CHFC 2017 Annual Report

Allocation of Purchase Price 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 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 The outstanding contractual principal balance and the carrying amount of the Monarch acquired loan portfolio were $76.0 million and $70.8 million, respectively, at December 31, 2017, compared to $92.4 million and $86.4 million, respectively, at December 31, 2016. 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, 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. Chemical Financial Corporation Notes to Consolidated Financial Statements December 31, 2017 100