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Chemical Financial Corporation Reports 2016 First Quarter Operating Results

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MIDLAND, Mich., April 15, 2016 (GLOBE NEWSWIRE) -- Chemical Financial Corporation ("Corporation" or "Chemical") (NASDAQ: CHFC) today announced 2016 first quarter net income of $23.3 million, or $0.60 per diluted share, compared to 2015 fourth quarter net income of $25.5 million, or $0.66 per diluted share and 2015 first quarter net income of $17.8 million, or $0.54 per diluted share. Excluding merger and acquisition-related transaction expenses ("transaction expenses"), net income in the first quarter of 2016 was $24.9 million, or $0.65 per diluted share, compared to $26.9 million, or $0.70 per diluted share, in the fourth quarter of 2015 and $18.7 million, or $0.57 per diluted share, in the first quarter of 2015.

Transaction expenses attributable to the pending merger with Talmer Bancorp, Inc. ("Talmer"), which was announced on January 26, 2016, were $2.6 million in the first quarter of 2016, while transaction expenses attributable to the April 1, 2015 acquisition of Monarch Community Bancorp, Inc. ("Monarch") and the May 31, 2015 acquisition of Lake Michigan Financial Corporation ("Lake Michigan") were $2.1 million in the fourth quarter of 2015 and $1.4 million in the first quarter of 2015.

"Between these solid financial results, and our late January announcement of our partnership with Talmer, 2016 is off to a strong start for Chemical Financial Corporation. The improvement in our first quarter 2016 financial results over the prior year's first quarter was driven, in large part, by the benefits and synergies of the two acquisitions we have completed in the intervening period, combined with solid organic loan and deposit growth over the past year. The resultant balance sheet and revenue growth, combined with our sustained high level of credit quality and ability to keep operating expenses in check, has translated into strong first quarter earnings performance," noted David B. Ramaker, Chairman, Chief Executive Officer and President of Chemical Financial Corporation.

"We continue to believe that our community-centric approach to commercial banking makes us an attractive financial service provider for the households and small- and middle-market businesses that operate in the communities we serve, while also making us an appealing potential partner for like-minded financial institutions. Our pending merger with Talmer represents another instance of our ability to bring strong, complementary, talented commercial banking operations into the Chemical Financial Corporation family. We look forward to continuing to execute on our growth strategy across select Midwestern markets in the months and years ahead," added Ramaker.

The Corporation's return on average assets was 1.01% during the first quarter of 2016, compared to 1.10% in the fourth quarter of 2015 and 0.98% in the first quarter of 2015. The Corporation's return on average shareholders' equity was 9.2% in the first quarter of 2016, compared to 10.1% in the fourth quarter of 2015 and 9.0% in the first quarter of 2015. Excluding transaction expenses, the Corporation's return on average assets was 1.09% during the first quarter of 2016, compared to 1.16% in the fourth quarter of 2015 and 1.03% in the first quarter of 2015 and the Corporation's return on average shareholders' equity was 9.9% in the first quarter of 2016, compared to 10.7% in the fourth quarter of 2015 and 9.5% in the first quarter of 2015.

Net interest income was $74.3 million in the first quarter of 2016, $1.1 million, or 1.5%, lower than the fourth quarter of 2015, although $15.1 million, or 26%, higher than the first quarter of 2015. The decrease in net interest income in the first quarter of 2016, compared to the fourth quarter of 2015, was largely attributable to lower interest income resulting from one less day in the first quarter of 2016 and semi-annual interest income from Federal Reserve Bank (FRB) dividends and seasonal loan fees in the fourth quarter of 2015. Loan growth in the first quarter of 2016 was offset by a slight reduction in the average yield of the loan portfolio during the quarter. The increase in net interest income in the first quarter of 2016 over the first quarter of 2015 was largely attributable to the positive impact of organic loan growth and the impact of the Corporation's acquisitions of Monarch and Lake Michigan.

The net interest margin (on a tax-equivalent basis) was 3.60% in the first quarter of 2016, compared to 3.64% in the fourth quarter of 2015 and 3.55% in the first quarter of 2015. The average yield on the loan portfolio was 4.13% in the first quarter of 2016, compared to 4.16% in both the fourth quarter of 2015 and the first quarter of 2015. The average yield of the investment securities portfolio was 2.29% in the first quarter of 2016, compared to 2.21% in the fourth quarter of 2015 and 1.96% in the first quarter of 2015. The Corporation's average cost of funds was 0.25% in both the first quarter of 2016 and the fourth quarter of 2015, compared to 0.21% in the first quarter of 2015.

The provision for loan losses was $1.5 million in the first quarter of 2016, compared to $2.0 million in the fourth quarter of 2015 and $1.5 million in the first quarter of 2015. Net loan charge-offs were $4.5 million, or 0.25% of average loans, in the first quarter of 2016, compared to $4.3 million, or 0.24% of average loans, in the fourth quarter of 2015 and $1.9 million, or 0.14% of average loans, in the first quarter of 2015. Net loan charge-offs in the first quarter of 2016 included $2.9 million from one commercial loan relationship.

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 $73.3 million at March 31, 2016, compared to $83.9 million at December 31, 2015 and $72.7 million at March 31, 2015. The $10.6 million, or 13%, decrease in nonperforming loans during the first quarter of 2016 was primarily attributable to a combination of net loan charge-offs and $7.8 million of principal paydowns. Nonperforming loans comprised 0.99% of total loans at March 31, 2016, compared to 1.15% at December 31, 2015 and 1.28% at March 31, 2015. The decrease in the percentage of nonperforming loans to total loans at March 31, 2016, compared to March 31, 2015, was partially due to the addition of $1.11 billion of total loans acquired in the Monarch and Lake Michigan 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.

At March 31, 2016, the allowance for loan losses of the originated loan portfolio was $70.3 million, or 1.17% of originated loans, compared to $73.3 million, or 1.26% of originated loans, at December 31, 2015 and $75.3 million, or 1.49% of originated loans, at March 31, 2015. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 96% at March 31, 2016, compared to 87% at December 31, 2015 and 103% at March 31, 2015.

Noninterest income was $19.4 million in the first quarter of 2016, compared to $20.1 million in the fourth quarter of 2015 and $19.3 million in the first quarter of 2015. Noninterest income in the first quarter of 2016 was lower than the fourth quarter of 2015, due primarily to lower seasonal overdraft fees and mortgage banking revenue.

Operating expenses were $58.9 million in the first quarter of 2016, compared to $57.8 million in the fourth quarter of 2015 and $51.0 million in the first quarter of 2015. Operating expenses included transaction expenses of $2.6 million in the first quarter of 2016, $2.1 million in the fourth quarter of 2015 and $1.4 million in the first quarter of 2015. Excluding these transaction expenses, operating expenses were $56.3 million in the first quarter of 2016, $0.6 million, or 1.0%, higher than the fourth quarter of 2015 and $6.6 million, or 13%, higher than the first quarter of 2015. The increase in operating expenses in the first quarter of 2016, compared to the fourth quarter of 2015, was primarily attributable to higher employee benefit costs related to $1.1 million of higher payroll tax expenses, which are highest in the first quarter of the year, and $0.4 million higher group health costs. These and other increases were partially offset by lower expenses in other categories, including variable and incentive compensation, equipment and software and credit-related expenses. The increase in operating expenses in the first quarter of 2016, compared to the first quarter of 2015, was primarily attributable to incremental operating costs associated with the Monarch and Lake Michigan transactions.

The Corporation's efficiency ratio was 58.8% in the first quarter of 2016, 57.1% in the fourth quarter of 2015 and 62.4% in the first quarter of 2015.

Total assets were $9.30 billion at March 31, 2016, compared to $9.19 billion at December 31, 2015 and $7.55 billion at March 31, 2015. The increase in total assets during the three months ended March 31, 2016 was primarily attributable to loan growth that was funded by an increase in seasonal municipal deposit accounts. The increase in total assets during the twelve months ended March 31, 2016 was attributable to $1.47 billion of assets acquired in the Monarch and Lake Michigan acquisitions and loan growth that was partially funded by $355 million of organic growth in customer deposits. Interest-bearing balances at the Federal Reserve Bank totaled $90 million at March 31, 2016, compared to $15 million at December 31, 2015 and $239 million at March 31, 2015. Investment securities were $1.03 billion at March 31, 2016, compared to $1.06 billion at both December 31, 2015 and March 31, 2015.

Total loans were $7.37 billion at March 31, 2016, up $96 million, or 1.3%, from total loans of $7.27 billion at December 31, 2015 and up $1.66 billion, or 29%, from total loans of $5.70 billion at March 31, 2015. During the first quarter of 2016, commercial real estate loans grew $42 million, residential mortgage loans grew $32 million and commercial loans grew $16 million. The increase in loans during the twelve months ended March 31, 2016 was attributable to $1.11 billion of loans acquired in the Monarch and Lake Michigan acquisitions and $557 million of organic loan growth.

Total deposits were $7.65 billion at March 31, 2016, compared to $7.46 billion at December 31, 2015 and $6.32 billion at March 31, 2015. The increase in deposits during the first quarter of 2016 was primarily attributable to a $131 million increase in seasonal municipal deposit accounts. The increase in total deposits during the twelve months ended March 31, 2016 was attributable to the Corporation acquiring $1.07 billion of deposits in the Monarch and Lake Michigan acquisitions and organic growth in customer deposits of $355 million, which were partially offset by a decrease of $94 million related to maturing brokered deposits that were acquired in the Lake Michigan transaction.

Securities sold under agreements to repurchase with customers were $283 million at March 31, 2016, compared to $297 million at December 31, 2015 and $372 million at March 31, 2015, with the decrease from March 31, 2015 due largely to $50 million of temporary funds received from one customer of Chemical Bank that were withdrawn during the second quarter of 2015. Short-term borrowings were $100 million at December 31, 2015 (none at March 31, 2016 and March 31, 2015) and consisted of short-term FHLB advances utilized by the Corporation to fund short-term liquidity needs. The decrease in short-term borrowings during the first quarter of 2016 was due to the Corporation utilizing a portion of funds received from the seasonal increase in municipal deposit accounts to pay off maturing short-term FHLB advances. Long-term borrowings were $274 million at March 31, 2016 and $242 million at December 31, 2015. The Corporation had no long-term borrowings at March 31, 2015. The increase in long-term borrowings during the first quarter of 2016 was attributable to the Corporation borrowing an additional $50 million of long-term FHLB advances to fund future liquidity needs and in anticipation of increases in market interest rates. During the first quarter of 2016, the Corporation paid off its subordinated debt obligations of $18 million that were acquired in the Lake Michigan transaction.

At March 31, 2016, the Corporation's tangible equity to assets ratio and total risk-based capital ratio were 8.2% and 11.5%, respectively, compared to 8.1% and 11.8%, respectively, at December 31, 2015 and 8.5% and 13.0%, respectively, at March 31, 2015. The decrease in the Corporation's capital ratios at March 31, 2016 and December 31, 2015, compared to March 31, 2015, was attributable to the Monarch and Lake Michigan acquisitions. At March 31, 2016, the Corporation's book value was $26.99 per share, compared to $26.62 per share at December 31, 2015 and $24.68 per share at March 31, 2015. At March 31, 2016, the Corporation's tangible book value was $19.20 per share, compared to $18.78 per share at December 31, 2015 and $18.95 per share at March 31, 2015.

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 transaction 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. A reconciliation of non-GAAP financial measures may be found in the financial tables included with this press release.

Chemical Financial Corporation will host a conference call to discuss its first quarter 2016 operating results on Monday, April 18, 2016, at 10:30 a.m. ET. Anyone interested may access the conference call on a live basis by dialing toll-free at 1-888-359-3627 and entering 2475121 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 bank, Chemical Bank, with 175 banking offices spread over 47 counties in Michigan. At March 31, 2016, 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," "continue," "estimates," "expects," "forecasts," "future," "intends," "is likely," "judgment," "look ahead," "look forward," "on schedule," "opinion," "opportunity," "plans," "potential," "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 also contains forward-looking statements regarding Chemical's outlook or expectations with respect to its planned merger with Talmer Bancorp, Inc. ("Talmer"), the expected costs to be incurred in connection with the transaction, the expected impact of the transaction on Chemical's future financial performance and consequences of the integration of Talmer into Chemical.

Risk factors relating both to the transaction and the integration of Talmer into Chemical after closing include, without limitation:

  • Completion of the transaction is dependent on, among other things, receipt of regulatory approvals and receipt of Chemical's and Talmer's shareholder approvals, the timing of which cannot be predicted with precision at this point and which may not be received at all.
  • The impact of the completion of the transaction on Chemical's financial statements will be affected by the timing of the transaction.
  • 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 Talmer's business and operations into Chemical, which will include conversion of Talmer's operating systems and procedures, may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results relating to Chemical's or Talmer's existing businesses.
  • Chemical's ability to achieve anticipated results from the transaction is dependent on the state of the economic and financial markets going forward. Specifically, Chemical may incur more credit losses than expected and customer attrition may be greater than expected.

In addition, risk factors include, but are not limited to, the risk factors described in Item 1A of Chemical's Annual Report on Form 10-K for the year ended December 31, 2015. 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.

No Offer or Solicitation

This communication is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to any merger agreement associated with the Talmer transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Additional Information about the Transaction

Chemical has filed a registration statement on Form S-4 with the Securities and Exchange Commission ("SEC") to register the securities that the Talmer shareholders will receive if the transaction is consummated. The registration statement contains a prospectus for Chemical and a joint proxy statement to be used by Chemical and Talmer to solicit the required approvals of their respective shareholders of the merger and other relevant documents concerning the transaction. Chemical and Talmer may also file other documents with the SEC concerning the proposed merger. Before making an investment or voting decision, investors and shareholders of Chemical and Talmer are urged to read the registration statement, the prospectus and joint proxy statement, and any other relevant documents when they become available because they will contain important information about Chemical, Talmer, and the transaction. Investors will be able to obtain these documents free of charge at the SEC's website at www.sec.gov. Copies of the documents filed with the SEC in connection with the merger can also be obtained, when available, without charge, from Chemical's website at www.chemicalbankmi.com, or by contacting Chemical Financial Corporation, 235 East Main Street, P.O. Box 569, Midland, MI 48640-0569, Attention: Ms. Lori A. Gwizdala, Investor Relations, telephone 800-867-9757, or at Talmer's website at www.talmerbank.com, or by contacting Talmer Bancorp, Inc., 2301 West Big Beaver Road, Suite 525, Troy, Michigan 48084, Attention: Mr. Brad Adams, Investor Relations, telephone 248-498-2862.

Participants in the Merger Solicitation

Chemical and Talmer, and their respective directors, executive officers, and certain other members of management and employees, may be soliciting proxies from Chemical and Talmer shareholders in favor of the transaction. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of Chemical and Talmer shareholders in connection with the proposed transaction are set forth in the prospectus and joint proxy statement filed with the SEC. Free copies of this document may be obtained as described above. Information about Chemical's directors and executive officers can be found in Chemical's definitive proxy statement in connection with its 2016 annual meeting of shareholders, as filed with the SEC on March 4, 2016, and other documents subsequently filed by Chemical with the SEC. Information about Talmer's directors and executive officers can be found in Talmer's Annual Report on Form 10-K, Amendment No. 1, as filed with the SEC on March 30, 2016, and other documents subsequently filed by Talmer with the SEC. Additional information regarding the interests of such participants are included in the prospectus and joint proxy statement and other relevant documents regarding the merger filed with the SEC when they become available.


 
Chemical Financial Corporation Announces 2016 First Quarter Operating Results
       
       
Consolidated Statements of Financial Position (Unaudited)      
Chemical Financial Corporation      
(In thousands, except per share data)      
       
  March 31,
 2016
 December 31,
 2015
 March 31,
 2015
   
Assets      
Cash and cash equivalents:      
Cash and cash due from banks $168,739  $194,136  $121,796 
Interest-bearing deposits with the Federal Reserve Bank and other banks 122,635  44,653  272,142 
Total cash and cash equivalents 291,374  238,789  393,938 
Investment securities:      
Available-for-sale 514,015  553,731  680,644 
Held-to-maturity 518,300  509,971  381,450 
Total investment securities 1,032,315  1,063,702  1,062,094 
Loans held-for-sale 9,667  10,327  9,675 
Loans:      
Total loans 7,366,885  7,271,147  5,702,874 
Allowance for loan losses (70,318) (73,328) (75,256)
Net loans 7,296,567  7,197,819  5,627,618 
Premises and equipment 105,868  106,317  96,486 
Goodwill 286,867  287,393  180,128 
Other intangible assets 36,266  38,104  31,655 
Interest receivable and other assets 244,708  246,346  150,041 
Total Assets $9,303,632  $9,188,797  $7,551,635 
Liabilities      
Deposits:      
Noninterest-bearing $1,951,193  $1,934,583  $1,614,319 
Interest-bearing 5,698,923  5,522,184  4,706,034 
Total deposits 7,650,116  7,456,767  6,320,353 
Interest payable and other liabilities 64,120  76,466  48,545 
Securities sold under agreements to repurchase with customers 283,383  297,199  372,236 
Short-term borrowings   100,000   
Long-term borrowings 273,722  242,391   
Total liabilities 8,271,341  8,172,823  6,741,134 
Shareholders' Equity      
Preferred stock, no par value per share      
Common stock, $1 par value per share 38,248  38,168  32,847 
Additional paid-in capital 725,874  725,280  565,851 
Retained earnings 294,859  281,558  241,582 
Accumulated other comprehensive loss (26,690) (29,032) (29,779)
Total shareholders' equity 1,032,291  1,015,974  810,501 
Total Liabilities and Shareholders' Equity $9,303,632  $9,188,797  $7,551,635 
             


 
Chemical Financial Corporation Announces 2016 First Quarter Operating Results
   
Consolidated Statements of Income (Unaudited)  
Chemical Financial Corporation  
(In thousands, except per share data)  
   
  Three Months Ended
  March 31, 2016 December 31, 2015 March 31, 2015
       
Interest Income      
Interest and fees on loans $74,401  $75,253  $58,097 
Interest on investment securities:      
Taxable 1,929  2,044  2,307 
Tax-exempt 2,665  2,583  1,906 
Dividends on nonmarketable equity securities 256  633  198 
Interest on deposits with the Federal Reserve Bank and other banks 213  116  122 
Total interest income 79,464  80,629  62,630 
Interest Expense      
Interest on deposits 4,059  4,120  3,352 
Interest on short-term borrowings 100  110  98 
Interest on other borrowings 975  923   
Total interest expense 5,134  5,153  3,450 
Net Interest Income 74,330  75,476  59,180 
Provision for loan losses 1,500  2,000  1,500 
Net interest income after provision for loan losses 72,830  73,476  57,680 
Noninterest Income      
Service charges and fees on deposit accounts 5,720  6,398  5,916 
Wealth management revenue 5,201  5,151  5,071 
Other charges and fees for customer services 6,392  6,189  5,990 
Mortgage banking revenue 1,405  1,606  1,403 
Gain on sale of investment securities 19  18  579 
Other 682  690  316 
Total noninterest income 19,419  20,052  19,275 
Operating Expenses      
Salaries, wages and employee benefits 33,890  32,971  29,253 
Occupancy 4,905  4,620  4,426 
Equipment and software 4,404  5,102  4,398 
Merger and acquisition-related transaction expenses (transaction expenses) 2,594  2,085  1,362 
Other 13,094  13,046  11,581 
Total operating expenses 58,887  57,824  51,020 
Income before income taxes 33,362  35,704  25,935 
Federal income tax expense 10,100  10,200  8,100 
Net Income $23,262  $25,504  $17,835 
Earnings Per Common Share:      
Weighted average common shares outstanding for basic earnings per share 38,198  38,150  32,809 
Weighted average common shares outstanding for diluted earnings per share, including common stock equivalents 38,521  38,498  33,044 
Basic earnings per share $0.61  $0.67  $0.54 
Diluted earnings per share 0.60  0.66  0.54 
       
Cash Dividends Declared Per Common Share 0.26  0.26  0.24 
       
Key Ratios (annualized where applicable):      
Return on average assets 1.01% 1.10% 0.98%
Return on average shareholders' equity 9.2% 10.1% 9.0%
Net interest margin 3.60% 3.64% 3.55%
Efficiency ratio 58.8% 57.1% 62.4%
          


 
Chemical Financial Corporation Announces 2016 First Quarter Operating Results
 
           
Selected Quarterly Information (Unaudited)          
Chemical Financial Corporation          
(Dollars in thousands, except per share data)          
           
  1st Quarter 2016 4th Quarter 2015 3rd Quarter 2015 2nd Quarter 2015 1st Quarter 2015
                     
Summary of Operations          
Interest income $79,464  $80,629  $78,851  $69,679  $62,630 
Interest expense 5,134  5,153  5,234  3,944  3,450 
Net interest income 74,330  75,476  73,617  65,735  59,180 
Provision for loan losses 1,500  2,000  1,500  1,500  1,500 
Net interest income after provision for loan losses 72,830  73,476  72,117  64,235  57,680 
Noninterest income 19,419  20,052  20,215  20,674  19,275 
Operating expenses 56,293  55,739  57,365  53,328  49,658 
Transaction expenses 2,594  2,085  900  3,457  1,362 
Income before income taxes 33,362  35,704  34,067  28,124  25,935 
Federal income tax expense 10,100  10,200  9,600  9,100  8,100 
Net income $23,262  $25,504  $24,467  $19,024  $17,835 
Net income, excluding transaction expenses $24,948  $26,859  $25,052  $21,683  $18,720 
           
Per Common Share Data          
Net income:          
Basic $0.61  $0.67  $0.64  $0.54  $0.54 
Diluted 0.60  0.66  0.64  0.54  0.54 
Diluted, excluding transaction expenses 0.65  0.70  0.65  0.61  0.57 
Cash dividends declared 0.26  0.26  0.26  0.24  0.24 
Book value - period-end 26.99  26.62  26.18  25.74  24.68 
Tangible book value - period-end 19.20  18.78  18.32  17.89  18.95 
Market value - period-end 35.69  34.27  32.35  33.06  31.36 
           
Key Ratios (annualized where applicable)          
Net interest margin (taxable equivalent basis) 3.60% 3.64% 3.55% 3.59% 3.55%
Efficiency ratio 58.8% 57.1% 59.9% 60.5% 62.4%
Return on average assets 1.01% 1.10% 1.05% 0.94% 0.98%
Return on average shareholders' equity 9.2% 10.1% 9.8% 8.6% 9.0%
Average shareholders' equity as a percent of average assets 11.0% 10.9% 10.7% 10.9% 10.8%
Capital ratios (period end):          
Tangible shareholders' equity as a percent of tangible assets 8.2% 8.1% 7.8% 7.8% 8.5%
Total risk-based capital ratio 11.5% 11.8% 11.6% 11.7% 13.0%
           


 
Chemical Financial Corporation Announces 2016 First Quarter Operating Results
 
 
Average Balances, Fully Tax Equivalent (FTE) Interest and Effective Yields and Rates* (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
 
  Three Months Ended
  March 31, 2016 December 31, 2015 March 31, 2015
  Average
Balance
 Interest (FTE) Effective
Yield/Rate*
 Average
Balance
 Interest (FTE) Effective
Yield/Rate*
 Average
Balance
 Interest (FTE) Effective
Yield/Rate*
                   
Assets                  
Interest-earning assets:                  
Loans:**                  
Commercial $1,901,879  $19,774  4.18% $1,847,093  $19,828  4.26% $1,352,986  $14,156  4.24%
Commercial real estate and real estate construction 2,361,105  28,254  4.81  2,361,734  28,503  4.79  1,730,931  20,853  4.89 
Residential mortgage 1,453,420  13,588  3.74  1,425,812  13,408  3.76  1,123,202  10,981  3.91 
Consumer installment and home equity 1,583,067  13,483  3.43  1,606,700  14,166  3.50  1,498,934  12,670  3.43 
Total loans 7,299,471  75,099  4.13  7,241,339  75,905  4.16  5,706,053  58,660  4.16 
Taxable investment securities 554,524  1,929  1.39  609,406  2,044  1.34  734,890  2,307  1.26 
Tax-exempt investment securities 496,304  4,100  3.30  481,968  3,973  3.30  331,878  2,932  3.53 
Other interest-earning assets 39,493  256  2.61  36,799  633  6.82  29,438  198  2.73 
Interest-bearing deposits with the Federal Reserve Bank and other banks 136,919  213  0.63  87,952  116  0.52  118,475  122  0.42 
Total interest-earning assets 8,526,711  81,597  3.84  8,457,464  82,671  3.89  6,920,734  64,219  3.75 
Less: allowance for loan losses 73,547      75,225      75,880     
Other assets:                  
Cash and cash due from banks 158,277      157,939      138,308     
Premises and equipment 105,959      110,141      97,105     
Interest receivable and other assets 523,634      524,905      320,991     
Total assets $9,241,034      $9,175,224      $7,401,258     
Liabilities and Shareholders' Equity                    
Interest-bearing liabilities:                  
Interest-bearing demand deposits $1,953,626  $468  0.10% $1,816,694  $414  0.09% $1,506,953  $324  0.09%
Savings deposits 2,048,867  389  0.08  2,024,543  393  0.08  1,777,344  370  0.08 
Time deposits 1,625,573  3,202  0.79  1,671,913  3,313  0.79  1,332,698  2,658  0.81 
Short-term borrowings 349,699  100  0.12  405,713  110  0.11  342,128  98  0.12 
Long-term borrowings 266,022  975  1.47  243,170  923  1.51       
Total interest-bearing liabilities 6,243,787  5,134  0.33  6,162,033  5,153  0.33  4,959,123  3,450  0.28 
Noninterest-bearing deposits 1,906,896      1,936,328      1,587,100     
Total deposits and borrowed funds 8,150,683  5,134  0.25  8,098,361  5,153  0.25  6,546,223  3,450  0.21 
Interest payable and other liabilities 72,422      76,516      53,597     
Shareholders' equity 1,017,929      1,000,347      801,438     
Total liabilities and shareholders' equity $9,241,034      $9,175,224      $7,401,258     
Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities)     3.51%     3.56%     3.47%
Net Interest Income (FTE)   $76,463      $77,518      $60,769   
Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets)     3.60%     3.64%     3.55%


*Fully taxable equivalent (FTE) basis using a federal income tax rate of 35%. The adjustments to determine tax equivalent net interest income were $2.1 million, $2.0 million and $1.6 million for the three months ended March 31, 2016, December 31, 2015 and March 31, 2015, respectively.
**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 2016 First Quarter Operating Results
 
 
Noninterest Income and Operating Expenses Information (Unaudited)
Chemical Financial Corporation
(In thousands)
 
  1st Quarter
2016
 4th Quarter
2015
 3rd Quarter
2015
 2nd Quarter
2015
 1st Quarter
2015
                     
Noninterest income          
Service charges and fees on deposit accounts $5,720  $6,398  $6,722  $6,445  $5,916 
Wealth management revenue 5,201  5,151  4,725  5,605  5,071 
Electronic banking fees 4,918  4,712  5,059  4,775  4,572 
Mortgage banking revenue 1,405  1,606  1,436  1,688  1,403 
Other fees for customer services 1,131  1,477  1,280  1,132  901 
Other 1,044  708  993  1,029  1,412 
Total noninterest income $19,419  $20,052  $20,215  $20,674  $19,275 


  1st Quarter
2016
 4th Quarter
2015
 3rd Quarter
2015
 2nd Quarter
2015
 1st Quarter
2015
                     
Operating expenses          
Salaries and wages $26,743  $27,341  $27,872  $25,535  $23,741 
Employee benefits 7,147  5,630  6,113  6,176  5,512 
Occupancy 4,905  4,620  4,781  4,386  4,426 
Equipment and software 4,404  5,102  4,589  4,480  4,398 
Outside processing and service fees 3,711  3,576  4,146  3,926  3,558 
FDIC insurance premiums 1,407  1,482  1,441  1,337  1,225 
Professional fees 1,036  1,112  1,235  1,258  1,237 
Intangible asset amortization 1,194  1,341  1,270  987  791 
Credit-related expenses 30  600  90  (192) 133 
Transaction expenses 2,594  2,085  900  3,457  1,362 
Other 5,716  4,935  5,828  5,435  4,637 
Total operating expenses $58,887  $57,824  $58,265  $56,785  $51,020 
                     


 
Chemical Financial Corporation Announces 2016 First Quarter Operating Results
 
 
Composition of Loans and Deposits and Additional Information on Intangible Assets (Unaudited)
Chemical Financial Corporation
(Dollars in Thousands)
 
  March 31,
2016
 Dec 31,
2015
 March 31,
2016 vs 
Dec 31,
2015 
(% Change)
 Sept 30,
2015
 June 30,
2015
 March 31,
2015
 March 31,
2016 vs
March 31,
2015 
(% Change)
               
Composition of Loans              
Commercial loan portfolio:              
Commercial $1,922,259  $1,905,879  0.9% $1,829,870  $1,754,873  $1,356,169  41.7%
Commercial real estate 2,143,051  2,112,162  1.5  2,227,364  2,243,513  1,616,923  32.5 
Real estate construction 242,899  232,076  4.7  145,581  112,312  108,839  123.2 
Subtotal - commercial loans 4,308,209  4,250,117  1.4  4,202,815  4,110,698  3,081,931  39.8 
Consumer loan portfolio:              
Residential mortgage 1,461,120  1,429,636  2.2  1,394,427  1,310,167  1,117,445  30.8 
Consumer installment 897,078  877,457  2.2  899,751  887,907  844,066  6.3 
Home equity 700,478  713,937  (1.9) 719,202  725,971  659,432  6.2 
Subtotal - consumer loans 3,058,676  3,021,030  1.2  3,013,380  2,924,045  2,620,943  16.7 
Total loans $7,366,885  $7,271,147  1.3% $7,216,195  $7,034,743  $5,702,874  29.2%
                           


  March 31,
2016
 Dec 31,
2015
 March 31,
2016 vs
  Dec 31,
2015
  (% Change)
 Sept 30,
2015
 June 30,
2015
 March 31,
2015
 March 31,
2016 vs
March 31,
2015 
(% Change)
               
Composition of Deposits              
Noninterest-bearing demand $1,951,193  $1,934,583  0.9% $1,875,636  $1,860,863  $1,614,319  20.9%
Savings 1,080,940  1,026,269  5.3  1,004,987  1,015,036  921,335  17.3 
Interest-bearing demand 2,005,053  1,870,197  7.2  2,029,556  1,630,211  1,556,152  28.8 
Money market accounts 1,006,271  978,306  2.9  1,013,924  1,041,654  896,462  12.2 
Brokered deposits 186,143  206,439  (9.8) 227,306  256,254  2,015  9,137.9 
Other time deposits 1,420,516  1,440,973  (1.4) 1,463,802  1,488,961  1,330,070  6.8 
Total deposits $7,650,116  $7,456,767  2.6% $7,615,211  $7,292,979  $6,320,353  21.0%
                           


  March 31,
2016
 Dec 31,
2015
 Sept 30,
2015
 June 30,
2015
 March 31,
2015
           
Additional Data - Intangibles          
Goodwill $286,867  $287,393  $286,454  $285,512  $180,128 
Core deposit intangibles (CDI) 25,542  26,654  27,890  28,353  20,072 
Mortgage servicing rights (MSR) 10,478  11,122  11,540  12,307  11,583 
Noncompete agreements 246  328  434  541   
                


 
Chemical Financial Corporation Announces 2016 First Quarter Operating Results
           
           
Nonperforming Assets (Unaudited)          
Chemical Financial Corporation          
(In thousands)          
           
  March 31, 2016 Dec 31, 2015 Sept 30, 2015 June 30, 2015 March 31, 2015
                     
Nonperforming Assets          
Nonperforming Loans:          
Nonaccrual loans:          
Commercial $19,264  $28,554  $26,463  $17,260  $18,904 
Commercial real estate 25,859  25,163  24,969  25,287  24,766 
Real estate construction 546  521  544  502  953 
Residential mortgage 5,062  5,557  6,248  6,004  6,514 
Consumer installment 360  451  536  393  433 
Home equity 2,328  1,979  1,876  1,769  1,870 
Total nonaccrual loans 53,419  62,225  60,636  51,215  53,440 
Accruing loans contractually past due 90 days or more as to interest or principal payments:          
Commercial 370  364  122  711  52 
Commercial real estate   254  216  56  148 
Real estate construction          
Residential mortgage 423  402  572  424  172 
Consumer installment          
Home equity 679  1,267  558  588  429 
Total accruing loans contractually past due 90 days or more as to interest or principal payments 1,472  2,287  1,468  1,779  801 
Nonperforming troubled debt restructurings:          
Commercial loan portfolio 15,351  16,297  15,559  14,547  15,810 
Consumer loan portfolio 3,013  3,071  3,554  3,365  2,690 
Total nonperforming troubled debt restructurings 18,364  19,368  19,113  17,912  18,500 
Total nonperforming loans 73,255  83,880  81,217  70,906  72,741 
Other real estate and repossessed assets 9,248  9,935  11,207  14,197  14,744 
Total nonperforming assets $82,503  $93,815  $92,424  $85,103  $87,485 
           
Nonperforming loans as a percent of total loans 0.99% 1.15% 1.13% 1.01% 1.28%
Nonperforming assets as a percent of:          
Total loans plus other real estate and repossessed assets 1.12% 1.29% 1.28% 1.21% 1.53%
Total assets 0.89% 1.02% 1.00% 0.94% 1.16%
           
Performing troubled debt restructurings $49,886  $47,810  $44,803  $45,808  $45,981 
                     


 
Chemical Financial Corporation Announces 2016 First Quarter Operating Results
 
 
Summary of Allowance and Loan Loss Experience (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
 
  1st Quarter 2016 4th Quarter 2015 3rd Quarter 2015 2nd Quarter 2015 1st Quarter 2015
      
                               
Allowance for loan losses - originated loan portfolio  
Allowance for loan losses - beginning of period $73,328  $75,626  $74,941  $75,256  $75,183 
Provision for loan losses 1,500  2,000  1,500  1,500  2,000 
Net loan (charge-offs) recoveries:          
Commercial (3,115) (2,207) 86  (36) (424)
Commercial real estate (440) (624) 145  (581) (415)
Real estate construction (11)   (1) (49) (91)
Residential mortgage (172) (545) (214) (661) (492)
Consumer installment (602) (770) (782) (590) (649)
Home equity (170) (152) (49) 102  144 
Net loan charge-offs (4,510) (4,298) (815) (1,815) (1,927)
Allowance for loan losses - end of period 70,318  73,328  75,626  74,941  75,256 
Allowance for loan losses - acquired loan portfolio  
Allowance for loan losses - beginning of period         500 
Provision for loan losses         (500)
Allowance for loan losses - end of period          
Total allowance for loan losses $70,318  $73,328  $75,626  $74,941  $75,256 
           
Summary of net loan charge-offs:          
Loan charge-offs $5,458  $5,439  $2,195  $2,724  $3,143 
Loan recoveries (948) (1,141) (1,380) (909) (1,216)
Net loan charge-offs (quarter only) $4,510  $4,298  $815  $1,815  $1,927 
Net loan charge-offs (year-to-date) $4,510  $8,855  $4,557  $3,742  $1,927 
Net loan charge-offs as a percent of average loans:          
Quarter only (annualized)  0.25%  0.24%  0.05%  0.12%  0.14%
Year-to-date (annualized)  0.25%  0.13%  0.10%  0.13%  0.14%
           
           
Originated loans $6,001,714  $5,807,934  $5,667,159  $5,351,010  $5,048,662 
Acquired loans 1,365,171  1,463,213  1,549,036  1,683,733  654,212 
Total loans $7,366,885  $7,271,147  $7,216,195  $7,034,743  $5,702,874 
           
Allowance for loan losses as a percent of:          
Total originated loans  1.17%  1.26%  1.33%  1.40%  1.49%
Nonperforming loans  96%  87%  93%  106%  103%
Nonaccretable discount (credit mark) as a percent of acquired loans  4.5%  4.4%  4.2%  3.9%  5.7%
                     


 
Chemical Financial Corporation Announces 2016 First Quarter Operating Results
 
 
Non-GAAP Financial Measures (Unaudited)
Chemical Financial Corporation
(Amounts in thousands, except per share data)
 
   1st Quarter 2016 4th Quarter 2015 3rd Quarter 2015 2nd Quarter 2015 1st Quarter 2015
                      
Non-GAAP Operating Results      
Net Income           
Net income, as reported  $23,262  $25,504  $24,467  $19,024  $17,835 
Transaction expenses, net of tax  1,686  1,355  585  2,659  885 
Net income, excluding transaction expenses  $24,948  $26,859  $25,052  $21,683  $18,720 
            
Diluted Earnings Per Share           
Diluted earnings per share, as reported  $0.60  $0.66  $0.64  $0.54  $0.54 
Effect of transaction expenses, net of tax  0.05  0.04  0.01  0.07  0.03 
Diluted earnings per share, excluding transaction expenses  $0.65  $0.70  $0.65  $0.61  $0.57 
            
Return on Average Assets           
Return on average assets, as reported  1.01% 1.10% 1.05% 0.94% 0.98%
Effect of transaction expenses, net of tax  0.08  0.06  0.03  0.13  0.05 
Return on average assets, excluding transaction expenses  1.09% 1.16% 1.08% 1.07% 1.03%
            
Return on Average Shareholders' Equity        
Return on average shareholders' equity, as reported  9.2% 10.1% 9.8% 8.6% 9.0%
Effect of transaction expenses, net of tax  0.7  0.6  0.3  1.2  0.5 
Return on average shareholders' equity, excluding transaction expenses  9.9% 10.7% 10.1% 9.8% 9.5%
                 


  March 31,
2016
 Dec 31,
2015
 Sept 30,
2015
 June 30,
2015
 March 31,
2015
                     
Tangible Book Value          
Shareholders' equity, as reported $1,032,291  $1,015,974  $998,363  $980,791  $810,501 
Goodwill, CDI and noncompete agreements, net of tax (297,821) (299,123) (299,681) (299,109) (187,991)
Tangible shareholders' equity $734,470  $716,851  $698,682  $681,682  $622,510 
Common shares outstanding 38,248  38,168  38,131  38,110  32,847 
Book value per share (shareholders' equity, as reported, divided by common shares outstanding) $26.99  $26.62  $26.18  $25.74  $24.68 
Tangible book value per share (tangible shareholders' equity divided by common shares outstanding) $19.20  $18.78  $18.32  $17.89  $18.95 
           
Tangible Shareholders' Equity to Tangible Assets          
Total assets $9,303,632  $9,188,797  $9,264,554  $9,020,725  $7,551,635 
Goodwill, CDI and noncompete agreements, net of tax (297,821) (299,123) (299,681) (299,109) (187,991)
Tangible assets $9,005,811  $8,889,674  $8,964,873  $8,721,616  $7,363,644 
Tangible shareholders' equity to tangible assets 8.2% 8.1% 7.8% 7.8% 8.5%
                

 

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

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