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 ------------------------------------------------------------------------- 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 ------------------------------------------------------------------------- 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 --------------------------------------------------------------------- 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 --------------------------------------------------------------------- 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