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Chemical Financial Corporation Announces First Quarter Operating Results

Company Release - 4/21/2003 8:12 AM ET

MIDLAND, Mich., April 21 /PRNewswire-FirstCall/ -- Aloysius J. Oliver, Chairman of Chemical Financial Corporation (Nasdaq: CHFC), today announced first quarter net income of $14.0 million or $.59 per diluted share, up $.3 million as compared with net income of $13.7 million, or $.58 per diluted share for the first quarter of 2002. This represents an increase of 1.7% in earnings per share and a 2.2% increase in net income for the first quarter 2003. The returns on average assets and average equity during the first quarter of 2003 were 1.59% and 13.1%, respectively, as compared with 1.57% and 14.1%, respectively, for the first quarter of 2002.

Net interest income decreased $1.1 million, or 3.0%, to $35.1 million in the first quarter of 2003, as compared to the first quarter 2002. The decrease, in part, was due to the low interest rate environment and the decrease in the yield on our earning assets which is outpacing the decrease in our cost of funds. The Corporation's earnings were positively affected by an increase in noninterest income of $.6 million, or 7.4%. This increase was primarily due to higher service charge income of $1.3 million. A reduction in operating expenses of $.7 million, or 2.8%, also had a positive effect on earnings.

Total assets of the Corporation at March 31, 2003 were $3.61 billion, up 2.6% over the $3.52 billion in total assets reported at March 31, 2002. Total deposits at March 31, 2003 were $2.90 billion, up 2.8% over total deposits of $2.82 billion at March 31, 2002. Total loans increased 2.2% during the latest twelve months, from $2.09 billion at March 31, 2002, to $2.13 billion in outstanding loans at March 31, 2003.

The Corporation's provision for loan losses for the quarter ended March 31, 2003 was $295 thousand as compared to net loan losses of $274 thousand. As of March 31, 2003, the allowance for loan losses was $30.7 million and represented 1.44% of total loans. Non-performing loans were $11.2 million, or .52% of total loans at the current quarter-end.

Shareholders' equity at March 31, 2003 was $437 million, or $18.45 per share, and represented 12.1% of total assets and a tangible equity to asset ratio of 11.1% as of March 31, 2003.

Chemical Financial Corporation is the fourth largest bank holding company headquartered in Michigan. The Company's three subsidiary banks operate 129 "Chemical Bank" offices and 2 loan production offices spread over 32 counties in the lower peninsula of Michigan.

Chemical Financial Corporation common stock trades on The Nasdaq Stock Market under the symbol CHFC and is one of the issues comprising the Nasdaq Financial 100 index.

Forward Looking Statements

This press release contains forward-looking statements. Words such as "anticipates," "believes," "estimates," "expects," "intends," "should," "will," variations of such words and similar expressions are intended to identify forward-looking statements. These statements reflect management's current beliefs as to the expected outcomes of future events and are not guarantees of future performance. These statements involve certain risks, uncertainties and assumptions 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. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates and banking regulations; the impact of competition from traditional or new sources; and the possibility that anticipated cost savings and revenue enhancements from mergers and acquisitions and bank consolidations may not be fully realized at all or within the expected time frames. These and other factors that may emerge could cause decisions and actual results to differ materially from current expectations. Chemical undertakes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.

     Chemical Financial Corporation Announces First Quarter Operating Results


    Consolidated Statements of Financial Position (Unaudited)
    Chemical Financial Corporation and Subsidiaries


                                             March 31,  December 31, March 31,
    (In thousands)                             2003        2002        2002
    Assets:
    Cash and demand deposits due from
     banks                                   $114,023    $148,112    $116,846
    Federal funds sold                         32,400      69,900     112,925
    Interest-bearing deposits with
     unaffiliated banks                        18,674      53,135      75,200
    Investment securities taxable           1,171,406   1,076,292     977,058
    Investment securities nontaxable           51,672      51,690      57,922
        Total Investment Securities         1,223,078   1,127,982   1,034,980
    Commercial loans                          325,673     327,438     314,831
    Real estate construction loans            106,384     108,589     129,254
    Real estate commercial loans              506,243     481,084     451,947
    Real estate residential loans             691,626     648,286     691,397
    Consumer loans                            501,767     509,789     498,610
        Total Loans                         2,131,693   2,075,186   2,086,039
    Less: Allowance for loan losses            30,693      30,672      30,890
        Net Loans                           2,101,000   2,044,514   2,055,149
    Premises and equipment                     41,841      42,767      43,192
    Intangible assets                          40,060      40,489      42,711
    Other assets                               42,423      41,994      40,782
        Total Assets                       $3,613,499  $3,568,893  $3,521,785
    Liabilities and Shareholders' Equity:
    Noninterest-bearing deposits             $448,585    $475,933    $417,469
    Interest-bearing deposits               2,455,517   2,371,339   2,406,780
        Total Deposits                      2,904,102   2,847,272   2,824,249
    FHLB borrowings                           153,591     157,393     167,545
    Other borrowings - short term              83,348     104,212     103,950
    Interest payable and other liabilities     35,418      29,677      33,808
        Total Liabilities                   3,176,459   3,138,554   3,129,552
    Shareholders' Equity:
      Common stock, $1 par value               23,690      23,684      22,539
      Surplus                                 325,096     325,149     290,660
      Retained earnings                        70,812      62,721      73,079
      Accumulated other comprehensive
       income                                  17,442      18,785       5,955
        Total Shareholders' Equity            437,040     430,339     392,233
        Total Liabilities and
         Shareholders' Equity              $3,613,499  $3,568,893  $3,521,785



    Consolidated Statements of Income (Unaudited)
    Chemical Financial Corporation and Subsidiaries

                                                        Three Months Ended
                                                             March 31,
    (In thousands, except per share data)              2003              2002
    Interest Income:
    Interest and fees on loans                      $36,414           $40,510
    Interest on investment securities:
       Taxable                                       10,680            11,994
       Nontaxable                                       677               782
          Total Interest on Securities               11,357            12,776
    Interest on federal funds sold                      336               692
    Interest on deposits with unaffiliated
     banks                                              139               263
          Total Interest Income                      48,246            54,241

    Interest Expense:
    Interest on deposits                             10,840            15,542
    Interest on FHLB borrowings                       2,113             2,210
    Interest on other borrowings - short
     term                                               169               266
          Total Interest Expense                     13,122            18,018
          Net Interest Income                        35,124            36,223
    Provision for loan losses                           295               653
          Net Interest Income after
                Provision for Loan Losses            34,829            35,570

    Noninterest Income:
    Service charges on deposit accounts               3,891             2,635
    Trust services revenue                            1,727             1,681
    Other charges and fees for customer
     services                                         1,915             1,782
    Mortgage banking revenue                          1,547             2,556
    Investment securities gains (losses)                184               (45)
    Other                                                50                62
          Total Noninterest Income                    9,314             8,671

    Operating Expenses:
    Salaries and employee benefits                   13,689            13,744
    Occupancy and equipment                           4,013             4,077
    Other                                             5,324             5,858
          Total Operating Expenses                   23,026            23,679
    Income Before Income Taxes                       21,117            20,562
          Federal income taxes                        7,103             6,852
    Net Income                                      $14,014           $13,710

    Net income per share:
       Basic                                          $0.59             $0.58
       Diluted                                         0.59              0.58

    Cash dividends per share                           0.25              0.23

    Average shares outstanding:
       Basic                                         23,696            23,658
       Diluted                                       23,740            23,715



    Financial Summary (Unaudited)
    Chemical Financial Corporation and Subsidiaries
    (Dollars in thousands)

                                                      Three Months Ended
                                                           March 31,
                                                    2003               2002
    Average Balances
    Total assets                                $3,574,354         $3,545,676
    Total interest-earning assets                3,398,914          3,328,868
    Total loans                                  2,100,747          2,135,900
    Total deposits                               2,861,776          2,843,348
    Total shareholders' equity                     433,989            393,520

                                                       Three Months Ended
                                                            March 31,
                                                     2003               2002
    Key Ratios (annualized where
     applicable)
    Net interest margin                               4.25%              4.48%
    Efficiency ratio                                  51.3%              52.1%
    Return on average assets                          1.59%              1.57%
    Return on average shareholders'
     equity                                           13.1%              14.1%
    Average shareholders' equity as a
       percent of average assets                      12.1%              11.1%
    Tangible shareholders' equity as a
       percent of total assets                        11.1%              10.0%
    Total risk-based capital ratio                    18.7%              18.0%

                                                              March 31,
                                                      2003               2002
    Credit Quality Statistics
    Nonaccrual loans                                $5,730             $9,895
    Loans 90 or more days past due
       and still accruing                            5,442              3,519
    Restructured loans                                   -                  -
    Total nonperforming loans                       11,172             13,414
    Repossessed assets acquired (RAA)                4,590              1,159
    Total nonperforming assets                      15,762             14,573
    Net loan charge-offs                               274                757

    Allowance for loan losses as a
       percent of total loans                         1.44%              1.48%
    Allowance for loan losses as a
       percent of nonperforming loans                  275%               230%
    Nonperforming loans as a
       percent of total loans                         0.52%              0.64%
    Nonperforming assets as a
       percent of total loans plus RAA                0.74%              0.70%
    Net loan charge-offs as a
       percent of average loans                       0.05%              0.14%

                                                             March 31,
                                                      2003               2002
    Additional Data
    Goodwill                                       $27,940            $27,940
    Core deposit intangibles                         9,592             11,322
    Mortgage servicing rights                        2,528              3,448
    Amortization of intangibles                        808                745



    Selected Quarterly Information (Unaudited)
    Chemical Financial Corporation and Subsidiaries
    (Dollars in thousands)

                                1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
                                  2003     2002     2002     2002     2002
    Summary of Operations
    Interest income             $48,246  $51,036  $52,475  $53,292  $54,241
    Interest expense             13,122   14,673   16,076   16,585   18,018
    Net interest income          35,124   36,363   36,399   36,707   36,223
    Provision for loan losses       295    1,013      747    1,352      653
    Net interest income after
     provision
         for loan losses         34,829   35,350   35,652   35,355   35,570
    Noninterest income            9,314    9,275    8,588    8,000    8,671
    Noninterest expense          23,026   23,692   23,134   23,021   23,679
    Income taxes                  7,103    7,251    7,088    6,799    6,852
    Net income                   14,014   13,682   14,018   13,535   13,710

    Per Common Share Data
    Net income:
         Basic                    $0.59    $0.58    $0.59    $0.57    $0.58
         Diluted                   0.59     0.57     0.59     0.57     0.58
    Cash dividends                 0.25     0.23     0.23     0.23     0.23
    Book value                    18.45    18.17    17.78    17.19    16.57

SOURCE  Chemical Financial Corporation
    -0-                             04/21/2003
    /CONTACT:  David B. Ramaker, President & CEO, +1-989-839-5269, or Lori A.
Gwizdala, Executive Vice President & Chief Financial Officer, +1-989-839-5358,
both of Chemical Financial Corporation/
    /Company News On-Call: http://www.prnewswire.com/gh/cnoc/comp/157448.html/
    /Web site:  http://chemicalbankmi.com /
    (CHFC)

CO:  Chemical Financial Corporation
ST:  Michigan
IN:  FIN
SU:  ERN



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7932 04/21/2003 08:12 EDT http://www.prnewswire.com