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EXHIBIT 10.4 CHEMICAL FINANCIAL CORPORATION DEFERRED COMPENSATION PLAN
Table of Contents SECTION 1 - Declaration 1 1.1 Establishment of Plan 1 1.2 Effective Date 1 SECTION 2 - Definitions 1 2.1 Defined Terms 1 2.2 Administrator 2 2.3 Agent for Service of Process 2 2.4 Beneficiary 2 2.5 Change in Control 3 2.6 Compensation 3 2.7 Disability 3 2.8 Employee 4 2.9 Employer 4 2.10 Participant 4 2.11 Persons Acting as a Group 4 2.12 Plan Year 4 2.13 Separation From Service 4 2.14 Specified Employee 4 2.15 Spouse 5 2.16 Surviving Spouse 5 SECTION 3 - Participation 5 3.1 Designation as Participant 5 3.2 Termination of Participation 5 3.3 Participation Agreement 5 SECTION 4 - Elective Deferral Credits 6 4.1 Payroll Deductions 6 4.2 Amount Allowed 6 4.3 Prior Irrevocable Election 6 SECTION 5 - Accounting; Earnings Credits 6 5.1 Accounting Records 6 5.2 Timing of Credits 7 5.3 Earnings Credits and Debits 7 SECTION 6 - Vesting 7 SECTION 7 - Payment of Benefits 7 7.1 Events of Payment 7 7.2 Form of Payment 8 7.3 Time of Payment 8 7.4 Death 9 SECTION 8 - General Provisions 9 8.1 Amendment; Termination 9 8.2 Employment Relationship 9 8.3 Rights Not Assignable 9 8.4 Unsecured Obligation 10 8.5 Construction; Interpretation 10 8.6 Governing Law 10 8.7 Unfunded Plan 10 EXHIBIT A - Participation Agreement 1 EXHIBIT B - Deferred Compensation Trust 1
CHEMICAL FINANCIAL CORPORATION DEFERRED COMPENSATION PLAN SECTION 1 Declaration 1.1 Establishment of Plan. This is the Chemical Financial Corporation Deferred Compensation Plan ("plan" or "this plan"), established by Chemical Financial Corporation (the "Employer"), as a nonqualified plan for a select group of management personnel employed by Employer. This plan is intended to be a plan described in Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). This plan is a nonqualified supplemental retirement program that is not subject to limitations in the Internal Revenue Code of 1986, as amended ("Code"), applicable to benefits provided through a qualified, tax-exempt employee benefit plan established under Section 401(a) of the Code. This plan is intended to comply with Section 409A of the Code. 1.2 Effective Date. The "Effective Date" of this plan is July 1, 2006, unless a provision of this plan specifies a different effective date. Each plan provision applies until the effective date of an amendment of that provision. SECTION 2 Definitions 2.1 Defined Terms. Defined terms are found in the following locations: Term Location Administrator 2.2 Agent for Service of Process 2.3 Beneficiary 2.4 Board of Directors 2.9 Change in Control 2.5 Code 1.1 Compensation 2.6 Designation as Participant 3.1 Disability 2.7 Effective Date 1.2 Elective Deferral Credit 4.1 Elective Deferral Credits Account 5.1
Employee 2.8 Employer 2.9 ERISA 1.1 Identification Date 2.14 Participant 2.10 Participation Agreement 3.3 Persons Acting as a Group 2.11 Plan Year 2.12 Separation From Service 2.13 Specified Employee 2.14 Spouse 2.15 Surviving Spouse 2.16 Termination of Participation 3.2 Trust 5.3 Unforeseeable Emergency 2.17 2.2 Administrator. "Administrator" means Employer. 2.3 Agent for Service of Process. "Agent for Service of Process" means the Administrator or the individual designated by the Administrator to accept service of process on behalf of this plan. 2.4 Beneficiary. "Beneficiary" means the individual, trust, or other entity designated by the Participant to receive any benefits payable under this plan after the Participant's death. A Participant may designate or change a Beneficiary by filing a signed designation with the Administrator in the form approved by the Administrator. The Participant's Will is not effective for this purpose. If a designation has not been properly completed and filed with the Administrator or is ineffective for any other reason, the Beneficiary shall be the Participant's Surviving Spouse. If there is no effective designation and the Participant does not have a Surviving Spouse, the Beneficiary for each date of distribution shall be the first of the following classes with a living member on the date of distribution: (a) Children. The Participant's children, including those by adoption, dividing the distribution equally among the Participant's children with the living descendants of any deceased child taking their parent's share by right of representation; (b) Parents. The Participant's parents, dividing the distribution equally if both parents are living; and (c) Siblings. The Participant's brothers and sisters, dividing the distribution equally among the Participant's living brothers and sisters.
If a deceased Participant has no surviving Beneficiary, the remaining balance, if any, will be paid to the Participant's estate. For purposes of this plan, "by right of representation" among a Participant's descendants shall mean that the plan benefits shall be divided into as many equal shares as the Participant has (1) then living descendants in the nearest degree of kinship to the Participant and (2) deceased descendants in the same degree who left descendants who survived the Participant, if any. Each then living descendant in the nearest degree of kinship is allocated one share. The share of each deceased person in the same degree is divided among his or her descendants in the same manner. A posthumous child is considered as living at the death of the child's parent. 2.5 Change in Control. A "Change in Control" occurs upon: (a) 50% Stock. The acquisition, by a person or Persons Acting as a Group, of stock of Chemical Financial Corporation that together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of Chemical Financial Corporation; (b) 35% Stock. The acquisition, by a person or Persons Acting as a Group, of ownership of stock of Chemical Financial Corporation that constitutes 35% or more of the total voting power of Chemical Financial Corporation's stock in a single transaction or within a twelve month period ending with the most recent acquisition; (c) Board of Directors. The majority of members of the Board of Directors of Chemical Financial Corporation being replaced during any twelve month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors of Chemical Financial Corporation prior to the date of appointment or election; or (d) Assets. The acquisition, by a person or Persons Acting as a Group, of Employer's assets that have a total gross fair market value equal to or exceeding forty percent (40%) of the total gross fair market value of Employer's assets in a single transaction or within a twelve month period ending with the most recent acquisition. For the purpose of this section, gross fair market value means the value of the assets of the corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. 2.6 Compensation. "Compensation" means an Employee's cash compensation for the Plan Year plus any deferrals under Code Sections 125 and 401(k) and any individual deferral under this plan or any other plan of the Employer, excluding bonus compensation and severance pay. 2.7 Disability. "Disability" means that a Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months: (a) Activity. Unable to engage in any substantial gainful activity; or (b) Benefits. Receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of Employer.
2.8 Employee. "Employee" means an individual employed by the Employer who receives compensation for personal services performed for the Employer that is subject to withholding for federal income tax purposes. 2.9 Employer. "Employer" means Chemical Financial Corporation and its subsidiaries. Actions on behalf of the Employer shall be taken by the Chemical Financial Corporation Board of Directors ("Employer's Board of Directors" or "Board of Directors"). 2.10 Participant. "Participant" means a management or highly compensated Employee who has been designated by the Board of Directors of the Employer as eligible to participate in this plan and whose participation has not terminated. 2.11 Persons Acting as a Group. "Persons Acting as a Group" means more than one person acting as a group as defined in regulations under Section 409A of the Code. For this purpose, persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time or as a result of the same public offering, or purchase assets of the same corporation at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or assets, or similar business transaction with the corporation. If a person, including an entity or entity shareholder, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock or assets, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only to the extent of the ownership in that corporation prior to
the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. 2.12 Plan Year. "Plan Year" means the 12-month period beginning each January 1. 2.13 Separation From Service. "Separation From Service" means the Participant retires or otherwise has a termination of employment with the Employer for any reason other than death. 2.14 Specified Employee. "Specified Employee" means an employee who, at any time during the 12-month period ending on December 31 of each year (the "Identification Date"), is: (1) an officer of the employer with annual compensation greater than $140,000 in 2006 (as adjusted for future years), (2) a 5-percent owner of the Employer, or (3) a 1-percent owner of the Employer with annual compensation greater than $150,000. Such an employee is a Specified Employee for the 12-month period beginning the first April 1 following the Identification date and ending on March 31 of the following year.
2.15 Spouse. "Spouse" means the Participant's husband or wife on the date the benefit is scheduled to be paid or payment is scheduled to begin. The legal existence of the spousal relationship shall be governed by the law of the state or other jurisdiction of domicile of the Participant. 2.16 Surviving Spouse. "Surviving Spouse" means the Spouse of the Participant at the time of the Participant's death who survives the Participant. If the Participant and Spouse die under circumstances that prevent ascertainment of the order of their deaths, it shall be presumed for this plan that the Participant survived the Spouse. 2.17 Unforeseeable Emergency. "Unforeseeable Emergency" means a severe financial hardship of the Participant resulting from (1) an illness or accident of the Participant, the Participant's Beneficiary, or the Participant's or Beneficiary's dependent, (2) a casualty loss of the Participant's or Beneficiary's property or (3) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's or Beneficiary's control. The Chief Executive Officer of Chemical Financial Corporation will determine whether the Participant or Beneficiary has suffered an Unforeseeable Emergency based on all the facts and circumstances, and that decision shall be final and binding on all parties to this plan. SECTION 3 Participation 3.1 Designation as Participant. Only management and highly compensated Employees shall be eligible to become Participants under this plan. Employer's Board of Directors shall designate those eligible Employees who shall become Participants from time to time and shall specify the effective date of participation for each Participant. 3.2 Termination of Participation. A Participant's status as a Participant shall continue until the earlier of termination of employment or termination of the Participant's status as a Participant by Employer's Board of Directors. A former Participant may resume participation in the plan only upon redesignation as a Participant. 3.3 Participation Agreement. As a condition of participation in the plan, Participant will enter into a "Participation Agreement" with the Employer in the form attached as Exhibit A.
SECTION 4 Elective Deferral Credits 4.1 Payroll Deductions. Subject to the limitations below, a Participant may elect to reduce the Participant's Compensation for a Plan Year through payroll deductions that reduce the Participant's salary (but not bonus or severance pay). The amount shall be in a whole percentage or a fixed dollar amount. Each payroll deduction will result in the credit of a corresponding dollar amount to be paid under this plan as deferred compensation for the Participant ("Elective Deferral Credit"). 4.2 Amount Allowed. A Participant may elect to defer a fixed amount of Compensation to this plan, plus an additional variable amount equal to the maximum deferral amount permissible under an Employer-sponsored plan that is qualified under the Code and in which the Participant participates without regard to any limitations imposed by the Code except Section 402(g), less any amount the Participant actually deferred under that qualified plan. The fixed amount of Compensation may not exceed 75% of the Participant's Compensation for the Plan Year less the maximum deferral amount permissible under an Employer-sponsored plan for the Plan Year, as described in the preceding sentence. 4.3 Prior Irrevocable Election. The election to defer Compensation under this plan shall be made by the Participant on a form provided for that purpose prior to the beginning of a Plan Year and shall become irrevocable for each Plan Year thereafter as of the beginning of the Plan Year. The deferral election shall continue in effect for each Plan Year until revoked or modified for a subsequent Plan Year. A new Participant may make an initial, irrevocable election of payroll deductions during the first 30 days of eligibility to participate applicable only to Compensation earned after the date of the election. If a new Participant does not make an election during this 30-day period, the Participant may not make an election for the initial year of participation. An election of payroll deductions for a Plan Year shall be discontinued on the date the Participant's employment terminates. The Participant shall have no claim or right to payment of the amounts deferred by payroll deductions and shall be limited
solely to the rights and benefits conferred under the terms of this plan. In no event shall an election to defer Compensation become effective sooner than the beginning of the next payroll period following the date of the written, irrevocable election. SECTION 5 Accounting; Earnings Credits 5.1 Accounting Records. The Administrator shall maintain separate accounting records for each Participant for the Participant's Elective Deferral Credits under Section 4. The separate account shall be the Participant's "Elective Deferral Credits Account."
5.2 Timing of Credits. Elective Deferral Credits shall be credited to the Participant's Elective Deferral Credits Account as of the end of the month that includes the payroll dates on which the corresponding amounts were deducted from the Participant's Compensation. 5.3 Earnings Credits and Debits. Each Participant's accounts will be credited with earnings credits (or debits) as follows: (a) Trust. The Employer may establish a trust or use any trust currently established by the Employer that meets the requirements of this Section 5.3(a) (the "Trust") for the purpose of providing for the payment of deferred compensation under this plan. To the extent allowed by law, a Participant's credits, as reflected in the Participant's account, will be deposited into the Trust as soon as administratively feasible after the Participant's credits are credited to the Participant's account. The Trust, and any assets held in the Trust to assist the Employer in meeting its obligations under this plan, will conform to the terms of the trust attached as Appendix B. Notwithstanding the Trust, it is the intention of the Employer that this plan is unfunded for tax purposes and for purposes of ERISA. (b) Investment. A Participant may designate investments for the Participant's accounts. The Employer shall purchase such investments and will credit or debit the Participant's account with the actual earnings or losses on the investments. A Participant may change the designated investments at such times as mutually agreed by the parties. Earnings credits and losses shall continue to accrue after a Participant's employment has terminated and until all amounts due have been paid in full. SECTION 6 Vesting A Participant shall be 100% vested with respect to all amounts in the Participant's Elective Deferral Credits Account. SECTION 7 Payment of Benefits 7.1 Events of Payment. The Participant's Elective Deferral Credits Account is distributable upon the Participant's Separation From Service, a Change in Control, or the Participant's death or Disability. In addition: (a) Unforeseeable Emergency. The Participant may request and the Administrator may make a distribution from the Participant's vested accounts of an amount reasonably necessary to pay for the Unforeseeable Emergency (including any amount necessary to pay applicable taxes or penalties arising from the distribution). In no case shall a distribution be made for an Unforeseeable Emergency to the extent that the emergency may be relieved through alternate means, such as insurance, liquidation of assets (to the extent the liquidation would not cause financial hardship), or by ceasing deferrals under this plan.
(b) Specified Time. The Participant may elect a specific time of payment in the Participation Agreement. 7.2 Form of Payment. (a) Participant Election. Payment may be made in a lump sum or in 5 or 10 annual installments for each payment event (other than for payment upon an Unforeseeable Emergency, which may only be made in a lump sum), as the Participant elects in the Participation Agreement and each Annual Deferral Election Form. If the Participant fails to make an election in the Participation Agreement or Annual Deferral Election Form, then payment of the Elective Deferral Credits that would otherwise have been governed by the Participation Agreement or Annual Deferral Election Form shall be made in a lump sum. Except in that case, the Participant and any Beneficiary shall have no power or authority to require a different form of payment than the Participant elects in the Participation Agreement or Annual Deferral Election Form. For benefits the Participant elects to be paid in installments, the series of installments shall be treated as a series of
separate payments. (b) Calculation of Installments. The amount of each payment shall be determined by dividing the vested balance of the Participant's account as of the date of the payment event for the first installment, and as of the payment event's anniversary date for subsequent installments, by the number of installment payments remaining to be made. (c) Withholding. Employer has the right to withhold and deduct from a Participant's payments, or make arrangements for the collection of, all amounts deemed necessary to satisfy federal, state and local withholding and employment-related tax requirements attributable to a Participant's payments pursuant to this plan. 7.3 Time of Payment. The Participant and Beneficiary shall have no power or authority to require different timing of payment than the timing provided in Section 7.2, except as provided in 7.3(b). (a) Specified Employee. Notwithstanding any other timing provision in this Section 7, if, at the time the payments would commence, Participant is a Specified Employee, no payment may be made before the date that is six months after Participant would otherwise be entitled to payment. Payments to which Participant would otherwise have been entitled during that six months will be accumulated and paid on the first day of the seventh month following the date the Participant was otherwise first entitled to payment. (b) Subsequent Deferral. A Participant may elect to defer payment under this plan upon Separation From Service or at a Specified Time for at least 5 years so long as the election is made at least 12 months prior to the scheduled payment date, the Participant elected the same distribution method in all Annual Deferral Election forms for payment upon Separation From Service, and the election is made in writing in a form acceptable to the Employer. For distributions paid in installments, each installment is deemed a separate payment that a Participant may elect to defer on an installment by installment basis. (c) No Acceleration. The time and schedule of payment under this plan may not be accelerated.
7.4 Death. (a) Beneficiary. If the Participant dies after his termination of employment, but prior to payment of all amounts due under this plan, payment shall be made or shall continue to be made to the Participant's Beneficiary in the form the Participant elected in his or her Participation Agreement. (b) Limitation. Notwithstanding any other provision in this plan or any related trust agreement, the Employer may withhold or direct the trustee to withhold any benefits payable to a Beneficiary as a result of the death of a Participant or any other Beneficiary until it can be determined whether a generation-skipping transfer tax, as defined in Chapter 13 of the Code, or any substitute provision therefore, is payable by the Employer or the trustee and the amount of generation-skipping transfer tax, including interest, that is due. If such tax is payable, the benefits otherwise payable hereunder shall be reduced by an amount equal to the generation-skipping transfer tax and interest. Any benefits withheld shall be payable as soon as there is a final determination of the applicable generation-skipping transfer tax and interest. No interest shall be payable to any Beneficiary for the period from the date of death to the time when the
amount of benefits payable to a Beneficiary can be fully determined pursuant to this paragraph. SECTION 8 General Provisions 8.1 Amendment and Termination. The Employer shall have the right at any time to amend this plan prospectively or retroactively, or to terminate this plan, provided that an amendment or termination may not reduce or revoke the accrued benefits of Participants as of the end of the Plan Year preceding the Plan Year in which the amendment or termination is adopted. Upon termination of this plan, the accrued benefits of affected Participants shall become nonforfeitable. Each Participant's vested accrued benefits shall be distributed in accordance with the provisions of this plan. 8.2 Employment Relationship. Nothing in this plan shall be construed as creating a contract of employment between the Employer and any Participant or otherwise conferring upon any Participant or other person a legal right to continuation of employment or any rights other than those specified in this plan. This plan shall not limit or affect the right of the Employer to discharge or retire a Participant. 8.3 Rights Not Assignable. Except for designation of a Beneficiary, amounts promised under this plan shall not be subject to assignment, conveyance, transfer, anticipation, pledge, alienation, sale, encumbrance, or charge, whether voluntary or involuntary, by the Participant or any Beneficiary of the Participant, even if directed under a qualified domestic relations order or other divorce order. An interest in any amount promised shall not provide collateral or security for a debt of a Participant or Beneficiary or be subject to garnishment, execution, assignment, levy, or to another form of judicial or administrative process or to the claim of a creditor of a Participant or Beneficiary, through legal process or otherwise. Any attempt to assign, convey, transfer, anticipate, pledge, alienate, sell, encumber, charge, or otherwise dispose of benefits
8.4 Unsecured Obligation. The right to a benefit under this plan constitutes merely the unsecured promise of Employer to pay benefits from Employer' general assets. Nothing contained in this plan, and no action taken pursuant to the provisions of this plan, shall create or be construed to create a trust of any kind, a fund, or any fiduciary relationship between Employer and any Participant, Beneficiary, or any other person, except as provided in Section 5.3(a). Any reserve or fund established by Employer in connection with this plan shall be and shall remain, until paid to any Participant or Beneficiary, solely the property and rights of Employer, subject to the rights and claims of Employer's general creditors. No Participant, Beneficiary, or any other person other than Employer shall have any right, title, or interest in or to such funds or other assets. Any right to a benefit under this plan shall be no greater than the claim of any other unsecured general creditor of Employer. 8.5 Construction and Interpretation. The singular includes the plural, and the plural includes the singular, unless the context clearly indicates the contrary. Capitalized terms (except those at the beginning of a sentence or part of a heading) have the meaning specified in this plan. All questions or issues regarding interpretation or application of the provisions of this plan, including, but not limited to, questions of eligibility for benefits, the amount of benefits, and forfeiture, payment, or termination of benefits, will be resolved by the Administrator, whose determination shall be final and binding. 8.6 Governing Law. This plan shall be interpreted, construed, enforced, and performed in accordance with applicable federal law and, to the extent not preempted by federal law, in accordance with the laws of the state of Michigan. 8.7 Unfunded Plan. This shall be an unfunded plan within the meaning of ERISA. Benefits provided herein shall consist solely of aggregate unfunded credits which are the sum of Elective Deferral Credits and earnings credits and shall constitute only an unsecured contractual promise to pay in accordance with the terms of this plan by the Employer. IN WITNESS WHEREOF, this instrument is executed as an act of the Employer as of ________________________, 2006. CHEMICAL FINANCIAL CORPORATION By Its
Exhibit A CHEMICAL FINANCIAL CORPORATION PARTICIPATION AGREEMENT THIS PARTICIPATION AGREEMENT ("Agreement") is entered into as of _____________________, 20____, between Chemical Financial Corporation (the "Company") and (the "Participant"), setting forth certain obligations of the Company, the Participant's agreement to the terms of the Chemical Financial Corporation Deferred Compensation Plan (the "Plan"), the Participant's agreement to the covenants in this Agreement and the Participant's election of a distribution method for certain payment events authorized under the Plan. All capitalized terms not otherwise defined here will have the same meaning as found in the Plan. The Participant understands and agrees that: 1. The Participant has the right to elect to defer Compensation, as defined in the Plan. 2. The Participant elects payment as provided in the Plan as follows (note: these elections may not be changed at any time): Specified Change Death Disability Unforeseeable Distribution o o o o o Lump Sum o o o o NA 5 Annual o o o o NA 10 Annual 3. No payment shall be made other than as elected above upon a Specified Time, Change in Control, Death, Disability or Unforeseeable Emergency, and if no distribution method is selected above, distribution will be made as a lump sum. Election for payment upon Separation from Service may be made annually in a separate Annual Deferral Election Form. 4. The Plan provides for elective deferrals only, and the Company will not make any Company contribution under the Plan. 5. This Agreement and the Plan are subject to amendment or termination at any time in the sole discretion of the Company's Board of Directors. Amendment or termination may result in cessation of accrual of any further benefits on behalf of the Participant, in accordance with Section 8.1 of the Plan.
6. Participant will be an unsecured creditor of the Company with respect to any amounts contributed, and that some or all of the value of such contributions may be available to creditors of the Company in the event of its insolvency. 7. Nothing in this Agreement will be construed as granting the Participant the right to be continued in the employment of the Company for any given period or upon any specific terms of employment. The Company at any time may dismiss the Participant from employment free from any claim or liability under this Agreement except for Participant's vested accrued benefits under the plan. 8. If a court of competent jurisdiction determines that any provision of the Plan or this Agreement or any portion of a provision is void or unenforceable, only such provision or portion will be rendered void or unenforceable. The remainder of this Agreement will continue in full force and effect. 9. Any notice or election pursuant to this Agreement will be made by personal delivery or sent by certified mail, return receipt requested, addressed, if to the Company, to its business office or, if to the Participant, at the most recent address of the Participant on the records of the Company. Either party may change the address for notices by written notice to the other party. The effective date of any notice will be the date of delivery or the date of mailing as evidenced by the postmark. 10. This Agreement will be interpreted, construed, enforced, and performed in accordance with applicable federal law and, to the extent not preempted by federal law, in accordance with the laws of the state of Michigan. IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first written above. CHEMICAL FINANCIAL CORPORATION By Its "Company" By "Participant"
Exhibit B CHEMICAL FINANCIAL CORPORATION On this _____ day of _______________, 2006, Chemical Financial Corporation (the Employer) and _________________________ (the Trustee) create the Chemical Financial Corporation Deferred Compensation Trust (the Trust). SECTION I Establishment 1.1 Effective Date. The Trust is generally effective as of August 1, 2006. 1.2 Intent. The Employer has adopted the Chemical Financial Corporation Deferred Compensation Plan (the Plan) for the benefit of select management personnel employed by each respective Employer. The Employer has incurred or expects to incur liability under the terms of the Plan with respect to the individuals employed by it participating in the Plan. The Employer wishes to establish a trust and to contribute assets to be held in it, subject to the claims of creditors of the Employer in the event of its Insolvency, as defined, or until paid to Plan participants and their beneficiaries in the manner and at the times specified in the Plan. (a) Unfunded Plan. The parties intend that the Trust constitute an unfunded arrangement that does not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974. (b) Contributions. The Employer also intends to make contributions to the Trust to provide a source of funds to assist it in meeting its liabilities under the Plan. 1.3 Establishment of Trusts. The Employer hereby deposits with Trustee in trust an amount identified in Schedule A as the initial principal of its Trust to be held, administered and disposed of by Trustee as provided in this Agreement. (a) Irrevocability. The Trust is irrevocable as long as any amount is due under the Plan to any Plan participant. (b) Grantor Trust. The Trust is intended to be a grantor trust, of which the Employer is the grantor within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, except as explicitly provided in this Trust. The Trust shall be construed accordingly.
(c) Exclusive Use. The principal of the Trust and any earnings shall be held separate and apart from other funds of the Employer and, except as explicitly provided in this Trust, shall be used exclusively for the uses and purposes of Plan participants and general creditors of the Employer. Except as provided in Sections II and III and Section 6.3(b), the Employer shall have no right or power to direct the Trustee to return to that Employer or to divert to others any of the Trust assets held in the Trust before all payments of benefits attributable to the Plan participants and beneficiaries have been made to those Plan participants and their beneficiaries pursuant to the terms of the Plan. (d) No Claim. Plan participants and their beneficiaries have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan and this Trust are mere unsecured contractual rights of Plan participants and their beneficiaries against the Employer. Any assets held by the Trust are subject to the claims of that Employer's general creditors under federal and state law in the event of Insolvency, as defined in Section 3.1(a), of the Employer. (e) Contributions. The Employer, in its sole discretion, may at any time make additional deposits of cash or other property to the Trust in trust with Trustee to augment the principal to be held, administered and disposed of by Trustee as provided in this Agreement. Except with respect to the contributions described in Section 1.3(f) or 2.2(b), neither Trustee nor any Plan participant or beneficiary may compel such additional deposits. SECTION II Payments 2.1 Payments to Plan Participants and Beneficiaries. The Employer shall, from time to time, but not less often than annually, deliver to Trustee schedules (Payment Schedules) that indicate the amounts payable in respect of one or more Plan participants (and his or her beneficiaries), or a formula and employee census or other instructions acceptable to Trustee for determining the amounts payable, the form in which the amount is to be paid (as provided for or available under the Plan), and the time of commencement for payment of the amounts. The Employer shall provide the Trustee with the current governing Plan document. (a) Payments. Except as otherwise provided, the Trustee shall make payments from the Trust to the Plan participants and their beneficiaries in accordance with the Payment Schedules. (b) Withholding. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan actually paid from the Trust account and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by the Employer. (c) Claims. Prior to a Change in Control, the entitlement of a Plan participant or his or her beneficiaries to benefits under the Plan shall be determined by the Employer or such party as it shall designate under the Plan, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan. Following a Change in Control, the entitlement of a Plan participant or his or her beneficiaries to benefits under the Plan shall be determined by the Trustee. The Trustee shall rely on the appropriate Plan documents, the Payment Schedule and other appropriate documents to make this decision.
2.2 Alternative. The Employer may make payment of benefits directly to Plan participants or their beneficiaries as they become due under the terms of the Plan. The Employer shall notify Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to participants or their beneficiaries. Following a Change in Control, the Participant or his or her beneficiaries may contest the sufficiency of such payment in a written statement to the Trustee. If the Trustee determines that such payments were insufficient, the Trustee shall make the balance of such payments due directly from this Trust to the Participant or his or her beneficiaries. (a) Reimbursement. Prior to a Change in Control, an Employer may direct the Trustee in writing to reimburse the Employer from the Trust for amounts paid directly to participants or their beneficiaries by the Employer. To be effective, that direction to the Trustee must be made within sixty (60) days of the payment by the Employer to the participant or beneficiary. The Trustee shall reimburse the Employer for such payments only after receipt by Trustee of satisfactory evidence that the Employer has made such direct payment. Following a Change in Control, such amounts shall be returned only after a determination by the Trustee that all remaining liabilities to Participants and beneficiaries may be reasonably expected to be paid from the Trust and sufficient Trust assets are available to meet these expected liabilities. (b) Insufficient. If the principal of the Trust and any earnings of the Account are not sufficient to make payments of benefits in accordance with the terms of the Plan, the Trustee shall make a demand for such difference. The Employer shall make such contribution to the Trust or the Employer shall make the balance of each such payment as it falls due directly to the Participant or beneficiary. The Trustee shall notify the Employer if the principal and earnings are not sufficient. SECTION III Insolvency 3.1 Trustee Responsibility Regarding Payments to Trust Beneficiary When Employer is Insolvent. The Trustee shall cease payment of benefits to Plan participants and their beneficiaries attributable to an Employer if the Employer is Insolvent. (a) Insolvent. The Employer shall be considered Insolvent for purposes of this Trust if the Employer: (i) Debts. Is unable to pay its debts as they become due, or (ii) Bankruptcy. Is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) Claims of Creditors. At all times during the continuance of the Trust, as provided in Section 1.3(c), the principal and income of the Trust shall be subject to claims of general creditors of the Employer under federal and state law as set forth below. (i) Duty to Inform. The Board of Directors and the Chief Executive Officer of the Employer each have the duty to inform Trustee in writing of the Employer's Insolvency. If a person claiming to be a creditor of the Employer alleges in writing to Trustee that the Employer has become Insolvent, the Trustee shall determine whether the Employer is Insolvent and,
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2
3
35
36
38
42
77
78
81
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Table of Contents
Years Ended December 31,
2006
2005
2004
2003
2002
$
132,236
$
141,851
$
147,634
$
139,772
$
145,692
5,200
4,285
3,819
2,834
3,765
40,147
39,220
39,329
39,094
34,534
97,874
98,463
98,469
91,923
93,526
46,844
52,878
56,682
55,716
54,945
$
1.88
$
2.10
$
2.26
$
2.24
$
2.21
1.88
2.10
2.25
2.23
2.20
1.10
1.06
1.01
0.95
0.87
20.46
19.98
19.26
18.33
17.30
33.30
31.76
40.62
34.66
29.13
24,828
25,079
25,169
24,991
24,868
$
3,789,247
$
3,749,316
$
3,764,125
$
3,708,888
$
3,568,649
2,807,660
2,706,695
2,583,540
2,476,360
2,043,566
2,898,085
2,819,880
2,863,473
2,967,236
2,847,272
354,041
400,363
386,830
246,897
261,605
507,886
501,065
484,836
458,049
430,339
$
3,763,067
$
3,788,469
$
3,856,036
$
3,578,678
$
3,538,599
3,521,489
3,550,695
3,608,157
3,381,083
3,325,572
2,767,114
2,641,465
2,567,956
2,222,704
2,088,395
2,692,410
2,718,267
2,803,015
2,616,027
2,648,039
2,861,916
2,886,209
2,976,150
2,868,180
2,825,975
362,990
377,499
370,785
237,787
270,801
510,255
493,419
472,226
439,178
406,762
1.24
%
1.40
%
1.47
%
1.56
%
1.55
%
9.2
10.7
12.0
12.7
13.5
3.82
4.04
4.13
4.18
4.44
56.1
54.2
52.6
50.9
51.3
13.6
13.0
12.2
12.3
11.5
58.5
50.5
44.9
42.6
39.4
11.6
11.7
11.1
10.5
11.0
17.5
17.8
17.5
16.6
18.6
1.21
%
1.26
%
1.32
%
1.34
%
1.50
%
0.96
0.73
0.39
0.46
0.36
0.94
0.71
0.45
0.47
0.32
0.20
0.16
0.11
0.15
0.20
(1)
Adjusted for stock dividends.
2
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3
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December 31, 2005
and
December 31,
2006
December 31, 2004
8% 9%
9% 10%
4% 6%
5% 7%
3% 5%
3% 5%
4
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5
Table of Contents
6
Table of Contents
7
Table of Contents
2006
2005
2004
2003
2002
$
1.10
$
1.06
$
1.01
$
0.95
$
0.87
8
Table of Contents
Years Ended December 31,
2006
2005
2004
Tax
Effective
Tax
Effective
Tax
Effective
Average
Equivalent
Yield/
Average
Equivalent
Yield/
Average
Equivalent
Yield/
Balance
Interest
Rate
Balance
Interest
Rate
Balance
Interest
Rate
$
2,767,114
$
186,476
6.74
%
$
2,641,465
$
165,355
6.26
%
$
2,567,956
$
152,993
5.96
%
597,506
24,391
4.08
754,961
28,289
3.74
879,102
32,283
3.68
58,814
3,789
6.44
47,522
3,235
6.81
42,779
3,187
7.45
24,502
1,268
5.18
20,730
927
4.47
19,983
841
4.21
60,482
2,975
4.92
69,061
2,121
3.07
83,871
1,077
1.28
13,071
634
4.85
16,956
984
5.80
14,466
411
2.84
3,521,489
219,533
6.23
3,550,695
200,911
5.66
3,608,157
190,792
5.29
34,384
34,189
33,663
99,166
105,435
110,017
46,161
46,233
48,071
130,635
120,295
123,454
$
3,763,067
$
3,788,469
$
3,856,036
$
538,063
$
12,605
2.34
%
$
544,174
$
7,050
1.30
%
$
542,211
$
2,163
0.40
%
714,920
12,326
1.72
858,143
9,426
1.10
1,005,728
6,914
0.69
1,076,437
44,164
4.10
938,451
28,156
3.00
884,291
21,664
2.45
152,003
5,561
3.66
107,634
2,162
2.01
90,016
574
0.64
4,110
154
3.75
5,890
216
3.67
52,055
2,707
5.20
16,011
643
4.02
8,333
123
1.48
154,822
7,670
4.95
247,964
9,800
3.95
272,436
10,178
3.74
2,692,410
85,187
3.16
2,718,267
57,453
2.11
2,803,015
41,616
1.48
532,496
545,441
543,920
3,224,906
3,263,708
3,346,935
27,906
31,342
36,875
510,255
493,419
472,226
$
3,763,067
$
3,788,469
$
3,856,036
3.07
%
3.55
%
3.81
%
$
134,346
$
143,458
$
149,176
3.82
%
4.04
%
4.13
%
*
Taxable equivalent basis using a
federal income tax rate of 35%.
**
Nonaccrual loans are included in
average balances reported and are included in the calculation of
yields.
9
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2006 Compared to 2005
2005 Compared to 2004
Increase (Decrease)
Increase (Decrease)
Due to Changes in
Combined
Due to Changes in
Combined
Average
Average
Increase
Average
Average
Increase
Volume(2)
Yield/Rate(2)
(Decrease)(1)
Volume(2)
Yield/Rate(2)
(Decrease)(1)
$
8,097
$
13,024
$
21,121
$
4,610
$
7,752
$
12,362
(6,160
)
2,603
(3,557
)
(4,690
)
782
(3,908
)
735
(181
)
554
336
(288
)
48
(290
)
1,144
854
(220
)
1,264
1,044
(203
)
(147
)
(350
)
82
491
573
2,179
16,443
18,622
118
10,001
10,119
(80
)
5,635
5,555
8
4,879
4,887
(1,776
)
4,676
2,900
(1,136
)
3,648
2,512
4,575
11,433
16,008
1,391
5,101
6,492
2,443
2,958
5,401
283
2,041
2,324
(4,238
)
2,108
(2,130
)
(937
)
559
(378
)
924
26,810
27,734
(391
)
16,228
15,837
$
1,255
$
(10,367
)
$
(9,112
)
$
509
$
(6,227
)
$
(5,718
)
(1)
Taxable equivalent basis using a
federal income tax rate of 35%.
(2)
The change in interest income and
interest expense due to both volume and rate has been allocated
to the volume and rate change in proportion to the relationship
of the absolute dollar amount of the change in each.
10
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11
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12
Table of Contents
Years Ended December 31,
2006
2005
2004
2003
2002
(Dollars in thousands)
$
545,591
$
517,852
$
468,970
$
405,929
$
327,438
726,554
704,684
697,779
628,815
481,084
145,933
158,376
120,900
138,280
108,589
835,263
785,160
758,789
762,284
616,666
554,319
540,623
537,102
541,052
509,789
$
2,807,660
$
2,706,695
$
2,583,540
$
2,476,360
$
2,043,566
$
34,148
$
34,166
$
33,179
$
30,672
$
30,994
(1,389
)
(2,126
)
(1,270
)
(2,002
)
(2,345
)
(1,564
)
(88
)
(40
)
(1,201
)
(107
)
(515
)
(453
)
(430
)
(102
)
(164
)
(1,976
)
(2,407
)
(2,175
)
(1,927
)
(2,214
)
(6,645
)
(4,986
)
(3,963
)
(4,071
)
(4,830
)
370
110
464
174
329
6
11
7
7
17
98
29
105
38
18
521
533
555
500
379
995
683
1,131
719
743
(5,650
)
(4,303
)
(2,832
)
(3,352
)
(4,087
)
5,200
4,285
3,819
2,834
3,765
400
3,025
$
34,098
$
34,148
$
34,166
$
33,179
$
30,672
0.20
%
0.16
%
0.11
%
0.15
%
0.20
%
1.21
%
1.26
%
1.32
%
1.34
%
1.50
%
13
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14
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December 31, 2006
December 31, 2005
Due In
Due In
1 Year
1 to 5
Over 5
1 Year
1 to 5
Over 5
or Less
Years
Years
Total
or Less
Years
Years
Total
$
278,006
$
223,968
$
43,617
$
545,591
$
252,682
$
224,191
$
40,979
$
517,852
120,694
560,677
45,183
726,554
94,465
578,713
31,506
704,684
67,177
38,171
40,585
145,933
68,213
41,923
48,240
158,376
$
465,877
$
822,816
$
129,385
$
1,418,078
$
415,360
$
844,827
$
120,725
$
1,380,912
33
%
58
%
9
%
100
%
30
%
61
%
9
%
100
%
December 31, 2006
December 31, 2005
Amount
Percent
Amount
Percent
one year which have:
$
791,222
83
%
$
745,496
77
%
160,979
17
220,056
23
$
952,201
100
%
$
965,552
100
%
15
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16
Table of Contents
December 31,
2006
2005
2004
2003
2002
(Dollars in thousands)
$
10,245
$
3,133
$
3,245
$
3,902
$
1,460
4,394
2,950
1,343
1,550
887
1,728
3,741
2,887
3,853
3,133
694
1,739
985
884
676
545
773
20,239
14,561
8,397
6,691
4,859
1,693
825
106
777
231
2,232
2,002
924
318
174
1,158
1,717
1,023
2,371
1,388
1,414
592
524
584
485
6,671
5,136
1,653
4,656
2,422
26,910
19,697
10,050
11,347
7,281
8,852
6,801
6,799
6,002
4,298
$
35,762
$
26,498
$
16,849
$
17,349
$
11,579
0.96
%
0.73
%
0.39
%
0.46
%
0.36
%
0.94
%
0.71
%
0.45
%
0.47
%
0.32
%
*
Interest income totaling $669,000
was recorded in 2006 on loans in nonaccrual status at
December 31, 2006. Additional interest income of
$1.1 million would have been recorded during 2006 on these
loans had they been current in accordance with their original
terms.
17
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18
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19
Table of Contents
December 31,
2006
2005
2004
2003
2002
Percent
Percent
Percent
Percent
Percent
of Loans
of Loans
of Loans
of Loans
of Loans
in Each
in Each
in Each
in Each
in Each
Category
Category
Category
Category
Category
Allowance
to Total
Allowance
to Total
Allowance
to Total
Allowance
to Total
Allowance
to Total
Loan Type
Amount
Loans
Amount
Loans
Amount
Loans
Amount
Loans
Amount
Loans
(Dollars in thousands)
$
8,896
19.4
%
$
9,011
19.1
%
$
8,752
18.1
%
$
8,814
16.4
%
$
9,065
15.8
%
11,375
25.9
11,613
26.0
11,914
27.0
9,997
25.3
6,167
23.2
1,761
5.2
1,816
5.8
1,382
4.7
1,874
5.6
1,097
5.2
3,641
29.8
3,576
29.1
4,023
29.4
4,006
30.9
3,563
31.2
6,835
19.7
6,744
20.0
6,659
20.8
7,799
21.8
7,930
24.6
1,590
1,388
1,436
689
2,850
$
34,098
100.0
%
$
34,148
100.0
%
$
34,166
100.0
%
$
33,179
100.0
%
$
30,672
100.0
%
20
Table of Contents
Years Ended December 31,
2006
2005
2004
(In thousands)
$
20,993
$
20,371
$
19,301
7,906
7,909
7,396
3,068
2,363
2,121
2,707
2,726
2,541
2,472
1,877
598
778
917
1,335
1,742
1,663
3,328
1,053
(1,330
)
541
1,367
758
853
1,342
$
40,147
$
39,220
$
39,329
21
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22
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Years Ended December 31,
2006
2005
2004
(Dollars in thousands)
$
44,959
$
44,304
$
44,763
11,053
12,462
12,734
9,534
9,421
9,165
9,168
8,867
8,955
2,599
2,559
3,123
1,335
1,145
1,082
3,062
3,736
2,841
1,815
1,347
1,000
1,391
2,012
1,645
1,645
1,720
1,659
2,087
2,152
2,273
1,868
1,696
1,797
2,482
1,359
1,064
4,876
5,683
6,368
$
97,874
$
98,463
$
98,469
1,478
1,434
1,506
56.1
%
54.2
%
52.6
%
23
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24
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25
Table of Contents
Maturity**
After One
After Five
Total
Within
but Within
but Within
After
Carrying
Total
One Year
Five Years
Ten Years
Ten Years
Value
Fair
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
Value
(Dollars in thousands)
$
%
$
22,850
4.42
%
$
%
$
%
$
22,850
4.42
%
$
22,850
68,690
4.09
158,202
4.56
1,473
5.97
228,365
4.43
228,365
448
7.85
2,534
7.65
5,272
7.56
8,254
7.60
8,254
49,270
4.47
140,631
4.38
30,340
4.94
28,983
5.21
249,224
4.56
249,224
199
6.47
295
6.90
131
6.91
150
6.73
775
6.76
775
8,101
3.98
2,446
3.82
10,547
3.94
10,547
852
8.93
852
8.93
852
126,708
4.25
326,958
4.49
37,216
5.36
29,985
5.33
520,867
4.54
520,867
21,009
3.17
18,722
3.58
39,731
3.37
39,068
5,656
6.24
16,570
6.25
19,807
6.38
11,963
6.47
53,996
6.34
54,229
171
7.69
331
7.60
173
7.26
162
6.57
837
7.35
875
26,836
3.85
35,623
4.86
19,980
6.38
12,125
6.47
94,564
5.10
94,172
$
153,544
4.18
%
$
362,581
4.53
%
$
57,196
5.72
%
$
42,110
5.66
%
$
615,431
4.63
%
$
615,039
*
Yields are weighted by amount and
time to contractual maturity, are on a taxable equivalent basis
using a 35% federal income tax rate and are based on amortized
cost.
**
Mortgage-backed securities and
collateralized mortgage obligations are based on scheduled
principal maturity. Equity securities have no stated maturity.
All others are based on final contractual maturity.
26
Table of Contents
December 31,
2006
2005
2004
(In thousands)
$
22,850
$
43,755
$
100,291
228,365
220,080
248,728
8,254
9,370
13,533
249,224
297,811
282,437
775
1,079
1,459
10,547
21,544
48,746
852
852
1,577
520,867
594,491
696,771
39,731
79,327
141,622
53,996
47,438
31,221
837
1,041
1,419
2,255
94,564
127,806
176,517
$
615,431
$
722,297
$
873,288
December 31,
2006
2005
2004
25.0
%
23.8
%
28.6
%
58.9
60.7
46.8
9.3
7.9
14.8
6.8
7.6
9.8
100.0
%
100.0
%
100.0
%
27
Table of Contents
December 31,
2006
2005
2004
Amount
Percent
Amount
Percent
Amount
Percent
(Dollars in thousands)
$
210,717
59
%
$
141,242
46
%
$
99,896
46
%
57,038
16
65,326
21
26,010
12
73,997
21
52,388
17
33,656
15
13,929
4
50,741
16
58,670
27
$
355,681
100
%
$
309,697
100
%
$
218,232
100
%
28
Table of Contents
December 31, 2006
Minimum Payments Due by Period
Less than
More than
1 year
1-3 years
3-5 years
5 years
Total
(In thousands)
$
1,758,838
$
$
$
$
1,758,838
1,022,984
101,987
11,172
3,104
1,139,247
208,969
208,969
15,023
90,049
40,000
145,072
279
471
351
1,101
3,748
3,157
1,313
186
8,404
$
3,009,841
$
195,664
$
52,836
$
3,290
$
3,261,631
December 31, 2006
Expected Expiration Dates by Period
Less than
More than
1 year
1-3 years
3-5 years
5 years
Total
(In thousands)
$
237,172
$
74,784
$
46,178
$
43,391
$
401,525
165,250
165,250
34,758
5,211
5,254
10
45,233
$
437,180
$
79,995
$
51,432
$
43,401
$
612,008
29
Table of Contents
30
Table of Contents
Year-End 2006 Twelve Month
Projection
Interest Rate Change Projection (in basis points)
−200
−100
0
+100
+200
2.6
%
1.4
%
(1.4
)%
(3.1
)%
Year-End 2005 Twelve Month
Projection
Interest Rate Change Projection (in basis points)
−200
−100
0
+100
+200
0.5
%
0.5
%
(0.5
)%
(1.1
)%
31
Table of Contents
December 31, 2006
Risk-Based
Leverage
Capital Ratios
Ratio
Tier 1
Total
11.9
%
16.2
%
17.5
%
5.0
6.0
10.0
3.0
4.0
8.0
32
Table of Contents
Total
Average
Total Number of Shares
Maximum Number of
Number of
Price
Purchased as Part of
Shares that May Yet
Period Beginning on First Day
of
Shares
Paid Per
Publicly Announced
Be Purchased Under
Month Ended
Purchased(1)
Share
Plans or Programs
the Plans or Programs
3,359
$
32.67
373,100
373,100
373,100
81,262
29.93
76,500
296,600
106,500
29.21
106,500
190,100
114,454
29.17
114,100
76,000
21,458
29.18
21,458
54,542
693
29.90
54,542
5,948
29.60
54,542
11,260
30.20
54,542
8,038
30.96
54,542
4,622
33.23
54,542
357,594
$
29.52
318,558
(1)
Includes shares delivered or
attested in satisfaction of the exercise price
and/or tax
withholding obligations by holders of employee stock options who
exercised options in 2006. The Corporations stock
compensation plans permit employees to use stock to satisfy such
obligations based on the market value of the stock on the date
of exercise.
33
Table of Contents
34
Table of Contents
OF INTERNAL CONTROL OVER FINANCIAL REPORTING
Lori A. Gwizdala
Executive Vice President, Chief
Financial Officer
and Treasurer
February 28, 2007
35
Table of Contents
36
Table of Contents
37
Table of Contents
December 31,
2006
2005
(In thousands, except share data)
$
135,544
$
145,575
49,500
6,600
5,712
5,321
520,867
594,491
94,564
127,806
22,131
21,051
5,667
3,519
2,807,660
2,706,695
(34,098
)
(34,148
)
2,773,562
2,672,547
49,475
45,058
70,129
63,293
8,777
8,203
53,319
55,852
$
3,789,247
$
3,749,316
$
551,177
$
542,014
2,346,908
2,277,866
2,898,085
2,819,880
29,235
28,008
208,969
203,598
145,072
196,765
3,281,361
3,248,251
24,828
25,079
368,554
376,046
123,454
106,507
(8,950
)
(6,567
)
507,886
501,065
$
3,789,247
$
3,749,316
38
Table of Contents
Years Ended December 31,
2006
2005
2004
(In thousands, except per share data)
$
185,598
$
164,830
$
152,534
24,391
28,289
32,283
2,557
2,153
2,104
1,268
927
841
2,975
2,121
1,077
634
984
411
217,423
199,304
189,250
69,095
44,632
30,741
8,422
3,021
697
7,670
9,800
10,178
85,187
57,453
41,616
132,236
141,851
147,634
5,200
4,285
3,819
127,036
137,566
143,815
20,993
20,371
19,301
7,906
7,909
7,396
9,025
7,883
6,595
1,742
1,663
3,328
1,053
(1,330
)
541
1,367
758
853
1,342
40,147
39,220
39,329
56,012
56,766
57,497
9,534
9,421
9,165
9,168
8,867
8,955
23,160
23,409
22,852
97,874
98,463
98,469
69,309
78,323
84,675
22,465
25,445
27,993
$
46,844
$
52,878
$
56,682
$
1.88
$
2.10
$
2.26
1.88
2.10
2.25
1.10
1.06
1.01
39
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
Accumulated
Other
Common
Retained
Comprehensive
(In thousands, except per share
data)
Stock
Surplus
Earnings
Income (Loss)
Total
$
23,801
$
328,774
$
94,746
$
10,728
$
458,049
1,199
44,584
(45,783
)
56,682
(9,132
)
(889
)
46,661
(25,379
)
(25,379
)
162
5,124
5,286
7
212
219
25,169
378,694
80,266
707
484,836
52,878
(6,922
)
(352
)
45,604
(26,637
)
(26,637
)
31
847
878
6
225
231
(127
)
(3,720
)
(3,847
)
25,079
376,046
106,507
(6,567
)
501,065
4,582
4,582
46,844
1,725
865
49,434
(4,973
)
(4,973
)
(27,403
)
(27,403
)
(7,076
)
(7,076
)
59
1,286
1,345
8
247
255
(318
)
(9,025
)
(9,343
)
$
24,828
$
368,554
$
123,454
$
(8,950
)
$
507,886
40
Table of Contents
Years Ended December 31,
2006
2005
2004
(In thousands)
$
46,844
$
52,878
$
56,682
5,200
4,285
3,819
(1,859
)
(1,048
)
(2,125
)
133,463
110,430
158,453
(119,870
)
(110,856
)
(153,458
)
1,330
(541
)
(1,367
)
344
396
363
(553
)
5,762
6,041
6,215
2,876
3,273
3,810
1,224
4,161
9,449
(793
)
12
(417
)
67
1,115
(9,236
)
(1,392
)
4,674
(998
)
(497
)
(5,044
)
64,675
67,197
81,240
(5,738
)
123,414
208,602
247,081
66,673
114,341
101,574
(114,772
)
(234,940
)
(358,146
)
46,068
90,524
94,133
(13,089
)
(42,616
)
(79,022
)
3,572
393
(4,651
)
(1,065
)
(1,541
)
(116,958
)
(134,716
)
(117,998
)
(13,882
)
6,493
6,406
6,498
(10,815
)
(3,522
)
(4,189
)
(27,947
)
3,014
(116,955
)
(75,362
)
(166,522
)
(48,614
)
153,567
122,929
(49,085
)
53,371
23,764
10,403
(10,000
)
10,000
135,000
108,000
10,000
(173,000
)
(40,000
)
(10,000
)
35,000
35,000
150,000
(86,693
)
(123,231
)
(20,377
)
(27,403
)
(26,637
)
(25,379
)
255
231
219
224
916
664
3,291
(9,343
)
(3,847
)
(3,468
)
(59,649
)
20,458
33,260
10,562
(15,257
)
157,496
146,934
162,191
$
190,756
$
157,496
$
146,934
$
83,977
$
56,114
$
41,566
23,920
24,660
27,540
10,743
7,258
7,986
41
Table of Contents
42
Table of Contents
43
Table of Contents
44
Table of Contents
45
Table of Contents
2005
2004
$
52,878
$
56,682
(2,592
)
(552
)
$
50,286
$
56,130
$
2.10
$
2.26
2.00
2.24
2.10
2.25
2.00
2.23
46
Table of Contents
47
Table of Contents
2006
2005
2004
(In thousands)
$
46,844
$
52,878
$
56,682
24,921
25,138
25,130
34
55
88
24,955
25,193
25,218
$
1.88
$
2.10
$
2.26
1.88
2.10
2.25
Amortization Method Amortize servicing assets or
servicing liabilities in proportion to and over the period of
net servicing income or net servicing loss and assess the
servicing assets or liabilities for impairment or increased
obligation based on fair value at each reporting date.
Fair Value Measurement Method Measure servicing
assets or servicing liabilities at fair value at each reporting
date and report changes in fair value in earnings in the periods
in which the changes occur.
48
Table of Contents
49
Table of Contents
50
Table of Contents
December 31,
2006
Amortized Cost
Unrealized Gains
Unrealized Losses
Fair Value
(In thousands)
$
23,025
$
$
175
$
22,850
230,403
18
2,056
228,365
8,091
163
8,254
253,202
235
4,213
249,224
760
16
1
775
10,654
107
10,547
526,135
432
6,552
520,015
852
852
$
526,987
$
432
$
6,552
$
520,867
$
44,435
$
8
$
688
$
43,755
223,920
3,840
220,080
9,097
274
1
9,370
303,379
378
5,946
297,811
1,060
21
2
1,079
21,851
1
308
21,544
603,742
682
10,785
593,639
852
852
$
604,594
$
682
$
10,785
$
594,491
51
Table of Contents
December 31,
2006
Amortized Cost
Unrealized Gains
Unrealized Losses
Fair Value
(In thousands)
$
39,731
$
$
663
$
39,068
53,996
358
125
54,229
837
38
875
$
94,564
$
396
$
788
$
94,172
$
79,327
$
11
$
1,199
$
78,139
47,438
486
116
47,808
1,041
56
1,097
$
127,806
$
553
$
1,315
$
127,044
December 31, 2006
Amortized Cost
Fair Value
(In thousands)
$
127,900
$
126,708
331,264
326,958
37,493
37,216
29,478
29,133
852
852
$
526,987
$
520,867
December 31, 2006
Amortized Cost
Fair Value
(In thousands)
$
26,836
$
26,593
35,623
35,271
19,980
20,145
12,125
12,163
$
94,564
$
94,172
52
Table of Contents
December 31, 2006
Less Than 12 Months
12 Months or More
Total
Gross
Gross
Gross
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Losses
Value
Losses
Value
Losses
(In thousands)
$
13,032
$
38
$
9,818
$
137
$
22,850
$
175
76,769
208
175,092
2,511
251,861
2,719
2,186
9
7,920
116
10,106
125
21,354
122
199,197
4,091
220,551
4,213
71
237
1
308
1
294
1
10,253
106
10,547
107
$
113,706
$
378
$
402,517
$
6,962
$
516,223
$
7,340
December 31, 2005
Less Than 12 Months
12 Months or More
Total
Gross
Gross
Gross
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Losses
Value
Losses
Value
Losses
(In thousands)
$
9,777
$
94
$
15,949
$
594
$
25,726
$
688
121,800
1,285
166,395
3,754
288,195
5,039
7,058
74
1,904
43
8,962
117
101,585
1,286
148,378
4,660
249,963
5,946
4
320
2
324
2
5,387
49
16,006
259
21,393
308
$
245,611
$
2,788
$
348,952
$
9,312
$
594,563
$
12,100
53
Table of Contents
2006
2005
2004
(In thousands)
$
2,423
$
3,197
$
3,264
764
347
677
(789
)
(1,121
)
(1,537
)
793
$
2,398
$
2,423
$
3,197
$
551,819
$
544,112
$
596,390
2006
2005
2004
(In thousands)
$
$
$
793
(793
)
$
$
$
2006
2005
(In thousands)
$
545,591
$
517,852
726,554
704,684
145,933
158,376
835,263
785,160
554,319
540,623
$
2,807,660
$
2,706,695
54
Table of Contents
2006
2005
2004
(In thousands)
$
34,148
$
34,166
$
33,179
(6,645
)
(4,986
)
(3,963
)
995
683
1,131
(5,650
)
(4,303
)
(2,832
)
5,200
4,285
3,819
400
$
34,098
$
34,148
$
34,166
2006
2005
2004
(In thousands)
$
10,245
$
3,133
$
3,245
4,394
2,950
1,343
1,728
3,741
2,887
3,853
3,133
985
884
676
20,239
14,561
8,397
1,693
825
106
2,232
2,002
174
1,158
1,717
1,023
1,414
592
524
6,671
5,136
1,653
$
26,910
$
19,697
$
10,050
55
Table of Contents
Impaired Loans
Valuation Allowance
2006
2005
2004
2006
2005
2004
(In thousands)
$
3,770
$
5,067
$
804
$
912
$
1,284
$
379
16,063
4,757
3,762
$
19,833
$
9,824
$
4,566
$
912
$
1,284
$
379
$
14,586
$
5,120
$
4,237
December 31,
2006
2005
(In thousands)
$
9,427
$
8,992
65,290
60,565
37,271
35,594
111,988
105,151
(62,513
)
(60,093
)
$
49,475
$
45,058
December 31,
2006
2005
(In thousands)
$
551,177
$
542,014
523,287
528,660
684,374
763,526
355,681
309,697
783,566
675,983
$
2,898,085
$
2,819,880
56
Table of Contents
Years Ended December 31,
2006
2005
2004
(In thousands)
$
20,993
$
20,371
$
19,301
7,906
7,909
7,396
3,068
2,363
2,121
2,707
2,726
2,541
2,472
1,877
598
778
917
1,335
1,742
1,663
3,328
1,053
(1,330
)
541
1,367
758
853
1,342
$
40,147
$
39,220
$
39,329
Years Ended December 31,
2006
2005
2004
(In thousands)
$
44,959
$
44,304
$
44,763
11,053
12,462
12,734
9,534
9,421
9,165
9,168
8,867
8,955
2,599
2,559
3,123
1,335
1,145
1,082
3,062
3,736
2,841
1,815
1,347
1,000
1,391
2,012
1,645
1,645
1,720
1,659
2,087
2,152
2,273
1,868
1,696
1,797
2,482
1,359
1,064
4,876
5,683
6,368
$
97,874
$
98,463
$
98,469
57
Table of Contents
2006
2005
2004
(In thousands)
$
24,258
$
27,413
$
29,636
(1,295
)
(923
)
(876
)
(498
)
(1,045
)
(767
)
$
22,465
$
25,445
$
27,993
2006
2005
2004
(In thousands)
$
22,882
$
25,378
$
26,878
(417
)
67
1,115
$
22,465
$
25,445
$
27,993
2006
2005
(In thousands)
$
11,798
$
11,761
1,164
2,132
2,142
3,536
427
856
672
2,098
1,807
18,485
19,908
545
2,217
839
848
1,970
1,530
804
221
1,203
911
4,816
6,272
$
13,669
$
13,636
58
Table of Contents
Asset Category
2006
2005
61
%
60
%
33
31
6
9
100
%
100
%
59
Table of Contents
2006
2005
(In thousands)
$
84,772
$
75,367
3,177
4,879
4,452
4,273
(9,993
)
2,797
(2,864
)
(2,544
)
(3,964
)
75,580
84,772
76,155
71,937
6,582
698
6,064
(2,864
)
(2,544
)
79,873
76,155
4,293
(8,617
)
8,581
23,550
(26
)
(147
)
12,848
14,786
(8,555
)
$
4,293
$
14,786
2006
2005
2004
6.00
%
5.60
%
5.75
%
6.00
5.75
6.00
7.00
8.00
8.00
4.25
5.00
5.00
(1)
The Pension Plan discount rate was
5.60% from January 1 through May 31, 2006. The discount
rate was changed to 6.25% effective June 1, 2006 in
conjunction with the partial freeze of the Pension Plan,
resulting in an average discount rate of 6.00% in 2006.
2006
2005
2004
(In thousands)
$
3,177
$
4,879
$
4,495
4,452
4,273
4,099
(5,853
)
(5,845
)
(5,422
)
(13
)
(24
)
(36
)
282
473
372
(108
)
$
1,937
$
3,756
$
3,508
60
Table of Contents
$
2,886
3,226
3,448
3,946
4,156
25,332
$
42,994
2006
2005
(In thousands)
$
789
$
674
21
15
43
38
(180
)
103
(41
)
(41
)
632
789
41
41
(41
)
(41
)
632
789
79
(102
)
711
687
(79
)
$
632
$
687
2006
2005
2004
6.00
%
5.60
%
5.75
%
5.60
5.75
6.00
4.25
5.00
5.00
61
Table of Contents
2006
2005
2004
(In thousands)
$
21
$
15
$
16
43
38
35
2
$
66
$
53
$
51
$
41
40
40
39
40
234
$
434
62
Table of Contents
2006
2005
(In thousands)
$
5,427
$
5,328
271
281
(613
)
112
(306
)
(294
)
4,779
5,427
306
294
(306
)
(294
)
4,779
5,427
(1,095
)
(1,710
)
1,921
2,246
5,605
5,963
(826
)
$
4,779
$
5,963
2006
2005
2004
(In thousands)
$
$
$
30
271
281
316
(325
)
(324
)
(324
)
56
61
324
$
2
$
18
$
346
$
353
371
382
388
391
1,891
$
3,776
2006
2005
2004
6.00
%
5.60
%
5.75
%
5.60
5.75
6.00
9.00
10.50
10.00
63
Table of Contents
One Percentage-
One Percentage-
Point Increase
Point Decrease
(In thousands)
$
27
$
(23
)
469
(410
)
Before Application of
After Application of
SFAS 158
Adjustment
SFAS 158
(In thousands)
$
59,197
$
(5,878
)
$
53,319
3,795,125
(5,878
)
3,789,247
30,140
(905
)
29,235
3,282,266
(905
)
3,281,361
3,977
4,973
8,950
512,859
(4,973
)
507,886
$
12,848
$
(8,555
)
$
4,293
10,992
2,677
13,669
711
(79
)
632
5,605
(826
)
4,779
(1)
Included in interest receivable and
other assets in the consolidated statement of financial position.
(2)
Included in interest payable and
other liabilities in the consolidated statement of financial
position.
64
Table of Contents
Maximum
Weighted Average
Average Amount
Weighted Average
Outstanding
Ending
Interest Rate At
Outstanding
Interest Rate
at any
Balance
Year-End
During Year
During Year
Month-End
(Dollars in thousands)
$
178,969
3.91
%
$
152,003
3.66
%
$
178,969
4,109
3.74
10,000
30,000
5.28
52,055
5.20
125,000
$
208,969
4.13
%
$
208,167
4.05
%
$
313,969
$
125,598
2.76
%
$
107,634
2.01
%
$
127,613
10,000
3.64
5,890
3.66
10,000
68,000
4.41
16,011
4.02
68,000
$
203,598
3.35
%
$
129,535
2.33
%
$
205,613
$
101,834
1.10
%
$
90,016
0.65
%
$
101,834
8,333
1.38
10,000
$
101,834
1.10
%
$
98,349
0.71
%
$
111,834
December 31, 2006
December 31, 2005
Weighted Average
Weighted Average
Ending
Interest Rate
Ending
Interest Rate
Balance
At Year-End
Balance
At Year-End
(Dollars in thousands)
$
65,072
4.76
%
$
93,765
3.45
%
80,000
5.68
103,000
5.44
$
145,072
5.26
%
$
196,765
4.49
%
65
Table of Contents
$
15,023
80,024
10,025
40,000
$
145,072
66
Table of Contents
December 31, 2006
Original
Accumulated
Carrying
Amount
Amortization
Amount
$
21,956
$
15,577
$
6,379
December 31, 2005
Original
Accumulated
Carrying
Amount
Amortization
Amount
$
19,269
$
13,666
$
5,603
690
514
176
$
2,087
2,152
2,273
$
1,757
1,513
689
441
377
1,602
$
6,379
67
Table of Contents
2005
2004
3.20
%
2.50
%
33.00
32.60
4.45
3.14
7.00
7.00
68
Table of Contents
Weighted
Weighted-Average
Average
Remaining
Aggregate
Number of
Exercise Price
Contractual Terms
Intrinsic Value
Options
Per Share
(In years)
(In thousands)
638,520
$
24.26
188,738
39.69
(195,695
)
18.57
(5,548
)
22.15
626,015
30.73
177,450
32.28
(50,562
)
22.53
(7,475
)
33.33
745,428
31.63
(97,896
)
21.75
(6,038
)
30.92
641,494
$
33.15
6.76
$
1,442
636,257
$
33.19
6.77
$
1,413
Options Outstanding
Options Exercisable
Weighted
Weighted
Average
Range of
Average
Exercise
Exercise
Exercise
Number
Price
Average
Prices
Number
Price
Outstanding
Per Share
Term
(1)
Per Share
Exercisable
Per Share
34,845
$
23.79
4.36
$
23.14 - $25.62
34,845
$
23.79
162,459
27.37
3.45
26.17 - 27.78
157,222
27.36
175,600
32.28
8.97
32.28
175,600
32.28
84,840
35.67
6.95
35.67
84,840
35.67
183,750
39.69
7.95
39.69
183,750
39.69
641,494
$
33.15
6.76
$
23.14 - $39.69
636,257
$
33.19
(1)
Weighted average remaining
contractual term in years
69
Table of Contents
$
3,748
1,883
1,274
1,035
278
186
$
8,404
70
Table of Contents
December 31, 2006
Risk-Based Capital
Leverage
Tier 1
Total
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in millions)
$
440
12
%
$
440
16
%
$
474
18
%
111
3
108
4
217
8
185
5
163
6
271
10
432
12
432
16
466
17
111
3
108
4
216
8
185
5
162
6
270
10
71
Table of Contents
December 31, 2005
Risk-Based Capital
Leverage
Tier 1
Total
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in millions)
$
438
12
%
$
438
17
%
$
471
18
%
111
3
106
4
212
8
185
5
159
6
265
10
416
11
416
16
449
17
112
3
106
4
212
8
187
5
159
6
265
10
Table of Contents
2006
2005
Carrying
Fair
Carrying
Fair
Amount
Value
Amount
Value
(In thousands)
$
135,544
$
135,544
$
145,575
$
145,575
55,212
55,212
11,921
11,921
637,562
637,170
743,348
742,586
5,667
5,667
3,519
3,519
2,773,562
2,717,617
2,672,547
2,611,577
17,755
17,755
17,375
17,375
$
1,758,838
$
1,758,838
$
1,834,200
$
1,834,200
1,139,247
1,136,374
985,680
982,782
4,828
4,828
3,618
3,618
208,969
208,954
203,598
203,595
145,072
145,945
196,765
198,353
73
Table of Contents
December 31,
Condensed Statements of
Financial Position
2006
2005
(In thousands)
$
9,616
$
17,853
850
5,421
498,859
477,523
548
5,710
5,975
1,092
1,092
320
3,824
$
516,447
$
512,236
$
8,561
$
11,171
8,561
11,171
507,886
501,065
$
516,447
$
512,236
Years Ended December 31,
Condensed Statements of
Income
2006
2005
2004
(In thousands)
$
28,000
$
27,000
$
37,620
475
593
506
198
137
213
218
88
536
536
848
656
9
155
213
28,827
29,733
39,441
1,720
4,486
3,938
1,720
4,486
3,938
27,107
25,247
35,503
599
1,134
1,047
19,123
26,717
19,903
15
(220
)
229
$
46,844
$
52,878
$
56,682
74
Table of Contents
Years Ended December 31,
Condensed Statements of Cash
Flows
2006
2005
2004
(In thousands)
$
46,844
$
52,878
$
56,682
(848
)
(656
)
328
937
949
16
42
33
(19,138
)
(26,497
)
(20,132
)
190
(483
)
2,588
(989
)
346
(1,927
)
27,251
26,375
37,537
(11,600
)
1,360
(1,132
)
(498
)
(470
)
(241
)
(1,041
)
(4,059
)
100
250
250
1,531
3,374
87
242
(12,505
)
(27,403
)
(26,637
)
(25,379
)
255
231
219
916
664
3,291
(9,343
)
(3,847
)
(35,575
)
(29,589
)
(21,869
)
(8,237
)
(2,972
)
3,163
17,853
20,825
17,662
$
9,616
$
17,853
$
20,825
Table of Contents
2006
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
(In thousands, except per share data)
$
52,277
$
53,391
$
55,556
$
56,199
18,686
20,174
22,817
23,510
33,591
33,217
32,739
32,689
460
400
1,750
2,590
(1,330
)
9,832
10,518
9,896
11,231
25,121
25,076
24,196
23,481
17,842
18,259
16,689
16,519
5,945
6,030
5,199
5,291
$
11,897
$
12,229
$
11,490
$
11,228
$
0.47
$
0.49
$
0.46
$
0.45
0.47
0.49
0.46
0.45
2005
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
(In thousands, except per share data)
$
47,960
$
49,012
$
50,420
$
51,912
12,013
13,314
15,274
16,852
35,947
35,698
35,146
35,060
730
730
1,500
1,325
1,089
82
3
(633
)
9,091
9,671
10,246
9,671
24,983
24,763
24,839
23,878
20,414
19,958
19,056
18,895
6,910
6,743
5,451
6,341
$
13,504
$
13,215
$
13,605
$
12,554
$
0.54
$
0.53
$
0.54
$
0.50
0.53
0.53
0.54
0.50
76
Table of Contents
CORPORATION COMMON STOCK AND RELATED
SHAREHOLDER MATTERS (UNAUDITED)
2006
2005
High
Low
High
Low
$
33.18
$
30.28
$
42.50
$
31.01
32.45
28.56
33.75
28.55
30.89
28.65
35.95
30.71
33.96
29.02
34.00
29.51
Years Ended December 31,
2006
2005
2004
2003
2002
$
0.275
$
0.265
$
0.252
$
0.238
$
0.217
0.275
0.265
0.252
0.238
0.217
0.275
0.265
0.252
0.238
0.217
0.275
0.265
0.252
0.238
0.217
$
1.100
$
1.060
$
1.008
$
0.952
$
0.868
77
Table of Contents
S&P
Chemical
500
Financial
KBW 50
Stock
December 31
Corporation
Index
Index
2001
$
100.0
$
100.0
$
100.0
2002
110.0
93.0
78.0
2003
135.0
124.6
100.3
2004
162.8
137.1
111.2
2005
131.5
138.7
116.6
2006
142.8
165.6
135.0
78
Table of Contents
(a diversified company specializing in the development,
manufacture and marketing of silicones and related silicon-based
products)
(a holding company with interests in diversified businesses in
Southwest Michigan)
(an accounting and tax services company)
(a company that purchases, sells and leases farm equipment)
(a diversified science and technology company that manufactures
chemical, plastic and agricultural products)
(a health care organization)
(a land development and construction company)
(an automotive parts distribution company)
(a diversified science and technology company that manufactures
chemical, plastic and agricultural products)
Chemical Bank
Chemical Bank
Chemical Bank
Chemical Bank
Chemical Bank
Chemical Bank
79
Table of Contents
80
Table of Contents
Annual Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended December 31, 2006
or
Transition Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934
For the transition period from
to
.
Michigan
(State or Other
Jurisdiction of
Incorporation or Organization)
38-2022454
(I.R.S. Employer
Identification No.)
235 E. Main
Street
48640
(Zip Code)
Yes ü No
Yes No ü
Yes ü No
Yes No ü
81
Table of Contents
Pages
Business
Selected Financial Data
2
Average Balances, Tax Equivalent
Interest and Effective Yields and Rates
9
Volume and Rate Variance Analysis
10
Summary of Loans and Loan Loss
Experience
13
Comparison of Loan Maturities and
Interest Sensitivity
15
Nonperforming Assets
17
Allocation of the Allowance for
Loan Losses
20
Maturities and Yields of
Investment Securities at December 31, 2006
26
Summary of Investment Securities
27
Managements Discussion and
Analysis Subheadings: Net Interest Income,
Loans, Nonperforming Assets,
Provision and Allowance for Loan Losses,
Liquidity Risk and Market Risk
8-31
Maturity Distribution of Time
Deposits of $100,000 or More
28
Investment Securities
51-53
Loans
54-56
Short-term Borrowings
65
Business
83-87
Risk Factors
87-88
Unresolved Staff Comments
88
Properties
88-89
Legal Proceedings
89
Submission of Matters to a Vote of
Security Holders
89
Executive Officers of the
Registrant
89-90
82
Table of Contents
Pages
Market for the Registrants
Common Equity, Related Stockholder Matters and Issuer Purchases
90
of Equity Securities
90
Selected Financial Data
90
Managements Discussion and
Analysis of Financial Condition and Results of Operations
90
Quantitative and Qualitative
Disclosures About Market Risk
90
Financial Statements and
Supplementary Data
91
Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
91
Controls and Procedures
91
Other Information
91
Directors, Executive Officers and
Corporate Governance
92
Executive Compensation
92
Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
92-94
Matters
Certain Relationships and Related
Transactions and Director Independence
94
Principal Accountant Fees and
Services
94
Exhibits and Financial Statement
Schedules
94-95
96
83
Table of Contents
84
Table of Contents
85
Table of Contents
86
Table of Contents
Item 1A.
Risk
Factors.
Variations in quarterly or annual operating results
Changes in interest rates
New developments in the banking industry
Regulatory actions
Volatility of stock market prices and volumes
Changes in market valuations of similar companies
Changes in securities analysts estimates of financial
performance
New litigation or contingencies or changes in existing
litigation or contingencies
Changes in accounting policies or procedures as may be required
by the Financial Accounting Standards Board or other regulatory
agencies
Rumors or erroneous information
87
Table of Contents
Item 1B.
Unresolved
Staff Comments.
Item 2.
Properties.
88
Table of Contents
Item 3.
Legal
Proceedings.
Item 4.
Submission
of Matters to a Vote of Security Holders.
89
Table of Contents
Item 5.
Market
for the Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.
Item 6.
Selected
Financial Data.
90
Table of Contents
Item 9.
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Item 9A.
Controls
and Procedures.
Item 9B.
Other
Information.
91
Table of Contents
Item 10.
Directors,
Executive Officers and Corporate Governance.
Item 11.
Executive
Compensation.
Item 12.
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
Equity Compensation Plan Information
Number of Securities
Remaining Available for
Number of Securities to be
Weighted-Average
Future Issuance under
Issued upon Exercise of
Exercise Price of
Equity Compensation
Outstanding Options,
Outstanding Options,
Plans (excluding Securities
Warrants and Rights
Warrants and Rights
Reflected in Column (a))
Plan category
(a)
(b)
(c)
Equity compensation plans
approved by security holders
637,507
$
33.19
1,000,000
Equity compensation plans not
approved by security holders
3,987
25.49
48,836
641,494
$
33.15
1,048,836
92
Table of Contents
93
Table of Contents
Item 13.
Certain
Relationships and Related Transactions and Director
Independence.
Item 14.
Principal
Accountant Fees and Services.
Item 15.
Exhibits
and Financial Statement Schedules.
Pages
38
39
41
40
42-76
36-37
91
(2)
Financial Statement Schedules. The
schedules for the Corporation are omitted because of the absence
of conditions under which they are required, or because the
information is set forth in the consolidated financial
statements or the notes thereto.
94
Table of Contents
(3)
Exhibits. The following lists the Exhibits to the Annual
Report on
Form 10-K:
Restated Articles of
Incorporation. Previously filed as Exhibit 4.1 to the
registrants Registration Statement on
Form S-8,
filed with the Commission on March 2, 2001. Here
incorporated by reference.
Restated Bylaws. Previously filed
as Exhibit 3.2 to the registrants Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2004, filed with
the Commission on November 5, 2004. Here incorporated by
reference.
Long-Term Debt. The registrant has
outstanding long-term debt which at the time of this report does
not exceed 10% of the registrants total consolidated
assets. The registrant agrees to furnish copies of the
agreements defining the rights of holders of such long-term debt
to the Securities and Exchange Commission upon request.
Chemical Financial Corporation
Stock Incentive Plan of 2006.* Previously filed as an exhibit to
the registrants
Form 8-K,
filed with the Commission on April 21, 2006. Herein
incorporated by reference.
Chemical Financial Corporation
Stock Incentive Plan of 1997 and Underlying Agreements.*
Previously filed as Exhibit 10.1 to the registrants
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2004, filed with the
Commission on March 15, 2006. Here incorporated by
reference.
Chemical Financial Corporation
Deferred Compensation Plan for Directors.* Previously filed as
Exhibit 10.3 to the registrants Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005, filed with the
Commission on March 13, 2006. Here incorporated by
reference.
Chemical Financial Corporation
Deferred Compensation Plan.*
Chemical Financial Corporation
Supplemental Pension Plan.* Previously filed as
Exhibit 10.4 to the registrants Annual Report on
Form 10-K
for the fiscal year ended December 31, 2003, filed with the
Commission on March 12, 2004. Here incorporated by
reference.
Chemical Financial Corporation
Stock Option Plan for Holders of Shoreline Financial
Corporation.* Previously filed as Exhibit 4.3 to the
registrants Registration Statement on
Form S-8,
filed with the Commission on March 2, 2001. Here
incorporated by reference.
Chemical Financial Corporation
2001 Stock Purchase Plan for Subsidiary and Community Bank
Directors.* Previously filed as Exhibit 4.3 to the
registrants Registration Statement on
Form S-8,
filed with the Commission on March 25, 2002. Here
incorporated by reference.
Subsidiaries.
Consent of Independent Registered
Public Accounting Firm.
Consent of Independent Registered
Public Accounting Firm.
Consent of Independent Registered
Public Accounting Firm.
Powers of Attorney.
Certification of Chief Executive
Officer.
Certification of Chief Financial
Officer.
Certification pursuant to
18 U.S.C. §1350.
Chemical Financial Corporation
2001 Stock Purchase Plan for Subsidiary and Community Bank
Directors Audited Financial Statements and Notes.
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Table of Contents
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payable, before actual receipt of the benefits, or a right to receive benefits, shall be void and shall not be recognized.
DEFERRED COMPENSATION PLAN
(Select only one box in each column.)
Time:
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in
Control
Emergency
Method
Installments
Installments
DEFERRED COMPENSATION TRUST
(ii) Knowledge. Unless Trustee has actual knowledge of the Employer's Insolvency, or has received notice of such Insolvency or notice from a person claiming to be a creditor alleging that the Employer is Insolvent, Trustee has no duty to inquire whether the Employer is Insolvent. Trustee may in all events rely on such evidence concerning the Employer's solvency as may be furnished to Trustee that provides Trustee with a reasonable basis for making a determination concerning the Employer's solvency.
(iii) Discontinuance. If at any time the Trustee has determined that the Employer is Insolvent, Trustee shall discontinue regular direct payments to Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of that Employer's general creditors, except that Trustee shall make payments out of the Trust fund in only one or more of the following ways:
(A) Court. To general creditors of the Employer in accordance with instructions from a court with jurisdiction over the Employer's condition of Insolvency;
(B) Participants. To Plan participants and beneficiaries in accordance with such instructions; and
(C) Fees. In payment of its own fees and expenses.
Nothing in this Trust shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of the Employer with respect to benefits due under the Plan or otherwise.
(iv) Resumption. The Trustee shall resume the payment of regular direct benefits from the Trust to Plan participants or their beneficiaries in accordance with Section 2.1 of this Trust only after Trustee has determined that the Employer is not insolvent (or is no longer insolvent).
(c) Make-Up. Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to Section 3.1(b) and subsequently resumes payments, the first payment from the Trust following discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan for the period of discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by the Employer in lieu of the payments provided for under the Trust during any such period of discontinuance.
SECTION IV
Investment
4.1 Management.
Except as provided in this Trust, the Trustee has the exclusive right to manage and control the Trust.
(a) Appointment of and Investment by Manager. Prior to a Change in Control, an Employer may appoint as an Investment Manager for its Trust an investment advisor registered under the
Investment Advisors Act of 1940 who acknowledges, in writing, status as a fiduciary. After a Change in Control, that authority will rest in the Trustee only.
(b) Authority of Investment Manager. An Investment Manager has the right to direct the investment of the Trust over which it has been given authority and may direct the Trustee to exercise its powers to implement investment directions. An Investment Manager is subject to the limitations applicable to the Trustee under Section 4.2 and the remainder of this Agreement in this regard. The Trustee may act upon written investment instructions received from an Investment Manager which would be within the Trustee's authority prior to receipt of notice from the Employer of a change or termination of such Manager.
4.2 Investment Authority.
Except as explicitly provided in Section 4.1, all rights associated with assets of the Trusts shall be exercised by Trustee or the person designated by Trustee, and shall in no event be exercisable by or rest with Plan participants, except that voting rights with respect to Trust assets may, at its request, be exercised by the Employer.
(a) Authorized Investments. If the Trustee does not receive instructions from the Employer or an Investment Manager for the investment of part or all of the Trust, the Trustee shall invest and reinvest the assets of the Trust as the Trustee, in its sole discretion, may deem appropriate, subject to the limitations and restrictions of this Trust. Subject to those limitations and restrictions, the Trustee may invest in:
(i) Stock. Common and preferred stocks that do not violate the limitations of Section 4.2(b), shares, or certificates of participation issued by investment companies, investment trusts, mutual funds, common or pooled investment funds;
(ii) Real Property. Investments in improved and unimproved real property (whether or not income producing), mortgages, deeds of trust, leases, ground leases, limited partnership interests, real or personal property interests owned, developed, or managed by joint venture or limited partnerships;
(iii) Other. Bonds, debentures, notes, commercial paper, certificates of deposit, and other securities or evidences of indebtedness, secured or unsecured, including variable amount notes, convertible securities of all types and kinds, interest-bearing savings or deposit accounts with any federally insured bank (including the Trustee), or any federally insured savings and loan association, insurance and annuity contracts, notes secured by real or personal property, obligations of governmental bodies, both domestic and foreign, and any other property permitted as trust investments under applicable law; and
(iv) Pooled. Any common or pooled investment fund or mutual fund now or hereafter maintained, sponsored, provided investment management services by, or otherwise associated with, Trustee, or any affiliate of Trustee, and in any interest-bearing savings or deposit accounts with the banking department of Trustee. Trustee shall be the owner of all insurance and annuity contracts held in the Trust. Trustee may retain in money market funds, or other daily interest and availability funds, so much of the Trust fund as Trustee deems advisable.
(b) Limitation. In no event may Trustee, the Employer or the Investment Manager hold or invest in securities (including stock or rights to acquire stock) or obligations issued by the Employer (or any subsidiary, affiliate, successor, or other related party of the Employer.
4.3 Substitution.
Subject to the limitations of Section 4.2, the Employer has the right, at its discretion from time to time, to substitute assets of equal fair market value for any asset held by the Trust. This right is exercisable by the Employer in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity.
4.4 Disposition of Income.
During the term of the Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested.
SECTION V
Trustee Duties
5.1 Accounting by Trustee.
Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including any specific records agreed upon in writing between an Employer and the Trustee. As soon as possible following the close of each calendar year and within 60 days after the removal or resignation of the Trustee, the Trustee shall deliver to the Employer a written account of its administration of the Trust during the year or during the period from the close of the last preceding year to the date of such removal or resignation. The account must set forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and show all cash, securities and other property held in the Trust at the end of the year or as of th e date of removal or resignation, as the case may be.
5.2 Responsibility of Trustee.
The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. The Trustee shall act solely in the interest of the Participants and their beneficiaries.
(a) Exception. Notwithstanding that, the Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by the Employer with respect to its Trust which is contemplated by, and in conformity with, the terms of the Plan or this Agreement and is given in writing by the Employer. In the event of a dispute between the Employer and a party, the Trustee may hire experts to determine the dispute and may if unable to determine the dispute apply to a court of competent jurisdiction to resolve the dispute.
(b) Litigation. If the Trustee undertakes or defends any litigation arising in connection with the Trust, the Employer agrees to indemnify the Trustee against the Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. Prior to a Change in Control, if the Employer does not pay such costs, expenses and liabilities in a reasonably timely manner, the Trustee may obtain payment from the Trust. Following a Change in Control, the Employer shall be obligated to pay all of the Trustee's costs, expenses and liabilities as described above not later than 90 days following the date such expenses are incurred.
(c) Counsel. The Trustee may consult with legal counsel (who may also be counsel for the Employer or, following a Change in Control, the Trustee's counsel) with respect to any of its duties or obligations under this Trust and may rely on the advice of such counsel.
(d) Assistance. The Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder.
(e) General. The Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law, unless expressly provided otherwise here, provided, however, that if an insurance policy is held as an asset of the Trust, the Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person other than the Employer the proceeds of any borrowing against such policy.
Notwithstanding any powers granted to the Trustee pursuant to this Agreement or applicable law, the Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code.
5.3 Compensation and Expenses of Trustee.
Prior to a Change in Control, the Employer may pay all reasonable administrative and Trustee's fees and expenses. If not so paid, the fees and expenses shall be paid from the Trust. Following a Change in Control, the Employer shall pay all reasonable administrative and Trustee's fees and expenses in a timely fashion.
SECTION VI
Change of Trustee and Amendment
6.1 Resignation and Removal of Trustee.
The Trustee may resign at any time by written notice to the Employer, which shall be effective 60 days after receipt of such notice unless the Employer and the Trustee agree otherwise.
(a) Effect of Change in Control. Prior to a Change in Control, the Trustee may be removed on 60 days' notice by the Employer. In connection with or after a Change in Control, the Trustee may be removed by the Employer only upon a judicial determination of breach of fiduciary responsibility by the Trustee under the terms of this document or applicable state or federal law governing the responsibility of fiduciaries or upon a finding of such breach by an agency or department of the United States Government. In that event, the Trustee may be removed by the Employer upon 60 days' notice in writing to the Trustee.
(b) Transfer to Successor. Upon resignation or removal of the Trustee and proper appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within 60 days after receipt of notice of resignation, removal or transfer, unless the Employer extends the time limit.
(c) Appointment of Successor. If the Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 6.2, by the effective date of resignation or removal under this section. If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. If the resignation or removal occurs in connection with a Change in Control, the Plan participants shall be necessary parties to that action. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust.
6.2 Successor.
If the Trustee resigns or is removed in accordance with Section 6.1, the Employer may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace the Trustee upon resignation or removal.
(a) Change in Control. If the change of Trustee occurs in connection with or after a Change in Control, the appointment of a successor Trustee is conditioned upon and shall not be effective without the written consent of a majority of the Plan participants. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the Employer or the successor Trustee to evidence the transfer.
(b) Liability. The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 5.1 and 5.2. The successor Trustee shall not be responsible for, and the Employer shall indemnify and defend the successor Trustee from, any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee.
6.3 Amendment or Termination. This Trust may be amended by a written instrument executed by Trustee and the Employer.
(a) Limitations. No amendment may conflict with the terms of the Plan or make the Trust revocable. In addition, this Agreement may not be amended in connection with or after a Change in Control without the written consent of a majority of the Plan participants who are beneficiaries of the Trust to be affected by the amendment.
(b) Termination. Upon the written approval of all of the participants and beneficiaries entitled to payment of benefits from the Trust pursuant to the terms of the Plan, the Employer may terminate the Trust prior to the time all benefit payments under the Plan have been made. Without that written approval, the Trust shall not terminate until the date on which no Plan participant or beneficiary is any longer entitled to benefits from the Trust pursuant to the terms of the Plan.
(c) Reversion. Except as provided here, all assets in the Trust, at a proper termination, shall be returned to the Employer.
6.4 Miscellaneous.
The following provisions also apply:
(a) Savings Clause. Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions.
(b) Antialienation. Benefits payable to Plan participants and their beneficiaries under this Trust may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process.
(c) Governing Law. This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, except as required by applicable federal law.
IN WITNESS WHEREOF, the Employer and the Trustee have caused this Trust to be executed by their respective duly authorized officers on the date first written above.
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SCHEDULE A
Initial Principal of Trust |
$_____________ |
EXHIBIT NO. 21
SUBSIDIARY OF
CHEMICAL FINANCIAL CORPORATION
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Ownership |
State or Other Jurisdiction |
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Chemical Bank |
100% |
Michigan |
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CFC Financial Services, Inc. |
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also operates under d/b/a CFC |
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CFC Title Services, Inc. |
100% |
Michigan |
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Shoreline Insurance Services, Inc. |
100% |
Michigan |
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Chemical Loan Management |
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Chemical Loan Services, LLC |
100% |
Michigan |
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JV Midland No. 1, LLC |
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also operates under d/b/a Bailey |
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EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Chemical Financial Corporation
We consent to the incorporation by reference in the registration statements (No. 333-109184) on Form S-3 and (Nos. 33-40792, 333-38511, 333-56482, 333-84862, 333-125031, and 333-133962) on Form S-8 of Chemical Financial Corporation of our reports dated February 28, 2007, with respect to the consolidated statement of financial position of Chemical Financial Corporation as of December 31, 2006, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for the year ended December 31, 2006, management's assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and the effectiveness of internal control over financial reporting as of December 31, 2006, which reports appear in the December 31, 2006 annual report on Form 10-K of Chemical Financial Corporation.
Our report refers to changes in the method of measuring prior-year uncorrected misstatements when quantifying misstatements in current year financial statements and the method of accounting for defined benefit and post retirement obligations on 2006.
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/s/ KPMG LLP |
Detroit, Michigan
February 28, 2007
EXHIBIT 23.2
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
Registration Statement No. 33-40792 on Form S-8 dated May 21, 1991
401 (k) Plan;
Registration Statement No. 333-38511 on Form S-8 dated October 22, 1997
Stock Incentive Plan of 1997;
Registration Statement No. 333-56482 on Form S-8 dated March 2, 2001
Stock Option Plan for Option Holders of Shoreline Financial Corporation;
Registration Statement No. 333-84862 on Form S-8 dated March 25, 2002
2001 Stock Purchase Plan for Subsidiary and Community Bank Directors;
Registration Statement No. 333-109184 on Form S-3 dated September 26, 2003
Dividend Reinvestment Plan - Chemical Invest Direct;
Registration Statement No. 333-125031 on Form S-8 dated May 18, 2005
Chemical Financial Corporation 401(k) Savings Plan,
Registration Statement No. 333-133962 on Form S-8 dated May 10, 2006
Chemical Financial Corporation Stock Incentive Plan of 2006
of our report dated February 24, 2006, with respect to the consolidated financial statements of Chemical Financial Corporation, included in this Annual Report (Form 10-K) for the year ended December 31, 2006 filed with the Securities and Exchange Commission.
We also consent to the incorporation by reference in the Registration Statement No. 333-84862 on Form S-8 dated March 25, 2002 of our report dated March 6, 2006 with respect to the financial statements of the Chemical Financial Corporation 2001 Stock Purchase Plan for Subsidiary and Community Bank Directors included in Exhibit 99.1 of this Annual Report (Form 10-K) for the year ended December 31, 2006 filed with the Securities and Exchange Commission.
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/s/ Ernst & Young LLP |
Detroit, Michigan
February 28, 2007
EXHIBIT 23.3
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statement No. 333-84862 on Form S-8 dated March 25, 2002 of our report dated February 28, 2007 with respect to the financial statements of the Chemical Financial Corporation 2001 Stock Purchase Plan for Subsidiary and Community Bank Directors included in Exhibit 99.1 of this Annual Report (Form 10-K) for the year ended December 31, 2006 filed with the Securities and Exchange Commission.
/s/ Andrews Hooper & Pavlik P.L.C. |
Saginaw, Michigan
February 28, 2007
EXHIBIT NO. 24
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 8, 2006 |
/s/ Gary E. Anderson |
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Gary E. Anderson |
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 12, 2006 |
/s/ J. Daniel Bernson |
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J. Daniel Bernson |
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 11, 2006 |
/s/ Nancy Bowman |
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Nancy Bowman |
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 11, 2006 |
/s/ James A. Currie |
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James A. Currie |
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 9, 2006 |
/s/ Thomas T. Huff |
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Thomas T. Huff |
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 12, 2006 |
/s/ Michael T. Laethem |
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Michael T. Laethem |
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 12, 2006 |
/s/ Geoffery E. Merszei |
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Geoffery E. Merszei |
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 11, 2006 |
/s/ Terence F. Moore |
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(signature) |
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Terence F. Moore |
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 11, 2006 |
/s/ Aloysius J. Oliver |
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(signature) |
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Aloysius J. Oliver |
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 11, 2006 |
/s/ Calvin D. Prins |
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(signature) |
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Calvin D. Prins |
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 8, 2006 |
/s/ Larry D. Stauffer |
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Larry D. Stauffer |
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 18, 2006 |
/s/ William S. Stavropoulos |
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William S. Stavropoulos |
LIMITED POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer, or both, of Chemical Financial Corporation, does hereby appoint Gary E. Anderson, David B. Ramaker and Lori A. Gwizdala, or either of them, his or her attorneys or attorney, with full power of substitution, to execute in his or her name an Annual Report of Chemical Financial Corporation on Form 10-K for its fiscal year ended December 31, 2006, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys.
Dated: December 11, 2006 |
/s/ Franklin C. Wheatlake |
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Franklin C. Wheatlake |
EXHIBIT 31.1
CERTIFICATIONS
I, David B. Ramaker, certify that:
1. |
I have reviewed this annual report on Form 10-K for the year ended December 31, 2006 of Chemical Financial Corporation; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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|
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: February 28, 2007
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/s/ David B. Ramaker |
|
David B. Ramaker |
EXHIBIT 31.2
CERTIFICATIONS
I, Lori A. Gwizdala, certify that:
1. |
I have reviewed this annual report on Form 10-K for the year ended December 31, 2006 of Chemical Financial Corporation; |
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|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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|
|
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: February 28, 2007
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/s/ Lori A. Gwizdala |
|
Lori A. Gwizdala |
EXHIBIT 32
CERTIFICATION
Pursuant to 18 U.S.C. § 1350, each of the undersigned hereby certifies in his capacity as an officer of Chemical Financial Corporation (the "Company") that the Annual Report of the Company on Form 10-K for the accounting period ended December 31, 2006 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such period and the results of operations of the Company for such period.
Dated: February 28, 2007 |
/s/ David B. Ramaker |
|
David B. Ramaker |
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Dated: February 28, 2007 |
/s/ Lori A. Gwizdala |
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Lori A. Gwizdala |
A signed original of this written statement required by Section 906 has been provided to Chemical Financial Corporation and will be retained by Chemical Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request. |
EXHIBIT No. 99.1
Financial Statements
With Report of Independent Registered Public Accounting Firm
Chemical Financial Corporation
2001 Stock Purchase Plan
for Subsidiary and Community Bank Directors
December 31, 2006
Report of Independent Registered Public Accounting Firm
Plan Administrator
Chemical Financial Corporation
2001 Stock Purchase Plan for Subsidiary and Community Bank Directors
We have audited the accompanying statement of financial condition of the Chemical Financial Corporation 2001 Stock Purchase Plan for Subsidiary and Community Bank Directors as of December 31, 2006 and the related statement of income and changes in plan equity for the year ended December 31, 2006. These financial statements are the responsibility of the Plan's Administrator. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan's internal control over financial reporting. Our audit included considerations of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Plan Administrator, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Chemical Financial Corporation 2001 Stock Purchase Plan for Subsidiary and Community Bank Directors as of December 31, 2006 and the results of its operations and changes in its plan equity for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.
|
/s/ Andrews Hooper & Pavlik P.L.C. |
Saginaw, Michigan
February 28, 2007
Chemical Financial Corporation
2001 Stock Purchase Plan
for Subsidiary and Community Bank Directors
Statements of Financial Condition
|
December 31 |
|
December 31 |
||
Assets |
|
|
|
|
|
Cash |
$ |
1,066 |
|
$ |
867 |
Common stock receivable of Chemical |
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|
|
|
|
Financial Corporation, at market value - (7,107 shares at a |
|
|
|
|
|
Total Assets |
$ |
237,729 |
|
$ |
250,532 |
|
|
|
|
|
|
Plan Equity |
|
|
|
|
|
Plan equity (58 participants at December 31, 2006 and |
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|
|
|
|
See accompanying notes.
Chemical Financial Corporation
2001 Stock Purchase Plan
for Subsidiary and Community Bank Directors
Statements of Income and Changes in Plan Equity
|
Year Ended |
|
Year Ended |
|
Year Ended |
|
||||
|
|
|
|
|
|
|
|
|
|
|
Participant contributions |
$ |
217,625 |
|
$ |
249,525 |
|
|
$ |
227,925 |
|
Dividend equivalents and |
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|
|
|
|
|
|
|
|
|
fractional share interests |
|
5,863 |
|
|
5,400 |
|
|
|
3,564 |
|
|
|
223,488 |
|
|
254,925 |
|
|
|
231,489 |
|
|
|
|
|
|
|
|
|
|
|
|
Deductions |
|
|
|
|
|
|
|
|
|
|
Plan distributions |
|
249,810 |
|
|
267,381 |
|
|
|
255,431 |
|
|
|
(26,322 |
) |
|
(12,456 |
) |
|
|
(23,942 |
) |
Net unrealized appreciation (depreciation) |
|
|
|
|
|
|
|
|
|
|
in fair value of common stock receivable |
|
13,519 |
|
|
(5,135 |
) |
|
|
36,012 |
|
Net increase (decrease) |
|
(12,803 |
) |
|
(17,591 |
) |
|
|
12,070 |
|
Plan equity at beginning of period |
|
250,532 |
|
|
268,123 |
|
|
|
256,053 |
|
Plan equity at end of period |
$ |
237,729 |
|
$ |
250,532 |
|
|
$ |
268,123 |
|
See accompanying notes.
Chemical Financial Corporation
2001 Stock Purchase Plan
for Subsidiary and Community Bank Directors
Notes to Financial Statements
December 31, 2006
Note 1 - Description of the Plan
The Chemical Financial Corporation 2001 Stock Purchase Plan for Subsidiary and Community Bank Directors (Plan) was made effective by Chemical Financial Corporation (Corporation) on March 25, 2002. The Plan is designed to provide non-employee directors of the Corporation's subsidiaries and community banks, who are neither directors nor employees of the Corporation, with a convenient method of acquiring Corporation stock. The Plan provides for a maximum of 75,000 shares of the Corporation's common stock, $1.00 par value (Common Stock), subject to adjustments for certain changes in the capital structure of the Corporation as defined in the Plan (including stock dividends and stock splits), to be available under the Plan.
Subsidiary directors and community bank directors, who elect to participate in the Plan, may elect to contribute to the Plan fifty percent or one hundred percent of their director retainer fees and/or fifty percent or one hundred percent of their board of director fees and/or fifty percent or one hundred percent of their director committee fees, earned as directors or community bank directors of the Corporation's subsidiaries. Participant contributions to the Plan are made by the Corporation's subsidiaries on behalf of each electing participant. As of the last day of each month, each participant's cash account is debited for the purchase of whole shares of the Corporation's stock that is credited to a separate participant stock account. The stock purchased under the Plan during the calendar year is issued by the Corporation directly to the participants in the following calendar year. The Plan provides for dividend equivalents to be credited to each participant's cash account as of the dividend record date of the Corporation's common stock. Dividend equivalents are calculated by multiplying the Corporation's dividend rate by the number of shares of common stock in each participant's stock account as of the Corporation's dividend record date. The Plan also provides for an appropriate credit to each participant's stock account for stock dividends, stock splits or other distributions of the Corporation's common stock by the Corporation. Fractional shares calculated as a result of the above adjustments are converted to cash based on the market price of the Corporation's common stock and are credited to each participant's cash account. Plan participants may terminate their participation in the Plan, at any time, by written notice of withdrawal to the Corporation. Participants will cease to be eligible to participate in the Plan when they cease to serve as directors or community bank directors of subsidiaries of the Corporation. Upon withdrawal from the Plan, each participant will receive the shares of common stock of the Corporation in their participant stock account and the cash in their participant cash account.
Chemical Financial Corporation
2001 Stock Purchase Plan
for Subsidiary and Community Bank Directors
Notes to Financial Statements (continued)
December 31, 2006
Note 1 - Description of the Plan (continued)
The Plan had 48,836 shares and 56,697 shares as of December 31, 2006 and 2005, respectively, of the Corporation's common stock available for future issuance.
The Corporation reserves the right to terminate or amend the Plan at any time, provided, however, that no termination or amendment shall affect or diminish any participant's right to the benefit of contributions made by him/her prior to the date of such amendment or termination.
The Plan provides that all expenses of the Plan and its administration shall be paid by the Corporation.
The Plan is not qualified under Sections 401(a) or 501(a) of the Internal Revenue Code of 1986, as amended. The Plan does not provide for income taxes because any income is taxable to the participants. Participants in the Plan must treat as taxable income the contributions made to the Plan by the Corporation's subsidiaries on their behalf. Dividend equivalents and any other cash credited to the participants' cash accounts are taxable to the participants for Federal and state income tax purposes in the year such dividend equivalent or cash is credited to the participant cash account. Upon disposition of the common stock of the Corporation issued under the Plan, participants must treat any gain or loss as long-term or short-term capital gain or loss depending upon when such disposition occurs.
Chemical Financial Corporation
2001 Stock Purchase Plan
for Subsidiary and Community Bank Directors
Notes to Financial Statements (continued)
December 31, 2006
Note 2 - Summary of Accounting Policies
Valuation of Common Stock Receivable
Common stock receivable of the Corporation is recorded at the market value per share of the Corporation's common stock multiplied by the number of shares receivable at the valuation date. Market value is based on the closing price of the Corporation's common stock at year end ($33.30 per share at December 31, 2006 and $31.76 per share at December 31, 2005).
Income
Dividend equivalents and fractional share interests are accrued on the Corporation's dividend or other record date.
Contributions
Contributions are accounted for on the accrual basis.
Chemical Financial Corporation
2001 Stock Purchase Plan
for Subsidiary and Community Bank Directors
Notes to Financial Statements (continued)
December 31, 2006
Note 3 - Contributions
Contributions for participants by the participating companies were as follows:
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
Chemical Bank |
$ |
217,625 |
|
$ |
87,650 |
|
$ |
94,575 |
Chemical Bank Shoreline |
|
|
|
|
90,700 |
|
|
62,850 |
Chemical Bank West |
|
|
|
|
67,175 |
|
|
65,700 |
CFC Financial Services, Inc. |
|
|
|
|
2,000 |
|
|
2,400 |
CFC Title Services, Inc. |
|
|
|
|
2,000 |
|
|
2,400 |
Total Participant Contributions |
$ |
217,625 |
|
$ |
249,525 |
|
$ |
227,925 |
Report of Independent Registered Public Accounting Firm
Plan Administrator
Chemical Financial Corporation
2001 Stock Purchase Plan for Subsidiary and Community Bank Directors
We have audited the accompanying statements of financial condition of the Chemical Financial Corporation 2001 Stock Purchase Plan for Subsidiary and Community Bank Directors as of December 31, 2005 and the related statements of income and changes in plan equity for each of the two years ended December 31, 2005. These financial statements are the responsibility of the Plan's Administrator. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan's internal control over financial reporting. Our audits included considerations of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Plan administrator, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Chemical Financial Corporation 2001 Stock Purchase Plan for Subsidiary and Community Bank Directors as of December 31, 2005 and the results of its operations and changes in its plan equity for each of the two years ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.
|
/s/ Ernst & Young |
Detroit, Michigan
March 6, 2006