For further information:
David B. Ramaker, CEO
Lori A. Gwizdala, CFO
989-839-5350
Chemical Financial Corporation Reports Third Quarter 2012 Results
MIDLAND, MI, October 22, 2012 -- -- Chemical Financial Corporation (NASDAQ:CHFC) today announced 2012 third quarter net income of $13.1 million, or $0.48 per diluted share, compared to 2012 second quarter net income of $13.9 million, or $0.50 per diluted share, and 2011 third quarter net income of $11.6 million, or $0.42 per diluted share. For the nine months ended September 30, 2012, net income was $39.3 million, or $1.43 per diluted share, compared to net income for the nine months ended September 30, 2011 of $31.8 million, or $1.16 per diluted share.
"Despite uneven economic conditions, Chemical Financial continues to post strong operating performance and stable financial results. Furthermore, we are making substantial progress working through our nonperforming loans and other real estate (ORE) portfolio, while controlling costs. As a result, our key credit quality and financial performance metrics continue to improve," said David B. Ramaker, Chairman, Chief Executive Officer and President of the Corporation.
"Our strong financial condition favorably positions us to pursue organic and acquisitive growth opportunities, as evidenced by our pending acquisition of 21 branch offices from Independent Bank, which has received regulatory approval and is expected to close in the fourth quarter of 2012. We will selectively assess other potential growth opportunities that arise as we expect Michigan's banking industry to continue to consolidate," said Ramaker.
The decrease in net income in the third quarter of 2012 from the second quarter of 2012 of $0.8 million, or 5.5 percent, was primarily attributable to a decrease of $1.2 million in noninterest income that was largely due to the receipt of nonrecurring noninterest income of $0.8 million in
1
the second quarter of 2012. While net interest income was $0.5 million higher in the third quarter of 2012 than in the second quarter of 2012, the increase in net interest income was offset by $0.5 million increases in both the provision for loan losses and operating expenses in the third quarter of 2012, as compared to the second quarter of 2012.
The increase in net income in the third quarter of 2012 over the third quarter of 2011 of $1.5 million, or 12.7 percent, was attributable to increases in both net interest income and noninterest income and a decrease in the provision for loan losses, which were partially offset by an increase in operating expenses. The increase in operating expenses was attributable to acquisition-related expenses incurred in the third quarter of 2012.
The Corporation's return on average assets during the third quarter of 2012 was 0.96 percent, compared to 1.04 percent in the second quarter of 2012 and 0.87 percent in the third quarter of 2011. The Corporation's return on average equity was 8.8 percent in the third quarter of 2012, compared to 9.6 percent in the second quarter of 2012 and 8.0 percent in the third quarter of 2011.
Net interest income was $46.9 million in the third quarter of 2012, which was $0.5 million, or 1.0 percent, higher than the second quarter of 2012 and $0.6 million, or 1.4 percent, higher than the third quarter of 2011. The net interest margin (on a tax-equivalent basis) in the third quarter of 2012 was 3.76 percent, compared to 3.80 percent in both the second quarter of 2012 and the third quarter of 2011.
The increase in net interest income of $0.5 million in the third quarter of 2012 over the second quarter of 2012 was primarily attributable to an increase in interest income that resulted from an increase in average loans of $87 million, or 2.2 percent, during the third quarter of 2012, which was partially offset by the net impact of interest-earning assets and interest-bearing liabilities repricing during the third quarter of 2012. The increase in net interest income of $0.6 million in the third quarter of 2012 over the third quarter of 2011 was primarily attributable to both an increase in interest income that resulted from an increase in average loans of $218 million, or 5.8 percent, during the twelve months ended September 30, 2012 and a slight decrease in interest
2
expense resulting from a change in the mix of deposit liabilities between these two quarters. The favorable impact on net interest income of these two items was partially offset by the net impact of interest-earning assets and interest-bearing liabilities repricing during the twelve months ended September 30, 2012.
The provision for loan losses (provision) was $4.5 million in the third quarter of 2012, compared to $4.0 million in the second quarter of 2012 and $6.4 million in the third quarter of 2011, with $0.5 million of the provision in the third quarter of 2012 and $1.3 million of the provision in the third quarter of 2011 applicable to the acquired loan portfolio. Net loan charge-offs were $6.5 million in the third quarter of 2012, compared to $5.1 million in the second quarter of 2012 and $7.4 million in the third quarter of 2011, with $2.2 million of net loan charge-offs in the third quarter of 2012 related to one loan relationship in the acquired loan portfolio.
The Corporation established an allowance for loan losses on the acquired loan portfolio of $1.6 million in 2011 and increased it by $0.6 million and $0.5 million in the first and third quarters of 2012, respectively. The establishment of the allowance for loan losses on the acquired loan portfolio was primarily attributable to the impairment of one commercial loan relationship which resulted in one of the acquired loan pools performing below original expectations. During the third quarter of 2012, the Corporation charged off $2.2 million of this loan relationship, resulting in a $0.2 million loan balance that remained outstanding at September 30, 2012. At September 30, 2012, the allowance for loan losses on the acquired loan portfolio was $0.5 million and was related to two consumer loan pools performing slightly below original expectations. It is management's belief that the remaining acquired loan pools at September 30, 2012, were performing, overall, as or slightly better than expected compared to original expectations.
Noninterest income was $12.1 million in the third quarter of 2012, compared to $13.3 million in the second quarter of 2012 and $11.2 million in the third quarter of 2011. Noninterest income in the second quarter of 2012 included nonrecurring income of $0.6 million from the partial insurance recovery of a 2008 branch cash loss and $0.2 million of other nonrecurring income. Excluding nonrecurring income, noninterest income in the third quarter of 2012 was $0.4 million
3
lower than the second quarter of 2012, which was attributable to lower wealth management revenue.
Noninterest income in the third quarter of 2012 was $0.9 million higher than the third quarter of 2011, with the increase attributable to increases across all major categories of noninterest income as a result of both fee increases and volume growth. The largest increase in noninterest income was in mortgage banking revenue (MBR), with MBR of $1.5 million in the third quarter of 2012 up $0.3 million from MBR of $1.2 million in the third quarter of 2011. The increase in MBR between these two quarters was primarily driven by higher volume, as the Corporation sold $71 million of mortgages in the secondary market in the third quarter of 2012, compared to the sale of $48 million in the third quarter of 2011.
Operating expenses were $36.1 million in the third quarter of 2012, compared to $35.5 million in the second quarter of 2012 and $35.4 million in the third quarter of 2011. The Corporation's control of operating expenses has resulted in its ability to maintain its efficiency ratio favorably below the average efficiency ratios of its Federal Reserve Bank peer group. The Corporation's efficiency ratios were 59.9 percent in the third quarter of 2012, 58.3 percent in the second quarter of 2012 and 60.2 percent in the third quarter of 2011.
Operating expenses in the second and third quarters of 2012 included acquisition-related expenses applicable to the pending acquisition of branches from Independent Bank of $0.5 million and $0.6 million, respectively. Excluding acquisition-related expenses, operating expenses in the third quarter of 2012 were $0.4 million higher than the second quarter of 2012 and $0.1 million higher than the third quarter of 2011. The increase in operating expenses in the third quarter of 2012 over the second quarter of 2012 was primarily attributable to seasonally higher advertising and marketing costs. The Corporation's operating expenses were essentially the same in the third quarters of 2012 and 2011, as increases in various expense categories in the third quarter of 2012, including an increase in compensation costs of $1.5 million, or 7.8 percent, were almost entirely offset by decreases in other expense categories, including lower credit-related expenses. Credit-related expenses were $0.5 million in the third quarter of 2012, a
4
reduction of $1.7 million, or 75 percent, from credit-related expenses of $2.2 million in the third quarter of 2011.
Credit-related expenses, comprised of loan collection costs and ORE net costs, were $2.6 million during the nine months ended September 30, 2012, a decrease of $3.2 million, or 55 percent, from credit-related expenses of $5.8 million during the nine months ended September 30, 2011. Credit-related expenses were lower in all three quarters of 2012, as compared to their respective quarters in 2011. The decrease in credit-related expenses of $3.2 million was largely attributable to the Corporation recognizing net gains of $1.4 million on the sale/writedown of ORE properties during the nine months ended September 30, 2012, compared to incurring net expense of $0.6 million during the nine months ended September 30, 2011. The additional reduction in credit-related expenses of $1.2 million was largely attributable to lower legal collection costs and lower appraisal fees on nonperforming and watch loan credits as the credit quality of the Corporation's loan portfolio continued to improve.
Total assets were $5.58 billion at September 30, 2012, up from $5.35 billion at June 30, 2012 and $5.44 billion at September 30, 2011. The increase in total assets during the third quarter of 2012 was attributable to an increase in interest-bearing balances held at the Federal Reserve Bank (FRB) due to a seasonal increase in municipal customer deposits. The Corporation has maintained significant amounts of funds at the FRB, with $315 million in balances held at the FRB at September 30, 2012, compared to $120 million at June 30, 2012 and $479 million at September 30, 2011.
Total loans were $4.02 billion at September 30, 2012, up from $3.96 billion at June 30, 2012 and $3.76 billion at September 30, 2011. Total loans increased $57 million, or 1.4%, in the third quarter of 2012. The Corporation's loan growth during the third quarter of 2012 occurred primarily in the commercial and consumer loan portfolios, with commercial loans increasing $37 million, or 4 percent, and consumer loans increasing $19 million, or 2 percent. During the twelve months ended September 30, 2012, total loans increased $259 million, or 6.9 percent, with commercial loans increasing $93 million, or 10.8 percent, real estate commercial loans increasing $61 million, or 5.8 percent, real estate residential loans increasing $40 million, or 4.8
5
percent, and consumer installment and home equity loans increasing $93 million, or 10.6 percent, while real estate construction and land development loans decreased $29 million, or 24.2 percent. The increases in loans during the three and twelve months ended September 30, 2012 were attributable to a combination of improving economic conditions and higher loan demand, as well as the Corporation increasing its market share. The average yield on the loan portfolio was 4.86 percent in the third quarter of 2012, compared to 4.96 percent in the second quarter of 2012 and 5.29 percent in the third quarter of 2011.
Investment securities were $868 million at September 30, 2012, compared to $893 million at June 30, 2012 and $797 million at September 30, 2011. The average yield of the investment securities portfolio, on a fully taxable equivalent basis, was 2.13 percent in the third quarter of 2012, compared to 2.17 percent in the second quarter of 2012 and 2.35 percent in the third quarter of 2011.
Total deposits were $4.60 billion at September 30, 2012, up from $4.38 billion at June 30, 2012 and $4.48 billion at September 30, 2011. The Corporation experienced an increase in total deposits of $215 million, or 4.9 percent, during the third quarter of 2012, which was attributable to a seasonal increase in deposits of municipal customers. Remaining brokered deposits acquired in the Corporation's 2010 acquisition of Byron Bank were $75 million at September 30, 2012, compared to $84 million at June 30, 2012 and $98 million at September 30, 2011. Federal Home Loan Bank (FHLB) advances totaled $37.2 million at September 30, 2012, compared to $38.2 million at June 30, 2012 and $46.0 million at September 30, 2011. The repricing of matured customer certificates of deposit and the decrease in interest rates on various interest-bearing deposit accounts to reflect lower market interest rates resulted in the Corporation's average cost of funds declining to 0.46 percent in the third quarter of 2012 from 0.51 percent in the second quarter of 2012 and 0.65 percent in the third quarter of 2011.
At September 30, 2012, the Corporation's tangible equity to assets ratio and total risk-based capital ratio were 8.8 percent and 13.6 percent, respectively, compared to 9.0 percent and 13.6 percent, respectively, at June 30, 2012 and 8.6 percent and 13.1 percent, respectively, at
6
September 30, 2011. At September 30, 2012, the Corporation's book value was $21.75 per share, compared to $21.42 per share at June 30, 2012 and $21.02 per share at September 30, 2011.
The credit quality of the Corporation's loan portfolio continued to show further improvement during the third quarter of 2012. At September 30, 2012, the Corporation's nonperforming loans, consisting of nonaccrual loans, accruing loans past due 90 days or more as to principal or interest and nonperforming troubled debt restructurings, totaled $90.9 million, compared to $92.8 million at June 30, 2012 and $120.4 million at September 30, 2011, representing declines of 2.1 percent and 24.5 percent, respectively. At September 30, 2012, nonperforming loans as a percentage of total loans were 2.26 percent, compared to 2.34 percent at June 30, 2012 and 3.20 percent at September 30, 2011.
Other real estate and repossessed assets totaled $19.5 million at September 30, 2012, compared to $23.5 million at June 30, 2012 and $28.7 million at September 30, 2011. The decrease in other real estate during the third quarter of 2012 was primarily attributable to the sale of one ORE property, which consisted of vacant land with a carrying value of $4.1 million. This ORE property was obtained as a result of the Corporation receiving a deed in lieu of foreclosure on this property during the fourth quarter of 2010 that was attributable to a loan acquired in the Corporation's acquisition of Byron Bank. This loan was impaired at the acquisition date and was recorded at the estimated fair value of the collateral at that time.
At September 30, 2012, the allowance for loan losses of the originated loan portfolio was $84.2 million, or 2.33 percent of originated loans, compared to 2.40 percent at June 30, 2012 and 2.68 percent at September 30, 2011. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 93 percent at September 30, 2012, compared to 91 percent at June 30, 2012 and 73 percent at September 30, 2011. The allowance for loan losses of the acquired loan portfolio was $0.5 million at September 30, 2012, compared to $2.2 million at June 30, 2012 and $1.3 million at September 30, 2011. Management believes that the Corporation's acquired loan portfolio at September 30, 2012 totaling $413 million, was performing, overall, as or slightly better than original expectations.
7
Chemical Financial Corporation is the second largest bank holding company headquartered and operating branch offices in Michigan. The Corporation operates through a single subsidiary bank, Chemical Bank, with 142 banking offices spread over 32 counties in the lower peninsula of Michigan. At September 30, 2012, the Corporation had total assets of $5.6 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. More information about the Corporation is available by visiting the investor relations section of its website at www.chemicalbankmi.com.
8
Forward-Looking Statements
This press release contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy and Chemical Financial Corporation. Words such as "anticipated," "awaiting," "believe," "continue," "estimated," "expects," "further," "improving," "opportunities," "pending," "positions," "potential," "strategies," "trends," "will" and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements are based upon current beliefs and expectations and involve substantial risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These statements include, among others, statements related to the credit quality of the loan portfolio, future levels of nonperforming loans, future economic trends and conditions, anticipated consolidation opportunities in Michigan's banking industry, potential growth opportunities, future income levels, and our ability to grow our loan portfolio, improve credit quality and control operating costs. All statements referencing future time periods are forward-looking. Management's determination of the provision and allowance for loan losses, the carrying value of acquired loans, goodwill, mortgage servicing rights and other real estate owned and the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary and the amount of any impairment) involve judgments that are inherently forward-looking. Management's assumptions concerning pension and other postretirement benefit plans involve judgments that are inherently forward-looking. There can be no assurance that future loan losses will be limited to the amounts estimated or that other real estate owned can be sold for its carrying value or at all. The future effect of changes in the financial and credit markets and the national and regional economy on the banking industry, generally, and on the 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. The Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
This press release contains forward-looking statements regarding the Corporation's outlook or expectations with respect to the planned acquisition of branches from Independent Bank, the expected costs to be incurred in connection with the acquisition, the future performance of the branches to be acquired, the consequences of their integration into Chemical Bank, and the impact of the transaction on the Corporation's future performance. Even though regulatory approval has been received, circumstances could arise which may delay or impede the completion of the transaction, although none are known at this time. The impact of the completion of the transaction on the Corporation's financial statements will be affected by the timing of the transaction, including, in particular, the ability to complete the acquisition in the fourth quarter of 2012. The transaction may be more expensive to complete and the anticipated benefits, including anticipated strategic gains, may be significantly harder or take longer to achieve than expected or may not be achieved in their entirety or at all as a result of unexpected factors or events.
9
Risk factors include, but are not limited to, the risk factors described in Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2011. 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.
10
Chemical Financial Corporation Announces Third Quarter Operating Results |
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
| September 30 | | December 31 | | September 30 | |
(In thousands, except per share data) | 2012 | | 2011 | | 2011 | |
Assets: | | | | | | | | | |
Cash and cash equivalents: | | | | | | | | | |
Cash and cash due from banks | $ | 123,519 | | $ | 121,294 | | $ | 126,712 | |
Interest-bearing deposits with unaffiliated banks and others | | 315,201 | | | 260,646 | | | 484,572 | |
Total cash and cash equivalents | | 438,720 | | | 381,940 | | | 611,284 | |
Investment securities: | | | | | | | | | |
Available-for-sale | | 646,578 | | | 667,276 | | | 610,493 | |
Held-to-maturity | | 221,536 | | | 183,339 | | | 186,432 | |
Total Investment Securities | | 868,114 | | | 850,615 | | | 796,925 | |
Loans held-for-sale | | 15,075 | | | 18,818 | | | 15,212 | |
| | | | | | | | | |
Loans: | | | | | | | | | |
Commercial | | 951,938 | | | 895,150 | | | 858,969 | |
Real estate commercial | | 1,117,073 | | | 1,071,999 | | | 1,056,092 | |
Real estate construction and land development | | 90,882 | | | 118,176 | | | 119,829 | |
Real estate residential | | 880,295 | | | 861,716 | | | 840,044 | |
Consumer installment and home equity | | 978,971 | | | 884,244 | | | 885,492 | |
Total Loans | | 4,019,159 | | | 3,831,285 | | | 3,760,426 | |
Allowance for loan losses | | (84,694 | ) | | (88,333 | ) | | (88,713 | ) |
Net Loans | | 3,934,465 | | | 3,742,952 | | | 3,671,713 | |
| | | | | | | | | |
Premises and equipment | | 67,796 | | | 65,997 | | | 64,998 | |
Goodwill | | 113,414 | | | 113,414 | | | 113,414 | |
Other intangible assets | | 10,243 | | | 11,472 | | | 11,849 | |
Interest receivable and other assets | | 132,594 | | | 154,245 | | | 154,209 | |
Total Assets | $ | 5,580,421 | | $ | 5,339,453 | | $ | 5,439,604 | |
| | | | | | | | | |
Liabilities: | | | | | | | | | |
Deposits: | | | | | | | | | |
Noninterest-bearing | $ | 952,126 | | $ | 875,791 | | $ | 891,363 | |
Interest-bearing | | 3,646,746 | | | 3,491,066 | | | 3,589,223 | |
Total Deposits | | 4,598,872 | | | 4,366,857 | | | 4,480,586 | |
Interest payable and other liabilities | | 34,738 | | | 54,024 | | | 33,700 | |
Short-term borrowings | | 311,471 | | | 303,786 | | | 302,298 | |
Federal Home Loan Bank advances | | 37,237 | | | 43,057 | | | 45,991 | |
Total Liabilities | | 4,982,318 | | | 4,767,724 | | | 4,862,575 | |
| | | | | | | | | |
Shareholders' Equity: | | | | | | | | | |
Preferred stock, no par value per share | | - | | | - | | | - | |
Common stock, $1 par value per share | | 27,498 | | | 27,457 | | | 27,457 | |
Additional paid-in capital | | 432,627 | | | 431,277 | | | 430,462 | |
Retained earnings | | 160,884 | | | 138,324 | | | 132,611 | |
Accumulated other comprehensive loss | | (22,906 | ) | | (25,329 | ) | | (13,501 | ) |
Total Shareholders' Equity | | 598,103 | | | 571,729 | | | 577,029 | |
Total Liabilities and Shareholders' Equity | $ | 5,580,421 | | $ | 5,339,453 | | $ | 5,439,604 | |
11
Chemical Financial Corporation Announces Third Quarter Operating Results |
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
| Three Months Ended
September 30 | | Nine Months Ended
September 30 | |
(In thousands, except per share data) | 2012 | | 2011 | | 2012 | | 2011 | |
Interest Income: | | | | | | | | | | | | |
Interest and fees on loans | $ | 48,322 | | $ | 49,770 | | $ | 144,472 | | $ | 148,382 | |
Interest on investment securities: | | | | | | | | | | | | |
Taxable | | 2,458 | | | 2,335 | | | 7,610 | | | 6,884 | |
Tax-exempt | | 1,457 | | | 1,513 | | | 4,407 | | | 4,385 | |
Dividends on nonmarketable equity securities | | 128 | | | 114 | | | 638 | | | 605 | |
Interest on deposits with unaffiliated banks and others | | 136 | | | 266 | | | 505 | | | 856 | |
Total Interest Income | | 52,501 | | | 53,998 | | | 157,632 | | | 161,112 | |
| | | | | | | | | | | | |
Interest Expense: | | | | | | | | | | | | |
Interest on deposits | | 5,238 | | | 7,199 | | | 16,999 | | | 22,628 | |
Interest on short-term borrowings | | 105 | | | 117 | | | 317 | | | 418 | |
Interest on Federal Home Loan Bank advances | | 248 | | | 413 | | | 765 | | | 1,298 | |
Total Interest Expense | | 5,591 | | | 7,729 | | | 18,081 | | | 24,344 | |
Net Interest Income | | 46,910 | | | 46,269 | | | 139,551 | | | 136,768 | |
Provision for loan losses | | 4,500 | | | 6,400 | | | 13,500 | | | 20,900 | |
Net Interest Income after Provision for Loan Losses | | 42,410 | | | 39,869 | | | 126,051 | | | 115,868 | |
| | | | | | | | | | | | |
Noninterest Income: | | | | | | | | | | | | |
Service charges and fees on deposit accounts | | 5,028 | | | 4,780 | | | 14,546 | | | 13,504 | |
Wealth management revenue | | 2,745 | | | 2,638 | | | 8,835 | | | 8,430 | |
Other charges and fees for customer services | | 2,778 | | | 2,581 | | | 8,489 | | | 7,967 | |
Mortgage banking revenue | | 1,457 | | | 1,173 | | | 4,059 | | | 2,736 | |
Gain on sale of merchant card services | | - | | | - | | | 1,280 | | | - | |
Other | | 54 | | | 53 | | | 784 | | | 262 | |
Total Noninterest Income | | 12,062 | | | 11,225 | | | 37,993 | | | 32,899 | |
| | | | | | | | | | | | |
Operating Expenses: | | | | | | | | | | | | |
Salaries, wages and employee benefits | | 20,738 | | | 19,229 | | | 61,846 | | | 55,622 | |
Occupancy | | 3,137 | | | 3,093 | | | 9,264 | | | 9,530 | |
Equipment and software | | 3,406 | | | 3,162 | | | 9,651 | | | 8,994 | |
Other | | 8,785 | | | 9,910 | | | 27,137 | | | 30,050 | |
Total Operating Expenses | | 36,066 | | | 35,394 | | | 107,898 | | | 104,196 | |
Income Before Income Taxes | | 18,406 | | | 15,700 | | | 56,146 | | | 44,571 | |
Federal Income Tax Expense | | 5,300 | | | 4,075 | | | 16,800 | | | 12,725 | |
Net Income | $ | 13,106 | | $ | 11,625 | | $ | 39,346 | | $ | 31,846 | |
| | | | | | | | | | | | |
Net income per common share: | | | | | | | | | | | | |
Basic | $ | 0.48 | | $ | 0.42 | | $ | 1.43 | | $ | 1.16 | |
Diluted | | 0.48 | | | 0.42 | | | 1.43 | | | 1.16 | |
| | | | | | | | | | | | |
Key Ratios: | | | | | | | | | | | | |
Return on average assets | | 0.96% | | | 0.87% | | | 0.97% | | | 0.80% | |
Return on average shareholders' equity | | 8.8% | | | 8.0% | | | 9.0% | | | 7.5% | |
Net interest margin | | 3.76% | | | 3.80% | | | 3.77% | | | 3.79% | |
Efficiency ratio | | 59.9% | | | 60.2% | | | 59.5% | | | 60.0% | |
12
Chemical Financial Corporation Announces Third Quarter Operating Results |
Financial Summary (Unaudited)
Chemical Financial Corporation
| Three Months Ended |
| Sept 30 | | June 30 | | March 31 | | Dec 31 | | Sept 30 | | June 30 | | March 31 |
(Dollars in thousands) | 2012 | | 2012 | | 2012 | | 2011 | | 2011 | | 2011 | | 2011 |
Average Balances | | | | | | | | | | | | | | | | | | | | |
Total assets | $ | 5,433,491 | | $ | 5,360,598 | | $ | 5,396,420 | | $ | 5,341,079 | | $ | 5,323,962 | | $ | 5,255,244 | | $ | 5,302,558 |
Total interest-earning assets | | 5,105,101 | | | 5,044,629 | | | 5,061,882 | | | 5,008,813 | | | 4,985,380 | | | 4,928,590 | | | 4,963,384 |
Total loans | | 3,987,928 | | | 3,901,321 | | | 3,824,604 | | | 3,772,140 | | | 3,769,745 | | | 3,707,468 | | | 3,672,301 |
Total deposits | | 4,464,582 | | | 4,383,628 | | | 4,416,273 | | | 4,378,066 | | | 4,358,658 | | | 4,299,728 | | | 4,362,774 |
Total interest-bearing liabilities | | 3,823,954 | | | 3,817,753 | | | 3,903,986 | | | 3,847,003 | | | 3,853,443 | | | 3,857,678 | | | 3,942,406 |
Total shareholders' equity | | 591,683 | | | 582,873 | | | 574,261 | | | 578,105 | | | 573,580 | | | 565,500 | | | 560,661 |
| | | | | | | | | | | | | | | | | | | | |
Key Ratios (annualized where applicable) | | | | | | | | | | | | | | | | | | | | |
Net interest margin (taxable
equivalent basis) | |
3.76%
| | |
3.80%
| | |
3.76%
| | |
3.84%
| | |
3.80%
| | |
3.78%
| | |
3.78%
|
Efficiency ratio | | 59.9% | | | 58.3% | | | 60.4% | | | 63.1% | | | 60.2% | | | 58.2% | | | 61.8% |
Return on average assets | | 0.96% | | | 1.04% | | | 0.92% | | | 0.83% | | | 0.87% | | | 0.84% | | | 0.70% |
Return on average shareholders' equity | | 8.8% | | | 9.6% | | | 8.7% | | | 7.7% | | | 8.0% | | | 7.8% | | | 6.6% |
Average shareholders' equity as a | | | | | | | | | | | | | | | | | | | | |
percent of average assets | | 10.9% | | | 10.9% | | | 10.6% | | | 10.8% | | | 10.8% | | | 10.8% | | | 10.6% |
Capital ratios (period end): | | | | | | | | | | | | | | | | | | | | |
Tangible shareholders' equity as a | | | | | | | | | | | | | | | | | | | | |
percent of total assets | | 8.8% | | | 9.0% | | | 8.7% | | | 8.7% | | | 8.6% | | | 8.9% | | | 8.5% |
Total risk-based capital ratio | | 13.6% | | | 13.6% | | | 13.7% | | | 13.3% | | | 13.1% | | | 13.0% | | | 13.0% |
| Sept 30 | | June 30 | | March 31 | | Dec 31 | | Sept 30 | | June 30 | | March 31 |
| 2012 | | 2012 | | 2012 | | 2011 | | 2011 | | 2011 | | 2011 |
Credit Quality Statistics | | | | | | | | | | | | | | | | | | | | |
Originated Loans | $ | 3,606,547 | | $ | 3,515,110 | | $ | 3,370,279 | | $ | 3,338,502 | | $ | 3,265,054 | | $ | 3,225,179 | | $ | 3,143,489 |
Acquired Loans | | 412,612 | | | 447,232 | | | 472,819 | | | 492,783 | | | 495,372 | | | 522,831 | | | 539,027 |
Nonperforming Assets: | | | | | | | | | | | | | | | | | | | | |
Nonperforming loans | | 90,877 | | | 92,811 | | | 98,548 | | | 106,269 | | | 120,395 | | | 135,929 | | | 145,859 |
Other real estate and repossessed
assets (ORE) | |
19,467
| | |
23,509
| | |
25,944
| | |
25,484
| | |
28,679
| | |
24,607
| | |
26,355
|
Total nonperforming assets | | 110,344 | | | 116,320 | | | 124,492 | | | 131,753 | | | 149,074 | | | 160,536 | | | 172,214 |
| | | | | | | | | | | | | | | | | | | | |
Performing troubled debt
restructurings | |
26,806
| | |
26,383
| | |
27,177
| | |
20,394
| | |
15,543
| | |
12,889
| | |
-
|
| | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses-originated
as a percent of: | | | | | | | | | | | | | | | | | | | | |
Total originated loans | | 2.33% | | | 2.40% | | | 2.54% | | | 2.60% | | | 2.68% | | | 2.78% | | | 2.85% |
Nonperforming loans | | 93% | | | 91% | | | 87% | | | 82% | | | 73% | | | 66% | | | 61% |
| | | | | | | | | | | | | | | | | | | | |
Nonperforming loans as a percent of
total loans | |
2.26%
| | |
2.34%
| | |
2.56%
| | |
2.77%
| | |
3.20%
| | |
3.63%
| | |
3.96%
|
Nonperforming assets as a percent of: | | | | | | | | | | | | | | | | | | | | |
Total loans plus ORE | | 2.73% | | | 2.92% | | | 3.22% | | | 3.42% | | | 3.93% | | | 4.26% | | | 4.64% |
Total assets | | 1.98% | | | 2.17% | | | 2.28% | | | 2.47% | | | 2.74% | | | 3.08% | | | 3.23% |
| | | | | | | | | | | | | | | | | | | | |
Net loan charge-offs (year-to-date): | | | | | | | | | | | | | | | | | | | | |
Originated | | 14,939 | | | 10,622 | | | 5,548 | | | 27,197 | | | 21,717 | | | 14,297 | | | 7,356 |
Acquired | | 2,200 | | | - | | | - | | | - | | | - | | | - | | | - |
Total loan charge-offs (year-to-date) | | 17,139 | | | 10,622 | | | 5,548 | | | 27,197 | | | 21,717 | | | 14,297 | | | 7,356 |
Net loan charge-offs as a percent of | | | | | | | | | | | | | | | | | | | | |
average loans (year-to-date,
annualized) | |
0.59%
| | |
0.55%
| | |
0.58%
| | |
0.73%
| | |
0.78%
| | |
0.77%
| | |
0.80%
|
| Sept 30 | | June 30 | | March 31 | | Dec 31 | | Sept 30 | | June 30 | | March 31 |
| 2012 | | 2012 | | 2012 | | 2011 | | 2011 | | 2011 | | 2011 |
Additional Data - Intangibles | | | | | | | | | | | | | | | | | | | | |
Goodwill | $ | 113,414 | | $ | 113,414 | | $ | 113,414 | | $ | 113,414 | | $ | 113,414 | | $ | 113,414 | | $ | 113,414 |
Core deposit intangibles | | 6,777 | | | 7,144 | | | 7,512 | | | 7,879 | | | 8,261 | | | 8,643 | | | 9,024 |
Mortgage servicing rights (MSR) | | 3,466 | | | 3,463 | | | 3,427 | | | 3,593 | | | 3,561 | | | 3,577 | | | 3,832 |
Other intangible assets | | - | | | - | | | - | | | - | | | 27 | | | 107 | | | 204 |
Amortization of core deposit
intangibles (quarter only) | |
367
| | |
368
| | |
367
| | |
382
| | |
382
| | |
381
| | |
382
|
13
Chemical Financial Corporation Announces Third Quarter Operating Results |
Average Balances, Tax Equivalent Interest and Effective Yields and Rates (Unaudited)*
| Three Months Ended September 30, 2012 | |
(Dollars in thousands)
|
Average
Balance
| | Tax
Equivalent
Interest | |
Effective
Yield/Rate
| |
Assets | | | | | | | | |
Interest-Earning Assets: | | | | | | | | |
Loans** | $ | 4,001,117 | | $ | 48,807 | | 4.86 | % |
Taxable investment securities | | 685,580 | | | 2,458 | | 1.43 | |
Tax-exempt investment securities | | 191,902 | | | 2,221 | | 4.63 | |
Other interest-earning assets | | 25,572 | | | 128 | | 1.99 | |
Interest-bearing deposits with | | | | | | | | |
unaffiliated banks and others | | 200,930 | | | 136 | | 0.27 | |
Total interest-earning assets | | 5,105,101 | | | 53,750 | | 4.19 | |
Less: Allowance for loan losses | | 87,796 | | | | | | |
Other Assets: | | | | | | | | |
Cash and cash due from banks | | 119,107 | | | | | | |
Premises and equipment | | 67,911 | | | | | | |
Interest receivable and other assets | | 229,168 | | | | | | |
Total Assets | $ | 5,433,491 | | | | | | |
| | | | | | | | |
Liabilities and shareholders' equity | | | | | | | | |
Interest-bearing Liabilities: | | | | | | | | |
Interest-bearing demand deposits | $ | 890,457 | | $ | 228 | | 0.10 | % |
Savings deposits | | 1,158,985 | | | 303 | | 0.10 | |
Time deposits | | 1,434,738 | | | 4,707 | | 1.31 | |
Short-term borrowings | | 302,051 | | | 105 | | 0.14 | |
FHLB advances | | 37,723 | | | 248 | | 2.62 | |
Total interest-bearing liabilities | | 3,823,954 | | | 5,591 | | 0.58 | |
Noninterest-bearing deposits | | 980,402 | | | - | | - | |
Total deposits and borrowed funds | | 4,804,356 | | | 5,591 | | 0.46 | |
Interest payable and other liabilities | | 37,452 | | | | | | |
Shareholders' equity | | 591,683 | | | | | | |
Total Liabilities and Shareholders' Equity | $ | 5,433,491 | | | | | | |
Net Interest Spread (Average yield earned on interest-earning | | | | | | | | |
assets minus average rate paid on interest-bearing liabilities) | | | | | | | 3.61 | % |
Net Interest Income (FTE) | | | | $ | 48,159 | | | |
Net Interest Margin (Net Interest Income (FTE) divided by | | | | | | | | |
total average interest-earning assets) | | | | | | | 3.76 | % |
* | Taxable equivalent basis using a federal income tax rate of 35%. |
** | Nonaccrual loans and loans held-for-sale are included in average balances reported and are included in the calculation of yields. |
| Also, tax equivalent interest includes net loan fees. |
14
Chemical Financial Corporation Announces Third Quarter Operating Results |
Nonperforming Assets (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
| Sept 30
2012 | | June 30
2012 | | March 31
2012 | | Dec 31
2011 | | Sept 30
2011 | | June 30
2011 | | March 31
2011 |
Nonperforming Loans: | | | | | | | | | | | | | | | | | | | | |
Nonaccrual loans: | | | | | | | | | | | | | | | | | | | | |
Commercial | $ | 15,217 | | $ | 12,673 | | $ | 11,443 | | $ | 10,726 | | $ | 10,804 | | $ | 14,386 | | $ | 15,672 |
Real estate commercial | | 41,311 | | | 41,691 | | | 46,870 | | | 44,438 | | | 48,854 | | | 57,324 | | | 59,931 |
Real estate construction and land development | | 6,664 | | | 3,485 | | | 3,809 | | | 6,190 | | | 7,877 | | | 8,933 | | | 9,414 |
Real estate residential | | 11,307 | | | 12,613 | | | 12,687 | | | 12,573 | | | 17,544 | | | 17,809 | | | 15,505 |
Consumer installment and home equity | | 3,825 | | | 3,994 | | | 4,344 | | | 4,467 | | | 6,033 | | | 6,898 | | | 5,774 |
Total nonaccrual loans | | 78,324 | | | 74,456 | | | 79,153 | | | 78,394 | | | 91,112 | | | 105,350 | | | 106,296 |
Accruing loans contractually past due 90 days or | | | | | | | | | | | | | | | | | | | | |
more as to interest or principal payments: | | | | | | | | | | | | | | | | | | | | |
Commercial | | 273 | | | 300 | | | 1,005 | | | 1,381 | | | 282 | | | 629 | | | 455 |
Real estate commercial | | 247 | | | 269 | | | 75 | | | 374 | | | 415 | | | 143 | | | 459 |
Real estate construction and land development | | - | | | - | | | - | | | 287 | | | - | | | - | | | - |
Real estate residential | | 431 | | | 840 | | | 333 | | | 752 | | | 974 | | | 1,729 | | | 191 |
Consumer installment and home equity | | 1,147 | | | 1,157 | | | 1,233 | | | 1,023 | | | 1,344 | | | 1,243 | | | 1,091 |
Total accruing loans contractually past due 90 days | | | | | | | | | | | | | | | | | | | | |
or more as to interest or principal payments | | 2,098 | | | 2,566 | | | 2,646 | | | 3,817 | | | 3,015 | | | 3,744 | | | 2,196 |
Nonperforming troubled debt restructurings: | | | | | | | | | | | | | | | | | | | | |
Commercial loan portfolio | | 6,553 | | | 11,691 | | | 11,258 | | | 14,675 | | | 16,457 | | | 15,443 | | | 15,201 |
Consumer loan portfolio | | 3,902 | | | 4,098 | | | 5,491 | | | 9,383 | | | 9,811 | | | 11,392 | | | 22,166 |
Total nonperforming troubled debt restructurings | | 10,455 | | | 15,789 | | | 16,749 | | | 24,058 | | | 26,268 | | | 26,835 | | | 37,367 |
Total nonperforming loans | | 90,877 | | | 92,811 | | | 98,548 | | | 106,269 | | | 120,395 | | | 135,929 | | | 145,859 |
Other real estate and repossessed assets | | 19,467 | | | 23,509 | | | 25,944 | | | 25,484 | | | 28,679 | | | 24,607 | | | 26,355 |
Total nonperforming assets | $ | 110,344 | | $ | 116,320 | | $ | 124,492 | | $ | 131,753 | | $ | 149,074 | | $ | 160,536 | | $ | 172,214 |
15
Chemical Financial Corporation Announces Third Quarter Operating Results |
Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation
| Three Months Ended | |
(Dollars in thousands)
| Sept 30
2012 | | June 30
2012 | | March 31
2012 | | Dec 31
2011 | | Sept 30
2011 | | June 30
2011 | | March 31
2011 | |
Allowance for loan losses - originated loan
portfolio | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses - originated,
at beginning of period |
$
|
84,511
| |
$
|
85,585
| |
$
|
86,733
| |
$
|
87,413
| |
$
|
89,733
| |
$
|
89,674
| |
$
|
89,530
| |
Provision for loan losses - originated | | 4,000 | | | 4,000 | | | 4,400 | | | 4,800 | | | 5,100 | | | 7,000 | | | 7,500 | |
Loans charged off: | | | | | | | | | | | | | | | | | | | | | |
Commercial | | (551 | ) | | (974 | ) | | (1,079 | ) | | (1,768 | ) | | (1,234 | ) | | (1,972 | ) | | (1,976 | ) |
Real estate commercial | | (1,952 | ) | | (2,178 | ) | | (2,268 | ) | | (2,120 | ) | | (3,969 | ) | | (3,168 | ) | | (3,875 | ) |
Real estate construction and land
development | |
(51
|
)
| |
(45
|
)
| |
(32
|
)
| |
(54
|
)
| |
(236
|
)
| |
(136
|
)
| |
(63
|
)
|
Real estate residential | | (1,357 | ) | | (1,140 | ) | | (1,717 | ) | | (945 | ) | | (1,884 | ) | | (1,198 | ) | | (944 | ) |
Consumer installment and home equity | | (1,485 | ) | | (1,835 | ) | | (1,451 | ) | | (1,434 | ) | | (1,516 | ) | | (1,832 | ) | | (1,784 | ) |
Total loan charge-offs | | (5,396 | ) | | (6,172 | ) | | (6,547 | ) | | (6,321 | ) | | (8,839 | ) | | (8,306 | ) | | (8,642 | ) |
Recoveries of loans previously charged
off: | | | | | | | | | | | | | | | | | | | | | |
Commercial | | 135 | | | 140 | | | 191 | | | 137 | | | 614 | | | 710 | | | 215 | |
Real estate commercial | | 325 | | | 298 | | | 421 | | | 272 | | | 285 | | | 212 | | | 87 | |
Real estate construction and land
development | |
-
| | |
-
| | |
2
| | |
40
| | |
-
| | |
5
| | |
-
| |
Real estate residential | | 237 | | | 199 | | | 22 | | | 80 | | | 207 | | | 106 | | | 456 | |
Consumer installment and home equity | | 382 | | | 461 | | | 363 | | | 312 | | | 313 | | | 332 | | | 528 | |
Total loan recoveries | | 1,079 | | | 1,098 | | | 999 | | | 841 | | | 1,419 | | | 1,365 | | | 1,286 | |
Net loan charge-offs - originated | | (4,317 | ) | | (5,074 | ) | | (5,548 | ) | | (5,480 | ) | | (7,420 | ) | | (6,941 | ) | | (7,356 | ) |
Allowance for loan losses - originated,
at end of period | |
84,194
| | |
84,511
| | |
85,585
| | |
86,733
| | |
87,413
| | |
89,733
| | |
89,674
| |
| | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses - acquired loan
portfolio | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses - acquired,
at beginning of period | |
2,200
| | |
2,200
| | |
1,600
| | |
1,300
| | |
-
| | |
-
| | |
-
| |
Provision for loan losses - acquired | | 500 | | | - | | | 600 | | | 300 | | | 1,300 | | | - | | | - | |
Net loan charge-offs - acquired
(commercial) | |
(2,200
|
)
| |
-
| | |
-
| | |
-
| | |
-
| | |
-
| | |
-
| |
Allowance for loan losses - acquired,
at end of period | |
500
| | |
2,200
| | |
2,200
| | |
1,600
| | |
1,300
| | |
-
| | |
-
| |
| | | | | | | | | | | | | | | | | | | | | |
Total allowance for loan losses | $ | 84,694 | | $ | 86,711 | | $ | 87,785 | | $ | 88,333 | | $ | 88,713 | | $ | 89,733 | | $ | 89,674 | |
16
Chemical Financial Corporation Announces Third Quarter Operating Results |
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
(Dollars in thousands, except per share data)
| 3rd Qtr.
2012 | | 2nd Qtr.
2012 | | 1st Qtr.
2012 | | 4th Qtr.
2011 | | 3rd Qtr.
2011 | | 2nd Qtr.
2011 | | 1st Qtr.
2011 |
Summary of Operations | | | | | | | | | | | | | | | | | | | | |
Interest income | $ | 52,501 | | $ | 52,467 | | $ | 52,664 | | $ | 54,130 | | $ | 53,998 | | $ | 53,439 | | $ | 53,675 |
Interest expense | | 5,591 | | | 6,021 | | | 6,469 | | | 7,045 | | | 7,729 | | | 8,145 | | | 8,470 |
Net interest income | | 46,910 | | | 46,446 | | | 46,195 | | | 47,085 | | | 46,269 | | | 45,294 | | | 45,205 |
Provision for loan losses | | 4,500 | | | 4,000 | | | 5,000 | | | 5,100 | | | 6,400 | | | 7,000 | | | 7,500 |
Net interest income after provision | | | | | | | | | | | | | | | | | | | | |
for loan losses | | 42,410 | | | 42,446 | | | 41,195 | | | 41,985 | | | 39,869 | | | 38,294 | | | 37,705 |
Noninterest income | | 12,062 | | | 13,282 | | | 12,649 | | | 11,501 | | | 11,225 | | | 10,902 | | | 10,772 |
Operating expenses | | 36,066 | | | 35,537 | | | 36,295 | | | 37,807 | | | 35,394 | | | 33,413 | | | 35,389 |
Income before income taxes | | 18,406 | | | 20,191 | | | 17,549 | | | 15,679 | | | 15,700 | | | 15,783 | | | 13,088 |
Federal income tax expense | | 5,300 | | | 6,325 | | | 5,175 | | | 4,475 | | | 4,075 | | | 4,750 | | | 3,900 |
Net income | $ | 13,106 | | $ | 13,866 | | $ | 12,374 | | $ | 11,204 | | $ | 11,625 | | $ | 11,033 | | $ | 9,188 |
| | | | | | | | | | | | | | | | | | | | |
Net interest margin | | 3.76% | | | 3.80% | | | 3.76% | | | 3.84% | | | 3.80% | | | 3.78% | | | 3.78% |
| | | | | | | | | | | | | | | | | | | | |
Per Common Share Data | | | | | | | | | | | | | | | | | | | | |
Net income: | | | | | | | | | | | | | | | | | | | | |
Basic | $ | 0.48 | | $ | 0.50 | | $ | 0.45 | | $ | 0.41 | | $ | 0.42 | | $ | 0.40 | | $ | 0.33 |
Diluted | | 0.48 | | | 0.50 | | | 0.45 | | | 0.41 | | | 0.42 | | | 0.40 | | | 0.33 |
Cash dividends declared | | 0.21 | | | 0.20 | | | 0.20 | | | 0.20 | | | 0.20 | | | 0.20 | | | 0.20 |
Book value - period-end | | 21.75 | | | 21.42 | | | 21.10 | | | 20.82 | | | 21.02 | | | 20.78 | | | 20.54 |
Tangible book value - period-end | | 17.52 | | | 17.17 | | | 16.84 | | | 16.54 | | | 16.71 | | | 16.46 | | | 16.19 |
Market value - period-end | | 24.20 | | | 21.50 | | | 23.44 | | | 21.32 | | | 15.31 | | | 18.76 | | | 19.93 |
17
