Chemical Financial Corporation Reports 2016 Second Quarter Operating Results


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


MIDLAND, MI, July 26, 2016 -- Chemical Financial Corporation ("Corporation" or "Chemical") (NASDAQ:CHFC)
today announced 2016 second quarter net income of $25.7 million, or $0.67 per diluted share, compared to 2016 first
quarter net income of $23.3 million, or $0.60 per diluted share and 2015 second quarter net income of $19.0 million,
or $0.54 per diluted share. Net income was $49.0 million, or $1.27 per diluted share, for the six months ended June 30,
2016, compared to $36.9 million, or $1.08 per diluted share, for the six months ended June 30, 2015.
Merger and acquisition-related transaction expenses ("transaction expenses") attributable to the pending merger with
Talmer Bancorp, Inc. ("Talmer"), which was announced on January 26, 2016, were $3.1 million in the second quarter
of 2016, $2.6 million in the first quarter of 2016 and $5.6 million for the six months ended June 30, 2016, while
transaction expenses attributable to the April 1, 2015 acquisition of Monarch Community Bancorp, Inc. ("Monarch")
and the May 31, 2015 acquisition of Lake Michigan Financial Corporation ("Lake Michigan") were $3.5 million and
$4.8 million for the three- and six- month periods ended June 30, 2015, respectively. Excluding transaction expenses,
net income in the second quarter of 2016 was $27.7 million, or $0.72 per diluted share, compared to $24.9 million, or
$0.65 per diluted share, in the first quarter of 2016 and $21.7 million, or $0.61 per diluted share, in the second quarter
of 2015. Net income, excluding transaction expenses, was $52.6 million, or $1.37 per diluted share, for the six months
ended June 30, 2016, compared to $40.4 million, or $1.18 per diluted share, for the six months ended June 30, 2015.
"We are pleased to report another quarter of solid financial results, with second quarter per share net income growing
by double-digit annual rates, excluding transaction expenses, over last year’s second quarter. This sustained growth is
not only reflective of the efforts of the extended Chemical team, but also of the reception of our products and community
banking philosophy among the communities and customers we serve," noted David B. Ramaker, Chairman, Chief
Executive Officer and President of Chemical Financial Corporation.
"Interest income in the quarter was aided by the loan interest accretion attributable to the higher than anticipated credit
quality of the Byron Bank and Northwestern Bank acquired portfolios," added Ramaker. "Our ability to continue to
execute at a high level while a significant portion of our senior management team concentrates on past and pending
mergers and acquisitions is a testament to our core banking team’s focus on serving our customers."
The Corporation's return on average assets was 1.11% during the second quarter of 2016, compared to 1.01% in the
first quarter of 2016 and 0.94% in the second quarter of 2015. The Corporation's return on average shareholders' equity
was 10.0% in the second quarter of 2016, compared to 9.2% in the first quarter of 2016 and 8.6% in the second quarter
of 2015. Excluding transaction expenses, the Corporation's return on average assets was 1.19% during the second
quarter of 2016, compared to 1.09% in the first quarter of 2016 and 1.07% in the second quarter of 2015 and the
Corporation's return on average shareholders' equity was 10.8% in the second quarter of 2016, compared to 9.9% in
the first quarter of 2016 and 9.8% in the second quarter of 2015.
Net interest income was $77.5 million in the second quarter of 2016, $3.2 million, or 4.3%, higher than the first quarter
of 2016 and $11.8 million, or 18%, higher than the second quarter of 2015. The increase in net interest income in the
second quarter of 2016, compared to the first quarter of 2016, was primarily attributable to loan growth in the second
quarter of 2016 and an increase in the amount of interest accretion recognized on acquired loans resulting from
improvements in expected cash flows from certain pools of acquired loans. During the second quarter of 2016, the
Corporation transferred $10 million of nonaccretable discount to accretable yield due to lower expected losses on loans
acquired in both the 2010 acquisition of OAK Financial Corporation and the 2014 acquisition of Northwestern Bancorp,
Inc. The Corporation's net interest income included $2.5 million of interest accretion on acquired loans in the second
quarter of 2016, compared to $0.7 million in the first quarter of 2016 and $0.8 million in the second quarter of 2015.
The increase in net interest income in the second quarter of 2016 over the second quarter of 2015 was primarily
attributable to the positive impact of organic loan growth and the impact of the Corporation's acquisition of Lake
Michigan.

The net interest margin (on a tax-equivalent basis) was 3.70% in the second quarter of 2016, compared to 3.60% in
the first quarter of 2016 and 3.59% in the second quarter of 2015. The average yield on the loan portfolio was 4.19%
in the second quarter of 2016, compared to 4.13% in the first quarter of 2016 and 4.17% in the second quarter of 2015.
Interest accretion on acquired loans contributed 11 basis points to the Corporation's net interest margin in the second
quarter of 2016, compared to 3 basis points in the first quarter of 2016 and 4 basis points in the second quarter of 2015.
Interest accretion on acquired loans comprised 13 basis points of the yield on the Corporation's loan portfolio in the
second quarter of 2016, compared to 4 basis points in the first quarter of 2016 and 5 basis points in the second quarter
of 2015. The average yield of the investment securities portfolio was 2.34% in the second quarter of 2016, compared
to 2.29% in the first quarter of 2016 and 2.03% in the second quarter of 2015. The Corporation's average cost of funds
was 0.27% in the second quarter of 2016, compared to 0.25% in the first quarter of 2016 and 0.22% in the second
quarter of 2015.
The provision for loan losses was $3.0 million in the second quarter of 2016, compared to $1.5 million in both the first
quarter of 2016 and the second quarter of 2015. The increase in the provision for loan losses was due to loan growth,
with loans in the Corporation's originated loan portfolio up $377 million during the second quarter of 2016. Net loan
charge-offs were $1.8 million, or 0.10% of average loans, in the second quarter of 2016, compared to $4.5 million, or
0.25% of average loans, in the first quarter of 2016 and $1.8 million, or 0.12% of average loans, in the second quarter
of 2015. Net loan charge-offs in the second quarter of 2016 and in the first quarter of 2016 included $1.0 million and
$2.9 million, respectively, of losses from one commercial loan relationship.
The Corporation's nonperforming loans, consisting of nonaccrual loans, accruing loans past due 90 days or more as
to principal or interest payments and nonperforming troubled debt restructurings, totaled $62.0 million at June 30,
2016, compared to $73.3 million at March 31, 2016 and $70.9 million at June 30, 2015. The $11.3 million, or 15%,
decrease in nonperforming loans during the second quarter of 2016 was attributable to a combination of $6.4 million
of principal paydowns, $3.9 million of nonaccrual loans being upgraded to accruing status during the quarter, and net
loan charge-offs. Nonperforming loans comprised 0.81% of total loans at June 30, 2016, compared to 0.99% at
March 31, 2016 and 1.01% at June 30, 2015.
At June 30, 2016, the allowance for loan losses of the originated loan portfolio was $71.5 million, or 1.12% of originated
loans, compared to $70.3 million, or 1.17% of originated loans, at March 31, 2016 and $74.9 million, or 1.40% of
originated loans, at June 30, 2015. The allowance for loan losses of the originated loan portfolio as a percentage of
nonperforming loans was 115% at June 30, 2016, compared to 96% at March 31, 2016 and 106% at June 30, 2015.
Noninterest income was $20.9 million in the second quarter of 2016, compared to $19.4 million in the first quarter of
2016 and $20.7 million in the second quarter of 2015. Noninterest income in the second quarter of 2016 was higher
than the first quarter of 2016, due primarily to higher seasonal trust fees from the preparation of trust tax returns and
higher seasonal overdraft fees. Mortgage banking revenue was $0.2 million higher in the second quarter of 2016,
compared to the first quarter of 2016, due to an increase in gains from the sales of residential mortgages, which was
partially offset by a $0.4 million impairment of the Corporation's mortgage servicing asset resulting from the recent
decline in market interest rates.
Operating expenses were $59.1 million in the second quarter of 2016, compared to $58.9 million in the first quarter
of 2016 and $56.8 million in the second quarter of 2015. Operating expenses included transaction expenses of $3.1
million in the second quarter of 2016, $2.6 million in the first quarter of 2016 and $3.5 million in the second quarter
of 2015. Excluding these transaction expenses, operating expenses were $56.0 million in the second quarter of 2016,
$0.3 million lower than the first quarter of 2016 and $2.7 million, or 5%, higher than the second quarter of 2015. The
decrease in operating expenses in the second quarter of 2016, compared to the first quarter of 2016, was primarily
attributable to a $0.7 million reduction in payroll tax expenses (these are highest in the first quarter of the year) and a
$1.4 million reduction in credit related expenses. The reduction in credit related expenses was driven by higher gains
from the sale of other real estate properties and a $0.7 million gain resulting from the receipt of life insurance proceeds
on a policy the Corporation had previously obtained as collateral on a loan. These decreases were partially offset by
$1.1 million of higher outside services expense and a $1.0 million write-down included in occupancy expenses
associated with the closure of several branch locations during the quarter. Aportion of the increase in outside services
during the quarter was attributable to the seasonal trust fees described above and increases in various project costs,
many of which have been accelerated to complete them in advance of the pending Talmer merger.

The Corporation's efficiency ratio was 55.1% in the second quarter of 2016, 58.8% in the first quarter of 2016 and
60.5% in the second quarter of 2015.
Total assets were $9.51 billion at June 30, 2016, compared to $9.30 billion at March 31, 2016 and $9.02 billion at
June 30, 2015. The increase in total assets during the three months ended June 30, 2016 was attributable to loan growth
that was largely funded by an increase in Federal Home Loan Bank (FHLB) advances. The increase in total assets
during the twelve months ended June 30, 2016 was also attributable to loan growth that was funded by a combination
of organic growth in customer deposits, an increase in FHLB advances and proceeds from maturing investment
securities. Investment securities were $1.01 billion at June 30, 2016, compared to $1.03 billion at March 31, 2016 and
$1.16 billion at June 30, 2015.
Total loans were $7.65 billion at June 30, 2016, up $280 million, or 3.8%, from total loans of $7.37 billion at March 31,
2016 and up $613 million, or 8.7%, from total loans of $7.03 billion at June 30, 2015. During the second quarter of
2016, consumer installment loans grew $151 million, commercial real estate and real estate construction loans grew
$58 million, residential mortgage loans grew $33 million, commercial loans grew $31 million and home equity loans
grew $7 million.
Total deposits were $7.46 billion at June 30, 2016, compared to $7.65 billion at March 31, 2016 and $7.29 billion at
June 30, 2015. The decrease in deposits during the second quarter of 2016 was primarily attributable to a $183 million
decline in seasonal municipal deposit accounts. The increase in total deposits during the twelve months ended June 30,
2016 was attributable to organic growth in customer deposits of $268 million, or 3.8%, which was partially offset by
a decrease of $96 million related to maturing brokered deposits that were acquired in the Lake Michigan transaction.
Securities sold under agreements to repurchase with customers were $256 million at June 30, 2016, compared to $283
million at March 31, 2016 and $305 million at June 30, 2015. Short-term borrowings were $300 million at June 30,
2016 and $227 million at June 30, 2015 (there were none at March 31, 2016) and consisted of short-term FHLB
advances utilized by the Corporation to fund short-term liquidity needs. Long-term borrowings were $372 million at
June 30, 2016, compared to $274 million at March 31, 2016 and $148 million at June 30, 2015. The increase in shortterm
and long-term borrowings during the second quarter of 2016 was attributable to the Corporation's liquidity needs
to replace the seasonal decrease in municipal deposit accounts and to partially fund loan growth. During the second
quarter of 2016, the Corporation borrowed $100 million of long-term FHLB advances that mature in three years at a
fixed rate of 1.00%.
At June 30, 2016, the Corporation's tangible equity to tangible assets ratio and total risk-based capital ratio were 8.2%
and 11.4%, respectively, compared to 8.2% and 11.5%, respectively, at March 31, 2016 and 7.8% and 11.6%,
respectively, at June 30, 2015. At June 30, 2016, the Corporation's book value was $27.45 per share, compared to
$26.99 per share at March 31, 2016 and $25.74 per share at June 30, 2015. At June 30, 2016, the Corporation's tangible
book value was $19.68 per share, compared to $19.20 per share at March 31, 2016 and $17.89 per share at June 30,
2015.
This press release contains references to financial measures which are not defined in generally accepted accounting
principles ("GAAP"). Such non-GAAP financial measures include the Corporation's tangible equity to tangible assets
ratio, tangible book value per share, presentation of net interest income and net interest margin on a fully taxable
equivalent (FTE) basis, and information presented excluding transaction expenses, including net income, diluted
earnings per share, return on average assets, return on average shareholders' equity and operating expenses. These non-
GAAPfinancial measures have been included as the Corporation believes they are helpful for investors to analyze and
evaluate the Corporation's financial condition. Reconciliations of non-GAAP financial measures may be found in the
financial tables included with this press release.
Chemical Financial Corporation will host a conference call to discuss its second quarter 2016 operating results on
Wednesday, July 27, 2016, at 10:30 a.m. ET. Anyone interested may access the conference call on a live basis by
dialing toll-free at 1-800-930-7709 and entering 485377 for the conference ID. The call will also be broadcast live
over the Internet hosted at Chemical Financial Corporation's website at www.chemicalbankmi.com under the "Investor
Info" section. Acopy of the slide-show presentation and an audio replay of the call will remain available on Chemical
Financial Corporation's website for at least 14 days.

Chemical Financial Corporation is the second largest banking company headquartered and operating branch offices
in Michigan. The Corporation operates through its subsidiary bank, Chemical Bank, with 175 banking offices spread
over 47 counties in Michigan. At June 30, 2016, the Corporation had total assets of $9.5 billion. Chemical Financial
Corporation's common stock trades on The NASDAQ Stock Market under the symbol CHFC and is one of the issues
comprising The NASDAQ Global Select Market. More information about the Corporation is available by visiting the
investor relations section of its website at www.chemicalbankmi.com.
Forward-Looking Statements
This press release contains forward-looking statements that are based on management's beliefs, assumptions, current
expectations, estimates and projections about the financial services industry, the economy and the Corporation. Words
and phrases such as "anticipates," "believes," "continue," "estimates," "expects," "forecasts," "future," "intends," "is
likely," "judgment," "look ahead," "look forward," "on schedule," "opinion," "opportunity," "plans," "potential,"
"predicts," "probable," "projects," "should," "strategic," "trend," "will," and variations of such words and phrases or
similar expressions are intended to identify such forward-looking statements. Such statements are based upon current
beliefs and expectations and involve substantial risks and uncertainties which could cause actual results to differ
materially from those expressed or implied by such forward-looking statements. These statements include, among
others, statements related to future levels of loan charge-offs, future levels of provisions for loan losses, real estate
valuation, future levels of nonperforming assets, the rate of asset dispositions, future capital levels, future dividends,
future growth and funding sources, future liquidity levels, future profitability levels, future deposit insurance premiums,
future asset levels, the effects on earnings of future changes in interest rates, the future level of other revenue sources,
future economic trends and conditions, future initiatives to expand the Corporation’s market share, expected
performance and cash flows from acquired loans, future effects of new or changed accounting standards, future
opportunities for acquisitions, opportunities to increase top line revenues, the Corporation’s ability to grow its core
franchise, future cost savings and the Corporation’s ability to maintain adequate liquidity and capital based on the
requirements adopted by the Basel Committee on Banking Supervision and U.S. regulators. All statements referencing
future time periods are forward-looking.
Management's determination of the provision and allowance for loan losses; the carrying value of acquired loans,
goodwill and mortgage servicing rights; the fair value of investment securities (including whether any impairment on
any investment security is temporary or other-than-temporary and the amount of any impairment); and management's
assumptions concerning pension and other postretirement benefit plans involve judgments that are inherently forwardlooking.
There can be no assurance that future loan losses will be limited to the amounts estimated. All of the information
concerning interest rate sensitivity is forward-looking. The future effect of changes in the financial and credit markets
and the national and regional economies on the banking industry, generally, and on the Corporation, specifically, are
also inherently uncertain. These statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extent, likelihood and
degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or
forecasted in such forward-looking statements. The Corporation undertakes no obligation to update, amend or clarify
forward-looking statements, whether as a result of new information, future events or otherwise.
This press release also contains forward-looking statements regarding Chemical's outlook or expectations with respect
to its planned merger with Talmer Bancorp, Inc. ("Talmer"), the expected costs to be incurred in connection with the
transaction, the expected impact of the transaction on Chemical's future financial performance and consequences of
the integration of Talmer into Chemical.
Risk factors relating both to the transaction and the integration of Talmer into Chemical after closing include, without
limitation:
• Completion of the transaction is dependent on, among other things, receipt of regulatory approvals, the timing
of which cannot be predicted with precision at this point and which may not be received at all.
• The impact of the completion of the transaction on Chemical's financial statements will be affected by the
timing of the transaction.
• The transaction may be more expensive to complete and the anticipated benefits, including anticipated cost
savings and strategic gains, may be significantly harder or take longer to achieve than expected or may not be
achieved in their entirety as a result of unexpected factors or events.
• The integration of Talmer’s business and operations into Chemical, which will include conversion of Talmer’s
operating systems and procedures, may take longer than anticipated or be more costly than anticipated or have
unanticipated adverse results relating to Chemical's or Talmer’s existing businesses.
• Chemical’s ability to achieve anticipated results from the transaction is dependent on the state of the economic
and financial markets going forward. Specifically, Chemical may incur more credit losses than expected and
customer and employee attrition may be greater than expected.
• The outcome of pending or threatened litigation, whether currently existing or commencing in the future,
including litigation related to the transaction.
• The effect of divestitures that may be required by regulatory authorities in certain markets in which Chemical
and Talmer compete.
• The challenges of integrating, retaining and hiring key personnel.
• Failure to attract new customers and retain existing customers in the manner anticipated.
In addition, risk factors include, but are not limited to, the risk factors described in Item 1A of Chemical's Annual
Report on Form 10-K for the year ended December 31, 2015. These and other factors are representative of the risk
factors that may emerge and could cause a difference between an ultimate actual outcome and a preceding forwardlooking
statement.