A week after reporting a nearly 5% drop in third-quarter earnings, Chemical Financial Corp. of Midland, Mich., announced a broad restructuring Friday aimed at cutting costs and boosting profits.
The $3.8 billion-asset company said it is consolidating its three banking charters into one, closing eight of its 132 branches, and shuffling its senior management. President and chief executive David B. Ramaker said the moves would free up individual bank presidents from administrative duties to focus on business development.
“We have a strategic plan for the company, and as part of the strategic plan is a review of the delivery system and how we go about generating loans,” Mr. Ramaker said Friday.
Chemical said last week that it earned $40 million in the third quarter, 4.8% less than a year earlier. It blamed a decline in net interest income, a larger provision for loan losses, and higher operating expenses.
Brad Milsaps, an analyst in Atlanta with Sandler O’Neill & Partners LP, said the restructuring is a positive step.
“By consolidating the charters they are able to have these people more focused on revenue activities,” Mr. Milsaps said. “It sounds like they have realigned some of their people to take on a little less of a management role and being more of a producer. That’s important.”
Wilson L. Smith, an analyst with Boenning & Scattergood Inc. of Conshocken, Pa., said that like other banking companies Chemical is struggling to increase earnings in the current rate climate.
Michigan’s sluggish economy makes that especially hard, he said. It was the only state with a net job loss in the 12 months through June 30, according to data compiled by the Federal Deposit Insurance Corp.
Though Chemical has good management and is well run, Mr. Smith said, “they needed to look at what they could to do tighten their belts and make the company more efficient.”
Chemical said restructuring costs would not go above $1 million but did not forecast how much it would save.
Investor reaction to news of the restructuring was lukewarm. The stock price was up 3.4% late Friday, to $30.91, but trading volume was low. Chemical’s stock is down nearly 30% this year.
Mr. Ramaker said the company expects to consolidate the charters by Dec. 31 and thereby eliminate 50 to 75 positions statewide.
“The lion’s share of the reductions and redundancies will be in the back room and administrative positions,” Mr. Ramaker said.
Two of Chemical’s bank presidents will be reassigned as market presidents, and one will become the chief credit and lending officer. Mr. Ramaker said that with one charter executives will spend less time meeting with each other and more meeting with clients.
“We currently have 13 audit meetings a year,” he said. “We’re going to go to five.”
The company plans to close the eight branches by Feb. 3. Mr. Ramaker said the branches were evaluated on the basis of profitability, efficiency, and the deposits they generate.
