Mergers and Acquisitions

Merger with Talmer Bancorp, Inc.

On August 31, 2016, the Corporation completed a merger with Talmer Bancorp, Inc. ("Talmer") for total consideration of $1.61 billion. As a result of the merger, the Corporation issued 32.1 million shares of its common stock based on an exchange ratio where each Talmer shareholder received 0.4725 shares of the Corporation's common stock, and $1.61 in cash, for each share of Talmer common stock. In conjunction with the merger, the Corporation entered into and drew on a $125.0 million credit facility. The proceeds from the credit facility were used to pay off the Corporation's $25.0 million line-of-credit and a $37.5 million line-of-credit of Talmer, with the remaining proceeds used to partially fund the cash portion of the merger consideration. The Corporation incurred $7.0 million and $43.1 million of merger and acquisition-related transaction expenses during the nine months ended September 30, 2017 and 2016, respectively, primarily related to the merger with Talmer. As a result of the merger, Talmer Bank and Trust became a wholly-owned subsidiary of the Corporation. Talmer Bank and Trust was consolidated with and into Chemical Bank during the fourth quarter of 2016.

The Corporation determined that the merger with Talmer constitutes a business combination as defined by ASC 805. The assets and liabilities associated with the merger with Talmer were recorded in the Consolidated Statements of Financial Position at fair value 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:
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	$	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 prior to August 31, 2017, including the corresponding tax effects.

During the third quarter of 2017, prior to August 31, 2017, additional valuation information was obtained related to the fair value of certain liabilities and deferred tax assets, which resulted in an adjustment to goodwill acquired in the Talmer transaction. The adjustment recorded during the third quarter of 2017 resulted in a $1.0 million increase to the amount of goodwill recorded for the Talmer transaction.

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

Unaudited Pro Forma Combined Results of Operations

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, 2016. 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 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.



	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands) ⁽¹⁾	2017		2016		2017		2016
Net interest and other income	$	175,750	$	175,783	$	523,373	$	503,501
Net Income	40,459		10,439		140,077		86,911
Earnings per share:
Basic	$	0.57	$	0.15	$	1.98	$	1.23
Diluted	0.56		0.15		1.95		1.22


⁽¹⁾	As the business combination was effective August 31, 2016, there were no proforma adjustments for the three and nine months ended September 30, 2017.