Chemical Bank Earnings Beat the Street, Bank Hikes Quarterly Dividend

Chemical Financial's second quarter earnings beat Wall Street expectations by a penny per share and the bank has increased its upcoming third quarter dividend payment by more than 21-percent as well.

The bank holding company for Chemical Bank, which has multiple branch locations across Michigan's Great Southwest, announced this week that their 2018 second quarter net income of $69-million translates to $0.96 per diluted share, as compared to $52-million and $0.73 per diluted share in the same quarter a year ago. In the wake of those gains, the Board of Directors at Chemical has declared a third quarter dividend of 34-cents per share, payable on September 21, 2018 to shareholders of record on September 7th. That dividend rises 6-cents per share, or 21.4-percent, from the second quarter dividend of 28-cents per share.

Those results surpassed Wall Street expectations where one report of an average of five analysts indicated expectations of 95-cents per share, so they beat the street by a penny.

David Provost, who serves as CEO at Chemical and Thomas Shafer, who serves as Vice Chair and Chemical Financial as well as CEO at Chemical Bank jointly said, "Our results for the quarter reflect our continued strong growth which included 10-percent annualized loan growth and an increase in net interest income of $5.7 million compared to the prior quarter." The two execs added, "We are pleased with the improvement in our net interest margin and our ability to maintain our efficiency ratio in a period in which we were working diligently on completing substantial upgrades to our core operating systems." They went on to say, "This past weekend we crossed a significant milestone with the successful completion of these upgrades. With the system transformation complete, we believe we are well positioned to continue our strong revenue growth through the optimal best-in-class service experience we are creating for our customers."

ADVERTISEMENT
Your content continues below

The bank, which also announced this week relocation of their corporate headquarters from Midland to downtown Detroit and a forthcoming 20-story headquarters building at the center of downtown Detroit, reports their return on average assets was 1.39-percent during the second quarter of 2018, compared to 1.14% in the same quarter a year ago. Their return on average tangible shareholders' equity was 17.8-percent in the second quarter of 2018, compared to 14.3-percent a year ago.

Chemical's net interest income was $157.5 million in the second quarter of 2018, which is $5.7 million, or 3.7-percent, higher than the first quarter of 2018 and $19.6 million, or 14.2-percent, higher than the second quarter of 2017. The increase in our net interest income in the second quarter of 2018, compared to both the first quarter of 2018 and the second quarter of 2017, was primarily attributable to increases in average balances and yields earned on loans and investment securities, partially offset by an increase in the cost of funds. For the second quarter of 2018, the bank experienced loan growth of $360.9 million, compared to the first quarter of 2018 and $912.3 million compared to June 30, 2017. Approximately 40-percent of that loan growth in the second quarter of 2018 was within the bank's commercial loan portfolio. Meanwhile, investment securities portfolios grew by $158.6 million, compared to the first quarter of 2018, and $719.5 million, compared to June 30, 2017.

On the operating expense side of the card, expenses were $104.6 million in the second quarter of 2018, compared to $98.2 million in the second quarter of 2017. There were no merger and restructuring expenses during the first or second quarters of 2018 and $0.5 million in the second quarter of 2017.

Chemical's total assets were $20.28 billion at June 30, 2018, compared to $19.76 billion at March 31, 2018 and $18.78 billion at June 30, 2017. The increase in total assets during both the second quarter of 2018 and the twelve months ended June 30, 2018 was primarily attributable to net loan growth and additions to their investment securities portfolio.

Total deposits were $14.55 billion at June 30, 2018, compared to $13.97 billion at March 31, 2018 and $13.20 billion at June 30, 2017. The increase in deposits during the three months ended June 30, 2018 was due to increases in brokered deposits of $436.1 million and customer deposits of $147.6 million.