Exhibit 99.1
2007 Financial Information Second Quarter
| | | |
| Table of Contents | | |
| | | |
| | Pages 1-4 |
| | | |
| | Page 5 |
| | | |
| | Page 6 |
| | | |
| | Page 7 |
| | | |
| | Page 8 |
(Fully-tax Equivalent Interest Rates and Interest Differential) | | |
| | | |
| | Page 9 |
| | | |
| | Page 10 |
(Linked Quarters) | | |
| | | |
| | Page 11 |
| | | |
| | Page 12 |
| | | |
| | Page 13 |
| | | |
FirstMerit Corporation
III Cascade Plaza
Akron, Ohio 44308
Investor Relations
Tom O’Malley
p.330-384-7109
For Release July 24, 2007, 7:30 a.m. EST
Analysts and Media: Thomas P. O’Malley
(330) 384-7109
FirstMerit Reports 6 Percent Increase in Second Quarter 2007 Earnings Per Share of $0.37
AKRON, Ohio, — July 24, 2007 —FirstMerit Corporation (Nasdaq: FMER) today announced second quarter 2007 net income of $29.9 million, or $0.37 per diluted share. This compares with $27.7 million, or $0.35 per diluted share, for the prior-year quarter. Returns on average common equity (“ROE”) and average assets (“ROA”) for the second quarter 2007 were 13.75% and 1.16%, respectively, compared with 12.75% and 1.10% for the prior-year quarter.
For the first six months of 2007, the Company reported net income of $61.3 million, or $0.76 per diluted share, compared with $57.6 million, or $0.72 per diluted share, for the first six months of 2006. ROE and ROA were 14.32% and 1.20%, respectively, compared with 13.21% and 1.15% for the prior-year period.
“The improvements in loan portfolio management practices we have made over the past year has laid a solid foundation for growth and for building shareholder value,” said Paul G. Greig, Chairman and Chief Executive Officer of FirstMerit. “I am pleased to report that in the second quarter we saw solid, sequential commercial loan growth, as well as a quarter-to-quarter increase in net interest margin and continued tight expense control.”
“While incentives tied to credit quality improvement are embedded deeply throughout the organization, our bankers are competing for-and are being rewarded for-bringing in profitable and sound new business. Winning and deepening relationships in our markets are critical elements of our strategy to build a sustainable and consistent high-quality earnings stream for our shareholders.”
Net interest margin was 3.62% for the second quarter of 2007 compared with 3.58% for the first quarter of 2007 and 3.78% for the second quarter of 2006. The Company’s expanding net interest margin during the second quarter of 2007, compared with the first quarter of 2007, reflects increasing investment portfolio securities’ yields and declining funding costs. The decrease in net interest margin compared with the second quarter of 2006 reflected the shift in consumer preference for higher-costing term deposit products as well as increased deposit costs due to a higher interest rate environment.
Net interest income on a fully tax-equivalent (“FTE”) basis was $85.6 million in the second quarter of 2007 compared with $83.2 million in the first quarter of 2007 and $86.4 million in the second quarter of 2006. The increase in FTE net interest income
1
compared with the first quarter of 2007 reflected net interest margin expansion and modest average earning asset growth of $48.4 million, or 0.51%. The decrease in FTE net interest income compared with the second quarter of 2006 resulted from net interest margin contraction, partly offset by an increase in average earning assets of $311.8 million, or 3.40%.
Average loans for the second quarter of 2007 increased $84.1 million, or 1.22%, compared with the first quarter of 2007. Average commercial loans grew $96.3 million, or 2.57%, during the period offsetting a $5.8 million, or 0.19%, decrease in the average consumer portfolio of loans and a $6.5 million, or 8.29%, decrease in average leases. Compared with the second quarter of 2006, average loans increased $272.2 million, or 4.04%, led by a $242.3 million, or 6.73%, increase in average commercial loans. Average investments for the second quarter of 2007 increased $10.5 million, or 0.43%, compared with the first quarter of 2007. Compared with the second quarter of 2006, average investments increased $47.8 million, or 2.00%. Average investments represent 23.64% of average assets for the second quarter of 2007, compared with 23.64% and 23.80% for the first quarter of 2007 and the second quarter of 2006, respectively.
Average deposits in the second quarter of 2007 were $7.5 billion, an increase of $33.2 million, or 0.44%, compared with the first quarter of 2007. The growth came solely from increased transaction account categories, namely in demand-non-interest bearing deposits which rose $19.4 million, or 1.4%, resulting in an increased core deposit mix. The increased composition of core deposits contributed to lower funding costs and an expanded net interest margin for the quarter. Compared with the second quarter of 2006, average deposits increased $89.2 million, or 1.20%. Average certificates and other time deposits increased $224.3 million, or 7.94%, reflecting consumer preference for higher-yielding term deposits.
Noninterest income net of securities transactions for the second quarter of 2007 was $48.9 million, compared with $48.9 million in the first quarter of 2007 which included net gains of $3.5 million from previously disclosed asset sales. Excluding loan sales and servicing income, which declined $3.5 million compared with the first quarter of 2007, all other fee income categories increased in the second quarter of 2007. The primary growth in fee income came from service charges on deposits, which increased $0.8 million, or 4.96%, compared with the first quarter of 2007 and credit card fees, which increased $0.6 million, or 5.52%.
Compared with the second quarter of 2006, noninterest income decreased $3.1 million, or 6.04%. The year-over-year quarterly comparison is impacted by $3.3 million in noninterest income reported in the second quarter of 2006 and identified by the Company as related to one-time events reported in loan sales and servicing income and bank owned life insurance. Noninterest income, net of securities gains, as a percentage of net revenue for the first quarter of 2007 was 36.37% compared with 37.00% for the first quarter of 2007 and 37.61% for the second quarter of 2006. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.
For the second quarter of 2007, noninterest expense was $81.4 million, a decrease of $0.2 million, or 0.19%, from the first quarter of 2007 and a decrease of $3.8 million, or 4.51%, from the second quarter of 2006.
2
Mr.Greig added, “Our expense levels came in as expected this quarter and we will continue to scrutinize all categories within noninterest expense to achieve greater efficiencies in our operations.”
Net charge-offs totaled $7.6 million, or 0.43% of average portfolio loans, in the second quarter of 2007, $3.5 million, or 0.21% of average portfolio loans, in the first quarter of 2007 and $13.0 million, or 0.78% of average portfolio loans, in the second quarter of 2006.
Nonperforming assets totaled $37.0 million at June 30, 2007, compared with $32.7 million on March 31, 2007 and $58.8 million on June 30, 2006. Nonperforming assets at June 30, 2007 represented 0.52% of period-end loans plus other real estate, compared with 0.47% at March 31, 2007 and 0.86% at June 30, 2006.
The provision for loan losses was $10.0 million in the second quarter of 2007, compared with $4.2 million in the first quarter of 2007 and $13.2 million in the second quarter of 2006. The provision for loan losses exceeded net charge-offs by $2.4 million to support balance sheet growth in the second quarter of 2007.
The allowance for loan losses totaled $94.4 million at June 30, 2007, an increase of $2.4 million and $6.7 million from March 31, 2007 and June 30, 2006, respectively. At June 30, 2007, the allowance for loan losses was 1.34% of period-end loans compared with 1.32% at March 31, 2007 and 1.29% at June 30, 2006. The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments. For comparative purposes the allowance for credit losses as a percentage of period end loans was 1.43% at June 30, 2007, compared with 1.42% at March 31, 2007 and 1.37% at June 30, 2006. The allowance for credit losses to nonperforming loans was 315.56% at June 30, 2007 compared with 356.26% on March 31, 2007 and 186.19% on June 30, 2006.
FirstMerit’s total assets at June 30, 2007 were $10.4 billion, an increase of $82.0 million, or 0.79%, compared with March 31, 2007 and an increase of $174.3 million, or 1.70%, compared with June 30, 2006. The increase from March 31, 2007, was driven by commercial loan growth of $98.8 million, or 2.60%, offsetting a $6.5 million, or 0.21%, decrease in consumer loans and a $4.5 million, or 5.99%, decrease in the lease portfolio. Commercial loan growth of $239.2 million, or 6.54%, supported overall asset growth from June 30, 2006.
Total deposits were $7.5 billion at June 30, 2007, a decrease of $226.7 million, or 2.94%, from March 31, 2007, and an increase of $72.2 million, or 0.98%, from June 30, 2006. Core deposits, which exclude all time deposits, totaled $4.4 billion at June 30, 2007, a decrease of $133.1 million, or 2.91%, from March 31, 2007 and a decrease of $126.9 million, or 2.78%, from June 30, 2006.
Shareholders’ equity was $862.3 million at June 30, 2007 and the Company’s capital position remains strong as tangible equity to assets was 7.00%. The common dividend per share paid in the second quarter 2007 was $0.29.
3
Second Quarter 2007 Conference Call
FirstMerit’s senior management will host an earnings conference call on July 24, 2007, at 2:00 p.m. Eastern time to provide an overview of second quarter results and highlights. To participate in the conference call, please dial 866-425-6191 ten minutes before start time and provide the reservation number: 9031144. A replay of the conference call will be available at approximately 4:30 p.m., on July 24, 2007 through July 31, 2007, by dialing 877-519-4471, and entering the PIN: 9031144.
About FirstMerit
FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $10.4 billion as of June 30, 2007 and 160 banking offices and 176 ATMs in 25 Ohio and Western Pennsylvania counties. FirstMerit provides a complete range of banking and other financial services to consumers and businesses through its core operations. Principal wholly-owned subsidiaries include: FirstMerit Bank, N.A., FirstMerit Mortgage Corporation, FirstMerit Title Agency, Ltd., and FirstMerit Community Development Corporation.
Forward-Looking Statement
This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Company, as well as its operations, markets and products. Actual results could differ materially from those indicated. Among the important factors that could cause results to differ materially are interest rate changes, continued softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Company’s business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Company’s periodic reports and registration statements filed with the Securities and Exchange Commission. The Company undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.
4
| | | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands) | |  |
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarters |
| | | 2007 | | 2007 | | 2006 | | 2006 | | 2006 |
| EARNINGS | | 2nd Qtr | | 1st Qtr | | 4th Qtr | | 3rd Qtr | | 2nd Qtr |
| |
| Net interest income FTE (a) | | $ | 85,593 | | | $ | 83,218 | | | $ | 84,502 | | | $ | 85,850 | | | $ | 86,377 | |
| Provision for loan losses | | | 9,967 | | | | 4,210 | | | | 44,235 | | | | 12,612 | | | | 13,159 | |
| Other income | | | 48,930 | | | | 48,876 | | | | 48,332 | | | | 49,341 | | | | 52,078 | |
| Other expenses | | | 81,375 | | | | 81,526 | | | | 83,987 | | | | 76,983 | | | | 85,218 | |
| FTE adjustment (a) | | | 1,368 | | | | 1,212 | | | | 919 | | | | 763 | | | | 647 | |
| Net income | | | 29,885 | | | | 31,421 | | | | 6,117 | | | | 31,204 | | | | 27,661 | |
| Diluted EPS | | | 0.37 | | | | 0.39 | | | | 0.07 | | | | 0.39 | | | | 0.35 | |
| | | | | | | | | | | | | | | | | | | | | |
| PERFORMANCE RATIOS | | | | | | | | | | | | | | | | | | | | |
| Return on average assets (ROA) | | | 1.16 | % | | | 1.24 | % | | | 0.24 | % | | | 1.22 | % | | | 1.10 | % |
| Return on average common equity (ROE) | | | 13.75 | % | | | 14.91 | % | | | 2.66 | % | | | 13.93 | % | | | 12.75 | % |
| Net interest margin FTE (a) | | | 3.62 | % | | | 3.58 | % | | | 3.58 | % | | | 3.68 | % | | | 3.78 | % |
| Efficiency ratio | | | 60.33 | % | | | 61.55 | % | | | 63.06 | % | | | 56.78 | % | | | 61.39 | % |
| Number of full-time equivalent employees | | | 2,725 | | | | 2,751 | | | | 2,755 | | | | 2,769 | | | | 2,986 | |
| | | | | | | | | | | | | | | | | | | | | |
| MARKET DATA | | | | | | | | | | | | | | | | | | | | |
| Book value/common share | | $ | 10.71 | | | $ | 10.78 | | | $ | 10.56 | | | $ | 11.28 | | | $ | 10.88 | |
| Period-end common share mkt value | | | 20.93 | | | | 21.11 | | | | 24.14 | | | | 23.17 | | | | 20.94 | |
| Market as a % of book | | | 195 | % | | | 196 | % | | | 229 | % | | | 205 | % | | | 193 | % |
| Cash dividends/common share | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.28 | |
| Common stock dividend payout ratio | | | 78.38 | % | | | 74.36 | % | | | 414.29 | % | | | 74.36 | % | | | 80.00 | % |
| Average basic common shares | | | 80,426 | | | | 80,113 | | | | 80,091 | | | | 80,066 | | | | 79,983 | |
| Average diluted common shares | | | 80,570 | | | | 80,298 | | | | 80,316 | | | | 80,262 | | | | 80,203 | |
| Period end common shares | | | 80,477 | | | | 80,112 | | | | 80,101 | | | | 80,072 | | | | 80,058 | |
| Common shares repurchased | | | 36,159 | | | | 27,011 | | | | 15,876 | | | | 0 | | | | 1,329 | |
| Common stock market capitalization | | $ | 1,684,384 | | | $ | 1,691,164 | | | $ | 1,933,638 | | | $ | 1,855,268 | | | $ | 1,676,415 | |
| | | | | | | | | | | | | | | | | | | | | |
| ASSET QUALITY | | | | | | | | | | | | | | | | | | | | |
| Gross charge-offs | | $ | 10,609 | | | $ | 9,424 | | | $ | 22,323 | | | $ | 15,453 | | | $ | 18,038 | |
| Net charge-offs | | | 7,580 | | | | 3,507 | | | | 18,559 | | | | 11,584 | | | | 13,021 | |
| Allowance for loan losses | | | 94,432 | | | | 92,045 | | | | 91,342 | | | | 88,755 | | | | 87,727 | |
| Reserve for unfunded lending commitments | | | 6,553 | | | | 6,746 | | | | 6,294 | | | | 6,307 | | | | 5,716 | |
| Nonperforming assets (NPAs) | | | 37,038 | | | | 32,664 | | | | 64,177 | | | | 72,464 | | | | 58,786 | |
| Net charge-offs/average loans ratio | | | 0.43 | % | | | 0.21 | % | | | 1.06 | % | | | 0.67 | % | | | 0.78 | % |
| Net charge-offs and allowance related to loans held for sale/average loans ratio | | | 0.43 | % | | | 0.21 | % | | | 1.40 | % | | | 0.67 | % | | | 0.78 | % |
| Allowance for loan losses/period-end loans | | | 1.34 | % | | | 1.32 | % | | | 1.33 | % | | | 1.28 | % | | | 1.29 | % |
| Allowance for credit losses/period-end loans | | | 1.43 | % | | | 1.42 | % | | | 1.42 | % | | | 1.37 | % | | | 1.37 | % |
| NPAs/loans and other real estate | | | 0.52 | % | | | 0.47 | % | | | 0.93 | % | | | 1.05 | % | | | 0.86 | % |
| Allowance for loan losses/nonperforming loans | | | 295.08 | % | | | 331.93 | % | | | 168.03 | % | | | 143.73 | % | | | 174.80 | % |
| Allowance for credit losses/nonperforming loans | | | 315.56 | % | | | 356.26 | % | | | 179.60 | % | | | 153.94 | % | | | 186.19 | % |
| | | | | | | | | | | | | | | | | | | | | |
| CAPITAL & LIQUIDITY | | | | | | | | | | | | | | | | | | | | |
| Period-end tangible equity to assets | | | 7.00 | % | | | 7.07 | % | | | 6.96 | % | | | 7.55 | % | | | 7.20 | % |
| Average equity to assets | | | 8.45 | % | | | 8.32 | % | | | 8.91 | % | | | 8.77 | % | | | 8.66 | % |
| Average equity to loans | | | 12.45 | % | | | 12.35 | % | | | 13.17 | % | | | 12.99 | % | | | 12.93 | % |
| Average loans to deposits | | | 93.18 | % | | | 92.47 | % | | | 92.97 | % | | | 93.05 | % | | | 90.63 | % |
| | | | | | | | | | | | | | | | | | | | | |
| AVERAGE BALANCES | | | | | | | | | | | | | | | | | | | | |
| Assets | | $ | 10,319,454 | | | $ | 10,276,241 | | | $ | 10,227,154 | | | $ | 10,138,856 | | | $ | 10,051,623 | |
| Deposits | | | 7,515,205 | | | | 7,481,969 | | | | 7,440,331 | | | | 7,355,877 | | | | 7,426,029 | |
| Loans | | | 7,002,750 | | | | 6,918,636 | | | | 6,917,572 | | | | 6,844,593 | | | | 6,730,531 | |
| Earning assets | | | 9,485,819 | | | | 9,437,418 | | | | 9,374,223 | | | | 9,249,769 | | | | 9,174,008 | |
| Shareholders’ equity | | | 871,554 | | | | 854,713 | | | | 911,348 | | | | 888,841 | | | | 870,234 | |
| | | | | | | | | | | | | | | | | | | | | |
| ENDING BALANCES | | | | | | | | | | | | | | | | | | | | |
| Assets | | $ | 10,429,099 | | | $ | 10,347,121 | | | $ | 10,252,572 | | | $ | 10,217,968 | | | $ | 10,254,773 | |
| Deposits | | | 7,474,466 | | | | 7,701,202 | | | | 7,498,921 | | | | 7,389,633 | | | | 7,402,239 | |
| Loans | | | 7,052,390 | | | | 6,951,631 | | | | 6,878,873 | | | | 6,917,347 | | | | 6,804,769 | |
| Goodwill | | | 139,245 | | | | 139,245 | | | | 139,245 | | | | 139,245 | | | | 139,245 | |
| Intangible assets | | | 2,422 | | | | 2,644 | | | | 2,865 | | | | 3,088 | | | | 3,311 | |
| Earning assets | | | 9,545,752 | | | | 9,447,346 | | | | 9,382,033 | | | | 9,344,841 | | | | 9,315,062 | |
| Total shareholders’ equity | | | 862,265 | | | | 863,641 | | | | 846,111 | | | | 903,383 | | | | 870,698 | |
| | |
| NOTES: | | |
| |
| (a) | | - Net interest income on a fully tax-equivalent (“FTE”) basis restates interest on tax-exempt securities and loans as if such interest were subject to federal income tax at the statutory rate. Net interest income on an FTE basis is not an accounting principle generally accepted in the United States of America. |
5
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited, except December 31, 2006, which is derived from the
audited financial statements)
| | | | | | | | | | | | | |
| | | June 30, | | | December 31, | | | June 30, | |
| | | 2007 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | |
| Cash and due from banks | | $ | 210,722 | | | $ | 200,204 | | | $ | 228,690 | |
| Investment securities (at fair value) and federal funds sold | | | 2,442,906 | | | | 2,407,888 | | | | 2,461,086 | |
| Loans held for sale | | | 50,456 | | | | 95,272 | | | | 49,207 | |
| Loans: | | | | | | | | | | | | |
| Commercial loans | | | 3,898,943 | | | | 3,694,121 | | | | 3,659,687 | |
| Mortgage loans | | | 586,612 | | | | 608,008 | | | | 618,560 | |
| Installment loans | | | 1,641,790 | | | | 1,619,747 | | | | 1,561,757 | |
| Home equity loans | | | 712,021 | | | | 731,473 | | | | 763,585 | |
| Credit card loans | | | 141,162 | | | | 147,553 | | | | 136,966 | |
| Leases | | | 71,862 | | | | 77,971 | | | | 64,214 | |
| | | | | | | | | | |
| Total loans | | | 7,052,390 | | | | 6,878,873 | | | | 6,804,769 | |
| Less allowance for loan losses | | | (94,432 | ) | | | (91,342 | ) | | | (87,727 | ) |
| | | | | | | | | | |
| Net loans | | | 6,957,958 | | | | 6,787,531 | | | | 6,717,042 | |
| Premises and equipment, net | | | 118,294 | | | | 122,954 | | | | 119,233 | |
| Goodwill | | | 139,245 | | | | 139,245 | | | | 139,245 | |
| Intangible assets | | | 2,422 | | | | 2,865 | | | | 3,311 | |
| Accrued interest receivable and other assets | | | 507,096 | | | | 496,613 | | | | 536,959 | |
| | | | | | | | | | |
| Total assets | | $ | 10,429,099 | | | $ | 10,252,572 | | | $ | 10,254,773 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | |
| Demand-non-interest bearing | | $ | 1,424,892 | | | $ | 1,455,097 | | | $ | 1,466,628 | |
| Demand-interest bearing | | | 755,931 | | | | 799,571 | | | | 842,354 | |
| Savings and money market accounts | | | 2,262,828 | | | | 2,267,686 | | | | 2,261,557 | |
| Certificates and other time deposits | | | 3,030,815 | | | | 2,976,567 | | | | 2,831,700 | |
| | | | | | | | | | |
| Total deposits | | | 7,474,466 | | | | 7,498,921 | | | | 7,402,239 | |
| | | | | | | | | | |
| Securities sold under agreements to repurchase | | | 1,302,175 | | | | 1,261,821 | | | | 1,156,346 | |
| Wholesale borrowings | | | 578,659 | | | | 464,227 | | | | 658,720 | |
| Accrued taxes, expenses, and other liabilities | | | 211,534 | | | | 181,492 | | | | 166,770 | |
| | | | | | | | | | |
| Total liabilities | | | 9,566,834 | | | | 9,406,461 | | | | 9,384,075 | |
| | | | | | | | | | |
| 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, 2007, December 31, 2006 and June 30, 2006 | | | 127,937 | | | | 127,937 | | | | 127,937 | |
| Capital surplus | | | 100,700 | | | | 106,916 | | | | 105,397 | |
| Accumulated other comprehensive loss | | | (82,073 | ) | | | (79,508 | ) | | | (62,013 | ) |
| Retained earnings | | | 1,012,699 | | | | 998,079 | | | | 1,007,346 | |
| Treasury stock, at cost, 11,548,911, 11,925,803 and 11,968,035 shares at June 30, 2007, December 31, 2006 and June 30, 2006, respectively | | | (296,998 | ) | | | (307,313 | ) | | | (307,969 | ) |
| | | | | | | | | | |
| Total shareholders’ equity | | | 862,265 | | | | 846,111 | | | | 870,698 | |
| | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 10,429,099 | | | $ | 10,252,572 | | | $ | 10,254,773 | |
| | | | | | | | | | |
6
| | | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands) | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarterly Periods | |
| | | June 30, | | | March 31, | | | December 31, | | | September 30, | | | June 30, | |
| | | 2007 | | | 2007 | | | 2006 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 177,524 | | | $ | 179,566 | | | $ | 175,735 | | | $ | 185,628 | | | $ | 188,915 | |
| Investment securities/fed funds sold | | | 2,440,015 | | | | 2,429,539 | | | | 2,410,879 | | | | 2,360,494 | | | | 2,392,208 | |
| Loans held for sale | | | 43,054 | | | | 89,243 | | | | 45,772 | | | | 44,682 | | | | 51,269 | |
| Loans: | | | | | | | | | | | | | | | | | | | | |
| Commercial loans | | | 3,845,395 | | | | 3,749,067 | | | | 3,730,110 | | | | 3,674,988 | | | | 3,603,083 | |
| Mortgage loans | | | 596,758 | | | | 607,602 | | | | 614,204 | | | | 619,542 | | | | 626,476 | |
| Installment loans | | | 1,636,669 | | | | 1,622,324 | | | | 1,625,962 | | | | 1,592,917 | | | | 1,526,094 | |
| Home equity loans | | | 711,113 | | | | 717,806 | | | | 738,630 | | | | 755,044 | | | | 772,196 | |
| Credit card loans | | | 141,294 | | | | 143,853 | | | | 144,351 | | | | 139,117 | | | | 137,545 | |
| Leases | | | 71,521 | | | | 77,984 | | | | 64,315 | | | | 62,985 | | | | 65,137 | |
| | | | | | | | | | | | | | | | |
| Total loans | | | 7,002,750 | | | | 6,918,636 | | | | 6,917,572 | | | | 6,844,593 | | | | 6,730,531 | |
| Less allowance for loan losses | | | 92,298 | | | | 91,256 | | | | 88,175 | | | | 87,127 | | | | 86,583 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loans | | | 6,910,452 | | | | 6,827,380 | | | | 6,829,397 | | | | 6,757,466 | | | | 6,643,948 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total earning assets | | | 9,485,819 | | | | 9,437,418 | | | | 9,374,223 | | | | 9,249,769 | | | | 9,174,008 | |
| | | | | | | | | | | | | | | | | | | | | |
| Premises and equipment, net | | | 119,818 | | | | 121,988 | | | | 121,956 | | | | 120,088 | | | | 119,666 | |
| Accrued interest receivable and other assets | | | 628,591 | | | | 628,525 | | | | 643,415 | | | | 670,498 | | | | 655,617 | |
| | | | | | | | | | | | | | | | |
| |
TOTAL ASSETS | | $ | 10,319,454 | | | $ | 10,276,241 | | | $ | 10,227,154 | | | $ | 10,138,856 | | | $ | 10,051,623 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
LIABILITIES | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | |
| Demand-non-interest bearing | | $ | 1,408,827 | | | $ | 1,389,455 | | | $ | 1,413,682 | | | $ | 1,407,653 | | | $ | 1,455,229 | |
| Demand-interest bearing | | | 763,907 | | | | 756,678 | | | | 767,430 | | | | 794,886 | | | | 865,563 | |
| Savings and money market accounts | | | 2,293,567 | | | | 2,284,549 | | | | 2,267,268 | | | | 2,246,386 | | | | 2,280,657 | |
| Certificates and other time deposits | | | 3,048,904 | | | | 3,051,287 | | | | 2,991,951 | | | | 2,906,952 | | | | 2,824,580 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total deposits | | | 7,515,205 | | | | 7,481,969 | | | | 7,440,331 | | | | 7,355,877 | | | | 7,426,029 | |
| | | | | | | | | | | | | | | | | | | | | |
| Securities sold under agreements to repurchase | | | 1,458,982 | | | | 1,352,961 | | | | 1,269,873 | | | | 1,357,746 | | | | 1,212,470 | |
| Wholesale borrowings | | | 280,914 | | | | 399,638 | | | | 446,950 | | | | 367,640 | | | | 371,309 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total funds | | | 9,255,101 | | | | 9,234,568 | | | | 9,157,154 | | | | 9,081,263 | | | | 9,009,808 | |
| Accrued taxes, expenses and other liabilities | | | 192,799 | | | | 186,960 | | | | 158,652 | | | | 168,752 | | | | 171,581 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total liabilities | | | 9,447,900 | | | | 9,421,528 | | | | 9,315,806 | | | | 9,250,015 | | | | 9,181,389 | |
| | | | | | | | | | | | | | | | | | | | | |
SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | |
| Preferred stock | | | — | | | | — | | | | — | | | | — | | | | — | |
| Common stock | | | 127,937 | | | | 127,937 | | | | 127,937 | | | | 127,937 | | | | 127,937 | |
| Capital surplus | | | 102,355 | | | | 107,178 | | | | 106,339 | | | | 105,587 | | | | 104,477 | |
| Accumulated other comprehensive (loss) income | | | (72,170 | ) | | | (76,926 | ) | | | (36,045 | ) | | | (52,601 | ) | | | (54,132 | ) |
| Retained earnings | | | 1,012,675 | | | | 1,003,605 | | | | 1,020,518 | | | | 1,015,749 | | | | 1,001,647 | |
| Treasury stock | | | (299,243 | ) | | | (307,081 | ) | | | (307,401 | ) | | | (307,831 | ) | | | (309,695 | ) |
| | | | | | | | | | | | | | | | |
| |
| Total shareholders’ equity | | | 871,554 | �� | | | 854,713 | | | | 911,348 | | | | 888,841 | | | | 870,234 | |
| | | | | | | | | | | | | | | | |
| |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 10,319,454 | | | $ | 10,276,241 | | | $ | 10,227,154 | | | $ | 10,138,856 | | | $ | 10,051,623 | |
| | | | | | | | | | | | | | | | |
7
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited) Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT CORPORATION AND SUBSIDIARIES
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended | | | Year ended | | | Three months ended | |
| | | June 30, 2007 | | | December 31, 2006 | | | June 30, 2006 | |
| | | Average | | | | | | | Average | | | Average | | | | | | | Average | | | Average | | | | | | | Average | |
| | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | |
| | | |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 177,524 | | | | | | | | | | | $ | 186,029 | | | | | | | | | | | $ | 188,915 | | | | | | | | | |
| Investment securities and federal funds sold: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury securities and U.S. Government agency obligations (taxable) | | | 1,936,833 | | | | 20,359 | | | | 4.22 | % | | | 2,050,736 | | | | 81,207 | | | | 3.96 | % | | | 2,054,338 | | | | 20,102 | | | | 3.92 | % |
| Obligations of states and political subdivisions (tax exempt) | | | 256,153 | | | | 3,883 | | | | 6.08 | % | | | 114,548 | | | | 7,390 | | | | 6.45 | % | | | 88,144 | | | | 1,490 | | | | 6.78 | % |
| Other securities and federal funds sold | | | 247,029 | | | | 4,477 | | | | 7.27 | % | | | 250,221 | | | | 15,264 | | | | 6.10 | % | | | 249,726 | | | | 3,823 | | | | 6.14 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total investment securities and federal funds sold | | | 2,440,015 | | | | 28,719 | | | | 4.72 | % | | | 2,415,505 | | | | 103,861 | | | | 4.30 | % | | | 2,392,208 | | | | 25,415 | | | | 4.26 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans held for sale | | | 43,054 | | | | 739 | | | | 6.88 | % | | | 47,449 | | | | 3,153 | | | | 6.65 | % | | | 51,269 | | | | 512 | | | | 4.01 | % |
| Loans | | | 7,002,750 | | | | 131,369 | | | | 7.52 | % | | | 6,798,338 | | | | 499,746 | | | | 7.35 | % | | | 6,730,531 | | | | 122,990 | | | | 7.33 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| Total earning assets | | | 9,485,819 | | | | 160,827 | | | | 6.80 | % | | | 9,261,292 | | | | 606,760 | | | | 6.55 | % | | | 9,174,008 | | | | 148,917 | | | | 6.51 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses | | | (92,298 | ) | | | | | | | | | | | (88,020 | ) | | | | | | | | | | | (86,583 | ) | | | | | | | | |
| Other assets | | | 748,409 | | | | | | | | | | | | 770,714 | | | | | | | | | | | | 775,283 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 10,319,454 | | | | | | | | | | | $ | 10,130,015 | | | | | | | | | | | $ | 10,051,623 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS�� EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand — non-interest bearing | | $ | 1,408,827 | | | | — | | | | — | | | $ | 1,434,539 | | | | — | | | | — | | | $ | 1,455,229 | | | | — | | | | — | |
| Demand — interest bearing | | | 763,907 | | | | 1,876 | | | | 0.99 | % | | | 818,735 | | | | 9,217 | | | | 1.13 | % | | | 865,563 | | | | 2,583 | | | | 1.20 | % |
| Savings and money market accounts | | | 2,293,567 | | | | 13,992 | | | | 2.45 | % | | | 2,271,654 | | | | 50,083 | | | | 2.20 | % | | | 2,280,657 | | | | 12,079 | | | | 2.12 | % |
| Certificates and other time deposits | | | 3,048,904 | | | | 36,725 | | | | 4.83 | % | | | 2,859,218 | | | | 123,877 | | | | 4.33 | % | | | 2,824,580 | | | | 29,326 | | | | 4.16 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total deposits | | | 7,515,205 | | | | 52,593 | | | | 2.81 | % | | | 7,384,146 | | | | 183,177 | | | | 2.48 | % | | | 7,426,029 | | | | 43,988 | | | | 2.38 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Securities sold under agreements to repurchase | | | 1,458,982 | | | | 18,005 | | | | 4.95 | % | | | 1,283,951 | | | | 56,151 | | | | 4.37 | % | | | 1,212,470 | | | | 12,957 | | | | 4.29 | % |
| Wholesale borrowings | | | 280,914 | | | | 4,636 | | | | 6.62 | % | | | 404,723 | | | | 24,140 | | | | 5.96 | % | | | 371,309 | | | | 5,595 | | | | 6.04 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total interest bearing liabilities | | | 7,846,274 | | | | 75,234 | | | | 3.85 | % | | | 7,638,281 | | | | 263,468 | | | | 3.45 | % | | | 7,554,579 | | | | 62,540 | | | | 3.32 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other liabilities | | | 192,799 | | | | | | | | | | | | 167,266 | | | | | | | | | | | | 171,581 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shareholders’ equity | | | 871,554 | | | | | | | | | | | | 889,929 | | | | | | | | | | | | 870,234 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 10,319,454 | | | | | | | | | | | $ | 10,130,015 | | | | | | | | | | | $ | 10,051,623 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net yield on earning assets | | $ | 9,485,819 | | | | 85,593 | | | | 3.62 | % | | $ | 9,261,292 | | | | 343,292 | | | | 3.71 | % | | $ | 9,174,008 | | | | 86,377 | | | | 3.78 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| Interest rate spread | | | | | | | | | | | 2.95 | % | | | | | | | | | | | 3.10 | % | | | | | | | | | | | 3.19 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| Note: | | Interest income on tax-exempt securities and loans has been adjusted to a fully-taxable equivalent basis.
Nonaccrual loans have been included in the average balances. |
8
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands except per share data)
| | | | | | | | | | | | | | | | | |
| | | Quarters ended | | | Six months ended | |
| | | June 30, | | | June 30, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| Interest income: | | | | | | �� | | | | | | | | | | |
| Interest and fees on loans, including held for sale | | $ | 132,076 | | | $ | 123,450 | | | $ | 262,165 | | | $ | 241,190 | |
| Interest and dividends on investment securities and federal funds sold | | | 27,383 | | | | 24,820 | | | | 54,229 | | | | 50,152 | |
| | | | | | | | | | | | | |
| Total interest income | | | 159,459 | | | | 148,270 | | | | 316,394 | | | | 291,342 | |
| | | | | | | | | | | | | |
| Interest expense: | | | | | | | | | | | | | | | | |
| Interest on deposits: | | | | | | | | | | | | | | | | |
| Demand-interest bearing | | | 1,876 | | | | 2,583 | | | | 3,795 | | | | 4,945 | |
| Savings and money market accounts | | | 13,992 | | | | 12,079 | | | | 27,998 | | | | 22,827 | |
| Certificates and other time deposits | | | 36,725 | | | | 29,326 | | | | 72,805 | | | | 55,427 | |
| Interest on securities sold under agreements to repurchase | | | 18,005 | | | | 12,957 | | | | 34,790 | | | | 24,880 | |
| Interest on wholesale borrowings | | | 4,636 | | | | 5,595 | | | | 10,775 | | | | 11,560 | |
| | | | | | | | | | | | | |
| Total interest expense | | | 75,234 | | | | 62,540 | | | | 150,163 | | | | 119,639 | |
| | | | | | | | | | | | | |
| Net interest income | | | 84,225 | | | | 85,730 | | | | 166,231 | | | | 171,703 | |
| Provision for loan losses | | | 9,967 | | | | 13,159 | | | | 14,177 | | | | 19,265 | |
| | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 74,258 | | | | 72,571 | | | | 152,054 | | | | 152,438 | |
| | | | | | | | | | | | | |
| Other income: | | | | | | | | | | | | | | | | |
| Trust department income | | | 6,096 | | | | 5,744 | | | | 11,692 | | | | 11,138 | |
| Service charges on deposits | | | 17,055 | | | | 18,010 | | | | 33,304 | | | | 34,076 | |
| Credit card fees | | | 11,712 | | | | 11,478 | | | | 22,811 | | | | 22,149 | |
| ATM and other service fees | | | 3,189 | | | | 3,273 | | | | 6,260 | | | | 6,381 | |
| Bank owned life insurance income | | | 3,290 | | | | 5,310 | | | | 6,458 | | | | 8,296 | |
| Investment services and insurance | | | 2,660 | | | | 2,581 | | | | 5,113 | | | | 5,178 | |
| Investment securities gains, net | | | 1 | | | | 4 | | | | 1 | | | | 20 | |
| Loan sales and servicing income | | | 1,911 | | | | 2,833 | | | | 7,349 | | | | 4,278 | |
| Other operating income | | | 3,016 | | | | 2,845 | | | | 4,818 | | | | 5,959 | |
| | | | | | | | | | | | | |
| Total other income | | | 48,930 | | | | 52,078 | | | | 97,806 | | | | 97,475 | |
| | | | | | | | | | | | | |
| Other expenses: | | | | | | | | | | | | | | | | |
| Salaries, wages, pension and employee benefits | | | 43,538 | | | | 46,721 | | | | 86,038 | | | | 89,752 | |
| Net occupancy expense | | | 6,521 | | | | 6,120 | | | | 13,207 | | | | 12,669 | |
| Equipment expense | | | 2,851 | | | | 2,914 | | | | 5,935 | | | | 5,872 | |
| Stationery, supplies and postage | | | 2,252 | | | | 2,403 | | | | 4,585 | | | | 4,856 | |
| Bankcard, loan processing and other costs | | | 7,607 | | | | 7,417 | | | | 15,077 | | | | 13,244 | |
| Professional services | | | 4,525 | | | | 3,738 | | | | 9,354 | | | | 6,501 | |
| Amortization of intangibles | | | 222 | | | | 222 | | | | 445 | | | | 445 | |
| Other operating expense | | | 13,859 | | | | 15,683 | | | | 28,260 | | | | 33,778 | |
| | | | | | | | | | | | | |
| Total other expenses | | | 81,375 | | | | 85,218 | | | | 162,901 | | | | 167,117 | |
| | | | | | | | | | | | | |
| Income before federal income tax expense | | | 41,813 | | | | 39,431 | | | | 86,959 | | | | 82,796 | |
| Federal income tax expense | | | 11,928 | | | | 11,770 | | | | 25,653 | | | | 25,171 | |
| | | | | | | | | | | | | |
| Net income | | $ | 29,885 | | | $ | 27,661 | | | $ | 61,306 | | | $ | 57,625 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Other comprehensive income (loss), net of taxes | | | | | | | | | | | | | | | | |
| Unrealized securities’ holding gain (loss), net of taxes | | $ | (13,051 | ) | | $ | (8,652 | ) | | $ | (4,938 | ) | | $ | (18,400 | ) |
| Unrealized hedging gain (loss), net of taxes | | | 561 | | | | 37 | | | | 628 | | | | (750 | ) |
| Minimum pension liability adjustment, net of taxes | | | 1,746 | | | | — | | | | 1,746 | | | | — | |
| Less: reclassification adjustment for securities’ gains losses realized in net income, net of taxes | | | 1 | | | | 3 | | | | 1 | | | | 13 | |
| | | | | | | | | | | | | |
| Total other comprehensive income (loss), net of taxes | | | (10,745 | ) | | | (8,618 | ) | | | (2,565 | ) | | | (19,163 | ) |
| | | | | | | | | | | | | |
| Comprehensive income | | $ | 19,140 | | | $ | 19,043 | | | $ | 58,741 | | | $ | 38,462 | |
| | | | | | | | | | | | | |
| Net income applicable to common shares | | $ | 29,885 | | | $ | 27,661 | | | $ | 61,306 | | | $ | 57,625 | |
| | | | | | | | | | | | | |
| Net income used in diluted EPS calculation | | $ | 29,889 | | | $ | 27,666 | | | $ | 61,314 | | | $ | 57,635 | |
| | | | | | | | | | | | | |
| Weighted average number of common shares outstanding — basic | | | 80,426 | | | | 79,983 | | | | 80,270 | | | | 80,177 | |
| | | | | | | | | | | | | |
| Weighted average number of common shares outstanding — diluted | | | 80,570 | | | | 80,203 | | | | 80,433 | | | | 80,420 | |
| | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.37 | | | $ | 0.35 | | | $ | 0.76 | | | $ | 0.72 | |
| | | | | | | | | | | | | |
| Diluted earnings per share | | $ | 0.37 | | | $ | 0.35 | | | $ | 0.76 | | | $ | 0.72 | |
| | | | | | | | | | | | | |
| Dividend per share | | $ | 0.29 | | | $ | 0.28 | | | $ | 0.58 | | | $ | 0.56 | |
| | | | | | | | | | | | | |
9
| | | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME—LINKED QUARTERS
(Unaudited)
(Dollars in thousands, except share data) | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarterly Results | |
| | | 2007 | | | 2007 | | | 2006 | | | 2006 | | | 2006 | |
| | | 2nd Q | | | 1st Q | | | 4th Q | | | 3rd Q | | | 2nd Q | |
| |
| Interest and fees on loans, including held for sale | | $ | 132,076 | | | $ | 130,089 | | | $ | 131,683 | | | $ | 129,890 | | | $ | 123,450 | |
| Interest and dividends — securities and federal funds sold | | | 27,383 | | | | 26,846 | | | | 25,795 | | | | 25,131 | | | | 24,820 | |
| | | | | | | | | | | | | | | | |
| Total interest income | | | 159,459 | | | | 156,935 | | | | 157,478 | | | | 155,021 | | | | 148,270 | |
| | | | | | | | | | | | | | | | |
| Interest on deposits: | | | | | | | | | | | | | | | | | | | | |
| Demand—interest bearing | | | 1,876 | | | | 1,919 | | | | 2,031 | | | | 2,241 | | | | 2,583 | |
| Savings and money market accounts | | | 13,992 | | | | 14,006 | | | | 14,068 | | | | 13,188 | | | | 12,079 | |
| Certificates and other time deposits | | | 36,725 | | | | 36,080 | | | | 35,569 | | | | 32,881 | | | | 29,326 | |
| Securities sold under agreements to repurchase | | | 18,005 | | | | 16,785 | | | | 15,393 | | | | 15,878 | | | | 12,957 | |
| Wholesale borrowings | | | 4,636 | | | | 6,139 | | | | 6,834 | | | | 5,746 | | | | 5,595 | |
| | | | | | | | | | | | | | | | |
| Total interest expense | | | 75,234 | | | | 74,929 | | | | 73,895 | | | | 69,934 | | | | 62,540 | |
| | | | | | | | | | | | | | | | |
| Net interest income | | | 84,225 | | | | 82,006 | | | | 83,583 | | | | 85,087 | | | | 85,730 | |
| Provision for loan losses | | | 9,967 | | | | 4,210 | | | | 44,235 | | | | 12,612 | | | | 13,159 | |
| | | | | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 74,258 | | | | 77,796 | | | | 39,348 | | | | 72,475 | | | | 72,571 | |
| | | | | | | | | | | | | | | | |
| Other income: | | | | | | | | | | | | | | | | | | | | |
| Trust department income | | | 6,096 | | | | 5,596 | | | | 5,794 | | | | 5,721 | | | | 5,744 | |
| Service charges on deposits | | | 17,055 | | | | 16,249 | | | | 18,198 | | | | 19,250 | | | | 18,010 | |
| Credit card fees | | | 11,712 | | | | 11,099 | | | | 11,325 | | | | 11,251 | | | | 11,478 | |
| ATM and other service fees | | | 3,189 | | | | 3,071 | | | | 3,135 | | | | 3,301 | | | | 3,273 | |
| Bank owned life insurance income | | | 3,290 | | | | 3,168 | | | | 3,001 | | | | 3,042 | | | | 5,310 | |
| Investment services and insurance | | | 2,660 | | | | 2,453 | | | | 2,011 | | | | 2,631 | | | | 2,581 | |
| Investment securities gains (losses), net | | | 1 | | | | — | | | | — | | | | 2 | | | | 4 | |
| Loan sales and servicing income | | | 1,911 | | | | 5,438 | | | | 1,504 | | | | 1,731 | | | | 2,833 | |
| Other operating income | | | 3,016 | | | | 1,802 | | | | 3,364 | | | | 2,412 | | | | 2,845 | |
| | | | | | | | | | | | | | | | |
| Total other income | | | 48,930 | | | | 48,876 | | | | 48,332 | | | | 49,341 | | | | 52,078 | |
| | | | | | | | | | | | | | | | |
| Other expenses: | | | | | | | | | | | | | | | | | | | | |
| Salaries, wages, pension and employee benefits | | | 43,538 | | | | 42,500 | | | | 43,700 | | | | 43,248 | | | | 46,721 | |
| Net occupancy expense | | | 6,521 | | | | 6,686 | | | | 6,143 | | | | 6,002 | | | | 6,120 | |
| Equipment expense | | | 2,851 | | | | 3,084 | | | | 3,030 | | | | 3,097 | | | | 2,914 | |
| Stationery, supplies and postage | | | 2,252 | | | | 2,333 | | | | 2,633 | | | | 2,423 | | | | 2,403 | |
| Bankcard, loan processing and other costs | | | 7,607 | | | | 7,470 | | | | 7,508 | | | | 7,459 | | | | 7,417 | |
| Professional services | | | 4,525 | | | | 4,829 | | | | 5,000 | | | | 5,470 | | | | 3,738 | |
| Amortization of intangibles | | | 222 | | | | 223 | | | | 222 | | | | 222 | | | | 222 | |
| Other operating expense | | | 13,859 | | | | 14,401 | | | | 15,751 | | | | 9,062 | | | | 15,683 | |
| | | | | | | | | | | | | | | | |
| Total other expenses | | | 81,375 | | | | 81,526 | | | | 83,987 | | | | 76,983 | | | | 85,218 | |
| | | | | | | | | | | | | | | | |
| Income before income tax expense | | | 41,813 | | | | 45,146 | | | | 3,693 | | | | 44,833 | | | | 39,431 | |
| Federal income taxes | | | 11,928 | | | | 13,725 | | | | (2,424 | ) | | | 13,629 | | | | 11,770 | |
| | | | | | | | | | | | | | | | |
| Net income | | $ | 29,885 | | | $ | 31,421 | | | $ | 6,117 | | | $ | 31,204 | | | $ | 27,661 | |
| | | | | | | | | | | | | | | | |
| Other comprehensive income (loss), net of taxes | | | (10,745 | ) | | | 8,180 | | | | (41,365 | ) | | | 23,870 | | | | (8,618 | ) |
| | | | | | | | | | | | | | | | |
| Comprehensive income | | $ | 19,140 | | | $ | 39,601 | | | $ | (35,248 | ) | | $ | 55,074 | | | $ | 19,043 | |
| | | | | | | | | | | | | | | | |
| Net income applicable to common shares | | | 29,885 | | | | 31,421 | | | | 6,117 | | | | 31,204 | | | | 27,661 | |
| | | | | | | | | | | | | | | | |
| Adjusted net income used in diluted EPS calculation | | | 29,889 | | | | 31,425 | | | | 6,121 | | | | 31,209 | | | | 27,666 | |
| | | | | | | | | | | | | | | | |
| Weighted—average common shares — basic | | | 80,426 | | | | 80,113 | | | | 80,091 | | | | 80,066 | | | | 79,983 | |
| | | | | | | | | | | | | | | | |
| Weighted—average common shares — diluted | | | 80,570 | | | | 80,298 | | | | 80,316 | | | | 80,262 | | | | 80,203 | |
| | | | | | | | | | | | | | | | |
| |
| Basic net income per share | | $ | 0.37 | | | $ | 0.39 | | | $ | 0.07 | | | $ | 0.39 | | | $ | 0.35 | |
| | | | | | | | | | | | | | | | |
| |
| Diluted net income per share | | $ | 0.37 | | | $ | 0.39 | | | $ | 0.07 | | | $ | 0.39 | | | $ | 0.35 | |
| | | | | | | | | | | | | | | | |
10
| | | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION | | |
(Unaudited, except December 31, 2006 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarterly Periods | | | Annual Period | |
| | | 30-Jun | | | 31-Mar | | | 31-Dec | | | Sep 30 | | | June 30 | | | Dec 31 | |
| Allowance for Credit Losses | | 2007 | | | 2007 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses, beginning of period | | $ | 92,045 | | | $ | 91,342 | | | $ | 88,755 | | | $ | 87,727 | | | $ | 87,589 | | | $ | 90,661 | |
| Allowance related to loans held for sale | | | — | | | | — | | | | (23,089 | ) | | | — | | | | — | | | | (23,089 | ) |
| Provision for loan losses | | | 9,967 | | | | 4,210 | | | | 44,235 | | | | 12,612 | | | | 13,159 | | | | 76,112 | |
| Charge—offs | | | 10,609 | | | | 9,424 | | | | 22,323 | | | | 15,453 | | | | 18,038 | | | | 70,728 | |
| Recoveries | | | 3,029 | | | | 5,917 | | | | 3,764 | | | | 3,869 | | | | 5,017 | | | | 18,386 | |
| | | | | | | | | | | | | | | | | | | |
| Net charge—offs | | | 7,580 | | | | 3,507 | | | | 18,559 | | | | 11,584 | | | | 13,021 | | | | 52,342 | |
| | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses, end of period | | $ | 94,432 | | | $ | 92,045 | | | $ | 91,342 | | | $ | 88,755 | | | $ | 87,727 | | | $ | 91,342 | |
| | | | | | | | | | | | | | | | | | | |
| Reserve for unfunded lending commitments, beginning of period | | $ | 6,746 | | | $ | 6,294 | | | $ | 6,307 | | | $ | 5,716 | | | $ | 5,853 | | | $ | 6,072 | |
| Provision for credit losses | | | (193 | ) | | | 452 | | | | (13 | ) | | | 591 | | | | (137 | ) | | | 222 | |
| | | | | | | | | | | | | | | | | | | |
| Reserve for unfunded lending commitments, end of period | | $ | 6,553 | | | $ | 6,746 | | | $ | 6,294 | | | $ | 6,307 | | | $ | 5,716 | | | $ | 6,294 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for Credit Losses | | $ | 100,985 | | | $ | 98,791 | | | $ | 97,636 | | | $ | 95,062 | | | $ | 93,443 | | | $ | 97,636 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Ratios | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Provision for loan losses as a % of average loans | | | 0.57 | % | | | 0.25 | % | | | 2.54 | % | | | 0.73 | % | | | 0.78 | % | | | 1.12 | % |
| Provision for credit losses as a % of average loans | | | -0.01 | % | | | 0.03 | % | | | 0.00 | % | | | 0.03 | % | | | -0.01 | % | | | 0.00 | % |
| Net charge—offs as a % of average loans | | | 0.43 | % | | | 0.21 | % | | | 1.06 | % | | | 0.67 | % | | | 0.78 | % | | | 0.77 | % |
| Net charge—offs and allowance related to loans held for sale as a % of average loans | | | 0.43 | % | | | 0.21 | % | | | 1.40 | % | | | 0.67 | % | | | 0.78 | % | | | 1.11 | % |
| Allowance for loan losses as a % of period—end loans | | | 1.34 | % | | | 1.32 | % | | | 1.33 | % | | | 1.28 | % | | | 1.29 | % | | | 1.33 | % |
| Allowance for credit losses as a % of period—end loans | | | 1.43 | % | | | 1.42 | % | | | 1.42 | % | | | 1.37 | % | | | 1.37 | % | | | 1.42 | % |
| Allowance for loan losses as a % of nonperforming loans | | | 295.08 | % | | | 331.93 | % | | | 168.03 | % | | | 143.73 | % | | | 174.80 | % | | | 168.03 | % |
| Allowance for credit losses as a % of nonperforming loans | | | 315.56 | % | | | 356.26 | % | | | 179.60 | % | | | 153.94 | % | | | 186.19 | % | | | 179.60 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Asset Quality | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Impaired loans: | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual | | $ | 20,877 | | | $ | 17,049 | | | $ | 45,045 | | | $ | 52,621 | | | $ | 41,927 | | | $ | 45,045 | |
| Other nonperforming loans: | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual | | | 11,125 | | | | 10,681 | | | | 9,317 | | | | 9,132 | | | | 8,261 | | | | 9,317 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total nonperforming loans | | | 32,002 | | | | 27,730 | | | | 54,362 | | | | 61,753 | | | | 50,188 | | | | 54,362 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Other real estate (“ORE”) | | | 5,036 | | | | 4,934 | | | | 9,815 | | | | 10,711 | | | | 8,598 | | | | 9,815 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total nonperforming assets (“NPAs”) | | $ | 37,038 | | | $ | 32,664 | | | $ | 64,177 | | | $ | 72,464 | | | $ | 58,786 | | | $ | 64,177 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| NPAs as % of period—end loans + ORE | | | 0.52 | % | | | 0.47 | % | | | 0.93 | % | | | 1.05 | % | | | 0.86 | % | | | 0.93 | % |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Past due 90 days or more & accruing interest | | $ | 10,536 | | | $ | 15,209 | | | $ | 16,860 | | | $ | 15,311 | | | $ | 16,483 | | | $ | 16,860 | |
| | | | | | | | | | | | | | | | | | | |
11
| | | |
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands) | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2007 | | | 2006 | | | 2006 | | | 2006 | |
| QUARTERLY OTHER INCOME DETAIL | | 2nd Qtr | | | 1st Qtr | | | 4th Qtr | | | 3rd Qtr | | | 2nd Qtr | |
| | | | | | | | | | | | | | | | | | | | | |
| Trust department income | | $ | 6,096 | | | $ | 5,596 | | | $ | 5,794 | | | $ | 5,721 | | | $ | 5,744 | |
| Service charges on deposits | | | 17,055 | | | | 16,249 | | | | 18,198 | | | | 19,250 | | | | 18,010 | |
| Credit card fees | | | 11,712 | | | | 11,099 | | | | 11,325 | | | | 11,251 | | | | 11,478 | |
| ATM and other service fees | | | 3,189 | | | | 3,071 | | | | 3,135 | | | | 3,301 | | | | 3,273 | |
| Bank owned life insurance income | | | 3,290 | | | | 3,168 | | | | 3,001 | | | | 3,042 | | | | 5,310 | |
| Investment services and insurance | | | 2,660 | | | | 2,453 | | | | 2,011 | | | | 2,631 | | | | 2,581 | |
| Investment securities gains (losses), net | | | 1 | | | | — | | | | — | | | | 2 | | | | 4 | |
| Loan sales and servicing income | | | 1,911 | | | | 5,438 | | | | 1,504 | | | | 1,731 | | | | 2,833 | |
| Other operating income | | | 3,016 | | | | 1,802 | | | | 3,364 | | | | 2,412 | | | | 2,845 | |
| |
| | | | | | | | | | | | | | | | |
| Total Other Income | | $ | 48,930 | | | $ | 48,876 | | | $ | 48,332 | | | $ | 49,341 | | | $ | 52,078 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2007 | | | 2006 | | | 2006 | | | 2006 | |
| QUARTERLY OTHER EXPENSES DETAIL | | 2nd Qtr | | | 1st Qtr | | | 4th Qtr | | | 3rd Qtr | | | 2nd Qtr | |
| | | | | | | | | | | | | | | | | | | | | |
| Salaries, wages, pension and employee benefits | | $ | 43,538 | | | $ | 42,500 | | | $ | 43,700 | | | $ | 43,248 | | | $ | 46,721 | |
| Net occupancy expense | | | 6,521 | | | | 6,686 | | | | 6,143 | | | | 6,002 | | | | 6,120 | |
| Equipment expense | | | 2,851 | | | | 3,084 | | | | 3,030 | | | | 3,097 | | | | 2,914 | |
| Taxes, other than federal income taxes | | | 1,655 | | | | 1,662 | | | | 1,753 | | | | (7,703 | ) | | | 1,802 | |
| Stationery, supplies and postage | | | 2,252 | | | | 2,333 | | | | 2,633 | | | | 2,423 | | | | 2,403 | |
| Bankcard, loan processing and other costs | | | 7,607 | | | | 7,470 | | | | 7,508 | | | | 7,459 | | | | 7,417 | |
| Advertising | | | 1,260 | | | | 1,420 | | | | 798 | | | | 1,152 | | | | 2,369 | |
| Professional services | | | 4,525 | | | | 4,829 | | | | 5,000 | | | | 5,470 | | | | 3,738 | |
| Telephone | | | 1,094 | | | | 1,120 | | | | 1,362 | | | | 1,138 | | | | 1,094 | |
| Amortization of intangibles | | | 222 | | | | 223 | | | | 222 | | | | 222 | | | | 222 | |
| Other operating expense | | | 9,850 | | | | 10,199 | | | | 11,838 | | | | 14,475 | | | | 10,418 | |
| |
| | | | | | | | | | | | | | | | |
| Total Other Expenses | | $ | 81,375 | | | $ | 81,526 | | | $ | 83,987 | | | $ | 76,983 | | | $ | 85,218 | |
| | | | | | | | | | | | | | | | |
12
| | | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES — Net Charge-off Detail
(Unaudited)
(Dollars in thousands) | | |
| | | | | | | | | | | | | | | | | |
| | | Quarters ended | | | Six months ended | |
| | | June 30, | | | June 30, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | | | | | | | | | | | | | | | |
| Allowance for loan losses — beginning of period | | $ | 92,045 | | | $ | 87,589 | | | $ | 91,342 | | | $ | 90,661 | |
| Loans charged off: | | | | | | | | | | | | | | | | |
| Commercial | | | 1,212 | | | | 10,086 | | | | 1,660 | | | | 16,152 | |
| Mortgage | | | 1,568 | | | | 325 | | | | 2,558 | | | | 698 | |
| Installment | | | 4,321 | | | | 4,524 | | | | 9,067 | | | | 10,554 | |
| Home equity | | | 1,478 | | | | 1,146 | | | | 2,298 | | | | 1,766 | |
| Credit cards | | | 2,025 | | | | 1,951 | | | | 4,424 | | | | 3,725 | |
| Leases | | | 5 | | | | 6 | | | | 26 | | | | 57 | |
| | | | | | | | | | | | | |
| Total | | | 10,609 | | | | 18,038 | | | | 20,033 | | | | 32,952 | |
| | | | | | | | | | | | | |
| Recoveries: | | | | | | | | | | | | | | | | |
| Commercial | | | 11 | | | | 945 | | | | 2,889 | | | | 2,382 | |
| Mortgage | | | — | | | | 30 | | | | 8 | | | | 86 | |
| Installment | | | 2,092 | | | | 2,965 | | | | 4,206 | | | | 6,111 | |
| Home equity | | | 307 | | | | 307 | | | | 564 | | | | 685 | |
| Credit cards | | | 474 | | | | 585 | | | | 948 | | | | 1,034 | |
| Manufactured housing | | | 96 | | | | 84 | | | | 170 | | | | 185 | |
| Leases | | | 49 | | | | 101 | | | | 161 | | | | 270 | |
| | | | | | | | | | | | | |
| Total | | | 3,029 | | | | 5,017 | | | | 8,946 | | | | 10,753 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net charge-offs | | | 7,580 | | | | 13,021 | | | | 11,087 | | | | 22,199 | |
| Provision for loan losses | | | 9,967 | | | | 13,159 | | | | 14,177 | | | | 19,265 | |
| Allowance related to loans held for sale | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Allowance for loan losses — end of period | | $ | 94,432 | | | $ | 87,727 | | | $ | 94,432 | | | $ | 87,727 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Average loans outstanding | | $ | 7,002,750 | | | $ | 6,730,531 | | | $ | 6,961,099 | | | $ | 6,714,222 | |
| | | | | | | | | | | | | |
| Ratio to average loans: | | | | | | | | | | | | | | | | |
| (Annualized) net charge-offs | | | 0.43 | % | | | 0.78 | % | | | 0.32 | % | | | 0.67 | % |
| | | | | | | | | | | | | |
| (Annualized) net charge-offs and allowance related to loans held for sale | | | 0.43 | % | | | 0.78 | % | | | 0.32 | % | | | 0.67 | % |
| | | | | | | | | | | | | |
| Provision for loan losses | | | 0.57 | % | | | 0.78 | % | | | 0.41 | % | | | 0.58 | % |
| | | | | | | | | | | | | |
| Loans outstanding — period-end | | $ | 7,052,390 | | | $ | 6,804,769 | | | $ | 7,052,390 | | | $ | 6,804,769 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Allowance for credit losses: | | | 100,985 | | | | 93,443 | | | | 100,985 | | | | 93,443 | |
| | | | | | | | | | | | | |
| As a multiple of (annualized) net charge-offs | | | 3.32 | | | | 1.79 | | | | 4.52 | | | | 2.09 | |
| | | | | | | | | | | | | |
| As a multiple of (annualized) net charge-offs and allowance related to loans held for sale | | | 3.32 | | | | 1.79 | | | | 4.52 | | | | 2.09 | |
| | | | | | | | | | | | | |
| Allowance for loan losses: | | | | | | | | | | | | | | | | |
| As a percent of period-end loans outstanding | | | 1.34 | % | | | 1.29 | % | | | 1.34 | % | | | 1.29 | % |
| | | | | | | | | | | | | |
| As a multiple of (annualized) net charge-offs | | | 3.11 | | | | 1.68 | | | | 4.22 | | | | 1.96 | |
| | | | | | | | | | | | | |
| As a multiple of (annualized) net charge-offs and allowance related to loans held for sale | | | 3.11 | | | | 1.68 | | | | 4.22 | | | | 1.96 | |
| | | | | | | | | | | | | |
13
