FIRSTMERIT CORP 
By AKRON, Ohio, Jan. 22, 2013 /PRNewswire/ --
Quarterly Highlights include:
-- Sustained profitability: 55th consecutive quarter of profitability.
-- Continued organic growth: Average commercial noncovered loan growth of
$156.8 million, or 2.88%, from prior quarter; average core deposit
growth of $109.1 million, or 1.08%, from prior quarter.
-- Superior credit quality: Nonperforming assets as a percent of noncovered
period end loans plus other real estate declined to 0.57% from 0.77% in
the prior quarter; net charge-offs to noncovered average loans decreased
to 0.34% from 0.72% in the prior quarter.
-- Strong balance sheet: Strong tangible common equity ratio at 8.16%.
FirstMerit Corporation (Nasdaq: FMER) reported fourth quarter 2012 net income of $38.2 million, or $0.35 per diluted share. This compares with $35.0 million, or $0.32 per diluted share, for the third quarter 2012 and $30.5 million, or $0.28 per diluted share, for the fourth quarter 2011. For the full year 2012, the Corporation reported net income of $134.1 million, or $1.22 per diluted share, compared with $119.6 million, or $1.10 per diluted share in 2011.
(Logo: http://photos.prnewswire.com/prnh/20070920/CLTU138LOGO )
Returns on average common equity ("ROE") and average assets ("ROA") for the fourth quarter 2012 were 9.30% and 1.03%, respectively, compared with 8.60% and 0.94%, respectively, for the third quarter 2012 and 7.70% and 0.83% for the fourth quarter 2011.
"Our ongoing commitment to sound banking fundamentals is reflected in our strong fourth quarter results. While the low-interest rate environment and slow economic recovery continue to challenge the banking industry, I am pleased to report that FirstMerit again performed well and grew our business. Reflecting this organic growth, total commercial loan production for the fourth quarter was up 65% over the year-ago quarter. Our strong asset quality continued to improve, with net charge-offs decreasing to 0.34% of average noncovered loans," said Paul G. Greig, chairman, president and CEO, FirstMerit Corporation.
"We continued to make progress on our efficiency initiative. In the fourth quarter, excluding costs related to the Citizens transaction and our investment portfolio repositioning, expenses came in below our target of $110 million. Our performance in the quarter demonstrates the financial strength and stability we look to bring to Michigan and Wisconsin once we receive regulatory and shareholder approval of our announced acquisition of Flint-based Citizens Republic Bancorp," Greig said.
Net interest margin was 3.58% for the fourth quarter 2012 compared with 3.66% for the third quarter 2012 and 3.85% for the fourth quarter 2011. Despite the Corporation's continued success in reducing deposit costs in the quarter through an improved mix of core deposits, downward pressure on earning asset yields were responsible for a compression in the net interest margin of 8 basis points compared with the third quarter of 2012.
Average noncovered loans during the fourth quarter 2012 increased $258.7 million, or 3.16%, compared with the third quarter 2012 and also increased $770.3 million, or 10.04%, compared with the fourth quarter 2011. Average noncovered commercial loans increased $156.8 million, or 2.88%, compared with the prior quarter, and increased $551.0 million, or 10.91%, compared with the year ago quarter.
Average deposits were $11.6 billion during the fourth quarter 2012, an increase of $3.2 million, or 0.03%, compared with the third quarter 2012, and an increase of $178.5 million, or 1.56%, compared with the fourth quarter 2011. During the fourth quarter 2012, average core deposits, which exclude time deposits, increased $109.1 million, or 1.08%, compared with the third quarter 2012 and $598.6 million, or 6.25%, compared with the fourth quarter 2011. Average time deposits decreased $105.9 million, or 6.93%, and decreased $420.1 million, or 22.80%, respectively, over prior and year-ago quarters. The Corporation continues to emphasize growth in lower cost deposit products and decrease its reliance on certificates of deposit accounts to support balance sheet growth. For the fourth quarter 2012, average core deposits accounted for 87.73% of total average deposits, compared with 86.82% for the third quarter 2012 and 83.86% for the fourth quarter 2011.
Average investments decreased $6.8 million, or 0.18%, compared with the third quarter 2012 and increased $206.3 million, or 5.93% compared with the fourth quarter 2011.
Net interest income on a fully tax-equivalent ("FTE") basis was $119.1 million in the fourth quarter 2012 compared with $120.7 million in the third quarter 2012 and $123.6 million in the fourth quarter 2011.
Noninterest income, excluding gains on securities transactions of $2.4 million, for the fourth quarter 2012 was $59.2 million, an increase of $4.9 million, or 8.93%, from the third quarter 2012 and an increase of $5.3 million, or 9.79%, from the fourth quarter 2011. The increase in noninterest income in the fourth quarter of 2012 was mainly attributable to a $5.0 million gain on covered loans paid in full.
Other income, net of $2.4 million in securities gains, as a percentage of net revenue for the fourth quarter 2012 was 33.21% compared with 31.05% for third quarter 2012 and 30.38% for the fourth quarter 2011. Net revenue is defined as net interest income, on an FTE basis, plus other income, less gains from securities sales.
Noninterest expense for the fourth quarter 2012 was $112.2 million, an increase of $3.6 million, or 3.31%, from the third quarter 2012 and a decrease of $11.7 million, or 9.44%, from the fourth quarter 2011. Included in noninterest expense in the fourth quarter of 2012 were professional and legal fees of $1.0 million associated with the proposed acquisition of Citizens as well as $2.3 million of fees related to the early termination of Federal Home Loan Bank advances. FDIC expense decreased $3.4 million from the prior year ago quarter. Included in noninterest expense in the fourth quarter of 2011 was $4.9 million of fees related to the early termination of repurchase agreements and Federal Home Loan Bank advances as part of the Corporation's investment portfolio repositioning strategy and $1.3 million of expense related to an increase in the liability associated with the sale of the Corporation's Visa Class B shares in 2008.
During the fourth quarter 2012, the Corporation reported an efficiency ratio of 62.65%, compared with 61.75% for the third quarter 2012 and 69.46% for the fourth quarter 2011.
Net noncovered charge-offs totaled $7.1 million, or 0.34% of average noncovered loans in the fourth quarter 2012, compared with $14.9 million, or 0.72% of average noncovered loans, in the third quarter 2012 and $13.8 million, or 0.71% of average noncovered loans, in the fourth quarter 2011. As a result of guidance from the Office of the Comptroller of the Currency ("OCC"), during the third quarter of 2012, $10.6 million of consumer loans were identified as troubled debt restructurings whereby the borrower's obligation to the Corporation has been discharged in bankruptcy and the borrower had not reaffirmed the debt. These loans were reclassified from performing loans to nonaccrual status and consisted of $6.7 million of first mortgages, $1.0 million of junior liens and $2.9 million of automobile loans, and net loan charge-offs of $2.8 million were recognized in the third quarter of 2012.
Nonperforming assets totaled $50.2 million at December 31, 2012, a decrease of $13.8 million, or 21.59%, compared with September 30, 2012 and a decrease of $30.9 million, or 38.07%, compared with December 31, 2011. Nonperforming assets at December 31, 2012 represented 0.57% of period-end noncovered loans plus other real estate compared with 0.77% at September 30, 2012 and 1.04% at December 31, 2011.
The allowance for noncovered loan losses totaled $98.9 million at December 31, 2012. At December 31, 2012, the allowance for noncovered loan losses was 1.13% of period-end noncovered loans compared with 1.19% at September 30, 2012 and 1.39% at December 31, 2011. The allowance for credit losses is the sum of the allowance for noncovered loan losses and the reserve for unfunded lending commitments. For comparative purposes, the allowance for credit losses was 1.20% of period end noncovered loans at December 31, 2012, compared with 1.26% at September 30, 2012 and 1.47% at December 31, 2011. The allowance for credit losses to nonperforming loans was 284.50% at December 31, 2012, compared with 208.11% at September 30, 2012 and 176.50% at December 31, 2011.
The Corporation's total assets at December 31, 2012 were $14.9 billion, an increase of $284.2 million, or 1.94%, compared with September 30, 2012 and an increase of $471.3 million, or 3.26%, compared with December 31, 2011.
Total deposits were $11.8 billion at December 31, 2012, an increase of $227.0 million, or 1.97%, from September 30, 2012 and an increase of $327.8 million, or 2.87%, from December 31, 2011. Core deposits totaled $10.4 billion at December 31, 2012, an increase of $328.7 million, or 3.27%, from September 30, 2012 and an increase of $695.6 million, or 7.18%, from December 31, 2011.
Shareholders' equity was $1.6 billion at December 31, 2012, September 30, 2012, and December 31, 2011. The Corporation maintained a strong capital position as tangible common equity to assets was 8.16% at December 31, 2012, compared with 8.18% at September 30, 2012 and 7.86% at December 31, 2011. The common cash dividend per share paid in the fourth quarter 2012 was $0.16.
Fourth Quarter 2012 Conference Call
FirstMerit (Nasdaq: FMER) senior management will host an earnings conference call today at 11:00 a.m. (Eastern Time) to provide an overview of fourth quarter results and highlights. To participate in the conference call, please dial (888) 693-3477 ten minutes before start time and provide the reservation number: 87347317. A replay of the conference call will be available at approximately 2:00 p.m. (Eastern Time) on January 22, 2013 through February 5, 2013 by dialing (855) 859-2056, and entering the PIN: 87347317. The Corporation will provide a slide presentation, which management will speak to during the conference call. A copy of the presentation will be available at https://www.firstmerit.com/personal/investors.aspx; click on the Presentations link to access the slide presentation.
About FirstMerit Corporation
FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $14.9 billion as of December 31, 2012 and 196 banking offices and 203 ATM locations in Ohio, Western Pennsylvania, and Chicago areas. FirstMerit provides a complete range of banking and other financial services to consumers and businesses through its core operations. Principal wholly-owned subsidiaries include: FirstMerit Bank, N.A., FirstMerit Mortgage Corporation, FirstMerit Title Agency, Ltd., and FirstMerit Community Development Corporation.
Subsequent Events
The Corporation is required under generally accepted accounting principles to evaluate subsequent events through the filing of the its consolidated financial statements for the year ended December 31, 2012 on Form 10-K. As a result, the Corporation will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of December 31, 2012 and will adjust amounts preliminarily reported, if necessary.
Forward-Looking Statements
This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Corporation, as well as its operations, markets and products. Actual results could differ materially from those indicated. Among the important factors that could cause results to differ materially are interest rate changes, continued softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Corporation's business, competitive pressures, changes in accounting, tax or regulatory practices or requirements, the Corporation's ability to successfully complete the proposed acquisition of Citizens, and those risk factors detailed in the Corporation's periodic reports and registration statements filed with the Securities and Exchange Commission. The Corporation undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.
Additional Information and Where to Find It
This document does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. In connection with the proposed merger between FirstMerit and Citizens, FirstMerit has filed with the U.S. Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that includes a preliminary joint proxy statement of FirstMerit and Citizens that also constitutes a prospectus of FirstMerit. FirstMerit and Citizens will deliver the definitive joint proxy statement/prospectus to their respective shareholders. FirstMerit and Citizens urge investors and shareholders to read the preliminary joint proxy statement/prospectus regarding the proposed merger and the definitive joint proxy statement/prospectus when it becomes available, as well as other documents filed with the SEC, because they will contain important information. You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC's website (www.sec.gov). You may also obtain these documents, free of charge, from FirstMerit's website (www.firstmerit.com) under the heading "Investors" and then under the heading "Publications and Filings." You may also obtain these documents, free of charge, from Citizens' website (www.citizensbanking.com) under the tab "Investors" and then under the heading "Financial Documents" and then under the heading "SEC Filings."
Participants in the Merger Solicitation
FirstMerit, Citizens, and their respective directors, executive officers and certain other members of management and employees may be soliciting proxies from FirstMerit and Citizens shareholders in favor of the merger and related matters. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of FirstMerit and Citizens shareholders in connection with the proposed merger are set forth in the preliminary joint proxy statement/prospectus. You can find information about FirstMerit's executive officers and directors in its definitive proxy statement filed with the SEC on March 8, 2012. You can find information about Citizens' executive officers and directors in its definitive proxy statement filed with the SEC on March 12, 2012. Additional information about FirstMerit's executive officers and directors and Citizens' executive officers and directors can be found in the above-referenced Registration Statement on Form S-4. You can obtain free copies of these documents from FirstMerit and Citizens using the contact information above.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
--------
(Dollars in thousands, except per share amounts) 2012 2012 2012 2012 2011
4th qtr 3rd qtr 2nd qtr 1st qtr 4th qtr
------- ------- ------- ------- -------
EARNINGS
--------
Net interest income FTE (a) $119,130 $120,741 $121,689 $121,428 $123,598
Provision for noncovered loan losses 7,116 9,965 8,766 8,129 12,275
Provision for covered loan losses 5,146 6,214 3,430 5,932 2,773
Other income 61,652 54,925 55,301 51,726 59,737
Other expenses 112,181 108,587 119,077 113,768 123,874
FTE adjustment (a) 2,900 2,851 2,766 2,641 2,632
Net income 38,224 34,953 30,585 30,344 30,496
Diluted EPS 0.35 0.32 0.28 0.28 0.28
PERFORMANCE RATIOS
------------------
Return on average assets (ROA) 1.03% 0.94% 0.84% 0.84% 0.83%
Return on average common equity (ROE) 9.30% 8.60% 7.69% 7.72% 7.70%
Net interest margin FTE (a) 3.58% 3.66% 3.77% 3.78% 3.85%
Efficiency ratio 62.65% 61.75% 67.21% 65.52% 69.46%
Number of full-time equivalent employees 2,724 2,733 2,789 2,997 3,018
MARKET DATA
-----------
Book value per common share $15.00 $14.82 $14.60 $14.51 $14.33
Period-end common share market value 14.19 14.71 16.51 16.86 15.13
Market as a % of book 95% 99% 113% 116% 106%
Cash dividends per common share $0.16 $0.16 $0.16 $0.16 $0.16
Common stock dividend payout ratio 45.71% 50.00% 57.14% 57.14% 57.14%
Average basic common shares 109,652 109,645 109,562 109,211 109,249
Average diluted common shares 109,652 109,645 109,562 109,211 109,249
Period end common shares 109,649 109,653 109,641 109,187 109,251
Common shares repurchased 12 6 111 69 7
Common stock market capitalization $1,555,919 $1,612,996 $1,810,173 $1,840,893 $1,652,968
ASSET QUALITY (excluding covered loans)
--------------------------------------
Gross charge-offs $12,475 $20,999 $15,014 $17,417 $18,984
Net charge-offs 7,116 14,872 8,766 11,979 13,763
Allowance for noncovered loan losses 98,942 98,942 103,849 103,849 107,699
Reserve for unfunded lending commitments 5,433 5,760 5,666 5,410 6,373
Nonperforming assets (NPAs) (b) 50,224 64,055 61,080 67,933 81,094
Net charge-offs to average loans ratio (b) 0.34% 0.72% 0.44% 0.62% 0.71%
Allowance for noncovered loan losses to period-end loans (b) 1.13% 1.19% 1.28% 1.32% 1.39%
Allowance for credit losses to period-end loans (b) 1.20% 1.26% 1.35% 1.39% 1.47%
NPAs to loans and other real estate (b) 0.57% 0.77% 0.75% 0.86% 1.04%
Allowance for noncovered loan losses to nonperforming loans 269.69% 196.66% 222.44% 194.97% 166.64%
Allowance for credit losses to nonperforming loans 284.50% 208.11% 234.57% 205.13% 176.50%
CAPITAL & LIQUIDITY
-------------------
Period-end tangible common equity to assets 8.16% 8.18% 8.01% 7.86% 7.86%
Average equity to assets 11.12% 10.97% 10.98% 10.91% 10.75%
Average equity to total loans (c) 17.37% 17.46% 17.57% 17.50% 17.40%
Average total loans to deposits (c) 81.21% 79.89% 78.78% 78.74% 79.12%
AVERAGE BALANCES
----------------
Assets $14,702,215 $14,734,016 $14,558,514 $14,496,937 $14,623,441
Deposits 11,595,085 11,591,931 11,555,283 11,472,021 11,416,546
Loans, excluding acquired loans (c) 8,389,223 8,121,083 7,857,840 7,677,963 7,520,400
Acquired loans, including covered loans (c) 1,026,574 1,139,568 1,245,246 1,355,086 1,512,123
Earning assets 13,246,693 13,119,473 12,986,988 12,935,184 12,747,868
Shareholders' equity 1,635,275 1,616,569 1,599,187 1,581,009 1,572,061
ENDING BALANCES
---------------
Assets $14,913,012 $14,628,843 $14,621,344 $14,670,818 $14,441,702
Deposits 11,759,425 11,532,426 11,615,841 11,648,165 11,431,609
Loans, excluding acquired loans (c) 8,677,501 8,260,426 8,031,998 7,764,058 7,635,776
Acquired loans, including covered loans (c) 959,549 1,099,052 1,187,203 1,306,165 1,404,644
Goodwill 460,044 460,044 460,044 460,044 460,044
Intangible assets 6,373 6,817 7,274 7,756 8,239
Earning assets 13,472,067 13,219,301 13,212,071 13,318,202 13,011,267
Total shareholders' equity 1,645,202 1,624,704 1,600,815 1,584,105 1,565,953
NOTES:
(a) - Net interest income on a fully tax-equivalent ("FTE") basis restates interest on tax-exempt securities and loans as if such interest were subject to federal income tax at the statutory rate. Net interest income on an FTE basis is not an accounting principle generally accepted in the United States of America.
(b) -Covered loans and other real estate from George Washington Savings Bank and Midwest Bank & Trust Company are excluded from the ratio of our allowance for loan and credit losses and NPAs. Nonperforming assets at December 31, 2012 and September 30, 2012 include $7.7 million and $10.6 million, respectively, of loans resulting from
consumer loans classified as troubled debt restructurings where the borrower's obligation to the Corporation has been restructured in bankruptcy.
(c) - Excludes loss share receivable of $113.7 million, $131.9 million, $152.6 million, $171.1 million and $205.7 million as of December 31, 2012, September 30, 2012, June 30, 2012, March 31, 2012 and December 31, 2011, respectively.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) December 31,
(Unaudited, except December 31, 2011, which is derived from the audited financial statements) 2012 2011
---- ----
ASSETS
Cash and due from banks $244,223 $219,256
Interest-bearing deposits in banks 13,791 158,063
------
Total cash and cash equivalents 258,014 377,319
Investment securities:
Held-to-maturity 622,121 82,764
Available-for-sale 2,920,971 3,353,553
Other investments 140,717 140,726
Loans held for sale 23,683 30,077
Noncovered loans:
Commercial 5,866,489 5,107,747
Mortgage 445,211 413,664
Installment 1,328,258 1,263,665
Home equity 806,078 743,982
Credit card 146,387 146,356
Leases 139,236 73,530
------- ------
Total noncovered loans 8,731,659 7,748,944
Allowance for noncovered loan losses (98,942) (107,699)
------- --------
Net noncovered loans 8,632,717 7,641,245
Covered loans (includes loss share receivable of $113.7 million and $205.7
million at December 31, 2012 and 2011, respectively) 1,019,125 1,497,140
Allowance for covered loan losses (43,255) (36,417)
------- -------
Net covered loans 975,870 1,460,723
Net loans 9,608,587 9,101,968
Premises and equipment, net 181,149 192,949
Goodwill 460,044 460,044
Intangible assets 6,373 8,239
Covered other real estate (includes loss share receivable of $.05 million
and $1.3 million at December 31, 2012 and December 31, 2011, respectively) 59,855 54,505
Accrued interest receivable and other assets 631,498 639,558
-------
Total assets $14,913,012 $14,441,702
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $3,338,371 $3,030,225
Interest-bearing 1,287,674 1,062,896
Savings and money market accounts 5,758,123 5,595,409
Certificates and other time deposits 1,375,257 1,743,079
--------- ---------
Total deposits 11,759,425 11,431,609
Federal funds purchased and securities sold under agreements to
repurchase 1,104,525 866,265
Wholesale borrowings 136,883 203,462
Accrued taxes, expenses, and other liabilities 266,977 374,413
------- -------
Total liabilities 13,267,810 12,875,749
Shareholders' equity:
Preferred stock, without par value:
authorized and unissued 7,000,000 shares - -
Preferred stock, Series A, without par value:
designated 800,000 shares; none outstanding - -
Convertible preferred stock, Series B, without par value:
designated 220,000 shares; none outstanding - -
Common stock, without par value; authorized 300,000,000 shares; issued: 2012 and 2011 - 115,121,731 shares 127,937 127,937
Capital surplus 475,979 479,882
Accumulated other comprehensive loss (16,205) (23,887)
Retained earnings 1,195,850 1,131,203
Treasury stock, at cost: 2012 - 5,472,915 shares; 2011 - 5,870,923 shares (138,359) (149,182)
-------- --------
Total shareholders' equity 1,645,202 1,565,953
--------- ---------
Total liabilities and shareholders' equity $14,913,012 $14,441,702
=========== ===========
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Quarterly Periods
-----------------
(Unaudited) December 31, September 30, June 30, March 31, December 31,
(Dollars in thousands) 2012 2012 2012 2012 2011
---- ---- ---- ---- ----
ASSETS
Cash and due from banks $238,366 $440,231 $410,533 $378,736 $621,899
Investment securities:
Held-to-maturity 620,154 337,685 127,769 90,664 89,166
Available-for-sale 2,925,938 3,215,203 3,429,411 3,459,439 3,231,195
Other investments 140,723 140,736 140,744 140,719 160,147
Loans held for sale 20,485 23,631 22,731 26,483 24,215
Noncovered loans:
Commercial 5,600,522 5,443,712 5,274,352 5,143,087 5,049,479
Residential Mortgage 443,542 437,123 431,752 421,648 405,329
Installment 1,331,131 1,293,054 1,263,013 1,261,122 1,267,952
Home equity 798,663 779,087 750,859 738,154 744,326
Credit card 145,050 143,948 142,311 143,794 145,560
Leases 125,300 88,583 78,862 73,644 61,267
------- ------ ------ ------ ------
Total noncovered loans 8,444,208 8,185,507 7,941,149 7,781,449 7,673,913
Covered loans and loss share receivable 1,095,185 1,216,711 1,325,184 1,436,430 1,569,232
--------- --------- --------- --------- ---------
Total loans 9,539,393 9,402,218 9,266,333 9,217,879 9,243,145
Less: allowance for loan losses 141,270 145,061 143,565 142,628 141,360
------- ------- ------- ------- -------
Net loans 9,398,123 9,257,157 9,122,768 9,075,251 9,101,785
Total earning assets 13,246,693 13,119,473 12,986,988 12,935,184 12,747,868
Premises and equipment, net 181,738 184,544 187,181 190,669 193,219
Accrued interest receivable and other assets 1,176,688 1,134,829 1,117,377 1,134,976 1,201,815
--------- --------- --------- --------- ---------
TOTAL ASSETS $14,702,215 $14,734,016 $14,558,514 $14,496,937 $14,623,441
=========== =========== =========== =========== ===========
LIABILITIES
Deposits:
Noninterest-bearing $3,306,444 $3,236,703 $3,144,183 $3,036,590 $3,013,543
Interest-bearing 1,122,796 1,080,841 1,060,771 1,066,132 991,456
Savings and money market accounts 5,743,599 5,746,210 5,732,007 5,675,052 5,569,213
Certificates and other time deposits 1,422,246 1,528,177 1,618,322 1,694,247 1,842,334
--------- --------- --------- --------- ---------
Total deposits 11,595,085 11,591,931 11,555,283 11,472,021 11,416,546
Federal funds purchased and securities sold under
agreements to repurchase 957,564 1,032,401 920,352 887,715 999,639
Wholesale borrowings 163,405 178,022 177,987 184,659 225,116
------- ------- ------- ------- -------
Total funds 12,716,054 12,802,354 12,653,622 12,544,395 12,641,301
Accrued taxes, expenses and other liabilities 350,886 315,093 305,705 371,533 410,079
------- ------- ------- ------- -------
Total liabilities 13,066,940 13,117,447 12,959,327 12,915,928 13,051,380
SHAREHOLDERS' EQUITY
Common stock 127,937 127,937 127,937 127,937 127,937
Capital surplus 474,532 472,820 473,650 481,856 479,257
Accumulated other comprehensive income (loss) (17,666) (14,627) (18,363) (19,862) (15,198)
Retained earnings 1,188,641 1,168,649 1,156,324 1,140,953 1,129,392
Treasury stock (138,169) (138,210) (140,361) (149,875) (149,327)
-------- -------- -------- -------- --------
Total shareholders' equity 1,635,275 1,616,569 1,599,187 1,581,009 1,572,061
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,702,215 $14,734,016 $14,558,514 $14,496,937 $14,623,441
=========== =========== =========== =========== ===========
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Fully Tax-equivalent Interest Rates and Interest Differential
Three months ended Three months ended
------------------ ------------------
December 31, 2012 December 31, 2011
----------------- -----------------
(Unaudited) Average Average Average Average
(Dollars in thousands) Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
ASSETS
Cash and due from banks $238,366 $621,899
Investment securities and federal funds sold:
U.S. treasury securities and U.S. government
agency obligations (taxable) 2,794,524 $16,767 2.39% 2,761,042 $19,028 2.73%
Obligations of states and political
subdivisions (tax exempt) 510,722 6,583 5.13% 403,405 5,568 5.48%
Other securities and federal funds sold 381,569 3,429 3.58% 316,061 2,406 3.02%
------- ----- ------- -----
Total investment securities and federal
funds sold 3,686,815 26,779 2.89% 3,480,508 27,002 3.08%
Loans held for sale 20,485 199 3.86% 24,215 266 4.36%
Noncovered loans, covered loans and loss share
receivable 9,539,393 101,288 4.22% 9,243,145 107,612 4.62%
--------- ------- --------- -------
Total earning assets 13,246,693 128,266 3.85% 12,747,868 134,880 4.20%
Allowance for loan losses (141,270) (141,360)
Other assets 1,358,426 1,395,034
--------- ---------
Total assets $14,702,215 $14,623,441
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $3,306,444 - - $3,013,543 - -
Interest-bearing 1,122,796 261 0.09% 991,456 237 0.09%
Savings and money market accounts 5,743,599 5,261 0.36% 5,569,213 5,998 0.43%
Certificates and other time deposits 1,422,246 2,287 0.64% 1,842,334 3,201 0.69%
--------- ----- --------- -----
Total deposits 11,595,085 7,809 0.27% 11,416,546 9,436 0.33%
Securities sold under agreements to repurchase 957,564 303 0.13% 999,639 512 0.20%
Wholesale borrowings 163,405 1,024 2.49% 225,116 1,334 2.35%
------- ----- ------- -----
Total interest bearing liabilities 9,409,610 9,136 0.39% 9,627,758 11,282 0.46%
Other liabilities 350,886 410,079
Shareholders' equity 1,635,275 1,572,061
--------- ---------
Total liabilities and shareholders' equity $14,702,215 $14,623,441
=========== ===========
Net yield on earning assets $13,246,693 $119,130 3.58% $12,747,868 $123,598 3.85%
=========== ======== ==== =========== ======== ====
Interest rate spread 3.47% 3.73%
==== === ====
Note: Interest income on tax-exempt securities and loans has been adjusted to a fully-taxable equivalent basis.
Nonaccrual loans have been included in the average balances.
FIRST MERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Fully Tax-equivalent Interest Rates and Interest Differential
Twelve months ended Twelve months ended
------------------- -------------------
December 31, 2012 December 31, 2011
----------------- -----------------
(Unaudited) Average Average Average Average
(Dollars in thousands) Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
ASSETS
Cash and due from banks $366,815 $562,133
Investment securities and federal funds sold:
U.S. treasury securities and U.S. government
agency obligations (taxable) 2,825,283 $73,455 2.60% 2,869,664 $78,202 2.73%
Obligations of states and political
subdivisions (tax exempt) 483,582 25,034 5.18% 378,834 21,277 5.62%
Other securities and federal funds sold 383,420 11,575 3.02% 301,786 8,842 2.93%
------- ------ ------- -----
Total investment securities and federal
funds sold 3,692,285 110,064 2.98% 3,550,284 108,321 3.05%
Loans held for sale 23,326 960 4.12% 22,467 1,045 4.65%
Noncovered loans, covered loans and loss share
receivable 9,357,080 410,818 4.39% 9,155,973 438,579 4.79%
--------- ------- --------- -------
Total earning assets 13,072,691 521,842 3.99% 12,728,724 547,945 4.30%
Allowance for loan losses (143,131) (139,414)
Other assets 1,324,252 1,343,887
--------- ---------
Total assets $14,620,627 $14,495,330
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $3,181,475 - - $2,969,137 - -
Interest bearing 1,082,740 987 0.09% 893,062 816 0.09%
Savings and money market accounts 5,724,330 20,563 0.36% 5,320,392 28,171 0.53%
Certificates and other time deposits 1,565,253 11,723 0.75% 2,229,910 20,003 0.90%
--------- ------ --------- ------
Total deposits 11,553,798 33,273 0.29% 11,412,501 48,990 0.43%
Securities sold under agreements to repurchase 949,756 1,157 0.12% 925,803 3,344 0.36%
Wholesale borrowings 175,989 4,423 2.51% 298,835 6,295 2.11%
------- ----- ------- -----
Total interest bearing liabilities 9,498,068 38,853 0.41% 9,668,002 58,629 0.61%
Other liabilities 332,976 309,838
Shareholders' equity 1,608,108 1,548,353
--------- ---------
Total liabilities and shareholders' equity $14,620,627 $14,495,330
=========== ===========
Net yield on earning assets $13,072,691 $482,989 3.69% $12,728,724 $489,316 3.84%
=========== ======== ==== =========== ======== ====
Interest rate spread 3.58% 3.70%
==== === ====
Note: Interest income on tax-exempt securities and loans has been adjusted to a fully-taxable equivalent basis.
Nonaccrual loans have been included in the average balances.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) Quarters ended Twelve months ended
(Dollars in thousands except per share data) December 31, December 31,
------------ ------------
2012 2011 2012 2011
---- ---- ---- ----
Interest income:
Loans and loans held for sale $101,086 $107,516 $410,299 $438,393
Investment securities:
Taxable 20,196 21,434 85,030 87,044
Tax-exempt 4,084 3,298 15,354 12,819
----- ----- ------ ------
Total investment securities interest 24,280 24,732 100,384 99,863
------ ------ ------- ------
Total interest income 125,366 132,248 510,683 538,256
Interest expense:
Deposits:
Interest-bearing 261 237 987 816
Savings and money market accounts 5,261 5,998 20,563 28,171
Certificates and other time deposits 2,287 3,201 11,723 20,003
Securities sold under agreements to
repurchase 303 512 1,157 3,344
Wholesale borrowings 1,024 1,334 4,423 6,295
-----
Total interest expense 9,136 11,282 38,853 58,629
----- ------ ------ ------
Net interest income 116,230 120,966 471,830 479,627
Provision for noncovered loan losses 7,116 12,275 33,976 54,035
Provision for covered loan losses 5,146 2,773 20,722 20,353
----- ----- ------ ------
Net interest income after provision for
loan losses 103,968 105,918 417,132 405,239
------- ------- ------- -------
Other income:
Trust department income 5,662 5,413 23,143 22,396
Service charges on deposits 14,247 15,622 57,737 64,082
Credit card fees 11,167 10,182 43,569 49,539
ATM and other service fees 3,432 3,920 14,792 13,701
Bank owned life insurance income 3,067 3,381 12,140 14,820
Investment services and insurance 2,147 1,844 8,990 8,228
Investment securities gains, net 2,425 5,790 3,786 11,081
Loan sales and servicing income 7,946 5,102 27,031 14,205
Other operating income 11,559 8,483 32,416 26,705
------
Total other income 61,652 59,737 223,604 224,757
Other expenses:
Salaries, wages, pension and employee
benefits 61,560 62,546 245,192 240,362
Net occupancy expense 7,114 7,270 31,754 32,414
Equipment expense 7,398 7,234 29,243 27,959
Stationery, supplies and postage 2,162 2,719 8,800 10,691
Bankcard, loan processing and other costs 9,260 7,948 34,195 32,226
Professional services 6,119 5,763 23,480 23,229
Amortization of intangibles 444 543 1,866 2,172
FDIC insurance expense 1,738 5,119 10,753 17,306
Other operating expense 16,386 24,732 68,330 77,986
------
Total other expenses 112,181 123,874 453,613 464,345
------- ------- ------- -------
Income before income tax expense 53,439 41,781 187,123 165,651
Income tax expense 15,215 11,285 53,017 46,093
------ ------ ------ ------
Net income $38,224 $30,496 $134,106 $119,558
Other comprehensive income, net of taxes
Changes in unrealized securities' holding
gains and losses $(6,718) $1,317 $4,154 $26,205
Reclassification for realized securities'
gains (1,576) (3,764) (2,461) (7,203)
Change in minimum pension liability 5,989 (16,786) 5,989 (16,786)
-----
Total other comprehensive gain (loss), net
of taxes (2,305) (19,233) 7,682 2,216
-------
Comprehensive income $35,919 $11,263 $141,788 $121,774
======= ======= ======== ========
Net income applicable to common shares $38,224 $30,496 $134,106 $119,558
===
Net income used in diluted EPS calculation $38,224 $30,496 $134,106 $119,558
===
Weighted average number of common shares outstanding - basic 109,652 109,249 109,518 109,102
======= ======= ======= =======
Weighted average number of common shares outstanding - diluted 109,652 109,249 109,518 109,102
======= ======= ======= =======
Basic earnings per common share $0.35 $0.28 $1.22 $1.10
===== ===== ===== =====
Diluted earnings per common share $0.35 $0.28 $1.22 $1.10
===== ===== ===== =====
Dividend per common share $0.16 $0.16 $0.64 $0.64
===== ===== ===== =====
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME---LINKED QUARTERS
Quarterly Results
-----------------
(Unaudited) 2012 2012 2012 2012 2011
(Dollars in thousands, except share data) 4th qtr 3rd qtr 2nd qtr 1st qtr 4th qtr
------- ------- ------- ------- -------
Loans and loans held for sale $101,086 $103,005 $103,126 $103,082 $107,516
Investment securities 24,280 24,477 25,629 25,998 24,732
------ ------ ------ ------ ------
Total interest income 125,366 127,482 128,755 129,080 132,248
Interest on deposits:
Interest-bearing 261 243 236 247 237
Savings and money market accounts 5,261 5,166 5,033 5,103 5,998
Certificates and other time deposits 2,287 2,743 3,169 3,524 3,201
Securities sold under agreements to repurchase 303 310 276 268 512
Wholesale borrowings 1,024 1,130 1,118 1,151 1,334
----- ----- ----- ----- -----
Total interest expense 9,136 9,592 9,832 10,293 11,282
----- ----- ----- ------ ------
Net interest income 116,230 117,890 118,923 118,787 120,966
Provision for noncovered loan losses 7,116 9,965 8,766 8,129 12,275
Provision for covered loan losses 5,146 6,214 3,430 5,932 2,773
----- ----- ----- ----- -----
Net interest income after provision for loan losses 103,968 101,711 106,727 104,726 105,918
------- ------- ------- ------- -------
Other income:
Trust department income 5,662 6,124 5,730 5,627 5,413
Service charges on deposits 14,247 14,603 14,478 14,409 15,622
Credit card fees 11,167 11,006 11,216 10,180 10,182
ATM and other service fees 3,432 3,680 3,890 3,790 3,920
Bank owned life insurance income 3,067 3,094 2,923 3,056 3,381
Investment services and insurance 2,147 2,208 2,388 2,247 1,844
Investment securities gains, net 2,425 553 548 260 5,790
Loan sales and servicing income 7,946 7,255 5,139 6,691 5,102
Other operating income 11,559 6,402 8,989 5,466 8,483
------ ----- ----- ----- -----
Total other income 61,652 54,925 55,301 51,726 59,737
Other expenses:
Salaries, wages, pension and employee benefits 61,560 58,061 61,598 63,973 62,546
Net occupancy expense 7,114 8,077 7,971 8,592 7,270
Equipment expense 7,398 7,143 7,598 7,104 7,234
Stationery, supplies and postage 2,162 2,210 2,285 2,143 2,719
Bankcard, loan processing and other costs 9,260 8,424 8,858 7,653 7,948
Professional services 6,119 4,702 9,307 3,352 5,763
Amortization of intangibles 444 456 483 483 543
FDIC insurance expense 1,738 1,832 3,463 3,720 5,119
Other operating expense 16,386 17,682 17,514 16,748 24,732
------ ------ ------ ------ ------
Total other expenses 112,181 108,587 119,077 113,768 123,874
------- ------- ------- ------- -------
Income before income tax expense 53,439 48,049 42,951 42,684 41,781
Income taxes 15,215 13,096 12,366 12,340 11,285
------ ------ ------ ------ ------
Net income 38,224 34,953 30,585 30,344 30,496
Other comprehensive income (loss), net of taxes (2,305) 4,525 3,747 1,715 (19,233)
====== ===== ===== ===== =======
Comprehensive income $35,919 $39,478 $34,332 $32,059 $11,263
======= ======= ======= ======= =======
Net income applicable to common shares $38,224 $34,953 $30,585 $30,344 $30,496
======= ======= ======= ======= =======
Net income used in diluted EPS calculation $38,224 $34,953 $30,585 $30,344 $30,496
======= ======= ======= ======= =======
Weighted-average common shares - basic 109,652 109,645 109,562 109,211 109,249
======= ======= ======= ======= =======
Weighted-average common shares - diluted 109,652 109,645 109,562 109,211 109,249
======= ======= ======= ======= =======
Basic earnings per common share $0.35 $0.32 $0.28 $0.28 $0.28
===== ===== ===== ===== =====
Diluted earnings per common share $0.35 $0.32 $0.28 $0.28 $0.28
===== ===== ===== ===== =====
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION (excluding Covered Assets)
(Unaudited) (Audited)
(Dollars in thousands, except ratios) Quarterly Periods Annual Period
----------------- -------------
December 31, September 30, June 30, March 31, December 31, December 31,
Allowance for Credit Losses 2012 2012 2012 2012 2011 2011
--------------------------- ---- ---- ---- ---- ---- ----
Allowance for noncovered loan losses, beginning of period $98,942 $103,849 $103,849 $107,699 $109,187 $114,690
Provision for noncovered loan losses 7,116 9,965 8,766 8,129 12,275 54,035
Charge-offs 12,475 20,999 15,014 17,417 18,984 82,768
Recoveries 5,359 6,127 6,248 5,438 5,221 21,742
----- ----- ----- ----- ----- ------
Net charge-offs 7,116 14,872 8,766 11,979 13,763 61,026
----- ------ ----- ------ ------ ------
Allowance for noncovered loan losses, end of period $98,942 $98,942 $103,849 $103,849 $107,699 $107,699
======= ======= ======== ======== ======== ========
Reserve for unfunded lending commitments,
beginning of period $5,760 $5,666 $5,410 $6,373 $6,360 $8,849
Provision for (relief of) credit losses (327) 94 256 (963) 13 (2,476)
---- --- --- ---- --- ------
Reserve for unfunded lending commitments,
end of period $5,433 $5,760 $5,666 $5,410 $6,373 $6,373
====== ====== ====== ====== ====== ======
Allowance for Credit Losses $104,375 $104,702 $109,515 $109,259 $114,072 $114,072
======== ======== ======== ======== ======== ========
Ratios (a)
---------
Provision for loan losses to average loans 0.34% 0.48% 0.44% 0.42% 0.63% 0.73%
Net charge-offs to average loans 0.34% 0.72% 0.44% 0.62% 0.71% 0.82%
Allowance for loan losses to period-end loans 1.13% 1.19% 1.28% 1.32% 1.39% 1.39%
Allowance for credit losses to period-end loans 1.20% 1.26% 1.35% 1.39% 1.47% 1.47%
Allowance for loan losses to nonperforming loans 269.69% 196.66% 222.44% 194.97% 166.64% 166.64%
Allowance for credit losses to nonperforming loans 284.50% 208.11% 234.57% 205.13% 176.50% 176.50%
Asset Quality (a)
----------------
Impaired noncovered loans:
Nonaccrual $21,766 $31,492 $38,381 $44,546 $55,815 $55,815
Other nonperforming loans:
Nonaccrual (b) 14,921 18,819 8,306 8,717 8,816 8,816
------ ------ ----- ----- ----- -----
Total nonperforming loans 36,687 50,311 46,687 53,263 64,631 64,631
Other real estate ("ORE") 13,537 13,744 14,393 14,670 16,463 16,463
------ ------ ------ ------ ------ ------
Total nonperforming assets ("NPAs") $50,224 $64,055 $61,080 $67,933 $81,094 $81,094
======= ======= ======= ======= ======= =======
NPAs to period-end loans + ORE 0.57% 0.77% 0.75% 0.86% 1.04% 1.04%
==== === ==== === ==== ==== ==== ====
Accruing noncovered loans past due 90 days or more $9,417 $9,691 $6,545 $9,261 $11,376 $11,376
====== ====== ====== ====== ======= =======
(a) Excludes covered loans and related loss share receivable with a period end balance of $1.0 billion, $1.2 billion, $1.3 billion, $1.4 billion and $1.5 billion and covered ORE and related loss share receivable with a period end balance of $59.9 million, $56.8 million, $54.5 million, $56.4 million and $54.5 million at December 31, 2012, September 30, 2012,
June 30, 2012, March 31, 2012 and December 31, 2011, respectively.
(b) At December 31, 2012 and September 30, 2012, included are $7.7 million and $10.6 million, respectively, of consumer loans classified as troubled debt restructurings where the borrower's obligation to the Corporation has been restructured in bankruptcy.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands)
2012 2012 2012 2012 2011
QUARTERLY OTHER INCOME DETAIL 4th qtr 3rd qtr 2nd qtr 1st qtr 4th qtr
------- ------- ------- ------- -------
Trust department income $5,662 $6,124 $5,730 $5,627 $5,413
Service charges on deposits 14,247 14,603 14,478 14,409 15,622
Credit card fees 11,167 11,006 11,216 10,180 10,182
ATM and other service fees 3,432 3,680 3,890 3,790 3,920
Bank owned life insurance income 3,067 3,094 2,923 3,056 3,381
Investment services and insurance 2,147 2,208 2,388 2,247 1,844
Investment securities gains, net 2,425 553 548 260 5,790
Loan sales and servicing income 7,946 7,255 5,139 6,691 5,102
Other operating income 11,559 6,402 8,989 5,466 8,483
------ ----- ----- ----- -----
Total Other Income $61,652 $54,925 $55,301 $51,726 $59,737
======= ======= ======= ======= =======
2012 2012 2012 2012 2011
QUARTERLY OTHER EXPENSES DETAIL 4th qtr 3rd qtr 2nd qtr 1st qtr 4th qtr
------- ------- ------- ------- -------
Salaries, wages, pension and employee benefits $61,560 $58,061 $61,598 $63,973 $62,546
Net occupancy expense 7,114 8,077 7,971 8,592 7,270
Equipment expense 7,398 7,143 7,598 7,104 7,234
Taxes, other than income taxes 1,924 2,051 2,020 1,955 1,389
Stationery, supplies and postage 2,162 2,210 2,285 2,143 2,719
Bankcard, loan processing and other costs 9,260 8,424 8,858 7,653 7,948
Advertising 2,774 2,472 2,280 1,684 2,275
Professional services 6,119 4,702 9,307 3,352 5,763
Telephone 1,230 1,316 1,379 1,398 1,525
Amortization of intangibles 444 456 483 483 543
FDIC insurance expense 1,738 1,832 3,463 3,720 5,119
Other operating expense 10,458 11,843 11,835 11,711 19,543
------ ------ ------ ------ ------
Total Other Expenses $112,181 $108,587 $119,077 $113,768 $123,874
======== ======== ======== ======== ========
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR NONCOVERED LOAN LOSSES - Net Charge-off Detail
(Unaudited) Quarters ended Year ended
(Dollars in thousands) December 31, December 31,
------------ ------------
2012 2011 2012 2011
---- ---- ---- ----
Allowance for noncovered loan losses - beginning of period $98,942 $109,187 $107,699 $114,690
Loans charged off:
Commercial 5,081 7,418 28,648 31,943
Mortgage 533 1,033 3,964 4,819
Installment 3,588 5,635 18,029 25,839
Home equity 1,141 2,491 7,249 8,691
Credit cards 1,553 1,711 6,171 7,846
Leases 144 - 144 778
Overdrafts 435 696 1,700 2,852
--- --- ----- -----
Total 12,475 18,984 65,905 82,768
------ ------ ------ ------
Recoveries:
Commercial 1,317 850 5,626 2,703
Mortgage 44 29 235 221
Installment 2,581 2,890 11,635 13,639
Home equity 725 730 2,819 1,985
Credit cards 555 475 2,138 2,264
Manufactured housing 9 56 59 119
Leases - 2 38 37
Overdrafts 128 189 622 774
--- --- --- ---
Total 5,359 5,221 23,172 21,742
----- ----- ------ ------
Net charge-offs 7,116 13,763 42,733 61,026
Provision for noncovered loan losses 7,116 12,275 33,976 54,035
----- ------ ------ ------
Allowance for noncovered loan losses-end of period $98,942 $107,699 $98,942 $107,699
======= ======== ======= ========
Average noncovered loans (a) $8,444,208 $7,673,913 $8,089,317 $7,409,502
========== ========== ========== ==========
Ratio to average noncovered loans (a):
(Annualized) noncovered net charge-offs 0.34% 0.71% 0.53% 0.82%
==== ==== ==== ====
Provision for noncovered loan losses 0.34% 0.63% 0.42% 0.73%
==== ==== ==== ====
Noncovered Loans, period-end (a) $8,731,659 $7,748,944 $8,731,659 $7,748,944
========== ========== ========== ==========
Allowance for credit losses (a): $104,375 $114,072 $104,375 $114,072
======== ======== ========
To (annualized) net charge-offs 3.69 2.09 2.44 1.87
==== ==== ==== ====
Allowance for noncovered loan losses (a):
To period-end noncovered loans 1.13% 1.39% 1.13% 1.39%
==== ==== ==== ====
To (annualized) net noncovered charge-offs 3.50 1.97 2.32 1.76
==== ==== ==== ====
(a) Excludes covered loans and loss share receivable.
FirstMerit Corporation
Analysts: Thomas O'Malley/Investor Relations Officer
Phone: 330.384.7109
Media Contact: Robert Townsend/Media Relations Officer
Phone: 330.384.7075
SOURCE FirstMerit Corporation
