Business Combinations Business Combinations (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The Citizens transaction was accounted for using the acquisition method of accounting and, as such, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the Acquisition Date. All acquired loans were also recorded at fair value. No allowance for loan losses was carried over and no allowance was created at Acquisition Date. Per the acquisition method of accounting, these fair values are preliminary and subject to refinement for up to one year after the Acquisition Date as additional information relative to closing date fair values become available.

The following table provides the preliminary purchase price calculation as of the Acquisition Date and the identifiable assets purchased and the liabilities assumed at their estimated fair value. These fair value measurements are provisional based on third-party valuations that are currently under review.



Purchase Price:
FirstMerit shares of Common Stock issued for Citizens' shares				55,468,283
Closing price per share of the Corporation's Common Stock on April 12, 2013				$	16.68
Consideration from Common Stock conversion (1.37 ratio)				925,211
Cash paid to the Treasury for Citizens' TARP Preferred				355,371
Cash paid in lieu of fractional shares to the former Citizens' shareholders				61
Consideration from the warrant issued to the Treasury for Citizens' TARP warrant				3,000
Total purchase price				$	1,283,643

Preliminary Statement of Net Assets Acquired at Fair Value:
ASSETS
Cash and due from banks	$	544,380
Investment Securities	3,202,575
Loans	4,617,004
Premises and equipment	138,536
Intangible assets	84,774		¹
Accrued interest receivable and other assets	680,020
Total assets	$	9,267,289
LIABILITIES
Deposits	$	7,276,754
Borrowings	908,824
Accrued taxes, expenses, and other liabilities	77,843
Total liabilities	$	8,263,421
Net identifiable assets acquired				1,003,868
Goodwill				$	279,775

1 - Intangible assets consist of core deposit intangibles of $70.8 million and trust relationships of approximately $14.0 million. The useful lives for which the core deposit intangible and the trust relationships are being amortized over are 15 years and 12 years, respectively.

Acquired Impaired and Non-Impaired Loans at Acquisition Date

The following table summarizes the provisional fair value of both acquired impaired and nonimpaired loans by product type as of the Acquisition Date.



	Acquired Impaired Loans		Acquired Nonimpaired Loans		Acquired Loans Total
Commercial
C&I	$	93,735	$	1,660,199	$	1,753,934
CRE	378,569		359,066		737,635
Construction	13,399		17,135		30,534
Total commercial	485,703		2,036,400		2,522,103
Consumer
Residential mortgages	232,291		278,404		510,695
Installment	54,108		1,165,235		1,219,343
Home equity lines	47,613		317,250		364,863
Total consumer	334,012		1,760,889		2,094,901
Total	$	819,715	$	3,797,289	$	4,617,004

Acquired Non-impaired Loans Fair Value at Acquisition Date

For acquired nonimpaired loans, the difference between the Acquisition Date fair value and the contractual amounts due at the Acquisition Date represents the fair value adjustment. Fair value adjustments may be discounts (or premiums) to a loan's cost basis and are accreted (or amortized) to interest income over the the loan's remaining life using the level yield method. Acquired nonimpaired loans are reported net of the unamortized fair value adjustment in the Consolidated Balance Sheet. The fair value adjustment for acquired nonimpaired loans as of the Acquisition Date is presented in the following table.



	Acquired Nonimpaired Loans
Outstanding balance	$	4,017,304
Less: Fair value adjustment	220,015
Fair value of acquired nonimpaired loans	$	3,797,289

Nonimpaired Loans Cash Flows Reconciliation at Acquisition Date

The table below details contractually required payments, cash flows not expected to be collected and cash flows expected to be collected on acquired nonimpaired loans as of the Acquisition Date.



	Acquired Nonimpaired Loans
Contractually required payments including interest (a)	$	4,955,180
Less: Contractual cash flows not expected to be collected	680,664
Cash flows expected to be collected	$	4,274,516

(a) - Total undiscounted amounts of all uncollected contractual principal and interest, including any fees and penalties, both past due and scheduled for the future, assuming no loss or prepayment.

Reconciliation of Carrying Amount of Acquired Impaired Loans

A reconciliation of the contractual required payments to the fair value of the acquired impaired loans at the Acquisition Date is as follows:



	Acquired Impaired Loans
Contractually required payments including interest (a)	$	1,231,172
Nonaccretable difference (b)	(279,899		)
Cash flows expected to be collected (c)	951,273
Accretable yield (d)	(131,558		)
Fair value of loans acquired	$	819,715

Business Acquisition, Pro Forma Information

The following table provides the unaudited pro forma information for the results of operations for the years ended December 31, 2013 and 2012, as if the acquisition had occurred January 1 of each year. These adjustments include the impact of certain purchase accounting adjustments including accretion of loan marks, which makes up the vast majority of the adjustments, followed by intangible assets amortization, investment securities amortization, fixed assets depreciation and deposit accretion. In addition, the $75.1 million in year to date merger-related expenses previously discussed are included in each period presented. The Corporation expects to achieve further operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts. These unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined corporation that would have been achieved had the acquisition occurred at the beginning of each period presented, nor are they intended to represent or be indicative of future results of operations.



	(Unaudited)
	Year Ended December 31,
	2013		2012
Total revenue, net of interest expense	$	1,096,960	$	1,254,594
Net income	196,744		609,259

Note: 2012 net income includes approximately $276.8 million of tax benefits as a result of Citizens reversal of its valuation allowance on its DTA.