EX-99.1 2 l39617exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(FIRSTMERIT CORPORATION LOGO)
FOR IMMEDIATE RELEASE
FirstMerit Corporation
Analysts: Thomas O’Malley/Investor Relations Officer
Phone: 330.384.7109
Media Contact: Robert Townsend/Media Relations Officer
Phone: 330.384.7075
FirstMerit Corporation Reports First Quarter 2010 EPS of $0.21 Per Share
Quarterly Highlights include:
    Increase in net income of $3.5 million, to $18.0 million
 
    Expansion in net interest margin of 8 basis points, to 3.72%
 
    Increase in allowance for credit losses of $3.3 million, to $124.1 million, or 1.82% of loans
 
    Decrease in net charge-offs of $8.4 million, to $22.8 million, or 1.36% of average loans
 
    Two bank acquisitions in February, adding $1.6 billion in total assets
     Akron, Ohio (May 4, 2010) — FirstMerit Corporation (Nasdaq: FMER) reported first quarter 2010 net income of $18.0 million, or $0.21 per diluted share. This compares with $14.5 million, or $0.17 per diluted share, for the fourth quarter 2009 and $29.4 million, or $0.33 per diluted share, for the first quarter 2009.
     Returns on average common equity (“ROE”) and average assets (“ROA”) for the first quarter 2010 were 6.68% and 0.64%, respectively, compared with 5.38% and 0.54% for the fourth quarter 2009 and 12.39% and 1.07% for the first quarter 2009.
     “FirstMerit reported solid results in the first quarter. Our 44th consecutive quarter of profitability in a continually challenging economy reflects FirstMerit’s financial strength and stability, which provides us a solid platform with which to pursue strategic growth opportunities,” said Paul G. Greig, chairman, president and CEO of FirstMerit Corporation. “This quarter we demonstrated good performance on many fronts, including a 10th straight quarter of core deposit growth, continued net interest margin expansion and a decrease in net charge-offs. To facilitate future profitable growth, we added $80.0 million of tangible common equity to our strong balance sheet during the quarter with execution of an at-the-market stock offering in March.”
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FirstMerit Corporation Reports First Quarter 2010 EPS Results / Page 2
     In the first quarter of 2010, The Corporation completed two strategic acquisitions in the Chicago area: 24 branches of First Bank and certain assets and substantially all of the deposits of the 4-branch George Washington Savings Bank.
     Net interest margin was 3.72% for the first quarter of 2010 compared with 3.64% for the fourth quarter of 2009 and 3.53% for the first quarter of 2009. The Corporation’s continued emphasis on core deposit gathering and shifting deposit mix away from higher-priced certificate of deposit products drove the expansion over both time periods.
     Average loans during the first quarter of 2010 increased $150.5 million, or 2.16%, compared with the fourth quarter of 2009 and decreased $281.5 million, or 3.81%, compared with the first quarter of 2009. Excluding $286.8 million in average loan balances related to the aforementioned Chicago bank acquisitions, average loans decreased $119.9 million, or 1.73%, compared with the fourth quarter of 2009 and decreased $568.4 million, or 7.70% compared with the first quarter of 2009. The decrease in average balances reflects a reduced level of commercial and consumer credit demand and the focus on debt reduction by The Corporation’s business and retail customer base.
     Average deposits during the first quarter of 2010 increased $943.2 million, or 12.75%, compared with the fourth quarter of 2009 and increased $696.7 million, or 9.11%, compared with the first quarter of 2009. During the first quarter of 2010 the Corporation increased its average core deposits, which excludes time deposits, by $687.3 million, or 11.74%, compared with the fourth quarter of 2009, and $1.5 billion, or 29.28%, compared with the first quarter of 2009. Acquisitions represent $706.5 million of average deposit growth and $275.5 million of average core deposit growth in the first quarter of 2010.
     Average investments during the first quarter of 2010 increased $168.4 million, or 6.13%, compared with the fourth quarter of 2009 and increased $132.7 million, or 4.76%, over the first quarter of 2009.
     Net interest income on a fully tax-equivalent (“FTE”) basis was $92.3 million in the first quarter 2010 compared with $89.2 million in the fourth quarter of 2009 and $88.6 million in the first quarter of 2009. Compared with the fourth quarter of 2009, average earning assets increased $366.7 million, or 3.77% and decreased $108.4 million or 1.06% compared to the first quarter of 2009.
     Noninterest income net of securities transactions for the first quarter of 2010 was $53.9 million, an increase of $3.2 million, or 6.27%, from the fourth quarter of 2009 and a decrease of $1.2 million, or 2.25%, from the first quarter of 2009 which included $9.5 million due to curtailment of the postretirement medical benefit plan for active employees. Included in noninterest income in the first quarter 2010 was a $5.1 million ($3.3 million after-tax) gain related to the George Washington Savings Bank acquisition.
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FirstMerit Corporation Reports First Quarter 2010 EPS Results / Page 3
     The primary changes in other income for the 2010 first quarter as compared to the first quarter of 2009 were as follows: trust income was $5.3 million, an increase of 10.25% primarily due to advances in the equity markets; service charges on deposits were $15.4 million, an increase of 8.49% due to an increase in new accounts; credit card fees were $11.6 million, an increase of 4.28% attributable to the improvement in the economy; loan sales and servicing income was $3.2 million, an increase of 38.63%, primarily attributable to refinancing in the current low rate mortgage market environment; bank owned life insurance income was $5.7 million, an increase of $2.6 million attributable to realized policy proceeds. A separate line item was added in the attached schedules for the $5.1 million gain on the acquisition of George Washington Savings Bank, while separately stated in the first quarter of 2009 was the $9.5 million gain due to curtailment of the postretirement medical benefit plan.
     Other income, net of securities gains, as a percentage of net revenue for the first quarter of 2010 was 36.88% compared with 36.28% for fourth quarter of 2009 and 38.39% for the first quarter of 2009. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.
     Noninterest expense for the first quarter of 2010 was $94.0 million, a decrease of $0.9 million, or 0.92%, from the fourth quarter of 2009 and an increase of $10.8 million, or 12.99%, from the first quarter of 2009. For the three months ended March 31, 2010, increases in operating expenses compared to the first quarter 2009 were primarily attributable to increased salary and benefits, professional services and FDIC expense. Onetime expenses associated with data processing conversions and related expenses for the acquisitions totaled $2.7 million.
     During the first quarter of 2010, the Corporation reported an efficiency ratio of 64.10%, compared with 67.74% for the fourth quarter of 2009 and 57.81% for the first quarter of 2009.
     Net charge-offs totaled $22.8 million, or 1.36% of average loans, in the first quarter of 2010 compared with $31.2 million, or 1.79% of average loans, in the fourth quarter 2009 and $15.6 million, or 0.86% of average loans, in the first quarter of 2009.
     Nonperforming assets totaled $123.3 million at March 31, 2010, an increase of $22.3 million compared with December 31, 2009 and an increase of $47.1 million compared with March 31, 2009. Nonperforming assets at March 31, 2010 represented 1.80% of period-end loans plus other real estate compared with 1.48% at December 31, 2009 and 1.04% at March 31, 2009.
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FirstMerit Corporation Reports First Quarter 2010 EPS Results / Page 4
     The allowance for loan losses totaled $117.8 million at March 31, 2010, an increase of $2.7 million from December 31, 2009. At March 31, 2010, the allowance for loan losses was 1.72% of period-end loans compared with 1.68% at December 31, 2009 and 1.45% at March 31, 2009. The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments. For comparative purposes the allowance for credit losses was 1.82% of period-end loans at March 31, 2010, compared with 1.77% at December 31, 2009 and 1.53% at March 31, 2009. The allowance for credit losses to nonperforming loans was 110.80% at March 31, 2010, compared with 131.82% at December 31, 2009 and 159.93% at March 31, 2009.
     The Corporation’s total assets at March 31, 2010 were $12.3 billion, an increase of $1.8 billion inclusive of intangible assets, or 16.92%, compared with December 31, 2009 and an increase of $1.4 billion, or 12.32%, compared with March 31, 2009. Total loans increased $436.3 million, or 6.30%, compared with December 31, 2009 and increased $9.0 million, or 0.12%, over March 31, 2009.
     Total deposits were $9.4 billion at March 31, 2010, an increase of $1.9 billion, or 24.67%, from December 31, 2009 and an increase of $1.7 billion, or 22.03%, from March 31, 2009. The increase compared with March 31, 2009 was driven by both an overall increase in savings and demand deposits and the acquisitions of the First Bank branches and George Washington Savings Bank. Core deposits totaled $7.0 billion at March 31, 2010, an increase of $852.4 million, or 13.85%, from December 31, 2009 and an increase of $1.7 billion, or 32.70%, from March 31, 2009.
     Shareholders’ equity was $1,155.4 million at March 31, 2010, compared with $1,065.6 million at December 31, 2009 and $1,084.3 million at March 31, 2009. The Corporation maintained a strong capital position as tangible common equity to assets was 7.93% at March 31, 2010, compared with 8.89% and 7.60% at December 31, 2009 and March 31, 2009, respectively. The common dividend per share paid in the first quarter 2010 was $0.16.
     During the first quarter of 2010, the Corporation raised $80.0 million in common equity through a Distribution Agency Agreement with Credit Suisse Securities (USA) LLC pursuant to which the Corporation, from time to time, offered and sold shares of the Corporation’s common stock. Sales of the Common Shares were made by means of ordinary brokers’ transactions on the Nasdaq Global Select Market at market prices, in block transaction or as otherwise agreed with Credit Suisse. During this time, 3.9 million shares were sold at an average market value of $20.58 per share, net of broker’s fees.
     Mr. Greig said, “FirstMerit is committed to maintaining a strong capital position. While the health of our institution positions us to explore opportunities for profitable growth, it is vital that we are well-capitalized in order to maintain and grow our already strong balance sheet and produce results that generate value for our shareholders.”
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FirstMerit Corporation Reports First Quarter 2010 EPS Results / Page 5
Acquisitions
     In the first quarter of 2010, The Corporation completed two strategic acquisitions. On February 19, 2010, FirstMerit Bank, N.A., completed the acquisition of certain assets and the transfer of certain liabilities with respect to 24 branches of First Bank located in the greater Chicago, Illinois, area. Excluding the purchase accounting adjustments, the acquisition included the assumption of approximately $1.2 billion in deposits and the purchase of $328.9 million of loans and certain other assets of First Bank associated with the acquired branch locations. All of the loans in the acquired portfolio were performing and pass-grade credits. This acquisition was accounted for under the acquisition method in accordance with ASC 805.
     Also, on February 19, 2010, the Corporation acquired, through its subsidiary FirstMerit Bank, N.A., certain assets and assumed substantially all of the deposits and liabilities of George Washington Savings Bank (“George Washington”) through a purchase and assumptions agreement with the Federal Deposit Insurance Corporation (“FDIC”). The Illinois Department of financial and Professional Regulation, Division of Banking, declared George Washington closed on February 19, 2010 and appointed the FDIC as receiver. Excluding the effects of purchase accounting adjustments, FirstMerit Bank, N.A. acquired approximately $403.8 million in assets and assumed $398.3 million of the deposits of George Washington.
     In connection with the George Washington acquisition, FirstMerit Bank, N.A., entered into a loss sharing agreement with the FDIC that collectively cover $325.1 million of assets including single family residential mortgage loans, commercial real estate and commercial and industrial loans, and other real estate. FirstMerit Bank N.A., acquired other George Washington assets that are not covered by the loss sharing agreement with the FDIC including investment securities purchased at fair market value and other tangible assets.
About FirstMerit Corporation
     FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $12.3 billion as of March 31, 2010 and 183 banking offices and 204 ATMs in Ohio, Western Pennsylvania and the Chicago area. FirstMerit Corporation provides a complete range of banking and other financial services to consumers and businesses through its core operations. Principal wholly-owned subsidiaries include: FirstMerit Bank, N.A., FirstMerit Mortgage Corporation, FirstMerit Title Agency, Ltd., and FirstMerit Community Development Corporation.
Subsequent Events
     The Corporation is required under generally accepted accounting principles to evaluate subsequent events through the filing of the March 31, 2010 consolidated financial statements on Form 10-Q. As a result, the Corporation will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of March 31, 2010 and will adjust amounts preliminarily reported, if necessary.
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FirstMerit Corporation Reports First Quarter 2010 EPS Results / Page 6
Forward-Looking Statement
     This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Corporation, as well as its operations, markets and products. Actual results could differ materially from those indicated. Among the important factors that could cause results to differ materially are interest rate changes, continued softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Corporation’s business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Corporation’s periodic reports and registration statements filed with the Securities and Exchange Commission. The Corporation undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.
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FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
  (FIRSTMERIT CORPORATION LOGO)
                                         
    Quarters
(Unaudited)   2010   2009   2009   2009   2009
(Dollars in thousands)   1st Qtr   4th Qtr   3rd Qtr   2nd Qtr   1st Qtr
EARNINGS
                                       
Net interest income FTE (a)
  $ 92,348     $ 89,171     $ 89,079     $ 88,806     $ 88,577  
Provision for loan losses
    25,493       29,960       23,887       26,521       18,065  
Other income
    53,949       52,701       51,567       50,845       55,188  
Other expenses
    94,013       94,885       84,165       90,564       83,203  
FTE adjustment (a)
    1,954       1,793       1,702       1,691       1,683  
Net income
    18,021       14,478       22,763       15,495       29,434  
Diluted EPS (b)
    0.21       0.17       0.27       0.13       0.33  
 
                                       
PERFORMANCE RATIOS
                                       
Return on average assets (ROA)
    0.64 %     0.54 %     0.85 %     0.57 %     1.07 %
Return on average common equity (ROE)
    6.68 %     5.38 %     8.69 %     6.27 %     12.39 %
Net interest margin FTE (a)
    3.72 %     3.64 %     3.61 %     3.56 %     3.53 %
Efficiency ratio
    64.10 %     67.74 %     61.05 %     65.34 %     57.81 %
Number of full-time equivalent employees
    2,723       2,495       2,522       2,540       2,562  
 
                                       
MARKET DATA
                                       
Book value/common share
  $ 12.72     $ 12.25     $ 12.34     $ 11.99     $ 11.84  
Period-end common share mkt value
    21.57       20.14       19.03       17.00       18.20  
Market as a % of book
    170 %     164 %     154 %     142 %     154 %
Cash dividends/common share
  $ 0.16     $ 0.16     $ 0.16     $ 0.16     $ 0.29  
Common stock dividend payout ratio
    80.00 %     94.12 %     59.26 %     84.21 %     80.56 %
Average basic common shares (b)
    87,771       86,149       85,872       84,123       82,514  
Average diluted common shares (b)
    87,777       86,157       85,880       84,131       82,523  
Period end common shares
    90,810       87,004       85,869       85,266       81,417  
Common shares repurchased
    115       35       13       61       45  
Common stock market capitalization
  $ 1,958,772     $ 1,752,261     $ 1,634,087     $ 1,449,522     $ 1,481,789  
 
                                       
ASSET QUALITY (excluding acquired loans)
                                       
Gross charge-offs
  $ 26,195     $ 34,232     $ 21,819     $ 24,726     $ 18,936  
Net charge-offs
    22,779       31,220       18,757       21,556       15,565  
Allowance for loan losses
    117,806       115,092       116,352       111,222       106,257  
Reserve for unfunded lending commitments
    6,337       5,751       4,470       6,054       6,019  
Nonperforming assets (NPAs) (c)
    123,320       101,001       88,881       73,351       76,243  
Net charge-offs/average loans ratio (c)
    1.36 %     1.79 %     1.05 %     1.19 %     0.86 %
Allowance for loan losses/period-end loans (c)
    1.72 %     1.68 %     1.66 %     1.56 %     1.45 %
Allowance for credit losses/period-end loans (c)
    1.82 %     1.77 %     1.72 %     1.64 %     1.53 %
NPAs/loans and other real estate (c)
    1.80 %     1.48 %     1.26 %     1.03 %     1.04 %
Allowance for loan losses/nonperforming loans
    105.14 %     125.55 %     147.60 %     175.17 %     151.35 %
Allowance for credit losses/nonperforming loans
    110.80 %     131.82 %     153.27 %     184.71 %     159.93 %
 
                                       
CAPITAL & LIQUIDITY
                                       
Period-end tangible common equity to assets
    7.93 %     8.89 %     8.65 %     8.36 %     7.60 %
Average equity to assets
    9.63 %     10.11 %     9.77 %     9.37 %     9.66 %
Average equity to total loans (d)
    15.40 %     15.37 %     14.72 %     14.07 %     14.54 %
Average total loans to deposits
    85.12 %     93.94 %     95.57 %     95.17 %     96.56 %
 
                                       
AVERAGE BALANCES
                                       
Assets
  $ 11,357,110     $ 10,559,231     $ 10,629,359     $ 10,884,228     $ 11,115,042  
Deposits
    8,340,796       7,397,592       7,384,507       7,614,826       7,644,118  
Loans, excluding acquired loans (d)
    6,812,647       6,932,566       7,057,021       7,246,752       7,381,019  
Acquired loans, including covered loans (d)
    286,846       16,419                    
Earning assets
    10,080,871       9,714,193       9,802,810       10,001,266       10,189,233  
Shareholders’ equity
    1,093,568       1,068,013       1,038,824       1,019,628       1,073,276  
 
                                       
ENDING BALANCES
                                       
Assets
  $ 12,323,448     $ 10,539,902     $ 10,761,355     $ 10,696,962     $ 10,972,176  
Deposits
    9,370,009       7,515,796       7,271,274       7,451,220       7,678,213  
Loans, excluding acquired loans (d)
    6,836,451       6,835,425       7,029,648       7,145,146       7,350,763  
Acquired loans, including covered loans (d)
    523,341       88,064                    
Goodwill
    187,945       139,598       139,245       139,245       139,245  
Intangible assets
    5,659       1,158       1,143       1,229       1,316  
Earning assets
    10,784,885       9,685,155       9,793,244       9,869,183       10,108,403  
Total shareholders’ equity
    1,155,353       1,065,627       1,059,209       1,022,647       1,084,269  
 
NOTES:
 
(a) Net interest income on a fully tax-equivalent (“FTE”) basis restates interest on tax-exempt securities and loans as if such interest were subject to federal income tax at the statutory rate. Net interest income on an FTE basis is not an accounting principle generally accepted in the United States of America.
 
(b) Average outstanding shares and per share data restated to reflect the effect of stock dividends declared April 28, 2009 and August 20, 2009.
 
(c) As required by current accounting guidance, the acquired loans and other real estate from First Bank and George Washington Savings Bank were recorded at fair value with no carryover of the related allowances. The ratio of our allowance for loan and credit losses and NPAs do not include these loans and other real estate.
 
(d) Excludes loss share receivable

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FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                         
(In thousands)   March 31,     December 31,     March 31,  
(Unaudited, except December 31, 2009, which is derived from the audited financial statements)   2010     2009     2009  
ASSETS
                       
Cash and due from banks
  $ 721,938     $ 161,033     $ 179,397  
Investment securities
                       
Held-to-maturity
    67,256       50,686       30,588  
Available-for-sale
    3,102,407       2,565,943       2,576,637  
Other investments
    131,376       128,209       128,007  
Loans held for sale
    16,009       16,828       22,408  
Noncovered Loans:
                       
Commercial loans
    4,389,859       4,066,522       4,344,915  
Mortgage loans
    447,575       463,416       524,909  
Installment loans
    1,382,522       1,425,373       1,533,885  
Home equity loans
    766,073       753,112       741,073  
Credit card loans
    145,029       153,525       141,597  
Leases
    59,464       61,541       64,384  
 
                 
Total noncovered loans
    7,190,522       6,923,489       7,350,763  
Less: allowance for loan losses
    (117,806 )     (115,092 )     (106,257 )
 
                 
Net noncovered loans
    7,072,716       6,808,397       7,244,506  
Covered loans (includes loss share receivable of $108.0 million)
    277,315              
 
                 
Net loans
    7,350,031       6,808,397       7,244,506  
Premises and equipment, net
    164,408       125,205       130,920  
Goodwill
    187,945       139,598       139,245  
Intangible assets
    5,659       1,158       1,316  
Other real estate covered by FDIC loss share
    11,415              
Accrued interest receivable and other assets
    565,004       542,845       519,152  
 
                 
Total assets
  $ 12,323,448     $ 10,539,902     $ 10,972,176  
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                       
Deposits:
                       
Demand-non-interest bearing
  $ 2,217,714     $ 2,069,921       1,848,200  
Demand-interest bearing
    686,503       677,448       669,789  
Savings and money market accounts
    4,103,657       3,408,109       2,763,058  
Certificates and other time deposits
    2,362,135       1,360,318       2,397,166  
 
                 
Total deposits
    9,370,009       7,515,796       7,678,213  
 
                 
Federal funds purchased and securities sold under agreements to repurchase
    896,330       996,345       804,525  
Wholesale borrowings
    677,715       740,105       1,134,152  
Accrued taxes, expenses, and other liabilities
    224,041       222,029       271,017  
 
                 
Total liabilities
    11,168,095       9,474,275       9,887,907  
 
                 
Commitments and contingencies
                       
Shareholders’ equity:
                       
Preferred stock, without par value:
                       
authorized and unissued 7,000,000 shares
                 
Preferred stock, Series A, without par value:
                       
designated 800,000 shares; none outstanding
                 
Convertible preferred stock, Series B, without par value:
                       
designated 220,000 shares; none outstanding
                 
Fixed-Rate Cumulative Perpetual Preferred Stock, Series A, $1,000 liquidation preference; authorized and issued 125,000 shares
                120,622  
Common stock, without par value:
                       
authorized 300,000,000 shares; issued 97,521,571, 93,633,871 and 92,026,350 at March 31, 2010, December 31, 2009 and March 31, 2009, respectively
    127,937       127,937       127,937  
Common stock warrant
                4,582  
Capital surplus
    171,330       88,573       84,876  
Accumulated other comprehensive loss
    (20,983 )     (25,459 )     (38,634 )
Retained earnings
    1,047,827       1,043,625       1,057,681  
Treasury stock, at cost, 6,711,936, 6,629,995 and 10,609,284 shares at March 31, 2010, December 31, 2009 and March 31, 2009, respectively
    (170,758 )     (169,049 )     (272,795 )
 
                 
Total shareholders’ equity
    1,155,353       1,065,627       1,084,269  
 
                 
Total liabilities and shareholders’ equity
  $ 12,323,448     $ 10,539,902     $ 10,972,176  
 
                 

8


 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
  (FIRSTMERIT CORPORATION LOGO)
                                         
    Quarterly Periods  
(Unaudited)   March 31,     December 31,     September 30,     June 30,     March 31,  
(Dollars in thousands)   2010     2009     2009     2009     2009  
 
                                       
ASSETS
                                       
Cash and due from banks
  $ 521,666     $ 167,608     $ 159,985     $ 194,381     $ 209,922  
Investment securities
                                       
Held-to-maturity
    56,322       43,228       32,017       28,821       33,210  
Available-for-sale
    2,731,639       2,577,759       2,568,348       2,576,994       2,623,732  
Other investments
    129,652       128,209       128,067       128,056       128,007  
Fed funds sold
    6       5                   17  
Loans held for sale
    14,538       16,007       17,357       20,643       23,248  
Noncovered loans:
                                       
Commercial loans
    4,197,663       4,058,851       4,105,778       4,263,114       4,337,108  
Mortgage loans
    454,525       472,829       492,089       513,982       536,498  
Installment loans
    1,402,552       1,449,091       1,492,019       1,512,929       1,558,374  
Home equity loans
    757,094       756,478       758,353       749,097       736,956  
Credit card loans
    150,117       151,233       149,460       146,589       146,355  
Leases
    60,430       60,503       59,322       61,041       65,728  
 
                             
Total noncovered loans
    7,022,381       6,948,985       7,057,021       7,246,752       7,381,019  
Less: allowance for loan losses
    115,031       113,438       111,073       104,864       102,533  
 
                             
Net noncovered loans
    6,907,350       6,835,547       6,945,948       7,141,888       7,278,486  
Covered loans and loss share receivable
    126,333                          
 
                             
Net loans
    7,033,683       6,835,547       6,945,948       7,141,888       7,278,486  
 
                                       
Total earning assets
    10,080,871       9,714,193       9,802,810       10,001,266       10,189,233  
 
                                       
Premises and equipment, net
    141,405       126,073       127,096       129,433       132,156  
Accrued interest receivable and other assets
    728,199       664,795       650,541       664,012       686,264  
 
                             
 
                                       
TOTAL ASSETS
  $ 11,357,110     $ 10,559,231     $ 10,629,359     $ 10,884,228     $ 11,115,042  
 
                             
 
                                       
LIABILITIES
                                       
Deposits:
                                       
Demand-non-interest bearing
  $ 2,146,969     $ 2,028,977     $ 1,947,359     $ 1,891,792     $ 1,767,885  
Demand-interest bearing
    687,233       651,381       647,712       671,235       655,279  
Savings and money market accounts
    3,709,246       3,175,825       2,916,980       2,810,155       2,638,166  
Certificates and other time deposits
    1,797,348       1,541,409       1,872,456       2,241,644       2,582,788  
 
                             
 
                                       
Total deposits
    8,340,796       7,397,592       7,384,507       7,614,826       7,644,118  
 
                                       
Federal funds purchased and securities sold under agreements to repurchase
    951,927       1,076,199       1,087,875       945,178       941,112  
Wholesale borrowings
    708,414       762,023       883,377       1,019,786       1,151,777  
 
                             
 
                                       
Total funds
    10,001,137       9,235,814       9,355,759       9,579,790       9,737,007  
Accrued taxes, expenses and other liabilities
    262,405       255,404       234,776       284,810       304,759  
 
                             
 
                                       
Total liabilities
    10,263,542       9,491,218       9,590,535       9,864,600       10,041,766  
 
                                       
SHAREHOLDERS’ EQUITY
                                       
Preferred stock
                      27,850       109,807  
Common stock
    127,937       127,937       127,937       127,937       127,937  
Common stock warrant
                      2,820       4,175  
Capital surplus
    106,350       74,213       55,732       63,457       86,872  
Accumulated other comprehensive loss
    (20,593 )     (9,266 )     (26,793 )     (35,569 )     (49,477 )
Retained earnings
    1,049,774       1,047,097       1,050,359       1,056,739       1,069,948  
Treasury stock
    (169,900 )     (171,968 )     (168,411 )     (223,606 )     (275,986 )
 
                             
 
                                       
Total shareholders’ equity
    1,093,568       1,068,013       1,038,824       1,019,628       1,073,276  
 
                             
 
                                       
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $ 11,357,110     $ 10,559,231     $ 10,629,359     $ 10,884,228     $ 11,115,042  
 
                             

9


 

AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully Tax-equivalent Interest Rates and Interest Differential
FIRSTMERIT CORPORATION AND SUBSIDIARIES
                                                                         
    Three months ended     Year ended     Three months ended  
    March 31, 2010     December 31, 2009     March 31, 2009  
    Average             Average     Average             Average     Average             Average  
(Dollars in thousands)   Balance     Interest     Rate     Balance     Interest     Rate     Balance     Interest     Rate  
             
ASSETS
                                                                       
Cash and due from banks
  $ 521,666                     $ 183,215                     $ 209,922                  
Investment securities and federal funds sold:
                                                                       
U.S. Treasury securities and U.S. Government agency obligations (taxable)
    2,377,729       22,909       3.91 %     2,222,771       97,871       4.40 %     2,251,028       25,954       4.68 %
Obligations of states and political subdivisions (tax exempt)
    344,899       5,139       6.04 %     321,919       19,718       6.13 %     320,943       4,914       6.21 %
Other securities and federal funds sold
    194,991       1,986       4.13 %     204,272       8,394       4.11 %     212,995       2,341       4.46 %
 
                                                           
Total investment securities and federal
                                                                       
funds sold
    2,917,619       30,034       4.17 %     2,748,962       125,983       4.58 %     2,784,966       33,209       4.84 %
Loans held for sale
    14,538       184       5.13 %     19,289       1,032       5.35 %     23,248       322       5.62 %
Noncovered loans
    7,022,381       81,829       4.73 %     7,156,983       339,381       4.74 %     7,381,019       87,508       4.81 %
Covered loans and loss share receivable
    126,333       1,761       5.65 %                                    
 
                                                           
Total earning assets
    10,080,871       113,808       4.58 %     9,925,234       466,396       4.70 %     10,189,233       121,039       4.82 %
Allowance for loan losses
    (115,031 )                     (108,017 )                     (102,533 )                
Other assets
    869,604                       793,062                       818,420                  
 
                                                                 
Total assets
  $ 11,357,110                     $ 10,793,494                     $ 11,115,042                  
 
                                                                 
 
                                                                       
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                                                       
Deposits:
                                                                       
Demand — non-interest bearing
  $ 2,146,969                 $ 1,910,171                 $ 1,767,885              
Demand — interest bearing
    687,233       152       0.09 %     656,367       600       0.09 %     655,279       155       0.10 %
Savings and money market accounts
    3,709,246       7,601       0.83 %     2,886,842       23,472       0.81 %     2,638,166       5,377       0.83 %
Certificates and other time deposits
    1,797,348       6,406       1.45 %     2,056,208       54,610       2.66 %     2,582,788       18,588       2.92 %
 
                                                           
Total deposits
    8,340,796       14,159       0.69 %     7,509,588       78,682       1.05 %     7,644,118       24,120       1.28 %
Securities sold under agreements to repurchase
    951,927       1,127       0.48 %     1,013,167       4,764       0.47 %     941,112       999       0.43 %
Wholesale borrowings
    708,414       6,174       3.53 %     952,979       27,317       2.87 %     1,151,777       7,343       2.59 %
 
                                                           
Total interest bearing liabilities
    7,854,168       21,460       1.11 %     7,565,563       110,763       1.46 %     7,969,122       32,462       1.65 %
Other liabilities
    262,405                       267,835                       304,759                  
Shareholders’ equity
    1,093,568                       1,049,925                       1,073,276                  
 
                                                                 
Total liabilities and shareholders’ equity
  $ 11,357,110                     $ 10,793,494                     $ 11,115,042                  
 
                                                                 
Net yield on earning assets
  $ 10,080,871       92,348       3.72 %   $ 9,925,234       355,633       3.58 %   $ 10,189,233       88,577       3.53 %
 
                                                     
Interest rate spread
                    3.47 %                     3.24 %                     3.17 %
 
                                                                 
Note:   Interest income on tax-exempt securities and loans has been adjusted to a fully-taxable equivalent basis. Nonaccrual loans have been included in the average balances.

10


 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                 
    Quarters ended  
(Unaudited)   March 31,  
(In thousands except per share data)   2010     2009  
Interest income:
               
Interest and fees on loans, including held for sale
  $ 83,150     $ 87,799  
Investment securities
               
Taxable
    24,870       28,295  
Tax-exempt
    3,339       3,262  
 
           
Total investment securities interest
    28,209       31,557  
Other earning assets
    495        
 
           
Total interest income
    111,854       119,356  
 
           
Interest expense:
               
Interest on deposits:
               
Demand-interest bearing
    152       155  
Savings and money market accounts
    7,601       5,377  
Certificates and other time deposits
    6,406       18,588  
Interest on securities sold under agreements to repurchase
    1,127       999  
Interest on wholesale borrowings
    6,174       7,343  
 
           
Total interest expense
    21,460       32,462  
 
           
Net interest income
    90,394       86,894  
Provision for loan losses
    25,493       18,065  
 
           
Net interest income after provision for loan losses
    64,901       68,829  
 
           
Other income:
               
Trust department income
    5,281       4,790  
Service charges on deposits
    15,366       14,163  
Credit card fees
    11,558       11,084  
ATM and other service fees
    2,509       2,606  
Bank owned life insurance income
    5,652       3,015  
Investment services and insurance
    1,928       2,918  
Loan sales and servicing income
    3,237       2,335  
Gain on acquistion
    5,090        
Gain on post medical retirement curtailment
          9,543  
Other operating income
    3,328       4,734  
 
           
Total other income
    53,949       55,188  
 
           
Other expenses:
               
Salaries, wages, pension and employee benefits
    48,156       42,682  
Net occupancy expense
    7,140       6,871  
Equipment expense
    6,050       5,797  
Stationery, supplies and postage
    2,693       2,275  
Bankcard, loan processing and other costs
    7,818       7,842  
Professional services
    5,237       3,480  
Amortization of intangibles
    234       87  
FDIC expense
    3,765       2,556  
Other operating expense
    12,920       11,613  
 
           
Total other expenses
    94,013       83,203  
 
           
Income before federal income tax expense
    24,837       40,814  
Federal income tax expense
    6,816       11,380  
 
           
Net income
  $ 18,021     $ 29,434  
 
           
 
               
Other comprehensive income, net of taxes
               
Unrealized securities’ holding gain, net of taxes
  $ 4,476     $ 15,817  
Unrealized hedging loss, net of taxes
          (94 )
Minimum pension liability adjustment, net of taxes
          (277 )
Total other comprehensive gain, net of taxes
    4,476       15,446  
 
           
Comprehensive income
  $ 22,497     $ 44,880  
 
           
Net income applicable to common shares
  $ 18,021     $ 27,563  
 
           
Net income used in diluted EPS calculation
  $ 18,021     $ 27,563  
 
           
Weighted average number of common shares outstanding — basic *
    87,771       82,514  
 
           
Weighted average number of common shares outstanding — diluted *
    87,777       82,523  
 
           
Basic earnings per share *
  $ 0.21     $ 0.33  
 
           
Diluted earnings per share *
  $ 0.21     $ 0.33  
 
           
Dividend per share
  $ 0.16     $ 0.29  
 
           
 
*   Average outstanding shares and per share data restated to reflect the effect of stock dividends declared April 28, 2009 and August 20, 2009.

11


 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME—LINKED QUARTERS
  (FIRSTMERIT CORPORATION LOGO)
                                         
    Quarterly Results  
(Unaudited)   2010     2009     2009     2009     2009  
(Dollars in thousands, except share data)   1st Q     4th Q     3rd Q     2nd Q     1st Q  
Interest and fees on loans, including held for sale
  $ 83,150     $ 81,907     $ 84,283     $ 86,247     $ 87,799  
Interest and dividends — securities and federal funds sold
    28,209       28,434       29,388       29,912       31,557  
Other earning assets
    495                          
 
                             
Total interest income
    111,854       110,341       113,671       116,159       119,356  
 
                             
Interest on deposits:
                                       
Demand-interest bearing
    152       149       137       159       155  
Savings and money market accounts
    7,601       6,880       5,763       5,452       5,377  
Certificates and other time deposits
    6,406       8,413       12,284       15,325       18,588  
Securities sold under agreements to repurchase
    1,127       1,268       1,286       1,211       999  
Wholesale borrowings
    6,174       6,253       6,824       6,897       7,343  
 
                             
Total interest expense
    21,460       22,963       26,294       29,044       32,462  
 
                             
Net interest income
    90,394       87,378       87,377       87,115       86,894  
Provision for loan losses
    25,493       29,960       23,887       26,521       18,065  
 
                             
Net interest income after provision for loan losses
    64,901       57,418       63,490       60,594       68,829  
 
                             
Other income:
                                       
Trust department income
    5,281       5,374       5,081       5,438       4,790  
Service charges on deposits
    15,366       16,568       16,782       15,853       14,163  
Credit card fees
    11,558       12,049       11,711       11,668       11,084  
ATM and other service fees
    2,509       2,730       2,935       2,839       2,606  
Bank owned life insurance income
    5,652       4,524       3,216       2,985       3,015  
Investment services and insurance
    1,928       2,322       2,498       2,270       2,918  
Investment securities gains, net
          1,934       2,925       1,178        
Loan sales and servicing income
    3,237       2,947       3,881       3,791       2,335  
Gain on acquisition
    5,090                          
Gain on post medical retirement curtailment
                            9,543  
Other operating income
    3,328       4,253       2,538       4,823       4,734  
 
                             
Total other income
    53,949       52,701       51,567       50,845       55,188  
 
                             
Other expenses:
                                       
Salaries, wages, pension and employee benefits
    48,156       45,748       43,351       44,125       42,682  
Net occupancy expense
    7,140       5,631       5,739       5,858       6,871  
Equipment expense
    6,050       6,445       5,847       6,212       5,797  
Stationery, supplies and postage
    2,693       2,414       2,167       2,051       2,275  
Bankcard, loan processing and other costs
    7,818       8,215       7,548       7,862       7,842  
Professional services
    5,237       6,098       3,980       2,856       3,480  
Amortization of intangibles
    234       87       86       87       87  
FDIC expense
    3,765       3,160       2,298       8,496       2,556  
Other operating expense
    12,920       17,087       13,149       13,017       11,613  
 
                             
Total other expenses
    94,013       94,885       84,165       90,564       83,203  
 
                             
Income before income tax expense
    24,837       15,234       30,892       20,875       40,814  
Federal income taxes
    6,816       756       8,129       5,380       11,380  
 
                             
Net income
  $ 18,021     $ 14,478     $ 22,763     $ 15,495     $ 29,434  
 
                             
Other comprehensive income (loss), net of taxes
    4,476       (18,022 )     25,994       5,203       15,446  
 
                             
Comprehensive income
  $ 22,497     $ (3,544 )   $ 48,757     $ 20,698     $ 44,880  
 
                             
Net income applicable to common shares
  $ 18,021     $ 14,478     $ 22,763     $ 10,995     $ 27,563  
 
                             
Adjusted net income used in diluted EPS calculation
  $ 18,021     $ 14,478     $ 22,763     $ 10,995     $ 27,563  
 
                             
Weighted-average common shares — basic *
    87,771       86,149       85,872       84,123       82,514  
 
                             
Weighted-average common shares — diluted *
    87,777       86,157       85,880       84,131       82,523  
 
                             
 
                                       
Basic net income per share *
  $ 0.21     $ 0.17     $ 0.27     $ 0.13     $ 0.33  
 
                             
 
                                       
Diluted net income per share *
  $ 0.21     $ 0.17     $ 0.27     $ 0.13     $ 0.33  
 
                             
 
*   Average outstanding shares and per share data restated to reflect the effect of stock dividends declared April 28, 2009 and August 20, 2009.

12


 

     
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION (excluding acquired loans)
  (FIRSTMERITCORPORATION LOGO)
                                                 
(Unaudited, except December 31, 2009 annual period which    Quarterly Periods     Annual Period  
is derived from the audited financial statements)   Mar 31     Dec 31     Sept 30     Jun 30     Mar 31     Dec 31  
(Dollars in thousands, except ratios)   2010     2009     2009     2009     2009     2009  
 
                                               
Allowance for Credit Losses
                                               
 
                                               
Allowance for loan losses, beginning of period
  $ 115,092     $ 116,352     $ 111,222     $ 106,257     $ 103,757     $ 103,757  
Provision for loan losses
    25,493       29,960       23,887       26,521       18,065       98,433  
Charge-offs
    26,195       34,232       21,819       24,726       18,936       99,713  
Recoveries
    3,416       3,012       3,062       3,170       3,371       12,615  
 
                                   
Net charge-offs
    22,779       31,220       18,757       21,556       15,565       87,098  
 
                                   
Allowance for loan losses, end of period
  $ 117,806     $ 115,092     $ 116,352     $ 111,222     $ 106,257     $ 115,092  
 
                                   
Reserve for unfunded lending commitments, beginning of period
  $ 5,751     $ 4,470     $ 6,054     $ 6,019     $ 6,588     $ 6,588  
Provision for credit losses
    586       1,281       (1,584 )     35       (569 )     (837 )
 
                                   
Reserve for unfunded lending commitments, end of period
  $ 6,337     $ 5,751     $ 4,470     $ 6,054     $ 6,019     $ 5,751  
 
                                   
Allowance for Credit Losses
  $ 124,143     $ 120,843     $ 120,822     $ 117,276     $ 112,276     $ 120,843  
 
                                   
 
                                               
Ratios (a)
                                               
 
                                               
Provision for loan losses as a % of average loans (b)
    1.52 %     1.71 %     1.34 %     1.47 %     0.99 %     1.38 %
Provision for credit losses as a % of average loans (b)
    0.03 %     0.07 %     -0.09 %     0.00 %     -0.03 %     -0.01 %
Net charge-offs as a % of average loans (b)
    1.36 %     1.79 %     1.05 %     1.19 %     0.86 %     1.22 %
Allowance for loan losses as a % of period-end loans (b)
    1.72 %     1.68 %     1.66 %     1.56 %     1.45 %     1.58 %
Allowance for credit losses as a % of period-end loans (b)
    1.82 %     1.77 %     1.72 %     1.64 %     1.53 %     1.66 %
Allowance for loan losses as a % of nonperforming loans
    105.14 %     125.55 %     147.60 %     175.17 %     151.35 %     125.55 %
Allowance for credit losses as a % of nonperforming loans
    110.80 %     131.82 %     153.27 %     184.71 %     159.93 %     131.82 %
 
                                               
Asset Quality (*)
                                               
 
                                               
Impaired loans:
                                               
Nonaccrual
  $ 94,798     $ 74,033     $ 63,357     $ 48,563     $ 54,070     $ 74,033  
Other nonperforming loans:
                                               
Nonaccrual
    17,245       17,639       15,474       14,929       16,134       17,639  
 
                                   
 
                                               
Total nonperforming loans
    112,043       91,672       78,831       63,492       70,204       91,672  
 
                                               
Other real estate (“ORE”)
    11,277       9,329       10,050       9,859       6,039       9,329  
 
                                   
 
                                               
Total nonperforming assets (“NPAs”)
  $ 123,320     $ 101,001     $ 88,881     $ 73,351     $ 76,243     $ 101,001  
 
                                   
 
                                               
NPAs as % of period-end loans + ORE
    1.80 %     1.48 %     1.26 %     1.03 %     1.04 %     1.39 %
 
                                   
 
                                               
Past due 90 days or more & accruing interest
  $ 21,099     $ 35,025     $ 27,764     $ 22,129     $ 18,602     $ 35,025  
 
                                   
 
(a)   All ratios of our allowance for loan and credit losses exclude acquired loans with a period end balance of $523.3 million, which as required by current accounting guidance, were recorded at fair value on the date of acquistion. Ratios of nonperforming loans exclude acquired loans and ORE covered by an FDIC loss share with a period end balance of $11.4 million.
 
(b)   Excludes loss share receivable

13


 

     
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
  (FIRSTMERITCORPORATION LOGO)
                                         
(Unaudited)   2010     2009     2009     2009     2009  
(Dollars in thousands)   1st Qtr     4th Qtr     3rd Qtr     2nd Qtr     1st Qtr  
QUARTERLY OTHER INCOME DETAIL
                                       
Trust department income
  $ 5,281     $ 5,374     $ 5,081     $ 5,438     $ 4,790  
Service charges on deposits
    15,366       16,568       16,782       15,853       14,163  
Credit card fees
    11,558       12,049       11,711       11,668       11,084  
ATM and other service fees
    2,509       2,730       2,935       2,839       2,606  
Bank owned life insurance income
    5,652       4,524       3,216       2,985       3,015  
Investment services and insurance
    1,928       2,322       2,498       2,270       2,918  
Investment securities gains, net
          1,934       2,925       1,178        
Loan sales and servicing income
    3,237       2,947       3,881       3,791       2,335  
Gain on acquisition
    5,090                          
Gain on post medical retirement curtailment
                            9,543  
Other operating income
    3,328       4,253       2,538       4,823       4,734  
 
                                       
 
                             
Total Other Income
  $ 53,949     $ 52,701     $ 51,567     $ 50,845     $ 55,188  
 
                             
                                         
    2010     2009     2009     2009     2009  
    1st Qtr     4th Qtr     3rd Qtr     2nd Qtr     1st Qtr  
QUARTERLY OTHER EXPENSES DETAIL
                                       
Salaries, wages, pension and employee benefits
  $ 48,156     $ 45,748     $ 43,351     $ 44,125     $ 42,682  
Net occupancy expense
    7,140       5,631       5,739       5,858       6,871  
Equipment expense
    6,050       6,445       5,847       6,212       5,797  
Taxes, other than federal income taxes
    1,938       1,593       1,646       1,631       1,626  
Stationery, supplies and postage
    2,693       2,414       2,167       2,051       2,275  
Bankcard, loan processing and other costs
    7,818       8,215       7,548       7,862       7,842  
Advertising
    1,592       1,510       1,635       1,887       1,971  
Professional services
    5,237       6,098       3,980       2,856       3,480  
Telephone
    1,133       1,039       1,010       997       1,014  
Amortization of intangibles
    234       87       86       87       87  
Hedge terminiation
          3,877                    
FDIC expense
    3,765       3,160       2,298       8,496       2,556  
Other operating expense
    8,257       9,068       8,858       8,502       7,002  
 
                                       
 
                             
Total Other Expenses
  $ 94,013     $ 94,885     $ 84,165     $ 90,564     $ 83,203  
 
                             

14


 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES — Net Charge-off Detail (excluding acquired loans)
                         
    Quarters ended     Year ended  
(Unaudited)   March 31,     December 31,  
(Dollars in thousands)   2010     2009     2009  
 
                       
Allowance for loan losses — beginning of period
  $ 115,092     $ 103,757     $ 103,757  
Loans charged off:
                       
Commercial
    8,895       4,554       39,685  
Mortgage
    1,646       923       4,960  
Installment
    8,805       8,438       31,622  
Home equity
    2,070       1,535       7,200  
Credit cards
    4,168       2,967       13,558  
Leases
    20             97  
Overdrafts
    591       519       2,591  
 
                 
Total
    26,195       18,936       99,713  
 
                 
Recoveries:
                       
Commercial
    372       224       890  
Mortgage
    25       26       270  
Installment
    2,017       2,401       8,329  
Home equity
    257       85       494  
Credit cards
    473       387       1,710  
Manufactured housing
    31       53       171  
Leases
    9       5       57  
Overdrafts
    232       190       694  
 
                 
Total
    3,416       3,371       12,615  
 
                 
 
                       
Net charge-offs
    22,779       15,565       87,098  
Provision for loan losses
    25,493       18,065       98,433  
 
                 
Allowance for loan losses — end of period
  $ 117,806     $ 106,257     $ 115,092  
 
                 
 
                       
Average loans, excluding acquired loans (a)
  $ 6,812,647     $ 7,381,019     $ 7,152,845  
 
                 
Ratio to average loans:
                       
(Annualized) net charge-offs
    1.36 %     0.86 %     1.22 %
 
                 
Provision for loan losses
    1.52 %     0.99 %     1.38 %
 
                 
Loans, excluding acquired loans — period-end (a)
  $ 6,836,451     $ 7,350,763     $ 6,835,425  
 
                 
 
                       
Allowance for credit losses:
  $ 124,143     $ 112,276     $ 120,843  
 
                 
As a multiple of (annualized) net charge-offs
    1.34       1.78       1.39  
 
                 
Allowance for loan losses:
                       
As a percent of period-end loans, excluding acquired loans (a)
    1.72 %     1.45 %     1.68 %
 
                 
As a multiple of (annualized) net charge-offs
    1.28       1.68       1.32  
 
                 
 
(a)   Excludes loss share receivable.

15