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Chemical Financial Corporation Reports 2014 Second Quarter Operating Results

Company Release - 7/23/2014 8:00 AM ET

MIDLAND, Mich., July 23, 2014 (GLOBE NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced 2014 second quarter net income of $16.2 million, or $0.54 per diluted share, compared to 2013 second quarter net income of $14.2 million, or $0.51 per diluted share, and 2014 first quarter net income of $13.8 million, or $0.46 per diluted share. For the six months ended June 30, 2014, net income was $30.0 million, or $1.00 per diluted share, compared to net income for the six months ended June 30, 2013 of $27.4 million, or $0.99 per diluted share.

As previously announced, on June 24, 2014, the Corporation completed an underwritten public offering of 2,500,000 shares of its common stock, and on June 30, 2014 completed the sale of an additional 375,000 shares of its common stock pursuant to the underwriters' exercise of the over-allotment option, at a price of $28.00 per share to the public. After the underwriting discount and other offering related expenses, the Corporation netted proceeds of approximately $76 million from the offering. David B. Ramaker, Chairman, Chief Executive Officer and President of Chemical Financial Corporation noted that "the Company took advantage of favorable market conditions to complete the equity raise, the proceeds from which we plan to rapidly deploy into organic and acquisitive growth opportunities."

Commenting on the quarter, Ramaker said "a strengthening Michigan economy and market share gains fueled continued growth for Chemical Financial Corporation in the second quarter of 2014, driving another solid quarter of earnings. Robust, multi-sector organic loan growth, led by gains in consumer and home equity lending, was reflected in total loan growth of 5.4% year-to-date and 13.0% over the past year. The resultant 6.3% increase in net interest income over the prior year's second quarter, coupled with a lower loan loss provision reflective of improved credit quality, and continued expense controls, led to an over 14% increase in net income over the prior year's second quarter," noted Ramaker.

"During the second quarter of 2014, shareholders of Northwestern Bancorp, Inc. ("Northwestern"), the holding company for Northwestern Bank, formally approved the Agreement and Plan of Merger pursuant to which Chemical will acquire all of the outstanding shares of Northwestern's common stock. We look forward to consummating, upon receipt of regulatory approval anticipated in the third quarter of 2014, our strategic partnership with Northwestern and its 25 locations across 11 northwestern Michigan counties, which will provide a compelling choice for the state's residents and businesses," added Ramaker.

Net income of $16.2 million in the second quarter of 2014 was $2.0 million, or 14.3%, higher than the second quarter of 2013, with the increase primarily attributable to a combination of higher net interest income and a lower provision for loan losses. Net income in the second quarter of 2014 was $2.4 million, or 17.5%, higher than the first quarter of 2014, with the increase primarily attributable to higher net interest income and noninterest income.

The Corporation's return on average assets was 1.04% during the second quarter of 2014, compared to 0.97% in the second quarter of 2013 and 0.90% in the first quarter of 2014. The Corporation's return on average shareholders' equity was 9.1% in the second quarter of 2014, compared to 9.4% in the second quarter of 2013 and 8.0% in the first quarter of 2014. The decrease in return on average shareholders' equity in the second quarter of 2014, compared to the second quarter of 2013, was primarily attributable to an increase in shareholders' equity resulting from the Corporation's September 2013 common equity offering.

Net interest income was $51.5 million in the second quarter of 2014, $3.1 million higher than the second quarter of 2013 and $1.7 million higher than the first quarter of 2014. The increase in net interest income in the second quarter of 2014 over the second quarter of 2013 was largely attributable to the positive impact of loan growth of $563 million, or 13.0%, during the twelve months ended June 30, 2014. The increase in net interest income in the second quarter of 2014 over the first quarter of 2014 was also largely attributable to the positive impact of loan growth, with average loans up $132 million, or 2.8%, in the second quarter of 2014 over the first quarter of 2014.

The net interest margin (on a tax-equivalent basis) was 3.59% in the second quarter of 2014, compared to 3.60% in the second quarter of 2013 and 3.53% in the first quarter of 2014. The slight decrease in the net interest margin in the second quarter of 2014, compared to the second quarter of 2013, was primarily attributable to the significant positive impact attributable to growth in loans during the twelve months ended June 30, 2014, that was largely offset by loans repricing downward. The increase in the net interest margin in the second quarter of 2014, compared to the first quarter of 2014, was primarily attributable to growth in loans. The average yield on the loan portfolio was 4.26% in the second quarter of 2014, compared to 4.56% in the second quarter of 2013 and 4.28% in the first quarter of 2014. The average yield of the investment securities portfolio was 2.13% in the second quarter of 2014, compared to 2.08% in the second quarter of 2013 and 2.11% in the first quarter of 2014. Modest changes in the mix of customer deposits and the repricing of matured customer certificates of deposit resulted in the Corporation's average cost of funds declining to 0.27% in the second quarter of 2014 from 0.34% in the second quarter of 2013 and 0.29% in the first quarter of 2014.

The provision for loan losses was $1.5 million in the second quarter of 2014, compared to $3.0 million in the second quarter of 2013 and $1.6 million in the first quarter of 2014. The decrease in the provision for loan losses in the second quarter of 2014, compared to the second quarter of 2013, was attributable to the continued improvement in the overall credit quality of the loan portfolio.

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 $73.7 million at June 30, 2014, compared to $76.5 million at March 31, 2014 and $79.3 million at June 30, 2013. Nonperforming loans comprised 1.51% of total loans at June 30, 2014, compared to 1.61% at March 31, 2014 and 1.83% at June 30, 2013. The reduction in nonperforming loans during the three and twelve months ended June 30, 2014 was attributable to a combination of improving economic conditions and loan charge-offs.

Net loan charge-offs were $2.2 million, or 0.18% of average loans, in the second quarter of 2014, compared to $3.7 million, or 0.34% of average loans, in the second quarter of 2013 and $2.2 million, or 0.19% of average loans, in the first quarter of 2014.

At June 30, 2014, the allowance for loan losses of the originated loan portfolio was $77.3 million, or 1.67% of originated loans, compared to $78.0 million, or 1.75% of originated loans, at March 31, 2014 and $81.7 million, or 2.05% of originated loans, at June 30, 2013. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 105% at June 30, 2014, compared to 102% at March 31, 2014 and 103% at June 30, 2013.

Noninterest income was $15.8 million in the second quarter of 2014, compared to $15.9 million in the second quarter of 2013 and $13.7 million in the first quarter of 2014. Noninterest income in the second quarter of 2014 was only $0.1 million lower than the second quarter of 2013 as modest increases in electronic banking fees and wealth management revenue, as well as a $0.4 million reduction in the Corporation's secondary mortgage market indemnification reserve, offset reduced secondary mortgage market net loan sale gains. The reduction in net loan sale gains was primarily attributable to a decrease in the volume of loans sold. The Corporation had no investment securities gains in the second quarter of 2014, compared to $0.3 million in the same quarter of the prior year. Noninterest income in the second quarter of 2014 was $2.1 million higher than the first quarter of 2014, with the increase primarily attributable to increases in mortgage banking revenue and title insurance revenue of $0.5 million, an increase in service charges and fees on deposit accounts of $0.6 million, an increase in wealth management revenue of $0.3 million and the $0.4 million reduction in the indemnification reserve discussed above.

Operating expenses were $42.4 million in the second quarter of 2014, compared to $41.0 million in the second quarter of 2013 and $42.2 million in the first quarter of 2014. Operating expenses included nonrecurring transaction-related costs attributable to the pending acquisition of Northwestern of $0.7 million in the second quarter of 2014 and $0.3 million in the first quarter of 2014. Excluding these nonrecurring costs, operating expenses in the second quarter of 2014 were just $0.7 million, or 1.8%, higher than the second quarter of 2013 and $0.1 million lower than the first quarter of 2014.

The Corporation's efficiency ratio was 60.9% in the second quarter of 2014, 64.5% in the first quarter of 2014 and 63.3% in the second quarter of 2013.

Total assets were $6.23 billion at June 30, 2014, compared to $6.34 billion at March 31, 2014 and $5.81 billion at June 30, 2013. The increase in total assets during the twelve months ended June 30, 2014 was largely attributable to an increase in deposits that was used to partially fund loan growth. The increase was also partially attributable to $130 million of net proceeds received by the Corporation as part of its June 2014 and September 2013 common equity offerings. Interest-bearing balances at the Federal Reserve Bank (FRB) were $1.3 million at June 30, 2014, compared to $260.1 million at March 31, 2014 and $69.4 million at June 30, 2013. Investment securities were $924.1 million at June 30, 2014, compared to $935.9 million at March 31, 2014 and $1.01 billion at June 30, 2013. The decreases in interest-bearing balances at the FRB and investment securities during the twelve months ended June 30, 2014 were attributable to the Corporation utilizing some of the liquidity from its excess funds held at the FRB and maturing investment securities to also fund loan growth. The decrease in interest-bearing balances at the FRB during the second quarter of 2014 was largely attributable to a seasonal decrease in municipal customer deposits and a $100 million reduction in temporary funds from one customer.

Total loans were $4.90 billion at June 30, 2014, up from $4.75 billion at March 31, 2014 and $4.34 billion at June 30, 2013. During the three and twelve months ended June 30, 2014, total loans increased $145.5 million, or 3.1%, and $562.9 million, or 13.0%, respectively. The increases in loans during the three and twelve months ended June 30, 2014 generally occurred across all major loan categories, although most notably in the Corporation's consumer loan portfolio, and were largely attributable to a combination of continued improving economic conditions and increased market share. The increase in loans of $145.5 million during the second quarter of 2014 was primarily attributable to increases in consumer installment and home equity loans of $100.9 million, or 8.4%, commercial real estate loans of $19.2 million, or 1.5%, and real estate construction loans of $16.1 million, or 18.9%.

Total deposits were $5.09 billion at June 30, 2014, compared to $5.23 billion at March 31, 2014 and $4.81 billion at June 30, 2013. The decrease in total deposits during the second quarter of 2014 was largely attributable to a seasonal decrease in municipal customer deposits and a $50 million reduction in temporary interest-bearing deposits from one customer. The Corporation experienced an increase in total deposits of $279 million, or 5.8%, during the twelve months ended June 30, 2014. The increase in deposits during the twelve months ended June 30, 2014 was partially attributable to the Corporation converting approximately $40 million of securities sold under agreements to repurchase with business customers, which are classified as short-term borrowings, into interest-bearing checking deposit accounts. Securities sold under agreements to repurchase, which the Corporation considers to be a stable source of liquidity much like its core deposit base, totaled $293.4 million at June 30, 2014, a decrease of $53.6 million, or 15.4%, during the twelve months ended June 30, 2014.

At June 30, 2014, the Corporation's tangible equity to assets ratio and total risk-based capital ratio were 11.0% and 15.3%, respectively, compared to 9.3% and 13.8%, respectively, at March 31, 2014 and 8.5% and 13.1%, respectively, at June 30, 2013. The increases in the Corporation's capital ratios at June 30, 2014, compared to both March 31, 2014 and June 30, 2013 were largely attributable to the Corporation's June 2014 and September 2013 public offerings of common stock. At June 30, 2014, the Corporation's book value was $24.22 per share, compared to $23.63 per share at March 31, 2014 and $22.14 per share at June 30, 2013. At June 30, 2014, the Corporation's tangible book value was $20.42 per share, compared to $19.44 per share at March 31, 2014 and $17.53 per share at June 30, 2013.

Chemical Financial Corporation will host a conference call to discuss its second quarter 2014 results on Wednesday, July 23, 2014 at 11:00 a.m. EDT. Anyone interested may access the conference call on a live basis by dialing toll-free at 1-888-389-5997 and entering 5007788 for the conference ID. The call will also be broadcast live over the Internet hosted at Chemical Financial Corporation's website at www.chemicalbankmi.com under the "Investor Info" section. A copy of the slide-show presentation and an audio replay of the call will remain available on Chemical Financial Corporation's website for at least 14 days.

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 157 banking offices spread over 38 counties in the lower peninsula of Michigan. At June 30, 2014, the Corporation had total assets of $6.2 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 report 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 and phrases such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "judgment," "look forward," "opinion," "plans," "predicts," "probable," "projects," "should," "strategic," "trend," "will," and variations of such words and phrases or 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, future deposit insurance premiums, 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 performance and cash flows from acquired loans, future effects of new or changed accounting standards, future opportunities for acquisitions, opportunities to increase top line revenues, the Corporation's ability to grow its core franchise, future cost savings and the Corporation's ability to maintain adequate liquidity and capital based on the requirements adopted by the Basel Committee on Banking Supervision and U.S. regulators. 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. All of the information concerning interest rate sensitivity is forward-looking. 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.

This report also contains forward-looking statements regarding the Corporation's outlook or expectations with respect to the planned merger with Northwestern Bancorp, Inc. (Northwestern), the expected costs to be incurred in connection with the merger, Northwestern's future performance and consequences of its integration into the Corporation and the impact of the transaction on the Corporation's future performance.

Risk factors relating to both the transaction and the integration of Northwestern into the Corporation after closing include, without limitation:

Completion of the transaction is dependent on, among other things, receipt of regulatory approvals, the timing of which cannot be predicted with precision at this point 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 2014.

The transaction may be more expensive to complete and the anticipated benefits, including anticipated cost savings and strategic gains, may be significantly harder or take longer to achieve than expected or may not be achieved in their entirety as a result of unexpected factors or events.

The integration of Northwestern's business and operations into the Corporation, which will include conversion of Northwestern's operating systems and procedures, may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results relating to Northwestern's or the Corporation's existing businesses.

The Corporation's ability to achieve anticipated results from the transaction is dependent on the state of the economic and financial markets going forward. Specifically, the Corporation may incur more credit losses from Northwestern's loan portfolio than expected and deposit attrition may be greater than expected.

Risk factors also include, but are not limited to, the risk factors described under "Risk Factors" (including the risk factors under the heading "Risk Factors - Risks Related to the Pending Merger with Northwestern") in the Corporation's Prospectus Supplement, dated June 19, 2014, and in Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2013. 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 2014Second Quarter Operating Results
 
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
         
 June 30, 2014March 31, 2014December 31, 2013June 30, 2013
 (In thousands, except per share data)
Assets        
Cash and cash equivalents:        
Cash and cash due from banks $ 139,023  $ 122,288  $ 130,811  $ 137,586
Interest-bearing deposits with the Federal Reserve Bank1,271 260,097 179,977 69,371
Total cash and cash equivalents140,294 382,385 310,788 206,957
Investment securities:        
Available-for-sale615,975 657,818 684,570 734,052
Held-to-maturity308,130 278,099 273,905 274,715
Total investment securities924,105 935,917 958,475 1,008,767
Loans held-for-sale6,329 3,814 5,219 9,180
Loans:        
Commercial1,212,383 1,208,641 1,176,307 1,091,894
Commercial real estate1,298,365 1,279,167 1,232,658 1,172,347
Real estate construction and land development112,124 98,845 109,861 100,629
Residential mortgage970,397 962,009 960,423 898,816
Consumer installment and home equity1,305,535 1,204,627 1,168,372 1,072,185
Total loans4,898,804 4,753,289 4,647,621 4,335,871
Allowance for loan losses(77,793) (78,473) (79,072) (82,184)
Net loans4,821,011 4,674,816 4,568,549 4,253,687
Premises and equipment74,291 74,779 75,308 73,379
Goodwill120,164 120,164 120,164 120,164
Other intangible assets12,454 12,872 13,424 14,354
Interest receivable and other assets133,327 133,581 132,781 119,723
Total Assets $ 6,231,975  $ 6,338,328  $ 6,184,708  $ 5,806,211
Liabilities        
Deposits:        
Noninterest-bearing $ 1,283,439  $ 1,219,081  $ 1,227,768  $ 1,107,453
Interest-bearing3,809,474 4,012,212 3,894,617 3,706,732
Total deposits5,092,913 5,231,293 5,122,385 4,814,185
Interest payable and other liabilities40,142 40,209 38,395 35,460
Short-term borrowings305,422 361,231 327,428 346,995
Total liabilities5,438,477 5,632,733 5,488,208 5,196,640
Shareholders' Equity        
Preferred stock, no par value per share
Common stock, $1 par value per share32,760 29,866 29,790 27,538
Additional paid-in capital563,393 489,045 488,177 434,479
Retained earnings215,333 205,985 199,053 182,619
Accumulated other comprehensive loss(17,988) (19,301) (20,520) (35,065)
Total shareholders' equity793,498 705,595 696,500 609,571
Total Liabilities and Shareholders' Equity $ 6,231,975  $ 6,338,328  $ 6,184,708  $ 5,806,211
         
Chemical Financial Corporation Announces 2014Second Quarter Operating Results
 
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
         
 Three Months EndedSix Months Ended
 June 30,June 30,
 2014201320142013
 (In thousands, except per share data)
Interest Income        
Interest and fees on loans $ 50,751  $ 48,029 $ 99,946  $ 95,934
Interest on investment securities:        
Taxable2,248 2,5854,631 5,023
Tax-exempt1,671 1,5873,375 3,151
Dividends on nonmarketable equity securities411 400649 551
Interest on deposits with the Federal Reserve Bank99 180224 501
Total interest income55,180 52,781108,825 105,160
Interest Expense        
Interest on deposits3,626 4,2647,371 8,830
Interest on short-term borrowings94 121215 235
Interest on FHLB advances 47
Total interest expense3,720 4,3857,586 9,112
Net Interest Income51,460 48,396101,239 96,048
Provision for loan losses1,500 3,0003,100 6,000
Net interest income after provision for loan losses49,960 45,39698,139 90,048
Noninterest Income        
Service charges and fees on deposit accounts5,486 5,53510,416 10,730
Wealth management revenue3,958 3,8797,589 7,324
Other charges and fees for customer services4,682 4,3038,876 8,954
Mortgage banking revenue1,491 1,6492,285 3,661
Gain on sale of investment securities 257 1,104
Other184 325351 414
Total noninterest income15,801 15,94829,517 32,187
Operating Expenses        
Salaries, wages and employee benefits24,860 24,62849,044 47,997
Occupancy3,638 3,3808,012 7,043
Equipment and software3,792 3,4477,253 6,897
Other10,135 9,58620,298 21,061
Total operating expenses42,425 41,04184,607 82,998
Income before income taxes23,336 20,30343,049 39,237
Federal income tax expense7,100 6,10013,000 11,800
Net Income $ 16,236  $ 14,203 $ 30,049  $ 27,437
Earnings Per Common Share:        
Weighted average common shares outstanding for basic earnings per share30,068 27,53429,947 27,527
Weighted average common shares outstanding for diluted earnings per share, including common stock equivalents30,279 27,67430,159 27,658
Basic earnings per share $ 0.54  $ 0.52 $ 1.00  $ 1.00
Diluted earnings per share0.54 0.511.00 0.99
         
Cash Dividends Declared Per Common Share0.23 0.210.46 0.42
         
Key Ratios (annualized where applicable):        
Return on average assets1.04% 0.97%0.97% 0.94%
Return on average shareholders' equity9.1% 9.4%8.6% 9.2%
Net interest margin3.59% 3.60%3.56% 3.57%
Efficiency ratio60.9% 63.3%62.6% 63.8%
             
Chemical Financial Corporation Announces 2014Second Quarter Operating Results
 
Financial Summary (Unaudited)
Chemical Financial Corporation
(Dollars in Thousands)
   
 2nd Quarter 20141st Quarter 20144th Quarter 20133rd Quarter 20132nd Quarter 20131st Quarter 2013
Average Balances            
Total assets $ 6,253,574  $ 6,210,569  $ 6,117,217  $ 5,966,988  $ 5,859,822  $ 5,924,820
Total interest-earning assets5,907,549 5,860,429 5,782,141 5,621,542 5,530,262 5,579,789
Total loans4,824,299 4,692,430 4,588,448 4,424,332 4,249,708 4,152,570
Total deposits5,151,581 5,142,276 5,065,671 4,960,270 4,878,214 4,950,956
Total interest-bearing liabilities4,250,158 4,276,677 4,211,647 4,167,915 4,126,751 4,221,638
Total shareholders' equity714,355 701,878 678,487 620,911 606,607 599,406
Key Ratios (annualized where applicable)            
Net interest margin (taxable equivalent basis)3.59% 3.53% 3.63% 3.58% 3.60% 3.54%
Efficiency ratio60.9% 64.5% 63.7% 61.0% 63.3% 64.4%
Return on average assets1.04% 0.90% 0.93% 1.00% 0.97% 0.91%
Return on average shareholders' equity9.1% 8.0% 8.4% 9.6% 9.4% 9.0%
Average shareholders' equity as a percent of average assets11.4% 11.3% 11.1% 10.4% 10.4% 10.1%
Capital ratios (period end):            
Tangible shareholders' equity as a percent of total assets11.0% 9.3% 9.4% 8.9% 8.5% 8.1%
Total risk-based capital ratio15.3% 13.8% 14.0% 14.2% 13.1% 13.3%
             
   
 2nd Quarter 20141st Quarter 20144th Quarter 20133rd Quarter 20132nd Quarter 20131st Quarter 2013
Credit Quality Statistics            
Originated loans $ 4,624,409  $ 4,464,465  $ 4,352,924  $ 4,213,728  $ 3,990,633  $ 3,810,989
Acquired loans274,395 288,824 294,697 308,943 345,238 374,272
Nonperforming assets:            
Nonperforming loans73,735 76,544 81,984 75,818 79,342 86,417
Other real estate / repossessed assets (ORE)10,392 10,056 9,776 12,033 13,659 18,194
Total nonperforming assets84,127 86,600 91,760 87,851 93,001 104,611
Performing troubled debt restructurings44,133 41,823 39,571 34,071 32,657 30,723
Allowance for loan losses - originated as a percent of:            
Total originated loans1.67% 1.75% 1.81% 1.92% 2.05% 2.16%
Nonperforming loans105% 102% 96% 107% 103% 95%
Nonperforming loans as a percent of total loans1.51% 1.61% 1.76% 1.68% 1.83% 2.06%
Nonperforming assets as a percent of:            
Total loans plus ORE1.71% 1.82% 1.97% 1.94% 2.14% 2.49%
Total assets1.35% 1.37% 1.48% 1.40% 1.60% 1.75%
Net loan charge-offs (year-to-date):            
Originated $ 4,379  $ 2,199  $ 16,419  $ 11,959  $ 8,307  $ 4,657
Acquired
Total loan charge-offs (year-to-date)4,379 2,199 16,419 11,959 8,307 4,657
Net loan charge-offs as a percent of average loans (year-to-date, annualized)0.18% 0.19% 0.38% 0.37% 0.40% 0.45%
   
 June 30, 2014March 31, 2014December 31, 2013September 30, 2013June 30, 2013March 31, 2013
Additional Data - Intangibles            
Goodwill $ 120,164  $ 120,164  $ 120,164  $ 120,164  $ 120,164  $ 120,164
Core deposit intangibles (CDI)9,110 9,556 10,001 10,466 10,933 11,417
Mortgage servicing rights (MSR)3,344 3,316 3,423 3,399 3,421 3,485
Amortization of CDI (during quarter ended)446 445 465 467 484 493
             
Chemical Financial Corporation Announces 2014Second Quarter Operating Results
 
Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates* (Unaudited)
Chemical Financial Corporation
             
 Three Months Ended June 30, 2014Three Months Ended June 30, 2013
 Average  InterestEffectiveAverageInterestEffective
 Balance(FTE)Yield/Rate*Balance(FTE)Yield/Rate*
Assets(Dollars in thousands)
Interest-earning assets:            
Loans** $ 4,830,341  $ 51,284 4.26%  $ 4,264,009  $ 48,510 4.56%
Taxable investment securities651,6852,2481.38 734,767 2,585 1.41
Tax-exempt investment securities253,4682,5764.07 229,773 2,423 4.22
Other interest-earning assets25,5724116.45 25,572 400 6.27
Interest-bearing deposits with the Federal Reserve Bank146,483990.27 276,141 180 0.26
Total interest-earning assets5,907,54956,6183.84 5,530,262 54,098 3.92
Less: allowance for loan losses78,626     83,850    
Other assets:            
Cash and cash due from banks116,390     114,988    
Premises and equipment74,353     73,802    
Interest receivable and other assets233,908     224,620    
Total assets $ 6,253,574      $ 5,859,822    
Liabilities and shareholders' equity            
Interest-bearing liabilities:            
Interest-bearing demand deposits $ 1,149,063  $ 273 0.10%  $ 1,032,580  $ 231 0.09%
Savings deposits1,416,9613150.09 1,353,769 301 0.09
Time deposits1,336,5513,0380.91 1,398,716 3,732 1.07
Short-term borrowings347,583940.11 341,686 121 0.14
FHLB advances
Total interest-bearing liabilities4,250,1583,7200.35 4,126,751 4,385 0.43
Noninterest-bearing deposits1,249,006 1,093,149
Total deposits and borrowed funds5,499,1643,7200.27 5,219,900 4,385 0.34
Interest payable and other liabilities40,055     33,315    
Shareholders' equity714,355     606,607    
Total liabilities and shareholders' equity $ 6,253,574      $ 5,859,822    
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities)    3.49%     3.49%
Net Interest Income (FTE)   $ 52,898      $ 49,713  
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets)    3.59%     3.60%
             
* Fully taxable equivalent (FTE) 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 2014Second Quarter Operating Results
 
Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates* (Unaudited)
Chemical Financial Corporation
             
 Six Months Ended June 30, 2014Six Months Ended June 30, 2013
 AverageInterestEffectiveAverage  InterestEffective
 Balance(FTE)Yield/Rate*Balance(FTE)Yield/Rate*
Assets(Dollars in thousands)
Interest-earning assets:            
Loans** $ 4,763,748  $ 101,028 4.27%  $ 4,216,078  $ 96,871 4.63%
Taxable investment securities671,6624,6311.38 700,976 5,023 1.43
Tax-exempt investment securities255,3105,1914.07 222,789 4,811 4.32
Other interest-earning assets25,5726495.12 25,572 551 4.34
Interest-bearing deposits with the Federal Reserve Bank167,8272240.27 389,474 501 0.26
Total interest-earning assets5,884,119111,7233.82 5,554,889 107,757 3.90
Less: allowance for loan losses78,972     84,411    
Other assets:            
Cash and cash due from banks118,269     116,297    
Premises and equipment74,557     74,203    
Interest receivable and other assets234,217     231,163    
Total assets $ 6,232,190      $ 5,892,141    
Liabilities and shareholders' equity            
Interest-bearing liabilities:            
Interest-bearing demand deposits $ 1,180,623  $ 560 0.10%  $ 1,067,290  $ 483 0.09%
Savings deposits1,416,0456300.09 1,345,637 597 0.09
Time deposits1,328,8786,1810.94 1,425,053 7,750 1.10
Short-term borrowings337,7982150.13 332,051 235 0.14
FHLB advances 3,902 47 2.43
Total interest-bearing liabilities4,263,3447,5860.36 4,173,933 9,112 0.44
Noninterest-bearing deposits1,221,408 1,076,404
Total deposits and borrowed funds5,484,7527,5860.28 5,250,337 9,112 0.35
Interest payable and other liabilities39,287     38,777    
Shareholders' equity708,151     603,027    
Total liabilities and shareholders' equity $ 6,232,190      $ 5,892,141    
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities)    3.46%     3.46%
Net Interest Income (FTE)   $ 104,137      $ 98,645  
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets)    3.56%     3.57%
             
* Fully taxable equivalent (FTE) 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 2014Second Quarter Operating Results
 
Nonperforming Assets (Unaudited)
Chemical Financial Corporation
             
 June 30, 2014March 31, 2014December 31, 2013September 30, 2013June 30, 2013March 31, 2013
 (In thousands)
Nonperforming Loans:            
Nonaccrual loans:            
Commercial $ 18,773  $ 18,251  $ 18,374  $ 11,809  $ 11,052  $ 12,186
Commercial real estate25,361 27,568 28,598 28,623 28,498 35,849
Real estate construction160 160 371 183 183 168
Land development2,184 2,267 2,309 2,954 3,434 4,105
Residential mortgage6,325 6,589 8,921 8,029 9,241 10,407
Consumer installment536 806 676 665 552 699
Home equity2,296 2,046 2,648 3,023 3,064 2,837
Total nonaccrual loans55,635 57,687 61,897 55,286 56,024 66,251
Accruing loans contractually past due 90 days or more as to interest or principal payments:            
Commercial15 43 536 281 1 4
Commercial real estate69 730 190 78 177
Real estate construction
Land development
Residential mortgage376 537 692 164 196
Consumer installment
Home equity1,075 622 734 686 689 874
Total accruing loans contractually past due 90 days or more as to interest or principal payments1,535 1,395 1,997 1,659 932 1,251
Nonperforming troubled debt restructurings:            
Commercial loan portfolio11,049 11,218 13,414 15,744 19,140 14,587
Consumer loan portfolio5,516 6,244 4,676 3,129 3,246 4,328
Total nonperforming troubled debt restructurings16,565 17,462 18,090 18,873 22,386 18,915
Total nonperforming loans73,735 76,544 81,984 75,818 79,342 86,417
Other real estate and repossessed assets10,392 10,056 9,776 12,033 13,659 18,194
Total nonperforming assets $ 84,127  $ 86,600  $ 91,760  $ 87,851  $ 93,001  $ 104,611
                 
Chemical Financial Corporation Announces 2014Second Quarter Operating Results
 
Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation
                 
             Six Months Ended
 2nd Quarter 20141st Quarter 20144th Quarter 20133rd Quarter 20132nd Quarter 20131st Quarter 2013June 30, 2014June 30, 2013
 (In thousands)
Allowance for loan losses - originated loan portfolio                
Allowance for loan losses - beginning of period $ 77,973  $ 78,572  $ 81,032  $ 81,684  $ 82,334  $ 83,991 $ 78,572  $ 83,991
Provision for loan losses1,500 1,600 2,000 3,000 3,000 3,0003,100 6,000
Net loan (charge-offs) recoveries:                
Commercial(569) (233) (448) (615) (59) (1,199)(802) (1,258)
Commercial real estate(783) (241) (1,233) (1,248) (1,786) (2,010)(1,024) (3,796)
Real estate construction (100) (37)(100)
Land development127 142 (207) (400) (50) (96)269 (146)
Residential mortgage(341) (704) (527) (409) (1,023) (573)(1,045) (1,596)
Consumer installment(612) (801) (836) (786) (574) (447)(1,413) (1,021)
Home equity(2) (262) (1,172) (194) (158) (332)(264) (490)
Net loan charge-offs(2,180) (2,199) (4,460) (3,652) (3,650) (4,657)(4,379) (8,307)
Allowance for loan losses - end of period77,293 77,973 78,572 81,032 81,684 82,33477,293 81,684
Allowance for loan losses - acquired loan portfolio                
Allowance for loan losses - beginning of period500 500 500 500 500 500500 500
Provision for loan losses
Net loan charge-offs
Allowance for loan losses - end of period500 500 500 500 500 500500 500
Total allowance for loan losses $ 77,793  $ 78,473  $ 79,072  $ 81,532  $ 82,184  $ 82,834 $ 77,793  $ 82,184
Net loan charge-offs as a percent of average loans (quarter only, annualized)0.18% 0.19% 0.39% 0.33% 0.34% 0.45%0.18% 0.40%
             
Chemical Financial Corporation Announces 2014Second Quarter Operating Results
 
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
             
 2nd Quarter 20141st Quarter 20144th Quarter 20133rd Quarter 20132nd Quarter 20131st Quarter 2013
 (Dollars in thousands, except per share data)
Summary of Operations            
Interest income $ 55,180  $ 53,645  $ 55,323  $ 53,578  $ 52,781  $ 52,379
Interest expense3,720 3,866 4,018 4,284 4,385 4,727
Net interest income51,460 49,779 51,305 49,294 48,396 47,652
Provision for loan losses1,500 1,600 2,000 3,000 3,000 3,000
Net interest income after provision for loan losses49,960 48,179 49,305 46,294 45,396 44,652
Noninterest income15,801 13,716 13,578 14,644 15,948 16,239
Operating expenses42,425 42,182 42,405 39,545 41,041 41,957
Income before income taxes23,336 19,713 20,478 21,393 20,303 18,934
Federal income tax expense7,100 5,900 6,100 6,400 6,100 5,700
Net income $ 16,236  $ 13,813  $ 14,378  $ 14,993  $ 14,203  $ 13,234
Net interest margin3.59% 3.53% 3.63% 3.58% 3.60% 3.54%
 
Per Common Share Data            
Net income:            
Basic $ 0.54  $ 0.46  $ 0.48  $ 0.54  $ 0.52  $ 0.48
Diluted0.54 0.46 0.48 0.53 0.51 0.48
Cash dividends declared0.23 0.23 0.23 0.22 0.21 0.21
Book value - period-end24.22 23.63 23.38 22.61 22.14 21.97
Tangible book value - period-end20.42 19.44 19.17 18.36 17.53 17.34
Market value - period-end28.08 32.45 31.67 27.92 25.99 26.38
CONTACT: For further information:
         David B. Ramaker, CEO
         Lori A. Gwizdala, CFO
         989-839-5350
Source: Chemical Financial Corporation