 January 2013
Fixed Income Investor
Presentation
Exhibit 99.1 |
 1
Forward-looking Statement Disclosure
This presentation contains forward-looking statements relating to present or future
trends or factors affecting the banking industry, and specifically the financial condition and
results of operations, including without limitation, statements relating to the earnings outlook of the Corporation, as well
as its operations, markets and products. Actual results could differ materially from those indicated.
Among the important factors that could cause results to differ materially are interest rate
changes, continued softening in the economy, which could materially impact credit quality trends and
the ability to generate loans, changes in the mix of the Corporation's business, competitive
pressures, changes in accounting, tax or regulatory practices or requirements and those risk
factors detailed in the Corporation's periodic reports and registration statements filed with the Securities
and Exchange Commission. The Corporation undertakes no obligation to release revisions to these
forward-looking statements or reflect events or circumstances after the date of this
release. Additional Information and Where to Find It
In connection with the proposed merger between FirstMerit Corporation ("FirstMerit") and
Citizens Republic Bancorp., Inc. ("Citizens"), FirstMerit has filed with the U.S.
Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-4 that includes a preliminary joint proxy
statement of FirstMerit and Citizens that also constitutes a prospectus of FirstMerit. FirstMerit and
Citizens will deliver the definitive joint proxy statement/prospectus to their respective
shareholders. FirstMerit and Citizens urge investors and shareholders to read the joint proxy
statement/prospectus regarding the proposed merger and the definitive joint proxy statement/prospectus
(when it becomes available), as well as other documents filed with the SEC, because they will
contain important information. You may obtain copies of all documents filed with the SEC
regarding this transaction, free of charge, at the SEC’s website (www.sec.gov). You may also
obtain these documents, free of charge, from FirstMerit’s website (www.firstmerit.com)
under the heading “Investors” and then under the heading “Publications and Filings.” You may also
obtain these documents, free of charge, from Citizens’ website (www.citizensbanking.com) under
the tab “Investors” and then under the heading “Financial Documents” and
then under the heading “SEC Filings.” Participants in the Merger Solicitation
FirstMerit, Citizens, and their respective directors, executive officers and certain other members of
management and employees may be soliciting proxies from FirstMerit and Citizens shareholders in
favor of the merger and related matters. Information regarding the persons who may, under the
rules of the SEC, be deemed participants in the solicitation of FirstMerit and Citizens shareholders in connection with the proposed merger are
set forth in the preliminary joint proxy statement/prospectus. You can find information about
FirstMerit’s executive officers and directors in its definitive proxy statement filed with
the SEC on March 8, 2012. You can find information about Citizens’ executive officers and directors in its
definitive proxy statement filed with the SEC on March 12, 2012. Additional information about
FirstMerit’s executive officers and directors and Citizens’ executive officers and
directors can be found in the above-referenced Registration Statement on Form S-4. You can obtain free copies of
these documents from FirstMerit and Citizens using the contact information above.
|
 FirstMerit Overview
(1)
•
Headquarters: Akron, Ohio
•
Employees (FTE): 2,724
•
Founded: 1845
•
Assets: $14.9 Billion
4th largest Ohio bank
41
st
largest US bank
•
Market Capitalization: $1.7 Billion
•
S&P
/
Moody’s
Hold
Co.
Ratings:
BBB+
/
A2
•
Ticker: FMER (NASDAQ)
2
Source: SNL Financial.
(1) Total assets at 12/31/12 and market capitalization as of 1/18/13.
|
 The
First Merit Opportunity Highly regarded
and experienced
management team
•
Senior management team with an average of over 25 years of banking industry
experience principally with larger institutions
•
Dedicated focus on risk management, credit, and controls
Stable earnings
base
•
55 consecutive quarters of profitability
•
Stable NIM historically and throughout the cycle
Experienced
integrator
•
Successfully integrated 3 bank M&A transactions in 2010
•
Robust planning, identified risks and detailed integration plan
Citizens Republic
–
strategically
compelling and
financially
attractive
•
Creates a premier Midwest banking franchise with over $23bn in assets
•
EPS accretive, IRR of 18%+, with short TBV earnback period
3
•
Robust pro forma capital and capital generation capacity
•
Outstanding asset quality, exceptional liquidity profile, and strong core deposit
base Robust credit,
capital, and
liquidity |
 Highly Regarded and
Experienced Management Team 4
Name
Title
Industry
Experience
Bio
Paul G. Greig
Chairman &
CEO
35
Terrence E. Bichsel
Executive VP &
CFO
39
William P. Richgels
Executive VP &
CCO
31
Mr. Richgels joined FirstMerit as Executive Vice President, Chief Credit Officer on May 1, 2007. He
joined FirstMerit from JP Morgan Chase, Chicago, where he held the position of Senior Vice
President and Senior Credit Executive since 2004. Mr. Richgel’s experiences and successes
in lending include asset-based, commercial and industrial, commercial real estate, floor
plan, private banking, distressed debt and mezzanine.
Mark N. DuHamel
Executive VP
and Treasurer
30
Thomas P. O’Malley
Senior VP, Dir.
of Investor
Relations and
Corporate
Communications
17
Mr. O’Malley
is
Senior
Vice
President,
Director
of
Investor
Relations
and
Corporate
Communications.
He
joined FirstMerit in 2004 from National City Corporation, Cleveland, where he was a buy-side
equity research analyst
covering
financial
service
companies.
Prior
to
that,
he
was
a
sell-side
equity
research
analyst
covering banks for McDonald & Company/KeyCorp., Cleveland.
Mr. Greig has served as Chairman, President and CEO of FirstMerit since 2006 and is a member of the
Company’s Executive Committee. Mr. Greig is also the Chairman, President and CEO of
FirstMerit Bank, N.A. Prior to joining FirstMerit, Mr. Greig served as President and CEO of
Charter One Bank, Illinois from 2005-2006 and President and CEO of Chase, Wisconsin from
1999-2005.
Mr. Bichsel is the Executive Vice President and Chief Financial Officer of FirstMerit Corporation. He
joined FirstMerit in September 1999 from Banc One Corporation where he was the Vice President
of Finance and Performance Management. He previously held high level finance positions in Bank
One Services Corporation, Bank One Wisconsin Corp, and Bank One, Dayton. He has more than 30
years of experience in financial management, systems, budgeting, risk management, investments,
cost accounting and financial forecast modeling. Mark N. DuHamel is Executive Vice President of Treasury for FirstMerit Corporation. He also serves as
Executive Vice President and Treasurer of FirstMerit Bank, NA.. He directs investment
portfolio strategy and execution, manages wholesale funding activities and oversees the bank's
asset liability management function. He manages the corporation's investor relations function
and he is the corporate development officer overseeing merger and acquisition activity. |
 Highly Regarded and Experienced Management Team (cont.)
5
Name
Title
Industry
Experience
Bio
David G. Goodall
Executive VP,
Corporate
Banking
15
Mr. Goodall serves as Executive Vice President, Commercial Banking and has held
this position since November 2009. He joined FirstMerit in March 2009 as
Executive Vice President and Head of Specialized Banking from National City Business
Credit, Inc., a subsidiary of National City Bank, where he was President and
CEO. N. James
Brocklehurst
Executive VP,
Retail Banking
23
Mr. Brocklehurst was appointed Executive Vice President, Retail Banking in July
2010. He joined FirstMerit as Senior Vice President, Retail Sales Manager
in July 2006, from JPMorgan Chase where he served as Senior Vice President, Retail
Market Manager since 2003. Mr. Brocklehurst began his banking career in 1989 in
Branch Management in Indianapolis, IN. Mike G. Robinson
Executive VP,
Wealth
Management
Services
27
Mark D. Quinlan
Executive VP &
Chief
Information
Officer
25
Mr. Quinlan is Executive Vice President and Chief Information Officer. Prior to
joining FirstMerit in 2013, he was Executive Vice President, Chief
Information and Operations Officer at Associated Bancorp in Green Bay, Wis. Prior to that, he held
significant positions at such organizations as Charter One, Union Center Insurance
and Investments, US Bancorp and Citibank.
Christopher J.
Maurer
Executive VP,
Human
Resources
41
Judith A. Steiner
Executive VP,
Risk
Management
25
Ms. Steiner joined FirstMerit in 1990. She is Executive Vice President, General
Counsel, Corporate Secretary and Chief Risk Officer of FirstMerit
Corporation. Prior to her current position, Ms. Steiner was manager of the Legal and Compliance
Departments and was AML/BSA Officer of the Corporation. Her responsibilities
include oversight of the Legal, Compliance, AM/BSA, CRA, Security,
Insurance and Enterprise Risk Management functions. Prior to joining FirstMerit, she was an
Associate with Brouse McDowell law firm, Akron, Ohio.
Julie C. Tutkovics
Senior VP &
Chief Marketing
Officer
20
Mr. Robinson is Executive Vice President, Wealth Management Services. Prior to joining FirstMerit, he
spent 27 years at JPMorgan Chase where he held a number of leadership roles within the
company’s wealth management business. As a managing director and co-head of the JP
Morgan Private Bank in Michigan, Mr. Robinson managed a team of specialists in wealth
advisory, investment management, estate and trust administration and banking Mr. Maurer is Executive Vice President, Human Resources of FirstMerit Corporation. He joined First
National Bank of Ohio (now part of FirstMerit) in June 1992 as Senior Vice President and
Director of Human Resources. In November 1993, Mr. Maurer was named Senior Vice President and
Director of Human Resources of FirstMerit Corporation. Prior to his joining First
National, he was employed by Diebold Incorporated where he spent 21 years holding various management positions in
Human Resources.
Mrs. Tutkovics was appointed Senior Vice President, Chief Marketing Officer, in November 2010. She is
responsible for corporate Line of Business marketing across the country, driving
FirstMerit’s branding initiatives, overseeing product development, heading up marketing
research and working closely with line of business heads to develop marketing and advertising
strategies. Prior to joining FirstMerit, Mrs. Tutkovics served as First Vice President, Director of Product
Development at New York Community Bancorp, Inc. (formerly AmTrust Bank). Before that, she served in
a variety of marketing roles at Citizens Financial Group/Charter One Bank, Citizens
Bank, Fidelity Investments and KeyCorp. |
 6
•
Solid asset quality results
(1)
NCO
ratio
consistently
below
peers
(0.53%
for
2012
vs.
0.81%
for
peers)
NPA ratio at 0.57% vs. peers at 2.43%
(2)
•
Robust capital
Tangible common equity ratio of 8.16% as of 12/31/12
Pro forma acquisition of 7.15% as of 9/30/12
Ratios well in excess of fully phased-in Basel III NPR requirements
•
Strong liquidity
Strong core deposit funding base anchored by noninterest-bearing demand
deposits
Core deposits are 88% of deposit base at 12/31/12
Robust Credit, Capital and Liquidity
Note: Financial metrics for FMER as of 12/31/2012. Financial metrics for peers as of
9/30/2012 YTD. Peer Group includes Huntington, Associated, Fulton Financial,
TCF Financial, Citizens Banking, Park National, First
Commonwealth
Financial,
Old
National,
MB
Financial
and
FNB
as
of
most
recent
quarter
available.
(1)
Includes $10.6 million of accruing consumer post chapter 7 bankruptcy loans
reclassified to non performing based on guidance from the Office of the Comptroller of the Currency in Q3’12.
(2)
Excludes restructured loans. |
 Stable Earnings Base
Source: SNL Financial. FMER 2012YTD as of 12/31/2012. Peer 2012YTD as of
9/30/2012. Peer Group includes Huntington, Associated, Fulton Financial, TCF
Financial, Citizens Banking, Park National, First Commonwealth
Financial, Old National, MB Financial and FNB 7
55 Consecutive Quarters of Profitability
ROAA
ROAE
1.19%
1.13%
0.76%
0.76%
0.82%
0.92%
0.96%
0.06%
(0.85%)
0.23%
0.68%
1.10%
(1.00%)
(0.50%)
0.00%
0.50%
1.00%
1.50%
2007
2008
2009
2010
2011
2012 YTD
FMER
Peers
14.1%
12.8%
8.1%
7.8%
7.7%
8.3%
10.4%
1.5%
(7.1%)
2.3%
6.0%
8.9%
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
15.0%
2007
2008
2009
2010
2011
2012 YTD
FMER
Peers |
 Assets: $415 million
Branches: 24
February 2010
Assets: $420 million
Branches: 4
February 2010
Assets: $3.0 billion
Branches: 26
May 2010
•
Successful integration in a new market
–
Seamless conversions of three franchises in 2010, within very compressed,
overlapping timelines –
Smooth transition from announcement to conversion
–
Experienced project management team executing integration process
•
Chicago commercial lending initiative began in February 2010 with a commercial staff
of 5, which has significantly exceeded expectations
–
FirstMerit’s commercial team today has grown to over 40 relationship managers
–
Commercial calling effort has developed $780 million in loans outstanding with
total commitments of $1.4 billion in just 2 ½
years
•
Total Chicago loan portfolio in excess of $2 billion of outstanding loans
–
Balanced
portfolio
–
approximately
$1
billion
of
new
production
and
$1
billion
of
acquired
loans
Experienced Integrator
8 |
 Citizens Republic –
Strategically Compelling and Financially Attractive
Strategically
compelling
combination
•
Traditional community banking franchises in the Midwest
•
Creates a franchise with size and scale to compete effectively
•
Leverages FMER’s core middle market commercial lending expertise
•
Robust planning, identified risks and detailed game plan
•
Following a proven model from previous, recent acquisitions
•
Assistance from well-recognized third parties
Exhaustive due
diligence and
mitigated credit
risks
•
Estimated loan portfolio fair value mark of $377.6 million (6.8%) at transaction
closing, and NCOs
of
12.3%
(for
a
total
of
19.1%),
mitigates
credit
exposure
going
forward
•
Conservative risk profile
•
44% of pro forma portfolio will be marked at fair value
•
More than 120 people (110 FirstMerit employees), three months, multiple external
third parties
Very strong
liquidity, capital
levels
•
All stock transaction
•
Strong pro forma capital and capital generation capacity
•
Capital raise for TARP repayment equal to TARP outstanding
•
Exceptional liquidity profile
9
•
EPS accretive in first full year following close
•
18%+ IRR, well in excess of cost of capital
•
Increased earnings capacity and lower total payout ratio
Financially
Attractive
Proven
integration
strategy |
 Summary of Key Deal Terms
Consideration
•
Fixed Exchange Ratio:
1.37 shares of FirstMerit for each share of Citizens
Republic
•
Implied Value
(1)
:
$22.50 per common share, or $912 million
•
Consideration Mix:
100% stock
•
Dividend:
TARP Repayment
•
Intend to repay in full at closing, subject to regulatory authorization and
Treasury approval •
Intend to fund repayment with a combination of FirstMerit preferred stock and
debt Balance Sheet Restructuring
•
Balance sheet deleveraging at close of approximately $750 million focused on
higher cost FHLB borrowings and Repos
Cost Savings
•
22% ($59 million) of 6/30/12 CRBC YTD annualized noninterest expense
Merger-Related Charges
•
$88 million pre-tax
Name
•
Rebranded to FirstMerit Bank
Board Representation
•
FirstMerit
will
appoint
2
Citizens
Republic
Board
members
to
its
Board
Required Approvals
•
Approval of Citizens Republic and FirstMerit shareholders
•
Customary
regulatory
approvals,
including
approval
to
repay
Citizens’
TARP
Anticipated Closing
•
Early 2Q 2013
(1) Based
on
FirstMerit’s
10
day
average
closing
share
price
prior
to
signing
the
definitive
merger
agreement
(8/29/12
–
9/12/12).
10
Current quarterly dividend of $0.16
|
 Creating a Premier Midwest Banking Franchise
Source: Balance sheet items as of 12/31/12, other items of 9/30/12. Figures are pro
forma for purchase accounting. Loans by state are not adjusted for purchase
accounting mark. (1) Includes
4
FirstMerit
branches
in
Western
Pennsylvania
($0.2
billion
of
deposits).
•
$24.5 billion in Assets
•
$14.9 billion in Loans
•
$18.9 billion in Deposits
•
10.59% Tier 1 Ratio
•
9.50% Tier 1 Common Ratio
•
415 branches
•
452
ATMs
•
Over 5,000 employees
State
Deposits ($bn)
Loans ($bn)
Branches
Ohio
(1)
$9.2
$7.9
162
Michigan
$5.9
$4.3
158
Illinois
$2.7
$2.1
44
Wisconsin
$1.0
$0.4
47
FirstMerit (196 branches)
Citizens Republic (219 branches)
Green Bay
Chicago
Akron
Pro Forma Franchise
11 |
 12
A Stronger Regional Presence
Top
Banks
Headquartered
in
the
Midwest
by
Assets
(1)
Source:
SNL Financial as of 1/18/13.
(1) Excludes mutual holding companies and NTRS.
($ in billions)
Top
Banks
Headquartered
in
the
Midwest
by
Market
Capitalization
(1)
($ in billions)
$60.0
$65.0
$61.4
$353
$350
$375
$118
$112
$87
$57
$25
$22
$21
$18
$17
$15
$14
$13
$13
$10
$10
$0
$25
$50
$75
$100
$125
$14.4
$8.7
$5.9
$3.4
$2.5
$2.3
$2.1
$1.9
$1.8
$1.7
$1.4
$1.4
$1.4
$1.3
$1.3
$1.2
$1.0
$1.0
$1.0
$0.9
$0.8
$0.0
$5.0
$10.0
$15.0 |
 13
Compelling Financial Rationale
Attractive Pricing
Superior Returns
•
First
full-year
EPS
accretion
of
7.5%
(3)
•
18%+ IRR
(3)
•
TBV dilution of 6.9%, inclusive of balance sheet restructuring charge
•
Earn-back
of
TBV
dilution
of
under
2.5
years
(3)
Conservative
Synergies
•
22%
($59
million)
cost
savings
net
of
investments
(3)
•
Future synergies accruing to combined shareholders
•
Further opportunity to leverage FirstMerit’s efficiency discipline
Mitigated Credit
Risk
•
Extensive credit review involving both FirstMerit’s credit team and third
party valuation consultants
•
6.8% loan mark ($378 million) and implied 19.1% credit cycle losses
FMER
–
CRBC
(1)
Recent
Transactions
–
Median
(2)
Price / Book Value:
0.87x
1.49x
Price / Tangible Book Value:
1.26x
1.75x
Core Deposit Premium:
2.8%
10.4%
(1)
At announcement.
(2) Based
on
the
following
transactions
(Buyer
/
Target):
Union
Bank
/
Pacific
Capital,
Prosperity
/
American
State,
Susquehanna
/
Tower, Valley National / State, Brookline / Bancorp Rhode Island, Susquehanna /
Abington, People’s United / Danvers, Comerica / Sterling, Hancock /
Whitney, BMO / Marshall & Ilsley, M&T / Wilmington, and First Niagara / New Alliance.
(3) Estimated. |
 14
FMER
12/31/12
FMER
Pro Forma
Well-Capitalized
Minimums
TCE / TA
8.16%
7.15%
N/A
Leverage Ratio
8.43%
7.30%
5.00%
Tier 1 Common Ratio
11.25%
9.50%
N/A
Tier 1 Ratio
11.25%
10.59%
6.00%
Total Risk-Based Capital
12.50%
13.06%
10.00%
Strong Balance Sheet…
•
Preliminary
estimates
based
on
Basel
III
NPR
show
capital
ratios
in
excess
of
fully
phased
in
requirements
•
Planned capital actions
–
Raise $250 million of Tier 2 debt and $100 million of Tier 1 preferred
•
Expect to quickly accumulate capital
–
Recover TCE / TA in under 2 years
•
Excellent prospects to reinvest in business
Capital Ratios |
 Minimized Liquidity Risk
FirstMerit Bank
Citizens Bank
Pro Forma
FirstMerit Bank
As of 6/30/12
Loans / Deposits
79.2%
75.4%
75.6%
Wholesale / Total Funding
1.4%
9.3%
0.9%
As of 12/31/12
Holding Company Cash
$141mm
--
--
As of 8/31/12
As a % of Total Deposits
3.6%
5.9%
4.5%
Asset-based Liquidity / Total Assets
13.3%
28.2%
16.3%
(1)
15
•
•
•
Both companies use cash flow liquidity practices in measuring liquidity risk
Both companies perform extensive cash flow liquidity stress tests using severely
adverse conditions Post restructuring, limited reliance on wholesale
funding (1)
Pro forma wholesale / total funding includes repayment of $658mm of FHLB borrowings and $103.4mm of
repos and $44.0mm write-up of deposits. |
 16
Conservative Credit Evaluation
Gross Loan Mark
Type
Mark ($mm)
Mark (%)
C&I
$62.4
3.6%
CRE
$103.6
7.3%
Indirect
Consumer
–
RV
/
Marine
$23.7
2.4%
Mortgage
$29.8
4.5%
HELOC
$158.2
21.4%
Total Loan Mark
$377.6
6.8%
Citizens’
NCOs since 1/1/08 as a % of 12/31/07 gross loan balance:
12.3%
Total Loan Mark and NCOs since 1/1/08:
19.1%
Note: Estimated based on most recently available information.
|
 17
Similar Customer-Focused Cultures Ensure Smooth Integration
•
History of both companies is based on Midwest ethos embraced by customers and
employees •
Independent third party brand awareness study on both companies revealed strikingly
similar themes –
FirstMerit
and
Citizens
are
both
recognized
in
their
markets
for
same
characteristics
–
Big bank capabilities and product offerings with local delivery
–
Strong presence in marketplace
–
Customers know their banker
–
FirstMerit
and
Citizens
customer
base
cited
same
attributes
when
asked
to
describe
their
bank
–
Approachable
–
Resourceful
–
Committed
–
Conservative
•
Remarkable level of similarity also found in independent third party customer
satisfaction study on both companies
–
FirstMerit and Citizens customers report comparable levels of high satisfaction
with their bank –
86% (FirstMerit)
–
89% (Citizens)
–
Both bank customer bases also show strikingly similar tendency to act as advocate
of their bank to others –
86% (FirstMerit and Citizens)
•
Similar corporate values and excellence in customer service will
ensure smooth integration
–
Limiting customer disruption and ensuring employee retention
|
 Lending Presence and Product Offerings
Source: SNL Financial based on regulatory data as of 9/30/12.
Note: CRBC and FMER loan compositions do not reflect estimated loan mark.
•
Leverage FirstMerit’s lending expertise across the Citizens Republic
footprint –
Commercial banking: middle market, business banking and asset-based
lending –
Indirect auto and dealer services
–
Mortgage banking and credit card
•
Expand Citizens Republic’s specialized indirect consumer lending
experience –
Extensive experience in indirect consumer lending with over 750 dealer
relationships across the Midwest –
Superior
credit
–
NPLs
were
~35bps
of
total
loans
throughout
the
cycle
($ in millions)
Pro Forma
18
Gross Loans: $9,377.0
C&I
32%
Other
13%
Consumer
14%
Multifamily
2%
NonOwner-Occ
CRE
12%
Owner-Occ
CRE
13%
C&D
6%
1-4 Family
8%
Gross Loans: $5,461.0
C&I
23%
1-4 Family
16%
NonOwner-Occ
CRE
13%
Multifamily
2%
Consumer
20%
Other
11%
C&D
2%
Owner-Occ
CRE
13%
Gross Loans: $14,838.0
C&I
29%
Other
12%
Consumer
16%
Multifamily
2%
NonOwner-Occ
CRE
13%
Owner-Occ
CRE
13%
C&D
4%
1-4 Family
11% |
 Strong Core Deposit Funding
Source: SNL Financial based on GAAP data as of 9/30/12.
(1) Core deposits include all deposits less certificates of deposit.
•
Deposit product offering very similar to FirstMerit’s
•
Strong core deposit funding base anchored by noninterest-bearing demand
deposits •
Opportunity
for
additional
core
deposit
growth
driven
by
growing
middle
market
commercial
relationships
($ in millions)
Pro Forma
19
Deposits: $11,532.4
MRQ Cost: 0.28%
Core Deposits: 87%
(1)
MMDA, Savings
& Other
59%
Retail CDs
8%
Jumbo CDs
5%
Non-Interest
Bearing
28%
MMDA, Savings
& Other
51%
Retail CDs
17%
Jumbo CDs
7%
Non-Interest
Bearing
25%
Deposits: $18,835.4
Cost: 0.36%
Core Deposits: 82%
(1)
MMDA, Savings
& Other
55%
Retail CDs
12%
Jumbo CDs
6%
Non-Interest
Bearing
27%
Deposits: $7,303.0
MRQ Cost: 0.48%
Core Deposits: 76%
(1) |
 Opportunities to Expand Fee Income
Source: SNL Financial based on GAAP data as of 9/30/12.
Note:
Core
fee
income
shown
(excludes
gains
/
losses
on
sales
of
securities
and
loans
held
for
sale).
•
Citizens
Republic
currently
outsources
mortgage
banking
–
conversion
to
FirstMerit's
business
model
will
enhance
fee income
•
Expansion
of
middle-market
commercial
solutions
–
treasury
management,
interest
rate
derivatives,
international,
and merchant card services
•
Leverage FirstMerit's success in wealth management
–
Greater scale and enhanced product suite
–
Focused cross-sell initiatives with commercial / consumer banking
($ in millions)
20
Other
12%
BOLI Income
6%
Loan Sales &
Other Loan Income
13%
Wealth
Management
15%
Credit Card & ATM
Service Charges
27%
MRQ Annualized: $217.5
Fees
27%
MRQ Annualized: $95.6
Credit Card & ATM
19%
Wealth
23%
Other
Loan Sales &
8%
Service
42%
Fees
Management
10%
Other Loan Income
Charges
MRQ Annualized: $313.1
Other
BOLI Income
Wealth
18%
Credit Card & ATM
24%
Loan Sales &
12%
Service Charges
11%
4%
Management
Fees
Other Loan Income
31%
Pro Forma |
 Significant Cost Savings
Annualized Net Expense Reductions
Category
Amount
($MM)
Personnel
$24.8
Technology
$18.3
Regulatory
$5.9
Professional
$5.6
Other
$5.6
Occupancy
$1.7
Marketing
($2.8)
Total
$59.1
(1) Excludes value of restructuring charge.
(2) Assumes a 35% tax rate.
•
31% of costs saves will be achieved in 2013
•
FMER does not include any revenue synergy assumptions in its projections
21 |
 22
Disciplined Execution Strategy
•
FirstMerit will leverage its extensive, best-practice integration experience from
its recent Chicago expansion
–
FDIC deals were significantly more complex
–
Limited involvement from target institutions
•
Disciplined FirstMerit project management approach to integration has begun
–
Every line of business and functional area is participating and communicating
daily –
Third party experts utilized as necessary, especially in IT area
•
Similar product sets and product features across all business lines facilitate a
smooth integration and transition for customers and staff
–
Core operating systems both provided by Fidelity Information Services (FIS)
•
Hiring of Sandra Pierce establishes strong, local leadership in that market
–
Enhancing customer and employee experience during transition
|
 The
First Merit Opportunity Highly regarded
and experienced
management team
•
Senior management team with an average of over 25 years of banking industry
experience principally with larger institutions
•
Dedicated focus on risk management, credit, and controls
Stable earnings
base
•
55 consecutive quarters of profitability
•
Stable NIM historically and throughout the cycle
Experienced
integrator
•
Successfully integrated 3 bank M&A transactions in 2010
•
Robust planning, identified risks and detailed integration plan
Citizens Republic
–
strategically
compelling and
financially
attractive
•
Creates a premier Midwest banking franchise with over $23bn in assets
•
EPS accretive, IRR of 18%+, with short TBV earnback period
23
•
Robust pro forma capital and capital generation capacity
•
Outstanding asset quality, exceptional liquidity profile, and strong core deposit
base Robust credit,
capital, and
liquidity |
 24
Appendix –
FirstMerit Financial Performance |
 0.44%
0.98%
2.01%
2.29%
1.82%
0.81%
0.40%
0.68%
1.22%
1.23%
0.85%
0.53%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
2007
2008
2009
2010
2011
2012
N
e
t
C
h
a
r
g
e
-
o
f
f
s
Peers
FMER
25
•
Primary focus of entire management team and organization
•
Aligned incentives
•
Hired Chief Credit Officer and added other key personnel
•
Active internal focus on credit quality
•
Ongoing comprehensive internal and external review of portfolio
•
Implementing initiatives for ongoing credit improvement
Actions to Sustain Improved Performance
Source: SNL Financial.
Note: FMER data as of 12/31/2012. Peer data as of 9/30/2012.
National, MB Financial and FNB. Figures shown are simple averages.
Credit Quality Initiatives
Leads to Superior Credit Quality
Peer Group includes Huntington, Associated, Fulton Financial, TCF Financial, Citizens Banking, Park
National, First Commonwealth Financial, Old |
 $14.6
$13.8
$12.0
$8.8
$14.9
$7.1
0.79%
0.73%
0.63%
0.45%
0.59%
0.34%
0.00%
0.50%
1.00%
1.50%
$0.0
$5.0
$10.0
$15.0
$20.0
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
Net charge-offs
NCO ratio
26
Credit
Results-Excluding
Covered
Loans
(1)
(1)
Gray bar represents $10.6 million of accruing consumer post chapter 7 bankruptcy
loans reclassified to non performing based on guidance
from
the
Office
of
the
Comptroller
of
the
Currency.
NCO
ratio
excludes
reclassification
impact.
176.5%
205.0%
234.3%
208.1%
284.5%
1.06%
0.87%
0.75%
0.77%
0.57%
0.00%
1.00%
2.00%
3.00%
0.0%
60.0%
120.0%
180.0%
240.0%
300.0%
4Q11
1Q12
2Q12
3Q12
4Q12
Reserves/NPLs
NPA Ratio
(1) |
 Credit
Results
(continued)
Source: SNL Financial
Note: FMER metrics as of 12/31/2012. Peer metrics as of 9/30/2012.
Note: Peer Group Includes Huntington, Associated, Fulton Financial, TCF Financial,
Citizens Banking, Park National, First Commonwealth Financial, Old
National, MB Financial and FNB 27
0.34%
0.83%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
FMER
Peers
285%
73%
0%
50%
100%
150%
200%
250%
300%
FMER
Peers
0.57%
2.43%
0.00%
1.00%
2.00%
3.00%
FMER
Peers
Net-Charge offs / Average Loans
NPAs / Loans and OREO
Allowance for Credit Losses /
Nonperforming Loans |
 Margin Stability
Source: Bloomberg
28
Margin Historical Performance
•
Net interest margin stability throughout volatile
interest rate cycle
3.74%
3.66%
3.71%
3.76%
3.73%
3.74%
3.70%
3.73%
3.80%
3.78%
3.68%
3.58%
3.58%
3.62%
3.61%
3.66%
3.60%
3.69%
3.78%
3.82%
3.53%
3.56%
3.61%
3.64%
3.72%
4.02%
3.96%
4.14%
4.00%
3.77%
3.75%
3.85%
3.78%
3.77%
3.66%
3.58%
0%
1%
2%
3%
4%
5%
NIM
Fed Funds* |
 29
Investment Portfolio Summary
Investment Portfolio Composition
Book Yield and Duration
*Other: FHLB/FRB stock and Trups
(1) as of 12/31/12 |