MIDLAND, Mich., Jan. 26, 2009 (GLOBE NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced fourth quarter 2008 net income of $1.6 million, or $0.06 per diluted share, versus net income of $9.8 million, or $0.41 per diluted share, in the fourth quarter of 2007.
Net income was $19.8 million, or $0.83 per diluted share, for the twelve months ended December 31, 2008, compared to net income of $39.0 million, or $1.60 per diluted share, for the twelve months ended December 31, 2007.
"Although net interest income in the fourth quarter of 2008 increased over 15 percent from the prior year's quarter, increasing credit quality issues and associated costs produced a lower level of financial performance. During the fourth quarter of 2008, we recorded an $18 million provision for loan losses and incurred $2.6 million in other credit quality related costs. In light of these amounts and the credit quality issues facing the banking industry nationwide, we are encouraged by our continued profitability, but by no means satisfied with our reported results," said David B. Ramaker, Chairman, Chief Executive Officer and President of Chemical Financial Corporation.
"With the national economy and Michigan's economy in the midst of a significant recession, and the outlook uncertain, we continue to enhance our efforts to address credit quality issues. Opportunities remain for quality consumer and commercial loan growth, however, as national competitors continue to abandon lending to the Michigan market," noted Ramaker.
"Our balance sheet, capital position, and liquidity leave Chemical Financial Corporation well positioned to capture this growth by expanding our commercial and consumer relationships as well as capitalizing on other expansion opportunities that present themselves. Chemical Financial Corporation will continue to take a leadership role in meeting the financial needs of the communities we serve," added Ramaker.
Net interest income was $38.5 million in the fourth quarter of 2008, an increase of $5.1 million, or 15.2 percent, from fourth quarter 2007 net interest income of $33.4 million and an increase of $1.8 million, or 4.9 percent, from third quarter 2008 net interest income of $36.7 million. The increases in net interest income were attributable primarily to continued increases in net interest margin. The net interest margin (on a tax-equivalent basis) in the fourth quarter of 2008 was 4.38 percent, up substantially from 3.86 percent in the fourth quarter of 2007 and up from 4.20 percent in the third quarter of 2008. The increases in net interest margin were primarily attributable to decreases in rates paid on interest-bearing liabilities exceeding decreases in rates earned on interest-earning assets, as deposits repriced more rapidly than loans in the falling interest rate environment experienced in the past 12 months.
Total assets were $3.87 billion at December 31, 2008, up slightly from $3.79 billion at September 30, 2008 and up modestly from $3.75 billion at December 31, 2007. At December 31, 2008, total loans were $2.98 billion, versus $2.93 billion at September 30, 2008 and $2.80 billion at December 31, 2007. The Company had no Federal funds sold at December 31, 2008, versus $2 million at September 30, 2008 and $58 million at December 31, 2007. Due to the low yields on Federal funds sold in the current interest rate environment, all overnight investable liquidity, $50 million at year-end 2008, was held in cash at the Federal Reserve Bank in Chicago. Investment securities were $547 million at December 31, 2008, down from $566 million at September 30, 2008, and down from $595 million at December 31, 2007. During 2008, the Company utilized excess liquidity to fund loan growth.
Total deposits were $2.98 billion at December 31, 2008, up from $2.94 billion at September 30, 2008, and up from $2.88 billion at December 31, 2007. Long-term wholesale borrowings, comprised of Federal Home Loan Bank advances, totaled $135 million at December 31, 2008, up from $90 million at September 30, 2008, although down from $150 million at December 31, 2007.
The provision for loan losses was $18.0 million in the fourth quarter of 2008, compared to $22.0 million in the third quarter of 2008 and $4.5 million in the fourth quarter of 2007. Included in the third quarter 2008 provision was $10.1 million attributable to a previously disclosed fraudulent loan transaction. Net loan charge-offs were $7.3 million in the fourth quarter of 2008, down from $15.3 million in the third quarter of 2008, but up substantially from $3.4 million in the fourth quarter of 2007. The declines in both the provision and loan charge-offs in the fourth quarter of 2008, as compared to the third quarter of 2008, were attributable to the fraudulent loan transaction that was reported in the third quarter of 2008. At December 31, 2008, nonperforming assets totaled $113.3 million, up from $98.4 million at September 30, 2008 and up from $74.5 million at December 31, 2007. Nonperforming loans were $93.3 million at December 31, 2008, compared to $82.7 million at September 30, 2008 and $63.4 million at December 31, 2007. At December 31, 2008, nonperforming loans as a percentage of total loans were 3.13 percent, up from 2.83 percent at September 30, 2008 and up from 2.26 percent at December 31, 2007.
The allowance for loan losses was $57.1 million at December 31, 2008, up 22.9 percent from $46.4 million at September 30, 2008. The allowance at December 31, 2008 was 1.91 percent of total loans, up from 1.58 percent of total loans at September 30, 2008 and up from 1.41 percent of total loans at December 31, 2007. The allowance for loan losses as a percent of nonperforming loans was 61 percent at December 31, 2008, up from 56 percent at September 30, 2008, but down slightly from 62 percent at December 31, 2007. As part of Chemical Financial Corporation's ongoing credit portfolio monitoring program, the Company makes regular, periodic assessments of the quality of each nonperforming credit, the financial condition of the borrower and the value of any underlying collateral to identify potential loss exposure on nonperforming loans.
Total noninterest income was $9.6 million in the fourth quarter of 2008, down $0.5 million, or 4.5 percent, from $10.1 million in the third quarter of 2008 and down $1.2 million, or 11.3 percent, from $10.8 million in the fourth quarter of 2007. The decrease in the fourth quarter of 2008 was primarily attributable to decreases in trust and investment services revenue, service charges on deposit accounts and other income. The decrease in trust and investment services revenue resulted from declines in U.S. equity markets, which reduced the market value of the assets under management. Operating expenses in the fourth quarter of 2008 were $28.6 million, up $1.9 million, or 7.0 percent, from the third quarter of 2008, and up $3.1 million, or 12.2 percent, from $25.5 million in the fourth quarter of 2007. The increase in the fourth quarter of 2008 was attributable to higher operating costs incurred across the company's expense base, although largely due to increases in other credit-related costs. Credit related costs, included in other operating expenses, were $2.6 million in the fourth quarter of 2008, compared to $1.1 million in the third quarter of 2008 and $0.9 million in the fourth quarter of 2007. The Company's efficiency ratio was 58.7 percent in the fourth quarter of 2008, up from 56.5 percent in the third quarter of 2008 and from 56.9 percent in the fourth quarter of 2007. The increase in the efficiency ratio from the prior year's quarter was attributable to the increase in operating expenses.
The Company's return on average assets during the fourth quarter of 2008 was 0.17 percent, up from (0.11) percent in the third quarter of 2008, but down from 1.04 percent in the fourth quarter of 2007. At December 31, 2008, the Company's book value stood at $20.58 per share versus $21.35 per share at December 31, 2007.
Net income for the twelve months ended December 31, 2008 of $19.8 million was 49 percent lower than net income for the twelve months ended December 31, 2007. Costs attributable to declining credit quality along with the previously disclosed fraud loss were the primary cause of the decline in net income. Although net interest income increased by over $15 million, or 11.7 percent, this increase was insufficient to overcome the substantial increase in the provision for loan losses. The provision for loan losses in the twelve months ended December 31, 2008 totaled $49.2 million, more than four times the $11.5 million provision incurred in 2007. Noninterest income declined by 4.8 percent in 2008 from the prior year, due primarily to declines in other income and trust and investment services revenue, while operating expenses increased by 4.2 percent, due primarily to increases in credit-related costs, which are reported in other operating expenses.
As previously announced on January 21, 2009, the Company declared its first quarter 2009 cash dividend of $0.295 per share, unchanged from the prior quarter's dividend level.
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 December 31, 2008, the Company had total assets of $3.87 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.
Safe Harbor Statement
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. Management's determination of the provision and allowance for loan losses involves judgments that are inherently forward-looking. 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.
Chemical Financial Corporation Announces
Fourth Quarter Operating Results
---------------------------------------------------------------------
Consolidated Statements of Financial Position (Unaudited)
Chemical Financial Corporation
(In thousands,
except per December 31 December 31
share data) 2008 2007
----------------------------------------- ----------- -----------
Assets:
Cash and cash equivalents:
Cash and cash due from banks $ 168,650 $ 125,285
Federal funds sold -- 58,000
Interest-bearing deposits with
unaffiliated banks 4,572 6,228
----------- -----------
Total Cash and Cash Equivalents 173,222 189,513
Investment securities:
Available for sale 449,947 503,271
Held to maturity 97,511 91,243
----------- -----------
Total Investment Securities 547,458 594,514
Other securities 22,128 22,135
Loans held for sale 8,463 7,883
Loans:
Commercial 587,554 515,319
Real estate commercial 786,404 760,399
Real estate construction 119,001 134,828
Real estate residential 839,555 838,545
Consumer 649,163 550,343
----------- -----------
Total Loans 2,981,677 2,799,434
Allowance for loan losses (57,056) (39,422)
----------- -----------
Net Loans 2,924,621 2,760,012
Premises and equipment 53,036 49,930
Goodwill 69,908 69,908
Other intangible assets 5,241 6,876
Interest receivable and other assets 70,236 53,542
----------- -----------
Total Assets $ 3,874,313 $ 3,754,313
=========== ===========
Liabilities:
Deposits:
Noninterest-bearing $ 524,464 $ 535,705
Interest-bearing 2,454,328 2,339,884
----------- -----------
Total Deposits 2,978,792 2,875,589
Interest payable and other liabilities 35,214 22,848
Short-term borrowings 233,738 197,363
Federal Home Loan Bank advances --
long-term 135,025 150,049
----------- -----------
Total Liabilities 3,382,769 3,245,849
Shareholders' Equity:
Common stock, $1 par value per share 23,881 23,815
Surplus 346,916 344,579
Retained earnings 133,578 141,867
Accumulated other comprehensive loss (12,831) (1,797)
----------- -----------
Total Shareholders' Equity 491,544 508,464
----------- -----------
Total Liabilities
and Shareholders' Equity $ 3,874,313 $ 3,754,313
=========== ===========
Chemical Financial Corporation Announces
Fourth Quarter Operating Results
--------------------------------------------------------------------
Consolidated Statements of Income (Unaudited)
Chemical Financial Corporation
(In thousands, Three Months Ended Twelve Months Ended
except per December 31 December 31
share data) 2008 2007 2008 2007
----------------------- --------- --------- --------- ---------
Interest Income:
Interest and fees
on loans $ 45,357 $ 47,630 $180,629 $191,480
Interest on investment
securities:
Taxable 5,148 6,260 21,793 24,927
Tax-exempt 762 701 2,882 2,719
Dividends on other
securities 372 361 1,167 1,116
Interest on federal
funds sold 56 640 1,666 5,135
Interest on deposits
with unaffiliated
banks 8 134 199 517
--------- --------- --------- ---------
Total Interest
Income 51,703 55,726 208,336 225,894
Interest Expense:
Interest on deposits 11,716 18,944 54,763 81,234
Interest on short-term
borrowings 281 1,596 2,223 7,327
Interest on Federal
Home Loan Bank
advances - long-term 1,195 1,764 6,097 7,244
--------- --------- --------- ---------
Total Interest
Expense 13,192 22,304 63,083 95,805
--------- --------- --------- ---------
Net Interest
Income 38,511 33,422 145,253 130,089
Provision for loan
losses 18,000 4,475 49,200 11,500
--------- --------- --------- ---------
Net Interest
Income after
Provision
for Loan Losses 20,511 28,947 96,053 118,589
Noninterest Income:
Service charges on
deposit accounts 4,951 5,306 20,048 20,549
Trust and investment
services revenue 2,517 2,906 10,625 11,325
Other charges and fees
for customer services 1,658 1,759 6,894 6,772
Mortgage banking
revenue 428 470 1,836 2,117
Investment securities
net gains -- -- 1,278 4
Other 50 391 516 2,521
--------- --------- --------- ---------
Total Noninterest
Income 9,604 10,832 41,197 43,288
Operating Expenses:
Salaries, wages and
employee benefits 14,863 14,033 59,227 59,008
Occupancy 2,619 2,451 10,221 10,172
Equipment 2,564 2,301 9,230 8,722
Other 8,583 6,737 30,430 26,769
--------- --------- --------- ---------
Total Operating
Expenses 28,629 25,522 109,108 104,671
--------- --------- --------- ---------
Income Before
Income Taxes 1,486 14,257 28,142 57,206
Federal Income
Tax Expense
(Benefit) (100) 4,411 8,300 18,197
--------- --------- --------- ---------
Net Income $ 1,586 $ 9,846 $ 19,842 $ 39,009
========= ========= ========= =========
Net income per share:
Basic $ 0.06 $ 0.41 $ 0.83 $ 1.60
Diluted 0.06 0.41 0.83 1.60
Cash dividends
per share 0.295 0.285 1.180 1.140
Average shares
outstanding:
Basic 23,878 23,884 23,840 24,360
Diluted 23,894 23,893 23,853 24,371
Chemical Financial Corporation Announces
Fourth Quarter Operating Results
--------------------------------------------------------------------
Financial Summary (Unaudited)
Chemical Financial Corporation
Three Months Twelve Months
Ended Ended
(Dollars in December 31 December 31
thousands) 2008 2007 2008 2007
----------------- ---------- ---------- ---------- ----------
Average Balances
Total assets $3,807,132 $3,741,603 $3,784,617 $3,785,034
Total
interest-earning
assets 3,567,966 3,510,614 3,550,611 3,551,867
Total loans 2,966,308 2,814,004 2,873,151 2,805,880
Total deposits 2,930,089 2,883,060 2,924,361 2,923,004
Total
interest-bearing
liabilities 2,738,703 2,677,572 2,711,413 2,718,814
Total
shareholders'
equity 503,758 502,260 509,100 505,915
Three Months Twelve Months
Ended Ended
December 31 December 31
2008 2007 2008 2007
----------------- ---------- ---------- ---------- ----------
Key Ratios
(annualized
where applicable)
Net interest
margin (taxable
equivalent basis) 4.38% 3.86% 4.16% 3.73%
Efficiency ratio 58.7% 56.9% 57.8% 59.6%
Return on average
assets 0.17% 1.04% 0.52% 1.03%
Return on average
shareholders'
equity 1.3% 7.8% 3.9% 7.7%
Average
shareholders'
equity as a
percent of
average assets 13.2% 13.4% 13.5% 13.4%
Tangible
shareholders'
equity as a
percent of total
assets 11.0% 11.7%
Total risk-based
capital ratio 16.4% 17.3%
Dec 31 Sept 30 June 30 Mar 31 Dec 31
2008 2008 2008 2008 2007
------------------ -------- -------- -------- -------- --------
Credit Quality
Statistics
Nonaccrual loans $ 76,466 $ 69,719 $ 61,635 $ 61,360 $ 55,596
Loans 90 or more
days past due and
still accruing 16,862 13,012 10,288 10,570 7,764
Total
nonperforming
loans 93,328 82,731 71,923 71,930 63,360
Repossessed
assets (RA) 19,923 15,699 15,897 12,664 11,132
Total
nonperforming
assets 113,251 98,430 87,820 84,594 74,492
Net loan
charge-offs
(year-to-date) 31,566 24,210 8,958 2,460 6,176
Allowance for
loan losses as
a percent of
total loans 1.91% 1.58% 1.39% 1.42% 1.41%
Allowance for
loan losses as
a percent of
nonperforming
loans 61% 56% 55% 55% 62%
Nonperforming
loans as a
percent of
total loans 3.13% 2.83% 2.52% 2.58% 2.26%
Nonperforming
assets as a
percent of total
loans plus RA 3.77% 3.34% 3.06% 3.02% 2.65%
Nonperforming
assets as a
percent of total
assets 2.92% 2.60% 2.35% 2.23% 1.98%
Net loan
charge-offs as a
percent of
average loans
(year-to-date,
annualized) 1.10% 1.14% 0.64% 0.35% 0.22%
Dec 31 Sept 30 June 30 Mar 31 Dec 31
2008 2008 2008 2008 2007
------------------ -------- -------- -------- -------- --------
Additional Data -
Intangibles
Goodwill $ 69,908 $ 69,908 $ 69,908 $ 69,908 $ 69,908
Core deposit
intangibles 3,050 3,266 3,609 4,062 4,593
Mortgage servicing
rights (MSR) 2,191 2,328 2,354 2,280 2,283
Amortization of
core deposit
intangibles
(quarter only) 216 343 453 531 431
Chemical Financial Corporation Announces
Fourth Quarter Operating Results
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Nonperforming Assets (Unaudited)
Chemical Financial Corporation
(Dollars in Dec 31 Sept 30 June 30 March 31 Dec 31
thousands) 2008 2008 2008 2008 2007
------------------ -------- -------- -------- -------- --------
Nonaccrual loans:
Commercial $ 16,324 $ 13,320 $ 10,918 $ 11,595 $ 10,961
Real estate
commercial 27,344 24,230 17,915 19,235 19,672
Real estate
construction 15,310 14,513 15,157 17,206 12,979
Real estate
residential 12,175 12,869 11,955 9,267 8,516
Consumer 5,313 4,787 5,690 4,057 3,468
-------- -------- -------- -------- --------
Total
nonaccrual loans 76,466 69,719 61,635 61,360 55,596
Accruing loans
contractually
past due 90 days
or more as to
interest
or principal
payments:
Commercial 1,652 1,735 3,130 1,631 1,958
Real estate
commercial 9,995 6,586 2,948 2,865 4,170
Real estate
construction 759 1,096 676 392 --
Real estate
residential 3,369 2,910 2,746 4,742 1,470
Consumer 1,087 685 788 940 166
-------- -------- -------- -------- --------
Total accruing
loans
contractually
past due 90
days or more as
to interest or
principal
payments 16,862 13,012 10,288 10,570 7,764
-------- -------- -------- -------- --------
Total nonperforming
loans 93,328 82,731 71,923 71,930 63,360
Other real estate
and repossessed
assets 19,923 15,699 15,897 12,664 11,132
-------- -------- -------- -------- --------
Total nonperforming
assets $113,251 $ 98,430 $ 87,820 $ 84,594 $ 74,492
-------- -------- -------- -------- --------
Chemical Financial Corporation Announces
Fourth Quarter Operating Results
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Summary of Loan Loss Experience (Unaudited)
Chemical Financial Corporation
Three Months Ended
------------------------------------------------
(Dollars in Dec 31 Sept 30 June 30 Mar 31 Dec 31
thousands) 2008 2008 2008 2008 2007
------------------ -------- -------- -------- -------- --------
Allowance for loan
losses at
beginning
of period $ 46,412 $ 39,664 $ 39,662 $ 39,422 $ 38,386
Provision for
loan losses 18,000 22,000 6,500 2,700 4,475
Loans charged off:
Commercial (3,254) (11,468) (1,474) (591) (550)
Real estate
commercial (1,581) (673) (3,373) (1,304) (1,415)
Real estate
construction (954) (923) (1,070) (16) (850)
Real estate
residential (1,063) (749) (358) (245) (306)
Consumer (1,918) (1,776) (612) (540) (596)
-------- -------- -------- -------- --------
Total loan
charge-offs (8,770) (15,589) (6,887) (2,696) (3,717)
Recoveries of
loans previously
charged off:
Commercial 1,094 74 228 77 90
Real estate
commercial 11 68 32 20 1
Real estate
construction -- -- -- 29 30
Real estate
residential 83 50 5 22 12
Consumer 226 145 124 88 145
-------- -------- -------- -------- --------
Total loan
recoveries 1,414 337 389 236 278
-------- -------- -------- -------- --------
Net loan
charge-offs (7,356) (15,252) (6,498) (2,460) (3,439)
-------- -------- -------- -------- --------
Allowance for loan
losses at end
of period $ 57,056 $ 46,412 $ 39,664 $ 39,662 $ 39,422
-------- -------- -------- -------- --------
Chemical Financial Corporation Announces
Fourth Quarter Operating Results
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Selected Quarterly Information (Unaudited)
Chemical Financial Corporation
(In thousands,
except per share 4th Qtr 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr.
data) 2008 2008 2008 2008 2007
------------------ -------- -------- -------- -------- --------
Summary of
Operations
Interest income $ 51,703 $ 51,688 $ 51,508 $ 53,437 $ 55,726
Interest expense 13,192 14,968 15,872 19,051 22,304
-------- -------- -------- -------- --------
Net interest
income 38,511 36,720 35,636 34,386 33,422
Provision for
loan losses 18,000 22,000 6,500 2,700 4,475
-------- -------- -------- -------- --------
Net interest
income after
provision for
loan losses 20,511 14,720 29,136 31,686 28,947
Noninterest income 9,604 10,054 11,959 9,580 10,832
Operating expenses 28,629 26,750 26,885 26,844 25,522
-------- -------- -------- -------- --------
Income (Loss)
Before Income
Taxes 1,486 (1,976) 14,210 14,422 14,257
Federal Income
Tax Expense
(Benefit) (100) (951) 4,600 4,751 4,411
-------- -------- -------- -------- --------
Net Income (Loss) $ 1,586 $(1,025) $ 9,610 $ 9,671 $ 9,846
------------------ -------- -------- -------- -------- --------
Per Common
Share Data
Net income (loss):
Basic $ 0.06 $ (0.04) $ 0.40 $ 0.41 $ 0.41
Diluted 0.06 (0.04) 0.40 0.41 0.41
Cash dividends 0.295 0.295 0.295 0.295 0.285
Book value -
period-end 20.58 21.19 21.58 21.60 21.35
Market value -
period-end 27.88 31.14 20.40 23.84 23.79