EX-99.1 2 l25809aexv99w1.htm EX-99.1 EX-99.1
 

Exhibit 99.1
 
For Release April 24, 2007, 7:30 a.m. EST
Analysts: Thomas P. O’Malley
(330) 384-7109
FirstMerit Reports First Quarter 2007 Results of $0.39 per share
and Announces Completion of Asset Sale
AKRON, Ohio, — April 24, 2007 — FirstMerit Corporation (Nasdaq: FMER) today announced first quarter 2007 net income of $31.4 million, or $0.39 per diluted share. This compares with $30.0 million, or $0.37 per diluted share, for the prior-year quarter.
Returns on average common equity (“ROE”) and average assets (“ROA”) for the first quarter 2007 were 14.91% and 1.24%, respectively, compared with 13.67% and 1.20% for the prior-year quarter.
“Our immediate priority is to accelerate the pace of credit improvement at FirstMerit. We sold $81 million of problem assets this quarter resulting in meaningful improvement in our credit metrics, a stronger balance sheet and higher quality earnings,” said Paul G. Greig, Chairman and Chief Executive Officer of FirstMerit. “This quarter we are reporting significantly lower net charge-offs, nonperforming assets and provision for loan losses. A stronger credit position along with enhancements to our overall credit and portfolio management processes moves FirstMerit toward our objective of reaching peer levels of credit quality. Improving credit quality yields improved profitability for the Company, as shown by our returns on average assets and average equity this quarter. I also am encouraged with our robust commercial loan growth which increased 2.87% from the prior quarter, and the stability of our net interest margin over the same time period.”
Net interest margin was 3.58% for the first quarter of 2007 compared with 3.58% for the fourth quarter of 2006 and 3.80% for the first quarter of 2006. The Company maintained a stable net interest margin during the first quarter of 2007, compared with the fourth quarter of 2006, by reinvesting maturing investment portfolio securities at higher yields and managing the costs of core deposits. The decrease in net interest margin compared with the first quarter of 2006 reflects both a shift in consumer preference for higher-yielding deposit products as well as increased deposit costs from a higher interest rate environment.

1

 

Net interest income on a fully tax-equivalent (“FTE”) basis was $83.2 million in the first quarter of 2007 compared with $84.5 million in the fourth quarter of 2006 and $86.6 million in the first quarter of 2006. The decrease in FTE net interest income compared with the fourth quarter 2006 resulted from fewer days in the quarter while average earning assets grew $63.2 million, or 0.67%, along with a stable net interest margin. The decrease in FTE net interest income compared with the first quarter of 2006 resulted from lower net interest margin, partly offset by an increase in average earning assets. Compared with the first quarter of 2006, average loans increased 3.30% and average investments decreased 2.82%.
Noninterest income net of securities transactions for the first quarter of 2007 was $48.9 million, an increase of $0.5 million or 1.13% from the fourth quarter of 2006 and an increase of $3.5 million or 7.70% from the first quarter of 2006. In the first quarter of 2007, the Company completed a previously announced asset sale that contributed $4.1 to loan sales and servicing income offset by the $0.5 million loss on the sale of other real estate which is recorded in other operating expense, for the quarter. Other income, net of securities gains, as a percentage of net revenue for the first quarter of 2007 was 37.00% compared with 36.39% for fourth quarter of 2006 and 34.39% for the first quarter of 2006. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.
Noninterest expense for the first quarter of 2007 was $81.5 million, a decrease of $2.5 million, or 2.93%, from the fourth quarter of 2006 and a decrease of $0.4 million, or 0.46%, from the first quarter of 2006.
Net charge-offs totaled $3.5 million, or 0.21% of average portfolio loans in the first quarter of 2007 compared with $9.2 million, or 0.56% of average portfolio loans in the first quarter of 2006.
Nonperforming assets totaled $32.7 million at March 31, 2007, a decrease of $31.5 million, or 49.1%, compared with December 31, 2006 and a decrease of $40.2 million, or 55.22%, compared with March 31, 2006. The asset sale completed during the first quarter of 2007 included $31.0 million of nonperforming assets. Nonperforming assets at March 31, 2007 represented 0.47% of period-end loans plus other real estate compared with 0.93% at December 31, 2006 and 1.09% at March 31, 2006.
The provision for loan losses decreased to $4.2 million in the first quarter of 2007 compared with $44.2 million in the fourth quarter of 2006 and $6.1 million in the first quarter of 2006. In the fourth quarter of 2006, the Company’s higher provision for loan losses were impacted by its decision to sell $73.7 million of commercial loans included in the asset sales completed during the first quarter of 2007.

2

 

The allowance for loan losses totaled $92.0 million at March 31, 2007, an increase of $0.7 million and $4.5 million from December 31, 2006 and March 31, 2006, respectively. At March 31, 2007, the allowance for loan losses was 1.32% of period-end loans compared with 1.33% at December 31, 2006 and 1.31% at March 31, 2006. 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 as a percentage of period end loans was 1.42% at March 31, 2007 compared with 1.42% at December 31, 2006 and 1.40% at March 31, 2006. The allowance for credit losses to nonperforming loans increased to 356.26% at March 31, 2007 compared with 179.60% on December 31, 2006 and 145.32% on March 31, 2006.
FirstMerit’s total assets at March 31, 2007 were $10.3 billion, an increase of $94.5 million, or 0.92%, compared with December 31, 2006 and an increase of $246.4 million, or 2.44%, compared with March 31, 2006. The increase from December 31, 2006, was due to continued growth in the commercial loan portfolio, which increased $106.0 million, or 2.87%, and offset decreases in the consumer portfolio. Commercial loan growth of $237.1 million, or 6.66%, drove a majority of the asset growth from March 31, 2006.
Total deposits were $7.7 billion at March 31, 2007, an increase of $202.3 million, or 2.70% from December 31, 2006, and an increase of $190.6 million, or 2.54%, from March 31, 2006. Core deposits, which exclude all time deposits, totaled $4.6 billion at March 31, 2007, an increase of $54.4 million or 1.20% from December 31, 2006 and a decrease of $132.3 million, or 2.81% from March 31, 2006.
Shareholders’ equity was $863.6 million at March 31, 2007 and the Company’s capital position remains strong as tangible equity to assets was 7.07%. The common dividend per share paid in the first quarter 2007 was $0.29.

3

 

First Quarter 2007 Conference Call
FirstMerit will host an earnings conference call on April 24, 2007, at 2:00 p.m. Eastern time to provide an overview of first quarter results and highlights. To participate in the conference call, please dial (888) 694-4728 ten minutes before start time and provide the reservation number: 8685718. A replay of the conference call will be available at approximately 4:30 p.m., on April 24, 2007 through May 1, 2007, by dialing (877) 519-4471, and entering the PIN: 8685718.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001220/FIRSTMERITLOGO)
The first quarter earnings release will be available at approximately 7:30 a.m. that same morning 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.
About FirstMerit
FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $10.3 billion as of March 31, 2007 and 161 banking offices and 176 ATMs in 25 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., and FirstMerit Community Development Corporation.
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)
 
                                         
    Quarters  
    2007     2006     2006     2006     2006  
EARNINGS   1st Qtr     4th Qtr     3rd Qtr     2nd Qtr     1st Qtr  
Net interest income FTE (a)
   $ 83,218       84,502       85,850       86,377       86,563  
Provision for loan losses
     4,210       44,235       12,612       13,159       6,106  
Other income
     48,876       48,332       49,341       52,078       45,397  
Other expenses
     81,526       83,987       76,983       85,218       81,899  
FTE adjustment (a)
     1,212       919       763       647       590  
Net income
     31,421       6,117       31,204       27,661       29,964  
Diluted EPS
     0.39       0.07       0.39       0.35       0.37  
 
                                        
PERFORMANCE RATIOS
                                        
Return on average assets (ROA)
     1.24 %     0.24 %     1.22 %     1.10 %     1.20 %
Return on average common equity (ROE)
     14.91 %     2.66 %     13.93 %     12.75 %     13.67 %
Net interest margin FTE (a)
     3.58 %     3.58 %     3.68 %     3.78 %     3.80 %
Efficiency ratio
     61.55 %     63.06 %     56.78 %     61.39 %     61.90 %
Number of full-time equivalent employees
     2,751       2,755       2,769       2,986       3,104  
 
                                        
MARKET DATA
                                        
Book value/common share
   $ 10.78       10.56       11.28       10.88       10.91  
Period-end common share mkt value
     21.11       24.14       23.17       20.94       24.66  
Market as a % of book
     196 %     229 %     205 %     193 %     226 %
Cash dividends/common share
   $ 0.29       0.29       0.29       0.28       0.28  
Common stock dividend payout ratio
     74.36 %     414.29 %     74.36 %     80.00 %     75.68 %
Average basic common shares
     80,113       80,091       80,066       79,983       80,374  
Average diluted common shares
     80,298       80,316       80,262       80,203       80,648  
Period end common shares
     80,112       80,101       80,072       80,058       79,766  
Common shares repurchased
     2,000       15,876       0       1,329       2,618,588  
Common stock market capitalization
   $ 1,691,164       1,933,638       1,855,268       1,676,415       1,967,030  
 
                                        
ASSET QUALITY
                                        
Gross charge-offs
   $ 9,424       22,323       15,453       18,038       14,914  
Net charge-offs
     3,507       18,559       11,584       13,021       9,178  
Allowance for loan losses
     92,045       91,342       88,755       87,727       87,589  
Reserve for unfunded lending commitments
     6,746       6,294       6,307       5,716       5,853  
Nonperforming assets (NPAs)
     32,664       64,177       72,464       58,786       72,941  
Net charge-offs/average loans ratio
     0.21 %     1.06 %     0.67 %     0.78 %     0.56 %
Net charge-offs and allowance related to loans held for sale/average loans ratio
     0.21 %     1.40 %     0.67 %     0.78 %     0.56 %
Allowance for loan losses/period-end loans
     1.32 %     1.33 %     1.28 %     1.29 %     1.31 %
Allowance for credit losses/period-end loans
     1.42 %     1.42 %     1.37 %     1.37 %     1.40 %
NPAs/loans and other real estate
     0.47 %     0.93 %     1.05 %     0.86 %     1.09 %
Allowance for loan losses/nonperforming loans
     331.93 %     168.03 %     143.73 %     174.80 %     136.22 %
Allowance for credit losses/nonperforming loans
     356.26 %     179.60 %     153.94 %     186.19 %     145.32 %
 
                                        
CAPITAL & LIQUIDITY
                                        
Period-end tangible equity to assets
     7.07 %     6.96 %     7.55 %     7.20 %     7.31 %
Average equity to assets
     8.32 %     8.91 %     8.77 %     8.66 %     8.79 %
Average equity to loans
     12.35 %     13.17 %     12.99 %     12.93 %     13.27 %
Average loans to deposits
     92.47 %     92.97 %     93.05 %     90.63 %     91.58 %
 
                                        
AVERAGE BALANCES
                                        
Assets
   $ 10,276,241       10,227,154       10,138,856       10,051,623       10,111,553  
Deposits
     7,481,969       7,440,331       7,355,877       7,426,029       7,313,509  
Loans
     6,918,636       6,917,572       6,844,593       6,730,531       6,697,732  
Earning assets
     9,437,418       9,374,223       9,249,769       9,174,008       9,245,882  
Shareholders’ equity
     854,713       911,348       888,841       870,234       888,818  
 
                                        
ENDING BALANCES
                                        
Assets
   $ 10,347,121       10,252,572       10,217,968       10,254,773       10,100,717  
Deposits
     7,701,202       7,498,921       7,389,633       7,402,239       7,510,562  
Loans
     6,951,631       6,878,873       6,917,347       6,804,769       6,672,102  
Goodwill
     139,245       139,245       139,245       139,245       139,245  
Intangible assets
     2,644       2,865       3,088       3,311       3,533  
Earning assets
     9,447,346       9,382,033       9,344,841       9,315,062       9,193,741  
Total shareholders’ equity
     863,641       846,111       903,383       870,698       870,552  
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.

 

                         
FIRSTMERIT CORPORATION AND SUBSIDIARIES                  
CONSOLIDATED BALANCE SHEETS                  
(In thousands)                  
(Unaudited, except December 31, 2006, which is derived from the   March 31,     December 31,     March 31,  
     audited financial statements)   2007     2006     2006  
 
                        
ASSETS
                        
Cash and due from banks
   $ 242,470       200,204       206,912  
Investment securities (at fair value) and federal funds sold
     2,447,426       2,407,888       2,460,321  
Loans held for sale
     48,289       95,272       61,318  
Loans:
                        
Commercial loans
     3,800,125       3,694,121       3,562,968  
Mortgage loans
     598,390       608,008       625,514  
Installment loans
     1,628,531       1,619,747       1,509,714  
Home equity loans
     709,964       731,473       772,308  
Credit card loans
     138,183       147,553       135,916  
Leases
     76,438       77,971       65,682  
 
                  
Total loans
     6,951,631       6,878,873       6,672,102  
Less allowance for loan losses
     (92,045 )     (91,342 )     (87,589 )
 
                  
Net loans
     6,859,586       6,787,531       6,584,513  
Premises and equipment, net
     120,556       122,954       119,571  
Goodwill
     139,245       139,245       139,245  
Intangible assets
     2,644       2,865       3,533  
Accrued interest receivable and other assets
     486,905       496,613       525,304  
 
                  
Total assets
   $ 10,347,121       10,252,572       10,100,717  
 
                  
 
                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                        
Deposits:
                        
Demand-non-interest bearing
   $ 1,463,039       1,455,097       1,465,168  
Demand-interest bearing
     779,790       799,571       923,491  
Savings and money market accounts
     2,333,907       2,267,686       2,320,360  
Certificates and other time deposits
     3,124,466       2,976,567       2,801,543  
 
                  
Total deposits
     7,701,202       7,498,921       7,510,562  
 
                  
Securities sold under agreements to repurchase
     1,380,591       1,261,821       1,272,362  
Wholesale borrowings
     208,744       464,227       285,143  
Accrued taxes, expenses, and other liabilities
     192,943       181,492       162,098  
 
                  
Total liabilities
     9,483,480       9,406,461       9,230,165  
 
                  
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 March 31, 2007, December 31, 2006 and March 31, 2006
     127,937       127,937       127,937  
Capital surplus
     108,073       106,916       108,958  
Accumulated other comprehensive loss
     (71,328 )     (79,508 )     (53,395 )
Retained earnings
     1,006,207       998,079       1,002,035  
Treasury stock, at cost, 11,914,435, 11,925,803 and 12,257,585 shares at March 31, 2007, December 31, 2006 and March 31, 2006, respectively
     (307,248 )     (307,313 )     (314,983 )
 
                  
Total shareholders’ equity
     863,641       846,111       870,552  
 
                  
Total liabilities and shareholders’ equity
   $ 10,347,121       10,252,572       10,100,717  
 
                  

 

     
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
 
                                         
    Quarterly Periods              
    March 31,     December 31,     September 30,     June 30,     March 31,  
    2007     2006     2006     2006     2006  
ASSETS
                                        
Cash and due from banks
   $ 179,566       175,735       185,628       188,915       194,042  
Investment securities/fed funds sold
     2,429,539       2,410,879       2,360,494       2,392,208       2,500,021  
Loans held for sale
     89,243       45,772       44,682       51,269       48,129  
Loans:
                                        
Commercial loans
     3,749,067       3,730,110       3,674,988       3,603,083       3,567,263  
Mortgage loans
     607,602       614,204       619,542       626,476       630,702  
Installment loans
     1,622,324       1,625,962       1,592,917       1,526,094       1,513,938  
Home equity loans
     717,806       738,630       755,044       772,196       775,728  
Credit card loans
     143,853       144,351       139,117       137,545       141,821  
Leases
     77,984       64,315       62,985       65,137       68,280  
 
                              
Total loans
     6,918,636       6,917,572       6,844,593       6,730,531       6,697,732  
Less allowance for loan losses
     91,256       88,175       87,127       86,583       90,229  
 
                              
 
Net loans
     6,827,380       6,829,397       6,757,466       6,643,948       6,607,503  
 
Total earning assets
     9,437,418       9,374,223       9,249,769       9,174,008       9,245,882  
 
Premises and equipment, net
     121,988       121,956       120,088       119,666       120,155  
Accrued interest receivable and other assets
     628,525       643,415       670,498       655,617       641,703  
 
                              
 
TOTAL ASSETS
   $ 10,276,241       10,227,154       10,138,856       10,051,623       10,111,553  
 
                              
 
                                        
LIABILITIES
                                        
Deposits:
                                        
Demand-non-interest bearing
   $ 1,389,455       1,413,682       1,407,653       1,455,229       1,462,671  
Demand-interest bearing
     756,678       767,430       794,886       865,563       848,209  
Savings and money market accounts
     2,284,549       2,267,268       2,246,386       2,280,657       2,292,865  
Certificates and other time deposits
     3,051,287       2,991,951       2,906,952       2,824,580       2,709,764  
 
                              
 
Total deposits
     7,481,969       7,440,331       7,355,877       7,426,029       7,313,509  
 
Securities sold under agreements to repurchase
     1,352,961       1,269,873       1,357,746       1,212,470       1,295,178  
Wholesale borrowings
     399,638       446,950       367,640       371,309       433,257  
 
                              
 
Total funds
     9,234,568       9,157,154       9,081,263       9,009,808       9,041,944  
Accrued taxes, expenses and other liabilities
     186,960       158,652       168,752       171,581       180,791  
 
                              
 
Total liabilities
     9,421,528       9,315,806       9,250,015       9,181,389       9,222,735  
 
                                        
SHAREHOLDERS’ EQUITY
                                        
Preferred stock
     —       —       —       —       —  
Common stock
     127,937       127,937       127,937       127,937       127,937  
Capital surplus
     107,178       106,339       105,587       104,477       108,330  
Accumulated other comprehensive (loss) income
     (76,926 )     (36,045 )     (52,601 )     (54,132 )     (44,150 )
Retained earnings
     1,003,605       1,020,518       1,015,749       1,001,647       998,173  
Treasury stock
     (307,081 )     (307,401 )     (307,831 )     (309,695 )     (301,472 )
 
                              
 
Total shareholders’ equity
     854,713       911,348       888,841       870,234       888,818  
 
                              
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 10,276,241       10,227,154       10,138,856       10,051,623       10,111,553  
 
                              

 

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)   March 31, 2007     December 31, 2006     March 31, 2006  
    Average             Average     Average             Average     Average             Average  
    Balance     Interest     Rate     Balance     Interest     Rate     Balance     Interest     Rate  
ASSETS
                                                                        
Cash and due from banks
   $ 179,566                       186,029                       194,042                  
Investment securities and federal funds sold:
                                                                        
U.S. Treasury securities and
                                                                        
U.S. Government agency obligations (taxable)
     1,955,704       20,222       4.19 %     2,050,736       81,207       3.96 %     2,161,306       20,850       3.91 %
Obligations of states and political subdivisions (tax exempt)
     222,381       3,382       6.17 %     114,548       7,390       6.45 %     90,622       1,527       6.83 %
Other securities and federal funds sold
     251,454       4,421       7.13 %     250,221       15,264       6.10 %     248,093       3,526       5.76 %
 
                                                            
Total investment securities and federal funds sold
     2,429,539       28,025       4.68 %     2,415,505       103,861       4.30 %     2,500,021       25,903       4.20 %
Loans held for sale
     89,243       763       3.47 %     47,449       3,153       6.65 %     48,129       762       6.42 %
Loans
     6,918,636       129,359       7.58 %     6,798,338       499,746       7.35 %     6,697,732       116,997       7.08 %
 
                                                            
Total earning assets
     9,437,418       158,147       6.80 %     9,261,292       606,760       6.55 %     9,245,882       143,662       6.30 %
Allowance for loan losses
     (91,256 )                     (88,020 )                     (90,229 )                
Other assets
     750,513                       770,714                       761,858                  
 
                                                                  
Total assets
   $ 10,276,241                       10,130,015                       10,111,553                  
 
                                                                  
 
                                                                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                                                        
Deposits:
                                                                        
Demand — non-interest bearing
   $ 1,389,455       —       —       1,434,539       —       —       1,462,671       —       —  
Demand — interest bearing
     756,678       1,919       1.03 %     818,735       9,217       1.13 %     848,209       2,362       1.13 %
Savings and money market accounts
     2,284,549       14,006       2.49 %     2,271,654       50,083       2.20 %     2,292,865       10,748       1.90 %
Certificates and other time deposits
     3,051,287       36,080       4.80 %     2,859,218       123,877       4.33 %     2,709,764       26,101       3.91 %
 
                                                            
Total deposits
     7,481,969       52,005       2.82 %     7,384,146       183,177       2.48 %     7,313,509       39,211       2.17 %
 
                                                                        
Securities sold under agreements to repurchase
     1,352,961       16,785       5.03 %     1,283,951       56,151       4.37 %     1,295,178       11,923       3.73 %
Wholesale borrowings
     399,638       6,139       6.23 %     404,723       24,140       5.96 %     433,257       5,965       5.58 %
 
                                                            
Total interest bearing liabilities
     7,845,113       74,929       3.87 %     7,638,281       263,468       3.45 %     7,579,273       57,099       3.06 %
 
                                                                        
Other liabilities
     186,960                       167,266                       180,791                  
 
                                                                        
Shareholders’ equity
     854,713                       889,929                       888,818                  
 
                                                                  
Total liabilities and shareholders’ equity
   $ 10,276,241                       10,130,015                       10,111,553                  
 
                                                                  
 
                                                                        
Net yield on earning assets
   $ 9,437,418       83,218       3.58 %     9,261,292       343,292       3.71 %     9,245,882       86,563       3.80 %
 
                                                      
 
                                                                        
Interest rate spread
                     2.93 %                     3.10 %                     3.25 %
 
                                                                  
     
Note:
  Interest income on tax-exempt securities and loans has been adjusted to a fully-taxable equivalent basis. Nonaccrual loans have been included in the average balances.

 

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands except per share data)
                 
    Quarters ended
March 31,		  
    2007     2006  
Interest income:
                
Interest and fees on loans, including held for sale
   $ 130,089       117,740  
Interest and dividends on investment securities and federal funds sold
     26,846       25,332  
 
            
Total interest income
     156,935       143,072  
 
            
Interest expense:
                
Interest on deposits:
                
Demand-interest bearing
     1,919       2,362  
Savings and money market accounts
     14,006       10,748  
Certificates and other time deposits
     36,080       26,101  
Interest on securities sold under agreements to repurchase
     16,785       11,923  
Interest on wholesale borrowings
     6,139       5,965  
 
            
Total interest expense
     74,929       57,099  
 
            
Net interest income
     82,006       85,973  
Provision for loan losses
     4,210       6,106  
 
            
Net interest income after provision for loan losses
     77,796       79,867  
 
            
Other income:
                
Trust department income
     5,596       5,394  
Service charges on deposits
     16,249       16,066  
Credit card fees
     11,099       10,671  
ATM and other service fees
     3,071       3,108  
Bank owned life insurance income
     3,168       2,986  
Investment services and insurance
     2,453       2,597  
Investment securities gains, net
     —       16  
Loan sales and servicing income
     5,438       1,445  
Other operating income
     1,802       3,114  
 
            
Total other income
     48,876       45,397  
 
            
Other expenses:
                
Salaries, wages, pension and employee benefits
     42,500       43,031  
Net occupancy expense
     6,686       6,549  
Equipment expense
     3,084       2,958  
Stationery, supplies and postage
     2,333       2,453  
Bankcard, loan processing and other costs
     7,470       5,827  
Professional services
     4,829       2,763  
Amortization of intangibles
     223       223  
Other operating expense
     14,401       18,095  
 
            
Total other expenses
     81,526       81,899  
 
            
Income before federal income tax expense
     45,146       43,365  
Federal income tax expense
     13,725       13,401  
 
            
Net income
   $ 31,421       29,964  
 
            
 
                
Other comprehensive income (loss), net of taxes
                
Unrealized securities’ holding gain (loss), net of taxes
     8,113       (9,748 )
Unrealized hedging gain (loss), net of taxes
     67       (787 )
Minimum pension liability adjustment, net of taxes
     —       —  
Less: reclassification adjustment for securities’ gains losses realized in net income, net of taxes
     —       10  
Total other comprehensive income (loss), net of taxes
     8,180       (10,545 )
 
            
Comprehensive income
   $ 39,601       19,419  
 
            
Net income applicable to common shares
   $ 31,421       29,964  
 
            
Net income used in diluted EPS calculation
   $ 31,425       29,969  
 
            
Weighted average number of common shares outstanding — basic
     80,113       80,374  
 
            
Weighted average number of common shares outstanding — diluted
     80,298       80,648  
 
            
Basic earnings per share
   $ 0.39       0.37  
 
            
Diluted earnings per share
   $ 0.39       0.37  
 
            
Dividend per share
   $ 0.29       0.28  
 
            
 9 

 

     
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME—LINKED QUARTERS
(Unaudited)
(Dollars in thousands, except share data)
 
                                         
    Quarterly Results  
    2007     2006     2006     2006     2006  
    1st Q     4th Q     3rd Q     2nd Q     1st Q  
 
                                        
Interest and fees on loans, including held for sale
   $ 130,089       131,683       129,890       123,450       117,740  
Interest and dividends — securities and federal funds sold
     26,846       25,795       25,131       24,820       25,332  
 
                              
Total interest income
     156,935       157,478       155,021       148,270       143,072  
 
                              
Interest on deposits:
                                        
Demand-interest bearing
     1,919       2,031       2,241       2,583       2,362  
Savings and money market accounts
     14,006       14,068       13,188       12,079       10,748  
Certificates and other time deposits
     36,080       35,569       32,881       29,326       26,101  
Securities sold under agreements to repurchase
     16,785       15,393       15,878       12,957       11,923  
Wholesale borrowings
     6,139       6,834       5,746       5,595       5,965  
 
                              
Total interest expense
     74,929       73,895       69,934       62,540       57,099  
 
                              
Net interest income
     82,006       83,583       85,087       85,730       85,973  
Provision for loan losses
     4,210       44,235       12,612       13,159       6,106  
 
                              
Net interest income after provision for loan losses
     77,796       39,348       72,475       72,571       79,867  
 
                              
Other income:
                                        
Trust department income
     5,596       5,794       5,721       5,744       5,394  
Service charges on deposits
     16,249       18,198       19,250       18,010       16,066  
Credit card fees
     11,099       11,325       11,251       11,478       10,671  
ATM and other service fees
     3,071       3,135       3,301       3,273       3,108  
Bank owned life insurance income
     3,168       3,001       3,042       5,310       2,986  
Investment services and insurance
     2,453       2,011       2,631       2,581       2,597  
Investment securities gains (losses), net
     —       —       2       4       16  
Loan sales and servicing income
     5,438       1,504       1,731       2,833       1,445  
Other operating income
     1,802       3,364       2,412       2,845       3,114  
 
                              
Total other income
     48,876       48,332       49,341       52,078       45,397  
 
                              
Other expenses:
                                        
Salaries, wages, pension and employee benefits
     42,500       43,700       43,248       46,721       43,031  
Net occupancy expense
     6,686       6,143       6,002       6,120       6,549  
Equipment expense
     3,084       3,030       3,097       2,914       2,958  
Stationery, supplies and postage
     2,333       2,633       2,423       2,403       2,453  
Bankcard, loan processing and other costs
     7,470       7,508       7,459       7,417       5,827  
Professional services
     4,829       5,000       5,470       3,738       2,763  
Amortization of intangibles
     223       222       222       222       223  
Other operating expense
     14,401       15,751       9,062       15,683       18,095  
 
                              
Total other expenses
     81,526       83,987       76,983       85,218       81,899  
 
                              
Income before income tax expense
     45,146       3,693       44,833       39,431       43,365  
Federal income taxes
     13,725       (2,424 )     13,629       11,770       13,401  
 
                              
Net income
   $ 31,421       6,117       31,204       27,661       29,964  
 
                              
Other comprehensive income (loss), net of taxes
     8,180       (41,365 )     23,870       (8,618 )     (10,545 )
 
                              
Comprehensive income
   $ 39,601       (35,248 )     55,074       19,043       19,419  
 
                              
Net income applicable to common shares
     31,421       6,117       31,204       27,661       29,964  
 
                              
Adjusted net income used in diluted EPS calculation
     31,425       6,121       31,209       27,666       29,968  
 
                              
Weighted-average common shares — basic
     80,113       80,091       80,066       79,983       80,374  
 
                              
Weighted-average common shares — diluted
     80,298       80,316       80,262       80,203       80,648  
 
                              
 
                                        
Basic net income per share
   $ 0.39       0.07       0.39       0.35       0.37  
 
                              
 
                                        
Diluted net income per share
   $ 0.39       0.07       0.39       0.35       0.37  
 
                              
 
 10 

 

     
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited, except December 31, 2006 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
 
                                                 
    Quarterly Periods     Annual Period  
    31-Mar     31-Dec     Sep 30     June 30     Mar 31     Dec 31  
    2007     2006     2006     2006     2006     2006  
Allowance for Credit Losses
                                                
 
                                                
Allowance for loan losses, beginning of period
   $ 91,342       88,755       87,727       87,589       90,661       90,661  
Allowance related to loans held for sale
     —       (23,089 )     —       —       —       (23,089 )
Provision for loan losses
     4,210       44,235       12,612       13,159       6,106       76,112  
Charge-offs
     9,424       22,323       15,453       18,038       14,914       70,728  
Recoveries
     5,917       3,764       3,869       5,017       5,736       18,386  
 
                                    
Net charge-offs
     3,507       18,559       11,584       13,021       9,178       52,342  
 
                                    
Allowance for loan losses, end of period
   $ 92,045       91,342       88,755       87,727       87,589       91,342  
 
                                    
Reserve for unfunded lending commitments, beginning of period
   $ 6,294       6,307       5,716       5,853       6,072       6,072  
Provision for credit losses
     452       (13 )     591       (137 )     (219 )     222  
 
                                    
Reserve for unfunded lending commitments, end of period
   $ 6,746       6,294       6,307       5,716       5,853       6,294  
 
                                    
 
                                                
Allowance for Credit Losses
   $ 98,791       97,636       95,062       93,443       93,442       97,636  
 
                                    
 
                                                
Ratios
                                                
 
                                                
Provision for loan losses as a % of average loans
     0.25 %     2.54 %     0.73 %     0.78 %     0.37 %     1.12 %
Provision for credit losses as a % of average loans
     0.03 %     0.00 %     0.03 %     -0.01 %     -0.01 %     0.00 %
Net charge-offs as a % of average loans
     0.21 %     1.06 %     0.67 %     0.78 %     0.56 %     0.77 %
Net charge-offs and allowance related to loans held for sale as a % of average loans
     0.21 %     1.40 %     0.67 %     0.78 %     0.56 %     1.11 %
Allowance for loan losses as a % of period-end loans
     1.32 %     1.33 %     1.28 %     1.29 %     1.31 %     1.33 %
Allowance for credit losses as a % of period-end loans
     1.42 %     1.42 %     1.37 %     1.37 %     1.40 %     1.42 %
Allowance for loan losses as a % of nonperforming loans
     331.93 %     168.03 %     143.73 %     174.80 %     136.22 %     168.03 %
Allowance for credit losses as a % of nonperforming loans
     356.26 %     179.60 %     153.94 %     186.19 %     145.32 %     179.60 %
 
                                                
Asset Quality
                                                
 
                                                
Impaired loans:
                                                
Nonaccrual
   $ 17,049       45,045       52,621       41,927       56,258       45,045  
Other nonperforming loans:
                                                
Nonaccrual
     10,681       9,317       9,132       8,261       8,044       9,317  
 
                                      
 
                                                
Total nonperforming loans
     27,730       54,362       61,753       50,188       64,302       54,362  
 
                                                
Other real estate (“ORE”)
     4,934       9,815       10,711       8,598       8,639       9,815  
 
                                    
 
                                                
Total nonperforming assets (“NPAs”)
   $ 32,664       64,177       72,464       58,786       72,941       64,177  
 
                                    
 
                                                
NPAs as % of period-end loans + ORE
     0.47 %     0.93 %     1.05 %     0.86 %     1.09 %     0.93 %
 
                                    
 
                                                
Past due 90 days or more & accruing interest
   $ 15,209       16,860       15,311       16,483       18,640       16,860  
 
                                    
 
                                                
  

 

     
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands)
 
                                         
    2007     2006     2006     2006     2006  
    1st Qtr     4th Qtr     3rd Qtr     2nd Qtr     1st Qtr  
QUARTERLY OTHER INCOME DETAIL
                                        
 
                                        
Trust department income
   $ 5,596       5,794       5,721       5,744       5,394  
Service charges on deposits
     16,249       18,198       19,250       18,010       16,066  
Credit card fees
     11,099       11,325       11,251       11,478       10,671  
ATM and other service fees
     3,071       3,135       3,301       3,273       3,108  
Bank owned life insurance income
     3,168       3,001       3,042       5,310       2,986  
Investment services and insurance
     2,453       2,011       2,631       2,581       2,597  
Investment securities gains (losses), net
     —       —       2       4       16  
Loan sales and servicing income
     5,438       1,504       1,731       2,833       1,445  
Other operating income
     1,802       3,364       2,412       2,845       3,114  
 
                              
Total Other Income
   $ 48,876       48,332       49,341       52,078       45,397  
 
                              
                                         
    2007     2006     2006     2006     2006  
    1st Qtr     4th Qtr     3rd Qtr     2nd Qtr     1st Qtr  
QUARTERLY OTHER EXPENSES DETAIL
                                        
 
                                        
Salaries, wages, pension and employee benefits
   $ 42,500       43,700       43,248       46,721       43,031  
Net occupancy expense
     6,686       6,143       6,002       6,120       6,549  
Equipment expense
     3,084       3,030       3,097       2,914       2,958  
Taxes, other than federal income taxes
     1,662       1,753       (7,703 )     1,802       1,819  
Stationery, supplies and postage
     2,333       2,633       2,423       2,403       2,453  
Bankcard, loan processing and other costs
     7,470       7,508       7,459       7,417       5,827  
Advertising
     1,420       798       1,152       2,369       2,766  
Professional services
     4,829       5,000       5,470       3,738       2,763  
Telephone
     1,120       1,362       1,138       1,094       1,128  
Amortization of intangibles
     223       222       222       222       223  
Other operating expense
     10,199       11,838       14,475       10,418       12,382  
 
                              
Total Other Expenses
   $ 81,526       83,987       76,983       85,218       81,899  
 
                              

 

     
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES — Net Charge-off Detail
(Unaudited)
(Dollars in thousands)
 
                         
    Quarters ended     Year ended  
    March 31,     December 31,  
    2007     2006     2006  
 
                        
Allowance for loan losses — beginning of period
   $ 91,342       90,661       90,661  
Loans charged off:
                        
Commercial
     448       6,066       32,628  
Mortgage
     990       373       1,670  
Installment
     4,746       6,030       20,682  
Home equity
     820       620       3,847  
Credit cards
     2,399       1,774       8,294  
Leases
     21       51       3,607  
 
                  
Total
     9,424       14,914       70,728  
 
                  
Recoveries:
                        
Commercial
     2,878       1,437       3,734  
Mortgage
     8       56       142  
Installment
     2,114       3,146       10,340  
Home equity
     257       378       1,293  
Credit cards
     474       449       2,123  
Manufactured housing
     112       169       451  
Leases
     74       101       303  
 
                  
Total
     5,917       5,736       18,386  
 
                  
 
                        
Net charge-offs
     3,507       9,178       52,342  
Provision for loan losses
     4,210       6,106       76,112  
Allowance related to loans held for sale
     —       —       (23,089 )
 
                  
Allowance for loan losses — end of period
   $ 92,045       87,589       91,342  
 
                  
 
                        
Average loans outstanding
   $ 6,918,636       6,697,732       6,798,338  
 
                  
Ratio to average loans:
                        
(Annualized) net charge-offs
     0.21 %     0.56 %     0.77 %
 
                  
(Annualized) net charge-offs and allowance related to loans held for sale
     0.21 %     0.56 %     1.11 %
 
                  
Provision for loan losses
     0.25 %     0.37 %     1.12 %
 
                  
Loans outstanding — period-end
   $ 6,951,631       6,672,102       6,878,873  
 
                  
 
                        
Allowance for credit losses:
     98,791       93,442       97,636  
 
                  
As a multiple of (annualized) net charge-offs
     6.95       2.51       1.87  
 
                  
As a multiple of (annualized) net charge-offs and allowance related to loans held for sale
     6.95       2.51       1.29  
 
                  
Allowance for loan losses:
                        
As a percent of period-end loans outstanding
     1.32 %     1.31 %     1.33 %
 
                  
As a multiple of (annualized) net charge-offs
     6.47       2.35       1.75  
 
                  
As a multiple of (annualized) net charge-offs and allowance related to loans held for sale
     6.47       2.35       1.21