Exhibit 99.1
2007 Financial Information Third Quarter
Table of Contents
| | | | | |
| | Pages 1-5 |
| | | | | |
| | Page 6 |
| | | | | |
| | Page 7 |
| | | | | |
| | Page 8 |
| | | | | |
| | Page 9 |
(Fully-tax Equivalent Interest Rates and Interest Differential) | | | | |
| | | | | |
| | Page 10 |
| | | | | |
| | Page 11 |
(Linked Quarters) | | | | |
| | | | | |
| | Page 12 |
| | | | | |
| | Page 13 |
| | | | | |
| | Page 14 |
FirstMerit Corporation
III Cascade Plaza
Akron, Ohio 44308
Investor Relations
Thomas P. O’Malley
p.330-384-7109
For Release October 23, 2007, 7:30 a.m. ET
Analysts and Media: Thomas P. O’Malley
(330) 384-7109
FirstMerit Reports Third Quarter 2007 Earnings Per Share of $0.38
AKRON, Ohio, — October 23, 2007 —FirstMerit Corporation (Nasdaq: FMER) today announced third quarter 2007 net income of $30.3 million, or $0.38 per diluted share. This compares with $31.2 million, or $0.39 per diluted share, for the prior-year quarter. Returns on average common equity (“ROE”) and average assets (“ROA”) for the third quarter 2007 were 13.71% and 1.16%, respectively, compared with 13.93% and 1.22% for the prior-year quarter.
For the first nine months of 2007, the Company reported net income of $91.6 million, or $1.14 per diluted share, compared with $88.8 million, or $1.11 per diluted share. ROE and ROA were 14.11% and 1.19%, respectively, compared with 13.45% and 1.18% for the prior-year period.
“Our primary goal is to generate increased returns and build long-term shareholder value at FirstMerit. One of our main objectives in the near-term is to continue the solid momentum that we have established in improving and maintaining asset quality. We believe we will achieve this by executing on our enhanced underwriting and portfolio management procedures,” said Paul G. Greig, Chairman and Chief Executive Officer of FirstMerit.
“I am satisfied with our credit performance this quarter that includes a declining level of nonperforming assets and year-to-date reduction in our net charge-off levels.” Mr. Greig continued, “The Company also is directing efforts toward quality organic growth with prudent and effective balance sheet management. I am pleased with the relative stability in the third quarter net interest margin given today’s interest rate environment along with rising deposit costs associated with renewed consumer preference for higher cost deposit products.”
1
Net interest margin was 3.61% for the third quarter of 2007 compared with 3.62% for the second quarter of 2007 and 3.68% for the third quarter of 2006. The Company experienced a slight contraction in the net interest margin during the third quarter of 2007, compared with the second quarter of 2007, reflecting rising deposit costs from increased certificate of deposit balances. Overall incremental deposit cost increases were largely offset by increased yields on the investment securities portfolio. During the third quarter the Company earned higher returns from the investment securities portfolio as cash flows from maturing investments were reinvested into similar instruments with higher yields and slightly longer terms. The decrease in net interest margin compared with the third quarter of 2006 reflected both a shift in consumer preference for higher-costing term deposit products as well as increased deposit costs due to the scheduled upward repricing of renewing and new term deposit products.
Net interest income on a fully tax-equivalent (“FTE”) basis was $86.6 million in the third quarter of 2007 compared with $85.6 million in the second quarter of 2007 and $85.9 million in the third quarter of 2006. The increase in FTE net interest income compared with the second quarter of 2007 reflected growth in average earning assets of $27.4 million, or 0.29%, offset partly by net interest margin contraction of one basis point. The increase in FTE net interest income compared with the third quarter of 2006 was driven by a $263.5 million, or 2.85%, increase in average earning assets, offset by seven basis points of net interest margin contraction.
Average loans for the third quarter of 2007 increased $9.0 million, or 0.13%, compared with the second quarter of 2007. Average commercial loans grew $22.8 million, or 0.59%, compared with the second quarter of 2007, offsetting a $10.7 million, or 0.35%, decrease in average consumer loans; comprised of mortgage, installment, home equity, credit card and leases. Compared with the third quarter of 2006, average loans increased $167.2 million, or 2.44%, led by a $193.2 million, or 5.26%, increase in average commercial loans.Average investments for the third quarter of 2007 increased $15.8 million, or 0.65%, compared with the second quarter of 2007. Compared with the third quarter of 2006, average investments increased $95.3 million, or 4.04%. Average investments represent 23.70% of average assets for the third quarter of 2007, compared with 23.64% and 23.28% for the second quarter of 2007 and the third quarter of 2006, respectively.
Average deposits in the third quarter of 2007 were $7.5 billion, a decrease of $35.2 million, or 0.47%, compared with the second quarter of 2007. Growth in certificates and other time deposits of $91.9 million, or 3.02%, was offset by decreases of $127.2 million in core deposit account balances comprised of demand-non-interest bearing, demand-interest bearing and savings and money market accounts; with savings and money market accounts decreasing $69.6 million, or 3.03%, and demand-interest bearing accounts decreasing $49.7 million, or 6.50%.
Customer preference for higher yielding deposit product reduced the concentration of core deposits during the third quarter of 2007 resulting in higher deposit costs. A majority of the increase in deposit costs were offset by increased income earned from the investment portfolio. During the quarter the Company added higher-yielding investment
2
securities to the balance sheet replacing maturing investments with lower yields and supporting the net interest margin against further contraction pressure.
Compared with the third quarter of 2006, average deposits increased $124.1 million, or 1.69%. Average certificates and other time deposits increased $233.9 million, or 8.05%.
Noninterest income net of securities transactions for the third quarter of 2007 was $49.1 million, compared with $48.9 million in the second quarter of 2007, an increase of $0.2 million, or 0.40%. Compared with the third quarter of 2006, noninterest income decreased $0.2 million, or 0.44%. Noninterest income, net of securities gains, as a percentage of net revenue for the third quarter of 2007 was 36.20% compared with 36.37% for the second quarter of 2007 and 36.50% for the third 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 third quarter of 2007, noninterest expense was $84.0 million, an increase of $2.7 million, or 3.26%, from the second quarter of 2007 and an increase of $7.0 million, or 9.15%, from the third quarter of 2006. The increase primarily resulted from a $4.1 million operating loss related to a customer check-kiting fraud. FirstMerit is cooperating with authorities conducting a criminal investigation and intends to pursue appropriate legal recourse. Going forward the Company expects its normalized run rate of expenses to resume at levels more in line with the first and second quarters of 2007.
Net charge-offs totaled $7.9 million, or 0.45% of average portfolio loans, in the third quarter of 2007, $7.6 million, or 0.43% of average portfolio loans, in the second quarter of 2007 and $11.6 million, or 0.67% of average portfolio loans, in the third quarter of 2006.
Nonperforming assets totaled $34.2 million at September 30, 2007, compared with $37.0 million on June 30, 2007 and $72.5 million on September 30, 2006. Nonperforming assets at September 30, 2007 represented 0.49% of period-end loans plus other real estate, compared with 0.52% at June 30, 2007 and 1.05% at September 30, 2006.
The provision for loan losses was $7.3 million in the third quarter of 2007, compared with $10.0 million in the second quarter of 2007 and $12.6 million in the third quarter of 2006.
The allowance for loan losses totaled $93.8 million at September 30, 2007, an increase of $5.1 million from September 30, 2006. At September 30, 2007, the allowance for loan losses was 1.34% of period-end loans compared with 1.28% at September 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 1.44% at September 30, 2007, compared with 1.37% at September 30, 2006. The allowance for credit losses to nonperforming loans was 339.04% at September 30, 2007 compared with 153.94% on September 30, 2006.
FirstMerit’s total assets at September 30, 2007 were $10.4 billion, an increase of $155.1 million, or 1.51%, compared with December 31, 2006 and an increase of $189.8 million,
3
or 1.86%, compared with September 30, 2006. The increase from December 31, 2006, was driven by commercial loan growth of $193.9 million, or 5.25%, offset by a $45.5 million, or 47.79% reduction in loans held for sale. The increase in total assets compared with September 30, 2006, was driven by commercial loan growth of $154.3 million, or 4.13%, and growth in the investment securities portfolio of $126.9 million, or 5.35%, offsetting a $46.7 million, or 6.25%, decrease in home equity loans and a $33.4 million, or 5.44%, decrease in mortgage loans.
Total deposits were $7.4 billion at September 30, 2007, a decrease of $90.6 million, or 1.21%, from December 31, 2006, and an increase of $18.7 million, or 0.25%, from September��30, 2006. Core deposits, which exclude all time deposits, totaled $4.3 billion at September 30, 2007, a decrease of $198.8 million, or 4.40%, from December 31, 2006 and a decrease of $96.4 million, or 2.18%, from September 30, 2006.
Shareholders’ equity was $884.9 million at September 30, 2007 and the Company’s capital position remains strong as tangible equity to assets was 7.24%. The common dividend per share paid in the third quarter 2007 was $0.29.
4
Third Quarter 2007 Conference Call
FirstMerit’s senior management will host an earnings conference call this afternoon at 2:00 p.m. Eastern time to provide an overview of third quarter results and highlights. To participate in the conference call, please dial (888) 693-3477 ten minutes before start time and provide the reservation number: 9353039. A replay of the conference call will be available at approximately 4:30 p.m., on October 23, 2007 through October 30, 2007, by dialing (877) 519-4471, and entering the PIN: 9353039.
About FirstMerit:FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $10.4 billion as of September 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.
5
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarters |
| | | 2007 | | 2007 | | 2007 | | 2006 | | 2006 |
| EARNINGS | | 3rd Qtr | | 2nd Qtr | | 1st Qtr | | 4th Qtr | | 3rd Qtr |
| |
| Net interest income FTE (a) | | $ | 86,582 | | | $ | 85,593 | | | $ | 83,218 | | | $ | 84,502 | | | $ | 85,850 | |
| Provision for loan losses | | | 7,324 | | | | 9,967 | | | | 4,210 | | | | 44,235 | | | | 12,612 | |
| Other income | | | 49,124 | | | | 48,930 | | | | 48,876 | | | | 48,332 | | | | 49,341 | |
| Other expenses | | | 84,030 | | | | 81,375 | | | | 81,526 | | | | 83,987 | | | | 76,983 | |
| FTE adjustment (a) | | | 1,428 | | | | 1,368 | | | | 1,212 | | | | 919 | | | | 763 | |
| Net income | | | 30,262 | | | | 29,885 | | | | 31,421 | | | | 6,117 | | | | 31,204 | |
| Diluted EPS | | | 0.38 | | | | 0.37 | | | | 0.39 | | | | 0.07 | | | | 0.39 | |
| | | | | | | | | | | | | | | | | | | | | |
| PERFORMANCE RATIOS | | | | | | | | | | | | | | | | | | | | |
| Return on average assets (ROA) | | | 1.16 | % | | | 1.16 | % | | | 1.24 | % | | | 0.24 | % | | | 1.22 | % |
| Return on average common equity (ROE) | | | 13.71 | % | | | 13.75 | % | | | 14.91 | % | | | 2.66 | % | | | 13.93 | % |
| Net interest margin FTE (a) | | | 3.61 | % | | | 3.62 | % | | | 3.58 | % | | | 3.58 | % | | | 3.68 | % |
| Efficiency ratio | | | 61.76 | % | | | 60.33 | % | | | 61.55 | % | | | 63.06 | % | | | 56.78 | % |
| Number of full-time equivalent employees | | | 2,704 | | | | 2,725 | | | | 2,751 | | | | 2,755 | | | | 2,769 | |
| | | | | | | | | | | | | | | | | | | | | |
| MARKET DATA | | | | | | | | | | | | | | | | | | | | |
| Book value/common share | | $ | 11.00 | | | $ | 10.71 | | | $ | 10.78 | | | $ | 10.56 | | | $ | 11.28 | |
| Period-end common share mkt value | | | 19.76 | | | | 20.93 | | | | 21.11 | | | | 24.14 | | | | 23.17 | |
| Market as a % of book | | | 180 | % | | | 195 | % | | | 196 | % | | | 229 | % | | | 205 | % |
| Cash dividends/common share | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.29 | |
| Common stock dividend payout ratio | | | 76.32 | % | | | 78.38 | % | | | 74.36 | % | | | 414.29 | % | | | 74.36 | % |
| Average basic common shares | | | 80,467 | | | | 80,426 | | | | 80,113 | | | | 80,091 | | | | 80,066 | |
| Average diluted common shares | | | 80,561 | | | | 80,570 | | | | 80,298 | | | | 80,316 | | | | 80,262 | |
| Period end common shares | | | 80,467 | | | | 80,477 | | | | 80,112 | | | | 80,101 | | | | 80,072 | |
| Common shares repurchased | | | 22,473 | | | | 36,159 | | | | 27,011 | | | | 15,876 | | | | 0 | |
| Common stock market capitalization | | $ | 1,590,028 | | | $ | 1,684,384 | | | $ | 1,691,164 | | | $ | 1,933,638 | | | $ | 1,855,268 | |
| | | | | | | | | | | | | | | | | | | | | |
| ASSET QUALITY | | | | | | | | | | | | | | | | | | | | |
| Gross charge-offs | | $ | 12,347 | | | $ | 10,609 | | | $ | 9,424 | | | $ | 22,323 | | | $ | 15,453 | |
| Net charge-offs | | | 7,945 | | | | 7,580 | | | | 3,507 | | | | 18,559 | | | | 11,584 | |
| Allowance for loan losses | | | 93,811 | | | | 94,432 | | | | 92,045 | | | | 91,342 | | | | 88,755 | |
| Reserve for unfunded lending commitments | | | 7,409 | | | | 6,553 | | | | 6,746 | | | | 6,294 | | | | 6,307 | |
| Nonperforming assets (NPAs) | | | 34,199 | | | | 37,038 | | | | 32,664 | | | | 64,177 | | | | 72,464 | |
| Net charge-offs/average loans ratio | | | 0.45 | % | | | 0.43 | % | | | 0.21 | % | | | 1.06 | % | | | 0.67 | % |
| Net charge-offs and allowance related to loans held for sale/average loans ratio | | | 0.45 | % | | | 0.43 | % | | | 0.21 | % | | | 1.40 | % | | | 0.67 | % |
| Allowance for loan losses/period-end loans | | | 1.34 | % | | | 1.34 | % | | | 1.32 | % | | | 1.33 | % | | | 1.28 | % |
| Allowance for credit losses/period-end loans | | | 1.44 | % | | | 1.43 | % | | | 1.42 | % | | | 1.42 | % | | | 1.37 | % |
| NPAs/loans and other real estate | | | 0.49 | % | | | 0.52 | % | | | 0.47 | % | | | 0.93 | % | | | 1.05 | % |
| Allowance for loan losses/nonperforming loans | | | 314.22 | % | | | 295.08 | % | | | 331.93 | % | | | 168.03 | % | | | 143.73 | % |
| Allowance for credit losses/nonperforming loans | | | 339.04 | % | | | 315.56 | % | | | 356.26 | % | | | 179.60 | % | | | 153.94 | % |
| | | | | | | | | | | | | | | | | | | | | |
| CAPITAL & LIQUIDITY | | | | | | | | | | | | | | | | | | | | |
| Period-end tangible equity to assets | | | 7.24 | % | | | 7.00 | % | | | 7.07 | % | | | 6.96 | % | | | 7.55 | % |
| Average equity to assets | | | 8.45 | % | | | 8.45 | % | | | 8.32 | % | | | 8.91 | % | | | 8.77 | % |
| Average equity to loans | | | 12.49 | % | | | 12.45 | % | | | 12.35 | % | | | 13.17 | % | | | 12.99 | % |
| Average loans to deposits | | | 93.74 | % | | | 93.18 | % | | | 92.47 | % | | | 92.97 | % | | | 93.05 | % |
| | | | | | | | | | | | | | | | | | | | | |
| AVERAGE BALANCES | | | | | | | | | | | | | | | | | | | | |
| Assets | | $ | 10,360,739 | | | $ | 10,319,454 | | | $ | 10,276,241 | | | $ | 10,227,154 | | | $ | 10,138,856 | |
| Deposits | | | 7,479,960 | | | | 7,515,205 | | | | 7,481,969 | | | | 7,440,331 | | | | 7,355,877 | |
| Loans | | | 7,011,776 | | | | 7,002,750 | | | | 6,918,636 | | | | 6,917,572 | | | | 6,844,593 | |
| Earning assets | | | 9,513,230 | | | | 9,485,819 | | | | 9,437,418 | | | | 9,374,223 | | | | 9,249,769 | |
| Shareholders’ equity | | | 875,720 | | | | 871,554 | | | | 854,713 | | | | 911,348 | | | | 888,841 | |
| | | | | | | | | | | | | | | | | | | | | |
| ENDING BALANCES | | | | | | | | | | | | | | | | | | | | |
| Assets | | $ | 10,407,765 | | | $ | 10,429,099 | | | $ | 10,347,121 | | | $ | 10,252,572 | | | $ | 10,217,968 | |
| Deposits | | | 7,408,296 | | | | 7,474,466 | | | | 7,701,202 | | | | 7,498,921 | | | | 7,389,633 | |
| Loans | | | 7,014,389 | | | | 7,052,390 | | | | 6,951,631 | | | | 6,878,873 | | | | 6,917,347 | |
| Goodwill | | | 139,245 | | | | 139,245 | | | | 139,245 | | | | 139,245 | | | | 139,245 | |
| Intangible assets | | | 2,200 | | | | 2,422 | | | | 2,644 | | | | 2,865 | | | | 3,088 | |
| Earning assets | | | 9,563,541 | | | | 9,545,752 | | | | 9,447,346 | | | | 9,382,033 | | | | 9,344,841 | |
| Total shareholders’ equity | | | 884,877 | | | | 862,265 | | | | 863,641 | | | | 846,111 | | | | 903,383 | |
| | |
| 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. |
6
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited, except December 31, 2006, which is derived from the audited financial statements)
| | | | | | | | | | | | | |
| | | September 30, | | | December 31, | | | September 30, | |
| | | 2007 | | | 2006 | | | 2006 | |
ASSETS | | | | | | | | | | | | |
| Cash and due from banks | | $ | 193,721 | | | $ | 200,204 | | | $ | 196,116 | |
| Investment securities (at fair value) and federal funds sold | | | 2,499,406 | | | | 2,407,888 | | | | 2,372,484 | |
| Loans held for sale | | | 49,746 | | | | 95,272 | | | | 55,010 | |
| Loans: | | | | | | | | | | | | |
| Commercial loans | | | 3,887,985 | | | | 3,694,121 | | | | 3,733,734 | |
| Mortgage loans | | | 579,954 | | | | 608,008 | | | | 613,332 | |
| Installment loans | | | 1,633,231 | | | | 1,619,747 | | | | 1,622,355 | |
| Home equity loans | | | 701,565 | | | | 731,473 | | | | 748,307 | |
| Credit card loans | | | 142,986 | | | | 147,553 | | | | 140,143 | |
| Leases | | | 68,668 | | | | 77,971 | | | | 59,476 | |
| | | | | | | | | | |
| Total loans | | | 7,014,389 | | | | 6,878,873 | | | | 6,917,347 | |
| Less allowance for loan losses | | | (93,811 | ) | | | (91,342 | ) | | | (88,755 | ) |
| | | | | | | | | | |
| Net loans | | | 6,920,578 | | | | 6,787,531 | | | | 6,828,592 | |
| Premises and equipment, net | | | 116,552 | | | | 122,954 | | | | 121,008 | |
| Goodwill | | | 139,245 | | | | 139,245 | | | | 139,245 | |
| Intangible assets | | | 2,200 | | | | 2,865 | | | | 3,088 | |
| Accrued interest receivable and other assets | | | 486,317 | | | | 496,613 | | | | 502,425 | |
| | | | | | | | | | |
| Total assets | | $ | 10,407,765 | | | $ | 10,252,572 | | | $ | 10,217,968 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | |
| Demand — non-interest bearing | | $ | 1,413,167 | | | $ | 1,455,097 | | | $ | 1,419,002 | |
| Demand — interest bearing | | | 703,045 | | | | 799,571 | | | | 784,226 | |
| Savings and money market accounts | | | 2,207,356 | | | | 2,267,686 | | | | 2,216,732 | |
| Certificates and other time deposits | | | 3,084,728 | | | | 2,976,567 | | | | 2,969,673 | |
| | | | | | | | | | |
| Total deposits | | | 7,408,296 | | | | 7,498,921 | | | | 7,389,633 | |
| | | | | | | | | | |
| Securities sold under agreements to repurchase | | | 1,531,215 | | | | 1,261,821 | | | | 1,269,040 | |
| Wholesale borrowings | | | 403,438 | | | | 464,227 | | | | 509,129 | |
| Accrued taxes, expenses, and other liabilities | | | 179,939 | | | | 181,492 | | | | 146,783 | |
| | | | | | | | | | |
| Total liabilities | | | 9,522,888 | | | | 9,406,461 | | | | 9,314,585 | |
| | | | | | | | | | |
| 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 September 30, 2007, December 31, 2006 and September 30, 2006 | | | 127,937 | | | | 127,937 | | | | 127,937 | |
| Capital surplus | | | 99,727 | | | | 106,916 | | | | 106,182 | |
| Accumulated other comprehensive loss | | | (66,352 | ) | | | (79,508 | ) | | | (38,143 | ) |
| Retained earnings | | | 1,019,656 | | | | 998,079 | | | | 1,015,249 | |
| Treasury stock, at cost, 11,559,284, 11,925,803 and 11,954,829 shares at September 30, 2007, December 31, 2006 and September 30, 2006, respectively | | | (296,091 | ) | | | (307,313 | ) | | | (307,842 | ) |
| | | | | | | | | | |
| Total shareholders’ equity | | | 884,877 | | | | 846,111 | | | | 903,383 | |
| | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 10,407,765 | | | $ | 10,252,572 | | | $ | 10,217,968 | |
| | | | | | | | | | |
7
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarterly Periods | |
| | | September 30, | | | June 30, | | | March 31, | | | December 31, | | | September 30, | |
| | | 2007 | | | 2007 | | | 2007 | | | 2006 | | | 2006 | |
ASSETS | | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 180,426 | | | $ | 177,524 | | | $ | 179,566 | | | $ | 175,735 | | | $ | 185,628 | |
| Investment securities/fed funds sold | | | 2,455,777 | | | | 2,440,015 | | | | 2,429,539 | | | | 2,410,879 | | | | 2,360,494 | |
| Loans held for sale | | | 45,677 | | | | 43,054 | | | | 89,243 | | | | 45,772 | | | | 44,682 | |
| Loans: | | | | | | | | | | | | | | | | | | | | |
| Commercial loans | | | 3,868,235 | | | | 3,845,395 | | | | 3,749,067 | | | | 3,730,110 | | | | 3,674,988 | |
| Mortgage loans | | | 586,911 | | | | 596,758 | | | | 607,602 | | | | 614,204 | | | | 619,542 | |
| Installment loans | | | 1,640,380 | | | | 1,636,669 | | | | 1,622,324 | | | | 1,625,962 | | | | 1,592,917 | |
| Home equity loans | | | 704,499 | | | | 711,113 | | | | 717,806 | | | | 738,630 | | | | 755,044 | |
| Credit card loans | | | 143,312 | | | | 141,294 | | | | 143,853 | | | | 144,351 | | | | 139,117 | |
| Leases | | | 68,439 | | | | 71,521 | | | | 77,984 | | | | 64,315 | | | | 62,985 | |
| | | | | | | | | | | | | | | | |
| Total loans | | | 7,011,776 | | | | 7,002,750 | | | | 6,918,636 | | | | 6,917,572 | | | | 6,844,593 | |
| Less allowance for loan losses | | | 94,393 | | | | 92,298 | | | | 91,256 | | | | 88,175 | | | | 87,127 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loans | | | 6,917,383 | | | | 6,910,452 | | | | 6,827,380 | | | | 6,829,397 | | | | 6,757,466 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total earning assets | | | 9,513,230 | | | | 9,485,819 | | | | 9,437,418 | | | | 9,374,223 | | | | 9,249,769 | |
| | | | | | | | | | | | | | | | | | | | | |
| Premises and equipment, net | | | 117,970 | | | | 119,818 | | | | 121,988 | | | | 121,956 | | | | 120,088 | |
| Accrued interest receivable and other assets | | | 643,506 | | | | 628,591 | | | | 628,525 | | | | 643,415 | | | | 670,498 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
TOTAL ASSETS | | $ | 10,360,739 | | | $ | 10,319,454 | | | $ | 10,276,241 | | | $ | 10,227,154 | | | $ | 10,138,856 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
LIABILITIES | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | |
| Demand — non-interest bearing | | $ | 1,400,848 | | | $ | 1,408,827 | | | $ | 1,389,455 | | | $ | 1,413,682 | | | $ | 1,407,653 | |
| Demand — interest bearing | | | 714,216 | | | | 763,907 | | | | 756,678 | | | | 767,430 | | | | 794,886 | |
| Savings and money market accounts | | | 2,224,048 | | | | 2,293,567 | | | | 2,284,549 | | | | 2,267,268 | | | | 2,246,386 | |
| Certificates and other time deposits | | | 3,140,848 | | | | 3,048,904 | | | | 3,051,287 | | | | 2,991,951 | | | | 2,906,952 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total deposits | | | 7,479,960 | | | | 7,515,205 | | | | 7,481,969 | | | | 7,440,331 | | | | 7,355,877 | |
| | | | | | | | | | | | | | | | | | | | | |
| Securities sold under agreements to repurchase | | | 1,555,235 | | | | 1,458,982 | | | | 1,352,961 | | | | 1,269,873 | | | | 1,357,746 | |
| Wholesale borrowings | | | 256,356 | | | | 280,914 | | | | 399,638 | | | | 446,950 | | | | 367,640 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total funds | | | 9,291,551 | | | | 9,255,101 | | | | 9,234,568 | | | | 9,157,154 | | | | 9,081,263 | |
| Accrued taxes, expenses and other liabilities | | | 193,468 | | | | 192,799 | | | | 186,960 | | | | 158,652 | | | | 168,752 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total liabilities | | | 9,485,019 | | | | 9,447,900 | | | | 9,421,528 | | | | 9,315,806 | | | | 9,250,015 | |
| | | | | | | | | | | | | | | | | | | | | |
SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | |
| Preferred stock | | | — | | | | — | | | | — | | | | — | | | | — | |
| Common stock | | | 127,937 | | | | 127,937 | | | | 127,937 | | | | 127,937 | | | | 127,937 | |
| Capital surplus | | | 100,511 | | | | 102,355 | | | | 107,178 | | | | 106,339 | | | | 105,587 | |
| Accumulated other comprehensive (loss) income | | | (77,215 | ) | | | (72,170 | ) | | | (76,926 | ) | | | (36,045 | ) | | | (52,601 | ) |
| Retained earnings | | | 1,020,979 | | | | 1,012,675 | | | | 1,003,605 | | | | 1,020,518 | | | | 1,015,749 | |
| Treasury stock | | | (296,492 | ) | | | (299,243 | ) | | | (307,081 | ) | | | (307,401 | ) | | | (307,831 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total shareholders’ equity | | | 875,720 | | | | 871,554 | | | | 854,713 | | | | 911,348 | | | | 888,841 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 10,360,739 | | | $ | 10,319,454 | | | $ | 10,276,241 | | | $ | 10,227,154 | | | $ | 10,138,856 | |
| | | | | | | | | | | | | | | | |
8
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 | |
| | | September 30, 2007 | | | December 31, 2006 | | | September 30, 2006 | |
| | | Average | | | | | | | Average | | | Average | | | | | | | Average | | | Average | | | | | | | Average | |
| (Dollars in thousands) | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | |
| | | |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 180,426 | | | | | | | | | | | $ | 186,029 | | | | | | | | | | | $ | 185,628 | | | | | | | | | |
| Investment securities and federal funds sold: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury securities and U.S. Government agency obligations (taxable) | | | 1,949,851 | | | | 22,011 | | | | 4.48 | % | | | 2,050,736 | | | | 81,207 | | | | 3.96 | % | | | 1,993,447 | | | | 20,012 | | | | 3.98 | % |
| Obligations of states and political subdivisions (tax exempt) | | | 265,608 | | | | 4,079 | | | | 6.09 | % | | | 114,548 | | | | 7,390 | | | | 6.45 | % | | | 114,805 | | | | 1,925 | | | | 6.65 | % |
| Other securities and federal funds sold | | | 240,318 | | | | 4,078 | | | | 6.73 | % | | | 250,221 | | | | 15,264 | | | | 6.10 | % | | | 252,242 | | | | 3,924 | | | | 6.17 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total investment securities and federal funds sold | | | 2,455,777 | | | | 30,168 | | | | 4.87 | % | | | 2,415,505 | | | | 103,861 | | | | 4.30 | % | | | 2,360,494 | | | | 25,861 | | | | 4.35 | % |
| Loans held for sale | | | 45,677 | | | | 789 | | | | 6.85 | % | | | 47,449 | | | | 3,153 | | | | 6.65 | % | | | 44,682 | | | | 812 | | | | 7.21 | % |
| Loans | | | 7,011,776 | | | | 133,102 | | | | 7.53 | % | | | 6,798,338 | | | | 499,746 | | | | 7.35 | % | | | 6,844,593 | | | | 129,111 | | | | 7.48 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total earning assets | | | 9,513,230 | | | | 164,059 | | | | 6.84 | % | | | 9,261,292 | | | | 606,760 | | | | 6.55 | % | | | 9,249,769 | | | | 155,784 | | | | 6.68 | % |
| Allowance for loan losses | | | (94,393 | ) | | | | | | | | | | | (88,020 | ) | | | | | | | | | | | (87,127 | ) | | | | | | | | |
| Other assets | | | 761,476 | | | | | | | | | | | | 770,714 | | | | | | | | | | | | 790,586 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 10,360,739 | | | | | | | | | | | $ | 10,130,015 | | | | | | | | | | | $ | 10,138,856 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand — non-interest bearing | | $ | 1,400,848 | | | | — | | | | — | | | $ | 1,434,539 | | | | — | | | | — | | | $ | 1,407,653 | | | | — | | | | — | |
| Demand — interest bearing | | | 714,216 | | | | 1,677 | | | | 0.93 | % | | | 818,735 | | | | 9,217 | | | | 1.13 | % | | | 794,886 | | | | 2,241 | | | | 1.12 | % |
| Savings and money market accounts | | | 2,224,048 | | | | 13,501 | | | | 2.41 | % | | | 2,271,654 | | | | 50,083 | | | | 2.20 | % | | | 2,246,386 | | | | 13,188 | | | | 2.33 | % |
| Certificates and other time deposits | | | 3,140,848 | | | | 38,464 | | | | 4.86 | % | | | 2,859,218 | | | | 123,877 | | | | 4.33 | % | | | 2,906,952 | | | | 32,881 | | | | 4.49 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total deposits | | | 7,479,960 | | | | 53,642 | | | | 2.85 | % | | | 7,384,146 | | | | 183,177 | | | | 2.48 | % | | | 7,355,877 | | | | 48,310 | | | | 2.61 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Securities sold under agreements to repurchase | | | 1,555,235 | | | | 19,514 | | | | 4.98 | % | | | 1,283,951 | | | | 56,151 | | | | 4.37 | % | | | 1,357,746 | | | | 15,878 | | | | 4.64 | % |
| Wholesale borrowings | | | 256,356 | | | | 4,321 | | | | 6.69 | % | | | 404,723 | | | | 24,140 | | | | 5.96 | % | | | 367,640 | | | | 5,746 | | | | 6.20 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total interest bearing liabilities | | | 7,890,703 | | | | 77,477 | | | | 3.90 | % | | | 7,638,281 | | | | 263,468 | | | | 3.45 | % | | | 7,673,610 | | | | 69,934 | | | | 3.62 | % |
| Other liabilities | | | 193,468 | | | | | | | | | | | | 167,266 | | | | | | | | | | | | 168,752 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shareholders’ equity | | | 875,720 | | | | | | | | | | | | 889,929 | | | | | | | | | | | | 888,841 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 10,360,739 | | | | | | | | | | | $ | 10,130,015 | | | | | | | | | | | $ | 10,138,856 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net yield on earning assets | | $ | 9,513,230 | | | | 86,582 | | | | 3.61 | % | | $ | 9,261,292 | | | | 343,292 | | | | 3.71 | % | | $ | 9,249,769 | | | | 85,850 | | | | 3.68 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate spread | | | | | | | | | | | 2.94 | % | | | | | | | | | | | 3.10 | % | | | | | | | | | | | 3.06 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| Note: | | Interest income on tax-exempt securities and loans has been adjusted to a fully-taxable equivalent basis. Nonaccrual loans have been included in the average balances. |
9
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands except per share data)
| | | | | | | | | | | | | | | | | |
| | | Quarters ended | | | Nine months ended | |
| | | September 30, | | | September 30, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| Interest income: | | | | | | | | | | | | | | | | |
| Interest and fees on loans, including held for sale | | $ | 133,860 | | | $ | 129,890 | | | $ | 396,025 | | | $ | 371,080 | |
| Interest and dividends on investment securities and federal funds sold | | | 28,771 | | | | 25,131 | | | | 83,000 | | | | 75,283 | |
| | | | | | | | | | | | | |
| Total interest income | | | 162,631 | | | | 155,021 | | | | 479,025 | | | | 446,363 | |
| | | | | | | | | | | | | |
| Interest expense: | | | | | | | | | | | | | | | | |
| Interest on deposits: | | | | | | | | | | | | | | | | |
| Demand — interest bearing | | | 1,677 | | | | 2,241 | | | | 5,472 | | | | 7,186 | |
| Savings and money market accounts | | | 13,501 | | | | 13,188 | | | | 41,499 | | | | 36,015 | |
| Certificates and other time deposits | | | 38,464 | | | | 32,881 | | | | 111,269 | | | | 88,308 | |
| Interest on securities sold under agreements to repurchase | | | 19,514 | | | | 15,878 | | | | 54,304 | | | | 40,758 | |
| Interest on wholesale borrowings | | | 4,321 | | | | 5,746 | | | | 15,096 | | | | 17,306 | |
| | | | | | | | | | | | | |
| Total interest expense | | | 77,477 | | | | 69,934 | | | | 227,640 | | | | 189,573 | |
| | | | | | | | | | | | | |
| Net interest income | | | 85,154 | | | | 85,087 | | | | 251,385 | | | | 256,790 | |
| Provision for loan losses | | | 7,324 | | | | 12,612 | | | | 21,501 | | | | 31,877 | |
| | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 77,830 | | | | 72,475 | | | | 229,884 | | | | 224,913 | |
| | | | | | | | | | | | | |
| Other income: | | | | | | | | | | | | | | | | |
| Trust department income | | | 5,657 | | | | 5,721 | | | | 17,349 | | | | 16,859 | |
| Service charges on deposits | | | 17,003 | | | | 19,250 | | | | 50,307 | | | | 53,326 | |
| Credit card fees | | | 11,679 | | | | 11,251 | | | | 34,490 | | | | 33,400 | |
| ATM and other service fees | | | 3,306 | | | | 3,301 | | | | 9,566 | | | | 9,682 | |
| Bank owned life insurance income | | | 3,735 | | | | 3,042 | | | | 10,193 | | | | 11,338 | |
| Investment services and insurance | | | 3,007 | | | | 2,631 | | | | 8,120 | | | | 7,809 | |
| Investment securities gains, net | | | — | | | | 2 | | | | 1 | | | | 22 | |
| Loan sales and servicing income | | | 1,411 | | | | 1,731 | | | | 8,760 | | | | 6,009 | |
| Other operating income | | | 3,326 | | | | 2,412 | | | | 8,144 | | | | 8,371 | |
| | | | | | | | | | | | | |
| Total other income | | | 49,124 | | | | 49,341 | | | | 146,930 | | | | 146,816 | |
| | | | | | | | | | | | | |
| Other expenses: | | | | | | | | | | | | | | | | |
| Salaries, wages, pension and employee benefits | | | 41,332 | | | | 43,248 | | | | 127,370 | | | | 133,000 | |
| Net occupancy expense | | | 6,188 | | | | 6,002 | | | | 19,395 | | | | 18,671 | |
| Equipment expense | | | 2,958 | | | | 3,097 | | | | 8,893 | | | | 8,969 | |
| Stationery, supplies and postage | | | 2,463 | | | | 2,423 | | | | 7,048 | | | | 7,279 | |
| Bankcard, loan processing and other costs | | | 7,222 | | | | 7,459 | | | | 22,299 | | | | 20,703 | |
| Professional services | | | 2,923 | | | | 5,470 | | | | 12,277 | | | | 11,971 | |
| Amortization of intangibles | | | 222 | | | | 222 | | | | 667 | | | | 667 | |
| Other operating expense | | | 20,722 | | | | 9,062 | | | | 48,982 | | | | 42,840 | |
| | | | | | | | | | | | | |
| Total other expenses | | | 84,030 | | | | 76,983 | | | | 246,931 | | | | 244,100 | |
| | | | | | | | | | | | | |
| Income before federal income tax expense | | | 42,924 | | | | 44,833 | | | | 129,883 | | | | 127,629 | |
| Federal income tax expense | | | 12,662 | | | | 13,629 | | | | 38,315 | | | | 38,800 | |
| | | | | | | | | | | | | |
| Net income | | $ | 30,262 | | | $ | 31,204 | | | $ | 91,568 | | | $ | 88,829 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Other comprehensive income (loss), net of taxes | | | | | | | | | | | | | | | | |
| Unrealized securities’ holding gain (loss), net of taxes | | $ | 16,383 | | | $ | 23,868 | | | $ | 11,445 | | | $ | 5,468 | |
| Unrealized hedging gain (loss), net of taxes | | | (1,537 | ) | | | 3 | | | | (909 | ) | | | (747 | ) |
| Minimum pension liability adjustment, net of taxes | | | 875 | | | | — | | | | 2,621 | | | | — | |
| Less: reclassification adjustment for securities’ gains losses realized in net income, net of taxes | | | — | | | | 1 | | | | 1 | | | | 14 | |
| | | | | | | | | | | | | |
| Total other comprehensive income (loss), net of taxes | | | 15,721 | | | | 23,870 | | | | 13,156 | | | | 4,707 | |
| | | | | | | | | | | | | |
| Comprehensive income | | $ | 45,983 | | | $ | 55,074 | | | $ | 104,724 | | | $ | 93,536 | |
| | | | | | | | | | | | | |
| Net income applicable to common shares | | $ | 30,262 | | | $ | 31,204 | | | $ | 91,568 | | | $ | 88,829 | |
| | | | | | | | | | | | | |
| Net income used in diluted EPS calculation | | $ | 30,266 | | | $ | 31,209 | | | $ | 91,580 | | | $ | 88,844 | |
| | | | | | | | | | | | | |
| Weighted average number of common shares outstanding — basic | | | 80,467 | | | | 80,066 | | | | 80,337 | | | | 80,140 | |
| | | | | | | | | | | | | |
| Weighted average number of common shares outstanding — diluted | | | 80,561 | | | | 80,262 | | | | 80,483 | | | | 80,365 | |
| | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.38 | | | $ | 0.39 | | | $ | 1.14 | | | $ | 1.11 | |
| | | | | | | | | | | | | |
| Diluted earnings per share | | $ | 0.38 | | | $ | 0.39 | | | $ | 1.14 | | | $ | 1.11 | |
| | | | | | | | | | | | | |
| Dividend per share | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.87 | | | $ | 0.85 | |
| | | | | | | | | | | | | |
10
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME—LINKED QUARTERS
(Unaudited)
(Dollars in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarterly Results | |
| | | 2007 | | | 2007 | | | 2007 | | | 2006 | | | 2006 | |
| | | 3rd Q | | | 2nd Q | | | 1st Q | | | 4th Q | | | 3rd Q | |
| Interest and fees on loans, including held for sale | | $ | 133,860 | | | $ | 132,076 | | | $ | 130,089 | | | $ | 131,683 | | | $ | 129,890 | |
| Interest and dividends — securities and federal funds sold | | | 28,771 | | | | 27,383 | | | | 26,846 | | | | 25,795 | | | | 25,131 | |
| | | | | | | | | | | | | | | | |
| Total interest income | | | 162,631 | | | | 159,459 | | | | 156,935 | | | | 157,478 | | | | 155,021 | |
| | | | | | | | | | | | | | | | |
| Interest on deposits: | | | | | | | | | | | | | | | | | | | | |
| Demand — interest bearing | | | 1,677 | | | | 1,876 | | | | 1,919 | | | | 2,031 | | | | 2,241 | |
| Savings and money market accounts | | | 13,501 | | | | 13,992 | | | | 14,006 | | | | 14,068 | | | | 13,188 | |
| Certificates and other time deposits | | | 38,464 | | | | 36,725 | | | | 36,080 | | | | 35,569 | | | | 32,881 | |
| Securities sold under agreements to repurchase | | | 19,514 | | | | 18,005 | | | | 16,785 | | | | 15,393 | | | | 15,878 | |
| Wholesale borrowings | | | 4,321 | | | | 4,636 | | | | 6,139 | | | | 6,834 | | | | 5,746 | |
| | | | | | | | | | | | | | | | |
| Total interest expense | | | 77,477 | | | | 75,234 | | | | 74,929 | | | | 73,895 | | | | 69,934 | |
| | | | | | | | | | | | | | | | |
| Net interest income | | | 85,154 | | | | 84,225 | | | | 82,006 | | | | 83,583 | | | | 85,087 | |
| Provision for loan losses | | | 7,324 | | | | 9,967 | | | | 4,210 | | | | 44,235 | | | | 12,612 | |
| | | | | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 77,830 | | | | 74,258 | | | | 77,796 | | | | 39,348 | | | | 72,475 | |
| | | | | | | | | | | | | | | | |
| Other income: | | | | | | | | | | | | | | | | | | | | |
| Trust department income | | | 5,657 | | | | 6,096 | | | | 5,596 | | | | 5,794 | | | | 5,721 | |
| Service charges on deposits | | | 17,003 | | | | 17,055 | | | | 16,249 | | | | 18,198 | | | | 19,250 | |
| Credit card fees | | | 11,679 | | | | 11,712 | | | | 11,099 | | | | 11,325 | | | | 11,251 | |
| ATM and other service fees | | | 3,306 | | | | 3,189 | | | | 3,071 | | | | 3,135 | | | | 3,301 | |
| Bank owned life insurance income | | | 3,735 | | | | 3,290 | | | | 3,168 | | | | 3,001 | | | | 3,042 | |
| Investment services and insurance | | | 3,007 | | | | 2,660 | | | | 2,453 | | | | 2,011 | | | | 2,631 | |
| Investment securities gains (losses), net | | | — | | | | 1 | | | | — | | | | — | | | | 2 | |
| Loan sales and servicing income | | | 1,411 | | | | 1,911 | | | | 5,438 | | | | 1,504 | | | | 1,731 | |
| Other operating income | | | 3,326 | | | | 3,016 | | | | 1,802 | | | | 3,364 | | | | 2,412 | |
| | | | | | | | | | | | | | | | |
| Total other income | | | 49,124 | | | | 48,930 | | | | 48,876 | | | | 48,332 | | | | 49,341 | |
| | | | | | | | | | | | | | | | |
| Other expenses: | | | | | | | | | | | | | | | | | | | | |
| Salaries, wages, pension and employee benefits | | | 41,332 | | | | 43,538 | | | | 42,500 | | | | 43,700 | | | | 43,248 | |
| Net occupancy expense | | | 6,188 | | | | 6,521 | | | | 6,686 | | | | 6,143 | | | | 6,002 | |
| Equipment expense | | | 2,958 | | | | 2,851 | | | | 3,084 | | | | 3,030 | | | | 3,097 | |
| Stationery, supplies and postage | | | 2,463 | | | | 2,252 | | | | 2,333 | | | | 2,633 | | | | 2,423 | |
| Bankcard, loan processing and other costs | | | 7,222 | | | | 7,607 | | | | 7,470 | | | | 7,508 | | | | 7,459 | |
| Professional services | | | 2,923 | | | | 4,525 | | | | 4,829 | | | | 5,000 | | | | 5,470 | |
| Amortization of intangibles | | | 222 | | | | 222 | | | | 223 | | | | 222 | | | | 222 | |
| Other operating expense | | | 20,722 | | | | 13,859 | | | | 14,401 | | | | 15,751 | | | | 9,062 | |
| | | | | | | | | | | | | | | | |
| Total other expenses | | | 84,030 | | | | 81,375 | | | | 81,526 | | | | 83,987 | | | | 76,983 | |
| | | | | | | | | | | | | | | | |
| Income before income tax expense | | | 42,924 | | | | 41,813 | | | | 45,146 | | | | 3,693 | | | | 44,833 | |
| Federal income taxes | | | 12,662 | | | | 11,928 | | | | 13,725 | | | | (2,424 | ) | | | 13,629 | |
| | | | | | | | | | | | | | | | |
| Net income | | $ | 30,262 | | | $ | 29,885 | | | $ | 31,421 | | | $ | 6,117 | | | $ | 31,204 | |
| | | | | | | | | | | | | | | | |
| Other comprehensive income (loss), net of taxes | | | 15,721 | | | | (10,745 | ) | | | 8,180 | | | | (41,365 | ) | | | 23,870 | |
| | | | | | | | | | | | | | | | |
| Comprehensive income | | $ | 45,983 | | | $ | 19,140 | | | $ | 39,601 | | | $ | (35,248 | ) | | $ | 55,074 | |
| | | | | | | | | | | | | | | | |
| Net income applicable to common shares | | | 30,262 | | | | 29,885 | | | | 31,421 | | | | 6,117 | | | | 31,204 | |
| | | | | | | | | | | | | | | | |
| Adjusted net income used in diluted EPS calculation | | | 30,266 | | | | 29,889 | | | | 31,425 | | | | 6,121 | | | | 31,209 | |
| | | | | | | | | | | | | | | | |
| Weighted — average common shares — basic | | | 80,467 | | | | 80,426 | | | | 80,113 | | | | 80,091 | | | | 80,066 | |
| | | | | | | | | | | | | | | | |
| Weighted — average common shares — diluted | | | 80,561 | | | | 80,570 | | | | 80,298 | | | | 80,316 | | | | 80,262 | |
| | | | | | | | | | | | | | | | |
| |
| Basic net income per share | | $ | 0.38 | | | $ | 0.37 | | | $ | 0.39 | | | $ | 0.07 | | | $ | 0.39 | |
| | | | | | | | | | | | | | | | |
| |
| Diluted net income per share | | $ | 0.38 | | | $ | 0.37 | | | $ | 0.39 | | | $ | 0.07 | | | $ | 0.39 | |
| | | | | | | | | | | | | | | | |
11
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 | |
| | | Sept 30 | | | June 30 | | | Mar 31 | | | Dec 31 | | | Sep 30 | | | Dec 31 | |
| Allowance for Credit Losses | | 2007 | | | 2007 | | | 2007 | | | 2006 | | | 2006 | | | 2006 | |
| Allowance for loan losses, beginning of period | | $ | 94,432 | | | $ | 92,045 | | | $ | 91,342 | | | $ | 88,755 | | | $ | 87,727 | | | $ | 90,661 | |
| Allowance related to loans held for sale | | | — | | | | — | | | | — | | | | (23,089 | ) | | | — | | | | (23,089 | ) |
| Provision for loan losses | | | 7,324 | | | | 9,967 | | | | 4,210 | | | | 44,235 | | | | 12,612 | | | | 76,112 | |
| Charge — offs | | | 12,347 | | | | 10,609 | | | | 9,424 | | | | 22,323 | | | | 15,453 | | | | 70,728 | |
| Recoveries | | | 4,402 | | | | 3,029 | | | | 5,917 | | | | 3,764 | | | | 3,869 | | | | 18,386 | |
| | | | | | | | | | | | | | | | | | | | |
| Net charge — offs | | | 7,945 | | | | 7,580 | | | | 3,507 | | | | 18,559 | | | | 11,584 | | | | 52,342 | |
| | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses, end of period | | $ | 93,811 | | | $ | 94,432 | | | $ | 92,045 | | | $ | 91,342 | | | $ | 88,755 | | | $ | 91,342 | |
| | | | | | | | | | | | | | | | | | | |
| Reserve for unfunded lending commitments, beginning of period | | $ | 6,553 | | | $ | 6,746 | | | $ | 6,294 | | | $ | 6,307 | | | $ | 5,716 | | | $ | 6,072 | |
| Provision for credit losses | | | 856 | | | | (193 | ) | | | 452 | | | | (13 | ) | | | 591 | | | | 222 | |
| | | | | | | | | | | | | | | | | | | |
| Reserve for unfunded lending commitments, end of period | | $ | 7,409 | | | $ | 6,553 | | | $ | 6,746 | | | $ | 6,294 | | | $ | 6,307 | | | $ | 6,294 | |
| | | | | | | | | | | | | | | | | | | |
| Allowance for Credit Losses | | $ | 101,220 | | | $ | 100,985 | | | $ | 98,791 | | | $ | 97,636 | | | $ | 95,062 | | | $ | 97,636 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Ratios | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Provision for loan losses as a % of average loans | | | 0.41 | % | | | 0.57 | % | | | 0.25 | % | | | 2.54 | % | | | 0.73 | % | | | 1.12 | % |
| Provision for credit losses as a % of average loans | | | 0.05 | % | | | -0.01 | % | | | 0.03 | % | | | 0.00 | % | | | 0.03 | % | | | 0.00 | % |
| Net charge — offs as a % of average loans | | | 0.45 | % | | | 0.43 | % | | | 0.21 | % | | | 1.06 | % | | | 0.67 | % | | | 0.77 | % |
| Net charge — offs and allowance related to loans held for sale as a % of average loans | | | 0.45 | % | | | 0.43 | % | | | 0.21 | % | | | 1.40 | % | | | 0.67 | % | | | 1.11 | % |
| Allowance for loan losses as a % of period — end loans | | | 1.34 | % | | | 1.34 | % | | | 1.32 | % | | | 1.33 | % | | | 1.28 | % | | | 1.33 | % |
| Allowance for credit losses as a % of period — end loans | | | 1.44 | % | | | 1.43 | % | | | 1.42 | % | | | 1.42 | % | | | 1.37 | % | | | 1.42 | % |
| Allowance for loan losses as a % of nonperforming loans | | | 314.22 | % | | | 295.08 | % | | | 331.93 | % | | | 168.03 | % | | | 143.73 | % | | | 168.03 | % |
| Allowance for credit losses as a % of nonperforming loans | | | 339.04 | % | | | 315.56 | % | | | 356.26 | % | | | 179.60 | % | | | 153.94 | % | | | 179.60 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Asset Quality | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Impaired loans: | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual | | $ | 20,165 | | | $ | 20,877 | | | $ | 17,049 | | | $ | 45,045 | | | $ | 52,621 | | | $ | 45,045 | |
| Other nonperforming loans: | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual | | | 9,690 | | | | 11,125 | | | | 10,681 | | | | 9,317 | | | | 9,132 | | | | 9,317 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total nonperforming loans | | | 29,855 | | | | 32,002 | | | | 27,730 | | | | 54,362 | | | | 61,753 | | | | 54,362 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Other real estate (“ORE”) | | | 4,344 | | | | 5,036 | | | | 4,934 | | | | 9,815 | | | | 10,711 | | | | 9,815 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total nonperforming assets (“NPAs”) | | $ | 34,199 | | | $ | 37,038 | | | $ | 32,664 | | | $ | 64,177 | | | $ | 72,464 | | | $ | 64,177 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| NPAs as % of period — end loans + ORE | | | 0.49 | % | | | 0.52 | % | | | 0.47 | % | | | 0.93 | % | | | 1.05 | % | | | 0.93 | % |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Past due 90 days or more & accruing interest | | $ | 13,107 | | | $ | 10,536 | | | $ | 15,209 | | | $ | 16,860 | | | $ | 15,311 | | | $ | 16,860 | |
| | | | | | | | | | | | | | | | | | | |
12
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2007 | | | 2007 | | | 2006 | | | 2006 | |
| QUARTERLY OTHER INCOME DETAIL | | 3rd Qtr | | | 2nd Qtr | | | 1st Qtr | | | 4th Qtr | | | 3rd Qtr | |
| |
| Trust department income | | $ | 5,657 | | | $ | 6,096 | | | $ | 5,596 | | | $ | 5,794 | | | $ | 5,721 | |
| Service charges on deposits | | | 17,003 | | | | 17,055 | | | | 16,249 | | | | 18,198 | | | | 19,250 | |
| Credit card fees | | | 11,679 | | | | 11,712 | | | | 11,099 | | | | 11,325 | | | | 11,251 | |
| ATM and other service fees | | | 3,306 | | | | 3,189 | | | | 3,071 | | | | 3,135 | | | | 3,301 | |
| Bank owned life insurance income | | | 3,735 | | | | 3,290 | | | | 3,168 | | | | 3,001 | | | | 3,042 | |
| Investment services and insurance | | | 3,007 | | | | 2,660 | | | | 2,453 | | | | 2,011 | | | | 2,631 | |
| Investment securities gains (losses), net | | | — | | | | 1 | | | | — | | | | — | | | | 2 | |
| Loan sales and servicing income | | | 1,411 | | | | 1,911 | | | | 5,438 | | | | 1,504 | | | | 1,731 | |
| Other operating income | | | 3,326 | | | | 3,016 | | | | 1,802 | | | | 3,364 | | | | 2,412 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total Other Income | | $ | 49,124 | | | $ | 48,930 | | | $ | 48,876 | | | $ | 48,332 | | | $ | 49,341 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2007 | | | 2007 | | | 2006 | | | 2006 | |
| QUARTERLY OTHER EXPENSES DETAIL | | 3rd Qtr | | | 2nd Qtr | | | 1st Qtr | | | 4th Qtr | | | 3rd Qtr | |
| |
| Salaries, wages, pension and employee benefits | | $ | 41,332 | | | $ | 43,538 | | | $ | 42,500 | | | $ | 43,700 | | | $ | 43,248 | |
| Net occupancy expense | | | 6,188 | | | | 6,521 | | | | 6,686 | | | | 6,143 | | | | 6,002 | |
| Equipment expense | | | 2,958 | | | | 2,851 | | | | 3,084 | | | | 3,030 | | | | 3,097 | |
| Taxes, other than federal income taxes | | | 1,984 | | | | 1,655 | | | | 1,662 | | | | 1,753 | | | | (7,703 | ) |
| Stationery, supplies and postage | | | 2,463 | | | | 2,252 | | | | 2,333 | | | | 2,633 | | | | 2,423 | |
| Bankcard, loan processing and other costs | | | 7,222 | | | | 7,607 | | | | 7,470 | | | | 7,508 | | | | 7,459 | |
| Advertising | | | 3,332 | | | | 1,260 | | | | 1,420 | | | | 798 | | | | 1,152 | |
| Professional services | | | 2,923 | | | | 4,525 | | | | 4,829 | | | | 5,000 | | | | 5,470 | |
| Telephone | | | 1,142 | | | | 1,094 | | | | 1,120 | | | | 1,362 | | | | 1,138 | |
| Amortization of intangibles | | | 222 | | | | 222 | | | | 223 | | | | 222 | | | | 222 | |
| Other operating expense | | | 14,264 | | | | 9,850 | | | | 10,199 | | | | 11,838 | | | | 14,475 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total Other Expenses | | $ | 84,030 | | | $ | 81,375 | | | $ | 81,526 | | | $ | 83,987 | | | $ | 76,983 | |
| | | | | | | | | | | | | | | | |
13
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES — Net Charge-off Detail
(Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | |
| | | Quarters ended | | | Nine months ended | |
| | | September 30, | | | September 30, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| Allowance for loan losses — beginning of period | | $ | 94,432 | | | $ | 87,727 | | | $ | 91,342 | | | $ | 90,661 | |
| Loans charged off: | | | | | | | | | | | | | | | | |
| Commercial | | | 3,227 | | | | 6,731 | | | | 4,887 | | | | 22,883 | |
| Mortgage | | | 1,510 | | | | 459 | | | | 4,068 | | | | 1,157 | |
| Installment | | | 4,531 | | | | 4,832 | | | | 13,598 | | | | 15,386 | |
| Home equity | | | 1,095 | | | | 1,112 | | | | 3,393 | | | | 2,878 | |
| Credit cards | | | 1,969 | | | | 2,315 | | | | 6,393 | | | | 6,040 | |
| Leases | | | 15 | | | | 4 | | | | 41 | | | | 61 | |
| | | | | | | | | | | | | |
| Total | | | 12,347 | | | | 15,453 | | | | 32,380 | | | | 48,405 | |
| | | | | | | | | | | | | |
| Recoveries: | | | | | | | | | | | | | | | | |
| Commercial | | | 1,105 | | | | 566 | | | | 3,994 | | | | 2,948 | |
| Mortgage | | | — | | | | 9 | | | | 8 | | | | 95 | |
| Installment | | | 2,110 | | | | 2,219 | | | | 6,316 | | | | 8,330 | |
| Home equity | | | 519 | | | | 333 | | | | 1,083 | | | | 1,018 | |
| Credit cards | | | 504 | | | | 585 | | | | 1,452 | | | | 1,619 | |
| Manufactured housing | | | 82 | | | | 102 | | | | 252 | | | | 372 | |
| Leases | | | 82 | | | | 55 | | | | 243 | | | | 240 | |
| | | | | | | | | | | | | |
| Total | | | 4,402 | | | | 3,869 | | | | 13,348 | | | | 14,622 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net charge-offs | | | 7,945 | | | | 11,584 | | | | 19,032 | | | | 33,783 | |
| Provision for loan losses | | | 7,324 | | | | 12,612 | | | | 21,501 | | | | 31,877 | |
| Allowance related to loans held for sale | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Allowance for loan losses — end of period | | $ | 93,811 | | | $ | 88,755 | | | $ | 93,811 | | | $ | 88,755 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Average loans outstanding | | $ | 7,011,776 | | | $ | 6,844,593 | | | $ | 6,978,178 | | | $ | 6,758,157 | |
| | | | | | | | | | | | | |
| Ratio to average loans: | | | | | | | | | | | | | | | | |
| (Annualized) net charge-offs | | | 0.45 | % | | | 0.67 | % | | | 0.36 | % | | | 0.67 | % |
| | | | | | | | | | | | | |
| (Annualized) net charge-offs and allowance related to loans held for sale | | | 0.45 | % | | | 0.67 | % | | | 0.36 | % | | | 0.67 | % |
| | | | | | | | | | | | | |
| Provision for loan losses | | | 0.41 | % | | | 0.73 | % | | | 0.41 | % | | | 0.63 | % |
| | | | | | | | | | | | | |
| Loans outstanding — period-end | | $ | 7,014,389 | | | $ | 6,917,347 | | | $ | 7,014,389 | | | $ | 6,917,347 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Allowance for credit losses: | | | 101,220 | | | | 95,062 | | | | 101,220 | | | | 95,062 | |
| | | | | | | | | | | | | |
| As a multiple of (annualized) net charge-offs | | | 3.21 | | | | 2.07 | | | | 3.98 | | | | 2.10 | |
| | | | | | | | | | | | | |
| As a multiple of (annualized) net charge-offs and allowance related to loans held for sale | | | 3.21 | | | | 2.07 | | | | 3.98 | | | | 2.10 | |
| | | | | | | | | | | | | |
| Allowance for loan losses: | | | | | | | | | | | | | | | | |
| As a percent of period-end loans outstanding | | | 1.34 | % | | | 1.28 | % | | | 1.34 | % | | | 1.28 | % |
| | | | | | | | | | | | | |
| As a multiple of (annualized) net charge-offs | | | 2.98 | | | | 1.93 | | | | 3.69 | | | | 1.97 | |
| | | | | | | | | | | | | |
| As a multiple of (annualized) net charge-offs and allowance related to loans held for sale | | | 2.98 | | | | 1.93 | | | | 3.69 | | | | 1.97 | |
| | | | | | | | | | | | | |
14
