Chemical Financial Corp. has agreed to acquire fellow Michigan bank O.A.K. Financial Corp. in an all-stock deal worth about $77 million.

"This merger clearly enhances our competitive position, branch distribution system and overall capabilities in the Grand Rapids market, which possesses both attractive demographics and solid long-term growth potential," said Chemical Chairman and Chief Executive David B. Ramaker. He also called the banks "two of Michigan's stronger institutions."

Banks in the state have been slammed by Michigan's economic woes, resulting in surging loan delinquencies and losses in the state with the nation's highest unemployment rate.

The deal calls for O.A.K.'s shareholders receiving 1.306 shares of Chemical common stock in exchange for each share of O.A.K. That values O.A.K. at $28.41, a 58% premium over Thursday's closing price.

The acquisition of O.A.K. and its 14 branches is expected to up Chemical's core deposit base by about $438 million. Chemical is expected to have $4.1 billion in deposits and 143 offices after the deal closes, slated for the second quarter.

Shares of Chemical closed Thursday at $21.75 and was inactive premarket.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.