FirstMerit Reports Third Quarter 2013 EPS of $0.23 Per Share

News provided by

FirstMerit Corporation

Oct 22, 2013, 07:30 ET

AKRON, Ohio, Oct. 22, 2013 /PRNewswire/ -- 

Quarterly Highlights include:

  • Sustained profitability: 58th consecutive quarter of profitability.
  • Continued organic growth: Average loan growth of $444.0 million, or 3.25% from the prior quarter; average core deposit growth of $1.1 billion or 6.91% from the prior quarter.
  • Superior credit quality: Net charge-offs to average originated loans decreased to 0.12% from 0.15% in the prior quarter; nonperforming assets as a percent of period end originated loans plus other real estate remained low at 0.57%.
  • Strong balance sheet: Strong tangible common equity ratio at 7.44%.
  • Continued integration of Citizens Republic Bancorp: Successful conversion of core systems in October.

FirstMerit Corporation (Nasdaq: FMER) (the "Corporation") reported third quarter 2013 net income of $40.7 million, or $0.23 per diluted share.  This compares with $48.5 million, or $0.29 per diluted share, for the second quarter 2013 and $35.0 million, or $0.32 per diluted share, for the third quarter 2012. Included in net income for the third quarter 2013 were $33.4 million of one time pre-tax merger related costs that were recorded as noninterest expense.  One time pre-tax merger related costs for the second quarter 2013 totaled $32.1 million of which $2.8 million was recorded as a reduction to noninterest income and $29.3 million was recorded as noninterest expense.

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

Returns on average common equity ("ROE") and average assets ("ROA") for the third quarter 2013 were 6.07% and 0.67%, respectively, compared with 7.56% and 0.85%, respectively, for the second quarter 2013 and 8.60% and 0.94%, respectively, for the third quarter 2012. 

"Our strong financial results in the third quarter reflect solid performance throughout the company with characteristic focus and dedication at all levels, demonstrated by organic loan and deposit growth. This past weekend, we successfully converted Citizens Republic Bancorp's operating systems onto our platform. We now  operate across our five-state footprint as one bank operating with unified systems and procedures from the front of the house to the back. With this last milestone behind us, we are actively working to take market share in all of our markets, grow our business and enhance shareholder value," said Paul Greig, chairman, president and CEO, FirstMerit Corporation.

Except as noted, the Citizens Republic Bancorp ("Citizens") acquisition is primarily contributing to the increases over the prior year period in the income statement and balance sheets.  Citizens' results of operations are included in the reported current year to date period results since the date of acquisition, April 12, 2013.

"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 ("FTE") basis was $207.1 million in the third quarter 2013 compared with $201.6 million in the second quarter 2013 and $120.7 million in the third quarter 2012.

Net interest margin was 4.05% for the third quarter 2013 compared with 4.12% for the second quarter 2013 and 3.66% for the third quarter 2012.  Third quarter 2013 net interest margin compression compared with the second quarter 2013 was primarily driven by lower yields in the acquired loan portfolio and lower volume from the run off in the covered loan portfolio.  Reduced funding costs within average deposits offset additional margin pressure during the quarter.   

Average originated loans were $9.4 billion during the third quarter 2013, an increase of $500.1 million, or 5.63%, compared with the second quarter 2013, and an increase of $1.2 billion, or 14.57%, compared with the third quarter 2012.  Average originated commercial loans increased $242.5 million, or 4.12%, compared with the prior quarter, and increased $687.7 million, or 12.63%, compared with the year ago quarter.

Average deposits were $19.5 billion during the third quarter 2013, an increase of $1.1 billion, or 6.12%, compared with the second quarter 2013, and an increase of $7.9 billion, or 67.84%, compared with the third quarter 2012.  During the third quarter 2013, average core deposits, which exclude time deposits, increased $1.1 billion, or 6.91%, compared with the second quarter 2013 and increased $6.7 billion, or 66.29%, compared with the third quarter 2012.  Average time deposits increased $40.6 million, or 1.51%, and increased $1.2 billion, or 78.05%, respectively, over the prior and year-ago quarters.  For the third quarter 2013, average core deposits accounted for 86.02% of total average deposits, compared with 85.38% for the second quarter 2013 and 86.82% for the third quarter 2012.

Average investments increased $222.0 million, or 3.74%, compared with the second quarter 2013 and increased $2.5 billion, or 66.55% compared with the third quarter 2012.

Noninterest Income

Noninterest income, excluding gains and losses on securities transactions, for the third quarter 2013 was $71.1 million, a decrease of $1.1 million, or 1.58%, from the second quarter 2013 and an increase of $16.7 million, or 30.75%, from the third quarter 2012.  Included in noninterest income in the third quarter 2013, second quarter 2013 and  were approximately $1.8 million and  $1.0 million. There were no gains on covered loans paid in full in the third quarter 2012.

Other income, excluding net securities gains and losses, as a percentage of net revenue for the third quarter 2013 was 25.56% compared with 26.38% for second quarter 2013 and 31.05% for the third quarter 2012.  Net revenue is defined as net interest income, on an FTE basis, plus other income, excluding gains and losses from securities sales.

Noninterest Expense

Noninterest expense for the third quarter 2013 was $211.4 million, an increase of $21.7 million, or 11.46%, from the second quarter 2013 and an increase of $102.8 million, or 94.66%, from the third quarter 2012.  Included in noninterest expense in the third quarter 2013 and second quarter 2013 were one time merger related costs associated with the Citizens acquisition of $33.4 million and $29.3 million, respectively.  The majority of the merger related costs incurred in the third quarter 2013 are from fees for early termination of existing agreements assumed from the merger and are included within Bankcard, loan processing and other costs in the accompanying consolidated statements of comprehensive income.  The majority of the merger related costs incurred in the second quarter of 2013 were associated with severance arrangements and professional and legal services rendered in connection with the merger.  The Corporation's efficiency ratio was 74.92% for the third quarter 2013, compared with 68.37% for the second quarter 2013 and 61.75% for the third quarter 2012.

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 $2.9 million, or 0.12% of average originated loans in the third quarter 2013, compared with $3.3 million, or 0.15% of average originated loans, in the second quarter 2013 and $14.9 million, or 0.72% of average originated loans, in the third quarter 2012. 

Nonperforming assets totaled $55.4 million at September 30, 2013, a decrease of $10.8 million, or 16.25%, compared with June 30, 2013 and a decrease of $8.6 million, or 13.47%, compared with September 30, 2012. Nonperforming assets at September 30, 2013 represented 0.57% of period-end originated loans plus other real estate compared with 0.72% at June 30, 2013 and 0.77% at September 30, 2012.

The allowance for originated loan losses totaled $98.3 million at September 30, 2013.   At September 30, 2013, the allowance for originated loan losses was 1.00% of period-end originated loans compared with 1.08% at June 30, 2013 and 1.19% at September 30, 2012.  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 1.09% of period end originated loans at September 30, 2013, compared with 1.17% at June 30, 2013 and 1.26% at September 30, 2012.  The allowance for credit losses to nonperforming loans was 300.06% at September 30, 2013, compared with 234.82% at June 30, 2013 and 208.11% at September 30, 2012.

Balance Sheet

The Corporation's total assets at September 30, 2013 were $24.1 billion, an increase of $602.9 million, or 2.56%, compared with June 30, 2013 and an increase of $9.5 billion, or 64.98%, compared with September 30, 2012. 

Total deposits were $19.5 billion at September 30, 2013, an increase of $369.8 million, or 1.93%, from June 30, 2013 and an increase of $8.0 billion, or 69.00%, from September 30, 2012.  Core deposits totaled $16.9 billion at September 30, 2013, an increase of $549.8 million, or 3.37%, from June 30, 2013 and an increase of $6.8 billion, or 67.60%, from September 30, 2012. 

Shareholders' equity was $2.7 billion as of September 30, 2013 and June 30, 2013 and $1.6 billion as of September 30, 2012.  The increases mainly reflect the addition of $928.3 million in equity from the Citizen acquisition.  The Corporation maintained a strong capital position as tangible common equity to assets was 7.44% at September 30, 2013, compared with 7.61% at June 30, 2013 and 8.18% at September 30, 2012.  The common cash dividend per share paid in the third quarter 2013 was $0.16.

Integration Update

The integration of Citizens into the Corporation continues to progress as scheduled.  Professional consulting groups have been assisting the Corporation with the integration and accounting matters related to the transaction.  Core operating systems were converted as of October 20, 2013.

One time merger related costs incurred through September 30, 2013 totaled approximately $72.1 million.  Management expects a total of approximately $78.1 million in one time pre-tax merger related costs related to the Citizens acquisition.

Third Quarter 2013 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: 79710266.  A replay of the conference call will be available at approximately 2:00 p.m. (Eastern Time) on October 22, 2013 through November 5, 2013 by dialing (855) 859-2056, and entering the PIN: 79710266.  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 $24.1 billion as of September 30, 2013, and 412 banking offices and 440 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, FirstMerit Title Agency, Ltd., and FirstMerit Community Development Corporation.

Subsequent Events

The Corporation is required under generally accepted accounting principles to evaluate subsequent events through the filing of the its consolidated financial statements for the quarter ended September 30, 2013 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, 2013 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 and registration statements filed with the Securities and Exchange Commission.  The Corporation undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.

FirstMerit Corporation
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 (a)







(Unaudited)




Quarters



(Dollars in thousands, except per share amounts)

2013

2013

2013

2012

2012


     3rd qtr

     2nd qtr

     1st qtr

     4th qtr

     3rd qtr

EARNINGS









Net interest income FTE (b)

$

207,079

$

201,605

$

114,376

$

119,130

$

120,741

FTE adjustment (b)

3,739

3,574

3,027

2,900

2,851

Provision for originated loan losses

2,523

3,151

5,808

7,116

9,965

Provision for acquired loan losses

2,033

—

—

—

—

Provision for covered loan losses

1,823

4,158

4,138

5,146

6,214

Other income

71,090

69,439

57,392

61,652

54,925

Other expenses

211,378

189,640

106,925

112,181

108,587

Net income

40,715

48,450

37,346

38,224

34,953

Diluted EPS (d)

0.23

0.29

0.33

0.35

0.32

PERFORMANCE RATIOS









Return on average assets (ROA)

0.67

%

0.85

%

1.01

%

1.03

%

0.94

%

Return on average equity (ROE)

6.07

%

7.56

%

8.83

%

9.30

%

8.60

%

Return on average tangible common equity (e)

9.29

%

11.49

%

12.76

%

13.01

%

12.10

%

Net interest margin FTE (b)

4.05

%

4.12

%

3.46

%

3.58

%

3.66

%

Efficiency ratio (f)

74.92

%

68.37

%

62.06

%

62.65

%

61.75

%

Number of full-time equivalent employees

4,666

4,619

2,767

2,738

2,733

MARKET DATA









Book value per share

$

16.08

$

16.06

$

15.99

$

15.00

$

14.82

Tangible book value per share (e)

$

10.51

10.47

10.83

10.75

10.56

Period-end common share market value

21.72

20.03

16.54

14.19

14.71

Market as a % of book

135

%

125

%

103

%

95

%

99

%

Cash dividends per common share

$

0.16

$

0.16

$

0.16

$

0.16

$

0.16

Common stock dividend payout ratio

69.57

%

55.17

%

48.48

%

45.71

%

50.00

%

Average basic common shares

165,044

157,863

109,689

109,652

109,645

Average diluted common shares

168,917

157,982

109,689

109,652

109,645

Period end common shares

165,045

165,045

109,746

109,649

109,653

Common shares repurchased

7

168

26

12

6

Common stock market capitalization

$

3,584,777

$

3,305,851

$

1,815,199

$

1,555,919

$

1,612,996

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









Gross charge-offs

$

8,515

$

10,969

$

10,776

$

12,475

$

20,999

Net charge-offs

2,877

3,349

5,907

7,116

14,872

Allowance for originated loan losses

98,291

98,645

98,843

98,942

98,942

Reserve for unfunded lending commitments

8,493

8,114

4,941

5,433

5,760

Nonperforming assets (NPAs)

55,426

66,177

52,231

50,224

64,055

Net charge-offs to average loans ratio

0.12

%

0.15

%

0.27

%

0.34

%

0.72

%

Allowance for originated loan losses to period-end loans

1.00

%

1.08

%

1.13

%

1.13

%

1.19

%

Allowance for credit losses to period-end loans

1.09

%

1.17

%

1.18

%

1.20

%

1.26

%

NPAs to loans and other real estate

0.57

%

0.72

%

0.59

%

0.57

%

0.77

%

Allowance for originated loan losses to nonperforming loans

276.19

%

216.97

%

242.21

%

269.69

%

196.66

%

Allowance for credit losses to nonperforming loans

300.06

%

234.82

%

254.32

%

284.50

%

208.11

%

CAPITAL & LIQUIDITY









Period-end tangible common equity to assets (e)

7.44

%

7.61

%

8.03

%

8.16

%

8.18

%

Average equity to assets

11.08

%

11.28

%

11.45

%

11.12

%

10.97

%

Average equity to total loans

18.97

%

18.95

%

17.88

%

17.37

%

17.46

%

Average total loans to deposits

72.11

%

74.04

%

81.36

%

81.21

%

79.89

%

AVERAGE BALANCES









Assets

$

24,013,594

$

22,810,702

$

14,983,543

$

14,702,215

$

14,734,016

Deposits

19,456,231

18,334,244

11,789,784

11,595,085

11,591,931

Originated loans

9,377,826

8,877,754

8,735,307

8,444,208

8,185,507

Acquired loans, including covered loans, less loss share receivable

4,652,101

4,696,740

856,875

971,589

1,075,144

Earning assets

20,276,825

19,609,974

13,408,789

13,246,693

13,119,473

Shareholders' equity

2,661,546

2,571,964

1,715,005

1,635,275

1,616,569

ENDING BALANCES









Assets

$

24,134,986

$

23,532,129

$

15,272,484

$

14,913,012

$

14,628,843

Deposits

19,489,533

19,119,722

11,925,767

11,759,425

11,532,426

Originated loans

9,789,139

9,132,625

8,779,970

8,731,659

8,316,420

Acquired loans, including covered loans, less loss share receivable

4,410,041

4,935,218

801,239

905,391

1,043,058

Goodwill

734,883

734,883

460,044

460,044

460,044

Intangible assets

85,447

88,419

6,055

6,373

6,817

Earning assets

21,305,580

20,781,079

13,905,342

13,472,067

13,219,301

Total shareholders' equity

2,654,645

2,650,909

1,754,850

1,645,202

1,624,704

NOTES:









(a) - Effective April 12, 2013, the Corporation acquired Citizens.  Citizens' assets and liabilities were included in the consolidated balance sheet on the date of acquisition at fair value.  Citizens'

results of operations were included in the consolidated statements of comprehensive income beginning on the date of acquisition.

(b) - Net interest income on a fully tax-equivalent ("FTE") basis is a non-GAAP measure and restates interest on tax-exempt securities and loans as if such interest were subject to federal income tax at the statutory rate.

(c) - 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.

(d) - 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 ended September 30, 2013 and June 30, 2013 and $0.9 million in the quarter ended March 31, 2013.

(e) -  Tangible common equity and related ratios are non-GAAP measures and exclude goodwill and other intangibles as well as preferred stock.  Management uses these measures to assess the quality of capital and believes that investors may find them useful in their analysis of the Corporation.

(f) - The efficiency ratio excludes securities gains (losses).

FIRSTMERIT CORPORATION AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS



















(Dollars in thousands)

September 30,

December 31,

September 30,

(Unaudited, except December 31, 2012, which is derived from the audited financial statements)

2013

2012

2012

ASSETS








Cash and due from banks

$

505,228

$

244,223

$

201,359

Interest-bearing deposits in banks

742,039

13,791

37,058


Total cash and cash equivalents

1,247,267

258,014

238,417

Investment securities:









Held-to-maturity

2,749,934

622,121

620,631


Available-for-sale

3,256,259

2,920,971

2,911,993


Other investments

270,369

140,717

140,730

Loans held for sale

17,813

23,683

17,540

Loans

14,269,166

9,750,784

9,491,349

Allowance for loan losses

(143,835)

(142,197)

(142,586)

     Net loans

14,125,331

9,608,587

9,348,763

Premises and equipment, net

324,337

181,149

182,043

Goodwill

734,883

460,044

460,044

Intangible assets

85,447

6,373

6,817

Covered other real estate

70,791

59,855

56,795

Accrued interest receivable and other assets

1,252,555

631,498

645,070



    Total assets

$

24,134,986

$

14,913,012

$

14,628,843

LIABILITIES AND SHAREHOLDERS' EQUITY








Deposits:









Noninterest-bearing

$

5,461,674

$

3,338,371

$

3,231,500


Interest-bearing

2,815,681

1,287,674

1,079,913


Savings and money market accounts

8,575,292

5,758,123

5,744,103


Certificates and other time deposits

2,636,886

1,375,257

1,476,910



Total deposits

19,489,533

11,759,425

11,532,426


Federal funds purchased and securities sold under agreements to repurchase

1,049,801

1,104,525

963,455


Wholesale borrowings

200,858

136,883

178,083


Long-term debt

324,425

—

—


Accrued taxes, expenses, and other liabilities

415,724

266,977

330,175



Total liabilities

21,480,341

13,267,810

13,004,139


Shareholders' equity:










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

100,000

—

—



Common stock warrant

3,000

—

—



Common stock, without par value;  authorized 300,000,000 shares; issued: September 30, 2013 - 170,179,305 shares; December 31, 2012 and September 30, 2012 - 115,121,731 shares

127,937

127,937

127,937



Capital surplus

1,388,638

475,979

473,781



Accumulated other comprehensive loss

(83,613)

(16,205)

(13,900)



Retained earnings

1,248,554

1,195,850

1,175,001



Treasury stock, at cost: September 30, 2013 - 5,134,681 shares; December 31, 2012 - 5,472,915 shares; September 30, 2012 -  5,468,853 shares

(129,871)

(138,359)

(138,115)



Total shareholders' equity

2,654,645

1,645,202

1,624,704



    Total liabilities and shareholders' equity

$

24,134,986

$

14,913,012

$

14,628,843

FIRSTMERIT CORPORATION AND SUBSIDIARIES

Period End Loans by Product Type (Unaudited)

(Dollars in thousands)







As of September 30, 2013


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

6,420,369

$

1,971,062

$

422,225

$

8,813,656

Mortgage

487,283

467,608

52,796

1,007,687

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

3,825,751

584,290

14,199,180

Loss share receivable

—

—

69,986

69,986

    Total loans

9,789,139

3,825,751

654,276

14,269,166

Less allowance for loan losses

98,291

—

45,544

143,835

Net loans

$

9,690,848

$

3,825,751

$

608,732

$

14,125,331


























As of June 30, 2013


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

5,997,812

$

2,275,127

$

505,706

$

8,778,645

Mortgage

462,427

440,394

56,056

958,877

Installment

1,496,663

1,221,060

7,794

2,725,517

Home equity

845,051

322,111

106,970

1,274,132

Credit card

142,319

—

—

142,319

Leases

188,353

—

—

188,353

    Subtotal

9,132,625

4,258,692

676,526

14,067,843

Loss share receivable

—

—

83,910

83,910

    Total loans

9,132,625

4,258,692

760,436

14,151,753

Less allowance for loan losses

98,645

—

49,069

147,714

Net loans

$

9,033,980

$

4,258,692

$

711,367

$

14,004,039


























As of March 31, 2013


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

5,888,337

$

—

$

621,188

$

6,509,525

Mortgage

451,522

—

58,627

510,149

Installment

1,322,795

—

8,081

1,330,876

Home equity

812,458

—

113,343

925,801

Credit card

140,721

—

—

140,721

Leases

164,137

—

—

164,137

    Subtotal

8,779,970

—

801,239

9,581,209

Loss share receivable

—

—

95,593

95,593

    Total loans

8,779,970

—

896,832

9,676,802

Less allowance for loan losses

98,843

—

47,945

146,788

Net loans

$

8,681,127

$

—

$

848,887

$

9,530,014


























As of December 31, 2012


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

5,866,489

$

—

$

718,437

$

6,584,926

Mortgage

445,211

—

61,540

506,751

Installment

1,328,258

—

8,189

1,336,447

Home equity

806,078

—

117,225

923,303

Credit card

146,387

—

—

146,387

Leases

139,236

—

—

139,236

    Subtotal

8,731,659

—

905,391

9,637,050

Loss share receivable

—

—

113,734

113,734

    Total loans

8,731,659

—

1,019,125

9,750,784

Less allowance for loan losses

98,942

—

43,255

142,197

Net loans

$

8,632,717

$

—

$

975,870

$

9,608,587


























As of September 30, 2012


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

5,511,678

$

—

$

847,741

$

6,359,419

Mortgage

439,062

—

63,779

502,841

Installment

1,321,081

—

8,360

1,329,441

Home equity

789,743

—

123,178

912,921

Credit card

143,918

—

—

143,918

Leases

110,938

—

—

110,938

    Subtotal

8,316,420

—

1,043,058

9,359,478

Loss share receivable

—

—

131,871

131,871

    Total loans

8,316,420

—

1,174,929

9,491,349

Less allowance for loan losses

98,942

—

43,644

142,586

Net loans

$

8,217,478

$

—

$

1,131,285

$

9,348,763












(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)

2013

2013

2013

2012

2012

ASSETS













Cash and due from banks

$

1,415,430

$

806,129

$

394,896

$

238,366

$

440,231

Investment securities:













Held-to-maturity

2,640,807

1,953,094

637,614

620,154

337,685

Available-for-sale

3,243,173

3,723,002

2,919,636

2,925,938

3,215,203

Other investments

267,743

253,649

140,729

140,723

140,736

Loans held for sale

18,265

17,394

14,884

20,485

23,631

Loans

14,106,837

13,662,835

9,695,926

9,539,393

9,402,218

Less: allowance for loan losses

146,509

146,705

141,735

141,270

145,061

Net loans

13,960,328

13,516,130

9,554,191

9,398,123

9,257,157

Total earning assets

20,276,825

19,609,974

13,408,789

13,246,693

13,119,473

Premises and equipment, net

322,236

299,979

179,381

181,738

184,544

Accrued interest receivable and other assets

2,145,612

2,241,325

1,142,212

1,176,688

1,134,829

TOTAL ASSETS

$

24,013,594

$

22,810,702

$

14,983,543

$

14,702,215

$

14,734,016

 

LIABILITIES













Deposits:













Noninterest-bearing

$

5,443,800

$

5,095,977

$

3,321,660

$

3,306,444

$

3,236,703

Interest-bearing

2,720,592

2,347,155

1,300,816

1,122,796

1,080,841

Savings and money market accounts

8,570,910

8,210,780

5,835,750

5,743,599

5,746,210

Certificates and other time deposits

2,720,929

2,680,332

1,331,558

1,422,246

1,528,177

Total deposits

19,456,231

18,334,244

11,789,784

11,595,085

11,591,931

Federal funds purchased and securities sold under













agreements to repurchase

1,011,991

927,451

906,717

957,564

1,032,401

Wholesale borrowings

201,012

237,887

136,298

163,405

178,022

Long-term borrowings

324,424

314,597

155,506

—

—

Total funds

20,993,658

19,814,179

12,988,305

12,716,054

12,802,354

Accrued taxes, expenses and other liabilities

358,390

424,559

280,233

350,886

315,093

Total liabilities

21,352,048

20,238,738

13,268,538

13,066,940

13,117,447

 

SHAREHOLDERS' EQUITY













Preferred stock

100,000

100,000

62,222

—

—

Common stock warrant

3,000

2,637

—

—

—

Common stock

127,937

127,937

127,937

127,937

127,937

Capital surplus

1,386,931

1,274,758

473,943

474,532

472,820

Accumulated other comprehensive income (loss)

(82,598)

(29,033)

(21,247)

(17,666)

(14,627)

Retained earnings

1,256,052

1,225,380

1,209,837

1,188,641

1,168,649

Treasury stock

(129,776)

(129,715)

(137,687)

(138,169)

(138,210)

Total shareholders' equity

2,661,546

2,571,964

1,715,005

1,635,275

1,616,569

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

24,013,594

$

22,810,702

$

14,983,543

$

14,702,215

$

14,734,016















FIRSTMERIT CORPORATION AND SUBSIDIARIES

Average Loans by Product Type (Unaudited)

(Dollars in thousands)







Quarter ended September 30, 2013


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

6,131,423

$

2,118,803

$

460,242

$

8,710,468

Mortgage

472,281

448,206

54,403

974,890

Installment

1,570,124

1,145,824

7,180

2,723,128

Home equity

866,001

312,681

104,762

1,283,444

Credit card

143,637

—

—

143,637

Leases

194,360

—

—

194,360

    Subtotal

9,377,826

4,025,514

626,587

14,029,927

Loss share receivable

—

—

76,910

76,910

    Total loans

9,377,826

4,025,514

703,497

14,106,837

Less allowance for loan losses

97,693

68

48,748

146,509

Net loans

$

9,280,133

$

4,025,446

$

654,749

$

13,960,328


























Quarter ended June 30, 2013


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

5,888,935

$

2,141,015

$

575,859

$

8,605,809

Mortgage

453,813

408,723

56,825

919,361

Installment

1,388,765

1,107,076

7,912

2,503,753

Home equity

831,243

288,254

111,076

1,230,573

Credit card

141,785

—

—

141,785

Leases

173,213

—

—

173,213

    Subtotal

8,877,754

3,945,068

751,672

13,574,494

Loss share receivable

—

—

88,341

88,341

    Total loans

8,877,754

3,945,068

840,013

13,662,835

Less allowance for loan losses

99,411

—

47,294

146,705

Net loans

$

8,778,343

$

3,945,068

$

792,719

$

13,516,130


























Quarter Ended March 31, 2013


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

5,859,818

$

—

$

673,815

$

6,533,633

Mortgage

448,589

—

60,391

508,980

Installment

1,325,016

—

8,118

1,333,134

Home equity

806,936

—

114,551

921,487

Credit card

144,159

—

—

144,159

Leases

150,789

—

—

150,789

    Subtotal

8,735,307

—

856,875

9,592,182

Loss share receivable

—

—

103,744

103,744

    Total loans

8,735,307

—

960,619

9,695,926

Less allowance for loan losses

98,660

—

43,075

141,735

Net loans

$

8,636,647

$

—

$

917,544

$

9,554,191


























Quarter Ended December 31, 2012


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

5,600,522

$

—

$

780,904

$

6,381,426

Mortgage

443,542

—

62,382

505,924

Installment

1,331,131

—

8,251

1,339,382

Home equity

798,663

—

120,052

918,715

Credit card

145,050

—

—

145,050

Leases

125,300

—

—

125,300

    Subtotal

8,444,208

—

971,589

9,415,797

Loss share receivable

—

—

123,596

123,596

    Total loans

8,444,208

—

1,095,185

9,539,393

Less allowance for loan losses

99,461

—

41,809

141,270

Net loans

$

8,344,747

$

—

$

1,053,376

$

9,398,123


























Quarter ended September 30, 2012


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

5,443,712

$

—

$

877,003

$

6,320,715

Mortgage

437,123

—

64,382

501,505

Installment

1,293,054

—

8,388

1,301,442

Home equity

779,087

—

125,371

904,458

Credit card

143,948

—

—

143,948

Leases

88,583

—

—

88,583

    Subtotal

8,185,507

—

1,075,144

9,260,651

Loss share receivable

—

—

141,567

141,567

    Total loans

8,185,507

—

1,216,711

9,402,218

Less allowance for loan losses

103,511

—

41,550

145,061

Net loans

$

8,081,996

$

—

$

1,175,161

$

9,257,157












(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, 2013

June 30, 2013

September 30, 2012

(Unaudited)

Average



Average

Average



Average

Average



Average

(Dollars in thousands)

Balance

Interest

Rate

Balance

Interest

Rate

Balance

Interest

Rate

ASSETS






















Cash and due from banks

$

1,415,430






$

806,129






$

440,231





Investment securities and federal funds sold:






















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

4,849,135

$

23,551

1.93

%

4,714,823

$

24,679

2.10

%

2,688,658

$

17,981

2.66

%

Obligations of states and political subdivisions (tax exempt)

712,296

8,890

4.95

%

710,579

9,217

5.20

%

660,143

6,332

3.82

%

Other securities and federal funds sold

590,292

6,215

4.18

%

504,343

4,459

3.55

%

344,823

2,652

3.06

%

Total investment securities and federal funds sold

6,151,723

38,656

2.49

%

5,929,745

38,355

2.59

%

3,693,624

26,965

2.90

%

Loans held for sale

18,265

174

3.78

%

17,394

143

3.30

%

23,631

240

4.04

%

Loans, including loss share receivable

14,106,837

182,406

5.13

%

13,662,835

178,847

5.25

%

9,402,218

103,128

4.36

%

Total earning assets

20,276,825

221,236

4.33

%

19,609,974

217,345

4.45

%

13,119,473

130,333

3.95

%

Allowance for loan losses

(146,509)






(146,705)






(145,061)





Other assets

2,467,848






2,541,304






1,319,373





Total assets

$

24,013,594






$

22,810,702






$

14,734,016





LIABILITIES AND SHAREHOLDERS' EQUITY

















Deposits:






















Noninterest-bearing

$

5,443,800

—

—

%

$

5,095,977

—

—

%

$

3,236,703

—

—

%

Interest-bearing

2,720,592

809

0.12

%

2,347,155

656

0.11

%

1,080,841

243

0.09

%

Savings and money market accounts

8,570,910

6,495

0.30

%

8,210,780

6,469

0.32

%

5,746,210

5,166

0.36

%

Certificates and other time deposits

2,720,929

1,712

0.25

%

2,680,332

3,374

0.50

%

1,528,177

2,743

0.71

%

Total deposits

19,456,231

9,016

0.18

%

18,334,244

10,499

0.23

%

11,591,931

8,152

0.28

%

Securities sold under agreements to repurchase

1,011,991

306

0.12

%

927,451

329

0.14

%

1,032,401

310

0.12

%

Wholesale borrowings

201,012

936

1.85

%

237,887

1,169

1.97

%

178,022

1,130

2.53

%

Long-term debt

324,424

3,899

4.77

%

314,597

3,743

4.77

%

—

—

—

%

Total interest bearing liabilities

15,549,858

14,157

0.36

%

14,718,202

15,740

0.43

%

9,565,651

9,592

0.40

%

Other liabilities

358,390






424,559






315,093





Shareholders' equity

2,661,546






2,571,964






1,616,569





Total liabilities and shareholders' equity

$

24,013,594






$

22,810,702






$

14,734,016





Net yield on earning assets

$

20,276,825

$

207,079

4.05

%

$

19,609,974

$

201,605

4.12

%

$

13,119,473

$

120,741

3.66

%

Interest rate spread





3.97

%






4.02

%






3.55

%
























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

Nonaccrual loans have been included in the average balances.

FIRSTMERIT CORPORATION AND SUBIDARIES







AVERAGE CONSOLIDATED BALANCE SHEETS

Fully Tax-equivalent Interest Rates and Interest Differential








Nine months ended

Nine months ended


September 30, 2013

September 30, 2012

(Unaudited)

Average



Average

Average



Average

(Dollars in thousands)

Balance

Interest

Rate

Balance

Interest

Rate

ASSETS














Cash and due from banks

$

875,890






$

409,944





Investment securities and federal funds sold:














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

4,125,541

$

64,525

2.09

%

2,797,521

$

56,688

2.71

%

Obligations of states and political subdivisions (tax exempt)

655,257

24,702

5.04

%

526,962

18,450

4.68

%

  Other securities and federal funds sold

488,005

13,618

3.73

%

369,639

8,146

2.94

%

Total investment securities and federal funds sold

5,268,803

102,845

2.61

%

3,694,122

83,284

3.01

%

Loans held for sale

16,860

461

3.66

%

24,279

761

4.19

%

Loans, including loss share receivable

12,504,632

460,257

4.92

%

9,295,866

309,530

4.45

%

Total earning assets

17,790,295

563,563

4.24

%

13,014,267

393,575

4.04

%

Allowance for loan losses

(144,954)






(143,756)





Other assets

2,111,427






1,316,071





Total assets

$

20,632,658






$

14,596,526





LIABILITIES AND SHAREHOLDERS' EQUITY














Deposits:














Noninterest-bearing

$

4,628,252

—

—

%

$

3,139,515

—

—

%

Interest-bearing

2,128,055

1,784

0.11

%

1,069,290

726

0.09

%

Savings and money market accounts

7,549,165

18,279

0.32

%

5,717,860

15,302

0.36

%

Certificates and other time deposits

2,249,362

7,149

0.42

%

1,613,270

9,436

0.78

%

Total deposits

16,554,834

27,212

0.22

%

11,539,935

25,464

0.29

%

Securities sold under agreements to repurchase

949,105

949

0.13

%

947,135

854

0.12

%

Wholesale borrowings

191,970

2,955

2.06

%

180,215

3,399

2.52

%

Long-term debt

265,461

9,390

4.73

%

—

—

—

%

Total interest bearing liabilities

13,333,118

40,506

0.41

%

9,527,770

29,717

0.42

%

Other liabilities

351,650






330,254





Shareholders' equity

2,319,638






1,598,987





Total liabilities and shareholders' equity

$

20,632,658






$

14,596,526





Net yield on earning assets

$

17,790,295

$

523,057

3.93

%

$

13,014,267

$

363,858

3.73

%

Interest rate spread





3.83

%






3.62

%
















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

Nonaccrual loans have been included in the average balances.

FIRSTMERIT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Quarters Ended

Nine Months Ended

(Dollars in thousands except per share data)

September 30,

September 30,

2013

2012

2013

2012

Interest income:











Loans and loans held for sale

$

182,107

$

103,005

$

459,313

$

309,213

Investment securities:












Taxable

29,766

20,633

78,143

64,834


Tax-exempt

5,624

3,844

15,767

11,270


Total investment securities interest

35,390

24,477

93,910

76,104



Total interest income

217,497

127,482

553,223

385,317

Interest expense:











Deposits:












Interest-bearing

809

243

1,784

726


Savings and money market accounts

6,495

5,166

18,279

15,302


Certificates and other time deposits

1,712

2,743

7,149

9,436

Securities sold under agreements to repurchase

306

310

949

854

Wholesale borrowings

936

1,130

2,955

3,399

Long-term debt

3,899

—

9,390

—


Total interest expense

14,157

9,592

40,506

29,717


Net interest income

203,340

117,890

512,717

355,600

Provision for originated loan losses

2,523

9,965

11,482

26,860

Provision for acquired loan losses

2,033

—

2,033

—

Provision for covered loan losses

1,823

6,214

10,119

15,576


Total provision

6,379

16,179

23,634

42,436


Net interest income after provision for loan losses

196,961

101,711

489,083

313,164

Other income:











Trust department income

9,608

6,124

24,515

17,481

Service charges on deposits

22,146

14,603

55,315

43,490

Credit card fees

13,588

11,006

38,128

32,402

ATM and other service fees

5,216

3,680

13,496

11,360

Bank owned life insurance income

4,351

3,094

12,889

9,073

Investment services and insurance

3,403

2,208

9,247

6,843

Investment securities (losses)/gains, net

—

553

(2,803)

1,361

Loan sales and servicing income

3,644

7,255

19,492

19,085

Other operating income

9,134

6,402

27,644

20,857


Total other income

71,090

54,925

197,923

161,952

Other expenses:











Salaries, wages, pension and employee benefits

97,390

58,061

260,395

183,632

Net occupancy expense

13,816

8,077

35,444

24,640

Equipment expense

11,040

7,143

28,698

21,845

Stationery, supplies and postage

3,801

2,210

9,304

6,638

Bankcard, loan processing and other costs

40,786

8,424

61,043

24,935

Professional services

9,768

4,702

32,322

17,361

Amortization of intangibles

2,972

456

5,700

1,422

FDIC insurance expense

4,925

1,832

12,601

9,015

Other operating expense

26,880

17,682

62,436

51,944


Total other expenses

211,378

108,587

507,943

341,432



Income before income tax expense

56,673

48,049

179,063

133,684

Income tax expense

15,958

13,096

52,553

37,802



Net income

$

40,715

$

34,953

$

126,510

$

95,882

Other comprehensive income, net of taxes











Changes in unrealized securities' holding gains and (losses), net of taxes of

($6.3) million and $2.4 million for the quarter ended and ($36.3) million and

$5.4 million for the nine months ended, respectively

$

(11,716)

$

4,884

$

(69,229)

$

10,872

Reclassification for realized securities' (gains) and losses, net of taxes of ($0.0)

million and $0.19 million for the quarter ended and ($0.98)million and $0.48

million for the nine months ended, respectively

—

(359)

1,822

(885)

Total other comprehensive gain (loss), net of taxes

(11,716)


4,525


(67,407)


9,987


Comprehensive income

$

28,999

$

39,478

$

59,103

$

105,869

Net income attributable to common shareholders

$

38,937

$

34,797

$

121,544

$

95,795

Net income used in diluted EPS calculation

$

38,939

$

34,797

$

121,549

$

95,795

Weighted average number of common shares outstanding - basic

165,044

109,645

144,402

109,473

Weighted average number of common shares outstanding - diluted

168,917

109,645

147,342

109,473

Basic earnings per common share

$

0.24

$

0.32

$

0.84

$

0.88

Diluted earnings per common share

$

0.23

$

0.32

$

0.82

$

0.88

Dividend per common share

$

0.16

$

0.16

$

0.48

$

0.48

FIRSTMERIT CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME---LINKED QUARTERS



















Quarterly Results

(Unaudited)

2013

2013

2013

2012

2012

(Dollars in thousands, except share data)

3rd qtr

2nd qtr

1st qtr

4th qtr

3rd qtr

Loans and loans held for sale

$

182,107

$

178,535

$

98,672

$

101,086

$

103,005

Investment securities

35,390

35,236

23,284

24,280

24,477

Total interest income

217,497

213,771

121,956

125,366

127,482

Interest on deposits:













Interest-bearing

809

656

318

261

243

Savings and money market accounts

6,495

6,469

5,315

5,261

5,166

Certificates and other time deposits

1,712

3,374

2,063

2,287

2,743

Securities sold under agreements to repurchase

306

329

313

303

310

Wholesale borrowings

936

1,169

850

1,024

1,130

Long-term debt

3,899

3,743

1,748

—

—

Total interest expense

14,157

15,740

10,607

9,136

9,592

Net interest income

203,340

198,031

111,349

116,230

117,890

Provision for originated loan losses

2,523

3,151

5,808

7,116

9,965

Provision for acquired loan losses

2,033

—

—

—

—

Provision for covered loan losses

1,823

4,158

4,138

5,146

6,214

Total provision for loan losses

6,379

7,309

9,946

12,262

16,179

Net interest income after provision for loan losses

196,961

190,722

101,403

103,968

101,711

Other income:













Trust department income

9,608

9,167

5,741

5,662

6,124

Service charges on deposits

22,146

20,582

12,585

14,247

14,603

Credit card fees

13,588

14,317

10,222

11,167

11,006

ATM and other service fees

5,216

4,945

3,335

3,432

3,680

Bank owned life insurance income

4,351

3,641

4,897

3,067

3,094

Investment services and insurance

3,403

3,429

2,415

2,147

2,208

Investment securities (losses)/gains, net

—

(2,794)

(9)

2,425

553

Loan sales and servicing income

3,644

7,985

7,863

7,946

7,255

Other operating income

9,134

8,167

10,343

11,559

6,402

Total other income

71,090

69,439

57,392

61,652

54,925

Other expenses:













Salaries, wages, pension and employee benefits

97,390

105,099

57,906

61,560

58,061

Net occupancy expense

13,816

13,346

8,282

7,114

8,077

Equipment expense

11,040

10,309

7,349

7,398

7,143

Stationery, supplies and postage

3,801

3,407

2,096

2,162

2,210

Bankcard, loan processing and other costs

40,786

12,417

7,840

9,260

8,424

Professional services

9,768

17,144

5,410

6,119

4,702

Amortization of intangibles

2,972

2,411

317

444

456

FDIC  insurance expense

4,925

4,149

3,526

1,738

1,832

Other operating expense

26,880

21,358

14,199

16,386

17,682

Total other expenses

211,378

189,640

106,925

112,181

108,587

Income before income tax expense

56,673

70,521

51,870

53,439

48,049

Income taxes

15,958

22,071

14,524

15,215

13,096

Net income

40,715

48,450

37,346

38,224

34,953

Other comprehensive income (loss), net of taxes

(11,716)

(47,777)

(7,914)

(2,305)

4,525

Comprehensive income

$

28,999

$

673

$

29,432

$

35,919

$

39,478

Net income attributable to common shareholders

$

38,937

$

46,597

$

36,125

$

38,041

$

34,797

Net income used in diluted EPS calculation

$

38,939

$

46,597

$

36,125

$

38,041

$

34,797

Weighted-average common shares - basic

165,044

157,863

109,689

109,652

109,645

Weighted-average common shares - diluted

168,917

157,982

109,689

109,652

109,645

Basic earnings per common share

$

0.24

$

0.30

$

0.33

$

0.35

$

0.32

Diluted earnings per common share

$

0.23

$

0.29

$

0.33

$

0.35

$

0.32















FIRSTMERIT CORPORATION AND SUBSIDIARIES








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














































(Unaudited)

(Audited)

(Dollars in thousands, except ratios)

Quarterly Periods

Annual Period


September 30,

June 30,

March 31,

December 31,

September 30,

December 31,

Allowance for Credit Losses

2013

2013

2013

2012

2012

2012

Allowance for originated loan losses, beginning of period

$

98,645

$

98,843

$

98,942

$

98,942

$

103,849

$

107,699

Provision for originated loan losses

2,523

3,151

5,808

7,116

9,965

33,976

Charge-offs

8,515

10,969

10,776

12,475

20,999

65,905

Recoveries

5,638

7,620

4,869

5,359

6,127

23,172

Net charge-offs

2,877

3,349

5,907

7,116

14,872

42,733

Allowance for originated loan losses, end of period

$

98,291

$

98,645

$

98,843

$

98,942

$

98,942

$

98,942

Reserve for unfunded lending commitments,
















beginning of period

$

8,114

$

4,941

$

5,433

$

5,760

$

5,666

$

6,373

Provision for (relief of) credit losses

379

3,173

(492)

(327)

94

(940)

Reserve for unfunded lending commitments,
















end of period

$

8,493

$

8,114

$

4,941

$

5,433

$

5,760

$

5,433

Allowance for Credit Losses

$

106,784

$

106,759

$

103,784

$

104,375

$

104,702

$

104,375

 

Ratios
















Provision for loan losses to average loans

0.11

%

0.14

%

0.27

%

0.34

%

0.48

%

0.42

%

Provision for credit losses as a % of average loans

0.00

%

0.00

%

0.03

%

(0.08)%

(0.10)%

0.05

%

Net charge-offs to average loans

0.12

%

0.15

%

0.27

%

0.34

%

0.72

%

0.53

%

Allowance for loan losses to period-end loans

1.00

%

1.08

%

1.13

%

1.13

%

1.19

%

1.13

%

Allowance for credit losses to period-end loans

1.09

%

1.17

%

1.18

%

1.20

%

1.26

%

1.20

%

Allowance for loan losses to nonperforming loans

276.19

%

216.97

%

242.21

%

269.69

%

196.66

%

269.69

%

Allowance for credit losses to nonperforming loans

300.06

%

234.82

%

254.32

%

284.50

%

208.11

%

284.50

%

 

Asset Quality
















Impaired originated loans:
















Nonaccrual

$

19,140

$

28,935

$

23,843

$

21,766

$

31,492

$

21,766

Other nonperforming loans:
















Nonaccrual

16,448

16,529

16,966

14,921

18,819

14,921

Total nonperforming loans

35,588

45,464

40,809

36,687

50,311

36,687

Other real estate ("ORE")

19,838

20,713

11,422

13,537

13,744.00

13,537

Total nonperforming assets ("NPAs")

$

55,426

$

66,177

$

52,231

$

50,224

$

64,055

$

50,224

NPAs to period-end loans + ORE

0.57

%

0.72

%

0.59

%

0.57

%

0.77

%

0.57

%

Accruing originated loans past due 90 days or more

$

6,253

$

11,760

$

12,393

$

9,417

$

9,691

$

9,417

 

(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)
















2013

2013

2013

2012

2012

QUARTERLY OTHER INCOME DETAIL

3rd qtr

2nd qtr

1st qtr

4th qtr

3rd qtr

Trust department income

$

9,608

$

9,167

$

5,741

$

5,662

$

6,124

Service charges on deposits

22,146

20,582

12,585

14,247

14,603

Credit card fees

13,588

14,317

10,222

11,167

11,006

ATM and other service fees

5,216

4,945

3,335

3,432

3,680

Bank owned life insurance income

4,351

3,641

4,897

3,067

3,094

Investment services and insurance

3,403

3,429

2,415

2,147

2,208

Investment securities (losses)/gains, net

—

(2,794)

(9)

2,425

553

Loan sales and servicing income

3,644

7,985

7,863

7,946

7,255

Other operating income

9,134

8,167

10,343

11,559

6,402

Total Other Income

$

71,090

$

69,439

$

57,392

$

61,652

$

54,925


 

2013

2013

2013

2012

2012

QUARTERLY OTHER EXPENSES DETAIL

3rd qtr

2nd qtr

1st qtr

4th qtr

3rd qtr

Salaries and wages

$

79,369

$

85,680

$

46,391

$

45,988

$

43,806

Pension and employee benefits

18,021

19,419

11,515

15,572

14,255

Net occupancy expense

13,816

13,346

8,282

7,114

8,077

Equipment expense

11,040

10,309

7,349

7,398

7,143

Taxes, other than income taxes

2,785

2,891

1,922

1,924

2,051

Stationery, supplies and postage

3,801

3,407

2,096

2,162

2,210

Bankcard, loan processing and other costs

40,786

12,417

7,840

9,260

8,424

Advertising

4,432

3,745

2,070

2,774

2,472

Professional services

9,768

17,144

5,410

6,119

4,702

Telephone

3,326

2,728

1,177

1,230

1,316

Amortization of intangibles

2,972

2,411

317

444

456

FDIC insurance expense

4,925

4,149

3,526

1,738

1,832

Other operating expense

16,337

11,994

9,030

10,458

11,843

Total Other Expenses

$

211,378

$

189,640

$

106,925

$

112,181

$

108,587

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)

September 30,

September 30,

December 31,

2013

2012

2013

2012

2012

Allowance for originated loan losses - beginning of period

$

98,645

$

103,849

$

98,942

$

107,699

$

107,699

Loans charged off:













Commercial

1,222.00

9,627

6,644.00

23,567

28,648

Mortgage

501.00

1,691

1,185.00

3,431

3,964

Installment

3,582.00

5,507

11,788.00

14,441

18,029

Home equity

1,396.00

2,319

3,835.00

6,108

7,249

Credit cards

1,367

1,390

4,229

4,618

6,171

Leases

—

—

1,237.00

—

144

Overdrafts

447.00

465

1,342.00

1,265

1,700

Total

8,515

20,999

30,260

53,430

65,905

Recoveries:













Commercial

1,724.00

1,649

6,731.00

4,309

5,626

Mortgage

39.00

100

133.00

191

235

Installment

2,613.00

2,870

7,810.00

9,054

11,635

Home equity

704.00

856

1,537.00

2,094

2,819

Credit cards

438.00

488

1,420.00

1,583

2,138

Manufactured housing

11.00

13

49.00

50

59

Leases

11.00

—

100.00

38

38

Overdrafts

98.00

151

347.00

494

622

Total

5,638

6,127

18,127

17,813

23,172

Net charge-offs

2,877

14,872

12,133

35,617

42,733

Provision for originated loan losses

2,523

9,965

11,482

26,860

33,976

 

Allowance for originated loan losses-end of period

$

98,291

$

98,942

$

98,291

$

98,942

$

98,942















Average originated loans

$

9,377,826

$

8,185,507

$

8,999,316

$

7,970,157

$

8,089,317

Ratio to average originated loans:













(Annualized) originated net charge-offs

0.12

%

0.72

%

0.18

%

0.60

%

0.53

%

Provision for originated loan losses

0.11

%

0.48

%

0.17

%

0.45

%

0.42

%

Originated Loans, period-end

$

9,789,139

$

8,316,420

$

9,789,139

$

8,316,420

$

8,731,659















Allowance for credit losses:

$

106,784

$

104,702

$

106,784

$

104,702

$

104,375

To (annualized) net charge-offs

9.36

1.77

6.58

2.20

2.44

Allowance for originated loan losses:













To period-end originated loans

1.00

%

1.19

%

1.00

%

1.19

%

1.13

%

To (annualized) net originated charge-offs

8.61

1.67

6.06

2.08

2.32















(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.

SOURCE FirstMerit Corporation

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