CHFC 2018 Annual Report

ar Ended December 31, (Dollars in thousands, except per share data) 2018 2017 2016 2015 2014 Reconciliation of Non-GAAP Operating Results Net Income Net income, as reported $ 284,020 $ 149,523 $ 108,032 $ 86,830 $ 62,121 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 $ 284,020 $ 219,556 $ 143,727 $ 92,314 $ 66,676 Diluted Earnings Per Share Diluted earnings per share, as reported $ 3.94 $ 2.08 $ 2.17 $ 2.39 $ 1.97 Effect of significant items, net of tax — 0.98 0.71 0.15 0.14 Diluted earnings per share, excluding significant items $ 3.94 $ 3.06 $ 2.88 $ 2.54 $ 2.11 Return on Average Assets Return on average assets, as reported 1.41% 0.81% 0.90% 1.02% 0.96% Effect of significant items, net of tax — 0.38 0.29 0.07 0.07 Return on average assets, excluding significant items 1.41% 1.19% 1.19% 1.09% 1.03% Return on Average Shareholders' Equity Return on average shareholders' equity, as reported 10.4% 5.7% 7.0% 9.4% 8.2% Effect of significant items, net of tax — 2.7 2.3 0.6 0.6 Return on average shareholders' equity, excluding significant items 10.4% 8.4% 9.3% 10.0% 8.8% Return on Average Tangible Shareholders' Equity Average shareholders' equity $ 2,740,399 $ 2,627,862 $ 1,546,721 $ 919,328 $ 754,211 Average goodwill, CDI and noncompete agreements, net of tax 1,156,371 1,155,734 582,536 245,894 157,634 Average tangible shareholders' equity $ 1,584,028 $ 1,472,128 $ 964,185 $ 673,434 $ 596,577 Return on average tangible shareholders' equity 17.9% 10.2% 11.2% 12.9% 10.4% Effect of significant items, net of tax — 4.7 3.7 0.8 0.8 Return on average tangible shareholders' equity, excluding significant items 17.9% 14.9% 14.9% 13.7% 11.2% Efficiency Ratio Net interest income $ 632,333 $ 557,578 $ 381,081 $ 274,008 $ 212,551 Noninterest income 148,536 144,019 122,350 80,216 63,095 Total revenue - GAAP 780,869 701,597 503,431 354,224 275,646 Net interest income FTE adjustment 9,458 13,078 9,642 7,452 5,975 Loan servicing rights change in fair value (gains) losses (1,827) 6,375 (5,112) — — Gains on sale of branch offices — — (7,391) — — (Gains) losses from closed branch locations and sale of investment securities (224) 7,388 (669) (779) — Total revenue - non-GAAP $ 788,276 $ 728,438 $ 499,901 $ 360,897 $ 281,621 Operating expenses - GAAP $ 424,198 $ 421,994 $ 338,418 $ 223,894 $ 179,925 Merger expenses — (8,522) (61,134) (7,804) (6,388) Restructuring expenses — (19,880) — — — Impairment of income tax credits (3) (12,284) (9,252) — — — Operating expense, core - Non-GAAP 411,914 384,340 277,284 216,090 173,537 Amortization of intangibles (5,716) (6,089) (5,524) (4,389) (2,029) Operating expenses, efficiency ratio - Non-GAAP $ 406,198 $ 378,251 $ 271,760 $ 211,701 $ 171,508 Efficiency ratio - GAAP 54.3% 60.1% 67.2% 63.2% 65.3% Efficiency ratio - adjusted Non-GAAP 51.5% 51.9% 54.4% 58.7% 60.9% (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 income tax credits is related to federal historic tax credits 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. 48