ChoiceOne Financial Services, Inc. (COFS): PESTLE Analysis [Nov-2025 Updated]

You need to know if ChoiceOne Financial Services, Inc. (COFS) can translate its recent merger scale into real returns, and the answer is nuanced: they are positioned for moderate growth, leveraging their post-merger $4.3 billion in consolidated assets and a transaction-friendly political environment. This isn't just about the consensus $3.67 Earnings Per Share (EPS) forecast for 2025; it's about how they manage the dual pressure of increasing digital demand and the rising costs of cybersecurity and new climate-related financial risk disclosures. We'll break down the six external forces-Political, Economic, Sociological, Technological, Legal, and Environmental-that will defintely drive their performance into 2026.

Political Landscape: M&A Tailwinds and Manageable Regulation

The political environment is currently favorable for regional banks like ChoiceOne Financial Services, Inc. (COFS), especially regarding mergers and acquisitions (M&A). The Federal Reserve Board's approval of the Fentura Financial, Inc. merger in February 2025 signals a transaction-friendly regulatory climate, and we anticipate this will fuel increased bank M&A activity throughout the rest of 2025. Also, because ChoiceOne Financial Services, Inc. remains below the $100 billion threshold in total assets, it is largely exempt from the most stringent Basel III Endgame capital reforms, which is a significant cost advantage over larger competitors. Still, the company is subject to extensive federal and state oversight by the Federal Reserve Board and the Michigan Department of Insurance and Financial Services. You can't avoid regulatory scrutiny, but you can manage its scope.

Here's the quick math: avoiding Basel III means lower compliance overhead, which directly supports the bottom line. The political climate is helping them grow, not hindering them.

Action: Strategy: Prioritize identifying and evaluating smaller, strategic M&A targets within Michigan to capitalize on the friendly regulatory window before it shifts.

Economic Outlook: Post-Merger Scale and Michigan Growth

The economic picture for ChoiceOne Financial Services, Inc. is solid, largely due to its increased scale following the merger and positive regional trends. Total consolidated assets reached $4.3 billion as of June 30, 2025, giving the bank greater lending capacity and market presence. Analysts forecast full-year 2025 Earnings Per Share (EPS) at $3.67 per share, reflecting this stability. Plus, the regional economy in Michigan is a strong tailwind. The state's economy is forecast to grow moderately in 2025, with the unemployment rate expected to average 4.1%. This is good, but the real boost comes from residential construction, which anticipates 17,000 new single-family units in Michigan for 2025. That directly translates into strong loan demand for mortgages and construction financing. What this estimate hides is the potential impact of any unexpected auto industry slowdown, which is a major driver of Michigan's economy.

Regional strength translates directly into loan portfolio stability.

Action: Lending Division: Increase residential construction loan capacity by 15% for Q4 2025 to meet the anticipated 17,000 new unit demand.

Sociological Trends: Local Loyalty Meets Digital Demand

ChoiceOne Financial Services, Inc. operates on a high-touch, community-focused model, which is a powerful source of social capital. They maintain a large physical footprint of 56 offices across West, Central, and Southeast Michigan, emphasizing local relationships and community engagement through scholarships and support. This builds deep customer loyalty, which is hard to replicate. However, they must manage the natural shift in customer behavior: balancing the demand for digital convenience with the expectation of personal, in-branch service. Honestly, customers want both, not one or the other. Fortunately, solid personal income growth in Michigan, forecast to outpace inflation, supports consumer spending and deposit stability, giving the bank a stable base to manage this transition. The challenge is making the digital experience feel as personal as a branch visit.

Community banks must be digital-first, but not digital-only.

Action: Marketing/Product: Launch a campaign highlighting the seamless integration between the award-winning website and personal in-branch service by December 2025.

Technological Evolution: Validated Digital Strength, Constant Risk

ChoiceOne Financial Services, Inc. has clearly invested wisely in its digital experience, evidenced by receiving the Web Marketing Association's 2025 Outstanding Bank Website WebAward. This validates their customer-facing technology. They utilize advanced digital platforms like Zelle for person-to-person payments and have a new commercial lending platform, Metriciti, plus sophisticated Treasury Management solutions for businesses, including same-day Automated Clearing House (ACH) payments. This technology stack is competitive. But, cybersecurity risk is a constant, non-negotiable threat. Continuous investment is required just to protect digital banking platforms and customer data from evolving threats. You can't stop investing in security; you can only manage the risk exposure.

A great website only matters if the back-end is impenetrable.

Action: IT/Security: Conduct a third-party penetration test on the new Metriciti commercial lending platform before year-end 2025.

Legal and Compliance: Rising Cost of Digital Trust

For regional banks, the legal and compliance burden is growing, particularly in the digital space. ChoiceOne Financial Services, Inc. is facing increasing regulatory scrutiny on cybersecurity and consumer data privacy standards. Also, new anti-money laundering (AML) and Bank Secrecy Act (BSA) requirements are increasing compliance costs across the board. The good news is the company successfully navigated the complex legal and regulatory requirements for its major merger and consolidation in early 2025, proving its legal team can handle large-scale complexity. However, the day-to-day cost of digital compliance is a persistent drain on resources. This is a cost of doing business in a digital world.

Compliance is the new cost of customer acquisition.

Action: Compliance: Benchmark Q3 2025 AML/BSA compliance spending against regional peers to identify potential efficiency gains by November 2025.

Environmental Factors: Integrating Climate Risk

Environmental, Social, and Governance (ESG) compliance and climate-related financial risk disclosures are rapidly moving from a niche topic to a core regulatory focus for US banking regulators in 2025. ChoiceOne Financial Services, Inc. already indirectly lowers its carbon footprint by promoting digital services, like eStatements, which reduces paper use and branch traffic. That's a start, but it's not enough. The major new requirement is that the bank must start integrating climate-related risks-like lending exposure to weather-sensitive Michigan industries (e.g., agriculture, tourism)-into its formal risk management framework. This is a new layer of risk modeling that requires dedicated resources, and it's coming fast. You need to know which loans are most vulnerable to extreme weather events.

Climate risk is now credit risk.

Action: Risk Management: Establish a working group to draft a preliminary framework for integrating climate-related lending exposure into the Q1 2026 risk assessment.

ChoiceOne Financial Services, Inc. (COFS) - PESTLE Analysis: Political factors

Below the $100 billion threshold, largely exempt from the most stringent Basel III Endgame capital reforms.

The regulatory environment for regional banks like ChoiceOne Financial Services, Inc. (COFS) is defined, in large part, by the $100 billion asset threshold. Because COFS's total assets, even after the Fentura Financial, Inc. merger, stood at approximately $4.3 billion as of September 30, 2025, the company is largely exempt from the most stringent capital reforms proposed under the Basel III Endgame.

This exemption is a significant competitive advantage. It means COFS avoids the substantial compliance costs and the average 16% increase in Common Equity Tier 1 (CET1) capital requirements that larger banks (those with $100 billion or more in assets) must prepare for. Simply put, you don't have to divert capital to meet a new, complex global standard; you can put that money to work in Michigan. This is defintely a clear tailwind for smaller regional players.

Federal Reserve Board approval of the Fentura Financial, Inc. merger in February 2025 signals a transaction-friendly regulatory environment for regional M&A.

The swift approval of the Fentura Financial, Inc. merger by the Federal Reserve Board on February 12, 2025, is a concrete political signal. This transaction, which was effective on March 1, 2025, created a combined entity with 56 offices across West and Southeastern Michigan. The quick, positive decision confirms that federal regulators are currently open to strategic consolidation among smaller regional banks, seeing it as a way to build stronger, more resilient institutions.

This is a crucial data point for your strategic planning. It suggests that future, similarly-sized, in-market mergers will likely face a less hostile regulatory review compared to the previous administration's stance, where M&A activity for the U.S. banking industry dropped significantly. The regulatory environment is shifting from a 'slow-walk' to a 'green light' for regional consolidation. So, if you have other acquisition targets, now is the time to start the due diligence process.

Subject to extensive federal and state oversight by the Federal Reserve Board and the Michigan Department of Insurance and Financial Services.

While COFS benefits from being below the systemic risk thresholds, it remains subject to comprehensive and continuous oversight. This dual-level of regulation-federal and state-creates a complex compliance landscape.

The primary regulatory bodies are:

• Federal Reserve Board (FRB): Oversees the bank holding company, ChoiceOne Financial Services, Inc., for safety, soundness, and compliance with federal laws, including the Bank Holding Company Act.
• Michigan Department of Insurance and Financial Services (DIFS): Provides state-level regulation for ChoiceOne Bank, covering aspects like branching, loan interest rates, and capital requirements under state banking laws.

The political reality is that regulatory compliance is a non-negotiable, fixed cost of doing business. The strong oversight, however, also provides a level of stability and public trust, which is invaluable in the current financial climate.

Potential for increased bank M&A activity in 2025 due to a shift toward a more transaction-friendly administration.

Looking ahead, the political climate in 2025 is broadly expected to favor increased bank M&A activity, particularly for regional and community banks. After a period of heightened regulatory scrutiny that cooled dealmaking, new agency leadership at bodies like the FDIC is already proposing to rescind stricter merger policies.

This shift, coupled with the need for scale to invest in technology and spread costs over a larger asset base, makes M&A an increasingly attractive option for both buyers and sellers. For COFS, this means two things: you have a clearer path for future strategic acquisitions, but you also face a higher risk of competition for those same targets, potentially driving up acquisition premiums.

ChoiceOne Financial Services, Inc. (COFS) - PESTLE Analysis: Economic factors

Full-year 2025 consensus Earnings Per Share (EPS) is forecast at $3.67 per share.

You need a clear picture of near-term profitability, and the analyst consensus for ChoiceOne Financial Services, Inc. (COFS) provides just that. The full-year 2025 consensus Earnings Per Share (EPS) is forecast at $3.67 per share. This figure is a critical benchmark for investors and signals a degree of stability in the bank's core earnings power, especially as the economic environment in Michigan remains mixed. To be fair, this consensus is built on the assumption of successful integration of the recent merger and a steady, though not explosive, regional economy. If interest rates shift unexpectedly, that number could change defintely.

Here's the quick math on recent performance: ChoiceOne Financial Services' earnings are expected to grow from the 2025 forecast of $3.67 to $3.85 per share in the following year, representing a projected growth rate of 4.90%. This modest growth rate, while not beating the broader US Banks - Regional industry's average forecast, shows a predictable trajectory for a community-focused bank.

Total consolidated assets reached $4.3 billion as of June 30, 2025, following the Fentura merger.

The biggest economic event for ChoiceOne Financial Services in 2025 was the successful merger with Fentura Financial, Inc. This transaction fundamentally reshaped the bank's balance sheet and market footprint. As of June 30, 2025, the bank's total consolidated assets swelled to $4.3 billion. This represents an increase of $1.7 billion compared to the prior year, directly attributed to the merger.

The merger, which was completed on March 1, 2025, was a significant expansion, creating the third largest publicly traded bank in Michigan. The acquired assets, loans, and deposits from Fentura Financial, Inc. were substantial, immediately expanding the bank's capacity to serve a wider region. This jump in scale is a huge opportunity, but it also means managing the integration risk and the associated costs, like the $13.9 million in merger-related expenses (net of taxes) recorded for the six months ended June 30, 2025.

Michigan's economy is forecast to grow moderately in 2025, with the unemployment rate expected to average 4.1%.

The economic backdrop in ChoiceOne Financial Services' primary operating area, Michigan, is one of moderate growth, which is a good, stable environment for a regional bank. The state's economy is forecast to expand moderately in 2025, a pace roughly similar to 2024. Crucially, the Michigan unemployment rate is expected to average 4.1% for the year. While another forecast suggests a higher rate of 4.5%, both scenarios point to a relatively tight labor market compared to historical averages, which supports consumer spending and loan repayment capacity.

This stability is a double-edged sword for a bank. It means fewer loan defaults, but also potentially less urgent demand for new business loans as companies manage steady, rather than rapid, expansion. Personal income is forecast to grow solidly, outpacing inflation, which boosts real incomes and consumption-a positive tailwind for retail banking.

Strong tailwinds in residential construction, with an anticipated 17,000 new single-family units in Michigan for 2025, boosting loan demand.

For a bank focused on community and commercial lending, the residential construction sector in Michigan provides a clear opportunity. Strong tailwinds in residential construction are expected to deliver a robust year for single-family home building in 2025. The forecast anticipates an additional 17,000 new single-family units will be added to the housing supply in Michigan.

This construction boom is driven by persistently low existing home inventory and rising homebuilder confidence. For ChoiceOne Financial Services, this translates to clear, actionable opportunities:

• Finance land acquisition and development for builders.
• Increase construction loan volume for the 17,000 new units.
• Grow mortgage origination as these new homes are sold.
• Capitalize on rising house prices, which are forecast to increase solidly again in 2025, increasing the average loan size.

What this estimate hides is the potential for higher interest rates to cool demand late in the year, but for now, the pipeline for construction and mortgage lending looks strong.

ChoiceOne Financial Services, Inc. (COFS) - PESTLE Analysis: Social factors

Operates a large physical footprint of 56 offices across West, Central, and Southeast Michigan, emphasizing local relationships.

ChoiceOne Financial Services, Inc. (COFS) maintains a deeply embedded, high-touch strategy, which is a key social factor differentiating it from larger national banks. The company operates a network of 56 offices across its West, Central, and Southeast Michigan footprint, a significant physical presence for a bank with approximately $4.3 billion in total assets as of late 2025. This extensive branch network is not just a cost center; it's a strategic asset that builds social capital, especially in smaller, relationship-driven communities.

This local density allows for stronger personal connections with small business owners and individual clients. Honestly, in community banking, your branch manager is often a more trusted figure than a national call center. This focus helps ChoiceOne attract stable deposits and maintain lending relationships that might be overlooked by institutions relying solely on digital channels. The physical presence acts as a barrier to entry for pure-play digital competitors, still, the cost of maintaining 56 locations must be continually justified by the value of those relationships.

Focus on community engagement through scholarships and local support, which builds social capital and customer loyalty in its regional markets.

The bank's commitment to community engagement is a core part of its social license to operate, translating directly into customer loyalty and brand equity. ChoiceOne uses targeted programs to invest in its communities, generating goodwill that is difficult for non-local competitors to replicate. For the 2025 college year, the Annual ChoiceOne Scholarship Program awarded 13 scholarships of $1,000 each to local high school seniors.

Beyond scholarships, the bank's broader social investment is substantial. In 2024, ChoiceOne employees volunteered over 6,000 hours, and the bank donated approximately $420,000 to community organizations. This funding is strategic, with more than half of the donations attributed to financial literacy programs, directly addressing a critical social need. Plus, the bank acts as a community anchor, as seen in October 2025 when it collected and matched voluntary donations up to $25,000 to support victims of a local tragedy in Grand Blanc.

• Volunteered: Over 6,000 hours (2024).
• Scholarships: 13 recipients of $1,000 each (2025).
• Down Payment Assistance: Nearly $1 million provided.

Must manage the shift in customer behavior, balancing the demand for digital convenience with the expectation of personal, in-branch service.

The biggest social challenge is navigating the digital transformation without alienating the core customer base that values in-person service. You have a customer who wants the speed of a fintech but still expects to talk to a loan officer they know. ChoiceOne has made defintely progress here, winning the Web Marketing Association's 2025 Outstanding Bank Website WebAward, which validates its digital platform's usability and professional feel.

The bank's strategy is to use its digital platforms for high-speed convenience while maintaining its full-service branch network to connect and create long-term personal relationships. This dual approach is essential because while digital adoption is rising, the 'flight to quality' during periods of economic uncertainty often drives customers back to trusted, local institutions where they can meet face-to-face. The risk is in over-investing in one channel at the expense of the other, diluting the bank's core community advantage.

Solid personal income growth in Michigan, forecast to outpace inflation, supports consumer spending and deposit stability.

The underlying economic health of ChoiceOne's operating territory is a critical social factor, directly affecting deposit levels and loan demand. The forecast for Michigan's personal income growth in 2025 is a clear positive signal. Nominal personal income growth is projected at a solid 3.9 percent for the year.

Crucially, this growth is expected to outpace local inflation. The Detroit Consumer Price Index (CPI) is forecast to moderate significantly to 2.0 percent in 2025, its slowest pace since 2020. Here's the quick math: this combination boosts real disposable income per capita growth to an estimated 1.6 percent in 2025, well above the long-term average. This means consumers have more actual purchasing power, supporting higher consumer spending and deposit stability for ChoiceOne Financial Services, Inc.

ChoiceOne Financial Services, Inc. (COFS) - PESTLE Analysis: Technological factors

Received the Web Marketing Association's 2025 Outstanding Bank Website WebAward, validating its digital customer experience.

You need to know where ChoiceOne Financial Services, Inc. (COFS) stands in the digital race, and honestly, they've earned their stripes. The company's focus on a seamless digital experience was validated by receiving the Web Marketing Association (WMA) 2025 Outstanding Website WebAward in the banking category. This isn't just a trophy; it confirms that their website is functional, secure, and user-friendly, which is critical when competing with national banks and nimble financial technology (fintech) startups.

The judges specifically praised the site's design, solid navigation, and excellent use of technology to enhance usability, noting its professional feel that builds customer confidence in the online experience. This recognition is a clear indicator that their investment in the user interface (UI) and user experience (UX) is paying off in the near term, reducing friction for customers and likely lowering the cost-to-serve for routine transactions.

Utilizes advanced digital platforms, including Zelle (person-to-person payments) and a new commercial lending platform, Metriciti.

The firm has made a strategic move from simply using technology to creating it, which is a massive shift for a community bank. Their digital platform strategy is two-pronged: adopting best-in-class consumer tools and building proprietary business solutions.

• Consumer Payments: Like most forward-thinking banks, ChoiceOne Bank offers Zelle for person-to-person (P2P) payments, a necessary feature for retaining the younger demographic. The Zelle network itself processed nearly $600 billion in payments in the first half of 2025, showing the sheer volume of transactions ChoiceOne Bank is positioned to capture.
• Commercial Lending: The real differentiator is Metriciti, a commercial lending platform developed in-house and now licensed to other community banks via a partnership with DPT Solutions. This platform is a significant competitive asset, having already processed over $3 billion in commercial loans since its 2019 launch. Metriciti streamlines the entire lending process, from lead generation to portfolio management, using advanced data analytics to drive efficiency and loan growth.

Offers sophisticated Treasury Management solutions for businesses, including same-day Automated Clearing House (ACH) payments.

For business customers, ChoiceOne Bank's Treasury Management solutions are keeping pace with larger regional players. They've enhanced their platform to offer sophisticated cash management tools, which is defintely a requirement for attracting and retaining mid-sized commercial clients.

A key feature is the inclusion of same-day Automated Clearing House (ACH) payments. This capability allows businesses to manage payroll and vendor payments with greater speed and precision, a vital service in today's rapid business environment. This focus on advanced business services, combined with the Metriciti platform, positions the company as a credible technology partner for Michigan businesses.

Cybersecurity risk is a constant, requiring continuous investment to protect digital banking platforms and customer data.

The flip side of all this digital innovation is the constant, escalating threat of cyber risk. It's a non-negotiable cost of doing business, and ChoiceOne Financial Services, Inc. is taking concrete steps to mitigate it. In January 2025, the company transitioned its website domain to '.bank' from '.com.' This move is a strategic security investment because the '.bank' domain is only available to verified financial institutions, adding an extra layer of authentication that hackers cannot easily replicate for phishing or spoofing.

While a specific line-item for security spend is rarely public, we can see the scale of their operation and the capacity for investment. As of September 30, 2025, the company reported total assets of $4.3 billion. Furthermore, the year-to-date increase in noninterest expense for the nine months ended September 30, 2025, was $44.0 million, a significant portion of which goes toward maintaining and securing their expanded digital infrastructure, especially following the March 2025 merger. This investment is continuous, and the stakes are high: a major breach could quickly erode the customer trust they've worked hard to build.

ChoiceOne Financial Services, Inc. (COFS) - PESTLE Analysis: Legal factors

You're operating in a regulatory environment that is moving faster than ever, and for a regional bank like ChoiceOne Financial Services, Inc. (COFS), this means the cost of simply staying compliant is a major strategic factor. We aren't talking about abstract rules; we're talking about real dollars spent on technology, staffing, and legal counsel. The good news is that COFS successfully navigated a massive legal undertaking in early 2025, but that success now raises the compliance stakes for the combined entity.

Facing increasing regulatory scrutiny on cybersecurity and consumer data privacy standards in the digital banking space

The digital banking space is a minefield of new legal risks, and the scrutiny on COFS is only intensifying post-merger. The regulators-the Federal Financial Institutions Examination Council (FFIEC), the Office of the Comptroller of the Currency (OCC), and others-are demanding more than just basic firewalls; they want proactive, risk-based programs. Honestly, the biggest cost driver here is technology and data processing.

Here's the quick math: For regional and superregional banks, median data processing expenses-which include the heavy lift of cybersecurity and digital platform compliance-continue to rise faster than other noninterest costs. We're seeing five-year compound annual growth rates in the double digits for some institutions in this category. That's a huge drag on operating leverage.

Plus, the penalties for a data breach are getting steeper. While COFS is headquartered in Michigan, any business that processes the personal information of 100,000 or more California residents or households must comply with the California Consumer Privacy Act (CCPA). This is a real risk, as administrative fines for an intentional violation increased in 2025 to up to $7,988 per violation. You defintely need to treat consumer data privacy as a non-negotiable legal and financial risk.

Must comply with new anti-money laundering (AML) and Bank Secrecy Act (BSA) requirements, which increase compliance costs for regional banks

AML and BSA compliance is no longer just a back-office function; it's a major cost center that is growing. The regulatory focus in 2025 is on beneficial ownership reporting under the Corporate Transparency Act and enhanced due diligence for high-risk accounts. These new rules demand significant investment in RegTech (regulatory technology) solutions to automate transaction monitoring and reduce false positives.

For a bank of COFS's new size-approximately $4.3 billion in assets-we can map the general industry cost. Banks in the $1 billion to $10 billion asset range typically allocate around 2.9% of their non-interest expenses to compliance duties. This percentage is significant because smaller institutions often bear a disproportionately high compliance burden compared to the largest banks.

Here is how compliance costs break down for community banks in 2025, which shows exactly where the BSA/AML spending is concentrated:

Money laundering compliance accounts for a quarter of the total compliance budget, and that figure is only rising as 99% of US and Canadian financial institutions reported an increase in financial crime compliance costs in 2023.

The company successfully navigated the complex legal and regulatory requirements for its major merger and consolidation in early 2025

To be fair, the biggest legal hurdle of 2025 is now behind COFS. The merger with Fentura Financial, Inc. was a massive undertaking that required navigating approvals from the Board of Governors of the Federal Reserve System and other regulatory bodies. The transaction was completed on March 1, 2025, with the consolidation of ChoiceOne Bank and The State Bank becoming effective on March 14, 2025.

This successful navigation had a clear, quantifiable cost. The merger-related expenses, which cover the legal, advisory, and integration costs of this complex regulatory process, totaled $17.4 million for the nine months ended September 30, 2025. Net of taxes, this amounted to $13.9 million, or $1.02 per diluted share. That's a big number, but it's the price of successfully scaling up, and management does not anticipate additional material merger expenses going forward.

The key takeaway is that the legal and compliance teams proved they can execute on a large, complex transaction, setting the stage for the combined entity to manage its new, higher regulatory profile.

• Complete merger on March 1, 2025.
• Total merger-related expenses of $17.4 million (YTD Q3 2025).
• New combined asset size is approximately $4.3 billion.

Next step: The Compliance team needs to finalize the integration of the two banks' BSA/AML monitoring systems by year-end to ensure the combined entity meets the 25% compliance cost allocation efficiency.

ChoiceOne Financial Services, Inc. (COFS) - PESTLE Analysis: Environmental factors

US banking regulators are increasing focus on Environmental, Social, and Governance (ESG) compliance and climate-related financial risk disclosures in 2025.

The regulatory landscape for climate risk is currently in flux, which creates uncertainty for all financial institutions, even for a community bank like ChoiceOne Financial Services, Inc. While the Federal Reserve, FDIC, and OCC formally withdrew the Interagency Principles for Climate-Related Financial Risk Management for large banks (those over $100 billion in assets) in October 2025, the underlying regulatory expectation has not disappeared.

ChoiceOne Financial Services, Inc., with total assets of $4.3 billion as of September 30, 2025, is not directly subject to the withdrawn guidance. However, the core principle remains: all institutions must manage material risks, and climate change is an emerging material risk. This means ChoiceOne Financial Services, Inc. must still integrate physical and transition risk analysis into its existing risk framework, or risk being caught flat-footed by future, potentially more stringent, state or federal mandates.

Indirectly lowers its carbon footprint by promoting digital services, like eStatements, which reduces paper use and branch traffic.

ChoiceOne Financial Services, Inc.'s ongoing investment in technology-driven platforms and digital services is a key, low-cost environmental strategy. By shifting customer interactions online, the company naturally reduces its operational carbon footprint from paper, printing, and branch energy consumption.

For context, the industry saw a major digital shift in 2025: 77% of consumer banking interactions now happen via digital channels, with only 8% still occurring at a physical branch. This trend is a tailwind for ChoiceOne Financial Services, Inc.'s environmental efforts, even without a formal net-zero commitment.

The challenge is converting digital users to paperless services like eStatements. While roughly 70% of active digital banking users nationwide have eStatements, only about 54% actually opt out of receiving paper statements, which shows a significant gap between enrollment and true paper reduction. ChoiceOne Financial Services, Inc. needs to close that 16% gap to maximize the environmental and cost benefits of its digital push.

• Convert the 16% eStatement gap to actual paperless adoption.
• Digital channels are now preferred by 77% of consumers.
• Fewer branch visits means lower utility costs.

Must start integrating climate-related risks-like lending exposure to weather-sensitive Michigan industries-into its risk management framework.

The most tangible environmental risk for ChoiceOne Financial Services, Inc. is the physical risk tied to its concentrated loan portfolio in Michigan. The state's key industries are inherently sensitive to extreme weather events, which are increasing in frequency and severity. This risk is particularly acute in the bank's Commercial Real Estate (CRE) and agricultural lending segments.

The bank's exposure to non-owner occupied Commercial Real Estate (CRE) loans is high, measured at 302.0% of total capital as of September 30, 2025. This concentration means that a severe, localized flooding event or a major storm could simultaneously damage a significant portion of its collateral base, leading to higher credit losses and impacting the allowance for credit losses, which stood at 1.19% of total loans on September 30, 2025.

The agricultural sector is also a core part of their business, and it faces significant transition risk (e.g., new state-level ESG mandates) and physical risk (e.g., unpredictable growing seasons, drought, or excessive rain). Michigan is actively pushing a clean energy transition, with a goal of 100% carbon neutrality by 2050, creating opportunities for green lending but also regulatory pressure on high-emitting clients.

Here's the quick math on the largest area of exposure:

What this estimate hides is the potential for catastrophic loss correlation: a single weather event could trigger defaults across multiple loan types-CRE, residential, and agricultural-in the same geographic area, stressing the bank's capital beyond normal expectations.