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Press release from GlobeNewswire (a Nasdaq OMX company)

Chemical Financial Corporation Reports Third Quarter 2012 Results

Monday, October 22, 2012

Chemical Financial Corporation Reports Third Quarter 2012 Results13:05 EDT Monday, October 22, 2012MIDLAND, Mich., Oct. 22, 2012 (GLOBE NEWSWIRE) -- Chemical Financial Corporation (Nasdaq:CHFC) today announced 2012 third quarter net income of $13.1 million, or $0.48 per diluted share, compared to 2012 second quarter net income of $13.9 million, or $0.50 per diluted share, and 2011 third quarter net income of $11.6 million, or $0.42 per diluted share. For the nine months ended September 30, 2012, net income was $39.3 million, or $1.43 per diluted share, compared to net income for the nine months ended September 30, 2011 of $31.8 million, or $1.16 per diluted share. "Despite uneven economic conditions, Chemical Financial continues to post strong operating performance and stable financial results. Furthermore, we are making substantial progress working through our nonperforming loans and other real estate (ORE) portfolio, while controlling costs. As a result, our key credit quality and financial performance metrics continue to improve," said David B. Ramaker, Chairman, Chief Executive Officer and President of the Corporation. "Our strong financial condition favorably positions us to pursue organic and acquisitive growth opportunities, as evidenced by our pending acquisition of 21 branch offices from Independent Bank, which has received regulatory approval and is expected to close in the fourth quarter of 2012. We will selectively assess other potential growth opportunities that arise as we expect Michigan's banking industry to continue to consolidate," said Ramaker. The decrease in net income in the third quarter of 2012 from the second quarter of 2012 of $0.8 million, or 5.5 percent, was primarily attributable to a decrease of $1.2 million in noninterest income that was largely due to the receipt of nonrecurring noninterest income of $0.8 million in the second quarter of 2012. While net interest income was $0.5 million higher in the third quarter of 2012 than in the second quarter of 2012, the increase in net interest income was offset by $0.5 million increases in both the provision for loan losses and operating expenses in the third quarter of 2012, as compared to the second quarter of 2012. The increase in net income in the third quarter of 2012 over the third quarter of 2011 of $1.5 million, or 12.7 percent, was attributable to increases in both net interest income and noninterest income and a decrease in the provision for loan losses, which were partially offset by an increase in operating expenses. The increase in operating expenses was attributable to acquisition-related expenses incurred in the third quarter of 2012. The Corporation's return on average assets during the third quarter of 2012 was 0.96 percent, compared to 1.04 percent in the second quarter of 2012 and 0.87 percent in the third quarter of 2011. The Corporation's return on average equity was 8.8 percent in the third quarter of 2012, compared to 9.6 percent in the second quarter of 2012 and 8.0 percent in the third quarter of 2011. Net interest income was $46.9 million in the third quarter of 2012, which was $0.5 million, or 1.0 percent, higher than the second quarter of 2012 and $0.6 million, or 1.4 percent, higher than the third quarter of 2011. The net interest margin (on a tax-equivalent basis) in the third quarter of 2012 was 3.76 percent, compared to 3.80 percent in both the second quarter of 2012 and the third quarter of 2011. The increase in net interest income of $0.5 million in the third quarter of 2012 over the second quarter of 2012 was primarily attributable to an increase in interest income that resulted from an increase in average loans of $87 million, or 2.2 percent, during the third quarter of 2012, which was partially offset by the net impact of interest-earning assets and interest-bearing liabilities repricing during the third quarter of 2012. The increase in net interest income of $0.6 million in the third quarter of 2012 over the third quarter of 2011 was primarily attributable to both an increase in interest income that resulted from an increase in average loans of $218 million, or 5.8 percent, during the twelve months ended September 30, 2012 and a slight decrease in interest expense resulting from a change in the mix of deposit liabilities between these two quarters. The favorable impact on net interest income of these two items was partially offset by the net impact of interest-earning assets and interest-bearing liabilities repricing during the twelve months ended September 30, 2012. The provision for loan losses (provision) was $4.5 million in the third quarter of 2012, compared to $4.0 million in the second quarter of 2012 and $6.4 million in the third quarter of 2011, with $0.5 million of the provision in the third quarter of 2012 and $1.3 million of the provision in the third quarter of 2011 applicable to the acquired loan portfolio. Net loan charge-offs were $6.5 million in the third quarter of 2012, compared to $5.1 million in the second quarter of 2012 and $7.4 million in the third quarter of 2011, with $2.2 million of net loan charge-offs in the third quarter of 2012 related to one loan relationship in the acquired loan portfolio. The Corporation established an allowance for loan losses on the acquired loan portfolio of $1.6 million in 2011 and increased it by $0.6 million and $0.5 million in the first and third quarters of 2012, respectively. The establishment of the allowance for loan losses on the acquired loan portfolio was primarily attributable to the impairment of one commercial loan relationship which resulted in one of the acquired loan pools performing below original expectations. During the third quarter of 2012, the Corporation charged off $2.2 million of this loan relationship, resulting in a $0.2 million loan balance that remained outstanding at September 30, 2012. At September 30, 2012, the allowance for loan losses on the acquired loan portfolio was $0.5 million and was related to two consumer loan pools performing slightly below original expectations. It is management's belief that the remaining acquired loan pools at September 30, 2012, were performing, overall, as or slightly better than expected compared to original expectations. Noninterest income was $12.1 million in the third quarter of 2012, compared to $13.3 million in the second quarter of 2012 and $11.2 million in the third quarter of 2011. Noninterest income in the second quarter of 2012 included nonrecurring income of $0.6 million from the partial insurance recovery of a 2008 branch cash loss and $0.2 million of other nonrecurring income. Excluding nonrecurring income, noninterest income in the third quarter of 2012 was $0.4 million lower than the second quarter of 2012, which was attributable to lower wealth management revenue. Noninterest income in the third quarter of 2012 was $0.9 million higher than the third quarter of 2011, with the increase attributable to increases across all major categories of noninterest income as a result of both fee increases and volume growth. The largest increase in noninterest income was in mortgage banking revenue (MBR), with MBR of $1.5 million in the third quarter of 2012 up $0.3 million from MBR of $1.2 million in the third quarter of 2011. The increase in MBR between these two quarters was primarily driven by higher volume, as the Corporation sold $71 million of mortgages in the secondary market in the third quarter of 2012, compared to the sale of $48 million in the third quarter of 2011. Operating expenses were $36.1 million in the third quarter of 2012, compared to $35.5 million in the second quarter of 2012 and $35.4 million in the third quarter of 2011. The Corporation's control of operating expenses has resulted in its ability to maintain its efficiency ratio favorably below the average efficiency ratios of its Federal Reserve Bank peer group. The Corporation's efficiency ratios were 59.9 percent in the third quarter of 2012, 58.3 percent in the second quarter of 2012 and 60.2 percent in the third quarter of 2011. Operating expenses in the second and third quarters of 2012 included acquisition-related expenses applicable to the pending acquisition of branches from Independent Bank of $0.5 million and $0.6 million, respectively. Excluding acquisition-related expenses, operating expenses in the third quarter of 2012 were $0.4 million higher than the second quarter of 2012 and $0.1 million higher than the third quarter of 2011. The increase in operating expenses in the third quarter of 2012 over the second quarter of 2012 was primarily attributable to seasonally higher advertising and marketing costs. The Corporation's operating expenses were essentially the same in the third quarters of 2012 and 2011, as increases in various expense categories in the third quarter of 2012, including an increase in compensation costs of $1.5 million, or 7.8 percent, were almost entirely offset by decreases in other expense categories, including lower credit-related expenses. Credit-related expenses were $0.5 million in the third quarter of 2012, a reduction of $1.7 million, or 75 percent, from credit-related expenses of $2.2 million in the third quarter of 2011.  Credit-related expenses, comprised of loan collection costs and ORE net costs, were $2.6 million during the nine months ended September 30, 2012, a decrease of $3.2 million, or 55 percent, from credit-related expenses of $5.8 million during the nine months ended September 30, 2011. Credit-related expenses were lower in all three quarters of 2012, as compared to their respective quarters in 2011. The decrease in credit-related expenses of $3.2 million was largely attributable to the Corporation recognizing net gains of $1.4 million on the sale/writedown of ORE properties during the nine months ended September 30, 2012, compared to incurring net expense of $0.6 million during the nine months ended September 30, 2011. The additional reduction in credit-related expenses of $1.2 million was largely attributable to lower legal collection costs and lower appraisal fees on nonperforming and watch loan credits as the credit quality of the Corporation's loan portfolio continued to improve. Total assets were $5.58 billion at September 30, 2012, up from $5.35 billion at June 30, 2012 and $5.44 billion at September 30, 2011. The increase in total assets during the third quarter of 2012 was attributable to an increase in interest-bearing balances held at the Federal Reserve Bank (FRB) due to a seasonal increase in municipal customer deposits. The Corporation has maintained significant amounts of funds at the FRB, with $315 million in balances held at the FRB at September 30, 2012, compared to $120 million at June 30, 2012 and $479 million at September 30, 2011. Total loans were $4.02 billion at September 30, 2012, up from $3.96 billion at June 30, 2012 and $3.76 billion at September 30, 2011. Total loans increased $57 million, or 1.4%, in the third quarter of 2012. The Corporation's loan growth during the third quarter of 2012 occurred primarily in the commercial and consumer loan portfolios, with commercial loans increasing $37 million, or 4 percent, and consumer loans increasing $19 million, or 2 percent. During the twelve months ended September 30, 2012, total loans increased $259 million, or 6.9 percent, with commercial loans increasing $93 million, or 10.8 percent, real estate commercial loans increasing $61 million, or 5.8 percent, real estate residential loans increasing $40 million, or 4.8 percent, and consumer installment and home equity loans increasing $93 million, or 10.6 percent, while real estate construction and land development loans decreased $29 million, or 24.2 percent. The increases in loans during the three and twelve months ended September 30, 2012 were attributable to a combination of improving economic conditions and higher loan demand, as well as the Corporation increasing its market share. The average yield on the loan portfolio was 4.86 percent in the third quarter of 2012, compared to 4.96 percent in the second quarter of 2012 and 5.29 percent in the third quarter of 2011. Investment securities were $868 million at September 30, 2012, compared to $893 million at June 30, 2012 and $797 million at September 30, 2011. The average yield of the investment securities portfolio, on a fully taxable equivalent basis, was 2.13 percent in the third quarter of 2012, compared to 2.17 percent in the second quarter of 2012 and 2.35 percent in the third quarter of 2011. Total deposits were $4.60 billion at September 30, 2012, up from $4.38 billion at June 30, 2012 and $4.48 billion at September 30, 2011. The Corporation experienced an increase in total deposits of $215 million, or 4.9 percent, during the third quarter of 2012, which was attributable to a seasonal increase in deposits of municipal customers. Remaining brokered deposits acquired in the Corporation's 2010 acquisition of Byron Bank were $75 million at September 30, 2012, compared to $84 million at June 30, 2012 and $98 million at September 30, 2011. Federal Home Loan Bank (FHLB) advances totaled $37.2 million at September 30, 2012, compared to $38.2 million at June 30, 2012 and $46.0 million at September 30, 2011. The repricing of matured customer certificates of deposit and the decrease in interest rates on various interest-bearing deposit accounts to reflect lower market interest rates resulted in the Corporation's average cost of funds declining to 0.46 percent in the third quarter of 2012 from 0.51 percent in the second quarter of 2012 and 0.65 percent in the third quarter of 2011. At September 30, 2012, the Corporation's tangible equity to assets ratio and total risk-based capital ratio were 8.8 percent and 13.6 percent, respectively, compared to 9.0 percent and 13.6 percent, respectively, at June 30, 2012 and 8.6 percent and 13.1 percent, respectively, at September 30, 2011. At September 30, 2012, the Corporation's book value was $21.75 per share, compared to $21.42 per share at June 30, 2012 and $21.02 per share at September 30, 2011. The credit quality of the Corporation's loan portfolio continued to show further improvement during the third quarter of 2012. At September 30, 2012, the Corporation's nonperforming loans, consisting of nonaccrual loans, accruing loans past due 90 days or more as to principal or interest and nonperforming troubled debt restructurings, totaled $90.9 million, compared to $92.8 million at June 30, 2012 and $120.4 million at September 30, 2011, representing declines of 2.1 percent and 24.5 percent, respectively. At September 30, 2012, nonperforming loans as a percentage of total loans were 2.26 percent, compared to 2.34 percent at June 30, 2012 and 3.20 percent at September 30, 2011.  Other real estate and repossessed assets totaled $19.5 million at September 30, 2012, compared to $23.5 million at June 30, 2012 and $28.7 million at September 30, 2011. The decrease in other real estate during the third quarter of 2012 was primarily attributable to the sale of one ORE property, which consisted of vacant land with a carrying value of $4.1 million. This ORE property was obtained as a result of the Corporation receiving a deed in lieu of foreclosure on this property during the fourth quarter of 2010 that was attributable to a loan acquired in the Corporation's acquisition of Byron Bank. This loan was impaired at the acquisition date and was recorded at the estimated fair value of the collateral at that time. At September 30, 2012, the allowance for loan losses of the originated loan portfolio was $84.2 million, or 2.33 percent of originated loans, compared to 2.40 percent at June 30, 2012 and 2.68 percent at September 30, 2011. The allowance for loan losses of the originated loan portfolio as a percentage of nonperforming loans was 93 percent at September 30, 2012, compared to 91 percent at June 30, 2012 and 73 percent at September 30, 2011. The allowance for loan losses of the acquired loan portfolio was $0.5 million at September 30, 2012, compared to $2.2 million at June 30, 2012 and $1.3 million at September 30, 2011. Management believes that the Corporation's acquired loan portfolio at September 30, 2012 totaling $413 million, was performing, overall, as or slightly better than original expectations. Chemical Financial Corporation is the second largest bank holding company headquartered and operating branch offices in Michigan. The Corporation operates through a single subsidiary bank, Chemical Bank, with 142 banking offices spread over 32 counties in the lower peninsula of Michigan. At September 30, 2012, the Corporation had total assets of $5.6 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. More information about the Corporation is available by visiting the investor relations section of its website at www.chemicalbankmi.com.Forward-Looking Statements This press release 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. Words such as "anticipated," "awaiting," "believe," "continue," "estimated," "expects," "further," "improving," "opportunities," "pending," "positions," "potential," "strategies," "trends," "will" and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements are based upon current beliefs and expectations and involve substantial risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These statements include, among others, statements related to the credit quality of the loan portfolio, future levels of nonperforming loans, future economic trends and conditions, anticipated consolidation opportunities in Michigan's banking industry, potential growth opportunities, future income levels, and our ability to grow our loan portfolio, improve credit quality and control operating costs. All statements referencing future time periods are forward-looking. Management's determination of the provision and allowance for loan losses, the carrying value of acquired loans, goodwill, mortgage servicing rights and other real estate owned and the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary and the amount of any impairment) involve judgments that are inherently forward-looking. Management's assumptions concerning pension and other postretirement benefit plans involve judgments that are inherently forward-looking. There can be no assurance that future loan losses will be limited to the amounts estimated or that other real estate owned can be sold for its carrying value or at all. The future effect of changes in the financial and credit markets and the national and regional economy on the banking industry, generally, and on the Corporation, specifically, are also inherently uncertain. 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. The Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise. This press release contains forward-looking statements regarding the Corporation's outlook or expectations with respect to the planned acquisition of branches from Independent Bank, the expected costs to be incurred in connection with the acquisition, the future performance of the branches to be acquired, the consequences of their integration into Chemical Bank, and the impact of the transaction on the Corporation's future performance. Even though regulatory approval has been received, circumstances could arise which may delay or impede the completion of the transaction, although none are known at this time. The impact of the completion of the transaction on the Corporation's financial statements will be affected by the timing of the transaction, including, in particular, the ability to complete the acquisition in the fourth quarter of 2012. The transaction may be more expensive to complete and the anticipated benefits, including anticipated strategic gains, may be significantly harder or take longer to achieve than expected or may not be achieved in their entirety or at all as a result of unexpected factors or events. Risk factors include, but are not limited to, the risk factors described in Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2011. 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 Third Quarter Operating Results           Consolidated Statements of Financial Position (Unaudited)       Chemical Financial Corporation                (In thousands, except per share data) September 30 2012 December 31 2011 September 30 2011 Assets:       Cash and cash equivalents:       Cash and cash due from banks  $ 123,519  $ 121,294  $ 126,712 Interest-bearing deposits with unaffiliated banks and others  315,201  260,646  484,572 Total cash and cash equivalents  438,720  381,940  611,284 Investment securities:       Available-for-sale  646,578  667,276  610,493 Held-to-maturity  221,536  183,339  186,432 Total Investment Securities  868,114  850,615  796,925 Loans held-for-sale  15,075  18,818  15,212         Loans:       Commercial   951,938  895,150  858,969 Real estate commercial   1,117,073  1,071,999  1,056,092 Real estate construction and land development   90,882  118,176  119,829 Real estate residential   880,295  861,716  840,044 Consumer installment and home equity  978,971  884,244  885,492 Total Loans  4,019,159  3,831,285  3,760,426 Allowance for loan losses  (84,694)  (88,333)  (88,713) Net Loans  3,934,465  3,742,952  3,671,713         Premises and equipment  67,796  65,997  64,998 Goodwill  113,414  113,414  113,414 Other intangible assets  10,243  11,472  11,849 Interest receivable and other assets  132,594  154,245  154,209 Total Assets  $ 5,580,421  $ 5,339,453  $ 5,439,604         Liabilities:       Deposits:       Noninterest-bearing   $ 952,126  $ 875,791  $ 891,363 Interest-bearing   3,646,746  3,491,066  3,589,223 Total Deposits  4,598,872  4,366,857  4,480,586 Interest payable and other liabilities  34,738  54,024  33,700 Short-term borrowings  311,471  303,786  302,298 Federal Home Loan Bank advances   37,237  43,057  45,991 Total Liabilities  4,982,318  4,767,724  4,862,575         Shareholders' Equity:       Preferred stock, no par value per share  --  --  -- Common stock, $1 par value per share  27,498  27,457  27,457 Additional paid-in capital  432,627  431,277  430,462 Retained earnings  160,884  138,324  132,611 Accumulated other comprehensive loss  (22,906)  (25,329)  (13,501) Total Shareholders' Equity  598,103  571,729  577,029 Total Liabilities and Shareholders' Equity  $ 5,580,421  $ 5,339,453  $ 5,439,604                     Chemical Financial Corporation Announces Third Quarter Operating Results                   Consolidated Statements of Income (Unaudited)         Chemical Financial Corporation                      Three Months Ended September 30 Nine Months Ended September 30 (In thousands, except per share data) 2012 2011 2012 2011 Interest Income:         Interest and fees on loans  $ 48,322  $ 49,770  $ 144,472  $ 148,382 Interest on investment securities:         Taxable  2,458  2,335  7,610  6,884 Tax-exempt  1,457  1,513  4,407  4,385 Dividends on nonmarketable equity securities  128  114  638  605 Interest on deposits with unaffiliated banks and others  136  266  505  856 Total Interest Income  52,501  53,998  157,632  161,112           Interest Expense:         Interest on deposits  5,238  7,199  16,999  22,628 Interest on short-term borrowings  105  117  317  418 Interest on Federal Home Loan Bank advances   248  413  765  1,298 Total Interest Expense  5,591  7,729  18,081  24,344 Net Interest Income   46,910  46,269  139,551  136,768 Provision for loan losses  4,500  6,400  13,500  20,900 Net Interest Income after Provision for Loan Losses  42,410  39,869  126,051  115,868           Noninterest Income:         Service charges and fees on deposit accounts  5,028  4,780  14,546  13,504 Wealth management revenue  2,745  2,638  8,835  8,430 Other charges and fees for customer services  2,778  2,581  8,489  7,967 Mortgage banking revenue  1,457  1,173  4,059  2,736 Gain on sale of merchant card services  --  --  1,280  -- Other   54  53  784  262 Total Noninterest Income  12,062  11,225  37,993  32,899           Operating Expenses:         Salaries, wages and employee benefits  20,738  19,229  61,846  55,622 Occupancy   3,137  3,093  9,264  9,530 Equipment and software  3,406  3,162  9,651  8,994 Other  8,785  9,910  27,137  30,050 Total Operating Expenses  36,066  35,394  107,898  104,196 Income Before Income Taxes  18,406  15,700  56,146  44,571 Federal Income Tax Expense   5,300  4,075  16,800  12,725 Net Income   $ 13,106  $ 11,625  $ 39,346  $ 31,846           Net income per common share:         Basic  $ 0.48  $ 0.42  $ 1.43  $ 1.16 Diluted  0.48  0.42  1.43  1.16           Key Ratios:         Return on average assets 0.96% 0.87% 0.97% 0.80% Return on average shareholders' equity 8.8% 8.0% 9.0% 7.5% Net interest margin  3.76% 3.80% 3.77% 3.79% Efficiency ratio  59.9% 60.2% 59.5% 60.0%   Chemical Financial Corporation Announces Third Quarter Operating Results                 Financial Summary (Unaudited)               Chemical Financial Corporation                  Three Months Ended (Dollars in thousands) Sept 30 2012 June 30 2012 March 31 2012 Dec 31 2011 Sept 30 2011 June 30 2011 March 31 2011Average Balances                Total assets  $ 5,433,491  $ 5,360,598  $ 5,396,420  $ 5,341,079  $ 5,323,962  $ 5,255,244  $ 5,302,558 Total interest-earning assets  5,105,101  5,044,629  5,061,882  5,008,813  4,985,380  4,928,590  4,963,384 Total loans  3,987,928  3,901,321  3,824,604  3,772,140  3,769,745  3,707,468  3,672,301 Total deposits  4,464,582  4,383,628  4,416,273  4,378,066  4,358,658  4,299,728  4,362,774 Total interest-bearing liabilities  3,823,954  3,817,753  3,903,986  3,847,003  3,853,443  3,857,678  3,942,406 Total shareholders' equity  591,683  582,873  574,261  578,105  573,580  565,500  560,661                Key Ratios (annualized where applicable)               Net interest margin (taxable equivalent basis) 3.76% 3.80% 3.76% 3.84% 3.80% 3.78% 3.78% Efficiency ratio  59.9% 58.3% 60.4% 63.1% 60.2% 58.2% 61.8% Return on average assets 0.96% 1.04% 0.92% 0.83% 0.87% 0.84% 0.70% Return on average shareholders' equity 8.8% 9.6% 8.7% 7.7% 8.0% 7.8% 6.6% Average shareholders' equity as a percent of average assets 10.9% 10.9% 10.6% 10.8% 10.8% 10.8% 10.6% Capital ratios (period end):               Tangible shareholders' equity as a percent of total assets 8.8% 9.0% 8.7% 8.7% 8.6% 8.9% 8.5% Total risk-based capital ratio 13.6% 13.6% 13.7% 13.3% 13.1% 13.0% 13.0%                  Sept 30 2012 June 30 2012 March 31 2012 Dec 31 2011 Sept 30 2011 June 30 2011 March 31 2011Credit Quality Statistics               Originated Loans  $ 3,606,547  $ 3,515,110  $ 3,370,279  $ 3,338,502  $ 3,265,054  $ 3,225,179  $ 3,143,489 Acquired Loans  412,612  447,232  472,819  492,783  495,372  522,831  539,027 Nonperforming Assets:               Nonperforming loans   90,877  92,811  98,548  106,269  120,395 135,929 145,859 Other real estate and repossessed assets (ORE)  19,467  23,509  25,944  25,484  28,679 24,607 26,355 Total nonperforming assets  110,344  116,320  124,492  131,753  149,074 160,536 172,214                 Performing troubled debt restructurings  26,806  26,383  27,177  20,394  15,543  12,889  --                 Allowance for loan losses-originated as a percent of:               Total originated loans 2.33% 2.40% 2.54% 2.60% 2.68% 2.78% 2.85% Nonperforming loans 93% 91% 87% 82% 73% 66% 61%                 Nonperforming loans as a percent of total loans 2.26% 2.34% 2.56% 2.77% 3.20% 3.63% 3.96% Nonperforming assets as a percent of:               Total loans plus ORE 2.73% 2.92% 3.22% 3.42% 3.93% 4.26% 4.64% Total assets 1.98% 2.17% 2.28% 2.47% 2.74% 3.08% 3.23%                 Net loan charge-offs (year-to-date):               Originated  14,939  10,622  5,548  27,197  21,717  14,297  7,356 Acquired  2,200  --  --  --  --  --  -- Total loan charge-offs (year-to-date)  17,139  10,622  5,548  27,197  21,717  14,297  7,356 Net loan charge-offs as a percent of average loans (year-to-date, annualized) 0.59% 0.55% 0.58% 0.73% 0.78% 0.77% 0.80%                   Sept 30 2012 June 30  2012 March 31 2012 Dec 31 2011 Sept 30 2011 June 30  2011 March 31 2011Additional Data - Intangibles               Goodwill  $ 113,414  $ 113,414  $ 113,414  $ 113,414  $ 113,414  $ 113,414  $ 113,414 Core deposit intangibles  6,777  7,144  7,512  7,879  8,261  8,643  9,024 Mortgage servicing rights (MSR)  3,466  3,463  3,427  3,593  3,561  3,577  3,832 Other intangible assets  --  --  --  --  27  107  204 Amortization of core deposit intangibles (quarter only)  367  368  367  382  382  381  382   Chemical Financial Corporation Announces Third Quarter Operating Results         Average Balances, Tax Equivalent Interest and Effective Yields and Rates (Unaudited)*           Three Months Ended September 30, 2012 (Dollars in thousands) Average Balance Tax Equivalent Interest Effective Yield/Rate Assets       Interest-Earning Assets:       Loans**  $ 4,001,117  $ 48,807  4.86 % Taxable investment securities 685,580 2,458  1.43 Tax-exempt investment securities 191,902 2,221  4.63 Other interest-earning assets 25,572 128  1.99 Interest-bearing deposits with unaffiliated banks and others 200,930 136  0.27 Total interest-earning assets 5,105,101 53,750  4.19 Less: Allowance for loan losses 87,796     Other Assets:       Cash and cash due from banks 119,107     Premises and equipment 67,911     Interest receivable and other assets 229,168     Total Assets  $ 5,433,491             Liabilities and shareholders' equity       Interest-bearing Liabilities:       Interest-bearing demand deposits  $ 890,457  $ 228  0.10 % Savings deposits 1,158,985 303  0.10 Time deposits 1,434,738 4,707  1.31 Short-term borrowings 302,051 105  0.14 FHLB advances 37,723 248  2.62 Total interest-bearing liabilities 3,823,954 5,591  0.58 Noninterest-bearing deposits 980,402  --   --  Total deposits and borrowed funds 4,804,356 5,591  0.46 Interest payable and other liabilities 37,452     Shareholders' equity 591,683     Total Liabilities and Shareholders' Equity  $ 5,433,491     Net Interest Spread (Average yield earned on interest-earning assets minus average rate paid on interest-bearing liabilities)  3.61 % Net Interest Income (FTE)    $ 48,159   Net Interest Margin (Net Interest Income (FTE) divided by total average interest-earning assets)  3.76 %         * Taxable equivalent basis using a federal income tax rate of 35%.       ** Nonaccrual loans and loans held-for-sale are included in average balances reported and are included in the calculation of yields.  Also, tax equivalent interest includes net loan fees.         Chemical Financial Corporation Announces Third Quarter Operating Results                 Nonperforming Assets (Unaudited)               Chemical Financial Corporation                                (Dollars in thousands) Sept 30 2012 June 30 2012 March 31 2012 Dec 31 2011 Sept 30 2011 June 30 2011 March 31 2011 Nonperforming Loans:               Nonaccrual loans:               Commercial  $ 15,217  $ 12,673  $ 11,443  $ 10,726  $ 10,804  $ 14,386  $ 15,672 Real estate commercial  41,311  41,691  46,870  44,438  48,854  57,324 59,931 Real estate construction and land development  6,664  3,485  3,809  6,190  7,877  8,933 9,414 Real estate residential  11,307  12,613  12,687  12,573  17,544  17,809 15,505 Consumer installment and home equity  3,825  3,994  4,344  4,467  6,033  6,898 5,774 Total nonaccrual loans  78,324  74,456  79,153  78,394  91,112  105,350 106,296 Accruing loans contractually past due 90 days or more as to interest or principal payments:               Commercial  273  300  1,005  1,381  282  629 455 Real estate commercial  247  269  75  374  415  143 459 Real estate construction and land development  --  --  --  287  --  --  -- Real estate residential  431  840  333  752  974  1,729 191 Consumer installment and home equity  1,147  1,157  1,233  1,023  1,344  1,243 1,091 Total accruing loans contractually past due 90 days or more as to interest or principal payments  2,098  2,566  2,646  3,817  3,015  3,744 2,196 Nonperforming troubled debt restructurings:               Commercial loan portfolio  6,553  11,691  11,258  14,675  16,457  15,443 15,201 Consumer loan portfolio  3,902  4,098  5,491  9,383  9,811  11,392 22,166 Total nonperforming troubled debt restructurings  10,455  15,789  16,749  24,058  26,268  26,835 37,367 Total nonperforming loans  90,877  92,811  98,548  106,269  120,395  135,929 145,859 Other real estate and repossessed assets  19,467  23,509  25,944  25,484  28,679  24,607 26,355 Total nonperforming assets  $ 110,344  $ 116,320  $ 124,492  $ 131,753  $ 149,074  $ 160,536  $ 172,214   Chemical Financial Corporation Announces Third Quarter Operating Results                 Summary of Loan Loss Experience (Unaudited)               Chemical Financial Corporation                                  Three Months Ended (Dollars in thousands) Sept 30 2012 June 30 2012 March 31 2012 Dec 31 2011 Sept 30 2011 June 30 2011 March 31 2011                 Allowance for loan losses - originated loan portfolio               Allowance for loan losses - originated, at beginning of period  $ 84,511  $ 85,585  $ 86,733  $ 87,413  $ 89,733  $ 89,674  $ 89,530 Provision for loan losses - originated  4,000 4,000 4,400 4,800 5,100 7,000 7,500 Loans charged off:               Commercial  (551)  (974)  (1,079)  (1,768)  (1,234)  (1,972)  (1,976) Real estate commercial  (1,952)  (2,178)  (2,268)  (2,120)  (3,969)  (3,168)  (3,875) Real estate construction and land development  (51)  (45)  (32)  (54)  (236)  (136)  (63) Real estate residential  (1,357)  (1,140)  (1,717)  (945)  (1,884)  (1,198)  (944) Consumer installment and home equity  (1,485)  (1,835)  (1,451)  (1,434)  (1,516)  (1,832)  (1,784) Total loan charge-offs  (5,396)  (6,172)  (6,547)  (6,321)  (8,839)  (8,306)  (8,642) Recoveries of loans previously charged off:               Commercial  135  140  191  137  614  710  215 Real estate commercial  325  298  421  272  285  212  87 Real estate construction and land development  --  --  2  40  --  5  -- Real estate residential  237  199  22  80  207  106  456 Consumer installment and home equity  382  461  363  312  313  332  528 Total loan recoveries  1,079  1,098  999  841  1,419  1,365  1,286 Net loan charge-offs - originated  (4,317)  (5,074)  (5,548)  (5,480)  (7,420)  (6,941)  (7,356) Allowance for loan losses - originated, at end of period  84,194  84,511  85,585  86,733  87,413  89,733  89,674                 Allowance for loan losses - acquired loan portfolio               Allowance for loan losses - acquired, at beginning of period  2,200  2,200  1,600  1,300  --  --  -- Provision for loan losses - acquired  500  --  600  300  1,300  --  -- Net loan charge-offs - acquired (commercial)  (2,200)  --  --  --  --  --  -- Allowance for loan losses - acquired, at end of period  500  2,200  2,200  1,600  1,300  --  --                 Total allowance for loan losses  $ 84,694  $ 86,711  $ 87,785  $ 88,333  $ 88,713  $ 89,733  $ 89,674   Chemical Financial Corporation Announces Third Quarter Operating Results                 Selected Quarterly Information (Unaudited)               Chemical Financial Corporation                                (Dollars in thousands, except per share data) 3rd Qtr. 2012 2nd Qtr. 2012 1st Qtr. 2012 4th Qtr. 2011 3rd Qtr. 2011 2nd Qtr. 2011 1st Qtr. 2011Summary of Operations               Interest income  $ 52,501  $ 52,467  $ 52,664  $ 54,130  $ 53,998  $ 53,439  $ 53,675 Interest expense  5,591  6,021  6,469  7,045  7,729 8,145 8,470 Net interest income  46,910  46,446  46,195  47,085  46,269 45,294 45,205 Provision for loan losses  4,500  4,000  5,000  5,100  6,400 7,000 7,500 Net interest income after provision for loan losses  42,410  42,446  41,195  41,985  39,869 38,294 37,705 Noninterest income  12,062  13,282  12,649  11,501  11,225 10,902 10,772 Operating expenses   36,066  35,537  36,295  37,807  35,394 33,413 35,389 Income before income taxes  18,406  20,191  17,549  15,679  15,700 15,783 13,088 Federal income tax expense  5,300  6,325  5,175  4,475  4,075 4,750 3,900 Net income   $ 13,106  $ 13,866  $ 12,374  $ 11,204  $ 11,625  $ 11,033  $ 9,188                 Net interest margin 3.76% 3.80% 3.76% 3.84% 3.80% 3.78% 3.78%                Per Common Share Data               Net income:               Basic  $ 0.48  $ 0.50  $ 0.45  $ 0.41  $ 0.42  $ 0.40  $ 0.33 Diluted  0.48  0.50 0.45  0.41  0.42 0.40  0.33 Cash dividends declared  0.21  0.20  0.20  0.20  0.20 0.20  0.20 Book value - period-end  21.75  21.42  21.10  20.82  21.02 20.78  20.54 Tangible book value - period-end  17.52  17.17  16.84  16.54  16.71  16.46  16.19 Market value - period-end  24.20  21.50  23.44  21.32  15.31 18.76  19.93CONTACT: For further information: David B. Ramaker, CEO Lori A. Gwizdala, CFO 989-839-5350