FirstMerit Reports Second Quarter 2012 EPS of $0.28 Per Share

Jul 24, 2012, 07:30 ET from FirstMerit Corporation

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

      &#