Regulatory Capital

9 Months Ended

Sep. 30, 2014

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 September 30, 2014, 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. At September 30, 2014, Chemical Bank was "well-capitalized" as defined by federal banking regulations. In addition to the statutory limits, the Corporation considers the overall financial and capital position of Chemical Bank prior to making any cash dividend decisions.

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.

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 of the Corporation totaled $5.06 billion, $4.64 billion and $4.51 billion at September 30, 2014, December 31, 2013 and September 30, 2013, respectively.

At September 30, 2014, December 31, 2013 and September 30, 2013, 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)
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
December 31, 2013
Total Capital to Risk-Weighted Assets:
Corporation	$	649,836	14.0	%	$	371,465	8.0	%	N/A		N/A
Chemical Bank	579,494		12.5		370,881		8.0		$	463,601	10.0	%
Tier 1 Capital to Risk-Weighted Assets:
Corporation	591,535		12.7		185,732		4.0		N/A		N/A
Chemical Bank	521,283		11.2		185,440		4.0		278,160		6.0
Leverage Ratio:
Corporation	591,535		9.9		239,010		4.0		N/A		N/A
Chemical Bank	521,283		8.7		238,884		4.0		298,605		5.0
September 30, 2013
Total Capital to Risk-Weighted Assets:
Corporation	$	638,786	14.2	%	$	361,199	8.0	%	N/A		N/A
Chemical Bank	568,626		12.6		360,617		8.0		$	450,771	10.0	%
Tier 1 Capital to Risk-Weighted Assets:
Corporation	582,039		12.9		180,600		4.0		N/A		N/A
Chemical Bank	511,969		11.4		180,309		4.0		270,463		6.0
Leverage Ratio:
Corporation	582,039		10.0		232,972		4.0		N/A		N/A
Chemical Bank	511,969		8.8		232,828		4.0		291,034		5.0

- Definition

The entire disclosure for banks, savings institutions, and credit unions, for regulatory capital requirements imposed by the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS) or for any state imposed capital requirements, as applicable. The disclosure may include (1) a description of regulatory capital requirements (a) for capital adequacy purposes and (b) established by the prompt corrective action provisions of Section 38 of the Federal Depository Insurance Act; (2) the actual or possible material effects of noncompliance with such requirements; (3) whether the entity is in compliance with the regulatory capital requirements including (a) required and actual ratios and amounts of Tier 1 leverage, Tier 1 risk-based, and total risk-based capital, tangible capital (for savings institutions), and Tier 3 capital for market risk (for certain banks and bank holding companies), (b) factors that may significantly affect capital adequacy; (4) the prompt corrective action category in which the entity was classified as of its most recent notification; (5) whether management believes any conditions or events since notification have changed the entity's category. Also may include additional information that might be disclosed in situations where substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

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+ Details