-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ARZxufatb0ZyJXm74En3ZCqEKn9Utn0ID9EXF/jJCA5TofnbUJZUNJR4Y+CT8pzI M6+YOBc8OthKWetGGE2vhw== 0000950152-06-005993.txt : 20060721 0000950152-06-005993.hdr.sgml : 20060721 20060721103459 ACCESSION NUMBER: 0000950152-06-005993 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060720 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060721 DATE AS OF CHANGE: 20060721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTMERIT CORP /OH/ CENTRAL INDEX KEY: 0000354869 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 341339938 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-10161 FILM NUMBER: 06973197 BUSINESS ADDRESS: STREET 1: 111 CASCADE PLAZA STREET 2: 7TH FLOOR CITY: AKRON STATE: OH ZIP: 44308 BUSINESS PHONE: 3309966300 FORMER COMPANY: FORMER CONFORMED NAME: FIRSTMERIT CORP / DATE OF NAME CHANGE: 19980116 FORMER COMPANY: FORMER CONFORMED NAME: FIRSTMERIT CORP DATE OF NAME CHANGE: 19941219 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANCORPORATION OF OHIO /OH/ DATE OF NAME CHANGE: 19941219 8-K 1 l21470ae8vk.htm FIRSTMERIT CORPORATION 8-K FirstMerit Corporation 8-K
 

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 20, 2006
FIRSTMERIT CORPORATION
 
(Exact name of registrant as specified in its charter)
         
Ohio   0-10161   34-1339938
 
(State or other jurisdiction   (Commission   (IRS Employer
of incorporation)   File Number)   Identification No.)
         
III Cascade Plaza, 7th Floor Akron, Ohio       44308
 
(Address of principal executive offices)       (Zip Code)
(330) 996-6300
 
(Registrant’s telephone number, including area code)
 
 
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
    o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
    o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
    o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
    o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

 

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
     On July 20, 2006, FirstMerit Corporation (the “Company”) announced earnings for the second quarter of 2006. A copy of the press release and certain financial information for this period is attached as Exhibit 99.1 hereto and incorporated by reference herein.
     Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in this Item 2.02 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Furthermore, the information in this Item 2.02 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
     (d) Exhibits.
     
Exhibit Number   Description
 
99.1
  Press Release dated July 20, 2006

2

 

Signature
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
    FirstMerit Corporation
 		  
  By:   /s/ Terrence E. Bichsel    
    Terrence E. Bichsel   
    Executive Vice President and
Chief Financial Officer 		  
 
Date: July 20, 2006

3

EX-99.1 2 l21470aexv99w1.htm EX-99.1 EX-99.1
 

Exhibit 99.1
(FIRSTMERIT CORPORATION LOGO)
2006 Financial Information Second Quarter
Table of Contents
         
Earnings Release
   Pages 1-4
 
        
Consolidated Financial Highlights
   Page 5
 
        
Consolidated Balance Sheets
   Page 6
 
        
Average Consolidated Balance Sheets
   Page 7
 
        
Average Consolidated Balance Sheets
   Page 8
(Fully-tax Equivalent Interest Rates and Interest Differential)
        
 
        
Consolidated Statements of Income and Comprehensive Income
   Page 9
 
        
Consolidated Statements of Income and Comprehensive Income
   Page 10
(Linked Quarters)
        
 
        
Asset Quality Information
   Page 11
 
        
Non Interest Income and Non Interest Expense Detail
   Page 12
 
        
Allowance for Loan Losses – Net Charge-off Detail
   Page 13
     
 
  FirstMerit Corporation
 
  III Cascade Plaza
 
  Akron, Ohio 44308
 
    
 
  Investor Relations:
 
  Tom O’Malley
 
  p. 330-384-7109

 

 

(FIRSTMERIT CORPORATION LOGO)
     
 
  For Release July 20, 2006, 7:30 a.m. EST
 
    
 
  Analysts: Tom O’Malley
 
  (330) 384-7109
FirstMerit Reports Second Quarter
2006 Earnings of $0.35 Per Share
Second Quarter Highlights
  •   Diluted earnings per share of $0.35
 
  •   Net income of $27.7 million
 
  •   Return on average common equity of 12.75%
 
  •   Return on average assets of 1.10%
AKRON, Ohio, — July 20, 2006 — FirstMerit Corporation (Nasdaq: FMER) today announced second quarter 2006 net income of $27.7 million, or $0.35 per diluted share. This compares with $36.1 million, or $0.43 per diluted share, for the second quarter 2005. Returns on average common equity (“ROE”) and average assets (“ROA”) for second quarter were 12.75% and 1.10%, respectively, compared with 15.07% and 1.40% for the second quarter 2005.
For the first six months of 2006, the Company reported net income of $57.6 million, or $0.72 per diluted share, compared with $66.2 million, or $0.79 per diluted share, for the first six months of 2005.
Paul G. Greig, President and Chief Executive Officer, said, “During my first two months, at FirstMerit I visited all of our regions, met with all of our people and a significant number of our customers. I am extremely impressed with our high level of customer service which is essential to the successful execution of our super community banking model. Building on the foundation I saw, we have undertaken a number of actions to make us a stronger company, enhance our relationships with customers, and improve revenue growth and efficiency. The major change was reorganizing around business segments, with business segment leaders reporting to me. This increases our company’s focus on commercial banking and better supports commercial and small business revenue generation. We also realigned the structure of our retail branch system, placing profitability and service responsibility on branch managers and incenting them on those key measures.”
In commenting on the quarter, Greig said, “In addition to absorbing costs associated with the organizational improvements, we also experienced higher credit-related costs driven by a single $4.6 million after-tax charge-off. Given the underlying credit indicators for the quarter, we believe this charge-off to be more of an anomaly than indicative of future

1

 

trends. Over the past few years FirstMerit has delivered on its commitment to restoring credit quality and lowering net charge-offs and I expect overall progress to continue in 2006.”
Total revenue, defined as net interest income on a fully tax-equivalent (“FTE”) basis plus noninterest income net of securities transactions, totaled $138.5 million for the second quarter 2006, compared with $138.6 million reported in the second quarter 2005. FTE net interest income was $86.4 million for the second quarter 2006, a decline of $2.1 million, or 2.32%, compared with the year-ago quarter. During the quarter the net interest margin expanded 4 basis points to 3.78%, compared with the second quarter 2005.
The Company expanded its net interest margin amidst a challenging interest rate environment by taking advantage of opportunities within its flexibly structured investment portfolio. For the second quarter 2006, average investment securities accounted for 23.80% of average assets, compared with 27.44% for the second quarter 2005. The $441.6 million, or 15.58%, reduction in the securities portfolio supported a $300.0 million, or 15.92%, reduction of average borrowed funds, along with $129.3 million, or 1.96%, growth in the average loan portfolio. Average commercial loan growth of $168.1 million, or 4.89%, and average home equity loan growth of $68.1 million, or 9.68%, offset declining average balances in the mortgage, installment and lease portfolios.
Noninterest income excluding securities transactions totaled $52.1 million for the second quarter 2006, compared with $50.1 million for the second quarter 2005, an increase of $2.0 million, or 3.90%. Credit card fees increased $1.0 million, or 9.08%, and service charges increased $0.2 million, or 1.18%. Compared with the first quarter 2006, credit card fees increased $0.8 million, or 7.56%, and deposit service charges rose $1.9 million, or 12.10%.
Noninterest expense totaled $85.2 million for the second quarter 2006, compared with $79.4 million for the second quarter 2005. Salary, wages, pension and employee benefits increased $5.4 million, or 12.99%, driven primarily by share-based compensation expense of $3.4 million. Additionally, expenses related to organizational restructurings also increased overall non interest expense during the quarter. The organizational changes are part of the Company’s initiatives to improve efficiency and generate revenue through a realigned and streamlined business structure.
Net charge-offs totaled $13.0 million in the second quarter 2006, compared with $10.3 million for the second quarter 2005, or 0.78% and 0.62% of average loans, respectively. The Company’s longer term trend of improving charge-off levels was interrupted by costs related to a credit relationship that accounted for $6.6 million of the quarter’s total net charge-offs. The Company expects to return to its trend of lower charge-off levels for the balance of 2006. As of June 30, 2006, nonperforming assets were $58.8 million, or 0.86%, of period-end loans plus other real estate, compared with $54.0 million, or 0.82%, at June 30, 2005. Nonperforming assets declined $14.2 million, or 19.41%, from March 31, 2006.

2

 

The Company recorded $13.2 million of loan loss provision in the second quarter 2006, compared with loan loss provision of $6.0 million in the second quarter 2005. On June 30, 2006, criticized commercial assets accounted for 6.93% of total commercial loans, compared with criticized commercial asset levels of 7.59% on June 30, 2005.
At June 30 2006, the allowance for loan losses was 1.29% of loans, compared with 1.36% at December 31, 2005. The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments. For comparative purposes the allowance for credit losses was 1.37% at June 30, 2006, compared with 1.45% at December 31, 2005.
Assets at June 30, 2006, totaled $10.3 billion, equivalent to $10.3 billion total at June 30, 2005. Period-end loan growth of $194.4 million, or 2.94%, was driven by a $236.9 million, or 6.90% increase in the commercial lending portfolio, offsetting declines in the mortgage, installment and leasing portfolios.
Deposits totaled $7.4 billion at June 30, 2006, an increase of $228.4 million, or 3.18% from June 30, 2005. Non interest bearing demand deposit accounts (DDA) increased $26.8 million, or 1.86% over that time. For the second quarter of 2006, average deposits increased $104.2 million, or 1.42%, compared with the second quarter of 2005.
Shareholders’ equity was $870.7 million at June 30, 2006. The Company’s capital position remains strong as tangible equity to assets was 7.20% at quarter-end. The common dividend per share paid in the second quarter 2006 was $0.28, a $0.01 increase from the second quarter 2005.
Second Quarter 2006
Conference Call: FirstMerit Corporation will host a conference call today, July 20, 2006, at 2P.M. EST.
To participate in the conference, please dial (877) 493-9121 ten minutes before start time and provide the reservation number 7617207.
The 2006 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 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, 2006 and 160 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.

3

 

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.

4

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands) 		  (FIRSTMERIT CORPORATION LOGO)
                                         
    Quarters
    2006   2006   2005   2005   2005
EARNINGS   2nd Qtr   1st Qtr   4th Qtr   3rd Qtr   2nd Qtr
Net interest income FTE (a)
   $ 86,377       86,563       88,152       88,347       88,432  
Provision for loan losses
     13,159       6,106       16,260       9,974       5,972  
Other income
     52,078       45,397       47,586       47,846       50,095  
Other expenses
     85,218       81,899       79,274       78,926       79,397  
FTE adjustment (a)
     647       590       650       641       655  
Net income
     27,661       29,964       27,656       36,594       36,145  
Diluted EPS
     0.35       0.37       0.34       0.43       0.43  
 
                                        
PERFORMANCE RATIOS
                                        
Return on average assets (ROA)
     1.10 %     1.20 %     1.07 %     1.41 %     1.40 %
Return on average common equity (ROE)
     12.75 %     13.67 %     11.52 %     14.90 %     15.07 %
Net interest margin FTE (a)
     3.78 %     3.80 %     3.73 %     3.70 %     3.74 %
Efficiency ratio
     61.39 %     61.90 %     58.26 %     57.81 %     57.14 %
Number of full-time equivalent employees
     2,986       3,104       3,057       3,073       3,078  
 
                                        
MARKET DATA
                                        
Book value/common share
   $ 10.88       10.91       11.39       11.65       11.69  
Period-end common share mkt value
     20.94       24.66       25.91       26.79       26.11  
Market as a % of book
     193 %     226 %     228 %     230 %     223 %
Cash dividends/common share
   $ 0.28       0.28       0.28       0.28       0.27  
Common stock dividend payout ratio
     80.00 %     75.68 %     82.35 %     65.12 %     62.79 %
Average basic common shares
     79,983       80,374       82,786       83,489       83,603  
Average diluted common shares
     80,203       80,648       83,082       83,978       83,890  
Period end common shares
     80,058       79,766       82,335       83,442       83,522  
Common shares repurchased
     1,329       2,618,588       1,228,293       178,872       145,143  
Common stock market capitalization
   $ 1,676,415       1,967,030       2,133,300       2,235,411       2,180,759  
 
                                        
ASSET QUALITY
                                        
Gross charge-offs
   $ 18,038       14,914       22,736       14,207       15,422  
Net charge-offs
     13,021       9,178       18,379       10,002       10,278  
Allowance for loan losses
     87,727       87,589       90,661       92,780       92,808  
Reserve for unfunded lending commitments
     5,716       5,853       6,072       5,857       5,785  
Nonperforming assets (NPAs)
     58,786       72,941       72,257       51,398       53,985  
Net charge-off/average loans ratio
     0.78 %     0.56 %     1.09 %     0.60 %     0.62 %
Allowance for loan losses/period-end loans
     1.29 %     1.31 %     1.36 %     1.39 %     1.40 %
Allowance for credit losses/period-end loans
     1.37 %     1.40 %     1.45 %     1.47 %     1.49 %
NPAs/loans and other real estate
     0.86 %     1.09 %     1.08 %     0.77 %     0.82 %
Allowance for loan losses/nonperforming loans
     174.80 %     136.22 %     145.61 %     221.46 %     208.74 %
Allowance for credit losses/nonperforming loans
     186.19 %     145.32 %     155.36 %     235.44 %     221.76 %
 
                                        
CAPITAL & LIQUIDITY
                                        
Period-end tangible equity to assets
     7.20 %     7.31 %     7.94 %     8.18 %     8.19 %
Average equity to assets
     8.66 %     8.79 %     9.33 %     9.46 %     9.32 %
Average equity to loans
     12.93 %     13.27 %     14.22 %     14.66 %     14.58 %
Average loans to deposits
     90.63 %     91.58 %     92.11 %     91.73 %     90.16 %
 
                                        
AVERAGE BALANCES
                                        
Assets
   $ 10,051,623       10,111,553       10,211,619       10,295,827       10,329,167  
Deposits
     7,426,029       7,313,509       7,273,980       7,245,562       7,321,860  
Loans
     6,730,531       6,697,732       6,699,997       6,646,112       6,601,204  
Earning assets
     9,174,008       9,245,882       9,368,139       9,465,288       9,489,431  
Shareholders’ equity
     870,234       888,818       952,715       974,147       962,239  
 
                                        
ENDING BALANCES
                                        
Assets
   $ 10,254,773       10,100,717       10,154,359       10,285,329       10,313,955  
Deposits
     7,402,239       7,510,562       7,233,650       7,352,026       7,173,857  
Loans
     6,804,769       6,672,102       6,667,327       6,685,462       6,610,385  
Goodwill
     139,245       139,245       139,245       139,245       139,245  
Intangible assets
     3,311       3,533       3,756       3,978       4,200  
Earning assets
     9,315,062       9,193,741       9,256,389       9,419,355       9,491,957  
Total shareholders’ equity
     870,698       870,552       937,580       972,348       976,016  
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.

5

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited, except December 31, 2005, which is derived from the
    audited financial statements) 		   
                         
    June 30,     December 31,     June 30,  
    2006     2005     2005  
ASSETS
                        
Cash and due from banks
   $ 228,690       225,953       201,240  
Investment securities (at fair value)
     2,436,086       2,546,496       2,828,127  
Federal funds sold
     25,000       —       890  
Loans held for sale
     49,207       42,566       52,555  
Loans:
                        
Commercial loans
     3,659,687       3,519,483       3,422,758  
Mortgage loans
     618,560       628,581       634,777  
Installment loans
     1,561,757       1,524,355       1,601,022  
Home equity loans
     763,585       778,697       737,207  
Credit card loans
     136,966       145,592       138,335  
Leases
     64,214       70,619       76,286  
 
                  
Total loans
     6,804,769       6,667,327       6,610,385  
Less allowance for loan losses
     (87,727 )     (90,661 )     (92,808 )
 
                  
Net loans
     6,717,042       6,576,666       6,517,577  
Premises and equipment, net
     119,233       120,420       118,038  
Goodwill
     139,245       139,245       139,245  
Intangible assets
     3,311       3,756       4,200  
Accrued interest receivable and other assets
     536,959       499,257       452,083  
 
                  
Total assets
   $ 10,254,773       10,154,359       10,313,955  
 
                  
 
                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                        
Deposits:
                        
Demand-non-interest bearing
   $ 1,466,628       1,523,731       1,439,800  
Demand-interest bearing
     842,354       830,248       834,315  
Savings and money market accounts
     2,261,557       2,304,177       2,350,829  
Certificates and other time deposits
     2,831,700       2,575,494       2,548,913  
 
                  
Total deposits
     7,402,239       7,233,650       7,173,857  
 
                  
Securities sold under agreements to repurchase
     1,156,346       1,426,037       1,699,337  
Wholesale borrowings
     658,720       401,104       333,627  
Accrued taxes, expenses, and other liabilities
     166,770       155,988       131,118  
 
                  
Total liabilities
     9,384,075       9,216,779       9,337,939  
 
                  
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, 2006, December 31, 2005 and June 30, 2005
     127,937       127,937       127,937  
Capital surplus
     105,397       108,210       108,736  
Accumulated other comprehensive loss
     (62,013 )     (42,850 )     (19,651 )
Retained earnings
     1,007,346       994,487       977,052  
Treasury stock, at cost, 11,968,035, 9,691,424 and 8,504,487 shares at June 30, 2006, December 31, 2005 and June 30, 2005, respectively
     (307,969 )     (250,204 )     (218,058 )
 
                  
Total shareholders’ equity
     870,698       937,580       976,016  
 
                  
Total liabilities and shareholders’ equity
   $ 10,254,773       10,154,359       10,313,955  
 
                  
The accompanying notes are an integral part of the consolidated financial statements.

6

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands) 		  (FIRSTMERIT CORPORATION LOGO)
                                         
    Quarterly Periods  
    June 30,     March 31,     December 31,     September 30,     June 30,  
    2006     2006     2005     2005     2005  
ASSETS
                                        
Cash and due from banks
   $ 188,915       194,042       192,189       197,412       197,548  
Investment securities/fed funds sold
     2,392,208       2,500,021       2,619,248       2,764,724       2,833,818  
Loans held for sale
     51,269       48,129       48,894       54,452       54,409  
Loans:
                                        
Commercial loans
     3,603,083       3,567,263       3,519,807       3,441,231       3,434,946  
Mortgage loans
     626,476       630,702       637,877       641,532       641,865  
Installment loans
     1,526,094       1,513,938       1,556,212       1,594,801       1,601,775  
Home equity loans
     772,196       775,728       772,757       754,492       704,054  
Credit card loans
     137,545       141,821       142,743       140,873       137,919  
Leases
     65,137       68,280       70,601       73,183       80,645  
 
                              
Total loans
     6,730,531       6,697,732       6,699,997       6,646,112       6,601,204  
Less allowance for loan losses (a)
     86,583       90,229       91,916       91,852       96,342  
 
                              
 
                                        
Net loans
     6,643,948       6,607,503       6,608,081       6,554,260       6,504,862  
 
                                        
Total earning assets
     9,174,008       9,245,882       9,368,139       9,465,288       9,489,431  
 
                                        
Premises and equipment, net
     119,666       120,155       117,387       117,471       118,392  
Accrued interest receivable and other assets
     655,617       641,703       625,820       607,508       620,138  
 
                              
 
                                        
TOTAL ASSETS
   $ 10,051,623       10,111,553       10,211,619       10,295,827       10,329,167  
 
                              
 
                                        
LIABILITIES
                                        
Deposits:
                                        
Demand-non-interest bearing
   $ 1,455,229       1,462,671       1,488,679       1,457,487       1,470,673  
Demand-interest bearing
     865,563       848,209       817,009       838,549       834,708  
Savings and money market accounts
     2,280,657       2,292,865       2,332,528       2,333,331       2,370,280  
Certificates and other time deposits
     2,824,580       2,709,764       2,635,764       2,616,195       2,646,199  
 
                              
 
                                        
Total deposits
     7,426,029       7,313,509       7,273,980       7,245,562       7,321,860  
 
                                        
Securities sold under agreements to repurchase
     1,212,470       1,295,178       1,443,740       1,478,857       1,385,644  
Wholesale borrowings
     371,309       433,257       375,167       442,035       498,088  
 
                              
 
                                        
Total funds
     9,009,808       9,041,944       9,092,887       9,166,454       9,205,592  
Accrued taxes, expenses and other liabilities (a)
     171,581       180,791       166,017       155,226       161,336  
 
                              
 
                                        
Total liabilities
     9,181,389       9,222,735       9,258,904       9,321,680       9,366,928  
 
                                        
SHAREHOLDERS’ EQUITY
                                        
Preferred stock
     —       —       —       —       —  
Common stock
     127,937       127,937       127,937       127,937       127,937  
Capital surplus
     104,477       108,330       108,303       108,564       108,559  
Accumulated other comprehensive (loss) income
     (54,132 )     (44,150 )     (39,834 )     (25,682 )     (26,883 )
Retained earnings
     1,001,647       998,173       994,301       982,419       968,408  
Treasury stock
     (309,695 )     (301,472 )     (237,992 )     (219,091 )     (215,782 )
 
                              
 
                                        
Total shareholders’ equity
     870,234       888,818       952,715       974,147       962,239  
 
                              
 
                                        
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 10,051,623       10,111,553       10,211,619       10,295,827       10,329,167  
 
                              

7

 

AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT CORPORATION AND SUBSIDIARIES
(Dollars in thousands)
                                                                         
    Three months ended     Year ended     Three months ended  
    June 30, 2006     December 31, 2005     June 30, 2005  
    Average             Average     Average             Average     Average             Average  
    Balance     Interest     Rate     Balance     Interest     Rate     Balance     Interest     Rate  
ASSETS
                                                                        
Cash and due from banks
   $ 188,915                       194,485                       197,548                  
Investment securities and federal funds sold:
                                                                        
U.S. Treasury securities and U.S. Government agency obligations (taxable)
     2,054,338       20,102       3.92 %     2,416,360       91,814       3.80 %     2,478,319       23,722       3.84 %
Obligations of states and political subdivisions (tax exempt)
     88,144       1,490       6.78 %     99,487       6,707       6.74 %     99,756       1,673       6.73 %
Other securities and federal funds sold
     249,726       3,823       6.14 %     255,568       12,291       4.81 %     255,743       3,037       4.76 %
 
                                                            
Total investment securities and federal funds sold
     2,392,208       25,415       4.26 %     2,771,415       110,812       4.00 %     2,833,818       28,432       4.02 %
Loans held for sale
     51,269       512       4.01 %     52,740       2,854       5.41 %     54,409       804       5.93 %
Loans
     6,730,531       122,990       7.33 %     6,610,509       430,402       6.51 %     6,601,204       105,196       6.39 %
 
                                                            
Total earning assets
     9,174,008       148,917       6.51 %     9,434,664       544,068       5.77 %     9,489,431       134,432       5.68 %
Allowance for loan losses
     (86,583 )                     (94,118 )                     (96,342 )                
Other assets
     775,283                       729,398                       738,530                  
 
                                                                  
Total assets
   $ 10,051,623                       10,264,429                       10,329,167                  
 
                                                                  
 
                                                                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                                                        
Deposits:
                                                                        
Demand — non-interest bearing
   $ 1,455,229       —       —       1,466,106       —       —       1,470,673       —       —  
Demand — interest bearing
     865,563       2,583       1.20 %     827,829       5,871       0.71 %     834,708       1,230       0.59 %
Savings and money market accounts
     2,280,657       12,079       2.12 %     2,356,813       32,944       1.40 %     2,370,280       7,517       1.27 %
Certificates and other time deposits
     2,824,580       29,326       4.16 %     2,647,908       86,764       3.28 %     2,646,199       20,696       3.14 %
 
                                                            
Total deposits
     7,426,029       43,988       2.38 %     7,298,656       125,579       1.72 %     7,321,860       29,443       1.61 %
 
                                                                        
Securities sold under agreements to repurchase
     1,212,470       12,957       4.29 %     1,409,135       45,423       3.22 %     1,385,644       10,624       3.08 %
Wholesale borrowings
     371,309       5,595       6.04 %     431,787       21,449       4.97 %     498,088       5,933       4.78 %
 
                                                            
Total interest bearing liabilities
     7,554,579       62,540       3.32 %     7,673,472       192,451       2.51 %     7,734,919       46,000       2.39 %
Other liabilities
     171,581                       158,125                       161,336                  
 
                                                                        
Shareholders’ equity
     870,234                       966,726                       962,239                  
 
                                                                  
Total liabilities and shareholders’ equity
   $ 10,051,623                       10,264,429                       10,329,167                  
 
                                                                  
 
                                                                        
Net yield on earning assets
   $ 9,174,008       86,377       3.78 %     9,434,664       351,617       3.73 %     9,489,431       88,432       3.74 %
 
                                                      
 
                                                                        
Interest rate spread
                     3.19 %                     3.26 %                     3.30 %
 
                                                                  
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.

8

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands except per share data)
                                 
    Quarters ended     Six months ended  
    June 30,     June 30,  
    2006     2005     2006     2005  
Interest income:
                                
Interest and fees on loans, including held for sale
   $ 123,450       105,975       241,190       206,124  
Interest and dividends on investment securities and federal funds sold
     24,820       27,802       50,152       55,494  
 
                        
Total interest income
     148,270       133,777       291,342       261,618  
 
                        
Interest expense:
                                
Interest on deposits:
                                
Demand-interest bearing
     2,583       1,230       4,945       2,186  
Savings and money market accounts
     12,079       7,517       22,827       13,892  
Certificates and other time deposits
     29,326       20,696       55,427       41,296  
Interest on securities sold under agreements to repurchase
     12,957       10,624       24,880       19,465  
Interest on wholesale borrowings
     5,595       5,933       11,560       10,992  
 
                        
Total interest expense
     62,540       46,000       119,639       87,831  
 
                        
Net interest income
     85,730       87,777       171,703       173,787  
Provision for loan losses
     13,159       5,972       19,265       17,586  
 
                        
Net interest income after provision for loan losses
     72,571       81,805       152,438       156,201  
 
                        
Other income:
                                
Trust department income
     5,744       5,684       11,138       11,189  
Service charges on deposits
     18,010       17,800       34,076       32,620  
Credit card fees
     11,478       10,523       22,149       19,934  
ATM and other service fees
     3,273       3,298       6,381       6,257  
Bank owned life insurance income
     5,310       3,024       8,296       6,098  
Investment services and insurance
     2,581       2,828       5,178       5,686  
Manufactured housing income
     35       40       38       142  
Investment securities gains, net
     4       (25 )     20       1,847  
Loan sales and servicing income
     2,833       1,520       4,278       2,653  
Other operating income
     2,810       5,403       5,921       8,608  
 
                        
Total other income
     52,078       50,095       97,475       95,034  
 
                        
Other expenses:
                                
Salaries, wages, pension and employee benefits
     46,721       41,351       89,752       80,744  
Net occupancy expense
     6,120       5,881       12,669       12,417  
Equipment expense
     2,914       3,002       5,872       6,187  
Stationery, supplies and postage
     2,403       2,484       4,856       4,945  
Bankcard, loan processing and other costs
     7,417       5,444       13,244       11,168  
Professional services
     3,738       3,843       6,501       5,993  
Amortization of intangibles
     222       222       445       445  
Other operating expense
     15,683       17,170       33,778       33,409  
 
                        
Total other expenses
     85,218       79,397       167,117       155,308  
 
                        
Income before federal income tax expense
     39,431       52,503       82,796       95,927  
Federal income tax expense
     11,770       16,358       25,171       29,694  
 
                        
Net income
   $ 27,661       36,145       57,625       66,233  
 
                        
 
                                
Other comprehensive income (loss), net of taxes
                                
Unrealized securities’ holding losses, net of taxes
     (8,652 )     18,111       (18,400 )     (4,493 )
Unrealized hedging gain (loss), net of taxes
     37       538       (750 )     556  
Minimum pension liability adjustment, net of taxes
     —       (122 )     —       (305 )
Less: reclassification adjustment for securities’ gains losses realized in net income, net of taxes
     3       (16 )     13       1,201  
 
                        
Total other comprehensive income (loss), net of taxes
     (8,618 )     18,543       (19,163 )     (5,443 )
 
                        
Comprehensive income
   $ 19,043       54,688       38,462       60,790  
 
                        
Net income applicable to common shares
   $ 27,661       36,145       57,625       66,233  
 
                        
Net income used in diluted EPS calculation
   $ 27,666       36,152       57,635       66,247  
 
                        
Weighted average number of common shares outstanding — basic
     79,983       83,603       80,177       83,849  
 
                        
Weighted average number of common shares outstanding — diluted
     80,203       83,890       80,420       84,187  
 
                        
Basic earnings per share
   $ 0.35       0.43       0.72       0.79  
 
                        
Diluted earnings per share
   $ 0.35       0.43       0.72       0.79  
 
                        
Dividend per share
   $ 0.28       0.27       0.56       0.54  
 
                        
The accompanying notes are an integral part of the consolidated financial statements.

9

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME—LINKED QUARTERS
(Unaudited)
(Dollars in thousands, except share data) 		  (FIRSTMERIT CORPORATION LOGO)
                                         
    Quarterly Results  
    2006     2006     2005     2005     2005  
    2nd Q     1st Q     4th Q     3rd Q     2nd Q  
Interest and fees on loans, including held for sale
   $ 123,450       117,740       115,850       111,169       105,975  
Interest and dividends — securities and federal funds sold
     24,820       25,332       26,109       26,700       27,802  
 
                              
Total interest income
     148,270       143,072       141,959       137,869       133,777  
 
                              
Interest on deposits:
                                        
Demand-interest bearing
     2,583       2,362       1,953       1,732       1,230  
Savings and money market accounts
     12,079       10,748       10,352       8,700       7,517  
Certificates and other time deposits
     29,326       26,101       23,831       21,637       20,696  
Securities sold under agreements to repurchase
     12,957       11,923       13,423       12,535       10,624  
Wholesale borrowings
     5,595       5,965       4,898       5,559       5,933  
 
                              
Total interest expense
     62,540       57,099       54,457       50,163       46,000  
 
                              
Net interest income
     85,730       85,973       87,502       87,706       87,777  
Provision for loan losses
     13,159       6,106       16,260       9,974       5,972  
 
                              
Net interest income after provision for loan losses
     72,571       79,867       71,242       77,732       81,805  
 
                              
Other income:
                                        
Trust department income
     5,744       5,394       5,430       5,515       5,684  
Service charges on deposits
     18,010       16,066       17,884       18,561       17,800  
Credit card fees
     11,478       10,671       10,601       10,437       10,523  
ATM and other service fees
     3,273       3,108       3,157       3,453       3,298  
Bank owned life insurance income
     5,310       2,986       3,092       3,074       3,024  
Investment services and insurance
     2,581       2,597       2,696       2,226       2,828  
Manufactured housing income
     35       3       3       3       40  
Investment securities gains (losses), net
     4       16       39       40       (25 )
Loan sales and servicing income
     2,833       1,445       1,668       2,076       1,520  
Other operating income
     2,810       3,111       3,016       2,461       5,403  
 
                              
Total other income
     52,078       45,397       47,586       47,846       50,095  
 
                              
Other expenses:
                                        
Salaries, wages, pension and employee benefits
     46,721       43,031       40,790       42,149       41,351  
Net occupancy expense
     6,120       6,549       5,746       5,567       5,881  
Equipment expense
     2,914       2,958       4,152       2,962       3,002  
Stationery, supplies and postage
     2,403       2,453       2,546       2,559       2,484  
Bankcard, loan processing and other costs
     7,417       5,827       7,042       5,802       5,444  
Professional services
     3,738       2,763       3,389       2,632       3,843  
Amortization of intangibles
     222       223       222       222       222  
Other operating expense
     15,683       18,095       15,387       17,033       17,170  
 
                              
Total other expenses
     85,218       81,899       79,274       78,926       79,397  
 
                              
Income before income tax expense
     39,431       43,365       39,554       46,652       52,503  
Federal income taxes
     11,770       13,401       11,898       10,058       16,358  
 
                              
Net income
   $ 27,661       29,964       27,656       36,594       36,145  
 
                              
Other comprehensive income (loss), net of taxes
     (8,618 )     (10,545 )     (8,927 )     (14,272 )     18,540  
 
                              
Comprehensive income
   $ 19,043       19,419       18,729       22,322       54,685  
 
                              
Net income applicable to common shares
     27,661       29,964       27,656       36,594       36,145  
 
                              
Adjusted net income used in diluted EPS calculation
     27,666       29,969       27,659       36,601       36,152  
 
                              
Weighted-average common shares — basic
     79,983       80,374       82,786       83,489       83,603  
 
                              
Weighted-average common shares — diluted
     80,203       80,648       83,082       83,978       83,890  
 
                              
 
                                        
Basic net income per share
   $ 0.35       0.37       0.33       0.44       0.43  
 
                              
 
                                        
Diluted net income per share
   $ 0.35       0.37       0.34       0.43       0.43  
 
                              
Note: Certain prior year balances have been reclassified to conform to the current year presentation.

10

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited, except December 31, 2005 annual period which
    is derived from the audited financial statements)
(Dollars in thousands, except ratios) 		  (FIRSTMERIT CORPORATION LOGO)
                                                 
    Quarterly Periods     Annual Period  
    June 30     Mar 31     Dec 31     Sep 30     June 30     Dec 31  
    2006     2006     2005     2005     2005     2005  
Allowance for Credit Losses
                                                
 
                                                
Allowance for loan losses, beginning of period
   $ 87,589       90,661       92,780       92,808       97,115       97,296  
Allowance related to loans sold
     —       —       —       —       —       —  
Provision for loan losses
     13,159       6,106       16,260       9,974       5,971       43,820  
Charge-offs
     18,038       14,914       22,736       14,207       15,422       69,105  
Recoveries
     5,017       5,736       4,357       4,205       5,144       18,650  
 
                                    
Net charge-offs
     13,021       9,178       18,379       10,002       10,278       50,455  
 
                                    
Allowance for loan losses, end of period
   $ 87,727       87,589       90,661       92,780       92,808       90,661  
 
                                    
Reserve for unfunded lending commitments, beginning of period
   $ 5,853       6,072       5,857       5,785       6,479       5,774  
Provision for credit losses
     (137 )     (219 )     215       72       (694 )     298  
 
                                    
Reserve for unfunded lending commitments, end of period
   $ 5,716       5,853       6,072       5,857       5,785       6,072  
 
                                    
 
                                                
Allowance for Credit Losses
   $ 93,443       93,442       96,733       98,637       98,593       96,733  
 
                                    
 
                                                
Ratios
                                                
 
                                                
Provision for loan losses as a % of average loans
     0.78 %     0.37 %     0.96 %     0.60 %     0.36 %     0.66 %
Provision for credit losses as a % of average loans
     -0.01 %     -0.01 %     0.01 %     0.00 %     -0.04 %     0.00 %
Net charge-offs as a % of average loans
     0.78 %     0.56 %     1.09 %     0.60 %     0.62 %     0.76 %
Allowance for loan losses as a % of period-end loans
     1.29 %     1.31 %     1.36 %     1.39 %     1.40 %     1.36 %
Allowance for credit losses as a % of period-end loans
     1.37 %     1.40 %     1.45 %     1.48 %     1.49 %     1.45 %
Allowance for loan losses as a % of nonperforming loans
     174.80 %     136.22 %     145.61 %     221.46 %     208.74 %     145.61 %
Allowance for credit losses as a % of nonperforming loans
     186.19 %     145.32 %     155.36 %     235.44 %     221.76 %     155.36 %
 
                                                
Asset Quality
                                                
 
                                                
Impaired loans:
                                                
Nonaccrual
   $ 41,927       56,258       54,176       34,144       38,124       54,176  
Other nonperforming loans:
                                                
Nonaccrual
     8,261       8,044       8,086       7,751       6,336       8,086  
 
                                    
 
                                                
Total nonperforming loans
     50,188       64,302       62,262       41,895       44,460       62,262  
 
                                                
Other real estate (“ORE”)
     8,598       8,639       9,995       9,503       9,525       9,995  
 
                                    
 
                                                
Total nonperforming assets (“NPAs”)
   $ 58,786       72,941       72,257       51,398       53,985       72,257  
 
                                    
 
                                                
NPAs as % of period-end loans + ORE
     0.86 %     1.09 %     1.08 %     0.77 %     0.82 %     1.08 %
 
                                    
 
                                                
Past due 90 days or more & accruing interest
   $ 16,483       18,640       17,931       21,451       17,969       17,931  
 
                                    

11

 

FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands) 		  (FIRSTMERIT CORPORATION LOGO)
                                         
    2006     2006     2005     2005     2005  
QUARTERLY OTHER INCOME DETAIL   2nd Qtr     1st Qtr     4th Qtr     3rd Qtr     2nd Qtr  
Trust department income
   $ 5,744       5,394       5,430       5,515       5,684  
Service charges on deposits
     18,010       16,066       17,884       18,561       17,800  
Credit card fees
     11,478       10,671       10,601       10,437       10,523  
ATM and other service fees
     3,273       3,108       3,157       3,453       3,298  
Bank owned life insurance income
     5,310       2,986       3,092       3,074       3,024  
Investment services and insurance
     2,581       2,597       2,696       2,226       2,828  
Manufactured housing income
     35       3       3       3       40  
Investment securities gains (losses), net
     4       16       39       40       (25 )
Loan sales and servicing income
     2,833       1,445       1,668       2,076       1,520  
Other operating income
     2,810       3,111       3,016       2,461       5,403  
 
                                        
 
                              
Total Other Income
   $ 52,078       45,397       47,586       47,846       50,095  
 
                              
                                         
    2006     2006     2005     2005     2005  
QUARTERLY OTHER EXPENSES DETAIL   2nd Qtr     1st Qtr     4th Qtr     3 Qtr     2nd Qtr  
Salaries, wages, pension and employee benefits
   $ 46,721       43,031       40,790       42,149       41,351  
Net occupancy expense
     6,120       6,549       5,746       5,567       5,881  
Equipment expense
     2,914       2,958       4,152       2,962       3,002  
Taxes, other than federal income taxes
     1,802       1,819       1,578       849       880  
Stationery, supplies and postage
     2,403       2,453       2,546       2,559       2,484  
Bankcard, loan processing and other costs
     7,417       5,827       7,042       5,802       5,444  
Advertising
     2,369       2,766       1,415       1,863       3,182  
Professional services
     3,738       2,763       3,389       2,632       3,843  
Telephone
     1,094       1,128       1,136       1,206       1,095  
Amortization of intangibles
     222       223       222       222       222  
Other operating expense
     10,418       12,382       11,258       13,115       12,013  
 
                                        
 
                              
Total Other Expenses
   $ 85,218       81,899       79,274       78,926       79,397  
 
                              

12

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES — Net Charge-off Detail
(Unaudited)
(Dollars in thousands) 		  (FIRSTMERIT CORPORATION LOGO)
                                 
    Quarters ended     Six months ended  
    June 30,     June 30,  
    2006     2005     2006     2005  
Allowance for loan losses — beginning of period
   $ 87,589       97,115       90,661       97,296  
Loans charged off:
                                
Commercial
     10,086       4,502       16,152       8,653  
Mortgage
     325       415       698       682  
Installment
     4,524       6,514       10,554       14,057  
Home equity
     1,146       571       1,766       1,323  
Credit cards
     1,951       2,662       3,725       5,082  
Leases
     6       758       57       2,365  
 
                        
Total
     18,038       15,422       32,952       32,162  
 
                        
Recoveries:
                                
Commercial
     945       1,184       2,382       2,212  
Mortgage
     30       52       86       107  
Installment
     2,965       2,580       6,111       5,305  
Home equity
     307       318       685       611  
Credit cards
     585       734       1,034       1,310  
Manufactured housing
     84       147       185       355  
Leases
     101       129       270       189  
 
                        
Total
     5,017       5,144       10,753       10,089  
 
                        
 
                                
Net charge-offs
     13,021       10,278       22,199       22,073  
Provision for loan losses
     13,159       5,971       19,265       17,585  
 
                        
Allowance for loan losses — end of period
   $ 87,727       92,808       87,727       92,808  
 
                        
 
                                
Average loans outstanding
   $ 6,730,531       6,601,204       6,714,222       6,546,926  
 
                        
Ratio to average loans:
                                
(Annualized) net charge-offs
     0.78 %     0.62 %     0.67 %     0.68 %
 
                        
Provision for loan losses
     0.78 %     0.36 %     0.58 %     0.54 %
 
                        
Loans outstanding — period-end
   $ 6,804,769       6,610,385       6,804,769       6,610,385  
 
                        
 
                                
Allowance for credit losses:
     93,443       98,593       93,443       98,593  
 
                        
As a multiple of (annualized) net charge-offs
     1.79       2.39       2.09       2.21  
 
                        
Allowance for loan losses:
                                
As a percent of period-end loans outstanding
     1.29 %     1.40 %     1.29 %     1.40 %
 
                        
As a multiple of (annualized) net charge-offs
     1.68       2.25       1.96       2.09  
 
                        

13

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