FirstMerit Corporation

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FirstMerit Reports Second Quarter 2013 EPS of $0.29 Per Share

AKRON, Ohio, July 23, 2013 /PRNewswire/ --

Quarterly Highlights include:

  • Sustained profitability: 57th consecutive quarter of profitability.
  • Superior credit quality: Net charge-offs to average originated loans decreased to 0.15% from 0.27% in the prior quarter; nonperforming assets as a percent of period end originated loans plus other real estate remained low at 0.72%.
  • Strong balance sheet: Strong tangible common equity ratio at 7.61%.
  • Closed Citizens Republic Bancorp acquisition on April 12: Executed successful rebranding campaign in June.

FirstMerit Corporation (Nasdaq: FMER) (the "Corporation") reported second quarter 2013 net income of $48.5 million, or $0.29 per diluted share.  This compares with $37.3 million, or $0.33 per diluted share, for the first quarter 2013 and $30.6 million, or $0.28 per diluted share, for the second quarter 2012. Included in net income for the second quarter of 2013 were $32.1 million of one time pre-tax merger-related costs of which $2.8 million was recorded as a reduction to noninterest income and $29.3 million was recorded as noninterest expense.  One time pre-tax merger costs for the first quarter of 2013 totaled $3.6 million and were recorded as noninterest expense.

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

Returns on average common equity ("ROE") and average assets ("ROA") for the second quarter 2013 were 7.56% and 0.85%, respectively, compared with 8.83% and 1.01%, respectively, for the first quarter 2013 and 7.69% and 0.84% for the second quarter 2012. 

On April 12, 2013, the Corporation completed its acquisition of Citizens Republic Bancorp, Inc. ("Citizens") headquartered in Flint, Michigan.  The impact of the acquisition is reflected in the Corporation's financial information from acquisition date.  The acquisition added $9.3 billion in assets, $4.7 billion in loans and $7.3 billion in deposits.  The purchase price of the acquisition was $1.3 billion, including the exchange of Citizens' common stock for 55.5 million shares of the Corporation's outstanding common stock and $355.4 million paid to the U.S. Treasury for Citizens' preferred stock and unpaid dividends and interest.

"FirstMerit's strong second quarter financial results continued to reflect profitable growth.  We completed our acquisition of Citizens on April 12 and introduced the FirstMerit brand to our new branch locations in Michigan and Wisconsin in June.  As a combined company, we are now focused on taking advantage of the many revenue growth opportunities we see across our Midwest footprint. Our value proposition provides consistently strong financial results supported by strong credit quality, a solid balance sheet and high capital levels," said Paul G. Greig, FirstMerit chairman, president and CEO.

Except as noted, the Citizens acquisition is primarily contributing to the increases period over period in the income statement and balance sheets.  Citizens' results of operations are included in the reported current period results since the date of acquisition.

Citizens Acquisition

As required under purchase accounting rules, Citizens' balance sheet was recorded at estimated fair value at acquisition date, April 12, 2013.  These fair value measurements are provisional based on third-party valuations that are currently under review and as such fair values are subject to refinement for up to one year after the acquisition date based on additional information obtained that existed as of the acquisition date.  The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

(dollars in thousands)

ASSETS


Cash and due from banks

$

544,380


Securities

3,120,715


Loans and loans held for sale

4,708,008


Property and equipment

138,946


Other intangible assets

84,594


Other assets

677,056


Total identifiable assets acquired

$

9,273,699


LIABILITIES


Deposits

7,276,754


Borrowings

908,824


Other liabilities

78,866


Total liabilities assumed

8,264,444


Net identifiable assets acquired

1,009,255


Goodwill

274,388


Net assets acquired

$

1,283,643


"Acquired loans", as used herein, are those purchased in the Citizens acquisition. (As used herein, "originated loans" refer to loans which 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.)  To record the acquired loans at fair value, a preliminary adjustment, or "mark" of $346.6 million was recorded to reduce the acquired loans to estimated fair value.  The fair value of the acquired loans does not include the pre-acquisition recorded allowance for loan losses of $104.0 million, as such amount was eliminated in purchase accounting.  The acquired loans were segregated between those considered to be performing ("non-impaired acquired loans") and those with evidence of credit deterioration ("acquired impaired loans").  Acquired loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable, at acquisition, all contractually required payments will not be collected.  Revolving loans, including lines of credit, are excluded from acquired impaired loan accounting.

The difference between the fair value of the non-impaired acquired loans and contractual amounts due at the acquisition date is accreted into interest income over the remaining life of the loans.  The excess of cash flows expected to be collected over the carrying amount of the acquired impaired loans is accreted into interest income over the remaining life of the acquired impaired loans.  Acquired impaired loans are not classified as nonaccrual as they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for purchased impaired loans and not to contractual interest payments. 

Net Interest Income

Net interest income on a fully tax-equivalent ("FTE") basis was $201.6 million in the second quarter 2013 compared with $114.4 million in the first quarter 2013 and $121.7 million in the second quarter 2012.

Net interest margin was 4.12% for the second quarter 2013 compared with 3.46% for the first quarter 2013 and 3.77% for the second quarter 2012.  Net interest margin in the current period was impacted by the net accretion of the fair value adjustments on the acquired loans and certificates of deposits.

Average originated loans were $8.9 billion during the second quarter 2013, an increase of $142.4 million, or 1.63%, compared with the first quarter 2013, and an increase of $936.6 million, or 11.79%, compared with the second quarter 2012.  Average originated commercial loans increased $29.1 million, or 0.50%, compared with the prior quarter, and increased $614.6 million, or 11.65%, compared with the year ago quarter.

Average deposits were $18.3 billion during the second quarter 2013, an increase of $6.5 billion, or 55.51%, compared with the first quarter 2013, and an increase of $6.8 billion, or 58.67%, compared with the second quarter 2012.  Average balances include Citizens' deposit portfolio from the date of acquisition.  During the second quarter 2013, average core deposits, which exclude time deposits, increased $5.2 billion, or 49.68%, compared with the first quarter 2013 and increased $5.7 billion, or 57.53%, compared with the second quarter 2012.  Average time deposits increased $1.3 billion, or 101.29%, and increased $1.1 billion, or 65.62%, respectively, over prior and year-ago quarters.  For the second quarter 2013, average core deposits accounted for 85.38% of total average deposits, compared with 88.71% for the first quarter 2013 and 85.99% for the second quarter 2012.

Average investments increased $2.2 billion, or 60.35%, compared with the first quarter 2013 and increased $2.2 billion, or 60.35% compared with the second quarter 2012.

Noninterest Income

Noninterest income for the second quarter 2013, excluding losses on securities transactions of $2.8 million related to dispositions of securities acquired from Citizens,  was $72.2 million, an increase of $14.8 million, or 25.84%, from the first quarter 2013 and an increase of $17.5 million, or 31.93%, from the second quarter 2012.  Included in noninterest income in the second quarter of 2013, the first quarter of 2013 and the second quarter of 2012 was approximately $1.0 million, $5.0 million and $2.6 million of gains on covered loans paid in full, respectively.

Other income, excluding net securities gains and losses, as a percentage of net revenue for the second quarter 2013 was 26.38% compared with 33.42% for first quarter 2013 and 31.03% for the second 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 second quarter 2013 was $189.6 million, an increase of $82.7 million, or 77.36%, from the first quarter 2013 and an increase of $70.6 million, or 59.26%, from the second quarter 2012.  Included in noninterest expense in the second quarter of 2013 and first quarter of 2013 were one time merger related costs associated with the Citizens acquisition of $29.3 million and $3.6 million, respectively.  The majority of these one time costs were from severance arrangements and professional and legal services rendered in connection with the merger.  The Corporation's efficiency ratio was 68.37% for the second quarter 2013, compared with 62.06% for the first quarter 2013 and 67.21% for the second quarter 2012.

Asset Quality (excluding acquired loans and covered assets)

Due to the impact of acquisition 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 with no allowance brought forward in accordance with acquisition accounting.  Impaired acquired and covered loans are considered to be performing due to the application of the accretion method under acquisition accounting. 

Net charge-offs on originated loans totaled $3.3 million, or 0.15% of average originated loans in the second quarter 2013, compared with $5.9 million, or 0.27% of average originated loans, in the first quarter 2013 and $8.8 million, or 0.44% of average originated loans, in the second quarter 2012. 

Nonperforming assets totaled $66.2 million at June 30, 2013, an increase of $13.9 million, or 26.70%, compared with March 31, 2013 and an increase of $5.1 million, or 8.34%, compared with June 30, 2012. Nonperforming assets at June 30, 2013 represented 0.72% of period-end originated loans plus other real estate compared with 0.59% at March 31, 2013 and 0.75% at June 30, 2012.

The allowance for originated loan losses totaled $98.6 million at June 30, 2013.   At June 30, 2013, the allowance for originated loan losses was 1.08% of period-end originated loans compared with 1.13% at March 31, 2013 and 1.28% at June 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 1.17% of period end originated loans at June 30, 2013, compared with 1.18% at March 31, 2013 and 1.35% at June 30, 2012.  The allowance for credit losses to nonperforming loans was 234.82% at June 30, 2013, compared with 254.32% at March 31, 2013 and 234.57% at June 30, 2012.

Balance Sheet

The Corporation's total assets at June 30, 2013 were $23.5 billion, an increase of $8.3 billion, or 54.08%, compared with March 31, 2013 and an increase of $8.9 billion, or 60.94%, compared with June 30, 2012.  The increases from prior periods mainly reflect the $9.3 billion in assets acquired in the Citizens merger.

Total deposits were $19.1 billion at June 30, 2013, an increase of $7.2 billion, or 60.32%, from March 31, 2013 and an increase of $7.5 billion, or 64.60%, from June 30, 2012.  Core deposits totaled $16.3 billion at June 30, 2013, an increase of $5.7 billion, or 53.47%, from March 31, 2013 and an increase of $6.3 billion, or 62.42%, from June 30, 2012.  The increases from prior periods reflect the Citizens acquisition.

Shareholders' equity was $2.7 billion as of June 30, 2013 and $1.8 billion as of March 31, 2013 and $1.6 billion as of June 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 7.61% at June 30, 2013, compared with 8.03% at March 31, 2013 and 8.01% at June 30, 2012.  The common cash dividend per share paid in the second 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.  The main systems conversion is currently scheduled for the fourth quarter of 2013.

One time merger costs incurred to-date totaled approximately $38.7 million.  Management expects a total of approximately $79.4 million in one time pre-tax merger costs related to the Citizens acquisition.

To date the Corporation has achieved merger-related cost savings related mainly to reduction in headcount.  The timeline for realization of these expected cost synergies remains on track and Management remains confident it will meet its total projected annual cost saves of $59.0 million.

Second 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 second 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: 17141232.  A replay of the conference call will be available at approximately 2:00 p.m. (Eastern Time) on July 23, 2013 through August 6, 2013 by dialing (855) 859-2056, and entering the PIN: 17141232.  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 $23.5 billion as of June 30, 2013, and 416 banking offices and 452 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 June 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 June 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

2012

2012

2012


2nd qtr

1st qtr

4th qtr

3rd qtr

2nd qtr

EARNINGS






Net interest income FTE (b)

$

201,605


$

114,376


$

119,130


$

120,741


$

121,689


Provision for originated loan losses

3,151


5,808


7,116


9,965


8,766


Provision for covered loan losses

4,158


4,138


5,146


6,214


3,430


Other income

69,439


57,392


61,652


54,925


55,301


Other expenses

189,640


106,925


112,181


108,587


119,077


FTE adjustment (b)

3,574


3,027


2,900


2,851


2,766


Net income

48,450


37,346


38,224


34,953


30,585


Diluted EPS (e)

0.29


0.33


0.35


0.32


0.28


PERFORMANCE RATIOS






Return on average assets (ROA)

0.85

%

1.01

%

1.03

%

0.94

%

0.84

%

Return on average equity (ROE)

7.56

%

8.83

%

9.30

%

8.60

%

7.69

%

Net interest margin FTE (b)

4.12

%

3.46

%

3.58

%

3.66

%

3.77

%

Efficiency ratio

68.37

%

62.06

%

62.65

%

61.75

%

67.21

%

Number of full-time equivalent employees

4,619


2,767


2,738


2,733


2,789


MARKET DATA






Book value per share

$

16.06


$

15.99


$

15.00


$

14.82


$

14.60


Period-end common share market value

20.03


16.54


14.19


14.71


16.51


Market as a % of book

125

%

103

%

95

%

99

%

113

%

Cash dividends per common share

$

0.16


$

0.16


$

0.16


$

0.16


$

0.16


Common stock dividend payout ratio

55.17

%

48.48

%

45.71

%

50.00

%

57.14

%

Average basic common shares

157,863


109,689


109,652


109,645


109,562


Average diluted common shares

157,982


109,689


109,652


109,645


109,562


Period end common shares

165,045


109,746


109,649


109,653


109,641


Common shares repurchased

168


26


12


6


111


Common stock market capitalization

$

3,305,851


$

1,815,199


$

1,555,919


$

1,612,996


$

1,810,173


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






Gross charge-offs

$

10,969


$

10,776


$

12,475


$

20,999


$

15,014


Net charge-offs

3,349


5,907


7,116


14,872


8,766


Allowance for originated loan losses

98,645


98,843


98,942


98,942


103,849


Reserve for unfunded lending commitments

8,114


4,941


5,433


5,760


5,666


Nonperforming assets (NPAs)

66,177


52,231


50,224


64,055


61,080


Net charge-offs to average loans ratio

0.15

%

0.27

%

0.34

%

0.72

%

0.44

%

Allowance for originated loan losses to period-end loans

1.08

%

1.13

%

1.13

%

1.19

%

1.28

%

Allowance for credit losses to period-end loans

1.17

%

1.18

%

1.20

%

1.26

%

1.35

%

NPAs to loans and other real estate

0.72

%

0.59

%

0.57

%

0.77

%

0.75

%

Allowance for originated loan losses to nonperforming loans

216.97

%

242.21

%

269.69

%

196.66

%

222.44

%

Allowance for credit losses to nonperforming loans

234.82

%

254.32

%

284.50

%

208.11

%

234.57

%

CAPITAL & LIQUIDITY






Period-end tangible common equity to assets

7.61

%

8.03

%

8.16

%

8.18

%

8.01

%

Average equity to assets

11.28

%

11.45

%

11.12

%

10.97

%

10.98

%

Average equity to total loans (d)

18.95

%

17.88

%

17.37

%

17.46

%

17.57

%

Average total loans to deposits (d)

74.04

%

81.36

%

81.21

%

79.89

%

78.78

%

AVERAGE BALANCES






Assets

$

22,810,702


$

14,983,543


$

14,702,215


$

14,734,016


$

14,558,514


Deposits

18,334,244


11,789,784


11,595,085


11,591,931


11,555,283


Originated loans

8,877,754


8,735,307


8,444,208


8,185,507


7,941,149


Acquired loans, including covered loans (d)

4,696,740


856,875


971,589


1,075,144


1,161,937


Earning assets

19,609,974


13,408,789


13,246,693


13,119,473


12,986,988


Shareholders' equity

2,571,964


1,715,005


1,635,275


1,616,569


1,599,187


ENDING BALANCES






Assets

$

23,532,129


$

15,272,484


$

14,913,012


$

14,628,843


$

14,621,344


Deposits

19,119,722


11,925,767


11,759,425


11,532,426


11,615,841


Originated loans

9,132,625


8,779,970


8,731,659


8,316,420


8,099,928


Acquired loans, including covered loans (d)

4,935,418


801,239


905,391


1,043,058


1,119,273


Goodwill

734,382


460,044


460,044


460,044


460,044


Intangible assets

88,419


6,055


6,373


6,817


7,274


Earning assets

20,781,279


13,905,342


13,472,067


13,219,301


13,212,071


Total shareholders' equity

2,650,909


1,754,850


1,645,202


1,624,704


1,600,815








NOTES:

(a) - Effective April 12, 2013, the Corporation acquired Citizens.  Citizens' assets and liabilities are included in the consolidated balance sheet at their respective acquisition date fair value.  Citizens' results of operations are included in the consolidated statement of comprehensive income beginning on the date of acquisition. 

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

(c) - Due to the impact of acquisition 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) - Excludes loss share receivable of $83.9 million, $95.6 million, $113.7 million$131.9 million and $152.6 million as of June 30, 2013, March 31, 2013, December 31, 2012, September 30, 2012 and June 30, 2012, respectively.

(e) - Net income used to determine diluted EPS for the quarters ended June 30, 2013 and March 31, 2013 was reduced by the cash dividends of approximately $1.5 million and $0.9 million, respectively, payable on the Corporation's 5.875% Non-Cumulative Perpetual Preferred Stock, Series A.

FIRSTMERIT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS















(Dollars in thousands)

June 30,


December 31,


June 30,

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

2013


2012


2012

ASSETS







Cash and due from banks

$

421,836



$

244,223



$

226,026



Interest-bearing deposits in banks

487,654



13,791



111,909




Total cash and cash equivalents

909,490



258,014



337,935



Investment securities:








Held-to-maturity

2,551,860



622,121



352,221




Available-for-sale

3,299,392



2,920,971



3,216,365




Other investments

267,565



140,717



140,742



Loans held for sale

22,855



23,683



19,018



Loans

14,151,953



9,750,784



9,371,816



Allowance for loan losses

(147,714)



(142,197)



(146,455)



Net loans

14,004,239



9,608,587



9,225,361



Premises and equipment, net

317,107



181,149



184,851



Goodwill

734,382



460,044



460,044



Intangible assets

88,419



6,373



7,274



Covered other real estate

67,786



59,855



54,549



Accrued interest receivable and other assets

1,269,034



631,498



622,984





Total assets

$

23,532,129



$

14,913,012



$

14,621,344


LIABILITIES AND SHAREHOLDERS' EQUITY







Deposits:








Noninterest-bearing

$

5,277,647



$

3,338,371



$

3,227,819




Interest-bearing

2,504,368



1,287,674



1,080,790




Savings and money market accounts

8,520,806



5,758,123



5,728,598




Certificates and other time deposits

2,816,901



1,375,257



1,578,634





Total deposits

19,119,722



11,759,425



11,615,841




Federal funds purchased and securities sold under agreements to repurchase

844,871



1,104,525



896,910




Wholesale borrowings

201,337



136,883



178,135




Long-term debt

324,422








Accrued taxes, expenses, and other liabilities

390,868



266,977



329,643





Total liabilities

20,881,220



13,267,810



13,020,529




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: June 30, 2013 -

170,179,911 shares, December 31, 2012 and June 30, 2012 - 115,121,731 shares

127,937



127,937



127,937





Capital surplus

1,386,063



475,979



472,138





Accumulated other comprehensive loss

(71,897)



(16,205)



(18,425)





Retained earnings

1,235,530



1,195,850



1,157,422





Treasury stock, at cost: June 30, 2013 - 5,134,463 shares; December 31, 2012 - 5,472,915 shares;

June 30, 2012 -  5,481,058 shares

(129,724)



(138,359)



(138,257)





Total shareholders' equity

2,650,909



1,645,202



1,600,815





Total liabilities and shareholders' equity

$

23,532,129



$

14,913,012



$

14,621,344











 

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


As of June 30, 2013

As of June 30, 2013


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

5,997,812


$

2,275,243


$

505,706


$

8,778,761


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


322,195


106,970


1,274,216


Credit card

142,319




142,319


Leases

188,353




188,353


Subtotal

9,132,625


4,258,892


676,526


14,068,043


Loss share receivable



83,910


83,910


    Total loans

$

9,132,625


$

4,258,892


$

760,436


$

14,151,953


Less allowance for loan losses

98,645



49,069


147,714


Net loans

$

9,033,980


$

4,258,892


$

711,367


$

14,004,239













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













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













As of June 30, 2012


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

5,404,971


$


$

915,038


$

6,320,009


Mortgage

438,147



65,772


503,919


Installment

1,262,877



8,835


1,271,712


Home equity

766,840



129,628


896,468


Credit card

142,586




142,586


Leases

84,507




84,507


Subtotal

8,099,928



1,119,273


9,219,201


Loss share receivable



152,615


152,615


    Total loans

$

8,099,928


$


$

1,271,888


$

9,371,816


Less allowance for loan losses

103,849



42,606


146,455


Net loans

$

7,996,079


$


$

1,229,282


$

9,225,361







(1) Loans acquired from Citizens.  No allowance was brought forward in accordance with the acquisition method of 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)

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in thousands)

2013

2013

2012

2012

2012

ASSETS






Cash and due from banks

$

806,129


$

394,896


$

238,366


$

440,231


$

410,533


Investment securities:






Held-to-maturity

1,953,094


637,614


620,154


337,685


127,769


Available-for-sale

3,723,002


2,919,636


2,925,938


3,215,203


3,429,411


Other investments

253,649


140,729


140,723


140,736


140,744


Loans held for sale

17,394


14,884


20,485


23,631


22,731


Loans

13,662,835


9,695,926


9,539,393


9,402,218


9,266,333


Less: allowance for loan losses

146,705


141,735


141,270


145,061


143,565


Net loans

13,516,130


9,554,191


9,398,123


9,257,157


9,122,768


Total earning assets

19,609,974


13,408,789


13,246,693


13,119,473


12,986,988


Premises and equipment, net

299,979


179,381


181,738


184,544


187,181


Accrued interest receivable and other assets

2,241,325


1,142,212


1,176,688


1,134,829


1,117,377


TOTAL ASSETS

$

22,810,702


$

14,983,543


$

14,702,215


$

14,734,016


$

14,558,514








LIABILITIES






Deposits:






Noninterest-bearing

$

5,095,977


$

3,321,660


$

3,306,444


$

3,236,703


$

3,144,183


Interest-bearing

2,347,155


1,300,816


1,122,796


1,080,841


1,060,771


Savings and money market accounts

8,210,780


5,835,750


5,743,599


5,746,210


5,732,007


Certificates and other time deposits

2,680,332


1,331,558


1,422,246


1,528,177


1,618,322


Total deposits

18,334,244


11,789,784


11,595,085


11,591,931


11,555,283


Federal funds purchased and securities sold under






agreements to repurchase

927,451


906,717


957,564


1,032,401


920,352


Wholesale borrowings

237,887


136,298


163,405


178,022


177,987


Long-term borrowings

314,597


155,506





Total funds

19,814,179


12,988,305


12,716,054


12,802,354


12,653,622


Accrued taxes, expenses and other liabilities

424,559


280,233


350,886


315,093


305,705


Total liabilities

20,238,738


13,268,538


13,066,940


13,117,447


12,959,327


SHAREHOLDERS' EQUITY






Preferred stock

100,000


62,222





Common stock warrant

2,637






Common stock

127,937


127,937


127,937


127,937


127,937


Capital surplus

1,274,758


473,943


474,532


472,820


473,650


Accumulated other comprehensive income (loss)

(29,033)


(21,247)


(17,666)


(14,627)


(18,363)


Retained earnings

1,225,380


1,209,837


1,188,641


1,168,649


1,156,324


Treasury stock

(129,715)


(137,687)


(138,169)


(138,210)


(140,361)


Total shareholders' equity

2,571,964


1,715,005


1,635,275


1,616,569


1,599,187


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

22,810,702


$

14,983,543


$

14,702,215


$

14,734,016


$

14,558,514








 

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



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













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













June 30, 2012


Originated Loans

Acquired Loans (1)

Covered Loans (2)

Total Loans

Commercial

$

5,274,352


$


$

953,016


$

6,227,368


Mortgage

431,752



67,026


498,778


Installment

1,263,013



9,001


1,272,014


Home equity

750,859



132,894


883,753


Credit card

142,311




142,311


Leases

78,862




78,862


Subtotal

7,941,149



1,161,937


9,103,086


Loss share receivable



163,247


163,247


    Total loans

$

7,941,149


$


$

1,325,184


$

9,266,333


Less allowance for loan losses

103,535



40,030


143,565


Net loans

$

7,837,614


$


$

1,285,154


$

9,122,768







(1) Loans acquired from Citizens.  No allowance was brought forward in accordance with the acquisition method of 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



June 30, 2013



March 31, 2013



June 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

$

806,129







$

394,896







$

410,533






Investment securities and

federal funds sold:


















U.S. treasury securities

and U.S. government agency

obligations (taxable)

4,714,823



$

24,679



2.10

%


2,790,039



$

16,294



2.37

%


2,823,055



$

19,028



2.71

%

Obligations of states

and political subdivisions (tax

exempt)

710,579



9,217



5.20

%


541,014



6,595



4.94

%


482,475



6,254



5.21

%

Other securities and federal

funds sold

504,343



4,459



3.55

%


366,926



2,944



3.25

%


392,394



2,756



2.82

%

Total investment

securities and federal funds

sold

5,929,745



38,355



2.59

%


3,697,979



25,833



2.83

%


3,697,924



28,038



3.05

%

Loans held for sale

17,394



143



3.30

%


14,884



144



3.92

%


22,731



238



4.21

%

Loans, including loss share

receivable

13,662,835



178,847



5.25

%


9,695,926



99,006



4.14

%


9,266,333



103,245



4.48

%

Total earning assets

19,609,974



217,345



4.45

%


13,408,789



124,983



3.78

%


12,986,988



131,521



4.07

%

Allowance for loan losses

(146,565)







(141,735)







(143,565)






Other assets

2,541,164







1,321,593







1,304,558






Total assets

$

22,810,702







$

14,983,543







$

14,558,514






LIABILITIES AND

SHAREHOLDERS'

EQUITY


















Deposits:


















Noninterest-bearing

$

5,095,977





%


$

3,321,660





%


$

3,144,183



%

Interest-bearing

2,347,155



656



0.11

%


1,300,816



318



0.10

%


1,060,771


236


0.09

%

Savings and money market

accounts

8,210,780



6,469



0.32

%


5,835,750



5,315



0.37

%


5,732,007


5,033


0.35

%

Certificates and other time

deposits

2,680,332



3,374



0.50

%


1,331,558



2,063



0.63

%


1,618,322


3,169


0.79

%

Total deposits

18,334,244



10,499



0.23

%


11,789,784



7,696



0.26

%


11,555,283


8,438


0.29

%

Securities sold under

agreements to repurchase

927,451



329



0.14

%


906,717



313



0.14

%


920,352


276


0.12

%

Wholesale borrowings

237,887



1,169



1.97

%


136,298



850



2.53

%


177,987


1,118


2.53

%

Long-term debt

314,597



3,743



4.77

%


155,506



1,748



4.56

%




%

Total interest bearing

liabilities

14,718,202



15,740



0.43

%


9,666,645



10,607



0.45

%


9,509,439


9,832


0.42

%

Other liabilities

424,559







280,233







305,705





Shareholders' equity

2,571,964







1,715,005







1,599,187





Total liabilities and

shareholders' equity

$

22,810,702







$

14,983,543







$

14,558,514





Net yield on earning assets

$

19,609,974



$

201,605



4.12

%


$

13,408,789



$

114,376



3.46

%


$

12,986,988


$

121,689


3.77

%

Interest rate spread





4.02

%






3.34

%






3.66

%



















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









Six months ended



Six months ended



June 30, 2013



June 30, 2012


(Unaudited)

Average




Average


Average




Average

(Dollars in thousands)

Balance


Interest


Rate


Balance


Interest


Rate

ASSETS












Cash and due from banks

$

601,649







$

394,634






Investment securities and federal funds sold:












U.S. treasury securities and U.S. government agency obligations

(taxable)

3,757,748



$

40,974



2.20

%


2,852,550



$

38,707



2.73

%

Obligations of states and political subdivisions (tax exempt)

626,265



15,812



5.09

%


459,640



12,118



5.30

%

Other securities and federal funds sold

436,014



7,403



3.42

%


382,184



5,494



2.89

%

Total investment securities and federal funds sold

4,820,027



64,189



2.69

%


3,694,374



56,319



3.07

%

Loans held for sale

16,146



287



3.58

%


24,607



522



4.27

%

Loans,including loss share receivable

11,690,339



277,852



4.79

%


9,242,105



206,400



4.49

%

Total earning assets

16,526,512



342,328



4.18

%


12,961,086



263,241



4.08

%

Allowance for loan losses

(144,164)







(143,096)






Other assets

1,930,584







1,314,888






Total assets

$

18,914,581







$

14,527,512






LIABILITIES AND SHAREHOLDERS' EQUITY












Deposits:












Noninterest-bearing

$

4,213,720





%


$

3,090,386



%

Interest-bearing

1,826,876



974



0.11

%


1,063,451


483


0.09

%

Savings and money market accounts

7,029,826



11,784



0.34

%


5,703,530


10,136


0.36

%

Certificates and other time deposits

2,009,671



5,437



0.55

%


1,656,284


6,693


0.81

%

Total deposits

15,080,093



18,195



0.24

%


11,513,651


17,312


0.30

%

Securities sold under agreements to repurchase

917,141



642



0.14

%


904,033


544


0.12

%

Wholesale borrowings

187,373



2,019



2.17

%


181,323


2,269


2.52

%

Long-term debt

235,491



5,491



4.70

%




%

Total interest bearing liabilities

12,206,378



26,347



0.44

%


9,508,621


20,125


0.43

%

Other liabilities

348,632







338,408





Shareholders' equity

2,145,851







1,590,097





Total liabilities and shareholders' equity

$

18,914,581







$

14,527,512





Net yield on earning assets

$

16,526,512



$

315,981



3.86

%


$

12,961,086


$

243,116


3.77

%

Interest rate spread





3.74

%






3.66

%













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


Six months ended

(Dollars in thousands except per share data)

June 30,


June 30,





2013


2012


2013


2012

Interest income:









Loans and loans held for sale

$

178,535



$

103,126



$

277,206



$

206,208



Investment securities:










Taxable

29,138



21,783



48,377



44,201




Tax-exempt

6,098



3,846



10,143



7,426




Total investment securities interest

35,236



25,629



58,520



51,627





Total interest income

213,771



128,755



335,726



257,835


Interest expense:









Deposits:










Interest-bearing

656



236



974



483




Savings and money market accounts

6,469



5,033



11,784



10,136




Certificates and other time deposits

3,374



3,169



5,437



6,693



Securities sold under agreements to repurchase

329



276



642



544



Wholesale borrowings

1,169



1,118



2,019



2,269



Long-term debt

3,743





5,491






Total interest expense

15,740



9,832



26,347



20,125




Net interest income

198,031



118,923



309,379



237,710


Provision for originated loan losses

3,151



8,766



8,959



16,895


Provision for covered loan losses

4,158



3,430



8,297



9,362




Net interest income after provision for loan losses

190,722



106,727



292,123



211,453


Other income:









Trust department income

9,167



5,730



14,907



11,357



Service charges on deposits

20,582



14,478



33,168



28,887



Credit card fees

14,317



11,216



24,540



21,396



ATM and other service fees

4,945



3,890



8,280



7,680



Bank owned life insurance income

3,641



2,923



8,538



5,979



Investment services and insurance

3,429



2,388



5,844



4,635



Investment securities (losses)/gains, net

(2,794)



548



(2,803)



808



Loan sales and servicing income

7,985



5,139



15,848



11,830



Other operating income

8,167



8,989



18,510



14,455




Total other income

69,439



55,301



126,832



107,027


Other expenses:









Salaries, wages, pension and employee benefits

105,099



61,598



163,005



125,571



Net occupancy expense

13,346



7,971



21,628



16,563



Equipment expense

10,309



7,598



17,659



14,702



Stationery, supplies and postage

3,407



2,285



5,503



4,428



Bankcard, loan processing and other costs

12,417



8,858



20,257



16,511



Professional services

17,144



9,307



22,554



12,659



Amortization of intangibles

2,411



483



2,728



966



FDIC insurance expense

4,149



3,463



7,675



7,183



Other operating expense

21,358



17,514



35,556



34,262




Total other expenses

189,640



119,077



296,565



232,845





Income before income tax expense

70,521



42,951



122,391



85,635


Income tax expense

22,071



12,366



36,595



24,706





Net income

$

48,450



$

30,585



$

85,796



$

60,929


Other comprehensive income, net of taxes









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

($26.7) million and $2.2 million for the quarter ended and ($31.0) and $3.2

million for the six months ended, respectively

$

(49,593)



$

4,103



$

(57,513)



$

5,987



Reclassification for realized securities' (gains) and losses, net of taxes of ($0.98)

million and $0.19 million for the quarter ended and ($0.98) million and $0.28

million for the six months ended, respectively

1,816



(356)



1,822



(525)



Total other comprehensive gain (loss), net of taxes

(47,777)



3,747



(55,691)



5,462




Comprehensive income

$

673



$

34,332



$

30,105



$

66,391



Net income attributable to common shareholders

$

46,597



$

30,472



$

36,416



$

60,786



Net income used in diluted EPS calculation

$

46,597



$

30,472



$

36,416



$

60,786


Weighted average number of common shares outstanding - basic

157,863



109,562



133,909



109,386


Weighted average number of common shares outstanding - diluted

157,982



109,562



133,969



109,386


Basic earnings per common share

$

0.30



$

0.28



$

0.62



$

0.56


Diluted earnings per common share

$

0.29



$

0.28



$

0.62



$

0.56


Dividend per common share

$

0.16



$

0.16



$

0.32



$

0.32













 

FIRSTMERIT CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME---LINKED QUARTERS









Quarterly Results

(Unaudited)

2013

2013

2012

2012

2012

(Dollars in thousands, except share data)

2nd qtr

1st qtr

4th qtr

3rd qtr

2nd qtr

Loans and loans held for sale

$

178,535


$

98,672


$

101,086


$

103,005


$

103,126


Investment securities

35,236


23,284


24,280


24,477


25,629


Total interest income

213,771


121,956


125,366


127,482


128,755


Interest on deposits:






Interest-bearing

656


318


261


243


236


Savings and money market accounts

6,469


5,315


5,261


5,166


5,033


Certificates and other time deposits

3,374


2,063


2,287


2,743


3,169


Securities sold under agreements to repurchase

329


313


303


310


276


Wholesale borrowings

1,169


850


1,024


1,130


1,118


Long-term debt

3,743


1,748





Total interest expense

15,740


10,607


9,136


9,592


9,832


Net interest income

198,031


111,349


116,230


117,890


118,923


Provision for originated loan losses

3,151


5,808


7,116


9,965


8,766


Provision for covered loan losses

4,158


4,138


5,146


6,214


3,430


Net interest income after provision for loan losses

190,722


101,403


103,968


101,711


106,727


Other income:






Trust department income

9,167


5,741


5,662


6,124


5,730


Service charges on deposits

20,582


12,585


14,247


14,603


14,478


Credit card fees

14,317


10,222


11,167


11,006


11,216


ATM and other service fees

4,945


3,335


3,432


3,680


3,890


Bank owned life insurance income

3,641


4,897


3,067


3,094


2,923


Investment services and insurance

3,429


2,415


2,147


2,208


2,388


Investment securities (losses)/gains, net

(2,794)


(9)


2,425


553


548


Loan sales and servicing income

7,985


7,863


7,946


7,255


5,139


Other operating income

8,167


10,343


11,559


6,402


8,989


Total other income

69,439


57,392


61,652


54,925


55,301


Other expenses:






Salaries, wages, pension and employee benefits

105,099


57,906


61,560


58,061


61,598


Net occupancy expense

13,346


8,282


7,114


8,077


7,971


Equipment expense

10,309


7,349


7,398


7,143


7,598


Stationery, supplies and postage

3,407


2,096


2,162


2,210


2,285


Bankcard, loan processing and other costs

12,417


7,840


9,260


8,424


8,858


Professional services

17,144


5,410


6,119


4,702


9,307


Amortization of intangibles

2,411


317


444


456


483


FDIC  insurance expense

4,149


3,526


1,738


1,832


3,463


Other operating expense

21,358


14,199


16,386


17,682


17,514


Total other expenses

189,640


106,925


112,181


108,587


119,077


Income before income tax expense

70,521


51,870


53,439


48,049


42,951


Income taxes

22,071


14,524


15,215


13,096


12,366


Net income

48,450


37,346


38,224


34,953


30,585


Other comprehensive income (loss), net of taxes

(47,777)


(7,914)


(2,305)


4,525


3,747


Comprehensive income

$

673


$

29,432


$

35,919


$

39,478


$

34,332


Net income attributable to common shareholders

$

46,597


$

36,125


$

38,041


$

34,797


$

30,472


Net income used in diluted EPS calculation

$

46,597


$

36,125


$

38,041


$

34,797


$

30,472


Weighted-average common shares - basic

157,863


109,689


109,652


109,645


109,562


Weighted-average common shares - diluted

157,982


109,689


109,652


109,645


109,562


Basic earnings per common share

$

0.30


$

0.33


$

0.35


$

0.32


$

0.28


Diluted earnings per common share

$

0.29


$

0.33


$

0.35


$

0.32


$

0.28








 

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


June 30,

March 31,

December 31,

September 30,

June 30,


December 31,

Allowance for Credit Losses

2013

2013

2012

2012

2012


2012

Allowance for originated loan losses, beginning of period

$

98,843


$

98,942


$

98,942


$

103,849


$

103,849



$

107,699


Provision for originated loan losses

3,151


5,808


7,116


9,965


8,766



33,976


Charge-offs

10,969


10,776


12,475


20,999


15,014



65,905


Recoveries

7,620


4,869


5,359


6,127


6,248



23,172


Net charge-offs

3,349


5,907


7,116


14,872


8,766



42,733


Allowance for originated loan losses, end of period

$

98,645


$

98,843


$

98,942


$

98,942


$

103,849



$

98,942


Reserve for unfunded lending commitments,








beginning of period

$

4,941


$

5,433


$

5,760


$

5,666


$

5,410



$

6,373


Provision for (relief of) credit losses

3,173


(492)


(327)


94


256



(940)


Reserve for unfunded lending commitments,








end of period

$

8,114


$

4,941


$

5,433


$

5,760


$

5,666



$

5,433


Allowance for Credit Losses

$

106,759


$

103,784


$

104,375


$

104,702


$

109,515



$

104,375


Ratios








Provision for loan losses to average loans

0.14

%

0.27

%

0.34

%

0.48

%

0.44

%


0.42

%

Net charge-offs to average loans

0.15

%

0.27

%

0.34

%

0.72

%

0.44

%


0.53

%

Allowance for loan losses to period-end loans

1.08

%

1.13

%

1.13

%

1.19

%

1.28

%


1.13

%

Allowance for credit losses to period-end loans

1.17

%

1.18

%

1.20

%

1.26

%

1.35

%


1.20

%

Allowance for loan losses to nonperforming loans

216.97

%

242.21

%

269.69

%

196.66

%

222.44

%


269.69

%

Allowance for credit losses to nonperforming loans

234.82

%

254.32

%

284.50

%

208.11

%

234.57

%


284.50

%

Asset Quality








Impaired originated loans:








Nonaccrual

$

28,935


$

23,843


$

21,766


$

31,492


$

38,381



$

21,766


Other nonperforming loans:








Nonaccrual

16,529


16,966


14,921


18,819


8,306



14,921


Total nonperforming loans

45,464


40,809


36,687


50,311


46,687



36,687


Other real estate ("ORE")

20,713


11,422


13,537


13,744


14,393



13,537


Total nonperforming assets ("NPAs")

$

66,177


$

52,231


$

50,224


$

64,055


$

61,080



$

50,224


NPAs to period-end loans + ORE

0.72

%

0.59

%

0.57

%

0.77

%

0.75

%


0.57

%

Accruing originated loans past due 90 days or more

$

11,760


$

12,393


$

9,417


$

9,691


$

6,545



$

9,417










(a) Due to the impact of acquisition 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.  Acquired and covered loans and the related loss share receivable had a period end balance of $5.0 billion, $0.9 billion, $1.0 billion, $1.0 billion and $1.2 billion and covered ORE and related loss share receivable had a period end balance of $67.8 million, $70.3 million, $59.9 million, $56.8 million and $54.5 million at June 30, 2013, March 31, 2013, December 31, 2012, September 30, 2012 and June 30, 2012, respectively.

FIRSTMERIT CORPORATION AND SUBSIDIARIES








NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL




















(Unaudited)












(Dollars in thousands)















2013


2013


2012


2012


2012

QUARTERLY OTHER INCOME DETAIL



2nd qtr


1st qtr


4th qtr


3rd qtr


2nd qtr

Trust department income


$

9,167


$

5,741



$

5,662



$

6,124



$

5,730


Service charges on deposits



20,582


12,585



14,247



14,603



14,478


Credit card fees



14,317


10,222



11,167



11,006



11,216


ATM and other service fees



4,945


3,335



3,432



3,680



3,890


Bank owned life insurance income



3,641


4,897



3,067



3,094



2,923


Investment services and insurance



3,429


2,415



2,147



2,208



2,388


Investment securities (losses)/gains, net



(2,794)


(9)



2,425



553



548


Loan sales and servicing income



7,985


7,863



7,946



7,255



5,139


Other operating income



8,167


10,343



11,559



6,402



8,989


Total Other Income


$

69,439


$

57,392



$

61,652



$

54,925



$

55,301





2013


2013


2012


2012


2012

QUARTERLY OTHER EXPENSES DETAIL



2nd qtr


1st qtr


4th qtr


3rd qtr


2nd qtr

Salaries and wages


$

85,680


$

46,391



$

45,988



$

43,806



$

48,766


Pension and employee benefits



19,419


11,515



15,572



14,255



12,832


Net occupancy expense



13,346


8,282



7,114



8,077



7,971


Equipment expense



10,309


7,349



7,398



7,143



7,598


Taxes, other than income taxes



2,891


1,922



1,924



2,051



2,020


Stationery, supplies and postage



3,407


2,096



2,162



2,210



2,285


Bankcard, loan processing and other costs



12,417


7,840



9,260



8,424



8,858


Advertising



3,745


2,070



2,774



2,472



2,280


Professional services



17,144


5,410



6,119



4,702



9,307


Telephone



2,728


1,177



1,230



1,316



1,379


Amortization of intangibles



2,411


317



444



456



483


FDIC insurance expense



4,149


3,526



1,738



1,832



3,463


Other operating expense



11,994


9,030



10,458



11,843



11,835


Total Other Expenses


$

189,640


$

106,925



$

112,181



$

108,587



$

119,077


 

FIRSTMERIT CORPORATION AND SUBSIDIARIES









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













(Unaudited)

Quarters ended


Six months ended


Year ended

(Dollars in thousands)

June 30,


June 30,


December 31,


2013


2012


2013


2012


2012

Allowance for originated loan losses - beginning

of period

$

98,843



$

103,849



$

98,942



$

107,699



$

107,699


Loans charged off:










Commercial

2,750



6,941



5,422



13,940



28,648


Mortgage

414



878



684



1,740



3,964


Installment

3,612



3,696



8,206



8,934



18,029


Home equity

1,133



1,465



2,439



3,789



7,249


Credit cards

1,459



1,645



2,862



3,228



6,171


Leases

1,237





1,237





144


Overdrafts

364



389



895



800



1,700


Total

10,969



15,014



21,745



32,431



65,905


Recoveries:










Commercial

3,762



1,966



5,007



2,660



5,626


Mortgage

51



56



94



91



235


Installment

2,728



3,004



5,197



6,184



11,635


Home equity

486



593



833



1,238



2,819


Credit cards

469



465



982



1,095



2,138


Manufactured housing

11



15



38



37



59


Leases



1



89



38



38


Overdrafts

113



148



249



343



622


Total

7,620



6,248



12,489



11,686



23,172


Net charge-offs

3,349



8,766



9,256



20,745



42,733


Provision for originated loan losses

3,151



8,766



8,959



16,895



33,976


Allowance for originated loan losses-end of

period

$

98,645



$

103,849



$

98,645



$

103,849



$

98,942












Average originated loans

$

8,877,754



$

7,941,149



$

8,806,924



$

7,861,298



$

8,089,317


Ratio to average originated loans:










(Annualized) originated net charge-offs

0.15

%


0.44

%


0.21

%


0.53

%


0.53

%

Provision for originated loan losses

0.14

%


0.44

%


0.21

%


0.43

%


0.42

%

Originated Loans, period-end

$

9,132,625



$

8,099,928



$

9,132,625



$

8,099,928



$

8,731,659












Allowance for credit losses:

$

106,759



$

109,515



$

106,759



$

109,515



$

104,375


To (annualized) net charge-offs

7.95



3.11



5.72



2.63



2.44


Allowance for originated loan losses:










To period-end originated loans

1.08

%


1.28

%


1.08

%


1.28

%


1.13

%

To (annualized) net originated charge-offs

7.34



2.95



5.28



2.49



2.32












(a) Due to the impact of acquisition 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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