Loading, Please Wait...

CST: 20/08/2019 18:14:00   

Chemical Financial Corporation reports fourth quarter 2018 net income of $73.0 million, representing $1.01 of earnings per diluted average share

204 Days ago

DETROIT, Jan. 28, 2019 (GLOBE NEWSWIRE) -- Chemical Financial Corporation ("Corporation" or "Chemical") (NASDAQ:CHFC) today announced 2018 fourth quarter net income of $73.0 million, or $1.01 per diluted share, compared to 2018 third quarter net income of $70.4 million, or $0.98 per diluted share, and 2017 fourth quarter net income of $9.4 million, or $0.13 per diluted share. Net income in the fourth quarter of 2017, excluding merger and restructuring expenses, the revaluation of our net deferred tax assets following the signing of the Tax Cuts and Jobs Act in December 2017 and losses on sales of investment securities taken as part of our treasury and tax management objectives (which we collectively refer to herein as "significant items"), a non-GAAP financial measure, was $62.7 million, or $0.87 per diluted share.(1) Net income for the full year 2018 was $284.0 million, or $3.94 per diluted share, compared to $149.5 million, or $2.08 per diluted share for the full year 2017. Net income for the full year 2017, excluding significant items, a non-GAAP financial measure, was $219.6 million, or $3.06 per diluted share.(1)  As previously announced, on January 22, 2019, our Board of Directors declared a first quarter of 2019 dividend on our common stock of $0.34 per share. The first quarter of 2019 dividend will be payable on March 15, 2019, to shareholders of record on March 1, 2019.

"We are pleased with our results for the quarter which reflect loan growth fueling our continued trend of increasing net interest income, improvement in our operating efficiency and an increase in net interest margin," noted David T. Provost, Chief Executive Officer of the Corporation and Thomas C. Shafer, Vice Chairman of the Corporation and Chief Executive Office of Chemical Bank. "We fully recognize and have appreciation for the dedicated efforts of our employees who have strengthened our foundation and positioned us for continued growth and sound operating performance in the years to come."

Our return on average assets was 1.39% during the fourth quarter of 2018, compared to 1.37% in the third quarter of 2018, and 0.20% in the fourth quarter of 2017. Our return on average shareholders' equity was 10.4% in the fourth quarter of 2018, compared to 10.2% in the third quarter of 2018 and 1.4% in the fourth quarter of 2017. Our return on average tangible shareholders' equity, a non-GAP financial measure, was 17.8% in the fourth quarter of 2018, compared to 17.5% in the third quarter of 2018, and 2.5% in the fourth quarter of 2017. During the fourth quarter of  2017, our return on average assets and return on average tangible shareholders' equity, excluding significant items, both non-GAAP financial measures, was 1.31% and 16.5%, respectively.(1)

Our net interest income was $163.5 million for the fourth quarter of 2018, $4.0 million, or 2.5%, higher than the third quarter of 2018, and $17.5 million, or 12.0%, higher than the fourth quarter of 2017. The increase in net interest income for the fourth quarter of 2018, compared to both the third quarter of 2018 and the fourth quarter of 2017 was primarily attributable to increases in average balances and yields earned on loans and investment securities, partially offset by an increase in average deposit balances and cost of funds. Fourth quarter 2018 net loan growth was $473.5 million, or an annualized growth rate of 12.8%, and net loan growth over the past twelve months was $1.11 billion, or 7.9%. Our investment securities portfolio grew by $300.7 million in the fourth quarter of 2018, compared to the third quarter of 2018, and $1.01 billion, compared to the fourth quarter of 2017.

Our net interest margin was 3.42% for both the fourth quarter of 2018 and the third quarter of 2018, compared to 3.39% for the fourth quarter of 2017. The net interest margin (fully taxable equivalent (FTE)), a non-GAAP financial measure, increased to 3.49% for the fourth quarter of 2018, compared to 3.48% for the third quarter of 2018, and 3.47% for the fourth quarter of 2017.(1)  The increase in our net interest margin (FTE), for the fourth quarter of 2018, compared to both the third quarter of 2018 and the fourth quarter of 2017, was primarily due to increases in average balances and yields earned on loans and investment securities, partially offset by an increase in average interest-bearing deposit balances and cost of funds. Our average cost of funds was 1.03% for the fourth quarter of 2018, compared to 0.88% for the third quarter of 2018, and 0.56% for the fourth quarter of 2017. The average yield on our loan portfolio increased to 4.80% in the fourth quarter of 2018, compared to 4.68% in the third quarter of 2018 and 4.31% in the fourth quarter of 2017. Interest accretion from purchase accounting discounts on acquired loans contributed 23 basis points to our net interest margin (FTE) in both the fourth quarter of 2018 and the third quarter of 2018, compared to 22 basis points in the fourth quarter of 2017.

Our net interest income was $632.3 million for the year ended December 31, 2018, $74.8 million, or 13.4%, higher than the year ended December 31, 2017. The increase in net interest income for the year ended December 31, 2018, compared to the year ended December 31, 2017, was primarily attributable to increases in average balances and yields earned on loans and investments securities, partially offset by increases in average interest-bearing deposit balances and cost of funds. Our average balance of loans outstanding during the year ended December 31, 2018 was up $998.3 million, compared to the prior year. Our net interest margin improved to 3.48% for the year ended 2018, compared to 3.40% for the year ended 2017. Our net interest margin (FTE), a non-GAAP financial measure, increased to 3.53% for the year ended 2018, compared to 3.48% for the year ended 2017.(1)

Our provision for loan losses was $8.9 million for the fourth quarter of 2018, compared to $6.0 million for the third quarter of 2018 and $7.5 million for the fourth quarter of 2017. The higher provision for loan losses for the fourth quarter of 2018, compared to both the third quarter of 2018 and the fourth quarter of 2017, was primarily the result of an increase in originated loan growth. Our provision for loan losses was $30.8 million for the year ended December 31, 2018, compared to $23.3 million for the year ended December 31, 2017, with the increase primarily due to an increase in originated loan growth.

Net loan charge-offs were $3.0 million, or 0.08% of average loans, for the fourth quarter of 2018, compared to $2.0 million, or 0.05% of average loans, for the third quarter of 2018 and $1.4 million, or 0.04% of average loans, for the fourth quarter of 2017. Net loan charge-offs totaled $12.7 million, or 0.09% of average loans, for the year ended December 31, 2018, compared to $9.7 million, or 0.07% of average loans, for the year ended December 31, 2017. 

Our nonperforming loans totaled $85.4 million at December 31, 2018, compared to $96.7 million at September 30, 2018 and $63.1 million at December 31, 2017. Nonperforming loans comprised 0.56% of total loans at December 31, 2018, compared to 0.65% at September 30, 2018, and 0.45% at December 31, 2017. The decrease in nonperforming loans as a percentage of total loans at December 31, 2018, compared to September 30, 2018, was primarily due to the fourth quarter of 2018 settlement of a real estate construction loan relationship. The increase in nonperforming loans as a percentage of total loans at December 31, 2018, compared to December 31, 2017, was primarily due to commercial and commercial real estate loan relationships that were downgraded to nonaccrual status during the year ended December 31, 2018. Each nonperforming loan is individually evaluated for impairment and we have either established a specific reserve within our allowance for loan losses or charged the loan relationship down to the value of the underlying collateral.

Our total allowance for loan losses was $110.0 million at December 31, 2018. Our allowance for loan losses on our originated loan portfolio was $109.6 million, or 0.93% of originated loans, at December 31, 2018, compared to $103.1 million, or 0.93% of originated loans, at September 30, 2018 and $91.9 million, or 0.94% of originated loans, at December 31, 2017. Our allowance for loan losses on our originated loan portfolio as a percentage of nonperforming loans was 128.7% at December 31, 2018, compared to 106.6% at September 30, 2018, and 145.6% at December 31, 2017. We recorded all acquired loans at their estimated fair value at each respective acquisition date without a carryover of the related allowance and, as of December 31, 2018 and September 30, 2018, our allowance for loan losses on our acquired loan portfolio was $420 thousand and $970 thousand, respectively.  At December 31, 2017, we determined no allowance was needed for our acquired loan portfolio.
           
Our noninterest income was $32.0 million for the fourth quarter of 2018, compared to $37.9 million for the third quarter of 2018, and $32.3 million for the fourth quarter of 2017. Noninterest income for the fourth quarter of 2018 was lower than the third quarter of 2018, primarily due to a decrease in net gain on sale of loans and other mortgage banking revenue of $5.9 million due to a detriment to earnings caused by a change in fair value in loan servicing rights and lower production volume, and a decrease in bank-owned life insurance of $0.9 million, partially offset by an increase in electronic banking fees of $0.8 million. Noninterest income in the fourth quarter of 2018 was slightly lower than the fourth quarter of 2017, primarily due to decreases in net gain on sale of loans and other mortgage banking revenue of $3.9 million, service charges and fees on deposit accounts of $1.3 million and other noninterest income of $2.6 million, partially offset by the $7.6 million loss on sale of investment securities incurred in the fourth quarter of 2017, as part of our treasury and tax management objectives. Net gain on sale of loans and other mortgage banking revenue included a $2.8 million detriment to earnings due to a change in fair value in loan servicing rights for the fourth quarter of 2018, compared to a $0.9 million benefit for the third quarter of 2018, and a $13 thousand detriment for the fourth quarter of 2017. The change in fair value in loan servicing rights was a detriment of $0.03 to diluted earnings per share for the fourth quarter of 2018, compared to a benefit of $0.01 for the third quarter of 2018 and no impact for the fourth quarter of 2017.
                   
Our noninterest income was $148.5 million for the year ended December 31, 2018, compared to $144.0 million for the year ended 2017, which increased primarily due to the $7.6 million loss on sale of investment securities incurred in the fourth quarter of 2017 and an increase in net gain on sale of loans and other mortgage banking revenue of $3.0 million for the year ended December 31, 2018, partially offset by a decrease in electronic banking fees of $5.9 million for the year ended December 31, 2018. Net gain on sale of loans and other mortgage banking revenue included a $1.8 million benefit to earnings due to a change in fair value in loan servicing rights for the year ended December 31, 2018, compared to a $6.4 million detriment for the year ended December 31, 2017.

Our operating expenses were $108.4 million for the fourth quarter of 2018, compared to $109.7 million for the third quarter of 2018, and $100.0 million for the fourth quarter of 2017. We had no merger and restructuring expenses during the fourth or third quarters of 2018, compared to $2.6 million for the fourth quarter of 2017. Fourth quarter of 2018 included $5.8 million of impairment related to federal historic tax credits, compared to $3.2 million for the third quarter of 2018 and $6.2 million for the fourth quarter of 2017, included within other operating expense. The fourth quarter of 2018 also included expense related to our efforts to implement upgrades to our core operating systems of $1.6 million, compared to $2.7 million for the third quarter of 2018. Our operating expenses excluding the impact of federal historic tax credits, core operating system conversion expense and merger and restructuring expenses, were $101.0 million for the fourth quarter of 2018, compared to $103.8 million for the third quarter of 2018 and $91.3 million for the fourth quarter of 2017. The $2.8 million decrease for the fourth quarter of 2018 operating expenses excluding the previously noted items, compared to the third quarter of 2018, was primarily due to $0.9 million of early lease termination expense in the third quarter of 2018, which reduced occupancy expense in the fourth quarter of 2018, and decreases in credit-related and other expenses included within other operating expenses. The $9.7 million increase in operating expenses excluding the previously noted items, compared to the fourth quarter of 2017, was primarily due to an increase in salaries, wages and employee benefits impacted by increases in staff to support our strategic focus on commercial lending growth and an increase in outside processing and service fees due to the substantial enhancements to our core operating systems.

Our operating expenses were $424.2 million for the year ended December 31, 2018, compared to $422.0 million for the year ended 2017. We had no merger and restructuring expenses during the year ended December 31, 2018, compared to $28.4 million for 2017. The year ended December 31, 2018 included $12.3 million of impairment related to federal historic tax credits, compared to $9.3 million for 2017. The year ended December 31, 2018 also included expense related to our efforts to implement upgrades to our core operating systems of $8.5 million. Operating expenses, excluding the impact of federal historic tax credits, core operation system conversion expense and merger and restructuring expenses, were $403.4 million for the year ended December 31, 2018, an increase of $19.1 million compared to the year ended 2017, primarily due to an increase in salaries, wages and employee benefits impacted by increases in staff to support our strategic focus on commercial lending growth and an increase in outside processing and service fees due to the substantial enhancements to our core operating systems.

Our efficiency ratio is a measure of operating expenses as a percentage of net interest income and noninterest income. Our efficiency ratio was 55.4% for the fourth quarter of 2018, compared to 55.6% for the third quarter of 2018 and 56.1% for the fourth quarter of 2017. Our efficiency ratio was 54.3% for the year ended December 31, 2018 and 60.1% for the year ended 2017. Our adjusted efficiency ratio, a non-GAAP financial measure, which excludes, as applicable, significant items, amortization of intangibles, impairment of income tax credits, the net interest income FTE adjustment, the change in fair value on loan servicing rights, and losses/gains from sale of investment securities, was 50.4% for the fourth quarter of 2018, compared to 52.8% for the third quarter of 2018 and 47.4% for the fourth quarter of 2017.(1) Our adjusted efficiency ratio was 51.5% for the year ended December 31, 2018 and 51.9% for the year ended 2017.(1)

Our effective tax rate was 6.6% for the fourth quarter of 2018, compared to 13.8% for the third quarter of 2018 and 86.6% for the fourth quarter of 2017. Our tax rates for periods during 2018 benefited from the enactment of the Tax Cuts and Jobs Act which reduced the federal corporate tax rate to 21% effective January 1, 2018. The tax rate for each period benefited from federal historic tax credits of $6.2 million for the fourth quarter of 2018, $3.2 million for the third quarter of 2018 and $6.2 million for the fourth quarter of 2017. The income tax benefit from the tax credits placed into service was partially offset by the impairment recorded on the same tax credits included within other operating expenses. The effective tax rate for the fourth quarter of 2018 also benefited from adjustments to our tax provisional amounts related to the one year measurement period provided by Staff Accounting Bulletin No. 118 in order to finalize items that were not available in the enactment period associated with the passing of the Tax Cuts and Jobs Act and by certain changes in estimates associated with the filing of our final 2017 tax return. The fourth quarter of 2017 was also impacted by the $46.7 million charge to income tax expense as a result of the revaluation of our net deferred tax assets. The effective tax rate for the year ended December 31, 2018 was 12.9%, compared to 41.7% for the year ended 2017. The tax rate for each period benefited from federal historic tax credits of $12.9 million in the year ended December 31, 2018 and $9.3 million for the year ended December 31, 2017.

Our total assets were $21.50 billion at December 31, 2018, compared to $20.91 billion at September 30, 2018, and $19.28 billion at December 31, 2017. The increase in our total assets during both the fourth quarter of 2018 and the year ended December 31, 2018 was primarily attributable to net loan growth and additions to our investment securities portfolio.

Our total loans were $15.27 billion at December 31, 2018, an increase of $473.5 million, or 3.2%, from total loans of $14.80 billion at September 30, 2018, and an increase of $1.11 billion, or 7.9%, from total loans of $14.16 billion at December 31, 2017. We experienced originated loan growth of $699.3 million in the fourth quarter of 2018, compared to $448.9 million in the third quarter of 2018, and $591.3 million in the fourth quarter of 2017. Growth in our originated loan portfolio was partially offset by run-off in our acquired loan portfolio of $225.8 million in the fourth quarter of 2018, compared to $232.4 million in the third quarter of 2018, and $269.4 million in the fourth quarter of 2017. We experienced originated loan growth of $2.10 billion for the year ended December 31, 2018, partially offset by run-off in our acquired loan portfolio of $982.8 million.

Our investment securities portfolio totaled $3.65 billion at December 31, 2018, an increase of $300.7 million, from $3.35 billion at September 30, 2018, and an increase of $1.01 billion, from $2.64 billion at December 31, 2017. The increase in both the fourth quarter of 2018 and the year ended December 31, 2018 reflects our long-term plan to increase our investment securities portfolio as a percentage of total assets.

Our total deposits were $15.59 billion at December 31, 2018, compared to $15.44 billion at September 30, 2018, and $13.64 billion at December 31, 2017. The increase in deposits during the fourth quarter of 2018 was due to an increase in customer deposits of $78.3 million driven by interest-bearing demand and other time deposit accounts and an increase in brokered deposits of $70.2 million. The increase in deposits during the year ended December 31, 2018 was primarily due to increases of $1.42 billion in customer deposits, with increases across all categories, and $532.3 million in brokered deposits. Collateralized customer deposits were $382.7 million at December 31, 2018, compared to $377.5 million at September 30, 2018, and $415.2 million at December 31, 2017. Loans as a percentage of deposits plus collateralized customer deposits were 95.6% at December 31, 2018, compared to 93.5% at September 30, 2018 and 100.7% at December 31, 2017.

Our short-term borrowings were $2.04 billion at December 31, 2018, compared to $1.67 billion at September 30, 2018, and $2.00 billion at December 31, 2017. Our short-term borrowings include short-term FHLB advances that we used to fund our short-term liquidity needs. Our long-term borrowings were $426.0 million at December 31, 2018, compared to $431.0 million at September 30, 2018, and $372.9 million at December 31, 2017.

Our shareholders' equity to total assets ratio was 13.2% at December 31, 2018, compared to 13.3% at September 30, 2018, and 13.8% at December 31, 2017. Our tangible shareholders' equity to assets ratio, a non-GAAP financial measure, and total risk-based capital ratio, were 8.3% and 11.5% (estimated), respectively, at December 31, 2018, compared to 8.3% and 11.7%, respectively, at September 30, 2018, and 8.3% and 11.0%, respectively, at December 31, 2017.(1) Our book value was $39.69 per share at December 31, 2018, compared to $39.04 per share at September 30, 2018 and $37.48 per share at December 31, 2017. Our tangible book value, a non-GAAP financial measure, was $23.54 per share at December 31, 2018, compared to $22.87 per share at September 30, 2018, and $21.21 per share at December 31, 2017.(1)

(1) 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.

Subsequent Event

As announced and further described in a separate press release issued by Chemical today, Chemical and TCF Financial Corporation have entered into a merger agreement under which the companies will combine in an all stock merger of equals transaction.

Conference Call Details

In light of today's announcement that Chemical has entered into a merger agreement with TCF Financial Corporation ("TCF"), Chemical has canceled its live conference webcast to review fourth quarter 2018 financial results that was scheduled for Tuesday, January 29, 2019 at 10:30 am ET. Instead, Chemical and TCF will jointly host a live conference call and webcast today at 10:00 am ET to discuss the merger and Chemical will also discuss its fourth quarter 2018 financial results. To listen to the live call, please dial 888-378-4398 and enter 575396 for the conference ID. The webcast of the conference call, along with related slides, will be accessible through Chemical's and TCF's websites as well as through the joint transaction website www.PremierMidwestBank.com. The conference call will also be available for replay through TCF's and Chemical's websites.

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 212 banking offices located in Michigan, northeast Ohio and northern Indiana. At December 31, 2018, the Corporation had total consolidated assets of $21.50 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 Info" section of our 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 net income (excluding significant items), diluted earnings per share (excluding significant items), return on average assets, return on average shareholders' equity and return on average tangible shareholders' equity (each excluding significant items), tangible book value per share, the presentation of net interest income and net interest margin on a FTE basis, core operating expenses, operating expenses-efficiency ratio, and the adjusted efficiency ratio.

These non-GAAP financial measures have been included we believe they are helpful for investors to analyze and evaluate our 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

Statements included in this press release which are not historical in nature are intended to be, and hereby are identified as, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Examples of forward-looking statements include, but are not limited to, statements regarding our belief that we are positioned for continued growth and strong operating performance. Words and phrases such as “anticipates,” “believes,” “plans,” “continue,” “estimates,” “expects,” “forecasts,” “future,” “intends,” “is likely,” “judgment,” “look ahead,” “look forward,” “on schedule,” “opinion,” “opportunity,” “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.

Management's determination of the provision and allowance for loan losses; the carrying value of acquired loans, goodwill and loan 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. The future effect of changes in the financial and credit markets and the national and regional economies on the banking industry, generally, and on Chemical, specifically, are also inherently uncertain.

Forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated results. Such risks, uncertainties and assumptions, include, among others, the following:

  • our ability 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;
  • operational and regulatory challenges associated with our information technology systems and policies and procedures  in light of our rapid growth and systems conversion in 2018;
  • our ability to grow deposits; 
  • our inability to execute on our strategy to expand investments and commercial lending;
  • our inability to efficiently manage our operating expenses;
  • economic conditions (both generally and in our markets) may be less favorable than expected, which could result in, among other things, a deterioration in credit quality, a reduction in demand for credit and a decline in real estate values;
  • a general decline in the real estate and lending markets, particularly in our market areas, could negatively affect our financial results;
  • increased cybersecurity risk, including potential network breaches, business disruptions, or financial losses;
  • increases in competitive pressure in the banking and financial services industry;
  • the timing of when historic tax credits are placed into service could impact operating expenses;
  • current or future restrictions or conditions imposed by our regulators on our operations may make it more difficult for us to achieve our goals;
  • legislative or regulatory changes, including changes in accounting standards and compliance requirements, may adversely affect us;
  • changes in the interest rate environment may reduce margins or the volumes or values of the loans we make or have acquired; economic, governmental, or other factors may prevent the projected population, residential, and commercial growth in the markets in which we operate; and
  • the risks, uncertainties and assumptions set forth under the heading “Cautionary Note Regarding Forward-Looking Statements” in the joint press release issued by Chemical and TCF on the date hereof with respect to the proposed merger transaction between Chemical and TCF.

Additional factors that could cause results to differ materially from those described above can be found in the risk factors described in Item 1A of Chemical’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2017.  Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.  Chemical disclaims any obligation to update or revise any forward-looking statements contained in this press release, which speak only as of the date hereof, whether as a result of new information, future events or otherwise, except as required by law.

For further information:
David T. Provost, CEO
Dennis L. Klaeser, CFO
800-867-9757


Chemical Financial Corporation Announces Fourth Quarter and Full Year 2018 Operating Results

 

Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
(In thousands, except per share data)

    December 31, 2018   September 30, 2018   December 31, 2017
Assets            
Cash and cash equivalents:            
Cash and cash due from banks   $ 228,527     $ 285,605     $ 226,003  
Interest-bearing deposits with the Federal Reserve Bank and other banks and federal funds sold   267,312     379,158     229,988  
Total cash and cash equivalents   495,839     664,763     455,991  
Investment securities:            
Carried at fair value   3,021,832     2,736,880     1,963,546  
Held-to-maturity   624,099     608,367     677,093  
Total investment securities   3,645,931     3,345,247     2,640,639  
Loans held-for-sale   85,030     93,736     52,133  
Loans:            
Total loans   15,269,779     14,796,252     14,155,267  
Allowance for loan losses   (109,984 )   (104,041 )   (91,887 )
Net loans   15,159,795     14,692,211     14,063,380  
Premises and equipment   123,442     123,305     126,896  
Loan servicing rights   71,013     72,707     63,841  
Goodwill   1,134,568     1,134,568     1,134,568  
Other intangible assets   28,556     29,981     34,271  
Interest receivable and other assets   754,167     748,971     709,154  
Total Assets   $ 21,498,341     $ 20,905,489     $ 19,280,873  
Liabilities            
Deposits:            
Noninterest-bearing   $ 3,809,252     $ 4,015,323     $ 3,725,779  
Interest-bearing   11,784,030     11,429,529     9,917,024  
Total deposits   15,593,282     15,444,852     13,642,803  
Collateralized customer deposits   382,687     377,471     415,236  
Short-term borrowings   2,035,000     1,670,000     2,000,000  
Long-term borrowings   426,002     430,971     372,882  
Interest payable and other liabilities   225,110     193,271     181,203  
Total liabilities   18,662,081     18,116,565     16,612,124  
Shareholders' Equity            
Preferred stock, no par value per share            
Common stock, $1 par value per share   71,460     71,438     71,207  
Additional paid-in capital   2,209,761     2,207,631     2,203,637  
Retained earnings   616,149     567,510     419,403  
Accumulated other comprehensive loss   (61,110 )   (57,655 )   (25,498 )
Total shareholders' equity   2,836,260     2,788,924     2,668,749  
Total Liabilities and Shareholders' Equity   $ 21,498,341     $ 20,905,489     $ 19,280,873  


Chemical Financial Corporation Announces Fourth Quarter and Full Year 2018 Operating Results

 

Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
(In thousands, except per share data)

  Three Months Ended   Year Ended
  December 31,
 2018
  September 30,
 2018
  December 31,
 2017
  December 31,
 2018
  December 31,
 2017
Interest Income                  
Interest and fees on loans $ 180,983     $ 172,686     $ 150,558     $ 675,875     $ 573,128  
Interest on investment securities:                  
Taxable 18,746     16,360     10,289     62,231     31,496  
Tax-exempt 6,554     6,178     5,105     24,286     18,343  
Dividends on nonmarketable equity securities 2,419     1,368     2,018     7,877     4,924  
Interest on deposits with the Federal Reserve Bank and other banks and federal funds sold 1,401     1,785     1,192     5,727     4,244  
Total interest income 210,103     198,377     169,162     775,996     632,135  
Interest Expense                  
Interest on deposits 34,106     27,250     14,303     96,980     46,727  
Interest on collateralized customer deposits 721     721     461     2,607     1,269  
Interest on short-term borrowings 9,426     9,510     6,952     37,510     19,052  
Interest on long-term borrowings 2,398     1,415     1,541     6,566     7,509  
Total interest expense 46,651     38,896     23,257     143,663     74,557  
Net Interest Income 163,452     159,481     145,905     632,333     557,578  
Provision for loan losses 8,894     6,028     7,522     30,750     23,300  
Net interest income after provision for loan losses 154,558     153,453     138,383     601,583     534,278  
Noninterest Income                  
Service charges and fees on deposit accounts 8,654     9,319     9,994     37,097     38,367  
Wealth management revenue 6,457     6,040     6,539     25,996     25,512  
Other charges and fees for customer services 6,506     5,349     6,601     21,437     29,405  
Net gain on sale of loans and other mortgage banking revenue 3,977     9,837     7,925     35,193     32,205  
Gain (loss) on sale of investment securities 221         (7,556 )   224     (7,388 )
Other 6,232     7,372     8,816     28,589     25,918  
Total noninterest income 32,047     37,917     32,319     148,536     144,019  
Operating Expenses                  
Salaries, wages and employee benefits 56,828     56,894     47,363     225,427     212,094  
Occupancy 7,360     8,620     7,546     31,670     30,554  
Equipment and software 7,641     8,185     8,000     31,761     32,248  
Outside processing and service fees 11,698     12,660     9,081     45,387     35,142  
Merger expenses         1,511         8,522  
Restructuring expenses         1,056         19,880  
Other 24,839     23,302     25,465     89,953     83,554  
Total operating expenses 108,366     109,661     100,022     424,198     421,994  
Income before income taxes 78,239     81,709     70,680     325,921     256,303  
Income tax expense 5,200     11,312     61,234     41,901     106,780  
Net Income $ 73,039     $ 70,397     $ 9,446     $ 284,020     $ 149,523  
Earnings Per Common Share:                  
Weighted average common shares outstanding-basic 71,445     71,385     71,095     71,385     70,865  
Weighted average common shares outstanding-diluted 72,079     72,087     71,682     72,025     71,513  
Basic earnings per common share $ 1.02     $ 0.99     $ 0.13     $ 3.98     $ 2.11  
Diluted earnings per common share $ 1.01     $ 0.98     $ 0.13     $ 3.94     $ 2.08  
Diluted earnings per common share, excluding significant items (non-GAAP) $ 1.01     $ 0.98     $ 0.87     $ 3.94     $ 3.06  
Cash Dividends Declared Per Common Share $ 0.34     $ 0.34     $ 0.28     $ 1.24     $ 1.10  
Key Ratios (annualized where applicable):                  
Return on average assets 1.39 %   1.37 %   0.20 %   1.41 %   0.81 %
Return on average tangible shareholders' equity, excluding significant items (non-GAAP) 17.8 %   17.5 %   16.5 %   17.9 %   14.9 %
Net interest margin (FTE) (non-GAAP) 3.49 %   3.48 %   3.47 %   3.53 %   3.48 %
Efficiency ratio - GAAP 55.4 %   55.6 %   56.1 %   54.3 %   60.1 %
Efficiency ratio - adjusted (non-GAAP) 50.4 %   52.8 %   47.4 %   51.5 %   51.9 %


Chemical Financial Corporation Announces Fourth Quarter and Full Year 2018 Operating Results

 

Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
(Dollars in thousands, except per share data)

  4th
Quarter
2018
  3rd
Quarter
2018
  2nd
Quarter
2018
  1st
Quarter
2018
  4th
Quarter
2017
  3rd
Quarter
2017
  2nd
Quarter
2017
  1st
Quarter
2017
Summary of Operations                              
Interest income $ 210,103
    $ 198,377     $ 189,582     $ 177,934     $ 169,162     $ 164,944     $ 155,133     $ 142,896  
Interest expense   46,651     38,896     32,045     26,071     23,257     21,316     17,185     12,799  
Net interest income   163,452     159,481     157,537     151,863     145,905     143,628     137,948     130,097  
Provision for loan losses   8,894     6,028     9,572     6,256     7,522     5,499     6,229     4,050  
Net interest income after provision for loan losses   154,558     153,453     147,965     145,607     138,383     138,129     131,719     126,047  
Noninterest income   32,047     37,917     38,018     40,554     32,319     32,122     41,568     38,010  
Operating expenses, excluding merger and restructuring expenses and impairment of income tax credits (non-GAAP)   102,594     106,499     102,845     99,976     91,298     95,241     97,772     100,029  
Merger and restructuring expenses                   2,567     21,203     465     4,167  
Impairment of income tax credits   5,772     3,162     1,716     1,634     6,157     3,095          
Income before income taxes   78,239     81,709     81,422     84,551     70,680     50,712     75,050     59,861  
Income tax expense   5,200     11,312     12,434     12,955     61,234     10,253     23,036     12,257  
Net income $ 73,039     $ 70,397     $ 68,988     $ 71,596     $ 9,446     $ 40,459     $ 52,014     $ 47,604  
Significant items, net of tax                   53,240     13,782     302     2,709  
Net income, excluding significant items $ 73,039     $ 70,397     $ 68,988     $ 71,596     $ 62,686     $ 54,241     $ 52,316     $ 50,313  
                               
Per Common Share Data                              
Net income:                              
Basic $ 1.02     $ 0.99     $ 0.97     $ 1.01     $ 0.13     $ 0.57     $ 0.73     $ 0.67  
Diluted   1.01     0.98     0.96     0.99     0.13     0.56     0.73     0.67  
Diluted, excluding significant items (non-GAAP)   1.01     0.98     0.96     0.99     0.87     0.76     0.73     0.70  
Cash dividends declared   0.34     0.34     0.28     0.28     0.28     0.28     0.27     0.27  
Book value - period-end   39.69     39.04     38.52     37.91     37.48     37.57     37.11     36.56  
Tangible book value - period-end (non-GAAP)   23.54     22.87     22.33     21.68     21.21     21.36     20.89     20.32  
Market value - period-end   36.61     53.40     55.67     54.68     53.47     52.26     48.41     51.15  
                               
Key Ratios (annualized where applicable)                        
Net interest margin (FTE) (non-GAAP)   3.49 %   3.48 %   3.59 %   3.56 %   3.47 %   3.48 %   3.48 %   3.49 %
Efficiency ratio - adjusted (non-GAAP)   50.4 %   52.8 %   51.2 %   51.6 %   47.4 %   51.2 %   52.2 %   57.4 %
Return on average assets   1.39 %   1.37 %   1.39 %   1.47 %   0.20 %   0.86 %   1.14 %   1.09 %
Return on average assets, excluding significant items (non-GAAP)   1.39 %   1.37 %   1.39 %   1.47 %   1.31 %   1.15 %   1.15 %   1.15 %
Return on average shareholders' equity   10.4 %   10.2 %   10.2 %   10.7 %   1.4 %   6.1 %   8.0 %   7.4 %
Return on average tangible shareholders' equity (non-GAAP)   17.8 %   17.5 %   17.8 %   19.0 %   2.5 %   10.9 %   14.3 %   13.3 %
Return on average tangible shareholders' equity, excluding significant items (non-GAAP)   17.8 %   17.5 %   17.8 %   19.0 %   16.5 %   14.6 %   14.4 %   14.1 %
Average shareholders' equity as a percent of average assets   13.4 %   13.5 %   13.6 %   13.7 %   13.9 %   14.0 %   14.3 %   14.8 %
Capital ratios (period end):                              
Tangible shareholders' equity as a percent of tangible assets   8.3 %   8.3 %   8.3 %   8.3 %   8.3 %   8.3 %   8.4 %   8.8 %
Total risk-based capital ratio (1)   11.5 %   11.7 %   11.4 %   11.2 %   11.0 %   11.2 %   11.1 %   11.4 %


(1) Estimated at December 31, 2018.


Chemical Financial Corporation Announces Fourth Quarter and Full Year 2018 Operating Results

 

Average Balances, Tax Equivalent Interest and Effective Yields and Rates (Unaudited)(1)
Chemical Financial Corporation
(Dollars in thousands)

  Three Months Ended
  December 31, 2018   September 30, 2018   December 31, 2017
  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) $ 15,058,271     $ 181,765
    4.80 %   $ 14,740,445     $ 173,453     4.68 %   $ 13,954,366     $ 151,413     4.31 %
Taxable investment securities   2,399,177       18,746     3.13       2,187,644       16,360     2.99       1,715,494       10,289     2.40  
Tax-exempt investment
securities(1)
  1,075,377       8,286     3.08       1,038,301       7,797     3.00       981,299       7,830     3.19  
Other interest-earning assets   193,333       2,419     4.97       193,350       1,368     2.81       180,098       2,018     4.45  
Interest-bearing deposits with the FRB and other banks and federal funds sold   230,142       1,401     2.41       330,940       1,785     2.14       307,028       1,192     1.54  
Total interest-earning assets   18,956,300       212,617     4.46       18,490,680       200,763     4.32       17,138,285       172,742     4.01  
Less: allowance for loan losses   (105,767 )             (101,689 )             (86,521 )        
Other assets:                                  
Cash and cash due from banks   191,985               223,038               239,307          
Premises and equipment   123,993               125,153               138,880          
Interest receivable and other assets   1,789,195               1,764,041               1,777,479          
Total assets $ 20,955,706           $ 20,501,223           $ 19,207,430        
Liabilities and shareholders' equity                            
Interest-bearing liabilities:                                  
Interest-bearing demand deposits $ 3,072,237     $ 4,791     0.62 %   $ 2,705,746     $ 2,836     0.42 %   $ 2,709,033     $ 1,242     0.18 %
Savings deposits   4,436,212       10,209     0.91       4,378,620       8,417     0.76       4,023,075       4,296     0.42  
Time deposits   4,029,519       19,106     1.88       3,846,857       15,997     1.65       3,136,655       8,765     1.11  
Collateralized customer deposits   383,457       721     0.75       374,833       721     0.76       408,962       461     0.45  
Short-term borrowings   1,693,750       9,426     2.21       1,885,741       9,510     2.00       1,957,609       6,952     1.41  
Long-term borrowings   428,425       2,398     2.22       341,282       1,415     1.65       383,739       1,541     1.67  
Total interest-bearing liabilities   14,043,600       46,651     1.32       13,533,079       38,896     1.14       12,619,073       23,257     0.73  
Noninterest-bearing deposits   3,892,517                 4,004,433                 3,734,650            
Total deposits and borrowed funds   17,936,117       46,651     1.03       17,537,512       38,896     0.88       16,353,723       23,257     0.56  
Interest payable and other liabilities   221,091               194,610               177,678          
Shareholders' equity   2,798,498               2,769,101               2,676,029          
Total liabilities and shareholders' equity $ 20,955,706             $ 20,501,223             $ 19,207,430          
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities)   3.14 %           3.18 %           3.28 %
Net Interest Income (FTE)     $ 165,966           $ 161,867           $ 149,485    
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets)   3.49 %           3.48 %           3.47 %
Reconciliation to Reported Net Interest Income                        
Net interest income, fully taxable equivalent (non-GAAP)   $ 165,966           $ 161,867           $ 149,485    
Adjustments for taxable equivalent interest(1):                            
Loans       (782 )             (767 )             (855 )    
Tax-exempt investment securities     (1,732 )             (1,619 )             (2,725 )    
Total taxable equivalent interest adjustments     (2,514 )             (2,386 )             (3,580 )    
Net interest income (GAAP)     $ 163,452           $ 159,481           $ 145,905    
Net interest margin (GAAP)       3.42 %             3.42 %             3.39 %    


(1)  Fully taxable equivalent (FTE) basis using a federal income tax rate of 21% for the three month periods ending in 2018 and 35% for the three months ended December 31, 2017. 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 Fourth Quarter and Full Year 2018 Operating Results

 

Average Balances, Tax Equivalent Interest and Effective Yields and Rates (Unaudited)(1)
Chemical Financial Corporation
(Dollars in thousands)

    Year Ended
    December 31, 2018   December 31, 2017
    Average
Balance
  Interest
(FTE)
  Effective
Yield/Rate(1)
  Average
Balance
  Interest
(FTE)
  Effective
Yield/Rate(1)
Assets    
Interest-earning assets:                        
Loans(1)(2)   $ 14,605,963     $ 678,911     4.65 %   $ 13,607,683     $ 576,429     4.24 %
Taxable investment securities   2,098,894     62,231     2.96     1,431,167     31,496     2.20  
Tax-exempt investment securities(1)   1,036,269     30,708     2.96     905,831     28,120     3.10  
Other interest-earning assets   189,153     7,877     4.16     157,738     4,924     3.12  
Interest-bearing deposits with the FRB and other banks and federal funds sold   263,210     5,727     2.18     298,006     4,244     1.42  
Total interest-earning assets   18,193,489     785,454     4.32     16,400,425     645,213     3.93  
Less: allowance for loan losses   (99,152 )           (82,644 )        
Other assets:                        
Cash and cash due from banks   215,284             235,621          
Premises and equipment   125,606             144,114          
Interest receivable and other assets   1,765,303             1,767,640          
Total assets   $ 20,200,530             $ 18,465,156          
Liabilities and shareholders' equity                        
Interest-bearing liabilities:                        
Interest-bearing demand deposits   $ 2,786,138     $ 10,029     0.36 %   $ 2,753,294     $ 4,870     0.18 %
Savings deposits   4,246,063     29,636     0.70     3,940,499     13,049     0.33  
Time deposits   3,654,470     57,315     1.57     3,014,302     28,808     0.96  
Collateralized customer deposits   391,703     2,607     0.67     366,828     1,269     0.35  
Short-term borrowings   1,970,009     37,510     1.90     1,612,123     19,052     1.18  
Long-term borrowings   369,910     6,566     1.77     455,246     7,509     1.67  
Total interest-bearing liabilities   13,418,293     143,663     1.07     12,142,292     74,557     0.61  
Noninterest-bearing deposits   3,845,773             3,547,271          
Total deposits and borrowed funds   17,264,066     143,663     0.83     15,689,563     74,557     0.48  
Interest payable and other liabilities   196,065             147,731          
Shareholders' equity   2,740,399             2,627,862          
Total liabilities and shareholders' equity   $ 20,200,530             $ 18,465,156          
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities)       3.25 %           3.32 %
Net Interest Income (FTE)       $ 641,791             $ 570,656      
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets)       3.53 %           3.48 %
                         
Reconciliation to Reported Net Interest Income                    
Net interest income, fully taxable equivalent (non-GAAP)   $ 641,791             $ 570,656      
Adjustments for taxable equivalent interest(1):                        
Loans       (3,036 )           (3,301 )    
Tax-exempt investment securities       (6,422 )           (9,777 )    
Total taxable equivalent interest adjustments       (9,458 )           (13,078 )    
Net interest income (GAAP)       $ 632,333             $ 557,578      
Net interest margin (GAAP)       3.48 %           3.40 %    


(1)  Fully taxable equivalent (FTE) basis using a federal income tax rate of 21% for the year ended December 31, 2018 and 35% for the year ended December 31, 2017. 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 Fourth Quarter and Full Year 2018 Operating Results

 

Noninterest Income and Operating Expenses Information (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)

  4th

Quarter

2018
  3rd

Quarter

2018
  2nd

Quarter

2018
  1st

Quarter

2018
  4th

Quarter

2017
  3rd

Quarter

2017
  2nd

Quarter

2017
  1st

Quarter

2017
       
Noninterest income                              
Service charges and fees on deposit accounts $ 8,654     $ 9,319     $ 9,690     $ 9,434     $ 9,994     $ 9,874     $ 9,667     $ 8,832  
Wealth management revenue 6,457     6,040     7,188     6,311     6,539     6,188     6,958     5,827  
Other fees for customer
services(1)
1,379     1,067     1,050     1,164     1,535     1,841     1,793     1,590  
Electronic banking fees(1) 5,127     4,282     3,749     3,619     5,066     4,056     7,051     6,473  
Net gain on sale of loans and other mortgage banking revenue(2) 6,804     8,905     8,874     8,783     7,938     9,282     11,681     9,679  
Change in fair value in loan servicing rights(2) (2,827 )   932     (30 )   3,752     (13 )   (4,041 )   (1,802 )   (519 )
Gain (loss) on sale of investment securities 221         3         (7,556 )   1     77     90  
Bank-owned life insurance(3) 273     1,167     1,669     891     1,377     1,124     1,106     1,211  
Other(3) 5,959     6,205     5,825     6,600     7,439     3,797     5,037     4,827  
Total noninterest income $ 32,047     $ 37,917     $ 38,018     $ 40,554     $ 32,319     $ 32,122     $ 41,568     $ 38,010  


(1) Included within the line item "Other charges and fees for customers services" in the Consolidated Statements of Income.
(2) Included within the line item "Net gain on sale of loans and other mortgage banking revenue" in the Consolidated Statements of Income.
(3) Included within the line item "Other" noninterest income in the Consolidated Statements of Income.


  4th
Quarter
2018
  3rd
Quarter
2018
  2nd
Quarter
2018
  1st
Quarter
2018
  4th
Quarter
2017
  3rd
Quarter
2017
  2nd
Quarter
2017
  1st
Quarter
2017
       
Operating expenses                              
Salaries and wages(1) $ 48,486     $ 49,182     $ 47,810     $ 45,644     $ 41,866     $ 44,641     $ 44,959     $ 48,526  
Employee benefits(1) 8,342     7,712     8,338     9,913     5,497     7,949     7,288     11,368  
Occupancy 7,360     8,620     7,679     8,011     7,546     6,871     8,745     7,392  
Equipment and software 7,641     8,185     8,276     7,659     8,000     7,582     8,149     8,517  
Outside processing and service fees 11,698     12,660     10,673     10,356     9,081     9,626     8,924     7,511  
FDIC insurance premiums(2) 3,583     4,823     4,473     5,629     4,556     2,768     2,460     1,406  
Professional fees(2) 3,758     3,399     3,004     2,458     3,483     3,489     2,567     1,968  
Intangible asset amortization(2) 1,426     1,426     1,425     1,439     1,525     1,526     1,525     1,513  
Credit-related expenses(2) 829     1,239     1,467     1,306     803     1,874     1,895     1,200  
Merger expenses                 1,511     2,379     465     4,167  
Restructuring expenses                 1,056     18,824          
Impairment of income tax credit(2) 5,772     3,162     1,716     1,634     6,157     3,095          
Other(2) 9,471     9,253     9,700     7,561     8,941     8,915     11,260     10,628  
Total operating expenses $ 108,366     $ 109,661     $ 104,561     $ 101,610     $ 100,022     $ 119,539     $ 98,237     $ 104,196  


(1) Included within the line item "Salaries, wages and employee benefits" in the Consolidated Statements of Income.
(2) Included within the line item "Other" operating expenses in the Consolidated Statements of Income.


Chemical Financial Corporation Announces Fourth Quarter and Full Year 2018 Operating Results

 

Composition of Loans and Deposits and Additional Information on Intangible Assets (Unaudited)
Chemical Financial Corporation
(Dollars in Thousands)

  Dec 31,
 2018
  Sep 30,
 2018
  Loan Growth -
Three
Months
Ended
Dec 31,
2018(1)
  Jun 30,
 2018
  Mar 31,
 2018
  Dec 31,
 2017
  Loan
Growth -
Year Ended
Dec 31,
2018
                           
Composition of Loans                          
Commercial loan portfolio:                          
Commercial $ 4,002,568     $ 3,719,922     30.4 %   $ 3,576,438     $ 3,427,285     $ 3,385,642     18.2 %
Commercial real estate:                          
Owner-occupied 2,059,557     1,897,934     34.1     1,863,563     1,832,824     1,813,562     13.6  
Non-owner occupied 2,785,020     2,739,700     6.6     2,728,103     2,680,801     2,606,761     6.8  
Vacant land 67,510     73,987     (35.0 )   79,606     74,751     80,347     (16.0 )
Total commercial real estate 4,912,087     4,711,621     17.0     4,671,272     4,588,376     4,500,670     9.1  
Real estate construction 597,212     622,147     (16.0 )   618,985     559,780     574,215     4.0  
Subtotal - commercial loans 9,511,867     9,053,690     20.2     8,866,695     8,575,441     8,460,527     12.4  
Consumer loan portfolio:                          
Residential mortgage 3,458,666     3,391,987     7.9     3,325,277     3,264,620     3,252,487     6.3  
Consumer installment 1,521,074     1,560,265     (10.0 )   1,587,327     1,572,240     1,613,008     (5.7 )
Home equity 778,172     790,310     (6.1 )   800,394     806,446     829,245     (6.2 )
Subtotal - consumer loans 5,757,912     5,742,562     1.1     5,712,998     5,643,306     5,694,740     1.1  
Total loans $ 15,269,779     $ 14,796,252     12.8 %   $ 14,579,693     $ 14,218,747     $ 14,155,267     7.9 %

(1)      Annualized.  

  Dec 31,
 2018
  Sep 30,
 2018
  Deposit
Growth -
Three
Months
Ended
Dec 31,
2018(1)
  Jun 30,
 2018
  Mar 31,
 2018
  Dec 31,
 2017
  Deposit
Growth -
Twelve
Months
Ended
Dec 31,
2018
                           
Composition of Deposits                          
Noninterest-bearing demand $ 3,809,252     $ 4,015,323     (20.5 )%   $ 3,894,259     $ 3,801,125     $ 3,725,779     2.2 %
Savings and money market accounts 4,092,082     4,220,658     (12.2 )   3,841,540     3,774,975     3,655,671     11.9  
Interest-bearing demand 3,316,278     3,037,289     36.7     2,514,232     2,701,055     2,724,415     21.7  
Brokered deposits 985,522     915,348     30.7     1,087,959     651,846     453,227     117.4  
Other time deposits 3,390,148     3,256,234     16.5     3,213,546     3,038,816     3,083,711     9.9  
Total deposits $ 15,593,282     $ 15,444,852     3.8 %   $ 14,551,536     $ 13,967,817     $ 13,642,803     14.3 %

(1)       Annualized.   

  Dec 31,
 2018
  Sep 30,
 2018
  Jun 30,
 2018
  Mar 31,
 2018
  Dec 31,
 2017
                   
Additional Data - Intangibles                  
Goodwill $ 1,134,568     $ 1,134,568     $ 1,134,568     $ 1,134,568     $ 1,134,568  
Loan servicing rights 71,013     72,707     70,364     68,837     63,841  
Core deposit intangibles (CDI) 28,556     29,981     31,407     32,833     34,259  
Noncompete agreements                 13  


Chemical Financial Corporation Announces Fourth Quarter and Full Year 2018 Operating Results

 

Nonperforming Assets (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)

  Dec 31,
2018
  Sep 30,
2018
  Jun 30,
2018
  Mar 31,
2018
  Dec 31,
2017
  Sep 30,
2017
  Jun 30,
2017
  Mar 31,
2017
Nonperforming Assets                              
Nonperforming Loans(1):                              
Nonaccrual loans:                              
Commercial $ 30,139     $ 25,328     $ 20,741     $ 20,000     $ 19,691     $ 15,648     $ 18,773     $ 16,717  
Commercial real estate:                              
Owner-occupied 16,056     14,936     16,103     19,855     19,070     16,295     11,683     12,575  
Non-owner occupied 23,021     8,991     9,168     5,489     5,270     4,361     3,600     3,793  
Vacant land 3,337     4,711     3,135     4,829     5,205     4,494     4,440     4,460  
Total commercial real estate 42,414     28,638     28,406     30,173     29,545     25,150     19,723     20,828  
Real estate construction 12     28,477     5,704     77     77     78     56     79  
Residential mortgage 7,988     9,611     7,974     7,621     8,635     8,646     7,714     6,749  
Consumer installment 1,276     1,350     945     922     842     875     757     755  
Home equity 3,604     3,269     2,972     3,039     4,305     3,908     3,871     2,713  
Total nonaccrual loans(1) 85,433     96,673     66,742     61,832     63,095     54,305     50,894     47,841  
Other real estate and repossessed assets 6,256     6,584     5,828     7,719     8,807     10,605     14,582     16,395  
Total nonperforming assets $ 91,689     $ 103,257     $ 72,570     $ 69,551     $ 71,902     $ 64,910     $ 65,476     $ 64,236  
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 $     $ 632     $ 472     $ 322     $     $ 3,521     $ 58     $ 1,823  
Commercial real estate:                              
Owner-occupied 52     47     461             144         700  
Non-owner occupied 887                 13              
Vacant land         16                 262      
Total commercial real estate 939     47     477         13     144     262     700  
Real estate construction     38                          
Home equity 488     475     713     913     1,364     2,367     2,026     1,169  
Total accruing loans contractually past due 90 days or more as to interest or principal payments $ 1,427     $ 1,192     $ 1,662     $ 1,235     $ 1,377     $ 6,032     $ 2,346     $ 3,692  


(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 Fourth Quarter and Full Year 2018 Operating Results

 

Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)

                                  Year Ended
  4th
Quarter
2018
  3rd
Quarter
2018
  2nd
Quarter
2018
  1st
Quarter
2018
  4th
Quarter
2017
  3rd
Quarter
2017
  2nd
Quarter
2017
  1st
Quarter
2017
  Dec 31,
 2018
  Dec 31,
 2017
Allowance for loan losses - originated portfolio        
 Allowance for loan losses - beginning of period $ 103,071     $ 100,015     $ 94,762     $ 91,887     $ 85,181     $ 83,797     $ 78,774     $ 78,268     $ 91,887     $ 78,268  
Provision for loan losses 9,444     5,058     9,572     6,256     8,101     4,920     6,229     4,050     30,330     23,300  
Net loan charge-offs:                                      
Commercial (627 )   (564 )   (517 )   (1,252 )   (613 )   (2,348 )   (239 )   (1,999 )   (2,960 )   (5,199 )
Commercial real estate:                                      
Owner-occupied (153 )   255     (1,656 )   341     (232 )   (170 )   (173 )   725     (1,213 )   150  
Non-owner occupied (544 )   392     92     (456 )   748     (7 )   (35 )   21     (516 )   727  
Vacant land     2     (921 )   (448 )   267     3     3     (16 )   (1,367 )   257  
Total commercial real estate (697 )   649     (2,485 )   (563 )   783     (174 )   (205 )   730     (3,096 )   1,134  
Real estate construction             26     (1 )           (9 )   26     (10 )
Residential mortgage (243 )   (773 )   (88 )   (53 )   (142 )   (44 )   19     (567 )   (1,157 )   (734 )
Consumer installment (1,293 )   (1,410 )   (994 )   (997 )   (1,318 )   (857 )   (747 )   (1,310 )   (4,694 )   (4,232 )
Home equity (91 )   96     (235 )   (542 )   (104 )   (113 )   (34 )   (389 )   (772 )   (640 )
Net loan charge-offs (2,951 )   (2,002 )   (4,319 )   (3,381 )   (1,395 )   (3,536 )   (1,206 )   (3,544 )   (12,653 )   (9,681 )
Allowance for loan losses - end of period 109,564     103,071     100,015     94,762     91,887     85,181     83,797     78,774     109,564     91,887  
Allowance for loan losses - acquired loan portfolio                                
Allowance for loan losses - beginning of period 970                 579                      
Provision for loan losses (550 )   970             (579 )   579             420      
Allowance for loan losses - end of period 420     970                 579             420      
Total allowance for loan losses $ 109,984     $ 104,041     $ 100,015     $ 94,762     $ 91,887     $ 85,760     $ 83,797     $ 78,774     $ 109,984     $ 91,887  
Net loan charge-offs as a percent of average loans (quarterly amounts annualized) 0.08 %   0.05 %   0.12 %   0.10 %   0.04 %   0.10 %   0.04 %   0.11 %   0.09 %   0.07 %


  Dec 31,
 2018
  Sep 30,
 2018
  Jun 30,
 2018
  Mar 31,
 2018
  Dec 31,
 2017
                   
Originated loans $ 11,844,756     $ 11,145,442     $ 10,696,533     $ 10,012,516     $ 9,747,429  
Acquired loans 3,425,023     3,650,810     3,883,160     4,206,231     4,407,838  
Total loans $ 15,269,779     $ 14,796,252     $ 14,579,693     $ 14,218,747     $ 14,155,267  
                   
Allowance for loan losses, originated portfolio, as a percent of:        
Total originated loans 0.93 %   0.93 %   0.94 %   0.95 %   0.94 %
Nonperforming loans 128.2 %   106.6 %   149.9 %   153.3 %   145.6 %
Credit mark as a percent of unpaid principal balance on acquired loans 1.7 %   1.7 %   1.8 %   1.8 %   2.4 %


Chemical Financial Corporation Announces Fourth Quarter and Full Year 2018 Operating Results

 

Reconciliation of Non-GAAP Financial Measures (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)

  4th
Quarter
2018
  3rd
Quarter
2018
  2nd
Quarter
2018
  1st
Quarter
2018
  4th
Quarter
2017
  3rd
Quarter
2017
  2nd
Quarter
2017
  1st
Quarter
2017
  Year Ended
                  Dec 31,
2018
  Dec 31,
2017
Non-GAAP Operating Results                    
Net Income                                
Net income, as reported $ 73,039     $ 70,397     $ 68,988     $ 71,596     $ 9,446     $ 40,459     $ 52,014     $ 47,604     $ 284,020
    $ 149,523  
Merger and restructuring expenses                           2,567       21,203       465       4,167             28,402  
Losses on sales of investment securities(1)                           7,556                               7,556  
Significant items                           10,123       21,203       465       4,167             35,958  
Income tax benefit (2)                           (3,543 )     (7,421 )     (163 )     (1,458 )           (12,585 )
Revaluation of net deferred tax assets                           46,660                               46,660  
Significant items, net of tax                           53,240       13,782       302       2,709             70,033  
Net income, excluding significant items $ 73,039     $ 70,397     $ 68,988     $ 71,596     $ 62,686     $ 54,241     $ 52,316     $ 50,313     $ 284,020     $ 219,556  
Diluted Earnings Per Share                                    
Diluted earnings per share, as reported $ 1.01     $ 0.98     $ 0.96     $ 0.99     $ 0.13     $ 0.56     $ 0.73     $ 0.67     $ 3.94     $ 2.08  
Effect of significant items, net of tax                           0.74       0.20             0.03             0.98  
Diluted earnings per share, excluding significant items $ 1.01     $ 0.98     $ 0.96     $ 0.99     $ 0.87     $ 0.76     $ 0.73     $ 0.70     $ 3.94     $ 3.06  
Return on Average Assets                                      
Return on average assets, as reported   1.39 %     1.37 %     1.39 %     1.47 %     0.20 %     0.86 %     1.14 %     1.09 %     1.41 %     0.81 %
Effect of significant items, net of tax                           1.11       0.29       0.01       0.06             0.38  
Return on average assets, excluding significant items   1.39 %     1.37 %     1.39 %     1.47 %     1.31 %     1.15 %     1.15 %     1.15 %     1.41 %     1.19 %
Return on Average Shareholders' Equity                                
Return on average shareholders' equity   10.4 %     10.2 %     10.2 %     10.7 %     1.4 %     6.1 %     8.0 %     7.4 %     10.4 %     5.7 %
Effect of significant items, net of tax                           8.0       2.1             0.4             2.7  
Return on average shareholders' equity, excluding significant items   10.4 %     10.2 %     10.2 %     10.7 %     9.4 %     8.2 %     8.0 %     7.8 %     10.4 %     8.4 %
Return on Average Tangible Shareholders' Equity                                
Average shareholders' equity, as reported $ 2,798,498
    $ 2,769,101     $ 2,707,346     $ 2,668,325     $ 2,676,029     $ 2,643,233     $ 2,606,517     $ 2,584,501     $ 2,740,399
    $ 2,627,862  
Average goodwill, CDI and noncompete agreements, net of tax   1,154,469
      1,155,679       1,156,877       1,158,084       1,156,122       1,153,394       1,154,229       1,155,177       1,156,371
      1,155,734  
Average tangible shareholders' equity   1,644,029
      1,613,422       1,550,469       1,510,241       1,519,907       1,489,839       1,452,288       1,429,324       1,584,028
      1,472,128  
Return on average tangible shareholders' equity   17.8 %     17.5 %     17.8 %     19.0 %     2.5 %     10.9 %     14.3 %     13.3 %     17.9 %     10.2 %
Effect of significant items, net of tax                           14.0       3.7       0.1       0.8             4.7  
Return on average tangible shareholders' equity, excluding significant items   17.8 %     17.5 %     17.8 %     19.0 %     16.5 %     14.6 %     14.4 %     14.1 %     17.9 %     14.9 %


(1)  Represents losses on sales of investment securities in the fourth quarter of 2017 as part of our treasury and tax management objectives.
(2)  Assumes merger and restructuring expenses and other significant items are deductible at an income tax rate of 35% for each period during 2017.


Chemical Financial Corporation Announces Fourth Quarter and Full Year 2018 Operating Results

 

Reconciliation of Non-GAAP Financial Measures (Unaudited)
Chemical Financial Corporation
(Dollars in thousands, except per share data)


                                  Year Ended
  4th
Quarter
2018
  3rd
Quarter
2018
  2nd
Quarter
2018
  1st
Quarter 
2018
  4th
Quarter
2017
  3rd
Quarter
2017
  2nd
Quarter
2017
  1st
Quarter
2017
  Dec 31,
2018
  Dec 31,
2017
Efficiency Ratio                                                                              
Net interest income $ 163,452     $ 159,481     $ 157,537     $ 151,863     $ 145,905     $ 143,628     $ 137,948     $ 130,097     $ 632,333     $ 557,578  
Noninterest income 32,047     37,917     38,018     40,554     32,319     32,122     41,568     38,010     148,536     144,019  
Total revenue - GAAP 195,499     197,398     195,555     192,417     178,224     175,750     179,516     168,107     780,869     701,597  
Net interest income FTE adjustment 2,514     2,386     2,331     2,227     3,580     3,260     3,169     3,068     9,458     13,077  
Loan servicing rights change in fair value (gains)losses 2,827     (932 )   30     (3,752 )   13     4,041     1,802     519     (1,827 )   6,375  
Losses (gains) from sale of investment securities (221 )       (3 )       7,556     (1 )   (77 )   (90 )   (224 )   7,388  
Total revenue - Non-GAAP $ 200,619     $ 198,852     $ 197,913     $ 190,892     $ 189,373     $ 183,050     $ 184,410     $ 171,604     $ 788,276     $ 728,437  
Operating expenses - GAAP $ 108,366     $ 109,661     $ 104,561     $ 101,610     $ 100,022     $ 119,539     $ 98,237     $ 104,196     $ 424,198     $ 421,994  
Merger and restructuring expenses                 (2,567 )   (21,203 )   (465 )   (4,167 )       (28,402 )
Impairment of income tax credits (5,772 )   (3,162 )   (1,716 )   (1,634 )   (6,157 )   (3,095 )           (12,284 )   (9,252 )
Operating expense, core - Non-GAAP 102,594     106,499     102,845     99,976     91,298     95,241     97,772     100,029     411,914     384,340  
Amortization of intangibles (1,426 )   (1,426 )   (1,425 )   (1,439 )   (1,525 )   (1,526 )   (1,525 )   (1,513 )   (5,716 )   (6,089 )
Operating expenses, efficiency ratio - Non-GAAP $ 101,168     $ 105,073     $ 101,420     $ 98,537     $ 89,773     $ 93,715     $ 96,247     $ 98,516     $ 406,198     $ 378,251  
Efficiency ratio - GAAP 55.4 %   55.6 %   53.5 %   52.8 %   56.1 %   68.0 %   54.7 %   62.0 %   54.3 %   60.1 %
Efficiency ratio - adjusted Non-GAAP 50.4 %   52.8 %   51.2 %   51.6 %   47.4 %   51.2 %   52.2 %   57.4 %   51.5 %   51.9 %


  Dec 31,
 2018
  Sep 30,
 2018
  Jun 30,
 2018
  Mar 31,
 2018
  Dec 31,
 2017
  Sep 30,
 2017
  Jun 30,
 2017
  Mar 31,
 2017
Tangible Book Value
                             
Shareholders' equity $ 2,836,260     $ 2,788,924     $ 2,750,999     $ 2,704,703     $ 2,668,749     $ 2,673,089     $ 2,639,442     $ 2,600,051  
Goodwill, CDI and noncompete agreements, net of tax (1,153,877 )   (1,155,083 )   (1,156,307 )   (1,157,505 )   (1,158,738 )   (1,153,576 )   (1,153,595 )   (1,154,915 )
Tangible shareholders' equity $ 1,682,383     $ 1,633,841     $ 1,594,692     $ 1,547,198     $ 1,510,011     $ 1,519,513     $ 1,485,847     $ 1,445,136  
Common shares outstanding 71,460     71,438     71,418     71,350     71,207     71,152     71,131     71,118  
Book value per share (shareholders' equity, as reported, divided by common shares outstanding) $ 39.69     $ 39.04     $ 38.52     $ 37.91     $ 37.48     $ 37.57     $ 37.11     $ 36.56  
Tangible book value per share (tangible shareholders' equity divided by common shares outstanding) $ 23.54     $ 22.87     $ 22.33     $ 21.68     $ 21.21     $ 21.36     $ 20.89     $ 20.32  
Tangible Shareholders' Equity to Tangible Assets                        
Total assets $21,498,341   $20,905,489   $20,282,603   $19,757,510   $19,280,873   $19,354,308   $18,781,405   $17,636,973
Goodwill, CDI and noncompete agreements, net of tax       (1,153,877 )         (1,155,083 )         (1,156,307 )         (1,157,505 )         (1,158,738 )         (1,153,576 )         (1,153,595 )         (1,154,915 )
Tangible assets $20,344,464   $19,750,406   $19,126,296   $18,600,005   $18,122,135   $18,200,732   $17,627,810   $16,482,058
Shareholders' equity to total assets 13.2 %   13.3 %   13.6 %   13.7 %   13.8 %   13.8 %   14.1 %   14.7 %
Tangible shareholders' equity to tangible assets 8.3 %   8.3 %   8.3 %   8.3 %   8.3 %   8.3 %   8.4 %   8.8 %

 

Is your business listed correctly on America’s largest city directory network of 1,000 portals?