March 12--TRAVERSE CITY -- The Grand Traverse region's burgeoning economy sparked the proposed merger of Northwestern and Chemical banks in a deal that will cause layoffs.
Chemical Financial Corporation President David Ramaker said today the bank will pay $120 million cash for Traverse City-based Northwestern, which employs 374 people and owns 25 branches in 11 northwestern Michigan counties.
Ramaker said the Midland-based financial institution wanted a presence in the Traverse City area financial market and Northwestern Bank was the perfect fit.
"If you look at our particular footprint of our company today ... the northwestern part of the state is where we are not," Ramaker said. "We've looked at this area for a long time. The attractiveness is the vibrancy of it, the diversity of it, and, in partnering with someone like Northwestern, we truly get the depth and breadth of the market."
Ramaker confirmed the merger will cause job losses.
"Anytime you do a merger like this, part of the way that you pay for that is, unfortunately, consolidations of jobs," Ramaker said.
"Anyone who is servicing customers day in and day out, we need all those people," Ramaker said. "They are the ones who are servicing the customers today. When you take a look at the operational side of the equation, that's typically where, unfortunately, the positions are eliminated. Those are where the jobs are lost. We are looking at how we can minimize that in every way possible."
The merger comes two months after Northwestern emerged from a consent agreement with federal regulators because of failures in some of Northwestern's commercial loans in 2012. In September 2013 the Federal Deposit Insurance Corporation alleged Northwestern Bank's former president, Harry "Scrub" Calcutt, and two other bank executives tried to hide in excess of $38 million in loan defaults by the bank's largest borrower from the bank's board of directors and government regulators.
Calcutt denied wrongdoing. The government's case against him is pending.
Northwestern President Daniel Terpsma said the bank's emergence from the consent agreement isn't related to the merger.
"I would consider it separate," Terpsma said. "We were working with the regulators, and we made tremendous progress during 2013, both in asset quality and earnings. As a result of that we had the consent order lifted at year's end. Where it is a part of this is that this same improvement created more value in attracting us to Chemical."
The merger will make Chemical the eighth largest financial institution in Michigan. Chemical will acquire all outstanding shares of Northwestern's common stock in a deal expected to close in the third quarter of this year. Chemical will consolidate Northwestern's banking operations into Chemical's and operate under the Chemical Bank name.
Terpsma said Northwestern customers won't be affected.
"They (Chemical) are a community bank, the largest community bank in effect in Michigan," Terpsma said. "They bring more products and services that we believe our employees will enjoy providing to our customers. Our customers will benefit."
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