MIDLAND, Mich., July 27, 2009 (GLOBE NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced 2009 second quarter net income of $2.3 million, or $0.10 per diluted share, versus net income of $9.6 million, or $0.40 per diluted share, in the second quarter of 2008.
Net income was $5.0 million, or $0.21 per diluted share, for the six months ended June 30, 2009, compared to net income of $19.3 million, or $0.81 per diluted share, for the six months ended June 30, 2008.
"Although we remain profitable, loan loss provisioning, credit related costs and increased FDIC premiums depressed second quarter earnings, as Michigan's ongoing recession continued to negatively impact virtually all segments of our customer base. In the quarter, we recorded a $15.2 million provision for loan losses, as we incurred net loan charge-offs of $7.8 million in the quarter and increased our allowance for loan losses an additional $7.4 million," said David B. Ramaker, Chairman, Chief Executive Officer & President. "This increase in our allowance for loan losses was precipitated primarily by an increase in nonperforming loans during the quarter."
"Our capital levels and liquidity bear witness to our financial strength and stability, which have enabled us to pursue quality opportunities for growth in consumer loans, real estate residential loan originations and deposits despite the challenging economic environment. Since the year began, our consumer lending portfolio has grown by $100 million, which is approximately a 30 percent annualized rate of growth. Extensive opportunities in indirect consumer lending due to a combination of an increased sales effort, new technology to support indirect loan application processing and a reduction in the number of competing lenders has facilitated this growth. Similarly, deposit growth has been strong, with total deposits up 8.4 percent in the past twelve months. As credit concerns ease and the economy recovers, the Company intends to increasingly deploy these deposits into loans, which we believe will translate into improved earnings performance."
"Due in part to our strong capital levels, which we are committed to maintaining, we remain well positioned to capitalize on other growth opportunities that may present themselves, and we will continue to take a strong leadership position in meeting the needs of the communities we serve," added Ramaker.
Net interest income was $37.0 million in the second quarter of 2009, an increase of $1.4 million, or 3.8 percent, from second quarter 2008 net interest income of $35.6 million and an increase of $0.4 million, or 1.1 percent, from first quarter 2009 net interest income of $36.6 million. These increases resulted primarily from improved income from growth in earning assets outpacing declines in net interest margin. The net interest margin (on a tax-equivalent basis) in the second quarter of 2009 was 4.00 percent, down slightly from 4.11 percent in the second quarter of 2008 and from 4.06 percent in the first quarter of 2009. The decrease in the net interest margin was largely attributable to a higher proportion of earning assets being invested in lower rate-yielding assets. In general, this shift in earning asset mix was attributable to a lack of quality business lending opportunities under current economic conditions and a reduction in the residential loan portfolio, which resulted in the Company investing funds received as the result of relationship-based deposit growth into lower earning asset classes, such as securities and overnight investments.
Total assets were $4.00 billion at June 30, 2009, up from $3.87 billion at December 31, 2008 and from $3.74 billion at June 30, 2008. At June 30, 2009, total loans were $2.98 billion, versus $2.98 billion at December 31, 2008 and $2.85 billion at June 30, 2008. As previously mentioned, in the current economic environment, the Company is challenged in finding adequate high quality commercial and retail loan opportunities to maintain and grow certain segments of its loan portfolio. The Company experienced a $66.4 million, or 7.9 percent, decline in the residential loan portfolio during the six months ended June 30, 2009. This decline was primarily attributable to the historically low fixed mortgage interest rates that have been prevalent throughout 2009. As adjustable rate portfolio loans refinanced into fixed rate products, the Company sold the majority of fixed rate loans it originated during the six months ended June 30, 2009 into the secondary market, while retaining servicing rights on the majority of the loans sold; resulting in an increase in mortgage banking revenue. Investment securities were $637 million at June 30, 2009, up substantially from $547 million at December 31, 2008 and up from $589 million at June 30, 2008.
Total deposits were $3.13 billion at June 30, 2009, up from $2.98 billion at December 31, 2008 and from $2.89 billion at June 30, 2008. The strong deposit growth over the past year was attributable, in part, to the Company's ongoing efforts to enhance and build customer relationships. Long-term wholesale borrowings, comprised of Federal Home Loan Bank advances, totaled $115 million at June 30, 2009, down $20 million, or 15 percent, from $135 million at December 31, 2008 and down $15 million, or 12 percent, from $130 million at June 30, 2008.
The provision for loan losses was $15.2 million in the second quarter of 2009, compared to $14.0 million in the first quarter of 2009 and $6.5 million in the second quarter of 2008. Net loan charge-offs were $7.8 million in the second quarter of 2009, down from $8.5 million in the first quarter of 2009, although up from $6.5 million in the second quarter of 2008.
At June 30, 2009, nonperforming assets totaled $142.8 million, up from $125.7 million at March 31, 2009 and $87.8 million at June 30, 2008. Nonperforming loans were $124.4 million at June 30, 2009, up from $105.0 million at March 31, 2009, with the increase attributable primarily to increases in the commercial, real estate commercial and real estate residential categories. At June 30, 2009, nonperforming loans as a percentage of total loans were 4.18 percent, up from 3.56 percent at March 31, 2009 and up from 2.52 percent at June 30, 2008.
The allowance for loan losses of $70.0 million at June 30, 2009 was 2.35 percent of total loans, up from 2.12 percent of total loans at March 31, 2009 and up from 1.39 percent of total loans at June 30, 2008. The allowance for loan losses as a percent of nonperforming loans was 56 percent at June 30, 2009, compared to 60 percent at March 31, 2009, and 55 percent at June 30, 2008. The Company's nonperforming loans at June 30, 2009 included commercial, real estate commercial and residential development construction loans, totaling $48.6 million, which have been analyzed and deemed to be adequately collateralized so as not to require a valuation allowance.
Total noninterest income was $11.0 million in the second quarter of 2009, up $1.1 million, or 11.2 percent, from the first quarter of 2009, although down $1.0 million, or 8.4 percent, from the second quarter of 2008. The increase in noninterest income in the second quarter of 2009, compared to the first quarter of 2009, was primarily attributable to increases in both service charges on deposit accounts and mortgage banking revenue. The decrease from the prior year was primarily attributable to the realization of a $1.7 million gain on the sale of MasterCard stock in the second quarter of 2008. As compared to the second quarter of 2008, in the second quarter of 2009 the Company saw strong increases in mortgage banking revenue, which were partially offset by declines in trust and investment services revenue due primarily to declines in the value of trust assets.
Operating expenses of $30.0 million in the second quarter of 2009 were up $0.8 million, or 2.8 percent, from the first quarter of 2009 and up $3.1 million, or 11.6 percent, from the second quarter of 2008. FDIC insurance premiums were $3.1 million in the second quarter of 2009, up from $1.2 million in the first quarter of 2009, and up substantially from $0.2 million in the second quarter of 2008. The premium in the second quarter of 2009 included a FDIC industry-wide special assessment of $1.8 million for the Company. The FDIC has notified banks that it is probable another special assessment may be assessed in the fourth quarter of 2009. Loan collection expenses and costs related to the Company's nonperforming assets totaled $2.3 million in the second quarter of 2009, compared to $2.2 million in the first quarter of 2009 and $1.1 million in the second quarter of 2008. Employee benefit costs were $0.8 million lower in the second quarter of 2009 than in the first quarter of 2009 due largely to an experience rated reduction in group health costs during the quarter.
The Company's return on average assets during the second quarter of 2009 was 0.23 percent, down from 0.28 percent in the first quarter of 2009 and down from 1.03 percent in the second quarter of 2008. The decrease in return on assets resulted in a decrease in return on average equity to 1.9 percent in the second quarter of 2009 from 7.6 percent in the second quarter of 2008. At June 30, 2009, the Company's book value stood at $20.23 per share versus $21.58 per share at June 30, 2008.
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, 2009, the Company had total assets of $4.0 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 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, 2008; 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.
Chemical Financial Corporation Announces Second Quarter Operating Results
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Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
(In thousands, except per June 30 Dec. 31 June 30
share data) 2009 2008 2008
---------------------------------------------------------------------
Assets:
Cash and cash equivalents:
Cash and cash due from banks $ 88,210 $ 168,650 $ 110,050
Federal funds sold -- -- 8,000
Interest-bearing deposits with
unaffiliated banks and others 119,413 4,572 4,827
----------- ----------- -----------
Total Cash and Cash
Equivalents 207,623 173,222 122,877
Investment securities:
Available-for-sale 492,096 449,947 477,910
Held-to-maturity 144,556 97,511 111,579
----------- ----------- -----------
Total Investment Securities 636,652 547,458 589,489
Other securities 22,128 22,128 22,142
Loans held for sale 26,008 8,463 7,571
Loans:
Commercial 560,187 587,554 539,086
Real estate commercial 774,881 786,404 776,505
Real estate construction 119,674 119,001 130,079
Real estate residential 773,126 839,555 824,588
Consumer 749,032 649,163 580,203
----------- ----------- -----------
Total Loans 2,976,900 2,981,677 2,850,461
Allowance for loan losses (69,956) (57,056) (39,664)
----------- ----------- -----------
Net Loans 2,906,944 2,924,621 2,810,797
Premises and equipment 52,578 53,036 49,164
Goodwill 69,908 69,908 69,908
Other intangible assets 5,498 5,241 5,963
Interest receivable and other
assets 71,417 70,236 59,943
----------- ----------- -----------
Total Assets $3,998,756 $3,874,313 $3,737,854
=========== =========== ===========
Liabilities:
Deposits:
Noninterest-bearing $ 551,060 $ 524,464 $ 552,550
Interest-bearing 2,579,367 2,454,328 2,334,409
----------- ----------- -----------
Total Deposits 3,130,427 2,978,792 2,886,959
Interest payable and other
liabilities 36,329 35,214 21,207
Short-term borrowings 233,674 233,738 185,472
Federal Home Loan Bank
advances - long-term 115,000 135,025 130,025
----------- ----------- -----------
Total Liabilities 3,515,430 3,382,769 3,223,663
Shareholders' Equity:
Common stock, $1 par value
per share 23,890 23,881 23,823
Surplus 347,447 346,916 345,117
Retained earnings 124,496 133,578 147,092
Accumulated other
comprehensive loss (12,507) (12,831) (1,841)
----------- ----------- -----------
Total Shareholders' Equity 483,326 491,544 514,191
----------- ----------- -----------
Total Liabilities and
Shareholders' Equity $3,998,756 $3,874,313 $3,737,854
=========== =========== ===========
Chemical Financial Corporation Announces Second Quarter Operating Results
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Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
Three Months Six Months
(In thousands, except Ended June 30 Ended June 30
per share data) 2009 2008 2009 2008
---------------------------------------------------------------------
Interest Income:
Interest and fees on loans $42,997 $44,491 $85,790 $ 90,061
Interest on investment
securities:
Taxable 4,024 5,473 8,526 11,312
Tax-exempt 893 687 1,670 1,382
Dividends on other securities 267 390 430 584
Interest on federal funds sold -- 412 -- 1,430
Interest on deposits with
unaffiliated banks and others 102 55 189 176
-------- -------- -------- --------
Total Interest Income 48,283 51,508 96,605 104,945
Interest Expense:
Interest on deposits 9,808 13,734 19,975 30,061
Interest on short-term
borrowings 239 501 472 1,460
Interest on Federal Home Loan
Bank advances - long-term 1,258 1,637 2,590 3,402
-------- -------- -------- --------
Total Interest Expense 11,305 15,872 23,037 34,923
-------- -------- -------- --------
Net Interest Income 36,978 35,636 73,568 70,022
Provision for loan losses 15,200 6,500 29,200 9,200
-------- -------- -------- --------
Net Interest Income after
Provision for Loan Losses 21,778 29,136 44,368 60,822
Noninterest Income:
Service charges on deposit
accounts 4,781 5,007 9,256 9,781
Trust and investment services
revenue 2,374 2,838 4,749 5,492
Other charges and fees for
customer services 1,994 1,713 3,795 3,309
Mortgage banking revenue 1,462 524 2,612 1,060
Investment securities gains 95 1,716 95 1,716
Other 252 161 308 181
-------- -------- -------- --------
Total Noninterest Income 10,958 11,959 20,815 21,539
Operating Expenses:
Salaries, wages and employee
benefits 14,683 14,810 30,100 29,289
Occupancy 2,407 2,360 5,114 5,130
Equipment 2,364 2,133 4,706 4,320
Other 10,562 7,582 19,301 14,990
-------- -------- -------- --------
Total Operating Expenses 30,016 26,885 59,221 53,729
-------- -------- -------- --------
Income Before Income Taxes 2,720 14,210 5,962 28,632
Federal Income Tax Expense 426 4,600 950 9,351
-------- -------- -------- --------
Net Income $ 2,294 $ 9,610 $ 5,012 $ 19,281
======== ======== ======== ========
Net income per share:
Basic $ 0.10 $ 0.40 $ 0.21 $ 0.81
Diluted 0.10 0.40 0.21 0.81
Cash dividends per share 0.295 0.295 0.590 0.590
Average shares outstanding:
Basic 23,890 23,823 23,890 23,823
Diluted 23,908 23,831 23,904 23,829
Chemical Financial Corporation Announces Second Quarter Operating Results
-------------------------------------------------------------------------
Financial Summary (Unaudited)
Chemical Financial Corporation
Three Months Ended Six Months Ended
June 30 June 30
(Dollars in thousands) 2009 2008 2009 2008
---------------------------------------------------------------------
Average Balances
Total assets $4,001,155 $3,757,238 $3,964,318 $3,774,361
Total interest-earning
assets 3,776,766 3,530,750 3,737,963 3,546,177
Total loans 2,968,039 2,827,260 2,964,528 2,813,105
Total deposits 3,130,678 2,910,357 3,089,126 2,921,693
Total interest-bearing
liabilities 2,926,290 2,680,550 2,905,601 2,708,823
Total shareholders'
equity 488,765 511,926 488,432 510,079
Three Months Ended Six Months Ended
June 30 June 30
2009 2008 2009 2008
---------------------------------------------------------------------
Key Ratios (annualized
where applicable)
Net interest margin
(taxable equivalent
basis) 4.00% 4.11% 4.03% 4.02%
Efficiency ratio 61.7% 55.8% 61.9% 58.0%
Return on average
assets 0.23% 1.03% 0.25% 1.03%
Return on average
shareholders' equity 1.9% 7.6% 2.1% 7.6%
Average shareholders'
equity as a percent
of average assets 12.2% 13.6% 12.3% 13.5%
Tangible shareholders'
equity as a percent
of total assets 10.5% 12.0%
Total risk-based
capital ratio 16.0% 17.3%
June 30 March 31 Dec 31 Sept 30 June 30
2009 2009 2008 2008 2008
---------------------------------------------------------------------
Credit Quality
Statistics
Nonaccrual loans $109,944 $ 94,737 $ 76,466 $69,719 $61,635
Loans 90 or more
days past due and
still accruing 10,502 10,240 16,862 13,012 10,288
Loans modified under
troubled debt
restructuring 3,981 -- -- -- --
Total nonperforming
loans 124,427 104,977 93,328 82,731 71,923
Repossessed assets
(RA) 18,344 20,688 19,923 15,699 15,897
Total nonperforming
assets 142,771 125,665 113,251 98,430 87,820
Net loan charge-offs
(year-to-date) 16,300 8,494 31,566 24,210 8,958
Allowance for loan
losses as a percent
of total loans 2.35% 2.12% 1.91% 1.58% 1.39%
Allowance for loan
losses as a percent
of nonperforming
loans 56% 60% 61% 56% 55%
Nonperforming loans
as a percent of
total loans 4.18% 3.56% 3.13% 2.83% 2.52%
Nonperforming assets
as a percent of
total loans plus RA 4.77% 4.23% 3.77% 3.34% 3.06%
Nonperforming assets
as a percent of
total assets 3.57% 3.16% 2.92% 2.60% 2.35%
Net loan charge-offs
as a percent of
average loans
(year-to-date,
annualized) 1.10% 1.15% 1.10% 1.14% 0.64%
June 30 March 31 Dec 31 Sept 30 June 30
2009 2009 2008 2008 2008
---------------------------------------------------------------------
Additional Data -
Intangibles
Goodwill $69,908 $69,908 $69,908 $69,908 $69,908
Core deposit
intangibles 2,629 2,847 3,050 3,266 3,609
Mortgage servicing
rights (MSR) 2,869 2,377 2,191 2,328 2,354
Amortization of core
deposit intangibles
(quarter only) 217 203 216 343 453
Chemical Financial Corporation Announces Second Quarter Operating
Results
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Nonperforming Assets (Unaudited)
Chemical Financial Corporation
(Dollars in June 30 March 31 Dec 31 Sept 30 June 30
thousands) 2009 2009 2008 2008 2008
---------------------------------------------------------------------
Nonaccrual loans:
Commercial $ 20,371 $ 16,419 $ 16,324 $ 13,320 $ 10,918
Real estate
commercial 50,067 41,826 27,344 24,230 17,915
Real estate
construction 17,935 18,504 15,310 14,513 15,157
Real estate
residential 15,905 12,803 12,175 12,869 11,955
Consumer 5,666 5,185 5,313 4,787 5,690
-------------------------------------------------
Total nonaccrual
loans 109,944 94,737 76,466 69,719 61,635
Accruing loans
contractually past
due 90 days or more
as to interest or
principal payments:
Commercial 1,201 2,581 1,652 1,735 3,130
Real estate
commercial 1,542 4,352 9,995 6,586 2,948
Real estate
construction 259 538 759 1,096 676
Real estate
residential 6,236 1,699 3,369 2,910 2,746
Consumer 1,264 1,070 1,087 685 788
-------------------------------------------------
Total accruing
loans contract-
ually past due
90 days or more
as to interest
or principal
payments 10,502 10,240 16,862 13,012 10,288
Loans modified under
troubled debt
restructuring 3,981 -- -- -- --
-------------------------------------------------
Total nonperforming
loans 124,427 104,977 93,328 82,731 71,923
Other real estate
and repossessed
assets 18,344 20,688 19,923 15,699 15,897
-------------------------------------------------
Total nonperforming
assets $142,771 $125,665 $113,251 $ 98,430 $ 87,820
-------------------------------------------------
Chemical Financial Corporation Announces Second Quarter Operating
Results
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Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation
Three Months Ended
-------------------------------------------------
(Dollars in June 30 March 31 Dec 31 Sept 30 June 30
thousands) 2009 2009 2008 2008 2008
---------------------------------------------------------------------
Allowance for loan
losses at beginning
of period $ 62,562 $ 57,056 $ 46,412 $ 39,664 $ 39,662
Provision for loan
losses 15,200 14,000 18,000 22,000 6,500
Loans charged off:
Commercial (3,289) (3,290) (3,254) (11,468) (1,474)
Real estate
commercial (1,930) (2,589) (1,645) (673) (3,373)
Real estate
construction (762) (1,700) (954) (923) (1,070)
Real estate
residential (1,043) (235) (1,106) (749) (358)
Consumer (1,544) (1,253) (1,811) (1,776) (612)
-------------------------------------------------
Total loan
charge-offs (8,568) (9,067) (8,770) (15,589) (6,887)
Recoveries of loans
previously charged
off:
Commercial 130 205 1,094 74 228
Real estate
commercial 226 87 11 68 32
Real estate
construction -- -- -- -- --
Real estate
residential 127 82 83 50 5
Consumer 279 199 226 145 124
-------------------------------------------------
Total loan
recoveries 762 573 1,414 337 389
-------------------------------------------------
Net loan charge-
offs (7,806) (8,494) (7,356) (15,252) (6,498)
-------------------------------------------------
Allowance for loan
losses at end of
period $ 69,956 $ 62,562 $ 57,056 $ 46,412 $ 39,664
-------------------------------------------------
Chemical Financial Corporation Announces Second Quarter Operating
Results
---------------------------------------------------------------------
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
(In thousands,
except per share 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
data) 2009 2009 2008 2008 2008
---------------------------------------------------------------------
Summary of Operations
Interest income $ 48,283 $ 48,322 $ 51,703 $ 51,688 $ 51,508
Interest expense 11,305 11,732 13,192 14,968 15,872
-------------------------------------------------
Net interest income 36,978 36,590 38,511 36,720 35,636
Provision for loan
losses 15,200 14,000 18,000 22,000 6,500
-------------------------------------------------
Net interest income
after provision for
loan losses 21,778 22,590 20,511 14,720 29,136
Noninterest income 10,958 9,857 9,604 10,054 11,959
Operating expenses 30,016 29,205 28,629 26,750 26,885
-------------------------------------------------
Income (loss) lefore
income taxes 2,720 3,242 1,486 (1,976) 14,210
Federal income tax
expense (benefit) 426 524 (100) (951) 4,600
-------------------------------------------------
Net income (loss) $ 2,294 $ 2,718 $ 1,586 $ (1,025) $ 9,610
=================================================
---------------------------------------------------------------------
Per Common Share
Data
Net income (loss):
Basic $ 0.10 $ 0.11 $ 0.06 $ (0.04) $ 0.40
Diluted 0.10 0.11 0.06 (0.04) 0.40
Cash dividends 0.295 0.295 0.295 0.295 0.295
Book value - period-
end 20.23 20.40 20.58 21.19 21.58
Market value -
period-end 19.91 20.81 27.88 31.14 20.40