2014

FirstMerit Reports Third Quarter 2012 EPS of $0.32 Per Share

AKRON, Ohio, Oct. 23, 2012 /PRNewswire/ -- 

Quarterly Highlights include:

  • Sustained profitability: 54th consecutive quarter of profitability
  • Continued organic growth: Average commercial noncovered loan growth of $169.4 million, or 3.21%, from prior quarter; average core deposit growth of $126.8 million, or 1.28%, from prior quarter
  • Strong balance sheet: Strong tangible common equity ratio increased to 8.18% from 8.01% in the prior quarter.

FirstMerit Corporation (Nasdaq: FMER) reported third quarter 2012 net income of $35.0 million, or $0.32 per diluted share.  This compares with $30.6 million, or $0.28 per diluted share, for the second quarter 2012 and $31.7 million, or $0.29 per diluted share, for the third quarter 2011. 

(Logo: http://photos.prnewswire.com/prnh/20070920/CLTU138LOGO )

Returns on average common equity ("ROE") and average assets ("ROA") for the third quarter 2012 were 8.60% and 0.94%, respectively, compared with 7.69% and 0.84%, respectively, for the second quarter 2012 and 8.02% and 0.86%, respectively, for the third quarter 2011. 

"Our strong results in the third quarter reflect our continued focus on banking fundamentals in the face of ongoing industry challenges including a low-interest environment and slow economic recovery. Our financial strength and stability support continued geographic growth.  To that point, we announced this quarter our intention to acquire Citizens Republic Bancorp ("Citizens") in Michigan. We anticipate this transaction will close in the second quarter of 2013, subject to the receipt of regulatory approvals and other closing conditions, and at that time we look to become the bank of choice throughout the Upper Midwest, across the five contiguous states of Pennsylvania, Ohio, Michigan, Illinois and Wisconsin," said Paul G. Greig, chairman, president and CEO, FirstMerit Corporation.

"Noncovered commercial loan growth was very strong this quarter in both our Chicago and legacy Ohio markets.  Additionally, progress on our efficiency initiative is reflected in our lower operating expense levels and improved efficiency ratio compared against both prior and year ago quarterly periods," said Greig. 

Net interest margin was 3.66% for the third quarter of 2012 compared with 3.77% for the second quarter of 2012 and 3.75% for the third quarter of 2011.   The net interest margin compressed 11 basis points compared with the second quarter of 2012 due to reductions in overall loan and investment portfolio yields.  Reductions in deposit costs and a favorable mix shift did not offset the downward pressure on earning asset yields in this persistent low rate environment.

Average noncovered loans during the third quarter of 2012 increased $244.4 million, or 3.08%, compared with the second quarter of 2012 and increased $702.2 million, or 9.38%, compared with the third quarter of 2011.   Average noncovered commercial loans increased $169.4 million, or 3.21%, compared with the prior quarter, and increased $567.7 million, or 11.64%, compared with the year ago quarter. The average consumer loan portfolio grew for the fifth consecutive quarter, increasing $65.3 million, or 2.52%, compared to the prior quarter, and $102.8 million, or 4.03%, compared with the year ago quarter.

Average deposits were $11.6 billion during the third quarter of 2012, an increase of $36.6 million, or 0.32%, compared with the second quarter of 2012, and an increase of $144.2 million, or 1.26%, compared with the third quarter of 2011.  During the third quarter 2012, average core deposits, which exclude time deposits, increased $126.8 million, or 1.28%, compared with the second quarter 2012 and increased $715.6 million, or 7.66%, compared with the third quarter 2011.   Average time deposits decreased $90.1 million, or 5.57%, and decreased $571.4 million, or 27.21%, respectively, over prior and year-ago quarters.  The Corporation continues to emphasize growth in lower cost core deposit products and decrease its reliance on certificates of deposit accounts to support balance sheet growth.   For the third quarter of 2012, average core deposits accounted for 86.82% of total average deposits, compared with 85.99% for the second quarter of 2012 and 81.66% for the third quarter of 2011.

Average investments decreased $4.3 million, or 0.12%, compared with the second quarter of 2012 and increased $17.5 million, or 0.48% compared with the third quarter of 2011. 

Net interest income on a fully tax-equivalent ("FTE") basis was $120.7 million in the third quarter 2012 compared with $121.7 million in the second quarter of 2012 and $121.8 million in the third quarter of 2011. 

Noninterest income, excluding gains on securities transactions of $0.6 million, for the third quarter of 2012 was $54.4 million, a decrease of $0.4 million, or 0.70%, from the second quarter of 2012 and a decrease of $2.0 million, or 3.54%, from the third quarter of 2011.  The decrease in noninterest income from the second quarter of 2012 was attributable to a decrease of $2.6 million in gains on covered loans paid in full partially offset by increased loan sales and servicing income of $2.1 million.  The decrease in noninterest income from the third quarter of 2011 was attributable a decline in service charges on deposits of $3.2 million as a result of regulatory revisions to overdraft fee policies which took effect in the fourth quarter of 2011 and a decline in credit card fees of $2.6 million as a result of the implementation of the Durbin Interchange Amendment in the fourth quarter of 2011.  These declines in income were partially offset by an increase in loans sales and servicing income of $3.8 million resulting from an increase in mortgage loan originations and refinancings activity due to a decrease in interest rates in 2012.

Other income, net of $0.6 million in securities gains, as a percentage of net revenue for the third quarter of 2012 was 31.05% compared with 31.03% for second quarter of 2012 and 31.64% for the third quarter of 2011.  Net revenue is defined as net interest income, on an FTE basis, plus other income, less gains from securities sales.

Noninterest expense for the third quarter of 2012 was $108.6 million, a decrease of $10.5 million, or 8.81%, from the second quarter of 2012, which included $8.9 million in one-time charges related to the Efficiency Initiative announced in the prior quarter, and a decrease of $7.4 million, or 6.36%, from the third quarter of 2011. Other one-time charges incurred in the third quarter of 2012 included $0.5 million associated with costs of closing eight full service branches and $1.1 million of professional and legal fees associated with the proposed acquisition of Citizens.  The Corporation demonstrated significant ongoing progress in reducing operating expenses in response to the challenging industry environment.

During the third quarter of 2012, the Corporation reported an efficiency ratio of 61.75%, compared with 67.21% for the second quarter of 2012 and 64.78% for the third quarter of 2011.  Excluding the $8.9 million in one-time charges related to the Efficiency Initiative announced in the prior quarter, the reported efficiency ratio for the second quarter of 2012 would be 62.15%.

As a result of guidance from the Office of the Comptroller of the Currency ("OCC"), $10.6 million of consumer loans were identified as troubled debt restructurings whereby the borrower's obligation to the Corporation has been discharged in bankruptcy and the borrower has not reaffirmed the debt.  These loans were reclassified from performing loans to nonaccrual status and consisted of $6.7 million of first mortgages, $1.0 million of junior liens and $2.9 million of automobile loans, and net loan charge-offs of $2.8 million were recognized.

Net charge-offs of noncovered loans totaled $14.9 million, or 0.72% of average noncovered loans in the third quarter of 2012, including $2.8 million in charge-offs relating to the aforementioned troubled debt restructured loans, compared with $8.8 million, or 0.44% of average noncovered loans, in the second quarter 2012 and $14.6 million, or 0.77% of average noncovered loans, in the third quarter of 2011.

Nonperforming assets totaled $64.1 million at September 30, 2012, an increase of $3.0 million, or 4.87%, compared with June 30, 2012 and a decrease of $26.0 million, or 28.89%, compared with September 30, 2011.  The increase in nonperforming assets in the third quarter is a result of the $10.6 million in loans noted above.  Excluding the impact of the OCC guidance, nonperforming assets decreased $7.6 million or 12.44% compared with June 30, 2012 and $36.6 million or 40.63% compared with September 30, 2011.  Nonperforming assets at September 30, 2012 represented 0.77% of period-end noncovered loans plus noncovered other real estate compared with 0.75% at June 30, 2012 and 1.18% at September 30, 2011. 

The allowance for noncovered loan losses totaled $98.9 million at September 30, 2012, down from $103.8 million at June 30, 2012.  At September 30, 2012, the allowance for noncovered loan losses was 1.19% of period-end noncovered loans compared with 1.28% at June 30, 2012 and 1.43% at September 30, 2011.  The allowance for credit losses is the sum of the allowance for noncovered loan losses and the reserve for unfunded lending commitments.  For comparative purposes the allowance for credit losses was 1.26% of period-end noncovered loans at September 30, 2012, compared with 1.35% at June 30, 2012 and 1.51% at September 30, 2011.  The allowance for credit losses to nonperforming noncovered loans was 208.11% at September 30, 2012, compared with 234.57% at June 30, 2012 and 170.16% at September 30, 2011.

The Corporation's total assets at September 30, 2012 were $14.6 billion, an increase of $7.5 million, or 0.05%, compared with June 30, 2012 and a decrease of $59.4 million, or 0.40%, compared with September 30, 2011. 

Total deposits were $11.5 billion at September 30, 2012, a decrease of $83.4 million, or 0.72%, from June 30, 2012 and an increase of $136.3 million, or 1.20%, from September 30, 2011.  Core deposits totaled $10.1 billion at September 30, 2012, an increase of $18.3 million, or 0.18% from June 30, 2012 and an increase of $0.6 billion, or 6.38%, from September 30, 2011.

Shareholders' equity was $1.6 billion at September 30, 2012,  June 30, 2012 and September 30, 2011, respectively.  The Corporation maintained a strong capital position as tangible common equity to assets was 8.18% at September 30, 2012, compared with 8.01% at June 30, 2012 and 7.75% at September 30, 2011.  The common cash dividend per share paid in the third quarter 2012 was $0.16.

Third Quarter 2012 Conference Call

FirstMerit (Nasdaq: FMER) senior management will host an earnings conference call today at 11:00 a.m. (Eastern Time) to provide an overview of third 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: 39956933.  A replay of the conference call will be available at approximately 2:00 p.m. (Eastern Time) on October 23, 2012 through November 6, 2012 by dialing (855) 859-2056, and entering the PIN: 39956933.  The Corporation will provide a slide presentation, which management will speak to during the conference call. A copy of the presentation will be available prior to the earnings conference call at https://www.firstmerit.com/personal/investors.aspx; click on the Presentations link to access the slide presentation.

About FirstMerit Corporation

FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $14.6 billion as of September 30, 2012 and 196 banking offices and 204 ATM locations in Ohio, Western Pennsylvania, and Chicago, Illinois areas. FirstMerit provides a complete range of banking and other financial services to consumers and businesses through its core operations. Principal affiliates include: FirstMerit Bank, N.A., FirstMerit Mortgage Corporation, FirstMerit Title Agency, Ltd. and FirstMerit Community Development Corporation.

Subsequent Events

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

Forward-Looking Statements

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

Additional Information and Where to Find It

This document does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. In connection with the proposed merger between FirstMerit and Citizens, FirstMerit will file with the U.S. Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that will include a joint proxy statement of FirstMerit and Citizens that also constitutes a prospectus of FirstMerit. FirstMerit and Citizens will deliver the joint proxy statement/prospectus to their respective shareholders. FirstMerit and Citizens urge investors and shareholders to read the joint proxy statement/prospectus regarding the proposed merger when it becomes available, as well as other documents filed with the SEC, because they will contain important information. You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC's website (www.sec.gov). You may also obtain these documents, free of charge, from FirstMerit's website (www.firstmerit.com) under the heading "Investors" and then under the heading "Publications and Filings." You may also obtain these documents, free of charge, from Citizens' website (www.citizensbanking.com) under the tab "Investors" and then under the heading "Financial Documents" and then under the heading "SEC Filings."

Participants in the Merger Solicitation 

FirstMerit, Citizens, and their respective directors, executive officers and certain other members of management and employees may be soliciting proxies from FirstMerit and Citizens shareholders in favor of the merger and related matters. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of FirstMerit and Citizens shareholders in connection with the proposed merger will be set forth in the joint proxy statement/prospectus when it is filed with the SEC. You can find information about FirstMerit's executive officers and directors in its definitive proxy statement filed with the SEC on March 8, 2012. You can find information about Citizens' executive officers and directors in its definitive proxy statement filed with the SEC on March 12, 2012. Additional information about FirstMerit's executive officers and directors and Citizens' executive officers and directors can be found in the above-referenced Registration Statement on Form S-4 when it becomes available. You can obtain free copies of these documents from FirstMerit and Citizens using the contact information above.

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES




Consolidated Financial Highlights




(Unaudited)






(Dollars in thousands)















Quarters




2012

2012

2012

2011

2011


3rd Qtr

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

EARNINGS






Net interest income FTE (a)

$           120,741

$       121,689

$       121,428

$       123,598

$       121,788

Provision for noncovered loan losses

9,965

8,766

8,129

12,275

14,604

Provision for covered loan losses

6,214

3,430

5,932

2,773

4,768

Other income

54,925

55,301

51,726

59,737

60,772

Other expenses

108,587

119,077

113,768

123,874

115,957

FTE adjustment (a)

2,851

2,766

2,641

2,632

2,396

Net income

34,953

30,585

30,344

30,496

31,737

Diluted EPS

0.32

0.28

0.28

0.28

0.29

PERFORMANCE RATIOS






Return on average assets (ROA)

0.94%

0.84%

0.84%

0.83%

0.86%

Return on average common equity (ROE)

8.60%

7.69%

7.72%

7.70%

8.02%

Net interest margin FTE (a)

3.66%

3.77%

3.78%

3.85%

3.75%

Efficiency ratio

61.75%

67.21%

65.52%

69.46%

64.78%

Number of full-time equivalent employees

2,733

2,789

2,997

3,018

3,016

MARKET DATA






Book value/common share

$               14.82

$14.60

$14.51

$14.33

$14.38

Period-end common share mkt value

14.71

16.51

16.86

15.13

11.36

Market as a % of book

99%

113%

116%

106%

79%

Cash dividends/common share

$                 0.16

$0.16

$0.16

$0.16

$0.16

Common stock dividend payout ratio

50.00%

57.14%

57.14%

57.14%

55.17%

Average basic common shares

109,645

109,562

109,211

109,249

109,245

Average diluted common shares

109,645

109,562

109,211

109,249

109,246

Period end common shares

109,653

109,641

109,187

109,251

109,247

Common shares repurchased

6

111

69

7

10

Common stock market capitalization

$        1,612,996

$    1,810,173

$    1,840,893

$    1,652,968

$    1,241,046

ASSET QUALITY (excluding acquired loans)






Gross charge-offs

$             20,999

$         15,014

$         17,417

$         18,984

$         20,014

Net charge-offs

14,872

8,766

11,979

13,763

14,604

Allowance for noncovered loan losses

98,942

103,849

103,849

107,699

109,187

Reserve for unfunded lending commitments

5,760

5,666

5,410

6,373

6,360

Nonperforming assets (NPAs) (b)

64,055

61,080

67,933

81,094

90,075

Net charge-offs/average loans ratio (b)

0.72%

0.44%

0.62%

0.71%

0.77%

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

1.19%

1.28%

1.32%

1.39%

1.43%

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

1.26%

1.35%

1.39%

1.47%

1.51%

NPAs/loans and other real estate (b)

0.77%

0.75%

0.86%

1.04%

1.18%

Allowance for noncovered loan losses/nonperforming loans

196.66%

222.44%

194.97%

166.64%

160.80%

Allowance for credit losses/nonperforming loans

208.11%

234.57%

205.13%

176.50%

170.16%

CAPITAL & LIQUIDITY






Period-end tangible common equity to assets

8.18%

8.01%

7.86%

7.86%

7.75%

Average equity to assets

10.97%

10.98%

10.91%

10.75%

10.75%

Average equity to total loans (c)

17.46%

17.57%

17.50%

17.40%

17.55%

Average total loans to deposits (c)

79.89%

78.78%

78.74%

79.12%

78.18%

AVERAGE BALANCES






Assets

$      14,734,016

$  14,558,514

$  14,496,937

$  14,623,441

$  14,610,628

Deposits

11,591,931

11,555,283

11,472,021

11,416,546

11,447,682

Loans, excluding acquired loans (c)

8,121,083

7,857,840

7,677,963

7,520,400

7,298,446

Acquired loans, including covered loans (c)

1,139,568

1,245,246

1,355,086

1,512,123

1,651,559

Earning assets

13,119,473

12,986,988

12,935,184

12,747,868

12,878,105

Shareholders' equity

1,616,569

1,599,187

1,581,009

1,572,061

1,570,411

ENDING BALANCES






Assets

$      14,628,843

$  14,621,344

$  14,670,818

$  14,441,702

$  14,688,278

Deposits

11,532,426

11,615,841

11,648,165

11,431,609

11,396,121

Loans, excluding acquired loans (c)

8,260,426

8,031,998

7,764,058

7,635,776

7,453,613

Acquired loans, including covered loans (c)

1,099,052

1,187,203

1,306,165

1,404,644

1,604,706

Goodwill

460,044

460,044

460,044

460,044

460,044

Intangible assets

6,817

7,274

7,756

8,239

8,782

Earning assets

13,219,301

13,212,071

13,318,202

13,011,267

12,885,242

Total shareholders' equity

1,624,704

1,600,815

1,584,105

1,565,953

1,570,654

NOTES:












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


(b) - Covered loans and other real estate from George Washington Savings Bank and Midwest Bank & Trust Company are excluded from the ratio of our allowance for loan and credit losses and NPAs.  Nonperforming assets at September 30, 2012 includes $10.6 million of loans resulting from implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series.  The updated guidance requires those performing loans where the borrower's obligation to the Corporation has been restructured in bankruptcy to be placed on nonaccrual status.


(c) - Excludes loss share receivable of $131.9 million, $152.6 million, $171.1 million,  $205.7 million and $220.5 million as of September 30, 2012, June 30, 2012, March 31, 2012, December 31, 2011 and September 30, 2011, respectively.

 

 

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES 






Consolidated Balance Sheets












(Dollars in thousands )






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







September 30,


December 31,


September 30,


2012


2011


2011

ASSETS







Cash and due from banks

$               201,359


$            219,256


$           202,886


Interest-bearing deposits in banks

37,058


158,063


116,059



Total cash and cash equivalents

238,417


377,319


318,945


Investment securities








Held-to-maturity

620,631


82,764


92,214



Available-for-sale

2,911,993


3,353,553


3,198,046



Other investments

140,730


140,726


160,793


Loans held for sale

17,540


30,077


39,340


Noncovered loans:








Commercial

5,511,678


5,107,747


5,018,857



Residential mortgage

439,062


413,664


397,309



Installment

1,321,081


1,263,665


1,271,327



Home equity

789,743


743,982


743,377



Credit cards

143,918


146,356


142,710



Leases

110,938


73,530


57,992




Total noncovered loans

8,316,420


7,748,944


7,631,572




   Allowance for noncovered loan losses

(98,942)


(107,699)


(109,187)




Net noncovered loans

8,217,478


7,641,245


7,522,385


Covered loans (includes loss share receivable of $131.9 million, $205.7 million and $220.5 million at September 30, 2012, December 31, 2011 and September 30, 2011, respectively)

1,174,929


1,497,140


1,647,218




   Allowance for covered loan losses

(43,644)


(36,417)


(34,603)




Net covered loans

1,131,285


1,460,723


1,612,615




Net loans

9,348,763


9,101,968


9,135,000


Premises and equipment, net

182,043


192,949


193,075


Goodwill

460,044


460,044


460,044


Intangible assets

6,817


8,239


8,782


Covered other real estate (includes loss share receivable of $0.1 million, $1.3 million and $3.5 million at September 30, 2012, December 31, 2011 and September 30, 2011, respectively)

56,795


54,505


61,890


Accrued interest receivable and other assets

645,070


639,558


1,020,149




    Total assets

$          14,628,843


$       14,441,702


$      14,688,278

LIABILITIES AND SHAREHOLDERS' EQUITY







Deposits:








Noninterest-bearing

$            3,231,500


$         3,030,225


$        2,971,555



Interest-bearing

1,079,913


1,062,896


967,574



Savings and money market accounts

5,744,103


5,595,409


5,513,472



Certificates and other time deposits

1,476,910


1,743,079


1,943,520




Total deposits

11,532,426


11,431,609


11,396,121


Federal funds purchased and securities sold under agreements to repurchase

963,455


866,265


987,030


Wholesale borrowings

178,083


203,462


248,006


Accrued taxes, expenses, and other liabilities

330,175


374,413


486,467




Total liabilities

13,004,139


12,875,749


13,117,624


Shareholders' equity:








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





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





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





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

127,937


127,937


127,937



Capital surplus

473,781


479,882


478,738



Accumulated other comprehensive loss

(13,900)


(23,887)


(4,654)



Retained earnings

1,175,001


1,131,203


1,118,027



Treasury stock, at cost: September 30, 2012 - 5,468,853 shares; December 31, 2011 - 5,870,923 shares; September 30, 2011 -5,874,748 shares

(138,115)


(149,182)


(149,394)




Total shareholders' equity

1,624,704


1,565,953


1,570,654




    Total liabilities and shareholders' equity

$          14,628,843


$       14,441,702


$      14,688,278

 

 

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES




Average Consolidated Balance Sheets











Quarterly Periods

(Unaudited)

 September 30, 

 June 30, 

March 31,

December 31,

September 30,

(Dollars in thousands)

2012

2012

2012

2011

2011







ASSETS






Cash and due from banks

$          440,231

$          410,533

$          378,736

$          621,899

$          517,150

Investment securities:






   Held-to-maturity

337,685

127,769

90,664

89,166

85,664

   Available-for-sale

3,215,203

3,429,411

3,459,439

3,231,195

3,429,631

   Other investments

140,736

140,744

140,719

160,147

160,799

Loans held for sale

23,631

22,731

26,483

24,215

24,524

Noncovered loans:






   Commercial

5,443,712

5,274,352

5,143,087

5,049,479

4,876,034

   Residential mortgage

437,123

431,752

421,648

405,329

399,228

   Installment

1,293,054

1,263,013

1,261,122

1,267,952

1,264,868

   Home equity

779,087

750,859

738,154

744,326

741,497

   Credit card

143,948

142,311

143,794

145,560

144,796

   Leases

88,583

78,862

73,644

61,267

56,909

      Total noncovered loans

8,185,507

7,941,149

7,781,449

7,673,913

7,483,332

Covered loans and loss share receivable

1,216,711

1,325,184

1,436,430

1,569,232

1,694,155

       Total loans

9,402,218

9,266,333

9,217,879

9,243,145

9,177,487

Less: allowance for loan losses

145,061

143,565

142,628

141,360

138,441

       Net loans

9,257,157

9,122,768

9,075,251

9,101,785

9,039,046

Total earning assets

13,119,473

12,986,988

12,935,184

12,747,868

12,878,105

Premises and equipment, net

184,544

187,181

190,669

193,219

192,218

Accrued interest receivable and other assets

1,134,829

1,117,377

1,134,976

1,201,815

1,161,596

TOTAL ASSETS

$     14,734,016

$     14,558,514

$     14,496,937

$     14,623,441

$     14,610,628

LIABILITIES 






Deposits:






   Noninterest-bearing

$       3,236,703

$       3,144,183

$       3,036,590

$       3,013,543

$       2,988,521

   Interest-bearing

1,080,841

1,060,771

1,066,132

991,456

913,252

   Savings and money market accounts

5,746,210

5,732,007

5,675,052

5,569,213

5,446,351

   Certificates and other time deposits

1,528,177

1,618,322

1,694,247

1,842,334

2,099,558

      Total deposits

11,591,931

11,555,283

11,472,021

11,416,546

11,447,682

Federal funds purchased and securities sold under agreements to repurchase

1,032,401

920,352

887,715

999,639

969,020

Wholesale borrowings

178,022

177,987

184,659

225,116

320,691

      Total funds

12,802,354

12,653,622

12,544,395

12,641,301

12,737,393

Accrued taxes, expenses and other liabilities

315,093

305,705

371,533

410,079

302,824

      Total liabilities

13,117,447

12,959,327

12,915,928

13,051,380

13,040,217

SHAREHOLDERS' EQUITY






Common stock

127,937

127,937

127,937

127,937

127,937

Capital surplus

472,820

473,650

481,856

479,257

477,864

Accumulated other comprehensive loss

(14,627)

(18,363)

(19,862)

(15,198)

(2,211)

Retained earnings

1,168,649

1,156,324

1,140,953

1,129,392

1,116,207

Treasury stock

(138,210)

(140,361)

(149,875)

(149,327)

(149,386)

       Total shareholders' equity

1,616,569

1,599,187

1,581,009

1,572,061

1,570,411

TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY

$     14,734,016

$     14,558,514

$     14,496,937

$     14,623,441

$     14,610,628

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES 















Average Consolidated Balance Sheets















Fully Tax-equivalent Interest Rates and Interest Differential
































Three months ended


Three months ended


Three months ended

(Unaudited)

September 30, 2012


June 30, 2012


September 30, 2011

(Dollars in thousands)

Average




Average


Average




Average


Average




Average


Balance


Interest


Rate


Balance


Interest


Rate


Balance


Interest


Rate

ASSETS


















Cash and due from banks

$        440,231






$        410,533






$        517,150





Investment securities and federal funds sold:


















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

2,688,658


$     17,981


2.66%


2,823,055


$     19,028


2.71%


2,974,656


$       19,864


2.65%

    Obligations of states and political subdivisions (tax exempt)

660,143


6,332


3.82%


482,475


6,254


5.21%


385,055


5,275


5.44%

    Other securities and federal funds sold

344,823


2,652


3.06%


392,394


2,756


2.82%


316,383


2,084


2.61%

      Total investment securities and federal funds sold

3,693,624


26,965


2.90%


3,697,924


28,038


3.05%


3,676,094


27,223


2.94%

Loans held for sale

23,631


240


4.04%


22,731


238


4.21%


24,524


284


4.59%

Loans, including loss share receivable

9,402,218


103,128


4.36%


9,266,333


103,245


4.48%


9,177,487


108,444


4.69%

      Total earning assets

13,119,473


130,333


3.95%


12,986,988


131,521


4.07%


12,878,105


135,951


4.19%

Allowance for loan losses

(145,061)






(143,565)






(138,441)





Other assets

1,319,373






1,304,558






1,353,814





Total assets

$   14,734,016






$   14,558,514






$   14,610,628





LIABILITIES AND SHAREHOLDERS' EQUITY


















Deposits:


















    Noninterest-bearing

$     3,236,703



—%


$     3,144,183



—%


$     2,988,521



—%

    Interest-bearing

1,080,841


243


0.09%


1,060,771


236


0.09%


913,252


218


0.09%

    Savings and money market accounts

5,746,210


5,166


0.36%


5,732,007


5,033


0.35%


5,446,351


6,929


0.50%

    Certificates and other time deposits

1,528,177


2,743


0.71%


1,618,322


3,169


0.79%


2,099,558


4,370


0.83%

       Total deposits

11,591,931


8,152


0.28%


11,555,283


8,438


0.29%


11,447,682


11,517


0.40%

Securities sold under agreements to repurchase

1,032,401


310


0.12%


920,352


276


0.12%


969,020


977


0.40%

Wholesale borrowings

178,022


1,130


2.53%


177,987


1,118


2.53%


320,691


1,669


2.06%

       Total interest bearing liabilities

9,565,651


9,592


0.40%


9,509,439


9,832


0.42%


9,748,872


14,163


0.58%

Other liabilities

315,093






305,705






302,824





Shareholders' equity

1,616,569






1,599,187






1,570,411





Total liabilities and shareholders' equity

$   14,734,016






$   14,558,514






$   14,610,628





Net yield on earning assets

$   13,119,473


$   120,741


3.66%


$   12,986,988


$   121,689


3.77%


$   12,878,105


$     121,788


3.75%

Interest rate spread





3.55%






3.66%






3.61%





































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








Nonaccrual loans have been included in the average balances.













 

 

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES









Average Consolidated Balance Sheets









Fully Tax-equivalent Interest Rates and Interest Differential















Nine Months Ended


Nine Months Ended


September 30, 2012


September 30, 2011

(Unaudited)

Average




Average


Average




Average

(Dollars in thousands)

Balance


Interest


Rate


Balance


Interest


Rate

ASSETS












Cash and due from banks

$                   409,944






$               541,992





Investment securities and federal funds sold:












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

2,797,521


$    56,688


2.71%


2,906,269


$         59,174


2.72%

    Obligations of states and political subdivisions (tax exempt)

526,962


18,450


4.68%


370,553


15,709


5.67%

    Other securities and federal funds sold

369,639


8,146


2.94%


296,976


6,436


2.90%

      Total investment securities and federal funds sold

3,694,122


83,284


3.01%


3,573,798


81,319


3.04%

Loans held for sale

24,279


761


4.19%


21,877


779


4.76%

Loans, including loss share receivable

9,295,866


309,530


4.45%


9,126,596


330,965


4.85%

      Total earning assets

13,014,267


393,575


4.04%


12,722,271


413,063


4.34%

Allowance for loan losses

(143,756)






(138,758)





Other assets

1,316,071






1,326,045





Total assets

$              14,596,526






$          14,451,550





LIABILITIES AND SHAREHOLDERS' EQUITY












Deposits:












    Noninterest-bearing

$                3,139,515



—%


$            2,954,172



—%

    Interest-bearing

1,069,290


726


0.09%


859,903


579


0.09%

    Savings and money market accounts

5,717,860


15,302


0.36%


5,236,540


22,172


0.57%

    Certificates and other time deposits

1,613,270


9,436


0.78%


2,360,522


16,803


0.95%

       Total deposits

11,539,935


25,464


0.29%


11,411,137


39,554


0.46%

Securities sold under agreements to repurchase

947,135


854


0.12%


900,920


2,832


0.42%

Wholesale borrowings

180,215


3,399


2.52%


323,678


4,963


2.05%

       Total interest bearing liabilities

9,527,770


29,717


0.42%


9,681,563


47,349


0.65%

Other liabilities

330,254






275,452





Shareholders' equity

1,598,987






1,540,363





Total liabilities and shareholders' equity

$              14,596,526






$          14,451,550





Net yield on earning assets

$              13,014,267


$  363,858


3.73%


$          12,722,271


$       365,714


3.84%

Interest rate spread





3.62%






3.69%













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


Nonaccrual loans have been included in the average balances.







 

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES






Consolidated Statements of Comprehensive Income




















Quarters ended


Nine Months Ended

(Unaudited)

September 30,


September 30, 

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

2012


2011


2012


2011

Interest income:









Loans and loans held for sale

$                 103,005


$             108,417


$                309,213


$            330,877


Investment securities










Taxable

20,633


21,949


64,834


65,610



Tax-exempt

3,844


3,189


11,270


9,521



Total investment securities interest

24,477


25,138


76,104


75,131




Total interest income

127,482


133,555


385,317


406,008

Interest expense:









Deposits:










Interest-bearing

243


218


726


579



Savings and money market accounts

5,166


6,929


15,302


22,172



Certificates and other time deposits

2,743


4,370


9,436


16,803


Securities sold under agreements to repurchase

310


977


854


2,832


Wholesale borrowings

1,130


1,669


3,399


4,963



Total interest expense

9,592


14,163


29,717


47,349



Net interest income

117,890


119,392


355,600


358,659

Provision for noncovered loan losses

9,965


14,604


26,860


41,760

Provision for covered loan losses

6,214


4,768


15,576


17,580



Net interest income after provision for loan losses

101,711


100,020


313,164


299,319

Other income:









Trust department income

6,124


5,607


17,481


16,983


Service charges on deposits

14,603


17,838


43,490


48,460


Credit card fees

11,006


13,640


32,402


39,357


ATM and other service fees

3,680


3,801


11,360


9,781


Bank owned life insurance income

3,094


3,182


9,073


11,439


Investment services and insurance

2,208


1,965


6,843


6,384


Investment securities gains, net

553


4,402


1,361


5,291


Loan sales and servicing income

7,255


3,426


19,085


9,102


Other operating income

6,402


6,911


20,857


18,222



Total other income

54,925


60,772


161,952


165,019

Other expenses:









Salaries, wages, pension and employee benefits

58,061


61,232


183,632


177,815


Net occupancy expense

8,077


8,464


24,640


25,144


Equipment expense

7,143


7,073


21,845


20,725


Stationery, supplies and postage

2,210


2,517


6,638


7,972


Bankcard, loan processing and other costs

8,424


8,449


24,935


24,278


Professional services

4,702


5,732


17,361


17,466


Amortization of intangibles

456


543


1,422


1,629


FDIC insurance expense

1,832


3,240


9,015


12,187


Other operating expense

17,682


18,707


51,944


53,254



Total other expenses

108,587


115,957


341,432


340,470




Income before income tax expense

48,049


44,835


133,684


123,868

Income tax expense

13,096


13,098


37,802


34,808




Net income

34,953


31,737


95,882


89,060

Other comprehensive income, net of taxes









Changes in unrealized securities' holding gains and losses

$                     4,884


$                 7,353


$                  10,872


$              24,889


Reclassification for realized securities' gains

(359)


(2,862)


(885)


(3,440)


   Total other comprehensive gain, net of taxes

4,525


4,491


9,987


21,449



  Comprehensive income

$                   39,478


$               36,228


$                105,869


$            110,509

Net income applicable to common shares

$                   34,953


$               31,737


$                  95,882


$              89,060

Net income used in diluted EPS calculation

$                   34,953


$               31,737


$                  95,882


$              89,060

Weighted average number of common shares outstanding - basic

109,645


109,245


109,473


109,052

Weighted average number of common shares outstanding - diluted

109,645


109,246


109,473


109,053

Basic earnings per common share

$0.32


$0.29


$0.88


$0.82

Diluted earnings per common share

$0.32


$0.29


$0.88


$0.82

Dividend per common share

$0.16


$0.16


$0.48


$0.48

 

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES 


Consolidated Statements of Comprehensive Income---Linked Quarters


















Quarterly Results

(Unaudited)


2012

2012

2012

2011

2011

(Dollars in thousands, except per share data)


3rd Qtr

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

Loans and loans held for sale


$        103,005

$         103,126

$        103,082

$        107,516

$        108,417

Investment securities


24,477

25,629

25,998

24,732

25,138

          Total interest income


127,482

128,755

129,080

132,248

133,555

Interest on deposits:







     Interest-bearing


243

236

247

237

218

     Savings and money market accounts


5,166

5,033

5,103

5,998

6,929

     Certificates and other time deposits 


2,743

3,169

3,524

3,201

4,370

Securities sold under agreements to repurchase


310

276

268

512

977

Wholesale borrowings 


1,130

1,118

1,151

1,334

1,669

          Total interest expense


9,592

9,832

10,293

11,282

14,163

          Net interest income


117,890

118,923

118,787

120,966

119,392

Provision for noncovered loan losses


9,965

8,766

8,129

12,275

14,604

Provision for covered loan losses


6,214

3,430

5,932

2,773

4,768

     Net interest income after provision for loan losses


101,711

106,727

104,726

105,918

100,020

Other income:







     Trust department income


6,124

5,730

5,627

5,413

5,607

     Service charges on deposits


14,603

14,478

14,409

15,622

17,838

     Credit card fees


11,006

11,216

10,180

10,182

13,640

     ATM and other service fees


3,680

3,890

3,790

3,920

3,801

     Bank owned life insurance income


3,094

2,923

3,056

3,381

3,182

     Investment services and insurance


2,208

2,388

2,247

1,844

1,965

     Investment securities gains, net 


553

548

260

5,790

4,402

     Loan sales and servicing income


7,255

5,139

6,691

5,102

3,426

    Other operating income


6,402

8,989

5,466

8,483

6,911

          Total other income


54,925

55,301

51,726

59,737

60,772

Other expenses:







     Salaries, wages, pension and employee benefits


58,061

61,598

63,973

62,546

61,232

     Net occupancy expense


8,077

7,971

8,592

7,270

8,464

     Equipment expense


7,143

7,598

7,104

7,234

7,073

     Stationery, supplies and postage


2,210

2,285

2,143

2,719

2,517

     Bankcard, loan processing and other costs


8,424

8,858

7,653

7,948

8,449

     Professional services


4,702

9,307

3,352

5,763

5,732

     Amortization of intangibles


456

483

483

543

543

     FDIC expense


1,832

3,463

3,720

5,119

3,240

     Other operating expense


17,682

17,514

16,748

24,732

18,707

          Total other expenses


108,587

119,077

113,768

123,874

115,957

Income before income tax expense


48,049

42,951

42,684

41,781

44,835

Income taxes


13,096

12,366

12,340

11,285

13,098

              Net income


34,953

30,585

30,344

30,496

31,737

Other comprehensive income (loss), net of taxes


4,525

3,747

1,715

(19,233)

4,491

         Comprehensive income 


$          39,478

$           34,332

$          32,059

$          11,263

$          36,228

Net income applicable to common shares


$          34,953

$           30,585

$          30,344

$          30,496

$          31,737

Net income used in diluted EPS calculation


$          34,953

$           30,585

$          30,344

$          30,496

$          31,737

Weighted-average common shares - basic 


109,645

109,562

109,211

109,249

109,245

Weighted-average common shares - diluted


109,645

109,562

109,211

109,249

109,246

Basic earnings per common share 


$0.32

$0.28

$0.28

$0.28

$0.29

Diluted earnings per common share


$0.32

$0.28

$0.28

$0.28

$0.29

 

 

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES






Asset Quality Information (Excluding Acquired Assets)














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

(Dollars in thousands, except ratios)







Quarterly Periods


Annual Period



September 30,

June 30,

March 31,

December 31,

September 30,


December 31,

Allowance for Credit Losses


2012

2012

2012

2011

2011


2011

Allowance for noncovered loan losses, beginning of period


$      103,849

$      103,849

$         107,699

$      109,187

$      109,187


$         114,690

     Provision for noncovered loan losses


9,965

8,766

8,129

12,275

14,604


54,035

     Charge-offs


20,999

15,014

17,417

18,984

20,014


82,768

     Recoveries


6,127

6,248

5,438

5,221

5,410


21,742

       Net charge-offs


14,872

8,766

11,979

13,763

14,604


61,026

Allowance for noncovered loan losses, end of period


$        98,942

$      103,849

$         103,849

$      107,699

$      109,187


$         107,699

Reserve for unfunded lending commitments, beginning of period


$          5,666

$          5,410

$             6,373

$          6,360

$          5,799


$             8,849

     Provision for/(relief of) credit losses


94

256

(963)

13

561


(2,476)

Reserve for unfunded lending commitments, end of period


5,760

5,666

5,410

6,373

6,360


6,373

Allowance for Credit Losses


$      104,702

$      109,515

$         109,259

$      114,072

$      115,547


$         114,072

Ratios (a)









Provision for noncovered loan losses as a % of average loans


0.48%

0.44%

0.42%

0.63%

0.77%


0.73%

Net charge-offs as a % of average loans


0.72%

0.44%

0.62%

0.71%

0.77%


0.82%

Allowance for noncovered loan losses as % of period-end loans


1.19%

1.28%

1.32%

1.39%

1.43%


1.39%

Allowance for credit losses as a % of period-end loans


1.26%

1.35%

1.39%

1.47%

1.51%


1.47%

Allowance for noncovered loans losses as a % of nonperforming loans


196.66%

222.44%

194.97%

166.64%

160.80%


166.64%

Allowance for credit losses as a % of nonperforming loans


208.11%

234.57%

205.13%

176.50%

170.16%


176.50%

Asset Quality (a)









Impaired loans:









     Nonaccrual


$        31,492

$        38,381

$           44,546

$        55,815

$        59,932


$           55,815

Other nonperforming loans:









     Nonaccrual (b)


18,819

8,306

8,717

8,816

7,971


8,816

       Total nonperforming loans


50,311

46,687

53,263

64,631

67,903


64,631

    Other real estate ("ORE")


13,744

14,393

14,670

16,463

22,172


16,463

     Total nonperforming assets ("NPAs")


$        64,055

$        61,080

$           67,933

$        81,094

$        90,075


$           81,094

NPAs as % of period-end loans + ORE


0.77%

0.75%

0.86%

1.04%

1.18%


1.04%

Noncovered loans past due 90 days or more & accruing interest


$          9,691

$          6,545

$             9,261

$        11,376

$          4,403


$           11,376










(a) Excludes covered loans and related loss share receivable with a period end balance of $1.2 billion, $1.3 billion, $1.4 billion, $1.5 billion and $1.6 billion and covered ORE  and related loss share receivable with a period end balance of $56.8 million, $54.5 million, $56.4 million, $54.5 million and $61.9 million at September 30, 2012, June 30, 2012, March 31, 2012, December 31, 2011 and September 30, 2011, respectively.


(b) Includes $10.6 million at September 30, 2012 resulting from implementation of a third quarter 2012 OCC update to the Bank Accounting Advisory Series.  The updated guidance requires those performing loans where the borrower's obligation to the Corporation has been restructured in bankruptcy to be placed on nonaccrual status.

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES







Noninterest Income and Noninterest Expense Detail














(Unaudited)










(Dollars in thousands)




















QUARTERLY OTHER INCOME DETAIL

2012
3rd Qtr


2012
2nd Qtr


2012
1st Qtr


2011
4th Qtr


2011
3rd Qtr

Trust department income

$           6,124


$           5,730


$           5,627


$           5,413


$          5,607

Service charges on deposits

14,603


14,478


14,409


15,622


17,838

Credit card fees

11,006


11,216


10,180


10,182


13,640

ATM and other service fees

3,680


3,890


3,790


3,920


3,801

Bank owned life insurance income

3,094


2,923


3,056


3,381


3,182

Investment services and insurance

2,208


2,388


2,247


1,844


1,965

Investment securities gains, net

553


548


260


5,790


4,402

Loan sales and servicing income

7,255


5,139


6,691


5,102


3,426

Other operating income

6,402


8,989


5,466


8,483


6,911

Total Other Income

$         54,925


$         55,301


$         51,726


$         59,737


$        60,772

 

QUARTERLY OTHER EXPENSES DETAIL

2012
3rd Qtr


2012
2nd Qtr


2012
1st Qtr


2011
4th Qtr


2011
3rd Qtr

Salaries, wages, pension and employee benefits

$         58,061


$         61,598


$         63,973


$         62,546


$        61,232

Net occupancy expense

8,077


7,971


8,592


7,270


8,464

Equipment expense

7,143


7,598


7,104


7,234


7,073

Taxes, other than income taxes

2,051


2,020


1,955


1,389


1,507

Stationery, supplies and postage

2,210


2,285


2,143


2,719


2,517

Bankcard, loan processing and other costs