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, 2017~~March 31, 2022

☐	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period from ~~_______________~~ to ~~_____________~~

Commission File Number:000-19202

ChoiceOne Financial Services, Inc.

(Exact Name of Registrant as Specified in its Charter)

Michigan (State or Other Jurisdiction of Incorporation or Organization)		38-2659066 (I.R.S. Employer Identification No.)

109 East Division Sparta, Michigan (Address of Principal Executive Offices)		49345 (Zip Code)

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

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

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, ~~and posted on its corporate 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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” ~~and~~ “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☐☒	Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ~~Yes ☐ No~~ ☐

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock	COFS	NASDAQ Capital Market

As of ~~October 31, 2017,~~April 30, 2022, the ~~Registrant~~Registrant had outstanding ~~3,451,987~~7,493,521 shares of common stock.

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements.

ChoiceOne Financial Services, Inc.

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
(Dollars in thousands)	2022			2021
	(Unaudited)			(Audited)
Assets
Cash and due from banks	$	89,626		$	31,537
Time deposits in other financial institutions		350			350
Cash and cash equivalents		89,976			31,887

Equity securities, at fair value (Note 2)		8,282			8,492
Securities available for sale, at fair value (Note 2)		641,048			1,098,885
Securities held to maturity (Note 2)		429,918			0
Federal Home Loan Bank stock		3,493			3,824
Federal Reserve Bank stock		5,064			5,064
Loans held for sale		13,450			9,351
Loans to other financial institutions		0			42,632
Loans (Note 3)		1,027,406			1,016,848
Allowance for loan losses (Note 3)		(7,601	)		(7,688	)
Loans, net		1,019,805			1,009,160

Premises and equipment, net		29,678			29,880
Other real estate owned, net		172			194
Cash value of life insurance policies		43,520			43,356
Goodwill		59,946			59,946
Core deposit intangible		3,660			3,962
Other assets		28,766			20,049
Total assets	$	2,376,778		$	2,366,682

Liabilities
Deposits – noninterest-bearing	$	565,657		$	560,931
Deposits – interest-bearing		1,579,944			1,491,363
Total deposits		2,145,601			2,052,294
Borrowings		0			50,000
Subordinated debentures		35,078			35,017
Other liabilities		4,981			7,702
Total liabilities		2,185,660			2,145,013

Shareholders' Equity
Preferred stock; shares authorized: 100,000; shares outstanding: none		0			0
Common stock and paid-in capital, no par value; shares authorized: 12,000,000; shares outstanding: 7,489,812 at March 31, 2022 and 7,510,379 at December 31, 2021		171,492			171,913
Retained earnings		55,988			52,332
Accumulated other comprehensive loss, net		(36,362	)		(2,576	)
Total shareholders’ equity		191,118			221,669
Total liabilities and shareholders’ equity	$	2,376,778		$	2,366,682

September 30, December 31,
(Dollars in thousands) 2017 2016
(Unaudited) (Audited)
Assets
Cash and due from banks $ 12,725 $ 14,809

Securities available for sale (Note 2) 173,306 174,388
Federal Home Loan Bank stock 1,994 1,994
Federal Reserve Bank stock 1,573 1,573

Loans held for sale 2,378 1,974
Loans to other financial institutions 13,293 —
Loans (Note 3) 394,090 369,000
Allowance for loan losses (Note 3) (4,216 ) (4,277 )
Loans, net 389,874 364,723

Premises and equipment, net 12,271 12,588
Cash surrender value of life insurance policies 14,415 14,117
Goodwill 13,728 13,728
Other assets 6,495 7,477
Total assets $ 642,052 $ 607,371

Liabilities
Deposits – noninterest-bearing $ 136,542 $ 127,611
Deposits – interest-bearing 389,296 384,775
Total deposits 525,838 512,386

Federal funds purchased 2,650 —
Repurchase agreements 3,794 7,913
Advances from Federal Home Loan Bank 30,276 12,301
Other liabilities 3,188 3,073
Total liabilities 565,746 535,673

Shareholders’ Equity
Common stock and paid in capital, no par value; shares authorized: 7,000,000; shares outstanding: 3,451,445 at September 30, 2017 and 3,277,944 at December 31, 2016 50,307 46,299
Retained earnings 25,281 25,997
Accumulated other comprehensive income (loss), net 718 (598 )
Total shareholders’ equity 76,306 71,698
Total liabilities and shareholders’ equity $ 642,052 $ 607,371

See accompanying notes to interim consolidated financial statements.

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

	Three Months Ended
(Dollars in thousands, except per share data)	March 31,
	2022			2021
Interest income
Loans, including fees	$	12,298		$	12,682
Securities:
Taxable		3,507			1,856
Tax exempt		1,655			1,097
Other		14			20
Total interest income		17,474			15,655

Interest expense
Deposits		783			880
Advances from Federal Home Loan Bank		1			1
Other		369			86
Total interest expense		1,153			967

Net interest income		16,321			14,688
Provision for loan losses		0			250
Net interest income after provision for loan losses		16,321			14,438

Noninterest income
Customer service charges		2,189			1,920
Insurance and investment commissions		205			273
Gains on sales of loans		804			2,146
Net gains on sales of securities		0			1
Net gains on sales and write downs of other assets		171			5
Earnings on life insurance policies		280			186
Trust income		178			172
Change in market value of equity securities		(356	)		608
Other		374			289
Total noninterest income		3,845			5,600

Noninterest expense
Salaries and benefits		7,606			7,168
Occupancy and equipment		1,625			1,555
Data processing		1,744			1,429
Professional fees		510			729
Supplies and postage		191			100
Advertising and promotional		132			145
Intangible amortization		282			307
FDIC insurance		225			152
Other		1,375			943
Total noninterest expense		13,690			12,528

Income before income tax		6,476			7,510
Income tax expense		948			1,272

Net income	$	5,528		$	6,238

Basic earnings per share (Note 4)	$	0.74		$	0.80
Diluted earnings per share (Note 4)	$	0.74		$	0.80
Dividends declared per share	$	0.25		$	0.22

See accompanying notes to interim consolidated financial statements.

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

	Three Months Ended
(Dollars in thousands)	March 31,
	2022			2021
Net income	$	5,528		$	6,238

Other comprehensive income:
Changes in net unrealized gains on investment securities available for sale, net of tax (benefit)/expense of ($8,981) and ($3,560) for the three months ended March 31, 2022 and March 31, 2021, respectively.		(33,786	)		(13,393	)

Reclassification adjustment for realized (gain) loss on sale of investment securities available for sale included in net income, net of tax expense (benefit) of $0 and $0 for the three months ended March 31, 2022 and March 31, 2021, respectively.		0			(1	)

Other comprehensive income (loss), net of tax		(33,786	)		(13,394	)

Comprehensive income (loss)	$	(28,258	)	$	(7,156	)

See accompanying notes to interim consolidated financial statements.

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

For the three months ended March 31,

										Accumulated
				Common						Other
				Stock and						Comprehensive
	Number of			Paid in			Retained			Income/(Loss),
(Dollars in thousands, except per share data)	Shares			Capital			Earnings			Net			Total

Balance, January 1, 2021		7,796,352		$	178,750		$	37,490		$	11,028		$	227,268

Net income					0			6,238			0			6,238
Other comprehensive loss					0			0			(13,394	)		(13,394	)
Shares issued		4,732			175			0			0			175
Effect of employee stock purchases		1,201			4			0			0			4
Stock-based compensation expense		-			64			0			0			64
Cash dividends declared ($0.22 per share)					0			(1,716	)		0			(1,716	)

Balance, March 31, 2021		7,802,285		$	178,993		$	42,012		$	(2,366	)	$	218,639


Balance, January 1, 2022		7,510,379		$	171,913		$	52,332		$	(2,576	)	$	221,669

Net income					0			5,528			0			5,528
Other comprehensive loss					0			0			(33,786	)		(33,786	)
Shares issued		5,332			133			0			0			133
Effect of employee stock purchases		0			7			0			0			7
Stock-based compensation expense					121			0			0			121
Shares repurchased		(25,899	)		(682	)		0			0			(682	)
Cash dividends declared ($0.25 per share)					0			(1,872	)		0			(1,872	)

Balance, March 31, 2022		7,489,812		$	171,492		$	55,988		$	(36,362	)	$	191,118

See accompanying notes to interim consolidated financial statements.

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

	Three Months Ended
(Dollars in thousands)	March 31,
	2022			2021
Cash flows from operating activities:
Net income	$	5,528		$	6,238
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses		0			250
Depreciation		672			646
Amortization		2,673			1,949
Compensation expense on employee and director stock purchases, stock options, and restricted stock units		226			214
Net gains on sales of securities		0			(1	)
Net change in market value of equity securities		356			(608	)
Gains on sales of loans		(804	)		(2,146	)
Loans originated for sale		(29,531	)		(72,727	)
Proceeds from loan sales		25,896			68,637
Earnings on bank-owned life insurance		(280	)		(186	)
Proceeds from BOLI policy		130			0
Earnings on death benefit from bank-owned life insurance		(14	)		0
(Gains)/losses on sales of other real estate owned		(41	)		(4	)
Proceeds from sales of other real estate owned		235			270
Deferred federal income tax (benefit)/expense		248			506
Net change in:
Other assets		173			(3,952	)
Other liabilities		(2,665	)		3,124
Net cash provided by operating activities		2,802			2,210

Cash flows from investing activities:
Maturities, prepayments and calls of securities available for sale		13,157			12,918
Maturities, prepayments and calls of securities held to maturity		1,078			0
Purchases of securities available for sale		(28,197	)		(179,221	)
Purchases of securities held to maturity		(3,160	)		0
Proceeds from redemption of Federal Home Loan Bank stock		331			0
Loan originations and payments, net		31,816			63,084
Additions to premises and equipment		(526	)		(1,038	)
Net cash provided by (used in) investing activities		14,499			(104,257	)

Cash flows from financing activities:
Net change in deposits		93,307			165,386
Net change in short term borrowings		(50,000	)		(5,843	)
Issuance of common stock		35			29
Repurchase of common stock		(682	)		0
Cash dividends		(1,872	)		(1,716	)
Net cash provided by financing activities		40,788			157,856

Net change in cash and cash equivalents		58,089			55,809
Beginning cash and cash equivalents		31,887			79,519

Ending cash and cash equivalents	$	89,976		$	135,328

Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,413		$	1,021
Cash paid for income taxes		0			0
Loans transferred to other real estate owned		172			123

See accompanying notes to interim consolidated financial statements.

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

Three Months Ended Nine Months Ended
(Dollars in thousands, except per share data) September 30, September 30,
2017 2016 2017 2016
Interest income
Loans, including fees $ 4,592 $ 4,210 $ 13,157 $ 12,293
Securities:
Taxable 651 594 1,935 1,731
Tax exempt 355 358 1,068 1,088
Other 26 5 50 14
Total interest income 5,624 5,167 16,210 15,126

Interest expense
Deposits 320 190 860 599
Advances from Federal Home Loan Bank 62 44 169 119
Other 3 2 10 7
Total interest expense 385 236 1,039 725

Net interest income 5,239 4,931 15,171 14,401
Provision for loan losses 95 — 120 —

Net interest income after provision for loan losses 5,144 4,931 15,051 14,401

Noninterest income
Customer service charges 1,058 1,030 3,081 3,020
Insurance and investment commissions 260 290 760 740
Gains on sales of loans 355 508 920 1,345
Gains on sales of securities 51 28 177 255
(Losses) gains on sales and write-downs of other assets 17 (3 ) 21 (26 )
Earnings on life insurance policies 101 88 299 265
Other 141 124 399 360
Total noninterest income 1,983 2,065 5,657 5,959

Noninterest expense
Salaries and benefits 2,619 2,542 7,725 7,519
Occupancy and equipment 702 626 2,099 1,959
Data processing 551 556 1,681 1,654
Professional fees 287 232 778 700
Supplies and postage 102 92 293 312
Advertising and promotional 58 52 185 184
Intangible amortization — 112 — 336
FDIC insurance 51 78 151 218
Other 421 379 1,327 1,485
Total noninterest expense 4,791 4,669 14,239 14,367

Income before income tax 2,336 2,327 6,470 5,993
Income tax expense 616 644 1,668 1,591

Net income $ 1,720 $ 1,683 $ 4,801 $ 4,402

Basic earnings per share (Note 4) * $ 0.50 $ 0.50 $ 1.39 $ 1.28
Diluted earnings per share (Note 4) * $ 0.50 $ 0.50 $ 1.39 $ 1.28
Dividends declared per share * $ 0.17 $ 0.16 $ 0.50 $ 0.49

~~See accompanying notes to interim consolidated financial statements.~~

*Note that 2016 per-share amounts have been adjusted for the 5% stock dividend paid on May 31, 2017.

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

Three Months Ended Nine Months Ended
(Dollars in thousands) September 30, September 30,
2017 2016 2017 2016
Net income $ 1,720 $ 1,683 $ 4,801 $ 4,402
Other comprehensive income:

Changes in net unrealized gains (loss) on investment securities available for sale, net of tax expense of $(171) and $35 for the three months ended September 30, 2017 and September 30, 2016 respectively. Changes in net unrealized gains on investment securities available for sale, net of tax expense of $738 and $747 for the nine months ended September 30, 2017 and September 30, 2016 respectively. (333 ) 68 1,433 1,450

Less: Reclassification adjustment for realized gain on sale of investment securities available for sale included in net income, net of tax benefit of $17 and $9 for the three months ended September 30, 2017 and September 30,2016 respectively. Reclassification adjustment for realized gain on sale of investment securities available for sale included in net income, net of tax benefit of $60 and $87 for the nine months ended September 30, 2017 and September 30, 2016 respectively. (34 ) (19 ) (117 ) (168 )

Other comprehensive income, net of tax (367 ) 49 1,316 1,282

Comprehensive income $ 1,353 $ 1,732 $ 6,117 $ 5,684

~~See accompanying notes to interim consolidated financial statements.~~

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

Accumulated
Common Other
Stock and Comprehensive
Number of Paid in Retained Income (Loss),
(Dollars in thousands) Shares Capital Earnings Net Total

Balance, January 1, 2016 3,295,228 $ 46,501 $ 22,138 $ 1,203 $ 69,842
Net income 4,402 4,402
Other comprehensive income 1,282 1,282
Shares issued 11,559 137 137
Shares repurchased (35,000 ) (794 ) (794 )
Change in ESOP repurchase obligation 127 127
Effect of employee stock purchases 9 9
Stock-based compensation 3,414 248 248
Cash dividends declared ($0.49 per share) * (1,674 ) (1,674 )

Balance, September 30, 2016 3,275,201 $ 46,228 $ 24,866 $ 2,485 $ 73,579

Balance, January 1, 2017 3,277,944 $ 46,299 $ 25,997 $ (598 ) $ 71,698
Net income 4,801 4,801
Other comprehensive income 1,316 1,316
Shares issued 7,115 115 115
Shares repurchased (3,800 ) (88 ) (88 )
Effect of employee stock purchases 9 9
Stock options exercised 1,000 13 13
Stock-based compensation expense 180 180
Restricted stock units issued 5,197 — —
Stock dividend declared (5%) 163,989 3,779 (3,779 ) —
Cash dividends declared ($0.50 per share) (1,738 ) (1,738 )

Balance, September 30, 2017 3,451,445 $ 50,307 $ 25,281 $ 718 $ 76,306

~~See accompanying notes to interim consolidated financial statements.~~

*Note that 2016 per-share amounts have been adjusted for the 5% stock dividend paid on May 31, 2017.

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

Nine Months Ended
(Dollars in thousands) September 30,
2017 2016
Cash flows from operating activities:
Net income $ 4,801 $ 4,402
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses 120 —
Depreciation 944 757
Amortization 814 1,199
Compensation expense on stock purchases and restricted stock units 241 257
Gains on sales of securities (177 ) (255 )
Gains on sales of loans (920 ) (1,345 )
Loans originated for sale (28,356 ) (39,173 )
Proceeds from loan sales 27,922 42,313
Earnings on bank-owned life insurance (299 ) (265 )
Gains on sales of other real estate owned (10 ) 3
Proceeds from sales of other real estate owned 579 28
Deferred federal income tax benefit (29 ) (86 )
Net changes in other assets 572 (135 )
Net changes in other liabilities (532 ) 481
Net cash from operating activities 5,670 8,181
Cash flows from investing activities:
Securities available for sale:
Sales 22,521 14,538
Maturities, prepayments and calls 14,163 33,412
Purchases (33,998 ) (63,780 )
Loan originations and payments, net (38,235 ) (13,700 )
Additions to premises and equipment (413 ) (1,112 )
Net cash from investing activities (35,962 ) (30,642 )
Cash flows from financing activities:
Net change in deposits 13,452 2,691
Net change in repurchase agreements (4,119 ) (3,043 )
Net change in federal funds purchased 2,650 624
Proceeds from Federal Home Loan Bank advances 166,500 271,000
Payments on Federal Home Loan Bank advances (148,525 ) (245,023 )
Issuance of common stock 76 137
Repurchase of common stock (88 ) (794 )
Cash dividends (1,738 ) (1,674 )
Net cash from financing activities 28,208 23,918
Net change in cash and cash equivalents (2,084 ) 1,457
Beginning cash and cash equivalents 14,809 11,187
Ending cash and cash equivalents $ 12,725 $ 12,644
Supplemental disclosures of cash flow information:
Cash paid for interest $ 1,029 $ 726
Cash paid for taxes $ 1,150 $ 925
Loans transferred to other real estate owned $ 314 $ 483

~~See accompanying notes to interim consolidated financial statements.~~

~~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”~~("ChoiceOne") ~~and~~, its wholly-owned subsidiary, ChoiceOne Bank, ~~(the “Bank”),~~ and ~~the~~ChoiceOne Bank’s wholly-owned subsidiary, ChoiceOne Insurance Agencies, Inc. (the "Insurance Agency"). Intercompany transactions and balances have been eliminated in consolidation.

~~The unaudited condensed financial statements have been prepared pursuant to the rules and regulations~~ChoiceOne owns all of the ~~Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with~~common securities of Community Shores Capital Trust I (the “Capital Trust”). Under U.S. generally accepted accounting principles ~~have been condensed or omitted pursuant to those rules~~("GAAP"), the Capital Trust is not consolidated because it is a variable interest entity and ~~regulations, although~~ChoiceOne is not the ~~company believes that the disclosures made are adequate to make the information not misleading.~~primary beneficiary.

The accompanying unaudited consolidated financial statements and notes thereto 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, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, the Consolidated Statements of Income for the ~~three- and nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016,~~March 31, 2021, the Consolidated Statements of Comprehensive Income for the ~~three- and nine-month~~three-month periods ended ~~September 30, 2017~~ March 31, 2022 and ~~September 30, 2016,~~March 31, 2021, the Consolidated Statements of Changes in Shareholders’ Equity for the ~~nine-month periods~~three months ended ~~September 30, 2017~~ March 31, 2022 and ~~September 30, 2016,~~March 31, 2021, and the Consolidated Statements of Cash Flows for the ~~nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016.~~March 31, 2021. Operating results for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2022.

The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in ChoiceOne’s Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2016.~~2021.

~~Allowance for Loan Losses~~

~~The~~

Use of Estimates

To prepare financial statements in conformity with GAAP, ChoiceOne’s management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided. These estimates and assumptions are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, including the effects of the COVID-19 pandemic, and its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state and local government laws, regulations and orders in connection with the pandemic. Actual results may differ from these estimates. Estimates associated with the allowance for loan losses ~~is maintained~~are particularly susceptible to change.

Investment Securities

Investment securities for which ChoiceOne has the intent and ability to hold to maturity are classified as held to maturity and are carried at amortized cost. Investment securities not classified as held to maturity are classified as available for sale and are reported at fair value with unrealized gains and losses, net of income taxes, as a ~~level believed adequate by management~~separate component of other comprehensive income. ChoiceOne determines the appropriate classification of investment securities at the time of purchase and reassesses the classification at each reporting date.

Loans to ~~absorb probable incurred losses inherent~~Other Financial Institutions

ChoiceOne Bank entered into an agreement with another financial institution to fund mortgage loans. Loans to other financial institutions are purchased participating interests in individual advances made to mortgage bankers nation-wide from an unaffiliated originating bank. The originating bank services these loans and cash flows on the individual advances (principal, interest, and fees) which are allocated pro-rata based on ownership in the ~~consolidated~~participating interest, less fees paid for the servicing activity. The underlying collateral is generally made up of 1-4 family first residential mortgages owned by the mortgage banker and held for sale in the secondary market and have been underwritten using secondary market underwriting standards prior to purchasing the participating interest. Once the mortgage banker delivers the loan ~~portfolio. Management’s evaluation~~to the secondary market, the advance is required to be paid off, including ChoiceOne Bank’s participating interest. If the advance (in which ChoiceOne Bank has a participating interest) is outstanding over 90 days, the originating bank has the right to request the participating interest be paid off by the mortgage banker. There was no participating interest as of March 31, 2022.

Credit risk associated with the ~~adequacy of~~participating interest is measured as an allowance for loan losses when necessary. Losses are charged off against the allowance when incurred and recoveries of loan charge-offs are recorded when received. At least quarterly, ChoiceOne Bank reviews the portfolios of participating interests for potential losses including any participating interest that is ~~an estimate based on reviews of individual~~outstanding over 90 days (even if the advance and participating interest is current). Loans to other financial institutions are excluded from the loans ~~assessments of the impact of current economic conditions on the portfolio and historical loss experience of seasoned loan portfolios. See~~described in Note 3 to the interim consolidated financial ~~statements for additional information.~~statements.

~~Management believes~~

Goodwill

Goodwill results from business acquisitions and represents 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 volumesexcess of the ~~portfolios and economic conditions and (2)~~purchase price over the ~~impact~~fair value of ~~recognizing an impairment or loan loss could have a material effect on ChoiceOne’s reported~~the acquired tangible assets and ~~net income.~~liabilities and identifiable intangible assets. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed.

Core Deposit Intangible

Core deposit intangible represents the value of the acquired customer core deposit bases and is included as an asset on the consolidated balance sheets. The core deposit intangible has an estimated finite life, is amortized on an accelerated basis over a 120 month period and is subject to periodic impairment evaluation.

Stock Transactions

A total of ~~3,881~~3,698 shares of common stock were issued to ChoiceOne’s Board of Directors for a cash price of ~~$89,000~~$98,000 under the terms of the Directors’ Stock Purchase Plan in the first ~~nine months~~ quarter of ~~2017.~~2022. A total of ~~1,000~~1,634 shares ~~of common stock were issued upon the exercise of stock options in the first three quarters of 2017. A total of 3,234 shares of common stock were issued to employees~~ for a cash price of ~~$62,000~~$35,000 were issued under the Employee Stock Purchase Plan in the first ~~nine months~~ quarter of ~~2017. A~~2022. ChoiceOne repurchased 25,899 shares for $682,000, or a weighted average all-in cost per share of $26.35, during the first quarter of 2022. This was part of the common stock repurchase program announced in April 2021 which authorized repurchases of up to 390,114 shares, representing 5% of the total ~~of 5,197~~outstanding shares of common stock ~~were issued to employees for Restricted Stock Units that vested during~~as of the ~~first nine months of 2017.~~date the program was adopted.

~~Stock-Based Compensation~~

~~Effective July 1, 2013, ChoiceOne began granting Restricted Stock Units to~~

Allowance for Loan Losses

The allowance for loan losses is a ~~select group~~valuation allowance for probable incurred credit losses. The allowance for loan losses is increased by the provision for loan losses and decreased by loans charged off less any recoveries of ~~employees under~~charged off loans. Management estimates the ~~Stock Incentive Plan of 2012. All~~allowance for loan losses balance required based on past loan loss experience, the nature and volume of the ~~Restricted Stock Units are initially unvested~~loan portfolio, information about specific borrower situations and ~~vest in three annual installments on each~~estimated collateral values, economic conditions, and other factors. Allocations of the ~~next three anniversaries~~allowance for loan losses may be made for specific loans, but the entire allowance for loan losses is available for any loan that, in management’s judgment, should be charged off. Loan losses are charged against the allowance for loan losses when management believes that collection of ~~the grant date. Certain additional vesting provisions apply. Each unit, once vested,~~a loan balance is ~~settled by delivery of one share of ChoiceOne common stock.~~not possible.

~~Comprehensive Income~~

~~Comprehensive income~~The allowance for loan losses consists of ~~net income~~general and ~~other comprehensive income or loss. Other comprehensive income or loss includes unrealized gains~~specific components. The general component covers non-classified loans and ~~losses on securities available for sale and changes in the funded status of post-retirement plans, net of tax, which are also recognized as a separate component of shareholders’ equity.~~

~~Revenue Recognition~~

~~The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09,~~~~Revenue from Contracts with Customers (Topic 606)~~~~. The ASU adopts a standardized approach for revenue recognition and was a joint effort with the International Accounting Standards Board (IASB). The new revenue recognition standard~~ is based on ~~a core principle~~historical loss experience adjusted for current factors. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful. The general component of ~~recognizing revenue to depict~~management's estimate of the ~~transfer~~allowance for loan losses covers non-impaired loans and is based on historical loss experience adjusted for current factors. Management's adjustment for current factors is based on trends in delinquencies, trends in charge-offs and recoveries, trends in the volume of ~~promised goods or services to customers~~loans, changes in ~~an amount that reflects the consideration to which the entity expects to be entitled~~underwriting standards, trends in exchange for those goods or services. The ASU does not apply to financial instruments. The ASU is effective for public entities for reporting periods beginning after December 15, 2017 (therefore, for the year ending December 31, 2018 for the Corporation). Early implementation is not allowed for public companies. Management is completing an overall assessmentloan review findings, experience and ability of ~~noninterest revenue streams~~lending staff, national and ~~evaluating the expanded disclosure requirements.~~economic trends and conditions, industry conditions, trends in real estate values, and other conditions.

~~Reclassifications~~A loan is impaired when full payment under the loan terms is not expected. Troubled debt restructuring of loans is undertaken to improve the likelihood that the loan will be repaid in full under the modified terms in accordance with a reasonable repayment schedule. All modified loans are evaluated to determine whether the loans should be reported as Troubled Debt Restructurings ("TDR"). A loan is a TDR when the Bank, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower by modifying a loan. To make this determination, the Bank must determine whether (a) the borrower is experiencing financial difficulties and (b) the Bank granted the borrower a concession. This determination requires consideration of all facts and circumstances surrounding the modification. An overall general decline in the economy or some deterioration in a borrower’s financial condition does not automatically mean the borrower is experiencing financial difficulties. Commercial loans are evaluated for impairment on an individual loan basis. If a loan is considered impaired or if a loan has been classified as a TDR, a portion of the allowance for loan losses is allocated to the loan so that it is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller-balance homogeneous loans such as consumer and residential real estate mortgage loans are collectively evaluated for impairment and, accordingly, they are not separately identified for impairment disclosures.

Reclassifications

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

Recent Accounting Pronouncements

The Financial Accounting Standards Board (FASB) issued ASU No.2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance attempts to reflect an entity’s current estimate of all expected credit losses and broadens the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually to include forecasted information, as well as past events and current conditions. There is no specified method for measuring expected credit losses, and an entity may apply methods that reasonably reflect its expectations of the credit loss estimate. Although an entity may still use its current systems and methods for recording the allowance for credit losses, under the new rules, the inputs used to record the allowance for credit losses generally will need to change to appropriately reflect an estimate of all expected credit losses and the use of reasonable and supportable forecasts. Additionally, credit losses on available-for-sale debt securities will have to be presented as an allowance rather than as a write-down. This ASU is effective for fiscal years beginning after December 15, 2022, and for interim periods within those years for companies considered smaller reporting companies with the Securities and Exchange Commission. ChoiceOne was classified as a smaller reporting company as of the measurement date. Management is currently evaluating the impact of this new ASU on its consolidated financial statements which may be significant.

NOTE 2 - – SECURITIES

During the three months ended March 31, 2022, ChoiceOne reassessed and transferred, at fair value $428.4 million of securities classified as available for sale to the held to maturity classification. The net unrealized pre-tax loss of $3.4 million as of the transfer date remained in accumulated other comprehensive income to be amortized over the remaining life of the securities, offsetting the related amortization of discount or premium on the transferred securities. No gains or losses were recognized at the time of the transfer. The remaining net unamortized unrealized loss on transferred securities included in accumulated other comprehensive income was $2.6 million after tax as of March 31, 2022.

The fair value of equity securities ~~available for sale~~ and the related gross unrealized gains and (losses) recognized in noninterest income were as follows:

	March 31, 2022
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Equity securities	$	8,100	$	545	$	(363	)	$	8,282

	December 31, 2021
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Equity securities	$	7,953	$	665	$	(126	)	$	8,492

The following tables present the amortized cost and fair value of investment securities at the dates indicated and the corresponding amounts of gross unrealized gains and losses, including the corresponding amounts of gross unrealized gains and losses on investment securities available for sale recognized in accumulated other comprehensive ~~income (loss) were as follows:~~income:

September 30, 2017
(Dollars in thousands) Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value
U.S. Government and federal agency $ 51,086 $ 11 $ (444 ) $ 50,653
U.S. Treasury 4,025 — (10 ) 4,015
State and municipal 94,360 1,459 (224 ) 95,595
Mortgage-backed 9,501 17 (98 ) 9,420
Corporate 5,696 16 (17 ) 5,695
Foreign debt 4,512 — (72 ) 4,440
Equity securities 3,083 294 — 3,377
Asset-backed securities 112 — (1 ) 111
Total $ 172,375 $ 1,797 $ (866 ) $ 173,306

	March 31, 2022
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
Available for Sale:	Cost		Gains		Losses			Value
U.S. Government and federal agency	$	0	$	0	$	0		$	0
U.S. Treasury notes and bonds		93,154		8		(6,671	)		86,491
State and municipal		334,907		443		(22,962	)		312,388
Mortgage-backed		240,062		19		(13,412	)		226,669
Corporate		1,255		4		(4	)		1,255
Asset-backed securities		14,465		0		(220	)		14,245
Total	$	683,843	$	474	$	(43,269	)	$	641,048

Held to Maturity:
U.S. Government and federal agency	$	2,962	$	0	$	(195	)	$	2,767
U.S. Treasury notes and bonds		0		0		0			0
State and municipal		204,201		2		(17,668	)		186,535
Mortgage-backed		204,165		30		(13,533	)		190,662
Corporate		17,161		0		(606	)		16,555
Asset-backed securities		1,429		0		(37	)		1,392
Total	$	429,918	$	32	$	(32,039	)	$	397,911

December 31, 2016
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value
U.S. Government and federal agency $ 59,864 $ 34 $ (846 ) $ 59,052
U.S. Treasury 4,111 — (39 ) 4,072
State and municipal 89,169 748 (944 ) 88,973
Mortgage-backed 7,925 19 (155 ) 7,789
Corporate 7,069 12 (40 ) 7,041
Foreign debt 4,514 — (114 ) 4,400
Equity securities 2,617 266 — 2,883
Asset-backed securities 182 — (4 ) 178
Total $ 175,451 $ 1,079 $ (2,142 ) $ 174,388

	December 31, 2021
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
Available for Sale:	Cost		Gains		Losses			Value
U.S. Government and federal agency	$	2,001	$	7	$	0		$	2,008
U.S. Treasury notes and bonds		93,267		23		(1,311	)		91,979
State and municipal		528,252		10,704		(4,109	)		534,847
Mortgage-backed		441,383		781		(9,049	)		433,115
Corporate		20,856		19		(233	)		20,642
Asset-backed securities		16,387		0		(93	)		16,294
Total	$	1,102,146	$	11,534	$	(14,795	)	$	1,098,885

ChoiceOne reviews its securities portfolio on a quarterly basis to determine whether unrealized losses are considered to be temporary or other-than-temporary. NoNaN other-than-temporary impairment charges were recorded in the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2022 or in the same period in2021. ChoiceOne ~~believed~~believes 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.

Presented below is a schedule of maturities of securities as of ~~September 30, 2017,~~March 31, 2022, the fair value of securities available for sale and the amortized cost of securities held to maturity as of ~~September 30, 2017~~March 31, 2022. Callable securities in the money are presumed called and ~~December 31, 2016, and~~matured at the ~~weighted average yields of securities as of September 30, 2017:~~callable date.

	Available for Sale Securities maturing within:
									Fair Value
	Less than		1 Year -		5 Years -		More than		at March 31,
(Dollars in thousands)	1 Year		5 Years		10 Years		10 Years		2022

U.S. Government and federal agency	$	0	$	0	$	0	$	0	$	0
U.S. Treasury notes and bonds		2,007		0		84,484		0		86,491
State and municipal		17,913		34,667		185,902		73,906		312,388
Corporate		501		508		246		0		1,255
Asset-backed securities		0		10,305		3,940		0		14,245
Total debt securities		20,421		45,480		274,572		73,906		414,379

Mortgage-backed securities		13,689		84,660		119,303		9,017		226,669
Equity securities		0		1,000		0		7,282		8,282
Total Available for Sale	$	34,110	$	131,140	$	393,875	$	90,205	$	649,330

													Held to Maturity Securities maturing within:
																					Amortized Cost
		Securities maturing within:											Less than		1 Year -		5 Years -		More than		at March 31,
(Dollars in thousands)		Less than 1 Year		1 Year - 5 Years		5 Years - 10 Years		More than 10 Years		Fair Value at September 30, 2017		Fair Value at Dec. 31, 2016	1 Year		5 Years		10 Years		10 Years		2022

U.S. Government and federal agency	$	20,250	$	28,460	$	1,943	$	—	$	50,653	$	59,052	$	0	$	0	$	2,962	$	0	$	2,962
U.S. Treasury notes and bonds		—		4,015		—		—		4,015		4,072		0		0		0		0		0
State and municipal		8,362		47,395		36,016		3,822		95,595		88,973		2,755		4,608		97,764		99,074		204,201
Corporate		5,302		393		—		—		5,695		7,041		0		250		15,911		1,000		17,161
Foreign debt securities		1,000		3,440		—		—		4,440		4,400
Asset-backed securities		111		—		—		—		111		178		0		1,429		0		0		1,429
Total debt securities		35,025		83,703		37,959		3,822		160,509		163,716		2,755		6,287		116,637		100,074		225,753

Mortgage-backed securities		—		9,330		90		—		9,420		7,789		3,511		44,972		155,682		0		204,165
Equity securities (1)		—		—		1,000	��	2,377		3,377		2,883
Total	$	35,025	$	93,033	$	39,049	$	6,199	$	173,306	$	174,388
Equity securities														0		0		0		0		0
Total Held to Maturity													$	6,266	$	51,259	$	272,319	$	100,074	$	429,918

Following is information regarding unrealized gains and losses on equity securities for the three months ended March 31, 2022 and 2021:

~~(1) Equity securities are preferred and common stock that may or may not have a stated maturity.~~

	Three Months Ended
	March 31,
	2022			2021

Net gains and (losses) recognized during the period	$	(356	)	$	608
Less: Net gains and (losses) recognized during the period on securities sold		0			0

Unrealized gains and (losses) recognized during the reporting period on securities still held at the reporting date	$	(356	)	$	608

NOTE 3 – LOANS AND ALLOWANCE FOR LOAN LOSSES

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

																												Commercial
(Dollars in thousands)	Agricultural			Commercial and Industrial			Consumer			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Unallocated			Total						and						Commercial			Construction			Residential
																									Agricultural			Industrial			Consumer			Real Estate			Real Estate			Real Estate			Unallocated			Total
Allowance for Loan Losses Three Months Ended September 30, 2017
Allowance for Loan Losses Three Months Ended March 31, 2022
Beginning balance	$	395		$	904		$	294		$	1,551		$	25		$	748		$	181		$	4,098		$	448		$	1,454		$	290		$	3,705		$	110		$	671		$	1,010		$	7,688
Charge-offs		—			(12	)		(52	)		—			—			(9	)		—			(73	)		0			(31	)		(112	)		0			0			0			0			(143	)
Recoveries		—			4			16			65			—			11			—			96			0			2			52			1			0			1			0			56
Provision		(1	)		(98	)		1			(152	)		1			(140	)		484			95			(61	)		327			74			(16	)		(73	)		(83	)		(168	)		0
Ending balance	$	394		$	798		$	259		$	1,464		$	26		$	610		$	665		$	4,216		$	387		$	1,752		$	304		$	3,690		$	37		$	589		$	842		$	7,601

Nine Months Ended September 30, 2017
Beginning balance	$	433		$	688		$	305		$	1,438		$	62		$	1,014		$	337		$	4,277
Charge-offs		—			(374	)		(189	)		—			—			(44	)		—			(607	)
Recoveries		—			4			107			226			40			49			—			426
Provision		(39	)		480			36			(200	)		(76	)		(409	)		328			120
Ending balance	$	394		$	798		$	259		$	1,464		$	26		$	610		$	665		$	4,216

Individually evaluated for impairment	$	—		$	5		$	4		$	54		$	—		$	228		$	—		$	291		$	253		$	116		$	3		$	9		$	0		$	167		$	0		$	548

Collectively evaluated for impairment	$	394		$	793		$	255		$	1,410		$	26		$	382		$	665		$	3,925		$	134		$	1,636		$	301		$	3,681		$	37		$	422		$	842		$	7,053

Three Months Ended September 30, 2016
Beginning balance	$	399		$	656		$	279		$	1,133		$	44		$	1,222		$	563		$	4,296
Charge-offs		—			—			(68	)		—			—			(25	)		—			(93	)
Recoveries		—			8			49			5			—			11			—			73
Provision		(11	)		(55	)		30			340			(3	)		(205	)		(96	)		—
Ending balance	$	388		$	609		$	290		$	1,478		$	41		$	1,003		$	467		$	4,276

Nine Months Ended September 30, 2016
Beginning balance	$	420		$	586		$	297		$	1,030		$	46		$	1,388		$	427		$	4,194
Charge-offs		—			(33	)		(136	)		—			—			(94	)		—			(263	)
Recoveries		—			31			119			35			—			160			—			345
Provision		(32	)		26			10			412			(5	)		(451	)		40			—
Ending balance	$	388		$	610		$	290		$	1,477		$	41		$	1,003		$	467		$	4,276

Individually evaluated for impairment	$	4		$	8		$	1		$	167		$	—		$	321		$	—		$	501

Collectively evaluated for impairment	$	384		$	602		$	289		$	1,310		$	41		$	682		$	467		$	3,775


Loans September 30, 2017
Individually evaluated for impairment	$	424		$	192		$	34		$	936		$	—		$	2,472					$	4,058
Collectively evaluated for Impairment		45,682			101,244			23,977			122,480			7,298			89,351						390,032
Ending balance	$	46,106		$	101,436		$	24,011		$	123,416		$	7,298		$	91,823					$	394,090

December 31, 2016
Loans
March 31, 2022
Individually evaluated for impairment	$	526		$	301		$	28		$	1,073		$	—		$	2,983					$	4,911		$	2,542		$	356		$	32		$	157		$	0		$	1,853			0		$	4,940
Collectively evaluated for impairment		44,088			95,787			21,568			109,689			6,153			86,804						364,089			59,076			194,024			36,108			527,743			15,669			174,206			0			1,006,826
Acquired with deteriorated credit quality																										0			4,534			11			9,352			0			1,743			0			15,640
Ending balance	$	44,614		$	96,088		$	21,596		$	110,762		$	6,153		$	89,787					$	369,000		$	61,618		$	198,914		$	36,151		$	537,252		$	15,669		$	177,802			0		$	1,027,406

			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 March 31, 2021
Beginning balance	$	257	$	1,327		$	317		$	4,178		$	97		$	1,300		$	117		$	7,593
Charge-offs		0		(74	)		(71	)		(48	)		0			0			0			(193	)
Recoveries		0		9			79			0			0			2			0			90
Provision		85		337			(78	)		215			(23	)		(278	)		(8	)		250
Ending balance	$	342	$	1,599		$	247		$	4,345		$	74		$	1,024		$	109		$	7,740

Individually evaluated for impairment	$	114	$	2		$	0		$	10		$	0		$	213		$	0		$	339

Collectively evaluated for impairment	$	227	$	1,596		$	246		$	4,337		$	75		$	811		$	109		$	7,401


Loans
March 31, 2021
Individually evaluated for impairment	$	3,173	$	1,626		$	0		$	3,001		$	0		$	2,589			0		$	10,389
Collectively evaluated for impairment		43,513		290,140			32,311			448,261			15,670			174,562			0			1,004,457
Acquired with deteriorated credit quality		0		6,284			19			11,159			0			2,775			0			20,237
Ending balance	$	46,686	$	298,050		$	32,330		$	462,421		$	15,670		$	179,926					$	1,035,083

			Commercial
(Dollars in thousands)			and				Commercial		Construction		Residential
	Agricultural		Industrial		Consumer		Real Estate		Real Estate		Real Estate		Unallocated		Total
Allowance for Loan Losses
December 31, 2021
Individually evaluated for impairment	$	251	$	95	$	2	$	9	$	0	$	146	$	0	$	503

Collectively evaluated for impairment	$	197	$	1,359	$	288	$	3,696	$	110	$	525	$	1,010	$	7,185


Loans
December 31, 2021
Individually evaluated for impairment	$	2,616	$	339	$	14	$	273	$	0	$	2,191		0	$	5,433
Collectively evaluated for impairment		62,203		197,656		35,148		515,528		19,066		164,647		0		994,248
Acquired with deteriorated credit quality		0		5,029		12		10,083		0		2,043		0		17,167
Ending balance	$	64,819	$	203,024	$	35,174	$	525,884	$	19,066	$	168,881		0	$	1,016,848

The process to monitor the credit quality of ChoiceOne’s loan portfolio includes tracking ~~(1)~~(1) the risk ratings of business loans, ~~(2)~~(2) the level of classified business loans, and ~~(3)~~(3) delinquent and nonperforming consumer loans. Business loans are risk rated on a scale of 1 to 8.9. A description of the characteristics of the ratings follows:

Risk ~~ratings~~ Rating 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:~~ through 5 or pass: 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 with6 or special mention: Loans and other credit extensions bearing this ~~rating, it is not anticipated.~~

~~Risk rating 5: These loans are considered special mention credits. Loans in this risk rating~~grade are considered to be inadequately protected by the ~~net~~current sound worth and debt service ~~coverage~~capacity of the borrower or of any pledged collateral. These ~~loans~~obligations, even if apparently protected by collateral value, have ~~well defined~~well-defined weaknesses related to adverse financial, managerial, economic, market, or political conditions that ~~may jeopardize the borrower’s ability to repay the loan. If the weaknesses are not corrected, loss~~have clearly jeopardized repayment of principal and interest ~~could be probable.~~as originally intended. Furthermore, there is the possibility that ChoiceOne Bank will sustain some future loss if such weaknesses are not corrected. Clear loss potential, however, does not have to exist in any individual assets classified as substandard. Loans falling into this category should have clear action plans and timelines with benchmarks to determine which direction the relationship will move.

Risk rating ~~6: These loans are considered substandard credits. These loans~~7 or substandard: Loans and other credit extensions graded “7” have ~~well defined~~all the weaknesses inherent in those graded “6”, with the added characteristic that the severity of ~~which~~the weaknesses makes collection ~~of principal and interest~~or liquidation in full ~~questionable.~~highly questionable or improbable based upon currently existing facts, conditions, and values. Loans in this ~~category may~~classification should be ~~placed on~~evaluated for non-accrual status. All nonaccrual ~~status.~~commercial and Retail loans must be at a minimum graded a risk code “7”.

Risk rating ~~7: These loans are considered doubtful credits. Some loss of principal~~8 or doubtful: Loans and ~~interest has~~other credit extensions bearing this grade have been determined to ~~be probable. The estimate~~have the extreme probability of some loss, but because of certain important and reasonably specific factors, the amount of loss cannot be determined. Such pending factors could ~~be affected by factors such as the borrower’s ability to provide~~include merger or liquidation, additional capital injection, refinancing plans, or ~~collateral. Loans in this category are~~perfection of liens on ~~nonaccrual status.~~additional collateral.

Risk rating ~~8: These loans are considered loss credits. They~~9 or loss: Loans in this classification are considered uncollectible and ~~will~~cannot be ~~charged~~justified as a viable asset of ChoiceOne Bank. This classification does not mean the loan has absolutely no recovery value, but that it is neither practical nor desirable to defer writing off ~~against~~this loan even though partial recovery may be obtained in the ~~allowance for loan losses.~~future.

Information regarding ~~the Bank’s~~ChoiceOne Bank's credit exposure iswas 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,
2017 2016 2017 2016 2017 2016
Risk ratings 1 and 2 $ 12,488 $ 12,005 $ 12,691 $ 12,135 $ 8,069 $ 8,013
Risk rating 3 23,957 23,852 64,953 56,714 72,370 59,343
Risk rating 4 8,865 7,505 23,141 25,895 39,920 39,641
Risk rating 5 373 726 484 1,267 1,530 1,867
Risk rating 6 423 526 167 77 1,527 1,898
Risk rating 7 — — — — — —
$ 46,106 $ 44,614 $ 101,436 $ 96,088 $ 123,416 $ 110,762

(Dollars in thousands)	Agricultural				Commercial and Industrial				Commercial Real Estate
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
	2022		2021		2022		2021		2022		2021
Pass	$	58,749	$	61,864	$	196,394	$	201,202	$	531,683	$	519,537
Special Mention		327		339		1,190		300		749		778
Substandard		2,542		2,616		1,245		1,266		4,820		5,569
Doubtful		0		0		85		256		0		0
	$	61,618	$	64,819	$	198,914	$	203,024	$	537,252	$	525,884

~~Corporate~~Consumer Credit Exposure - Credit Risk Profile Based On Payment Activity

(Dollars in thousands)													Consumer				Construction Real Estate				Residential Real Estate
	Consumer				Construction Real Estate				Residential Real Estate				March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
(Dollars in thousands)	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2017		2016		2017		2016		2017		2016		2022		2021		2022		2021		2022		2021
Performing	$	23,995	$	21,590	$	7,298	$	6,153	$	91,252	$	88,767	$	36,119	$	35,174	$	15,669	$	19,066	$	177,186	$	168,031
Nonperforming		—		—		—		—		132		229		0		0		0		0		0		0
Nonaccrual		16		6		—		—		439		791		32		0		0		0		616		850
	$	24,011	$	21,596	$	7,298	$	6,153	$	91,823	$	89,787	$	36,151	$	35,174	$	15,669	$	19,066	$	177,802	$	168,881

~~There were no~~The following table provides information on loans that were considered troubled debt restructurings ~~(“TDRs”~~("TDRs") that were modified during the ~~three-~~three months ended March 31, 2022 and nine-month periods ended September 30, 2017. The following schedule provides information on loans that were considered TDRs that were modified during the three- and nine-month periods ended September 30, 2016:March 31, 2021.

	Three Months Ended September 30, 2016						Nine Months Ended September 30, 2016						Three Months Ended March 31, 2022
			Pre-		Post-				Pre-		Post-				Pre-		Post-
			Modification		Modification				Modification		Modification				Modification		Modification
			Outstanding		Outstanding				Outstanding		Outstanding				Outstanding		Outstanding
(Dollars in thousands)	Number of		Recorded		Recorded		Number of		Recorded		Recorded		Number of		Recorded		Recorded
	Loans		Investment		Investment		Loans		Investment		Investment		Loans		Investment		Investment
Commercial Real estate		—	$	—	$	—		1	$	113	$	113
Residential Real Estate		—		—		—		2		156		156
Agricultural														1	$	258	$	258
Total		—	$	—	$	—		3	$	269	$	269		1	$	258	$	258

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.

	Three Months Ended March 31, 2021
			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
(Dollars in thousands)	Number of		Recorded		Recorded
	Loans		Investment		Investment
Agricultural		6	$	2,326	$	2,326
Commercial Real Estate		1		958		958
Total		7	$	3,284	$	3,284

There were no0 TDRs as of ~~September 30, 2017~~March 31, 2022 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, 2017 that~~March 31, 2022, which loans had been modified and classified as TDRs during the year prior to the default. The following schedule provides information on TDRs as of ~~September 30, 2016~~March 31,2021 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, 2016 that~~March 31, 2021, which loans had been modified and classified as TDRs during the year prior to the ~~default:~~default.

Three Months Ended

Nine Months Ended

Three Months Ended

September 30, 2016

March 31, 2021

(Dollars in thousands)

Number

Recorded

Number

Recorded

Number

Recorded

of Loans

Investment

of Loans

Investment

of Loans

Investment

Commercial real estate

—

113

Commercial and industrial

Commercial Real Estate

1,850

Total

1,902

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

Impaired loans by loan category ~~as of September 30, 2017 and 2016 were as follows:~~follow:

			Unpaid				Average		Interest					Unpaid
(Dollars in thousands)	Recorded		Principal		Related		Recorded		Income			Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Recognized			Investment		Balance		Allowance
September 30, 2017
March 31, 2022
With no related allowance recorded
Agricultural	$	424	$	455	$	—	$	288	$	—		$	314	$	428	$	-
Commercial and industrial		58		69		—		137		—			92		123		-
Consumer		—		—		—		—		—			0		0		-
Construction real estate													0		0		-
Commercial real estate		113		245		—		104		—			0		0		-
Residential real estate		136		147		—		103		—			0		0		-
Subtotal		731		916		—		632		—			406		551		-
With an allowance recorded
Agricultural		—		—		—		161		—			2,228		2,228		253
Commercial and industrial		134		134		5		195		1			264		279		116
Consumer		34		35		4		33		1			32		32		3
Construction real estate													0		0		0
Commercial real estate		823		904		54		884		26			157		157		8
Residential real estate		2,336		2,354		228		2,475		75			1,853		1,907		167
Subtotal		3,327		3,427		291		3,748		103			4,534		4,603		547

Total
Agricultural		424		455		—		449		—			2,542		2,656		253
Commercial and industrial		192		203		5		332		1			356		402		116
Consumer		34		35		4		33		1			32		32		3
Construction real estate													0		0		0
Commercial real estate		936		1,149		54		988		26			157		157		8
Residential real estate		2,472		2,501		228		2,578		75			1,853		1,907		167
Total	$	4,058	$	4,343	$	291	$	4,380	$	103		$	4,940	$	5,154	$	547

September 30, 2016
With no related allowance recorded
Agricultural	$	489	$	493	$	—	$	154	$	(1	)
Commercial and industrial		177		177		—		63		—
Consumer		5		5		—		1		—
Commercial real estate		230		351		—		1,071		33
Residential real estate		266		266		—		134		46
Subtotal		1,167		1,292		—		1,423		78
With an allowance recorded
Agricultural		45		45		4		79		16
Commercial and industrial		273		247		8		242		4
Consumer		21		21		1		22		3
Commercial real estate		1,229		1,799		167		1,426		116
Residential real estate		2,843		2,859		321		2,670		308
Subtotal		4,411		4,971		501		4,439		447

Agricultural		534		538		4		233		15
Commercial and industrial		449		424		8		305		4
Consumer		26		26		1		23		3
Commercial real estate		1,459		2,150		167		2,497		149
Residential real estate		3,110		3,125		321		2,804		354
Total	$	5,578	$	6,263	$	501	$	5,862	$	525

			Unpaid
(Dollars in thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
December 31, 2021
With no related allowance recorded
Agricultural	$	314	$	428	$	-
Commercial and industrial		0		0		-
Consumer		0		0		-
Construction real estate		0		0		-
Commercial real estate		94		94		-
Residential real estate		164		172		-
Subtotal		572		694		-
With an allowance recorded
Agricultural		2,302		2,302		251
Commercial and industrial		339		363		95
Consumer		14		15		2
Construction real estate		0		0		0
Commercial real estate		179		179		9
Residential real estate		2,027		2,084		146
Subtotal		4,861		4,943		503
Total
Agricultural		2,616		2,730		251
Commercial and industrial		339		363		95
Consumer		14		15		2
Construction real estate		0		0		0
Commercial real estate		273		273		9
Residential real estate		2,191		2,256		146
Total	$	5,433	$	5,637	$	503

The following schedule provides information regarding average balances of impaired loans and interest recognized on impaired loans for the three months ended March 31, 2022 and March 31, 2021:

	Average		Interest
(Dollars in thousands)	Recorded		Income
	Investment		Recognized
Three Months Ended March 31, 2022
With no related allowance recorded
Agricultural	$	314	$	0
Commercial and industrial		46		1
Consumer		0		0
Construction real estate		0		0
Commercial real estate		47		0
Residential real estate		82		0
Subtotal		489		1
With an allowance recorded
Agricultural		2,265		42
Commercial and industrial		301		2
Consumer		23		0
Construction real estate		0		0
Commercial real estate		168		3
Residential real estate		1,940		17
Subtotal		4,697		64
Total
Agricultural		2,579		42
Commercial and industrial		347		3
Consumer		23		0
Construction real estate		0		0
Commercial real estate		215		3
Residential real estate		2,022		17
Total	$	5,186	$	65

	Average		Interest
(Dollars in thousands)	Recorded		Income
	Investment		Recognized
Three Months Ended March 31, 2021
With no related allowance recorded
Agricultural	$	348	$	0
Commercial and industrial		1,490		0
Consumer		0		0
Construction real estate		40		0
Commercial real estate		2,238		3
Residential real estate		166		1
Subtotal		4,282		4
With an allowance recorded
Agricultural		1,413		0
Commercial and industrial		155		0
Consumer		4		0
Construction real estate		0		0
Commercial real estate		778		4
Residential real estate		2,488		17
Subtotal		4,838		21
Total
Agricultural		1,761		0
Commercial and industrial		1,645		0
Consumer		4		0
Construction real estate		40		0
Commercial real estate		3,016		7
Residential real estate		2,654		18
Total	$	9,120	$	25

An aging analysis of loans by loan category follows:

																				Loans
																Loans		Loans		Past Due								Loans
					Greater									90 Days Past		Past Due		Past Due		Greater								90 Days Past
(Dollars in thousands)	30 to 59		60 to 89		Than 90					Loans Not				Due and		30 to 59		60 to 89		Than 90				Loans Not		Total		Due and
	Days		Days		Days (1)		Total			Past Due		Total Loans		Accruing		Days (1)		Days (1)		Days (1)		Total (1)		Past Due		Loans		Accruing
September 30, 2017
March 31, 2022
Agricultural	$	—	$	—	$	83	$	83		$	46,023	$	46,106	$	—	$	0	$	0	$	0	$	0	$	61,618	$	61,618	$	0
Commercial and industrial		—		—		58		58			101,378		101,436		—		0		93		85		178		198,736		198,914		0
Consumer		132		1		11		144			23,867		24,011		—		66		0		32		98		36,053		36,151		0
Commercial real estate		—		—		113		113			123,303		123,416		—		0		0		0		0		537,252		537,252		0
Construction real estate		—		—		—		—			7,298		7,298		—		0		0		0		0		15,669		15,669		0
Residential real estate		625		24		221		870			90,953		91,823		132		2,032		28		0		2,060		175,742		177,802		0
	$	757	$	25	$	486	$	1,268		$	392,822	$	394,090	$	132	$	2,098	$	121	$	117	$	2,336	$	1,025,070	$	1,027,406	$	0

December 31, 2016
December 31, 2021
Agricultural	$	—	$	—	$	—	$	—		$	44,614	$	44,614	$	—	$	0	$	0	$	0	$	0	$	64,819	$	64,819	$	0
Commercial and industrial		—		30		245		275			95,813		96,088		—		21		0		88		109		202,915		203,024		0
Consumer		99		2		6		107	��		21,489		21,596		—		70		15		0		85		35,089		35,174		0
Commercial real estate		—		—		260		260			110,502		110,762		—		422		13		279		714		525,170		525,884		0
Construction real estate		—		—		—		—			6,153		6,153		—		1,149		1,235		0		2,384		16,682		19,066		0
Residential real estate		1,027		109		646		1,782			88,005		89,787		229		1,489		306		454		2,249		166,632		168,881		0
	$	1,126	$	141	$	1,157	$	2,424		$	366,576	$	369,000	$	229	$	3,151	$	1,569	$	821	$	5,541	$	1,011,307	$	1,016,848	$	0

~~(1)~~(1) Includes nonaccrual loans.

Nonaccrual loans by loan category follow:

(Dollars in thousands) September 30, December 31,
2017 2016
Agricultural $ 423 $ 482
Commercial and industrial 59 245
Consumer 17 6
Commercial real estate 211 458
Construction real estate — —
Residential real estate 439 792
$ 1,149 $ 1,983

(Dollars in thousands)	March 31,		December 31,
	2022		2021
Agricultural	$	314	$	313
Commercial and industrial		205		285
Consumer		32		0
Commercial real estate		0		279
Residential real estate		616		850
	$	1,167	$	1,727

The table below details the outstanding balances of the County Bank Corp. acquired loan portfolio and the acquisition fair value adjustments at acquisition date of October 1, 2019 (dollars in thousands):

	*Acquired*			*Acquired*			*Acquired*
	*Impaired*			*Non-impaired*			*Total*
Loans acquired - contractual payments	$	7,729		$	387,394		$	395,123
Nonaccretable difference		(2,928	)		0			(2,928	)
Expected cash flows		4,801			387,394			392,195
Accretable yield		(185	)		(1,894	)		(2,079	)
Carrying balance at acquisition date	$	4,616		$	385,500		$	390,116

The table below presents a roll forward of the accretable yield on the County Bank Corp. acquired loan portfolio for the years ended December 31, 2019, December 31, 2020, and December 31, 2021 and the three months ended March 31, 2022 (dollars in thousands):

(Dollars in thousands)	*Acquired*			*Acquired*			*Acquired*
	*Impaired*			*Non-impaired*			*Total*
Balance, January 1, 2019	$	0		$	0		$	0
Merger with County Bank Corp on October 1, 2019		185			1,894			2,079
Accretion October 1, 2019 through December 31, 2019		0			(75	)		(75	)
Balance January 1, 2020		185			1,819			2,004
Accretion January 1, 2020 through December 31, 2020		(50	)		(295	)		(345	)
Balance January 1, 2021		135			1,524			1,659
Accretion January 1, 2021 through December 31, 2021		(247	)		(95	)		(342	)
Transfer from non-accretable to accretable yield		400			0			400
Balance January 1, 2022		288			1,429			1,717
Transfer from non-accretable to accretable yield		400			0			400
Accretion January 1, 2022 through March 31, 2022		(102	)		(151	)		(253	)
Balance, March 31, 2022	$	586		$	1,278		$	1,864

The table below details the outstanding balances of the Community Shores Bank Corporation acquired loan portfolio and the acquisition fair value adjustments at acquisition date of July 1, 2020 (dollars in thousands):

	*Acquired*			*Acquired*			*Acquired*
	*Impaired*			*Non-impaired*			*Total*
Loans acquired - contractual payments	$	20,491		$	158,495		$	178,986
Nonaccretable difference		(2,719	)		0			(2,719	)
Expected cash flows		17,772			158,495			176,267
Accretable yield		(869	)		(596	)		(1,465	)
Carrying balance at acquisition date	$	16,903		$	157,899		$	174,802

The table below presents a roll forward of the accretable yield on Community Shores Bank Corporation acquired loan portfolio for the years ended December 31, 2020 and December 31, 2021 and the three months ended March 31, 2022 (dollars in thousands):

	*Acquired*			*Acquired*			*Acquired*
	*Impaired*			*Non-impaired*			*Total*
Balance January 1, 2020	$	0		$	0		$	0
Merger with Community Shores Bank Corporation on July 1, 2020		869			596			1,465
Accretion July 1, 2020 through December 31, 2020		(26	)		(141	)		(167	)
Balance, January 1, 2021		843			455			1,298
Accretion January 1, 2021 through December 31, 2021		(321	)		(258	)		(579	)
Balance January 1, 2022		522			197			719
Transfer from non-accretable to accretable yield		874			0			874
Accretion January 1, 2022 through March 31, 2022		(302	)		0			(302	)
Balance, March 31, 2022	$	1,094		$	197		$	1,291

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:

(Dollars in thousands, except per share data) Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Basic Earnings Per Share
Net income available to common shareholders $ 1,720 $ 1,683 $ 4,801 $ 4,402

Weighted average common shares outstanding 3,452,278 3,439,633 3,448,341 3,455,141

Basic earnings per share $ 0.50 $ 0.50 $ 1.39 $ 1.28

Diluted Earnings Per Share
Net income available to common shareholders $ 1,720 $ 1,683 $ 4,801 $ 4,402

Weighted average common shares outstanding 3,452,278 3,439,633 3,448,341 3,455,141
Plus dilutive stock options and restricted stock units 6,370 4,146 4,744 4,380

Weighted average common shares outstanding and potentially dilutive shares 3,458,648 3,443,780 3,453,085 3,459,520

Diluted earnings per share $ 0.50 $ 0.50 $ 1.39 $ 1.28

	Three Months Ended
(Dollars in thousands, except share data)	March 31,
	2022		2021
Basic
Net income	$	5,528	$	6,238

Weighted average common shares outstanding		7,495,464		7,801,058

Basic earnings per common shares	$	0.74	$	0.80

Diluted
Net income	$	5,528	$	6,238

Weighted average common shares outstanding		7,495,464		7,801,058
Plus dilutive stock options and restricted stock units		21,461		9,732

Weighted average common shares outstanding and potentially dilutive shares		7,516,925		7,810,790

Diluted earnings per common share	$	0.74	$	0.80

~~Note~~There were 12,000 stock options that ~~2016~~were considered anti-dilutive to earnings per share ~~amounts have been adjusted~~ for the ~~5% stock dividend paid on May~~three months ended March 31, ~~2017.~~

2022. There were ~~31,500~~0 stock options that were considered to be anti-dilutive to earnings per share for the three months ended ~~September 30, 2017 and 32,550 for~~March 31, 2021. There were 0 restricted stock units that were considered anti-dilutive to earnings per share during either the three months ended ~~September 30, 2016 with an exercise price more than the average market price which have been excluded from the calculation of diluted earnings above.~~March 31, 2022 or March 31, 2021.

~~NOTE~~ Note 5 – ~~FINANCIAL INSTRUMENTS~~Financial Instruments

Financial instruments as of the dates indicated were as follows:

(Dollars in thousands) Carrying Amount Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

September 30, 2017
Assets:
Cash and due from banks $ 12,725 $ 12,725 $ 12,725 $ — $ —
Securities available for sale 173,306 173,306 1,877 157,886 13,543
Federal Home Loan Bank and Federal Reserve Bank stock 3,567 3,567 — 3,567 —
Loans held for sale 2,378 2,451 — 2,451 —
Loans to other financial institutions 13,293 13,699 — — 13,699
Loans, net 389,874 391,408 — — 391,408

Liabilities:
Noninterest-bearing deposits 136,542 136,542 — 136,542 —
Interest-bearing deposits 389,296 388,603 — 388,603 —
Federal funds purchased 2,650 2,650 — 2,650 —
Repurchase agreements 3,794 3,794 — 3,794 —
Federal Home Loan Bank advances 30,276 30,298 — 30,298 —

December 31, 2016
Assets:
Cash and due from banks $ 14,809 $ 14,809 $ 14,809 $ — $ —
Securities available for sale 174,388 174,388 1,383 157,902 15,103
Federal Home Loan Bank and Federal Reserve Bank stock 3,567 3,567 — 3,567 —
Loans held for sale 1,974 2,044 — 2,044 —
Loans, net 364,723 365,780 — — 365,780

Liabilities:
Noninterest-bearing deposits 127,611 127,611 — 127,611 —
Interest-bearing deposits 384,775 383,879 — 383,879 —
Repurchase agreements 7,913 7,913 — 7,913 —
Federal Home Loan Bank advances 12,301 12,323 — 12,323 —

					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)
March 31, 2022
Assets
Cash and cash equivalents	$	89,976	$	89,976	$	89,976	$	0	$	0
Equity securities at fair value		8,282		8,282		6,515		0		1,767
Securities available for sale		641,048		641,048		0		641,048		0
Securities held to maturity		429,918		397,911		0		380,447		17,464
Federal Home Loan Bank and Federal
Reserve Bank stock		8,557		8,557		0		8,557		0
Loans held for sale		13,450		13,853		0		13,853		0
Loans to other financial institutions		0		0		0		0		0
Loans, net		1,019,805		1,001,696		0		0		1,001,696
Accrued interest receivable		9,382		9,382		0		9,382		0
Interest rate lock commitments		167		167		0		167		0
Mortgage loan servicing rights		4,680		5,537		0		5,537		0

Liabilities
Noninterest-bearing deposits		565,657		565,657		0		565,657		0
Interest-bearing deposits		1,579,944		1,577,909		0		1,577,909		0
Borrowings		0		0		0		0		0
Subordinated debentures		35,078		31,350		0		31,350		0
Accrued interest payable		181		181		0		181		0

December 31, 2021
Assets
Cash and cash equivalents	$	31,887	$	31,887	$	31,887	$	0	$	0
Equity securities at fair value		8,492		8,492		6,724		0		1,768
Securities available for sale		1,098,885		1,098,885		0		1,077,835		21,050
Federal Home Loan Bank and Federal
Reserve Bank stock		8,888		8,888		0		8,888		0
Loans held for sale		9,351		9,632		0		9,632		0
Loans to other financial institutions		42,632		42,632		0		42,632		0
Loans, net		1,009,160		999,393		0		0		999,393
Accrued interest receivable		8,211		8,211		0		8,211		0
Interest rate lock commitments		172		172		0		172		0
Mortgage loan servicing rights		4,666		5,522		0		5,522		0

Liabilities
Noninterest-bearing deposits		560,931		560,931		0		560,931		0
Interest-bearing deposits		1,491,363		1,491,135		0		1,491,135		0
Borrowings		50,000		50,000		0		50,000		0
Subordinated debentures		35,017		33,414		0		33,414		0
Accrued interest payable		441		441		0		441		0

The estimated fair values approximate the carrying amounts for all financial instruments except those described later in this paragraph. The methodology for determining the estimated fair value for securities available for sale is described in Note 6. The estimated fair value for loans is based on the rates charged at September 30, 2017 and December 31, 2016 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, 2017 and December 31, 2016 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~~ChoiceOne 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~~ChoiceOne 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, 2017~~March 31, 2022 or December 31, ~~2016.~~2021. Disclosures concerning assets measured at fair value are as follows:

Assets Measured at Fair Value on a Recurring Basis

	Quoted Prices
	In Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable		Balance
(Dollars in thousands)	Assets		Inputs		Inputs		at Date
	(Level 1)		(Level 2)		(Level 3)		Indicated
Equity Securities Held at Fair Value - March 31, 2022
Equity securities	$	6,515	$	0	$	1,767	$	8,282

Investment Securities, Available for Sale - March 31, 2022
U. S. Government and federal agency	$	0	$	0	$	0	$	0
U. S. Treasury notes and bonds		0		86,491		0		86,491
State and municipal		0		312,388		0		312,388
Mortgage-backed		0		226,669		0		226,669
Corporate		0		1,255		0		1,255
Asset-backed securities		0		14,245		0		14,245
Total	$	0	$	641,048	$	0	$	641,048

Equity Securities Held at Fair Value - December 31, 2021
Equity securities	$	6,724	$	0	$	1,768	$	8,492

Investment Securities, Available for Sale - December 31, 2021
U. S. Government and federal agency	$	0	$	2,008	$	0	$	2,008
U. S. Treasury notes and bonds		0		91,979		0		91,979
State and municipal		0		514,797		20,050		534,847
Mortgage-backed		0		433,115		0		433,115
Corporate		0		19,642		1,000		20,642
Asset-backed securities		0		16,294		0		16,294
Total	$	0	$	1,077,835	$	21,050	$	1,098,885

(Dollars in thousands) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance at Date Indicated

Investment Securities, Available for Sale – September 30, 2017
U.S. Treasury notes and bonds $ — $ 4,015 $ — $ 4,015
U.S. Government and federal agency — 50,653 — 50,653
State and municipal — 83,552 12,043 95,595
Mortgage-backed — 9,420 — 9,420
Corporate — 5,695 — 5,695
Foreign debt — 4,440 — 4,440
Equity securities 1,877 — 1,500 3,377
Asset backed securities — 111 — 111
Total $ 1,877 $ 157,886 $ 13,543 $ 173,306

Investment Securities, Available for Sale - December 31, 2016
U.S. Treasury notes and bonds $ — $ 4,072 $ — $ 4,072
U.S. Government and federal agency — 59,052 — 59,052
State and municipal — 75,370 13,603 88,973
Mortgage-backed — 7,789 — 7,789
Corporate — 7,041 — 7,041
Foreign debt — 4,400 — 4,400
Equity securities 1,383 — 1,500 2,883
Asset backed securities — 178 — 178
Total $ 1,383 $ 157,902 $ 15,103 $ 174,388

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

						Three Months Ended
(Dollars in thousands)						March 31,
						2022			2021
Equity Securities Held at Fair Value
Balance, January 1						$	1,768		$	1,485
Total realized and unrealized gains included in noninterest income							(1	)		(40	)
Net purchases, sales, calls, and maturities							0			500
Net transfers into Level 3							0			0
Balance, March 31						$	1,767		$	1,945

Amount of total losses for the period included in earning attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at March 31						$	(1	)	$	(40	)
	2017			2016
Investment Securities, Available for Sale
Balance, January 1	$	15,103		$	11,799	$	21,050		$	11,423
Total realized and unrealized gains included in income		—			—
Total unrealized gains (losses) included in other comprehensive income		271			131
Total unrealized gains included in other comprehensive income							0			(270	)
Net purchases, sales, calls, and maturities		(1,831	)		2,598		0			2,453
Net transfers into Level 3		—			—		0			0
Balance, September 30	$	13,543		$	14,528
Transfer to held to maturity							(21,050	)		0
Balance, March 31						$	0		$	13,606

Amount of total losses for the period included in earning attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at March 31						$	0		$	(270	)

Of the Level 3 assets that were held by the Bank at September 30, 2017, the net unrealized gain for the nine months ended September 30, 2017 was $271,000, which is recognized in other comprehensive income in the consolidated balance sheet.$3.2 million of Level 3 securities were purchased during the first nine months of 2017, $4.8 million of Level 3 securities matured or were called, and there were $204,000 in principal paydowns in the same period. Of the Level 3 assets that were held by the Bank at September 30, 2016, the net unrealized gain for the nine months ended September 30, 2016 was $131,000, which is recognized in other comprehensive income in the consolidated balance sheet.$5.1 million of Level 3 securities were purchased during the first nine months of 2016, $2.2 million of Level 3 securities matured or were called, and there were $267,000 in principal payments in the same period.

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~~Securities categorized as Level 3 assets as of March 31, 2022 primarily consist of common and preferred equity securities of community banks. As of December 31, 2021, bonds issued by local ~~municipalities. The Bank~~municipalities were classified as available for sale and were included as Level 3 securities. ChoiceOne estimates the fair value of these bonds and equity securities 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~~ChoiceOne also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets are not normally measured at fair value, but can be subject to fair value adjustments in certain circumstances, such as impairment. Disclosures concerning assets measured at fair value on a non-recurring basis are as follows:

Assets Measured at Fair Value on a Non-recurring Basis

(Dollars in thousands) Balance at Dates Indicated Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

Impaired Loans
September 30, 2017 $ 4,058 $ — $ — $ 4,058
December 31, 2016 $ 4,911 $ — $ — $ 4,911

Other Real Estate
September 30, 2017 $ 182 $ — $ — $ 182
December 31, 2016 $ 437 $ — $ — $ 437

			Quoted Prices
			In Active		Significant
			Markets for		Other		Significant
	Balances at		Identical		Observable		Unobservable
(Dollars in thousands)	Dates		Assets		Inputs		Inputs
	Indicated		(Level 1)		(Level 2)		(Level 3)
Impaired Loans
March 31, 2022	$	4,940	$	0	$	0	$	4,940
December 31, 2021	$	5,433	$	0	$	0	$	5,433

Other Real Estate
March 31, 2022	$	172	$	0	$	0	$	172
December 31, 2021	$	194	$	0	$	0	$	194

Mortgage Loan Servicing Rights
March 31, 2022	$	4,680	$	0	$	4,680	$	0
December 31, 2021	$	4,666	$	0	$	4,666	$	0

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

NOTE 7 – REVENUE FROM CONTRACTS WITH CUSTOMERS

ChoiceOne has a variety of sources of revenue, which include interest and fees from customers as well as revenue from non-customers. ASC Topic 606, Revenue from Contracts With Customers, covers certain sources of revenue that are classified within noninterest income in the Consolidated Statements of Income. Sources of revenue that are included in the scope of ASC Topic 606 include service charges and fees on deposit accounts, interchange income, investment asset management income and transaction-based revenue, and other charges and fees for customer services.

Service Charges and Fees on Deposit Accounts

Revenue includes charges and fees to provide account maintenance, overdraft services, wire transfers, funds transfer, and other deposit-related services. Account maintenance fees such as monthly service charges are recognized over the period of time that the service is provided. Transaction fees such as wire transfer charges are recognized when the service is provided to the customer.

Interchange Income

Revenue includes debit card interchange and network revenues. This revenue is earned on debit card transactions that are conducted through payment networks such as MasterCard. The revenue is recorded as services are delivered and is presented net of interchange expenses.

Investment Commission Income

Revenue includes fees from the investment management advisory services and revenue is recognized when services are rendered. Revenue also includes commissions received from the placement of brokerage transactions for purchase or sale of stocks or other investments. Commission income is recognized when the transaction has been completed.

Trust Fee Income

Revenue includes fees from the management of trust assets and from other related advisory services. Revenue is recognized when services are rendered.

Following is noninterest income separated by revenue within the scope of ASC 606 and revenue within the scope of other GAAP topics:

	Three Months Ended
	March 31,
(Dollars in thousands)	2022		2021

Service charges and fees on deposit accounts	$	1,031	$	785
Interchange income		1,157		1,135
Investment commission income		205		236
Trust fee income		178		173
Other charges and fees for customer services		148		166
Noninterest income from contracts with customers within the scope of ASC 606		2,719		2,495
Noninterest income within the scope of other GAAP topics		1,126		3,105
Total noninterest income	$	3,845	$	5,600

NOTE 78 – SUBSEQUENT EVENTS

During the first quarter of 2022, the Federal Reserve increased the federal funds rate by 25 basis points in response to published inflation rates, causing interest rates generally to sharply increase. This change in interest rates increased ChoiceOne's unrealized pre-tax loss on its available for sale securities portfolio from $3.3 million at December 31, 2021 to $42.8 million at March 31, 2022. Additionally, meeting minutes from the Federal Open Market Committee indicated that additional increases in the federal funds rate are expected in order to combat inflation in the coming quarters. As such, ChoiceOne has elected to utilize interest rate derivatives in order to better manage its interest rate risk position. On ~~October 3, 2017~~ April 21, 2022, ChoiceOne ~~Insurance Agencies Inc (“the Agency”)~~purchased five forward-starting interest rate caps with a total notional amount of $200 million and entered into ~~an agreement with Ridgetown Investments LLC (“Ridgetown”), to sell~~ a ~~portion~~$200 million forward-starting pay-fixed interest rate swap. ChoiceOne also entered into a $200 million receive-fixed interest rate swap, which, in the current environment, offsets the cost of the ~~investment book of business previously managed by the Agency. Per the agreement, Ridgetown agreed to pay $908,000~~rising rate protection. The five forward-starting interest rate caps are tied to the ~~Agency for future revenue generated by the book~~Secured Overnight Financing Rate ("SOFR") with a strike price of ~~business. This transaction would result~~2.68%, and are structured as a two-year forward eight year term. The forward-starting pay-fixed interest rate swap is also structured with a two-year forward eight year term, and ChoiceOne will pay a coupon rate of 2.75% while receiving SOFR. The receive-fixed interest rate swap has a two year term with an immediate start date and ChoiceOne is receiving a fixed coupon of 2.41% while paying SOFR. These strategies create accounting symmetry between available-for-sale securities and other comprehensive income (equity), thus protecting tangible capital from further increases in ~~a $908,000 gain which will be reported~~interest rates. These three strategies, in the ~~fourth quarter of 2017.~~aggregate, are expected to be modestly accretive to net income in 2022 and better position ChoiceOne Bank should rates continue to rise.

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”) ~~and~~, its wholly-owned subsidiary ChoiceOne Bank, ~~(the “Bank”),~~ and ~~the~~ChoiceOne 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.~~ChoiceOne. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “may,” “could,” “look forward,” “continue”, “future”, 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, other real estate owned, and the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary and the amount of any impairment) and management’s assumptions ~~concerning pension and other postretirement benefit plans involve judgments~~ that are inherently forward-looking. Examples of forward-looking statements also include, but are not limited to, statements related to risks and uncertainties related to, and the impact of, the COVID-19 pandemic on the businesses, financial condition and results of operations of ChoiceOne and its customers and statements regarding the outlook and expectations of ChoiceOne and its customers. All of the information concerning interest rate sensitivity is forward-looking. All statements with references to future time periods are forward-looking. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“risk factors”) that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed, implied or forecasted in such forward-looking statements. Furthermore, ChoiceOne undertakes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.

~~Risk~~Additional risk factors include, but are not limited to, the risk factors discussed in Item 1A of ChoiceOne’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021 and in Part II, Item 1A of this Quarterly Report on Form 10-Q. 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

~~RESULTS OF OPERATIONS~~

~~Summary~~

Net income for the ~~third~~first quarter of ~~2017~~2022 was ~~$1,720,000,~~$5,528,000, which represented ~~an increase~~a decline of ~~$37,000~~$710,000 or 11% compared to the first quarter of 2021. Basic and diluted earnings per common share were $0.74 for the first quarter of 2022 compared to $0.80 for the first quarter of the prior year. The decline in net income in the first quarter of 2022 compared to the same period in ~~2016.~~the prior year resulted in part from a decline of refinancing activity within ChoiceOne's mortgage portfolio due to a rise in mortgage rates since the first quarter of the prior year. Net income ~~for the first nine months~~also declined as noninterest expense increased related to salaries and wages of ~~2017 was $4,801,000, which represented~~new commercial loan production staff and wealth management staff. These factors were offset by an increase of ~~$399,000 or 9% over~~$1.8 million in interest income as the balance of both core loans and securities continued to grow. Core loans (defined as loans excluding loans held for sale, loans to other financial institutions, and Paycheck Protection Program (“PPP”) loans) increased $121.3 million from March 31, 2021 to March 31, 2022.

The return on average assets and return on average shareholders’ equity were 0.93% and 10.72%, respectively, for the first quarter of 2022, compared to 1.25% and 11.13%, respectively, for the same period in ~~2016. Growth~~2021.

Paycheck Protection Program ("PPP")

ChoiceOne processed over $126 million in ~~net interest income~~PPP loans in 2020, acquired an additional $37 million in PPP loans in the merger with Community Shores, and originated $89.1 million in PPP loans in 2021. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. PPP loans carry a fixed rate of 1.00% and a ~~relatively small reduction~~term of two years (loans made before June 5, 2020) or five years (loans made on or after June 5, 2020), if not forgiven in ~~noninterest expense~~whole or in part. Payments are deferred until either the date on which the Small Business Administration ("SBA") remits the amount of forgiveness proceeds to the lender or the date that is ten months after the last day of the covered period if the borrower does not apply for forgiveness within that ten-month period. The loans are 100% guaranteed by the SBA. The SBA pays the originating bank a processing fee ranging from 1% to 5%, based on the size of the loan. Upon SBA forgiveness, unrecognized fees are recognized into interest income. During the three months ended March 31, 2022, $24.7 million of PPP loans were ~~partially offset by a higher provision for loan losses~~forgiven resulting in $869,000 of fee income. $8.5 million in PPP loans and ~~lower noninterest~~$351,000 in deferred PPP fee income remains outstanding as of March 31, 2022. Management expects the remaining PPP loans to be forgiven in the second quarter of 2022.

Dividends

Cash dividends of $1,872,000 or $0.25 per share were declared in the first quarter of 2022, compared to $1,716,000 or $0.22 per share declared in the first quarter of 2021. The cash dividend payout percentage was 33.9% for the first ~~nine months~~quarter of ~~2017 than~~2022, compared to 27.5% in the same period in the prior year. Basic and diluted earnings per common share were $0.50 for the third quarter and $1.39 for the first nine months of 2017, compared to adjusted amounts of $0.50 and $1.28, respectively, for the same periods in 2016. Earnings per share amounts for the prior year have been adjusted for the 5% stock dividend paid on May 31, 2017. The return on average assets (“ROAA”) and return on average shareholders’ equity (“ROAE”) percentages were 1.02% and 8.59%, respectively, for the first nine months of 2017, compared to 1.01% and 8.15%, respectively, for the same period in 2016. ROAA and ROAE percentages are non-GAAP financial measures management believes to be useful to investors.

~~Dividends~~

Cash dividends of $585,000 or $0.17 per share were declared in the third quarter of 2017, compared to $557,000 or an adjusted $0.16 per share in the third quarter of 2016. The cash dividends declared in the first nine months of 2017 were $1,738,000 or an adjusted $0.50 per share, compared to $1,674,000 or an adjusted $0.49 per share declared in the same period in 2016. Dividends per share amounts for the prior year have been adjusted for the 5% stock dividend paid on May 31, 2017.

Interest Income and Expense

Tables 1 and 2 on the following pages provide information regarding interest income and expense for the ~~nine-month periods~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016, respectively.~~2021. 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.

Table 1 – Average Balances and Tax-Equivalent Interest Rates

Nine Months Ended September 30,
2017 2016
(Dollars in thousands) Average
Balance Interest Rate Average
Balance Interest Rate
Assets:
Loans (1) $ 382,478 13,165 4.59 % $ 355,281 12,301 4.62 %
Taxable securities (2) (3) 126,288 1,935 2.04 117,635 1,731 1.96
Nontaxable securities (1) (2) 55,229 1,613 3.89 53,685 1,643 4.08
Other 6,345 50 1.06 3,915 14 0.18
Interest-earning assets 570,340 16,763 3.92 530,516 15,689 3.94
Noninterest-earning assets 56,682 53,913
Total assets $ 627,022 $ 584,429

Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits $ 207,642 275 0.18 % $ 193,675 190 0.13 %
Savings deposits 76,369 11 0.02 72,619 16 0.03
Certificates of deposit 106,695 574 0.72 86,707 393 0.60
Advances from Federal Home Loan Bank 19,963 169 1.13 25,127 119 0.63
Other 5,453 10 0.24 8,698 7 0.11
Interest-bearing liabilities 416,122 1,039 0.33 386,826 725 0.25
Noninterest-bearing demand deposits 133,636 122,641
Other noninterest-bearing liabilities 2,775 2,945
Total liabilities 552,533 512,412
Shareholders’ equity 74,489 72,017
Total liabilities and shareholders’ equity $ 627,022 $ 584,429

Net interest income (tax-equivalent basis) - interest spread (Non-GAAP) 15,724 3.59 % 14,964 3.69 %
Tax-equivalent adjustment (1) (553 ) (563 )
Net interest income (GAAP) $ 15,171 $ 14,401
Net interest income as a percentage of earning assets (tax-equivalent basis) (Non-GAAP) 3.68 % 3.76 %

	Three Months Ended March 31,
	2022								2021
(Dollars in thousands)	Average								Average
	Balance		Interest			Rate			Balance		Interest			Rate
Assets:
Loans (1)(3)(4)(5)	$	1,037,646	$	12,304			4.74	%	$	1,080,181	$	12,687			4.70	%
Taxable securities (2)		795,888		3,507			1.76			438,575		1,856			1.69
Nontaxable securities (1)		334,793		2,097			2.50			201,228		1,390			2.76
Other		36,460		14			0.15			84,822		20			0.09
Interest-earning assets		2,204,787		17,921			3.25			1,804,806		15,953			3.54
Noninterest-earning assets		171,077								184,954
Total assets	$	2,375,864							$	1,989,760

Liabilities and Shareholders' Equity:
Interest-bearing demand deposits	$	928,437	$	435			0.19	%	$	715,868	$	429			0.24	%
Savings deposits		440,873		146			0.13			355,395		114			0.13
Certificates of deposit		179,375		202			0.45			195,093		337			0.69
Borrowings		10,239		6			0.22			8,462		35			1.70
Subordinated debentures		35,342		364			4.12			3,099		52			6.65
Interest-bearing liabilities		1,594,266		1,153			0.29			1,277,917		967			0.30
Demand deposits		553,267								479,649
Other noninterest-bearing liabilities		22,051								7,937
Total liabilities		2,169,584								1,765,503
Shareholders' equity		206,280								224,257
Total liabilities and shareholders' equity	$	2,375,864							$	1,989,760

Net interest income (tax-equivalent basis) (Non-GAAP) (1)			$	16,768							$	14,986

Net interest margin (tax-equivalent basis) (Non-GAAP) (1)							3.04	%							3.32	%

Reconciliation to Reported Net Interest Income
Net interest income (tax-equivalent basis) (Non-GAAP) (1)			$	16,768							$	14,986
Adjustment for taxable equivalent interest				(447	)							(297	)
Net interest income (GAAP)			$	16,321							$	14,689
Net interest margin (GAAP)							2.96	%							3.26	%

	~~(1)~~
	(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~~21%. The presentation of these measures on a tax-equivalent basis is not in accordance with GAAP, but is customary in the ~~periods presented.~~banking industry. These non-GAAP measures ensure comparability with respect to both taxable and tax-exempt loans and securities.
	(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.
	(3)	Loans include both loans to other financial institutions and loans held for sale.
	(4)	Non-accruing loan and PPP loan balances are included in the balances of average loans. Non-accruing loan average balances were $1.4 million and $5.9 million in the first quarter of 2022 and 2021, respectively. PPP loan average balances were $22.8 million and $137.7 million in the first quarter of 2022 and 2021, respectively.
	(5)	Interest on loans included net origination fees, accretion income, and PPP fees. Accretion income was $818,000 and $351,000 in the first quarter of 2022 and 2021, respectively. PPP fees were approximately $869,000 and $1.4 million in the first quarter of 2022 and 2021, respectively.

Table 2 – Changes in Tax-Equivalent Net Interest Income

	Nine Months Ended September 30,									Three Months Ended March 31,
(Dollars in thousands)	2017 Over 2016									2022 Over 2021
	Total			Volume			Rate			Total			Volume			Rate
Increase (decrease) in interest income (1)
Loans (2)	$	864		$	981		$	(117	)	$	(383	)	$	(1,063	)	$	680
Taxable securities		204			131			73			1,651			1,568			83
Nontaxable securities (2)		(30	)		66			(96	)		707			1,521			(814	)
Other		36			12			24			(6	)		(50	)		43
Net change in tax-equivalent interest income		1,074			1,190			(116	)
Net change in interest income											1,969			1,976			(8	)

Increase (decrease) in interest expense (1)
Interest-bearing demand deposits		85			15			70			6			436			(430	)
Savings deposits		(5	)		1			(6	)		32			30			2
Certificates of deposit		181			100			81			(135	)		(25	)		(110	)
Advances from Federal Home Loan Bank		50			(41	)		91
Other		3			(5	)		8
Borrowings											(30	)		43			(73	)
Subordinated debentures											312			452			(139	)
Net change in interest expense		314			69			245			185			936			(750	)
Net change in tax-equivalent net interest income	$	760		$	1,121		$	(361	)	$	1,784		$	1,040		$	742

	(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.~~21%.

Net Interest Income

The presentation of net interest income on a tax-equivalent basis is not in accordance with U.S. 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 $553,000 and $563,000 for the nine months ended September 30, 2017 and 2016, respectively. These adjustments were computed using a 34% federal income tax rate.

~~As shown in Tables 1 and 2, tax-equivalent~~Tax-equivalent net interest income increased ~~$760,000~~$1.8 million in the first ~~nine~~three months of ~~2017~~2022 compared to the same period in ~~2016.~~2021. This was partially due to a $490.9 million increase in the securities portfolio balance compared to 2021. Net interest margin on a tax-equivalent basis declined by 28 basis points to 3.04% in the first quarter of 2022 from 3.32% in the same period of 2021. The ~~effect~~decline was due to lower PPP fees and a higher percentage of ~~growth~~securities to total assets.

The average balance of loans decreased $42.5 million in the first quarter of 2022 compared to the same period in 2021. The decline in average ~~interest-earning assets, partially~~loan balance is due to average PPP loans declining $116.9 million from March 31, 2021 to March 31, 2022. This decline in balance was offset by an increase in average ~~interest-bearing liabilities, caused tax-equivalent net interest income~~core loans (defined as loans excluding PPP loans, loans to ~~increase $1.1~~other financial institutions, and loans held for sale) of $86.7 million ~~in the first nine months of 2017 compared~~from March 31, 2021 to ~~the same period in the prior year.~~March 31, 2022. The ~~net interest spread was reduced 10 basis points from 3.69% in the first nine months of 2016, to 3.59% in the first nine months in 2017, which caused a~~ decrease in ~~net interest income of $361,000.~~

The decline in the interest spread was due to a 2 basis point decrease in the average rate earned on interest-earning assets in the first nine months of 2017 compared to the same nine months in 2016 plus the effect of an 8 basis point increase in the average rate paid on interest-bearing liabilities. The reduction in the average rate earned on interest-earning assets was caused by relatively low general market rates on newPPP loan ~~originations~~balance and securities purchased in 2016 and the first nine months of 2017. Interest rates on loans are also being impacted by rate pressure from competing financial institutions in the markets in which ChoiceOne operates. The higher rate paid on interest-bearing liabilities resulted from growth in brokered certificates of deposit, which increased the overall average rate on this deposit type, as well as increases in short-term interest rates in 2016 and the first nine months of 2017 which increased the average rate paid on advances from the Federal Home Loan Bank.

The average balance of loans increased $27.2 million in the first nine months of 2017 compared to the same period in 2016. Average commercial and industrial and commercial real estate loans were $22.1 million higher, while average consumer and residential mortgage loans grew $2.2 million and $2.9 million, respectively, in the first nine months of 2017. The increase in the average loans balance was offset by a 3 basis point decrease in the average rate earned. The combination of the loan growth and interest rate declinefees caused tax-equivalent interest income from loans to ~~increase $864,000~~decrease $383,000 in the first ~~nine months~~quarter of ~~2017~~2022 compared to the same period in the prior year. The average balance of total securities ~~grew $10.2~~increased $490.9 million in the first ~~nine months~~quarter of ~~2017~~2022 compared to the same period in ~~2016. Additional~~2021. The securities ~~were purchased~~portfolio has grown as ChoiceOne has deployed excess deposit dollars into securities with the intent to transition to loans as good credits become available. The effect of the average balance growth, partially offset by a combined 5 basis point reduction in ~~2016 and~~the average rate earned on securities, caused tax-equivalent securities income to increase $2.4 million in the first ~~nine months~~quarter of 2017 to provide added liquidity and to provide earning asset growth. Growth in the average balance of securities, offset by a small decline in the overall average interest rate earned, caused interest income on securities to increase $174,000 in the first nine months of 20172022 compared to the same period in ~~2016.~~2021.

~~The~~

Growth of $298.0 million in the average balance of interest-bearing demand deposits ~~increased $14.0 million~~and savings deposits, partially offset by a combined 3 basis point decrease in the ~~first nine months of 2017 compared to the same period in 2016. This growth, plus the effect of a 5 basis point increase in the~~average rate paid, caused interest expense to ~~grow $85,000~~be $38,000 higher in the first three ~~quarters~~months of ~~2017~~2022 compared to the ~~same period in~~first three months of the prior year. The average balance of certificates of deposit ~~increased $20.0~~decreased $15.7 million in the first ~~nine~~three months of ~~2017~~2022 compared to the same period in ~~2016.~~2021. The decreased balance and a reduction of 24 basis points in the average rate paid on certificates caused interest expense to decrease $135,000 in the first three months of 2022 compared to the same period in 2021. In September 2021, ChoiceOne completed a private placement of $32.5 million in aggregate principal amount of 3.25% fixed-to-floating rate subordinated notes due 2031. In addition, ChoiceOne holds certain subordinated debentures issued in connection with a trust preferred securities offering that were obtained as part of the merger with Community Shores. These increased the average balance of ~~brokered certificates of deposit was $26.4~~subordinated debentures by $32.2 million ~~higher~~ in the first ~~nine~~three months of ~~2017 and the balance of local certificates of deposit was $6.4 million lower in the first nine months of 2017~~2022 compared to the same period in the prior ~~year. The impact of growth in the average certificates balance~~year and ~~a 12 basis point increase in the average rate paid~~ caused interest expense to ~~grow $181,000~~increase by $312,000.

Provision and Allowance for Loan Losses

The provision for loan losses was $0 in the first ~~three quarters~~quarter of ~~2017~~2022, compared to ~~the same period~~$250,000 in 2016. The effect of a $5.2 million decline in the average balance of Federal Home Loan Bank advances was more than offset by a 50 basis point increase in the average rate paid which caused growth of $50,000 in interest expense in the first nine months of 2017 compared to the same period in the prior year.

~~Provision and Allowance for Loan Losses~~

~~Total loans increased $25.1 million~~ No provision in the first ~~nine months~~quarter of ~~2017, while~~2022 was deemed prudent based on our assessment of the probable estimated losses inherent in the loan portfolio. Our methodology for measuring the appropriate level of allowance for loan losses ~~decreased $61,000 during the same period. A~~and related provision for loan losses involves specific allocations for loans considered impaired, and general allocations for homogeneous loans based on historical loss experience.

Loans classified as impaired loans declined by $494,000 during the three months ended March 31, 2022. The specific allowance for loan losses for impaired loans increased by $44,000 during the three months ended March 31, 2022 as the loans being evaluated had a higher risk of ~~$95,000 was recorded~~loss based on management's judgement than impaired loans at December 31, 2021.

The determination of our loss factors is based, in part, upon our actual loss history adjusted for significant qualitative factors that, in management's judgment, affect the ~~third~~collectability of the portfolio as of the analysis date. ChoiceOne uses a rolling 20 quarter ~~and $120,000~~actual net charge-off history as the base for the ~~first nine months of 2017, compared to $0 for the same periods in 2016.~~ computation.

Nonperforming loans were ~~$3.9~~$4.7 million as of ~~September 30, 2017,~~March 31, 2022, compared to ~~$4.6 million as of June 30, 2017 and $5.1~~$5.5 million as of December 31, ~~2016. The decrease in nonperforming loans in the third quarter was due to lower balances of nonaccrual loans and loans past due 90 days or more and still accruing.~~2021. The allowance for loan losses was ~~1.07%~~0.74% of total loans at ~~September 30, 2017,~~March 31, 2022, compared to ~~1.08% at June 30, 2017, and 1.16%~~0.76% at December 31, ~~2016.~~2021. Loans acquired in the mergers with County and Community Shores were recorded at fair value and as a result do not have an allowance for loan losses allocated to them unless credit deteriorates subsequent to acquisition. ChoiceOne has $4.5 million in credit mark remaining on loans acquired in the mergers. If the credit mark associated with the loans acquired in the mergers were added to the allowance for loan losses, the total allowance for loan losses would have represented 1.18% of total loans at March 31, 2022.

Charge-offs and recoveries for respective loan categories for the ~~nine~~three months ended ~~September 30~~March 31, 2022 and 2021 were as follows:

(Dollars in thousands)	2017				2016				2022				2021
	Charge-offs		Recoveries		Charge-offs		Recoveries		Charge-offs		Recoveries		Charge-offs		Recoveries
Agricultural	$	—	$	—	$	—	$	—	$	-	$	-	$	-	$	-
Commercial and industrial		374		4		33		31		31		2		74		9
Consumer		189		107		136		119		112		52		71		79
Commercial real estate		—		226		—		35		-		1		48		-
Construction real estate		—		40		—		—
Residential real estate		44		49		94		160		-		1		-		2
	$	607	$	426	$	263	$	345	$	143	$	56	$	193	$	90

Net ~~recoveries were $23,000 in the third quarter and net~~ charge-offs were ~~$181,000~~$87,000 in the first ~~nine months~~quarter of ~~2017,~~2022, compared to net charge-offs of ~~$20,000 and net recoveries of $82,000 in~~$103,000 during the same ~~periods~~period in ~~the prior year.~~2021. Net charge-offs on an annualized basis as a percentage of average loans were ~~0.06%~~0.03% in the first ~~nine~~three months of ~~2017,~~2022 compared to annualized net ~~recoveries~~charge-offs of ~~0.03% for~~0.04% of average loans in the same period in the prior year. Management is aware that the economic climate in Michigan will continue to affect business and individual borrowers. Management believes that the COVID-19 pandemic will continue to have an impact in 2022 and, accordingly, has maintained a qualitative allocation related to the COVID-19 pandemic in evaluating its allowance for loan losses. Management has worked and intends to continue to work with delinquent borrowers in an attempt to lessen the ~~negative~~ impact of the COVID-19 pandemic on ChoiceOne.

ChoiceOne has allocated approximately $545,000 of its allowance for loan losses to ~~ChoiceOne. As~~borrowers falling into industry classification codes that management believes to be highly or moderately affected by the pandemic, as follows:

Highly Affected	Moderately Affected
Accommodation	Ambulatory Health Care Services
Amusement, Gambling, and Recreation Industries	Educational Services
Food Services and Drinking Places	Merchant Wholesalers, Durable Goods
Performing Arts, Spectator Sports, and Related Industries	Merchant Wholesalers, Nondurable Goods
Rental and Leasing Services	Miscellaneous Store Retailers
Scenic and Sightseeing Transportation	Motion Picture and Sound Recording Industries
Transit and Ground Passenger Transportation	Real Estate

Loans highly affected and moderately affected based on their commercial industry category have been allocated an additional 10 basis points and 5 basis points, respectively. ChoiceOne has also allocated 5 basis points to all retail loan categories. It is noted that this allowance amount is in addition to the regularly calculated allowance based on risk rating and qualitative factors. These allocations have continued to decline, as ChoiceOne has seen improvements in customer, industry, and economic conditions related to the effects of the pandemic. ChoiceOne will continue to monitor concentrations as part of its analysis on an ongoing basis. Management will continue to monitor charge-offs, changes in the level of nonperforming loans, ~~and~~ changes within the composition of the loan portfolio ~~occur in~~and the ~~remainder~~impact of ~~2017,~~the COVID-19 pandemic, and it will adjust the provision and allowance for loan losses ~~will be reviewed by the Bank’s management and adjusted~~ as determined to be necessary.

Noninterest Income

Total noninterest income ~~decreased $82,000 in the third quarter and $302,000~~declined $1.8 million in the first ~~nine months~~quarter of ~~2017 compared to the same periods in 2016. The decline was caused by lower gains on sales of loans in the first nine months of 2017 when~~2022 compared to the same period in ~~2016. The reduction in mortgage~~2021. Total noninterest income ~~was primarily due to higher interest rates~~ in the ~~current year and a relatively low inventory~~first quarter of ~~homes available for sale in the Bank’s primary market areas. Gains~~2021 was bolstered by heightened levels of refinancing activity within ChoiceOne's mortgage portfolio, with gains on sales of ~~securities were also lower~~loans $1.3 million larger than in the first ~~three quarters~~quarter of ~~2017~~2022. Customer service charges increased $269,000 compared to the same period in the prior year. Prior year ~~as a result~~service charges were depressed by stay at home orders during the COVID-19 pandemic. The market value of ~~higher interest rates in~~equity securities declined during the current ~~year which impacted ChoiceOne’s ability~~quarter compared to ~~recognize gains.~~the first quarter of 2021 consistent with general market conditions. Equity securities include local community bank stocks and Community Reinvestment Act bond mutual funds.

Noninterest Expense

Total noninterest expense ~~increased $122,000 in the third quarter and decreased $128,000~~declined $68,000 in the first ~~nine months~~quarter of ~~2017~~2022 compared to the fourth quarter of 2021 and increased $1.2 million compared to the first quarter of 2021. The increase since the first quarter of 2021 is related to an increase in salaries and wages due to new commercial loan production staff and wealth management staff. Data processing and other expenses have also increased in the first quarter of 2022 compared to the same ~~periods in 2016. An increase in salaries and benefits expense in both the third~~ quarter and first nine months of 2017 compared to the same periods in 2016 resulted from higher salaries from raises and personnel additions and higher bonus accruals. Occupancy and equipment expense grew in the third quarter and first three quarters of 2017 compared to the same periods in the prior year ~~due~~as ChoiceOne looks to ~~higher building~~improve its efficiency through automation and ~~equipment depreciation. The growth in salaries and benefits and occupancy and equipment expenses was partially offset by reductions~~use of $112,000 and $336,000 in intangible amortization expense in the third quarter and the first nine months of 2017, respectively, compared to the same periods in the prior year. The Bank’s intangible assets were completely amortized in the fourth quarter of 2016.digital tools.

Income Tax Expense

Income tax expense was ~~$1,668,000~~$948,000 in the first ~~nine months~~quarter of ~~2017~~2022 compared to ~~$1,591,000~~$1,272,000 for the same period in ~~2016.~~2021. The decrease was due to a higher level of income before income tax in 2021. The effective tax rate was ~~25.8%~~14.6% for the first ~~nine months~~quarter of ~~2017 and 26.5%~~2022 compared to 16.9% for the ~~same period in 2016. Income tax expense for the third~~first quarter of ~~2017 was slightly lower than the same period~~2021. The decline in the ~~prior year due~~effective tax rate resulted from increased interest income from tax-exempt securities in 2022 compared to ~~a larger impact from nontaxable income in the current year and slightly higher tax credits.~~2021.

FINANCIAL CONDITION

~~FINANCIAL CONDITION~~Securities

~~Securities~~

~~The~~In the last two years ChoiceOne has grown its securities portfolio substantially. Total available for sale securities on December 31, 2020, amounted to $577.7 million and grew steadily to an available for sale balance on December 31, 2021, of $1.1 billion. Many of the securities making up this balance include local municipals and other securities ChoiceOne has no intent to sell prior to maturity. During the three months ended March 31, 2022, ChoiceOne elected to move $428.4 million of the portfolio ~~decreased $7.1~~into a held to maturity status. Management believes the $641.0 million in ~~the third quarter and declined $1.1 million in the first nine months~~available for sale securities at March 31, 2022 to be sufficient for any future liquidity needs.

There were no sales of ~~2017. The decrease in the~~ securities ~~portfolio helped to fund ChoiceOne’s loan growth~~ in the first three ~~quarters of 2017. Various securities totaling $34.0 million were purchased in the first nine~~ months of ~~2017 to replace maturities, principal repayments, and calls within the securities portfolio. Approximately $12.4~~2022; however, $3.8 million of securities were called or matured ~~in the first nine months of 2017.~~during that same period. Principal repayments on securities totaled ~~$1.8~~$10.4 million in the first ~~nine~~three months of ~~2017. Approximately $22.5~~2022.

Loans

Core loans, which exclude PPP loans, held for sale loans, and loans to other financial institutions, grew organically by $121.3 million from March 31, 2021 to March 31, 2022. Additions to our commercial lending staff in 2021 and investments in the automation of our commercial loan process have helped drive our pipeline of commercial loans and corresponding growth. Loans to other financial institutions decreased $7.3 million from March 31, 2021 to March 31, 2022. Loans to other financial institutions is comprised of a warehouse line of credit to facilitate mortgage loan originations and fluctuates with the national mortgage market. In the first quarter of 2022, $24.7 million of ~~securities~~PPP loans were ~~sold~~forgiven resulting in $869,000 of fee income. $8.5 million in PPP loans and $351,000 in deferred PPP fee income remains outstanding as of March 31, 2022. During the first quarter of 2022, ChoiceOne recorded accretion income in the ~~first nine months~~amount of ~~2017 for a net gain~~$818,000, while the remaining credit mark on acquired loans from the recent mergers with County Bank Corp. and Community Shores totaled $4.5 million as of ~~$177,000.~~March 31, 2022.

~~Loans~~

~~Loans increased $14.6 million in the third quarter of 2017 and $25.1 million in the first nine months of 2017. Commercial real estate~~Excluding PPP loans, grew $6.5 million, agricultural loans grew $4.3 million, residential construction loans grew $1.8 million, residential real estate loans grew $1.4 million, and consumer loans grew $0.6 million in the most recent quarter whileChoiceOne saw an increase to commercial and industrial loans ~~were unchanged.~~of $20.0 million and commercial real estate loans of $10.3 million during the first three months of 2022. Excluding PPP loans, ChoiceOne saw declines of $3.3 million in agricultural loans and $3.4 million in construction real estate loans in the first three months of 2022. The ~~environment for loan originations~~other changes resulted from normal fluctuations in ~~ChoiceOne’s market area has become increasingly competitive.~~borrower activity.

Asset Quality

Information regarding impaired loans can be found in Note 3 to the consolidated financial statements included in this report. The total balance of loans classified as impaired was ~~$4.1~~$4.9 million ~~as of September 30, 2017,~~at March 31, 2022, compared to ~~$4.4 million as of June 30, 2017 and $4.9~~$5.4 million as of December 31, ~~2016.~~2021. The ~~impaired loans balance was steady or declined in all loan categories~~change in the ~~third quarter except for commercial~~first three months of 2022 was primarily comprised of a decrease of $338,000 in impaired residential real estate ~~loans which were up slightly.~~loans.

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.~~restructurings ("TDRs").

The balances of these nonperforming loans were as follows:

(Dollars in thousands) September 30,
2017 December 31,
2016
Loans accounted for on a nonaccrual basis $ 1,149 $ 1,983
Accruing loans contractually past due 90 days or more as to principal or interest payments 132 229
Loans considered troubled debt restructurings 2,637 2,853
Total $ 3,918 $ 5,065

(Dollars in thousands)	March 31,		December 31,
	2022		2021
Loans accounted for on a nonaccrual basis	$	1,167	$	1,727
Accruing loans which are contractually past due 90 days or more as to principal or interest payments		-		-
Loans defined as "troubled debt restructurings " which are not included above		3,513		3,816
Total	$	4,680	$	5,543

~~At September 30, 2017,~~The reduction in the balance of nonaccrual loans ~~included $423,000~~ in ~~agricultural~~the first three months of 2022 was primarily due to loans ~~$59,000 in commercial and industrial~~that were paid off. It is also noted that 90% of loans ~~$17,000 in consumer loans, $211,000 in commercial real estate loans, and $439,000 in residential real estate loans. At December~~considered TDRs were performing according to their restructured terms as of March 31, 2016, nonaccrual loans included $482,000 in agricultural loans, $245,000 in commercial and industrial loans, $6,000 in consumer loans, $458,000 in commercial real estate loans, and $792,000 in residential real estate loans.2022. Management believes the allowance for loan losses allocated to its nonperforming loans is sufficient at ~~September 30, 2017.~~March 31, 2022.

Goodwill

Goodwill is not amortized but is evaluated annually for impairment and on an interim basis if events or changes in circumstances indicate that goodwill might be impaired. The goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and an impairment charge would be recognized for any amount by which the carrying amount exceeds the reporting unit's fair value. Accounting pronouncements allow a company to first perform a qualitative assessment for goodwill prior to a quantitative assessment (Step 1 assessment). If the results of the qualitative assessment indicate that it is more likely than not that goodwill is impaired, then a quantitative assessment must be performed. If not, there is no further assessment required. ChoiceOne acquired Valley Ridge Financial Corp. in 2006, County in 2019, and Community Shores in 2020, which resulted in the recognition of goodwill of $13.7 million, $38.9 million and $7.3 million, respectively.

Management performed its annual qualitative assessment of goodwill as of June 30, 2021. In evaluating whether it is more likely than not that the fair value of ChoiceOne's operations was less than the carrying amount, management assessed the relevant events and circumstances such as the ones noted in ASC 350-20-35-3c. The analysis consisted of a review of ChoiceOne’s current and expected future financial performance, the potential impact of the COVID-19 pandemic on the ability of ChoiceOne’s borrowers to comply with loan terms, and the impact that both short-term and long-term interest rates have had and may continue to have on net interest margin and mortgage sales activity. The share price and book value of ChoiceOne’s stock were also compared to the prior year. Management also compared average deal values for recent closed bank transactions to ChoiceOne transactions. Despite ChoiceOne's market capitalization declining slightly from November 30, 2020 to June 30, 2021, ChoiceOne's financial performance remained positive. In assessing the totality of the events and circumstances, management determined that it was more likely than not that the fair value of ChoiceOne’s operations, from a qualitative perspective, exceeded the carrying value as of June 30, 2021 and impairment of goodwill was not necessary.

ChoiceOne’s stock price per share was less than its book value as of March 31, 2022. This indicated that goodwill may be impaired and resulted in management performing another qualitative goodwill impairment assessment as of the end of the first quarter of 2022. As a result of the analysis, management concluded that it was more-likely-than-not that the fair value of the reporting unit was greater than the carrying value. This was evidenced by the strong financial indicators, solid credit quality ratios, as well as the strong capital position of ChoiceOne. In addition, revenue in the first three months of 2022 reflected significant and continuing growth in ChoiceOne's interest income. Based on the results of the qualitative analysis, management believed that a quantitative analysis was not necessary as of March 31, 2022.

Deposits and Borrowings

Total deposits increased ~~$1.5 million in the third quarter of 2017 and $13.5 million in the last nine months of 2016. Checking and savings deposits declined $3.7~~$93.3 million in the first ~~nine months~~quarter of ~~2017, while local certificates~~2022 and 305.6 million since March 31, 2021. The change in deposits was due in part to funds related to the increased savings from the pandemic as well as funds on deposit from the PPP loans that were not fully utilized as of ~~deposit increased $4.2~~March 31, 2022.

In September 2021, ChoiceOne completed a private placement of $32.5 million ~~and brokered certificates~~in aggregate principal amount of ~~deposit grew $13.0 million. Brokered deposits~~3.25% fixed-to-floating rate subordinated notes due 2031. ChoiceOne also holds $3.2 million in subordinated debentures issued in connection with a $4.5 million trust preferred securities offering, which were obtained in the ~~first three quarters of 2017 to supplement funding of asset growth.~~merger with Community Shores, offset by the merger mark-to-market adjustment. ChoiceOne continued to place an emphasis on building its core deposits base in the first nine months of 2017. The small decrease in checking and savings deposits in the first nine months of 2017 was a normal seasonal fluctuation for ChoiceOne.

Federal funds purchased grew to $2.7 million as of September 30, 2017 as ChoiceOne used this as a short-term funding source. Repurchase agreements declined $4.1 million in the first nine months of 2017 due to normal fluctuations in funds provided by bank customers and movement of certain funds into other types of accounts. 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.may use Federal Home Loan Bank advances ~~grew $18.0~~and advances from the Federal Reserve Bank Discount Window to meet short-term funding needs if needed in the remainder of 2022.

Shareholders' Equity

Total shareholders' equity declined $30.6 million in the first three ~~quarters~~months of ~~2017 as advances were used~~2022. During the first quarter of 2022, the Federal Reserve increased the federal funds rate by 25 basis points in response to ~~supplement~~published inflation rates, causing interest rates generally to sharply increase. This change in interest rates increased ChoiceOne's unrealized pre-tax loss on the ~~funding~~available for ~~earning asset growth.~~

~~Shareholders’ Equity~~

~~Total shareholders’ equity increased $4.6~~sale securities portfolio from $3.3 million ~~from~~at December 31, ~~2016~~2021 to ~~September 30, 2017. Growth~~$42.8 million at March 31, 2022. Additionally, meeting minutes from the Federal Open Market Committee indicated that additional increases in ~~equity resulted from current year’s net income, an increase~~the federal funds rate are expected in ~~accumulated~~order to combat inflation in the coming quarters. As such, ChoiceOne has elected to utilize interest rate derivatives in order to better manage its interest rate risk position. On April 21, 2022, ChoiceOne purchased five forward-starting interest rate caps with a total notional amount of $200 million and entered into a $200 million forward-starting pay-fixed interest rate swap. These strategies create accounting symmetry between available for sale securities and other comprehensive income (equity), thus protecting tangible capital from further increases in interest rates. ChoiceOne also entered into a $200 million receive-fixed interest rate swap, which, in the current environment, offsets the cost of the rising rate protection. These three strategies, in the aggregate, are expected to be modestly accretive to net income in 2022 and ~~proceeds from~~better position ChoiceOne Bank should rates continue to rise. Importantly, the ~~issuance~~transactions were structured to qualify for hedge accounting, which means that changes in the fair value of ~~ChoiceOne stock, which were partially offset by a stock repurchase and cash dividends paid. The $1.3 million increase in~~the instruments flow through other comprehensive income (equity). Refer to further details in subsequent event footnote 8.

The reduction in common stock and paid in capital resulted from ChoiceOne's repurchase of 25,899 shares for $683,000, or a weighted average all-in cost per share of $26.35, during the first ~~nine months~~quarter of ~~2017 was caused by an increase in net unrealized gains on available~~2022. We do not expect further buybacks for ~~sale securities. The improvement in unrealized gains resulted from decreases in certain interest rate terms since December 31, 2016, which increased~~ the ~~market value~~remainder of the ~~Bank’s securities.~~year. This was part of the common stock repurchase program announced in April 2021 which authorized repurchases of up to 390,114 shares, representing 5% of the total outstanding shares of common stock as of the date the program was adopted. This program replaced and superseded all prior repurchase programs for ChoiceOne.

Regulatory Capital Requirements

Following is information regarding ~~the Bank’s~~ compliance of ChoiceOne and ChoiceOne Bank with regulatory capital ~~requirements~~:requirements:

																										Minimum Required
																										to be Well
																					Minimum Required					Capitalized Under
																					for Capital					Prompt Corrective
(Dollars in thousands)	Actual					Minimum Required for Capital Adequacy Purposes					Minimum Required to be Well Capitalized Under Prompt Corrective Action Regulations					Actual					Adequacy Purposes					Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2017
March 31, 2022
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$	66,071		13.5	%	$	39,033		8.0	%		N/A		N/A		$	207,839		14.6	%	$	113,648		8.0	%		N/A		N/A
Common Equity Tier 1 Capital (to risk weighted assets)		61,859		12.7			21,956		4.5			N/A		N/A
Common equity Tier 1 capital (to risk weighted assets) weighted assets)																	163,875		11.5			63,927		4.5			N/A		N/A
Tier 1 capital (to risk weighted assets)		61,859		12.7			19,516		6.0			N/A		N/A			168,375		11.9			85,236		6.0			N/A		N/A
Tier 1 capital (to average assets)		61,859		9.8			25,350		4.0			N/A		N/A			168,375		7.3			92,225		4.0			N/A		N/A

ChoiceOne Bank
Total capital (to risk weighted assets)	$	61,468		12.7	%	$	38,827		8.0	%	$	48,534		10.0	%	$	188,451		13.3	%	$	113,464		8.0	%	$	141,830		10.0	%
Common Equity Tier 1 Capital (to risk weighted assets)		57,256		11.8			21,840		4.5			31,547		6.5
Common equity Tier 1 capital (to risk weighted assets) weighted assets)																	180,850		12.8			63,824		4.5			92,190		6.5
Tier 1 capital (to risk weighted assets)		57,256		11.8			19,414		6.0			29,120		8.0			180,850		12.8			85,098		6.0			113,464		8.0
Tier 1 capital (to average assets)		57,256		9.1			25,204		4.0			31,505		5.0			180,850		7.9			92,130		4.0			115,163		5.0

December 31, 2016

December 31, 2021
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$	59,644		13.0	%	$	35,289		8.0	%		N/A		N/A		$	204,353		14.4	%	$	113,604		8.0	%		N/A		N/A
Common Equity Tier 1 Capital (to risk weighted assets)		55,324		12.1			19,850		4.5			N/A		N/A
Common equity Tier 1 capital (to risk weighted assets) weighted assets)																	160,338		11.3			63,902		4.5			N/A		N/A
Tier 1 capital (to risk weighted assets)		55,324		12.1			26,467		6.0			N/A		N/A			164,838		11.6			85,203		6.0			N/A		N/A
Tier 1 capital (to average assets)		55,324		9.2			23,641		4.0			N/A		N/A			164,838		7.4			89,415		4.0			N/A		N/A

ChoiceOne Bank
Total capital (to risk weighted assets)	$	58,963		14.2	%	$	35,119		8.0	%	$	43,899		10.0	%	$	182,275		12.9	%	$	113,444		8.0	%	$	141,806		10.0	%
Common Equity Tier 1 Capital (to risk weighted assets)		54,709		13.3			19,754		4.5			28,534		6.5
Common equity Tier 1 capital (to risk weighted assets) weighted assets)																	174,587		12.3			63,813		4.5			92,174		6.5
Tier 1 capital (to risk weighted assets)		54,709		13.3			26,339		6.0			35,119		8.0			174,587		12.3			85,083		6.0			113,444		8.0
Tier 1 capital (to average assets)		54,709		9.9			23,504		4.0			29,380		5.0			174,587		7.8			89,289		4.0			111,611		5.0

Management reviews the capital levels of ChoiceOne and ~~the~~ChoiceOne Bank on a regular basis. The Board of Directors ~~(the “Board”)~~ and management believe that the capital levels as of ~~September 30, 2017~~March 31, 2022 are adequate for the foreseeable future. The ~~Board’s~~Board of Directors’ determination of appropriate cash dividends for future periods will be based on, among other things, market conditions and ChoiceOne’s requirements for cash and capital.

Liquidity

Net cash provided ~~from~~by operating activities was ~~$5.7~~$2.8 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 compared to ~~$8.2~~$2.2 million ~~provided~~ in the same period a year ago. The change was ~~caused by a decrease in~~due to $1.3 million lower net proceeds ~~provided~~from loan sales in 2022 compared to 2021, which was offset by ~~loans originated for sale~~the change in ~~the secondary market.~~other assets and liabilities. Net cash ~~used for~~provided by investing activities was ~~$36.0~~$14.5 million for the first ~~nine~~three months of ~~2017,~~2022 compared to ~~$30.6~~net cash used of $104.3 million in the same period in ~~2016. A higher level~~2021. ChoiceOne had $31.4 million of ~~growth in loans~~securities purchases and sold $0 of securities in the first ~~nine~~three months of ~~2017~~2022 compared to $179.2 million and $0 in the same period in 2021, respectively. A decline in net loan originations and payments led to cash provided of $31.8 million in the first three months of 2022 compared to $63.1 million in the same period during the prior ~~year was partially offset by lower growth in securities available for sale.~~year. Net cash provided by financing activities was ~~$28.2~~$40.8 million infor the first ~~nine~~three months ~~of 2017,~~ended 2022, compared to ~~$23.9~~$157.9 million ~~during~~in the same period in the prior year. ~~The impact~~ChoiceOne experienced growth of ~~more growth~~$93.3 million in deposits ~~was offset by~~in the first three months of 2022 compared to $165.4 million in 2021, with a ~~lower level of net growth~~$44.2 million decrease in ~~Federal Home Loan Bank advances.~~borrowings contributing to the change.

~~Management~~ChoiceOne believes that the current level of liquidity is sufficient to meet ~~the Bank’s~~ChoiceOne 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~~and secured ~~line~~lines 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 ChoiceOne’s management, including the Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of ChoiceOne’s disclosure controls and procedures. Based on and as of the time of that evaluation, ChoiceOne’s management, including the Chief Executive Officer and Principal Financial Officer, concluded that ChoiceOne’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 ChoiceOne’s internal control over financial reporting that occurred during the nine months ended September 30, 2017 that has materially affected, or that is reasonably likely to materially affect, ChoiceOne’s internal control over financial reporting.

PART II. OTHER INFORMATION

~~Item~~ 1.

~~Legal Proceedings~~.

Item 1. Legal Proceedings.

There are no material pending legal proceedings to which ChoiceOne or ~~the~~ChoiceOne 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 ChoiceOne.

~~Item~~ ~~1A.~~

~~Risk Factors~~.

Item 1A. Risk Factors.

Information concerning risk factors is contained in the discussion in Item 1A, “Risk Factors,” in ChoiceOne’s Annual Report on Form 10-K for the year ended December 31, ~~2016. As~~2021.

Item 2. Unregistered Sales of ~~the date~~Equity Securities and Use of ~~this report, ChoiceOne does not believe that there has been a material change~~Proceeds.

There were no unregistered sales of equity securities in the ~~nature or categories~~first quarter of ~~ChoiceOne’s risk factors, as compared to the information disclosed in ChoiceOne’s Annual Report on Form 10-K for the year ended December 31, 2016.~~2022.

~~Item~~ 2.

~~Unregistered Sales of Equity Securities and Use of Proceeds~~.

On July 28, 2017, ChoiceOne issued 709 shares of common stock, without par value, to the directors of ChoiceOne pursuant to the Directors’ Stock Purchase Plan for an aggregate cash price of $16,000. ChoiceOne 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 ~~ChoiceOne’s~~ChoiceOne's purchases of its common stock during the quarter ended ~~September 30, 2017.~~March 31, 2022.

					Total Number		Maximum
					of Shares		Number of
	Total				Purchased as		Shares that
	Number		Average		Part of a		May Yet be
	of Shares		Price Paid		Publicly		Purchased
Period	Purchased		per Share		Announced Plan		Under the Plan (1)

January 1 - January 31, 2022
Employee Transactions		-	$	-		-		-
Repurchase Plan		14,391	$	26.43		14,391		66,449
February 1 - March 1, 2022
Employee Transactions		-	$	-		-		-
Repurchase Plan		11,508	$	26.26		11,508		54,941
March 2 - April 1, 2022
Employee Transactions		-	$	-		-		-
Repurchase Plan		-	$	-		-		54,941

(1) As of March 31, 2022, there are 54,941 shares remaining that may yet be purchased under approved plans. The repurchase plan was adopted and announced in April 2021. There was no stated expiration date. The plan authorized the repurchase of up to 390,114 shares, representing 5% of the total outstanding shares of common stock as of the date the plan was adopted.

(Dollars in thousands, except per share data)

Period Total Number
of Shares
Purchased Average
Price Paid
per Share Total Number
of Shares
Purchased as
Part of a
Publicly
Announced Plan Maximum Number of
Shares that
May Yet be
Purchased
Under the Plan

July 1 - July 31, 2017
Employee Transactions — $ —
Repurchase Plan — $ — — 24,224
August 1 - August 31, 2017
Employee Transactions (1) 200 $ 22.88
Repurchase Plan 3,800 $ 23.25 3,800 20,424
September 1 - September 30, 2017
Employee Transactions — $ —
Repurchase Plan — $ — — 20,424

Item 5. Other Information

~~(1)~~

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.

None.

~~(2)~~

As of September 30, 2017, there are 20,424 shares remaining that may yet be purchased under approved plans. 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.

Item 6. Exhibits

~~Item 6.~~

~~Exhibits~~.

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

Exhibit Number	~~Exhibit~~ ~~Number~~	Document
~~Document~~
3.1		Restated Articles of Incorporation of ChoiceOne Financial Services, Inc. Previously filed as an exhibit to ChoiceOne’s Form 8-A filed February 4, 2020. Here incorporated by reference.

3.2		Bylaws of ChoiceOne as currently in effect and any amendments thereto. Previously filed as an exhibit to ChoiceOne’s Form 8-K filed April 21, 2021. Here incorporated by reference.

4.1	~~3.1~~		~~Amended~~ Advances, Pledge and ~~Restated Articles~~Security Agreement between ChoiceOne Bank and the Federal Home Loan Bank of ~~Incorporation of ChoiceOne.~~Indianapolis. Previously filed as an exhibit to ~~ChoiceOne’s~~ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2013. Here incorporated by reference.

4.2	~~3.2~~		~~Bylaws~~Form of ~~ChoiceOne.~~3.25% Fixed-to-Floating Rate Subordinated Note due September 3, 2031. Previously filed as an exhibit to ~~ChoiceOne’s~~ChoiceOne Financial Services, Inc.'s Form ~~10-K Annual Report for the year ended December 31, 2013.~~8-K filed September 7, 2021. Here incorporated by reference.

4.3	~~31.1~~	Form of 3.25% Fixed-to-Floating Rate Global Subordinated Note due September 3, 2031. Previously filed as an exhibit to ChoiceOne Financial Services, Inc.'s Form 8-K filed September 7, 2021. Here incorporated by reference.

31.1		Certification of ~~President and~~ Chief Executive ~~Officer.~~Officer

31.2		Certification of Treasurer

32.1		Certification pursuant to 18 U.S.C. § 1350.

101.INS		Inline XBRL Instance Document

	~~31.2~~101.SCH		~~Certification of Treasurer.~~Inline XBRL Taxonomy Extension Schema Document

	~~32.1~~ ~~101.1~~ 101.CAL		~~Certification pursuant to 18 U.S.C. § 1350.~~ Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data ~~File.~~ File (formatted as Inline XBRL and contained in Exhibit 101)

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: May 13, 2022	~~November 14, 2017~~	~~/s/~~ /s/ Kelly J. Potes
		Kelly J. Potes Chief Executive Officer (Principal Executive Officer)

Date: May 13, 2022	~~November 14, 2017~~	/s/ ~~Thomas L. Lampen~~Adom J. Greenland
		~~Thomas L. Lampen~~ Adom J. Greenland Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

										Accumulated
				Common						Other
				Stock and						Comprehensive
	Number of			Paid in			Retained			Income (Loss),
(Dollars in thousands)	Shares			Capital			Earnings			Net			Total

Balance, January 1, 2016		3,295,228		$	46,501		$	22,138		$	1,203		$	69,842
Net income								4,402						4,402
Other comprehensive income											1,282			1,282
Shares issued		11,559			137									137
Shares repurchased		(35,000	)		(794	)								(794	)
Change in ESOP repurchase obligation					127									127
Effect of employee stock purchases					9									9
Stock-based compensation		3,414			248									248
Cash dividends declared ($0.49 per share) *								(1,674	)					(1,674	)

Balance, September 30, 2016		3,275,201		$	46,228		$	24,866		$	2,485		$	73,579

Balance, January 1, 2017		3,277,944		$	46,299		$	25,997		$	(598	)	$	71,698
Net income								4,801						4,801
Other comprehensive income											1,316			1,316
Shares issued		7,115			115									115
Shares repurchased		(3,800	)		(88	)								(88	)
Effect of employee stock purchases					9									9
Stock options exercised		1,000			13									13
Stock-based compensation expense					180									180
Restricted stock units issued		5,197			—									—
Stock dividend declared (5%)		163,989			3,779			(3,779	)					—
Cash dividends declared ($0.50 per share)								(1,738	)					(1,738	)

Balance, September 30, 2017		3,451,445		$	50,307		$	25,281		$	718		$	76,306

	September 30, 2017
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and federal agency	$	51,086	$	11	$	(444	)	$	50,653
U.S. Treasury		4,025		—		(10	)		4,015
State and municipal		94,360		1,459		(224	)		95,595
Mortgage-backed		9,501		17		(98	)		9,420
Corporate		5,696		16		(17	)		5,695
Foreign debt		4,512		—		(72	)		4,440
Equity securities		3,083		294		—			3,377
Asset-backed securities		112		—		(1	)		111
Total	$	172,375	$	1,797	$	(866	)	$	173,306

(Dollars in thousands, except per share data)	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Basic Earnings Per Share
Net income available to common shareholders	$	1,720	$	1,683	$	4,801	$	4,402

Weighted average common shares outstanding		3,452,278		3,439,633		3,448,341		3,455,141

Basic earnings per share	$	0.50	$	0.50	$	1.39	$	1.28

Diluted Earnings Per Share
Net income available to common shareholders	$	1,720	$	1,683	$	4,801	$	4,402

Weighted average common shares outstanding		3,452,278		3,439,633		3,448,341		3,455,141
Plus dilutive stock options and restricted stock units		6,370		4,146		4,744		4,380

Weighted average common shares outstanding and potentially dilutive shares		3,458,648		3,443,780		3,453,085		3,459,520

Diluted earnings per share	$	0.50	$	0.50	$	1.39	$	1.28

(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

September 30, 2017
Assets:
Cash and due from banks	$	12,725	$	12,725	$	12,725	$	—	$	—
Securities available for sale		173,306		173,306		1,877		157,886		13,543
Federal Home Loan Bank and Federal Reserve Bank stock		3,567		3,567		—		3,567		—
Loans held for sale		2,378		2,451		—		2,451		—
Loans to other financial institutions		13,293		13,699		—		—		13,699
Loans, net		389,874		391,408		—		—		391,408

Liabilities:
Noninterest-bearing deposits		136,542		136,542		—		136,542		—
Interest-bearing deposits		389,296		388,603		—		388,603		—
Federal funds purchased		2,650		2,650		—		2,650		—
Repurchase agreements		3,794		3,794		—		3,794		—
Federal Home Loan Bank advances		30,276		30,298		—		30,298		—

December 31, 2016
Assets:
Cash and due from banks	$	14,809	$	14,809	$	14,809	$	—	$	—
Securities available for sale		174,388		174,388		1,383		157,902		15,103
Federal Home Loan Bank and Federal Reserve Bank stock		3,567		3,567		—		3,567		—
Loans held for sale		1,974		2,044		—		2,044		—
Loans, net		364,723		365,780		—		—		365,780

Liabilities:
Noninterest-bearing deposits		127,611		127,611		—		127,611		—
Interest-bearing deposits		384,775		383,879		—		383,879		—
Repurchase agreements		7,913		7,913		—		7,913		—
Federal Home Loan Bank advances		12,301		12,323		—		12,323		—

(Dollars in thousands)	Balance at Dates Indicated		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Impaired Loans
September 30, 2017	$	4,058	$	—	$	—	$	4,058
December 31, 2016	$	4,911	$	—	$	—	$	4,911

Other Real Estate
September 30, 2017	$	182	$	—	$	—	$	182
December 31, 2016	$	437	$	—	$	—	$	437