MIDLAND, Mich., Oct. 23 /PRNewswire-FirstCall/ -- Chemical Financial
Corporation's (Nasdaq: CHFC) Board of Directors today announced 2006 third
quarter net income of $11.5 million, or $0.46 per diluted share, versus net
income of $13.6 million, or $0.54 per diluted share, in the third quarter
of 2005.
Net income was $35.6 million, or $1.42 per diluted share, for the nine
months ended September 30, 2006, compared to net income of $40.3 million,
or $1.60 per diluted share, for the nine months ended September 30, 2005.
"Michigan's economy continues to struggle and that fact, coupled with
the Federal Reserve's increases in interest rates earlier in the year,
continued to negatively impact profitability, as our deposits have repriced
more rapidly than our loans. Decreases in net interest income, caused
primarily by higher interest paid on deposits and short-term borrowings,
exceeded noninterest expense savings during the quarter," said David B.
Ramaker, Chairman, President and Chief Executive Officer of Chemical
Financial Corporation.
"During the quarter we completed implementation of our previously
announced internal consolidation. We also have seen some early, positive
signs from our system-wide retail sales and service training program, which
we kicked off at the end of last quarter to help bolster long-term organic
growth. In mid-August, we completed the previously announced purchase of
two branches in the Grand Rapids market and opened new branches in
Kalamazoo and Owosso, giving us a total of 127 branch offices at quarter's
end. The acquisition of the two branches in the Grand Rapids market added
$64 million in loans and $47 million in deposits at the date of the
transaction. We are confident that our new structure and reconfigured
branch network will allow us to more efficiently and effectively deliver
high quality financial products and services to the markets we serve, while
retaining the community banking orientation for which we are known," said
Ramaker.
During the third quarter of 2006, no internal consolidation costs were
incurred and no further costs are anticipated. Management had estimated
that total costs for the internal consolidation would not exceed $800,000
in 2006; actual internal consolidation costs incurred during 2006
year-to-date total $562,000.
Net interest income was $32.7 million in the third quarter of 2006, a
decrease of 6.8 percent from third quarter 2005 net interest income of
$35.1 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 decreases in average interest-bearing
liabilities. The net interest margin (on a tax-equivalent basis) fell from
3.96% in the third quarter of 2005 to 3.74% in the third quarter of 2006.
The decline in net interest margin was primarily attributable to increases
in rates paid on interest- bearing liabilities exceeding increases in rates
earned on interest-earning assets, as deposits repriced more rapidly than
loans in the rising interest rate environment experienced in the past 12
months. The Corporation continues to experience strong competition for
deposits in the markets it serves, which when combined with the increasing
interest rate environment, limits the Corporation's ability to utilize
deposit pricing as a means through which to control interest expenses.
Total assets were $3.84 billion at September 30, 2006, up from $3.73
billion at June 30, 2006 and unchanged from $3.84 billion at September 30,
2005. At September 30, 2006, total loans were $2.82 billion, versus $2.76
billion at June 30, 2006 and $2.70 billion at September 30, 2005. Chemical
has seen moderate loan growth across all types during the past year.
Investment securities were $638 million at September 30, 2006, down from
$646 million at June 30, 2006 and $766 million at September 30, 2005. The
decrease in investment securities was primarily attributable to the
Corporation using excess liquidity from maturing investment securities to
fund loan growth.
Total deposits were $2.96 billion at September 30, 2006, up from $2.79
billion at June 30, 2006 and from $2.91 billion at September 30, 2005.
Other liabilities, which include Federal Home Loan Bank advances, totaled
$374 million at September 30, 2006, down from $440 million at June 30, 2006
and from $436 million at September 30, 2005. The Corporation has utilized
seasonal liquidity from increased municipal deposits to temporarily reduce
wholesale borrowings.
The provision for loan losses was $1,750,000 in the third quarter of
2006, compared to $400,000 in the second quarter of 2006 and $1,500,000 in
the third quarter of 2005. Net loan losses were $440,000 in the third
quarter of 2006, compared to $916,000 in the second quarter of 2006 and
$719,000 in the third quarter of 2005. The increase in the provision for
loan losses in the third quarter of 2006, as compared to the previous
quarter, was primarily reflective of the increase in nonperforming loans
during the third quarter of 2006. The allowance for loan losses of $35.3
million at September 30, 2006 was 1.25 percent of total loans, up from 1.22
percent of total loans at June 30, 2006 and down from 1.28 percent of total
loans at September 30, 2005. At September 30, 2006, nonperforming loans as
a percentage of total loans were 1.16 percent, up from 0.99 percent at June
30, 2006 and from 0.75 percent at September 30, 2005.
At September 30, 2006, nonperforming assets totaled $42.7 million, up
from $36.9 million at June 30, 2006 and $26.8 million at September 30,
2005. The $5.8 million increase in nonperforming assets from the previous
quarter's end was due primarily to a $4.5 million increase in nonaccrual
commercial and commercial real estate loans, due in part to the struggling
Michigan economy. Management believes the Corporation's nonperforming loans
are generally well- secured.
Total noninterest income was $9.9 million in the third quarter of 2006,
down $0.3 million, or 3 percent, from $10.2 million in the third quarter of
2005. Increases in mortgage banking revenue were insufficient to overcome
slight decreases in trust and investment services revenue, service charges
on deposit accounts and other noninterest income.
Operating expenses were $24.2 million in the third quarter of 2006,
down $0.6 million, or 3 percent, from the third quarter of 2005, and down
$0.9 million from $25.1 million in the second quarter of 2006. The
Company's efficiency ratio was 56.1 percent in the third quarter of 2006,
up from 54.2 percent in the third quarter of 2005, but down from 56.8
percent in the second quarter of 2006. The increase in the ratio from the
prior year is primarily attributable to the decrease in net interest
income.
The Corporation's effective federal income tax rate was 31.2% in the
third quarter of 2006, compared to 28.6% in the third quarter of 2005. Both
quarters' federal income tax provisions were lowered due primarily to a
combination of the expiration of required tax reserves based on the statute
of limitations over the Corporation's federal income tax liability and the
reassessment of required tax accruals. In comparison, the effective federal
income tax rate was 33.3% and 33.0% in the first and second quarters of
2006, respectively.
The Company's return on average assets during the third quarter of 2006
was 1.20 percent, down from 1.42 percent in the third quarter of 2005 and
from 1.32 percent in the second quarter of 2006. Shareholders' equity
increased from $498 million at September 30, 2005 to $509 million at
September 30, 2006. At September 30, 2006, the Company's book value stood
at $20.51 per share versus $19.82 per share at September 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 9.1 percent in
the third quarter of 2006 from 10.9 percent in the third 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 127 banking offices spread over 32
counties in the lower peninsula of Michigan. At September 30, 2006, the
Company had total assets of $3.84 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 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 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
September December September
30, 31, 30,
(In thousands, except per share data) 2006 2005 2005
Assets:
Cash due from banks $87,430 $145,575 $111,115
Federal funds sold 86,500 6,600 76,300
Interest-bearing deposits with
unaffiliated banks 5,230 5,321 36,337
Investment securities - available for
sale 537,449 594,491 633,394
Investment securities - held to
maturity 100,980 127,806 132,898
Total Investment Securities 638,429 722,297 766,292
Other securities 23,368 21,051 21,051
Loans held for sale 29,578 3,519 6,710
Loans:
Commercial loans 539,349 517,852 504,189
Real estate commercial loans 725,988 704,684 708,152
Real estate construction loans 162,762 158,376 146,973
Real estate residential loans 820,798 785,160 777,124
Consumer loans 568,935 540,623 557,256
Total Loans 2,817,832 2,706,695 2,693,694
Less: Allowance for loan losses 35,348 34,148 34,603
Net Loans 2,782,484 2,672,547 2,659,091
Premises and equipment 47,559 45,058 45,123
Intangible assets 80,562 71,496 72,194
Interest receivable and other assets 58,166 55,852 47,948
Total Assets $3,839,306 $3,749,316 $3,842,161
Liabilities:
Noninterest-bearing deposits $524,373 $542,014 $521,969
Interest-bearing deposits 2,432,561 2,277,866 2,386,605
Total Deposits 2,956,934 2,819,880 2,908,574
Interest payable and other liabilities 27,135 28,008 29,118
Securities sold under agreements to
repurchase 166,451 125,598 127,613
Reverse repurchase agreements - 10,000 10,000
Federal Home Loan Bank advances -
short-term 30,000 68,000 25,000
Federal Home Loan Bank advances -
long-term 150,072 196,765 243,959
Total Liabilities 3,330,592 3,248,251 3,344,264
Shareholders' Equity:
Common stock, $1 par value 24,799 25,079 25,127
Surplus 367,991 376,046 377,469
Retained earnings 121,546 106,507 100,598
Accumulated other comprehensive loss (5,622) (6,567) (5,297)
Total Shareholders' Equity 508,714 501,065 497,897
Total Liabilities and
Shareholders' Equity $3,839,306 $3,749,316 $3,842,161
Chemical Financial Corporation Announces Third Quarter Operating Results
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands, except per share data) 2006 2005 2006 2005
Interest Income:
Interest and fees on loans $47,843 $42,023 $137,027 $121,055
Interest on investment securities:
Taxable 6,006 6,684 18,524 21,754
Nontaxable 661 539 1,892 1,551
Total Interest on Investment
Securities 6,667 7,223 20,416 23,305
Interest on other securities 178 266 867 705
Interest on federal funds sold 785 682 2,357 1,586
Interest on deposits with
unaffiliated banks 83 226 557 741
Total Interest Income 55,556 50,420 161,224 147,392
Interest Expense:
Interest on deposits 18,016 11,851 49,586 31,522
Interest on securities sold under
agreements to repurchase 1,665 641 3,929 1,403
Interest on reverse repurchase
agreements - 92 154 123
Interest on Federal Home Loan Bank
advances - short-term 1,282 233 2,301 269
Interest on Federal Home Loan Bank
advances - long-term 1,854 2,457 5,707 7,284
Total Interest Expense 22,817 15,274 61,677 40,601
Net Interest Income 32,739 35,146 99,547 106,791
Provision for loan losses 1,750 1,500 2,610 2,960
Net Interest Income after
Provision for Loan Losses 30,989 33,646 96,937 103,831
Noninterest Income:
Service charges on deposit accounts 5,308 5,406 15,761 15,136
Trust and investment services
revenue 1,745 1,891 5,844 5,963
Other charges and fees for customer
services 2,308 2,388 6,695 5,984
Mortgage banking revenue 476 322 1,389 1,292
Net gains on sales of investment
securities - 3 - 1,174
Other 59 239 557 633
Total Noninterest Income 9,896 10,249 30,246 30,182
Operating Expenses:
Salaries, wages and employee
benefits 13,984 14,372 42,586 43,541
Occupancy and equipment 4,439 4,480 13,991 13,753
Other 5,773 5,987 17,816 17,291
Total Operating Expenses 24,196 24,839 74,393 74,585
Income Before Income Taxes 16,689 19,056 52,790 59,428
Provision for federal income
taxes 5,199 5,451 17,174 19,104
Net Income $11,490 $13,605 $35,616 $40,324
Net income per share:
Basic $0.46 $0.54 $1.42 $1.60
Diluted 0.46 0.54 $1.42 1.60
Cash dividends per share $0.275 $0.265 $0.825 $0.795
Average shares outstanding:
Basic 24,800 25,134 24,957 25,156
Diluted 24,829 25,190 24,992 25,213
Chemical Financial Corporation Announces Third Quarter Operating Results
Financial Summary (Unaudited)
Chemical Financial Corporation
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2006 2005 2006 2005
Average Balances
Total assets $3,785,236 $3,800,550 $3,757,186 $3,794,386
Total interest-earning
assets 3,537,591 3,561,959 3,518,028 3,558,148
Total loans 2,807,848 2,677,776 2,745,405 2,619,616
Total deposits 2,846,603 2,876,608 2,853,044 2,899,205
Total shareholders' equity 503,486 496,405 503,591 491,624
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Key Ratios (annualized
where applicable)
Net interest margin 3.74% 3.96% 3.81% 4.06%
Efficiency ratio 56.1% 54.2% 56.7% 54.3%
Return on average assets 1.20% 1.42% 1.27% 1.42%
Return on average
shareholders' equity 9.1% 10.9% 9.5% 11.0%
Average shareholders'
equity as a percent of
average assets 13.3% 13.1% 13.4% 13.0%
Tangible shareholders'
equity as a percent of
total assets 11.4% 11.3%
Total risk-based capital
ratio 17.1% 17.5%
September December September
30, June 30, March 31, 31, 30,
2006 2006 2006 2005 2005
Credit Quality Statistics
Nonaccrual loans $23,113 $17,636 $13,902 $14,561 $9,913
Loans 90 or more days past
due and still accruing 9,505 9,618 5,773 5,136 10,364
Total nonperforming loans 32,618 27,254 19,675 19,697 20,277
Repossessed assets (RA) 10,062 9,615 7,905 6,801 6,511
Total nonperforming assets 42,680 36,869 27,580 26,498 26,788
Net loan charge-offs (year-
to-date) 1,810 1,370 454 4,303 2,523
Allowance for loan losses as
a percent of total loans 1.25% 1.22% 1.27% 1.26% 1.28%
Allowance for loan losses as
a percent of nonperforming
loans 108% 123% 174% 173% 171%
Nonperforming loans as a
percent of total loans 1.16% 0.99% 0.73% 0.73% 0.75%
Nonperforming assets as a
percent of total loans plus
RA 1.51% 1.33% 1.02% 0.98% 0.99%
Nonperforming assets as a
percent of total assets 1.11% 0.99% 0.74% 0.71% 0.70%
Net loan charge-offs as a
percent of average loans
(year-to-date, annualized) 0.09% 0.10% 0.07% 0.16% 0.13%
September December September
30, June 30, March 31, 31, 30,
2006 2006 2006 2005 2005
Additional Data
Goodwill $70,999 $63,293 $63,293 $63,293 $63,293
Core deposits and other
intangibles 7,030 4,743 5,246 5,780 6,306
Mortgage servicing rights
(MSR) 2,533 2,193 2,283 2,423 2,595
Amortization of intangibles
(quarter-to-date) 618 683 718 776 903
Chemical Financial Corporation Announces Third Quarter Operating Results
Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
(In thousands, except per
share data) 2006 2006 2006 2005 2005
Summary of Operations
Interest income $55,556 $53,391 $52,277 $51,912 $50,420
Interest expense 22,817 20,174 18,686 16,852 15,274
Net interest income 32,739 33,217 33,591 35,060 35,146
Provision for loan losses 1,750 400 460 1,325 1,500
Net interest income after
provision for loan losses 30,989 32,817 33,131 33,735 33,646
Noninterest income 9,896 10,518 9,832 9,038 10,249
Noninterest expense 24,196 25,076 25,121 23,878 24,839
Income taxes 5,199 6,030 5,945 6,341 5,451
Net income 11,490 12,229 11,897 12,554 13,605
Per Common Share Data
Net income:
Basic $0.46 $0.49 $0.47 $0.50 $0.54
Diluted 0.46 0.49 0.47 0.50 0.54
Cash dividends 0.275 0.275 0.275 0.265 0.265
Book value 20.51 20.14 20.10 19.98 19.82
SOURCE Chemical Financial Corporation
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