MIDLAND, Mich., July 24 /PRNewswire-FirstCall/ -- Chemical Financial
Corporation's (Nasdaq: CHFC) Board of Directors today announced 2006 second
quarter net income of $12.2 million, or $0.49 per diluted share, versus
reported net income of $13.2 million, or $0.53 per diluted share, in the
second quarter of 2005.
Net income was $24.1 million, or $0.96 per diluted share, in the first
six months of 2006, compared to net income of $26.7 million, or $1.06 per
diluted share, in the first six months of 2005.
"Rising interest rates continued to negatively impact financial results
during the second quarter. Increases in noninterest income were offset by a
decrease in net interest income, due primarily to higher interest paid on
deposits and short-term borrowings," said David B. Ramaker, Chairman,
President and Chief Executive Officer of Chemical Financial Corporation.
"The implementation phase of our previously announced strategic
restructuring plan, which we believe will position the Company to better
capitalize on growth opportunities and enhance operating efficiencies, is
nearing completion. During the quarter, we announced the acquisition of two
branch offices in the Grand Rapids market, which is expected to be
completed in the third quarter. In addition, to bolster organic growth, we
initiated a system-wide sales and service training program to improve
sales, cross sales and customer development and retention across our 123
branch office network. We continue to explore other avenues to enhance
financial performance. Absent further interest rate increases, we are
cautiously optimistic about the short- term financial outlook for the
remainder of the year," added Ramaker.
During the second quarter of 2006, restructuring costs of $0.17 million
were incurred. Management had estimated that total costs for the
restructuring would not exceed $0.8 million in 2006 and would be incurred
primarily during the first half of the year. Actual restructuring costs
incurred in the first six months of 2006 were $0.56 million. Management
anticipates incurring the remaining $0.24 million of restructuring costs
during the third quarter of 2006.
Net interest income was $33.2 million in the second quarter of 2006, a
decrease of 7.0 percent from second quarter 2005 net interest income of
$35.7 million. The decrease in net interest income was attributable to
decreases in both average interest-earning assets and the net interest
margin, partially offset by a decrease in average interest-bearing
liabilities. The net interest margin (on a tax-equivalent basis) fell from
4.10% in the second quarter of 2005 to 3.88% in the second quarter of 2006.
The decline in net interest margin was primarily attributable to increases
in rates paid on interest-bearing liabilities outstripping yields earned on
interest-earning assets, as deposits continued to reprice more rapidly than
loans in the rising interest rate environment.
Total assets were $3.73 billion at June 30, 2006, down slightly from
$3.75 billion at December 31, 2005 and up slightly from $3.72 billion at
June 30, 2005. At June 30, 2006, total loans were $2.76 billion, versus
$2.71 billion at December 31, 2005 and $2.65 billion at June 30, 2005.
Investment securities were $646 million at June 30, 2006, down from $722
million at December 31, 2005 and $799 million at June 30, 2005. The
decrease in investment securities was primarily attributable to the Company
using excess liquidity from maturing investment securities to fund loan
growth.
Total deposits were $2.79 billion at June 30, 2006, down slightly from
$2.82 billion at December 31, 2005 and from $2.82 billion at June 30, 2005.
In the second quarter of 2006, the Company continued to experience strong
competition for deposits in the markets it serves. Other liabilities, which
include Federal Home Loan Bank advances, totaled $440 million at June 30,
2006, up from $428 million at December 31, 2005 and from $403 million at
June 30, 2005.
The provision for loan losses was $400,000 in the second quarter of
2006, compared to $460,000 in the first quarter of 2006 and $730,000 in the
second quarter of 2005. Net loan losses were $916,000 in the second quarter
of 2006, compared to $454,000 in the first quarter of 2006 and $1,079,000
in the second quarter of 2005. Net loan losses in the second quarter of
2006 include a $0.6 million loss on a real estate commercial construction
loan. The loan was deemed an impaired loan during the fourth quarter of
2005, with a $0.6 million impairment reserve. The remaining loan balance of
$2.6 million was transferred to other real estate during the second quarter
of 2006. The allowance for loan losses as a percentage of total loans was
1.22 percent at June 30, 2006, down from 1.27 percent at March 31, 2006 and
from 1.27 percent at June 30, 2005. At June 30, 2006, nonperforming loans
as a percentage of total loans were 0.99 percent, up from 0.73 percent at
March 31, 2006 and up from 0.61 percent at June 30, 2005.
On June 30, 2006, nonperforming assets totaled $36.9 million, up from
$21.9 million at June 30, 2005 and $27.6 million at March 31, 2006. The
increase in nonperforming assets from the previous quarter's end is due
primarily to a $4.3 million increase in nonaccrual commercial loans and a
$3.7 million increase in real estate commercial loans past due 90 days or
more. While nonperforming assets have increased, management does not
anticipate increased significant loss exposure as a result of this
increase.
Total noninterest income was $10.5 million in the second quarter of
2006, up $0.8 million, or 7.8 percent, from the second quarter of 2005. In
the second quarter of 2006, the Company experienced increases in service
charges on deposit accounts, as well as increases in other fees for
customer services, compared to the second quarter of 2005.
Operating expenses were $25.1 million in the second quarter of 2006, up
$0.3 million, or 1.3 percent, from the second quarter of 2005, and
unchanged from $25.1 million in the first quarter of 2006. Excluding
restructuring expenses of $0.17 million incurred in the second quarter of
2006 in conjunction with the strategic restructuring, operating expenses in
the second quarter of 2006 were $24.9 million. The Company's efficiency
ratio was 56.8 percent in the second quarter of 2006, down from 57.3
percent in the first quarter of 2006, although up from 54.0 percent in the
second quarter of 2005. The increase in the ratio from the prior year is
primarily attributable to the decrease in net interest income.
The Company's return on average assets during the second quarter of
2006 was 1.32 percent, down from 1.41 percent in the second quarter of 2005
and up slightly from 1.28 percent in the first quarter of 2006.
Shareholders' equity increased from $495 million at June 30, 2005 to $500
million at June 30, 2006. At June 30, 2006, the Company's book value stood
at $20.14 per share versus $19.68 per share at June 30, 2005. The decline
in return on assets combined with the increase in shareholders' equity
resulted in a decline in return on average equity to 9.7 percent in the
second quarter of 2006 from 10.8 percent in the second quarter of 2005.
Chemical Financial Corporation is the fourth largest bank holding
company headquartered in Michigan. The Company operates through a single
subsidiary bank, Chemical Bank, with 123 banking offices spread over 32
counties in the lower peninsula of Michigan. At June 30, 2006, the Company
had total assets of $3.73 billion. Chemical Financial Corporation common
stock trades on The Nasdaq Stock Market, Inc. under the symbol CHFC and is
one of the issues comprising The NASDAQ Global Select Market and the NASDAQ
Financial 100 index.
Forward-Looking Statements
This press release contains forward-looking statements. Words such as
"anticipates," "believes," "estimates," "expects," "intends," "should,"
"will," variations of such words and similar expressions are intended to
identify forward-looking statements. These statements reflect management's
current beliefs as to the expected outcomes of future events and are not
guarantees of future performance. These statements involve certain risks,
uncertainties and assumptions 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. Factors that could cause a
difference include, among others: changes in the national and local
economies or market conditions; changes in interest rates and banking laws
and regulations; the impact of competition from traditional or new sources;
and the possibility that anticipated cost savings and revenue enhancements
from acquisitions, restructurings and bank consolidations may not be fully
realized at all or within the expected time frames. These and other factors
that may emerge could cause decisions and actual results to differ
materially from current expectations. Chemical Financial Corporation
undertakes no obligation to revise, update, or clarify forward-looking
statements to reflect events or conditions after the date of this release.
Chemical Financial Corporation Announces Second
Quarter Operating Results
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
June 30, December 31, June 30,
(In thousands, except per share data) 2006 2005 2005
Assets:
Cash and cash due from banks $110,457 $145,575 $105,261
Federal funds sold 36,500 6,600 5,000
Interest-bearing deposits with
unaffiliated banks 5,211 5,321 5,804
Investment securities - available for
sale 549,532 594,491 658,594
Investment securities - held to
maturity 96,518 127,806 139,934
Total Investment Securities 646,050 722,297 798,528
Other securities 25,683 21,051 21,052
Commercial loans 536,099 517,852 491,919
Real estate commercial loans 706,213 704,684 714,393
Real estate construction loans 155,463 158,376 129,144
Real estate residential loans 812,407 788,679 766,447
Consumer loans 554,492 540,623 552,100
Total Loans 2,764,674 2,710,214 2,654,003
Less: Allowance for loan losses 33,638 34,148 33,822
Net Loans 2,731,036 2,676,066 2,620,181
Premises and equipment 44,736 45,058 46,165
Intangible assets 70,229 71,496 73,031
Interest receivable and other assets 60,740 55,852 47,078
Total Assets $3,730,642 $3,749,316 $3,722,100
Liabilities:
Noninterest-bearing deposits $535,537 $542,014 $531,667
Interest-bearing deposits 2,255,816 2,277,866 2,292,512
Total Deposits 2,791,353 2,819,880 2,824,179
Interest payable and other liabilities 28,162 28,008 27,526
Securities sold under agreements to
repurchase 151,267 125,598 96,781
Reverse repurchase agreements - 10,000 10,000
Federal Home Loan Bank advances -
short-term 125,000 68,000 25,000
Federal Home Loan Bank advances -
long-term 135,072 196,765 243,959
Total Liabilities 3,230,854 3,248,251 3,227,445
Shareholders' Equity:
Common stock, $1 par value 24,817 25,079 25,138
Surplus 368,562 376,046 377,854
Retained earnings 116,875 106,507 93,650
Accumulated other comprehensive loss (10,466) (6,567) (1,987)
Total Shareholders' Equity 499,788 501,065 494,655
Total Liabilities and
Shareholders' Equity $3,730,642 $3,749,316 $3,722,100
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands, except per share data) 2006 2005 2006 2005
Interest Income:
Interest and fees on loans $45,474 $40,221 $89,184 $79,032
Interest on investment securities:
Taxable 6,176 7,506 12,518 15,070
Nontaxable 611 522 1,231 1,012
Total Interest on Investment
Securities 6,787 8,028 13,749 16,082
Interest on other securities 348 222 689 439
Interest on federal funds sold 621 251 1,572 904
Interest on deposits with unaffiliated
banks 161 290 474 515
Total Interest Income 53,391 49,012 105,668 96,972
Interest Expense:
Interest on deposits 16,496 10,478 31,570 19,671
Interest on securities sold under
agreements to repurchase 1,205 414 2,264 762
Interest on reverse repurchase
agreements 62 31 154 31
Interest on Federal Home Loan Bank
advances - short-term 602 36 1,019 36
Interest on Federal Home Loan Bank
advances - long-term 1,809 2,355 3,853 4,827
Total Interest Expense 20,174 13,314 38,860 25,327
Net Interest Income 33,217 35,698 66,808 71,645
Provision for loan losses 400 730 860 1,460
Net Interest Income after
Provision for Loan Losses 32,817 34,968 65,948 70,185
Noninterest Income:
Service charges on deposit accounts 5,356 5,014 10,453 9,730
Trust and investment services revenue 2,094 2,055 4,099 4,072
Other charges and fees for customer
services 2,255 1,908 4,387 3,596
Mortgage banking revenue 490 481 913 970
Net gains on sales of investment
securities - 82 - 1,171
Other 323 213 498 394
Total Noninterest Income 10,518 9,753 20,350 19,933
Operating Expenses:
Salaries, wages and employee benefits 14,012 14,625 28,602 29,169
Occupancy and equipment 4,766 4,517 9,552 9,273
Other 6,298 5,621 12,043 11,304
Total Operating Expenses 25,076 24,763 50,197 49,746
Income Before Income Taxes 18,259 19,958 36,101 40,372
Provision for federal income taxes 6,030 6,743 11,975 13,653
Net Income $12,229 $13,215 $24,126 $26,719
Net income per share:
Basic $0.49 $0.53 $0.96 $1.06
Diluted 0.49 0.53 0.96 1.06
Cash dividends per share $0.275 $0.265 $0.550 $0.530
Average shares outstanding:
Basic 24,977 25,152 25,036 25,167
Diluted 25,010 25,200 25,075 25,224
Financial Summary (Unaudited)
Chemical Financial Corporation
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands) 2006 2005 2006 2005
Average Balances
Total assets $3,715,334 $3,760,798 $3,742,930 $3,791,253
Total interest-earning
assets 3,480,772 3,527,087 3,508,098 3,556,211
Total loans 2,731,421 2,604,615 2,713,680 2,590,054
Total deposits 2,840,341 2,892,240 2,856,318 2,910,691
Total shareholders' equity 503,306 490,813 503,646 489,194
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Key Ratios (annualized where
applicable)
Net interest margin 3.88% 4.10% 3.89% 4.11%
Efficiency ratio 56.8% 54.0% 57.0% 54.4%
Return on average assets 1.32% 1.41% 1.30% 1.42%
Return on average shareholders'
equity 9.7% 10.8% 9.7% 11.0%
Average shareholders' equity as
a percent of average assets 13.5% 13.1% 13.5% 12.9%
Tangible shareholders' equity as
a percent of total assets 11.7% 11.6%
Total risk-based capital ratio 17.8% 17.7%
Sept.
June 30, March 31, Dec. 31, 30, June 30,
2006 2006 2005 2005 2005
Credit Quality Statistics
Nonaccrual loans $17,636 $13,902 $14,561 $9,913 $8,639
Loans 90 or more days past due
and still accruing 9,618 5,773 5,136 10,364 7,426
Total nonperforming loans 27,254 19,675 19,697 20,277 16,065
Repossessed assets (RA) 9,615 7,905 6,801 6,511 5,848
Total nonperforming assets 36,869 27,580 26,498 26,788 21,913
Net loan charge-offs (year-to-
date) 1,370 454 4,303 2,523 1,804
Allowance for loan losses as a
percent of total loans 1.22% 1.27% 1.26% 1.28% 1.27%
Allowance for loan losses as a
percent of nonperforming
loans 123% 174% 173% 171% 211%
Nonperforming loans as a
percent of total loans 0.99% 0.73% 0.73% 0.75% 0.61%
Nonperforming assets as a
percent of total loans plus
RA 1.33% 1.02% 0.98% 0.99% 0.82%
Nonperforming assets as a
percent of total assets 0.99% 0.74% 0.71% 0.70% 0.59%
Net loan charge-offs as a
percent of
average loans (year-to-date,
annualized) 0.10% 0.07% 0.16% 0.13% 0.14%
December September
June 30, March 31, 31, 30, June 30,
2006 2006 2005 2005 2005
Additional Data
Goodwill $63,293 $63,293 $63,293 $63,293 $63,293
Core deposits and other
intangibles 4,743 5,246 5,780 6,306 6,797
Mortgage servicing rights
(MSR) 2,193 2,283 2,423 2,595 2,941
Amortization of intangibles
(quarter-to-date) 683 718 776 903 793
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
(In thousands, except per
share data) 2006 2006 2005 2005 2005
Summary of Operations
Interest income $53,391 $52,277 $51,912 $50,420 $49,012
Interest expense 20,174 18,686 16,852 15,274 13,314
Net interest income 33,217 33,591 35,060 35,146 35,698
Provision for loan losses 400 460 1,325 1,500 730
Net interest income after
provision
for loan losses 32,817 33,131 33,735 33,646 34,968
Noninterest income 10,518 9,832 9,038 10,249 9,753
Noninterest expense 25,076 25,121 23,878 24,839 24,763
Income taxes 6,030 5,945 6,341 5,451 6,743
Net income 12,229 11,897 12,554 13,605 13,215
Per Common Share Data
Net income:
Basic $0.49 $0.47 $0.50 $0.54 $0.53
Diluted 0.49 0.47 0.50 0.54 0.53
Cash dividends 0.275 0.275 0.265 0.265 0.265
Book value 20.14 20.10 19.98 19.82 19.68
SOURCE Chemical Financial Corporation
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