Mergers and Acquisitions (Tables)

12 Months Ended

Dec. 31, 2017

Summary of assets acquired and liabilities assumed



(Dollars in thousands)
Stock	$	26,988
Cash	203
Total consideration	$	27,191

Net assets acquired:
Monarch shareholders' equity	$	15,270
Adjustments to reflect fair value of net assets acquired:
Loans	(7,150		)
Allowance for loan losses	2,128
Deferred tax assets, net:
Net operating loss carryforward	7,900
Other	1,826
Premises and equipment	(415		)
Core deposit intangibles	1,930
Mortgage servicing rights	315
Other assets and other liabilities	48
Fair value of adjusted net assets acquired	21,852
Goodwill recognized as a result of the Monarch transaction	$	5,339



(Dollars in thousands)
Stock	$	132,916
Cash	54,478
Total consideration	187,394

Net assets acquired:
Lake Michigan shareholders' equity	$	89,280
Adjustments to reflect fair value of net assets acquired:
Loans	(22,600		)
Allowance for loan losses	15,888
Premises and equipment	(5,031		)
Core deposit intangibles	8,003
Deferred tax assets, net	4,096
Deposits and borrowings, net	(3,182		)
Other assets and other liabilities	(121		)
Fair value of adjusted net assets acquired	86,333
Goodwill recognized as a result of the Lake Michigan transaction	$	101,061

The following schedule summarizes the acquisition date fair values of assets acquired and liabilities assumed from Lake Michigan:



(Dollars in thousands)
Assets
Cash and cash equivalents	$	39,301
Investment securities	66,699
Loans	985,542
Premises and equipment	10,975
Deferred tax asset, net	16,715
Goodwill	101,061
Core deposit intangible asset	8,003
Bank-owned life insurance	23,844
Other assets	37,695
Assets acquired, at fair value	1,289,835
Liabilities
Deposits	924,697
Short-term borrowings	30,000
Other borrowings	124,857
Other liabilities	22,887
Total liabilities acquired, at fair value	1,102,441
Total purchase price	$	187,394

Fair values were determined in accordance with the guidance provided in ASC Topic 820, Fair Value Measurements, as of the merger date as presented in the following table.



(Dollars in thousands)
Consideration paid:
Stock	$	1,504,811
Cash	107,638
Total consideration	1,612,449

Fair value of identifiable assets acquired⁽¹⁾:
Cash and cash equivalents	433,352
Investment securities:
Available-for-sale	808,894
Held-to-maturity	1,657
Loans held-for-sale	244,916
Loans	4,882,402
Premises and equipment	38,793
Loan servicing rights	42,462
Other intangible assets	19,088
Interest receivable and other assets⁽²⁾	395,539
Total identifiable assets acquired	6,867,103

Fair value of liabilities assumed⁽¹⁾:
Noninterest-bearing deposits	1,236,902
Interest-bearing deposits	4,057,716
Interest payable and other liabilities⁽²⁾	100,936
Securities sold under agreements to repurchase with customers	19,704
Short-term borrowings	387,500
Long-term borrowings	299,597
Total liabilities assumed	6,102,355

Fair value of net identifiable assets acquired	764,748
Goodwill resulting from acquisition⁽²⁾	$	847,701


⁽¹⁾	All amounts were previously reported in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2016, with the exception of interest receivable and other assets and interest payable and other liabilities.


⁽²⁾	Includes adjustments to the fair value as a result of additional valuation information obtained during the third quarter of 2017, including the corresponding tax effects.

The following schedule summarizes the revised acquisition date estimated fair values, including the adjustments to the fair values identified and recorded from the acquisition date through December 31, 2015, of assets acquired and liabilities assumed from Monarch.



(Dollars in thousands)
Assets
Cash and cash equivalents	$	32,171
Loans	121,783
Premises and equipment	3,019
Deferred tax assets, net
Net operating loss carryforward	7,900
Other	2,392
Interest receivable and other assets	6,972
Goodwill	5,339
Core deposit intangibles	1,930
Mortgage servicing rights	1,284
Assets acquired, at fair value	182,790
Liabilities
Deposits	144,300
FHLB advances	8,000
Interest payable and other liabilities	3,299
Total liabilities acquired, at fair value	155,599
Total purchase price	$	27,191

Information regarding acquired loans accounted for under ASC 310-30

Information regarding loans accounted for under ASC 310-30 at the merger date is as follows:



(Dollars in thousands)
Accounted for under ASC 310-30:
Contractual cash flows	$	5,968,488
Contractual cash flows not expected to be collected (nonaccretable difference)	223,959
Expected cash flows	5,744,529
Interest component of expected cash flows (accretable yield)	862,127
Fair value at acquisition	$	4,882,402

Information regarding loans accounted for under ASC 310-30 at the merger date is as follows:



(Dollars in thousands)
Accounted for under ASC 310-30:
Contractual cash flows	$	1,198,388
Contractual cash flows not expected to be collected (nonaccretable difference)	22,600
Expected cash flows	1,175,788
Interest component of expected cash flows (accretable yield)	190,246
Fair value at acquisition	$	985,542

Information regarding loans accounted for under ASC 310-30 at the merger date is as follows:



(Dollars in thousands)
Accounted for under ASC 310-30:
Contractual cash flows	$	166,797
Contractual cash flows not expected to be collected (nonaccretable difference)	7,100
Expected cash flows	159,697
Interest component of expected cash flows (accretable yield)	37,914
Fair value at acquisition	$	121,783

Pro forma financial information

The following unaudited pro forma financial information presents the consolidated results of operation of the Corporation and Talmer as if the merger had occurred as of January 1, 2015 and Lake Michigan and Monarch as if the acquisitions had occurred as of January 1, 2014. The unaudited pro forma combined results of operations are presented solely for information purposes and are not intended to represent or be indicative of the consolidated results of operations that Chemical would have reported had these transactions been completed as of the dates and for the periods presented, nor are they necessarily indicative of future results. In particular, no adjustments have been made to eliminate the amount of Talmer's, Lake Michigan's or Monarch's provision for loan losses incurred prior to the acquisition date that would not have been necessary had the acquired loans been recorded at fair value as of the beginning of each period indicated. In accordance with Article 11 of SEC Regulation S-X, transaction costs directly attributable to the acquisitions have been excluded.



	Years ended December 31,
(In thousands, except per share data)	2017		2016		2015
Net interest and other income	$	701,597	$	492,323	$	654,962
Net Income	149,523		115,847		142,504
Earnings per share:
Basic	$	2.11	$	1.65	$	2.03
Diluted	$	2.08	$	1.62	$	2.01