EX-99.1 12 chfc201610-kexhibit991dire.htm EXHIBIT 99.1 Exhibit



EXHIBIT No. 99.1










 



Financial Statements
With Report of Independent Registered Public Accounting Firm



Chemical Financial Corporation
Directors' Deferred Stock Plan


December 31, 2016





Report of Independent Registered Public Accounting Firm



Plan Administrator
Chemical Financial Corporation
Directors' Deferred Stock Plan

We have audited the accompanying statements of financial condition of the Chemical Financial Corporation Directors' Deferred Stock Plan as of December 31, 2016 and 2015 and the related statements of income and changes in plan equity for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Plan's Administrator. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of the Plan's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Plan Administrator, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Chemical Financial Corporation Directors' Deferred Stock Plan as of December 31, 2016 and 2015 and the results of its operations and changes in its plan equity for each of the three years in the period ended December 31, 2016, in accordance with accounting principles generally accepted in the United States of America.


/s/ Andrews Hooper Pavlik PLC

Andrews Hooper Pavlik PLC
Saginaw, Michigan

February 28, 2017



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Chemical Financial Corporation
Directors' Deferred Stock Plan


Statements of Financial Condition

 
 
December 31,
 
 
2016
 
2015
Assets
 
 
 
 
Cash
 
$
64,100

 
$
46,900

Common stock receivable of Chemical Financial Corporation, at fair value (880 shares at a cost of $47,451 at December 31, 2016 and 80,246 shares at a cost of $2,024,580 at December 31, 2015)
 
47,649

 
2,750,030

Total Assets
 
$
111,749

 
$
2,796,930

Plan Equity
 
 
 
 
Plan equity (19 participants at December 31, 2016 and 13 participants at December 31, 2015)
 
$
111,749

 
$
2,796,930



See accompanying notes.




2

Chemical Financial Corporation
Directors' Deferred Stock Plan


Statements of Income and Changes in Plan Equity

 
 
Years Ended December 31,
 
 
2016
 
2015
 
2014
Additions:
 
 
 
 
 
 
    Participant contributions
 
$
569,400

 
$
420,050

 
$
275,700

    Dividend equivalents
 
67,788

 
76,024

 
63,010

 
 
637,188

 
496,074

 
338,710

 
 
 
 
 
 
 
Plan distributions
 
(4,128,269
)
 
(106,700
)
 
(157,156
)
 
 
 
 
 
 
 
Net realized and unrealized (depreciation) appreciation in fair value of common stock receivable
 
805,900

 
314,740

 
(85,330
)
Net increase (decrease)
 
(2,685,181
)
 
704,114

 
96,224

Plan equity at beginning of period
 
2,796,930

 
2,092,816

 
1,996,592

Plan equity at end of period
 
$
111,749

 
$
2,796,930

 
$
2,092,816



See accompanying notes.



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Chemical Financial Corporation
Directors' Deferred Stock Plan

Notes to Financial Statements
Note 1 - Description of the Plan
The Chemical Financial Corporation Directors' Deferred Stock Plan (Plan) became effective on April 21, 2008. The Plan, which was approved by the shareholders of Chemical Financial Corporation (Corporation), is an unfunded supplemental nonqualified deferred compensation plan designed to provide benefits to each non-employee director (Director) of the Corporation and the Corporation's subsidiary bank, Chemical Bank. The Plan provides for a maximum of 400,000 shares of the Corporation's $1.00 par value common stock (Common Stock), subject to adjustments for certain changes in the capital structure of the Corporation as defined in the Plan (including stock dividends and stock splits), to be available under the Plan.
Under the Plan, Directors are required to defer fifty percent, or such greater percentage as determined by the board of directors of the Corporation, of their annual retainer in the form of investment in stock units representing Common Stock. The remaining part of the annual retainer may, at each Director's option, be deferred and invested in stock units representing Common Stock. In addition, all meeting and other director fees may, at each Director's option, be deferred and invested in stock units representing Common Stock. Directors opting to defer the remaining portion of their annual retainer and/or other fees earned as a Director must elect to do so at the beginning of each calendar year. The election is not revocable once the year of election begins and can only be revoked or modified for future years if done so before the start of any future calendar year.
The portion of the annual retainer deferred under the Plan is credited on the books of the Corporation to an account established for that Director and converted to a number of stock units equal to the cash amount of the deferred portion of the annual retainer divided by the fair market value of one share of Common Stock on the date the annual retainer is paid. Other fees deferred under the Plan are credited to that Director's account and converted to a number of stock units equal to the cash amount of the deferred portion of other fees earned divided by the fair market value of one share of Common Stock on the next date the Corporation pays its quarterly cash dividend. The Plan also provides for dividend equivalents to be credited to each Director's account on each date the Corporation pays its quarterly cash dividend. Dividend equivalents are calculated by multiplying the Corporation's dividend rate by the number of stock units credited in each Director's account as of the date the Corporation pays its quarterly cash dividend. The Plan also provides for an appropriate credit to each Director's account for stock dividends, stock splits or other distributions of Common Stock by the Corporation.
Directors are eligible for participation in the Plan on the first day of an individual's term as a Director. Elective deferrals must be made within the first 30 days of eligibility in order for an individual to participate in the first calendar year of eligibility. Otherwise, the deferral election will be effective at the beginning of the next calendar year. All annual retainer and director fees contributed to the Plan and dividend equivalents credited to each Director's account are vested immediately. Directors will cease to be eligible to participate in the Plan upon their termination of service on the board of directors of the Corporation. Upon termination of service, death, a change in control of the Corporation or termination of the Plan, a Director will receive a number of shares of Common Stock and cash in lieu of fractional shares equal to the number of stock units in their account. Distributions from the Plan will be made in the form of either a single lump-sum or in five annual installments.
As a result of the Corporation's merger with Talmer Bancorp, Inc. (Talmer) on August 31, 2016, a change in control of the Corporation occurred under the Plan, which caused all deferred compensation earned under the Plan up to that date to become payable in a lump-sum distribution. In addition, effective as of the time of the Talmer merger, the Plan was amended to (i) clarify the eligibility of both the Corporation's and Chemical Bank's directors to participate in the Plan, (ii) clarify the treatment of the Plan accounts related to payments due upon a change in control, and (iii) revise the default definition of a change in control in the Plan.

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Chemical Financial Corporation
Directors' Deferred Stock Plan

Notes to Financial Statements (continued)
Note 1 - Description of the Plan (continued)
The Plan had 287,471 shares and 303,081 shares as of December 31, 2016 and 2015, respectively, of Common Stock available for future issuance. A total of 94,977 shares and 3,472 shares of Common Stock were distributed from the Plan during 2016 and 2015, respectively. The Plan considers the common stock receivable at year-end to be issued.
The Corporation reserves the right to terminate or amend the Plan at any time, provided, however, that no termination or amendment shall affect or diminish any Director's right to the benefit of contributions made by him/her prior to the date of such amendment or termination.
The Plan is not qualified under Sections 401(a) or 501(a) of the Internal Revenue Code of 1986 (IRC), as amended. The Plan does not provide for income taxes because any income is taxable to the participants. Directors participating in the Plan must treat, as ordinary taxable income, the fair market value of shares of Common Stock received at the time of distribution from the Plan or upon failure of the Plan to meet the requirements of IRC Section 409A.
Note 2 - Summary of Accounting Policies
Cash
Amounts reported as cash represent fees deferred under the Plan that have been credited to a Director's account but have not been converted to stock units. These fees will be converted to stock units on the next date the Corporation pays its quarterly cash dividend.
The fair value of cash approximates its carrying value and is classified as Level 1 in accordance with the United States generally accepted accounting principles (GAAP) fair value measurement hierarchy.
Valuation of Common Stock Receivable
The Plan's common stock receivable is recorded at the fair value per share of Common Stock multiplied by the number of shares receivable at the valuation date. Fair value is based on the closing price of Common Stock at year end ($54.17 per share at December 31, 2016 and $34.27 per share at December 31, 2015).
In accordance with GAAP, the valuation of common stock receivable is measured at fair value on a recurring basis using Level 1 inputs based on quoted prices from The NASDAQ Stock Market®.
Contributions
Participant contributions represent annual retainer and/or fees earned and deferred by Directors during the year and are accounted for on the accrual basis.
Income
Dividend equivalents are accrued on the date the Corporation pays its quarterly cash dividend.
Operating Expenses
All expenses of the Plan and its administration are paid by the Corporation.
Related Party Transactions
Substantially all transactions and balances of the Plan are considered related party transactions.

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