Chemical Financial Corporation Reports Second Quarter of 2013 Results

MIDLAND, Mich., July 17, 2013 (GLOBE NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced 2013 second quarter net income of $14.2 million, or $0.51 per diluted share, compared to 2013 first quarter net income of $13.2 million, or $0.48 per diluted share, and 2012 second quarter net income of $13.9 million, or $0.50 per diluted share. For the six months ended June 30, 2013, net income was $27.4 million, or $0.99 per diluted share, compared to net income for the six months ended June 30, 2012 of $26.2 million, or $0.95 per diluted share.

"We turned in a solid performance in the second quarter of 2013, largely attributable to strong loan growth and improving asset quality that resulted in lower credit-related costs," noted David B. Ramaker, Chairman, Chief Executive Officer and President of the Corporation. "On a go forward basis, we continue to look to these factors and a focused cost discipline to drive earnings growth, but also remain well positioned to capitalize on two longer-term trends: the anticipated rising rate environment and ongoing consolidation in Michigan's banking industry. In addition, we are well positioned to benefit from any broader economic recovery, as our community-focused, relationship-oriented approach and strong financial condition make Chemical Bank the financial institution of choice in the Michigan markets we serve," Ramaker added.

Net income of $14.2 million in the second quarter of 2013 was $1.0 million, or 7.3%, higher than the first quarter of 2013, with higher net interest income and lower operating expenses in the second quarter of 2013 partially offset by lower noninterest income.

Net income in the second quarter of 2013 was $0.3 million, or 2.4%, higher than the second 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 had increases of $2.0 million in both net interest income and noninterest income in the second quarter of 2013 over the second quarter of 2012, while the provision for loan losses was $1.0 million lower in the second quarter of 2013, compared to the second quarter of 2012. Operating costs in the second quarter of 2013 were $4.8 million higher than the second quarter of 2012, which was partially attributable to the 21 branch banking offices acquired in December 2012 (branch acquisition transaction).

The Corporation's return on average assets was 0.97% during the second quarter of 2013, compared to 0.91% in the first quarter of 2013 and 1.04% in the second quarter of 2012. The Corporation's return on average shareholders' equity was 9.4% in the second quarter of 2013, compared to 9.0% in the first quarter of 2013 and 9.6% in the second quarter of 2012.

The net interest margin (on a tax-equivalent basis) was 3.60% in the second quarter of 2013, compared to 3.54% in the first quarter of 2013 and 3.80% in the second quarter of 2012. The decrease in the net interest margin from the second quarter of 2012 was primarily attributable to the branch acquisition transaction, in which the Corporation acquired $340 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 $48.4 million in the second quarter of 2013, $0.7 million higher than the first quarter of 2013 and $2.0 million higher than the second quarter of 2012. The increase in net interest income in the second quarter of 2013 over the first quarter of 2013 was largely attributable to the significant amount of loan growth in the second quarter of 2013. Total loans grew $151 million, or 3.6%, in the second quarter of 2013. The increase in net interest income in the second quarter of 2013 over the second quarter of 2012 resulted from a combination of loan portfolio growth and the further deployment of cash from the branch acquisition transaction.

The provision for loan losses was $3.0 million in both the second quarter of 2013 and first quarter of 2013, compared to $4.0 million in the second quarter of 2012. The provision for loan losses in the second quarter of 2013 was maintained at the same level as the first quarter of 2013, despite lower loan charge-offs and continued improvement in the credit quality of the loan portfolio, due to the significant growth in the loan portfolio during the quarter. Net loan charge-offs were $3.7 million, or 0.34% of average loans, in the second quarter of 2013, compared to $4.7 million, or 0.45% of average loans, in the first quarter of 2013 and $5.1 million, or 0.52% of average loans, in the second quarter of 2012.

Noninterest income was $15.9 million in the second quarter of 2013, compared to $16.2 million in the first quarter of 2013 and $13.9 million in the second quarter of 2012. Noninterest income in the second quarter of 2013 included gains from the redemption of a preferred stock investment security of $0.3 million and the sale of a closed branch office of $0.2 million, while the first quarter of 2013 included investment securities gains of $0.8 million and the second quarter of 2012 included nonrecurring income of $0.6 million from the partial insurance recovery of a 2008 branch cash loss. Excluding these gains and nonrecurring income (non-recurring gains), noninterest income in the second quarter of 2013 was approximately the same as the first quarter of 2013 and $2.1 million higher than the second quarter of 2012. While noninterest income, excluding non-recurring gains, was approximately the same in the second quarter of 2013, compared to the first quarter of 2013, an increase in wealth management revenue of $0.4 million was offset by a similar decrease in mortgage banking revenue.

The increase in noninterest income of $2.1 million in the second quarter of 2013 over the second quarter of 2012 (excluding non-recurring gains) was attributable to increases across all major categories of noninterest income and 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. Service charges and fees on deposit accounts and revenue generated from customers' debit card usage were both $0.5 million higher in the second quarter of 2013. In addition, wealth management revenue and mortgage banking revenue were $0.7 million and $0.2 million, respectively, higher in the second quarter of 2013.

Operating expenses were $41.0 million in the second quarter of 2013, compared to $42.0 million in the first quarter of 2013 and $36.2 million in the second quarter of 2012. Operating expenses in the first quarter of 2013 included $0.8 million of prepayment fees incurred to prepay the Corporation's FHLB advances, while the second quarter of 2012 included acquisition-related transaction expenses of $0.5 million. Excluding the prepayment fees and acquisition-related transaction expenses (non-recurring expenses), operating expenses in the second quarter of 2013 were $0.2 million lower than the first quarter of 2013 and $5.3 million higher than the second quarter of 2012.

The decrease in operating expenses of $0.2 million in the second quarter of 2013 compared to the first quarter of 2013 (excluding non-recurring expenses) was attributable to decreases in credit-related expenses, employee payroll taxes and occupancy expenses, which were partially offset by higher performance-based compensation. Credit-related expenses, comprised of loan collection costs and other real estate (ORE) net costs, in the second quarter of 2013 were $0.8 million lower than the first quarter of 2013. Employee payroll taxes, which are historically the highest in the first quarter of the year, declined $0.3 million in the second quarter of 2013 and occupancy expenses also declined $0.3 million from the first quarter of 2013. Performance-based compensation expense was $1.3 million higher than the first quarter of 2013.

The increase in operating expenses of $5.3 million in the second quarter of 2013 (excluding non-recurring expenses) over the second 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 expense.

The Corporation's efficiency ratio was 63.3% in the second quarter of 2013, 64.4% in the first quarter of 2013 and 58.7% in the second quarter of 2012.

Total assets were $5.81 billion at June 30, 2013, compared to $5.99 billion at March 31, 2013 and $5.35 billion at June 30, 2012. The increase in total assets during the twelve months ended June 30, 2013 was primarily attributable to the branch acquisition transaction that added $404 million in assets on the acquisition date. The Corporation has maintained significant amounts of funds at the Federal Reserve Bank (FRB), with $69 million in balances held at the FRB at June 30, 2013, compared to $477 million at March 31, 2013 and $120 million at June 30, 2012. The decrease in FRB balances during the three months ended June 30, 2013 was largely attributable to growth in the Corporation's loan and investment securities portfolios.

Total loans were $4.34 billion at June 30, 2013, up from $4.19 billion at March 31, 2013 and $3.96 billion at June 30, 2012. During the three and twelve months ended June 30, 2013, total loans increased $151 million, or 3.6%, and $374 million, or 9.4%, respectively. The increases in loans during the three and twelve months ended June 30, 2013 occurred across all loan categories and were largely attributable to a combination of improving economic conditions and increased market share. The average yield on the loan portfolio was 4.56% in the second quarter of 2013, compared to 4.69% in the first quarter of 2013 and 4.96% in the second quarter of 2012.

Investment securities were $1.01 billion at June 30, 2013, compared to $961 million at March 31, 2013 and $893 million at June 30, 2012. The average yield of the investment securities portfolio was 2.08% in the second quarter of 2013, compared to 2.19% in the first quarter of 2013 and 2.17% in the second quarter of 2012.

Total deposits were $4.81 billion at June 30, 2013, compared to $5.01 billion at March 31, 2013 and $4.38 billion at June 30, 2012. The slight decline in total deposits during the second quarter of 2013, compared to the first quarter of 2013, was largely attributable to the seasonality of deposits with municipalities. The Corporation experienced an increase in total deposits of $431 million, or 9.8%, during the twelve months ended June 30, 2013, with the increase primarily attributable to the branch acquisition transaction. The Corporation acquired $404 million of deposits on the date of acquisition. Remaining brokered deposits acquired in the Corporation's 2010 acquisition of Byron Bank were $25 million at June 30, 2013, compared to $44 million at March 31, 2013 and $84 million at June 30, 2012. 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 0.34% in the second quarter of 2013 from 0.36% in the first quarter of 2013 and 0.51% in the second quarter of 2012.

At June 30, 2013, the Corporation's tangible equity to assets ratio and total risk-based capital ratio were 8.5% and 13.1%, respectively, compared to 8.1% and 13.3%, respectively, at March 31, 2013 and 9.0% and 13.6%, respectively, at June 30, 2012. The decreases in the Corporation's equity ratios from June 30, 2012 to June 30, 2013 and March 31, 2013 were attributable to an increase in average assets that resulted from the branch acquisition transaction.

At June 30, 2013, the Corporation's book value was $22.14 per share, compared to $21.97 per share at March 31, 2013 and $21.42 per share at June 30, 2012. At June 30, 2013, the Corporation's tangible book value was $17.53 per share, compared to $17.34 per share at March 31, 2013 and $17.17 per share at June 30, 2012.

The credit quality of the Corporation's loan portfolio continued to show significant improvement during the second quarter of 2013, with nonperforming loans declining $7.1 million, or 8.2%. 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 $79.3 million at June 30, 2013, compared to $86.4 million at March 31, 2013 and $92.8 million at June 30, 2012. At June 30, 2013, nonperforming loans as a percentage of total loans were 1.83%, compared to 2.06% at March 31, 2013 and 2.34% at June 30, 2012. The reduction in nonperforming loans during the three and twelve months ended June 30, 2013 was attributable to a combination of improving economic conditions and reduced loan charge-offs.

Other real estate and repossessed assets declined $4.5 million, or 25%, during the second quarter of 2013 to $13.7 million at June 30, 2013, compared to $18.2 million at March 31, 2013 and $23.5 million at June 30, 2012. The reduction in other real estate and repossessed assets during the three and twelve months ended June 30, 2013 was attributable to sales of other real estate properties due partially to improving economic conditions.

At June 30, 2013, the allowance for loan losses of the originated loan portfolio was $81.7 million, or 2.05% of originated loans, compared to $82.3 million, or 2.16% of originated loans, at March 31, 2013 and $84.5 million, or 2.40% of originated loans, at June 30, 2012. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 103% at June 30, 2013, compared to 95% at March 31, 2013 and 91% at June 30, 2012. The allowance for loan losses of the acquired loan portfolio was $0.5 million at both June 30, 2013 and March 31, 2013, compared to $2.2 million at June 30, 2012. Management believes that the Corporation's acquired loan portfolio totaling $345 million at June 30, 2013 was performing, overall, at or 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 June 30, 2013, the Corporation had total assets of $5.8 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 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 cash flows from acquired loans, future effects of new or changed accounting standards, future opportunities for acquisitions, the impact of branch acquisition transactions on the Corporation's business, opportunities to increase top line revenues, the Corporation's ability to grow its core franchise, 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 Second Quarter Operating Results
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation

June 30, 2013
March 31,
2013
December 31,
2012

June 30, 2012
(In thousands, except per share data)
Assets
Cash and cash equivalents:
Cash and cash due from banks $ 137,586 $ 101,501 $ 142,467 $ 122,010
Interest-bearing deposits with the Federal Reserve Bank 69,371 477,225 513,668 119,813
Total cash and cash equivalents 206,957 578,726 656,135 241,823
Investment securities:
Available-for-sale 734,052 703,622 586,809 680,231
Held-to-maturity 274,715 257,749 229,977 213,034
Total investment securities 1,008,767 961,371 816,786 893,265
Loans held-for-sale 9,180 14,850 17,665 12,625
Loans:
Commercial 1,091,894 1,038,115 1,002,722 915,352
Commercial real estate 1,172,347 1,162,383 1,161,861 1,119,655
Real estate construction and land development 100,629 98,007 100,237 94,227
Residential mortgage 898,816 872,454 883,835 873,214
Consumer installment and home equity 1,072,185 1,014,302 1,019,080 959,894
Total loans 4,335,871 4,185,261 4,167,735 3,962,342
Allowance for loan losses (82,184) (82,834) (84,491) (86,711)
Net loans 4,253,687 4,102,427 4,083,244 3,875,631
Premises and equipment 73,379 73,501 75,458 67,382
Goodwill 120,164 120,164 120,164 113,414
Other intangible assets 14,354 14,902 15,388 10,607
Interest receivable and other assets 119,723 124,587 132,412 137,034
Total Assets $ 5,806,211 $ 5,990,528 $ 5,917,252 $ 5,351,781
Liabilities
Deposits:
Noninterest-bearing $ 1,107,453 $ 1,086,986 $ 1,085,857 $ 974,412
Interest-bearing 3,706,732 3,920,372 3,835,586 3,409,132
Total deposits 4,814,185 5,007,358 4,921,443 4,383,544
Interest payable and other liabilities 35,460 30,931 54,716 41,323
Short-term borrowings 346,995 347,484 310,463 299,748
Federal Home Loan Bank (FHLB) advances 34,289 38,177
Total liabilities 5,196,640 5,385,773 5,320,911 4,762,792
Shareholders' Equity
Preferred stock, no par value per share
Common stock, $1 par value per share 27,538 27,532 27,499 27,497
Additional paid-in capital 434,479 433,648 433,195 432,098
Retained earnings 182,619 174,209 166,766 153,558
Accumulated other comprehensive loss (35,065) (30,634) (31,119) (24,164)
Total shareholders' equity 609,571 604,755 596,341 588,989
Total Liabilities and Shareholders' Equity $ 5,806,211 $ 5,990,528 $ 5,917,252 $ 5,351,781
Chemical Financial Corporation Announces Second Quarter Operating Results
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
(In thousands, except per share data)
Interest Income
Interest and fees on loans $ 48,029 $ 47,894 $ 95,934 $ 96,150
Interest on investment securities:
Taxable 2,585 2,587 5,023 5,152
Tax-exempt 1,587 1,465 3,151 2,950
Dividends on nonmarketable equity securities 400 380 551 510
Interest on deposits with the Federal Reserve Bank 180 141 501 369
Total interest income 52,781 52,467 105,160 105,131
Interest Expense
Interest on deposits 4,264 5,659 8,830 11,761
Interest on short-term borrowings 121 108 235 212
Interest on FHLB advances 254 47 517
Total interest expense 4,385 6,021 9,112 12,490
Net Interest Income 48,396 46,446 96,048 92,641
Provision for loan losses 3,000 4,000 6,000 9,000
Net interest income after provision for loan losses 45,396 42,446 90,048 83,641
Noninterest Income
Service charges and fees on deposit accounts 5,535 5,013 10,730 9,518
Wealth management revenue 3,879 3,169 7,324 6,090
Other charges and fees for customer services 4,303 3,684 8,954 7,049
Mortgage banking revenue 1,649 1,417 3,661 2,602
Gain on sale of investment securities 257 1,104
Gain on sale of merchant card services 1,280
Other 325 661 414 730
Total noninterest income 15,948 13,944 32,187 27,269
Operating Expenses
Salaries, wages and employee benefits 24,628 20,539 47,997 41,108
Occupancy 3,380 2,973 7,043 6,127
Equipment and software 3,447 3,127 6,897 6,245
Other 9,586 9,560 21,061 19,690
Total operating expenses 41,041 36,199 82,998 73,170
Income before income taxes 20,303 20,191 39,237 37,740
Federal income tax expense 6,100 6,325 11,800 11,500
Net Income $ 14,203 $ 13,866 $ 27,437 $ 26,240
Net Income Per Common Share:
Basic $ 0.52 $ 0.50 $ 1.00 $ 0.95
Diluted 0.51 0.50 0.99 0.95
Key Ratios:
Return on average assets 0.97% 1.04% 0.94% 0.98%
Return on average shareholders' equity 9.4% 9.6% 9.2% 9.1%
Net interest margin 3.60% 3.80% 3.58% 3.78%
Efficiency ratio 63.3% 58.7% 63.8% 60.4%
Chemical Financial Corporation Announces Second Quarter Operating Results
Financial Summary (Unaudited)
Chemical Financial Corporation
(Dollars in Thousands)
Three Months Ended
June 30,
2013
March 31,
2013

Dec 31, 2012
Sept 30,
2012
June 30,
2012
March 31,
2012
Average Balances
Total assets $ 5,859,822 $ 5,924,820 $ 5,576,422 $ 5,433,491 $ 5,360,598 $ 5,396,420
Total interest-earning assets 5,530,262 5,579,789 5,251,531 5,105,101 5,044,629 5,061,882
Total loans 4,249,708 4,152,570 4,077,918 3,987,928 3,901,321 3,824,604
Total deposits 4,878,214 4,950,956 4,590,370 4,464,582 4,383,628 4,416,273
Total interest-bearing liabilities 4,126,751 4,221,638 3,926,582 3,823,954 3,817,753 3,903,986
Total shareholders' equity 606,607 599,406 600,794 591,683 582,873 574,261
Key Ratios (annualized where applicable)
Net interest margin (taxable equivalent basis) 3.60% 3.54% 3.74% 3.76% 3.80% 3.76%
Efficiency ratio 63.3% 64.4% 63.0% 59.3% 58.7% 62.1%
Return on average assets 0.97% 0.91% 0.83% 0.96% 1.04% 0.92%
Return on average shareholders' equity 9.4% 9.0% 7.7% 8.8% 9.6% 8.7%
Average shareholders' equity as a percent of average assets 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 8.5% 8.1% 8.1% 8.8% 9.0% 8.7%
Total risk-based capital ratio 13.1% 13.3% 13.2% 13.6% 13.6% 13.7%
June 30,
2013
March 31,
2013

Dec 31, 2012
Sept 30,
2012
June 30,
2012
March 31,
2012
Credit Quality Statistics
Originated Loans $ 3,990,633 $ 3,810,989 $ 3,775,140 $ 3,606,547 $ 3,515,110 $ 3,370,279
Acquired Loans 345,238 374,272 392,595 412,612 447,232 472,819
Nonperforming Assets:
Nonperforming loans 79,342 86,417 90,854 90,877 92,811 98,548
Other real estate and repossessed assets (ORE) 13,659 18,194 18,469 19,467 23,509 25,944
Total nonperforming assets 93,001 104,611 109,323 110,344 116,320 124,492
Performing troubled debt restructurings 32,657 30,723 31,369 30,406 26,383 27,177
Allowance for loan losses-originated as a percent of:
Total originated loans 2.05% 2.16% 2.22% 2.33% 2.40% 2.54%
Nonperforming loans 103% 95% 92% 93% 91% 87%
Nonperforming loans as a percent of total loans 1.83% 2.06% 2.18% 2.26% 2.34% 2.56%
Nonperforming assets as a percent of:
Total loans plus ORE 2.14% 2.49% 2.61% 2.73% 2.92% 3.22%
Total assets 1.60% 1.75% 1.85% 1.98% 2.17% 2.28%
Net loan charge-offs (year-to-date):
Originated $ 8,307 $ 4,657 $ 20,142 $ 14,939 $ 10,622 $ 5,548
Acquired 2,200 2,200
Total loan charge-offs (year-to-date) 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) 0.40% 0.45% 0.57% 0.59% 0.55% 0.58%
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 $ 113,414 $ 113,414 $ 113,414
Core deposit intangibles (CDI) 10,933 11,417 11,910 6,777 7,144 7,512
Mortgage servicing rights (MSR) 3,421 3,485 3,478 3,466 3,463 3,427
Amortization of CDI (quarter only) 484 493 467 367 368 367
Chemical Financial Corporation Announces Second Quarter Operating Results
Average Balances, Tax Equivalent Interest and Effective Yields and Rates (Unaudited)*
Chemical Financial Corporation
Three Months Ended June 30, 2013

Average
Balance
Tax
Equivalent
Interest

Effective
Yield/Rate
Assets (Dollars in thousands)
Interest-earning assets:
Loans** $ 4,264,009 $ 48,510 4.56%
Taxable investment securities 734,767 2,585 1.41
Tax-exempt investment securities 229,773 2,423 4.22
Other interest-earning assets 25,572 400 6.27
Interest-bearing deposits with the Federal Reserve Bank 276,141 180 0.26
Total interest-earning assets 5,530,262 54,098 3.92
Less: allowance for loan losses 83,850
Other Assets:
Cash and cash due from banks 114,988
Premises and equipment 73,802
Interest receivable and other assets 224,620
Total assets $ 5,859,822
Liabilities and shareholders' equity
Interest-bearing liabilities:
Interest-bearing demand deposits $ 1,032,580 $ 231 0.09%
Savings deposits 1,353,769 301 0.09
Time deposits 1,398,716 3,732 1.07
Short-term borrowings 341,686 121 0.14
FHLB advances
Total interest-bearing liabilities 4,126,751 4,385 0.43
Noninterest-bearing deposits 1,093,149
Total deposits and borrowed funds 5,219,900 4,385 0.34
Interest payable and other liabilities 33,315
Shareholders' equity 606,607
Total liabilities and shareholders' equity $ 5,859,822
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities) 3.49%
Net Interest Income (FTE) $ 49,713
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets) 3.60%
* 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 Second Quarter Operating Results
Nonperforming Assets (Unaudited)
Chemical Financial Corporation
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 $ 11,052 $ 12,186 $ 14,601 $ 15,217 $ 12,673 $ 11,443
Commercial real estate 28,498 35,849 37,660 41,311 41,691 46,870
Real estate construction 183 168 1,217 933 408 61
Land development 3,434 4,105 4,184 5,731 3,077 3,748
Residential mortgage 9,241 10,407 10,164 11,307 12,613 12,687
Consumer installment 552 699 739 876 1,182 1,278
Home equity 3,064 2,837 2,733 2,949 2,812 3,066
Total nonaccrual loans 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 1 4 273 300 1,005
Commercial real estate 78 177 87 247 269 75
Real estate construction
Land development
Residential mortgage 164 196 1,503 431 840 333
Consumer installment
Home equity 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 932 1,251 2,359 2,098 2,566 2,646
Nonperforming troubled debt restructurings:
Commercial loan portfolio 19,140 14,587 13,876 6,553 11,691 11,258
Consumer loan portfolio 3,246 4,328 3,321 3,902 4,098 5,491
Total nonperforming troubled debt restructurings 22,386 18,915 17,197 10,455 15,789 16,749
Total nonperforming loans 79,342 86,417 90,854 90,877 92,811 98,548
Other real estate and repossessed assets 13,659 18,194 18,469 19,467 23,509 25,944
Total nonperforming assets $ 93,001 $ 104,611 $ 109,323 $ 110,344 $ 116,320 $ 124,492
Chemical Financial Corporation Announces Second Quarter Operating Results
Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation
Three Months Ended
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 $ 82,334 $ 83,991 $ 84,194 $ 84,511 $ 85,585 $ 86,733
Provision for loan losses - originated 3,000 3,000 5,000 4,000 4,000 4,400
Loans charged off:
Commercial (703) (1,359) (1,623) (551) (974) (1,079)
Commercial real estate (2,453) (2,060) (1,532) (1,952) (2,178) (2,268)
Real estate construction (70)
Land development (65) (97) (1,168) (51) (45) (32)
Residential mortgage (1,060) (734) (1,224) (1,357) (1,140) (1,717)
Consumer installment (895) (849) (1,222) (1,050) (1,259) (1,074)
Home equity (185) (375) (282) (435) (576) (377)
Total loan charge-offs (5,361) (5,474) (7,121) (5,396) (6,172) (6,547)
Recoveries of loans previously charged off:
Commercial 644 160 278 135 140 191
Commercial real estate 667 50 1,202 325 298 421
Real estate construction
Land development 15 1 2
Residential mortgage 37 161 104 237 199 22
Consumer installment 321 402 305 359 387 345
Home equity 27 43 29 23 74 18
Total loan recoveries 1,711 817 1,918 1,079 1,098 999
Net loan charge-offs - originated (3,650) (4,657) (5,203) (4,317) (5,074) (5,548)
Allowance for loan losses - originated, at end of period 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 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 2,200 2,200
Total allowance for loan losses $ 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) 0.34% 0.45% 0.51% 0.65% 0.52% 0.58%
Chemical Financial Corporation Announces Second Quarter Operating Results
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
2013 2013 2012 2012 2012 2012
(Dollars in thousands, except per share data)
Summary of Operations
Interest income $ 52,781 $ 52,379 $ 53,126 $ 52,501 $ 52,467 $ 52,664
Interest expense 4,385 4,727 5,132 5,591 6,021 6,469
Net interest income 48,396 47,652 47,994 46,910 46,446 46,195
Provision for loan losses 3,000 3,000 5,000 4,500 4,000 5,000
Net interest income after provision for loan losses 45,396 44,652 42,994 42,410 42,446 41,195
Noninterest income 15,948 16,239 14,676 12,719 13,944 13,325
Operating expenses 41,041 41,957 42,008 36,723 36,199 36,971
Income before income taxes 20,303 18,934 15,662 18,406 20,191 17,549
Federal income tax expense 6,100 5,700 4,000 5,300 6,325 5,175
Net income $ 14,203 $ 13,234 $ 11,662 $ 13,106 $ 13,866 $ 12,374
Net interest margin 3.60% 3.54% 3.74% 3.76% 3.80% 3.76%
Per Common Share Data
Net income:
Basic $ 0.52 $ 0.48 $ 0.42 $ 0.48 $ 0.50 $ 0.45
Diluted 0.51 0.48 0.42 0.48 0.50 0.45
Cash dividends declared 0.21 0.21 0.21 0.21 0.20 0.20
Book value - period-end 22.14 21.97 21.69 21.75 21.42 21.10
Tangible book value - period-end 17.53 17.34 17.03 17.52 17.17 16.84
Market value - period-end 25.99 26.38 23.76 24.20 21.50 23.44

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