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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