MIDLAND, Mich., April 21, 2008 (PRIME NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced 2008 first quarter net income of $9.7 million, or $0.41 per diluted share, versus net income of $9.0 million, or $0.36 per diluted share, in the first quarter of 2007, resulting in an increase in net income and earnings per share of 7.0 percent and 13.9 percent, respectively.
"An increase in net interest income of $2.6 million, or 8.2 percent, more than offset an increase in the provision for loan losses, which resulted in improved net income for the first quarter of 2008. Operating expenses were also held in check, due primarily to the effects of the reorganization implemented during 2007. Although we are reasonably confident that net interest margin will further increase in 2008, as the Federal Reserve's recent rate cuts are reflected across our liability-sensitive balance sheet, the monitoring of credit quality remains a top priority," said David B. Ramaker, Chairman, Chief Executive Officer and President of Chemical Financial Corporation.
"Our balance sheet remains strong, and despite the depressed economic conditions in the United States in general and Michigan, in particular, Chemical Bank is relatively well positioned from a strategic, operating and capital perspective to take advantage of opportunities as they appear in the markets we serve," said Ramaker.
Total assets were $3.80 billion at March 31, 2008, up slightly from $3.75 billion at December 31, 2007 and down slightly from $3.82 billion at March 31, 2007. At March 31, 2008, total loans were $2.78 billion, compared to $2.80 billion at December 31, 2007 and March 31, 2007. Investment securities were $580 million at March 31, 2008, down from $595 million at December 31, 2007 and $613 million at March 31, 2007. The Company has continued to utilize excess liquidity from maturing investment securities to reduce Federal Home Loan Bank advances.
Total deposits were $2.95 billion at March 31, 2008, up slightly from $2.88 billion at December 31, 2007 and unchanged from $2.95 billion at March 31, 2007. Federal Home Loan Bank advances, both short-term and long-term, totaled $130 million at March 31, 2008, compared to $150 million at December 31, 2007 and $165 million at March 31, 2007.
Net interest income was $34.4 million in the first quarter of 2008, an increase of $2.6 million, or 8.2 percent, from first quarter 2007 net interest income of $31.8 million. The increase in net interest income was attributable primarily to an increase in net interest margin. The net interest margin (on a tax-equivalent basis) in the first quarter of 2008 was 3.94 percent, up from 3.86 percent in the fourth quarter of 2007 and 3.62 percent in the first quarter of 2007. The increase in net interest margin was primarily attributable to decreases in rates paid on interest-bearing liabilities exceeding decreases in rates earned on interest-earning assets. The Company benefited from declines in short-term interest rates in 2007 and will benefit further from the Federal Reserve's 2008 rate cuts.
The provision for loan losses was $2.7 million in the first quarter of 2008, compared to $4.5 million in the fourth quarter of 2007 and $1.6 million in the first quarter of 2007. Net loan charge-offs were $2.5 million in the first quarter of 2008, down from $3.4 million in the fourth quarter of 2007 but up substantially from $0.7 million in the first quarter of 2007. The increase in the provision for loan losses in the first quarter of 2008, as compared to the first quarter of 2007, was primarily reflective of increased loan charge-offs coupled with a general deterioration in credit quality, attributable, in part, to the continuing recessionary Michigan economy. The allowance for loan losses of $39.7 million at March 31, 2008 was 1.42 percent of total loans, up from 1.41 percent of total loans at December 31, 2007 and up significantly from 1.25 percent of total loans at March 31, 2007. At March 31, 2008, nonperforming loans as a percentage of total loans were 2.58 percent, up from 2.26 percent at December 31, 2007 and from 1.26 percent at March 31, 2007.
At March 31, 2008, nonperforming assets totaled $84.6 million, up from $74.5 million at December 31, 2007 and up from $44.4 million at March 31, 2007. The $10.1 million increase in nonperforming assets from the previous quarter's end was due primarily to increases in nonaccrual real estate construction loans and accruing real estate residential loans past due 90 days or more as to interest or principal payments. At March 31, 2008, the Company's nonperforming assets included $61.3 million in nonaccrual loans, $10.6 million in accruing loans contractually past due 90 days or more as to interest or principal payments and $12.7 million of other real estate and repossessed assets.
Total noninterest income was $9.6 million in the first quarter of 2008, down from $10.0 million in the first quarter of 2007. The Corporation experienced a slight decrease in a number of categories of noninterest income that was partially offset by a modest increase in mortgage banking revenue.
Operating expenses of $26.8 million in the first quarter of 2008 were up only $0.1 million, or 0.4 percent, from the first quarter of 2007, due primarily to increases in occupancy, equipment and other expense being almost entirely offset by a decline in salaries, wages and employee benefits expense. The Corporation's loan and collection costs, including other real estate writedowns (included in "other" operating expenses), were $1.0 million higher in the first quarter of 2008, as compared to the first quarter of 2007. These higher expenses were offset by decreases in professional fees, consulting fees, state taxes and advertising expenditures. The Company's first quarter 2008 efficiency ratio of 60.3 percent was up from 56.9 percent in the fourth quarter of 2007 and down from 63.1 percent in the first quarter of 2007.
The Company's return on average assets during the first quarter of 2008 was 1.03 percent, down slightly from 1.04 percent in the fourth quarter of 2007 and up from 0.97 percent in the first quarter of 2007. At March 31, 2008, the Company's book value stood at $21.60 per share, versus $21.35 per share at December 31, 2007 and $20.86 per share at March 31, 2007. The increase in net income resulted in an increase in return on average equity to 7.7 percent in the first quarter of 2008 from 7.2 percent in the first quarter of 2007.
Chemical Financial Corporation is the third-largest bank holding company headquartered in Michigan. The Company operates through a single subsidiary bank, Chemical Bank, with 129 banking offices spread over 31 counties in the lower peninsula of Michigan. At March 31, 2008, the Company had total assets of $3.80 billion. Chemical Financial Corporation common stock trades on The Nasdaq Stock Market under the symbol CHFC and is one of the issues comprising the Nasdaq Global Select Market.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and Chemical Financial Corporation itself. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "judgment," "plans," "predicts," "projects," "should," "will," variations of such words and similar expressions are intended to identify such forward-looking statements. 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. Chemical Financial Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
Risk factors include, but are not limited to, the risk factors described in Item 1A in Chemical Financial Corporation's Annual Report on Form 10-K for the year ended December 31, 2007, the timing and level of asset growth; changes in banking laws and regulations; changes in tax laws; changes in prices, levies and assessments; the impact of technological advances and issues; governmental and regulatory policy changes; opportunities for acquisitions and the effective completion of acquisitions and integration of acquired entities; the possibility that anticipated cost savings and revenue enhancements from acquisitions, restructurings, reorganizations and bank consolidations may not be realized fully or at all or within expected time frames; the local and global effects of the ongoing war on terrorism and other military actions, including actions in Iraq; and current uncertainties and fluctuations in the financial markets and stocks of financial services providers due to concerns about credit availability and concerns about the Michigan economy in particular. 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.
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
(In thousands, except per share data)
March 31 December 31 March 31
2008 2007 2007
---------------------------------------------------------------------
Assets:
Cash and cash equivalents:
Cash and cash due from banks $ 93,063 $ 125,285 $ 88,116
Federal funds sold 135,000 58,000 138,000
Interest-bearing deposits with
unaffiliated banks 34,066 6,228 5,210
---------- ---------- ----------
Total cash and cash equivalents 262,129 189,513 231,326
Investment securities:
Available for sale 491,452 503,271 520,892
Held to maturity 88,157 91,243 92,198
---------- ---------- ----------
Total investment securities 579,609 594,514 613,090
Other securities 22,142 22,135 22,131
Loans held for sale 10,792 7,883 7,005
Loans:
Commercial 537,127 525,894 558,190
Real estate commercial 743,394 747,400 727,650
Real estate construction 140,639 137,252 137,605
Real estate residential 817,348 838,545 833,580
Consumer 546,486 550,343 541,774
---------- ---------- ----------
Total Loans 2,784,994 2,799,434 2,798,799
Allowance for loan losses (39,662) (39,422) (35,016)
---------- ---------- ----------
Net Loans 2,745,332 2,760,012 2,763,783
Premises and equipment 49,339 49,930 49,442
Goodwill 69,908 69,908 69,908
Other intangible assets 6,342 6,876 8,185
Interest receivable and
other assets 53,705 53,542 52,623
---------- ---------- ----------
Total Assets $3,799,298 $3,754,313 $3,817,493
========== ========== ==========
Liabilities:
Deposits:
Noninterest-bearing $ 519,405 $ 535,705 $ 519,984
Interest-bearing 2,432,994 2,339,884 2,432,051
---------- ---------- ----------
Total Deposits 2,952,399 2,875,589 2,952,035
Interest payable and other
liabilities 24,274 22,848 24,672
Short-term borrowings 178,000 197,363 178,067
Federal Home Loan Bank
advances - long-term 130,049 150,049 145,072
---------- ---------- ----------
Total Liabilities 3,284,722 3,245,849 3,299,846
Shareholders' Equity:
Common stock, $1 par value
per share 23,823 23,815 24,814
Surplus 344,935 344,579 368,198
Retained earnings 144,510 141,867 132,532
Accumulated other comprehensive
gain/(loss) 1,308 (1,797) (7,897)
---------- ---------- ----------
Total Shareholders' Equity 514,576 508,464 517,647
---------- ---------- ----------
Total Liabilities and
Shareholders' Equity $3,799,298 $3,754,313 $3,817,493
========== ========== ==========
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
Three Months Ended
March 31
(In thousands, except per share data) 2008 2007
---------------------------------------------------------------------
Interest Income:
Interest and fees on loans $45,570 $47,366
Interest on investment securities:
Taxable 5,839 6,135
Tax-exempt 695 664
Dividends on other securities 194 216
Interest on federal funds sold 1,018 1,445
Interest on deposits with unaffiliated banks 121 99
------- -------
Total Interest Income 53,437 55,925
Interest Expense:
Interest on deposits 16,327 20,336
Interest on short-term borrowings 959 1,908
Interest on Federal Home Loan Bank
advances - long-term 1,765 1,907
------- -------
Total Interest Expense 19,051 24,151
------- -------
Net Interest Income 34,386 31,774
Provision for loan losses 2,700 1,625
------- -------
Net Interest Income after
Provision for Loan Losses 31,686 30,149
Noninterest Income:
Service charges on deposit accounts 4,774 4,968
Trust and investment services revenue 2,027 2,100
Other charges and fees for customer services 2,223 2,442
Mortgage banking revenue 536 442
Investment securities gains -- 4
Other 20 55
------- -------
Total Noninterest Income 9,580 10,011
Operating Expenses:
Salaries, wages and employee benefits 14,479 14,739
Occupancy 2,770 2,589
Equipment 2,187 2,149
Other 7,408 7,249
------- -------
Total Operating Expenses 26,844 26,726
------- -------
Income Before Income Taxes 14,422 13,434
Provision for federal income taxes 4,751 4,393
------- -------
Net Income $ 9,671 $ 9,041
======= =======
Net income per share:
Basic $ 0.41 $ 0.36
Diluted 0.41 0.36
Cash dividends per share $ 0.295 $ 0.285
Average shares outstanding:
Basic 23,823 24,833
Diluted 23,827 24,849
Financial Summary (Unaudited)
Chemical Financial Corporation
Three Months Ended
March 31
(Dollars in thousands) 2008 2007
---------------------------------------------------------------------
Average Balances
Total assets $ 3,790,841 $ 3,788,768
Total interest-earning assets 3,561,603 3,553,874
Total loans 2,798,949 2,798,614
Total deposits 2,933,028 2,919,599
Total interest-bearing liabilities 2,737,096 2,728,103
Total shareholders' equity 508,231 511,317
Key Ratios (annualized where applicable)
Net interest margin (taxable equivalent basis) 3.94% 3.62%
Efficiency ratio 60.3% 63.1%
Return on average assets 1.03% 0.97%
Return on average shareholders' equity 7.7% 7.2%
Average shareholders' equity as a
percent of average assets 13.4% 13.5%
Tangible shareholders' equity as a
percent of total assets 11.8% 11.8%
Total risk-based capital ratio 17.4% 17.8%
March 31 Dec. 31 Sept. 30 June 30 March 31
2008 2007 2007 2007 2007
---------------------------------------------------------------------
Credit Quality
Statistics
Nonaccrual loans $61,360 $55,596 $40,341 $36,119 $28,748
Loans 90 or more days
past due and still
accruing 10,570 7,764 13,282 11,704 6,441
Total nonperforming
loans 71,930 63,360 53,623 47,823 35,189
Repossessed assets
(RA) 12,664 11,132 9,164 9,177 9,250
Total nonperforming
assets 84,594 74,492 62,787 57,000 44,439
Net loan charge-offs
(year-to-date) 2,460 6,176 2,737 1,969 707
Allowance for loan
losses as a percent
of total loans 1.42% 1.41% 1.36% 1.30% 1.25%
Allowance for loan
losses as a percent
of nonperforming loans 55% 62% 72% 76% 100%
Nonperforming loans as
a percent of total
loans 2.58% 2.26% 1.90% 1.71% 1.26%
Nonperforming assets as
a percent of total
loans plus RA 3.02% 2.65% 2.22% 2.03% 1.58%
Nonperforming assets as
a percent of total
assets 2.23% 1.98% 1.64% 1.51% 1.16%
Net loan charge-offs as
a percent of average
loans (year-to-date,
annualized) 0.35% 0.22% 0.13% 0.14% 0.10%
Additional Data
- Intangibles
Goodwill $69,908 $69,908 $69,908 $69,908 $69,908
Core deposit
intangibles 4,062 4,593 5,024 5,455 5,886
Mortgage servicing
rights (MSR) 2,280 2,283 2,300 2,302 2,299
Amortization of core
deposit intangibles
(quarter only) 531 431 431 430 494
Nonperforming Assets (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
March 31 Dec. 31 Sept. 30 June 30 March 31
2008 2007 2007 2007 2007
---------------------------------------------------------------------
Nonaccrual loans:
Commercial $11,595 $10,961 $ 6,735 $ 5,810 $ 4,891
Real estate
commercial 19,235 19,672 19,664 19,163 14,621
Real estate
construction 17,206 12,979 4,573 4,483 3,283
Real estate
residential 9,267 8,516 7,244 4,967 4,660
Consumer 4,057 3,468 2,125 1,696 1,293
---------------------------------------------------------------------
Total nonaccrual
loans 61,360 55,596 40,341 36,119 28,748
Accruing loans
contractually past
due 90 days or more
as to interest or
principal payments:
Commercial 1,631 1,958 1,867 1,564 2,030
Real estate
commercial 2,865 4,170 5,367 5,561 2,342
Real estate
construction 392 -- 1,076 884 --
Real estate
residential 4,742 1,470 3,918 2,352 1,350
Consumer 940 166 1,054 1,343 719
---------------------------------------------------------------------
Total accruing
loans contractually
past due 90 days or
more as to interest
or principal
payments 10,570 7,764 13,282 11,704 6,441
---------------------------------------------------------------------
Total nonper-
forming loans 71,930 63,360 53,623 47,823 35,189
Other real
estate and
repossessed assets 12,664 11,132 9,164 9,177 9,250
---------------------------------------------------------------------
Total nonperforming
assets $84,594 $74,492 $62,787 $57,000 $44,439
---------------------------------------------------------------------
Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation
(Dollars in thousands)
Three Months Ended
--------------------------------------------------
March 31 Dec. 31 Sept. 30 June 30 March 31
2008 2007 2007 2007 2007
---------------------------------------------------------------------
Allowance for loan
losses at beginning
of period $39,422 $38,386 $36,254 $35,016 $34,098
Provision for loan
losses 2,700 4,475 2,900 2,500 1,625
Loans charged off:
Commercial (591) (550) (208) (435) (429)
Real estate
commercial (1,304) (1,415) -- (186) (74)
Real estate
construction (16) (850) (134) (221) (67)
Real estate
residential (245) (306) (64) (96) (18)
Consumer (540) (596) (501) (488) (350)
---------------------------------------------------------------------
Total loan
charge-offs (2,696) (3,717) (907) (1,426) (938)
Recoveries of loans
previously charged
off:
Commercial 77 90 18 42 99
Real estate
commercial 20 1 19 -- 1
Real estate
construction 29 30 -- -- --
Real estate
residential 22 12 4 1 1
Consumer 88 145 98 121 130
---------------------------------------------------------------------
Total loan
recoveries 236 278 139 164 231
---------------------------------------------------------------------
Net loan
charge-offs (2,460) (3,439) (768) (1,262) (707)
---------------------------------------------------------------------
Allowance for loan
losses at end of
period $39,662 $39,422 $38,386 $36,254 $35,016
---------------------------------------------------------------------
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
(In thousands, except per share data)
1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
2008 2007 2007 2007 2007
---------------------------------------------------------------------
Summary of Operations
Interest income $53,437 $55,726 $57,157 $57,086 $55,925
Interest expense 19,051 22,304 24,684 24,666 24,151
Net interest income 34,386 33,422 32,473 32,420 31,774
Provision for loan
losses 2,700 4,475 2,900 2,500 1,625
Net interest income
after provision
for loan losses 31,686 28,947 29,573 29,920 30,149
Noninterest income 9,580 10,723 11,057 11,337 10,011
Operating expenses 26,844 25,413 25,170 27,202 26,726
Income taxes 4,751 4,411 4,850 4,543 4,393
Net income $ 9,671 $ 9,846 $10,610 $ 9,512 $ 9,041
---------------------------------------------------------------------
Per Common Share Data
Net income:
Basic $ 0.41 $ 0.41 $ 0.44 $ 0.39 $ 0.36
Diluted 0.41 0.41 0.44 0.39 0.36
Cash dividends 0.295 0.285 0.285 0.285 0.285
Book value 21.60 21.35 21.04 20.79 20.86