Segment Information

3 Months Ended

Mar. 31, 2015

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, eliminating 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) to the 2014 Form 10-K. 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.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 three months endedMarch 31, 2015 and March 31, 2014:

												FirstMerit
(In thousands)	Commercial			Retail		Wealth			Other			Consolidated
March 31, 2015	QTD			QTD		QTD			QTD			QTD
OPERATIONS:
Net interest income/(loss)	$	99,844		$	91,095	$	5,353		$	(10,669	)	$	185,623
Provision (recapture) for loan losses	(526		)	7,533		(170		)	1,411			8,248
Noninterest income	22,490			21,737		13,976			7,644			65,847
Noninterest expense	61,653			88,271		13,719			(2,991		)	160,652
Net income/(loss)	39,785			11,068		3,756			2,530			57,139
AVERAGES:
Assets	$	9,454,218		$	5,845,417	$	302,186		$	9,303,273		$	24,905,094
Loans	9,506,529			5,570,590		292,016			58,046			15,427,181
Earning assets	9,794,483			5,582,849		292,016			6,431,069			22,100,417
Deposits	6,886,945			11,124,158		1,240,960			536,862			19,788,925
Economic capital	848,890			479,188		55,187			1,483,097			2,866,362

											FirstMerit
(In thousands)	Commercial		Retail		Wealth			Other			Consolidated
March 31, 2014	QTD		QTD		QTD			QTD			QTD
OPERATIONS:
Net interest income/(loss)	$	105,063	$	93,250	$	4,678		$	(9,091	)	$	193,900
Provision (recapture) for loan losses	5,706		8,339		(45		)	536			14,536
Noninterest income	21,306		27,035		13,464			5,465			67,270
Noninterest expense	63,966		96,701		13,518			(4,854		)	169,331
Net income/(loss)	36,884		9,909		3,035			3,627			53,455
AVERAGES:
Assets	$	9,072,390	$	5,449,856	$	241,618		$	9,380,706		$	24,144,570
Loans	9,061,371		5,084,555		230,429			36,126			14,412,481
Earning assets	9,308,031		5,101,740		230,429			6,263,663			20,903,863
Deposits	6,645,640		11,753,015		1,009,811			228,039			19,636,505
Economic capital	654,922		320,090		57,784			1,700,430			2,733,226