×

Chemical Financial Corporation Reports Third Quarter 2012 Results

MIDLAND, Mich., Oct. 22, 2012 (GLOBE NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced 2012 third quarter net income of $13.1 million, or $0.48 per diluted share, compared to 2012 second quarter net income of $13.9 million, or $0.50 per diluted share, and 2011 third quarter net income of $11.6 million, or $0.42 per diluted share. For the nine months ended September 30, 2012, net income was $39.3 million, or $1.43 per diluted share, compared to net income for the nine months ended September 30, 2011 of $31.8 million, or $1.16 per diluted share.

"Despite uneven economic conditions, Chemical Financial continues to post strong operating performance and stable financial results. Furthermore, we are making substantial progress working through our nonperforming loans and other real estate (ORE) portfolio, while controlling costs. As a result, our key credit quality and financial performance metrics continue to improve," said David B. Ramaker, Chairman, Chief Executive Officer and President of the Corporation.

"Our strong financial condition favorably positions us to pursue organic and acquisitive growth opportunities, as evidenced by our pending acquisition of 21 branch offices from Independent Bank, which has received regulatory approval and is expected to close in the fourth quarter of 2012. We will selectively assess other potential growth opportunities that arise as we expect Michigan's banking industry to continue to consolidate," said Ramaker.

The decrease in net income in the third quarter of 2012 from the second quarter of 2012 of $0.8 million, or 5.5 percent, was primarily attributable to a decrease of $1.2 million in noninterest income that was largely due to the receipt of nonrecurring noninterest income of $0.8 million in the second quarter of 2012. While net interest income was $0.5 million higher in the third quarter of 2012 than in the second quarter of 2012, the increase in net interest income was offset by $0.5 million increases in both the provision for loan losses and operating expenses in the third quarter of 2012, as compared to the second quarter of 2012.

The increase in net income in the third quarter of 2012 over the third quarter of 2011 of $1.5 million, or 12.7 percent, was attributable to increases in both net interest income and noninterest income and a decrease in the provision for loan losses, which were partially offset by an increase in operating expenses. The increase in operating expenses was attributable to acquisition-related expenses incurred in the third quarter of 2012.

The Corporation's return on average assets during the third quarter of 2012 was 0.96 percent, compared to 1.04 percent in the second quarter of 2012 and 0.87 percent in the third quarter of 2011. The Corporation's return on average equity was 8.8 percent in the third quarter of 2012, compared to 9.6 percent in the second quarter of 2012 and 8.0 percent in the third quarter of 2011.

Net interest income was $46.9 million in the third quarter of 2012, which was $0.5 million, or 1.0 percent, higher than the second quarter of 2012 and $0.6 million, or 1.4 percent, higher than the third quarter of 2011. The net interest margin (on a tax-equivalent basis) in the third quarter of 2012 was 3.76 percent, compared to 3.80 percent in both the second quarter of 2012 and the third quarter of 2011.

The increase in net interest income of $0.5 million in the third quarter of 2012 over the second quarter of 2012 was primarily attributable to an increase in interest income that resulted from an increase in average loans of $87 million, or 2.2 percent, during the third quarter of 2012, which was partially offset by the net impact of interest-earning assets and interest-bearing liabilities repricing during the third quarter of 2012. The increase in net interest income of $0.6 million in the third quarter of 2012 over the third quarter of 2011 was primarily attributable to both an increase in interest income that resulted from an increase in average loans of $218 million, or 5.8 percent, during the twelve months ended September 30, 2012 and a slight decrease in interest expense resulting from a change in the mix of deposit liabilities between these two quarters. The favorable impact on net interest income of these two items was partially offset by the net impact of interest-earning assets and interest-bearing liabilities repricing during the twelve months ended September 30, 2012.

The provision for loan losses (provision) was $4.5 million in the third quarter of 2012, compared to $4.0 million in the second quarter of 2012 and $6.4 million in the third quarter of 2011, with $0.5 million of the provision in the third quarter of 2012 and $1.3 million of the provision in the third quarter of 2011 applicable to the acquired loan portfolio. Net loan charge-offs were $6.5 million in the third quarter of 2012, compared to $5.1 million in the second quarter of 2012 and $7.4 million in the third quarter of 2011, with $2.2 million of net loan charge-offs in the third quarter of 2012 related to one loan relationship in the acquired loan portfolio.

The Corporation established an allowance for loan losses on the acquired loan portfolio of $1.6 million in 2011 and increased it by $0.6 million and $0.5 million in the first and third quarters of 2012, respectively. The establishment of the allowance for loan losses on the acquired loan portfolio was primarily attributable to the impairment of one commercial loan relationship which resulted in one of the acquired loan pools performing below original expectations. During the third quarter of 2012, the Corporation charged off $2.2 million of this loan relationship, resulting in a $0.2 million loan balance that remained outstanding at September 30, 2012. At September 30, 2012, the allowance for loan losses on the acquired loan portfolio was $0.5 million and was related to two consumer loan pools performing slightly below original expectations. It is management's belief that the remaining acquired loan pools at September 30, 2012, were performing, overall, as or slightly better than expected compared to original expectations.

Noninterest income was $12.1 million in the third quarter of 2012, compared to $13.3 million in the second quarter of 2012 and $11.2 million in the third quarter of 2011. Noninterest income in the second quarter of 2012 included nonrecurring income of $0.6 million from the partial insurance recovery of a 2008 branch cash loss and $0.2 million of other nonrecurring income. Excluding nonrecurring income, noninterest income in the third quarter of 2012 was $0.4 million lower than the second quarter of 2012, which was attributable to lower wealth management revenue.

Noninterest income in the third quarter of 2012 was $0.9 million higher than the third quarter of 2011, with the increase attributable to increases across all major categories of noninterest income as a result of both fee increases and volume growth. The largest increase in noninterest income was in mortgage banking revenue (MBR), with MBR of $1.5 million in the third quarter of 2012 up $0.3 million from MBR of $1.2 million in the third quarter of 2011. The increase in MBR between these two quarters was primarily driven by higher volume, as the Corporation sold $71 million of mortgages in the secondary market in the third quarter of 2012, compared to the sale of $48 million in the third quarter of 2011.

Operating expenses were $36.1 million in the third quarter of 2012, compared to $35.5 million in the second quarter of 2012 and $35.4 million in the third quarter of 2011. The Corporation's control of operating expenses has resulted in its ability to maintain its efficiency ratio favorably below the average efficiency ratios of its Federal Reserve Bank peer group. The Corporation's efficiency ratios were 59.9 percent in the third quarter of 2012, 58.3 percent in the second quarter of 2012 and 60.2 percent in the third quarter of 2011.

Operating expenses in the second and third quarters of 2012 included acquisition-related expenses applicable to the pending acquisition of branches from Independent Bank of $0.5 million and $0.6 million, respectively. Excluding acquisition-related expenses, operating expenses in the third quarter of 2012 were $0.4 million higher than the second quarter of 2012 and $0.1 million higher than the third quarter of 2011. The increase in operating expenses in the third quarter of 2012 over the second quarter of 2012 was primarily attributable to seasonally higher advertising and marketing costs. The Corporation's operating expenses were essentially the same in the third quarters of 2012 and 2011, as increases in various expense categories in the third quarter of 2012, including an increase in compensation costs of $1.5 million, or 7.8 percent, were almost entirely offset by decreases in other expense categories, including lower credit-related expenses. Credit-related expenses were $0.5 million in the third quarter of 2012, a reduction of $1.7 million, or 75 percent, from credit-related expenses of $2.2 million in the third quarter of 2011.

Credit-related expenses, comprised of loan collection costs and ORE net costs, were $2.6 million during the nine months ended September 30, 2012, a decrease of $3.2 million, or 55 percent, from credit-related expenses of $5.8 million during the nine months ended September 30, 2011. Credit-related expenses were lower in all three quarters of 2012, as compared to their respective quarters in 2011. The decrease in credit-related expenses of $3.2 million was largely attributable to the Corporation recognizing net gains of $1.4 million on the sale/writedown of ORE properties during the nine months ended September 30, 2012, compared to incurring net expense of $0.6 million during the nine months ended September 30, 2011. The additional reduction in credit-related expenses of $1.2 million was largely attributable to lower legal collection costs and lower appraisal fees on nonperforming and watch loan credits as the credit quality of the Corporation's loan portfolio continued to improve.

Total assets were $5.58 billion at September 30, 2012, up from $5.35 billion at June 30, 2012 and $5.44 billion at September 30, 2011. The increase in total assets during the third quarter of 2012 was attributable to an increase in interest-bearing balances held at the Federal Reserve Bank (FRB) due to a seasonal increase in municipal customer deposits. The Corporation has maintained significant amounts of funds at the FRB, with $315 million in balances held at the FRB at September 30, 2012, compared to $120 million at June 30, 2012 and $479 million at September 30, 2011.

Total loans were $4.02 billion at September 30, 2012, up from $3.96 billion at June 30, 2012 and $3.76 billion at September 30, 2011. Total loans increased $57 million, or 1.4%, in the third quarter of 2012. The Corporation's loan growth during the third quarter of 2012 occurred primarily in the commercial and consumer loan portfolios, with commercial loans increasing $37 million, or 4 percent, and consumer loans increasing $19 million, or 2 percent. During the twelve months ended September 30, 2012, total loans increased $259 million, or 6.9 percent, with commercial loans increasing $93 million, or 10.8 percent, real estate commercial loans increasing $61 million, or 5.8 percent, real estate residential loans increasing $40 million, or 4.8 percent, and consumer installment and home equity loans increasing $93 million, or 10.6 percent, while real estate construction and land development loans decreased $29 million, or 24.2 percent. The increases in loans during the three and twelve months ended September 30, 2012 were attributable to a combination of improving economic conditions and higher loan demand, as well as the Corporation increasing its market share. The average yield on the loan portfolio was 4.86 percent in the third quarter of 2012, compared to 4.96 percent in the second quarter of 2012 and 5.29 percent in the third quarter of 2011.

Investment securities were $868 million at September 30, 2012, compared to $893 million at June 30, 2012 and $797 million at September 30, 2011. The average yield of the investment securities portfolio, on a fully taxable equivalent basis, was 2.13 percent in the third quarter of 2012, compared to 2.17 percent in the second quarter of 2012 and 2.35 percent in the third quarter of 2011.

Total deposits were $4.60 billion at September 30, 2012, up from $4.38 billion at June 30, 2012 and $4.48 billion at September 30, 2011. The Corporation experienced an increase in total deposits of $215 million, or 4.9 percent, during the third quarter of 2012, which was attributable to a seasonal increase in deposits of municipal customers. Remaining brokered deposits acquired in the Corporation's 2010 acquisition of Byron Bank were $75 million at September 30, 2012, compared to $84 million at June 30, 2012 and $98 million at September 30, 2011. Federal Home Loan Bank (FHLB) advances totaled $37.2 million at September 30, 2012, compared to $38.2 million at June 30, 2012 and $46.0 million at September 30, 2011. 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 0.46 percent in the third quarter of 2012 from 0.51 percent in the second quarter of 2012 and 0.65 percent in the third quarter of 2011.

At September 30, 2012, the Corporation's tangible equity to assets ratio and total risk-based capital ratio were 8.8 percent and 13.6 percent, respectively, compared to 9.0 percent and 13.6 percent, respectively, at June 30, 2012 and 8.6 percent and 13.1 percent, respectively, at September 30, 2011. At September 30, 2012, the Corporation's book value was $21.75 per share, compared to $21.42 per share at June 30, 2012 and $21.02 per share at September 30, 2011.

The credit quality of the Corporation's loan portfolio continued to show further improvement during the third quarter of 2012. At September 30, 2012, the Corporation's nonperforming loans, consisting of nonaccrual loans, accruing loans past due 90 days or more as to principal or interest and nonperforming troubled debt restructurings, totaled $90.9 million, compared to $92.8 million at June 30, 2012 and $120.4 million at September 30, 2011, representing declines of 2.1 percent and 24.5 percent, respectively. At September 30, 2012, nonperforming loans as a percentage of total loans were 2.26 percent, compared to 2.34 percent at June 30, 2012 and 3.20 percent at September 30, 2011.

Other real estate and repossessed assets totaled $19.5 million at September 30, 2012, compared to $23.5 million at June 30, 2012 and $28.7 million at September 30, 2011. The decrease in other real estate during the third quarter of 2012 was primarily attributable to the sale of one ORE property, which consisted of vacant land with a carrying value of $4.1 million. This ORE property was obtained as a result of the Corporation receiving a deed in lieu of foreclosure on this property during the fourth quarter of 2010 that was attributable to a loan acquired in the Corporation's acquisition of Byron Bank. This loan was impaired at the acquisition date and was recorded at the estimated fair value of the collateral at that time.

At September 30, 2012, the allowance for loan losses of the originated loan portfolio was $84.2 million, or 2.33 percent of originated loans, compared to 2.40 percent at June 30, 2012 and 2.68 percent at September 30, 2011. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 93 percent at September 30, 2012, compared to 91 percent at June 30, 2012 and 73 percent at September 30, 2011. The allowance for loan losses of the acquired loan portfolio was $0.5 million at September 30, 2012, compared to $2.2 million at June 30, 2012 and $1.3 million at September 30, 2011. Management believes that the Corporation's acquired loan portfolio at September 30, 2012 totaling $413 million, was performing, overall, as or slightly better than original expectations.

Chemical Financial Corporation is the second largest bank holding company headquartered and operating branch offices in Michigan. The Corporation operates through a single subsidiary bank, Chemical Bank, with 142 banking offices spread over 32 counties in the lower peninsula of Michigan. At September 30, 2012, the Corporation had total assets of $5.6 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. Words such as "anticipated," "awaiting," "believe," "continue," "estimated," "expects," "further," "improving," "opportunities," "pending," "positions," "potential," "strategies," "trends," "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 the credit quality of the loan portfolio, future levels of nonperforming loans, future economic trends and conditions, anticipated consolidation opportunities in Michigan's banking industry, potential growth opportunities, future income levels, and our ability to grow our loan portfolio, improve credit quality and control operating costs. 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, mortgage servicing rights and other real estate owned and 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) involve judgments that are inherently forward-looking. 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 or that other real estate owned can be sold for its carrying value or at all. The future effect of changes in the financial and credit markets and the national and regional economy 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 contains forward-looking statements regarding the Corporation's outlook or expectations with respect to the planned acquisition of branches from Independent Bank, the expected costs to be incurred in connection with the acquisition, the future performance of the branches to be acquired, the consequences of their integration into Chemical Bank, and the impact of the transaction on the Corporation's future performance. Even though regulatory approval has been received, circumstances could arise which may delay or impede the completion of the transaction, although none are known at this time. 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 2012. The transaction may be more expensive to complete and the anticipated benefits, including anticipated strategic gains, may be significantly harder or take longer to achieve than expected or may not be achieved in their entirety or at all as a result of unexpected factors or events.

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, 2011. 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
(In thousands, except per share data) September 30
2012
December 31
2011
September 30
2011
Assets:
Cash and cash equivalents:
Cash and cash due from banks $ 123,519 $ 121,294 $ 126,712
Interest-bearing deposits with unaffiliated banks and others 315,201 260,646 484,572
Total cash and cash equivalents 438,720 381,940 611,284
Investment securities:
Available-for-sale 646,578 667,276 610,493
Held-to-maturity 221,536 183,339 186,432
Total Investment Securities 868,114 850,615 796,925
Loans held-for-sale 15,075 18,818 15,212
Loans:
Commercial 951,938 895,150 858,969
Real estate commercial 1,117,073 1,071,999 1,056,092
Real estate construction and land development 90,882 118,176 119,829
Real estate residential 880,295 861,716 840,044
Consumer installment and home equity 978,971 884,244 885,492
Total Loans 4,019,159 3,831,285 3,760,426
Allowance for loan losses (84,694) (88,333) (88,713)
Net Loans 3,934,465 3,742,952 3,671,713
Premises and equipment 67,796 65,997 64,998
Goodwill 113,414 113,414 113,414
Other intangible assets 10,243 11,472 11,849
Interest receivable and other assets 132,594 154,245 154,209
Total Assets $ 5,580,421 $ 5,339,453 $ 5,439,604
Liabilities:
Deposits:
Noninterest-bearing $ 952,126 $ 875,791 $ 891,363
Interest-bearing 3,646,746 3,491,066 3,589,223
Total Deposits 4,598,872 4,366,857 4,480,586
Interest payable and other liabilities 34,738 54,024 33,700
Short-term borrowings 311,471 303,786 302,298
Federal Home Loan Bank advances 37,237 43,057 45,991
Total Liabilities 4,982,318 4,767,724 4,862,575
Shareholders' Equity:
Preferred stock, no par value per share -- -- --
Common stock, $1 par value per share 27,498 27,457 27,457
Additional paid-in capital 432,627 431,277 430,462
Retained earnings 160,884 138,324 132,611
Accumulated other comprehensive loss (22,906) (25,329) (13,501)
Total Shareholders' Equity 598,103 571,729 577,029
Total Liabilities and Shareholders' Equity $ 5,580,421 $ 5,339,453 $ 5,439,604
Chemical Financial Corporation Announces Third Quarter Operating Results
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
Three Months Ended
September 30
Nine Months Ended
September 30
(In thousands, except per share data) 2012 2011 2012 2011
Interest Income:
Interest and fees on loans $ 48,322 $ 49,770 $ 144,472 $ 148,382
Interest on investment securities:
Taxable 2,458 2,335 7,610 6,884
Tax-exempt 1,457 1,513 4,407 4,385
Dividends on nonmarketable equity securities 128 114 638 605
Interest on deposits with unaffiliated banks and others 136 266 505 856
Total Interest Income 52,501 53,998 157,632 161,112
Interest Expense:
Interest on deposits 5,238 7,199 16,999 22,628
Interest on short-term borrowings 105 117 317 418
Interest on Federal Home Loan Bank advances 248 413 765 1,298
Total Interest Expense 5,591 7,729 18,081 24,344
Net Interest Income 46,910 46,269 139,551 136,768
Provision for loan losses 4,500 6,400 13,500 20,900
Net Interest Income after Provision for Loan Losses 42,410 39,869 126,051 115,868
Noninterest Income:
Service charges and fees on deposit accounts 5,028 4,780 14,546 13,504
Wealth management revenue 2,745 2,638 8,835 8,430
Other charges and fees for customer services 2,778 2,581 8,489 7,967
Mortgage banking revenue 1,457 1,173 4,059 2,736
Gain on sale of merchant card services -- -- 1,280 --
Other 54 53 784 262
Total Noninterest Income 12,062 11,225 37,993 32,899
Operating Expenses:
Salaries, wages and employee benefits 20,738 19,229 61,846 55,622
Occupancy 3,137 3,093 9,264 9,530
Equipment and software 3,406 3,162 9,651 8,994
Other 8,785 9,910 27,137 30,050
Total Operating Expenses 36,066 35,394 107,898 104,196
Income Before Income Taxes 18,406 15,700 56,146 44,571
Federal Income Tax Expense 5,300 4,075 16,800 12,725
Net Income $ 13,106 $ 11,625 $ 39,346 $ 31,846
Net income per common share:
Basic $ 0.48 $ 0.42 $ 1.43 $ 1.16
Diluted 0.48 0.42 1.43 1.16
Key Ratios:
Return on average assets 0.96% 0.87% 0.97% 0.80%
Return on average shareholders' equity 8.8% 8.0% 9.0% 7.5%
Net interest margin 3.76% 3.80% 3.77% 3.79%
Efficiency ratio 59.9% 60.2% 59.5% 60.0%
Chemical Financial Corporation Announces Third Quarter Operating Results
Financial Summary (Unaudited)
Chemical Financial Corporation
Three Months Ended
(Dollars in thousands) Sept 30
2012
June 30
2012
March 31
2012
Dec 31
2011
Sept 30
2011
June 30
2011
March 31
2011
Average Balances
Total assets $ 5,433,491 $ 5,360,598 $ 5,396,420 $ 5,341,079 $ 5,323,962 $ 5,255,244 $ 5,302,558
Total interest-earning assets 5,105,101 5,044,629 5,061,882 5,008,813 4,985,380 4,928,590 4,963,384
Total loans 3,987,928 3,901,321 3,824,604 3,772,140 3,769,745 3,707,468 3,672,301
Total deposits 4,464,582 4,383,628 4,416,273 4,378,066 4,358,658 4,299,728 4,362,774
Total interest-bearing liabilities 3,823,954 3,817,753 3,903,986 3,847,003 3,853,443 3,857,678 3,942,406
Total shareholders' equity 591,683 582,873 574,261 578,105 573,580 565,500 560,661
Key Ratios (annualized where applicable)
Net interest margin (taxable equivalent basis) 3.76% 3.80% 3.76% 3.84% 3.80% 3.78% 3.78%
Efficiency ratio 59.9% 58.3% 60.4% 63.1% 60.2% 58.2% 61.8%
Return on average assets 0.96% 1.04% 0.92% 0.83% 0.87% 0.84% 0.70%
Return on average shareholders' equity 8.8% 9.6% 8.7% 7.7% 8.0% 7.8% 6.6%
Average shareholders' equity as a percent of average assets 10.9% 10.9% 10.6% 10.8% 10.8% 10.8% 10.6%
Capital ratios (period end):
Tangible shareholders' equity as a percent of total assets 8.8% 9.0% 8.7% 8.7% 8.6% 8.9% 8.5%
Total risk-based capital ratio 13.6% 13.6% 13.7% 13.3% 13.1% 13.0% 13.0%
Sept 30
2012
June 30
2012
March 31
2012
Dec 31
2011
Sept 30
2011
June 30
2011
March 31
2011
Credit Quality Statistics
Originated Loans $ 3,606,547 $ 3,515,110 $ 3,370,279 $ 3,338,502 $ 3,265,054 $ 3,225,179 $ 3,143,489
Acquired Loans 412,612 447,232 472,819 492,783 495,372 522,831 539,027
Nonperforming Assets:
Nonperforming loans 90,877 92,811 98,548 106,269 120,395 135,929 145,859
Other real estate and repossessed assets (ORE) 19,467 23,509 25,944 25,484 28,679 24,607 26,355
Total nonperforming assets 110,344 116,320 124,492 131,753 149,074 160,536 172,214
Performing troubled debt restructurings 26,806 26,383 27,177 20,394 15,543 12,889 --
Allowance for loan losses-originated as a percent of:
Total originated loans 2.33% 2.40% 2.54% 2.60% 2.68% 2.78% 2.85%
Nonperforming loans 93% 91% 87% 82% 73% 66% 61%
Nonperforming loans as a percent of total loans 2.26% 2.34% 2.56% 2.77% 3.20% 3.63% 3.96%
Nonperforming assets as a percent of:
Total loans plus ORE 2.73% 2.92% 3.22% 3.42% 3.93% 4.26% 4.64%
Total assets 1.98% 2.17% 2.28% 2.47% 2.74% 3.08% 3.23%
Net loan charge-offs (year-to-date):
Originated 14,939 10,622 5,548 27,197 21,717 14,297 7,356
Acquired 2,200 -- -- -- -- -- --
Total loan charge-offs (year-to-date) 17,139 10,622 5,548 27,197 21,717 14,297 7,356
Net loan charge-offs as a percent of average loans (year-to-date, annualized) 0.59% 0.55% 0.58% 0.73% 0.78% 0.77% 0.80%
Sept 30
2012
June 30
2012
March 31
2012
Dec 31
2011
Sept 30
2011
June 30
2011
March 31
2011
Additional Data - Intangibles
Goodwill $ 113,414 $ 113,414 $ 113,414 $ 113,414 $ 113,414 $ 113,414 $ 113,414
Core deposit intangibles 6,777 7,144 7,512 7,879 8,261 8,643 9,024
Mortgage servicing rights (MSR) 3,466 3,463 3,427 3,593 3,561 3,577 3,832
Other intangible assets -- -- -- -- 27 107 204
Amortization of core deposit intangibles (quarter only) 367 368 367 382 382 381 382
Chemical Financial Corporation Announces Third Quarter Operating Results
Average Balances, Tax Equivalent Interest and Effective Yields and Rates (Unaudited)*
Three Months Ended September 30, 2012
(Dollars in thousands) Average
Balance
Tax
Equivalent
Interest
Effective
Yield/Rate
Assets
Interest-Earning Assets:
Loans** $ 4,001,117 $ 48,807 4.86 %
Taxable investment securities 685,580 2,458 1.43
Tax-exempt investment securities 191,902 2,221 4.63
Other interest-earning assets 25,572 128 1.99
Interest-bearing deposits with unaffiliated banks and others 200,930 136 0.27
Total interest-earning assets 5,105,101 53,750 4.19
Less: Allowance for loan losses 87,796
Other Assets:
Cash and cash due from banks 119,107
Premises and equipment 67,911
Interest receivable and other assets 229,168
Total Assets $ 5,433,491
Liabilities and shareholders' equity
Interest-bearing Liabilities:
Interest-bearing demand deposits $ 890,457 $ 228 0.10 %
Savings deposits 1,158,985 303 0.10
Time deposits 1,434,738 4,707 1.31
Short-term borrowings 302,051 105 0.14
FHLB advances 37,723 248 2.62
Total interest-bearing liabilities 3,823,954 5,591 0.58
Noninterest-bearing deposits 980,402 -- --
Total deposits and borrowed funds 4,804,356 5,591 0.46
Interest payable and other liabilities 37,452
Shareholders' equity 591,683
Total Liabilities and Shareholders' Equity $ 5,433,491
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities) 3.61 %
Net Interest Income (FTE) $ 48,159
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets) 3.76 %
* 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
(Dollars in thousands) Sept 30
2012
June 30
2012
March 31
2012
Dec 31
2011
Sept 30
2011
June 30
2011
March 31
2011
Nonperforming Loans:
Nonaccrual loans:
Commercial $ 15,217 $ 12,673 $ 11,443 $ 10,726 $ 10,804 $ 14,386 $ 15,672
Real estate commercial 41,311 41,691 46,870 44,438 48,854 57,324 59,931
Real estate construction and land development 6,664 3,485 3,809 6,190 7,877 8,933 9,414
Real estate residential 11,307 12,613 12,687 12,573 17,544 17,809 15,505
Consumer installment and home equity 3,825 3,994 4,344 4,467 6,033 6,898 5,774
Total nonaccrual loans 78,324 74,456 79,153 78,394 91,112 105,350 106,296
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial 273 300 1,005 1,381 282 629 455
Real estate commercial 247 269 75 374 415 143 459
Real estate construction and land development -- -- -- 287 -- -- --
Real estate residential 431 840 333 752 974 1,729 191
Consumer installment and home equity 1,147 1,157 1,233 1,023 1,344 1,243 1,091
Total accruing loans contractually past due 90 days or more as to interest or principal payments 2,098 2,566 2,646 3,817 3,015 3,744 2,196
Nonperforming troubled debt restructurings:
Commercial loan portfolio 6,553 11,691 11,258 14,675 16,457 15,443 15,201
Consumer loan portfolio 3,902 4,098 5,491 9,383 9,811 11,392 22,166
Total nonperforming troubled debt restructurings 10,455 15,789 16,749 24,058 26,268 26,835 37,367
Total nonperforming loans 90,877 92,811 98,548 106,269 120,395 135,929 145,859
Other real estate and repossessed assets 19,467 23,509 25,944 25,484 28,679 24,607 26,355
Total nonperforming assets $ 110,344 $ 116,320 $ 124,492 $ 131,753 $ 149,074 $ 160,536 $ 172,214
Chemical Financial Corporation Announces Third Quarter Operating Results
Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation
Three Months Ended
(Dollars in thousands) Sept 30
2012
June 30
2012
March 31
2012
Dec 31
2011
Sept 30
2011
June 30
2011
March 31
2011
Allowance for loan losses - originated loan portfolio
Allowance for loan losses - originated, at beginning of period $ 84,511 $ 85,585 $ 86,733 $ 87,413 $ 89,733 $ 89,674 $ 89,530
Provision for loan losses - originated 4,000 4,000 4,400 4,800 5,100 7,000 7,500
Loans charged off:
Commercial (551) (974) (1,079) (1,768) (1,234) (1,972) (1,976)
Real estate commercial (1,952) (2,178) (2,268) (2,120) (3,969) (3,168) (3,875)
Real estate construction and land development (51) (45) (32) (54) (236) (136) (63)
Real estate residential (1,357) (1,140) (1,717) (945) (1,884) (1,198) (944)
Consumer installment and home equity (1,485) (1,835) (1,451) (1,434) (1,516) (1,832) (1,784)
Total loan charge-offs (5,396) (6,172) (6,547) (6,321) (8,839) (8,306) (8,642)
Recoveries of loans previously charged off:
Commercial 135 140 191 137 614 710 215
Real estate commercial 325 298 421 272 285 212 87
Real estate construction and land development -- -- 2 40 -- 5 --
Real estate residential 237 199 22 80 207 106 456
Consumer installment and home equity 382 461 363 312 313 332 528
Total loan recoveries 1,079 1,098 999 841 1,419 1,365 1,286
Net loan charge-offs - originated (4,317) (5,074) (5,548) (5,480) (7,420) (6,941) (7,356)
Allowance for loan losses - originated, at end of period 84,194 84,511 85,585 86,733 87,413 89,733 89,674
Allowance for loan losses - acquired loan portfolio
Allowance for loan losses - acquired, at beginning of period 2,200 2,200 1,600 1,300 -- -- --
Provision for loan losses - acquired 500 -- 600 300 1,300 -- --
Net loan charge-offs - acquired (commercial) (2,200) -- -- -- -- -- --
Allowance for loan losses - acquired, at end of period 500 2,200 2,200 1,600 1,300 -- --
Total allowance for loan losses $ 84,694 $ 86,711 $ 87,785 $ 88,333 $ 88,713 $ 89,733 $ 89,674
Chemical Financial Corporation Announces Third Quarter Operating Results
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
(Dollars in thousands, except per share data) 3rd Qtr.
2012
2nd Qtr.
2012
1st Qtr.
2012
4th Qtr.
2011
3rd Qtr.
2011
2nd Qtr.
2011
1st Qtr.
2011
Summary of Operations
Interest income $ 52,501 $ 52,467 $ 52,664 $ 54,130 $ 53,998 $ 53,439 $ 53,675
Interest expense 5,591 6,021 6,469 7,045 7,729 8,145 8,470
Net interest income 46,910 46,446 46,195 47,085 46,269 45,294 45,205
Provision for loan losses 4,500 4,000 5,000 5,100 6,400 7,000 7,500
Net interest income after provision for loan losses 42,410 42,446 41,195 41,985 39,869 38,294 37,705
Noninterest income 12,062 13,282 12,649 11,501 11,225 10,902 10,772
Operating expenses 36,066 35,537 36,295 37,807 35,394 33,413 35,389
Income before income taxes 18,406 20,191 17,549 15,679 15,700 15,783 13,088
Federal income tax expense 5,300 6,325 5,175 4,475 4,075 4,750 3,900
Net income $ 13,106 $ 13,866 $ 12,374 $ 11,204 $ 11,625 $ 11,033 $ 9,188
Net interest margin 3.76% 3.80% 3.76% 3.84% 3.80% 3.78% 3.78%
Per Common Share Data
Net income:
Basic $ 0.48 $ 0.50 $ 0.45 $ 0.41 $ 0.42 $ 0.40 $ 0.33
Diluted 0.48 0.50 0.45 0.41 0.42 0.40 0.33
Cash dividends declared 0.21 0.20 0.20 0.20 0.20 0.20 0.20
Book value - period-end 21.75 21.42 21.10 20.82 21.02 20.78 20.54
Tangible book value - period-end 17.52 17.17 16.84 16.54 16.71 16.46 16.19
Market value - period-end 24.20 21.50 23.44 21.32 15.31 18.76 19.93
CONTACT: For further information: David B. Ramaker, CEO Lori A. Gwizdala, CFO 989-839-5350Source:Chemical Financial Corporation