EXHIBIT 99.2
Audited Financial Statements
Chemical Financial Corporation
1992 Stock Purchase Plan
for Subsidiary Directors
December 31, 1998
ERNST & YOUNG LLP - Suite 1700 - Phone: 313 596 7100
500 Woodward Avenue
Detroit, Michigan 48226-3426
REPORT OF INDEPENDENT AUDITORS
Plan Administrator
Chemical Financial Corporation
1992 Stock Purchase Plan for
Subsidiary Directors
We have audited the accompanying statements of financial condition of
the Chemical Financial Corporation 1992 Stock Purchase Plan for Subsidiary
Directors as of December 31, 1998 and 1997 and the related statements of
income and changes in plan equity for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility
of the Plan's administrator. 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 the Plan Administrator, 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 financial position of the Chemical
Financial Corporation 1992 Stock Purchase Plan for Subsidiary Directors at
December 31, 1998 and 1997, and the results of its operations and changes
in its plan equity for each of the three years in the period December 31,
1998 in conformity with generally accepted accounting principles.
S/ ERNST & YOUNG LLP
February 5, 1999
CHEMICAL FINANCIAL CORPORATION
1992 STOCK PURCHASE PLAN
FOR SUBSIDIARY DIRECTORS
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
1998 1997
-------- --------
ASSETS
Cash $ 963 $ 1,139
Common stock receivable of Chemical
Financial Corporation, at market value - (9,076
shares at a cost of $300,078 at December 31, 1998
and 9,197 shares at a cost of $263,868 at
December 31, 1997) 304,046 329,270
-------- --------
Total assets $305,009 $330,409
======== ========
LIABILITIES AND PLAN EQUITY
Plan equity (51 participants at December 31,
1998 and 46 participants at December 31, 1997) $305,009 $330,409
======== ========
See accompanying notes.
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CHEMICAL FINANCIAL CORPORATION
1992 STOCK PURCHASE PLAN
FOR SUBSIDIARY DIRECTORS
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
YEARS ENDED DECEMBER 31
1998 1997 1996
-------- -------- --------
ADDITIONS
Participant contributions $294,650 $258,775 $263,650
Dividend equivalents 3,669 3,501 2,965
Other income 704 1,055 848
-------- -------- --------
299,023 263,331 267,463
DEDUCTIONS
Plan distributions 329,354 291,431 294,346
-------- -------- --------
(30,331) (28,100) (26,883)
Net realized appreciation
in fair value of investments 4,931 65,402 25,745
-------- -------- --------
Net increase (decrease) (25,400) 37,302 (1,138)
Plan equity at beginning of year 330,409 293,107 294,245
-------- -------- --------
Plan equity at end of year $305,009 $330,409 $293,107
======== ======== ========
See accompanying notes.
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CHEMICAL FINANCIAL CORPORATION
1992 STOCK PURCHASE PLAN
FOR SUBSIDIARY DIRECTORS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
The Chemical Financial Corporation 1992 Stock Purchase Plan for
Subsidiary Directors (the Plan) was implemented by Chemical Financial
Corporation (the Corporation) on April 30, 1992. The Plan is designed
to provide non-employee directors and advisory directors of the
Corporation's subsidiaries, who are neither directors or employees of
the Corporation, with a convenient method of acquiring Corporation
stock.
NOTE 1 - DESCRIPTION OF THE PLAN
Subsidiary directors and advisory directors, who elect to
participate in the Plan, may elect to contribute to the Plan fifty
percent or one hundred percent of their director board fees and/or
fifty percent or one hundred percent of their director committee fees,
earned as directors or advisory directors of the Corporation's
subsidiaries. Participant contributions to the Plan are made by the
Corporation's subsidiaries on behalf of each electing participant.
Amounts remitted to the Plan are credited to a separate cash account
for each participant. As of the last day of each month, each
participant's cash account is debited for the purchase of whole shares
of the Corporation's stock and credited to a separate participant
stock account. The stock purchased under the Plan during the calendar
year is issued by the Corporation directly to the participants in the
following calendar year, in the month of January. The Plan provides
for dividend equivalents to be credited to each participant's cash
account, as of the dividend record date of the Corporation's common
stock. Dividend equivalents are calculated by multiplying the
Corporation's dividend rate by the number of shares of common stock in
each participant's stock account, as of the Corporation's dividend
record date. The Plan also provides for an appropriate credit to each
participant's stock account for stock dividends, stock splits or other
distributions of the Corporation's common stock by the Corporation.
Fractional shares calculated as a result of the above adjustments are
converted to cash based on the market price of the Corporation's
common stock, and are credited to each participant's cash account.
Plan participants may terminate their participation in the Plan, at
any time, by written notice of withdrawal to the Corporation.
Participants will cease to be eligible to participate in the Plan when
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they cease to serve as directors or advisory directors of subsidiaries
of the Corporation. Upon withdrawal from the Plan, each participant
will receive the shares of common stock of the Corporation in their
participant stock account and the cash in their participant cash
account.
NOTE 1 - DESCRIPTION OF THE PLAN (CONTINUED)
As of December 31, 1998, the Plan had 6,186 remaining shares of
the Corporation that it was authorized to issue. The 1998 Stock
Purchase Plan for Subsidiary Directors ("new plan") was approved by
the Board of Directors of the Corporation on December 14, 1998, with
the same terms and provisions of the Plan. A common stock receivable
for 2,890 shares of the Corporation, with a market value of $96,815,
cost basis of $95,245, and cash of $963 were transferred to the new
plan on January 1, 1999.
The Corporation reserves the right to terminate or amend the Plan
at any time, provided, however, that no termination or amendment shall
affect or diminish any participant's right to the benefit of
contributions made by him/her prior to the date of such amendment or
termination.
The Plan provides that all expenses of the Plan and its
administration shall be paid by the Corporation.
The Plan is not qualified under Sections 401(a) or 501(a) of the
Internal Revenue Code of 1986, as amended. The Plan does not provide
for income taxes because any income is taxable to the participants.
Participants in the Plan must treat as taxable income the
contributions made to the Plan by the Corporation's subsidiaries on
their behalf. Dividend equivalents and any other cash credited to the
participants' cash accounts are taxable to the participants for
Federal and state income tax purposes in the year such dividend
equivalent or cash is credited to the participant cash account. Upon
disposition of the common stock of Chemical Financial Corporation
purchased under the Plan, participants must treat any gain or loss as
long-term or short-term capital gain or loss depending upon when such
disposition occurs.
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CHEMICAL FINANCIAL CORPORATION
1992 STOCK PURCHASE PLAN
FOR SUBSIDIARY DIRECTORS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
VALUATION OF COMMON STOCK RECEIVABLE
Common stock receivable of Chemical Financial Corporation is
recorded at the fair market value of the number of shares receivable
at the end of the period. Market value is based on the closing bid
price of the Corporation's stock at year end ($33.50 per share at
December 31, 1998 and $35.80 per share at December 31, 1997). The
number of shares receivable and closing bid prices were adjusted for
the 5 for 4 stock split paid on Chemical Financial Corporation common
stock on December 16, 1998.
INCOME
Dividend equivalents and fractional share interests are accrued
on the Corporation's dividend or other record date.
CONTRIBUTIONS
Contributions are accounted for on the accrual basis.
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CHEMICAL FINANCIAL CORPORATION
1992 STOCK PURCHASE PLAN
FOR SUBSIDIARY DIRECTORS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 3 - CONTRIBUTIONS
Contributions for participants by the participating companies
were as follows:
YEARS ENDED DECEMBER 31
PARTICIPATING COMPANY 1998 1997 1996
-------- -------- --------
Chemical Bank and Trust Co. $ 55,000 $ 70,700 $ 73,025
Chemical Bank Bay Area 34,800 33,100 37,525
Chemical Bank Central 37,150 26,400 22,050
Chemical Bank Thumb Area 34,100 26,650 21,200
Chemical Bank Michigan 32,700 29,750 31,750
Chemical Bank Montcalm 16,200 15,000 19,500
Chemical Bank North 13,575 3,150 4,650
Chemical Bank South 23,425 19,125 19,425
Chemical Bank West 11,700 8,900 8,625
Chemical Bank Key State 33,000 20,000 20,400
CFC Data Corp 3,000 6,000 5,500
-------- -------- --------
Total Contributions $294,650 $258,775 $263,650
======== ======== ========
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