FirstMerit (FMER) 10-Q 2007 Q3 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED September 30, 2007

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

For the transition period from                    to                    

COMMISSION FILE NUMBER 0-10161

FIRSTMERIT CORPORATION

(Exact name of registrant as specified in its charter)

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

III CASCADE PLAZA, 7TH FLOOR, AKRON, OHIO
44308-1103

(Address of principal executive offices)

(330) 996-6300

(Telephone Number)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YESþ NOo

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

     Large accelerated filerþ Accelerated filero Non-accelerated filero 

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YESo NOþ

     As of October 31, 2007, 80,473,990 shares, without par value, were outstanding.

TABLE OF CONTENTS

	PART I — FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 1A. RISK FACTORS
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS
SIGNATURES
EX-31.1
EX-31.2
EX-32.1
EX-99.1

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands)
(Unaudited, except December 31, 2006, which is derived from the	September 30,			December 31,			September 30,
audited financial statements)	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		2,198			2,865			3,088
Accrued interest receivable and other assets		486,319			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

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

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FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)	Quarters ended					Nine months ended
(In thousands except per share data)	September 30,					September 30,
	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

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

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FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)	Nine months ended September 30
(In thousands)	2007			2006
Operating Activities
Net income	$	91,568		$	88,829
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		21,501			31,877
Provision for depreciation and amortization		11,527			10,981
Amortization of investment securities premiums, net		554			1,699
Accretion of income for lease financing		(3,209	)		(2,828	)
Gains on sales and calls of investment securities, net		(1	)		(22	)
Decrease (increase) in interest receivable		156			(4,796	)
Increase in interest payable		2,785			10,469
Increase in employee pension liability		2,918			6,221
Increase in bank owned life insurance		(9,029	)		(7,320	)
Decrease in Ohio franchise tax payable		—			(10,629	)
Originations of loans held for sale		(189,492	)		(234,468	)
Proceeds from sales of loans, primarily mortgage loans sold in the secondary mortgage markets		183,855			229,279
Losses (gains) on sales of loans, net		515			(138	)
Amortization of intangible assets		667			667
Other changes		6,283			(4,450	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		120,598			115,371
Investing Activities
Dispositions of investment securities:
Available-for-sale — sales		2			—
Available-for-sale — maturities		538,284			642,518
Purchases of available-for-sale investment securities		(617,443	)		(461,793	)
Net increase in loans and leases, excluding sales		(93,521	)		(288,841	)
Purchases of premises and equipment		(5,450	)		(13,651	)
Sales of premises and equipment		325			2,082
NET CASH USED IN INVESTING ACTIVITIES		(177,803	)		(119,685	)
Financing Activities
Net decrease in demand accounts		(138,456	)		(150,751	)
Net decrease in savings and money market accounts		(60,330	)		(87,445	)
Net increase in certificates and other time deposits		108,161			394,179
Net increase (decrease) in securities sold under agreements to repurchase		269,394			(156,997	)
Net (decrease) increase in wholesale borrowings		(60,789	)		108,025
Cash dividends — common		(69,991	)		(68,067	)
Purchase of treasury shares		(236	)		(65,430	)
Proceeds from exercise of stock options, conversion of debentures or conversion of preferred stock		2,969			963
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES		50,722			(25,523	)
Decrease in cash and cash equivalents		(6,483	)		(29,837	)
Cash and cash equivalents at beginning of period		200,204			225,953
Cash and cash equivalents at end of period	$	193,721		$	196,116
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized	$	125,125		$	108,136
Federal income taxes	$	33,670		$	37,770

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

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FirstMerit Corporation and Subsidiaries

Notes to Consolidated Financial Statements
September 30, 2007(Unaudited)(Dollars in thousands except per share data)

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

     The consolidated balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date. The accompanying unaudited interim financial statements reflect all adjustments (consisting only of normally recurring accruals) that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted in accordance with the rules of the Securities and Exchange Commission (“SEC”). The consolidated financial statements of the Corporation as of September 30, 2007 and 2006 are not necessarily indicative of the results that may be achieved for the full fiscal year or for any future period. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 31, 2006.

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

2.Recent Accounting Pronouncements —During February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Standards (“SFAS”) No. 156 “Accounting for Servicing of Financial Assets,” which amends SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” with respect to the accounting for separately recognized servicing assets and servicing liabilities. This statement requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value. Should a company not elect to use the fair value method for subsequent measurement, the company would continue to use the amortization method previously required by SFAS No. 140, under which the servicing asset or servicing liability is amortized and periodically evaluated for impairment. SFAS No. 156 permits, but does not require, the subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value. Management has not elected to use the fair value method for subsequent measurement.

     During February 2006, the FASB issued SFAS No. 155 “Accounting for Certain Hybrid Financial Instruments” which amends SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities��� and SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS 155”). This statement permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. It also clarifies which interest-only strips and

5

principal-only strips are not subject to the requirements of SFAS No. 133 and establishes a requirement to evaluate interests in securitized financial assets to identify interests that contain an embedded derivative requiring bifurcation. SFAS 155 was effective for all financial instruments acquired or issued after January 1, 2007. The adoption of SFAS 155 did not have a material impact on the Corporation’s consolidated financial condition or results of operations.

     During September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). This standard establishes a standard definition for fair value, establishes a framework under generally accepted accounting principles for measuring fair value and expands disclosure requirements for fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Corporation is currently assessing the impact of adopting SFAS 157.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” (“SFAS 159”) which permits companies to elect to measure certain eligible items at fair value. Subsequent unrealized gains and losses on those items will be reported in earnings. Upfront costs and fees related to those items will be reported in earnings as incurred and not deferred. SFAS 159 is effective for fiscal years beginning after November 15, 2007. If a company elects to apply the provision of SFAS 159 to eligible items existing at that date, the effect of the remeasurement to fair value will be reported as a cumulative effect adjustment to the opening balance of retained earnings. Retrospective application will not be permitted. The Corporation is currently assessing whether it will elect to use the fair value option for any of its eligible items.

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

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

     The components of investment securities are as follows:

	September 30, 2007
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available for sale:
U.S. Government agency obligations	$	630,588	$	1,460	$	(6,275	)	$	625,773
Obligations of state and political subdivisions		273,337		1,492		(966	)		273,863
Mortgage-backed securities		1,393,317		1,952		(24,976	)		1,370,293
Other securities		231,706		2,406		(4,635	)		229,477
	$	2,528,948	$	7,310	$	(36,852	)	$	2,499,406

			Fair
	Book Value		Value
Due in one year or less	$	159,239	$	158,459
Due after one year through five years		1,639,721		1,612,459
Due after five years through ten years		437,431		437,572
Due after ten years		292,557		290,916
	$	2,528,948	$	2,499,406

	December 31, 2006
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available for sale:
U.S. Government agency obligations	$	846,517	$	72	$	(14,670	)	$	831,919
Obligations of state and political subdivisions		195,054		1,872		(128	)		196,798
Mortgage-backed securities		1,164,205		625		(36,778	)		1,128,052
Other securities		249,261		3,282		(1,424	)		251,119
	$	2,455,037	$	5,851	$	(53,000	)	$	2,407,888

	Amortized		Fair
	Cost		Value
Due in one year or less	$	376,918	$	373,502
Due after one year through five years		1,580,074		1,534,847
Due after five years through ten years		274,173		271,978
Due after ten years		223,872		227,561
	$	2,455,037	$	2,407,888

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	September 30, 2006
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available for sale:
U.S. Government agency obligations	$	892,116	$	412	$	(16,932	)	$	875,596
Obligations of state and political subdivisions		132,159		2,117		(33	)		134,243
Mortgage-backed securities		1,150,847		520		(38,692	)		1,112,675
Other securities		248,382		2,967		(1,379	)		249,970
	$	2,423,504	$	6,016	$	(57,036	)	$	2,372,484

			Fair
	Book Value		Value
Due in one year or less	$	330,507	$	326,367
Due after one year through five years		1,822,233		1,773,279
Due after five years through ten years		110,046		108,649
Due after ten years		160,718		164,189
	$	2,423,504	$	2,372,484

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

     The carrying amount of investment securities pledged to secure trust and public deposits and for purposes required or permitted by law amounted to approximately $2.0 billion at September 30, 2007, $1.8 billion at December 31, 2006 and $1.9 billion at September 30, 2006.

     At September 30, 2007, December 31, 2006 and September 30, 2006, the Corporation’s investment in Federal Reserve Bank (“FRB”) common stock was $8.7 million, $8.7 million and $8.6 million, respectively. At September 30, 2007, December 31, 2006 and September 30, 2006, the Corporation’s investment in Federal Home Loan Bank (“FHLB”) stock amounted to $114.5 million, $114.5 million and $112.8 million, respectively and is included in other securities in the preceding table. FRB and FHLB stock are classified as a restricted investment, carried at cost, and their value is determined by the ultimate recoverability of par value.

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

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	At September 30, 2007
	Less than 12 months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized
Description of Securities	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
U.S. Government agency obligations	$	40,546	$	(252	)	$	446,622	$	(6,023	)	$	487,168	$	(6,275	)
Obligations of states and political subdivisions		117,616		(942	)		1,729		(24	)		119,345		(966	)
Mortgage-backed securities		235,735		(1,317	)		842,173		(23,659	)		1,077,908		(24,976	)
Other securities		38,479		(1,879	)		51,120		(2,756	)		89,599		(4,635	)
Total temporarily impaired securities	$	432,376	$	(4,390	)	$	1,341,644	$	(32,462	)	$	1,774,020	$	(36,852	)

	At December 31, 2006
	Less than 12 months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized
Description of Securities	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
U.S. Government agency obligations	$	69,934	$	(66	)	$	711,861	$	(14,603	)	$	781,795	$	(14,669	)
Obligations of states and political subdivisions		30,926		(96	)		1,722		(32	)		32,648		(128	)
Mortgage-backed securities		43,585		(12	)		1,015,354		(36,767	)		1,058,940		(36,779	)
Other securities		9,790		(9	)		59,918		(1,415	)		69,707		(1,424	)
Total temporarily impaired securities	$	154,235	$	(183	)	$	1,788,855	$	(52,817	)	$	1,943,090	$	(53,000	)

	At September 30, 2006
	Less than 12 months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized
Description of Securities	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
U.S. Government agency obligations	$	30,033	$	(27	)	$	745,151	$	(16,905	)	$	775,184	$	(16,932	)
Obligations of states and political subdivisions		—		—			2,315		(33	)		2,315		(33	)
Mortgage-backed securities		38,613		(800	)		1,025,683		(37,892	)		1,064,296		(38,692	)
Other securities		—		—			60,915		(1,379	)		60,915		(1,379	)
Total temporarily impaired securities	$	68,646	$	(827	)	$	1,834,064	$	(56,209	)	$	1,902,710	$	(57,036	)

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

     The activity within the ALL for the quarter and nine months ended September 30, 2007 and 2006 and the full year ended December 31, 2006 is shown in the following table:

9

     Note 1 (Summary of Significant Accounting Policies) and Note 4 (Allowance for Loan Losses) in the 2006 Form 10-K, more fully describe the components of the allowance for loan loss model.

					Nine		Nine
	Quarter ended		Quarter ended		months ended		months ended		Year Ended
	September 30,		September 30,		September 30,		September 30,		December 31,
	2007		2006		2007		2006		2006
Allowance for loan losses-beginning of period	$	94,432	$	87,727	$	91,342	$	90,661	$	90,661
Loans charged off:
Commercial		3,227		6,731		4,887		22,883		32,628
Mortgage		1,510		459		4,068		1,157		1,670
Installment		4,531		4,832		13,598		15,386		20,682
Home equity		1,095		1,112		3,393		2,878		3,847
Credit cards		1,969		2,315		6,393		6,040		8,294
Leases		15		4		41		61		3,607
Total charge-offs		12,347		15,453		32,380		48,405		70,728
Recoveries:
Commercial		1,105		566		3,994		2,948		3,734
Mortgage		—		9		8		95		142
Installment		2,110		2,219		6,316		8,330		10,340
Home equity		519		333		1,083		1,018		1,293
Credit cards		504		585		1,452		1,619		2,123
Manufactured housing		82		102		252		372		451
Leases		82		55		243		240		303
Total recoveries		4,402		3,869		13,348		14,622		18,386
Net charge-offs		7,945		11,584		19,032		33,783		52,342
Allowance related to loans held for sale		—		—		—		—		(23,089	)
Provision for loan losses		7,324		12,612		21,501		31,877		76,112
Allowance for loan losses-end of period	$	93,811	$	88,755	$	93,811	$	88,755	$	91,342

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

	At September 30, 2007						At December 31, 2006						At September 30, 2006
	Gross		Accumulated		Net		Gross		Accumulated		Net		Gross		Accumulated		Net
	Amount		Amortization		Amount		Amount		Amortization		Amount		Amount		Amortization		Amount
Amortizable intangible assets:
Deposit base intangible assets	$	10,137		7,939	$	2,198	$	10,137		7,272	$	2,865	$	10,137		7,049	$	3,088
Unamortizable intangible assets:
Goodwill	$	139,245			$	139,245	$	139,245			$	139,245	$	139,245			$	139,245

     Amortization expense for intangible assets was $0.22 million for both quarters ended September 30, 2007 and 2006. The following table shows the estimated future amortization expense for deposit base intangible assets based on existing asset balances at September 30, 2007:

For the years ended:

December 31, 2007	$	889
December 31, 2008		573
December 31, 2009		347
December 31, 2010		347
December 31, 2011 and beyond		42
	$	2,198

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

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

					Nine		Nine
	Quarter ended		Quarter ended		months ended		months ended
	September 30,		September 30,		September 30,		September 30,
	2007		2006		2007		2006
BASIC EPS:
Net income applicable to common shares	$	30,262	$	31,204	$	91,568	$	88,829
Average common shares outstanding		80,467		80,066		80,337		80,140
Net income per share — basic	$	0.38	$	0.39	$	1.14	$	1.11
DILUTED EPS:
Net income available to common shares	$	30,262	$	31,204	$	91,568	$	88,829
Add: interest expense on convertible bonds		4		5		12		15
	$	30,266	$	31,209	$	91,580	$	88,844
Avg common shares outstanding		80,467		80,066		80,337		80,140
Add: Equivalents from stock options and restricted stock		52		149		102		176
Add: Equivalents-convertible bonds		42		47		44		49
Average common shares and equivalents outstanding		80,561		80,262		80,483		80,365
Net income per common share — diluted	$	0.38	$	0.39	$	1.14	$	1.11

     For the quarters ended September 30, 2007 and 2006, options to purchase 6.4 million and 6.7 million shares, respectively, were outstanding, but not included in the computation of diluted earnings per share because they were antidilutive.

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

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7.Segment Information — Management monitors the Corporation’s results by an internal performance measurement system, which provides lines of business results and key performance measures. The profitability measurement system is based on internal management methodologies designed to produce consistent results and reflect the underlying economics of the businesses. The development and application of these methodologies is a dynamic process. Accordingly, these measurement tools and assumptions may be revised periodically to reflect methodological, product, and/or management organizational changes. Further, these tools measure financial results that support the strategic objectives and internal organizational structure of the Corporation. Consequently, the information presented is not necessarily comparable with similar information for other financial institutions.

     A description of each business, selected financial performance, and the methodologies used to measure financial performance are presented below.

• Commercial —The commercial line of business provides a full range of lending, depository, and related financial services to middle-market corporate, industrial, financial, small business, government and leasing clients. Commercial also includes the personal business of commercial loan clients as well as the “micro business” lines. Products and services offered include commercial loans such as term loans, revolving credit arrangements, inventory and accounts receivable financing, commercial mortgages, real estate construction lending and letters of credit.

• Retail —The retail line of business includes consumer lending and deposit gathering and residential mortgage loan origination and servicing. Retail offers a variety of retail financial products and services including direct and indirect installment loans, debit and credit cards, home equity loans and lines of credit, residential mortgage loans, deposit products, fixed and variable annuities and ATM network services. Deposit products include checking, savings, money market accounts and certificates of deposit.

• Wealth —The wealth line of business offers a broad array of asset management, private banking, financial planning, estate settlement and administration, credit and deposit products and services. Trust and investment services include personal trust and planning, investment management, estate settlement and administration services. Retirement plan services focus on investment management and fiduciary activities. Brokerage and insurance delivers retail mutual funds, other securities, variable and fixed annuities, personal disability and life insurance products and brokerage services. Private banking provides credit, deposit and asset management solutions for affluent clients.

• Other —The other line of business includes activities that are not directly attributable to one of the three principal lines of business. Included in the Other category are the parent company, eliminations companies, community development operations, the treasury group, which includes the securities portfolio, wholesale funding and asset liability management activities, and the economic impact of certain assets, capital and support function not specifically identifiable with the three primary lines of business.

     The accounting policies of the lines of businesses are the same as those of the Corporation described in Note 1 (Summary of Significant Accounting Policies) to the 2006 Form 10-K. Funds transfer pricing is used in the determination of net interest income by assigning a cost for funds used or credit for funds provided to assets and liabilities within each business unit. Assets and liabilities are match-funded based on their maturity, prepayment and/or repricing

13

characteristics. As a result the three primary lines of business are generally insulated from changes in interest rates. Changes in net interest income due to changes in rates are reported in Other by the treasury group. Capital has been allocated on an economic risk basis. Loans and lines of credit have been allocated capital based upon their respective credit risk. Asset management holdings in the Wealth segment have been allocated capital based upon their respective market risk related to assets under management. Normal business operating risk has been allocated to each line of business by the level of noninterest expense. Mismatch between asset and liability cash flow as well as interest rate risk for MSR and the origination business franchise value have been allocated capital based upon their respective asset/liability management risk. The provision for loan losses is allocated based upon the actual net charge-offs of each respective line of business, adjusted for loan growth and changes in risk profile. Noninterest income and expenses directly attributable to a line of business are assigned to that line of business. Expenses for centrally provided services are allocated to the business line by various activity based cost formulas.

     Prior to 2007, the Corporation managed its operations through the major line of business “Supercommunity Banking.” To improve revenue growth and profitability as well as enhance relationships with customers, Management moved to a line of business model during the first quarter of 2007. Accordingly, prior period information has been reclassified to reflect this change.

     The Corporation’s business is conducted solely in the United States of America. The following tables present a summary of financial results as of and for the quarter and nine month periods endedSeptember 30, 2007 and 2006 and the full year ended December 31, 2006:

	Commercial					Retail				Wealth				Other						FirstMerit Consolidated
September 30, 2007	3rd Qtr			YTD		3rd Qtr		YTD		3rd Qtr		YTD		3rd Qtr			YTD			3rd Qtr		YTD
OPERATIONS:
Net interest income	$	38,466		$	112,985	$	48,217	$	144,460	$	4,479	$	13,414	$	(6,008	)	$	(19,474	)	$	85,154	$	251,385
Provision for loan losses		(277	)		4,919		5,492		14,529		309		2,060		1,800			(7	)		7,324		21,501
Other income		9,333			31,716		27,035		78,433		8,929		26,436		3,827			10,345			49,124		146,930
Other expenses		18,569			59,352		48,664		143,964		8,956		27,021		7,841			16,594			84,030		246,931
Net income		19,179			52,278		13,712		41,859		2,693		6,999		(5,322	)		(9,568	)		30,262		91,568
AVERAGES :
Assets	$	3,776,936		$	3,741,925	$	3,000,618	$	3,006,717	$	340,311	$	342,835	$	3,242,874		$	3,229,778		$	10,360,739	$	10,321,255
Loans		3,806,630			3,758,090		2,841,624		2,849,200		338,513		341,648		25,009			29,240			7,011,776		6,978,178
Earnings assets		3,835,118			3,799,672		2,893,374		2,899,278		338,511		341,735		2,446,227			2,438,532			9,513,230		9,479,217
Deposits		1,936,666			1,908,037		4,698,832		4,756,332		428,063		434,369		416,399			393,632			7,479,960		7,492,370
Economic Capital		241,421			245,902		188,464		191,779		47,047		47,566		398,788			382,159			875,720		867,406

Full Year	Commercial			Retail			Wealth			Other				FirstMerit Consolidated
December 31, 2006		YTD			YTD			YTD			YTD				YTD
OPERATIONS:
Net interest income		$	148,502		$	202,292		$	18,192		$	(28,613	)		$	340,373
Provision for loan losses			50,545			19,265			2,142			4,160				76,112
Other income			37,350			109,383			33,502			14,913				195,148
Other expenses			76,246			196,204			35,915			19,722				328,087
Net income			38,389			62,534			8,864			(14,841	)			94,946
AVERAGES:
Assets		$	3,543,088		$	3,019,254		$	337,528		$	3,230,145			$	10,130,015
Loans			3,565,105			2,859,247			335,169			38,817				6,798,338
Earnings assets			3,597,040			2,910,712			335,180			2,418,360				9,261,292
Deposits			2,022,510			4,702,580			389,937			269,119				7,384,146
Economic Capital			250,011			216,268			47,838			375,812				889,929

14

	Commercial				Retail				Wealth				Other						FirstMerit Consolidated
September 30, 2006	3rd Qtr		YTD		3rd Qtr		YTD		3rd Qtr		YTD		3rd Qtr			YTD			3rd Qtr		YTD
OPERATIONS:
Net interest income	$	37,998	$	110,940	$	50,577	$	152,222	$	4,616	$	13,572	$	(8,104	)	$	(19,944	)	$	85,087	$	256,790
Provision for loan losses		6,199		21,355		7,092		10,377		419		1,040		(1,098	)		(895	)		12,612		31,877
Other income		9,262		28,199		28,300		81,642		8,602		25,436		3,177			11,539			49,341		146,816
Other expenses		20,180		60,234		50,058		153,115		9,102		27,261		(2,357	)		3,490			76,983		244,100
Net income		13,572		37,407		14,123		45,741		2,403		6,960		1,106			(1,279	)		31,204		88,829
AVERAGE:
Assets	$	3,579,068	$	3,514,680	$	3,030,809	$	3,009,749	$	336,732	$	334,356	$	3,192,247		$	3,238,807		$	10,138,856	$	10,097,592
Loans		3,602,442		3,537,447		2,868,258		2,849,510		335,890		331,527		38,003			39,673			6,844,593		6,758,157
Earnings assets		3,634,250		3,569,671		2,918,215		2,902,013		335,890		331,538		2,361,414			2,420,012			9,249,769		9,223,234
Deposits		1,996,871		2,049,790		4,669,505		4,702,671		394,995		379,999		294,506			232,752			7,355,877		7,365,212
Economic Capital		255,424		248,980		218,337		216,584		47,428		48,157		367,652			368,991			888,841		882,712

8. Accounting for Derivatives — The Corporation follows the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 149 and SFAS No. 155 in accounting for its derivative activities.

     At September 30, 2007 the Corporation had various interest rate swaps in place that were accounted for as fair value hedges under SFAS No. 133 since their purpose is to “swap” fixed interest rate liabilities and assets to a variable interest rate basis. Substantially all of the interest rate swaps are associated with the Corporation’s fixed-rate commercial loan swap program that was initiated during the first quarter of 2003 and the remaining interest rate swaps convert the fixed interest rate of commercial real estate construction loans and the fixed interest rate of manditorily redeemable preferred securities to a variable interest rate basis. All of the interest rate swaps associated with the fixed-rate commercial loan swap program qualify for the “shortcut method of accounting” as prescribed in SFAS No. 133. The shortcut method of accounting requires that the hedge and the hedged item meet certain qualifying criteria. If the swap qualifies for the shortcut method of accounting, no hedge ineffectiveness can be assumed, and the need to test for ongoing effectiveness is eliminated. For hedges that qualify for the shortcut method of accounting, the fair value of the swap and the fair value of the hedged item are recorded on the balance sheets. The remaining hedges do not meet all the criteria necessary to be considered for the shortcut method of accounting. Therefore, the long-haul method of accounting is utilized. The long-haul method of accounting requires periodic testing of hedge effectiveness with the portion of the hedge deemed to be ineffective reported in other operating expense.

     During the first quarter of 2007, the Corporation entered into forward swap agreements which, in effect, fixed the borrowing costs of certain variable rate liabilities in the future. These transactions do not qualify for the short-cut method of accounting under SFAS No. 133, as previously discussed. The Corporation classifies these transactions as cash flow hedges, with any hedge ineffectiveness being reported in other operating expense. It is anticipated that the hedges will prove to be effective. A correlation analysis performed at quarter-end verified that the hedges were effective.

     Additionally, in the normal course of business, the Corporation sells originated mortgage loans into the secondary mortgage loan markets. The Corporation maintains a risk management program to protect and manage interest-rate risk and pricing associated with its mortgage commitment pipeline. The Corporation’s mortgage commitment pipeline included interest-rate lock commitments (“IRLCs”) that have been extended to borrowers who have applied for loan funding and met certain defined credit and underwriting standards. During the term of the

15

IRLCs, the Corporation is exposed to interest-rate risk, in that the value of the IRLCs may change significantly before the loans close. To mitigate this interest-rate risk, the Corporation enters into various derivatives by selling loans forward to investors using forward commitments. In accordance with SFAS No. 133, the Corporation classifies and accounts for IRLCs as nondesignated derivatives that are recorded at fair value with changes in value recorded in current earnings. The forward sale commitments used to manage the risk on the IRLCs are also classified and accounted for as nondesignated derivatives and, therefore, recorded at fair value with changes recorded in current earnings. The Corporation implemented a SFAS No. 133 hedging program for its mortgage loan warehouse to gain protection for the changes in fair value of the mortgage loan warehouse and the forward commitments. As such, both the mortgage loan warehouse and the forward commitments are accounted for utilizing the long-haul method of accounting and any hedge ineffectiveness is reported in other operating expense.

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

	Pension Benefits
							Nine			Nine
	Quarter ended			Quarter ended			months ended			months ended
	September 30,			September 30,			September 30,			September 30,
	2007			2006			2007			2006
Components of Net Periodic Pension Cost
Service Cost	$	1,866		$	1,702		$	5,599		$	5,243
Interest Cost		2,414			2,354			7,241			6,919
Expected return on assets		(2,796	)		(2,849	)		(8,388	)		(8,524	)
Amortization of unrecognized prior service costs		41			45			123			135
Cumulative net loss		1,337			1,389			4,010			4,349
Net periodic pension cost	$	2,862		$	2,641		$	8,585		$	8,122

	Postretirement Benefits
							Nine			Nine
	Quarter ended			Quarter ended			months ended			months ended
	September 30,			September 30,			September 30,			September 30,
	2007			2006			2007			2006
Components of Net Periodic Postretirement Cost
Service Cost	$	222		$	187		$	667		$	560
Interest Cost		434			416			1,302			1,247
Amortization of unrecognized prior service costs		(135	)		(135	)		(406	)		(406	)
Cumulative net loss		102			107			305			322
Net periodic postretirement cost	$	623		$	575		$	1,868		$	1,723

     The Corporation is not required and does not anticipate making a contribution to the defined benefit pension plan during 2007.

16

     On May 18, 2006, the Corporation’s Board of Directors approved freezing the current defined benefit pension plan for non-vested employees and closed it to new entrants after December 31, 2006. Participants vested in the current pension plan as of December 31, 2006 will remain participants in the existing pension plan. A new defined contribution plan was also approved for non-vested employees and new hires as of January 1, 2007. These plan amendments qualified as a curtailment of the defined benefit pension plan, the impact of which was a $1.4 million gain that was recognized by a direct reduction of the plan’s cumulative net loss with no impact on 2006 year end earnings. During the quarter and nine months ended September 30, 2007, $0.3 million and $1.0 million, respectively was expensed relating to the new defined contribution plan.

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

17

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

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

FIRSTMERIT CORPORATION AND
SUBSIDIARIES	Three months ended								Year ended								Three months ended
	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.

18

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

FIRSTMERIT CORPORATION AND
SUBSIDIARIES	Nine months ended								Nine months ended
	September 30, 2007								September 30, 2006
	Average					Average			Average					Average
(Dollars in thousands)	Balance			Interest		Rate			Balance			Interest		Rate
ASSETS
Cash and due from banks	$	179,175							$	189,498
Investment securities and federal funds sold:
U.S. Treasury securities and U.S. Government agency obligations (taxable)		1,947,441			62,596		4.30	%		2,069,081			60,962		3.94	%
Obligations of states and political subdivisions (tax exempt)		248,206			11,345		6.11	%		97,946			4,942		6.75	%
Other securities and federal funds sold		246,227			12,972		7.04	%		250,036			11,276		6.03	%
Total investment securities and federal funds sold		2,441,874			86,913		4.76	%		2,417,063			77,180		4.27	%
Loans held for sale		59,165			2,290		5.17	%		48,014			2,409		6.71	%
Loans		6,978,178			393,830		7.55	%		6,758,157			368,772		7.30	%
Total earning assets		9,479,217			483,033		6.81	%		9,223,234			448,361		6.50	%
Allowance for loan losses		(92,661	)							(87,968	)
Other assets		755,524								772,828
Total assets	$	10,321,255							$	10,097,592
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand — non-interest bearing	$	1,399,752			—		—		$	1,441,568			—		—
Demand — interest bearing		744,778			5,472		0.98	%		836,024			7,186		1.15	%
Savings and money market accounts		2,267,166			41,499		2.45	%		2,273,132			36,015		2.12	%
Certificates and other time deposits		3,080,674			111,269		4.83	%		2,814,488			88,308		4.19	%
Total deposits		7,492,370			158,240		2.82	%		7,365,212			131,509		2.39	%
Securities sold under agreements to repurchase		1,456,467			54,304		4.98	%		1,288,694			40,758		4.23	%
Wholesale borrowings		311,892			15,096		6.47	%		390,495			17,306		5.93	%
Total interest bearing liabilities		7,860,977			227,640		3.87	%		7,602,833			189,573		3.33	%
Other liabilities		193,120								170,479
Shareholders’ equity		867,406								882,712
Total liabilities and shareholders’ equity	$	10,321,255							$	10,097,592
Net yield on earning assets	$	9,479,217			255,393		3.60	%	$	9,223,234			258,788		3.75	%
Interest rate spread							2.94	%							3.17	%

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.

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SUMMARY

     The Corporation recorded 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 Corporation 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.

     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 Corporation 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 Corporation 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

20

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 Corporation added higher-yielding investment 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 legal recourse. Going forward the Corporation 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.

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     The Corporation’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, 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 Corporation’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.

RESULTS OF OPERATION

Net Interest Income

     Net interest income, the Corporation’s principal source of earnings, is the difference between interest income generated by earning assets (primarily loans and investment securities) and interest paid on interest-bearing funds (namely customer deposits, securities sold under agreements to repurchase and wholesale borrowings). Net interest income for the quarter ended September 30, 2007 was $85.2 million compared to $85.1 million for the quarter ended June 30, 2006. Net interest income for the nine months ended September 30, 2007 was $251.4 million compared to $256.8 million for the nine months ended September 30, 2006. For the purpose of this remaining discussion, net interest income is presented on an FTE basis, to provide a comparison among all types of interest earning assets. That is, interest on tax-free securities and tax-exempt loans has been restated as if such interest were taxed at the statutory Federal income tax rate of 35%, adjusted for the non-deductible portion of interest expense incurred to acquire the tax-free assets. Net interest income presented on an FTE basis is a non-GAAP financial measure widely used by financial services organizations. The FTE adjustment was $1.4 million and $0.8 million for the quarters ending September 30, 2007 and 2006, respectively. The FTE adjustment was $4.0 million and $2.0 million for the nine months ending September 30, 2007 and 2006, respectively.

     FTE net interest income for the quarter ended September 30, 2007 was $86.6 million compared to $85.9 million for the three months ended September 30, 2006. The $0.7 million increase in FTE net interest income occurred because the $8.3 million increase in interest income, compared to the same quarter last year, was more than the $7.6 million increase in interest expense during the same period.

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     In a similar analysis, FTE net interest income for the nine months ended September 30, 2007 was $255.4 million compared to $258.8 million for the nine months ended June 30, 2006. The $3.4 million decrease in FTE net interest income occurred because the $38.1 million increase in interest expense, compared to the same quarter last year, was more than the $34.7 million increase in interest income during the same period.

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

	Quarters ended September 30, 2007 and 2006									Nine months ended September 30, 2007 and 2006
RATE/VOLUME ANALYSIS	Increases (Decreases)									Increases (Decreases)
(Dollars in thousands)	Volume			Rate			Total			Volume			Rate			Total
INTEREST INCOME — FTE
Investment securities	$	1,693		$	2,576		$	4,269		$	2,789		$	6,848		$	9,637
Loans held for sale		18			(41	)		(23	)		496			(615	)		(119	)
Loans		3,169			822			3,991			12,206			12,852			25,058
Federal funds sold		40			(1	)		39			87			9			96
Total interest income — FTE	$	4,920		$	3,356		$	8,276		$	15,578		$	19,094		$	34,672
INTEREST EXPENSE
Demand deposits-interest bearing	$	(213	)	$	(351	)	$	(564	)	$	(735	)	$	(979	)	$	(1,714	)
Savings and money market accounts		(133	)		446			313			(94	)		5,578			5,484
Certificates of deposits and other time deposits		2,753			2,830			5,583			8,838			14,123			22,961
Securities sold under agreements to repurchase		2,422			1,214			3,636			5,706			7,840			13,546
Wholesale borrowings		(1,849	)		424			(1,425	)		(3,703	)		1,493			(2,210	)
Total interest expense	$	2,980		$	4,563		$	7,543		$	10,012		$	28,055		$	38,067
Net interest income — FTE	$	1,940		$	(1,207	)	$	733		$	5,566		$	(8,961	)	$	(3,395	)

     As illustrated in the preceding table, the increased amount of interest income recorded in the 2007 third quarter compared to the same 2006 period was primarily volume driven as higher loan balances increased interest income by $3.2 million during those periods. The table also depicts a three-month increase of $2.9 million in interest expense primarily caused by higher rates paid on customer deposits. The nine-month changes were primarily rate driven as the higher yield on loans increased interest income by $12.9 million while the increase in rates on deposits increased interest expense by $18.7 million.

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Net Interest Margin

     The following table provides 2007 FTE net interest income and net interest margin totals as well as 2006 comparative amounts:

	Quarters ended						Nine months ended
	September 30,						September 30,
(Dollars in thousands)	2007			2006			2007			2006
Net interest income	$	85,154		$	85,087		$	251,385		$	256,790
Tax equivalent adjustment		1,428			763			4,008			2,000
Net interest income - FTE	$	86,582		$	85,850		$	255,393		$	258,790
Average earning assets	$	9,513,230		$	9,249,769		$	9,479,217		$	9,223,234
Net interest margin - FTE		3.61	%		3.68	%		3.60	%		3.75	%

     Average loans outstanding for the current year and prior year third quarters totaled $7.0 billion and $6.8 billion, respectively. Increases in average loan balances from third quarter 2006 to the third quarter 2007 occurred in commercial, installment loans, credit card loans, and leases, while mortgage loans and home equity loans declined. Efforts to grow loans outstanding continue to be tempered by the less than robust economy that currently exists in the Corporation’s primary lending areas.

     Specific changes in average loans outstanding, compared to the third quarter 2006, were as follows: commercial loans were up $193.2 million or 5.26%; installment loans, both direct and indirect rose $47.5 million or 2.98%; credit card loans rose $4.2 million or 3.02%; leases increased $5.5 million or 8.66%; mortgage loans were down $32.6 million or 5.27%; and home equity loans were down $50.5 million, or 6.69%. The majority of fixed-rate mortgage loan originations are sold to investors through the secondary mortgage loan market. Average outstanding loans for the 2007 and 2006 third quarters equaled 73.71% and 74.00% of average earning assets, respectively.

     Average deposits were $7.5 billion during the 2007 third quarter, up $124.1 million, or 1.69%, from the same period last year. For the quarter ended September 30, 2007, average core deposits (which are defined as checking accounts, savings accounts and money market savings products) decreased $109.8 million, or 2.47%, and represented 58.01% of total average deposits, compared to 60.48% for the 2006 third quarter. Average certificates of deposit (“CDs”) increased $233.9 million, or 8.05%, compared to the prior year quarter due to marketing promotions during the 2007 year. The decrease in core deposits and the corresponding increase in CD’s represent the consumer preference for longer term, higher yielding deposits. Average wholesale borrowings decreased $111.3 million and as a percentage of total interest-bearing funds equaled 3.25% for the 2007 third quarter and 4.79% for the same quarter one year ago. Securities sold under agreements to repurchase increased $197.5 million, and as a percentage of total interest bearing funds equaled 19.71% for the 2007 third quarter and 17.69% for the 2006 third quarter. Average interest-bearing liabilities funded 82.94% of average earning assets in the current year quarter and 82.96% during the quarter ended September 30, 2006.

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Other Income

     Other (non-interest) income for the quarter totaled $49.1 million, a decrease of $0.2 million from the $49.3 million earned during the same period one year ago. Other income for the nine months ended September 30, 2007 totaled $146.9 million an increase of $0.1 million from the $146.8 million earned during the nine months ended September 30, 2006.

     Other income, net of securities gains, as a percentage of net revenue for the first quarter was 36.20%, compared to 36.50% for the same quarter one year ago. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.

     The primary changes in other income for the 2007 third quarter as compared to the third quarter of 2006, were as follows: trust department income was $5.7 million, down 1.12%; credit card fees increased $0.4 million, or 3.80%; service charges on deposit accounts totaled $17.0 million, down 11.67% due to changes in customer behavior whereby they are maintaining higher balances to avoid being charged fees; loan sales and servicing income was $1.4 million, a decrease of $0.3 million, primarily attributable to the continued slow down in mortgage originations; bank owned life insurance income was up $0.7 million due to an tax free exchange of policies resulting in higher yields; investment services and insurance fees increased $0.4 million; there were no significant sales of investment securities during the third quarter of 2007 or 2006; and other operating income was up $0.9 million, or 6.01% primarily attributable to a one time gain on the sale of MasterCard stock.

     The primary changes in other income for the nine months ended September 30, 2007 as compared to the nine months ended September 30, 2006, were as follows: trust department income was up $0.5 million, or 2.91%; credit card fees increased $1.1 million, or 3.26%; service charges on deposit accounts totaled $50.3 million, down 5.66% due to changes in customer behavior whereby they are maintaining higher balances to avoid being charged fees; loan sales and servicing income was $8.8 million, an increase of $2.8 million, primarily attributable to the $4.1 million gain on sale from the commercial loan sale which occurred during the first quarter 2007; investment services and insurance fees increased $0.3 million, or 3.98%; there were no significant sales of investment securities during the nine months ended September 30, 2007 or 2006; and other operating income was down $0.2 million primarily due to losses incurred on the sale of other real estate during the first quarter of 2007 and gains on venture capital and other real estate sales that occurred in the first quarter of 2006.

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

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	Quarter ended			Quarter ended			Quarter ended			Quarter ended			Quarter ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(Dollars in thousands)	2007			2007			2007			2006			2006
Balance at beginning of period	$	19,339		$	19,366		$	19,575		$	19,777		$	20,025
Addition of mortgage servicing rights		737			626			477			593			524
Amortization		(646	)		(653	)		(686	)		(795	)		(772	)
Changes in valuation allowance		—			—			—			—			—
Balance at end of period	$	19,430		$	19,339		$	19,366		$	19,575		$	19,777

     On a quarterly basis, the Corporation assesses its MSRs for impairment based on their current fair value. As required, the Corporation disaggregates its MSRs portfolio based on loan type and interest rate which are the predominant risk characteristics of the underlying loans. If any impairment results after current market assumptions are applied, the value of the servicing rights is reduced through the use of a valuation allowance. There was no valuation allowance at September 30, 2007, December 31, 2006 and September 30, 2006. The MSRs are amortized over the period of and in proportion to the estimated net servicing revenues.

     These MSR balances represent the rights to service approximately $2.0 billion of mortgage loans for all periods at September 30, 2007, December 31, 2006, and September 30, 2006. The portfolio primarily consists of conventional mortgages.

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

Other Expenses

     Other (non-interest) expenses totaled $84.0 million for the third quarter 2007 compared to $77.0 million for the same 2006 quarter, a increase of $7.0 million, or 9.15%. Other expenses totaled $246.9 million for the nine months ended September 30, 2007 compared to $244.1 million for the nine months ended September 30, 2006, an increase of $2.8 million, or 1.16%.

     For the three months ended September 30, 2007, decreases in operating costs compared to the third quarter 2006 occurred as follows: salaries,wages, pension and employee benefits fell $1.9 million, primarily due to the reduction of staff from the branch restructurings being realized in 2007; net occupancy expense increased $0.2 million due to higher utility costs; professional services decreased $2.5 million due in part to the consulting services necessary to remediate bank secrecy act issues which have been winding down in 2007; other operating expense increased $11.7 million primarily attributable to a $4.1 million operating loss related to a customer check-kiting fraud in the quarter ended September 30, 2007. During the quarter ended September 30, 2006, the Corporation settled several multi-jurisdictional nonincome tax audits which reduced other nonincome tax expense by $7.0 million.

For the nine months ended September 30, 2007, decreases in operating costs compared to the first nine months of 2006 occurred as follows: salaries,wages, pension and employee benefits fell $5.6 million, primarily due to the reduction of staff from the branch restructurings being

26

realized in 2007 and the one time expense for the accelerated vesting of retirement eligible executives in the 2006 second quarter equity grants; bankcard, loan processing and other costs increased $1.6 million, primarily attributable to the losses associated with credit card fraud; professional services increased $0.3 million due in part to the consulting services necessary to remediate bank secrecy act issues winding down in the third quarter of 2007; other operating expense increased $6.1 million primarily attributable to a $4.1 million operating loss related to a customer check-kiting fraud in the quarter ended September 30, 2007 and offset by the $3.1 million reduction in marketing expense and various other expense reductions which occurred in the second quarter of 2007. During the quarter ended September 30, 2006, the Corporation settled several multi-jurisdictional nonincome tax audits which reduced other nonincome tax expense by $7.0 million

     The efficiency ratio of 61.76% for third quarter 2007 increased 498 basis points over the efficiency ratio of 56.78% recorded for the third quarter, 2006. The efficiency ratio for the three months ended September 30, 2007 indicates 61.76 cents of operating costs were spent in order to generate each dollar of net revenue.

Federal Income Taxes

     Federal income tax expense was $12.7 million and $13.6 million for the quarters ended September 30, 2007 and 2006, respectively. The effective federal income tax rate for the third quarter 2007 was 29.50%, compared to 30.40% for the same quarter 2006. For the nine months ended September 30, 2007 and 2006, respectively, the effective tax rate was 29.50% and 30.40%. Additional federal income tax information is contained in Note 11 (Federal Income Taxes) in the 2006 Form 10-K.

     The Corporation adopted FIN 48 “Accounting for Uncertainty in Income Taxes” on January 1, 2007. Under FIN 48 a liability was created for any unrecognized tax benefits. This liability would have been included in the contractual obligations table in December 31, 2006 Form 10-K MD&A. Current liabilities related to FIN 48 for September 30, 2007 are $2.0 million. It is the Corporation’ policy to accrue interest and penalties in accrued taxes and recognized in the consolidated statements of income and comprehensive income as income taxes. This was also the Corporation’s policy prior to the adoption of FIN 48.

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FINANCIAL CONDITION

Investment Securities

     The September 30, 2007 amortized cost and market value of investment securities, including mortgage-backed securities, by average remaining term, are included in Note 3 (Investment Securities) to the unaudited consolidated financial statements included in this report. These securities are purchased within an overall strategy to maximize future earnings, taking into account an acceptable level of interest rate risk. While the maturities of the mortgage and asset-backed securities are beyond five years, these instruments provide periodic principal payments and include securities with adjustable interest rates, reducing the interest rate risk associated with longer-term investments.

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Allowance for Credit Losses

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

	Quarter ended			Year Ended			Quarter ended
Allowance for Loan Losses	September 30,			December 31,			September 30,
(In thousands)	2007			2006			2006
Allowance for loan losses-beginning of period	$	94,432		$	90,661		$	87,727
Provision for loan losses		7,324			76,112			12,612
Net charge-offs		(7,945	)		(52,342	)		(15,453	)
Allowance related to loans held for sale/sold		—			(23,089	)		3,869
Allowance for loan losses-end of period	$	93,811		$	91,342		$	88,755
Reserve for Unfunded Lending Commitments
Balance at beginning of period	$	6,553		$	6,072		$	5,716
Provision for credit losses		856			222			591
Balance at end of period	$	7,409		$	6,294		$	6,307
Allowance for Credit Losses	$	101,220		$	97,636		$	95,062
Annualized net charge-offs and allowance related to loans held for sale/sold as a % of average loans		0.45	%		1.11	%		0.67	%
Annualized net charge-offs as a % of average loans		0.45	%		0.77	%		0.67	%
Allowance for loan losses:
As a percentage of loans outstanding		1.34	%		1.33	%		1.28	%
As a percentage of nonperforming loans		314.22	%		168.03	%		143.73	%
As a multiple of annualized net charge offs		2.98	X		1.75	X		1.93	X
Allowance for credit losses:
As a percentage of loans outstanding		1.44	%		1.42	%		1.37	%
As a percentage of nonperforming loans		339.04	%		179.60	%		153.94	%
As a multiple of annualized net charge offs and allowance related to loans held for sale		3.21	X		1.21	X		2.07	X

     The allowance for credit losses increased $0.2 million from June 30, 2007 to September 30, 2007, and increased $6.2 million from September 30, 2006 to September 30, 2007. The increase for both periods was attributable to additional reserves that were established to address identified risks associated with the slow down in the housing markets and the decline in residential and commercial real estate values. The following tables show the overall trend in increased credit quality for consumer loans and decreased credit quality for commercial loans by specific asset and risk categories.

29

	At September 30, 2007
	Loan Type
	Commercial		Commercial R/E				Installment		Home Equity		Credit Card		Res Mortgage
Allowance for Loan Losses Components:	Loans		Loans		Leases		Loans		Loans		Loans		Loans		Total
(In thousands)
Individually Impaired Loan Component:
Loan balance	$	3,541	$	13,317	$	—	$	—	$	—	$	—	$	—	$	16,858
Allowance		1,448		1,610		—		—		—		—		—		3,058
Collective Loan Impairment Components:
Credit risk-graded loans
Grade 1 loan balance		24,586		100		3,683										28,369
Grade 1 allowance		55		—		10										65
Grade 2 loan balance		193,502		127,428		5,104										326,034
Grade 2 allowance		969		574		30										1,573
Grade 3 loan balance		446,125		423,833		33,041										902,999
Grade 3 allowance		2,251		3,007		193										5,451
Grade 4 loan balance		902,404		1,554,762		26,446										2,483,612
Grade 4 allowance		14,744		21,150		519										36,413
Grade 5 (Special Mention) loan balance		62,004		77,594		—										139,598
Grade 5 allowance		3,775		3,756		—										7,531
Grade 6 (Substandard) loan balance		32,185		26,271		74										58,530
Grade 6 allowance		4,702		3,108		10										7,820
Grade 7 (Doubtful) loan balance		147		186		—										333
Grade 7 allowance		40		28		—										68
Consumer loans based on payment status:
Current loan balances						295		1,617,458		698,996		139,017		554,710		3,010,476
Current loans allowance						1		12,602		3,820		3,324		3,930		23,677
30 days past due loan balance						12		10,417		1,472		1,473		12,218		25,592
30 days past due allowance						—		996		301		562		566		2,425
60 days past due loan balance						13		3,577		912		992		2,825		8,319
60 days past due allowance						1		1,011		435		609		437		2,493
90+ days past due loan balance						—		1,779		185		1,504		10,201		13,669
90+ days past due allowance						—		886		148		1,331		872		3,237
Total loans	$	1,664,494	$	2,223,491	$	68,668	$	1,633,231	$	701,565	$	142,986	$	579,954	$	7,014,389
Total Allowance for Loan Losses	$	27,984	$	33,233	$	764	$	15,495	$	4,704	$	5,826	$	5,805	$	93,811

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	At December 31, 2006
	Loan Type
	Commercial		Commercial R/E					Installment		Home Equity		Credit Card		Res Mortgage
Allowance for Loan Losses Components:	Loans		Loans		Leases		��	Loans		Loans		Loans		Loans		Total
(In thousands)
Individually Impaired Loan Component:
Loan balance	$	19,394	$	41,889	$	—		$	—	$	—	$	—	$	—	$	61,283
Allowance		973		515		—			—		—		—		—		1,488
Collective Loan Impairment Components:
Credit risk-graded loans
Grade 1 loan balance		28,350		2,789		3,526											34,665
Grade 1 allowance		82		2		12											96
Grade 2 loan balance		144,084		109,238		8,927											262,249
Grade 2 allowance		757		412		55											1,224
Grade 3 loan balance		377,713		366,903		33,115											777,731
Grade 3 allowance		2,235		1,902		229											4,366
Grade 4 loan balance		859,458		1,512,529		28,072											2,400,059
Grade 4 allowance		16,555		17,124		643											34,322
Grade 5 (Special Mention) loan balance		57,281		100,657		96											158,034
Grade 5 allowance		3,351		4,163		5											7,519
Grade 6 (Substandard) loan balance		42,771		30,604		2,196											75,571
Grade 6 allowance		5,598		3,118		257											8,973
Grade 7 (Doubtful) loan balance		442		19		—											461
Grade 7 allowance		150		3		—											153
Consumer loans based on payment status:
Current loan balances						1,802			1,600,560		728,302		142,598		576,927		3,050,189
Current loans allowance						6			15,058		2,499		3,578		3,201		24,342
30 days past due loan balance						171			13,165		2,084		1,977		11,813		29,210
30 days past due allowance						2			1,245		236		725		399		2,607
60 days past due loan balance						30			4,340		523		1,122		4,840		10,855
60 days past due allowance						1			1,180		150		660		524		2,515
90+ days past due loan balance						36			1,682		564		1,856		14,428		18,566
90+ days past due allowance						4			823		266		1,628		1,016		3,737
Total loans	$	1,529,493	$	2,164,628	$	77,971		$	1,619,747	$	731,473	$	147,553	$	608,008	$	6,878,873
Total Allowance for Loan Losses	$	29,701	$	27,239	$	1,214		$	18,306	$	3,151	$	6,591	$	5,140	$	91,342

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	At Sepember 30, 2006
	Loan Type
	Commercial		Commercial R/E				Installment		Home Equity		Credit Card		Res Mortgage
Allowance for Loan Losses Components:	Loans		Loans		Leases		Loans		Loans		Loans		Loans		Total
(In thousands)
Individually Impaired Loan Component:
Loan balance	$	20,321		24,287		—		—		—		—		—		44,608
Allowance		5,510		4,394		—		—		—		—		—		9,904
Collective Loan Impairment Components:
Credit risk-graded loans
Grade 1 loan balance		18,761		2,592		—										21,353
Grade 1 allowance		64		2		—										66
Grade 2 loan balance		153,377		100,147		9,487										263,011
Grade 2 allowance		833		397		59										1,289
Grade 3 loan balance		363,783		398,463		16,159										778,405
Grade 3 allowance		2,374		2,182		120										4,676
Grade 4 loan balance		878,161		1,533,606		27,829										2,439,596
Grade 4 allowance		12,950		13,720		738										27,408
Grade 5 (Special Mention) loan balance		57,041		87,810		501										145,352
Grade 5 allowance		2,731		2,723		27										5,481
Grade 6 (Substandard) loan balance		54,020		40,748		2,509										97,277
Grade 6 allowance		5,598		2,775		297										8,670
Grade 7 (Doubtful) loan balance		347		270		—										617
Grade 7 allowance		120		35		—										155
Consumer loans based on payment status:
Current loan balances						2,715		1,604,263		745,426		135,628		581,486		3,069,518
Current loans allowance						11		15,037		2,051		3,346		2,628		23,073
30 days past due loan balance						181		12,466		1,673		1,711		13,727		29,758
30 days past due allowance						2		1,099		144		602		359		2,206
60 days past due loan balance						62		3,690		602		1,090		4,625		10,069
60 days past due allowance						2		942		135		622		413		2,114
90+ days past due loan balance						33		1,936		606		1,714		13,494		17,783
90+ days past due allowance						3		885		233		1,458		1,134		3,713
Total loans	$	1,545,811		2,187,923		59,476		1,622,355		748,307		140,143		613,332		6,917,347
Total Allowance for Loan Losses	$	30,180		26,228		1,259		17,963		2,563		6,028		4,534		88,755

     Total charge-offs were $12.3 million for the quarter ended September 30 2007, down $3.1 million, or 20.1%, from the year ago quarter. Criticized commercial assets (“individually impaired,” “special mention,” “substandard” and “doubtful”) decreased $72.5 million and accounted for 5.39% of total commercial loans for the 2007 third quarter compared with criticized commercial asset levels of 7.54% at September 30, 2006.

     Commercial charge-offs were down $3.5 million over the prior year third quarter primarily as a result of the loan sale that occurred in the first quarter 2007. Loans past due 90 days or more accruing interest were down $2.6 million or 24.40% from the linked quarter ended June 30, 2006 and down $2.2 million or 14.39% from year ago quarter ended September 30, 2006 reflecting the favorable trends in the retail portfolio.

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Loans

     Total loans outstanding at September 30, 2007 were $7.0 billion compared to $6.9 billion at December 31, 2006 and $6.8 billion at September 30, 2006.

     The commercial loan portfolio for the 2007 third quarter increased by 4.13% over the prior year third quarter, while criticized commercial loans were down 25.20% over the prior year third quarter, demonstrating prudent loan growth and an improving credit profile. While the Corporation originated $78.9 million of mortgage loans in the third quarter 2007, compared to $81.5 million in same quarter of 2006, and $380.8 million for the full year ended December 31, 2006, the majority of these loans were fixed rate mortgages which were sold with servicing rights retained. Further discussion of the Corporation’s loan mix strategy as well as changes in average balances for the quarter ended September 30, 2007 compared to the quarter ended September 30, 2006 can be found under the Net Interest Income sub-caption in this report.

	As of		As of		As of
	September 30,		December 31,		September 30,
(Dollars in thousands)	2007		2006		2006
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

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

	As of
	September 30, 2007
	(Dollars in thousands)
Due in one year or less	$	1,747,360
Due after one year but within five years		1,734,661
Due after five years		405,964
Totals	$	3,887,985
Due after one year with a predetermined fixed interest rate	$	996,521
Due after one year with a floating interest rate		1,144,104
Totals	$	2,140,625

     The Corporation has an interest rate hedge strategy in place that swaps fixed interest rate commercial real estate loans to a variable interest rate basis. At September 30, 2007, $576.6 million of fixed rate commercial real estate loans were hedged. This strategy is more fully described in Footnote 8, Accounting for Derivatives, in these consolidated financial statements.

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     The following table summarizes the Corporation’s nonperforming assets:

	September 30,			December 31,			September 30,
	2007			2006			2006
	(Dollars in thousands)
Nonperforming commercial loans	$	20,165		$	45,045		$	52,621
Other nonaccrual loans:		9,690			9,317			9,132
Total nonperforming loans		29,855			54,362			61,753
Other real estate (“ORE”)		4,344			9,815			10,711
Total nonperforming assets	$	34,199		$	64,177		$	72,464
Loans past due 90 day or more accruing interest	$	13,107		$	16,860		$	15,311
Total nonperforming assets as a percentage of total loans and ORE		0.49	%		0.93	%		1.05	%

     The allowance for credit losses covers nonperforming loans by 339.04% at September 30, 2007 compared to 153.94% at the end of the prior year quarter. This increase is primarily attributable to the decrease in nonperforming commercial loans. See Note 1 (Summary of Significant Accounting Policies) of the 2006 Form 10-K, as amended for a summary of the Corporation’s nonaccrual and charge-off policies.

     The following table is a nonaccrual commercial loan flow analysis:

	Period End
(Dollars in thousands)	3Q07			2Q07			1Q07			4Q06			3Q06
Nonaccrual commercial loans beginning of period	$	20,877		$	17,049		$	45,045		$	52,621		$	41,927
Credit Actions:
New		8,632			7,579			5,983			27,087			31,619
Loan and lease losses		(3,033	)		(890	)		—			(24,592	)		(4,006	)
Charged down		(3,310	)		(1,055	)		(448	)		(3,616	)		(2,725	)
Return to accruing status		(1,923	)		(131	)		—			(3,985	)		(773	)
Payments and tranfers to ORE		(1,078	)		(1,675	)		(7,199	)		(2,470	)		(13,421	)
Sales					—			(26,332	)		—			—
Nonaccrual commercial loans end of period	$	20,165		$	20,877		$	17,049		$	45,045		$	52,621

     Nonaccrual commercial loans have decreased $32.5 million from the third quarter of 2006 and decreased $0.7 million from the second quarter of 2007. As reflected above, $26.3 million of nonaccrual loans were sold in March 2007.

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Deposits

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

	Quarter Ended					Year Ended					Quarter Ended
	September 30, 2007					December 31, 2006					September 30, 2006
	Average		Average			Average		Average			Average		Average
	Balance		Rate			Balance		Rate			Balance		Rate
	(Dollars in thousands)
Non-interest DDA	$	1,400,848		—		$	1,434,539		—		$	1,407,653		—
Interest-bearing DDA		714,216		0.93	%		818,735		1.13	%		794,886		1.12	%
Savings and money market		2,224,048		2.41	%		2,271,654		2.20	%		2,246,386		2.33	%
CDs and other time deposits		3,140,848		4.86	%		2,859,218		4.33	%		2,906,952		4.49	%
Total customer deposits		7,479,960		2.85	%		7,384,146		2.48	%		7,355,877		2.61	%
Securities sold under agreements to repurchase		1,555,235		4.98	%		1,283,951		4.37	%		1,357,746		4.64	%
Wholesale borrowings		256,356		6.69	%		404,723		5.96	%		367,640		6.20	%
Total funds	$	9,291,551				$	9,072,820				$	9,081,263

     Interest-bearing and non-interest-bearing demand deposits, on a combined basis, averaged $2.1 billion during the 2007 third quarter, down $87.5 million, or 3.97%, from the third quarter 2006. Savings deposits, including money market savings accounts, averaged $2.2 billion, $22.3 million or 0.99% lower than the year ago quarter. The sum of demand and savings accounts, often referred to as “core deposits,” dropped $109.8 million, or 2.47%, and represented 58.01% of total average deposits for the second quarter 2007, compared to 60.48% last year. The drop was attributable to intense competition for core deposits within the Corporation’s regional banking areas.

     During the 2007 third quarter, the weighted-average yield paid on interest-bearing core deposits at 2.07% was 4 basis points more than last year’s average core deposits rate. Average CDs, still the largest individual component of deposits, totaled $3.1 billion for the third quarter, up 8.05% from the same quarter last year. Average rates paid on CDs rose 37 basis points from 4.49% in the 2006 quarter to 4.86% this year. On a percentage basis, average CDs were 39.80% and 37.88%, respectively, of total interest-bearing funds for the June 30, 2007 and 2006 quarters.

     Securities sold under agreements to repurchase increased to 19.71% of interest-bearing funds during the three months ended September 30, 2007 from 17.69% for the September 30, 2006 quarter. Interest-bearing liabilities funded 82.94% of average earning assets during the quarter ended September 30, 2007 and 82.96% during the quarter ended September 30, 2006. Wholesale funds decreased to 3.25% of interest-bearing funds during the third quarter 2007 from 4.79% in the year ago quarter. In summary, the decrease in average core deposits during the quarter compared to the same period in 2006 was partially offset by the decrease in higher rate

35

wholesale borrowings. The funding mix from higher priced wholesale borrowings towards less expensive CDs has helped to mitigate the effect of the flat yield curve and support the net interest margin.

     The following table summarizes scheduled maturities of CDs of $100 thousand or more (“Jumbo CDs”) that were outstanding as of September 30, 2007:

Maturing in:	Amount
	(In thousands)
Under 3 months	$	521,986
3 to 6 months		164,597
6 to 12 months		158,494
Over 1 year through 3 years		61,607
Over 3 years		14,268
	$	920,952

Market Risk

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

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

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

     The interest rate risk position is measured and monitored using risk management tools, including earnings simulation modeling and economic value of equity sensitivity analysis, which

36

capture both near-term and long-term interest rate risk exposures. Combining the results from these separate risk measurement processes allows a reasonably comprehensive view of short-term and long-term interest rate risk in the Corporation.

     Earnings simulation involves forecasting net interest earnings under a variety of scenarios, including changes in the level of interest rates, the shape of the yield curve, and spreads between market interest rates. The sensitivity of net interest income to changes in interest rates is measured using numerous interest rate scenarios, including shocks, gradual ramps, curve flattening, curve steepening and forecasts of likely interest rate scenarios. Presented below is the Corporation’s interest rate risk profile as of September 30, 2007 and 2006:

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

	-200 basis points			-100 basis points			+100 basis points			+200 basis points
September 30, 2007		(2.78	%)		(1.07	%)		0.07	%		(0.02	%)
September 30, 2006		(3.42	%)		(0.94	%)		0.21	%		0.02	%

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

     The Corporation also has longer-term interest rate risk exposure, which may not be appropriately measured by earnings sensitivity analysis. ALCO uses economic value of equity, or EVE, sensitivity analysis to study the impact of long-term cash flows on earnings and capital. Economic value of equity involves discounting present values of all cash flows on the balance sheet and off balance sheet items under different interest rate scenarios. The discounted present value of all cash flows represents the Corporation’s economic value of equity. The analysis requires modifying the expected cash flows in each interest rate scenario, which will impact the discounted present value. The amount of base-case measurement and its sensitivity to shifts in the yield curve allow management to measure longer-term repricing and option risk in the balance sheet. Presented below is the Corporation’s EVE profile as of September 30, 2007 and 2006:

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

	-200 basis points			-100 basis points			+100 basis points			+200 basis points
September 30, 2007		(9.77	%)		(3.09	%)		(0.85	%)		(3.54	%)
September 30, 2006		(12.05	%)		(4.55	%)		1.62	%		1.45	%

Capital Resources

     Shareholders’ equity at September 30, 2007 totaled $884.9 million compared to $846.1 million at December 31, 2006 and $903.4 million at September 30, 2006.

     The following table reflects the various measures of capital:

	September 30,				December 31,				September 30,
	2007				2006				2006
					(Dollars in thousands)
Consolidated
Total equity	$	884,877	8.50	%	$	846,111	8.25	%	$	903,383	8.84	%
Common equity		884,877	8.50	%		846,111	8.25	%		903,383	8.84	%
Tangible common equity (a)		743,432	7.24	%		704,001	6.96	%		761,050	7.55	%
Tier 1 capital (b)		831,234	10.27	%		804,959	10.07	%		820,643	10.13	%
Total risk-based capital (c)		993,239	12.27	%		993,716	12.44	%		1,006,659	12.43	%
Leverage (d)	$	831,234	8.10	%	$	804,959	7.95	%	$	820,643	8.15	%
Bank Only
Total equity	$	742,324	7.14	%	$	704,047	6.87	%	$	738,306	7.23	%
Common equity		742,324	7.14	%		704,047	6.87	%		738,606	7.23	%
Tangible common equity (a)		600,879	5.86	%		561,937	5.56	%		595,973	5.92	%
Tier 1 capital (b)		775,647	9.60	%		750,912	9.41	%		742,438	9.18	%
Total risk-based capital (c)		934,313	11.57	%		936,720	11.74	%		925,588	11.45	%
Leverage (d)	$	775,647	7.56	%	$	750,912	7.42	%	$	742,438	7.38	%

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

     The risk-based capital guidelines issued by the Federal Reserve Bank in 1988 require banks to maintain adequate capital equal to 8% of risk-adjusted assets effective December 31,

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1993. At September 30, 2007, the Corporation’s risk-based capital equaled 12.27% of risk-adjusted assets, exceeding minimum guidelines.

     The cash dividend of $0.29 per share paid in the third quarter has an indicated annual rate of $1.16 per share.

Liquidity Risk Management

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

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

     The Corporation’s primary source of liquidity is its core deposit base, raised through its retail branch system, along with unencumbered, or unpledged, investment securities. The Corporation also has available unused wholesale sources of liquidity, including advances from the Federal Home Loan Bank of Cincinnati, issuance through dealers in the capital markets and access to certificates of deposit issued through brokers. Liquidity is also provided by unencumbered, or unpledged, investment securities that totaled $507.3 million at September 30, 2007.

     Funding Trends for the Quarter—During the three months ended September 30, 2007, total average deposits increased $35.2 million from the previous quarter and $24.6 million of higher rate wholesale borrowings were repaid.

     Parent Company Liquidity — The Corporation manages its liquidity principally through dividends from the bank subsidiary. During the quarter ended September 30, 2007, FirstMerit Bank paid $24.0 million in dividends to FirstMerit Corporation. As of September 30, 2007, FirstMerit Bank had an additional $46.7 million available to pay dividends without regulatory approval.

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Critical Accounting Policies

     The accounting and reporting policies of the Corporation are in accordance with accounting principles generally accepted within the United States of America and conform to general practices within the banking industry. Accounting and reporting policies for the allowance for loan losses, income taxes, mortgage servicing rights, derivative instruments and hedging activities, and pension and postretirement benefits are deemed critical since they involve the use of estimates and require significant management judgments. Application of assumptions different than those used by management could result in material changes in the Corporation’s financial position or results of operations. Note 1 (Summary of Significant Accounting Policies) and Note 4 (Allowance for Loan Losses), as described in the 2006 Form 10-K, provide detail with regard to the Corporation’s methodology and reporting of the allowance for loan losses. Additional information for income tax accounting is contained within Note 1, as well as in Note 11 (Federal Income Taxes) as described in the 2006 Form 10-K. Accounting for mortgage servicing rights was also discussed in the 2006 Form 10-K in Note 1 and Note 6 (Mortgage Servicing Rights and Mortgage Servicing Activity). Derivative instruments and hedging activities are described more fully in Note 9 (Accounting for Derivatives) in these consolidated financial statements, as well as Note 1, Note 16 (Fair Value Disclosure of Financial Instruments), and Note 17 (Financial Instruments with Off-Balance-Sheet Risk) of the 2006 Form 10-K. A description of the plans and the assumptions used to estimate the liabilities for pension and postretirement benefits is described in Note 12 (Benefit Plans) to the 2006 Form 10-K as well as Note 10 (Benefit Plans) in the consolidated financial statements included in this report.

Off-Balance Sheet Arrangements

     A detailed discussion of the Corporation’s off-balance sheet arrangements, including swaps, hedges, forward swap agreements, IRLCs, TBA securities, options and swaptions is included in Note 8 (Accounting for Derivatives) to the consolidated financial statements included in this report and in Note 17 to the 2006 Form 10-K. There have been no significant changes since December 31, 2006.

Forward-looking Safe-harbor Statement

     Discussions in this report that are not statements of historical fact (including statements that include terms such as “will,” “may,” “should,” “believe,” “expect,” “anticipate,” “estimate,” “project,” intend,” and “plan”) are forward-looking statements that involve risks and uncertainties. Any forward-looking statement is not a guarantee of future performance and actual future results could differ materially from those contained in forward-looking information. Factors that could cause or contribute to such differences include, without limitation, risks and uncertainties detailed from time to time in the Corporation’s filings with the Securities and Exchange Commission, including without limitation the risk factors disclosed in Item 1A, “Risk Factors,” of the Corporation’s 2006 Annual Report on Form 10-K, as well as the following:

• The Corporation faces the risk that loan losses, including unanticipated loan losses due to changes in loan portfolios, fraud, deterioration in commercial and residential real estate values, and economic factors, will exceed the allowance for loan losses and that

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additional increases in the allowance will be required. Additions to the allowance would cause net income to decline and could have a negative impact on capital and financial position.

• While the Corporation attempts to manage the risk from changes in market interest rates, interest rate risk management techniques are not exact. In addition, the Corporation may not be able to economically hedge its interest rate risk. A rapid or substantial increase or decrease in interest rates could adversely affect net interest income and results of operations.

• An economic downturn, and the negative economic effects caused by terrorist attacks, potential attacks and other destabilizing events, would likely contribute to the deterioration of the quality of the loan portfolio and could reduce the Corporation’s customer base, its level of deposits, and demand for financial products such as loans.

• If the Corporation is unable to continue to attract core deposits or continue to obtain third party financing on favorable terms, its cost of funds will increase, adversely affecting the ability to generate the funds necessary for lending operations, reducing net interest margin and negatively affecting results of operations.

• Increased competition with other financial institutions or an adverse change in the Corporation’s relationship with a number of major customers could reduce the Corporation’s net interest margin and net income by decreasing the number and size of loans originated, the interest rates charged on these loans and the fees charged for services to customers. If the Corporation were to lend to customers who are less likely to pay in order to maintain historical origination levels, it may not be able to maintain current loan quality levels.

• The Corporation is party to various lawsuits incidental to its business. Litigation is subject to many uncertainties such that the expenses and ultimate exposure with respect to many of these matters cannot be ascertained.

• The financial services industry is undergoing rapid technological changes. If the Corporation is unable to adequately invest in and implement new technology-driven products and services, it may not be able to compete effectively, or the cost to provide products and services many increase significantly.

• The Corporation’s business may be adversely affected by the highly regulated environment in which it operates. Changes in banking or tax laws, regulations and regulatory practices at either the federal or state level may adversely affect the Corporation, including its ability to offer new products and services, obtain financing, pay dividends from the subsidiaries to the Holding Company, attract deposits, make loans and leases at satisfactory spreads, and may also result in the imposition of additional costs.

• The products and services offered by the banking industry and customer expectations regarding them are subject to change. The Corporation attempts to respond to perceived customer needs and expectations by offering new products and services, which are often costly to develop and market initially. A lack of market acceptance of these products and services would have a negative effect on the Corporation’s business and negative impact on the results of operations.

• The Corporation’s vendors could fail to fulfill their contractual obligations, resulting in a material interruption in, or disruption to, its business and a negative impact on the results of operations.

• The Corporation could face unanticipated environmental liabilities or costs related to real property owned or acquired through foreclosure. Compliance with federal, state and local environmental laws and regulations, including those related to investigation and

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clean-up of contaminated site, could have a negative effect on the Corporation’s expenses and results of operations.

• New accounting or tax pronouncements or interpretation may be issued by the accounting profession, regulators or other government bodies which could change existing accounting methods. Changes in accounting methods could negatively impact the Corporation’s results of operations and financial position.

• The Corporation’s business continuity plans or data security systems could prove to be inadequate, resulting in a material interruption in, or disruption to, the Corporation’s business and a negative impact on the results of operations.

• As a bank holding company that conducts substantially all of its operation through its subsidiaries, the ability of the Corporation to pay dividends, repurchase its shares or to repay its indebtedness depends upon the results of operations of its subsidiaries and their ability to pay dividends to the Corporation. Dividends paid by these subsidiaries are subject to limits imposed by federal and state law.

• The Corporation’s controls and procedures may fail or be circumvented, which could have a material adverse effect on its business, results of operations, and financial condition.

• The Corporation’s articles of incorporation and by-laws as well as certain banking laws, may have an anti-takeover effect.

Other factors not currently anticipated may also materially and adversely affect the Corporation’s results of operations, cash flows and financial position. There can be no assurance that future results will meet expectations. While the Corporation believes that the forward-looking statements in this report are reasonable, the reader should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. The Corporation does not undertake, and expressly disclaims, any obligation to update or alter any statements whether as a result of new information, future events or otherwise, except as may be required by applicable law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

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

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

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

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

     There have been no material changes in our risk factors from those disclosed in our 2006 Annual Report on Form 10-K.

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

(a) Not applicable.

(b) Not applicable.

(c) The following table provides information with respect to purchases the Corporation made of its common shares during the third quarter of the 2007 fiscal year:

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					Total Number of		Maximum
					Shares Purchased		Number of Shares
					as Part of Publicly		that May Yet Be
	Total Number of		Average Price		Announced Plans		Purchased Under
	Shares Purchased		Paid per Share		or Programs (1)		Plans or Programs
Balance as of June 30, 2007								396,272
July 1, 2007 — July 31, 2007		14,710	$	21.07		—		396,272
August 1, 2007 — August 31, 2007		6,243		20.75		—		396,272
September 1, 2007 — September 30, 2007		1,520		22.48		—		396,272
Balance as of September 30, 2007:		22,473	$	21.08		—		396,272

(1)

On January 19, 2006, the Board of Directors authorized the repurchase of up to 3 million shares (the “New Repurchase Plan”). The New Repurchase Plan, which has no expiration date, superseded all other repurchase programs, including that authorized by the Board of Directors on July 15, 2004 (the “Prior Repurchase Plan”). The Corporation had purchased all of the shares it was authorized to acquire under the Prior Repurchase Plan.

(2)

22,473 of these common shares were either: (1) delivered by the option holder with respect to the exercise of stock options; (2) in the case of restricted shares of common stock, shares were withheld to pay income taxes or other tax liabilities with respect to the vesting of restricted shares; or (3) shares were returned upon the resignation of the restricted shareholder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 5. OTHER INFORMATION

On October 18, 2007, the Board of Directors, acting on the recommendation of the Corporate Governance and Nominating Committee, approved revisions to its Corporate Governance Guidelines (the “Guidelines”). The Guidelines are furnished as Exhibit 99.1 to this report on Form 10‑Q and are also available under the investors tab on the Company’s website,www.firstmerit.com. Information under the heading “IV. Selection of Directors” in the Guidelines provides provisions applicable to the recommendation or nomination of director candidates.

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ITEM 6. EXHIBITS

(a) Exhibits

Exhibit
Number
3.1	Second Amended and Restated Articles of Incorporation of FirstMerit Corporation (incorporated by reference to Exhibit 3.1 to the Corporation’s Form 10‑Q for the period ending June 30, 2007).
3.2	Second Amended and Restated Code of Regulations of FirstMerit Corporation (incorporated by reference to Exhibit 3.2 to the Corporation’s Form 10‑Q for the period ending June 30, 2007).
31.1	Rule 13a-14(a)/Section 302 Certification of Paul G. Greig, Chief Executive Officer of FirstMerit Corporation (filed herewith).
31.2	Rule 13a-14(a)/Section 302 Certification of Terrence E. Bichsel, Executive Vice President and Chief Financial Officer of FirstMerit Corporation (filed herewith).
32.1	Rule 13a-14(b)/Section 906 Certifications of Paul G. Greig, Chief Executive Officer of FirstMerit Corporation, and Terrence E. Bichsel, Executive Vice President and Chief Financial Officer of FirstMerit Corporation (filed herewith).
99.1	FirstMerit Corporation Corporate Governance Guidelines (filed herewith).

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SIGNATURES

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

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

Date: November 2, 2007

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