Market Overview

FirstMerit Reports Third Quarter 2015 EPS of $0.34 Per Share

Share:

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

Quarterly Highlights include:

  • Profitability Sustained: 66th consecutive quarter of profitability.
  • Loan growth continued: Total loan growth of $94.2 million, or 0.60% from the prior quarter.
  • Credit quality remained solid: Net charge-offs to average originated loans of 0.24%.
  • Balance sheet remained strong: Strong tangible common equity ratio1 at 8.31%.

FirstMerit Corporation (Nasdaq: FMER) (the "Corporation") reported third quarter 2015 net income of $59.0 million, or $0.34 per diluted share.  This compares with $56.6 million, or $0.33 per diluted share, for the second quarter 2015 and $63.9 million, or $0.37 per diluted share, for the third quarter 2014.

FirstMerit Corporation

"FirstMerit's third quarter financial performance reflects success in our strategic focus on profitable organic growth across our markets.  This past quarter we increased both our originated commercial and consumer loan portfolios while maintaining disciplined credit management.  We also lowered expenses over the prior quarter and improved our efficiency ratio. Additionally, our solid results this past quarter supported a 6.25% increase in the quarterly dividend, which we announced in August," said Paul Greig, Chairman, President and CEO of FirstMerit Corporation.

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

Earnings Summary





















Change 3Q 2015 vs.



2015



2015



2014



2015

2014

(Dollars in thousands, except per share amounts)

3rd qtr

2nd qtr

3rd qtr

2nd qtr

3rd qtr

Net interest income TE 1

$

189,119



$

189,018



$

197,644



0.05

%

(4.31)

%

Diluted earnings per common share

0.34



0.33



0.37



3.03



(8.11)















Net interest margin on TE basis1

3.33

%

3.39

%

3.60

%





Return on average assets

0.93



0.90



1.03







Return on average common equity

8.05



7.85



9.03







Return on average tangible common equity 1

11.69



11.44



13.41















































The increase in net interest income TE compared to the second quarter 2015 was attributable to higher earning assets and an additional day in the current quarter, partially offset by lower interest income on acquired and FDIC acquired loans.  The net interest margin in the third quarter of 2015 declined six basis points over the prior quarter primarily from runoff in the acquired and FDIC acquired portfolios and slightly lower yields on the investment portfolio.  Originated portfolio yields increased in the third quarter 2015 primarily due to an increased mix of consumer loans.

Loans

Average originated loans were $13.5 billion during the third quarter 2015, an increase of $435.3 million, or 3.32%, compared with the second quarter 2015, and an increase of $1.7 billion, or 14.51%, compared with the third quarter 2014.  The loan growth was driven primarily by installment loans. Average originated installment loans increased $198.9 million, or 7.60%, compared with the prior quarter, and increased $646.0 million, or 29.75%, compared with the year-ago quarter.  This growth is a result of introducing recreational lending into the Corporation's legacy markets and expanding indirect auto lending into Michigan and Wisconsin.  Average originated commercial loans also increased $177.3 million, or 2.08%, compared with the prior quarter, and increased $822.6 million, or 10.46%, compared with the year-ago quarter. 

Deposits

Average deposits were $20.0 billion during the third quarter 2015, an increase of $274.9 million, or 1.40%, compared with the second quarter 2015, and an increase of $425.8 million, or 2.18%, compared with the third quarter 2014.  Average core deposits were $17.7 billion during the third quarter 2015, or 88.85% of total average deposits, an increase of $338.1 million, or 1.94%, compared with the second quarter 2015 and an increase of $535.8 million, or 3.12%, compared with the third quarter 2014.   Partially offsetting the increases in average core deposits was a decrease in average time deposits of $63.1 million, or 2.76%, and $110.0 million, or 4.71%, over the prior and year-ago quarters, respectively.

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

Noninterest Income





















Change 3Q 2015 vs.



2015



2015



2014



2015

2014

(Dollars in thousands)

3rd qtr

2nd qtr

3rd qtr

2nd qtr

3rd qtr

Trust department income

$

10,948



$

10,820



$

10,300



1.18

%

6.29

%

Service charges on deposits

17,295



16,704



18,684



3.54



(7.43)



Credit card fees

13,939



14,124



13,754



(1.31)



1.35



ATM and other service fees

6,518



6,345



6,182



2.73



5.44



Bank owned life insurance income

4,622



3,697



4,218



25.02



9.58



Investment services and insurance

4,032



3,871



3,606



4.16



11.81



Investment securities gains/(losses), net

41



567



14



(92.77)



192.86



Loan sales and servicing income

2,414



3,276



4,740



(26.31)



(49.07)



Other operating income

11,617



7,178



8,235



61.84



41.07



Total noninterest income

$

71,426



$

66,582



$

69,733



7.28

%

2.43

%













Noninterest income, excluding net securities gains, as a percentage of net revenue1

27.40

%

25.88

%

26.08

%

















Noninterest income, excluding gains and losses on securities transactions1, for the third quarter 2015 was $71.4 million, an increase of $5.4 million, or 8.13%, from the second quarter 2015 and an increase of $1.7 million, or 2.39%, from the third quarter 2014.  Fee based income increased across multiple areas including wealth management, treasury management, and service charges on deposits accounts.  Loan sales and servicing income decreased from the prior quarter primarily due to interest rate fluctuations that negatively impacted the value of the mortgage servicing rights.  Other operating income increased over the prior quarter as a result of higher loan commitment fees, fees on interest rate swaps, and income on resolution of FDIC acquired loans.  Additionally, other operating income in the prior quarter was reduced by $1.8 million from losses on branch closures.

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

Noninterest Expense





















Change 3Q 2015 vs.



2015



2015



2014



2015

2014

(Dollars in thousands)

3rd qtr

2nd qtr

3rd qtr

2nd qtr

3rd qtr

Salaries and wages

$

68,775



$

67,485



$

71,769



1.91

%

(4.17)

%

Pension and employee benefits

16,997



18,535



18,824



(8.30)

%

(9.71)

%

Net occupancy expense

13,540



13,727



13,887



(1.36)

%

(2.50)

%

Equipment expense

12,235



12,592



12,188



(2.84)

%

0.39

%

Taxes, other than federal income taxes

2,003



2,032



1,286



(1.43)

%

55.75

%

Stationary, supplies and postage

3,304



3,370



3,723



(1.96)

%

(11.25)

%

Bankcard, loan processing and other costs

12,335



12,461



11,151



(1.01)

%

10.62

%

Advertising

4,278



3,103



3,942



37.87

%

8.52

%

Professional services

5,154



5,358



5,270



(3.81)

%

(2.20)

%

Telephone

2,480



2,599



2,831



(4.58)

%

(12.40)

%

Amortization of intangibles

2,598



2,598



2,933



%

(11.42)

%

FDIC expense

5,234



5,077



2,988



3.09

%

75.17

%

Other operating expenses

11,809



12,737



12,353



(7.29)

%

(4.40)

%

Total noninterest expense

$

160,742



$

161,674



$

163,145



(0.58)

%

(1.47)

%













Efficiency ratio1

60.71

%

62.37

%

59.92

%

















Noninterest expense for the third quarter 2015 was $160.7 million, a decrease of $0.9 million, or 0.58%, from the second quarter 2015, and a decrease of $2.4 million, or 1.47%, from the third quarter 2014. Salaries and wages and employee benefits were down $4.8 million, or 5.3%, compared with the year ago-period reflecting 341, or 7.9%, fewer full time equivalent employees.  Compared to the second quarter of 2015, salaries and wages increased $1.3 million, or 1.91%, reflecting the impact of merit increases and an additional day in the current quarter.

Provision for Income Taxes

The effective tax rate was 27.80% for the third quarter 2015, compared with 30.19% for the second quarter 2015, and 29.76% for the third quarter 2014.

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

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.





















Change 3Q 2015 vs.



2015



2015



2014



2015

2014

(Dollars in thousands)

3rd qtr

2nd qtr

3rd qtr

2nd qtr

3rd qtr

Net charge-offs

$

8,029



$

6,672



$

5,929



20.34

%

35.42

%

Net charge-offs on average originated loans

0.24

%

0.20

%

0.20

%





Nonperforming loans at period end

$

47,036



$

55,142



$

34,617



(14.70)

%

19.62

%

Nonperforming assets at period end

$

107,058



$

117,311



$

63,119



(8.74)

%

69.61

%

Allowance for loan losses

104,055



101,682



90,883



2.33

%

14.49

%

Allowance for loan losses to nonperforming loans

221.22

%

184.40

%

231.13

%





Provision for originated loan losses

$

10,402



$

10,809



$

4,862



(3.77)

%

113.94

%













Nonperforming assets totaled $107.1 million at September 30, 2015, a decrease of $10.3 million, or 8.74%, compared with June 30, 2015 and an increase of $43.9 million, or 69.61%, compared with September 30, 2014. Nonperforming assets at September 30, 2015 represented 0.78% of period-end originated loans plus noncovered other real estate compared with 0.87% at June 30, 2015 and 0.52% at September 30, 2014. Included in nonperforming assets as of September 30, 2015 and June 30, 2015 were $40.0 million and $42.0 million, respectively, of OREO no longer covered by FDIC loss share agreements.

The allowance for originated loan losses totaled $104.1 million at September 30, 2015.  At September 30, 2015, the allowance for originated loan losses was 0.76% of period-end originated loans, compared with 0.76% at June 30, 2015 and 0.75% at September 30, 2014.  The allowance for originated loan losses at September 30, 2015 compared to June 30, 2015 increased by $2.4 million and increased by $13.2 million compared to September 30, 2014.  The allowance for credit losses is the sum of the allowance for originated loan losses and the reserve for unfunded lending commitments.  The allowance for credit losses was 0.79% of period end originated loans at September 30, 2015, compared with 0.79% at June 30, 2015 and 0.81% at September 30, 2014.  The allowance for credit losses to nonperforming loans was 228.82% at September 30, 2015, compared with 191.48% at June 30, 2015 and 248.85% at September 30, 2014.

Capital

Shareholders' equity was $2.9 billion, $2.9 billion and $2.8 billion as of September 30, 2015, June 30, 2015, and September 30, 2014, respectively. The Corporation maintained a strong capital position as tangible common equity1 to assets was 8.31% at September 30, 2015, compared with 8.09% at June 30, 2015 and 8.01% at September 30, 2014.  The common share cash dividend paid in the third quarter 2015 was $0.17 per share, an increase of $0.01 per share, or 6.25%, from the prior quarter.

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

On January 1, 2015, the Corporation became subject to the Basel III capital framework and standardized approach for calculating risk-weighted assets.  At September 30, 2015, Basel III capital ratios on a transitional basis remain well in excess of applicable regulatory requirements, with a total risk-based capital ratio of 13.71%, and a common equity tier 1 risk-based capital ratio of 10.58%.

Non-GAAP Financial Measures

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

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

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

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

 

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





Quarters

(unaudited)

2015

2015

2015

2014

2014

(Dollars in thousands)

3rd qtr

2nd qtr

1st qtr

4th qtr

3rd qtr

Net interest income (GAAP)

$

185,323



$

185,118



$

185,623



$

192,511



$

193,578



Plus:

Fully taxable-equivalent adjustment

3,796



3,900



3,931



3,998



4,066



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

189,119



189,018



189,554



196,509



197,644



Average earning assets

22,548,977



22,352,721



22,100,417



21,920,889



21,804,243



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

3.33

%

3.39

%

3.48

%

3.56

%

3.60

%





































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





Quarters

(unaudited)

2015

2015

2015

2014

2014

(Dollars in thousands)

3rd qtr

2nd qtr

1st qtr

4th qtr

3rd qtr

Noninterest expense (GAAP)

$

160,742



$

161,674



$

160,652



$

165,041



$

163,145



Less:

Intangible asset amortization

2,598



2,598



2,598



2,933

2,933



Adjusted noninterest expense (non-GAAP)

158,144



159,076



158,054



162,108



160,212



Noninterest income (GAAP)

71,426



66,582



65,847



71,960



69,733



Less:

Securities gains/(losses)

41



567



354



16



14



Adjusted noninterest income  (non-GAAP)

71,385



66,015



65,493



71,944



69,719



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

189,119



189,018



189,554



196,509



197,644



Adjusted revenue (non-GAAP)

260,504



255,033



255,047



268,453



267,363



Efficiency ratio (non-GAAP)

60.71

%

62.37

%

61.97

%

60.39

%

59.92

%





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





Quarters

(unaudited)

2015

2015

2015

2014

2014

(Dollars in thousands, except per share amounts)

3rd qtr

2nd qtr

1st qtr

4th qtr

3rd qtr

Shareholders' equity (GAAP)

$

2,937,300



$

2,887,957



$

2,888,786



$

2,834,281



$

2,820,431



Less:

Preferred stock

100,000



100,000



100,000



100,000



100,000



Common shareholders' equity (non-GAAP)

2,837,300



2,787,957



2,788,786



2,734,281



2,720,431



Less:

Intangible assets

63,226



65,824



68,422



71,020



73,953





Goodwill

741,740



741,740



741,740



741,740



741,740



Tangible common equity (non-GAAP)

2,032,334



1,980,393



1,978,624



1,921,521



1,904,738



Total assets (GAAP)

$

25,246,917



$

25,297,014



$

25,118,120



$

24,902,347



$

24,608,207



Less:

Intangible assets

63,226



65,824



68,422



71,020



73,953





Goodwill

741,740



741,740



741,740



741,740



741,740



Tangible assets (non-GAAP)

$

24,441,951



$

24,489,450



$

24,307,958



$

24,089,587



$

23,792,514



Period end common shares

165,759



165,773



165,453



165,390



165,384



Tangible book value per common share

$

12.26



$

11.95



$

11.96



$

11.62



$

11.52



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

8.31

%

8.09

%

8.14

%

7.98

%

8.01

%

Subsequent Events

The Corporation is required under GAAP to evaluate subsequent events through the filing of its consolidated financial statements for the quarter ended September 30, 2015 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, 2015 and will adjust amounts preliminarily reported, if necessary.

Third Quarter 2015 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) 708-5710 ten minutes before start time and provide the reservation number: 823849.

A replay of the conference call will be available at approximately 2:00 p.m. (Eastern Time) on October 27, 2015 through November 10, 2015 by dialing (888) 203-1112, and entering the PIN: 823849.  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/about-us/investors/index.html; 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 $25.2 billion as of September 30, 2015, and 367 banking offices and 399 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. and FirstMerit Mortgage Corporation.

Forward-Looking Statements

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

 



FIRSTMERIT CORPORATION AND SUBSIDIARIES











Consolidated Financial Highlights











(Unaudited)





Quarters





(Dollars in thousands, except per share amounts)

2015

2015

2015

2014

2014



3rd qtr

2nd qtr

1st qtr

4th qtr

3rd qtr

EARNINGS











Net interest income TE (1)

$

189,119



$

189,018



$

189,554



$

196,509



$

197,644



TE adjustment (1)

3,796



3,900



3,931



3,998



4,066



Provision for originated loan losses

10,402



10,809



6,036



8,662



4,862



Provision/(recapture) for acquired loan losses

144



(952)



2,214



3,407



4,411



Provision/(recapture) for FDIC acquired loan losses

3,729



(891)



(2)



1,228



(81)



Noninterest income

71,426



66,582



65,847



71,960



69,733



Noninterest expense

160,742



161,674



160,652



165,041



163,145



Net income

59,012



56,584



57,139



61,079



63,898



Diluted EPS (3)

0.34



0.33



0.33



0.36



0.37



PERFORMANCE RATIOS











Return on average assets (ROA)

0.93

%

0.90

%

0.93

%

0.98

%

1.03

%

Return on average equity (ROE)

8.05

%

7.85

%

8.08

%

8.50

%

9.03

%

Return on average tangible common equity (1)

11.69

%

11.44

%

11.85

%

12.52

%

13.41

%

Net interest margin TE (1)

3.33

%

3.39

%

3.48

%

3.56

%

3.60

%

Efficiency ratio (1)

60.71

%

62.37

%

61.97

%

60.39

%

59.92

%

Number of full-time equivalent employees

3,961



4,017



4,103



4,273



4,302



MARKET DATA











Book value per common share

$

17.72



$

17.42



$

17.46



$

17.14



$

17.05



Tangible book value per common share (1)

12.26



11.95



11.96



11.62



11.52



Period end common share market value

17.67



20.83



19.06



18.89



17.62



Market as a % of book

100

%

120

%

109

%

110

%

103

%

Cash dividends per common share

$

0.17



$

0.16



$

0.16



$

0.16



$

0.16



Common Stock dividend payout ratio

50.00

%

48.48

%

48.48

%

44.44

%

43.24

%

Average basic common shares

165,762



165,736



165,411



165,395



165,389



Average diluted common shares

166,058



166,277



166,003



165,974



165,804



Period end common shares

165,759



165,773



165,453



165,390



165,384



Common shares repurchased

20



211



66



15



10



Common Stock market capitalization

$

2,928,962



$

3,453,052



$

3,153,534



$

3,124,217



$

2,914,066



ASSET QUALITY (excluding acquired, FDIC acquired loans and covered OREO) (2)











Gross charge-offs

$

13,398



$

11,298



$

8,567



$

9,205



$

11,410



Net charge-offs

8,029



6,672



4,187



3,849



5,929



Allowance for originated loan losses

104,055



101,682



97,545



95,696



90,883



Reserve for unfunded lending commitments

3,574



3,905



4,330



5,848



6,966



Nonperforming assets (NPAs)

107,058



117,311



68,606



55,038



63,119



Net charge-offs to average loans ratio

0.24

%

0.20

%

0.13

%

0.12

%

0.20

%

Allowance for originated loan losses to period-end loans

0.76

%

0.76

%

0.76

%

0.77

%

0.75

%

Allowance for credit losses to period-end loans

0.79

%

0.79

%

0.79

%

0.81

%

0.81

%

NPAs to loans and other real estate

0.78

%

0.87

%

0.53

%

0.44

%

0.52

%

Allowance for originated loan losses to nonperforming loans

221.22

%

184.40

%

211.66

%

276.44

%

231.13

%

Allowance for credit losses to nonperforming loans

228.82

%

191.48

%

221.06

%

293.34

%

248.85

%

CAPITAL & LIQUIDITY











Period end tangible common equity to assets (1)

8.31

%

8.09

%

8.14

%

7.98

%

8.01

%

Average equity to assets

11.54

%

11.51

%

11.51

%

11.55

%

11.42

%

Average equity to total loans

18.48

%

18.59

%

18.60

%

18.67

%

18.58

%

Average total loans to deposits

78.91

%

79.06

%

77.86

%

78.47

%

77.36

%

AVERAGE BALANCES











Assets

$

25,217,856



$

25,129,859



$

24,905,094



$

24,664,987



$

24,583,776



Deposits

19,957,586



19,682,662



19,788,925



19,450,647



19,531,800



Originated loans

13,528,268



13,092,972



12,689,791



12,306,171



11,814,314



Acquired loans, including FDIC acquired loans, less loss share receivable

2,219,488



2,468,035



2,717,884



2,956,867



3,295,547



Earning assets

22,548,977



22,352,721



22,100,417



21,920,889



21,804,243



Shareholders' equity

2,909,660



2,892,432



2,866,362



2,849,618



2,807,886



ENDING BALANCES











Assets

$

25,246,917



$

25,297,014



$

25,118,120



$

24,902,347



$

24,608,207



Deposits

19,821,916



19,673,850



19,925,595



19,504,665



19,366,911



Originated loans

13,648,325



13,355,912



12,856,037



12,493,812



12,071,759



Acquired loans, including FDIC acquired loans, less loss share receivable

2,140,029



2,337,378



2,614,847



2,810,302



3,139,521



Goodwill

741,740



741,740



741,740



741,740



741,740



Intangible assets

63,226



65,824



68,422



71,020



73,953



Earning assets

22,661,171



22,599,272



22,395,343



22,153,552



21,930,840



Total shareholders' equity

2,937,300



2,887,957



2,888,786



2,834,281



2,820,431



NOTES:

























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

(2) Due to the impact of business combination accounting and protection of FDIC loss sharing agreements, which provide considerable protection against credit risk, acquired and FDIC acquired loans and covered OREO are excluded from this table to provide for improved comparability to prior periods and better perspective into asset quality trends. George Washington and Midwest non-single family loss share agreements with the FDIC expired at March 31, 2015 and June 30, 2015, respectively. As of September 30, 2015, $85.9 million of FDIC acquired loans remained covered by single family loss share agreements, providing considerable protection against credit risk.

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

 

 



FIRSTMERIT CORPORATION AND SUBSIDIARIES











CONSOLIDATED BALANCE SHEETS





























(In thousands, except per share amounts)

September 30,



December 31,



September 30,

(Unaudited, except December 31, 2014, which is derived from the audited financial statements)

2015



2014



2014

ASSETS













Cash and due from banks

$

357,397





$

480,998





$

429,699





Interest-bearing deposits in banks

54,190





216,426





55,629







Total cash and cash equivalents

411,587





697,424





485,328





Investment securities:















Held-to-maturity

2,728,638





2,903,609





3,002,262







Available-for-sale

3,925,724





3,545,288





3,462,990







Other investments

147,955





148,654





148,421





Loans held for sale

5,384





13,428





19,512





Loans

15,799,280





15,326,147





15,242,026





Allowance for loan losses

(153,450)





(143,649)





(140,077)





     Net loans

15,645,830





15,182,498





15,101,949





Premises and equipment, net

311,129





332,297





318,690





Goodwill

741,740





741,740





741,740





Intangible assets

63,226





71,020





73,953





Covered other real estate

1,986





49,641





51,434





Accrued interest receivable and other assets

1,263,718





1,216,748





1,201,928









 Total assets

$

25,246,917





$

24,902,347





$

24,608,207



LIABILITIES AND SHAREHOLDERS' EQUITY













Deposits:















Noninterest-bearing

$

5,865,255





$

5,786,662





$

5,535,886







Interest-bearing

3,335,190





3,028,888





3,043,952







Savings and money market accounts

8,380,921





8,399,612





8,396,064







Certificates and other time deposits

2,240,550





2,289,503





2,391,009









Total deposits

19,821,916





19,504,665





19,366,911







Federal funds purchased and securities sold under agreements to repurchase

1,208,275





1,272,591





1,273,290







Wholesale borrowings

381,299





428,071





608,463







Long-term debt

508,947





505,192





249,933







Accrued taxes, expenses, and other liabilities

389,180





357,547





289,179









Total liabilities

22,309,617





22,068,066





21,787,776







Shareholders' equity:

















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

100,000





100,000





100,000









Common stock warrant





3,000





3,000









Common Stock, without par value;  authorized 300,000,000 shares; issued: September 30, 2015, December 31, 2014 and September 30, 2014 - 170,183,515 shares

127,937





127,937





127,937









Capital surplus

1,382,714





1,393,090





1,390,207









Accumulated other comprehensive loss

(50,766)





(71,892)





(49,583)









Retained earnings

1,492,245





1,404,717





1,371,453









Treasury stock, at cost: September 30, 2015 - 4,424,712; December 31, 2014 - 4,793,566 shares; September 30, 2014 - 4,799,239 shares

(114,830)





(122,571)





(122,583)









Total shareholders' equity

2,937,300





2,834,281





2,820,431









    Total liabilities and shareholders' equity

$

25,246,917





$

24,902,347





$

24,608,207





















 

 

 



FIRSTMERIT CORPORATION AND SUBSIDIARIES

Period End Loans by Product Type















(Unaudited)

As of September 30, 2015

(In thousands)

Originated Loans



Acquired Loans (1)



FDIC Acquired
Loans (2)



Total Loans

C&I

$

5,521,955





$

274,552





$

38,787





$

5,835,294



CRE

2,089,533





497,690





94,531





2,681,754



Construction

619,569





6,172





5,859





631,600



Leases

461,642













461,642



    Total Commercial

8,692,699





778,414





139,177





9,610,290



Mortgage

673,591





341,278





36,362





1,051,231



Installment

2,899,559





611,061





2,156





3,512,776



Home equity

1,212,084





184,211





47,370





1,443,665



Credit card

170,392













170,392



    Total Consumer

4,955,626





1,136,550





85,888





6,178,064



    Subtotal

13,648,325





1,914,964





225,065





15,788,354



Loss share receivable









10,926





10,926



    Total loans

13,648,325





1,914,964





235,991





15,799,280



Allowance for loan losses

(104,055)





(4,199)





(45,196)





(153,450)



Net loans

$

13,544,270





$

1,910,765





$

190,795





$

15,645,830





































As of June 30, 2015



Originated Loans



Acquired Loans (1)



FDIC Acquired
Loans (2)



Total Loans

C&I

$

5,471,363





$

337,423





$

38,138





$

5,846,924



CRE

2,138,373





533,945





101,808





2,774,126



Construction

586,894





6,230





5,875





598,999



Leases

436,702













436,702



    Total Commercial

8,633,332





877,598





145,821





9,656,751



Mortgage

653,143





358,559





38,029





1,049,731



Installment

2,720,059





659,348





2,299





3,381,706



Home equity

1,180,802





200,179





55,545





1,436,526



Credit card

168,576













168,576



    Total Consumer

4,722,580





1,218,086





95,873





6,036,539



    Subtotal

13,355,912





2,095,684





241,694





15,693,290



Loss share receivable









11,820





11,820



    Total loans

13,355,912





2,095,684





253,514





15,705,110



Allowance for loan losses

(101,682)





(4,950)





(41,627)





(148,259)



Net loans

$

13,254,230





$

2,090,734





$

211,887





$

15,556,851





































As of March 31, 2015



Originated Loans



Acquired Loans (1)



FDIC Acquired
Loans (2)



Total Loans

C&I

$

5,317,897





$

420,810





$

42,814





$

5,781,521



CRE

2,133,017





584,072





127,908





2,844,997



Construction

580,978





6,288





8,825





596,091



Leases

388,873













388,873



    Total Commercial

8,420,765





1,011,170





179,547





9,611,482



Mortgage

639,980





378,192





40,470





1,058,642



Installment

2,500,288





717,693





4,781





3,222,762



Home equity

1,134,238





217,824





65,170





1,417,232



Credit card

160,766













160,766



    Total Consumer

4,435,272





1,313,709





110,421





5,859,402



    Subtotal

12,856,037





2,324,879





289,968





15,470,884



Loss share receivable









20,005





20,005



    Total loans

12,856,037





2,324,879





309,973





15,490,889



Allowance for loan losses

(97,545)





(7,493)





(41,514)





(146,552)



Net loans

$

12,758,492





$

2,317,386





$

268,459





$

15,344,337





































As of December 31, 2014



Originated Loans



Acquired Loans (1)



FDIC Acquired
Loans (2)



Total Loans

C&I

$

5,175,201





$

449,254





$

48,837





$

5,673,292



CRE

2,117,118





630,674





153,508





2,901,300



Construction

537,766





6,971





9,262





553,999



Leases

370,179













370,179



    Total Commercial

8,200,264





1,086,899





211,607





9,498,770



Mortgage

625,283





394,484





41,276





1,061,043



Installment

2,393,451





764,168





4,874





3,162,493



Home equity

1,110,336





233,629





73,365





1,417,330



Credit card

164,478













164,478



    Total Consumer

4,293,548





1,392,281





119,515





5,805,344



    Subtotal

12,493,812





2,479,180





331,122





15,304,114



Loss share receivable









22,033





22,033



    Total loans

12,493,812





2,479,180





353,155





15,326,147



Allowance for loan losses

(95,696)





(7,457)





(40,496)





(143,649)



Net loans

$

12,398,116





$

2,471,723





$

312,659





$

15,182,498





































As of September 30, 2014



Originated Loans



Acquired Loans (1)



FDIC Acquired
Loans (2)



Total Loans

C&I

$

5,039,320





$

551,489





$

56,076





$

5,646,885



CRE

2,119,734





710,495





192,746





3,022,975



Construction

467,112





10,260





13,497





490,869



Leases

339,936













339,936



    Total Commercial

7,966,102





1,272,244





262,319





9,500,665



Mortgage

605,998





410,065





43,672





1,059,735



Installment

2,277,533





809,820





5,148





3,092,501



Home equity

1,062,013





252,975





83,278





1,398,266



Credit card

160,113













160,113



    Total Consumer

4,105,657





1,472,860





132,098





5,710,615



    Subtotal

12,071,759





2,745,104





394,417





15,211,280



Loss share receivable









30,746





30,746



    Total loans

12,071,759





2,745,104





425,163





15,242,026



Allowance for loan losses

(90,883)





(6,206)





(42,988)





(140,077)



Net loans

$

11,980,876





$

2,738,898





$

382,175





$

15,101,949





















(1)  Loans assumed from Citizens.

(2)  Loans acquired in an FDIC-assisted transaction. Certain non-single family loss share agreements with the FDIC expired at March 31, 2015 and June 30, 2015. As of September 30, 2015, $85.9 million of FDIC acquired loans remained covered by single family loss share agreements, providing considerable protection against credit risk.

 

 

 



FIRSTMERIT CORPORATION AND SUBSIDIARIES



















AVERAGE CONSOLIDATED BALANCE SHEETS





















Three Months Ended

(Unaudited)

September 30,



June 30,



March 31,



December 31,



September 30,

(In thousands)

2015



2015



2015



2014



2014

ASSETS



















Cash and cash equivalents

$

457,317





$

518,820





$

563,265





$

500,559





$

521,210



Investment securities:



















Held-to-maturity

2,754,001





2,806,325





2,874,169





2,966,127





3,029,971



Available-for-sale

3,881,959





3,816,827





3,645,057





3,499,528





3,460,312



Other investments

147,961





148,577





148,532





148,636





148,427



Loans held for sale

4,929





3,631





5,478





16,708





17,433



Loans

15,760,127





15,577,361





15,427,181





15,289,890





15,148,100



Less: allowance for loan losses

147,136





146,558





144,363





138,540





140,026



Net loans

15,612,991





15,430,803





15,282,818





15,151,350





15,008,074



Total earning assets

22,548,977





22,352,721





22,100,417





21,920,889





21,804,243



Premises and equipment, net

313,336





320,492





322,431





321,187





317,366



Accrued interest receivable and other assets

2,045,362





2,084,384





2,063,344





2,060,892





2,080,983



TOTAL ASSETS

$

25,217,856





$

25,129,859





$

24,905,094





$

24,664,987





$

24,583,776



LIABILITIES



















Deposits:



















Noninterest-bearing

$

5,897,768





$

5,722,240





$

5,728,763





$

5,706,631





$

5,603,104



Interest-bearing

3,353,541





3,203,836





3,209,285





3,021,188





3,100,904



Savings and money market accounts

8,480,682





8,467,845





8,542,154





8,381,548





8,492,172



Certificates and other time deposits

2,225,595





2,288,741





2,308,723





2,341,280





2,335,620



Total deposits

19,957,586





19,682,662





19,788,925





19,450,647





19,531,800



Federal funds purchased and securities sold under



















agreements to repurchase

1,109,924





1,285,920





1,024,863





1,241,948





1,182,507



Wholesale borrowings

377,594





393,379





350,991





450,587





438,941



Long-term debt

497,566





508,744





505,275





350,535





320,387



Total funds

21,942,670





21,870,705





21,670,054





21,493,717





21,473,635



Accrued taxes, expenses and other liabilities

365,526





366,722





368,678





321,652





302,255



Total liabilities

22,308,196





22,237,427





22,038,732





21,815,369





21,775,890



SHAREHOLDERS' EQUITY



















Preferred stock

100,000





100,000





100,000





100,000





100,000



Common stock warrant





1,385





3,000





3,000





3,000



Common stock

127,937





127,937





127,937





127,937





127,937



Capital surplus

1,380,622





1,382,717





1,393,682





1,391,189





1,388,423



Accumulated other comprehensive loss

(63,402)





(51,571)





(58,025)





(38,827)





(41,963)



Retained earnings

1,479,181





1,447,195





1,422,067





1,388,661





1,352,867



Treasury stock

(114,678)





(115,231)





(122,299)





(122,342)





(122,378)



Total shareholders' equity

2,909,660





2,892,432





2,866,362





2,849,618





2,807,886



TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

25,217,856





$

25,129,859





$

24,905,094





$

24,664,987





$

24,583,776























 

 

 



FIRSTMERIT CORPORATION AND SUBSIDIARIES

Average Loans by Product Type

(Unaudited)















(In thousands)

Three Months Ended September 30, 2015



Originated Loans



Acquired Loans (1)



FDIC Acquired
Loans (2)



Total Loans

C&I

$

5,503,191





$

291,727





$

38,332





$

5,833,250



CRE

2,139,943





516,945





96,739





2,753,627



Construction

599,652





6,200





5,916





611,768



Leases

441,513













441,513



    Total Commercial

8,684,299





814,872





140,987





9,640,158



Mortgage

662,909





348,863





36,809





1,048,581



Installment

2,817,221





632,789





2,227





3,452,237



Home equity

1,194,165





190,947





51,994





1,437,106



Credit card

169,674













169,674



    Total Consumer

4,843,969





1,172,599





91,030





6,107,598



    Subtotal

13,528,268





1,987,471





232,017





15,747,756



Loss share receivable









12,371





12,371



    Total loans

13,528,268





1,987,471





244,388





15,760,127



Less allowance for loan losses

102,153





4,143





40,840





147,136



Net loans

$

13,426,115





$

1,983,328





$

203,548





$

15,612,991





































Three Months ended June 30, 2015



Originated Loans



Acquired Loans (1)



FDIC Acquired
Loans (2)



Total Loans

C&I

$

5,362,893





$

376,541





$

42,100





$

5,781,534



CRE

2,156,511





554,681





112,035





2,823,227



Construction

579,249





6,258





8,082





593,589



Leases

408,384













408,384



    Total Commercial

8,507,037





937,480





162,217





9,606,734



Mortgage

647,418





367,871





39,438





1,054,727



Installment

2,618,297





688,465





3,823





3,310,585



Home equity

1,156,019





209,185





59,556





1,424,760



Credit card

164,201













164,201



    Total Consumer

4,585,935





1,265,521





102,817





5,954,273



    Subtotal

13,092,972





2,203,001





265,034





15,561,007



Loss share receivable









16,354





16,354



    Total loans

13,092,972





2,203,001





281,388





15,577,361



Less allowance for loan losses

98,529





7,434





40,595





146,558



Net loans

$

12,994,443





$

2,195,567





$

240,793





$

15,430,803





































Three Months Ended March 31, 2015



Originated Loans



Acquired Loans (1)



FDIC Acquired
Loans (2)



Total Loans

C&I

$

5,281,194





$

440,103





$

45,307





$

5,766,604



CRE

2,141,764





606,652





142,101





2,890,517



Construction

556,943





6,846





9,013





572,802



Leases

368,025













368,025



    Total Commercial

8,347,926





1,053,601





196,421





9,597,948



Mortgage

631,761





386,033





40,800





1,058,594



Installment

2,424,956





742,095





4,822





3,171,873



Home equity

1,122,988





224,444





69,669





1,417,100



Credit card

162,160













162,160



    Total Consumer

4,341,865





1,352,572





115,291





5,809,727



    Subtotal

12,689,791





2,406,173





311,711





15,407,675



Loss share receivable









19,506





19,506



    Total loans

12,689,791





2,406,173





331,217





15,427,181



Less allowance for loan losses

95,952





8,287





40,124





144,363



Net loans

$

12,593,839





$

2,397,886





$

291,093





$

15,282,818





















































































Three Months Ended December 31, 2014



Originated Loans



Acquired Loans (1)



FDIC Acquired
Loans (2)



Total Loans

C&I

$

5,112,469





$

491,419





$

49,902





$

5,653,790



CRE

2,131,879





672,099





172,327





2,976,305



Construction

490,533





7,018





9,302





506,853



Leases

351,222













351,222



    Total Commercial

8,086,103





1,170,536





231,531





9,488,170



Mortgage

617,803





401,173





42,409





1,061,385



Installment

2,353,599





785,035





4,944





3,143,578



Home equity

1,087,123





242,878





78,361





1,408,362



Credit card

161,543













161,543



    Total Consumer

4,220,068





1,429,086





125,714





5,774,868



    Subtotal

12,306,171





2,599,622





357,245





15,263,038



Loss share receivable









26,852





26,852



    Total loans

12,306,171





2,599,622





384,097





15,289,890



Less allowance for loan losses

91,178





6,203





41,159





138,540



Net loans

$

12,214,993





$

2,593,419





$

342,938





$

15,151,350





































Three Months Ended September 30, 2014



Originated Loans



Acquired Loans (1)



FDIC Acquired
Loans (2)



Total Loans

C&I

$

4,983,014





$

610,765





$

54,075





$

5,647,854



CRE

2,115,834





750,808





202,781





3,069,423



Construction

436,000





11,530





14,443





461,973



Leases

326,840













326,840



    Total Commercial

7,861,688





1,373,103





271,299





9,506,090



Mortgage

594,258





416,417





44,672





1,055,347



Installment

2,171,246





838,687





5,278





3,015,211



Home equity

1,030,256





259,867





86,224





1,376,347



Credit card

156,866













156,866



    Total Consumer

3,952,626





1,514,971





136,174





5,603,771



    Subtotal

11,814,314





2,888,074





407,473





15,109,861



Loss share receivable









38,239





38,239



    Total loans

11,814,314





2,888,074





445,712





15,148,100



Less allowance for loan losses

91,888





6,088





42,050





140,026



Net loans

$

11,722,426





$

2,881,986





$

403,662





$

15,008,074





















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

(2) Loans acquired in an FDIC-assisted transaction. Includes non-single family loans for which the loss share agreement expired on March 31, 2015 and June 30, 2015.

 

 

 



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, 2015



June 30, 2015



September 30, 2014

(Unaudited)

Average







Average



Average







Average



Average







Average

(Dollars in thousands)

Balance



Interest (1)



Rate



Balance



Interest (1)



Rate



Balance



Interest (1)



Rate

ASSETS



































Cash and cash equivalents

$

457,317













$

518,820













$

521,210











Investment securities and federal funds sold:



































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

5,474,222





$

27,507





1.99

%



5,452,598





$

27,098





1.99

%



5,276,354





$

26,502





1.99

%

Obligations of states and political subdivisions (tax exempt)

737,323





8,245





4.44

%



724,653





8,443





4.67

%



776,376





8,734





4.46

%

Other securities and federal funds sold

572,376





5,134





3.56

%



594,478





5,077





3.43

%



585,980





5,571





3.77

%

Total investment securities and federal funds sold

6,783,921





40,886





2.39

%



6,771,729





40,618





2.41

%



6,638,710





40,807





2.44

%

Loans held for sale

4,929





66





5.31

%



3,631





46





5.08

%



17,433





154





3.50

%

Loans, including loss share receivable (2)

15,760,127





162,903





4.10

%



15,577,361





162,610





4.19

%



15,148,100





171,302





4.49

%

Total earning assets

22,548,977





$

203,855





3.59

%



22,352,721





$

203,274





3.65

%



21,804,243





$

212,263





3.86

%

Total allowance for loan losses

(147,136)













(146,558)













(140,026)











Other assets

2,358,698













2,404,876













2,398,349











Total assets

$

25,217,856













$

25,129,859













$

24,583,776











LIABILITIES AND SHAREHOLDERS' EQUITY





























Deposits:



































Noninterest-bearing

$

5,897,768





$





%



$

5,722,240





$





%



$

5,603,104





$





%

Interest-bearing

3,353,541





750





0.09

%



3,203,836





783





0.10

%



3,100,904





755





0.10

%

Savings and money market accounts

8,480,682





5,639





0.26

%



8,467,845





5,588





0.26

%



8,492,172





5,570





0.26

%

Certificates and other time deposits

2,225,595





2,757





0.49

%



2,288,741





2,510





0.44

%



2,335,620





2,846





0.48

%

Total deposits

19,957,586





9,146





0.18

%



19,682,662





8,881





0.18

%



19,531,800





9,171





0.19

%

Securities sold under agreements to repurchase

1,109,924





254





0.09

%



1,285,920





329





0.10

%



1,182,507





268





0.09

%

Wholesale borrowings

377,594





1,171





1.23

%



393,379





1,129





1.15

%



438,941





1,397





1.26

%

Long-term debt

497,566





4,165





3.32

%



508,744





3,917





3.09

%



320,387





3,783





4.68

%

Total interest-bearing liabilities

16,044,902





14,736





0.36

%



16,148,465





14,256





0.35

%



15,870,531





14,619





0.37

%

Other liabilities

365,526













366,722













302,255











Shareholders' equity

2,909,660













2,892,432













2,807,886











Total liabilities and shareholders' equity

$

25,217,856













$

25,129,859













$

24,583,776











Net yield on earning assets

$

22,548,977





$

189,119





3.33

%



$

22,352,721





$

189,018





3.39

%



$

21,804,243





$

197,644





3.60

%

Interest rate spread









3.23

%











3.30

%











3.50

%







































(1) The net yield on earning assets is calculated as annualized taxable-equivalent net interest income divided by average earning assets.  The interest income earned on certain earning assets is completely or partially exempt from federal and/or state income taxes.  As such, these tax-exempt securities typically yield lower returns than taxable securities.  To provide more meaningful comparisons of net interest margins for all earning assets, net interest income on a taxable-equivalent basis is used in calculating net interest margin by increasing the interest earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments.  This adjustment is not permitted under U.S. generally accepted accounting principles in the Consolidated Statements of Income.  The taxable-equivalent adjustments to net interest income were $3.8 million, $3.9 million, and $4.1 million for the three months ended September 30, 2015, June 30, 2015, and September 30, 2014, respectively.

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

 

 

FIRSTMERIT CORPORATION AND SUBIDARIES













AVERAGE CONSOLIDATED BALANCE SHEETS

Fully Tax-equivalent Interest Rates and Interest Differential











Nine Months Ended



Nine Months Ended



September 30, 2015



September 30, 2014

(Unaudited)

Average







Average



Average







Average

(Dollars in thousands)

Balance



Interest (1)



Rate



Balance



Interest (1)



Rate

ASSETS























Cash and cash equivalents

$

512,746













$

712,490











Investment securities and federal funds sold:























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

5,419,377





$

81,365





2.01

%



5,244,238





$

79,162





2.02

%

Obligations of states and political subdivisions (tax exempt)

731,726





25,835





4.72

%



761,461





26,100





4.58

%

Other securities and federal funds sold

590,458





15,401





3.49

%



587,622





17,185





3.91

%

Total investment securities and federal funds sold

6,741,561





122,601





2.43

%



6,593,321





122,447





2.48

%

Loans held for sale

4,678





169





4.83

%



11,517





302





3.51

%

Loans, including loss share receivable (2)

15,589,444





487,805





4.18

%



14,756,994





515,757





4.67

%

Total earning assets

22,335,683





$

610,575





3.65

%



21,361,832





$

638,506





4.00

%

Total allowance for loan losses

(146,029)













(141,766)











Other assets

2,381,209













2,405,097











Total assets

$

25,083,609













$

24,337,653











LIABILITIES AND SHAREHOLDERS' EQUITY

















Deposits:























Noninterest-bearing

$

5,783,542





$





%



$

5,536,306





$





%

Interest-bearing

3,256,082





2,300





0.09

%



3,071,220





2,236





0.10

%

Savings and money market accounts

8,496,668





16,774





0.26

%



8,589,882





16,605





0.26

%

Certificates and other time deposits

2,274,049





7,444





0.44

%



2,357,241





8,319





0.47

%

Total deposits

19,810,341





26,518





0.18

%



19,554,649





27,160





0.19

%

Securities sold under agreements to repurchase

1,140,547





826





0.10

%



1,031,483





697





0.09

%

Wholesale borrowings

374,085





3,459





1.24

%



363,422





3,917





1.44

%

Long-term debt

502,578





12,081





3.21

%



323,068





11,566





4.79

%

Total interest-bearing liabilities

16,044,009





42,884





0.36

%



15,736,316





43,340





0.37

%

Other liabilities

366,414













294,936











Shareholders' equity

2,889,644













2,770,095











Total liabilities and shareholders' equity

$

25,083,609













$

24,337,653











Net yield on earning assets

$

22,335,683





$

567,691





3.40

%



$

21,361,832





$

595,166





3.73

%

Interest rate spread









3.29

%











3.63

%



























(1) The net yield on earning assets is calculated as annualized taxable-equivalent net interest income divided by average earning assets.  The interest income earned on certain earning assets is completely or partially exempt from federal and/or state income taxes.  As such, these tax-exempt securities typically yield lower returns than taxable securities.  To provide more meaningful comparisons of net interest margins for all earning assets, net interest income on a taxable-equivalent basis is used in calculating net interest margin by increasing the interest earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments.  This adjustment is not permitted under generally accepted accounting principles in the Consolidated Statements of Income.   The taxable-equivalent adjustments to net interest income were $11.6 million and $12.1 million for the nine months ended September 30, 2015 and 2014, respectively.

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

 

 



FIRSTMERIT CORPORATION AND SUBSIDIARIES









CONSOLIDATED STATEMENTS OF INCOME









(Unaudited)

Three Months Ended



Nine Months Ended

(In thousands, except per share amounts)

September 30,



September 30,









2015



2014



2015



2014

Interest income:

















Loans and loans held for sale

$

162,204





$

170,648





$

485,615





$

513,678





Investment securities:



















Taxable

32,641





32,072





96,766





96,347







Tax-exempt

5,214





5,477





16,567





16,372







Total investment securities interest

37,855





37,549





113,333





112,719









Total interest income

200,059





208,197





598,948





626,397



Interest expense:

















Deposits:



















Interest-bearing

750





755





2,300





2,236







Savings and money market accounts

5,639





5,570





16,774





16,605







Certificates and other time deposits

2,757





2,846





7,444





8,319





Federal funds purchased and securities sold under agreements to repurchase

254





268





826





697





Wholesale borrowings

1,171





1,397





3,459





3,917





Long-term debt

4,165





3,783





12,081





11,566







Total interest expense

14,736





14,619





42,884





43,340







Net interest income

185,323





193,578





556,064





583,057





Provision for loan losses

14,275





9,192





31,489





38,982







Net interest income after provision for loan losses

171,048





184,386





524,575





544,075



Noninterest income:

















Trust department income

10,948





10,300





31,917





30,118





Service charges on deposits

17,295





18,684





49,667





53,860





Credit card fees

13,939





13,754





40,712





39,361





ATM and other service fees

6,518





6,182





18,962





17,998





Bank owned life insurance income

4,622





4,218





11,911





11,840





Investment services and insurance

4,032





3,606





11,607





10,974





Investment securities gains/(losses), net

41





14





962





150





Loan sales and servicing income

2,414





4,740





7,290





12,932





Other operating income

11,617





8,235





30,827





32,331







Total noninterest income

71,426





69,733





203,855





209,564



Noninterest expenses:

















Salaries, wages, pension and employee benefits

85,772





90,593





262,318





269,071





Net occupancy expense

13,540





13,887





43,221





45,248





Equipment expense

12,235





12,188





35,852





36,366





Stationery, supplies and postage

3,304





3,723





10,202





11,820





Bankcard, loan processing and other costs

12,335





11,151





35,935





33,795





Professional services

5,154





5,270





14,522





15,373





Amortization of intangibles

2,598





2,933





7,794





8,802





FDIC insurance expense

5,234





2,988





15,478





14,492





Other operating expense

20,570





20,412





57,746





64,911







Total noninterest expenses

160,742





163,145





483,068





499,878



Income before income tax expense

81,732





90,974





245,362





253,761



Income tax expense

22,720





27,076





72,627





76,889









Net income

$

59,012





$

63,898





$

172,735





$

176,872



Less:

Net income allocated to participating shareholders

477





519





1,401





1,433









Preferred stock dividends

1,469





1,469





4,407





4,407



Net income attributable to common shareholders

$

57,066





$

61,910





$

166,927





$

171,032



Net income used in diluted EPS calculation

$

57,066





$

61,910





$

166,927





$

171,032



Weighted average number of common shares outstanding - basic

165,762





165,389





165,638





165,263



Weighted average number of common shares outstanding - diluted

166,058





165,804





165,939





165,916



Basic earnings per common share

$

0.34





$

0.37





$

1.01





$

1.03



Diluted earnings per common share

0.34





0.37





1.01





1.03



Cash dividends per common share

0.17





0.16





0.49





0.48

























 


 

FIRSTMERIT CORPORATION AND SUBSIDIARIES













CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME













(Unaudited)

Three Months Ended



Nine Months Ended

(In thousands)

September 30, 2015



September 30, 2015



Pre-tax



Tax



After-tax



Pre-tax



Tax



After-tax

Net Income

$

81,732





$

22,720





$

59,012





$

245,362





$

72,627





$

172,735



Other comprehensive income/(loss)























Unrealized gains and losses on securities available for sale:























 Changes in unrealized securities' holding gains/(losses)

25,691





8,991





16,700





31,166





10,908





20,258



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

(1,266)





(442)





(824)





(2,345)





(821)





(1,524)



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

(41)





(14)





(27)





(962)





(336)





(626)



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

24,384





8,535





15,849





27,859





9,751





18,108



Pension plans and other postretirement benefits:























 Amortization of actuarial gain

1,138





399





739





3,414





1,195





2,219



Amortization of prior service cost reclassified to other noninterest expense

410





144





266





1,230





431





799



Net change from defined benefit pension plans

1,548





543





1,005





4,644





1,626





3,018



Total other comprehensive gains/(losses)

25,932





9,078





16,854





32,503





11,377





21,126



Comprehensive income

$

107,664





$

31,798





$

75,866





$

277,865





$

84,004





$

193,861



 

 



Three Months Ended



Nine Months Ended



September 30, 2014



September 30, 2014



Pre-tax



Tax



After-tax



Pre-tax



Tax



After-tax

Net Income

$

90,974





$

27,076





$

63,898





$

253,761





$

76,889





$

176,872



Other comprehensive income/(loss)























Unrealized gains and losses on securities available for sale:























 Changes in unrealized securities' holding gains/(losses)

(16,207)





(5,672)





(10,535)





24,293





8,503





15,790



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

(563)





(197)





(366)





(1,551)





(543)





(1,008)



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

(14)





(5)





(9)





(150)





(53)





(97)



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

(16,784)





(5,874)





(10,910)





22,592





7,907





14,685



Pension plans and other postretirement benefits:























 Amortization of actuarial gain

768





269





499





2,398





839





1,559



Amortization of prior service cost reclassified to other noninterest expense

516





181





335





1,614





565





1,049



Net change from defined benefit pension plans

1,284





450





834





4,012





1,404





2,608



Total other comprehensive gains/(losses)

(15,500)





(5,424)





(10,076)





26,604





9,311





17,293



Comprehensive income

$

75,474





$

21,652





$

53,822





$

280,365





$

86,200





$

194,165



























 

 



FIRSTMERIT CORPORATION AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF INCOME---LINKED QUARTERS



























Quarterly Results

(In thousands, except per share amounts)

2015



2015



2015



2014



2014

(Unaudited)

3rd qtr



2nd qtr



1st qtr



4th qtr



3rd qtr

Interest Income:



















Loans and loans held for sale

$

162,204





$

161,872





$

161,539





$

168,650





$

170,648



Investment securities

37,855





37,502





37,976





37,451





37,549



Total interest income

200,059





199,374





199,515





206,101





208,197



Interest expense:



















Deposits:



















Interest-bearing

750





783





767





727





755



Savings and money market accounts

5,639





5,588





5,547





5,496





5,570



Certificates and other time deposits

2,757





2,510





2,177





2,525





2,846



Federal funds purchased and securities sold under agreements to repurchase

254





329





243





294





268



Wholesale borrowings

1,171





1,129





1,160





1,292





1,397



Long-term debt

4,165





3,917





3,998





3,256





3,783



Total interest expense

14,736





14,256





13,892





13,590





14,619



Net interest income

185,323





185,118





185,623





192,511





193,578



Provision for loan losses

14,275





8,966





8,248





13,297





9,192



Net interest income after provision for loan losses

171,048





176,152





177,375





179,214





184,386



Noninterest income:



















Trust department income

10,948





10,820





10,149





9,831





10,300



Service charges on deposits

17,295





16,704





15,668





17,597





18,684



Credit card fees

13,939





14,124





12,649





13,305





13,754



ATM and other service fees

6,518





6,345





6,099





6,181





6,182



Bank owned life insurance income

4,622





3,697





3,592





7,337





4,218



Investment services and insurance

4,032





3,871





3,704





4,171





3,606



Investment securities gains/(losses), net

41





567





354





16





14



Loan sales and servicing income

2,414





3,276





1,600





3,112





4,740



Other operating income

11,617





7,178





12,032





10,410





8,235



Total noninterest income

71,426





66,582





65,847





71,960





69,733



Noninterest expenses:



















Salaries, wages, pension and employee benefits

85,772





86,020





90,526





89,899





90,593



Net occupancy expense

13,540





13,727





15,954





14,188





13,887



Equipment expense

12,235





12,592





11,025





12,133





12,188



Stationery, supplies and postage

3,304





3,370





3,528





3,767





3,723



Bankcard, loan processing and other costs

12,335





12,461





11,139





11,830





11,151



Professional services

5,154





5,358





4,010





6,440





5,270



Amortization of intangibles

2,598





2,598





2,598





2,933





2,933



FDIC  insurance expense

5,234





5,077





5,167





5,989





2,988



Other operating expense

20,570





20,471





16,705





17,862





20,412



Total noninterest expenses

160,742





161,674





160,652





165,041





163,145



Income before income tax expense

81,732





81,060





82,570





86,133





90,974



Income tax expense

22,720





24,476





25,431





25,054





27,076



Net income

59,012





56,584





57,139





61,079





63,898



Less:  Net income allocated to participating shareholders

477





467





407





496





519



Preferred stock dividends

1,469





1,469





1,469





1,469





1,469



Net income attributable to common shareholders

$

57,066





$

54,648





$

55,263





$

59,114





$

61,910



Net income used in diluted EPS calculation

$

57,066





$

54,648





$

55,263





$

59,114





$

61,910



Weighted-average number of common shares outstanding - basic

165,762





165,736





165,411





165,395





165,389



Weighted-average number of common shares outstanding- diluted

166,058





166,277





166,003





165,974





165,804



Basic earnings per common share

$

0.34





$

0.33





$

0.33





$

0.36





$

0.37



Diluted earnings per common share

$

0.34





$

0.33





$

0.33





$

0.36





$

0.37



Cash dividends per common share

$

0.17





$

0.16





$

0.16





$

0.16





$

0.16























 


 

FIRSTMERIT CORPORATION AND SUBSIDIARIES













NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL



































(Unaudited)





















(In thousands)

























2015



2015



2015



2014



2014

Noninterest income detail



3rd qtr



2nd qtr



1st qtr



4th qtr



3rd qtr

Trust department income



$

10,948





$

10,820





$

10,149





$

9,831





$

10,300



Service charges on deposits



17,295





16,704





15,668





17,597





18,684



Credit card fees



13,939





14,124





12,649





13,305





13,754



ATM and other service fees



6,518





6,345





6,099





6,181





6,182



Bank owned life insurance income



4,622





3,697





3,592





7,337





4,218



Investment services and insurance



4,032





3,871





3,704





4,171





3,606



Investment securities gains/(losses), net



41





567





354





16





14



Loan sales and servicing income



2,414





3,276





1,600





3,112





4,740



Other operating income



11,617





7,178





12,032





10,410





8,235



Total Noninterest Income



$

71,426





$

66,582





$

65,847





$

71,960





$

69,733





























2015



2015



2015



2014



2014

Noninterest expense detail



3rd qtr



2nd qtr



1st qtr



4th qtr



3rd qtr

Salaries and wages



$

68,775





$

67,485





$

71,914





$

71,638





$

71,769



Pension and employee benefits



16,997





18,535





18,612





18,261





18,824



Net occupancy expense



13,540





13,727





15,954





14,188





13,887



Equipment expense



12,235





12,592





11,025





12,133





12,188



Taxes, other than federal income taxes



2,003





2,032





2,014





1,661





1,286



Stationery, supplies and postage



3,304





3,370





3,528





3,767





3,723



Bankcard, loan processing and other costs



12,335





12,461





11,139





11,830





11,151



Advertising



4,278





3,103





2,747





3,586





3,942



Professional services



5,154





5,358





4,010





6,440





5,270



Telephone



2,480





2,599





2,574





2,779





2,831



Amortization of intangibles



2,598





2,598





2,598





2,933





2,933



FDIC insurance expense



5,234





5,077





5,167





5,989





2,988



Other operating expense



11,809





12,737





9,370





9,836





12,353



Total Noninterest Expense



$

160,742





$

161,674





$

160,652





$

165,041





$

163,145

























 

 



FIRSTMERIT CORPORATION AND SUBSIDIARIES













ASSET QUALITY INFORMATION (excluding acquired loans, FDIC acquired loans, and covered OREO) (1)

















































(Unaudited)

(Unaudited)



(Audited)

(Dollars in thousands)

Quarterly Periods



Annual Period



September 30,



June 30,



March 31,



December 31,



September 30,



December 31,

Allowance for Credit Losses

2015



2015



2015



2014



2014



2014

Allowance for originated loan losses, beginning of period

$

101,682





$

97,545





$

95,696





$

90,883





$

91,950





$

96,484



Provision for originated loan losses

10,402





10,809





6,036





8,662





4,862





23,171



Charge-offs

13,398





11,298





8,567





9,205





11,410





44,923



Recoveries

5,369





4,626





4,380





5,356





5,481





20,964



Net charge-offs

8,029





6,672





4,187





3,849





5,929





23,959



Allowance for originated loan losses, end of period

$

104,055





$

101,682





$

97,545





$

95,696





$

90,883





$

95,696



Reserve for unfunded lending commitments,























beginning of period

$

3,905





$

4,330





$

5,848





$

6,966





$

7,107





$

7,907



Provision for (relief of) credit losses

(331)





(425)





(1,518)





(1,118)





(141)





(2,059)



Reserve for unfunded lending commitments,























end of period

$

3,574





$

3,905





$

4,330





$

5,848





$

6,966





$

5,848



Allowance for Credit Losses

$

107,629





$

105,587





$

101,875





$

101,544





$

97,849





$

101,544



Ratios























Provision for loan losses to average loans

0.31

%



0.33

%



0.19

%



0.28

%



0.16

%



0.20

%

Net charge-offs to average loans

0.24

%



0.20

%



0.13

%



0.12

%



0.20

%



0.21

%

Allowance for loan losses to period-end loans

0.76

%



0.76

%



0.76

%



0.77

%



0.75

%



0.77

%

Allowance for credit losses to period-end loans

0.79

%



0.79

%



0.79

%



0.81

%



0.81

%



0.81

%

Allowance for loan losses to nonperforming loans

221.22

%



184.40

%



211.66

%



276.44

%



231.13

%



276.44

%

Allowance for credit losses to nonperforming loans

228.82

%



191.48

%



221.06

%



293.34

%



248.85

%



293.34

%

Asset Quality























Impaired originated loans:























Commercial loans

$

30,821





$

37,889





$

28,478





$

17,147





$

22,347





$

17,147



Consumer loans

16,215





17,253





17,607





17,470





16,974





17,470



Total nonperforming loans

47,036





55,142





46,085





34,617





39,321





34,617



Other real estate owned ("OREO"), noncovered (2)

60,022





62,169





22,521





20,421





23,798





20,421



Total nonperforming assets ("NPAs") (2)

$

107,058





$

117,311





$

68,606





$

55,038





$

63,119





$

55,038



NPAs to period-end loans + noncovered OREO (2)

0.78

%



0.87

%



0.53

%



0.44

%



0.52

%



0.44

%

Accruing originated loans past due 90 days or more

$

9,888





$

8,009





$

7,914





$

12,156





$

8,538





$

12,156





























(1) Due to the impact of business combination accounting and the protection afforded by FDIC loss sharing agreements, which provide considerable protection against credit risk, acquired loans and FDIC acquired loans, and covered OREO are excluded from this table to provide for improved comparability to prior periods and better perspective into asset quality trends. George Washington and Midwest non-single family loss share agreements with the FDIC expired at March 31, 2015 and June 30, 2015. As of September 30, 2015, $85.9 million of FDIC acquired loans remained covered by single family loss share agreements, providing considerable protection against credit risk.

(2) As of September 30, 2015 and June 30, 2015, $40.0 million and $42.0 million, respectively, of OREO was no longer covered by  FDIC loss share agreements, and therefore, was included in NPAs. OREO that remains covered by FDIC loss share agreements has considerable protection against credit risk and is not reported as NPAs.

 

 



FIRSTMERIT CORPORATION AND SUBSIDIARIES









ALLOWANCE FOR ORIGINATED LOAN LOSSES - Net Charge-off Detail (excluding acquired and FDIC acquired loans) (1)





















(Unaudited)

Three Months Ended



Nine Months Ended



Year Ended

(Dollars in thousands)

September 30,



September 30,



December 31,



2015



2014



2015



2014



2014

Allowance for originated loan losses - beginning of period

$

101,682





$

91,950





$

95,696





$

96,484





$

96,484



Loans charged off:



















Commercial

4,476





4,046





8,738





12,256





12,701



Mortgage

409





91





1,206





1,484





2,031



Installment

4,456





4,323





13,682





12,983





17,932



Home equity

940





1,361





2,822





3,403





4,831



Credit cards

1,173





778





3,834





3,544





4,604



Leases

1,268









1,268











Overdrafts

676





811





1,713





2,048





2,824



Total

13,398





11,410





33,263





35,718





44,923



Recoveries:



















Commercial

759





1,287





1,532





2,720





4,332



Mortgage

80





114





204





219





318



Installment

2,774





2,729





8,358





8,195





10,513



Home equity

564





708





2,016





2,227





2,940



Credit cards

331





403





1,055





1,260





1,716



Manufactured housing

7





54





26





78





87



Leases

730





2





737





374





379



Overdrafts

124





184





447





535





679



Total

5,369





5,481





14,375





15,608





20,964



Net charge-offs

8,029





5,929





18,888





20,110





23,959



Provision for originated loan losses

10,402





4,862





27,247





14,509





23,171



Allowance for originated loan losses-end of period

$

104,055





$

90,883





$

104,055





$

90,883





$

95,696























Average originated loans

$

13,528,268





$

11,814,314





$

13,106,749





$

11,123,269





$

11,421,426



Ratio (annualized) to average originated loans:



















Originated net charge-offs

0.24

%



0.20

%



0.19

%



0.24

%



0.21

%

Provision for originated loan losses

0.31

%



0.16

%



0.28

%



0.17

%



0.20

%

Originated Loans, period-end

$

13,648,325





$

12,071,759





$

13,648,325





$

12,071,759





$

12,493,812























Allowance for credit losses:

$

107,629





$

97,849





$

107,629





$

97,849





$

101,544



To (annualized) net charge-offs

3.38





4.16





4.26





3.64





4.24



Allowance for originated loan losses:



















To period-end originated loans

0.76

%



0.75

%



0.76

%



0.75

%



0.77

%

To (annualized) net originated charge-offs

3.27





3.86





4.12





3.38





3.99

























(1) Due to the impact of business combination accounting and protection of FDIC loss sharing agreements, which provide considerable protection against credit risk, acquired and FDIC acquired loans are excluded from this table to provide for improved comparability to prior periods and better perspective into asset quality trends.  George Washington and Midwest non-single family loss share agreements with the FDIC expired at March 31, 2015 and June 30, 2015. As of September 30, 2015, $85.9 million of FDIC acquired loans remained covered by single family loss share agreements, providing considerable protection against credit risk.

 

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



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SOURCE FirstMerit Corporation

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