FirstMerit Reports Fourth Quarter 2014 EPS of $0.36 Per Share

News provided by

FirstMerit Corporation

Jan 27, 2015, 07:30 ET

AKRON, Ohio, Jan. 27, 2015 /PRNewswire/ -- 

Quarterly Highlights include:

  • Profitability Sustained: 63rd consecutive quarter of profitability.
  • Loan growth continued: Total loan growth of $84.1 million, or 0.55% from the prior quarter.
  • Credit quality remained solid: Net charge-offs to average originated loans of 0.12%; nonperforming assets as a percent of period end originated loans plus other real estate at 0.44%.
  • Balance sheet remained strong: Strong tangible common equity ratio1 at 7.98%.

FirstMerit Corporation (Nasdaq: FMER) (the "Corporation") reported fourth quarter 2014 net income of $61.1 million, or $0.36 per diluted share.  This compares with $63.9 million, or $0.37 per diluted share, for the third quarter 2014 and $57.2 million, or $0.33 per diluted share, for the fourth quarter 2013.

Returns on average common equity ("ROE") and average assets ("ROA") for the fourth quarter 2014 were 8.50% and 0.98%, respectively, compared with 9.03% and 1.03%, respectively, for the third quarter 2014 and 8.48% and 0.94%, respectively, for the fourth quarter 2013. 

"FirstMerit's solid performance in the fourth quarter of 2014 as well as for the entire year reflects a continued focus on strong organic growth, solid credit quality and strong capital levels. Our first full year of serving our five-state Midwest footprint resulted in record net income for the Corporation, keeping our span of consecutive profitable quarters going for more than 15 years. Our dedicated employees across the Corporation continue to work hard to provide our customers with exceptional service," said Paul Greig, Chairman, President and CEO of FirstMerit Corporation.

1 - See Non-GAAP Financial Measures section of this release for a reconciliation to financial measures as defined by GAAP.

Net Interest Income

Net interest income on a fully tax-equivalent ("TE")1 basis was $196.5 million in the fourth quarter 2014 compared with $197.6 million in the third quarter 2014 and $202.1 million in the fourth quarter 2013.

Net interest margin on TE basis1 was 3.56% for the fourth quarter 2014 compared with 3.60% for the third quarter 2014 and 3.89% for the fourth quarter 2013.  Net interest margin compression in the fourth 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 $12.3 billion during the fourth quarter 2014, an increase of $491.9 million, or 4.16%, compared with the third quarter 2014, and an increase of $2.3 billion, or 23.20%, compared with the fourth quarter 2013.  Average originated commercial loans increased $200.0 million, or 2.65%, compared with the prior quarter, and increased $1.2 billion, or 18.52%, compared with the year-ago quarter.

Average deposits were $19.5 billion during the fourth quarter 2014, a decrease of $81.2 million, or 0.42%, compared with the third quarter 2014, and a decrease of $66.8 million, or 0.34%, compared with the fourth quarter 2013.  During the fourth quarter 2014, average core deposits, which exclude time deposits, decreased $86.8 million, or 0.50%, compared with the third quarter 2014 and increased $143.6 million, or 0.85%, compared with the fourth quarter 2013.  Average time deposits increased $5.7 million, or 0.24%, and decreased $210.4 million, or 8.25%, respectively, over the prior and year-ago quarters.  For the fourth quarter 2014, average core deposits accounted for 87.96% of total average deposits, compared with 88.04% for the third quarter 2014 and 86.93% for the fourth quarter 2013.

Average investments decreased $24.4 million, or 0.37%, compared with the third quarter 2014 and increased $312.6 million, or 4.96%, compared with the fourth quarter 2013.

Noninterest Income

Noninterest income, excluding gains and losses on securities transactions1, for the fourth quarter 2014 was $71.9 million, an increase of $2.2 million, or 3.19%, from the third quarter 2014 and relatively flat compared to the fourth quarter 2013. Included in noninterest income in the fourth quarter 2014 were death benefit proceeds of $3.5 million, and $0.5 million of net gains on covered loan resolutions. This additional income in the current quarter was partially offset by a decline from the third quarter 2014 in loan sales and servicing income of $1.2 million reflecting impairment on mortgage servicing rights and a decrease in the net fair value of the mortgage pipeline due to declining interest rates.

Noninterest income, excluding net securities gains and losses, as a percentage of net revenue1 for the fourth quarter 2014 was 26.80% compared with 26.08% for third quarter 2014 and 26.38% for the fourth quarter 2013.

1 - See Non-GAAP Financial Measures section of this release for a reconciliation to financial measures as defined by GAAP.

Noninterest Expense

Noninterest expense for the fourth quarter 2014 was $165.0 million, an increase of $1.9 million, or 1.16%, from the third quarter 2014 and a decrease of $13.6 million, or 7.60%, from the fourth quarter 2013.  Noninterest expense in the current quarter included $0.9 million of restructure costs.  Included in noninterest expense in the fourth quarter 2013 were merger related costs associated with the Citizens acquisition of $6.0 million.  The Corporation's efficiency ratio1 was 60.39% for the fourth quarter 2014, compared with 59.92% for the third quarter 2014 and 64.08% for the fourth quarter 2013.

The effective tax rate was 29.09% for the fourth quarter 2014 compared with 29.76% for the third quarter 2014 and 30.12% for the fourth 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 $3.8 million in the fourth quarter 2014, compared to $5.9 million in the third quarter 2014, and $3.4 million in the fourth quarter 2013. Net charge-offs on originated loans were 0.12% of average originated loans at December 31, 2014, compared to 0.20% at September 30, 2014 and 0.13% at December 31, 2013. 

Nonperforming assets totaled $55.0 million at December 31, 2014, a decrease of $8.1 million, or 12.80%, compared with September 30, 2014 and a decrease of $5.8 million, or 9.60%, compared with December 31, 2013. Nonperforming assets at December 31, 2014 represented 0.44% of period-end originated loans plus other real estate compared with 0.52% at September 30, 2014 and 0.60% at December 31, 2013.

The allowance for originated loan losses totaled $95.7 million at December 31, 2014.   At December 31, 2014, the allowance for originated loan losses was 0.77% of period-end originated loans, compared with 0.75% at September 30, 2014 and 0.94% at December 31, 2013.  In support of continued strong loan growth, the allowance for originated loan losses at December 31, 2014 compared to September 30, 2014 increased by $4.8 million.   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 December 31, 2014, compared with 0.81% at September 30, 2014 and 1.02% at December 31, 2013.  The allowance for credit losses to nonperforming loans was 293.34% at December 31, 2014, compared with 248.85% at September 30, 2014 and 247.35% at December 31, 2013.

1 - See Non-GAAP Financial Measures section of this release for a reconciliation to financial measures as defined by GAAP.

Balance Sheet

The Corporation's total assets at December 31, 2014 were $24.9 billion, an increase of $294.1 million, or 1.20%, compared with September 30, 2014 and an increase of $990.3 million, or 4.14%, compared with December 31, 2013.  Total gross loans (originated, acquired, and covered) and total deposits were $15.3 billion and $19.5 billion, respectively, at December 31, 2014, $15.2 billion and $19.4 billion, respectively, at September 30, 2014 and $14.3 billion and $19.5 billion, respectively, at December 31, 2013.  Core deposits totaled $17.2 billion at December 31, 2014, an increase of $239.3 million, or 1.41%, from September 30, 2014 and an increase of $142.2 million, or 0.83%, from December 31, 2013. 

In the fourth quarter of 2014, FirstMerit Bank N.A. issued $250.0 million in aggregate principal of 4.270% subordinated notes due 2026. In connection with the issuance of these notes, the Bank entered into an interest rate swap agreement to manage interest rate risk whereby the fixed rate of interest was contractually modified to a floating rate of 1 month LIBOR + 1.61%.

Shareholders' equity was $2.8 billion as of December 31, 2014 and September 30, 2014, and $2.7 billion as of December 31, 2013.  The Corporation maintained a strong capital position as tangible common equity1 to assets was 7.98% at December 31, 2014, compared with 8.01% at September 30, 2014 and 7.70% at December 31, 2013.  The common share cash dividend paid in the fourth quarter 2014 was $0.16 per share.

1 - See Non-GAAP Financial Measures section of this release for a reconciliation to financial measures as defined by GAAP.

Non-GAAP Financial Measures

In addition to results presented in accordance with U.S. generally accepted accounting principles ("GAAP"), this news release contains certain non-GAAP financial information and performance measures. The Corporation's management uses these non-GAAP financial measures in their analysis of the Corporation's performance and the efficiency of its operations. Management believes that these non-GAAP financial 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.

The Corporation evaluates its net interest income on a fully taxable-equivalent basis, a non-GAAP financial measure. The Corporation believes managing the business with net interest income on a fully taxable-equivalent basis provides a more accurate picture of the interest margin for comparative purposes. Total revenue, net of interest expense, includes net interest income on a fully taxable-equivalent basis and noninterest income excluding gains and losses on the sale of securities. The Corporation views related ratios and analyses (i.e., efficiency ratios) on a fully taxable-equivalent basis. To derive the fully taxable-equivalent basis, net interest income is adjusted to reflect tax-exempt income on an equivalent before-tax basis with a corresponding increase in income tax expense. For purposes of this calculation, the Corporation uses the federal statutory tax rate of 35 percent. This measure ensures comparability of net interest income arising from taxable and tax-exempt sources.

The Corporation also evaluates its business based on the following ratios that utilize tangible equity, a non-GAAP financial measure. Tangible equity represents an adjusted shareholders' equity or common shareholders' equity amount which has been reduced by goodwill and intangible assets. Return on average tangible common shareholders' equity measures the Corporation's earnings contribution as a percentage of adjusted average common shareholders' equity. The tangible common equity ratio represents adjusted ending common shareholders' equity divided by total assets less goodwill and intangible assets. Return on average tangible shareholders' equity measures the Corporation's earnings contribution as a percentage of adjusted average total shareholders' equity. The tangible equity ratio represents adjusted ending shareholders' equity divided by total assets less goodwill and intangible assets. Tangible book value per common share represents adjusted ending common shareholders' equity divided by ending common shares outstanding. These measures are used to evaluate the Corporation's use of equity. In addition, profitability, relationship and investment models all use return on average tangible shareholders' equity as key measures to support our overall growth goals.

The following tables provide reconciliations of these non-GAAP measures to financial measures defined by GAAP.

Reconciliation of net interest income to net interest income on a fully taxable-equivalent basis


Quarters

2014

2014

2014

2014

2013

(Dollars in thousands)

4th qtr

3rd qtr

2nd qtr

1st qtr

4th qtr

Net interest income (GAAP)

$

192,511

$

193,578

$

195,577

$

193,900

$

198,068

Plus:

Fully taxable-equivalent adjustment

3,998

4,066

4,089

3,954

4,077

Net interest income on a fully taxable-equivalent basis (non-GAAP)

196,509

197,644

199,666

197,854

202,145

Average earning assets

21,920,889

21,804,243

21,367,496

20,903,863

20,593,750

Net interest margin on a fully taxable-equivalent basis (non-GAAP)

3.56

%

3.60

%

3.75

%

3.84

%

3.89

%

















Reconciliation of noninterest income and noninterest expense to adjusted noninterest income and adjusted noninterest expense

Quarters

2014

2014

2014

2014

2013

(Dollars in thousands)

4th qtr

3rd qtr

2nd qtr

1st qtr

4th qtr

Noninterest expense (GAAP)

$

165,041

$

163,145

$

167,400

$

169,331

$

178,620

Less:

Intangible asset amortization

2,933

2,933

2,933

2,936

2,692

Adjusted noninterest expense (non-GAAP)

162,108

160,212

164,467

166,395

175,928

Noninterest income (GAAP)

71,960

69,733

72,560

67,270

72,420

Less:

Securities (gains)/losses

16

14

80

56

—

Adjusted noninterest income  (non-GAAP)

71,944

69,719

72,480

67,214

72,420

Net interest income on a fully taxable-equivalent basis (non-GAAP)

196,509

197,644

199,666

197,854

202,145

Adjusted revenue (non-GAAP)

268,453

267,363

272,146

265,068

274,565

Efficiency ratio (non-GAAP)

60.39

%

59.92

%

60.43

%

62.77

%

64.08

%

















Reconciliation of shareholders' equity to tangible common equity, and total assets to tangible assets


Quarters

2014

2014

2014

2014

2013

(Dollars in thousands, except per share amounts)

4th qtr

3rd qtr

2nd qtr

1st qtr

4th qtr

Shareholders' equity (GAAP)

$

2,834,281

$

2,820,431

$

2,791,738

$

2,742,966

$

2,702,894

Less:

Preferred stock

100,000

100,000

100,000

100,000

100,000

Common shareholders' equity (non-GAAP)

2,734,281

2,720,431

2,691,738

2,642,966

2,602,894

Less:

Intangible assets

71,020

73,953

76,886

79,819

82,755

Goodwill

741,740

741,740

741,740

741,740

741,740

Tangible common equity (non-GAAP)

1,921,521

1,904,738

1,873,112

1,821,407

1,778,399

Total assets (GAAP)

$

24,902,347

$

24,608,207

$

24,564,431

$

24,498,661

$

23,912,028

Less:

Intangible assets

71,020

73,953

76,886

79,819

82,755

Goodwill

741,740

741,740

741,740

741,740

741,740

Tangible assets (non-GAAP)

$

24,089,587

$

23,792,514

$

23,745,805

$

23,677,102

$

23,087,533

Period end common shares

165,390

165,384

165,393

165,087

165,056

Tangible book value per common share

$

11.62

$

11.52

$

11.33

$

11.03

$

10.77

Tangible common equity to tangible assets ratio (non-GAAP)

7.98

%

8.01

%

7.89

%

7.69

%

7.70

%

Fourth 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 fourth 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: 63896536.  A replay of the conference call will be available at approximately 2:00 p.m. (Eastern Time) on January 27, 2015 through February 10, 2015 by dialing (855) 859-2056, and entering the PIN: 63896536.  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.

About FirstMerit Corporation

FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of approximately $24.9 billion as of December 31, 2014, and 383 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 its consolidated financial statements for the year ended December 31, 2014 on Form 10-K.  As a result, the Corporation will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of December 31, 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

2014

2013

4th qtr

3rd qtr

2nd qtr

1st qtr

4th qtr

EARNINGS









Net interest income TE (a)

$

196,509

$

197,644

$

199,666

$

197,854

$

202,145

TE adjustment (a)

3,998

4,066

4,089

3,954

4,077

Provision for originated loan losses

8,662

4,862

5,993

3,654

1,552

Provision for acquired loan losses

3,407

4,411

5,815

7,827

5,515

Provision/(recapture) for covered loan losses

1,228

(81)

3,445

3,055

2,983

Noninterest income

71,960

69,733

72,560

67,270

72,420

Noninterest expense

165,041

163,145

167,400

169,331

178,620

Net income

61,079

63,898

59,519

53,455

57,174

Diluted EPS (c)

0.36

0.37

0.35

0.31

0.33

PERFORMANCE RATIOS









Return on average assets (ROA)

0.98

%

1.03

%

0.98

%

0.90

%

0.94

%

Return on average equity (ROE)

8.50

%

9.03

%

8.62

%

7.93

%

8.48

%

Return on average tangible common equity (a)

12.52

%

13.41

%

12.92

%

11.98

%

12.96

%

Net interest margin TE (a)

3.56

%

3.60

%

3.75

%

3.84

%

3.89

%

Efficiency ratio (a)

60.39

%

59.92

%

60.43

%

62.77

%

64.08

%

Number of full-time equivalent employees

4,273

4,302

4,392

4,521

4,570

MARKET DATA









Book value per common share

$

17.14

$

17.05

$

16.88

$

16.62

$

16.38

Tangible book value per common share (a)

11.62

11.52

11.33

11.03

10.77

Period end common share market value

18.89

17.62

19.75

20.83

22.23

Market as a % of book

110

%

103

%

117

%

125

%

136

%

Cash dividends per common share

$

0.16

$

0.16

$

0.16

$

0.16

$

0.16

Common Stock dividend payout ratio

44.44

%

43.24

%

45.71

%

51.61

%

48.48

%

Average basic common shares

165,395

165,389

165,335

165,060

165,054

Average diluted common shares

165,974

165,804

166,147

166,004

166,097

Period end common shares

165,390

165,384

165,393

165,087

165,056

Common shares repurchased

15

10

186

51

17

Common Stock market capitalization

$

3,124,217

$

2,914,066

$

3,266,512

$

3,438,762

$

3,669,195

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









Gross charge-offs

$

9,205

$

11,410

$

11,148

$

13,160

$

9,913

Net charge-offs

3,849

5,929

6,159

8,022

3,359

Allowance for originated loan losses

95,696

90,883

91,950

92,116

96,484

Reserve for unfunded lending commitments

5,848

6,966

7,107

7,481

7,907

Nonperforming assets (NPAs)

55,038

63,119

60,922

62,711

60,883

Net charge-offs to average loans ratio

0.12

%

0.20

%

0.22

%

0.31

%

0.13

%

Allowance for originated loan losses to period-end loans

0.77

%

0.75

%

0.80

%

0.85

%

0.94

%

Allowance for credit losses to period-end loans

0.81

%

0.81

%

0.86

%

0.92

%

1.02

%

NPAs to loans and other real estate

0.44

%

0.52

%

0.53

%

0.58

%

0.60

%

Allowance for originated loan losses to nonperforming loans

276.44

%

231.13

%

250.27

%

212.01

%

228.62

%

Allowance for credit losses to nonperforming loans

293.34

%

248.85

%

269.61

%

229.23

%

247.35

%

CAPITAL & LIQUIDITY









Period end tangible common equity to assets (a)

7.98

%

8.01

%

7.89

%

7.69

%

7.70

%

Average equity to assets

11.55

%

11.42

%

11.40

%

11.32

%

11.12

%

Average equity to total loans

18.67

%

18.58

%

18.90

%

19.04

%

18.81

%

Average total loans to deposits

78.47

%

77.36

%

75.15

%

73.11

%

72.84

%

AVERAGE BALANCES









Assets

$

24,664,987

$

24,583,776

$

24,291,276

$

24,144,570

$

24,034,846

Deposits

19,450,647

19,531,800

19,496,795

19,636,506

19,517,476

Originated loans

12,306,171

11,814,314

11,092,101

10,448,383

9,988,587

Acquired loans, including covered loans, less loss share receivable

2,956,867

3,295,547

3,558,810

3,907,802

4,227,693

Earning assets

21,920,889

21,804,243

21,367,496

20,903,863

20,593,750

Shareholders' equity

2,849,618

2,807,886

2,768,352

2,733,226

2,673,635

ENDING BALANCES









Assets

$

24,902,347

$

24,608,207

$

24,564,431

$

24,498,661

$

23,912,028

Deposits

19,504,665

19,366,911

19,298,396

19,811,674

19,533,601

Originated loans

12,493,812

12,071,759

11,467,193

10,826,913

10,213,387

Acquired loans, including covered loans, less loss share receivable

2,810,302

3,139,521

3,458,453

3,726,952

4,025,758

Goodwill

741,740

741,740

741,740

741,740

741,740

Intangible assets

71,020

73,953

76,886

79,819

82,755

Earning assets

22,153,552

21,930,840

21,789,773

21,715,302

21,048,910

Total shareholders' equity

2,834,281

2,820,431

2,791,738

2,742,966

2,702,894

NOTES:










(a) - Represents a non-GAAP financial measure.  Refer to the Non-GAAP Financial Measures section of this press release for a reconciliation to GAAP financial measures.

(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.

FIRSTMERIT CORPORATION AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS















(Dollars in thousands)

December 31,

December 31,

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

2014

2013

ASSETS






Cash and due from banks

$

480,998

$

571,171


Interest-bearing deposits in banks

216,426

346,651



Total cash and cash equivalents

697,424

917,822


Investment securities:







Held-to-maturity

2,903,609

2,935,688



Available-for-sale

3,545,288

3,273,174



Other investments

148,654

180,803


Loans held for sale

13,428

11,622


Loans

15,326,147

14,300,972


Allowance for loan losses

(143,649)

(141,252)


     Net loans

15,182,498

14,159,720


Premises and equipment, net

332,297

327,054


Goodwill

741,740

741,740


Intangible assets

71,020

82,755


Covered other real estate

49,641

65,234


Accrued interest receivable and other assets

1,216,748

1,216,416




    Total assets

$

24,902,347

$

23,912,028

LIABILITIES AND SHAREHOLDERS' EQUITY






Deposits:







Noninterest-bearing

$

5,786,662

$

5,459,029



Interest-bearing

3,028,888

3,026,735



Savings and money market accounts

8,399,612

8,587,167



Certificates and other time deposits

2,289,503

2,460,670




Total deposits

19,504,665

19,533,601



Federal funds purchased and securities sold under agreements to repurchase

1,272,591

851,535



Wholesale borrowings

428,071

200,600



Long-term debt

505,192

324,428



Accrued taxes, expenses, and other liabilities

357,547

298,970




Total liabilities

22,068,066

21,209,134



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




Common stock warrant

3,000

3,000




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

127,937

127,937




Capital surplus

1,393,090

1,390,643




Accumulated other comprehensive loss

(71,892)

(66,876)




Retained earnings

1,404,717

1,277,975




Treasury stock, at cost: December 31, 2014 - 4,793,566 shares; December 31, 2013 - 5,127,332 shares

(122,571)

(129,785)




Total shareholders' equity

2,834,281

2,702,894




    Total liabilities and shareholders' equity

$

24,902,347

$

23,912,028

FIRSTMERIT CORPORATION AND SUBSIDIARIES
Period End Loans by Product Type (Unaudited)
(Dollars in thousands)











As of December 31, 2014

Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

7,830,085

$

1,086,899

$

211,607

$

9,128,591

Mortgage

625,283

394,484

41,276

1,061,043

Installment

2,393,451

764,168

4,874

3,162,493

Home equity

1,110,336

233,629

73,365

1,417,330

Credit card

164,478

—

—

164,478

Leases

370,179

—

—

370,179

    Subtotal

12,493,812

2,479,180

331,122

15,304,114

Loss share receivable

—

—

22,033

22,033

    Total loans

12,493,812

2,479,180

353,155

15,326,147

Allowance for loan losses

(95,696)

(7,457)

(40,496)

(143,649)

Net loans

$

12,398,116

$

2,471,723

$

312,659

$

15,182,498

























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












(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)

December 31,

September 30,

June 30,

March 31,

December 31,

(Dollars in thousands)

2014

2014

2014

2014

2013

ASSETS













Cash and cash equivalents

$

500,559

$

521,210

$

662,000

$

959,071

$

1,135,601

Investment securities:













Held-to-maturity

2,966,127

3,029,971

3,061,711

2,983,831

2,763,517

Available-for-sale

3,499,528

3,460,312

3,444,830

3,332,358

3,284,635

Other investments

148,636

148,427

148,440

168,389

253,490

Loans held for sale

16,708

17,433

10,196

6,804

10,248

Loans

15,289,890

15,148,100

14,702,319

14,412,481

14,281,860

Less: allowance for loan losses

138,540

140,026

146,368

138,891

177,628

Net loans

15,151,350

15,008,074

14,555,951

14,273,590

14,104,232

Total earning assets

21,920,889

21,804,243

21,367,496

20,903,863

20,593,750

Premises and equipment, net

321,187

317,366

323,175

327,845

326,632

Accrued interest receivable and other assets

2,060,892

2,080,983

2,084,973

2,092,682

2,156,491

TOTAL ASSETS

$

24,664,987

$

24,583,776

$

24,291,276

$

24,144,570

$

24,034,846















LIABILITIES













Deposits:













Noninterest-bearing

$

5,706,631

$

5,603,104

$

5,515,807

$

5,488,751

$

5,546,316

Interest-bearing

3,021,188

3,100,904

3,066,201

3,045,952

2,875,375

Savings and money market accounts

8,381,548

8,492,172

8,580,928

8,698,817

8,544,097

Certificates and other time deposits

2,341,280

2,335,620

2,333,859

2,402,986

2,551,688

Total deposits

19,450,647

19,531,800

19,496,795

19,636,506

19,517,476

Federal funds purchased and securities sold under













agreements to repurchase

1,241,948

1,182,507

1,024,598

884,065

948,959

Wholesale borrowings

450,587

438,941

373,213

276,324

200,622

Long-term debt

350,535

320,387

324,431

324,428

324,426

Total funds

21,493,717

21,473,635

21,219,037

21,121,323

20,991,483

Accrued taxes, expenses and other liabilities

321,652

302,255

303,887

290,021

369,728

Total liabilities

21,815,369

21,775,890

21,522,924

21,411,344

21,361,211

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

1,391,189

1,388,423

1,386,497

1,391,695

1,389,222

Accumulated other comprehensive loss

(38,827)

(41,963)

(44,952)

(52,940)

(79,431)

Retained earnings

1,388,661

1,352,867

1,319,515

1,293,379

1,262,705

Treasury stock

(122,342)

(122,378)

(123,645)

(129,845)

(129,798)

Total shareholders' equity

2,849,618

2,807,886

2,768,352

2,733,226

2,673,635

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

24,664,987

$

24,583,776

$

24,291,276

$

24,144,570

$

24,034,846















FIRSTMERIT CORPORATION AND SUBSIDIARIES
Average Loans by Product Type (Unaudited)
(Dollars in thousands)











Quarter ended December 31, 2014

Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

7,734,881

$

1,170,536

$

231,531

$

9,136,948

Mortgage

617,803

401,173

42,409

1,061,385

Installment

2,353,599

785,035

4,944

3,143,578

Home equity

1,087,123

242,878

78,361

1,408,362

Credit card

161,543

—

—

161,543

Leases

351,222

—

—

351,222

    Subtotal

12,306,171

2,599,622

357,245

15,263,038

Loss share receivable

—

—

26,852

26,852

    Total loans

12,306,171

2,599,622

384,097

15,289,890

Less allowance for loan losses

91,178

6,203

41,159

138,540

Net loans

$

12,214,993

$

2,593,419

$

342,938

$

15,151,350

























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












(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

December 31, 2014

September 30, 2014

December 31, 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

$

500,559







$

521,210







$

1,135,601






Investment securities and federal funds sold:

























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

5,257,657

$

26,803

2.02

%

5,276,354

$

26,502

1.99

%

4,895,147

$

24,236

1.96

%

Obligations of states and political subdivisions (tax exempt)

767,026

8,636

4.47

%

776,376

8,734

4.46

%

728,408

8,609

4.69

%

Other securities and federal funds sold

589,608

5,213

3.51

%

585,980

5,571

3.77

%

678,087

6,445

3.77

%

Total investment securities and federal funds sold

6,614,291

40,652

2.44

%

6,638,710

40,807

2.44

%

6,301,642

39,290

2.47

%

Loans held for sale

16,708

145

3.44

%

17,433

154

3.50

%

10,248

92

3.56

%

Loans, including loss share receivable (2)

15,289,890

169,302

4.39

%

15,148,100

171,302

4.49

%

14,281,860

177,275

4.92

%

Total earning assets

21,920,889

$

210,099

3.80

%

21,804,243

$

212,263

3.86

%

20,593,750

$

216,657

4.17

%

Total allowance for loan losses

(138,540)







(140,026)







(177,628)






Other assets

2,382,079







2,398,349







2,483,123






Total assets

$

24,664,987







$

24,583,776







$

24,034,846






LIABILITIES AND SHAREHOLDERS' EQUITY




















Deposits:

























Noninterest-bearing

$

5,706,631

$

—

—

%

$

5,603,104

$

—

—

%

$

5,546,316

$

—

—

%

Interest-bearing

3,021,188

727

0.10

%

3,100,904

755

0.10

%

2,875,375

759

0.10

%

Savings and money market accounts

8,381,548

5,496

0.26

%

8,492,172

5,570

0.26

%

8,544,097

6,127

0.28

%

Certificates and other time deposits

2,341,280

2,525

0.43

%

2,335,620

2,846

0.48

%

2,551,688

2,500

0.39

%

Total deposits

19,450,647

8,748

0.18

%

19,531,800

9,171

0.19

%

19,517,476

9,386

0.19

%

Securities sold under agreements to repurchase

1,241,948

294

0.09

%

1,182,507

268

0.09

%

948,959

291

0.12

%

Wholesale borrowings

450,587

2,360

2.08

%

438,941

1,397

1.26

%

200,622

938

1.85

%

Long-term debt

350,535

2,188

2.48

%

320,387

3,783

4.68

%

324,426

3,897

4.77

%

Total interest-bearing liabilities

15,787,086

13,590

0.34

%

15,870,531

14,619

0.37

%

15,445,167

14,512

0.37

%

Other liabilities

321,652







302,255







369,728






Shareholders' equity

2,849,618







2,807,886







2,673,635






Total liabilities and shareholders' equity

$

24,664,987







$

24,583,776







$

24,034,846






Net yield on earning assets

$

21,920,889

$

196,509

3.56

%

$

21,804,243

$

197,644

3.60

%

$

20,593,750

$

202,145

3.89

%

Interest rate spread





3.46

%






3.50

%






3.80

%



























(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 $4.0 million, $4.1 million, and $4.1 million for the three months ended December 31, 2014, September 30, 2014 and December 31, 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





Year Ended

Year Ended

December 31, 2014

December 31, 2013

(Unaudited)

Average



Average

Average



Average

(Dollars in thousands)

Balance

Interest (1)

Rate

Balance

Interest (1)

Rate

ASSETS
















Cash and cash equivalents

$

659,072







$

941,356






Investment securities and federal funds sold:
















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

5,247,620

$

105,966

2.02

%

4,319,524

$

88,761

2.05

%

Obligations of states and political subdivisions (tax exempt)

762,864

34,736

4.55

%

673,695

33,311

4.94

%

Other securities and federal funds sold

588,123

22,398

3.81

%

535,916

20,063

3.74

%

Total investment securities and federal funds sold

6,598,607

163,100

2.47

%

5,529,135

142,135

2.57

%

Loans held for sale

12,825

447

3.49

%

15,194

553

3.64

%

Loans, including loss share receivable (2)

14,891,315

685,058

4.60

%

12,948,666

637,532

4.92

%

Total earning assets

21,502,747

$

848,605

3.95

%

18,492,995

$

780,220

4.22

%

Total allowance for loan losses

(140,953)







(153,190)






Other assets

2,397,345







2,208,614






Total assets

$

24,418,211







$

21,489,775






LIABILITIES AND SHAREHOLDERS' EQUITY











Deposits:
















Noninterest-bearing

$

5,579,237

$

—

—

%

$

4,859,659

$

—

—

%

Interest-bearing

3,058,609

2,963

0.10

%

2,316,421

2,543

0.11

%

Savings and money market accounts

8,537,371

22,101

0.26

%

7,799,943

24,406

0.31

%

Certificates and other time deposits

2,353,218

10,844

0.46

%

2,325,565

9,649

0.41

%

Total deposits

19,528,435

35,908

0.18

%

17,301,588

36,598

0.21

%

Securities sold under agreements to repurchase

1,084,532

991

0.09

%

949,068

1,240

0.13

%

Wholesale borrowings

385,392

13,754

1.63

%

194,150

3,893

2.01

%

Long-term debt

329,991

6,277

4.17

%

280,323

13,287

4.74

%

Total interest-bearing liabilities

15,749,113

56,930

0.36

%

13,865,470

55,018

0.40

%

Other liabilities

299,722







355,781






Shareholders' equity

2,790,139







2,408,865






Total liabilities and shareholders' equity

$

24,418,211







$

21,489,775






Net yield on earning assets

$

21,502,747

$

791,675

3.68

%

$

18,492,995

$

725,202

3.92

%

Interest rate spread





3.59

%






3.82

%


















(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 $16.1 million and $14.4 million for the twelve months ended December 31, 2014 and December 31, 2013, respectively.

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

FIRSTMERIT CORPORATION AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF INCOME





(Unaudited)

Quarters Ended

Year Ended

(Dollars in thousands except per share data)

December 31,

December 31,




2014

2013

2014

2013

Interest income:











Loans and loans held for sale

$

168,650

$

176,559

$

682,328

$

635,872

Investment securities:












Taxable

32,016

30,681

128,363

108,824


Tax-exempt

5,435

5,340

21,807

21,107


Total investment securities interest

37,451

36,021

150,170

129,931



Total interest income

206,101

212,580

832,498

765,803

Interest expense:











Deposits:












Interest-bearing

727

759

2,963

2,543


Savings and money market accounts

5,496

6,127

22,101

24,406


Certificates and other time deposits

2,525

2,500

10,844

9,649

Securities sold under agreements to repurchase

294

291

991

1,240

Wholesale borrowings

2,360

938

6,277

3,893

Long-term debt

2,188

3,897

13,754

13,287


Total interest expense

13,590

14,512

56,930

55,018


Net interest income

192,511

198,068

775,568

710,785

Provision for loan losses

13,297

10,050

52,279

33,684


Net interest income after provision for loan losses

179,214

188,018

723,289

677,101

Noninterest income:











Trust department income

9,831

10,255

39,949

34,770

Service charges on deposits

17,597

19,084

71,457

74,399

Credit card fees

13,305

12,414

52,666

50,542

ATM and other service fees

6,181

5,659

24,179

19,155

Bank owned life insurance income

7,337

4,037

19,177

16,926

Investment services and insurance

4,171

3,530

15,145

12,777

Investment securities gains/(losses), net

16

—

166

(2,803)

Loan sales and servicing income

3,112

3,577

16,044

23,069

Other operating income

10,410

13,864

42,741

41,508


Total noninterest income

71,960

72,420

281,524

270,343

Noninterest expenses:











Salaries, wages, pension and employee benefits

89,899

93,621

358,970

354,016

Net occupancy expense

14,188

14,066

59,436

49,510

Equipment expense

12,133

13,177

48,499

41,875

Stationery, supplies and postage

3,767

4,895

15,587

14,199

Bankcard, loan processing and other costs

11,830

10,886

45,625

71,929

Professional services

6,440

8,358

21,813

40,680

Amortization of intangibles

2,933

2,692

11,735

8,392

FDIC insurance expense

5,989

5,106

20,481

17,707

Other operating expense

17,862

25,819

82,773

85,945


Total noninterest expenses

165,041

178,620

664,919

684,253

Income before income tax expense

86,133

81,818

339,894

263,191

Income tax expense

25,054

24,644

101,943

79,507



Net income

$

61,079

$

57,174

$

237,951

$

183,684

Less:

Net income allocated to participating shareholders

496

441

1,930

1,545



Preferred stock dividends

1,469

1,469

5,876

5,337

Net income attributable to common shareholders

$

59,114

$

55,264

$

230,145

$

176,802

Net income used in diluted EPS calculation

$

59,114

$

55,264

$

230,145

$

176,802

Weighted average number of common shares outstanding - basic

165,395

165,054

165,296

149,607

Weighted average number of common shares outstanding - diluted

165,974

166,097

166,054

150,421

Basic earnings per common share

$

0.36

$

0.33

$

1.39

$

1.18

Diluted earnings per common share

$

0.36

$

0.33

$

1.39

$

1.18

Cash dividends per common share

$

0.16

$

0.16

$

0.64

$

0.64
















































FIRSTMERIT CORPORATION AND SUBSIDIARIES








CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME








(Unaudited)

Quarter Ended

Year Ended

(Dollars in thousands)

December 31, 2014

December 31, 2014

Pre-tax

Tax

After-tax

Pre-tax

Tax

After-tax

Net Income

$

86,133

$

25,054

$

61,079

$

339,894

$

101,943

$

237,951

Other comprehensive income/(loss)
















Unrealized gains and losses on securities available for sale:
















Changes in unrealized securities' holding gains/(losses)

14,571

5,100

9,471

38,864

13,602

25,262

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

(606)

(210)

(396)

(2,157)

(753)

(1,404)

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

(16)

(6)

(10)

(166)

(58)

(108)

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

13,949

4,884

9,065

36,541

12,791

23,750

Pension plans and other postretirement benefits:
















Net gains/(losses) arising during the period

(49,552)

(17,345)

(32,207)

(49,552)

(17,345)

(32,207)

Amortization of actuarial gain

767

269

498

3,165

1,108

2,057

Amortization of prior service cost reclassified to other noninterest expense

516

181

335

2,130

746

1,384

Net change from defined benefit pension plans

(48,269)

(16,895)

(31,374)

(44,257)

(15,491)

(28,766)

Total other comprehensive gains/(losses)

(34,320)

(12,011)

(22,309)

(7,716)

(2,700)

(5,016)

Comprehensive income

$

51,813

$

13,043

$

38,770

$

332,178

$

99,243

$

232,935


(Unaudited)

Quarter Ended

Year Ended

(Dollars in thousands)

December 31, 2013

December 31, 2013

Pre-tax

Tax

After-tax

Pre-tax

Tax

After-tax

Net Income

$

81,818

$

24,644

$

57,174

$

263,191

$

79,507

$

183,684

Other comprehensive income (loss)
















Unrealized gains and losses on securities available for sale:
















Changes in unrealized securities' holding gains/(losses)

(26,093)

(9,134)

(16,959)

(130,947)

(45,832)

(85,115)

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

(533)

(186)

(347)

(2,187)

(765)

(1,422)

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

—

—

—

2,803

981

1,822

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

(26,626)

(9,320)

(17,306)

(130,331)

(45,616)

(84,715)

Pension plans and other postretirement benefits:
















Net gains/(losses) arising during the period

47,940

16,779

31,161

47,940

16,779

31,161

Amortization of actuarial gain

4,437

1,553

2,884

4,437

1,553

2,884

Amortization of prior service cost reclassified to other noninterest expense

(1)

—

(1)

(1)

—

(1)

Net change from defined benefit pension plans

52,376

18,332

34,044

52,376

18,332

34,044

Total other comprehensive gains/(losses)

25,750

9,012

16,738

(77,955)

(27,284)

(50,671)

Comprehensive income

$

107,568

$

33,656

$

73,912

$

185,236

$

52,223

$

133,013

FIRSTMERIT CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF INCOME---LINKED QUARTERS


















Quarterly Results

(Unaudited)

2014

2014

2014

2014

2013

(Dollars in thousands, except share data)

4th qtr

3rd qtr

2nd qtr

1st qtr

4th qtr

Loans and loans held for sale

$

168,650

$

170,648

$

172,517

$

170,514

$

176,559

Investment securities

37,451

37,549

37,808

37,362

36,021

Total interest income

206,101

208,197

210,325

207,876

212,580

Interest expense













Deposits:













Interest-bearing

727

755

745

737

759

Savings and money market accounts

5,496

5,570

5,477

5,559

6,127

Certificates and other time deposits

2,525

2,846

3,009

2,464

2,500

Securities sold under agreements to repurchase

294

268

233

197

291

Wholesale borrowings

2,360

1,397

1,391

1,129

938

Long-term debt

2,188

3,783

3,893

3,890

3,897

Total interest expense

13,590

14,619

14,748

13,976

14,512

Net interest income

192,511

193,578

195,577

193,900

198,068

Provision for loan losses

13,297

9,192

15,253

14,536

10,050

Net interest income after provision for loan losses

179,214

184,386

180,324

179,364

188,018

Noninterest income:













Trust department income

9,831

10,300

10,070

9,748

10,255

Service charges on deposits

17,597

18,684

18,528

16,648

19,084

Credit card fees

13,305

13,754

13,455

12,152

12,414

ATM and other service fees

6,181

6,182

5,996

5,819

5,659

Bank owned life insurance income

7,337

4,218

4,040

3,582

4,037

Investment services and insurance

4,171

3,606

3,852

3,516

3,530

Investment securities gains/(losses), net

16

14

80

56

—

Loan sales and servicing income

3,112

4,740

4,462

3,730

3,577

Other operating income

10,410

8,235

12,077

12,019

13,864

Total noninterest income

71,960

69,733

72,560

67,270

72,420

Noninterest expenses:













Salaries, wages, pension and employee benefits

89,899

90,593

89,465

89,013

93,621

Net occupancy expense

14,188

13,887

14,347

17,014

14,066

Equipment expense

12,133

12,188

12,267

11,911

13,177

Stationery, supplies and postage

3,767

3,723

3,990

4,108

4,895

Bankcard, loan processing and other costs

11,830

11,151

11,810

10,834

10,886

Professional services

6,440

5,270

4,745

5,359

8,358

Amortization of intangibles

2,933

2,933

2,933

2,936

2,692

FDIC  insurance expense

5,989

2,988

5,533

5,971

5,106

Other operating expense

17,862

20,412

22,310

22,185

25,819

Total noninterest expenses

165,041

163,145

167,400

169,331

178,620

Income before income tax expense

86,133

90,974

85,484

77,303

81,818

Income tax expense

25,054

27,076

25,965

23,848

24,644

Net income

61,079

63,898

59,519

53,455

57,174

Less:  Net income allocated to participating shareholders

496

519

489

380

441

Preferred stock dividends

1,469

1,469

1,469

1,469

1,469

Net income attributable to common shareholders

$

59,114

$

61,910

$

57,561

$

51,606

$

55,264

Net income used in diluted EPS calculation

$

59,114

$

61,910

$

57,561

$

51,606

$

55,264

Weighted-average number of common shares outstanding - basic

165,395

165,389

165,335

165,060

165,054

Weighted-average number of common shares outstanding- diluted

165,974

165,804

166,147

166,004

166,097

Basic earnings per common share

$

0.36

$

0.37

$

0.35

$

0.31

$

0.33

Diluted earnings per common share

$

0.36

$

0.37

$

0.35

$

0.31

$

0.33

Cash dividends per common share

$

0.16

$

0.16

$

0.16

$

0.16

$

0.16




























































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

December 31,

September 30,

June 30,

March 31,

December 31,

December 31,

Allowance for Credit Losses

2014

2014

2014

2014

2013

2013

Allowance for originated loan losses, beginning of period

$

90,883

$

91,950

$

92,116

$

96,484

$

98,291

$

98,942

Provision for originated loan losses

8,662

4,862

5,993

3,654

1,552

13,034

Charge-offs

9,205

11,410

11,148

13,160

9,913

40,173

Recoveries

5,356

5,481

4,989

5,138

6,554

24,681

Net charge-offs

3,849

5,929

6,159

8,022

3,359

15,492

Allowance for originated loan losses, end of period

$

95,696

$

90,883

$

91,950

$

92,116

$

96,484

$

96,484

Reserve for unfunded lending commitments,
















beginning of period

$

6,966

$

7,107

$

7,481

$

7,907

$

8,493

$

5,433

Provision for (relief of) credit losses

(1,118)

(141)

(374)

(426)

(586)

2,474

Reserve for unfunded lending commitments,
















end of period

$

5,848

$

6,966

$

7,107

$

7,481

$

7,907

$

7,907

Allowance for Credit Losses

$

101,544

$

97,849

$

99,057

$

99,597

$

104,391

$

104,391


Ratios
















Provision for loan losses to average loans

0.28

%

0.16

%

0.22

%

0.14

%

0.06

%

0.14

%

Net charge-offs to average loans

0.12

%

0.20

%

0.22

%

0.31

%

0.13

%

0.17

%

Allowance for loan losses to period-end loans

0.77

%

0.75

%

0.80

%

0.85

%

0.94

%

0.94

%

Allowance for credit losses to period-end loans

0.81

%

0.81

%

0.86

%

0.92

%

1.02

%

1.02

%

Allowance for loan losses to nonperforming loans

276.44

%

231.13

%

250.27

%

212.01

%

228.62

%

228.62

%

Allowance for credit losses to nonperforming loans

293.34

%

248.85

%

269.61

%

229.23

%

247.35

%

247.35

%


Asset Quality
















Impaired originated loans:
















Nonaccrual

$

17,147

$

22,347

$

21,072

$

27,122

$

25,674

$

25,674

Other nonperforming loans:
















Nonaccrual

17,470

16,974

15,669

16,326

16,529

16,529

Total nonperforming loans

34,617

39,321

36,741

43,448

42,203

42,203

Other real estate ("ORE")

20,421

23,798

24,181

19,263

18,680

18,680

Total nonperforming assets ("NPAs")

$

55,038

$

63,119

$

60,922

$

62,711

$

60,883

$

60,883

NPAs to period-end loans + ORE

0.44

%

0.52

%

0.53

%

0.58

%

0.60

%

0.60

%

Accruing originated loans past due 90 days or more

$

12,156

$

8,538

$

15,643

$

11,860

$

11,176

$

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

2014

2013

QUARTERLY NONINTEREST INCOME DETAIL

4th qtr

3rd qtr

2nd qtr

1st qtr

4th qtr

Trust department income

$

9,831

$

10,300

$

10,070

$

9,748

$

10,255

Service charges on deposits

17,597

18,684

18,528

16,648

19,084

Credit card fees

13,305

13,754

13,455

12,152

12,414

ATM and other service fees

6,181

6,182

5,996

5,819

5,659

Bank owned life insurance income

7,337

4,218

4,040

3,582

4,037

Investment services and insurance

4,171

3,606

3,852

3,516

3,530

Investment securities gains/(losses), net

16

14

80

56

—

Loan sales and servicing income

3,112

4,740

4,462

3,730

3,577

Other operating income

10,410

8,235

12,077

12,019

13,864

Total Noninterest Income

$

71,960

$

69,733

$

72,560

$

67,270

$

72,420


















2014

2014

2014

2014

2013

QUARTERLY NONINTEREST EXPENSE DETAIL

4th qtr

3rd qtr

2nd qtr

1st qtr

4th qtr

Salaries and wages

$

71,638

$

71,769

$

69,892

$

71,669

$

76,685

Pension and employee benefits

18,261

18,824

19,573

17,344

16,936

Net occupancy expense

14,188

13,887

14,347

17,014

14,066

Equipment expense

12,133

12,188

12,267

11,911

13,177

Taxes, other than federal income taxes

1,661

1,286

2,576

2,774

2,618

Stationery, supplies and postage

3,767

3,723

3,990

4,108

4,895

Bankcard, loan processing and other costs

11,830

11,151

11,810

10,834

10,886

Advertising

3,586

3,942

3,801

3,516

4,855

Professional services

6,440

5,270

4,745

5,359

8,358

Telephone

2,779

2,831

2,857

2,908

3,427

Amortization of intangibles

2,933

2,933

2,933

2,936

2,692

FDIC insurance expense

5,989

2,988

5,533

5,971

5,106

Other operating expense

9,836

12,353

13,076

12,987

14,919

Total Noninterest Expense

$

165,041

$

163,145

$

167,400

$

169,331

$

178,620

FIRSTMERIT CORPORATION AND SUBSIDIARIES




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












(Unaudited)

Quarters Ended

Year Ended

(Dollars in thousands, except ratios)

December 31,

December 31,

2014

2013

2014

2013

Allowance for originated loan losses - beginning of period

$

90,883

$

98,291

$

96,484

$

98,942

Loans charged off:










Commercial

445

993

12,701

7,637

Mortgage

547

718

2,031

1,903

Installment

4,949

4,895

17,932

16,683

Home equity

1,428

1,201

4,831

5,036

Credit cards

1,060

1,312

4,604

5,541

Leases

—

—

—

1,237

Overdrafts

776

794

2,824

2,136

Total

9,205

9,913

44,923

40,173

Recoveries:










Commercial

1,612

2,281

4,332

9,012

Mortgage

99

97

318

230

Installment

2,318

2,649

10,513

10,459

Home equity

713

955

2,940

2,492

Credit cards

456

421

1,716

1,841

Manufactured housing

9

11

87

60

Leases

5

—

379

100

Overdrafts

144

140

679

487

Total

5,356

6,554

20,964

24,681

Net charge-offs

3,849

3,359

23,959

15,492

Provision for originated loan losses

8,662

1,552

23,171

13,034

Allowance for originated loan losses-end of period

$

95,696

$

96,484

$

95,696

$

96,484












Average originated loans

$

12,306,171

$

9,988,587

$

11,421,426

$

9,252,555

Ratio (annualized) to average originated loans:










Originated net charge-offs

0.12

%

0.13

%

0.21

%

0.17

%

Provision for originated loan losses

0.28

%

0.06

%

0.20

%

0.14

%

Originated Loans, period-end

$

12,493,812

$

10,213,387

$

12,493,812

$

10,213,387












Allowance for credit losses:

$

101,544

$

104,391

$

101,544

$

104,391

To (annualized) net charge-offs

6.65

7.83

4.24

6.74

Allowance for originated loan losses:










To period-end originated loans

0.77

%

0.94

%

0.77

%

0.94

%

To (annualized) net originated charge-offs

6.27

7.24

3.99

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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