CHFC 2017 Annual Report

impacts the market value of trust assets and the related investment fees. Wealth management revenue was $25.5 million in 2017, $22.6 million in 2016 and $20.6 million in 2015. Wealth management revenue increased $2.9 million, or 12.9%, in 2017, compared to 2016, and wealth management revenue increased $2.0 million, or 10.0%, in 2016, compared to 2015, with the increases due primarily to a combination of improving equity market performance that led to increased assets under management, growth in assets under management resulting from new customer accounts and the impact of our merger with Talmer. At December 31, 2017, the estimated fair value of trust assets under administration was $5.13 billion (including discretionary assets of $2.67 billion and nondiscretionary assets of $2.46 billion), compared to $4.41 billion at December 31, 2016 (including discretionary assets of $2.43 billion and nondiscretionary assets of $1.97 billion), and $3.71 billion at December 31, 2015 (including discretionary assets of $2.11 billion and nondiscretionary assets of $1.60 billion). Wealth management revenue also includes fees from the sale of investment products offered through the Chemical Financial Advisors program. Fees from this program totaled $5.2 million in 2017, compared to $4.7 million in 2016 and $3.9 million in 2015. We had customer assets in the Chemical Financial Advisors program of $1.31 billion at December 31, 2017, compared to $1.15 billion at December 31, 2016 and $0.87 billion at December 31, 2015. Electronic banking fees, which represent income earned fromATM transactions, debit card activity and internet banking fees, were $24.2 million in 2017, $23.4 million in 2016 and $19.1 million in 2015. Electronic banking fees increased $0.8 million, or 3.5%, in 2017, compared to 2016, and increased $4.3 million, or 22.6%, in 2016, compared to 2015. The slight increase in electronic banking fees in 2017, compared to 2016, was primarily due to a combination of a higher volume of customers due to our merger with Talmer, partially offset by a reduction in interchange fees resulting from limitations set by the Durbin amendment, which became effective for us on July 1, 2017. Net gain on sale of loans and other mortgage banking revenue ("MBR") includes revenue from originating, selling and servicing residential mortgage loans for the secondary market and other loan sales. MBR was $32.2 million in 2017, $21.9 million in 2016 and $6.1 million in 2015. MBR increased $10.3 million, or 47.3%, in 2017, compared to 2016, due primarily to the impact of our merger with Talmer and a higher volume of loans sold in the secondary market. These increases were partially offset by the change in fair value in loan servicing rights recognized, which was a detriment of $6.4 million in 2017, compared to income of $5.1 million in 2016. MBR increased $15.7 million, in 2016, compared to 2015, due primarily to the impact of our merger with Talmer and a higher volume of loans sold in the secondary market. We sold $806.8 million of residential mortgage loans in the secondary market during 2017, compared to $707.8 million during 2016 and $222.6 million during 2015. At December 31, 2017, we were servicing $7.11 billion of residential mortgage loans that had been originated in our market areas and subsequently sold in the secondary market, compared to $7.37 billion at December 31, 2016 and $2.08 billion at December 31, 2015. We sell residential mortgage loans in the secondary market on both a servicing retained and servicing released basis. These sales include our entering into residential mortgage loan sale agreements with buyers in the normal course of business. The agreements contain provisions that include various representations and warranties regarding the origination, characteristics and underwriting of the mortgage loans. The recourse of the buyer may result in either indemnification of the loss incurred by the buyer or a requirement for us to repurchase a loan that the buyer believes does not comply with the representations included in the loan sale agreement. Repurchase demands and loss indemnifications received are reviewed by a senior officer on a loan-by- loan basis to validate the claim made by the buyer. We maintain a reserve for probable losses expected to be incurred from loans previously sold in the secondary market. This contingent liability is based on trends in repurchase and indemnification requests, actual loss experience, information requests, known and inherent risks in the sale of loans in the secondary market and current economic conditions. We record losses resulting from the repurchase of loans previously sold in the secondary market, as well as adjustments to estimates of future probable losses, as part of its MBR in the period incurred. The reserve for probable losses was $5.3 million at December 31, 2017, compared to $6.5 million at December 31, 2016. All other categories of noninterest income-other fees for customer services, insurance commissions, (loss) gain on investment securities, bank-owned life insurance, rental income, gain on sale of branch offices (in 2016), gain on sale of closed branch offices and other assets (in 2015) and other noninterest income-totaled $27.1 million in 2017, $18.9 million in 2016 and $8.9 million in 2015. (Loss) gain on investment securities for 2017 included the loss incurred on the sales of investment securities late in the fourth quarter of 2017 as part of our treasury and tax management objectives following the signing of the Tax Cuts and Jobs Act. Other fees for customer services include revenue from safe deposit boxes, credit card referral fees, wire transfer fees, letter of credit fees and other fees for services. The increase in all other categories of noninterest income during 2017, compared to 2016 and 2015, was largely attributable to incremental revenue resulting from the impact of our merger with Talmer. 71