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Chemical Financial Corporation Reports 2017 Third Quarter Operating Results

MIDLAND, Mich., Oct. 24, 2017 (GLOBE NEWSWIRE) -- Chemical Financial Corporation ("Corporation" or "Chemical") (NASDAQ:CHFC) today announced 2017 third quarter net income of $40.5 million, or $0.56 per diluted share, compared to 2017 second quarter net income of $52.0 million, or $0.73 per diluted share and 2016 third quarter net income of $11.5 million, or $0.23 per diluted share. Excluding merger and restructuring expenses and the change in fair value in loan servicing rights ("significant items"), net income in the third quarter of 2017 was $56.9 million, or $0.79 per diluted share, compared to $53.5 million, or $0.75 per diluted share, in the second quarter of 2017 and $37.4 million, or $0.75 per diluted share, in the third quarter of 2016.(1)

During the third quarter of 2017, significant items included restructuring expenses of $18.8 million, merger expenses of $2.4 million and a $4.0 million detriment to earnings due to the change in fair value in loan servicing rights, compared to merger expenses of $0.5 million and a $1.8 million detriment to earnings due to the change in fair value in loan servicing rights in the second quarter of 2017. The restructuring expenses incurred during the third quarter of 2017 were a result of the Corporation's previously announced restructuring efforts, consisting primarily of severance and retirement related expenses. The third quarter of 2016 included $37.5 million of merger expenses and a $1.2 million detriment to earnings due to the change in fair value in loan servicing rights.

"We are pleased with our core underlying trends this quarter, including increased net interest income, improved operating efficiency and a stable net interest margin," noted David T. Provost, Chief Executive Officer of Chemical Financial Corporation and Thomas C. Shafer, Vice Chairman of the Corporation and Chief Executive Officer of Chemical Bank. "With the enhancements we have made in the third quarter of 2017 in association with our restructuring efforts, we believe we are on target to achieve the long-term growth prospects established as part of our most recent merger performance targets."

The Corporation's return on average assets was 0.86% during the third quarter of 2017, compared to 1.14% during the second quarter of 2017 and 0.37% in the third quarter of 2016. The Corporation's return on average shareholders' equity was 6.1% in the third quarter of 2017, compared to 8.0% during the second quarter of 2017 and 2.9% in the third quarter of 2016. Excluding significant items, the Corporation's return on average assets was 1.21% during the third quarter of 2017, compared to 1.17% during the second quarter of 2017 and 1.22% in the third quarter of 2016 and, excluding significant items, the Corporation's return on average shareholders' equity was 8.6% in the third quarter of 2017, compared to 8.2% during the second quarter of 2017 and 9.6% in the third quarter of 2016. The Corporation's return on average tangible shareholders' equity was 10.9% in the third quarter of 2017, compared to 14.3% during the second quarter of 2017 and 4.7% in the third quarter of 2016. Excluding significant items, the Corporation's return on average tangible equity was 15.3% in the third quarter of 2017, compared to 14.7% during the second quarter of 2017 and 15.4% in the third quarter of 2016.(2)

Net interest income was $143.6 million in the third quarter of 2017, $5.7 million, or 4.1%, higher than the second quarter of 2017 and $46.8 million, or 48.4%, higher than the third quarter of 2016. The higher net interest income in the third quarter of 2017 compared to the second quarter of 2017 was driven by the positive impact of organic loan growth, an increase in the investment securities portfolio, improvement in yields on loans, and one additional day in the quarter. These benefits to net interest income were partially offset by the interest expense impact of increases in average deposits and short-term borrowings. The increase in net interest income in the third quarter of 2017 over the third quarter of 2016 was primarily attributable to organic loan growth and loans acquired in the merger with Talmer Bancorp, Inc. ("Talmer"). The Corporation experienced net organic loan growth of $166.0 million during the third quarter of 2017 and $1.12 billion during the twelve months ended September 30, 2017. The merger with Talmer added $4.88 billion of loans on August 31, 2016.

The net interest margin was 3.40% in the third quarter of 2017, compared to 3.41% in the second quarter of 2017 and 3.49% in the third quarter of 2016. The net interest margin (on a tax-equivalent basis) was 3.48% in both the third quarter of 2017 and second quarter of 2017, compared to 3.58% in the third quarter of 2016.(3) The net interest margin (on a tax-equivalent basis) in the third quarter of 2017, compared to the second quarter of 2017, was compressed due to an increase in the investment securities portfolio funded by an increase in average borrowings and time deposits. This compression was offset by an increase of 9 basis points in yield on total loans in the third quarter of 2017 to 4.31%, compared to the second quarter of 2017, primarily due to higher yields on originated loans and the benefit from interest rate adjustments on variable rate loans during the third quarter of 2017.

The provision for loan losses was $5.5 million in the third quarter of 2017, compared to $6.2 million in the second quarter of 2017 and $4.1 million in the third quarter of 2016. The decrease in the provision for loan losses in the third quarter of 2017, compared to the second quarter of 2017, was primarily the result of a lower amount of net organic loan growth in addition to improvements in collateral position of loans that are individually evaluated for impairment, partially offset by $0.6 million of impairment recorded during the third quarter of 2017 as a result of the quarterly re-estimation of cash flows of the acquired loan portfolio. The increase in provision for loan losses in the third quarter of 2017, compared to the third quarter of 2016, was primarily the result of an increase in originated loan growth. Originated loan growth was $496.5 million in the third quarter of 2017, compared to $699.9 million in the second quarter of 2017 and $377.0 million in the third quarter of 2016. The growth in the originated loan portfolio was partially offset by run-off in the acquired loan portfolio of $330.5 million in the third quarter of 2017, compared to $305.9 million in the second quarter of 2017 and $190.9 million in the third quarter of 2016. All acquired loans were recorded at their estimated fair value at each respective acquisition date without a carryover of the related allowance and, as of September 30, 2017, the allowance recorded for this population of loans was $0.6 million, reflecting impairment recorded during the third quarter of 2017.

Net loan charge-offs were $3.5 million, or 0.10% of average loans, in the third quarter of 2017, compared to $1.2 million, or 0.04% of average loans, in the second quarter of 2017 and $1.8 million, or 0.08% of average loans, in the third quarter of 2016. The increase in charge-offs in the third quarter of 2017 was primarily due to one commercial loan relationship.

The Corporation's nonperforming loans totaled $54.3 million at September 30, 2017, compared to $50.9 million at June 30, 2017 and $41.3 million at September 30, 2016. Nonperforming loans comprised 0.39% of total loans at September 30, 2017, compared to 0.37% at June 30, 2017 and 0.32% at September 30, 2016. The increase in the percentage of nonperforming loans to total loans at September 30, 2017, compared to June 30, 2017, was primarily due to an increase in commercial real estate nonaccrual loans.

At September 30, 2017, the allowance for loan losses was $85.8 million, including $85.2 million for the originated loan portfolio and $0.6 million for the acquired loan portfolio. The allowance for loan losses for the originated loan portfolio was $85.2 million, or 0.93% of originated loans at September 30, 2017, compared to $83.8 million, or 0.97% of originated loans, at June 30, 2017 and $73.8 million, or 1.09% of originated loans, at September 30, 2016. The reduction in the allowance for loan losses as a percentage of originated loans primarily reflects improvement in collateral position of loans individually evaluated for impairment. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 156.9% at September 30, 2017, compared to 164.7% at June 30, 2017 and 178.6% at September 30, 2016. The allowance for loan losses for the acquired loan portfolio of $0.6 million was established during the third quarter of 2017 due to impairment identified in the quarterly re-estimation of cash flows.

Noninterest income was $32.1 million in the third quarter of 2017, compared to $41.6 million in the second quarter of 2017 and $27.8 million in the third quarter of 2016. Noninterest income in the third quarter of 2017 decreased compared to the second quarter of 2017, primarily due to decreases in net gain on sale of loans and other mortgage banking revenue of $4.6 million and other charges and fees for customer services of $3.1 million. The decrease in net gain on sale of loans and other mortgage banking revenue, included a $4.0 million detriment to earnings due to a change in fair value in loan servicing rights in the third quarter of 2017, compared to a $1.8 million detriment in the second quarter of 2017. The decrease in other charges and fees for customers services in the third quarter of 2017, compared to the second quarter of 2017, was primarily due to a reduction in interchange fees resulting from limitations set by the Durbin amendment, which became effective for the Corporation July 1, 2017.

Operating expenses were $119.5 million in the third quarter of 2017, compared to $98.2 million in the second quarter of 2017 and $106.1 million in the third quarter of 2016. Operating expenses included merger and restructuring expenses of $21.2 million in the third quarter of 2017, $0.5 million in the second quarter of 2017 and $37.5 million in the third quarter of 2016. The increase in merger and restructuring expenses in the third quarter of 2017, compared to the second quarter of 2017, was primarily due to the Corporation's previously announced restructuring efforts. Third quarter of 2017 other operating expenses included $3.1 million of impairment related to a federal housing tax credit placed into service in the third quarter of 2017. Excluding merger and restructuring expenses and the impairment of federal housing tax credit, core operating expenses were $95.2 million in the third quarter of 2017, a decrease of $2.5 million compared to the second quarter of 2017.(4) We expect a decline in operating expenses from the previously announced restructuring efforts to be evident in the fourth quarter of 2017.

The Corporation's effective tax rate was 20.2% in the third quarter of 2017, compared to 30.7% in the second quarter of 2017 and 19.9% in the third quarter of 2016. The tax rate for the third quarter of 2017 benefited from a federal housing tax credit placed into service during the quarter. The income tax benefit from the tax credit placed into service was partially offset by the impairment recorded on the same tax credit included within other operating expenses. The tax rate for the third quarter of 2016 benefited from stock option exercises that occurred in the third 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 68.0% in the third quarter of 2017, compared to 54.7% in the second quarter of 2017 and 85.2% in the third quarter of 2016. The Corporation's adjusted efficiency ratio, which excludes significant items, amortization of intangibles, impairment of income tax credits, the net interest income FTE adjustment and gains from sale of investment securities and closed branch locations, was 51.2% in the third quarter of 2017, compared to 52.2% in the second quarter of 2017 and 52.7% in the third quarter of 2016.(5)

Total assets were $19.35 billion at September 30, 2017, compared to $18.78 billion at June 30, 2017 and $17.38 billion at September 30, 2016. The increase in total assets during the three months ended September 30, 2017 was primarily attributable to an increase in investment securities and loan growth that was funded primarily by an increase in deposits. During the quarter, the investment securities portfolio grew by $273.8 million to $2.69 billion at September 30, 2017. The increase in total assets during the twelve months ended September 30, 2017 was primarily attributable to organic loan growth and an increase in investment securities.

Total loans were $13.83 billion at September 30, 2017, an increase of $166.0 million, or 1.2%, from total loans of $13.67 billion at June 30, 2017 and an increase of $1.12 billion, or 8.8%, from total loans of $12.72 billion at September 30, 2016. The Corporation experienced organic loan growth of $166.0 million during the third quarter of 2017 and $1.12 billion during the twelve months ended September 30, 2017.

Total deposits were $13.81 billion at September 30, 2017, compared to $13.20 billion at June 30, 2017 and $13.27 billion at September 30, 2016. The increase in deposits during the three months ended September 30, 2017 was primarily due to an increase in interest-bearing demand accounts and other time deposits. The Corporation experienced organic growth in customer deposits of $591.8 million during the third quarter of 2017.

Securities sold under agreements to repurchase with customers were $414.6 million at September 30, 2017, compared to $310.0 million at June 30, 2017 and $326.8 million at September 30, 2016. Short-term borrowings were $1.90 billion at September 30, 2017, compared to $2.05 billion at June 30, 2017 and $400.0 million at September 30, 2016 and consisted of short-term FHLB advances utilized by the Corporation to fund short-term liquidity needs. Long-term borrowings were $397.8 million at September 30, 2017, compared to $435.9 million at June 30, 2017 and $676.6 million at September 30, 2016.

The Corporation's shareholders' equity to total assets ratio was 13.8% at September 30, 2017, compared to 14.1% at June 30, 2017 and 14.7% at September 30, 2016. The Corporation's tangible equity to tangible assets ratio and total risk-based capital ratio were 8.3% and 11.2% (estimated), respectively, at September 30, 2017 compared to 8.4% and 11.1%, respectively, at June 30, 2017 and 8.7% and 11.1%, respectively, at September 30, 2016. (6) The Corporation's book value was $37.57 per share at September 30, 2017, compared to $37.11 per share at June 30, 2017 and $36.37 per share at September 30, 2016. The Corporation's tangible book value was $21.36 per share at September 30, 2017, compared to $20.89 per share at June 30, 2017 and $19.99 per share at September 30, 2016.(7)

(1) Net income, excluding significant items, and diluted earnings per share, excluding significant items, are non-GAAP financial measures. Please refer to the section entitled "Non-GAAP Financial Measures" in this press release and to the financial tables entitled "Reconciliation of Non-GAAP Financial Measures" for a reconciliation to the most directly comparable GAAP financial measures. For the fourth quarter of 2016, "significant items" also includes gain on sales of branch offices.

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

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

(4) Core operating expenses, excluding merger and restructuring expenses and impairment of federal housing tax credits 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 measures.

(5) Adjusted efficiency ratio is a non-GAAP financial measure, which excludes significant items, amortization of intangibles, impairment of income tax credits, net interest income FTE adjustment, gains from sale of investment securities and closed branch locations. Please refer to the section entitled "Non-GAAP Financial Measures" in this press release and to the financial tables entitled "Reconciliation of Non-GAAP Financial Measures" for a reconciliation to the most directly comparable GAAP financial measure.

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

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

Conference Call Details

Chemical Financial Corporation will host a conference call to discuss its third quarter 2017 operating results on Wednesday, October 25, 2017, at 10:30 a.m. ET. Anyone interested may access the conference call on a live basis by dialing toll-free at 1-844-616-0064 and entering 658387 for the conference ID. The call will also be broadcast live over the Internet hosted at Chemical Financial Corporation's website at www.chemicalbank.com under the "Investor Info" section. A copy of the slide-show presentation and an audio replay of the call will remain available on Chemical Financial Corporation's website for at least 14 days.

About Chemical Financial Corporation

Chemical Financial Corporation is the largest banking company headquartered and operating branch offices in Michigan. The Corporation operates through its subsidiary bank, Chemical Bank, with 236 banking offices located primarily in Michigan, northeast Ohio and northern Indiana. At September 30, 2017, the Corporation had total assets of $19.35 billion. Chemical Financial Corporation's common stock trades on The NASDAQ Stock Market under the symbol CHFC and is one of the issuers comprising The NASDAQ Global Select Market and the S&P MidCap 400 Index. More information about the Corporation is available by visiting the investor relations section of its website at www.chemicalbank.com.

Non-GAAP Financial Measures

This press release contains references to financial measures which are not defined in generally accepted accounting principles ("GAAP"). Such non-GAAP financial measures include the Corporation's tangible equity to tangible assets ratio, tangible book value per share, presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis, operating expenses-core (which excludes merger and restructuring expenses and impairment of income tax credits), operating expenses-efficiency ratio (which excludes merger and restructuring expenses, impairment of income tax credits and amortization of intangibles), the adjusted efficiency ratio (which excludes significant items, impairment of income tax credits, amortization of intangibles, net interest income FTE adjustments, gains from sale of investment securities and closed branch locations) and other information presented excluding significant items, including net income, diluted earnings per share, return on average assets and return on average shareholders' equity.

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. However, these non-GAAP financial measures have inherent limitations and should not be considered in isolation or as a substitute for GAAP measures. In addition, because non-GAAP measures are not standardized, it may not be possible to compare the non-GAAP historical measures in this press release with other companies non-GAAP financial measures. 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. These statements include, among others, statements related to our belief that we are on target to achieve the long-term growth prospects established as part of our most recent merger performance targets and our expectations regarding operating expenses related to our restructuring efforts. . 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.

Forward-looking statements are based upon current beliefs and expectations and involve substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Accordingly, such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. The Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise. Risk factors include, without limitation, a downturn in the economy, particularly in our markets, volatile credit and financial markets both domestic and foreign, potential deterioration in real estate value, regulatory changes, excessive loan losses, the Corporation's inability to attract and retain new commercial lenders and other bankers as well as key operations staff in light of competition for experienced employees in the banking industry, the Corporation's inability to grow its deposits while reducing the number of physical branches that is operates, and negative reactions to the restructuring efforts by Chemical Bank's customers, employees and other counterparties.

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

Chemical Financial Corporation Announces 2017 Third Quarter Operating Results
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
(In thousands, except per share data)
September 30,
2017
June 30,
2017
December 31,
2016
September 30,
2016
Assets
Cash and cash equivalents:
Cash and cash due from banks$223,498 $230,219 $237,758 $286,351
Interest-bearing deposits with the Federal Reserve Bank and other banks and federal funds sold 485,713 389,022 236,644 270,216
Total cash and cash equivalents709,211 619,241 474,402 556,567
Investment securities:
Available-for-sale2,029,672 1,767,478 1,234,964 1,303,381
Held-to-maturity657,176 645,605 623,427 563,721
Total investment securities2,686,848 2,413,083 1,858,391 1,867,102
Loans held-for-sale87,198 65,371 81,830 276,061
Loans:
Total loans13,833,368 13,667,372 12,990,779 12,715,789
Allowance for loan losses(85,760) (83,797) (78,268) (73,775)
Net loans13,747,608 13,583,575 12,912,511 12,642,014
Premises and equipment141,550 146,460 145,012 144,165
Loan servicing rights62,195 64,522 58,315 51,393
Goodwill1,134,568 1,133,534 1,133,534 1,137,166
Other intangible assets35,797 37,322 40,211 35,700
Interest receivable and other assets749,333 718,297 650,973 673,469
Total Assets$19,354,308 $18,781,405 $17,355,179 $17,383,637
Liabilities
Deposits:
Noninterest-bearing$3,688,848 $3,626,592 $3,341,520 $3,264,934
Interest-bearing10,116,397 9,577,775 9,531,602 10,007,928
Total deposits13,805,245 13,204,367 12,873,122 13,272,862
Interest payable and other liabilities163,532 141,702 134,637 143,708
Securities sold under agreements to repurchase with customers414,597 310,042 343,047 326,789
Short-term borrowings1,900,000 2,050,000 825,000 400,000
Long-term borrowings397,845 435,852 597,847 676,612
Total liabilities16,681,219 16,141,963 14,773,653 14,819,971
Shareholders' Equity
Preferred stock, no par value per share
Common stock, $1 par value per share71,152 71,131 70,599 70,497
Additional paid-in capital2,201,334 2,197,501 2,210,762 2,206,182
Retained earnings425,433 404,939 340,201 312,129
Accumulated other comprehensive loss(24,830) (34,129) (40,036) (25,142)
Total shareholders' equity2,673,089 2,639,442 2,581,526 2,563,666
Total Liabilities and Shareholders' Equity$19,354,308 $18,781,405 $17,355,179 $17,383,637


Chemical Financial Corporation Announces 2017 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,
2017
June 30,
2017
September 30,
2016
September 30,
2017
September 30,
2016
Interest Income
Interest and fees on loans$148,771 $141,314 $97,103 $422,570 $249,082
Interest on investment securities:
Taxable9,326 7,125 2,575 21,207 6,302
Tax-exempt4,577 4,426 3,072 13,238 8,377
Dividends on nonmarketable equity securities1,039 1,246 358 2,906 1,391
Interest on deposits with the Federal Reserve Bank and other banks and federal funds sold 1,231 1,022 454 3,052 811
Total interest income164,944 155,133 103,562 462,973 265,963
Interest Expense
Interest on deposits12,926 10,582 5,836 32,424 14,155
Interest on short-term borrowings6,591 4,659 459 12,908 785
Interest on long-term borrowings1,799 1,944 458 5,968 2,389
Total interest expense21,316 17,185 6,753 51,300 17,329
Net Interest Income143,628 137,948 96,809 411,673 248,634
Provision for loan losses5,499 6,229 4,103 15,778 8,603
Net interest income after provision for loan losses138,129 131,719 92,706 395,895 240,031
Noninterest Income
Service charges and fees on deposit accounts9,147 8,777 7,665 25,928 19,722
Wealth management revenue6,188 6,958 5,584 18,973 16,567
Other charges and fees for customer services6,624 9,734 7,410 25,249 20,265
Net gain on sale of loans and other mortgage banking revenue5,241 9,879 4,439 24,280 7,439
Gain on sale of investment securities1 77 16 168 53
Other4,921 6,143 2,656 17,102 4,040
Total noninterest income32,122 41,568 27,770 111,700 68,086
Operating Expenses
Salaries, wages and employee benefits52,621 52,601 40,565 165,470 107,582
Occupancy6,871 8,745 5,462 23,008 15,881
Equipment and software7,582 8,149 6,420 24,248 15,699
Outside processing and service fees9,626 8,924 5,365 26,061 13,909
Merger expenses2,379 465 37,470 7,011 43,118
Restructuring expenses18,824 18,824
Other21,636 19,353 10,862 57,350 27,927
Total operating expenses119,539 98,237 106,144 321,972 224,116
Income before income taxes50,712 75,050 14,332 185,623 84,001
Income tax expense10,253 23,036 2,848 45,546 23,137
Net Income$40,459 $52,014 $11,484 $140,077 $60,864
Earnings Per Common Share:
Weighted average common shares outstanding-basic70,911 70,819 49,107 70,787 41,881
Weighted average common shares outstanding-diluted71,505 71,443 49,631 71,454 42,321
Basic earnings per share$0.57 $0.73 $0.23 $1.98 $1.45
Diluted earnings per share0.56 0.73 0.23 1.95 1.42
Cash Dividends Declared Per Common Share0.28 0.27 0.27 0.82 0.79
Key Ratios (annualized where applicable):
Return on average assets0.86% 1.14% 0.37% 1.03% 0.79%
Return on average shareholders' equity6.1% 8.0% 2.9% 7.2% 6.7%
Net interest margin (tax-equivalent basis) (non-GAAP)3.48% 3.48% 3.58% 3.48% 3.62%
Efficiency ratio - GAAP68.0% 54.7% 85.2% 61.5% 70.8%
Efficiency ratio - adjusted (non-GAAP)51.2% 52.2% 52.7% 53.5% 54.7%


Chemical Financial Corporation Announces 2017 Third Quarter Operating Results
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
(Dollars in thousands, except per share data)
3rd Quarter 2017 2nd Quarter 2017 1st Quarter 2017 4th Quarter 2016 3rd Quarter 2016 2nd Quarter 2016 1st Quarter 2016
Summary of Operations
Interest income$164,944 $155,133 $142,896 $144,416 $103,562 $82,937 $79,464
Interest expense21,316 17,185 12,799 11,969 6,753 5,442 5,134
Net interest income143,628 137,948 130,097 132,447 96,809 77,495 74,330
Provision for loan losses5,499 6,229 4,050 6,272 4,103 3,000 1,500
Net interest income after provision for loan losses138,129 131,719 126,047 126,175 92,706 74,495 72,830
Noninterest income32,122 41,568 38,010 54,264 27,770 20,897 19,419
Operating expenses, excluding merger and restructuring expenses and impairment of income tax credits (non-GAAP)95,241 97,772 100,029 94,443 68,674 56,031 56,293
Merger and restructuring expenses21,203 465 4,167 18,016 37,470 3,054 2,594
Impairment of income tax credits3,095
Income before income taxes50,712 75,050 59,861 67,980 14,332 36,307 33,362
Income tax expense10,253 23,036 12,257 18,969 2,848 10,532 9,757
Net income$40,459 $52,014 $47,604 $49,011 $11,484 $25,775 $23,605
Significant items, net of tax16,409 1,474 3,046 2,781 25,921 1,985 1,686
Net income, excluding significant items$56,868 $53,488 $50,650 $51,792 $37,405 $27,760 $25,291
Per Common Share Data
Net income:
Basic$0.57 $0.73 $0.67 $0.67 $0.23 $0.67 $0.61
Diluted0.56 0.73 0.67 0.66 0.23 0.67 0.60
Diluted, excluding significant items (non-GAAP)0.79 0.75 0.71 0.70 0.75 0.72 0.65
Cash dividends declared0.28 0.27 0.27 0.27 0.27 0.26 0.26
Book value - period-end37.57 37.11 36.56 36.57 36.37 27.45 26.99
Tangible book value - period-end21.36 20.89 20.32 20.20 19.99 19.68 19.20
Market value - period-end52.26 48.41 51.15 54.17 44.13 37.29 35.69
Key Ratios (annualized where applicable)
Net interest margin (taxable equivalent basis) (non-GAAP)3.48% 3.48% 3.49% 3.56% 3.58% 3.70% 3.60%
Efficiency ratio - adjusted (non-GAAP)51.2% 52.2% 57.4% 53.7% 52.7% 54.6% 57.6%
Return on average assets0.86% 1.14% 1.09% 1.09% 0.37% 1.10% 1.02%
Return on average shareholders' equity6.1% 8.0% 7.4% 7.4% 2.9% 10.0% 9.3%
Average shareholders' equity as a percent of average assets14.0% 14.3% 14.8% 14.9% 12.7% 11.1% 11.0%
Capital ratios (period end):
Tangible shareholders' equity as a percent of tangible assets8.3% 8.4% 8.8% 8.8% 8.7% 8.2% 8.2%
Total risk-based capital ratio (1)11.2% 11.1% 11.4% 11.5% 11.1% 11.4% 11.5%

(1) Estimated at September 30, 2017.

Chemical Financial Corporation Announces 2017 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, 2017 June 30, 2017 September 30, 2016
Average
Balance
Interest (FTE) Effective
Yield/Rate (1)
Average
Balance
Interest (FTE) Effective
Yield/Rate (1)
Average
Balance
Interest (FTE) Effective
Yield/Rate (1)
Assets
Interest-earning assets:
Loans (1)(2)$13,795,750 $149,595 4.31% $13,513,927 $142,128 4.22% $9,470,650 $97,880 4.12%
Taxable investment securities1,629,344 9,326 2.29 1,364,358 7,125 2.09 687,259 2,575 1.50
Tax-exempt investment securities(1)896,854 7,013 3.13 882,445 6,781 3.07 592,747 4,721 3.19
Other interest-earning assets180,188 1,039 2.29 166,244 1,246 3.01 57,756 358 2.47
Interest-bearing deposits with the FRB and other banks and federal funds sold313,104 1,231 1.56 302,022 1,022 1.36 249,731 454 0.72
Total interest-earning assets16,815,240 168,204 3.98 16,228,996 158,302 3.91 11,058,143 105,988 3.82
Less: allowance for loan losses(84,640) (80,690) (72,242)
Other assets:
Cash and cash due from banks250,743 222,954 194,171
Premises and equipment146,266 145,320 116,944
Interest receivable and other assets1,730,539 1,748,119 953,714
Total assets$18,858,148 $18,264,699 $12,250,730
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits$2,725,807 $1,321 0.19% $2,682,652 $1,289 0.19% $2,327,762 $961 0.16%
Savings deposits4,012,299 3,985 0.39 3,881,260 3,047 0.31 2,512,620 749 0.12
Time deposits3,007,109 7,620 1.01 2,958,436 6,246 0.85 2,186,781 4,126 0.75
Short-term borrowings2,279,998 6,591 1.15 2,027,505 4,659 0.92 593,903 459 0.31
Long-term borrowings426,155 1,799 1.67 474,086 1,944 1.65 494,810 458 0.37
Total interest-bearing liabilities12,451,368 21,316 0.68 12,023,939 17,185 0.57 8,115,876 6,753 0.33
Noninterest-bearing deposits3,643,765 3,499,686 2,456,469
Total deposits and borrowed funds16,095,133 21,316 0.53 15,523,625 17,185 0.44 10,572,345 6,753 0.25
Interest payable and other liabilities119,782 134,557 118,717
Shareholders' equity2,643,233 2,606,517 1,559,668
Total liabilities and shareholders' equity$18,858,148 $18,264,699 $12,250,730
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities) 3.30% 3.34% 3.49%
Net Interest Income (FTE) $146,888 $141,117 $99,235
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets) 3.48% 3.48% 3.58%
Reconciliation to Reported Net Interest Income
Net interest income, fully taxable equivalent (non-GAAP) $146,888 $141,117 $99,235
Adjustments for taxable equivalent interest (1):
Loans (824) (814) (777)
Tax-exempt investment securities (2,436) (2,355) (1,649)
Total taxable equivalent interest adjustments (3,260) (3,169) (2,426)
Net interest income (GAAP) $143,628 $137,948 $96,809
Net interest margin (GAAP) 3.40% 3.41% 3.49%

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

Chemical Financial Corporation Announces 2017 Third Quarter Operating Results
Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates (1) (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
Nine Months Ended
September 30, 2017 September 30, 2016
Average
Balance
Interest (FTE) Effective
Yield/Rate (1)
Average
Balance
Interest (FTE) Effective
Yield/Rate (1)
Assets
Interest-earning assets:
Loans (1)(2) $13,490,851 $425,016 4.21% $8,098,796 $251,274 4.14%
Taxable investment securities 1,335,349 21,207 2.12 586,066 6,302 1.43
Tax-exempt investment securities (1) 880,398 20,290 3.07 524,690 12,882 3.27
Other interest-earning assets 150,203 2,906 2.59 46,994 1,391 3.95
Interest-bearing deposits with the FRB and other banks and federal funds sold 294,967 3,052 1.38 156,640 811 0.69
Total interest-earning assets 16,151,768 472,471 3.91 9,413,186 272,660 3.87
Less: allowance for loan losses (81,337) (72,525)
Other assets:
Cash and cash due from banks 234,379 166,927
Premises and equipment 145,877 109,159
Interest receivable and other assets 1,753,337 665,185
Total assets $18,204,024 $10,281,932
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits $2,768,209 $3,628 0.18% $2,058,951 $2,011 0.13%
Savings deposits 3,912,672 8,753 0.30 2,212,732 1,614 0.10
Time deposits 2,973,070 20,043 0.90 1,799,691 10,530 0.78
Short-term borrowings 1,848,325 12,908 0.93 454,456 785 0.23
Long-term borrowings 479,344 5,968 1.66 347,925 2,389 0.92
Total interest-bearing liabilities 11,981,620 51,300 0.57 6,873,755 17,329 0.34
Noninterest-bearing deposits 3,484,125 2,115,511
Total deposits and borrowed funds 15,465,745 51,300 0.44 8,989,266 17,329 0.26
Interest payable and other liabilities 126,649 87,829
Shareholders' equity 2,611,630 1,204,837
Total liabilities and shareholders' equity $18,204,024 $10,281,932
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities) 3.34% 3.53%
Net Interest Income (FTE) $421,171 $255,331
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets) 3.48% 3.62%
Reconciliation to Reported Net Interest Income
Net interest income, fully taxable equivalent (non-GAAP) $421,171 $255,331
Adjustments for taxable equivalent interest (1):
Loans (2,446) (2,192)
Tax-exempt investment securities (7,052) (4,505)
Total taxable equivalent interest adjustments (9,498) (6,697)
Net interest income (GAAP) $411,673 $248,634
Net interest margin (GAAP) 3.40% 3.53%

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

Chemical Financial Corporation Announces 2017 Third Quarter Operating Results
Noninterest Income and Operating Expenses Information (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
3rd
Quarter
2017
2nd
Quarter
2017
1st
Quarter
2017
4th
Quarter
2016
3rd
Quarter
2016
2nd
Quarter
2016
1st
Quarter
2016
Noninterest income
Service charges and fees on deposit accounts$9,147 $8,777 $8,004 $8,414 $7,665 $6,337 $5,720
Wealth management revenue6,188 6,958 5,827 6,034 5,584 5,782 5,201
Electronic banking fees4,370 7,482 6,817 8,196 5,533 4,786 4,918
Net gain on sale of loans and other mortgage banking revenue 5,241 9,879 9,160 14,420 4,439 1,595 1,405
Other fees for customer services2,254 2,252 2,074 1,785 1,877 1,677 1,474
Gain on sale of investment securities1 77 90 76 16 18 19
Gain on sale of branch offices 7,391
Other4,921 6,143 6,038 7,948 2,656 702 682
Total noninterest income$32,122 $41,568 $38,010 $54,264 $27,770 $20,897 $19,419


3rd
Quarter
2017
2nd
Quarter
2017
1st
Quarter
2017
4th
Quarter
2016
3rd
Quarter
2016
2nd
Quarter
2016
1st
Quarter
2016
Operating expenses
Salaries and wages$44,641 $44,959 $48,526 $47,936 $33,841 $26,887 $26,743
Employee benefits7,980 7,642 11,722 9,695 6,724 6,240 7,147
Occupancy6,871 8,745 7,392 7,644 5,462 5,514 4,905
Equipment and software7,582 8,149 8,517 8,709 6,420 4,875 4,404
Outside processing and service fees 9,626 8,924 7,511 7,290 5,365 4,833 3,711
FDIC insurance premiums2,768 2,460 1,406 2,813 1,849 1,338 1,407
Professional fees3,489 2,567 1,968 2,304 1,472 1,020 1,036
Intangible asset amortization1,526 1,525 1,513 1,843 1,292 1,195 1,194
Credit-related expenses1,874 1,895 1,200 (1,029) (371) (1,331) 30
Merger expenses2,379 465 4,167 18,016 37,470 3,054 2,594
Restructuring expenses18,824
Impairment of income tax credit3,095
Other8,884 10,906 10,274 9,081 6,620 5,460 5,716
Total operating expenses$119,539 $98,237 $104,196 $114,302 $106,144 $59,085 $58,887


Chemical Financial Corporation Announces 2017 Third Quarter Operating Results
Composition of Loans and Deposits and Additional Information on Intangible Assets (Unaudited)
Chemical Financial Corporation
(Dollars in Thousands)
Organic
Growth -
Organic
Growth -
Sep 30,
2017
June 30,
2017
Three
Months
Ended
September
30, 2017
March 31,
2017
Dec 31,
2016
Sep 30,
2016
Twelve
Months
Ended
September
30, 2017
Composition of Loans
Commercial loan portfolio:
Commercial$3,319,965 $3,360,161 (1.2)% $3,253,608 $3,217,300 $3,199,576 3.8%
Commercial real estate4,315,978 4,324,323 (0.2) 4,097,771 3,973,140 3,733,377 15.6
Real estate construction501,413 446,678 12.3 453,811 403,772 500,494 0.2
Subtotal - commercial loans8,137,356 8,131,162 0.1 7,805,190 7,594,212 7,433,447 9.5
Consumer loan portfolio:
Residential mortgage3,221,307 3,125,397 3.1 3,133,465 3,086,474 3,046,959 5.7
Consumer installment1,615,983 1,553,967 4.0 1,481,057 1,433,884 1,335,707 21.0
Home equity858,722 856,846 0.2 853,680 876,209 899,676 (4.6)
Subtotal - consumer loans5,696,012 5,536,210 2.9 5,468,202 5,396,567 5,282,342 7.8
Total loans$13,833,368 $13,667,372 1.2% $13,273,392 $12,990,779 $12,715,789 8.8%


Organic
Growth -
Organic
Growth -
Sep 30,
2017
June 30,
2017
Three
Months
Ended
September
30, 2017
March 31,
2017
Dec 31,
2016
Sep 30,
2016
Twelve
Months
Ended
September
30, 2017
Composition of Deposits
Noninterest-bearing demand $3,688,848 $3,626,592 1.7% $3,399,287 $3,341,520 $3,264,934 13.0%
Savings1,736,360 1,749,199 (0.7) 1,752,040 1,662,115 1,650,276 5.2
Interest-bearing demand2,976,212 2,606,032 14.2 2,900,546 2,825,801 3,316,635 (10.3)
Money market accounts2,289,852 2,235,412 2.4 2,161,645 2,033,319 1,692,656 35.3
Brokered deposits132,806 123,728 7.3 156,367 226,429 474,902 (72.0)
Other time deposits2,981,167 2,863,404 4.1 2,762,462 2,783,938 2,873,459 3.7
Total deposits$13,805,245 $13,204,367 4.6% $13,132,347 $12,873,122 $13,272,862 4.0%


September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
Additional Data - Intangibles
Goodwill$1,134,568 $1,133,534 $1,133,534 $1,133,534 $1,137,166
Loan servicing rights62,195 64,522 64,604 58,315 51,393
Core deposit intangibles (CDI)35,747 37,235 38,723 40,211 35,618
Noncompete agreements50 87 125 82


Chemical Financial Corporation Announces 2017 Third Quarter Operating Results
Nonperforming Assets (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
Sep 30,
2017
June 30,
2017
March 31,
2017
Dec 31,
2016
Sep 30,
2016
June 30,
2016
March 31,
2016
Nonperforming Assets
Nonperforming Loans (1):
Nonaccrual loans:
Commercial$15,648 $18,773 $16,717 $13,178 $13,742 $14,577 $19,264
Commercial real estate25,150 19,723 20,828 19,877 19,914 21,325 25,859
Real estate construction78 56 79 80 80 496 546
Residential mortgage8,646 7,714 6,749 6,969 5,119 5,343 5,062
Consumer installment875 757 755 879 378 285 360
Home equity3,908 3,871 2,713 3,351 2,064 1,971 2,328
Total nonaccrual loans(1)54,305 50,894 47,841 44,334 41,297 43,997 53,419
Other real estate and repossessed assets10,605 14,582 16,395 17,187 20,730 8,440 9,248
Total nonperforming assets$64,910 $65,476 $64,236 $61,521 $62,027 $52,437 $62,667
Accruing loans contractually past due 90 days or more as to interest or principal payments, excluding acquired loans accounted for under ASC 310-30:
Commercial$3,521 $58 $1,823 $11 $221 $3 $370
Commercial real estate144 262 700 277 739 3
Real estate construction 1,439
Residential mortgage 375 407 423
Home equity2,367 2,026 1,169 995 628 1,071 679
Total accruing loans contractually past due 90 days or more as to interest or principal payments$6,032 2,346 $3,692 $1,283 $3,402 $1,484 $1,472

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

Chemical Financial Corporation Announces 2017 Third Quarter Operating Results
Summary of Allowance and Loan Loss Experience (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
3rd
Quarter
2017
2nd
Quarter
2017
1st
Quarter
2017
4th
Quarter
2016
3rd
Quarter
2016
2nd
Quarter
2016
1st
Quarter
2016
Nine Months Ended
Sep 30,
2017
Sep 30,
2016
Allowance for loan losses - originated loan portfolio
Allowance for loan losses - beginning of period$83,797 $78,774 $78,268 $73,775 $71,506 $70,318 $73,328 $78,268 $73,328
Provision for loan losses4,921 6,229 4,050 6,272 4,103 3,000 1,500 15,200 8,603
Net loan (charge-offs) recoveries:
Commercial(2,348) (239) (1,999) (336) (150) (1,153) (3,115) (4,586) (4,418)
Commercial real estate(174) (205) 730 (280) (154) (187) (440) 351 (781)
Real estate construction (9) 36 (31) (11) (9) (42)
Residential mortgage(44) 19 (567) (236) (304) 8 (172) (592) (468)
Consumer installment(858) (747) (1,310) (823) (1,137) (486) (602) (2,915) (2,225)
Home equity(113) (34) (389) (140) (58) 6 (170) (536) (222)
Net loan charge-offs(3,537) (1,206) (3,544) (1,779) (1,834) (1,812) (4,510) (8,287) (8,156)
Allowance for loan losses - end of period85,181 83,797 78,774 78,268 73,775 71,506 70,318 85,181 73,775
Allowance for loan losses - acquired loan portfolio
Allowance for loan losses - beginning of period
Provision for loan losses579 579
Allowance for loan losses - end of period579 579
Total allowance for loan losses$85,760 $83,797 $78,774 $78,268 $73,775 $71,506 $70,318 $85,760 $73,775
Net loan charge-offs as a percent of average loans (annualized) 0.10% 0.04% 0.11% 0.06% 0.08% 0.10% 0.25% 0.08% 0.13%


Sep 30,
2017
June 30,
2017
March 31,
2017
Dec 31,
2016
Sep 30,
2016
Originated loans$9,156,096 $8,659,622 $7,959,769 $7,458,401 $6,755,931
Acquired loans4,677,272 5,007,750 5,313,623 5,532,378 5,959,858
Total loans$13,833,368 $13,667,372 $13,273,392 $12,990,779 $12,715,789
Allowance for loan losses (originated loan portfolio) as a percent of:
Total originated loans0.93% 0.97% 0.99% 1.05% 1.09%
Nonperforming loans156.9% 164.7% 177.7% 176.5% 178.6%
Credit mark as a percent of unpaid principal balance on acquired loans 2.7% 2.6% 2.8% 3.1% 3.0%


Chemical Financial Corporation Announces 2017 Third Quarter Operating Results
Reconciliation of Non-GAAP Financial Measures (Unaudited)
Chemical Financial Corporation
(Amounts in thousands)
3rd
Quarter 2017
2nd
Quarter
2017
1st
Quarter 2017
4th
Quarter 2016
3rd
Quarter 2016
2nd
Quarter 2016
1st
Quarter 2016
Nine Months Ended
Sep 30,
2017
Sep 30,
2016
Non-GAAP Operating Results
Net Income
Net income, as reported$40,459 $52,014 $47,604 $47,168 $11,484 $25,775 $23,605 $140,077 $60,864
Merger and restructuring expenses 21,203 465 4,167 18,016 37,470 3,054 2,594 25,835 43,118
Gain on sales of branch offices (7,391)
Loan servicing rights change in fair valuation 4,041 1,802 519 (6,348) 1,236 6,362 1,236
Significant items 25,244 2,267 4,686 4,277 38,706 3,054 2,594 32,197 44,354
Income tax benefit (1) (8,835) (793) (1,640) (1,496) (12,785) (1,069) (908) (11,268) (14,762)
Significant items, net of tax 16,409 1,474 3,046 2,781 25,921 1,985 1,686 20,929 29,592
Net income, excluding significant items$56,868 $53,488 $50,650 $49,949 $37,405 $27,760 $25,291 $161,006 $90,456
Diluted Earnings Per Share
Diluted earnings per share, as reported$0.56 $0.73 $0.67 $0.66 $0.23 $0.67 $0.60 $1.95 $1.42
Effect of significant items, net of tax 0.23 0.02 0.04 0.04 0.52 0.05 0.05 0.29 0.69
Diluted earnings per share, excluding significant items$0.79 $0.75 $0.71 $0.70 $0.75 $0.72 $0.65 $2.24 $2.11
Return on Average Assets
Return on average assets, as reported 0.86% 1.14% 1.09% 1.09% 0.37% 1.10% 1.02% 1.03% 0.79%
Effect of significant items, net of tax 0.35 0.03 0.07 0.07 0.85 0.09 0.07 0.15 0.38
Return on average assets, excluding significant items 1.21% 1.17% 1.16% 1.16% 1.22% 1.19% 1.09% 1.18% 1.17%
Return on Average Shareholders' Equity
Return on average shareholders' equity, as reported 6.1% 8.0% 7.4% 7.4% 2.9% 10.0% 9.3% 7.2% 6.7%
Effect of significant items, net of tax 2.5 0.2 0.4 0.4 6.7 0.7 0.6 1.0 3.3
Return on average shareholders' equity, excluding significant items 8.6% 8.2% 7.8% 7.8% 9.6% 10.7% 9.9% 8.2% 10.0%
Return on Average Tangible Shareholders' Equity
Average shareholders' equity$2,643,233
$2,606,517 $2,584,501 $2,564,943 $1,559,668 $1,033,014 $1,017,929 $2,611,630 $1,204,837
Average goodwill, CDI and noncompete agreements, net of tax 1,153,394
1,154,229 1,155,177 1,153,598 585,393 295,882 299,685 1,154,243 393,023
Average tangible shareholders' equity$1,489,839
$1,452,288 $1,429,324 $1,411,345 $974,275 $737,132 $718,244 $1,457,387 $811,814
Return on average tangible shareholders' equity 10.9% 14.3% 13.3% 13.4% 4.7% 14.0% 13.1% 12.8% 10.0%
Effect of significant items, net of tax 4.4 0.4 0.9 0.8 10.7 1.1 1.0 1.9 4.9
Return on average tangible shareholders' equity, excluding significant items 15.3% 14.7% 14.2% 14.2% 15.4% 15.1% 14.1% 14.7% 14.9%

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

Chemical Financial Corporation Announces 2017 Third Quarter Operating Results
Reconciliation of Non-GAAP Financial Measures (Unaudited)
Chemical Financial Corporation
(Amounts in thousands, except per share data)
3rd
Quarter
2017
2nd
Quarter
2017
1st
Quarter
2017
4th
Quarter
2016
3rd
Quarter
2016
2nd
Quarter
2016
1st
Quarter
2016
Nine Months Ended
Sep 30,
2017
Sep 30,
2016
Efficiency Ratio
Net interest income$143,628 $137,948 $130,097 $132,447 $96,809 $77,495 $74,330 $411,673 $248,634
Noninterest income32,122 41,568 38,010 54,264 27,770 20,897 19,419 111,700 68,086
Total revenue - GAAP175,750 179,516 168,107 186,711 124,579 98,392 93,749 523,373 316,720
Net interest income FTE adjustment3,260 3,169 3,068 2,945 2,426 2,138 2,133 9,498 6,697
Loan servicing rights change in fair value (gains)losses4,041 1,802 519 (6,348) 1,236 6,362 1,236
Gain on sales of branch offices (7,391)
Gains from sale of investment securities and closed branch locations (1) (77) (90) (76) (301) (123) (169) (168) (593)
Total revenue - Non-GAAP$183,050 $184,410 $171,604 $175,841 $127,940 $100,407 $95,713 $539,065 $324,060
Operating expenses - GAAP$119,539 $98,237 $104,196 $114,302 $106,144 $59,085 $58,887 $321,972 $224,116
Merger and restructuring expenses(21,203) (465) (4,167) (18,016) (37,470) (3,054) (2,594) (25,835) (43,118)
Impairment of income tax credits(3,095) (3,095)
Operating expense, core - Non-GAAP95,241 97,772 100,029 96,286 68,674 56,031 56,293 293,042 180,998
Amortization of intangibles(1,526) (1,525) (1,513) (1,843) (1,292) (1,195) (1,194) (4,564) (3,681)
Operating expenses, efficiency ratio - Non-GAAP$93,715 $96,247 $98,516 $94,443 $67,382 $54,836 $55,099 $288,478 $177,317
Efficiency ratio - GAAP68.0% 54.7% 62.0% 61.2% 85.2% 60.1% 62.8% 61.5% 70.8%
Efficiency ratio - adjusted Non-GAAP51.2% 52.2% 57.4% 53.7% 52.7% 54.6% 57.6% 53.5% 54.7%


Sep 30,
2017
June 30,
2017
March 31,
2017
Dec 31,
2016
Sep 30,
2016
June 30,
2016
March 31,
2016
Tangible Book Value
Shareholders' equity, as reported$2,673,089 $2,639,442 $2,600,051 $2,581,526 $2,563,666 $1,050,299 $1,032,291
Goodwill, CDI and noncompete agreements, net of tax(1,153,576) (1,153,595) (1,154,915) (1,155,617) (1,154,121) (297,044) (297,821)
Tangible shareholders' equity$1,519,513 $1,485,847 $1,445,136 $1,425,909 $1,409,545 $753,255 $734,470
Common shares outstanding71,152 71,131 71,118 70,599 70,497 38,267 38,248
Book value per share (shareholders' equity, as reported, divided by common shares outstanding)$37.57 $37.11 $36.56 $36.57 $36.37 $27.45 $26.99
Tangible book value per share (tangible shareholders' equity divided by common shares outstanding) $21.36 $20.89 $20.32 $20.20 $19.99 $19.68 $19.20
Tangible Shareholders' Equity to Tangible Assets
Total assets, as reported$19,354,308 $18,781,405 $17,636,973 $17,355,179 $17,383,637 $9,514,172 $9,303,632
Goodwill, CDI and noncompete agreements, net of tax(1,153,576) (1,153,595) (1,154,915) (1,155,617) (1,154,121) (297,044) (297,821)
Tangible assets$18,200,732 $17,627,810 $16,482,058 $16,199,562 $16,229,516 $9,217,128 $9,005,811
Shareholders' equity to total assets13.8% 14.1% 14.7% 14.9% 14.7% 11.0% 11.1%
Tangible shareholders' equity to tangible assets8.3% 8.4% 8.8% 8.8% 8.7% 8.2% 8.2%

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

Source:Chemical Financial Corporation