EXHIBIT 99.1
Financial Statements and Schedules
Chemical Financial Corporation
401(k) Savings Plan
Years ended December 31, 1998 and
December 31, 1997 with
Report of Independent Auditors
ERNST & YOUNG LLP - Suite 1700 - Phone: 313 596 7100
500 Woodward Avenue
Detroit, Michigan 48226-3426
REPORT OF INDEPENDENT AUDITORS
Administrative Committee
Chemical Financial Corporation 401(k) Savings Plan
We have audited the accompanying statements of assets
available for plan benefits of the Chemical Financial Corporation
401(k) Savings Plan as of December 31, 1998 and 1997 and the
related statements of changes in assets available for plan
benefits for the years then ended. These financial statements
are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the assets available
for plan benefits of the Plan at December 31, 1998 and 1997, and
the changes in its assets available for plan benefits for the
years then ended in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion
on the financial statements taken as a whole. The accompanying
supplemental schedules of assets held for investment purposes and
reportable transactions as of and for the year ended December 31,
1998 are presented for purposes of complying with the Department
of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974, and
are not a required part of the financial statements. The fund
information in the statements of assets available for plan
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benefits and the statements of changes in assets available for
plan benefits is presented for purposes of additional analysis
rather than to present the assets available for plan benefits and
changes in assets available for plan benefits of each fund. The
supplemental schedules and fund information have been subjected
to the auditing procedures applied in our audits of the financial
statements and, in our opinion, are fairly stated in all material
respects in relation to the financial statements taken as a
whole.
S/ ERNST & YOUNG LLP
February 12, 1999
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STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
CHEMICAL FINANCIAL CORPORATION 401(k) SAVINGS PLAN
DECEMBER 31, 1998
FUND INFORMATION
--------------------------------------------------------------------------
CHEMICAL
STOCK FINANCIAL CASH AND
INTERMEDIATE AND CORPORATION MONEY PARTICIPANT
BOND INDEX BOND STOCK MARKET LOAN
FUND FUND FUND FUND FUND FUND TOTAL
------------- ------- -------- ----------- -------- ----------- --------
ASSETS:
Investments at fair value:
Chemical Financial Corporation
Common Stock $2,040,820 $2,040,820
Federated Investors Mutual Funds:
Short-Intermediate
Government Trust $171,343 171,343
Max-Cap Fund $1,923,651 1,923,651
Treasury Obligations Fund 1,866 $239,862 241,728
Fidelity Investments-Puritan Fund $707,512 707,512
Participant loans $38,169 38,169
-------- ---------- -------- ---------- -------- ------- ----------
171,343 1,923,651 707,512 2,042,686 239,862 38,169 5,123,223
Employee contributions receivable 1,479 13,382 5,097 9,281 1,534 30,773
Cash and accrued income 618 35 964 486 2,103
-------- ---------- -------- ---------- -------- ------- ----------
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Assets Available for Plan
Benefits $173,440 $1,937,033 $712,609 $2,052,002 $242,360 $38,655 $5,156,099
======== ========== ======== ========== ======== ======= ==========
See accompanying notes
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STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
CHEMICAL FINANCIAL CORPORATION 401(k) SAVINGS PLAN
DECEMBER 31, 1997
FUND INFORMATION
--------------------------------------------------------------------------
CHEMICAL
STOCK FINANCIAL CASH AND
INTERMEDIATE AND CORPORATION MONEY PARTICIPANT
BOND INDEX BOND STOCK MARKET LOAN
FUND FUND FUND FUND FUND FUND TOTAL
------------- ------- -------- ----------- -------- ----------- --------
ASSETS:
Investments at fair value:
Chemical Financial Corporation
Common Stock $1,906,118 $1,906,118
Federated Investors Mutual Funds:
Short-Intermediate
Government Trust $136,904 136,904
Max-Cap Fund $1,253,475 1,253,475
Treasury Obligations Fund 62 56 $ 101 274 $218,049 $3,882 222,424
Fidelity Investments-Puritan Fund 547,145 547,145
Participant loans 39,646 39,646
-------- ---------- -------- ---------- -------- ------- ----------
136,966 1,253,531 547,246 1,906,392 218,049 43,528 4,105,712
Employee contributions receivable 1,190 11,089 6,877 9,570 1,417 30,143
Cash and accrued income 622 26 16 40 1,012 16 1,732
-------- ---------- -------- ---------- -------- ------- ----------
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Assets Available for Plan
Benefits $138,778 $1,264,646 $554,139 $1,916,002 $220,478 $43,544 $4,137,587
======== ========== ======== ========== ======== ======= ==========
See accompanying notes
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STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
CHEMICAL FINANCIAL CORPORATION 401(k) SAVINGS PLAN
DECEMBER 31, 1998
FUND INFORMATION
--------------------------------------------------------------------------
CHEMICAL CASH AND
STOCK FINANCIAL MONEY
INTERMEDIATE INDEX AND BOND CORPORATION MARKET PARTICIPANT
BOND FUND FUND FUND STOCK FUND FUND LOAN FUND TOTAL
------------- ------- -------- ----------- -------- ----------- --------
Additions:
Interest and dividend income $7,472 $38,287 $72,496 $44,156 $10,722 $4,576 $177,709
Employee contributions 29,760 318,881 134,072 232,139 29,822 744,674
-------- ---------- -------- ---------- -------- ------- ----------
37,232 357,168 206,568 276,295 40,544 4,576 922,383
Deductions:
Participants' accounts distributed
upon withdrawal (1,115) (24,405) (38,275) (41,646) (70,704) (1,356) (177,501)
Net transfers between funds (3,236) (27,593) (33,158) 20,054 52,042 (8,109) 0
Net realized and unrealized
appreciation (depreciation)
in fair value of investments 1,781 367,217 23,335 (118,703) 273,630
-------- ---------- -------- ---------- -------- ------- ----------
Net increase (decrease) 34,662 672,387 158,470 136,000 21,882 (4,889) 1,018,512
Assets available for plan
benefits at beginning of year 138,778 1,264,646 554,139 1,916,002 220,478 43,544 4,137,587
-------- ---------- -------- ---------- -------- ------- ----------
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Assets available for plan
benefits at end of year $173,440 $1,937,033 $712,609 $2,052,002 $242,360 $38,655 $5,156,099
======== ========== ======== ========== ======== ======= ==========
See accompanying notes.
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STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
CHEMICAL FINANCIAL CORPORATION 401(k) SAVINGS PLAN
DECEMBER 31, 1997
FUND INFORMATION
--------------------------------------------------------------------------
CHEMICAL CASH AND
STOCK FINANCIAL MONEY
INTERMEDIATE INDEX AND BOND CORPORATION MARKET PARTICIPANT
BOND FUND FUND FUND STOCK FUND FUND LOAN FUND TOTAL
------------- ------- -------- ----------- -------- ----------- --------
Additions:
Interest and dividend income $6,836 $53,219 $41,209 $36,399 $10,985 $3,510 $152,158
Employee contributions 33,744 224,685 162,564 266,581 37,230 724,804
-------- ---------- -------- ---------- -------- ------- ----------
40,580 277,904 203,773 302,980 48,215 3,510 876,962
Deductions:
Participants' accounts distributed
upon withdrawal (7,809) (15,066) (17,148) (81,987) (12,196) (467) (134,673)
Net transfers between funds (19,600) 87,077 23,017 (47,077) (59,255) 15,838 0
Net realized and unrealized
appreciation (depreciation)
in fair value of investments 646 205,658 47,158 331,234 584,696
-------- ---------- -------- ---------- -------- ------- ----------
Net increase (decrease) 13,817 555,573 256,800 505,150 (23,236) 18,881 1,326,985
Assets available for plan
benefits at beginning of year 124,961 709,073 297,339 1,410,852 243,714 24,663 2,810,602
-------- ---------- -------- ---------- -------- ------- ----------
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Assets available for plan
benefits at end of year $138,778 $1,264,646 $554,139 $1,916,002 $220,478 $43,544 $4,137,587
======== ========== ======== ========== ======== ======= ==========
See accompanying notes.
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NOTES TO FINANCIAL STATEMENTS
CHEMICAL FINANCIAL CORPORATION 401(K) SAVINGS PLAN
DECEMBER 31, 1998
NOTE A - - DESCRIPTION OF THE PLAN
The Chemical Financial Corporation 401(k) Savings Plan
(the Plan) is a voluntary, defined-contribution plan covering all
eligible employees of Chemical Financial Corporation (the
Corporation) and subsidiaries.
The Plan provides for the deferral of salaries, wages and
bonuses in accordance with Section 401(k) of the Internal Revenue
Code. Employees of the Corporation or any of its subsidiaries
are eligible for participation upon attaining age 21 and
completing one year of service. At December 31, 1998 there were
486 participants in the Plan. Participants are eligible to
contribute up to 15% of their annual compensation, up to a
maximum of $10,000 in 1998 and $9,500 in 1997. The employer made
no contributions to the Plan during 1998 or 1997.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets at the date of the financial statements and the
reported amounts of changes in assets during the year. Actual
results could differ from those estimates.
Participants may direct their contributions into an
intermediate bond fund, a stock index fund, a stock and bond
fund, a money market fund, a Chemical Financial Corporation
common stock fund or a combination of these funds, and may elect
to change the percentage directed to each fund daily. All
participant contributions are fully vested. Participant loans
are permitted under the Plan. These loans are subject to a
strict set of rules established by laws and regulations. As of
December 31, 1998 the Plan had ten participant loans outstanding
at interest rates ranging from 7.0%-11.45%.
Information about the plan agreement and the vesting and
benefit provisions is contained in the Summary Plan Description
contained in the Chemical Financial Corporation Employee Handbook
and is available along with information regarding investment
alternatives from the Plan Administrator and Personnel
Departments.
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The Corporation, acting through its Board of Directors,
has the right to amend or terminate the Plan at any time.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE B - - SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared under the
accrual basis of accounting in accordance with generally accepted
accounting principles.
Investments are stated at aggregate fair value.
Securities traded on a national securities exchange are valued at
the last reported sales price on the last business day of the
Plan year. Investments traded in the over-the-counter market and
listed securities for which no sale was reported on that date are
valued at the last reported bid price.
Expenses incurred in connection with the operation of the
Plan are borne by the Corporation.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE C - - INVESTMENTS
During the years ended December 31, 1998 and December 31,
1997 the Plan's net appreciation (depreciation) in the fair value
of investments (including investments bought, sold, as well as
held during the year) is summarized as follows:
1998 1997
-------- --------
Intermediate Bond Fund $ 1,781 $ 646
Index Fund 367,217 205,658
Stock and Bond Fund 23,335 47,158
Chemical Financial Corporation Common Stock Fund (118,703) 331,234
-------- --------
$273,630 $584,696
======== ========
The fair value of individual investments that represent 5% or
more of the Plan's net assets are as follows:
DECEMBER 31
---------------------------
1998 1997
---------- ----------
Federated Investors Mutual Funds:
Treasury Obligations Fund $ 241,728 $ 22,424
Max-Cap Fund 1,923,651 1,253,475
Fidelity Investments-Puritan Fund 707,512 547,145
Chemical Financial Corporation Common Stock 2,040,820 1,906,118
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE D - - TRANSACTIONS WITH PARTIES-IN-INTEREST
THE FOLLOWING IS A SUMMARY OF TRANSACTIONS (AT COST) WITH
PARTIES-IN-INTEREST:
CHEMICAL
FINANCIAL
CORPORATION
COMMON STOCK
------------
Balance at January 1, 1997 $994,177
Purchases in 1997 403,695
Sales in 1997 (113,741)
Distributions in 1997 (49,978)
----------
Balance at December 31, 1997 $1,234,153
Purchases in 1998 379,041
Sales in 1998 (62,840)
Distributions in 1998 (25,846)
----------
Balance at December 31, 1998 $1,524,508
==========
NOTE E - - INCOME TAX STATUS
The Plan has received a determination letter from the
Internal Revenue Service dated August 23, 1994, stating that the
Plan is qualified under section 401(a) of the Internal Revenue
Code (the "Code") and, therefore, the related trust is exempt from
taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan
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Administrator believes the plan is being operated in compliance
with the applicable requirements of the Code and, therefore,
believes that the Plan is qualified and the related trust is tax
exempt.
NOTE F - - PLAN MERGER
In May 1996, the Corporation acquired State Savings Bancorp,
Inc. During 1997, the participants of the Retirement Plan for
the State Savings Bank of Caro were given the option to rollover
their account balances into the Plan and, accordingly,
approximately $145,000 of such rollover contributions are
included as employee contributions in the accompanying financial
statements for the year ended December 31, 1997.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE G - - YEAR 2000 READINESS DISCLOSURE (UNAUDITED)
The Corporation has modified its internal information
technology to be ready for the year 2000 and it is the
Corporation's opinion that the conversion of its critical data
processing systems and the testing of those systems was complete
as of December 31, 1998. The Corporation does not expect the
Year 2000 project to have a significant effect on plan
operations.
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EMPLOYEE ID# 38-2022454
PLAN # 002
ITEM 27A -- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
CHEMICAL FINANCIAL CORPORATION 401(K) SAVINGS PLAN
DECEMBER 31, 1998
DESCRIPTION OF INVESTMENT INCLUDING COST PROCEEDS
IDENTITY OF ISSUE, BORROWER, LESSOR OR MATURITY DATE, RATE OF INTEREST, OF OF
SIMILAR PARTY COLLATERAL, PAR OR MATURITY VALUE COST FAIR VALUE ACQUISITIONS DISPOSITIONS
- -------------------------------------- ----------------------------------- --------- ---------- ------------ ------------
<F*>Chemical Financial Corporation Common Stock - 60,920 shares
Common Stock $1,524,508 $2,040,820
Federated Investors Mutual Funds:
Short-Intermediate
Government Trust Intermediate Bond Fund- 16,272 shares 169,824 171,343
Max-Cap Fund Index Fund - 75,734 units 1,265,310 1,923,651
Treasury Obligations Fund Money Market Fund - 241,728 shares 241,728 241,728
Fidelity Investments-Puritan Fund Stock and Bond Fund - 35,252 shares 627,869 707,512
---------- ----------
Total Mutual Funds 2,304,731 3,044,234
---------- ----------
Participant Loans Ten loans at interest rates ranging
from 7.0%-11.45% and maturing
1/31/00-2/28/03 38,169 38,169 $ $
---------- ---------- ========= =========
TOTAL INVESTMENTS $3,867,408 $5,123,223
========== ==========
<FN>
<F*>Indicates party-in-interest to the Plan
There were no investment assets reportable as acquired and disposed of during the year.
</FN>
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EMPLOYEE ID# 38-2022454
PLAN # 002
ITEM 27D -- SCHEDULE OF REPORTABLE TRANSACTIONS
CHEMICAL FINANCIAL CORPORATION
401(K) SAVINGS PLAN
YEAR ENDED DECEMBER 31, 1998
DESCRIPTION OF ASSET EXPENSE VALUE ON
(INTEREST RATE AND MATURITY PURCHASE SELLING LEASE INCURRED WITH COST TRANSACTION NET GAIN
IDENTITY OF PARTY INVOLVED IN CASE OF A LOAN) PRICE PRICE RENTAL TRANSACTION OF ASSET DATE (LOSS)
- -------------------------- ------------------------------ -------- ------- ------ ------------ -------- ----------- --------
Category iii) A series of
transactions involving
securities of the same issue
which, when aggregated,
involve an amount in excess of
5% of the current value of
plan assets:
Chemical Financial Corporation Common Stock:
71 purchases $379,041 $379,041
50 sales 88,686 87,128 ($1,558)
Federated Investors Index Fund:
60 purchases 450,235 450,235
21 sales 103,260 147,275 $44,015
Money Market Fund:
184 purchases 712,920 712,920
116 sales 693,616 693,616 - - -
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Fidelity Investments Stock and Bond Fund:
55 purchases 225,731 225,731
12 sales 81,430 88,699 $7,269
There were no category i), ii) or iv) reportable transactions.
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