CHFC 2018 Annual Report

Chemical Financial Corporation Consolidated Statements of Cash Flows Year Ended December 31, (Dollars in thousands) 2018 2017 2016 Cash flows from operating activities Net income $ 284,020 $ 149,523 $ 108,032 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 30,750 23,300 14,875 Gains on sales of loans (12,173) (31,734) (15,686) Proceeds from sales of loans 741,902 838,549 723,521 Loans originated for sale (760,591) (772,968) (534,422) Net losses (gains) on sale of investment securities (224) 7,388 (129) Net losses (gains) from sales/writedowns of other real estate and repossessed assets 203 (1,017) (5,212) Depreciation of premises and equipment 17,026 17,722 13,270 Amortization of intangible assets 5,716 6,090 10,046 Additions to loan servicing rights (8,226) (8,745) (4,333) Valuation change in loan servicing rights 1,054 8,880 (4,585) Net amortization of premiums and discounts on investment securities 19,446 19,262 9,713 Share-based compensation expense 8,578 17,346 13,452 Deferred income tax expense 41,916 93,184 24,091 Change in deferred tax valuation allowance 317 (1,089) (706) Net increase in interest receivable and other assets (74,723) (150,585) (24,977) Net increase (decrease) in interest payable and other liabilities 29,410 59,760 (46,449) Net cash provided by operating activities 324,401 274,866 280,501 Cash flows from investing activities Investment securities — carried at fair value: Proceeds from maturities, calls and principal reductions 291,008 318,952 248,772 Proceeds from sales and redemptions 4,215 409,220 41,446 Purchases (1,405,798) (1,480,524) (187,702) Investment securities — held-to-maturity: Proceeds from maturities, calls and principal reductions 104,535 93,600 90,933 Purchases (52,752) (141,489) (206,023) Net increase in loans (1,140,686) (1,189,865) (860,135) Proceeds from sales of other real estate and repossessed assets 13,396 19,879 22,147 Purchases of premises and equipment, net of disposals (13,572) (12,852) (18,098) Proceeds from returns of investment in equity method investments 326 143 77 Cash acquired, net of cash paid, in business combinations — — 325,714 Net cash used in investing activities (2,199,328) (1,982,936) (542,869) Cash flows from financing activities Net increase in interest and noninterest-bearing demand deposits and savings accounts 1,111,747 243,110 672,584 Net increase (decrease) in time deposits 838,732 526,571 (550,847) Net increase in collateralized customer deposits and other short-term borrowings 2,451 1,247,189 401,144 Proceeds from issuance of long-term borrowings 200,000 — 375,000 Repayment of long-term borrowings (147,000) (224,850) (351,018) Cash dividends paid (88,954) (78,498) (49,389) Proceeds from directors' stock plans and exercise of stock options, net of shares withheld 3,115 3,991 1,572 Cash paid for payroll taxes upon conversion of share-based awards (5,316) (27,854) (1,065) Net cash provided by financing activities 1,914,775 1,689,659 497,981 Net increase (decrease) in cash and cash equivalents 39,848 (18,411) 235,613 Cash and cash equivalents at beginning of year 455,991 474,402 238,789 Cash and cash equivalents at end of year $ 495,839 $ 455,991 $ 474,402 Supplemental disclosures of cash flow information: Interest paid $ 136,706 $ 73,643 $ 25,460 Income tax payments, net 4,063 2,252 22,200 Non-cash activities: Loans transferred to other real estate and repossessed assets 11,486 11,546 12,970 Net transfer of loans held-for-sale to loans held- for-investment (2,035) (4,150) (289) Closed branch offices transferred to other assets — 13,246 4,846 Business combinations: Fair value of tangible assets acquired (noncash) — 420 6,371,781 Goodwill, loan servicing rights and other identifiable intangible assets acquired — 1,034 908,217 Liabilities assumed — 1,454 6,100,901 Common stock and stock options issued — — 1,504,811 See accompanying notes to Consolidated Financial Statements. 87