<PAGE>
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
- ---------------------------------------------------------------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999, OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File Number: 0-8185
CHEMICAL FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN 38-2022454
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
333 EAST MAIN STREET
MIDLAND, MICHIGAN 48640
(Address of Principal Executive Offices) (Zip Code)
(517) 839-5350
(Registrant's Telephone Number, Including Area Code)
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 _____
The number of shares outstanding of the Registrant's Common Stock, $1 par
value, as of April 30, 1999, was 13,478,973 shares.
===========================================================================
<PAGE>
INDEX
CHEMICAL FINANCIAL CORPORATION
FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements (unaudited,
except Consolidated Statement of Financial
Position as of December 31, 1998)
Consolidated Statement of Income for the Three
Months Ended March 31, 1999 and March 31, 1998 3
Consolidated Statement of Financial Position
as of March 31, 1999, December 31, 1998 and
March 31, 1998 4
Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 1999 and March 31,
1998 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-18
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income (Unaudited)
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
1999 1998
------- -------
(In thousands, except per
share amounts)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . . $18,206 $17,948
Interest on investment securities:
Taxable. . . . . . . . . . . . . . . . . . . . . 10,350 10,319
Tax-exempt. . . . . . . . . . . . . . . . . . . . 497 552
------- -------
TOTAL INTEREST ON SECURITIES . . . . . . . . . . . 10,847 10,871
Interest on federal funds sold. . . . . . . . . . . . . . 1,011 1,005
Interest on deposits with unaffiliated banks . . . . . . . . . 33
------- -------
TOTAL INTEREST INCOME. . . . . . . . . . . . . . 30,097 29,824
INTEREST EXPENSE
Interest on deposits . . . . . . . . . . . . . . . . . 11,259 11,827
Interest on short-term borrowings. . . . . . . . . . . . . 398 372
Interest on long-term debt . . . . . . . . . . . . . . . 115 149
------- -------
TOTAL INTEREST EXPENSE . . . . . . . . . . . . . 11,772 12,348
------- -------
NET INTEREST INCOME . . . . . . . . . . . . . . 18,325 17,476
Provision for loan losses . . . . . . . . . . . . . . . 175 219
------- -------
NET INTEREST INCOME after provision for
loan losses . . . . . . . . . . . . . . . . . . . 18,150 17,257
NONINTEREST INCOME
Trust department income . . . . . . . . . . . . . . . . 888 810
Service charges on deposit accounts . . . . . . . . . . . . 1,328 1,222
Other charges and fees for customer services . . . . . . . . . 1,225 1,184
Gains on sales of loans. . . . . . . . . . . . . . . . 245 184
Other. . . . . . . . . . . . . . . . . . . . . . . 347 121
------- -------
TOTAL NONINTEREST INCOME . . . . . . . . . . . . 4,033 3,521
3
<PAGE>
OPERATING EXPENSES
Salaries, wages and employee benefits . . . . . . . . . . . 7,466 7,320
Occupancy. . . . . . . . . . . . . . . . . . . . . 1,220 1,188
Equipment. . . . . . . . . . . . . . . . . . . . . 879 833
Other . . . . . . . . . . . . . . . . . . . . . . 2,963 2,873
------- -------
TOTAL OPERATING EXPENSES . . . . . . . . . . . . 12,528 12,214
------- -------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . 9,655 8,564
Federal income taxes . . . . . . . . . . . . . . . . . 3,184 2,785
------- -------
NET INCOME . . . . . . . . . . . . . . . . . $ 6,471 $ 5,779
======= =======
NET INCOME PER SHARE
Basic . . . . . . . . . . . . . . . . . . . . . . $ .48 $ .43
======= =======
Diluted . . . . . . . . . . . . . . . . . . . . . $ .47 $ .42
======= =======
CASH DIVIDENDS PER SHARE. . . . . . . . . . . . . . . . $ .21 $ .19
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Financial Position
<CAPTION>
MARCH 31 DECEMBER 31 MARCH 31
1999 1998 1998
---------- ----------- ----------
(Unaudited) (Unaudited)
(in thousands)
<S> <C> <C> <C>
ASSETS
Cash and demand deposits due from banks . . . . . . . . $ 81,648 $ 98,483 $ 83,056
Federal funds sold . . . . . . . . . . . . . . . 83,120 113,150 82,650
Interest bearing deposits with unaffiliated banks. . . . . 5,000
Investment securities:
Available for sale (at market value) . . . . . . . . 496,892 488,976 487,007
Held to maturity (market value $291,815 at 3/31/99,
$244,430 at 12/31/98, and $263,668 at 3/31/98) . . . . 289,446 240,847 261,818
---------- ---------- ----------
Total investment securities . . . . . . . . 786,338 729,823 748,825
Loans:
Commercial and agricultural . . . . . . . . . . . 145,210 139,051 132,782
Real estate construction . . . . . . . . . . . . 31,211 35,039 30,697
Real estate mortgage. . . . . . . . . . . . . . 536,117 520,972 526,758
Consumer . . . . . . . . . . . . . . . . . 206,119 203,231 168,675
---------- ---------- ----------
Total loans . . . . . . . . . . . . . 918,657 898,293 858,912
Less: Allowance for loan losses. . . . . . . . . . 18,217 18,071 17,548
---------- ---------- ----------
Net loans . . . . . . . . . . . . . . 900,440 880,222 841,364
Premises and equipment. . . . . . . . . . . . . . 19,890 20,215 20,189
Accrued income . . . . . . . . . . . . . . . . 15,158 14,195 15,292
Other assets . . . . . . . . . . . . . . . . . 14,119 11,538 10,670
---------- ---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . $1,900,713 $1,872,626 $1,802,046
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . $ 242,635 $ 272,388 $ 238,585
Interest-bearing . . . . . . . . . . . . . . . 1,336,225 1,281,883 1,276,532
---------- ---------- ----------
Total deposits . . . . . . . . . . . . 1,578,860 1,554,271 1,515,117
Short-term borrowings:
Treasury tax and loan notes payable to the U.S. Treasury. . 7,772 5,137 7,196
Securities sold under agreements to repurchase . . . . . 41,880 48,113 28,340
---------- ---------- ----------
Total short-term borrowings . . . . . . . . 49,652 53,250 35,536
5
<PAGE>
Interest payable and other liabilities . . . . . . . . 20,620 15,266 14,514
Long-term debt . . . . . . . . . . . . . . . . 8,000 8,000 9,000
---------- ---------- ----------
Total liabilities . . . . . . . . . . . 1,657,132 1,630,787 1,574,167
Shareholders' equity:
Common stock, $1 par value ($10 par value at 3/31/98):
Authorized - 18,000,000 shares (15,000,000 at 3/31/98)
Issued - 13,485,026 shares, 13,496,230 shares,
and 10,784,040 shares, respectively. . . . . . . 13,485 13,496 107,840
Surplus . . . . . . . . . . . . . . . . . 183,762 184,384 87,222
Retained earnings. . . . . . . . . . . . . . . 44,527 40,892 31,094
Accumulated other comprehensive income. . . . . . . . 1,807 3,067 1,723
---------- ---------- ----------
Total shareholders' equity . . . . . . . . 243,581 241,839 227,879
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY . . . . . . . . . . $1,900,713 $1,872,626 $1,802,046
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
<TABLE>
CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows (Unaudited)
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------------
1999 1998
--------- ---------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,471 $ 5,779
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 175 219
Gains on sales of loans (245) (184)
Provision for depreciation and amortization 925 838
Net amortization of investment securities 174 145
Net increase in accrued income and other assets (2,867) (629)
Net increase in interest payable and other liabilities 5,588 570
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 10,221 6,738
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in interest-bearing deposits with unaffiliated banks 5,000
Proceeds from maturities of securities available for sale 108,134 36,302
Purchases of securities available for sale (117,995) (28,683)
Proceeds from maturities of securities held to maturity 4,520 19,724
Purchases of securities held to maturity (53,286) (30,631)
Proceeds from sales of loans 16,733 32,012
Net loan originations, excluding sales (37,076) (45,109)
Purchases of premises and equipment (404) (470)
--------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (74,374) (16,855)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW accounts and
savings accounts (15,331) 21,364
Net increase in certificates of deposit and other time deposits 39,920 17,912
Net decrease in short-term borrowings (3,598) (6,660)
Cash dividends paid (2,835) (2,588)
Proceeds from stock purchase plan 65 70
Proceeds from exercise of stock options 64 181
Repurchases of common stock (997)
--------- ---------
7
<PAGE>
NET CASH PROVIDED BY FINANCING ACTIVITIES 17,288 30,279
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (46,865) 20,162
Cash and cash equivalents at beginning of year 211,633 145,544
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 164,768 $ 165,706
========= =========
- -------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Interest paid on deposits, short-term borrowings and long-term debt $ 11,585 $ 11,910
Federal income taxes paid 235
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
NOTE A: BASIS OF PRESENTATION The accompanying unaudited consolidated
financial statements of Chemical Financial Corporation (the "Corporation")
have been prepared in accordance with 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 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 months ended March 31, 1999 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1999. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Corporation's annual report on Form 10-K
for the year ended December 31, 1998.
EARNINGS PER SHARE
All earnings per share amounts have been presented to conform to
Statement of Financial Accounting Standards No. 128, Earnings Per Share
("SFAS 128"), requirements. Basic earnings per share excludes 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.
The following table summarizes the number of shares used in the denominator
of the basic and diluted earnings per share computations:
9
<PAGE>
CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
1999 1998
---- ----
(In thousands)
<S> <C> <C>
Denominator for basic earnings per share 13,500 13,470
====== ======
Denominator for diluted earnings per share 13,624 13,632
====== ======
</TABLE>
COMPREHENSIVE INCOME
As of January 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS 130").
SFAS 130 established new rules for the reporting and display of
comprehensive income and its components. The adoption of SFAS 130 had no
impact on the Corporation's net income or shareholders' equity. SFAS 130
requires unrealized gains or losses on the Corporation's investment
securities available for sale to be included in other comprehensive income.
The components of comprehensive income, net of related tax, for the three-
month periods ended March 31, 1999 and 1998 are as follows (in thousands of
dollars):
10
<PAGE>
CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
1999 1998
------- -------
<S> <C> <C>
Net income $ 6,471 $ 5,779
Unrealized net gains (losses) on investment
securities available for sale (1,260) 318
------- -------
Comprehensive income $ 5,211 $ 6,097
======= =======
</TABLE>
The components of accumulated other comprehensive income, net of related
tax, at March 31, 1999, December 31, 1998 and March 31, 1998 are as follows
(in thousands of dollars):
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31 MARCH 31
1999 1998 1998
-------- ----------- --------
<S> <C> <C> <C>
Unrealized net gains on investment
securities available for sale $ 1,807 $ 3,067 $ 1,723
------- ------- -------
Accumulated other comprehensive
income $ 1,807 $ 3,067 $ 1,723
======= ======= =======
</TABLE>
OPERATING SEGMENT
As of January 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise
and Related Information (SFAS 131). SFAS 131 established standards for
the reporting of information about operating segments and related
disclosures about products and services, geographic areas and major
customers.
11
<PAGE>
CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
The Corporation is a bank holding company that operates ten commercial
banks and a data processing company, each as a separate subsidiary of the
Corporation. All ten of 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 of their geographical market areas. The products and services
offered by the commercial bank subsidiaries are consistent throughout the
Corporation, as is the pricing of these products and services. Each of
the Corporation's commercial banking subsidiaries operates in a separate
geographical area within the state of Michigan. The geographical area
served by each of these subsidiaries is generally the twenty-five mile
radius surrounding its headquarters. All marketing of products and
services throughout the Corporation's ten subsidiary banks is uniform,
as many of the markets served by these 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. All ten commercial bank
subsidiaries are state chartered commercial banks, and operate under the
same banking regulations. The data processing subsidiary primarily
performs data processing functions for the Corporation's ten commercial
banking subsidiaries. It is management's opinion that the Corporation
operates in a single operating segment - commercial banking.
OTHER
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"), was issued in
June 1998. SFAS 133 is effective for all fiscal quarters beginning after
June 15, 1999. SFAS 133 standardizes the accounting for derivative
instruments embedded in other contracts by requiring the recognition of
those items as assets or liabilities in the statement of financial
position and measuring them at fair value. SFAS 133 generally provides for
matching the timing of gain or loss recognition on the hedging instrument
with the recognition of (a) changes in the fair value of the hedged asset
or liability that are attributable to the hedged risk, or (b) the earnings
effect of the hedged forecasted transaction. The adoption of SFAS 133 is
currently expected to have no effect on the financial position, liquidity
or results of operations of the Corporation. As of March 31, 1999, the
Corporation held no derivative financial instruments.
12
<PAGE>
CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year financial statement presentation.
NOTE B: LOANS AND NONPERFORMING ASSETS The following summarizes loans and
nonperforming assets at the dates indicated (in thousands of dollars):
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31 MARCH 31
1999 1998 1998
-------- ----------- --------
<S> <C> <C> <C>
LOANS:
Commercial. . . . . . . . . . . . . . $145,210 $139,051 $132,782
Real estate construction . . . . . . . . . 31,211 35,039 30,697
Real estate mortgage . . . . . . . . . . 536,117 520,972 526,758
Consumer . . . . . . . . . . . . . . 206,119 203,231 168,675
-------- -------- --------
Total Loans . . . . . . . . . . . . . $918,657 $898,293 $858,912
======== ======== ========
NONPERFORMING ASSETS:
Nonaccrual loans. . . . . . . . . . . . $ 1,670 $ 1,785 $ 1,890
Loans 90 days or more past due and
still accruing interest. . . . . . . . . 441 1,316 1,052
Restructured loans . . . . . . . . . . . 835
-------- -------- --------
Total nonperforming loans. . . . . . . . . 2,946 3,101 2,942
-------- -------- --------
Other real estate owned <F1>. . . . . . . . 394 470 368
-------- -------- --------
Total nonperforming assets . . . . . . . . $ 3,340 $ 3,571 $ 3,310
======== ======== ========
<FN>
<F1> Other real estate owned includes properties acquired through
foreclosure and by acceptance of a deed in lieu of foreclosure, and
other property held for sale.
</FN>
</TABLE>
13
<PAGE>
CHEMICAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
NOTE C: ALLOWANCE FOR LOAN LOSSES The following summarizes the changes
in the allowance for loan losses (in thousands of dollars):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------
1999 1998
------- -------
<S> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance as of January 1 . . . . . . . . . . . . . . . . . $18,071 $17,359
Provision for loan losses . . . . . . . . . . . . . . . . 175 219
Gross loans charged-off . . . . . . . . . . . . . . . . . (84) (89)
Gross recoveries of loans previously charged-off. . . . . . . . . 55 59
------- -------
Net loans charged-off. . . . . . . . . . . . . . . . . . (29) (30)
------- -------
Balance at March 31 . . . . . . . . . . . . . . . . . . $18,217 $17,548
======= =======
</TABLE>
14
<PAGE>
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.
FORWARD-LOOKING STATEMENTS
This discussion and analysis of financial condition and results of
operations, and other sections of this report, contain forward-looking
statements that are based on management's beliefs, assumptions, current
expectations, estimates and projections about the financial services
industry, the economy, and about the Corporation itself. Words such as
"anticipates," "believes," "estimates," "judgment," "expects,"
"forecasts," "intends," "is likely," "plans," "predicts," "projects,"
variations of such words and similar expressions are intended to identify
such forward-looking statements. In addition, the statements under the
caption "Year 2000 Readiness Disclosure" are forward-looking statements.
Assessments that the Corporation and/or its information and non-information
technology systems are Year 2000 "compliant" or "ready" are statements of
belief as to the outcome of future events based in part on information
provided by vendors and other third parties that the Corporation has not
independently verified. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions
("Future 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, implied or
forecasted in such forward-looking statements.
Future 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 regulations; changes in tax laws; changes in prices,
levies and assessments; the impact of technological advances and issues,
including Year 2000 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; and changes in
the national economy. These are representative of the Future Factors that
could cause a difference between an ultimate actual outcome and a preceding
forward-looking statement. The Corporation undertakes no obligation to
update, amend or clarify forward-looking statements, whether as a result of
new information, future events or otherwise.
15
<PAGE>
SUMMARY
The Corporation's net income was $6,471,000 in the first quarter of 1999,
as compared to net income of $5,779,000 during the first quarter of 1998.
Earnings per share in the first quarter of 1999 were $.47, compared to
earnings per share of $.42 in the first quarter of 1998.
The increases in net income during the three months ended March 31, 1999,
as compared to the three months ended March 31, 1998, were principally the
result of increases in both net interest income and noninterest income.
These revenue increases were slightly offset by increased operating
expenses.
Return on average assets in the first quarter of 1999 was 1.40%, as
compared to 1.33% during the first quarter of 1998. Return on average
equity for the three months ended March 31, 1999 and March 31, 1998 was
10.9% and 10.4%, respectively.
Total assets were $1.901 billion as of March 31, 1999, up $28.1 million, or
1.5%, from total assets of $1.873 billion as of December 31, 1998, and up
$98.7 million, or 5.5%, from total assets of $1.802 billion as of March 31,
1998.
Total loans increased $20.4 million, or 2.3%, from December 31, 1998, and
$59.7 million, or 7%, from March 31, 1998 to $918.7 million as of March 31,
1999. The Corporation experienced increases from December 31, 1998 and
March 31, 1998 to March 31, 1999 in commercial, real estate mortgage and
consumer loans.
Shareholders' equity increased $15.7 million, or 6.9%, from March 31, 1998,
to $243.6 million as of March 31, 1999, or $18.06 per share, representing
12.8% of total assets. The increase was primarily attributable to retained
net income.
RESULTS OF OPERATIONS
NET INTEREST INCOME
The Corporation's net interest income for the first quarter of 1999 was
$18.33 million, a $.85 million, or 4.9%, increase over the $17.48 million
recorded in the first quarter of 1998. The increase in net interest income
was due primarily to increases in average earning assets. Average earning
assets increased $97.5 million, or 5.9%, in the first quarter of 1999,
compared to the first quarter of 1998, attributable to increases in
deposits and shareholders' equity. Average deposits increased $69.9
million, or 4.7%, in the first quarter of 1999, compared to the first
16
<PAGE>
quarter of 1998, while average shareholders' equity increased $16.7
million, or 7.4%. The Corporation's net interest margin was 4.31% in the
first quarter of 1999, compared to 4.35% in the first quarter of 1998.
NONINTEREST INCOME
Noninterest income increased $512,000, or 14.5%, in the first quarter of
1999, compared to the first quarter of 1998. Almost one-half of this
increase was attributable to a $236,000 gain that was realized on the sale
of land owned by the Corporation's lead subsidiary bank, Chemical Bank and
Trust Company. The Corporation's trust department income increased
$78,000, or 9.6%, in the first quarter of 1999, compared to the first
quarter of 1998, due to a combination of increased fees resulting from an
increase in the market value of trust assets and new business. Service
charges on deposit accounts increased $106,000, or 8.7%, in the first
quarter of 1999, compared to the first quarter of 1998. Other charges and
fees for customer services increased $41,000, or 3.5%, in the first quarter
of 1999, compared to the first quarter of 1998. Gains on sales of
residential mortgage loans in the secondary market increased $61,000 in the
first quarter of 1999, compared to the first quarter of 1998.
PROVISION FOR LOAN LOSSES
The provision for loan losses reflects management's judgment of changing
economic conditions, as well as increases and other changes in the
subsidiary banks' loan portfolios. It is management's policy to control
loan quality through a carefully structured review of loan requests. In
assessing the adequacy of the allowance for loan losses (the "Allowance"),
management believes that its historical experience confirms, in principle,
its judgment in what is essentially a subjective decision. Based upon
historical experience and a constant evaluation of risks in the loan
portfolios, management believes that the Allowance is adequate. During the
three months ended March 31, 1999, the Corporation added $175,000 to the
Allowance through the provision for loan losses, compared to $219,000
during the three months ended March 31, 1998. Net loan charge-offs during
the three months ended March 31, 1999 were $29,000, compared to net loan
charge-offs of $30,000 during the three months ended March 31, 1998.
OPERATING EXPENSES
Total operating expenses increased $314,000, or 2.6%, in the first quarter
of 1999, compared to the first quarter of 1998.
Salaries, wages and employee benefits increased $146,000, or 2%, in the
first quarter of 1999 over the first quarter of 1998. Occupancy expense
and equipment expense, combined, increased $78,000, or 3.9%, during the
first quarter of 1999, compared to the first quarter of 1998. Other
17
<PAGE>
operating expenses increased $90,000, or 3.1%, in the first quarter of
1999, compared to the first quarter of 1998.
INCOME TAX EXPENSE
The Corporation's effective federal income tax rate was 33% during the
three months ended March 31, 1999, compared to 32.5% during the three
months ended March 31, 1998. The effective federal income tax rate is a
function of the proportion of the Corporation's interest income exempt from
federal taxation, nondeductible interest expense and other nondeductible
expenses.
BALANCE SHEET CHANGES
ASSET AND DEPOSIT CHANGES
Total assets increased $28.1 million, or 1.5%, from December 31, 1998 and
increased $98.7 million, or 5.5%, from March 31, 1998 to $1.901 billion as
of March 31, 1999. Total deposits increased $24.6 million, or 1.6%, from
December 31, 1998 and increased $63.7 million, or 4.2%, from March 31, 1998
to $1.579 billion as of March 31, 1999.
LOANS
The Corporation's philosophy is such that it will neither compromise on
loan quality nor make loans outside its banking markets to increase its
loan portfolio. The Corporation does not purchase participation loans,
which is a method utilized by many financial institutions to increase the
size of their loan portfolios.
Total loans as of March 31, 1999 were $918.7 million, compared to $858.9
million as of March 31, 1998 and $898.3 million as of December 31, 1998.
Commercial loans increased $12.4 million, or 9.4%, from March 31, 1998, and
$6.2 million, or 4.4%, from December 31, 1998 to $145.2 million as of March
31, 1999. The growth in commercial loans was achieved through an increased
sales effort by the Corporation to increase commercial loans as a
percentage of total loans. Commercial loans represented 15.8%, 15.5% and
15.5% of the Corporation's loan portfolio as of March 31, 1999, December
31, 1998 and March 31, 1998, respectively.
Real estate construction and mortgage loans increased $9.9 million, or
1.8%, from March 31, 1998, and increased $11.3 million, or 2%, from
December 31, 1998 to $567.3 million as of March 31, 1999. Real estate
construction and mortgage loans represented 61.8%, 61.9% and 64.9% of the
Corporation's loan portfolio as of March 31, 1999, December 31, 1998 and
March 31, 1998, respectively.
18
<PAGE>
Consumer loans increased $37.4 million, or 22.2%, from March 31, 1998, and
$2.9 million, or 1.4%, from December 31, 1998 to $206.1 million as of March
31, 1999. The increase from March 31, 1998 was the result of several
consumer loan promotions, which offered lower interest rates on certain
types of consumer loans during the twelve month period ended March 31,
1999. These various consumer loan promotions offered loans with annual
percentage rates ranging from 6.90% to 7.64% and had maximum terms of 60
months. Consumer loans represented 22.4%, 22.6% and 19.6% of total loans
as of March 31, 1999, December 31, 1998 and March 31, 1998, respectively.
The Corporation's total loan to deposit ratio as of March 31, 1999,
December 31, 1998 and March 31, 1998 was 58.2%, 57.8% and 56.7%,
respectively.
The Corporation traditionally has had a conservative loan underwriting
policy. This is evidenced by its historically low loan losses and low
ratio of nonperforming loans to total loans. During the three months ended
March 31, 1999, the Corporation experienced net loan charge-offs of
$29,000, compared to net loan charge-offs of $30,000 during the three
months ended March 31, 1998.
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 renegotiated to less than market terms due to a serious
weakening of the borrower's financial condition. Nonperforming loans were
$2.9 million as of March 31, 1999, $3.1 million as of December 31, 1998 and
$2.9 million as of March 31, 1998, and represented .32%, .35% and .34% of
total loans as of those dates, respectively.
The allowance for loan losses at March 31, 1999 was $18,217,000 and
represented 1.98% of total loans, compared to $18,071,000, or 2.01% of
total loans, at December 31, 1998 and $17,548,000, or 2.04% of total loans,
at March 31, 1998.
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. The banking subsidiaries' primary liquidity sources
consist of investment securities, those maturing within one year and those
classified as available for sale, maturing loans and federal funds sold.
As of March 31, 1999, the Corporation's investment securities portfolio had
an average life of less than two years. In addition, at March 31, 1999,
the Corporation held only $1.7 million in mortgage-backed securities, which
represented less than one percent of the investment securities portfolio,
and had no other derivative type investments.
19
<PAGE>
CAPITAL RESOURCES
As of March 31, 1999, shareholders' equity was $243.6 million, compared to
$241.8 million as of December 31, 1998 and $227.9 million as of March 31,
1998, resulting in an increase of $1.7 million, or .7%, from December 31,
1998 and $15.7 million, or 6.9%, from March 31, 1998. Shareholders' equity
as a percentage of total assets was 12.8% as of March 31, 1999, 12.9% at
December 31, 1998 and 12.6% as of March 31, 1998. Total equity included an
after-tax unrealized net gain of $1.8 million as of March 31, 1999, $3.1
million as of December 31, 1998 and $1.7 million as of March 31, 1998, on
investment securities available for sale in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities."
A statement of changes in shareholders' equity covering the three-month
periods ended March 31, 1999 and March 31, 1998 follows (in thousands of
dollars):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
1999 1998
-------- --------
<S> <C> <C>
Total shareholders' equity as of January 1 $241,839 $223,925
Comprehensive income:
Net income 6,471 5,779
Change in unrealized net gains (losses) on securities
available for sale (1,260) 318
-------- --------
Total comprehensive income 5,211 6,097
Dividends (2,835) (2,588)
Shares issued upon exercise of employee stock options 64 181
Shares issued from director stock purchase plan 299 264
Repurchases of common stock (997)
-------- --------
Total shareholders' equity as of end of period $243,581 $227,879
======== ========
</TABLE>
The following table represents the Corporation's regulatory capital ratios
as of March 31, 1999:
20
<PAGE>
<TABLE>
<CAPTION>
TIER 1 TOTAL
RISK-BASED RISK-BASED
LEVERAGE CAPITAL CAPITAL
---------- ---------- ----------
<S> <C> <C> <C>
Chemical Financial Corporation - actual ratio 12.7% 27.2% 28.5%
Regulatory minimum ratio 3.0 4.0 8.0
Ratio considered "well capitalized" by
regulatory agencies 5.0 6.0 10.0
</TABLE>
The Corporation's Tier 1 and Total capital ratios under the risk-based
capital measure at March 31, 1999 are high due to the Corporation holding
$469 million in investment securities and other assets which are assigned a
0% risk rating, $445 million in assets which are assigned a 20% risk rating
and $460 million in residential real estate mortgages and other assets
which are assigned a 50% risk rating. These three risk ratings (0%, 20%
and 50%) represent 70% of the Corporation's total risk-based assets
(including off-balance sheet items) as of March 31, 1999.
OTHER
The Corporation paid a 5 for 4 stock split on December 16, 1998. All per
share amounts have been adjusted for this stock split.
YEAR 2000 READINESS DISCLOSURE
During the third quarter of 1996, the Corporation formed a Year 2000
project team and began developing its plan to prepare for the Year 2000.
The project began with a process to identify information technology and
non-information technology systems that required modification for the Year
2000. A Year 2000 Plan was developed with goals and target dates. This
plan includes communicating with third party vendors and suppliers, and
obtaining certifications of compliance from third party software and
service providers. During the early planning process, the Corporation was
notified by the vendor of its core operating system that the core operating
system used by the Corporation was not Year 2000 compliant and that it
would not be modified to become Year 2000 compliant. The Corporation
performed an extensive evaluation of replacement operating systems and, in
July 1997, chose to convert its core operating system to a new system
("Dimension") offered by its existing vendor. The vendor of the new core
operating system has certified to the Corporation that its Dimension system
is Year 2000 compliant and guarantees that Dimension software has been
designed to accurately store and calculate all dates for the current and
future millennia. The Dimension software was created as Year 2000
21
<PAGE>
compliant, as opposed to being modified to be Year 2000 compliant. The
Dimension software has received a Year 2000 certification by the
Information Technology Association of America ("ITAA"). ITAA is the
software industry trade group's century date change certification program.
The program examines processes and methods used by companies to perform their
Year 2000 software calculations and conversions. The certification by ITAA
indicates that it is the opinion of ITAA that the processes and methods
used by the Kirchman Corporation, which developed the Dimension software,
meet the information technology industry's best software development
practices for addressing the Year 2000 issue and the Kirchman Corporation
has the core capabilities needed to address the Year 2000 issue. The
Corporation converted to the new operating system during the first quarter
of 1998. The cost of converting to the new operating system was
approximately $300,000. In conjunction with the conversion to the new core
operating system, the Corporation purchased a new mainframe computer in
1997 at a cost of approximately $1 million, which was capitalized. The
existing mainframe computer and core operating system software were fully
depreciated prior to 1997.
The Corporation continued to assess the impact of the Year 2000 issue on
the remainder of its computer-based systems and applications and non-
information technology systems throughout 1998. As of March 31, 1999, it
was the Corporation's opinion that it was complete with the assessment
phase of its Year 2000 Plan. Management believes that, as of March 31, 1999
(i) the conversion to the new core operating system software had been
completed and all testing related to Year 2000 compliance on the new core
operating system software had also been completed; (ii) the core operating
system represents approximately 85% of the Corporation's mission critical
systems; (iii) all mission critical systems and software have been
renovated; and (iv) the Corporation was substantially complete with the
testing of its internal mission critical systems and hardware and with the
testing of its other mission critical systems and other software programs.
The Corporation's Year 2000 Plan has set June 30, 1999 as the date for all
testing to be complete for both internal and external mission critical
systems. Based on the testing procedures performed through March 31, 1999,
the Corporation was on target to meet the June 30, 1999 completion date.
The Corporation replaced computer hardware, primarily desktop computers,
and software that were not Year 2000 compliant in 1998 at a total cost of
$525,000, which was capitalized. The Corporation currently anticipates
that remaining Year 2000 costs for hardware and software purchases,
associated reprogramming and remedial actions for both information
technology and non-information technology will not exceed $250,000 in 1999.
As part of the Corporation's Year 2000 Plan, the Trust Department of the
Corporation's lead subsidiary bank replaced its computer hardware during
1998. In addition, both of its core operating systems were upgraded during
22
<PAGE>
1998 to be Year 2000 compliant. The Trust Department uses the SunGard
Series 7 system for the processing of trust accounting transactions and the
Corbel Quantech system for employee benefit recordkeeping transactions.
During the fourth quarter of 1998, extensive testing of the two systems
used by the Trust Department for Year 2000 compliance was performed and it
is management's opinion that all necessary testing had been satisfactorily
completed as of December 31, 1998. During 1999, the Trust Department will
focus on the Year 2000 compliance of the systems of other third party
providers of services to the Trust Department and the progress of those
companies and entities in which the fiduciary customers of the Trust
Department are invested toward Year 2000 compliance. In accordance with
the Corporation's Year 2000 Plan, the Trust Department is developing
contingency plans to address Year 2000 issues which may arise after
December 31, 1999.
The impact of the Year 2000 issues on the Corporation will depend not only
on corrective actions that the Corporation takes, but also on the way in
which Year 2000 issues are addressed by governmental agencies, businesses
and other third parties that provide services or data to, or receive
services or data from, the Corporation, or whose financial condition or
operational capabilities are important to the Corporation. To reduce this
exposure, the Corporation has initiated formal communications with its
significant suppliers and large customers to determine the extent to which
the Corporation's interface systems are vulnerable to those third parties'
failures to resolve their own Year 2000 issues. The Corporation has
received communications from a majority of its third party vendors and
suppliers confirming either that the third parties' software systems are
Year 2000 compliant or providing the Corporation with a time line of an
expected compliance date by mid 1999. The testing of both mission critical
and non-critical third party software systems has begun. The Corporation is
on schedule to have all testing of third party software systems completed
by June 30, 1999. The Corporation is continuing to seek assurances that the
systems of other companies on which the Corporation's systems rely will be
timely converted or modified. If such modifications and conversions are
not completed timely, their inability to correctly recognize the Year 2000
could have an adverse impact on the operations of the Corporation.
The Corporation's credit risk associated with borrowers may increase to the
extent borrowers fail to adequately address Year 2000 issues. As a result,
all of the Corporation's subsidiary banks have identified their material
borrowers and have assessed these borrowers' Year 2000 readiness. The
material borrowers' Year 2000 readiness will be monitored periodically,
based on the level of risk that the Year 2000 has been estimated to pose to
the business of each borrower.
The Corporation is preparing general contingency plans to address
unforeseen Year 2000 issues, including plans in the event that mission
23
<PAGE>
critical systems experience difficulties or other significant third parties
fail to adequately address Year 2000 issues. Such plans principally
involve the operation of systems in an off-line, "limited computerized,"
environment. This would be accomplished by the manual and desktop computer
update of financial records until problems or difficulties are remedied.
The Corporation has determined that it must rely primarily on its software
vendors to remedy any unforeseen problems with its mission critical systems
in a timely manner. Internal remediation plans are being developed in the
remaining information and non-information technology areas. The
Corporation is also enhancing its existing business resumption plans to
reflect Year 2000 issues. It is developing plans, designed to coordinate
the efforts of its personnel and resources, in addressing any Year 2000
difficulties that become evident after December 31, 1999. The
Corporation's business resumption plans include the education of customers
about the Year 2000 and explain what the Corporation has done and its plan
to be ready for the Year 2000, in order to minimize unwarranted public
concerns, and include the consideration of the additional cash demands of
its customers posed by Year 2000 concerns. There can be no assurance that
any plans will fully mitigate any such difficulties. Furthermore, there
may be certain mission critical third parties, such as utilities or
telecommunications companies, where alternative arrangements or other
sources are limited or unavailable.
The Corporation believes that with the modifications to existing software,
new hardware and software purchases, and the conversion of the
Corporation's core operating system, the Year 2000 issue will not pose
significant operational problems for its computer systems and that the
additional costs to be incurred are not expected to be material to the
Corporation's results of operations, liquidity or capital resources.
The costs of the project and the date on which the Corporation projects it
will complete the Year 2000 modifications, as well as the estimated
potential effects on the Corporation's operations of Year 2000 issues, were
based on management's best estimates. There can be no guarantee that these
estimates will be achieved and actual results could differ materially from
those anticipated. Specific factors that might cause differences include,
but are not limited to, the ability of other companies on which the
Corporation's systems rely to modify or convert their systems to be Year
2000 compliant, the ability to locate and correct all relevant computer
codes, the interruption of electronic or telephonic communications, the
failure of basic utilities, and similar uncertainties.
This Year 2000 readiness disclosure is in part based upon and repeats
information provided to the Corporation by outside sources, including its
customers, vendors and outside consultants and other business partners.
Although the Corporation believes this outside information is accurate, the
Corporation is not the original source of this outside information and has
not independently verified the information.
24
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The information concerning quantitative and qualitative disclosures about
market risk contained under the caption "Liquidity and Interest
Sensitivity" on pages 37 through 41 (inclusive) of the Corporation's Annual
Report to Shareholders for the year ended December 31, 1998 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, 1998.
The Corporation does not believe that there has been a material change in
the nature or categories of the Corporation's primary market risk
exposures, 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 exposures, 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 which 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 Item 2 of 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 statement of financial position
contained in this report.
25
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following documents are filed as exhibits to this
report on Form 10-Q:
EXHIBIT
NUMBER DOCUMENT
3.1 RESTATED ARTICLES OF INCORPORATION. Previously filed as
Exhibit 3.1 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998. Here
incorporated by reference.
3.2 BYLAWS. Previously filed as Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998. Here incorporated by reference.
27 FINANCIAL DATA SCHEDULE.
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the
quarter covered by this report on Form 10-Q.
26
<PAGE>
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
Date: May 13, 1999 By /S/ALOYSIUS J. OLIVER
Aloysius J. Oliver
Chief Executive Officer and
President
(Principal Executive Officer)
Date: May 13, 1999 By /S/LORI A. GWIZDALA
Lori A. Gwizdala
Senior Vice President, Chief
Financial Officer and Treasurer
(Principal Financial and
Accounting Officer)
27
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT
3.1 RESTATED ARTICLES OF INCORPORATION. Previously filed as
Exhibit 3.1 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998. Here
incorporated by reference.
3.2 BYLAWS. Previously filed as Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998. Here incorporated by reference.
27 FINANCIAL DATA SCHEDULE.
28
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF CHEMICAL FINANCIAL
CORPORATION AND SUBSIDIARIES FOR THE PERIOD ENDED MARCH 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 81,648
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 83,120
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 496,940
<INVESTMENTS-CARRYING> 289,398
<INVESTMENTS-MARKET> 291,767
<LOANS> 918,657
<ALLOWANCE> 18,217
<TOTAL-ASSETS> 1,900,713
<DEPOSITS> 1,578,860
<SHORT-TERM> 49,652
<LIABILITIES-OTHER> 20,620
<LONG-TERM> 8,000
<COMMON> 13,485
0
0
<OTHER-SE> 230,096
<TOTAL-LIABILITIES-AND-EQUITY> 1,900,713
<INTEREST-LOAN> 18,206
<INTEREST-INVEST> 10,847
<INTEREST-OTHER> 1,044
<INTEREST-TOTAL> 30,097
<INTEREST-DEPOSIT> 11,259
<INTEREST-EXPENSE> 11,772
<INTEREST-INCOME-NET> 18,325
<LOAN-LOSSES> 175
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 12,528
<INCOME-PRETAX> 9,655
<INCOME-PRE-EXTRAORDINARY> 9,655
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,471
<EPS-PRIMARY> .48
<EPS-DILUTED> .47
<YIELD-ACTUAL> 4.31
<LOANS-NON> 1,670
<LOANS-PAST> 441
<LOANS-TROUBLED> 835
<LOANS-PROBLEM> 2,946
<ALLOWANCE-OPEN> 18,071
<CHARGE-OFFS> 84
<RECOVERIES> 55
<ALLOWANCE-CLOSE> 18,217
<ALLOWANCE-DOMESTIC> 18,217
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
