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Press Release

Chemical Financial Corporation Reports Second Quarter 2008 Earnings

Earnings Per Share Increase 3 Percent

Company Release - 7/28/2008 9:13 AM ET

MIDLAND, Mich., July 28, 2008 (PRIME NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced 2008 second quarter net income of $9.6 million, or $0.40 per diluted share, versus net income of $9.5 million, or $0.39 per diluted share, in the second quarter of 2007.

Net income was $19.3 million, or $0.81 per diluted share, for the six months ended June 30, 2008, compared to net income of $18.6 million, or $0.75 per diluted share, for the six months ended June 30, 2007.

"We are pleased with our quarterly earnings performance especially in light of the challenges posed by the economy. An increase in net interest income resulting from a higher net interest margin was augmented by a one time gain in the amount of $1.7 million from the sale of MasterCard stock during the second quarter. These increases were partially offset by continued weaknesses in credit quality, which resulted in a substantial increase in the provision for loan losses and other credit related costs," said David B. Ramaker, Chairman, President and Chief Executive Officer of Chemical Financial Corporation. "We have not yet seen sustained evidence of a recovery in the Michigan economy, and in view of the struggling housing industry, the low level of consumer confidence and the U.S. automotive industry facing unprecedented challenges, it is difficult to foresee any economic turnaround in the short term. However, we are confident that our increased net interest income, strong balance sheet, healthy capital position and conservative credit culture will allow us to not only weather the storm, but capitalize on any opportunities," added Ramaker.

Net interest income was $35.6 million in the second quarter of 2008, an increase of $3.2 million, or 9.9 percent, from second quarter 2007 net interest income of $32.4 million and an increase of $1.2 million, or 3.6 percent, from first quarter 2008 net interest income of $34.4 million. The increases in net interest income were attributable primarily to the increases in net interest margin. The net interest margin (on a tax-equivalent basis) in the second quarter of 2008 was 4.11 percent, up substantially from 3.70 percent in the second quarter of 2007 and up from 3.94 percent in the first quarter of 2008. The increases in net interest margin were primarily attributable to decreases in rates paid on interest-bearing liabilities exceeding decreases in rates earned on interest-earning assets, as deposits repriced more rapidly than loans in the falling interest rate environment experienced in the past 12 months.

Total assets were $3.74 billion at June 30, 2008, down slightly from $3.75 billion at December 31, 2007 and down from $3.78 billion at June 30, 2007. At June 30, 2008, total loans were $2.85 billion, versus $2.80 billion at December 31, 2007 and June 30, 2007. Federal funds sold were $8 million at June 30, 2008, down from $58 million at December 31, 2007 and $86 million at June 30, 2007. During the first six months of 2008, the Company utilized excess liquidity to fund approximately $51 million in loan growth. Investment securities were $589 million at June 30, 2008, down from $595 million at December 31, 2007 and down from $621 million at June 30, 2007.

Total deposits were $2.89 billion at June 30, 2008, up slightly from $2.88 billion at December 31, 2007, although down from $2.94 billion at June 30, 2007. Long-term wholesale borrowings, comprised of Federal Home Loan Bank advances, totaled $130 million at June 30, 2008, down $20 million, or 13.3 percent, from $150 million at December 31, 2007 and down $5 million, or 3.7 percent, from $135 million at June 30, 2007.

The provision for loan losses was $6.5 million in the second quarter of 2008, compared to $2.7 million in the first quarter of 2008 and $2.5 million in the second quarter of 2007. Net loan charge-offs were $6.5 million in the second quarter of 2008, up substantially from $2.5 million in the first quarter of 2008 and $1.3 million in the second quarter of 2007. The increases in the provision for loan losses in the second quarter of 2008, as compared to the first quarter of 2008 and the previous year, were due primarily to increases in commercial, real estate commercial and real estate construction loan charge-offs.

At June 30, 2008, nonperforming assets totaled $87.8 million, up from $84.6 million at March 31, 2008 and up from $57.0 million at June 30, 2007. Nonperforming loans were $71.9 million at June 30, 2008 and March 31, 2008, with the increase in nonperforming assets in the second quarter of 2008 occurring in the other real estate component of nonperforming assets. At June 30, 2008, nonperforming loans as a percentage of total loans were 2.52 percent, down from 2.58 percent at March 31, 2008 and up from 1.71 percent at June 30, 2007.

The allowance for loan losses of $39.7 million at June 30, 2008 was 1.39 percent of total loans, down from 1.42 percent of total loans at March 31, 2008 and up from 1.30 percent of total loans at June 30, 2007. The allowance for loan losses as a percent of nonperforming loans was 55 percent at both June 30, 2008 and March 31, 2008, compared to 76 percent at June 30, 2007. The Company's nonperforming loans at June 30, 2008 included commercial, real estate commercial and residential development construction loans, totaling $28 million, which have been analyzed and deemed to have sufficient collateral values so as not to require allocation of the allowance for loan losses to these loans.

Total noninterest income was $12.0 million in the second quarter of 2008, up $0.6 million, or 5.3 percent, from $11.4 million in the second quarter of 2007. The increase over the prior year was attributable to the realization of a $1.7 million gain on the sale of MasterCard stock. In comparison, in the second quarter of 2007, the Company recognized $0.9 million in gains on the sales of a previously consolidated branch office location and a parcel of excess land contiguous to an existing branch office.

Operating expenses in the second quarter of 2008 were $26.9 million, down $0.3 million, or 1.2 percent, from $27.2 million in the second quarter of 2007. Operating expenses in the second quarter of 2007 included $1.6 million of reorganization (compensation-related) expenses. Excluding these reorganization expenses, operating expenses in the second quarter of 2008 were up $1.3 million, or 5 percent, as compared to the second quarter of 2007. This increase in operating expenses was largely attributable to a customer merchant credit card loss of $0.6 million. The Company's efficiency ratio was 55.8 percent in the second quarter of 2008, down from 60.3 percent in the first quarter of 2008 and down from 61.4 percent in the second quarter of 2007. The decreases in the efficiency ratio were primarily attributable to the increase in net interest income.

The Company's return on average assets during the second quarter of 2008 was 1.03 percent, the same as in the first quarter of 2008 and up slightly from 1.00 percent in the second quarter of 2007. At June 30, 2008, the Company's book value stood at $21.58 per share versus $20.79 per share at June 30, 2007. The increase in return on assets resulted in a slight increase in return on average equity to 7.6 percent in the second quarter of 2008 from 7.5 percent in the second quarter of 2007.

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 June 30, 2008, the Company had total assets of $3.74 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.

Safe Harbor Statement

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 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. Management's determination of the provision and allowance for loan losses involves judgments that are inherently forward-looking. 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 Chemical Financial Corporation's Annual Report on Form 10-K for the year ended December 31, 2007, 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 fully or at all or within expected time frames; the local and global effects of the ongoing war on terrorism and other military actions, including actions in Iraq; and current uncertainties and fluctuations in the financial markets and stocks of financial services providers due to concerns about credit availability and concerns about the Michigan economy in particular. 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.


 Consolidated Statements of Financial Position (Unaudited)
 Chemical Financial Corporation

 (In thousands, except               June 30      Dec 31     June 30
  per share data)                      2008        2007        2007
 ---------------------------------------------------------------------
 Assets:
 Cash and cash equivalents:
  Cash and cash due from banks      $  110,050  $  125,285  $  103,910
  Federal funds sold                     8,000      58,000      86,200
  Interest-bearing deposits with
   unaffiliated banks                    4,827       6,228       5,487
                                    ----------  ----------  ----------
   Total cash and cash equivalents     122,877     189,513     195,597
 Investment securities:
  Available for sale                   477,910     503,271     513,954
  Held to maturity                     111,579      91,243     106,792
                                    ----------  ----------  ----------
   Total investment securities         589,489     594,514     620,746
 Other securities                       22,142      22,135      22,135
 Loans held for sale                     7,571       7,883       6,560

 Loans:
  Commercial                           539,086     515,319     522,535
  Real estate commercial               776,505     760,399     735,510
  Real estate construction             130,079     134,828     132,900
  Real estate residential              824,588     838,545     845,432
  Consumer                             580,203     550,343     559,955
                                    ----------  ----------  ----------
   Total Loans                       2,850,461   2,799,434   2,796,332
 Allowance for loan losses             (39,664)    (39,422)    (36,254)
                                    ----------  ----------  ----------
   Net Loans                         2,810,797   2,760,012   2,760,078

 Premises and equipment                 49,164      49,930      48,313
 Goodwill                               69,908      69,908      69,908
 Other intangible assets                 5,963       6,876       7,757
 Interest receivable and other
  assets                                59,943      53,542      53,820
                                    ----------  ----------  ----------
   Total Assets                     $3,737,854  $3,754,313  $3,784,914
                                    ==========  ==========  ==========
 Liabilities:
 Deposits:
  Noninterest-bearing               $  552,550  $  535,705  $  544,555
  Interest-bearing                   2,334,409   2,339,884   2,391,323
                                    ----------  ----------  ----------
   Total Deposits                    2,886,959   2,875,589   2,935,878
 Interest payable and other
  liabilities                           21,207      22,848      22,156
 Short-term borrowings                 185,472     197,363     185,357
 Federal Home Loan Bank advances -
  long-term                            130,025     150,049     135,049
                                    ----------  ----------  ----------
   Total Liabilities                 3,223,663   3,245,849   3,278,440

 Shareholders' Equity:
  Common stock, $1 par value per
   share                                23,823      23,815      24,365
  Surplus                              345,117     344,579     356,532
  Retained earnings                    147,092     141,867     135,054
  Accumulated other comprehensive
   loss                                 (1,841)     (1,797)     (9,477)
                                    ----------  ----------  ----------
   Total Shareholders' Equity          514,191     508,464     506,474
                                    ----------  ----------  ----------
   Total Liabilities and
    Shareholders' Equity            $3,737,854  $3,754,313  $3,784,914
                                    ==========  ==========  ==========


 Consolidated Statements of Income (Unaudited)
 Chemical Financial Corporation

                                Three Months Ended   Six Months Ended
 (In thousands, except               June 30             June 30
  per share data)                 2008      2007      2008      2007
 ---------------------------------------------------------------------
 Interest Income:
 Interest and fees on loans     $ 44,491  $ 48,138  $ 90,061  $ 95,504
 Interest on investment
  securities:
  Taxable                          5,473     6,233    11,312    12,368
  Tax-exempt                         687       666     1,382     1,330
 Dividends on other securities       390       357       584       573
 Interest on federal funds sold      412     1,617     1,430     3,062
 Interest on deposits with
  unaffiliated banks                  55        75       176       174
                                --------  --------  --------  --------
   Total Interest Income          51,508    57,086   104,945   113,011

 Interest Expense:
 Interest on deposits             13,734    20,917    30,061    41,253
 Interest on short-term
  borrowings                         501     1,866     1,460     3,774
 Interest on Federal Home
  Loan Bank advances - long-term   1,637     1,883     3,402     3,790
                                --------  --------  --------  --------
   Total Interest Expense         15,872    24,666    34,923    48,817
                                --------  --------  --------  --------
   Net Interest Income            35,636    32,420    70,022    64,194
 Provision for loan losses         6,500     2,500     9,200     4,125
                                --------  --------  --------  --------
   Net Interest Income after
    Provision for Loan Losses     29,136    29,920    60,822    60,069

 Noninterest Income:
 Service charges on deposit
  accounts                         5,007     5,236     9,781    10,204
 Trust and investment services
  revenue                          2,090     2,087     4,117     4,187
 Other charges and fees for
  customer services                2,461     2,376     4,684     4,818
 Mortgage banking revenue            524       628     1,060     1,070
 Investment securities gains       1,716        --     1,716         4
 Other                               161     1,029       181     1,116
                                --------  --------  --------  --------
   Total Noninterest Income       11,959    11,356    21,539    21,399

 Operating Expenses:
 Salaries, wages and employee
  benefits                        14,810    15,773    29,289    30,512
 Occupancy                         2,360     2,771     5,130     5,360
 Equipment                         2,133     2,207     4,320     4,356
 Other                             7,582     6,470    14,990    13,751
                                --------  --------  --------  --------
   Total Operating Expenses       26,885    27,221    53,729    53,979
                                --------  --------  --------  --------
 Income Before Income Taxes       14,210    14,055    28,632    27,489
   Provision for federal income
    taxes                          4,600     4,543     9,351     8,936
                                --------  --------  --------  --------
 Net Income                     $  9,610  $  9,512  $ 19,281  $ 18,553
                                ========  ========  ========  ========
 Net income per share:
  Basic                         $   0.40  $   0.39  $   0.81  $   0.75
  Diluted                           0.40      0.39      0.81      0.75

 Cash dividends per share          0.295     0.285     0.590     0.570

 Average shares outstanding:
  Basic                           23,823    24,644    23,823    24,738
  Diluted                         23,831    24,655    23,829    24,752


 Financial Summary (Unaudited)
 Chemical Financial Corporation

                          Three Months Ended       Six Months Ended
                                June 30                 June 30
 (Dollars in thousands)     2008        2007        2008       2007
 ---------------------------------------------------------------------
 Average Balances
 Total assets           $3,757,238  $3,797,749  $3,774,361  $3,793,283
 Total interest-earning
  assets                 3,530,750   3,566,517   3,546,177   3,560,228
 Total loans             2,827,260   2,796,902   2,813,105   2,797,752
 Total deposits          2,910,357   2,931,977   2,921,693   2,925,820
 Total interest-bearing
  liabilities            2,680,550   2,729,085   2,708,823   2,728,594
 Total shareholders'
  equity                   511,926     510,902     510,079     511,108

                                  Three Months Ended  Six Months Ended
                                        June 30           June 30
                                    2008       2007    2008      2007
 ---------------------------------------------------------------------
 Key Ratios (annualized where
  applicable)
 Net interest margin (taxable
  equivalent basis)                 4.11%      3.70%   4.02%     3.68%
 Efficiency ratio                   55.8%      61.4%   58.0%     62.3%
 Return on average assets           1.03%      1.00%   1.03%     0.99%
 Return on average shareholders'
  equity                             7.6%       7.5%    7.6%      7.3%
 Average shareholders' equity as a
  percent of average assets         13.6%      13.5%   13.5%     13.5%
 Tangible shareholders' equity as
  a percent of total assets                            12.0%     11.6%
 Total risk-based capital ratio                        17.3%     17.5%


                           June 30  March 31  Dec 31  Sept 30  June 30
                             2008     2008     2007     2007     2007
 ---------------------------------------------------------------------
 Credit Quality Statistics
 Nonaccrual loans          $61,635  $61,360  $55,596  $40,341  $36,119
 Loans 90 or more days past
  due and still accruing    10,288   10,570    7,764   13,282   11,704
 Total nonperforming loans  71,923   71,930   63,360   53,623   47,823
 Repossessed assets (RA)    15,897   12,664   11,132    9,164    9,177
 Total nonperforming assets 87,820   84,594   74,492   62,787   57,000
 Net loan charge-offs
  (year-to-date)             8,958    2,460    6,176    2,737    1,969

 Allowance for loan losses
  as a percent of total
  loans                       1.39%    1.42%    1.41%    1.36%    1.30%
 Allowance for loan losses
  as a percent of
  nonperforming loans           55%      55%      62%      72%      76%
 Nonperforming loans as a
  percent of total loans      2.52%    2.58%    2.26%    1.90%    1.71%
 Nonperforming assets as a
  percent of total loans
  plus RA                     3.06%    3.02%    2.65%    2.22%    2.03%
 Nonperforming assets as a
  percent of total assets     2.35%    2.23%    1.98%    1.64%    1.51%
 Net loan charge-offs as a
  percent of average loans
  (year-to-date,
  annualized)                 0.64%    0.35%    0.22%    0.13%    0.14%


                           June 30  March 31  Dec 31  Sept 30  June 30
                             2008     2008     2007     2007     2007
 ---------------------------------------------------------------------
 Additional Data -
  Intangibles
 Goodwill                  $69,908  $69,908  $69,908  $69,908  $69,908
 Core deposit intangibles    3,609    4,062    4,593    5,024    5,455
 Mortgage servicing rights
  (MSR)                      2,354    2,280    2,283    2,300    2,302
 Amortization of core
  deposit intangibles
  (quarter only)               453      531      431      431      430


 Nonperforming Assets (Unaudited)
 Chemical Financial Corporation

                           June 30  March 31  Dec 31  Sept 30  June 30
 (Dollars in thousands)      2008     2008     2007     2007     2007
 ---------------------------------------------------------------------
 Nonaccrual loans:
  Commercial               $10,918  $11,595  $10,961  $ 6,735  $ 5,810
  Real estate commercial    17,915   19,235   19,672   19,664   19,163
  Real estate construction  15,157   17,206   12,979    4,573    4,483
  Real estate residential   11,955    9,267    8,516    7,244    4,967
  Consumer                   5,690    4,057    3,468    2,125    1,696
 ---------------------------------------------------------------------
  Total nonaccrual loans    61,635   61,360   55,596   40,341   36,119
 Accruing loans
  contractually past due
  90 days or more as to
  interest or principal
  payments:
  Commercial                 3,130    1,631    1,958    1,867    1,564
  Real estate commercial     2,948    2,865    4,170    5,367    5,561
  Real estate construction     676      392       --    1,076      884
  Real estate residential    2,746    4,742    1,470    3,918    2,352
  Consumer                     788      940      166    1,054    1,343
 ---------------------------------------------------------------------
  Total accruing loans
   contractually past due
   90 days or more as to
   interest or principal
   payments                 10,288   10,570    7,764   13,282   11,704
 ---------------------------------------------------------------------
 Total nonperforming loans  71,923   71,930   63,360   53,623   47,823
 Other real estate and
  repossessed assets        15,897   12,664   11,132    9,164    9,177
 ---------------------------------------------------------------------
 Total nonperforming
  assets                   $87,820  $84,594  $74,492  $62,787  $57,000
 =====================================================================


 Summary of Loan Loss Experience (Unaudited)
 Chemical Financial Corporation

                                   Three Months Ended
                  -----------------------------------------------------
 (Dollars in      June 30  March 31  Dec 31  Sept 30  June 30  March 31
  thousands)        2008     2008     2007     2007     2007     2007
 ----------------------------------------------------------------------
 Allowance for
  loan losses at
  beginning of
  period          $39,662  $39,422  $38,386  $36,254  $35,016  $34,098
 Provision for
  loan losses       6,500    2,700    4,475    2,900    2,500    1,625

 Loans charged off:
  Commercial       (1,474)    (591)    (550)    (208)    (435)    (429)
  Real estate
   commercial      (3,373)  (1,304)  (1,415)      --     (186)     (74)
  Real estate
   construction    (1,070)     (16)    (850)    (134)    (221)     (67)
  Real estate
   residential       (358)    (245)    (306)     (64)     (96)     (18)
  Consumer           (612)    (540)    (596)    (501)    (488)    (350)
 ----------------------------------------------------------------------
  Total loan
   charge-offs     (6,887)  (2,696)  (3,717)    (907)  (1,426)    (938)
 Recoveries of
  loans previously
  charged off:
  Commercial          228       77       90       18       42       99
  Real estate
   commercial          32       20        1       19       --        1
  Real estate
   construction        --       29       30       --       --       --
  Real estate
   residential          5       22       12        4        1        1
  Consumer            124       88      145       98      121      130
 ----------------------------------------------------------------------
  Total loan
   recoveries         389      236      278      139      164      231
 ----------------------------------------------------------------------
  Net loan
   charge-offs     (6,498)  (2,460)  (3,439)    (768)  (1,262)    (707)
 ---------------------------------------------------------------------
 Allowance for
  loan losses at
  end of period   $39,664  $39,662  $39,422  $38,386  $36,254  $35,016
 ======================================================================

 Selected Quarterly Information (Unaudited)
 Chemical Financial Corporation


 (In thousands, except     2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
  per share data)           2008     2008     2007     2007     2007
 ----------------------------------------------------------------------
 Summary of Operations
 Interest income           $51,508  $53,437  $55,726  $57,157  $57,086
 Interest expense           15,872   19,051   22,304   24,684   24,666
 Net interest income        35,636   34,386   33,422   32,473   32,420
 Provision for loan losses   6,500    2,700    4,475    2,900    2,500
 Net interest income after
  provision for loan
  losses                    29,136   31,686   28,947   29,573   29,920
 Noninterest income         11,959    9,580   10,832   11,057   11,356
 Operating expenses         26,885   26,844   25,522   25,170   27,221
 Income taxes                4,600    4,751    4,411    4,850    4,543
 Net income                 $9,610   $9,671   $9,846  $10,610   $9,512

 ----------------------------------------------------------------------
 Per Common Share Data
 Net income:
  Basic                     $ 0.40   $ 0.41   $ 0.41   $ 0.44   $ 0.39
  Diluted                     0.40     0.41     0.41     0.44     0.39
 Cash dividends              0.295    0.295    0.285    0.285    0.285
 Book value - period-end     21.58    21.60    21.35    21.04    20.79
 Market value - period-end   20.40    23.84    23.79    24.25    25.87
CONTACT:  Chemical Financial Corporation
          Lori A. Gwizdala, CFO
          989 839 5358