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 Third Quarter 2009 EPS of $0.27 Per Share
Company announces:
| | • | | increase in net interest margin to 3.61%, |
| |
| | • | | increase in allowance for credit losses to 1.72 percent |
| |
| | • | | increase in tangible common equity levels to 8.65 percent, and |
| |
| | • | | increase in core deposit accounts of 2.58 percent |
Akron, Ohio (October 27, 2009) — FirstMerit Corporation (Nasdaq: FMER) reported third quarter 2009 net income of $22.8 million, or $0.27 per diluted share. This compares with $15.5 million, or $0.13 per diluted share, for the second quarter 2009 and $29.8 million, or $0.36 per diluted share, for the third quarter 2008 which has been restated for the stock dividends.
Returns on average common equity (“ROE”) and average assets (“ROA”) for the third quarter 2009 were 8.69% and 0.85%, respectively, compared with 6.27% and 0.57% for the second quarter 2009 and 12.73% and 1.12% for the third 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.
“In the third quarter FirstMerit again delivered relatively strong financial performance in a very challenging environment. Conditions in our markets mirror the strains of the national economy stemming from job losses and overall contraction. However, our commitment to sound, fundamental banking strategies and appropriate risk management continues to provide consistent returns to our investors,” said Paul G. Greig, chairman, president and CEO of FirstMerit Corporation.
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FirstMerit Reports Third Quarter 2009 EPS Results / Page 2
“This past quarter we increased our loan loss reserve and tangible common equity levels. While our balance sheet is structured to absorb future credit losses given the uncertainty surrounding the timing and magnitude of an economic recovery, its inherent strength also positions us to take advantage of organic growth and strategic acquisition opportunities. This past quarter we demonstrated further success growing core deposits by leveraging our best-in-class consumer and commercial Reality Checking and Savings products. These valuable core deposits continue to provide us with ample liquidity in order to meet our customers’ current and future funding needs,” added Greig.
Net interest margin was 3.61% for the third quarter of 2009 compared with 3.56% for the second quarter of 2009 and 3.78% for the third 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 third quarter of 2009 decreased $189.7 million, or 2.62%, compared to the second quarter of 2009 and decreased $225.3 million, or 3.09%, compared with the third quarter of 2008. The fluctuation from second quarter 2009 to third quarter 2009 was due to decreases in commercial loans of $157.3 million or 3.69%, mortgage loans of $21.9 million, or 4.26%, and installment loans of $20.9 million, or 1.38%. The decrease in the third quarter 2009 as compared to third quarter 2008 was due to decreases in commercial loans of $63.2 million, or 1.52%, mortgage loans of $77.2 million, or 13.56%, and installment loans of $125.2 million, or 7.74%. The decrease in average loan volume over both periods reflects the current economic cycle in which business owners and consumers are retrenching on their demand for leverage and borrowing. Business customers continue their trend in inventory and receivable reduction and paying down existing debt to strengthen their balance sheets. Consumer customers are taking a similar approach with lower borrowing demand and increased usage of short-term savings products.
Average deposits during the third quarter of 2009 decreased $230.3 million, or 3.02%, compared with the second quarter of 2009 and increased $58.1 million, or 0.79%, compared with the third quarter of 2008. During the third quarter of 2009 the Company increased its average core deposits, which excludes time deposits, by $138.9 million, or 2.58%, compared with the second quarter of 2009, and $913.8 million, or 19.87%, compared with the third quarter of 2008. These results reflect the company’s continued success in growing core deposit relationships and deemphasizing a reliance on higher-cost certificate of deposit accounts. The core deposit growth reflects the company’s success in building a strong brand name in its core markets and capitalizing on market disruption in northeast Ohio.
Average investments decreased $5.4 million, or 0.20%, compared with the second quarter of 2009 and increased $270.7 million, or 11.01%, over the third quarter of 2008. 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 Third Quarter 2009 EPS Results / Page 3
Net interest income on a fully tax-equivalent (“FTE”) basis was $89.1 million in the third quarter 2009 compared with $88.8 million in the second quarter of 2009 and $92.7 million in the third quarter of 2008. Compared with the second quarter of 2009, average earning assets decreased $198.5 million, or 1.98% and increased $47.0 million or 0.48% compared to the third quarter of 2008.
Noninterest income net of securities transactions for the third quarter of 2009 was $48.6 million, a decrease of $1.0 million, or 2.06%, from the second quarter of 2009 and an increase of $1.6 million, or 3.43%, from the third quarter of 2008. The primary changes in these noninterest income categories compared with the third quarter of 2008 were as follows: trust income was $5.1 million, a decrease of $0.5 million; ATM and other service fees was $2.9 million, an increase of $0.2 million; investment services and insurance was $2.5 million, a decrease of $0.4 million; and loan sales and servicing was $3.9 million, an increase of $2.5 million. The increase in loan sales and servicing is primarily attributed to increased mortgage origination and sales volume.
Other income, net of securities gains, as a percentage of net revenue for the third quarter of 2009 was 35.32% compared with 35.87% for second quarter of 2009 and 33.67% for the third 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 third quarter of 2009 was $84.2 million, a decrease of $6.4 million, or 7.07%, from the second quarter of 2009 and an increase of $3.6 million, or 4.41%, from the third quarter of 2008. Included in the second quarter 2009 expenses was the FDIC Special Assessment pretax fee of $5.1 million.
The efficiency ratio for the third quarter of 2009 was 61.05%, compared with 65.34% for the second quarter of 2009 and 57.64% for the third quarter of 2008.
Net charge-offs totaled $18.8 million, or 1.05% of average loans, in the third quarter of 2009 compared with $21.6 million, or 1.19% of average loans, in the second quarter 2009 and $11.8 million, or 0.64% of average loans, in the third quarter of 2008.
Nonperforming assets totaled $88.9 million at September 30, 2009, an increase of $15.5 million, or 21.17%, compared with June 30, 2009 and an increase of $45.4 million, or 104.37%, compared with September 30, 2008. Nonperforming assets at September 30, 2009 represented 1.26% of period-end loans plus other real estate compared with 1.03% at June 30, 2009 and 0.59% at September 30, 2008.
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FirstMerit Reports Third Quarter 2009 EPS Results / Page 4
The allowance for loan losses totaled $116.4 million at September 30, 2009, an increase of $5.1 million from June 30, 2009. Given the current economic environment, the Company has continued a strategy to build reserve levels and year-to-date has provided $12.6 million in excess of net charge-offs to the allowance for loan losses. At September 30, 2009, the allowance for loan losses was 1.66% of period-end loans compared with 1.56% at June 30, 2009 and 1.38% at September 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 1.72% at September 30, 2009, compared with 1.64% at June 30, 2009 and 1.47% at September 30, 2008. The allowance for credit losses to nonperforming loans was 153.27% at September 30, 2009, compared with 184.71% at June 30, 2009 and 281.28% at September 30, 2008.
The Company’s total assets at September 30, 2009 were $10.8 billion, an increase of $64.4 million, or 0.60%, compared with June 30, 2009 and an increase of $76.5 million, or 0.72%, compared with September 30, 2008. Growth in investment securities of $300.8 million, or 12.28%, compared with September 30, 2008, provided the majority of the overall asset growth.
Total deposits were $7.3 billion at September 30, 2009, a decrease of $179.9 million, or 2.41%, from June 30, 2009 and a decrease of $159.3 million, or 2.14%, from September 30, 2008. The decrease as compared to both June 30, 2009 and September 30, 2008 was driven by a decrease in certificates and time deposits of 18.12% and 40.40%, respectively, reflecting the company’s success remixing the balance sheet and focusing on core deposit growth. Core deposits totaled $5.6 billion at September 30, 2009, an increase of $194.5 million, or 3.61%, from June 30, 2009 and an increase of $988.1 million, or 21.52%, from September 30, 2008.
Shareholders’ equity was $1,059.2 million at September 30, 2009, compared with $1,022.6 million at June 30, 2009 and $926.1 million at September 30, 2008. The Company increased its strong capital position as tangible common equity to assets was 8.65% at September 30, 2009, compared with 8.36% at June 30, 2009 and, 7.45% at September 30, 2008. The common dividend per share paid in the third quarter 2009 was $0.16 as well as a $0.13 per share dividend of common stock.
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FirstMerit Reports Third Quarter 2009 EPS Results / Page 5
Third Quarter 2009 Conference Call
FirstMerit will host an earnings conference call on October 27, 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: 34702586.A replay of the conference call will be available at approximately 5:00 p.m., on October 27, 2009 through November 4, 2009, by dialing (800) 642-1687, and entering the PIN: 34702586.
About FirstMerit
FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $10.8 billion as of September 30, 2009 and 156 banking offices and 179 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) | | Quarters |
| (Dollars in thousands) | | 2009 | | 2009 | | 2009 | | 2008 | | 2008 |
| EARNINGS | | 3rd Qtr | | 2nd Qtr | | 1st Qtr | | 4th Qtr | | 3rd Qtr |
| |
| Net interest income FTE (a) | | $ | 89,079 | | | $ | 88,806 | | | $ | 88,577 | | | $ | 94,855 | | | $ | 92,659 | |
| Provision for loan losses | | | 23,887 | | | | 26,521 | | | | 18,065 | | | | 16,986 | | | | 15,531 | |
| Other income | | | 51,567 | | | | 50,845 | | | | 55,188 | | | | 52,795 | | | | 47,029 | |
| Other expenses | | | 84,165 | | | | 90,564 | | | | 83,203 | | | | 88,240 | | | | 80,609 | |
| FTE adjustment (a) | | | 1,702 | | | | 1,691 | | | | 1,683 | | | | 1,617 | | | | 1,538 | |
| Net income | | | 22,763 | | | | 15,495 | | | | 29,434 | | | | 29,136 | | | | 29,753 | |
| Diluted EPS (b) | | | 0.27 | | | | 0.13 | | | | 0.33 | | | | 0.35 | | | | 0.36 | |
| | | | | | | | | | | | | | | | | | | | | |
| PERFORMANCE RATIOS | | | | | | | | | | | | | | | | | | | | |
| Return on average assets (ROA) | | | 0.85 | % | | | 0.57 | % | | | 1.07 | % | | | 1.08 | % | | | 1.12 | % |
| Return on average common equity (ROE) | | | 8.69 | % | | | 6.27 | % | | | 12.39 | % | | | 12.47 | % | | | 12.73 | % |
| Net interest margin FTE (a) | | | 3.61 | % | | | 3.56 | % | | | 3.53 | % | | | 3.82 | % | | | 3.78 | % |
| Efficiency ratio | | | 61.05 | % | | | 65.34 | % | | | 57.81 | % | | | 60.34 | % | | | 57.64 | % |
| Number of full-time equivalent employees | | | 2,522 | | | | 2,540 | | | | 2,562 | | | | 2,575 | | | | 2,614 | |
| | | | | | | | | | | | | | | | | | | | | |
| MARKET DATA | | | | | | | | | | | | | | | | | | | | |
| Book value/common share | | $ | 12.34 | | | $ | 11.99 | | | $ | 11.84 | | | $ | 11.58 | | | $ | 11.44 | |
| Period-end common share mkt value | | | 19.03 | | | | 17.00 | | | | 18.20 | | | | 20.59 | | | | 21.00 | |
| Market as a % of book | | | 154 | % | | | 142 | % | | | 154 | % | | | 178 | % | | | 184 | % |
| Cash dividends/common share | | $ | 0.16 | | | $ | 0.16 | | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.29 | |
| Common stock dividend payout ratio | | | 59.26 | % | | | 84.21 | % | | | 80.56 | % | | | 82.86 | % | | | 80.56 | % |
| Average basic common shares (b) | | | 85,872 | | | | 84,123 | | | | 82,514 | | | | 82,193 | | | | 82,090 | |
| Average diluted common shares (b) | | | 85,880 | | | | 84,131 | | | | 82,523 | | | | 82,202 | | | | 82,117 | |
| Period end common shares | | | 85,869 | | | | 85,266 | | | | 81,417 | | | | 80,960 | | | | 80,974 | |
| Common shares repurchased | | | 13 | | | | 61 | | | | 45 | | | | 19 | | | | 3 | |
| Common stock market capitalization | | $ | 1,634,087 | | | $ | 1,449,522 | | | $ | 1,481,789 | | | $ | 1,666,966 | | | $ | 1,700,454 | |
| | | | | | | | | | | | | | | | | | | | | |
| ASSET QUALITY | | | | | | | | | | | | | | | | | | | | |
| Gross charge-offs | | $ | 21,819 | | | $ | 24,726 | | | $ | 18,936 | | | $ | 17,932 | | | $ | 14,957 | |
| Net charge-offs | | | 18,757 | | | | 21,556 | | | | 15,565 | | | | 15,236 | | | | 11,763 | |
| Allowance for loan losses | | | 116,352 | | | | 111,222 | | | | 106,257 | | | | 103,757 | | | | 102,007 | |
| Reserve for unfunded lending commitments | | | 4,470 | | | | 6,054 | | | | 6,019 | | | | 6,588 | | | | 6,493 | |
| Nonperforming assets (NPAs) | | | 88,881 | | | | 73,351 | | | | 76,243 | | | | 57,526 | | | | 43,491 | |
| Net charge-offs/average loans ratio | | | 1.05 | % | | | 1.19 | % | | | 0.86 | % | | | 0.82 | % | | | 0.64 | % |
| Allowance for loan losses/period-end loans | | | 1.66 | % | | | 1.56 | % | | | 1.45 | % | | | 1.40 | % | | | 1.38 | % |
| Allowance for credit losses/period-end loans | | | 1.72 | % | | | 1.64 | % | | | 1.53 | % | | | 1.49 | % | | | 1.47 | % |
| NPAs/loans and other real estate | | | 1.26 | % | | | 1.03 | % | | | 1.04 | % | | | 0.77 | % | | | 0.59 | % |
| Allowance for loan losses/nonperforming loans | | | 147.60 | % | | | 175.17 | % | | | 151.35 | % | | | 198.76 | % | | | 264.45 | % |
| Allowance for credit losses/nonperforming loans | | | 153.27 | % | | | 184.71 | % | | | 159.93 | % | | | 211.38 | % | | | 281.28 | % |
| | | | | | | | | | | | | | | | | | | | | |
| CAPITAL & LIQUIDITY | | | | | | | | | | | | | | | | | | | | |
| Period-end tangible common equity to assets | | | 8.65 | % | | | 8.36 | % | | | 7.60 | % | | | 7.27 | % | | | 7.45 | % |
| Average equity to assets | | | 9.77 | % | | | 9.37 | % | | | 9.66 | % | | | 8.66 | % | | | 8.79 | % |
| Average equity to loans | | | 14.72 | % | | | 14.07 | % | | | 14.54 | % | | | 12.62 | % | | | 12.76 | % |
| Average loans to deposits | | | 95.57 | % | | | 95.17 | % | | | 96.56 | % | | | 96.01 | % | | | 99.40 | % |
| | | | | | | | | | | | | | | | | | | | | |
| AVERAGE BALANCES | | | | | | | | | | | | | | | | | | | | |
| Assets | | $ | 10,629,359 | | | $ | 10,884,228 | | | $ | 11,115,042 | | | $ | 10,731,029 | | | $ | 10,569,496 | |
| Deposits | | | 7,384,507 | | | | 7,614,826 | | | | 7,644,118 | | | | 7,672,560 | | | | 7,326,364 | |
| Loans | | | 7,057,021 | | | | 7,246,752 | | | | 7,381,019 | | | | 7,366,246 | | | | 7,282,333 | |
| Earning assets | | | 9,802,810 | | | | 10,001,266 | | | | 10,189,233 | | | | 9,876,488 | | | | 9,755,812 | |
| Shareholders’ equity | | | 1,038,824 | | | | 1,019,628 | | | | 1,073,276 | | | | 929,788 | | | | 929,495 | |
| | | | | | | | | | | | | | | | | | | | | |
| ENDING BALANCES | | | | | | | | | | | | | | | | | | | | |
| Assets | | $ | 10,761,355 | | | $ | 10,696,962 | | | $ | 10,972,176 | | | $ | 11,100,026 | | | $ | 10,684,845 | |
| Deposits | | | 7,271,274 | | | | 7,451,220 | | | | 7,678,213 | | | | 7,597,679 | | | | 7,430,556 | |
| Loans | | | 7,029,648 | | | | 7,145,146 | | | | 7,350,763 | | | | 7,425,613 | | | | 7,381,592 | |
| Goodwill | | | 139,245 | | | | 139,245 | | | | 139,245 | | | | 139,245 | | | | 139,245 | |
| Intangible assets | | | 1,143 | | | | 1,229 | | | | 1,316 | | | | 1,403 | | | | 1,490 | |
| Earning assets | | | 9,793,244 | | | | 9,869,183 | | | | 10,108,403 | | | | 10,209,602 | | | | 9,840,951 | |
| Total shareholders’ equity | | | 1,059,209 | | | | 1,022,647 | | | | 1,084,269 | | | | 937,843 | | | | 926,078 | |
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| NOTES: | |
| |
| (a) | — | Net interest income on a fully tax-equivalent (“FTE”) basis restates interest on tax-exempt securities and loans as if such interest were subject to federal income tax at the statutory rate. Net interest income on an FTE basis is not an accounting principle generally accepted in the United States of America. |
| |
| (b) | — | Average outstanding shares and per share data restated to reflect the effect of stock dividends declared April 28, 2009 and August 20, 2009. |
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FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | |
| (Unaudited, except December 31, 2008, which is derived from the | | September 30, | | | December 31, | | | September 30, | |
| audited financial statements) | | 2009 | | | 2008 | | | 2008 | |
ASSETS | | | | | | | | | | | | |
| Cash and due from banks | | $ | 193,060 | | | $ | 178,406 | | | $ | 186,087 | |
| Investment securities | | | | | | | | | | | | |
| Held-to-maturity | | | 166,663 | | | | 158,273 | | | | 161,722 | |
| Available-for-sale | | | 2,584,414 | | | | 2,614,575 | | | | 2,288,511 | |
| Loans held for sale | | | 12,519 | | | | 11,141 | | | | 9,126 | |
| Loans: | | | | | | | | | | | | |
| Commercial loans | | | 4,097,252 | | | | 4,352,730 | | | | 4,273,065 | |
| Mortgage loans | | | 481,336 | | | | 547,125 | | | | 559,276 | |
| Installment loans | | | 1,481,200 | | | | 1,574,587 | | | | 1,613,481 | |
| Home equity loans | | | 761,553 | | | | 733,832 | | | | 717,887 | |
| Credit card loans | | | 147,767 | | | | 149,745 | | | | 148,179 | |
| Leases | | | 60,540 | | | | 67,594 | | | | 69,704 | |
| | | | | | | | | | |
| Total loans | | | 7,029,648 | | | | 7,425,613 | | | | 7,381,592 | |
| Less allowance for loan losses | | | (116,352 | ) | | | (103,757 | ) | | | (102,007 | ) |
| | | | | | | | | | |
| Net loans | | | 6,913,296 | | | | 7,321,856 | | | | 7,279,585 | |
| Premises and equipment, net | | | 126,416 | | | | 133,184 | | | | 128,570 | |
| Goodwill | | | 139,245 | | | | 139,245 | | | | 139,245 | |
| Intangible assets | | | 1,143 | | | | 1,403 | | | | 1,490 | |
| Accrued interest receivable and other assets | | | 624,599 | | | | 541,943 | | | | 490,509 | |
| | | | | | | | | | |
| Total assets | | $ | 10,761,355 | | | $ | 11,100,026 | | | $ | 10,684,845 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | |
| Demand-non-interest bearing | | $ | 1,898,913 | | | $ | 1,637,534 | | | | 1,540,523 | |
| Demand-interest bearing | | | 644,121 | | | | 666,615 | | | | 663,924 | |
| Savings and money market accounts | | | 3,035,922 | | | | 2,512,331 | | | | 2,386,453 | |
| Certificates and other time deposits | | | 1,692,318 | | | | 2,781,199 | | | | 2,839,656 | |
| | | | | | | | | | |
| Total deposits | | | 7,271,274 | | | | 7,597,679 | | | | 7,430,556 | |
| | | | | | | | | | |
| Securities sold under agreements to repurchase | | | 1,350,475 | | | | 921,390 | | | | 1,244,200 | |
| Wholesale borrowings | | | 749,397 | | | | 1,344,195 | | | | 898,720 | |
| Accrued taxes, expenses, and other liabilities | | | 331,000 | | | | 298,919 | | | | 185,291 | |
| | | | | | | | | | |
| Total liabilities | | | 9,702,146 | | | | 10,162,183 | | | | 9,758,767 | |
| | | | | | | | | | |
| 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 92,635,910, 92,026,350 and 92,026,350 at September 30, 2009, December 31, 2008 and September 30, 2008, respectively. | | | 127,937 | | | | 127,937 | | | | 127,937 | |
| Capital surplus | | | 68,694 | | | | 94,802 | | | | 93,387 | |
| Accumulated other comprehensive loss | | | (7,437 | ) | | | (54,080 | ) | | | (59,190 | ) |
| Retained earnings | | | 1,042,752 | | | | 1,053,435 | | | | 1,047,781 | |
| Treasury stock, at cost, 6,767,053, 11,066,108 and 11,052,155 shares at September 30, 2009, December 31, 2008 and September 30, 2008, respectively | | | (172,737 | ) | | | (284,251 | ) | | | (283,837 | ) |
| | | | | | | | | | |
| Total shareholders’ equity | | | 1,059,209 | | | | 937,843 | | | | 926,078 | |
| | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 10,761,355 | | | $ | 11,100,026 | | | $ | 10,684,845 | |
| | | | | | | | | | |
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FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS | |  |
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarterly Periods | |
| (Unaudited) | | September 30, | | | June 30, | | | March 31, | | | December 31, | | | September 30, | |
| (Dollars in thousands) | | 2009 | | | 2009 | | | 2009 | | | 2008 | | | 2008 | |
ASSETS | | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 159,985 | | | $ | 194,381 | | | $ | 209,922 | | | $ | 192,804 | | | $ | 171,370 | |
| Investment securities | | | | | | | | | | | | | | | | | | | | |
| Held-to-maturity | | | 160,084 | | | | 156,877 | | | | 161,217 | | | | 160,283 | | | | 159,928 | |
| Available-for-sale | | | 2,568,348 | | | | 2,576,994 | | | | 2,623,732 | | | | 2,340,639 | | | | 2,297,829 | |
| Fed funds sold | | | — | | | | — | | | | 17 | | | | 424 | | | | 3,674 | |
| Loans held for sale | | | 17,357 | | | | 20,643 | | | | 23,248 | | | | 8,896 | | | | 12,048 | |
| Loans: | | | | | | | | | | | | | | | | | | | | |
| Commercial loans | | | 4,105,778 | | | | 4,263,114 | | | | 4,337,108 | | | | 4,273,123 | | | | 4,168,951 | |
| Mortgage loans | | | 492,089 | | | | 513,982 | | | | 536,498 | | | | 555,713 | | | | 569,293 | |
| Installment loans | | | 1,492,019 | | | | 1,512,929 | | | | 1,558,374 | | | | 1,596,053 | | | | 1,617,265 | |
| Home equity loans | | | 758,353 | | | | 749,097 | | | | 736,956 | | | | 722,466 | | | | 709,365 | |
| Credit card loans | | | 149,460 | | | | 146,589 | | | | 146,355 | | | | 150,133 | | | | 147,924 | |
| Leases | | | 59,322 | | | | 61,041 | | | | 65,728 | | | | 68,758 | | | | 69,535 | |
| | | | | | | | | | | | | | | | |
| Total loans | | | 7,057,021 | | | | 7,246,752 | | | | 7,381,019 | | | | 7,366,246 | | | | 7,282,333 | |
| Less allowance for loan losses | | | 111,073 | | | | 104,864 | | | | 102,533 | | | | 100,898 | | | | 98,091 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loans | | | 6,945,948 | | | | 7,141,888 | | | | 7,278,486 | | | | 7,265,348 | | | | 7,184,242 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total earning assets | | | 9,802,810 | | | | 10,001,266 | | | | 10,189,233 | | | | 9,876,488 | | | | 9,755,812 | |
| | | | | | | | | | | | | | | | | | | | | |
| Premises and equipment, net | | | 127,096 | | | | 129,433 | | | | 132,156 | | | | 130,511 | | | | 127,267 | |
| Accrued interest receivable and other assets | | | 650,541 | | | | 664,012 | | | | 686,264 | | | | 632,124 | | | | 613,138 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
TOTAL ASSETS | | $ | 10,629,359 | | | $ | 10,884,228 | | | $ | 11,115,042 | | | $ | 10,731,029 | | | $ | 10,569,496 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
LIABILITIES | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | |
| Demand-non-interest bearing | | $ | 1,947,359 | | | $ | 1,891,792 | | | $ | 1,767,885 | | | $ | 1,607,901 | | | $ | 1,545,427 | |
| Demand-interest bearing | | | 647,712 | | | | 671,235 | | | | 655,279 | | | | 658,208 | | | | 678,803 | |
| Savings and money market accounts | | | 2,916,980 | | | | 2,810,155 | | | | 2,638,166 | | | | 2,534,702 | | | | 2,373,995 | |
| Certificates and other time deposits | | | 1,872,456 | | | | 2,241,644 | | | | 2,582,788 | | | | 2,871,749 | | | | 2,728,139 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total deposits | | | 7,384,507 | | | | 7,614,826 | | | | 7,644,118 | | | | 7,672,560 | | | | 7,326,364 | |
| Securities sold under agreements to repurchase | | | 1,087,875 | | | | 945,178 | | | | 941,112 | | | | 1,168,438 | | | | 1,504,011 | |
| Wholesale borrowings | | | 883,377 | | | | 1,019,786 | | | | 1,151,777 | | | | 766,358 | | | | 634,226 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total funds | | | 9,355,759 | | | | 9,579,790 | | | | 9,737,007 | | | | 9,607,356 | | | | 9,464,601 | |
| Accrued taxes, expenses and other liabilities | | | 234,776 | | | | 284,810 | | | | 304,759 | | | | 193,885 | | | | 175,400 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total liabilities | | | 9,590,535 | | | | 9,864,600 | | | | 10,041,766 | | | | 9,801,241 | | | | 9,640,001 | |
| | | | | | | | | | | | | | | | | | | | | |
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 | | | 55,732 | | | | 63,457 | | | | 86,872 | | | | 93,761 | | | | 93,381 | |
| Accumulated other comprehensive loss | | | (26,793 | ) | | | (35,569 | ) | | | (49,477 | ) | | | (62,018 | ) | | | (54,000 | ) |
| Retained earnings | | | 1,050,359 | | | | 1,056,739 | | | | 1,069,948 | | | | 1,053,992 | | | | 1,048,452 | |
| Treasury stock | | | (168,411 | ) | | | (223,606 | ) | | | (275,986 | ) | | | (283,884 | ) | | | (286,275 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total shareholders’ equity | | | 1,038,824 | | | | 1,019,628 | | | | 1,073,276 | | | | 929,788 | | | | 929,495 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 10,629,359 | | | $ | 10,884,228 | | | $ | 11,115,042 | | | $ | 10,731,029 | | | $ | 10,569,496 | |
| | | | | | | | | | | | | | | | |
8
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | | Year ended | | | Three months ended | |
| | | September 30, 2009 | | | December 31, 2008 | | | September 30, 2008 | |
| FIRSTMERIT CORPORATION AND SUBSIDIARIES | | Average | | | | | | | Average | | | Average | | | | | | | Average | | | Average | | | | | | | Average | |
| (Dollars in thousands) | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 159,985 | | | | | | | | | | | $ | 177,089 | | | | | | | | | | | $ | 171,370 | | | | | | | | | |
| Investment securities and federal funds sold: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury securities and U.S. Government agency obligations (taxable) | | | 2,210,551 | | | | 24,115 | | | | 4.33 | % | | | 1,985,026 | | | | 94,260 | | | | 4.75 | % | | | 1,943,589 | | | | 23,374 | | | | 4.78 | % |
| Obligations of states and political subdivisions (tax exempt) | | | 318,853 | | | | 4,872 | | | | 6.06 | % | | | 294,724 | | | | 17,910 | | | | 6.08 | % | | | 301,688 | | | | 4,575 | | | | 6.03 | % |
| Other securities and federal funds sold | | | 199,028 | | | | 2,049 | | | | 4.08 | % | | | 216,794 | | | | 11,326 | | | | 5.22 | % | | | 216,154 | | | | 2,780 | | | | 5.12 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total investment securities and federal funds sold | | | 2,728,432 | | | | 31,036 | | | | 4.51 | % | | | 2,496,544 | | | | 123,496 | | | | 4.95 | % | | | 2,461,431 | | | | 30,729 | | | | 4.97 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans held for sale | | | 17,357 | | | | 230 | | | | 5.26 | % | | | 29,419 | | | | 1,602 | | | | 5.45 | % | | | 12,048 | | | | 178 | | | | 5.88 | % |
| Loans | | | 7,057,021 | | | | 84,107 | | | | 4.73 | % | | | 7,203,946 | | | | 434,704 | | | | 6.03 | % | | | 7,282,333 | | | | 107,781 | | | | 5.89 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total earning assets | | | 9,802,810 | | | | 115,373 | | | | 4.67 | % | | | 9,729,909 | | | | 559,802 | | | | 5.75 | % | | | 9,755,812 | | | | 138,688 | | | | 5.66 | % |
| Allowance for loan losses | | | (111,073 | ) | | | | | | | | | | | (96,714 | ) | | | | | | | | | | | (98,091 | ) | | | | | | | | |
| Other assets | | | 777,637 | | | | | | | | | | | | 739,158 | | | | | | | | | | | | 740,405 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 10,629,359 | | | | | | | | | | | $ | 10,549,442 | | | | | | | | | | | $ | 10,569,496 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand — non-interest bearing | | $ | 1,947,359 | | | | — | | | | — | | | $ | 1,530,021 | | | | — | | | | — | | | $ | 1,545,427 | | | | — | | | | — | |
| Demand — interest bearing | | | 647,712 | | | | 137 | | | | 0.08 | % | | | 687,160 | | | | 2,514 | | | | 0.37 | % | | | 678,803 | | | | 589 | | | | 0.35 | % |
| Savings and money market accounts | | | 2,916,980 | | | | 5,763 | | | | 0.78 | % | | | 2,398,778 | | | | 29,839 | | | | 1.24 | % | | | 2,373,995 | | | | 6,932 | | | | 1.16 | % |
| Certificates and other time deposits | | | 1,872,456 | | | | 12,284 | | | | 2.60 | % | | | 2,801,623 | | | | 105,853 | | | | 3.78 | % | | | 2,728,139 | | | | 23,463 | | | | 3.42 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total deposits | | | 7,384,507 | | | | 18,184 | | | | 0.98 | % | | | 7,417,582 | | | | 138,206 | | | | 1.86 | % | | | 7,326,364 | | | | 30,984 | | | | 1.68 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Securities sold under agreements to repurchase | | | 1,087,875 | | | | 1,286 | | | | 0.47 | % | | | 1,343,441 | | | | 31,857 | | | | 2.37 | % | | | 1,504,011 | | | | 8,244 | | | | 2.18 | % |
| Wholesale borrowings | | | 883,377 | | | | 6,824 | | | | 3.06 | % | | | 663,109 | | | | 27,574 | | | | 4.16 | % | | | 634,226 | | | | 6,801 | | | | 4.27 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total interest bearing liabilities | | | 7,408,400 | | | | 26,294 | | | | 1.41 | % | | | 7,894,111 | | | | 197,637 | | | | 2.50 | % | | | 7,919,174 | | | | 46,029 | | | | 2.31 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other liabilities | | | 234,776 | | | | | | | | | | | | 189,222 | | | | | | | | | | | | 175,400 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shareholders’ equity | | | 1,038,824 | | | | | | | | | | | | 936,088 | | | | | | | | | | | | 929,495 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 10,629,359 | | | | | | | | | | | $ | 10,549,442 | | | | | | | | | | | $ | 10,569,496 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net yield on earning assets | | $ | 9,802,810 | | | | 89,079 | | | | 3.61 | % | | $ | 9,729,909 | | | | 362,165 | | | | 3.72 | % | | $ | 9,755,812 | | | | 92,659 | | | | 3.78 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate spread | | | | | | | | | | | 3.26 | % | | | | | | | | | | | 3.25 | % | | | | | | | | | | | 3.35 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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) | | Quarters ended | | | Nine months ended | |
| (In thousands except per share data) | | September 30, | | | September 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| Interest income: | | | | | | | | | | | | | | | | |
| Interest and fees on loans, including held for sale | | $ | 84,283 | | | $ | 107,927 | | | | 258,329 | | | $ | 330,731 | |
| Interest and dividends on investment securities and federal funds sold | | | 29,388 | | | | 29,223 | | | | 90,857 | | | | 87,714 | |
| | | | | | | | | | | | | |
| Total interest income | | | 113,671 | | | | 137,150 | | | | 349,186 | | | | 418,445 | |
| | | | | | | | | | | | | |
| Interest expense: | | | | | | | | | | | | | | | | |
| Interest on deposits: | | | | | | | | | | | | | | | | |
| Demand-interest bearing | | | 137 | | | | 589 | | | | 451 | | | | 2,144 | |
| Savings and money market accounts | | | 5,763 | | | | 6,932 | | | | 16,592 | | | | 23,075 | |
| Certificates and other time deposits | | | 12,284 | | | | 23,463 | | | | 46,197 | | | | 82,037 | |
| Interest on securities sold under agreements to repurchase | | | 1,286 | | | | 8,244 | | | | 3,496 | | | | 28,105 | |
| Interest on wholesale borrowings | | | 6,824 | | | | 6,801 | | | | 21,064 | | | | 20,133 | |
| | | | | | | | | | | | | |
| Total interest expense | | | 26,294 | | | | 46,029 | | | | 87,800 | | | | 155,494 | |
| | | | | | | | | | | | | |
| Net interest income | | | 87,377 | | | | 91,121 | | | | 261,386 | | | | 262,951 | |
| Provision for loan losses | | | 23,887 | | | | 15,531 | | | | 68,473 | | | | 41,617 | |
| | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 63,490 | | | | 75,590 | | | | 192,913 | | | | 221,334 | |
| | | | | | | | | | | | | |
| Other income: | | | | | | | | | | | | | | | | |
| Trust department income | | | 5,081 | | | | 5,562 | | | | 15,309 | | | | 16,836 | |
| Service charges on deposits | | | 16,782 | | | | 16,648 | | | | 46,798 | | | | 47,412 | |
| Credit card fees | | | 11,711 | | | | 12,084 | | | | 34,463 | | | | 35,387 | |
| ATM and other service fees | | | 2,935 | | | | 2,717 | | | | 8,380 | | | | 8,281 | |
| Bank owned life insurance income | | | 3,216 | | | | 3,139 | | | | 9,216 | | | | 9,557 | |
| Investment services and insurance | | | 2,498 | | | | 2,899 | | | | 7,686 | | | | 8,554 | |
| Investment securities gains, net | | | 2,925 | | | | — | | | | 4,103 | | | | 571 | |
| Loan sales and servicing income | | | 3,881 | | | | 1,370 | | | | 10,007 | | | | 4,646 | |
| Gain on Visa Inc. redemption | | | — | | | | — | | | | — | | | | 7,898 | |
| Gain on post medical retirement curtailment | | | — | | | | — | | | | 9,543 | | | | — | |
| Other operating income | | | 2,538 | | | | 2,610 | | | | 12,095 | | | | 9,499 | |
| | | | | | | | | | | | | |
| Total other income | | | 51,567 | | | | 47,029 | | | | 157,600 | | | | 148,641 | |
| | | | | | | | | | | | | |
| Other expenses: | | | | | | | | | | | | | | | | |
| Salaries, wages, pension and employee benefits | | | 43,351 | | | | 45,043 | | | | 130,158 | | | | 132,472 | |
| Net occupancy expense | | | 5,739 | | | | 5,741 | | | | 18,468 | | | | 18,699 | |
| Equipment expense | | | 5,847 | | | | 5,962 | | | | 17,856 | | | | 17,998 | |
| Stationery, supplies and postage | | | 2,167 | | | | 2,347 | | | | 6,493 | | | | 6,914 | |
| Bankcard, loan processing and other costs | | | 7,548 | | | | 7,497 | | | | 23,252 | | | | 22,097 | |
| Professional services | | | 3,980 | | | | 3,966 | | | | 10,316 | | | | 8,434 | |
| Amortization of intangibles | | | 86 | | | | 86 | | | | 260 | | | | 486 | |
| Other operating expense | | | 15,447 | | | | 9,967 | | | | 51,129 | | | | 35,293 | |
| | | | | | | | | | | | | |
| Total other expenses | | | 84,165 | | | | 80,609 | | | | 257,932 | | | | 242,393 | |
| | | | | | | | | | | | | |
| Income before federal income tax expense | | | 30,892 | | | | 42,010 | | | | 92,581 | | | | 127,582 | |
| Federal income tax expense | | | 8,129 | | | | 12,257 | | | | 24,889 | | | | 37,233 | |
| | | | | | | | | | | | | |
| Net income | | $ | 22,763 | | | $ | 29,753 | | | | 67,692 | | | $ | 90,349 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Other comprehensive income, net of taxes | | | | | | | | | | | | | | | | |
| Unrealized securities’ holding gain (loss), net of taxes | | $ | 28,172 | | | $ | (8,978 | ) | | | 50,235 | | | $ | (19,488 | ) |
| Unrealized hedging gain (loss), net of taxes | | | — | | | | 347 | | | | (94 | ) | | | 1,133 | |
| Minimum pension liability adjustment, net of taxes | | | (277 | ) | | | 875 | | | | (831 | ) | | | 2,621 | |
| Less: reclassification adjustment for securities’ gain realized in net income, net of taxes | | | 1,901 | | | | — | | | | 2,667 | | | | 371 | |
| | | | | | | | | | | | | |
| Total other comprehensive gain (loss), net of taxes | | | 25,994 | | | | (7,756 | ) | | | 46,643 | | | | (16,105 | ) |
| | | | | | | | | | | | | |
| Comprehensive income | | $ | 48,757 | | | $ | 21,997 | | | | 114,335 | | | $ | 74,244 | |
| | | | | | | | | | | | | |
| Net income applicable to common shares | | $ | 22,763 | | | $ | 29,753 | | | | 61,321 | | | $ | 90,349 | |
| | | | | | | | | | | | | |
| Net income used in diluted EPS calculation | | $ | 22,763 | | | $ | 29,753 | | | | 61,321 | | | $ | 90,354 | |
| | | | | | | | | | | | | |
| Weighted average number of common shares outstanding — basic * | | | 85,872 | | | | 82,090 | | | | 84,182 | | | | 82,015 | |
| | | | | | | | | | | | | |
| Weighted average number of common shares outstanding — diluted * | | | 85,880 | | | | 82,117 | | | | 84,190 | | | | 82,062 | |
| | | | | | | | | | | | | |
| Basic earnings per share * | | $ | 0.27 | | | $ | 0.36 | | | | 0.73 | | | $ | 1.10 | |
| | | | | | | | | | | | | |
| Diluted earnings per share * | | $ | 0.27 | | | $ | 0.36 | | | | 0.73 | | | $ | 1.10 | |
| | | | | | | | | | | | | |
| Stock dividend per share | | | 0.72 | % | | | — | | | | 0.73 | % | | | — | |
| | | | | | | | | | | | | |
| Dividend per share | | $ | 0.16 | | | $ | 0.29 | | | | 0.61 | | | $ | 0.87 | |
| | | | | | | | | | | | | |
| | |
| * | | Average outstanding shares and per share data restated to reflect the effect of stock dividends declared April 28, 2009 and August 20, 2009. |
10
| | | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME—LINKED QUARTERS | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarterly Results | |
| (Unaudited) | | 2009 | | | 2009 | | | 2009 | | | 2008 | | | 2008 | |
| (Dollars in thousands, except share data) | | 3rd Q | | | 2nd Q | | | 1st Q | | | 4th Q | | | 3rd Q | |
| | | | | | | | | | | | | | | | | | | | | |
| Interest and fees on loans, including held for sale | | $ | 84,283 | | | $ | 86,247 | | | $ | 87,799 | | | $ | 105,463 | | | $ | 107,927 | |
| Interest and dividends — securities and federal funds sold | | | 29,388 | | | | 29,912 | | | | 31,557 | | | | 29,918 | | | | 29,223 | |
| | | | | | | | | | | | | | | | |
| Total interest income | | | 113,671 | | | | 116,159 | | | | 119,356 | | | | 135,381 | | | | 137,150 | |
| | | | | | | | | | | | | | | | |
| Interest on deposits: | | | | | | | | | | | | | | | | | | | | |
| Demand-interest bearing | | | 137 | | | | 159 | | | | 155 | | | | 370 | | | | 589 | |
| Savings and money market accounts | | | 5,763 | | | | 5,452 | | | | 5,377 | | | | 6,764 | | | | 6,932 | |
| Certificates and other time deposits | | | 12,284 | | | | 15,325 | | | | 18,588 | | | | 23,816 | | | | 23,463 | |
| Securities sold under agreements to repurchase | | | 1,286 | | | | 1,211 | | | | 999 | | | | 3,752 | | | | 8,244 | |
| Wholesale borrowings | | | 6,824 | | | | 6,897 | | | | 7,343 | | | | 7,441 | | | | 6,801 | |
| | | | | | | | | | | | | | | | |
| Total interest expense | | | 26,294 | | | | 29,044 | | | | 32,462 | | | | 42,143 | | | | 46,029 | |
| | | | | | | | | | | | | | | | |
| Net interest income | | | 87,377 | | | | 87,115 | | | | 86,894 | | | | 93,238 | | | | 91,121 | |
| Provision for loan losses | | | 23,887 | | | | 26,521 | | | | 18,065 | | | | 16,986 | | | | 15,531 | |
| | | | | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 63,490 | | | | 60,594 | | | | 68,829 | | | | 76,252 | | | | 75,590 | |
| | | | | | | | | | | | | | | | |
| Other income: | | | | | | | | | | | | | | | | | | | | |
| Trust department income | | | 5,081 | | | | 5,438 | | | | 4,790 | | | | 5,291 | | | | 5,562 | |
| Service charges on deposits | | | 16,782 | | | | 15,853 | | | | 14,163 | | | | 15,450 | | | | 16,648 | |
| Credit card fees | | | 11,711 | | | | 11,668 | | | | 11,084 | | | | 11,667 | | | | 12,084 | |
| ATM and other service fees | | | 2,935 | | | | 2,839 | | | | 2,606 | | | | 2,613 | | | | 2,717 | |
| Bank owned life insurance income | | | 3,216 | | | | 2,985 | | | | 3,015 | | | | 2,451 | | | | 3,139 | |
| Investment services and insurance | | | 2,498 | | | | 2,270 | | | | 2,918 | | | | 1,949 | | | | 2,899 | |
| Investment securities gains, net | | | 2,925 | | | | 1,178 | | | | — | | | | 1,555 | | | | — | |
| Loan sales and servicing income | | | 3,881 | | | | 3,791 | | | | 2,335 | | | | 2,294 | | | | 1,370 | |
| Gain on Visa Inc. | | | — | | | | — | | | | — | | | | 5,768 | | | | — | |
| Gain on post medical retirement curtailment | | | — | | | | — | | | | 9,543 | | | | — | | | | — | |
| Other operating income | | | 2,538 | | | | 4,823 | | | | 4,734 | | | | 3,757 | | | | 2,610 | |
| | | | | | | | | | | | | | | | |
| Total other income | | | 51,567 | | | | 50,845 | | | | 55,188 | | | | 52,795 | | | | 47,029 | |
| | | | | | | | | | | | | | | | |
| Other expenses: | | | | | | | | | | | | | | | | | | | | |
| Salaries, wages, pension and employee benefits | | | 43,351 | | | | 44,125 | | | | 42,682 | | | | 46,991 | | | | 45,043 | |
| Net occupancy expense | | | 5,739 | | | | 5,858 | | | | 6,871 | | | | 5,950 | | | | 5,741 | |
| Equipment expense | | | 5,847 | | | | 6,212 | | | | 5,797 | | | | 6,139 | | | | 5,962 | |
| Stationery, supplies and postage | | | 2,167 | | | | 2,051 | | | | 2,275 | | | | 2,458 | | | | 2,347 | |
| Bankcard, loan processing and other costs | | | 7,548 | | | | 7,862 | | | | 7,842 | | | | 7,359 | | | | 7,497 | |
| Professional services | | | 3,980 | | | | 2,856 | | | | 3,480 | | | | 3,261 | | | | 3,966 | |
| Amortization of intangibles | | | 86 | | | | 87 | | | | 87 | | | | 87 | | | | 86 | |
| Other operating expense | | | 15,447 | | | | 21,513 | | | | 14,169 | | | | 15,995 | | | | 9,967 | |
| | | | | | | | | | | | | | | | |
| Total other expenses | | | 84,165 | | | | 90,564 | | | | 83,203 | | | | 88,240 | | | | 80,609 | |
| | | | | | | | | | | | | | | | |
| Income before income tax expense | | | 30,892 | | | | 20,875 | | | | 40,814 | | | | 40,807 | | | | 42,010 | |
| Federal income taxes | | | 8,129 | | | | 5,380 | | | | 11,380 | | | | 11,671 | | | | 12,257 | |
| | | | | | | | | | | | | | | | |
| Net income | | $ | 22,763 | | | $ | 15,495 | | | $ | 29,434 | | | $ | 29,136 | | | $ | 29,753 | |
| | | | | | | | | | | | | | | | |
| Other comprehensive income (loss), net of taxes | | | 25,994 | | | | 5,203 | | | | 15,446 | | | | 5,110 | | | | (7,756 | ) |
| | | | | | | | | | | | | | | | |
| Comprehensive income | | $ | 48,757 | | | $ | 20,698 | | | $ | 44,880 | | | $ | 34,246 | | | $ | 21,997 | |
| | | | | | | | | | | | | | | | |
| Net income applicable to common shares | | $ | 22,763 | | | $ | 10,995 | | | $ | 27,563 | | | $ | 29,136 | | | $ | 29,753 | |
| | | | | | | | | | | | | | | | |
| Adjusted net income used in diluted EPS calculation | | $ | 22,763 | | | $ | 10,995 | | | $ | 27,563 | | | $ | 29,136 | | | $ | 29,753 | |
| | | | | | | | | | | | | | | | |
| Weighted-average common shares — basic * | | | 85,872 | | | | 84,123 | | | | 82,514 | | | | 82,193 | | | | 82,090 | |
| | | | | | | | | | | | | | | | |
| Weighted-average common shares — diluted * | | | 85,880 | | | | 84,131 | | | | 82,523 | | | | 82,202 | | | | 82,117 | |
| | | | | | | | | | | | | | | | |
| Basic net income per share * | | $ | 0.27 | | | $ | 0.13 | | | $ | 0.33 | | | $ | 0.35 | | | $ | 0.36 | |
| | | | | | | | | | | | | | | | |
| Diluted net income per share * | | $ | 0.27 | | | $ | 0.13 | | | $ | 0.33 | | | $ | 0.35 | | | $ | 0.36 | |
| | | | | | | | | | | | | | | | |
| | |
| * | | Average outstanding shares and per share data restated to reflect the effect of stock dividends declared April 28, 2009 and August 20, 2009. |
11
| | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| (Unaudited, except December 31, 2008 annual period which | | Quarterly Periods | | | Annual Period | |
| is derived from the audited financial statements) | | Sept 30 | | | Jun 30 | | | Mar 31 | | | Dec 31 | | | Sept 30 | | | Dec 31 | |
| (Dollars in thousands, except ratios) | | 2009 | | | 2009 | | | 2009 | | | 2008 | | | 2008 | | | 2008 | |
Allowance for Credit Losses | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses, beginning of period | | $ | 111,222 | | | $ | 106,257 | | | $ | 103,757 | | | $ | 102,007 | | | $ | 98,239 | | | $ | 94,205 | |
| Provision for loan losses | | | 23,887 | | | | 26,521 | | | | 18,065 | | | | 16,986 | | | | 15,531 | | | | 58,603 | |
| Charge-offs | | | 21,819 | | | | 24,726 | | | | 18,936 | | | | 17,932 | | | | 14,957 | | | | 62,388 | |
| Recoveries | | | 3,062 | | | | 3,170 | | | | 3,371 | | | | 2,696 | | | | 3,194 | | | | 13,337 | |
| | | | | | | | | | | | | | | | | | | |
| Net charge-offs | | | 18,757 | | | | 21,556 | | | | 15,565 | | | | 15,236 | | | | 11,763 | | | | 49,051 | |
| | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses, end of period | | $ | 116,352 | | | $ | 111,222 | | | $ | 106,257 | | | $ | 103,757 | | | $ | 102,007 | | | $ | 103,757 | |
| | | | | | | | | | | | | | | | | | | |
| Reserve for unfunded lending commitments, beginning of period | | $ | 6,054 | | | $ | 6,019 | | | $ | 6,588 | | | $ | 6,493 | | | $ | 7,310 | | | $ | 7,394 | |
| Provision for credit losses | | | (1,584 | ) | | | 35 | | | | (569 | ) | | | 95 | | | | (817 | ) | | | (806 | ) |
| | | | | | | | | | | | | | | | | | | |
| Reserve for unfunded lending commitments, end of period | | $ | 4,470 | | | $ | 6,054 | | | $ | 6,019 | | | $ | 6,588 | | | $ | 6,493 | | | $ | 6,588 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for Credit Losses | | $ | 120,822 | | | $ | 117,276 | | | $ | 112,276 | | | $ | 110,345 | | | $ | 108,500 | | | $ | 110,345 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Ratios | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Provision for loan losses as a % of average loans | | | 1.34 | % | | | 1.47 | % | | | 0.99 | % | | | 0.92 | % | | | 0.85 | % | | | 0.81 | % |
| Provision for credit losses as a % of average loans | | | (0.09 | )% | | | (0.00 | )% | | | (0.03 | )% | | | 0.01 | % | | | (0.04 | )% | | | (0.01 | )% |
| Net charge-offs as a % of average loans | | | 1.05 | % | | | 1.19 | % | | | 0.86 | % | | | 0.82 | % | | | 0.64 | % | | | 0.68 | % |
| Allowance for loan losses as a % of period-end loans | | | 1.66 | % | | | 1.56 | % | | | 1.45 | % | | | 1.40 | % | | | 1.38 | % | | | 1.40 | % |
| Allowance for credit losses as a % of period-end loans | | | 1.72 | % | | | 1.64 | % | | | 1.53 | % | | | 1.49 | % | | | 1.47 | % | | | 1.49 | % |
| Allowance for loan losses as a % of nonperforming loans | | | 147.60 | % | | | 175.17 | % | | | 151.35 | % | | | 198.76 | % | | | 264.45 | % | | | 198.76 | % |
| Allowance for credit losses as a % of nonperforming loans | | | 153.27 | % | | | 184.71 | % | | | 159.93 | % | | | 211.38 | % | | | 281.28 | % | | | 211.38 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Asset Quality | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Impaired loans: | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual | | $ | 63,357 | | | $ | 48,563 | | | $ | 54,070 | | | $ | 40,195 | | | $ | 29,245 | | | $ | 40,195 | |
| Other nonperforming loans: | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual | | | 15,474 | | | | 14,929 | | | | 16,134 | | | | 12,007 | | | | 9,328 | | | | 12,007 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total nonperforming loans | | | 78,831 | | | | 63,492 | | | | 70,204 | | | | 52,202 | | | | 38,573 | | | | 52,202 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Other real estate (“ORE”) | | | 10,050 | | | | 9,859 | | | | 6,039 | | | | 5,324 | | | | 4,918 | | | | 5,324 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total nonperforming assets (“NPAs”) | | $ | 88,881 | | | $ | 73,351 | | | $ | 76,243 | | | $ | 57,526 | | | $ | 43,491 | | | $ | 57,526 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| NPAs as % of period-end loans + ORE | | | 1.26 | % | | | 1.03 | % | | | 1.04 | % | | | 0.77 | % | | | 0.59 | % | | | 0.77 | % |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Past due 90 days or more & accruing interest | | $ | 27,764 | | | $ | 22,129 | | | $ | 18,602 | | | $ | 23,928 | | | $ | 16,241 | | | $ | 23,928 | |
| | | | | | | | | | | | | | | | | | | |
12
| | |
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL | | |
| | | | | | | | | | | | | | | | | | | | | |
(Unaudited)
(Dollars in thousands) | | 2009 | | | 2009 | | | 2009 | | | 2008 | | | 2008 | |
| QUARTERLY OTHER INCOME DETAIL | | 3rd Qtr | | | 2nd Qtr | | | 1st Qtr | | | 4th Qtr | | | 3rd Qtr | |
| | | | | | | | | | | | | | | | | | | | | |
| Trust department income | | $ | 5,081 | | | $ | 5,438 | | | $ | 4,790 | | | $ | 5,291 | | | $ | 5,562 | |
| Service charges on deposits | | | 16,782 | | | | 15,853 | | | | 14,163 | | | | 15,450 | | | | 16,648 | |
| Credit card fees | | | 11,711 | | | | 11,668 | | | | 11,084 | | | | 11,667 | | | | 12,084 | |
| ATM and other service fees | | | 2,935 | | | | 2,839 | | | | 2,606 | | | | 2,613 | | | | 2,717 | |
| Bank owned life insurance income | | | 3,216 | | | | 2,985 | | | | 3,015 | | | | 2,451 | | | | 3,139 | |
| Investment services and insurance | | | 2,498 | | | | 2,270 | | | | 2,918 | | | | 1,949 | | | | 2,899 | |
| Investment securities gains, net | | | 2,925 | | | | 1,178 | | | | — | | | | 1,555 | | | | — | |
| Loan sales and servicing income | | | 3,881 | | | | 3,791 | | | | 2,335 | | | | 2,294 | | | | 1,370 | |
| Gain on Visa Inc. | | | — | | | | — | | | | — | | | | 5,768 | | | | — | |
| Gain on post medical retirement curtailment | | | — | | | | — | | | | 9,543 | | | | — | | | | — | |
| Other operating income | | | 2,538 | | | | 4,823 | | | | 4,734 | | | | 3,757 | | | | 2,610 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Other Income | | $ | 51,567 | | | $ | 50,845 | | | $ | 55,188 | | | $ | 52,795 | | | $ | 47,029 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | 2009 | | | 2009 | | | 2008 | | | 2008 | |
| QUARTERLY OTHER EXPENSES DETAIL | | 3rd Qtr | | | 2nd Qtr | | | 1st Qtr | | | 4th Qtr | | | 3rd Qtr | |
| | | | | | | | | | | | | | | | | | | | | |
| Salaries, wages, pension and employee benefits | | $ | 43,351 | | | $ | 44,125 | | | $ | 42,682 | | | $ | 46,991 | | | $ | 45,043 | |
| Net occupancy expense | | | 5,739 | | | | 5,858 | | | | 6,871 | | | | 5,950 | | | | 5,741 | |
| Equipment expense | | | 5,847 | | | | 6,212 | | | | 5,797 | | | | 6,139 | | | | 5,962 | |
| Taxes, other than federal income taxes | | | 1,646 | | | | 1,631 | | | | 1,626 | | | | 1,463 | | | | 1,714 | |
| Stationery, supplies and postage | | | 2,167 | | | | 2,051 | | | | 2,275 | | | | 2,458 | | | | 2,347 | |
| Bankcard, loan processing and other costs | | | 7,548 | | | | 7,862 | | | | 7,842 | | | | 7,359 | | | | 7,497 | |
| Advertising | | | 1,635 | | | | 1,887 | | | | 1,971 | | | | 1,863 | | | | 2,476 | |
| Professional services | | | 3,980 | | | | 2,856 | | | | 3,480 | | | | 3,261 | | | | 3,966 | |
| Telephone | | | 1,010 | | | | 997 | | | | 1,014 | | | | 978 | | | | 956 | |
| Amortization of intangibles | | | 86 | | | | 87 | | | | 87 | | | | 87 | | | | 86 | |
| Other operating expense | | | 11,156 | | | | 16,998 | | | | 9,558 | | | | 11,691 | | | | 4,821 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Other Expenses | | $ | 84,165 | | | $ | 90,564 | | | $ | 83,203 | | | $ | 88,240 | | | $ | 80,609 | |
| | | | | | | | | | | | | | | | |
13
| | | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES — Net Charge-off Detail | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarters ended | | | Year ended | | | Nine months ended | |
| (Unaudited) | | September 30, | | | December 31, | | | September 30, | |
| (Dollars in thousands) | | 2009 | | | 2008 | | | 2008 | | | 2009 | | | 2008 | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses — beginning of period | | $ | 111,222 | | | $ | 98,239 | | | $ | 94,205 | | | $ | 103,757 | | | $ | 94,205 | |
| Loans charged off: | | | | | | | | | | | | | | | | | | | | |
| Commercial | | | 7,208 | | | | 3,556 | | | | 16,318 | | | | 21,892 | | | | 10,727 | |
| Mortgage | | | 1,455 | | | | 1,162 | | | | 4,696 | | | | 3,693 | | | | 3,671 | |
| Installment | | | 7,135 | | | | 5,840 | | | | 24,740 | | | | 23,060 | | | | 17,464 | |
| Home equity | | | 1,911 | | | | 1,154 | | | | 4,153 | | | | 4,943 | | | | 3,446 | |
| Credit cards | | | 3,384 | | | | 2,522 | | | | 9,821 | | | | 10,047 | | | | 7,315 | |
| Leases | | | — | | | | 20 | | | | 26 | | | | 3 | | | | 20 | |
| Overdrafts | | | 726 | | | | 703 | | | | 2,634 | | | | 1,843 | | | | 1,813 | |
| | | | | | | | | | | | | | | | |
| Total | | | 21,819 | | | | 14,957 | | | | 62,388 | | | | 65,481 | | | | 44,456 | |
| | | | | | | | | | | | | | | | |
| Recoveries: | | | | | | | | | | | | | | | | | | | | |
| Commercial | | | 90 | | | | 232 | | | | 2,388 | | | | 521 | | | | 1,986 | |
| Mortgage | | | 41 | | | | 2 | | | | 76 | | | | 260 | | | | 41 | |
| Installment | | | 2,104 | | | | 1,757 | | | | 7,071 | | | | 6,527 | | | | 5,598 | |
| Home equity | | | 99 | | | | 484 | | | | 851 | | | | 295 | | | | 726 | |
| Credit cards | | | 514 | | | | 439 | | | | 1,831 | | | | 1,289 | | | | 1,455 | |
| Manufactured housing | | | 37 | | | | 44 | | | | 247 | | | | 122 | | | | 170 | |
| Leases | | | 6 | | | | 28 | | | | 104 | | | | 53 | | | | 97 | |
| Overdrafts | | | 171 | | | | 208 | | | | 769 | | | | 536 | | | | 568 | |
| | | | | | | | | | | | | | | | |
| Total | | | 3,062 | | | | 3,194 | | | | 13,337 | | | | 9,603 | | | | 10,641 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs | | | 18,757 | | | | 11,763 | | | | 49,051 | | | | 55,878 | | | | 33,815 | |
| Provision for loan losses | | | 23,887 | | | | 15,531 | | | | 58,603 | | | | 68,473 | | | | 41,617 | |
| | | | | | | | | | | | | | | | |
| Allowance for loan losses — end of period | | $ | 116,352 | | | $ | 102,007 | | | $ | 103,757 | | | $ | 116,352 | | | $ | 102,007 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Average loans outstanding | | $ | 7,057,021 | | | $ | 7,282,333 | | | $ | 7,203,946 | | | $ | 7,227,077 | | | $ | 7,149,451 | |
| | | | | | | | | | | | | | | | |
| Ratio to average loans: | | | | | | | | | | | | | | | | | | | | |
| (Annualized) net charge-offs | | | 1.05 | % | | | 0.64 | % | | | 0.68 | % | | | 1.03 | % | | | 0.63 | % |
| | | | | | | | | | | | | | | | |
| Provision for loan losses | | | 1.34 | % | | | 0.85 | % | | | 0.81 | % | | | 1.27 | % | | | 0.78 | % |
| | | | | | | | | | | | | | | | |
| Loans outstanding — period-end | | $ | 7,029,648 | | | $ | 7,381,592 | | | $ | 7,425,613 | | | $ | 7,029,648 | | | $ | 7,381,592 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for credit losses: | | $ | 120,822 | | | $ | 108,500 | | | $ | 110,345 | | | $ | 120,822 | | | $ | 108,500 | |
| | | | | | | | | | | | | | | | |
| As a multiple of (annualized) net charge-offs | | | 1.62 | | | | 2.32 | | | | 2.25 | | | | 1.62 | | | | 2.40 | |
| | | | | | | | | | | | | | | | |
| Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | |
| As a percent of period-end loans outstanding | | | 1.66 | % | | | 1.38 | % | | | 1.40 | % | | | 1.66 | % | | | 1.38 | % |
| | | | | | | | | | | | | | | | |
| As a multiple of (annualized) net charge-offs | | | 1.56 | | | | 2.18 | | | | 2.12 | | | | 1.56 | | | | 2.26 | |
| | | | | | | | | | | | | | | | |
14
