Chemical Financial Corporation (NASDAQ:CHFC) Q1 2018 Earnings Conference Call Transcript

Apr 25, 2018 • 10:30 am ET

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Chemical Financial Corporation (NASDAQ:CHFC) Q1 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Chemical Financial Corporation First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, today's conference is being recorded.

Chemical would like to remind you that a copy of today's earnings release can be accessed by logging onto chemicalbank.com and selecting the investor information tab at the top of the website. Also included is a slide presentation on our Investor information page with supplemental information that will be referenced in today's call.

With us today are David Provost, CEO and President of Chemical Financial Corporation; Thomas Shafer, Vice Chairman Chemical Financial Corporation and CEO of Chemical Bank, and Dennis Klaeser, Chief Financial Officer. After brief comments from management, the call will be opened to your questions.

Before we begin, the Corporation would like to caution listeners that this conference call may contain forward-looking statements about Chemical, its business, strategies, and prospects. Please refer to the forward-looking statements disclaimer in our earnings release, our periodic filings with the SEC including our Annual Report and Pages 2 to 3 of slide presentation for a description of risks and uncertainties that could cause actual results to differ materially from those reflected in forward-looking statements.

On today's call, we'll also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in the slide presentation.

And now, I'd like to turn the conference over to David Provost.

Executive
David T. Provost

Thank you and good morning everyone. We are pleased with our strong earnings result of $70.2 million for the quarter and earnings per diluted share of $0.97 for the quarter. This is up 11% from the fourth quarter of 2017, excluding significant items, and up 39% compared to the first quarter of 2017, excluding significant items.

Our earnings results were driven by strong growth in our net interest income, helped by improvement in our net interest margin as our loan yields increased the benefit from the effects of repositioning our investment securities portfolio at the end of last year and the reduction in the federal corporate tax rate.

While our earnings were strong in the quarter, our loan growth was lower than previously anticipated as we reduced our exposure to lower margin indirect auto lending and slow the addition to our residential mortgage portfolio to position us to expand our higher yielding loan portfolios as the interest rates move upward.

We reduced our total outstanding consumer installment loans by $41 million in the quarter and grew our residential mortgage portfolio by only $12 million in the first quarter compared to $31 million in the fourth quarter of 2017. We have an optimistic outlook as we begin reinvesting a position -- a portion of our cost savings we created from the restructuring efforts we took in the second half of last year in the top notch commercial