EX-99.1 2 l15126aexv99w1.htm EX-99.1 PRESS RELEASE DATED JULY 21, 2005 Exhibit 99.1
 

Exhibit 99.1
(FIRSTMERIT CORPORATION LOGO)
2005 Financial Information 2nd Quarter
Table of Contents
         
Earnings Release
   Page 2
 
        
Consolidated Financial Highlights
   Page 7
 
        
Consolidated Balance Sheets
   Page 8
 
        
Average Consolidated Balance Sheets
   Page 9
 
        
Average Consolidated Balance Sheets
   Page 10
(Fully-tax Equivalent Interest Rates and Interest Differential)
        
 
        
Consolidated Statements of Income and Comprehensive Income
   Page 11
 
        
Consolidated Statements of Income and Comprehensive Income
   Page 12
(Linked Quarters)
        
 
        
Asset Quality Information
   Page 13
 
        
Non Interest Income and Non Interest Expense Detail
   Page 14
 
        
Allowance for Loan Losses – Net Charge-off Detail
   Page 15
     
 
  FirstMerit Corporation
 
  III Cascade Plaza
 
  Akron, Ohio 44308
 
    
 
  Investor Relations:
 
  Tom O’Malley
 
  p. 330-384-7109

 

 

         
FOR RELEASE:   IMMEDIATE   (FIRSTMERIT CORPORATION LOGO)
 
        
CONTACT:
  Analysts: Tom O’Malley   Media: Jacque Sir Louis
 
  (330) 384-7109   (330) 849-8877
Second Quarter Highlights
  •   Diluted earnings per share of $0.43
 
  •   Net income of $36.1 million
 
  •   Return on average common equity of 15.07%
 
  •   Return on average assets of 1.40%
FirstMerit Reports 19 Percent Increase in
Second Quarter 2005 Earnings Per Share
AKRON, Ohio, — July 21, 2005 — FirstMerit Corporation (Nasdaq: FMER) today announced second quarter 2005 net income of $36.1 million, or $0.43 per diluted share, up from $31.0 million, or $0.36 per diluted share, for the second quarter of 2004. Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 15.07% and 1.40%, respectively, compared with 12.71% and 1.19% for the second quarter of 2004.
For the first six months of 2005, the Company reported net income of $66.2 million, or $0.79 per diluted share, up from $43.7 million, or $0.51 per diluted share, for the first six months of 2004. ROE and ROA were 13.77% and 1.30%, respectively, compared with 8.87% and 0.84% for the prior-year period.
“Sequential growth in our average loan portfolio continued in the second quarter at an improved pace,” said John R. Cochran, chairman and CEO. “Our strong team of bankers and their aggressive marketing efforts helped us uncover strong credit opportunities in our footprint. Funding demands from our commercial customers are rising and the retail loan book also supported this quarter’s overall growth driven by our customer’s increased use of FirstMerit’s home equity product offerings.”
Mr. Cochran added, “FirstMerit had good revenue generation this quarter. Fee income was the primary driver, producing solid returns on ongoing initiatives we have in place to enhance profitability. Our revenue increases off of the previous quarter and from one year ago show we are progressing on our long term goals of 6%-8% revenue growth.
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“This quarter’s results also show further progress with respect to efficiency. Our efficiency ratio was better than in recent periods, but we know there is room for even more improvement. We will look to capitalize on every opportunity to maintain discipline on our expense base as we grow the franchise with the objective of returning to efficiency levels closer to 50%.”
Total revenue, defined as net interest income on a fully-tax equivalent (“FTE”) basis plus non-interest income net of securities transactions, was $138.6 million for the second quarter of 2005, compared with $132.1 million in the prior-year quarter. FTE net interest income increased 0.74% year-over-year, to $88.4 million. The impact of an 8 basis point increase in the net interest margin to 3.74% offset a 1.75% decline in average earning assets to $9.5 billion. While the investment portfolio declined as a result of the Company’s strategy of de-leveraging the balance sheet to manage its interest rate risk position, the yield on the investment portfolio has improved since the second quarter of 2004. Average loans increased 0.92%, to $6.6 billion, with growth tempered by the sale of problem commercial assets in June of 2004. While the disposal of criticized assets restrained the Company’s growth somewhat over the past twelve months, the overall risk profile of the balance sheet was strengthened.
Non-interest income for the second quarter of 2005 totaled $50.1 million, compared with $45.7 million for the second quarter of 2004. Excluding securities gains (losses), non-interest income was $50.1 million in the second quarter of 2005 and $44.3 million in the same period last year. The overall increase in non interest income reflects increased deposit and bankcard fees resulting from the Company’s strategies to generate higher fee income from these business lines and the favorable settlement of certain contractual obligations.
Non-interest expense totaled $79.4 million for the second quarter of 2005, compared with $77.5 million for the second quarter of 2004, an increase of 2.40%. Advertising and promotion expense increased $1.6 million, compared with the second quarter of 2004 and salary and benefits expense increased $2.2 million, or 5.65%. The efficiency ratio for the quarter was 57.14%, compared with 58.53% for the year ago quarter. The Company’s recent investments in personnel and marketing contributed to improved operating performance for the quarter.
As of June 30, 2005, nonperforming assets were $54.0 million, or 0.82% of period-end loans plus other real estate, compared with $46.7 million, or 0.71%, as of March 31, 2005, and $48.8 million
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or 0.75%, as of June 30, 2004. Net charge-offs for the second quarter of 2005 were $10.3 million, compared with $14.2 million for the second quarter of 2004, a decline of $3.9 million, or 27.53%. Compared with the previous quarter, net charge-offs decreased $1.5 million, or 12.86%. Annualized net charge-offs to average loans in the second quarter of 2005 improved to 0.62%, compared with 0.74% for the prior quarter and 0.87% for the second quarter of 2004.
The Company recorded $6.0 million of loan loss provision in the second quarter of 2005, compared with $14.9 million in the second quarter of 2004. In the first quarter of 2005, the loan loss provision was $11.6 million. The reduced loan loss provision was primarily the result of significant improvement in the Company’s level of criticized commercial loans in the second quarter of 2005. This reduction in criticized loans reflects continued strengthening of the overall quality of the loan portfolio and factored into the allowance for loan loss methodology for the period. The allowance for credit losses at June 30, 2005 was 1.49% of period-end loans, compared with 1.59% on March 31, 2005 and 1.65% on June 30, 2004.
Assets at June 30, 2005 totaled $10.3 billion, down 0.67% from June 30, 2004. Period-end loan growth of $91.0 million, or 1.40%, was driven by commercial loans and home equity loans increasing 2.98% and 14.08%, respectively, to mitigate a 4.05% decline in installment loans and an anticipated 32.52% decline in the leasing portfolio. Investment securities and federal funds sold decreased $144.8 million, or 4.87%, over the same time period, funding the growth of other earning assets.
Deposits totaled $7.2 billion at June 30, 2005, down 3.09% from June 30, 2004. Time deposits declined $150.7 million, or 5.58%, significantly impacted by the maturing of high-cost brokered CD’s. The Company increased its core deposit concentration to 64.47% of deposits at June 30, 2005, compared with 63.53% at June 30, 2004.
Shareholders’ equity was $976.0 million on June 30, 2005. The Company’s capital position remains strong as tangible equity to assets was 8.19%, compared with 7.94% on June 30, 2004. The common dividend paid during the quarter was $0.27 per share, a $0.01 increase from the prior-year quarter. During the second quarter of 2005 the Company repurchased 145,143 common shares. Period-end common shares outstanding totaled 83.5 million.
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Second Quarter 2005 Highlights
Robert M. Leggett to Chief Investment Officer for FirstMerit Wealth Management Services. Mr. Leggett is responsible for the strategic planning and investment results of FirstMerit’s $2.4 billion in client investments, and fills a key position in FirstMerit’s Wealth team. Mr. Leggett brings more than 20 years of experience in leading investment management teams.
The Board of Directors of FirstMerit Corporation (Nasdaq: FMER) declared a quarterly cash dividend of $0.27 per share on the Corporation’s Common Stock.
FirstMerit Investment Securities, Inc. formed a strategic alliance with INVEST Financial Corporation to manage its brokerage-dealer operations effective July 1, 2005. Customers will have access to more services and a wider array of products. INVEST is a 20- year leader in securities products for financial institutions. Partnering with a third-party to manage certain operations will bring advanced technology, more investment alternatives and a greater efficiency.
Conference Call Information
FirstMerit’s senior management will host an earnings conference call on July 21, 2005, at 2:00 p.m. Eastern time to provide an overview of second quarter results and highlights. To participate in the conference call, please dial (800) 322-0079 ten minutes before start time. A replay of the conference call will be available at approximately 4:30 p.m., on July 21, 2005 through August 5, 2005, by dialing (877) 519-4471, reservation number 6277056.
The second quarter earnings release will be available at approximately 7:30 a.m. on the Internet at http://www.firstmerit.com under the Investor Relations portion of the Web site. Any material non-public information that might be disclosed during the conference call will be posted on the Web site immediately after the conference call ends.
FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $10.3 billion as of June 30, 2005, 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 wholly-owned subsidiaries which 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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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, 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 		  (FIRSTMERIT CORPORATION LOGO)
                                         
(Unaudited)   Quarters  
(Dollars in thousands)                              
    2005     2005     2004     2004     2004  
EARNINGS   2nd Qtr     1st Qtr     4th Qtr     3rd Qtr     2nd Qtr  
 
Net interest income FTE (a)
   $ 88,432       86,685       87,993       88,051       87,782  
Provision for loan losses
     5,972       11,614       9,358       9,325       14,850  
Other income
     50,095       44,939       39,402       44,078       45,719  
Other expenses
     79,397       75,911       80,279       77,250       77,536  
FTE adjustment (a)
     655       675       669       679       675  
Net income
     36,145       30,088       28,369       31,111       31,028  
Diluted EPS
     0.43       0.36       0.33       0.37       0.36  
 
                                        
PERFORMANCE RATIOS
                                        
Return on average assets (ROA)
     1.40 %     1.19 %     1.12 %     1.21 %     1.19 %
Return on average common equity (ROE)
     15.07 %     12.48 %     11.49 %     12.78 %     12.71 %
Net interest margin FTE (a)
     3.74 %     3.73 %     3.76 %     3.71 %     3.66 %
Efficiency ratio
     57.14 %     58.33 %     60.69 %     58.31 %     58.53 %
Number of full-time equivalent employees
     3,078       3,081       3,158       3,232       3,267  
 
                                        
MARKET DATA
                                        
Book value/common share
   $ 11.69       11.32       11.66       11.62       11.28  
Period-end common share mkt value
     26.11       26.76       28.49       26.31       26.37  
Market as a % of book
     223 %     236 %     244 %     226 %     234 %
Cash dividends/common share
   $ 0.27       0.27       0.27       0.27       0.26  
Common stock dividend payout ratio
     62.79 %     75.00 %     81.82 %     72.97 %     72.22 %
Average basic common shares
     83,603       84,097       84,286       84,544       84,809  
Average diluted common shares
     83,890       84,497       84,777       84,962       85,149  
Period end common shares
     83,522       83,612       84,191       84,302       84,829  
Common shares repurchased
     145,143       816,208       197,235       562,538       —  
Common stock market capitalization
   $ 2,180,759       2,237,457       2,398,602       2,217,986       2,236,941  
 
                                        
ASSET QUALITY
                                        
Gross charge-offs
   $ 15,422       16,740       17,873       16,119       21,341  
Net charge-offs
     10,278       11,795       12,553       10,403       14,183  
Allowance for loan losses (b)
     92,808       97,115       97,296       100,491       101,569  
Reserve for unfunded lending commitments (b)
     5,785       6,479       5,774       5,619       5,992  
Nonperforming assets (NPAs)
     53,985       46,703       45,891       47,789       48,819  
Net charge-off/average loans ratio
     0.62 %     0.74 %     0.78 %     0.64 %     0.87 %
Allowance for loan losses/period-end loans
     1.40 %     1.49 %     1.51 %     1.56 %     1.56 %
Allowance for credit losses/period-end loans (c)
     1.49 %     1.59 %     1.60 %     1.64 %     1.65 %
NPAs/loans and other real estate
     0.82 %     0.71 %     0.71 %     0.74 %     0.75 %
Allowance for loan losses/nonperforming loans
     208.74 %     235.71 %     240.14 %     240.03 %     247.10 %
Allowance for credit losses/nonperforming loans
   221.76%     251.44 %     254.39 %     253.45 %     261.67 %
 
                                        
CAPITAL & LIQUIDITY
                                        
Period-end tangible equity to assets
     8.19 %     7.93 %     8.39 %     8.34 %     7.94 %
Average equity to assets
     9.32 %     9.56 %     9.70 %     9.43 %     9.38 %
Average equity to loans
     14.58 %     15.06 %     15.26 %     14.96 %     15.02 %
Average loans to deposits
     90.16 %     88.27 %     86.69 %     86.79 %     87.95 %
 
                                        
AVERAGE BALANCES
                                        
Assets (b)
   $ 10,329,167       10,226,765       10,120,109       10,268,456       10,471,960  
Deposits
     7,321,860       7,354,689       7,421,815       7,459,927       7,437,054  
Loans
     6,601,204       6,492,044       6,434,115       6,474,512       6,540,974  
Earning assets
     9,489,431       9,421,693       9,314,744       9,441,368       9,658,873  
Shareholders’ equity
     962,239       977,888       982,147       968,697       982,195  
 
                                        
ENDING BALANCES
                                        
Assets (b)
   $ 10,314,268       10,274,154       10,122,627       10,164,098       10,378,155  
Deposits
     7,173,857       7,324,551       7,365,447       7,377,108       7,402,800  
Loans
     6,611,011       6,530,546       6,433,083       6,461,741       6,520,001  
Goodwill
     139,245       139,245       139,245       139,245       139,245  
Intangible assets
     4,200       4,424       4,647       4,869       5,091  
Earning assets
     9,492,583       9,453,738       9,343,491       9,377,760       9,552,721  
Total shareholders’ equity
     976,016       946,731       981,257       979,640       957,095  

 
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)   - As of December 31, 2004, the reserve for unfunded lending commitments has been reclassified from the allowance for loan losses to other liabilities. Amounts presented prior to December 31, 2004, have been reclassified to conform to the current presentation.
 
(c)   - The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments.
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FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 		  (FIRSTMERIT CORPORATION LOGO)
                         
(In thousands)                  
(Unaudited, except December 31, 2004, which is derived from the   June 30,     December 31,     June 30,  
  audited financial statements)   2005     2004     2004  
ASSETS
                        
Cash and due from banks
   $ 201,240       169,052       216,258  
Investment securities (at fair value) and federal funds sold
     2,829,017       2,862,015       2,973,858  
Loans held for sale
     52,555       48,393       58,862  
Loans:
                        
Commercial loans
     3,423,384       3,285,012       3,324,335  
Mortgage loans
     634,777       639,715       627,633  
Installment loans
     1,601,022       1,598,588       1,668,679  
Home equity loans
     737,207       676,230       646,197  
Credit card loans
     138,335       145,042       140,110  
Leases
     76,286       88,496       113,047  
 
                  
Total loans
     6,611,011       6,433,083       6,520,001  
Less allowance for loan losses (a)
     (92,808 )     (97,296 )     (101,569 )
 
                  
Net loans
     6,518,203       6,335,787       6,418,432  
Premises and equipment, net
     118,038       121,198       121,373  
Goodwill
     139,245       139,245       139,245  
Intangible assets
     4,200       4,647       5,091  
Accrued interest receivable and other assets
     451,770       442,290       451,028  
 
                  
Total assets
   $ 10,314,268       10,122,627       10,384,147  
 
                  
 
                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                        
Deposits:
                        
Demand-non-interest bearing
   $ 1,439,800       1,470,543       1,400,715  
Demand-interest bearing
     834,315       841,595       804,355  
Savings and money market accounts
     2,350,829       2,384,510       2,498,152  
Certificates and other time deposits
     2,548,913       2,668,799       2,699,578  
 
                  
Total deposits
     7,173,857       7,365,447       7,402,800  
 
                  
Securities sold under agreements to repurchase
     1,699,337       1,336,471       1,573,492  
Wholesale borrowings
     333,627       300,220       320,367  
Accrued taxes, expenses, and other liabilities (a)
     131,431       139,232       130,393  
 
                  
 
Total liabilities
     9,338,252       9,141,370       9,427,052  
 
                  
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
     —       —       —  
Common stock, without par value: authorized 300,000,000 shares; issued 92,026,350 at June 30, 2005, December 31, 2004 and June 30, 2004
     127,937       127,937       127,937  
Capital surplus
     108,736       110,513       110,415  
Accumulated other comprehensive (loss) income
     (19,651 )     (14,208 )     (41,601 )
Retained earnings
     977,052       956,802       943,021  
Treasury stock, at cost, 8,504,487, 7,835,399 and 7,197,488 shares at June 30, 2005, December 31, 2004 and June 30, 2004, respectively
     (218,058 )     (199,787 )     (182,677 )
 
                  
Total shareholders’ equity
     976,016       981,257       957,095  
 
                  
Total liabilities and shareholders’ equity
   $ 10,314,268       10,122,627       10,384,147  
 
                  
 
(a)   As of December 31, 2004, the reserve for unfunded lending commitments has been reclassified from the allowance for loan losses to other liabilities. Amounts presented prior to December 31, 2004 have been reclassifed to conform to the current presentation.
The accompanying notes are an integral part of the consolidated financial statements.

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FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS 		  (FIRSTMERIT CORPORATION LOGO)
                                         
            Quarterly Periods  
(Unaudited)                              
(Dollars in thousands)   June 30,     March 31,     Dec 31,     Sept 30,     June 30,  
    2005     2005     2004     2004     2004  
ASSETS
                                        
Cash and due from banks
   $ 197,548       190,740       198,077       219,025       226,637  
Investment securities/fed funds sold
     2,833,818       2,876,415       2,831,253       2,913,395       3,054,655  
Loans held for sale
     54,409       53,234       49,376       53,461       63,244  
Loans:
                                        
Commercial loans
     3,434,946       3,346,425       3,272,545       3,286,775       3,368,633  
Mortgage loans
     641,865       646,528       642,569       637,796       628,381  
Installment loans
     1,601,775       1,598,953       1,612,132       1,646,826       1,640,665  
Home equity loans
     704,054       674,913       670,366       654,882       642,369  
Credit card loans
     137,919       141,440       141,953       141,751       141,460  
Leases
     80,645       83,785       94,550       106,482       119,466  
 
                              
Total loans
     6,601,204       6,492,044       6,434,115       6,474,512       6,540,974  
Less allowance for loan losses (a)
     96,342       96,438       99,675       101,119       112,120  
 
                              
 
                                        
Net loans
     6,504,862       6,395,606       6,334,440       6,373,393       6,428,854  
 
                                        
Total earning assets
     9,489,431       9,421,693       9,314,744       9,441,368       9,658,873  
 
                                        
Premises and equipment, net
     118,392       119,916       121,147       121,672       120,798  
Accrued interest receivable and other assets
     620,138       590,854       585,816       587,510       577,772  
 
                              
 
                                        
TOTAL ASSETS
   $ 10,329,167       10,226,765       10,120,109       10,268,456       10,471,960  
 
                              
 
                                        
LIABILITIES
                                        
Deposits:
                                        
Demand-non-interest bearing
   $ 1,470,673       1,447,226       1,462,830       1,396,593       1,402,273  
Demand-interest bearing
     834,708       820,974       829,650       809,707       814,718  
Savings and money market accounts
     2,370,280       2,392,023       2,423,790       2,495,659       2,492,318  
Certificates and other time deposits
     2,646,199       2,694,466       2,705,545       2,757,968       2,727,745  
 
                        
 
                                        
Total deposits
     7,321,860       7,354,689       7,421,815       7,459,927       7,437,054  
 
                                        
Securities sold under agreements to repurchase
     1,385,644       1,326,242       1,262,156       1,394,398       1,589,014  
Wholesale borrowings
     498,088       412,149       300,550       300,477       320,222  
 
                        
 
                                        
Total funds
     9,205,592       9,093,080       8,984,521       9,154,802       9,346,290  
Accrued taxes, expenses and other liabilities (a)
     161,336       155,797       153,441       144,957       143,475  
 
                              
 
                                        
Total liabilities
     9,366,928       9,248,877       9,137,962       9,299,759       9,489,765  
 
                                        
SHAREHOLDERS’ EQUITY
                                        
Preferred stock
     —       —       —       —       —  
Common stock
     127,937       127,937       127,937       127,937       127,937  
Capital surplus
     108,559       108,478       110,217       110,297       110,902  
Accumulated other comprehensive income
     (26,883 )     (16,998 )     (12,559 )     (29,493 )     (13,730 )
Retained earnings
     968,408       960,740       953,566       950,094       940,726  
Treasury stock
     (215,782 )     (202,269 )     (197,014 )     (190,138 )     (183,640 )
 
                        
 
                                        
Total shareholders’ equity
     962,239       977,888       982,147       968,697       982,195  
 
                        
 
                                        
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 10,329,167       10,226,765       10,120,109       10,268,456       10,471,960  
 
                        
 
(a)   As of December 31, 2004, the reserve for unfunded lending commitments has been reclassified from the allowance for loan losses. Amounts presented prior to December 31, 2004 have been reclassified to conform to the current presentation.

Page 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  
(Dollars in thousands )   June 30, 2005     December 31, 2004     June 30, 2004  
    Average             Average     Average             Average     Average             Average  
    Balance     Interest     Rate     Balance     Interest     Rate     Balance     Interest     Rate  
ASSETS
                                                                        
Cash and due from banks
   $ 197,548                       213,994                       226,637                  
Investment securities and federal funds sold:
                                                                        
U.S. Treasury securities     and U.S. Government     agency obligations      (taxable)
     2,478,319       23,722       3.84 %     2,602,317       97,037       3.73 %     2,689,533       24,729       3.70 %
Obligations of states and     political subdivisions     (tax exempt)
     99,756       1,673       6.73 %     103,402       7,311       7.07 %     104,132       1,825       7.05 %
Other securities and federal     funds sold
     255,743       3,037       4.76 %     261,765       9,765       3.73 %     260,990       2,324       3.58 %
 
                                                            
                                                                       
Total investment securities and federal funds sold
     2,833,818       28,432       4.02 %     2,967,484       114,113       3.85 %     3,054,655       28,878       3.80 %
                                                                       
Loans held for sale
     54,409       804       5.93 %     55,002       2,089       3.80 %     63,244       633       4.03 %
Loans
     6,601,204       105,196       6.39 %     6,493,472       383,905       5.91 %     6,540,974       93,511       5.75 %
 
                                                            
                                                                       
Total earning assets
     9,489,431       134,432       5.68 %     9,515,958       500,107       5.26 %     9,658,873       123,022       5.12 %
                                                                       
Allowance for loan losses
     (96,342 )                     (100,959 )                     (112,120 )                
Other assets
     738,530                       689,312                       698,570                  
 
                                                                  
                                                                       
Total assets
   $ 10,329,167                       10,318,305                       10,471,960                  
 
                                                                  
 
                                                                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                                                        
Deposits:
                                                                        
Demand — non-interest     bearing
   $ 1,470,673       —       —       1,398,112       —       —       1,402,273       —       —  
Demand — interest     bearing
     834,708       1,230       0.59 %     805,419       2,152       0.27 %     814,718       503       0.25 %
Savings and money market     accounts
     2,370,280       7,517       1.27 %     2,473,728       19,145       0.77 %     2,492,318       4,512       0.73 %
Certificates and other time     deposits
     2,646,199       20,696       3.14 %     2,762,975       81,540       2.95 %     2,727,745       19,598       2.89 %
 
                                                            
                                                                       
Total deposits
     7,321,860       29,443       1.61 %     7,440,234       102,837       1.38 %     7,437,054       24,613       1.33 %
 
                                                                        
Securities sold under agreements     to repurchase
     1,385,644       10,624       3.08 %     1,447,629       26,259       1.81 %     1,589,014       6,271       1.59 %
Wholesale borrowings
     498,088       5,933       4.78 %     307,867       17,494       5.68 %     320,222       4,356       5.47 %
 
                                                            
                                                                       
Total interest bearing liabilities
     7,734,919       46,000       2.39 %     7,797,618       146,590       1.88 %     7,944,017       35,240       1.78 %
                                                                       
Other liabilities
     161,336                       139,046                       143,475                  
                                                                       
Shareholders’ equity
     962,239                       983,529                       982,195                  
 
                                                                  
                                                                       
Total liabilities and shareholders’ equity
   $ 10,329,167                       10,318,305                       10,471,960                  
 
                                                                  
 
                                                                        
Net yield on earning assets
   $ 9,489,431       88,432       3.74 %     9,515,958       353,517       3.71 %     9,658,873       87,782       3.66 %
 
                                                      
 
                                                                        
Interest rate spread
                     3.30 %                     3.38 %                     3.34 %
 
                                                                  
     
Notes:
  Interest income on tax-exempt securities and loans have been adjusted to a fully-taxable equivalent basis.
 
    
 
  Nonaccrual loans have been included in the average balances.

Page 10

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME 		  (FIRSTMERIT CORPORATION LOGO)
                                 
(Unaudited)   Quarters ended     Six months ended  
(In thousands except per share data)   June 30,     June 30,  
    2005     2004     2005     2004  
Interest income:
                                
Interest and fees on loans, including held for sale
   $ 105,975       94,126       206,124       190,753  
Interest and dividends on investment securities and federal funds sold
     27,802       28,221       55,494       57,432  
 
                        
Total interest income
     133,777       122,347       261,618       248,185  
 
                        
Interest expense:
                                
Interest on deposits:
                                
Demand-interest bearing
     1,230       503       2,186       869  
Savings and money market accounts
     7,517       4,512       13,892       8,826  
Certificates and other time deposits
     20,696       19,598       41,296       41,229  
Interest on securities sold under agreements to repurchase
     10,624       6,271       19,465       12,409  
Interest on wholesale borrowings
     5,933       4,356       10,992       8,743  
 
                        
Total interest expense
     46,000       35,240       87,831       72,076  
 
                        
Net interest income
     87,777       87,107       173,787       176,109  
Provision for loan losses
     5,972       14,850       17,586       55,240  
 
                        
Net interest income after provision for loan losses
     81,805       72,257       156,201       120,869  
 
                        
Other income:
                                
Trust department income
     5,684       5,696       11,189       11,052  
Service charges on deposits
     17,800       15,705       32,620       31,124  
Credit card fees
     10,523       9,546       19,934       18,210  
ATM and other service fees
     3,298       3,071       6,257       5,819  
Bank owned life insurance income
     3,024       3,083       6,098       6,209  
Investment services and insurance
     2,828       3,527       5,686       7,359  
Manufactured housing income
     40       5       142       150  
Investment securities gains, net
     (25 )     1,412       1,847       1,482  
Loan sales and servicing income
     1,520       334       2,653       2,412  
Other operating income
     5,403       3,340       8,608       6,988  
 
                        
Total other income
     50,095       45,719       95,034       90,805  
 
                        
Other expenses:
                                
Salaries, wages, pension and employee benefits
     41,351       39,139       80,744       78,200  
Net occupancy expense
     5,881       5,526       12,417       11,543  
Equipment expense
     3,002       3,323       6,187       6,858  
Stationery, supplies and postage
     2,484       2,577       4,945       5,289  
Bankcard, loan processing and other costs
     5,444       5,988       11,168       11,691  
Professional services
     3,843       3,977       5,993       7,123  
Amortization of intangibles
     222       222       445       445  
Other operating expense
     17,170       16,784       33,409       33,251  
 
                        
Total other expenses
     79,397       77,536       155,308       154,400  
 
                        
Income before income tax expense
     52,503       40,440       95,927       57,274  
Federal income taxes
     16,358       9,412       29,694       13,540  
 
                        
Net income
   $ 36,145       31,028       66,233       43,734  
 
                        
Other comprehensive income (loss), net of taxes
                                
Unrealized securities’ holding gains (losses), net of taxes
     18,524       (54,037 )     (4,059 )     (31,163 )
Minimum pension liability adjustment, net of taxes
     —       —       (183 )     —  
Less: reclassification adjustment for securities’ gains (losses) realized in net income, net of taxes
     (16 )     917       1,201       963  
 
                        
Total other comprehensive income (loss), net of taxes
     18,540       (54,954 )     (5,443 )     (32,126 )
 
                        
Comprehensive income (loss)
   $ 54,685       (23,926 )     60,790       11,608  
 
                        
Net income applicable to common shares
   $ 36,145       31,028       66,233       43,734  
 
                        
Net income used in diluted EPS calculation
   $ 36,152       31,035       66,247       43,748  
 
                        
Weighted average number of common shares outstanding — basic
     83,603       84,809       83,849       84,789  
 
                        
Weighted average number of common shares outstanding — diluted
     83,890       85,149       84,187       85,161  
 
                        
Basic earnings per share
   $ 0.43       0.37       0.79       0.52  
 
                        
Diluted earnings per share
   $ 0.43       0.36       0.79       0.51  
 
                        
Dividend per share
   $ 0.27       0.26       0.54       0.52  
 
                        
Note: Certain prior year balances have been reclassified to conform to the current year presentation.
The accompanying notes are an integral part of the consolidated financial statements.

Page 11

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME—LINKED QUARTERS 		  (FIRSTMERIT CORPORATION LOGO)

(Unaudited)                                        
(Dollars in thousands, except share data)           Quarterly Results  
    2005     2005     2004     2004     2004  
    2nd Q     1st Q     4th Q     3rd Q     2nd Q  
Interest and fees on loans, including held for sale
   $ 105,975       100,149       98,792       96,374       94,126  
Interest and dividends — securities and federal funds sold
     27,802       27,692       26,590       27,454       28,221  
 
                              
Total interest income
     133,777       127,841       125,382       123,828       122,347  
 
                              
Interest on deposits:
                                        
Demand-interest bearing
     1,230       956       704       579       503  
Savings and money market accounts
     7,517       6,375       5,310       5,009       4,512  
Certificates and other time deposits
     20,696       20,600       20,463       19,848       19,598  
Securities sold under agreements to repurchase
     10,624       8,841       7,182       6,668       6,271  
Wholesale borrowings
     5,933       5,059       4,399       4,352       4,356  
 
                              
Total interest expense
     46,000       41,831       38,058       36,456       35,240  
 
                              
Net interest income
     87,777       86,010       87,324       87,372       87,107  
Provision for loan losses
     5,972       11,614       9,358       9,325       14,850  
 
                              
Net interest income after provision for loan losses
     81,805       74,396       77,966       78,047       72,257  
 
                              
Other income:
                                        
Trust department income
     5,684       5,505       5,315       5,228       5,696  
Service charges on deposits
     17,800       14,820       15,135       15,903       15,705  
Credit card fees
     10,523       9,411       9,937       9,581       9,546  
ATM and other service fees
     3,298       2,959       2,892       3,168       3,071  
Bank owned life insurance income
     3,024       3,074       3,113       2,992       3,083  
Investment services and insurance
     2,828       2,858       2,560       2,931       3,527  
Manufactured housing income
     40       102       10       5       5  
Investment securities gains (losses), net
     (25 )     1,872       (4,508 )     29       1,412  
Loan sales and servicing income
     1,520       1,133       2,033       1,630       334  
Other operating income
     5,403       3,205       2,915       2,611       3,340  
 
                              
Total other income
     50,095       44,939       39,402       44,078       45,719  
 
                              
Other expenses:
                                        
Salaries, wages, pension and employee benefits
     41,351       39,393       40,756       41,096       39,139  
Net occupancy expense
     5,881       6,536       5,468       5,546       5,526  
Equipment expense
     3,002       3,185       3,347       3,140       3,323  
Stationery, supplies and postage
     2,484       2,461       2,821       2,606       2,577  
Bankcard, loan processing and other costs
     5,444       5,724       6,355       6,261       5,988  
Professional services
     3,843       2,150       3,785       2,780       3,977  
Amortization of intangibles
     222       223       222       222       222  
Other operating expense
     17,170       16,239       17,525       15,599       16,784  
 
                              
Total other expenses
     79,397       75,911       80,279       77,250       77,536  
 
                              
Income before income tax expense
     52,503       43,424       37,089       44,875       40,440  
Federal income taxes
     16,358       13,336       8,720       13,764       9,412  
 
                              
Net income
   $ 36,145       30,088       28,369       31,111       31,028  
 
                              
Other comprehensive income (loss), net of taxes
     18,540       (23,983 )     (823 )     28,216       (54,954 )
 
                              
Comprehensive income (loss)
   $ 54,685       6,105       27,546       59,327       (23,926 )
 
                              
Net income applicable to common shares
     36,145       30,088       28,369       31,111       31,028  
 
                              
Adjusted net income used in diluted EPS calculation
     36,152       30,095       28,377       31,119       31,035  
 
                              
Weighted-average common shares — basic
     83,603       84,097       84,286       84,544       84,809  
 
                              
Weighted-average common shares — diluted
     83,890       84,497       84,777       84,962       85,149  
 
                              
 
                                        
Basic net income per share
   $ 0.43       0.36       0.34       0.36       0.37  
 
                              
 
                                        
Diluted net income per share
   $ 0.43       0.36       0.33       0.37       0.36  
 
                              
Note: Certain prior year balances have been reclassified to conform to the current year presentation.

Page 12

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION 		  (FIRSTMERIT CORPORATION LOGO)
(Unaudited, except December 31,2004 annual period which
   is derived from the audited financial statements)
(Dollars in thousands, except ratios)
                                                 
    Quarterly Periods     Annual Period  
    30-Jun     Mar 31     Dec 31     Sep 30     June 30     Dec 31  
    2005     2005     2004     2004     2004     2004  
Allowance for Credit Losses (a)
                                                
Allowance for loan losses, beginning of period (b)
   $ 97,115       97,296       100,491       101,569       113,573       91,459  
Allowance related to loans sold
     —       —       —       —       (12,671 )     (12,671 )
Provision for loan losses
     5,971       11,614       9,358       9,325       14,850       73,923  
Charge-offs
     15,422       16,740       17,873       16,119       21,341       78,999  
Recoveries
     5,144       4,945       5,320       5,716       7,158       23,584  
 
                                    
Net charge-offs
     10,278       11,795       12,553       10,403       14,183       55,415  
 
                                    
Allowance for loan losses, end of period
   $ 92,808       97,115       97,296       100,491       101,569       97,296  
 
                                    
Reserve for unfunded lending commitments, beginning of period (b)
   $ 6,479       5,774       5,619       5,992       6,688       6,094  
Provision for credit losses
     (694 )     705       155       (373 )     (696 )     (320 )
 
                                    
Reserve for unfunded lending commitments, end of period
   $ 5,785       6,479       5,774       5,619       5,992       5,774  
 
                                    
 
                                                
Allowance for Credit Losses
   $ 98,593       103,594       103,070       106,110       107,561       103,070  
 
                                    
 
                                                
Ratios (a) (b)
                                                
 
                                                
Provision for loan losses as a % of average loans
     0.36 %     0.73 %     0.58 %     0.57 %     0.91 %     1.13 %
Provision for credit losses as a % of average loans
     -0.04 %     0.04 %     0.01 %     -0.02 %     -0.04 %     0.00 %
Net charge-offs as a % of average loans
     0.62 %     0.74 %     0.78 %     0.64 %     0.87 %     0.85 %
Allowance for loan losses as a % of period-end loans
     1.40 %     1.49 %     1.51 %     1.56 %     1.56 %     1.51 %
Allowance for credit losses as a % of period-end loans
     1.49 %     1.59 %     1.60 %     1.64 %     1.65 %     1.60 %
Allowance for loan losses as a % of nonperforming loans
     208.74 %     235.71 %     240.14 %     240.03 %     247.10 %     240.14 %
Allowance for credit losses as a % of nonperforming loans
     221.76 %     251.44 %     254.39 %     253.45 %     261.67 %     254.39 %
 
                                                
Asset Quality
                                                
 
                                                
Impaired loans:
                                                
Nonaccrual
   $ 38,124       34,207       33,831       33,812       33,080       33,831  
Other nonperforming loans:
                                                
Nonaccrual
     6,336       6,994       6,685       8,054       8,025       6,685  
 
                                    
 
                                                
Total nonperforming loans
     44,460       41,201       40,516       41,866       41,105       40,516  
 
                                                
Other real estate (“ORE”)
     9,525       5,502       5,375       5,923       7,714       5,375  
 
                                    
 
                                                
Total nonperforming assets (“NPAs”)
   $ 53,985       46,703       45,891       47,789       48,819       45,891  
 
                                    
 
                                                
NPAs as % of period-end loans + ORE
     0.82 %     0.71 %     0.71 %     0.74 %     0.75 %     0.71 %
 
                                    
 
                                                
Past due 90 days or more & accruing interest
   $ 17,969       22,899       20,703       30,882       18,387       20,703  
 
                                    
 
(a)   The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments.
 
(b)   As of December 31, 2004, the reserve for unfunded lending commitments has been reclassified from the allowance for loan losses. Amounts presented prior to December 31, 2004 have been reclassified to conform to the current presentation.

Page 13

 

FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL 		(FIRSTMERIT CORPORATION LOGO)
(Unaudited)
(Dollars in thousands)
                                         
    2005     2005     2004     2004     2004  
QUARTERLY OTHER INCOME DETAIL   2nd Qtr     1st Qtr     4th Qtr     3rd Qtr     2nd Qtr  
Trust department income
   $ 5,684       5,505       5,315       5,228       5,696  
Service charges on deposits
     17,800       14,820       15,135       15,903       15,705  
Credit card fees
     10,523       9,411       9,937       9,581       9,546  
ATM and other service fees
     3,298       2,959       2,892       3,168       3,071  
Bank owned life insurance income
     3,024       3,074       3,113       2,992       3,083  
Investment services and insurance
     2,828       2,858       2,560       2,931       3,527  
Manufactured housing income
     40       102       10       5       5  
Investment securities gains (losses), net
     (25 )     1,872       (4,508 )     29       1,412  
Loan sales and servicing income
     1,520       1,133       2,033       1,630       334  
Other operating income
     5,403       3,205       2,915       2,611       3,340  
 
                                        
 
                              
Total Other Income
   $ 50,095       44,939       39,402       44,078       45,719  
 
                              
                                         
    2005     2005     2004     2004     2004  
QUARTERLY OTHER EXPENSES DETAIL   2nd Qtr     1st Qtr     4th Qtr     3rd Qtr     2nd Qtr  
Salaries, wages, pension and employee benefits
   $ 41,351       39,393       40,756       41,096       39,139  
Net occupancy expense
     5,881       6,536       5,468       5,546       5,526  
Equipment expense
     3,002       3,185       3,347       3,140       3,323  
Taxes, other than federal income taxes
     880       735       908       1,387       1,406  
Stationery, supplies and postage
     2,484       2,461       2,821       2,606       2,577  
Bankcard, loan processing and other costs
     5,444       5,724       6,355       6,261       5,988  
Advertising
     3,182       1,244       2,984       1,807       1,554  
Professional services
     3,843       2,150       3,785       2,780       3,977  
Telephone
     1,095       1,119       1,204       1,146       1,221  
Amortization of intangibles
     222       223       222       222       222  
Other operating expense
     12,013       13,141       12,429       11,259       12,603  
 
                                        
 
                              
Total Other Expenses
   $ 79,397       75,911       80,279       77,250       77,536  
 
                              

Page 14

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES — Net Charge-off Detail 		  (FIRSTMERIT CORPORATION LOGO)
                                 
(Unaudited)            
(Dollars in thousands)   Quarters ended     Six months ended  
    June 30,     June 30,  
    2005     2004     2005     2004  
Allowance for loan losses — beginning of period (a)
   $ 97,115       113,573       97,296       91,459  
Loans charged off:
                                
Commercial
     4,502       9,112       8,653       17,962  
Mortgage
     415       188       682       292  
Installment
     6,514       8,135       14,057       18,222  
Home equity
     571       542       1,323       1,327  
Credit cards
     2,662       2,941       5,082       5,696  
Manufactured housing
     —       27       —       313  
Leases
     758       396       2,365       1,195  
 
                        
Total
     15,422       21,341       32,162       45,007  
 
                        
Recoveries:
                                
Commercial
     1,184       2,466       2,212       3,364  
Mortgage
     52       7       107       32  
Installment
     2,580       3,194       5,305       6,041  
Home equity
     318       306       611       681  
Credit cards
     734       791       1,310       1,474  
Manufactured housing
     147       255       355       677  
Leases
     129       139       189       279  
 
                        
Total
     5,144       7,158       10,089       12,548  
 
                        
 
                                
Net charge-offs
     10,278       14,183       22,073       32,459  
 
                        
Allowance related to loans sold
     —       (12,671 )     —       (12,671 )
Provision for loan losses
     5,971       14,850       17,585       55,240  
 
                        
Allowance for loan losses — end of period
   $ 92,808       101,569       92,808       101,569  
 
                        
 
                                
Average loans outstanding
   $ 6,601,204       6,540,974       6,546,926       6,533,061  
Ratio to average loans:
                                
(Annualized) net charge-offs
     0.62 %     0.87 %     0.68 %     1.00 %
 
                        
Provision for loan losses
     0.36 %     0.91 %     0.54 %     1.70 %
 
                        
Loans outstanding — period-end
   $ 6,611,011       6,520,001       6,611,011       6,520,001  
 
                        
 
                                
Allowance for loan losses:
                                
As a percent of period-end loans outstanding
     1.40 %     1.56 %     1.40 %     1.56 %
 
                        
As a multiple of (annualized) net charge-offs
     2.25       1.78       2.09       1.56  
 
                        
As a multiple of (annualized) net charge-offs and allowance related to loans sold
     2.25       1.46       2.09       1.30  
 
                        
 
(a)   As of December 31, 2004, the reserve for unfunded lending commitments has been reclassified from the allowance for loan losses to other liabilities. Amounts presented prior to December 31, 2004 have been reclassified to conform to the current presentation.

Page 15