Exhibit 99.1
FOR IMMEDIATE RELEASE
FirstMerit Corporation
Analysts: Thomas O’Malley/Investor Relations Officer
Phone: 330.384.7109
Media Contact: Robert Townsend/Media Relations Officer
Phone: 330.384.7075
FirstMerit Reports Second Quarter 2009 EPS of $0.13 Per Share
Company announces:
| | • | | year-over-year revenue growth, |
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| | • | | increase in tangible common equity levels to 8.36 percent, |
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| | • | | increase in allowance for credit losses to 1.64 percent, and |
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| | • | | reduction in nonperforming assets of 3.79 percent |
Akron, Ohio (July 28, 2009) — FirstMerit Corporation (Nasdaq: FMER) reported second quarter 2009 net income of $15.5 million, or $0.13 per diluted share. This compares with $29.4 million, or $0.34 per diluted share, for the first quarter 2009 and $29.2 million, or $0.36 per diluted share, for the second quarter 2008. Included in the second quarter 2009 results was a $3.7 million after-tax FDIC Special Assessment fee ($0.04 per share). Also included in the second quarter 2009 results was a $4.5 million after-tax expense ($0.06 per share) associated with the unamortized discount on the preferred stock under the TARP program. The Company’s provision for loan losses in the second quarter 2009 exceeded net charge-offs by $5.0 million. The after-tax impact to net income from this reserve build action was $3.6 million ($0.04 per share).
On April 22, FirstMerit repurchased all of the $125 million in preferred, non-voting stock that was sold to the Treasury Department under the Capital Purchase Program (“CPP”) under the Troubled Asset Relief Program (“TARP”). On May 27, 2009, FirstMerit repurchased a warrant to issue common shares which was issued to the Treasury for $5.0 million. This action completes FirstMerit’s participation in CPP under TARP.
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FirstMerit Reports Second Quarter 2009 EPS Results / Page 2
“Our second quarter results reflect solid performance that confirms FirstMerit’s position as the strong and stable bank of choice in northeast Ohio. Remaining focused on sound banking fundamentals and pursuing strategies for consistent and sustainable profitability resulted in increased revenue, better-than-peer credit quality, well-managed expenses and a strong balance sheet,” said Paul G. Greig, chairman, president and CEO of FirstMerit Corporation. “In a challenging operating environment, our efforts once again produced increased revenue over the prior-year quarter.”
“Our increased capital levels provide us with additional support in this uncertain economy and position us to take advantage of growth opportunities in and around our core markets,” Greig said. “During this past quarter, we enhanced our already strong balance sheet by adding $61 million of tangible common equity generated by our at-the-market stock offering”
Returns on average common equity (“ROE”) and average assets (“ROA”) for the second quarter 2009 were 6.27% and 0.57%, respectively, compared with 12.39% and 1.07% for the first quarter 2009 and 12.31% and 1.11% for the second quarter 2008.
Net interest margin was 3.56% for the second quarter of 2009 compared with 3.53% for the first quarter of 2009 and 3.69% for the second quarter of 2008. The margin expansion in the quarter was primarily driven by lower funding costs due to a continued shift in deposit mix with increased emphasis on core deposit products and lower certificate of deposit balances.
Average loans during the second quarter of 2009 decreased $134.3 million, or 1.82%, compared to the first quarter of 2009 and increased $106.1 million, or 1.49%, compared with the second quarter of 2008. The increase in the second quarter 2009 as compared to second quarter 2008 was due to commercial loan growth of $193.8 million, or 4.76%. The reduction in loans in the second quarter of 2009 compared to the prior quarter reflects the current economic cycle in which business owners have reduced inventory and receivables and are focused on paying down existing debt.
During the second quarter of 2009 the Company increased its average core deposits, which excludes time deposits, by $311.9 million, or 6.16%, compared with the first quarter of 2009, and $778.1 million, or 16.93%, compared with the second quarter of 2008. Average deposits during the second quarter of 2009 decreased $29.3 million, or 0.38%, compared with the first quarter of 2009 and increased $275.3 million, or 3.75%, compared with the second quarter of 2008.
Average investments decreased $51.1 million, or 1.83%, compared with the first quarter of 2009 and increased $218.3 million, or 8.68%, over the second quarter of 2008. The decrease in the quarter was primarily attributable to principal repayment on mortgage-backed securities. The year-over-year increase is a result of the leverage strategy implemented in the fourth quarter of 2008.
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FirstMerit Reports Second Quarter 2009 EPS Results / Page 3
Net interest income on a fully tax-equivalent (“FTE”) basis was $88.8 million in the second quarter 2009 compared with $88.6 million in the first quarter of 2009 and $89.0 million in the second quarter of 2008. Compared with the first quarter of 2009, average earning assets decreased $188.0 million, or 1.84% and increased $297.0 million, or 3.06% compared to the second quarter of 2008.
Noninterest income net of securities transactions for the second quarter of 2009 was $49.7 million, a decrease of $5.5 million, or 10.00%, from the first quarter of 2009 and an increase of $1.0 million, or 1.96%, from the second quarter of 2008. Noninterest income in the first quarter of 2009 included a one-time $9.5 million gain due to curtailment of the postretirement medical benefit plan for active employees.
Other income, net of securities gains, as a percentage of net revenue for the second quarter of 2009 was 35.87% compared with 38.39% for first quarter of 2009 and 35.38% for the second quarter of 2008. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.
Noninterest expense for the second quarter of 2009 was $90.6 million, an increase of $7.4 million, or 8.85%, from the first quarter of 2009 and an increase of $10.0 million, or 12.43%, from the second quarter of 2008. Included in the second quarter 2009 expenses was the FDIC Special Assessment fee of $5.1 million.
The reported efficiency ratio for the second quarter of 2009 was 65.34%, compared with 57.81% for the first quarter of 2009 and 58.38% for the second quarter of 2008. Absent the $5.1 million FDIC Special Assessment fee, the efficiency ratio is 61.66%.
Net charge-offs totaled $21.6 million, or 1.19% of average loans, in the second quarter of 2009 compared with $15.6 million, or 0.86% of average loans, in the first quarter 2009 and $10.7 million, or 0.60% of average loans, in the second quarter of 2008.
Nonperforming assets at June 30, 2009 represented 1.03% of period-end loans plus other real estate compared with 1.04% at March 31, 2009 and 0.57% at June 30, 2008. Nonperforming assets totaled $73.4 million at June 30, 2009, an increase of $31.7 million compared with June 30, 2008. Significantly, nonperforming assets in second quarter 2009 decreased $2.9 million, or 3.79%, from first quarter 2009. This decrease reflects strong workout and collection activity coupled with timely charge-off recognition.
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FirstMerit Reports Second Quarter 2009 EPS Results / Page 4
The allowance for loan losses totaled $111.2 million at June 30, 2009, an increase of $5.0 million from March 31, 2009. Given the current economic environment, the Company has continued a strategy to build reserve levels and year-to-date has provided $7.6 million in excess of net charge-offs to the allowance for loan losses. At June 30, 2009, the allowance for loan losses was 1.56% of period-end loans compared with 1.45% at March 31, 2009 and 1.36% at June 30, 2008. 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 1.64% at June 30, 2009, compared with 1.53% at March 31, 2009 and 1.46% at June 30, 2008. The allowance for credit losses to nonperforming loans was 184.71% at June 30, 2009, compared with 159.93% at March 31, 2009 and 288.50% at June 30, 2008. Given the current environment, management increased the allowance for loan losses at June 30, 2009 The increase in the allowance for loan losses in second quarter 2009 is attributable to the migration of some commercial credits within pass credit categories to higher risk levels as well as the consumer retail portfolio showing additional stress related to unemployment rates under current economic conditions.
The Company’s total assets at June 30, 2009 were $10.7 billion, a decrease of $275.2 million, or 2.51%, compared with March 31, 2009 and an increase of $132.2 million, or 1.25%, compared with June 30, 2008. The decrease in total assets compared with March 31, 2009, was due to a $205 million decrease in total loans and the $125 repurchase of TARP preferred shares. These reductions were partially offset by the $61 million of equity raised through the Company’s at-the-market stock offering. Growth in investment securities of $233.6 million, or 9.46%, in the fourth quarter of 2008, compared with June 30, 2008, provided the majority of the overall asset growth. Total loans decreased $205.6 million compared with March 31, 2009.
Total deposits were $7.5 billion at June 30, 2009, a decrease of $227.0 million, or 2.96%, from March 31, 2009 and an increase of $174.0 million, or 2.39%, from June 30, 2008. The increase compared with June 30, 2008 was driven by an overall increase in savings and demand deposits. Core deposits totaled $5.4 billion at June 30, 2009, an increase of $103.4 million, or 1.96%, from March 31, 2009 and an increase of $741.2 million, or 15.96%, from June 30, 2008.
Shareholders’ equity was $1,022.6 million at June 30, 2009, compared with $1,084.3 million at March 31, 2009 and $924.4 million at June 30, 2008. The Company increased its strong capital position as tangible common equity to assets was 8.36% at June 30, 2009, compared with 7.56% and 7.52% at March 31, 2009 and June 30, 2008, respectively. The common dividend per share paid in the second quarter 2009 was $0.16 as well as a $0.13 per share dividend of common stock.
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FirstMerit Reports Second Quarter 2009 EPS Results / Page 5
During the second quarter of 2009, the Company entered into a Distribution Agency Agreement with Credit Suisse Securities (USA) LLC pursuant to which the Company, from time to time, offered and sold shares of the Corporation’s common stock. Sales of the Common Shares were made by means of ordinary brokers’ transactions on the Nasdaq Global Select Market at market prices, in block transaction or as otherwise agreed with Credit Suisse. During this time, 3.3 million shares were sold at an average market value net of broker’s fees of $18.36 per share.
Second Quarter 2009 Conference Call
FirstMerit will host an earnings conference call on July 28, 2009, at 2:00 p.m. EDT to provide an overview of first quarter results and highlights. To participate in the conference call, please dial (888) 693-3477 ten minutes before start time and provide the reservation number: 18105340. A replay of the conference call will be available at approximately 5:00 p.m., on July 28, 2009 through August 4, 2009, by dialing (800) 642-1687, and entering the PIN: 18105340.
About FirstMerit
FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $10.7 billion as of June 30, 2009 and 155 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.
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FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights | |  |
(Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarters |
| | | 2009 | | 2009 | | 2008 | | 2008 | | 2008 |
| EARNINGS | | 2nd Qtr | | 1st Qtr | | 4th Qtr | | 3rd Qtr | | 2nd Qtr |
| |
| Net interest income FTE (a) | | $ | 88,806 | | | $ | 88,577 | | | $ | 94,855 | | | $ | 92,659 | | | $ | 88,956 | |
| Provision for loan losses | | | 26,521 | | | | 18,065 | | | | 16,986 | | | | 15,531 | | | | 14,565 | |
| Other income | | | 50,845 | | | | 55,188 | | | | 52,795 | | | | 47,029 | | | | 48,758 | |
| Other expenses | | | 90,564 | | | | 83,203 | | | | 88,240 | | | | 80,609 | | | | 80,550 | |
| FTE adjustment (a) | | | 1,691 | | | | 1,683 | | | | 1,617 | | | | 1,538 | | | | 1,425 | |
| Net income | | | 15,495 | | | | 29,434 | | | | 29,136 | | | | 29,753 | | | | 29,153 | |
| Diluted EPS (b) | | | 0.13 | | | | 0.34 | | | | 0.36 | | | | 0.37 | | | | 0.36 | |
| | | | | | | | | | | | | | | | | | | | | |
| PERFORMANCE RATIOS | | | | | | | | | | | | | | | | | | | | |
| Return on average assets (ROA) | | | 0.57 | % | | | 1.07 | % | | | 1.08 | % | | | 1.12 | % | | | 1.11 | % |
| Return on average common equity (ROE) | | | 6.27 | % | | | 12.39 | % | | | 12.47 | % | | | 12.73 | % | | | 12.31 | % |
| Net interest margin FTE (a) | | | 3.56 | % | | | 3.53 | % | | | 3.82 | % | | | 3.78 | % | | | 3.69 | % |
| Efficiency ratio | | | 65.34 | % | | | 57.81 | % | | | 60.34 | % | | | 57.64 | % | | | 58.38 | % |
| Number of full-time equivalent employees | | | 2,540 | | | | 2,562 | | | | 2,575 | | | | 2,614 | | | | 2,679 | |
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| MARKET DATA | | | | | | | | | | | | | | | | | | | | |
| Book value/common share | | $ | 11.99 | | | $ | 11.84 | | | $ | 11.58 | | | $ | 11.44 | | | $ | 11.43 | |
| Period-end common share mkt value | | | 17.00 | | | | 18.20 | | | | 20.59 | | | | 21.00 | | | | 16.31 | |
| Market as a % of book | | | 142 | % | | | 154 | % | | | 178 | % | | | 184 | % | | | 143 | % |
| Cash dividends/common share | | $ | 0.16 | | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.29 | |
| Common stock dividend payout ratio | | | 84.21 | % | | | 80.56 | % | | | 80.56 | % | | | 78.38 | % | | | 80.56 | % |
| Average basic common shares (b) | | | 83,317 | | | | 81,725 | | | | 81,404 | | | | 81,301 | | | | 81,287 | |
| Average diluted common shares (b) | | | 83,325 | | | | 81,734 | | | | 81,413 | | | | 81,328 | | | | 81,330 | |
| Period end common shares | | | 85,266 | | | | 81,417 | | | | 80,960 | | | | 80,974 | | | | 80,846 | |
| Common shares repurchased | | | 61 | | | | 45 | | | | 19 | | | | 3 | | | | 34 | |
| Common stock market capitalization | | $ | 1,449,522 | | | $ | 1,481,789 | | | $ | 1,666,966 | | | $ | 1,700,454 | | | $ | 1,318,598 | |
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| ASSET QUALITY | | | | | | | | | | | | | | | | | | | | |
| Gross charge-offs | | $ | 24,726 | | | $ | 18,936 | | | $ | 17,932 | | | $ | 14,957 | | | $ | 14,830 | |
| Net charge-offs | | | 21,556 | | | | 15,565 | | | | 15,236 | | | | 11,763 | | | | 10,737 | |
| Allowance for loan losses | | | 111,222 | | | | 106,257 | | | | 103,757 | | | | 102,007 | | | | 98,239 | |
| Reserve for unfunded lending commitments | | | 6,054 | | | | 6,019 | | | | 6,588 | | | | 6,493 | | | | 7,310 | |
| Nonperforming assets (NPAs) | | | 73,351 | | | | 76,243 | | | | 57,526 | | | | 43,491 | | | | 41,639 | |
| Net charge-offs/average loans ratio | | | 1.19 | % | | | 0.86 | % | | | 0.82 | % | | | 0.64 | % | | | 0.60 | % |
| Allowance for loan losses/period-end loans | | | 1.56 | % | | | 1.45 | % | | | 1.40 | % | | | 1.38 | % | | | 1.36 | % |
| Allowance for credit losses/period-end loans | | | 1.64 | % | | | 1.53 | % | | | 1.49 | % | | | 1.47 | % | | | 1.46 | % |
| NPAs/loans and other real estate | | | 1.03 | % | | | 1.04 | % | | | 0.77 | % | | | 0.59 | % | | | 0.57 | % |
| Allowance for loan losses/nonperforming loans | | | 175.17 | % | | | 151.35 | % | | | 198.76 | % | | | 264.45 | % | | | 268.52 | % |
| Allowance for credit losses/nonperforming loans | | | 184.71 | % | | | 159.93 | % | | | 211.38 | % | | | 281.28 | % | | | 288.50 | % |
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| CAPITAL & LIQUIDITY | | | | | | | | | | | | | | | | | | | | |
| Period-end tangible common equity to assets | | | 8.36 | % | | | 7.60 | % | | | 7.27 | % | | | 7.45 | % | | | 7.52 | % |
| Average equity to assets | | | 9.37 | % | | | 9.66 | % | | | 8.66 | % | | | 8.79 | % | | | 9.06 | % |
| Average equity to loans | | | 14.07 | % | | | 14.54 | % | | | 12.62 | % | | | 12.76 | % | | | 13.34 | % |
| Average loans to deposits | | | 95.17 | % | | | 96.56 | % | | | 96.01 | % | | | 99.40 | % | | | 97.29 | % |
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| AVERAGE BALANCES | | | | | | | | | | | | | | | | | | | | |
| Assets | | $ | 10,884,228 | | | $ | 11,115,042 | | | $ | 10,731,029 | | | $ | 10,569,496 | | | $ | 10,520,469 | |
| Deposits | | | 7,614,826 | | | | 7,644,118 | | | | 7,672,560 | | | | 7,326,364 | | | | 7,339,506 | |
| Loans | | | 7,246,752 | | | | 7,381,019 | | | | 7,366,246 | | | | 7,282,333 | | | | 7,140,627 | |
| Earning assets | | | 10,001,266 | | | | 10,189,233 | | | | 9,876,488 | | | | 9,755,812 | | | | 9,704,252 | |
| Shareholders’ equity | | | 1,019,628 | | | | 1,073,276 | | | | 929,788 | | | | 929,495 | | | | 952,769 | |
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| ENDING BALANCES | | | | | | | | | | | | | | | | | | | | |
| Assets | | $ | 10,696,962 | | | $ | 10,972,176 | | | $ | 11,100,026 | | | $ | 10,684,845 | | | $ | 10,564,752 | |
| Deposits | | | 7,451,220 | | | | 7,678,213 | | | | 7,597,679 | | | | 7,430,556 | | | | 7,277,184 | |
| Loans | | | 7,145,146 | | | | 7,350,763 | | | | 7,425,613 | | | | 7,381,592 | | | | 7,240,882 | |
| Goodwill | | | 139,245 | | | | 139,245 | | | | 139,245 | | | | 139,245 | | | | 139,245 | |
| Intangible assets | | | 1,229 | | | | 1,316 | | | | 1,403 | | | | 1,490 | | | | 1,577 | |
| Earning assets | | | 9,869,183 | | | | 10,108,403 | | | | 10,209,602 | | | | 9,840,951 | | | | 9,724,859 | |
| Total shareholders’ equity | | | 1,022,647 | | | | 1,084,269 | | | | 937,843 | | | | 926,078 | | | | 924,429 | |
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| NOTES: |
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| (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. |
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| (b) | | — Average outstanding shares and per share data restated to reflect the effect of a stock dividend declared April 28, 2009. |
6
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited, except December 31, 2008, which is derived from the
audited financial statements)
| | | | | | | | | | | | | |
| | | June 30, | | | December 31, | | | June 30, | |
| | | 2009 | | | 2008 | | | 2008 | |
ASSETS | | | | | | | | | | | | |
| Cash and due from banks | | $ | 156,590 | | | $ | 178,406 | | | $ | 195,930 | |
| Investment securities (at fair value) | | | 2,703,257 | | | | 2,772,848 | | | | 2,469,692 | |
| Loans held for sale | | | 20,780 | | | | 11,141 | | | | 14,285 | |
| Loans: | | | | | | | | | | | | |
| Commercial loans | | | 4,181,857 | | | | 4,352,730 | | | | 4,136,273 | |
| Mortgage loans | | | 503,890 | | | | 547,125 | | | | 569,516 | |
| Installment loans | | | 1,497,211 | | | | 1,574,587 | | | | 1,619,383 | |
| Home equity loans | | | 754,110 | | | | 733,832 | | | | 697,729 | |
| Credit card loans | | | 148,104 | | | | 149,745 | | | | 146,727 | |
| Leases | | | 59,974 | | | | 67,594 | | | | 71,254 | |
| | | | | | | | | | |
| Total loans | | | 7,145,146 | | | | 7,425,613 | | | | 7,240,882 | |
| Less allowance for loan losses | | | (111,222 | ) | | | (103,757 | ) | | | (98,239 | ) |
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| Net loans | | | 7,033,924 | | | | 7,321,856 | | | | 7,142,643 | |
| Premises and equipment, net | | | 127,284 | | �� | | 133,184 | | | | 126,021 | |
| Goodwill | | | 139,245 | | | | 139,245 | | | | 139,245 | |
| Intangible assets | | | 1,229 | | | | 1,403 | | | | 1,577 | |
| Accrued interest receivable and other assets | | | 514,653 | | | | 541,943 | | | | 475,359 | |
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| Total assets | | $ | 10,696,962 | | | $ | 11,100,026 | | | $ | 10,564,752 | |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | |
| Demand-non-interest bearing | | $ | 1,885,087 | | | $ | 1,637,534 | | | | 1,576,584 | |
| Demand-interest bearing | | | 648,132 | | | | 666,615 | | | | 698,829 | |
| Savings and money market accounts | | | 2,851,236 | | | | 2,512,331 | | | | 2,367,825 | |
| Certificates and other time deposits | | | 2,066,765 | | | | 2,781,199 | | | | 2,633,946 | |
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| Total deposits | | | 7,451,220 | | | | 7,597,679 | | | | 7,277,184 | |
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| Securities sold under agreements to repurchase | | | 1,069,945 | | | | 921,390 | | | | 1,239,925 | |
| Wholesale borrowings | | | 924,438 | | | | 1,344,195 | | | | 953,759 | |
| Accrued taxes, expenses, and other liabilities | | | 228,712 | | | | 298,919 | | | | 169,455 | |
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| Total liabilities | | | 9,674,315 | | | | 10,162,183 | | | | 9,640,323 | |
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| 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 | | | — | | | | — | | | | — | |
Fixed-Rate Cumulative Perpetual Preferred Stock, Series A,
$1,000 liquidation preference; authorized and issued 125,000 shares | | | — | | | | — | | | | — | |
Common stock, without par value:
authorized 300,000,000 shares; issued 92,026,350 at June 30, 2009, December 31, 2008 and June 30, 2008 | | | 127,937 | | | | 127,937 | | | | 127,937 | |
| Capital surplus | | | 45,674 | | | | 94,802 | | | | 93,267 | |
| Accumulated other comprehensive loss | | | (33,431 | ) | | | (54,080 | ) | | | (51,434 | ) |
| Retained earnings | | | 1,055,283 | | | | 1,053,435 | | | | 1,041,473 | |
| Treasury stock, at cost, 6,760,676, 11,066,108 and 11,180,046 shares at June 30, 2009, December 31, 2008 and June 30, 2008, respectively | | | (172,816 | ) | | | (284,251 | ) | | | (286,814 | ) |
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| Total shareholders’ equity | | | 1,022,647 | | | | 937,843 | | | | 924,429 | |
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| Total liabilities and shareholders’ equity | | $ | 10,696,962 | | | $ | 11,100,026 | | | $ | 10,564,752 | |
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7
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FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS | |  |
(Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarterly Periods | |
| | | June 30, | | | March 31, | | | December 31, | | | September 30, | | | June 30, | |
| | | 2009 | | | 2009 | | | 2008 | | | 2008 | | | 2008 | |
ASSETS | | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 194,381 | | | $ | 209,922 | | | $ | 192,804 | | | $ | 171,370 | | | $ | 173,044 | |
| Investment securities/fed funds sold | | | 2,733,871 | | | | 2,784,966 | | | | 2,501,346 | | | | 2,461,431 | | | | 2,515,546 | |
| Loans held for sale | | | 20,643 | | | | 23,248 | | | | 8,896 | | | | 12,048 | | | | 48,079 | |
| Loans: | | | | | | | | | | | | | | | | | | | | |
| Commercial loans | | | 4,263,114 | | | | 4,337,108 | | | | 4,273,123 | | | | 4,168,951 | | | | 4,069,305 | |
| Mortgage loans | | | 513,982 | | | | 536,498 | | | | 555,713 | | | | 569,293 | | | | 577,178 | |
| Installment loans | | | 1,512,929 | | | | 1,558,374 | | | | 1,596,053 | | | | 1,617,265 | | | | 1,584,825 | |
| Home equity loans | | | 749,097 | | | | 736,956 | | | | 722,466 | | | | 709,365 | | | | 692,567 | |
| Credit card loans | | | 146,589 | | | | 146,355 | | | | 150,133 | | | | 147,924 | | | | 147,242 | |
| Leases | | | 61,041 | | | | 65,728 | | | | 68,758 | | | | 69,535 | | | | 69,510 | |
| | | | | | | | | | | | | | | | |
| Total loans | | | 7,246,752 | | | | 7,381,019 | | | | 7,366,246 | | | | 7,282,333 | | | | 7,140,627 | |
| Less allowance for loan losses | | | 104,864 | | | | 102,533 | | | | 100,898 | | | | 98,091 | | | | 94,002 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loans | | | 7,141,888 | | | | 7,278,486 | | | | 7,265,348 | | | | 7,184,242 | | | | 7,046,625 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total earning assets | | | 10,001,266 | | | | 10,189,233 | | | | 9,876,488 | | | | 9,755,812 | | | | 9,704,252 | |
| | | | | | | | | | | | | | | | | | | | | |
| Premises and equipment, net | | | 129,433 | | | | 132,156 | | | | 130,511 | | | | 127,267 | | | | 126,488 | |
| Accrued interest receivable and other assets | | | 664,012 | | | | 686,264 | | | | 632,124 | | | | 613,138 | | | | 610,687 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
TOTAL ASSETS | | $ | 10,884,228 | | | $ | 11,115,042 | | | $ | 10,731,029 | | | $ | 10,569,496 | | | $ | 10,520,469 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
LIABILITIES | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | |
| Demand-non-interest bearing | | $ | 1,891,792 | | | $ | 1,767,885 | | | $ | 1,607,901 | | | $ | 1,545,427 | | | $ | 1,518,841 | |
| Demand-interest bearing | | | 671,235 | | | | 655,279 | | | | 658,208 | | | | 678,803 | | | | 709,922 | |
| Savings and money market accounts | | | 2,810,155 | | | | 2,638,166 | | | | 2,534,702 | | | | 2,373,995 | | | | 2,366,296 | |
| Certificates and other time deposits | | | 2,241,644 | | | | 2,582,788 | | | | 2,871,749 | | | | 2,728,139 | | | | 2,744,447 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total deposits | | | 7,614,826 | | | | 7,644,118 | | | | 7,672,560 | | | | 7,326,364 | | | | 7,339,506 | |
| | | | | | | | | | | | | | | | | | | | | |
| Securities sold under agreements to repurchase | | | 945,178 | | | | 941,112 | | | | 1,168,438 | | | | 1,504,011 | | | | 1,312,436 | |
| Wholesale borrowings | | | 1,019,786 | | | | 1,151,777 | | | | 766,358 | | | | 634,226 | | | | 711,132 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total funds | | | 9,579,790 | | | | 9,737,007 | | | | 9,607,356 | | | | 9,464,601 | | | | 9,363,074 | |
| Accrued taxes, expenses and other liabilities | | | 284,810 | | | | 304,759 | | | | 193,885 | | | | 175,400 | | | | 204,626 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total liabilities | | | 9,864,600 | | | | 10,041,766 | | | | 9,801,241 | | | | 9,640,001 | | | | 9,567,700 | |
| | | | | | | | | | | | | | | | | | | | | |
SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | |
| Preferred stock | | | 27,850 | | | | 109,807 | | | | — | | | | — | | | | — | |
| Common stock | | | 127,937 | | | | 127,937 | | | | 127,937 | | | | 127,937 | | | | 127,937 | |
| Common stock warrant | | | 2,820 | | | | 4,175 | | | | — | | | | — | | | | — | |
| Capital surplus | | | 63,457 | | | | 86,872 | | | | 93,761 | | | | 93,381 | | | | 92,313 | |
| Accumulated other comprehensive (loss) income | | | (35,569 | ) | | | (49,477 | ) | | | (62,018 | ) | | | (54,000 | ) | | | (40,757 | ) |
| Retained earnings | | | 1,056,739 | | | | 1,069,948 | | | | 1,053,992 | | | | 1,048,452 | | | | 1,059,840 | |
| Treasury stock | | | (223,606 | ) | | | (275,986 | ) | | | (283,884 | ) | | | (286,275 | ) | | | (286,564 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total shareholders’ equity | | | 1,019,628 | | | | 1,073,276 | | | | 929,788 | | | | 929,495 | | | | 952,769 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 10,884,228 | | | $ | 11,115,042 | | | $ | 10,731,029 | | | $ | 10,569,496 | | | $ | 10,520,469 | |
| | | | | | | | | | | | | | | | |
8
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, 2009 | | December 31, 2008 | | June 30, 2008 |
| | | Average | | | | | | | Average | | | Average | | | | | | | Average | | | Average | | | | | | | Average | |
| | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | |
| | | |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 194,381 | | | | | | | | | | | $ | 177,089 | | | | | | | | | | | $ | 173,044 | | | | | | | | | |
| Investment securities and federal funds sold: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury securities and U.S. Government agency obligations (taxable) | | | 2,205,221 | | | | 24,455 | | | | 4.45 | % | | | 1,985,026 | | | | 94,260 | | | | 4.75 | % | | | 2,021,209 | | | | 23,609 | | | | 4.70 | % |
| Obligations of states and political subdivisions (tax exempt) | | | 316,703 | | | | 4,910 | | | | 6.22 | % | | | 294,724 | | | | 17,910 | | | | 6.08 | % | | | 279,757 | | | | 4,270 | | | | 6.14 | % |
| Other securities and federal funds sold | | | 211,947 | | | | 2,204 | | | | 4.17 | % | | | 216,794 | | | | 11,326 | | | | 5.22 | % | | | 214,580 | | | | 2,777 | | | | 5.21 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total investment securities and federal funds sold | | | 2,733,871 | | | | 31,569 | | | | 4.63 | % | | | 2,496,544 | | | | 123,496 | | | | 4.95 | % | | | 2,515,546 | | | | 30,656 | | | | 4.90 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans held for sale | | | 20,643 | | | | 277 | | | | 5.38 | % | | | 29,419 | | | | 1,602 | | | | 5.45 | % | | | 48,079 | | | | 651 | | | | 5.45 | % |
| Loans | | | 7,246,752 | | | | 86,004 | | | | 4.76 | % | | | 7,203,946 | | | | 434,704 | | | | 6.03 | % | | | 7,140,627 | | | | 105,889 | | | | 5.96 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total earning assets | | | 10,001,266 | | | | 117,850 | | | | 4.73 | % | | | 9,729,909 | | | | 559,802 | | | | 5.75 | % | | | 9,704,252 | | | | 137,196 | | | | 5.69 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses | | | (104,864 | ) | | | | | | | | | | | (96,714 | ) | | | | | | | | | | | (94,002 | ) | | | | | | | | |
| Other assets | | | 793,445 | | | | | | | | | | | | 739,158 | | | | | | | | | | | | 737,175 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 10,884,228 | | | | | | | | | | | $ | 10,549,442 | | | | | | | | | | | $ | 10,520,469 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand — non-interest bearing | | $ | 1,891,792 | | | | — | | | | — | | | $ | 1,530,021 | | | | — | | | | — | | | $ | 1,518,841 | | | | — | | | | — | |
| Demand — interest bearing | | | 671,235 | | | | 159 | | | | 0.10 | % | | | 687,160 | | | | 2,514 | | | | 0.37 | % | | | 709,922 | | | | 591 | | | | 0.33 | % |
| Savings and money market accounts | | | 2,810,155 | | | | 5,452 | | | | 0.78 | % | | | 2,398,778 | | | | 29,839 | | | | 1.24 | % | | | 2,366,296 | | | | 6,500 | | | | 1.10 | % |
| Certificates and other time deposits | | | 2,241,644 | | | | 15,325 | | | | 2.74 | % | | | 2,801,623 | | | | 105,853 | | | | 3.78 | % | | | 2,744,447 | | | | 26,587 | | | | 3.90 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total deposits | | | 7,614,826 | | | | 20,936 | | | | 1.10 | % | | | 7,417,582 | | | | 138,206 | | | | 1.86 | % | | | 7,339,506 | | | | 33,678 | | | | 1.85 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Securities sold under agreements to repurchase | | | 945,178 | | | | 1,211 | | | | 0.51 | % | | | 1,343,441 | | | | 31,857 | | | | 2.37 | % | | | 1,312,436 | | | | 8,319 | | | | 2.55 | % |
| Wholesale borrowings | | | 1,019,786 | | | | 6,897 | | | | 2.71 | % | | | 663,109 | | | | 27,574 | | | | 4.16 | % | | | 711,132 | | | | 6,243 | | | | 3.53 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total interest bearing liabilities | | | 7,687,998 | | | | 29,044 | | | | 1.52 | % | | | 7,894,111 | | | | 197,637 | | | | 2.50 | % | | | 7,844,233 | | | | 48,240 | | | | 2.47 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other liabilities | | | 284,810 | | | | | | | | | | | | 189,222 | | | | | | | | | | | | 204,626 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shareholders’ equity | | | 1,019,628 | | | | | | | | | | | | 936,088 | | | | | | | | | | | | 952,769 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 10,884,228 | | | | | | | | | | | $ | 10,549,442 | | | | | | | | | | | $ | 10,520,469 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net yield on earning assets | | $ | 10,001,266 | | | | 88,806 | | | | 3.56 | % | | $ | 9,729,909 | | | | 362,165 | | | | 3.72 | % | | $ | 9,704,252 | | | | 88,956 | | | | 3.69 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate spread | | | | | | | | | | | 3.21 | % | | | | | | | | | | | 3.25 | % | | | | | | | | | | | 3.22 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| 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. |
9
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, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| Interest income: | | | | | | | | | | | | | | | | |
| Interest and fees on loans, including held for sale | | $ | 86,247 | | | $ | 106,516 | | | | 174,046 | | | $ | 222,804 | |
| Interest and dividends on investment securities and federal funds sold | | | 29,912 | | | | 29,255 | | | | 61,469 | | | | 58,491 | |
| | | | | | | | | | | | | |
| Total interest income | | | 116,159 | | | | 135,771 | | | | 235,515 | | | | 281,295 | |
| | | | | | | | | | | | | |
| Interest expense: | | | | | | | | | | | | | | | | |
| Interest on deposits: | | | | | | | | | | | | | | | | |
| Demand-interest bearing | | | 159 | | | | 591 | | | | 314 | | | | 1,555 | |
| Savings and money market accounts | | | 5,452 | | | | 6,500 | | | | 10,829 | | | | 16,143 | |
| Certificates and other time deposits | | | 15,325 | | | | 26,587 | | | | 33,913 | | | | 58,574 | |
| Interest on securities sold under agreements to repurchase | | | 1,211 | | | | 8,319 | | | | 2,210 | | | | 19,861 | |
| Interest on wholesale borrowings | | | 6,897 | | | | 6,243 | | | | 14,240 | | | | 13,332 | |
| | | | | | | | | | | | | |
| Total interest expense | | | 29,044 | | | | 48,240 | | | | 61,506 | | | | 109,465 | |
| | | | | | | | | | | | | |
| Net interest income | | | 87,115 | | | | 87,531 | | | | 174,009 | | | | 171,830 | |
| Provision for loan losses | | | 26,521 | | | | 14,565 | | | | 44,586 | | | | 26,086 | |
| | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 60,594 | | | | 72,966 | | | | 129,423 | | | | 145,744 | |
| | | | | | | | | | | | | |
| Other income: | | | | | | | | | | | | | | | | |
| Trust department income | | | 5,438 | | | | 5,824 | | | | 10,228 | | | | 11,274 | |
| Service charges on deposits | | | 15,853 | | | | 16,028 | | | | 30,016 | | | | 30,764 | |
| Credit card fees | | | 11,668 | | | | 12,146 | | | | 22,752 | | | | 23,303 | |
| ATM and other service fees | | | 2,839 | | | | 2,770 | | | | 5,445 | | | | 5,564 | |
| Bank owned life insurance income | | | 2,985 | | | | 3,217 | | | | 6,000 | | | | 6,418 | |
| Investment services and insurance | | | 2,270 | | | | 2,790 | | | | 5,188 | | | | 5,655 | |
| Investment securities gains, net | | | 1,178 | | | | 47 | | | | 1,178 | | | | 571 | |
| Loan sales and servicing income | | | 3,791 | | | | 1,885 | | | | 6,126 | | | | 3,276 | |
| Gain on Visa Inc. redemption | | | — | | | | — | | | | — | | | | 7,898 | |
| Gain on post medical retirement curtailment | | | — | | | | — | | | | 9,543 | | | | — | |
| Other operating income | | | 4,823 | | | | 4,051 | | | | 9,557 | | | | 6,889 | |
| | | | | | | | | | | | | |
| Total other income | | | 50,845 | | | | 48,758 | | | | 106,033 | | | | 101,612 | |
| | | | | | | | | | | | | |
| Other expenses: | | | | | | | | | | | | | | | | |
| Salaries, wages, pension and employee benefits | | | 44,125 | | | | 44,364 | | | | 86,807 | | | | 87,429 | |
| Net occupancy expense | | | 5,858 | | | | 6,204 | | | | 12,729 | | | | 12,958 | |
| Equipment expense | | | 6,212 | | | | 5,842 | | | | 12,009 | | | | 12,036 | |
| Stationery, supplies and postage | | | 2,051 | | | | 2,242 | | | | 4,326 | | | | 4,567 | |
| Bankcard, loan processing and other costs | | | 7,862 | | | | 7,356 | | | | 15,704 | | | | 14,600 | |
| Professional services | | | 2,856 | | | | 2,581 | | | | 6,336 | | | | 4,468 | |
| Amortization of intangibles | | | 87 | | | | 177 | | | | 174 | | | | 400 | |
| Other operating expense | | | 21,513 | | | | 11,784 | | | | 35,682 | | | | 25,326 | |
| | | | | | | | | | | | | |
| Total other expenses | | | 90,564 | | | | 80,550 | | | | 173,767 | | | | 161,784 | |
| | | | | | | | | | | | | |
| Income before federal income tax expense | | | 20,875 | | | | 41,174 | | | | 61,689 | | | | 85,572 | |
| Federal income tax expense | | | 5,380 | | | | 12,021 | | | | 16,760 | | | | 24,976 | |
| | | | | | | | | | | | | |
| Net income | | $ | 15,495 | | | $ | 29,153 | | | | 44,929 | | | $ | 60,596 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Other comprehensive income, net of taxes | | | | | | | | | | | | | | | | |
| Unrealized securities’ holding gain (loss), net of taxes | | $ | 6,246 | | | $ | (22,119 | ) | | | 22,063 | | | $ | (10,510 | ) |
| Unrealized hedging gain (loss), net of taxes | | | — | | | | 1,419 | | | | (94 | ) | | | 786 | |
| Minimum pension liability adjustment, net of taxes | | | (277 | ) | | | 873 | | | | (554 | ) | | | 1,746 | |
| Less: reclassification adjustment for securities’ gain realized in net income, net of taxes | | | 766 | | | | 31 | | | | 766 | | | | 371 | |
| | | | | | | | | | | | | |
| Total other comprehensive gain (loss), net of taxes | | | 5,203 | | | | (19,858 | ) | | | 20,649 | | | | (8,349 | ) |
| | | | | | | | | | | | | |
| Comprehensive income | | $ | 20,698 | | | $ | 9,295 | | | | 65,578 | | | $ | 52,247 | |
| | | | | | | | | | | | | |
| Net income applicable to common shares | | $ | 10,995 | | | $ | 29,153 | | | | 38,558 | | | $ | 60,596 | |
| | | | | | | | | | | | | |
| Net income used in diluted EPS calculation | | $ | 10,995 | | | $ | 29,154 | | | | 38,558 | | | $ | 60,601 | |
| | | | | | | | | | | | | |
| Weighted average number of common shares outstanding — basic * | | | 83,317 | | | | 81,287 | | | | 82,310 | | | | 80,972 | |
| | | | | | | | | | | | | |
| Weighted average number of common shares outstanding — diluted * | | | 83,325 | | | | 81,330 | | | | 82,318 | | | | 81,030 | |
| | | | | | | | | | | | | |
| Basic earnings per share * | | $ | 0.13 | | | $ | 0.36 | | | | 0.47 | | | $ | 0.75 | |
| | | | | | | | | | | | | |
| Diluted earnings per share * | | $ | 0.13 | | | $ | 0.36 | | | | 0.47 | | | $ | 0.75 | |
| | | | | | | | | | | | | |
| Stock dividend per share | | | 0.74 | % | | | — | | | | 0.74 | % | | | — | |
| | | | | | | | | | | | | |
| Dividend per share | | $ | 0.16 | | | $ | 0.29 | | | | 0.45 | | | $ | 0.58 | |
| | | | | | | | | | | | | |
| | |
| * | | Average outstanding shares and per share data restated to reflect the effect of a stock dividend declared April 28, 2009. |
10
| | |
| | | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME—LINKED QUARTERS | |  |
(Unaudited)
(Dollars in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarterly Results | |
| | | 2009 | | | 2009 | | | 2008 | | | 2008 | | | 2008 | |
| | | 2nd Q | | | 1st Q | | | 4th Q | | | 3rd Q | | | 2nd Q | |
| Interest and fees on loans, including held for sale | | $ | 86,247 | | | $ | 87,799 | | | $ | 105,463 | | | $ | 107,927 | | | $ | 106,516 | |
| Interest and dividends — securities and federal funds sold | | | 29,912 | | | | 31,557 | | | | 29,918 | | | | 29,223 | | | | 29,255 | |
| | | | | | | | | | | | | | | | |
| Total interest income | | | 116,159 | | | | 119,356 | | | | 135,381 | | | | 137,150 | | | | 135,771 | |
| | | | | | | | | | | | | | | | |
| Interest on deposits: | | | | | | | | | | | | | | | | | | | | |
| Demand-interest bearing | | | 159 | | | | 155 | | | | 370 | | | | 589 | | | | 591 | |
| Savings and money market accounts | | | 5,452 | | | | 5,377 | | | | 6,764 | | | | 6,932 | | | | 6,500 | |
| Certificates and other time deposits | | | 15,325 | | | | 18,588 | | | | 23,816 | | | | 23,463 | | | | 26,587 | |
| Securities sold under agreements to repurchase | | | 1,211 | | | | 999 | | | | 3,752 | | | | 8,244 | | | | 8,319 | |
| Wholesale borrowings | | | 6,897 | | | | 7,343 | | | | 7,441 | | | | 6,801 | | | | 6,243 | |
| | | | | | | | | | | | | | | | |
| Total interest expense | | | 29,044 | | | | 32,462 | | | | 42,143 | | | | 46,029 | | | | 48,240 | |
| | | | | | | | | | | | | | | | |
| Net interest income | | | 87,115 | | | | 86,894 | | | | 93,238 | | | | 91,121 | | | | 87,531 | |
| Provision for loan losses | | | 26,521 | | | | 18,065 | | | | 16,986 | | | | 15,531 | | | | 14,565 | |
| | | | | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 60,594 | | | | 68,829 | | | | 76,252 | | | | 75,590 | | | | 72,966 | |
| | | | | | | | | | | | | | | | |
| Other income: | | | | | | | | | | | | | | | | | | | | |
| Trust department income | | | 5,438 | | | | 4,790 | | | | 5,291 | | | | 5,562 | | | | 5,824 | |
| Service charges on deposits | | | 15,853 | | | | 14,163 | | | | 15,450 | | | | 16,648 | | | | 16,028 | |
| Credit card fees | | | 11,668 | | | | 11,084 | | | | 11,667 | | | | 12,084 | | | | 12,146 | |
| ATM and other service fees | | | 2,839 | | | | 2,606 | | | | 2,613 | | | | 2,717 | | | | 2,770 | |
| Bank owned life insurance income | | | 2,985 | | | | 3,015 | | | | 2,451 | | | | 3,139 | | | | 3,217 | |
| Investment services and insurance | | | 2,270 | | | | 2,918 | | | | 1,949 | | | | 2,899 | | | | 2,790 | |
| Investment securities gains, net | | | 1,178 | | | | — | | | | 1,555 | | | | — | | | | 47 | |
| Loan sales and servicing income | | | 3,791 | | | | 2,335 | | | | 2,294 | | | | 1,370 | | | | 1,885 | |
| Gain on Visa Inc. | | | — | | | | — | | | | 5,768 | | | | — | | | | — | |
| Gain on post medical retirement curtailment | | | — | | | | 9,543 | | | | — | | | | — | | | | — | |
| Other operating income | | | 4,823 | | | | 4,734 | | | | 3,757 | | | | 2,610 | | | | 4,051 | |
| | | | | | | | | | | | | | | | |
| Total other income | | | 50,845 | | | | 55,188 | | | | 52,795 | | | | 47,029 | | | | 48,758 | |
| | | | | | | | | | | | | | | | |
| Other expenses: | | | | | | | | | | | | | | | | | | | | |
| Salaries, wages, pension and employee benefits | | | 44,125 | | | | 42,682 | | | | 46,991 | | | | 45,043 | | | | 44,364 | |
| Net occupancy expense | | | 5,858 | | | | 6,871 | | | | 5,950 | | | | 5,741 | | | | 6,204 | |
| Equipment expense | | | 6,212 | | | | 5,797 | | | | 6,139 | | | | 5,962 | | | | 5,842 | |
| Stationery, supplies and postage | | | 2,051 | | | | 2,275 | | | | 2,458 | | | | 2,347 | | | | 2,242 | |
| Bankcard, loan processing and other costs | | | 7,862 | | | | 7,842 | | | | 7,359 | | | | 7,497 | | | | 7,356 | |
| Professional services | | | 2,856 | | | | 3,480 | | | | 3,261 | | | | 3,966 | | | | 2,581 | |
| Amortization of intangibles | | | 87 | | | | 87 | | | | 87 | | | | 86 | | | | 177 | |
| Other operating expense | | | 21,513 | | | | 14,169 | | | | 15,995 | | | | 9,967 | | | | 11,784 | |
| | | | | | | | | | | | | | | | |
| Total other expenses | | | 90,564 | | | | 83,203 | | | | 88,240 | | | | 80,609 | | | | 80,550 | |
| | | | | | | | | | | | | | | | |
| Income before income tax expense | | | 20,875 | | | | 40,814 | | | | 40,807 | | | | 42,010 | | | | 41,174 | |
| Federal income taxes | | | 5,380 | | | | 11,380 | | | | 11,671 | | | | 12,257 | | | | 12,021 | |
| | | | | | | | | | | | | | | | |
| Net income | | $ | 15,495 | | | $ | 29,434 | | | $ | 29,136 | | | $ | 29,753 | | | $ | 29,153 | |
| | | | | | | | | | | | | | | | |
| Other comprehensive income (loss), net of taxes | | | 5,203 | | | | 15,446 | | | | 5,110 | | | | (7,756 | ) | | | (19,858 | ) |
| | | | | | | | | | | | | | | | |
| Comprehensive income | | $ | 20,698 | | | $ | 44,880 | | | $ | 34,246 | | | $ | 21,997 | | | $ | 9,295 | |
| | | | | | | | | | | | | | | | |
| Net income applicable to common shares | | $ | 10,995 | | | $ | 27,563 | | | $ | 29,136 | | | $ | 29,753 | | | $ | 29,153 | |
| | | | | | | | | | | | | | | | |
| Adjusted net income used in diluted EPS calculation | | $ | 10,995 | | | $ | 27,563 | | | $ | 29,136 | | | $ | 29,753 | | | $ | 29,154 | |
| | | | | | | | | | | | | | | | |
| Weighted-average common shares — basic * | | | 83,317 | | | | 81,725 | | | | 81,404 | | | | 81,301 | | | | 81,287 | |
| | | | | | | | | | | | | | | | |
| Weighted-average common shares — diluted * | | | 83,325 | | | | 81,734 | | | | 81,413 | | | | 81,328 | | | | 81,330 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Basic net income per share * | | $ | 0.13 | | | | 0.34 | | | | 0.36 | | | $ | 0.37 | | | $ | 0.36 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Diluted net income per share * | | $ | 0.13 | | | | 0.34 | | | | 0.36 | | | $ | 0.37 | | | $ | 0.36 | |
| | | | | | | | | | | | | | | | |
| | |
| * | | Average outstanding shares and per share data restated to reflect the effect of a stock dividend declared April 28, 2009. |
11
| | |
| | | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION | |  |
(Unaudited, except December 31, 2008 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarterly Periods | | | Annual Period | |
| | | Jun 30 | | | Mar 31 | | | Dec 31 | | | Sept 30 | | | Jun 30 | | | Dec 31 | |
| | 2009 | | | 2009 | | | 2008 | | | 2008 | | | 2008 | | | 2008 | |
Allowance for Credit Losses | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses, beginning of period | | $ | 106,257 | | | $ | 103,757 | | | $ | 102,007 | | | $ | 98,239 | | | $ | 94,411 | | | $ | 94,205 | |
| Provision for loan losses | | | 26,521 | | | | 18,065 | | | | 16,986 | | | | 15,531 | | | | 14,565 | | | | 58,603 | |
| Charge-offs | | | 24,726 | | | | 18,936 | | | | 17,932 | | | | 14,957 | | | | 14,830 | | | | 62,388 | |
| Recoveries | | | 3,170 | | | | 3,371 | | | | 2,696 | | | | 3,194 | | | | 4,093 | | | | 13,337 | |
| | | | | | | | | | | | | | | | | | | |
| Net charge-offs | | | 21,556 | | | | 15,565 | | | | 15,236 | | | | 11,763 | | | | 10,737 | | | | 49,051 | |
| | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses, end of period | | $ | 111,222 | | | $ | 106,257 | | | $ | 103,757 | | | $ | 102,007 | | | $ | 98,239 | | | $ | 103,757 | |
| | | | | | | | | | | | | | | | | | | |
| Reserve for unfunded lending commitments, beginning of period | | $ | 6,019 | | | $ | 6,588 | | | $ | 6,493 | | | $ | 7,310 | | | $ | 7,903 | | | $ | 7,394 | |
| Provision for credit losses | | | 35 | | | | (569 | ) | | | 95 | | | | (817 | ) | | | (593 | ) | | | (806 | ) |
| | | | | | | | | | | | | | | | | | | |
| Reserve for unfunded lending commitments, end of period | | $ | 6,054 | | | $ | 6,019 | | | $ | 6,588 | | | $ | 6,493 | | | $ | 7,310 | | | $ | 6,588 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for Credit Losses | | $ | 117,276 | | | $ | 112,276 | | | $ | 110,345 | | | $ | 108,500 | | | $ | 105,549 | | | $ | 110,345 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Ratios | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Provision for loan losses as a % of average loans | | | 1.47 | % | | | 0.99 | % | | | 0.92 | % | | | 0.85 | % | | | 0.82 | % | | | 0.81 | % |
| Provision for credit losses as a % of average loans | | | (0.00 | )% | | | (0.03 | )% | | | 0.01 | % | | | (0.04 | )% | | | (0.03 | )% | | | (0.01 | )% |
| Net charge-offs as a % of average loans | | | 1.19 | % | | | 0.86 | % | | | 0.82 | % | | | 0.64 | % | | | 0.60 | % | | | 0.68 | % |
| Allowance for loan losses as a % of period-end loans | | | 1.56 | % | | | 1.45 | % | | | 1.40 | % | | | 1.38 | % | | | 1.36 | % | | | 1.40 | % |
| Allowance for credit losses as a % of period-end loans | | | 1.64 | % | | | 1.53 | % | | | 1.49 | % | | | 1.47 | % | | | 1.46 | % | | | 1.49 | % |
| Allowance for loan losses as a % of nonperforming loans | | | 175.17 | % | | | 151.35 | % | | | 198.76 | % | | | 264.45 | % | | | 268.52 | % | | | 198.76 | % |
| Allowance for credit losses as a % of nonperforming loans | | | 184.71 | % | | | 159.93 | % | | | 211.38 | % | | | 281.28 | % | | | 288.50 | % | | | 211.38 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Asset Quality | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Impaired loans: | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual | | $ | 48,563 | | | $ | 54,070 | | | $ | 40,195 | | | $ | 29,245 | | | $ | 26,702 | | | $ | 40,195 | |
| Other nonperforming loans: | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual | | | 14,929 | | | | 16,134 | | | | 12,007 | | | | 9,328 | | | | 9,884 | | | | 12,007 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total nonperforming loans | | | 63,492 | | | | 70,204 | | | | 52,202 | | | | 38,573 | | | | 36,586 | | | | 52,202 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Other real estate (“ORE”) | | | 9,859 | | | | 6,039 | | | | 5,324 | | | | 4,918 | | | | 5,053 | | | | 5,324 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total nonperforming assets (“NPAs”) | | $ | 73,351 | | | $ | 76,243 | | | $ | 57,526 | | | $ | 43,491 | | | $ | 41,639 | | | $ | 57,526 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| NPAs as % of period-end loans + ORE | | | 1.03 | % | | | 1.04 | % | | | 0.77 | % | | | 0.59 | % | | | 0.57 | % | | | 0.77 | % |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Past due 90 days or more & accruing interest | | $ | 22,129 | | | $ | 18,602 | | | $ | 23,928 | | | $ | 16,241 | | | $ | 10,654 | | | $ | 23,928 | |
| | | | | | | | | | | | | | | | | | | |
12
| | |
| | | |
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL | |  |
(Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | 2009 | | | 2008 | | | 2008 | | | 2008 | |
| QUARTERLY OTHER INCOME DETAIL | | 2nd Qtr | | | 1st Qtr | | | 4th Qtr | | | 3rd Qtr | | | 2nd Qtr | |
| Trust department income | | $ | 5,438 | | | $ | 4,790 | | | $ | 5,291 | | | $ | 5,562 | | | $ | 5,824 | |
| Service charges on deposits | | | 15,853 | | | | 14,163 | | | | 15,450 | | | | 16,648 | | | | 16,028 | |
| Credit card fees | | | 11,668 | | | | 11,084 | | | | 11,667 | | | | 12,084 | | | | 12,146 | |
| ATM and other service fees | | | 2,839 | | | | 2,606 | | | | 2,613 | | | | 2,717 | | | | 2,770 | |
| Bank owned life insurance income | | | 2,985 | | | | 3,015 | | | | 2,451 | | | | 3,139 | | | | 3,217 | |
| Investment services and insurance | | | 2,270 | | | | 2,918 | | | | 1,949 | | | | 2,899 | | | | 2,790 | |
| Investment securities gains, net | | | 1,178 | | | | — | | | | 1,555 | | | | — | | | | 47 | |
| Loan sales and servicing income | | | 3,791 | | | | 2,335 | | | | 2,294 | | | | 1,370 | | | | 1,885 | |
| Gain on Visa Inc. | | | — | | | | — | | | | 5,768 | | | | — | | | | — | |
| Gain on post medical retirement curtailment | | | — | | | | 9,543 | | | | — | | | | — | | | | — | |
| Other operating income | | | 4,823 | | | | 4,734 | | | | 3,757 | | | | 2,610 | | | | 4,051 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total Other Income | | $ | 50,845 | | | $ | 55,188 | | | $ | 52,795 | | | $ | 47,029 | | | $ | 48,758 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | 2009 | | | 2008 | | | 2008 | | | 2008 | |
| QUARTERLY OTHER EXPENSES DETAIL | | 2nd Qtr | | | 1st Qtr | | | 4th Qtr | | | 3rd Qtr | | | 2nd Qtr | |
| Salaries, wages, pension and employee benefits | | $ | 44,125 | | | $ | 42,682 | | | $ | 46,991 | | | $ | 45,043 | | | $ | 44,364 | |
| Net occupancy expense | | | 5,858 | | | | 6,871 | | | | 5,950 | | | | 5,741 | | | | 6,204 | |
| Equipment expense | | | 6,212 | | | | 5,797 | | | | 6,139 | | | | 5,962 | | | | 5,842 | |
| Taxes, other than federal income taxes | | | 1,631 | | | | 1,626 | | | | 1,463 | | | | 1,714 | | | | 1,701 | |
| Stationery, supplies and postage | | | 2,051 | | | | 2,275 | | | | 2,458 | | | | 2,347 | | | | 2,242 | |
| Bankcard, loan processing and other costs | | | 7,862 | | | | 7,842 | | | | 7,359 | | | | 7,497 | | | | 7,356 | |
| Advertising | | | 1,887 | | | | 1,971 | | | | 1,863 | | | | 2,476 | | | | 2,489 | |
| Professional services | | | 2,856 | | | | 3,480 | | | | 3,261 | | | | 3,966 | | | | 2,581 | |
| Telephone | | | 997 | | | | 1,014 | | | | 978 | | | | 956 | | | | 994 | |
| Amortization of intangibles | | | 87 | | | | 87 | | | | 87 | | | | 86 | | | | 177 | |
| Other operating expense | | | 16,998 | | | | 9,558 | | | | 11,691 | | | | 4,821 | | | | 6,600 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total Other Expenses | | $ | 90,564 | | | $ | 83,203 | | | $ | 88,240 | | | $ | 80,609 | | | $ | 80,550 | |
| | | | | | | | | | | | | | | | |
13
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| | | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES — Net Charge-off Detail | | |
(Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarters ended | | | Year ended | | | Six months ended | |
| | | June 30, | | | December 31, | | | June 30, | |
| | | 2009 | | | 2008 | | | 2008 | | | 2009 | | | 2008 | |
| Allowance for loan losses — beginning of period | | $ | 106,257 | | | $ | 94,411 | | | $ | 94,205 | | | $ | 103,757 | | | $ | 94,205 | |
| Loans charged off: | | | | | | | | | | | | | | | | | | | | |
| Commercial | | | 10,130 | | | | 3,718 | | | | 16,318 | | | | 14,684 | | | | 7,171 | |
| Mortgage | | | 1,315 | | | | 1,229 | | | | 4,696 | | | | 2,238 | | | | 2,509 | |
| Installment | | | 7,487 | | | | 5,620 | | | | 24,740 | | | | 15,925 | | | | 11,624 | |
| Home equity | | | 1,497 | | | | 1,226 | | | | 4,153 | | | | 3,032 | | | | 2,292 | |
| Credit cards | | | 3,696 | | | | 2,500 | | | | 9,821 | | | | 6,663 | | | | 4,793 | |
| Leases | | | 3 | | | | — | | | | 26 | | | | 3 | | | | — | |
| Overdrafts | | | 598 | | | | 537 | | | | 2,634 | | | | 1,117 | | | | 1,110 | |
| | | | | | | | | | | | | | | | |
| Total | | | 24,726 | | | | 14,830 | | | | 62,388 | | | | 43,662 | | | | 29,499 | |
| | | | | | | | | | | | | | | | |
| Recoveries: | | | | | | | | | | | | | | | | | | | | |
| Commercial | | | 207 | | | | 1,032 | | | | 2,388 | | | | 431 | | | | 1,754 | |
| Mortgage | | | 193 | | | | 7 | | | | 76 | | | | 219 | | | | 39 | |
| Installment | | | 2,022 | | | | 2,099 | | | | 7,071 | | | | 4,423 | | | | 3,841 | |
| Home equity | | | 111 | | | | 142 | | | | 851 | | | | 196 | | | | 242 | |
| Credit cards | | | 388 | | | | 557 | | | | 1,831 | | | | 775 | | | | 1,016 | |
| Manufactured housing | | | 32 | | | | 54 | | | | 247 | | | | 85 | | | | 126 | |
| Leases | | | 42 | | | | 31 | | | | 104 | | | | 47 | | | | 69 | |
| Overdrafts | | | 175 | | | | 171 | | | | 769 | | | | 365 | | | | 360 | |
| | | | | | | | | | | | | | | | |
| Total | | | 3,170 | | | | 4,093 | | | | 13,337 | | | | 6,541 | | | | 7,447 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs | | | 21,556 | | | | 10,737 | | | | 49,051 | | | | 37,121 | | | | 22,052 | |
| Provision for loan losses | | | 26,521 | | | | 14,565 | | | | 58,603 | | | | 44,586 | | | | 26,086 | |
| | | | | | | | | | | | | | | | |
| Allowance for loan losses — end of period | | $ | 111,222 | | | $ | 98,239 | | | $ | 103,757 | | | $ | 111,222 | | | $ | 98,239 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Average loans outstanding | | $ | 7,246,752 | | | $ | 7,140,627 | | | $ | 7,203,946 | | | $ | 7,313,516 | | | $ | 7,082,279 | |
| | | | | | | | | | | | | | | | |
| Ratio to average loans: | | | | | | | | | | | | | | | | | | | | |
| (Annualized) net charge-offs | | | 1.19 | % | | | 0.60 | % | | | 0.68 | % | | | 1.02 | % | | | 0.63 | % |
| | | | | | | | | | | | | | | | |
| Provision for loan losses | | | 1.47 | % | | | 0.82 | % | | | 0.81 | % | | | 1.23 | % | | | 0.74 | % |
| | | | | | | | | | | | | | | | |
| Loans outstanding — period-end | | $ | 7,145,146 | | | $ | 7,240,882 | | | $ | 7,425,613 | | | $ | 7,145,146 | | | $ | 7,240,882 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for credit losses: | | $ | 117,276 | | | $ | 105,549 | | | $ | 110,345 | | | $ | 117,276 | | | $ | 105,549 | |
| | | | | | | | | | | | | | | | |
| As a multiple of (annualized) net charge-offs | | | 1.36 | | | | 2.44 | | | | 2.25 | | | | 1.57 | | | | 2.38 | |
| | | | | | | | | | | | | | | | |
| Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | |
| As a percent of period-end loans outstanding | | | 1.56 | % | | | 1.36 | % | | | 1.40 | % | | | 1.56 | % | | | 1.36 | % |
| | | | | | | | | | | | | | | | |
| As a multiple of (annualized) net charge-offs | | | 1.29 | | | | 2.27 | | | | 2.12 | | | | 1.49 | | | | 2.22 | |
| | | | | | | | | | | | | | | | |
14
