Acquisitions

Pending Branch Acquisition

On May 23, 2012, Chemical Bank, the wholly-owned banking subsidiary of the Corporation, entered into a purchase and assumption agreement with Independent Bank, a wholly-owned banking subsidiary of Independent Bank Corporation, to acquire 21 branches located in the Northeastern and Battle Creek regions of Michigan. Under the terms of the agreement, Chemical Bank will assume approximately $420 million in customer deposits at a blended premium of approximately 2.93%, acquire approximately $50 million of loans at a discount of 1.75%, and recognize goodwill of approximately $7 million. The branch acquisition, which has received regulatory approval, is expected to close during the fourth quarter of 2012.

Acquisition of O.A.K. Financial Corporation (OAK)

On April 30, 2010, the Corporation acquired OAK for total consideration of $83.7 million. OAK, a bank holding company, owned Byron Bank, which provided traditional banking services and products through 14 banking offices serving communities in Ottawa, Allegan and Kent counties in west Michigan. Byron Bank was consolidated with and into Chemical Bank on July 23, 2010. At the acquisition date, OAK had total assets of $820 million, including total loans of $627 million, and total deposits of $693 million, including brokered deposits of $193 million.

Upon acquisition, the OAK loan portfolio had contractually required principal and interest payments receivable of $683 million and $97 million, respectively, expected principal and interest cash flows of $636 million and $88 million, respectively, and a fair value of $627 million. The difference between the contractually required payments receivable and the expected cash flows represents the nonaccretable difference, which totaled $56 million at the acquisition date, with $47 million attributable to expected credit losses. The difference between the expected cash flows and fair value represents the accretable yield, which totaled $97 million at the acquisition date. The outstanding contractual principal balance and the carrying amount of the acquired loan portfolio were $440 million and $413 million, respectively, at September 30, 2012, compared to $530 million and $493 million, respectively, at December 31, 2011 and $534 million and $495 million, respectively, at September 30, 2011.

Activity for the accretable yield, which includes contractually due interest, of acquired loans follows:



	Nine Months Ended
	September 30,
	2012			2011
	(In thousands)
Balance at beginning of period	$	43,359		$	72,863
Additions	—			—
Reductions	—			—
Accretion recognized in interest income	(18,481		)	(24,549		)
Reclassification from (to) nonaccretable difference	—			300
Balance at end of period	$	24,878		$	48,614