FirstMerit Reports Second Quarter 2014 EPS of $0.35 Per Share

22 Jul, 2014, 07:30 ET from FirstMerit Corporation

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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