CHFC 2017 Annual Report

Mergers, Acquisitions and Branch Closings Merger with Talmer Bancorp, Inc. On August 31, 2016, we acquired all the outstanding stock of Talmer Bancorp, Inc. ("Talmer") for total consideration of $1.61 billion, which included stock consideration of $1.50 billion and cash consideration of $107.6 million. As a result of the merger, we issued 32.1 million shares of our common stock based on an exchange ratio of 0.4725 shares of our common stock, and paid $1.61 in cash, for each share of Talmer common stock outstanding. Talmer, a bank holding company, owned Talmer Bank and Trust, which was consolidated with and into Chemical Bank effective November 10, 2016. Talmer Bank and Trust operated a full service community bank offering a full suite of commercial banking, retail banking, mortgage banking, wealth management and trust services to small and medium-sized businesses and individuals through 80 full service banking offices located primarily within southeast Michigan and northeast Ohio, as well as in west Michigan, northeast Michigan, and northern Indiana. The merger with Talmer resulted in increases in our total assets of $7.71 billion, including total loans of $4.88 billion, total deposits of $5.29 billion and investment securities of $810.6 million. In connection with the merger with Talmer, we recorded $847.7 million of goodwill, which was primarily due to the synergies and economies of scale expected from combining our operations with those of Talmer. In addition, we recorded $19.1 million of core deposit intangibles in conjunction with the merger. We incurred $8.5 million and $61.1 million of merger and acquisition-related transaction expenses during the years ended December 31, 2017 and 2016, respectively, primarily related to the merger with Talmer, which reduced diluted earnings per share by $0.08 in 2017 and $0.81 in 2016. Acquisition of Lake Michigan Financial Corporation On May 31, 2015, we acquired all of the outstanding stock of Lake Michigan Financial Corporation (Lake Michigan) for total consideration of $187.4 million, which included stock consideration of $132.9 million and cash consideration of $54.5 million. As a result of the acquisition, we issued approximately 4.3 million shares of our common stock, based on an exchange ratio of 1.326 shares of our common stock, and paid $16.64 in cash, for each share of Lake Michigan common stock outstanding. Lake Michigan, a bank holding company, owned The Bank of Holland and The Bank of Northern Michigan, which combined operated five banking offices in Holland, Grand Haven, Grand Rapids, Petoskey and Traverse City, Michigan. The Bank of Holland and The Bank of Northern Michigan were consolidated with and into Chemical Bank on November 13, 2015. The acquisition of Lake Michigan resulted in increases in total assets of $1.24 billion, including total loans of $985.5 million, and total deposits of $924.7 million, as of the acquisition date. In connection with the acquisition of Lake Michigan, we recorded $101.1 million of goodwill, which was primarily attributable to the synergies and economies of scale expected from combining our operations with those of Lake Michigan. In addition, we recorded $8.6 million of core deposit and other intangible assets in conjunction with the acquisition. Acquisition expenses associated with the acquisition of Lake Michigan totaled $5.5 million during 2015, which reduced net income per common share by $0.11 in 2015. Acquisition of Monarch Community Bancorp, Inc. On April 1, 2015, we acquired all of the outstanding stock of Monarch Community Bancorp, Inc. (Monarch) in an all- stock transaction valued at $27.2 million. As a result of the acquisition, we issued 860,575 shares of our common stock based on an exchange ratio of 0.0982 shares of our common stock for each share of Monarch common stock outstanding. Monarch, a bank holding company, owned Monarch Community Bank, which operated five full service branch offices in Coldwater, Marshall, Hillsdale and Union City, Michigan. Monarch Community Bank was consolidated with and into Chemical Bank on May 8, 2015. The acquisition of Monarch resulted in increases in our total assets of $182.8 million, including total loans of $121.8 million, and total deposits of $144.3 million, as of the acquisition date. In connection with the acquisition of Monarch, we recorded $5.3 million of goodwill, which was primarily attributable to the synergies and economies of scale expected from combining our operations with Monarch. In addition, we recorded $1.9 million of core deposit intangible assets in conjunction with the acquisition. Acquisition expenses associated with the acquisition of Monarch totaled $2.3 million during 2015, which reduced net income per common share by $0.04 in 2015. Acquisition of Northwestern Bancorp, Inc. On October 31, 2014, we acquired all of the outstanding stock of Northwestern Bancorp, Inc. (Northwestern) for total cash consideration of $121.0million. Northwestern, a bank holding companywhich ownedNorthwesternBank, provided traditional banking services and products through 25 banking offices serving communities in the northwestern lower peninsula of Michigan. At the acquisition date, Northwestern added total assets of $815.0 million, including total loans of $475.3 million, and total deposits of $794.4 million, to our operations. Northwestern Bank was consolidated with and into Chemical Bank as of the acquisition date. In connection with the acquisition of Northwestern, we recorded $60.3 million of goodwill, which was primarily attributable to 36