MIDLAND, Mich., Oct. 26, 2009 (GLOBE NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced third quarter 2009 net income of $2.5 million, or $0.10 per diluted share, versus a net loss of $1.0 million, or $0.04 per diluted share, in the third quarter of 2008.
Net income was $7.5 million, or $0.31 per diluted share, for the nine months ended September 30, 2009, compared to net income of $18.3 million, or $0.77 per diluted share, for the nine months ended September 30, 2008.
"The quarter's financial results benefitted from a decrease in our loan loss provision from $22.0 million in last year's third quarter to $14.2 million in this year's third quarter, which was partially offset by higher operating expenses. Although total assets have increased by over 12 percent during the past twelve months, this growth has not yet translated into higher net interest income due to the combination of a lack of sufficient quality lending opportunities in our markets and our decision to maintain a higher level of liquidity," said David B. Ramaker, Chairman, Chief Executive Officer and President of Chemical Financial Corporation.
"While we are pleased to maintain our profitability in light of the difficulties faced by our industry, the national and Michigan economies continue to face challenges. As a result, credit quality measures continued to deteriorate during the third quarter of 2009, although net charge-offs moderated slightly from the previous two quarters.
"Our strong balance sheet, ample liquidity, high capital ratios and risk management practices are reflective of our sound business practices, which continue to serve us well in this environment. We believe we remain well positioned to benefit from future economic recovery and take advantage of selected opportunities for growth that may result from the industry's current challenges," added Ramaker.
Net interest income was $36.7 million in the third quarter of 2009, essentially unchanged from third quarter 2008 net interest income, but slightly below second quarter 2009 net interest income of $37.0 million. As compared to the third quarter of 2008, increases in net interest-earning assets were offset by decreases in net interest margin. The net interest margin (on a tax-equivalent basis) in the third quarter of 2009 was 3.83 percent, down from 4.20 percent in the third quarter of 2008 and from 4.00 percent in the second quarter of 2009. The decreases in net interest margin were partially attributable to the Company's decision to maintain a higher degree of liquidity coupled with the loss of interest on nonaccrual loans.
Total assets were $4.27 billion at September 30, 2009, up substantially from $3.87 billion at December 31, 2008 and $3.79 billion at September 30, 2008. During the first nine months of 2009, the Company increased liquidity substantially, with $466 million in cash and cash equivalents at September 30, 2009, versus $173 million at December 31, 2008 and $114 million at September 30, 2008. Investment securities were $645 million at September 30, 2009, up from $547 million at December 31, 2008 and $566 million at September 30, 2008. At September 30, 2009, total loans were $3.00 billion, versus $2.98 billion at December 31, 2008 and $2.93 billion at September 30, 2008. Growth in the consumer loan portfolio more than offset a decline in the residential real estate portfolio.
Total deposits were $3.40 billion at September 30, 2009, up substantially from $2.98 billion at December 31, 2008, and $2.94 billion at September 30, 2008. A portion of the growth in the current year is attributable to a strong level of seasonal deposits at September 30, 2009. Federal Home Loan Bank advances totaled $115 million at September 30, 2009, down $20 million, or 14.8 percent, from $135 million at December 31, 2008, but up $25 million, or 27.7 percent, from $90 million at September 30, 2008.
The provision for loan losses was $14.2 million in the third quarter of 2009, compared to $15.2 million in the second quarter of 2009 and $22.0 million in the third quarter of 2008. Included in the third quarter 2008 provision for loan losses was $10.1 million attributable to a fraudulent loan transaction identified in that quarter. Net loan charge-offs were $6.7 million in the third quarter of 2009, down from $7.8 million in the second quarter of 2009 and down from $15.3 million in the third quarter of 2008, which included a $10.1 million charge-off for the fraudulent loan transaction.
At September 30, 2009, nonperforming assets totaled $157.5 million, up from $142.8 million at June 30, 2009 and up substantially from $98.4 million at September 30, 2008. Nonperforming loans were $138.5 million at September 30, 2009, compared to $124.4 million at June 30, 2009 and $82.7 million at September 30, 2008. At September 30, 2009, nonperforming loans as a percentage of total loans were 4.61 percent, up from 4.18 percent at June 30, 2009 and 2.83 percent at September 30, 2008.
The allowance for loan losses totaled $77.5 million at September 30, 2009, up 10.8 percent from $70.0 million at June 30, 2009 and up 67.0 percent from $46.4 million at September 30, 2008. The allowance at September 30, 2009 was 2.58 percent of total loans, up from 2.35 percent of total loans at June 30, 2009 and 1.58 percent of total loans at September 30, 2008. The allowance for loan losses as a percent of nonperforming loans was 56 percent at September 30, 2009, June 30, 2009 and September 30, 2008.
As part of Chemical Financial Corporation's ongoing credit portfolio monitoring program, the Company 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 Company's nonperforming loans at September 30, 2009, June 30, 2009 and September 30, 2008 included commercial, real estate commercial and real estate construction loans totaling $49.6 million, $48.6 million and $27.3 million, respectively, which after being analyzed were 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 $10.1 million in the third quarter of 2009, down from $11.0 million in the second quarter of 2009, but essentially unchanged from the third quarter of 2008. The reduction in noninterest income in the third quarter of 2009, as compared to the second quarter of 2009, was primarily attributable to lower mortgage banking revenue as the refinancing volume of residential real estate loans into long-term fixed interest rate loans significantly declined during the latest quarter. The reduced volume resulted in lower revenue generated from the sale of these loans into the secondary market. As compared to the third quarter of 2008, this year's third quarter found increases in mortgage banking revenues largely offsetting decreases in service charges on deposit accounts and trust and investment services revenues. In addition, during the third quarter of 2008, noninterest income included recognition of an other-than-temporary impairment loss of $0.4 million on an investment security. During the third quarter of 2009, the Company had no investment securities gains or losses.
Operating expenses in the third quarter of 2009 were $29.6 million, down slightly from $30.0 million in the second quarter of 2009, but up $2.8 million, or 10.6 percent, from $26.8 million in the third quarter of 2008. FDIC insurance costs were $1.3 million, $3.1 million and $0.1 million during the third quarter of 2009, second quarter of 2009 and third quarter of 2008, respectively. Excluding FDIC insurance costs, operating expenses were up $1.3 million, or 5.0 percent, during the third quarter of 2009 compared to the second quarter of 2009. This increase was largely driven by higher seasonal salaries, group health benefit costs and marketing expenses. The increase over the third quarter of the prior year was attributable primarily to higher FDIC insurance costs and higher costs associated with nonperforming assets and other real estate.
The Company's return on average assets during the third quarter of 2009 was 0.24 percent, up marginally from 0.23 percent in the second quarter of 2009, and up from (0.11) percent in the third quarter of 2008. At September 30, 2009, the Company's book value stood at $20.06 per share versus $20.23 per share at June 30, 2009 and $21.19 per share at September 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 September 30, 2009, the Company 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 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, 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 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 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.
Chemical Financial Corporation Announces Third Quarter Operating
Results
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Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
(In thousands, except per September 30 December 31 September 30
share data) 2009 2008 2008
---------------------------------------------------------------------
Assets:
Cash and cash equivalents:
Cash and cash due from banks $ 90,215 $ 168,650 $ 107,311
Federal funds sold -- -- 2,000
Interest-bearing deposits
with unaffiliated banks and
others 375,489 4,572 4,579
------------ ------------ ------------
Total Cash and Cash
Equivalents 465,704 173,222 113,890
Investment securities:
Available-for-sale 512,413 449,947 455,158
Held-to-maturity 132,438 97,511 111,261
------------ ------------ ------------
Total Investment Securities 644,851 547,458 566,419
Other securities 22,128 22,128 22,142
Loans held for sale 7,043 8,463 10,861
Loans:
Commercial 575,062 587,554 574,006
Real estate commercial 782,640 786,404 776,617
Real estate construction 118,116 119,001 133,615
Real estate residential 753,744 839,555 831,700
Consumer 773,902 649,163 612,433
------------ ------------ ------------
Total Loans 3,003,464 2,981,677 2,928,371
Allowance for loan losses (77,491) (57,056) (46,412)
------------ ------------ ------------
Net Loans 2,925,973 2,924,621 2,881,959
Premises and equipment 53,172 53,036 51,471
Goodwill 69,908 69,908 69,908
Other intangible assets 5,477 5,241 5,594
Interest receivable and other
assets 74,107 70,236 65,842
------------ ------------ ------------
Total Assets $ 4,268,363 $ 3,874,313 $ 3,788,086
============ ============ ============
Liabilities:
Deposits:
Noninterest-bearing $ 533,430 $ 524,464 $ 531,355
Interest-bearing 2,870,069 2,454,328 2,412,521
------------ ------------ ------------
Total Deposits 3,403,499 2,978,792 2,943,876
Interest payable and other
liabilities 36,891 35,214 23,606
Short-term borrowings 233,693 233,738 224,684
Federal Home Loan Bank advances 115,000 135,025 90,025
------------ ------------ ------------
Total Liabilities 3,789,083 3,382,769 3,282,191
Shareholders' Equity:
Preferred stock, no par value
per share -- -- --
Common stock, $1 par value
per share 23,890 23,881 23,877
Surplus 347,667 346,916 346,652
Retained earnings 119,920 133,578 139,037
Accumulated other
comprehensive loss (12,197) (12,831) (3,671)
------------ ------------ ------------
Total Shareholders' Equity 479,280 491,544 505,895
------------ ------------ ------------
Total Liabilities and
Shareholders' Equity $ 4,268,363 $ 3,874,313 $ 3,788,086
============ ============ ============
Chemical Financial Corporation Announces Third Quarter Operating
Results
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Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
Three Months Ended Nine Months Ended
(In thousands, except per September 30 September 30
share data) 2009 2008 2009 2008
---------------------------------------------------------------------
Interest Income:
Interest and fees on loans $ 43,289 $ 45,211 $129,079 $135,272
Interest on investment
securities:
Taxable 3,527 5,333 12,053 16,645
Tax-exempt 962 738 2,632 2,120
Dividends on other securities 132 211 562 795
Interest on federal funds sold -- 180 -- 1,610
Interest on deposits with
unaffiliated banks and others 156 15 345 191
--------- --------- --------- ---------
Total Interest Income 48,066 51,688 144,671 156,633
Interest Expense:
Interest on deposits 9,942 12,986 29,917 43,047
Interest on short-term
borrowings 251 482 723 1,942
Interest on Federal Home Loan
Bank advances 1,210 1,500 3,800 4,902
--------- --------- --------- ---------
Total Interest Expense 11,403 14,968 34,440 49,891
--------- --------- --------- ---------
Net Interest Income 36,663 36,720 110,231 106,742
Provision for loan losses 14,200 22,000 43,400 31,200
--------- --------- --------- ---------
Net Interest Income after
Provision for Loan Losses 22,463 14,720 66,831 75,542
Noninterest Income:
Service charges on deposit
accounts 4,949 5,316 14,205 15,097
Trust and investment services
revenue 2,306 2,616 7,055 8,108
Other charges and fees for
customer services 1,971 1,927 5,766 5,236
Mortgage banking revenue 840 348 3,452 1,408
Investment securities gains -- 6 95 1,722
Other-than-temporary
impairment writedown of
investment security -- (444) -- (444)
Other 26 285 334 466
--------- --------- --------- ---------
Total Noninterest Income 10,092 10,054 30,907 31,593
Operating Expenses:
Salaries, wages and employee
benefits 15,765 15,075 45,865 44,364
Occupancy 2,497 2,472 7,611 7,602
Equipment 2,435 2,346 7,141 6,666
Other 8,885 6,857 28,186 21,847
--------- --------- --------- ---------
Total Operating Expenses 29,582 26,750 88,803 80,479
--------- --------- --------- ---------
Income (Loss) Before Income
Taxes 2,973 (1,976) 8,935 26,656
Federal Income Tax Expense
(Benefit) 500 (951) 1,450 8,400
--------- --------- --------- ---------
Net Income (Loss) $ 2,473 $ (1,025) $ 7,485 $ 18,256
========= ========= ========= =========
Net income (loss) per share:
Basic $ 0.10 $ (0.04) $ 0.31 $ 0.77
Diluted 0.10 (0.04) 0.31 0.77
Cash dividends per share 0.295 0.295 0.885 0.885
Average shares outstanding:
Basic 23,890 23,836 23,890 23,827
Diluted 23,912 23,836 23,907 23,839
Chemical Financial Corporation Announces Third Quarter Operating
Results
---------------------------------------------------------------------
Financial Summary (Unaudited)
Chemical Financial Corporation
Three Months Ended Nine Months Ended
(Dollars in September 30 September 30
thousands) 2009 2008 2009 2008
---------------------------------------------------------------------
Average
Balances
Total assets $ 4,111,923 $ 3,782,391 $ 4,014,060 $ 3,777,057
Total interest-
earning assets 3,894,124 3,542,031 3,790,588 3,544,785
Total loans 2,985,388 2,889,648 2,971,557 2,834,790
Total deposits 3,235,959 2,923,912 3,138,608 2,922,438
Total interest-
bearing
liabilities 3,036,864 2,689,248 2,949,836 2,702,251
Total
shareholders'
equity 480,064 512,504 485,612 510,893
Three Months Ended Nine Months Ended
September 30 September 30
2009 2008 2009 2008
---------------------------------------------------------------------
Key Ratios
(annualized
where
applicable)
Net interest
margin
(taxable
equivalent
basis) 3.83% 4.20% 3.96% 4.08%
Efficiency
ratio 62.3% 56.5% 62.0% 57.5%
Return on
average assets 0.24% (0.11)% 0.25% 0.65%
Return on
average
shareholders'
equity 2.0% (0.8)% 2.1% 4.8%
Average
shareholders'
equity as a
percent of
average assets 11.7% 13.5% 12.1% 13.5%
Tangible
shareholders'
equity as a
percent of
total assets 9.7% 11.6%
Total risk-
based capital
ratio 15.7% 16.7%
Sept 30 June 30 March 31 Dec 31 Sept 30
2009 2009 2009 2008 2008
---------------------------------------------------------------------
Credit Quality
Statistics
Nonaccrual
loans $ 120,186 $ 109,944 $ 94,737 $ 76,466 $ 69,719
Loans 90 or
more days past
due and still
accruing 8,699 10,502 10,240 16,862 13,012
Loans modified
under troubled
debt
restructurings 9,567 3,981 -- -- --
Total
nonperforming
loans 138,452 124,427 104,977 93,328 82,731
Repossessed
assets (RA) 19,067 18,344 20,688 19,923 15,699
Total
nonperforming
assets 157,519 142,771 125,665 113,251 98,430
Net loan
charge-offs
(year-to-date) 22,965 16,300 8,494 31,566 24,210
Allowance for
loan losses as
a percent of
total loans 2.58% 2.35% 2.12% 1.91% 1.58%
Allowance for
loan losses as
a percent of
nonperforming
loans 56% 56% 60% 61% 56%
Nonperforming
loans as a
percent of
total loans 4.61% 4.18% 3.56% 3.13% 2.83%
Nonperforming
assets as a
percent of
total loans
plus RA 5.21% 4.77% 4.23% 3.77% 3.34%
Nonperforming
assets as a
percent of
total assets 3.69% 3.57% 3.16% 2.92% 2.60%
Net loan
charge-offs as
a percent of
average loans
(year-to-date,
annualized) 1.03% 1.10% 1.15% 1.10% 1.14%
Sept 30 June 30 March 31 Dec 31 Sept 30
2009 2009 2009 2008 2008
---------------------------------------------------------------------
Additional Data
- Intangibles
Goodwill $ 69,908 $ 69,908 $ 69,908 $ 69,908 $ 69,908
Core deposit
intangibles 2,480 2,629 2,847 3,050 3,266
Mortgage
servicing
rights (MSR) 2,997 2,869 2,377 2,191 2,328
Amortization of
core deposit
intangibles
(quarter only) 149 217 203 216 343
Chemical Financial Corporation Announces Third Quarter Operating
Results
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Nonperforming Assets (Unaudited)
Chemical Financial Corporation
(Dollars in Sept 30 June 30 March 31 Dec 31 Sept 30
thousands) 2009 2009 2009 2008 2008
---------------------------------------------------------------------
Nonaccrual loans:
Commercial $ 21,379 $ 20,371 $ 16,419 $ 16,324 $ 13,320
Real estate
commercial 58,930 50,067 41,826 27,344 24,230
Real estate
construction 18,196 17,935 18,504 15,310 14,513
Real estate
residential 15,739 15,905 12,803 12,175 12,869
Consumer 5,942 5,666 5,185 5,313 4,787
-------------------------------------------------
Total nonaccrual
loans 120,186 109,944 94,737 76,466 69,719
Accruing loans
contractually past
due 90 days or more
as to interest or
principal payments:
Commercial 1,073 1,201 2,581 1,652 1,735
Real estate
commercial 2,138 1,542 4,352 9,995 6,586
Real estate
construction 675 259 538 759 1,096
Real estate
residential 3,839 6,236 1,699 3,369 2,910
Consumer 974 1,264 1,070 1,087 685
-------------------------------------------------
Total accruing
loans
contractually
past due 90 days
or more as to
interest or
principal
payments 8,699 10,502 10,240 16,862 13,012
Loans modified under
troubled debt
restructurings 9,567 3,981 -- -- --
-------------------------------------------------
Total nonperforming
loans 138,452 124,427 104,977 93,328 82,731
Other real estate
and repossessed
assets 19,067 18,344 20,688 19,923 15,699
-------------------------------------------------
Total nonperforming
assets $157,519 $142,771 $125,665 $113,251 $ 98,430
-------------------------------------------------
Chemical Financial Corporation Announces Third Quarter Operating
Results
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Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation
Three Months Ended
-------------------------------------------------
(Dollars in Sept 30 June 30 March 31 Dec 31 Sept 30
thousands) 2009 2009 2009 2008 2008
---------------------------------------------------------------------
Allowance for loan
losses at beginning
of period $ 69,956 $ 62,562 $ 57,056 $ 46,412 $ 39,664
Provision for loan
losses 14,200 15,200 14,000 18,000 22,000
Loans charged off:
Commercial (1,786) (3,289) (3,290) (3,254) (11,468)
Real estate
commercial (1,703) (1,930) (2,589) (1,645) (673)
Real estate
construction (874) (762) (1,700) (954) (923)
Real estate
residential (1,346) (1,043) (235) (1,106) (749)
Consumer (1,996) (1,544) (1,253) (1,811) (1,776)
-------------------------------------------------
Total loan charge-
offs (7,705) (8,568) (9,067) (8,770) (15,589)
Recoveries of loans
previously charged
off:
Commercial 349 130 205 1,094 74
Real estate
commercial 91 226 87 11 68
Real estate
construction 46 -- -- -- --
Real estate
residential 231 127 82 83 50
Consumer 323 279 199 226 145
-------------------------------------------------
Total loan
recoveries 1,040 762 573 1,414 337
-------------------------------------------------
Net loan charge-
offs (6,665) (7,806) (8,494) (7,356) (15,252)
-------------------------------------------------
Allowance for loan
losses at end of
period $ 77,491 $ 69,956 $ 62,562 $ 57,056 $ 46,412
-------------------------------------------------
Chemical Financial Corporation Announces Third Quarter Operating
Results
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Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
(In thousands,
except per share 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
data) 2009 2009 2009 2008 2008
---------------------------------------------------------------------
Summary of
Operations
Interest income $ 48,066 $ 48,283 $ 48,322 $ 51,703 $ 51,688
Interest expense 11,403 11,305 11,732 13,192 14,968
-------------------------------------------------
Net interest income 36,663 36,978 36,590 38,511 36,720
Provision for loan
losses 14,200 15,200 14,000 18,000 22,000
-------------------------------------------------
Net interest income
after provision for
loan losses 22,463 21,778 22,590 20,511 14,720
Noninterest income 10,092 10,958 9,857 9,604 10,054
Operating expenses 29,582 30,016 29,205 28,629 26,750
-------------------------------------------------
Income (loss) before
income taxes 2,973 2,720 3,242 1,486 (1,976)
Federal income tax
expense (benefit) 500 426 524 (100) (951)
-------------------------------------------------
Net income (loss) $ 2,473 $ 2,294 $ 2,718 $ 1,586 $ (1,025)
=================================================
---------------------------------------------------------------------
Per Common Share
Data
Net income (loss):
Basic $ 0.10 $ 0.10 $ 0.11 $ 0.06 $ (0.04)
Diluted 0.10 0.10 0.11 0.06 (0.04)
Cash dividends 0.295 0.295 0.295 0.295 0.295
Book value - period-
end 20.06 20.23 20.40 20.58 21.19
Market value -
period-end 21.79 19.91 20.81 27.88 31.14