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Chemical Financial Corporation Reports 2017 Second Quarter Operating Results

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MIDLAND, Mich., July 25, 2017 (GLOBE NEWSWIRE) -- Chemical Financial Corporation ("Corporation" or "Chemical") (NASDAQ:CHFC) today announced 2017 second quarter net income of $52.0 million, or $0.73 per diluted share, compared to 2017 first quarter net income of $47.6 million, or $0.67 per diluted share and 2016 second quarter net income of $25.8 million, or $0.67 per diluted share. Excluding transaction expenses and the change in fair value in loan servicing rights ("significant items"), net income in the second quarter of 2017 was $53.5 million, or $0.75 per diluted share, compared to $50.7 million, or $0.71 per diluted share, in the first quarter of 2017 and $27.8 million, or $0.72 per diluted share, in the second quarter of 2016.(1)

During the second quarter of 2017, significant items included transaction expenses of $0.5 million and a $1.8 million detriment to earnings due to the change in fair value in loan servicing rights, compared to transaction expenses of $4.2 million and a $0.5 million detriment to earnings due to the change in fair value in loan servicing rights in the first quarter of 2017. Transaction expenses for the second quarter of 2016 were $3.1 million.

"We are encouraged by the underlying trends this quarter including improved operating expense trends, fee income and quality loan growth," noted David T. Provost, Chief Executive Officer of Chemical Financial Corporation and Thomas C. Shafer, Vice Chairman of the Corporation and Chief Executive Officer of Chemical Bank. "Going forward, we will seek to further improve our fundamentals by carefully assessing how we allocate capital and focusing on strategies to enhance revenue growth while continuing to improve our operating efficiency."

The Corporation's return on average assets was 1.14% during the second quarter of 2017, compared to 1.09% during the first quarter of 2017 and 1.10% in the second quarter of 2016. The Corporation's return on average shareholders' equity was 8.0% in the second quarter of 2017, compared to 7.4% during the first quarter of 2017 and 10.0% in the second quarter of 2016. Excluding significant items, the Corporation's return on average assets was 1.17% during the second quarter of 2017, compared to 1.16% during the first quarter of 2017 and 1.19% in the second quarter of 2016 and the Corporation's return on average shareholders' equity was 8.2% in the second quarter of 2017, compared to 7.8% during the first quarter of 2017 and 10.7% in the second quarter of 2016. The Corporation's return on average tangible shareholders' equity was 14.3% in the second quarter of 2017, compared to 13.3% during the first quarter of 2017 and 14.3% in the second quarter of 2016. Excluding significant items, the Corporation's return on average tangible equity was 14.7% in the second quarter of 2017, compared to 14.2% during the first quarter of 2017 and 15.4% in the second quarter of 2016.(2)

Net interest income was $137.9 million in the second quarter of 2017, $7.9 million, or 6.0%, higher than the first quarter of 2017 and $60.5 million, or 78.0%, higher than the second quarter of 2016. The higher net interest income in the second quarter of 2017 compared to the first quarter of 2017 was driven by the positive impact of organic loan growth, an increase in the investment securities portfolio, an increase in interest accretion from purchase accounting discounts on acquired loans, and one additional day in the quarter. These benefits to net interest income were partially offset by the interest expense impact of increases in short-term borrowings and deposits. The increase in net interest income in the second quarter of 2017 over the second quarter of 2016 was primarily attributable to loans acquired in the merger with Talmer Bancorp, Inc. ("Talmer") and organic loan growth. The Corporation experienced net organic loan growth of $394.0 million during the second quarter of 2017 and $1.14 billion during the twelve months ended June 30, 2017. The merger with Talmer added $4.88 billion of loans on August 31, 2016.

The net interest margin was 3.41% in both the second quarter of 2017 and the first quarter of 2017, compared to 3.60% in the second quarter of 2016. The net interest margin (on a tax-equivalent basis) was 3.48% in the second quarter of 2017, compared to 3.49% in the first quarter of 2017 and 3.70% in the second quarter of 2016.(3) The net interest margin (on a tax-equivalent basis) in the second quarter of 2017, compared to the first quarter of 2017, was compressed due to an increase in the investment securities portfolio funded by an increase in short-term borrowings. This compression was offset by an increase of 11 basis points in yield on total loans in the second quarter of 2017 to 4.22%, compared to the first quarter of 2017, primarily due to an increase of interest accretion from purchase accounting discounts on acquired loans and an increase in the average coupon rates on loans. 

The provision for loan losses was $6.2 million in the second quarter of 2017, compared to $4.1 million in the first quarter of 2017 and $3.0 million in the second quarter of 2016. The increase in the provision for loan losses in the second quarter of 2017, compared to both the first quarter of 2017 and the second quarter of 2016, was primarily the result of an increase in organic growth in the loan portfolio. Originated loan growth was $699.9 million in the second quarter of 2017, compared to $501.4 million in the first quarter of 2017. The growth in the originated loan portfolio was partially offset by run-off in the acquired loan portfolio of $305.9 million in the second quarter of 2017, compared to $218.8 million in the first quarter of 2017. It is important to note that the acquired loan portfolio was adjusted to the fair value of loans at each respective acquisition date and, as of June 30, 2017, no allowance has been recorded for this population of loans. Therefore, the run-off of acquired loans does not result in the reduction of allowance.

Net loan charge-offs were $1.2 million, or 0.04% of average loans, in the second quarter of 2017, compared to $3.5 million, or 0.11% of average loans, in the first quarter of 2017 and $1.8 million, or 0.10% of average loans, in the second quarter of 2016. Net loan charge-offs in the first quarter of 2017 included $1.5 million of losses from one commercial loan relationship.

The Corporation's nonperforming loans totaled $50.9 million at June 30, 2017, compared to $47.8 million at March 31, 2017 and $44.0 million at June 30, 2016. Nonperforming loans comprised 0.37% of total loans at June 30, 2017, compared to 0.36% at March 31, 2017 and 0.58% at June 30, 2016. The decrease in the percentage of nonperforming loans to total loans at June 30, 2017, compared to June 30, 2016, was primarily due to $4.88 billion of total loans added as a result of the merger with Talmer, as none of these loans are classified as nonperforming after the merger date since they are recorded in loan pools at their estimated net realizable value in accordance with generally accepted accounting principles.

At June 30, 2017, the allowance for loan losses of the originated loan portfolio was $83.8 million, or 0.97% of originated loans, compared to $78.8 million, or 0.99% of originated loans, at March 31, 2017 and $71.5 million, or 1.12% of originated loans, at June 30, 2016. The reduction in allowance for loan losses as a percentage of originated loans primarily reflects overall credit improvement. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 164.7% at both June 30, 2017 and March 31, 2017, compared to 162.5% at June 30, 2016.

Noninterest income was $41.6 million in the second quarter of 2017, compared to $38.0 million in the first quarter of 2017 and $20.9 million in the second quarter of 2016. Noninterest income in the second quarter of 2017 increased compared to the first quarter of 2017, primarily due to a $1.1 million increase in wealth management revenue. Net gain on sale of loans and other mortgage banking revenue also increased $0.7 million and included a $1.8 million detriment to earnings due to a change in fair value in loan servicing rights in the second quarter of 2017, compared to a $0.5 million detriment in the first quarter of 2017. Noninterest income in the second quarter of 2017 was higher than the second quarter of 2016 due primarily to incremental revenue resulting from the merger with Talmer.

Operating expenses were $98.2 million in the second quarter of 2017, compared to $104.2 million in the first quarter of 2017 and $59.1 million in the second quarter of 2016. Operating expenses included transaction expenses of $0.5 million in the second quarter of 2017, $4.2 million in the first quarter of 2017 and $3.1 million in the second quarter of 2016. Excluding these transaction expenses, operating expenses were $97.8 million in the second quarter of 2017, compared to $100.0 million in the first quarter of 2017 and $56.0 million in the second quarter of 2016.(4) The decrease in operating expenses, excluding transaction expenses, in the second quarter of 2017, compared to the first quarter of 2017 was primarily due to a decrease of $7.6 million in salaries, wages and employee benefits expenses, aided by a decrease in payroll taxes mostly attributable to stock option exercises during the first quarter of 2017 and an increase in the deferral of loan origination costs due to increased loan production and revised loan origination costs based on an updated loan origination cost study. The increase in operating expenses, excluding transaction expenses, in the second quarter of 2017, compared to the second quarter of 2016, was primarily attributable to incremental expenses resulting from the merger with Talmer.

The effective tax rate was 30.7% in the second quarter of 2017, compared to 20.5% in the first quarter of 2017 and 29.0% in the second quarter of 2016. The tax rate for the first quarter of 2017 benefited from stock option exercises that occurred in the first quarter of 2017.

The efficiency ratio is a measure of operating expenses as a percentage of net interest income and noninterest income. The Corporation's efficiency ratio was 54.7% in the second quarter of 2017, compared to 62.0% in the first quarter of 2017 and 60.1% in the second quarter of 2016. The Corporation's adjusted efficiency ratio, which excludes significant items, amortization of intangibles and net gains on sales of branches, closed branch locations and investment securities, was 52.2% in the second quarter of 2017, compared to 57.4% in the first quarter of 2017 and 54.6% in the second quarter of 2016.(5)

Total assets were $18.78 billion at June 30, 2017, compared to $17.64 billion at March 31, 2017 and $9.51 billion at June 30, 2016. The increase in total assets during the three months ended June 30, 2017 was primarily attributable to an increase in investment securities available-for-sale and loan growth that was funded by an increase in short-term FHLB advances. During the quarter, the investment securities portfolio grew by $490.0 million to $2.41 billion at June 30, 2017.  The increase in total assets during the twelve months ended June 30, 2017 was primarily attributable to the merger with Talmer, organic loan growth and an increase in investment securities available-for-sale.

Total loans were $13.67 billion at June 30, 2017, an increase of $394.0 million, or 3.0%, from total loans of $13.27 billion at March 31, 2017 and an increase of $6.02 billion, or 78.7%, from total loans of $7.65 billion at June 30, 2016. The Corporation experienced organic loan growth of $394.0 million during the second quarter of 2017 and $1.14 billion during the twelve months ended June 30, 2017. The Corporation added $4.88 billion of loans as part of the merger with Talmer on August 31, 2016.

Total deposits were $13.20 billion at June 30, 2017, compared to $13.13 billion at March 31, 2017 and $7.46 billion at June 30, 2016. The Corporation experienced organic growth in customer deposits of $72.0 million during the second quarter of 2017. The Corporation added $5.29 billion of deposits as part of the merger with Talmer that was completed on August 31, 2016, including $403.2 million of brokered deposits. The Corporation reduced the balance of brokered deposits by $351.2 million during the period of September 30, 2016 to June 30, 2017.

Securities sold under agreements to repurchase with customers were $310.0 million at June 30, 2017, compared to $398.9 million at March 31, 2017 and $256.2 million at June 30, 2016. Short-term borrowings were $2.05 billion at June 30, 2017, compared to $900.0 million at March 31, 2017 and $300.0 million at June 30, 2016 and consisted of short-term FHLB advances utilized by the Corporation to fund short-term liquidity needs. The increase in short-term FHLB advances in the second quarter 2017 was primarily utilized to fund an increase in the investment securities portfolio and loan growth. Long-term borrowings were $435.9 million at June 30, 2017, compared to $490.9 million at March 31, 2017 and $371.6 million at June 30, 2016.

The Corporation's shareholders' equity to total assets ratio was 14.1% at June 30, 2017, compared to 14.7% at March 31, 2017 and 11.0% at June 30, 2016. The Corporation's tangible equity to tangible assets ratio and total risk-based capital ratio were 8.4% and 11.1% (estimated), respectively, at June 30, 2017 compared to 8.8% and 11.4%, respectively, at March 31, 2017 and 8.2% and 11.4%, respectively, at June 30, 2016.(6) The Corporation's book value was $37.11 per share at June 30, 2017, compared to $36.56 per share at March 31, 2017 and $27.45 per share at June 30, 2016. The Corporation's tangible book value was $20.89 per share at June 30, 2017, compared to $20.32 per share at March 31, 2017 and $19.68 per share at June 30, 2016.(7)

(1) Net income, excluding significant items, and diluted earnings per share, excluding significant items, are non-GAAP financial measures. Please refer to the section entitled "Non-GAAP Financial Measures" in this press release and to the financial tables entitled "Reconciliation of Non-GAAP Financial Measures" for a reconciliation to the most directly comparable GAAP financial measures.

(2) Return on average assets, excluding significant items, return on average shareholders' equity, excluding significant items,  return on average tangible shareholders' equity, and return on average tangible shareholders' equity, excluding significant items are non-GAAP financial measures. Please refer to the section entitled "Non-GAAP Financial Measures" in this press release and to the financial tables entitled "Reconciliation of Non-GAAP Financial Measures" for a reconciliation to the most directly comparable GAAP financial measures.

(3) Net interest margin, on a tax equivalent basis, is a non-GAAP financial measure. Please refer to the section entitled "Non-GAAP Financial Measures" in this press release and to the financial tables entitled "Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates" for a reconciliation of net interest income used to compute net interest margin on a tax equivalent basis to the most directly comparable GAAP financial measure.

(4) Operating expenses excluding transaction expenses is a non-GAAP financial measure.

(5) Adjusted efficiency ratio is a non-GAAP financial measure. Please refer to the section entitled "Non-GAAP Financial Measures" in this press release and to the financial tables entitled "Reconciliation of Non-GAAP Financial Measures" for a reconciliation to the most directly comparable GAAP financial measure.

(6) Tangible equity to tangible assets ratio is a non-GAAP financial measure. Please refer to the section entitled "Non-GAAP Financial Measures" in this press release and to the financial tables entitled "Reconciliation of Non-GAAP Financial Measures" for a reconciliation to the most directly comparable GAAP financial measure.

(7) Tangible book value per share is a non-GAAP financial measure. Please refer to the section entitled "Non-GAAP Financial Measures" in this press release and to the financial tables entitled "Reconciliation of Non-GAAP Financial Measures" for a reconciliation to the most directly comparable GAAP financial measure.

Conference Call Details

Chemical Financial Corporation will host a conference call to discuss its second quarter 2017 operating results on Wednesday, July 26, 2017, at 10:30 a.m. ET. Anyone interested may access the conference call on a live basis by dialing toll-free at 1-888-490-2760 and entering 481059 for the conference ID. The call will also be broadcast live over the Internet hosted at Chemical Financial Corporation's website at www.chemicalbank.com under the "Investor Info" section. A copy of the slide-show presentation and an audio replay of the call will remain available on Chemical Financial Corporation's website for at least 14 days.

About Chemical Financial Corporation

Chemical Financial Corporation is the largest banking company headquartered and operating branch offices in Michigan. The Corporation operates through its subsidiary bank, Chemical Bank, with 249 banking offices located primarily in Michigan, northeast Ohio and northern Indiana. At June 30, 2017, the Corporation had total assets of $18.78 billion. Chemical Financial Corporation's common stock trades on The NASDAQ Stock Market under the symbol CHFC and is one of the issuers comprising The NASDAQ Global Select Market and the S&P MidCap 400 Index. More information about the Corporation is available by visiting the investor relations section of its website at www.chemicalbank.com.

Non-GAAP Financial Measures

This press release contains references to financial measures which are not defined in generally accepted accounting principles ("GAAP"). Such non-GAAP financial measures include the Corporation's tangible equity to tangible assets ratio, tangible book value per share, presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis, and information presented excluding transaction expenses or significant items, including net income, diluted earnings per share, return on average assets, return on average shareholders' equity, operating expenses and the efficiency ratio. These non-GAAP financial measures have been included as the Corporation believes they are helpful for investors to analyze and evaluate the Corporation's financial condition. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measure may be found in the financial tables included with this press release.

Forward-Looking Statements

This press release contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy and the Corporation. Words and phrases such as "anticipates," "believes," "continue," "estimates," "expects," "forecasts," "future," "intends," "is likely," "judgment," "look ahead," "look forward," "on schedule," "opinion," "opportunity," "plans," "potential," "predicts," "probable," "projects," "should," "strategic," "trend," "will," and variations of such words and phrases or similar expressions are intended to identify such forward-looking statements. Such statements are based upon current beliefs and expectations and involve substantial risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These statements include, among others, statements related to future improvement of core operating efficiency, future levels of loan charge-offs, future levels of provisions for loan losses, real estate valuation, future levels of nonperforming assets, the rate of asset dispositions, future capital levels, future dividends, future growth and funding sources, future liquidity levels, future profitability levels, future deposit insurance premiums, future asset levels, the effects on earnings of future changes in interest rates, the future level of other revenue sources, future economic trends and conditions, future initiatives to expand the Corporation's market share, expected performance and cash flows from acquired loans, future effects of new or changed accounting standards, future opportunities for acquisitions, opportunities to increase top line revenues, the Corporation's ability to grow its core franchise, future cost savings and the Corporation's ability to maintain adequate liquidity and capital based on the requirements adopted by the Basel Committee on Banking Supervision and U.S. regulators. All statements referencing future time periods are forward-looking.

Management's determination of the provision and allowance for loan losses; the carrying value of acquired loans, goodwill and mortgage servicing rights; the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary and the amount of any impairment); and management's assumptions concerning pension and other postretirement benefit plans involve judgments that are inherently forward-looking. There can be no assurance that future loan losses will be limited to the amounts estimated. All of the information concerning interest rate sensitivity is forward-looking. The future effect of changes in the financial and credit markets and the national and regional economies on the banking industry, generally, and on the Corporation, specifically, are also inherently uncertain. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. The Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

Risk factors include, but are not limited to, the risk factors described in Item 1A of Chemical's Annual Report on Form 10-K for the year ended December 31, 2016. These and other factors are representative of the risk factors that may emerge and could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.


 
Chemical Financial Corporation Announces 2017 Second Quarter Operating Results
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
(In thousands, except per share data)
 
  June 30,
 2017
  March 31,
 2017
  December 31,
 2016
  June 30,
 2016
               
Assets              
Cash and cash equivalents:              
Cash and cash due from banks $ 230,219     $ 191,940     $ 237,758     $ 179,310  
Interest-bearing deposits with the Federal Reserve Bank and other banks and federal funds sold 389,022     249,840     236,644     53,650  
Total cash and cash equivalents 619,241     441,780     474,402     232,960  
Investment securities:              
Available-for-sale 1,767,478     1,275,846     1,234,964     458,552  
Held-to-maturity 645,605     647,192     623,427     552,828  
Total investment securities 2,413,083     1,923,038     1,858,391     1,011,380  
Loans held-for-sale 65,371     39,123     81,830     13,990  
Loans:              
Total loans 13,667,372     13,273,392     12,990,779     7,647,269  
Allowance for loan losses (83,797 )   (78,774 )   (78,268 )   (71,506 )
Net loans 13,583,575     13,194,618     12,912,511     7,575,763  
Premises and equipment 146,460     142,763     145,012     102,709  
Loan servicing rights 64,522     64,604     58,315     9,677  
Goodwill 1,133,534     1,133,534     1,133,534     286,867  
Other intangible assets 37,322     38,848     40,211     24,593  
Interest receivable and other assets 718,297     658,665     650,973     256,233  
Total Assets $ 18,781,405     $ 17,636,973     $ 17,355,179     $ 9,514,172  
Liabilities              
Deposits:              
Noninterest-bearing $ 3,626,592     $ 3,399,287     $ 3,341,520     $ 2,007,629  
Interest-bearing 9,577,775     9,733,060     9,531,602     5,457,017  
Total deposits 13,204,367     13,132,347     12,873,122     7,464,646  
Interest payable and other liabilities 141,702     114,789     134,637     71,417  
Securities sold under agreements to repurchase with customers 310,042     398,910     343,047     256,213  
Short-term borrowings 2,050,000     900,000     825,000     300,000  
Long-term borrowings 435,852     490,876     597,847     371,597  
Total liabilities 16,141,963     15,036,922     14,773,653     8,463,873  
Shareholders' Equity              
Preferred stock, no par value per share              
Common stock, $1 par value per share 71,131     71,118     70,599     38,267  
Additional paid-in capital 2,197,501     2,194,705     2,210,762     726,734  
Retained earnings 404,939     372,193     340,201     310,996  
Accumulated other comprehensive loss (34,129 )   (37,965 )   (40,036 )   (25,698 )
Total shareholders' equity 2,639,442     2,600,051     2,581,526     1,050,299  
Total Liabilities and Shareholders' Equity $ 18,781,405     $ 17,636,973     $ 17,355,179     $ 9,514,172  


 
Chemical Financial Corporation Announces 2017 Second Quarter Operating Results
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
(In thousands, except per share data)
  Three Months Ended   Six Months Ended
  June 30,
 2017
  March 31,
 2017
  June 30,
 2016
  June 30,
 2017
  June 30,
 2016
Interest Income                  
Interest and fees on loans $ 141,314     $ 132,485     $ 77,578     $ 273,799     $ 151,979  
Interest on investment securities:                  
Taxable 7,125     4,756     1,798     11,881     3,727  
Tax-exempt 4,426     4,235     2,640     8,661     5,305  
Dividends on nonmarketable equity securities 1,246     621     777     1,867     1,033  
Interest on deposits with the Federal Reserve Bank and other banks and federal funds sold 1,022     799     144     1,821     357  
Total interest income 155,133     142,896     82,937     298,029     162,401  
Interest Expense                  
Interest on deposits 10,582     8,916     4,260     19,498     8,319  
Interest on short-term borrowings 4,659     1,658     226     6,317     326  
Interest on long-term borrowings 1,944     2,225     956     4,169     1,931  
Total interest expense 17,185     12,799     5,442     29,984     10,576  
Net Interest Income 137,948     130,097     77,495     268,045     151,825  
Provision for loan losses 6,229     4,050     3,000     10,279     4,500  
Net interest income after provision for loan losses 131,719     126,047     74,495     257,766     147,325  
Noninterest Income                  
Service charges and fees on deposit accounts 8,777     8,004     6,337     16,781     12,057  
Wealth management revenue 6,958     5,827     5,782     12,785     10,983  
Other charges and fees for customer services 9,734     8,891     6,463     18,625     12,855  
Net gain on sale of loans and other mortgage banking revenue 9,879     9,160     1,595     19,039     3,000  
Gain on sale of investment securities 77     90     18     167     37  
Other 6,143     6,038     702     12,181     1,384  
Total noninterest income 41,568     38,010     20,897     79,578     40,316  
Operating Expenses                  
Salaries, wages and employee benefits 52,601     60,248     33,127     112,849     67,017  
Occupancy 8,745     7,392     5,514     16,137     10,419  
Equipment and software 8,149     8,517     4,875     16,666     9,279  
Merger and acquisition-related transaction expenses (transaction expenses) 465     4,167     3,054     4,632     5,648  
Other 28,277     23,872     12,515     52,149     25,609  
Total operating expenses 98,237     104,196     59,085     202,433     117,972  
Income before income taxes 75,050     59,861     36,307     134,911     69,669  
Income tax expense 23,036     12,257     10,532     35,293     20,289  
Net Income $ 52,014     $ 47,604     $ 25,775     $ 99,618     $ 49,380  
Earnings Per Common Share:                  
Weighted average common shares outstanding-basic 70,819     70,628     38,258     70,725     38,228  
Weighted average common shares outstanding-diluted 71,443     71,415     38,600     71,429     38,560  
Basic earnings per share $ 0.73     $ 0.67     $ 0.67     $ 1.41     $ 1.29  
Diluted earnings per share 0.73     0.67     0.67     1.39     1.28  
Cash Dividends Declared Per Common Share 0.27     0.27     0.26     0.54     0.52  
Key Ratios (annualized where applicable):                  
Return on average assets 1.14 %   1.09 %   1.10 %   1.11 %   1.06 %
Return on average shareholders' equity 8.0 %   7.4 %   10.0 %   7.7 %   9.6 %
Net interest margin (tax-equivalent basis) (non-GAAP) 3.48 %   3.49 %   3.70 %   3.49 %   3.65 %
Efficiency ratio - GAAP 54.7 %   62.0 %   60.1 %   58.2 %   61.4 %
Efficiency ratio - adjusted (non-GAAP) 52.2 %   57.4 %   54.6 %   54.7 %   56.1 %


 
Chemical Financial Corporation Announces 2017 Second Quarter Operating Results
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
(Dollars in thousands, except per share data)
  2nd
Quarter
2017
  1st
Quarter
2017
  4th
Quarter
2016
  3rd
Quarter
2016
  2nd
Quarter
2016
  1st
Quarter
2016
                                               
Summary of Operations                      
Interest income $ 155,133     $ 142,896     $ 144,416     $ 103,562     $ 82,937     $ 79,464  
Interest expense 17,185     12,799     11,969     6,753     5,442     5,134  
Net interest income 137,948     130,097     132,447     96,809     77,495     74,330  
Provision for loan losses 6,229     4,050     6,272     4,103     3,000     1,500  
Net interest income after provision for loan losses 131,719     126,047     126,175     92,706     74,495     72,830  
Noninterest income 41,568     38,010     54,264     27,770     20,897     19,419  
Operating expenses, excluding transaction expenses (non-GAAP) 97,772     100,029     96,286     68,674     56,031     56,293  
Transaction expenses 465     4,167     18,016     37,470     3,054     2,594  
Income before income taxes 75,050     59,861     66,137     14,332     36,307     33,362  
Income tax expense 23,036     12,257     18,969     2,848     10,532     9,757  
Net income $ 52,014     $ 47,604     $ 47,168     $ 11,484     $ 25,775     $ 23,605  
Significant items, net of tax 1,474     3,046     2,781     25,921     1,985     1,686  
Net income, excluding significant items $ 53,488     $ 50,650     $ 49,949     $ 37,405     $ 27,760     $ 25,291  
                       
Per Common Share Data                      
Net income:                      
Basic $ 0.73     $ 0.67     $ 0.67     $ 0.23     $ 0.67     $ 0.61  
Diluted 0.73     0.67     0.66     0.23     0.67     0.60  
Diluted, excluding significant items (non-GAAP) 0.75     0.71     0.70     0.75     0.72     0.65  
Cash dividends declared 0.27     0.27     0.27     0.27     0.26     0.26  
Book value - period-end 37.11     36.56     36.57     36.37     27.45     26.99  
Tangible book value - period-end 20.89     20.32     20.20     19.99     19.68     19.20  
Market value - period-end 48.41     51.15     54.17     44.13     37.29     35.69  
                       
Key Ratios (annualized where applicable)                    
Net interest margin (taxable equivalent basis) (non-GAAP) 3.48 %   3.49 %   3.56 %   3.58 %   3.70 %   3.60 %
Efficiency ratio - adjusted (non-GAAP) 52.2 %   57.4 %   53.7 %   52.7 %   54.6 %   57.6 %
Return on average assets 1.14 %   1.09 %   1.09 %   0.37 %   1.10 %   1.02 %
Return on average shareholders' equity 8.0 %   7.4 %   7.4 %   2.9 %   10.0 %   9.3 %
Average shareholders' equity as a percent of average assets 14.3 %   14.8 %   14.9 %   12.7 %   11.1 %   11.0 %
Capital ratios (period end):                      
Tangible shareholders' equity as a percent of tangible assets 8.4 %   8.8 %   8.8 %   8.7 %   8.2 %   8.2 %
Total risk-based capital ratio (1) 11.1 %   11.4 %   11.5 %   11.1 %   11.4 %   11.5 %

(1) Estimated at June 30, 2017.


 
Chemical Financial Corporation Announces 2017 Second Quarter Operating Results
Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates(1) (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
  Three Months Ended
  June 30, 2017   March 31, 2017   June 30, 2016
  Average
Balance
  Interest (FTE)   Effective
Yield/Rate (1)
  Average
Balance
  Interest (FTE)   Effective
Yield/Rate (1)
  Average
Balance
  Interest (FTE)   Effective
Yield/Rate (1)
Assets                                  
Interest-earning assets:                                  
Loans (1)(2) $ 13,513,927     $ 142,128     4.22 %   $ 13,155,846     $ 133,293     4.11 %   $ 7,511,192     $ 78,295     4.19 %
Taxable investment securities 1,364,358     7,125     2.09     1,005,489     4,756     1.89     515,303     1,798     1.40  
Tax-exempt investment  securities(1) 882,445     6,781     3.07     861,508     6,495     3.02     484,271     4,061     3.35  
Other interest-earning assets 166,244     1,246     3.01     103,334     621     2.44     43,615     777     7.16  
Interest-bearing deposits with the FRB and other banks and federal funds sold 302,022     1,022     1.36     269,288     799     1.20     82,246     144     0.70  
Total interest-earning assets 16,228,996     158,302     3.91     15,395,465     145,964     3.83     8,636,627     85,075     3.96  
Less: allowance for loan losses (80,690 )           (78,616 )           (71,790 )        
Other assets:                                  
Cash and cash due from banks 222,954             229,203             148,034          
Premises and equipment 145,320             146,044             104,488          
Interest receivable and other assets 1,748,119             1,781,923             515,039          
Total assets $ 18,264,699             $ 17,474,019             $ 9,332,398          
Liabilities and shareholders' equity                                
Interest-bearing liabilities:                                  
Interest-bearing demand deposits $ 2,682,652     $ 1,289     0.19 %   $ 2,898,061     $ 1,018     0.14 %   $ 1,892,512     $ 582     0.12 %
Savings deposits 3,881,260     3,047     0.31     3,842,594     1,721     0.18     2,073,412     476     0.09  
Time deposits 2,958,436     6,246     0.85     2,953,069     6,177     0.85     1,582,467     3,202     0.81  
Short-term borrowings 2,027,505     4,659     0.92     1,225,888     1,658     0.55     418,232     226     0.22  
Long-term borrowings 474,086     1,944     1.65     539,032     2,225     1.67     281,327     956     1.37  
Total interest-bearing liabilities 12,023,939     17,185     0.57     11,458,644     12,799     0.45     6,247,950     5,442     0.35  
Noninterest-bearing deposits 3,499,686             3,305,201             1,979,423          
Total deposits and borrowed funds 15,523,625     17,185     0.44     14,763,845     12,799     0.35     8,227,373     5,442     0.27  
Interest payable and other liabilities 134,557             125,673             72,011          
Shareholders' equity 2,606,517             2,584,501             1,033,014          
Total liabilities and shareholders' equity $ 18,264,699             $ 17,474,019             $ 9,332,398          
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities)     3.34 %           3.38 %           3.61 %
Net Interest Income (FTE)     $ 141,117             $ 133,165             $ 79,633      
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets)     3.48 %           3.49 %           3.70 %
                                   
Reconciliation to Reported Net Interest Income                                
Net interest income, fully taxable equivalent (non-GAAP)   $ 141,117             $ 133,165             $ 79,633      
Adjustments for taxable equivalent interest (1):                                
Loans     (814 )           (808 )           (717 )    
Tax-exempt investment securities     (2,355 )           (2,260 )           (1,421 )    
Total taxable equivalent interest adjustments   (3,169 )           (3,068 )           (2,138 )    
Net interest income (GAAP)     $ 137,948             $ 130,097             $ 77,495      
Net interest margin (GAAP)     3.41 %           3.41 %           3.60 %    

(1) Fully taxable equivalent (FTE) basis using a federal income tax rate of 35%. The presentation of net interest income on a FTE basis is not in accordance with GAAP, but is customary in the banking industry.
(2) Nonaccrual loans and loans held-for-sale are included in average balances reported and are included in the calculation of yields. Also, tax equivalent interest includes net loan fees.


 
Chemical Financial Corporation Announces 2017 Second Quarter Operating Results
Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates (1) (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
    Six Months Ended
    June 30, 2017   June 30, 2016
    Average
Balance
  Interest
(FTE)
  Effective
Yield/Rate(1)
  Average
Balance
  Interest
(FTE)
  Effective
Yield/Rate(1)
Assets    
Interest-earning assets:                        
Loans (1)(2)   $ 13,335,876     $ 275,421     4.16 %   $ 7,405,332     $ 153,394     4.16 %
Taxable investment securities   1,185,915     11,881     2.00     534,914     3,727     1.39  
Tax-exempt investment securities (1)   872,034     13,276     3.04     490,287     8,161     3.33  
Other interest-earning assets   134,962     1,867     2.79     41,554     1,033     5.00  
Interest-bearing deposits with the FRB and other banks and federal funds sold   285,746     1,821     1.28     109,582     357     0.66  
Total interest-earning assets   15,814,533     304,266     3.87     8,581,669     166,672     3.90  
Less: allowance for loan losses   (79,658 )           (72,669 )        
Other assets:                        
Cash and cash due from banks   226,061             153,156          
Premises and equipment   145,680             105,223          
Interest receivable and other assets   1,764,925             519,337          
Total assets   $ 17,871,541             $ 9,286,716          
Liabilities and Shareholders' Equity                        
Interest-bearing liabilities:                        
Interest-bearing demand deposits   $ 2,789,762     $ 2,307     0.17 %   $ 1,923,068     $ 1,050     0.11 %
Savings deposits   3,862,033     4,768     0.25     2,061,141     865     0.08  
Time deposits   2,955,768     12,423     0.85     1,604,020     6,404     0.80  
Short-term borrowings   1,628,911     6,317     0.78     383,966     326     0.17  
Long-term borrowings   506,379     4,169     1.66     273,675     1,931     1.42  
Total interest-bearing liabilities   11,742,853     29,984     0.51     6,245,870     10,576     0.34  
Noninterest-bearing deposits   3,402,981             1,943,159          
Total deposits and borrowed funds   15,145,834     29,984     0.40     8,189,029     10,576     0.26  
Interest payable and other liabilities   130,140             72,216          
Shareholders' equity   2,595,567             1,025,471          
Total liabilities and shareholders' equity   $ 17,871,541             $ 9,286,716          
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities)           3.36 %           3.56 %
Net Interest Income (FTE)       $ 274,282             $ 156,096      
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets)           3.49 %           3.65 %
                         
Reconciliation to Reported Net Interest Income                        
Net interest income, fully taxable equivalent (non-GAAP)       $ 274,282             $ 156,096      
Adjustments for taxable equivalent interest (1):                        
Loans       (1,622 )           (1,415 )    
Tax-exempt investment securities       (4,615 )           (2,856 )    
Total taxable equivalent interest adjustments       (6,237 )           (4,271 )    
Net interest income (GAAP)       $ 268,045             $ 151,825      
Net interest margin (GAAP)       3.41 %           3.55 %    

(1) Fully taxable equivalent (FTE) basis using a federal income tax rate of 35%. The presentation of net interest income on a FTE basis is not in accordance with GAAP, but is customary in the banking industry.
(2) Nonaccrual loans and loans held-for-sale are included in average balances reported and are included in the calculation of yields. Also, tax equivalent interest includes net loan fees.


 
Chemical Financial Corporation Announces 2017 Second Quarter Operating Results
Noninterest Income and Operating Expenses Information (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
 
  2nd
Quarter
2017
  1st
Quarter
2017
  4th
Quarter
2016
  3rd
Quarter
2016
  2nd
Quarter
2016
  1st
Quarter
2016
                                               
Noninterest income                      
Service charges and fees on deposit accounts $ 8,777     $ 8,004     $ 8,414     $ 7,665     $ 6,337     $ 5,720  
Wealth management revenue 6,958     5,827     6,034     5,584     5,782     5,201  
Electronic banking fees 7,482     6,817     8,196     5,533     4,786     4,918  
Net gain on sale of loans and other mortgage banking revenue 9,879     9,160     14,420     4,439     1,595     1,405  
Other fees for customer services 2,252     2,074     1,785     1,877     1,677     1,474  
Gain on sale of investment securities 77     90     76     16     18     19  
Gain on sale of branch offices         7,391              
Other 6,143     6,038     7,948     2,656     702     682  
Total noninterest income $ 41,568     $ 38,010     $ 54,264     $ 27,770     $ 20,897     $ 19,419  


  2nd
Quarter
2017
  1st
Quarter
2017
  4th
Quarter
2016
  3rd
Quarter
2016
  2nd
Quarter
2016
  1st
Quarter
2016
                                               
Operating expenses                      
Salaries and wages $ 44,959     $ 48,526     $ 47,936     $ 33,841     $ 26,887     $ 26,743  
Employee benefits 7,642     11,722     9,695     6,724     6,240     7,147  
Occupancy 8,745     7,392     7,644     5,462     5,514     4,905  
Equipment and software 8,149     8,517     8,709     6,420     4,875     4,404  
Outside processing and service fees 8,924     7,511     7,290     5,365     4,833     3,711  
FDIC insurance premiums 2,460     1,406     2,813     1,849     1,338     1,407  
Professional fees 2,567     1,968     2,304     1,472     1,020     1,036  
Intangible asset amortization 1,525     1,513     1,843     1,292     1,195     1,194  
Credit-related expenses 1,895     1,200     (1,029 )   (371 )   (1,331 )   30  
Transaction expenses 465     4,167     18,016     37,470     3,054     2,594  
Other 10,906     10,274     9,081     6,620     5,460     5,716  
Total operating expenses $ 98,237     $ 104,196     $ 114,302     $ 106,144     $ 59,085     $ 58,887  


 
Chemical Financial Corporation Announces 2017 Second Quarter Operating Results
Composition of Loans and Deposits and Additional Information on Intangible Assets (Unaudited)
Chemical Financial Corporation
(Dollars in Thousands)
 
          Organic
Growth -
                  Organic
Growth -
  June 30,
2017
  March 31, 2017   Three
Months
Ended
June 30,
2017
  Dec 31,
 2016
  Sep 30,
 2016
  Talmer
Merger
Aug 31,
2016
  June 30,
2016
  Twelve
Months
Ended
June 30,
2017
                               
Composition of Loans                              
Commercial loan portfolio:                              
Commercial $ 3,360,161     $ 3,253,608     3.3 %   $ 3,217,300     $ 3,199,576     $ 1,223,179     $ 1,953,301     9.4 %
Commercial real estate 4,324,323     4,097,771     5.5     3,973,140     3,733,377     1,589,900     2,157,733     26.7  
Real estate construction 446,678     453,811     (1.6 )   403,772     500,494     166,364     285,848     (1.9 )
Subtotal - commercial loans 8,131,162     7,805,190     4.2     7,594,212     7,433,447     2,979,443     4,396,882     17.2  
Consumer loan portfolio:                              
Residential mortgage 3,125,397     3,133,465     (0.3 )   3,086,474     3,046,959     1,531,641     1,494,192     6.7  
Consumer installment 1,553,967     1,481,057     4.9     1,433,884     1,335,707     158,835     1,048,622     33.0  
Home equity 856,846     853,680     0.4     876,209     899,676     212,483     707,573     (8.9 )
Subtotal - consumer loans 5,536,210     5,468,202     1.2     5,396,567     5,282,342     1,902,959     3,250,387     11.8  
Total loans $ 13,667,372     $ 13,273,392     3.0 %   $ 12,990,779     $ 12,715,789     $ 4,882,402     $ 7,647,269     14.9 %


          Organic
Growth -
                  Organic
Growth -
  June 30,
 2017
  March 31,
 2017
  Three
Months
Ended
June 30,
2017
  Dec 31,
 2016
  Sep 30,
 2016
  Talmer
Merger

Aug 31,
2016
  June 30,
 2016
  Twelve
Months
Ended
June 30,
2017
Composition of Deposits                              
Noninterest-bearing demand $ 3,626,592     $ 3,399,287     6.7 %   $ 3,341,520     $ 3,264,934     $ 1,236,902     $ 2,007,629     19.0 %
Savings 1,749,199     1,752,040     (0.2 )   1,662,115     1,650,276     549,428     1,107,558     8.3  
Interest-bearing demand 2,606,032     2,900,546     (10.2 )   2,825,801     3,316,635     894,748     1,819,865     (6.0 )
Money market accounts 2,235,412     2,161,645     3.4     2,033,319     1,692,656     699,739     969,566     58.4  
Brokered deposits 123,728     156,367     (20.9 )   226,429     474,902     403,210     173,092     (261.5 )
Other time deposits 2,863,404     2,762,462     3.7     2,783,938     2,873,459     1,510,591     1,386,936     (2.5 )
Total deposits $ 13,204,367     $ 13,132,347     0.5 %   $ 12,873,122     $ 13,272,862     $ 5,294,618     $ 7,464,646     6.0 %


    June 30,
 2017
  March 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
  June 30,
 2016
                     
Additional Data - Intangibles                    
Goodwill   $ 1,133,534     $ 1,133,534     $ 1,133,534     $ 1,137,166     $ 286,867  
Loan servicing rights   64,522     64,604     58,315     51,393     9,677  
Core deposit intangibles (CDI)   37,235     38,723     40,211     35,618     24,429  
Noncompete agreements   87     125         82     164  
                               


 
Chemical Financial Corporation Announces 2017 Second Quarter Operating Results
Nonperforming Assets (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
 
    June 30,
2017
  March 31,
2017
  Dec 31,
 2016
  Sep 30,
 2016
  June 30,
 2016
  March 31,
 2016
Nonperforming Assets                        
Nonperforming Loans (1):                        
Nonaccrual loans:                        
Commercial   $ 18,773     $ 16,717     $ 13,178     $ 13,742     $ 14,577     $ 19,264  
Commercial real estate   19,723     20,828     19,877     19,914     21,325     25,859  
Real estate construction   56     79     80     80     496     546  
Residential mortgage   7,714     6,749     6,969     5,119     5,343     5,062  
Consumer installment   757     755     879     378     285     360  
Home equity   3,871     2,713     3,351     2,064     1,971     2,328  
Total nonaccrual loans(1)   50,894     47,841     44,334     41,297     43,997     53,419  
Other real estate and repossessed assets   14,582     16,395     17,187     20,730     8,440     9,248  
Total nonperforming assets   $ 65,476     $ 64,236     $ 61,521     $ 62,027     $ 52,437     $ 62,667  
Accruing loans contractually past due 90 days or more as to interest or principal payments, excluding acquired loans accounted for under ASC 310-30:
Commercial   58     1,823     11     221     3     370  
Commercial real estate   262     700     277     739     3      
Real estate construction               1,439          
Residential mortgage               375     407     423  
Home equity   2,026     1,169     995     628     1,071     679  
Total accruing loans contractually past due 90 days or more as to interest or principal payments   $ 2,346     3,692     $ 1,283     $ 3,402     $ 1,484     $ 1,472  

(1) Acquired loans, accounted for under Accounting Standards Codification 310-30, that are not performing in accordance with contractual terms are not reported as nonperforming loans because these loans are recorded in pools at their net realizable value based on the principal and interest the Corporation expects to collect on these loans.


 
Chemical Financial Corporation Announces 2017 Second Quarter Operating Results
Summary of Allowance and Loan Loss Experience (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
 
  2nd
Quarter
2017
  1st Quarter 2017   4th
Quarter
2016
  3rd
Quarter
2016
  2nd
Quarter
2016
  1st
Quarter
2016
  Six Months Ended
              June 30,
2017
  June 30,
2016
Allowance for loan losses - originated loan portfolio                                                  
 Allowance for loan losses - beginning of period $ 78,774     $ 78,268     $ 73,775     $ 71,506     $ 70,318     $ 73,328     $ 78,268     $ 73,328  
Provision for loan losses 6,229     4,050     6,272     4,103     3,000     1,500     10,279     4,500  
Net loan (charge-offs) recoveries:                            
Commercial (239 )   (1,999 )   (336 )   (150 )   (1,153 )   (3,115 )   (2,238 )   (4,268 )
Commercial real estate (205 )   730     (280 )   (154 )   (187 )   (440 )   525     (627 )
Real estate construction     (9 )   36     (31 )       (11 )   (9 )   (11 )
Residential mortgage 19     (567 )   (236 )   (304 )   8     (172 )   (548 )   (164 )
Consumer installment (747 )   (1,310 )   (823 )   (1,137 )   (486 )   (602 )   (2,057 )   (1,088 )
Home equity (34 )   (389 )   (140 )   (58 )   6     (170 )   (423 )   (164 )
Net loan charge-offs (1,206 )   (3,544 )   (1,779 )   (1,834 )   (1,812 )   (4,510 )   (4,750 )   (6,322 )
Allowance for loan losses - end of period 83,797     78,774     78,268     73,775     71,506     70,318     83,797     71,506  
Allowance for loan losses - acquired loan portfolio                        
Allowance for loan losses - beginning of period                              
Provision for loan losses                              
Allowance for loan losses - end of period                              
Total allowance for loan losses $ 83,797     $ 78,774     $ 78,268     $ 73,775     $ 71,506     $ 70,318     $ 83,797     $ 71,506  
Net loan charge-offs as a percent of average loans (annualized) 0.04 %   0.11 %   0.06 %   0.08 %   0.10 %   0.25 %   0.07 %   0.17 %


  June 30,
2017
  March 31,
2017
  Dec 31,
 2016
  Sep 30,
 2016
  June 30,
2016
Originated loans $ 8,659,622     $ 7,959,769     $ 7,458,401     $ 6,755,931     $ 6,378,934  
Acquired loans 5,007,750     5,313,623     5,532,378     5,959,858     1,268,335  
Total loans $ 13,667,372     $ 13,273,392     $ 12,990,779     $ 12,715,789     $ 7,647,269  
                   
Allowance for loan losses as a percent of:                
Total originated loans 0.97 %   0.99 %   1.05 %   1.09 %   1.12 %
Nonperforming loans 164.7 %   164.7 %   176.5 %   178.6 %   162.5 %
Credit mark as a percent of unpaid principal balance on acquired loans 1.3 %   2.8 %   3.1 %   3.0 %   4.1 %


 
Chemical Financial Corporation Announces 2017 Second Quarter Operating Results
Reconciliation of Non-GAAP Financial Measures (Unaudited)
Chemical Financial Corporation
(Amounts in thousands)
  2nd
Quarter
2017
  1st
Quarter
2017
  4th
Quarter
2016
  3rd
Quarter
2016
  2nd
Quarter
2016
  1st
Quarter
2016
  Six Months Ended
              June 30,
2017
  June 30,
2016
Non-GAAP Operating Results                                                  
Net Income                              
Net income, as reported $ 52,014     $ 47,604     $ 47,168     $ 11,484     $ 25,775     $ 23,605     $ 99,618     $ 49,380  
Transaction expenses   465       4,167       18,016       37,470       3,054       2,594       4,632       5,648  
Gain on sales of branch offices               (7,391 )                              
Loan servicing rights change in fair valuation   1,802       519       (6,348 )     1,236                   2,321        
Significant items   2,267       4,686       4,277       38,706       3,054       2,594       6,953       5,648  
Income tax benefit (1)   (793 )     (1,640 )     (1,496 )     (12,785 )     (1,069 )     (908 )     (2,433 )     (1,977 )
Significant items, net of tax   1,474       3,046       2,781       25,921       1,985       1,686       4,520       3,671  
Net income, excluding significant items $ 53,488     $ 50,650     $ 49,949     $ 37,405     $ 27,760     $ 25,291     $ 104,138     $ 53,051  
Diluted Earnings Per Share                            
Diluted earnings per share, as reported $ 0.73     $ 0.67     $ 0.66     $ 0.23     $ 0.67     $ 0.60     $ 1.39     $ 1.28  
Effect of significant items, net of tax   0.02       0.04       0.04       0.52       0.05       0.05       0.06       0.10  
Diluted earnings per share, excluding significant items $ 0.75     $ 0.71     $ 0.70     $ 0.75     $ 0.72     $ 0.65     $ 1.45     $ 1.38  
Return on Average Assets                              
Return on average assets, as reported   1.14 %     1.09 %     1.09 %     0.37 %     1.10 %     1.02 %     1.11 %     1.06 %
Effect of significant items, net of tax   0.03       0.07       0.07       0.85       0.09       0.07       0.06       0.08  
Return on average assets, excluding significant items   1.17 %     1.16 %     1.16 %     1.22 %     1.19 %     1.09 %     1.17 %     1.14 %
Return on Average Shareholders' Equity                            
Return on average shareholders' equity, as reported   8.0 %     7.4 %     7.4 %     2.9 %     10.0 %     9.3 %     7.7 %     9.6 %
Effect of significant items, net of tax   0.2       0.4       0.4       6.7       0.7       0.6       0.3       0.7  
Return on average shareholders' equity, excluding significant items   8.2 %     7.8 %     7.8 %     9.6 %     10.7 %     9.9 %     8.0 %     10.3 %
Return on Average Tangible Shareholders' Equity                                          
Average shareholders' equity $ 2,606,517
    $ 2,584,501     $ 2,564,943     $ 1,559,668     $ 1,033,014     $ 1,017,929     $ 2,595,567
    $ 1,025,471  
Average goodwill, CDI and noncompete agreements, net of tax   1,171,593       1,173,019       1,172,079       601,544       312,033       313,753       1,172,302
      312,893  
Average tangible shareholders' equity $ 1,434,924
    $ 1,411,482     $ 1,392,864     $ 958,124     $ 720,981     $ 704,176     $ 1,423,265
    $ 712,578  
Return on average tangible shareholders' equity   14.3 %     13.3 %     13.4 %     4.8 %     14.3 %     13.4 %     14.0 %     13.9 %
Effect of significant items, net of tax   0.4       0.9       0.8       10.8       1.1       1.0       0.6       1.0  
Return on average tangible shareholders' equity, excluding significant items   14.7 %     14.2 %     14.2 %     15.6 %     15.4 %     14.4 %     14.6 %     14.9 %

(1) Assumes transaction expenses and other significant items are deductible at an income tax rate of 35%, except for the impact of estimated nondeductible expenses incurred in periods when the Corporation completes merger and acquisition transactions.


 
Chemical Financial Corporation Announces 2017 Second Quarter Operating Results
Reconciliation of Non-GAAP Financial Measures (Unaudited)
Chemical Financial Corporation
(Amounts in thousands, except per share data)
  2nd
Quarter
2017
  1st
Quarter
2017
  4th
Quarter
2016
  3rd
Quarter
2016
  2nd
Quarter
2016
  1st
Quarter
2016
  Six Months Ended
              June 30,
2017
  June 30,
2016
Efficiency Ratio                            
Net interest income $ 137,948     $ 130,097     $ 132,447     $ 96,809     $ 77,495     $ 74,330     $ 268,045     $ 151,825  
Noninterest income 41,568     38,010     54,264     27,770     20,897     19,419     79,578     40,316  
Total revenue - GAAP 179,516     168,107     186,711     124,579     98,392     93,749     347,623     192,141  
Net interest income FTE adjustment 3,169     3,068     2,945     2,426     2,138     2,133     6,237     4,271  
Loan servicing rights change in fair value (gains)losses 1,802     519     (6,348 )   1,236             2,321      
Gain on sales of branch offices         (7,391 )                    
Gains from sale of investment securities gains and closed branch locations (77 )   (90 )   (76 )   (301 )   (123 )   (169 )   (167 )   (292 )
Total revenue - Non-GAAP $ 184,410     $ 171,604     $ 175,841     $ 127,940     $ 100,407     $ 95,713     $ 356,014     $ 196,120  
Operating expenses - GAAP $ 98,237     $ 104,196     $ 114,302     $ 106,144     $ 59,085     $ 58,887     $ 202,433     $ 117,972  
Transaction expenses (465 )   (4,167 )   (18,016 )   (37,470 )   (3,054 )   (2,594 )   (4,632 )   (5,648 )
Amortization of intangibles (1,525 )   (1,513 )   (1,843 )   (1,292 )   (1,195 )   (1,194 )   (3,038 )   (2,389 )
Operating expenses - Non-GAAP $ 96,247     $ 98,516     $ 94,443     $ 67,382     $ 54,836     $ 55,099     $ 194,763     $ 109,935  
Efficiency ratio - GAAP 54.7 %   62.0 %   61.2 %   85.2 %   60.1 %   62.8 %   58.2 %   61.4 %
Efficiency ratio - adjusted Non-GAAP 52.2 %   57.4 %   53.7 %   52.7 %   54.6 %   57.6 %   54.7 %   56.1 %


  June 30,
 2017
  March 31,
 2017
  Dec 31,
 2016
  Sep 30,
 2016
  June 30,
 2016
  March 31,
 2016
Tangible Book Value                      
Shareholders' equity, as reported $ 2,639,442     $ 2,600,051     $ 2,581,526     $ 2,563,666     $ 1,050,299     $ 1,032,291  
Goodwill, CDI and noncompete agreements, net of tax (1,153,595 )   (1,154,915 )   (1,155,617 )   (1,154,121 )   (297,044 )   (297,821 )
Tangible shareholders' equity $ 1,485,847     $ 1,445,136     $ 1,425,909     $ 1,409,545     $ 753,255     $ 734,470  
Common shares outstanding 71,131     71,118     70,599     70,497     38,267     38,248  
Book value per share (shareholders' equity, as reported, divided by common shares outstanding) $ 37.11     $ 36.56     $ 36.57     $ 36.37     $ 27.45     $ 26.99  
Tangible book value per share (tangible shareholders' equity divided by common shares outstanding) $ 20.89     $ 20.32     $ 20.20     $ 19.99     $ 19.68     $ 19.20  
                       
Tangible Shareholders' Equity to Tangible Assets                
Total assets, as reported $ 18,781,405     $ 17,636,973     $ 17,355,179     $ 17,383,637     $ 9,514,172     $ 9,303,632  
Goodwill, CDI and noncompete agreements, net of tax (1,153,595 )   (1,154,915 )   (1,155,617 )   (1,154,121 )   (297,044 )   (297,821 )
Tangible assets $ 17,627,810     $ 16,482,058     $ 16,199,562     $ 16,229,516     $ 9,217,128     $ 9,005,811  
Shareholders' equity to total assets 14.1 %   14.7 %   14.9 %   14.7 %   11.0 %   11.1 %
Tangible shareholders' equity to tangible assets 8.4 %   8.8 %   8.8 %   8.7 %   8.2 %   8.2 %
                                   


For further information:
David T. Provost, CEO
Dennis L. Klaeser, CFO
989-839-5350

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