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Chemical Financial Corporation Reports 2016 First Quarter Operating Results

MIDLAND, Mich., April 15, 2016 (GLOBE NEWSWIRE) -- Chemical Financial Corporation ("Corporation" or "Chemical") (NASDAQ:CHFC) today announced 2016 first quarter net income of $23.3 million, or $0.60 per diluted share, compared to 2015 fourth quarter net income of $25.5 million, or $0.66 per diluted share and 2015 first quarter net income of $17.8 million, or $0.54 per diluted share. Excluding merger and acquisition-related transaction expenses ("transaction expenses"), net income in the first quarter of 2016 was $24.9 million, or $0.65 per diluted share, compared to $26.9 million, or $0.70 per diluted share, in the fourth quarter of 2015 and $18.7 million, or $0.57 per diluted share, in the first quarter of 2015.

Transaction expenses attributable to the pending merger with Talmer Bancorp, Inc. ("Talmer"), which was announced on January 26, 2016, were $2.6 million in the first quarter of 2016, while transaction expenses attributable to the April 1, 2015 acquisition of Monarch Community Bancorp, Inc. ("Monarch") and the May 31, 2015 acquisition of Lake Michigan Financial Corporation ("Lake Michigan") were $2.1 million in the fourth quarter of 2015 and $1.4 million in the first quarter of 2015.

"Between these solid financial results, and our late January announcement of our partnership with Talmer, 2016 is off to a strong start for Chemical Financial Corporation. The improvement in our first quarter 2016 financial results over the prior year’s first quarter was driven, in large part, by the benefits and synergies of the two acquisitions we have completed in the intervening period, combined with solid organic loan and deposit growth over the past year. The resultant balance sheet and revenue growth, combined with our sustained high level of credit quality and ability to keep operating expenses in check, has translated into strong first quarter earnings performance," noted David B. Ramaker, Chairman, Chief Executive Officer and President of Chemical Financial Corporation.

"We continue to believe that our community-centric approach to commercial banking makes us an attractive financial service provider for the households and small- and middle-market businesses that operate in the communities we serve, while also making us an appealing potential partner for like-minded financial institutions. Our pending merger with Talmer represents another instance of our ability to bring strong, complementary, talented commercial banking operations into the Chemical Financial Corporation family. We look forward to continuing to execute on our growth strategy across select Midwestern markets in the months and years ahead," added Ramaker.

The Corporation's return on average assets was 1.01% during the first quarter of 2016, compared to 1.10% in the fourth quarter of 2015 and 0.98% in the first quarter of 2015. The Corporation's return on average shareholders' equity was 9.2% in the first quarter of 2016, compared to 10.1% in the fourth quarter of 2015 and 9.0% in the first quarter of 2015. Excluding transaction expenses, the Corporation's return on average assets was 1.09% during the first quarter of 2016, compared to 1.16% in the fourth quarter of 2015 and 1.03% in the first quarter of 2015 and the Corporation's return on average shareholders' equity was 9.9% in the first quarter of 2016, compared to 10.7% in the fourth quarter of 2015 and 9.5% in the first quarter of 2015.

Net interest income was $74.3 million in the first quarter of 2016, $1.1 million, or 1.5%, lower than the fourth quarter of 2015, although $15.1 million, or 26%, higher than the first quarter of 2015. The decrease in net interest income in the first quarter of 2016, compared to the fourth quarter of 2015, was largely attributable to lower interest income resulting from one less day in the first quarter of 2016 and semi-annual interest income from Federal Reserve Bank (FRB) dividends and seasonal loan fees in the fourth quarter of 2015. Loan growth in the first quarter of 2016 was offset by a slight reduction in the average yield of the loan portfolio during the quarter. The increase in net interest income in the first quarter of 2016 over the first quarter of 2015 was largely attributable to the positive impact of organic loan growth and the impact of the Corporation's acquisitions of Monarch and Lake Michigan.

The net interest margin (on a tax-equivalent basis) was 3.60% in the first quarter of 2016, compared to 3.64% in the fourth quarter of 2015 and 3.55% in the first quarter of 2015. The average yield on the loan portfolio was 4.13% in the first quarter of 2016, compared to 4.16% in both the fourth quarter of 2015 and the first quarter of 2015. The average yield of the investment securities portfolio was 2.29% in the first quarter of 2016, compared to 2.21% in the fourth quarter of 2015 and 1.96% in the first quarter of 2015. The Corporation's average cost of funds was 0.25% in both the first quarter of 2016 and the fourth quarter of 2015, compared to 0.21% in the first quarter of 2015.

The provision for loan losses was $1.5 million in the first quarter of 2016, compared to $2.0 million in the fourth quarter of 2015 and $1.5 million in the first quarter of 2015. Net loan charge-offs were $4.5 million, or 0.25% of average loans, in the first quarter of 2016, compared to $4.3 million, or 0.24% of average loans, in the fourth quarter of 2015 and $1.9 million, or 0.14% of average loans, in the first quarter of 2015. Net loan charge-offs in the first quarter of 2016 included $2.9 million from one commercial loan relationship.

The Corporation's nonperforming loans, consisting of nonaccrual loans, accruing loans past due 90 days or more as to principal or interest payments and nonperforming troubled debt restructurings, totaled $73.3 million at March 31, 2016, compared to $83.9 million at December 31, 2015 and $72.7 million at March 31, 2015. The $10.6 million, or 13%, decrease in nonperforming loans during the first quarter of 2016 was primarily attributable to a combination of net loan charge-offs and $7.8 million of principal paydowns. Nonperforming loans comprised 0.99% of total loans at March 31, 2016, compared to 1.15% at December 31, 2015 and 1.28% at March 31, 2015. The decrease in the percentage of nonperforming loans to total loans at March 31, 2016, compared to March 31, 2015, was partially due to the addition of $1.11 billion of total loans acquired in the Monarch and Lake Michigan transactions, with no corresponding increase in nonperforming loans as these acquired loans are not classified as nonperforming after the acquisition date since they are recorded in loan pools at their net realizable value.

At March 31, 2016, the allowance for loan losses of the originated loan portfolio was $70.3 million, or 1.17% of originated loans, compared to $73.3 million, or 1.26% of originated loans, at December 31, 2015 and $75.3 million, or 1.49% of originated loans, at March 31, 2015. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 96% at March 31, 2016, compared to 87% at December 31, 2015 and 103% at March 31, 2015.

Noninterest income was $19.4 million in the first quarter of 2016, compared to $20.1 million in the fourth quarter of 2015 and $19.3 million in the first quarter of 2015. Noninterest income in the first quarter of 2016 was lower than the fourth quarter of 2015, due primarily to lower seasonal overdraft fees and mortgage banking revenue.

Operating expenses were $58.9 million in the first quarter of 2016, compared to $57.8 million in the fourth quarter of 2015 and $51.0 million in the first quarter of 2015. Operating expenses included transaction expenses of $2.6 million in the first quarter of 2016, $2.1 million in the fourth quarter of 2015 and $1.4 million in the first quarter of 2015. Excluding these transaction expenses, operating expenses were $56.3 million in the first quarter of 2016, $0.6 million, or 1.0%, higher than the fourth quarter of 2015 and $6.6 million, or 13%, higher than the first quarter of 2015. The increase in operating expenses in the first quarter of 2016, compared to the fourth quarter of 2015, was primarily attributable to higher employee benefit costs related to $1.1 million of higher payroll tax expenses, which are highest in the first quarter of the year, and $0.4 million higher group health costs. These and other increases were partially offset by lower expenses in other categories, including variable and incentive compensation, equipment and software and credit-related expenses. The increase in operating expenses in the first quarter of 2016, compared to the first quarter of 2015, was primarily attributable to incremental operating costs associated with the Monarch and Lake Michigan transactions.

The Corporation's efficiency ratio was 58.8% in the first quarter of 2016, 57.1% in the fourth quarter of 2015 and 62.4% in the first quarter of 2015.

Total assets were $9.30 billion at March 31, 2016, compared to $9.19 billion at December 31, 2015 and $7.55 billion at March 31, 2015. The increase in total assets during the three months ended March 31, 2016 was primarily attributable to loan growth that was funded by an increase in seasonal municipal deposit accounts. The increase in total assets during the twelve months ended March 31, 2016 was attributable to $1.47 billion of assets acquired in the Monarch and Lake Michigan acquisitions and loan growth that was partially funded by $355 million of organic growth in customer deposits. Interest-bearing balances at the Federal Reserve Bank totaled $90 million at March 31, 2016, compared to $15 million at December 31, 2015 and $239 million at March 31, 2015. Investment securities were $1.03 billion at March 31, 2016, compared to $1.06 billion at both December 31, 2015 and March 31, 2015.

Total loans were $7.37 billion at March 31, 2016, up $96 million, or 1.3%, from total loans of $7.27 billion at December 31, 2015 and up $1.66 billion, or 29%, from total loans of $5.70 billion at March 31, 2015. During the first quarter of 2016, commercial real estate loans grew $42 million, residential mortgage loans grew $32 million and commercial loans grew $16 million. The increase in loans during the twelve months ended March 31, 2016 was attributable to $1.11 billion of loans acquired in the Monarch and Lake Michigan acquisitions and $557 million of organic loan growth.

Total deposits were $7.65 billion at March 31, 2016, compared to $7.46 billion at December 31, 2015 and $6.32 billion at March 31, 2015. The increase in deposits during the first quarter of 2016 was primarily attributable to a $131 million increase in seasonal municipal deposit accounts. The increase in total deposits during the twelve months ended March 31, 2016 was attributable to the Corporation acquiring $1.07 billion of deposits in the Monarch and Lake Michigan acquisitions and organic growth in customer deposits of $355 million, which were partially offset by a decrease of $94 million related to maturing brokered deposits that were acquired in the Lake Michigan transaction.

Securities sold under agreements to repurchase with customers were $283 million at March 31, 2016, compared to $297 million at December 31, 2015 and $372 million at March 31, 2015, with the decrease from March 31, 2015 due largely to $50 million of temporary funds received from one customer of Chemical Bank that were withdrawn during the second quarter of 2015. Short-term borrowings were $100 million at December 31, 2015 (none at March 31, 2016 and March 31, 2015) and consisted of short-term FHLB advances utilized by the Corporation to fund short-term liquidity needs. The decrease in short-term borrowings during the first quarter of 2016 was due to the Corporation utilizing a portion of funds received from the seasonal increase in municipal deposit accounts to pay off maturing short-term FHLB advances. Long-term borrowings were $274 million at March 31, 2016 and $242 million at December 31, 2015. The Corporation had no long-term borrowings at March 31, 2015. The increase in long-term borrowings during the first quarter of 2016 was attributable to the Corporation borrowing an additional $50 million of long-term FHLB advances to fund future liquidity needs and in anticipation of increases in market interest rates. During the first quarter of 2016, the Corporation paid off its subordinated debt obligations of $18 million that were acquired in the Lake Michigan transaction.

At March 31, 2016, the Corporation's tangible equity to assets ratio and total risk-based capital ratio were 8.2% and 11.5%, respectively, compared to 8.1% and 11.8%, respectively, at December 31, 2015 and 8.5% and 13.0%, respectively, at March 31, 2015. The decrease in the Corporation's capital ratios at March 31, 2016 and December 31, 2015, compared to March 31, 2015, was attributable to the Monarch and Lake Michigan acquisitions. At March 31, 2016, the Corporation's book value was $26.99 per share, compared to $26.62 per share at December 31, 2015 and $24.68 per share at March 31, 2015. At March 31, 2016, the Corporation's tangible book value was $19.20 per share, compared to $18.78 per share at December 31, 2015 and $18.95 per share at March 31, 2015.

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 assets ratio, presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis, and information presented excluding transaction expenses, including net income, diluted earnings per share, return on average assets, return on average shareholders' equity and operating expenses. 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. A reconciliation of non-GAAP financial measures may be found in the financial tables included with this press release.

Chemical Financial Corporation will host a conference call to discuss its first quarter 2016 operating results on Monday, April 18, 2016, at 10:30 a.m. ET. Anyone interested may access the conference call on a live basis by dialing toll-free at 1-888-359-3627 and entering 2475121 for the conference ID. The call will also be broadcast live over the Internet hosted at Chemical Financial Corporation's website at www.chemicalbankmi.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.

Chemical Financial Corporation is the second largest banking company headquartered and operating branch offices in Michigan. The Corporation operates through its subsidiary bank, Chemical Bank, with 175 banking offices spread over 47 counties in Michigan. At March 31, 2016, the Corporation had total assets of $9.3 billion. Chemical Financial Corporation's common stock trades on The NASDAQ Stock Market under the symbol CHFC and is one of the issues comprising The NASDAQ Global Select Market. More information about the Corporation is available by visiting the investor relations section of its website at www.chemicalbankmi.com.

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 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.

This press release also contains forward-looking statements regarding Chemical's outlook or expectations with respect to its planned merger with Talmer Bancorp, Inc. ("Talmer"), the expected costs to be incurred in connection with the transaction, the expected impact of the transaction on Chemical's future financial performance and consequences of the integration of Talmer into Chemical.

Risk factors relating both to the transaction and the integration of Talmer into Chemical after closing include, without limitation:

  • Completion of the transaction is dependent on, among other things, receipt of regulatory approvals and receipt of Chemical's and Talmer's shareholder approvals, the timing of which cannot be predicted with precision at this point and which may not be received at all.
  • The impact of the completion of the transaction on Chemical's financial statements will be affected by the timing of the transaction.
  • The transaction may be more expensive to complete and the anticipated benefits, including anticipated cost savings and strategic gains, may be significantly harder or take longer to achieve than expected or may not be achieved in their entirety as a result of unexpected factors or events.
  • The integration of Talmer’s business and operations into Chemical, which will include conversion of Talmer’s operating systems and procedures, may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results relating to Chemical's or Talmer’s existing businesses.
  • Chemical’s ability to achieve anticipated results from the transaction is dependent on the state of the economic and financial markets going forward. Specifically, Chemical may incur more credit losses than expected and customer attrition may be greater than expected.

In addition, 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, 2015. 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.

No Offer or Solicitation

This communication is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to any merger agreement associated with the Talmer transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Additional Information about the Transaction

Chemical has filed a registration statement on Form S-4 with the Securities and Exchange Commission ("SEC") to register the securities that the Talmer shareholders will receive if the transaction is consummated. The registration statement contains a prospectus for Chemical and a joint proxy statement to be used by Chemical and Talmer to solicit the required approvals of their respective shareholders of the merger and other relevant documents concerning the transaction. Chemical and Talmer may also file other documents with the SEC concerning the proposed merger. Before making an investment or voting decision, investors and shareholders of Chemical and Talmer are urged to read the registration statement, the prospectus and joint proxy statement, and any other relevant documents when they become available because they will contain important information about Chemical, Talmer, and the transaction. Investors will be able to obtain these documents free of charge at the SEC’s website at www.sec.gov. Copies of the documents filed with the SEC in connection with the merger can also be obtained, when available, without charge, from Chemical’s website at www.chemicalbankmi.com, or by contacting Chemical Financial Corporation, 235 East Main Street, P.O. Box 569, Midland, MI 48640-0569, Attention: Ms. Lori A. Gwizdala, Investor Relations, telephone 800-867-9757, or at Talmer’s website at www.talmerbank.com, or by contacting Talmer Bancorp, Inc., 2301 West Big Beaver Road, Suite 525, Troy, Michigan 48084, Attention: Mr. Brad Adams, Investor Relations, telephone 248-498-2862.

Participants in the Merger Solicitation

Chemical and Talmer, and their respective directors, executive officers, and certain other members of management and employees, may be soliciting proxies from Chemical and Talmer shareholders in favor of the transaction. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of Chemical and Talmer shareholders in connection with the proposed transaction are set forth in the prospectus and joint proxy statement filed with the SEC. Free copies of this document may be obtained as described above. Information about Chemical's directors and executive officers can be found in Chemical's definitive proxy statement in connection with its 2016 annual meeting of shareholders, as filed with the SEC on March 4, 2016, and other documents subsequently filed by Chemical with the SEC. Information about Talmer’s directors and executive officers can be found in Talmer’s Annual Report on Form 10-K, Amendment No. 1, as filed with the SEC on March 30, 2016, and other documents subsequently filed by Talmer with the SEC. Additional information regarding the interests of such participants are included in the prospectus and joint proxy statement and other relevant documents regarding the merger filed with the SEC when they become available.


Chemical Financial Corporation Announces 2016 First Quarter Operating Results
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
(In thousands, except per share data)
March 31,
2016
December 31,
2015
March 31,
2015
Assets
Cash and cash equivalents:
Cash and cash due from banks $168,739 $194,136 $121,796
Interest-bearing deposits with the Federal Reserve Bank and other banks 122,635 44,653 272,142
Total cash and cash equivalents 291,374 238,789 393,938
Investment securities:
Available-for-sale 514,015 553,731 680,644
Held-to-maturity 518,300 509,971 381,450
Total investment securities 1,032,315 1,063,702 1,062,094
Loans held-for-sale 9,667 10,327 9,675
Loans:
Total loans 7,366,885 7,271,147 5,702,874
Allowance for loan losses (70,318) (73,328) (75,256)
Net loans 7,296,567 7,197,819 5,627,618
Premises and equipment 105,868 106,317 96,486
Goodwill 286,867 287,393 180,128
Other intangible assets 36,266 38,104 31,655
Interest receivable and other assets 244,708 246,346 150,041
Total Assets $9,303,632 $9,188,797 $7,551,635
Liabilities
Deposits:
Noninterest-bearing $1,951,193 $1,934,583 $1,614,319
Interest-bearing 5,698,923 5,522,184 4,706,034
Total deposits 7,650,116 7,456,767 6,320,353
Interest payable and other liabilities 64,120 76,466 48,545
Securities sold under agreements to repurchase with customers 283,383 297,199 372,236
Short-term borrowings 100,000
Long-term borrowings 273,722 242,391
Total liabilities 8,271,341 8,172,823 6,741,134
Shareholders' Equity
Preferred stock, no par value per share
Common stock, $1 par value per share 38,248 38,168 32,847
Additional paid-in capital 725,874 725,280 565,851
Retained earnings 294,859 281,558 241,582
Accumulated other comprehensive loss (26,690) (29,032) (29,779)
Total shareholders' equity 1,032,291 1,015,974 810,501
Total Liabilities and Shareholders' Equity $9,303,632 $9,188,797 $7,551,635


Chemical Financial Corporation Announces 2016 First Quarter Operating Results
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
(In thousands, except per share data)
Three Months Ended
March 31, 2016 December 31, 2015 March 31, 2015
Interest Income
Interest and fees on loans $74,401 $75,253 $58,097
Interest on investment securities:
Taxable 1,929 2,044 2,307
Tax-exempt 2,665 2,583 1,906
Dividends on nonmarketable equity securities 256 633 198
Interest on deposits with the Federal Reserve Bank and other banks 213 116 122
Total interest income 79,464 80,629 62,630
Interest Expense
Interest on deposits 4,059 4,120 3,352
Interest on short-term borrowings 100 110 98
Interest on other borrowings 975 923
Total interest expense 5,134 5,153 3,450
Net Interest Income 74,330 75,476 59,180
Provision for loan losses 1,500 2,000 1,500
Net interest income after provision for loan losses 72,830 73,476 57,680
Noninterest Income
Service charges and fees on deposit accounts 5,720 6,398 5,916
Wealth management revenue 5,201 5,151 5,071
Other charges and fees for customer services 6,392 6,189 5,990
Mortgage banking revenue 1,405 1,606 1,403
Gain on sale of investment securities 19 18 579
Other 682 690 316
Total noninterest income 19,419 20,052 19,275
Operating Expenses
Salaries, wages and employee benefits 33,890 32,971 29,253
Occupancy 4,905 4,620 4,426
Equipment and software 4,404 5,102 4,398
Merger and acquisition-related transaction expenses (transaction expenses) 2,594 2,085 1,362
Other 13,094 13,046 11,581
Total operating expenses 58,887 57,824 51,020
Income before income taxes 33,362 35,704 25,935
Federal income tax expense 10,100 10,200 8,100
Net Income $23,262 $25,504 $17,835
Earnings Per Common Share:
Weighted average common shares outstanding for basic earnings per share 38,198 38,150 32,809
Weighted average common shares outstanding for diluted earnings per share, including common stock equivalents 38,521 38,498 33,044
Basic earnings per share $0.61 $0.67 $0.54
Diluted earnings per share 0.60 0.66 0.54
Cash Dividends Declared Per Common Share 0.26 0.26 0.24
Key Ratios (annualized where applicable):
Return on average assets 1.01% 1.10% 0.98%
Return on average shareholders' equity 9.2% 10.1% 9.0%
Net interest margin 3.60% 3.64% 3.55%
Efficiency ratio 58.8% 57.1% 62.4%


Chemical Financial Corporation Announces 2016 First Quarter Operating Results
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
(Dollars in thousands, except per share data)
1st Quarter 2016 4th Quarter 2015 3rd Quarter 2015 2nd Quarter 2015 1st Quarter 2015
Summary of Operations
Interest income $79,464 $80,629 $78,851 $69,679 $62,630
Interest expense 5,134 5,153 5,234 3,944 3,450
Net interest income 74,330 75,476 73,617 65,735 59,180
Provision for loan losses 1,500 2,000 1,500 1,500 1,500
Net interest income after provision for loan losses 72,830 73,476 72,117 64,235 57,680
Noninterest income 19,419 20,052 20,215 20,674 19,275
Operating expenses 56,293 55,739 57,365 53,328 49,658
Transaction expenses 2,594 2,085 900 3,457 1,362
Income before income taxes 33,362 35,704 34,067 28,124 25,935
Federal income tax expense 10,100 10,200 9,600 9,100 8,100
Net income $23,262 $25,504 $24,467 $19,024 $17,835
Net income, excluding transaction expenses $24,948 $26,859 $25,052 $21,683 $18,720
Per Common Share Data
Net income:
Basic $0.61 $0.67 $0.64 $0.54 $0.54
Diluted 0.60 0.66 0.64 0.54 0.54
Diluted, excluding transaction expenses 0.65 0.70 0.65 0.61 0.57
Cash dividends declared 0.26 0.26 0.26 0.24 0.24
Book value - period-end 26.99 26.62 26.18 25.74 24.68
Tangible book value - period-end 19.20 18.78 18.32 17.89 18.95
Market value - period-end 35.69 34.27 32.35 33.06 31.36
Key Ratios (annualized where applicable)
Net interest margin (taxable equivalent basis) 3.60% 3.64% 3.55% 3.59% 3.55%
Efficiency ratio 58.8% 57.1% 59.9% 60.5% 62.4%
Return on average assets 1.01% 1.10% 1.05% 0.94% 0.98%
Return on average shareholders' equity 9.2% 10.1% 9.8% 8.6% 9.0%
Average shareholders' equity as a percent of average assets 11.0% 10.9% 10.7% 10.9% 10.8%
Capital ratios (period end):
Tangible shareholders' equity as a percent of tangible assets 8.2% 8.1% 7.8% 7.8% 8.5%
Total risk-based capital ratio 11.5% 11.8% 11.6% 11.7% 13.0%


Chemical Financial Corporation Announces 2016 First Quarter Operating Results
Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates* (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
Three Months Ended
March 31, 2016 December 31, 2015 March 31, 2015
Average
Balance
Interest (FTE) Effective
Yield/Rate*
Average
Balance
Interest (FTE) Effective
Yield/Rate*
Average
Balance
Interest (FTE) Effective
Yield/Rate*
Assets
Interest-earning assets:
Loans:**
Commercial $1,901,879 $19,774 4.18% $1,847,093 $19,828 4.26% $1,352,986 $14,156 4.24%
Commercial real estate and real estate construction 2,361,105 28,254 4.81 2,361,734 28,503 4.79 1,730,931 20,853 4.89
Residential mortgage 1,453,420 13,588 3.74 1,425,812 13,408 3.76 1,123,202 10,981 3.91
Consumer installment and home equity 1,583,067 13,483 3.43 1,606,700 14,166 3.50 1,498,934 12,670 3.43
Total loans 7,299,471 75,099 4.13 7,241,339 75,905 4.16 5,706,053 58,660 4.16
Taxable investment securities 554,524 1,929 1.39 609,406 2,044 1.34 734,890 2,307 1.26
Tax-exempt investment securities 496,304 4,100 3.30 481,968 3,973 3.30 331,878 2,932 3.53
Other interest-earning assets 39,493 256 2.61 36,799 633 6.82 29,438 198 2.73
Interest-bearing deposits with the Federal Reserve Bank and other banks 136,919 213 0.63 87,952 116 0.52 118,475 122 0.42
Total interest-earning assets 8,526,711 81,597 3.84 8,457,464 82,671 3.89 6,920,734 64,219 3.75
Less: allowance for loan losses 73,547 75,225 75,880
Other assets:
Cash and cash due from banks 158,277 157,939 138,308
Premises and equipment 105,959 110,141 97,105
Interest receivable and other assets 523,634 524,905 320,991
Total assets $9,241,034 $9,175,224 $7,401,258
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $1,953,626 $468 0.10% $1,816,694 $414 0.09% $1,506,953 $324 0.09%
Savings deposits 2,048,867 389 0.08 2,024,543 393 0.08 1,777,344 370 0.08
Time deposits 1,625,573 3,202 0.79 1,671,913 3,313 0.79 1,332,698 2,658 0.81
Short-term borrowings 349,699 100 0.12 405,713 110 0.11 342,128 98 0.12
Long-term borrowings 266,022 975 1.47 243,170 923 1.51
Total interest-bearing liabilities 6,243,787 5,134 0.33 6,162,033 5,153 0.33 4,959,123 3,450 0.28
Noninterest-bearing deposits 1,906,896 1,936,328 1,587,100
Total deposits and borrowed funds 8,150,683 5,134 0.25 8,098,361 5,153 0.25 6,546,223 3,450 0.21
Interest payable and other liabilities 72,422 76,516 53,597
Shareholders' equity 1,017,929 1,000,347 801,438
Total liabilities and shareholders' equity $9,241,034 $9,175,224 $7,401,258
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities) 3.51% 3.56% 3.47%
Net Interest Income (FTE) $76,463 $77,518 $60,769
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets) 3.60% 3.64% 3.55%


*Fully taxable equivalent (FTE) basis using a federal income tax rate of 35%. The adjustments to determine tax equivalent net interest income were $2.1 million, $2.0 million and $1.6 million for the three months ended March 31, 2016, December 31, 2015 and March 31, 2015, respectively.
**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 2016 First Quarter Operating Results
Noninterest Income and Operating Expenses Information (Unaudited)
Chemical Financial Corporation
(In thousands)
1st Quarter
2016
4th Quarter
2015
3rd Quarter
2015
2nd Quarter
2015
1st Quarter
2015
Noninterest income
Service charges and fees on deposit accounts $5,720 $6,398 $6,722 $6,445 $5,916
Wealth management revenue 5,201 5,151 4,725 5,605 5,071
Electronic banking fees 4,918 4,712 5,059 4,775 4,572
Mortgage banking revenue 1,405 1,606 1,436 1,688 1,403
Other fees for customer services 1,131 1,477 1,280 1,132 901
Other 1,044 708 993 1,029 1,412
Total noninterest income $19,419 $20,052 $20,215 $20,674 $19,275


1st Quarter
2016
4th Quarter
2015
3rd Quarter
2015
2nd Quarter
2015
1st Quarter
2015
Operating expenses
Salaries and wages $26,743 $27,341 $27,872 $25,535 $23,741
Employee benefits 7,147 5,630 6,113 6,176 5,512
Occupancy 4,905 4,620 4,781 4,386 4,426
Equipment and software 4,404 5,102 4,589 4,480 4,398
Outside processing and service fees 3,711 3,576 4,146 3,926 3,558
FDIC insurance premiums 1,407 1,482 1,441 1,337 1,225
Professional fees 1,036 1,112 1,235 1,258 1,237
Intangible asset amortization 1,194 1,341 1,270 987 791
Credit-related expenses 30 600 90 (192) 133
Transaction expenses 2,594 2,085 900 3,457 1,362
Other 5,716 4,935 5,828 5,435 4,637
Total operating expenses $58,887 $57,824 $58,265 $56,785 $51,020


Chemical Financial Corporation Announces 2016 First Quarter Operating Results
Composition of Loans and Deposits and Additional Information on Intangible Assets (Unaudited)
Chemical Financial Corporation
(Dollars in Thousands)
March 31,
2016
Dec 31,
2015
March 31,
2016 vs
Dec 31,
2015
(% Change)
Sept 30,
2015
June 30,
2015
March 31,
2015
March 31,
2016 vs
March 31,
2015
(% Change)
Composition of Loans
Commercial loan portfolio:
Commercial $1,922,259 $1,905,879 0.9% $1,829,870 $1,754,873 $1,356,169 41.7%
Commercial real estate 2,143,051 2,112,162 1.5 2,227,364 2,243,513 1,616,923 32.5
Real estate construction 242,899 232,076 4.7 145,581 112,312 108,839 123.2
Subtotal - commercial loans 4,308,209 4,250,117 1.4 4,202,815 4,110,698 3,081,931 39.8
Consumer loan portfolio:
Residential mortgage 1,461,120 1,429,636 2.2 1,394,427 1,310,167 1,117,445 30.8
Consumer installment 897,078 877,457 2.2 899,751 887,907 844,066 6.3
Home equity 700,478 713,937 (1.9) 719,202 725,971 659,432 6.2
Subtotal - consumer loans 3,058,676 3,021,030 1.2 3,013,380 2,924,045 2,620,943 16.7
Total loans $7,366,885 $7,271,147 1.3% $7,216,195 $7,034,743 $5,702,874 29.2%


March 31,
2016
Dec 31,
2015
March 31,
2016 vs
Dec 31,
2015
(% Change)
Sept 30,
2015
June 30,
2015
March 31,
2015
March 31,
2016 vs
March 31,
2015
(% Change)
Composition of Deposits
Noninterest-bearing demand $1,951,193 $1,934,583 0.9% $1,875,636 $1,860,863 $1,614,319 20.9%
Savings 1,080,940 1,026,269 5.3 1,004,987 1,015,036 921,335 17.3
Interest-bearing demand 2,005,053 1,870,197 7.2 2,029,556 1,630,211 1,556,152 28.8
Money market accounts 1,006,271 978,306 2.9 1,013,924 1,041,654 896,462 12.2
Brokered deposits 186,143 206,439 (9.8) 227,306 256,254 2,015 9,137.9
Other time deposits 1,420,516 1,440,973 (1.4) 1,463,802 1,488,961 1,330,070 6.8
Total deposits $7,650,116 $7,456,767 2.6% $7,615,211 $7,292,979 $6,320,353 21.0%


March 31,
2016
Dec 31,
2015
Sept 30,
2015
June 30,
2015
March 31,
2015
Additional Data - Intangibles
Goodwill $286,867 $287,393 $286,454 $285,512 $180,128
Core deposit intangibles (CDI) 25,542 26,654 27,890 28,353 20,072
Mortgage servicing rights (MSR) 10,478 11,122 11,540 12,307 11,583
Noncompete agreements 246 328 434 541


Chemical Financial Corporation Announces 2016 First Quarter Operating Results
Nonperforming Assets (Unaudited)
Chemical Financial Corporation
(In thousands)
March 31, 2016 Dec 31, 2015 Sept 30, 2015 June 30, 2015 March 31, 2015
Nonperforming Assets
Nonperforming Loans:
Nonaccrual loans:
Commercial $19,264 $28,554 $26,463 $17,260 $18,904
Commercial real estate 25,859 25,163 24,969 25,287 24,766
Real estate construction 546 521 544 502 953
Residential mortgage 5,062 5,557 6,248 6,004 6,514
Consumer installment 360 451 536 393 433
Home equity 2,328 1,979 1,876 1,769 1,870
Total nonaccrual loans 53,419 62,225 60,636 51,215 53,440
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial 370 364 122 711 52
Commercial real estate 254 216 56 148
Real estate construction
Residential mortgage 423 402 572 424 172
Consumer installment
Home equity 679 1,267 558 588 429
Total accruing loans contractually past due 90 days or more as to interest or principal payments 1,472 2,287 1,468 1,779 801
Nonperforming troubled debt restructurings:
Commercial loan portfolio 15,351 16,297 15,559 14,547 15,810
Consumer loan portfolio 3,013 3,071 3,554 3,365 2,690
Total nonperforming troubled debt restructurings 18,364 19,368 19,113 17,912 18,500
Total nonperforming loans 73,255 83,880 81,217 70,906 72,741
Other real estate and repossessed assets 9,248 9,935 11,207 14,197 14,744
Total nonperforming assets $82,503 $93,815 $92,424 $85,103 $87,485
Nonperforming loans as a percent of total loans 0.99% 1.15% 1.13% 1.01% 1.28%
Nonperforming assets as a percent of:
Total loans plus other real estate and repossessed assets 1.12% 1.29% 1.28% 1.21% 1.53%
Total assets 0.89% 1.02% 1.00% 0.94% 1.16%
Performing troubled debt restructurings $49,886 $47,810 $44,803 $45,808 $45,981


Chemical Financial Corporation Announces 2016 First Quarter Operating Results
Summary of Allowance and Loan Loss Experience (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
1st Quarter 2016 4th Quarter 2015 3rd Quarter 2015 2nd Quarter 2015 1st Quarter 2015
Allowance for loan losses - originated loan portfolio
Allowance for loan losses - beginning of period $73,328 $75,626 $74,941 $75,256 $75,183
Provision for loan losses 1,500 2,000 1,500 1,500 2,000
Net loan (charge-offs) recoveries:
Commercial (3,115) (2,207) 86 (36) (424)
Commercial real estate (440) (624) 145 (581) (415)
Real estate construction (11) (1) (49) (91)
Residential mortgage (172) (545) (214) (661) (492)
Consumer installment (602) (770) (782) (590) (649)
Home equity (170) (152) (49) 102 144
Net loan charge-offs (4,510) (4,298) (815) (1,815) (1,927)
Allowance for loan losses - end of period 70,318 73,328 75,626 74,941 75,256
Allowance for loan losses - acquired loan portfolio
Allowance for loan losses - beginning of period 500
Provision for loan losses (500)
Allowance for loan losses - end of period
Total allowance for loan losses $70,318 $73,328 $75,626 $74,941 $75,256
Summary of net loan charge-offs:
Loan charge-offs $5,458 $5,439 $2,195 $2,724 $3,143
Loan recoveries (948) (1,141) (1,380) (909) (1,216)
Net loan charge-offs (quarter only) $4,510 $4,298 $815 $1,815 $1,927
Net loan charge-offs (year-to-date) $4,510 $8,855 $4,557 $3,742 $1,927
Net loan charge-offs as a percent of average loans:
Quarter only (annualized) 0.25% 0.24% 0.05% 0.12% 0.14%
Year-to-date (annualized) 0.25% 0.13% 0.10% 0.13% 0.14%
Originated loans $6,001,714 $5,807,934 $5,667,159 $5,351,010 $5,048,662
Acquired loans 1,365,171 1,463,213 1,549,036 1,683,733 654,212
Total loans $7,366,885 $7,271,147 $7,216,195 $7,034,743 $5,702,874
Allowance for loan losses as a percent of:
Total originated loans 1.17% 1.26% 1.33% 1.40% 1.49%
Nonperforming loans 96% 87% 93% 106% 103%
Nonaccretable discount (credit mark) as a percent of acquired loans 4.5% 4.4% 4.2% 3.9% 5.7%


Chemical Financial Corporation Announces 2016 First Quarter Operating Results
Non-GAAP Financial Measures (Unaudited)
Chemical Financial Corporation
(Amounts in thousands, except per share data)
1st Quarter 2016 4th Quarter 2015 3rd Quarter 2015 2nd Quarter 2015 1st Quarter 2015
Non-GAAP Operating Results
Net Income
Net income, as reported $23,262 $25,504 $24,467 $19,024 $17,835
Transaction expenses, net of tax 1,686 1,355 585 2,659 885
Net income, excluding transaction expenses $24,948 $26,859 $25,052 $21,683 $18,720
Diluted Earnings Per Share
Diluted earnings per share, as reported $0.60 $0.66 $0.64 $0.54 $0.54
Effect of transaction expenses, net of tax 0.05 0.04 0.01 0.07 0.03
Diluted earnings per share, excluding transaction expenses $0.65 $0.70 $0.65 $0.61 $0.57
Return on Average Assets
Return on average assets, as reported 1.01% 1.10% 1.05% 0.94% 0.98%
Effect of transaction expenses, net of tax 0.08 0.06 0.03 0.13 0.05
Return on average assets, excluding transaction expenses 1.09% 1.16% 1.08% 1.07% 1.03%
Return on Average Shareholders' Equity
Return on average shareholders' equity, as reported 9.2% 10.1% 9.8% 8.6% 9.0%
Effect of transaction expenses, net of tax 0.7 0.6 0.3 1.2 0.5
Return on average shareholders' equity, excluding transaction expenses 9.9% 10.7% 10.1% 9.8% 9.5%


March 31,
2016
Dec 31,
2015
Sept 30,
2015
June 30,
2015
March 31,
2015
Tangible Book Value
Shareholders' equity, as reported $1,032,291 $1,015,974 $998,363 $980,791 $810,501
Goodwill, CDI and noncompete agreements, net of tax (297,821) (299,123) (299,681) (299,109) (187,991)
Tangible shareholders' equity $734,470 $716,851 $698,682 $681,682 $622,510
Common shares outstanding 38,248 38,168 38,131 38,110 32,847
Book value per share (shareholders' equity, as reported, divided by common shares outstanding) $26.99 $26.62 $26.18 $25.74 $24.68
Tangible book value per share (tangible shareholders' equity divided by common shares outstanding) $19.20 $18.78 $18.32 $17.89 $18.95
Tangible Shareholders' Equity to Tangible Assets
Total assets $9,303,632 $9,188,797 $9,264,554 $9,020,725 $7,551,635
Goodwill, CDI and noncompete agreements, net of tax (297,821) (299,123) (299,681) (299,109) (187,991)
Tangible assets $9,005,811 $8,889,674 $8,964,873 $8,721,616 $7,363,644
Tangible shareholders' equity to tangible assets 8.2% 8.1% 7.8% 7.8% 8.5%


For further information: David B. Ramaker, CEO Lori A. Gwizdala, CFO 989-839-5350

Source:Chemical Financial Corporation