CHFC 2018 Annual Report

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, 2015. 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 withArticle 11 of SECRegulation S-X, transaction costs directly attributable to the acquisitions have been excluded. Years ended December 31, (In thousands, except per share data) 2018 2017 2016 Net interest and other income $ 780,869 $ 701,597 $ 492,323 Net Income 284,020 149,523 115,847 Earnings per share: Basic $ 3.98 $ 2.11 $ 1.65 Diluted $ 3.94 $ 2.08 $ 1.62 Chemical Financial Corporation Notes to Consolidated Financial Statements December 31, 2018 104 Note 3: Fair Value Measurements Fair value, as defined by GAAP, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for market activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact. The Corporation utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Investment securities — carried at fair value, loans held-for-sale, loan servicing rights and derivatives are recorded at fair value on a recurring basis. Additionally, the Corporation may be required to record other assets, such as impaired loans, goodwill, other intangible assets, other real estate and repossessed assets, at fair value on a nonrecurring basis. These nonrecurring fair value adjustments typically involve the application of lower of cost or market accounting or write- downs of individual assets.