CHFC 2017 Annual Report

Chemical Financial Corporation Consolidated Statements of Cash Flows Year Ended December 31, (Dollars in thousands) 2017 2016 2015 Cash flows from operating activities Net income $ 149,523 $ 108,032 $ 86,830 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 23,300 14,875 6,500 Gains on sales of loans (31,734) (15,686) (6,354) Proceeds from sales of loans 838,549 723,521 228,995 Loans originated for sale (772,968) (534,422) (220,765) Net losses (gains) on sale of investment securities 7,388 (129) (630) Net gains from sales/writedowns of other real estate and repossessed assets (1,017) (5,212) (2,681) Depreciation of premises and equipment 17,722 13,270 11,028 Amortization of intangible assets 6,090 10,046 8,444 Additions to loan servicing rights (8,745) (4,333) (1,476) Valuation change in loan servicing rights 8,880 (4,585) (200) Net amortization of premiums and discounts on investment securities 19,262 9,713 6,007 Share-based compensation expense 17,346 13,452 3,478 Deferred income tax expense 93,184 24,091 5,700 Net increase in interest receivable and other assets (151,531) (25,606) (19,027) Net increase (decrease) in interest payable and other liabilities 59,760 (46,449) (2,800) Net cash from operating activities 275,009 280,578 103,049 Cash flows from investing activities Investment securities — available-for-sale: Proceeds from maturities, calls and principal reductions 318,952 248,772 212,051 Proceeds from sales and redemptions 409,220 41,446 40,301 Purchases (1,480,524) (187,702) — Investment securities — held-to-maturity: Proceeds from maturities, calls and principal reductions 93,600 90,933 87,189 Purchases (141,489) (206,023) (279,226) Net increase in loans (1,189,865) (860,135) (493,776) Proceeds from sales of other real estate and repossessed assets 19,879 22,147 16,653 Purchases of premises and equipment, net of disposals (12,852) (18,098) (8,527) Cash acquired, net of cash paid, in business combinations — 325,714 16,551 Net cash used in investing activities (1,983,079) (542,946) (408,784) Cash flows from financing activities Net increase in interest- and noninterest-bearing demand deposits and savings accounts 243,110 672,584 479,386 Net increase (decrease) in time deposits 526,571 (550,847) (170,598) Net increase (decrease) in securities sold under agreements to repurchase with customers and other short-term borrowings 1,247,189 401,144 (31,268) Proceeds from issuance of long-term borrowings — 375,000 125,000 Repayment of long-term borrowings (224,850) (351,018) (6,000) Cash dividends paid (78,498) (49,389) (36,918) Proceeds from directors' stock plans and exercise of stock options, net of shares withheld 3,991 1,572 2,473 Cash paid for payroll taxes upon conversion of share-based awards (27,854) (1,065) (571) Net cash from financing activities 1,689,659 497,981 361,504 Net increase (decrease) in cash and cash equivalents (18,411) 235,613 55,769 Cash and cash equivalents at beginning of year 474,402 238,789 183,020 Cash and cash equivalents at end of year $ 455,991 $ 474,402 $ 238,789 Supplemental disclosures of cash flow information: Interest paid $ 73,643 $ 25,460 $ 16,958 Net income tax payments 2,252 22,200 41,450 Non-cash activities: Loans transferred to other real estate and repossessed assets 11,546 12,970 9,329 Net transfer of loans held-for-sale to loans held- for-investment (4,150) (289) — Closed branch offices transferred to other assets 13,246 4,846 2,692 Business combinations: Fair value of tangible assets acquired (noncash) 420 6,371,781 1,282,420 Goodwill, loan servicing rights and other identifiable intangible assets acquired 1,034 908,217 118,744 Liabilities assumed 1,454 6,100,901 1,258,051 Common stock and stock options issued — 1,504,811 159,904 See accompanying notes to Consolidated Financial Statements. 83