10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended September 30, 2014
☐	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 Sparta, Michigan	49345
(Address of Principal Executive Offices)	(Zip Code)

(616) 887-7366

(Registrant’s Telephone Number, including Area Code)

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

Yes  ☒         No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ☒         No  ☐

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐         No  ☒

As of October 31, 2014, the Registrant had outstanding 3,300,523 shares of common stock.

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

ChoiceOne Financial Services, Inc.
CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
(Dollars in thousands)	2014			2013
	(Unaudited)			(Audited)
Assets
Cash and due from banks	$	10,793		$	20,479
Securities available for sale		141,017			136,082
Federal Home Loan Bank stock		2,478			2,478
Federal Reserve Bank stock		1,272			1,272
Loans held for sale		1,987			931
Loans		338,415			315,966
Allowance for loan losses		(4,660	)		(4,735	)
Loans, net		333,755			311,231
Premises and equipment, net		11,864			11,995
Cash value of life insurance policies		10,487			10,269
Intangible assets, net		939			1,275
Goodwill		13,728			13,728
Other assets		5,099			4,835
Total assets	$	533,419		$	514,575
Liabilities
Deposits – noninterest-bearing	$	107,802		$	102,243
Deposits – interest-bearing		314,748			315,884
Total deposits		422,550			418,127
Federal funds purchased		2,149			—
Repurchase agreements		19,654			26,033
Advances from Federal Home Loan Bank		20,370			6,392
Other liabilities		3,591			2,465
Total liabilities		468,314			453,017
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:
3,300,105 at September 30, 2014 and 3,295,463 at December 31, 2013		46,636			46,595
Retained earnings		17,503			14,815
Accumulated other comprehensive income, net		966			148
Total shareholders’ equity		65,105			61,558
Total liabilities and shareholders’ equity	$	533,419		$	514,575

See accompanying notes to interim consolidated financial statements.

2

ChoiceOne Financial Services, Inc.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands, except per share data)	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Interest income
Loans, including fees	$	4,008		$	3,935		$	11,772		$	11,943
Securities:
Taxable		458			448			1,394			1,365
Tax exempt		349			349			1,039			1,042
Other		2			3			6			8
Total interest income		4,817			4,735			14,211			14,358
Interest expense
Deposits		258			317			800			1,031
Advances from Federal Home Loan Bank		15			14			41			29
Other		9			13			33			32
Total interest expense		282			344			874			1,092
Net interest income		4,535			4,391			13,337			13,266
Provision for loan losses		—			—			100			300
Net interest income after provision for loan losses		4,535			4,391			13,237			12,966
Noninterest income
Customer service charges		1,056			963			2,878			2,735
Insurance and investment commissions		242			288			678			631
Gains on sales of loans		276			295			726			1,269
Gains on sales of securities		89			13			182			89
Losses on sales and write-downs of other assets		(32	)		(520	)		(142	)		(820	)
Earnings on life insurance policies		75			75			219			225
Other		130			160			362			427
Total noninterest income		1,836			1,274			4,903			4,556
Noninterest expense
Salaries and benefits		2,127			2,119			6,288			6,236
Occupancy and equipment		599			580			1,812			1,742
Data processing		473			422			1,360			1,328
Professional fees		250			185			683			577
Supplies and postage		100			100			317			344
Advertising and promotional		57			44			191			156
Intangible amortization		112			112			336			336
Loan and collection expense		37			98			103			275
FDIC insurance		86			68			257			247
Other		388			350			1,151			1,234
Total noninterest expense		4,229			4,078			12,498			12,475
Income before income tax		2,142			1,587			5,642			5,047
Income tax expense		588			386			1,503			1,299
Net income	$	1,554		$	1,201		$	4,139		$	3,748
Basic earnings per share	$	0.47		$	0.37		$	1.25		$	1.14
Diluted earnings per share	$	0.47		$	0.36		$	1.25		$	1.13
Dividends declared per share	$	0.15		$	0.14		$	0.44		$	0.40

See accompanying notes to interim consolidated financial statements.

3

ChoiceOne Financial Services, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) 

(Dollars in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net income	$	1,554		$	1,201		$	4,139		$	3,748
Other comprehensive income:
Unrealized holding gains/(losses) on available for sale securities		230			(735	)		1,420			(3,013	)
Less: Reclassification adjustment for gain recognized in earnings		(89	)		(13	)		(182	)		(89	)
Net unrealized gain/(loss)		141			(748	)		1,238			(3,102	)
Tax (expense)/benefit		(48	)		254			(420	)		1,055
Other comprehensive income/(loss), net of tax		93			(494	)		818			(2,047	)
Comprehensive income	$	1,647		$	707		$	4,957		$	1,701

See accompanying notes to interim consolidated financial statements

4

ChoiceOne Financial Services, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

										Accumulated
				Common						Other
				Stock and						Comprehensive
	Number of			Paid in			Retained			Income,
(Dollars in thousands)	Shares			Capital			Earnings			Net			Total
Balance, January 1, 2013		3,298,081		$	46,649		$	11,501		$	2,356		$	60,506
Net income								3,748						3,748
Other comprehensive loss											(2,047	)		(2,047	)
Shares repurchased		(11,468	)		(192	)								(192	)
Shares issued		7,165			104									104
Change in ESOP repurchase obligation					(13	)								(13	)
Effect of employee stock purchases					9									9
Issuance of restricted stock units					6									6
Cash dividends declared ($0.40 per share)								(1,320	)					(1,320	)
Balance, September 30, 2013		3,293,778		$	46,563		$	13,929		$	309		$	60,801
Balance, January 1, 2014		3,295,463		$	46,595		$	14,815		$	148		$	61,558
Net income								4,139						4,139
Other comprehensive income											818			818
Shares repurchased		(3,437	)		(69	)								(69	)
Shares issued		7,137			101									101
Change in ESOP repurchase obligation					(18	)								(18	)
Effect of employee stock purchases					9									9
Restricted stock units issued		942			18									18
Cash dividends declared ($0.44 per share)								(1,451	)					(1,451	)
Balance, September 30, 2014		3,300,105		$	46,636		$	17,503		$	966		$	65,105

See accompanying notes to interim consolidated financial statements.

5

ChoiceOne Financial Services, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)	Nine Months Ended September 30,
	2014			2013
Cash flows from operating activities:
Net income	$	4,139		$	3,748
Adjustments to reconcile net income to net cash from
operating activities:
Provision for loan losses		100			300
Depreciation		746			686
Amortization		1,156			1,240
Compensation expense on stock purchases and
restricted stock units		27			15
Gains on sales of securities		(182	)		(89	)
Gains on sales of loans		(726	)		(1,269	)
Loans originated for sale		(20,892	)		(34,442	)
Proceeds from loan sales		20,506			36,437
Earnings on bank-owned life insurance		(219	)		(225	)
Gains on sales of other real estate owned		(22	)		(11	)
Write-downs of other real estate owned		154			831
Proceeds from sales of other real estate owned		761			701
Deferred federal income tax benefit		(250	)		(317	)
Net changes in other assets		(724	)		150
Net changes in other liabilities		937			104
Net cash from operating activities		5,511			7,859
Cash flows from investing activities:
Securities available for sale:
Sales		17,386			4,371
Maturities, prepayments and calls		8,637			19,978
Purchases		(30,211	)		(21,082	)
Loan originations and payments, net		(23,146	)		(5,131	)
Additions to premises and equipment		(615	)		(707	)
Net cash from investing activities		(27,949	)		(2,571	)
Cash flows from financing activities:
Net change in deposits		4,423			(17,845	)
Net change in repurchase agreements		(6,379	)		(354	)
Net change in federal funds purchased		2,149			—
Proceeds from Federal Home Loan Bank advances		56,700			18,000
Payments on Federal Home Loan Bank advances		(42,722	)		(9,021	)
Issuance of common stock		101			104
Repurchase of common stock		(69	)		(192	)
Cash dividends		(1,451	)		(1,320	)
Net cash from financing activities		12,752			(10,628	)
Net change in cash and cash equivalents		(9,686	)		(5,340	)
Beginning cash and cash equivalents		20,479			19,034
Ending cash and cash equivalents	$	10,793		$	13,694
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	980		$	1,092
Cash paid for interest	$	884		$	1,025
Loans transferred to other real estate owned	$	521		$	472

See accompanying notes to interim consolidated financial statements.

6

ChoiceOne Financial Services, Inc.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, prevailing practices within the banking industry and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The accompanying consolidated financial statements reflect all adjustments ordinary in nature which are, in the opinion of management, necessary for a fair presentation of the Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013, the Consolidated Statements of Income for the three- and nine-month periods ended September 30, 2014 and September 30, 2013, the Consolidated Statements of Comprehensive Income for the three- and nine-month periods ended September 30, 2014 and September 30, 2013, the Consolidated Statements of Changes in Shareholders' Equity for the nine-month periods ended September 30, 2014 and September 30, 2013, and the Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2014 and September 30, 2013. Operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013.

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. See Note 3 to the interim consolidated financial statements for additional information.

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 economic conditions and (2) the impact of recognizing an impairment or loan loss could have a material effect on ChoiceOne’s assets reported on the balance sheets as well as its net income.

Stock Transactions

A total of 2,740 shares of common stock were issued to the Registrant’s Board of Directors for a cash price of $48,000 under the terms of the Directors’ Stock Purchase Plan in the first nine months of 2014. A total of 3,284 shares were issued to employees for a cash price of $53,000 under the Employee Stock Purchase Plan in the first three quarters of 2014. A total of 1,113 shares were issued upon the exercise of stock options in the first three quarters of 2014. A total of 3,437 shares of common stock were repurchased in the first three quarters of 2014. A total of 942 shares were issued upon the vesting of Restricted Stock Units.

Stock-Based Compensation

Effective July 1, 2013, ChoiceOne began granting Restricted Stock Units to a select group of employees under the Stock Incentive Plan of 2012. All of the Restricted Stock Units are initially unvested and vest in three annual installments on each of the next three anniversaries of the grant date. Certain additional vesting provisions apply. Each unit, once vested, is settled by delivery of one share of ChoiceOne common stock.

Reclassifications

Certain amounts presented in prior periods have been reclassified to conform to the current presentation.

7

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) were as follows:

			September 30, 2014
				Gross		Gross
(Dollars in thousands)		Amortized		Unrealized		Unrealized			Fair
		Cost		Gains		Losses			Value
U.S. Government and federal agency	$	40,675	$	73	$	(251	)	$	40,497
U.S. Treasury		13,224		—		(84	)		13,140
State and municipal		66,385		1,869		(368	)		67,886
Mortgage-backed		9,363		51		(80	)		9,334
Corporate		7,041		30		(19	)		7,052
Foreign debt		1,000		—		(6	)		994
Equity securities		1,707		10		—			1,717
Asset-backed securities		400		—		(3	)		397
Total	$	139,795	$	2,033	$	(811	)	$	141,017

			December 31, 2013
				Gross		Gross
		Amortized		Unrealized		Unrealized			Fair
		Cost		Gains		Losses			Value
U.S. Government and federal agency	$	44,059	$	166	$	(503	)	$	43,722
U.S. Treasury		7,285		17		(78	)		7,224
State and municipal		64,215		1,622		(1,062	)		64,775
Mortgage-backed		8,541		95		(166	)		8,470
Corporate		8,805		61		(51	)		8,815
Foreign debt		1,000		—		(10	)		990
Equity securities		1,707		7		(111	)		1,603
Asset-backed securities		486		—		(3	)		483
Total	$	136,098	$	1,968	$	(1,984	)	$	136,082

ChoiceOne reviews its securities portfolio on a quarterly basis to determine whether unrealized losses are considered to be temporary or other-than-temporary. No other-than-temporary impairment charges were recorded during the nine months ended September 30, 2014. ChoiceOne believed that unrealized losses on securities were temporary in nature and were due to changes in interest rates and reduced market liquidity and not as a result of credit quality issues.

8

NOTE 3 – LOANS AND ALLOWANCE FOR LOAN LOSSES

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

				Commercial
(Dollars in thousands)				and						Commercial			Construction			Residential
	Agricultural			Industrial			Consumer			Real Estate			Real Estate			Real Estate			Unallocated			Total
Allowance for Loan Losses
Three Months Ended
September 30, 2014
Beginning balance	$	180		$	677		$	195		$	1,743		$	5		$	1,269		$	587		$	4,656
Charge-offs		—			—			(82	)		—			—			(7	)		—			(89	)
Recoveries		6			23			39			16			—			9			—			93
Provision		(47	)		(78	)		42			325			1			(120	)		(123	)		—
Ending balance	$	139		$	622		$	194		$	2,084		$	6		$	1,151		$	464		$	4,660
Nine Months Ended
September 30, 2014
Beginning balance	$	179		$	562		$	192		$	1,842		$	12		$	1,625		$	323		$	4,735
Charge-offs		—			—			(199	)		(185	)		—			(117	)		—			(501	)
Recoveries		10			90			146			39			—			41			—			326
Provision		(50	)		(30	)		55			388			(6	)		(398	)		141			100
Ending balance	$	139		$	622		$	194		$	2,084		$	6		$	1,151		$	464		$	4,660
Individually evaluated for impairment	$	6		$	18		$	3		$	1,053		$	—		$	301		$	—		$	1,381
Collectively evaluated for impairment	$	133		$	604		$	191		$	1,031		$	6		$	850		$	464		$	3,279
Three Months Ended
September 30, 2013
Beginning balance	$	140		$	810		$	215		$	2,450		$	20		$	1,671		$	558		$	5,864
Charge-offs		(88	)		(5	)		(102	)		—			—			(148	)		—			(343	)
Recoveries		3			19			41			24			—			104			—			191
Provision		83			(203	)		51			74			(7	)		126			(124	)		—
Ending balance	$	138		$	621		$	205		$	2,548		$	13		$	1,753		$	434		$	5,712
Nine Months Ended
September 30, 2013
Beginning balance	$	140		$	381		$	250		$	2,596		$	15		$	1,923		$	547		$	5,852
Charge-offs		(88	)		(54	)		(286	)		(166	)		—			(431	)		—			(1,025	)
Recoveries		5			258			145			55			—			122			—			585
Provision		81			36			96			63			(2	)		139			(113	)		300
Ending balance	$	138		$	621		$	205		$	2,548		$	13		$	1,753		$	434		$	5,712
Individually evaluated for impairment	$	—		$	174		$	4		$	1,145		$	—		$	492		$	—		$	1,815
Collectively evaluated for impairment	$	138		$	447		$	201		$	1,403		$	13		$	1,261		$	434		$	3,897
Loans
September 30, 2014
Individually evaluated for impairment	$	61		$	156		$	32		$	4,831		$	—		$	2,771					$	7,851
Collectively evaluated for impairment		33,758			87,914			21,009			96,338			1,992			89,553						330,564
Ending balance	$	33,819		$	88,070		$	21,041		$	101,169		$	1,992		$	92,324					$	338,415
December 31, 2013
Individually evaluated for impairment	$	452		$	776		$	37		$	4,195		$	—		$	2,827					$	8,287
Collectively evaluated for impairment		36,596			67,754			19,894			92,792			890			89,753						307,679
Ending balance	$	37,048		$	68,530		$	19,931		$	96,987		$	890		$	92,580					$	315,966

9

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 pass credits. However, 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 is as follows:

Corporate Credit Exposure - Credit Risk Profile By Creditworthiness Category

		Agricultural				Commercial and Industrial				Commercial Real Estate
(Dollars in thousands)		September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
		2014		2013		2014		2013		2014		2013
Risk ratings 1 and 2	$	6,035	$	8,339	$	8,939	$	7,333	$	2,689	$	3,000
Risk rating 3		21,614		23,036		64,255		46,943		59,259		53,681
Risk rating 4		5,324		4,330		13,069		12,557		27,310		27,610
Risk rating 5		783		1,193		1,293		1,025		7,040		6,813
Risk rating 6		63		150		454		608		4,753		5,818
Risk rating 7		—		—		60		64		118		65
	$	33,819	$	37,048	$	88,070	$	68,530	$	101,169	$	96,987

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Corporate Credit Exposure - Credit Risk Profile Based On Payment Activity 

		Consumer				Construction Real Estate				Residential Real Estate
		September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
		2014		2013		2014		2013		2014		2013
Performing	$	21,009	$	19,900	$	1,992	$	890	$	89,569	$	89,959
Nonperforming		32		31		—		—		2,755		2,621
	$	21,041	$	19,931	$	1,992	$	890	$	92,324	$	92,580

The following schedule provides information on loans that were considered TDRs that were modified during the three- and nine-month periods ended September 30, 2014:

	Three Months Ended September 30, 2014						Nine Months Ended September 30, 2014
				Pre-		Post-				Pre-		Post-
				Modification		Modification				Modification		Modification
				Outstanding		Outstanding				Outstanding		Outstanding
(Dollars in thousands)		Number of		Recorded		Recorded		Number of		Recorded		Recorded
		Loans		Investment		Investment		Loans		Investment		Investment
Commercial real estate		2	$	731	$	731		5	$	1,165	$	1,167
Residential real estate		1		197		193		2		286		281
		3	$	928	$	924		7	$	1,451	$	1,448

The following schedule provides information on loans that were considered TDRs that were modified during the three- and nine-month periods ended September 30, 2013:

Three Months Ended September 30, 2013

Nine Months Ended September 30, 2013

Pre-

Post-

Pre-

Post-

Modification

Modification

Modification

Modification

Outstanding

Outstanding

Outstanding

Outstanding

(Dollars in thousands)

Number of

Recorded

Recorded

Number of

Recorded

Recorded

Loans

Investment

Investment

Loans

Investment

Investment

Commercial real estate

1

$

214

$

214

1

$

214

$

214

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.

11

The following schedule provides information on TDRs as of September 30, 2014 where the borrower was past due with respect to principal and/or interest for 30 days or more during the three months and nine months ended September 30, 2014 that had been modified during the year prior to the default:

	Three Months Ended				Nine Months Ended
	September 30, 2014				September 30, 2014
(Dollars in thousands)	Number		Recorded		Number		Recorded
	of Loans		Investment		of Loans		Investment
Commercial real estate		6	$	1,315		6	$	1,315
Residential real estate		2		111		2		111
		8	$	1,426		8	$	1,426

The following schedule provides information on TDRs as of September 30, 2013 where the borrower was past due with respect to principal and/or interest for 30 days or more during the three months and nine months ended September 30, 2013 that had been modified during the year prior to the default:

	Three Months Ended				Nine Months Ended
	September 30, 2013				September 30, 2013
(Dollars in thousands)	Number		Recorded		Number		Recorded
	of Loans		Investment		of Loans		Investment
Commercial and industrial		—	$	—		1	$	88
Commercial real estate		1		246		2		368
Consumer		—		—		1		29
		1	$	246		4	$	485

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.

12

Impaired loans by loan category follow:

			Unpaid
(Dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
September 30, 2014
With no related allowance recorded
Agricultural	$	—	$	—	$	—
Commercial and industrial		7		9		—
Consumer		3		4		—
Commercial real estate		3		3		—
Residential real estate		232		232		—
Subtotal		245		248		—
With an allowance recorded
Agricultural		61		64		6
Commercial and industrial		149		153		18
Consumer		29		29		3
Commercial real estate		4,828		5,610		1,053
Residential real estate		2,539		2,553		301
Subtotal		7,606		8,409		1,381
Total
Agricultural		61		64		6
Commercial and industrial		156		162		18
Consumer		32		33		3
Commercial real estate		4,831		5,613		1,053
Residential real estate		2,771		2,785		301
Total	$	7,851	$	8,657	$	1,381
December 31, 2013
With no related allowance recorded
Agricultural	$	452	$	455	$	—
Commercial and industrial		229		300		—
Consumer		2		3		—
Commercial real estate		782		843		—
Residential real estate		891		1,128		—
Subtotal		2,356		2,729		—
With an allowance recorded
Agricultural		—		—		—
Commercial and industrial		547		554		53
Consumer		35		35		3
Commercial real estate		3,413		3,997		699
Residential real estate		1,936		1,936		308
Subtotal		5,931		6,522		1,063
Total
Agricultural		452		455		—
Commercial and industrial		776		854		53
Consumer		37		38		3
Commercial real estate		4,195		4,840		699
Residential real estate		2,827		3,064		308
Total	$	8,287	$	9,251	$	1,063

13

The following schedule provides information regarding average balances of impaired loans and interest recognized on impaired loans for the nine months ended September 30, 2014 and 2013: 

	Average		Interest
(Dollars in thousands)	Recorded		Income
	Investment		Recognized
September 30, 2014
With no related allowance recorded
Agricultural	$	113	$	—
Commercial and industrial		91		—
Consumer		1		—
Commercial real estate		338		5
Residential real estate		490		5
Subtotal		1,033		10
With an allowance recorded
Agricultural		162		—
Commercial and industrial		365		4
Consumer		32		2
Commercial real estate		4,055		71
Residential real estate		2,289		69
Subtotal		6,903		146
Total
Agricultural		275		—
Commercial and industrial		457		4
Consumer		33		2
Commercial real estate		4,392		76
Residential real estate		2,779		74
Total	$	7,936	$	156
September 30, 2013
With no related allowance recorded
Agricultural	$	142	$	7
Commercial and industrial		49		—
Consumer		3		—
Commercial real estate		670		(1	)
Residential real estate		348		3
Subtotal		1,212		9
With an allowance recorded
Agricultural		140		1
Commercial and industrial		334		7
Consumer		45		3
Commercial real estate		4,305		200
Residential real estate		2,275		61
Subtotal		7,099		272
Total
Agricultural		282		8
Commercial and industrial		383		7
Consumer		48		3
Commercial real estate		4,975		199
Residential real estate		2,623		64
Total	$	8,311	$	281

14

An aging analysis of loans by loan category follows:

					Greater								90 Days Past
(Dollars in thousands)	30 to 59		60 to 89		Than 90				Loans Not				Due and
	Days		Days		Days (1)		Total		Past Due		Total Loans		Accruing
September 30, 2014
Agricultural	$	288	$	—	$	—	$	288	$	33,531	$	33,819	$	—
Commercial and industrial		306		—		—		306		87,764		88,070		—
Consumer		38		2		5		45		20,996		21,041		5
Commercial real estate		1,621		53		474		2,148		99,021		101,169		—
Construction real estate		—		—		—		—		1,992		1,992		—
Residential real estate		1,939		168		461		2,568		89,756		92,324		192
	$	4,192	$	223	$	940	$	5,355	$	333,060	$	338,415	$	197

December 31, 2013
Agricultural	$	9	$	1	$	428	$	438	$	36,610	$	37,048	$	—
Commercial and industrial		93		352		73		518		68,012		68,530		—
Consumer		60		7		—		67		19,864		19,931		—
Commercial real estate		901		884		242		2,027		94,960		96,987		—
Construction real estate		—		—		—		—		890		890		—
Residential real estate		673		186		167		1,026		91,554		92,580		11
	$	1,736	$	1,430	$	910	$	4,076	$	311,890	$	315,966	$	11

(1)   Includes nonaccrual loans.

Nonaccrual loans by loan category follow:

(Dollars in thousands)	September 30,		December 31,
	2014		2013
Agricultural	$	61	$	452
Commercial and industrial		156		372
Consumer		—		2
Commercial real estate		3,274		1,606
Residential real estate		604		691
	$	4,095	$	3,123

15

NOTE 4 - EARNINGS PER SHARE

Earnings per share are based on the weighted average number of shares outstanding during the period. A computation of basic earnings per share and diluted earnings per share follows:

	Three Months Ended				Nine Months Ended
(Dollars in thousands, except per share data)	September 30,				September 30,
	2014		2013		2014		2013
Basic Earnings Per Share
Net income available to common
shareholders	$	1,554	$	1,201	$	4,139	$	3,748
Weighted average common shares outstanding		3,300,139		3,294,480		3,298,321		3,298,607
Basic earnings per share	$	0.47	$	0.37	$	1.25	$	1.14
Diluted Earnings Per Share
Net income available to common
shareholders	$	1,554	$	1,201	$	4,139	$	3,748
Weighted average common shares outstanding		3,300,139		3,294,480		3,298,321		3,298,607
Plus dilutive stock options and restricted stock units		9,129		6,135		8,662		5,850
Weighted average common shares outstanding
and potentially dilutive shares		3,309,268		3,300,615		3,306,983		3,304,457
Diluted earnings per share	$	0.47	$	0.36	$	1.25	$	1.13

There were 6,038 stock options as of September 30, 2014 and 24,800 stock options as of September 30, 2013, that are considered to be anti-dilutive to earnings per share for the three-month and nine-month periods ended September 30, 2014 and 2013. These stock options have been excluded from the calculation above.

16

NOTE 5 – FINANCIAL INSTRUMENTS

Financial instruments as of the dates indicated were as follows:

					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
(Dollars in thousands)	Carrying		Estimated		Assets		Inputs		Inputs
	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2014
Assets:
Cash and due from banks	$	10,793	$	10,793	$	10,793	$	—	$	—
Securities available for sale		141,017		141,017		217		129,608		11,192
Federal Home Loan Bank and Federal
Reserve Bank stock		3,750		3,750		—		3,750		—
Loans held for sale		1,987		2,048		—		2,048		—
Loans, net		333,755		334,809		—		—		334,809
Liabilities:
Noninterest-bearing deposits		107,802		107,802		—		107,802		—
Interest-bearing deposits		314,748		314,748		—		314,748		—
Federal funds purchased		2,149		2,149		—		2,149		—
Repurchase agreements		19,654		19,654		—		19,654		—
Federal Home Loan Bank advances		20,370		20,409		—		20,409		—
December 31, 2013
Assets:
Cash and due from banks	$	20,479	$	20,479	$	20,479	$	—	$	—
Securities available for sale		136,082		136,082		214		124,540		11,328
Federal Home Loan Bank and Federal
Reserve Bank stock		3,750		3,750		—		3,750		—
Loans held for sale		931		957		—		957		—
Loans, net		311,231		313,659		—		—		313,659
Liabilities:
Noninterest-bearing deposits		102,243		102,243		—		102,243		—
Interest-bearing deposits		315,884		316,222		—		316,222		—
Repurchase agreements		26,033		26,033		—		26,033		—
Federal Home Loan Bank advances		6,392		6,428		—		6,428		—

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 6. The estimated fair value for loans is based on the rates charged at September 30, 2014 and December 31, 2013 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 Federal Home Loan Bank (“FHLB”) advances are based on the rates paid at September 30, 2014 and December 31, 2013 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 6 – FAIR VALUE MEASUREMENTS

The following tables present information about the Bank’s assets and liabilities measured at fair value on a recurring basis 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.

17

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 September 30, 2014 or December 31, 2013. Disclosures concerning assets measured at fair value are as follows:

Assets Measured at Fair Value on a Recurring Basis

	Quoted Prices		Significant
	in Active		Other		Significant
	Markets for Identical		Observable		Unobservable
(Dollars in thousands)	Assets		Inputs		Inputs		Balance at
	(Level 1)		(Level 2)		(Level 3)		Date Indicated
Investment Securities, Available for
Sale – September 30, 2014
U.S. Treasury	$	—	$	13,140	$	—	$	13,140
U.S. Government and federal agency		—		40,497		—		40,497
State and municipal		—		58,592		9,294		67,886
Mortgage-backed		—		9,334		—		9,334
Corporate		—		6,654		398		7,052
Foreign debt		—		994		—		994
Equity securities		217		—		1,500		1,717
Asset backed securities		—		397		—		397
Total	$	217	$	129,608	$	11,192	$	141,017
Investment Securities, Available for
Sale - December 31, 2013
U.S. Treasury	$	—	$	7,224	$	—	$	7,224
U.S. Government and federal agency		—		43,722		—		43,722
State and municipal		—		55,234		9,541		64,775
Mortgage-backed		—		8,470		—		8,470
Corporate		—		8,417		398		8,815
Foreign debt		—		990				990
Equity securities		214		—		1,389		1,603
Asset backed securities		—		483		—		483
Total	$	214	$	124,540	$	11,328	$	136,082

18

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

(Dollars in thousands)
	2014			2013
Investment Securities, Available for Sale
Balance, January 1	$	11,328		$	2,599
Total realized and unrealized losses included in income		(11	)		—
Total unrealized gains (losses) included in other comprehensive income		(115	)		8
Net purchases, sales, calls, and maturities		(84	)		1,551
Net transfers into Level 3		74			—
Balance, September 30	$	11,192		$	4,158

Of the Level 3 assets that were held by the Bank at September 30, 2014, the net unrealized gain for the nine months ended September 30, 2014 was $138,000, which is recognized in other comprehensive income in the consolidated balance sheet. Purchases of level 3 securities during the first three quarters of 2014 and 2013 consisted of local municipal issues. During the first nine months of 2014, a $600,000 Level 3 bond was sold. There were no sales of Level 3 securities in the first nine months of 2013.

Both observable and unobservable inputs may be used to determine the fair value of positions classified as Level 3 investment securities 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 primarily consist of bonds issued by local municipalities. The Bank estimates the fair value of these bonds 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

				Quoted Prices	Significant
				in Active	Other		Significant
				Markets for Identical	Observable		Unobservable
(Dollars in thousands)	Balance at			Assets	Inputs		Inputs
	Date Indicated			(Level 1)	(Level 2)		(Level 3)
Impaired Loans
September 30, 2014	$	7,851	$	—	$	—	$	7,851
December 31, 2013	$	8,287	$	—	$	—	$	8,287

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).

Item 2.  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 “Registrant”) and its wholly-owned subsidiary, ChoiceOne Bank (the "Bank"), and the Bank’s wholly-owned subsidiary, ChoiceOne Insurance Agencies, Inc. This discussion should be read in conjunction with the interim consolidated financial statements and related notes.

FORWARD-LOOKING STATEMENTS

This discussion and other sections of this quarterly 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," and variations of such words and similar expressions are intended to identify such forward-looking statements. Management’s determination of the provision and allowance for loan losses, the carrying value of goodwill and loan servicing rights, 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.

19

Risk factors include, but are not limited to, the risk factors discussed in Item 1A of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013; 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 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.

RESULTS OF OPERATIONS

Summary

Net income for the third quarter of 2014 was $1,554,000, which represented an increase of $353,000 or 29% compared to the same period in 2013. Net income for the first nine months of 2014 was $4,139,000, which represented an increase of $391,000 or 10% over the same period in 2013. Increases in net interest income and noninterest income were partially offset by an increase in noninterest expense and income tax expense for the third quarter of 2014 compared to the third quarter of 2013. Basic earnings per common share were $0.47 for the third quarter of 2014 and $1.25 for the first nine months of 2014, compared to $0.37 and $1.14, respectively, for the same periods in 2013. Diluted earnings per common share were $0.47 for the third quarter of 2014 and $1.25 for the first nine months of 2014, compared to $0.36 and $1.13, respectively, for the same periods in 2013. The return on average assets and return on average shareholders’ equity percentages were 1.06% and 8.68%, respectively, for the first three quarters of 2014, compared to 1.00% and 8.18%, respectively, for the same periods in 2013.

Dividends

Cash dividends of $495,000 or $0.15 per share were declared in the third quarter of 2014, compared to $462,000 or $0.14 per share in the third quarter of 2013. The cash dividends declared in the first nine months of 2014 were $1,451,000 or $0.44 per share, compared to $1,320,000 or $0.40 per share declared in the same period in 2013. The cash dividend payout percentage was 35% for the first nine months of 2014 as well as 2013.

Interest Income and Expense

Tables 1 and 2 on the following pages provide information regarding interest income and expense for the nine-month periods ended September 30, 2014 and 2013. Table 1 documents ChoiceOne’s average balances and interest income and expense, as well as the average rates earned or paid on assets and liabilities. Table 2 documents the effect on interest income and expense of changes in volume (average balance) and interest rates. These tables are referred to in the discussion of interest income, interest expense and net interest income.

20

Table 1 – Average Balances and Tax-Equivalent Interest Rates

(Dollars in thousands)	Nine Months Ended September 30,
	2014							2013
	Average							Average
		Balance		Interest		Rate			Balance		Interest		Rate
Assets:
Loans (1)	$	324,145	$	11,782		4.85	%	$	312,528	$	11,954		5.10	%
Taxable securities (2) (3)		98,082		1,394		1.90			91,296		1,364		1.99
Nontaxable securities (1) (2)		44,025		1,569		4.75			42,290		1,575		4.97
Other		3,734		6		0.21			4,455		8		0.24
Interest-earning assets		469,986		14,751		4.18			450,569		14,901		4.41
Noninterest-earning assets		52,041							51,608
Total assets	$	522,027						$	502,177
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits	$	138,824		174		0.17	%	$	134,178		200		0.20	%
Savings deposits		68,179		32		0.06			65,739		30		0.06
Certificates of deposit		107,693		594		0.74			120,392		801		0.89
Advances from Federal Home Loan Bank		11,472		41		0.48			6,165		29		0.63
Other		21,130		33		0.21			18,175		32		0.23
Interest-bearing liabilities		347,298		874		0.34			344,649		1,092		0.42
Noninterest-bearing demand deposits		109,238							93,073
Other noninterest-bearing liabilities		1,931							3,387
Total liabilities		458,467							441,109
Shareholders' equity		63,560							61,068
Total liabilities and
shareholders' equity	$	522,027						$	502,177
Net interest income (tax-equivalent basis) -
interest spread				13,877		3.85	%				13,809		3.99	%
Tax-equivalent adjustment (1)				(540	)						(543	)
Net interest income			$	13,337						$	13,266
Net interest income as a percentage of earning
assets (tax-equivalent basis)						3.94	%						4.09	%

_____________________

(1)	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 periods presented.
(2)	Includes the effect of unrealized gains or losses on securities.
(3)	Taxable securities include dividend income from Federal Home Loan Bank and Federal Reserve Bank stock.

21

Table 2 – Changes in Tax-Equivalent Net Interest Income

(Dollars in thousands)	Nine Months Ended September 30,
	2014 Over 2013
		Total			Volume			Rate
Increase (decrease) in interest income (1)
Loans (2)	$	(172	)	$	605		$	(777	)
Taxable securities		30			124			(94	)
Nontaxable securities (2)		(6	)		86			(92	)
Other		(2	)		(1	)		(1	)
Net change in tax-equivalent interest income		(150	)		814			(964	)
Increase (decrease) in interest expense (1)
Interest-bearing demand deposits		(26	)		11			(37	)
Savings deposits		2			1			1
Certificates of deposit		(207	)		(79	)		(128	)
Advances from Federal Home Loan Bank		12			24			(12	)
Other		1			6			(5	)
Net change in interest expense		(218	)		(37	)		(181	)
Net change in tax-equivalent
net interest income	$	68		$	851		$	(783	)

_______________

(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 nontaxable investment securities and loans has been adjusted to a fully tax-equivalent basis using an incremental tax rate of 34% for the periods presented.

Net Interest Income

The presentation of net interest income on a tax-equivalent basis is not in accordance with generally accepted accounting principles (“GAAP”), but is customary in the banking industry. This non-GAAP measure ensures comparability of net interest income arising from both taxable and tax-exempt loans and investment securities. The adjustments to determine net interest income on a tax-equivalent basis were $540,000 and $543,000 for the nine months ended September 30, 2014 and 2013, respectively. These adjustments were computed using a 34% federal income tax rate.

As shown in Tables 1 and 2, tax-equivalent net interest income increased $68,000 in the first nine months of 2014 compared to the same period in 2013. The relationship between growth in average interest-earning assets and average interest-bearing liabilities caused net interest income to increase $850,000 in the first three quarters of 2014 compared to the same period in the prior year. A decrease of 14 basis points in the net interest spread from 3.99% in the first nine months of 2013 to 3.85% in the first nine months of 2014 resulted in a $782,000 decrease in net interest income.

The average balance of loans increased $11.6 million in the first nine months of 2014 compared to the same period in 2013. Average commercial loans increased $15.4 million and average consumer loans grew $1.0 million while average residential mortgage loans declined $4.8 million in the first three quarters of 2014 compared to the same period in 2013. The average interest rate earned on loans declined 25 basis points from the first nine months of 2013 to the same period in 2014 as a result of renewals of existing loans and new loan production at lower rates than in the existing portfolio. The increase in the average loans balance, offset by the decrease in the average rate earned, caused tax-equivalent interest income from loans to decline $172,000 in the first three quarters of 2014 compared to the same period in the prior year. The average balance of total securities grew $8.5 million in the first nine months of 2014 compared to the same period in 2013. Additional securities were purchased during the first nine months of 2014 to provide earning asset growth. Growth in average securities, offset by the effect of lower interest rates earned, caused tax-equivalent interest income to increase $24,000 in the first nine months of 2014 compared to the same period in 2013.

22

The average balance of interest-bearing demand deposits increased $4.6 million in the first nine months of 2014 compared to the same period in 2013. The effect of the higher average balance, offset by a 3 basis point decline in the average rate paid, caused interest expense to decrease $26,000 in the first three quarters of 2014 compared to the same period in 2013. The average balance of savings deposits increased $2.4 million in the first nine months of 2014 compared to the same period in the prior year. The impact of the savings deposit growth and a less than 1 basis point increase in the average rate paid caused interest expense to increase $2,000 in the first nine months of 2014 compared to the same period in 2013. The average balance of certificates of deposit was down $12.7 million in the first nine months of 2014 compared to the same period in 2013. The decline in certificates of deposit plus a 15 basis point reduction in the average rate paid on certificates caused interest expense to fall $207,000 in the first nine months of 2014 compared to the same period in 2013. A $5.3 million increase in the average balance of Federal Home Loan Bank advances was partially offset by a 15 basis point reduction in the average rate paid and caused interest expense to increase $12,000 in the first nine months of 2014 compared to the same period in the prior year. Growth of $3.0 million in the average balance of other interest-bearing liabilities in the first nine months of 2014 compared to the first nine months of 2013 and the effect of a 2 basis point decrease in the average rate paid caused a $1,000 increase in interest expense.

ChoiceOne’s net interest income spread was 3.85% in the first nine months of 2014, compared to 3.99% for the first nine months of 2013. The decrease in the interest spread was due to a 22 basis point decrease in the average rate earned on interest-earning assets, which was partially offset by an 8 basis point decrease in the average rate paid on interest-bearing liabilities in the first nine months of 2014 compared to the same period in 2013. The reduction in the average rate earned on interest-earning assets was caused by relatively low general market rates which affected new loan originations and securities purchases in 2013 and the first nine months of 2014. Interest rates on loans are also being impacted by rate pressure from some of ChoiceOne’s competing financial institutions. The lower rate paid on interest-bearing liabilities resulted from repricing of local deposits as general market interest rates remained low during 2013 and the first nine months of 2014. If market interest rates continue to remain low, ChoiceOne’s net interest spread may decrease in future quarters if reductions in the average rate on interest-earning assets exceed the ability to reprice local deposits.

Provision and Allowance for Loan Losses

Total loans increased $22.4 million since the end of 2013, while the allowance for loan losses declined $75,000 from December 31, 2013 to September 30, 2014. The provision for loan losses was $0 in the third quarter and $100,000 in the first nine months of 2014, compared to $0 and $300,000, respectively, in the same periods in 2013. The reduction in the provision for loan losses was due to a lower level of net charge-offs in the first nine months of 2014 than in the same period in 2013. Nonperforming loans were $7.8 million as of September 30, 2014, compared to $7.1 million as of June 30, 2014 and $7.7 million as of December 31, 2013. The increase in nonperforming loans in the third quarter of 2014 was due to an increase of $755,000 in nonaccrual loans. Nonaccrual commercial real estate loans increased $909,000 during the third quarter of 2014, which was partially offset by the net effect of changes in the other loan categories. The allowance for loan losses was 1.38% of total loans at September 30, 2014, compared to 1.41% at June 30, 2014 and 1.50% at December 31, 2013.

Charge-offs and recoveries for respective loan categories for the nine months ended September 30 were as follows:

(Dollars in thousands)	2014				2013
		Charge-offs		Recoveries		Charge-offs		Recoveries
Agricultural	$	—	$	10	$	88	$	5
Commercial and industrial		—		90		54		258
Consumer		199		146		286		145
Real estate, commercial		185		39		166		55
Real estate, residential		117		41		431		122
	$	501	$	326	$	1,025	$	585

Net recoveries were $4,000 in the third quarter of 2014 and net charge-offs were $175,000 in the first nine months of 2014, compared to net charge-offs of $152,000 in the third quarter of 2013 and $440,000 in the first nine months of 2013. Net charge-offs on an annualized basis as a percentage of average loans were 0.07% in the first nine months of 2014 compared to 0.19% for the same period in the prior year. Management is aware that the economic climate in Michigan will continue to affect business and personal borrowers. Management has worked and intends to continue to work with delinquent borrowers in an attempt to lessen the negative impact to ChoiceOne. As charge-offs, changes in the level of nonperforming loans, and changes within the composition of the loan portfolio occur in the remainder of 2014, the provision and allowance for loan losses will be reviewed by the Bank's management and adjusted as believed to be necessary.

23

Noninterest Income

Total noninterest income increased $562,000 in the third quarter of 2014 and $347,000 in the first nine months of 2014 compared to the same periods in 2013. An increase in customer service charges of $93,000 in the third quarter and $143,000 in the first nine months of 2014 compared to the same periods in the prior year was due to changes in pricing and a higher volume of overdraft and debit card fees. Insurance and investment commissions decreased $46,000 in the third quarter of 2014 and increased $47,000 in the first three quarters of 2014 compared to the same periods in 2013. Gains on loan sales decreased $19,000 in the third quarter and $543,000 in the first nine months of 2014 compared to the same periods in 2013. Residential mortgage refinancing activity has slowed in 2014, causing the significant decrease. Increases of $76,000 in the third quarter and $93,000 in the first nine months of 2014 in gains on sales of securities when compared to the same periods in 2013 resulted from higher sales activity in the first nine months of 2014 than in the same period of the prior year. Decreases of $488,000 in the third quarter and $678,000 in the first nine months of 2014 in losses on sales and write-downs of other assets when compared to the same periods in 2013 resulted from less write-downs of foreclosed properties.

Noninterest Expense

Total noninterest expense increased $151,000 in the third quarter of 2014 and $23,000 in the first nine months of 2014 compared to the same periods in 2013. The increase of $8,000 in salaries and benefits in the third quarter of 2014 and $52,000 in the first nine months of 2014 compared to the same periods in 2013 resulted primarily from higher salaries and health insurance costs. Occupancy and equipment expense increased $19,000 and $70,000 in the third quarter and first nine months of 2014, respectively, compared the same periods in 2013 as a result of higher utility costs and investment in information technology equipment. Data processing expense increased $51,000 in the third quarter of 2014 and $32,000 in the first nine months of 2014 compared to the same periods in the prior year. In the third quarter of 2014, ChoiceOne incurred higher data communication expenses than in the first six months of 2014 and in the prior year. Professional fees increased $65,000 in the third quarter of 2014 and $106,000 in the first three quarters of 2014 compared to the same periods in 2013 as a result of higher legal and consulting fees. The $61,000 decrease in loan and collection expense in the third quarter of 2014 and the decrease of $172,000 year to date compared to the same periods in 2013 was due to a lower level of other real estate properties.

Income Tax Expense

Income tax expense was $1,503,000 in the first nine months of 2014 compared to $1,299,000 for the same period in 2013. The effective tax rate was 26.6% for 2014 and 25.7% for 2013. The increase in the effective tax rate in 2014 compared to 2013 was due to a lower percentage of nontaxable income from municipal securities.

FINANCIAL CONDITION

Securities

The securities available for sale portfolio increased $1.7 million in the third quarter of 2014 and $4.9 million in the first nine months of 2014. The increase in the securities portfolio was due to growth in deposits in the first nine months of 2014. Various securities totaling $30.2 million were purchased in the first nine months of 2014 to provide earning assets and to replace maturities, principal repayments, and calls within the securities portfolio. Approximately $6.9 million in various securities were called or matured since the end of 2013. Principal repayments on securities totaled $1.7 million in the first nine months of 2014. Approximately $17.4 million of securities were sold in the first three quarters of 2014 for a net gain of $182,000.

Loans

The loan portfolio (excluding loans held for sale) increased $8.7 million in the third quarter of 2014 and $22.4 million in the first nine months of 2014. Commercial and industrial loans and consumer loans increased $5.1 million and $0.5 million, respectively, in the third quarter of 2014 and $19.5 million and $1.1 million, respectively, in the first nine months of 2014. Mortgage loans increased $1.6 million and $0.8 million in the third quarter and first nine months of 2014, respectively. Commercial real estate loans decreased less than $0.1 million in the third quarter but increased $4.2 million in the first three quarters of 2014. Agricultural loans increased $1.7 million in the third quarter, but declined $3.2 million in the first nine months of 2014.

Asset Quality

Information regarding impaired loans can be found in Note 3 to the interim consolidated financial statements included in this report. The total balance of loans classified as impaired was $7.9 million at September 30, 2014, $7.3 million as of June 30, 2014 and $8.3 million as of December 31, 2013. The balance of commercial real estate loans classified as impaired has grown $636,000, the balance of commercial and industrial loans classified as impaired has decreased $620,000, and the balance of agricultural loans classified as impaired has decreased $391,000 since the end of 2013.

24

As part of its review of the loan portfolio, management also monitors the 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 loans past due 90 days or more, which are considered troubled debt restructurings.

The balances of these nonperforming loans were as follows:

(Dollars in thousands)	September 30,		December 31,
	2014		2013
Loans accounted for on a nonaccrual basis	$	4,095	$	3,123
Accruing loans contractually past due 90 days
or more as to principal or interest payments		197		11
Loans considered troubled debt restructurings		3,543		4,523
Total	$	7,835	$	7,657

At September 30, 2014, nonaccrual loans included $3.3 million in commercial real estate loans, $604,000 in residential real estate loans, $156,000 in commercial and industrial loans, and $61,000 in agricultural loans. At December 31, 2013, nonaccrual loans included $1.6 million in commercial real estate loans, $691,000 in residential real estate loans, $372,000 in commercial and industrial loans and $452,000 in agricultural loans. The increase in nonaccrual loans was due to the deterioration of certain credits. Management believes the allowance allocated to its nonperforming loans was sufficient at September 30, 2014; however, management believes future credit deterioration is possible depending on conditions in the Michigan economy.

Deposits and Borrowings

Total deposits decreased $5.2 million in the third quarter of 2014 and increased $4.4 million since the end of 2013. Checking and savings deposits decreased $3.9 million in the third quarter of 2014 but increased $10.6 million in the first nine months of 2014. Local certificates of deposit decreased $1.2 million in the third quarter and $4.2 million in the first nine months of 2014. Nonlocal certificates of deposit were reduced $2.0 million in the first nine months of 2014.

A decrease of $6.4 million in repurchase agreements in the first nine months of 2014 was due to normal fluctuations in funds provided by bank customers. Certain securities are sold under agreements to repurchase them the following day. Management plans to continue this practice as a low-cost source of funding. Federal Home Loan Bank advances increased $14.0 million in the first nine months of 2014 due to short-term advances taken and federal funds purchased from correspondent banks in the third quarter of 2014.

Shareholders' Equity

Total shareholders' equity increased $3.5 million from December 31, 2013 to September 30, 2014. Growth in equity resulted from current year’s net income, proceeds from the issuance of ChoiceOne stock and an increase in accumulated other comprehensive income offset by cash dividends paid and repurchases of shares. The $819,000 increase in accumulated other comprehensive income since the end of 2013 was caused by an increase in net unrealized gains on available for sale securities. The change in unrealized gains resulted from decreases in mid- and short-term rates in 2014, which increased the market value of the Bank’s securities.

25

Following is information regarding the Bank’s compliance with regulatory capital requirements:

							Total
(Dollars in thousands)	Leverage			Tier 1			Risk - Based
	Capital			Capital			Capital
Capital balances at September 30, 2014	$	47,752		$	47,752		$	52,163
Required regulatory capital to be considered "well capitalized"		25,834			22,493			37,488
Capital in excess of "well capitalized" minimum		21,918			25,259			14,675
Capital ratios at September 30, 2014		9.24	%		12.74	%		13.91	%
Regulatory capital ratios - minimum requirement
to be considered "well capitalized"		5.00	%		6.00	%		10.00	%

Management reviews the capital levels of ChoiceOne and the Bank on a regular basis. The Board of Directors (the “Board”) and management believe that the capital levels as of September 30, 2014 are adequate for the foreseeable future. The Board’s determination of appropriate cash dividends for future periods will be based on market conditions and ChoiceOne’s requirements for cash and capital.

Liquidity

Net cash provided from operating activities was $5.5 million for the nine months ended September 30, 2014 compared to $7.9 million provided in the same period a year ago. Lower proceeds from loan sales were offset by lower loans originated for sale. A lower provision for loan losses in 2014, lower gains on sales of loans, and lower write-downs of other real estate owned (“OREO”) properties also affected operating activities. Net cash used in investing activities was $27.9 million for the first nine months of 2014 compared to $2.6 million in the same period in 2013. The change was due to a higher level of net loan originations and net securities purchases. Net cash provided from financing activities was $12.8 million in the nine months ended September 30, 2014, compared to $10.6 million in cash used by financing activities in the same period in the prior year. An increase in deposits, , net proceeds from the Federal Home Loan Bank advances, and federal funds purchased from correspondent banks in the first nine months of 2014 compared to the same period of 2013 was partially offset by a decrease in repurchase agreements.

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 from correspondent banks, and advances available from the Federal Home Loan Bank. The Bank also has a secured line of credit available from the Federal Reserve Bank.

Item 4.  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 to ensure that material information required to be disclosed in the reports that ChoiceOne files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that ChoiceOne files or submits under the Exchange Act is accumulated and communicated to management, including ChoiceOne’s principal executive and principal financial officers, as appropriate to allow for timely decisions regarding required disclosure. There was no change in the Registrant’s internal control over financial reporting that occurred during the quarter ended September 30, 2014 that has materially affected, or that is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings.

There are no material pending legal proceedings to which the Registrant or the Bank is a party or to which any of their properties are subject, except for proceedings that arose in the ordinary course of business. In the belief of management, pending or current legal proceedings should not have a material effect on the consolidated financial condition of the Registrant.

26

 Item 1A.  Risk Factors.

Information concerning risk factors is contained in the discussion in Item 1A, “Risk Factors,” in the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013. As of the date of this report, ChoiceOne does not believe that there has been a material change in the nature or categories of ChoiceOne's risk factors, as compared to the information disclosed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

On July 23, 2014 the Registrant issued 470 shares of common stock, without par value, to the directors of the Registrant pursuant to the Directors’ Stock Purchase Plan for an aggregate cash price of $9,000. The Registrant relied on the exemption contained in Section 4(a)(5) of the Securities Act of 1933 in connection with these sales.

ISSUER PURCHASES OF EQUITY SECURITIES

The following table provides information regarding the Registrant’s purchases of its own common stock during the quarter ended September 30, 2014.

							Maximum
					Total Number of		Number of
					Shares Purchased		Shares that May
	Total Number		Average		as Part of a		Yet be
	of Shares		Price Paid		Publicly		Purchased
Period	Purchased		per Share		Announced Plan		Under the Plan
July 1 - July 31, 2014
Employee Transactions		—	$	—
Repurchase Program		—	$	—		—		84,920
August 1 - August 31, 2014
Employee Transactions		—	$	—
Repurchase Program (1)		3,437	$	20.00		3,437		81,483
September 1 - September 30, 2014
Employee Transactions (2)		258	$	18.45
Repurchase Program		—	$	—		—		81,483

(1) On August 21, 2014, the Registrant purchased 3,437 shares of common stock for an aggregate cash price of $69,000. As of September 30, 2014, there are 81,483 shares remaining that may yet be purchased under approved plans or programs. The repurchase plan was adopted and announced on July 26, 2007. There is no stated expiration date. The plan authorized the repurchase of up to 100,000 shares.

(2) Shares submitted for cancellation to satisfy tax withholding obligations that occur upon the vesting of restricted units. The value of the shares delivered or withheld is determined by the applicable stock compensation plan.

Item 6.  Exhibits

The following exhibits are filed or incorporated by reference as part of this report:

Exhibit Number	Document
3.1	Amended and Restated Articles of Incorporation of the Registrant. Previously filed as an exhibit to the Registrant’s Form 10-K Annual Report for the year ended December 31, 2013.  Here incorporated by reference.

3.2	Bylaws of the Registrant as currently in effect and any amendments thereto.  Previously filed as an exhibit to the Registrant’s Form 10-K Annual Report for the year ended December 31, 2013.  Here incorporated by reference.
31.1	Certification of President and Chief Executive Officer
31.2	Certification of Treasurer
32.1	Certification pursuant to 18 U.S.C. § 1350.
101.1	Interactive Data File.

27

SIGNATURES 

Pursuant to the requirements 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.
Date:   November 12, 2014	/s/ James A. Bosserd
	James A. Bosserd President and Chief Executive Officer (Principal Executive Officer)
Date:   November 12, 2014	/s/ Thomas L. Lampen
	Thomas L. Lampen Treasurer (Principal Financial and Accounting Officer)

28

EX-31.1

ChoiceOne Financial Services, Inc. 10-Q

 EXHIBIT 31.1

CERTIFICATIONS

I, James A. Bosserd, certify that:

1.	I have reviewed this quarterly report on Form 10-Q 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:  November 12, 2014

/s/ James A. Bosserd

James A. Bosserd

President and Chief Executive Officer

ChoiceOne Financial Services, Inc.

EX-31.2

ChoiceOne Financial Services, Inc. 10-Q

 EXHIBIT 31.2

CERTIFICATIONS

I, Thomas L. Lampen, certify that:

1.	I have reviewed this quarterly report on Form 10-Q 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: November 12, 2014


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

EX-32.1

ChoiceOne Financial Services, Inc. 10-Q

 EXHIBIT 32.1

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 Quarterly Report of the Company on Form 10-Q for the quarter ended September 30, 2014 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.

Date:   November 12, 2014	/s/ James A. Bosserd
	James A. Bosserd President and Chief Executive Officer
Date:   November 12, 2014	/s/ Thomas L. Lampen
	Thomas L. Lampen Treasurer

XML

FAIR VALUE MEASUREMENTS (Details Narrative) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net unrealized gain on Level 3 securities recognized in other comprehensive income	$ 89	$ 13	$ 182	$ 89
Fair Value measured on a Non-Recurring Basis [Member]
Net unrealized gain on Level 3 securities recognized in other comprehensive income			138
Value of Level 3 bond sold	$ 600		$ 600

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Risk rated loans	$ 338,415	$ 315,966
Consumer [Member]
Risk rated loans	21,041	19,931
Consumer [Member] | Performing [Member]
Risk rated loans	21,009	19,900
Consumer [Member] | Nonperforming [Member]
Risk rated loans	32	31
Construction Real Estate [Member]
Risk rated loans	1,992	890
Construction Real Estate [Member] | Performing [Member]
Risk rated loans	1,992	890
Residential Real Estate [Member]
Risk rated loans	92,324	92,580
Residential Real Estate [Member] | Performing [Member]
Risk rated loans	89,569	89,959
Residential Real Estate [Member] | Nonperforming [Member]
Risk rated loans	$ 2,755	$ 2,621

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, prevailing practices within the banking industry and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The accompanying consolidated financial statements reflect all adjustments ordinary in nature which are, in the opinion of management, necessary for a fair presentation of the Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013, the Consolidated Statements of Income for the three- and nine-month periods ended September 30, 2014 and September 30, 2013, the Consolidated Statements of Comprehensive Income for the three- and nine-month periods ended September 30, 2014 and September 30, 2013, the Consolidated Statements of Changes in Shareholders' Equity for the nine-month periods ended September 30, 2014 and September 30, 2013, and the Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2014 and September 30, 2013. Operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013.

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. See Note 3 to the interim consolidated financial statements for additional information.

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 economic conditions and (2) the impact of recognizing an impairment or loan loss could have a material effect on ChoiceOne’s assets reported on the balance sheets as well as its net income.

Stock Transactions

A total of 2,740 shares of common stock were issued to the Registrant’s Board of Directors for a cash price of $48,000 under the terms of the Directors’ Stock Purchase Plan in the first nine months of 2014. A total of 3,284 shares were issued to employees for a cash price of $53,000 under the Employee Stock Purchase Plan in the first three quarters of 2014. A total of 1,113 shares were issued upon the exercise of stock options in the first three quarters of 2014. A total of 3,437 shares of common stock were repurchased in the first three quarters of 2014. A total of 942 shares were issued upon the vesting of Restricted Stock Units.

Stock-Based Compensation

Effective July 1, 2013, ChoiceOne began granting Restricted Stock Units to a select group of employees under the Stock Incentive Plan of 2012. All of the Restricted Stock Units are initially unvested and vest in three annual installments on each of the next three anniversaries of the grant date. Certain additional vesting provisions apply. Each unit, once vested, is settled by delivery of one share of ChoiceOne common stock.

Reclassifications

Certain amounts presented in prior periods have been reclassified to conform to the current presentation.

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 6) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Non-accrual loans	$ 4,095	$ 3,123
Agricultural [Member]
Non-accrual loans	61	452
Commercial and Industrial [Member]
Non-accrual loans	156	372
Consumer [Member]
Non-accrual loans		2
Commercial Real Estate [Member]
Non-accrual loans	3,274	1,606
Residential Real Estate [Member]
Non-accrual loans	$ 604	$ 691

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 5) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014		Dec. 31, 2013
Aging analysis of past due loans
Past Due 30 to 59 Days	$ 4,192		$ 1,736
Past Due 60 to 89 Days	223		1,430
Past Due Greater Than 90 Days	940	[1]	910	[1]
Past Due Total	5,355		4,076
Loans Not Past Due	333,060		311,890
Loans	338,415		315,966
90 Days Past Due and Accruing	197		11
Agricultural [Member]
Aging analysis of past due loans
Past Due 30 to 59 Days	288		9
Past Due 60 to 89 Days			1
Past Due Greater Than 90 Days			428	[1]
Past Due Total	288		438
Loans Not Past Due	33,531		36,610
Loans	33,819		37,048
Commercial and Industrial [Member]
Aging analysis of past due loans
Past Due 30 to 59 Days	306		93
Past Due 60 to 89 Days			352
Past Due Greater Than 90 Days			73	[1]
Past Due Total	306		518
Loans Not Past Due	87,764		68,012
Loans	88,070		68,530
Consumer [Member]
Aging analysis of past due loans
Past Due 30 to 59 Days	38		60
Past Due 60 to 89 Days	2		7
Past Due Greater Than 90 Days	5	[1]
Past Due Total	45		67
Loans Not Past Due	20,996		19,864
Loans	21,041		19,931
Commercial Real Estate [Member]
Aging analysis of past due loans
Past Due 30 to 59 Days	1,621		901
Past Due 60 to 89 Days	53		884
Past Due Greater Than 90 Days	474	[1]	242	[1]
Past Due Total	2,148		2,027
Loans Not Past Due	99,021		94,960
Loans	101,169		96,987
Construction Real Estate [Member]
Aging analysis of past due loans
Loans Not Past Due	1,992		890
Loans	1,992		890
Residential Real Estate [Member]
Aging analysis of past due loans
Past Due 30 to 59 Days	1,939		673
Past Due 60 to 89 Days	168		186
Past Due Greater Than 90 Days	461	[1]	167	[1]
Past Due Total	2,568		1,026
Loans Not Past Due	89,756		91,554
Loans	92,324		92,580
90 Days Past Due and Accruing	$ 192		$ 11

[1] Includes nonaccrual loans.

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EARNINGS PER SHARE (Details Narrative)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Earnings Per Share [Abstract]
Stock options considered to be anti-dilutive to earnings per share	6,038	24,800	6,038	24,800

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EARNINGS PER SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Basic Earnings Per Share
Net income	$ 1,554	$ 1,201	$ 4,139	$ 3,748
Basic earnings per share	$ 0.47	$ 0.37	$ 1.25	$ 1.14
Diluted Earnings Per Share
Plus dilutive stock options and restricted stock units	9,129	6,135	8,662	5,850
Weighted average common shares outstanding and potentially dilutive shares	3,309,268	3,300,615	3,306,983	3,304,457
Diluted earnings per share	$ 0.47	$ 0.36	$ 1.25	$ 1.13

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Cash flows from operating activities:
Net income	$ 4,139	$ 3,748
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses	100	300
Depreciation	746	686
Amortization	1,156	1,240
Compensation expense on employee stock purchases and restricted stock units	27	15
Gains on sales of securities	(182)	(89)
Gains on sales of loans	(726)	(1,269)
Loans originated for sale	(20,892)	(34,442)
Proceeds from loan sales	20,506	36,437
Earnings on bank-owned life insurance	(219)	(225)
Gains on sales of other real estate owned	(22)	(11)
Write-downs of other real estate owned	154	831
Proceeds from sales of other real estate owned	761	701
Deferred federal income tax (benefit)/expense	(250)	(317)
Net changes in other assets	(724)	150
Net changes in other liabilities	937	104
Net cash from operating activities	5,511	7,859
Securities available for sale:
Sales	17,386	4,371
Maturities, prepayments and calls	8,637	19,978
Purchases	(30,211)	(21,082)
Loan originations and payments, net	(23,146)	(5,131)
Additions to premises and equipment	(615)	(707)
Net cash from investing activities	(27,949)	(2,571)
Cash flows from financing activities:
Net change in deposits	4,423	(17,845)
Net change in repurchase agreements	(6,379)	(354)
Net change in federal funds purchased	2,149
Proceeds from Federal Home Loan Bank advances	56,700	18,000
Payments on Federal Home Loan Bank advances	(42,722)	(9,021)
Issuance of common stock	101	104
Repurchase of common stock	(69)	(192)
Cash dividends	(1,451)	(1,320)
Net cash from financing activities	12,752	(10,628)
Net change in cash and cash equivalents	(9,686)	(5,340)
Beginning cash and cash equivalents	20,479	19,034
Ending cash and cash equivalents	10,793	13,694
Supplemental disclosures of cash flow information:
Cash paid for income taxes	980	1,092
Cash paid for interest	884	1,025
Loans transferred to other real estate owned	$ 521	$ 472

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FINANCIAL INSTRUMENTS (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Assets:
Securities available for sale	$ 141,017	$ 136,082
Liabilities:
Noninterest-bearing deposits	107,802	102,243
Interest-bearing deposits	314,748	315,884
Federal funds purchased	2,149
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets:
Cash and due from banks	10,793	20,479
Securities available for sale	217	214
Significant Other Observable Inputs (Level 2) [Member]
Assets:
Securities available for sale	129,608	124,540
Federal Home Loan Bank and Federal Reserve Bank stock	3,750	3,750
Loans held for sale	2,048	957
Liabilities:
Noninterest-bearing deposits	107,802	102,243
Interest-bearing deposits	314,748	316,222
Federal funds purchased	2,149
Repurchase agreements	19,654	26,033
Federal Home Loan Bank advances	20,409	6,428
Significant Unobservable Inputs (Level 3) [Member]
Assets:
Securities available for sale	11,192	11,328
Loans, net	334,809	313,659
Carrying Amount [Member]
Assets:
Cash and due from banks	10,793	20,479
Securities available for sale	141,017	136,082
Federal Home Loan Bank and Federal Reserve Bank stock	3,750	3,750
Loans held for sale	1,987	931
Loans, net	333,755	311,231
Liabilities:
Noninterest-bearing deposits	107,802	102,243
Interest-bearing deposits	314,748	315,884
Federal funds purchased	2,149
Repurchase agreements	19,654	26,033
Federal Home Loan Bank advances	20,370	6,392
Estimated Fair Value [Member]
Assets:
Cash and due from banks	10,793	20,479
Securities available for sale	141,017	136,082
Federal Home Loan Bank and Federal Reserve Bank stock	3,750	3,750
Loans held for sale	2,048	957
Loans, net	334,809	313,659
Liabilities:
Noninterest-bearing deposits	107,802	102,243
Interest-bearing deposits	314,748	316,222
Federal funds purchased	2,149
Repurchase agreements	19,654	26,033
Federal Home Loan Bank advances	$ 20,409	$ 6,428

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CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Assets
Cash and due from banks	$ 10,793	$ 20,479
Securities available for sale	141,017	136,082
Federal Home Loan Bank stock	2,478	2,478
Federal Reserve Bank stock	1,272	1,272
Loans held for sale	1,987	931
Loans	338,415	315,966
Allowance for loan losses	(4,660)	(4,735)
Loans, net	333,755	311,231
Premises and equipment, net	11,864	11,995
Cash value of life insurance policies	10,487	10,269
Intangible assets, net	939	1,275
Goodwill	13,728	13,728
Other assets	5,099	4,835
Total assets	533,419	514,575
Liabilities
Deposits - noninterest-bearing	107,802	102,243
Deposits - interest-bearing	314,748	315,884
Total deposits	422,550	418,127
Federal funds purchased	2,149
Repurchase agreements	19,654	26,033
Advances from Federal Home Loan Bank	20,370	6,392
Other liabilities	3,591	2,465
Total liabilities	468,314	453,017
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: 3,300,105 at September 30, 2014 and 3,295,463 at December 31, 2013	46,636	46,595
Retained earnings	17,503	14,815
Accumulated other comprehensive income, net	966	148
Total shareholders' equity	65,105	61,558
Total liabilities and shareholders' equity	$ 533,419	$ 514,575

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (USD $) In Thousands, except Share data	Common Stock and Paid In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income, Net [Member]	Total
Balance, beginning at Dec. 31, 2012	$ 46,649	$ 11,501	$ 2,356	$ 60,506
Balance, beginning, shares at Dec. 31, 2012	3,298,081
Net income		3,748		3,748
Other comprehensive income (loss)			(2,047)	(2,047)
Shares repurchased	(192)			(192)
Shares repurchased, shares	(11,468)
Shares issued	104			104
Shares issued, shares	7,165
Change in ESOP repurchase obligation	(13)			(13)
Effect of employee stock purchases	9			9
Cash dividends declared		(1,320)		(1,320)
Issuance of restricted stock units	6			6
Balance, ending at Sep. 30, 2013	46,563	13,929	309	60,801
Balance, ending, shares at Sep. 30, 2013	3,293,778
Balance, beginning at Dec. 31, 2013	46,595	14,815	148	61,558
Balance, beginning, shares at Dec. 31, 2013	3,295,463			3,295,463
Net income		4,139		4,139
Other comprehensive income (loss)			818	818
Shares repurchased	(69)			(69)
Shares repurchased, shares	(3,437)
Shares issued	101			101
Shares issued, shares	7,137
Change in ESOP repurchase obligation	(18)			(18)
Effect of employee stock purchases	9			9
Cash dividends declared		(1,451)		(1,451)
Issuance of restricted stock units	18			18
Issuance of restricted stock units, shares	942
Balance, ending at Sep. 30, 2014	$ 46,636	$ 17,503	$ 966	$ 65,105
Balance, ending, shares at Sep. 30, 2014	3,300,105			3,300,105

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FAIR VALUE MEASUREMENTS (Details 1) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Changes in Level 3 Investment Securities, Available for Sale Measured at Fair Value on a Recurring Basis
Balance at the beginning of year	$ 11,328	$ 2,599
Total realized and unrealized losses included in income	(11)
Total unrealized gains (losses) included in other comprehensive income	(115)	8
Net purchases, sales, calls, and maturities	(84)	1,551
Transfers into Level 3	74
Balance at the end of period	$ 11,192	$ 4,158

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SECURITIES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended		12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended
	Dec. 31, 2013	Sep. 30, 2014	Sep. 30, 2014 U.S. Government and federal agency [Member]	Dec. 31, 2013 U.S. Government and federal agency [Member]	Sep. 30, 2014 U.S. Treasury [Member]	Dec. 31, 2013 U.S. Treasury [Member]	Sep. 30, 2014 State and municipal [Member]	Dec. 31, 2013 State and municipal [Member]	Sep. 30, 2014 Mortgage-backed [Member]	Dec. 31, 2013 Mortgage-backed [Member]	Sep. 30, 2014 Corporate [Member]	Dec. 31, 2013 Corporate [Member]	Sep. 30, 2014 Foreign Debt [Member]	Dec. 31, 2013 Foreign Debt [Member]	Sep. 30, 2014 Equity securities [Member]	Dec. 31, 2013 Equity securities [Member]	Sep. 30, 2014 Asset-backed [Member]	Dec. 31, 2013 Asset-backed [Member]
Amortized Cost	$ 136,098	$ 139,795	$ 40,675	$ 44,059	$ 13,224	$ 7,285	$ 66,385	$ 64,215	$ 9,363	$ 8,541	$ 7,041	$ 8,805	$ 1,000	$ 1,000	$ 1,707	$ 1,707	$ 400	$ 486
Gross Unrealized Gains	1,968	2,033	73	166		17	1,869	1,622	51	95	30	61			10	7
Gross Unrealized Losses	(1,984)	(811)	(251)	(503)	(84)	(78)	(368)	(1,062)	(80)	(166)	(19)	(51)	(6)	(10)		(111)	(3)	(3)
Fair Value	$ 136,082	$ 141,017	$ 40,497	$ 43,722	$ 13,140	$ 7,224	$ 67,886	$ 64,775	$ 9,334	$ 8,470	$ 7,052	$ 8,815	$ 994	$ 990	$ 1,717	$ 1,603	$ 397	$ 483

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FAIR VALUE MEASUREMENTS (Details 2) (Fair Value measured on a Non-Recurring Basis [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Impaired Loans	$ 7,851	$ 8,287
Significant Unobservable Inputs (Level 3) [Member]
Impaired Loans	$ 7,851	$ 8,287

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Risk rated loans	$ 338,415	$ 315,966
Agricultural [Member]
Risk rated loans	33,819	37,048
Agricultural [Member] | Risk ratings 1 and 2 [Member]
Risk rated loans	6,035	8,339
Agricultural [Member] | Risk ratings 3 [Member]
Risk rated loans	21,614	23,036
Agricultural [Member] | Risk ratings 4 [Member]
Risk rated loans	5,324	4,330
Agricultural [Member] | Risk ratings 5 [Member]
Risk rated loans	783	1,193
Agricultural [Member] | Risk ratings 6 [Member]
Risk rated loans	63	150
Commercial and Industrial [Member]
Risk rated loans	88,070	68,530
Commercial and Industrial [Member] | Risk ratings 1 and 2 [Member]
Risk rated loans	8,939	7,333
Commercial and Industrial [Member] | Risk ratings 3 [Member]
Risk rated loans	64,255	46,943
Commercial and Industrial [Member] | Risk ratings 4 [Member]
Risk rated loans	13,069	12,557
Commercial and Industrial [Member] | Risk ratings 5 [Member]
Risk rated loans	1,293	1,025
Commercial and Industrial [Member] | Risk ratings 6 [Member]
Risk rated loans	454	608
Commercial and Industrial [Member] | Risk ratings 7 [Member]
Risk rated loans	60	64
Commercial Real Estate [Member]
Risk rated loans	101,169	96,987
Commercial Real Estate [Member] | Risk ratings 1 and 2 [Member]
Risk rated loans	2,689	3,000
Commercial Real Estate [Member] | Risk ratings 3 [Member]
Risk rated loans	59,259	53,681
Commercial Real Estate [Member] | Risk ratings 4 [Member]
Risk rated loans	27,310	27,610
Commercial Real Estate [Member] | Risk ratings 5 [Member]
Risk rated loans	7,040	6,813
Commercial Real Estate [Member] | Risk ratings 6 [Member]
Risk rated loans	4,753	5,818
Commercial Real Estate [Member] | Risk ratings 7 [Member]
Risk rated loans	$ 118	$ 65

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Statement of Stockholders' Equity [Abstract]
Cash dividend declared, per share	$ 0.15	$ 0.14	$ 0.44	$ 0.40

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CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical)	Sep. 30, 2014	Dec. 31, 2013
Statement of Financial Position [Abstract]
Preferred stock, authorized	100,000	100,000
Preferred stock, outstanding	0	0
Common stock, shares authorized	7,000,000	7,000,000
Common stock, shares outstanding	3,300,105	3,295,463

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)

9 Months Ended

Sep. 30, 2014

Receivables [Abstract]

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:

				Commercial
(Dollars in thousands)				and						Commercial			Construction			Residential
	Agricultural			Industrial			Consumer			Real Estate			Real Estate			Real Estate			Unallocated			Total
Allowance for Loan Losses
Three Months Ended
September 30, 2014
Beginning balance	$	180		$	677		$	195		$	1,743		$	5		$	1,269		$	587		$	4,656
Charge-offs		—			—			(82	)		—			—			(7	)		—			(89	)
Recoveries		6			23			39			16			—			9			—			93
Provision		(47	)		(78	)		42			325			1			(120	)		(123	)		—
Ending balance	$	139		$	622		$	194		$	2,084		$	6		$	1,151		$	464		$	4,660
Nine Months Ended
September 30, 2014
Beginning balance	$	179		$	562		$	192		$	1,842		$	12		$	1,625		$	323		$	4,735
Charge-offs		—			—			(199	)		(185	)		—			(117	)		—			(501	)
Recoveries		10			90			146			39			—			41			—			326
Provision		(50	)		(30	)		55			388			(6	)		(398	)		141			100
Ending balance	$	139		$	622		$	194		$	2,084		$	6		$	1,151		$	464		$	4,660
Individually evaluated for impairment	$	6		$	18		$	3		$	1,053		$	—		$	301		$	—		$	1,381
Collectively evaluated for impairment	$	133		$	604		$	191		$	1,031		$	6		$	850		$	464		$	3,279
Three Months Ended
September 30, 2013
Beginning balance	$	140		$	810		$	215		$	2,450		$	20		$	1,671		$	558		$	5,864
Charge-offs		(88	)		(5	)		(102	)		—			—			(148	)		—			(343	)
Recoveries		3			19			41			24			—			104			—			191
Provision		83			(203	)		51			74			(7	)		126			(124	)		—
Ending balance	$	138		$	621		$	205		$	2,548		$	13		$	1,753		$	434		$	5,712
Nine Months Ended
September 30, 2013
Beginning balance	$	140		$	381		$	250		$	2,596		$	15		$	1,923		$	547		$	5,852
Charge-offs		(88	)		(54	)		(286	)		(166	)		—			(431	)		—			(1,025	)
Recoveries		5			258			145			55			—			122			—			585
Provision		81			36			96			63			(2	)		139			(113	)		300
Ending balance	$	138		$	621		$	205		$	2,548		$	13		$	1,753		$	434		$	5,712
Individually evaluated for impairment	$	—		$	174		$	4		$	1,145		$	—		$	492		$	—		$	1,815
Collectively evaluated for impairment	$	138		$	447		$	201		$	1,403		$	13		$	1,261		$	434		$	3,897
Loans
September 30, 2014
Individually evaluated for impairment	$	61		$	156		$	32		$	4,831		$	—		$	2,771					$	7,851
Collectively evaluated for impairment		33,758			87,914			21,009			96,338			1,992			89,553						330,564
Ending balance	$	33,819		$	88,070		$	21,041		$	101,169		$	1,992		$	92,324					$	338,415
December 31, 2013
Individually evaluated for impairment	$	452		$	776		$	37		$	4,195		$	—		$	2,827					$	8,287
Collectively evaluated for impairment		36,596			67,754			19,894			92,792			890			89,753						307,679
Ending balance	$	37,048		$	68,530		$	19,931		$	96,987		$	890		$	92,580					$	315,966

Schedule of credit exposure

Information regarding the Bank’s credit exposure is as follows:

Corporate Credit Exposure - Credit Risk Profile By Creditworthiness Category

		Agricultural				Commercial and Industrial				Commercial Real Estate
(Dollars in thousands)		September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
		2014		2013		2014		2013		2014		2013
Risk ratings 1 and 2	$	6,035	$	8,339	$	8,939	$	7,333	$	2,689	$	3,000
Risk rating 3		21,614		23,036		64,255		46,943		59,259		53,681
Risk rating 4		5,324		4,330		13,069		12,557		27,310		27,610
Risk rating 5		783		1,193		1,293		1,025		7,040		6,813
Risk rating 6		63		150		454		608		4,753		5,818
Risk rating 7		—		—		60		64		118		65
	$	33,819	$	37,048	$	88,070	$	68,530	$	101,169	$	96,987

Corporate Credit Exposure - Credit Risk Profile Based On Payment Activity 

		Consumer				Construction Real Estate				Residential Real Estate
		September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
		2014		2013		2014		2013		2014		2013
Performing	$	21,009	$	19,900	$	1,992	$	890	$	89,569	$	89,959
Nonperforming		32		31		—		—		2,755		2,621
	$	21,041	$	19,931	$	1,992	$	890	$	92,324	$	92,580

Schedule of troubled debt restructurings

The following schedule provides information on loans that were considered TDRs that were modified during the three- and nine-month periods ended September 30, 2014:

	Three Months Ended September 30, 2014						Nine Months Ended September 30, 2014
				Pre-		Post-				Pre-		Post-
				Modification		Modification				Modification		Modification
				Outstanding		Outstanding				Outstanding		Outstanding
(Dollars in thousands)		Number of		Recorded		Recorded		Number of		Recorded		Recorded
		Loans		Investment		Investment		Loans		Investment		Investment
Commercial real estate		2	$	731	$	731		5	$	1,165	$	1,167
Residential real estate		1		197		193		2		286		281
		3	$	928	$	924		7	$	1,451	$	1,448

The following schedule provides information on loans that were considered TDRs that were modified during the three- and nine-month periods ended September 30, 2013:

Three Months Ended September 30, 2013

Nine Months Ended September 30, 2013

Pre-

Post-

Pre-

Post-

Modification

Modification

Modification

Modification

Outstanding

Outstanding

Outstanding

Outstanding

(Dollars in thousands)

Number of

Recorded

Recorded

Number of

Recorded

Recorded

Loans

Investment

Investment

Loans

Investment

Investment

Commercial real estate

1

$

214

$

214

1

$

214

$

214

The following schedule provides information on TDRs as of September 30, 2014 where the borrower was past due with respect to principal and/or interest for 30 days or more during the three months and nine months ended September 30, 2014 that had been modified during the year prior to the default:

	Three Months Ended				Nine Months Ended
	September 30, 2014				September 30, 2014
(Dollars in thousands)	Number		Recorded		Number		Recorded
	of Loans		Investment		of Loans		Investment
Commercial real estate		6	$	1,315		6	$	1,315
Residential real estate		2		111		2		111
		8	$	1,426		8	$	1,426

The following schedule provides information on TDRs as of September 30, 2013 where the borrower was past due with respect to principal and/or interest for 30 days or more during the three months and nine months ended September 30, 2013 that had been modified during the year prior to the default:

	Three Months Ended				Nine Months Ended
	September 30, 2013				September 30, 2013
(Dollars in thousands)	Number		Recorded		Number		Recorded
	of Loans		Investment		of Loans		Investment
Commercial and industrial		—	$	—		1	$	88
Commercial real estate		1		246		2		368
Consumer		—		—		1		29
		1	$	246		4	$	485

Schedule of impaired loans

Impaired loans by loan category follow:

			Unpaid
(Dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
September 30, 2014
With no related allowance recorded
Agricultural	$	—	$	—	$	—
Commercial and industrial		7		9		—
Consumer		3		4		—
Commercial real estate		3		3		—
Residential real estate		232		232		—
Subtotal		245		248		—
With an allowance recorded
Agricultural		61		64		6
Commercial and industrial		149		153		18
Consumer		29		29		3
Commercial real estate		4,828		5,610		1,053
Residential real estate		2,539		2,553		301
Subtotal		7,606		8,409		1,381
Total
Agricultural		61		64		6
Commercial and industrial		156		162		18
Consumer		32		33		3
Commercial real estate		4,831		5,613		1,053
Residential real estate		2,771		2,785		301
Total	$	7,851	$	8,657	$	1,381
December 31, 2013
With no related allowance recorded
Agricultural	$	452	$	455	$	—
Commercial and industrial		229		300		—
Consumer		2		3		—
Commercial real estate		782		843		—
Residential real estate		891		1,128		—
Subtotal		2,356		2,729		—
With an allowance recorded
Agricultural		—		—		—
Commercial and industrial		547		554		53
Consumer		35		35		3
Commercial real estate		3,413		3,997		699
Residential real estate		1,936		1,936		308
Subtotal		5,931		6,522		1,063
Total
Agricultural		452		455		—
Commercial and industrial		776		854		53
Consumer		37		38		3
Commercial real estate		4,195		4,840		699
Residential real estate		2,827		3,064		308
Total	$	8,287	$	9,251	$	1,063

The following schedule provides information regarding average balances of impaired loans and interest recognized on impaired loans for the nine months ended September 30, 2014 and 2013: 

	Average		Interest
(Dollars in thousands)	Recorded		Income
	Investment		Recognized
September 30, 2014
With no related allowance recorded
Agricultural	$	113	$	—
Commercial and industrial		91		—
Consumer		1		—
Commercial real estate		338		5
Residential real estate		490		5
Subtotal		1,033		10
With an allowance recorded
Agricultural		162		—
Commercial and industrial		365		4
Consumer		32		2
Commercial real estate		4,055		71
Residential real estate		2,289		69
Subtotal		6,903		146
Total
Agricultural		275		—
Commercial and industrial		457		4
Consumer		33		2
Commercial real estate		4,392		76
Residential real estate		2,779		74
Total	$	7,936	$	156
September 30, 2013
With no related allowance recorded
Agricultural	$	142	$	7
Commercial and industrial		49		—
Consumer		3		—
Commercial real estate		670		(1	)
Residential real estate		348		3
Subtotal		1,212		9
With an allowance recorded
Agricultural		140		1
Commercial and industrial		334		7
Consumer		45		3
Commercial real estate		4,305		200
Residential real estate		2,275		61
Subtotal		7,099		272
Total
Agricultural		282		8
Commercial and industrial		383		7
Consumer		48		3
Commercial real estate		4,975		199
Residential real estate		2,623		64
Total	$	8,311	$	281

Schedule of aging analysis of loans by loan category

An aging analysis of loans by loan category follows:

					Greater								90 Days Past
(Dollars in thousands)	30 to 59		60 to 89		Than 90				Loans Not				Due and
	Days		Days		Days (1)		Total		Past Due		Total Loans		Accruing
September 30, 2014
Agricultural	$	288	$	—	$	—	$	288	$	33,531	$	33,819	$	—
Commercial and industrial		306		—		—		306		87,764		88,070		—
Consumer		38		2		5		45		20,996		21,041		5
Commercial real estate		1,621		53		474		2,148		99,021		101,169		—
Construction real estate		—		—		—		—		1,992		1,992		—
Residential real estate		1,939		168		461		2,568		89,756		92,324		192
	$	4,192	$	223	$	940	$	5,355	$	333,060	$	338,415	$	197

December 31, 2013
Agricultural	$	9	$	1	$	428	$	438	$	36,610	$	37,048	$	—
Commercial and industrial		93		352		73		518		68,012		68,530		—
Consumer		60		7		—		67		19,864		19,931		—
Commercial real estate		901		884		242		2,027		94,960		96,987		—
Construction real estate		—		—		—		—		890		890		—
Residential real estate		673		186		167		1,026		91,554		92,580		11
	$	1,736	$	1,430	$	910	$	4,076	$	311,890	$	315,966	$	11

(1)   Includes nonaccrual loans.

Schedule of nonaccrual loans by loan category

Nonaccrual loans by loan category follow:

(Dollars in thousands)	September 30,		December 31,
	2014		2013
Agricultural	$	61	$	452
Commercial and industrial		156		372
Consumer		—		2
Commercial real estate		3,274		1,606
Residential real estate		604		691
	$	4,095	$	3,123

XML

Document And Entity Information	9 Months Ended
	Sep. 30, 2014	Oct. 31, 2014
Document And Entity Information
Entity Registrant Name	CHOICEONE FINANCIAL SERVICES INC
Entity Central Index Key	0000803164
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		3,300,523
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2014

XML

EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Schedule of basic earnings per share and diluted earnings per share

A computation of basic earnings per share and diluted earnings per share follows:

	Three Months Ended				Nine Months Ended
(Dollars in thousands, except per share data)	September 30,				September 30,
	2014		2013		2014		2013
Basic Earnings Per Share
Net income available to common
shareholders	$	1,554	$	1,201	$	4,139	$	3,748
Weighted average common shares outstanding		3,300,139		3,294,480		3,298,321		3,298,607
Basic earnings per share	$	0.47	$	0.37	$	1.25	$	1.14
Diluted Earnings Per Share
Net income available to common
shareholders	$	1,554	$	1,201	$	4,139	$	3,748
Weighted average common shares outstanding		3,300,139		3,294,480		3,298,321		3,298,607
Plus dilutive stock options and restricted stock units		9,129		6,135		8,662		5,850
Weighted average common shares outstanding
and potentially dilutive shares		3,309,268		3,300,615		3,306,983		3,304,457
Diluted earnings per share	$	0.47	$	0.36	$	1.25	$	1.13

XML

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Interest income
Loans, including fees	$ 4,008	$ 3,935	$ 11,772	$ 11,943
Securities:
Taxable	458	448	1,394	1,365
Tax exempt	349	349	1,039	1,042
Other	2	3	6	8
Total interest income	4,817	4,735	14,211	14,358
Interest expense
Deposits	258	317	800	1,031
Advances from Federal Home Loan Bank	15	14	41	29
Other	9	13	33	32
Total interest expense	282	344	874	1,092
Net interest income	4,535	4,391	13,337	13,266
Provision for loan losses			100	300
Net interest income after provision for loan losses	4,535	4,391	13,237	12,966
Noninterest income
Customer service charges	1,056	963	2,878	2,735
Insurance and investment commissions	242	288	678	631
Gains on sales of loans	276	295	726	1,269
Gains on sales of securities	89	13	182	89
Losses on sales and write-downs of other assets	(32)	(520)	(142)	(820)
Earnings on life insurance policies	75	75	219	225
Other	130	160	362	427
Total noninterest income	1,836	1,274	4,903	4,556
Noninterest expense
Salaries and benefits	2,127	2,119	6,288	6,236
Occupancy and equipment	599	580	1,812	1,742
Data processing	473	422	1,360	1,328
Professional fees	250	185	683	577
Supplies and postage	100	100	317	344
Advertising and promotional	57	44	191	156
Intangible amortization	112	112	336	336
Loan and collection expense	37	98	103	275
FDIC insurance	86	68	257	247
Other	388	350	1,151	1,234
Total noninterest expense	4,229	4,078	12,498	12,475
Income before income tax	2,142	1,587	5,642	5,047
Income tax expense	588	386	1,503	1,299
Net income	$ 1,554	$ 1,201	$ 4,139	$ 3,748
Basic earnings per share	$ 0.47	$ 0.37	$ 1.25	$ 1.14
Diluted earnings per share	$ 0.47	$ 0.36	$ 1.25	$ 1.13
Dividends declared per share	$ 0.15	$ 0.14	$ 0.44	$ 0.40

XML

EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 4 - EARNINGS PER SHARE

Earnings per share are based on the weighted average number of shares outstanding during the period. A computation of basic earnings per share and diluted earnings per share follows:

	Three Months Ended				Nine Months Ended
(Dollars in thousands, except per share data)	September 30,				September 30,
	2014		2013		2014		2013
Basic Earnings Per Share
Net income available to common
shareholders	$	1,554	$	1,201	$	4,139	$	3,748
Weighted average common shares outstanding		3,300,139		3,294,480		3,298,321		3,298,607
Basic earnings per share	$	0.47	$	0.37	$	1.25	$	1.14
Diluted Earnings Per Share
Net income available to common
shareholders	$	1,554	$	1,201	$	4,139	$	3,748
Weighted average common shares outstanding		3,300,139		3,294,480		3,298,321		3,298,607
Plus dilutive stock options and restricted stock units		9,129		6,135		8,662		5,850
Weighted average common shares outstanding
and potentially dilutive shares		3,309,268		3,300,615		3,306,983		3,304,457
Diluted earnings per share	$	0.47	$	0.36	$	1.25	$	1.13

There were 6,038 stock options as of September 30, 2014 and 24,800 stock options as of September 30, 2013, that are considered to be anti-dilutive to earnings per share for the three-month and nine-month periods ended September 30, 2014 and 2013. These stock options have been excluded from the calculation above.

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES

9 Months Ended

Sep. 30, 2014

Receivables [Abstract]

LOANS AND ALLOWANCE FOR LOAN LOSSES

NOTE 3 – LOANS AND ALLOWANCE FOR LOAN LOSSES

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

				Commercial
(Dollars in thousands)				and						Commercial			Construction			Residential
	Agricultural			Industrial			Consumer			Real Estate			Real Estate			Real Estate			Unallocated			Total
Allowance for Loan Losses
Three Months Ended
September 30, 2014
Beginning balance	$	180		$	677		$	195		$	1,743		$	5		$	1,269		$	587		$	4,656
Charge-offs		—			—			(82	)		—			—			(7	)		—			(89	)
Recoveries		6			23			39			16			—			9			—			93
Provision		(47	)		(78	)		42			325			1			(120	)		(123	)		—
Ending balance	$	139		$	622		$	194		$	2,084		$	6		$	1,151		$	464		$	4,660
Nine Months Ended
September 30, 2014
Beginning balance	$	179		$	562		$	192		$	1,842		$	12		$	1,625		$	323		$	4,735
Charge-offs		—			—			(199	)		(185	)		—			(117	)		—			(501	)
Recoveries		10			90			146			39			—			41			—			326
Provision		(50	)		(30	)		55			388			(6	)		(398	)		141			100
Ending balance	$	139		$	622		$	194		$	2,084		$	6		$	1,151		$	464		$	4,660
Individually evaluated for impairment	$	6		$	18		$	3		$	1,053		$	—		$	301		$	—		$	1,381
Collectively evaluated for impairment	$	133		$	604		$	191		$	1,031		$	6		$	850		$	464		$	3,279
Three Months Ended
September 30, 2013
Beginning balance	$	140		$	810		$	215		$	2,450		$	20		$	1,671		$	558		$	5,864
Charge-offs		(88	)		(5	)		(102	)		—			—			(148	)		—			(343	)
Recoveries		3			19			41			24			—			104			—			191
Provision		83			(203	)		51			74			(7	)		126			(124	)		—
Ending balance	$	138		$	621		$	205		$	2,548		$	13		$	1,753		$	434		$	5,712
Nine Months Ended
September 30, 2013
Beginning balance	$	140		$	381		$	250		$	2,596		$	15		$	1,923		$	547		$	5,852
Charge-offs		(88	)		(54	)		(286	)		(166	)		—			(431	)		—			(1,025	)
Recoveries		5			258			145			55			—			122			—			585
Provision		81			36			96			63			(2	)		139			(113	)		300
Ending balance	$	138		$	621		$	205		$	2,548		$	13		$	1,753		$	434		$	5,712
Individually evaluated for impairment	$	—		$	174		$	4		$	1,145		$	—		$	492		$	—		$	1,815
Collectively evaluated for impairment	$	138		$	447		$	201		$	1,403		$	13		$	1,261		$	434		$	3,897
Loans
September 30, 2014
Individually evaluated for impairment	$	61		$	156		$	32		$	4,831		$	—		$	2,771					$	7,851
Collectively evaluated for impairment		33,758			87,914			21,009			96,338			1,992			89,553						330,564
Ending balance	$	33,819		$	88,070		$	21,041		$	101,169		$	1,992		$	92,324					$	338,415
December 31, 2013
Individually evaluated for impairment	$	452		$	776		$	37		$	4,195		$	—		$	2,827					$	8,287
Collectively evaluated for impairment		36,596			67,754			19,894			92,792			890			89,753						307,679
Ending balance	$	37,048		$	68,530		$	19,931		$	96,987		$	890		$	92,580					$	315,966

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 pass credits. However, 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 is as follows:

Corporate Credit Exposure - Credit Risk Profile By Creditworthiness Category

		Agricultural				Commercial and Industrial				Commercial Real Estate
(Dollars in thousands)		September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
		2014		2013		2014		2013		2014		2013
Risk ratings 1 and 2	$	6,035	$	8,339	$	8,939	$	7,333	$	2,689	$	3,000
Risk rating 3		21,614		23,036		64,255		46,943		59,259		53,681
Risk rating 4		5,324		4,330		13,069		12,557		27,310		27,610
Risk rating 5		783		1,193		1,293		1,025		7,040		6,813
Risk rating 6		63		150		454		608		4,753		5,818
Risk rating 7		—		—		60		64		118		65
	$	33,819	$	37,048	$	88,070	$	68,530	$	101,169	$	96,987

Corporate Credit Exposure - Credit Risk Profile Based On Payment Activity 

		Consumer				Construction Real Estate				Residential Real Estate
		September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
		2014		2013		2014		2013		2014		2013
Performing	$	21,009	$	19,900	$	1,992	$	890	$	89,569	$	89,959
Nonperforming		32		31		—		—		2,755		2,621
	$	21,041	$	19,931	$	1,992	$	890	$	92,324	$	92,580

The following schedule provides information on loans that were considered TDRs that were modified during the three- and nine-month periods ended September 30, 2014:

	Three Months Ended September 30, 2014						Nine Months Ended September 30, 2014
				Pre-		Post-				Pre-		Post-
				Modification		Modification				Modification		Modification
				Outstanding		Outstanding				Outstanding		Outstanding
(Dollars in thousands)		Number of		Recorded		Recorded		Number of		Recorded		Recorded
		Loans		Investment		Investment		Loans		Investment		Investment
Commercial real estate		2	$	731	$	731		5	$	1,165	$	1,167
Residential real estate		1		197		193		2		286		281
		3	$	928	$	924		7	$	1,451	$	1,448

The following schedule provides information on loans that were considered TDRs that were modified during the three- and nine-month periods ended September 30, 2013:

Three Months Ended September 30, 2013

Nine Months Ended September 30, 2013

Pre-

Post-

Pre-

Post-

Modification

Modification

Modification

Modification

Outstanding

Outstanding

Outstanding

Outstanding

(Dollars in thousands)

Number of

Recorded

Recorded

Number of

Recorded

Recorded

Loans

Investment

Investment

Loans

Investment

Investment

Commercial real estate

1

$

214

$

214

1

$

214

$

214

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 September 30, 2014 where the borrower was past due with respect to principal and/or interest for 30 days or more during the three months and nine months ended September 30, 2014 that had been modified during the year prior to the default:

	Three Months Ended				Nine Months Ended
	September 30, 2014				September 30, 2014
(Dollars in thousands)	Number		Recorded		Number		Recorded
	of Loans		Investment		of Loans		Investment
Commercial real estate		6	$	1,315		6	$	1,315
Residential real estate		2		111		2		111
		8	$	1,426		8	$	1,426

The following schedule provides information on TDRs as of September 30, 2013 where the borrower was past due with respect to principal and/or interest for 30 days or more during the three months and nine months ended September 30, 2013 that had been modified during the year prior to the default:

	Three Months Ended				Nine Months Ended
	September 30, 2013				September 30, 2013
(Dollars in thousands)	Number		Recorded		Number		Recorded
	of Loans		Investment		of Loans		Investment
Commercial and industrial		—	$	—		1	$	88
Commercial real estate		1		246		2		368
Consumer		—		—		1		29
		1	$	246		4	$	485

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 follow:

			Unpaid
(Dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
September 30, 2014
With no related allowance recorded
Agricultural	$	—	$	—	$	—
Commercial and industrial		7		9		—
Consumer		3		4		—
Commercial real estate		3		3		—
Residential real estate		232		232		—
Subtotal		245		248		—
With an allowance recorded
Agricultural		61		64		6
Commercial and industrial		149		153		18
Consumer		29		29		3
Commercial real estate		4,828		5,610		1,053
Residential real estate		2,539		2,553		301
Subtotal		7,606		8,409		1,381
Total
Agricultural		61		64		6
Commercial and industrial		156		162		18
Consumer		32		33		3
Commercial real estate		4,831		5,613		1,053
Residential real estate		2,771		2,785		301
Total	$	7,851	$	8,657	$	1,381
December 31, 2013
With no related allowance recorded
Agricultural	$	452	$	455	$	—
Commercial and industrial		229		300		—
Consumer		2		3		—
Commercial real estate		782		843		—
Residential real estate		891		1,128		—
Subtotal		2,356		2,729		—
With an allowance recorded
Agricultural		—		—		—
Commercial and industrial		547		554		53
Consumer		35		35		3
Commercial real estate		3,413		3,997		699
Residential real estate		1,936		1,936		308
Subtotal		5,931		6,522		1,063
Total
Agricultural		452		455		—
Commercial and industrial		776		854		53
Consumer		37		38		3
Commercial real estate		4,195		4,840		699
Residential real estate		2,827		3,064		308
Total	$	8,287	$	9,251	$	1,063

The following schedule provides information regarding average balances of impaired loans and interest recognized on impaired loans for the nine months ended September 30, 2014 and 2013: 

	Average		Interest
(Dollars in thousands)	Recorded		Income
	Investment		Recognized
September 30, 2014
With no related allowance recorded
Agricultural	$	113	$	—
Commercial and industrial		91		—
Consumer		1		—
Commercial real estate		338		5
Residential real estate		490		5
Subtotal		1,033		10
With an allowance recorded
Agricultural		162		—
Commercial and industrial		365		4
Consumer		32		2
Commercial real estate		4,055		71
Residential real estate		2,289		69
Subtotal		6,903		146
Total
Agricultural		275		—
Commercial and industrial		457		4
Consumer		33		2
Commercial real estate		4,392		76
Residential real estate		2,779		74
Total	$	7,936	$	156
September 30, 2013
With no related allowance recorded
Agricultural	$	142	$	7
Commercial and industrial		49		—
Consumer		3		—
Commercial real estate		670		(1	)
Residential real estate		348		3
Subtotal		1,212		9
With an allowance recorded
Agricultural		140		1
Commercial and industrial		334		7
Consumer		45		3
Commercial real estate		4,305		200
Residential real estate		2,275		61
Subtotal		7,099		272
Total
Agricultural		282		8
Commercial and industrial		383		7
Consumer		48		3
Commercial real estate		4,975		199
Residential real estate		2,623		64
Total	$	8,311	$	281

An aging analysis of loans by loan category follows:

					Greater								90 Days Past
(Dollars in thousands)	30 to 59		60 to 89		Than 90				Loans Not				Due and
	Days		Days		Days (1)		Total		Past Due		Total Loans		Accruing
September 30, 2014
Agricultural	$	288	$	—	$	—	$	288	$	33,531	$	33,819	$	—
Commercial and industrial		306		—		—		306		87,764		88,070		—
Consumer		38		2		5		45		20,996		21,041		5
Commercial real estate		1,621		53		474		2,148		99,021		101,169		—
Construction real estate		—		—		—		—		1,992		1,992		—
Residential real estate		1,939		168		461		2,568		89,756		92,324		192
	$	4,192	$	223	$	940	$	5,355	$	333,060	$	338,415	$	197

December 31, 2013
Agricultural	$	9	$	1	$	428	$	438	$	36,610	$	37,048	$	—
Commercial and industrial		93		352		73		518		68,012		68,530		—
Consumer		60		7		—		67		19,864		19,931		—
Commercial real estate		901		884		242		2,027		94,960		96,987		—
Construction real estate		—		—		—		—		890		890		—
Residential real estate		673		186		167		1,026		91,554		92,580		11
	$	1,736	$	1,430	$	910	$	4,076	$	311,890	$	315,966	$	11

(1)   Includes nonaccrual loans.

Nonaccrual loans by loan category follow:

(Dollars in thousands)	September 30,		December 31,
	2014		2013
Agricultural	$	61	$	452
Commercial and industrial		156		372
Consumer		—		2
Commercial real estate		3,274		1,606
Residential real estate		604		691
	$	4,095	$	3,123

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Allowance for Loan Losses
Beginning balance	$ 4,656	$ 5,864	$ 4,735	$ 5,852
Charge-offs	(89)	(343)	(501)	(1,025)
Recoveries	93	191	326	585
Provision			100	300
Ending balance	4,660	5,712	4,660	5,712
Individually evaluated for impairment	1,815	1,441	1,815	1,441
Collectively evaluated for impairment	3,897	4,423	3,897	4,423
Loans
Individually evaluated for impairment	7,851		7,851		8,287
Collectively evaluated for impairment	330,564		330,564		307,679
Ending balance	338,415		338,415		315,966
Agricultural [Member]
Allowance for Loan Losses
Beginning balance	180	140	179	140
Charge-offs		(88)		(88)
Recoveries	6	3	10	5
Provision	(47)	83	(50)	81
Ending balance	139	138	139	138
Individually evaluated for impairment		23		23
Collectively evaluated for impairment	138	117	138	117
Loans
Individually evaluated for impairment	61		61		452
Collectively evaluated for impairment	33,758		33,758		36,596
Ending balance	33,819		33,819		37,048
Commercial and Industrial [Member]
Allowance for Loan Losses
Beginning balance	677	810	562	381
Charge-offs		(5)		(54)
Recoveries	23	19	90	258
Provision	(78)	(203)	(30)	36
Ending balance	622	621	622	621
Individually evaluated for impairment	174	280	174	280
Collectively evaluated for impairment	447	530	447	530
Loans
Individually evaluated for impairment	156		156		776
Collectively evaluated for impairment	87,914		87,914		67,754
Ending balance	88,070		88,070		68,530
Consumer [Member]
Allowance for Loan Losses
Beginning balance	195	215	192	250
Charge-offs	(82)	(102)	(199)	(286)
Recoveries	39	41	146	145
Provision	42	51	55	96
Ending balance	194	205	194	205
Individually evaluated for impairment	4	6	4	6
Collectively evaluated for impairment	201	209	201	209
Loans
Individually evaluated for impairment	32		32		37
Collectively evaluated for impairment	21,009		21,009		19,894
Ending balance	21,041		21,041		19,931
Commercial Real Estate [Member]
Allowance for Loan Losses
Beginning balance	1,743	2,450	1,842	2,596
Charge-offs			(185)	(166)
Recoveries	16	24	39	55
Provision	325	74	388	63
Ending balance	2,084	2,548	2,084	2,548
Individually evaluated for impairment	1,145	817	1,145	817
Collectively evaluated for impairment	1,403	1,633	1,403	1,633
Loans
Individually evaluated for impairment	4,831		4,831		4,195
Collectively evaluated for impairment	96,338		96,338		92,792
Ending balance	101,169		101,169		96,987
Construction Real Estate [Member]
Allowance for Loan Losses
Beginning balance	5	20	12	15
Provision	1	(7)	(6)	(2)
Ending balance	6	13	6	13
Collectively evaluated for impairment	13	20	13	20
Loans
Collectively evaluated for impairment	1,992		1,992		890
Ending balance	1,992		1,992		890
Residential Real Estate [Member]
Allowance for Loan Losses
Beginning balance	1,269	1,671	1,625	1,923
Charge-offs	(7)	(148)	(117)	(431)
Recoveries	9	104	41	122
Provision	(120)	126	(398)	139
Ending balance	1,151	1,753	1,151	1,753
Individually evaluated for impairment	492	315	492	315
Collectively evaluated for impairment	1,261	1,356	1,261	1,356
Loans
Individually evaluated for impairment	2,771		2,771		2,827
Collectively evaluated for impairment	89,553		89,553		89,753
Ending balance	92,324		92,324		92,580
Unallocated [Member]
Allowance for Loan Losses
Beginning balance	587	558	323	547
Provision	(123)	(124)	141	(113)
Ending balance	464	434	464	434
Collectively evaluated for impairment	$ 434	$ 558	$ 434	$ 558

XML

FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2014

Disclosure Text Block Supplement [Abstract]

Schedule of carrying value and fair value of financial instruments

Financial instruments as of the dates indicated were as follows:

					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
(Dollars in thousands)	Carrying		Estimated		Assets		Inputs		Inputs
	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2014
Assets:
Cash and due from banks	$	10,793	$	10,793	$	10,793	$	—	$	—
Securities available for sale		141,017		141,017		217		129,608		11,192
Federal Home Loan Bank and Federal
Reserve Bank stock		3,750		3,750		—		3,750		—
Loans held for sale		1,987		2,048		—		2,048		—
Loans, net		333,755		334,809		—		—		334,809
Liabilities:
Noninterest-bearing deposits		107,802		107,802		—		107,802		—
Interest-bearing deposits		314,748		314,748		—		314,748		—
Federal funds purchased		2,149		2,149		—		2,149		—
Repurchase agreements		19,654		19,654		—		19,654		—
Federal Home Loan Bank advances		20,370		20,409		—		20,409		—
December 31, 2013
Assets:
Cash and due from banks	$	20,479	$	20,479	$	20,479	$	—	$	—
Securities available for sale		136,082		136,082		214		124,540		11,328
Federal Home Loan Bank and Federal
Reserve Bank stock		3,750		3,750		—		3,750		—
Loans held for sale		931		957		—		957		—
Loans, net		311,231		313,659		—		—		313,659
Liabilities:
Noninterest-bearing deposits		102,243		102,243		—		102,243		—
Interest-bearing deposits		315,884		316,222		—		316,222		—
Repurchase agreements		26,033		26,033		—		26,033		—
Federal Home Loan Bank advances		6,392		6,428		—		6,428		—

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

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

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, prevailing practices within the banking industry and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The accompanying consolidated financial statements reflect all adjustments ordinary in nature which are, in the opinion of management, necessary for a fair presentation of the Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013, the Consolidated Statements of Income for the three- and nine-month periods ended September 30, 2014 and September 30, 2013, the Consolidated Statements of Comprehensive Income for the three- and nine-month periods ended September 30, 2014 and September 30, 2013, the Consolidated Statements of Changes in Shareholders' Equity for the nine-month periods ended September 30, 2014 and September 30, 2013, and the Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2014 and September 30, 2013. Operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013.

Allowance for Loan Losses

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. See Note 3 to the interim consolidated financial statements for additional information.

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 economic conditions and (2) the impact of recognizing an impairment or loan loss could have a material effect on ChoiceOne’s assets reported on the balance sheets as well as its net income.

Stock-Based Compensation

Stock-Based Compensation

Effective July 1, 2013, ChoiceOne began granting Restricted Stock Units to a select group of employees under the Stock Incentive Plan of 2012. All of the Restricted Stock Units are initially unvested and vest in three annual installments on each of the next three anniversaries of the grant date. Certain additional vesting provisions apply. Each unit, once vested, is settled by delivery of one share of ChoiceOne common stock.

Reclassifications

Reclassifications

Certain amounts presented in prior periods have been reclassified to conform to the current presentation.

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FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2014

Disclosure Text Block Supplement [Abstract]

FINANCIAL INSTRUMENTS

NOTE 5 – FINANCIAL INSTRUMENTS

Financial instruments as of the dates indicated were as follows:

					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
(Dollars in thousands)	Carrying		Estimated		Assets		Inputs		Inputs
	Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2014
Assets:
Cash and due from banks	$	10,793	$	10,793	$	10,793	$	—	$	—
Securities available for sale		141,017		141,017		217		129,608		11,192
Federal Home Loan Bank and Federal
Reserve Bank stock		3,750		3,750		—		3,750		—
Loans held for sale		1,987		2,048		—		2,048		—
Loans, net		333,755		334,809		—		—		334,809
Liabilities:
Noninterest-bearing deposits		107,802		107,802		—		107,802		—
Interest-bearing deposits		314,748		314,748		—		314,748		—
Federal funds purchased		2,149		2,149		—		2,149		—
Repurchase agreements		19,654		19,654		—		19,654		—
Federal Home Loan Bank advances		20,370		20,409		—		20,409		—
December 31, 2013
Assets:
Cash and due from banks	$	20,479	$	20,479	$	20,479	$	—	$	—
Securities available for sale		136,082		136,082		214		124,540		11,328
Federal Home Loan Bank and Federal
Reserve Bank stock		3,750		3,750		—		3,750		—
Loans held for sale		931		957		—		957		—
Loans, net		311,231		313,659		—		—		313,659
Liabilities:
Noninterest-bearing deposits		102,243		102,243		—		102,243		—
Interest-bearing deposits		315,884		316,222		—		316,222		—
Repurchase agreements		26,033		26,033		—		26,033		—
Federal Home Loan Bank advances		6,392		6,428		—		6,428		—

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 6. The estimated fair value for loans is based on the rates charged at September 30, 2014 and December 31, 2013 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 Federal Home Loan Bank (“FHLB”) advances are based on the rates paid at September 30, 2014 and December 31, 2013 for new deposits or FHLB advances, applied until maturity. The estimated fair values for other financial instruments and off-balance sheet loan commitments are considered nominal.

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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 6 – FAIR VALUE MEASUREMENTS

The following tables present information about the Bank’s assets and liabilities measured at fair value on a recurring basis 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 September 30, 2014 or December 31, 2013. Disclosures concerning assets measured at fair value are as follows:

Assets Measured at Fair Value on a Recurring Basis

	Quoted Prices		Significant
	in Active		Other		Significant
	Markets for Identical		Observable		Unobservable
(Dollars in thousands)	Assets		Inputs		Inputs		Balance at
	(Level 1)		(Level 2)		(Level 3)		Date Indicated
Investment Securities, Available for
Sale – September 30, 2014
U.S. Treasury	$	—	$	13,140	$	—	$	13,140
U.S. Government and federal agency		—		40,497		—		40,497
State and municipal		—		58,592		9,294		67,886
Mortgage-backed		—		9,334		—		9,334
Corporate		—		6,654		398		7,052
Foreign debt		—		994		—		994
Equity securities		217		—		1,500		1,717
Asset backed securities		—		397		—		397
Total	$	217	$	129,608	$	11,192	$	141,017
Investment Securities, Available for
Sale - December 31, 2013
U.S. Treasury	$	—	$	7,224	$	—	$	7,224
U.S. Government and federal agency		—		43,722		—		43,722
State and municipal		—		55,234		9,541		64,775
Mortgage-backed		—		8,470		—		8,470
Corporate		—		8,417		398		8,815
Foreign debt		—		990				990
Equity securities		214		—		1,389		1,603
Asset backed securities		—		483		—		483
Total	$	214	$	124,540	$	11,328	$	136,082

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

(Dollars in thousands)
	2014			2013
Investment Securities, Available for Sale
Balance, January 1	$	11,328		$	2,599
Total realized and unrealized losses included in income		(11	)		—
Total unrealized gains (losses) included in other comprehensive income		(115	)		8
Net purchases, sales, calls, and maturities		(84	)		1,551
Net transfers into Level 3		74			—
Balance, September 30	$	11,192		$	4,158

Of the Level 3 assets that were held by the Bank at September 30, 2014, the net unrealized gain for the nine months ended September 30, 2014 was $138,000, which is recognized in other comprehensive income in the consolidated balance sheet. Purchases of level 3 securities during the first three quarters of 2014 and 2013 consisted of local municipal issues. During the first nine months of 2014, a $600,000 Level 3 bond was sold. There were no sales of Level 3 securities in the first nine months of 2013.

Both observable and unobservable inputs may be used to determine the fair value of positions classified as Level 3 investment securities 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 primarily consist of bonds issued by local municipalities. The Bank estimates the fair value of these bonds 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

				Quoted Prices	Significant
				in Active	Other		Significant
				Markets for Identical	Observable		Unobservable
(Dollars in thousands)	Balance at			Assets	Inputs		Inputs
	Date Indicated			(Level 1)	(Level 2)		(Level 3)
Impaired Loans
September 30, 2014	$	7,851	$	—	$	—	$	7,851
December 31, 2013	$	8,287	$	—	$	—	$	8,287

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).

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SECURITIES (Tables)

9 Months Ended

Sep. 30, 2014

Investments, Debt and Equity Securities [Abstract]

Schedule of fair value of securities available for sale and the related gross unrealized gains and losses recognized

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

			September 30, 2014
				Gross		Gross
(Dollars in thousands)		Amortized		Unrealized		Unrealized			Fair
		Cost		Gains		Losses			Value
U.S. Government and federal agency	$	40,675	$	73	$	(251	)	$	40,497
U.S. Treasury		13,224		—		(84	)		13,140
State and municipal		66,385		1,869		(368	)		67,886
Mortgage-backed		9,363		51		(80	)		9,334
Corporate		7,041		30		(19	)		7,052
Foreign debt		1,000		—		(6	)		994
Equity securities		1,707		10		—			1,717
Asset-backed securities		400		—		(3	)		397
Total	$	139,795	$	2,033	$	(811	)	$	141,017

			December 31, 2013
				Gross		Gross
		Amortized		Unrealized		Unrealized			Fair
		Cost		Gains		Losses			Value
U.S. Government and federal agency	$	44,059	$	166	$	(503	)	$	43,722
U.S. Treasury		7,285		17		(78	)		7,224
State and municipal		64,215		1,622		(1,062	)		64,775
Mortgage-backed		8,541		95		(166	)		8,470
Corporate		8,805		61		(51	)		8,815
Foreign debt		1,000		—		(10	)		990
Equity securities		1,707		7		(111	)		1,603
Asset-backed securities		486		—		(3	)		483
Total	$	136,098	$	1,968	$	(1,984	)	$	136,082

XML

FAIR VALUE MEASUREMENTS (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Securities available for sale	$ 141,017	$ 136,082
U.S. Treasury [Member]
Securities available for sale	13,140	7,224
U.S. Government and federal agency [Member]
Securities available for sale	40,497	43,722
State and municipal [Member]
Securities available for sale	67,886	64,775
Mortgage-backed [Member]
Securities available for sale	9,334	8,470
Corporate [Member]
Securities available for sale	7,052	8,815
Foreign Debt [Member]
Securities available for sale	994	990
Equity securities [Member]
Securities available for sale	1,717	1,603
Asset-backed [Member]
Securities available for sale	397	483
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Securities available for sale	217	214
Significant Other Observable Inputs (Level 2) [Member]
Securities available for sale	129,608	124,540
Significant Other Observable Inputs (Level 2) [Member] | Asset-backed [Member] | Fair Value Measured on a Recurring Basis [Member]
Securities available for sale	397
Significant Unobservable Inputs (Level 3) [Member]
Securities available for sale	11,192	11,328
Significant Unobservable Inputs (Level 3) [Member] | Asset-backed [Member] | Fair Value Measured on a Recurring Basis [Member]
Securities available for sale	11,192
Fair Value Measured on a Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Securities available for sale	217	214
Fair Value Measured on a Recurring Basis [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Equity securities [Member]
Securities available for sale	217	214
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member]
Securities available for sale	129,608	124,540
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Treasury [Member]
Securities available for sale	13,140	7,224
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | U.S. Government and federal agency [Member]
Securities available for sale	40,497	43,722
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | State and municipal [Member]
Securities available for sale	58,592	55,234
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Mortgage-backed [Member]
Securities available for sale	9,334	8,470
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Corporate [Member]
Securities available for sale	6,654	8,417
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Foreign Debt [Member]
Securities available for sale	994	990
Fair Value Measured on a Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | Asset-backed [Member]
Securities available for sale		483
Fair Value Measured on a Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member]
Securities available for sale		11,328
Fair Value Measured on a Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | State and municipal [Member]
Securities available for sale	9,294	9,541
Fair Value Measured on a Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | Corporate [Member]
Securities available for sale	398	398
Fair Value Measured on a Recurring Basis [Member] | Significant Unobservable Inputs (Level 3) [Member] | Equity securities [Member]
Securities available for sale	$ 1,500	$ 1,389

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Shares issued through exercise of stock options	1,113
Directors' Stock Purchase Plan [Member]
Value of shares issued through stock purchase plan	$ 48,000
Shares issued through stock purchase plan	2,740
Employee Stock Purchase Plan [Member]
Value of shares issued through stock purchase plan	$ 53,000
Shares issued through stock purchase plan	3,284
Restricted Stock Units [Member]
Sotck-based compensation vesting terms	vest in three annual installments on each of the next three anniversaries of the grant date

XML

LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014 N	Sep. 30, 2013 N	Sep. 30, 2014 N	Sep. 30, 2013 N
Number of contracts	3		7
Pre-Modification Outstanding Recorded Investment	$ 928		$ 1,451
Post Modification Oustanding Recorded Investment	924		1,448
Number of Contracts	8	1	8	4
Post Modification Oustanding Recorded Investment - past due for 30 days or more	1,426	246	1,426	485
Commercial and Industrial [Member]
Number of Contracts				1
Post Modification Oustanding Recorded Investment - past due for 30 days or more				88
Commercial Real Estate [Member]
Number of contracts	2	1	5	1
Pre-Modification Outstanding Recorded Investment	731	214	1,165	214
Post Modification Oustanding Recorded Investment	731	214	1,167	214
Number of Contracts	6	1	6	2
Post Modification Oustanding Recorded Investment - past due for 30 days or more	1,315	246	1,315	368
Residential Real Estate [Member]
Number of contracts	1		2
Pre-Modification Outstanding Recorded Investment	197		286
Post Modification Oustanding Recorded Investment	193		281
Number of Contracts	2		2
Post Modification Oustanding Recorded Investment - past due for 30 days or more	111		111
Consumer [Member]
Number of Contracts				1
Post Modification Oustanding Recorded Investment - past due for 30 days or more				$ 29

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Consolidated Statements Of Comprehensive Income
Net income	$ 1,554	$ 1,201	$ 4,139	$ 3,748
Other comprehensive income:
Unrealized holding gains/(losses) on available for sale securities	230	(735)	1,420	(3,013)
Less: Reclassification adjustment for gain recognized in earnings	(89)	(13)	(182)	(89)
Net unrealized gain/(loss)	141	(748)	1,238	(3,102)
Tax (expense)/benefit	(48)	254	(420)	1,055
Other comprehensive income/(loss), net of tax	93	(494)	818	(2,047)
Comprehensive income/(loss)	$ 1,647	$ 707	$ 4,957	$ 1,701

XML

SECURITIES

9 Months Ended

Sep. 30, 2014

Investments, Debt and Equity Securities [Abstract]

SECURITIES

NOTE 2 - SECURITIES

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

			September 30, 2014
				Gross		Gross
(Dollars in thousands)		Amortized		Unrealized		Unrealized			Fair
		Cost		Gains		Losses			Value
U.S. Government and federal agency	$	40,675	$	73	$	(251	)	$	40,497
U.S. Treasury		13,224		—		(84	)		13,140
State and municipal		66,385		1,869		(368	)		67,886
Mortgage-backed		9,363		51		(80	)		9,334
Corporate		7,041		30		(19	)		7,052
Foreign debt		1,000		—		(6	)		994
Equity securities		1,707		10		—			1,717
Asset-backed securities		400		—		(3	)		397
Total	$	139,795	$	2,033	$	(811	)	$	141,017

			December 31, 2013
				Gross		Gross
		Amortized		Unrealized		Unrealized			Fair
		Cost		Gains		Losses			Value
U.S. Government and federal agency	$	44,059	$	166	$	(503	)	$	43,722
U.S. Treasury		7,285		17		(78	)		7,224
State and municipal		64,215		1,622		(1,062	)		64,775
Mortgage-backed		8,541		95		(166	)		8,470
Corporate		8,805		61		(51	)		8,815
Foreign debt		1,000		—		(10	)		990
Equity securities		1,707		7		(111	)		1,603
Asset-backed securities		486		—		(3	)		483
Total	$	136,098	$	1,968	$	(1,984	)	$	136,082

ChoiceOne reviews its securities portfolio on a quarterly basis to determine whether unrealized losses are considered to be temporary or other-than-temporary. No other-than-temporary impairment charges were recorded during the nine months ended September 30, 2014. ChoiceOne believed that unrealized losses on securities were temporary in nature and were due to changes in interest rates and reduced market liquidity and not as a result of credit quality issues.

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 4) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Loans with no related allowance recorded
Recorded Investment	$ 245		$ 2,356
Unpaid Principal Balance	248		2,729
Average Recorded Investment	1,033	1,212
Interest Income Recognized	10	9
Loans with an allowance recorded
Recorded Investment	7,606		5,931
Unpaid Principal Balance	8,409		6,522
Related Allowance	1,381		1,063
Average Recorded Investment	6,903	7,099
Interest Income Recognized	146	272
Total Loans
Recorded Investment	7,851		8,287
Unpaid Principal Balance	8,657
Average Recorded Investment	7,936	8,311
Interest Income Recognized	156	281
Agricultural [Member]
Loans with no related allowance recorded
Recorded Investment			452
Unpaid Principal Balance			455
Average Recorded Investment	113	142
Interest Income Recognized		7
Loans with an allowance recorded
Recorded Investment	61
Unpaid Principal Balance	64
Related Allowance	6
Average Recorded Investment	162	140
Interest Income Recognized		1
Total Loans
Recorded Investment	61		452
Unpaid Principal Balance	64		455
Average Recorded Investment	275	282
Interest Income Recognized		8
Commercial and Industrial [Member]
Loans with no related allowance recorded
Recorded Investment	7		229
Unpaid Principal Balance	9		300
Average Recorded Investment	91	49
Loans with an allowance recorded
Recorded Investment	149		547
Unpaid Principal Balance	153		554
Related Allowance	18		53
Average Recorded Investment	365	334
Interest Income Recognized	4	7
Total Loans
Recorded Investment	156		776
Unpaid Principal Balance	162		854
Average Recorded Investment	457	383
Interest Income Recognized	4	7
Consumer [Member]
Loans with no related allowance recorded
Recorded Investment	3		2
Unpaid Principal Balance	4		3
Average Recorded Investment	1	3
Loans with an allowance recorded
Recorded Investment	29		35
Unpaid Principal Balance	29		35
Related Allowance	3		3
Average Recorded Investment	32	45
Interest Income Recognized	2	3
Total Loans
Recorded Investment	32		37
Unpaid Principal Balance	33		38
Average Recorded Investment	33	48
Interest Income Recognized	2	3
Commercial Real Estate [Member]
Loans with no related allowance recorded
Recorded Investment	3		782
Unpaid Principal Balance	3		843
Average Recorded Investment	338	670
Interest Income Recognized	5	(1)
Loans with an allowance recorded
Recorded Investment	4,828		3,413
Unpaid Principal Balance	5,610		3,997
Related Allowance	1,053		699
Average Recorded Investment	4,055	4,305
Interest Income Recognized	71	200
Total Loans
Recorded Investment	4,831		4,195
Unpaid Principal Balance	5,613		4,840
Average Recorded Investment	4,392	4,975
Interest Income Recognized	76	199
Residential Real Estate [Member]
Loans with no related allowance recorded
Recorded Investment	232		891
Unpaid Principal Balance	232		1,128
Average Recorded Investment	490	348
Interest Income Recognized	5	3
Loans with an allowance recorded
Recorded Investment	2,539		1,936
Unpaid Principal Balance	2,553		1,936
Related Allowance	301		308
Average Recorded Investment	2,289	2,275
Interest Income Recognized	69	61
Total Loans
Recorded Investment	2,771		2,827
Unpaid Principal Balance	2,785		3,064
Average Recorded Investment	2,779	2,623
Interest Income Recognized	$ 74	$ 64

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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

Schedule of assets measured at fair value

Disclosures concerning assets measured at fair value are as follows:

Assets Measured at Fair Value on a Recurring Basis

	Quoted Prices		Significant
	in Active		Other		Significant
	Markets for Identical		Observable		Unobservable
(Dollars in thousands)	Assets		Inputs		Inputs		Balance at
	(Level 1)		(Level 2)		(Level 3)		Date Indicated
Investment Securities, Available for
Sale – September 30, 2014
U.S. Treasury	$	—	$	13,140	$	—	$	13,140
U.S. Government and federal agency		—		40,497		—		40,497
State and municipal		—		58,592		9,294		67,886
Mortgage-backed		—		9,334		—		9,334
Corporate		—		6,654		398		7,052
Foreign debt		—		994		—		994
Equity securities		217		—		1,500		1,717
Asset backed securities		—		397		—		397
Total	$	217	$	129,608	$	11,192	$	141,017
Investment Securities, Available for
Sale - December 31, 2013
U.S. Treasury	$	—	$	7,224	$	—	$	7,224
U.S. Government and federal agency		—		43,722		—		43,722
State and municipal		—		55,234		9,541		64,775
Mortgage-backed		—		8,470		—		8,470
Corporate		—		8,417		398		8,815
Foreign debt		—		990				990
Equity securities		214		—		1,389		1,603
Asset backed securities		—		483		—		483
Total	$	214	$	124,540	$	11,328	$	136,082

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

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

(Dollars in thousands)
	2014			2013
Investment Securities, Available for Sale
Balance, January 1	$	11,328		$	2,599
Total realized and unrealized losses included in income		(11	)		—
Total unrealized gains (losses) included in other comprehensive income		(115	)		8
Net purchases, sales, calls, and maturities		(84	)		1,551
Net transfers into Level 3		74			—
Balance, September 30	$	11,192		$	4,158

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

				Quoted Prices	Significant
				in Active	Other		Significant
				Markets for Identical	Observable		Unobservable
(Dollars in thousands)	Balance at			Assets	Inputs		Inputs
	Date Indicated			(Level 1)	(Level 2)		(Level 3)
Impaired Loans
September 30, 2014	$	7,851	$	—	$	—	$	7,851
December 31, 2013	$	8,287	$	—	$	—	$	8,287