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FirstMerit Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 4, 2012 10:56AM
FirstMerit Corp. (FMER) filed Quarterly Report for the period ended 2012-03-31. Firstmerit Corp has a market cap of $1.85 billion; its shares were traded at around $16.51 with a P/E ratio of 15.2 and P/S ratio of 2.4. The dividend yield of Firstmerit Corp stocks is 3.8%.
Highlight of Business Operations:The Corporation regularly sells residential mortgage loans service retained to government sponsored enterprises (“GSEs”) as part of its mortgage banking activities. The Corporation provides customary representation and warranties to the GSEs in conjunction with these sales. These representations and warranties generally require the Corporation to repurchase assets if it is subsequently determined that a loan did not meet specified criteria, such as a documentation deficiency or rescission of mortgage insurance. If the Corporation is unable to cure or refute a repurchase request, the Corporation is generally obligated to repurchase the loan or otherwise reimburse the counterparty for losses. The Corporation also sells residential mortgage loans serviced released to other investors which contain early payment default recourse provisions. As of March 31, 2012, December 31, 2011 and March 31, 2011, the Corporation had $17.2 million, $28.1 million and $29.1 million, respectively, of outstanding residential mortgage loans sold to GSEs and other investors with recourse provisions. As of March 31, 2012, the Corporation had reserved $0.4 million and as of December 31, 2011 and March 31, 2011 $0.5 million for potential losses from representation and warranty obligations and early payment default recourse provisions.
Excluding investment gains, other income for the quarter ended March 31, 2012 totaled $51.5 million, a decrease of $1.3 million from the $52.8 million earned during the same period one year ago. Other income as a percentage of net revenue (FTE net interest income plus other income, less security gains from securities) was 29.77%, compared to 29.81% for the same quarter one year ago. Explanations for the most significant changes in the components of other income are discussed immediately after the following table.
The efficiency ratio for the first quarter 2012 was 65.52%, compared to 64.37% during the same period in 2011. The efficiency ratio indicates the percentage of operating costs that are used to generate each dollar of net revenue - that is during the first quarter 2012, 65.52 cents was spent to generate each $1 of net revenue. Net revenue is defined as net interest income, on a tax-equivalent basis, plus other income less gains from the sales of securities.
Stocks Discussed: FMER,