CHFC 2017 Annual Report

Year Ended December 31, (Dollars in thousands, except per share data) 2017 2016 2015 2014 2013 Reconciliation of Non-GAAP Operating Results Net Income Net income, as reported $ 149,523 $ 108,032 $ 86,830 $ 62,121 $ 56,808 Merger expenses 8,522 61,134 7,804 6,388 — Restructuring expenses 19,880 — — — — Gain on sales of branch offices — (7,391) — — — Losses on sales of investment securities (1) 7,556 — — — — Significant items 35,958 53,743 7,804 6,388 — Income tax benefit (2) (12,585) (18,048) (2,320) (1,833) — Revaluation of net deferred tax assets 46,660 — — — — Significant items, net of tax 70,033 35,695 5,484 4,555 — Net income, excluding significant items $ 219,556 $ 143,727 $ 92,314 $ 66,676 $ 56,808 Diluted Earnings Per Share Diluted earnings per share, as reported $ 2.08 $ 2.17 $ 2.39 $ 1.97 $ 2.00 Effect of significant items, net of tax 0.98 0.71 0.15 0.14 — Diluted earnings per share, excluding significant items $ 3.06 $ 2.88 $ 2.54 $ 2.11 $ 2.00 Return on Average Assets Return on average assets, as reported 0.81% 0.90% 1.02% 0.96% 0.95% Effect of significant items, net of tax 0.38 0.29 0.07 0.07 — Return on average assets, excluding significant items 1.19% 1.19% 1.09% 1.03% 0.95% Return on Average Shareholders' Equity Return on average shareholders' equity, as reported 5.7% 7.0% 9.4% 8.2% 9.1% Effect of significant items, net of tax 2.7 2.3 0.6 0.6 — Return on average shareholders' equity, excluding significant items 8.4% 9.3% 10.0% 8.8% 9.1% Return on Average Tangible Shareholders' Equity Average shareholders' equity $ 2,627,862 $ 1,546,721 $ 919,328 $ 754,211 $ 626,555 Average goodwill, CDI and noncompete agreements, net of tax 1,155,734 582,536 245,894 157,634 127,363 Average tangible shareholders' equity $ 1,472,128 $ 964,185 $ 673,434 $ 596,577 $ 499,192 Return on average tangible shareholders' equity 10.2% 11.2% 12.9% 10.4% 11.4% Efficiency Ratio Net interest income $ 557,578 $ 381,081 $ 274,008 $ 212,551 $ 196,647 Noninterest income 144,019 122,350 80,216 63,095 60,409 Total revenue - GAAP 701,597 503,431 354,224 275,646 257,056 Net interest income FTE adjustment 13,077 9,642 7,452 5,975 5,355 Loan servicing rights change in fair value (gains) losses 6,375 (5,112) — — — Gains on sale of branch offices — (7,391) — — — Gains from closed branch locations and sale of investment securities 7,388 (669) (779) — (1,133) Total revenue - non-GAAP $ 728,437 $ 499,901 $ 360,897 $ 281,621 $ 261,278 Operating expenses - GAAP $ 421,994 $ 338,418 $ 223,894 $ 179,925 $ 164,948 Merger expenses (8,522) (61,134) (7,804) (6,388) — Restructuring expenses (19,880) — — — — Impairment of federal income tax credits (3) (9,252) — — — — Operating expense, core - Non-GAAP 384,340 277,284 216,090 173,537 164,948 Amortization of intangibles (6,089) (5,524) (4,389) (2,029) (1,909) Operating expenses, efficiency ratio - Non-GAAP $ 378,251 $ 271,760 $ 211,701 $ 171,508 $ 163,039 Efficiency ratio - GAAP 60.1% 67.2% 63.2% 65.3% 64.2% Efficiency ratio - adjusted Non-GAAP 51.9% 54.4% 58.7% 60.9% 62.4% (1) Fourth quarter of 2017 losses on sales of investment securities are deemed a significant item for 2017 as they were taken as part of our treasury and tax management objectives associated with the Tax Cuts and Jobs Act. (2) Assumes merger expenses are deductible at an income tax rate of 35%, except for the impact of estimated nondeductible expenses incurred in periods when merger and acquisition transactions are completed. (3) The impairment of federal income tax credits is related to federal historic tax credits placed into service during the period that provide a reduction to our income tax expense. The impairment, included within other operating expenses, is more than offset by a reduction to our income tax expense related to the same tax credits included within other operating expenses. 44