrant’s reputation, expose it to the risks of litigation and liability, disrupt the Registrant’s operations and have a material adverse effect on the Registrant’s business.

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

The Registrant 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 Registrant’s customer relationship management, general ledger, deposit, loan and other systems. While the Registrant 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 Registrant’s information systems or its customers’ information or computer systems would not damage the Registrant’s reputation, result in a loss of customer business, subject the Registrant to additional regulatory scrutiny, or expose the Registrant to civil litigation and financial liability, any of which could have a material adverse effect on the Registrant’s financial condition and results of operations.

12

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

Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a significant impact on the Registrant’s ability to conduct business. Such events could affect the stability of the Registrant’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 Registrant to incur additional expenses.

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 Registrant and the Registrant’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.

Item 2. Properties

The offices of the Bank and Insurance Agency as of February 28, 2013, were as follows:

Registrant’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.

13

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 Registrant operates its business at the main office of the Bank. The Registrant did not own any properties as of February 28, 2013. The Registrant, Bank and Insurance Agency believe that their offices are suitable and adequate for their future needs and are in good condition. The Registrant’s management believes all offices are adequately covered by property insurance.

Item 3. Legal Proceedings

As of December 31, 2012, there are no significant pending legal proceedings to which the Registrant 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 effect on the consolidated financial condition of the Registrant.

Item 4. Mine Safety Disclosures

Not applicable.

14

PART II

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

The information under the caption “Stock Information” on pages 1 and 2 of the Registrant’s Annual Report to Shareholders for the year ended December 31, 2012, is incorporated herein by reference.

On October 24, 2012, the Registrant issued 746 shares of common stock to its directors pursuant to the Directors’ Stock Purchase Plan for an aggregate cash price of $11,000. The Registrant relied on the exemption contained in Section 4(6) of the Securities Act of 1933 in connection with this sale.

ISSUER PURCHASES OF EQUITY SECURITIES

The following table provides information regarding the Registrant’s purchases of its own common stock during the quarter ended December 31, 2012.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs or Plans		Maximum Number of Shares that May Yet be Purchased Under Plans or Programs
October 1 – October 31, 2012
Employee Transactions (1)		—	$	—		—
Repurchase Program (2)		—	$	—		—		101,388
November 1 – November 30, 2012
Employee Transactions (1)		—	$	—		—
Repurchase Program (2)		5,000	$	14.90		5,000		96,388
December 1 – December 31, 2012
Employee Transactions (1)		1,444	$	14.94		—
Repurchase Program (2)		—	$	—		—		96,388
Total for Fourth Quarter ended December 31, 2012			$
Employee Transactions (1)		1,444	$	14.94		—
Repurchase Program (2)		5,000	$	14.90		5,000	$	96,388

 (1) Employee transactions are under the Registrant’s stock incentive plans. These transactions may include: (1) shares of common stock delivered in satisfaction of the exercise price and/or tax withholding obligations by holders of employee stock options who exercised options, and (2) shares submitted for cancellation to satisfy tax withholding obligations that occur upon the vesting of the restricted shares. As of December 31, 2012, all 50,000 shares authorized under this plan have been repurchased. The value of the shares delivered or withheld is determined by the applicable stock compensation plan.

(2) On July 21, 2004, the Board of Directors authorized the Registrant to repurchase 50,000 shares under a publicly announced repurchase plan. As of December 31, 2012, all 50,000 shares authorized under this plan have been repurchased. The Board of Directors authorized an additional repurchase plan on July 26, 2007 to buy back 100,000 shares. There is no stated expiration date.

15

Item 6. Selected Financial Data

The information under the caption “Selected Financial Data” on page 5 of the Registrant’s Annual Report to Shareholders for the year ended December 31, 2012, is incorporated herein by reference.

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

The information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including all subheadings, on pages 6 through 19, inclusive, of the Registrant’s Annual Report to Shareholders for the year ended December 31, 2012, is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The information under the subheading “Liquidity and Interest Rate Risk” under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 17 through 19, inclusive, of the Registrant’s Annual Report to Shareholders for the year ended December 31, 2012, is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

The Report of Independent Registered Public Accounting Firm, Consolidated Financial Statements, and Notes to Consolidated Financial Statements on pages 21 through 52, inclusive, of the Registrant’s Annual Report to Shareholders for the year ended December 31, 2012, are incorporated herein by reference.

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 Registrant’s management, including the Chief Executive Officer and principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on and as of the time of that evaluation, the Registrant’s management, including the Chief Executive Officer and principal financial officer, concluded that the Registrant’s disclosure controls and procedures were effective as of the end of the period covered by this report. There was no change in the Registrant’s internal control over financial reporting that occurred during the three months ended December 31, 2012 that has materially affected, or that is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting on page 20 of the Registrant’s Annual Report to Shareholders for the year ended December 31, 2012 is here incorporated by reference.

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 Registrant’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 1, 2013, is incorporated herein by reference.

The Registrant 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 Registrant’s website at “www.choiceone.com.“ The Registrant 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.“

16

Item 11. Executive Compensation

The information under the captions “Executive Compensation” in the Registrant’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 1, 2013, 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 Registrant’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 1, 2013, 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, 2012:

	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		36,900	$	16.95		145,393
Equity compensation plans not approved by security holders		—		—		3,849
Total		36,900	$	16.95		149,242

Equity compensation plans approved by security holders include the Amended and Restated Executive Stock Incentive Plan and the Employee Stock Purchase Plan.

Shareholders at the Registrant’s 2012 Annual Meeting approved the Stock Incentive Plan of 2012. Officers and key employees of the Registrant and its subsidiaries are eligible to receive awards under this Plan. Incentive awards may be given in the form of stock options, stock appreciation rights, restricted stock units, restricted stock, stock awards and other equity-based awards. The Plan provides for a maximum of 100,000 shares of the Registrant’s common stock, subject to adjustments in the capital structure of the Registrant. New awards for up to 100,000 shares may be made under this Plan.

The number of shares available for issuance under the Plan is equal to the number determined by the following formula: (a) for the initial plan year, 5% of the total number of shares of common stock outstanding at the time the Plan became effective; plus (b) in each subsequent plan year, an additional number of shares of common stock not to exceed 2% of the number of shares of common stock outstanding as reported in the Registrant’s Annual Report on Form 10-K for the fiscal year ending immediately before such plan year such that at the beginning of each plan year after the initial plan year there shall be available, in addition to any amount of shares remaining from the 5% authorization for the initial plan year, a minimum number of shares equal to 2% of the number of shares of common stock outstanding; plus (c) there shall be carried forward and available for additional awards certain shares that are either unused, canceled or surrendered in connection with incentive awards.

Shareholders at the 2002 Annual Meeting approved the Employee Stock Purchase Plan. This Plan allows employees to purchase the Registrant’s common stock at up to a 15% discount from the average bid price for the Registrant’s common stock. Employees who elect to participate in the plan can purchase shares of the Registrant’s common stock on a quarterly basis. The Plan provides for a maximum of 55,126 shares of the Registrant’s common stock, subject to adjustments for certain changes in the capital structure of the Registrant. Shareholders at the 2011 Annual Meeting approved an Amended and Restated Employee Stock Purchase Plan. The new plan made an additional 50,000 available for purchase providing a total of 105,126 shares under the plan. As of December 31, 2012, new issuances for up to 45,393 shares may be made under the plan.

17

Equity compensation plans not approved by security holders consist of the Directors’ Stock Purchase Plan. The Plan is designed to provide directors of the Registrant the option of receiving their fees in the Registrant’s 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 Registrant. Contributions to the Plan are made by the Registrant 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 Registrant. Participants will cease to be eligible to participate in the Plan when they cease to serve as directors of the Registrant. Shares are distributed to participants on a quarterly basis. The Plan provides for a maximum of 72,978 shares of the Registrant’s common stock, subject to adjustments for certain changes in the capital structure of the Registrant. New issuances for up to 3,849 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 Registrant’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 1, 2013, 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 Registrant’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 1, 2013, is incorporated herein by reference.

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, 2012 and 2011.
			Consolidated Statements of Income for the years ended December 31, 2012, 2011, and 2010.
			Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2012, 2011, and 2010.
			Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011, and 2010.
			Notes to Consolidated Financial Statements.
			Report of Independent Registered Public Accounting Firm dated March 27, 2013.
		The consolidated financial statements, notes to consolidated financial statements and independent auditors’ report dated March 27, 2013 listed above are incorporated by reference in Item 8 of this report from the Registrant’s Annual Report to Shareholders for the year ended December 31, 2012.
	(2)	Financial Statement Schedules. None.

(b) Exhibits. The following exhibits are filed as part of this report:

18

Exhibit	Document
3.1	Amended and Restated Articles of Incorporation of the Registrant. Previously filed as an exhibit to the Registrant’s Form 10-Q Quarterly Report for the quarter ended June 30, 2008. Here incorporated by reference.
3.2	Bylaws of the Registrant as currently in effect and any amendments thereto. Previously filed as an exhibit to the Registrant’s Form 10-K Annual Report for the year ended December 31, 2008. 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 the Registrant’s Form 10-K Annual Report for the year ended December 31, 2007. Here incorporated by reference.
10.1	Employment Agreement with James A. Bosserd. (1)
10.2	Stock Incentive Plan of 2012. (1) Previously filed as an appendix to the Registrant’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 the Registrant’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 the Registrant’s Form 10-K Annual Report for the year ended December 31, 2011. Here incorporated by reference.
10.5	Former Valley Ridge Executive Employee Salary Continuation Agreements, as amended. (1) Previously filed as an exhibit to the Registrant’s Form 10-K Annual Report for the year ended December 31, 2007. Here incorporated by reference.
10.6	Former Valley Ridge Directors’ Deferred Compensation Plan and Agreement. (1) Previously filed as an exhibit to the Registrant’s Form 10-K Annual Report for the year ended December 31, 2006. Here incorporated by reference.
13	Annual Report to Shareholders for the year ended December 31, 2012.
21	Subsidiaries of the Registrant.
23	Consent of Independent Registered Public Accounting Firm for fiscal years ended December 31, 2012, 2011, and 2010.
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.
	*As provided in Rule 406T of Regulation S-T, this information shall not be deemed filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Exchange Act or otherwise subject to liability under those sections.

(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.

19

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 27, 2013
	James A. Bosserd
	President and 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	President and Chief Executive Officer and Director (Principal Executive Officer)	March 27, 2013
James A. Bosserd
/s/ Thomas L. Lampen	Treasurer (Principal Financial and Accounting Officer)	March 27, 2013
Thomas L. Lampen
*/s/ Stuart Goodfellow	Chairman of the Board and Director	March 27, 2013
Stuart Goodfellow
*/s/ Jerome Arends	Director	March 27, 2013
Jerome Arends
*/s/ Frank G. Berris	Director	March 27, 2013
Frank G. Berris
*/s/ K. Timothy Bull	Director	March 27, 2013
K. Timothy Bull
*/s/ William F. Cutler, Jr.	Director	March 27, 2013
William F. Cutler, Jr.
*/s/ Lewis G. Emmons	Director	March 27, 2013
Lewis G. Emmons
*/s/ Gary Gust	Director	March 27, 2013
Gary Gust
*/s/ Paul L. Johnson	Director	March 27, 2013
Paul L. Johnson
*/s/ Dennis C. Nelson	Director	March 27, 2013
Dennis C. Nelson
*/s/ Nels W. Nyblad	Director	March 27, 2013
Nels W. Nyblad

20

*/s/ Roxanne M. Page	Director	March 27, 2013
Roxanne M. Page
*/s/ Donald VanSingel	Director	March 27, 2013
Donald VanSingel

*By	/s/ Thomas L. Lampen
	Attorney-in-Fact

21

EXHIBIT INDEX

Exhibit	Document
3.1	Amended and Restated Articles of Incorporation of the Registrant. Previously filed as an exhibit to the Registrant’s Form 10-Q Quarterly Report for the quarter ended June 30, 2008. Here incorporated by reference.
3.2	Bylaws of the Registrant as currently in effect and any amendments thereto. Previously filed as an exhibit to the Registrant’s Form 10-K Annual Report for the year ended December 31, 2008. 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 the Registrant’s Form 10-K Annual Report for the year ended December 31, 2007. Here incorporated by reference.
10.1	Employment Agreement with James A. Bosserd. (1)
10.2	Stock Incentive Plan of 2012. (1) Previously filed as an appendix to the Registrant’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 the Registrant’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 the Registrant’s Form 10-K Annual Report for the year ended December 31, 2011. Here incorporated by reference.
10.5	Former Valley Ridge Executive Employee Salary Continuation Agreements, as amended. (1) Previously filed as an exhibit to the Registrant’s Form 10-K Annual Report for the year ended December 31, 2007. Here incorporated by reference.
10.6	Former Valley Ridge Directors’ Deferred Compensation Plan and Agreement. (1) Previously filed as an exhibit to the Registrant’s Form 10-K Annual Report for the year ended December 31, 2006. Here incorporated by reference.
13	Annual Report to Shareholders for the year ended December 31, 2012.
21	Subsidiaries of the Registrant.
23	Consent of Independent Registered Public Accounting Firm for fiscal years ended December 31, 2012, 2011, and 2010.
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.
	*As provided in Rule 406T of Regulation S-T, this information shall not be deemed filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Exchange Act or otherwise subject to liability under those sections.

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

EX-10.1

Choiceone  Financial Services Inc; 10-K  

EXHIBIT 10.1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

                    THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT between CHOICEONE FINANCIAL SERVICES, INC., a Michigan Corporation (the "Company"), and JAMES A. BOSSERD, an individual residing in Sparta, Michigan (the "Employee") is dated November 1, 2006 (the "Effective Date") and completely amends and restates that employment agreement between the parties dated March 23, 2001.

                    WHEREAS, the Company has retained the services of the Employee as a senior executive officer, and the Employee has accepted such employment; and

                    WHEREAS, the parties have operated in an employment relationship for several years; and

                    WHEREAS, the parties desire to enter into this Agreement, which is intended to set forth in its entirety the terms and conditions of the employment relationship between the Company and the Employee; and

                    WHEREAS, the Board of Directors of the Company has approved this Agreement and authorized the Chairman of the Board to enter into this Agreement with the Employee;

                    THEREFORE, THE PARTIES AGREE as follows:

          1.          Employment. The Employee is employed to render such executive services to the Company as may from time to time be reasonably directed by the Company's Board of Directors. Among his other duties, it is contemplated that he will serve as the President and Chief Executive Officer of the Company and the Company's subsidiary, ChoiceOne Bank (the "Subsidiary Bank"). Employee will have primary responsibility for the operation of the Company and the Subsidiary Bank. Employee shall devote his full time, best efforts and skill to the affairs of the Company. Employee will have no outside interests, business or otherwise, which interfere or conflict with his duties under this Agreement.

          2.          Compensation. The Company agrees to pay the Employee during the Term (defined below) of this Agreement a base salary in the sum of at least One Hundred Sixty Thousand Dollars ($160,000) per annum (the "Minimum Salary"), provided, however, that any salary (other than bonuses provided for in Section 4 of this Agreement) paid to the Employee by any subsidiary of the Company shall be deemed to reduce the salary paid to the Employee pursuant to this Section 2. The salary provided in this Section shall be payable in accordance with the periodic payment procedures for all employees of the Company. The Employee's salary shall be reviewed by the Personnel and Benefits Committee of the Board of Directors not less often than annually beginning on the date one year after the Effective Date (the "First Anniversary Date") and may be increased (but not decreased) from time to time in such amounts as the Board in its discretion may determine; any such increased salary shall become the new Minimum Salary. The Employee's salary shall be subject to the usual payroll taxes and withholding required with respect to compensation paid by a corporation to an employee.

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          3.          Directors' Fees. The Employee shall be paid the regular directors' fees for attending meetings of the Board of Directors of the Company, but not meetings of committees of the Board. The Employee shall also be paid the regular directors' fees for attending meetings of the Board of Directors of the Subsidiary Bank, but not meetings of committees thereof.

          4.          Discretionary Bonuses. In addition to the salary provided for in Section 2, the Employee shall be entitled to participate in discretionary bonuses as may be authorized and declared from time to time by the Board of Directors of the Company or the Subsidiary Bank. No other compensation provided for in this Agreement shall be deemed a substitute for the Employee's right to participate in such bonuses when and as declared by the Board of Directors.

          5.          Retirement, Employee Benefit Plans, and Fringe Benefits.

          (a)          The Employee shall be entitled to participate in any plan of the Company or the Subsidiary Bank relating to pension, thrift, deferred profit-sharing, group life insurance, medical coverage, education, or other retirement or employee benefits that the Company or the Subsidiary Bank may adopt for the benefit of its executive employees.

          (b)          The Employee shall be eligible to participate in any other fringe benefits which may be, or may later become, applicable to the Company's or the Subsidiary Bank's executive or salaried employees, including with respect to the Employee, but not limited to, the following: health plans; insurance plans; an automobile allowance of Six Hundred Dollars ($600.00) per month; reimbursement for reasonable travel, entertainment and other expenses in rendering services for, on behalf of or for the benefit of the Company or the Subsidiary Bank; the payment of reasonable expenses for attending annual and periodic meetings of trade associations; and any other benefits which are commensurate with the responsibilities and functions to be performed by the Employee under this Agreement.

          6.          Term. The initial term of this Agreement shall be a period of three years commencing on the Effective Date, subject to earlier termination as provided in this Agreement. Beginning on the first anniversary of the Effective Date, and on each anniversary thereafter, the term of this Agreement shall be extended for a period of one year in addition to the then-remaining term, unless the Company has given notice to the Employee in writing at least 90 days prior to such anniversary that the term of this Agreement shall not be extended further; if such notice is given, this Agreement will expire at the end of the then-remaining term. References in this Agreement to the "Term" of this Agreement shall refer to both such initial term and such extended terms.

          7.          Non-Competition. In exchange for the promises made by Company in this Agreement, Employee agrees that, during the Non-Competition Period (defined below), he will not engage in any Prohibited Activity, whether as an employee, agent, consultant, representative, joint-venturer, owner or otherwise. The "Non-Competition Period" shall begin with the first day of this Agreement and continue as follows:

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In the event that the Employee's employment is terminated:		then the Non-Competition Period shall last until:
(a)	by the Company for Cause,	the expiration of the then remaining Term.
(b)	by the Employee prior to a Change in Control of the Company for any reason,	the expiration of the then remaining Term.
(c)	by the Employee after a Change in Control of the Company without a Good Reason,	the expiration of the then remaining Term.
(d)	by the Company or the Employee for any other reason,	the Employee's last day of employment for the Company.

"Prohibited Activity" means directly or indirectly (a) soliciting or offering services or products competitive to those offered by or through the Company or any of its affiliates to any Customer; or (b) inducing any employee of the Company or any of its affiliates to leave his or her employment. "Customer" means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization or other entity who, at any time while the Employee was employed by the Company, (a) was a customer of the Company; or (b) was identified by the Company as a potential customer.

          8.          Standards. The Employee shall perform his duties under this Agreement in accordance with reasonable standards established from time to time by the Board of Directors of the Company.

          9.          Vacations. The Employee shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment under this Agreement, all such voluntary absences to count as vacation or personal time, provided that:

          (a)          The Employee shall be entitled to twenty-six (26) personal and vacation days each year. Other than the length of vacation and personal time awarded, the Company's Vacation/Personal Days Policy will apply to the Employee.

          (b)          The timing of vacations shall be scheduled in a reasonable, mutually agreeable manner.

          10.          Termination of Employment.

          (a)          The Employee's employment under this Agreement may be terminated at any time by the Board of Directors of the Company for "Cause" (as defined below). The Employee shall have no right to receive severance pay or any other remuneration whatsoever under this Agreement for any period after voluntary termination without "Good Reason" (as defined below) or termination for Cause.

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For purposes of this Agreement, termination for "Cause" shall mean termination of employment for only the following reasons:

          (i)          Willful misconduct materially adverse to the Company or the Subsidiary Bank;

          (ii)          Willful breach of a fiduciary duty involving personal profit;

          (iii)          Willful violation of any law, rule, or regulation materially relating to the operation of the Company or the Subsidiary Bank;

          (iv)          The order of any court or supervising agency with jurisdiction over the affairs of the Company or the Subsidiary Bank; or

          (v)          The Employee's intentional violation of any material provision of this Agreement, if Employee fails to cure the breach within a reasonable time after written notice from the Company's Board of Directors informing him of the breach.

                    For purposes of this Agreement, no act or failure to act on the Employee's behalf shall be considered "willful" or "intentional" unless done, or admitted to be done, by him not in good faith and unless he knew or should have known that his action or omission was not in, or was opposed to, the best interests of the Company or the Subsidiary Bank; provided, that any act or omission to act on the Employee's behalf in reliance upon an opinion of counsel to the Company shall not be deemed to be willful or intentional. The Employee shall not be deemed to have been terminated for cause unless or until there shall have been delivered to him a copy of a certification of a majority of the non-officer members of the Company Board of Directors finding that, in the good faith opinion of such majority, the employee was guilty of conduct deemed to be cause and specifying the details thereof, after reasonable notice to the Employee and an opportunity for him, together with his counsel, to be heard before such majority. No such determination of the Board shall affect Employee's right to determination through the legal system of whether there was in fact cause for termination.

          (b)          The Employee may terminate his employment at any time upon ninety (90) days' written notice to the Company or upon such shorter period as may be agreed upon between the Employee and the Board of Directors of the Company. In the event of such termination without Good Reason, the Company shall be obligated only to continue to pay the Employee's salary and provide the other compensation and benefits provided by this Agreement up to the date of the termination.

          (c)          The Employee may terminate his employment with the Company for "Good Reason" after a Change in Control of the Company, which shall mean the occurrence of any of the following events without the Employee's consent:

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          (i)          A material demotion or other adverse change made by the Company in the Employee's status or position as a senior executive officer of the Company or the Subsidiary Bank;

          (ii)          The assignment to the Employee of any duties or responsibilities which are materially inconsistent with such status or position, or a material reduction in the duties and responsibilities previously exercised by the Employee;

          (iii)          The imposition of any requirement, whether by relocation of the Company's offices or otherwise, that the Employee perform his normal day-to-day duties and responsibilities outside of an area within a thirty (30) mile radius of Sparta, Michigan;

          (iv)          Failure of the Company to elect the Employee as Chief Executive Officer of the Company or as Chief Executive Officer and a director of the Subsidiary Bank; or

          (v)          Material breach by the Company of any material provision of this Agreement, if the Company fails to cure the breach within a reasonable time after Employee has given the Company's Board of Directors written notice of the breach.

Before terminating his employment for Good Reason pursuant to this Section 9(c), the Employee shall give written notice to the Company's Board of Directors of the act or omission constituting Good Reason, within 60 days after the occurrence of such act or omission. If the Board of Directors promptly corrects such act or omission, and takes reasonable measures to prevent its recurrence, Employee shall not be entitled to terminate the employment with Good Reason. Otherwise, Employee may terminate the employment for Good Reason within 60 days after such notice to the Board of Directors. If Employee fails to give notice as provided above, Employee may not terminate the Employment for Good Reason on account of such act or omission.

          (d)          If the Employee's employment is terminated by the Employee for Good Reason after a Change in Control of the Company or by the Company without Cause, the Employee shall be entitled to continuation of his salary (provided in Section 2) and benefits (provided in Section 5) until the end of the term of this Agreement as if termination of his employment had not occurred.

                    If the termination by the Company occurs prior to a Change in Control of the Company, then Employee must use his reasonable efforts to procure new employment. Any new compensation and/or benefits Employee receives from such

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new employment, including self-employment, shall reduce the payments or benefit obligations due under this Section.

                    If the termination by the Company occurs after a Change in Control of the Company, then payment of salary and continuation of benefits as provided in this Section shall continue regardless of whether the Employee finds new employment following such termination, and without reduction due to any earnings and/or benefits received by Employee from any other employment or self employment. If continuation of a specific benefit is not possible under applicable law, Employee shall be provided with an equal substitute benefit or, if that is not possible, with cash in lieu of such benefit; such substitute benefit or cash shall be structured or supplemented as necessary to place Employee in the same economic position, after all applicable taxes, as if the benefit had been continued.

                    Notwithstanding the preceding, if, at the time the payments under this Section would commence, Employee is a "specified employee" within the meaning of IRC Regulation Section 1.409A-1(i), no payment may be made under this Section before the date that is six months after Employee's separation from service. Payments to which Employee would otherwise have been entitled under this Section during that six months will be accumulated and paid on the first day of the seventh month following the date of Employee's separation from service.

                    If any payment to or benefit continuation for the Employee pursuant to Agreement constitutes a "parachute payment" under Internal Revenue Code Section 280(G) and, when added to all other payments to the Employee that are "parachute payments" would result in "excess parachute payments" to Employee (as defined under Internal Revenue Code Section 280(G)) being nondeductible by the Corporation under Internal Revenue Code Section 280(G), then the payments and benefit continuation provided for under this Section shall be reduced (but not below 0) or delayed until there are no such excess parachute payments. The amount of any reduction or delay shall be determined by the Company's certified public accountants, in consultation with the Employee, and to the extent possible Employee shall have the option to choose which payments or benefits shall be reduced or delayed.

          (e)          In the event of the death of the Employee while still employed under this Agreement, the Employee's estate or beneficiary shall not be entitled to salary and benefit continuation under this Section, but shall be entitled to receive the salary due the Employee through the last day of the calendar month in which his death shall have occurred, plus such other benefits as shall have accrued under this Agreement up to the date of death.

          (f)          A Change in Control shall be deemed to have occurred as of the first day that there is a change in the ownership, the effective control, or the ownership of

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a substantial portion of the assets of the Company within the meaning of IRC Proposed Regulation Section 1.409A-3(g)(5), as amended.

                    The parties agree that the strategic merger of equals between ChoiceOne Financial Services, Inc. and Valley Ridge Financial Corp. does not constitute a Change in Control under this Agreement and does not trigger any payments required by this Section and the Employee hereby waives any right to any such payment as a result of that transaction.

          (g)          If the Employee shall become and remain disabled to the extent that he is unable to perform his duties under this Agreement for a continuous period of six months or more, the Board of Directors of the Company may terminate Employee's employment without salary or benefit continuation under Section 9(d). For purposes of this Agreement, the Employee shall be considered disabled if he is prevented from performing his essential duties under this Agreement by (i) accidental bodily injury; (ii) sickness; (iii) mental illness; or (iv) substance abuse.

          11.          Attorney Fees. In the event that the Company exercises its right of termination for Cause, but it is determined by a court of competent jurisdiction or by an arbitrator that cause did not exist for such termination, or if in any event it is determined by any such court or arbitrator that the Company or the Subsidiary Bank has failed to make timely payment of any amounts owed to the Employee under this Agreement, the Employee shall be entitled to reimbursement for all reasonable costs, including attorneys' fees, incurred in challenging such termination or collecting such amounts. Such reimbursement shall be in addition to any rights to which the Employee is otherwise entitled under this Agreement.

          12.          No Assignment.

          (a)          This Agreement is personal to each of the parties hereto, and neither party may assign or delegate any of its rights or obligations hereunder without first obtaining the written consent of the other party; provided, however, that the Company may assign this Agreement to any subsidiary of the Company and shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company or the Subsidiary Bank, by an assumption agreement in form and substance satisfactory to the Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Failure of the Company to obtain such an assumption agreement prior to the effectiveness of any such succession or assignment shall be a breach of this Agreement and shall entitle the Employee to compensation from the Company in the same amount and on the same terms as the compensation pursuant to Section 9(d). For purposes of implementing the provisions of this Section 11(a), the date on which any such succession becomes effective shall be deemed the date of termination.

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          (b)          This Agreement and all rights of the Employee hereunder shall inure to the benefit of and be enforceable by the Employee' s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Employee should die while any amounts would still be payable to the Employee under this Agreement if the Employee had continued to live (including but not limited to salary and benefit continuation to which Employee becomes conditioned under Section 9(d) as a result of a covered termination of the employment before Employee' s death), all such amounts, unless otherwise provided in this Agreement, shall be paid in accordance with the terms of this Agreement to the Employee' s devisee, legatee or other designee or, if there is no such designee, to the Employee' s estate.

          13.          Other Contracts. All other prior agreements regarding conditions of employment, whether written or oral, are hereby superseded by this Agreement.

          14.          Notices. Any notices under this Agreement shall be deemed given when in writing and delivered personally or sent by certified mail, postage prepaid, to the last known address of the party to whom notice is given. If sent by mail, notice shall be deemed given on the second day after mailing.

          15.          Amendments. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties, except as herein otherwise provided.

          16.          Paragraph Headings. The paragraph headings used in this Agreement are included solely for convenience and shall not affect or be used in connection with the interpretation of this Agreement.

          17.          Severability. The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

          18.          Governing Law. Agreement shall be governed by the laws of the United States of America and the State of Michigan, without regard to conflict of laws principles.

          19.          Remedies/Arbitration. Any controversy or claim arising out of, or relating to this Agreement, or the breach thereof, shall be settled by arbitration before a single arbitrator in a hearing to be held in Kent County, Michigan, in accordance with the then existing rules of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereof.

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                    IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written.

CHOICEONE FINANCIAL SERVICES, INC.
By	/s/ Jon E. Pike
	Jon E. Pike, Chairman of the Board
	Company
	/s/ James A. Bosserd
	James A. Bosserd
	Employee

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EX-13

ChoiceOne Fiancial Services Inc. ,10-K

Exhibit 13

ChoiceOne Financial Services, Inc.

2012

Annual Report to Shareholders

ChoiceOne Financial Services, Inc.

2012 Annual Report to Shareholders

Contents
To Our Shareholders	3
About ChoiceOne Financial Services, Inc	3
Stock Information	3
Selected Financial Data	5
Management’s Discussion and Analysis of Financial Condition and Results of Operations	6
Management’s Report on Internal Control Over Financial Reporting	20
Report of Independent Registered Public Accounting Firm	21
Consolidated Financial Statements	22
Notes to Consolidated Financial Statements	27
Corporate and Shareholder Information	53
Directors and Officers	54

2

ChoiceOne Financial Services, Inc.

To Our Shareholders

This 2012 Annual Report to Shareholders contains our audited financial statements, detailed financial review and all of the information that regulations of the Securities and Exchange Commission (the “SEC”) require to be presented in annual reports to shareholders. For legal purposes, this is the ChoiceOne Financial Services, Inc. 2012 Annual Report to Shareholders. Although attached to our proxy statement, this report is not part of our proxy statement, is not considered to be soliciting material and is not considered to be filed with the SEC except to the extent that it is expressly incorporated by reference in a document filed with the SEC. Shareholders who would like to receive even more detailed information than that contained in this 2012 Annual Report to Shareholders are invited to request our Annual Report on Form 10-K.

Our Annual Report on Form 10-K for the year ended December 31, 2012, including the financial statements and financial statement schedules, will be provided to any shareholder, without charge, upon written request to Mr. Thomas Lampen, Treasurer, ChoiceOne Financial Services, Inc., 109 East Division Street, Sparta, Michigan 49345.

About ChoiceOne Financial Services, Inc.

ChoiceOne Financial Services, Inc. is a single-bank holding company. Its principal banking subsidiary, ChoiceOne Bank (Sparta, Michigan), primarily serves communities in portions of Kent, Muskegon, Newaygo, and Ottawa counties in Michigan where ChoiceOne’s offices are located and the areas immediately surrounding those communities. Currently ChoiceOne serves those markets through thirteen full-service offices. ChoiceOne Insurance Agencies, Inc. is a wholly-owned subsidiary of ChoiceOne Bank and sells insurance and investment products.

ChoiceOne’s business is primarily concentrated in a single industry segment – banking. ChoiceOne 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. ChoiceOne Bank’s consumer loan department makes direct loans to consumers and purchasers of residential property.

The principal source of revenue for ChoiceOne is interest and fees on loans. On a consolidated basis, interest and fees on loans accounted for 62%, 67%, and 69% of total revenues in 2012, 2011, and 2010, respectively. Interest from securities accounted for 12%, 11%, and 10% of total revenues in 2012, 2011, and 2010, respectively.

Stock Information

Several brokers trade ChoiceOne’s common shares in the over-the-counter bulletin board market. 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.OB’ 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:

	2012				2011
		Low		High		Low		High
First Quarter	$	11.25	$	14.14	$	11.00	$	20.00
Second Quarter		13.01		15.38		10.50		13.00
Third Quarter		13.50		16.50		10.60		12.75
Fourth Quarter		14.30		15.50		10.26		12.50

The prices listed above are over-the-counter market quotations reported to ChoiceOne by its market makers listed in this annual report. 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 28, 2013, the average bid price for shares of ChoiceOne common stock was $16.05.

As of February 28, 2013, there were 3,299,120 shares of ChoiceOne Financial Services, Inc. common stock issued and outstanding. As of February 28, 2013, there were 777 shareholders of record of ChoiceOne Financial Services, Inc. common stock.

3

The following table summarizes cash dividends declared per share of common stock during 2012 and 2011:

	2012		2011
First Quarter	$	0.12	$	0.12
Second Quarter		0.12		0.12
Third Quarter		0.13		0.12
Fourth Quarter		0.13		0.12
Total	$	0.50	$	0.48

ChoiceOne’s principal source of funds to pay cash dividends is the earnings and dividends paid by ChoiceOne Bank. ChoiceOne Bank is restricted in its ability to pay cash dividends under current banking regulations. See Note 21 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 2013, although the amount of the quarterly dividends will be dependent on market conditions and ChoiceOne’s requirements for cash and capital, among other things.

4

ChoiceOne Financial Services, Inc.

Selected Financial Data

(Dollars in thousands, except per share data)

	2012			2011			2010			2009			2008
For the year
Net interest income	$	17,675		$	17,922		$	16,995		$	15,996		$	15,331
Provision for loan losses		2,515			3,700			3,950			4,875			3,475
Noninterest income		6,889			6,139			5,569			5,421			4,083
Noninterest expense		16,444			15,788			15,249			15,259			14,711
Income before income taxes		5,605			4,573			3,365			1,283			1,228
Income tax expense/(benefit)		1,343			1,060			654			(195	)		(207	)
Net income		4,262			3,513			2,711			1,478			1,435
Cash dividends declared		1,648			1,578			1,572			1,563			2,202
Per share
Basic earnings	$	1.29		$	1.07		$	0.83		$	0.45		$	0.44
Diluted earnings		1.29			1.07			0.83			0.45			0.44
Cash dividends declared		0.50			0.48			0.48			0.48			0.68
Shareholders’ equity (at year end)		18.35			17.58			16.56			16.21			16.08
Average for the year
Securities	$	129,337		$	104,986		$	86,437		$	76,934		$	85,086
Gross loans		307,639			317,271			315,031			320,328			326,420
Deposits		408,785			396,474			374,274			347,007			347,190
Federal Home Loan Bank advances		6,130			8,461			16,477			28,857			38,803
Shareholders’ equity		59,431			56,098			54,012			53,115			53,411
Assets		500,636			486,478			469,484			453,876			465,741
At year end
Securities	$	138,242		$	118,025		$	94,979		$	78,987		$	81,941
Gross loans		311,468			320,127			316,940			322,716			325,977
Deposits		424,199			403,365			389,884			365,010			346,998
Federal Home Loan Bank advances		420			8,447			8,473			21,980			39,957
Shareholders’ equity		60,506			57,904			54,313			52,926			52,185
Assets		508,913			495,914			480,524			465,915			463,551
Selected financial ratios
Return on average assets		0.85	%		0.72	%		0.58	%		0.33	%		0.31	%
Return on average shareholders’ equity		7.17			6.26			5.02			2.78			2.69
Cash dividend payout as a percentage of net income		38.67			44.92			57.99			105.75			153.45
Shareholders’ equity to assets (at year end)		11.89			11.68			11.30			11.36			11.26

5

ChoiceOne Financial Services, Inc.

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 Financial Services, Inc. (“ChoiceOne” or the “Company”), and its wholly-owned subsidiaries, ChoiceOne Bank (the “Bank”) and ChoiceOne Insurance Agencies, Inc. (the “Insurance Agency”). This discussion should be read in conjunction with the consolidated financial statements and related footnotes.

Forward-Looking Statements

This discussion and other sections of this annual 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 itself. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “may,” “could,” 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 and loan servicing rights, and the fair value of investment securities (including whether any impairment on any investment security is temporary or other than temporary) 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. 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 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 discussed in Item 1A of the Company’s Annual Report on Form 10-K; changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking laws and regulations; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of pending and future litigation and contingencies; trends in customer behavior as well as their abilities to repay loans; changes in the local and national economies; changes in market conditions; the level and timing of asset growth; various other local and global uncertainties such as acts of terrorism and military actions; and current uncertainties and fluctuations in the financial markets and stocks of financial services providers due to concerns about capital and credit availability and concerns about the Michigan economy in particular. These are representative of the risk factors that could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.

Critical Accounting Policies And Estimates

The purpose of this section of the 2012 Annual Report to Shareholders is to provide a narrative discussion about the Company’s financial condition and results of operations during 2012. Management’s discussion and analysis of financial condition and results of operations as well as disclosures found elsewhere in the 2012 Annual Report to Shareholders 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, allowance for loan losses and loan servicing rights. Actual results could differ from those estimates.

Securities

Securities available for sale may be sold prior to maturity due to changes in interest rate, 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.

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 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.

6

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.

Management performed its annual review of goodwill as of June 30, 2012. ChoiceOne engaged an outside consulting firm to assist in the goodwill impairment analysis. The following steps were used in the valuation: determination of the reporting unit, determination of the appropriate standard of value, determination of the appropriate level of value, calculation of fair value, and comparison of the fair value computed to the equity carrying value. It was determined that the relevant reporting unit to be valued was ChoiceOne Bank. The standard of value used in the valuation was fair value as determined by generally accepted accounting principles. The appropriate level of value was determined to be the controlling interest level. The appraisal methodology used to calculate the fair value included the following valuation approaches:

Income Approach: A discounted cash flow value was calculated based on earnings capacity. The discount rate used for the calculation was 12.50%. The growth assumption for assets was 1.8% for the first year and 2.0% in subsequent years. In addition, it was assumed that cost savings of 20% of noninterest expense would occur as a result of synergies and cost reductions from a change in control.

Market Approach: The analysis was based on price-to-earnings multiples, price-to-tangible book value ratios, and core deposit premiums for selected bank sale transactions.

The Asset Approach was also an approach reviewed, but it was not used in determining the fair value since it did not render a control level indication of value. The results from the valuation approaches were used to calculate an estimate of the fair value of ChoiceOne’s equity. The fair value was compared to the carrying value of equity to determine whether the Step 1 test under generally accepted accounting principles that govern the valuation of goodwill was passed. The goodwill analysis determined that the fair value of ChoiceOne’s equity exceeded the carrying value by 10.8%. Based on this assessment, management believed that there was no indication of goodwill impairment.

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, 2012, management determined that a valuation allowance of $89,000 was necessary.

7

RESULTS OF OPERATIONS

Summary

(Dollars in thousands)	Year ended December 31
	2012			2011			2010
Net interest income	$	17,675		$	17,922		$	16,995
Provision for loan losses		(2,515	)		(3,700	)		(3,950	)
Noninterest income		6,889			6,139			5,569
Noninterest expense		(16,444	)		(15,788	)		(15,249	)
Income tax expense		(1,343	)		(1,060	)		(654	)
Net income	$	4,262		$	3,513		$	2,711

	2012			2011			2010
Return on average assets		0.85	%		0.72	%		0.58	%
Return on average equity		7.17	%		6.26	%		5.02	%

Net income for 2012 was $4,262,000, which represented a $749,000 or 21% increase from 2011. The growth in net income resulted from an increase in noninterest income and a decrease in the provision for loan losses, which was partially offset by a decrease in net interest income and an increase in noninterest expense in 2012 compared to 2011. The increase in noninterest income was due primarily to increases in gains on sales of loans and gains on sales of securities. The decrease in the provision for loan losses resulted from lower net charge-offs in 2012 than in 2011. The decrease in net interest income was primarily due to a lower average rate on average earning assets resulting in a decrease in ChoiceOne’s net interest spread in 2012 compared to the prior year. The increase in noninterest expense was due to higher salaries and benefits, data processing, professional fees, and other noninterest expense as well as smaller increases in other expense categories in 2012 compared to the prior year offset by decreases in supplies and postage and FDIC insurance expenses.

Net income for 2011 was $3,513,000, which represented an $802,000 or 30% increase from 2010. The growth in net income resulted from increases in net interest income and noninterest income and a decrease in the provision for loan losses, which was partially offset by an increase in noninterest expense in 2011 compared to 2010. The increase in net interest income was due to growth in average earning assets and an increase in ChoiceOne’s net interest spread in 2011 compared to the prior year. The expansion in noninterest income was due to growth in customer service charges and other noninterest income and an improvement in gains (losses) on sales of other assets in 2011 compared to 2010. The decrease in the provision for loan losses resulted from lower net charge-offs in 2011 than in 2010 and a $1.8 million reduction in nonperforming loans from December 31, 2010 to December 31, 2011. The increase in noninterest expense was due to higher salaries and benefits, professional fees, and other noninterest expense as well as smaller increases in other expense categories in 2011 compared to the prior year.

Dividends

Cash dividends of $1,648,000 or $0.50 per common share were declared in 2012, compared to $1,578,000 or $0.48 per common share in 2011 and $1,572,000 or $0.48 per common share in 2010. Dividends declared were $0.13 per share for the last two quarters and $0.12 per share for the first two quarters in 2012. Dividends declared were $0.12 for each quarter in 2011 and 2010. The dividend yield on ChoiceOne’s common stock was 3.53% in 2012, compared to 4.05% in 2011 and 4.79% in 2010. The cash dividend payout as a percentage of net income was 39% in 2012, compared to 45% in 2011 and 58% in 2010.

ChoiceOne’s principal source of funds to pay cash dividends is the earnings of the Bank. The availability of these earnings is dependent upon the capital needs, regulatory constraints and other factors involving the Bank. Regulatory constraints include the maintenance of minimum capital ratios and limits based on net income and retained earnings of the Bank for the past three years. ChoiceOne expects to pay quarterly cash dividends in 2013 to shareholders based on the actual earnings of the Bank, although the amount of the quarterly dividends will be dependent on market conditions and ChoiceOne’s requirements for cash and capital, among other things.

8

Table 1 – Average Balances and Tax-Equivalent Interest Rates

(Dollars in thousands)

	Year ended December 31
	2012								2011								2010
	Average Balance		Interest			Average Rate			Average Balance		Interest			Average Rate			Average Balance		Interest			Average Rate
Assets
Loans (1) (2)	$	307,639	$	16,891			5.49	%	$	317,271	$	18,417			5.80	%	$	315,031	$	19,103			6.06	%
Taxable securities (3)		90,783		1,958			2.16			71,871		1,789			2.49			50,997		1,460			2.86
Tax-exempt securities (1)		38,554		2,053			5.32			33,115		1,913			5.78			35,440		2,110			5.95
Other		10,021		25			0.25			8,426		20			0.25			6,498		22			0.34
Interest-earning assets		446,997		20,927			4.68			430,683		22,139			5.14			407,966		22,695			5.56
Noninterest-earning assets (4)		53,639								55,795								61,518
Total assets	$	500,636							$	486,478							$	469,484
Liabilities and Shareholders’ Equity
Interest-bearing demand deposits	$	136,118		364			0.27	%	$	124,575		541			0.43	%	$	108,522		553			0.51	%
Savings deposits		50,252		59			0.12			45,698		51			0.11			40,534		80			0.20
Certificates of deposit		138,805		1,664			1.20			153,494		2,364			1.54			160,390		3,281			2.05
Advances from FHLB		6,130		271			4.42			8,461		307			3.63			16,477		748			4.54
Other		22,282		186			0.83			21,179		290			1.37			19,273		304			1.58
Interest-bearing liabilities		353,587		2,544			0.72			353,407		3,553			1.01			345,196		4,966			1.44
Demand deposits		83,810								72,707								64,828
Other noninterest-bearing liabilities		3,808								4,266								5,448
Total liabilities		441,205								430,380								415,472
Shareholders’ equity		59,431								56,098								54,012
Total liabilities and shareholders’ equity	$	500,636							$	486,478							$	469,484
Net interest income (tax-equivalent basis) – interest spread				18,383			3.96	%				18,586			4.13	%				17,729			4.12	%
Tax-equivalent adjustment (1)				(708	)							(664	)							(734	)
Net interest income			$	17,375							$	17,922							$	16,995
Net interest income as a percentage of earning assets (tax-equivalent basis)							4.11	%							4.32	%							4.35	%

(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 $885,000, $831,000, and $751,000 in 2012, 2011, and 2010, 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 $4,364,000, $6,256,000, and $10,286,000 in 2012, 2011, and 2010, respectively.

Net Interest Income

As shown in Tables 1 and 2, tax-equivalent net interest income decreased $203,000 in 2012 compared to 2011. The decrease was attributed to a 46 basis point decline in the average rate on interest bearing assets offset by a 29 basis point decline in average interest bearing liabilities. The effect of the reduction in ChoiceOne’s net interest spread was partially offset by growth of $16.3 million in average interest-earning assets in 2012 compared to 2011.

9

The average balance of loans increased $9.6 million in 2012 compared to 2011. Combined with a 31 basis point decrease in the average rate earned on loans, interest income on loans declined $1,526,000 in 2012 compared to the prior year. The average balance of total securities increased by $24.4 million in 2012 compared to 2011. This growth in the average balance, partially offset by a lower average rate earned on securities, caused interest income from securities to increase $169,000 in 2012 compared to the prior year. A small increase in the average balance of other interest-earning assets resulted in an increase of $5,000 in 2012 compared to 2011. As average loans experienced a decline in 2012 compared to 2011, growth in securities was ChoiceOne’s method to achieve growth in earning assets in 2012.

The average balance of interest-bearing demand deposits increased $11.5 million in 2012 compared to 2011. The effect of this increase, offset by a 16 basis point decline in the average rate paid, caused interest expense to be $177,000 lower in 2012 than in the prior year. The effect of $4.6 million of growth in average savings deposits caused an $8,000 increase in interest expense in 2012 compared to the prior year. The average balance of certificates of deposit was $14.7 million lower in 2012 than in the prior year. Approximately $12.1 million of the certificates of deposit decline was related to certificates from ChoiceOne’s local markets, while the remaining $2.6 million resulted from a lower level of brokered certificates. The average balance decrease plus the effect of a 34 basis point decline in the average rate paid caused interest expense on certificates of deposit to fall $700,000 in 2012 compared to 2011. A $2.3 million decrease in the average balance of Federal Home Loan Bank advances, partially offset by a 79 basis point increase in the average rate paid, caused interest expense to decline $36,000 in 2012 compared to the prior year. The increase in the rate paid on FHLB advances in 2012 compared to 2011 was caused by the payoff of a $3 million advance with an interest rate of 2.54% in June 2012. Interest expense on other interest-bearing liabilities fell $104,000 in 2012 compared to 2011 due to a reduction of 54 basis points in the average interest rate paid, which was partially offset by a $1.1 million increase in the average balance. The growth experienced in 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 3.96% (shown in Table 1) for 2012, compared to 4.13% in 2011. The average yield received on interest-earning assets in 2012 decreased 46 basis points to 4.68% while the average rate paid on interest-bearing liabilities in 2012 fell 29 basis points to 0.72%. The decline in general market interest rates in both 2011 and 2012 caused the reduction in rates for both assets and liabilities in the two time periods.

Table 2 – Changes in Tax-Equivalent Net Interest Income

(Dollars in thousands)

	Year ended December 31
	2012 Over 2011									2011 Over 2010
		Total			Volume			Rate			Total			Volume			Rate
Increase (decrease) in interest income (1)
Loans (2)	$	(1,526	)	$	(548	)	$	(978	)	$	(686	)	$	135		$	(821	)
Taxable securities		169			429			(260	)		329			538			(209	)
Tax-exempt securities (2)		140			297			(157	)		(197	)		(136	)		(61	)
Other		5			4			1			(2	)		(30	)		28
Net change in tax-equivalent income		(1,212	)		182			(1,394	)		(556	)		507			(1,063	)
Increase (decrease) in interest expense (1)
Interest-bearing demand deposits		(177	)		46			(223	)		(12	)		76			(88	)
Savings deposits		8			5			3			(29	)		9			(38	)
Certificates of deposit		(700	)		(211	)		(489	)		(917	)		(136	)		(781	)
Advances from Federal Home Loan Bank		(36	)		(95	)		59			(441	)		(312	)		(129	)
Other		(104	)		15			(119	)		(14	)		28			(42	)
Net change in interest expense		(1,009	)		(240	)		(769	)		(1,413	)		(335	)		(1,078	)
Net change in tax-equivalent
net interest income	$	(203	)	$	422		$	(625	)	$	857		$	842		$	15

(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.

Tax-equivalent net interest income increased $857,000 in 2011 compared to 2010. The growth was due to growth of $15.4 million in average interest-earning assets in 2011 compared to 2010 and a 10 basis point increase in ChoiceOne’s net interest income spread compared to 2010. The higher level of average interest-earning assets contributed an additional $842,000 in net interest income in 2011 compared to 2010, while the growth in the net interest income spread caused an increase of $15,000 in net interest income in 2011 compared to the prior year.

10

The average balance of loans increased $2.2 million in 2011 compared to 2010. A 26 basis point decrease in the average rate earned on loans had a larger impact on interest income on loans as it declined $686,000 in 2011 compared to the prior year. The average balance of total securities increased by $18.5 million in 2011 compared to 2010. This growth in the average balance, partially offset by a lower average rate earned on securities, caused interest income from securities to increase $132,000 in 2011 compared to the prior year. A decrease in the average balance of other interest-earning assets, offset by an increase in the average rate earned resulted in a decrease in interest income of $2,000 in 2011 compared to 2010. Although the average balance of loans grew slightly in 2011 compared to 2010, loan demand continued to be sluggish due to continued concerns about the Michigan economy. Growth in securities was due to ChoiceOne’s desire to achieve growth in earning assets.

The average balance of interest-bearing demand deposits increased $16.1 million in 2011 compared to 2010. The effect of this increase, offset by an 8 basis point decline in the average rate paid, caused interest expense to be $12,000 lower in 2011 than in the prior year. The effect of a 9 basis point decrease in the average rate paid on savings deposits in 2011 compared to 2010 was partially offset by the effect of growth of $5.2 million in the average balance as interest expense dropped $29,000. The average balance of certificates of deposit was $6.9 million lower in 2011 than in the prior year. Approximately $5.3 million of the certificates of deposit decline was related to certificates from ChoiceOne’s local markets, while the remaining $1.6 million was a lower level of brokered certificates. The average balance decrease plus the effect of a 51 basis point decline in the average rate paid caused interest expense on certificates of deposit to fall $917,000 in 2011 compared to 2010. An $8.0 million decrease in the average balance of Federal Home Loan Bank advances and a 91 basis point decrease in the average rate paid caused interest expense to decline $441,000 in 2011 compared to the prior year. Interest expense on other interest-bearing liabilities fell $14,000 in 2011 compared to 2010 due to a reduction of 21 basis points in the average interest rate paid, which was partially offset by a $1.9 million increase in the average balance. The growth experienced in 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.

11

Allowance and Provision For Loan Losses

Information regarding the allowance and provision for loan losses can be found in Table 3 below:

Table 3 – Provision and Allowance For Loan Losses

(Dollars in thousands)

	2012			2011			2010			2009			2008
Allowance for loan losses at beginning of year	$	5,213		$	4,729		$	4,322		$	3,600		$	3,600
Charge-offs:
Agricultural		—			45			—			—			—
Commercial and industrial		405			228			765			1,558			1,193
Real estate - commercial		869			1,357			1,523			1,218			816
Real estate - construction		—			—			—			14			—
Real estate - residential		887			1,677			1,152			1,369			1,252
Consumer		338			361			444			535			567
Total		2,499			3,668			3,884			4,694			3,828
Recoveries:
Agricultural		5			10			—			—			—
Commercial and industrial		61			32			68			102			60
Real estate - commercial		224			89			16			58			35
Real estate - construction		—			—			—			29			—
Real estate - residential		119			104			27			106			6
Consumer		214			217			230			246			252
Total		623			452			341			541			353
Net charge-offs		1,876			3,216			3,543			4,153			3,475
Provision for loan losses		2,515			3,700			3,950			4,875			3,475
Allowance for loan losses at end of year	$	5,852		$	5,213		$	4,729		$	4,322		$	3,600
Allowance for loan losses as a percentage of:
Total loans as of year end		1.88	%		1.63	%		1.49	%		1.34	%		1.10	%
Nonaccrual loans, accrual loans past due 90 days or more and troubled debt restructurings		86	%		78	%		56	%		31	%		39	%
Ratio of net charge-offs to average total loans outstanding during the year		0.61	%		1.01	%		1.12	%		1.30	%		1.06	%
Loan recoveries as a percentage of prior year’s charge-offs		17	%		12	%		7	%		14	%		15	%

As shown in Table 3, the provision for loan losses was $1,185,000 lower in 2012 than in 2011. The reduction in the provision level resulted from a decrease of $1,341,000 in net charge-offs experienced in 2012 compared to 2011. Net charge-offs of residential real estate loans declined $805,000 and net charge-offs of commercial real estate loans decreased $623,000 in 2012 compared to 2011, while net charge-offs of commercial and industrial loans increased $148,000. Agricultural loans and consumer loans net charge-offs both decline slightly in 2012 compared to 2011. 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 increased from 1.63% as of the end of 2011 to 1.88% as of the end of 2012. The coverage ratio of the allowance for loan losses to nonperforming loans increased from 78% as of December 31, 2011 to 86% as of December 31, 2012. This was due to growth of $639,000 in the allowance balance during 2012. ChoiceOne had $700,000 of specific allowance allocations for problem loans as of the end of 2012, compared to $431,000 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 2012 and 2011 were reasonable based on the circumstances surrounding each particular borrower.

12

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)

	2012		2011		2010		2009		2008
Agricultural	$	140	$	55	$	181	$	124	$	242
Commercial and industrial		381		609		641		735		616
Real estate - commercial		2,596		2,299		1,729		1,546		996
Real estate - construction		15		34		2		3		5
Real estate - residential		1,923		1,847		1,554		1,590		1,124
Consumer		250		197		243		306		351
Unallocated		547		172		379		18		266
Total allowance for loan losses	$	5,852	$	5,213	$	4,729	$	4,322	$	3,600

The increase in the allowance allocation to agricultural loans was due in part to weather conditions that affected certain agricultural borrowers in 2012. The decrease in the allowance allocation to commercial and industrial loans and the increase in the allocation to commercial real estate loans were based on the perceived risk level in these loan categories.

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 declining 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, 2012 is 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 $750,000 in 2012 compared to 2011. Customer service charges decreased $89,000 in 2012 compared to the prior year as lower income from overdraft fees was partially offset by growth in debit card interchange fees. Gains on sales of loans grew $962,000 in 2012 compared to 2011 as proceeds from loan sales totaled $46 million in 2012 compared to $27 million in 2011. An increase of $290,000 in gains on sales of securities was caused by sales of $9.4 million of securities in 2012 compared to $3.3 million in the prior year. Losses on sales of other assets were $387,000 higher in 2012 than in the prior year as write-downs of values of other real estate properties and losses on sales of properties were more in 2012 than in 2011. Earnings on life insurance policies were $93,000 higher in 2012 than the prior year as a result of a death benefit received. The $158,000 decrease in other noninterest income in 2012 compared to 2011 was primarily due to lower ATM surcharge fees.

Total noninterest income increased $570,000 in 2011 compared to 2010. Customer service charges increased $294,000 in 2011 compared to the prior year as growth in debit card interchange fees and checking account fees were partially offset by a continued decline in overdraft fees. Gains on sales of securities declined $408,000 in 2011 compared to the prior year. Gains on sales of securities in 2010 included $386,000 from sales of preferred stock that represented a recovery of losses recognized on money market preferred securities in 2008. Gains (losses) on sales of other assets improved by $461,000 as write-downs of values of other real estate properties and losses on sales of properties were less in 2011 than in 2010. Most of the $163,000 increase in other noninterest income resulted from amortization of mark-to-market adjustment of mortgage servicing fees that ended in October 2010.

Noninterest Expense

Total noninterest expense increased $656,000 in 2012 compared to 2011. Salaries and benefits increased $525,000 in 2012 compared to the prior year as a result of higher commission expense related to mortgage originations, performance bonuses, and supplemental retirement expense. Data processing expense was $112,000 higher in 2012 than in 2011 due to higher software maintenance costs. Professional fees grew $94,000 higher in 2012 than in 2011 due to increased use of outside consultants. Supplies and postage expense was $87,000 lower in 2012 than in 2011 as a result of postage savings from increased electronic statement usage. The $52,000 increase in advertising and promotional expense in 2012 compared to the prior year was caused by higher radio and television advertising and website development expenses. FDIC insurance expense declined $111,000 in 2012 compared to 2011 due to a change in the insurance assessment base beginning in the second quarter of 2011.

13

Total noninterest expense increased $539,000 in 2011 compared to 2010. Salaries and benefits increased $308,000 in 2011 compared to the prior year as a result of staffing additions and increased incentives. Occupancy and equipment expense was $90,000 higher in 2011 than in 2010 as depreciation expense, utilities, and various other expenses increased from the prior year. The $89,000 increase in data processing expense in 2011 compared to the prior year resulted from higher costs related to electronic banking usage. Professional fees were $118,000 higher in 2011 than in 2010 due to increases in legal, accounting, and consulting costs. Loan and collection expense declined $103,000 in 2011 compared to 2010 due to lower collection costs for problem loans, including amounts paid for outside collection services. FDIC insurance expense was $153,000 lower in 2011 than in the prior year due to a change in the assessment base for insurance beginning in the second quarter of 2011. Other noninterest expense grew by $178,000 in 2011 compared to 2010 as a result of increases in training and recruiting expenses, directors’ fees, loan-related expense, and a number of other expense accounts.

Income Taxes

Income taxes were $1,343,000 in 2012, compared to tax expense of $1,060,000 in 2011 and a tax expense of $654,000 in 2010. The increase in income tax expense from 2010 to 2011 and from 2011 to 2012 was caused by higher income before income tax compared to the prior year in 2011 and 2012. In addition, the portion of income before income tax comprised of nontaxable income declined in both 2011 and 2012, which caused the effective tax rate to be higher.

Financial Condition

Summary

Total assets were $508.9 million as of December 31, 2012, which represented an increase of $13.0 million or 3% from the end of 2011. Securities available for sale increased $20.2 million during 2012 as management purchased securities to use funds that were provided by a decline in loans and deposit growth. Loans declined $8.7 million in 2012 with most of the decrease occurring in commercial real estate and agricultural loans. Total deposits grew $20.8 million in 2012 due to increases in checking and savings deposits, which were partially offset by a decrease in local and brokered certificates of deposit.

Securities

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

(Dollars in thousands)

	2012		2011
U.S. Government and federal agency	$	40,268	$	40,413
U.S. Treasury notes and bonds		7,398		—
State and municipal		64,678		54,499
Mortgage-backed		12,526		9,780
Corporate		6,712		6,011
Foreign debt		1,001		—
FDIC-guaranteed financial institution debt		—		2,038
Equity securities		1,909		1,535
Total	$	134,492	$	114,276

The securities available for sale portfolio increased $20.2 million from December 31, 2011 to December 31, 2012. ChoiceOne purchased $69.6 million of securities during 2012 to replace securities that matured or were called and to provide growth in earning assets. Approximately $34.9 million in various securities were called or matured in 2012. Principal payments for municipal and mortgage-backed securities totaling $4.2 million were received during 2012. Various securities totaling approximately $9.4 million were sold during 2012 for net gains totaling $419,000. 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.

State and municipal securities as of the end of 2011 included a security that matured on September 1, 2009 and was not redeemed by the issuer. A principal payment of $29,000 was received in October 2009 on the par value of $500,000. Impairment losses totaling $141,000 had been recorded in 2009 and 2010 due to uncertainty as to when or how much principal repayment would be received. Settlement was reached with the security’s issuer in December 2011 and ChoiceOne received the remaining carrying value of the security in the first quarter of 2012.

Equity securities included a money market preferred security (MMP) of $1,000,000, a trust preferred security of $500,000, preferred stock of $263,000, and common stock of $146,000 as of December 31, 2012 and an MMP of $768,000, a trust preferred security of $500,000, and preferred stock of $267,000 as of December 31, 2011.

Management will continue to monitor its securities in 2013. Securities may be sold if believed prudent from a risk standpoint.

14

Loans

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

(Dollars in thousands)

	2012		2011
Agricultural	$	31,791	$	38,929
Commercial and industrial		67,365		58,685
Consumer		19,367		18,657
Real estate - commercial		93,312		106,250
Real estate - construction		1,056		1,169
Real estate - residential		98,577		96,437
Total loans	$	311,468	$	320,127

The loan portfolio (excluding loans held for sale) decreased $8.7 million from December 31, 2011 to December 31, 2012. Economic concerns in ChoiceOne’s market areas continued to affect loan demand in 2012. The decline in agricultural loans was caused by increased competition for this type of loan as well as the impact of weather conditions in the second quarter of 2012. The growth in commercial and industrial loans resulted from calling efforts by ChoiceOne’s loan officers. Commercial real estate loans continued to be affected by reduced real estate collateral values in 2012. The increase in residential real estate loans resulted from management’s decision to hold certain longer term fixed-rates loans in portfolio instead of selling them in the secondary market.

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)

	2012		2011
Loans accounted for on a nonaccrual basis	$	2,331	$	4,155
Loans contractually past due 90 days or more as to principal or interest payments		30		70
Loans considered troubled debt restructurings which are not included above		4,405		2,448
Total	$	6,766	$	6,673

Nonaccrual loans included $94,000 in agricultural loans, $220,000 in commercial and industrial loans, $33,000 in consumer loans, $1,230,000 in commercial real estate loans, and $754,000 in residential real estate loans as of December 31, 2012. Nonaccrual loans included $26,000 in agricultural loans, $143,000 in commercial and industrial loans, $22,000 in consumer loans, $2,790,000 in commercial real estate loans, and $1,174,000 in residential real estate loans as of December 31, 2011. The decreases in nonaccrual loans in 2012 were caused by charge-offs, transfers to other real estate owned, and payments received on loans. 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 $72,000 in agricultural loans, $32,000 in consumer loans, $2,581,000 in commercial real estate loans, and $1,720,000 in residential real estate loans at December 31, 2012, compared to $1,197,000 in commercial real estate loans and $1,251,000 of residential real estate loans at December 31, 2011. 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 $14.2 million as of December 31, 2012, compared to $22.4 million as of December 31, 2011.

15

Deposits and Other Funding Sources

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

(Dollars in thousands)

	2012		2011
Noninterest-bearing demand deposits	$	101,861	$	78,263
Interest-bearing demand deposits		66,569		64,498
Money market deposits		60,806		63,007
Savings deposits		63,406		46,737
Local certificates of deposit		130,057		144,983
Brokered certificates of deposit		1,500		5,877
Total deposits	$	424,199	$	403,365

Total deposits increased $20.8 million from December 31, 2011 to December 31, 2012. Local deposits grew $25.2 million while brokered certificates of deposit declined $4.4 million during 2012. Management believes that the local deposit growth was due in part to the attractiveness of FDIC-guaranteed deposits in contrast to the uncertainty of alternative investments. Deposit growth also resulted from new product offerings and calling efforts on business and municipal clients. Management believes that some of the local certificate of deposit decrease consisted of transfers into the other interest-bearing deposit accounts since the liquidity obtained offset the relatively small difference in the interest rate paid.

Securities sold under agreements to repurchase decreased $2.3 million during 2012. The reduction was due to a maturity of a $5 million structured repurchase agreement with a correspondent bank, which was partially offset by growth in sweep repurchase accounts used by the Bank’s local customers. Advances from the Federal Home Loan Bank of Indianapolis decreased $8.0 million in 2012 due to maturities and payments on advances. A blanket collateral agreement covering residential real estate loans was pledged against all outstanding advances at the end of 2012. Approximately $46 million of additional advances were available as of December 31, 2012 based on the collateral pledged.

In 2013, 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 $2.6 million from December 31, 2011 to December 31, 2012. The growth in equity resulted from the retention of earnings in 2012 as net income exceeded dividends paid by $2.6 million. Funds provided by issuances of common stock were offset by a small decrease in other comprehensive income in 2012.

Note 21 to the consolidated financial statements presents regulatory capital information for the Bank at the end of 2012 and 2011. All three capital ratios presented increased in 2012 as a result of more growth in capital than assets during the year. Management will monitor these capital ratios closely during 2013 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. The Board of Directors and management believe that ChoiceOne’s capital level as of December 31, 2012 is adequate for the foreseeable future.

Table 4 – Contractual Obligations

The following table discloses information regarding the maturity of ChoiceOne’s contractual obligations at December 31, 2012:

(Dollars in thousands)

	Payment Due By Period
Contractual Obligations		Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 Years
Time deposits	$	131,557	$	86,086	$	32,117	$	12,819	$	535
Repurchase agreements		19,572		19,572		—		—		—
Advances from Federal Home Loan Bank		420		28		60		64		268
Operating leases		36		36		—		—		—
Other obligations		1,027		71		171		191		594
Total	$	152,612	$	105,793	$	32,348	$	13,074	$	1,397

16

Liquidity and Interest Rate Risk

Net cash from operating activities was $9.6 million for 2012 compared to $12.5 million for 2011. Lower proceeds from sales of other real estate owned and net changes in other assets and liabilities contributed to the change in 2012. Cash used in investing activities was $16.6 million in 2012 compared to $31.1 million in 2011. The decrease was caused by a reduction in loan balances in 2012 in contrast to growth in 2011. Cash flows from financing activities were $8.9 million in 2012 compared to $11.6 million in the prior year. A higher level of maturities and payments on Federal Home Loan Bank advances and a decline in the balance of repurchase agreements was partially offset by more growth in deposits in 2012 than in 2011.

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 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, 2012, the amount of federal funds available for purchase from the Bank’s correspondent banks totaled approximately $33 million. ChoiceOne had no federal funds purchased at the end of 2012 or 2011. The Bank also has a line of credit secured by ChoiceOne’s commercial loans with the Federal Reserve Bank of Chicago for $57 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 $46 million of borrowing capacity was available from the FHLB based on residential real estate loans pledged as collateral at year-end 2012. The acceptance of brokered certificates of deposit is not limited as long as the Bank’s capital to assets ratio is considered to be “well capitalized” under regulatory guidelines.

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.

17

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

(Dollars in thousands)

	As of December 31, 2012
	0-3 Months			3-12 Months			1-5 Years		Over 5 Years		Total
Assets
Securities available for sale	$	7,968		$	27,957		$	63,551	$	35,016	$	134,492
Federal Home Loan Bank stock		2,478			—			—		—		2,478
Federal Reserve Bank stock		—			—			—		1,272		1,272
Loans held for sale		1,874			—			—		—		1,874
Loans		109,286			88,979			103,628		9,575		311,468
Cash surrender value of life insurance policies		—			—			—		9,970		9,970
Rate-sensitive assets		121,606			116,936			167,179		55,833		461,554
Liabilities
Interest-bearing demand deposits		66,569			—			—		—		66,569
Money market deposits		60,806			—			—		—		60,806
Savings deposits		63,406			—			—		—		63,406
Certificates of deposit		37,801			47,956			45,265		535		131,557
Repurchase agreements		19,572			—			—		—		19,572
Advances from FHLB		7			21			125		267		420
Rate-sensitive liabilities		248,161			47,977			45,390		802		342,330
Rate-sensitive assets less rate-sensitive liabilities:
Asset (liability) gap for the period	$	(126,555	)	$	68,959		$	121,789	$	55,031	$	119,224
Cumulative asset (liability) gap	$	(126,555	)	$	(57,596	)	$	64,193	$	119,224

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 81% at December 31, 2012, compared to 80% at December 31, 2011. 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 2013. As interest rates change during 2013, 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, 2012, 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.

18

Table 6 provides an illustration of hypothetical interest rate changes as of December 31, 2012 and 2011, respectively:

Table 6 – Sensitivity to Changes in Interest Rates

	2012
(Dollars in thousands)	Net Interest Income		Percent Change			Market Value of Equity		Percent Change
Change in Interest Rates
400 basis point rise	$	17,057		-3	%	$	71,148		-15	%
300 basis point rise		17,262		-2	%		76,058		-9	%
200 basis point rise		17,391		-2	%		79,555		-5	%
100 basis point rise		17,488		-1	%		82,396		-2	%
Base rate scenario		17,657		—	%		83,731		—	%
100 basis point decline		17,226		-2	%		77,256		-8	%
200 basis point decline		16,851		-5	%		71,641		-14	%
300 basis point decline		16,550		-6	%		72,430		-13	%
400 basis point decline		16,489		-7	%		72,335		-14	%

	2011
(Dollars in thousands)	Net Interest Income		Percent Change			Market Value of Equity		Percent Change
Change in Interest Rates
400 basis point rise	$	18,346		+4	%	$	72,748		-12	%
300 basis point rise		18,229		+3	%		76,878		-7	%
200 basis point rise		18,023		+2	%		79,279		-4	%
100 basis point rise		17,787		+1	%		81,377		-1	%
Base rate scenario		17,630		—	%		82,249		—	%
100 basis point decline		17,381		-1	%		77,911		-5	%
200 basis point decline		17,073		-3	%		70,812		-14	%
300 basis point decline		16,868		-4	%		70,806		-14	%
400 basis point decline		16,837		-4	%		70,766		-14	%

As of both December 31, 2012 and December 31, 2011, 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.

19

ChoiceOne Financial Services, Inc.

Management’s Report on Internal Control Over Financial Reporting

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, 2012, 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”). Based on this assessment, management has concluded that, as of December 31, 2012, 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.

James A. Bosserd	Thomas L.
President and Chief Executive Officer	Lampen Treasurer
March 27, 2013	March 27, 2013

20

Plante & Moran, PLLC
Suite 400
634 Front Avenue N.W.
Grand Rapids, MI 49504
Tel: 616.774.8221
Fax: 616.774.0702
plantemoran.com

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. as of December 31, 2012 and 2011, 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, 2012. 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, 2012 and 2011, and the consolidated results of its operations and its cash flows for each year in the three-year period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

Plante & Moran, PLLC

Grand Rapids, Michigan

March 27, 2013

21

ChoiceOne Financial Services, Inc.

Consolidated Balance Sheets

(Dollars in thousands)

	December 31
	2012			2011
Assets
Cash and due from banks	$	19,034		$	17,125
Federal funds sold		—			—
Cash and cash equivalents		19,034			17,125
Securities available for sale (Note 2)		134,492			114,276
Federal Home Loan Bank stock		2,478			2,478
Federal Reserve Bank stock		1,272			1,271
Loans held for sale		1,874			1,262
Loans (Note 3)		311,468			320,127
Allowance for loan losses (Note 3)		(5,852	)		(5,213	)
Loans, net		305,616			314,914
Premises and equipment, net (Note 5)		12,121			12,080
Other real estate owned, net (Note 7)		2,019			1,934
Cash value of life insurance policies		9,970			9,834
Intangible assets, net (Note 6)		1,724			2,172
Goodwill (Note 6)		13,728			13,728
Other assets		4,585			4,840
Total assets	$	508,913		$	495,914
Liabilities
Deposits – noninterest-bearing (Note 8)	$	101,861		$	78,263
Deposits – interest-bearing (Note 8)		322,338			325,102
Total deposits		424,199			403,365
Repurchase agreements (Note 9)		19,572			21,869
Advances from Federal Home Loan Bank (Note 10)		420			8,447
Other liabilities (Notes 11 and 13)		4,216			4,329
Total liabilities		448,407			438,010
Shareholders’ Equity (Note 21)
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: 3,298,081 in 2012 and 3,293,269 in 2011 (Note 14)		46,649			46,602
Retained earnings		11,501			8,887
Accumulated other comprehensive income, net (Note 16)		2,356			2,415
Total shareholders’ equity		60,506			57,904
Total liabilities and shareholders’ equity	$	508,913		$	495,914

See accompanying notes to consolidated financial statements.

22

ChoiceOne Financial Services, Inc.

Consolidated Statements of Income

(Dollars in thousands, except per share data)

	Years ended December 31
	2012			2011		2010
Interest income
Loans, including fees	$	16,875		$	18,398	$	19,081
Securities
Taxable		1,958			1,789		1,460
Tax exempt		1,361			1,268		1,398
Other		25			20		22
Total interest income		20,219			21,475		21,961
Interest expense
Deposits		2,087			2,956		3,914
Advances from Federal Home Loan Bank		271			307		748
Other borrowings		186			290		304
Total interest expense		2,544			3,553		4,966
Net interest income		17,675			17,922		16,995
Provision for loan losses (Note 3)		2,515			3,700		3,950
Net interest income after provision for loan losses		15,160			14,222		13,045
Noninterest income
Customer service charges		3,365			3,454		3,160
Insurance and investment commissions		711			672		690
Gains on sales of loans (Note 4)		1,634			672		682
Gains on sales of securities (Note 2)		419			129		537
Loss on other than temporary impairment of securities (Note 2)		—			—		(94	)
Gains (losses) on sales and write-downs of other assets (Note 7)		(358	)		29		(432	)
Earnings on life insurance policies		447			354		360
Other income		671			829		666
Total noninterest income		6,889			6,139		5,569
Noninterest expense
Salaries and benefits (Notes 13 and 14)		7,873			7,348		7,040
Occupancy and equipment (Note 5)		2,256			2,247		2,157
Data processing		1,852			1,740		1,651
Professional fees		887			793		675
Supplies and postage		430			517		497
Advertising and promotional		212			160		168
Intangible asset amortization (Note 6)		448			448		448
Loan and collection expense		589			575		678
FDIC insurance		377			488		641
Other expense		1,520			1,472		1,294
Total noninterest expense		16,444			15,788		15,249
Income before income tax		5,605			4,573		3,365
Income tax expense (Note 11)		1,343			1,060		654
Net income	$	4,262		$	3,513	$	2,711
Basic earnings per common share (Note 15)	$	1.29		$	1.07	$	0.83
Diluted earnings per common share (Note 15)	$	1.29		$	1.07	$	0.83
Dividends declared per common share	$	0.50		$	0.48	$	0.48

See accompanying notes to consolidated financial statements.

23

ChoiceOne Financial Services, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

	Years ended December 31
	2012			2011			2010
Net income	$	4,262		$	3,513		$	2,711
Other comprehensive income, net of tax:
Unrealized holding gains on available for sale securities		240			1,615			419
Funded status of post-retirement benefit plan		(22	)		(15	)		(14	)
		218			1,600			405
Less: Reclassification adjustment for gain recognized in earnings, net of tax (Note 2)		277			85			292
Other comprehensive income/(loss), net of tax		(59	)		1,515			113
Comprehensive income	$	4,203		$	5,028			2,824

See accompanying notes to consolidated financial statements.

24

ChoiceOne Financial Services, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

(Dollars in thousands, except per share data)

	Number of Shares			Common Stock and Paid in Capital			Retained Earnings			Accumulated Other Comprehensive Income, Net			Total
Balance, January 1, 2010		3,265,714		$	46,326		$	5,813		$	787		$	52,926
Net income								2,711						2,711
Other comprehensive income											113			113
Shares issued		14,805			125									125
Shares cancelled		(4	)		—									—
Change in ESOP repurchase obligation					(16	)								(16	)
Stock-based compensation					15									15
Effect of employee stock purchases					11									11
Cash dividends declared ($0.48 per share)								(1,572	)					(1,572	)
Balance, December 31, 2010		3,280,515		$	46,461		$	6,952		$	900		$	54,313
Net income								3,513						3,513
Other comprehensive income											1,515			1,515
Shares issued		12,754			127									127
Change in ESOP repurchase obligation					(1	)								(1	)
Stock-based compensation					5									5
Effect of employee stock purchases					10									10
Cash dividends declared ($0.48 per share)								(1,578	)					(1,578	)
Balance, December 31, 2011		3,293,269		$	46,602		$	8,887		$	2,415		$	57,904
Net income								4,262						4,262
Other comprehensive (loss)											(59	)		(59	)
Shares issued		9,812			123									123
Shares repurchased		(5,000	)		(75	)								(75	)
Change in ESOP repurchase obligation					(12	)								(12	)
Effect of employee stock purchases					11									11
Cash dividends declared ($0.50 per share)								(1,648	)					(1,648	)
Balance, December 31, 2012		3,298,081		$	46,649		$	11,501		$	2,356		$	60,506

See accompanying notes to consolidated financial statements.

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ChoiceOne Financial Services, Inc.

Consolidated Statements of Cash Flows

(Dollars in thousands)

	Years ended December 31
	2012			2011			2010
Cash flows from operating activities:
Net income	$	4,262		$	3,513		$	2,711
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses		2,515			3,700			3,950
Depreciation		900			944			903
Amortization		1,569			1,300			1,173
Compensation expense on stock options and employee purchases		11			15			26
Gains on sales of securities		(419	)		(129	)		(537	)
Loss on other than temporary impairment of securities		—			—			94
Gains on sales of loans		(1,634	)		(672	)		(682	)
Loans originated for sale		(44,889	)		(25,685	)		(28,816	)
Proceeds from loan sales		45,622			26,611			28,088
Earnings on bank-owned life insurance		(447	)		(354	)		(360	)
(Gains)/losses on sales of other real estate owned		(51	)		(279	)		(96	)
Write-downs of other real estate owned		405			255			528
Proceeds from sales of other real estate owned		1,259			3,015			1,174
Deferred federal income tax expense/(benefit)		(132	)		378			(163	)
Net change in:
Other assets		667			2,391			875
Other liabilities		4			(2,458	)		357
Net cash from operating activities		9,642			12,545			9,225
Cash flows from investing activities:
Sales of securities available for sale		9,369			3,310			6,059
Maturities, prepayments and calls of securities available for sale		39,098			18,687			22,271
Purchases of securities available for sale		(69,564	)		(43,651	)		(44,063	)
Purchase of Federal Reserve Bank stock		(1	)		(1	)		—
Sale of Federal Home Loan Bank stock		—			411			—
Loan originations and payments, net		5,065			(9,375	)		875
Proceeds from life insurance		311			—			—
Additions to premises and equipment		(921	)		(499	)		(1,510	)
Net cash from investing activities		(16,643	)		(31,118	)		(16,368	)
Cash flows from financing activities:
Net change in deposits		20,834			13,481			24,874
Net change in repurchase agreements		(2,297	)		(380	)		1,565
Proceeds from Federal Home Loan Bank advances		—			250			—
Payments on Federal Home Loan Bank advances		(8,027	)		(276	)		(13,525	)
Issuance of common stock		123			127			125
Repurchase of common stock		(75	)		—			—
Cash dividends		(1,648	)		(1,578	)		(1,572	)
Net cash from financing activities		8,910			11,624			11,467
Net change in cash and cash equivalents		1,909			(6,949	)		4,324
Beginning cash and cash equivalents		17,125			24,074			19,750
Ending cash and cash equivalents	$	19,034		$	17,125		$	24,074
Supplemental disclosures of cash flow information:
Cash paid for interest	$	2,625		$	3,608		$	5,112
Cash paid for income taxes		1,425			765			285
Loans transferred to other real estate owned		1,718			2,972			1,358
Other real estate owned transferred to premises and equipment		20			—			—

See accompanying notes to consolidated financial statements.

26

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

ChoiceOne Bank (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 portions of 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.

ChoiceOne Insurance Agencies, Inc. (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 more likely than not will be required to sell the security before its anticipated recovery. 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.

27

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

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 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 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 may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. Loan losses are charged against the allowance when management believes the collectability of a loan balance is not possible.

The allowance 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 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 our 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 other noninterest income.

28

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Loan Servicing Rights

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 cashflows 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 contribute up to the IRS maximum. 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 postretirement benefits are accrued during the years in which the employee provides service.

Employee Stock Ownership Plan

The cost of shares issued to the Employee Stock Ownership Plan (the “ESOP”) but not yet allocated to participants is presented as a reduction of shareholders’ equity. Compensation expense is recorded based on the market price of the shares as they are committed to be released for allocation to participant accounts. The difference between the market price and the cost of shares committed to be released is recorded as an adjustment to additional paid-in capital. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings while dividends on unallocated ESOP shares are reflected as a reduction of debt and accrued interest. 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.

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, net of tax, and changes in the funded status of postretirement plans which are also recognized as a separate component of shareholders’ equity.

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.

29

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Cash Restrictions

Cash on hand or on deposit with the Federal Reserve Bank of $318,000 and $111,000 was required to meet regulatory reserve and clearing requirements at December 31, 2012 and 2011, respectively. The balance in excess of the amount required was interest-bearing as of December 31, 2012 and December 31, 2011.

Stock-Based Compensation

ChoiceOne records stock-based compensation cost using the fair value method. Compensation costs related to stock options granted is disclosed in Note 14.

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 21).

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 19 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

During 2012, ChoiceOne adopted new guidance related to the presentation of comprehensive income in the financial statements. Among other changes, the new guidance eliminated the option to only present comprehensive income in the statement of equity. ChoiceOne has elected to report comprehensive income in a separate statement of comprehensive income that begins with net income. The change in presentation has been applied retrospectively and the 2011 and 2010 financial statements have been restated to conform to the new presentation method. Other than the change in presentation of comprehensive income and related disclosures, the new guidance did not have a material effect on the financial statements.

In 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-02, A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (“ASU 2011-02”). This update applies to all creditors, both public and non-public, and was introduced to provide clarification surrounding troubled debt restructurings (“TDR”). The primary characteristics that previously caused a restructuring to quality as a TDR still exist: (1) the restructuring constitutes a concession to the borrower and (2) the borrower is experiencing financial difficulties. The update provides additional details and examples to provide clarity surrounding these items. The update also prohibits the use of the effective interest rate test when determining whether the restructuring constitutes a concession. The update is effective for annual reporting periods ending on or after December 15, 2012 (therefore, December 31, 2012, for ChoiceOne). Lastly the disclosure requirements set forth by ASU 2010-20 regarding TDRs, and later deferred by ASU 2011-01 until December 31, 2012 for ChoiceOne, are included in Note 3. Other than the additional disclosures, these updates did not have a significant impact on the financial statements.

In 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”). This update to Fair Value Measurement (Topic 820) results in common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The amendments in this update explain how to measure fair value. The do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting. However, this update does require expanding disclosure related to the nature and significance of inputs that are used in estimating and measuring the fair value of financial instruments. The amendments in this update are to be applied prospectively and are effective for annual reporting periods beginning after December 15, 2011 (therefore, December 31, 2012, for ChoiceOne). This update did not have a significant impact on the financial statements.

30

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

In July 2012, the FASB issued ASU No. 2012-02, Intangibles – Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”) to reduce the cost and complexity of testing indefinite-lived intangible assets for impairment. ASU 2012-02 gives an entity the option of first assessing qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Subtopic 350-30. An entity also has the option to bypass the qualitative assessment for any indefinite-lived asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. ASU 2012-02 is effective for fiscal years beginning after September 15, 2012 and early adoption is permitted. The adoption of ASU 2012-02 is not expected to have a material impact on ChoiceOne’s consolidated financial condition or results of operations.

Reclassifications

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

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:

	2012
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	39,815	$	455	$	(2	)	$	40,268
U.S. Treasury notes and bonds		7,362		45		(9	)		7,398
State and municipal		62,248		2,668		(238	)		64,678
Mortgage-backed		12,218		308		—			12,526
Corporate		6,600		113		(1	)		6,712
Foreign debt		1,000		1		—			1,001
Equity securities		1,902		12		(5	)		1,909
Total	$	131,145	$	3,602	$	(255	)	$	134,492

	2011
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	39,829	$	584	$	—		$	40,413
State and municipal		51,859		2,729		(89	)		54,499
Mortgage-backed		9,511		276		(7	)		9,780
Corporate		5,914		100		(3	)		6,011
FDIC-guaranteed financial institution debt		2,010		28		—			2,038
Equity securities		1,751		16		(232	)		1,535
Total	$	110,874	$	3,733	$	(331	)	$	114,276

Information regarding sales of securities available for sale follows:

(Dollars in thousands)

	2012		2011		2010
Proceeds from sales of securities	$	9,369	$	3,310	$	6,059
Gross realized gains		421		133		540
Gross realized losses		2		4		3
Loss on other than temporary impairment		—		—		94

31

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Contractual maturities of securities available for sale at December 31, 2012 were as follows:

(Dollars in thousands)	Fair Value
Due within one year	$	31,817
Due after one year through five years		53,249
Due after five years through ten years		32,565
Due after ten years		2,426
Total debt securities		120,057
Mortgage-backed securities, not due at a specific date		12,526
Equity securities		1,909
Total	$	134,492

Various securities were pledged as collateral for securities sold under agreements to repurchase. The carrying amount of securities pledged as collateral at December 31 was as follows:

(Dollars in thousands)

	2012		2011
Securities pledged for securities sold under agreements to repurchase	$	27,085	$	27,421

Securities with unrealized losses at year-end 2012 and 2011, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, were as follows:

(Dollars in thousands)	2012
	Less than 12 months					More than 12 months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Government agencies	$	1,997	$	(2	)	$	—	$	—		$	1,997	$	(2	)
U.S. Treasury notes and bonds		2,187		(9	)		—		—			2,187		(9	)
State and municipal		7,623		(203	)		811		(35	)		8,434		(238	)
Corporate		768		(1	)		—		—			768		(1	)
Equity securities		146		(5	)		—		—			146		(5	)
Total temporarily impaired	$	12,721	$	(220	)	$	811	$	(35	)	$	13,532	$	(255	)

(Dollars in thousands)	2011
	Less than 12 months					More than 12 months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	2,938	$	(28	)	$	1,245	$	(61	)	$	4,183	$	(89	)
Mortgage-backed		2,045		(7	)		—		—			2,045		(7	)
Corporate		1,023		(3	)		—		—			1,023		(3	)
Equity securities		—		—			768		(232	)		768		(232	)
Total temporarily impaired	$	6,006	$	(38	)	$	2,013	$	(293	)	$	8,019	$	(331	)

One municipal security with a fair value of $306,000 was considered to be other than temporarily impaired as of December 31, 2011. The issuer of the security defaulted upon its maturity of September 1, 2009. Impairment losses totaling $141,000 had been recorded through the end of 2010 due to uncertainty as to how much and when principal repayment would be received. Settlement was reached with the security’s issuer in December 2011 and the bond’s carrying value was reclassified from securities to other assets in January 2012 upon termination of the bond’s contractual agreement. ChoiceOne received the carrying value of the security in the second quarter of 2012.

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. Management believed that unrealized losses as of December 31, 2012 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 2012 or 2011.

32

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)

	2012			2011
Agricultural	$	31,790		$	38,929
Commercial and industrial		67,365			58,685
Consumer		19,367			18,657
Real estate – commercial		93,312			106,250
Real estate - construction		1,056			1,169
Real estate - residential		98,578			96,437
Loans, gross		311,468			320,127
Allowance for loan losses		(5,852	)		(5,213	)
Loans, net	$	305,616		$	314,914

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, who works with the borrower to bring payments current or takes 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.

33

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

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
2012
Allowance for Loan Losses
Beginning balance	$	55		$	609		$	197		$	2,299		$	34		$	1,847		$	172		$	5,213
Charge-offs		—			(405	)		(338	)		(869	)		—			(887	)		—			(2,499	)
Recoveries		5			61			214			224			—			119			—			623
Provision		80			116			177			942			(19	)		844			375			2,515
Ending balance	$	140		$	381		$	250		$	2,596		$	15		$	1,923		$	547		$	5,852
Individually evaluated for impairment	$	1		$	112		$	—		$	449		$	—		$	138		$	—		$	700
Collectively evaluated for impairment	$	139		$	269		$	250		$	2,147		$	15		$	1,785		$	547		$	5,152
Loans
Individually evaluated for impairment	$	166		$	198		$	32		$	3,723		$	—		$	1,820					$	5,939
Collectively evaluated for impairment		31,624			67,167			19,335			89,589			1,056			96,758						305,529
Ending balance	$	31,790		$	67,365		$	19,367		$	93,312		$	1,056		$	98,578					$	311,468
2011
Allowance for Loan Losses
Beginning balance	$	181		$	641		$	243		$	1,729		$	2		$	1,554		$	379		$	4,729
Charge-offs		(45	)		(228	)		(361	)		(1,357	)		—			(1,677	)		—			(3,668	)
Recoveries		10			32			217			89			—			104			—			452
Provision		(91	)		164			98			1,838			32			1,866			(207	)		3,700
Ending balance	$	55		$	609		$	197		$	2,299		$	34		$	1,847		$	172		$	5,213
Individually evaluated for impairment	$	—		$	7		$	—		$	424		$	—		$	—		$	—		$	431
Collectively evaluated for impairment	$	55		$	602		$	197		$	1,875		$	34		$	1,847		$	172		$	4,782
Loans
Individually evaluated for impairment	$	—		$	163		$	—		$	2,758		$	—		$	1,580					$	4,501
Collectively evaluated for impairment		38,929			58,522			18,657			103,492			1,169			94,857						315,626
Ending balance	$	38,929		$	58,685		$	18,657		$	106,250		$	1,169		$	96,437					$	320,127

34

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

	Agricultural		Commercial and Industrial			Consumer			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Unallocated		Total
2010
Allowance for Loan Losses
Beginning balance	$	124	$	735		$	306		$	1,546		$	3		$	1,590		$	18	$	4,322
Charge-offs		—		(765	)		(444	)		(1,523	)		—			(1,152	)		—		(3,884	)
Recoveries		—		68			230			16			—			27			—		341
Provision		57		603			151			1,690			(1	)		1,089			361		3,950
Ending balance	$	181	$	641		$	243		$	1,729		$	2		$	1,554		$	379	$	4,729
Individually evaluated for impairment	$	—	$	50		$	—		$	531		$	—		$	—		$	—	$	581
Collectively evaluated for impairment	$	181	$	591		$	243		$	1,198		$	2		$	1,554		$	379	$	4,148
Loans
Individually evaluated for impairment	$	39	$	272		$	—		$	3,529		$	—		$	2,733				$	6,573
Collectively evaluated for impairment		29,642		55,675			16,709			112,822			853			94,666					310,367
Ending balance	$	29,681	$	55,947		$	16,709		$	116,351		$	853		$	97,399				$	316,940

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.

35

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

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

(Dollars in thousands)

Corporate Credit Exposure - Credit Risk Profile By Creditworthiness Category

	Agricultural				Commercial and Industrial				Commercial Real Estate
	2012		2011		2012		2011		2012		2011
Risk ratings 1 and 2	$	8,615	$	6,486	$	9,040	$	4,149	$	2,711	$	6,403
Risk rating 3		16,173		20,211		43,549		30,109		45,295		45,034
Risk rating 4		5,040		9,499		13,417		21,993		30,223		33,462
Risk rating 5		1,939		2,672		855		1,669		7,847		14,313
Risk rating 6		19		57		361		680		6,960		5,009
Risk rating 7		4		4		143		85		276		2,029
	$	31,790	$	38,929	$	67,365	$	58,685	$	93,312	$	106,250

Consumer Credit Exposure - Credit Risk Profile Based On Payment Activity

	Consumer				Construction Real Estate				Residential Real Estate
	2012		2011		2012		2011		2012		2011
Performing	$	19,334	$	18,634	$	1,056	$	1,169	$	98,018	$	95,732
Nonperforming		33		23		—		—		560		705
	$	19,367	$	18,657	$	1,056	$	1,169	$	98,578	$	96,437

The following schedule provides information on loans that were considered troubled debt restructurings (“TDRs”) that were modified during the twelve months ended December 31, 2012 and December 31, 2011:

	December 31, 2012					December 31, 2011
(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	1	$	72	$	72	—	$	—	$	—
Commercial and industrial	2		159		149	1		48		48
Consumer	1		32		32	—		—		—
Commercial real estate	5		1,990		1,990	7		1,789		1,789
Residential real estate	3		353		353	5		639		639
	12	$	2,606	$	2,596	13	$	2,476	$	2,476

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.

36

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

The following schedule provides information on TDRs as of December 31, 2012 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, 2012 and December 31, 2011 that had been modified during the 12-month period prior to the default:

	With Payment Defaults During the Following Periods:
	December 31, 2012			December 31, 2011
(Dollars in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Agricultural	1	$	72	—	$	—
Commercial and industrial	2		149	1		48
Consumer	1		32	—		—
Commercial real estate	1		68	3		1,135
Residential real estate	—		—	7		865
	5	$	321	11	$	2,048

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 follow:

(Dollars in thousands)

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2012
With no related allowance recorded
Agricultural	$	94	$	441	$	—	$	19	$	—
Commercial and industrial		49		49		—		223		6
Consumer		—		—		—		—		—
Commercial real estate		577		848		—		1,586		—
Residential real estate		—		—		—		1,366		48
Subtotal		720		1,338		—		3,194		54
With an allowance recorded
Agricultural		72		72		1		14		1
Commercial and industrial		149		169		112		112		—
Consumer		32		32		—		6		—
Commercial real estate		3,146		3,193		449		1,576		24
Residential real estate		1,820		1,820		138		364		20
Subtotal		5,219		5,286		700		2,072		45
Total
Agricultural		166		513		1		33		1
Commercial and industrial		198		218		112		335		6
Consumer		32		32		—		6		—
Commercial real estate		3,723		4,041		449		3,162		24
Residential real estate		1,820		1,820		138		1,730		68
Total	$	5,939	$	6,624	$	700	$	5,266	$	99

37

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2011
With no related allowance recorded
Agricultural	$	—	$	—	$	—	$	45	$	—
Commercial and industrial		102		105		—		167		—
Commercial real estate		1,122		1,538		—		2,369		15
Residential real estate		1,580		1,580		—		1,620		50
Subtotal		2,804		3,223		—		4,201		65
With an allowance recorded
Agricultural		—		—		—		—		—
Commercial and industrial		61		63		7		85		—
Commercial real estate		1,636		2,120		424		1,490		6
Residential real estate		—		—		—		—		—
Subtotal		1,697		2,183		431		1,575		6
Total
Agricultural		—		—		—		45		—
Commercial and industrial		163		168		7		252		—
Commercial real estate		2,758		3,658		424		3,859		21
Residential real estate		1,580		1,580		—		1,620		50
Total	$	4,501	$	5,406	$	431	$	5,776	$	71

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

(Dollars in thousands)

	30 to 59 Days (1)		60 to 89 Days (1)		Greater Than 90 Days (1)		Total (1)		Loans Not Past Due		Total Loans		90 Days Past Due and Accruing
2012
Agricultural	$	262		$—		$—	$	262	$	31,529	$	31,790		$—
Commercial and industrial		102		4		198		304		67,061		67,365		—
Consumer		173		28		33		234		19,133		19,367		1
Commercial real estate		64		68		339		471		92,841		93,312		—
Construction real estate		—		—		—		—		1,056		1,056		—
Residential real estate		1,438		691		559		2,688		95,889		98,578		29
	$	2,039	$	791	$	1,129	$	3,959	$	307,509	$	311,468	$	30
2011
Agricultural	$	151		$—	$	22	$	173	$	38,756	$	38,929		$—
Commercial and industrial		541		143		97		781		57,904		58,685		—
Consumer		104		52		23		179		18,478		18,657		2
Commercial real estate		1,752		713		1,816		4,281		101,969		106,250		—
Construction real estate		—		—		—		—		1,169		1,169		—
Residential real estate		1,320		1,015		705		3,040		93,397		96,437		68
	$	3,868	$	1,923	$	2,663	$	8,454	$	311,673	$	320,127	$	70

(1) Includes nonaccrual loans.

38

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Nonaccrual loans by loan category as of December 31 follow:

(Dollars in thousands)

	2012		2011
Agricultural	$	94	$	26
Commercial and industrial		220		143
Consumer		33		22
Commercial real estate		1,230		2,790
Construction real estate		—		—
Residential real estate		754		1,174
	$	2,331	$	4,155

Note 4 – Mortgage Banking

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

(Dollars in thousands)

	2012		2011		2010
Loans originated for resale, net of principal payments	$	44,889	$	25,685	$	28,816
Proceeds from loan sales		45,622		26,611		28,088
Net gains on sales of loans held for sale		1,634		672		682
Loan servicing fees, net of amortization		131		161		41

Loans serviced for others are not reported as assets in the accompanying consolidated balance sheets. The unpaid principal balances of these loans were $97 million and $96 million at December 31, 2012 and 2011, respectively. The Bank maintains custodial escrow balances in connection with these serviced loans; however, such escrows were immaterial at December 31, 2012 and 2011.

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

(Dollars in thousands)

	2012			2011			2010
Balance, beginning of year	$	318		$	347		$	491
Capitalized		289			94			122
Amortization		(134	)		(123	)		(266	)
Balance, end of year	$	473		$	318		$	347

The fair value of loan servicing rights was $807,000 and $797,000 as of December 31, 2012 and 2011, respectively. Consequently, a valuation allowance was not necessary at year-end 2012 or 2011. The fair value of servicing rights at December 31, 2012 was determined using a discount rate of 7.7% and prepayment speeds ranging from 14% to 34%. The fair value of servicing rights at December 31, 2011 was determined using a discount rate of 7.7% and prepayment speeds ranging from 7% to 26%.

Note 5 – Premises and Equipment

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

(Dollars in thousands)

	2012			2011
Land and land improvements	$	4,108		$	4,084
Leasehold improvements		38			36
Buildings		11,190			11,080
Furniture and equipment		4,556			3,768
Total cost		19,892			18,968
Accumulated depreciation		(7,771	)		(6,888	)
Premises and equipment, net	$	12,121		$	12,080

Depreciation expense was $900,000, $944,000, and $903,000 for 2012, 2011 and 2010, respectively.

39

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

The Bank leases certain branch properties and automated-teller machine locations in its normal course of business. Rent expense totaled $98,000, $75,000, and $78,000 for 2012, 2011 and 2010, respectively. Rent commitments under non-cancelable operating leases were as follows, before considering renewal options that generally are present (dollars in thousands):

2013 $ 36

Note 6 - Goodwill and Intangible Assets

Goodwill

There were no changes in the goodwill balance in 2012 or 2011. ChoiceOne engaged an outside consulting firm to assist management in performing its annual evaluation of goodwill for impairment as of June 30, 2012. The following steps were used in the valuation: determination of the reporting unit, determination of the appropriate standard of value, determination of the appropriate level of value, calculation of fair value, and comparison of the fair value computed to the equity carrying value. It was determined that the relevant reporting unit to be valued was ChoiceOne Bank. The standard of value used in the valuation was fair value as determined by generally accepted accounting principles. The appropriate level of value was determined to be the controlling interest level. The appraisal methodology used to calculate the fair value included the income approach, which was a discounted cash flow value based on projected earnings capacity. The income approach used a discount rate of 12.50%, a growth assumption of 1.8% for assets for the first year and 2.0% in subsequent years, and an assumption of cost savings of 20% of noninterest expense as a result of synergies and cost reductions from a change in control. The appraisal methodology also included the market approach, which was based on price-to-earnings multiples, price-to-tangible book value ratios, and core deposit premiums for selected bank sale transactions. The asset approach was also an approach that was reviewed, but it was not used in determining the fair value since it did not render a control level indication of value. The results from the valuation approaches were used to calculate an estimate of the fair value of ChoiceOne’s equity, which was compared to the carrying value of equity to determine whether the Step 1 test under generally accepted accounting principles that govern the valuation of goodwill was passed. The goodwill analysis determined that the fair value of ChoiceOne’s equity exceeded the carrying value by 10.8%. Based on this assessment, management believed that there was no indication of goodwill impairment at June 30, 2012. Based on the testing performed and a review of factors that might impact ChoiceOne’s stock value subsequent to the annual evaluation, no impairment of goodwill was deemed to exist as of December 31, 2012.

Acquired Intangible Assets

Information for acquired intangible assets at December 31 follows:

(Dollars in thousands)

	2012				2011
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Core deposit intangible	$	4,134	$	2,549	$	4,134	$	2,136
Other intangible assets		347		208		347		173
Totals	$	4,481	$	2,757	$	4,481	$	2,309

The core deposit intangible and other intangible assets are being amortized on a straight-line basis over ten years. Aggregate amortization expense was $448,000 for 2012, 2011 and 2010. The estimated amortization expense for the next four years ending December 31 is as follows:

(Dollars in thousands)

	Core Deposit Intangible		Other Intangible Assets		Total
2013	$	413		35		448
2014		413		35		448
2015		413		35		448
2016		346		34		380
Total	$	1,585	$	139	$	1,724

40

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

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)

	2012			2011			2010
Balance, beginning of year	$	1,934		$	1,953		$	2,201
Transfers from loans		1,718			2,972			1,358
Reclassification to buildings		(20	)		—			—
Proceeds from sales		(1,259	)		(3,015	)		(1,174	)
Gains/(losses) on sales		51			279			96
Write-downs		(405	)		(255	)		(528	)
Balance, end of year	$	2,019		$	1,934		$	1,953

Note 8 – Deposits

Deposit balances as of December 31 consisted of the following:

(Dollars in thousands)

	2012		2011
Noninterest-bearing demand deposits	$	101,861	$	78,263
Interest-bearing demand deposits		66,569		64,498
Money market deposits		60,806		63,007
Savings deposits		63,406		46,737
Local certificates of deposit		130,057		144,983
Brokered certificates of deposit		1,500		5,877
Total deposits	$	424,199	$	403,365

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

(Dollars in thousands)

2013	$	86,086
2014		21,923
2015		10,194
2016		7,769
2017		5,050
2018		535
Total	$	131,557

The Bank had certificates of deposit issued in denominations of $100,000 or greater totaling $66.9 million and $70.9 million at December 31, 2012 and 2011, respectively. The Bank had brokered certificates of deposit totaling $1.5 million at December 31, 2012 compared to $5.9 million at December 31, 2011. As of December 31, 2012, the weighted average interest rate on the brokered certificate of deposit was 1.40%. In addition, the Bank had $14.2 million of certificates of deposit as of December 31, 2012 and $18.3 million as of December 31, 2011 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. As of December 31, 2011, the Bank had a $5 million structured repurchase agreement with a correspondent bank maturing on July 31, 2012 with a fixed interest rate of 4.55%. Information regarding repurchase agreements follows:

41

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

(Dollars in thousands)

	2012			2011
Outstanding balance at December 31	$	19,572		$	21,869
Average interest rate at December 31		0.25	%		1.27	%
Average balance during the year	$	22,185		$	20,815
Average interest rate during the year		0.84	%		1.38	%
Maximum month end balance during the year	$	24,662		$	22,249

Note 10 – Federal Home Loan Bank Advances

At December 31, advances from the Federal Home Loan Bank (the “FHLB”) were as follows:

(Dollars in thousands)

	2012		2011
Maturity of November 2024 with a fixed interest rate of 3.98%	$	420
Maturities ranging from November 2012 to November 2024, fixed interest rates ranging from 2.54% to 4.16%, with an average rate of 3.58%			$	8,447
Total advances outstanding at year-end	$	420	$	8,447

Penalties are charged on fixed rate advances that are paid prior to maturity. A $3,000,000 advance was paid prior to its maturity in June 2012 and a $37,000 prepayment penalty was charged. No fixed rate advances were paid prior to maturity in 2011 or 2010. Advances were secured by residential real estate loans with a carrying value of approximately $74 million at December 31, 2012 and $69 million at December 31, 2011. Based on this collateral, the Bank was eligible to borrow an additional $46 million at year-end 2012. The scheduled maturities of advances from the FHLB at December 31, 2012 were as follows (dollars in thousands):

2013	$	28
2014		29
2015		30
2016		32
2017		33
Thereafter		268
Total	$	420

Note 11 – Income Taxes

Information as of December 31 and for the year follows:

(Dollars in thousands)

	2012			2011		2010
Provision for Income Taxes
Current federal income tax expense	$	1,475		$	682	$	817
Deferred federal income tax expense/(benefit)		(132	)		378		(163	)
Income tax expense	$	1,343		$	1,060	$	654

	2012			2011			2010
Reconciliation of Income Tax Provision to Statutory Rate
Income tax computed at statutory federal rate of 34%	$	1,906		$	1,555		$	1,144
Tax exempt interest income		(466	)		(437	)		(483	)
Tax exempt earnings on bank-owned life insurance		(152	)		(121	)		(122	)
Nondeductible interest expense		13			16			25
Other items		42			47			90
Income tax expense	$	1,343		$	1,060		$	654
Effective income tax rate		24	%		23	%		19	%

42

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Components of Deferred Tax Assets and Liabilities	2012			2011
Deferred tax assets:
Allowance for loan losses	$	920		$	779
Deferred compensation		349			341
Write-downs on other real estate owned		255			339
Alternative minimum tax credit carryforward		—			75
Other		294			327
Total deferred tax assets		1,818			1,861
Deferred tax liabilities:
Depreciation		1,396			1,382
Unrealized gains on securities available for sale		1,138			1,157
Purchase accounting adjustments from merger		602			743
Loan servicing rights		161			108
Stock dividends received from Federal Home Loan Bank		83			83
Post-retirement benefits obligation		75			87
Other		112			103
Total deferred tax liabilities		3,567			3,663
Net deferred tax liabilities	$	(1,749	)	$	(1,802	)

ChoiceOne had a deferred tax asset of $45,000 as of December 31, 2012 and December 31, 2011 that resulted from capital losses incurred on the sales of equity securities in 2009 and 2010. A capital loss of $72,000 was carried back to 2007 during 2011 which utilized $24,000 of the deferred tax asset. A valuation allowance of $45,000 had been recorded as of December 31, 2012 and December 31, 2011 due to the uncertainty as to ChoiceOne’s ability to generate capital gains in the future that can offset the capital loss carryforward. ChoiceOne also had a deferred tax asset of $44,000 as of December 31, 2012 and December 31, 2011 that was related to unexercised stock options. A valuation allowance for the entire balance had been recorded due to the fact that the exercise price of most of the options was higher than the market price of ChoiceOne’s stock as of the end of 2012 and the exercise price of all of the options was higher than the market price of ChoiceOne’s stock as of the end of 2011. The valuation allowances totaling $89,000 as of December 31, 2012 and December 31, 2011 have been netted against the total deferred tax assets listed above.

Note 12 – Related Party Transactions

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

(Dollars in thousands)

	2012			2011
Balance, beginning of year	$	6,254		$	6,568
New loans		669			948
Repayments		(1,087	)		(1,262	)
Balance, end of year	$	5,836		$	6,254

Deposits from executive officers, directors and their affiliates were $12.5 million and $14.8 million at December 31, 2012 and 2011, respectively.

Note 13 – Employee Benefit Plans

401(k) Plan:

The 401(k) plan allows employees to contribute up to the IRS maximum. Matching company contributions to the plan are discretionary. Expense of this plan was $178,000, $115,000, and $112,000 in 2012, 2011, and 2010, respectively.

Employee Stock Ownership Plan:

Employees participate in an Employee Stock Ownership Plan (the “ESOP”). ChoiceOne may make discretionary contributions to the ESOP. Shares of ChoiceOne common stock are allocated to participants based on relative compensation earned and compensation expense is recorded when allocated. Dividends on allocated shares increase the participant accounts. Participants become fully vested upon completing six years of qualifying service. Participants receive the shares at the end of employment. A participant may require stock received to be repurchased by ChoiceOne at any time. ChoiceOne did not contribute to the ESOP nor was any expense recorded in 2012, 2011, or 2010.

43

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

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

(Dollars in thousands)

	2012		2011		2010
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	$	77	$	64	$	64

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 negative post-retirement benefit expense of $10,000 in 2012, $11,000 in 2011, and $15,000 in 2010. The post-retirement obligation liability was $158,000 as of December 31, 2012 and $131,000 as of December 31, 2011.

Deferred Compensation Plans:

A deferred director compensation plan covers former directors of Valley Ridge Bank, 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 $15,000, $17,000, and $20,000 in 2012, 2011, and 2010, respectively. The deferred compensation liability was $261,000 as of December 31, 2012 and $287,000 as of December 31, 2011.

A supplemental retirement plan covers four former executive officers of Valley Ridge Bank. 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. ChoiceOne incurred deferred compensation plan expense of $120,000 in 2012, $32,000 in 2011, and $41,000 in 2010. Deferred compensation liabilities of $766,000 and $715,000 were outstanding as of December 31, 2012 and December 31, 2011, respectively.

Note 14 - Stock Options

Options to buy stock have been granted to key employees under an incentive stock option plan to provide them with additional equity interest in ChoiceOne. ChoiceOne recognized compensation expense of $0 in 2012, $5,000 in 2011, and $15,000 in 2010 in connection with stock options that vested for current participants during these years. The Amended and Restated Executive Stock Incentive Plan under which the stock options were granted expired in 2012. A new Stock Incentive Plan was approved by the Registrant’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, 2012, there were 100,000 shares available for future grants.

A summary of the activity in the plan follows:

	2012				2011				2010
	Shares		Weighted average exercise price		Shares		Weighted average exercise price		Shares		Weighted average exercise price
Options outstanding, beginning of year		46,656	$	16.62		49,232	$	16.46		49,232	$	16.46
Options granted		—		—		—		—		—		—
Options exercised		2,625	$	13.70		2,576	$	13.44		—		—
Options forfeited or expired		7,131	$	15.97		—		—		—		—
Options outstanding, end of year		36,900	$	16.95		46,656	$	16.62		49,232	$	16.46
Options exercisable at December 31		36,900	$	16.95		46,656	$	16.62		46,357	$	16.64

44

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

The range of prices for options outstanding and exercisable at the end of 2012 ranged from $13.50 to $21.43 per share. The weighted average remaining contractual life of options outstanding and exercisable at the end of 2012 was approximately 3.2 years. A total of 12,100 options had an exercise price lower than ChoiceOne’s closing stock price as of the end of 2012, while 24,800 options had an exercise price higher than the closing stock price. Information pertaining to options outstanding at December 31, 2012 is as follows:

Exercise price of stock options:		Number of options outstanding at year-end		Number of options exercisable at year-end		Average remaining contractual life (in years)
$	13.50		10,000		10,000		5.07
$	13.70		2,100		2,100		0.04
$	16.31		5,512		5,512		1.06
$	17.95		8,000		8,000		4.05
$	18.85		5,250		5,250		3.05
$	21.43		6,038		6,038		2.05

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. No options were granted in 2012, 2011, or 2010.

There were no shares that were vested during 2012. As of December 31, 2012, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plan.

Note 15 - Earnings Per Share

(Dollars in thousands, except per share data)

	2012		2011		2010
Basic
Net income	$	4,262	$	3,513	$	2,711
Weighted average common shares outstanding		3,296,462		3,286,969		3,273,151
Basic earnings per common share	$	1.29	$	1.07	$	0.83
Diluted
Net income	$	4,262	$	3,513	$	2,711
Weighted average common shares outstanding		3,296,462		3,286,969		3,273,151
Plus: dilutive effect of assumed exercises of stock options		436		—		—
Average shares and dilutive potential common shares		3,296,898		3,286,969		3,273,151
Diluted earnings per common share	$	1.29	$	1.07	$	0.83

There were 28,625 stock options as of December 31, 2012, 46,656 as of December 31, 2011, and 49,232 as of December 31, 2010 considered to be anti-dilutive to earnings per share and thus have been excluded from the calculations above.

45

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Note 16 - Other Comprehensive Income (Loss)

Other comprehensive income (loss) components and related taxes follow:

(Dollars in thousands)

	2012			2011			2010
Unrealized holding gains on available for sale securities	$	363		$	2,448		$	635
Less reclassification adjustments for gains included in net income		419			129			443
Net unrealized gains		(56	)		2,319			192
Less tax effect		(19	)		789			65
Net-of-tax amount		(37	)		1,530			127
Change in funded status of post-retirement benefit plan		(34	)		(23	)		(21	)
Tax effect		(12	)		(8	)		(7	)
Net-of-tax amount		(22	)		(15	)		(14	)
Total	$	(59	)	$	1,515		$	113

Accumulated other comprehensive income, a component of equity, was comprised of the following at December 31:

(Dollars in thousands)

	2012			2011
Unrealized holding gains on available for sale securities	$	3,347		$	3,402
Unrecognized actuarial gains on post-retirement benefit plan		223			258
Tax effect		(1,214	)		(1,245	)
Net accumulated other comprehensive income	$	2,356		$	2,415

Note 17 – Condensed Financial Statements of Parent Company

Condensed Balance Sheets

(Dollars in thousands)	December 31
	2012		2011
Assets
Cash	$	135	$	487
Securities available for sale		628		218
Other assets		27		26
Investment in ChoiceOne Bank		59,810		57,264
Total assets	$	60,600	$	57,995
Liabilities
Mandatory redeemable shares under ESOP, at fair value	$	77	$	65
Other liabilities		17		26
Total liabilities		94		91
Shareholders’ equity		60,506		57,904
Total liabilities and shareholders’ equity	$	60,600	$	57,995

46

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Condensed Statements of Income

(Dollars in thousands)	Years Ended December 31
	2012		2011		2010
Interest and dividends from ChoiceOne Bank	$	1,710	$	1,695	$	1,641
Interest and dividends from other securities		16		7		7
Other income		—		33		—
Total income		1,726		1,735		1,648
Other expenses		89		81		67
Income before income tax and equity in undistributed net income of subsidiary		1,637		1,654		1,581
Income tax benefit		29		16		23
Income before equity in undistributed net income of subsidiary		1,666		1,670		1,604
Equity in undistributed net income of subsidiary		2,596		1,843		1,107
Net income	$	4,262	$	3,513	$	2,711

Condensed Statements of Cash Flows

(Dollars in thousands)	Years Ended December 31
	2012			2011			2010
Cash flows from operating activities:
Net income	$	4,262		$	3,513		$	2,711
Adjustments to reconcile net income to net cash from operating activities:
Equity in undistributed net income of subsidiary		(2,596	)		(1,843	)		(1,107	)
Amortization		2			—			—
Changes in other assets		(1	)		50			(17	)
Changes in other liabilities		(10	)		17			(18	)
Net cash from operating activities		1,657			1,737			1,569
Cash flows from investing activities:
Maturities of securities		—			—			200
Purchases of securities		(409	)		—			(202	)
Net cash from investing activities		(409	)		—			(2	)
Cash flows from financing activities:
Issuance of common stock		123			127			125
Repurchase of common stock		(75	)		—			—
Cash dividends paid		(1,648	)		(1,578	)		(1,572	)
Net cash from financing activities		(1,600	)		(1,451	)		(1,447	)
Net change in cash		(352	)		286			120
Beginning cash		487			201			81
Ending cash	$	135		$	487		$	201

47

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Note 18 – Financial Instruments

Financial instruments as of the dates indicated were as follows (dollars in thousands):

	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2012
Assets:
Cash and due from banks	$	19,034	$	19,034	$	19,034	$	—	$	—
Securities available for sale		134,492		134,492		—		131,893		2,599
Federal Home Loan Bank and Federal
Reserve Bank stock		3,750		3,750		—		3,750		—
Loans held for sale		1,874		1,933		—		1,933		—
Loans, net		305,616		310,175		—		—		310,175
Liabilities:
Noninterest-bearing deposits		101,861		101,861		—		101,861		—
Interest-bearing deposits		322,338		323,457		—		323,457		—
Repurchase agreements		19,572		19,573		—		19,573		—
Federal Home Loan Bank advances		420		485		—		485		—

	Carrying Amount		Estimated Fair Value
December 31, 2011
Assets:
Cash and due from banks	$	17,125	$	17,125
Securities available for sale		114,276		114,276
Federal Home Loan Bank and Federal
Reserve Bank stock		3,749		3,749
Loans held for sale		1,262		1,262
Loans, net		314,914		319,017
Liabilities:
Noninterest-bearing deposits		78,263		78,263
Interest-bearing deposits		325,102		326,123
Repurchase agreements		21,869		21,083
Federal Home Loan Bank advances		8,447		8,664

The estimated fair values approximate the carrying amounts for all assets and liabilities except those described later in this paragraph. The methodology for determining the estimated fair value for securities available for sale is described in Note 19. 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 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.

Note 19 – 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, 2012 and December 31, 2011, 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.

48

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

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, 2012 or December 31, 2011. Disclosures concerning assets measured at fair value are as follows:

Assets Measured at Fair Value on a Recurring Basis
(Dollars in Thousands)

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at Date Indicated
Investment Securities, Available for Sale – December 31, 2012
U.S. Government and federal agency	$	—	$	40,268	$	—	$	40,268
U.S. Treasury notes and bonds		—		7,398		—		7,398
State and municipal		—		62,579		2,099		64,678
Mortgage-backed		—		12,526		—		12,526
Corporate		—		6,712		—		6,712
Foreign debt		—		1,001		—		1,001
Equity securities		—		1,409		500		1,909
Total	$	—	$	131,893	$	2,599	$	134,492
Investment Securities, Available for Sale – December 31, 2011
U.S. Government and federal agency	$	—	$	40,413	$	—	$	40,413
State and municipal		—		52,228		2,271		54,499
Mortgage-backed		—		9,780		—		9,780
Corporate		—		6,011		—		6,011
FDIC-guaranteed financial institution debt		—		2,038		—		2,038
Equity securities		—		1,035		500		1,535
Total	$	—	$	111,505	$	2,771	$	114,276

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, state and municipal securities, mortgage-backed securities, corporate bonds, FDIC- guaranteed financial institution debt, and equity securities. The Company classified certain state and municipal securities and privately issued trust preferred 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.

ChoiceOne reviewed the methodologies used to estimate the fair values of all securities in 2012. Based on an updated analysis, it was determined that the fair values of U.S. Government and federal agency securities, corporate securities, and FDIC-guaranteed financial institution debt were based upon Level 2 inputs. These securities classes, which were previously disclosed as based on Level 1 inputs, have been adjusted accordingly.

49

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)

	2012			2011
Investment Securities, Available for Sale
Balance, January 1	$	2,771		$	2,839
Total realized and unrealized gains included in income		—			—
Total unrealized gains (losses) included in other comprehensive income		(9	)		164
Net purchases, sales, calls, and maturities		(163	)		(299	)
Net transfers into Level 3		—			67
Balance, December 31	$	2,599		$	2,771

Of the Level 3 assets that were still held by the Bank at December 31, 2012, the net unrealized loss for the twelve months ended December 31, 2012 was $9,000, which is recognized in other comprehensive income in the consolidated balance sheet. A total of $564,000 of Level 3 securities were purchased in 2012. One security was reclassified from a Level 2 measurement of fair value to a Level 3 measurement in 2011 as a result of a change in the marketability of the security.

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)

	Balance 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, 2012	$	5,939	$	—	$	—	$	5,939
December 31, 2011	$	4,501	$	—	$	—	$	4,501
Other Real Estate
December 31, 2012	$	2,019	$	—	$	—	$	2,019
December 31, 2011	$	1,934	$	—	$	—	$	1,934

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.

50

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Note 20 – 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:

(Dollars in thousands)	2012				2011
		Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Unused lines of credit and letters of credit	$	2,474	$	49,196	$	2,868	$	47,217
Commitments to fund loans (at market rates)		5,145		5,798		3,610		1,919

Commitments to fund loans are generally made for periods of 180 days or less. The fixed rate loan commitments have interest rates ranging from 1.00% to 4.35% and maturities ranging from 1 year to 30 years.

Note 21 – Regulatory Capital

ChoiceOne Bank is 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. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as are asset growth and expansion, and plans for capital restoration are required. At year-end 2012 and 2011, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s categories.

Actual capital levels and minimum required levels for ChoiceOne 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, 2012
Total capital (to risk weighted assets)	$	46,004	13.7	%	$	26,856	8.0	%	$	33,570	10.0	%
Tier 1 capital (to risk weighted assets)		42,015	12.5			13,428	4.0			20,142	6.0
Tier 1 capital (to average assets)		42,015	8.8			19,191	4.0			23,988	5.0
December 31, 2011
Total capital (to risk weighted assets)	$	43,042	12.5	%	$	27,510	8.0	%	$	34,387	10.0	%
Tier 1 capital (to risk weighted assets)		38,960	11.3			13,755	4.0			20,632	6.0
Tier 1 capital (to average assets)		38,960	8.3			18,801	4.0			23,502	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, 2012, approximately $5,546,000 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 Bank, which is restricted by state law and regulations.

51

ChoiceOne Financial Services, Inc.

Notes to Consolidated Financial Statements

Note 22 – Quarterly Financial Data (Unaudited)

(Dollars in thousands)							Earnings Per Share
		Interest Income		Net Interest Income		Net Income		Basic		Fully Diluted
2012
First Quarter	$	5,175	$	4,419	$	1,015	$	0.31	$	0.31
Second Quarter		5,004		4,290		1,021		0.31		0.31
Third Quarter		5,103		4,512		1,122		0.34		0.34
Fourth Quarter		4,937		4,454		1,104		0.33		0.33
2011
First Quarter	$	5,282	$	4,345	$	704	$	0.21	$	0.21
Second Quarter		5,386		4,472		904		0.28		0.28
Third Quarter		5,399		4,523		886		0.27		0.27
Fourth Quarter		5,408		4,582		1,019		0.31		0.31

There were no significant fluctuations in the quarterly financial data in 2011 or 2012. The growth in net income that occurred in 2012 was due to reduced provision for loan losses and increased noninterest income, which was partially offset by a decline in net interest income and growth in noninterest expenses.

52

ChoiceOne Financial Services, Inc.

Corporate and Shareholder information

Corporate Headquarters
ChoiceOne Financial Services, Inc.
109 East Division Street
Sparta, Michigan 49345
Phone: (616) 887-7366
Fax: (616) 887-7990
Website: www.choiceone.com

Market Makers in ChoiceOne Financial
Services, Inc. Stock
Boenning & Scattergood
Powell, Ohio
(866) 326-8113

Stock Registrar and Transfer Agent
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
(800) 368-5948

Annual Shareholder Meeting
The 2013 Annual Shareholder Meeting of
ChoiceOne Financial Services, Inc., will
be held at 11:00 a.m. local time on Wednesday, May 1, 2013, at Moss Ridge Golf Club in Ravenna, Michigan. ChoiceOne Bank
Alpine Office
5050 Alpine Avenue NW
Comstock Park, Michigan 49321

Cedar Springs Office
4170 – 17 Mile Road
Cedar Springs, Michigan 49319

Coopersville Office
661 West Randall Street
Coopersville, Michigan 49404

Egelston Office
5475 East Apple Avenue
Muskegon, Michigan 49442

Fremont Office
1423 West Main Street
Fremont, Michigan 49412

Grant Office
10 West Main Street
Grant, Michigan 49327

Kent City Office
450 West Muskegon Street
Kent City, Michigan 49330

Newaygo Office
246 West River Valley
Newaygo, Michigan 49337

Ravenna Office
3069 Slocum Road
Ravenna, Michigan 49451

Rockford Office
6795 Courtland Drive
Rockford, Michigan 49341

Sparta - Main Office
109 East Division Street
Sparta, Michigan 49345

Sparta - Appletree Office
416 West Division Street
Sparta, Michigan 49345 ChoiceOne Insurance Agencies, Inc.
Sparta Office
109 East Division Street
Sparta, Michigan 49345

53

ChoiceOne Financial Services, Inc.

Directors and Officers

Directors
ChoiceOne Financial Services, Inc.

Jerome B. Arends
Former President and Chief Executive
Officer of Ravenna Farm Equipment
(Agricultural Equipment Supplier)

Frank G. Berris
President and Chief Executive Officer,
American Gas & Oil Co., Inc.
(Distributor of Petroleum Products)

James A. Bosserd
President and Chief Executive Officer,
ChoiceOne Financial Services, Inc. and
ChoiceOne Bank

K. Timothy Bull
President, Moon Lake Orchards, Inc.
(Fruit Producer)

William F. Cutler, Jr.
Former Vice President, H. H. Cutler Co.
(Apparel Manufacturer)

Lewis G. Emmons
President, Emmons Development (Real Estate Development)

Stuart Goodfellow
Chairman of The Board, ChoiceOne Financial Services, Inc. and ChoiceOne Bank Former Owner, Goodfellow Blueberry Farms
Former Owner, Goodfellow Vending
Services (Vending Company)

Gary Gust
Former President, Gust Construction Company
(General Contractor)

Paul L. Johnson
Former President, Falcon Resources, Inc.
(Automotive and Furniture Design)

Dennis C. Nelson, DDS
General Dentistry Directors
ChoiceOne Financial Services, Inc.
(continued)

Nels W. Nyblad
President, Nyblad Orchards
(Fruit Producer)

Roxanne M. Page
CPA and Partner, Beene Garter LLP
(Certified Public Accountants)

Donald VanSingel
Vice Chairman of The Board, ChoiceOne Financial Services, Inc. and ChoiceOne Bank Former Consultant, Governmental
Consultant Services, Inc. Former Legislator, Michigan House of Representatives Officers
ChoiceOne Financial Services, Inc.

James A. Bosserd
President and Chief Executive Officer

Louis D. Knooihuizen
Senior Vice President

Michael E. McHugh
Senior Vice President

Mary J. Johnson
Secretary

Thomas L. Lampen
Treasurer

54

Officers ChoiceOne Bank	Officers ChoiceOne Bank (continued)	Officers ChoiceOne Bank (continued)
James A. Bosserd President Chief Executive Officer Lee A. Braford Senior Vice President Chief Credit Officer Sheila R. Clark Senior Vice President Human Resources Director Mary J. Johnson Senior Vice President Operations/Cashier Louis D. Knooihuizen Senior Vice President Chief Lending Officer Thomas L. Lampen, CPA Senior Vice President Chief Financial Officer Michael E. McHugh Senior Vice President Accounting, Sales & Marketing Kelly J. Potes Senior Vice President Retail Banking & GM Investments/Ins. Linda K. Anderson Vice President Call Center & Regional/Branch Sales Manager, Rockford Brian R. Bacon Vice President Commercial Loan Officer Kent G. Gagnon Vice President Business Development Denise L. Gates Vice President Regional/Branch Sales Manager, Cedar Springs Gregory M. Goss Vice President Security/BSA Officer Amy S. Homich Vice President Marketing & Business Development	Kevin T. Kelling Vice President Mortgage Loan Sales & Operations Officer Peggy A. O’Dea Vice President Regional/Branch Sales Manager, Coopersville Nicole N. Sakowski Vice President Collections Department Manager Daniel C. Wheat Vice President Regional/Branch Sales Manager, Grant Lisa R. Beard Assistant Vice President Branch Sales Manager - Fremont Rita A. Flintoff Assistant Vice President Branch Sales Manager – Newaygo Stephen P. Grey Assistant Vice President Credit Department Manager & Loan Officer Jason J. Herbig Assistant Vice President Network Administrator Rebecca J. Johnson Assistant Vice President Retail Banking Bonnie K. Koehn Assistant Vice President Branch Sales Manager – Sparta Main & Appletree Linda S. Nichols Assistant Vice President Branch Sales Manager, Ravenna Lori J. O’Brien Assistant Vice President Loan Operations Jason A. Parker Assistant Vice President Commercial Loan Officer Maria J. Roossinck Assistant Vice President Risk Management	Paul E. Tucker Assistant Vice President Network Administrator Cynthia J. Watson Assistant Vice President Operations Jennifer M. Bellamy Commercial Loan Officer Veronica M. Bishop Call Center Manager Candace J. Bouwkamp Administrative Services Manager Patricia J. Brown Branch Sales Manager, Egelston Susan Compton Branch Sales Manager, Kent City Lee J. Decker Consumer Loan Manager/ IT Specialist Gary B. Hall Mortgage Sales Manager John K. Harpst Mortgage Operations Manager Carrie J. Olson Branch Sales Manager, Alpine Officers ChoiceOne Insurance Agencies, Inc. James A. Bosserd President Kelly J. Potes, CFP Senior Vice President Randy A. Schmidt, CFP Vice President Investment Advisor/Agent Thomas L. Lampen, CPA Treasurer

55

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.

EX-23

ChoiceOne Financial Services, Inc 10-K

CONSENT OF REGISTERED PUBLIC ACCOUNTING FIRM

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 27, 2013 on the consolidated financial statements of ChoiceOne Financial Services, Inc. for the years ended December 31, 2012, 2011 and 2010, which report is included in Item 8 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

 

Plante & Moran, PLLC

Grand Rapids, Michigan

March 27, 2013

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, Michael E. McHugh and Thomas 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, 2012, 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, 2013	/s/ Jerome B. Arends
	(signature)
	Jerome B. Arends
	(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, Michael E. McHugh and Thomas 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, 2012, 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, 2013	/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, Michael E. McHugh and Thomas 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, 2012, 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 19, 2013	/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, Michael E. McHugh and Thomas 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, 2012, 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 23, 2013	/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, Michael E. McHugh and Thomas 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, 2012, 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, 2013	/s/ Lewis G. Emmons
	(signature)
	Lewis G. Emmons
	(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, Michael E. McHugh and Thomas 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, 2012, 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 19, 2013	/s/ Stuart Goodfellow
	(signature)
	Stuart Goodfellow
	(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, Michael E. McHugh and Thomas 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, 2012, 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 19, 2013	/s/ Gary Gust
	(signature)
	Gary Gust
	(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, Michael E. McHugh and Thomas 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, 2012, 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, 2013	/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, Michael E. McHugh and Thomas 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, 2012, 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, 2013	/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, Michael E. McHugh and Thomas 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, 2012, 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 23, 2013	/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, Michael E. McHugh and Thomas 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, 2012, 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 23, 2013	/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, Michael E. McHugh and Thomas 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, 2012, 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 19, 2013	/s/ Donald VanSingel
	(signature)
	Donald VanSingel
	(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, 2012 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 27, 2013	/s/ James A. Bosserd
	James A. Bosserd
	President and Chief Executive Officer ChoiceOne Financial Services, Inc.

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, 2012 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 27, 2013	/s/Thomas L. Lampen
	Thomas L. Lampen
	Treasurer ChoiceOne Financial Services, Inc.

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, 2012 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 27, 2013	/s/ James A. Bosserd
	James A. Bosserd
	President and Chief Executive Officer

Dated: March 27, 2013	/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.

XML

Federal Home Loan Bank Advances (Tables)

12 Months Ended

Dec. 31, 2012

Federal Home Loan Bank Advances Tables

Schedule of outstanding advances from the Federal Home Loan Bank

At December 31, advances from the Federal Home Loan Bank (the “FHLB”) were as follows:

(Dollars in thousands)

	2012		2011
Maturity of November 2024 with a fixed interest rate of 3.98%	$	420
Maturities ranging from November 2012 to November 2024, fixed interest rates ranging from 2.54% to 4.16%, with an average rate of 3.58%			$	8,447
Total advances outstanding at year-end	$	420	$	8,447

Schedule of maturities of FHLB Advances

Based on this collateral, the Bank was eligible to borrow an additional $46 million at year-end 2012. The scheduled maturities of advances from the FHLB at December 31, 2012 were as follows (dollars in thousands):

2013	$	28
2014		29
2015		30
2016		32
2017		33
Thereafter		268
Total	$	420

XML

Securities (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Securities Details 1
Proceeds from sales of securities	$ 9,369	$ 3,310	$ 6,059
Gross realized gains	421	133	540
Gross realized losses	2	4	3
Loss on other than temporary impairment			$ 94

XML

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2012

Fair Value Measurements Tables

Schedule of Assets Measured at Fair Value on a Recurring Basis

There were no liabilities measured at fair value as of December 31, 2012 or December 31, 2011. Disclosures concerning assets measured at fair value are as follows:

Assets Measured at Fair Value on a Recurring Basis
(Dollars in Thousands)

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at Date Indicated
Investment Securities, Available for Sale – December 31, 2012
U.S. Government and federal agency	$	—	$	40,268	$	—	$	40,268
U.S. Treasury notes and bonds		—		7,398		—		7,398
State and municipal		—		62,579		2,099		64,678
Mortgage-backed		—		12,526		—		12,526
Corporate		—		6,712		—		6,712
Foreign debt		—		1,001		—		1,001
Equity securities		—		1,409		500		1,909
Total	$	—	$	131,893	$	2,599	$	134,492
Investment Securities, Available for Sale – December 31, 2011
U.S. Government and federal agency	$	—	$	40,413	$	—	$	40,413
State and municipal		—		52,228		2,271		54,499
Mortgage-backed		—		9,780		—		9,780
Corporate		—		6,011		—		6,011
FDIC-guaranteed financial institution debt		—		2,038		—		2,038
Equity securities		—		1,035		500		1,535
Total	$	—	$	111,505	$	2,771	$	114,276

Schedule of Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

	2012			2011
Investment Securities, Available for Sale
Balance, January 1	$	2,771		$	2,839
Total realized and unrealized gains included in income		—			—
Total unrealized gains (losses) included in other comprehensive income		(9	)		164
Net purchases, sales, calls, and maturities		(163	)		(299	)
Net transfers into Level 3		—			67
Balance, December 31	$	2,599		$	2,771

Schedule of Assets Measured at Fair Value on a Nonrecurring Basis

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)

	Balance 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, 2012	$	5,939	$	—	$	—	$	5,939
December 31, 2011	$	4,501	$	—	$	—	$	4,501
Other Real Estate
December 31, 2012	$	2,019	$	—	$	—	$	2,019
December 31, 2011	$	1,934	$	—	$	—	$	1,934

XML

Premises and Equipment (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Premises and equipment, gross	$ 19,892	$ 18,968
Accumulated depreciation	(7,771)	(6,888)
Premises and equipment, net	12,121	12,080
Land and Land Improvements
Premises and equipment, gross	4,108	4,084
Leasehold Improvements
Premises and equipment, gross	38	36
Buildings
Premises and equipment, gross	11,190	11,080
Furniture and Equipment
Premises and equipment, gross	$ 4,556	$ 3,768

XML

Securities (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Available for Sale Securities, Fair Values
Due within one year	$ 31,817
Due after one year through five years	53,249
Due after five years through ten years	32,565
Due after ten years	2,426
Total Debt Securities	120,057
Maturities without single maturity date	12,526
Equity securities	1,909
Fair Value	$ 134,492	$ 114,276

XML

Deposits (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Deposits Details 1
2013	$ 86,086
2014	21,923
2015	10,194
2016	7,769
2017	5,050
2018	535
Total	$ 131,557

XML

Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 134,492	$ 114,276
U.S. Government and federal agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	40,268	40,413
U.S. Treasury notes and bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	7,398
State and municipal
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	64,678	54,499
Mortgage-backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	12,526	9,780
Corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	6,712	6,011
Foreign Debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	1,909
Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	1,001	1,535
FDIC-guaranteed financial institution debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		2,038
Fair Value Measured on a Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Government and federal agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Treasury notes and bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | State and municipal
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage-backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Foreign Debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | FDIC-guaranteed financial institution debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	131,893	111,505
Fair Value Measured on a Recurring Basis | Significant Other Observable Inputs (Level 2) | U.S. Government and federal agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	40,268	40,413
Fair Value Measured on a Recurring Basis | Significant Other Observable Inputs (Level 2) | U.S. Treasury notes and bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	7,398
Fair Value Measured on a Recurring Basis | Significant Other Observable Inputs (Level 2) | State and municipal
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	62,579	52,228
Fair Value Measured on a Recurring Basis | Significant Other Observable Inputs (Level 2) | Mortgage-backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	12,526	9,780
Fair Value Measured on a Recurring Basis | Significant Other Observable Inputs (Level 2) | Corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	6,712	6,011
Fair Value Measured on a Recurring Basis | Significant Other Observable Inputs (Level 2) | Foreign Debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	1,001
Fair Value Measured on a Recurring Basis | Significant Other Observable Inputs (Level 2) | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	1,409	1,035
Fair Value Measured on a Recurring Basis | Significant Other Observable Inputs (Level 2) | FDIC-guaranteed financial institution debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		2,038
Fair Value Measured on a Recurring Basis | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	2,599	2,771
Fair Value Measured on a Recurring Basis | Significant Unobservable Inputs (Level 3) | U.S. Government and federal agency
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Significant Unobservable Inputs (Level 3) | U.S. Treasury notes and bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Significant Unobservable Inputs (Level 3) | State and municipal
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	2,099	2,271
Fair Value Measured on a Recurring Basis | Significant Unobservable Inputs (Level 3) | Mortgage-backed
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Significant Unobservable Inputs (Level 3) | Corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Significant Unobservable Inputs (Level 3) | Foreign Debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale
Fair Value Measured on a Recurring Basis | Significant Unobservable Inputs (Level 3) | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	500	500
Fair Value Measured on a Recurring Basis | Significant Unobservable Inputs (Level 3) | FDIC-guaranteed financial institution debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale

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Condensed Financial Statements of Parent Company (Tables)

12 Months Ended

Dec. 31, 2012

Financial Statements Of Parent Company Tables

Condensed Balance Sheets

Condensed Balance Sheets

(Dollars in thousands)	December 31
	2012		2011
Assets
Cash	$	135	$	487
Securities available for sale		628		218
Other assets		27		26
Investment in ChoiceOne Bank		59,810		57,264
Total assets	$	60,600	$	57,995
Liabilities
Mandatory redeemable shares under ESOP, at fair value	$	77	$	65
Other liabilities		17		26
Total liabilities		94		91
Shareholders’ equity		60,506		57,904
Total liabilities and shareholders’ equity	$	60,600	$	57,995

Condensed Statements of Income

Condensed Statements of Income

(Dollars in thousands)	Years Ended December 31
	2012		2011		2010
Interest and dividends from ChoiceOne Bank	$	1,710	$	1,695	$	1,641
Interest and dividends from other securities		16		7		7
Other income		—		33		—
Total income		1,726		1,735		1,648
Other expenses		89		81		67
Income before income tax and equity in undistributed net income of subsidiary		1,637		1,654		1,581
Income tax benefit		29		16		23
Income before equity in undistributed net income of subsidiary		1,666		1,670		1,604
Equity in undistributed net income of subsidiary		2,596		1,843		1,107
Net income	$	4,262	$	3,513	$	2,711

Condensed Statements of Cash Flows

Condensed Statements of Cash Flows

(Dollars in thousands)	Years Ended December 31
	2012			2011			2010
Cash flows from operating activities:
Net income	$	4,262		$	3,513		$	2,711
Adjustments to reconcile net income to net cash from operating activities:
Equity in undistributed net income of subsidiary		(2,596	)		(1,843	)		(1,107	)
Amortization		2			—			—
Changes in other assets		(1	)		50			(17	)
Changes in other liabilities		(10	)		17			(18	)
Net cash from operating activities		1,657			1,737			1,569
Cash flows from investing activities:
Maturities of securities		—			—			200
Purchases of securities		(409	)		—			(202	)
Net cash from investing activities		(409	)		—			(2	)
Cash flows from financing activities:
Issuance of common stock		123			127			125
Repurchase of common stock		(75	)		—			—
Cash dividends paid		(1,648	)		(1,578	)		(1,572	)
Net cash from financing activities		(1,600	)		(1,451	)		(1,447	)
Net change in cash		(352	)		286			120
Beginning cash		487			201			81
Ending cash	$	135		$	487		$	201

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Mortgage Banking (Tables)

12 Months Ended

Dec. 31, 2012

Mortgage Banking Tables

Schedule of activity in secondar market loans

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

(Dollars in thousands)

	2012		2011		2010
Loans originated for resale, net of principal payments	$	44,889	$	25,685	$	28,816
Proceeds from loan sales		45,622		26,611		28,088
Net gains on sales of loans held for sale		1,634		672		682
Loan servicing fees, net of amortization		131		161		41

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)

	2012			2011			2010
Balance, beginning of year	$	318		$	347		$	491
Capitalized		289			94			122
Amortization		(134	)		(123	)		(266	)
Balance, end of year	$	473		$	318		$	347

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Deposits (Details Narrative) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Deposits Details Narrative
Certificates of deposit $100,000 or more	$ 66,900	$ 70,900
Weighted average interest rate on brokered certificate of deposit	1.40%
Certificates of Deposit issued through CDARS	$ 14,200	$ 18,300

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Goodwill and Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Gross Carryng Amount	$ 4,481	$ 4,481
Accumulated Amortization	2,757	2,309
Core Deposit Intangible
Gross Carryng Amount	4,134	4,134
Accumulated Amortization	2,549	2,136
Other Intangible Assets
Gross Carryng Amount	347	347
Accumulated Amortization	$ 208	$ 173

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Related Party Transactions (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Related Party Transactions Details
Beginning Balance	$ 6,254	$ 6,568
New loans	669	948
Repayments	(1,087)	(1,262)
Ending Balance	$ 5,836	$ 6,254

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Securities (Details 4) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Securities with unrealized loss position
Less than 12 Months, Fair Value	$ 12,721	$ 6,006
Less than 12 Months, Unrealized Losses	(220)	(38)
12 Months or More, Fair Value	811	2,013
12 Months or More, Unrealized Losses	(35)	(293)
Total, Fair Value	13,532	8,019
Total, Unrealized Losses	(255)	(331)
U.S. Government and federal agency
Securities with unrealized loss position
Less than 12 Months, Fair Value	1,997
Less than 12 Months, Unrealized Losses	(2)
12 Months or More, Fair Value
12 Months or More, Unrealized Losses
Total, Fair Value	1,997
Total, Unrealized Losses	(2)
U.S. Treasury notes and bonds
Securities with unrealized loss position
Less than 12 Months, Fair Value	2,187
Less than 12 Months, Unrealized Losses	(9)
12 Months or More, Fair Value
12 Months or More, Unrealized Losses
Total, Fair Value	2,187
Total, Unrealized Losses	(9)
State and municipal
Securities with unrealized loss position
Less than 12 Months, Fair Value	7,623	2,938
Less than 12 Months, Unrealized Losses	(203)	(28)
12 Months or More, Fair Value	811	1,245
12 Months or More, Unrealized Losses	(35)	(61)
Total, Fair Value	8,434	4,183
Total, Unrealized Losses	(238)	(89)
Corporate
Securities with unrealized loss position
Less than 12 Months, Fair Value	768	1,023
Less than 12 Months, Unrealized Losses	(1)	(3)
12 Months or More, Fair Value
12 Months or More, Unrealized Losses
Total, Fair Value	768	1,023
Total, Unrealized Losses	(1)	(3)
Equity securities
Securities with unrealized loss position
Less than 12 Months, Fair Value	146
Less than 12 Months, Unrealized Losses	(5)
12 Months or More, Fair Value		768
12 Months or More, Unrealized Losses		(232)
Total, Fair Value	146	768
Total, Unrealized Losses	(5)	(232)
Mortgage-backed
Securities with unrealized loss position
Less than 12 Months, Fair Value		2,045
Less than 12 Months, Unrealized Losses		(7)
12 Months or More, Fair Value
12 Months or More, Unrealized Losses
Total, Fair Value		2,045
Total, Unrealized Losses		$ (7)

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Regulatory Capital (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Regulatory Capital Details
Total Capital	$ 46,004	$ 43,042
Total Capital (to risk-weighted assets) ratio	13.70%	12.50%
Minimum amount of capital for adequacy purposes	26,856	27,510
Minimum amount of capital for adequacy purposes, ratio	8.00%	8.00%
Minimum Capital required to be well-capitalized	33,570	34,387
Minimum Capital required to be well-capitalized, ratio	10.00%	10.00%
Tier 1 Capital	42,015	38,960
Tier 1 Capital (to average assets) ratio	12.50%	11.30%
Minimum amount of Tier 1 Capital for adequacy purposes	13,428	13,755
Minimum amount of Tier 1 Capital for adequacy purposes, ratio	4.00%	4.00%
Minimum Tier 1 Capital required to be well-capitalized	20,142	20,632
Minimum Tier 1 Capital required to be well-capitalized, ratio	6.00%	6.00%
Tier 1 Capital	42,015	38,960
Tier 1 Capital (to risk-weighted assets) ratio	8.80%	8.30%
Minimum amount of Tier 1 Capital for adequacy purposes	19,191	18,801
Minimum amount of Tier 1 Capital for adequacy purposes, ratio	4.00%	4.00%
Minimum Tier 1 Capital required to be well-capitalized	$ 23,988	$ 23,502
Minimum Tier 1 Capital required to be well-capitalized, ratio	5.00%	5.00%

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Other Real Estate Owned (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Other Real Estate Owned Details
Other real estate owned, net	$ 1,934	$ 1,953	$ 2,201
Transfers from loans	1,718	2,972	1,358
Reclassification to buildings	(20)
Proceeds from sales	(1,259)	(3,015)	(1,174)
Gains/(losses) on sales	51	279	96
Write-downs	(405)	(255)	(528)
Other real estate owned, net	2,019	1,934	1,953
(Gains)/ losses on sales of other real estate owned	51	279	96
Write-downs of other real estate owned	(405)	(255)	(528)
Proceeds from sales of other real estate owned	$ (1,259)	$ (3,015)	$ (1,174)

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Income Taxes (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Taxes Details 1
Income tax computed at statutory federal rate of 34%	$ 1,906	$ 1,555	$ 1,144
Tax exempt interest income	(466)	(437)	(483)
Tax exempt earnings on bank-owned life insurance	(152)	(121)	(122)
Nondeductible interest expense	13	16	25
Other items	42	47	90
Income tax expense	$ 1,343	$ 1,060	$ 654
Effective income tax rate	24.00%	23.00%	19.00%

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Repurchase Agreements (Details Narrative) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Repurchase Agreements Details Narrative
Structured Repurchase Agreement	$ 5,000
Fixed interest rate of structured agreement	4.55%

XML

Income Taxes (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Income Taxes Details 2
Allowance for loan losses	$ 920	$ 779
Deferred compensation	349	341
Write-downs on other real estate carryforward	255	339
Alternative minimum tax credit carryforward		75
Other	294	327
Total deferred tax assets	1,818	1,861
Depreciation	1,396	1,382
Unrealized gains on securities available for sale	1,138	1,157
Purchase accounting adjustments from merger	602	743
Loan servicing rights	161	108
Stock dividends received from Federal Home Loan Bank	83	83
Post-retirement benefits obligation	75	87
Other	112	103
Total deferred tax liabilities	3,567	3,663
Net deferred tax liabilities	$ (1,749)	$ (1,802)

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Deposits (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Deposits Details
Noninterest-bearing demand deposits	$ 101,861	$ 78,263
Interest-bearing demand deposits	66,569	64,498
Money market deposits	60,806	63,007
Savings deposits	63,406	46,737
Local certificates of deposit	130,057	144,983
Brokered certificates of deposit	1,500	5,877
Total deposits	$ 424,199	$ 403,365

XML

Premises and Equipment (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Minimum annual lease payaments for the fiscal year ended:
2013	$ 36

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Financial Instruments

12 Months Ended

Dec. 31, 2012

Financial Instruments

Financial Instruments

Note 18 – Financial Instruments

Financial instruments as of the dates indicated were as follows (dollars in thousands):

	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2012
Assets:
Cash and due from banks	$	19,034	$	19,034	$	19,034	$	—	$	—
Securities available for sale		134,492		134,492		—		131,893		2,599
Federal Home Loan Bank and Federal
Reserve Bank stock		3,750		3,750		—		3,750		—
Loans held for sale		1,874		1,933		—		1,933		—
Loans, net		305,616		310,175		—		—		310,175
Liabilities:
Noninterest-bearing deposits		101,861		101,861		—		101,861		—
Interest-bearing deposits		322,338		323,457		—		323,457		—
Repurchase agreements		19,572		19,573		—		19,573		—
Federal Home Loan Bank advances		420		485		—		485		—

	Carrying Amount		Estimated Fair Value
December 31, 2011
Assets:
Cash and due from banks	$	17,125	$	17,125
Securities available for sale		114,276		114,276
Federal Home Loan Bank and Federal
Reserve Bank stock		3,749		3,749
Loans held for sale		1,262		1,262
Loans, net		314,914		319,017
Liabilities:
Noninterest-bearing deposits		78,263		78,263
Interest-bearing deposits		325,102		326,123
Repurchase agreements		21,869		21,083
Federal Home Loan Bank advances		8,447		8,664

The estimated fair values approximate the carrying amounts for all assets and liabilities except those described later in this paragraph. The methodology for determining the estimated fair value for securities available for sale is described in Note 19. 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 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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Regulatory Capital (Tables)

12 Months Ended

Dec. 31, 2012

Regulatory Capital Tables

Schedule of actual capital and minimum required levels

Actual capital levels and minimum required levels for ChoiceOne 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, 2012
Total capital (to risk weighted assets)	$	46,004	13.7	%	$	26,856	8.0	%	$	33,570	10.0	%
Tier 1 capital (to risk weighted assets)		42,015	12.5			13,428	4.0			20,142	6.0
Tier 1 capital (to average assets)		42,015	8.8			19,191	4.0			23,988	5.0
December 31, 2011
Total capital (to risk weighted assets)	$	43,042	12.5	%	$	27,510	8.0	%	$	34,387	10.0	%
Tier 1 capital (to risk weighted assets)		38,960	11.3			13,755	4.0			20,632	6.0
Tier 1 capital (to average assets)		38,960	8.3			18,801	4.0			23,502	5.0

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2012

Employee Benefit Plans Tables

Schedule of shares in ESOP plan

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

(Dollars in thousands)

	2012		2011		2010
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	$	77	$	64	$	64

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Goodwill and Intangible Assets (Details Narrative) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Goodwill And Intangible Assets Details Narrative
Intangible asset amortization	$ 448	$ 448	$ 448

XML

Earnings Per Share (Details Narrative)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Earnings Per Share Details
Stock options considered to be anti-dilutive to earnings per share	28,625	46,656	49,232

XML

Deposits (Tables)

12 Months Ended

Dec. 31, 2012

Deposits Tables

Schedule of deposits outstanding

Deposit balances as of December 31 consisted of the following:

(Dollars in thousands)

	2012		2011
Noninterest-bearing demand deposits	$	101,861	$	78,263
Interest-bearing demand deposits		66,569		64,498
Money market deposits		60,806		63,007
Savings deposits		63,406		46,737
Local certificates of deposit		130,057		144,983
Brokered certificates of deposit		1,500		5,877
Total deposits	$	424,199	$	403,365

Schedule of maturities of time deposits

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

(Dollars in thousands)

2013	$	86,086
2014		21,923
2015		10,194
2016		7,769
2017		5,050
2018		535
Total	$	131,557

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Summary of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Summary Of Significant Accounting Policies Details
Cash on deposit with Federal Reserve Bank	$ 318	$ 111

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Mortgage Banking (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Mortgage Banking Details
Loans originated for sale	$ 44,889	$ 25,685	$ 28,816
Proceeds from loan sales	45,622	26,611	28,088
Gains on sales of loans	1,634	672	682
Loan servicing fees, net of amortization	$ 131	$ 161	$ 41

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Quarterly Financial Data (Unaudited) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Quarterly Financial Data Details
Total interest income	$ 4,937	$ 5,103	$ 5,004	$ 5,175	$ 5,408	$ 5,399	$ 5,386	$ 5,282	$ 20,219	$ 21,475	$ 21,961
Net interest income	4,454	4,512	4,290	4,419	4,582	4,523	4,472	4,345	17,675	17,922	16,995
Net income	$ 1,104	$ 1,122	$ 1,021	$ 1,015	$ 1,019	$ 886	$ 904	$ 704	$ 4,262	$ 3,513	$ 2,711
Basic earnings per common share	$ 0.33	$ 0.34	$ 0.31	$ 0.31	$ 0.31	$ 0.27	$ 0.28	$ 0.21	$ 1.29	$ 1.07	$ 0.83
Diluted earnings per common share	$ 0.33	$ 0.34	$ 0.31	$ 0.31	$ 0.31	$ 0.27	$ 0.28	$ 0.21	$ 1.29	$ 1.07	$ 0.83

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Loans and Allowance for Loan Losses (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Risk rated loans	$ 311,468	$ 320,127	$ 316,940
Agricultural
Risk rated loans	31,790	38,929	29,681
Agricultural | Risk ratings 1 and 2
Risk rated loans	8,615	6,486
Agricultural | Risk ratings 3
Risk rated loans	16,173	20,211
Agricultural | Risk ratings 4
Risk rated loans	5,040	9,499
Agricultural | Risk ratings 5
Risk rated loans	1,939	2,672
Agricultural | Risk ratings 6
Risk rated loans	19	57
Agricultural | Risk ratings 7
Risk rated loans	4	4
Commercial and Industrial
Risk rated loans	67,365	58,685	55,947
Commercial and Industrial | Risk ratings 1 and 2
Risk rated loans	9,040	4,149
Commercial and Industrial | Risk ratings 3
Risk rated loans	43,549	30,109
Commercial and Industrial | Risk ratings 4
Risk rated loans	13,417	21,993
Commercial and Industrial | Risk ratings 5
Risk rated loans	855	1,669
Commercial and Industrial | Risk ratings 6
Risk rated loans	361	680
Commercial and Industrial | Risk ratings 7
Risk rated loans	143	85
Commercial Real Estate
Risk rated loans	93,312	106,250	116,351
Commercial Real Estate | Risk ratings 1 and 2
Risk rated loans	2,711	6,403
Commercial Real Estate | Risk ratings 3
Risk rated loans	45,295	45,034
Commercial Real Estate | Risk ratings 4
Risk rated loans	30,223	33,462
Commercial Real Estate | Risk ratings 5
Risk rated loans	74,847	14,313
Commercial Real Estate | Risk ratings 6
Risk rated loans	6,960	5,009
Commercial Real Estate | Risk ratings 7
Risk rated loans	$ 276	$ 2,029

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Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2012

Financial Instruments Tables

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

Financial instruments as of the dates indicated were as follows (dollars in thousands):

	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2012
Assets:
Cash and due from banks	$	19,034	$	19,034	$	19,034	$	—	$	—
Securities available for sale		134,492		134,492		—		131,893		2,599
Federal Home Loan Bank and Federal
Reserve Bank stock		3,750		3,750		—		3,750		—
Loans held for sale		1,874		1,933		—		1,933		—
Loans, net		305,616		310,175		—		—		310,175
Liabilities:
Noninterest-bearing deposits		101,861		101,861		—		101,861		—
Interest-bearing deposits		322,338		323,457		—		323,457		—
Repurchase agreements		19,572		19,573		—		19,573		—
Federal Home Loan Bank advances		420		485		—		485		—

	Carrying Amount		Estimated Fair Value
December 31, 2011
Assets:
Cash and due from banks	$	17,125	$	17,125
Securities available for sale		114,276		114,276
Federal Home Loan Bank and Federal
Reserve Bank stock		3,749		3,749
Loans held for sale		1,262		1,262
Loans, net		314,914		319,017
Liabilities:
Noninterest-bearing deposits		78,263		78,263
Interest-bearing deposits		325,102		326,123
Repurchase agreements		21,869		21,083
Federal Home Loan Bank advances		8,447		8,664

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Securities

12 Months Ended

Dec. 31, 2012

Securities

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:

	2012
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	39,815	$	455	$	(2	)	$	40,268
U.S. Treasury notes and bonds		7,362		45		(9	)		7,398
State and municipal		62,248		2,668		(238	)		64,678
Mortgage-backed		12,218		308		—			12,526
Corporate		6,600		113		(1	)		6,712
Foreign debt		1,000		1		—			1,001
Equity securities		1,902		12		(5	)		1,909
Total	$	131,145	$	3,602	$	(255	)	$	134,492

	2011
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	39,829	$	584	$	—		$	40,413
State and municipal		51,859		2,729		(89	)		54,499
Mortgage-backed		9,511		276		(7	)		9,780
Corporate		5,914		100		(3	)		6,011
FDIC-guaranteed financial institution debt		2,010		28		—			2,038
Equity securities		1,751		16		(232	)		1,535
Total	$	110,874	$	3,733	$	(331	)	$	114,276

Information regarding sales of securities available for sale follows:

(Dollars in thousands)

	2012		2011		2010
Proceeds from sales of securities	$	9,369	$	3,310	$	6,059
Gross realized gains		421		133		540
Gross realized losses		2		4		3
Loss on other than temporary impairment		—		—		94

Contractual maturities of securities available for sale at December 31, 2012 were as follows:

(Dollars in thousands)	Fair Value
Due within one year	$	31,817
Due after one year through five years		53,249
Due after five years through ten years		32,565
Due after ten years		2,426
Total debt securities		120,057
Mortgage-backed securities, not due at a specific date		12,526
Equity securities		1,909
Total	$	134,492

Various securities were pledged as collateral for securities sold under agreements to repurchase. The carrying amount of securities pledged as collateral at December 31 was as follows:

(Dollars in thousands)

	2012		2011
Securities pledged for securities sold under agreements to repurchase	$	27,085	$	27,421

Securities with unrealized losses at year-end 2012 and 2011, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, were as follows:

(Dollars in thousands)	2012
	Less than 12 months					More than 12 months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Government agencies	$	1,997	$	(2	)	$	—	$	—		$	1,997	$	(2	)
U.S. Treasury notes and bonds		2,187		(9	)		—		—			2,187		(9	)
State and municipal		7,623		(203	)		811		(35	)		8,434		(238	)
Corporate		768		(1	)		—		—			768		(1	)
Equity securities		146		(5	)		—		—			146		(5	)
Total temporarily impaired	$	12,721	$	(220	)	$	811	$	(35	)	$	13,532	$	(255	)

(Dollars in thousands)	2011
	Less than 12 months					More than 12 months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	2,938	$	(28	)	$	1,245	$	(61	)	$	4,183	$	(89	)
Mortgage-backed		2,045		(7	)		—		—			2,045		(7	)
Corporate		1,023		(3	)		—		—			1,023		(3	)
Equity securities		—		—			768		(232	)		768		(232	)
Total temporarily impaired	$	6,006	$	(38	)	$	2,013	$	(293	)	$	8,019	$	(331	)

One municipal security with a fair value of $306,000 was considered to be other than temporarily impaired as of December 31, 2011. The issuer of the security defaulted upon its maturity of September 1, 2009. Impairment losses totaling $141,000 had been recorded through the end of 2010 due to uncertainty as to how much and when principal repayment would be received. Settlement was reached with the security’s issuer in December 2011 and the bond’s carrying value was reclassified from securities to other assets in January 2012 upon termination of the bond’s contractual agreement. ChoiceOne received the carrying value of the security in the second quarter of 2012.

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. Management believed that unrealized losses as of December 31, 2012 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 2012 or 2011.

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Loans and Allowance for Loan Losses (Details 3) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Risk rated loans	$ 311,468	$ 320,127	$ 316,940
Consumer
Risk rated loans	19,367	18,657	16,709
Consumer | Performing
Risk rated loans	19,334	18,634
Consumer | Nonperforming
Risk rated loans	33	23
Construction Real Estate
Risk rated loans	1,056	1,169	853
Construction Real Estate | Performing
Risk rated loans	1,056	1,169
Construction Real Estate | Nonperforming
Risk rated loans
Residential Real Estate
Risk rated loans	98,578	96,437	97,399
Residential Real Estate | Performing
Risk rated loans	98,018	95,732
Residential Real Estate | Nonperforming
Risk rated loans	$ 560	$ 705

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Stock Options (Tables)

12 Months Ended

Dec. 31, 2012

Stock Options Tables

Schedule of stock option activity

A summary of the activity in the plan follows:

	2012				2011				2010
	Shares		Weighted average exercise price		Shares		Weighted average exercise price		Shares		Weighted average exercise price
Options outstanding, beginning of year		46,656	$	16.62		49,232	$	16.46		49,232	$	16.46
Options granted		—		—		—		—		—		—
Options exercised		2,625	$	13.70		2,576	$	13.44		—		—
Options forfeited or expired		7,131	$	15.97		—		—		—		—
Options outstanding, end of year		36,900	$	16.95		46,656	$	16.62		49,232	$	16.46
Options exercisable at December 31		36,900	$	16.95		46,656	$	16.62		46,357	$	16.64

Schedule of outstanding stock options

Information pertaining to options outstanding at December 31, 2012 is as follows:

Exercise price of stock options:		Number of options outstanding at year-end		Number of options exercisable at year-end		Average remaining contractual life (in years)
$	13.50		10,000		10,000		5.07
$	13.70		2,100		2,100		0.04
$	16.31		5,512		5,512		1.06
$	17.95		8,000		8,000		4.05
$	18.85		5,250		5,250		3.05
$	21.43		6,038		6,038		2.05

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Data

Quarterly Financial Data (Unaudited)

Note 22 – Quarterly Financial Data (Unaudited)

(Dollars in thousands)							Earnings Per Share
		Interest Income		Net Interest Income		Net Income		Basic		Fully Diluted
2012
First Quarter	$	5,175	$	4,419	$	1,015	$	0.31	$	0.31
Second Quarter		5,004		4,290		1,021		0.31		0.31
Third Quarter		5,103		4,512		1,122		0.34		0.34
Fourth Quarter		4,937		4,454		1,104		0.33		0.33
2011
First Quarter	$	5,282	$	4,345	$	704	$	0.21	$	0.21
Second Quarter		5,386		4,472		904		0.28		0.28
Third Quarter		5,399		4,523		886		0.27		0.27
Fourth Quarter		5,408		4,582		1,019		0.31		0.31

There were no significant fluctuations in the quarterly financial data in 2011 or 2012. The growth in net income that occurred in 2012 was due to reduced provision for loan losses and increased noninterest income, which was partially offset by a decline in net interest income and growth in noninterest expenses.

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Regulatory Capital

12 Months Ended

Dec. 31, 2012

Regulatory Capital

Regulatory Capital

Note 21 – Regulatory Capital

ChoiceOne Bank is 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. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as are asset growth and expansion, and plans for capital restoration are required. At year-end 2012 and 2011, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s categories.

Actual capital levels and minimum required levels for ChoiceOne 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, 2012
Total capital (to risk weighted assets)	$	46,004	13.7	%	$	26,856	8.0	%	$	33,570	10.0	%
Tier 1 capital (to risk weighted assets)		42,015	12.5			13,428	4.0			20,142	6.0
Tier 1 capital (to average assets)		42,015	8.8			19,191	4.0			23,988	5.0
December 31, 2011
Total capital (to risk weighted assets)	$	43,042	12.5	%	$	27,510	8.0	%	$	34,387	10.0	%
Tier 1 capital (to risk weighted assets)		38,960	11.3			13,755	4.0			20,632	6.0
Tier 1 capital (to average assets)		38,960	8.3			18,801	4.0			23,502	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, 2012, approximately $5,546,000 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 Bank, which is restricted by state law and regulations.

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Condensed Financial Statements of Parent Company (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Assets
Securities available for sale	$ 134,492	$ 114,276
Other assets	4,585	4,840
Total Assets	508,913	495,914
Liabilities
Other liabilities	4,216	4,329
Total liabilities	448,407	438,010
Total shareholders' equity	60,506	57,904	54,313	52,926
Total liabilities and shareholders' equity	508,913	495,914
Parent Company
Assets
Cash	135	487
Securities available for sale	628	218
Other assets	27	26
Investment in ChoiceOne Bank	59,810	57,264
Total Assets	60,600	57,995
Liabilities
Mandatory redeemable shares under ESOP, at fair value	77	65
Other liabilities	17	26
Total liabilities	94	91
Total shareholders' equity	60,506	57,904
Total liabilities and shareholders' equity	$ 60,600	$ 57,995

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Securities (Details 3) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Securities Details 3
Securities pledged for securities sold under agreements to repurchase	$ 27,085	$ 27,421

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2012

Earnings Per Share Tables

Schedule of basic earnings per share and diluted earnings per share

(Dollars in thousands, except per share data)

	2012		2011		2010
Basic
Net income	$	4,262	$	3,513	$	2,711
Weighted average common shares outstanding		3,296,462		3,286,969		3,273,151
Basic earnings per common share	$	1.29	$	1.07	$	0.83
Diluted
Net income	$	4,262	$	3,513	$	2,711
Weighted average common shares outstanding		3,296,462		3,286,969		3,273,151
Plus: dilutive effect of assumed exercises of stock options		436		—		—
Average shares and dilutive potential common shares		3,296,898		3,286,969		3,273,151
Diluted earnings per common share	$	1.29	$	1.07	$	0.83

There were 28,625 stock options as of December 31, 2012, 46,656 as of December 31, 2011, and 49,232 as of December 31, 2010 considered to be anti-dilutive to earnings per share and thus have been excluded from the calculations above.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2012

Summary Of Significant Accounting Policies Policies

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.

Nature of Operations

Nature of Operations

ChoiceOne Bank (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 portions of 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.

ChoiceOne Insurance Agencies, Inc. (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

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 more likely than not will be required to sell the security before its anticipated recovery. 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 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 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 may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. Loan losses are charged against the allowance when management believes the collectability of a loan balance is not possible.

The allowance 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 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 our 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 other noninterest income.

Loan Servicing Rights

Loan Servicing Rights

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 cashflows 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 contribute up to the IRS maximum. 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 postretirement benefits are accrued during the years in which the employee provides service.

Employee Stock Ownership Plan

Employee Stock Ownership Plan

The cost of shares issued to the Employee Stock Ownership Plan (the “ESOP”) but not yet allocated to participants is presented as a reduction of shareholders’ equity. Compensation expense is recorded based on the market price of the shares as they are committed to be released for allocation to participant accounts. The difference between the market price and the cost of shares committed to be released is recorded as an adjustment to additional paid-in capital. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings while dividends on unallocated ESOP shares are reflected as a reduction of debt and accrued interest. 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.

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, net of tax, and changes in the funded status of postretirement plans which are also recognized as a separate component of shareholders’ equity.

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.

Cash Restrictions

Cash Restrictions

Cash on hand or on deposit with the Federal Reserve Bank of $318,000 and $111,000 was required to meet regulatory reserve and clearing requirements at December 31, 2012 and 2011, respectively. The balance in excess of the amount required was interest-bearing as of December 31, 2012 and December 31, 2011.

Stock-Based Compensation

Stock-Based Compensation

ChoiceOne records stock-based compensation cost using the fair value method. Compensation costs related to stock options granted is disclosed in Note 14.

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 21).

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 19 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

During 2012, ChoiceOne adopted new guidance related to the presentation of comprehensive income in the financial statements. Among other changes, the new guidance eliminated the option to only present comprehensive income in the statement of equity. ChoiceOne has elected to report comprehensive income in a separate statement of comprehensive income that begins with net income. The change in presentation has been applied retrospectively and the 2011 and 2010 financial statements have been restated to conform to the new presentation method. Other than the change in presentation of comprehensive income and related disclosures, the new guidance did not have a material effect on the financial statements.

In 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-02, A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (“ASU 2011-02”). This update applies to all creditors, both public and non-public, and was introduced to provide clarification surrounding troubled debt restructurings (“TDR”). The primary characteristics that previously caused a restructuring to quality as a TDR still exist: (1) the restructuring constitutes a concession to the borrower and (2) the borrower is experiencing financial difficulties. The update provides additional details and examples to provide clarity surrounding these items. The update also prohibits the use of the effective interest rate test when determining whether the restructuring constitutes a concession. The update is effective for annual reporting periods ending on or after December 15, 2012 (therefore, December 31, 2012, for ChoiceOne). Lastly the disclosure requirements set forth by ASU 2010-20 regarding TDRs, and later deferred by ASU 2011-01 until December 31, 2012 for ChoiceOne, are included in Note 3. Other than the additional disclosures, these updates did not have a significant impact on the financial statements.

In 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”). This update to Fair Value Measurement (Topic 820) results in common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The amendments in this update explain how to measure fair value. The do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting. However, this update does require expanding disclosure related to the nature and significance of inputs that are used in estimating and measuring the fair value of financial instruments. The amendments in this update are to be applied prospectively and are effective for annual reporting periods beginning after December 15, 2011 (therefore, December 31, 2012, for ChoiceOne). This update did not have a significant impact on the financial statements.

In July 2012, the FASB issued ASU No. 2012-02, Intangibles – Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”) to reduce the cost and complexity of testing indefinite-lived intangible assets for impairment. ASU 2012-02 gives an entity the option of first assessing qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Subtopic 350-30. An entity also has the option to bypass the qualitative assessment for any indefinite-lived asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. ASU 2012-02 is effective for fiscal years beginning after September 15, 2012 and early adoption is permitted. The adoption of ASU 2012-02 is not expected to have a material impact on ChoiceOne’s consolidated financial condition or results of operations.

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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Securities (Tables)

12 Months Ended

Dec. 31, 2012

Securities Tables

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:

	2012
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	39,815	$	455	$	(2	)	$	40,268
U.S. Treasury notes and bonds		7,362		45		(9	)		7,398
State and municipal		62,248		2,668		(238	)		64,678
Mortgage-backed		12,218		308		—			12,526
Corporate		6,600		113		(1	)		6,712
Foreign debt		1,000		1		—			1,001
Equity securities		1,902		12		(5	)		1,909
Total	$	131,145	$	3,602	$	(255	)	$	134,492

	2011
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	39,829	$	584	$	—		$	40,413
State and municipal		51,859		2,729		(89	)		54,499
Mortgage-backed		9,511		276		(7	)		9,780
Corporate		5,914		100		(3	)		6,011
FDIC-guaranteed financial institution debt		2,010		28		—			2,038
Equity securities		1,751		16		(232	)		1,535
Total	$	110,874	$	3,733	$	(331	)	$	114,276

Schedule of proceeds from sales of securities

Information regarding sales of securities available for sale follows:

(Dollars in thousands)

	2012		2011		2010
Proceeds from sales of securities	$	9,369	$	3,310	$	6,059
Gross realized gains		421		133		540
Gross realized losses		2		4		3
Loss on other than temporary impairment		—		—		94

Schedule of Expected Maturities of Available for Sale Securities

Information regarding sales of securities available for sale follows:

(Dollars in thousands)

	2012		2011		2010
Proceeds from sales of securities	$	9,369	$	3,310	$	6,059
Gross realized gains		421		133		540
Gross realized losses		2		4		3
Loss on other than temporary impairment		—		—		94

Schedule of securities pledged as collateral

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

(Dollars in thousands)

	2012		2011
Securities pledged for securities sold under agreements to repurchase	$	27,085	$	27,421

Schedule of securities in a continuous unrealized loss position

Securities with unrealized losses at year-end 2012 and 2011, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, were as follows:

(Dollars in thousands)	2012
	Less than 12 months					More than 12 months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Government agencies	$	1,997	$	(2	)	$	—	$	—		$	1,997	$	(2	)
U.S. Treasury notes and bonds		2,187		(9	)		—		—			2,187		(9	)
State and municipal		7,623		(203	)		811		(35	)		8,434		(238	)
Corporate		768		(1	)		—		—			768		(1	)
Equity securities		146		(5	)		—		—			146		(5	)
Total temporarily impaired	$	12,721	$	(220	)	$	811	$	(35	)	$	13,532	$	(255	)

(Dollars in thousands)	2011
	Less than 12 months					More than 12 months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal	$	2,938	$	(28	)	$	1,245	$	(61	)	$	4,183	$	(89	)
Mortgage-backed		2,045		(7	)		—		—			2,045		(7	)
Corporate		1,023		(3	)		—		—			1,023		(3	)
Equity securities		—		—			768		(232	)		768		(232	)
Total temporarily impaired	$	6,006	$	(38	)	$	2,013	$	(293	)	$	8,019	$	(331	)

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2012

Summary Of Significant Accounting Policies

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

ChoiceOne Bank (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 portions of 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.

ChoiceOne Insurance Agencies, Inc. (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 more likely than not will be required to sell the security before its anticipated recovery. 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 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 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 may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. Loan losses are charged against the allowance when management believes the collectability of a loan balance is not possible.

The allowance 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 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 our 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 other noninterest income.

Loan Servicing Rights

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 cashflows 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 contribute up to the IRS maximum. 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 postretirement benefits are accrued during the years in which the employee provides service.

Employee Stock Ownership Plan

The cost of shares issued to the Employee Stock Ownership Plan (the “ESOP”) but not yet allocated to participants is presented as a reduction of shareholders’ equity. Compensation expense is recorded based on the market price of the shares as they are committed to be released for allocation to participant accounts. The difference between the market price and the cost of shares committed to be released is recorded as an adjustment to additional paid-in capital. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings while dividends on unallocated ESOP shares are reflected as a reduction of debt and accrued interest. 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.

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, net of tax, and changes in the funded status of postretirement plans which are also recognized as a separate component of shareholders’ equity.

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.

Cash Restrictions

Cash on hand or on deposit with the Federal Reserve Bank of $318,000 and $111,000 was required to meet regulatory reserve and clearing requirements at December 31, 2012 and 2011, respectively. The balance in excess of the amount required was interest-bearing as of December 31, 2012 and December 31, 2011.

Stock-Based Compensation

ChoiceOne records stock-based compensation cost using the fair value method. Compensation costs related to stock options granted is disclosed in Note 14.

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 21).

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 19 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

During 2012, ChoiceOne adopted new guidance related to the presentation of comprehensive income in the financial statements. Among other changes, the new guidance eliminated the option to only present comprehensive income in the statement of equity. ChoiceOne has elected to report comprehensive income in a separate statement of comprehensive income that begins with net income. The change in presentation has been applied retrospectively and the 2011 and 2010 financial statements have been restated to conform to the new presentation method. Other than the change in presentation of comprehensive income and related disclosures, the new guidance did not have a material effect on the financial statements.

In 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-02, A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (“ASU 2011-02”). This update applies to all creditors, both public and non-public, and was introduced to provide clarification surrounding troubled debt restructurings (“TDR”). The primary characteristics that previously caused a restructuring to quality as a TDR still exist: (1) the restructuring constitutes a concession to the borrower and (2) the borrower is experiencing financial difficulties. The update provides additional details and examples to provide clarity surrounding these items. The update also prohibits the use of the effective interest rate test when determining whether the restructuring constitutes a concession. The update is effective for annual reporting periods ending on or after December 15, 2012 (therefore, December 31, 2012, for ChoiceOne). Lastly the disclosure requirements set forth by ASU 2010-20 regarding TDRs, and later deferred by ASU 2011-01 until December 31, 2012 for ChoiceOne, are included in Note 3. Other than the additional disclosures, these updates did not have a significant impact on the financial statements.

In 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”). This update to Fair Value Measurement (Topic 820) results in common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The amendments in this update explain how to measure fair value. The do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting. However, this update does require expanding disclosure related to the nature and significance of inputs that are used in estimating and measuring the fair value of financial instruments. The amendments in this update are to be applied prospectively and are effective for annual reporting periods beginning after December 15, 2011 (therefore, December 31, 2012, for ChoiceOne). This update did not have a significant impact on the financial statements.

In July 2012, the FASB issued ASU No. 2012-02, Intangibles – Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”) to reduce the cost and complexity of testing indefinite-lived intangible assets for impairment. ASU 2012-02 gives an entity the option of first assessing qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Subtopic 350-30. An entity also has the option to bypass the qualitative assessment for any indefinite-lived asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. ASU 2012-02 is effective for fiscal years beginning after September 15, 2012 and early adoption is permitted. The adoption of ASU 2012-02 is not expected to have a material impact on ChoiceOne’s consolidated financial condition or results of operations.

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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Loans and Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2012

Loans And Allowance For Loan Losses Tables

Schedule of loan portfolio

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

(Dollars in thousands)

	2012			2011
Agricultural	$	31,790		$	38,929
Commercial and industrial		67,365			58,685
Consumer		19,367			18,657
Real estate – commercial		93,312			106,250
Real estate - construction		1,056			1,169
Real estate - residential		98,578			96,437
Loans, gross		311,468			320,127
Allowance for loan losses		(5,852	)		(5,213	)
Loans, net	$	305,616		$	314,914

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
2012
Allowance for Loan Losses
Beginning balance	$	55		$	609		$	197		$	2,299		$	34		$	1,847		$	172		$	5,213
Charge-offs		—			(405	)		(338	)		(869	)		—			(887	)		—			(2,499	)
Recoveries		5			61			214			224			—			119			—			623
Provision		80			116			177			942			(19	)		844			375			2,515
Ending balance	$	140		$	381		$	250		$	2,596		$	15		$	1,923		$	547		$	5,852
Individually evaluated for impairment	$	1		$	112		$	—		$	449		$	—		$	138		$	—		$	700
Collectively evaluated for impairment	$	139		$	269		$	250		$	2,147		$	15		$	1,785		$	547		$	5,152
Loans
Individually evaluated for impairment	$	166		$	198		$	32		$	3,723		$	—		$	1,820					$	5,939
Collectively evaluated for impairment		31,624			67,167			19,335			89,589			1,056			96,758						305,529
Ending balance	$	31,790		$	67,365		$	19,367		$	93,312		$	1,056		$	98,578					$	311,468
2011
Allowance for Loan Losses
Beginning balance	$	181		$	641		$	243		$	1,729		$	2		$	1,554		$	379		$	4,729
Charge-offs		(45	)		(228	)		(361	)		(1,357	)		—			(1,677	)		—			(3,668	)
Recoveries		10			32			217			89			—			104			—			452
Provision		(91	)		164			98			1,838			32			1,866			(207	)		3,700
Ending balance	$	55		$	609		$	197		$	2,299		$	34		$	1,847		$	172		$	5,213
Individually evaluated for impairment	$	—		$	7		$	—		$	424		$	—		$	—		$	—		$	431
Collectively evaluated for impairment	$	55		$	602		$	197		$	1,875		$	34		$	1,847		$	172		$	4,782
Loans
Individually evaluated for impairment	$	—		$	163		$	—		$	2,758		$	—		$	1,580					$	4,501
Collectively evaluated for impairment		38,929			58,522			18,657			103,492			1,169			94,857						315,626
Ending balance	$	38,929		$	58,685		$	18,657		$	106,250		$	1,169		$	96,437					$	320,127

	Agricultural		Commercial and Industrial			Consumer			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Unallocated		Total
2010
Allowance for Loan Losses
Beginning balance	$	124	$	735		$	306		$	1,546		$	3		$	1,590		$	18	$	4,322
Charge-offs		—		(765	)		(444	)		(1,523	)		—			(1,152	)		—		(3,884	)
Recoveries		—		68			230			16			—			27			—		341
Provision		57		603			151			1,690			(1	)		1,089			361		3,950
Ending balance	$	181	$	641		$	243		$	1,729		$	2		$	1,554		$	379	$	4,729
Individually evaluated for impairment	$	—	$	50		$	—		$	531		$	—		$	—		$	—	$	581
Collectively evaluated for impairment	$	181	$	591		$	243		$	1,198		$	2		$	1,554		$	379	$	4,148
Loans
Individually evaluated for impairment	$	39	$	272		$	—		$	3,529		$	—		$	2,733				$	6,573
Collectively evaluated for impairment		29,642		55,675			16,709			112,822			853			94,666					310,367
Ending balance	$	29,681	$	55,947		$	16,709		$	116,351		$	853		$	97,399				$	316,940

Schedule of the Bank's credit exposure

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

(Dollars in thousands)

Corporate Credit Exposure - Credit Risk Profile By Creditworthiness Category

	Agricultural				Commercial and Industrial				Commercial Real Estate
	2012		2011		2012		2011		2012		2011
Risk ratings 1 and 2	$	8,615	$	6,486	$	9,040	$	4,149	$	2,711	$	6,403
Risk rating 3		16,173		20,211		43,549		30,109		45,295		45,034
Risk rating 4		5,040		9,499		13,417		21,993		30,223		33,462
Risk rating 5		1,939		2,672		855		1,669		7,847		14,313
Risk rating 6		19		57		361		680		6,960		5,009
Risk rating 7		4		4		143		85		276		2,029
	$	31,790	$	38,929	$	67,365	$	58,685	$	93,312	$	106,250

Consumer Credit Exposure - Credit Risk Profile Based On Payment Activity

	Consumer				Construction Real Estate				Residential Real Estate
	2012		2011		2012		2011		2012		2011
Performing	$	19,334	$	18,634	$	1,056	$	1,169	$	98,018	$	95,732
Nonperforming		33		23		—		—		560		705
	$	19,367	$	18,657	$	1,056	$	1,169	$	98,578	$	96,437

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, 2012 and December 31, 2011:

	December 31, 2012					December 31, 2011
(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	1	$	72	$	72	—	$	—	$	—
Commercial and industrial	2		159		149	1		48		48
Consumer	1		32		32	—		—		—
Commercial real estate	5		1,990		1,990	7		1,789		1,789
Residential real estate	3		353		353	5		639		639
	12	$	2,606	$	2,596	13	$	2,476	$	2,476

Schedule of impaired loans

The following schedule provides information on TDRs as of December 31, 2012 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, 2012 and December 31, 2011 that had been modified during the 12-month period prior to the default:

	With Payment Defaults During the Following Periods:
	December 31, 2012			December 31, 2011
(Dollars in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Agricultural	1	$	72	—	$	—
Commercial and industrial	2		149	1		48
Consumer	1		32	—		—
Commercial real estate	1		68	3		1,135
Residential real estate	—		—	7		865
	5	$	321	11	$	2,048

Schedule of aging analysis of loans by loan category

Impaired loans by loan category as of December 31 follow:

(Dollars in thousands)

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2012
With no related allowance recorded
Agricultural	$	94	$	441	$	—	$	19	$	—
Commercial and industrial		49		49		—		223		6
Consumer		—		—		—		—		—
Commercial real estate		577		848		—		1,586		—
Residential real estate		—		—		—		1,366		48
Subtotal		720		1,338		—		3,194		54
With an allowance recorded
Agricultural		72		72		1		14		1
Commercial and industrial		149		169		112		112		—
Consumer		32		32		—		6		—
Commercial real estate		3,146		3,193		449		1,576		24
Residential real estate		1,820		1,820		138		364		20
Subtotal		5,219		5,286		700		2,072		45
Total
Agricultural		166		513		1		33		1
Commercial and industrial		198		218		112		335		6
Consumer		32		32		—		6		—
Commercial real estate		3,723		4,041		449		3,162		24
Residential real estate		1,820		1,820		138		1,730		68
Total	$	5,939	$	6,624	$	700	$	5,266	$	99

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2011
With no related allowance recorded
Agricultural	$	—	$	—	$	—	$	45	$	—
Commercial and industrial		102		105		—		167		—
Commercial real estate		1,122		1,538		—		2,369		15
Residential real estate		1,580		1,580		—		1,620		50
Subtotal		2,804		3,223		—		4,201		65
With an allowance recorded
Agricultural		—		—		—		—		—
Commercial and industrial		61		63		7		85		—
Commercial real estate		1,636		2,120		424		1,490		6
Residential real estate		—		—		—		—		—
Subtotal		1,697		2,183		431		1,575		6
Total
Agricultural		—		—		—		45		—
Commercial and industrial		163		168		7		252		—
Commercial real estate		2,758		3,658		424		3,859		21
Residential real estate		1,580		1,580		—		1,620		50
Total	$	4,501	$	5,406	$	431	$	5,776	$	71

Schedule of nonaccrual loans by loan category

Nonaccrual loans by loan category as of December 31 follow:

(Dollars in thousands)

	2012		2011
Agricultural	$	94	$	26
Commercial and industrial		220		143
Consumer		33		22
Commercial real estate		1,230		2,790
Construction real estate		—		—
Residential real estate		754		1,174
	$	2,331	$	4,155

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Federal Home Loan Bank Advances (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Maturities of Federal Home Loan Bank Advances
2013	$ 28
2014	29
2015	30
2016	32
2017	33
Thereafter	268
[FederalHomeLoanBankAdvancesMaturitiesSummary]	$ 420

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Taxes Tables

Schedule of Components of Income Tax Expense

Information as of December 31 and for the year follows:

(Dollars in thousands)

	2012			2011		2010
Provision for Income Taxes
Current federal income tax expense	$	1,475		$	682	$	817
Deferred federal income tax expense/(benefit)		(132	)		378		(163	)
Income tax expense	$	1,343		$	1,060	$	654

Reconciliation of Income Tax Expense

Reconciliation of Income Tax Provision to Statutory Rate
Income tax computed at statutory federal rate of 34%	$	1,906		$	1,555		$	1,144
Tax exempt interest income		(466	)		(437	)		(483	)
Tax exempt earnings on bank-owned life insurance		(152	)		(121	)		(122	)
Nondeductible interest expense		13			16			25
Other items		42			47			90
Income tax expense	$	1,343		$	1,060		$	654
Effective income tax rate		24	%		23	%		19	%

Schedule of Deferred Tax Assets and Liabilities

Components of Deferred Tax Assets and Liabilities	2012			2011
Deferred tax assets:
Allowance for loan losses	$	920		$	779
Deferred compensation		349			341
Write-downs on other real estate owned		255			339
Alternative minimum tax credit carryforward		—			75
Other		294			327
Total deferred tax assets		1,818			1,861
Deferred tax liabilities:
Depreciation		1,396			1,382
Unrealized gains on securities available for sale		1,138			1,157
Purchase accounting adjustments from merger		602			743
Loan servicing rights		161			108
Stock dividends received from Federal Home Loan Bank		83			83
Post-retirement benefits obligation		75			87
Other		112			103
Total deferred tax liabilities		3,567			3,663
Net deferred tax liabilities	$	(1,749	)	$	(1,802	)

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Securities (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Amortized Cost	$ 131,145	$ 110,874
Gross Unrealized Gains	3,602	3,733
Gross Unrealized Losses	(255)	(331)
Fair Value	134,492	114,276
U.S. Government and federal agency
Amortized Cost	39,815	39,829
Gross Unrealized Gains	455	584
Gross Unrealized Losses	(2)
Fair Value	40,268	40,413
U.S. Treasury notes and bonds
Amortized Cost	7,362
Gross Unrealized Gains	45
Gross Unrealized Losses	(9)
Fair Value	7,398
State and municipal
Amortized Cost	62,248	51,859
Gross Unrealized Gains	2,668	2,729
Gross Unrealized Losses	(238)	(89)
Fair Value	64,678	54,499
Mortgage-backed
Amortized Cost	12,218	9,511
Gross Unrealized Gains	308	276
Gross Unrealized Losses		(7)
Fair Value	12,526	9,780
Corporate
Amortized Cost	6,600	5,914
Gross Unrealized Gains	113	100
Gross Unrealized Losses	(1)	(3)
Fair Value	6,712	6,011
Foreign Debt
Amortized Cost	1,000
Gross Unrealized Gains	1
Gross Unrealized Losses
Fair Value	1,001
Equity securities
Amortized Cost	1,902	1,751
Gross Unrealized Gains	12	16
Gross Unrealized Losses	(5)	(232)
Fair Value	1,909	1,535
FDIC-guaranteed financial institution debt
Amortized Cost		2,010
Gross Unrealized Gains		28
Gross Unrealized Losses
Fair Value		$ 2,038

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Premises and Equipment (Details Narrative) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Premises And Equipment Details Narrative
Depreciation expense	$ 900	$ 944	$ 903
Rent expense	$ 98	$ 75	$ 78

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Assets
Cash and due from banks	$ 19,034	$ 17,125
Federal funds sold
Cash and cash equivalents	19,034	17,125
Securities available for sale (Note 2)	134,492	114,276
Federal Home Loan Bank stock	2,478	2,478
Federal Reserve Bank stock	1,272	1,271
Loans held for sale	1,874	1,262
Loans (Note 3)	311,468	320,127
Allowance for loan losses (Note 3)	(5,852)	(5,213)
Loans, net	305,616	314,914
Premises and equipment, net (Note 5)	12,121	12,080
Other real estate owned, net (Note 7)	2,019	1,934
Cash value of life insurance policies	9,970	9,834
Intangible assets, net (Note 6)	1,724	2,172
Goodwill (Note 6)	13,728	13,728
Other assets	4,585	4,840
Total assets	508,913	495,914
Liabilities
Deposits - noninterest-bearing (Note 8)	101,861	78,263
Deposits - interest-bearing (Note 8)	322,338	325,102
Total deposits	424,199	403,365
Repurchase agreements (Note 9)	19,572	21,869
Advances from Federal Home Loan Bank (Note 10)	420	8,447
Other liabilities (Notes 11 and 13)	4,216	4,329
Total liabilities	448,407	438,010
Shareholders' Equity
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: 3,298,081 a in 2012 and 3,293,269 in 2011 (Notes 14)	46,649	46,602
Retained earnings	11,501	8,887
Accumulated other comprehensive income, net (Note 16)	2,356	2,415
Total shareholders' equity	60,506	57,904
Total liabilities and shareholders' equity	$ 508,913	$ 495,914

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Other Comprehensive Income (Loss) (Tables)

12 Months Ended

Dec. 31, 2012

Other Comprehensive Income Loss Tables

Tax effect allocated to each component of other comprehensive income (loss)

Other comprehensive income (loss) components and related taxes follow:

(Dollars in thousands)

	2012			2011			2010
Unrealized holding gains on available for sale securities	$	363		$	2,448		$	635
Less reclassification adjustments for gains included in net income		419			129			443
Net unrealized gains		(56	)		2,319			192
Less tax effect		(19	)		789			65
Net-of-tax amount		(37	)		1,530			127
Change in funded status of post-retirement benefit plan		(34	)		(23	)		(21	)
Tax effect		(12	)		(8	)		(7	)
Net-of-tax amount		(22	)		(15	)		(14	)
Total	$	(59	)	$	1,515		$	113

Schedule of Accumulated Other Comprehensive Income

Accumulated other comprehensive income, a component of equity, was comprised of the following at December 31:

(Dollars in thousands)

	2012			2011
Unrealized holding gains on available for sale securities	$	3,347		$	3,402
Unrecognized actuarial gains on post-retirement benefit plan		223			258
Tax effect		(1,214	)		(1,245	)
Net accumulated other comprehensive income	$	2,356		$	2,415

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Earnings Per Share Details
Net income	$ 1,104	$ 1,122	$ 1,021	$ 1,015	$ 1,019	$ 886	$ 904	$ 704	$ 4,262	$ 3,513	$ 2,711
Weighted average common shares outstanding									3,296,462	3,286,969	3,273,151
Basic earnings per share	$ 0.33	$ 0.34	$ 0.31	$ 0.31	$ 0.31	$ 0.27	$ 0.28	$ 0.21	$ 1.29	$ 1.07	$ 0.83
Plus dilutive effect of assumed exercises of stock options									436
Weighted average common shares outstanding and potentially dilutive shares									3,296,898	3,286,969	3,273,151
Diluted earnings per share	$ 0.33	$ 0.34	$ 0.31	$ 0.31	$ 0.31	$ 0.27	$ 0.28	$ 0.21	$ 1.29	$ 1.07	$ 0.83

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CONSOLDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (USD $) In Thousands, except Share data	Common Stock and Paid in Capital	Retained Earnings	Accumulated Other Comprehensive Income, net	Total
Balance, beginning at Dec. 31, 2009	$ 46,326	$ 5,813	$ 787	$ 52,926
Balance, beginning, shares at Dec. 31, 2009	3,265,714
Net income		2,711		2,711
Other comprehensive income			113	113
Shares issued	125			125
Shares issued, shares	14,805
Shares cancelled, shares	(4)
Change in ESOP repurchase obligation	(16)			(16)
Stock-based compensation	15			15
Effect of employee stock purchases	11			11
Cash dividends declared		(1,572)		(1,572)
Balance, ending at Dec. 31, 2010	46,461	6,952	900	54,313
Balance, ending, shares at Dec. 31, 2010	3,280,515
Net income		3,513		3,513
Other comprehensive income			1,515	1,515
Shares issued	127			127
Shares issued, shares	12,754
Change in ESOP repurchase obligation	(1)			(1)
Stock-based compensation	5			5
Effect of employee stock purchases	10			10
Cash dividends declared		(1,578)		(1,578)
Balance, ending at Dec. 31, 2011	46,602	8,887	2,415	57,904
Balance, ending, shares at Dec. 31, 2011	3,293,269			3,293,269
Net income		4,262		4,262
Other comprehensive income			(59)	(59)
Shares issued	123			123
Shares issued, shares	9,812
Shares repurchased	(75)			(75)
Shares repurchased, shares	(5,000)
Change in ESOP repurchase obligation	(12)			(12)
Effect of employee stock purchases	11			11
Cash dividends declared		(1,648)		(1,648)
Balance, ending at Dec. 31, 2012	$ 46,649	$ 11,501	$ 2,356	$ 60,506
Balance, ending, shares at Dec. 31, 2012	3,298,081			3,298,081

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Stock Options (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2012
Stock Options - Exercise Price $13.50
Weighted Average Exercise Price of Options outstanding, ending	$ 13.50
Number of Options outstanding, ending	10,000
Number of Options exercisable	10,000
Weighted average remaining contractual life of options outstanding and exercisable	5 years 0 months 25 days
Stock Options - Exercise Price $13.70
Weighted Average Exercise Price of Options outstanding, ending	$ 13.70
Number of Options outstanding, ending	2,100
Number of Options exercisable	2,100
Weighted average remaining contractual life of options outstanding and exercisable	0 years 0 months 14 days
Stock Options - Exercise Price $16.31
Weighted Average Exercise Price of Options outstanding, ending	$ 16.31
Number of Options outstanding, ending	5,512
Number of Options exercisable	5,512
Weighted average remaining contractual life of options outstanding and exercisable	1 year 0 months 22 days
Stock Options - Exercise Price $17.95
Weighted Average Exercise Price of Options outstanding, ending	$ 17.95
Number of Options outstanding, ending	8,000
Number of Options exercisable	8,000
Weighted average remaining contractual life of options outstanding and exercisable	4 years 0 months 18 days
Stock Options - Exercise Price $18.85
Weighted Average Exercise Price of Options outstanding, ending	$ 18.85
Number of Options outstanding, ending	5,250
Number of Options exercisable	5,250
Weighted average remaining contractual life of options outstanding and exercisable	3 years 0 months 18 days
Stock Options - Exercise Price $21.43
Weighted Average Exercise Price of Options outstanding, ending	$ 21.43
Number of Options outstanding, ending	6,038
Number of Options exercisable	6,038
Weighted average remaining contractual life of options outstanding and exercisable	2 years 0 months 18 days

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Loans and Allowance for Loan Losses (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Loans	$ 311,468	$ 320,127	$ 316,940
Allowance for loan losses	(5,852)	(5,213)	(4,729)	(4,322)
Loans, net	305,616	314,914
Agricultural
Loans	31,790	38,929	29,681
Allowance for loan losses	(140)	(55)	(181)	(124)
Commercial and Industrial
Loans	67,365	58,685	55,947
Allowance for loan losses	(381)	(609)	(641)	(735)
Consumer
Loans	19,367	18,657	16,709
Allowance for loan losses	(250)	(197)	(243)	(306)
Commercial Real Estate
Loans	93,312	106,250	116,351
Allowance for loan losses	(2,596)	(2,299)	(1,729)	(1,546)
Construction Real Estate
Loans	1,056	1,169	853
Allowance for loan losses	(15)	(34)	(2)	(3)
Residential Real Estate
Loans	98,578	96,437	97,399
Allowance for loan losses	$ (1,923)	$ (1,847)	$ (1,554)	$ (1,590)

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Other Comprehensive Income (Loss) (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Other Comprehensive Income Loss Details 1
Unrealized holding gains on available for sale securities	$ 3,347	$ 3,402
Unrecognized actuarial gains on post-retirement benefit plan	223	258
Tax effect	(1,214)	(1,245)
Net accumulated other comprehensive income	$ 2,356	$ 2,415

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2012

Goodwill And Intangible Assets Tables

Schedule of acquired intangible assets

Information for acquired intangible assets at December 31 follows:

(Dollars in thousands)

	2012				2011
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Core deposit intangible	$	4,134	$	2,549	$	4,134	$	2,136
Other intangible assets		347		208		347		173
Totals	$	4,481	$	2,757	$	4,481	$	2,309

Schedule of estimated amortization expense for the next four years

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

(Dollars in thousands)

	Core Deposit Intangible		Other Intangible Assets		Total
2013	$	413		35		448
2014		413		35		448
2015		413		35		448
2016		346		34		380
Total	$	1,585	$	139	$	1,724

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Loans and Allowance for Loan Losses (Details 6) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Aging analysis of past due loans
Past Due 30 to 59 Days	$ 2,039	[1]	$ 3,868	[1]
Past Due 60 to 89 Days	791	[1]	1,923	[1]
Past Due Greater Than 90 Days	1,129		2,663
Past Due Total	3,959	[1]	8,454	[1]
Loans Not Past Due	307,509		311,673
Loans	311,468		320,127		316,940
90 Days Past Due and Accruing	30		70
Agricultural
Aging analysis of past due loans
Past Due 30 to 59 Days	262	[1]	151	[1]
Past Due 60 to 89 Days		[1]		[1]
Past Due Greater Than 90 Days			22
Past Due Total	262	[1]	173	[1]
Loans Not Past Due	31,529		38,756
Loans	31,790		38,929		29,681
90 Days Past Due and Accruing
Commercial and Industrial
Aging analysis of past due loans
Past Due 30 to 59 Days	102	[1]	541	[1]
Past Due 60 to 89 Days	4	[1]	143	[1]
Past Due Greater Than 90 Days	198		97
Past Due Total	304	[1]	781	[1]
Loans Not Past Due	67,061		57,904
Loans	67,365		58,685		55,947
90 Days Past Due and Accruing
Consumer
Aging analysis of past due loans
Past Due 30 to 59 Days	173	[1]	104	[1]
Past Due 60 to 89 Days	28	[1]	52	[1]
Past Due Greater Than 90 Days	33		23
Past Due Total	234	[1]	179	[1]
Loans Not Past Due	19,133		18,478
Loans	19,367		18,657		16,709
90 Days Past Due and Accruing	1		2
Commercial Real Estate
Aging analysis of past due loans
Past Due 30 to 59 Days	64	[1]	1,752	[1]
Past Due 60 to 89 Days	68	[1]	713	[1]
Past Due Greater Than 90 Days	339		1,816
Past Due Total	471	[1]	4,281	[1]
Loans Not Past Due	92,841		101,969
Loans	93,312		106,250		116,351
90 Days Past Due and Accruing
Construction Real Estate
Aging analysis of past due loans
Past Due 30 to 59 Days		[1]		[1]
Past Due 60 to 89 Days		[1]		[1]
Past Due Greater Than 90 Days
Past Due Total		[1]		[1]
Loans Not Past Due	1,056		1,169
Loans	1,056		1,169		853
90 Days Past Due and Accruing
Residential Real Estate
Aging analysis of past due loans
Past Due 30 to 59 Days	1,438	[1]	1,320	[1]
Past Due 60 to 89 Days	691	[1]	1,015	[1]
Past Due Greater Than 90 Days	559		705
Past Due Total	2,688	[1]	3,040	[1]
Loans Not Past Due	95,889		93,397
Loans	98,578		96,437		97,399
90 Days Past Due and Accruing	$ 29		$ 68

[1] Includes nonaccrual loans.

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Earnings Per Share

12 Months Ended

Dec. 31, 2012

Earnings Per Share [Abstract]

Earnings Per Share

Note 15 - Earnings Per Share

(Dollars in thousands, except per share data)

	2012		2011		2010
Basic
Net income	$	4,262	$	3,513	$	2,711
Weighted average common shares outstanding		3,296,462		3,286,969		3,273,151
Basic earnings per common share	$	1.29	$	1.07	$	0.83
Diluted
Net income	$	4,262	$	3,513	$	2,711
Weighted average common shares outstanding		3,296,462		3,286,969		3,273,151
Plus: dilutive effect of assumed exercises of stock options		436		—		—
Average shares and dilutive potential common shares		3,296,898		3,286,969		3,273,151
Diluted earnings per common share	$	1.29	$	1.07	$	0.83

There were 28,625 stock options as of December 31, 2012, 46,656 as of December 31, 2011, and 49,232 as of December 31, 2010 considered to be anti-dilutive to earnings per share and thus have been excluded from the calculations above.

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Other Real Estate Owned (Tables)

12 Months Ended

Dec. 31, 2012

Other Real Estate Owned Tables

Schedule of Other Real Estate Owned

Activity within other real estate owned was as follows:

(Dollars in thousands)

	2012			2011			2010
Balance, beginning of year	$	1,934		$	1,953		$	2,201
Transfers from loans		1,718			2,972			1,358
Reclassification to buildings		(20	)		—			—
Proceeds from sales		(1,259	)		(3,015	)		(1,174	)
Gains/(losses) on sales		51			279			96
Write-downs		(405	)		(255	)		(528	)
Balance, end of year	$	2,019		$	1,934		$	1,953

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Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Other Comprehensive Income Loss Details
Unrealized holding gains on available for sale securities	$ 363	$ 2,448	$ 635
Less reclassification adjustments for gains included in inet income	419	129	443
Net unrealized gains	(56)	2,319	192
Less tax effect	(19)	789	65
Net-of-tax-amount	(37)	1,530	127
Change in funded status of post-retirement benefit plan	(34)	(23)	(21)
Tax effect	(12)	(8)	(7)
Net-of-tax amount	(22)	(15)	(14)
Total	$ (59)	$ 1,515	$ 113

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Condensed Financial Statements of Parent Company

12 Months Ended

Dec. 31, 2012

Financial Statements Of Parent Company

Condensed Financial Statements of Parent Company

Note 17 – Condensed Financial Statements of Parent Company

Condensed Balance Sheets

(Dollars in thousands)	December 31
	2012		2011
Assets
Cash	$	135	$	487
Securities available for sale		628		218
Other assets		27		26
Investment in ChoiceOne Bank		59,810		57,264
Total assets	$	60,600	$	57,995
Liabilities
Mandatory redeemable shares under ESOP, at fair value	$	77	$	65
Other liabilities		17		26
Total liabilities		94		91
Shareholders’ equity		60,506		57,904
Total liabilities and shareholders’ equity	$	60,600	$	57,995

Condensed Statements of Income

(Dollars in thousands)	Years Ended December 31
	2012		2011		2010
Interest and dividends from ChoiceOne Bank	$	1,710	$	1,695	$	1,641
Interest and dividends from other securities		16		7		7
Other income		—		33		—
Total income		1,726		1,735		1,648
Other expenses		89		81		67
Income before income tax and equity in undistributed net income of subsidiary		1,637		1,654		1,581
Income tax benefit		29		16		23
Income before equity in undistributed net income of subsidiary		1,666		1,670		1,604
Equity in undistributed net income of subsidiary		2,596		1,843		1,107
Net income	$	4,262	$	3,513	$	2,711

Condensed Statements of Cash Flows

(Dollars in thousands)	Years Ended December 31
	2012			2011			2010
Cash flows from operating activities:
Net income	$	4,262		$	3,513		$	2,711
Adjustments to reconcile net income to net cash from operating activities:
Equity in undistributed net income of subsidiary		(2,596	)		(1,843	)		(1,107	)
Amortization		2			—			—
Changes in other assets		(1	)		50			(17	)
Changes in other liabilities		(10	)		17			(18	)
Net cash from operating activities		1,657			1,737			1,569
Cash flows from investing activities:
Maturities of securities		—			—			200
Purchases of securities		(409	)		—			(202	)
Net cash from investing activities		(409	)		—			(2	)
Cash flows from financing activities:
Issuance of common stock		123			127			125
Repurchase of common stock		(75	)		—			—
Cash dividends paid		(1,648	)		(1,578	)		(1,572	)
Net cash from financing activities		(1,600	)		(1,451	)		(1,447	)
Net change in cash		(352	)		286			120
Beginning cash		487			201			81
Ending cash	$	135		$	487		$	201

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Mortgage Banking (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Mortgage Banking Details 1
Balance, beginning of year	$ 318	$ 347	$ 491
Capitalized	289	94	122
Amortization	(134)	(123)	(266)
Balance, end of year	$ 473	$ 318	$ 347

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Off-Balance Sheet Activities (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 Lower Range	Dec. 31, 2012 Upper Range	Dec. 31, 2012 Unused lines of Credit - Fixed Rate	Dec. 31, 2011 Unused lines of Credit - Fixed Rate	Dec. 31, 2012 Unused lines of Credit - Variable Rate	Dec. 31, 2011 Unused lines of Credit - Variable Rate	Dec. 31, 2012 Commitments to fund loans - Fixed Rate	Dec. 31, 2011 Commitments to fund loans - Fixed Rate	Dec. 31, 2012 Commitments to fund loans - Variable Rate	Dec. 31, 2011 Commitments to fund loans - Variable Rate
Contractual amount of financial instruments with off-balance sheet risk			$ 2,474	$ 5,798	$ 49,196	$ 47,217	$ 5,145	$ 3,610	$ 2,868	$ 1,919
Interest rate of commitments	1.00%	4.35%
Term of commitments	1 year	30 years

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Statement of Cash Flows [Abstract]
Net income	$ 4,262	$ 3,513	$ 2,711
Provision for loan losses	2,515	3,700	3,950
Depreciation	900	944	903
Amortization	1,569	1,300	1,173
Compensation expense on stock options and employee purchases	11	15	26
Gains on sales of securities	(419)	(129)	(537)
Loss on other than temporary impairment of securities			94
Gains on sales of loans	(1,634)	(672)	(682)
Loans originated for sale	(44,889)	(25,685)	(28,816)
Proceeds from loan sales	45,622	26,611	28,088
Earnings on bank-owned life insurance	(447)	(354)	(360)
(Gains)/losses on sales of other real estate owned	(51)	(279)	(96)
Write-downs of other real estate owned	405	255	528
Proceeds from sales of other real estate owned	1,259	3,015	1,174
Deferred federal income tax expense/(benefit)	(132)	378	(163)
other assets	667	2,391	875
other liabilities	4	(2,458)	357
Net cash from operating activities	9,642	12,545	9,225
Sales of securities available for sale	9,369	3,310	6,059
Maturities, prepayments and calls of securities available for sale	39,098	18,687	22,271
Purchases of securities available for sale	(69,564)	(43,651)	(44,063)
Purchase of Federal Reserve Bank stock	(1)	(1)
Sale of Federal Home Loan Bank stock		411
Loan originations and payments, net	5,065	(9,375)	875
Proceeds from life insurance	311
Additions to premises and equipment	(921)	(499)	(1,510)
Net cash from investing activities	(16,643)	(31,118)	(16,368)
Net change in deposits	20,834	13,481	24,874
Net change in repurchase agreements	(2,297)	(380)	1,565
Proceeds from Federal Home Loan Bank advances		250
Payments on Federal Home Loan Bank advances	(8,027)	(276)	(13,525)
Issuance of common stock	123	127	125
Repurchase of common stock	(75)
Cash dividends	(1,648)	(1,578)	(1,572)
Net cash from financing activities	8,910	11,624	11,467
Net change in cash and cash equivalents	1,909	(6,949)	4,324
Beginning cash and cash equivalents	17,125	24,074	19,750
Ending cash and cash equivalents	19,034	17,125	24,074
Cash paid for interest	2,625	3,608	5,112
Cash paid for income taxes	1,425	765	285
Loans transferred to other real estate owned	1,718	2,972	1,358
Other real estate owned transferred to premises and equipment	$ 20

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Statement of Financial Position [Abstract]
Preferred stock, authorized	100,000	100,000
Preferred stock, outstanding	0	0
Common stock, no par value	$ 0.00	$ 0.00
Common stock, shares authorized	7,000,000	7,000,000
Common stock, shares outstanding	3,298,081	3,293,269

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Federal Home Loan Bank Advances

12 Months Ended

Dec. 31, 2012

Federal Home Loan Bank Advances

Federal Home Loan Bank Advances

Note 10 – Federal Home Loan Bank Advances

At December 31, advances from the Federal Home Loan Bank (the “FHLB”) were as follows:

(Dollars in thousands)

	2012		2011
Maturity of November 2024 with a fixed interest rate of 3.98%	$	420
Maturities ranging from November 2012 to November 2024, fixed interest rates ranging from 2.54% to 4.16%, with an average rate of 3.58%			$	8,447
Total advances outstanding at year-end	$	420	$	8,447

Penalties are charged on fixed rate advances that are paid prior to maturity. A $3,000,000 advance was paid prior to its maturity in June 2012 and a $37,000 prepayment penalty was charged. No fixed rate advances were paid prior to maturity in 2011 or 2010. Advances were secured by residential real estate loans with a carrying value of approximately $74 million at December 31, 2012 and $69 million at December 31, 2011. Based on this collateral, the Bank was eligible to borrow an additional $46 million at year-end 2012. The scheduled maturities of advances from the FHLB at December 31, 2012 were as follows (dollars in thousands):

2013	$	28
2014		29
2015		30
2016		32
2017		33
Thereafter		268
Total	$	420

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Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Assets:
Securities available for sale	$ 134,492	$ 114,276
Liabilities:
Noninterest-bearing deposits	101,861	78,263
Interest-bearing deposits	322,338	325,102
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Cash and due from banks	19,034
Securities available for sale
Federal Home Loan Bank and Federal Reserve Bank stock
Loans held for sale
Loans, net
Liabilities:
Noninterest-bearing deposits
Interest-bearing deposits
Repurchase agreements
Federal Home Loan Bank advances
Significant Other Observable Inputs (Level 2)
Assets:
Cash and due from banks
Securities available for sale	131,893
Federal Home Loan Bank and Federal Reserve Bank stock	3,750
Loans held for sale	1,933
Loans, net
Liabilities:
Noninterest-bearing deposits	101,861
Interest-bearing deposits	323,457
Repurchase agreements	19,573
Federal Home Loan Bank advances	485
Significant Unobservable Inputs (Level 3)
Assets:
Cash and due from banks
Securities available for sale	2,599
Federal Home Loan Bank and Federal Reserve Bank stock
Loans held for sale
Loans, net	310,175
Liabilities:
Noninterest-bearing deposits
Interest-bearing deposits
Repurchase agreements
Federal Home Loan Bank advances
Carrying Amount
Assets:
Cash and due from banks	19,034	17,125
Securities available for sale	134,492	114,276
Federal Home Loan Bank and Federal Reserve Bank stock	3,750	3,749
Loans held for sale	1,874	1,262
Loans, net	305,616	314,914
Liabilities:
Noninterest-bearing deposits	101,861	78,263
Interest-bearing deposits	323,338	325,102
Repurchase agreements	19,572	21,869
Federal Home Loan Bank advances	420	8,447
Estimated Fair Value
Assets:
Cash and due from banks	19,034	17,125
Securities available for sale	134,492	114,276
Federal Home Loan Bank and Federal Reserve Bank stock	3,750	3,749
Loans held for sale	1,933	1,262
Loans, net	310,175	319,017
Liabilities:
Noninterest-bearing deposits	101,861	78,263
Interest-bearing deposits	323,457	326,123
Repurchase agreements	19,573	21,083
Federal Home Loan Bank advances	$ 485	$ 8,664

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Stock Options (Details) (Stock Options, USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Stock Options
Number of options:
Number of Options outstanding, beginning	46,656	49,232	49,232
Number of Options granted
Number of Options exercised	2,625	2,576
Number of Options forfeited	7,131
Number of Options outstanding, ending	36,900	46,656	49,232
Number of Options exercisable	36,900	46,656	49,232
Weighted Average Exercise Price of Options outstanding, beginning	$ 16.62	$ 16.46	$ 16.46
Weighted Average Exercise Price of Options granted
Weighted Average Exercise Price of Options exercised	$ 13.70	$ 13.44
Weighted Average Exercise Price of Options forfeited	$ 15.97
Weighted Average Exercise Price of Options outstanding, ending	$ 16.95	$ 16.62	$ 16.46
Weighted Average Exercise Price of Options exercisable	$ 16.95	$ 16.62	$ 16.64

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Employee Benefit Plans (Details) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Employee Benefit Plans Details
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	$ 77	$ 64	$ 64

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Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2012	Mar. 15, 2013	Jun. 30, 2012
Document And Entity Information
Entity Registrant Name	CHOICEONE FINANCIAL SERVICES INC
Entity Central Index Key	0000803164
Document Type	10-K
Document Period End Date	Dec. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 47,600,000
Entity Common Stock, Shares Outstanding		3,299,120
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2012

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Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes

Income Taxes

Note 11 – Income Taxes

Information as of December 31 and for the year follows:

(Dollars in thousands)

	2012			2011		2010
Provision for Income Taxes
Current federal income tax expense	$	1,475		$	682	$	817
Deferred federal income tax expense/(benefit)		(132	)		378		(163	)
Income tax expense	$	1,343		$	1,060	$	654

	2012			2011			2010
Reconciliation of Income Tax Provision to Statutory Rate
Income tax computed at statutory federal rate of 34%	$	1,906		$	1,555		$	1,144
Tax exempt interest income		(466	)		(437	)		(483	)
Tax exempt earnings on bank-owned life insurance		(152	)		(121	)		(122	)
Nondeductible interest expense		13			16			25
Other items		42			47			90
Income tax expense	$	1,343		$	1,060		$	654
Effective income tax rate		24	%		23	%		19	%

Components of Deferred Tax Assets and Liabilities	2012			2011
Deferred tax assets:
Allowance for loan losses	$	920		$	779
Deferred compensation		349			341
Write-downs on other real estate owned		255			339
Alternative minimum tax credit carryforward		—			75
Other		294			327
Total deferred tax assets		1,818			1,861
Deferred tax liabilities:
Depreciation		1,396			1,382
Unrealized gains on securities available for sale		1,138			1,157
Purchase accounting adjustments from merger		602			743
Loan servicing rights		161			108
Stock dividends received from Federal Home Loan Bank		83			83
Post-retirement benefits obligation		75			87
Other		112			103
Total deferred tax liabilities		3,567			3,663
Net deferred tax liabilities	$	(1,749	)	$	(1,802	)

ChoiceOne had a deferred tax asset of $45,000 as of December 31, 2012 and December 31, 2011 that resulted from capital losses incurred on the sales of equity securities in 2009 and 2010. A capital loss of $72,000 was carried back to 2007 during 2011 which utilized $24,000 of the deferred tax asset. A valuation allowance of $45,000 had been recorded as of December 31, 2012 and December 31, 2011 due to the uncertainty as to ChoiceOne’s ability to generate capital gains in the future that can offset the capital loss carryforward. ChoiceOne also had a deferred tax asset of $44,000 as of December 31, 2012 and December 31, 2011 that was related to unexercised stock options. A valuation allowance for the entire balance had been recorded due to the fact that the exercise price of most of the options was higher than the market price of ChoiceOne’s stock as of the end of 2012 and the exercise price of all of the options was higher than the market price of ChoiceOne’s stock as of the end of 2011. The valuation allowances totaling $89,000 as of December 31, 2012 and December 31, 2011 have been netted against the total deferred tax assets listed above.

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Repurchase Agreements (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Accounting Policies [Abstract]
Outstanding balance at December 31	$ 19,572	$ 21,869
Average interest rate at December 31	0.25%	1.27%
Average balance during the year	22,185	20,815
Average interest rate during the year	0.84%	1.38%
Maximum month end balance during the year	$ 24,662	$ 22,249

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Related Party Transactions (Details Narrative) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Related Party Transactions Details Narrative
Related Party deposit liabilities	$ 12,500	$ 14,800

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CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Interest income
Loans, including fees	$ 16,875	$ 18,398	$ 19,081
Securities:
Taxable	1,958	1,789	1,460
Tax exempt	1,361	1,268	1,398
Other	25	20	22
Total interest income	20,219	21,475	21,961
Interest expense
Deposits	2,087	2,956	3,914
Advances from Federal Home Loan Bank	271	307	748
Other borrowings	186	290	304
Total interest expense	2,544	3,553	4,966
Net interest income	17,675	17,922	16,995
Provision for loan losses (Note 3)	2,515	3,700	3,950
Net interest income after provision for loan losses	15,160	14,222	13,045
Noninterest income
Customer service charges	3,365	3,454	3,160
Insurance and investment commissions	711	672	690
Gains on sales of loans (Note 4)	1,634	672	682
Gains on sales of securities (Note 2)	419	129	537
Loss on other than temporary impairment of securities (Note 2)			(94)
Gains/(losses) on sales and write-downs and other assets (Note 7)	(358)	29	(432)
Earnings on life insurance policies	447	354	360
Other income	671	829	666
Total noninterest income	6,889	6,139	5,569
Noninterest expense
Salaries and benefits (Notes 13 and 14)	7,873	7,348	7,040
Occupancy and equipment (Note 5)	2,256	2,247	2,157
Data processing	1,852	1,740	1,651
Professional fees	887	793	675
Supplies and postage	430	517	497
Advertising and promotional	212	160	168
Intangible asset amortization (Note 6)	448	448	448
Loan and collection expense	589	575	678
FDIC insurance	377	488	641
Other expense	1,520	1,472	1,294
Total noninterest expense	16,444	15,788	15,249
Income before income tax	5,605	4,573	3,365
Income tax expense (Note 11)	1,343	1,060	654
Net income	$ 4,262	$ 3,513	$ 2,711
Basic earnings per common share (Note 15)	$ 1.29	$ 1.07	$ 0.83
Diluted earnings per common share (Note 15)	$ 1.29	$ 1.07	$ 0.83
Dividends declared per common share	$ 0.50	$ 0.48	$ 0.48

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Premises and Equipment

12 Months Ended

Dec. 31, 2012

Premises And Equipment

Premises and Equipment

Note 5 – Premises and Equipment

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

(Dollars in thousands)

	2012			2011
Land and land improvements	$	4,108		$	4,084
Leasehold improvements		38			36
Buildings		11,190			11,080
Furniture and equipment		4,556			3,768
Total cost		19,892			18,968
Accumulated depreciation		(7,771	)		(6,888	)
Premises and equipment, net	$	12,121		$	12,080

Depreciation expense was $900,000, $944,000, and $903,000 for 2012, 2011 and 2010, respectively.

The Bank leases certain branch properties and automated-teller machine locations in its normal course of business. Rent expense totaled $98,000, $75,000, and $78,000 for 2012, 2011 and 2010, respectively. Rent commitments under non-cancelable operating leases were as follows, before considering renewal options that generally are present (dollars in thousands):

2013 $ 36

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Mortgage Banking

12 Months Ended

Dec. 31, 2012

Mortgage Banking [Abstract]

Mortgage Banking

Note 4 – Mortgage Banking

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

(Dollars in thousands)

	2012		2011		2010
Loans originated for resale, net of principal payments	$	44,889	$	25,685	$	28,816
Proceeds from loan sales		45,622		26,611		28,088
Net gains on sales of loans held for sale		1,634		672		682
Loan servicing fees, net of amortization		131		161		41

Loans serviced for others are not reported as assets in the accompanying consolidated balance sheets. The unpaid principal balances of these loans were $97 million and $96 million at December 31, 2012 and 2011, respectively. The Bank maintains custodial escrow balances in connection with these serviced loans; however, such escrows were immaterial at December 31, 2012 and 2011.

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

(Dollars in thousands)

	2012			2011			2010
Balance, beginning of year	$	318		$	347		$	491
Capitalized		289			94			122
Amortization		(134	)		(123	)		(266	)
Balance, end of year	$	473		$	318		$	347

The fair value of loan servicing rights was $807,000 and $797,000 as of December 31, 2012 and 2011, respectively. Consequently, a valuation allowance was not necessary at year-end 2012 or 2011. The fair value of servicing rights at December 31, 2012 was determined using a discount rate of 7.7% and prepayment speeds ranging from 14% to 34%. The fair value of servicing rights at December 31, 2011 was determined using a discount rate of 7.7% and prepayment speeds ranging from 7% to 26%.

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Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2012

Other Comprehensive Income Loss

Other Comprehensive Income (Loss)

Note 16 - Other Comprehensive Income (Loss)

Other comprehensive income (loss) components and related taxes follow:

(Dollars in thousands)

	2012			2011			2010
Unrealized holding gains on available for sale securities	$	363		$	2,448		$	635
Less reclassification adjustments for gains included in net income		419			129			443
Net unrealized gains		(56	)		2,319			192
Less tax effect		(19	)		789			65
Net-of-tax amount		(37	)		1,530			127
Change in funded status of post-retirement benefit plan		(34	)		(23	)		(21	)
Tax effect		(12	)		(8	)		(7	)
Net-of-tax amount		(22	)		(15	)		(14	)
Total	$	(59	)	$	1,515		$	113

Accumulated other comprehensive income, a component of equity, was comprised of the following at December 31:

(Dollars in thousands)

	2012			2011
Unrealized holding gains on available for sale securities	$	3,347		$	3,402
Unrecognized actuarial gains on post-retirement benefit plan		223			258
Tax effect		(1,214	)		(1,245	)
Net accumulated other comprehensive income	$	2,356		$	2,415

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Related Party Transactions

12 Months Ended

Dec. 31, 2012

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)

	2012			2011
Balance, beginning of year	$	6,254		$	6,568
New loans		669			948
Repayments		(1,087	)		(1,262	)
Balance, end of year	$	5,836		$	6,254

Deposits from executive officers, directors and their affiliates were $12.5 million and $14.8 million at December 31, 2012 and 2011, respectively.

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Federal Home Loan Bank Advances (Details Narrative) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2012 Residential Real Estate	Dec. 31, 2011 Residential Real Estate
Prepayment of advances	$ 3,000
Penalty on prepayment	37
Collateral pledged		74,000	69,000
Amount of unused funds available to be borrowed	$ 46,000

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Deposits

12 Months Ended

Dec. 31, 2012

Deposits [Abstract]

Deposits

Note 8 – Deposits

Deposit balances as of December 31 consisted of the following:

(Dollars in thousands)

	2012		2011
Noninterest-bearing demand deposits	$	101,861	$	78,263
Interest-bearing demand deposits		66,569		64,498
Money market deposits		60,806		63,007
Savings deposits		63,406		46,737
Local certificates of deposit		130,057		144,983
Brokered certificates of deposit		1,500		5,877
Total deposits	$	424,199	$	403,365

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

(Dollars in thousands)

2013	$	86,086
2014		21,923
2015		10,194
2016		7,769
2017		5,050
2018		535
Total	$	131,557

The Bank had certificates of deposit issued in denominations of $100,000 or greater totaling $66.9 million and $70.9 million at December 31, 2012 and 2011, respectively. The Bank had brokered certificates of deposit totaling $1.5 million at December 31, 2012 compared to $5.9 million at December 31, 2011. As of December 31, 2012, the weighted average interest rate on the brokered certificate of deposit was 1.40%. In addition, the Bank had $14.2 million of certificates of deposit as of December 31, 2012 and $18.3 million as of December 31, 2011 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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Loans and Allowance for Loan Losses (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Beginning balance	$ 5,213	$ 4,729	$ 4,322
Charge-offs	(2,499)	(3,668)	(3,884)
Recoveries	623	452	341
Provision	2,515	3,700	3,950
Ending balance	5,852	5,213	4,729
Individually evaluated for impairment	700	431	581
Collectively evaluated for impairment	5,152	4,782	4,148
Individually evaluated for impairment	5,939	4,501	6,573
Collectively evaluated for impairment	305,529	315,626	310,367
Ending balance	311,468	320,127	316,940
Agricultural
Beginning balance	55	181	124
Charge-offs		(45)
Recoveries	5	10
Provision	81	(91)	57
Ending balance	140	55	181
Individually evaluated for impairment	1
Collectively evaluated for impairment	139	55	181
Individually evaluated for impairment	166		39
Collectively evaluated for impairment	31,624	38,929	29,642
Ending balance	31,790	38,929	29,681
Commercial and Industrial
Beginning balance	609	641	735
Charge-offs	(405)	(228)	(765)
Recoveries	61	32	68
Provision	116	164	603
Ending balance	381	609	641
Individually evaluated for impairment	112	7	50
Collectively evaluated for impairment	269	602	591
Individually evaluated for impairment	198	163	272
Collectively evaluated for impairment	67,167	58,522	55,675
Ending balance	67,365	58,685	55,947
Consumer
Beginning balance	197	243	306
Charge-offs	(338)	(361)	(444)
Recoveries	214	217	230
Provision	177	98	151
Ending balance	250	197	243
Individually evaluated for impairment
Collectively evaluated for impairment	250	197	243
Individually evaluated for impairment	32
Collectively evaluated for impairment	19,335	18,657	16,709
Ending balance	19,367	18,657	16,709
Commercial Real Estate
Beginning balance	2,299	1,729	1,546
Charge-offs	(869)	(1,357)	(1,523)
Recoveries	224	89	16
Provision	942	1,838	1,690
Ending balance	2,596	2,299	1,729
Individually evaluated for impairment	449	424	531
Collectively evaluated for impairment	2,147	1,875	1,198
Individually evaluated for impairment	3,723	2,758	3,529
Collectively evaluated for impairment	89,589	103,492	112,822
Ending balance	93,312	106,250	116,351
Construction Real Estate
Beginning balance	34	2	3
Charge-offs
Recoveries
Provision	(19)	32	(1)
Ending balance	15	34	2
Individually evaluated for impairment
Collectively evaluated for impairment	15	34	2
Individually evaluated for impairment
Collectively evaluated for impairment	1,056	1,169	853
Ending balance	1,056	1,169	853
Residential Real Estate
Beginning balance	1,847	1,554	1,590
Charge-offs	(887)	(1,677)	(1,152)
Recoveries	119	104	27
Provision	844	1,866	1,089
Ending balance	1,923	1,847	1,554
Individually evaluated for impairment	138
Collectively evaluated for impairment	1,785	1,847	1,554
Individually evaluated for impairment	1,820	1,580	2,733
Collectively evaluated for impairment	96,758	94,857	94,666
Ending balance	98,578	96,437	97,399
Unallocated
Beginning balance	172	379	18
Charge-offs
Recoveries
Provision	375	(207)	361
Ending balance	547	172	379
Individually evaluated for impairment
Collectively evaluated for impairment	$ 547	$ 172	$ 379

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Regulatory Capital (Details Narrative) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Regulatory Capital Details Narrative
Amount of undistributed net income available for dividends	$ 5,546

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Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2012

Goodwill And Intangible Assets

Goodwill and Intangible Assets

Note 6 - Goodwill and Intangible Assets

Goodwill

There were no changes in the goodwill balance in 2012 or 2011. ChoiceOne engaged an outside consulting firm to assist management in performing its annual evaluation of goodwill for impairment as of June 30, 2012. The following steps were used in the valuation: determination of the reporting unit, determination of the appropriate standard of value, determination of the appropriate level of value, calculation of fair value, and comparison of the fair value computed to the equity carrying value. It was determined that the relevant reporting unit to be valued was ChoiceOne Bank. The standard of value used in the valuation was fair value as determined by generally accepted accounting principles. The appropriate level of value was determined to be the controlling interest level. The appraisal methodology used to calculate the fair value included the income approach, which was a discounted cash flow value based on projected earnings capacity. The income approach used a discount rate of 12.50%, a growth assumption of 1.8% for assets for the first year and 2.0% in subsequent years, and an assumption of cost savings of 20% of noninterest expense as a result of synergies and cost reductions from a change in control. The appraisal methodology also included the market approach, which was based on price-to-earnings multiples, price-to-tangible book value ratios, and core deposit premiums for selected bank sale transactions. The asset approach was also an approach that was reviewed, but it was not used in determining the fair value since it did not render a control level indication of value. The results from the valuation approaches were used to calculate an estimate of the fair value of ChoiceOne’s equity, which was compared to the carrying value of equity to determine whether the Step 1 test under generally accepted accounting principles that govern the valuation of goodwill was passed. The goodwill analysis determined that the fair value of ChoiceOne’s equity exceeded the carrying value by 10.8%. Based on this assessment, management believed that there was no indication of goodwill impairment at June 30, 2012. Based on the testing performed and a review of factors that might impact ChoiceOne’s stock value subsequent to the annual evaluation, no impairment of goodwill was deemed to exist as of December 31, 2012.

Acquired Intangible Assets

Information for acquired intangible assets at December 31 follows:

(Dollars in thousands)

	2012				2011
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Core deposit intangible	$	4,134	$	2,549	$	4,134	$	2,136
Other intangible assets		347		208		347		173
Totals	$	4,481	$	2,757	$	4,481	$	2,309

The core deposit intangible and other intangible assets are being amortized on a straight-line basis over ten years. Aggregate amortization expense was $448,000 for 2012, 2011 and 2010. The estimated amortization expense for the next four years ending December 31 is as follows:

(Dollars in thousands)

	Core Deposit Intangible		Other Intangible Assets		Total
2013	$	413		35		448
2014		413		35		448
2015		413		35		448
2016		346		34		380
Total	$	1,585	$	139	$	1,724

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Other Real Estate Owned

12 Months Ended

Dec. 31, 2012

Other Real Estate Owned

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)

	2012			2011			2010
Balance, beginning of year	$	1,934		$	1,953		$	2,201
Transfers from loans		1,718			2,972			1,358
Reclassification to buildings		(20	)		—			—
Proceeds from sales		(1,259	)		(3,015	)		(1,174	)
Gains/(losses) on sales		51			279			96
Write-downs		(405	)		(255	)		(528	)
Balance, end of year	$	2,019		$	1,934		$	1,953

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Repurchase Agreements

12 Months Ended

Dec. 31, 2012

Repurchase Agreements

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. As of December 31, 2011, the Bank had a $5 million structured repurchase agreement with a correspondent bank maturing on July 31, 2012 with a fixed interest rate of 4.55%. Information regarding repurchase agreements follows:

(Dollars in thousands)

	2012			2011
Outstanding balance at December 31	$	19,572		$	21,869
Average interest rate at December 31		0.25	%		1.27	%
Average balance during the year	$	22,185		$	20,815
Average interest rate during the year		0.84	%		1.38	%
Maximum month end balance during the year	$	24,662		$	22,249

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Loans and Allowance for Loan Losses (Details 5) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Recorded Investment With no related allowance recorded	$ 720	$ 2,804
Unpaid Principal Balance With no related allowance recorded	1,338	3,223
Average Recorded Investment With no related allowance recorded	3,194	4,201
Interest Income Recognized With no related allowance recorded	54	65
Recorded Investment With an allowance recorded	5,219	1,697
Unpaid Principal Balance With an allowance recorded	5,286	2,183
Related Allowance	700	431
Average Recorded Investment With an allowance recorded	2,072	1,575
Interest Income Recognized With an allowance recorded	45	6
Recorded Investment	5,939	4,501
Unpaid Principal Balance	6,624	5,406
Average Recorded Investment	5,266	5,776
Interest Income Recognized	99	71
Agricultural
Recorded Investment With no related allowance recorded	94
Unpaid Principal Balance With no related allowance recorded	441
Average Recorded Investment With no related allowance recorded	19	45
Interest Income Recognized With no related allowance recorded
Recorded Investment With an allowance recorded	72
Unpaid Principal Balance With an allowance recorded	72
Related Allowance	1
Average Recorded Investment With an allowance recorded	14
Interest Income Recognized With an allowance recorded	1
Recorded Investment	166
Unpaid Principal Balance	513
Average Recorded Investment	33	45
Interest Income Recognized	1
Commercial and Industrial
Recorded Investment With no related allowance recorded	49	102
Unpaid Principal Balance With no related allowance recorded	49	105
Average Recorded Investment With no related allowance recorded	223	167
Interest Income Recognized With no related allowance recorded	6
Recorded Investment With an allowance recorded	149	61
Unpaid Principal Balance With an allowance recorded	169	63
Related Allowance	112	7
Average Recorded Investment With an allowance recorded	112	85
Interest Income Recognized With an allowance recorded
Recorded Investment	198	163
Unpaid Principal Balance	218	168
Average Recorded Investment	335	252
Interest Income Recognized	6
Consumer
Recorded Investment With no related allowance recorded
Unpaid Principal Balance With no related allowance recorded
Average Recorded Investment With no related allowance recorded
Interest Income Recognized With no related allowance recorded
Recorded Investment With an allowance recorded	32
Unpaid Principal Balance With an allowance recorded	32
Related Allowance
Average Recorded Investment With an allowance recorded	6
Interest Income Recognized With an allowance recorded
Recorded Investment	32
Unpaid Principal Balance	32
Average Recorded Investment	6
Interest Income Recognized
Commercial Real Estate
Recorded Investment With no related allowance recorded	577	1,122
Unpaid Principal Balance With no related allowance recorded	848	1,538
Average Recorded Investment With no related allowance recorded	1,586	2,369
Interest Income Recognized With no related allowance recorded		15
Recorded Investment With an allowance recorded	3,146	1,636
Unpaid Principal Balance With an allowance recorded	3,193	2,120
Related Allowance	449	424
Average Recorded Investment With an allowance recorded	1,576	1,490
Interest Income Recognized With an allowance recorded	24	6
Recorded Investment	3,723	2,758
Unpaid Principal Balance	4,041	3,658
Average Recorded Investment	3,162	3,859
Interest Income Recognized	24	21
Residential Real Estate
Recorded Investment With no related allowance recorded		1,580
Unpaid Principal Balance With no related allowance recorded		1,580
Average Recorded Investment With no related allowance recorded	1,366	1,620
Interest Income Recognized With no related allowance recorded	48	50
Recorded Investment With an allowance recorded	1,820
Unpaid Principal Balance With an allowance recorded	1,820
Related Allowance	138
Average Recorded Investment With an allowance recorded	364
Interest Income Recognized With an allowance recorded	20
Recorded Investment	1,820	1,580
Unpaid Principal Balance	1,820	1,580
Average Recorded Investment	1,730	1,620
Interest Income Recognized	$ 68	$ 50

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Taxes Details
Current federal income tax expense	$ 1,475	$ 682	$ 817
Deferred federal income tax expense (benefit)	(132)	378	(163)
Income tax expense	$ 1,343	$ 1,060	$ 654

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Loans and Allowance for Loan Losses (Details 7) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Nonaccrual past due loans	$ 2,331	$ 4,155
Agricultural
Nonaccrual past due loans	94	26
Commercial and Industrial
Nonaccrual past due loans	220	143
Consumer
Nonaccrual past due loans	33	22
Commercial Real Estate
Nonaccrual past due loans	1,230	2,790
Construction Real Estate
Nonaccrual past due loans
Residential Real Estate
Nonaccrual past due loans	$ 754	$ 1,174

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Condensed Financial Statements of Parent Company (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Net income	$ 1,104	$ 1,122	$ 1,021	$ 1,015	$ 1,019	$ 886	$ 904	$ 704	$ 4,262	$ 3,513	$ 2,711
Adjustments to reconcile net income to net cash from operating activities:
Amortization									1,569	1,300	1,173
Changes in other assets									667	2,391	875
Changes in other liabilities									4	(2,458)	357
Net cash from operating activities									9,642	12,545	9,225
Maturities of securities									39,098	18,687	22,271
Purchases of securities									(69,564)	(43,651)	(44,063)
Net cash from investing activities									(16,643)	(31,118)	(16,368)
Issuance of common stock									123	127	125
Repurchase of common stock									(75)
Cash dividends paid									(1,648)	(1,578)	(1,572)
Net cash from financing activities									8,910	11,624	11,467
Net change in cash									1,909	(6,949)	4,324
Beginning cash and cash equivalents				17,125				24,074	17,125	24,074	19,750
Ending cash and cash equivalents	19,034				17,125				19,034	17,125	24,074
Parent Company
Net income									4,262	3,513	2,711
Adjustments to reconcile net income to net cash from operating activities:
Equity in undistributed net income of subsidiary									(2,596)	(1,843)	(1,107)
Amortization									2
Changes in other assets									(1)	50	(17)
Changes in other liabilities									(10)	17	(18)
Net cash from operating activities									1,657	1,737	1,569
Maturities of securities											200
Purchases of securities									(409)		(202)
Net cash from investing activities									(409)		(2)
Issuance of common stock									123	127	125
Repurchase of common stock									(75)
Cash dividends paid									(1,648)	(1,578)	(1,572)
Net cash from financing activities									(1,600)	(1,451)	(1,447)
Net change in cash									(352)	286	120
Beginning cash and cash equivalents				487				201	487	201	81
Ending cash and cash equivalents	$ 135				$ 487				$ 135	$ 487	$ 201

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Loans and Allowance for Loan Losses (Details 4) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012 N	Dec. 31, 2011 N
Number of Contracts	12	13
Pre-Modification Outstanding Recorded Investment	$ 2,606	$ 2,476
Post Modification Oustanding Recorded Investment	2,596	2,476
TDRs subsequently defaulted, number of contracts	5	11
TDRs subsequently defaulted, recorded investment	321	2,048
Agricultural
Number of Contracts	1
Pre-Modification Outstanding Recorded Investment	72
Post Modification Oustanding Recorded Investment	72
TDRs subsequently defaulted, number of contracts	1
TDRs subsequently defaulted, recorded investment	72
Commercial and Industrial
Number of Contracts	2	1
Pre-Modification Outstanding Recorded Investment	159	48
Post Modification Oustanding Recorded Investment	149	48
TDRs subsequently defaulted, number of contracts	2	1
TDRs subsequently defaulted, recorded investment	149	48
Consumer
Number of Contracts	1
Pre-Modification Outstanding Recorded Investment	32
Post Modification Oustanding Recorded Investment	32
TDRs subsequently defaulted, number of contracts	1
TDRs subsequently defaulted, recorded investment	32
Commercial Real Estate
Number of Contracts	5	7
Pre-Modification Outstanding Recorded Investment	1,990	1,789
Post Modification Oustanding Recorded Investment	1,990	1,789
TDRs subsequently defaulted, number of contracts	1	3
TDRs subsequently defaulted, recorded investment	68	1,135
Residential Real Estate
Number of Contracts	3	5
Pre-Modification Outstanding Recorded Investment	353	639
Post Modification Oustanding Recorded Investment	353	639
TDRs subsequently defaulted, number of contracts		7
TDRs subsequently defaulted, recorded investment		$ 865

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Employee Benefit Plans (Details Narrative) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Matching contributions to 401(k) plan cost	$ 178	$ 115	$ 112
Post-retirement Benefits Plan
Benefit expense	10	11	15
Benefit obligation	158	131
Deferred Compensation Plans - Directors
Benefit expense	15	17	20
Benefit obligation	261	287
Deferred Compensation Plans - Executive Officers
Benefit expense	120	32	41
Benefit obligation	$ 766	$ 715

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Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2012

Premises And Equipment Tables

Schedule of premises and equipment

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

(Dollars in thousands)

	2012			2011
Land and land improvements	$	4,108		$	4,084
Leasehold improvements		38			36
Buildings		11,190			11,080
Furniture and equipment		4,556			3,768
Total cost		19,892			18,968
Accumulated depreciation		(7,771	)		(6,888	)
Premises and equipment, net	$	12,121		$	12,080

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):

2013 $ 36

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Data Tables

Schedule of Quarterly Financial Data (Unaudited)

(Dollars in thousands)							Earnings Per Share
		Interest Income		Net Interest Income		Net Income		Basic		Fully Diluted
2012
First Quarter	$	5,175	$	4,419	$	1,015	$	0.31	$	0.31
Second Quarter		5,004		4,290		1,021		0.31		0.31
Third Quarter		5,103		4,512		1,122		0.34		0.34
Fourth Quarter		4,937		4,454		1,104		0.33		0.33
2011
First Quarter	$	5,282	$	4,345	$	704	$	0.21	$	0.21
Second Quarter		5,386		4,472		904		0.28		0.28
Third Quarter		5,399		4,523		886		0.27		0.27
Fourth Quarter		5,408		4,582		1,019		0.31		0.31

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Stock Options

12 Months Ended

Dec. 31, 2012

StockOptionsAbstract

Stock Options

Note 14 - Stock Options

Options to buy stock have been granted to key employees under an incentive stock option plan to provide them with additional equity interest in ChoiceOne. ChoiceOne recognized compensation expense of $0 in 2012, $5,000 in 2011, and $15,000 in 2010 in connection with stock options that vested for current participants during these years. The Amended and Restated Executive Stock Incentive Plan under which the stock options were granted expired in 2012. A new Stock Incentive Plan was approved by the Registrant’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, 2012, there were 100,000 shares available for future grants.

A summary of the activity in the plan follows:

	2012				2011				2010
	Shares		Weighted average exercise price		Shares		Weighted average exercise price		Shares		Weighted average exercise price
Options outstanding, beginning of year		46,656	$	16.62		49,232	$	16.46		49,232	$	16.46
Options granted		—		—		—		—		—		—
Options exercised		2,625	$	13.70		2,576	$	13.44		—		—
Options forfeited or expired		7,131	$	15.97		—		—		—		—
Options outstanding, end of year		36,900	$	16.95		46,656	$	16.62		49,232	$	16.46
Options exercisable at December 31		36,900	$	16.95		46,656	$	16.62		46,357	$	16.64

The range of prices for options outstanding and exercisable at the end of 2012 ranged from $13.50 to $21.43 per share. The weighted average remaining contractual life of options outstanding and exercisable at the end of 2012 was approximately 3.2 years. A total of 12,100 options had an exercise price lower than ChoiceOne’s closing stock price as of the end of 2012, while 24,800 options had an exercise price higher than the closing stock price. Information pertaining to options outstanding at December 31, 2012 is as follows:

Exercise price of stock options:		Number of options outstanding at year-end		Number of options exercisable at year-end		Average remaining contractual life (in years)
$	13.50		10,000		10,000		5.07
$	13.70		2,100		2,100		0.04
$	16.31		5,512		5,512		1.06
$	17.95		8,000		8,000		4.05
$	18.85		5,250		5,250		3.05
$	21.43		6,038		6,038		2.05

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. No options were granted in 2012, 2011, or 2010.

There were no shares that were vested during 2012. As of December 31, 2012, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plan.

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Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Measurements

Fair Value Measurements

Note 19 – 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, 2012 and December 31, 2011, 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, 2012 or December 31, 2011. Disclosures concerning assets measured at fair value are as follows:

Assets Measured at Fair Value on a Recurring Basis
(Dollars in Thousands)

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at Date Indicated
Investment Securities, Available for Sale – December 31, 2012
U.S. Government and federal agency	$	—	$	40,268	$	—	$	40,268
U.S. Treasury notes and bonds		—		7,398		—		7,398
State and municipal		—		62,579		2,099		64,678
Mortgage-backed		—		12,526		—		12,526
Corporate		—		6,712		—		6,712
Foreign debt		—		1,001		—		1,001
Equity securities		—		1,409		500		1,909
Total	$	—	$	131,893	$	2,599	$	134,492
Investment Securities, Available for Sale – December 31, 2011
U.S. Government and federal agency	$	—	$	40,413	$	—	$	40,413
State and municipal		—		52,228		2,271		54,499
Mortgage-backed		—		9,780		—		9,780
Corporate		—		6,011		—		6,011
FDIC-guaranteed financial institution debt		—		2,038		—		2,038
Equity securities		—		1,035		500		1,535
Total	$	—	$	111,505	$	2,771	$	114,276

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, state and municipal securities, mortgage-backed securities, corporate bonds, FDIC- guaranteed financial institution debt, and equity securities. The Company classified certain state and municipal securities and privately issued trust preferred 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.

ChoiceOne reviewed the methodologies used to estimate the fair values of all securities in 2012. Based on an updated analysis, it was determined that the fair values of U.S. Government and federal agency securities, corporate securities, and FDIC-guaranteed financial institution debt were based upon Level 2 inputs. These securities classes, which were previously disclosed as based on Level 1 inputs, have been adjusted accordingly.

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

(Dollars in Thousands)

	2012			2011
Investment Securities, Available for Sale
Balance, January 1	$	2,771		$	2,839
Total realized and unrealized gains included in income		—			—
Total unrealized gains (losses) included in other comprehensive income		(9	)		164
Net purchases, sales, calls, and maturities		(163	)		(299	)
Net transfers into Level 3		—			67
Balance, December 31	$	2,599		$	2,771

Of the Level 3 assets that were still held by the Bank at December 31, 2012, the net unrealized loss for the twelve months ended December 31, 2012 was $9,000, which is recognized in other comprehensive income in the consolidated balance sheet. A total of $564,000 of Level 3 securities were purchased in 2012. One security was reclassified from a Level 2 measurement of fair value to a Level 3 measurement in 2011 as a result of a change in the marketability of the security.

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)

	Balance 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, 2012	$	5,939	$	—	$	—	$	5,939
December 31, 2011	$	4,501	$	—	$	—	$	4,501
Other Real Estate
December 31, 2012	$	2,019	$	—	$	—	$	2,019
December 31, 2011	$	1,934	$	—	$	—	$	1,934

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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Stock Options (Details Narrative) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Stock-based compensation expense	$ 11	$ 15	$ 26
Authorized number of awards	100,000
Lower Range
Exercise price of options outstanding and exercisable	$ 13.50
Upper Range
Exercise price of options outstanding and exercisable	$ 21.43
Stock Options
Stock-based compensation expense	$ 0	$ 5	$ 15
Weighted average remaining contractual life of options outstanding and exercisable	3 years 2 months 12 days

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Off-Balance Sheet Activities (Tables)

12 Months Ended

Dec. 31, 2012

Off-Balance Sheet Activities Tables

Schedule 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:

(Dollars in thousands)	2012				2011
		Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Unused lines of credit and letters of credit	$	2,474	$	49,196	$	2,868	$	47,217
Commitments to fund loans (at market rates)		5,145		5,798		3,610		1,919

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Fair Value Measurements (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Fair Value Measurements Details 1
Balance at the beginning of year	$ 2,771	$ 2,839
Total realized and unrealized gains included in income
Total unrealized gains included in other comprehensive income	(9)	164
Net purchases, sales, calls and maturities	(163)	(299)
Transfers into Level 3		67
Balance at the end of period	$ 2,599	$ 2,771

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2012

Related Party Transactions Tables

Schedule of related party loans

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

(Dollars in thousands)

	2012			2011
Balance, beginning of year	$	6,254		$	6,568
New loans		669			948
Repayments		(1,087	)		(1,262	)
Balance, end of year	$	5,836		$	6,254

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Fair Value Measurements (Details Narrative) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Fair Value Measurements Details Narrative
Total unrealized gains included in other comprehensive income	$ (9)	$ 164
Level 3 securities purchased	$ 564

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Consolidated Statements Of Comprehensive Income
Net income	$ 4,262	$ 3,513	$ 2,711
Unrealized holding gains on available for sale securities	240	1,615	419
Funded status of post-retirement benefit plan	(22)	(15)	(14)
[OtherComprehensiveIncomeTotalBeforeReclassification]	218	1,600	405
Less: Reclassification adjustment for gain recognized in earnings, net of tax	277	85	292
Other comprehensive income/(loss), net of tax	(59)	1,515	113
Comprehensive income	$ 4,203	$ 5,028	$ 2,824

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Income Taxes (Details Narrative) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Income Taxes Details Narrative
Deferred tax asset resulting from losses on sales of securities in 2009 and 2010	$ 45	$ 45
Deferred tax asset related to unexercised stock options	44	44
Deferred Tax valuation allowances	$ 89	$ 89

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Loans and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2012

Loans And Allowance For Loan Losses

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)

	2012			2011
Agricultural	$	31,790		$	38,929
Commercial and industrial		67,365			58,685
Consumer		19,367			18,657
Real estate – commercial		93,312			106,250
Real estate - construction		1,056			1,169
Real estate - residential		98,578			96,437
Loans, gross		311,468			320,127
Allowance for loan losses		(5,852	)		(5,213	)
Loans, net	$	305,616		$	314,914

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, who works with the borrower to bring payments current or takes 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
2012
Allowance for Loan Losses
Beginning balance	$	55		$	609		$	197		$	2,299		$	34		$	1,847		$	172		$	5,213
Charge-offs		—			(405	)		(338	)		(869	)		—			(887	)		—			(2,499	)
Recoveries		5			61			214			224			—			119			—			623
Provision		80			116			177			942			(19	)		844			375			2,515
Ending balance	$	140		$	381		$	250		$	2,596		$	15		$	1,923		$	547		$	5,852
Individually evaluated for impairment	$	1		$	112		$	—		$	449		$	—		$	138		$	—		$	700
Collectively evaluated for impairment	$	139		$	269		$	250		$	2,147		$	15		$	1,785		$	547		$	5,152
Loans
Individually evaluated for impairment	$	166		$	198		$	32		$	3,723		$	—		$	1,820					$	5,939
Collectively evaluated for impairment		31,624			67,167			19,335			89,589			1,056			96,758						305,529
Ending balance	$	31,790		$	67,365		$	19,367		$	93,312		$	1,056		$	98,578					$	311,468
2011
Allowance for Loan Losses
Beginning balance	$	181		$	641		$	243		$	1,729		$	2		$	1,554		$	379		$	4,729
Charge-offs		(45	)		(228	)		(361	)		(1,357	)		—			(1,677	)		—			(3,668	)
Recoveries		10			32			217			89			—			104			—			452
Provision		(91	)		164			98			1,838			32			1,866			(207	)		3,700
Ending balance	$	55		$	609		$	197		$	2,299		$	34		$	1,847		$	172		$	5,213
Individually evaluated for impairment	$	—		$	7		$	—		$	424		$	—		$	—		$	—		$	431
Collectively evaluated for impairment	$	55		$	602		$	197		$	1,875		$	34		$	1,847		$	172		$	4,782
Loans
Individually evaluated for impairment	$	—		$	163		$	—		$	2,758		$	—		$	1,580					$	4,501
Collectively evaluated for impairment		38,929			58,522			18,657			103,492			1,169			94,857						315,626
Ending balance	$	38,929		$	58,685		$	18,657		$	106,250		$	1,169		$	96,437					$	320,127

	Agricultural		Commercial and Industrial			Consumer			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Unallocated		Total
2010
Allowance for Loan Losses
Beginning balance	$	124	$	735		$	306		$	1,546		$	3		$	1,590		$	18	$	4,322
Charge-offs		—		(765	)		(444	)		(1,523	)		—			(1,152	)		—		(3,884	)
Recoveries		—		68			230			16			—			27			—		341
Provision		57		603			151			1,690			(1	)		1,089			361		3,950
Ending balance	$	181	$	641		$	243		$	1,729		$	2		$	1,554		$	379	$	4,729
Individually evaluated for impairment	$	—	$	50		$	—		$	531		$	—		$	—		$	—	$	581
Collectively evaluated for impairment	$	181	$	591		$	243		$	1,198		$	2		$	1,554		$	379	$	4,148
Loans
Individually evaluated for impairment	$	39	$	272		$	—		$	3,529		$	—		$	2,733				$	6,573
Collectively evaluated for impairment		29,642		55,675			16,709			112,822			853			94,666					310,367
Ending balance	$	29,681	$	55,947		$	16,709		$	116,351		$	853		$	97,399				$	316,940

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:

(Dollars in thousands)

Corporate Credit Exposure - Credit Risk Profile By Creditworthiness Category

	Agricultural				Commercial and Industrial				Commercial Real Estate
	2012		2011		2012		2011		2012		2011
Risk ratings 1 and 2	$	8,615	$	6,486	$	9,040	$	4,149	$	2,711	$	6,403
Risk rating 3		16,173		20,211		43,549		30,109		45,295		45,034
Risk rating 4		5,040		9,499		13,417		21,993		30,223		33,462
Risk rating 5		1,939		2,672		855		1,669		7,847		14,313
Risk rating 6		19		57		361		680		6,960		5,009
Risk rating 7		4		4		143		85		276		2,029
	$	31,790	$	38,929	$	67,365	$	58,685	$	93,312	$	106,250

Consumer Credit Exposure - Credit Risk Profile Based On Payment Activity

	Consumer				Construction Real Estate				Residential Real Estate
	2012		2011		2012		2011		2012		2011
Performing	$	19,334	$	18,634	$	1,056	$	1,169	$	98,018	$	95,732
Nonperforming		33		23		—		—		560		705
	$	19,367	$	18,657	$	1,056	$	1,169	$	98,578	$	96,437

The following schedule provides information on loans that were considered troubled debt restructurings (“TDRs”) that were modified during the twelve months ended December 31, 2012 and December 31, 2011:

	December 31, 2012					December 31, 2011
(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	1	$	72	$	72	—	$	—	$	—
Commercial and industrial	2		159		149	1		48		48
Consumer	1		32		32	—		—		—
Commercial real estate	5		1,990		1,990	7		1,789		1,789
Residential real estate	3		353		353	5		639		639
	12	$	2,606	$	2,596	13	$	2,476	$	2,476

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, 2012 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, 2012 and December 31, 2011 that had been modified during the 12-month period prior to the default:

	With Payment Defaults During the Following Periods:
	December 31, 2012			December 31, 2011
(Dollars in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Agricultural	1	$	72	—	$	—
Commercial and industrial	2		149	1		48
Consumer	1		32	—		—
Commercial real estate	1		68	3		1,135
Residential real estate	—		—	7		865
	5	$	321	11	$	2,048

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 follow:

(Dollars in thousands)

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2012
With no related allowance recorded
Agricultural	$	94	$	441	$	—	$	19	$	—
Commercial and industrial		49		49		—		223		6
Consumer		—		—		—		—		—
Commercial real estate		577		848		—		1,586		—
Residential real estate		—		—		—		1,366		48
Subtotal		720		1,338		—		3,194		54
With an allowance recorded
Agricultural		72		72		1		14		1
Commercial and industrial		149		169		112		112		—
Consumer		32		32		—		6		—
Commercial real estate		3,146		3,193		449		1,576		24
Residential real estate		1,820		1,820		138		364		20
Subtotal		5,219		5,286		700		2,072		45
Total
Agricultural		166		513		1		33		1
Commercial and industrial		198		218		112		335		6
Consumer		32		32		—		6		—
Commercial real estate		3,723		4,041		449		3,162		24
Residential real estate		1,820		1,820		138		1,730		68
Total	$	5,939	$	6,624	$	700	$	5,266	$	99

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
2011
With no related allowance recorded
Agricultural	$	—	$	—	$	—	$	45	$	—
Commercial and industrial		102		105		—		167		—
Commercial real estate		1,122		1,538		—		2,369		15
Residential real estate		1,580		1,580		—		1,620		50
Subtotal		2,804		3,223		—		4,201		65
With an allowance recorded
Agricultural		—		—		—		—		—
Commercial and industrial		61		63		7		85		—
Commercial real estate		1,636		2,120		424		1,490		6
Residential real estate		—		—		—		—		—
Subtotal		1,697		2,183		431		1,575		6
Total
Agricultural		—		—		—		45		—
Commercial and industrial		163		168		7		252		—
Commercial real estate		2,758		3,658		424		3,859		21
Residential real estate		1,580		1,580		—		1,620		50
Total	$	4,501	$	5,406	$	431	$	5,776	$	71

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

(Dollars in thousands)

	30 to 59 Days (1)		60 to 89 Days (1)		Greater Than 90 Days (1)		Total (1)		Loans Not Past Due		Total Loans		90 Days Past Due and Accruing
2012
Agricultural	$	262		$—		$—	$	262	$	31,529	$	31,790		$—
Commercial and industrial		102		4		198		304		67,061		67,365		—
Consumer		173		28		33		234		19,133		19,367		1
Commercial real estate		64		68		339		471		92,841		93,312		—
Construction real estate		—		—		—		—		1,056		1,056		—
Residential real estate		1,438		691		559		2,688		95,889		98,578		29
	$	2,039	$	791	$	1,129	$	3,959	$	307,509	$	311,468	$	30
2011
Agricultural	$	151		$—	$	22	$	173	$	38,756	$	38,929		$—
Commercial and industrial		541		143		97		781		57,904		58,685		—
Consumer		104		52		23		179		18,478		18,657		2
Commercial real estate		1,752		713		1,816		4,281		101,969		106,250		—
Construction real estate		—		—		—		—		1,169		1,169		—
Residential real estate		1,320		1,015		705		3,040		93,397		96,437		68
	$	3,868	$	1,923	$	2,663	$	8,454	$	311,673	$	320,127	$	70

(1) Includes nonaccrual loans.

Nonaccrual loans by loan category as of December 31 follow:

(Dollars in thousands)

	2012		2011
Agricultural	$	94	$	26
Commercial and industrial		220		143
Consumer		33		22
Commercial real estate		1,230		2,790
Construction real estate		—		—
Residential real estate		754		1,174
	$	2,331	$	4,155

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Securities (Details Narrative) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011
Securities Details Narrative
Fair value of Other than temporarily impaired one municipal security	$ 311
Impairment losses on other than temporarily impaired municipal security	$ 141

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Federal Home Loan Bank Advances (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Federal Home Loan Bank Advances Details
Advances from Federal Home Loan Bank	$ 420	$ 8,447
Fixed Interest rate	3.98%
Interest rate, lower range		2.54%
Interest rate, upper range		4.16%
Weighted average interest rate		3.58%
Maturity date, lower range	Nov. 30, 2024	Nov. 30, 2012
Maturity date, upper range	2024-11-30	2024-11-30

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Fair Value Measurements (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other real estate owned, net	$ 2,019	$ 1,934	$ 1,953	$ 2,201
Fair Value measured on a Non-Recurring Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	5,939	4,501
Other real estate owned, net	2,019	1,934
Fair Value measured on a Non-Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans
Other real estate owned, net
Fair Value measured on a Non-Recurring Basis | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans
Other real estate owned, net
Fair Value measured on a Non-Recurring Basis | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	5,939	4,501
Other real estate owned, net	$ 2,019	$ 1,934

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Mortgage Banking (Details Narrative) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Mortgage Loans serviced for others, recorded off balance sheet	$ 97,000	$ 96,000
Fair value of loan servicing rights	$ 807	$ 797
Discount Rate	7.70%	7.70%
Lower Range
Prepayment Speed	14.00%	7.00%
Upper Range
Prepayment Speed	34.00%	26.00%

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Off-Balance Sheet Activities

12 Months Ended

Dec. 31, 2012

Off-Balance Sheet Activities

Off-Balance Sheet Activities

Note 20 – 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:

(Dollars in thousands)	2012				2011
		Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Unused lines of credit and letters of credit	$	2,474	$	49,196	$	2,868	$	47,217
Commitments to fund loans (at market rates)		5,145		5,798		3,610		1,919

Commitments to fund loans are generally made for periods of 180 days or less. The fixed rate loan commitments have interest rates ranging from 1.00% to 4.35% and maturities ranging from 1 year to 30 years.

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Goodwill and Intangible Assets (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Estimated amortization expense:
For the year ended December 31, 2013	$ 448
For the year ended December 31, 2014	448
For the year ended December 31, 2015	448
For the year ended December 31, 2016	380
[FiniteLivedIntangibleAssetsNet]	1,724
Core Deposit Intangible
Estimated amortization expense:
For the year ended December 31, 2013	413
For the year ended December 31, 2014	413
For the year ended December 31, 2015	413
For the year ended December 31, 2016	346
[FiniteLivedIntangibleAssetsNet]	1,585
Other Intangible Assets
Estimated amortization expense:
For the year ended December 31, 2013	35
For the year ended December 31, 2014	35
For the year ended December 31, 2015	35
For the year ended December 31, 2016	34
[FiniteLivedIntangibleAssetsNet]	$ 139

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Repurchase Agreements (Tables)

12 Months Ended

Dec. 31, 2012

Repurchase Agreements Tables

Schedule of Securities Sold Under Repurchase Agreements

As of December 31, 2011, the Bank had a $5 million structured repurchase agreement with a correspondent bank maturing on July 31, 2012 with a fixed interest rate of 4.55%. Information regarding repurchase agreements follows:

(Dollars in thousands)

	2012			2011
Outstanding balance at December 31	$	19,572		$	21,869
Average interest rate at December 31		0.25	%		1.27	%
Average balance during the year	$	22,185		$	20,815
Average interest rate during the year		0.84	%		1.38	%
Maximum month end balance during the year	$	24,662		$	22,249

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2012

Employee Benefit Plans

Employee Benefits Plan

Note 13 – Employee Benefit Plans

401(k) Plan:

The 401(k) plan allows employees to contribute up to the IRS maximum. Matching company contributions to the plan are discretionary. Expense of this plan was $178,000, $115,000, and $112,000 in 2012, 2011, and 2010, respectively.

Employee Stock Ownership Plan:

Employees participate in an Employee Stock Ownership Plan (the “ESOP”). ChoiceOne may make discretionary contributions to the ESOP. Shares of ChoiceOne common stock are allocated to participants based on relative compensation earned and compensation expense is recorded when allocated. Dividends on allocated shares increase the participant accounts. Participants become fully vested upon completing six years of qualifying service. Participants receive the shares at the end of employment. A participant may require stock received to be repurchased by ChoiceOne at any time. ChoiceOne did not contribute to the ESOP nor was any expense recorded in 2012, 2011, or 2010.

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

(Dollars in thousands)

	2012		2011		2010
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	$	77	$	64	$	64

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 negative post-retirement benefit expense of $10,000 in 2012, $11,000 in 2011, and $15,000 in 2010. The post-retirement obligation liability was $158,000 as of December 31, 2012 and $131,000 as of December 31, 2011.

Deferred Compensation Plans:

A deferred director compensation plan covers former directors of Valley Ridge Bank, 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 $15,000, $17,000, and $20,000 in 2012, 2011, and 2010, respectively. The deferred compensation liability was $261,000 as of December 31, 2012 and $287,000 as of December 31, 2011.

A supplemental retirement plan covers four former executive officers of Valley Ridge Bank. 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. ChoiceOne incurred deferred compensation plan expense of $120,000 in 2012, $32,000 in 2011, and $41,000 in 2010. Deferred compensation liabilities of $766,000 and $715,000 were outstanding as of December 31, 2012 and December 31, 2011, respectively.

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Condensed Financial Statements of Parent Company (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income before income tax and equity in undistributed net income of subsidiary									$ 5,605	$ 4,573	$ 3,365
Income tax benefit									1,343	1,060	654
Net income	1,104	1,122	1,021	1,015	1,019	886	904	704	4,262	3,513	2,711
Parent Company
Interest and dividends from ChoiceOne Bank									1,710	1,695	1,641
Interest and dividends from other securities									16	7	7
Other income										33
Total income									1,726	1,735	1,648
Other expenses									89	81	67
Income before income tax and equity in undistributed net income of subsidiary									1,637	1,654	1,581
Income tax benefit									29	16	23
Income before equity in undistributed net income of subsidiary									1,666	1,670	1,604
Equity in undistributed net income of subsidiary									2,596	1,843	1,107
Net income									$ 4,262	$ 3,513	$ 2,711