FirstMerit Reports Second Quarter 2014 EPS of $0.35 Per Share

AKRON, Ohio, July 22, 2014 /PRNewswire/ --

Quarterly Highlights include:

  • Profitability Sustained: 61st consecutive quarter of profitability.
  • Organic growth continued: Total loan growth of $361.0 million, or 2.47% from the prior quarter.
  • Credit quality remained solid: Net charge-offs to average originated loans of 0.22%; nonperforming assets as a percent of period end originated loans plus other real estate at 0.53%.
  • Balance sheet remained strong: Strong tangible common equity ratio at 7.89%.

FirstMerit Corporation (Nasdaq: FMER) (the "Corporation") reported second quarter 2014 net income of $59.5 million, or $0.35 per diluted share.  This compares with $53.5 million, or $0.31 per diluted share, for the first quarter 2014 and $48.5 million, or $0.29 per diluted share, for the second quarter 2013.  Pre-tax costs associated with branch closures of $4.0 million were recognized in the second quarter of 2014 and are included within noninterest income.

Returns on average common equity ("ROE") and average assets ("ROA") for the second quarter 2014 were 8.62% and 0.98%, respectively, compared with 7.93% and 0.90%, respectively, for the first quarter 2014 and 7.56% and 0.85%, respectively, for the second quarter 2013. 

"Our second quarter 2014 results demonstrate solid execution on our strategies to grow organically, maintain strong asset quality and generate robust capital levels to both support profitable growth across our footprint and to allow us to pay a healthy dividend to our shareholders," said Paul Greig, chairman, president and CEO, FirstMerit Corporation.            

"Acquired loans," as used herein, are those assumed in the Citizens acquisition. As used herein, "originated loans" refer to loans that have been originated in the normal course of business and "covered loans" refer to loans covered by loss sharing agreements with the FDIC providing considerable protection against credit risk.

Net Interest Income

Net interest income on a fully tax-equivalent ("TE") basis was $199.7 million in the second quarter 2014 compared with $197.9 million in the first quarter 2014 and $201.6 million in the second quarter 2013.

Net interest margin was 3.75% for the second quarter 2014 compared with 3.84% for the first quarter 2014 and 4.12% for the second quarter 2013.  Second quarter 2014 net interest margin compression compared with the first quarter 2014 was primarily driven by declining volume in the acquired loan portfolio and lower investment portfolio yields, partially offset by increased volume of originated loans and day count.

Average originated loans were $11.1 billion during the second quarter 2014, an increase of $643.7 million, or 6.16%, compared with the first quarter 2014, and an increase of $2.2 billion, or 24.94%, compared with the second quarter 2013.  Average originated commercial loans increased $365.5 million, or 5.36%, compared with the prior quarter, and increased $1.3 billion, or 22.01%, compared with the year-ago quarter.

Average deposits were $19.5 billion during the second quarter 2014, a decrease of $139.7 million, or 0.71%, compared with the first quarter 2014, and an increase of $1.2 billion, or 6.34%, compared with the second quarter 2013.  During the second quarter 2014, average core deposits, which exclude time deposits, decreased $70.6 million, or 0.41%, compared with the first quarter 2014 and increased $1.5 billion, or 9.64%, compared with the second quarter 2013.  Average time deposits decreased $69.1 million, or 2.88%, and decreased $346.5 million, or 12.93%, respectively, over the prior and year-ago quarters.  For the second quarter 2014, average core deposits accounted for 88.03% of total average deposits, compared with 87.76% for the first quarter 2014 and 85.38% for the second quarter 2013.

Average investments increased $170.4 million, or 2.63%, compared with the first quarter 2014 and increased $725.2 million, or 12.23% compared with the second quarter 2013.

Noninterest Income

Noninterest income, excluding gains and losses on securities transactions, for the second quarter 2014 was $72.5 million, an increase of $5.3 million, or 7.83%, from the first quarter 2014 and an increase of $0.2 million, or 0.34%, from the second quarter 2013. Included in noninterest income in the second quarter 2014 was $4.1 million of gains on covered loans paid in full, compared to $1.6 million and $1.0 million in the first quarter 2014 and second quarter 2013, respectively. Also included in noninterest income in the second quarter of 2014 were costs of $4.0 million associated with branch closures.

Noninterest income, excluding net securities gains and losses, as a percentage of net revenue for the second quarter 2014 was 26.63% compared with 25.36% for first quarter 2014 and 26.38% for the second quarter 2013.  Net revenue is defined as net interest income, on an TE basis, plus other income, excluding gains and losses from securities sales.

Noninterest Expense

Noninterest expense for the second quarter 2014 was $167.4 million, a decrease of $1.9 million, or 1.14%, from the first quarter 2014 and a decrease of $21.5 million, or 11.38%, from the second quarter 2013.  Included in noninterest expense in the first quarter 2014 and second quarter 2013 were merger related costs associated with the Citizens acquisition of $1.0 million and $32.1 million, respectively.  The Corporation's efficiency ratio was 60.43% for the second quarter 2014, compared with 62.77% for the first quarter 2014 and 68.10% for the second quarter 2013.

The effective tax rate was 30.37% for the second quarter 2014 compared with 30.85% for the first quarter 2014 and 32.02% for the second quarter 2013.

Asset Quality (excluding acquired loans and covered assets)

Due to the impact of business combination accounting and protection against credit risk from FDIC loss sharing agreements, acquired loans and covered assets are excluded from the asset quality discussion to provide for improved comparability to prior periods and better perspective into asset quality trends. Acquired loans are recorded at fair value at the date of acquisition with no allowance brought forward in accordance with business combination accounting. Impaired acquired and covered loans are considered to be performing due to the application of the accretion method under the applicable accounting guidance.

Net charge-offs on originated loans totaled $6.2 million, or 0.22% of average originated loans in the second quarter 2014, compared with $8.0 million, or 0.31% of average originated loans, in the first quarter 2014 and $3.3 million, or 0.15% of average originated loans, in the second quarter 2013. 

Nonperforming assets totaled $60.9 million at June 30, 2014, a decrease of $1.8 million, or 2.85%, compared with March 31, 2014 and a decrease of $5.3 million, or 7.94%, compared with June 30, 2013. Nonperforming assets at June 30, 2014 represented 0.53% of period-end originated loans plus other real estate compared with 0.58% at March 31, 2014 and 0.72% at June 30, 2013.

The allowance for originated loan losses totaled $92.0 million at June 30, 2014.   At June 30, 2014, the allowance for originated loan losses was 0.80% of period-end originated loans compared with 0.85% at March 31, 2014 and 1.08% at June 30, 2013.  The allowance for credit losses is the sum of the allowance for originated loan losses and the reserve for unfunded lending commitments.  For comparative purposes, the allowance for credit losses was 0.86% of period end originated loans at June 30, 2014, compared with 0.92% at March 31, 2014 and 1.17% at June 30, 2013.  The allowance for credit losses to nonperforming loans was 269.61% at June 30, 2014, compared with 229.23% at March 31, 2014 and 234.82% at June 30, 2013.

Balance Sheet

The Corporation's total assets at June 30, 2014 were $24.6 billion, an increase of $65.8 million, or 0.27%, compared with March 31, 2014 and an increase of $1.0 billion, or 4.37%, compared with June 30, 2013. 

Total deposits were $19.3 billion at June 30, 2014, a decrease of $513.3 million, or 2.59%, from March 31, 2014 and an increase of $178.7 million, or 0.93%, from June 30, 2013.  Core deposits totaled $17.0 billion at June 30, 2014, a decrease of $397.7 million, or 2.28%, from March 31, 2014 and an increase of $727.2 million, or 4.46%, from June 30, 2013. 

Shareholders' equity was $2.8 billion as of June 30, 2014, and $2.7 billion as of March 31, 2014 and June 30, 2013.  The Corporation maintained a strong capital position as tangible common equity to assets was 7.89% at June 30, 2014, compared with 7.69% at March 31, 2014  and 7.58% at June 30, 2013.  The common share cash dividend paid in the second quarter 2014 was $0.16 per share.

Second Quarter 2014 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: 71490061.  A replay of the conference call will be available at approximately 2:00 p.m. (Eastern Time) on July 22, 2014 through August 5, 2014 by dialing (855) 859-2056, and entering the PIN: 71490061.  The Corporation will provide a slide presentation, which management will speak to during the conference call.  A copy of the presentation will be available at https://www.firstmerit.com/personal/investors.aspx; click on the Presentations link to access the slide presentation.

Non-GAAP Measures:  This news release contains financial information and performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Corporation's management uses these non-GAAP measures in their analysis of the Corporation's performance and the efficiency of its operations. Management believes that these non-GAAP measures provide a greater understanding of ongoing operations of the Corporation and enhance comparability of results with prior periods, and facilitate investors' assessments of business and performance trends in comparison to others in the financial services industry. The Corporation believes that a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance. The Corporation's management believes that investors may use these non-GAAP financial measures to analyze financial performance without the impact of unusual items that may obscure trends in the Corporation's underlying performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

About FirstMerit Corporation

FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of approximately $24.6 billion as of June 30, 2014, and 379 banking offices and 412 ATM locations in Ohio, Michigan, Wisconsin, Illinois and Pennsylvania. 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 and FirstMerit Title Agency, Ltd.

Subsequent Events

The Corporation is required under generally accepted accounting principles to evaluate subsequent events through the filing of the its consolidated financial statements for the quarter ended June 30, 2014 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, 2014 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, competitive pressures, changes in accounting, tax or regulatory practices or requirements, the Corporation's ability to realize the synergies and benefits contemplated by the acquisition of Citizens, such as it being accretive to earnings and expanding the Corporation's geographic presence, in the time frame anticipated or at all, and those risk factors detailed in the Corporation's periodic reports 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)





Quarters






(Dollars in thousands, except per share amounts)

2014


2014


2013


2013


2013



2nd qtr


1st qtr


4th qtr


3rd qtr


2nd qtr


EARNINGS











Net interest income TE (a)

$

199,666


$

197,854


$

202,145


$

207,079


$

201,605


TE adjustment (a)

4,089


3,954


4,077


3,739


3,574


Provision for originated loan losses

5,993


3,654


1,552


2,523


3,151


Provision for acquired loan losses

5,815


7,827


5,515


2,033



Provision for covered loan losses

3,445


3,055


2,983


1,823


4,158


Noninterest income

72,560


67,270


72,420


71,090


69,439


Noninterest expense

167,400


169,331


178,620


210,599


188,888


Net income

59,519


53,455


57,174


40,715


48,450


Diluted EPS (c)

0.35


0.31


0.33


0.23


0.29


PERFORMANCE RATIOS











Return on average assets (ROA)

0.98

%

0.90

%

0.94

%

0.67

%

0.85

%

Return on average equity (ROE)

8.62

%

7.93

%

8.48

%

6.07

%

7.56

%

Return on average tangible common equity (d)

12.92

%

11.98

%

12.96

%

9.29

%

11.49

%

Net interest margin TE (a)

3.75

%

3.84

%

3.89

%

4.05

%

4.12

%

Efficiency ratio (e)

60.43

%

62.77

%

64.08

%

74.64

%

68.10

%

Number of full-time equivalent employees

4,392


4,521


4,570


4,666


4,619


MARKET DATA











Book value per common share

$

16.88


$

16.62


$

16.38


$

16.08


$

16.06


Tangible book value per common share (d)

11.33


11.03


10.77


10.47


10.43


Period end common share market value

19.75


20.83


22.23


21.72


20.03


Market as a % of book

117

%

125

%

136

%

135

%

125

%

Cash dividends per common share

$

0.16


$

0.16


$

0.16


$

0.16


$

0.16


Common Stock dividend payout ratio

45.71

%

51.61

%

48.48

%

69.57

%

55.17

%

Average basic common shares

165,335


165,060


165,054


165,044


157,863


Average diluted common shares

166,147


166,004


166,097


165,874


158,390


Period end common shares

165,393


165,087


165,056


165,045


165,045


Common shares repurchased

186


51


17


7


168


Common Stock market capitalization

$

3,266,512


$

3,438,762


$

3,669,195


$

3,584,777


$

3,305,851


ASSET QUALITY (excluding acquired and covered loans) (b)











Gross charge-offs

$

11,148


$

13,160


$

9,913


$

8,515


$

10,969


Net charge-offs

6,159


8,022


3,359


2,877


3,349


Allowance for originated loan losses

91,950


92,116


96,484


98,291


98,645


Reserve for unfunded lending commitments

7,107


7,481


7,907


8,493


8,114


Nonperforming assets (NPAs)

60,922


62,711


60,883


55,426


66,177


Net charge-offs to average loans ratio

0.22

%

0.31

%

0.13

%

0.12

%

0.15

%

Allowance for originated loan losses to period-end loans

0.80

%

0.85

%

0.94

%

1.00

%

1.08

%

Allowance for credit losses to period-end loans

0.86

%

0.92

%

1.02

%

1.09

%

1.17

%

NPAs to loans and other real estate

0.53

%

0.58

%

0.60

%

0.57

%

0.72

%

Allowance for originated loan losses to nonperforming loans

250.27

%

212.01

%

228.62

%

276.19

%

216.97

%

Allowance for credit losses to nonperforming loans

269.61

%

229.23

%

247.35

%

300.06

%

234.82

%

CAPITAL & LIQUIDITY











Period end tangible common equity to assets (d)

7.89

%

7.69

%

7.70

%

7.41

%

7.58

%

Average equity to assets

11.40

%

11.32

%

11.12

%

11.08

%

11.28

%

Average equity to total loans

18.90

%

19.04

%

18.81

%

18.97

%

18.95

%

Average total loans to deposits

75.15

%

73.11

%

72.84

%

72.11

%

74.04

%

AVERAGE BALANCES











Assets

$

24,291,276


$

24,144,570


$

24,034,846


$

24,013,594


$

22,810,702


Deposits

19,496,795


19,636,506


19,517,476


19,456,231


18,334,244


Originated loans

11,092,101


10,448,383


9,988,587


9,377,826


8,877,754


Acquired loans, including covered loans, less loss share receivable

3,558,810


3,907,802


4,227,693


4,652,101


4,696,740


Earning assets

21,367,496


20,903,863


20,593,750


20,276,825


19,609,974


Shareholders' equity

2,768,352


2,733,226


2,673,635


2,661,546


2,571,964


ENDING BALANCES











Assets

$

24,564,431


$

24,498,661


$

23,912,028


$

24,137,730


$

23,534,873


Deposits

19,298,396


19,811,674


19,533,601


19,489,533


19,119,722


Originated loans

11,467,193


10,826,913


10,213,387


9,789,139


9,132,625


Acquired loans, including covered loans, less loss share receivable

3,458,453


3,726,952


4,025,758


4,401,711


4,926,888


Goodwill

741,740


741,740


741,740


741,740


741,740


Intangible assets

76,886


79,819


82,755


85,447


88,419


Earning assets

21,789,773


21,715,302


21,048,910


21,297,250


20,772,749


Total shareholders' equity

2,791,738


2,742,966


2,702,894


2,654,645


2,650,909


NOTES:











(a) - The interest income earned on certain earning assets is completely or partially exempt from federal and/or state income taxes.  As such, these tax-exempt securities typically yield lower

returns than taxable securities.  To provide more meaningful comparisons of net interest margins for all earning assets, net interest income on a taxable-equivalent basis is used in calculating

net interest margin by increasing the interest earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments.  This adjustment is not permitted under

generally accepted accounting principles in the Consolidated Statements of Comprehensive Income.

(b) - Due to the impact of business combination accounting and protection of FDIC loss sharing agreements, which provide considerable protection against credit risk, acquired loans and covered assets are excluded from this table to provide for improved comparability to prior periods and better perspective into asset quality trends.

(c) - Net income used to determine diluted EPS was reduced by the cash dividends payable on the Corporation's 5.875% Non-Cumulative Perpetual Preferred Stock, Series A of approximately $1.5 million in each of the quarters presented.

(d) -  Tangible book value per common share is a non-GAAP financial measure and is calculated based on tangible common equity divided by period end common shares outstanding.  Tangible common equity excludes goodwill, intangible assets, and preferred stock.  Management believes this non-GAAP measure serves as a useful tool to help evaluate the strength and discipline of a company's capital management strategies and as an additional, conservative measure of total company value.

(e) - The efficiency ratio is calculated as noninterest expense divided by total revenue, excluding net gains on the sale of securities of $0.1 million and $0.1 million in the quarters ended June 30, 2014 and March 31, 2014,  respectively, and a net loss of $2.8 million in the quarter ended June 30, 2013.

 

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES









CONSOLIDATED BALANCE SHEETS





















(Dollars in thousands)

June 30,



December 31,



June 30,


(Unaudited, except December 31, 2013, which is derived from the audited financial statements)

2014



2013



2013


ASSETS










Cash and due from banks

$

523,027



$

571,171



$

421,836



Interest-bearing deposits in banks

119,543



346,651



487,654




Total cash and cash equivalents

642,570



917,822



909,490



Investment securities:











Held-to-maturity

3,052,118



2,935,688



2,551,860




Available-for-sale

3,478,420



3,273,174



3,299,392




Other investments

148,433



180,803



267,565



Loans held for sale

21,632



11,622



22,855



Loans

14,969,627



14,300,972



14,143,423



Allowance for loan losses

(142,036)



(141,252)



(147,714)



     Net loans

14,827,591



14,159,720



13,995,709



Premises and equipment, net

315,770



327,054



316,877



Goodwill

741,740



741,740



741,740



Intangible assets

76,886



82,755



88,419



Covered other real estate

51,072



65,234



67,786



Accrued interest receivable and other assets

1,208,199



1,216,416



1,273,180





    Total assets

$

24,564,431



$

23,912,028



$

23,534,873


LIABILITIES AND SHAREHOLDERS' EQUITY










Deposits:











Noninterest-bearing

$

5,525,484



$

5,459,029



$

5,277,647




Interest-bearing

3,028,479



3,026,735



2,504,368




Savings and money market accounts

8,476,096



8,587,167



8,520,806




Certificates and other time deposits

2,268,337



2,460,670



2,816,901





Total deposits

19,298,396



19,533,601



19,119,722




Federal funds purchased and securities sold under agreements to repurchase

1,218,855



851,535



844,871




Wholesale borrowings

649,021



200,600



201,337




Long-term debt

324,433



324,428



324,422




Accrued taxes, expenses, and other liabilities

281,988



298,970



393,612





Total liabilities

21,772,693



21,209,134



20,883,964




Shareholders' equity:












5.875% Non-Cumulative Perpetual Preferred stock, Series A, without par value: authorized 115,000 shares; 100,000 issued

100,000



100,000



100,000





Common stock warrant

3,000



3,000



3,000





Common Stock, without par value;  authorized 300,000,000 shares; issued: June 30, 2014 and

December 31, 2013 - 170,183,540 shares; June 30, 2013 - 170,179,911 shares

127,937



127,937



127,937





Capital surplus

1,387,253



1,390,643



1,386,063





Accumulated other comprehensive loss

(39,507)



(66,876)



(71,897)





Retained earnings

1,335,371



1,277,975



1,235,530





Treasury stock, at cost: June 30, 2014 - 4,790,517 December 31, 2013 - 5,127,332 shares; June 30, 2013 - 5,134,463 shares

(122,316)



(129,785)



(129,724)





Total shareholders' equity

2,791,738



2,702,894



2,650,909





    Total liabilities and shareholders' equity

$

24,564,431



$

23,912,028



$

23,534,873



























FIRSTMERIT CORPORATION AND SUBSIDIARIES

Period End Loans by Product Type (Unaudited)

(Dollars in thousands)













As of June 30, 2014


Originated Loans


Acquired Loans (1)


Covered Loans (2)


Total Loans

Commercial

$

7,365,499



$

1,457,903



$

292,782



$

9,116,184


Mortgage

580,166



425,584



46,705



1,052,455


Installment

2,051,587



872,034



5,364



2,928,985


Home equity

998,179



268,266



89,815



1,356,260


Credit card

151,967







151,967


Leases

319,795







319,795


    Subtotal

11,467,193



3,023,787



434,666



14,925,646


Loss share receivable





43,981



43,981


    Total loans

11,467,193



3,023,787



478,647



14,969,627


Allowance for loan losses

(91,950)



(4,977)



(45,109)



(142,036)


Net loans

$

11,375,243



$

3,018,810



$

433,538



$

14,827,591



























As of March 31, 2014


Originated Loans


Acquired Loans (1)


Covered Loans (2)


Total Loans

Commercial

$

7,083,192



$

1,562,878



$

341,267



$

8,987,337


Mortgage

555,971



446,374



49,411



1,051,756


Installment

1,835,522



943,354



5,531



2,784,407


Home equity

946,802



283,309



94,828



1,324,939


Credit card

147,917







147,917


Leases

257,509







257,509


    Subtotal

10,826,913



3,235,915



491,037



14,553,865


Loss share receivable





54,748



54,748


    Total loans

10,826,913



3,235,915



545,785



14,608,613


Allowance for loan losses

(92,116)



(2,974)



(49,970)



(145,060)


Net loans

$

10,734,797



$

3,232,941



$

495,815



$

14,463,553



























As of December 31, 2013


Originated Loans


Acquired Loans (1)


Covered Loans (2)


Total Loans

Commercial

$

6,648,279



$

1,725,970



$

375,860



$

8,750,109


Mortgage

529,253



470,652



50,679



1,050,584


Installment

1,727,925



1,004,569



6,162



2,738,656


Home equity

920,066



294,424



97,442



1,311,932


Credit card

148,313







148,313


Leases

239,551







239,551


    Subtotal

10,213,387



3,495,615



530,143



14,239,145


Loss share receivable





61,827



61,827


    Total loans

10,213,387



3,495,615



591,970



14,300,972


Allowance for loan losses

(96,484)



(741)



(44,027)



(141,252)


Net loans

$

10,116,903



$

3,494,874



$

547,943



$

14,159,720



























As of September 30, 2013


Originated Loans


Acquired Loans (1)


Covered Loans (2)


Total Loans

Commercial

6,420,369



$

1,963,746



$

422,225



$

8,806,340


Mortgage

487,283



466,594



52,796



1,006,673


Installment

1,647,095



1,080,298



6,361



2,733,754


Home equity

889,372



306,783



102,908



1,299,063


Credit card

145,113







145,113


Leases

199,907







199,907


    Subtotal

9,789,139



3,817,421



584,290



14,190,850


Loss share receivable





69,986



69,986


    Total loans

9,789,139



3,817,421



654,276



14,260,836


Allowance for loan losses

(98,291)





(45,544)



(143,835)


Net loans

$

9,690,848



$

3,817,421



$

608,732



$

14,117,001



























As of June 30, 2013


Originated Loans


Acquired Loans (1)


Covered Loans (2)


Total Loans

Commercial

$

5,997,812



$

2,267,811



$

505,706



$

8,771,329


Mortgage

462,427



439,380



56,056



957,863


Installment

1,496,663



1,221,060



7,794



2,725,517


Home equity

845,051



322,111



106,970



1,274,132


Credit card

142,319







142,319


Leases

188,353







188,353


    Subtotal

9,132,625



4,250,362



676,526



14,059,513


Loss share receivable





83,910



83,910


    Total loans

9,132,625



4,250,362



760,436



14,143,423


Allowance for loan losses

(98,645)





(49,069)



(147,714)


Net loans

$

9,033,980



$

4,250,362



$

711,367



$

13,995,709














(1) Loans assumed from Citizens.  No allowance was brought forward on the date of acquisition in accordance with business combination accounting.

(2) Loans which are covered by loss sharing agreements with the FDIC providing considerable protection against credit risk.

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES















AVERAGE CONSOLIDATED BALANCE SHEETS
















Quarterly Periods

(Unaudited)

June 30,



March 31,



December 31,



September 30,



June 30,


(Dollars in thousands)

2014



2014



2013



2013



2013


ASSETS















Cash and cash equivalents

$

662,000



$

959,071



$

1,135,601



$

1,415,430



$

806,129


Investment securities:















Held-to-maturity

3,061,711



2,983,831



2,763,517



2,640,807



1,953,094


Available-for-sale

3,444,830



3,332,358



3,284,635



3,243,173



3,723,002


Other investments

148,440



168,389



253,490



267,743



253,649


Loans held for sale

10,196



6,804



10,248



18,265



17,394


Loans

14,702,319



14,412,481



14,281,860



14,106,837



13,662,835


Less: allowance for loan losses

146,368



138,891



177,628



146,509



146,705


Net loans

14,555,951



14,273,590



14,104,232



13,960,328



13,516,130


Total earning assets

21,367,496



20,903,863



20,593,750



20,276,825



19,609,974


Premises and equipment, net

323,175



327,845



326,632



322,236



299,979


Accrued interest receivable and other assets

2,084,973



2,092,682



2,156,491



2,145,612



2,241,325


TOTAL ASSETS

$

24,291,276



$

24,144,570



$

24,034,846



$

24,013,594



$

22,810,702


 

LIABILITIES















Deposits:















Noninterest-bearing

$

5,515,807



$

5,488,751



$

5,546,316



$

5,443,800



$

5,095,977


Interest-bearing

3,066,201



3,045,952



2,875,375



2,720,592



2,347,155


Savings and money market accounts

8,580,928



8,698,817



8,544,097



8,570,910



8,210,780


Certificates and other time deposits

2,333,859



2,402,986



2,551,688



2,720,929



2,680,332


Total deposits

19,496,795



19,636,506



19,517,476



19,456,231



18,334,244


Federal funds purchased and securities sold under















agreements to repurchase

1,024,598



884,065



948,959



1,011,991



927,451


Wholesale borrowings

373,213



276,324



200,622



201,012



237,887


Long-term debt

324,431



324,428



324,426



324,424



314,597


Total funds

21,219,037



21,121,323



20,991,483



20,993,658



19,814,179


Accrued taxes, expenses and other liabilities

303,887



290,021



369,728



358,390



424,559


Total liabilities

21,522,924



21,411,344



21,361,211



21,352,048



20,238,738


SHAREHOLDERS' EQUITY















Preferred stock

100,000



100,000



100,000



100,000



100,000


Common stock warrant

3,000



3,000



3,000



3,000



2,637


Common stock

127,937



127,937



127,937



127,937



127,937


Capital surplus

1,386,497



1,391,695



1,389,222



1,386,931



1,274,758


Accumulated other comprehensive loss

(44,952)



(52,940)



(79,431)



(82,598)



(29,033)


Retained earnings

1,319,515



1,293,379



1,262,705



1,256,052



1,225,380


Treasury stock

(123,645)



(129,845)



(129,798)



(129,776)



(129,715)


Total shareholders' equity

2,768,352



2,733,226



2,673,635



2,661,546



2,571,964


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

24,291,276



$

24,144,570



$

24,034,846



$

24,013,594



$

22,810,702









































FIRSTMERIT CORPORATION AND SUBSIDIARIES

Average Loans by Product Type (Unaudited)

(Dollars in thousands)













Quarter ended June 30, 2014


Originated Loans


Acquired Loans (1)


Covered Loans (2)


Total Loans

Commercial

$

7,185,060



$

1,492,139



$

303,721



$

8,980,920


Mortgage

565,703



434,936



48,258



1,048,897


Installment

1,939,802



907,069



5,445



2,852,316


Home equity

969,592



275,387



91,855



1,336,834


Credit card

149,903







149,903


Leases

282,041







282,041


    Subtotal

11,092,101



3,109,531



449,279



14,650,911


Loss share receivable





51,408



51,408


    Total loans

11,092,101



3,109,531



500,687



14,702,319


Less allowance for loan losses

94,063



3,034



49,271



146,368


Net loans

$

10,998,038



$

3,106,497



$

451,416



$

14,555,951



























Quarter ended March 31, 2014


Originated Loans


Acquired Loans (1)


Covered Loans (2)


Total Loans

Commercial

$

6,819,522



$

1,678,267



$

357,033



$

8,854,822


Mortgage

538,151



459,842



49,921



1,047,914


Installment

1,771,434



972,711



6,012



2,750,157


Home equity

929,362



288,529



95,487



1,313,378


Credit card

147,265







147,265


Leases

242,649







242,649


    Subtotal

10,448,383



3,399,349



508,453



14,356,185


Loss share receivable





56,296



56,296


    Total loans

10,448,383



3,399,349



564,749



14,412,481


Less allowance for loan losses

96,789



(617)



42,719



138,891


Net loans

$

10,351,594



$

3,399,966



$

522,030



$

14,273,590



























Quarter Ended December 31, 2013


Originated Loans


Acquired Loans (1)


Covered Loans (2)


Total Loans

Commercial

$

6,526,243



$

1,866,064



$

400,105



$

8,792,412


Mortgage

509,685



472,771



51,304



1,033,760


Installment

1,697,651



1,032,245



6,279



2,736,175


Home equity

905,172



298,212



100,712



1,304,096


Credit card

146,805







146,805


Leases

203,031







203,031


    Subtotal

9,988,587



3,669,292



558,401



14,216,280


Loss share receivable





65,580



65,580


    Total loans

9,988,587



3,669,292



623,981



14,281,860


Less allowance for loan losses

134,890



(2,091)



44,829



177,628


Net loans

$

9,853,697



$

3,671,383



$

579,152



$

14,104,232



























Quarter Ended September 30, 2013


Originated Loans


Acquired Loans (1)


Covered Loans (2)


Total Loans

Commercial

$

6,131,423



$

2,118,803



$

460,242



$

8,710,468


Mortgage

472,281



448,206



54,403



974,890


Installment

1,570,124



1,145,824



7,180



2,723,128


Home equity

866,001



312,681



104,762



1,283,444


Credit card

143,637







143,637


Leases

194,360







194,360


    Subtotal

9,377,826



4,025,514



626,587



14,029,927


Loss share receivable





76,910



76,910


    Total loans

9,377,826



4,025,514



703,497



14,106,837


Less allowance for loan losses

97,693



68



48,748



146,509


Net loans

$

9,280,133



$

4,025,446



$

654,749



$

13,960,328



























Quarter ended June 30, 2013


Originated Loans


Acquired Loans (1)


Covered Loans (2)


Total Loans

Commercial

$

5,888,935



$

2,141,015



$

575,859



$

8,605,809


Mortgage

453,813



408,723



56,825



919,361


Installment

1,388,765



1,107,076



7,912



2,503,753


Home equity

831,243



288,254



111,076



1,230,573


Credit card

141,785







141,785


Leases

173,213







173,213


    Subtotal

8,877,754



3,945,068



751,672



13,574,494


Loss share receivable





88,341



88,341


    Total loans

8,877,754



3,945,068



840,013



13,662,835


Less allowance for loan losses

99,411





47,294



146,705


Net loans

$

8,778,343



$

3,945,068



$

792,719



$

13,516,130














(1) Loans assumed from Citizens.  No allowance was brought forward on the date of acquisition in accordance with business combination accounting.

(2) Loans which are covered by loss sharing agreements with the FDIC providing considerable protection against credit risk.

 

FIRSTMERIT CORPORATION AND SUBIDARIES



















AVERAGE CONSOLIDATED BALANCE SHEETS

Fully Tax-equivalent Interest Rates and Interest Differential















Three months ended


Three months ended


Three months ended


June 30, 2014


March 31, 2014


June 30, 2013

(Unaudited)

Average





Average


Average





Average


Average





Average

(Dollars in thousands)

Balance


Interest (1)


Rate


Balance


Interest (1)


Rate


Balance


Interest (1)


Rate

ASSETS



























Cash and cash equivalents

$

662,000









$

959,071









$

806,129








Investment securities and federal funds sold:



























U.S. treasury securities and U.S. government agency obligations (taxable)

5,303,645



$

26,751



2.02

%


5,151,341



$

25,910



2.04

%


4,714,823



$

24,679



2.10

%

Obligations of states and political subdivisions (tax exempt)

767,731



8,753



4.57

%


739,875



8,613



4.72

%


710,579



9,217



5.20

%

Other securities and federal funds sold

583,605



5,501



3.78

%


593,362



6,112



4.18

%


504,343



4,459



3.55

%

Total investment securities and federal funds sold

6,654,981



41,005



2.47

%


6,484,578



40,635



2.54

%


5,929,745



38,355



2.59

%

Loans held for sale

10,196



89



3.51

%


6,804



59



3.53

%


17,394



143



3.30

%

Loans, including loss share receivable (2)

14,702,319



173,320



4.73

%


14,412,481



171,136



4.82

%


13,662,835



178,847



5.25

%

Total earning assets

21,367,496



214,414



4.02

%


20,903,863



211,830



4.11

%


19,609,974



217,345



4.45

%

Total allowance for loan losses

(146,368)









(138,891)









(146,565)








Other assets

2,408,148









2,420,527









2,541,164








Total assets

$

24,291,276









$

24,144,570









$

22,810,702








 

LIABILITIES AND SHAREHOLDERS' EQUITY






















Deposits:



























Noninterest-bearing

$

5,515,807





%


$

5,488,751





%


$

5,095,977





%

Interest-bearing

3,066,201



745



0.10

%


3,045,952



737



0.10

%


2,347,155



656



0.11

%

Savings and money market accounts

8,580,928



5,477



0.26

%


8,698,817



5,559



0.26

%


8,210,780



6,469



0.32

%

Certificates and other time deposits

2,333,859



3,009



0.52

%


2,402,986



2,464



0.42

%


2,680,332



3,374



0.50

%

Total deposits

19,496,795



9,231



0.19

%


19,636,506



8,760



0.18

%


18,334,244



10,499



0.23

%

Securities sold under agreements to repurchase

1,024,598



233



0.09

%


884,065



197



0.09

%


927,451



329



0.14

%

Wholesale borrowings

373,213



1,391



1.49

%


276,324



1,129



1.66

%


237,887



1,169



1.97

%

Long-term debt

324,431



3,893



4.81

%


324,428



3,890



4.86

%


314,597



3,743



4.77

%

Total interest-bearing liabilities

15,703,230



14,748



0.38

%


15,632,572



13,976



0.36

%


14,718,202



15,740



0.43

%

Other liabilities

303,887









290,021









424,559








Shareholders' equity

2,768,352









2,733,226









2,571,964








Total liabilities and shareholders' equity

$

24,291,276









$

24,144,570









$

22,810,702








Net yield on earning assets

$

21,367,496



$

199,666



3.75

%


$

20,903,863



$

197,854



3.84

%


$

19,609,974



$

201,605



4.12

%

Interest rate spread







3.65

%








3.75

%








4.02

%




























(1) The net yield on earning assets is calculated as annualized taxable-equivalent net interest income divided by average earning assets.  The interest income earned on certain earning assets is completely or partially exempt from federal

and/or state income taxes.  As such, these tax-exempt securities typically yield lower returns than taxable securities.  To provide more meaningful comparisons of net interest margins for all earning assets, net interest income on a

taxable-equivalent basis is used in calculating net interest margin by increasing the interest earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments.  This adjustment is not permitted under

generally accepted accounting principles in the Consolidated Statements of Income.  The taxable-equivalent adjustments to net interest income were $4.1 million, $4.0 million  and $3.6 million for the three months ended June 30, 2014,

March 31, 2014 and June 30, 2013, respectively.

(2) Nonaccrual loans have been included in the average balances.

FIRSTMERIT CORPORATION AND SUBIDARIES










AVERAGE CONSOLIDATED BALANCE SHEETS

Fully Tax-equivalent Interest Rates and Interest Differential






Six Months Ended


Six Months Ended


June 30, 2014


June 30, 2013

(Unaudited)

Average





Average


Average





Average

(Dollars in thousands)

Balance


Interest (1)


Rate


Balance


Interest (1)


Rate

ASSETS


















Cash and cash equivalents

$

809,715









$

601,649








Investment securities and federal funds sold:


















U.S. treasury securities and U.S. government agency obligations

(taxable)

5,227,913



$

52,661



2.03

%


3,757,748



$

40,974



2.20

%

Obligations of states and political subdivisions (tax exempt)

753,880



17,365



4.65

%


626,265



15,812



5.09

%

Other securities and federal funds sold

588,457



11,614



3.98

%


436,014



7,403



3.42

%

Total investment securities and federal funds sold

6,570,250



81,640



2.51

%


4,820,027



64,189



2.69

%

Loans held for sale

8,510



148



3.52

%


16,146



287



3.58

%

Loans, including loss share receivable (2)

14,558,200



344,453



4.77

%


11,690,339



277,852



4.79

%

Total earning assets

21,136,960



426,241



4.07

%


16,526,512



342,328



4.18

%

Total allowance for loan losses

(142,649)









(144,164)








Other assets

2,412,433









1,930,584








Total assets

$

24,216,459









$

18,914,581








LIABILITIES AND SHAREHOLDERS' EQUITY













Deposits:


















Noninterest-bearing

$

5,502,354





%


$

4,213,720





%

Interest-bearing

3,056,132



1,481



0.10

%


1,826,876



974



0.11

%

Savings and money market accounts

8,639,547



11,035



0.26

%


7,029,826



11,784



0.34

%

Certificates and other time deposits

2,368,231



5,473



0.47

%


2,009,671



5,437



0.55

%

Total deposits

19,566,264



17,989



0.19

%


15,080,093



18,195



0.24

%

Securities sold under agreements to repurchase

954,719



429



0.09

%


917,141



642



0.14

%

Wholesale borrowings

325,036



2,520



1.56

%


187,373



2,019



2.17

%

Long-term debt

324,430



7,783



4.84

%


235,491



5,491



4.70

%

Total interest-bearing liabilities

15,668,095



28,721



0.37

%


12,206,378



26,347



0.44

%

Other liabilities

295,124









348,632








Shareholders' equity

2,750,886









2,145,851








Total liabilities and shareholders' equity

$

24,216,459









$

18,914,581








Net yield on earning assets

$

21,136,960



$

397,520



3.79

%


$

16,526,512



$

315,981



3.86

%

Interest rate spread







3.70

%








3.74

%



















(1) The net yield on earning assets is calculated as annualized taxable-equivalent net interest income divided by average earning assets.  The interest income earned on certain earning assets is completely or

partially exempt from federal and/or state income taxes.  As such, these tax-exempt securities typically yield lower returns than taxable securities.  To provide more meaningful comparisons of net interest

margins for all earning assets, net interest income on a taxable-equivalent basis is used in calculating net interest margin by increasing the interest earned on tax-exempt assets to make it fully equivalent to

interest income earned on taxable investments.  This adjustment is not permitted under generally accepted accounting principles in the Consolidated Statements of Income.   The taxable-equivalent adjustments

to net interest income were $8.0 million and $6.6 million for the six months ended June 30, 2014 and June 30, 2013, respectively.

(2) Nonaccrual loans have been included in the average balances.

 

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES







CONSOLIDATED STATEMENTS OF INCOME







(Unaudited)

Quarters Ended


Six Months Ended

(Dollars in thousands except per share data)

June 30,


June 30,





2014



2013



2014



2013


Interest income:













Loans and loans held for sale

$

172,517



$

178,535



$

343,030



$

277,206



Investment securities:














Taxable

32,253



29,138



64,275



48,377




Tax-exempt

5,555



6,098



10,895



10,143




Total investment securities interest

37,808



35,236



75,170



58,520





Total interest income

210,325



213,771



418,200



335,726


Interest expense:













Deposits:














Interest-bearing

745



656



1,481



974




Savings and money market accounts

5,477



6,469



11,035



11,784




Certificates and other time deposits

3,009



3,374



5,473



5,437



Securities sold under agreements to repurchase

233



329



429



642



Wholesale borrowings

1,391



1,169



2,520



2,019



Long-term debt

3,893



3,743



7,783



5,491




Total interest expense

14,748



15,740



28,721



26,347




Net interest income

195,577



198,031



389,479



309,379



Provision for loan losses

15,253



7,309



29,790



17,256




Net interest income after provision for loan losses

180,324



190,722



359,689



292,123


Noninterest income:













Trust department income

10,070



9,167



19,818



14,907



Service charges on deposits

18,528



20,582



35,176



33,168



Credit card fees

13,455



14,317



25,607



24,540



ATM and other service fees

5,996



4,945



11,816



8,280



Bank owned life insurance income

4,040



3,641



7,622



8,538



Investment services and insurance

3,852



3,429



7,368



5,844



Investment securities gains/(losses), net

80



(2,794)



136



(2,803)



Loan sales and servicing income

4,462



7,985



8,192



15,848



Other operating income

12,077



8,167



24,096



18,510




Total noninterest income

72,560



69,439



139,831



126,832


Noninterest expenses:













Salaries, wages, pension and employee benefits

89,465



105,099



178,478



163,005



Net occupancy expense

14,347



13,346



31,361



21,628



Equipment expense

12,267



10,309



24,178



17,659



Stationery, supplies and postage

3,990



3,407



8,097



5,503



Bankcard, loan processing and other costs

11,810



12,417



22,644



20,257



Professional services

4,745



17,144



10,103



22,554



Amortization of intangibles

2,933



2,411



5,869



2,728



FDIC insurance expense

5,533



4,149



11,504



7,675



Other operating expense

22,310



20,606



44,499



34,025




Total noninterest expenses

167,400



188,888



336,733



295,034


Income before income tax expense

85,484



71,273



162,787



123,921


Income tax expense

25,965



22,823



49,813



38,125





Net income

$

59,519



$

48,450



$

112,974



$

85,796


Less:

Net income allocated to participating shareholders

489



383



926



813





Preferred stock dividends

1,469



1,469



2,938



2,399


Net income attributable to common shareholders

$

57,561



$

46,598



$

109,110



$

82,584


Net income used in diluted EPS calculation

$

57,561



$

46,598



$

109,110



$

82,584


Weighted average number of common shares outstanding - basic

165,335



157,863



165,198



133,909


Weighted average number of common shares outstanding - diluted

166,147



158,390



166,052



134,406


Basic earnings per common share

$

0.35



$

0.30



$

0.66



$

0.62


Diluted earnings per common share

$

0.35



$

0.29



$

0.66



$

0.61


Dividend per common share

$

0.16



$

0.16



$

0.32



$

0.32






















FIRSTMERIT CORPORATION AND SUBSIDIARIES










CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME










(Unaudited)

Quarter Ended


Six Months Ended

(Dollars in thousands)

June 30, 2014


June 30, 2014


Pretax


Tax


After-tax


Pre-tax


Tax


After-tax

Net Income

$

85,484



$

25,965



$

59,519



$

162,787



$

49,813



$

112,974


Other comprehensive income/(loss)


















Unrealized gains and losses on securities available for sale:


















Changes in unrealized securities' holding gains/(losses)

22,456



7,860



14,596



40,500



14,175



26,325


Changes in unrealized securities' holding gains/(losses) that result from securities being transferred into available-for-sale from held-to-maturity

(494)



(173)



(321)



(988)



(346)



(642)


Net losses/(gains) realized on sale of securities reclassified to noninterest income

(80)



(28)



(52)



(136)



(48)



(88)


Net change in unrealized gains/(losses) on securities available for sale

21,882



7,659



14,223



39,376



13,781



25,595


Pension plans and other postretirement benefits:


















Net gains/(losses) arising during the period












Amortization of prior service cost reclassified to other noninterest expense

1,631



571



1,060



1,631



571



1,060


Amortization of actuarial gain

1,097



383



714



1,097



383



714


Net change from defined benefit pension plans

2,728



954



1,774



2,728



954



1,774


Total other comprehensive gains/(losses)

24,610



8,613



15,997



42,104



14,735



27,369


Comprehensive income

$

110,094



$

34,578



$

75,516



$

204,891



$

64,548



$

140,343



 

 

Quarter Ended


Six Months Ended


June 30, 2013


June 30, 2013


Pretax


Tax


After-tax


Pretax


Tax


After-tax

Net Income

$

71,273



$

22,823



$

48,450



$

123,921



$

38,125



$

85,796


Other comprehensive income (loss)


















Unrealized gains and losses on securities available for sale:


















Changes in unrealized securities' holding gains/(losses)

(75,729)



(26,505)



(49,224)



(87,362)



(30,577)



(56,785)


Changes in unrealized securities' holding gains/(losses) that result from securities being transferred into available-for-sale from held-to-maturity

(568)



(199)



(369)



(1,120)



(392)



(728)


Net losses/(gains) realized on sale of securities reclassified to noninterest income

2,794



978



1,816



2,803



981



1,822


Net change in unrealized gains/(losses) on securities available for sale

(73,503)



(25,726)



(47,777)



(85,679)



(29,988)



(55,691)


Pension plans and other postretirement benefits:


















Net gains/(losses) arising during the period












Amortization of prior service cost reclassified to other noninterest expense












Amortization of actuarial gain












Net change from defined benefit pension plans












Total other comprehensive gains/(losses)

(73,503)



(25,726)



(47,777)



(85,679)



(29,988)



(55,691)


Comprehensive income

$

(2,230)



$

(2,903)



$

673



$

38,242



$

8,137



$

30,105


 

FIRSTMERIT CORPORATION AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF INCOME---LINKED QUARTERS




















Quarterly Results

(Unaudited)

2014



2014



2013



2013



2013


(Dollars in thousands, except share data)

2nd qtr



1st qtr



4th qtr



3rd qtr



2nd qtr


Loans and loans held for sale

$

172,517



$

170,514



$

176,559



$

182,107



$

178,535


Investment securities

37,808



37,362



36,021



35,390



35,236


Total interest income

210,325



207,876



212,580



217,497



213,771


Interest expense















Deposits:















Interest-bearing

745



737



759



809



656


Savings and money market accounts

5,477



5,559



6,127



6,495



6,469


Certificates and other time deposits

3,009



2,464



2,500



1,712



3,374


Securities sold under agreements to repurchase

233



197



291



306



329


Wholesale borrowings

1,391



1,129



938



936



1,169


Long-term debt

3,893



3,890



3,897



3,899



3,743


Total interest expense

14,748



13,976



14,512



14,157



15,740


Net interest income

195,577



193,900



198,068



203,340



198,031


Provision for loan losses

15,253



14,536



10,050



6,379



7,309


Net interest income after provision for loan losses

180,324



179,364



188,018



196,961



190,722


Noninterest income:















Trust department income

10,070



9,748



10,255



9,608



9,167


Service charges on deposits

18,528



16,648



19,084



22,146



20,582


Credit card fees

13,455



12,152



12,414



13,588



14,317


ATM and other service fees

5,996



5,819



5,659



5,216



4,945


Bank owned life insurance income

4,040



3,582



4,037



4,351



3,641


Investment services and insurance

3,852



3,516



3,530



3,403



3,429


Investment securities gains/(losses), net

80



56







(2,794)


Loan sales and servicing income

4,462



3,730



3,577



3,644



7,985


Other operating income

12,077



12,019



13,864



9,134



8,167


Total noninterest income

72,560



67,270



72,420



71,090



69,439


Noninterest expenses:















Salaries, wages, pension and employee benefits

89,465



89,013



93,621



97,390



105,099


Net occupancy expense

14,347



17,014



14,066



13,816



13,346


Equipment expense

12,267



11,911



13,177



11,040



10,309


Stationery, supplies and postage

3,990



4,108



4,895



3,801



3,407


Bankcard, loan processing and other costs

11,810



10,834



10,886



40,786



12,417


Professional services

4,745



5,359



8,358



9,768



17,144


Amortization of intangibles

2,933



2,936



2,692



2,972



2,411


FDIC  insurance expense

5,533



5,971



5,106



4,925



4,149


Other operating expense

22,310



22,185



25,819



26,101



20,606


Total noninterest expenses

167,400



169,331



178,620



210,599



188,888


Income before income tax expense

85,484



77,303



81,818



57,452



71,273


Income tax expense

25,965



23,848



24,644



16,737



22,823


Net income

59,519



53,455



57,174



40,715



48,450


Less:  Income allocated to participating shareholders

489



380



441



310



383


Preferred stock dividends

1,469



1,469



1,469



1,469



1,469


Net income attributable to common shareholders

$

57,561



$

51,606



$

55,264



$

38,936



$

46,598


Net income used in diluted EPS calculation

$

57,561



$

51,606



$

55,264



$

38,936



$

46,598


Weighted-average number of common shares outstanding - basic

165,335



165,060



165,054



165,044



157,863


Weighted-average number of common shares outstanding- diluted

166,147



166,004



166,097



165,874



158,390


Basic earnings per common share

$

0.35



$

0.31



$

0.33



$

0.24



$

0.30


Diluted earnings per common share

$

0.35



$

0.31



$

0.33



$

0.23



$

0.29

















 

FIRSTMERIT CORPORATION AND SUBSIDIARIES










ASSET QUALITY INFORMATION (excluding acquired loans and covered assets) (a)


















































(Unaudited)


(Audited)


(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

2014



2014



2013



2013



2013



2013


Allowance for originated loan losses, beginning of period

$

92,116



$

96,484



$

98,291



$

98,645



$

98,843



$

98,942


Provision for originated loan losses

5,993



3,654



1,552



2,523



3,151



13,034


Charge-offs

11,148



13,160



9,913



8,515



10,969



40,173


Recoveries

4,989



5,138



6,554



5,638



7,620



24,681


Net charge-offs

6,159



8,022



3,359



2,877



3,349



15,492


Allowance for originated loan losses, end of period

$

91,950



$

92,116



$

96,484



$

98,291



$

98,645



$

96,484


Reserve for unfunded lending commitments,


















beginning of period

$

7,481



$

7,907



$

8,493



$

8,114



$

4,941



$

5,433


Provision for (relief of) credit losses

(374)



(426)



(586)



379



3,173



2,474


Reserve for unfunded lending commitments,


















end of period

$

7,107



$

7,481



$

7,907



$

8,493



$

8,114



$

7,907


Allowance for Credit Losses

$

99,057



$

99,597



$

104,391



$

106,784



$

106,759



$

104,391


 

Ratios


















Provision for loan losses to average loans

0.22

%


0.14

%


0.06

%


0.11

%


0.14

%


0.14

%

Net charge-offs to average loans

0.22

%


0.31

%


0.13

%


0.12

%


0.15

%


0.17

%

Allowance for loan losses to period-end loans

0.80

%


0.85

%


0.94

%


1.00

%


1.08

%


0.94

%

Allowance for credit losses to period-end loans

0.86

%


0.92

%


1.02

%


1.09

%


1.17

%


1.02

%

Allowance for loan losses to nonperforming loans

250.27

%


212.01

%


228.62

%


276.19

%


216.97

%


228.62

%

Allowance for credit losses to nonperforming loans

269.61

%


229.23

%


247.35

%


300.06

%


234.82

%


247.35

%

 

Asset Quality


















Impaired originated loans:


















Nonaccrual

$

21,072



$

27,122



$

25,674



$

19,140



$

28,935



$

25,674


Other nonperforming loans:


















Nonaccrual

15,669



16,326



16,529



16,448



16,529



16,529


Total nonperforming loans

36,741



43,448



42,203



35,588



45,464



42,203


Other real estate ("ORE")

24,181



19,263



18,680



19,838



20,713



18,680


Total nonperforming assets ("NPAs")

$

60,922



$

62,711



$

60,883



$

55,426



$

66,177



$

60,883


NPAs to period-end loans + ORE

0.53

%


0.58

%


0.60

%


0.57

%


0.72

%


0.60

%

Accruing originated loans past due 90 days or more

$

15,643



$

11,860



$

11,176



$

12,452



$

11,760



$

11,176


 

(a) Due to the impact of business combination accounting and protection of FDIC loss sharing agreements, which provide considerable protection against credit risk, acquired and covered loans are excluded from this table to provide for improved comparability to prior periods and better perspective into asset quality trends.





















FIRSTMERIT CORPORATION AND SUBSIDIARIES










NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL


























(Unaudited)
















(Dollars in thousands)


















2014



2014



2013



2013



2013


QUARTERLY NONINTEREST INCOME DETAIL


2nd qtr



1st qtr



4th qtr



3rd qtr



2nd qtr


Trust department income


$

10,070



$

9,748



$

10,255



$

9,608



$

9,167


Service charges on deposits


18,528



16,648



19,084



22,146



20,582


Credit card fees


13,455



12,152



12,414



13,588



14,317


ATM and other service fees


5,996



5,819



5,659



5,216



4,945


Bank owned life insurance income


4,040



3,582



4,037



4,351



3,641


Investment services and insurance


3,852



3,516



3,530



3,403



3,429


Investment securities gains/(losses), net


80



56







(2,794)


Loan sales and servicing income


4,462



3,730



3,577



3,644



7,985


Other operating income


12,077



12,019



13,864



9,134



8,167


Total Noninterest Income


$

72,560



$

67,270



$

72,420



$

71,090



$

69,439




















2014



2014



2013



2013



2013


QUARTERLY NONINTEREST EXPENSE DETAIL


2nd qtr



1st qtr



4th qtr



3rd qtr



2nd qtr


Salaries and wages


$

69,892



$

71,669



$

76,685



$

79,369



$

85,680


Pension and employee benefits


19,573



17,344



16,936



18,021



19,419


Net occupancy expense


14,347



17,014



14,066



13,816



13,346


Equipment expense


12,267



11,911



13,177



11,040



10,309


Taxes, other than income taxes


2,576



2,774



2,618



2,785



2,891


Stationery, supplies and postage


3,990



4,108



4,895



3,801



3,407


Bankcard, loan processing and other costs


11,810



10,834



10,886



40,786



12,417


Advertising


3,801



3,516



4,855



4,432



3,745


Professional services


4,745



5,359



8,358



9,768



17,144


Telephone


2,857



2,908



3,427



3,326



2,728


Amortization of intangibles


2,933



2,936



2,692



2,972



2,411


FDIC insurance expense


5,533



5,971



5,106



4,925



4,149


Other operating expense


13,076



12,987



14,919



15,558



11,242


Total Noninterest Expense


$

167,400



$

169,331



$

178,620



$

210,599



$

188,888
















FIRSTMERIT CORPORATION AND SUBSIDIARIES







ALLOWANCE FOR ORIGINATED LOAN LOSSES - Net Charge-off Detail (excluding acquired and covered loans) (a)
















(Unaudited)

Quarters Ended


Six Months Ended


Year Ended


(Dollars in thousands)

June 30,


June 30,


December 31,



2014



2013



2014



2013



2013


Allowance for originated loan losses - beginning of period

$

92,116



$

98,843



$

96,484



$

98,942



$

98,942


Loans charged off:















Commercial

3,057



2,750



8,210



5,422



7,637


Mortgage

834



414



1,393



684



1,903


Installment

4,076



3,612



8,660



8,206



16,683


Home equity

1,204



1,133



2,042



2,439



5,036


Credit cards

1,311



1,459



2,766



2,862



5,541


Leases



1,237





1,237



1,237


Overdrafts

666



364



1,237



895



2,136


Total

11,148



10,969



24,308



21,745



40,173


Recoveries:















Commercial

404



3,762



1,433



5,007



9,012


Mortgage

67



51



105



94



230


Installment

2,728



2,728



5,466



5,197



10,459


Home equity

820



486



1,519



833



2,492


Credit cards

439



469



857



982



1,841


Manufactured housing

13



11



24



38



60


Leases

372





372



89



100


Overdrafts

146



113



351



249



487


Total

4,989



7,620



10,127



12,489



24,681


Net charge-offs

6,159



3,349



14,181



9,256



15,492


Provision for originated loan losses

5,993



3,151



9,647



8,959



13,034


Allowance for originated loan losses-end of period

$

91,950



$

98,645



$

91,950



$

98,645



$

96,484

















Average originated loans

$

11,092,101



$

8,877,754



$

10,772,020



$

8,806,924



$

9,252,555


Ratio (annualized) to average originated loans:















Originated net charge-offs

0.22

%


0.15

%


0.27

%


0.21

%


0.17

%

Provision for originated loan losses

0.22

%


0.14

%


0.18

%


0.21

%


0.14

%

Originated Loans, period-end

$

11,467,193



$

9,132,625



$

11,467,193



$

9,132,625



$

10,213,387

















Allowance for credit losses:

$

99,057



$

106,759



$

99,057



$

106,759



$

104,391


To (annualized) net charge-offs

4.01



7.95



3.46



5.72



6.74


Allowance for originated loan losses:















To period-end originated loans

0.80

%


1.08

%


0.80

%


1.08

%


0.94

%

To (annualized) net originated charge-offs

3.72



7.34



3.22



5.28



6.23

















(a) Due to the impact of business combination accounting and protection of FDIC loss sharing agreements, which provide considerable protection against credit risk, acquired and covered loans are excluded from this table to provide for improved comparability to prior periods and better perspective into asset quality trends.

 

 

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SOURCE FirstMerit Corporation



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