FirstMerit Reports Second Quarter 2012 EPS of $0.28 Per Share

AKRON, Ohio, July 24, 2012 /PRNewswire/ --

Quarterly Highlights include:

  • Consistent profits: 53rd consecutive quarter of profitability
  • Robust organic growth: Average commercial loan growth of $131.3 million, or 2.55%, from prior quarter; average core deposit growth of $159.2 million, or 1.63%, from prior quarter
  • Superior credit quality: Nonperforming assets as a percent of period end loans declined 10.14% from 0.87% to 0.76%; net charge-offs to average loans, excluding acquired loans, decreased to 0.45% from 0.63% in the prior quarter.
  • Solid balance sheet: Strong tangible common equity ratio at 8.01%

FirstMerit Corporation (Nasdaq: FMER) reported second quarter 2012 net income of $30.6 million, or $0.28 per diluted share.  This compares with $30.3 million, or $0.28 per diluted share, for the first quarter 2012 and $29.8 million, or $0.27 per diluted share, for the second quarter 2011. 

Returns on average common equity ("ROE") and average assets ("ROA") for the second quarter 2012 were 7.69% and 0.84%, respectively, compared with 7.72% and 0.84%, respectively, for the first quarter 2012 and 7.78% and 0.82% for the second quarter 2011. 

"Our solid performance in the second quarter reflects the Corporation's strength in the face of a persistently lagging economy, a low interest rate environment and additional costs of complying with federal legislation affecting the banking industry," said Paul G. Greig, chairman, president and CEO of FirstMerit Corporation. "Despite these challenges, we have continued to grow organically, focus on our operating efficiencies and lower our funding costs. These accomplishments position us to increase our value to customers and shareholders."

Net interest margin was 3.77% for the second quarter of 2012 compared with 3.78% for the first quarter of 2012 and 3.77% for the second quarter of 2011.   The net interest margin compressed one basis point compared with first quarter of 2012 with earning asset yields declining three basis points offset by two basis points of improved funding costs.  The decline in funding costs in the quarter resulted from the Corporation's continued execution on its strategy of core deposit growth through new customer acquisition and transitioning certificates of deposit customers into lower cost deposits.  The net interest margin was unchanged from the second quarter of 2011.

Average loans, not including covered loans, during the second quarter of 2012 increased $159.7 million, or 2.05%, compared with the first quarter of 2012 and increased $668.1 million, or 9.19%, compared with the second quarter of 2011.   Average commercial loans, excluding covered loans, increased $131.3 million, or 2.55%, compared with the prior quarter, and increased $608.8 million, or 13.05%, compared with the year ago quarter. While commercial loans were the primary driver of overall average loan growth, the Corporation has experienced increased average consumer loans for four consecutive quarters.

Average deposits were $11.6 billion during the second quarter of 2012, an increase of $83.3 million, or 0.73%, compared with the first quarter of 2012, and an increase of $90.5 million, or 0.79%, compared with the second quarter of 2011.  During the second quarter 2012, average core deposits, which exclude time deposits, increased $159.2 million, or 1.63%, compared with the first quarter 2012 and increased $835.4 million, or 9.18%, compared with the second quarter 2011.   Average time deposits decreased $75.9 million, or 4.48%, and decreased $744.8 million, or 31.52%, respectively, over prior and year-ago quarters.  The Corporation continues to emphasize growth in lower cost core deposit products and decrease its reliance on certificates of deposit accounts to support balance sheet growth.   For the second quarter of 2012, average core deposits accounted for 85.99% of total average deposits, compared with 85.23% for the first quarter of 2012 and 79.39% for the second quarter of 2011.

Average investments increased $7.1 million, or 0.19%, compared with the first quarter of 2012 and increased $75.2 million, or 2.07% compared with the second quarter of 2011. 

Net interest income on a fully tax-equivalent ("FTE") basis was $121.7 million in the second quarter 2012 compared with $121.4 million in the first quarter of 2012 and $119.7 million in the second quarter of 2011. 

During the quarter ended June 30, 2012, management announced its implementation plan to enhance the operating efficiency and profitability of the Corporation (the "Efficiency Initiative") and as a result recognized $8.9 million in one-time charges primarily consisting of employee separation costs and professional services fees. The Efficiency Initiative is a long-term plan to optimize service channels and lower the overall cost structure. It includes the elimination of assistant branch manager positions and closing of eight full service branches.  All branch closures are expected to occur in the quarter ended September 30, 2012.

Noninterest income, excluding gains on securities transactions of $0.5 million, for the second quarter of 2012 was $54.8 million, an increase of $3.3 million, or 6.39%, from the first quarter of 2012 and an increase of $4.2 million, or 8.20%, from the second quarter of 2011.  Loan sales and servicing income decreased $1.6 million from the first quarter of 2012, which included a change in the valuation of mortgage servicing rights of $2.6 million, and increased $2.2 million from the second quarter of 2011.  Other operating income in the second quarter of 2012 increased $3.5 million compared with the prior quarter and increased $4.4 million compared with the prior year quarter.  Other operating income in the second quarter of 2012 included $2.6 million in gains on covered loans paid in full.

Other income, net of $0.5 million in securities gains, as a percentage of net revenue for the second quarter of 2012 was 31.03% compared with 29.77% for first quarter of 2012 and 29.71% for the second quarter of 2011.  Net revenue is defined as net interest income, on an FTE basis, plus other income, less gains from securities sales.

Noninterest expense for the second quarter of 2012 was $119.1 million, an increase of $5.3 million, or 4.67%, from the first quarter of 2012 and an increase of $9.0 million, or 8.18%, from the second quarter of 2011. Excluding the $8.9 million in one-time charges from implementation of the Efficiency Initiative in the second quarter of 2012, the Corporation has displayed significant progress in reducing operating expenses in response to the challenging industry environment.  Of the total one-time charges, $3.3 million was related to employee separation costs and $5.2 million was related to professional services fees.

During the second quarter of 2012, the Corporation reported an efficiency ratio of 67.21%, compared with 65.52% for the first quarter of 2012 and 64.30% for the second quarter of 2011.  Excluding the $8.9 million in one-time charges related to the Efficiency Initiative, the reported efficiency ratio for the second quarter of 2012 would be 62.15%.

Net charge-offs, excluding covered loans, totaled $8.8 million, or 0.45% of average loans, excluding acquired loans, in the second quarter of 2012,  compared with $12.0 million, or 0.63% of average loans, in the first quarter 2012 and $15.6 million, or 0.89% of average loans, in the second quarter of 2011. 

Nonperforming assets totaled $61.1 million at June 30, 2012, a decrease of $6.9 million, or 10.14%, compared with March 31, 2012 and a decrease of $38.8 million, or 38.83%, compared with June 30, 2011. Nonperforming assets at June 30, 2012 represented 0.76% of period-end loans plus other real estate compared with 0.87% at March 31, 2012 and 1.38% at June 30, 2011.

The allowance for noncovered loan losses totaled $103.8 million at June 30, 2012.   At June 30, 2012, the allowance for noncovered loan losses was 1.29% of period-end loans compared with 1.34% at March 31, 2012 and 1.51% at June 30, 2011.  The allowance for credit losses is the sum of the allowance for noncovered loan losses and the reserve for unfunded lending commitments.  For comparative purposes the allowance for credit losses was 1.36% of period end loans, excluding acquired loans, at June 30, 2012, compared with 1.41% at March 31, 2012 and 1.59% at June 30, 2011.  The allowance for credit losses to nonperforming loans was 234.57% at June 30, 2012, compared with 204.98% at March 31, 2012 and 158.30% at June 30, 2011.

The Corporation's total assets at June 30, 2012 were $14.6 billion, a decrease of $49.5 million, or 0.34%, compared with March 31, 2012 and an increase of $273.8 million, or 1.91%, compared with June 30, 2011. 

Total deposits were $11.6 billion at June 30, 2012, a decrease of $32.3 million, or 0.28%, from March 31, 2012 and an increase of $274.9 million, or 2.42%, from June 30, 2011.  Core deposits totaled $10.0 billion at June 30, 2012, an increase of $39.0 million, or 0.39% from March 31, 2012 and an increase of $945.2 million, or 10.40%, from June 30, 2011.

Shareholders' equity was $1.6 billion at June 30, 2012, compared with $1.6 billion at March 31, 2012, and $1.6 billion at June 30, 2011.  The Corporation maintained a strong capital position as tangible common equity to assets was 8.01% at June 30, 2012, compared with 7.86% at March 31, 2012 and 7.79% at June 30, 2011.  The common cash dividend per share paid in the second quarter 2012 was $0.16.

Second Quarter 2012 Conference Call

FirstMerit (Nasdaq: FMER) senior management will host an earnings conference call today at 11:00 a.m. (Eastern Time) to provide an overview of second quarter results and highlights. To participate in the conference call, please dial (888) 693-3477 ten minutes before start time and provide the reservation number: 99505861.  A replay of the conference call will be available at approximately 2:00 p.m. (Eastern Time) on July 24, 2012 through August 7, 2012 by dialing (855) 859-2056, and entering the PIN: 99505861.  The Corporation will provide a slide presentation, which management will speak to during the conference call. A copy of the presentation will be available prior to the earnings conference call at https://www.firstmerit.com/personal/investors.aspx; click on the Presentations link to access the slide presentation.

About FirstMerit Corporation

FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $14.6 billion as of June 30, 2012 and 205 banking offices and 213 ATM locations in Ohio, Western Pennsylvania, and Chicago, Illinois areas. FirstMerit provides a complete range of banking and other financial services to consumers and businesses through its core operations. Principal affiliates include: FirstMerit Bank, N.A., FirstMerit Mortgage Corporation, FirstMerit Title Agency, Ltd. and FirstMerit Community Development Corporation.

Subsequent Events

The Corporation is required under generally accepted accounting principles to evaluate subsequent events through the filing of its consolidated financial statements for the quarter ended June 30, 2012 on Form 10-Q. As a result, the Corporation will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of June 30, 2012 and will adjust amounts preliminarily reported, if necessary.

Forward-Looking Statements

This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Corporation, as well as its operations, markets and products. Actual results could differ materially from those indicated. Among the important factors that could cause results to differ materially are interest rate changes, continued softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Corporation's business, success of the Corporation's efforts to reduce operating expenses, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Corporation's periodic reports and registration statements filed with the Securities and Exchange Commission. The Corporation undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.

FirstMerit Corporation
Analysts: Thomas O'Malley/Investor Relations Officer
Phone: 330.384.7109
Media Contact: Robert Townsend/Media Relations Officer
Phone: 330.384.7075

 







FIRSTMERIT CORPORATION AND SUBSIDIARIES

Consolidated Financial Highlights

(Unaudited)






(Dollars in thousands)















Quarters




2012

2012

2011

2011

2011


2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

EARNINGS






Net interest income FTE (a)

$     121,689

$     121,428

$     123,598

$     121,788

$     119,735

Provision for noncovered loan losses

8,766

8,129

12,275

14,604

10,138

Provision for covered loan losses

3,430

5,932

2,773

4,768

7,481

Other income

55,301

51,726

59,737

60,772

51,491

Other expenses

119,077

113,768

123,874

115,957

110,068

FTE adjustment (a)

2,766

2,641

2,632

2,396

2,292

Net income

30,585

30,344

30,496

31,737

29,763

Diluted EPS

0.28

0.28

0.28

0.29

0.27

PERFORMANCE RATIOS






Return on average assets (ROA)

0.84%

0.84%

0.83%

0.86%

0.82%

Return on average common equity (ROE)

7.69%

7.72%

7.70%

8.02%

7.78%

Net interest margin FTE (a)

3.77%

3.78%

3.85%

3.75%

3.77%

Efficiency ratio

67.21%

65.52%

69.46%

64.78%

64.30%

Number of full-time equivalent employees

2,789

2,997

3,018

3,016

3,028

MARKET DATA






Book value/common share

$         14.60

$         14.51

$         14.33

$         14.38

$         14.19

Period-end common share mkt value

16.51

16.86

15.13

11.36

16.51

Market as a % of book

113%

116%

106%

79%

116%

Cash dividends/common share

$           0.16

$           0.16

$           0.16

$           0.16

$           0.16

Common stock dividend payout ratio

57.14%

57.14%

57.14%

55.17%

59.26%

Average basic common shares

109,562

109,211

109,249

109,245

109,138

Average diluted common shares

109,562

109,211

109,249

109,246

109,139

Period end common shares

109,641

109,187

109,251

109,247

109,241

Common shares repurchased

111

69

7

10

45

Common stock market capitalization

$  1,810,173

$  1,840,893

$  1,652,968

$  1,241,046

$  1,803,569

ASSET QUALITY (excluding acquired loans)






Gross charge-offs

$       15,014

$       17,417

$       18,984

$       20,014

$       20,958

Net charge-offs

8,766

11,979

13,763

14,604

15,641

Allowance for noncovered loan losses

103,849

103,849

107,699

109,187

109,187

Reserve for unfunded lending commitments

5,666

5,410

6,373

6,360

5,799

Nonperforming assets (NPAs) (b)

61,080

67,971

81,094

90,375

99,846

Net charge-offs/average loans ratio (b)

0.45%

0.63%

0.73%

0.79%

0.89%

Allowance for noncovered loan losses/period-end loans (b)

1.29%

1.34%

1.41%

1.46%

1.51%

Allowance for credit losses/period-end loans (b)

1.36%

1.41%

1.49%

1.55%

1.59%

NPAs/loans and other real estate (b)

0.76%

0.87%

1.06%

1.21%

1.38%

Allowance for noncovered loan losses/nonperforming loans

222.44%

194.83%

166.64%

160.09%

150.31%

Allowance for credit losses/nonperforming loans

234.57%

204.98%

176.50%

169.42%

158.30%

CAPITAL & LIQUIDITY






Period-end tangible common equity to assets

8.01%

7.86%

7.86%

7.75%

7.79%

Average equity to assets

10.98%

10.91%

10.75%

10.75%

10.59%

Average equity to total loans (c)

17.57%

17.50%

17.40%

17.55%

17.36%

Average total loans to deposits (c)

78.78%

78.74%

79.12%

78.18%

77.05%

AVERAGE BALANCES






Assets

$14,558,514

$14,496,937

$14,623,441

$14,610,628

$14,481,208

Deposits

11,555,283

11,472,021

11,416,546

11,447,682

11,464,738

Loans, excluding acquired loans (c)

7,857,840

7,677,963

7,520,400

7,298,446

7,080,109

Acquired loans, including covered loans (c)

1,245,246

1,355,086

1,512,123

1,651,559

1,753,943

Earning assets

12,986,988

12,935,184

12,747,868

12,878,105

12,724,269

Shareholders' equity

1,599,187

1,581,009

1,572,061

1,570,411

1,533,855

ENDING BALANCES






Assets

$14,621,344

$14,670,818

$14,441,702

$14,688,278

$14,347,557

Deposits

11,615,841

11,648,165

11,431,609

11,396,121

11,340,939

Loans, excluding acquired loans (c)

8,031,998

7,764,058

7,635,776

7,453,613

7,216,015

Acquired loans, including covered loans (c)

1,187,203

1,306,165

1,404,644

1,604,706

1,707,887

Goodwill

460,044

460,044

460,044

460,044

460,044

Intangible assets

7,274

7,756

8,239

8,782

9,325

Earning assets

13,212,071

13,318,202

13,011,267

12,885,242

12,958,324

Total shareholders' equity

1,600,815

1,584,105

1,565,953

1,570,654

1,550,387

NOTES:






(a) - Net interest income on a fully tax-equivalent ("FTE") basis restates interest on tax-exempt securities and loans as if such interest were subject to federal income tax at the statutory rate.  Net interest income on an FTE basis is not an accounting principle generally accepted in the United States of America.

 (b) - Acquired loans and other real estate from First Bank, George Washington Savings Bank and Midwest Bank & Trust Company are excluded from the ratio of our allowance for loan and credit losses and NPAs.

(c)- Excludes loss share receivable of $152.6 million, $171.1 million, $205.7 million, $220.5 million and $239.4 million as of June 30, 2012, March 31, 2012, December 31, 2011, September 30, 2011 and June 30, 2011, respectively.







     

FIRSTMERIT CORPORATION AND SUBSIDIARIES 




Consolidated Balance Sheets

















(Dollars in thousands )







(Unaudited, except December 31, 2011, which is derived from the audited financial statements)


















June 30,


December 31,


June 30,






2012


2011


2011


ASSETS









Cash and due from banks

$               226,026


$            219,256


$           191,965



Interest-bearing deposits in banks

111,909


158,063


32,113




Total cash and cash equivalents

337,935


377,319


224,078



Investment securities









Held-to-maturity

352,221


82,764


80,857




Available-for-sale

3,216,365


3,353,553


3,498,272




Other investments

140,742


140,726


160,805



Loans held for sale

19,018


30,077


22,951



Noncovered loans:









Commercial

5,404,971


5,107,747


4,808,305




Residential mortgage

438,147


413,664


400,661




Installment

1,262,877


1,263,665


1,259,072




Home equity

766,840


743,982


738,719




Credit cards

142,586


146,356


143,828




Leases

84,507


73,530


57,634





Total noncovered loans

8,099,928


7,748,944


7,408,219





   Allowance for noncovered loan losses

(103,849)


(107,699)


(109,187)





Net noncovered loans

7,996,079


7,641,245


7,299,032



Covered loans (includes loss share receivable of $152.6 million, $205.7 million and $239.4 million at June 30, 2012, December 31, 2011 and June 30, 2011, respectively)

1,271,888


1,497,140


1,755,107





   Allowance for covered loan losses

(42,606)


(36,417)


(33,360)





Net covered loans

1,229,282


1,460,723


1,721,747





Net loans

9,225,361


9,101,968


9,020,779



Premises and equipment, net

184,851


192,949


191,674



Goodwill

460,044


460,044


460,044



Intangible assets

7,274


8,239


9,325



Covered other real estate (includes loss share receivable of $0.3 million, $1.3 million and $5.1 million at June 30, 2012, December 31, 2011 and June 30, 2011, respectively)

54,549


54,505


58,502



Accrued interest receivable and other assets

622,984


639,558


620,270





    Total assets

$          14,621,344


$       14,441,702


$      14,347,557


LIABILITIES AND SHAREHOLDERS' EQUITY








Deposits:









Noninterest-bearing

$            3,227,819


$         3,030,225


$        2,944,117




Interest-bearing

1,080,790


1,062,896


842,280




Savings and money market accounts

5,728,598


5,595,409


5,305,584




Certificates and other time deposits

1,578,634


1,743,079


2,248,958





Total deposits

11,615,841


11,431,609


11,340,939



Federal funds purchased and securities sold under agreements to repurchase

896,910


866,265


809,570



Wholesale borrowings

178,135


203,462


325,133



Accrued taxes, expenses, and other liabilities

329,643


374,413


321,528





Total liabilities

13,020,529


12,875,749


12,797,170



Shareholders' equity:









Preferred stock, without par value: authorized and unissued 7,000,000 shares

-


-


-




Preferred stock, Series A, without par value: designated 800,000 shares; none outstanding

-


-


-




Convertible preferred stock, Series B, without par value: designated 220,000 shares; none outstanding

-


-


-




Common stock, without par value;  authorized 300,000,000 shares; issued: June 30, 2012, December 31, 2011 and June 30, 2011 - 115,121,731 shares

127,937


127,937


127,937




Capital surplus

472,138


479,882


477,449




Accumulated other comprehensive loss

(18,425)


(23,887)


(9,145)




Retained earnings

1,157,422


1,131,203


1,103,608




Treasury stock, at cost: June 30, 2012 -5,481,058 shares; December 31, 2011 - 5,870,923 shares; June 30, 2011 - 5,880,692 shares

(138,257)


(149,182)


(149,462)





Total shareholders' equity

1,600,815


1,565,953


1,550,387





    Total liabilities and shareholders' equity

$          14,621,344


$       14,441,702


$      14,347,557










































  

FIRSTMERIT CORPORATION AND SUBSIDIARIES







Average Consolidated Balance Sheets


















Quarterly Periods

(Unaudited)

 June 30, 


March 31,


December 30,


September 30,


 June 30, 

(Dollars in thousands)

2012


2012


2011


2011


2011











ASSETS










Cash and due from banks

$          410,533


$          378,736


$          621,899


$          517,150


$          588,487

Investment securities:










   Held-to-maturity

127,769


90,664


89,166


85,664


79,012

   Available-for-sale

3,429,411


3,459,439


3,231,195


3,429,631


3,382,943

   Other investments

140,744


140,719


160,147


160,799


160,811

Loans held for sale

22,731


26,483


24,215


24,524


18,512

Noncovered loans:










   Commercial

5,274,352


5,143,087


5,049,479


4,876,034


4,665,550

   Residential mortgage

431,752


421,648


405,329


399,228


398,702

   Installment

1,263,013


1,261,122


1,267,952


1,264,868


1,270,589

   Home equity

750,859


738,154


744,326


741,497


736,117

   Credit card

142,311


143,794


145,560


144,796


143,528

   Leases

78,862


73,644


61,267


56,909


58,607

      Total noncovered loans

7,941,149


7,781,449


7,673,913


7,483,332


7,273,093

Covered loans and loss share receivable

1,325,184


1,436,430


1,569,232


1,694,155


1,809,898

       Total loans

9,266,333


9,217,879


9,243,145


9,177,487


9,082,991

Less: allowance for loan losses

143,565


142,628


141,360


138,441


143,721

       Net loans

9,122,768


9,075,251


9,101,785


9,039,046


8,939,270

Total earning assets

12,986,988


12,935,184


12,747,868


12,878,105


12,724,269

Premises and equipment, net

187,181


190,669


193,219


192,218


192,584

Accrued interest receivable and other assets

1,117,377


1,134,976


1,201,815


1,161,596


1,119,589

TOTAL ASSETS

$     14,558,514


$     14,496,937


$     14,623,441


$     14,610,628


$     14,481,208

LIABILITIES 










Deposits:










   Noninterest-bearing

$       3,144,183


$       3,036,590


$       3,013,543


$       2,988,521


$       2,998,090

   Interest-bearing

1,060,771


1,066,132


991,456


913,252


824,125

   Savings and money market accounts

5,732,007


5,675,052


5,569,213


5,446,351


5,279,353

   Certificates and other time deposits

1,618,322


1,694,247


1,842,334


2,099,558


2,363,170

      Total deposits

11,555,283


11,472,021


11,416,546


11,447,682


11,464,738

Federal funds purchased and securities sold under agreements to repurchase

920,352


887,715


999,639


969,020


884,244

Wholesale borrowings

177,987


184,659


225,116


320,691


325,057

      Total funds

12,653,622


12,544,395


12,641,301


12,737,393


12,674,039

Accrued taxes, expenses and other liabilities

305,705


371,533


410,079


302,824


273,314

      Total liabilities

12,959,327


12,915,928


13,051,380


13,040,217


12,947,353

SHAREHOLDERS' EQUITY










Common stock

127,937


127,937


127,937


127,937


127,937

Capital surplus

473,650


481,856


479,257


477,864


479,078

Accumulated other comprehensive loss

(18,363)


(19,862)


(15,198)


(2,211)


(16,402)

Retained earnings

1,156,324


1,140,953


1,129,392


1,116,207


1,095,270

Treasury stock

(140,361)


(149,875)


(149,327)


(149,386)


(152,028)

       Total shareholders' equity

1,599,187


1,581,009


1,572,061


1,570,411


1,533,855

TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY

$     14,558,514


$     14,496,937


$     14,623,441


$     14,610,628


$     14,481,208











FIRSTMERIT CORPORATION AND SUBSIDIARIES 















Average Consolidated Balance Sheets















Fully Tax-equivalent Interest Rates and Interest Differential




































































Three months ended


Three months ended


Three months ended

(Unaudited)

June 30, 2012


March 31, 2012


June 30, 2011

(Dollars in thousands)

Average




Average


Average




Average


Average




Average


Balance


Interest


Rate


Balance


Interest


Rate


Balance


Interest


Rate

ASSETS


















Cash and due from banks

$        410,533






$        378,736






$        588,487





Investment securities and federal funds sold:


















    U.S. Treasury securities and U.S. Government agency obligations (taxable)

2,823,055


19,028


2.71%


2,882,045


19,679


2.75%


2,958,993


19,942


2.70%

    Obligations of states and political subdivisions (tax exempt)

482,475


6,254


5.21%


436,804


5,864


5.40%


368,790


5,155


5.61%

    Other securities and federal funds sold

392,394


2,756


2.82%


371,973


2,739


2.96%


294,983


2,235


3.04%

      Total investment securities and federal funds sold

3,697,924


28,038


3.05%


3,690,822


28,282


3.08%


3,622,766


27,332


3.03%

Loans held for sale

22,731


238


4.21%


26,483


283


4.30%


18,512


221


4.79%

Loans, including loss share receivable

9,266,333


103,245


4.48%


9,217,879


103,156


4.50%


9,082,991


107,956


4.77%

      Total earning assets

12,986,988


131,521


4.07%


12,935,184


131,721


4.10%


12,724,269


135,509


4.27%

Allowance for loan losses

(143,565)






(142,628)






(143,721)





Other assets

1,304,558






1,325,645






1,312,173





Total assets

$   14,558,514






$   14,496,937






$   14,481,208





LIABILITIES AND SHAREHOLDERS' EQUITY


















Deposits:


















    Noninterest-bearing

$     3,144,183



—%


$     3,036,590



—%


$     2,998,090



—%

    Interest-bearing

1,060,771


236


0.09%


1,066,132


247


0.09%


824,125


177


0.09%

    Savings and money market accounts

5,732,007


5,033


0.35%


5,675,052


5,103


0.36%


5,279,353


7,398


0.56%

    Certificates and other time deposits

1,618,322


3,169


0.79%


1,694,247


3,524


0.84%


2,363,170


5,606


0.95%

       Total deposits

11,555,283


8,438


0.29%


11,472,021


8,874


0.31%


11,464,738


13,181


0.46%

Securities sold under agreements to repurchase

920,352


276


0.12%


887,715


268


0.12%


884,244


940


0.43%

Wholesale borrowings

177,987


1,118


2.53%


184,659


1,151


2.51%


325,057


1,653


2.04%

       Total interest bearing liabilities

9,509,439


9,832


0.42%


9,507,805


10,293


0.44%


9,675,949


15,774


0.65%

Other liabilities

305,705






371,533






273,314





Shareholders' equity

1,599,187






1,581,009






1,533,855





Total liabilities and shareholders' equity

$   14,558,514






$   14,496,937






$   14,481,208





Net yield on earning assets

$   12,986,988


121,689


3.77%


$   12,935,184


121,428


3.78%


$   12,724,269


119,735


3.77%

Interest rate spread





3.66%






3.66%






3.62%





































Note:  Interest income on tax-exempt securities and loans has been adjusted to a fully-taxable equivalent basis.  









Nonaccrual loans have been included in the average balances.













FIRSTMERIT CORPORATION AND SUBSIDIARIES








Average Consolidated Balance Sheets









Fully Tax-equivalent Interest Rates and Interest Differential








Six Months Ended


Six Months Ended


June 30, 2012


June 30, 2011

(Unaudited)

Average




Average


Average




Average

(Dollars in thousands)

Balance


Interest


Rate


Balance


Interest


Rate

ASSETS












Cash and due from banks

$                   394,634






$               554,732





Investment securities and federal funds sold:












    U.S. Treasury securities and U.S. Government agency obligations (taxable)

2,852,550


38,707


2.73%


2,871,510


39,309


2.76%

    Obligations of states and political subdivisions (tax exempt)

459,640


12,118


5.30%


363,182


10,436


5.79%

    Other securities and federal funds sold

382,184


5,494


2.89%


287,111


4,352


3.06%

      Total investment securities and federal funds sold

3,694,374


56,319


3.07%


3,521,803


54,097


3.10%

Loans held for sale

24,607


522


4.27%


20,532


494


4.85%

Loans, including loss share receivable

9,242,105


206,400


4.49%


9,100,729


222,520


4.93%

      Total earning assets

12,961,086


263,241


4.08%


12,643,064


277,111


4.42%

Allowance for loan losses

(143,096)






(138,920)





Other assets

1,314,888






1,316,576





Total assets

$              14,527,512






$          14,375,452





LIABILITIES AND SHAREHOLDERS' EQUITY












Deposits:












    Noninterest-bearing

$                3,090,386



—%


$            2,936,827



—%

    Interest-bearing

1,063,451


483


0.09%


832,787


361


0.09%

    Savings and money market accounts

5,703,530


10,136


0.36%


5,129,894


15,243


0.60%

    Certificates and other time deposits

1,656,284


6,693


0.81%


2,493,167


12,433


1.01%

       Total deposits

11,513,651


17,312


0.30%


11,392,675


28,037


0.50%

Securities sold under agreements to repurchase

904,033


544


0.12%


866,306


1,855


0.43%

Wholesale borrowings

181,323


2,269


2.52%


325,197


3,292


2.04%

       Total interest bearing liabilities

9,508,621


20,125


0.43%


9,647,351


33,184


0.65%

Other liabilities

338,408






266,184





Shareholders' equity

1,590,097






1,525,090





Total liabilities and shareholders' equity

$              14,527,512






$          14,375,452





Net yield on earning assets

$              12,961,086


243,116


3.77%


$          12,643,064


243,927


3.89%

Interest rate spread





3.66%






3.72%













Note:  Interest income on tax-exempt securities and loans has been adjusted to a fully-taxable equivalent basis.  





Nonaccrual loans have been included in the average balances.



















FIRSTMERIT CORPORATION AND SUBSIDIARIES

































Consolidated Statements of Comprehensive Income

















































Quarters ended


Six Months Ended


(Unaudited)

June 30,


June 30,


(Dollars and shares in thousands, except per share data)

2012


2011


2012


2011


Interest income:










Loans and loans held for sale

$                 103,126


$             107,904


$                206,208


$            222,460



Investment securities











Taxable

21,783


22,176


44,201


43,661




Tax-exempt

3,846


3,137


7,426


6,332




Total investment securities interest

25,629


25,313


51,627


49,993





Total interest income

128,755


133,217


257,835


272,453


Interest expense:










Deposits:











Interest-bearing

236


177


483


361




Savings and money market accounts

5,033


7,398


10,136


15,243




Certificates and other time deposits

3,169


5,606


6,693


12,433



Securities sold under agreements to repurchase

276


940


544


1,855



Wholesale borrowings

1,118


1,653


2,269


3,292




Total interest expense

9,832


15,774


20,125


33,184




Net interest income

118,923


117,443


237,710


239,269


Provision for noncovered loan losses

8,766


10,138


16,895


27,156


Provision for covered loan losses

3,430


7,481


9,362


12,812




Net interest income after provision for loan losses

106,727


99,824


211,453


199,301


Other income:










Trust department income

5,730


5,863


11,357


11,377



Service charges on deposits

14,478


15,712


28,887


30,622



Credit card fees

11,216


13,510


21,396


25,717



ATM and other service fees

3,890


3,063


7,680


5,980



Bank owned life insurance income

2,923


3,015


5,979


8,256



Investment services and insurance

2,388


1,972


4,635


4,419



Investment securities gains, net

548


889


808


889



Loan sales and servicing income

5,139


2,891


11,830


5,676



Other operating income

8,989


4,576


14,455


11,311




Total other income

55,301


51,491


107,027


104,247


Other expenses:










Salaries, wages, pension and employee benefits

61,598


56,713


125,571


116,583



Net occupancy expense

7,971


8,086


16,563


16,680



Equipment expense

7,598


6,816


14,702


13,652



Stationery, supplies and postage

2,285


2,750


4,428


5,455



Bankcard, loan processing and other costs

8,858


8,266


16,511


15,829



Professional services

9,307


5,940


12,659


11,734



Amortization of intangibles

483


543


966


1,086



FDIC insurance expense

3,463


4,581


7,183


8,947



Other operating expense

17,514


16,373


34,262


34,548




Total other expenses

119,077


110,068


232,845


224,514





Income before income tax expense

42,951


41,247


85,635


79,034


Income tax expense

12,366


11,484


24,706


21,710





Net income

30,585


29,763


60,929


57,324


Other comprehensive income, net of taxes










Changes in unrealized securities' holding gains and losses

$                     4,103


$               17,198


$                    5,987


$              17,536



Reclassification for realized securities' gains

(356)


(578)


(525)


(578)



   Total other comprehensive gain, net of taxes

3,747


16,620


5,462


16,958




  Comprehensive income

$                   34,332


$               46,383


$                  66,391


$              74,282


Net income applicable to common shares

$                   30,585


$               29,763


$                  60,929


$              57,324


Net income used in diluted EPS calculation

$                   30,585


$               29,763


$                  60,929


$              57,324


Weighted average number of common shares outstanding - basic

109,562


109,138


109,386


108,954


Weighted average number of common shares outstanding - diluted

109,562


109,139


109,386


108,955


Basic earnings per common share

$                       0.28


$                   0.27


$                      0.56


$                  0.53


Diluted earnings per common share

$                       0.28


$                   0.27


$                      0.56


$                  0.53


Dividend per common share

$                       0.16


$                   0.16


$                      0.32


$                  0.32


























FIRSTMERIT CORPORATION AND SUBSIDIARIES



Consolidated Statements of Comprehensive Income---Linked Quarters



























Quarterly Results

(Unaudited)


2012


2012


2011


2011


2011

(Dollars in thousands, except per share data)


2nd Qtr


1st Qtr


4th Qtr


3rd Qtr


2nd Qtr

Loans and loans held for sale


$        103,126


$         103,082


$        107,516


$        108,417


$        107,904

Investment securities


25,629


25,998


24,732


25,138


25,313

          Total interest income


128,755


129,080


132,248


133,555


133,217

Interest on deposits:











     Interest-bearing


236


247


237


218


177

     Savings and money market accounts


5,033


5,103


5,998


6,929


7,398

     Certificates and other time deposits


3,169


3,524


3,201


4,370


5,606

Securities sold under agreements to repurchase


276


268


512


977


940

Wholesale borrowings


1,118


1,151


1,334


1,669


1,653

          Total interest expense


9,832


10,293


11,282


14,163


15,774

          Net interest income


118,923


118,787


120,966


119,392


117,443

Provision for noncovered loan losses


8,766


8,129


12,275


14,604


10,138

Provision for covered loan losses


3,430


5,932


2,773


4,768


7,481

     Net interest income after provision for loan losses


106,727


104,726


105,918


100,020


99,824

Other income:











     Trust department income


5,730


5,627


5,413


5,607


5,863

     Service charges on deposits


14,478


14,409


15,622


17,838


15,712

     Credit card fees


11,216


10,180


10,182


13,640


13,510

     ATM and other service fees


3,890


3,790


3,920


3,801


3,063

     Bank owned life insurance income


2,923


3,056


3,381


3,182


3,015

     Investment services and insurance


2,388


2,247


1,844


1,965


1,972

     Investment securities gains, net


548


260


5,790


4,402


889

     Loan sales and servicing income


5,139


6,691


5,102


3,426


2,891

    Other operating income


8,989


5,466


8,483


6,911


4,576

          Total other income


55,301


51,726


59,737


60,772


51,491

Other expenses:











     Salaries, wages, pension and employee benefits


61,598


63,973


62,546


61,232


56,713

     Net occupancy expense


7,971


8,592


7,270


8,464


8,086

     Equipment expense


7,598


7,104


7,234


7,073


6,816

     Stationery, supplies and postage


2,285


2,143


2,719


2,517


2,750

     Bankcard, loan processing and other costs


8,858


7,653


7,948


8,449


8,266

     Professional services


9,307


3,352


5,763


5,732


5,940

     Amortization of intangibles


483


483


543


543


543

     FDIC expense


3,463


3,720


5,119


3,240


4,581

     Other operating expense


17,514


16,748


24,732


18,707


16,373

          Total other expenses


119,077


113,768


123,874


115,957


110,068

Income before income tax expense


42,951


42,684


41,781


44,835


41,247

Income taxes


12,366


12,340


11,285


13,098


11,484

              Net income


30,585


30,344


30,496


31,737


29,763

Other comprehensive income (loss), net of taxes


3,747


1,715


(19,233)


4,491


16,620

         Comprehensive income


$          34,332


$           32,059


$          11,263


$          36,228


$          46,383

Net income applicable to common shares


$          30,585


$           30,344


$          30,496


$          31,737


$          29,763

Net income used in diluted EPS calculation


$          30,585


$           30,344


$          30,496


$          31,737


$          29,763

Weighted-average common shares outstanding - basic


109,562


109,211


109,249


109,245


109,138

Weighted-average common shares outstanding - diluted


109,562


109,211


109,249


109,246


109,139

Basic earnings per common share


$              0.28


$               0.28


$              0.28


$              0.29


$              0.27

Diluted earnings per common share


$              0.28


$               0.28


$              0.28


$              0.29


$              0.27












FIRSTMERIT CORPORATION AND SUBSIDIARIES













Asset Quality Information (Excluding Acquired Assets)




















(Unaudited, except December 31, 2011 annual period which is derived from the audited financial statements)







(Dollars in thousands, except ratios)















Quarterly Periods


Annual Period



June 30,


March 31,


December 31,


September 30,


June 30,


December 31,

Allowance for Credit Losses


2012


2012


2011


2011


2011


2011

Allowance for noncovered loan losses, beginning of period


$      103,849


$      107,699


$         109,187


$      109,187


$      114,690


$         114,690

     Provision for noncovered loan losses


8,766


8,129


12,275


14,604


10,138


54,035

     Charge-offs


15,014


17,417


18,984


20,014


20,958


82,768

     Recoveries


6,248


5,438


5,221


5,410


5,317


21,742

       Net charge-offs


8,766


11,979


13,763


14,604


15,641


61,026

Allowance for noncovered loan losses, end of period


$      103,849


$      103,849


$         107,699


$      109,187


$      109,187


$         107,699

Reserve for unfunded lending commitments, beginning of period


$          5,410


$          6,373


$             6,360


$          5,799