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Press Release

Chemical Financial Corporation Reports First Quarter 2007 Earnings

Announces Reorganization of Retail Banking Operations

Company Release - 4/16/2007 10:53 AM ET

MIDLAND, Mich., April 16, 2007 (PRIME NEWSWIRE) -- Chemical Financial Corporation's (Nasdaq:CHFC) Board of Directors today announced 2007 first quarter net income of $9.0 million, or $0.36 per diluted share, versus net income of $11.9 million, or $0.47 per diluted share, in the first quarter of 2006.

"Decreasing net interest income coupled with an increase in our provision for loan losses and operating expenses led to an unacceptable decline in net income in comparison to the first quarter of 2006. In response, we are instituting measures to improve our financial performance while maintaining our investment in longer-term growth initiatives," said David B. Ramaker, Chairman, President and Chief Executive Officer of Chemical Financial Corporation. "Specifically, we are announcing the reorganization of our retail banking operations and consolidating support operations while eliminating approximately 50 positions bankwide."

"The reorganization of our retail banking operations will align the operations into four distinct regions, each to be led by a senior executive with accountability for that executive's region's results," added Ramaker. "We continue to invest in improving sales and service in our retail delivery channel. Our short-term objectives in this area are to increase our market share by increasing the number of households who hold multiple products with Chemical Bank while improving customer retention by enhancing service delivery levels. In combination, these factors can drive incremental revenue growth despite a stagnant Michigan economy."

Chemical Financial Corporation will reorganize its retail banking operations from its current 15 community bank structure into a four-region structure. As a result of the reorganization, a number of management and support positions will be eliminated through a combination of early retirements, attrition and staff reductions. In addition, the Company will centralize six operations departments whose functions are currently spread throughout the organization, consolidating positions in the process. Importantly, these eliminations will not affect front-line service, as they will be concentrated among back office and management positions. In conjunction with the reorganization, Chemical Financial Corporation estimates it will incur a one-time, second quarter pre-tax charge to earnings of $1.5 million for early retirement and severance costs. Subsequent to the year of implementation, it is expected that the reorganization will yield annual pre-tax compensation expense savings of approximately $2 million.

Net interest income was $31.8 million in the first quarter of 2007, a decrease of 5.4 percent from first quarter 2006 net interest income of $33.6 million. The decrease in net interest income was attributable primarily to a decrease in net interest margin. The net interest margin (on a tax-equivalent basis) in the first quarter of 2007 was 3.62 percent, down from 3.73 percent in the fourth quarter of 2006 and 3.90 percent in the first quarter of 2006. The decline in net interest margin was primarily attributable to increases in rates paid on interest-bearing liabilities exceeding increases in rates earned on interest-earning assets, as deposits continue to re-price more rapidly than loans, and the impact of funds migrating within the deposit portfolio from lower cost transaction and savings accounts to higher cost savings and time deposits. Management anticipates that the decline in net interest income will moderate as the pace of interest rate increases has slowed.

The provision for loan losses was $1.625 million in the first quarter of 2007, compared to $2.59 million in the fourth quarter of 2006 and $0.46 million in the first quarter of 2006. Net loan charge-offs were $0.7 million in the first quarter of 2007, down significantly from $3.8 million in the fourth quarter of 2006, but up from $0.5 million in the first quarter of 2006. The increase in the provision for loan losses in the first quarter of 2007, as compared to the first quarter of 2006, was primarily reflective of an increase in nonaccrual real estate commercial and real estate residential loans due to a general deterioration in credit quality attributable, in part, to the continuing recessionary Michigan economy. The allowance for loan losses of $35.0 million at March 31, 2007 was 1.25 percent of total loans, up from 1.21 percent of total loans at December 31, 2006 but down slightly from 1.27 percent of total loans at March 31, 2006. At March 31, 2007, nonperforming loans as a percentage of total loans were 1.26 percent, up from 0.96 percent at December 31, 2006 and from 0.73 percent at March 31, 2006.

At March 31, 2007, nonperforming assets totaled $44.44 million, up substantially from $35.76 million at December 31, 2006, and up from $27.58 million at March 31, 2006. The $8.68 million increase in nonperforming assets from the previous quarter's end was due primarily to increases in nonaccrual real estate commercial and real estate residential loans.

Total noninterest income was $10.0 million in the first quarter of 2007, up slightly from $9.8 million in the first quarter of 2006. Modest increases in other charges and fees for customer services and trust and investment services revenue more than offset slight declines in service charges on deposit accounts and other income.

Operating expenses of $26.8 million in the first quarter of 2007 were up $1.6 million, or 6.5 percent, from the first quarter of 2006, due primarily to an increase in "other" expense attributable to higher professional and consulting fees of $1 million. In addition, approximately $0.5 million of the increase in operating expenses between the first quarter of 2006 and the first quarter of 2007 was attributable to additional operating expenses associated with the two branches acquired in August 2006 and the opening of four new branches later in 2006 and 2007. The Company's first quarter 2007 efficiency ratio of 63.2 percent was up from 54.4 percent in the fourth quarter of 2006, and from 57.3 percent in the first quarter of 2006. The increase in the efficiency ratio from the prior year was attributable to the decrease in net interest income combined with the aforementioned increase in operating expenses.

Total assets were $3.82 billion at March 31, 2007, up slightly from $3.79 billion at December 31, 2006 and from $3.74 billion at March 31, 2006. At March 31, 2007, total loans were $2.80 billion, compared to $2.81 billion at December 31, 2006 and $2.69 billion at March 31, 2006. Investment securities were $613 million at March 31, 2007, down from $615 million at December 31, 2006 and $673 million at March 31, 2006. The decrease in investment securities from the prior year first quarter was primarily attributable to the Company using excess liquidity from maturing investment securities to fund higher yielding loan growth.

Total deposits were $2.95 billion at March 31, 2007, up slightly from $2.90 billion at December 31, 2006 and from $2.87 billion at March 31, 2006. Federal Home Loan Bank advances totaled $165 million at March 31, 2007, compared to $175 million at December 31, 2006 and $193 million at March 31, 2006.

The Company's return on average assets during the first quarter of 2007 was 0.97 percent, down from 1.18 percent in the fourth quarter of 2006 and from 1.28 percent in the first quarter of 2006. At March 31, 2007, the Company's book value stood at $20.86 per share, versus $20.46 per share at December 31, 2006 and $20.10 per share at March 31, 2006. The decline in return on assets combined with the increase in shareholders' equity resulted in a decline in return on average equity to 7.2 percent in the first quarter of 2007 from 9.6 percent in the first quarter of 2006.

Chemical Financial Corporation is the third-largest bank holding company headquartered in Michigan. The Company operates through a single subsidiary bank, Chemical Bank, with 129 banking offices spread over 31 counties in the lower peninsula of Michigan. At March 31, 2007, the Company had total assets of $3.82 billion. Chemical Financial Corporation common stock trades on The Nasdaq Stock Market under the symbol CHFC and is one of the issues comprising the Nasdaq Global Select Market.

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 itself. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "judgment," "plans," "predicts," "projects," "should," "will," variations of such words and similar expressions are intended to identify such forward-looking statements. 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. Chemical Financial Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

Risk factors include, but are not limited to, the risk factors described in Item 1A in the Company's Annual Report on Form 10-K for the year ended December 31, 2006; the timing and level of asset growth; changes in banking laws and regulations; changes in tax laws; changes in prices, levies and assessments; the impact of technological advances and issues; governmental and regulatory policy changes; opportunities for acquisitions and the effective completion of acquisitions and integration of acquired entities; the possibility that anticipated cost savings and revenue enhancements from acquisitions, restructurings, reorganizations and bank consolidations may not be realized at all or within expected time frames; and the local and global effects of the ongoing war on terrorism and other military actions, including actions in Iraq. 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
  First Quarter Operating Results
 -------------------------------------------------------------------

 Consolidated Statements of Financial Position (Unaudited)
 Chemical Financial Corporation

 (In thousands, except per share data)
                            March 31     December 31       March 31
                              2007          2006             2006
                           -----------    -----------    -----------
 Assets:
 Cash and cash due
  from banks               $    88,116    $   135,544    $    92,404
 Federal funds sold            138,000         49,500         85,600
 Interest-bearing
  deposits with
  unaffiliated banks             5,210          5,712         22,448
 Investment securities
  - available for sale         520,892        520,867        571,262
 Investment securities
  - held to maturity            92,198         94,564        102,222
 Other securities               22,131         22,131         25,683
 Loans held for sale             8,739          5,667          5,748
 Loans:
 Commercial loans              558,190        545,591        521,792
 Real estate
  commercial loans             727,650        726,554        704,547
 Real estate
  construction loans           137,605        145,933        157,087
 Real estate
  residential loans            831,846        835,263        786,121
 Consumer loans                541,774        554,319        522,558
                           -----------    -----------    -----------
     Total Loans             2,797,065      2,807,660      2,692,105
 Less: Allowance
  for loan losses               35,016         34,098         34,154
                           -----------    -----------    -----------
     Net Loans               2,762,049      2,773,562      2,657,951
 Premises and
  equipment                     49,442         49,475         44,699
 Goodwill                       69,908         70,129         63,293
 Other intangible
  assets                         8,185          8,777          7,529
 Interest receivable
  and other assets              52,623         53,319         59,240
                           -----------    -----------    -----------
     Total Assets          $ 3,817,493    $ 3,789,247    $ 3,738,079
                           ===========    ===========    ===========
 Liabilities:
 Noninterest-bearing
  deposits                 $   519,984    $   551,177    $   522,790
 Interest-bearing
  deposits                   2,432,051      2,346,908      2,343,349
                           -----------    -----------    -----------
     Total Deposits          2,952,035      2,898,085      2,866,139
 Interest payable
  and other liabilities         24,672         29,235         34,934
 Short-term borrowings         178,067        208,969        174,392
 Federal Home Loan
  Bank advances
  - long-term                  145,072        145,072        158,093
                           -----------    -----------    -----------
     Total Liabilities       3,299,846      3,281,361      3,233,558
 Shareholders' Equity:
   Common stock,
    $1 par value                24,814         24,828         25,101
   Surplus                     368,198        368,554        376,501
   Retained earnings           132,532        123,454        111,501
   Accumulated other
    comprehensive loss          (7,897)        (8,950)        (8,582)
                           -----------    -----------    -----------
      Total
       Shareholders'
       Equity                  517,647        507,886        504,521
                           -----------    -----------    -----------
      Total Liabilities
       and Shareholders'
       Equity              $ 3,817,493    $ 3,789,247    $ 3,738,079
                           ===========    ===========    ===========


 Chemical Financial Corporation Announces
  First Quarter Operating Results
 ---------------------------------------------------------------------

 Consolidated Statements of Income (Unaudited)
 Chemical Financial Corporation

                                               Three Months Ended
                                                    March 31
  (In thousands, except per share data)      2007              2006
 --------------------------------------------------------------------
  Interest Income:
  Interest and fees on loans                $47,366           $43,710
  Interest on investment
   securities:
      Taxable                                 6,135             6,342
      Tax-exempt                                664               620
  Dividends on other
   securities                                   216               341
  Interest on federal
   funds sold                                 1,445               951
  Interest on deposits with
   unaffiliated banks                            99               313
                                            -------           -------
       Total Interest Income                 55,925            52,277

  Interest Expense:
  Interest on deposits                       20,336            15,074
  Interest on short-term
   borrowings                                 1,908             1,568
  Interest on Federal Home
   Loan Bank advances -
   long-term                                  1,907             2,044
                                            -------           -------
        Total Interest Expense               24,151            18,686
                                            -------           -------
        Net Interest Income                  31,774            33,591
  Provision for loan losses                   1,625               460
                                            -------           -------
        Net Interest Income
         after Provision
         for Loan Losses                     30,149            33,131

  Noninterest Income:
  Service charges on
   deposit accounts                           4,968             5,097
  Trust and investment
   services revenue                           2,100             2,005
  Other charges and fees for
   customer services                          2,442             2,132
  Mortgage banking revenue                      442               423
  Net gains on sales of
   investment securities                          4                --
  Other                                          87               175
                                            -------           -------
         Total Noninterest Income            10,043             9,832

  Operating Expenses:
  Salaries, wages and
   employee benefits                         14,739            14,590
  Occupancy                                   2,589             2,598
  Equipment                                   2,304             2,188
  Other                                       7,126             5,745
                                            -------           -------
         Total Operating Expenses            26,758            25,121
                                            -------           -------
  Income Before Income Taxes                 13,434            17,842
         Provision for federal
          income taxes                        4,393             5,945
                                            -------           -------
  Net Income                                $ 9,041           $11,897
                                            =======           =======

  Net income per share:
    Basic                                   $  0.36           $  0.47
    Diluted                                    0.36              0.47

  Cash dividends per share                  $ 0.285           $ 0.275

  Average shares outstanding:
    Basic                                    24,833            25,097
    Diluted                                  24,849            25,141


 Chemical Financial Corporation Announces
  First Quarter Operating Results
 ---------------------------------------------------------------------

 Financial Summary (Unaudited)
 Chemical Financial Corporation


                                               Three Months Ended
                                                    March 31
 (Dollars in thousands)                       2007             2006
 ---------------------------------------------------------------------
 Average Balances
  Total assets                             $3,788,768       $3,770,833
  Total interest-earning assets             3,553,874        3,535,728
  Total loans                               2,798,614        2,695,742
  Total deposits                            2,919,599        2,872,473
  Total interest-bearing liabilities        2,728,103        2,708,628
  Total shareholders' equity                  511,317          503,990

                                                Three Months Ended
                                                     March 31
                                               2007             2006
 ---------------------------------------------------------------------
 Key Ratios (annualized where applicable)
 Net interest margin (taxable
   equivalent basis)                             3.62%            3.90%
  Efficiency ratio                               63.2%            57.3%
  Return on average assets                       0.97%            1.28%
  Return on average shareholders'equity           7.2%             9.6%
  Average shareholders' equity as a
   percent of average assets                     13.5%            13.4%
  Tangible shareholders' equity as
   a percent of total assets                     11.8%            11.8%
  Total risk-based capital ratio                 17.8%            18.1

 Chemical Financial Corporation Announces
  First Quarter Operating Results
 ---------------------------------------------------------------------

 Financial Summary (Unaudited)
 Chemical Financial Corporation

(Dollars in thousands)

                         March  December September  June     March
                          31       31        30      30        31
                         2007     2006      2006    2006      2006
 -------------------------------------------------------------------
 Credit Quality
  Statistics

 Nonaccrual loans       $28,748  $20,239  $23,113  $17,636  $13,902
 Loans 90 or more
  days past due
  and still accruing      6,441    6,671    9,505    9,618    5,773
 Total nonperforming
  loans                  35,189   26,910   32,618   27,254   19,675
 Repossessed
  assets (RA)             9,250    8,852   10,062    9,615    7,905
 Total nonperforming
  assets                 44,439   35,762   42,680   36,869   27,580
 Net loan
  charge-offs
  (year-to-date)            707    5,650    1,810    1,370      454

 Allowance for
  loan losses as
  a percent of
  total loans              1.25%    1.21%    1.25%    1.22%    1.27%
 Allowance for
  loan losses as
  a percent of
  nonperforming loans       100%     127%     108%     123%     174%
 Nonperforming
  loans as a
  percent of
  total loans              1.26%    0.96%    1.16%    0.99%    0.73%
 Nonperforming
  assets as a
  percent of total
  loans plus RA            1.58%    1.27%    1.51%    1.33%    1.02%
 Nonperforming
  assets as a
  percent of total
  assets                   1.16%    0.94%    1.11%    0.99%    0.74%
 Net loan
  charge-offs as a
  percent of
  average loans
  (year-to-date,
  annualized)              0.10%    0.20%    0.09%    0.10%    0.07%


                         March  December September  June     March
                          31       31        30      30        31
                         2007     2006      2006    2006      2006
 --------------------------------------------------------------------
 Additional Data -
  Intangibles

 Goodwill             $69,908   $70,129   $70,999   $63,293   $63,293
 Core deposits
  and other
  intangibles           5,886     6,379     7,030     4,743     5,246
 Mortgage servicing
  rights (MSR)          2,299     2,398     2,533     2,193     2,283
 Amortization of
  intangibles
  (quarter only)          734       857       618       683       718


 Chemical Financial Corporation Announces
  First Quarter Operating Results
 --------------------------------------------------------------------

 Nonperforming Assets (Unaudited)
 Chemical Financial Corporation

 (Dollars in thousands)

                         March  December September  June     March
                          31       31        30      30        31
                         2007     2006      2006    2006      2006
 -------------------------------------------------------------------
 Nonaccrual loans:
  Commercial           $6,537    $5,867    $6,713    $6,335   $3,014
  Real estate
   commercial          12,975     7,948     8,740     4,788    3,798
  Real estate
   construction-
   commercial           3,283     2,552     2,017     1,735    3,943
  Real estate
   residential          4,660     2,887     4,455     3,892    2,499
  Consumer              1,293       985     1,188       886      648
 -------------------------------------------------------------------

  Total nonaccrual
  loans                28,748    20,239    23,113    17,636    13,902
 Accruing loans
  contractually past
  due 90 days or more
  as to interest or
  principal payments:
   Commercial           2,030     1,693     3,151     1,903     2,238
   Real estate
   commercial           2,342     2,232     3,081     5,569     1,558
   Real estate
    construction-
    commercial             --       174        --       179       490
   Real estate
    residential         1,350     1,158     1,857     1,618     1,057
   Consumer               719     1,414     1,416       349       430
 --------------------------------------------------------------------
  Total accruing
   loans contractually
   past due 90 days
   or more as to
   interest or
   principal payments   6,441     6,671     9,505     9,618     5,773
 --------------------------------------------------------------------
 Total
  nonperforming
  loans                35,189    26,910    32,618    27,254    19,675
 Other real
  estate and
  repossessed
  assets                9,250     8,852    10,062     9,615     7,905
 --------------------------------------------------------------------
  Total
   nonperforming
   assets             $44,439   $35,762   $42,680   $36,869   $27,580
 --------------------------------------------------------------------


 Chemical Financial Corporation Announces
 First Quarter Operating Results
 --------------------------------------------------------------------

 Summary of Loan Loss Experience (Unaudited)
 Chemical Financial Corporation

 (Dollars in thousands)

                                      Three Months Ended
 --------------------------------------------------------------------
                         March  December September  June     March
                          31       31        30      30        31
                         2007     2006      2006    2006      2006
 --------------------------------------------------------------------
 Allowance for loan
  losses at beginning
  of period          $ 34,098  $ 35,348  $ 33,638  $ 34,154  $ 34,148
 Loans charged off:
  Commercial             (429)   (1,056)      (52)     (244)      (37)
  Real estate
   commercial             (74)     (964)       --      (600)       --
  Real estate
   construction           (67)   (1,201)       --        --        --
  Real estate
   residential            (18)     (108)     (101)     (109)     (197)
  Consumer               (350)     (677)     (475)     (344)     (480)
 ------------------------------- ------------------------------------
  Total loan charge-
   offs                  (938)   (4,006)     (628)   (1,297)     (714)
 Recoveries of loans
  previously charged
  off:
  Commercial               99        52        58       138       122
  Real estate
   commercial               1         1         2         1         2
  Real estate
   residential              1        --         1        97        --
 Consumer                 130       113       127       145       136
 --------------------------------------------------------------------
  Total loan
   recoveries             231       166       188       381       260
 --------------------------------------------------------------------
  Net loan
   charge-offs           (707)   (3,840)     (440)     (916)     (454)
 Provision for
  loan losses           1,625     2,590     1,750       400       460

 Allowance of
  branches acquired        --        --       400        --        --
 --------------------------------------------------------------------
 Allowance for
  loan losses at
  end of period       $35,016   $34,098   $35,348   $33,638   $34,154
 --------------------------------------------------------------------


 Chemical Financial Corporation
  Announces First Quarter Operating Results
 -------------------------------------------------------------------

 Selected Quarterly Information (Unaudited)
 Chemical Financial Corporation

 (In thousands, except per share data)

                       1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
                         2007      2006    2006     2006     2006
 ------------------------------------------------------------------
 Summary of Operations
 Interest income        $55,925  $56,199  $55,556  $53,391  $52,277
 Interest expense        24,151   23,510   22,817   20,174   18,686
 Net interest income     31,774   32,689   32,739   33,217   33,591
 Provision for loan
  losses                  1,625    2,590    1,750      400      460
 Net interest income
  after provision
  for loan losses        30,149   30,099   30,989   32,817   33,131
 Noninterest income      10,043    9,901    9,896   10,518    9,832
 Noninterest expense     26,758   23,481   24,196   25,076   25,121
 Income taxes             4,393    5,291    5,199    6,030    5,945
 Net income             $ 9,041  $11,228  $11,490  $12,229  $11,897

 -----------------------------------------------------------------
 Per Common
  Share Data
 Net income:
  Basic                 $  0.36  $  0.45  $  0.46  $  0.49  $  0.47
  Diluted                  0.36     0.45     0.46     0.49     0.47
 Cash dividends           0.285    0.275    0.275    0.275    0.275
 Book value               20.86    20.46    20.51    20.14    20.10
CONTACT: Chemical Financial Corporation
         Lori A. Gwizdala, CFO
         (989) 839-5358