FirstMerit (FMER) 10-Q 2006 Q2 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2006

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

COMMISSION FILE NUMBER 0-10161

FIRSTMERIT CORPORATION

(Exact name of registrant as specified in its charter)

OHIO
(State or other jurisdiction of
incorporation or organization) 34-1339938
(IRS Employer Identification
Number)

III CASCADE PLAZA, 7TH FLOOR, AKRON,
OHIO 44308-1103
(Address of principal executive offices)

(330) 996-6300
(Telephone Number)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

     As of July 31, 2006 80,060,459 shares, without par value, were outstanding.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION ITEM 1. Financial Statements
	FIRSTMERIT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
		FIRSTMERIT CORPORATION AND SUBSIDIARIES
		FirstMerit Corporation and
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
		AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
		Fully-tax Equivalent Interest Rates and Interest Differential
	RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 1A. RISK FACTORS
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EX-10.5
EX-31.1
EX-31.2
EX-32.1

PART I — FINANCIAL INFORMATION
ITEM 1. Financial Statements

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands)
(Unaudited, except December 31, 2005, which is derived from the	June 30,			December 31,			June 30,
audited financial statements)	2006			2005			2005
ASSETS
Cash and due from banks	$	228,690			225,953			201,240
Investment securities (at fair value)		2,436,086			2,546,496			2,828,127
Federal funds sold		25,000			—			890
Loans held for sale		49,207			42,566			52,555
Loans:
Commercial loans		3,659,687			3,519,483			3,422,758
Mortgage loans		618,560			628,581			634,777
Installment loans		1,561,757			1,524,355			1,601,022
Home equity loans		763,585			778,697			737,207
Credit card loans		136,966			145,592			138,335
Leases		64,214			70,619			76,286
Total loans		6,804,769			6,667,327			6,610,385
Less allowance for loan losses		(87,727	)		(90,661	)		(92,808	)
Net loans		6,717,042			6,576,666			6,517,577
Premises and equipment, net		119,233			120,420			118,038
Goodwill		139,245			139,245			139,245
Intangible assets		3,311			3,756			4,200
Accrued interest receivable and other assets		536,959			499,257			452,083
Total assets	$	10,254,773			10,154,359			10,313,955
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand-non-interest bearing	$	1,466,628			1,523,731			1,439,800
Demand-interest bearing		842,354			830,248			834,315
Savings and money market accounts		2,261,557			2,304,177			2,350,829
Certificates and other time deposits		2,831,700			2,575,494			2,548,913
Total deposits		7,402,239			7,233,650			7,173,857
Securities sold under agreements to repurchase		1,156,346			1,426,037			1,699,337
Wholesale borrowings		658,720			401,104			333,627
Accrued taxes, expenses, and other liabilities		166,770			155,988			131,118
Total liabilities		9,384,075			9,216,779			9,337,939
Commitments and contingencies Shareholders’ equity:
Preferred stock, without par value:
authorized and unissued 7,000,000 shares		—			—			—
Preferred stock, Series A, without par value:
designated 800,000 shares; none outstanding		—			—			—
Convertible preferred stock, Series B, without par value:
designated 220,000 shares; none outstanding		—			—			—
Common stock, without par value:
authorized 300,000,000 shares; issued 92,026,350 at June 30, 2006, December 31, 2005 and June 30, 2005		127,937			127,937			127,937
Capital surplus		105,397			108,210			108,736
Accumulated other comprehensive loss		(62,013	)		(42,850	)		(19,651	)
Retained earnings		1,007,346			994,487			977,052
Treasury stock, at cost, 11,968,035, 9,691,424 and 8,504,487 shares at June 30, 2006, December 31, 2005 and June 30, 2005, respectively		(307,969	)		(250,204	)		(218,058	)
Total shareholders’ equity		870,698			937,580			976,016
Total liabilities and shareholders’ equity	$	10,254,773			10,154,359			10,313,955

The accompanying notes are an integral part of the consolidated financial statements.

FIRSTMERIT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

	Quarters ended						Six months ended
(Unaudited)	June 30,						June 30,
(In thousands except per share data)	2006			2005			2006			2005
Interest income:
Interest and fees on loans, including held for sale	$	123,450			105,975			241,190			206,124
Interest and dividends on investment securities and federal funds sold		24,820			27,802			50,152			55,494
Total interest income		148,270			133,777			291,342			261,618
Interest expense:
Interest on deposits:
Demand-interest bearing		2,583			1,230			4,945			2,186
Savings and money market accounts		12,079			7,517			22,827			13,892
Certificates and other time deposits		29,326			20,696			55,427			41,296
Interest on securities sold under agreements to repurchase		12,957			10,624			24,880			19,465
Interest on wholesale borrowings		5,595			5,933			11,560			10,992
Total interest expense		62,540			46,000			119,639			87,831
Net interest income		85,730			87,777			171,703			173,787
Provision for loan losses		13,159			5,972			19,265			17,586
Net interest income after provision for loan losses		72,571			81,805			152,438			156,201
Other income:
Trust department income		5,744			5,684			11,138			11,189
Service charges on deposits		18,010			17,800			34,076			32,620
Credit card fees		11,478			10,523			22,149			19,934
ATM and other service fees		3,273			3,298			6,381			6,257
Bank owned life insurance income		5,310			3,024			8,296			6,098
Investment services and insurance		2,581			2,828			5,178			5,686
Investment securities gains, net		4			(25	)		20			1,847
Loan sales and servicing income		2,833			1,520			4,278			2,653
Other operating income		2,845			5,443			5,959			8,750
Total other income		52,078			50,095			97,475			95,034
Other expenses:
Salaries, wages, pension and employee benefits		46,721			41,351			89,752			80,744
Net occupancy expense		6,120			5,881			12,669			12,417
Equipment expense		2,914			3,002			5,872			6,187
Stationery, supplies and postage		2,403			2,484			4,856			4,945
Bankcard, loan processing and other costs		7,417			5,444			13,244			11,168
Professional services		3,738			3,843			6,501			5,993
Amortization of intangibles		222			222			445			445
Other operating expense		15,683			17,170			33,778			33,409
Total other expenses		85,218			79,397			167,117			155,308
Income before federal income tax expense		39,431			52,503			82,796			95,927
Federal income tax expense		11,770			16,358			25,171			29,694
Net income	$	27,661			36,145			57,625			66,233
Other comprehensive income (loss), net of taxes
Unrealized securities’ holding gain (loss), net of taxes		(8,652	)		18,111			(18,400	)		(4,493	)
Unrealized hedging gain (loss), net of taxes		37			538			(750	)		556
Minimum pension liability adjustment, net of taxes		—			(122	)		—			(305	)
Less: reclassification adjustment for securities’ gains losses realized in net income, net of taxes		3			(16	)		13			1,201
Total other comprehensive income (loss), net of taxes		(8,618	)		18,543			(19,163	)		(5,443	)
Comprehensive income	$	19,043			54,688			38,462			60,790
Net income applicable to common shares	$	27,661			36,145			57,625			66,233
Net income used in diluted EPS calculation	$	27,666			36,152			57,635			66,247
Weighted average number of common shares outstanding — basic		79,983			83,603			80,177			83,849
Weighted average number of common shares outstanding — diluted		80,203			83,890			80,420			84,187
Basic earnings per share	$	0.35			0.43			0.72			0.79
Diluted earnings per share	$	0.35			0.43			0.72			0.79
Dividend per share	$	0.28			0.27			0.56			0.54

The accompanying notes are an integral part of the consolidated financial statements.

FIRSTMERIT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended June 30,
(Unaudited)	2006			2005
	(In thousands)
Operating Activities
Net income	$	57,625			66,233
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		19,265			17,586
Provision for depreciation and amortization		7,251			6,801
Amortization of investment securities premiums, net		1,464			2,198
Accretion of income for lease financing		(1,941	)		(2,335	)
Gains on sales of investment securities, net		(20	)		(1,847	)
(Increase) decrease in interest receivable		1,912			(1,690	)
Increase in interest payable		7,620			330
Increase in prepaid assets		(4,337	)		(3,175	)
Increase in bank owned life insurance		(4,278	)		(6,100	)
Originations of loans held for sale		(167,936	)		(175,771	)
Proceeds from sales of loans, primarily mortgage loans sold in the secondary mortgage markets		161,653			171,026
(Gains) losses on sales of loans, net		(358	)		573
Amortization of intangible assets		445			445
Other changes		(1,885	)		(2,046	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		76,480			72,228
Investing Activities
Dispositions of investment securities:
Available-for-sale — sales		—			87,524
Available-for-sale — maturities		255,007			249,222
Purchases of available-for-sale investment securities		(174,370	)		(310,887	)
Net (increase) decrease in fed funds sold		(25,000	)		685
Net increase in loans and leases, except sales		(170,541	)		(197,667	)
Purchases of premises and equipment		(8,017	)		(4,783	)
Sales of premises and equipment		1,953			1,142
NET CASH USED BY INVESTING ACTIVITIES		(120,968	)		(174,764	)
Financing Activities
Net decrease in demand accounts		(44,997	)		(38,023	)
Net decrease in savings and money market accounts		(42,620	)		(33,681	)
Net increase (decrease) in certificates and other time deposits		256,206			(119,886	)
Net increase (decrease) in securities sold under agreements to repurchase		(269,691	)		362,866
Net increase in wholesale borrowings		257,616			30,562
Cash dividends — common		(44,766	)		(45,983	)
Purchase of treasury shares		(65,430	)		(25,605	)
Proceeds from exercise of stock options, conversion of debentures or conversion of preferred stock		907			4,474
NET CASH PROVIDED BY FINANCING ACTIVITIES		47,225			134,724
Increase in cash and cash equivalents		2,737			32,188
Cash and cash equivalents at beginning of period		225,953			169,052
Cash and cash equivalents at end of period	$	228,690			201,240
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized	$	69,702			49,660
Federal income taxes	$	25,150			30,020

The accompanying notes are an integral part of the consolidated financial statements.

FirstMerit Corporation and Subsidiaries

Notes to Consolidated Financial Statements
June 30, 2006(Unaudited)(Dollars in thousands except per share data)

1.Company Organization and Financial Presentation — FirstMerit Corporation (“Corporation”) is a bank holding company whose principal asset is the common stock of its wholly-owned subsidiary, FirstMerit Bank, N. A. The Corporation’s other subsidiaries include Citizens Savings Corporation of Stark County, FirstMerit Capital Trust I, FirstMerit Community Development Corporation, FMT, Inc., SF Development Corp and Realty Facility Holdings XV, L.L.C.

     The consolidated balance sheet at December 31, 2005 has been derived from the audited consolidated financial statements at that date. The accompanying unaudited interim financial statements reflect all adjustments (consisting only of normally recurring accruals) that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted in accordance with the rules of the Securities and Exchange Commission (“SEC”). The consolidated financial statements of the Corporation as of June 30, 2006 and 2005 and for the six months ended June 30, 2006 and 2005 are not necessarily indicative of the results that may be achieved for the full fiscal year or for any future period. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 31, 2005.

     Certain previously reported amounts have been reclassified to conform to the current reporting presentation.

2.Recent Accounting Pronouncements — During February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Standards (“SFAS”) No. 156 “Accounting for Servicing of Financial Assets,” which amends SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” with respect to the accounting for separately recognized servicing assets and servicing liabilities. This statement requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value. SFAS No. 156 permits, but does not require, the subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value. SFAS No.156 is effective for the first fiscal year that begins after September 15, 2006, but permits earlier adoption. Management has not elected to early adopt and does not anticipate that adoption will have a material impact on the Corporation’s consolidated financial condition or results of operations.

     During February 2006, the FASB issued SFAS No. 155 “Accounting for Certain Hybrid Financial Instruments” which amends SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” and SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. It also clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133 and establishes a requirement to

evaluate interests in securitized financial assets to identify interest that contain an embedded derivative requiring bifurcation. This statement is effective for all financial instruments acquired or issued after the beginning of the entity’s first fiscal year that begins after September 15, 2006. Management is currently evaluating the impact of SFAS No. 155 and does not anticipate that it will have a material impact on the Corporation’s consolidated financial condition or results of operations.

     On July 13, 2006, the FASB issued FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes (“FIN 48”.) This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statement in accordance with SFAS No. 109 “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective for fiscal years beginning after December 15, 2006. Management is currently evaluating the impact of FIN 48 and does not anticipate that it will have a material impact on the Corporation’s consolidated financial condition or results of operations.

     On July 13, 2006 the FASB also issued FASB Staff Position (“FSP”) FAS 13-2, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction.” This FSP amends SFAS No. 13 to require a lessor in a leveraged-lease transaction to recalculate the leveraged lease for the effect of a change or projected change in the timing of cash flows relating to income taxes that are generated by the leveraged lease. The Corporation is currently evaluating the impact of FSP FAS 13-2 and does not anticipate that it will have a material impact on the Corporation’s consolidated financial condition or results of operations.

3.Investment Securities — All investment securities of the Corporation are classified as available-for-sale. The available-for-sale classification provides the Corporation with more flexibility to respond, through the portfolio, to changes in market interest rates, or to increases in loan demand or deposit withdrawals.

     The components of investment securities are as follows:

	June 30, 2006
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available for sale:
U.S. Government agency obligations	$	959,392		—		26,827		932,565
Obligations of state and political subdivisions		103,376		780		514		103,642
Mortgage-backed securities		1,213,682		153		61,615		1,152,220
Other securities		247,375		2,752		2,468		247,659
	$	2,523,825		3,685		91,424		2,436,086

	Book Value		Fair Value
Due in one year or less	$	352,238		347,932
Due after one year through five years		1,967,860		1,885,006
Due after five years through ten years		73,518		71,832
Due after ten years		130,209		131,316
	$	2,523,825		2,436,086

	December 31, 2005
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available for sale:
U.S. Government agency obligations	$	926,459		1		22,056		904,404
Obligations of state and political subdivisions		92,378		1,512		53		93,837
Mortgage-backed securities		1,338,694		819		39,964		1,299,549
Other securities		248,376		2,071		1,741		248,706
	$	2,605,907		4,403		63,814		2,546,496

			Fair
	Book Value		Value
Due in one year or less	$	150,505		149,204
Due after one year through five years		2,158,175		2,101,053
Due after five years through ten years		178,355		176,118
Due after ten years		118,872		120,121
	$	2,605,907		2,546,496

	June 30, 2005
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available for sale:
U.S. Treasury securities		747		34		3		778
U.S. Government agency obligations	$	973,290		434		13,200		960,524
Obligations of state and political subdivisions		100,128		2,474		30		102,572
Mortgage-backed securities		1,526,454		2,090		20,409		1,508,135
Other securities		255,805		1,599		1,286		256,118
	$	2,856,424		6,631		34,928		2,828,127

			Fair
	Book Value		Value
Due in one year or less	$	140,094		138,877
Due after one year through five years		2,326,571		2,297,868
Due after five years through ten years		256,565		256,768
Due after ten years		133,194		134,614
	$	2,856,424		2,828,127

     Expected maturities will differ from contractual maturities based on the issuers’ rights to call or prepay obligations with or without call or prepayment penalties. Securities with remaining maturities over five years consist of mortgage and asset backed securities.

     The carrying amount of investment securities pledged to secure trust and public deposits and for purposes required or permitted by law amounted to approximately $1.8 billion at June 30, 2006, $1.9 billion at December 31, 2005, and $2.0 billion at June 30, 2005.

     At June 30, 2006, December 31, 2005 and June 30, 2005, the Corporation’s investment in Federal Reserve Bank (“FRB”) common stock was $8.6 million for each period. At June 30, 2006, December 31, 2005 and June 30, 2005, the Corporation’s investment in Federal Home Loan Bank (“FHLB”) stock amounted to $111.2 million, $108.1 million and $105.2 million, respectively and is included in other securities in the preceding table. FRB and FHLB stock are classified as a restricted investment, carried at cost, and their value is determined by the ultimate recoverability of par value.

     The following tables show the unrealized losses that have not been recognized as other-than-temporary in accordance with FASB Staff Position (“FSP) No. FAS 115-1. Management believes that due to the credit-worthiness of the issuers and the fact that the Corporation has the intent and the ability to hold the securities for the period necessary to recover the cost of the securities, the decline in the fair values is temporary in nature.

	At June 30, 2006
	Less than 12 months					12 months or longer							Total
											No.
Description of			Unrealized					Unrealized			Securities				Unrealized
Securities	Fair Value		Losses			Fair Value		Losses			Impaired		Fair Value		Losses
U.S. Government agency obligations	$	141,141		(738	)		761,424		(26,089	)		39		902,565		(26,827	)
Obligations of states and political subdivisions		30,268		(426	)		2,261		(88	)		4		32,529		(514	)
Mortgage-backed securities		96,579		(2,495	)		1,024,252		(59,120	)		57		1,120,831		(61,615	)
Other securities		40,210		(1,718	)		38,809		(750	)		5		79,019		(2,468	)
Total temporarily impaired securities	$	308,198		(5,377	)		1,826,746		(86,047	)		105		2,134,944		(91,424	)

	At December 31, 2005
	Less than 12 months					12 months or longer							Total
											No.
Description of			Unrealized					Unrealized			Securities				Unrealized
Securities	Fair Value		Losses			Fair Value		Losses			Impaired		Fair Value		Losses
U.S. Government agency obligations	$	289,001		(5,361	)		615,319		(16,695	)		33		904,320		(22,056	)
Obligations of states and political subdivisions		3,795		(11	)		1,988		(42	)		3		5,783		(53	)
Mortgage-backed securities		420,506		(7,630	)		834,827		(32,334	)		41		1,255,333		(39,964	)
Other securities		79,095		(1,232	)		14,403		(509	)		3		93,498		(1,741	)
Total temporarily impaired securities	$	792,397		(14,234	)		1,466,537		(49,580	)		80		2,258,934		(63,814	)

	At June 30, 2005
	Less than 12 months					12 months or longer							Total
											No.
Description of			Unrealized					Unrealized			Securities				Unrealized
Securities	Fair Value		Losses			Fair Value		Losses			Impaired		Fair Value		Losses
U.S. Treasury securities	$	247		(3	)		—		—			—		247		(3	)
U.S. Government agency obligations		385,285		(2,057	)		536,901		(11,144	)		30		922,186		(13,201	)
Obligations of states and political subdivisions		4,633		(13	)		1,724		(6	)		2		6,357		(19	)
Mortgage-backed securities		526,963		(3,241	)		792,859		(17,168	)		37		1,319,822		(20,409	)
Other securities		18,243		(245	)		40,723		(1,041	)		6		58,966		(1,286	)
Total temporarily impaired securities	$	935,371		(5,559	)		1,372,207		(29,359	)		75		2,307,578		(34,918	)

4.Allowance for loan losses (“ALL”) — The Corporation’s Credit Policy Division manages credit risk by establishing common credit policies for its subsidiary bank, participating in approval of its loans, conducting reviews of loan portfolios, providing centralized consumer underwriting, collections and loan operation services, and overseeing loan workouts. The Corporation’s objective is to minimize losses from its commercial lending activities and to maintain consumer losses at acceptable levels that are stable and consistent with growth and profitability objectives.

     The activity within the ALL for the three and six months ended June 30, 2006 and 2005 and the full year ended December 31, 2005 is shown in the following table:

					Six		Six
	Quarter ended		Quarter ended		months ended		months ended		Year ended
	June 30,		June 30,		June 30,		June 30,		December 31,
	2006		2005		2006		2005		2005
Allowance for loan losses-beginning of period	$	87,589		97,115		90,661		97,296		97,296
Loans charged off:
Commercial		10,086		4,502		16,152		8,653		19,349
Mortgage		325		415		698		682		1,721
Installment		4,524		6,514		10,554		14,057		29,307
Home equity		1,146		571		1,766		1,323		4,340
Credit cards		1,951		2,662		3,725		5,082		11,320
Leases		6		758		57		2,365		3,068
Total charge-offs	$	18,038		15,422		32,952		32,162		69,105
Recoveries:
Commercial		945		1,184		2,382		2,212		4,166
Mortgage		30		52		86		107		190
Installment		2,965		2,580		6,111		5,305		9,495
Home equity		307		318		685		611		1,302
Credit cards		585		734		1,034		1,310		2,348
Manufactured housing		84		147		185		355		710
Leases		101		129		270		189		439
Total recoveries	$	5,017		5,144		10,753		10,089		18,650
Net charge-offs	$	13,021		10,278		22,199		22,073		50,455
Provision for loan losses		13,159		5,971		19,265		17,585		43,820
Allowance for loan losses-end of period	$	87,727		92,808		87,727		92,808		90,661

     Note 1 (Summary of Significant Accounting Policies) and Note 4 (Allowance for Loan Losses) in the 2005 Form 10-K, as amended more fully describe the components of the allowance for loan loss model.

5.Goodwill and Intangible Assets — The following table summarizes goodwill and intangible assets:

	At June 30, 2006						At December 31, 2005						At June 30, 2005
	Gross		Accumulated		Net		Gross		Accumulated		Net		Gross		Accumulated		Net
	Amount		Amortization		Amount		Amount		Amortization		Amount		Amount		Amortization		Amount
Amortizable intangible assets:
Deposit base intangible assets	$	10,137		6,826		3,311		10,137		6,381		3,756		10,137		5,937		4,200
Unamortizable intangible assets:
Goodwill	$	139,245				139,245		139,245				139,245		139,245				139,245

     Amortization expense for intangible assets was $0.22 million for both quarters ended June 30, 2006 and 2005. The following table shows the estimated future amortization expense for deposit base intangible assets based on existing asset balances at December 31, 2005:

For the years ended:

December 31, 2006	$	889
December 31, 2007		889
December 31, 2008		573
December 31, 2009		347
December 31, 2010		347

     During the first quarter of 2006, the Corporation conducted its annual impairment testing as required by SFAS No. 142 “Goodwill and Other Intangible Assets,” and concluded that goodwill was not impaired.

6.Earnings per share — The reconciliation between basic and diluted earnings per share (“EPS”) is calculated utilizing the treasury stock method and presented as follows:

					Six		Six
	Quarter ended		Quarter ended		months ended		months ended
	June 30,		June 30,		June 30,		June 30,
	2006		2005		2006		2005
BASIC EPS:
Net income applicable to common shares	$	27,661		36,145		57,625		66,233
Average common shares outstanding		79,983		83,603		80,177		83,849
Net income per share — basic	$	0.35		0.43		0.72		0.79
DILUTED EPS:
Net income available to common shares	$	27,661		36,145		57,625		66,233
Add: interest expense on convertible bonds		5		7		10		14
		27,666		36,152		57,635		66,247
Avg common shares outstanding		79,983		83,603		80,177		83,849
Add: Equivalents from stock options and restricted stock		170		235		193		285
Add: Equivalents-convertible bonds		50		52		50		53
Average common shares and equivalents outstanding		80,203		83,890		80,420		84,187
Net income per common share — diluted	$	0.35		0.43		0.72		0.79

     For the quarters ended June 30, 2006 and 2005, options to purchase 6.7 million and 5.8 million shares, respectively, were outstanding, but not included in the computation of diluted earnings per share because they were antidilutive.

     On January 20, 2006 the Corporation entered into an accelerated share repurchase arrangement with Goldman, Sachs & Co. to repurchase 2.5 million common shares. The initial price paid per common shares was $25.97. The repurchased common shares were subject to a volume weighted average share price during the repurchase period that ended on March 29, 2006. The 103,728 shares received by the Corporation as a purchase price adjustment at settlement, as well as the repurchased common shares, were reflected in treasury stock on the consolidated balance sheet to be used solely to satisfy the obligations of the Corporation under its various employee stock option, thrift savings, purchase programs or other corporate purposes.

7.Segment Information — The Corporation provides a diversified range of banking and certain nonbanking financial services and products through its various subsidiaries. Management reports the Corporation’s results through its major segment classification, Supercommunity Banking. Included in the Parent Company and Other Subsidiaries category are certain nonbanking affiliates and portions of certain assets, capital, and support functions not specifically identifiable with Supercommunity Banking.

     The Corporation’s business is conducted solely in the United States of America. The following tables present a summary of financial results as of and for the three-month and six-month periods ended June 30, 2006 and 2005 and the full year ended December 31, 2005:

	Supercommunity				Parent Company and												FirstMerit
	Banking				Other Subsidiaries						Eliminations						Consolidated
June 30, 2006	2nd Qtr		YTD		2nd Qtr			YTD			2nd Qtr			YTD			2nd Qtr		YTD
OPERATIONS (thousands) :
Net interest income	$	83,714		167,758		28,073			56,049			(26,057	)		(52,104	)		85,730		171,703
Provision for loan losses		13,160		19,313		(1	)		(48	)		—			—			13,159		19,265
Other income		52,078		97,475		—			—			—			—			52,078		97,475
Other expenses		82,757		163,443		2,458			3,665			3			9			85,218		167,117
Net income		28,305		57,642		29,153			60,597			(29,797	)		(60,614	)		27,661		57,625
AVERAGES (millions) :
Assets	$	9,944		9,979		1,081			1,091			(973	)		(993	)		10,052		10,077
Loans		6,728		6,711		3			3			—			—			6,731		6,714
Earning assets		9,169		9,205		1,040			1,045			(1,035	)		(1,040	)		9,174		9,210
Deposits		7,458		7,407		—			—			(32	)		(37	)		7,426		7,370
Shareholders’ equity		714		718		1,047			1,057			(891	)		(895	)		870		880

	Supercommunity		Parent Company and						FirstMerit
	Banking		Other Subsidiaries			Eliminations			Consolidated
December 31, 2005	YTD		YTD			YTD			YTD
OPERATIONS (thousands) :
Net interest income	$	342,089		200,687			(193,781	)		348,995
Provision for loan losses		43,853		(33	)		—			43,820
Other income		190,056		410			—			190,466
Other expenses		309,213		4,287			8			313,508
Net income		128,427		137,933			(135,877	)		130,483
AVERAGES (millions) :
Assets	$	10,177		1,253			(1,165	)		10,265
Loans		6,605		6			—			6,611
Earning assets		9,418		1,116			(1,100	)		9,434
Deposits		7,334		—			(36	)		7,298
Shareholders’ equity		800		1,151			(984	)		967

	Supercommunity				Parent Company and										FirstMerit
	Banking				Other Subsidiaries				Eliminations						Consolidated
June 30, 2005	2nd Qtr		YTD		2nd Qtr		YTD		2nd Qtr			YTD			2nd Qtr		YTD
OPERATIONS (thousands) :
Net interest income	$	86,120		170,552		27,234		53,029		(25,577	)		(49,794	)		87,777		173,787
Provision for loan losses		5,820		17,586		152		—		—			—			5,972		17,586
Other income		49,933		94,719		162		315		—			—			50,095		95,034
Other expenses		78,046		152,765		1,347		2,536		4			7			79,397		155,308
Net income		35,938		65,571		38,328		69,626		(38,121	)		(68,964	)		36,145		66,233
AVERAGES (millions) :
Assets	$	10,242		10,194		1,248		1,254		(1,161	)		(1,170	)		10,329		10,278
Loans		6,597		6,543		4		4		—			—			6,601		6,547
Earning assets		9,473		9,438		1,113		1,114		(1,097	)		(1,098	)		9,489		9,454
Deposits		7,357		7,380		—		—		(35	)		(42	)		7,322		7,338
Shareholders’ equity		798		799		1,146		1,154		(982	)		(983	)		962		970

8.Accounting for Derivatives — The Corporation follows the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 149, in accounting for its derivative activities.

     At June 30, 2006, the Corporation had various interest rate swaps in place that were accounted for as fair value hedges under SFAS No. 133 since their purpose is to “swap” fixed interest rate liabilities and assets to a variable interest rate basis. Substantially all of the interest rate swaps are associated with the Corporation’s fixed-rate commercial loan swap program that

was initiated during the first quarter of 2003 and the remaining interest rate swaps convert the fixed interest rate of commercial real estate construction loans and the fixed interest rate of manditorily redeemable preferred securities to a variable interest rate basis. All of the interest rate swaps associated with the fixed-rate commercial loan swap program qualify for the “shortcut method of accounting” as prescribed in SFAS No. 133. The shortcut method of accounting requires that the hedge and the hedged item meet certain qualifying criteria. If the swap qualifies for the shortcut method of accounting, no hedge ineffectiveness can be assumed, and the need to test for ongoing effectiveness is eliminated. For hedges that qualify for the shortcut method of accounting, the fair value of the swap and the fair value of the hedged item are recorded on the balance sheets. The remaining hedges do not meet all the criteria necessary to be considered for the shortcut method of accounting. Therefore, the long-haul method of accounting is utilized. The long-haul method of accounting requires periodic testing of hedge effectiveness with the portion of the hedge deemed to be ineffective reported in other operating expense.

     During 2004, the Corporation began entering into forward swap agreements which, in effect, fixed the borrowing costs of certain variable rate liabilities in the future. These transactions do not qualify for the short-cut method of accounting under SFAS No. 133, as previously discussed. The Corporation classifies these transactions as cash flow hedges, with any hedge ineffectiveness being reported in other operating expense. It is anticipated that the hedges will prove to be effective. A correlation analysis performed at quarter-end verified that the hedges were effective. The Corporation has not entered into any new forward swap agreements and the one remaining swap will mature in August, 2006.

     Additionally, in the normal course of business, the Corporation sells originated mortgage loans into the secondary mortgage loan markets. The Corporation maintains a risk management program to protect and manage interest-rate risk and pricing associated with its mortgage commitment pipeline. The Corporation’s mortgage commitment pipeline included interest-rate lock commitments (“IRLCs”) that have been extended to borrowers who have applied for loan funding and met certain defined credit and underwriting standards. During the term of the IRLCs, the Corporation is exposed to interest-rate risk, in that the value of the IRLCs may change significantly before the loans close. To mitigate this interest-rate risk, the Corporation enters into various derivatives by selling loans forward to investors using forward commitments. In accordance with SFAS No. 133, the Corporation classifies and accounts for IRLCs as nondesignated derivatives that are recorded at fair value with changes in value recorded to current earnings. The forward sale commitments used to manage the risk on the IRLCs are also classified and accounted for as nondesignated derivatives and, therefore, recorded at fair value with changes recorded to current earnings. During 2003, the Corporation implemented a SFAS No. 133 hedging program for its mortgage loan warehouse to gain protection for the changes in fair value of the mortgage loan warehouse and the forward commitments. As such, both the mortgage loan warehouse and the forward commitments are accounted for utilizing the long-haul method of accounting and any hedge ineffectiveness is reported in other operating expense.

9.Benefit Plans — The Corporation sponsors several qualified and nonqualified pension and other postretirement benefit plans for certain of its employees. The net periodic benefit cost is based on estimated values provided by outside actuaries. The components of net periodic benefit cost are as follows:

	Pension Benefits
							Six			Six
	Quarter ended			Quarter ended			months ended			months ended
	June 30,			June 30,			June 30,			June 30,
	2006			2005			2006			2005
Components of Net Periodic Pension Cost Service Cost	$	1,771			1,597			3,542			3,194
Interest Cost		2,282			2,206			4,564			4,413
Expected return on assets		(2,837	)		(2,875	)		(5,674	)		(5,751	)
Amortization of unrecognized:
Prior service costs		45			57			90			114
Cumulative net loss		1,480			863			2,960			1,726
Net periodic pension cost	$	2,741			1,848			5,482			3,696

	Postretirement Benefits
							Six			Six
	Quarter ended			Quarter ended			months ended			months ended
	June 30,			June 30,			June 30,			June 30,
	2006			2005			2006			2005
Components of Net Periodic Postretirement Cost Service Cost	$	187			201			374			402
Interest Cost		416			386			831			772
Amortization of unrecognized prior service costs		(135	)		(135	)		(270	)		(270	)
Cumulative net loss		107			24			214			48
Net periodic postretirement cost	$	575			476			1,149			952

     The Corporation does not anticipate making a contribution to the pension plan during 2006.

     On May 18, 2006 the Corporation’s Board of Directors approved freezing the current defined benefit pension plan for non-vested employees and closed it to new entrants after December 31, 2006. Participants vested in the current pension plan as of December 31, 2006 will remain participants in the existing pension plan. A new defined contribution plan was also approved for non-vested employees and new hires as of January 1, 2007. These plan amendments qualify as a curtailment of the defined benefit pension plan, the impact of which was a $1.4 million gain that was recognized by a direct reduction of the plan’s cumulative net loss with no impact on current period earnings.

10.Share-Based Compensation — The Corporation’s 1987, 1992, 1993, 1996, 1997, 1999, 2002 and 2006 Stock and Equity Plans (the “Plans”) provide stock options and restricted stock awards to certain key employees (and to all full-time employees in the case of the 1999, 2002 and 2006 Plans) for up to 10,609,528 common shares of the Corporation. In addition, the 2002 and 2006 Plans provide for the granting of non-qualified stock options and nonvested (restricted)

shares to certain non-employee directors of the Corporation. Outstanding options under these Plans are generally not exercisable for twelve months from date of grant.

     Options under these Plans are granted with an exercise price equal to the market price of the Corporation’s stock at the date of grant; those option awards generally vest based on 3 years of continuous service and have a 10 year contractual terms. Options granted as incentive stock options must be exercised within ten years and options granted as non-qualified stock options have terms established by the Compensation Committee of the Board and approved by the non-employee directors of the Board. Options are cancelable within defined periods based upon the reason for termination of employment.

     The Corporation adopted the FASB’s SFAS No. 123 (revised 2004), “Share-Based Payment,” (SFAS No. 123(R)) on the required effective date, January 1, 2006, using the modified prospective transition method provided for under the standard. SFAS 123(R) required an entity to recognize as compensation expense the grant-date fair value of stock options and other equity-based compensation granted to employees within the income statement using a fair-value-based method, eliminating the intrinsic value method of accounting previously permissible under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB No. 25) and related interpretations. The Corporation previously elected to use APB No. 25 and adopted the disclosure requirements of SFAS No. 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.”

     Pro forma information regarding net income and earning per share for the three and six months ended June 30, 2005 is presented below as if the Corporation had accounted for all stock-based compensation under the fair value method of SFAS No. 123. The financial statements for the prior interim periods and fiscal years do not reflect any compensation expense calculated under the fair-value method.

	Quarter			Six months
	ended			ended
	June 30, 2005			June 30, 2005
Net income, as reported	$	36,145			66,233
Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(937	)		(1,682	)
Pro forma net income	$	35,208			64,551
Pro forma EPS — Basic	$	0.42			0.77
Pro forma EPS — Diluted	$	0.42			0.77
Reported EPS — Basic	$	0.43			0.79
Reported EPS — Diluted	$	0.43			0.79
Assumptions:
Dividend yield		4.12	%		4.02	%
Expected volatility		26.72	%		28.48	%
Risk free interest rate		3.85 - 4.04	%		3.77 - 4.04	%
Expected lives	5 Years			5 Years

     Certain of the Corporation’s share-based award grants contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. As provided for under SFAS No. 123(R), the Corporation has elected to recognize compensation expense for awards with graded vesting schedule on a straight-line basis over the requisite service period for the entire award. SFAS No. 123(R) requires companies to recognize compensation expense based on the estimated number of stock options and awards for which service is to be rendered. Upon stock option exercise or stock unit conversion, it is the policy of the Corporation to issue shares from treasury stock.

     The Black-Scholes option pricing model was used to estimate the fair market value of the options at the date of grant. This model was originally developed for use in estimating the fair value of traded options which have different characteristics from the Corporation’s employee stock options. The model is also sensitive to changes in subjective assumptions, which can materially affect fair value estimates. Expected volatilities are based on implied volatilities from historical volatility of the Corporation’s stock, and other factors. The Corporation uses historical data to estimate option exercise and employee termination with the valuation model. The expected term of options granted is derived from the output of the option valuation model and represent the period of time that options granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	Six Months Ended			Year Ended
	June 30, 2006			December 31, 2005
Assumptions:
Dividend yield		4.24	%		4.02	%
Expected volatility		23.50	%		28.39	%
Risk free interest rate		4.88			3.77 - 4.38	%
Expected lives	4.92 years			5 years

     On December 27, 2005, with the approval of the Compensation Committee of the Board of Directors, the Corporation accelerated the vesting of unvested out-of-the-money stock options (“Options”) outstanding under the Amended and Restated 2002 Stock Plan.

     The decision to accelerate these Options was made primarily to reduce non-cash compensation expense that would have been recorded in the Corporation’s income statement in future periods upon the adoption of SFAS No. 123(R). The Compensation Committee of the Board of Directors of the Corporation is authorized under the 2002 Plan to prescribe the time of the exercise of stock options and to accelerate the time at which stock options become exercisable. As a result of this decision, the Corporation reduced the after-tax stock option expense it would have been required to record by approximately $2.3 million in 2006 and $1.5 million in 2007.

     As a result of this vesting acceleration, options to purchase approximately 1.7 million shares became exercisable immediately. These Options would have vested through February 2008. Based upon the Corporation’s closing price of $26.32, on December 27, 2005, all of the Options accelerated were out-of-the-money, that is, the Options’ exercise price was greater than the current market value of the Corporation’s stock. The number of shares, exercise prices and terms of the Options, subject to acceleration, remain the same.

     A summary of stock option activity under the Plans as of June 30, 2006, and changes during the six months then ended is as follows:

						Weighted—Average
	Shares			Weighted—Average		Remaining		Aggregate Intrinsic
Options	(000’s)			Exercise Price		Contractual Term		Value (000’s)
Outstanding at January 1, 2006		7,495		$	25.66
Granted		501			24.16
Exercised		(57	)		16.49
Forfeited		(25	)		25.22
Expired		(237	)		26.72
Outstanding at June 30, 2006		7,677			25.59		5.78	$	1,683
Exercisable at June 30, 2006		6,861		$	25.71		5.49	$	1,492

     The weighted average grant-date fair value of options granted during the six months ended June 30, 2006 was $4.20. The total intrinsic value of options exercised during the six months ended June 30, 2006 was $0.4 million.

     Cash received from option exercise under all share-based payment arrangements for the six months ended June 30, 2006 was a $0.9 million. The actual tax benefit realized for the tax deduction from option exercise of the share-based payment arrangements totaled $0.1 million.

     The Corporation has a policy of repurchasing shares on the open market to satisfy share option exercises. During the first quarter of 2006 the Corporation repurchased 2.6 million common shares of stock which Management estimates will be adequate to cover option exercises for the full year.

     At June 30, 2006, there was $2.2 million of unrecognized compensation cost related to stock options granted under the Plans which will be recognized over a weighted average period of 1.33 years.

     A summary of the status of the Corporation’s nonvested shares as of December 31, 2005, and changes during the six months ended June 30, 2006, is as follows:

				Weighted—Average
	Shares			Grant—Date
Nonvested (restricted) Shares	(000’s)			Fair Value
Nonvested at January 1, 2006		68		$	24.52
Granted		287			24.18
Vested		(29	)		23.76
Forfeited or expired		(1	)		24.18
Nonvested at June 30, 2006		325		$	24.14

     As of June 30, 2006, there was $5.0 million of total unrecognized compensation cost related to nonvested (restricted) share-based compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted-average period of 1.91 years. The total fair value of shares vested during the six months ended June 30, 2006 was $0.7 million.

     In accordance with the Corporation’s stock option and nonvested (restricted) shares plans, employee participants that are 55 or older and have 15 years of service are eligible to retire. At retirement, all unvested awards immediately vest. As required by SFAS 123(R), the Corporation began accelerating the recognition of compensation costs for share-based awards granted to retirement-eligible employees and employees who become retirement-eligible prior to full vesting of the awards. Compensation cost for awards granted or modified after the adoption of SFAS 123(R) will be recognized over a period to the date an employee first becomes eligible for retirement. In accordance with this change in policy, share-based compensation for the three months ending June 30, 2006 included expense of $2.8 million for share-based compensation that was granted to retirement-eligible employee participants.

     The total share-based compensation expense recognized during the six months ended June, 30, 2006 was $4.1 million and the related tax benefits thereto was $1.5 million.

11.Contingencies — The nature of the Corporation’s business results in a certain amount of litigation. Accordingly, the Corporation and its subsidiaries are subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. Management, after consultation with legal counsel, is of the opinion that the ultimate liability of such pending matters will not have a material effect on the Corporation’s financial condition and results of operations.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential

FIRSTMERIT CORPORATION AND SUBSIDIARIES

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

Notes: Interest income on tax-exempt securities and loans have been adjusted to a fully-taxable equivalent basis.

Nonaccrual loans have been included in the average balances.

AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)Continued
Fully-tax Equivalent Interest Rates and Interest Differential

FIRSTMERIT CORPORATION AND SUBSIDIARIES

	Six months ended								Six months ended
	June 30, 2006								June 30, 2005
	Average					Average			Average					Average
(Dollars in thousands)	Balance			Interest		Rate			Balance			Interest		Rate
ASSETS
Cash and due from banks	$	191,465								194,163
Investment securities:
U.S. Treasury securities and U.S. Government agency obligations (taxable)		2,107,527			40,951		3.92	%		2,496,528			47,540		3.84	%
Obligations of states and political subdivisions (tax exempt)		89,376			3,018		6.81	%		100,659			3,436		6.88	%
Other securities		245,278			7,265		5.97	%		253,816			5,743		4.56	%
Total investment securities		2,442,181			51,234		4.23	%		2,851,003			56,719		4.01	%
Federal funds sold		3,635			85		4.72	%		2,083			57		5.52	%
Loans held for sale		49,708			1,597		6.48	%		53,825			1,431		5.36	%
Loans		6,714,222			239,663		7.20	%		6,546,926			204,742		6.31	%
Total earning assets		9,209,746			292,579		6.41	%		9,453,837			262,949		5.61	%
Allowance for loan losses		(88,396	)							(96,390	)
Other assets		764,305								726,859
Total assets	$	10,077,120								10,278,469
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand — non-interest bearing	$	1,458,807			—		—			1,459,014			—		—
Demand — interest bearing		856,934			4,945		1.16	%		827,879			2,186		0.53	%
Savings and money market accounts		2,286,727			22,827		2.01	%		2,381,092			13,892		1.18	%
Certificates and other time deposits		2,767,489			55,427		4.04	%		2,670,199			41,296		3.12	%
Total deposits		7,369,957			83,199		2.28	%		7,338,184			57,374		1.58	%
Securities sold under agreements to repurchase		1,253,596			24,880		4.00	%		1,356,106			19,465		2.89	%
Wholesale borrowings		402,111			11,560		5.80	%		455,357			10,992		4.87	%
Total interest bearing liabilities		7,566,857			119,639		3.19	%		7,690,633			87,831		2.30	%
Other liabilities		171,858								158,804
Shareholders’ equity		879,598								970,018
Total liabilities and shareholders’ equity	$	10,077,120								10,278,469
Net yield on earning assets	$	9,209,746			172,940		3.79	%		9,453,837			175,118		3.74	%
Interest rate spread							3.22	%							3.31	%

Notes: Interest income on tax-exempt securities and loans have been adjusted to a fully-taxable equivalent basis.

Nonaccrual loans have been included in the average balances.

RESULTS OF OPERATIONS

     FirstMerit Corporation reported second quarter 2006 net income of $27.7 million, or $0.35 per diluted share. This compares with $36.1 million, or $0.43 per diluted share, for the second quarter 2005. Returns on average common equity (“ROE”) and average assets (“ROA”) for 2006 second quarter were 12.75% and 1.10%, respectively, compared with 15.07% and 1.40% for the second quarter 2005.

     For the first six months of 2006, the Corporation reported net income of $57.6 million, or $0.72 per diluted share, compared with $66.2 million, or $0.79 per diluted share, for the first six months of 2005.

     Total revenue, defined as net interest income on a fully tax-equivalent (“FTE”) basis plus non-interest income net of securities transactions, totaled $138.5 million for the second quarter 2006, compared with $138.6 million reported in the second quarter 2005. FTE net interest income was $86.4 million for the second quarter 2006, a decline of $2.1 million, or 2.32%, compared with the year-ago quarter. During the quarter, the net interest margin expanded 4 basis points to 3.78%, from 3.74% in the second quarter 2005.

     The Corporation expanded its net interest margin amidst a challenging interest rate environment by taking advantage of opportunities within its flexibly structured investment portfolio. For the second quarter 2006, average investment securities accounted for 23.80% of average assets, compared with 27.44% for the second quarter 2005. The $441.6 million, or 15.58%, reduction in the securities portfolio supported a $300.0 million, or 15.92%, reduction of average borrowed funds, along with $129.3 million, or 1.96%, growth in the average loan portfolio. Average commercial loan growth of $168.1 million, or 4.89%, and average home equity loan growth of $68.1 million, or 9.68%, offset declining average balances in the mortgage, installment and lease portfolios.

     Non-interest income excluding securities transactions totaled $52.1 million for the second quarter 2006, compared with $50.1 million for the second quarter 2005, an increase of $2.0 million, or 3.90%. Credit card fees increased $1.0 million, or 9.08%, and service charges increased $0.2 million, or 1.18%. Compared with the first quarter 2006, credit card fees increased $0.8 million, or 7.56%, and deposit service charges rose $1.9 million, or 12.10%.

     Non-interest expense totaled $85.2 million for the second quarter 2006, compared with $79.4 million for the second quarter 2005. Salary, wages, pension and employee benefits increased $5.4 million, or 12.99%, driven primarily by the increase in share-based compensation expense of $3.3 million. Additionally, expenses related to organizational restructurings also increased overall non-interest expense during the quarter. The organizational changes are part of the Corporation’s initiatives to improve efficiency and generate revenue through a realigned and streamlined business structure.

     Net charge-offs totaled $13.0 million in the second quarter 2006, compared with $10.3 million for the second quarter 2005, or 0.78% and 0.62% of average loans, respectively.

     The Corporation’s longer term trend of improving charge-off levels was interrupted by costs related to a credit relationship that accounted for $6.6 million of the quarter’s total net charge-offs. The Company expects to return to its trend of lower charge-off levels for the balance of 2006. As of June 30, 2006, nonperforming assets were $58.8 million, or 0.86%, of period-end loans plus other real estate, compared with $54.0 million, or 0.82%, at June 30, 2005. Nonperforming assets declined $14.2 million, or 19.41%, from March 31, 2006.

     The Corporation recorded $13.2 million of loan loss provision in the second quarter 2006, compared with loan loss provision of $6.0 million in the second quarter 2005. On June 30, 2006, criticized commercial assets accounted for 6.93% of total commercial loans, compared with criticized commercial asset levels of 7.59% on June 30, 2005.

     At June 30 2006, the allowance for loan losses was 1.29% of loans, compared with 1.36% at December 31, 2005. The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments. For comparative purposes the allowance for credit losses was 1.37% at June 30, 2006, compared with 1.45% at December 31, 2005.

     Assets at June 30, 2006, totaled $10.3 billion, equivalent to $10.3 billion total at June 30, 2005. Period-end loan growth of $194.4 million, or 2.94%, was driven by a $236.9 million, or 6.90% increase in the commercial lending portfolio, offsetting declines in the mortgage, installment and leasing portfolios.

     Deposits totaled $7.4 billion at June 30, 2006, an increase of $228.4 million, or 3.18%, from June 30, 2005. Non interest bearing demand deposit accounts (DDA) increased $26.8 million, or 1.86%, over that time. For the second quarter of 2006, average deposits increased $104.2 million, or 1.42%, compared with the second quarter of 2005.

     Shareholders’ equity was $870.7 million at June 30, 2006. The Corporation’s capital position remains strong as tangible equity to assets was 7.20% at quarter-end. The common dividend per share paid in the second quarter 2006 was $0.28, a $0.01 increase from the second quarter 2005.

Net Interest Income

     Net interest income, the Corporation’s principal source of earnings, is the difference between interest income generated by earning assets (primarily loans and investment securities) and interest paid on interest-bearing funds (namely customer deposits, securities sold under agreements to repurchase and wholesale borrowings). Net interest income for the quarter ended June 30, 2006 was $85.7 million compared to $87.8 million for the three months ended June 30, 2005. Net interest income for the six months ended June 30, 2006 was $152.4 million compared to $156.2 million for the six months ended June 30, 2005. For the purpose of this remaining discussion, net interest income is presented on an FTE basis, to provide a comparison among all types of interest earning assets. That is, interest on tax-free securities and tax-exempt loans has been restated as if such interest were taxed at the statutory Federal income tax rate of 35%, adjusted for the non-deductible portion of interest expense incurred to acquire the tax-free assets. Net interest income presented on an FTE basis is a non-GAAP financial measure widely used by financial services organizations. The FTE adjustment was $0.6 million and $0.7 million for the quarters ending June 30, 2006 and 2005, respectively.

     FTE net interest income for the quarter ended June, 2006 was $86.4 million compared to $88.4 million for the three months ended June, 2005. The $2.0 million decrease in FTE net interest income occurred because the $16.5 million increase in interest expense, compared to the same quarter last year, was more than the $14.5 million increase in interest income during the same period.

     FTE net interest income for the six months ended June, 2006 was $172.9 million compared to $175.1 million for the six months ended June, 2005. The $2.2 million decrease in FTE net interest income occurred because the $31.8 million increase in interest expense, compared to the same period last year, was more than the $29.6 million increase in interest income during the same period.

     As illustrated in the following rate/volume analysis table, interest income and interest expense both increased due to the rising interest rate environment.

	Quarters ended June 30, 2006 and 2005									Six months ended June 30, 2006 and 2005
RATE/VOLUME ANALYSIS	Increases (Decreases)									Increases (Decreases)
	Volume			Rate			Total			Volume			Rate			Total
(Dollars in thousands)
INTEREST INCOME — FTE
Investment securities	$	(4,610	)		1,584			(3,026	)		(8,401	)		2,916			(5,485	)
Loans held for sale		(44	)		(248	)		(292	)		(115	)		281			166
Loans		2,097			15,697			17,794			5,345			29,576			34,921
Federal funds sold		34			(25	)		9			37			(9	)		28
Total interest income — FTE	$	(2,523	)		17,008			14,485			(3,134	)		32,764			29,630
INTEREST EXPENSE
Demand deposits-interest bearing	$	47			1,306			1,353			80			2,679			2,759
Savings and money market accounts		(295	)		4,857			4,562			(572	)		9,507			8,935
Certificates of deposits and other time deposits		1,473			7,157			8,630			1,554			12,577			14,131
Securities sold under agreements to repurchase		(1,454	)		3,787			2,333			(1,565	)		6,980			5,415
Wholesale borrowings		(1,706	)		1,368			(338	)		(1,379	)		1,947			568
Total interest expense	$	(1,935	)		18,475			16,540			(1,882	)		33,690			31,808
Net interest income — FTE	$	(588	)		(1,467	)		(2,055	)		(1,252	)		(926	)		(2,178	)

     As illustrated in the preceding table, the increased amount of interest income recorded in the 2006 second quarter compared to the same 2005 period was primarily rate driven as higher yields on loans increased interest income by $15.7 million during those periods. The table also depicts a similar three-month increase in interest expense, again caused by the continued rise in interest rates from 2005 through the second quarter of 2006. The higher rates paid on customer deposits and securities sold under agreements to repurchase in the 2006 quarter compared to the same 2005 period increased interest expense by $17.1 million. The six-month changes were also primarily rate driven as the higher yield on loans increased interest income by $29.6 million while the increase in rates paid on deposits and securities sold under agreements to repurchase increased interest expense by $31.7 million.

Net Interest Margin

     The following table provides 2006 FTE net interest income and net interest margin totals as well as 2005 comparative amounts:

	Quarters ended						Six months ended
	June 30,						June 30,
(Dollars in thousands)	2006			2005			2006			2005
Net interest income	$	85,730			87,777			171,703			173,787
Tax equivalent adjustment		647			655			1,237			1,331
Net interest income — FTE	$	86,377			88,432			172,940			175,118
Average earning assets	$	9,174,008			9,489,431			9,209,746			9,453,837
Net interest margin — FTE		3.78	%		3.74	%		3.79	%		3.74	%

     Average loans outstanding for the current year and prior year second quarters totaled $6.7 billion and $6.6 billion, respectively. Increases in average loan balances from second quarter 2005 to the second quarter this year occurred in commercial and home equity loans while mortgage loans, installment loans, credit card loans, and leases declined. Efforts to grow loans outstanding continue to be tempered by the less than robust economy that currently exists in the Corporation’s primary lending areas.

     Specific changes in average loans outstanding, compared to the second quarter 2005, were as follows: commercial loans were up $168.1 million or 4.89%; home equity loans, as a result of targeted marketing, rose $68.1 million or 9.68%; credit card loans were down $0.4 million or 0.27%; installment loans, both direct and indirect, were down $75.7 million or 4.72%; mortgage loans were down $15.4 million or 2.4%; and leases were down $15.5 million, or 19.23%. The majority of fixed-rate mortgage loan originations are sold to investors through the secondary mortgage loan market. Average outstanding loans for the 2006 and 2005 second quarters equaled 73.37% and 69.56% of average earning assets, respectively.

     Average deposits were $7.4 billion during the 2006 second quarter, up $104.2 million, or 1.42%, from the same period last year. For the quarter ended June 30, 2006, average core deposits (which are defined as checking accounts, savings accounts and money market savings products) decreased $74.2 million or 1.59% and represented 61.96% of total average deposits compared to 63.86% for the 2005 second quarter. Average certificates of deposit (“CDs”) increased $178.4 million or 6.74% compared to the prior year quarter. Average wholesale borrowings decreased $126.8 million and as a percentage of total interest-bearing funds equaled 4.92% for the 2006 second quarter and 6.44% for the same quarter one year ago. Securities sold under agreements to repurchase decreased $173.2 million and as a percentage of total interest bearing funds equaled 16.05% for the 2006 second quarter and 17.91% for the 2005 second quarter. Average interest-bearing liabilities funded 82.35% of average earning assets in the current year quarter and 81.51% during the quarter ended June 30, 2005.

Other Income

     Other (non-interest) income for the quarter totaled $52.1 million, an increase of $2.0 million from the $50.1 million earned during the same period one year ago.

     Other income, net of securities gains, as a percentage of net revenue for the second quarter was 37.61% compared to 36.17% for the same quarter one year ago. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.

     The primary changes in other income for the 2006 second quarter as compared to the second quarter of 2005, were as follows: trust department income was $5.7 million, up 1.06%; service charges on deposit accounts totaled $18.0 million, up 1.18% due in part to new fee strategies; credit card fees increased $1.0 million or 9.08%; loan sales and servicing income was $2.8 million, an increase of $1.3 million or 86.38%, due to the $1.0 million gain on the sale of nonperforming loans; income from bank owned life insurance increased $2.3 million, or 75.60%, due to death benefit proceeds; investment services and insurance fees decreased $0.2 million, or 8.73%, primarily due to the sale of the credit life portfolio in the fourth quarter of 2005; there

were no significant sales of investment securities during the second quarter of 2006 or 2005; and other operating income decreased $2.6 million or 47.99% due to a one time settlement of manufactured housing contractual obligations of $2.5 million in the 2005 second quarter.

The changes in other income for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 were consistent with the quarter results: trust department income was $11.3 million, down 0.46%; service charges on deposit accounts totaled $34.1 million, up 4.46% due in part to new fee strategies initiated in the third quarter of 2005; credit card fees increased $2.2 million or 11.11%; loan sales and servicing income was $4.3 million an increase of $1.6 million or 61.25%; income from bank owned life insurance increased $2.2 million or 26.04% due to death benefit proceeds in the second quarter of 2006; investment services and insurance fees decreased $0.5 million or 8.93% primarily due to the sale of the credit life portfolio in the fourth quarter of 2005; investment security gains were down $1.8 million or 98.92%; and other operating income decreased $2.7 million or 47.99% primarily due to a one time settlement of manufactured housing contractual obligations of $2.5 million.

A significant component of loan sales and servicing income category is the income derived from mortgage servicing activities. The following is a summary of changes in capitalized mortgage servicing rights (“MSRs”), net of accumulated amortization and valuation allowance, included in the unaudited consolidated balance sheets:

	Quarter ended			Quarter ended			Quarter ended			Quarter ended			Quarter ended
	June 30,			March 31,			December 31,			September 30,			June 30,
(Dollars in thousands)	2006			2006			2005			2005			2005
Balance at beginning of period	$	19,945			19,971			19,523			18,635			18,396
Addition of mortgage servicing rights		814			723			1,230			1,657			1,072
Amortization		(734	)		(773	)		(786	)		(825	)		(759	)
Changes in valuation allowance		—			24			4			56			(74	)
Balance at end of period	$	20,025			19,945			19,971			19,523			18,635

     On a quarterly basis, the Corporation assesses its MSRs for impairment based on their current fair value. As permitted, the Corporation disaggregates its MSRs portfolio based on loan type and interest rate which are the predominant risk characteristics of the underlying loans. If any impairment results after current market assumptions are applied, the value of the servicing rights is reduced through the use of a valuation allowance, the balance of which is $0, $24 thousand and $10 thousand at June 30, 2006, December 31, 2005 and June 30, 2005, respectively. The MSRs are amortized over the period of and in proportion to the estimated net servicing revenues.

     These balances represent the rights to service approximately $2.0 billion, $2.1 billion and $2.0 billion of mortgage loans at June 30, 2006, December 31, 2005, and June 30, 2005, respectively. The portfolio primarily consists of conventional mortgages.

     The Corporation continues to focus upon non-interest income (fee income) as a means by which to diversify revenue.

Other Expenses

     Other (non-interest) expenses totaled $85.2 million for the second quarter 2006 compared to $79.4 million for the same 2005 quarter, an increase of $5.8 million, or 7.33%.

     For the three months ended June 30, 2006, increases in operating costs compared to the second quarter 2005 occurred as follows: salaries,wages, pension and employee benefits rose $5.4 million, primarily due to the $3.3 million increase in share-based compensation expense, as well as $1.3 million additional expense associated with severance expenses of organizational restructurings; bankcard, loan processing and other costs increased $1.9 million, primarily attributable to the increase in loans outstanding and higher credit card activity; other operating expense decreased $1.5 million reflecting specific reserves on other real estate and manufactured housing contracts that were established in the second quarter of 2005; while other categories of expense remain relatively consistent.

     For the six months ended June 30, 2006, increases in operating costs compared to the six months ended June 30, 2005 occurred as follows: salaries,wages, pension and employee benefits rose $9.0 million, primarily due to increased pension and postretirement benefits as well as $3.3 million of share-based compensation expense, and $1.3 million additional expense associated with severance expenses of organizational restructurings; bankcard, loan processing and other costs increased $2.1 million primarily attributable to the increase in loans outstanding and higher credit card activity; while other categories of expense remain relatively consistent.

     The efficiency ratio of 61.39% for second quarter 2006 reflected an increase over the efficiency ratio of 57.14% recorded for the second quarter, 2005. The efficiency ratio for the three months ended June 30, 2006 indicates 61.39 cents of operating costs were spent in order to generate each dollar of net revenue.

Federal Income Taxes

     Federal income tax expense was $11.8 million and $16.4 million for the quarters ended June 30, 2006 and 2005, respectively. The effective federal income tax rate for the second quarter 2006 was 29.85% compared to 31.20% for the same quarter 2005. For the six months ended June 30, 2006 and 2005, respectively, the effective tax rate was 30.40% and 30.95%. Additional federal income tax information is contained in Note 11 (Federal Income Taxes) in the 2005 Form 10-K, as amended.

FINANCIAL CONDITION

Investment Securities

     The June 30, 2006 amortized cost and market value of investment securities, including mortgage-backed securities, by average remaining term, are included in Note 4 (Investment Securities) to these unaudited consolidated financial statements.

     These securities are purchased within an overall strategy to maximize future earnings, taking into account an acceptable level of interest rate risk. While the maturities of the mortgage and asset-backed securities are beyond five years, these instruments provide periodic principal payments and include securities with adjustable interest rates, reducing the interest rate risk associated with longer-term investments.

Allowance for Credit Losses

     The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments.

	Quarter ended			Year Ended			Quarter ended
	June 30,			December 31,			June 30,
Allowance for Loan Losses	2006			2005			2005
(In thousands)
Allowance for loan losses-beginning of period	$	87,589			97,296			97,115
Provision for loan losses		13,159			43,820			5,971
Loans charged off		(18,038	)		(69,105	)		(15,422	)
Recoveries on loans previously charged off		5,017			18,650			5,144
Allowance for loan losses-end of period	$	87,727			90,661			92,808
Reserve for Unfunded Lending Commitments
Balance at beginning of period	$	5,853			5,774			6,479
Provision for credit losses		(137	)		298			(694	)
Balance at end of period	$	5,716			6,072			5,785
Allowance for Credit Losses	$	93,443			96,733			98,593
Annualized net charge-offs as a % of average loans		0.78	%		0.76	%		0.62	%
Allowance for loan losses:
As a percentage of loans outstanding		1.29	%		1.36	%		1.40	%
As a percentage of nonperforming loans		174.80	%		145.61	%		208.74	%
As a multiple of annualized net charge offs		1.68	X		1.80	X		2.25	X
Allowance for credit losses:
As a percentage of loans outstanding		1.37	%		1.45	%		1.49	%
As a percentage of nonperforming loans		186.19	%		155.36	%		221.76	%
As a multiple of annualized net charge offs		1.79	X		1.92	X		2.39	X

     The allowance for credit losses decreased $3.2 million from December 31, 2005 to June 30, 2006, and decreased $5.2 million from June 30, 2005 to June 30, 2006. The decrease for both periods was attributable to an overall improvement in criticized assets (“individually impaired,” “substandard” and “doubtful”). The following tables show this overall trend in increased credit quality by specific asset and risk categories.

	At June 30, 2006
	Loan Type
Allowance for Loan	Commercial		Commercial R/E					Installment Home EquityCredit Card Res Mortgage
Losses Components:	Loans		Loans			Leases		Loans		Loans		Loans		Loans		Total
(In thousands)
Individually Impaired Loan Component:
Loan balance	$	17,099		16,772			—		—		—		—		—		33,871
Allowance		4,773		2,650			—		—		—		—		—		7,423
Collective Loan Impairment Components:
Credit risk-graded loans
Grade 1 loan balance		18,140		2,558			—										20,698
Grade 1 allowance		74		4			—										78
Grade 2 loan balance		122,432		94,050			13,653										230,135
Grade 2 allowance		974		375			121										1,470
Grade 3 loan balance		333,361		359,740			17,110										710,211
Grade 3 allowance		2,645		1,742			142										4,529
Grade 4 loan balance		939,873		1,532,492			26,727										2,499,092
Grade 4 allowance		17,114		13,080	��		862										31,056
Grade 5 (Special Mention) loan balance		60,153		58,771			124										119,048
Grade 5 allowance		3,314		1,731			8										5,053
Grade 6 (Substandard) loan balance		53,004		50,664			2,573										106,241
Grade 6 allowance		5,950		3,157			320										9,427
Grade 7 (Doubtful) loan balance		317		261			—										578
Grade 7 allowance		121		39			—										160
Consumer loans based on payment status:
Current loan balances							3,683		1,547,435		760,963		132,392		591,280		3,035,753
Current loans allowance							34		16,026		1,689		3,566		893		22,208
30 days past due loan balance							204		8,847		1,545		1,708		11,544		23,848
30 days past due allowance							4		787		99		646		96		1,632
60 days past due loan balance							129		3,131		631		1,157		3,986		9,034
60 days past due allowance							12		809		107		710		115		1,753
90+ days past due loan balance							11		2,344		446		1,709		11,750		16,260
90+ days past due allowance							2		1,072		129		1,576		159		2,938
Total loans	$	1,544,379		2,115,308			64,214		1,561,757		763,585		136,966		618,560		6,804,769
Total Allowance for Loan Losses	$	34,965		22,778			1,505		18,694		2,024		6,498		1,263		87,727

	At December 31, 2005
	Loan Type
Allowance for Loan	Commercial		Commercial R/E				Installment Home Equity Credit Card Res Mortgage
Losses Components:	Loans		Loans		Leases		Loans		Loans		Loans		Loans		Total
(In thousands)
Individually Impaired Loan Component:
Loan balance	$	27,515		18,254		—		—		—		—		—		45,769
Allowance		4,534		2,851		—		—		—		—		—		7,385
Collective Loan Impairment Components:
Credit risk-graded loans
Grade 1 loan balance		16,353		2,233		—										18,586
Grade 1 allowance		64		3		—										67
Grade 2 loan balance		159,785		99,392		3,643										262,820
Grade 2 allowance		1,297		341		33										1,671
Grade 3 loan balance		244,116		355,950		25,245										625,311
Grade 3 allowance		2,008		1,583		231										3,822
Grade 4 loan balance		851,968		1,514,990		31,428										2,398,386
Grade 4 allowance		15,600		11,387		1,018										28,005
Grade 5 (Special Mention) loan balance		58,878		46,657		127										105,662
Grade 5 allowance		3,463		1,110		8										4,581
Grade 6 (Substandard) loan balance		69,358		53,333		3,111										125,802
Grade 6 allowance		8,265		3,089		413										11,767
Grade 7 (Doubtful) loan balance		324		377		—										701
Grade 7 allowance		117		40		—										157
Consumer loans based on payment status:
Current loan balances						6,687		1,500,694		775,912		141,888		597,705		3,022,886
Current loans allowance						95		18,962		1,918		4,014		969		25,958
30 days past due loan balance						250		15,574		1,764		1,453		14,461		33,502
30 days past due allowance						8		1,456		108		545		133		2,250
60 days past due loan balance						75		5,296		511		1,154		4,569		11,605
60 days past due allowance						9		1,401		87		699		133		2,329
90+ days past due loan balance						53		2,791		510		1,097		11,846		16,297
90+ days past due allowance						16		1,377		155		975		146		2,669
Total loans	$	1,428,297		2,091,186		70,619		1,524,355		778,697		145,592		628,581		6,667,327
Total Allowance for Loan Losses	$	35,348		20,404		1,831		23,196		2,268		6,233		1,381		90,661

	At June 30, 2005
	Loan Type
	Commercial		Commercial R/E				Installment Home EquityCredit Card Res Mortgage
Allowance for Loan Losses Components:	Loans		Loans		Leases		Loans		Loans		Loans		Loans		Total
(In thousands)
Individually Impaired Loan Component:
Loan balance	$	13,510		15,694		—		—		—		—		—		29,204
Allowance		3,020		1,993		—		—		—		—		—		5,013
Collective Loan Impairment Components:
Credit risk-graded loans
Grade 1 loan balance		27,190		1,378		—										28,568
Grade 1 allowance		100		2		—										102
Grade 2 loan balance		165,035		95,489		14,581										275,105
Grade 2 allowance		1,341		285		130										1,756
Grade 3 loan balance		255,714		319,928		18,231										593,873
Grade 3 allowance		2,004		1,257		171										3,432
Grade 4 loan balance		867,753		1,422,815		39,142										2,329,710
Grade 4 allowance		18,118		9,885		1,200										29,203
Grade 5 (Special Mention) loan balance		55,682		37,789		594										94,065
Grade 5 allowance		3,754		708		44										4,506
Grade 6 (Substandard) loan balance		80,429		63,398		22										143,849
Grade 6 allowance		10,956		3,056		3										14,015
Grade 7 (Doubtful) loan balance		461		493		—										954
Grade 7 allowance		179		61		—										240
Consumer loans based on payment status:
Current loan balances						3,301		1,579,334		733,272		134,285		607,828		3,058,020
Current loans allowance						177		20,765		2,273		3,646		1,070		27,931
30 days past due loan balance						230		13,942		2,657		1,835		11,423		30,087
30 days past due allowance						7		1,155		135		648		125		2,070
60 days past due loan balance						131		4,857		576		948		4,055		10,567
60 days past due allowance						15		1,135		86		523		138		1,897
90+ days past due loan balance						54		2,889		702		1,267		11,471		16,383
90+ days past due allowance						15		1,304		195		1,001		128		2,643
Total loans	$	1,465,774		1,956,984		76,286		1,601,022		737,207		138,335		634,777		6,610,385
Total Allowance for Loan Losses	$	39,472		17,247		1,762		24,359		2,689		5,818		1,461		92,808

     Total charge-offs were $18.0 million for the quarter ended June 30, 2006 up $2.6 million, or 16.96%, from the year ago quarter and up $0.8 million or 2.46% for the six months ended June 30, 2006 from the six month ended June 30, 2005. Criticized commercial assets (“individually impaired,” “substandard” and “doubtful”) decreased $8.3 million and accounted for 6.93% of total commercial loans for the 2006 second quarter compared with criticized commercial asset levels of 7.59% at June 30, 2005. The Corporations long-term trend of improving charge-off levels was interrupted by costs related to a single credit relationship that accounted for $6.6 million of the quarter’s net charge-offs.

     Installment, mortgage credit card charge-offs were down $2.8 million from the prior year quarter reflecting the minimal negative residual impact from the October 2005 bankruptcy legislative change. Loans past due 90 days or more accruing interest were down $1.5 million or 8.27% reflecting the favorable trends in the retail portfolio.

Loans

     Total loans outstanding at June 30, 2006 were $6.8 billion compared to $6.7 billion at December 31, 2005 and $6.6 billion at June 30, 2005.

     The commercial loan portfolio for the 2006 second quarter increased by 6.92% over the prior year second quarter, but continues to be impacted by lower demand for credit in our region. While the Corporation originated $116.3 million of mortgage loans in the second quarter 2006, compared to $126.0 million in same quarter of 2005, and $509.9 million for the full year ended December 31, 2005, the majority of these loans were fixed rate mortgages which were sold with servicing rights retained. Further discussion of the Corporation’s loan mix strategy as well as changes in average balances for the quarter ended June 30, 2006 compared to the quarter ended June 30, 2005 can be found under the Net Interest Income sub-caption in this report.

	As of		As of		As of
	June 30,		December 31,		June 30,
(Dollars in thousands)	2006		2005		2005
Commercial loans	$	3,659,687		3,519,483		3,422,758
Mortgage loans		618,560		628,581		634,777
Installment loans		1,561,757		1,524,355		1,601,022
Home equity loans		763,585		778,697		737,207
Credit card loans		136,966		145,592		138,335
Leases		64,214		70,619		76,286
Total Loans	$	6,804,769		6,667,327		6,610,385

     Expected cash flow and interest rate information for commercial loans is presented in the following table:

	As of
	June 30, 2006
	(Dollars in thousands)
Due in one year or less	$	1,620,127
Due after one year but within five years		1,652,164
Due after five years		387,396
Totals	$	3,659,687
Due after one year with a predetermined fixed interest rate	$	975,947
Due after one year with a floating interest rate		1,063,613
Totals	$	2,039,560

     The Corporation has interest rate hedge strategy in place that swaps fixed interest rate commercial real estate loans to a variable interest rate basis. At June 30, 2006, $457.7 million of

fixed rate commercial real estate loans were hedged. This strategy is more fully described in Footnote 8, Accounting for Derivatives, in these consolidated financial statements.

     The following table summarizes the Corporation’s nonperforming assets:

	June 30,			December 31,			June 30,
	2006			2005			2005
	(Dollars in thousands)
Nonperforming commercial loans	$	41,927			54,176			38,124
Other nonaccrual loans:		8,261			8,086			6,336
Total nonperforming loans		50,188			62,262			44,460
Other real estate (“ORE”)		8,598			9,995			9,525
Total nonperforming assets	$	58,786			72,257			53,985
Loans past due 90 day or more accruing interest	$	16,483			17,931			17,969
Total nonperforming assets as a percentage of total loans and ORE		0.86	%		1.08	%		0.82	%

     The allowance for credit losses covers nonperforming loans by 186.19% at June 30, 2006 compared to 221.76% at the end of the prior year quarter. This decrease is primarily attributable to the increase in nonperforming commercial loans. See Note 1 (Summary of Significant Accounting Policies) of the 2005 Form 10-K, as amended for a summary of the Corporation’s nonaccrual and charge-off policies.

     The following table is a nonaccrual commercial loan flow analysis:

	Period End
	2Q06			1Q06			4Q05			3Q05			2Q05
	(Dollars in thousands)
Nonaccrual commercial loans beginning of period	$	56,258			54,176			34,144			38,124			34,207
Credit Actions:
New		6,652			10,259			29,778			4,848			22,498
Loan and lease losses		(1,927	)		(3,385	)		(3,005	)		(2,722	)		(3,332	)
Charged down		(5,079	)		(2,681	)		(5,285	)		(253	)		(2,444	)
Return to accruing status		(2,260	)		(368	)		(1,179	)		(228	)		(801	)
Payments and tranfers to ORE		(2,864	)		(1,743	)		(277	)		(5,625	)		(12,004	)
Sales		(8,853	)		—			—			—			—
Nonaccrual commercial loans end of period	$	41,927			56,258			54,176			34,144			38,124

     Nonaccrual commercial loans have decreased $14.3 million from the first quarter of 2006. As previously mentioned, nonaccrual loans were sold in April 2006. Additionally, the

collateral for a large commercial nonaccrual loan was auctioned during the second quarter resulting in an additional charge-off of $6.6 million.

Deposits

     The following schedule illustrates the change in composition of the average balances of deposits and average rates paid for the noted periods:

	Quarter Ended					Year Ended					Quarter Ended
	June 30, 2006					December 31, 2005					June 30, 2005
	Average		Average			Average		Average			Average		Average
	Balance		Rate			Balance		Rate			Balance		Rate
						(Dollars in thousands)
Non-interest DDA	$	1,455,229		—			1,466,106		—			1,470,673		—
Interest-bearing DDA		865,563		1.20	%		827,829		0.71	%		834,708		0.59	%
Savings and money market		2,280,657		2.12	%		2,356,813		1.40	%		2,370,280		1.27	%
CDs and other time deposits		2,824,580		4.16	%		2,647,908		3.28	%		2,646,199		3.14	%
Total customer deposits	$	7,426,029		2.38	%		7,298,656		1.72	%		7,321,860		1.61	%
Securities sold under agreements to repurchase		1,212,470		4.29	%		1,409,135		3.22	%		1,385,644		3.08	%
Wholesale borrowings		371,309		6.04	%		431,787		4.97	%		498,088		4.78	%
Total funds	$	9,009,808					9,139,578					9,205,592

     Interest-bearing and non-interest-bearing demand deposits, on a combined basis, averaged $2.3 billion during the 2006 second quarter, up $15.4 million or 0.67% from the second quarter 2005. Savings deposits, including money market savings accounts, averaged $2.3 billion, $89.6 million or 3.78% lower than the year ago quarter. The sum of demand and savings accounts, often referred to as “core deposits,” dropped $74.2 million or 1.59%, and represented 61.96% of total average deposits for the second quarter, 2006 compared to 63.86% last year. The drop was attributable to intense competition for core deposits within the Corporation’s regional banking areas.

     The weighted-average yield paid on interest-bearing core deposits during the quarter at 1.86% was 77 basis points more than last year’s average core deposits rate. Average CDs, still the largest individual component of deposits, totaled $2.8 billion for the first quarter, up 6.74% from the same quarter last year. Average rates paid on CDs rose 102 basis points from 3.14% in the 2005 quarter to 4.16% this year. On a percentage basis, average CDs were 37.39% and 34.21%, respectively, of total interest-bearing funds for the June 30, 2006 and 2005 quarters.

     Securities sold under agreements to repurchase decreased to 16.05% of interest-bearing funds during the three months ended June, 2006 from 17.91% for the June 30, 2005 quarter. Interest-bearing liabilities funded 82.35% of average earning assets during the quarter ended

June 30, 2006 and 81.51% during the quarter ended June 30, 2005. Wholesale funds decreased to 4.92% of interest-bearing funds during the second quarter, 2006 from 6.44% in the year ago quarter. In summary, the decrease in average core deposits during the quarter compared to the same period in 2005 was offset by the larger decrease in higher rate wholesale borrowings. The funding mix from higher priced wholesale borrowing towards less expensive CDs has helped to mitigate the effect of the flat yield curve and support the increase in the net interest margin.

     The following table summarizes scheduled maturities of CDs of $100 thousand or more (“Jumbo CDs”) that were outstanding as of June 30, 2006:

Maturing in:	Amount
	(In thousands)
Under 3 months	$	507,584
3 to 6 months		243,489
6 to 12 months		250,188
Over 1 year through 3 years		105,281
Over 3 years		41,764
	$	1,148,306

Market Risk

     Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices and commodity prices, including the correlation among these factors and their volatility. The Corporation is primarily exposed to interest rate risk as a result of offering a wide array of financial products to its customers.

     Changes in market interest rates may result in changes in the fair market value of the Corporation’s financial instruments, cash flows, and net interest income. The Corporation seeks to achieve consistent growth in net interest income and capital while managing volatility arising from shifts in market interest rates. The Asset and Liability Committee (“ALCO”) oversees market risk management, establishing risk measures, limits, and policy guidelines for managing the amount of interest rate risk and its effect on net interest income and capital. According to these policies, responsibility for measuring and the management of interest rate risk resides in the Corporate Treasury function.

     Interest rate risk on the Corporation’s consolidated balance sheets consists of reprice, option, and basis risks. Reprice risk results from differences in the maturity, or repricing, of asset and liability portfolios. Option risk arises from “embedded options” present in many financial instruments such as loan prepayment options, deposit early withdrawal options and interest rate options. These options allow customers opportunities to benefit when market interest rates change, which typically results in higher net revenue for the Corporation. Basis risk refers to the potential for changes in the underlying relationship between market rates or indices, which subsequently result in a narrowing of profit spread on an earning asset or liability. Basis risk is also present in administered rate liabilities, such as interest-bearing checking

accounts, savings accounts and money market accounts where historical pricing relationships to market rates may change due to the level or directional change in market interest rates.

     The interest rate risk position is measured and monitored using risk management tools, including earnings simulation modeling and economic value of equity sensitivity analysis, which capture both near-term and long-term interest rate risk exposures. Combining the results from these separate risk measurement processes allows a reasonably comprehensive view of short-term and long-term interest rate risk in the Corporation.

     Earnings simulation involves forecasting net interest earnings under a variety of scenarios including changes in the level of interest rates, the shape of the yield curve, and spreads between market interest rates. The sensitivity of net interest income to changes in interest rates is measured using numerous interest rate scenarios including shocks, gradual ramps, curve flattening, curve steepening as well as forecasts of likely interest rates scenarios. Presented below is the Corporation’s interest rate risk profile as of June 30, 2006 and 2005:

Immediate Change in Rates and Resulting Percentage Increase/(Decrease) in Net Interest Income:

	-100 basis points			+100 basis points			+200 basis points
June 30, 2006		0.08	%		0.07	%		(0.05	%)
June 30, 2005		(2.12	%)		(0.19	%)		(1.31	%)

     Modeling the sensitivity of net interest earnings to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process. To the extent that actual performance is different than what was assumed, actual net interest earnings sensitivity may be different than projected. The assumptions used in the models are management’s best estimate based on studies conducted by ALCO. ALCO uses a data-warehouse to study interest rate risk at a transactional level and uses various ad-hoc reports to refine assumptions continuously. Assumptions and methodologies regarding administered rate liabilities (e.g., savings, money market and interest-bearing checking accounts), balance trends, and repricing relationships reflect management’s best estimate of expected behavior and these assumptions are reviewed regularly.

     The Corporation also has longer-term interest rate risk exposure, which may not be appropriately measured by earnings sensitivity analysis. ALCO uses economic value of equity, or EVE, sensitivity analysis to study the impact of long-term cash flows on earnings and capital. Economic value of equity involves discounting present values of all cash flows on the balance sheet and off balance sheet items under different interest rate scenarios. The discounted present value of all cash flows represents the Corporation’s economic value of equity. The analysis requires modifying the expected cash flows in each interest rate scenario, which will impact the discounted present value. The amount of base-case measurement and its sensitivity to shifts in the yield curve allow management to measure longer-term repricing and option risk in the balance sheet. Presented below is the Corporation’s EVE profile as of June 30, 2006 and 2005:

Immediate Change in Rates and Resulting Percentage Increase/(Decrease) in EVE:

	-100 basis points			+100 basis points			+200 basis points
June 30, 2006		(1.20	%)		2.37	%		1.84	%
June 30, 2005		(2.72	%)		(0.16	%)		(1.77	%)

Capital Resources

     Shareholders’ equity at June 30, 2006 totaled $870.7 million compared to $937.6 million at December 31, 2005 and $976.0 million at June 30, 2005.

     The following table reflects the various measures of capital:

	June 30,				December 31,				June 30,
	2006				2005				2005
					(Dollars in thousands)
Consolidated
Total equity	$	870,698	8.49	%		937,580	9.23	%		976,016	9.46	%
Common equity		870,698	8.49	%		937,580	9.23	%		976,016	9.46	%
Tangible common equity (a)		728,142	7.20	%		794,579	7.93	%		832,571	8.19	%
Tier 1 capital (b)		811,605	9.91	%		858,879	10.60	%		873,672	11.01	%
Total risk-based capital (c)		995,630	12.15	%		1,075,987	13.28	%		1,092,262	13.76	%
Leverage (d)		811,605	8.13	%		858,879	8.48	%		873,672	8.54	%
Bank Only
Total equity	$	706,647	6.90	%		712,378	7.02	%		805,645	7.83	%
Common equity		706,647	6.90	%		712,378	7.02	%		805,645	7.83	%
Tangible common equity (a)		564,091	5.58	%		569,377	5.69	%		662,200	6.53	%
Tier 1 capital (b)		736,787	9.01	%		722,814	8.94	%		792,486	10.01	%
Total risk-based capital (c)		918,006	11.22	%		937,233	11.59	%		1,008,606	12.74	%
Leverage (d)	$	736,787	7.39	%		722,814	7.15	%		792,488	7.77	%

(a)	Common equity less all intangibles; computed as a ratio to total assets less intangible assets.
(b)	Shareholders’ equity minus net unrealized holding gains on equity securities, plus or minus net unrealized holding losses or gains on available for sale debt securities, less goodwill; computed as a ratio to risk-adjusted assets, as defined in the 1992 risk-based capital guidelines.
(c)	Tier 1 capital plus qualifying loan loss allowance, computed as a ratio to risk-adjusted assets, as defined in the 1992 risk-based capital guidelines.
(d)	Tier 1 capital; computed as a ratio to the latest quarter’s average assets less goodwill.

     The risk-based capital guidelines issued by the Federal Reserve Bank in 1988 require banks to maintain adequate capital equal to 8% of risk-adjusted assets effective December 31, 1993. At June 30, 2006, the Corporation’s risk-based capital equaled 12.15% of risk-adjusted assets, exceeding minimum guidelines.

     The cash dividend of $0.28 per share paid in the second quarter, has an indicated annual rate of $1.12 per share.

Liquidity Risk Management

     Liquidity risk is the possibility of the Corporation being unable to meet current and future financial obligations in a timely manner. Liquidity is managed to ensure stable, reliable and cost-effective sources of funds to satisfy demand for credit, deposit withdrawals and investment opportunities. The Corporation considers core earnings, strong capital ratios and credit quality essential for maintaining high credit ratings, which allow the Corporation cost-effective access to market-based liquidity. The Corporation relies on a large, stable core deposit base and a diversified base of wholesale funding sources to manage liquidity risk.

     The Treasury Group is responsible for identifying, measuring and monitoring the Corporation’s liquidity profile. The position is evaluated daily, weekly and monthly by analyzing the composition of all funding sources, reviewing projected liquidity commitments by future month and identifying sources and uses of funds. The Treasury Group also prepares a contingency funding plan that details the potential erosion of funds in the event of a systemic financial market crisis or institutional-specific stress. In addition, the overall management of the Corporation’s liquidity position is integrated into retail deposit pricing policies to ensure a stable core deposit base.

     The Corporation’s primary source of liquidity is its core deposit base, raised through its retail branch system, along with unencumbered, or unpledged, investment securities. The Corporation also has available unused wholesale sources of liquidity, including advances from the Federal Home Loan Bank of Cincinnati, issuance through dealers in the capital markets and access to certificates of deposits issued through brokers. Liquidity is also provided by unencumbered, or unpledged investment securities that totaled $741.7 million at June 30, 2006.

     Funding Trends for the Quarter — During the three months ended June 30, 2006, total average deposits increased $112.5 million from the linked quarter and $61.9 million of higher rate wholesale borrowings were repaid.

     Parent Company Liquidity — The Corporation manages its liquidity principally through dividends from the bank subsidiary. During the second quarter ended June 30, 2006, FirstMerit Bank paid FirstMerit Corporation $24.0 million in dividends. As of June 30, 2006, FirstMerit Bank had an additional $9.6 million available to pay dividends without regulatory approval.

Critical Accounting Policies

     The accounting and reporting policies of the Corporation are in accordance with accounting principles generally accepted within the United States of America and conform to general practices within the banking industry. Accounting and reporting policies for the allowance for loan losses, income taxes, mortgage servicing rights, derivative instruments and hedging activities, and pension and postretirement benefits are deemed critical since they involve the use of estimates and require significant management judgments. Application of assumptions different than those used by management could result in material changes in the Corporation’s financial position or results of operations. Note 1 (Summary of Significant Accounting Policies) and Note 4 (Allowance for Loan Losses), as described in the 2005 Form 10-K, as amended, provide detail with regard to the Corporation’s methodology and reporting of the allowance for loan losses. Additional information for income tax accounting is contained within Note 1, as well as in Note 11 (Federal Income Taxes) as described in the 2005 Form 10-K, as amended. Accounting for mortgage servicing rights was also discussed in the 2005 Form 10-K, as amended, in Note 1 and Note 6 (Mortgage Servicing Rights and Mortgage Servicing Activity). Derivative instruments and hedging activities are described more fully in Note 9 (Accounting for Derivatives) in these consolidated financial statements, as well as Note 1, Note 16 (Fair Value Disclosure of Financial Instruments), and Note 17 (Financial Instruments with Off-Balance-Sheet Risk) of the 2005 Form 10-K, as amended. A description of the plans and the assumptions used to estimate the liabilities for pension and postretirement benefits is described in Note 12 (Benefit Plans) to the 2005 Form 10-K, as amended as well as Note 10 (Benefit Plans) in these consolidated financial statements.

Off-Balance Sheet Arrangements

     A detailed discussion of the Corporation’s off-balance sheet arrangements, including swaps, hedges, forward swap agreements, IRLCs, TBA securities, options and swaptions is included in Note 8 (Accounting for Derivatives) in these consolidated financial statements and in Note 17 to the 2005 Form 10-K, as amended. There have been no significant changes since December 31, 2005.

Forward-looking Safe-harbor Statement

     The Corporation cautions that any forward-looking statements contained in this report, in a report incorporated by reference to this report or made by management of the Corporation, involve risks and uncertainties and are subject to change based upon various factors. Actual results could differ materially from those expressed or implied. Reference is made to the section titled “Forward-looking Statements” in the Corporation’s 2005 Form 10-K, as amended.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     See Market Risk Section in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 4. CONTROLS AND PROCEDURES

     Management, including the Corporation’s Chief Executive Officer and Chief Financial Officer, has made an evaluation of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.

     During the period covered by the report, there was no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

     Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer have concluded, as of the end of the period covered by this report, that the Corporation’s disclosure controls and procedures are effective.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     In the normal course of business, the Corporation is at all times subject to pending and threatened legal actions, some for which the relief or damages sought are substantial. Although the Corporation is not able to predict the outcome of such actions, after reviewing pending and threatened actions with counsel, management believes that the outcome of any or all such actions will not have a material adverse effect on the results of operations or shareholders’ equity of the Corporation.

ITEM 1A. RISK FACTORS

     There have been no material changes in our risk factors from those disclosed in our 2005 Annual Report on Form 10-K as amended.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)	Not applicable.
(b)	Not applicable.

     The following table provides information with respect to purchases the Corporation made of its common shares during the first quarter of the 2006 fiscal year:

					Total Number of		Maximum
					Shares Purchased		Number of Shares
					as Part of Publicly		that May Yet be
	Total Number of		Average Price		Announced Plans		Purchased Under
	Shares Purchased (2)		Paid per Share		or Programs (1)		Plans or Programs
Balance as of March 31, 2006:								396,272
April 1, 2006 - April 30, 2006		—		—		—		396,272
May 1, 2006 - May 31, 2006		1,329	$	23.93		—		396,272
June 1, 2006 - June 30, 2006		—		—		—		396,272
Balance as of June 30, 2006:		1,329	$	23.93		0		396,272

(1) On January 19, 2006, the Board of Directors authorized the repurchase of up to 3 million             shares (the “New Repurchase Plan”). The New Repurchase Plan superseded all other repurchase programs, including that authorized by the Board of Directors on July 15, 2004 (the “Prior Repurchase Plan”). The Corporation had purchased all of the shares it was authorized to acquire under the Prior Repurchase Plan.

(2) 1,329 of these common shares were either delivered by the option holder with respect to the exercise of stock options or the settlement of performance share awards, or in the case of restricted shares of common stock, withheld to pay income tax or other tax liabilities with respect to the vesting of restricted shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The Corporation held its Annual Meeting of Shareholders on April 19, 2006, for which the Board of Directors solicited proxies.

(b) Three Class III Directors were elected at the Annual Meeting for terms expiring at the 2009 Annual Meeting of Shareholders, with the following voting results:

					Authority
	For		Against		Withheld
John C. Blickle		65,209,684		*		1,182,993
Gina D. France		65,328,179		*		1,064,598
Terry L. Haines		65,188,840		*		1,208,937

* Proxies provide that shareholders may either cast a vote for, or abstain from voting for, directors.

Continuing Class I Directors serving until the 2007 Annual Meeting of Shareholders are John R. Cochran, Richard Colella, Philip A. Lloyd, II, Roger T. Read and Richard Seaman.

Continuing Class II Directors serving until the 2008 Annual Meeting of Shareholders are Karen S. Belden, R. Cary Blair, Robert W. Briggs, J. Michael Hochschwender and Clifford J. Isroff.

In addition, on May 18, 2006, the Paul G. Greig was appointed to the Board as a Class III Director with a term expiring at the 2009 Annual Meeting of Shareholders.

(c) In addition to the election of Directors, the following matters were voted on at the Annual Meeting of Shareholders:

(1) Adoption of the FirstMerit Corporation 2006 Equity Plan

					Broker
Votes For	Votes Against		Abstentions		Non-Votes
44,377,815		8,166,884		627,465		13,220,613

(2) Ratification of the selection of PricewaterhouseCoopers LLP as independent registered public accountants of the Corporation for the year ending December 31, 2006:

					Broker
Votes For	Votes Against		Abstentions		Non-Votes
65,591,595		589,667		211,512		0

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit
Number
	10.1	Employment Agreement, dated May 15, 2006, by and between the Company and Paul G. Greig (incorporated by reference from Exhibit 99.1 to the Form 8-K filed by the registrant on May 18, 2006)*
	10.2	Change of Control Agreement, dated May 18, 2006, by and between the Company and Paul G. Greig (incorporated by reference from Exhibit 99.2 to the Form 8-K filed by the registrant on May 18, 2006)*
	10.3	Displacement Agreement, dated May 18, 2006, by and between the Company and Paul G. Greig (incorporated by reference from Exhibit 99.3 to the Form 8-K filed by the registrant on May 18, 2006)*
	10.4	Transition Agreement, effective May 18, 2006, by and between the Company and John R. Cochran (incorporated by reference from Exhibit 99.1 to the Form 8-K filed by the registrant on June 21, 2006)*
	10.5	FirstMerit Corporation 2006 Equity Plan*
	31.1	Rule 13a-14(a)/Section 302 Certification of Paul G. Greig, Chief Executive Officer of FirstMerit Corporation
	31.2	Rule 13a-14(a)/Section 302 Certification of Terrence E. Bichsel, Executive Vice President and Chief Financial Officer of FirstMerit Corporation
	32.1	Rule 13a-14(b)/Section 906 Certifications of Paul G. Greig, Chief Executive Officer of FirstMerit Corporation, and Terrence E. Bichsel, Executive Vice President and Chief Financial Officer of FirstMerit Corporation

* Indicates management contract or compensatory plan or arrangement

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FIRSTMERIT CORPORATION
By:	/s/ TERRENCE E. BICHSEL
	Terrence E. Bichsel, Executive Vice President
	and Chief Financial Officer
	(duly authorized officer of registrant and principal financial officer)

Date: August 4, 2006