CHFC 2018 Annual Report

growth in customer deposit accounts. Overdraft/non-sufficient funds fees included in service charges and fees on deposit accounts were $22.3 million in 2018, compared to $25.1 million in 2017 and $21.0 million in 2016. Wealth management revenue is comprised of investment fees that are generally based on the market value of assets within a trust account, custodial account fees and fees from the sale of investment products. Volatility in the equity and bond markets impacts the market value of trust assets and our related investment fees. Wealth management revenue was $26.0 million in 2018, $25.5 million in 2017 and $22.6 million in 2016. Wealth management revenue increased $0.5 million, or 1.9%, in 2018, compared to 2017, and increased $2.9 million, or 12.9%, in 2017, compared to 2016. The increase in 2017, compared to 2016, was primarily due to increases in average trust assets under administration and fees from the sale of investment products. At December 31, 2018, the estimated fair value of trust assets under administration was $4.60 billion (including discretionary assets of $2.42 billion and nondiscretionary assets of $2.19 billion), compared to $5.13 billion at December 31, 2017 (including discretionary assets of $2.67 billion and nondiscretionary assets of $2.46 billion), and $4.41 billion at December 31, 2016 (including discretionary assets of $2.43 billion and nondiscretionary assets of $1.97 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 $5.4 million in 2018, compared to $5.2 million in 2017 and $4.7 million in 2016. We had customer assets in the Chemical Financial Advisors program of $1.17 billion at December 31, 2018, compared to $1.31 billion at December 31, 2017 and $1.15 billion at December 31, 2016. Electronic banking fees, which represent income earned fromATM transactions, debit card activity and internet banking fees, were $16.8 million in 2018, $22.6 million in 2017 and $22.1 million in 2016. Electronic banking fees decreased $5.8 million, or 25.9%, in 2018, compared to 2017, primarily due to a reduction in interchange fees resulting from limitations set by the Durbin amendment, which became effective for us on July 1, 2017. Electronic banking fees increased $0.5 million, or 2.4%, in 2017, compared to 2016, primarily due to a combination of higher volume of customers due to our merger with Talmer, partially offset by a reduction in interchange fees resulting from limitation set by the Durbin amendment. 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, other loan sales and the change in fair value in loan servicing rights. MBR was $35.2 million in 2018, $32.2 million in 2017 and $21.9 million in 2016. MBR increased $3.0 million, or 9.3%, in 2018, compared to 2017, due primarily to the change in the impact to earnings from the change in fair value in loan servicing rights, partially offset by a decrease in loan sales. 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, partially offset by the change in the impact to earnings from the change in fair value in loan servicing rights. The change in fair value in loan servicing rights resulted in income of $1.8 million in 2018, compared to a loss of $6.4 million in 2017 and income of $5.1 million in 2016. We sold $729.7 million of residential mortgage loans in the secondary market during 2018, compared to $806.8 million during 2017 and $707.8 million during 2016. At December 31, 2018, we were servicing $6.87 billion of residential mortgage loans that had been originated in our market areas and subsequently sold in the secondary market, compared to $7.11 billion at December 31, 2017 and $7.37 billion at December 31, 2016. We sell residential mortgage loans in the secondary market on both a servicing retained and servicing released basis. Our sales transactions require us to enter 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 by us 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 our MBR in the period incurred. Our reserve for probable losses was $4.1 million at December 31, 2018, compared to $5.3 million at December 31, 2017 and $6.5 million at December 31, 2016. All other categories of noninterest income, including other fees for customer services, insurance commissions, gain (loss) on sale of investment securities, bank-owned life insurance, rental income, gain on sale of branch offices (in 2016), and other noninterest income totaled $33.5 million in 2018, $25.3 million in 2017 and $25.1 million in 2016. Gain (loss) 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. 75