Northwestern Bank has been sold to Midland-based Chemical Bank for an all cash transaction valued at $120 million.
The partnership with Northwestern and its 25 branches across 11 northwestern Michigan counties is expected to increase Chemical Bank's core deposit base by approximately $760 million.
Post-closing, it is anticipated that Chemical will have the largest retail branch delivery network outside of the Detroit MSA of any financial institution operating in Michigan. Also, it is anticipated that Chemical Bank will become the 8th largest institution in Michigan overall; the largest Michigan-based financial institution when excluding the Detroit MSA; and the 3rd largest institution in the Traverse City MSA.
As of December 31, 2013, the combined organization had approximately $7 billion in assets, $5.1 billion in loans and $5.9 billion in deposits in 181 branches across 49 counties in southwestern, central and northern Michigan.
Under the terms of the definitive agreement, Chemical will acquire all of the outstanding shares of Northwestern's common stock in an all cash transaction.
Pending satisfaction of normal regulatory approval requirements and other customary closing conditions, as well as approval of Northwestern shareholders, the transaction is anticipated to close in the third quarter of 2014. Upon closing of the transaction, Chemical intends to consolidate Northwestern's banking subsidiary, Northwestern Bank, into Chemical's banking subsidiary, Chemical Bank, and operate under the Chemical Bank name. Upon completion of the transaction, one independent member of Northwestern's board of directors will join Chemical's board of directors.
Chemical anticipates the transaction, with cost saves fully phased in, to be immediately accretive to earnings per share of approximately 16 percent. Chemical expects net cost savings from post-closing synergies to reach an annual run rate of approximately $11 million, and they are expected to be fully achieved within 2 quarters after the closing. Chemical estimates pre-tax acquisition-related and integration costs of approximately $13 million dollars, which are anticipated to be incurred within 6 months of the closing date.
"We are delighted to welcome Northwestern Bank and its talented team of Michigan bankers to the Chemical Financial family. We view their organization as the premier northwestern Michigan community banking franchise, and believe the combination of these two community-driven, Michigan-focused institutions will provide a compelling choice for the state's residents and businesses," said David B. Ramaker, Chairman, Chief Executive Officer and President of Chemical Financial Corporation. "The organizations share a foundational approach to community banking -- encompassing experienced local management, capital strength and an underlying commitment to employees, customers and Michigan communities -- that will enable us to flourish as we grow."
"From a strategic perspective, this is a great fit. Not only do these institutions' core banking philosophies and cultural traits align, but their branch networks are complementary. As a result, the transaction will provide Chemical with a leading position in northern Michigan, expanding the breadth of our footprint and providing entry into several new markets where our robust product and service offerings, especially on the lending side, will provide significant growth potential. Furthermore, Northwestern's productive fee-based businesses, including wealth management and residential mortgage origination and servicing, will enhance our efforts in these areas," added Ramaker.
"Given the similarity in our community-based approaches to meeting Michigan's banking needs, Chemical was the clear choice as Northwestern's go-forward partner," said Daniel Terpsma, President and Chief Executive Officer of Northwestern Bank. "Chemical's proven strategy of customer-centric, community banking coupled with its commitment to Michigan and its people, clearly aligns with our vision, values and mission. We believe that our employees, customers and the communities we serve will benefit greatly from the strength, depth and growth prospects that Chemical brings to this region. On behalf of the Board of Directors of Northwestern, we want to thank our employees for helping us build a premiere community bank," noted Terpsma.
Chemical's estimated fair value credit adjustments in Northwestern's current loan portfolio would lower the recorded carrying amount of Northwestern's loan portfolio after allowance 4.4 percent.
Chemical anticipates that, as a result of the regulatory review process, it may be required to divest one acquired branch in the Gaylord, Michigan, market area. Chemical's current projections also reflect the potential consolidation of 4 other branches in 3 communities where Chemical and Northwestern have overlapping locations.