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Chemical Financial Corporation Reports 2016 Third Quarter Operating Results

MIDLAND, Mich., Oct. 25, 2016 (GLOBE NEWSWIRE) -- Chemical Financial Corporation ("Corporation" or "Chemical") (NASDAQ:CHFC) today announced 2016 third quarter net income of $10.7 million, or $0.21 per diluted share, compared to 2016 second quarter net income of $25.7 million, or $0.67 per diluted share and 2015 third quarter net income of $24.5 million, or $0.64 per diluted share. Net income was $59.7 million, or $1.40 per diluted share, for the nine months ended September 30, 2016, compared to $61.3 million, or $1.72 per diluted share, for the nine months ended September 30, 2015. The decrease in net income in the third quarter of 2016, compared to both the second quarter of 2016 and the third quarter of 2015, was driven by significant merger-related expenses incurred during the third quarter of 2016 resulting from completion of the Corporation's merger with Talmer Bancorp, Inc. ("Talmer").

As previously reported, the Corporation completed its merger with Talmer on August 31, 2016. Accordingly, the results of Talmer's operations are included in the Corporation's operations since the merger date. Talmer Bank and Trust will be operated as a separate subsidiary of the Corporation until its planned consolidation with and into Chemical Bank in the fourth quarter of 2016. The Corporation's total assets increased $7.9 billion in the third quarter of 2016 to $17.4 billion as of September 30, 2016 primarily due to the addition of $7.7 billion in assets added as a result of the merger with Talmer.

Excluding merger and transaction-related expenses ("transaction expenses"), net income in the third quarter of 2016 was $35.9 million, or $0.72 per diluted share, compared to $27.7 million, or $0.72 per diluted share, in the second quarter of 2016 and $25.1 million, or $0.65 per diluted share, in the third quarter of 2015.(1) Transaction expenses were $37.5 million in the third quarter of 2016, compared to $3.1 million in the second quarter of 2016 and $0.9 million in the third quarter of 2015. Net income, excluding transaction expenses, was $88.5 million, or $2.09 per diluted share, for the nine months ended September 30, 2016, compared to $65.5 million, or $1.84 per diluted share, for the nine months ended September 30, 2015. Transaction expenses were $43.1 million for the nine months ended September 30, 2016, compared to $5.7 million for the nine months ended September 30, 2015.

"Our third quarter 2016 financial results reflect not only the exceptional potential of Chemical Financial Corporation, but also of the underlying strength of the predecessor institutions. Our key core performance metrics for the quarter were solid, despite reflecting only a single month of the combined entities’ operations and prior to realizing the majority of our anticipated costs savings associated with the planned consolidation of Talmer Bank and Trust into Chemical Bank," noted David B. Ramaker, Chief Executive Officer and President of Chemical Financial Corporation. "Our core banking businesses continue to perform well, with strong organic growth in both loans and customer deposits during the third quarter. Credit quality remains high and expense growth is muted."

"On August 31, 2016, we were pleased to welcome the Talmer Bancorp team to the Chemical Financial Corporation family, bringing the combined team to approximately 3,500 bankers committed to meeting the financial service needs of our customers and communities. While we are cognizant of the challenges presented by large scale systems integrations, we are reassured by the fact that both institutions bring extensive experience to the merger integration process. When the institutions are consolidated as planned in the fourth quarter of 2016, our combined Chemical Bank footprint will blanket Michigan and extend into Ohio and Indiana, with 255 banking offices serving nearly 550,000 households and businesses," added Ramaker.

"With total assets exceeding $17 billion, we believe we have the scale to address the ever increasing regulatory burden that financial service providers face, and that our community-driven, Midwest-focused institution will provide a compelling option for the residents and businesses in the markets we serve. We remain committed and confident in both completing the integration of Talmer Bank and Trust into Chemical Bank and in our ability to achieve market share gains as we move forward," Ramaker said.

The increase in net income, excluding transaction expenses, in the third quarter of 2016, compared to both the second quarter of 2016 and the third quarter of 2015, was primarily attributable to incremental earnings resulting from the Talmer merger. The increase in net income for the first nine months of 2016, excluding transaction expenses, compared to the same period for 2015, was largely attributable to incremental earnings resulting from the merger with Talmer and the Corporation's acquisitions completed during 2015, in addition to an increase in net interest income resulting from organic loan growth.

The Corporation's return on average assets was 0.35% during the third quarter of 2016, compared to 1.11% in the second quarter of 2016 and 1.05% in the third quarter of 2015. The Corporation's return on average shareholders' equity was 2.7% in the third quarter of 2016, compared to 10.0% in the second quarter of 2016 and 9.8% in the third quarter of 2015. Excluding transaction expenses, the Corporation's return on average assets was 1.16% during the third quarter of 2016, compared to 1.19% in the second quarter of 2016 and 1.08% in the third quarter of 2015 and the Corporation's return on average shareholders' equity was 9.1% in the third quarter of 2016, compared to 10.8% in the second quarter of 2016 and 10.1% in the third quarter of 2015. (2)

Net interest income was $96.8 million in the third quarter of 2016, $19.3 million, or 25%, higher than the second quarter of 2016 and $23.2 million, or 32%, higher than the third quarter of 2015. The increase in net interest income in the third quarter of 2016, compared to both the second quarter of 2016 and the third quarter of 2015, was primarily attributable to loans acquired in the merger with Talmer, although also partially attributable to organic loan growth. The Corporation experienced organic loan growth of $186 million during the third quarter of 2016 and $617 million during the twelve months ended September 30, 2016. The Corporation's net interest income included $3.0 million of interest accretion on acquired loans in the third quarter of 2016, compared to $2.5 million in the second quarter of 2016 and $0.8 million in the third quarter of 2015.

The net interest margin (on a tax-equivalent basis) was 3.58% in the third quarter of 2016, compared to 3.70% in the second quarter of 2016 and 3.55% in the third quarter of 2015.(3) The decrease in the Corporation's net interest margin (on a tax-equivalent basis) in the third quarter of 2016, compared to the second quarter of 2016, was largely attributable to lower average yields on the Corporation's loan and investment securities portfolios resulting from the ongoing low interest rate environment, although also partially due to the impact from the Talmer merger. The average yield on the loan portfolio (on a tax-equivalent basis) was 4.12% in the third quarter of 2016, compared to 4.19% in the second quarter of 2016 and 4.15% in the third quarter of 2015. Interest accretion on acquired loans contributed 11 basis points to the Corporation's net interest margin (on a tax-equivalent basis) in both the third quarter of 2016 and the second quarter of 2016, compared to 4 basis points in the third quarter of 2015. Interest accretion on acquired loans comprised 13 basis points of the yield on the Corporation's loan portfolio in both the third quarter of 2016 and the second quarter of 2016, compared to 5 basis points in the third quarter of 2015. The average yield of the investment securities portfolio (on a tax-equivalent basis) was 2.28% in the third quarter of 2016, compared to 2.34% in the second quarter of 2016 and 2.08% in the third quarter of 2015. The Corporation's average cost of funds was 0.25% in the third quarter of 2016, compared to 0.27% in the second quarter of 2016 and 0.25% in the third quarter of 2015. The Corporation's cost of funds in the third quarter of 2016 was reduced by 4 basis points resulting from the acceleration of accretion of fair value adjustments on FHLB advances obtained in the merger with Talmer that matured during September 2016.

The provision for loan losses was $4.1 million in the third quarter of 2016, compared to $3.0 million in the second quarter of 2016 and $1.5 million in the third quarter of 2015. The increase in the provision for loan losses in the third quarter of 2016 was due to organic loan growth during the quarter. Net loan charge-offs were $1.8 million, or 0.08% of average loans, in the third quarter of 2016, compared to $1.8 million, or 0.10% of average loans, in the second quarter of 2016 and $0.8 million, or 0.05% of average loans, in the third quarter of 2015.

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 $61.7 million at September 30, 2016, compared to $62.0 million at June 30, 2016 and $81.2 million at September 30, 2015. Nonperforming loans comprised 0.48% of total loans at September 30, 2016, compared to 0.81% at June 30, 2016 and 1.13% at September 30, 2015. The decrease in the percentage of nonperforming loans to total loans at September 30, 2016 was primarily due to $4.9 billion of total loans added as a result of the merger with Talmer, as these loans are not 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 September 30, 2016, the allowance for loan losses of the originated loan portfolio was $73.8 million, or 1.09% of originated loans, compared to $71.5 million, or 1.12% of originated loans, at June 30, 2016 and $75.6 million, or 1.33% of originated loans, at September 30, 2015. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 120% at September 30, 2016, compared to 115% at June 30, 2016 and 93% at September 30, 2015.

Noninterest income was $27.8 million in the third quarter of 2016, compared to $20.9 million in the second quarter of 2016 and $20.2 million in the third quarter of 2015. Noninterest income in the third quarter of 2016 was higher than the second quarter of 2016, due to a combination of incremental revenue resulting from the merger with Talmer, higher mortgage banking revenue and higher overdraft and seasonal ATM fee revenue for Chemical Bank. Mortgage banking revenue was $2.8 million higher in the third quarter of 2016, compared to the second quarter of 2016, due largely to an increase in gains from the sales of residential mortgages resulting from the merger with Talmer.

Operating expenses were $106.1 million in the third quarter of 2016, compared to $59.1 million in the second quarter of 2016 and $58.3 million in the third quarter of 2015. Operating expenses included transaction expenses of $37.5 million in the third quarter of 2016, $3.1 million in the second quarter of 2016 and $0.9 million in the third quarter of 2015. Excluding these transaction expenses, operating expenses were $68.7 million in the third quarter of 2016, compared to $56.0 million in the second quarter of 2016 and $57.4 million in the third quarter of 2015. The increase in operating expenses in the third quarter of 2016, compared to both the second quarter of 2016 and the third quarter of 2015, was attributable to incremental expenses resulting from the merger with Talmer. Operating expenses in the third quarter of 2016 at Chemical Bank, excluding transaction expenses, were virtually unchanged compared to the second quarter of 2016.

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 85.2% in the third quarter of 2016, compared to 60.1% in the second quarter of 2016 and 62.1% in the third quarter of 2015. The Corporation's adjusted efficiency ratio, which excludes certain items including transaction expenses, was 53.2% in the third quarter of 2016, compared to 54.6% in the second quarter of 2016 and 58.6% in the third quarter of 2015. (4)

Total assets were $17.38 billion at September 30, 2016, compared to $9.51 billion at June 30, 2016 and $9.26 billion at September 30, 2015. The increase in total assets during the three and twelve months ended September 30, 2016 was primarily attributable to the Talmer merger. As of the merger date, Talmer added total assets of $7.7 billion, including total loans of $4.9 billion and goodwill of $850 million. The increase in total assets during the twelve months ended September 30, 2016 was also attributable to loan growth that was funded by a combination of organic growth in customer deposits, an increase in FHLB advances and proceeds from maturing investment securities. Investment securities were $1.87 billion at September 30, 2016, compared to $1.01 billion at June 30, 2016 and $1.14 billion at September 30, 2015. The Corporation added $810 million of investment securities as part of the merger with Talmer.

Total loans were $12.72 billion at September 30, 2016, an increase of $5.07 billion, or 66%, from total loans of $7.65 billion at June 30, 2016 and an increase of $5.50 billion, or 76%, from total loans of $7.22 billion at September 30, 2015. As of the merger date, the Corporation added $4.88 billion of loans as part of the merger with Talmer. The Corporation also experienced organic loan growth of $186 million during the third quarter of 2016 and $617 million during the twelve months ended September 30, 2016.

Total deposits were $13.27 billion at September 30, 2016, compared to $7.46 billion at June 30, 2016 and $7.62 billion at September 30, 2015. As of the merger date, the Corporation added $5.34 billion of deposits as part of the merger with Talmer, including $403 million of brokered deposits. The Corporation also experienced organic growth in customer deposits of $571 million during the third quarter of 2016 and $477 million during the twelve months ended September 30, 2016, which was partially offset by decreases related to maturing brokered deposits of $101 million and $158 million during the three and twelve months ended September 30, 2016, respectively. The increase in deposits during the third quarter of 2016 was primarily due to a seasonal increase in municipal deposit accounts.

Securities sold under agreements to repurchase with customers were $327 million at September 30, 2016, compared to $256 million at June 30, 2016 and $330 million at September 30, 2015. Short-term borrowings were $400 million at September 30, 2016 and $300 million at June 30, 2016 (there were none at September 30, 2015) and consisted of short-term FHLB advances utilized by the Corporation to fund short-term liquidity needs. Long-term borrowings were $677 million at September 30, 2016, compared to $372 million at June 30, 2016 and $248 million at September 30, 2015. The increase in long-term borrowings during the third quarter of 2016 was attributable to the merger with Talmer, including $284 million of long-term borrowings held by Talmer as of the merger date. In addition, the Corporation borrowed $125 million under a three-year credit facility to partially fund the cash portion of the merger consideration.

At September 30, 2016, the Corporation's tangible equity to tangible assets ratio and total risk-based capital ratio were 8.7% and 11.2% (estimated), respectively, compared to 8.2% and 11.4%, respectively, at June 30, 2016 and 7.8% and 11.6%, respectively, at September 30, 2015. (5) At September 30, 2016, the Corporation's book value was $36.37 per share, compared to $27.45 per share at June 30, 2016 and $26.18 per share at September 30, 2015. At September 30, 2016, the Corporation's tangible book value was $19.99 per share, compared to $19.68 per share at June 30, 2016 and $18.32 per share at September 30, 2015. (6)

(1) Net income, excluding transaction expenses, and diluted earnings per share, excluding transaction expenses, 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 transaction expenses, and return on average shareholders’ equity, excluding transaction expenses, 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) 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.

(5) 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.

(6) 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 third quarter 2016 operating results on Wednesday, October 26, 2016, at 10:30 a.m. ET. Anyone interested may access the conference call on a live basis by dialing toll-free at 1-855-490-5692 and entering 716275 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 banks, Chemical Bank and Talmer Bank and Trust, with 255 banking offices located primarily in Michigan, Northeast Ohio and other contiguous states. At September 30, 2016, the Corporation had total assets of $17.4 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 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, 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 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 merger with Talmer, including the benefits of the transaction, the expected costs to be incurred and cost savings to be realized 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 merger and the integration of Talmer into Chemical include, without limitation:

  • The anticipated benefits of the merger, 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 merger is dependent on the state of the economic and financial markets going forward. Specifically, Chemical may incur more credit losses than expected and customer and employee attrition may be greater than expected.
  • The outcome of pending or threatened litigation, whether currently existing or commencing in the future, including litigation related to the merger.
  • The challenges of integrating, retaining and hiring key personnel.
  • Failure to attract new customers and retain existing customers in the manner anticipated.

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.

Chemical Financial Corporation Announces 2016 Third Quarter Operating Results
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
(In thousands, except per share data)
September 30,
2016
June 30,
2016
December 31,
2015
September 30,
2015
Assets
Cash and cash equivalents:
Cash and cash due from banks $286,351 $179,310 $194,136 $157,512
Interest-bearing deposits with the Federal Reserve Bank (FRB) and other banks and federal funds sold 270,216 53,650 44,653 134,025
Total cash and cash equivalents 556,567 232,960 238,789 291,537
Investment securities:
Available-for-sale 1,303,381 458,552 553,731 635,641
Held-to-maturity 563,721 552,828 509,971 501,083
Total investment securities 1,867,102 1,011,380 1,063,702 1,136,724
Loans held-for-sale 276,061 13,990 10,327 12,319
Loans:
Total loans 12,715,789 7,647,269 7,271,147 7,216,195
Allowance for loan losses (73,775) (71,506) (73,328) (75,626)
Net loans 12,642,014 7,575,763 7,197,819 7,140,569
Premises and equipment 144,165 102,709 106,317 110,670
Loan servicing rights 51,393 9,677 11,122 12,307
Goodwill 1,137,166 286,867 287,393 286,454
Other intangible assets 35,700 24,593 26,982 27,557
Interest receivable and other assets 673,469 256,233 246,346 246,417
Total Assets $17,383,637 $9,514,172 $9,188,797 $9,264,554
Liabilities
Deposits:
Noninterest-bearing $3,264,934 $2,007,629 $1,934,583 $1,875,636
Interest-bearing 10,007,928 5,457,017 5,522,184 5,739,575
Total deposits 13,272,862 7,464,646 7,456,767 7,615,211
Interest payable and other liabilities 143,708 71,417 76,466 72,568
Securities sold under agreements to repurchase with customers 326,789 256,213 297,199 330,016
Short-term borrowings 400,000 300,000 100,000
Long-term borrowings 676,612 371,597 242,391 248,396
Total liabilities 14,819,971 8,463,873 8,172,823 8,266,191
Shareholders' Equity
Preferred stock, no par value per share
Common stock, $1 par value per share 70,497 38,267 38,168 38,131
Additional paid-in capital 2,207,345 727,145 725,280 723,427
Retained earnings 310,966 310,585 281,558 265,991
Accumulated other comprehensive loss (25,142) (25,698) (29,032) (29,186)
Total shareholders' equity 2,563,666 1,050,299 1,015,974 998,363
Total Liabilities and Shareholders' Equity $17,383,637 $9,514,172 $9,188,797 $9,264,554

Chemical Financial Corporation Announces 2016 Third Quarter Operating Results
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, 2016 June 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015
Interest Income
Interest and fees on loans$97,103 $77,578 $73,809 $249,082 $196,519
Interest on investment securities:
Taxable2,575 1,798 2,233 6,302 6,742
Tax-exempt3,072 2,640 2,399 8,377 6,490
Dividends on nonmarketable equity securities358 777 266 1,391 1,015
Interest on deposits with the FRB and other banks and federal funds sold454 144 144 811 394
Total interest income103,562 82,937 78,851 265,963 211,160
Interest Expense
Interest on deposits5,836 4,260 4,304 14,155 11,286
Interest on short-term borrowings459 226 144 785 343
Interest on long-term borrowings458 956 786 2,389 999
Total interest expense6,753 5,442 5,234 17,329 12,628
Net Interest Income96,809 77,495 73,617 248,634 198,532
Provision for loan losses4,103 3,000 1,500 8,603 4,500
Net interest income after provision for loan losses92,706 74,495 72,117 240,031 194,032
Noninterest Income
Service charges and fees on deposit accounts7,665 6,337 6,722 19,722 19,083
Wealth management revenue5,584 5,782 4,725 16,567 15,401
Other charges and fees for customer services7,410 6,463 6,818 20,265 19,324
Mortgage banking revenue4,439 1,595 1,436 7,439 4,527
Gain on sale of investment securities16 18 5 53 612
Other2,656 702 509 4,040 1,217
Total noninterest income27,770 20,897 20,215 68,086 60,164
Operating Expenses
Salaries, wages and employee benefits40,565 33,127 33,985 107,582 94,949
Occupancy5,462 5,514 4,781 15,881 13,593
Equipment and software6,420 4,875 4,589 15,699 13,467
Merger and acquisition-related transaction expenses (transaction expenses)37,470 3,054 900 43,118 5,719
Other16,227 12,515 14,010 41,836 38,342
Total operating expenses106,144 59,085 58,265 224,116 166,070
Income before income taxes14,332 36,307 34,067 84,001 88,126
Income tax expense3,600 10,600 9,600 24,300 26,800
Net Income$10,732 $25,707 $24,467 $59,701 $61,326
Earnings Per Common Share:
Weighted average common shares outstanding for basic earnings per share49,107 38,258 38,123 41,881 35,384
Weighted average common shares outstanding for diluted earnings per share, including common stock equivalents49,631 38,600 38,393 42,319 35,630
Basic earnings per share$0.22 $0.67 $0.64 $1.43 $1.73
Diluted earnings per share0.21 0.67 0.64 1.40 1.72
Cash Dividends Declared Per Common Share0.27 0.26 0.26 0.79 0.74
Key Ratios (annualized where applicable):
Return on average assets0.35% 1.11% 1.05% 0.78% 0.99%
Return on average shareholders' equity2.7% 10.0% 9.8% 6.6% 9.2%
Net interest margin (tax-equivalent basis)3.58% 3.70% 3.55% 3.62% 3.56%
Efficiency ratio - adjusted53.2% 54.6% 58.6% 54.9% 59.7%

Chemical Financial Corporation Announces 2016 Third Quarter Operating Results
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
(Dollars in thousands, except per share data)
3rd Quarter 2016 2nd Quarter 2016 1st Quarter 2016 4th Quarter 2015 3rd Quarter 2015 2nd Quarter 2015 1st Quarter 2015
Summary of Operations
Interest income $103,562 $82,937 $79,464 $80,629 $78,851 $69,679 $62,630
Interest expense 6,753 5,442 5,134 5,153 5,234 3,944 3,450
Net interest income 96,809 77,495 74,330 75,476 73,617 65,735 59,180
Provision for loan losses 4,103 3,000 1,500 2,000 1,500 1,500 1,500
Net interest income after provision for loan losses 92,706 74,495 72,830 73,476 72,117 64,235 57,680
Noninterest income 27,770 20,897 19,419 20,052 20,215 20,674 19,275
Operating expenses, excluding transaction expenses (non-GAAP) 68,674 56,031 56,293 55,739 57,365 53,328 49,658
Transaction expenses 37,470 3,054 2,594 2,085 900 3,457 1,362
Income before income taxes 14,332 36,307 33,362 35,704 34,067 28,124 25,935
Federal income tax expense 3,600 10,600 10,100 10,200 9,600 9,100 8,100
Net income $10,732 $25,707 $23,262 $25,504 $24,467 $19,024 $17,835
Transaction expenses, net of tax 25,118 1,985 1,686 1,355 585 2,659 885
Net income, excluding transaction expenses $35,850 $27,692 $24,948 $26,859 $25,052 $21,683 $18,720
Per Common Share Data
Net income:
Basic $0.22 $0.67 $0.61 $0.67 $0.64 $0.54 $0.54
Diluted 0.21 0.67 0.60 0.66 0.64 0.54 0.54
Diluted, excluding transaction expenses 0.72 0.72 0.65 0.70 0.65 0.61 0.57
Cash dividends declared 0.27 0.26 0.26 0.26 0.26 0.24 0.24
Book value - period-end 36.37 27.45 26.99 26.62 26.18 25.74 24.68
Tangible book value - period-end 19.99 19.68 19.20 18.78 18.32 17.89 18.95
Market value - period-end 44.13 37.29 35.69 34.27 32.35 33.06 31.36
Key Ratios (annualized where applicable)
Net interest margin (taxable equivalent basis) 3.58% 3.70% 3.60% 3.64% 3.55% 3.59% 3.55%
Efficiency ratio - adjusted 53.2% 54.6% 57.6% 56.2% 58.6% 59.4% 61.5%
Return on average assets 0.35% 1.11% 1.01% 1.10% 1.05% 0.94% 0.98%
Return on average shareholders' equity 2.7% 10.0% 9.2% 10.1% 9.8% 8.6% 9.0%
Average shareholders' equity as a percent of average assets 12.7% 11.1% 11.0% 10.9% 10.7% 10.9% 10.8%
Capital ratios (period end):
Tangible shareholders' equity as a percent of tangible assets 8.7% 8.2% 8.2% 8.1% 7.8% 7.8% 8.5%
Total risk-based capital ratio (1) 11.2
% 11.4% 11.5% 11.8% 11.6% 11.6% 13.0%

(1) Estimated at September 30, 2016.

Chemical Financial Corporation Announces 2016 Third 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
September 30, 2016 June 30, 2016 September 30, 2015
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)$9,470,650 $97,880 4.12% $7,511,192 $78,295 4.19% $7,135,013 $74,549 4.15%
Taxable investment securities687,259 2,575 1.50 515,303 1,798 1.40 692,906 2,233 1.29
Tax-exempt investment securities (1)592,747 4,721 3.19 484,271 4,061 3.35 448,214 3,690 3.29
Other interest-earning assets57,756 358 2.47 43,615 777 7.16 36,142 266 2.92
Interest-bearing deposits with the FRB and other banks and federal funds sold249,731 454 0.72 82,246 144 0.70 155,664 144 0.37
Total interest-earning assets11,058,143 105,988 3.82 8,636,627 85,075 3.96 8,467,939 80,882 3.80
Less: allowance for loan losses72,242 71,790 75,337
Other assets:
Cash and cash due from banks194,171 148,034 174,816
Premises and equipment116,944 104,488 112,252
Interest receivable and other assets953,714 515,039 524,186
Total assets$12,250,730 $9,332,398 $9,203,856
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits$2,327,762 $961 0.16% $1,892,512 $582 0.12% $1,778,681 $436 0.10%
Savings deposits2,512,620 749 0.12 2,073,412 476 0.09 2,033,613 389 0.08
Time deposits2,186,781 4,126 0.75 1,582,467 3,202 0.81 1,728,725 3,479 0.80
Short-term borrowings593,903 459 0.31 418,232 226 0.22 504,252 144 0.11
Long-term borrowings494,810 458 0.37 281,327 956 1.37 188,673 786 1.65
Total interest-bearing liabilities8,115,876 6,753 0.33 6,247,950 5,442 0.35 6,233,944 5,234 0.33
Noninterest-bearing deposits2,456,469 1,979,423 1,911,537
Total deposits and borrowed funds10,572,345 6,753 0.25 8,227,373 5,442 0.27 8,145,481 5,234 0.25
Interest payable and other liabilities118,717 72,011 70,648
Shareholders' equity1,559,668 1,033,014 987,727
Total liabilities and shareholders' equity$12,250,730 $9,332,398 $9,203,856
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities) 3.49% 3.61% 3.47%
Net Interest Income (FTE) $99,235 $79,633 $75,648
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets) 3.58% 3.70% 3.55%
Reconciliation to Reported Net Interest Income
Net interest income, fully taxable equivalent (non-GAAP) $99,235 $79,633 $75,648
Adjustments for taxable equivalent interest (1):
Loans (777) (717) (740)
Tax-exempt investment securities (1,649) (1,421) (1,291)
Total taxable equivalent interest adjustments (2,426) (2,138) (2,031)
Net interest income (GAAP) $96,809 $77,495 $73,617
Net interest margin (GAAP) 3.49% 3.60% 3.46%

(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 2016 Third Quarter Operating Results
Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates (1) (Unaudited)
Chemical Financial Corporation
Nine Months Ended
September 30, 2016 September 30, 2015
Average
Balance
Interest (FTE) Effective
Yield/Rate (1)
Average
Balance
Interest (FTE) Effective
Yield/Rate (1)
Assets (Dollars in thousands)
Interest-earning assets:
Loans (1)(2) $8,098,796 $251,274 4.14% $6,376,527 $198,436 4.16%
Taxable investment securities 586,066 6,302 1.43 708,618 6,742 1.27
Tax-exempt investment securities (1) 524,690 12,882 3.27 392,555 9,983 3.39
Other interest-earning assets 46,994 1,391 3.95 33,308 1,015 4.07
Interest-bearing deposits with the FRB and other banks and federal funds sold 156,640 811 0.69 135,795 394 0.39
Total interest-earning assets 9,413,186 272,660 3.87 7,646,803 216,570 3.78
Less: allowance for loan losses 72,525 75,430
Other assets:
Cash and cash due from banks 166,927 154,157
Premises and equipment 109,159 104,477
Interest receivable and other assets 665,185 417,347
Total assets $10,281,932 $8,247,354
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $2,058,951 $2,011 0.13% $1,609,323 $1,051 0.09%
Savings deposits 2,212,732 1,614 0.10 1,921,750 1,119 0.08
Time deposits 1,799,691 10,530 0.78 1,518,842 9,116 0.80
Short-term borrowings 454,456 785 0.23 415,160 343 0.11
Long-term borrowings 347,925 2,389 0.92 84,843 999 1.57
Total interest-bearing liabilities 6,873,755 17,329 0.34 5,549,918 12,628 0.30
Noninterest-bearing deposits 2,115,511 1,743,351
Total deposits and borrowed funds 8,989,266 17,329 0.26 7,293,269 12,628 0.23
Interest payable and other liabilities 87,829 62,060
Shareholders' equity 1,204,837 892,025
Total liabilities and shareholders' equity $10,281,932 $8,247,354
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities) 3.53% 3.48%
Net Interest Income (FTE) $255,331 $203,942
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets) 3.62% 3.56%
Reconciliation to Reported Net Interest Income
Net interest income, fully taxable equivalent (non-GAAP) $255,331 $203,942
Adjustments for taxable equivalent interest (1):
Loans (2,192) (1,917)
Tax-exempt investment securities (4,505) (3,493)
Total taxable equivalent interest adjustments (6,697) (5,410)
Net interest income (GAAP) $248,634 $198,532
Net interest margin (GAAP) 3.53% 3.47%

(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 2016 Third Quarter Operating Results
Noninterest Income and Operating Expenses Information (Unaudited)
Chemical Financial Corporation
(In thousands)
3rd Quarter 2016 2nd Quarter 2016 1st Quarter 2016 4th Quarter 2015 3rd Quarter 2015 2nd Quarter 2015 1st Quarter 2015
Noninterest income
Service charges and fees on deposit accounts $7,665 $6,337 $5,720 $6,398 $6,722 $6,445 $5,916
Wealth management revenue 5,584 5,782 5,201 5,151 4,725 5,605 5,071
Electronic banking fees 5,533 4,786 4,918 4,712 5,059 4,775 4,572
Mortgage banking revenue 4,439 1,595 1,405 1,606 1,436 1,688 1,403
Other fees for customer services 1,877 1,677 1,474 1,839 1,759 1,741 1,418
Other 2,672 720 701 346 514 420 895
Total noninterest income $27,770 $20,897 $19,419 $20,052 $20,215 $20,674 $19,275
3rd Quarter 2016 2nd Quarter 2016 1st Quarter 2016 4th Quarter 2015 3rd Quarter 2015 2nd Quarter 2015 1st Quarter 2015
Operating expenses
Salaries and wages $33,841 $26,887 $26,743 $27,341 $27,872 $25,535 $23,741
Employee benefits 6,724 6,240 7,147 5,630 6,113 6,176 5,512
Occupancy 5,462 5,514 4,905 4,620 4,781 4,386 4,426
Equipment and software 6,420 4,875 4,404 5,102 4,589 4,480 4,398
Outside processing and service fees 5,365 4,833 3,711 3,576 4,146 3,926 3,558
FDIC insurance premiums 1,849 1,338 1,407 1,482 1,441 1,337 1,225
Professional fees 1,472 1,020 1,036 1,112 1,235 1,258 1,237
Intangible asset amortization 1,292 1,195 1,194 1,341 1,270 987 791
Credit-related expenses (371) (1,331) 30 600 90 (192) 133
Transaction expenses 37,470 3,054 2,594 2,085 900 3,457 1,362
Other 6,620 5,460 5,716 4,935 5,828 5,435 4,637
Total operating expenses $106,144 $59,085 $58,887 $57,824 $58,265 $56,785 $51,020

Chemical Financial Corporation Announces 2016 Third Quarter Operating Results
Composition of Loans and Deposits and Additional Information on Intangible Assets (Unaudited)
Chemical Financial Corporation
(Dollars in Thousands)
Sept 30, 2016 Talmer Merger
Aug 31, 2016
June 30, 2016 Organic Growth -
Three Months Ended
Sept 30, 2016
March 31, 2016 Dec 31,
2015
Sept 30, 2015 Organic Growth -
Twelve Months Ended
Sept 30, 2016
Composition of Loans
Commercial loan portfolio:
Commercial $3,159,936 $1,180,130 $1,953,301 1.4% $1,922,259 $1,905,879 $1,829,870 8.2%
Commercial real estate 3,773,017 1,633,178 2,157,733 (0.8) 2,143,051 2,112,162 2,227,364 (3.9)
Real estate construction 500,494 166,369 285,848 16.9 242,899 232,076 145,581 129.5
Subtotal - commercial loans 7,433,447 2,979,677 4,396,882 1.3 4,308,209 4,250,117 4,202,815 6.0
Consumer loan portfolio:
Residential mortgage 3,046,959 1,531,837 1,494,192 1.4 1,461,120 1,429,636 1,394,427 8.7
Consumer installment 1,335,707 158,838 1,048,622 12.2 897,078 877,457 899,751 30.8
Home equity 899,676 212,512 707,573 (2.9) 700,478 713,937 719,202 (4.5)
Subtotal - consumer loans 5,282,342 1,903,187 3,250,387 4.0 3,058,676 3,021,030 3,013,380 12.1
Total loans $12,715,789 $4,882,864 $7,647,269 2.4% $7,366,885 $7,271,147 $7,216,195 8.5%
Sept 30, 2016 Talmer Merger
Aug 31, 2016
June 30, 2016 Organic Growth -
Three Months Ended
Sept 30, 2016
March 31, 2016 Dec 31,
2015
Sept 30, 2015 Organic Growth -
Twelve Months Ended
Sept 30, 2016
Composition of Deposits
Noninterest-bearing demand $3,264,934 $1,280,179 $2,007,629 (1.1)% $1,951,193 $1,934,583 $1,875,636 5.8%
Savings 1,650,276 549,428 1,107,558 (0.6) 1,080,940 1,026,269 1,004,987 9.5
Interest-bearing demand 3,316,635 894,748 1,819,865 33.1 2,005,053 1,870,197 2,029,556 19.3
Money market accounts 1,692,656 699,739 969,566 2.4 1,006,271 978,306 1,013,924 (2.1)
Brokered deposits 474,902 403,210 173,092 (58.6) 186,143 207,785 229,650 (68.8)
Other time deposits 2,873,459 1,510,844 1,386,936 (1.8) 1,420,516 1,439,627 1,461,458 (6.8)
Total deposits $13,272,862 $5,338,148 $7,464,646 6.3% $7,650,116 $7,456,767 $7,615,211 4.2%


Sept 30, 2016 June 30, 2016 March 31, 2016 Dec 31, 2015 Sept 30, 2015 June 30, 2015 March 31, 2015
Additional Data - Intangibles
Goodwill $1,137,166 $286,867 $286,867 $287,393 $286,454 $285,512 $180,128
Core deposit intangibles (CDI) 35,618 24,429 25,542 26,654 27,890 28,353 20,072
Loan servicing rights 51,393 9,677 10,478 11,122 11,540 12,307 11,583
Noncompete agreements 82 164 246 328 434 541

Chemical Financial Corporation Announces 2016 Third Quarter Operating Results
Nonperforming Assets (Unaudited)
Chemical Financial Corporation
(In thousands)
Sept 30,
2016
June 30,
2016
March 31,
2016
Dec 31,
2015
Sept 30,
2015
June 30,
2015
March 31,
2015
Nonperforming Assets
Nonperforming Loans (1):
Nonaccrual loans:
Commercial$13,742 $14,577 $19,264 $28,554 $26,463 $17,260 $18,904
Commercial real estate19,914 21,325 25,859 25,163 24,969 25,287 24,766
Real estate construction80 496 546 521 544 502 953
Residential mortgage5,119 5,343 5,062 5,557 6,248 6,004 6,514
Consumer installment378 285 360 451 536 393 433
Home equity2,064 1,971 2,328 1,979 1,876 1,769 1,870
Total nonaccrual loans41,297 43,997 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:
Commercial221 3 370 364 122 711 52
Commercial real estate739 3 254 216 56 148
Real estate construction1,439
Residential mortgage375 407 423 402 572 424 172
Consumer installment
Home equity628 1,071 679 1,267 558 588 429
Total accruing loans contractually past due 90 days or more as to interest or principal payments3,402 1,484 1,472 2,287 1,468 1,779 801
Nonperforming troubled debt restructurings:
Commercial loan portfolio15,261 14,240 15,351 16,297 15,559 14,547 15,810
Consumer loan portfolio1,691 2,233 3,013 3,071 3,554 3,365 2,690
Total nonperforming troubled debt restructurings16,952 16,473 18,364 19,368 19,113 17,912 18,500
Total nonperforming loans (1)61,651 61,954 73,255 83,880 81,217 70,906 72,741
Other real estate and repossessed assets20,730 8,440 9,248 9,935 11,207 14,197 14,744
Total nonperforming assets$82,381 $70,394 $82,503 $93,815 $92,424 $85,103 $87,485
Nonperforming loans as a percent of total loans0.48% 0.81% 0.99% 1.15% 1.13% 1.01% 1.28%
Nonperforming assets as a percent of:
Total loans plus other real estate and repossessed assets0.65% 0.92% 1.12% 1.29% 1.28% 1.21% 1.53%
Total assets0.47% 0.74% 0.89% 1.02% 1.00% 0.94% 1.16%
Performing troubled debt restructurings$48,835 $49,378 $49,886 $47,810 $44,803 $45,808 $45,981

(1) Acquired loans 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 2016 Third Quarter Operating Results
Summary of Allowance and Loan Loss Experience (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
3rd Quarter
2016
2nd Quarter
2016
1st Quarter
2016
4th Quarter
2015
3rd Quarter
2015
2nd Quarter
2015
1st Quarter
2015
Nine Months Ended
Sept 30,
2016
Sept 30,
2015
Allowance for loan losses - originated loan portfolio
Allowance for loan losses - beginning of period $71,506 $70,318 $73,328 $75,626 $74,941 $75,256 $75,183 $73,328 $75,183
Provision for loan losses 4,103 3,000 1,500 2,000 1,500 1,500 2,000 8,603 5,000
Net loan (charge-offs) recoveries:
Commercial (150) (1,153) (3,115) (2,207) 86 (36) (424) (4,418) (374)
Commercial real estate (154) (187) (440) (624) 145 (581) (415) (781) (851)
Real estate construction (31) (11) (1) (49) (91) (42) (141)
Residential mortgage (304) 8 (172) (545) (214) (661) (492) (468) (1,367)
Consumer installment (1,137) (486) (602) (770) (782) (590) (649) (2,225) (2,021)
Home equity (58) 6 (170) (152) (49) 102 144 (222) 197
Net loan charge-offs (1,834) (1,812) (4,510) (4,298) (815) (1,815) (1,927) (8,156) (4,557)
Allowance for loan losses - end of period 73,775 71,506 70,318 73,328 75,626 74,941 75,256 73,775 75,626
Allowance for loan losses - acquired loan portfolio
Allowance for loan losses - beginning of period 500 500
Provision for loan losses (500) (500)
Allowance for loan losses - end of period
Total allowance for loan losses $73,775 $71,506 $70,318 $73,328 $75,626 $74,941 $75,256 $73,775 $75,626
Summary of net loan charge-offs:
Loan charge-offs $2,861 $3,620 $5,458 $5,439 $2,195 $2,724 $3,143 $11,939 $8,062
Loan recoveries (1,027) (1,808) (948) (1,141) (1,380) (909) (1,216) (3,783) (3,505)
Net loan charge-offs (quarter only) $1,834 $1,812 $4,510 $4,298 $815 $1,815 $1,927 $8,156 $4,557
Net loan charge-offs (year-to-date) $8,156 $6,322 $4,510 $8,855 $4,557 $3,742 $1,927
Net loan charge-offs as a percent of average loans:
Quarter only (annualized) 0.08% 0.10% 0.25% 0.24% 0.05% 0.12% 0.14%
Year-to-date (annualized) 0.13% 0.17% 0.25% 0.13% 0.10% 0.13% 0.14%


Sept 30, 2016 June 30, 2016 March 31, 2016 Dec 31, 2015 Sept 30, 2015 June 30, 2015 March 31, 2015
Originated loans $6,755,931 $6,378,934 $6,001,714 $5,807,934 $5,667,159 $5,351,010 $5,048,662
Acquired loans 5,959,858 1,268,335 1,365,171 1,463,213 1,549,036 1,683,733 654,212
Total loans $12,715,789 $7,647,269 $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 1.09% 1.12% 1.17% 1.26% 1.33% 1.40% 1.49%
Nonperforming loans 120% 115% 96% 87% 93% 106% 103%
Credit mark as a percent of unpaid principal balance on acquired loans 3.0% 4.1% 4.5% 4.4% 4.2% 3.9% 5.7%

Chemical Financial Corporation Announces 2016 Third Quarter Operating Results
Reconciliation of Non-GAAP Financial Measures (Unaudited)
Chemical Financial Corporation
(Amounts in thousands)
3rd Quarter 2016 2nd Quarter 2016 1st Quarter 2016 4th Quarter 2015 3rd Quarter 2015 2nd Quarter 2015 1st Quarter 2015 Nine Months Ended
Sept 30, 2016 Sept 30, 2015
Non-GAAP Operating Results
Net Income
Net income, as reported$10,732 $25,707 $23,262 $25,504 $24,467 $19,024 $17,835 $59,701 $61,326
Transaction expenses, net of tax:
Transactions expenses37,470 3,054 2,594 2,085 900 3,457 1,362 43,118 5,719
Income tax benefit (1)(12,352) (1,069) (908) (730) (315) (798) (477) (14,329) (1,590)
Transaction expenses, net of tax25,118 1,985 1,686 1,355 585 2,659 885 28,789 4,129
Net income, excluding transaction expenses$35,850 $27,692 $24,948 $26,859 $25,052 $21,683 $18,720 $88,490 $65,455
Diluted Earnings Per Share
Diluted earnings per share, as reported$0.21 $0.67 $0.60 $0.66 $0.64 $0.54 $0.54 $1.40 $1.72
Effect of transaction expenses, net of tax0.51 0.05 0.05 0.04 0.01 0.07 0.03 0.69 0.12
Diluted earnings per share, excluding transaction expenses$0.72 $0.72 $0.65 $0.70 $0.65 $0.61 $0.57 $2.09 $1.84
Return on Average Assets
Return on average assets, as reported0.35% 1.11% 1.01% 1.10% 1.05% 0.94% 0.98% 0.78% 0.99%
Effect of transaction expenses, net of tax0.81 0.08 0.08 0.06 0.03 0.13 0.05 0.37 0.06
Return on average assets, excluding transaction expenses1.16% 1.19% 1.09% 1.16% 1.08% 1.07% 1.03% 1.15% 1.05%
Return on Average Shareholders' Equity
Return on average shareholders' equity, as reported2.7% 10.0% 9.2% 10.1% 9.8% 8.6% 9.0% 6.6% 9.2%
Effect of transaction expenses, net of tax6.4 0.8 0.7 0.6 0.3 1.2 0.5 3.2 0.5
Return on average shareholders' equity, excluding transaction expenses9.1% 10.8% 9.9% 10.7% 10.1% 9.8% 9.5% 9.8% 9.7%
Efficiency Ratio
Net interest income$96,809 $77,495 $74,330 $75,476 $73,617 $65,735 $59,180 $248,634 $198,532
Noninterest income27,770 20,897 19,419 20,052 20,215 20,674 19,275 68,086 60,164
Total revenue - GAAP124,579 98,392 93,749 95,528 93,832 86,409 78,455 316,720 258,696
Net interest income FTE adj2,426 2,138 2,133 2,042 2,031 1,790 1,589 6,697 5,410
Gains from sale of investment securities gains and closed branch locations(301) (123) (169) (42) (111) (47) (579) (593) (737)
Total revenue - Non-GAAP$126,704 $100,407 $95,713 $97,528 $95,752 $88,152 $79,465 $322,824 $263,369
Operating expenses - GAAP$106,144 $59,085 $58,887 $57,824 $58,265 $56,785 $51,020 $224,116 $166,070
Transaction expenses(37,470) (3,054) (2,594) (2,085) (900) (3,457) (1,362) (43,118) (5,719)
Amortization of intangibles(1,292) (1,195) (1,194) (1,341) (1,270) (987) (791) (3,681) (3,048)
Operating expenses - Non-GAAP$67,382 $54,836 $55,099 $54,398 $56,095 $52,341 $48,867 $177,317 $157,303
Efficiency ratio - GAAP85.2% 60.1% 62.8% 60.5% 62.1% 65.7% 65.0% 70.8% 64.2%
Efficiency ratio - adjusted53.2% 54.6% 57.6% 55.8% 58.6% 59.4% 61.5% 54.9% 59.7%

(1) Assumes transaction expenses 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 2016 Third Quarter Operating Results
Reconciliation of Non-GAAP Financial Measures (Unaudited)
Chemical Financial Corporation
(Amounts in thousands, except per share data)
Sept 30,
2016
June 30,
2016
March 31, 2016 Dec 31,
2015
Sept 30,
2015
June 30,
2015
March 31, 2015
Tangible Book Value
Shareholders' equity, as reported $2,563,666 $1,050,299 $1,032,291 $1,015,974 $998,363 $980,791 $810,501
Goodwill, CDI and noncompete agreements, net of tax (1,154,121) (297,044) (297,821) (299,123) (299,681) (299,109) (187,991)
Tangible shareholders' equity $1,409,545 $753,255 $734,470 $716,851 $698,682 $681,682 $622,510
Common shares outstanding 70,497 38,267 38,248 38,168 38,131 38,110 32,847
Book value per share (shareholders' equity, as reported, divided by common shares outstanding) $36.37 $27.45 $26.99 $26.62 $26.18 $25.74 $24.68
Tangible book value per share (tangible shareholders' equity divided by common shares outstanding) $19.99 $19.68 $19.20 $18.78 $18.32 $17.89 $18.95
Tangible Shareholders' Equity to Tangible Assets
Total assets, as reported $17,383,637 $9,514,172 $9,303,632 $9,188,797 $9,264,554 $9,020,725 $7,551,635
Goodwill, CDI and noncompete agreements, net of tax (1,154,121) (297,044) (297,821) (299,123) (299,681) (299,109) (187,991)
Tangible assets $16,229,516 $9,217,128 $9,005,811 $8,889,674 $8,964,873 $8,721,616 $7,363,644
Shareholders' equity to total assets 14.7% 11.0% 11.1% 11.1% 10.8% 10.9% 10.7%
Tangible shareholders' equity to tangible assets 8.7% 8.2% 8.2% 8.1% 7.8% 7.8% 8.5%

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

Source:Chemical Financial Corporation