FIRSTMERIT CORP AKRON, Ohio , April 26, 2016 /PRNewswire/ --
Quarterly Highlights include:
-- Profitability sustained: 68(th) consecutive quarter of profitability
-- Integration activities progress: Planned merger with Huntington
Bancshares Incorporated ("Huntington") on schedule; merger-related costs
of $5.5 million
-- Loan growth continued: Total loan growth of $148.5 million, or 0.92%
from the prior quarter
-- Credit quality remained solid: Net charge-offs to average originated
loans of 0.22%
-- Balance sheet remained strong: Strong tangible common equity ratio(1)
at 8.30%
FirstMerit Corporation (Nasdaq: FMER) (the "Corporation") reported first quarter 2016 net income of $54.1 million, or $0.31 per diluted share. Excluding merger-related charges of $5.5 million, or $3.5 million after tax, EPS was $0.34(1) per diluted share. This compares with $56.7 million, or $0.33 per diluted share, for the fourth quarter 2015 and $57.1 million, or $0.33 per diluted share, for the first quarter 2015.
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"Our results in the first quarter of 2016 reflect strong performance throughout the organization. We successfully achieved solid loan growth, continued to provide high levels of customer service and remain focused on expense management," said Paul G. Greig, chairman, president and CEO, FirstMerit Corporation.
"We are actively preparing and planning our merger integration with Huntington. We are pleased with the progress and expect to close on schedule during the third quarter of this year," Greig said.
Earnings Summary
Change 1Q 2016 vs.
------------------
2016 2015 2015 2015 2015
(Dollars in thousands, except per share amounts) 1st qtr 4th qtr 1st qtr 4th qtr 1st qtr
------- ------- ------- ------- -------
Net interest income TE (1) $189,115 $188,979 $189,554 0.07% (0.23)%
Diluted earnings per common share 0.31 0.33 0.33 (6.06) (6.06)
Net interest margin on TE basis(1) 3.32% 3.30% 3.48%
Return on average assets 0.84 0.89 0.93
Return on average common equity 7.33 7.65 8.08
Return on average tangible common equity (1) 10.52 11.04 11.85
Net Interest Margin
The net interest margin on a TE basis expanded two basis points compared with the prior quarter, driven by the Corporation's asset sensitive balance sheet and the increase in short-term market interest rates. During the first quarter 2016, the yield on originated loans increased nine basis points compared with the prior quarter. At March 31, 2016, 81% of the Corporation's commercial loan portfolio is variable or floating rate and will support continued margin expansion in a rising rate environment.
Loans
Average originated loans were $14.2 billion during the first quarter 2016, an increase of $323.9 million, or 2.34%, compared with the fourth quarter 2015, and an increase of $1.5 billion, or 11.80%, compared with the first quarter 2015. The loan growth was balanced between commercial and consumer throughout the footprint. Average originated commercial loans increased $193.0 million, or 2.19%, compared with the prior quarter, and increased $666.7 million, or 7.99%, compared with the year-ago quarter. Average originated installment loans increased $96.8 million, or 3.28%, compared with the prior quarter, and increased $622.8 million, or 25.68%, compared with the year-ago quarter.
Deposits
Average deposits were $20.6 billion during the first quarter 2016, an increase of $632.9 million, or 3.16%, compared with the fourth quarter 2015, and an increase of $846.7 million, or 4.28%, compared with the first quarter 2015. Average core deposits were $18.4 billion during the first quarter 2016, or 89.32% of total average deposits, an increase of $688.7 million, or 3.88%, compared with the fourth quarter 2015 and an increase of $952.3 million, or 5.45%, compared with the first quarter 2015. Deposit growth was strong, reflecting seasonality and increased balances across the footprint. Despite increases in short-term interest rates, deposit costs remained unchanged from the prior quarter.
Noninterest Income
Change 1Q 2016 vs.
------------------
2016 2015 2015 2015 2015
(Dollars in thousands) 1st qtr 4th qtr 1st qtr 4th qtr 1st qtr
------- ------- ------- ------- -------
Trust department income $10,284 $10,208 $10,149 0.74% 1.33%
Service charges on deposits 15,586 16,793 15,668 (7.19) (0.52)
Credit card fees 13,578 13,931 12,649 (2.53) 7.34
ATM and other service fees 6,234 6,626 6,099 (5.92) 2.21
Bank owned life insurance income 3,696 3,836 3,592 (3.65) 2.90
Investment services and insurance 3,905 3,816 3,704 2.33 5.43
Investment securities gains/(losses), net 295 (5) 354 nm (16.67)
Loan sales and servicing income 1,852 2,276 1,600 (18.63) 15.75
Other operating income 11,964 7,662 12,032 56.15 (0.57)
---------------------- ------
Total noninterest income $67,394 $65,143 $65,847 3.46% 2.35%
------- ------- ------- ---- ----
Noninterest income, excluding net securities
gains, as a percentage of net revenue(1) 26.19% 25.64% 25.68%
nm - Not meaningful
Noninterest income, excluding gains and losses on securities transactions(1), for the first quarter 2016 was $67.1 million, an increase of $2.0 million, or 2.99%, from the fourth quarter 2015 and an increase of $1.6 million, or 2.45%, from the first quarter 2015. The increase in noninterest income as a percentage of net revenue in the first quarter of 2016 compared with the fourth quarter of 2015 and first quarter of 2015 reflects the Corporation's ongoing success diversifying revenue sources. Other operating income increased $4.3 million, or 56.15%, from the prior quarter due to the denial of four disputed FDIC claims of $6.0 million submitted on the final commercial loss share certificate at June 30, 2015.
Noninterest Expense
Change 1Q 2016 vs.
------------------
2016 2015 2015 2015 2015
(Dollars in thousands) 1st qtr 4th qtr 1st qtr 4th qtr 1st qtr
------- ------- ------- ------- -------
Salaries and wages $69,410 $68,151 $71,914 1.85% (3.48)%
Pension and employee benefits 16,470 18,339 18,612 (10.19) (11.51)
Net occupancy expense 14,774 12,716 15,954 16.18 (7.40)
Equipment expense 12,408 12,074 11,025 2.77 12.54
Taxes, other than federal income taxes 2,031 2,096 2,014 (3.10) 0.84
Stationary, supplies and postage 3,619 3,222 3,528 12.32 2.58
Bankcard, loan processing and other costs 11,008 11,146 11,139 (1.24) (1.18)
Advertising 3,260 3,386 2,747 (3.72) 18.67
Professional services 8,351 5,056 4,010 65.17 108.25
Telephone 2,424 2,530 2,574 (4.19) (5.83)
Amortization of intangibles 2,304 2,598 2,598 (11.32) (11.32)
FDIC expense 5,445 5,252 5,167 3.67 5.38
Other operating expenses 15,459 9,056 9,370 70.70 64.98
------------------------ ------
Total noninterest expense $166,963 $155,622 $160,652 7.29% 3.93%
-------- -------- -------- ---- ----
Efficiency ratio(1) 64.27% 60.22% 61.97%
Noninterest expense for the first quarter 2016 was $167.0 million, an increase of $11.3 million, or 7.29%, from the fourth quarter 2015, and an increase of $6.3 million, or 3.93%, from the first quarter 2015. Included in noninterest expense for the first quarter 2016 was $5.5 million of merger-related costs, or $3.5 million of after tax expense. Professional services expense increased $3.3 million, or 65.17%, from the fourth quarter 2015, and $4.3 million, or 108.25%, from the first quarter 2015 primarily from merger-related costs. Salaries and wages decreased $2.5 million, or 3.48%, compared with the first quarter of 2015, demonstrating expense discipline. Other operating expense experienced an increase of $6.4 million, or 70.70%, from the fourth quarter 2015 primarily due to the favorable re-estimation of certain repurchase reserve liabilities recognized in the prior quarter.
Provision for Income Taxes
The effective tax rate was 30.40% for the first quarter 2016, compared with 30.06% for the fourth quarter 2015, and 30.80% for the first quarter 2015.
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 4Q 2015 vs.
------------------
2016 2015 2015 2015 2015
(Dollars in thousands) 1st qtr 4th qtr 1st qtr 4th qtr 1st qtr
------- ------- ------- ------- -------
Net charge-offs $7,630 $11,407 $4,187 (33.11)% 82.23%
Net charge-offs on average originated loans 0.22% 0.33% 0.13%
Nonperforming loans at period end $73,701 $44,105 $44,105 67.10 59.92
Nonperforming assets at period end 112,293 94,498 68,606 18.83 63.68
Allowance for loan losses 102,915 105,135 97,545 (2.11) 5.51
Allowance for loan losses to nonperforming loans 139.64% 238.37% 211.66%
Provision for originated loan losses $5,410 $12,487 $6,036 (56.67) (10.37)
Nonperforming assets totaled $112.3 million at March 31, 2016, an increase of $17.8 million, or 18.83%, compared with December 31, 2015 and an increase of $43.7 million, or 63.68%, compared with March 31, 2015. Nonperforming assets at March 31, 2016 represented 0.78% of period-end originated loans plus noncovered other real estate compared with 0.67% at December 31, 2015 and 0.53% at March 31, 2015. Included in nonperforming assets as of March 31, 2016 were $25.5 million of OREO no longer covered by FDIC loss share agreements.
The allowance for originated loan losses totaled $102.9 million at March 31, 2016. At March 31, 2016, the allowance for originated loan losses was 0.72% of period-end originated loans, compared with 0.74% at December 31, 2015, and 0.76% at March 31, 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 March 31, 2016, compared with 0.77% at December 31, 2015, and 0.79% at March 31, 2015. The allowance for credit losses to nonperforming loans was 146.35% at March 31, 2016, compared with 247.60% at December 31, 2015, and 221.06% at March 31, 2015.
Capital
Shareholders' equity was $3.0 billion at March 31, 2016 and $2.9 billion as of December 31, 2015 and March 31, 2015. The Corporation continued to have a strong capital position as tangible common equity(1) to assets was 8.30% at March 31, 2016, compared with 8.24% at December 31, 2015 and 8.14% at March 31, 2015. The common share cash dividend paid in the first quarter 2016 was $0.17 per share.
At March 31, 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 13.60%, and a common equity tier 1 risk-based capital ratio of 10.48%.
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 branch closing 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 2015 2015 2015 2015
(Dollars in thousands) 1st qtr 4th qtr 3rd qtr 2nd qtr 1st qtr
--------------------- ------- ------- ------- ------- -------
Net interest income (GAAP) $185,156 $185,231 $185,323 $185,118 $185,623
Plus: Fully taxable-equivalent adjustment 3,959 3,748 3,796 3,900 3,931
-------------
Net interest income on a fully taxable-equivalent basis (non-GAAP) 189,115 188,979 189,119 189,018 189,554
Average earning assets 22,890,082 22,747,631 22,548,977 22,352,721 22,100,417
Net interest margin on a fully taxable-equivalent basis (non-GAAP) 3.32% 3.30% 3.33% 3.39% 3.48%
----------------------------------------------------------------- ---- ---- ---- ---- ----
Reconciliation of noninterest income and noninterest expense to adjusted noninterest income and adjusted noninterest expense
Quarters
--------
(unaudited) 2016 2015 2015 2015 2015
(Dollars in thousands) 1st qtr 4th qtr 3rd qtr 2nd qtr 1st qtr
--------------------- ------- ------- ------- ------- -------
Noninterest expense (GAAP) $166,963 $155,622 $160,742 $161,674 $160,652
Less: Intangible asset amortization 2,304 2,598 2,598 2,598 2,598
--------------
Adjusted noninterest expense (non-GAAP) 164,659 153,024 158,144 159,076 158,054
-------------------------------------- ------- ------- ------- ------- -------
Noninterest income (GAAP) 67,394 65,143 71,426 66,582 65,847
Less: Securities gains/(losses) 295 (5) 41 567 354
--------------
Adjusted noninterest income (non-GAAP) 67,099 65,148 71,385 66,015 65,493
Net interest income on a fully taxable-equivalent basis (non-GAAP) 189,115 188,979 189,119 189,018 189,554
----------------------------------------------------------------- ------- ------- ------- ------- -------
Adjusted revenue (non-GAAP) 256,214 254,127 260,504 255,033 255,047
-------------------------- ------- ------- ------- ------- -------
Efficiency ratio (non-GAAP) 64.27% 60.22% 60.71% 62.37% 61.97%
-------------------------- ----- ----- ----- ----- -----
Reconciliation of shareholders' equity to tangible common equity, and total assets to tangible assets
Quarters
--------
(unaudited) 2016 2015 2015 2015 2015
(Dollars in thousands, except per share amounts) 1st qtr 4th qtr 3rd qtr 2nd qtr 1st qtr
----------------------------------------------- ------- ------- ------- ------- -------
Shareholders' equity (GAAP) $2,997,957 $2,940,095 $2,937,300 $2,887,957 $2,888,786
Less: Preferred stock 100,000 100,000 100,000 100,000 100,000
---------------
Common shareholders' equity (non-GAAP) 2,897,957 2,840,095 2,837,300 2,787,957 2,788,786
Less: Intangible assets 58,324 60,628 63,226 65,824 68,422
Goodwill 741,740 741,740 741,740 741,740 741,740
--------
Tangible common equity (non-GAAP) 2,097,893 2,037,727 2,032,334 1,980,393 1,978,624
Total assets (GAAP) $26,062,649 $25,524,604 $25,246,917 $25,297,014 $25,118,120
Less: Intangible assets 58,324 60,628 63,226 65,824 68,422
Goodwill 741,740 741,740 741,740 741,740 741,740
Tangible assets (non-GAAP) $25,262,585 $24,722,236 $24,441,951 $24,489,450 $24,307,958
------------------------- ----------- ----------- ----------- ----------- -----------
Period end common shares 165,720 165,758 165,759 165,773 165,453
Tangible book value per common share $12.66 $12.29 $12.26 $11.95 $11.96
Tangible common equity to tangible assets ratio (non-GAAP) 8.30% 8.24% 8.31% 8.09% 8.14%
--------------------------------------------------------- ---- ---- ---- ---- ----
Reconciliation of net income to adjusted net income
Quarters
--------
(unaudited) 2016 2015 2015 2015 2015
(Dollars in thousands, except per share amounts) 1st qtr 4th qtr 3rd qtr 2nd qtr 1st qtr
----------------------------------------------- ------- ------- ------- ------- -------
Net income (GAAP) $54,136 $56,749 $59,012 $56,584 $57,139
Net income adjustments
Plus: Restructure expenses, net of taxes - (200) - - 1,149
Merger-related and branch closure costs, net of taxes 3,546 - - 1,149 783
----------------------------------------------------- ----- --- --- ----- ---
Adjusted net income (non-GAAP) 57,682 56,549 59,012 57,733 59,071
----------------------------- ------ ------ ------ ------ ------
Annualized net income (GAAP) 217,734 225,145 234,124 226,958 231,730
Annualized adjusted net income (non-GAAP) 231,996 224,352 234,124 231,566 239,566
---------------------------------------- ------- ------- ------- ------- -------
Average assets (GAAP) 25,770,857 25,370,946 25,217,856 25,129,859 24,905,094
Average equity (GAAP) 2,970,167 2,943,268 2,909,660 2,892,432 2,866,362
Average tangible common equity (non-GAAP) 2,068,981 2,039,639 2,003,423 1,983,603 1,954,930
Return on average assets (GAAP) 0.84% 0.89% 0.93% 0.90% 0.93%
Adjusted return on average assets (non-GAAP) 0.90% 0.88% 0.93% 0.92% 0.96%
Return on average equity (GAAP) 7.33% 7.65% 8.05% 7.85% 8.08%
Adjusted return on average equity (non-GAAP) 7.81% 7.62% 8.05% 8.01% 8.36%
Return on average tangible common equity (non-GAAP) 10.52% 11.04% 11.69% 11.44% 11.85%
Adjusted return on average tangible common equity (non-GAAP) 11.21% 11.00% 11.69% 11.67% 12.25%
Net income used in diluted EPS calculation $52,280 $54,827 $57,066 $54,648 $55,263
Plus: Restructure expenses, net of taxes - (200) - - 1,149
Merger-related and branch closure costs, net of taxes 3,546 - - 1,149 783
----------------------------------------------------- ----- --- --- ----- ---
Adjusted net income used in diluted EPS calculation 55,826 54,627 57,066 55,797 57,195
(non-GAAP)
---------
Weighted average number of common shares outstanding - diluted 166,239 166,222 166,058 166,277 166,003
Diluted earnings per common share $0.31 $0.33 $0.34 $0.33 $0.33
Adjusted diluted earnings per common share (non-GAAP) 0.34 0.33 0.34 0.34 0.34
---------------------------------------------------- ---- ---- ---- ---- ----
Subsequent Events
The Corporation is required under GAAP to evaluate subsequent events through the filing of its consolidated financial statements for the three months ended March 31, 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 March 31, 2016 and will adjust amounts preliminarily reported, if necessary.
About FirstMerit Corporation
FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of approximately $26.1 billion as of March 31, 2016, and 368 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.
1 - See Non-GAAP Financial
Measures section of this
release for a reconciliation to
financial measures as defined
by GAAP.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
--------
(Dollars in thousands, except per share amounts) 2016 2015 2015 2015 2015
1st qtr 4th qtr 3rd qtr 2nd qtr 1st qtr
------- ------- ------- ------- -------
EARNINGS
--------
Net interest income TE (1) $189,115 $188,979 $189,119 $189,018 $189,554
TE adjustment (1) 3,959 3,748 3,796 3,900 3,931
Provision for originated loan losses 5,410 12,487 10,402 10,809 6,036
Provision/(recapture) for acquired loan losses 1,131 1,503 144 (952) 2,214
Provision/(recapture) for FDIC acquired loan losses 1,268 (379) 3,729 (891) (2)
Noninterest income 67,394 65,143 71,426 66,582 65,847
Noninterest expense 166,963 155,622 160,742 161,674 160,652
Net income 54,136 56,749 59,012 56,584 57,139
Diluted EPS (3) 0.31 0.33 0.34 0.33 0.33
-------------- ---- ---- ---- ---- ----
PERFORMANCE RATIOS
------------------
Return on average assets (ROA) 0.84% 0.89% 0.93% 0.90% 0.93%
Return on average equity (ROE) 7.33% 7.65% 8.05% 7.85% 8.08%
Return on average tangible common equity (1) 10.52% 11.04% 11.69% 11.44% 11.85%
Net interest margin TE (1) 3.32% 3.30% 3.33% 3.39% 3.48%
Efficiency ratio (1) 64.27% 60.22% 60.71% 62.37% 61.97%
Number of full-time equivalent employees 3,949 3,926 3,961 4,017 4,103
---------------------------------------- ----- ----- ----- ----- -----
MARKET DATA
-----------
Book value per common share $18.09 $17.74 $17.72 $17.42 $17.46
Tangible book value per common share (1) 12.66 12.29 12.26 11.95 11.96
Period end common share market value 21.05 18.65 17.67 20.83 19.06
Market as a % of book 116% 105% 100% 120% 109%
Cash dividends per common share $0.17 $0.17 $0.17 $0.16 $0.16
Common Stock dividend payout ratio 54.84% 51.52% 50.00% 48.48% 48.48%
Average basic common shares 165,745 165,762 165,762 165,736 165,411
Average diluted common shares 166,239 166,222 166,058 166,277 166,003
Period end common shares 165,720 165,758 165,759 165,773 165,453
Common shares repurchased 55 15 20 211 66
Common Stock market capitalization $3,488,406 $3,091,387 $2,928,962 $3,453,052 $3,153,534
---------------------------------- ---------- ---------- ---------- ---------- ----------
ASSET QUALITY (excluding acquired, FDIC acquired loans and covered OREO) (2)
---------------------------------------------------------------------------
Gross charge-offs $13,014 $15,514 $13,398 $11,298 $8,567
Net charge-offs 7,630 11,407 8,029 6,672 4,187
Allowance for originated loan losses 102,915 105,135 104,055 101,682 97,545
Reserve for unfunded lending commitments 4,944 4,068 3,574 3,905 4,330
Nonperforming assets (NPAs) 112,293 94,498 107,058 117,311 68,606
Net charge-offs to average loans ratio 0.22% 0.33% 0.24% 0.20% 0.13%
Allowance for originated loan losses to period-end loans 0.72% 0.74% 0.76% 0.76% 0.76%
Allowance for credit losses to period-end loans 0.75% 0.77% 0.79% 0.79% 0.79%
NPAs to loans and other real estate 0.78% 0.67% 0.78% 0.87% 0.53%
Allowance for originated loan losses to nonperforming loans 139.64% 238.37% 221.22% 184.40% 211.66%
Allowance for credit losses to nonperforming loans 146.35% 247.60% 228.82% 191.48% 221.06%
-------------------------------------------------- ------ ------ ------ ------ ------
CAPITAL & LIQUIDITY
-------------------
Period end tangible common equity to assets (1) 8.30% 8.24% 8.31% 8.09% 8.14%
Average equity to assets 11.53% 11.60% 11.54% 11.51% 11.51%
Average equity to total loans 18.48% 18.50% 18.48% 18.59% 18.60%
Average total loans to deposits 77.87% 79.54% 78.91% 79.06% 77.86%
------------------------------- ----- ----- ----- ----- -----
AVERAGE BALANCES
----------------
Assets $25,770,857 $25,370,946 $25,217,856 $25,129,859 $24,905,094
Deposits 20,635,665 20,002,793 19,957,586 19,682,662 19,788,925
Originated loans 14,187,793 13,863,910 13,528,268 13,092,972 12,689,791
Acquired loans, including FDIC acquired loans, less loss share receivable 1,881,965 2,047,167 2,219,488 2,468,035 2,717,884
Earning assets 22,890,082 22,747,631 22,548,977 22,352,721 22,100,417
Shareholders' equity 2,970,167 2,943,268 2,909,660 2,892,432 2,866,362
-------------------- --------- --------- --------- --------- ---------
ENDING BALANCES
---------------
Assets $26,062,649 $25,524,604 $25,246,917 $25,297,014 $25,118,120
Deposits 21,101,366 20,108,003 19,821,916 19,673,850 19,925,595
Originated loans 14,389,513 14,118,505 13,648,325 13,355,912 12,856,037
Acquired loans, including FDIC acquired loans, less loss share receivable 1,826,501 1,948,493 2,140,029 2,337,378 2,614,847
Goodwill 741,740 741,740 741,740 741,740 741,740
Intangible assets 58,324 60,628 63,226 65,824 68,422
Earning assets 23,525,620 22,955,435 22,661,171 22,599,272 22,395,343
Total shareholders' equity 2,997,957 2,940,095 2,937,300 2,887,957 2,888,786
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 March 31, 2016, $70.7 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) March 31, December 31, March 31,
(Unaudited, except December 31, 2015, which is derived from the audited financial statements) 2016 2015 2015
---- ---- ----
ASSETS
Cash and due from banks $331,049 $380,799 $426,247
Interest-bearing deposits in banks 428,848 83,018 106,178
---------------------------------- ------- ------ -------
Total cash and cash equivalents 759,897 463,817 532,425
Investment securities:
Held-to-maturity 2,613,700 2,674,093 2,855,174
Available-for-sale 4,104,214 3,967,735 3,791,059
Other investments 148,159 148,172 148,475
Loans held for sale 5,249 5,472 3,568
Loans 16,225,450 16,076,945 15,490,889
Allowance for loan losses (151,937) (153,691) (146,552)
------------------------- -------- -------- --------
Net loans 16,073,513 15,923,254 15,344,337
Premises and equipment, net 305,764 319,488 320,392
Goodwill 741,740 741,740 741,740
Intangible assets 58,324 60,628 68,422
Covered other real estate 783 2,134 40,231
Accrued interest receivable and other assets 1,251,306 1,218,071 1,272,297
-------------------------------------------- --------- --------- ---------
Total assets $26,062,649 $25,524,604 $25,118,120
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $6,055,569 $5,942,248 $5,666,752
Interest-bearing 3,641,216 3,476,729 3,277,118
Savings and money market accounts 9,231,829 8,450,123 8,610,553
Certificates and other time deposits 2,172,752 2,238,903 2,371,172
------------------------------------ --------- --------- ---------
Total deposits 21,101,366 20,108,003 19,925,595
-------------- ---------- ---------- ----------
Federal funds purchased and securities sold under agreements to
repurchase 719,850 1,037,075 1,113,371
Wholesale borrowings 378,996 580,648 316,628
Long-term debt 519,249 505,173 512,625
Accrued taxes, expenses, and other liabilities 345,231 353,610 361,115
---------------------------------------------- ------- ------- -------
Total liabilities 23,064,692 22,584,509 22,229,334
Shareholders' equity:
5.875% Non-Cumulative Perpetual Preferred stock, Series A, without par value: authorized 115,000 shares; 100,000 issued 100,000 100,000 100,000
Common stock warrant - - 3,000
Common Stock, without par value; authorized 300,000,000 shares; issued: March 31, 2016, December 31, 2015 and March 31, 2015 - 170,183,515 shares 127,937 127,937 127,937
Capital surplus 1,390,516 1,386,677 1,394,933
Accumulated other comprehensive loss (48,341) (79,274) (49,267)
Retained earnings 1,543,976 1,519,438 1,433,926
Treasury stock, at cost: March 31, 2016 - 4,463,581; December 31, 2015 - 4,425,927; March 31, 2015 - 4,730,374 shares (116,131) (114,683) (121,743)
--------------------------------------------------------------------------------------------------------------------- -------- -------- --------
Total shareholders' equity 2,997,957 2,940,095 2,888,786
-------------------------- ---------
Total liabilities and shareholders' equity $26,062,649 $25,524,604 $25,118,120
=========== =========== ===========
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Period End Loans by Product Type
(Unaudited) As of March 31, 2016
(In thousands) 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
=========== ========== ======== ===========
As of March 31, 2015
Originated Loans Acquired Loans (1) FDIC Acquired
Loans (2) Total Loans
---------------- ----------------- -------------- -----------
C&I $5,317,897 $420,810 $42,814 $5,781,521
CRE 2,133,017 584,072 127,908 2,844,997
Construction 580,978 6,288 8,825 596,091
Leases 388,873 - - 388,873
---
Total Commercial 8,420,765 1,011,170 179,547 9,611,482
Mortgage 639,980 378,192 40,470 1,058,642
Installment 2,500,288 717,693 4,781 3,222,762
Home equity 1,134,238 217,824 65,170 1,417,232
Credit card 160,766 - - 160,766
Total Consumer 4,435,272 1,313,709 110,421 5,859,402
--------- --------- ------- ---------
Subtotal 12,856,037 2,324,879 289,968 15,470,884
Loss share receivable - - 20,005 20,005
------
Total loans 12,856,037 2,324,879 309,973 15,490,889
Allowance for loan losses (97,545) (7,493) (41,514) (146,552)
------ ------- --------
Net loans $12,758,492 $2,317,386 $268,459 $15,344,337
=========== ========== ======== ===========
(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 March 31, 2016, $70.7 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) March 31, December 31, September 30, June 30, March 31,
(In thousands) 2016 2015 2015 2015 2015
---- ---- ---- ---- ----
ASSETS
Cash and cash equivalents $724,095 $415,756 $457,317 $518,820 $563,265
Investment securities:
Held-to-maturity 2,636,516 2,713,636 2,754,001 2,806,325 2,874,169
Available-for-sale 4,020,701 3,959,051 3,881,959 3,816,827 3,645,057
Other investments 148,165 148,176 147,961 148,577 148,532
Loans held for sale 5,253 5,028 4,929 3,631 5,478
Loans 16,079,447 15,921,740 15,760,127 15,577,361 15,427,181
Allowance for loan losses (152,600) (151,192) (147,136) (146,558) (144,363)
-------- -------- -------- -------- --------
Net loans 15,926,847 15,770,548 15,612,991 15,430,803 15,282,818
Total earning assets 22,890,082 22,747,631 22,548,977 22,352,721 22,100,417
Premises and equipment, net 313,056 312,771 313,336 320,492 322,431
Accrued interest receivable and other assets 1,996,224 2,045,980 2,045,362 2,084,384 2,063,344
--------- --------- --------- --------- ---------
TOTAL ASSETS $25,770,857 $25,370,946 $25,217,856 $25,129,859 $24,905,094
=========== =========== =========== =========== ===========
LIABILITIES
Deposits:
Noninterest-bearing $5,990,796 $5,982,186 $5,897,768 $5,722,240 $5,728,763
Interest-bearing 3,590,598 3,352,908 3,353,541 3,203,836 3,209,285
Savings and money market accounts 8,851,135 8,408,703 8,480,682 8,467,845 8,542,154
Certificates and other time deposits 2,203,136 2,258,996 2,225,595 2,288,741 2,308,723
--------- --------- --------- --------- ---------
Total deposits 20,635,665 20,002,793 19,957,586 19,682,662 19,788,925
Federal funds purchased and securities sold under
agreements to repurchase 844,290 1,131,659 1,109,924 1,285,920 1,024,863
Wholesale borrowings 473,149 402,679 377,594 393,379 350,991
Long-term debt 505,376 508,954 497,566 508,744 505,275
------- ------- ------- ------- -------
Total funds 22,458,480 22,046,085 21,942,670 21,870,705 21,670,054
Accrued taxes, expenses and other liabilities 342,210 381,593 365,526 366,722 368,678
------- ------- ------- ------- -------
Total liabilities 22,800,690 22,427,678 22,308,196 22,237,427 22,038,732
SHAREHOLDERS' EQUITY
Preferred stock 100,000 100,000 100,000 100,000 100,000
Common stock warrant - - - 1,385 3,000
Common stock 127,937 127,937 127,937 127,937 127,937
Capital surplus 1,388,171 1,383,777 1,380,622 1,382,717 1,393,682
Accumulated other comprehensive loss (61,309) (60,821) (63,402) (51,571) (58,025)
Retained earnings 1,530,545 1,507,069 1,479,181 1,447,195 1,422,067
Treasury stock (115,177) (114,694) (114,678) (115,231) (122,299)
-------- -------- -------- -------- --------
Total shareholders' equity 2,970,167 2,943,268 2,909,660 2,892,432 2,866,362
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $25,770,857 $25,370,946 $25,217,856 $25,129,859 $24,905,094
=========== =========== =========== =========== ===========
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Average Loans by Product Type
(Unaudited)
(In thousands) 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
=========== ========== ======== ===========
Three Months Ended March 31, 2015
---------------------------------
Originated Loans Acquired Loans (1) FDIC Acquired
Loans (2) Total Loans
---------------- ----------------- -------------- -----------
C&I $5,281,194 $440,103 $45,307 $5,766,604
CRE 2,141,764 606,652 142,101 2,890,517
Construction 556,943 6,846 9,013 572,802
Leases 368,025 - - 368,025
Total Commercial 8,347,926 1,053,601 196,421 9,597,948
Mortgage 631,761 386,033 40,800 1,058,594
Installment 2,424,956 742,095 4,822 3,171,873
Home equity 1,122,988 224,444 69,668 1,417,100
Credit card 162,160 - - 162,160
Total Consumer 4,341,865 1,352,572 115,290 5,809,727
Subtotal 12,689,791 2,406,173 311,711 15,407,675
Loss share
receivable - - 19,506 19,506
Total loans 12,689,791 2,406,173 331,217 15,427,181
Allowance for
loan losses (95,952) (8,287) (40,124) (144,363)
------- ------ ------- --------
Net loans $12,593,839 $2,397,886 $291,093 $15,282,818
=========== ========== ======== ===========
(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
------------------ ------------------ ------------------
March 31, 2016 December 31, 2015 March 31, 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 $724,095 $415,756 $563,265
Investment securities and federal funds sold:
U.S. treasury securities and U.S. government agency obligations (taxable) 5,470,079 $27,763 2.04% 5,456,888 $27,744 2.02% 5,329,725 $26,760 2.04%
Obligations of states and political subdivisions (tax exempt) 743,159 8,161 4.42% 768,288 8,349 4.31% 733,157 9,147 5.06%
Other securities and federal funds sold 592,144 5,386 3.66% 595,687 5,300 3.53% 604,876 5,190 3.48%
--------------------------------------- ------- ----- ------- ----- ------- -----
Total investment securities and federal funds sold 6,805,382 41,310 2.44% 6,820,863 41,393 2.41% 6,667,758 41,097 2.50%
Loans held for sale 5,253 52 3.98% 5,028 59 4.66% 5,478 57 4.22%
Loans, including loss share receivable (2) 16,079,447 163,285 4.08% 15,921,740 162,865 4.06% 15,427,181 162,292 4.27%
----------------------------------------- ---------- ------- ---------- ------- ---------- -------
Total earning assets 22,890,082 $204,647 3.60% 22,747,631 $204,317 3.56% 22,100,417 $203,446 3.73%
Total allowance for loan losses (152,600) (151,192) (144,363)
Other assets 2,309,280 2,358,751 2,385,775
------------ --------- --------- ---------
Total assets $25,770,857 $25,370,946 $24,905,094
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $5,990,796 $ - - % $5,982,186 $ - - % $5,728,763 $ - - %
Interest-bearing 3,590,598 929 0.10% 3,352,908 754 0.09% 3,209,285 767 0.10%
Savings and money market accounts 8,851,135 5,652 0.26% 8,408,703 5,611 0.26% 8,542,154 5,547 0.26%
Certificates and other time deposits 2,203,136 3,289 0.60% 2,258,996 3,378 0.59% 2,308,723 2,177 0.38%
------------------------------------ --------- ----- --------- ----- --------- -----
Total deposits 20,635,665 9,870 0.19% 20,002,793 9,743 0.19% 19,788,925 8,491 0.17%
Securities sold under agreements to repurchase 844,290 265 0.13% 1,131,659 300 0.11% 1,024,863 243 0.10%
Wholesale borrowings 473,149 1,234 1.05% 402,679 1,202 1.18% 350,991 1,160 1.34%
Long-term debt 505,376 4,163 3.31% 508,954 4,093 3.19% 505,275 3,998 3.21%
-------------- ------- ----- ------- ----- ------- -----
Total interest-bearing liabilities 16,467,684 15,532 0.38% 16,063,899 15,338 0.38% 15,941,291 13,892 0.35%
Other liabilities 342,210 381,593 368,678
Shareholders' equity 2,970,167 2,943,268 2,866,362
-------------------- --------- --------- ---------
Total liabilities and shareholders' equity $25,770,857 $25,370,946 $24,905,094
=========== =========== ===========
Net yield on earning assets $22,890,082 $189,115 3.32% $22,747,631 $188,979 3.30% $22,100,417 $189,554 3.48%
=========== ======== =========== ======== =========== ======== ====
Interest rate spread 3.22% 3.18% 3.38%
====
(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 $4.0 million, $3.7 million, and $3.9 million for the three months ended March 31, 2016, December 31, 2015, and March 31, 2015, respectively.
(2) Nonaccrual loans have been included in the average balances.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) Quarters Ended
(In thousands, except per share amounts) March 31,
---------
2016 2015
---- ----
Interest income:
Loans and loans held for
sale $162,278 $161,539
Investment securities:
Taxable 33,149 31,950
Tax-exempt 5,261 6,026
---------- ----- -----
Total investment
securities interest 38,410 37,976
-------------------- ------ ------
Total
interest
income 200,688 199,515
Interest expense:
Deposits:
Interest-bearing 929 767
Savings and money
market accounts 5,652 5,547
Certificates and
other time deposits 3,289 2,177
Federal funds purchased
and securities sold under
agreements to repurchase 265 243
Wholesale borrowings 1,234 1,160
Long-term debt 4,163 3,998
-------------- ----- -----
Total interest
expense 15,532 13,892
--------------- ------ ------
Net interest income 185,156 185,623
Provision for loan losses 7,809 8,248
------------------------- ----- -----
Net interest income
after provision for
loan losses 177,347 177,375
Noninterest income:
Trust department income 10,284 10,149
Service charges on
deposits 15,586 15,668
Credit card fees 13,578 12,649
ATM and other service fees 6,234 6,099
Bank owned life insurance
income 3,696 3,592
Investment services and
insurance 3,905 3,704
Investment securities
gains/(losses), net 295 354
Loan sales and servicing
income 1,852 1,600
Other operating income 11,964 12,032
---------------------- ------ ------
Total noninterest
income 67,394 65,847
------------------ ------ ------
Noninterest expense:
Salaries, wages, pension
and employee benefits 85,880 90,526
Net occupancy expense 14,774 15,954
Equipment expense 12,408 11,025
Stationery, supplies and
postage 3,619 3,528
Bankcard, loan processing
and other costs 11,008 11,139
Professional services 8,351 4,010
Amortization of
intangibles 2,304 2,598
FDIC insurance expense 5,445 5,167
Other operating expense 23,174 16,705
----------------------- ------ ------
Total noninterest
expense 166,963 160,652
------------------ ------- -------
Income before income tax expense 77,778 82,570
Income tax expense 23,642 25,431
------------------ ------ ------
Net income $54,136 $57,139
Less: Net income
allocated to
participating
shareholders 387 407
Preferred
stock
dividends 1,469 1,469
---------- ----- -----
Net income attributable to common shareholders $52,280 $55,263
======= =======
Net income used in diluted EPS calculation $52,280 $55,263
======= =======
Weighted average number of common shares outstanding - basic 165,745 165,411
Weighted average number of common shares outstanding -
diluted 166,239 166,003
Basic earnings per common share $0.32 $0.33
Diluted earnings per common share 0.31 0.33
Cash dividends per common share 0.17 0.16
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) Quarter Ended
-------------
March 31, 2016
--------------
(In thousands) Pre-tax Tax After-tax
------- --- ---------
Net Income $77,778 $23,642 $54,136
Other comprehensive income/
(loss)
Unrealized gains and losses on
securities available for sale:
Changes in unrealized
securities' holding gains/
(losses) 48,379 17,562 30,817
Changes in unrealized
securities' holding gains/
(losses) that result from
securities being transferred
from available-for-sale into
held-to-maturity (1,441) (147) (1,294)
Net losses/(gains) realized on
sale of securities reclassified
to noninterest income 295 107 188
--- --- ---
Net change in unrealized gains/
(losses) on securities
available for sale 47,233 17,522 29,711
Pension plans and other
postretirement benefits:
Net gains/(losses) arising
during the period - - -
Amortization of actuarial gain 2,168 773 1,395
Amortization of prior service
cost reclassified to other
noninterest expense (260) (87) (173)
---- --- ----
Net change from defined benefit
pension plans 1,908 686 1,222
----- --- -----
Total other comprehensive gains/
(losses) 49,141 18,208 30,933
------ ------ ------
Comprehensive income $126,919 $41,850 $85,069
======== ======= =======
Quarter Ended
March 31, 2015
(In thousands) Pre-tax Tax After-tax
------- --- ---------
Net Income $82,570 $25,431 $57,139
Other comprehensive income/
(loss)
Unrealized gains and losses on
securities available for sale:
Changes in unrealized
securities' holding gains/
(losses) 34,117 11,941 22,176
Changes in unrealized
securities' holding gains/
(losses) that result from
securities being transferred
from available-for-sale into
held-to-maturity (504) (176) (328)
Net losses/(gains) realized on
sale of securities reclassified
to noninterest income (354) (124) (230)
---- ---- ----
Net change in unrealized gains/
(losses) on securities
available for sale 33,259 11,641 21,618
------ ------ ------
Pension plans and other
postretirement benefits:
Amortization of actuarial gain 1,138 398 740
Amortization of prior service
cost reclassified to other
noninterest expense 410 143 267
--- --- ---
Net change from defined benefit
pension plans 1,548 541 1,007
----- --- -----
Total other comprehensive gains/
(losses) 34,807 12,182 22,625
------ ------ ------
Comprehensive income $117,377 $37,613 $79,764
======== ======= =======
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME---LINKED QUARTERS
Quarterly Results
-----------------
(In thousands, except per share amounts) 2016 2015 2015 2015 2015
(Unaudited) 1st qtr 4th qtr 3rd qtr 2nd qtr 1st qtr
------- ------- ------- ------- -------
Interest Income:
Loans and loans held for sale $162,278 $162,168 $162,204 $161,872 $161,539
Investment securities 38,410 38,401 37,855 37,502 37,976
--------------------- ------ ------ ------ ------ ------
Total interest income 200,688 200,569 200,059 199,374 199,515
--------------------- ------- ------- ------- ------- -------
Interest expense:
Deposits:
Interest-bearing 929 754 750 783 767
Savings and money market accounts 5,652 5,611 5,639 5,588 5,547
Certificates and other time deposits 3,289 3,378 2,757 2,510 2,177
Federal funds purchased and securities sold under agreements to repurchase 265 300 254 329 243
Wholesale borrowings 1,234 1,202 1,171 1,129 1,160
Long-term debt 4,163 4,093 4,165 3,917 3,998
-------------- ----- ----- ----- ----- -----
Total interest expense 15,532 15,338 14,736 14,256 13,892
---------------------- ------ ------ ------ ------ ------
Net interest income 185,156 185,231 185,323 185,118 185,623
Provision for loan losses 7,809 13,611 14,275 8,966 8,248
------------------------- ----- ------ ------ ----- -----
Net interest income after provision for loan losses 177,347 171,620 171,048 176,152 177,375
Noninterest income:
Trust department income 10,284 10,208 10,948 10,820 10,149
Service charges on deposits 15,586 16,793 17,295 16,704 15,668
Credit card fees 13,578 13,931 13,939 14,124 12,649
ATM and other service fees 6,234 6,626 6,518 6,345 6,099
Bank owned life insurance income 3,696 3,836 4,622 3,697 3,592
Investment services and insurance 3,905 3,816 4,032 3,871 3,704
Investment securities gains/(losses), net 295 (5) 41 567 354
Loan sales and servicing income 1,852 2,276 2,414 3,276 1,600
Other operating income 11,964 7,662 11,617 7,178 12,032
---------------------- ------ ----- ------ ----- ------
Total noninterest income 67,394 65,143 71,426 66,582 65,847
------------------------ ------ ------ ------ ------ ------
Noninterest expense:
Salaries, wages, pension and employee benefits 85,880 86,490 85,772 86,020 90,526
Net occupancy expense 14,774 12,716 13,540 13,727 15,954
Equipment expense 12,408 12,074 12,235 12,592 11,025
Stationery, supplies and postage 3,619 3,222 3,304 3,370 3,528
Bankcard, loan processing and other costs 11,008 11,146 12,335 12,461 11,139
Professional services 8,351 5,056 5,154 5,358 4,010
Amortization of intangibles 2,304 2,598 2,598 2,598 2,598
FDIC insurance expense 5,445 5,252 5,234 5,077 5,167
Other operating expense 23,174 17,068 20,570 20,471 16,705
----------------------- ------ ------ ------ ------ ------
Total noninterest expense 166,963 155,622 160,742 161,674 160,652
------------------------- ------- ------- ------- ------- -------
Income before income tax expense 77,778 81,141 81,732 81,060 82,570
Income tax expense 23,642 24,392 22,720 24,476 25,431
------------------ ------ ------ ------ ------ ------
Net income 54,136 56,749 59,012 56,584 57,139
Less: Net income allocated to participating shareholders 387 453 477 467 407
Preferred stock dividends 1,469 1,469 1,469 1,469 1,469
------------------------- ----- ----- ----- ----- -----
Net income attributable to common shareholders $52,280 $54,827 $57,066 $54,648 $55,263
======= ======= ======= ======= =======
Net income used in diluted EPS calculation $52,280 $54,827 $57,066 $54,648 $55,263
======= ======= ======= ======= =======
Weighted-average number of common shares outstanding - basic 165,745 165,762 165,762 165,736 165,411
Weighted-average number of common shares outstanding- diluted 166,239 166,222 166,058 166,277 166,003
Basic earnings per common share $0.32 $0.33 $0.34 $0.33 $0.33
Diluted earnings per common share $0.31 $0.33 $0.34 $0.33 $0.33
Cash dividends per common share $0.17 $0.17 $0.17 $0.16 $0.16
FIRSTMERIT CORPORATION AND SUBSIDIARIES
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(In thousands)
2016 2015 2015 2015 2015
Noninterest income detail 1st qtr 4th qtr 3rd qtr 2nd qtr 1st qtr
------------------------- ------- ------- ------- ------- -------
Trust department income $10,284 $10,208 $10,948 $10,820 $10,149
Service charges on deposits 15,586 16,793 17,295 16,704 15,668
Credit card fees 13,578 13,931 13,939 14,124 12,649
ATM and other service fees 6,234 6,626 6,518 6,345 6,099
Bank owned life insurance income 3,696 3,836 4,622 3,697 3,592
Investment services and insurance 3,905 3,816 4,032 3,871 3,704
Investment securities gains/(losses), net 295 (5) 41 567 354
Loan sales and servicing income 1,852 2,276 2,414 3,276 1,600
Other operating income 11,964 7,662 11,617 7,178 12,032
---------------------- ------ ----- ------ ----- ------
Total Noninterest Income $67,394 $65,143 $71,426 $66,582 $65,847
======= ======= ======= ======= =======
2016 2015 2015 2015 2015
Noninterest expense detail 1st qtr 4th qtr 3rd qtr 2nd qtr 1st qtr
-------------------------- -------
Salaries and wages $69,410 $68,151 $68,775 $67,485 $71,914
Pension and employee benefits 16,470 18,339 16,997 18,535 18,612
Net occupancy expense 14,774 12,716 13,540 13,727 15,954
Equipment expense 12,408 12,074 12,235 12,592 11,025
Taxes, other than federal income taxes 2,031 2,096 2,003 2,032 2,014
Stationery, supplies and postage 3,619 3,222 3,304 3,370 3,528
Bankcard, loan processing and other costs 11,008 11,146 12,335 12,461 11,139
Advertising 3,260 3,386 4,278 3,103 2,747
Professional services 8,351 5,056 5,154 5,358 4,010
Telephone 2,424 2,530 2,480 2,599 2,574
Amortization of intangibles 2,304 2,598 2,598 2,598 2,598
FDIC insurance expense 5,445 5,252 5,234 5,077 5,167
Other operating expense 15,459 9,056 11,809 12,737 9,370
----------------------- ------ ----- ------ ------ -----
Total Noninterest Expense $166,963 $155,622 $160,742 $161,674 $160,652
======== ======== ======== ======== ========
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
March 31, December 31, September 30, June 30, March 31, December 31,
Allowance for Credit Losses 2016 2015 2015 2015 2015 2015
--------------------------- ----
Allowance for originated loan losses, beginning of period $105,135 $104,055 $101,682 $97,545 $95,696 $95,696
Provision for originated loan losses 5,410 12,487 10,402 10,809 6,036 39,734
Charge-offs 13,014 15,514 13,398 11,298 8,567 48,778
Recoveries 5,384 4,107 5,369 4,626 4,380 18,483
----- ----- ----- ----- ----- ------
Net charge-offs 7,630 11,407 8,029 6,672 4,187 30,295
----- ------ ----- ----- ----- ------
Allowance for originated loan losses, end of period $102,915 $105,135 $104,055 $101,682 $97,545 $105,135
======== ======== ======== ======== ======= ========
Reserve for unfunded lending commitments,
beginning of period $4,068 $3,574 $3,905 $4,330 $5,848 $5,848
Provision for (relief of) credit losses 876 494 (331) (425) (1,518) (1,780)
--- --- ---- ---- ------ ------
Reserve for unfunded lending commitments,
end of period $4,944 $4,068 $3,574 $3,905 $4,330 $4,068
====== ====== ====== ====== ====== ======
Allowance for Credit Losses $107,859 $109,203 $107,629 $105,587 $101,875 $109,203
======== ======== ======== ======== ======== ========
Ratios
------
Provision for loan losses to average loans 0.15% 0.36% 0.31% 0.33% 0.19% 0.30%
Net charge-offs to average loans 0.22% 0.33% 0.24% 0.20% 0.13% 0.23%
Allowance for loan losses to period-end loans 0.72% 0.74% 0.76% 0.76% 0.76% 0.74%
Allowance for credit losses to period-end loans 0.75% 0.77% 0.79% 0.79% 0.79% 0.77%
Allowance for loan losses to nonperforming loans 139.64% 238.37% 221.22% 184.40% 211.66% 238.37%
Allowance for credit losses to nonperforming loans 146.35% 247.60% 228.82% 191.48% 221.06% 247.60%
Asset Quality
-------------
Impaired originated loans:
Commercial loans $56,726 $28,108 $30,821 $37,889 $28,478 $28,108
Consumer loans 16,975 15,997 16,215 17,253 17,607 15,997
------ ------ ------ ------ ------ ------
Total nonperforming loans 73,701 44,105 47,036 55,142 46,085 44,105
Other real estate owned ("OREO"), noncovered (2) 38,592 50,393 60,022 62,169 22,521 50,393
------ ------ ------ ------ ------ ------
Total nonperforming assets ("NPAs") (2) $112,293 $94,498 $107,058 $117,311 $68,606 $94,498
======== ======= ======== ======== ======= =======
NPAs to period-end loans + noncovered OREO (2) 0.78% 0.67% 0.78% 0.87% 0.53% 0.67%
==== ==== ==== ==== ==== ====
Accruing originated loans past due 90 days or more $9,361 $8,022 $9,888 $8,009 $7,914 $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 March 31, 2016, $70.7 million of FDIC acquired loans remained covered by single family loss share agreements, providing considerable protection against credit risk.
(2) As of March 31, 2016, December 31, 2015, September 30, 2015, and June 30, 2015, $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) Quarters Ended Year Ended
(Dollars in thousands) March 31, December 31,
--------- ------------
2016 2015 2015
---- ---- ----
Allowance for
originated loan
losses -beginning of
period $105,135 $95,696 $95,696
Loans charged off:
Commercial 3,248 685 15,270
Mortgage 450 424 1,443
Installment 6,310 4,605 19,546
Home equity 1,027 911 4,032
Credit cards 1,450 1,452 4,867
Leases - - 1,268
Overdrafts 529 490 2,352
--- --- -----
Total 13,014 8,567 48,778
------ ----- ------
Recoveries:
Commercial 535 325 1,798
Mortgage 20 35 257
Installment 3,614 2,868 11,062
Home equity 624 613 2,606
Credit cards 357 366 1,395
Manufactured housing 6 13 31
Leases 19 4 787
Overdrafts 209 156 547
--- --- ---
Total 5,384 4,380 18,483
----- ----- ------
Net charge-offs 7,630 4,187 30,295
Provision for
originated loan
losses 5,410 6,036 39,734
Allowance for
originated loan
losses-end of period $102,915 $97,545 $105,135
======== ======= ========
Average originated
loans $14,187,793 $12,689,791 $13,297,594
=========== =========== ===========
Ratio (annualized) to
average originated
loans:
Originated net charge-
offs 0.22% 0.13% 0.23%
==== ==== ====
Provision for
originated loan
losses 0.15% 0.19% 0.30%
==== ==== ====
Originated Loans,
period-end $14,389,513 $12,856,037 $14,118,505
=========== =========== ===========
Allowance for credit
losses: $107,859 $101,875 $109,203
======== ======== ========
To (annualized) net
charge-offs 3.51 6.00 3.60
==== ==== ====
Allowance for
originated loan
losses:
To period-end
originated loans 0.72% 0.76% 0.74%
==== ==== ====
To (annualized) net
originated charge-
offs 3.35 5.74 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 March 31, 2016, $70.7 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
