More than two months after announcing a controversial deal to sell itself at a discount, Talmer Bancorp in Troy, Mich., laid out its rationale.

The $6.6 billion-asset company reckoned that a broad swoon in the stock market shouldn't overshadow the benefits of joining the much larger Chemical Financial in Midland, Mich., based on details laid out in a recent regulatory filing.

The filing also for the first time detailed the company's previous flirtations with prospective merger partners — and what happened when employees caught wind of the talks.

Talmer and Chemical spent 16 months informally discussing a deal as Chemical focused on integrating a prior acquisition, the filing revealed. The companies finally agreed on a letter of intent on Dec. 22.

By that time, the stock market was well into a prolonged slump that had already forced several other banks to think fast to salvage their mergers. The lengthy delay also took a toll on Chemical's offer for Talmer; the valuation went from a 4.3% premium to Talmer's stock price in mid-December to a 2.5% discount on Jan. 22. The eventual price, announced on Jan. 26, represented a 2.3% discount.

When they announced the $1.1 billion merger, Talmer's management got an earful from two analysts who accused them of leaving money on the table.

The filing lays out several reasons why Talmer's board agreed to the merger despite the discounted pricing. The valuation, for instance, always represented a significant premium compared to Talmer's initial public offering in 2013.

While Talmer's board also determined that the declining value was largely a function of a bigger selloff in the stock market, the filing noted that the $9.2 billion-asset Chemical's stock was underperforming those of its peers due to "apparent market concern" it could reach $10 billion in assets "without engaging in a material transaction." At that size, additional regulatory burdens would kick in.

Chemical plans to address that issue by using economies of scale from buying the $6.6 billion-asset Talmer to offset bottom-line hits it will take — including $5 million in reduced annual interchange fees and $2 million in added compliance costs each year — from crossing the regulatory threshold.

The filing provided several other reasons why Talmer's board backed the merger, including the potential for higher dividends, earnings per share accretion and the creation of a larger bank in Michigan.

The board also considered "that Chemical had performed relatively well in the most recent economic downturn," the filing said.

Talmer's directors were also advised that the decline in Chemical's stock price "had provided additional leverage … to use in negotiating for [a] merger consideration that was at the highest end of the range set forth in the letter of intent."

In addition, "the stock price volatility had not affected the relative contributions of the parties with respect to assets, loans, deposits, tangible common equity or net income."

Talmer, meanwhile, had plenty of experience with considering a merger following its 2013 initial public offering. The company, from March 2014 to July 2015, had conversations with at least five other institutions about a merger of similarly-sized banks or an outright sale, the filing disclosed.

Despite talks with numerous suitors, only one company, a "substantially larger institution," got far enough along to conduct due diligence, the filing said. During that process, knowledge of the merger talks spread to Talmer's employee ranks, prompting the company last summer to "institute new retention incentives to retain certain key personnel."

The filing also disclosed the expected roles for certain Talmer executives after the Chemical deal is completed in the second half of this year.

David Provost, Talmer's president and chief executive, would become Chemical's vice chairman of growth strategy. Dennis Klaeser, Talmer's chief financial officer, would become chief strategy officer, while Thomas Shafer, president of Talmer Bank and Trust, would become an executive vice president of Chemical Bank. Provost and Klaeser would serve initial 24-month terms following the deal's completion.

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