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Chemical Financial Corporation Reports 2014 Third Quarter Operating Results

MIDLAND, Mich., Oct. 22, 2014 (GLOBE NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced 2014 third quarter net income of $16.8 million, or $0.51 per diluted share, compared to 2013 third quarter net income of $15.0 million, or $0.53 per diluted share, and 2014 second quarter net income of $16.2 million, or $0.54 per diluted share. For the nine months ended September 30, 2014, net income was $46.8 million, or $1.51 per diluted share, compared to net income for the nine months ended September 30, 2013 of $42.4 million, or $1.53 per diluted share. The declines in diluted per share earnings for the three and nine months ended September 30, 2014 were attributable to the higher number of outstanding shares resulting from the Corporation's September 2013 and June 2014 common equity offerings and nonrecurring transaction-related expenses incurred during 2014.

Nonrecurring transaction-related expenses attributable to the pending acquisition of Northwestern Bancorp, Inc. ("Northwestern") were $1.3 million and $2.2 million for the three and nine months ended September 30, 2014, respectively. Regulatory approval has been received and the Corporation expects to complete the acquisition on October 31, 2014, subject to the satisfaction of customary closing conditions.

Excluding nonrecurring transaction-related expenses, net income in the third quarter of 2014 was $17.6 million, or $0.53 per diluted share, up 17% over net income of $15.0 million in the third quarter of 2013.

"Chemical Financial enjoyed another quarter of strong earnings, as continued strength in the Michigan economy and solid performance across our banking franchise allowed us to post double-digit percentage growth in net income before the impact of nonrecurring transaction-related expenses," noted David B. Ramaker, Chairman, Chief Executive Officer and President of Chemical Financial Corporation. "Michigan's improving economy, coupled with competitive share gains across our market footprint, were the primary drivers of this quarter's results, enabling us to post double digit loan growth. Margins were stable and credit quality continued to improve."

"With the receipt of regulatory approval for our previously announced acquisition of Northwestern Bancorp, Inc., the holding company for Northwestern Bank, we anticipate closing the acquisition on October 31, 2014, putting our surplus capital to work. We continue to believe our strategic partnership with Northwestern and its 25 locations across 11 northwestern Michigan counties will provide a compelling choice for the state's residents and businesses," added Ramaker.

Net income, excluding nonrecurring transaction-related expenses, in the third quarter of 2014 was 17% higher than the third quarter of 2013 due to a combination of higher net interest income, higher noninterest income and a lower provision for loan losses, which were partially offset by higher operating expenses. Net income, excluding nonrecurring transaction-related expenses, in the third quarter of 2014 was 5.6% higher than the second quarter of 2014, with the increase primarily attributable to higher net interest income.

The Corporation's return on average assets was 1.04% during the third quarter of 2014, compared to 1.00% in the third quarter of 2013 and 1.04% in the second quarter of 2014. The Corporation's return on average shareholders' equity was 8.4% in the third quarter of 2014, compared to 9.6% in the third quarter of 2013 and 9.1% in the second quarter of 2014. The decreases in return on average shareholders' equity in the third quarter of 2014, compared to both the third quarter of 2013 and the second quarter of 2014, was primarily attributable to increases in shareholders' equity resulting from the Corporation's September 2013 and June 2014 common equity offerings and nonrecurring transaction-related expenses. Nonrecurring transaction-related expenses in the third quarter of 2014 reduced the Corporation's return on average assets by 5 basis points and return on average shareholders' equity by 42 basis points.

Net interest income was $53.1 million in the third quarter of 2014, $3.8 million, or 7.7%, higher than the third quarter of 2013 and $1.6 million, or 3.1%, higher than the second quarter of 2014. The increase in net interest income in the third quarter of 2014 over the third quarter of 2013 was largely attributable to the positive impact of loan growth of $518 million, or 11.5%, during the twelve months ended September 30, 2014. The increase in net interest income in the third quarter of 2014 over the second quarter of 2014 was also largely attributable to the positive impact of loan growth, with average loan balances up $139 million, or 2.9%, in the third quarter of 2014 over the second quarter of 2014.

The net interest margin (on a tax-equivalent basis) was 3.59% in the third quarter of 2014, compared to 3.58% in the third quarter of 2013 and 3.59% in the second quarter of 2014. The positive impact on the net interest margin attributable to loan growth during the three and twelve months ended September 30, 2014 was offset by a reduction in the average yield on the loan portfolio. The average yield on the loan portfolio was 4.23% in the third quarter of 2014, compared to 4.44% in the third quarter of 2013 and 4.26% in the second quarter of 2014. The average yield of the investment securities portfolio was 2.19% in the third quarter of 2014, compared to 2.05% in the third quarter of 2013 and 2.13% in the second quarter of 2014. Modest changes in the mix of customer deposits and the repricing of matured customer certificates of deposit resulted in the Corporation's average cost of funds declining to 0.25% in the third quarter of 2014 from 0.32% in the third quarter of 2013 and 0.27% in the second quarter of 2014.

The provision for loan losses was $1.5 million in the third quarter of 2014, compared to $3.0 million in the third quarter of 2013 and $1.5 million in the second quarter of 2014. The decrease in the provision for loan losses in the third quarter of 2014, compared to the third quarter of 2013, was attributable to the continued improvement in the overall credit quality of the loan portfolio.

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 $70.7 million at September 30, 2014, compared to $73.7 million at June 30, 2014 and $75.8 million at September 30, 2013. Nonperforming loans comprised 1.40% of total loans at September 30, 2014, compared to 1.51% at June 30, 2014 and 1.68% at September 30, 2013. The reduction in nonperforming loans during the three and twelve months ended September 30, 2014 was attributable to a combination of improving economic conditions and loan charge-offs.

Net loan charge-offs were $2.3 million, or 0.18% of average loans, in the third quarter of 2014, compared to $3.7 million, or 0.33% of average loans, in the third quarter of 2013 and $2.2 million, or 0.18% of average loans, in the second quarter of 2014.

At September 30, 2014, the allowance for loan losses of the originated loan portfolio was $76.5 million, or 1.60% of originated loans, compared to $77.3 million, or 1.67% of originated loans, at June 30, 2014 and $81.0 million, or 1.92% of originated loans, at September 30, 2013. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 108% at September 30, 2014, compared to 105% at June 30, 2014 and 107% at September 30, 2013.

Noninterest income was $15.4 million in the third quarter of 2014, compared to $14.6 million in the third quarter of 2013 and $15.8 million in the second quarter of 2014. Noninterest income in the third quarter of 2014 was $0.7 million higher than the third quarter of 2013, with the increase primarily attributable to modest increases in wealth management revenue and electronic banking fees. Noninterest income in the third quarter of 2014 was $0.5 million lower than the second quarter of 2014, with the decrease primarily attributable to a $0.4 million reduction in the Corporation's secondary mortgage market indemnification reserve in the second quarter of 2014.

Operating expenses were $42.7 million in the third quarter of 2014, compared to $39.5 million in the third quarter of 2013 and $42.4 million in the second quarter of 2014. Operating expenses included nonrecurring transaction-related expenses attributable to the pending acquisition of Northwestern of $1.3 million in the third quarter of 2014 and $0.7 million in the second quarter of 2014. Excluding these nonrecurring transaction-related expenses, operating expenses in the third quarter of 2014 were $1.9 million, or 4.7%, higher than the third quarter of 2013 and $0.3 million lower than the second quarter of 2014. The increase in operating expenses in the third quarter of 2014, compared to the third quarter of 2013, was attributable to higher salaries and wages resulting from merit and market-driven salary adjustments that took effect at the beginning of 2014 and higher credit-related expenses resulting from lower net gains from the sale of other real estate properties.

The Corporation's efficiency ratio was 59.2% in the third quarter of 2014, 60.9% in the second quarter of 2014 and 61.0% in the third quarter of 2013.

Total assets were $6.60 billion at September 30, 2014, compared to $6.23 billion at June 30, 2014 and $6.26 billion at September 30, 2013. The increase in total assets during the three months ended September 30, 2014 was largely attributable to an increase in seasonal municipal deposits, with a large portion of the funds received being held in interest-bearing balances at the Federal Reserve Bank (FRB). The increase in total assets during the twelve months ended September 30, 2014 was largely attributable to an increase in deposits that was used to partially fund loan growth. Interest-bearing balances at the FRB totaled $248.0 million at September 30, 2014, compared to $1.3 million at June 30, 2014 and $357.3 million at September 30, 2013. Investment securities were $894.8 million at September 30, 2014, compared to $924.1 million at June 30, 2014 and $987.7 million at September 30, 2013. The decreases in interest-bearing balances at the FRB and investment securities during the twelve months ended September 30, 2014 were attributable to the Corporation utilizing some of the liquidity from its excess funds held at the FRB and maturing investment securities to also fund loan growth.

Total loans were $5.04 billion at September 30, 2014, up from $4.90 billion at June 30, 2014 and $4.52 billion at September 30, 2013. During the three and twelve months ended September 30, 2014, total loans increased $142.1 million, or 2.9%, and $518.2 million, or 11.5%, respectively. The increases in loans during the three and twelve months ended September 30, 2014 generally occurred across all major loan categories, although most notably in the Corporation's consumer loan portfolio, and were largely attributable to a combination of continued improving economic conditions and increased market share. The increase in loans of $142.1 million during the third quarter of 2014 was attributable to increases in consumer installment and home equity loans of $52.5 million, or 4.0%, commercial loans of $27.6 million, or 2.3%, commercial real estate loans of $24.3 million, or 1.9%, real estate construction and land development loans of $24.1 million, or 21.5%, and residential mortgage loans of $13.7 million, or 1.4%.

Total deposits were $5.43 billion at September 30, 2014, compared to $5.09 billion at June 30, 2014 and $5.19 billion at September 30, 2013. The increase in total deposits during the third quarter of 2014 was largely attributable to a seasonal increase in municipal customer deposits. The Corporation experienced an increase in total deposits of $241 million, or 4.6%, during the twelve months ended September 30, 2014.

At September 30, 2014, the Corporation's tangible equity to assets ratio and total risk-based capital ratio were 10.5% and 15.0%, respectively, compared to 11.0% and 15.3%, respectively, at June 30, 2014 and 8.9% and 14.2%, respectively, at September 30, 2013. The increases in the Corporation's capital ratios at September 30, 2014, compared to September 30, 2013, were largely attributable to the Corporation's June 2014 public offering of common stock. At September 30, 2014, the Corporation's book value was $24.47 per share, compared to $24.22 per share at June 30, 2014 and $22.61 per share at September 30, 2013. At September 30, 2014, the Corporation's tangible book value was $20.68 per share, compared to $20.42 per share at June 30, 2014 and $18.36 per share at September 30, 2013.

This press release contains references to financial measures which are not defined in generally accepted accounting principles ("GAAP"). Such non-GAAP financial measures include the Corporation's tangible equity to assets ratio, presentation of net interest income on a fully taxable equivalent basis (FTE) and information presented excluding nonrecurring transaction-related expenses, including net income, diluted earnings per share, return on average assets, return on average shareholders' equity and operating expenses. These non-GAAP financial measures have been included as the Corporation believes they are helpful for investors to analyze and evaluate the Corporation's financial condition.

Chemical Financial Corporation will host a conference call to discuss its third quarter 2014 operating results on Thursday, October 23, 2014 at 11:00 a.m. EDT. Anyone interested may access the conference call on a live basis by dialing toll-free at 1-800-390-5360 and entering 7350138 for the conference ID. The call will also be broadcast live over the Internet hosted at Chemical Financial Corporation's website at www.chemicalbankmi.com under the "Investor Info" section. A copy of the slide-show presentation and an audio replay of the call will remain available on Chemical Financial Corporation's website for at least 14 days.

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 157 banking offices spread over 38 counties in Michigan. At September 30, 2014, the Corporation had total assets of $6.6 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 and phrases such as "anticipates," "believes," "continue," "estimates," "expects," "forecasts," "intends," "is likely," "judgment," "look forward," "opinion," "plans," "predicts," "probable," "projects," "should," "strategic," "trend," "will," and variations of such words and phrases or 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. 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. All of the information concerning interest rate sensitivity is forward-looking. 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.

This press release may contain forward-looking statements regarding the Corporation's outlook or expectations with respect to the planned acquisition of Northwestern Bancorp, Inc. (Northwestern), the expected costs to be incurred in connection with the acquisition, Northwestern's future performance and consequences of its integration into the Corporation and the impact of the transaction on the Corporation's future performance.

Risk factors relating to both the transaction and the integration of Northwestern into the Corporation after closing include, without limitation:

The impact of the completion of the transaction on the Corporation's financial statements will be affected by the timing of the transaction, including in particular the ability to complete the acquisition in the fourth quarter of 2014.

The transaction may be more expensive to complete and the anticipated benefits, including anticipated cost savings and strategic gains, may be significantly harder or take longer to achieve than expected or may not be achieved in their entirety as a result of unexpected factors or events.

The integration of Northwestern's business and operations into the Corporation, which will include conversion of Northwestern's operating systems and procedures, may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results relating to Northwestern's or the Corporation's existing businesses.

The Corporation's ability to achieve anticipated results from the transaction is dependent on the state of the economic and financial markets going forward. Specifically, the Corporation may incur more credit losses from Northwestern's loan portfolio than expected and deposit attrition may be greater than expected.

Risk factors also include, but are not limited to, the risk factors described under "Risk Factors" (including the risk factors under the heading "Risk Factors - Risks Related to the Pending Merger with Northwestern") in the Corporation's Prospectus Supplement, dated June 19, 2014, and in Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2013. 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 2014 Third Quarter Operating Results
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
September 30,
2014

June 30, 2014
December 31,
2013
September 30,
2013
(In thousands, except per share data)
Assets
Cash and cash equivalents:
Cash and cash due from banks $ 134,116 $ 139,023 $ 130,811 $ 135,839
Interest-bearing deposits with the Federal Reserve Bank 248,022 1,271 179,977 357,271
Total cash and cash equivalents 382,138 140,294 310,788 493,110
Investment securities:
Available-for-sale 576,211 615,975 684,570 705,146
Held-to-maturity 318,562 308,130 273,905 282,579
Total investment securities 894,773 924,105 958,475 987,725
Loans held-for-sale 9,347 6,329 5,219 7,907
Loans:
Commercial 1,239,946 1,212,383 1,176,307 1,128,122
Commercial real estate 1,322,646 1,298,365 1,232,658 1,215,631
Real estate construction and land development 136,216 112,124 109,861 102,034
Residential mortgage 984,049 970,397 960,423 942,777
Consumer installment and home equity 1,358,063 1,305,535 1,168,372 1,134,107
Total loans 5,040,920 4,898,804 4,647,621 4,522,671
Allowance for loan losses (77,006) (77,793) (79,072) (81,532)
Net loans 4,963,914 4,821,011 4,568,549 4,441,139
Premises and equipment 80,127 74,291 75,308 73,690
Goodwill 120,164 120,164 120,164 120,164
Other intangible assets 11,958 12,454 13,424 13,865
Interest receivable and other assets 134,564 133,327 132,781 120,636
Total Assets $ 6,596,985 $ 6,231,975 $ 6,184,708 $ 6,258,236
Liabilities
Deposits:
Noninterest-bearing $ 1,344,716 $ 1,283,439 $ 1,227,768 $ 1,162,599
Interest-bearing 4,087,211 3,809,474 3,894,617 4,028,706
Total deposits 5,431,927 5,092,913 5,122,385 5,191,305
Interest payable and other liabilities 40,366 40,142 38,395 36,019
Short-term borrowings 323,086 305,422 327,428 357,595
Total liabilities 5,795,379 5,438,477 5,488,208 5,584,919
Shareholders' Equity
Preferred stock, no par value per share
Common stock, $1 par value per share 32,763 32,760 29,790 29,778
Additional paid-in capital 564,127 563,393 488,177 487,176
Retained earnings 224,222 215,333 199,053 191,538
Accumulated other comprehensive loss (19,506) (17,988) (20,520) (35,175)
Total shareholders' equity 801,606 793,498 696,500 673,317
Total Liabilities and Shareholders' Equity $ 6,596,985 $ 6,231,975 $ 6,184,708 $ 6,258,236

Chemical Financial Corporation Announces 2014 Third Quarter Operating Results
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
(In thousands, except per share data)
Interest Income
Interest and fees on loans $ 52,343 $ 49,017 $ 152,289 $ 144,951
Interest on investment securities:
Taxable 2,194 2,714 6,825 7,737
Tax-exempt 1,838 1,587 5,213 4,738
Dividends on nonmarketable equity securities 160 150 809 701
Interest on deposits with the Federal Reserve Bank 94 110 318 611
Total interest income 56,629 53,578 165,454 158,738
Interest Expense
Interest on deposits 3,469 4,160 10,840 12,990
Interest on short-term borrowings 92 124 307 359
Interest on FHLB advances 47
Total interest expense 3,561 4,284 11,147 13,396
Net Interest Income 53,068 49,294 154,307 145,342
Provision for loan losses 1,500 3,000 4,600 9,000
Net interest income after provision for loan losses 51,568 46,294 149,707 136,342
Noninterest Income
Service charges and fees on deposit accounts 5,612 5,690 16,028 16,420
Wealth management revenue 3,730 3,369 11,319 10,693
Other charges and fees for customer services 4,686 4,272 13,562 13,226
Mortgage banking revenue 1,166 1,038 3,451 4,699
Gain on sale of investment securities 1,104
Other 157 275 508 689
Total noninterest income 15,351 14,644 44,868 46,831
Operating Expenses
Salaries, wages and employee benefits 24,885 24,065 73,929 72,062
Occupancy 3,629 3,406 11,641 10,449
Equipment and software 3,772 3,354 11,025 10,251
Other 10,416 8,720 30,714 29,781
Total operating expenses 42,702 39,545 127,309 122,543
Income before income taxes 24,217 21,393 67,266 60,630
Federal income tax expense 7,450 6,400 20,450 18,200
Net Income $ 16,767 $ 14,993 $ 46,816 $ 42,430
Earnings Per Common Share:
Weighted average common shares outstanding for basic earnings per share 32,762 27,870 30,896 27,642
Weighted average common shares outstanding for diluted earnings per share, including common stock equivalents 32,956 28,037 31,101 27,786
Basic earnings per share $ 0.51 $ 0.54 $ 1.52 $ 1.54
Diluted earnings per share 0.51 0.53 1.51 1.53
Cash Dividends Declared Per Common Share 0.24 0.22 0.70 0.64
Key Ratios (annualized where applicable):
Return on average assets 1.04% 1.00% 0.99% 0.96%
Return on average shareholders' equity 8.4% 9.6% 8.5% 9.3%
Net interest margin 3.59% 3.58% 3.57% 3.58%
Efficiency ratio 59.2% 61.0% 61.4% 62.9%

Chemical Financial Corporation Announces 2014 Third Quarter Operating Results
Financial Summary (Unaudited)
Chemical Financial Corporation
(Dollars in Thousands)
3rd Quarter 2014 2nd Quarter 2014 1st Quarter 2014 4th Quarter 2013 3rd Quarter 2013 2nd Quarter 2013 1st Quarter 2013
Average Balances
Total assets $ 6,412,460 $ 6,253,574 $ 6,210,569 $ 6,117,217 $ 5,966,988 $ 5,859,822 $ 5,924,820
Total interest-earning assets 6,046,991 5,907,549 5,860,429 5,782,141 5,621,542 5,530,262 5,579,789
Total loans 4,962,948 4,824,299 4,692,430 4,588,448 4,424,332 4,249,708 4,152,570
Total deposits 5,249,317 5,151,581 5,142,276 5,065,671 4,960,270 4,878,214 4,950,956
Total interest-bearing liabilities 4,237,626 4,250,158 4,276,677 4,211,647 4,167,915 4,126,751 4,221,638
Total shareholders' equity 794,711 714,355 701,878 678,487 620,911 606,607 599,406
Key Ratios (annualized where applicable)
Net interest margin (taxable equivalent basis) 3.59% 3.59% 3.53% 3.63% 3.58% 3.60% 3.54%
Efficiency ratio 59.2% 60.9% 64.5% 63.7% 61.0% 63.3% 64.4%
Return on average assets 1.04% 1.04% 0.90% 0.93% 1.00% 0.97% 0.91%
Return on average shareholders' equity 8.4% 9.1% 8.0% 8.4% 9.6% 9.4% 9.0%
Average shareholders' equity as a percent of average assets 12.4% 11.4% 11.3% 11.1% 10.4% 10.4% 10.1%
Capital ratios (period end):
Tangible shareholders' equity as a percent of total assets 10.5% 11.0% 9.3% 9.4% 8.9% 8.5% 8.1%
Total risk-based capital ratio 15.0% 15.3% 13.8% 14.0% 14.2% 13.1% 13.3%
3rd Quarter 2014 2nd Quarter 2014 1st Quarter 2014 4th Quarter 2013 3rd Quarter 2013 2nd Quarter 2013 1st Quarter 2013
Credit Quality Statistics
Originated loans $ 4,777,614 $ 4,624,409 $ 4,464,465 $ 4,352,924 $ 4,213,728 $ 3,990,633 $ 3,810,989
Acquired loans 263,306 274,395 288,824 294,697 308,943 345,238 374,272
Nonperforming assets:
Nonperforming loans (NPLs) 70,742 73,735 76,544 81,984 75,818 79,342 86,417
Other real estate/repossessed assets (ORE) 10,354 10,392 10,056 9,776 12,033 13,659 18,194
Total nonperforming assets 81,096 84,127 86,600 91,760 87,851 93,001 104,611
Performing troubled debt restructurings 44,588 44,133 41,823 39,571 34,071 32,657 30,723
Allowance for loan losses - originated as a percent of:
Total originated loans 1.60% 1.67% 1.75% 1.81% 1.92% 2.05% 2.16%
Nonperforming loans 108% 105% 102% 96% 107% 103% 95%
NPLs as a percent of total loans 1.40% 1.51% 1.61% 1.76% 1.68% 1.83% 2.06%
Nonperforming assets as a percent of:
Total loans plus ORE 1.61% 1.71% 1.82% 1.97% 1.94% 2.14% 2.49%
Total assets 1.23% 1.35% 1.37% 1.48% 1.40% 1.60% 1.75%
Net loan charge-offs (year-to-date):
Originated $ 6,666 $ 4,379 $ 2,199 $ 16,419 $ 11,959 $ 8,307 $ 4,657
Acquired
Total loan charge-offs (year-to-date) 6,666 4,379 2,199 16,419 11,959 8,307 4,657
Net loan charge-offs as a percent of average loans (year-to-date, annualized) 0.18% 0.18% 0.19% 0.38% 0.37% 0.40% 0.45%
Sept 30, 2014 June 30, 2014 March 31, 2014 Dec 31, 2013 Sept 30, 2013 June 30, 2013 March 31, 2013
Additional Data – Intangibles
Goodwill $ 120,164 $ 120,164 $ 120,164 $ 120,164 $ 120,164 $ 120,164 $ 120,164
Core deposit intangibles (CDI) 8,665 9,110 9,556 10,001 10,466 10,933 11,417
Mortgage servicing rights (MSR) 3,293 3,344 3,316 3,423 3,399 3,421 3,485
Amortization of CDI (during quarter ended) 445 446 445 465 467 484 493
Chemical Financial Corporation Announces 2014 Third Quarter Operating Results
Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates* (Unaudited)
Chemical Financial Corporation
Three Months Ended September 30, 2014 Three Months Ended September 30, 2013
Average
Balance

Interest (FTE)
Effective
Yield/Rate*
Average
Balance

Interest (FTE)
Effective
Yield/Rate*
Assets (Dollars in thousands)
Interest-earning assets:
Loans** $ 4,970,635 $ 52,900 4.23% $ 4,432,538 $ 49,525 4.44%
Taxable investment securities 616,191 2,194 1.42 759,431 2,714 1.43
Tax-exempt investment securities 300,975 2,827 3.76 242,664 2,423 3.99
Other interest-earning assets 25,572 160 2.48 25,572 150 2.33
Interest-bearing deposits with the Federal Reserve Bank 133,618 94 0.28 161,337 110 0.27
Total interest-earning assets 6,046,991 58,175 3.82 5,621,542 54,922 3.88
Less: allowance for loan losses 77,536 82,714
Other assets:
Cash and cash due from banks 133,465 130,598
Premises and equipment 74,738 73,874
Interest receivable and other assets 234,802 223,688
Total assets $ 6,412,460 $ 5,966,988
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 1,206,075 $ 308 0.10% $ 1,094,526 $ 262 0.09%
Savings deposits 1,441,114 327 0.09 1,355,289 304 0.09
Time deposits 1,264,477 2,834 0.89 1,367,792 3,594 1.04
Short-term borrowings 325,960 92 0.11 350,308 124 0.14
FHLB advances
Total interest-bearing liabilities 4,237,626 3,561 0.33 4,167,915 4,284 0.41
Noninterest-bearing deposits 1,337,651 1,142,663
Total deposits and borrowed funds 5,575,277 3,561 0.25 5,310,578 4,284 0.32
Interest payable and other liabilities 42,472 35,499
Shareholders' equity 794,711 620,911
Total liabilities and shareholders' equity $ 6,412,460 $ 5,966,988
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities) 3.49% 3.47%
Net Interest Income (FTE) $ 54,614 $ 50,638
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets) 3.59% 3.58%
* Fully taxable equivalent (FTE) 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 2014 Third Quarter Operating Results
Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates* (Unaudited)
Chemical Financial Corporation
Nine Months Ended September 30, 2014 Nine Months Ended September 30, 2013
Average
Balance
Interest (FTE) Effective
Yield/Rate*
Average
Balance
Interest (FTE) Effective
Yield/Rate*
Assets (Dollars in thousands)
Interest-earning assets:
Loans** $ 4,833,468 $ 153,928 4.26% $ 4,289,024 $ 146,396 4.56%
Taxable investment securities 652,969 6,825 1.39 720,675 7,737 1.43
Tax-exempt investment securities 270,699 8,018 3.95 229,486 7,234 4.20
Other interest-earning assets 25,572 809 4.23 25,572 701 3.66
Interest-bearing deposits with the Federal Reserve Bank 156,299 318 0.27 312,593 611 0.26
Total interest-earning assets 5,939,007 169,898 3.82 5,577,350 162,679 3.90
Less: allowance for loan losses 78,488 83,839
Other assets:
Cash and cash due from banks 123,390 121,116
Premises and equipment 74,618 74,092
Interest receivable and other assets 234,413 228,645
Total assets $ 6,292,940 $ 5,917,364
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 1,189,200 $ 868 0.10% $ 1,076,468 $ 745 0.09%
Savings deposits 1,424,494 958 0.09 1,348,890 901 0.09
Time deposits 1,307,174 9,014 0.92 1,405,756 11,344 1.08
Short-term borrowings 333,809 307 0.12 338,203 359 0.14
FHLB advances 2,587 47 2.43
Total interest-bearing liabilities 4,254,677 11,147 0.35 4,171,904 13,396 0.43
Noninterest-bearing deposits 1,260,582 1,098,733
Total deposits and borrowed funds 5,515,259 11,147 0.27 5,270,637 13,396 0.34
Interest payable and other liabilities 40,360 37,673
Shareholders' equity 737,321 609,054
Total liabilities and shareholders' equity $ 6,292,940 $ 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) $ 158,751 $ 149,283
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets) 3.57% 3.58%
* Fully taxable equivalent (FTE) 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 2014 Third Quarter Operating Results
Nonperforming Assets (Unaudited)
Chemical Financial Corporation
Sept 30, 2014 June 30, 2014 March 31, 2014 Dec 31, 2013 Sept 30, 2013 June 30, 2013 March 31, 2013
(In thousands)
Nonperforming Loans:
Nonaccrual loans:
Commercial $ 18,213 $ 18,773 $ 18,251 $ 18,374 $ 11,809 $ 11,052 $ 12,186
Commercial real estate 23,858 25,361 27,568 28,598 28,623 28,498 35,849
Real estate construction 162 160 160 371 183 183 168
Land development 1,467 2,184 2,267 2,309 2,954 3,434 4,105
Residential mortgage 6,693 6,325 6,589 8,921 8,029 9,241 10,407
Consumer installment 527 536 806 676 665 552 699
Home equity 2,116 2,296 2,046 2,648 3,023 3,064 2,837
Total nonaccrual loans 53,036 55,635 57,687 61,897 55,286 56,024 66,251
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial 16 15 43 536 281 1 4
Commercial real estate 87 69 730 190 78 177
Real estate construction
Land development
Residential mortgage 380 376 537 692 164 196
Consumer installment
Home equity 1,779 1,075 622 734 686 689 874
Total accruing loans contractually past due 90 days or more as to interest or principal payments 2,262 1,535 1,395 1,997 1,659 932 1,251
Nonperforming troubled debt restructurings:
Commercial loan portfolio 11,797 11,049 11,218 13,414 15,744 19,140 14,587
Consumer loan portfolio 3,647 5,516 6,244 4,676 3,129 3,246 4,328
Total nonperforming troubled debt restructurings 15,444 16,565 17,462 18,090 18,873 22,386 18,915
Total nonperforming loans 70,742 73,735 76,544 81,984 75,818 79,342 86,417
Other real estate and repossessed assets 10,354 10,392 10,056 9,776 12,033 13,659 18,194
Total nonperforming assets $ 81,096 $ 84,127 $ 86,600 $ 91,760 $ 87,851 $ 93,001 $ 104,611
Chemical Financial Corporation Announces 2014 Third Quarter Operating Results
Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation
3rd 2nd 1st 4th 3rd 2nd 1st Nine Months Ended
Quarter 2014 Quarter 2014 Quarter 2014 Quarter 2013 Quarter 2013 Quarter 2013 Quarter 2013 Sept 30, 2014 Sept 30, 2013
(In thousands)
Allowance for loan losses - originated loan portfolio
Allowance for loan losses - beginning of period $ 77,293 $ 77,973 $ 78,572 $ 81,032 $ 81,684 $ 82,334 $ 83,991 $ 78,572 $ 83,991
Provision for loan losses 1,500 1,500 1,600 2,000 3,000 3,000 3,000 4,600 9,000
Net loan (charge-offs) recoveries:
Commercial (535) (569) (233) (448) (615) (59) (1,199) (1,337) (1,873)
Commercial real estate (412) (783) (241) (1,233) (1,248) (1,786) (2,010) (1,436) (5,044)
Real estate construction (13) (100) (37) (113)
Land development 16 127 142 (207) (400) (50) (96) 285 (546)
Residential mortgage (304) (341) (704) (527) (409) (1,023) (573) (1,349) (2,005)
Consumer installment (689) (612) (801) (836) (786) (574) (447) (2,102) (1,807)
Home equity (350) (2) (262) (1,172) (194) (158) (332) (614) (684)
Net loan charge-offs (2,287) (2,180) (2,199) (4,460) (3,652) (3,650) (4,657) (6,666) (11,959)
Allowance for loan losses - end of period 76,506 77,293 77,973 78,572 81,032 81,684 82,334 76,506 81,032
Allowance for loan losses - acquired loan portfolio
Allowance for loan losses - beginning of period 500 500 500 500 500 500 500 500 500
Provision for loan losses
Net loan charge-offs
Allowance for loan losses - end of period 500 500 500 500 500 500 500 500 500
Total allowance for loan losses $ 77,006 $ 77,793 $ 78,473 $ 79,072 $ 81,532 $ 82,184 $ 82,834 $ 77,006 $ 81,532
Net loan charge-offs as a percent of average loans (quarter only, annualized) 0.18% 0.18% 0.19% 0.39% 0.33% 0.34% 0.45% 0.18% 0.37%
Chemical Financial Corporation Announces 2014 Third Quarter Operating Results
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
3rd Quarter 2014 2nd Quarter 2014 1st Quarter 2014 4th Quarter 2013 3rd Quarter 2013 2nd Quarter 2013 1st Quarter 2013
(Dollars in thousands, except per share data)
Summary of Operations
Interest income $ 56,629 $ 55,180 $ 53,645 $ 55,323 $ 53,578 $ 52,781 $ 52,379
Interest expense 3,561 3,720 3,866 4,018 4,284 4,385 4,727
Net interest income 53,068 51,460 49,779 51,305 49,294 48,396 47,652
Provision for loan losses 1,500 1,500 1,600 2,000 3,000 3,000 3,000
Net interest income after provision for loan losses 51,568 49,960 48,179 49,305 46,294 45,396 44,652
Noninterest income 15,351 15,801 13,716 13,578 14,644 15,948 16,239
Operating expenses 42,702 42,425 42,182 42,405 39,545 41,041 41,957
Income before income taxes 24,217 23,336 19,713 20,478 21,393 20,303 18,934
Federal income tax expense 7,450 7,100 5,900 6,100 6,400 6,100 5,700
Net income $ 16,767 $ 16,236 $ 13,813 $ 14,378 $ 14,993 $ 14,203 $ 13,234
Net interest margin 3.59% 3.59% 3.53% 3.63% 3.58% 3.60% 3.54%
Per Common Share Data
Net income:
Basic $ 0.51 $ 0.54 $ 0.46 $ 0.48 $ 0.54 $ 0.52 $ 0.48
Diluted 0.51 0.54 0.46 0.48 0.53 0.51 0.48
Cash dividends declared 0.24 0.23 0.23 0.23 0.22 0.21 0.21
Book value - period-end 24.47 24.22 23.63 23.38 22.61 22.14 21.97
Tangible book value - period-end 20.68 20.42 19.44 19.17 18.36 17.53 17.34
Market value - period-end 26.89 28.08 32.45 31.67 27.92 25.99 26.38

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