MIDLAND, Mich., Oct. 21 /PRNewswire-FirstCall/ -- Chemical Financial
Corporation's (Nasdaq: CHFC) Board of Directors today announced 2005 third
quarter net income of $13.61 million, or $0.54 per diluted share, down $0.69
million, or $0.03 per diluted share, as compared with net income of $14.30
million, or $0.57 per diluted share, in the third quarter of 2004.
Net income was $40.32 million or $1.60 per share in the first nine months
of 2005, compared to net income of $42.28 million, or $1.68 per share in the
first nine months of 2004. This represented a decrease of 4.6% in net income
and 4.8% in earnings per share for the first nine months of 2005, compared to
the prior year. The returns on average assets and average equity during the
first nine months of 2005 were 1.42% and 11.0%, respectively, as compared to
1.46% and 12.0%, respectively, for the first nine months of 2004.
Third Quarter Operating Results
Net income and earnings per share in the third quarter of 2005 decreased
4.8% and 5.3%, respectively, from the third quarter of 2004. The decreases in
net income and earnings per share were attributable to lower net interest
income, an increase in the provision for loan losses and increased operating
expenses. These items were partially offset by a modest increase in
noninterest income and a lower effective federal income tax rate.
Net interest income of $35.1 million in the third quarter of 2005 was $2.0
million, or 5.4%, lower than in the third quarter of 2004. The decrease in
net interest income was primarily attributable to a slight decrease in average
interest-earning assets and the impact of the continued flattening of the
interest yield curve. These factors were partially offset by a positive
change in the mix of interest-earnings assets, with average loans up $81
million, or 3.1%, in the third quarter of 2005, as compared to the third
quarter of 2004.
Average interest-earning assets were $3.56 billion in the third quarter of
2005, down $30 million, or 0.8% from the third quarter of 2004. The decrease
in average interest-earning assets between the third quarter of 2005 and the
third quarter of 2004 was primarily attributable to a decrease in investment
securities that resulted primarily from a decline in customer deposits.
The net interest margin was 3.96% in the third quarter of 2005, compared
to 4.16% in the third quarter of 2004. The decrease in net interest margin
was primarily attributable to the increase in the average yield on interest-
earning assets not keeping pace with the increase in the average cost of
interest-bearing liabilities. The average yield on interest-earning assets
increased 38 basis points in the third quarter of 2005, as compared to the
third quarter of 2004, to 5.66%, while the average cost of interest-bearing
liabilities increased 76 basis points, between the same periods, to 2.22%.
The increase in the average yield on interest-earning assets was primarily
driven by the increase in the interest yield on variable rate commercial loans
and home equity lines of credit tied to prime. The increase in the average
cost of interest-bearing liabilities continued to result from rising deposit
interest rates, which have been driven by the overall rise in short-term
market interest rates and increased competition for deposits.
The provision for loan losses ("provision") in the third quarter of 2005
was $1.5 million, an increase of $0.8 million over the $0.7 million provision
recorded in the third quarter of 2004. The provision was also $0.7 million in
both the first and second quarters of 2005. The increase in the provision in
the third quarter of 2005 over the third quarter of 2004 was primarily driven
by an increase in the Corporation's nonperforming commercial and commercial
real estate loans and other watch credits, and also the overall increase in
total loans during the third quarter of 2005. Based on these increases, the
Corporation's allowance for loan losses evaluation methodology identified the
need to increase the provision for loan losses over the level recorded in the
first two quarters of 2005. The allowance for loan losses calculation
includes reserve percentages for adversely-graded commercial loans that are
adjusted over time using actual loan loss experience. The Corporation
experienced a $4.2 million increase in nonperforming loans during the third
quarter of 2005. Based on the Corporation's internal evaluation process as of
September 30, 2005, the Corporation does not expect a significant increase in
net loan losses to result from the increase in nonperforming loans and other
watch loan credits that occurred during the three months ended September 30,
2005. Net loan charge-offs were $0.72 million in the third quarter of 2005,
compared to $0.73 million and $1.08 million in the first and second quarters
of 2005, respectively, and $0.62 million in the third quarter of 2004. Net
loan losses as a percentage of average total loans were 0.13% on an annualized
basis during the nine months ended September 30, 2005; slightly higher than
the percentage for the twelve months ended December 31, 2004 of 0.11%.
Total noninterest income was $10.25 million in the third quarter of 2005,
up $0.63 million or 6.5% from the third quarter of 2004. The Corporation
experienced increases in a number of noninterest income categories, including
trust and investment management services revenue, service charges on deposit
accounts, ATM service fees, debit card revenue, and letter of credit fees,
although these increases were partially offset by a decrease in mortgage
banking revenue. Mortgage banking revenue of $0.32 million in the third
quarter of 2005 was down $0.64 million, or 67%, from the third quarter of
2004. Mortgage banking revenue in the third quarter of 2004 was positively
impacted by a $0.4 million reversal of previously recorded impairment on
mortgage servicing rights. The Corporation was servicing $557 million of
residential mortgage loans that were sold in the secondary market as of
September 30, 2005, compared to $591 million as of September 30, 2004.
Operating expenses were $24.84 million in the third quarter of 2005, up
$0.34 million, or 1.4%, from the third quarter of 2004. In comparison,
operating expenses were $24.98 million and $24.76 million in the first and
second quarters of 2005, respectively. The increase in operating expenses
between the third quarter of 2005 and 2004 was primarily attributable to
increases in external audit fees, consulting fees, use taxes on computer
software license agreements, and an increase in personnel costs. The
increases in operating expenses were partially offset by a decrease in
incentive compensation expense of $0.46 million between the third quarters of
2005 and 2004. Incentive compensation expense was $0.03 million during the
third quarter of 2005, compared to $0.69 million in each of the first two
quarters of 2005, and $0.49 million during the third quarter of 2004.
The Corporation's federal income tax provision in the third quarter of
2005 was reduced $0.94 million as a result of federal income tax statutes
expiring on September 30, 2005. The $0.94 million reduction in the federal
income tax provision reduced the Corporation's effective federal income tax
rate to 28.6% in the third quarter of 2005. In comparison, the effective
federal income tax rate was 33.7% in the third quarter of 2004, and 33.9% and
33.8% in the first and second quarters of 2005, respectively.
The returns on average assets and average equity during the third quarter
of 2005 were 1.42% and 10.9%, respectively, as compared to 1.48% and 12.0%,
respectively, for the third quarter of 2004.
Balance Sheet and Capital Position
Total assets of the Corporation at September 30, 2005 were $3.842 billion,
up $78 million or 2.1% from the $3.764 billion in total assets reported at
December 31, 2004. Total deposits at September 30, 2005 were $2.908 billion,
up $45 million, or 1.6% from total deposits of $2.863 billion at December 31,
2004.
Total loans were $2.700 billion at September 30, 2005, up $114.8 million,
or 4.4% from total loans of $2.586 billion at December 31, 2004. The
Corporation experienced modest increases in all loan categories during the
nine months ended September 30, 2005. The Corporation achieved a $20.2
million, or 3.8% increase in consumer loans during the nine months ended
September 30, 2005. The Corporation's success in increasing the consumer loan
portfolio resulted largely from the combination of a special consumer loan
program that offered lower interest rates on newer automobile and recreation
vehicle loans and promotional pricing offered nationwide by some automobile
manufacturers.
As of September 30, 2005, the allowance for loan losses was $34.6 million
or 1.28% of total loans, while nonperforming loans were $20.3 million or 0.75%
of total loans. In comparison, nonperforming loans as a percentage of total
loans were 0.45% as of September 30, 2004 and 0.39% as of December 31, 2004.
Nonperforming loans at September 30, 2005 increased $4.2 million or 26% from
June 30, 2005 and were up $10.2 million or 102% from December 31, 2004.
Nonperforming loans as of September 30, 2005 included two commercial real
estate loan relationships with balances totaling approximately $5.0 million.
The Corporation expects these two loans to no longer be in the nonperforming
loan category at December 31, 2005, and therefore does not expect to record an
additional provision for loan losses related to these two loans. In addition,
nonperforming loans as of September 30, 2005 included $5.4 million of
residential real estate loans that were either in nonaccrual status or past
due greater than 90 days. These type of nonperforming loans have increased
$1.3 million, or 31%, since December 31, 2004. Residential real estate loans
by their nature are generally well secured, and based on the Corporation's
previous loss experience on these loans, loan losses from these loans are
expected to be immaterial.
Shareholders' equity at September 30, 2005 was $498 million or $19.82 per
share and represented 13.0% of total assets. The Corporation's total risk-
based capital and tangible equity to assets ratios were 17.5% and 11.3%,
respectively, as of September 30, 2005.
Chemical Financial Corporation is the fourth largest bank holding company
headquartered in Michigan. The Company's three subsidiary banks operate
banking offices spread over 32 counties in the lower peninsula of Michigan.
Chemical Financial Corporation common stock trades on The Nasdaq Stock
Market under the symbol CHFC and is one of the issues comprising 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
mergers and acquisitions 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 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 Third Quarter Operating Results
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation and Subsidiaries
September 30, December 31, September 30,
(In thousands) 2005 2004 2004
Assets:
Cash and demand deposits
due from banks $111,115 $106,565 $104,173
Federal funds sold 76,300 34,500 108,100
Interest-bearing deposits
with unaffiliated banks 36,337 5,869 15,219
Investment securities -
available for sale 654,445 716,757 743,343
Investment securities -
held to maturity 132,898 176,517 156,692
Total Investment
Securities 787,343 893,274 900,035
Commercial loans 504,189 468,970 475,977
Real estate construction loans 146,973 120,900 141,547
Real estate commercial loans 708,152 697,779 669,880
Real estate residential loans 783,834 760,834 771,201
Consumer loans 557,256 537,102 547,893
Total Loans 2,700,404 2,585,585 2,606,498
Less: Allowance for loan
losses 34,603 34,166 33,629
Net Loans 2,665,801 2,551,419 2,572,869
Premises and equipment 45,123 47,577 47,646
Intangible assets 72,194 74,421 75,306
Other assets 47,948 50,500 49,602
Total Assets $3,842,161 $3,764,125 $3,872,950
Liabilities:
Noninterest-bearing deposits $521,969 $555,287 $546,387
Interest-bearing deposits 2,386,605 2,308,186 2,428,916
Total Deposits 2,908,574 2,863,473 2,975,303
Other borrowings - short term 137,613 101,834 100,439
Interest payable and other
liabilities 29,118 28,986 33,189
FHLB borrowings 268,959 284,996 285,191
Total Liabilities 3,344,264 3,279,289 3,394,122
Shareholders' Equity:
Common stock, $1 par
value 25,127 25,169 23,948
Surplus 377,469 378,694 333,569
Retained earnings 100,598 80,266 118,000
Accumulated other
comprehensive income/
(loss) (5,297) 707 3,311
Total Shareholders'
Equity 497,897 484,836 478,828
Total Liabilities
and Shareholders'
Equity $3,842,161 $3,764,125 $3,872,950
Chemical Financial Corporation Announces Third Quarter Operating Results
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation and Subsidiaries
Quarter Ended Nine Months Ended
September 30, September 30,
(In thousands, except per 2005 2004 2005 2004
share data)
Interest Income:
Interest and fees on loans $42,023 $38,347 $121,055 $113,306
Interest on investment
securities:
Taxable 6,950 8,066 22,459 25,218
Nontaxable 539 511 1,551 1,602
Total Interest on
Investment Securities 7,489 8,577 24,010 26,820
Interest on federal funds sold 682 265 1,586 668
Interest on deposits with
unaffiliated banks 226 129 741 292
Total Interest Income 50,420 47,318 147,392 141,086
Interest Expense:
Interest on deposits 11,851 7,437 31,522 22,651
Interest on other borrowings -
short term 733 158 1,526 357
Interest on FHLB borrowings 2,690 2,570 7,553 7,694
Total Interest Expense 15,274 10,165 40,601 30,702
Net Interest Income 35,146 37,153 106,791 110,384
Provision for loan losses 1,500 701 2,960 2,108
Net Interest Income after
Provision for Loan
Losses 33,646 36,452 103,831 108,276
Noninterest Income:
Service charges on deposit
accounts 5,406 4,970 15,136 14,281
Trust & investment management
services revenue 1,891 1,761 5,963 5,541
Other charges and fees for
customer services 2,388 1,706 5,984 5,060
Mortgage banking revenue 322 960 1,292 2,820
Investment securities gains 3 9 1,174 1,259
Other 239 217 633 629
Total Noninterest Income 10,249 9,623 30,182 29,590
Operating Expenses:
Salaries and employee benefits 14,404 14,385 43,642 43,879
Occupancy and equipment 4,480 4,613 13,753 13,897
Other 5,955 5,501 17,190 16,803
Total Operating Expenses 24,839 24,499 74,585 74,579
Income Before Income Taxes 19,056 21,576 59,428 63,287
Federal income taxes 5,451 7,280 19,104 21,006
Net Income $13,605 $14,296 $40,324 $42,281
Net income per share:
Basic $0.54 $0.58 $1.60 $1.69
Diluted 0.54 0.57 1.60 1.68
Cash dividends per share $0.265 $0.252 $0.795 $0.756
Average shares outstanding:
Basic 25,134 25,144 25,156 25,120
Diluted 25,190 25,222 25,213 25,206
Chemical Financial Corporation Announces Third Quarter Operating Results
Financial Summary (Unaudited)
Chemical Financial Corporation and Subsidiaries
Quarter Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2005 2004 2005 2004
Average Balances
Total assets $3,800,550 $3,843,070 $3,794,386 $3,865,987
Total interest-earning
assets 3,561,959 3,591,860 3,558,148 3,615,976
Total loans 2,677,776 2,596,355 2,619,616 2,557,822
Total deposits 2,876,608 2,954,315 2,899,205 2,990,828
Total shareholders' equity 496,405 473,617 491,624 468,768
Quarter Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Key Ratios (annualized
where applicable)
Net interest margin 3.96% 4.16% 4.06% 4.12%
Efficiency ratio 54.2% 52.0% 54.3% 53.1%
Return on average assets 1.42% 1.48% 1.42% 1.46%
Return on average
shareholders' equity 10.9% 12.0% 11.0% 12.0%
Average shareholders'
equity as a percent of
average assets 13.1% 12.3% 13.0% 12.1%
Tangible shareholders'
equity as a percent of
total assets 11.3% 10.6%
Total risk-based capital ratio 17.5% 17.1%
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
Credit Quality
Statistics
Nonaccrual
loans $9,913 $8,639 $7,823 $8,397 $5,787
Loans 90 or
more days
past due
and still
accruing 10,364 7,426 2,914 1,653 5,914
Total
nonperforming
loans 20,277 16,065 10,737 10,050 11,701
Repossessed
assets
acquired
(RAA) 6,511 5,848 6,544 6,799 6,924
Total
nonperforming
assets 26,788 21,913 17,281 16,849 18,625
Net loan
charge
offs - year-
to-date 2,523 1,804 725 2,832 1,658
Allowance for
loan losses
as a percent
of total
loans 1.28% 1.27% 1.33% 1.32% 1.29%
Allowance for
loan losses
as a percent
of nonperforming
loans 171% 211% 318% 340% 288%
Nonperforming
loans as a
percent of
total loans 0.75% 0.61% 0.42% 0.39% 0.45%
Nonperforming
assets as a
percent of
total loans
plus RAA 0.99% 0.82% 0.67% 0.65% 0.71%
Net loan
charge-offs
as a percent
of average
loans - year-
to-date
(annualized) 0.13% 0.14% 0.11% 0.11% 0.09%
September 30, June 30, March 31, December 31, September 30,
2005 2005 2005 2004 2004
Additional
Data
Goodwill $63,293 $63,293 $63,293 $63,293 $63,293
Core deposits
and other
intangibles 6,306 6,797 7,324 7,931 8,572
Mortgage
servicing
rights (MSR) 2,595 2,941 3,111 3,197 3,441
Amortization
of intangibles
- quarter-to-
date 903 793 800 948 931
Chemical Financial Corporation Announces Third Quarter Operating Results
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation and Subsidiaries
(In thousands, 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
except per share data) 2005 2005 2005 2004 2004
Summary of Operations
Interest income $50,420 $49,012 $47,960 $48,164 $47,318
Interest expense 15,274 13,314 12,013 10,914 10,165
Net interest income 35,146 35,698 35,947 37,250 37,153
Provision for loan losses 1,500 730 730 1,711 701
Net interest income after
provision for loan
losses 33,646 34,968 35,217 35,539 36,452
Noninterest income 10,249 9,753 10,180 9,739 9,623
Noninterest expense 24,839 24,763 24,983 23,890 24,499
Income taxes 5,451 6,743 6,910 6,987 7,280
Net income 13,605 13,215 13,504 14,401 14,296
Per Common Share Data
Net income:
Basic $0.54 $0.53 $0.54 $0.57 $0.58
Diluted 0.54 0.53 0.53 0.57 0.57
Cash dividends 0.265 0.265 0.265 0.252 0.252
Book value 19.82 19.68 19.32 19.26 19.04
SOURCE Chemical Financial Corporation
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Related links:
http://chemicalbankmi.com
Company News On-Call:
http://www.prnewswire.com/comp/157448.html
CONTACT:
David B. Ramaker, President & Chief Executive
Officer, +1-989-839-5269, or Lori A. Gwizdala, Executive Vice
President & Chief Financial Officer, +1-989-839-5358, both of
Chemical Financial Corporation
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