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Proc-Type: 2001,MIC-CLEAR
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SECURITIES AND EXCHANGE COMMISSION FORM 10-Q (MARK ONE) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-08185 CHEMICAL FINANCIAL CORPORATION Michigan 38-2022454 333 East Main Street (989) 839-5350 Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No The number of shares outstanding of the Registrant's Common Stock, $1 par value, as of July 20, 2004, was 23,944,111 shares. INDEX Page FORWARD-LOOKING STATEMENTS 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited, except Consolidated Consolidated Statements of Income for the Three and Six Months Ended Consolidated Statements of Financial Position as of June 30, 2004, Consolidated Statements of Cash Flows for the Six Months Ended Notes to Consolidated Financial Statements 7-15 Item 2. Management's Discussion and Analysis of Financial Condition and Item 3. Quantitative and Qualitative Disclosures About Market Risk 24 Item 4. Controls and Procedures 24 PART II. OTHER INFORMATION Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases Item 4. Submission of Matters to a Vote of Security Holders 25 - 26 Item 6. Exhibits and Reports on Form 8-K 26 SIGNATURES 27 FORWARD-LOOKING STATEMENTS 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 the Corporation itself. Words such as "anticipates," "believes," "estimates," "judgment," "expects," "forecasts," "intends," "is likely," "plans," "predicts," "projects," "should," "will" and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, all statements under Part I, Item 3 concerning quantitative and qualitative disclosures about market risk are forward-looking statements. 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 statement
s. The 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, changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; 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; the outcomes of pending and future litigation and contingencies; trends in customer behavior as well as their ability to repay loans; changes in the local and national economy; opportunities for acquisition and the effective completion of acquisitions and integration of acquired entities; and the local and global effects of the ongoing war on terrorism and other military actions, including actions in Iraq. These are representative of the risk factors that could cause a difference between an ultimate actual outcome and a preceding forward-looking statement. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES Three Months Ended Six Months Ended 2004 2003 2004 2003 (In thousands, except per share amounts) INTEREST INCOME Interest and fees on loans $ 37,481 $ 36,155 $ 74,959 $ 72,569 Interest on investment securities: Taxable 8,276 9,778 17,152 20,458 Tax-exempt 526 639 1,091 1,316 Total interest on investment securities 8,802 10,417 18,243 21,774 Interest on federal funds sold 202 107 403 443 Interest on deposits with unaffiliated banks 98 18 163 157 TOTAL INTEREST INCOME 46,583 46,697 93,768 94,943 INTEREST EXPENSE Interest on deposits 7,523 9,453 15,214 20,293 Interest on FHLB borrowings 2,548 2,077 5,124 4,190 Interest on other borrowings - short term 103 138 199 307 TOTAL INTEREST EXPENSE 10,174 11,668 20,537 24,790 NET INTEREST INCOME 36,409 35,029 73,231 70,153 Provision for loan losses 661 1,272 1,407 1,567 NET INTEREST INCOME after provision for loan losses 35,748 33,757 71,824 68,586 NONINTEREST INCOME Service charges on deposit accounts 4,757 4,262 9,311 8,153 Trust services revenue 1,871 1,791 3,780 3,518 Other charges and fees for customer services 1,806 1,834 3,354 3,749 Mortgage banking revenue 1,080 1,861 1,860 3,408 Investment securities gains 267 308 1,250 492 Other 224 30 412 80 TOTAL NONINTEREST INCOME 10,005 10,086 19,967 19,400 OPERATING EXPENSES Salaries, wages and employee benefits 14,693 13,594 29,494 27,283 Occupancy 2,280 1,937 4,739 3,901 Equipment 2,160 2,079 4,545 4,128 Other 5,787 5,572 11,302 10,896 TOTAL OPERATING EXPENSES 24,920 23,182 50,080 46,208 INCOME BEFORE INCOME TAXES 20,833 20,661 41,711 41,778 Federal income taxes 6,967 6,991 13,726 14,094 NET INCOME $ 13,866 $ 13,670 $ 27,985 $ 27,684 NET INCOME PER SHARE (Basic) $ .58 $ .58 $ 1.17 $ 1.17 (Diluted) $ .58 $ .58 $ 1.17 $ 1.17 Cash dividends per share $ .265 $ .25 $ .53 $ .50 See accompanying notes to consolidated financial statements CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES June 30, December 31, June 30, (Unaudited) (Unaudited) ASSETS Cash and demand deposits due from banks $ 114,743 $ 131,184 $ 122,712 Federal funds sold 60,700 25,900 41,200 Interest bearing deposits with unaffiliated banks 9,931 5,107 6,096 Investment securities: Available for sale (at estimated market value) 768,228 728,499 832,506 Held to maturity (estimated market value - $158,310 at Total investment securities 924,590 921,862 1,088,822 Loans: Commercial 466,666 405,929 329,929 Real estate construction 132,956 138,280 106,747 Real estate commercial 655,053 628,815 527,400 Real estate residential 781,062 767,199 753,014 Consumer 553,237 541,052 519,727 Total loans 2,588,974 2,481,275 2,236,817 Less: Allowance for loan losses 33,552 33,179 30,482 Net loans 2,555,422 2,448,096 2,206,335 Premises and equipment 48,077 49,616 40,795 Intangible assets 75,683 76,846 39,472 Other assets 52,593 50,277 42,397 TOTAL ASSETS $ 3,841,739 $ 3,708,888 $ 3,587,829 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $ 551,087 $ 532,752 $ 530,010 Interest-bearing 2,408,162 2,434,484 2,347,416 Total deposits 2,959,249 2,967,236 2,877,426 FHLB borrowings 285,191 155,373 148,573 Other borrowings - short term 95,371 91,524 88,949 Interest payable and other liabilities 33,569 36,706 29,741 Total liabilities 3,373,380 3,250,839 3,144,689 Shareholders' equity: Common stock, $1 par value: Authorized - 30,000 shares Issued and outstanding - 23,944 shares at 6/30/04 Surplus 333,475 328,774 324,213 Retained earnings 110,054 94,746 78,558 Accumulated other comprehensive income 886 10,728 16,704 Total shareholders' equity 468,359 458,049 443,140 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,841,739 $ 3,708,888 $ 3,587,829 See accompanying notes to consolidated financial statements. CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES Six Months Ended 2004 2003 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 27,985 $ 27,684 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 1,407 1,567 Gains on sales of loans (1,258 ) (3,367 ) Proceeds from sales of loans 96,614 219,386 Loans originated for sale (93,755 ) (205,934 ) Investment securities gains (1,250 ) (492 ) Provision for depreciation and amortization 4,889 4,754 Net amortization of investment securities 5,246 5,824 Net decrease in accrued income and other assets 7,268 1,305 Net increase (decrease) in interest payable and other liabilities (1,142 ) 64 Net Cash Provided by Operating Activities 46,004 50,791 CASH FLOWS FROM INVESTING ACTIVITIES: Securities available for sale: Proceeds from maturities, calls and principal reductions 118,533 161,163 Proceeds from sales 81,252 60,631 Purchases (258,011 ) (204,229 ) Securities held to maturity: Proceeds from maturities, calls and principal reductions 56,586 93,207 Purchases (20,172 ) (83,344 ) Net increase in loans (114,935 ) (171,834 ) Purchases of premises and equipment (1,924 ) (793 ) Net Cash Used in Investing Activities (138,671 ) (145,199 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in demand deposits, NOW accounts and savings accounts 36,586 97,605 Net decrease in certificates of deposit and other time deposits (44,573 ) (67,451 ) Net increase (decrease) in other borrowings - short term 3,847 (15,263 ) Proceeds from FHLB borrowings 150,000 - Principal payments on FHLB borrowings (20,182 ) (8,820 ) Cash dividends paid (12,677 ) (11,847 ) Proceeds from shares issued 2,849 556 Repurchases of common stock - (1,511 ) Net Cash Provided by (Used in) Financing Activities 115,850 (6,731 ) Net Increase (Decrease) in Cash and Cash Equivalents 23,183 (101,139 ) Cash and cash equivalents at beginning of year 162,191 271,147 Cash and Cash Equivalents at End of Period $ 185,374 $ 170,008 Supplemental disclosure of cash flow information: Interest paid on deposits, FHLB borrowings and other borrowings - short-term $ 20,594 $ 25,456 Federal income taxes paid $ 13,200 $ 13,100 See accompanying notes to consolidated financial statements. CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTE A: BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Chemical Financial Corporation (the "Corporation") have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial condition and results of operations of the Corporation for the periods presented. Operating results for the three and six months ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto inc
luded in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2003. Certain prior year amounts have been reclassified to place them on a basis comparable with the current period's financial statements. Earnings Per Share All earnings per share amounts have been presented to conform to the requirements of Statement of Financial Accounting Standards No. 128, "Earnings Per Share." Basic earnings per share exclude any dilutive effect of stock options. Basic earnings per share for the Corporation is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share for the Corporation is computed by dividing net income by the sum of the weighted average number of common shares outstanding and the dilutive effect of outstanding employee stock options. CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES Earnings Per Share (continued) The following table summarizes the number of shares used in the numerator and denominator of the basic and diluted earnings per share computations: Three Months Ended Six Months Ended 2004 2003 2004 2003 (In thousands) Numerator for both basic and diluted earnings per share, net income $ 13,866 $ 13,670 $ 27,985 $ 27,684 Denominator for basic earnings per share, average outstanding common shares 23,934 23,684 23,913 23,690 Potential dilutive shares resulting from employee stock options 75 51 85 48 Denominator for diluted earnings per share 24,009 23,735 23,998 23,738 Comprehensive Income The components of comprehensive income, net of related tax, for the three and six months ended June 30, 2004 and 2003 are as follows (in thousands of dollars): Three Months Ended Six Months Ended 2004 2003 2004 2003 Net income $ 13,866 $ 13,670 $ 27,985 $ 27,684 Change in unrealized net gains on investment securities available for sale (9,385 ) (738 ) (9,842 ) (2,081) Comprehensive income $ 4,481 $ 12,932 $ 18,143 $ 25,603 CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES Comprehensive Income (continued) The components of accumulated other comprehensive income, net of related tax, at June 30, 2004, December 31, 2003 and June 30, 2003 are as follows (in thousands of dollars): June 30, December 31, June 30, Unrealized net gains on investment securities available for sale (net of related tax of $477 Accumulated other comprehensive income $ 886 $ 10,728 $ 16,704 Operating Segment Under the provisions of Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information," it is management's opinion that the Corporation operates in a single operating segment - commercial banking. The Corporation is a bank holding company that operates three commercial banks, a title insurance company and a property and casualty insurance company, each as a separate subsidiary of the Corporation, as of June 30, 2004. The Corporation's commercial bank subsidiaries operate as community banks and offer a full range of commercial banking and fiduciary products and services to the residents and business customers in their geographical market areas. The products and services offered by the commercial bank subsidiaries are generally consistent throughout the Corporation. Each of the Corporation's commercial bank subsidiaries operates within the state of Michigan. The marketing of products and services throughout the Corporation's subsidiary banks is gen
erally uniform, as many of the markets served by the subsidiaries overlap. The distribution of products and services is uniform throughout the Corporation's commercial bank subsidiaries and is achieved primarily through retail branch banking offices, automated teller machines and electronically accessed banking products. The commercial bank subsidiaries are state-chartered commercial banks and operate under the same banking regulations. CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES Goodwill During 2002, the Corporation adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). Under SFAS 142, goodwill is no longer amortized, but is subject to annual impairment tests. The Corporation tested goodwill for impairment as of December 31, 2003 and 2002. Based on these test results, the Corporation determined that there was no impairment of goodwill as of December 31, 2003 and 2002. Goodwill was $63.3 million at June 30, 2004 and $27.9 million at June 30, 2003. Goodwill increased due to the Caledonia acquisition. See Note G for further information about the Caledonia acquisition. Other The Corporation and its subsidiary banks are subject to certain legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the consolidated income or financial position of the Corporation. NOTE B: LOANS AND NONPERFORMING ASSETS The following summarizes loans and nonperforming assets at the dates indicated (in thousands of dollars): June 30, December 31, June 30, Loans: Commercial $ 466,666 $ 405,929 $ 329,929 Real estate construction 132,956 138,280 106,747 Real estate commercial 655,053 628,815 527,400 Real estate residential 781,062 767,199 753,014 Consumer 553,237 541,052 519,727 Total Loans $2,588,974 $2,481,275 $2,236,817 Nonperforming Assets: Nonaccrual loans $ 5,413 $ 6,691 $ 5,139 Loans 90 days or more past due and still accruing interest 5,488 4,656 5,066 Total Nonperforming Loans 10,901 11,347 10,205 Repossessed assets acquired (1) 7,344 6,002 5,659 Total Nonperforming Assets $ 18,245 $ 17,349 $ 15,864 (1) Includes property acquired through foreclosure and by acceptance of a deed in lieu of foreclosure, and other property held for sale. CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTE C: ALLOWANCE FOR LOAN LOSSES The following summarizes the changes in the allowance for loan losses (in thousands of dollars): Six Months Ended 2004 2003 Allowance for Loan Losses Balance as of January 1 $33,179 $30,672 Provision for loan losses 1,407 1,567 Gross loans charged off (1,502 ) (2,139 ) Gross recoveries of loans previously charged off 468 382 Net loans charged off (1,034 ) (1,757 ) Balance as of end of period $33,552 $30,482 The Corporation considers all nonaccrual commercial and commercial real estate loans to be impaired loans. Impaired loans as of June 30, 2004 and 2003 were $4.3 million and $3.8 million, respectively. The allowance for impaired loans was $1.2 million and $.8 million as of June 30, 2004 and 2003, respectively. NOTE D: ACQUIRED INTANGIBLE ASSETS The following table sets forth the carrying amount, accumulated amortization and amortization expense of acquired intangible assets (in thousands): June 30, 2004 December 31, 2003 June 30, 2003 Carrying Accumulated Carrying Accumulated Carrying Accumulated Core deposit intangibles $8,487 $10,782 $9,496 $9,773 $8,992 $8,849 Other 651 214 793 72 138 37 CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTE D: ACQUIRED INTANGIBLE ASSETS (continued) Amortization expense for the: Quarter ended June 30, 2004 $ 585 Six months ended June 30, 2004 1,151 Quarter ended June 30, 2003 462 Six months ended June 30, 2003 924 Year ended December 31, 2003 1,883 Estimated amortization expense for the years ending December 31: 2004 $2,272 2005 2,136 2006 1,920 2007 1,651 2008 and thereafter 2,310 NOTE E: STOCK OPTIONS The Corporation periodically grants stock options for a fixed number of shares with an exercise price equal to the market value of the shares on the date of grant. In accordance with Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," the Corporation accounts for stock option grants under the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). Under APB 25, because the exercise prices of the Corporation's stock options equal the market prices of the underlying stock at the dates of grant, no compensation expense is recognized at the date of grant. If the Corporation had elected to recognize compensation cost for options granted in the three and six months ended June 30, 2004 and 2003, based on the fair value of the options granted at the grant dates, net income and earnings per share would have been reduced to the pro forma amounts indicated below (in thousands, except per share amounts): CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTE E: STOCK OPTIONS (continued) Three Months Ended Six Months Ended 2004 2003 2004 2003 Net income - as reported $13,866 $13,670 $27,985 $27,684 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (131 ) (63 ) (263 ) (127 ) Net income - pro forma $13,735 $13,607 $27,722 $27,557 Basic earnings per share - as reported $ .58 $ .58 $ 1.17 $ 1.17 Basic earnings per share - pro forma .57 .57 1.16 1.16 Diluted earnings per share - as reported .58 .58 1.17 1.17 Diluted earnings per share - pro forma .57 .57 1.16 1.16 NOTE F: FINANCIAL GUARANTEES In the normal course of business, the Corporation is a party to financial instruments containing credit risk that are not required to be reflected in the consolidated statement of financial position. For the Corporation, these financial instruments are financial and performance standby letters of credit. The Corporation has risk management policies to identify, monitor and limit exposure to credit risk. To mitigate credit risk for these financial guarantees, the Corporation generally determines the need for specific covenant, guarantee and collateral requirements on a case-by-case basis, depending on the nature of the financial instrument and the customer's creditworthiness. At June 30, 2004, the Corporation had $20.3 million of outstanding financial and performance standby letters of credit. In 2003, the Financial Accounting Standards Board issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN No. 45"), which requires additional disclosures by a guarantor about its obligations under certain guarantees that it has issued. FIN No. 45 also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The instruments impacted for the Corporation are financial and performance standby letters of credit. The accounting pronouncements of FIN No. 45 became effective for the Corporation on January 1, 2003, on a prospective basis. The impact of adoption was not material to the Corporation's consolidated results of operations, financial position or cash flows. CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTE G: OTHER The Corporation acquired Caledonia Financial Corporation ("Caledonia"), a one-bank holding company headquartered in Caledonia, Michigan, on December 1, 2003. As of that date, Caledonia had total assets of $211 million, net loans of $184 million, total deposits of $171 million and shareholders' equity of $22.3 million. Shareholders of Caledonia received $39.00 cash for each share of Caledonia common stock in a taxable transaction. The total value of the transaction was approximately $56.8 million, of which $52.3 million was paid in cash and $4.5 million represented the value of stock options yet to be paid as of the transaction date. The purchase price represented a premium over book value of $34.5 million. The Corporation operated Caledonia's bank subsidiary, State Bank of Caledonia, with branch offices in Caledonia, Dutton, Middleville and Kalamazoo, as a separate subsidiary until June 2004. In June, the Corporation restructured the State Bank of Caledonia into two of its other three bank subsidiaries. The branches in Caledonia, Middleville and Dutton became a part of Chemical Bank West, headquartered in the Grand Rapids area, and the Kalamazoo branch became a part of Chemical Bank Shoreline, headquartered in Benton Harbor. On September 30, 2003, the Corporation consolidated CFC Data Corp, its wholly-owned data processing subsidiary, into the parent. The data processing operations are primarily performed for the Corporation's bank subsidiaries. NOTE H: EMPLOYEE BENEFIT PLANS The components of net periodic benefit cost for the Corporation's qualified pension plan and non-qualified postretirement benefit plan are as follows: (in thousands) Defined Benefit Postretirement Six Months Ended June 30, 2004 2003 2004 2003 Service cost $ 2,172 $ 1,822 $ 15 $ 11 Interest cost 2,068 1,920 158 130 Expected return on plan assets (2,712 ) (2,486 ) - - Amortization of transition amount - (6 ) - - Amortization of prior service cost (18 ) (20 ) (162 ) (162 ) Amortization of unrecognized net (gain) loss 188 (2 ) 162 84 Net periodic benefit cost $ 1,698 $ 1,228 $ 173 $ 63 CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES NOTE H: EMPLOYEE BENEFIT PLANS (continued) For further information on the Corporation's employee benefit plans, refer to Note H to the consolidated financial statements incorporated in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2003. NOTE I: PENDING ACCOUNTING PRONOUNCEMENTS In January 2004, the Financial Accounting Standards Board ("FASB") issued a FASB Staff Position ("FSP"), "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003," subsequently revised April 12, 2004. The FSP permits a sponsor of a postretirement health care plan that provides a prescription drug benefit to make a one-time election to defer accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") and requires certain disclosures pending further consideration of the underlying accounting issues. The Act introduces a Medicare prescription drug benefit as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the Medicare benefit. The Corporation is in the process of analyzing the impact the Act will have on its employee benefit plans. The FSP is effective for financial statements for interim or ann
ual periods ending after December 7, 2003. In accordance with the FSP, the Corporation elected to defer accounting for the effects of the Act. On May 12, 2004, the FASB issued FSP 106-2, which provides authoritative guidance in the accounting for the federal subsidy resulting from the Act. The Corporation's measures of the net periodic postretirement benefit cost do not reflect any amount associated with the federal subsidy because the Corporation, as of June 30, 2004, had not concluded whether the benefits provided by the plan are actuarially equivalent to Medicare Part D under the Act. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors that have affected the Corporation's financial condition and results of operations during the periods included in the consolidated financial statements included in this filing. SUMMARY The Corporation's net income was $13.9 million in the second quarter of 2004, up 1.4% over net income of $13.7 million in the second quarter of 2003. Earnings per share was $.58 in the second quarter of both 2004 and 2003. Return on average assets in the second quarter of 2004 was 1.44%, compared to 1.54% in the second quarter of 2003. Return on average equity in the second quarter of 2004 was 11.9%, compared to 12.4% in the second quarter of 2003. Total assets were $3.84 billion as of June 30, 2004, up $133 million, or 3.6%, from total assets of $3.71 billion as of December 31, 2003, and up $254 million, or 7.1%, from total assets of $3.59 billion as of June 30, 2003. Total loans increased $107.7 million, or 4.3%, from December 31, 2003, and $352.2 million, or 15.7% from June 30, 2003 to $2.59 billion as of June 30, 2004. The increase in total loans was primarily due to growth in commercial and commercial real estate loans. The growth in commercial and commercial real estate loans was due to increased emphasis by the Corporation on growing these loans in the Corporation's community bank market areas as well as the Caledonia acquisition on December 1, 2003, which added $184 million in loans. Shareholders' equity increased $10.3 million, or 2.3%, from December 31, 2003 and $25.2 million, or 5.7%, from June 30, 2003 to $468.4 million as of June 30, 2004, or $19.56 per share, representing 12.2% of total assets. The increases were primarily attributable to retained net income, partially offset by a reduction in the net unrealized gain on investment securities classified as available for sale. RESULTS OF OPERATIONS Net Interest Income The Corporation's net interest income in the second quarter of 2004 was $36.4 million, a $1.4 million, or 3.9%, increase from the $35 million recorded in the second quarter of 2003. The increase was attributable to the acquisition of Caledonia in December 2003. Net interest income was positively impacted by the growth in the loan portfolio, excluding Caledonia, of $168 million during the twelve months ended June 30, 2004. The increase in net interest income attributable to loan growth was partially offset by a lower net interest margin. Net interest margin decreased to 4.07% in the second quarter of 2004 from 4.22% in the second quarter of 2003. The Corporation's net interest income in the first six months of 2004 was $73.2 million, a $3.1 million, or 4.4%, increase from the $70.2 million recorded in the first six months of 2003. The increase was attributable to the acquisition of Caledonia in December 2003. Net interest income was positively impacted by the growth in the loan portfolio of $108 million during the six months ended June 30, 2004. The increase in net interest income attributable to loan growth was partially offset by a lower net interest margin. Net interest margin decreased to 4.09% in the first six months of 2004 from 4.24% in the first six months of 2003. Provision for Loan Losses The provision for loan losses ("provision") is the amount added to the allowance for loan losses ("allowance") to absorb loan losses in the loan portfolio. The allowance provides for probable losses that have been identified with specific customer relationships and for probable losses believed to be inherent in the remainder of the loan portfolio but that have not been specifically identified. The allowance is comprised of specific allowances (assessed for loans that have known credit weaknesses), general allowances based on an assigned risk rating and an unallocated allowance for imprecision in the subjective nature of the specific and general allowance methodology. Management continuously evaluates the allowance to ensure the level is adequate to absorb losses inherent in the loan portfolio. This evaluation is based on a continuous review of the loan portfolio, both individually and by category, and includes consideration of changes in the mix and volume of the loan portfolio, actual loan loss experienc
e, the financial condition of the borrowers, industry and geographical exposures within the portfolio, economic conditions and employment levels of the Corporation's local markets, and other factors affecting business sectors. A formal evaluation of the allowance is prepared quarterly to assess the risk in the loan portfolio and to determine the adequacy of the allowance. The Corporation's loan review personnel, who are independent of the loan origination function, review this evaluation. The provision for loan losses was $.66 million in the second quarter of 2004 and $1.41 million in the first six months of 2004, compared to $1.27 million in the second quarter of 2003 and $1.57 million in the first six months of 2003. Net loan losses were $.60 million in the second quarter of 2004 and $1.03 million in the first six months of 2004, compared to $1.48 million in the second quarter of 2003 and $1.76 million in the first six months of 2003. Noninterest Income Noninterest income decreased $.08 million, or .8%, in the second quarter of 2004, compared to the second quarter of 2003. The decrease was primarily due to lower mortgage banking revenue of $.8 million. Mortgage banking sales volume was lower by $66 million during the second quarter of 2004 compared to the second quarter of 2003. The decrease in loans sold was primarily due to significantly lower loan refinance activity. The lower mortgage banking revenue was partially offset by higher service charges on deposit accounts of $.5 million. The increase in service charge income was primarily attributable to higher levels of customer activity in areas where fees and service charges are applicable. Excluding the impact of Caledonia, noninterest income decreased $.27 million, or 2.7%, in the second quarter of 2004, compared to the second quarter of 2003. Noninterest income increased $.57 million, or 2.9%, in the first six months of 2004, compared to the first six months of 2003. The increase was due to an increase in investment securities gains of $.8 million. The increase in gains on investment securities was primarily due to the sale of the majority of the Corporation's equity securities portfolio. Service charge income also increased $1.2 million during the first six months of 2004, compared to the first six months of 2003. These increases were partially offset by a decrease in mortgage banking revenue of $1.5 million. Mortgage banking sales volume was lower by $123 million during the first six months of 2004, compared to the first six months of 2003. The decrease in loans sold was primarily due to a decrease in loan refinance activity. Excluding the impact of Caledonia, noninterest income increased $.18 million, or .9%, in the first six months of 2004, compared to the first six months of 2003. Operating Expenses Total operating expenses increased $1.7 million, or 7.5%, in the second quarter of 2004, compared to the second quarter of 2003. The increase in operating expenses attributable to the acquisition of Caledonia was approximately $1.2 million during the quarter ended June 30, 2004. Excluding the impact of Caledonia, operating expenses increased 2.6%, due primarily to higher employee benefit costs and occupancy expenses. Total operating expenses increased $3.9 million, or 8.4%, in the first six months of 2004, compared to the first six months of 2003. The increase in operating expenses attributable to the acquisition of Caledonia was approximately $2.3 million during the first six months of 2004. Excluding the impact of Caledonia, operating expenses increased 3.3%, due primarily to higher employee benefit costs, occupancy and equipment expenses. Income Tax Expense The Corporation's effective federal income tax rate was 33.4% in the second quarter of 2004 and 32.9% in the first six months of 2004, compared to 33.8% in the second quarter of 2003 and 33.7% in the first six months of 2003. The Corporation utilized a $.53 million capital loss carryover deduction during the first quarter of 2004, applicable to the $.61 million gain recognized on the sale of equity securities, which reduced federal income tax expense. The difference between the federal statutory income tax rate and the Corporation's effective federal income tax rate primarily is a function of the proportion of the Corporation's interest income exempt from federal taxation, nondeductible interest expense, other nondeductible expenses and tax credits. BALANCE SHEET CHANGES Total Assets Total assets were $3.84 billion as of June 30, 2004, up $133 million, or 3.6%, from total assets of $3.71 billion as of December 31, 2003, and up $254 million, or 7.1%, from total assets of $3.59 billion as of June 30, 2003. The increase in total assets from December 31, 2003 was primarily due to the Corporation borrowing $150 million in FHLB advances, which were invested in five and seven-year balloon mortgage-backed securities. The increase in total assets from June 30, 2003 was primarily due to the previously mentioned FHLB advances and to the acquisition of Caledonia on December 1, 2003, which added $211 million in total assets. The factors that increased total assets during the twelve months ended June 30, 2004 were partially offset by a decrease in total deposits, excluding the impact of Caledonia, of $89 million, or 3.1%. The decrease in total deposits from June 30, 2003 was primarily due to lower certificates of deposits of $127 million, partially offset by increases in money market deposits
of $29 million. Loans The Corporation's philosophy is such that it will not compromise on loan quality and generally does not make loans outside its banking markets to increase its loan portfolio. In addition, the Corporation generally does not participate in syndicated loans, which is a method utilized by many financial institutions to increase the size of their loan portfolios. The Corporation's loan portfolio is generally diversified geographically, as well as along industry lines and, therefore, the Corporation believes that its loan portfolio is reasonably sheltered from material adverse local economic impact. Total loans as of June 30, 2004 were $2.59 billion, compared to $2.48 billion as of December 31, 2003 and $2.24 billion as of June 30, 2003. Residential real estate loans increased $13.9 million, or 1.8%, from December 31, 2003 and $28.0 million, or 3.7%, from June 30, 2003 to $781.1 million as of June 30, 2004. Residential real estate loans represented 30.2%, 30.9% and 33.7 % of the Corporation's loan portfolio as of June 30, 2004, December 31, 2003 and June 30, 2003, respectively. The Corporation's residential real estate loans primarily consist of one- to four-family residential loans with original terms of fifteen years or less. The loan-to-value ratio at time of origination is generally 80% or less. Loans with more than an 80% loan-to-value ratio generally require private mortgage insurance. Real estate construction loans decreased $5.3 million, or 3.9%, from December 31, 2003 and increased $26.2 million, or 24.6%, from June 30, 2003 to $133.0 million as of June 30, 2004. The increase from June 30, 2003 was primarily due to the Caledonia acquisition. Real estate construction loans represented 5.1%, 5.6% and 4.8% of the Corporation's loan portfolio as of June 30, 2004, December 31, 2003 and June 30, 2003, respectively. Construction lending is generally considered to involve a higher degree of risk than one- to four-family residential lending because of the uncertainties of construction, including the possibility of costs exceeding the initial estimates and the need to obtain a tenant or purchaser of the property if it will not be owner-occupied. The Corporation generally attempts to mitigate the risks associated with construction lending by, among other things, lending primarily in its market area, using conservative underwriting guidelines, and closely monitoring the construction process. Commercial loans increased $60.7 million, or 15.0%, from December 31, 2003, and $136.7 million, or 41.4%, from June 30, 2003 to $466.7 million as of June 30, 2004. The increase in commercial loans from December 31, 2003 was due to increases emphasis on this type of lending. The increase in commercial loans from June 30, 2003 was primarily due to the Caledonia acquisition and the previously mentioned increased emphasis. Commercial loans represented 18.0%, 16.4% and 14.7% of the Corporation's loan portfolio as of June 30, 2004, December 31, 2003 and June 30, 2003, respectively. Commercial real estate loans increased $26.2 million, or 4.2%, from December 31, 2003 and $127.7 million, or 24.2%, from June 30, 2003 to $655.1 million as of June 30, 2004. The increase in commercial loans from June 30, 2003 was primarily due to the Caledonia acquisition and due to increased emphasis on growing these loans in the Corporation's community bank market areas. Commercial real estate loans represented 25.3%, 25.3% and 23.6% of the Corporation's loan portfolio as of June 30, 2004, December 31, 2003 and June 30, 2003, respectively. Commercial lending and commercial real estate lending are generally considered to involve a higher degree of risk than one- to four-family residential lending. Such lending typically involves large loan balances concentrated in a single borrower for rental or business properties or for the operation of a business. In addition, the payment experience on loans secured by income-producing properties is typically dependent on the success of the operation of the related project and thus is typically affected by adverse conditions in the real estate market and in the economy. The Corporation generally attempts to mitigate the risks associated with commercial lending by, among other things, lending primarily in its market area and using conservative loan-to-value ratios in the underwriting process. Consumer loans increased $12.2 million, or 2.3%, from December 31, 2003, and increased $33.5 million, or 6.4%, from June 30, 2003 to $553.2 million as of June 30, 2004. Consumer loans represented 21.4%, 21.8% and 23.2% of total loans as of June 30, 2004, December 31, 2003 and June 30, 2003, respectively. Consumer loans generally have shorter terms than mortgage loans but generally involve more credit risk than one- to four-family residential lending because of the type and nature of the collateral. Collateral values, particularly those of automobiles, are negatively impacted by many factors, such as new car promotions, vehicle condition and a slow economy. Consumer lending collections are dependent on the borrower's continuing financial stability, and thus are more likely to be negatively affected by adverse personal situations. Nonperforming loans consist of loans which are past due for principal or interest payments by 90 days or more and are still accruing interest, loans for which the accrual of interest has been discontinued, and other loans which have been restructured to less than market terms due to a serious weakening of the borrower's financial condition. Nonperforming loans were $10.9 million as of June 30, 2004, $11.3 million as of December 31, 2003 and $10.2 million as of June 30, 2003, and represented .42%, .46% and .46% of total loans, respectively. The slight decrease in nonperforming loans since December 31, 2003 was primarily due to loans being transferred to the other real estate category. A loan is considered impaired when management determines it is probable that all of the principal and interest due under the contractual terms of the loan will not be collected. In most instances, the impairment is measured based on the fair market value of the underlying collateral. Impairment may also be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate. A portion of the allowance for loan losses may be allocated to impaired loans. The Corporation has taken the position that all nonaccrual commercial and commercial real estate loans are considered impaired loans. Impaired loans totaled $4.3 million as of June 30, 2004, $5.5 million as of December 31, 2003 and $3.8 million as of June 30, 2003. After analyzing the various components of the customer relationships and evaluating the underlying collateral of impaired loans, the allowance for loan losses allocated to impaired loans was as follows: $1.2 million as of June 30, 2004, $2.4 million as of December 31, 2003 and $.8 million as of June 30, 2003. The process of measuring impaired loans and the allocation of the allowance for loan losses requires judgment and estimation. The eventual outcome may differ from the estimates used on these loans. The allowance for loan losses was $33.6 million at June 30, 2004 and represented 1.30% of total loans, compared to $33.2 million, or 1.34% of total loans at December 31, 2003 and $30.5 million, or 1.36% of total loans at June 30, 2003. LIQUIDITY The maintenance of an adequate level of liquidity is necessary to ensure that sufficient funds are available to meet customers' loan demands and deposit withdrawals and to capitalize on opportunities for business expansion. The banking subsidiaries' primary liquidity sources consist of investment securities, those maturing within one year and those classified as available for sale, loan payments, FHLB advances and federal funds sold. The Corporation's total loan to deposit ratio as of June 30, 2004, December 31, 2003 and June 30, 2003 was 87.5%, 83.6% and 77.7%, respectively. The Corporation has contractual obligations that require future cash payments. The most significant of these is FHLB borrowings. The following table shows scheduled principal reductions on FHLB advances (in thousands): July 1, 2004 - December 31, 2004 $ 10,000 2005 122,390 2006 69,687 2007 10,000 2008 30,000 Thereafter 43,114 Total $ 285,191 The Corporation increased its FHLB borrowings in January 2004 by $150 million. These borrowings primarily mature in 2005 and 2006. The Corporation's intention is to use existing investment securities maturing during 2005 and 2006 to fund the FHLB principal payments. The FHLB borrowings are collateralized by a blanket lien on qualified one-to four-family residential mortgage loans. The carrying value of these mortgage loans was $709 million, which represented a total borrowing capacity based on existing collateral of $489 million as of June 30, 2004. Therefore, the Corporation's additional borrowing availability through the FHLB at June 30, 2004 under the blanket lien agreement was $204 million. The Corporation has the option to pledge additional qualified loans and investment securities to create additional borrowing availability with the FHLB. The Corporation has various commitments that may impact liquidity. The following table summarizes the Corporation's commitments and expected expiration dates by period at June 30, 2004. Since many of these commitments historically have expired without being drawn upon, the total amount of these commitments does not necessarily represent future cash requirements of the Corporation. Commitments (in thousands) Expected Expiration Dates by Period Unused commitments to extend credit $355,471 $245,734 $17,292 $67,157 $25,288 Undisbursed loans 95,805 95,805 - - - Standby letters of credit and financial guarantees 20,278 11,496 4,995 2,610 1,177 Total commitments $471,554 $353,035 $22,287 $69,767 $26,465 CAPITAL RESOURCES As of June 30, 2004, shareholders' equity was $468.4 million, compared to $458.0 million as of December 31, 2003 and $443.1 million as of June 30, 2003, resulting in an increase of $10.3 million, or 2.3%, from December 31, 2003 and $25.2 million, or 5.7%, from June 30, 2003. Shareholders' equity as a percentage of total assets was 12.2% as of June 30, 2004, 12.4% as of December 31, 2003 and 12.4% as of June 30, 2003. A statement of changes in shareholders' equity covering the six-month periods ended June 30, 2004 and June 30, 2003 follows (in thousands): Six Months Ended 2004 2003 Total shareholders' equity as of January 1 $458,049 $430,339 Comprehensive income: Net income 27,985 27,684 Change in unrealized net gains on securities available for sale, net of tax (9,842 ) (2,081 ) Total comprehensive income 18,143 25,603 Cash dividends paid (12,677 ) (11,847 ) Shares issued from stock option and other plans 4,844 556 Repurchase of shares - (1,511 ) Total shareholders' equity as of end of period $468,359 $443,140 The following table represents the Corporation's regulatory capital ratios as of June 30, 2004: Tier 1 Total Chemical Financial Corporation-actual ratio 10.4 % 15.6 % 16.9 % Regulatory minimum ratio 3.0 4.0 8.0 Ratio considered "well capitalized" by The Corporation's Tier 1 and Total capital ratios under the risk-based capital measure at June 30, 2004 exceed the regulatory agencies ratios to be considered "well capitalized" partially due to the Corporation holding $243 million in investment securities and other assets which are assigned a 0% risk rating; $801 million in assets, primarily investment securities, which are assigned a 20% risk rating; and $911 million in residential real estate mortgages and other assets which are assigned a 50% risk rating. These three risk ratings (0%, 20% and 50%) represented 49.9% of the Corporation's total risk-based assets (including off-balance sheet items) as of June 30, 2004. The following table shows stock repurchase activity by the Corporation during the periods indicated:   Three Months Ended June 30 2004 2003 Number of shares repurchased 1,480 38,826 Average price of shares repurchased $35.82 $29.96 The shares included in the table above include 1,480 shares in 2004 and 4,826 shares in 2003 that were repurchased by the Corporation from officers and employees in payment of the exercise price and/or required tax withholding upon the exercise of stock options. The Corporation's latest stock repurchase program allows for the repurchase of up to 441,000 shares, of which 361,779 shares were available for future repurchase at June 30, 2004. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information concerning quantitative and qualitative disclosures about market risk contained in the discussion regarding interest rate risk and sensitivity under the caption "Liquidity Risk" and "Interest Rate Risk" on pages 17 through 21 of the Corporation's Annual Report to Shareholders for the year ended December 31, 2003 is here incorporated by reference. Such Annual Report was previously filed as Exhibit 13 to the Corporation's Annual Report on Form 10-K for the year ended December 31, 2003. The Corporation does not believe that there has been a material change in the nature or categories of the Corporation's primary market risk exposure, or the particular markets that present the primary risk of loss to the Corporation. As of the date of this report, the Corporation does not know of or expect there to be any material change in the general nature of its primary market risk exposure in the near term. The methods by which the Corporation manages its primary market risk exposure, as described in the sections of its Annual Report to Shareholders incorporated by reference in response to this item, have not changed materially during the current year. As of the date of this report, the Corporation does not expect to make material changes in those methods in the near term. The Corporation may change those methods in the future to adapt to changes in circumstances or to implement new techniques. The Corporation's market risk exposure is mainly comprised of its vulnerability to interest rate risk. Prevailing interest rates and interest rate relationships are primarily determined by market factors that are beyond the Corporation's control. All information provided in response to this item consists of forward-looking statements. Reference is made to the section captioned "Forward-Looking Statements" in this report for a discussion of the limitations on the Corporation's responsibility for such statements. In this discussion, "near term" means a period of one year following the date of the most recent consolidated statement of financial position contained in this report. ITEM 4. CONTROLS AND PROCEDURES An evaluation was performed under the supervision and with the participation of the Corporation's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures. Based on and as of the time of that evaluation, the Corporation's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Corporation's disclosure controls and procedures were effective as of the end of the period covered by this report. There was no change in the Corporation's internal control over financial reporting that occurred during the three months ended June 30, 2004 that has materially affected, or that is reasonably likely to materially affect, the Corporation's internal control over financial reporting. PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES The following tables provide the purchases of equity securities by the Corporation during the periods indicated: Maximum Number (or April 1-30, 2004 117 $35.99 - 361,779 May 1-31, 2004 - - - 361,779 June 1-30, 2004 1,363 35.81 - 361,779 Total 1,480 $35.82 - 361,779 * All shares purchased during the three months ended June 30, 2004 were in connection with stock option exercises. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Washington, D.C. 20549
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004, OR
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
(Exact Name of Registrant as Specified in its Charter)
(State or Other Jurisdiction
of Incorporation or Organization)
(I.R.S. Employer
Identification No.)
Midland, Michigan
(Address of Principal Executive Offices)
48640
(Zip Code)
(Registrant's Telephone Number, Including Area Code)
CHEMICAL FINANCIAL CORPORATION
FORM 10-Q
Statement of Financial Position as of December 31, 2003)
4
June 30, 2004 and June 30, 2003
4
December 31, 2003 and June 30, 2003
5
June 30, 2004 and June 30, 2003
6
Results of Operations
16-23
of Equity Securities
25
Consolidated Statements of Income (Unaudited)
June 30
June 30
Consolidated Statements of Financial Position (In thousands)
2004
2003
2003
6/30/04, $197,983 at 12/31/03 and $263,710 at 6/30/03)
156,362
193,363
256,316
23,801 shares at 12/31/03 and 23,665 shares at 6/30/03
23,944
23,801
23,665
Consolidated Statements of Cash Flows (Unaudited)
June 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2004
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2004
June 30
June 30
June 30
June 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2004
2004
2003
2003
at 6/30/04, $5,777 at 12/31/03, $8,994 at
6/30/03)
$ 886
$ 10,728
$ 16,704
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2004
2004
2003
2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2004
June 30
Amount
Amortization
Amount
Amortization
Amount
Amortization
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2004
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2004
June 30
June 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2004
Pension Plan
Benefit Plan
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2004
Total
Less than
1 year
1 - 3
years
3 - 5
years
More than
5 years
June 30
Leverage
Risk-Based
Capital
Risk-Based
Capital
regulatory agencies
5.0
6.0
10.0
Period
Total
Number of
Shares
(or Units)
Purchased*
Average
Price Paid
per Share
(or Unit)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs
The Corporation's annual meeting of shareholders was held April 19, 2004. At that meeting, the only matter voted on by the shareholders was the election of directors. All directors of the Corporation were standing for election at the meeting. The directors were elected by the following votes:
Election of Directors |
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Votes Cast |
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All nominees for director were elected: |
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For |
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Withheld |
|
J. Daniel Bernson |
|
19,622,845 |
|
165,421 |
|
Nancy Bowman |
|
19,634,105 |
|
154,161 |
|
James A. Currie |
|
19,613,184 |
|
175,082 |
|
Michael L. Dow |
|
19,582,266 |
|
206,001 |
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Thomas T. Huff |
|
19,464,554 |
|
323,713 |
|
Terence F. Moore |
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19,573,962 |
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214,305 |
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Aloysius J. Oliver |
|
19,566,800 |
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221,466 |
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Frank P. Popoff |
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19,603,299 |
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184,967 |
|
David B. Ramaker |
|
19,630,195 |
|
158,072 |
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Dan L. Smith |
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18,261,962 |
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1,526,304 |
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William S. Stavropoulos |
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19,488,674 |
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299,593 |
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There were no broker non-votes.
ITEM 6. |
EXHIBITS AND REPORTS ON FORM 8-K |
(a) |
Exhibits. The following exhibits are filed as part of this report on Form 10-Q: |
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Exhibit |
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3.1 |
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Restated Articles of Incorporation. Previously filed as Exhibit 4.1 to the Corporation's Registration Statement on Form S-8 filed with the Commission on June 2, 2001. Here incorporated by reference. |
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3.2 |
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Bylaws. Previously filed as Exhibit 3.2 to the Corporation's Annual Report on Form 10-K for the year ended December 31, 2001. Here incorporated by reference. |
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31.1 |
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Certification. Certification of President and Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
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Certification. Certification of Executive Vice President, Chief Financial Officer and Treasurer under Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
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Certification pursuant to 18 U.S.C. § 1350. |
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(b) |
Reports on Form 8-K. During the three-month period ended June 30, 2004, the following reports were filed on Form 8-K: |
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April 14, 2004 |
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9 |
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None |
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April 19, 2004 |
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7(c), 12 |
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None |
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April 23, 2004 |
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7(c), 9 |
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None |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
CHEMICAL FINANCIAL CORPORATION |
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Date: July 26, 2004 |
By: /s/ David B. Ramaker |
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David B. Ramaker |
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Date: July 26, 2004 |
By: /s/ Lori A. Gwizdala |
|
Lori A. Gwizdala |
EXHIBIT INDEX
Exhibit |
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3.1 |
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Restated Articles of Incorporation. Previously filed as Exhibit 4.1 to the Corporation's Registration Statement on Form S-8 filed with the Commission on June 2, 2001. Here incorporated by reference. |
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3.2 |
|
Bylaws. Previously filed as Exhibit 3.2 to the Corporation's Annual Report on Form 10-K for the year ended December 31, 2001. Here incorporated by reference. |
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31.1 |
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Certification. Certification of President and Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
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Certification. Certification of Executive Vice President, Chief Financial Officer and Treasurer under Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
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Certification pursuant to 18 U.S.C. § 1350. |
EXHIBIT 31.1
CERTIFICATIONS
I, David B. Ramaker, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Chemical Financial Corporation; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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c) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: July 26, 2004
/s/ David B. Ramaker |
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David B. Ramaker |
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EXHIBIT 31.2
CERTIFICATIONS
I, Lori A. Gwizdala, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Chemical Financial Corporation; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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c) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: July 26, 2004
/s/ Lori A. Gwizdala |
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Lori A. Gwizdala |
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EXHIBIT 32.1
CERTIFICATION
Pursuant to 18 U.S.C. § 1350, each of the undersigned hereby certifies in his or her capacity as an officer of Chemical Financial Corporation (the "Company") that the Quarterly Report of the Company on Form 10-Q for the quarter ended June 30, 2004 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such period and the results of operations of the Company for such period.
Dated: July 26, 2004 |
/s/ David B. Ramaker |
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David B. Ramaker |
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Dated: July 26, 2004 |
/s/ Lori A. Gwizdala |
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Lori A. Gwizdala |