EXHIBIT 99.1
For further information:
Lori A. Gwizdala,
Chief Financial Officer
Chemical Financial Corporation
989 839 5358
For Immediate Release
Chemical Financial Corporation Reports First Quarter 2006 Earnings
Midland, MI, April 17, 2006 -- Chemical Financial Corporation's (Nasdaq: CHFC) Board of Directors today reported earnings of $0.47 per diluted share for the first quarter of 2006 compared to first quarter 2005 earnings per diluted share of $0.53, a decrease of 11.3 percent. Net income for the first quarter of 2006 was $11.9 million compared to first quarter 2005 net income of $13.5 million.
"As anticipated, the effects of higher interest rates continued to impact our financial results. During the first quarter of 2006, decreasing net interest income resulted from higher interest paid on deposits and short-term borrowings, which was only partially offset by increases in interest earned on loans," said David B. Ramaker, President and Chief Executive Officer of Chemical Financial Corporation.
As announced previously, Chemical Financial Corporation is in the midst of a strategic restructuring which strives to position the Company to better capitalize on growth opportunities in high potential markets and enhance operating efficiencies.
"We have made substantial progress implementing the restructuring plan during the first quarter of 2006 and are on schedule. We have also initiated a comprehensive, system-wide sales and service training program to help bolster our people and the growth initiatives at all of our 124 banking offices. While we believe the steps we are taking to control costs and stimulate revenue growth will translate into improved financial performance in the future, the short-term financial outlook remains challenging," added Ramaker.
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During the first quarter of 2006, restructuring costs of $385,000 were incurred. Management had estimated that total costs for the restructuring would not exceed $800,000 in 2006 and would be incurred primarily during the first half of the year.
Net interest income totaled $33.6 million in the first quarter of 2006, a decrease of 6.6 percent from first quarter 2005 net interest income of $35.9 million. Increased interest income from interest-earning assets was insufficient to overcome increased interest expense on interest-bearing liabilities, as well as the effects of a lower level of average earning assets. Net interest margin (on a tax equivalent basis) was 3.90 percent in the first quarter of 2006, down from 3.99 percent in the fourth quarter of 2005 and down from 4.11 percent in the prior year's first quarter. The decrease in the net interest margin during the first quarter of 2006 resulted primarily from increases in deposit rates.
Total assets were $3.74 billion at March 31, 2006, down slightly from $3.75 billion at December 31, 2005 and down slightly from $3.80 billion at March 31, 2005. At March 31, 2006, total loans were $2.70 billion, versus $2.71 billion at December 31, 2005 and $2.58 billion at March 31, 2005. Investment securities were $673 million at March 31, 2006, down from $722 million at December 31, 2005 and $880 million at March 31, 2005. The decrease in investment securities was primarily attributable to the Corporation using excess liquidity from maturing investment securities to temporarily decrease wholesale borrowings.
Total deposits were $2.87 billion at March 31, 2006, up from $2.82 billion at December 31, 2005 and down from $2.93 billion at March 31, 2005. In 2005, the markets in which the Company operates saw intense competition for retail deposits translate into increases in deposit pricing and a slight erosion in core deposits. In the first quarter of 2006, the Company experienced an increase in seasonal/municipal customer deposits. Other liabilities, which include Federal Home Loan Bank advances, totaled $367 million at March 31, 2006, down substantially from $428 million at December 31, 2005 and down from $382 million at March 31, 2005.
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The provision for loan losses was $460,000 in the first quarter of 2006, compared to $1.33 million in the prior year fourth quarter and $730,000 in the first quarter of 2005. Net loan losses were $454,000 in the first quarter of 2006, compared to $1.78 million in the fourth quarter of 2005 and $725,000 in the first quarter of 2005. The allowance for loan losses as a percentage of total loans was 1.27 percent at March 31, 2006, up slightly from 1.26 percent at December 31, 2005 and down from 1.33 percent at March 31, 2005. At March 31, 2006, nonperforming loans as a percentage of total loans were 0.73 percent, unchanged from 0.73 percent at December 31, 2005 and up from 0.42 percent at March 31, 2005.
Noninterest income was $9.8 million in the first quarter of 2006, reflecting a decrease of approximately $348,000 or 3.4 percent from the first quarter of 2005, as increases in fee income were unable to offset decreases in securities gains and mortgage banking revenue. For the first quarter of 2006, there were no net gains on sales of investment securities, whereas in the first quarter of 2005, the Company booked gains of approximately $1.1 million. Excluding gains on sales of investment securities, noninterest income increased 8.2 percent in the first quarter of 2006 compared to the first quarter of 2005.
Services charges on deposit accounts increased 8.1 percent to $5.1 million in the first quarter of 2006 from $4.7 million in the first quarter of 2005. Other charges and fees for customer services increased to $2.1 million in the first quarter of 2006 from $1.7 million in the first quarter of 2005. First quarter 2006 trust and investment services revenue was essentially unchanged from the first quarter of 2005, at $2.0 million. Mortgage banking revenue fell by 13.5 percent to $423,000 in the first quarter of 2006 from $489,000 in the first quarter of 2005, but was up from fourth quarter 2005 mortgage banking revenue of $371,000. The Corporation was servicing $533 million of residential mortgage loans that were sold in the secondary market at March 31, 2006, compared to $589 million at March 31, 2005.
Operating expenses were $25.1 million in the first quarter of 2006, up from $23.9 million in the fourth quarter of 2005 and up slightly from $25.0 million in the first quarter of 2005. Excluding $385,000 in expenses incurred with the strategic restructuring, operating expenses in the first quarter of 2006 were $24.7 million. The Company's efficiency ratio rose to 57.3 percent
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in the first quarter of 2006 from 54.7 percent in the first quarter of 2005, primarily as a result of the decrease in net interest income.
The Company's return on average assets during the first quarter of 2006 was 1.28 percent, down from 1.43 percent in the prior year's first quarter. Shareholders' equity increased from $487 million at March 31, 2005 to $505 million at March 31, 2006. At March 31, 2006, the Company's book value stood at $20.10 per share versus $19.32 per share at March 31, 2005. The decline in return on assets combined with the increase in shareholders' equity resulted in a decline in return on average equity to 9.6 percent in the first quarter of 2006 from 11.2 percent in the first quarter of 2005.
Chemical Financial Corporation is the fourth largest bank holding company headquartered in Michigan. The Company operates through a single subsidiary bank, Chemical Bank, with 124 banking offices spread over 32 counties in the lower peninsula of Michigan. At March 31, 2006, the Company had total assets of $3.74 billion. Chemical Financial Corporation common stock trades on The Nasdaq Stock Market under the symbol CHFC and is one of the issues comprising the Nasdaq Financial 100 index.
Forward-Looking Statements
This press release contains forward-looking statements. Words such as "anticipates," "believes," "estimates," "expects," "intends," "should," "will," variations of such words and similar expressions are intended to identify forward-looking statements. These statements reflect management's current beliefs as to the expected outcomes of future events and are not guarantees of future performance. These statements involve certain risks, uncertainties and assumptions 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. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates and banking laws and regulations; the impact of competition from traditional or new sources; and the possibility that anticipated cost savings and revenue enhanc ements from acquisitions, restructurings and bank consolidations may not be fully realized at all or within the expected time frames. These and other factors that may emerge could cause decisions and actual results to differ materially from current expectations. Chemical undertakes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.
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Chemical Financial Corporation Announces First Quarter Operating Results
|
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation and Subsidiaries
(In thousands, except per share data)
| March 31,
2006
|
| December 31,
2005
|
| March 31,
2005
| |
Assets: | | | | | | | | | |
Cash due from banks | $ | 92,404 | | $ | 145,575 | | $ | 94,135 | |
Federal funds sold | | 85,600 | | | 6,600 | | | 51,500 | |
Interest-bearing deposits with unaffiliated banks | | 22,448 | | | 5,321 | | | 37,151 | |
| | | | | | | | | |
Investment securities - available for sale | | 571,262 | | | 594,491 | | | 720,752 | |
Investment securities - held to maturity |
| 102,222
| |
| 127,806
| |
| 159,467
| |
Total Investment Securities | | 673,484 | | | 722,297 | | | 880,219 | |
Other securities | | 25,683 | | | 21,051 | | | 19,986 | |
| | | | | | | | | |
Commercial loans | | 521,792 | | | 517,852 | | | 480,553 | |
Real estate commercial loans | | 704,547 | | | 704,684 | | | 696,018 | |
Real estate construction loans | | 157,087 | | | 158,376 | | | 122,951 | |
Real estate residential loans | | 791,869 | | | 788,679 | | | 756,468 | |
Consumer loans |
| 522,558
| |
| 540,623
| |
| 520,800
| |
Total Loans | | 2,697,853 | | | 2,710,214 | | | 2,576,790 | |
Less: Allowance for loan losses |
| 34,154
| |
| 34,148
| |
| 34,171
| |
Net Loans | | 2,663,699 | | | 2,676,066 | | | 2,542,619 | |
| | | | | | | | | |
Premises and equipment | | 44,699 | | | 45,058 | | | 46,671 | |
Intangible assets | | 70,822 | | | 71,496 | | | 73,728 | |
Other assets |
| 59,240
| |
| 55,852
| |
| 50,881
| |
Total Assets | $
| 3,738,079
| | $
| 3,749,316
| | $
| 3,796,890
| |
| | | | | | | | | |
Liabilities: | | | | | | | | | |
Noninterest-bearing deposits | $ | 522,790 | | $ | 542,014 | | $ | 525,272 | |
Interest-bearing deposits |
| 2,343,349
| |
| 2,277,866
| |
| 2,402,675
| |
Total Deposits | | 2,866,139 | | | 2,819,880 | | | 2,927,947 | |
Interest payable and other liabilities | | 34,934 | | | 28,008 | | | 33,828 | |
Securities sold under agreements to repurchase | | 129,392 | | | 125,598 | | | 94,445 | |
Reverse repurchase agreements | | 10,000 | | | 10,000 | | | - | |
Federal Home Loan Bank advances - short-term | | 35,000 | | | 68,000 | | | - | |
Federal Home Loan Bank advances - long-term |
| 158,093
| |
| 196,765
| |
| 253,979
| |
Total Liabilities | | 3,233,558 | | | 3,248,251 | | | 3,310,199 | |
| | | | | | | | | |
Shareholders' Equity: | | | | | | | | | |
Common stock, $1 par value | | 25,101 | | | 25,079 | | | 25,185 | |
Surplus | | 376,501 | | | 376,046 | | | 379,149 | |
Retained earnings | | 111,501 | | | 106,507 | | | 87,096 | |
Accumulated other comprehensive loss
|
| (8,582
| )
|
| (6,567
| )
|
| (4,739
| )
|
Total Shareholders' Equity |
| 504,521
| |
| 501,065
| |
| 486,691
| |
Total Liabilities and Shareholders' Equity | $
| 3,738,079
| | $
| 3,749,316
| | $
| 3,796,890
| |
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Chemical Financial Corporation Announces First Quarter Operating Results
|
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation and Subsidiaries
| Three Months Ended
March 31, |
(In thousands, except per share data)
| 2006
|
| 2005
|
Interest Income: | | | | | |
Interest and fees on loans | $ | 43,710 | | $ | 38,811 |
Interest on investment securities: | | | | | |
Taxable | | 6,342 | | | 7,564 |
Nontaxable |
| 620
| |
| 490
|
Total Interest on Investment Securities | | 6,962 | | | 8,054 |
Interest on other securities | | 341 | | | 217 |
Interest on federal funds sold | | 951 | | | 653 |
Interest on deposits with unaffiliated banks |
| 313
| |
| 225
|
Total Interest Income | | 52,277 | | | 47,960 |
| | | | | |
Interest Expense: | | | | | |
Interest on deposits | | 15,074 | | | 9,193 |
Interest on securities sold under agreements to repurchase | | 1,059 | | | 348 |
Interest on reverse repurchase agreements | | 92 | | | - |
Interest on Federal Home Loan Bank advances - short-term | | 417 | | | - |
Interest on Federal Home Loan Bank advances - long-term |
| 2,044
| |
| 2,472
|
Total Interest Expense |
| 18,686
| |
| 12,013
|
Net Interest Income | | 33,591 | | | 35,947 |
Provision for loan losses |
| 460
| |
| 730
|
Net Interest Income after | | | | | |
Provision for Loan Losses | | 33,131 | | | 35,217 |
| | | | | |
Noninterest Income: | | | | | |
Service charges on deposit accounts | | 5,097 | | | 4,716 |
Trust and investment services revenue | | 2,005 | | | 2,017 |
Other charges and fees for customer services | | 2,132 | | | 1,688 |
Mortgage banking revenue | | 423 | | | 489 |
Net gains on sales of investment securities | | - | | | 1,089 |
Other |
| 175
| |
| 181
|
Total Noninterest Income | | 9,832 | | | 10,180 |
| | | | | |
Operating Expenses: | | | | | |
Salaries, wages and employee benefits | | 14,590 | | | 14,544 |
Occupancy and equipment | | 4,786 | | | 4,756 |
Other |
| 5,745
| |
| 5,683
|
Total Operating Expenses |
| 25,121
| |
| 24,983
|
Income Before Income Taxes | | 17,842 | | | 20,414 |
Provision for federal income taxes |
| 5,945
| |
| 6,910
|
Net Income | $
| 11,897
| | $
| 13,504
|
| | | | | |
Net income per share: | | | | | |
Basic | $ | 0.47 | | $ | 0.54 |
Diluted | | 0.47 | | | 0.53 |
| | | | | |
Cash dividends per share | $ | 0.275 | | $ | 0.265 |
| | | | | |
Average shares outstanding: | | | | | |
Basic | | 25,097 | | | 25,183 |
Diluted | | 25,140 | | | 25,247 |
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Chemical Financial Corporation Announces First Quarter Operating Results
|
Financial Summary (Unaudited)
Chemical Financial Corporation and Subsidiaries
| Three Months Ended
March 31, |
(Dollars in thousands)
| 2006
|
| 2005
|
Average Balances | | | | | |
Total assets | $ | 3,770,833 | | $ | 3,822,046 |
Total interest-earning assets | | 3,535,728 | | | 3,585,659 |
Total loans | | 2,695,742 | | | 2,575,331 |
Total deposits | | 2,872,473 | | | 2,929,347 |
Total shareholders' equity | | 503,990 | | | 487,557 |
| Three Months Ended
March 31, |
| 2006
|
| 2005
|
Key Ratios (annualized where applicable) | | | | | |
Net interest margin | | 3.90% | | | 4.11% |
Efficiency ratio | | 57.3% | | | 54.7% |
Return on average assets | | 1.28% | | | 1.43% |
Return on average shareholders' equity | | 9.6% | | | 11.2% |
Average shareholders' equity as a | | | | | |
percent of average assets | | 13.4% | | | 12.8% |
Tangible shareholders' equity as a | | | | | |
percent of total assets | | 11.8% | | | 11.1% |
Total risk-based capital ratio | | 18.1% | | | 17.7% |
| March 31,
2006
|
| December 31,
2005
|
| September 30,
2005
|
| June 30,
2005
|
| March 31,
2005
|
Credit Quality Statistics | | | | | | | | | | | | | | |
Nonaccrual loans | $ | 13,902 | | $ | 14,561 | | $ | 9,913 | | $ | 8,639 | | $ | 7,823 |
Loans 90 or more days past due | | | | | | | | | | | | | | |
and still accruing | | 5,773 | | | 5,136 | | | 10,364 | | | 7,426 | | | 2,914 |
Total nonperforming loans | | 19,675 | | | 19,697 | | | 20,277 | | | 16,065 | | | 10,737 |
Repossessed assets (RA) | | 8,411 | | | 6,801 | | | 6,511 | | | 5,848 | | | 6,544 |
Total nonperforming assets | | 28,086 | | | 26,498 | | | 26,788 | | | 21,913 | | | 17,281 |
Net loan charge-offs (year-to-date) | | 454 | | | 4,303 | | | 2,523 | | | 1,804 | | | 725 |
| | | | | | | | | | | | | | |
Allowance for loan losses as a | | | | | | | | | | | | | | |
percent of total loans | | 1.27% | | | 1.26% | | | 1.28% | | | 1.27% | | | 1.33% |
Allowance for loan losses as a | | | | | | | | | | | | | | |
percent of nonperforming loans | | 174% | | | 173% | | | 171% | | | 211% | | | 318% |
Nonperforming loans as a | | | | | | | | | | | | | | |
percent of total loans | | 0.73% | | | 0.73% | | | 0.75% | | | 0.61% | | | 0.42% |
Nonperforming assets as a | | | | | | | | | | | | | | |
percent of total loans plus RA | | 1.04% | | | 0.98% | | | 0.99% | | | 0.82% | | | 0.67% |
Nonperforming assets as a | | | | | | | | | | | | | | |
percent of total assets | | 0.75% | | | 0.71% | | | 0.70% | | | 0.59% | | | 0.46% |
Net loan charge-offs as a percent of | | | | | | | | | | | | | | |
average loans (year-to-date, annualized) | | 0.07% | | | 0.16% | | | 0.13% | | | 0.14% | | | 0.11% |
| March 31,
2006
|
| December 31,
2005
|
| September 30,
2005
|
| June 30,
2005
|
| March 31,
2005
|
Additional Data | | | | | | | | | | | | | | |
Goodwill | $ | 63,293 | | $ | 63,293 | | $ | 63,293 | | $ | 63,293 | | $ | 63,293 |
Core deposits and other intangibles | | 5,246 | | | 5,780 | | | 6,306 | | | 6,797 | | | 7,324 |
Mortgage servicing rights (MSR) | | 2,283 | | | 2,423 | | | 2,595 | | | 2,941 | | | 3,111 |
Amortization of intangibles (quarter-to-date) | | 718 | | | 776 | | | 903 | | | 793 | | | 800 |
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Chemical Financial Corporation Announces First Quarter Operating Results
|
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation and Subsidiaries
(In thousands, except per share data)
| 1st Qtr.
2006
|
| 4th Qtr.
2005
|
| 3rd Qtr.
2005
|
| 2nd Qtr.
2005
|
| 1st Qtr.
2005
|
Summary of Operations | | | | | | | | | |
Interest income | $52,277 | | $51,912 | | $50,420 | | $49,012 | | $47,960 |
Interest expense | 18,686 | | 16,852 | | 15,274 | | 13,314 | | 12,013 |
Net interest income | 33,591 | | 35,060 | | 35,146 | | 35,698 | | 35,947 |
Provision for loan losses | 460 | | 1,325 | | 1,500 | | 730 | | 730 |
Net interest income after provision | | | | | | | | | |
for loan losses | 33,131 | | 33,735 | | 33,646 | | 34,968 | | 35,217 |
Noninterest income | 9,832 | | 9,038 | | 10,249 | | 9,753 | | 10,180 |
Noninterest expense | 25,121 | | 23,878 | | 24,839 | | 24,763 | | 24,983 |
Income taxes | 5,945 | | 6,341 | | 5,451 | | 6,743 | | 6,910 |
Net income | 11,897 | | 12,554 | | 13,605 | | 13,215 | | 13,504 |
|
|
|
|
|
|
|
|
|
|
Per Common Share Data | | | | | | | | | |
Net income: | | | | | | | | | |
Basic | $0.47 | | $0.50 | | $0.54 | | $0.53 | | $0.54 |
Diluted | 0.47 | | 0.50 | | 0.54 | | 0.53 | | 0.53 |
Cash dividends | 0.275 | | 0.265 | | 0.265 | | 0.265 | | 0.265 |
Book value | 20.10 | | 19.98 | | 19.82 | | 19.68 | | 19.32 |
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