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| 8-K - 8-K DA DAVIDSON FINANCIAL INSTITUTIONS CONFERENCE - TCF FINANCIAL CORP | chfc8-kdadavidsonfinancial.htm |
Creating a Preeminent Midwest
Community Bank
David B. Ramaker
Chief Executive Officer
Dennis L. Klaeser
Chief Financial Officer
May 9‐11, 2017
D. A. Davidson
19th Annual Financial Institutions Conference
Denver, Colorado
This presentation and the accompanying presentation by management may contain forward-looking statements that are based on management's beliefs,
assumptions, current expectations, estimates and projections about the financial services industry, the economy and Chemical Financial Corporation ("Chemical").
Words and phrases such as "anticipates," "believes," "continue," "estimates," "expects," "forecasts," "future," “go forward,” "intends," "is likely," "judgment," "look
ahead," "look forward," "on schedule," “on track,” "opinion," "opportunity," "plans," "potential," "predicts," "probable," "projects," "should," "strategic," "trend," "will," and
variations of such words and phrases or similar expressions are intended to identify such forward-looking statements. Such statements are based upon current beliefs
and expectations and involve substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-
looking statements. These statements include, among others, statements related to future levels of loan charge-offs, future levels of provisions for loan losses, real
estate valuation, future levels of nonperforming assets, the rate of asset dispositions, future capital levels, future dividends, future growth and funding sources, future
liquidity levels, future profitability levels, future deposit insurance premiums, future asset levels, the effects on earnings of future changes in interest rates, the future
level of other revenue sources, future economic trends and conditions, future initiatives to expand Chemical’s market share, expected performance and cash flows
from acquired loans, future effects of new or changed accounting standards, future opportunities for acquisitions, opportunities to increase top line revenues,
Chemical’s ability to grow its core franchise, future cost savings, Chemical’s ability to maintain adequate liquidity and capital based on the requirements adopted by
the Basel Committee on Banking Supervision and U.S. regulators and future changes in laws and regulations applicable to Chemical and the financial services
industry in general. 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 Chemical, specifically, are also
inherently uncertain. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("risk factors") that are
difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be
expressed or forecasted in such forward-looking statements. Chemical undertakes no obligation to update, amend or clarify forward-looking statements, whether as a
result of new information, future events or otherwise.
In addition, risk factors include, but are not limited to, the risk factors described in Item 1A of Chemical’s Annual Report on Form 10-K for the year ended
December 31, 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.
Non-GAAP Financial Measures
This presentation and the accompanying presentation by management contain certain non-GAAP financial disclosures that are not in accordance with U.S. generally
accepted accounting principles ("GAAP"). Such non-GAAP financial measures include Chemical’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 basis, and information presented excluding significant items, including
net income, diluted earnings per share, return on average assets, return on average shareholders’ equity, operating expenses and efficiency ratio. Chemical uses non-
GAAP financial measures to provide meaningful, supplemental information regarding its operational results and to enhance investors’ overall understanding of
Chemical’s financial performance. The limitations associated with non-GAAP financial measures include the risk that persons might disagree as to the
appropriateness of items comprising these measures and that different companies might calculate these measures differently. These disclosures should not be
considered an alternative to Chemical’s GAAP results. See the Supplemental Financial Information included with this presentation for a reconciliation of the non-GAAP
financial measures to the most directly comparable GAAP financial measures.
Forward-Looking Statements & Other
Information
2
Emphasize our strategy of
being the Preeminent Midwest
Community Bank
4
1
Demonstrated track record of
organic growth2
High performing pro forma
profitability should drive upside3
Realizing our ever greater potential
The largest community bank headquartered in Michigan
Scalable core strategies and disciplines
Proven organic growth initiatives
Leadership in EPS growth among peers (1)
Total Return out-performance (peers and indices) (1)
Pro Forma 1.2%+ ROA, ROATCE approaching 15%, low efficiency ratio
Delivering on projected merger benefits
Consistent EPS growth performance
Market share growth
Revenue enhancements
Concentrate on achieving cost savings and exploiting business synergy opportunities
Continue to build out and enhance risk management practices
(1) Source: SNL Geographic Intelligence
Overview
3
$17.6 billion in assets
Largest banking company headquartered and
operating branches in Michigan
Operates 249 banking offices primarily in Michigan,
Northeast Ohio and Northern Indiana
Local market knowledge and business development
opportunities led by 23 community-based advisory
boards
One of the largest trust and wealth management
operations of a Michigan-headquartered bank with
$4.6 billion in assets under management or custody
and another $1.4 billion in assets within the Chemical
Financial Advisors Program
Focused on realizing operating and business synergies
from Chemical / Talmer merger and enhancing
preparedness for future organic and acquisitive growth
$3.4 billion Market Capitalization(1)
(1) Based upon CHFC shares outstanding of 71.1 million and the CHFC stock price of $47.62 on May 2, 2017.
4
About Chemical Financial Corporation
“Local” community bank
Strong belief in the community banking concept
23 identified centers of influence
Community-driven leadership, rapid local response
Emphasis on building relationships
We know our markets, what works, and what does not work
Strong credit culture
Diversification
In-depth knowledge of our customers and markets
Underwriting discipline
Low cost, stable, core funding – starts at relationship level
Expense management and control
Clean balance sheet, solid capital ratios and intense focus on effective capital deployment
Identify, hire, motivate and retain talented individuals to carry out our relationship strategies
Sustain long-term growth through combination of organic and acquisitive growth
Higher lending limits provide enhanced middle market lending growth opportunities
Opportunities for fee income growth from Wealth Management and Mortgage Banking synergies
Future acquisitive growth opportunities in Michigan, Ohio, and Indiana
Scalable Core Strategies & Disciplines
Core Values
5
6
Breakdown of CHFC’s Loan Growth
Source: Company Documents, SNL Financial
* Annualized organic loan growth
$6,000
$1,041
$1,583
$5,720
’12 -’16 Year Loan Growth CAGR: 103%
’12 – ’16 Organic Loan Growth CAGR: 42%
Avg. Annual Organic Growth (’12-’16): 10.2%
Loans @ Year
End ($B) $4.2 $4.6 $5.7 $7.3 $13.0
Improving Organic Loan Growth
$13.3
*
7
EPS Growth Translates to Outsized Shareholder Return
Source: CHFC data per Company Documents, Peer data per SNL Financial; Market data as of 4/28/2017
(1) CHFC income excludes transaction expenses, loan servicing rights change in fair value and gains on sales of branches. Peer Income excludes extraordinary items, non-recurring items and
gains/losses on sale of securities. Please refer to slides 32 – 35 for a reconciliation of non-GAAP financial measures for CHFC calculations.
(2) Peers include nationwide banks with $10 to $25 billion in total assets
(3) Includes cash dividends paid to common shares
Diluted EPS, excluding significant items,
Growth(1)
Total Shareholder Return (%)(3)
(2)
148.6%
162.0%
(15%)
30%
75%
120%
165%
210%
Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
Peer Median (148.6%) CHFC (162.0%)
D
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(
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D
iluted E
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, excluding significant item
s, Y
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(
%
)
(2)
CHFC ’12-’16 Diluted EPS CAGR:
11.0%
(1)
(1)
’12-May-’17 Total Return CAGR:
CHFC: 19.8%
Peers: 18.6%
8
ROAA (%)
CHFC’s Performance Metrics
Source: SNL Financial and Company Documents; CHFC GAAP from SNL Financial
(1) CHFC Income excludes transaction expenses, loan servicing right changes in fair value and gains on sales of branches. Peer income excludes extraordinary items, non-recurring items and
gains/losses on sale of securities. Please refer to slides 32 - 35 for a reconciliation of non-GAAP financial measures.
(2) Peers include nationwide banks with $10 to $25 billion in total assets; ratios are presented on an “adjusted” basis, see footnote 1
(3) The Efficiency Ratio, adjusted, is a non-GAAP financial measure. Please refer to slides 32 – 35 for a reconciliation of non-GAAP financial measures.
ROATCE (%)
Efficiency Ratio, non-GAAP(3)(%)
(2) (2)
(2)
Dividends per Share ($)
(1) (1)
9
Delivering on Projected Merger Benefits
Source: Company Documents
(1) Taken from presentation dated 2/1/2016; presentation filed with the SEC and was utilized by CHFC’s Senior Mgmt. team during analyst / institutional investor meetings to discuss the
merger. CHFC 12/31/15 figures have been adjusted to reflect the current non-GAAP methodology utilized; the variance between the non-GAAP calculations are immaterial.
(2) Includes nationwide banks with total assets between $10 and $25 billion
(3) ROAA and ROATCE, excluding significant items, Efficiency Ratio and TCE/TA are non-GAAP financial measures. Refer to pages 32 – 35 for reconciliations of non-GAAP financial
measures.
(4) Market data as of 1/29/2016
(5) Market Data as of 5/1/2017
(6) EPS estimates in the 12/31/2015 CHFC column were consensus “Street” estimates just prior to announcement of the merger; estimates in the Pro Forma CHFC / TLMR column were the
pro forma estimates provided by CHFC; estimates in the Today column are the current consensus “Street” estimates per Bloomberg
(7) Difference between Peer Median and Top Quartile multiples and CHFC Today, divided by CHFC Today. This is forward-looking and not a guarantee of performance.
CHFC is Largest MI‐Headquartered Community Bank
CHFC Operating Markets
Source: SNL Financial. Deposit data as of 6/30/2016.
Note: CHFC’s two branches in Northern Indiana are excluded from the Southwest Michigan region.
(1) Local is defined as banks headquartered in Michigan
Northern Michigan Southeast Michigan
Southwest Michigan
Central Michigan
Northern Ohio
Deposit
Market
Share Rank
Number of
Branches
Deposits in
Market
($000)
Market
Share
(%)
Central Michigan 1 62 2,945,718 19.8%
Northern Michigan 1 58 2,104,274 17.5%
Southwest Michigan 3 78 3,247,458 8.9%
Southeast Michigan 9 30 2,983,852 2.3%
Northern Ohio 13 26 1,223,393 1.2%
The Preeminent Midwest Community Bank
10
Rank
"Local"
Rank (1) Institution (ST) Branches
Deposits
($mm)
Market
Share
(%)
1 JPMorgan Chase & Co. (NY) 241 42,007 21.0%
2 Comerica Inc. (TX) 204 26,964 13.5%
3 PNC Financial Services Group (PA) 192 17,326 8.7%
4 Bank of America Corp. (NC) 120 16,564 8.3%
5 Fifth Third Bancorp (OH) 211 16,073 8.0%
6 Huntington Bancshares Inc. (OH) 332 15,212 7.6%
7 1 Chemical Financial Corp. (MI) 228 11,281 5.6%
8 2 Flagstar Bancorp Inc. (MI) 99 8,773 4.4%
9 Citizens Financial Group Inc. (RI) 95 5,138 2.6%
10 TCF Financial Corp. (MN) 52 2,908 1.5%
11 Wells Fargo & Co. (CA) 18 2,812 1.4%
12 3 Mercantile Bank Corp. (MI) 48 2,282 1.1%
13 4 Independent Bank Corp. (MI) 64 2,152 1.1%
14 5 Macatawa Bank Corp. (MI) 30 1,360 0.7%
15 KeyCorp (OH) 23 1,334 0.7%
Totals (1‐123) 2,632 200,386 100.0%
Overlapping Michigan Markets New Michigan & Ohio MarketsOther Markets
Southwest MI Central MI Southeast MI Northern OHNorthern MI
(1) Source: USDOC’s Bureau of Economic Analysis. Considered the largest Metropolitan Statistical Area for each region. The Northern Michigan region does not have a Metropolitan Statistical Area as defined by
the Bureau of Economic Analysis
(2) State Deposits are in billions per SNL Financial and as of 6/30/16
(3) Source: SNL Geographic Intelligence
CHFC: Deposits / Rank $3.2 #3 CHFC: Deposits / Rank $2.9 #1 CHFC: Deposits / Rank $2.1 #1 CHFC: Deposits / Rank $3.0 #9 CHFC: Deposits / Rank $1.2 #13
All Major MI Markets & OH Growth Opportunity
96% of businesses / 96% of population is within MI footprint(3)
Southeast Michigan represents more than 50% of Michigan GDP – a huge opportunity with recent market disruption
CHFC Footprint By State & Regional Market
MI OH
Southwest
MI
Central
MI
Northern
MI
Southeast
MI
Northern
OH
Michigan
Penetration
TotalDeposits ($B) $11.3 $1.2 $3.2 $2.9 $2.1 $3.0 $1.2
Market Share Rank 7 23 3 1 1 9 13
Deposit Market Share (%) 5.6% 0.4% 8.9% 19.8% 17.5% 2.3% 1.2%
Market Information (as a % of):
% of State ($B) GDP (1) 12% 2% ‐ 53% 22%
% of State Deposits (2) 18% 7% 6% 66% 33% 97%
% of State Businesses (3) 25% 13% 11% 47% 39% 96%
% of State Population (3) 25% 13% 9% 49% 37% 96%
11
Increase in in-house lending limit creates opportunity in middle-market space
4 active lenders
Recruiting efforts: 1 additional lender in Grand Rapids (2Q2017), 1 additional
lender in Southeast Michigan (4Q2017)
Opportunity (Companies $50 - $150 million in sales revenue):
Grand Rapids – 150 companies; present penetration <15
Southeast Michigan – 400 companies; present penetration <10
Cleveland – 250 companies; present penetration <10
Portfolio Projections: $300 million at year-end 2017
Realizing our ever greater potential
12
Opportunity & Growth (October 2016 through April 2017)
Southeast Michigan Cleveland Grand Rapids Total
Loans booked (#) 4 5 1 10
Loans booked ($) $40 million $50 million $4 million $94 million
Pipeline (#) 4 2 2 8
Pipeline ($) $50 million $40 million $25 million $115 million
Build out of mortgage processing platform
October conversion to enterprise-wide operating / underwriting system
Hired 25 mortgage loan officers, 3 producing sales managers and 1 non-producing
sales manager
Anticipate hiring 20 – 25 additional MLO’s in 2017
Opportunity & Focus: Grand Rapids / Holland, Northern Indiana and Cleveland
Michigan Market Penetration:
4Q2016 (average): 2.05%
1Q2017 (average): 2.47%
Origination Volume:
4Q2016: $490.5 million – 60% purchase / 40% refinance; 54% sale / 46%
portfolio
YTD 2017: $432.4 million – 67% purchase / 33% refinance; 45% sale / 55%
portfolio
Realizing our ever greater potential
13
Opportunity, Enhancement, Growth (October 2016 through April 2017)
Indirect lending opportunities in Southeast Michigan and Ohio
70 new dealer relationships added company-wide
66 Automotive, 3 Marine, 1 RV
28 in Southeast Michigan
42 in Ohio
Volume in new markets:
Southeast Michigan: 636 loans, $18 million in production
Ohio: 240 loans, $6.3 million in production
Expect to establish 50 – 100 additional dealers relationships in new markets during
2017
Indirect lending is all in-market with a focus on cross selling to those customers
Realizing our ever greater potential
14
Opportunity, Quantity, Quality (October 2016 through April 2017)
Credit Score Southeast Michigan Ohio
Tier 1 (720 – 872) 561 214
Tier 2 (690 – 719) 64 16
Tier 3 (650 – 689) 11 10
Evolving macroeconomic environment suggests combination of headwinds
and tailwinds; too early to predict outcome
Emphasize our strategy of being the Preeminent Midwest Community Bank
Focus on what we can control
• Organic revenue growth and cost discipline
• Concentrate on achieving cost savings and exploiting business synergy
opportunities
• Continue to build out and enhance risk management practices
Closing Comments
15
Supplemental Information
David B. Ramaker
Chief Executive Officer
Dennis L. Klaeser
Chief Financial Officer
Q1 2017 Highlights
Diluted earnings per share of $0.67, compared to $0.66 in the 4th qtr. 2016 and $0.60 in the 1st qtr. 2016
Diluted earnings per share, excluding significant items(1) of $0.71; up 1% from 4th qtr. 2016, and up 9% from 1st
qtr. 2016(2)
Return on average assets and return on average equity of 1.09% and 7.4%, respectively, in 1st qtr. 2017 (1.16%
and 7.8%, respectively, excluding significant items(1)(2))
Loan Growth
$283 million in 1st qtr. 2017 (13% commercial, 62% commercial real estate, 16% residential mortgage and 9%
consumer loans)
Asset quality ratios
Nonperforming loans/total loans of 0.36% at 3/31/2017; up slightly from 0.34% at 12/31/2016, and down from
0.73% at 3/31/2016
Net loan charge-offs/average loans of 0.11%
Lower than normal tax rate primarily due to tax benefit from certain stock option exercises
(1)Significant items include transaction expenses, net gain on the sale of branches and the change in fair value in loan servicing rights.
(2)Denotes a non-GAAP financial measure. Refer to the Appendix for a reconciliation of non-GAAP financial measures.
17
(in thousands except per share data)
2017
1st Qtr.
2016
4th Qtr.
2016
1st Qtr.
Net interest income $130,097 $132,447 $74,330
Provision for loan losses 4,050 6,272 1,500
Noninterest income 38,010 54,264 19,419
Operating expenses 104,196 114,302 58,887
Operating expenses, excl. transaction expenses(1) 100,029 96,286 56,293
Transaction expenses 4,167 18,016 2,594
Net income 47,604 47,168 23,605
Net Income, excl. significant items(1) 50,650 49,949 25,291
Diluted EPS 0.67 0.66 0.60
Diluted EPS, excl. significant items(1) 0.71 0.70 0.65
Return on Avg. Assets 1.09% 1.09% 1.02%
Return on Avg. Shareholders’ Equity 7.4% 7.4% 9.3%
Efficiency Ratio 62.0% 61.2% 62.8%
Efficiency Ratio - Adjusted(1) 57.4% 53.7% 57.6%
Equity/Total Assets 14.7% 14.9% 11.1%
Tangible Equity/Total Assets(1) 8.8% 8.8% 8.2%
Book Value/Share $36.56 $36.57 $26.99
Tangible Book Value/Share(1) $20.32 $20.20 $19.20
Prior Quarter Comparison
Lower net interest income due to two
less days in Q1 compared to Q4 and
lower loan interest accretion−partially
offset by organic loan growth
Lower noninterest income due to Q4
branch sales and MSR fair value
adjustments
Operating expenses reflect increases
in credit-related expenses and payroll
taxes due to stock option exercises
Decrease in provision for loan losses
Favorable tax credits
Prior-Year Quarter Comparison
Impact of merger
Significant increase in net interest
income, attributable to Talmer merger
and $1.02 billion, or 13.9%, organic
growth in total loans during the twelve
months ended March 31, 2017
(1)Denotes a non-GAAP financial measure. Refer to the Appendix for a reconciliation of non-GAAP financial measures.
Income Statement Highlights
Financial Highlights
18
$17.8 $19.0
$24.5 $25.5 $23.6
$25.8
$11.5
$47.1 $47.6$26.0
$2.8 $3.1
[VALUE](3)
[VALUE](3)
$0.00
$0.50
$1.00
$0.0
$20.0
$40.0
$60.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
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t
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Significant items (after-tax)
Net Income
Diluted EPS, excluding significant items (non-GAAP)(3)
$25.3(2)(3)
2015 2016 2017
(1)Net Income
(2)Net Income, excluding significant items.
(3)Denotes a non-GAAP financial measure. Please refer to the Appendix for a reconciliation of non-GAAP
financial measures.
2016 Total: $108.0(1); $140.5(2)(3)2015 Total: $86.8(1); $92.3(2)(3) 2017
$49.9(2)(3) $50.7
(2)(3)
Net Income
Net Income Trending Upward ($ Millions, except EPS data)
$0.71(3)
19
$3,254
$4,551
$3,133
$2,335
$1,332
$2,165
$1,672
$737
$1,922
$2,386
$1,461
$1,598
Commercial CRE/C&D Residential Consumer
Loan Portfolio Composition ($ Millions)
$109
$409
$140
$366Commercial
CRE/C&D
Residential
Consumer
$1,223
$1,756
$1,532
$371
Talmer Merger
Aug. 31, 2016
$1,024 $4,882
$5,906
Total Loan Growth,
Excluding Talmer Merger,
Twelve Months Ended
March 31, 2017
Growth – Twelve months ended March 31, 2017
March 31, 2016, $7,367 Total Loan Growth twelve months ended March 31, 2017 March 31, 2017, $13,273
20
$88
$277
$125
$347
$36
$175
$47
$25
Commercial
CRE/C&D
Residential
Consumer
$0
$100
$200
$300
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2015 - $476 2016 - $837 2017 - $283
$15
$224
$181
$280
$56
$283$837
$96
$186
Loan Growth* ($ Millions)
Quarterly Loan Growth Trends
Loan Growth – 2016 Total* Loan Growth – 2017 Q1
$275
*Excludes the impact of the $4.88 billion of loans acquired in the Talmer merger.
$283
21
1Q 2017 4Q 2016 2016 Total
Originated Loan Portfolio
Commercial $ 88 $177 $ 380
CRE/C&D 239 307 594
Residential 119 104 258
Consumer 56 114 418
Total Originated Loan Portfolio Growth $ 502 $702 $1,650
Acquired Loan Portfolio
Commercial $ (52) $ (159) $(292)
CRE/C&D (64) (164) (317)
Residential (72) (65) (133)
Consumer (31) (39) (71)
Total Acquired Loan Portfolio Run-off $(219) $ (427) $(813)
Total Loan Portfolio
Commercial $ 36 $ 18 $ 88
CRE/C&D 175 143 277
Residential 47 39 125
Consumer 25 75 347
Total Loan Portfolio Growth $ 283 $275 $ 837
Loan Growth* – Originated v. Acquired
Loan Growth (Run-off) ($ Millions)
*Excludes the impact of the $4.88 billion of loans acquired in the Talmer merger. 22
6.4% 6.7%
4.5%
17.6%
Home Equity Auto All Other
Consumer
Total
Consumer
Home
Equity
$849
36%
Auto
$886
38%
All Other
Consumer
$599
26%
Portfolio mix: 75% used cars / 25% new cars
• Used car portfolio is generally comprised of collateral that is 4.5
years or less old
Sourcing of the portfolio
• 90% is originated indirectly through relationships with auto
dealers, but only with dealers located in Chemical Bank’s
branch footprint
• 10% of auto loans are originated directly in our retail branch
network
High quality borrowers
• 90% of auto loans have FICO scores of greater than 720
• Over 40% have FICOs of greater than 800
Business model
• Chemical Bank only originates loans for its own portfolio
• No Gain on Sale (GOS) or securitization component
Go forward expectations
• Auto loans to continue to comprise less than 7% of the total
loan portfolio
• Continued focus on high FICO lending within the Chemical
Bank footprint
23
Consumer Loan Portfolio Auto Portfolio Commentary
Consumer Lending Breakdown
(1) Total Gross Loans of $13.3 billion (2017 Q1)
Portfolio Composition ($ in mil)
Consumer Loan Balances as a % of Total Loans(1)
Total
Consumer
Portfolio:
$2.3 billion
$3.4
$2.9 $3.9
$2.7
$0.2
Noninterest-bearing Demand Deposits Interest-bearing Demand Deposits Savings Deposits Time Deposits Brokered Deposits
$2.0
$2.0
$2.0
$1.4
$0.2
(1)Comprised of $621 million of growth in customer deposits offset by a $433 million decrease in brokered deposits.
(2)Cost of deposits based on period averages.
Total Deposits – March 31, 2016
$7.65
Total Deposits – March 31, 2017
$13.13
Organic
$0.2, 2.4%(1)
$1.3
$0.9
$1.2
$1.5
$0.4
Talmer Merger
$5.3
$0.1
$0.7
($0.2) ($0.4)
Deposit Composition
Total Deposits ($ Billions)
$7,535 $7,528 $9,484 $13,003 $12,999
0.22% 0.23% 0.24%
0.27% 0.28%
0.00%
0.25%
0.50%
$4,000
$9,000
$14,000
Q1 Q2 Q3 Q4 Q1
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Deposits Cost of Deposits(2)
Average Deposits ($ Millions) & Cost of Deposits (%)
2016 2017
24
$10.2
$2.8
$1.5
Deposits:
Time Deposits
Customer Repurchase
Agreements
Wholesale borrowings (at Mar.
31, 2017: brokered deposits -
$0.2, short and long term
borrowings - $1.3)
$0.4
Average Cost of Funds Q1 2017 – 0.35%Average Cost of Funds Q4 2016 – 0.33%
$14.6 Billion $14.9 Billion
$9.9
$2.8
$0.3 $1.6
Interest and
noninterest-bearing,
demand, savings,
money market
Average cost of wholesale
borrowings – 1.06%
Average cost of wholesale
borrowings – 1.11%
Funding Breakdown ($ Billions)
December 31, 2016 March 31, 2017
25
$1.5 $1.5 $1.5 $2.0 $1.5 $3.0 $4.1 $6.3 $4.1
$1.9 $1.8
$0.8
$4.3 $4.5
$1.8 $1.8 $1.8
$3.5
$0.0
$3.5
$7.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Provision for Loan Losses Net Loan Losses
$78 $71 $62 $51 $62 $44 $48
$0
$60
$120
YE 2011 YE 2012 YE 2013 YE 2014 YE 2015 YE 2016 2017 Q1
ALL
NPLs
2015 2016 2017
Originated Loans ($ billions) $3.3 $3.8 $4.3 $5.0 $5.8 $7.5 $8.0
Acquired Loans ($ billions) 0.5 0.4 0.3 0.7 1.5 5.5 5.3
Total Loans ($ billions) $3.8 $4.2 $4.6 $5.7 $7.3 $13.0 $13.3
ALL $88 $84 $79 $76 $73 $78 $79
ALL/ Originated Loans 2.60% 2.22% 1.81% 1.51% 1.26% 1.05% 0.99%
NPLs/ Total Loans 2.05% 1.71% 1.33% 0.89% 0.86% 0.34% 0.36%
Credit Mark as a % of Unpaid
Principal on Acquired Loans 6.6% 6.0% 7.8% 5.4% 4.4% 3.1% 2.8%
Credit Quality ($ Millions, unless otherwise noted)
Provision for Loan Losses vs. Net Loan Losses
Nonperforming Loans (NPLs) and Allowance for Loan Losses (ALL)
26
$74.3
$77.5
$96.8
$132.4
$130.1
$40
$60
$80
$100
$120
$140
Q1 Q2 Q3 Q4 Q1
N
e
t
I
n
t
e
r
e
s
t
I
n
c
o
m
e
(
$
M
i
l
l
i
o
n
s
)
Net Interest Income
3.60% 3.70% 3.58% 3.56% 3.49%
0.03% 0.11% 0.11% 0.14% 0.12%
4.13% 4.19% 4.12% 4.18% 4.11%
0.00%
2.50%
5.00%
Q1 Q2 Q3 Q4 Q1
Net Interest Margin(1) and Loan Yields
Net Interest Margin(1)
Purchase Accounting Accretion on Loans
Loan Yields
2016 2017
2016 2017
Net Interest Income
Net Interest Income, Net Interest Margin
and Loan Yields
(Quarterly Trend)
(1)Computed on a fully taxable equivalent basis (non-GAAP) using a federal income tax rate of 35%. Please refer to the Appendix for a
reconciliation of non-GAAP financial measures.
27
$7.1 $7.2 $10.1
$25.4
$15.0
$5.2 $5.8
$5.6
$6.0
$5.8
$5.7 $6.3
$7.7
$8.4
$8.0
$1.4 $1.6
$4.4
$14.4
$9.2
$0.0
$30.0
$60.0
Q1 Q2 Q3 Q4 Q1
Other Wealth Management Service Charges Mortgage Banking Revenue
2016 2017
(
$
M
i
l
l
i
o
n
s
)
$19.4
$54.3*
Non-Interest Income
Quarterly
*Significant items: $(0.5) million change in fair value in loan servicing rights in 2017 Q1 and $13.7 million (branch
sales of $7.4 million and change in fair value in loan servicing rights of $6.3 million) in 2016 Q4
$38.0*
$20.9
$27.8
28
$13.1 $12.5 $16.1
$22.3 $23.9
$33.9 $33.1
$40.6
$57.7 $60.2$4.9 $5.5
$5.5
$7.6
$7.4
$4.4 $4.9
$6.4
$8.7
$8.5
$2.6 $3.1
$37.5
$18.0 $4.2
$0.0
$60.0
$120.0
Q1 Q2 Q3 Q4 Q1
Other Compensation Occupancy Equipment Transaction Expenses
$114.3
$104.2
2016 2017
(
$
M
i
l
l
i
o
n
s
)
$56.0
$59.1
$56.3
$58.9
$68.6
$106.1
Operating Expenses
Quarterly
$100.0$96.3
29
Peer Average
12/31/2016(1)
CHFC
12/31/2016
CHFC
3/31/2017
Shareholders’ Equity / Share NA $36.57 $36.56
Tangible Book Value / Share(2) NA $20.20 $20.32
Shareholders’ Equity / Total Assets 11.5% 14.9% 14.7%
Tangible Common Equity / Total Assets(2) 8.1% 8.8% 8.8%
Tier 1 Capital(3) 10.8% 10.7% 10.6%
Total Risk-Based Capital(3) 12.6% 11.5% 11.4%
$20.32
$1.07 $1.04
$19.20
$2.87 $0.36
$0
$5
$10
$15
$20
$25
TBV @ 3/31/2016 Net Income
(Excl. Transaction
Expenses)
Dividends Talmer AOCI Adj.
& Other
TBV @ 3/31/2017
Capital
Tangible Book Value and Capital Ratios
Tangible Book Value(2) (TBV) Roll Forward
(1)Source SNL Financial – ASB, WTFC, CBSH, TCB, UMBF, PVTB, MBFI, ONB, FMBI and FFBC (ordered by asset size).
(2)Denotes a non-GAAP financial measure. Refer to the Appendix for a reconciliation of non-GAAP financial measures.
(3)Estimated at March 31, 2017 30
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
$
P
e
r
S
h
a
r
e
Performance & Expectations Analyst
Consensus
Consistent growth and performance for shareholders through economic cycles
Merger creates the opportunity to strengthen the foundation for delivering
sustainable, strong EPS growth into the future
Consensus EPS Consensus Dividend
SNL Core EPS Common Dividend
31
Consistent EPS Growth Performance
Source: SNL Financial; analyst consensus estimates as of 5/1/2017
1Q 2017 4Q 2016 1Q 2016
Shareholders’ equity $ 2,600,051 $ 2,581,526 $ 1,032,291
Goodwill, CDI and non-compete agreements, net of tax (1,154,915) (1,155,617) (297,821)
Tangible shareholders’ equity $ 1,445,136 $ 1,425,909 $ 734,470
Common shares outstanding 71,118 70,599 38,248
Tangible book value per share $20.32 $20.20 $19.20
Total assets $ 17,636,973 $17,355,179 $ 9,303,632
Goodwill, CDI and non-compete agreements, net of tax (1,154,915) (1,155,617) (297,821)
Tangible assets $ 16,482,058 $16,199,562 $ 9,005,811
Tangible shareholders’ equity to tangible assets 8.8% 8.8% 8.2%
Net income $47,604 $47,168 $23,605
Significant items, net of tax 3,046 2,781 1,686
Net income, excl. significant items $50,650 $49,949 $25,291
Diluted earnings per share $0.67 $0.66 $0.60
Effect of significant items, net of tax 0.04 0.04 0.05
Diluted earnings per share, excl. significant items $0.71 $0.70 $0.65
Average assets $ 17,474,019 $17,264,688 $9,241,034
Return on average assets 1.09% 1.09% 1.02%
Effect of significant items, net of tax 0.07% 0.07% 0.07%
Return on average assets, excl. significant items 1.16% 1.16% 1.09%
Average shareholders’ equity $ 2,584,501 $ 2,564,943 $1,017,929
Return on average shareholders’ equity 7.4% 7.4% 9.3%
Effect of significant items, net of tax 0.4% 0.4% 0.6%
Return on average shareholders’ equity, excl. significant items 7.8% 7.8% 9.9%
Appendix: Non-GAAP Reconciliation
(Dollars in thousands, except per share data)
32
1Q 2017 4Q 2016 1Q 2016
Efficiency Ratio:
Total revenue – GAAP $ 168,107 $ 186,711 $93,749
Net interest income FTE adjustment 3,068 2,945 2,133
Significant items 429 (13,815) (169)
Total revenue – Non-GAAP $ 171,604 $175,841 $95,713
Operating expenses – GAAP $ 104,196 $114,302 $58,887
Transaction expenses (4,167) (18,016) (2,594)
Amortization of intangibles (1,513) (1,843) (1,194)
Operating expenses – Non-GAAP $ 98,516 $ 94,443 $55,099
Efficiency ratio – GAAP 62.0% 61.2% 62.8%
Efficiency ratio – adjusted 57.4% 53.7% 57.6%
Net Interest Margin:
Net interest income – GAAP $ 130,097 $132,447 $74,330
Adjustments for tax equivalent interest:
Loans 808 838 698
Investment securities 2,260 2,107 1,435
Total taxable equivalent adjustments 3,068 2,945 2,133
Net interest income (on a tax equivalent basis) $133,165 $135,392 $76,463
Average interest-earning assets $15,395,465 $15,156,107 $8,526,711
Net interest margin – GAAP 3.41% 3.48% 3.50%
Net interest margin (on a tax-equivalent basis) 3.49% 3.56% 3.60%
Appendix: Non-GAAP Reconciliation
(Dollars in thousands)
33
2016 2015 2014 2013 2012
Net income $108,032 $86,830 $62,121 $56,808 $51,008
Significant items, net of tax 32,373 5,484 4,555 0 0
Net income, excluding significant items $140,405 $92,314 $66,676 $56,808 $51,008
Diluted earnings per share $2.17 $2.39 $1.97 $2.00 $1.85
Effect of significant items, net of tax 0.64 0.15 0.14 0.00 0.00
Diluted earnings per share, excluding significant items $2.81 $2.54 $2.11 $2.00 $1.85
Average assets $12,037,155 $8,481,228 $6,473,144 $5,964,592 $5,442,079
Return on average assets 0.90% 1.02% 0.96% 0.95% 0.94%
Effect of significant items, net of tax 0.27% 0.07% 0.07% 0.00% 0.00%
Return on average assets, excluding significant items 1.17% 1.09% 1.03% 0.95% 0.94%
Efficiency Ratio:
Total revenue – GAAP $ 503,431 $ 354,224 $ 275,646 $ 257,056 $242,229
Net interest income FTE adjustment 9,642 7,452 5,975 5,355 5,037
Significant items (13,172) (779) 0 0 0
Total revenue – Non-GAAP $499,901 $360,897 $281,621 $ 262,411 $247,266
Operating expenses – GAAP $338,418 $223,894 $179,925 $ 164,948 $151,921
Transaction expenses (61,134) (7,804) (6,388) 0 0
Amortization of intangibles (5,524) (4,389) (2,029) (1,909) (1,569)
Operating expenses – Non-GAAP $271,760 $211,701 $171,508 $163,039 $150,352
Efficiency ratio – GAAP 67.2% 63.2% 65.3% 64.2% 62.7%
Efficiency ratio – adjusted 54.4% 58.7% 60.9% 62.1% 60.8%
34
Non-GAAP Reconciliation
(Dollars in thousands, except per share data)
35
2016 2015 2014 2013 2012
Average Tangible Book Value
Average shareholders’ equity $ 1,546,721 $ 919,328 $ 754,211 $ 626,555 $ 587,451
Average goodwill, CDI and
noncompete agreements, net of tax (514,634) (245,894) (157,634) (127,363) (130,173)
Average tangible shareholders’ equity $ 1,032,087 $ 673,434 $ 596,577 $ 499,192 $ 457,278
Return on Average Tangible
Shareholders’ Equity
Net income $140,405 $92,314 $66,676 $56,808 $51,008
Average tangible shareholders’ equity $1,032,087 $673,434 $596,577 $499,192 $457,278
Return on average tangible
shareholders’ equity 13.6% 13.7% 11.2% 11.4% 11.2%
Non-GAAP Reconciliation
(Dollars in thousands)
