EX-99.1 2 l08646aexv99w1.htm EX-99.1 NEWS RELEASE EX-99.1 News Release
 

           
 
News Release
 
FirstMerit Corporation
 www.firstmerit.com
   
     
For Release:
  July 15, 2004, 7:30 a.m. EDT
 
    
For Information Contact:
  (FIRSTMERIT LOGO)
     
Media:
  Analysts:
Jacque Sir Louis
  Tom O’Malley
(330) 849-8877
  (330) 384-7109

FIRSTMERIT REPORTS EARNINGS
FOR SECOND QUARTER 2004

AKRON, OH – July 15, 2004 — FirstMerit Corporation (Nasdaq: FMER) today announced second quarter 2004 net income of $31.0 million, or $0.36 per diluted share. This compares to $36.9 million, or $0.44 per diluted share, for the second quarter of 2003. The lower earnings primarily reflect reduced revenue from net interest margin compression and declining mortgage banking activity, partially offset by a lower provision for loan losses due to evidence of improvement in the Company’s credit quality outlook. Annualized return on average equity (ROE) and return on average assets (ROA) were 12.71% and 1.19%, respectively, compared with 15.09% and 1.40% for the second quarter of 2003.

For the first six months of 2004, FirstMerit reported net income of $43.7 million, or $0.51 per diluted share. This compares with $75.2 million, or $0.89 per diluted share, for the first six months of 2003. ROE and ROA were 8.87% and 0.84%, respectively, compared with 15.53% and 1.43% for the prior-year period.

“We are showing excellent progress in our primary goal of improving credit quality,” said John R. Cochran, chairman and CEO. “We are encouraged by general improvement of credit quality this quarter in the retail and commercial portfolios. Underlying credit quality advancements were achieved by this quarter’s reduction in non-performing assets and net charge-offs. The sale of a substantial portion of non-accrual commercial loans, a lower inflow of new non-accruals and continued improvement in our current retail loan portfolio, has contributed greatly to the normalization of FirstMerit’s asset quality. We attribute these tangible results to the changes we have made to strengthen our loan review process along with aggressive management of our non-performing assets.

“Further, with an improved economic environment in Northeast Ohio, we anticipate greater opportunities to grow and strengthen our business relationships. We also are encouraged by the level of business activity in our new in-store banking offices in Columbus, Ohio, and we anticipate the same success with our expansion into the Toledo market.”

Total revenue, consisting of fully tax-equivalent (FTE) net interest income plus non-interest income excluding securities gains, totaled $133.3 million for the second quarter of 2004, compared with $150.5 million reported in the prior-year period. FTE net interest income was $87.8 million, a decline of 11.9%, reflecting the impact of a 40 basis point narrowing in the net interest margin, to 3.66%, and a 1.8% decline in average earning assets, to $9.7 billion.

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News Release
 
FirstMerit Corporation
 www.firstmerit.com
   

Non-interest income for the second quarter of 2004 totaled $47.0 million, compared with $53.9 million for the second quarter of 2003. Excluding securities gains and income from the Company’s discontinued manufactured housing finance business, non-interest income for the second quarter was $45.6 million in 2004 and $50.3 million in 2003. The 9.3% decline primarily reflects reduced mortgage banking activity, partially offset by gains from the wealth management business. The combined contribution from trust, investment and insurance services posted overall fee growth of 11.9%.

Non-interest expense totaled $79.5 million for the second quarter of 2004, compared with $75.7 million for the second quarter of 2003, a 5.0% increase. The increase resulted primarily from 10.7% growth in salary and benefits expense, largely due to higher employment counts from the net addition of 127 full time equivalent employees (4% increase from second quarter, 2003). The increase in employment underscores the Company’s commitment on its aggressive initiatives for revenue growth. Excluding employee expense, operating expenses were virtually unchanged compared with the second quarter of 2003. The efficiency ratio for the quarter was 59.4%, compared with 50.2% for the year ago quarter.

As of June 30, 2004, nonperforming assets were $48.8 million, or 0.75% of period-end loans plus OREO, compared with $88.5 million, or 1.36%, for the linked quarter and $88.3 million, or 1.23%, twelve months ago. The lower level of nonperforming assets this quarter reflects the Company’s sale of non-accrual commercial loans during the quarter and a general improvement in credit quality trends for both the existing retail and commercial portfolios. Net charge-offs for the second quarter were $14.2 million, compared with $18.3 million in the linked quarter and $23.3 million in the prior-year period. Annualized net charge-offs for the second quarter of 2004 were 0.87% of average loans compared with 1.13% for the linked quarter, and 1.30% for the second quarter of 2003.

Total assets at June 30, 2004 totaled $10.4 billion, down 2.7% from June 30, 2003. Overall, net loans declined 9.2% relative to last year as a result of the sale of the Company’s manufactured housing finance business in the fourth quarter of 2003; excluding this business line, the total loan portfolio of $6.5 billion was unchanged from the prior year. Consumer and mortgage loans have been the Company’s focus and have increased 4.0% and 13.4%, respectively, offsetting the 3.3% decline in commercial loans. Investment securities increased 14.3%.

Deposits totaled $7.4 billion at June 30, 2004 a decline of 5.0% over the last twelve months. Core deposits now account for 63.5% of deposits, compared to 59.3% at June 30, 2003, reflecting a 14.8% decline in time deposits.

Shareholders’ equity was $957 million at June 30, 2004. The Company’s capital position remains strong; tangible equity-to-assets was 7.94% at quarter-end. The common dividend per share paid was $0.26, a $0.01 increase from the prior-year period. Period-end common shares outstanding totaled 84.8 million.

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News Release
 
FirstMerit Corporation
 www.firstmerit.com
   

Second Quarter 2004 Highlights

FirstMerit Reduces Nonperforming Loan Exposure: FirstMerit announced the sale of a $36.6 million portfolio of non-accrual commercial loans to numerous buyers on June 11, 2004. The sale positions the Company’s balance sheet for long-term profitability.

Executive Appointments Sharpen Northeast Ohio Focus: FirstMerit announced the restructuring of its important Northeast Ohio region, and named two experienced leaders to head this five-county area. David J. Janus was named president and CEO of FirstMerit’s Cuyahoga and East Lorain offices, and Bruce M. Kephart will serve as president and CEO of FirstMerit’s Lake, Geauga and Ashtabula offices. This expanded leadership team reflects FirstMerit’s commitment to serve the growing needs of owner-managed businesses in this important region.

In-Store Branches Expand FirstMerit’s Presence in Columbus: FirstMerit opened in-store banking offices in Kroger supermarkets in Columbus, Delaware and Upper Arlington, Ohio. An additional in-store banking office scheduled to open in the third quarter will increase FirstMerit’s bank network to eight branches in the growing Columbus market. Amy A. Sutphin, vice president and Regional Banking Center Manager, will oversee the four Columbus-area in-store banking offices. She brings more than 20 years of banking experience, with more than five years of experience in managing in-store branches.

Conference Call: FirstMerit Corporation will host a conference call today, July 15, 2004, at 10:00 a.m. Eastern Time. John Cochran, chairman and CEO, Terry Bichsel, executive vice president and CFO, David Lucht, executive vice president and Chief Credit Officer, and Mark DuHamel, senior vice president and Treasurer, will provide an overview of second quarter results and business highlights.

To participate in the conference call, please dial (800) 865-2821 five minutes before the start time. No pass code is necessary. A replay will be available beginning 1:30 p.m. July 15, 2004, through 12:00 a.m., July 22, 2004, by dialing (800) 642-1687, reservation number 8163474.

The second quarter 2004 earnings release will be available at approximately 7:30 a.m. on the Internet at www.firstmerit.com under the Investor Relations portion of the Web site. Any material non-public information discussed on the conference call will be posted on the Web site immediately after the conference call.

FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $10.4 billion as of June 30, 2004, and 161 banking offices in 24 Ohio and Western Pennsylvania counties. FirstMerit 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., FirstMerit Credit Life Insurance Company, and FirstMerit Community Development Corporation.

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News Release
 
FirstMerit Corporation
 www.firstmerit.com
   

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 Company, 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 Company’s business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Company’s periodic reports and registration statements filed with the Securities and Exchange Commission. The Company 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    
(Dollars in thousands)    
(Unaudited)   Quarters
    2004   2004   2003   2003   2003
EARNINGS   2nd Qtr   1st Qtr   4th Qtr   3rd Qtr   2nd Qtr
               
Net interest income FTE (a)
   $ 87,782       89,691       95,118       99,022       99,691  
Provision for loan losses
     14,154       40,984       32,733       22,540       23,442  
Other income
     46,969       45,867       46,752       57,661       53,881  
Other expenses
     79,482       77,051       101,167       76,196       75,714  
FTE adjustment (a)
     675       689       619       592       709  
After-tax income before cumulative effect of change in accounting principle
     31,028       12,706       7,170       39,278       36,927  
Cumulative effect of change in accounting principle, net of tax
     0       0       (688 )     0       0  
Net income
     31,028       12,706       6,482       39,278       36,927  
Income per diluted share before cumulative effect of change in accounting principle
     0.36       0.15       0.08       0.46       0.44  
Per share effect of cumulative effect of change in accounting principle
     0.00       0.00       (0.01 )     0.00       0.00  
Diluted EPS
   $ 0.36       0.15       0.07       0.46       0.44  
 
                                        
PERFORMANCE RATIOS
                                        
                                         
Return on average assets (ROA)
     1.19 %     0.49 %     0.24 %     1.46 %     1.40 %
Return on average common equity (ROE)
     12.71 %     5.10 %     2.63 %     15.99 %     15.09 %
Net interest margin FTE (a)
     3.66 %     3.74 %     3.86 %     3.97 %     4.06 %
Efficiency ratio
     59.44 %     56.70 %     70.46 %     48.80 %     50.17 %
Number of full-time equivalent employees
     3,336       3,235       3,021       3,187       3,209  
 
                                        
MARKET DATA
                                        
                                         
Book value/common share
   $ 11.28       11.82       11.65       11.64       11.71  
Period-end common share mkt value
     26.37       26.05       27.11       24.74       22.80  
Market as a % of book
     234 %     220 %     233 %     213 %     195 %
Cash dividends/common share
   $ 0.26       0.26       0.26       0.26       0.25  
Common stock dividend payout ratio
     72.22 %     173.33 %     371.43 %     56.52 %     56.82 %
Average basic common shares
     84,809       84,771       84,642       84,505       84,470  
Average diluted common shares
     85,149       85,186       85,086       84,982       84,880  
Period end common shares
     84,829       84,802       84,724       84,565       84,489  
Common shares repurchased
     —       —       —       —       29  
Common stock market capitalization
   $ 2,236,941       2,209,092       2,296,868       2,092,138       1,926,349  
 
                                        
ASSET QUALITY
                                        
                                         
Gross charge-offs
   $ 21,341       23,666       31,896       26,870       28,979  
Net charge-offs
     14,183       18,276       26,225       21,260       23,251  
Allowance for loan losses
     107,561       120,261       97,553       120,472       119,192  
Nonperforming assets (NPAs)
     48,819       88,472       81,166       95,602       88,349  
Net charge-off/average loans ratio
     0.87 %     1.13 %     1.48 %     1.17 %     1.30 %
Allowance for loan losses/period-end loans
     1.65 %     1.85 %     1.49 %     1.66 %     1.66 %
NPAs/loans and other real estate
     0.75 %     1.36 %     1.24 %     1.32 %     1.23 %
Allowance for loan losses/nonperforming loans
     261.67 %     148.09 %     132.47 %     134.34 %     144.38 %
 
                                        
CAPITAL & LIQUIDITY
                                        
                                         
Period-end tangible equity to assets
     7.94 %     8.32 %     8.16 %     8.01 %     8.03 %
Average equity to assets
     9.39 %     9.58 %     9.28 %     9.15 %     9.29 %
Average equity to loans
     15.02 %     15.34 %     13.91 %     13.53 %     13.73 %
Average loans to deposits
     87.95 %     87.68 %     92.55 %     93.75 %     92.83 %
 
                                        
AVERAGE BALANCES
                                        
                                         
Assets
   $ 10,465,272       10,456,439       10,531,679       10,646,746       10,577,897  
Deposits
     7,437,054       7,442,121       7,594,040       7,680,840       7,710,474  
Loans
     6,540,974       6,525,147       7,027,978       7,200,899       7,157,408  
Earning assets
     9,658,873       9,651,878       9,771,796       9,903,130       9,837,768  
Shareholders’ equity
     982,195       1,001,257       977,429       974,342       982,850  
 
                                        
ENDING BALANCES
                                        
                                         
Assets
   $ 10,378,155       10,450,306       10,473,635       10,648,301       10,665,444  
Deposits
     7,402,800       7,381,722       7,502,784       7,578,506       7,791,637  
Loans
     6,520,001       6,507,836       6,551,599       7,241,540       7,182,214  
Goodwill
     139,245       139,245       139,245       139,245       139,245  
Intangible assets
     5,091       5,314       5,536       5,759       5,980  
Earning assets
     9,552,721       9,693,976       9,676,415       9,869,693       9,816,593  
Total shareholders’ equity
     957,095       1,002,272       987,175       986,163       990,050  

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.

 

CONSOLIDATED BALANCE SHEETS
FIRSTMERIT CORPORATION AND SUBSIDIARIES

                         
(in thousands)            
(Unaudited, except December 31, 2003, which is derived from the   June 30   December 31   June 30
  audited financial statements)   2004   2003   2003
 
                        
ASSETS
                        
Cash and due from banks
   $ 216,258       199,049       308,697  
Investment securities (at fair value) and federal funds sold
     2,973,858       3,061,497       2,602,836  
Loans held for sale
     58,862       63,319       31,543  
Commercial loans
     3,324,335       3,352,014       3,437,977  
Mortgage loans
     627,633       614,073       553,329  
Installment loans
     1,668,679       1,668,421       1,596,973  
Home equity loans
     646,197       637,749       627,379  
Credit card loans
     140,110       144,514       136,973  
Manufactured housing loans
     —       —       661,909  
Leases
     113,047       134,828       167,674  
 
                        
Total loans
     6,520,001       6,551,599       7,182,214  
Less allowance for loan losses
     (107,561 )     (97,553 )     (119,192 )
 
                        
Net loans
     6,412,440       6,454,046       7,063,022  
Premises and equipment, net
     121,373       119,079       113,701  
Goodwill
     139,245       139,245       139,245  
Intangible assets
     5,091       5,536       5,980  
Accrued interest receivable and other assets
     451,028       431,864       400,420  
 
                        
Total assets
   $ 10,378,155       10,473,635       10,665,444  
 
                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                        
Deposits:
                        
Demand-non-interest bearing
   $ 1,400,715       1,346,574       1,428,645  
Demand-interest bearing
     804,355       773,514       766,463  
Savings and money market accounts
     2,498,152       2,461,265       2,428,042  
Certificates and other time deposits
     2,699,578       2,921,431       3,168,487  
 
                        
Total deposits
     7,402,800       7,502,784       7,791,637  
 
                        
Securities sold under agreements to repurchase
     1,573,492       1,525,804       1,162,589  
Wholesale borrowings
     320,367       311,038       555,840  
Accrued taxes, expenses, and other liabilities
     124,401       146,834       165,328  
 
                        
Total liabilities
     9,421,060       9,486,460       9,675,394  
 
                        
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; 0, 0 and 42,036 shares outstanding at June 30, 2004, December 31, 2003 and June 30, 2003, respectively
     —       —       1,011  
Common stock, without par value:
                        
authorized 300,000,000 shares; issued 92,026,350 at June 30, 2004, December 31, 2003 and June 30, 2003
     127,937       127,937       127,937  
Capital surplus
     110,415       110,473       111,791  
Accumulated other comprehensive loss
     (41,601 )     (9,475 )     (2,625 )
Retained earnings
     943,021       943,492       941,974  
Treasury stock, at cost, 7,197,488, 7,302,057 and 7,537,719 shares at June 30, 2004, December 31, 2003 and June 30, 2003, respectively
     (182,677 )     (185,252 )     (190,038 )
 
                        
Total shareholders’ equity
     957,095       987,175       990,050  
 
                        
Total liabilities and shareholders’ equity
   $ 10,378,155       10,473,635       10,665,444  
 
                        

The accompanying notes are an integral part of the consolidated financial statements.

 

                                         
FIRSTMERIT CORPORATION AND SUBSIDIARIES    
Average Consolidated Balance Sheets    
(Unaudited)   Quarterly Periods
(Dollars in thousands)   June 30,   March 31,   Dec 31,   Sept 30,   June 30,
    2004   2004   2003   2003   2003
ASSETS
                                        
Cash and due from banks
   $ 226,637       212,358       198,302       197,597       194,164  
Investment securities/fed funds sold
     3,054,655       3,072,724       2,687,500       2,633,880       2,616,682  
Loans held for sale
     63,244       54,007       56,318       68,351       63,678  
Commercial loans
     3,368,633       3,355,159       3,395,863       3,408,017       3,438,028  
Mortgage loans
     628,381       616,970       619,574       575,100       548,077  
Installment loans
     1,640,665       1,644,343       1,680,752       1,635,420       1,564,061  
Home equity loans
     642,369       638,549       632,369       629,465       617,815  
Credit card loans
     141,460       143,497       141,333       139,931       137,197  
Manufactured housing loans
     —       —       413,796       653,538       679,526  
Leases
     119,466       126,629       144,291       159,428       172,704  
 
                                        
Total loans
     6,540,974       6,525,147       7,027,978       7,200,899       7,157,408  
Less allowance for loan losses
     118,808       97,033       110,248       119,466       119,022  
 
                                        
Net loans
     6,422,166       6,428,114       6,917,730       7,081,433       7,038,386  
Total earning assets
     9,658,873       9,651,878       9,771,796       9,903,130       9,837,768  
Premises and equipment, net
     120,798       119,728       120,386       112,996       114,677  
Accrued interest receivable and other assets
     577,772       569,508       551,443       552,489       550,310  
 
                                        
TOTAL ASSETS
   $ 10,465,272       10,456,439       10,531,679       10,646,746       10,577,897  
 
                                        
 
                                        
LIABILITIES
                                        
Deposits:
                                        
Demand-non-interest bearing
   $ 1,402,273       1,330,056       1,348,374       1,340,484       1,296,372  
Demand-interest bearing
     814,718       767,287       755,093       748,646       753,386  
Savings and money market accounts
     2,492,318       2,483,451       2,508,706       2,466,018       2,367,223  
Certificates and other time deposits
     2,727,745       2,861,327       2,981,867       3,125,692       3,293,493  
 
                                        
Total deposits
     7,437,054       7,442,121       7,594,040       7,680,840       7,710,474  
Securities sold under agreements to repurchase
     1,589,014       1,547,575       1,340,204       1,289,908       1,136,425  
Wholesale borrowings
     320,222       310,767       462,998       542,171       566,831  
 
                                        
Total funds
     9,346,290       9,300,463       9,397,242       9,512,919       9,413,730  
Accrued taxes, expenses and other liabilities
     136,787       154,719       157,008       159,485       181,317  
 
                                        
Total liabilities
     9,483,077       9,455,182       9,554,250       9,672,404       9,595,047  
 
                                        
SHAREHOLDERS’ EQUITY
                                        
Preferred stock
     —       —       500       1,006       1,062  
Common stock
     127,937       127,937       127,937       127,937       127,937  
Capital surplus
     110,902       110,672       111,219       111,854       111,774  
Accumulated other comprehensive income
     (13,730 )     (1,457 )     (32,027 )     (27,000 )     1,246  
Retained earnings
     940,726       948,521       956,770       950,316       931,136  
Treasury stock
     (183,640 )     (184,416 )     (186,970 )     (189,771 )     (190,305 )
 
                                        
Total shareholders’ equity
     982,195       1,001,257       977,429       974,342       982,850  
 
                                        
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 10,465,272       10,456,439       10,531,679       10,646,746       10,577,897  
 
                                        

 

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FIRSTMERIT CORPORATION AND SUBSIDIARIES

                                 
    Three months ended   Six months ended
(Unaudited)   June 30,   June 30,
(In thousands except per share data)   2004   2003   2004   2003
Interest income:
                                
Interest and fees on loans, including held for sale
   $ 94,126       118,721       190,753       240,872  
Interest and dividends on investment securities and federal funds sold
     28,221       25,214       57,432       52,606  
 
                                
Total interest income
     122,347       143,935       248,185       293,478  
 
                                
Interest expense:
                                
Interest on deposits:
                                
Demand-interest bearing
     503       269       869       566  
Savings and money market accounts
     4,512       5,529       8,826       10,157  
Certificates and other time deposits
     19,598       26,083       41,229       55,972  
Interest on securities sold under agreements to repurchase
     6,271       4,742       12,409       9,271  
Interest on wholesale borrowings
     4,356       8,330       8,743       16,828  
 
                                
Total interest expense
     35,240       44,953       72,076       92,794  
 
                                
Net interest income
     87,107       98,982       176,109       200,684  
Provision for loan losses
     14,154       23,442       55,138       46,938  
 
                                
Net interest income after provision for loan losses
     72,953       75,540       120,971       153,746  
 
                                
Other income:
                                
Trust department income
     5,696       5,442       11,052       10,328  
Service charges on deposits
     15,705       15,292       31,124       30,180  
Credit card fees
     9,546       10,989       18,210       20,715  
ATM and other service fees
     3,071       3,201       5,819       6,091  
Bank owned life insurance income
     3,083       3,159       6,209       6,388  
Investment services and insurance
     3,527       2,801       7,359       6,434  
Manufactured housing income
     5       506       150       1,059  
Investment securities gains, net
     1,412       3,106       1,482       5,972  
Loan sales and servicing income
     1,584       5,701       4,443       10,611  
Other operating income
     3,340       3,684       6,988       7,955  
 
                                
Total other income
     46,969       53,881       92,836       105,733  
 
                                
Other expenses:
                                
Salaries, wages, pension and employee benefits
     40,389       36,488       80,231       73,627  
Net occupancy expense
     5,526       5,559       11,543       11,543  
Equipment expense
     3,323       3,663       6,858       7,570  
Stationery, supplies and postage
     2,577       2,735       5,289       5,765  
Bankcard, loan processing and other costs
     5,988       7,324       11,691       13,801  
Professional services
     3,977       2,739       7,123       5,361  
Amortization of intangibles
     222       223       445       445  
Other operating expense
     17,480       16,983       33,353       31,477  
 
                                
Total other expenses
     79,482       75,714       156,533       149,589  
 
                                
Income before income tax expense
     40,440       53,707       57,274       109,890  
Federal income taxes
     9,412       16,780       13,540       34,681  
 
                                
Net income
   $ 31,028       36,927       43,734       75,209  
 
                                
Other comprehensive income (loss), net of tax expense (benefit):
                                
Unrealized securities’ holding gains (losses), net of tax expense (benefit), arising during period
     (54,037 )     798       (31,163 )     (2,667 )
Less: reclassification adjustment for securities’ gains (losses) realized in net income, net of tax expense (benefit)
     (917 )     (2,019 )     (963 )     (3,882 )
 
                                
Net unrealized losses, net of tax expense (benefit)
     (54,954 )     (1,221 )     (32,126 )     (6,549 )
 
                                
Comprehensive income
   $ (23,926 )     35,706       11,608       68,660  
 
                                
Net income applicable to common shares
   $ 31,028       36,909       43,734       75,173  
 
                                
Net income used in diluted EPS calculation
     31,035       36,936       43,748       75,226  
 
                                
Weighted average number of common shares outstanding — basic
     84,809       84,470       84,789       84,491  
 
                                
Weighted average number of common shares outstanding — diluted
     85,149       84,880       85,161       84,881  
 
                                
Basic Earnings per Share
   $ 0.37       0.44       0.52       0.89  
 
                                
Diluted Earnings per Share
   $ 0.36       0.44       0.51       0.89  
 
                                
Dividend per Share
   $ 0.26       0.25       0.52       0.50  
 
                                

The accompanying notes are an integral part of the consolidated financial statements.

 

                                         
FIRSTMERIT CORPORATION AND SUBSIDIARIES                                        
Consolidated Statements of Earnings and Comprehensive Income                                
(Dollars in thousands, except share data)    
(Unaudited)   Quarterly Results
    2004   2004   2003   2003   2003
    2nd Q   1st Q   4th Q   3rd Q   2nd Q
Interest and fees on loans, including held for sale
   $ 94,126       96,627       109,118       115,841       118,721  
Interest and dividends — securities and federal funds sold
     28,221       29,211       24,896       23,936       25,214  
 
                                        
Total interest income
     122,347       125,838       134,014       139,777       143,935  
 
                                        
Interest on deposits:
                                        
Demand-interest bearing
     503       366       313       272       269  
Savings and money market accounts
     4,512       4,314       4,473       4,351       5,529  
Certificates and other time deposits
     19,598       21,631       23,033       23,950       26,083  
Securities sold under agreements to repurchase
     6,271       6,138       4,928       4,776       4,742  
Wholesale borrowings
     4,356       4,387       6,768       7,998       8,330  
 
                                        
Total interest expense
     35,240       36,836       39,515       41,347       44,953  
 
                                        
Net interest income
     87,107       89,002       94,499       98,430       98,982  
Provision for loan losses
     14,154       40,984       32,733       22,540       23,442  
 
                                        
Net interest income after provision for loan losses
     72,953       48,018       61,766       75,890       75,540  
 
                                        
Other income:
                                        
Trust department income
     5,696       5,356       5,484       5,153       5,442  
Service charges on deposits
     15,705       15,419       16,256       16,823       15,292  
Credit card fees
     9,546       8,664       9,615       10,322       10,989  
ATM and other service fees
     3,071       2,748       2,905       3,124       3,201  
Bank owned life insurance income
     3,083       3,126       3,245       3,238       3,159  
Investment services and insurance
     3,527       3,832       2,930       2,825       2,801  
Manufactured housing income
     5       145       346       387       506  
Investment securities gains (losses), net
     1,412       70       (1,390 )     992       3,106  
Loan sales and servicing income
     1,584       2,859       2,625       10,657       5,701  
Other operating income
     3,340       3,648       4,736       4,140       3,684  
 
                                        
Total other income
     46,969       45,867       46,752       57,661       53,881  
 
                                        
Other expenses:
                                        
Salaries, wages, pension and employee benefits
     40,389       39,842       38,682       38,860       36,488  
Net occupancy expense
     5,526       6,017       5,301       5,274       5,559  
Equipment expense
     3,323       3,535       3,377       3,535       4,363  
Stationery, supplies and postage
     2,577       2,712       2,976       2,801       2,735  
Bankcard, loan processing and other costs
     5,988       5,703       6,706       7,533       7,324  
Professional services
     3,977       3,146       3,279       2,812       2,739  
Amortization of intangibles
     222       223       222       222       223  
Other operating expenses
     17,480       15,873       40,624       15,159       16,283  
 
                                        
Total other expenses
     79,482       77,051       101,167       76,196       75,714  
 
                                        
Income before federal income taxes
     40,440       16,834       7,351       57,355       53,707  
Federal income taxes
     9,412       4,128       181       18,077       16,780  
 
                                        
Income after taxes but before cumulative effect of change in accounting principle
     31,028       12,706       7,170       39,278       36,927  
Cumulative effect of change in accounting principle net of tax
     0       0       (688 )     0       0  
 
                                        
Net income
   $ 31,028       12,706       6,482       39,278       36,927  
 
                                        
Other comprehensive income (loss), net of tax expense (benefit)
     (54,954 )     22,828       15,927       (22,777 )     (1,221 )
 
                                        
Comprehensive income (loss)
   $ (23,926 )     35,534       22,409       16,501       35,706  
 
                                        
Net income applicable to common shares
     31,028       12,706       6,465       37,789       36,909  
 
                                        
Adjusted net income used in diluted EPS calculation
     31,035       12,713       6,489       37,813       36,936  
 
                                        
Weighted-average common shares — basic
     84,809       84,771       84,642       84,505       84,470  
 
                                        
Weighted-average common shares — diluted
     85,149       85,186       85,086       84,982       84,880  
 
                                        
Basic net income per share
   $ 0.37       0.15       0.07       0.46       0.44  
 
                                        
 
 
                                        
Diluted net income per share
   $ 0.36       0.15       0.07       0.46       0.44  
 
                                        

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
Asset Quality Information

                                                 
(Dollars in thousands, except ratios)        
(Unaudited, except December 31,2003 annual period which        
  is derived from the audited financial statements)   Quarterly Periods   Annual Period
    June 30   Mar 31   Dec 31   Sep 30   June 30   Dec 31,
Allowance for Loan Losses   2004   2004   2003   2003   2003   2003
Balance at beginning of period
   $ 120,261       97,553       120,472       119,192       119,001       122,790  
Allowance related to loans sold
     (12,671 )     —       (29,427 )     —       —       (29,427 )
Provision for loan losses
     14,154       40,984       32,733       22,540       23,442       102,211  
Charge-offs
     21,341       23,666       31,896       26,870       28,979       119,877  
Recoveries
     7,158       5,390       5,671       5,610       5,728       21,856  
 
                                                
Net charge-offs
     14,183       18,276       26,225       21,260       23,251       98,021  
 
                                                
Balance at end of period
   $ 107,561       120,261       97,553       120,472       119,192       97,553  
 
                                                
 
                                                
Ratios
                                                
                                                 
Provision for loan losses as a % of average loans
     0.87 %     2.53 %     1.85 %     1.24 %     1.31 %     1.43 %
Net charge-offs as a % of average loans
     0.87 %     1.13 %     1.48 %     1.17 %     1.30 %     1.37 %
Allowance as a % of period-end loans
     1.65 %     1.85 %     1.49 %     1.66 %     1.66 %     1.49 %
Allowance as a % of nonperforming loans
     261.67 %     148.09 %     132.47 %     134.34 %     144.38 %     132.47 %
 
                                                
Asset Quality
                                                
                                                 
Impaired loans:
                                                
Nonaccrual
   $ 33,080       71,596       63,388       77,381       71,081       63,388  
Restructured
     —       —       35       40       46       35  
 
                                                
Total impaired loans
     33,080       71,596       63,423       77,421       71,127       63,423  
Other nonperforming loans:
                                                
Nonaccrual
     8,025       9,611       10,216       12,253       11,425       10,216  
Restructured
     —       —       —       —       —       —  
 
                                                
Total other nonperforming loans
     8,025       9,611       10,216       12,253       11,425       10,216  
 
                                                
 
                                                
Total nonperforming loans
     41,105       81,207       73,639       89,674       82,552       73,639  
Other real estate (“ORE”)
     7,714       7,265       7,527       5,928       5,797       7,527  
 
                                                
Total nonperforming assets (“NPAs”)
   $ 48,819       88,472       81,166       95,602       88,349       81,166  
 
                                                
NPAs as % of period-end loans + ORE
     0.75 %     1.36 %     1.24 %     1.32 %     1.23 %     1.24 %
 
                                                
Past due 90 days or more & accruing interest
   $ 18,387       20,995       27,515       32,439       28,603       27,515  
 
                                                

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES

                                         
(Dollars in thousands)                    
(Unaudited)                    
                     
QUARTERLY OTHER INCOME DETAIL   2004   2004   2003   2003   2003
    2nd Qtr   1st Qtr   4th Qtr   3rd Qtr   2nd Qtr
Trust department income
   $ 5,696       5,356       5,484       5,153       5,442  
Service charges on deposits
     15,705       15,419       16,256       16,823       15,292  
Credit card fees
     9,546       8,664       9,615       10,322       10,989  
ATM and other service fees
     3,071       2,748       2,905       3,124       3,201  
Bank owned life insurance income
     3,083       3,126       3,245       3,238       3,159  
Investment services and insurance
     3,527       3,832       2,930       2,825       2,801  
Manufactured housing income
     5       145       346       387       506  
Investment securities gains (losses), net
     1,412       70       (1,390 )     992       3,106  
Loan sales and servicing income
     1,584       2,859       2,625       10,657       5,701  
Other operating income
     3,340       3,648       4,736       4,140       3,684  
 
                                        
Total Other Income
   $ 46,969       45,867       46,752       57,661       53,881  
 
                                        
 
QUARTERLY OTHER EXPENSE DETAIL   2004   2004   2003   2003   2003
    2nd Qtr   1st Qtr   4th Qtr   3rd Qtr   2nd Qtr
Salaries, wages, pension and employee benefits
   $ 40,389       39,842       38,682       38,860       36,488  
Net occupancy expense
     5,526       6,017       5,301       5,274       5,559  
Equipment expense
     3,323       3,535       3,377       3,535       4,363  
Taxes, other than federal income taxes
     1,406       1,448       621       1,613       1,552  
Stationery, supplies and postage
     2,577       2,712       2,976       2,801       2,735  
Bankcard, loan processing and other costs
     5,988       5,703       6,706       7,533       7,324  
Advertising
     1,554       586       1,276       518       886  
Professional services
     3,977       3,146       3,279       2,812       2,739  
Telephone
     1,221       1,147       1,068       1,001       1,129  
Amortization of intangibles
     222       223       222       222       223  
Other operating expense
     13,299       12,692       37,659       12,027       12,716  
 
                                        
Total Other Expenses
   $ 79,482       77,051       101,167       76,196       75,714  
 
                                        

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
Allowance for Loan Losses — Net Charge-off Detail
(Dollars in thousands)
(Unaudited)

                                 
    Quarters ended   Six months ended
    June 30,   June 30,
    2004   2003   2004   2003
Allowance for loan losses — beginning of period
   $ 120,261       119,001       97,553       122,790  
 
                                
Loans charged off:
                                
Commercial
     9,112       7,057       17,962       17,341  
Mortgage
     188       194       292       297  
Installment
     8,135       9,807       18,222       20,641  
Home equity
     542       872       1,327       1,675  
Credit cards
     2,941       3,116       5,696       6,292  
Manufactured housing
     27       5,588       313       11,419  
Leases
     396       2,345       1,195       3,446  
 
                                
Total
     21,341       28,979       45,007       61,111  
 
                                
Recoveries:
                                
Commercial
     2,466       773       3,364       1,282  
Mortgage
     7       2       32       4  
Installment
     3,194       3,010       6,041       5,983  
Home equity
     306       266       681       494  
Credit cards
     791       510       1,474       937  
Manufactured housing
     255       949       677       1,543  
Leases
     139       218       279       332  
 
                                
Total
     7,158       5,728       12,548       10,575  
 
                                
Net charge-offs
     14,183       23,251       32,459       50,536  
 
                                
Allowance related to loans sold
     (12,671 )     —       (12,671 )     —  
Provision for loan losses
     14,154       23,442       55,138       46,938  
 
                                
Allowance for loan losses — end of period
   $ 107,561       119,192       107,561       119,192  
 
                                
 
                                
Average loans outstanding
   $ 6,540,974       7,157,408       6,533,061       7,163,311  
 
                                
Ratio to average loans:
                                
(Annualized) net charge-offs
     0.87 %     1.30 %     1.00 %     1.42 %
 
                                
Provision for loan losses
     0.87 %     1.33 %     1.70 %     1.32 %
 
                                
Loans outstanding — period-end
   $ 6,520,001       7,182,214       6,520,001       7,182,214  
 
                                
Allowance for loan losses:
                                
As a percent of period-end loans outstanding
     1.65 %     1.66 %     1.65 %     1.66 %
 
                                
As a multiple of (annualized) net charge-offs
     1.89       1.28       1.65       1.17