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Press Release

Chemical Financial Corporation Announces Fourth Quarter Operating Results

Company Release - 1/21/2003 12:00 AM ET
MIDLAND, Mich., Jan. 21 /PRNewswire-FirstCall/

Aloysius J. Oliver, Chairman of Chemical Financial Corporation (Nasdaq: CHFC), today announced December 31, 2002 year end net income of $54.945 million or $2.31 per share, as compared to net operating income of $49.80 million or $2.10 per share, for the year 2001. This represents an increase of 10.0% in operating earnings per share. Net operating income in 2001 excludes pre-tax non-recurring expenses of $9.20 million or $7.10 million on an after-tax basis, incurred in the first quarter of 2001 to complete the merger with Shoreline Financial Corporation and for internal bank consolidations. Comparing net income in 2002 to net income in 2001, which includes the merger related and consolidated charges, net income was up 28.6% during 2002.

Net income in the fourth quarter of 2002 was $13.682 million or $.57 per diluted share, down $95,000 as compared to net income of $13.777 million or $.58 per diluted share in the fourth quarter of 2001. The Corporation's fourth quarter 2002 net income was .7% below the fourth quarter 2001. The decrease in fourth quarter earnings was attributed to the write-down of equity securities of $472,000, net of taxes, reflecting an other-than-temporary decline in market value of these securities and a higher provision for loan losses of $283,000. These amounts were partially offset by an increase in net interest income and lower operating expenses.

Net interest income increased $433,000, or 1.2%, to $36.4 million in the fourth quarter of 2002. The increase was due to the decrease in the cost of funds outpacing the decrease in yield on earning assets. Total operating expenses decreased $330,000, or 1.4% in the fourth quarter of 2002 compared to 2001 primarily due to lower professional fees and the absence of goodwill amortization.

Total assets of the Corporation at December 31, 2002 were $3.569 billion, up 2.3% over the $3.488 billion in total assets reported at December 31, 2001. Total deposits at December 31, 2002 were $2.847 billion, up 2.1% over total deposits of $2.789 billion at December 31, 2001. Total loans were $2.075 billion at December 31, 2002, down $107 million, or 4.9%, from total loans at December 31, 2001 or $2.182 billion. The decline in loans was primarily attributable to a reduction in residential real estate loans. The low interest rate environment prompted many customers to refinance their mortgages to the longer-term fixed interest rate products that the Corporation sells in the secondary market.

The Corporation's provision for loan losses for the three and twelve months ended December 31, 2002 was $1.013 million and $3.765 million, respectively, as compared to net loan losses during the same periods in 2002 of $1.342 million and $4.087 million, respectively. As of December 31, 2002, the allowance for loan losses was $30.672 million, or 1.48% of total loans, while non-performing loans were $7.281 million, or .35% of total loans. Non-performing loans are down $5.797 million, or 44.3% from December 31, 2001.

Shareholders' equity at December 31, 2002 was $430 million, or $18.17 per share, and represented 12.1% of total assets. The Corporation's tangible equity to asset ratio was 11.0% as the end of the year.

On December 9, 2002, the Corporation announced a 5% stock dividend payable on January 24, 2002. All per share calculations are adjusted for the stock dividend.

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. CFC Data Corp, Midland, is the Company's wholly owned data processing subsidiary.

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 interests 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.