Profile: Chemical Financial Corporation (CHFC.O)

Chemical Financial Corporation is a financial holding company with its business concentrated in the commercial banking. The Company, through its subsidiary bank, offers a range of commercial banking services. These banking services include business and personal checking accounts, savings and individual retirement accounts, time deposit instruments, electronically accessed banking products, residential and commercial real estate financing, commercial lending, consumer financing, debit cards, safe deposit box services, money transfer services, automated teller machines, and access to insurance products and investment management services. During the year ended December 31, 2008, the Company operated through one subsidiary bank, Chemical Bank, serving 90 communities through 129 banking offices and three loan production offices located in 31 counties across Michigan’s. In addition to its banking offices, the Company operated 141 automated teller machines, both on- and off-bank premises.

Lending Activities

In 2008, the Bank’s loan portfolio was $2.98 billion and consisted of loans to commercial borrowers (commercial, real estate commercial and real estate construction-commercial) totaling $1.46 billion, or 49% of total loans, loans to consumer borrowers for the purpose of acquiring residential real estate (real estate construction-residential and real estate residential) totaling $869 million, or 29% of total loans, and loans to consumer borrowers secured by various types of collateral totaling $649 million, or 22% of total loans. Loans at fixed interest rates comprised 79% of the Corporation’s loan portfolio in 2008.

The total commercial loan portfolio of $1.46 billion in 2008 included 63 loan relationships of $2.5 million and greater. These 63 borrowing relationships totaled $320 million and represented 22% of the total commercial loan portfolio in 2008. Further, only four of these borrowing relationships were $10 million or higher, totaling $53.3 million, or 3.6%, of the commercial loan portfolio as of that date. The remaining commercial loan portfolio totaling $1.14 billion in 2008 consisted of approximately 5,900 relationships.

The commercial loans had a total of $587.5 million in 2008. Real estate loans include real estate commercial loans, real estate construction loans and real estate residential loans. The real estate loans totaled $1.74 billion in 2008. In 2008, the real estate loans were 58.5% of the total loans.

The real estate commercial loans were $786.4 million in 2008. In 2008, the real estate commercial loans were 26.4% of the total loans.

The real estate residential loans primarily consist of one- to four-family residential loans with original fixed interest rates of fifteen years or less. In 2008, the Bank had $52.2 million in real estate residential loans, or 6.2%, of the real estate residential loan portfolio that had private mortgage insurance. In 2008, the Bank was servicing $604 million of real estate residential loans. The consumer loans totaled $649.2 million in 2008. The consumer loans represented 21.8% of the total loans outstanding in 2008.

Investment Activities

The Bank’s investment securities portfolio had a carrying value of $547.5 million in 2008. In 2008, the investment securities portfolio included the United States Treasury and government sponsored agency securities that had no impairment, state and political subdivisions securities with gross impairment of $1.17 million, mortgage-backed securities and collateralized mortgage obligations, combined, with gross impairment of $0.59 million, corporate bonds with gross impairment of $2.40 million and trust preferred securities with gross impairment of $6.67 million. The state and political subdivisions held-to-maturity investment securities portfolio totaling $85.5 million was recorded at amortized cost. Of the total $85.5 million, investment securities totaling $34.1 million had gross impairment of $1.17 million in 2008. The mortgage-backed securities and collateralized mortgage obligations, combined in the available-for-sale investment securities portfolio, had an amortized cost of $204.7 million, with gross impairment of $0.59 million. In 2008, the Bank’s corporate bond portfolio had an amortized cost of $47.5 million, with gross impairment of $2.40 million.

Sources of Fund

The total deposits of the Bank were $2.98 billion in 2008. Average total deposits were $2.92 billion in 2008.