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Chemical Financial Corporation Reports 2015 Third Quarter Operating Results

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MIDLAND, Mich., Oct. 21, 2015 (GLOBE NEWSWIRE) -- Chemical Financial Corporation (the "Corporation") (NASDAQ: CHFC) today announced 2015 third quarter net income of $24.5 million, or $0.64 per diluted share, compared to 2014 third quarter net income of $16.8 million, or $0.51 per diluted share, and 2015 second quarter net income of $19.0 million, or $0.54 per diluted share. Net income was $61.3 million, or $1.72 per diluted share, for the nine months ended September 30, 2015, compared to $46.8 million, or $1.51 per diluted share, for the nine months ended September 30, 2014.

Excluding nonrecurring acquisition-related expenses, net income in the third quarter of 2015 was $25.1 million, or $0.65 per diluted share, compared to $17.6 million, or $0.53 per diluted share, in the third quarter of 2014 and $21.7 million, or $0.61 per diluted share, in the second quarter of 2015. For the first nine months of 2015, excluding nonrecurring acquisition-related expenses, net income was $65.5 million, or $1.84 per diluted share, compared to $48.3 million, or $1.55 per diluted share, during the first nine months of 2014.

"Chemical Financial Corporation's 25 percent per share earnings growth over the prior year's third quarter reflects the combined effects of the Northwestern Bancorp, Lake Michigan Financial Corporation and Monarch Community Bancorp acquisitions completed over the past year, augmented by sustained strong organic loan growth across our core banking franchise during that time," noted David B. Ramaker, Chairman, Chief Executive Officer and President of Chemical Financial Corporation. "The Company's ability to seamlessly integrate these acquisitions while sustaining growth across its expanding Michigan footprint is a testament to the continued strengthening of Michigan's economy, the attractiveness of Chemical's community-oriented approach to the Michigan businesses and customers we serve, and, importantly, the combined efforts of the 2,000 plus team members in the Chemical family."

"We are on schedule to complete the consolidation of The Bank of Holland and The Bank of Northern Michigan in the fourth quarter of 2015. As we look to the future, we are confident that our proven ability to combine organic growth in the markets we currently serve with acquisitive growth will benefit our shareholders as we look to significantly drive total assets beyond the $10 billion level," added Ramaker.

The double digit percentage increases in earnings per share, excluding nonrecurring acquisition-related expenses, for the three- and nine-month periods ended September 30, 2015, compared to the same periods for the prior year, were primarily driven by higher net interest income due to organic loan growth over the last twelve months and incremental earnings from the acquisitions of Northwestern Bancorp, Inc. ("Northwestern"), Monarch Community Bancorp, Inc. ("Monarch") and Lake Michigan Financial Corporation ("Lake Michigan") that closed on October 31, 2014, April 1, 2015 and May 31, 2015, respectively. The increase in earnings per share in the third quarter of 2015, compared to the second quarter of 2015, was attributable to increases in net interest income and noninterest income from the legacy operations of Chemical Bank, in addition to incremental earnings from the Lake Michigan and Monarch transactions.

The Corporation's return on average assets, excluding nonrecurring acquisition-related expenses, was 1.08% during the third quarter of 2015, compared to 1.09% in the third quarter of 2014 and 1.07% in the second quarter of 2015. The Corporation's return on average shareholders' equity, excluding nonrecurring acquisition-related expenses, was 10.1% in the third quarter of 2015, compared to 8.8% in the third quarter of 2014 and 9.8% in the second quarter of 2015.

Net interest income was $73.6 million in the third quarter of 2015, $20.5 million, or 39%, higher than the third quarter of 2014 and $7.9 million, or 12%, higher than the second quarter of 2015. The increase in net interest income in the third quarter of 2015 over the third quarter of 2014 was largely attributable to the positive impact of organic loan growth and the impact of the Lake Michigan, Monarch and Northwestern transactions. The increase in net interest income in the third quarter of 2015 over the second quarter of 2015 was primarily attributable to the incremental benefit of the Lake Michigan transaction for the full quarter. The Corporation's net interest income also benefited from one additional day in the third quarter of 2015 and additional net interest income resulting from second and third quarter 2015 organic loan growth.

The net interest margin (on a tax-equivalent basis) was 3.55% in the third quarter of 2015, compared to 3.59% in both the third quarter of 2014 and the second quarter of 2015. The decrease in the net interest margin in the third quarter of 2015, compared to the second quarter of 2015, was attributable to a combination of the Corporation borrowing $100 million of long-term FHLB advances at an average interest rate of 1.48%, which were used to pay down short-term borrowings with an average interest rate of 0.25%, an increase in the Corporation's seasonal municipal deposits that were maintained at the Federal Reserve Bank (FRB) at approximately the same interest yield as the interest rate paid on the deposits, and the impact of a full quarter of the Lake Michigan transaction. The positive impact on the net interest margin attributable to organic loan growth during the twelve months ended September 30, 2015 was partially offset by a reduction in the average yield on the loan portfolio. The average yield on the loan portfolio was 4.15% in the third quarter of 2015, compared to 4.23% in the third quarter of 2014 and 4.17% in the second quarter of 2015. The average yield of the investment securities portfolio was 2.08% in the third quarter of 2015, compared to 2.19% in the third quarter of 2014 and 2.03% in the second quarter of 2015. Modest changes in the mix of customer deposits and the repricing of matured customer certificates of deposit was offset by the higher cost of $278 million of brokered deposits and $155 million of other wholesale borrowings acquired in the Lake Michigan transaction. The Corporation's average cost of funds was 0.25% in the third quarter of 2015, compared to 0.25% in the third quarter of 2014 and 0.22% in the second quarter of 2015.

The provision for loan losses was $1.5 million in the third quarter of 2015, unchanged from both the third quarter of 2014 and the second quarter of 2015. The Corporation's quarterly provision for loan losses remained relatively consistent throughout 2014 and the first nine months of 2015, despite significant organic growth in its loan portfolio, due primarily to a reduction in net loan charge-offs and strong credit quality.

Net loan charge-offs were $0.8 million, or 0.05% of average loans, in the third quarter of 2015, compared to $2.3 million, or 0.18% of average loans, in the third quarter of 2014 and $1.8 million, or 0.12% of average loans, in the second quarter of 2015. The reduction in net loan charge-offs in the third quarter of 2015, compared to the third quarter of 2014, was characteristic of an improving economy in the State of Michigan. Net loan charge-offs were 0.10% of average loans during the nine months ended September 30, 2015, compared to 0.18% of average loans for the same period in 2014.

The Corporation's nonperforming loans, consisting of nonaccrual loans, accruing loans past due 90 days or more as to principal or interest payments and nonperforming troubled debt restructurings, totaled $81.2 million at September 30, 2015, compared to $70.9 million at June 30, 2015 and $70.7 million at September 30, 2014. Nonperforming loans comprised 1.13% of total loans at September 30, 2015, compared to 1.01% at June 30, 2015 and 1.40% at September 30, 2014. The decrease in the percentage of nonperforming loans to total loans at September 30, 2015, compared to September 30, 2014, was partially due to the addition of $1.58 billion of total loans acquired in the Lake Michigan, Monarch and Northwestern transactions, with no corresponding increase in nonperforming loans as these acquired loans are not classified as nonperforming after the acquisition date since they are recorded in loan pools at their net realizable value.

The increase in nonperforming loans during the third quarter of 2015 was primarily due to a $10.4 million commercial loan relationship being downgraded to nonaccrual status during the quarter. As of September 30, 2015, the borrower, which primarily operates as a tier 1 and tier 2 supplier in the automotive manufacturing industry, has made all principal and interest payments under a forbearance agreement with the Corporation. Based on a collateral review for this loan relationship, the Corporation established a specific impairment reserve of $3.0 million for this loan relationship as of September 30, 2015. The Corporation determined that an additional provision for loan losses as a result of this downgrade was not required as the Corporation's allowance for loan losses was at a sufficient level to absorb estimated losses from this commercial loan relationship due to the continued decline in the Corporation's loan losses. The Corporation has another $4.4 million of loans in its acquired loan portfolio at September 30, 2015 related to this same loan relationship. These additional loans are not classified as nonperforming since they are recorded in loan pools at their net realizable value. Based on the collateral review for the portion of this loan relationship that is included in the acquired loan portfolio, the Corporation estimated a reduction in expected cash flows of $1.3 million on this loan relationship. The Corporation did not need to recognize a provision for loan losses for these $4.4 million of acquired loans based on the total remaining expected cash flows of the loan pool in which they are included.

At September 30, 2015, the allowance for loan losses of the originated loan portfolio was $75.6 million, or 1.33% of originated loans, compared to $74.9 million, or 1.40% of originated loans, at June 30, 2015 and $76.5 million, or 1.60% of originated loans, at September 30, 2014. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 93% at September 30, 2015, compared to 106% at June 30, 2015 and 108% at September 30, 2014.

Noninterest income was $20.2 million in the third quarter of 2015, compared to $15.4 million in the third quarter of 2014 and $20.7 million in the second quarter of 2015. Noninterest income in the third quarter of 2015 was higher than the third quarter of 2014, with all major categories of noninterest income higher and largely attributable to incremental revenue due to the Lake Michigan, Monarch and Northwestern transactions. Noninterest income in the third quarter of 2015 was slightly lower than the second quarter of 2015, with the decrease largely attributable to lower wealth management revenue, which was partially offset by incremental revenue attributable to the Lake Michigan transaction. The reduction in wealth management revenue was primarily attributable to a reduction in asset-based fees that resulted from the general decline in the equity markets during the third quarter of 2015 and $0.2 million of seasonal tax-related revenue realized in the second quarter of 2015.

Operating expenses were $58.3 million in the third quarter of 2015, compared to $42.7 million in the third quarter of 2014 and $56.8 million in the second quarter of 2015. Operating expenses included nonrecurring acquisition-related expenses attributable to acquisitions of $0.9 million in the third quarter of 2015, $1.3 million in the third quarter of 2014 and $3.5 million in the second quarter of 2015. Excluding these nonrecurring acquisition-related expenses, operating expenses were $57.4 million in the third quarter of 2015, $15.9 million, or 38%, higher than the third quarter of 2014 and $4.0 million, or 7.6%, higher than the second quarter of 2015. The increase in operating expenses in the third quarter of 2015, compared to the third quarter of 2014, was primarily attributable to incremental operating costs associated with the Lake Michigan, Monarch and Northwestern transactions, while the increase in the third quarter of 2015, compared to the second quarter of 2015, was primarily attributable to incremental operating costs associated with the Lake Michigan transaction for the full quarter.

Nonrecurring acquisition-related expenses attributable to the Lake Michigan and Monarch acquisitions were $5.7 million for the nine months ended September 30, 2015, while nonrecurring acquisition-related expenses attributable to the acquisition of Northwestern were $2.2 million for the nine months ended September 30, 2014. The Corporation expects to incur approximately $1.5 million of nonrecurring acquisition-related expenses in the fourth quarter of 2015 in connection with the consolidations and related systems conversions of The Bank of Holland and The Bank of Northern Michigan with and into Chemical Bank.

The Corporation's efficiency ratio was 59.9% in the third quarter of 2015, 60.5% in the second quarter of 2015 and 59.2% in the third quarter of 2014.

Total assets were $9.26 billion at September 30, 2015, compared to $9.02 billion at June 30, 2015 and $6.60 billion at September 30, 2014. The increase in total assets during the three months ended September 30, 2015 was attributable to an increase in seasonal municipal deposits that were utilized to fund loan growth. The increase in total assets during the twelve months ended September 30, 2015 was largely attributable to the Lake Michigan, Monarch and Northwestern transactions, in addition to an organic increase in customer deposits of $374 million that was used to partially fund loan growth. Interest-bearing balances at the FRB totaled $109 million at September 30, 2015, compared to $16 million at June 30, 2015 and $248 million at September 30, 2014. The increase in interest-bearing balances at the FRB during the third quarter of 2015 was attributable to an increase in seasonable municipal deposit accounts. Investment securities were $1.14 billion at September 30, 2015, compared to $1.16 billion at June 30, 2015 and $895 million at September 30, 2014. The increase in investment securities during the twelve months ended September 30, 2015 was due to investment securities acquired in the Lake Michigan and Northwestern transactions.

Total loans were $7.22 billion at September 30, 2015, up $181 million, or 2.6%, from total loans of $7.03 billion at June 30, 2015 and up $2.18 billion, or 43%, from total loans of $5.04 billion at September 30, 2014. The increase in loans during the three months ended September 30, 2015 was attributable to organic loan growth. The increase in loans during the twelve months ended September 30, 2015 was attributable to $1.58 billion of loans acquired in the Lake Michigan, Monarch and Northwestern acquisitions and $592 million of organic loan growth.

Total deposits were $7.62 billion at September 30, 2015, compared to $7.29 billion at June 30, 2015 and $5.43 billion at September 30, 2014. The increase in deposits during the third quarter of 2015 was attributable to a $350 million increase in seasonal municipal deposit accounts. Short-term borrowings were $330 million at September 30, 2015, compared to $532 million at June 30, 2015 and $323 million at September 30, 2014. Other borrowings were $248 million at September 30, 2015 and $148 million at June 30, 2015. The Corporation had no other borrowings at September 30, 2014. The increase in other borrowings during the third quarter of 2015 was attributable to the Corporation borrowing $100 million of long-term FHLB advances which were used to pay down certain short-term borrowings. The decrease in short-term borrowings during the third quarter of 2015 was attributable to funds obtained from the long-term FHLB advances and seasonal municipal deposit accounts. The increase in total deposits and other borrowings during the twelve months ended September 30, 2015 was largely attributable to the acquisitions of Lake Michigan, Monarch and Northwestern. The Corporation acquired $1.86 billion in deposits and $163 million in combined borrowings as of the respective acquisition dates for these transactions.

At September 30, 2015, the Corporation's tangible equity to assets ratio and total risk-based capital ratio were 7.8% and 11.5%, respectively, compared to 7.8% and 11.7%, respectively, at June 30, 2015 and 10.5% and 15.0%, respectively, at September 30, 2014. The decrease in the Corporation's capital ratios at September 30, 2015, compared to September 30, 2014, was attributable to the Lake Michigan, Monarch and Northwestern acquisitions. At September 30, 2015, the Corporation's book value was $26.18 per share, compared to $25.74 per share at June 30, 2015 and $24.47 per share at September 30, 2014. At September 30, 2015, the Corporation's tangible book value was $18.32 per share, compared to $17.87 per share at June 30, 2015 and $20.68 per share at September 30, 2014.

This press release contains references to financial measures which are not defined in generally accepted accounting principles ("GAAP"). Such non-GAAP financial measures include the Corporation's tangible equity to assets ratio, presentation of net interest income and net interest margin on a fully taxable equivalent (FTE) basis, and information presented excluding nonrecurring acquisition-related expenses, including net income, diluted earnings per share, return on average assets, return on average shareholders' equity and operating expenses. These non-GAAP financial measures have been included as the Corporation believes they are helpful for investors to analyze and evaluate the Corporation's financial condition.

Chemical Financial Corporation will host a conference call to discuss its third quarter 2015 operating results on Thursday, October 22, 2015, at 10:30 a.m. EDT. Anyone interested may access the conference call on a live basis by dialing toll-free at 1-888-556-4997 and entering 6459217 for the conference ID. The call will also be broadcast live over the Internet hosted at Chemical Financial Corporation's website at www.chemicalbankmi.com under the "Investor Info" section. A copy of the slide-show presentation and an audio replay of the call will remain available on Chemical Financial Corporation's website for at least 14 days.

Chemical Financial Corporation is the second largest banking company headquartered and operating branch offices in Michigan. The Corporation operates through its subsidiary banks, Chemical Bank, The Bank of Holland and The Bank of Northern Michigan, with 187 banking offices spread over 47 counties in Michigan. At September 30, 2015, the Corporation had total assets of $9.3 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.

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 the Corporation. Words and phrases such as "anticipates," "believes," "beyond," "continue," "estimates," "expects," "forecasts," "future," "intends," "is likely," "judgment," "look forward," "on schedule," "opinion," "plans," "predicts," "probable," "projects," "should," "strategic," "trend," "will," and variations of such words and phrases or 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 future levels of loan charge-offs, future levels of provisions for loan losses, real estate valuation, future levels of nonperforming assets, the rate of asset dispositions, future capital levels, future dividends, future growth and funding sources, future liquidity levels, future profitability levels, future deposit insurance premiums, future asset levels, the effects on earnings of future changes in interest rates, the future level of other revenue sources, future economic trends and conditions, future initiatives to expand the Corporation's market share, expected performance and cash flows from acquired loans, future effects of new or changed accounting standards, future opportunities for acquisitions, opportunities to increase top line revenues, the Corporation's ability to grow its core franchise, future cost savings and the Corporation's ability to maintain adequate liquidity and capital based on the requirements adopted by the Basel Committee on Banking Supervision and U.S. regulators. 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 and mortgage servicing rights; 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); and 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. All of the information concerning interest rate sensitivity is forward-looking. The future effect of changes in the financial and credit markets and the national and regional economies 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 may also contain forward-looking statements regarding the Corporation's outlook or expectations with respect to its recently completed acquisition of Lake Michigan, the expected costs to be incurred in connection with the acquisition, Lake Michigan's future performance and consequences of its integration into the Corporation and the impact of the transaction on the Corporation's future performance.

Risk factors relating to this transaction and the integration of Lake Michigan into the Corporation after closing include, without limitation:

  • The transaction may be more expensive to complete and the anticipated benefits, including anticipated cost savings and strategic gains, may be significantly harder or take longer to achieve than expected or may not be achieved in their entirety as a result of unexpected factors or events.
  • The integration of Lake Michigan's business and operations into the Corporation, which will include conversion of operating systems and procedures, may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results relating to Lake Michigan's or the Corporation's existing businesses.
  • The Corporation's ability to achieve anticipated results from the transaction is dependent on the state of the economic and financial markets going forward. Specifically, the Corporation may incur more credit losses from Lake Michigan's loan portfolio than expected and deposit attrition may be greater than expected.

In addition, 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, 2014. These and other factors are representative of the risk factors that may emerge and could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.

 

Chemical Financial Corporation Announces 2015 Third Quarter Operating Results
 
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
  September 30, June 30, December 31, September 30,
  2015  2015  2014 2014
  (In thousands, except per share data)
Assets        
Cash and cash equivalents:        
Cash and cash due from banks $151,512  $167,054  $144,892  $134,116 
Interest-bearing deposits with the Federal Reserve Bank and other banks 140,025  47,980  38,128  248,022 
Total cash and cash equivalents 291,537  215,034  183,020  382,138 
Investment securities:        
Available-for-sale 635,641  685,706  748,864  576,211 
Held-to-maturity 501,083  469,837  316,413  318,562 
Total investment securities 1,136,724  1,155,543  1,065,277  894,773 
Loans held-for-sale 12,319  7,798  9,128  9,347 
Loans:        
Commercial 1,829,870  1,754,873  1,354,881  1,239,946 
Commercial real estate 2,227,364  2,243,513  1,557,648  1,322,646 
Real estate construction and land development 145,581  112,312  171,495  136,216 
Residential mortgage 1,394,427  1,310,167  1,110,390  984,049 
Consumer installment and home equity 1,618,953  1,613,878  1,493,816  1,358,063 
Total loans 7,216,195  7,034,743  5,688,230  5,040,920 
Allowance for loan losses (75,626) (74,941) (75,683) (77,006)
Net loans 7,140,569  6,959,802  5,612,547  4,963,914 
Premises and equipment 110,670  111,968  97,496  80,127 
Goodwill 286,454  285,512  180,128  120,164 
Other intangible assets 39,864  41,201  33,080  11,958 
Interest receivable and other assets 246,417  243,867  141,467  134,564 
Total Assets $9,264,554  $9,020,725  $7,322,143  $6,596,985 
Liabilities        
Deposits:        
Noninterest-bearing $1,875,636  $1,860,863  $1,591,661  $1,344,716 
Interest-bearing 5,739,575  5,432,116  4,487,310  4,087,211 
Total deposits 7,615,211  7,292,979  6,078,971  5,431,927 
Interest payable and other liabilities 72,568  66,174  56,572  40,366 
Short-term borrowings 330,016  532,291  389,467  323,086 
Other borrowings 248,396  148,490     
Total liabilities 8,266,191  8,039,934  6,525,010  5,795,379 
Shareholders' Equity        
Preferred stock, no par value per share        
Common stock, $1 par value per share 38,131  38,110  32,774  32,763 
Additional paid-in capital 723,427  722,329  565,166  564,127 
Retained earnings 265,991  251,456  231,646  224,222 
Accumulated other comprehensive loss (29,186) (31,104) (32,453) (19,506)
Total shareholders' equity 998,363  980,791  797,133  801,606 
Total Liabilities and Shareholders' Equity $9,264,554  $9,020,725  $7,322,143  $6,596,985 

 

Chemical Financial Corporation Announces 2015 Third Quarter Operating Results
 
Consolidated Statements of Income (Unaudited)    
Chemical Financial Corporation    
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2015 2014 2015 2014
  (In thousands, except per share data)
Interest Income        
Interest and fees on loans $73,809  $52,343  $196,519  $152,289 
Interest on investment securities:        
Taxable 2,233  2,194  6,742  6,825 
Tax-exempt 2,399  1,838  6,490  5,213 
Dividends on nonmarketable equity securities 266  160  1,015  809 
Interest on deposits with the Federal Reserve Bank and other banks 144  94  394  318 
Total interest income 78,851  56,629  211,160  165,454 
Interest Expense        
Interest on deposits 4,304  3,469  11,286  10,840 
Interest on short-term borrowings 144  92  343  307 
Interest on other borrowings 786    999   
Total interest expense 5,234  3,561  12,628  11,147 
Net Interest Income 73,617  53,068  198,532  154,307 
Provision for loan losses 1,500  1,500  4,500  4,600 
Net interest income after provision for loan losses 72,117  51,568  194,032  149,707 
Noninterest Income        
Service charges and fees on deposit accounts 6,722  5,612  19,083  16,028 
Wealth management revenue 4,725  3,730  15,401  11,319 
Other charges and fees for customer services 6,818  4,686  19,324  13,562 
Mortgage banking revenue 1,436  1,166  4,527  3,451 
Gain on sale of investment securities 5    612   
Other 509  157  1,217  508 
Total noninterest income 20,215  15,351  60,164  44,868 
Operating Expenses        
Salaries, wages and employee benefits 33,985  24,885  94,949  73,929 
Occupancy 4,781  3,629  13,593  11,641 
Equipment and software 4,589  3,587  13,467  10,461 
Acquisition-related expenses 900  1,279  5,719  2,249 
Other 14,010  9,322  38,342  29,029 
Total operating expenses 58,265  42,702  166,070  127,309 
Income before income taxes 34,067  24,217  88,126  67,266 
Federal income tax expense 9,600  7,450  26,800  20,450 
Net Income $24,467  $16,767  $61,326  $46,816 
         
Earnings Per Common Share:        
Weighted average common shares outstanding for basic earnings per share 38,123  32,762  35,384  30,896 
Weighted average common shares outstanding for diluted earnings per share, including common stock equivalents 38,393  32,956  35,630  31,101 
Basic earnings per share $0.64  $0.51  $1.73  $1.52 
Diluted earnings per share 0.64  0.51  1.72  1.51 
         
Cash Dividends Declared Per Common Share 0.26  0.24  0.74  0.70 
         
Key Ratios (annualized where applicable):        
Return on average assets 1.05% 1.04% 0.99% 0.99%
Return on average shareholders' equity 9.8% 8.4% 9.2% 8.5%
Net interest margin 3.55% 3.59% 3.56% 3.57%
Efficiency ratio 59.9% 59.2% 60.8% 61.4%

 

Chemical Financial Corporation Announces 2015 Third Quarter Operating Results
 
Financial Summary (Unaudited)
Chemical Financial Corporation
(Dollars in Thousands)
 
  3rd
Quarter 
2015
 2nd
Quarter
2015
 1st
Quarter
2015
 4th
Quarter
2014
 3rd
Quarter
2014
 2nd
Quarter
2014
 1st
Quarter
2014
Average Balances              
Total assets $9,203,856  $8,117,138  $7,401,258  $7,007,879  $6,412,460  $6,253,574  $6,210,569 
Total interest-earning assets 8,467,939  7,534,733  6,920,734  6,558,147  6,046,991  5,907,549  5,860,429 
Total loans 7,125,896  6,262,072  5,696,961  5,418,743  4,962,948  4,824,299  4,692,430 
Total deposits 7,452,556  6,709,428  6,204,095  5,808,187  5,249,317  5,151,581  5,142,276 
Total interest-bearing liabilities 6,233,944  5,442,676  4,959,123  4,632,769  4,237,626  4,250,158  4,276,677 
Total shareholders' equity 987,727  884,863  801,438  804,328  794,711  714,355  701,878 
Key Ratios (annualized where applicable)              
Net interest margin (taxable equivalent basis) 3.55% 3.59% 3.55% 3.62% 3.59% 3.59% 3.53%
Efficiency ratio 59.9% 60.5% 62.4% 62.2% 59.2% 60.9% 64.5%
Return on average assets 1.05% 0.94% 0.98% 0.87% 1.04% 1.04% 0.90%
Return on average shareholders' equity 9.8% 8.6% 9.0% 7.5% 8.4% 9.1% 8.0%
Average shareholders' equity as a percent of average assets 10.7% 10.9% 10.8% 11.5% 12.4% 11.4% 11.3%
Capital ratios (period end):              
Tangible shareholders' equity as a percent of total assets 7.8% 7.8% 8.4% 8.4% 10.5% 11.0% 9.3%
Total risk-based capital ratio 11.5% 11.7% 13.0% 12.4% 15.0% 15.3% 13.8%
                      
  3rd
Quarter
2015
 2nd
Quarter
2015
 1st
Quarter
2015
 4th
Quarter
2014
 3rd
Quarter
2014
 2nd
Quarter
2014
 1st
Quarter
2014
Credit Quality Statistics              
Originated loans $5,667,159  $5,351,011  $5,048,662  $4,990,067  $4,777,614  $4,624,409  $4,464,465 
Acquired loans 1,549,036  1,683,732  654,212  698,163  263,306  274,395  288,824 
Nonperforming assets:              
Nonperforming loans (NPLs) 81,217  70,906  72,741  71,184  70,742  73,735  76,544 
Other real estate/repossessed assets (ORE) 11,207  14,197  14,744  14,205  10,354  10,392  10,056 
Total nonperforming assets 92,424  85,103  87,485  85,389  81,096  84,127  86,600 
Performing troubled debt restructurings 44,803  45,808  45,981  45,664  44,588  44,133  41,823 
Allowance for loan losses - originated as a percent of:              
Total originated loans 1.33% 1.40% 1.49% 1.51% 1.60% 1.67% 1.75%
Nonperforming loans 93% 106% 103% 106% 108% 105% 102%
NPLs as a percent of total loans 1.13% 1.01% 1.28% 1.25% 1.40% 1.51% 1.61%
Nonperforming assets as a percent of:              
Total loans plus ORE 1.28% 1.21% 1.53% 1.50% 1.61% 1.71% 1.82%
Total assets 1.00% 0.94% 1.16% 1.17% 1.23% 1.35% 1.37%
Net loan charge-offs (year-to-date) $4,557  $3,742  $1,927  $9,489  $6,666  $4,379  $2,199 
Net loan charge-offs as a percent of average loans (year-to-date, annualized) 0.10% 0.13% 0.14% 0.19% 0.18% 0.18% 0.19%
                      
  Sept 30,
2015
 June 30,
2015
 March 31,
2015
 Dec 31,
2014
 Sept 30,
2014
 June 30,
2014
 March 31,
2014
Additional Data - Intangibles              
Goodwill $286,454  $285,512  $180,128  $180,128  $120,164  $120,164  $120,164 
Core deposit intangibles (CDI) 27,890  28,353  20,072  20,863  8,665  9,110  9,556 
Mortgage servicing rights (MSR) 11,540  12,307  11,583  12,217  3,293  3,344  3,316 
Noncompete agreements 434  541           
Amortization of CDI and noncompete agreements (during quarter ended) 1,270  987  791  693  445  446  445 


Chemical Financial Corporation Announces 2015 Third Quarter Operating Results
 
Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates* (Unaudited)
Chemical Financial Corporation    
     
  Three Months Ended
September 30, 2015
 Three Months Ended
September 30, 2014
  Average
Balance
 Interest (FTE) Effective
Yield/Rate*
 Average
Balance
 Interest (FTE) Effective
Yield/Rate*
Assets (Dollars in thousands)
Interest-earning assets:            
Loans** $7,135,013  $74,549  4.15% $4,970,635  $52,900  4.23%
Taxable investment securities 692,906  2,233  1.29  616,191  2,194  1.42 
Tax-exempt investment securities 448,214  3,690  3.29  300,975  2,827  3.76 
Other interest-earning assets 36,142  266  2.92  25,572  160  2.48 
Interest-bearing deposits with the Federal Reserve Bank and other banks 155,664  144  0.37  133,618  94  0.28 
Total interest-earning assets 8,467,939  80,882  3.80  6,046,991  58,175  3.82 
Less: allowance for loan losses 75,337      77,536     
Other assets:            
Cash and cash due from banks 174,816      133,465     
Premises and equipment 112,252      74,738     
Interest receivable and other assets 524,186      234,802     
Total assets $9,203,856      $6,412,460     
Liabilities and Shareholders' Equity            
Interest-bearing liabilities:            
Interest-bearing demand deposits $1,778,681  $436  0.10% $1,206,075  $308  0.10%
Savings deposits 2,033,613  389  0.08  1,441,114  327  0.09 
Time deposits 1,728,725  3,479  0.80  1,264,477  2,834  0.89 
Short-term borrowings 504,252  144  0.11  325,960  92  0.11 
Other borrowings 188,673  786  1.65       
Total interest-bearing liabilities 6,233,944  5,234  0.33  4,237,626  3,561  0.33 
Noninterest-bearing deposits 1,911,537      1,337,651     
Total deposits and borrowed funds 8,145,481  5,234  0.25  5,575,277  3,561  0.25 
Interest payable and other liabilities 70,648      42,472     
Shareholders' equity 987,727      794,711     
Total liabilities and shareholders' equity $9,203,856      $6,412,460     
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities)     3.47%     3.49%
Net Interest Income (FTE)   $75,648      $54,614   
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets)     3.55%     3.59


*Fully taxable equivalent (FTE) 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.


Chemical Financial Corporation Announces 2015 Third Quarter Operating Results
 
Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates* (Unaudited)
Chemical Financial Corporation
  Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014
  Average
Balance
 Interest (FTE) Effective
Yield/Rate*
 Average
Balance
 Interest (FTE) Effective
Yield/Rate*
Assets (Dollars in thousands)
Interest-earning assets:            
Loans** $6,376,527  $198,436  4.16% $4,833,468  $153,928  4.26%
Taxable investment securities 708,618  6,742  1.27  652,969  6,825  1.39 
Tax-exempt investment securities 392,555  9,983  3.39  270,699  8,018  3.95 
Other interest-earning assets 33,308  1,015  4.07  25,572  809  4.23 
Interest-bearing deposits with the Federal Reserve Bank and other banks 135,795  394  0.39  156,299  318  0.27 
Total interest-earning assets 7,646,803  216,570  3.78  5,939,007  169,898  3.82 
Less: allowance for loan losses 75,430      78,488     
Other assets:            
Cash and cash due from banks 154,157      123,390     
Premises and equipment 104,477      74,618     
Interest receivable and other assets 417,347      234,413     
Total assets $8,247,354      $6,292,940     
Liabilities and Shareholders' Equity            
Interest-bearing liabilities:            
Interest-bearing demand deposits $1,609,323  $1,051  0.09% $1,189,200  $868  0.10%
Savings deposits 1,921,750  1,119  0.08  1,424,494  958  0.09 
Time deposits 1,518,842  9,116  0.80  1,307,174  9,014  0.92 
Short-term borrowings 415,160  343  0.11  333,809  307  0.12 
Other borrowings 84,843  999  1.57       
Total interest-bearing liabilities 5,549,918  12,628  0.30  4,254,677  11,147  0.35 
Noninterest-bearing deposits 1,743,351      1,260,582     
Total deposits and borrowed funds 7,293,269  12,628  0.23  5,515,259  11,147  0.27 
Interest payable and other liabilities 62,060      40,360     
Shareholders' equity 892,025      737,321     
Total liabilities and shareholders' equity $8,247,354      $6,292,940     
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities)     3.48%     3.47%
Net Interest Income (FTE)   $203,942      $158,751   
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets)     3.56%     3.57


*Fully taxable equivalent (FTE) 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.


Chemical Financial Corporation Announces 2015 Third Quarter Operating Results
 
Nonperforming Assets (Unaudited)
Chemical Financial Corporation
  Sept 30,
2015
 June 30,
2015
 March 31,
2015
 Dec 31,
2014
 Sept 30,
2014
 June 30,
2014
 March 31,
2014
  (In thousands)
Nonperforming Loans:              
Nonaccrual loans:              
Commercial $26,463  $17,260  $18,904  $16,418  $18,213  $18,773  $18,251 
Commercial real estate 24,969  25,287  24,766  24,966  23,858  25,361  27,568 
Real estate construction 247  247  663  162  162  160  160 
Land development 297  255  290  225  1,467  2,184  2,267 
Residential mortgage 6,248  6,004  6,514  6,706  6,693  6,325  6,589 
Consumer installment 536  393  433  500  527  536  806 
Home equity 1,876  1,769  1,870  1,667  2,116  2,296  2,046 
Total nonaccrual loans 60,636  51,215  53,440  50,644  53,036  55,635  57,687 
Accruing loans contractually past due 90 days or more as to interest or principal payments:              
Commercial 122  711  52  170  16  15  43 
Commercial real estate 216  56  148    87  69  730 
Real estate construction              
Land development              
Residential mortgage 572  424  172  557  380  376   
Consumer installment              
Home equity 558  588  429  1,346  1,779  1,075  622 
Total accruing loans contractually past due 90 days or more as to interest or principal payments 1,468  1,779  801  2,073  2,262  1,535  1,395 
Nonperforming troubled debt restructurings:              
Commercial loan portfolio 15,559  14,547  15,810  15,271  11,797  11,049  11,218 
Consumer loan portfolio 3,554  3,365  2,690  3,196  3,647  5,516  6,244 
Total nonperforming troubled debt restructurings 19,113  17,912  18,500  18,467  15,444  16,565  17,462 
Total nonperforming loans 81,217  70,906  72,741  71,184  70,742  73,735  76,544 
Other real estate and repossessed assets 11,207  14,197  14,744  14,205  10,354  10,392  10,056 
Total nonperforming assets $92,424  $85,103  $87,485  $85,389  $81,096  $84,127  $86,600 


Chemical Financial Corporation Announces 2015 Third Quarter Operating Results
 
Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation
 
  3rd
Quarter
2015
 2nd
Quarter
2015
 1st
Quarter
2015
 4th
Quarter
2014
 3rd
Quarter
2014
 2nd
Quarter
2014
 1st
Quarter
2014
 Nine Months Ended
         Sept 30,
2015
 Sept 30,
2014
  (In thousands)
Allowance for loan losses - originated loan portfolio          
Allowance for loan losses - beginning of period $74,941  $75,256  $75,183  $76,506  $77,293  $77,973  $78,572  $75,183  $78,572 
Provision for loan losses 1,500  1,500  2,000  1,500  1,500  1,500  1,600  5,000  4,600 
Net loan (charge-offs) recoveries:                
Commercial 86  (36) (424) (932) (535) (569) (233) (374) (1,337)
Commercial real estate 145  (581) (415) (620) (412) (783) (241) (851) (1,436)
Real estate construction   (49) (80)   (13)   (100) (129) (113)
Land development (1)   (11) 363  16  127  142  (12) 285 
Residential mortgage (214) (661) (492) (277) (304) (341) (704) (1,367) (1,349)
Consumer installment (782) (590) (649) (813) (689) (612) (801) (2,021) (2,102)
Home equity (49) 102  144  (544) (350) (2) (262) 197  (614)
Net loan charge-offs (815) (1,815) (1,927) (2,823) (2,287) (2,180) (2,199) (4,557) (6,666)
Allowance for loan losses - end of period 75,626  74,941  75,256  75,183  76,506  77,293  77,973  75,626  76,506 
Allowance for loan losses - acquired loan portfolio          
Allowance for loan losses - beginning of period     500  500  500  500  500  500  500 
Provision for loan losses     (500)         (500)  
Allowance for loan losses - end of period       500  500  500  500    500 
Total allowance for loan losses $75,626  $74,941  $75,256  $75,683  $77,006  $77,793  $78,473  $75,626  $77,006 
Net loan charge-offs as a percent of average loans  0.05%  0.12%  0.14%  0.21%  0.18%  0.18%  0.19%  0.10%  0.18%


Chemical Financial Corporation Announces 2015 Third Quarter Operating Results
 
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
  3rd
Quarter
2015
 2nd
Quarter
2015
 1st
Quarter
2015
 4th
Quarter
2014
 3rd
Quarter
2014
 2nd
Quarter
2014
 1st
Quarter
2014
  (Dollars in thousands, except per share data)
Summary of Operations              
Interest income $78,851  $69,679  $62,630  $61,807  $56,629  $55,180  $53,645 
Interest expense 5,234  3,944  3,450  3,563  3,561  3,720  3,866 
Net interest income 73,617  65,735  59,180  58,244  53,068  51,460  49,779 
Provision for loan losses 1,500  1,500  1,500  1,500  1,500  1,500  1,600 
Net interest income after provision for loan losses 72,117  64,235  57,680  56,744  51,568  49,960  48,179 
Noninterest income 20,215  20,674  19,275  18,227  15,351  15,801  13,716 
Operating expenses 57,365  53,328  49,658  48,477  41,423  41,778  41,859 
Acquisition-related expenses 900  3,457  1,362  4,139  1,279  647  323 
Income before income taxes 34,067  28,124  25,935  22,355  24,217  23,336  19,713 
Federal income tax expense 9,600  9,100  8,100  7,050  7,450  7,100  5,900 
Net income $24,467  $19,024  $17,835  $15,305  $16,767  $16,236  $13,813 
Net interest margin 3.55% 3.59% 3.55% 3.62% 3.59% 3.59% 3.53%
               
Per Common Share Data              
Net income:              
Basic $0.64  $0.54  $0.54  $0.47  $0.51  $0.54  $0.46 
Diluted 0.64  0.54  0.54  0.46  0.51  0.54  0.46 
Diluted, excluding acquisition-related transaction expenses 0.65  0.61  0.57  0.56  0.53  0.55  0.47 
Cash dividends declared 0.26  0.24  0.24  0.24  0.24  0.23  0.23 
Book value - period-end 26.18  25.74  24.68  24.32  24.47  24.22  23.63 
Tangible book value - period-end 18.32  17.87  18.95  18.57  20.68  20.42  19.44 
Market value - period-end 32.35  33.06  31.36  30.64  26.89  28.08  32.45 

 

For further information: David B. Ramaker, CEO Lori A. Gwizdala, CFO 989-839-5350

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