FirstMerit Reports Third Quarter 2014 EPS of $0.37 Per Share

News provided by

FirstMerit Corporation

Oct 28, 2014, 07:30 ET

AKRON, Ohio, Oct. 28, 2014 /PRNewswire/ --

Quarterly Highlights include:

  • Profitability Sustained: 62nd consecutive quarter of profitability.
  • Organic growth continued: Total loan growth of $272.4 million, or 1.82% from the prior quarter.
  • Credit quality remained solid: Net charge-offs to average originated loans of 0.20%; nonperforming assets as a percent of period end originated loans plus other real estate at 0.52%.
  • Balance sheet remained strong: Strong tangible common equity ratio at 8.01%.

FirstMerit Corporation (Nasdaq: FMER) (the "Corporation") reported third quarter 2014 net income of $63.9 million, or $0.37 per diluted share.  This compares with $59.5 million, or $0.35 per diluted share, for the second quarter 2014 and $40.7 million, or $0.23 per diluted share, for the third quarter 2013.

Returns on average common equity ("ROE") and average assets ("ROA") for the third quarter 2014 were 9.03% and 1.03%, respectively, compared with 8.62% and 0.98%, respectively, for the second quarter 2014 and 6.07% and 0.67%, respectively, for the third quarter 2013. 

"In the third quarter, we continued to capitalize on multiple opportunities throughout our markets to execute on our primary goal of organic growth," said Paul Greig, chairman, president and CEO, FirstMerit Corporation. "Our significant average total loan growth in the quarter demonstrates our success in this initiative.  Importantly, we align our growth with strict underwriting standards and appropriate credit risk management practices to generate profitability.  Our focus on credit quality resulted in another solid quarter of asset quality metrics."          

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

Net Interest Income

Net interest income on a fully tax-equivalent ("TE") basis was $197.6 million in the third quarter 2014 compared with $199.7 million in the second quarter 2014 and $207.1 million in the third quarter 2013.

Net interest margin was 3.60% for the third quarter 2014 compared with 3.75% for the second quarter 2014 and 4.05% for the third quarter 2013.  Net interest margin compression in the third quarter, compared with the prior quarter, resulted from lower accretion from the acquired and covered loan portfolios due to the continued decline in the loan balances.

Average originated loans were $11.8 billion during the third quarter 2014, an increase of $722.2 million, or 6.51%, compared with the second quarter 2014, and an increase of $2.4 billion, or 25.98%, compared with the third quarter 2013.  Average originated commercial loans increased $349.8 million, or 4.87%, compared with the prior quarter, and increased $1.4 billion, or 22.89%, compared with the year-ago quarter.

Average deposits were $19.5 billion during the third quarter 2014, an increase of $35.0 million, or 0.18%, compared with the second quarter 2014, and an increase of $75.6 million, or 0.39%, compared with the third quarter 2013.  During the third quarter 2014, average core deposits, which exclude time deposits, increased $33.2 million, or 0.19%, compared with the second quarter 2014 and increased $460.9 million, or 2.75%, compared with the third quarter 2013.  Average time deposits increased $1.8 million, or 0.08%, and decreased $385.3 million, or 14.16%, respectively, over the prior and year-ago quarters.  For the third quarter 2014, average core deposits accounted for 88.04% of total average deposits, compared with 88.03% for the second quarter 2014 and 86.02% for the third quarter 2013.

Average investments decreased $16.3 million, or 0.24%, compared with the second quarter 2014 and increased $487.0 million, or 7.92%, compared with the third quarter 2013.

Noninterest Income

Noninterest income, excluding gains and losses on securities transactions, for the third quarter 2014 was $69.7 million, a decrease of $2.8 million, or 3.81%, from the second quarter 2014 and a decrease of $1.4 million, or 1.93%, from the third quarter 2013. Included in noninterest income in the third quarter 2014 was $1.2 million of net losses on covered loan resolutions, compared to net gains of $4.1 million and $1.8 million in the second quarter 2014 and third quarter 2013, respectively.

Noninterest income, excluding net securities gains and losses, as a percentage of net revenue for the third quarter 2014 was 26.08% compared with 26.63% for second quarter 2014 and 25.56% for the third quarter 2013.  Net revenue is defined as net interest income, on an TE basis, plus other income, excluding gains and losses from securities sales.

Noninterest Expense

Noninterest expense for the third quarter 2014 was $163.1 million, a decrease of $4.3 million, or 2.54%, from the second quarter 2014 and a decrease of $47.5 million, or 22.53%, from the third quarter 2013.  There were no merger related costs included in noninterest expense in the third quarter of 2014, however, included in noninterest expense in the third quarter 2013 were merger related costs associated with the Citizens acquisition of $33.4 million.  The Corporation's efficiency ratio was 59.92% for the third quarter 2014, compared with 60.43% for the second quarter 2014 and 74.64% for the third quarter 2013.

The effective tax rate was 29.76% for the third quarter 2014 compared with 30.37% for the second quarter 2014 and 29.13% for the third quarter 2013.

Asset Quality (excluding acquired loans and covered assets)

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

Net charge-offs on originated loans totaled $5.9 million, or 0.20% of average originated loans in the third quarter 2014, compared with $6.2 million, or 0.22% of average originated loans, in the second quarter 2014 and $2.9 million, or 0.12% of average originated loans, in the third quarter 2013. 

Nonperforming assets totaled $63.1 million at September 30, 2014, an increase of $2.2 million, or 3.61%, compared with June 30, 2014 and an increase of $7.7 million, or 13.88%, compared with September 30, 2013. Nonperforming assets at September 30, 2014 represented 0.52% of period-end originated loans plus other real estate compared with 0.53% at June 30, 2014 and 0.57% at September 30, 2013.

The allowance for originated loan losses totaled $90.9 million at September 30, 2014.   At September 30, 2014, the allowance for originated loan losses was 0.75% of period-end originated loans compared with 0.80% at June 30, 2014 and 1.00% at September 30, 2013.  The allowance for credit losses is the sum of the allowance for originated loan losses and the reserve for unfunded lending commitments.  For comparative purposes, the allowance for credit losses was 0.81% of period end originated loans at September 30, 2014, compared with 0.86% at June 30, 2014 and 1.09% at September 30, 2013.  The allowance for credit losses to nonperforming loans was 248.85% at September 30, 2014, compared with 269.61% at June 30, 2014 and 300.06% at September 30, 2013.

Balance Sheet

The Corporation's total assets at September 30, 2014 were $24.6 billion, an increase of $43.8 million, or 0.18%, compared with June 30, 2014 and an increase of $470.5 million, or 1.95%, compared with September 30, 2013. 

Total deposits were $19.4 billion at September 30, 2014, an increase of $68.5 million, or 0.36%, from June 30, 2014 and a decrease of $122.6 million, or 0.63%, from September 30, 2013.  Core deposits totaled $17.0 billion at September 30, 2014, a decrease of $54.2 million, or 0.32%, from June 30, 2014 and an increase of $123.3 million, or 0.73%, from September 30, 2013. 

Shareholders' equity was $2.8 billion as of September 30, 2014 and June 30, 2014, and $2.7 billion as of September 30, 2013.  The Corporation maintained a strong capital position as tangible common equity to assets was 8.01% at September 30, 2014, compared with 7.89% at June 30, 2014  and 7.41% at September 30, 2013.  The common share cash dividend paid in the third quarter 2014 was $0.16 per share.

Third Quarter 2014 Conference Call

FirstMerit (Nasdaq: FMER) senior management will host an earnings conference call today at 11:00 a.m. (Eastern Time) to provide an overview of 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: 19982852.  A replay of the conference call will be available at approximately 2:00 p.m. (Eastern Time) on October 28, 2014 through November 11, 2014 by dialing (855) 859-2056, and entering the PIN: 19982852.  The Corporation will provide a slide presentation, which management will speak to during the conference call.  A copy of the presentation will be available at https://www.firstmerit.com/personal/investors.aspx; click on the Presentations link to access the slide presentation.

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

About FirstMerit Corporation

FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of approximately $24.6 billion as of September 30, 2014, and 381 banking offices and 411 ATM locations in Ohio, Michigan, Wisconsin, Illinois and Pennsylvania. FirstMerit provides a complete range of banking and other financial services to consumers and businesses through its core operations. Principal affiliates include: FirstMerit Bank, N.A., FirstMerit Mortgage Corporation and FirstMerit Title Agency, Ltd.

Subsequent Events

The Corporation is required under GAAP to evaluate subsequent events through the filing of the its consolidated financial statements for the quarter ended September 30, 2014 on Form 10-Q.  As a result, the Corporation will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of September 30, 2014 and will adjust amounts preliminarily reported, if necessary.

Forward-Looking Statements

This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Corporation, as well as its operations, markets and products.  Actual results could differ materially from those indicated.  Among the important factors that could cause results to differ materially are interest rate changes, continued softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Corporation's business, competitive pressures, changes in accounting, tax or regulatory practices or requirements, the Corporation's ability to realize the synergies and benefits contemplated by the acquisition of Citizens, such as it being accretive to earnings and expanding the Corporation's geographic presence, in the time frame anticipated or at all, and those risk factors detailed in the Corporation's periodic reports filed with the Securities and Exchange Commission.  The Corporation undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.

FirstMerit Corporation
Analysts: Thomas O'Malley/Investor Relations Officer
Phone: 330.384.7109
Media Contact: Robert Townsend/Media Relations Officer
Phone: 330.384.7075

FIRSTMERIT CORPORATION AND SUBSIDIARIES









Consolidated Financial Highlights









(Unaudited)



Quarters



(Dollars in thousands, except per share amounts)

2014

2014

2014

2013

2013

3rd qtr

2nd qtr

1st qtr

4th qtr

3rd qtr

EARNINGS









Net interest income TE (a)

$

197,644

$

199,666

$

197,854

$

202,145

$

207,079

TE adjustment (a)

4,066

4,089

3,954

4,077

3,739

Provision for originated loan losses

4,862

5,993

3,654

1,552

2,523

Provision for acquired loan losses

4,411

5,815

7,827

5,515

2,033

Provision/(recapture) for covered loan losses

(81)

3,445

3,055

2,983

1,823

Noninterest income

69,733

72,560

67,270

72,420

71,090

Noninterest expense

163,145

167,400

169,331

178,620

210,599

Net income

63,898

59,519

53,455

57,174

40,715

Diluted EPS (c)

0.37

0.35

0.31

0.33

0.23

PERFORMANCE RATIOS









Return on average assets (ROA)

1.03

%

0.98

%

0.90

%

0.94

%

0.67

%

Return on average equity (ROE)

9.03

%

8.62

%

7.93

%

8.48

%

6.07

%

Return on average tangible common equity (d)

13.41

%

12.92

%

11.98

%

12.96

%

9.29

%

Net interest margin TE (a)

3.60

%

3.75

%

3.84

%

3.89

%

4.05

%

Efficiency ratio (e)

59.92

%

60.43

%

62.77

%

64.08

%

74.64

%

Number of full-time equivalent employees

4,302

4,392

4,521

4,570

4,666

MARKET DATA









Book value per common share

$

17.05

$

16.88

$

16.62

$

16.38

$

16.08

Tangible book value per common share (d)

11.52

11.33

11.03

10.77

10.47

Period end common share market value

17.62

19.75

20.83

22.23

21.72

Market as a % of book

103

%

117

%

125

%

136

%

135

%

Cash dividends per common share

$

0.16

$

0.16

$

0.16

$

0.16

$

0.16

Common Stock dividend payout ratio

43.24

%

45.71

%

51.61

%

48.48

%

69.57

%

Average basic common shares

165,389

165,335

165,060

165,054

165,044

Average diluted common shares

165,804

166,147

166,004

166,097

165,874

Period end common shares

165,384

165,393

165,087

165,056

165,045

Common shares repurchased

10

186

51

17

7

Common Stock market capitalization

$

2,914,066

$

3,266,512

$

3,438,762

$

3,669,195

$

3,584,777

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









Gross charge-offs

$

11,410

$

11,148

$

13,160

$

9,913

$

8,515

Net charge-offs

5,929

6,159

8,022

3,359

2,877

Allowance for originated loan losses

90,883

91,950

92,116

96,484

98,291

Reserve for unfunded lending commitments

6,966

7,107

7,481

7,907

8,493

Nonperforming assets (NPAs)

63,119

60,922

62,711

60,883

55,426

Net charge-offs to average loans ratio

0.20

%

0.22

%

0.31

%

0.13

%

0.12

%

Allowance for originated loan losses to period-end loans

0.75

%

0.80

%

0.85

%

0.94

%

1.00

%

Allowance for credit losses to period-end loans

0.81

%

0.86

%

0.92

%

1.02

%

1.09

%

NPAs to loans and other real estate

0.52

%

0.53

%

0.58

%

0.60

%

0.57

%

Allowance for originated loan losses to nonperforming loans

231.13

%

250.27

%

212.01

%

228.62

%

276.19

%

Allowance for credit losses to nonperforming loans

248.85

%

269.61

%

229.23

%

247.35

%

300.06

%

CAPITAL & LIQUIDITY









Period end tangible common equity to assets (d)

8.01

%

7.89

%

7.69

%

7.70

%

7.41

%

Average equity to assets

11.42

%

11.40

%

11.32

%

11.12

%

11.08

%

Average equity to total loans

18.58

%

18.90

%

19.04

%

18.81

%

18.97

%

Average total loans to deposits

77.36

%

75.15

%

73.11

%

72.84

%

72.11

%

AVERAGE BALANCES









Assets

$

24,583,776

$

24,291,276

$

24,144,570

$

24,034,846

$

24,013,594

Deposits

19,531,800

19,496,795

19,636,506

19,517,476

19,456,231

Originated loans

11,814,314

11,092,101

10,448,383

9,988,587

9,377,826

Acquired loans, including covered loans, less loss share receivable

3,295,547

3,558,810

3,907,802

4,227,693

4,652,101

Earning assets

21,804,243

21,367,496

20,903,863

20,593,750

20,276,825

Shareholders' equity

2,807,886

2,768,352

2,733,226

2,673,635

2,661,546

ENDING BALANCES









Assets

$

24,608,207

$

24,564,431

$

24,498,661

$

23,912,028

$

24,137,730

Deposits

19,366,911

19,298,396

19,811,674

19,533,601

19,489,533

Originated loans

12,071,759

11,467,193

10,826,913

10,213,387

9,789,139

Acquired loans, including covered loans,less loss share receivable

3,139,521

3,458,453

3,726,952

4,025,758

4,401,711

Goodwill

741,740

741,740

741,740

741,740

741,740

Intangible assets

73,953

76,886

79,819

82,755

85,447

Earning assets

21,930,840

21,789,773

21,715,302

21,048,910

21,297,250

Total shareholders' equity

2,820,431

2,791,738

2,742,966

2,702,894

2,654,645

NOTES:










(a) - The interest income earned on certain earning assets is completely or partially exempt from federal and/or state income taxes.  As such, these tax-exempt securities typically yield lower returns than taxable securities.  To provide more meaningful comparisons of net interest margins for all earning assets, net interest income on a taxable-equivalent basis is used in calculating net interest margin by increasing the interest earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments.  This adjustment is not permitted under generally accepted accounting principles in the Consolidated Statements of Comprehensive Income.

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

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

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

(e) - The efficiency ratio is calculated as noninterest expense divided by total revenue, excluding net gains on the sale of securities of $14.0 thousand, $80.0 thousand, and $56.0 thousand in the quarters ended September 30, 2014, June 30, 2014, and March 31, 2014,  respectively. There were no net gains on the sale of securities in the quarters ended December 31, 2013 or  September 30, 2013.

FIRSTMERIT CORPORATION AND SUBSIDIARIES




CONSOLIDATED BALANCE SHEETS













(Dollars in thousands)

September 30,

December 31,

September 30,

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

2014

2013

2013

ASSETS





Cash and due from banks

$

429,699

$

571,171

$

505,228

Interest-bearing deposits in banks

55,629

346,651

742,039


Total cash and cash equivalents

485,328

917,822

1,247,267

Investment securities:






Held-to-maturity

3,002,262

2,935,688

2,749,934


Available-for-sale

3,462,990

3,273,174

3,256,259


Other investments

148,421

180,803

270,369

Loans held for sale

19,512

11,622

17,813

Loans

15,242,026

14,300,972

14,260,836

Allowance for loan losses

(140,077)

(141,252)

(143,835)

     Net loans

15,101,949

14,159,720

14,117,001

Premises and equipment, net

318,690

327,054

324,337

Goodwill

741,740

741,740

741,740

Intangible assets

73,953

82,755

85,447

Covered other real estate

51,434

65,234

70,791

Accrued interest receivable and other assets

1,201,928

1,216,416

1,256,772



    Total assets

$

24,608,207

$

23,912,028

$

24,137,730

LIABILITIES AND SHAREHOLDERS' EQUITY





Deposits:






Noninterest-bearing

$

5,535,886

$

5,459,029

$

5,461,674


Interest-bearing

3,043,952

3,026,735

2,815,681


Savings and money market accounts

8,396,064

8,587,167

8,575,292


Certificates and other time deposits

2,391,009

2,460,670

2,636,886



Total deposits

19,366,911

19,533,601

19,489,533


Federal funds purchased and securities sold under agreements to repurchase

1,273,290

851,535

1,049,801


Wholesale borrowings

608,463

200,600

200,858


Long-term debt

249,933

324,428

324,425


Accrued taxes, expenses, and other liabilities

289,179

298,970

418,468



Total liabilities

21,787,776

21,209,134

21,483,085


Shareholders' equity:







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

100,000

100,000

100,000



Common stock warrant

3,000

3,000

3,000



Common Stock, without par value;  authorized 300,000,000 shares; issued: September 30, 2014 and December 31, 2013 - 170,183,540 shares; September 30, 2013 - 170,179,305 shares

127,937

127,937

127,937



Capital surplus

1,390,207

1,390,643

1,388,638



Accumulated other comprehensive loss

(49,583)

(66,876)

(83,613)



Retained earnings

1,371,453

1,277,975

1,248,554



Treasury stock, at cost: September 30, 2014 - 4,799,239; December 31, 2013 - 5,127,332 shares; September 30, 2013 - 5,134,681 shares

(122,583)

(129,785)

(129,871)



Total shareholders' equity

2,820,431

2,702,894

2,654,645



Total liabilities and shareholders' equity

$

24,608,207

$

23,912,028

$

24,137,730

FIRSTMERIT CORPORATION AND SUBSIDIARIES

Period End Loans by Product Type (Unaudited)

(Dollars in thousands)







As of September 30, 2014

Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

7,626,166

$

1,272,244

$

262,319

$

9,160,729

Mortgage

605,998

410,065

43,672

1,059,735

Installment

2,277,533

809,820

5,148

3,092,501

Home equity

1,062,013

252,975

83,278

1,398,266

Credit card

160,113

—

—

160,113

Leases

339,936

—

—

339,936

    Subtotal

12,071,759

2,745,104

394,417

15,211,280

Loss share receivable

—

—

30,746

30,746

    Total loans

12,071,759

2,745,104

425,163

15,242,026

Allowance for loan losses

(90,883)

(6,206)

(42,988)

(140,077)

  Net loans

$

11,980,876

$

2,738,898

$

382,175

$

15,101,949

















As of June 30, 2014

Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

7,365,499

$

1,457,903

$

292,782

$

9,116,184

Mortgage

580,166

425,584

46,705

1,052,455

Installment

2,051,587

872,034

5,364

2,928,985

Home equity

998,179

268,266

89,815

1,356,260

Credit card

151,967

—

—

151,967

Leases

319,795

—

—

319,795

    Subtotal

11,467,193

3,023,787

434,666

14,925,646

Loss share receivable

—

—

43,981

43,981

    Total loans

11,467,193

3,023,787

478,647

14,969,627

Allowance for loan losses

(91,950)

(4,977)

(45,109)

(142,036)

  Net loans

$

11,375,243

$

3,018,810

$

433,538

$

14,827,591

















As of March 31, 2014

Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

7,083,192

$

1,562,878

$

341,267

$

8,987,337

Mortgage

555,971

446,374

49,411

1,051,756

Installment

1,835,522

943,354

5,531

2,784,407

Home equity

946,802

283,309

94,828

1,324,939

Credit card

147,917

—

—

147,917

Leases

257,509

—

—

257,509

    Subtotal

10,826,913

3,235,915

491,037

14,553,865

Loss share receivable

—

—

54,748

54,748

    Total loans

10,826,913

3,235,915

545,785

14,608,613

Allowance for loan losses

(92,116)

(2,974)

(49,970)

(145,060)

  Net loans

$

10,734,797

$

3,232,941

$

495,815

$

14,463,553

















As of December 31, 2013

Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

6,648,279

$

1,725,970

$

375,860

$

8,750,109

Mortgage

529,253

470,652

50,679

1,050,584

Installment

1,727,925

1,004,569

6,162

2,738,656

Home equity

920,066

294,424

97,442

1,311,932

Credit card

148,313

—

—

148,313

Leases

239,551

—

—

239,551

    Subtotal

10,213,387

3,495,615

530,143

14,239,145

Loss share receivable

—

—

61,827

61,827

    Total loans

10,213,387

3,495,615

591,970

14,300,972

Allowance for loan losses

(96,484)

(741)

(44,027)

(141,252)

  Net loans

$

10,116,903

$

3,494,874

$

547,943

$

14,159,720

















As of September 30, 2013

Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

6,420,369

$

1,963,746

$

422,225

$

8,806,340

Mortgage

487,283

466,594

52,796

1,006,673

Installment

1,647,095

1,080,298

6,361

2,733,754

Home equity

889,372

306,783

102,908

1,299,063

Credit card

145,113

—

—

145,113

Leases

199,907

—

—

199,907

    Subtotal

9,789,139

3,817,421

584,290

14,190,850

Loss share receivable

—

—

69,986

69,986

    Total loans

9,789,139

3,817,421

654,276

14,260,836

Allowance for loan losses

(98,291)

—

(45,544)

(143,835)

  Net loans

$

9,690,848

$

3,817,421

$

608,732

$

14,117,001








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

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

FIRSTMERIT CORPORATION AND SUBSIDIARIES








AVERAGE CONSOLIDATED BALANCE SHEETS









Quarterly Periods

(Unaudited)

September 30,

June 30,

March 31,

December 31,

September 30,

(Dollars in thousands)

2014

2014

2014

2013

2013

ASSETS








Cash and cash equivalents

$

521,210

$

662,000

$

959,071

$

1,135,601

$

1,415,430

Investment securities:








Held-to-maturity

3,029,971

3,061,711

2,983,831

2,763,517

2,640,807

Available-for-sale

3,460,312

3,444,830

3,332,358

3,284,635

3,243,173

Other investments

148,427

148,440

168,389

253,490

267,743

Loans held for sale

17,433

10,196

6,804

10,248

18,265

Loans

15,148,100

14,702,319

14,412,481

14,281,860

14,106,837

Less: allowance for loan losses

140,026

146,368

138,891

177,628

146,509

Net loans

15,008,074

14,555,951

14,273,590

14,104,232

13,960,328

Total earning assets

21,804,243

21,367,496

20,903,863

20,593,750

20,276,825

Premises and equipment, net

317,366

323,175

327,845

326,632

322,236

Accrued interest receivable and other assets

2,080,983

2,084,973

2,092,682

2,156,491

2,145,612

TOTAL ASSETS

$

24,583,776

$

24,291,276

$

24,144,570

$

24,034,846

$

24,013,594

LIABILITIES








Deposits:








Noninterest-bearing

$

5,603,104

$

5,515,807

$

5,488,751

$

5,546,316

$

5,443,800

Interest-bearing

3,100,904

3,066,201

3,045,952

2,875,375

2,720,592

Savings and money market accounts

8,492,172

8,580,928

8,698,817

8,544,097

8,570,910

Certificates and other time deposits

2,335,620

2,333,859

2,402,986

2,551,688

2,720,929

Total deposits

19,531,800

19,496,795

19,636,506

19,517,476

19,456,231

Federal funds purchased and securities sold under








agreements to repurchase

1,182,507

1,024,598

884,065

948,959

1,011,991

Wholesale borrowings

438,941

373,213

276,324

200,622

201,012

Long-term debt

320,387

324,431

324,428

324,426

324,424

Total funds

21,473,635

21,219,037

21,121,323

20,991,483

20,993,658

Accrued taxes, expenses and other liabilities

302,255

303,887

290,021

369,728

358,390

Total liabilities

21,775,890

21,522,924

21,411,344

21,361,211

21,352,048

SHAREHOLDERS' EQUITY








Preferred stock

100,000

100,000

100,000

100,000

100,000

Common stock warrant

3,000

3,000

3,000

3,000

3,000

Common stock

127,937

127,937

127,937

127,937

127,937

Capital surplus

1,388,423

1,386,497

1,391,695

1,389,222

1,386,931

Accumulated other comprehensive loss

(41,963)

(44,952)

(52,940)

(79,431)

(82,598)

Retained earnings

1,352,867

1,319,515

1,293,379

1,262,705

1,256,052

Treasury stock

(122,378)

(123,645)

(129,845)

(129,798)

(129,776)

Total shareholders' equity

2,807,886

2,768,352

2,733,226

2,673,635

2,661,546

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

24,583,776

$

24,291,276

$

24,144,570

$

24,034,846

$

24,013,594

FIRSTMERIT CORPORATION AND SUBSIDIARIES

Average Loans by Product Type (Unaudited)

(Dollars in thousands)







Quarter ended September 30, 2014

Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

7,534,848

$

1,373,103

$

271,299

$

9,179,250

Mortgage

594,258

416,417

44,672

1,055,347

Installment

2,171,246

838,687

5,278

3,015,211

Home equity

1,030,256

259,867

86,224

1,376,347

Credit card

156,866

—

—

156,866

Leases

326,840

—

—

326,840

    Subtotal

11,814,314

2,888,074

407,473

15,109,861

Loss share receivable

—

—

38,239

38,239

    Total loans

11,814,314

2,888,074

445,712

15,148,100

Less allowance for loan losses

91,888

6,088

42,050

140,026

  Net loans

$

11,722,426

$

2,881,986

$

403,662

$

15,008,074

















Quarter ended June 30, 2014

Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

7,185,060

$

1,492,139

$

303,721

$

8,980,920

Mortgage

565,703

434,936

48,258

1,048,897

Installment

1,939,802

907,069

5,445

2,852,316

Home equity

969,592

275,387

91,855

1,336,834

Credit card

149,903

—

—

149,903

Leases

282,041

—

—

282,041

    Subtotal

11,092,101

3,109,531

449,279

14,650,911

Loss share receivable

—

—

51,408

51,408

    Total loans

11,092,101

3,109,531

500,687

14,702,319

Less allowance for loan losses

94,063

3,034

49,271

146,368

  Net loans

$

10,998,038

$

3,106,497

$

451,416

$

14,555,951

















Quarter Ended March 31, 2014

Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

6,819,522

$

1,678,267

$

357,033

$

8,854,822

Mortgage

538,151

459,842

49,921

1,047,914

Installment

1,771,434

972,711

6,012

2,750,157

Home equity

929,362

288,529

95,487

1,313,378

Credit card

147,265

—

—

147,265

Leases

242,649

—

—

242,649

    Subtotal

10,448,383

3,399,349

508,453

14,356,185

Loss share receivable

—

—

56,296

56,296

    Total loans

10,448,383

3,399,349

564,749

14,412,481

Less allowance for loan losses

96,789

(617)

42,719

138,891

  Net loans

$

10,351,594

$

3,399,966

$

522,030

$

14,273,590

















Quarter Ended December 31, 2013

Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

6,526,243

$

1,866,064

$

400,105

$

8,792,412

Mortgage

509,685

472,771

51,304

1,033,760

Installment

1,697,651

1,032,245

6,279

2,736,175

Home equity

905,172

298,212

100,712

1,304,096

Credit card

146,805

—

—

146,805

Leases

203,031

—

—

203,031

    Subtotal

9,988,587

3,669,292

558,401

14,216,280

Loss share receivable

—

—

65,580

65,580

    Total loans

9,988,587

3,669,292

623,981

14,281,860

Less allowance for loan losses

134,890

(2,091)

44,829

177,628

  Net loans

$

9,853,697

$

3,671,383

$

579,152

$

14,104,232

















Quarter ended September 30, 2013

Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

6,131,423

$

2,118,803

$

460,242

$

8,710,468

Mortgage

472,281

448,206

54,403

974,890

Installment

1,570,124

1,145,824

7,180

2,723,128

Home equity

866,001

312,681

104,762

1,283,444

Credit card

143,637

—

—

143,637

Leases

194,360

—

—

194,360

    Subtotal

9,377,826

4,025,514

626,587

14,029,927

Loss share receivable

—

—

76,910

76,910

    Total loans

9,377,826

4,025,514

703,497

14,106,837

Less allowance for loan losses

97,693

68

48,748

146,509

  Net loans

$

9,280,133

$

4,025,446

$

654,749

$

13,960,328








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

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

FIRSTMERIT CORPORATION AND SUBIDARIES

















AVERAGE CONSOLIDATED BALANCE SHEETS





















Fully Tax-equivalent Interest Rates and Interest Differential













































Three months ended

Three months ended

Three months ended

September 30, 2014

June 30, 2014

September 30, 2013

(Unaudited)

Average


Average

Average


Average

Average


Average

(Dollars in thousands)

Balance

Interest (1)

Rate

Balance

Interest (1)

Rate

Balance

Interest (1)

Rate

ASSETS



















Cash and cash equivalents

$

521,210





$

662,000





$

1,415,430




Investment securities and federal funds sold:



















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

5,276,354

$

26,502

1.99

%

5,303,645

$

26,751

2.02

%

4,849,135

$

23,551

1.93

%

  Obligations of states and political 
  subdivisions (tax exempt)

776,376

8,734

4.46

%

767,731

8,753

4.57

%

712,296

8,890

4.95

%

  Other securities and federal funds sold

585,980

5,571

3.77

%

583,605

5,501

3.78

%

590,292

6,215

4.18

%

  Total investment securities and
  federal funds sold

6,638,710

40,807

2.44

%

6,654,981

41,005

2.47

%

6,151,723

38,656

2.49

%

Loans held for sale

17,433

154

3.50

%

10,196

89

3.51

%

18,265

174

3.78

%

Loans, including loss share receivable (2)

15,148,100

171,302

4.49

%

14,702,319

173,320

4.73

%

14,106,837

182,406

5.13

%

  Total earning assets

21,804,243

$

212,263

3.86

%

21,367,496

$

214,414

4.02

%

20,276,825

$

221,236

4.33

%

Total allowance for loan losses

(140,026)





(146,368)





(146,509)




Other assets

2,398,349





2,408,148





2,467,848




  Total assets

$

24,583,776





$

24,291,276





$

24,013,594




LIABILITIES AND SHAREHOLDERS' EQUITY



















Deposits:



















  Noninterest-bearing

$

5,603,104

$

—

—

%

$

5,515,807

$

—

—

%

$

5,443,800

$

—

—

%

  Interest-bearing

3,100,904

755

0.10

%

3,066,201

745

0.10

%

2,720,592

809

0.12

%

  Savings and money market accounts

8,492,172

5,570

0.26

%

8,580,928

5,477

0.26

%

8,570,910

6,495

0.30

%

  Certificates and other time deposits

2,335,620

2,846

0.48

%

2,333,859

3,009

0.52

%

2,720,929

1,712

0.25

%

  Total deposits

19,531,800

9,171

0.19

%

19,496,795

9,231

0.19

%

19,456,231

9,016

0.18

%

Securities sold under agreements to
repurchase

1,182,507

268

0.09

%

1,024,598

233

0.09

%

1,011,991

306

0.12

%

Wholesale borrowings

438,941

1,397

1.26

%

373,213

1,391

1.49

%

201,012

936

1.85

%

Long-term debt

320,387

3,783

4.68

%

324,431

3,893

4.81

%

324,424

3,899

4.77

%

  Total interest-bearing liabilities

15,870,531

14,619

0.37

%

15,703,230

14,748

0.38

%

15,549,858

14,157

0.36

%

Other liabilities

302,255





303,887





358,390




Shareholders' equity

2,807,886





2,768,352





2,661,546




  Total liabilities and shareholders'
  equity

$

24,583,776





$

24,291,276





$

24,013,594




Net yield on earning assets

$

21,804,243

$

197,644

3.60

%

$

21,367,496

$

199,666

3.75

%

$

20,276,825

$

207,079

4.05

%

Interest rate spread



3.50

%




3.65

%




3.97

%





















(1) The net yield on earning assets is calculated as annualized taxable-equivalent net interest income divided by average earning assets.  The interest income earned on certain earning assets is completely or partially exempt from federal and/or state income taxes.  As such, these tax-exempt securities typically yield lower returns than taxable securities.  To provide more meaningful comparisons of net interest margins for all earning assets, net interest income on a taxable-equivalent basis is used in calculating net interest margin by increasing the interest earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments.  This adjustment is not permitted under generally accepted accounting principles in the Consolidated Statements of Income.  The taxable-equivalent adjustments to net interest income were $4.1 million, $4.1 million  and $3.7 million for the three months ended September 30, 2014, June 30, 2014 and September 30, 2013, respectively.

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

FIRSTMERIT CORPORATION AND SUBIDARIES












AVERAGE CONSOLIDATED BALANCE SHEETS














Fully Tax-equivalent Interest Rates and Interest Differential































Nine Months Ended

Nine Months Ended

September 30, 2014

September 30, 2013

(Unaudited)

Average


Average

Average


Average

(Dollars in thousands)

Balance

Interest (1)

Rate

Balance

Interest (1)

Rate

ASSETS












Cash and cash equivalents

$

712,490





$

875,890




Investment securities and federal funds sold:












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

5,244,238

$

79,162

2.02

%

4,125,541

$

64,525

2.09

%

Obligations of states and political subdivisions (tax exempt)

761,461

26,100

4.58

%

655,257

24,702

5.04

%

Other securities and federal funds sold

587,622

17,185

3.91

%

488,005

13,618

3.73

%

  Total investment securities and federal funds sold

6,593,321

122,447

2.48

%

5,268,803

102,845

2.61

%

Loans held for sale

11,517

302

3.51

%

16,860

461

3.66

%

Loans, including loss share receivable (2)

14,756,994

515,757

4.67

%

12,504,632

460,257

4.92

%

  Total earning assets

21,361,832

638,506

4.00

%

17,790,295

563,563

4.24

%

Total allowance for loan losses

(141,766)





(144,954)




Other assets

2,405,097





2,111,427




  Total assets

$

24,337,653





$

20,632,658




LIABILITIES AND SHAREHOLDERS' EQUITY












Deposits:












Noninterest-bearing

$

5,536,306

—

—

%

$

4,628,252

—

—%

Interest-bearing

3,071,220

2,236

0.10

%

2,128,055

1,784

0.11

%

Savings and money market accounts

8,589,882

16,605

0.26

%

7,549,165

18,279

0.32

%

Certificates and other time deposits

2,357,241

8,319

0.47

%

2,249,362

7,149

0.42

%

  Total deposits

19,554,649

27,160

0.19

%

16,554,834

27,212

0.22

%

Securities sold under agreements to repurchase

1,031,483

697

0.09

%

949,105

949

0.13

%

Wholesale borrowings

363,422

3,917

1.44

%

191,970

2,955

2.06

%

Long-term debt

323,068

11,566

4.79

%

265,461

9,390

4.73

%

  Total interest-bearing liabilities

15,736,316

43,340

0.37

%

13,333,118

40,506

0.41

%

Other liabilities

294,936





351,650




Shareholders' equity

2,770,095





2,319,638




  Total liabilities and shareholders' equity

$

24,337,653





$

20,632,658




Net yield on earning assets

$

21,361,832

$

595,166

3.73

%

$

17,790,295

$

523,057

3.93

%

Interest rate spread



3.63

%




3.83

%














(1) The net yield on earning assets is calculated as annualized taxable-equivalent net interest income divided by average earning assets.  The interest income earned on certain earning assets is completely or partially exempt from federal and/or state income taxes.  As such, these tax-exempt securities typically yield lower returns than taxable securities.  To provide more meaningful comparisons of net interest margins for all earning assets, net interest income on a taxable-equivalent basis is used in calculating net interest margin by increasing the interest earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments.  This adjustment is not permitted under generally accepted accounting principles in the Consolidated Statements of Income.   The taxable-equivalent adjustments to net interest income were $12.1 million and $10.3 million for the nine months ended September 30, 2014 and September 30, 2013, respectively.

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

FIRSTMERIT CORPORATION AND SUBSIDIARIES






CONSOLIDATED STATEMENTS OF INCOME






(Unaudited)

Quarters Ended

Nine Months Ended

(Dollars in thousands except per share data)

September 30,

September 30,




2014

2013

2014

2013

Interest income:







Loans and loans held for sale

$

170,648

$

182,107

$

513,678

$

459,313

Investment securities:








Taxable

32,072

29,766

96,347

78,143


Tax-exempt

5,477

5,624

16,372

15,767


Total investment securities interest

37,549

35,390

112,719

93,910



Total interest income

208,197

217,497

626,397

553,223

Interest expense:







Deposits:








Interest-bearing

755

809

2,236

1,784


Savings and money market accounts

5,570

6,495

16,605

18,279


Certificates and other time deposits

2,846

1,712

8,319

7,149

Securities sold under agreements to repurchase

268

306

697

949

Wholesale borrowings

1,397

936

3,917

2,955

Long-term debt

3,783

3,899

11,566

9,390


Total interest expense

14,619

14,157

43,340

40,506


Net interest income

193,578

203,340

583,057

512,717

Provision for loan losses

9,192

6,379

38,982

23,634


Net interest income after provision for loan losses

184,386

196,961

544,075

489,083

Noninterest income:







Trust department income

10,300

9,608

30,118

24,515

Service charges on deposits

18,684

22,146

53,860

55,315

Credit card fees

13,754

13,588

39,361

38,128

ATM and other service fees

6,182

5,216

17,998

13,496

Bank owned life insurance income

4,218

4,351

11,840

12,889

Investment services and insurance

3,606

3,403

10,974

9,247

Investment securities gains/(losses), net

14

—

150

(2,803)

Loan sales and servicing income

4,740

3,644

12,932

19,492

Other operating income

8,235

9,134

32,331

27,644


Total noninterest income

69,733

71,090

209,564

197,923

Noninterest expenses:







Salaries, wages, pension and employee benefits

90,593

97,390

269,071

260,395

Net occupancy expense

13,887

13,816

45,248

35,444

Equipment expense

12,188

11,040

36,366

28,698

Stationery, supplies and postage

3,723

3,801

11,820

9,304

Bankcard, loan processing and other costs

11,151

40,786

33,795

61,043

Professional services

5,270

9,768

15,373

32,322

Amortization of intangibles

2,933

2,972

8,802

5,700

FDIC insurance expense

2,988

4,925

14,492

12,601

Other operating expense

20,412

26,101

64,911

60,126


Total noninterest expenses

163,145

210,599

499,878

505,633

Income before income tax expense

90,974

57,452

253,761

181,373

Income tax expense

27,076

16,737

76,889

54,863



Net income

$

63,898

$

40,715

$

176,872

$

126,510

Less:

Net income allocated to participating shareholders

519

310

1,433

1,102



Preferred stock dividends

1,469

1,469

4,407

3,868

Net income attributable to common shareholders

$

61,910

$

38,936

$

171,032

$

121,540

Net income used in diluted EPS calculation

$

61,910

$

38,936

$

171,032

$

121,540

Weighted average number of common shares outstanding - basic

165,389

165,044

165,263

144,402

Weighted average number of common shares outstanding - diluted

165,804

165,874

165,916

147,392

Basic earnings per common share

$

0.37

$

0.24

$

1.03

$

0.84

Diluted earnings per common share

$

0.37

$

0.23

$

1.03

$

0.82

Dividend per common share

$

0.16

$

0.16

$

0.48

$

0.48

FIRSTMERIT CORPORATION AND SUBSIDIARIES











CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME











(Unaudited)

Quarter Ended

Nine Months Ended

(Dollars in thousands)

September 30, 2014

September 30, 2014

Pretax

Tax

After tax

Pretax

Tax

After tax

Net Income

$

90,974

$

27,076

$

63,898

$

253,761

$

76,889

$

176,872

Other comprehensive income/(loss)










Unrealized gains and losses on securities available for sale:










  Changes in unrealized securities' holding gains/(losses)

(16,207)

(5,672)

(10,535)

24,293

8,503

15,790

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

(563)

(197)

(366)

(1,551)

(543)

(1,008)

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

(14)

(5)

(9)

(150)

(53)

(97)

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

(16,784)

(5,874)

(10,910)

22,592

7,907

14,685

  Pension plans and other postretirement benefits:










    Net gains/(losses) arising during the period

—

—

—

—

—

—

    Amortization of actuarial gain

767

268

499

2,398

839

1,559

    Amortization of prior service cost reclassified to other
    noninterest expense

516

181

335

1,614

565

1,049

Net change from defined benefit pension plans

1,283

449

834

4,012

1,404

2,608

Total other comprehensive gains/(losses)

(15,501)

(5,425)

(10,076)

26,604

9,311

17,293

    Comprehensive income

$

75,473

$

21,651

$

53,822

$

280,365

$

86,200

$

194,165


















































Quarter Ended

Nine Months Ended

September 30, 2013

September 30, 2013

Pretax

Tax

After tax

Pretax

Tax

After tax

Net Income

$

57,452

$

16,737

$

40,715

$

181,373

$

54,863

$

126,510

Other comprehensive income (loss)










Unrealized gains and losses on securities available for sale:










  Changes in unrealized securities' holding gains/(losses)

(17,491)

(6,123)

(11,368)

(104,853)

(36,699)

(68,154)

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

(534)

(187)

(347)

(1,654)

(579)

(1,075)

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

(1)

—

(1)

2,802

981

1,821

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

(18,026)

(6,310)

(11,716)

(103,705)

(36,297)

(67,408)

  Pension plans and other postretirement benefits:










    Net gains/(losses) arising during the period

—

—

—

—

—

—

    Amortization of actuarial gain

—

—

—

—

—

—

    Amortization of prior service cost reclassified to other
    noninterest expense

—

—

—

—

—

—

Net change from defined benefit pension plans

—

—

—

—

—

—

Total other comprehensive gains/(losses)

(18,026)

(6,310)

(11,716)

(103,705)

(36,297)

(67,408)

    Comprehensive income

$

39,426

$

10,427

$

28,999

$

77,668

$

18,566

$

59,102

FIRSTMERIT CORPORATION AND SUBSIDIARIES










CONSOLIDATED STATEMENTS OF INCOME---LINKED QUARTERS





















Quarterly Results

(Unaudited)

2014

2014

2014

2013

2013

(Dollars in thousands, except share data)

3rd qtr

2nd qtr

1st qtr

4th qtr

3rd qtr

Loans and loans held for sale

$

170,648

$

172,517

$

170,514

$

176,559

$

182,107

Investment securities

37,549

37,808

37,362

36,021

35,390

Total interest income

208,197

210,325

207,876

212,580

217,497

Interest expense








Deposits:








Interest-bearing

755

745

737

759

809

Savings and money market accounts

5,570

5,477

5,559

6,127

6,495

Certificates and other time deposits

2,846

3,009

2,464

2,500

1,712

Securities sold under agreements to repurchase

268

233

197

291

306

Wholesale borrowings

1,397

1,391

1,129

938

936

Long-term debt

3,783

3,893

3,890

3,897

3,899

Total interest expense

14,619

14,748

13,976

14,512

14,157

Net interest income

193,578

195,577

193,900

198,068

203,340

Provision for loan losses

9,192

15,253

14,536

10,050

6,379

Net interest income after provision for loan losses

184,386

180,324

179,364

188,018

196,961

Noninterest income:








Trust department income

10,300

10,070

9,748

10,255

9,608

Service charges on deposits

18,684

18,528

16,648

19,084

22,146

Credit card fees

13,754

13,455

12,152

12,414

13,588

ATM and other service fees

6,182

5,996

5,819

5,659

5,216

Bank owned life insurance income

4,218

4,040

3,582

4,037

4,351

Investment services and insurance

3,606

3,852

3,516

3,530

3,403

Investment securities gains/(losses), net

14

80

56

—

—

Loan sales and servicing income

4,740

4,462

3,730

3,577

3,644

Other operating income

8,235

12,077

12,019

13,864

9,134

Total noninterest income

69,733

72,560

67,270

72,420

71,090

Noninterest expenses:








Salaries, wages, pension and employee benefits

90,593

89,465

89,013

93,621

97,390

Net occupancy expense

13,887

14,347

17,014

14,066

13,816

Equipment expense

12,188

12,267

11,911

13,177

11,040

Stationery, supplies and postage

3,723

3,990

4,108

4,895

3,801

Bankcard, loan processing and other costs

11,151

11,810

10,834

10,886

40,786

Professional services

5,270

4,745

5,359

8,358

9,768

Amortization of intangibles

2,933

2,933

2,936

2,692

2,972

FDIC  insurance expense

2,988

5,533

5,971

5,106

4,925

Other operating expense

20,412

22,310

22,185

25,819

26,101

Total noninterest expenses

163,145

167,400

169,331

178,620

210,599

Income before income tax expense

90,974

85,484

77,303

81,818

57,452

Income tax expense

27,076

25,965

23,848

24,644

16,737

Net income

63,898

59,519

53,455

57,174

40,715

Less:  Income allocated to participating shareholders

519

489

380

441

310

Preferred stock dividends

1,469

1,469

1,469

1,469

1,469

Net income attributable to common shareholders

$

61,910

$

57,561

$

51,606

$

55,264

$

38,936

Net income used in diluted EPS calculation

$

61,910

$

57,561

$

51,606

$

55,264

$

38,936

Weighted-average number of common shares outstanding - basic

165,389

165,335

165,060

165,054

165,044

Weighted-average number of common shares outstanding- diluted

165,804

166,147

166,004

166,097

165,874

Basic earnings per common share

$

0.37

$

0.35

$

0.31

$

0.33

$

0.24

Diluted earnings per common share

$

0.37

$

0.35

$

0.31

$

0.33

$

0.23

FIRSTMERIT CORPORATION AND SUBSIDIARIES












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















































(Unaudited)

(Unaudited)

(Audited)

(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

2014

2014

2014

2013

2013

2013

Allowance for originated loan losses, beginning of period

$

91,950

$

92,116

$

96,484

$

98,291

$

98,645

$

98,942

Provision for originated loan losses

4,862

5,993

3,654

1,552

2,523

13,034

Charge-offs

11,410

11,148

13,160

9,913

8,515

40,173

Recoveries

5,481

4,989

5,138

6,554

5,638

24,681

Net charge-offs

5,929

6,159

8,022

3,359

2,877

15,492

Allowance for originated loan losses, end of period

$

90,883

$

91,950

$

92,116

$

96,484

$

98,291

$

96,484

Reserve for unfunded lending commitments,
















beginning of period

$

7,107

$

7,481

$

7,907

$

8,493

$

8,114

$

5,433

Provision for (relief of) credit losses

(141)

(374)

(426)

(586)

379

2,474

Reserve for unfunded lending commitments,
















end of period

$

6,966

$

7,107

$

7,481

$

7,907

$

8,493

$

7,907

Allowance for Credit Losses

$

97,849

$

99,057

$

99,597

$

104,391

$

106,784

$

104,391

Ratios
















Provision for loan losses to average loans

0.16

%

0.22

%

0.14

%

0.06

%

0.11

%

0.14

%

Net charge-offs to average loans

0.20

%

0.22

%

0.31

%

0.13

%

0.12

%

0.17

%

Allowance for loan losses to period-end loans

0.75

%

0.80

%

0.85

%

0.94

%

1.00

%

0.94

%

Allowance for credit losses to period-end loans

0.81

%

0.86

%

0.92

%

1.02

%

1.09

%

1.02

%

Allowance for loan losses to nonperforming loans

231.13

%

250.27

%

212.01

%

228.62

%

276.19

%

228.62

%

Allowance for credit losses to nonperforming loans

248.85

%

269.61

%

229.23

%

247.35

%

300.06

%

247.35

%

Asset Quality
















Impaired originated loans:
















Nonaccrual

$

22,347

$

21,072

$

27,122

$

25,674

$

19,140

$

25,674

Other nonperforming loans:
















Nonaccrual

16,974

15,669

16,326

16,529

16,448

16,529

Total nonperforming loans

39,321

36,741

43,448

42,203

35,588

42,203

Other real estate ("ORE")

23,798

24,181

19,263

18,680

19,838

18,680

Total nonperforming assets ("NPAs")

$

63,119

$

60,922

$

62,711

$

60,883

$

55,426

$

60,883

NPAs to period-end loans + ORE

0.52

%

0.53

%

0.58

%

0.60

%

0.57

%

0.60

%

Accruing originated loans past due 90 days or more

$

8,538

$

15,643

$

11,860

$

11,176

$

12,452

$

11,176

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

FIRSTMERIT CORPORATION AND SUBSIDIARIES








NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL


















(Unaudited)








(Dollars in thousands)









2014

2014

2014

2013

2013

QUARTERLY NONINTEREST INCOME DETAIL

3rd qtr

2nd qtr

1st qtr

4th qtr

3rd qtr

Trust department income

$

10,300

$

10,070

$

9,748

$

10,255

$

9,608

Service charges on deposits

18,684

18,528

16,648

19,084

22,146

Credit card fees

13,754

13,455

12,152

12,414

13,588

ATM and other service fees

6,182

5,996

5,819

5,659

5,216

Bank owned life insurance income

4,218

4,040

3,582

4,037

4,351

Investment services and insurance

3,606

3,852

3,516

3,530

3,403

Investment securities gains/(losses), net

14

80

56

—

—

Loan sales and servicing income

4,740

4,462

3,730

3,577

3,644

Other operating income

8,235

12,077

12,019

13,864

9,134

Total Noninterest Income

$

69,733

$

72,560

$

67,270

$

72,420

$

71,090

2014

2014

2014

2013

2013

QUARTERLY NONINTEREST EXPENSE DETAIL

3rd qtr

2nd qtr

1st qtr

4th qtr

3rd qtr

Salaries and wages

$

71,769

$

69,892

$

71,669

$

76,685

$

79,369

Pension and employee benefits

18,824

19,573

17,344

16,936

18,021

Net occupancy expense

13,887

14,347

17,014

14,066

13,816

Equipment expense

12,188

12,267

11,911

13,177

11,040

Taxes, other than federal income taxes

1,286

2,576

2,774

2,618

2,785

Stationery, supplies and postage

3,723

3,990

4,108

4,895

3,801

Bankcard, loan processing and other costs

11,151

11,810

10,834

10,886

40,786

Advertising

3,942

3,801

3,516

4,855

4,432

Professional services

5,270

4,745

5,359

8,358

9,768

Telephone

2,831

2,857

2,908

3,427

3,326

Amortization of intangibles

2,933

2,933

2,936

2,692

2,972

FDIC insurance expense

2,988

5,533

5,971

5,106

4,925

Other operating expense

12,353

13,076

12,987

14,919

15,558

Total Noninterest Expense

$

163,145

$

167,400

$

169,331

$

178,620

$

210,599

FIRSTMERIT CORPORATION AND SUBSIDIARIES





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















(Unaudited)

Quarters Ended

Nine Months Ended

Year Ended

(Dollars in thousands, except ratios)

September 30,

September 30,

December 31,

2014

2013

2014

2013

2013

Allowance for originated loan losses - beginning of period

$

91,950

$

98,645

$

96,484

$

98,942

$

98,942

Loans charged off:













Commercial

4,046

1,222

12,256

6,644

7,637

Mortgage

91

501

1,484

1,185

1,903

Installment

4,323

3,582

12,983

11,788

16,683

Home equity

1,361

1,396

3,403

3,835

5,036

Credit cards

778

1,367

3,544

4,229

5,541

Leases

—

—

—

1,237

1,237

Overdrafts

811

447

2,048

1,342

2,136

Total

11,410

8,515

35,718

30,260

40,173

Recoveries:













Commercial

1,287

1,724

2,720

6,731

9,012

Mortgage

114

39

219

133

230

Installment

2,729

2,613

8,195

7,810

10,459

Home equity

708

704

2,227

1,537

2,492

Credit cards

403

438

1,260

1,420

1,841

Manufactured housing

54

11

78

49

60

Leases

2

11

374

100

100

Overdrafts

184

98

535

347

487

Total

5,481

5,638

15,608

18,127

24,681

Net charge-offs

5,929

2,877

20,110

12,133

15,492

Provision for originated loan losses

4,862

2,523

14,509

11,482

13,034

Allowance for originated loan losses-end of period

$

90,883

$

98,291

$

90,883

$

98,291

$

96,484















Average originated loans

$

11,814,314

$

9,377,826

$

11,123,269

$

8,999,316

$

9,252,555

Ratio (annualized) to average originated loans:













Originated net charge-offs

0.20

%

0.12

%

0.24

%

0.18

%

0.17

%

Provision for originated loan losses

0.16

%

0.11

%

0.17

%

0.17

%

0.14

%

Originated Loans, period-end

$

12,071,759

$

9,789,139

$

12,071,759

$

9,789,139

$

10,213,387















Allowance for credit losses:

$

97,849

$

106,784

$

97,849

$

106,784

$

104,391

To (annualized) net charge-offs

4.16

9.36

3.64

6.58

6.74

Allowance for originated loan losses:













To period-end originated loans

0.75

%

1.00

%

0.75

%

1.00

%

0.94

%

To (annualized) net originated charge-offs

3.86

8.61

3.38

6.06

6.23















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

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SOURCE FirstMerit Corporation

Related Links

http://www.firstmerit.com

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