FIRSTMERIT CORP AKRON, Ohio, July 26, 2016 /PRNewswire/ --
Quarterly Highlights include:
-- Profitability sustained: 69(th) consecutive quarter of profitability
-- Integration activities progress: Planned merger with Huntington
Bancshares Incorporated ("Huntington") on schedule; merger-related costs
of $2.5 million
-- Strategic branch consolidations: $4.1 million nonmerger-related real
estate write-downs primarily due to 9 branch consolidations
-- Loan growth continued: Total loan growth of $118.2 million, or 0.73%
from the prior quarter
-- Credit quality remained solid: Net charge-offs to average originated
loans of 0.13%
-- Balance sheet remained strong: Strong common equity ratio (GAAP) 11.27%
and tangible common equity ratio (non-GAAP)(1) at 8.48%
FirstMerit Corporation (Nasdaq: FMER) (the "Corporation") reported second quarter 2016 net income of $58.3 million, or $0.34 per diluted share. Excluding merger-related charges and nonmerger-related real estate write-downs primarily due to branch consolidations of $6.6 million, or $4.3 million after tax, EPS was $0.36(1) per diluted share. This compares with $54.1 million, or $0.31 per diluted share, for the first quarter 2016 and $56.6 million, or $0.33 per diluted share, for the second quarter 2015.
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On June 13, 2016, the respective shareholders of Huntington and FirstMerit approved the proposed merger of FirstMerit into Huntington during special meetings held in Akron, Ohio by FirstMerit and in Columbus, Ohio by Huntington.
"FirstMerit's results in the second quarter of 2016 reflect the hard work and dedication of our employees across the organization. We continue to focus on our up coming merger with Huntington and expect to close in the third quarter, as planned, creating one of the strongest regional banks in the country," said Paul G. Greig, Chairman, President and CEO, 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 2Q 2016 vs.
------------------
2016 2016 2015 2016 2015
(Dollars in thousands, except per share amounts) 2nd qtr 1st qtr 2nd qtr 1st qtr 2nd qtr
------- ------- ------- ------- -------
Net interest income TE (1) $189,897 $189,115 $189,018 0.41% 0.47%
Diluted earnings per common share 0.34 0.31 0.33 9.68 3.03
Net interest margin on TE basis(1) 3.30% 3.32% 3.39%
Return on average assets 0.90 0.84 0.90
Return on average common equity (GAAP) 7.79 7.33 7.85
Return on average tangible common equity (non-GAAP) (1) 11.10 10.52 11.44
Net Interest Margin
The net interest margin on a TE basis decreased two basis points compared with the prior quarter, due to the amortization of higher yielding covered and acquired loans offset by higher balances and higher yields on originated loans. During the second quarter 2016, the yield on originated loans increased three basis points compared with the prior quarter. At June 30, 2016, 81% of the Corporation's commercial loan portfolio is variable or floating rate and will support margin expansion in a rising rate environment. Yields in acquired and FDIC acquired loans decreased compared with the prior quarter, while yields on interest-bearing liabilities remained consistent with the prior quarter.
Loans
Average originated loans were $14.5 billion during the second quarter 2016, an increase of $302.1 million, or 2.13%, compared with the first quarter 2016, and an increase of $1.4 billion, or 10.67%, compared with the second quarter 2015. Originated loans grew in both the commercial and consumer portfolios across the footprint, predominantly in Michigan and Chicago as we continue to penetrate those markets. Average originated commercial loans increased $65.6 million, or 0.73%, compared with the prior quarter, and increased $573.2 million, or 6.74%, compared with the year-ago quarter. Average originated installment loans increased $206.0 million, or 6.76%, compared with the prior quarter, and increased $635.4 million, or 24.27%, compared with the year-ago quarter.
Deposits
Average deposits were $21.0 billion during the second quarter 2016, an increase of $331.8 million, or 1.61%, compared with the first quarter 2016, and an increase of $1.3 billion, or 6.53%, compared with the second quarter 2015. Average core deposits were $18.9 billion during the second quarter 2016, or 89.95% of total average deposits, an increase of $428.6 million, or 2.33%, compared with the first quarter 2016 and an increase of $1.5 billion, or 8.44%, compared with the second quarter 2015. Deposit growth continued to be strong, reflecting seasonality and increased balances across the footprint. Despite decreases in short-term interest rates, deposit costs remained unchanged from the prior quarter.
(1) - See Non-GAAP Financial Measures section of this release for a reconciliation to financial measures as defined by GAAP.
Noninterest Income
Change 2Q 2016 vs.
------------------
2016 2016 2015 2016 2015
(Dollars in thousands) 2nd qtr 1st qtr 2nd qtr 1st qtr 2nd qtr
------- ------- ------- ------- -------
Trust department income $11,167 $10,284 $10,820 8.59% 3.21%
Service charges on deposits 16,263 15,586 16,704 4.34 (2.64)
Credit card fees 14,942 13,578 14,124 10.05 5.79
ATM and other service fees 6,427 6,234 6,345 3.10 1.29
Bank owned life insurance income 4,186 3,696 3,697 13.26 13.23
Investment services and insurance 3,851 3,905 3,871 (1.38) (0.52)
Investment securities gains/(losses), net 2,164 295 567 633.56 281.66
Loan sales and servicing income 1,995 1,852 3,276 7.72 (39.10)
Other operating income 4,120 11,964 7,178 (65.56) (42.60)
---------------------- -----
Total noninterest income $65,115 $67,394 $66,582 (3.38)% (2.20)%
------- ------- ------- ------ ------
Noninterest income, excluding net securities gains, 24.90% 26.19% 25.88%
as a percentage of net revenue(1)
Noninterest income, excluding gains and losses on securities transactions(1), for the second quarter 2016 was $63.0 million, a decrease of $4.1 million, or 6.18%, from the first quarter 2016 and a decrease of $3.1 million, or 4.64%, from the second quarter 2015. The decrease in noninterest income as a percentage of net revenue in the second quarter of 2016 compared with the first quarter of 2016 and first quarter of 2015 reflects $4.1 million of nonmerger-related real estate write-downs primarily due to branch consolidations, or $2.7 million of costs after tax expense which are included in Other operating income.
(1) - See Non-GAAP Financial Measures section of this release for a reconciliation to financial measures as defined by GAAP.
Noninterest Expense
Change 2Q 2016 vs.
------------------
2016 2016 2015 2016 2015
(Dollars in thousands) 2nd qtr 1st qtr 2nd qtr 1st qtr 2nd qtr
------- ------- ------- ------- -------
Salaries and wages $68,752 $69,410 $67,485 (0.95)% 1.88%
Pension and employee benefits 18,037 16,470 18,535 9.51 (2.69)
Net occupancy expense 13,466 14,774 13,727 (8.85) (1.90)
Equipment expense 12,078 12,408 12,592 (2.66) (4.08)
Taxes, other than federal income taxes 1,922 2,031 2,032 (5.37) (5.41)
Stationary, supplies and postage 2,945 3,619 3,370 (18.62) (12.61)
Bankcard, loan processing and other costs 12,269 11,008 12,461 11.46 (1.54)
Advertising 3,685 3,260 3,103 13.04 18.76
Professional services 4,467 8,351 5,358 (46.51) (16.63)
Telephone 2,115 2,424 2,599 (12.75) (18.62)
Amortization of intangibles 2,304 2,304 2,598 - (11.32)
FDIC expense 5,192 5,445 5,077 (4.65) 2.27
Other operating expenses 13,088 15,459 12,737 (15.34) 2.76
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Total noninterest expense $160,320 $166,963 $161,674 (3.98)% (0.84)%
-------- -------- -------- ------ ------
Efficiency ratio(1) 62.49% 64.27% 62.37%
Noninterest expense for the second quarter 2016 was $160.3 million, a decrease of $6.6 million, or 3.98%, from the first quarter 2016, and a decrease of $1.4 million, or 0.84%, from the second quarter 2015. Included in noninterest expense for the second quarter 2016 was $2.5 million of merger-related costs, or $1.6 million of after tax expense. Professional services expense decreased $3.9 million, or 46.51%, from the first quarter 2016, and $0.9 million, or 16.63%, from the second quarter 2015 primarily from merger-related costs. Salaries and wages decreased 0.7 million, or 0.95%, compared with the first quarter of 2016, demonstrating expense discipline. Other operating expense experienced a decrease of $2.4 million, or 15.34%, from the first quarter 2016 primarily due to a decrease in expense for the reserve for unfunded lending commitments, gain on sale of other real estate owned, which were offset by an increase in the expense for the FDIC true-up liability.
Provision for Income Taxes
The effective tax rate was 30.98% for the second quarter 2016, compared with 30.40% for the first quarter 2016, and 30.19% for the second quarter 2015.
(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 2Q 2016 vs.
------------------
2016 2016 2015 2016 2015
(Dollars in thousands) 2nd qtr 1st qtr 2nd qtr 1st qtr 2nd qtr
------- ------- ------- ------- -------
Net charge-offs $4,687 $7,630 $6,672 (38.57)% (29.75)%
Net charge-offs on average originated loans 0.13% 0.22% 0.20%
Nonperforming loans at period end $84,297 $73,701 $55,142 14.38 52.87
Nonperforming assets at period end 115,653 112,293 117,311 2.99 (1.41)
Allowance for loan losses 105,175 102,915 101,682 2.20 3.44
Allowance for loan losses to nonperforming loans 124.77% 139.64% 184.40%
Provision for originated loan losses $6,947 $5,410 $10,809 28.41 (35.73)
Nonperforming loans totaled $84.3 million at June 30, 2016, an increase of $10.6 million, or 14.38%, compared with March 31, 2016 and an increase of $29.2 million, or 52.87%, compared with June 30, 2015 due to two notes, approximating $12.2 million, with the remaining principal balances being paid off in full subsequent to June 30, 2016.
Nonperforming assets totaled $115.7 million at June 30, 2016, an increase of $3.4 million, or 2.99%, compared with March 31, 2016 and a decrease of $1.7 million, or 1.41%, compared with June 30, 2015. Nonperforming assets at June 30, 2016 represented 0.79% of period-end originated loans plus noncovered other real estate compared with 0.78% at March 31, 2016 and 0.87% at June 30, 2015. Included in nonperforming assets as of June 30, 2016 were $19.0 million of OREO no longer covered by FDIC loss share agreements.
The allowance for originated loan losses totaled $105.2 million at June 30, 2016. At June 30, 2016, the allowance for originated loan losses was 0.72% of period-end originated loans, compared with 0.72% at March 31, 2016, and 0.76% at June 30, 2015. 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 0.75% of period end originated loans at June 30, 2016, compared with 0.75% at March 31, 2016, and 0.79% at June 30, 2015. The allowance for credit losses to nonperforming loans was 129.65% at June 30, 2016, compared with 146.35% at March 31, 2016, and 191.48% at June 30, 2015.
Capital
Shareholders' equity was $3.0 billion at June 30, 2016 and March 31, 2016, and $2.9 billion as of June 30, 2015. The Corporation continued to have a strong capital position as tangible common equity(1) to assets was 8.48% at June 30, 2016, compared with 8.30% at March 31, 2016 and 8.09% at June 30, 2015. The common share cash dividend paid in the second quarter 2016 was $0.17 per share.
(1) - See Non-GAAP Financial Measures section of this release for a reconciliation to financial measures as defined by GAAP.
At June 30, 2016, Basel III capital ratios on a transitional basis remain well in excess of applicable regulatory requirements, with a total risk-based capital ratio of 13.94%, and a common equity tier 1 risk-based capital ratio of 10.75%.
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.
Adjusted net income, a non-GAAP financial measure, eliminates the effects of restructure, merger-related, and nonmerger-related real estate due to branch consolidation costs. This measure makes it easier to analyze our results by presenting them on a more comparable basis.
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) 2016 2016 2015 2015 2015
(Dollars in thousands) 2nd qtr 1st qtr 4th qtr 3rd qtr 2nd qtr
--------------------- ------- ------- ------- ------- -------
Net interest income (GAAP) $186,078 $185,156 $185,231 $185,323 $185,118
Plus: Fully taxable-equivalent adjustment 3,819 3,959 3,748 3,796 3,900
----- ----------------------------------- ----- ----- ----- ----- -----
Net interest income on a fully taxable-equivalent basis (non-GAAP) 189,897 189,115 188,979 189,119 189,018
Average earning assets 23,121,303 22,890,082 22,747,631 22,548,977 22,352,721
Net interest margin on a fully taxable-equivalent basis (non-GAAP) 3.30% 3.32% 3.30% 3.33% 3.39%
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Reconciliation of noninterest income and noninterest expense to adjusted noninterest income and adjusted noninterest expense
Quarters
(unaudited) 2016 2016 2015 2015 2015
(Dollars in thousands) 2nd qtr 1st qtr 4th qtr 3rd qtr 2nd qtr
--------------------- ------- ------- ------- ------- -------
Noninterest expense (GAAP) $160,320 $166,963 $155,622 $160,742 $161,674
Less: Intangible asset amortization 2,304 2,304 2,598 2,598 2,598
----- ----------------------------- ----- ----- ----- ----- -----
Adjusted noninterest expense (non-GAAP) 158,016 164,659 153,024 158,144 159,076
-------------------------------------- ------- ------- ------- ------- -------
Noninterest income (GAAP) 65,115 67,394 65,143 71,426 66,582
Less: Securities gains/(losses) 2,164 295 (5) 41 567
----- ------------------------- ----- --- --- --- ---
Adjusted noninterest income (non-GAAP) 62,951 67,099 65,148 71,385 66,015
Net interest income on a fully taxable-equivalent basis (non-GAAP) 189,897 189,115 188,979 189,119 189,018
----------------------------------------------------------------- ------- ------- ------- ------- -------
Adjusted revenue (non-GAAP) 252,848 256,214 254,127 260,504 255,033
-------------------------- ------- ------- ------- ------- -------
Efficiency ratio (non-GAAP) 62.49% 64.27% 60.22% 60.71% 62.37%
-------------------------- ----- ----- ----- ----- -----
Reconciliation of shareholders' equity to tangible common equity, and total assets to tangible assets
Quarters
(unaudited) 2016 2016 2015 2015 2015
(Dollars in thousands, except per share amounts) 2nd qtr 1st qtr 4th qtr 3rd qtr 2nd qtr
----------------------------------------------- ------- ------- ------- ------- -------
Shareholders' equity (GAAP) $3,047,159 $2,997,957 $2,940,095 $2,937,300 $2,887,957
Less: Preferred stock 100,000 100,000 100,000 100,000 100,000
----- --------------- ------- ------- ------- ------- -------
Common shareholders' equity (non-GAAP) 2,947,159 2,897,957 2,840,095 2,837,300 2,787,957
Less: Intangible assets 56,020 58,324 60,628 63,226 65,824
Goodwill 741,740 741,740 741,740 741,740 741,740
-------- ------- ------- ------- ------- -------
Tangible common equity (non-GAAP) 2,149,399 2,097,893 2,037,727 2,032,334 1,980,393
Total assets (GAAP) $26,150,587 $26,062,649 $25,524,604 $25,246,917 $25,297,014
Less: Intangible assets 56,020 58,324 60,628 63,226 65,824
Goodwill 741,740 741,740 741,740 741,740 741,740
Tangible assets (non-GAAP) $25,352,827 $25,262,585 $24,722,236 $24,441,951 $24,489,450
------------------------- ----------- ----------- ----------- ----------- -----------
Period end common shares 166,169 165,720 165,758 165,759 165,773
Tangible book value per common share $12.94 $12.66 $12.29 $12.26 $11.95
Common equity to total assets ratio (GAAP) 11.27% 11.12% 11.13% 11.24% 11.02%
----------------------------------------- ----- ----- ----- ----- -----
Tangible common equity to tangible assets ratio (non-GAAP) 8.48% 8.30% 8.24% 8.31% 8.09%
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Reconciliation of net income to adjusted net income
Quarters
(unaudited) 2016 2016 2015 2015 2015
(Dollars in thousands, except per share amounts) 2nd qtr 1st qtr 4th qtr 3rd qtr 2nd qtr
----------------------------------------------- ------- ------- ------- ------- -------
Net income (GAAP) $58,309 $54,136 $56,749 $59,012 $56,584
Net income adjustments
Plus: Merger-related personnel, and restructure expenses, net of taxes 813 332 (200) - -
Merger-related nonpersonnel expenses, net of taxes 799 3,214 - - -
Real estate write-downs due to branch consolidation costs, net of taxes 2,679 - - - 1,149
----------------------------------------------------------------------- ----- --- --- --- -----
Adjusted net income (non-GAAP) 62,600 57,682 56,549 59,012 57,733
----------------------------- ------ ------ ------ ------ ------
Annualized net income (GAAP) 234,518 217,734 225,145 234,124 226,958
Annualized adjusted net income (non-GAAP) 251,776 231,996 224,352 234,124 231,566
---------------------------------------- ------- ------- ------- ------- -------
Average assets (GAAP) 25,923,566 25,770,857 25,370,946 25,217,856 25,129,859
Average equity (GAAP) 3,012,218 2,970,167 2,943,268 2,909,660 2,892,432
Average tangible common equity (non-GAAP) 2,113,336 2,068,981 2,039,639 2,003,423 1,983,603
Return on average assets (GAAP) 0.90% 0.84% 0.89% 0.93% 0.90%
Adjusted return on average assets (non-GAAP) 0.97% 0.90% 0.88% 0.93% 0.92%
Return on average equity (GAAP) 7.79% 7.33% 7.65% 8.05% 7.85%
Adjusted return on average equity (non-GAAP) 8.36% 7.81% 7.62% 8.05% 8.01%
Return on average tangible common equity (non-GAAP) 11.10% 10.52% 11.04% 11.69% 11.44%
Adjusted return on average tangible common equity (non-GAAP) 11.91% 11.21% 11.00% 11.69% 11.67%
Net income used in diluted EPS calculation $56,344 $52,280 $54,827 $57,066 $54,648
Plus: Merger-related personnel costs, and restructure costs, net of taxes 813 332 (200) - -
Merger-related nonpersonnel costs, net of taxes 799 3,214 - - -
Real estate write-downs due to branch consolidation costs, net of taxes 2,679 - - - 1,149
----------------------------------------------------------------------- ----- --- --- --- -----
Adjusted net income used in diluted EPS calculation 60,635 55,826 54,627 57,066 55,797
(non-GAAP)
---------
Weighted average number of common shares outstanding - diluted 166,807 166,239 166,222 166,058 166,277
Diluted earnings per common share $0.34 $0.31 $0.33 $0.34 $0.33
Adjusted diluted earnings per common share (non-GAAP) 0.36 0.34 0.33 0.34 0.34
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Subsequent Events
The Corporation is required under GAAP to evaluate subsequent events through the filing of its consolidated financial statements for the six months ended June 30, 2016 on Form 10-Q. As a result, the Corporation will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of June 30, 2016 and will adjust amounts preliminarily reported, if necessary.
On July 8, 2016, the Corporation consummated the sale of 4 branches, located in Wisconsin, for a gain of approximately $1.2 million, after tax.
As previously disclosed, on July 13, 2016, Huntington and FirstMerit have reached an agreement with the U.S. Department of Justice to divest 13 FirstMerit branches and associated assets, deposits and employees located in Ohio.
About FirstMerit Corporation
FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of approximately $26.2 billion as of June 30, 2016, and 359 banking offices and 400 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, the ability to complete the proposed merger with Huntington in a timely manner, if at all, the possibility that the anticipated benefits of the merger with Huntington are not realized when expected or at all, 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) 2016 2016 2015 2015 2015
2nd qtr 1st qtr 4th qtr 3rd qtr 2nd qtr
------- ------- ------- ------- -------
EARNINGS
--------
Net interest income TE (1) $189,897 $189,115 $188,979 $189,119 $189,018
TE adjustment (1) 3,819 3,959 3,748 3,796 3,900
Provision for originated loan losses 6,947 5,410 12,487 10,402 10,809
Provision/(recapture) for acquired loan losses (341) 1,131 1,503 144 (952)
Provision/(recapture) for FDIC acquired loan losses (215) 1,268 (379) 3,729 (891)
Noninterest income 65,115 67,394 65,143 71,426 66,582
Noninterest expense 160,320 166,963 155,622 160,742 161,674
Net income 58,309 54,136 56,749 59,012 56,584
Diluted EPS (3) 0.34 0.31 0.33 0.34 0.33
-------------- ---- ---- ---- ---- ----
PERFORMANCE RATIOS
------------------
Return on average assets (ROA) 0.90% 0.84% 0.89% 0.93% 0.90%
Return on average equity (ROE) 7.79% 7.33% 7.65% 8.05% 7.85%
Return on average tangible common equity (1) 11.10% 10.52% 11.04% 11.69% 11.44%
Net interest margin TE (1) 3.30% 3.32% 3.30% 3.33% 3.39%
Efficiency ratio (1) 62.49% 64.27% 60.22% 60.71% 62.37%
Number of full-time equivalent employees 3,844 3,949 3,926 3,961 4,017
---------------------------------------- ----- ----- ----- ----- -----
MARKET DATA
-----------
Book value per common share $18.34 $18.09 $17.74 $17.72 $17.42
Tangible book value per common share (1) 12.94 12.66 12.29 12.26 11.95
Period end common share market value 20.27 21.05 18.65 17.67 20.83
Market as a % of book 111% 116% 105% 100% 120%
Cash dividends per common share $0.17 $0.17 $0.17 $0.17 $0.16
Common Stock dividend payout ratio 50.00% 54.84% 51.52% 50.00% 48.48%
Average basic common shares 166,188 165,745 165,762 165,762 165,736
Average diluted common shares 166,807 166,239 166,222 166,058 166,277
Period end common shares 166,169 165,720 165,758 165,759 165,773
Common shares repurchased 167 55 15 20 211
Common Stock market capitalization $3,368,246 $3,488,406 $3,091,387 $2,928,962 $3,453,052
---------------------------------- ---------- ---------- ---------- ---------- ----------
ASSET QUALITY (excluding acquired, FDIC acquired loans and covered OREO) (2)
---------------------------------------------------------------------------
Gross charge-offs $10,798 $13,014 $15,514 $13,398 $11,298
Net charge-offs 4,687 7,630 11,407 8,029 6,672
Allowance for originated loan losses 105,175 102,915 105,135 104,055 101,682
Reserve for unfunded lending commitments 4,112 4,944 4,068 3,574 3,905
Nonperforming assets (NPAs) 115,653 112,293 94,498 107,058 117,311
Net charge-offs to average loans ratio 0.13% 0.22% 0.33% 0.24% 0.20%
Allowance for originated loan losses to period-end loans 0.72% 0.72% 0.74% 0.76% 0.76%
Allowance for credit losses to period-end loans 0.75% 0.75% 0.77% 0.79% 0.79%
NPAs to loans and other real estate 0.79% 0.78% 0.67% 0.78% 0.87%
Allowance for originated loan losses to nonperforming loans 124.77% 139.64% 238.37% 221.22% 184.40%
Allowance for credit losses to nonperforming loans 129.65% 146.35% 247.60% 228.82% 191.48%
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CAPITAL & LIQUIDITY
-------------------
Period end tangible common equity to assets (1) 8.48% 8.30% 8.24% 8.31% 8.09%
Average equity to assets 11.62% 11.53% 11.60% 11.54% 11.51%
Average equity to total loans 18.56% 18.48% 18.50% 18.48% 18.59%
Average total loans to deposits 77.42% 77.87% 79.54% 78.91% 79.06%
------------------------------- ----- ----- ----- ----- -----
AVERAGE BALANCES
----------------
Assets $25,923,566 $25,770,857 $25,370,946 $25,217,856 $25,129,859
Deposits 20,967,450 20,635,665 20,002,793 19,957,586 19,682,662
Originated loans 14,489,924 14,187,793 13,863,910 13,528,268 13,092,972
Acquired loans, including FDIC acquired loans, less loss share receivable 1,743,799 1,881,965 2,047,167 2,219,488 2,468,035
Earning assets 23,121,303 22,890,082 22,747,631 22,548,977 22,352,721
Shareholders' equity 3,012,218 2,970,167 2,943,268 2,909,660 2,892,432
-------------------- --------- --------- --------- --------- ---------
ENDING BALANCES
---------------
Assets $26,150,587 $26,062,649 $25,524,604 $25,246,917 $25,297,014
Deposits 20,952,643 21,101,366 20,108,003 19,821,916 19,673,850
Originated loans 14,665,631 14,389,513 14,118,505 13,648,325 13,355,912
Acquired loans, including FDIC acquired loans, less loss share receivable 1,669,420 1,826,501 1,948,493 2,140,029 2,337,378
Goodwill 741,740 741,740 741,740 741,740 741,740
Intangible assets 56,020 58,324 60,628 63,226 65,824
Earning assets 23,432,253 23,525,620 22,955,435 22,661,171 22,599,272
Total shareholders' equity 3,047,159 2,997,957 2,940,095 2,937,300 2,887,957
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 June 30, 2016, $65.0 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) June 30, December 31, June 30,
(Unaudited, except December 31, 2015, which is derived from the audited financial statements) 2016 2015 2015
---- ---- ----
ASSETS
Cash and due from banks $420,818 $380,799 $472,848
Interest-bearing deposits in banks 103,469 83,018 114,741
---------------------------------- ------- ------ -------
Total cash and cash equivalents 524,287 463,817 587,589
Investment securities:
Held-to-maturity 2,514,161 2,674,093 2,787,513
Available-for-sale 4,318,688 3,967,735 3,838,509
Other investments 148,367 148,172 147,967
Loans held for sale 3,962 5,472 5,432
Loans 16,343,606 16,076,945 15,705,110
Allowance for loan losses (149,649) (153,691) (148,259)
------------------------- -------- -------- --------
Net loans 16,193,957 15,923,254 15,556,851
Premises and equipment, net 293,209 319,488 313,819
Goodwill 741,740 741,740 741,740
Intangible assets 56,020 60,628 65,824
Covered other real estate 940 2,134 1,065
Accrued interest receivable and other assets 1,355,256 1,218,071 1,250,705
-------------------------------------------- --------- --------- ---------
Total assets $26,150,587 $25,524,604 $25,297,014
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $6,011,531 $5,942,248 $5,725,850
Interest-bearing 3,477,483 3,476,729 3,304,969
Savings and money market accounts 9,354,868 8,450,123 8,418,716
Certificates and other time deposits 2,108,761 2,238,903 2,224,315
------------------------------------ --------- --------- ---------
Total deposits 20,952,643 20,108,003 19,673,850
-------------- ---------- ---------- ----------
Federal funds purchased and securities sold under agreements to
repurchase 686,890 1,037,075 1,519,250
Wholesale borrowings 468,447 580,648 366,074
Long-term debt 526,389 505,173 497,393
Accrued taxes, expenses, and other liabilities 469,059 353,610 352,490
---------------------------------------------- ------- ------- -------
Total liabilities 23,103,428 22,584,509 22,409,057
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 - - -
Common Stock, without par value; authorized 300,000,000 shares; issued: June 30, 2016, December 31, 2015 and June 30, 2015 - 170,183,515 shares 127,937 127,937 127,937
Capital surplus 1,383,266 1,386,677 1,379,194
Accumulated other comprehensive loss (29,473) (79,274) (67,621)
Retained earnings 1,572,681 1,519,438 1,462,859
Treasury stock, at cost: June 30, 2016 - 4,014,513; December 31, 2015 - 4,425,927; June 30, 2015 - 4,410,939 shares (107,252) (114,683) (114,412)
------------------------------------------------------------------------------------------------------------------- -------- -------- --------
Total shareholders' equity 3,047,159 2,940,095 2,887,957
-------------------------- ---------
Total liabilities and shareholders' equity $26,150,587 $25,524,604 $25,297,014
=========== =========== ===========
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Period End Loans by Product Type
(Unaudited) As of June 30, 2016
-------------------
(In thousands) Originated Loans Acquired Loans (1) FDIC Acquired Loans (2) Total Loans
---------------- ----------------- ---------------------- -----------
C&I $5,882,994 $181,503 $31,274 $6,095,771
CRE 2,035,498 368,800 79,888 2,484,186
Construction 705,340 4,111 4,631 714,082
Leases 508,534 - - 508,534
---
Total Commercial 9,132,366 554,414 115,793 9,802,573
Mortgage 728,534 292,877 33,370 1,054,781
Installment 3,353,084 494,429 1,808 3,849,321
Home equity 1,276,661 146,916 29,813 1,453,390
Credit card 174,986 - - 174,986
---
Total Consumer 5,533,265 934,222 64,991 6,532,478
--------- ------- ------ ---------
Subtotal 14,665,631 1,488,636 180,784 16,335,051
Loss share receivable - - 8,555 8,555
-----
Total loans 14,665,631 1,488,636 189,339 16,343,606
Allowance for loan losses (105,175) (4,256) (40,218) (149,649)
------- --------
Net loans $14,560,456 $1,484,380 $149,121 $16,193,957
=========== ========== ======== ===========
As of March 31, 2016
--------------------
Originated Loans Acquired Loans (1) FDIC Acquired Loans (2) Total Loans
---------------- ----------------- ---------------------- -----------
C&I $5,837,315 $230,700 $31,930 $6,099,945
CRE 2,079,662 391,863 85,304 2,556,829
Construction 670,825 5,467 4,889 681,181
Leases 512,929 - - 512,929
---
Total Commercial 9,100,731 628,030 122,123 9,850,884
Mortgage 700,138 308,618 34,594 1,043,350
Installment 3,154,912 539,313 1,942 3,696,167
Home equity 1,254,709 157,745 34,136 1,446,590
Credit card 179,023 - - 179,023
Total Consumer 5,288,782 1,005,676 70,672 6,365,130
--------- --------- ------ ---------
Subtotal 14,389,513 1,633,706 192,795 16,216,014
Loss share receivable - - 9,436 9,436
-----
Total loans 14,389,513 1,633,706 202,231 16,225,450
Allowance for loan losses (102,915) (4,423) (44,599) (151,937)
------- --------
Net loans $14,286,598 $1,629,283 $157,632 $16,073,513
=========== ========== ======== ===========
As of December 31, 2015
-----------------------
Originated Loans Acquired Loans (1) FDIC Acquired Loans (2) Total Loans
---------------- ----------------- ---------------------- -----------
C&I $5,793,408 $240,145 $35,466 $6,069,019
CRE 2,077,344 430,891 87,774 2,596,009
Construction 645,337 6,113 5,869 657,319
Leases 491,741 - - 491,741
---
Total Commercial 9,007,830 677,149 129,109 9,814,088
Mortgage 689,045 324,008 35,568 1,048,621
Installment 2,990,349 573,372 2,077 3,565,798
Home equity 1,248,438 168,542 38,668 1,455,648
Credit card 182,843 - - 182,843
Total Consumer 5,110,675 1,065,922 76,313 6,252,910
--------- --------- ------ ---------
Subtotal 14,118,505 1,743,071 205,422 16,066,998
Loss share receivable - - 9,947 9,947
-----
Total loans 14,118,505 1,743,071 215,369 16,076,945
Allowance for loan losses (105,135) (3,877) (44,679) (153,691)
------- --------
Net loans $14,013,370 $1,739,194 $170,690 $15,923,254
=========== ========== ======== ===========
As of September 30, 2015
------------------------
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
=========== ========== ======== ===========
(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. Certain non-single family loss share agreements with the FDIC expired at March 31, 2015 and June 30, 2015. As of June 30, 2016, $65.0 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) June 30, March 31, December 31, September 30, June 30,
(In thousands) 2016 2016 2015 2015 2015
---- ---- ---- ---- ----
ASSETS
Cash and cash equivalents $622,355 $724,095 $415,756 $457,317 $518,820
Investment securities:
Held-to-maturity 2,562,583 2,636,516 2,713,636 2,754,001 2,806,325
Available-for-sale 4,163,822 4,020,701 3,959,051 3,881,959 3,816,827
Other investments 148,344 148,165 148,176 147,961 148,577
Loans held for sale 3,652 5,253 5,028 4,929 3,631
Loans 16,242,902 16,079,447 15,921,740 15,760,127 15,577,361
Allowance for loan losses (151,267) (152,600) (151,192) (147,136) (146,558)
-------- -------- -------- -------- --------
Net loans 16,091,635 15,926,847 15,770,548 15,612,991 15,430,803
Total earning assets 23,121,303 22,890,082 22,747,631 22,548,977 22,352,721
Premises and equipment, net 301,717 313,056 312,771 313,336 320,492
Accrued interest receivable and other assets 2,029,458 1,996,224 2,045,980 2,045,362 2,084,384
--------- --------- --------- --------- ---------
TOTAL ASSETS $25,923,566 $25,770,857 $25,370,946 $25,217,856 $25,129,859
=========== =========== =========== =========== ===========
LIABILITIES
Deposits:
Noninterest-bearing $6,035,959 $5,990,796 $5,982,186 $5,897,768 $5,722,240
Interest-bearing 3,601,589 3,590,598 3,352,908 3,353,541 3,203,836
Savings and money market accounts 9,223,623 8,851,135 8,408,703 8,480,682 8,467,845
Certificates and other time deposits 2,106,279 2,203,136 2,258,996 2,225,595 2,288,741
--------- --------- --------- --------- ---------
Total deposits 20,967,450 20,635,665 20,002,793 19,957,586 19,682,662
Federal funds purchased and securities sold under
agreements to repurchase 689,279 844,290 1,131,659 1,109,924 1,285,920
Wholesale borrowings 376,838 473,149 402,679 377,594 393,379
Long-term debt 519,376 505,376 508,954 497,566 508,744
------- ------- ------- ------- -------
Total funds 22,552,943 22,458,480 22,046,085 21,942,670 21,870,705
Accrued taxes, expenses and other liabilities 358,405 342,210 381,593 365,526 366,722
------- ------- ------- ------- -------
Total liabilities 22,911,348 22,800,690 22,427,678 22,308,196 22,237,427
SHAREHOLDERS' EQUITY
Preferred stock 100,000 100,000 100,000 100,000 100,000
Common stock warrant - - - - 1,385
Common stock 127,937 127,937 127,937 127,937 127,937
Capital surplus 1,381,423 1,388,171 1,383,777 1,380,622 1,382,717
Accumulated other comprehensive loss (48,020) (61,309) (60,821) (63,402) (51,571)
Retained earnings 1,557,784 1,530,545 1,507,069 1,479,181 1,447,195
Treasury stock (106,906) (115,177) (114,694) (114,678) (115,231)
-------- -------- -------- -------- --------
Total shareholders' equity 3,012,218 2,970,167 2,943,268 2,909,660 2,892,432
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $25,923,566 $25,770,857 $25,370,946 $25,217,856 $25,129,859
=========== =========== =========== =========== ===========
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Average Loans by Product Type
(Unaudited)
(In thousands) Three Months Ended June 30, 2016
--------------------------------
Originated Loans Acquired Loans (1) FDIC Acquired Loans (2) Total Loans
---------------- ----------------- ---------------------- -----------
C&I $5,809,398 $199,284 $32,235 $6,040,917
CRE 2,082,740 382,614 83,582 2,548,936
Construction 677,802 5,061 4,682 687,545
Leases 510,273 - - 510,273
--- ---
Total Commercial 9,080,213 586,959 120,499 9,787,671
Mortgage 708,899 299,414 34,047 1,042,360
Installment 3,253,720 517,193 1,874 3,772,787
Home equity 1,270,307 152,556 31,257 1,454,120
Credit card 176,785 - - 176,785
--- ---
Total Consumer 5,409,711 969,163 67,178 6,446,052
Subtotal 14,489,924 1,556,122 187,677 16,233,723
Loss share receivable - - 9,179 9,179
Total loans 14,489,924 1,556,122 196,856 16,242,902
Allowance for loan losses (103,889) (4,121) (43,257) (151,267)
-------- ------ ------- --------
Net loans $14,386,035 $1,552,001 $153,599 $16,091,635
=========== ========== ======== ===========
Three Months Ended March 31, 2016
---------------------------------
Originated Loans Acquired Loans (1) FDIC Acquired Loans (2) Total Loans
---------------- ----------------- ---------------------- -----------
C&I $5,778,863 $225,036 $33,090 $6,036,989
CRE 2,082,698 415,678 86,816 2,585,192
Construction 660,967 5,604 5,207 671,778
Leases 492,124 - - 492,124
--- ---
Total Commercial 9,014,652 646,318 125,113 9,786,083
Mortgage 694,598 316,722 34,942 1,046,262
Installment 3,047,754 557,826 1,985 3,607,565
Home equity 1,251,696 162,930 36,129 1,450,755
Credit card 179,093 - - 179,093
---
Total Consumer 5,173,141 1,037,478 73,056 6,283,675
Subtotal 14,187,793 1,683,796 198,169 16,069,758
Loss share receivable - - 9,689 9,689
Total loans 14,187,793 1,683,796 207,858 16,079,447
Allowance for loan losses (104,468) (3,970) (44,162) (152,600)
-------- ------ ------- --------
Net loans $14,083,325 $1,679,826 $163,696 $15,926,847
=========== ========== ======== ===========
Three Months Ended December 31, 2015
------------------------------------
Originated Loans Acquired Loans (1) FDIC Acquired Loans (2) Total Loans
---------------- ----------------- ---------------------- -----------
C&I $5,640,987 $263,937 $36,903 $5,941,827
CRE 2,090,700 463,379 91,944 2,646,023
Construction 628,139 6,143 5,858 640,140
Leases 461,798 - - 461,798
--- ---
Total Commercial 8,821,624 733,459 134,705 9,689,788
Mortgage 682,185 331,283 35,919 1,049,387
Installment 2,950,953 590,352 2,108 3,543,413
Home equity 1,232,035 175,827 43,514 1,451,376
Credit card 177,113 - - 177,113
---
Total Consumer 5,042,286 1,097,462 81,541 6,221,289
Subtotal 13,863,910 1,830,921 216,246 15,911,077
Loss share receivable - - 10,663 10,663
Total loans 13,863,910 1,830,921 226,909 15,921,740
Allowance for loan losses (102,524) (2,750) (45,918) (151,192)
-------- ------ ------- --------
Net loans $13,761,386 $1,828,171 $180,991 $15,770,548
=========== ========== ======== ===========
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
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
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
=========== ========== ======== ===========
(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 SUBSIDARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Fully Tax-equivalent Interest Rates and Interest Differential
Three months ended Three months ended Three months ended
------------------ ------------------ ------------------
June 30, 2016 March 31, 2016 June 30, 2015
------------- -------------- -------------
(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 $622,355 $724,095 $518,820
Investment securities and federal funds
sold:
U.S. treasury securities and U.S. government 5,558,522 $28,018 2.03% 5,470,079 $27,763 2.04% 5,452,598 $27,098 1.99%
agency obligations (taxable)
Obligations of states and political subdivisions (tax exempt) 702,550 7,755 4.44% 743,159 8,161 4.42% 724,653 8,443 4.67%
Other securities and federal funds sold 613,677 5,331 3.49% 592,144 5,386 3.66% 594,478 5,077 3.43%
--------------------------------------- ------- ----- ------- ----- ------- -----
Total investment securities and federal funds sold 6,874,749 41,104 2.40% 6,805,382 41,310 2.44% 6,771,729 40,618 2.41%
Loans held for sale 3,652 33 3.63% 5,253 52 3.98% 3,631 46 5.08%
Loans, including loss share receivable (2) 16,242,902 164,022 4.06% 16,079,447 163,285 4.08% 15,577,361 162,610 4.19%
----------------------------------------- ---------- ------- ---------- ------- ---------- -------
Total earning assets 23,121,303 $205,159 3.57% 22,890,082 $204,647 3.60% 22,352,721 $203,274 3.65%
Total allowance for loan losses (151,267) (152,600) (146,558)
Other assets 2,331,175 2,309,280 2,404,876
------------ --------- --------- ---------
Total assets $25,923,566 $25,770,857 $25,129,859
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $6,035,959 $ - - % $5,990,796 $ - - % $5,722,240 $ - - %
Interest-bearing 3,601,589 1,013 0.11% 3,590,598 929 0.10% 3,203,836 783 0.10%
Savings and money market accounts 9,223,623 5,641 0.25% 8,851,135 5,652 0.26% 8,467,845 5,588 0.26%
Certificates and other time deposits 2,106,279 3,116 0.60% 2,203,136 3,289 0.60% 2,288,741 2,510 0.44%
------------------------------------ --------- ----- --------- ----- --------- -----
Total deposits 20,967,450 9,770 0.19% 20,635,665 9,870 0.19% 19,682,662 8,881 0.18%
Securities sold under agreements to repurchase 689,279 109 0.06% 844,290 265 0.13% 1,285,920 329 0.10%
Wholesale borrowings 376,838 1,121 1.20% 473,149 1,234 1.05% 393,379 1,129 1.15%
Long-term debt 519,376 4,262 3.30% 505,376 4,163 3.31% 508,744 3,917 3.09%
-------------- ------- ----- ------- ----- ------- -----
Total interest-bearing liabilities 16,516,984 15,262 0.37% 16,467,684 15,532 0.38% 16,148,465 14,256 0.35%
Other liabilities 358,405 342,210 366,722
Shareholders' equity 3,012,218 2,970,167 2,892,432
-------------------- --------- --------- ---------
Total liabilities and shareholders' equity $25,923,566 $25,770,857 $25,129,859
=========== =========== ===========
Net yield on earning assets $23,121,303 $189,897 3.30% $22,890,082 $189,115 3.32% $22,352,721 $189,018 3.39%
=========== ======== ==== =========== ======== ==== =========== ======== ====
Interest rate spread 3.20% 3.22% 3.30%
==== ==== ====
(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, $4.0 million, and $3.9 million for the three months ended June 30, 2016, March 31, 2016, and June 30, 2015, respectively.
(2) Nonaccrual loans have been included in the average balances.
FIRSTMERIT CORPORATION AND SUBSIDARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Fully Tax-equivalent Interest Rates and Interest Differential
Six Months Ended Six Months Ended
---------------- ----------------
June 30, 2016 June 30, 2015
------------- -------------
(Unaudited) Average Average Average Average
(Dollars in thousands) Balance Interest (1) Rate Balance Interest (1) Rate
------- ----------- ---- ------- ----------- ----
ASSETS
Cash and cash equivalents $673,225 $540,920
Investment securities and federal funds sold:
U.S. treasury securities and U.S. government agency obligations (taxable) 5,514,302 $55,782 2.03% 5,391,501 $53,858 2.01%
Obligations of states and political subdivisions (tax exempt) 722,854 15,916 4.43% 728,882 17,590 4.87%
Other securities and federal funds sold 602,910 10,717 3.57% 599,648 10,267 3.45%
------- ------ ------- ------
Total investment securities and federal funds sold 6,840,066 82,415 2.42% 6,720,031 81,715 2.45%
Loans held for sale 4,453 85 3.84% 4,550 103 4.56%
Loans, including loss share receivable (2) 16,161,173 327,306 4.07% 15,502,686 324,902 4.23%
---------- ------- ---------- -------
Total earning assets 23,005,692 $409,806 3.58% 22,227,267 $406,720 3.69%
Total allowance for loan losses (151,935) (145,467)
Other assets 2,319,665 2,393,014
--------- ---------
Total assets $25,846,647 $25,015,734
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $6,013,378 $ - - % $5,725,483 $ - - %
Interest-bearing 3,596,094 1,942 0.11% 3,206,545 1,550 0.10%
Savings and money market accounts 9,037,379 11,293 0.25% 8,504,794 11,135 0.26%
Certificates and other time deposits 2,154,708 6,405 0.60% 2,298,677 4,687 0.41%
--------- ----- --------- -----
Total deposits 20,801,559 19,640 0.19% 19,735,499 17,372 0.18%
Securities sold under agreements to repurchase 766,785 374 0.10% 1,156,113 572 0.10%
Wholesale borrowings 424,993 2,355 1.11% 372,302 2,289 1.24%
Long-term debt 512,376 8,425 3.31% 505,125 7,915 3.16%
------- ----- ------- -----
Total interest-bearing liabilities 16,492,335 30,794 0.38% 16,043,556 28,148 0.35%
Other liabilities 349,744 367,226
Shareholders' equity 2,991,190 2,879,469
--------- ---------
Total liabilities and shareholders' equity $25,846,647 $25,015,734
=========== ===========
Net yield on earning assets $23,005,692 $379,012 3.31% $22,227,267 $378,572 3.43%
=========== ======== ==== =========== ======== ====
Interest rate spread 3.20% 3.34%
==== ====
((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 $7.8 million and $7.8 million for the six months ended June 30, 2016 and 2015, respectively.
((2)) Nonaccrual loans have been included in the average balances.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) Three Months Ended Six Months Ended
(In thousands, except per share amounts) June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
Interest income:
Loans and loans held for sale $162,977 $161,872 $325,255 $323,411
Investment securities:
Taxable 33,350 32,175 66,499 64,125
Tax-exempt 5,013 5,327 10,274 11,353
---------- ----- ----- ------ ------
Total investment securities interest 38,363 37,502 76,773 75,478
------------------------------------ ------ ------ ------ ------
Total interest income 201,340 199,374 402,028 398,889
Interest expense:
Deposits:
Interest-bearing 1,013 783 1,942 1,550
Savings and money market accounts 5,641 5,588 11,293 11,135
Certificates and other time deposits 3,116 2,510 6,405 4,687
Federal funds purchased and securities sold under
agreements to repurchase 109 329 374 572
Wholesale borrowings 1,121 1,129 2,355 2,289
Long-term debt 4,262 3,917 8,425 7,915
-------------- ----- ----- ----- -----
Total interest expense 15,262 14,256 30,794 28,148
---------------------- ------ ------ ------ ------
Net interest income 186,078 185,118 371,234 370,741
Provision for loan losses 6,391 8,966 14,200 17,214
------------------------- ----- ----- ------ ------
Net interest income after provision for loan
losses 179,687 176,152 357,034 353,527
Noninterest income:
Trust department income 11,167 10,820 21,451 20,969
Service charges on deposits 16,263 16,704 31,849 32,372
Credit card fees 14,942 14,124 28,520 26,773
ATM and other service fees 6,427 6,345 12,661 12,444
Bank owned life insurance income 4,186 3,697 7,882 7,289
Investment services and insurance 3,851 3,871 7,756 7,575
Investment securities gains/(losses), net 2,164 567 2,459 921
Loan sales and servicing income 1,995 3,276 3,847 4,876
Other operating income 4,120 7,178 16,084 19,210
---------------------- ----- ----- ------ ------
Total noninterest income 65,115 66,582 132,509 132,429
------------------------ ------ ------ ------- -------
Noninterest expense:
Salaries, wages, pension and employee benefits 86,789 86,020 172,669 176,546
Net occupancy expense 13,466 13,727 28,240 29,681
Equipment expense 12,078 12,592 24,486 23,617
Stationery, supplies and postage 2,945 3,370 6,564 6,898
Bankcard, loan processing and other costs 12,269 12,461 23,277 23,600
Professional services 4,467 5,358 12,818 9,368
Amortization of intangibles 2,304 2,598 4,608 5,196
FDIC insurance expense 5,192 5,077 10,637 10,244
Other operating expense 20,810 20,471 43,984 37,176
----------------------- ------ ------ ------ ------
Total noninterest expense 160,320 161,674 327,283 322,326
------------------------- ------- ------- ------- -------
Income before income tax expense 84,482 81,060 162,260 163,630
Income tax expense 26,173 24,476 49,815 49,907
------------------ ------ ------ ------ ------
Net income $58,309 $56,584 $112,445 $113,723
Less: Net income allocated to participating shareholders 496 467 955 937
Preferred stock dividends 1,469 1,469 2,938 2,938
------------------------- ----- ----- -----
Net income attributable to common shareholders $56,344 $54,648 $108,552 $109,848
======= ======= ======== ========
Net income used in diluted EPS calculation $56,344 $54,648 $108,552 $109,848
======= ======= ======== ========
Weighted average number of common shares outstanding - basic 166,188 165,736 165,966 165,574
Weighted average number of common shares outstanding - diluted 166,807 166,277 166,563 166,089
Basic earnings per common share $0.34 $0.33 $0.65 $0.66
Diluted earnings per common share 0.34 0.33 0.65 0.66
Cash dividends per common share 0.17 0.16 0.34 0.32
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) Three Months Ended Six Months Ended
------------------ ----------------
June 30, 2016 June 30, 2016
------------- -------------
(In thousands) Pre-tax Tax After-tax Pre-tax Tax After-tax
------- --- --------- ------- --- ---------
Net Income $84,482 $26,173 $58,309 $162,260 $49,815 $112,445
Other comprehensive income/(loss)
Unrealized gains and losses on securities available for sale:
Changes in unrealized securities' holding gains/(losses) 31,489 11,431 20,058 79,868 28,994 50,874
Changes in unrealized securities' holding gains/(losses) that result from securities being transferred from
available-for-sale into held-to-maturity (4,549) (1,651) (2,898) (5,990) (1,799) (4,191)
Net losses/(gains) realized on sale of securities reclassified to noninterest income 2,164 786 1,378 2,459 893 1,566
----- --- ----- ----- --- -----
Net change in unrealized gains/(losses) on securities available for sale 29,104 10,566 18,538 76,337 28,088 48,249
Pension plans and other postretirement benefits:
Amortization of actuarial gain 1,076 390 686 3,244 1,163 2,081
Amortization of prior service cost reclassified to other noninterest expense (560) (204) (356) (820) (291) (529)
---- ---- ---- ---- ---- ----
Net change from defined benefit pension plans 516 186 330 2,424 872 1,552
--- --- --- ----- --- -----
Total other comprehensive gains/(losses) 29,620 10,752 18,868 78,761 28,960 49,801
------ ------ ------ ------ ------ ------
Comprehensive income $114,102 $36,925 $77,177 $241,021 $78,775 $162,246
======== ======= ======= ======== ======= ========
Three Months Ended Six Months Ended
------------------
June 30, 2015 June 30, 2015
------------- -------------
(In thousands) Pre-tax Tax After-tax Pre-tax Tax After-tax
------- --- --------- ------- --- ---------
Net Income $81,060 $24,476 $56,584 $163,630 $49,907 $113,723
Other comprehensive income/(loss)
Unrealized gains and losses on securities available for sale:
Changes in unrealized securities' holding gains/(losses) (28,642) (10,024) (18,618) 5,475 1,916 3,559
Changes in unrealized securities' holding gains/(losses) that result from securities being transferred from
available-for-sale into held-to-maturity (575) (203) (372) (1,079) (378) (701)
Net losses/(gains) realized on sale of securities reclassified to noninterest income (567) (198) (369) (921) (322) (599)
---- ---- ---- ---- ---- ----
Net change in unrealized gains/(losses) on securities available for sale (29,784) (10,425) (19,359) 3,475 1,216 2,259
------- ------- ------- ----- ----- -----
Pension plans and other postretirement benefits:
Amortization of actuarial gain 1,138 399 739 2,276 797 1,479
Amortization of prior service cost reclassified to other noninterest expense 410 144 266 820 287 533
--- --- --- --- --- ---
Net change from defined benefit pension plans 1,548 543 1,005 3,096 1,084 2,012
----- --- ----- ----- ----- -----
Total other comprehensive gains/(losses) (28,236) (9,882) (18,354) 6,571 2,300 4,271
------- ------ ------- ----- ----- -----
Comprehensive income $52,824 $14,594 $38,230 $170,201 $52,207 $117,994
======= ======= ======= ======== ======= ========
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME---LINKED QUARTERS
Quarterly Results
-----------------
(In thousands, except per share amounts) 2016 2016 2015 2015 2015
(Unaudited) 2nd qtr 1st qtr 4th qtr 3rd qtr 2nd qtr
---------- ------- ------- ------- ------- -------
Interest Income:
Loans and loans held for sale $162,977 $162,278 $162,168 $162,204 $161,872
Investment securities 38,363 38,410 38,401 37,855 37,502
--------------------- ------ ------ ------ ------ ------
Total interest income 201,340 200,688 200,569 200,059 199,374
--------------------- ------- ------- ------- ------- -------
Interest expense:
Deposits:
Interest-bearing 1,013 929 754 750 783
Savings and money market accounts 5,641 5,652 5,611 5,639 5,588
Certificates and other time deposits 3,116 3,289 3,378 2,757 2,510
Federal funds purchased and securities sold under agreements to repurchase 109 265 300 254 329
Wholesale borrowings 1,121 1,234 1,202 1,171 1,129
Long-term debt 4,262 4,163 4,093 4,165 3,917
-------------- ----- ----- ----- ----- -----
Total interest expense 15,262 15,532 15,338 14,736 14,256
---------------------- ------ ------ ------ ------ ------
Net interest income 186,078 185,156 185,231 185,323 185,118
Provision for loan losses 6,391 7,809 13,611 14,275 8,966
------------------------- ----- ----- ------ ------ -----
Net interest income after provision for loan losses 179,687 177,347 171,620 171,048 176,152
Noninterest income:
Trust department income 11,167 10,284 10,208 10,948 10,820
Service charges on deposits 16,263 15,586 16,793 17,295 16,704
Credit card fees 14,942 13,578 13,931 13,939 14,124
ATM and other service fees 6,427 6,234 6,626 6,518 6,345
Bank owned life insurance income 4,186 3,696 3,836 4,622 3,697
Investment services and insurance 3,851 3,905 3,816 4,032 3,871
Investment securities gains/(losses), net 2,164 295 (5) 41 567
Loan sales and servicing income 1,995 1,852 2,276 2,414 3,276
Other operating income 4,120 11,964 7,662 11,617 7,178
---------------------- ----- ------ ----- ------ -----
Total noninterest income 65,115 67,394 65,143 71,426 66,582
------------------------ ------ ------ ------ ------ ------
Noninterest expense:
Salaries, wages, pension and employee benefits 86,789 85,880 86,490 85,772 86,020
Net occupancy expense 13,466 14,774 12,716 13,540 13,727
Equipment expense 12,078 12,408 12,074 12,235 12,592
Stationery, supplies and postage 2,945 3,619 3,222 3,304 3,370
Bankcard, loan processing and other costs 12,269 11,008 11,146 12,335 12,461
Professional services 4,467 8,351 5,056 5,154 5,358
Amortization of intangibles 2,304 2,304 2,598 2,598 2,598
FDIC insurance expense 5,192 5,445 5,252 5,234 5,077
Other operating expense 20,810 23,174 17,068 20,570 20,471
----------------------- ------ ------ ------ ------ ------
Total noninterest expense 160,320 166,963 155,622 160,742 161,674
------------------------- ------- ------- ------- ------- -------
Income before income tax expense 84,482 77,778 81,141 81,732 81,060
Income tax expense 26,173 23,642 24,392 22,720 24,476
------------------ ------ ------ ------ ------ ------
Net income 58,309 54,136 56,749 59,012 56,584
Less: Net income allocated to participating shareholders 496 387 453 477 467
Preferred stock dividends 1,469 1,469 1,469 1,469 1,469
------------------------- ----- ----- ----- ----- -----
Net income attributable to common shareholders $56,344 $52,280 $54,827 $57,066 $54,648
======= ======= ======= ======= =======
Net income used in diluted EPS calculation $56,344 $52,280 $54,827 $57,066 $54,648
======= ======= ======= ======= =======
Weighted-average number of common shares outstanding - basic 166,188 165,745 165,762 165,762 165,736
Weighted-average number of common shares outstanding- diluted 166,807 166,239 166,222 166,058 166,277
Basic earnings per common share $0.34 $0.32 $0.33 $0.34 $0.33
Diluted earnings per common share $0.34 $0.31 $0.33 $0.34 $0.33
Cash dividends per common share $0.17 $0.17 $0.17 $0.17 $0.16
FIRSTMERIT CORPORATION AND SUBSIDIARIES
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(In thousands)
2016 2016 2015 2015 2015
Noninterest income detail 2nd qtr 1st qtr 4th qtr 3rd qtr 2nd qtr
------------------------- ------- ------- ------- ------- -------
Trust department income $11,167 $10,284 $10,208 $10,948 $10,820
Service charges on deposits 16,263 15,586 16,793 17,295 16,704
Credit card fees 14,942 13,578 13,931 13,939 14,124
ATM and other service fees 6,427 6,234 6,626 6,518 6,345
Bank owned life insurance income 4,186 3,696 3,836 4,622 3,697
Investment services and insurance 3,851 3,905 3,816 4,032 3,871
Investment securities gains/(losses), net 2,164 295 (5) 41 567
Loan sales and servicing income 1,995 1,852 2,276 2,414 3,276
Other operating income 4,120 11,964 7,662 11,617 7,178
---------------------- ----- ------ ----- ------ -----
Total Noninterest Income $65,115 $67,394 $65,143 $71,426 $66,582
======= ======= ======= ======= =======
2016 2016 2015 2015 2015
Noninterest expense detail 2nd qtr 1st qtr 4th qtr 3rd qtr 2nd qtr
-------------------------- ------- ------- ------- ------- -------
Salaries and wages $68,752 $69,410 $68,151 $68,775 $67,485
Pension and employee benefits 18,037 16,470 18,339 16,997 18,535
Net occupancy expense 13,466 14,774 12,716 13,540 13,727
Equipment expense 12,078 12,408 12,074 12,235 12,592
Taxes, other than federal income taxes 1,922 2,031 2,096 2,003 2,032
Stationery, supplies and postage 2,945 3,619 3,222 3,304 3,370
Bankcard, loan processing and other costs 12,269 11,008 11,146 12,335 12,461
Advertising 3,685 3,260 3,386 4,278 3,103
Professional services 4,467 8,351 5,056 5,154 5,358
Telephone 2,115 2,424 2,530 2,480 2,599
Amortization of intangibles 2,304 2,304 2,598 2,598 2,598
FDIC insurance expense 5,192 5,445 5,252 5,234 5,077
Other operating expense 13,088 15,459 9,056 11,809 12,737
----------------------- ------ ------ ----- ------ ------
Total Noninterest Expense $160,320 $166,963 $155,622 $160,742 $161,674
======== ======== ======== ======== ========
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION (excluding acquired loans, FDIC acquired loans, and covered OREO) (1)
(Unaudited) (Audited)
(Dollars in thousands) Quarterly Periods Annual Period
----------------- -------------
June 30, March 31, December 31, September 30, June 30, December 31,
Allowance for Credit Losses 2016 2016 2015 2015 2015 2015
--------------------------- ---- ---- ---- ---- ---- ----
Allowance for originated loan losses, beginning of period $102,915 $105,135 $104,055 $101,682 $97,545 $95,696
Provision for originated loan losses 6,947 5,410 12,487 10,402 10,809 39,734
Charge-offs 10,798 13,014 15,514 13,398 11,298 48,778
Recoveries 6,111 5,384 4,107 5,369 4,626 18,483
----- ----- ----- ----- ----- ------
Net charge-offs 4,687 7,630 11,407 8,029 6,672 30,295
----- ----- ------ ----- ----- ------
Allowance for originated loan losses, end of period $105,175 $102,915 $105,135 $104,055 $101,682 $105,135
======== ======== ======== ======== ======== ========
Reserve for unfunded lending commitments,
beginning of period $4,944 $4,068 $3,574 $3,905 $4,330 $5,848
Provision for (relief of) credit losses (832) 876 494 (331) (425) (1,780)
---- --- --- ---- ---- ------
Reserve for unfunded lending commitments,
end of period $4,112 $4,944 $4,068 $3,574 $3,905 $4,068
====== ====== ====== ====== ====== ======
Allowance for Credit Losses $109,287 $107,859 $109,203 $107,629 $105,587 $109,203
======== ======== ======== ======== ======== ========
Ratios
------
Provision for loan losses to average loans 0.19% 0.15% 0.36% 0.31% 0.33% 0.30%
Net charge-offs to average loans 0.13% 0.22% 0.33% 0.24% 0.20% 0.23%
Allowance for loan losses to period-end loans 0.72% 0.72% 0.74% 0.76% 0.76% 0.74%
Allowance for credit losses to period-end loans 0.75% 0.75% 0.77% 0.79% 0.79% 0.77%
Allowance for loan losses to nonperforming loans 124.77% 139.64% 238.37% 221.22% 184.40% 238.37%
Allowance for credit losses to nonperforming loans 129.65% 146.35% 247.60% 228.82% 191.48% 247.60%
Asset Quality
-------------
Impaired originated loans:
Commercial loans $66,942 $56,726 $28,108 $30,821 $37,889 $28,108
Consumer loans 17,355 16,975 15,997 16,215 17,253 15,997
------ ------ ------ ------ ------ ------
Total nonperforming loans 84,297 73,701 44,105 47,036 55,142 44,105
Other real estate owned ("OREO"), noncovered (2) 31,356 38,592 50,393 60,022 62,169 50,393
------ ------ ------ ------ ------ ------
Total nonperforming assets ("NPAs") (2) $115,653 $112,293 $94,498 $107,058 $117,311 $94,498
======== ======== ======= ======== ======== =======
NPAs to period-end loans + noncovered OREO (2) 0.79% 0.78% 0.67% 0.78% 0.87% 0.67%
==== ==== ==== ==== ==== ====
Accruing originated loans past due 90 days or more $8,008 $9,361 $8,022 $9,888 $8,009 $8,022
====== ====== ====== ====== ====== ======
(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 June 30, 2016, $65.0 million of FDIC acquired loans remained covered by single family loss share agreements, providing considerable protection against credit risk.
(2) As of June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015, and June 30, 2015, $19.0 million, $25.5 million, $33.5 million, $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 Six Months Ended Year Ended
(Dollars in thousands) June 30, June 30, December 31,
-------- -------- ------------
2016 2015 2016 2015 2015
---- ---- ---- ---- ----
Allowance for originated loan losses - beginning of period $102,915 $97,545 $105,135 $95,696 $95,696
Loans charged off:
Commercial 2,634 3,577 5,882 4,262 15,270
Mortgage 708 373 1,158 797 1,443
Installment 4,548 4,621 10,858 9,226 19,546
Home equity 937 971 1,964 1,882 4,032
Credit cards 1,031 1,209 2,484 2,661 4,867
Leases - - - - 1,268
Overdrafts 940 547 1,468 1,037 2,352
--- --- ----- ----- -----
Total 10,798 11,298 23,814 19,865 48,778
------ ------ ------ ------ ------
Recoveries:
Commercial 1,509 448 2,045 773 1,798
Mortgage 45 89 65 124 257
Installment 3,337 2,716 6,951 5,584 11,062
Home equity 499 839 1,123 1,452 2,606
Credit cards 421 358 778 724 1,395
Manufactured housing 4 6 10 19 31
Leases 29 3 49 7 787
Overdrafts 267 167 476 323 547
--- --- --- --- ---
Total 6,111 4,626 11,497 9,006 18,483
----- ----- ------ ----- ------
Net charge-offs 4,687 6,672 12,317 10,859 30,295
Provision for originated loan losses 6,947 10,809 12,357 16,845 39,734
------ ------
Allowance for originated loan losses-end of period $105,175 $101,682 $105,175 $101,682 $105,135
======== ======== ======== ======== ========
Average originated loans $14,489,924 $13,092,972 $14,338,858 $12,892,495 $13,297,594
=========== =========== =========== =========== ===========
Ratio (annualized) to average originated loans:
Originated net charge-offs 0.13% 0.20% 0.17% 0.17% 0.23%
==== ==== ==== ==== ====
Provision for originated loan losses 0.19% 0.33% 0.17% 0.26% 0.30%
==== ==== ==== ==== ====
Originated Loans, period-end $14,665,631 $13,355,912 $14,665,631 $13,355,912 $14,118,505
=========== =========== =========== =========== ===========
Allowance for credit losses: $109,287 $105,587 $109,287 $105,587 $109,203
======== ======== ======== ======== ========
To (annualized) net charge-offs 5.80 3.95 4.41 4.82 3.60
==== ==== ==== ==== ====
Allowance for originated loan losses:
To period-end originated loans 0.72% 0.76% 0.72% 0.76% 0.74%
==== ==== ==== ==== ====
To (annualized) net originated charge-offs 5.58 3.80 4.25 4.64 3.47
==== ==== ==== ==== ====
(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, respectively. As of June 30, 2016, $65.0 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
