Segment Information

3 Months Ended

Mar. 31, 2016

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. Retail offers a variety of retail financial products and services including consumer direct and indirect installment loans, debit and credit 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 2015 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. 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. Mismatches between asset and liability cash flows as well as interest rate risk for mortgage servicing rights and mortgage origination business 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 ended March 31, 2016 and March 31, 2015:

											FirstMerit
(In thousands)	Commercial		Retail		Wealth			Other			Consolidated
March 31, 2016	QTD		QTD		QTD			QTD			QTD
OPERATIONS:
Net interest income/(loss)	$	102,619	$	94,728	$	6,552		$	(18,743	)	$	185,156
Provision/ (recapture) for loan losses	5,772		4,047		(155		)	(1,855		)	7,809
Noninterest income	21,179		23,594		14,309			8,312			67,394
Noninterest expense	61,020		88,694		13,353			3,896			166,963
Net income/(loss)	37,054		16,628		4,981			(4,527		)	54,136
AVERAGES:
Assets	$	9,592,202	$	6,232,255	$	305,566		$	9,640,834		$	25,770,857
Loans	9,709,788		6,020,757		297,143			51,759			16,079,447
Earning assets	10,074,234		6,027,689		297,143			6,491,016			22,890,082
Deposits	7,478,489		11,025,256		1,319,711			812,209			20,635,665
Economic capital	1,252,294		872,762		131,588			713,523			2,970,167

												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