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Chemical Financial Corporation Reports Second Quarter 2012 Results

Company Release - 7/23/2012 8:00 AM ET

MIDLAND, Mich., July 23, 2012 (GLOBE NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced 2012 second quarter net income of $13.9 million, or $0.50 per diluted share, compared to 2012 first quarter net income of $12.4 million, or $0.45 per diluted share, and 2011 second quarter net income of $11.0 million, or $0.40 per diluted share.

"Chemical Financial's strong operating performance is translating into continued improved financial results. Second quarter 2012 earnings reflect positive growth in net interest income and noninterest income, coupled with a lower loan loss provision due to continued improvement in credit quality. In fact, our 2012 second quarter earnings of $0.50 per share were 25 percent higher than 2011 second quarter earnings per share, and represent the highest level of quarterly earnings per share Chemical Financial has reported since the fourth quarter of 2005," said David B. Ramaker, Chairman, Chief Executive Officer and President of the Corporation.

"Our financial strength is facilitating Chemical Financial's ability to execute on our long-term growth strategy. In May, we announced an agreement to acquire 21 branch offices from Independent Bank, which will bolster our footprint in northeast Michigan and provide entry into a new market in Battle Creek. Chemical Bank will assume approximately $420 million in customer deposits, acquire approximately $40 million of loans and recognize approximately $7 million of goodwill in this transaction. The acquisition, excluding $2.6 million of estimated transaction-related expenses, is anticipated to be accretive to earnings upon closing, which we anticipate will occur in the third quarter of 2012. We remain uniquely positioned among Michigan banks to continue our pattern of long-term growth both organically and via acquisition opportunities that we believe will arise as our state's banking industry consolidates," said Ramaker.

The increases in net income in the second quarter of 2012 over both the first quarter of 2012 and the second quarter of 2011 were largely attributable to increases in net interest income and noninterest income and a decrease in the provision for loan losses. Operating expenses in the second quarter of 2012 were lower than the first quarter of 2012, although higher than the second quarter of 2011.

The Corporation's return on average assets during the second quarter of 2012 was 1.04 percent, up from 0.92 percent in the first quarter of 2012 and 0.84 percent in the second quarter of 2011. The Corporation's return on average equity was 9.6 percent in the second quarter of 2012, up from 8.7 percent in the first quarter of 2012 and 7.8 percent in the second quarter of 2011.

Net interest income was $46.4 million in the second quarter of 2012, up $0.3 million, or 0.5 percent, from the first quarter of 2012 and up $1.2 million, or 2.5 percent, from the second quarter of 2011. The net interest margin (on a tax-equivalent basis) in the second quarter of 2012 was 3.80 percent, compared to 3.76 percent in the first quarter of 2012 and 3.78 percent in the second quarter of 2011.

The Corporation's net interest income in the second quarter of 2012, as compared to the first quarter of 2012, was positively impacted by an increase in average loans of $77 million, or 2.0 percent, that was offset by the net impact of interest-earning assets and interest-bearing liabilities repricing during the second quarter of 2012. The increase in net interest income of $1.2 million in the second quarter of 2012 over the second quarter of 2011 was primarily attributable to an increase in average loans of $194 million, or 5.2 percent, between these two quarters that was partially offset by the net impact of interest-earning assets and interest-bearing liabilities repricing during the twelve months ended June 30, 2012.

The provision for loan losses was $4.0 million in the second quarter of 2012, compared to $5.0 million in the first quarter of 2012 and $7.0 million in the second quarter of 2011. Net loan charge-offs were $5.1 million in the second quarter of 2012, compared to $5.5 million in the first quarter of 2012 and $6.9 million in the second quarter of 2011.

Noninterest income was $13.3 million in the second quarter of 2012, compared to $12.6 million in the first quarter of 2012 and $10.9 million in the second 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, while noninterest income in the first quarter of 2012 included nonrecurring income of $1.3 million attributable to a gain from the sale of the Corporation's merchant card servicing business. Excluding this nonrecurring income, noninterest income in the second quarter of 2012 was $1.4 million higher than the first quarter of 2012 and $1.8 million higher than the second quarter of 2011. The $1.4 million increase in noninterest income over the first quarter of 2012 was primarily attributable to an increase of $0.5 million in service charges and fees on deposit accounts and increases of approximately $0.3 million, each, in wealth management revenue, mortgage banking revenue and other charges and fees for services. The $1.8 million increase in noninterest income over the second quarter of 2011 was primarily attributable to an increase of $0.9 million in mortgage banking revenue and an increase of $0.4 million in service charges and fees on deposit accounts.

Operating expenses were $35.5 million in the second quarter of 2012, compared to $36.3 million in the first quarter of 2012 and $33.4 million in the second quarter of 2011. Operating expenses in the second quarter of 2012 included $0.5 million of acquisition-related expenses applicable to the pending acquisition of branches from Independent Bank, while operating expenses in the second quarter of 2011 included a reversal of a $1.2 million state tax accrual as a result of the elimination of a state tax contingent liability. Excluding the acquisition-related expenses and the reversal of the state tax accrual, operating expenses in the second quarter of 2012 were $1.3 million lower than the first quarter of 2012, but were $0.4 million higher than the second quarter of 2011. The decline in operating expenses between the first and second quarters of 2012 was largely attributable to a $0.7 million reduction in credit-related operating expenses. The increase in operating expenses over the second quarter of 2011 was attributable to higher compensation costs that were partially offset by lower credit-related operating expenses, consulting expenses and outside process/service fee expenses. The Corporation's efficiency ratio was 58.3 percent in the second quarter of 2012, compared to 60.4 percent in the first quarter of 2012 and 58.2 percent in the second quarter of 2011.

Total assets were $5.35 billion at June 30, 2012, down from $5.45 billion at March 31, 2012 and up from $5.20 billion at June 30, 2011. The decrease in total assets during the second quarter of 2012 was largely attributable to a decrease in interest-bearing balances held at the Federal Reserve Bank (FRB). The Corporation continues to maintain significant amounts of funds at the FRB with $120 million in balances held at the FRB at June 30, 2012, compared to $348 million at March 31, 2012 and $265 million at June 30, 2011. The decline in funds at the FRB during the second quarter of 2012 was due to loan growth and a seasonal decrease in customer deposits.

Total loans were $3.96 billion at June 30, 2012, compared to $3.84 billion at March 31, 2012 and $3.75 billion at June 30, 2011. Total loans increased $119 million, or 3.1%, in the second quarter of 2012. This increase was largely driven by a consumer loan promotion during the quarter that resulted in an increase in the Corporation's consumer loan portfolio of $79 million, or 9.0%. The Corporation experienced growth in all loan categories, except real estate construction and land development, during the quarter. Total loans increased $214 million, or 5.7 percent, during the twelve months ended June 30, 2012, with commercial loans increasing $73 million, or 8.7 percent, real estate commercial loans increasing $54 million, or 5.1 percent, real estate residential loans increasing $47 million, or 5.7 percent, and consumer installment and home equity loans increasing $88 million, or 10.1 percent, while real estate construction and land development loans decreased $48 million, or 34 percent. The increases in loans during the three and twelve months ended June 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 4.96 percent in the second quarter of 2012, compared to 5.10 percent in the first quarter of 2012 and 5.37 percent in the second quarter of 2011.

Investment securities were $893 million at June 30, 2012, compared to $867 million at March 31, 2012 and $802 million at June 30, 2011.

Total deposits were $4.38 billion at June 30, 2012, compared to $4.46 billion at March 31, 2012 and $4.25 billion at June 30, 2011. The Corporation experienced a decrease in total deposits of $78 million, or 1.7 percent, during the second quarter of 2012, primarily attributable to a seasonal decrease in deposits of municipal customers. Federal Home Loan Bank (FHLB) advances totaled $38.2 million at June 30, 2012, compared to $42.1 million at March 31, 2012 and $71.9 million at June 30, 2011. Brokered deposits totaled $84 million at June 30, 2012, compared to $94 million at March 31, 2012 and $110 million at June 30, 2011. The repricing of matured customer certificates of deposit and various interest-bearing deposit accounts resulted in the Corporation's average cost of funds declining to 0.63 percent in the second quarter of 2012 from 0.67 percent in the first quarter of 2012 and 0.85 percent in the second quarter of 2011.

At June 30, 2012, the Corporation's tangible equity to assets ratio and total risk-based capital ratio were 9.0 percent and 13.6 percent, respectively, compared to 8.7 percent and 13.7 percent, respectively, at March 31, 2012 and 8.9 percent and 13.0 percent, respectively, at June 30, 2011. At June 30, 2012, the Corporation's book value was $21.42 per share, compared to $21.10 per share at March 31, 2012 and $20.78 per share at June 30, 2011.

The credit quality of the Corporation's loan portfolio continued to show further improvement during the second quarter of 2012. At June 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 $92.8 million, compared to $98.5 million at March 31, 2012 and $135.9 million at June 30, 2011, representing declines of 5.8 percent and 31.7 percent, respectively.

Other real estate and repossessed assets totaled $23.5 million at June 30, 2012, compared to $25.9 million at March 31, 2012 and $24.6 million at June 30, 2011.

At June 30, 2012, the allowance for loan losses of the originated portfolio was $84.5 million, or 2.40 percent of originated loans, compared to 2.54 percent at March 31, 2012 and 2.78 percent at June 30, 2011. The allowance for loan losses of the originated portfolio as a percentage of nonperforming loans was 91 percent at June 30, 2012, compared to 87 percent at March 31, 2012 and 66 percent at June 30, 2011. At June 30, 2012, nonperforming loans as a percentage of total loans were 2.34 percent, down from 2.56 percent at March 31, 2012 and 3.63 percent at June 30, 2011. The allowance for loan losses of the acquired portfolio was $2.2 million at both June 30, 2012 and March 31, 2012. At June 30, 2012, the Corporation's $447 million acquired loan portfolio was overall performing better than expected since the acquisition date.

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 June 30, 2012, the Corporation had total assets of $5.4 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," "believe," "continue," "estimated," "further," "improving," "opportunities," "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, 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. Completion of the transaction is dependent on, among other things, receipt of regulatory approvals, the timing of which cannot be predicted with precision and which may not be received at all. 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 third 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 Second Quarter Operating Results
       
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation 
       
(In thousands, except per share data) June 30
2012
December 31
2011
June 30
2011
Assets:      
Cash and cash equivalents:      
Cash and cash due from banks  $ 122,010  $ 121,294  $ 129,209
Interest-bearing deposits with unaffiliated banks and others  119,813  260,646  271,070
Total cash and cash equivalents  241,823  381,940  400,279
Investment securities:      
Available-for-sale  680,231  667,276  612,466
Held-to-maturity  213,034  183,339  190,029
Total Investment Securities  893,265  850,615  802,495
Loans held-for-sale  12,625  18,818  6,874
       
Loans:      
Commercial   915,352  895,150  842,404
Real estate commercial   1,119,655  1,071,999  1,065,606
Real estate construction and land development   94,227  118,176  142,351
Real estate residential   873,214  861,716  825,860
Consumer installment and home equity  959,894  884,244  871,789
Total Loans  3,962,342  3,831,285  3,748,010
Allowance for loan losses  (86,711)  (88,333)  (89,733)
Net Loans  3,875,631  3,742,952  3,658,277
       
Premises and equipment  67,382  65,997  65,252
Goodwill  113,414  113,414  113,414
Other intangible assets  10,607  11,472  12,327
Interest receivable and other assets  137,034  154,245  145,140
Total Assets  $ 5,351,781  $ 5,339,453  $ 5,204,058
       
Liabilities:      
Deposits:      
Noninterest-bearing   $ 974,412  $ 875,791  $ 813,863
Interest-bearing   3,409,132  3,491,066  3,437,113
Total Deposits  4,383,544  4,366,857  4,250,976
Interest payable and other liabilities  41,323  54,024  33,919
Short-term borrowings  299,748  303,786  276,600
Federal Home Loan Bank advances   38,177  43,057  71,928
Total Liabilities  4,762,792  4,767,724  4,633,423
       
Shareholders' Equity:      
Preferred stock, no par value per share  --  --  --
Common stock, $1 par value per share  27,497  27,457  27,457
Additional paid-in capital  432,098  431,277  430,134
Retained earnings  153,558  138,324  126,477
Accumulated other comprehensive loss  (24,164)  (25,329)  (13,433)
Total Shareholders' Equity  588,989  571,729  570,635
Total Liabilities and Shareholders' Equity  $ 5,351,781  $ 5,339,453  $ 5,204,058
 
 
Chemical Financial Corporation Announces Second Quarter Operating Results
         
 
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation 
         
  Three Months Ended
June 30
Six Months Ended
June 30
(In thousands, except per share data) 2012 2011 2012 2011
Interest Income:        
Interest and fees on loans  $ 47,894  $ 49,172  $ 96,150  $ 98,612
Interest on investment securities:        
Taxable  2,587  2,225  5,152  4,549
Tax-exempt  1,465  1,393  2,950  2,872
Dividends on nonmarketable equity securities  380  368  510  491
Interest on deposits with unaffiliated banks and others  141  281  369  590
Total Interest Income  52,467  53,439  105,131  107,114
         
Interest Expense:        
Interest on deposits  5,659  7,551  11,761  15,429
Interest on short-term borrowings  108  151  212  301
Interest on Federal Home Loan Bank advances   254  443  517  885
Total Interest Expense  6,021  8,145  12,490  16,615
Net Interest Income   46,446  45,294  92,641  90,499
Provision for loan losses  4,000  7,000  9,000  14,500
Net Interest Income after Provision for Loan Losses  42,446  38,294  83,641  75,999
         
Noninterest Income:        
Service charges and fees on deposit accounts  5,013  4,628  9,518  8,724
Wealth management revenue  3,169  3,026  6,090  5,792
Other charges and fees for customer services  3,022  2,728  5,711  5,386
Mortgage banking revenue  1,417  499  2,602  1,563
Gain on sale of merchant card services  --  --  1,280  --
Other   661  21  730  209
Total Noninterest Income  13,282  10,902  25,931  21,674
         
Operating Expenses:        
Salaries, wages and employee benefits  20,539  18,068  41,108  36,393
Occupancy   2,973  3,099  6,127  6,437
Equipment and software  3,127  3,110  6,245  5,832
Other  8,898  9,136  18,352  20,140
Total Operating Expenses  35,537  33,413  71,832  68,802
Income Before Income Taxes  20,191  15,783  37,740  28,871
Federal Income Tax Expense   6,325  4,750  11,500  8,650
Net Income   $ 13,866  $ 11,033  $ 26,240  $ 20,221
         
Net income per common share:        
Basic  $ 0.50  $ 0.40  $ 0.95  $ 0.74
Diluted  0.50  0.40  0.95  0.74
         
Key Ratios:        
Return on average assets 1.04% 0.84% 0.98% 0.77%
Return on average shareholders' equity 9.6% 7.8% 9.1% 7.2%
Net interest margin  3.80% 3.78% 3.78% 3.78%
Efficiency ratio  58.3% 58.2% 59.3% 60.0%
 
 
Chemical Financial Corporation Announces Second Quarter Operating Results
             
Financial Summary (Unaudited)
Chemical Financial Corporation 
             
  Three Months Ended
(Dollars in thousands) June 30
2012
March 31
2012
Dec 31
 2011
Sept 30
2011
June 30
 2011
March 31
2011
Average Balances             
Total assets  $ 5,360,598  $ 5,396,420  $ 5,341,079  $ 5,323,962  $ 5,255,244  $ 5,302,558
Total interest-earning assets  5,044,629  5,061,882  5,008,813  4,985,380  4,928,590  4,963,384
Total loans  3,901,321  3,824,604  3,772,140  3,769,745  3,707,468  3,672,301
Total deposits  4,383,629  4,416,273  4,378,066  4,358,658  4,299,728  4,362,774
Total interest-bearing liabilities  3,817,753  3,903,986  3,847,003  3,853,443  3,857,678  3,942,406
Total shareholders' equity  582,873  574,261  578,105  573,580  565,500  560,661
             
Key Ratios (annualized where applicable)            
Net interest margin (taxable equivalent basis) 3.80% 3.76% 3.84% 3.80% 3.78% 3.78%
Efficiency ratio  58.3% 60.4% 63.1% 60.2% 58.2% 61.8%
Return on average assets 1.04% 0.92% 0.83% 0.87% 0.84% 0.70%
Return on average shareholders' equity 9.6% 8.7% 7.7% 8.0% 7.8% 6.6%
Average shareholders' equity as a percent of average assets 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 9.0% 8.7% 8.7% 8.6% 8.9% 8.5%
Total risk-based capital ratio 13.6% 13.7% 13.3% 13.1% 13.0% 13.0%
             
              
  June 30
2012
March 31
2012
Dec 31
 2011
Sept 30
2011
June 30
 2011
March 31
2011
Credit Quality Statistics            
Originated Loans  $ 3,515,110  $ 3,370,279  $ 3,338,502  $ 3,265,054  $ 3,225,179  $ 3,143,489
Acquired Loans  447,232  472,819  492,783  495,372  522,831  539,027
Nonperforming Loans:            
 Nonaccrual loans  74,456  79,153  78,394  91,112  105,350  106,296
 Accruing loans past due 90 days or more  2,566  2,646  3,817  3,015 3,744 2,196
 Troubled debt restructurings  15,789  16,749 24,058 26,268 26,835 37,367
 Total nonperforming loans   92,811  98,548  106,269  120,395 135,929 145,859
Other real estate and repossessed assets (ORE)  23,509  25,944  25,484  28,679 24,607 26,355
Total nonperforming assets  116,320  124,492  131,753  149,074 160,536 172,214
             
Performing troubled debt restructurings  26,383  27,177  20,394  15,543  12,889  --
             
Allowance for loan losses-originated as a percent of:            
Total originated loans 2.40% 2.54% 2.60% 2.68% 2.78% 2.85%
Nonperforming loans 91% 87% 82% 73% 66% 61%
Nonperforming loans as a percent of total loans 2.34% 2.56% 2.77% 3.20% 3.63% 3.96%
Nonperforming assets as a percent of:            
Total loans plus ORE 2.92% 3.22% 3.42% 3.93% 4.26% 4.64%
Total assets 2.17% 2.28% 2.47% 2.74% 3.08% 3.23%
Net loan charge-offs as a percent of average loans (year-to-date, annualized) 0.55% 0.58% 0.73% 0.78% 0.77% 0.80%
             
  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
Core deposit intangibles  7,144  7,512  7,879  8,261  8,643  9,024
Mortgage servicing rights (MSR)  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)  368  367  382  382  381  382
 
 
Chemical Financial Corporation Announces Second Quarter Operating Results
       
Average Balances, Tax Equivalent Interest and Effective Yields and Rates (Unaudited)*
       
  Three Months Ended June 30, 2012
(Dollars in thousands) Average Balance Tax Equivalent Interest Effective Yield/Rate
Assets      
Interest-Earning Assets:      
 Loans**  $ 3,921,546  $ 48,375  4.96%
 Taxable investment securities 701,543 2,587  1.48
 Tax-exempt investment securities 185,113 2,232  4.82
 Other interest-earning assets 25,572 380  5.98
 Interest-bearing deposits with      
 unaffiliated banks and others 210,855 141  0.27
Total interest-earning assets 5,044,629 53,715  4.28
Less: Allowance for loan losses 88,702    
Other Assets:      
 Cash and cash due from banks 107,988    
 Premises and equipment 66,763    
 Interest receivable and other assets 229,920    
Total Assets  $ 5,360,598    
       
Liabilities and shareholders' equity      
Interest-bearing Liabilities:      
 Interest-bearing demand deposits  $ 833,763  $ 246  0.12%
 Savings deposits 1,163,412 389  0.13
 Time deposits 1,461,694 5,024  1.38
 Short-term borrowings 318,104 108  0.14
 FHLB advances 40,780 254  2.51
Total interest-bearing liabilities 3,817,753 6,021  0.63
Noninterest-bearing deposits 924,759    
Total deposits and borrowed funds 4,742,512    
Interest payable and other liabilities 35,213    
Shareholders' equity 582,873    
Total Liabilities and Shareholders' Equity  $ 5,360,598    
Net Interest Spread (Average yield earned minus average rate paid)      3.65%
Net Interest Income (FTE)    $ 47,694  
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets)      3.80%
       
* 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 
             
(Dollars in thousands) June 30 2012 March 31 2012 Dec 31 2011 Sept 30 2011 June 30 2011 March 31 2011
Nonperforming Loans:            
Nonaccrual loans:            
Commercial  $ 12,673  $ 11,443  $ 10,726  $ 10,804  $ 14,386  $ 15,672
Real estate commercial  41,691  46,870  44,438  48,854  57,324 59,931
Real estate construction and land development  3,485  3,809  6,190  7,877  8,933 9,414
Real estate residential  12,613  12,687  12,573  17,544  17,809 15,505
Consumer installment and home equity  3,994  4,344  4,467  6,033  6,898 5,774
Total nonaccrual loans  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  300  1,005  1,381  282  629 455
Real estate commercial  269  75  374  415  143 459
Real estate construction and land development  --  --  287  --  --  --
Real estate residential  840  333  752  974  1,729 191
Consumer installment and home equity  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  2,566  2,646  3,817  3,015  3,744 2,196
Nonperforming troubled debt restructurings:            
Commercial loan portfolio  11,691  11,258  14,675  16,457  15,443 15,201
Consumer loan portfolio  4,098  5,491  9,383  9,811  11,392 22,166
Total nonperforming troubled debt restructurings  15,789  16,749  24,058  26,268  26,835 37,367
Total nonperforming loans  92,811  98,548  106,269  120,395  135,929 145,859
Other real estate and repossessed assets  23,509  25,944  25,484  28,679  24,607 26,355
Total nonperforming assets  $ 116,320  $ 124,492  $ 131,753  $ 149,074  $ 160,536  $ 172,214
             
 
 
Chemical Financial Corporation Announces Second Quarter Operating Results
             
Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation 
             
  Three Months Ended
(Dollars in thousands) June 30 2012 March 31 2012 Dec 31 2011 Sept 30 2011 June 30 2011 March 31 2011
Allowance for loan losses at beginning of period  $ 87,785  $ 88,333  $ 88,713  $ 89,733  $ 89,674  $ 89,530
Provision for loan losses  4,000  5,000  5,100  6,400 7,000  7,500
Loans charged off:            
Commercial  (974)  (1,079)  (1,768)  (1,234) (1,972)  (1,976)
Real estate commercial  (2,178)  (2,268)  (2,120)  (3,969) (3,168)  (3,875)
Real estate construction and land development  (45)  (32)  (54)  (236) (136)  (63)
Real estate residential  (1,140)  (1,717)  (945)  (1,884) (1,198)  (944)
Consumer installment and home equity  (1,835)  (1,451)  (1,434)  (1,516) (1,832)  (1,784)
Total loan charge-offs  (6,172)  (6,547)  (6,321)  (8,839) (8,306)  (8,642)
Recoveries of loans previously charged off:            
Commercial  140  191  137  614 710  215
Real estate commercial  298  421  272  285 212  87
Real estate construction and land development  --  2  40  -- 5  --
Real estate residential  199  22  80  207 106  456
Consumer installment and home equity  461  363  312  313 332  528
Total loan recoveries  1,098  999  841  1,419 1,365  1,286
Net loan charge-offs  (5,074)  (5,548)  (5,480)  (7,420) (6,941)  (7,356)
Allowance for loan losses at end of period  $ 86,711  $ 87,785  $ 88,333  $ 88,713  $ 89,733  $ 89,674
             
Allowance for loan losses-originated  $ 84,511  $ 85,585  $ 86,733  $ 87,413  $ 89,733  $ 89,674
Allowance for loan losses-acquired  2,200  2,200  1,600  1,300  --  --
             
Provision for loan losses (year-to-date)  $ 9,000  $ 5,000  $ 26,000  $ 20,900  $ 14,500  $ 7,500
Net loan charge-offs (year-to-date)  10,622  5,548  27,197  21,717  14,297 7,356
             
             
             
             
Chemical Financial Corporation Announces Second Quarter Operating Results
             
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation 
             
(Dollars in thousands, except per share data) 2nd Qtr. 2012 1st Qtr. 2012 4th Qtr. 2011 3rd Qtr. 2011 2nd Qtr. 2011  1st Qtr. 2011
Summary of Operations            
Interest income  $ 52,467  $ 52,664  $ 54,130  $ 53,998  $ 53,439  $ 53,675
Interest expense  6,021  6,469  7,045  7,729 8,145 8,470
Net interest income  46,446  46,195  47,085  46,269 45,294 45,205
Provision for loan losses  4,000  5,000  5,100  6,400 7,000 7,500
Net interest income after provision            
 for loan losses  42,446  41,195  41,985  39,869 38,294 37,705
Noninterest income  13,282  12,649  11,501  11,225 10,902 10,772
Operating expenses   35,537  36,295  37,807  35,394 33,413 35,389
Income before income taxes  20,191  17,549  15,679  15,700 15,783 13,088
Federal income tax expense  6,325  5,175  4,475  4,075 4,750 3,900
Net income   $ 13,866  $ 12,374  $ 11,204  $ 11,625  $ 11,033  $ 9,188
             
Net interest margin 3.80% 3.76% 3.84% 3.80% 3.78% 3.78%
             
Per Common Share Data            
Net income:            
 Basic  $ 0.50  $ 0.45  $ 0.41  $ 0.42  $ 0.40  $ 0.33
 Diluted  0.50 0.45  0.41  0.42 0.40  0.33
Cash dividends declared  0.20  0.20  0.20  0.20 0.20  0.20
Book value - period-end  21.42  21.10  20.82  21.02 20.78  20.54
Tangible book value - period-end  17.17  16.84  16.54  16.71  16.46  16.19
Market value - period-end  21.50  23.44  21.32  15.31 18.76  19.93
CONTACT: For further information:
         David B. Ramaker, CEO
         Lori A. Gwizdala, CFO
         989-839-5350
Source: Chemical Financial Corporation