Regulatory Capital

6 Months Ended

Jun. 30, 2013

Banking and Thrift [Abstract]

Regulatory Capital

Regulatory Capital

The Corporation and Chemical Bank are subject to various regulatory capital requirements administered by federal banking agencies. Under these capital requirements, Chemical Bank must meet specific capital guidelines that involve quantitative measures of assets and certain off-balance sheet items as calculated under regulatory accounting practices. In addition, capital amounts and classifications are subject to qualitative judgments by regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s consolidated financial statements.

Federal and state banking regulations place certain restrictions on the transfer of assets, in the form of dividends, loans, or advances, from Chemical Bank to the Corporation. As of June 30, 2013, substantially all of the assets of Chemical Bank were restricted from transfer to the Corporation in the form of loans or advances. Dividends from Chemical Bank are the principal source of funds for the Corporation. As a member of the Federal Reserve System, Chemical Bank is subject to Regulation H, which among other things, provides that a member bank may not declare or pay a dividend during the calendar year which would exceed the bank's net income during the current calendar year and its retained net income for the prior two calendar years without regulatory approval. There are additional restrictions and prohibitions if a bank were to be less than well-capitalized.

Quantitative measures established by regulation to ensure capital adequacy require minimum ratios of Tier 1 capital to average assets (Leverage Ratio) and Tier 1 and Total capital to risk-weighted assets. These capital guidelines assign risk weights to on- and off-balance sheet items in arriving at total risk-weighted assets. Minimum capital levels are based upon the perceived risk of various asset categories and certain off-balance sheet instruments. Risk weighted assets totaled $4.36 billion, $4.18 billion and $4.00 billion at June 30, 2013, December 31, 2012 and June 30, 2012, respectively.

At June 30, 2013, December 31, 2012 and June 30, 2012, Chemical Bank’s capital ratios exceeded the quantitative capital ratios required for an institution to be considered “well-capitalized.” Significant factors that may affect capital adequacy include, but are not limited to, a disproportionate growth in assets versus capital and a change in mix or credit quality of assets.

The summary below compares the Corporation’s and Chemical Bank’s actual capital amounts and ratios with the quantitative measures established by regulation to ensure capital adequacy:

	Actual				Minimum Required for Capital Adequacy Purposes				Required to be Well Capitalized Under Prompt Corrective Action Regulations
	Capital Amount		Ratio		Capital Amount		Ratio		Capital Amount		Ratio
	(Dollars in thousands)
June 30, 2013
Total Capital to Risk-Weighted Assets:
Corporation	$	572,503	13.1	%	$	348,442	8.0	%	N/A		N/A
Chemical Bank	556,536		12.8		347,865		8.0		$	434,831	10.0	%
Tier 1 Capital to Risk-Weighted Assets:
Corporation	517,716		11.9		174,221		4.0		N/A		N/A
Chemical Bank	501,839		11.5		173,932		4.0		260,899		6.0
Leverage Ratio:
Corporation	517,716		9.1		228,436		4.0		N/A		N/A
Chemical Bank	501,839		8.8		228,126		4.0		285,157		5.0
December 31, 2012
Total Capital to Risk-Weighted Assets:
Corporation	$	552,171	13.2	%	$	334,140	8.0	%	N/A		N/A
Chemical Bank	536,223		12.9		333,195		8.0		$	416,494	10.0	%
Tier 1 Capital to Risk-Weighted Assets:
Corporation	499,563		12.0		167,070		4.0		N/A		N/A
Chemical Bank	483,761		11.6		166,598		4.0		249,896		6.0
Leverage Ratio:
Corporation	499,563		9.2		217,145		4.0		N/A		N/A
Chemical Bank	483,761		8.9		216,784		4.0		270,980		5.0
June 30, 2012
Total Capital to Risk-Weighted Assets:
Corporation	$	542,827	13.6	%	$	319,863	8.0	%	N/A		N/A
Chemical Bank	535,868		13.4		319,236		8.0		$	399,045	10.0	%
Tier 1 Capital to Risk-Weighted Assets:
Corporation	492,395		12.3		159,931		4.0		N/A		N/A
Chemical Bank	485,533		12.2		159,618		4.0		239,427		6.0
Leverage Ratio:
Corporation	492,395		9.4		208,808		4.0		N/A		N/A
Chemical Bank	485,533		9.3		208,778		4.0		260,973		5.0