Chemical Financial Corporation Reports Third Quarter of 2013 Results

MIDLAND, Mich., Oct. 28, 2013 (GLOBE NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced 2013 third quarter net income of $15.0 million, or $0.53 per diluted share, compared to 2013 second quarter net income of $14.2 million, or $0.51 per diluted share, and 2012 third quarter net income of $13.1 million, or $0.48 per diluted share. For the nine months ended September 30, 2013, net income was $42.4 million, or $1.53 per diluted share, an increase of 7.0% on a diluted per share basis compared to net income for the nine months ended September 30, 2012 of $39.3 million, or $1.43 per diluted share.

As previously announced, on September 18, 2013 the Corporation completed an underwritten public offering of 2,213,750 shares of its common stock, including 288,750 shares of common stock that were issued and sold upon the exercise in full of the underwriters' over-allotment option, at a price of $26.00 per share to the public. After the underwriting discount and other offering related expenses, the Corporation netted proceeds of approximately $54 million from the offering. The Corporation intends to use the net proceeds from the offering for general corporate purposes, which may include funding loan growth and long-term strategic opportunities that may arise in the future.

"Strong loan growth and cost discipline drove another solid earnings performance in the third quarter, with net income up over 5% from last quarter and over 14% from the third quarter of 2012. We are experiencing broad-based loan growth across all portfolio segments, attributable to a gradually improving economy and competitive gains, as we have continued to solidify Chemical Bank's position as the financial institution of choice in the Michigan markets we serve. At the same time, asset quality continues to improve, and is reflected in lower credit-related costs, lower charge-offs, and improving portfolio metrics," said David B. Ramaker, Chairman, Chief Executive Officer and President. "We were pleased by the market's reception to our recently completed public stock offering and will continue to prudently deploy the Corporation's capital on behalf of our shareholders. To that end, we continue to believe we are well positioned to take advantage of consolidation in Michigan's banking industry," Ramaker added.

Net income of $15.0 million in the third quarter of 2013 was $0.8 million, or 5.6%, higher than the second quarter of 2013, with higher net interest income and lower operating expenses in the third quarter of 2013 partially offset by lower noninterest income. Net income in the third quarter of 2013 was $1.9 million, or 14.4%, higher than the third quarter of 2012, attributable to a combination of higher net interest income, higher noninterest income and a lower provision for loan losses, all of which were partially offset by higher operating expenses.

The Corporation's return on average assets was 1.00% during the third quarter of 2013, compared to 0.97% in the second quarter of 2013 and 0.96% in the third quarter of 2012. The Corporation's return on average shareholders' equity was 9.6% in the third quarter of 2013, compared to 9.4% in the second quarter of 2013 and 8.8% in the third quarter of 2012.

The net interest margin (on a tax-equivalent basis) was 3.58% in the third quarter of 2013, compared to 3.60% in the second quarter of 2013 and 3.76% in the third quarter of 2012. The slight decrease in the net interest margin in the third quarter of 2013, compared to the second quarter of 2013, was attributable to an increase in total assets resulting from seasonal deposits. The decrease in the net interest margin in the third quarter of 2013, compared to the third quarter of 2012, was primarily attributable to the acquisition of 21 branch banking offices in December 2012 (branch acquisition transaction), in which the Corporation acquired $339 million in cash and $44 million in loans. The Corporation partially invested the cash acquired in the branch acquisition transaction in short-term investment securities and utilized the remainder to fund loan growth.

Net interest income was $49.3 million in the third quarter of 2013, $0.9 million higher than the second quarter of 2013 and $2.4 million higher than the third quarter of 2012. The increase in net interest income in the third quarter of 2013 over the second quarter of 2013 was largely attributable to continued loan growth in the third quarter of 2013. Total loans grew $187 million, or 4.3%, in the third quarter of 2013. The increase in net interest income in the third quarter of 2013 over the third quarter of 2012 was also largely attributable to loan growth of $504 million, or 12.5%, over the twelve months ended September 30, 2013.

The provision for loan losses was $3.0 million in both the third quarter of 2013 and the second quarter of 2013, compared to $4.5 million in the third quarter of 2012. The provision for loan losses in the third quarter of 2013 was maintained at the same level as the second quarter of 2013, despite continued improvement in the credit quality of the loan portfolio, due to the significant growth in the loan portfolio during the third quarter. The lower provision for loan losses in the third quarter of 2013, as compared to the third quarter of 2012, was attributable to a combination of lower loan charge-offs and continued improvement in the credit quality of the loan portfolio. Net loan charge-offs were $3.7 million, or 0.33% of average loans, in the third quarter of 2013, compared to $3.7 million, or 0.34% of average loans, in the second quarter of 2013 and $6.5 million, or 0.65% of average loans, in the third quarter of 2012.

Noninterest income was $14.6 million in the third quarter of 2013, compared to $15.9 million in the second quarter of 2013 and $12.7 million in the third quarter of 2012. Noninterest income in the third quarter of 2013 and the second quarter of 2013 included nonrecurring income of $0.2 million and $0.5 million, respectively. Excluding this nonrecurring income, noninterest income in the third quarter of 2013 was $1.0 million lower than the second quarter of 2013, with the decrease primarily attributable to a $0.6 million decline in mortgage banking revenue and a $0.5 million decline in wealth management revenue. Noninterest income, excluding nonrecurring income, in the third quarter of 2013 was $1.7 million higher than the third quarter of 2012, with the increase attributable to increases across all major categories of noninterest income other than mortgage banking revenue, that was partially driven by growth in the volume of services provided and additional fees and revenue earned as a result of the branch acquisition transaction.

Mortgage banking revenue of $1.0 million in the third quarter of 2013 was $0.6 million, or 37%, lower than the second quarter of 2013 and $0.4 million, or 29%, lower than the third quarter of 2012. The decreases in mortgage banking revenue in the third quarter of 2013, compared to both the second quarter of 2013 and the third quarter of 2012, were primarily attributable to declines in the volume of loans sold in the secondary market. The Corporation sold $45 million of residential mortgage loans in the secondary market in the third quarter of 2013, compared to $62 million in the second quarter of 2013 and $71 million in the third quarter of 2012. While there was a decline in the volume of loans sold in the secondary market, the Corporation experienced an increase in residential mortgage loan originations that it retained in its loan portfolio, with $98 million of residential mortgage loan originations retained in the third quarter of 2013, compared to $85 million in the second quarter of 2013 and $63 million in the third quarter of 2012.

Operating expenses were $39.5 million in the third quarter of 2013, compared to $41.0 million in the second quarter of 2013 and $36.7 million in the third quarter of 2012. The decrease in operating expenses of $1.5 million in the third quarter of 2013, compared to the second quarter of 2013, was primarily attributable to a $0.7 million decrease in credit-related expenses and decreases of $0.4 million in both employee benefit and advertising expenses. The decrease in credit-related expenses of $0.7 million in the third quarter of 2013, compared to the second quarter of 2013, was attributable to a combination of lower write-downs and lower costs to maintain other real estate properties. Operating expenses in the third quarter of 2012 included $0.6 million of nonrecurring costs associated with the branch acquisition transaction. Excluding these nonrecurring costs, the increase in operating expenses of $3.4 million in the third quarter of 2013 over the third quarter of 2012 was primarily attributable to incremental operating costs associated with the branch acquisition transaction, merit and market-driven compensation increases provided to the Corporation's employees effective January 1, 2013, and higher performance-based compensation expenses, all of which were partially offset by lower credit-related expenses.

The Corporation's efficiency ratio was 61.0% in the third quarter of 2013, 63.3% in the second quarter of 2013 and 59.3% in the third quarter of 2012.

Total assets were $6.26 billion at September 30, 2013, compared to $5.81 billion at June 30, 2013 and $5.58 billion at September 30, 2012. The increase in total assets during the twelve months ended September 30, 2013 was attributable to a combination of the branch acquisition transaction, which added $404 million in assets on the acquisition date, and an increase in deposits that partially funded loan growth. The Corporation continues to keep its excess liquidity at the Federal Reserve Bank (FRB), with $357 million in balances held at the FRB at September 30, 2013, compared to $69 million at June 30, 2013 and $315 million at September 30, 2012. The increase in FRB balances during the three months ended September 30, 2013 was largely attributable to a seasonal increase in municipal deposits, in addition to the net proceeds raised from the Corporation's public stock offering.

Total loans were $4.52 billion at September 30, 2013, up from $4.34 billion at June 30, 2013 and $4.02 billion at September 30, 2012. During the three and twelve months ended September 30, 2013, total loans increased $187 million, or 4.3%, and $504 million, or 12.5%, respectively. The increases in loans during the three and twelve months ended September 30, 2013 occurred across all loan categories and were largely attributable to a combination of improving economic conditions and increased market share. The increase in loans of $187 million during the third quarter of 2013 was attributable to increases in commercial loans of $36.2 million, or 3.3%, commercial real estate loans of $43.3 million, or 3.7%, real estate construction and land development loans of $1.4 million, or 1.4%, residential real estate loans of $44.0 million, or 4.9%, and consumer installment and home equity loans of $61.9 million, or 5.8%. The average yield on the loan portfolio was 4.44% in the third quarter of 2013, compared to 4.56% in the second quarter of 2013 and 4.86% in the third quarter of 2012.

Investment securities were $988 million at September 30, 2013, compared to $1.01 billion at June 30, 2013 and $868 million at September 30, 2012. The average yield of the investment securities portfolio was 2.05% in the third quarter of 2013, compared to 2.08% in the second quarter of 2013 and 2.13% in the third quarter of 2012.

Total deposits were $5.19 billion at September 30, 2013, compared to $4.81 billion at June 30, 2013 and $4.60 billion at September 30, 2012. The increase in total deposits during the third quarter of 2013 was largely attributable to a seasonal increase in municipal deposits. The Corporation experienced an increase in total deposits of $592 million, or 12.9%, during the twelve months ended September 30, 2013, with the increase largely attributable to the branch acquisition transaction in which the Corporation acquired $404 million of deposits on the date of acquisition. The Corporation also experienced organic deposit growth of $247 million during the twelve months ended September 30, 2013, which was partially offset by the payoff of maturing brokered deposits acquired in the acquisition of O.A.K. Financial Corporation in 2010. The repricing of matured customer certificates of deposit and the decrease in interest rates on various interest-bearing deposit accounts to reflect lower market interest rates resulted in the Corporation's average cost of funds declining to 0.32% in the third quarter of 2013 from 0.34% in the second quarter of 2013 and 0.46% in the third quarter of 2012.

At September 30, 2013, the Corporation's tangible equity to assets ratio and total risk-based capital ratio were 8.9% and 14.2%, respectively, compared to 8.5% and 13.1%, respectively, at June 30, 2013 and 8.8% and 13.6%, respectively, at September 30, 2012. At September 30, 2013, the Corporation's book value was $22.61 per share, compared to $22.14 per share at June 30, 2013 and $21.75 per share at September 30, 2012. At September 30, 2013, the Corporation's tangible book value was $18.36 per share, compared to $17.53 per share at June 30, 2013 and $17.52 per share at September 30, 2012.

The credit quality of the Corporation's loan portfolio continued its improvement during the third quarter of 2013, with nonperforming loans declining $3.5 million, or 4.4%. The Corporation's nonperforming loans, consisting of nonaccrual loans, accruing loans past due 90 days or more as to principal or interest payments and nonperforming troubled debt restructurings, totaled $75.8 million at September 30, 2013, compared to $79.3 million at June 30, 2013 and $90.9 million at September 30, 2012. Nonperforming loans comprised 1.68% of total loans at September 30, 2013, compared to 1.83% at June 30, 2013 and 2.26% at September 30, 2012. The reduction in nonperforming loans during the three and twelve months ended September 30, 2013 was attributable to a combination of improving economic conditions and loan charge-offs.

Other real estate and repossessed assets declined $1.7 million, or 11.9%, during the third quarter of 2013 to $12.0 million at September 30, 2013, compared to $13.7 million at June 30, 2013 and $19.5 million at September 30, 2012. The reduction in other real estate and repossessed assets during the three and twelve months ended September 30, 2013 was primarily attributable to sales of other real estate properties.

At September 30, 2013, the allowance for loan losses of the originated loan portfolio was $81.0 million, or 1.92% of originated loans, compared to $81.7 million, or 2.05% of originated loans, at June 30, 2013 and $84.2 million, or 2.33% of originated loans, at September 30, 2012. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 107% at September 30, 2013, compared to 103% at June 30, 2013 and 93% at September 30, 2012. The allowance for loan losses of the acquired loan portfolio was $0.5 million at September 30, 2013, June 30, 2013 and September 30, 2012. Management believes that the Corporation's acquired loan portfolio totaling $309 million at September 30, 2013 was overall performing slightly better than original expectations.

Chemical Financial Corporation is the second largest banking company headquartered and operating branch offices in Michigan. The Corporation operates through a single subsidiary bank, Chemical Bank, with 156 banking offices spread over 38 counties in the lower peninsula of Michigan. At September 30, 2013, the Corporation had total assets of $6.3 billion. Chemical Financial Corporation's common stock trades on The NASDAQ Stock Market under the symbol CHFC and is one of the issues comprising The NASDAQ Global Select Market. More information about the Corporation is available by visiting the investor relations section of its website at www.chemicalbankmi.com.

Forward-Looking Statements

This press release contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy and Chemical Financial Corporation (Corporation). Words such as "anticipates," "believes," "confident," "continue," "estimates," "expects," "focus," "forecasts," "intends," "is likely," "judgment," "look," "opinion," "opportunities," "plans," "predicts," "projects," "should," "trend," "will," and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements are based upon current beliefs and expectations and involve substantial risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These statements include, among others, statements related to future levels of loan charge-offs, future levels of provisions for loan losses, real estate valuation, future levels of nonperforming assets, the rate of asset dispositions, future capital levels, future changes in regulatory requirements, future dividends, future growth and funding sources, future liquidity levels, future profitability levels, the effects on earnings of future changes in interest rates, the future level of other revenue sources, future economic trends and conditions, future initiatives to expand the Corporation's market share, expected performance and cash flows from acquired loans, future effects of new or changed accounting standards, future opportunities for acquisitions, and future cost savings. All statements referencing future time periods are forward-looking.

Management's determination of the provision and allowance for loan losses; the carrying value of acquired loans, goodwill and mortgage servicing rights; the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary and the amount of any impairment); and management's assumptions concerning pension and other postretirement benefit plans involve judgments that are inherently forward-looking. There can be no assurance that future loan losses will be limited to the amounts estimated. The future effect of changes in the financial and credit markets and the national and regional economies on the banking industry, generally, and on the Corporation, specifically, are also inherently uncertain. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. The Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

Risk factors include, but are not limited to, the risk factors described in Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2012. These and other factors are representative of the risk factors that may emerge and could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.

Chemical Financial Corporation Announces Third Quarter Operating Results
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
September 30,
2013

June 30, 2013
December 31,
2012
September 30,
2012
(In thousands, except per share data)
Assets
Cash and cash equivalents:
Cash and cash due from banks $ 135,839 $ 137,586 $ 142,467 $ 123,519
Interest-bearing deposits with the Federal Reserve Bank 357,271 69,371 513,668 315,201
Total cash and cash equivalents 493,110 206,957 656,135 438,720
Investment securities:
Available-for-sale 705,146 734,052 586,809 646,578
Held-to-maturity 282,579 274,715 229,977 221,536
Total investment securities 987,725 1,008,767 816,786 868,114
Loans held-for-sale 7,907 9,180 17,665 15,075
Loans:
Commercial 1,128,122 1,091,894 1,002,722 951,938
Commercial real estate 1,215,631 1,172,347 1,161,861 1,117,073
Real estate construction and land development 102,034 100,629 100,237 90,882
Residential mortgage 942,777 898,816 883,835 880,295
Consumer installment and home equity 1,134,107 1,072,185 1,019,080 978,971
Total loans 4,522,671 4,335,871 4,167,735 4,019,159
Allowance for loan losses (81,532) (82,184) (84,491) (84,694)
Net loans 4,441,139 4,253,687 4,083,244 3,934,465
Premises and equipment 73,690 73,379 75,458 67,796
Goodwill 120,164 120,164 120,164 113,414
Other intangible assets 13,865 14,354 15,388 10,243
Interest receivable and other assets 120,636 119,723 132,412 132,594
Total Assets $ 6,258,236 $ 5,806,211 $ 5,917,252 $ 5,580,421
Liabilities
Deposits:
Noninterest-bearing $ 1,162,599 $ 1,107,453 $ 1,085,857 $ 952,126
Interest-bearing 4,028,706 3,706,732 3,835,586 3,646,746
Total deposits 5,191,305 4,814,185 4,921,443 4,598,872
Interest payable and other liabilities 36,019 35,460 54,716 34,738
Short-term borrowings 357,595 346,995 310,463 311,471
Federal Home Loan Bank (FHLB) advances 34,289 37,237
Total liabilities 5,584,919 5,196,640 5,320,911 4,982,318
Shareholders' Equity
Preferred stock, no par value per share
Common stock, $1 par value per share 29,778 27,538 27,499 27,498
Additional paid-in capital 487,176 434,479 433,195 432,627
Retained earnings 191,538 182,619 166,766 160,884
Accumulated other comprehensive loss (35,175) (35,065) (31,119) (22,906)
Total shareholders' equity 673,317 609,571 596,341 598,103
Total Liabilities and Shareholders' Equity $ 6,258,236 $ 5,806,211 $ 5,917,252 $ 5,580,421
Chemical Financial Corporation Announces Third Quarter Operating Results
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
Three Months Ended
September 30,
Nine Months Ended
September 30,
2013 2012 2013 2012
(In thousands, except per share data)
Interest Income
Interest and fees on loans $ 49,017 $ 48,322 $ 144,951 $ 144,472
Interest on investment securities:
Taxable 2,714 2,458 7,737 7,610
Tax-exempt 1,587 1,457 4,738 4,407
Dividends on nonmarketable equity securities 150 128 701 638
Interest on deposits with the Federal Reserve Bank 110 136 611 505
Total interest income 53,578 52,501 158,738 157,632
Interest Expense
Interest on deposits 4,160 5,238 12,990 16,999
Interest on short-term borrowings 124 105 359 317
Interest on FHLB advances 248 47 765
Total interest expense 4,284 5,591 13,396 18,081
Net Interest Income 49,294 46,910 145,342 139,551
Provision for loan losses 3,000 4,500 9,000 13,500
Net interest income after provision for loan losses 46,294 42,410 136,342 126,051
Noninterest Income
Service charges and fees on deposit accounts 5,690 5,028 16,420 14,546
Wealth management revenue 3,369 2,745 10,693 8,835
Other charges and fees for customer services 4,272 3,435 13,226 10,484
Mortgage banking revenue 1,038 1,457 4,699 4,059
Gain on sale of investment securities 1,104
Gain on sale of merchant card services 1,280
Other 275 54 689 784
Total noninterest income 14,644 12,719 46,831 39,988
Operating Expenses
Salaries, wages and employee benefits 24,065 20,738 72,062 61,846
Occupancy 3,406 3,137 10,449 9,264
Equipment and software 3,354 3,406 10,251 9,651
Other 8,720 9,442 29,781 29,132
Total operating expenses 39,545 36,723 122,543 109,893
Income before income taxes 21,393 18,406 60,630 56,146
Federal income tax expense 6,400 5,300 18,200 16,800
Net Income $ 14,993 $ 13,106 $ 42,430 $ 39,346
Net Income Per Common Share:
Basic $ 0.54 $ 0.48 $ 1.54 $ 1.43
Diluted 0.53 0.48 1.53 1.43
Cash Dividends Declared Per Common Share 0.22 0.21 0.64 0.61
Key Ratios (annualized where applicable):
Return on average assets 1.00% 0.96% 0.96% 0.97%
Return on average shareholders' equity 9.6% 8.8% 9.3% 9.0%
Net interest margin 3.58% 3.76% 3.58% 3.77%
Efficiency ratio 61.0% 59.3% 62.9% 60.0%
Chemical Financial Corporation Announces Third Quarter Operating Results
Financial Summary (Unaudited)
Chemical Financial Corporation
(Dollars in Thousands)
Three Months Ended

Sept 30, 2013
June 30,
2013
March 31,
2013

Dec 31, 2012
Sept 30,
2012
June 30,
2012
March 31,
2012
Average Balances
Total assets $ 5,966,988 $ 5,859,822 $ 5,924,820 $ 5,576,422 $ 5,433,491 $ 5,360,598 $ 5,396,420
Total interest-earning assets 5,621,542 5,530,262 5,579,789 5,251,531 5,105,101 5,044,629 5,061,882
Total loans 4,424,332 4,249,708 4,152,570 4,077,918 3,987,928 3,901,321 3,824,604
Total deposits 4,960,270 4,878,214 4,950,956 4,590,370 4,464,582 4,383,628 4,416,273
Total interest-bearing liabilities 4,167,915 4,126,751 4,221,638 3,926,582 3,823,954 3,817,753 3,903,986
Total shareholders' equity 620,911 606,607 599,406 600,794 591,683 582,873 574,261
Key Ratios (annualized where applicable)
Net interest margin (taxable equivalent basis) 3.58% 3.60% 3.54% 3.74% 3.76% 3.80% 3.76%
Efficiency ratio 61.0% 63.3% 64.4% 63.0% 59.3% 58.7% 62.1%
Return on average assets 1.00% 0.97% 0.91% 0.83% 0.96% 1.04% 0.92%
Return on average shareholders' equity 9.6% 9.4% 9.0% 7.7% 8.8% 9.6% 8.7%
Average shareholders' equity as a percent of average assets 10.4% 10.4% 10.1% 10.8% 10.9% 10.9% 10.6%
Capital ratios (period end):
Tangible shareholders' equity as a percent of total assets 8.9% 8.5% 8.1% 8.1% 8.8% 9.0% 8.7%
Total risk-based capital ratio 14.2% 13.1% 13.3% 13.2% 13.6% 13.6% 13.7%

Sept 30, 2013
June 30,
2013
March 31,
2013

Dec 31, 2012
Sept 30,
2012
June 30,
2012
March 31,
2012
Credit Quality Statistics
Originated Loans $ 4,213,728 $ 3,990,633 $ 3,810,989 $ 3,775,140 $ 3,606,547 $ 3,515,110 $ 3,370,279
Acquired Loans 308,943 345,238 374,272 392,595 412,612 447,232 472,819
Nonperforming Assets:
Nonperforming loans 75,818 79,342 86,417 90,854 90,877 92,811 98,548
Other real estate / repossessed assets (ORE) 12,033 13,659 18,194 18,469 19,467 23,509 25,944
Total nonperforming assets 87,851 93,001 104,611 109,323 110,344 116,320 124,492
Performing troubled debt restructurings 34,071 32,657 30,723 31,369 30,406 26,383 27,177
Allowance for loan losses - originated as a percent of:
Total originated loans 1.92% 2.05% 2.16% 2.22% 2.33% 2.40% 2.54%
Nonperforming loans 107% 103% 95% 92% 93% 91% 87%
Nonperforming loans as a percent of total loans 1.68% 1.83% 2.06% 2.18% 2.26% 2.34% 2.56%
Nonperforming assets as a percent of:
Total loans plus ORE 1.94% 2.14% 2.49% 2.61% 2.73% 2.92% 3.22%
Total assets 1.40% 1.60% 1.75% 1.85% 1.98% 2.17% 2.28%
Net loan charge-offs (year-to-date):
Originated $ 11,959 $ 8,307 $ 4,657 $ 20,142 $ 14,939 $ 10,622 $ 5,548
Acquired 2,200 2,200
Total loan charge-offs (year-to-date) 11,959 8,307 4,657 22,342 17,139 10,622 5,548
Net loan charge-offs as a percent of average loans (year-to-date, annualized) 0.37% 0.40% 0.45% 0.57% 0.59% 0.55% 0.58%

Sept 30, 2013
June 30,
2013
March 31,
2013

Dec 31, 2012
Sept 30,
2012
June 30,
2012
March 31,
2012
Additional Data - Intangibles
Goodwill $ 120,164 $ 120,164 $ 120,164 $ 120,164 $ 113,414 $ 113,414 $ 113,414
Core deposit intangibles (CDI) 10,466 10,933 11,417 11,910 6,777 7,144 7,512
Mortgage servicing rights (MSR) 3,399 3,421 3,485 3,478 3,466 3,463 3,427
Amortization of CDI (quarter only) 467 484 493 467 367 368 367
Chemical Financial Corporation Announces Third Quarter Operating Results
Average Balances, Tax Equivalent Interest and Effective Yields and Rates (Unaudited)*
Chemical Financial Corporation
Three Months Ended September 30, 2013 Nine Months Ended September 30, 2013

Average
Balance
Tax
Equivalent
Interest

Effective
Yield/Rate

Average
Balance
Tax
Equivalent
Interest

Effective
Yield/Rate
Assets (Dollars in thousands)
Interest-earning assets:
Loans** $ 4,432,538 $ 49,525 4.44% $ 4,289,024 $ 146,396 4.56%
Taxable investment securities 759,431 2,714 1.43 720,675 7,737 1.43
Tax-exempt investment securities 242,664 2,423 3.99 229,486 7,234 4.20
Other interest-earning assets 25,572 150 2.33 25,572 701 3.66
Interest-bearing deposits with the Federal Reserve Bank 161,337 110 0.27 312,593 611 0.26
Total interest-earning assets 5,621,542 54,922 3.88 5,577,350 162,679 3.90
Less: allowance for loan losses 82,714 83,839
Other Assets:
Cash and cash due from banks 130,598 121,116
Premises and equipment 73,874 74,092
Interest receivable and other assets 223,688 228,645
Total assets $ 5,966,988 $ 5,917,364
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 1,094,526 $ 262 0.09% $ 1,076,468 $ 745 0.09%
Savings deposits 1,355,289 304 0.09 1,348,890 901 0.09
Time deposits 1,367,792 3,594 1.04 1,405,756 11,344 1.08
Short-term borrowings 350,308 124 0.14 338,203 359 0.14
FHLB advances 2,587 47 2.43
Total interest-bearing liabilities 4,167,915 4,284 0.41 4,171,904 13,396 0.43
Noninterest-bearing deposits 1,142,663 1,098,733
Total deposits and borrowed funds 5,310,578 4,284 0.32 5,270,637 13,396 0.34
Interest payable and other liabilities 35,499 37,673
Shareholders' equity 620,911 609,054
Total liabilities and shareholders' equity $ 5,966,988 $ 5,917,364
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities) 3.47% 3.47%
Net Interest Income (FTE) $ 50,638 $ 149,283
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets) 3.58% 3.58%
* Taxable equivalent basis using a federal income tax rate of 35%.
** Nonaccrual loans and loans held-for-sale are included in average balances reported and are included in the calculation of yields. Also, tax equivalent interest includes net loan fees.
Chemical Financial Corporation Announces Third Quarter Operating Results
Nonperforming Assets (Unaudited)
Chemical Financial Corporation
Sept 30,
2013
June 30,
2013
March 31,
2013

Dec 31, 2012
Sept 30,
2012
June 30,
2012
March 31,
2012
(In thousands)
Nonperforming Loans:
Nonaccrual loans:
Commercial $ 11,809 $ 11,052 $ 12,186 $ 14,601 $ 15,217 $ 12,673 $ 11,443
Commercial real estate 28,623 28,498 35,849 37,660 41,311 41,691 46,870
Real estate construction 183 183 168 1,217 933 408 61
Land development 2,954 3,434 4,105 4,184 5,731 3,077 3,748
Residential mortgage 8,029 9,241 10,407 10,164 11,307 12,613 12,687
Consumer installment 665 552 699 739 876 1,182 1,278
Home equity 3,023 3,064 2,837 2,733 2,949 2,812 3,066
Total nonaccrual loans 55,286 56,024 66,251 71,298 78,324 74,456 79,153
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial 281 1 4 273 300 1,005
Commercial real estate 78 177 87 247 269 75
Real estate construction
Land development
Residential mortgage 692 164 196 1,503 431 840 333
Consumer installment
Home equity 686 689 874 769 1,147 1,157 1,233
Total accruing loans contractually past due 90 days or more as to interest or principal payments 1,659 932 1,251 2,359 2,098 2,566 2,646
Nonperforming troubled debt restructurings:
Commercial loan portfolio 15,744 19,140 14,587 13,876 6,553 11,691 11,258
Consumer loan portfolio 3,129 3,246 4,328 3,321 3,902 4,098 5,491
Total nonperforming troubled debt restructurings 18,873 22,386 18,915 17,197 10,455 15,789 16,749
Total nonperforming loans 75,818 79,342 86,417 90,854 90,877 92,811 98,548
Other real estate and repossessed assets 12,033 13,659 18,194 18,469 19,467 23,509 25,944
Total nonperforming assets $ 87,851 $ 93,001 $ 104,611 $ 109,323 $ 110,344 $ 116,320 $ 124,492
Chemical Financial Corporation Announces Third Quarter Operating Results
Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation
Three Months Ended
Sept 30,
2013
June 30,
2013
March 31,
2013

Dec 31, 2012
Sept 30,
2012
June 30,
2012
March 31,
2012
(In thousands)
Allowance for loan losses - originated loan portfolio
Allowance for loan losses - originated, at beginning of period $ 81,684 $ 82,334 $ 83,991 $ 84,194 $ 84,511 $ 85,585 $ 86,733
Provision for loan losses - originated 3,000 3,000 3,000 5,000 4,000 4,000 4,400
Loans charged off:
Commercial (971) (703) (1,359) (1,623) (551) (974) (1,079)
Commercial real estate (1,266) (2,453) (2,060) (1,532) (1,952) (2,178) (2,268)
Real estate construction (70)
Land development (400) (65) (97) (1,168) (51) (45) (32)
Residential mortgage (493) (1,060) (734) (1,224) (1,357) (1,140) (1,717)
Consumer installment (1,074) (895) (849) (1,222) (1,050) (1,259) (1,074)
Home equity (226) (185) (375) (282) (435) (576) (377)
Total loan charge-offs (4,430) (5,361) (5,474) (7,121) (5,396) (6,172) (6,547)
Recoveries of loans previously charged off:
Commercial 356 644 160 278 135 140 191
Commercial real estate 18 667 50 1,202 325 298 421
Real estate construction
Land development 15 1 2
Residential mortgage 84 37 161 104 237 199 22
Consumer installment 288 321 402 305 359 387 345
Home equity 32 27 43 29 23 74 18
Total loan recoveries 778 1,711 817 1,918 1,079 1,098 999
Net loan charge-offs - originated (3,652) (3,650) (4,657) (5,203) (4,317) (5,074) (5,548)
Allowance for loan losses - originated, at end of period 81,032 81,684 82,334 83,991 84,194 84,511 85,585
Allowance for loan losses - acquired loan portfolio
Allowance for loan losses - acquired, at beginning of period 500 500 500 500 2,200 2,200 1,600
Provision for loan losses - acquired 500 600
Net loan charge-offs - acquired (commercial) (2,200)
Allowance for loan losses - acquired, at end of period 500 500 500 500 500 2,200 2,200
Total allowance for loan losses $ 81,532 $ 82,184 $ 82,834 $ 84,491 $ 84,694 $ 86,711 $ 87,785
Net loan charge-offs as a percent of average loans (quarter only, annualized) 0.33% 0.34% 0.45% 0.51% 0.65% 0.52% 0.58%
Chemical Financial Corporation Announces Third Quarter Operating Results
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
3rd Qtr.
2013
2nd Qtr.
2013
1st Qtr.
2013
4th Qtr.
2012
3rd Qtr.
2012
2nd Qtr.
2012
1st Qtr.
2012
(Dollars in thousands, except per share data)
Summary of Operations
Interest income $ 53,578 $ 52,781 $ 52,379 $ 53,126 $ 52,501 $ 52,467 $ 52,664
Interest expense 4,284 4,385 4,727 5,132 5,591 6,021 6,469
Net interest income 49,294 48,396 47,652 47,994 46,910 46,446 46,195
Provision for loan losses 3,000 3,000 3,000 5,000 4,500 4,000 5,000
Net interest income after provision for loan losses 46,294 45,396 44,652 42,994 42,410 42,446 41,195
Noninterest income 14,644 15,948 16,239 14,676 12,719 13,944 13,325
Operating expenses 39,545 41,041 41,957 42,008 36,723 36,199 36,971
Income before income taxes 21,393 20,303 18,934 15,662 18,406 20,191 17,549
Federal income tax expense 6,400 6,100 5,700 4,000 5,300 6,325 5,175
Net income $ 14,993 $ 14,203 $ 13,234 $ 11,662 $ 13,106 $ 13,866 $ 12,374
Net interest margin 3.58% 3.60% 3.54% 3.74% 3.76% 3.80% 3.76%
Per Common Share Data
Net income:
Basic $ 0.54 $ 0.52 $ 0.48 $ 0.42 $ 0.48 $ 0.50 $ 0.45
Diluted 0.53 0.51 0.48 0.42 0.48 0.50 0.45
Cash dividends declared 0.22 0.21 0.21 0.21 0.21 0.20 0.20
Book value - period-end 22.61 22.14 21.97 21.69 21.75 21.42 21.10
Tangible book value - period-end 18.36 17.53 17.34 17.03 17.52 17.17 16.84
Market value - period-end 27.92 25.99 26.38 23.76 24.20 21.50 23.44

CONTACT: For further information: David B. Ramaker, CEO Lori A. Gwizdala, CFO 989-839-5350Source:Chemical Financial Corporation