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Chemical Financial Corporation Reports Fourth Quarter and Year End 2009 Results

Company Release - 1/25/2010 8:00 AM ET

MIDLAND, Mich., Jan. 25, 2010 (GLOBE NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced fourth quarter 2009 net income of $2.52 million, or $0.11 per diluted share, versus net income of $2.47 million, or $0.10 per diluted share, in the third quarter of 2009 and $1.59 million, or $0.06 per diluted share, in the fourth quarter of 2008.

Net income was $10.0 million, or $0.42 per diluted share, for the twelve months ended December 31, 2009, compared to net income of $19.8 million, or $0.83 per diluted share, for the twelve months ended December 31, 2008.

"Although fourth quarter 2009 performance improved over last year's comparative quarter, we are not yet satisfied with the level of reported earnings," said David B. Ramaker, Chairman, Chief Executive Officer and President of Chemical Financial Corporation. "The primary contributing factors that led to the modest increase in net income were a lower provision for loan losses and higher noninterest income."

"Full year 2009 earnings were driven lower primarily by three factors: a higher provision for loan losses, higher credit related costs and higher FDIC insurance premiums. While we are encouraged by a decline in nonaccrual loans during the last three months of 2009, our focus remains on improving asset quality. We are pursuing every action available to lower nonperforming asset levels, and credit quality issues will continue to be a primary concern in 2010."

"On the other hand, our recently announced agreement to acquire O.A.K. Financial Corporation (OAK), which we anticipate will close in the second quarter of 2010, is reflective of our optimistic long-term outlook for Michigan, in general, and the Grand Rapids market, in particular. The acquisition will enhance our competitive position, branch distribution system and overall capabilities in the Grand Rapids region and increase the number of experienced banking professionals on the Chemical team," noted Ramaker. "When combined with our balance sheet, capital position and strong liquidity, we anticipate the merged organization will become a force in retaining and expanding current relationships, as well as forging new relationships, in the attractive western Michigan market."

Net interest income was $37.2 million in the fourth quarter of 2009, an increase of $0.6 million, or 1.5 percent, from third quarter 2009 net interest income of $36.7 million and a decrease of $1.3 million, or 3.4 percent, from fourth quarter 2008 net interest income of $38.5 million. The slight increase in net interest income in the fourth quarter of 2009, compared to the third quarter of 2009, was attributable to a decline in interest expense between the two quarters, even though average interest-bearing liabilities were $120 million, or 4.0 percent, higher in the fourth quarter. The decrease in net interest income as compared to the prior year's quarter was primarily attributable to a decrease in net interest margin. The net interest margin (on a tax-equivalent basis) in the fourth quarter of 2009 was 3.77 percent, down from 3.83 percent in the third quarter of 2009 and 4.38 percent in the fourth quarter of 2008. The decreases in net interest margin were partially attributable to the Corporation's decision to maintain a higher degree of liquidity coupled with the loss of interest on nonaccrual loans. For the year 2009, net interest income of $147.4 million increased $2.2 million over 2008, due primarily to balance sheet growth.

Total assets were $4.25 billion at December 31, 2009, down slightly from $4.27 billion at September 30, 2009 and up significantly from $3.87 billion at December 31, 2008. At December 31, 2009, total loans were $2.99 billion, versus $3.00 billion at September 30, 2009 and $2.98 billion at December 31, 2008. Investment securities were $724 million at December 31, 2009, up from $645 million at September 30, 2009 and $547 million at December 31, 2008, as additional liquidity from deposit growth was partially invested during 2009.

Total deposits were $3.42 billion at December 31, 2009, up slightly from $3.40 billion at September 30, 2009, and up significantly from $2.98 billion at December 31, 2008. The $439 million, or 15 percent, growth in deposits during 2009 occurred across almost all of the Corporation's deposit account categories, although most predominately in retail certificates of deposit, and has enabled the Corporation to reduce its long-term wholesale borrowings, while also providing additional liquidity to the balance sheet. Long-term wholesale borrowings, comprised of Federal Home Loan Bank advances, totaled $90 million at December 31, 2009, down from $115 million at September 30, 2009 and $135 million at December 31, 2008.

The provision for loan losses was $15.6 million in the fourth quarter of 2009, compared to $14.2 million in the third quarter of 2009 and $18.0 million in the fourth quarter of 2008. Net loan charge-offs were $12.3 million in the fourth quarter of 2009, up from $6.7 million in the third quarter of 2009 and $7.4 million in the fourth quarter of 2008. As part of its ongoing credit portfolio monitoring program, the Corporation makes regular, periodic assessments of the quality of each nonperforming credit, the financial condition of the borrower and the value of any underlying collateral to identify potential loss exposure on nonperforming loans. The increase in net loan charge-offs in the fourth quarter of 2009, compared to the third quarter of 2009, occurred predominantly in the commercial, commercial real estate and construction loan categories and was attributable to a continued decline in the value of commercial real estate and residential development properties.

At December 31, 2009, nonperforming assets totaled $153.3 million, slightly lower than the $157.5 million reported at September 30, 2009 and up from the $113.3 million reported at December 31, 2008. Nonperforming loans were $135.8 million at December 31, 2009, compared to $138.5 million at September 30, 2009 and $93.3 million at December 31, 2008. Nonperforming loan totals at December 31, 2009 included modified residential real estate loans of $17.4 million, which increased $7.9 million during the quarter. Each of these modified loans was current in accordance with their modified terms at December 31, 2009. Beginning in the second quarter of 2009, the Corporation initiated a residential real estate loan modification program designed to help homeowners struggling to meet their Chemical Bank mortgage obligations stay in their homes. At December 31, 2009, nonperforming loans as a percentage of total loans were 4.54 percent, down slightly from 4.61 percent at September 30, 2009 and up substantially from 3.13 percent at December 31, 2008. Nonaccrual loans declined $13.6 million, or 11.3 percent, in the fourth quarter of 2009 to $106.6 million at December 31, 2009 from $120.2 million at September 30, 2009. Other real estate and repossessed assets declined to $17.5 million at December 31, 2009 from $19.1 million at September 30, 2009 and $19.9 million at December 31, 2008.

The allowance for loan losses was $80.8 million at December 31, 2009, up $3.4 million, or 4.3 percent, from $77.5 million at September 30, 2009 and up $23.8 million, or 41.7 percent, from $57.1 million at December 31, 2008. The allowance for loan losses at December 31, 2009 was 2.70 percent of total loans, up from 2.58 percent of total loans at September 30, 2009 and 1.91 percent of total loans at December 31, 2008. The allowance for loan losses as a percent of nonperforming loans was 60 percent at December 31, 2009, up from 56 percent at September 30, 2009, but down slightly from 61 percent at December 31, 2008.

Total noninterest income was $10.2 million in the fourth quarter of 2009, up $0.1 million from $10.1 million in the third quarter of 2009 and up $0.6 million, or 6.3 percent, from $9.6 million in the fourth quarter of 2008. The Corporation experienced modest declines in a number of noninterest income categories during the fourth quarter of 2009, compared to the third quarter of 2009, although they were slightly more than offset by increases in debit card and mortgage banking revenue. The increase in the fourth quarter of 2009 over the prior year's fourth quarter was primarily attributable to increases in mortgage banking revenue and other charges and fees for customer services, partially offset by declines in trust and investment services revenue.

Operating expenses in the fourth quarter of 2009 were $28.8 million, down $0.8 million from the third quarter of 2009, and up $0.2 million from the fourth quarter of 2008. Fourth quarter 2009 operating expenses included $0.8 million of professional expenses related to the announced merger transaction and $2.8 million of credit related costs, which were $0.9 million higher than the third quarter of 2009. The merger related costs and higher credit related costs in the fourth quarter of 2009 were more than offset by reductions in employee benefit expenses and advertising and marketing costs and the reversal of contingent tax reserves recorded for the Michigan Single Business Tax which were no longer required. For the full year of 2009, total operating expenses were $117.6 million, an $8.5 million, or 7.8 percent, increase over total operating expenses of $109.1 million in 2008. The increase in operating expenses during 2009 was largely driven by higher FDIC premiums and credit related costs and $0.8 million of merger related expenses. FDIC premiums were $7.0 million in 2009, $6.1 million higher than in 2008, while loan collection costs of $9.1 million in 2009 were $2.8 million higher than in 2008. These increases in operating expenses were partially offset by reductions in a number of operating expense categories, including professional fees, intangible asset amortization and miscellaneous non-loan losses. The Corporation's efficiency ratio was 59.8 percent in the fourth quarter of 2009, down from 62.3 percent in the third quarter of 2009 and up from 58.7 percent in the fourth quarter of 2008. The decrease in the efficiency ratio from the third quarter of 2009 was attributable to the decrease in operating expenses.

The Corporation's return on average assets during the fourth quarter of 2009 was 0.24 percent, unchanged from the third quarter of 2009 and up from 0.17 percent in the fourth quarter of 2008. At December 31, 2009, the Corporation's book value stood at $19.85 per share versus $20.58 per share at December 31, 2008.

As previously disclosed, on January 8, 2010, the Corporation announced that it would acquire OAK in an all stock transaction in which each share of OAK will be exchanged for 1.306 shares of Chemical's common stock. Total projected shares to be issued in the transaction are 3.5 million, subject to adjustment in certain limited circumstances. The transaction is expected to be accretive to earnings in 2011. Excluding estimated acquisition-related and integration costs, the Corporation expects the transaction to be accretive to operating results in 2010.

Chemical Financial Corporation is the third-largest bank holding company headquartered in Michigan. The Corporation operates through a single subsidiary bank, Chemical Bank, with 129 banking offices spread over 31 counties in the lower peninsula of Michigan. At December 31, 2009, the Corporation had total assets of $4.3 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.

SAFE HARBOR STATEMENT

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. This press release also contains forward-looking statements regarding Chemical's outlook or expectations with respect to the planned acquisition of OAK, the expected costs to be incurred in connection with the acquisition, OAK's future performance and consequences of its integration into Chemical and the impact of the transaction on Chemical's future performance. 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, the carrying value of goodwill and mortgage servicing rights and the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary) and management's assumptions concerning pension and other post retirement benefit plans involve judgments that are inherently forward-looking. The future effect of changes in the financial and credit markets and the national and regional economy on the banking industry, generally, and on Chemical Financial 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. 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, 2008; the risk factors described in Item 1A in OAK's Annual Report on Form 10-K for the year ended December 31, 2008; the timing and level of asset growth; changes in market interest rates; 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 current and future military actions, 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.

Risk factors also include, but are not limited to, risks and uncertainties related both to the proposed acquisition of OAK and to the integration of the acquired business into Chemical after closing, including:

Completion of the transaction is dependent on, among other things, receipt of regulatory and OAK shareholder 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 Chemical's financial statements will be affected by the timing of the transaction, including in particular the ability to complete the acquisition in the second quarter of 2010.

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.

Chemical's ability to achieve anticipated results from the transaction is dependent on the state of the economic and financial markets going forward, which have been under significant stress recently. Specifically, Chemical may incur more credit losses from OAK's loan portfolio than expected and deposit attrition may be greater than expected.

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

ADDITIONAL INFORMATION ABOUT THE CHEMICAL/OAK TRANSACTION

Chemical will file a registration statement with the Securities and Exchange Commission (SEC) to register the securities that the OAK shareholders will receive if the merger is consummated. The registration statement will contain a prospectus and proxy statement and other relevant documents concerning the merger. Investors are urged to read the registration statement, the prospectus and proxy statement, and any other relevant documents when they become available because they will contain important information about Chemical, OAK, and the merger. Investors will be able to obtain the documents free of charge at the SEC's website, www.sec.gov.

The proposed transaction will be submitted to the shareholders of OAK for their consideration and approval. In connection with the proposed transaction, OAK will be filing a proxy statement and other relevant documents to be distributed to the shareholders of OAK. Investors are urged to read the proxy statement regarding the proposed transaction when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. Investors will be able to obtain a free copy of the proxy statement, as well as other filings containing information about Chemical and OAK, free of charge from the SEC's website (www.sec.gov), by contacting Chemical Financial Corporation, 333 East Main Street, P.O. Box 569, Midland, MI 48640-0569, Attention: Ms. Lori A. Gwizdala, Investor Relations, telephone 800-867-9757 or by contacting O.A.K. Financial Corporation, 2445 84th Street, SW, Byron Center, MI 49315, Attention: Mr. James A. Luyk, Investor Relations, telephone 616-588-7419. INVESTORS SHOULD READ THE PROXY STATEMENT AND OTHER DOCUMENTS TO BE FILED WITH THE SEC CAREFULLY BEFORE MAKING A DECISION CONCERNING THE TRANSACTION.

OAK and its directors, executive officers, and certain other members of management and employees may be soliciting proxies from OAK shareholders in favor of the transaction. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of OAK shareholders in connection with the proposed transaction will be set forth in the proxy statement when it is filed with the SEC. You can find information about OAK's executive officers and directors in its most recent proxy statement filed with the SEC, which is available at the SEC's website (www.sec.gov). You can also obtain free copies of these documents from Chemical or OAK, as appropriate, using the contact information above.

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

  Consolidated Statements of
   Financial Position
   (Unaudited)
  Chemical Financial
   Corporation


                                December    December
                                   31          31

  (In thousands, except per
   share data)                    2009        2008
  ---------------------------  ----------  ----------
  Assets:
  Cash and cash equivalents:
    Cash and cash due from
     banks                       $131,383    $168,650
    Interest-bearing deposits
     with unaffiliated banks
     and others                   229,326       4,572
     Total Cash and Cash       ----------  ----------
      Equivalents                 360,709     173,222
  Investment securities:
    Available-for-sale            592,521     449,947
    Held-to-maturity              131,297      97,511
     Total Investment          ----------  ----------
      Securities                  723,818     547,458
  Other securities                 22,128      22,128
  Loans held for sale               8,362       8,463

  Loans:
    Commercial                    584,286     587,554
    Real estate commercial        785,675     786,404
    Real estate construction      121,305     119,001
    Real estate residential       739,380     839,555
    Consumer                      762,514     649,163
                               ----------  ----------
     Total Loans                2,993,160   2,981,677
    Allowance for loan losses    (80,841)    (57,056)
                               ----------  ----------
     Net Loans                  2,912,319   2,924,621

  Premises and equipment           53,934      53,036
  Goodwill                         69,908      69,908
  Other intangible assets           5,408       5,241
  Interest receivable and
   other assets                    94,126      70,236
                               ----------  ----------

     Total Assets              $4,250,712  $3,874,313
                               ==========  ==========

  Liabilities:
  Deposits:
    Noninterest-bearing          $573,159    $524,464
    Interest-bearing            2,844,966   2,454,328
                               ----------  ----------
     Total Deposits             3,418,125   2,978,792
  Interest payable and other
   liabilities                     27,708      35,214
  Short-term borrowings           240,568     233,738
  Federal Home Loan Bank
   advances                        90,000     135,025
                               ----------  ----------
     Total Liabilities          3,776,401   3,382,769

  Shareholders' Equity:
    Preferred stock, no par
     value per share                   --          --
    Common stock, $1 par
     value per share               23,891      23,881
    Surplus                       347,676     346,916
    Retained earnings             115,391     133,578
    Accumulated other
     comprehensive loss          (12,647)    (12,831)
                               ----------  ----------
     Total Shareholders'
      Equity                      474,311     491,544
                               ----------  ----------
     Total Liabilities and
      Shareholders' Equity     $4,250,712  $3,874,313
                               ==========  ==========

  Chemical Financial Corporation
   Announces Fourth Quarter
   Operating Results
  ------------------------------
  Consolidated Statements of
   Income (Unaudited)
  Chemical Financial Corporation

                                        Three Months       Twelve Months
                                           Ended               Ended
                                        December 31        December 31

  (In thousands, except per
   share data)                         2009     2008      2009      2008
  ------------------------------     --------  -------  --------  --------
  Interest Income:
  Interest and fees on loans          $43,309  $45,357  $172,388  $180,629
  Interest on investment
   securities:
    Taxable                             3,332    5,148    15,385    21,793
    Tax-exempt                            964      762     3,596     2,882
  Dividends on other securities           259      372       821     1,167
  Interest on federal funds sold           --       56        --     1,666
  Interest on deposits with
   unaffiliated banks and others          196        8       541       199
                                     --------  -------  --------  --------
     Total Interest Income             48,060   51,703   192,731   208,336

  Interest Expense:
  Interest on deposits                  9,583   11,716    39,500    54,763
  Interest on short-term
   borrowings                             183      281       906     2,223
  Interest on Federal Home Loan
   Bank advances                        1,081    1,195     4,881     6,097
                                     --------  -------  --------  --------

    Total Interest Expense             10,847   13,192    45,287    63,083
                                     --------  -------  --------  --------
    Net Interest Income                37,213   38,511   147,444   145,253
  Provision for loan losses            15,600   18,000    59,000    49,200
                                     --------  -------  --------  --------
    Net Interest Income after
     Provision for Loan Losses         21,613   20,511    88,444    96,053

  Noninterest Income:
  Service charges on deposit
   accounts                             4,911    4,951    19,116    20,048
  Trust and investment services
   revenue                              2,218    2,517     9,273    10,625
  Other charges and fees for
   customer services                    1,970    1,658     7,736     6,894
  Mortgage banking revenue                960      428     4,412     1,836
  Investment securities gains              --       --        95     1,722
  Other-than-temporary
   impairment writedown of
   investment security                     --       --        --     (444)
  Other                                   153       50       487       516
                                     --------  -------  --------  --------
     Total Noninterest Income          10,212    9,604    41,119    41,197

  Operating Expenses:
  Salaries, wages and employee
   benefits                            14,353   14,863    60,218    59,227
  Occupancy                             2,748    2,619    10,359    10,221
  Equipment                             2,582    2,564     9,723     9,230

  Other                                 9,124    8,583    37,310    30,430
                                     --------  -------  --------  --------

     Total Operating Expenses          28,807   28,629   117,610   109,108
                                     --------  -------  --------  --------
  Income Before Income Taxes            3,018    1,486    11,953    28,142
     Federal Income Tax Expense
      (Benefit)                           500    (100)     1,950     8,300
                                     --------  -------  --------  --------

  Net Income                           $2,518   $1,586   $10,003   $19,842
                                     ========  =======  ========  ========

  Net income per common share:
    Basic                               $0.11    $0.06     $0.42     $0.83
    Diluted                              0.11     0.06      0.42      0.83

  Cash dividends per common
   share                                0.295    0.295     1.180     1.180

  Average common shares
   outstanding:
    Basic                              23,890   23,878    23,890    23,840
    Diluted                            23,914   23,894    23,909    23,853


     Chemical Financial Corporation
   Announces Fourth Quarter Operating
                Results
  -----------------------------------
  Financial Summary (Unaudited)
  Chemical Financial Corporation
                                                   Three Months Ended     Twelve Months Ended
                                                      December 31             December 31

  (Dollars in thousands)                            2009        2008        2009        2008
  -----------------------------------            ----------  ----------  ----------  ----------
  Average Balances
  Total assets                                   $4,221,031  $3,807,132  $4,066,229  $3,784,617
  Total interest-earning assets                   4,014,422   3,567,966   3,847,006   3,550,611
  Total loans                                     3,005,554   2,959,360   2,980,126   2,866,102
  Total deposits                                  3,363,967   2,930,089   3,195,411   2,924,361
  Total interest-bearing liabilities              3,156,993   2,738,703   3,002,050   2,711,413
  Total shareholders' equity                        475,384     503,758     483,034     509,100

                                                   Three Months Ended     Twelve Months Ended
                                                      December 31             December 31

                                                    2009        2008        2009        2008
  -----------------------------------            ----------  ----------  ----------  ----------
  Key Ratios (annualized where
   applicable)
  Net interest margin (taxable
   equivalent basis)                                  3.77%       4.38%       3.91%       4.16%
  Efficiency ratio                                    59.8%       58.7%       61.4%       57.8%
  Return on average assets                            0.24%       0.17%       0.25%       0.52%
  Return on average shareholders'
   equity                                              2.1%        1.3%        2.1%        3.9%
  Average shareholders' equity as a
   percent of average assets                          11.3%       13.2%       11.9%       13.5%
  Tangible shareholders' equity as a
   percent of total assets                                                     9.6%       11.0%
  Total risk-based capital ratio                                              15.5%       16.4%

                                        Dec 31    Sept 30     June 30     March 31     Dec 31

                                         2009       2009        2009        2009        2008
  -----------------------------------  --------  ----------  ----------  ----------  ----------
  Credit Quality Statistics
  Nonaccrual loans                     $106,589    $120,186    $109,944     $94,737     $76,466
  Loans 90 or more days past due and
   still accruing                        11,733       8,699      10,502      10,240      16,862
  Loans modified under troubled debt
   restructurings                        17,433       9,567       3,981          --          --
  Total nonperforming loans             135,755     138,452     124,427     104,977      93,328
  Repossessed assets (RA)                17,540      19,067      18,344      20,688      19,923
  Total nonperforming assets            153,295     157,519     142,771     125,665     113,251
  Net loan charge-offs (year-to-date)    35,215      22,965      16,300       8,494      31,566

  Allowance for loan losses as a
   percent of total loans                 2.70%       2.58%       2.35%       2.12%       1.91%
  Allowance for loan losses as a
   percent of nonperforming loans           60%         56%         56%         60%         61%
  Nonperforming loans as a percent of
   total loans                            4.54%       4.61%       4.18%       3.56%       3.13%
  Nonperforming assets as a percent
   of total loans plus RA                 5.09%       5.21%       4.77%       4.23%       3.77%
  Nonperforming assets as a percent
   of total assets                        3.61%       3.69%       3.57%       3.16%       2.92%
  Net loan charge-offs as a percent
   of average loans (year-to-date,
   annualized)                            1.18%       1.03%       1.10%       1.15%       1.10%

                                        Dec 31    Sept 30     June 30     March 31     Dec 31

                                         2009       2009        2009        2009        2008
  -----------------------------------  --------  ----------  ----------  ----------  ----------
  Additional Data - Intangibles
  Goodwill                              $69,908     $69,908     $69,908     $69,908     $69,908
  Core deposit intangibles                2,331       2,480       2,629       2,847       3,050
  Mortgage servicing rights (MSR)         3,077       2,997       2,869       2,377       2,191
  Amortization of core deposit
   intangibles (quarter only)               149         149         217         203         216
  Chemical Financial
   Corporation Announces Fourth
   Quarter Operating Results
  -----------------------------
  Nonperforming Assets
   (Unaudited)
  Chemical Financial
   Corporation
                                  Dec 31    Sept 30   June 30  March 31   Dec 31

  (Dollars in thousands)           2009      2009      2009      2009      2008
  -----------------------------  --------  --------  --------  --------  --------
  Nonaccrual loans:
    Commercial                    $19,309   $21,379   $20,371   $16,419   $16,324
    Real estate commercial         49,419    58,930    50,067    41,826    27,344
    Real estate construction       15,184    18,196    17,935    18,504    15,310
    Real estate residential        15,508    15,739    15,905    12,803    12,175
    Consumer                        7,169     5,942     5,666     5,185     5,313
                                 --------  --------  --------  --------  --------
    Total nonaccrual loans        106,589   120,186   109,944    94,737    76,466
  Accruing loans contractually
   past due 90 days or more as
   to interest or principal
   payments:
    Commercial                      1,371     1,073     1,201     2,581     1,652
    Real estate commercial          3,971     2,138     1,542     4,352     9,995
    Real estate construction        1,990       675       259       538       759
    Real estate residential         3,614     3,839     6,236     1,699     3,369

    Consumer                          787       974     1,264     1,070     1,087
                                 --------  --------  --------  --------  --------
    Total accruing loans
     contractually past due 90
     days or more as to
     interest or principal
     payments                      11,733     8,699    10,502    10,240    16,862
  Loans modified under troubled
   debt restructurings             17,433     9,567     3,981        --        --
                                 --------  --------  --------  --------  --------
  Total nonperforming loans       135,755   138,452   124,427   104,977    93,328
  Other real estate and
   repossessed assets              17,540    19,067    18,344    20,688    19,923
                                 --------  --------  --------  --------  --------

  Total nonperforming assets     $153,295  $157,519  $142,771  $125,665  $113,251
                                 --------  --------  --------  --------  --------
  Chemical Financial Corporation Announces Fourth
   Quarter Operating Results
  -----------------------------------------------

  Summary of Loan Loss
   Experience (Unaudited)
  Chemical Financial
   Corporation


                                             Three Months Ended
                                --------------------------------------------
                                                             March
                                 Dec 31   Sept 30  June 30     31     Dec 31

  (Dollars in thousands)          2009     2009     2009     2009     2008
  ----------------------------  --------  -------  -------  -------  -------
  Allowance for loan losses at
   beginning of period           $77,491  $69,956  $62,562  $57,056  $46,412
  Provision for loan losses       15,600   14,200   15,200   14,000   18,000

  Loans charged off:
    Commercial                   (3,636)  (1,786)  (3,289)  (3,290)  (3,254)
    Real estate commercial       (3,009)  (1,703)  (1,930)  (2,589)  (1,645)
    Real estate construction     (3,633)    (874)    (762)  (1,700)    (954)
    Real estate residential      (1,070)  (1,346)  (1,043)    (235)  (1,106)
    Consumer                     (1,998)  (1,996)  (1,544)  (1,253)  (1,811)
                                --------  -------  -------  -------  -------
    Total loan charge-offs      (13,346)  (7,705)  (8,568)  (9,067)  (8,770)
  Recoveries of loans
   previously charged off:
    Commercial                       220      349      130      205    1,094
    Real estate commercial            91       91      226       87       11
    Real estate construction         261       46       --       --       --
    Real estate residential          174      231      127       82       83

    Consumer                         350      323      279      199      226
                                --------  -------  -------  -------  -------

    Total loan recoveries          1,096    1,040      762      573    1,414
                                --------  -------  -------  -------  -------

    Net loan charge-offs        (12,250)  (6,665)  (7,806)  (8,494)  (7,356)
                                --------  -------  -------  -------  -------
  Allowance for loan losses at
   end of period                 $80,841  $77,491  $69,956  $62,562  $57,056
                                --------  -------  -------  -------  -------



  Chemical Financial Corporation Announces Fourth
   Quarter Operating Results
  -----------------------------------------------------
  Selected Quarterly Information
   (Unaudited)
  Chemical Financial
   Corporation

                                4th      3rd      2nd      1st      4th
                               Qtr.     Qtr.     Qtr.     Qtr.     Qtr.

  (In thousands, except per
   share data)                 2009     2009     2009     2009     2008
  --------------------------  -------  -------  -------  -------  -------
  Summary of Operations
  Interest income             $48,060  $48,066  $48,283  $48,322  $51,703

  Interest expense             10,847   11,403   11,305   11,732   13,192
                              -------  -------  -------  -------  -------
  Net interest income          37,213   36,663   36,978   36,590   38,511

  Provision for loan losses    15,600   14,200   15,200   14,000   18,000
                              -------  -------  -------  -------  -------
  Net interest income after
   provision for loan losses   21,613   22,463   21,778   22,590   20,511
  Noninterest income           10,212   10,092   10,958    9,857    9,604

  Operating expenses           28,807   29,582   30,016   29,205   28,629
                              -------  -------  -------  -------  -------
  Income before income taxes    3,018    2,973    2,720    3,242    1,486
  Federal income tax expense
   (benefit)                      500      500      426      524    (100)
                              -------  -------  -------  -------  -------

  Net income                   $2,518   $2,473   $2,294   $2,718   $1,586
                              =======  =======  =======  =======  =======


  --------------------------
  Per Common Share Data
  Net income:
    Basic                       $0.11    $0.10    $0.10    $0.11    $0.06
    Diluted                      0.11     0.10     0.10     0.11     0.06
  Cash dividends                0.295    0.295    0.295    0.295    0.295
  Book value - period-end       19.85    20.06    20.23    20.40    20.58
  Market value - period-end     23.58    21.79    19.91    20.81    27.88
CONTACT:  Chemical Financial Corporation
          David B. Ramaker, CEO
          Lori A. Gwizdala, CFO
          989-839-5350