Segment Information

12 Months Ended

Dec. 31, 2014

Segment Reporting [Abstract]

Segment Information

Segment Information

Management monitors the Corporation’s results by an internal performance measurement system, which provides lines of business results and key performance measures. The profitability measurement system is based on internal financial management practices designed to produce consistent results and reflect the underlying economics of the businesses. The development and application of these methodologies is a dynamic process. Accordingly, these measurement tools and assumptions may be revised periodically to reflect methodological, product, and/or management organizational changes. Further, these tools measure financial results that support the strategic objectives and internal organizational structure of the Corporation. Consequently, the information presented is not necessarily comparable with similar information for other financial institutions.

A description of each business, selected financial performance, and the methodologies used to measure financial performance are presented below.

• Commercial – The commercial line of business provides a full range of lending, depository, and related financial services to middle-market corporate, industrial, financial, core business banking, public entities, and leasing clients. Commercial also includes personal business from commercial loan clients in coordination with the Wealth Management segment. Products and services offered include commercial term loans, revolving credit arrangements, asset-based lending, leasing, commercial mortgages, real estate construction lending, letters of credit, treasury management, government banking, international banking, merchant card and other depository products and services.

• Retail – The retail line of business includes consumer lending and deposit gathering, residential mortgage loan origination and servicing, and branch-based small business banking (formerly known as the “micro business” line). Retail offers a variety of retail financial products and services including consumer direct and indirect installment loans, debit and credit cards, debit gift cards, residential mortgage loans, home equity loans and lines of credit, deposit products, fixed and variable annuities and ATM network services. Deposit products include checking, savings, money market accounts and certificates of deposit.

• Wealth – The wealth line of business offers a broad array of asset management, private banking, financial planning, estate settlement and administration, credit and deposit products and services. Trust and investment services include personal trust and planning, investment management, estate settlement and administration services. Retirement plan services focus on investment management and fiduciary activities. Brokerage and insurance delivers retail mutual funds, other securities, variable and fixed annuities, personal disability and life insurance products and brokerage services. Private banking provides credit, deposit and asset management solutions for affluent clients.

• Other – The other line of business includes activities that are not directly attributable to one of the three principal lines of business. Included in the Other category are the parent company, eliminations companies, community development operations, the treasury group, which includes the securities portfolio, wholesale funding and asset liability management activities, and the economic impact of certain assets, capital and support functions not specifically identifiable with the three primary lines of business.

The accounting policies of the lines of businesses are the same as those of the Corporation described in Note 1 (Summary of Significant Accounting Policies). Funds transfer pricing is used in the determination of net interest income by assigning a cost for funds used or credit for funds provided to assets and liabilities within each business unit. In the first quarter of 2014, Management changed the estimate regarding the funds transfer pricing crediting rate provided on non-maturity deposits, including amounts for 2013. The same crediting rate estimate for 2012 did not need to be changed. Assets and liabilities are match-funded based on their maturity, prepayment and/or repricing characteristics. As a result, the three primary lines of business are generally insulated from changes in interest rates. Changes in net interest income due to changes in rates are reported in Other by the treasury group. Capital has been allocated on an economic risk basis. Loans and lines of credit have been allocated capital based upon their respective credit risk. Asset management holdings in the Wealth segment have been allocated capital based upon their respective market risk related to assets under management. Normal business operating risk has been allocated to each line of business by the level of noninterest expense. Mismatch between asset and liability cash flow as well as interest rate risk for mortgage servicing rights and the origination business franchise value have been allocated capital based upon their respective asset/liability management risk. The provision for loan loss is allocated based upon the actual net charge-offs of each respective line of business, adjusted for loan growth and changes in risk profile. Noninterest income and expenses directly attributable to a line of business are assigned to that line of business. Expenses for centrally provided services are allocated to the business line by various activity based cost formulas.

Substantially all of the Corporation’s business is conducted in the United States of America. The following tables present a summary of financial results as of and for the years ended December 31, 2014, 2013, and 2012:

(In thousands)										FirstMerit
December 31, 2014	Commercial		Retail		Wealth		Other			Consolidated
OPERATIONS:
Net interest income/(expense)	$	421,136	$	378,597	$	19,836	$	(44,001	)	$	775,568
Provision for loan losses	2,898		39,618		1,895		7,868			52,279
Noninterest income	91,483		106,356		55,800		27,885			281,524
Noninterest expense	240,142		354,305		51,269		19,203			664,919
Net income/(loss)	175,227		59,169		14,606		(11,051		)	237,951
AVERAGES:
Assets	9,265,088		5,632,881		271,975		9,248,267			24,418,211
Loans	9,262,224		5,305,513		261,321		62,257			14,891,315
Earnings assets	9,549,341		5,328,548		261,321		6,363,537			21,502,747
Deposits	6,679,007		11,484,769		1,089,068		275,591			19,528,435
Economic capital	743,071		353,098		58,106		1,635,864			2,790,139

(In thousands)											FirstMerit
December 31, 2013	Commercial		Retail		Wealth			Other			Consolidated
OPERATIONS:
Net interest income/(expense)	$	408,006	$	349,433	$	17,192		$	(63,846	)	$	710,785
Provision for loan losses	17,072		16,151		(692		)	1,153			33,684
Noninterest income	83,933		114,679		48,289			23,442			270,343
Noninterest expense	209,936		330,875		54,196			89,246			684,253
Net income/(loss)	172,206		76,105		7,784			(72,411		)	183,684
AVERAGES:
Assets	8,397,357		4,746,277		259,601			8,086,540			21,489,775
Loans	8,292,805		4,367,701		226,152			62,008			12,948,666
Earnings assets	8,480,005		4,392,937		226,179			5,393,874			18,492,995
Deposits	5,572,287		10,749,725		826,794			152,782			17,301,588
Economic capital	602,561		256,362		72,244			1,477,698			2,408,865

(In thousands)											FirstMerit
December 31, 2012	Commercial		Retail		Wealth			Other			Consolidated
OPERATIONS:
Net interest income/(expense)	$	258,575	$	207,907	$	17,444		$	(12,096	)	$	471,830
Provision for loan losses	32,319		10,008		(626		)	12,997			54,698
Noninterest income	67,606		103,279		32,996			19,723			223,604
Noninterest expense	159,525		221,297		39,296			30,819			450,937
Net income/(loss)	87,318		51,922		7,650			(12,784		)	134,106
AVERAGES:
Assets	6,424,226		2,952,280		238,805			5,005,316			14,620,627
Loans	6,391,189		2,674,997		225,018			65,876			9,357,080
Earnings assets	6,493,713		2,707,632		225,044			3,646,302			13,072,691
Deposits	3,284,722		7,416,982		709,786			142,308			11,553,798
Economic capital	404,005		212,409		49,313			942,381			1,608,108