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FirstMerit Reports First Quarter 2012 EPS of $0.28 Per Share

FirstMerit Corporation. (PRNewsFoto/FirstMerit Corporation) (PRNewsFoto/)

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FirstMerit Corporation

Apr 24, 2012, 07:30 ET

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

Quarterly Highlights include:

  • 52nd consecutive quarter of profitability
  • Average commercial loan growth of $93.6 million, or 1.85%, from prior quarter
  • Average core deposit growth of $203.6 million, or 2.13%, from prior quarter
  • $13.1 million, or 16.18%, decline in nonperforming assets from prior quarter
  • Net charge-offs to average loans, excluding covered loans, was 0.63%, down from prior quarter level of 0.73%
  • Strong tangible common equity ratio at 7.86%

FirstMerit Corporation (Nasdaq: FMER) reported first quarter 2012 net income of $30.3 million, or $0.28 per diluted share.  This compares with $30.5 million, or $0.28 per diluted share, for the fourth quarter 2011 and $27.6 million, or $0.25 per diluted share, for the first quarter 2011.  

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

Returns on average common equity ("ROE") and average assets ("ROA") for the first quarter 2012 were 7.72% and 0.84%, respectively, compared with 7.70% and 0.83%, respectively, for the fourth quarter 2011 and 7.37% and 0.78% for the first quarter 2011.  

"Our first quarter performance reflects continued credit improvements in our already strong asset quality, active loan growth to both businesses and consumers in the markets we serve and sustained increases in core deposits," said Paul G. Greig, chairman, president and CEO of FirstMerit Corporation. "I am pleased with our solid results in an economic and regulatory environment that continues to challenge. By sticking to sound banking principles, FirstMerit continues to take market share, grow organically and reinforce its reputation as a solid financial resource for our customers and shareholders."

Net interest margin was 3.78% for the first quarter of 2012 compared with 3.85% for the fourth quarter of 2011 and 4.01% for the first quarter of 2011.   The net interest margin compressed 7 basis points compared with the fourth quarter of 2011 with earning asset yields declining 10 basis points offset by three basis points of improved funding costs.   An increase in average noncovered loans and investments along with lower funding costs driven by continued growth of core deposits helped to mitigate downward margin pressure in the first quarter. The decline in net interest margin compared with the first quarter of 2011 is attributed to pressure on earning asset yields throughout the year under an interest rate environment of persistent low rates.

Average loans, not including covered loans, during the first quarter of 2012 increased $107.5 million, or 1.40%, compared with the fourth quarter of 2011 and increased $579.9 million, or 8.05%, compared with the first quarter of 2011.   Average commercial loans increased $93.6 million, or 1.85%, compared with the prior quarter, and increased $589.3 million, or 12.94%, compared with the year ago quarter. Commercial loans remain the primary driver in average loan portfolio growth, however, average consumer loans increased moderately for the third consecutive quarter.

Average deposits were $11.5 billion during the first quarter of 2012, an increase of $55.5 million, or 0.49%, compared with the fourth quarter of 2011, and an increase of $152.2 million, or 1.34%, compared with the first quarter of 2011.  During the first quarter 2012, average core deposits, which exclude time deposits, increased $203.6 million, or 2.13%, compared with the fourth quarter 2011 and increased $1.1 billion, or 12.45%, compared with the first quarter 2011.  During the first quarter of 2012, growth in checking, money market and savings account products continued with less emphasis on renewing maturing certificate of deposit accounts.  This strategy to increase the concentration of lower cost deposits within the overall deposit mix was initiated to efficiently fund balance sheet growth and to deepen and extend the length of customer relationships.  Average time deposits decreased $148.1 million, or 8.04%, and decreased $930.4 million, or 35.45%, respectively, over prior and year-ago quarters.  

Average investments increased $210.3 million, or 6.04%, compared with the fourth quarter of 2011 and increased $271.1 million, or 7.93% compared with the first quarter of 2011.  The increase over both time periods reflects the Corporation's continued execution of its previously announced portfolio repositioning.

Net interest income on a fully tax-equivalent ("FTE") basis was $121.4 million in the first quarter 2012 compared with $123.6 million in the fourth quarter of 2011 and $124.2 million in the first quarter of 2011.  

Noninterest income excluding securities transactions for the first quarter of 2012 was $51.5 million, a decrease of $2.5 million, or 4.60%, from the fourth quarter of 2011 and a decrease of $1.3 million, or 2.45%, from the first quarter of 2011.  Loans sales and servicing income increased $1.6 million  from the fourth quarter of 2011 and $3.9 million from the first quarter of 2011.  Other operating income in the first quarter of 2012 decreased $3.0 million, compared with the prior quarter, which included $2.7 million of insurance reimbursement of legal costs incurred and previously expensed. Other operating income in the first quarter of 2012 decreased $1.3 million compared with the prior year quarter, which included $2.9 million in gains on covered loans paid in full.

Other income, net of $0.3 million in securities gains, as a percentage of net revenue for the first quarter of 2012 was 29.77% compared with 30.38% for fourth quarter of 2011 and 29.81% for the first 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 first quarter of 2012 was $113.8 million, a decrease of $10.1 million, or 8.16%, from the fourth quarter of 2011 and a decrease of $0.7 million, or 0.59%, from the first quarter of 2011.   Included in other operating expense in the fourth quarter of 2011 was $4.9 million of fees related to the early termination of repurchase agreements and FHLB advances as part of the Corporation's investment portfolio repositioning strategy and $1.3 million of expense related to an increase in the liability associated with the sale of the Corporation's Visa® Class B shares in 2008.

During the first quarter of 2012, the Corporation reported an efficiency ratio of 65.52%, compared with 69.46% for the fourth quarter of 2011 and 64.37% for the first quarter of 2011.  The Corporation will provide an update on its initiative to improve its overall efficiency during today's earnings conference call.

Net charge-offs, excluding covered loans, totaled $12.0 million, or 0.63% of average loans, excluding acquired loans, in the first quarter of 2012,  compared with $13.8 million, or 0.73% of average loans, in the fourth quarter 2011 and $17.0 million, or 0.99% of average loans, in the first quarter of 2011.  

Nonperforming assets totaled $68.0 million at March 31, 2012, a decrease of $13.1 million, or 16.18%, compared with December 31, 2011 and a decrease of $44.8 million, or 39.72%, compared with March 31, 2011. Nonperforming assets at March 31, 2012 represented 0.87% of period-end loans plus other real estate compared with 1.06% at December 31, 2011 and 1.61% at March 31, 2011.

The allowance for noncovered loan losses totaled $103.8 million at March 31, 2012.   At March 31, 2012, the allowance for noncovered loan losses was 1.34% of period-end loans compared with 1.41% at December 31, 2011 and 1.64% at March 31, 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 1.41% of period end loans, excluding acquired loans, at March 31, 2012, compared with 1.49% at December 31, 2011 and 1.74% at March 31, 2011.  The allowance for credit losses to nonperforming loans was 204.98% at March 31, 2012, compared with 176.50% at December 31, 2011 and 147.38% at March 31, 2011.

The Corporation's total assets at March 31, 2012 were $14.7 billion, an increase of $229.1 million, or 1.59%, compared with December 31, 2011 and an increase of $204.3 million, or 1.41%, compared with March 31, 2011.  

Total deposits were $11.6 billion at March 31, 2012, an increase of $216.6 million, or 1.89%, from December 31, 2011 and an increase of $252.2 million, or 2.21%, from March 31, 2011.  Core deposits totaled $10.0 billion at March 31, 2012, an increase of $309.7 million, or 3.20% from December 31, 2011 and an increase of $1.1 billion, or 11.97%, from March 31, 2011.

Shareholders' equity was $1.6 billion at March 31, 2012, compared with $1.6 billion at December 31, 2011, and $1.5 billion at March 31, 2011.  The Corporation maintained a strong capital position as tangible common equity to assets was 7.86% at March 31, 2012, compared with 7.86% at December 31, 2011 and 7.50% at March 31, 2011.  The common cash dividend per share paid in the first quarter 2012 was $0.16.

First 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 first 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: 70615753.  A replay of the conference call will be available at approximately 2:00 p.m. (Eastern Time) on April 24, 2012 through May 7, 2012 by dialing (855) 859-2056, and entering the PIN: 70615753.  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 $14.7 billion as of March 31, 2012 and 205 banking offices and 213 ATMs 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 wholly-owned subsidiaries 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 the its consolidated financial statements for the year ended March 31, 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 March 31, 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, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Corporation's periodic reports and registration statements filed with the Securities and Exchange Commission. The Corporation undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.

FIRSTMERIT CORPORATION AND SUBSIDIARIES

Consolidated Financial Highlights

(Unaudited)

(Dollars in thousands)









Quarters




2012

2011

2011

2011

2011


1st Qtr

4th Qtr

3rd Qtr

2nd Qtr

1st Qtr

EARNINGS






Net interest income FTE (a)

$          121,428

$          123,598

$          121,788

$          119,735

$          124,191

Provision for noncovered loan losses

8,129

12,275

14,604

10,138

17,018

Provision for covered loan losses

5,932

2,773

4,768

7,481

5,331

Other income

51,726

59,737

60,772

51,491

52,756

Other expenses

113,768

123,874

115,957

110,068

114,445

FTE adjustment (a)

2,641

2,632

2,396

2,292

2,367

Net income

30,344

30,496

31,737

29,763

27,560

Diluted EPS

0.28

0.28

0.29

0.27

0.25

PERFORMANCE RATIOS






Return on average assets (ROA)

0.84%

0.83%

0.86%

0.82%

0.78%

Return on average common equity (ROE)

7.72%

7.70%

8.02%

7.78%

7.37%

Net interest margin FTE (a)

3.78%

3.85%

3.75%

3.77%

4.01%

Efficiency ratio

65.52%

69.46%

64.78%

64.30%

64.37%

Number of full-time equivalent employees

2,997

3,018

3,016

3,028

3,056

MARKET DATA






Book value/common share

$              14.51

$              14.33

$              14.38

$              14.19

$              13.98

Period-end common share mkt value

16.86

15.13

11.36

16.51

17.07

Market as a % of book

116%

106%

79%

116%

122%

Cash dividends/common share

$                0.16

$                0.16

$                0.16

$                0.16

$                0.16

Common stock dividend payout ratio

57.14%

57.14%

55.17%

59.26%

64.00%

Average basic common shares

109,211

109,249

109,245

109,138

108,769

Average diluted common shares

109,211

109,249

109,246

109,139

108,770

Period end common shares

109,187

109,251

109,247

109,241

108,734

Common shares repurchased

69

7

10

45

91

Common stock market capitalization

$       1,840,893

$       1,652,968

$       1,241,046

$       1,803,569

$       1,856,089

ASSET QUALITY (excluding acquired loans)






Gross charge-offs

$            17,417

$            18,984

$            20,014

$            20,958

$            22,812

Net charge-offs

11,979

13,763

14,604

15,641

17,018

Allowance for noncovered loan losses

103,849

107,699

109,187

109,187

114,690

Reserve for unfunded lending commitments

5,410

6,373

6,360

5,799

7,202

Nonperforming assets (NPAs) (b)

67,971

81,094

90,375

99,846

112,759

Net charge-offs/average loans ratio (b)

0.63%

0.73%

0.79%

0.89%

0.99%

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

1.34%

1.41%

1.46%

1.51%

1.64%

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

1.41%

1.49%

1.55%

1.59%

1.74%

NPAs/loans and other real estate (b)

0.87%

1.06%

1.21%

1.38%

1.61%

Allowance for noncovered loan losses/nonperforming loans

194.83%

166.64%

160.09%

150.31%

138.67%

Allowance for credit losses/nonperforming loans

204.98%

176.50%

169.42%

158.30%

147.38%

CAPITAL & LIQUIDITY






Period-end tangible common equity to assets

7.86%

7.86%

7.75%

7.79%

7.50%

Average equity to assets

10.91%

10.75%

10.75%

10.59%

10.62%

Average equity to total loans (c)

17.50%

17.40%

17.55%

17.36%

17.14%

Average total loans to deposits (c)

78.74%

79.12%

78.18%

77.05%

78.14%

AVERAGE BALANCES






Assets

$     14,496,937

$     14,623,441

$     14,610,628

$     14,481,208

$     14,270,871

Deposits

11,472,021

11,416,546

11,447,682

11,464,738

11,319,809

Loans, excluding acquired loans (c)

7,677,963

7,520,400

7,298,446

7,080,109

6,963,389

Acquired loans, including covered loans (c)

1,355,086

1,512,123

1,651,559

1,753,943

1,881,540

Earning assets

12,935,184

12,747,868

12,878,105

12,724,269

12,560,913

Shareholders' equity

1,581,009

1,572,061

1,570,411

1,533,855

1,516,227

ENDING BALANCES






Assets

$     14,670,818

$     14,441,702

$     14,688,278

$     14,347,557

$     14,466,509

Deposits

11,648,165

11,431,609

11,396,121

11,340,939

11,395,946

Loans, excluding acquired loans (c)

7,764,058

7,635,776

7,453,613

7,216,015

6,989,973

Acquired loans, including covered loans (c)

1,306,165

1,404,644

1,604,706

1,707,887

1,800,525

Goodwill

460,044

460,044

460,044

460,044

460,044

Intangible assets

7,757

8,239

8,782

9,325

9,868

Earning assets

13,318,202

13,011,267

12,885,242

12,958,324

13,129,667

Total shareholders' equity

1,584,105

1,565,953

1,570,654

1,550,387

1,519,957

NOTES:

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

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

(c) - Excludes loss share receivable of $171.1 million, $205.7 million, $220.5 million, $239.4 million and $266.0 million as of March 31, 2012, December 31, 2011, September 30, 2011, June 30, 2011 and March 31, 2011, respectively.

FIRSTMERIT CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets


(Dollars in thousands )







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


March 31,


December 31,


March 31,






2012


2011


2011

ASSETS








Cash and due from banks


$      188,789


$      219,256


$      168,528


Interest-bearing deposits in banks


301,196


158,063


470,253



Total cash and cash equivalents


489,985


377,319


638,781


Investment securities









Held-to-maturity


100,840


82,764


65,923



Available-for-sale


3,491,647


3,353,553


3,362,751



Other investments


140,713


140,726


160,818


Loans held for sale


42,447


30,077


13,443


Noncovered loans:









Commercial


5,220,051


5,107,747


4,565,376



Residential mortgage


428,950


413,664


399,380



Installment


1,259,930


1,263,665


1,282,170



Home equity


739,548


743,982


736,947



Credit cards


140,618


146,356


141,864



Leases


74,112


73,530


60,487




Total noncovered loans


7,863,209


7,748,944


7,186,224




  Allowance for noncovered loan losses


(103,849)


(107,699)


(114,690)




Net noncovered loans


7,759,360


7,641,245


7,071,534


Covered loans (includes loss share receivable of $171.1 million, $205.7 million and $266.0 million at March 31, 2012, December 31, 2011 and March 31, 2011, respectively)


1,378,150


1,497,140


1,870,255




  Allowance for covered loan losses


(41,070)


(36,417)


(28,405)




Net covered loans


1,337,080


1,460,723


1,841,850




Net loans


9,096,440


9,101,968


8,913,384


Premises and equipment, net


188,347


192,949


192,630


Goodwill


460,044


460,044


460,044


Intangible assets


7,757


8,239


9,868


Covered other real estate (includes loss share receivable of $0.7 million, $1.3 million and $7.9 million at March 31, 2012, December 31, 2011 and March 31, 2011, respectively)


56,411


54,505


58,688


Accrued interest receivable and other assets


596,187


639,558


590,179




   Total assets


$ 14,670,818


$ 14,441,702


$ 14,466,509

LIABILITIES AND SHAREHOLDERS' EQUITY








Deposits:









Noninterest-bearing


$   3,136,595


$   3,030,225


$   2,925,088



Interest-bearing


1,119,102


1,062,896


815,593



Savings and money market accounts


5,742,547


5,595,409


5,188,815



Certificates and other time deposits


1,649,921


1,743,079


2,466,450




Total deposits


11,648,165


11,431,609


11,395,946


Federal funds purchased and securities sold under agreements to repurchase


928,760


866,265


952,995


Wholesale borrowings


176,611


203,462


325,046


Accrued taxes, expenses, and other liabilities


333,177


374,413


272,565




Total liabilities


13,086,713


12,875,749


12,946,552


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: March 31, 2012, December 31, 2011 and March 31, 2011 - 115,121,731 shares


127,937


127,937


127,937



Capital surplus


484,491


479,882


488,770



Accumulated other comprehensive loss


(22,172)


(23,887)


(25,765)



Retained earnings


1,144,210


1,131,203


1,091,160



Treasury stock, at cost: March 31, 2012 -5,935,169 shares; December 31, 2011 - 5,870,923 shares; March 31, 2011 - 6,387,924 shares


(150,361)


(149,182)


(162,145)




Total shareholders' equity


1,584,105


1,565,953


1,519,957




   Total liabilities and shareholders' equity


$ 14,670,818


$ 14,441,702


$ 14,466,509

FIRSTMERIT CORPORATION AND SUBSIDIARIES

Average Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands)





Quarterly Periods



March 31,


December 31,


September 30,


June 30,


March 31,



2012


2011


2011


2011


2011

ASSETS











Cash and due from banks


$        378,736


$      621,899


$       517,150


$      588,487


$        520,602

Investment securities:











   Held-to-maturity


90,664


89,166


85,664


79,012


64,212

   Available-for-sale


3,459,439


3,231,195


3,429,631


3,382,943


3,194,751

   Other investments


140,719


160,147


160,799


160,811


160,752

Loans held for sale


26,483


24,215


24,524


18,512


22,574

Noncovered loans:











   Commercial


5,143,087


5,049,479


4,876,034


4,665,550


4,553,777

   Residential mortgage


421,648


405,329


399,228


398,702


403,758

   Installment


1,261,122


1,267,952


1,264,868


1,270,589


1,294,156

   Home equity


738,154


744,326


741,497


736,117


741,596

   Credit card


143,794


145,560


144,796


143,528


146,526

   Leases


73,644


61,267


56,909


58,607


61,768

      Total noncovered loans


7,781,449


7,673,913


7,483,332


7,273,093


7,201,581

Covered loans and loss share receivable


1,436,430


1,569,232


1,694,155


1,809,898


1,917,043

        Total loans


9,217,879


9,243,145


9,177,487


9,082,991


9,118,624

Less: allowance for loan losses


142,628


141,360


138,441


143,721


134,064

        Net loans


9,075,251


9,101,785


9,039,046


8,939,270


8,984,560

Total earning assets


12,935,184


12,747,868


12,878,105


12,724,269


12,560,913

Premises and equipment, net


190,669


193,219


192,218


192,584


195,296

Accrued interest receivable and other assets


1,134,976


1,201,815


1,161,596


1,119,589


1,128,124

TOTAL ASSETS


$   14,496,937


$ 14,623,441


$  14,610,628


$ 14,481,208


$   14,270,871

LIABILITIES











Deposits:











   Noninterest-bearing


$     3,036,590


$   3,013,543


$    2,988,521


$   2,998,090


$     2,874,884

   Interest-bearing


1,066,132


991,456


913,252


824,125


841,545

   Savings and money market accounts


5,675,052


5,569,213


5,446,351


5,279,353


4,978,773

   Certificates and other time deposits


1,694,247


1,842,334


2,099,558


2,363,170


2,624,607

      Total deposits


11,472,021


11,416,546


11,447,682


11,464,738


11,319,809

Federal funds purchased and securities sold under agreements to repurchase


887,715


999,639


969,020


884,244


848,169

Wholesale borrowings


184,659


225,116


320,691


325,057


325,296

      Total funds


12,544,395


12,641,301


12,737,393


12,674,039


12,493,274

Accrued taxes, expenses and other liabilities


371,533


410,079


302,824


273,314


261,370

      Total liabilities


12,915,928


13,051,380


13,040,217


12,947,353


12,754,644

SHAREHOLDERS' EQUITY











Common stock


127,937


127,937


127,937


127,937


127,937

Capital surplus


481,856


479,257


477,864


479,078


486,907

Accumulated other comprehensive loss


(19,862)


(15,198)


(2,211)


(16,402)


(26,703)

Retained earnings


1,140,953


1,129,392


1,116,207


1,095,270


1,089,554

Treasury stock


(149,875)


(149,327)


(149,386)


(152,028)


(161,468)

      Total shareholders' equity


1,581,009


1,572,061


1,570,411


1,533,855


1,516,227

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY


$   14,496,937


$ 14,623,441


$  14,610,628


$ 14,481,208


$   14,270,871

FIRSTMERIT CORPORATION AND SUBSIDIARIES

Average Consolidated Balance Sheets

Fully Tax-equivalent Interest Rates and Interest Differential

(Unaudited)

(Dollars in thousands)




















Three months ended


Three months ended


Three months ended


March 31, 2012


December 31, 2011


March 31, 2011


Average




Average


Average




Average


Average




Average


Balance


Interest


Rate


Balance


Interest


Rate


Balance


Interest


Rate

ASSETS


















Cash and due from banks

$      378,736






$      621,899






$      520,602





Investment securities and federal funds sold:


















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

2,882,045


19,679


2.75%


2,761,042


19,028


2.73%


2,783,053


19,368


2.82%

   Obligations of states and political subdivisions (tax exempt)

436,804


5,864


5.40%


403,405


5,568


5.48%


357,511


5,281


5.99%

   Other securities and federal funds sold

371,973


2,739


2.96%


316,061


2,406


3.02%


279,151


2,117


3.08%

     Total investment securities and federal funds sold

3,690,822


28,282


3.08%


3,480,508


27,002


3.08%


3,419,715


26,766


3.17%

Loans held for sale

26,483


283


4.30%


24,215


266


4.36%


22,574


274


4.92%

Loans, including loss share receivable

9,217,879


103,156


4.50%


9,243,145


107,612


4.62%


9,118,624


114,562


5.10%

     Total earning assets

12,935,184


131,721


4.10%


12,747,868


134,880


4.20%


12,560,913


141,602


4.57%

Allowance for loan losses

(142,628)






(141,360)






(134,064)





Other assets

1,325,645






1,395,034






1,323,420





Total assets

$ 14,496,937






$ 14,623,441






$ 14,270,871





LIABILITIES AND SHAREHOLDERS' EQUITY


















Deposits:


















   Noninterest-bearing

$   3,036,590


—


—%


$   3,013,543


—


—%


$   2,874,884


—


—%

   Interest-bearing

1,066,132


247


0.09%


991,456


237


0.09%


841,545


184


0.09%

   Savings and money market accounts

5,675,052


5,103


0.36%


5,569,213


5,998


0.43%


4,978,773


7,845


0.64%

   Certificates and other time deposits

1,694,247


3,524


0.84%


1,842,334


3,201


0.69%


2,624,607


6,827


1.05%

      Total deposits

11,472,021


8,874


0.31%


11,416,546


9,436


0.33%


11,319,809


14,856


0.53%

Securities sold under agreements to repurchase

887,715


268


0.12%


999,639


512


0.20%


848,169


915


0.44%

Wholesale borrowings

184,659


1,151


2.51%


225,116


1,334


2.35%


325,296


1,640


2.04%

      Total interest bearing liabilities

9,507,805


10,293


0.44%


9,627,758


11,282


0.46%


9,618,390


17,411


0.73%

Other liabilities

371,533






410,079






261,370





Shareholders' equity

1,581,009






1,572,061






1,516,227





Total liabilities and shareholders' equity

$ 14,496,937






$ 14,623,441






$ 14,270,871





Net yield on earning assets

$ 12,935,184


121,428


3.78%


$ 12,747,868


123,598


3.85%


$ 12,560,913


124,191


4.01%

Interest rate spread





3.66%






3.73%






3.84%



















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

(Unaudited)




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

Quarters ended


March 31,





2012


2011

Interest income:





Loans and loans held for sale

$  103,082


$   114,555


Investment securities






Taxable

22,418


21,485



Tax-exempt

3,580


3,195



Total investment securities interest

25,998


24,680




Total interest income

129,080


139,235

Interest expense:





Deposits:






Interest-bearing

247


184



Savings and money market accounts

5,103


7,845



Certificates and other time deposits

3,524


6,827


Securities sold under agreements to repurchase

268


915


Wholesale borrowings

1,151


1,640



Total interest expense

10,293


17,411



Net interest income

118,787


121,824

Provision for noncovered loan losses

8,129


17,018

Provision for covered loan losses

5,932


5,331



Net interest income after provision for loan losses

104,726


99,475

Other income:





Trust department income

5,627


5,514


Service charges on deposits

14,409


14,910


Credit card fees

10,180


12,207


ATM and other service fees

3,790


2,917


Bank owned life insurance income

3,056


5,241


Investment services and insurance

2,247


2,447


Investment securities gains, net

260


—


Loan sales and servicing income

6,691


2,785


Other operating income

5,466


6,735



Total other income

51,726


52,756

Other expenses:





Salaries, wages, pension and employee benefits

63,973


59,871


Net occupancy expense

8,592


8,594


Equipment expense

7,104


6,836


Stationery, supplies and postage

2,143


2,705


Bankcard, loan processing and other costs

7,653


7,562


Professional services

3,352


5,793


Amortization of intangibles

483


543


FDIC insurance expense

3,720


4,366


Other operating expense

16,748


18,175



Total other expenses

113,768


114,445




Income before income tax expense

42,684


37,786

Income tax expense

12,340


10,226




Net income

30,344


27,560

Other comprehensive income, net of taxes





Changes in unrealized securities' holding gains and losses

$   1,884


$      338


Reclassification for realized securities' gains

(169)


—


  Total other comprehensive gain, net of taxes

1,715


338



 Comprehensive income

$ 32,059


$ 27,898

Net income applicable to common shares

$ 30,344


$ 27,560

Net income used in diluted EPS calculation

$ 30,344


$ 27,560

Weighted average number of common shares outstanding - basic

109,211


108,769

Weighted average number of common shares outstanding - diluted

109,211


108,770

Basic earnings per common share

$     0.28


$     0.25

Diluted earnings per common share

$     0.28


$     0.25

Dividend per common share

$     0.16


$     0.16

FIRSTMERIT CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income---Linked Quarters

(Unaudited)

(Dollars in thousands, except per share data)



Quarterly Results



2012


2011


2011


2011


2011



1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr

Loans and loans held for sale


$   103,082


$   107,516


$    108,417


$   107,904


$   114,555

Investment securities


25,998


24,732


25,138


25,313


24,680

         Total interest income


129,080


132,248


133,555


133,217


139,235

Interest on deposits:











    Interest Bearing


247


237


218


177


184

    Savings and money market accounts


5,103


5,998


6,929


7,398


7,845

    Certificates and other time deposits


3,524


3,201


4,370


5,606


6,827

Securities sold under agreements to repurchase


268


512


977


940


915

Wholesale borrowings


1,151


1,334


1,669


1,653


1,640

         Total interest expense


10,293


11,282


14,163


15,774


17,411

         Net interest income


118,787


120,966


119,392


117,443


121,824

Provision for noncovered loan losses


8,129


12,275


14,604


10,138


17,018

Provision for covered loan losses


5,932


2,773


4,768


7,481


5,331

    Net interest income after provision for loan losses


104,726


105,918


100,020


99,824


99,475

Other income:











    Trust department income


5,627


5,413


5,607


5,863


5,514

    Service charges on deposits


14,409


15,622


17,838


15,712


14,910

    Credit card fees


10,180


10,182


13,640


13,510


12,207

    ATM and other service fees


3,790


3,920


3,801


3,063


2,917

    Bank owned life insurance income


3,056


3,381


3,182


3,015


5,241

    Investment services and insurance


2,247


1,844


1,965


1,972


2,447

    Investment securities gains, net


260


5,790


4,402


889


—

    Loan sales and servicing income


6,691


5,102


3,426


2,891


2,785

   Other operating income


5,466


8,483


6,911


4,576


6,735

         Total other income


51,726


59,737


60,772


51,491


52,756

Other expenses:











    Salaries, wages, pension and employee benefits


63,973


62,546


61,232


56,713


59,871

    Net occupancy expense


8,592


7,270


8,464


8,086


8,594

    Equipment expense


7,104


7,234


7,073


6,816


6,836

    Stationery, supplies and postage


2,143


2,719


2,517


2,750


2,705

    Bankcard, loan processing and other costs


7,653


7,948


8,449


8,266


7,562

    Professional services


3,352


5,763


5,732


5,940


5,793

    Amortization of intangibles


483


543


543


543


543

    FDIC expense


3,720


5,119


3,240


4,581


4,366

    Other operating expense


16,748


24,732


18,707


16,373


18,175

         Total other expenses


113,768


123,874


115,957


110,068


114,445

Income before income tax expense


42,684


41,781


44,835


41,247


37,786

Income taxes


12,340


11,285


13,098


11,484


10,226

             Net income


30,344


30,496


31,737


29,763


27,560

Other comprehensive income (loss), net of taxes


1,715


(19,233)


4,491


16,620


338

        Comprehensive income


$     32,059


$     11,263


$      36,228


$     46,383


$     27,898

Net income applicable to common shares


$     30,344


$     30,496


$      31,737


$     29,763


$     27,560

Net income used in diluted EPS calculation


$     30,344


$     30,496


$      31,737


$     29,763


$     27,560

Weighted-average common shares outstanding - basic


109,211


109,249


109,245


109,138


108,769

Weighted-average common shares outstanding - diluted


109,211


109,249


109,246


109,139


108,770

Basic earnings per common share


$         0.28


$         0.28


$          0.29


$         0.27


$         0.25

Diluted earnings per common share


$         0.28


$         0.28


$          0.29


$         0.27


$         0.25

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



March 31,


December 31,


September 30,


June 30,


March 31,


December 31,

Allowance for Credit Losses


2012


2011


2011


2011


2011


2011

Allowance for noncovered loan losses, beginning of period


$ 107,699


$      109,187


$       109,187


$ 114,690


$ 114,690


$      114,690

    Provision for noncovered loan losses


8,129


12,275


14,604


10,138


17,018


54,035

    Charge-offs


17,417


18,984


20,014


20,958


22,812


82,768

    Recoveries


5,438


5,221


5,410


5,317


5,794


21,742

      Net charge-offs


11,979


13,763


14,604


15,641


17,018


61,026

Allowance for noncovered loan losses, end of period


$ 103,849


$      107,699


$       109,187


$ 109,187


$ 114,690


$      107,699

Reserve for unfunded lending commitments, beginning of period


$     6,373


$          6,360


$           5,799


$     7,202


$     8,849


$          8,849

    Provision for/(relief of) credit losses


(963)


13


561


(1,403)


(1,647)


(2,476)

Reserve for unfunded lending commitments, end of period


5,410


6,373


6,360


5,799


7,202


6,373

Allowance for Credit Losses


$ 109,259


$      114,072


$       115,547


$ 114,986


$ 121,892


$      114,072














Ratios (a)













Provision for loan losses as a % of average loans


0.43%


0.65%


0.79%


0.57%


0.99%


0.75%

Provision for credit losses as a % of average loans


—%


—%


0.03%


(0.08)%


(0.10)%


—%

Net charge-offs as a % of average loans


0.63%


0.73%


0.79%


0.89%


0.99%


0.85%

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


1.34%


1.41%


1.46%


1.51%


1.64%


1.41%

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


1.41%


1.49%


1.55%


1.59%


1.74%


1.49%

Allowance for loan losses as a % of nonperforming loans


194.83%


166.64%


160.09%


150.31%


138.67%


166.64%

Allowance for credit losses as a % of nonperforming loans


204.98%


176.50%


169.42%


158.30%


147.38%


176.50%














Asset Quality (a)













Impaired loans:













    Nonaccrual


$   44,486


$        55,755


$         59,928


$   63,688


$   71,246


$        55,755

Other nonperforming loans:













    Nonaccrual


8,815


8,876


8,275


8,951


11,460


8,876

      Total nonperforming loans


53,301


64,631


68,203


72,639


82,706


64,631

Other real estate ("ORE")


14,670


16,463


22,172


27,207


30,053


16,463

    Total nonperforming assets ("NPAs")


$   67,971


$        81,094


$         90,375


$   99,846


$ 112,759


$        81,094

NPAs as % of period-end loans + ORE


0.87%


1.06%


1.21%


1.38%


1.61%


1.06%

Past due 90 days or more & accruing interest


$     6,808


$          8,866


$           6,268


$   10,424


$     5,652


$          8,866














(a) Excludes acquired loans and related loss share receivable with a period end balance of $1.5 billion, $1.6 billion, $1.8 billion, $1.9 billion and $2.1 billion and covered ORE  and related loss share receivable with a period end balance of $56.4 million, $54.5 million, $61.9 million, $58.5 million and $58.7 million at March 31, 2012, December 31, 2011, September 30, 2011, June 30, 2011 and March 31, 2011.

FIRSTMERIT CORPORATION AND SUBSIDIARIES

Noninterest Income and Noninterest Expense Detail

(Unaudited)

(Dollars in thousands)












2012


2011


2011


2011


2011

QUARTERLY OTHER INCOME DETAIL

1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr

Trust department income

$     5,627


$     5,413


$     5,607


$     5,863


$     5,514

Service charges on deposits

14,409


15,622


17,838


15,712


14,910

Credit card fees

10,180


10,182


13,640


13,510


12,207

ATM and other service fees

3,790


3,920


3,801


3,063


2,917

Bank owned life insurance income

3,056


3,381


3,182


3,015


5,241

Investment services and insurance

2,247


1,844


1,965


1,972


2,447

Investment securities gains, net

260


5,790


4,402


889


—

Loan sales and servicing income

6,691


5,102


3,426


2,891


2,785

Other operating income

5,466


8,483


6,911


4,576


6,735

Total Other Income

$   51,726


$   59,737


$   60,772


$   51,491


$   52,756












2012


2011


2011


2011


2011

QUARTERLY OTHER EXPENSES DETAIL

1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr

Salaries, wages, pension and employee benefits

$   63,973


$   62,546


$   61,232


$   56,713


$   59,871

Net occupancy expense

8,592


7,270


8,464


8,086


8,594

Equipment expense

7,104


7,234


7,073


6,816


6,836

Taxes, other than income taxes

1,955


1,389


1,507


922


1,960

Stationery, supplies and postage

2,143


2,719


2,517


2,750


2,705

Bankcard, loan processing and other costs

7,653


7,948


8,449


8,266


7,562

Advertising

1,684


2,275


2,391


2,287


2,384

Professional services

3,352


5,763


5,732


5,940


5,793

Telephone

1,398


1,525


1,570


1,462


1,486

Amortization of intangibles

483


543


543


543


543

FDIC insurance expense

3,720


5,119


3,240


4,581


4,366

Other operating expense

11,711


19,543


13,239


11,702


12,345

Total Other Expenses

$ 113,768


$ 123,874


$ 115,957


$ 110,068


$ 114,445

FIRSTMERIT CORPORATION AND SUBSIDIARIES

Allowance for Noncovered Loan Losses - Net Charge-off Detail

(Unaudited)

(Dollars in thousands)


Quarters ended


Year Ended


March 31,


December 31,


2012


2011


2011

Allowance for noncovered loan losses - beginning of period

$    107,699


$    114,690


$      114,690

  Loans charged off:






    Commercial

6,999


7,924


31,943

    Residential mortgage

862


1,664


4,819

    Installment

5,238


8,091


25,839

    Home equity

2,324


2,156


8,691

    Credit cards

1,583


2,318


7,846

    Leases

—


—


778

    Overdrafts

411


659


2,852

       Total

17,417


22,812


82,768

 Recoveries:






   Commercial

694


608


2,703

   Residential mortgage

35


89


221

   Installment

3,180


3,688


13,639

   Home equity

645


467


1,985

   Credit cards

630


647


2,264

   Manufactured housing

22


31


119

   Leases

37


32


37

   Overdrafts

195


232


774

      Total

5,438


5,794


21,742

 Net charge-offs

11,979


17,018


61,026

Provision for noncovered loan losses

8,129


17,018


54,035

Allowance for noncovered loan losses - end of period

$    103,849


$    114,690


$      107,699

Average loans (a)

$ 7,677,963


$ 6,963,389


$   7,217,349

Ratio to average loans (a):






(Annualized) net charge-offs

0.63%


0.99%


0.85%

Provision for loan losses

0.43%


0.99%


0.75%

Loans, period-end (a)

$ 7,764,058


$ 6,989,973


$   7,635,776

Allowance for credit losses (a):

$    109,259


$    121,892


$      114,072

 As a multiple of (annualized) net charge-offs

2.27


1.77


1.87

Allowance for noncovered loan losses (a):






 As a percent of period-end noncovered loans

1.34%


1.64%


1.41%

 As a multiple of (annualized) net noncovered charge-offs

2.16


1.66


1.76

(a) Excludes acquired loans and loss share receivable.

FirstMerit Corporation
Analysts: Thomas O'Malley/Investor Relations Officer
Phone: 330.384.7109

Media Contact: Robert Townsend/Media Relations Officer
Phone: 330.384.7075

SOURCE FirstMerit Corporation

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