MIDLAND — As Chemical Financial Corp. moves toward closing its latest and largest acquisition, David Ramaker remains open to additional deals that would further expand the bank’s footprint in the Midwest.
The $1.4 billion acquisition of Troy-based Talmer Bancorp Inc. gives the Midland-based Chemical Financial (Nasdaq: CHFC) entry into the Southeast Michigan market and neighboring states for the first time. The deal could close by the end of August, and the conversion of Talmer’s I.T. system and office name change is planned for early November.
The deal represents the largest in a series of acquisitions over the years. Upon its close, the acquisition will make Chemical Financial the largest bank headquartered in Michigan with $16 billion in assets. That acquisition strategy will continue, both in Michigan and neighboring states, said Ramaker, Chemical Financial’s chairman, president and CEO.
“A pre-eminent Midwest community bank is what our charge is to become,” Ramaker told MiBiz in an exclusive interview.
By mid-year 2017, Chemical Financial “will start cultivating relationships or establishing relationships in markets where we are not well known, Ohio and Indiana,” states the bank will enter with the Talmer deal, Ramaker said. Developing a rapport with colleagues can position Chemical Financial to get a look at potential future acquisitions when a bank decides to pursue a sale, he said.
“When a management team and a board decides that they want to sell their bank, it’s obviously a lot easier as it relates to negotiation (and) as it relates to talking about doing due diligence,” he said. “Getting an opportunity to actually be at the table, it definitely helps to have a relationship with that particular organization.
“It’s more opportunistic. I want people to understand that we have an interest and that we are ready and willing, if and when they have an interest.”
BECOMING A TARGET?
Rajesh Kothari, managing director at Cascade Partners LLC, a Southfield-based investment bank, expects to see Chemical Financial pursue further acquisitions of smaller community banks to fill out its footprint in Michigan and elsewhere.
The bank “will continue to find opportunities to acquire other banks that can be a fit,” Kothari said.
Ultimately, that could bring Chemical Financial to the attention of a larger institution pursuing its own acquisition strategy.
“Eventually, one of the big guys is going to say, ‘We like your market share in Michigan and Ohio’ and wherever they go next,” Kothari said. “They’re going to become a target themselves.”
The Talmer deal makes Chemical Financial a “solid regional player” in the Midwest with greater capabilities, but with a community bank model that decentralizes decision-making to the local level.
Past acquisitions by Chemical Financial have been for smaller community banks that lacked its scale. In contrast, Talmer had $6.76 billion in assets at the end of the second quarter and is by far the largest deal Chemical has ever made.
“In their words, they’re bringing together two strong community-based institutions under one roof that together can do some things that no one else can do on a community basis,” Kothari said. “They’re able to play with the big boys, but as a community bank. From a lending and a product offering (perspective), that’s important these days.
“I find people are looking for full-class, top-of-the-line offerings with a good, solid community touch. And there’s a niche in the market for that.”
SCALE ALLOWS NEW SERVICES
How well Chemical Financial pulls off its strategy of becoming a large community bank in the Midwest depends on how well it executes and maintains its culture, local control and autonomy, he said.
As it gets larger and spreads into new states, Chemical Financial wants to maintain the community-banking model, according to Ramaker.
Through the Talmer deal, Chemical Financial will expand its regions from four to seven and grow its individual community markets with local advisory boards from 18 to 23. Each region and community market is led by its own president, Ramaker said.
The model also hinges on culture and “the attitude and commitment of our people each and every day,” he said.
“We’re going to continue to be a community bank, first and foremost,” Ramaker said. “We’re going to work hard to continue to stay very community focused and I think the structure and our people are very committed to making that happen.”
That goal comes with a larger in-house lending cap that will nearly double to $50 million once the Talmer deal closes. Chemical will have the ability to begin pursuing commercial borrowers in the lower end of the middle market that have annual sales of $50 million to $200 million.
“We will be able to now enter into a phase in the market that we really haven’t played in,” Ramaker said. “We will be able to provide services to those customers that neither one of our two organizations have really focused on in the past.”
The Federal Reserve Board on Aug. 8 approved the acquisition. The combined bank would have $12.8 billion in total deposits and hold a 5.7-percent share of the statewide deposit market, ranking third in Michigan. Under terms of the deal, Talmer shareholders would receive $1.61 in cash and 0.4725 shares of Chemical Financial stock for each of their shares.
The merger will give Chemical Financial some 250 offices, mostly in Michigan and northeast Ohio.
Troy-based Talmer Bancorp (Nasdaq: TLMR) presently has 51 branches and lending offices in Michigan, plus locations in Ohio, Indiana, Illinois and Nevada. In West Michigan, existing Talmer Bank & Trust branches are in Grand Rapids, Portage, Holland, Muskegon and Grand Haven. Those locations stem from when Talmer bought the assets of the former Michigan Commerce Bank from the bankrupt Lansing-based Capital Bancorp in early 2014.
Chemical Financial will close an existing Talmer Bank & Trust branch on Eighth Street in Holland, plus offices in Flint and Port Hope, and transfer their deposits to nearby Chemical Bank offices, according to the Federal Reserve Board order approving the merger. The closing of Talmer’s Holland branch would leave Chemical with four offices in the market.
Chemical Financial also plans to consolidate four offices in the Thumb area and West Michigan that are just 1,000 feet apart, and sell two Talmer offices in Las Vegas and Chicago.