Regulatory Capital

9 Months Ended

Sep. 30, 2015

Banking and Thrift [Abstract]

Regulatory Capital

Regulatory Capital

Federal and state banking regulations place certain restrictions on the transfer of assets, in the form of dividends, loans, or advances, from Chemical Bank, The Bank of Holland and The Bank of Northern Michigan to the Corporation. As of September 30, 2015, substantially all of the assets of Chemical Bank, The Bank of Holland and The Bank of Northern Michigan 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. In addition to the statutory limits, the Corporation considers the overall financial and capital position of Chemical Bank, The Bank of Holland, and The Bank of Northern Michigan prior to making any cash dividend decisions.

The Corporation, Chemical Bank, The Bank of Holland and The Bank of Northern Michigan are subject to various regulatory capital requirements administered by federal banking agencies. Under these capital requirements, Chemical Bank, The Bank of Holland and The Bank of Northern Michigan 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.

Quantitative measures established by regulation to ensure capital adequacy require minimum ratios of Tier 1 capital to average assets (Leverage Ratio) and common equity Tier 1, 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 of the Corporation totaled $7.10 billion, $5.70 billion and $5.06 billion at September 30, 2015, December 31, 2014 and September 30, 2014, respectively.

In July 2013, the Federal Reserve Board and Federal Deposit Insurance Corporation (FDIC) approved final rules implementing the Basel Committee on Banking Supervision's (BCBS) capital guidelines for U.S. banks. Beginning January 1, 2015, the final rules include a new minimum common equity Tier 1 capital to risk-weighted assets (CET) ratio of 4.5%, in addition to raising the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% and requiring a minimum leverage ratio of 4.0%. The final rules also establish a new capital conservation buffer of 2.5% of risk-weighted assets, which is phased-in over a four-year period beginning January 1, 2016.

At September 30, 2015, December 31, 2014 and September 30, 2014, Chemical Bank’s capital ratios exceeded the quantitative capital ratios required for an institution to be considered “well-capitalized.” At September 30, 2015, the capital ratios of both The Bank of Holland and The Bank of Northern Michigan 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 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)
September 30, 2015
Total Capital to Risk-Weighted Assets:
Corporation	$	825,649	11.6	%	$	569,695	8.0	%	N/A		N/A
Chemical Bank	711,375		11.8		483,284		8.0		$	604,105	10.0	%
The Bank of Holland	80,315		10.6		60,686		8.0		75,857		10.0
The Bank of Northern Michigan	34,924		10.9		25,673		8.0		32,091		10.0
Tier 1 Capital to Risk-Weighted Assets:
Corporation	750,023		10.5		427,272		6.0		N/A		N/A
Chemical Bank	635,810		10.5		362,463		6.0		483,284		8.0
The Bank of Holland	79,354		10.5		45,514		6.0		60,686		8.0
The Bank of Northern Michigan	34,748		10.8		19,255		6.0		25,673		8.0
Common Equity Tier 1 Capital to Risk-Weighted Assets:
Corporation	736,158		10.3		320,454		4.5		N/A		N/A
Chemical Bank	635,810		10.5		271,847		4.5		392,668		6.5
The Bank of Holland	79,354		10.5		34,136		4.5		49,307		6.5
The Bank of Northern Michigan	34,748		10.8		14,441		4.5		20,859		6.5
Leverage Ratio:
Corporation	750,023		8.4		357,549		4.0		N/A		N/A
Chemical Bank	635,810		8.2		309,871		4.0		387,339		5.0
The Bank of Holland	79,354		9.8		32,387		4.0		40,484		5.0
The Bank of Northern Michigan	34,748		9.0		15,408		4.0		19,260		5.0
December 31, 2014
Total Capital to Risk-Weighted Assets:
Corporation	$	705,130	12.4	%	$	456,302	8.0	%	N/A		N/A
Chemical Bank	654,031		11.5		455,633		8.0		$	569,541	10.0	%
Tier 1 Capital to Risk-Weighted Assets:
Corporation	633,779		11.1		228,151		4.0		N/A		N/A
Chemical Bank	582,783		10.2		227,816		4.0		341,725		6.0
Leverage Ratio:
Corporation	633,779		9.3		273,226		4.0		N/A		N/A
Chemical Bank	582,783		8.5		273,048		4.0		341,310		5.0
September 30, 2014
Total Capital to Risk-Weighted Assets:
Corporation	$	760,324	15.0	%	$	404,420	8.0	%	N/A		N/A
Chemical Bank	613,673		12.2		403,840		8.0		$	504,799	10.0	%
Tier 1 Capital to Risk-Weighted Assets:
Corporation	696,963		13.8		202,210		4.0		N/A		N/A
Chemical Bank	550,401		10.9		201,920		4.0		302,880		6.0
Leverage Ratio:
Corporation	696,963		11.1		251,133		4.0		N/A		N/A
Chemical Bank	550,401		8.8		250,986		4.0		313,732		5.0