Exhibit 99.1
2008 Financial Information Second Quarter
Table of Contents
| | |
Earnings Release | | Pages 1-4 |
| | |
Consolidated Financial Highlights | | Page 5 |
| | |
Consolidated Balance Sheets | | Page 6 |
| | |
Average Consolidated Balance Sheets | | Page 7 |
| | |
Average Consolidated Balance Sheets | | Pages 8 |
(Fully-tax Equivalent Interest Rates and Interest Differential) | | |
| | |
Consolidated Statements of Income and Comprehensive Income | | Page 9 |
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Consolidated Statements of Income and Comprehensive Income | | Page 10 |
(Linked Quarters) | | |
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Asset Quality Information | | Page 11 |
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Noninterest Income and Noninterest Expense Detail | | Page 12 |
| | |
Allowance for Loan Losses — Net Charge-off Detail | | Page 13 |
FirstMerit Corporation
III Cascade Plaza
Akron, Ohio 44308
Corporate Communications and Investor Relations
Thomas P. O’Malley
p.330-384-7109
FOR IMMEDIATE RELEASE
FirstMerit Corporation
Analysts/Media Contact: Thomas O’Malley
Director Corporate Communications/Investor Relations Officer
Phone: 330.384.7109
FirstMerit Reports Second Quarter 2008 EPS of $0.36 Per Share
Akron, Ohio (July 22, 2008) — FirstMerit Corporation (Nasdaq: FMER) today announced second quarter 2008 net income of $29.2 million, or $0.36 per diluted share. This compares with $31.4 million, or $0.39 per diluted share, for the first quarter 2008 and $29.9 million, or $0.37 per diluted share, for the second quarter 2007.
Returns on average common equity (“ROE”) and average assets (“ROA”) for the second quarter 2008 were 12.31% and 1.11%, respectively, compared with 13.56% and 1.22%, respectively, for the first quarter 2008 and 13.75% and 1.16% for the second quarter 2007.
“Our second quarter financial results reflect the many initiatives that we have taken over the past several quarters to increase revenues, control expenses, and improve our credit quality. We are pleased to report revenue gains supported by net interest margin expansion, solid credit quality, continued capital strength and expense management,” said Paul G. Greig, Chairman and Chief Executive Officer of FirstMerit Corporation. “Our unwavering focus on executing our super community banking model is generating positive results amidst a challenging environment. We believe our competitive array of financial services and products combined with our excellence in customer service will increase profitability and enhance shareholder value over the longer term.”
Mr. Greig continued, “Commercial loan growth continued the strong momentum established in the first quarter. Relative economic stability and emerging opportunities in our markets are providing us a foundation to grow the balance sheet. Importantly, incentives within the organization remain aligned with maintaining a high standard of credit quality and the profitable expansion and penetration of our customer base.”
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FirstMerit Reports Second Quarter 2008 EPS Results/ Page 2
Net interest margin was 3.69% for the second quarter of 2008 compared with 3.60% for the first quarter of 2008 and 3.62% for the second quarter of 2007. Reduced funding costs compared with the first quarter of 2008 and the second quarter of 2007 due to an increased composition of lower cost core deposits along with lower liability pricing from a falling interest rate environment supported margin expansion over both periods.
Average loans during the second quarter of 2008 increased $116.7 million, or 1.66%, compared with the first quarter of 2008 and increased $137.9 million, or 1.97%, compared with the second quarter of 2007. Increases in the respective periods were driven by average commercial loan growth of $127.7 million, or 3.24%, and $223.9 million, or 5.82%.
During the second quarter of 2008 the Company increased its average core deposits, which excludes time deposits, by $127.2 million, or 2.85%, compared with the first quarter of 2008, and $128.8 million, or 2.88%, compared with the second quarter of 2007.
The Company’s investment portfolio yield decreased slightly in the second quarter of 2008, to 4.90%, compared with 4.91% in the first quarter of 2008, and increased from 4.72% in the second quarter of 2007. The increased investment portfolio yields compared with the second quarter of 2007 positively impacted the year-over-year increase in the net interest margin.
Net interest income on a fully tax-equivalent (“FTE”) basis was $89.0 million in the second quarter 2008 compared with $85.7 million in the first quarter of 2008 and $85.6 million in the second quarter of 2007. The increases in FTE net interest income compared with those two periods resulted from expansion in the net interest margin driven by the aforementioned decrease in liability pricing.
Noninterest income net of securities transactions for the second quarter of 2008 was $48.7 million, a decrease of $3.6 million, or 6.92%, from the first quarter of 2008 and a decrease of $0.2 million, or 0.45%, from the second quarter of 2007. Included in noninterest income in the first quarter 2008 is a $7.9 million gain from the partial redemption of Visa, Inc. shares.
Excluding the $7.9 million gain from the partial redemption of Visa, Inc. shares, noninterest income net of securities transactions increased $4.3 million, or 9.63%. The primary changes in other income for the second quarter of 2008 compared to the first quarter of 2008, were as follows: service charges on deposits increased $1.3 million, or 8.77%, other operating income increased $1.2 million, or 42.7%, and credit card fees increased $1.0 million, or 8.86%.
Other income, net of securities gains, as a percentage of net revenue for the second quarter of 2008 was 35.38% compared with 37.91% for first quarter of 2008 and 36.37% for the second quarter of 2007. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.
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FirstMerit Reports Second Quarter 2008 EPS Results/ Page 3
Noninterest expense for the second quarter of 2008 was $80.6 million, a decrease of $0.7 million, or 0.84%, from the first quarter of 2008 and a decrease of $0.8 million, or 1.01%, from the second quarter of 2007. Compared with the second quarter of 2007, professional services fell $1.9 million, down 42.96% due in part to the consulting services necessary to remediate Bank Secrecy Act issues performed in 2007 which were completed during the first quarter of 2008.
Net charge-offs totaled $10.7 million, or 0.60% of average loans, in the second quarter of 2008 compared with $11.3 million, or 0.65% of average loans, in the first quarter 2008 and $7.6 million, or 0.43% of average loans, in the second quarter of 2007.
Nonperforming assets totaled $41.6 million at June 30, 2008, an increase of $6.3 million, or 17.95%, compared with March 31, 2008. Nonperforming assets at June 30, 2008 represented 0.57% of period-end loans plus other real estate compared with 0.50% at March 31, 2008.
The allowance for loan losses totaled $98.2 million at June 30, 2008, an increase of $3.8 million from March 31, 2008. The increase was attributable to additional reserves that were established to address indentified risks associated with the slow down in the housing markets and the decline in residential and commercial real estate values. At June 30, 2008, the allowance for loan losses was 1.36% of period-end loans compared with 1.33% at March 31, 2008. The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments. For comparative purposes the allowance for credit losses was 1.46% at June 30, 2008 compared with 1.45% at March 31, 2008. The allowance for credit losses to nonperforming loans was 288.50% at June 30, 2008, compared with 345.59% at March 31, 2008.
FirstMerit’s total assets at June 30, 2008 were $10.6 billion, an increase of $48.0 million, or 0.46%, compared with March 31, 2008 and an increase of $135.7 million, or 1.30%, compared with June 30, 2007. Commercial loan growth of $116.1 million, or 2.89%, compared with March 31, 2008, and $237.3 million, or 6.09%, compared with June 30, 2007, provided the overall asset growth over both periods.
Total deposits were $7.3 billion at June 30, 2008, a decrease of $145.5 million, or 1.96%, from March 31, 2008 and a decrease of $197.3 million, or 2.64%, from June 30, 2007. The decrease compared with both periods was driven by a strategic reduction in the reliance on large brokered and consumer CDs to lower funding costs. Core deposits totaled $4.6 billion at June 30, 2008, an increase of $75.3 million, or 1.65%, from March 31, 2008 and an increase of $200.0 million, or 4.49%, from June 30, 2007.
Shareholders’ equity was $924 million at June 30, 2008, compared with $937 million at March 31, 2008, and $862 million at June 30, 2007. The Company maintained a strong capital position as tangible equity to assets was 7.52% at June 30, 2008, compared with 7.68% and 7.00% at March 31, 2008 and June 30, 2007, respectively. The common dividend per share paid in the second quarter 2008 was $0.29.
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FirstMerit Reports Second Quarter 2008 EPS Results/ Page 4
Second quarter 2008 Conference Call
FirstMerit will host an earnings conference call on July 22, 2008, at 2:00 p.m. EDT to provide an overview of second quarter results and highlights. To participate in the conference call, please dial (888) 693-3477 ten minutes before start time and provide the reservation number: 56237375. A replay of the conference call will be available at approximately 5:00 p.m., on July 22, 2008 through July, 29, 2008, by dialing (800) 642-1687, and entering the PIN: 56237375.
FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $10.6 billion as of June 30, 2008 and 160 banking offices and 175 ATMs in 25 Ohio and Western Pennsylvania counties. FirstMerit provides a complete range of banking and other financial services to consumers and businesses through its core operations. Principal wholly-owned subsidiaries include: FirstMerit Bank, N.A., FirstMerit Mortgage Corporation, FirstMerit Title Agency, Ltd., and FirstMerit Community Development Corporation.
Forward-Looking Statement
This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Company, as well as its operations, markets and products. Actual results could differ materially from those indicated. Among the important factors that could cause results to differ materially are interest rate changes, continued softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Company’s business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Company’s periodic reports and registration statements filed with the Securities and Exchange Commission. The Company undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.
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| | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES Consolidated Financial Highlights | | |
| | | | | | | | | | | | | | | | | | | | |
(Unaudited) | | Quarters |
(Dollars in thousands) | | 2008 | | 2008 | | 2007 | | 2007 | | 2007 |
EARNINGS | | 2nd Qtr | | 1st Qtr | | 4th Qtr | | 3rd Qtr | | 2nd Qtr |
|
Net interest income FTE (a) | | $ | 88,956 | | | $ | 85,695 | | | $ | 87,647 | | | $ | 86,582 | | | $ | 85,593 | |
Provision for loan losses | | | 14,565 | | | | 11,521 | | | | 9,334 | | | | 7,324 | | | | 9,967 | |
Other income | | | 48,758 | | | | 52,854 | | | | 49,993 | | | | 49,124 | | | | 48,930 | |
Other expenses | | | 80,550 | | | | 81,234 | | | | 83,295 | | | | 84,030 | | | | 81,375 | |
FTE adjustment (a) | | | 1,425 | | | | 1,396 | | | | 1,486 | | | | 1,428 | | | | 1,368 | |
Net income | | | 29,153 | | | | 31,443 | | | | 31,459 | | | | 30,262 | | | | 29,885 | |
Diluted EPS | | | 0.36 | | | | 0.39 | | | | 0.39 | | | | 0.38 | | | | 0.37 | |
| | | | | | | | | | | | | | | | | | | | |
PERFORMANCE RATIOS | | | | | | | | | | | | | | | | | | | | |
Return on average assets (ROA) | | | 1.11 | % | | | 1.22 | % | | | 1.21 | % | | | 1.16 | % | | | 1.16 | % |
Return on average common equity (ROE) | | | 12.31 | % | | | 13.56 | % | | | 13.87 | % | | | 13.71 | % | | | 13.75 | % |
Net interest margin FTE (a) | | | 3.69 | % | | | 3.60 | % | | | 3.66 | % | | | 3.61 | % | | | 3.62 | % |
Efficiency ratio | | | 58.38 | % | | | 58.69 | % | | | 60.85 | % | | | 61.76 | % | | | 60.33 | % |
Number of full-time equivalent employees | | | 2,679 | | | | 2,676 | | | | 2,688 | | | | 2,704 | | | | 2,725 | |
| | | | | | | | | | | | | | | | | | | | |
MARKET DATA | | | | | | | | | | | | | | | | | | | | |
Book value/common share | | $ | 11.43 | | | $ | 11.59 | | | $ | 11.39 | | | $ | 11.00 | | | $ | 10.71 | |
Period-end common share mkt value | | | 16.31 | | | | 20.66 | | | | 20.01 | | | | 19.76 | | | | 20.93 | |
Market as a % of book | | | 143 | % | | | 178 | % | | | 176 | % | | | 180 | % | | | 195 | % |
Cash dividends/common share | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.29 | |
Common stock dividend payout ratio | | | 80.56 | % | | | 74.36 | % | | | 74.36 | % | | | 76.32 | % | | | 78.38 | % |
Average basic common shares | | | 80,855 | | | | 80,655 | | | | 80,477 | | | | 80,467 | | | | 80,426 | |
Average diluted common shares | | | 80,898 | | | | 80,722 | | | | 80,595 | | | | 80,561 | | | | 80,570 | |
Period end common shares | | | 80,846 | | | | 80,879 | | | | 80,482 | | | | 80,467 | | | | 80,477 | |
Common shares repurchased | | | 34,380 | | | | 5,426 | | | | 6,066 | | | | 22,473 | | | | 36,159 | |
Common stock market capitalization | | $ | 1,318,598 | | | $ | 1,670,960 | | | $ | 1,610,445 | | | $ | 1,590,028 | | | $ | 1,684,384 | |
| | | | | | | | | | | | | | | | | | | | |
ASSET QUALITY | | | | | | | | | | | | | | | | | | | | |
Gross charge-offs | | $ | 14,830 | | | $ | 14,669 | | | $ | 11,768 | | | $ | 12,347 | | | $ | 10,609 | |
Net charge-offs | | | 10,737 | | | | 11,315 | | | | 8,940 | | | | 7,945 | | | | 7,580 | |
Allowance for loan losses | | | 98,239 | | | | 94,411 | | | | 94,205 | | | | 93,811 | | | | 94,432 | |
Reserve for unfunded lending commitments | | | 7,310 | | | | 7,903 | | | | 7,394 | | | | 7,409 | | | | 6,553 | |
Nonperforming assets (NPAs) | | | 41,639 | | | | 35,301 | | | | 37,262 | | | | 34,199 | | | | 37,038 | |
Net charge-offs/average loans ratio | | | 0.60 | % | | | 0.65 | % | | | 0.51 | % | | | 0.45 | % | | | 0.43 | % |
Allowance for loan losses/period-end loans | | | 1.36 | % | | | 1.33 | % | | | 1.35 | % | | | 1.34 | % | | | 1.34 | % |
Allowance for credit losses/period-end loans | | | 1.46 | % | | | 1.45 | % | | | 1.45 | % | | | 1.44 | % | | | 1.43 | % |
NPAs/loans and other real estate | | | 0.57 | % | | | 0.50 | % | | | 0.53 | % | | | 0.49 | % | | | 0.52 | % |
Allowance for loan losses/nonperforming loans | | | 268.52 | % | | | 318.89 | % | | | 299.70 | % | | | 314.22 | % | | | 295.08 | % |
Allowance for credit losses/nonperforming loans | | | 288.50 | % | | | 345.59 | % | | | 323.22 | % | | | 339.04 | % | | | 315.56 | % |
| | | | | | | | | | | | | | | | | | | | |
CAPITAL & LIQUIDITY | | | | | | | | | | | | | | | | | | | | |
Period-end tangible equity to assets | | | 7.52 | % | | | 7.68 | % | | | 7.56 | % | | | 7.24 | % | | | 7.00 | % |
Average equity to assets | | | 9.06 | % | | | 8.98 | % | | | 8.72 | % | | | 8.45 | % | | | 8.45 | % |
Average equity to loans | | | 13.34 | % | | | 13.27 | % | | | 12.94 | % | | | 12.49 | % | | | 12.45 | % |
Average loans to deposits | | | 97.29 | % | | | 95.82 | % | | | 94.71 | % | | | 93.74 | % | | | 93.18 | % |
| | | | | | | | | | | | | | | | | | | | |
AVERAGE BALANCES | | | | | | | | | | | | | | | | | | | | |
Assets | | $ | 10,520,469 | | | $ | 10,388,359 | | | $ | 10,313,707 | | | $ | 10,360,739 | | | $ | 10,319,454 | |
Deposits | | | 7,339,506 | | | | 7,330,097 | | | | 7,339,827 | | | | 7,479,960 | | | | 7,515,205 | |
Loans | | | 7,140,627 | | | | 7,023,928 | | | | 6,951,544 | | | | 7,011,776 | | | | 7,002,750 | |
Earning assets | | | 9,704,252 | | | | 9,581,121 | | | | 9,493,271 | | | | 9,513,230 | | | | 9,485,819 | |
Shareholders’ equity | | | 952,769 | | | | 932,405 | | | | 899,624 | | | | 875,720 | | | | 871,554 | |
| | | | | | | | | | | | | | | | | | | | |
ENDING BALANCES | | | | | | | | | | | | | | | | | | | | |
Assets | | $ | 10,564,752 | | | $ | 10,516,828 | | | $ | 10,400,666 | | | $ | 10,407,765 | | | $ | 10,429,099 | |
Deposits | | | 7,277,184 | | | | 7,422,678 | | | | 7,331,739 | | | | 7,408,296 | | | | 7,474,466 | |
Loans | | | 7,240,882 | | | | 7,072,797 | | | | 7,001,886 | | | | 7,014,389 | | | | 7,052,390 | |
Goodwill | | | 139,245 | | | | 139,245 | | | | 139,245 | | | | 139,245 | | | | 139,245 | |
Intangible assets | | | 1,577 | | | | 1,754 | | | | 1,977 | | | | 2,200 | | | | 2,422 | |
Earning assets | | | 9,724,859 | | | | 9,688,270 | | | | 9,509,680 | | | | 9,563,541 | | | | 9,545,752 | |
Total shareholders’ equity | | | 924,429 | | | | 937,439 | | | | 916,977 | | | | 884,877 | | | | 862,265 | |
| | |
NOTES: |
|
(a) - | | Net interest income on a fully tax-equivalent (“FTE”) basis restates interest on tax-exempt securities and loans as if such interest were subject to federal income tax at the statutory rate. Net interest income on an FTE basis is not an accounting principle generally accepted in the United States of America. |
5
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | | |
(In thousands) | | June 30, | | | December 31, | | | June 30, | |
(Unaudited, except December 31, 2007, which is derived from the audited financial statements) | | 2008 | | | 2007 | | | 2007 | |
| | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | |
Cash and due from banks | | $ | 195,930 | | | $ | 207,335 | | | $ | 210,722 | |
Investment securities (at fair value) and federal funds sold | | | 2,469,692 | | | | 2,460,453 | | | | 2,442,906 | |
Loans held for sale | | | 14,285 | | | | 47,341 | | | | 50,456 | |
Loans: | | | | | | | | | | | | |
Commercial loans | | | 4,136,273 | | | | 3,906,448 | | | | 3,898,943 | |
Mortgage loans | | | 569,516 | | | | 577,219 | | | | 586,612 | |
Installment loans | | | 1,619,383 | | | | 1,598,832 | | | | 1,641,790 | |
Home equity loans | | | 697,729 | | | | 691,922 | | | | 712,021 | |
Credit card loans | | | 146,727 | | | | 153,732 | | | | 141,162 | |
Leases | | | 71,254 | | | | 73,733 | | | | 71,862 | |
| | | | | | | | | |
Total loans | | | 7,240,882 | | | | 7,001,886 | | | | 7,052,390 | |
Less allowance for loan losses | | | (98,239 | ) | | | (94,205 | ) | | | (94,432 | ) |
| | | | | | | | | |
Net loans | | | 7,142,643 | | | | 6,907,681 | | | | 6,957,958 | |
Premises and equipment, net | | | 126,021 | | | | 130,469 | | | | 133,493 | |
Goodwill | | | 139,245 | | | | 139,245 | | | | 139,245 | |
Intangible assets | | | 1,577 | | | | 1,977 | | | | 2,422 | |
Accrued interest receivable and other assets | | | 475,359 | | | | 506,165 | | | | 491,897 | |
| | | | | | | | | |
Total assets | | $ | 10,564,752 | | | $ | 10,400,666 | | | $ | 10,429,099 | |
| | | | | | | | | |
| | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | |
Demand-non-interest bearing | | $ | 1,576,584 | | | $ | 1,482,480 | | | | 1,424,892 | |
Demand-interest bearing | | | 698,829 | | | | 727,966 | | | | 755,931 | |
Savings and money market accounts | | | 2,367,825 | | | | 2,295,147 | | | | 2,262,828 | |
Certificates and other time deposits | | | 2,633,946 | | | | 2,826,146 | | | | 3,030,815 | |
| | | | | | | | | |
Total deposits | | | 7,277,184 | | | | 7,331,739 | | | | 7,474,466 | |
| | | | | | | | | |
Securities sold under agreements to repurchase | | | 1,239,925 | | | | 1,256,080 | | | | 1,302,175 | |
Wholesale borrowings | | | 953,759 | | | | 705,121 | | | | 578,659 | |
Accrued taxes, expenses, and other liabilities | | | 169,455 | | | | 190,749 | | | | 211,534 | |
| | | | | | | | | |
Total liabilities | | | 9,640,323 | | | | 9,483,689 | | | | 9,566,834 | |
| | | | | | | | | |
Commitments and contingencies | | | | | | | | | | | | |
Shareholders’ equity: | | | | | | | | | | | | |
Preferred stock, without par value: | | | | | | | | | | | | |
authorized and unissued 7,000,000 shares | | | — | | | | — | | | | — | |
Preferred stock, Series A, without par value: | | | | | | | | | | | | |
designated 800,000 shares; none outstanding | | | — | | | | — | | | | — | |
Convertible preferred stock, Series B, without par value: | | | | | | | | | | | | |
designated 220,000 shares; none outstanding | | | — | | | | — | | | | — | |
Common stock, without par value: | | | | | | | | | | | | |
authorized 300,000,000 shares; issued 92,026,350 at June 30, 2008, December 31, 2007 and June 30, 2007 | | | 127,937 | | | | 127,937 | | | | 127,937 | |
Capital surplus | | | 93,267 | | | | 100,028 | | | | 100,700 | |
Accumulated other comprehensive loss | | | (51,434 | ) | | | (43,085 | ) | | | (82,073 | ) |
Retained earnings | | | 1,041,473 | | | | 1,027,775 | | | | 1,012,699 | |
Treasury stock, at cost, 11,180,046, 11,543,882 and 11,548,911 shares at June 30, 2008, December 31, 2007 and June 30, 2007, respectively | | | (286,814 | ) | | | (295,678 | ) | | | (296,998 | ) |
| | | | | | | | | |
Total shareholders’ equity | | | 924,429 | | | | 916,977 | | | | 862,265 | |
| | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 10,564,752 | | | $ | 10,400,666 | | | $ | 10,429,099 | |
| | | | | | | | | |
6
| | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES AVERAGE CONSOLIDATED BALANCE SHEETS | | |
| | | | | | | | | | | | | | | | | | | | |
| | Quarterly Periods | |
(Unaudited) | | June 30, | | | March 31, | | | December 31, | | | September 30, | | | June 30, | |
(Dollars in thousands) | | 2008 | | | 2008 | | | 2007 | | | 2007 | | | 2007 | |
| | | | | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 173,044 | | | $ | 171,028 | | | $ | 175,164 | | | $ | 180,426 | | | $ | 177,524 | |
Investment securities/fed funds sold | | | 2,515,546 | | | | 2,508,125 | | | | 2,494,975 | | | | 2,455,777 | | | | 2,440,015 | |
Loans held for sale | | | 48,079 | | | | 49,068 | | | | 46,752 | | | | 45,677 | | | | 43,054 | |
Loans: | | | | | | | | | | | | | | | | | | | | |
Commercial loans | | | 4,069,305 | | | | 3,941,573 | | | | 3,839,242 | | | | 3,868,235 | | | | 3,845,395 | |
Mortgage loans | | | 577,178 | | | | 584,000 | | | | 581,370 | | | | 586,911 | | | | 596,758 | |
Installment loans | | | 1,584,825 | | | | 1,587,267 | | | | 1,615,035 | | | | 1,640,380 | | | | 1,636,669 | |
Home equity loans | | | 692,567 | | | | 686,603 | | | | 696,259 | | | | 704,499 | | | | 711,113 | |
Credit card loans | | | 147,242 | | | | 150,575 | | | | 149,466 | | | | 143,312 | | | | 141,294 | |
Leases | | | 69,510 | | | | 73,910 | | | | 70,172 | | | | 68,439 | | | | 71,521 | |
| | | | | | | | | | | | | | | |
Total loans | | | 7,140,627 | | | | 7,023,928 | | | | 6,951,544 | | | | 7,011,776 | | | | 7,002,750 | |
Less allowance for loan losses | | | 94,002 | | | | 93,804 | | | | 92,667 | | | | 94,393 | | | | 92,298 | |
| | | | | | | �� | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Net loans | | | 7,046,625 | | | | 6,930,124 | | | | 6,858,877 | | | | 6,917,383 | | | | 6,910,452 | |
| | | | | | | | | | | | | | | | | | | | |
Total earning assets | | | 9,704,252 | | | | 9,581,121 | | | | 9,493,271 | | | | 9,513,230 | | | | 9,485,819 | |
| | | | | | | | | | | | | | | | | | | | |
Premises and equipment, net | | | 126,488 | | | | 128,185 | | | | 132,129 | | | | 133,303 | | | | 135,255 | |
Accrued interest receivable and other assets | | | 610,687 | | | | 601,829 | | | | 605,810 | | | | 628,173 | | | | 613,154 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
TOTAL ASSETS | | $ | 10,520,469 | | | $ | 10,388,359 | | | $ | 10,313,707 | | | $ | 10,360,739 | | | $ | 10,319,454 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
LIABILITIES | | | | | | | | | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | | | | | | | | | |
Demand-non-interest bearing | | $ | 1,518,841 | | | $ | 1,446,889 | | | $ | 1,435,358 | | | $ | 1,400,848 | | | $ | 1,408,827 | |
Demand-interest bearing | | | 709,922 | | | | 702,115 | | | | 699,675 | | | | 714,216 | | | | 763,907 | |
Savings and money market accounts | | | 2,366,296 | | | | 2,318,899 | | | | 2,262,818 | | | | 2,224,048 | | | | 2,293,567 | |
Certificates and other time deposits | | | 2,744,447 | | | | 2,862,194 | | | | 2,941,976 | | | | 3,140,848 | | | | 3,048,904 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total deposits | | | 7,339,506 | | | | 7,330,097 | | | | 7,339,827 | | | | 7,479,960 | | | | 7,515,205 | |
| | | | | | | | | | | | | | | | | | | | |
Securities sold under agreements to repurchase | | | 1,312,436 | | | | 1,310,364 | | | | 1,517,241 | | | | 1,555,235 | | | | 1,458,982 | |
Wholesale borrowings | | | 711,132 | | | | 618,572 | | | | 369,685 | | | | 256,356 | | | | 280,914 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total funds | | | 9,363,074 | | | | 9,259,033 | | | | 9,226,753 | | | | 9,291,551 | | | | 9,255,101 | |
Accrued taxes, expenses and other liabilities | | | 204,626 | | | | 196,921 | | | | 187,330 | | | | 193,468 | | | | 192,799 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | 9,567,700 | | | | 9,455,954 | | | | 9,414,083 | | | | 9,485,019 | | | | 9,447,900 | |
| | | | | | | | | | | | | | | | | | | | |
SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | |
Preferred stock | | | — | | | | — | | | | — | | | | — | | | | — | |
Common stock | | | 127,937 | | | | 127,937 | | | | 127,937 | | | | 127,937 | | | | 127,937 | |
Capital surplus | | | 92,313 | | | | 96,048 | | | | 99,749 | | | | 100,511 | | | | 102,355 | |
Accumulated other comprehensive (loss) income | | | (40,757 | ) | | | (32,170 | ) | | | (60,430 | ) | | | (77,215 | ) | | | (72,170 | ) |
Retained earnings | | | 1,059,840 | | | | 1,032,036 | | | | 1,028,170 | | | | 1,020,979 | | | | 1,012,675 | |
Treasury stock | | | (286,564 | ) | | | (291,446 | ) | | | (295,802 | ) | | | (296,492 | ) | | | (299,243 | ) |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total shareholders’ equity | | | 952,769 | | | | 932,405 | | | | 899,624 | | | | 875,720 | | | | 871,554 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 10,520,469 | | | $ | 10,388,359 | | | $ | 10,313,707 | | | $ | 10,360,739 | | | $ | 10,319,454 | |
| | | | | | | | | | | | | | | |
7
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)Fully-tax Equivalent Interest Rates and Interest Differential
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | | Year ended | | | Three months ended | |
| | June 30, 2008 | | | December 31, 2007 | | | June 30, 2007 | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES | | Average | | | | | | | Average | | | Average | | | | | | | Average | | | Average | | | | | | | Average | |
(Dollars in thousands) | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | $ | 173,044 | | | | | | | | | | | $ | 178,164 | | | | | | | | | | | $ | 177,524 | | | | | | | | | |
Investment securities and federal funds sold: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
U.S. Treasury securities and U.S. Government agency obligations (taxable) | | | 2,021,209 | | | | 23,609 | | | | 4.70 | % | | | 1,955,049 | | | | 85,544 | | | | 4.38 | % | | | 1,936,833 | | | | 20,359 | | | | 4.22 | % |
Obligations of states and political subdivisions (tax exempt) | | | 279,757 | | | | 4,270 | | | | 6.14 | % | | | 255,461 | | | | 15,595 | | | | 6.10 | % | | | 256,153 | | | | 3,883 | | | | 6.08 | % |
Other securities and federal funds sold | | | 214,580 | | | | 2,777 | | | | 5.21 | % | | | 244,749 | | | | 17,127 | | | | 7.00 | % | | | 247,029 | | | | 4,477 | | | | 7.27 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total investment securities and federal funds sold | | | 2,515,546 | | | | 30,656 | | | | 4.90 | % | | | 2,455,259 | | | | 118,266 | | | | 4.82 | % | | | 2,440,015 | | | | 28,719 | | | | 4.72 | % |
Loans held for sale | | | 48,079 | | | | 651 | | | | 5.45 | % | | | 56,036 | | | | 3,050 | | | | 5.44 | % | | | 43,054 | | | | 739 | | | | 6.88 | % |
Loans | | | 7,140,627 | | | | 105,889 | | | | 5.96 | % | | | 6,971,464 | | | | 521,172 | | | | 7.48 | % | | | 7,002,750 | | | | 131,369 | | | | 7.52 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total earning assets | | | 9,704,252 | | | | 137,196 | | | | 5.69 | % | | | 9,482,759 | | | | 642,488 | | | | 6.78 | % | | | 9,485,819 | | | | 160,827 | | | | 6.80 | % |
Allowance for loan losses | | | (94,002 | ) | | | | | | | | | | | (92,662 | ) | | | | | | | | | | | (92,298 | ) | | | | | | | | |
Other assets | | | 737,175 | | | | | | | | | | | | 750,527 | | | | | | | | | | | | 748,409 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 10,520,469 | | | | | | | | | | | $ | 10,318,788 | | | | | | | | | | | $ | 10,319,454 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Demand — non-interest bearing | | $ | 1,518,841 | | | | — | | | | — | | | $ | 1,408,726 | | | | — | | | | — | | | $ | 1,408,827 | | | | — | | | | — | |
Demand — interest bearing | | | 709,922 | | | | 591 | | | | 0.33 | % | | | 733,410 | | | | 6,824 | | | | 0.93 | % | | | 763,907 | | | | 1,876 | | | | 0.99 | % |
Savings and money market accounts | | | 2,366,296 | | | | 6,500 | | | | 1.10 | % | | | 2,266,070 | | | | 54,166 | | | | 2.39 | % | | | 2,293,567 | | | | 13,992 | | | | 2.45 | % |
Certificates and other time deposits | | | 2,744,447 | | | | 26,587 | | | | 3.90 | % | | | 3,045,715 | | | | 146,559 | | | | 4.81 | % | | | 3,048,904 | | | | 36,725 | | | | 4.83 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total deposits | | | 7,339,506 | | | | 33,678 | | | | 1.85 | % | | | 7,453,921 | | | | 207,549 | | | | 2.78 | % | | | 7,515,205 | | | | 52,593 | | | | 2.81 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Securities sold under agreements to repurchase | | | 1,312,436 | | | | 8,319 | | | | 2.55 | % | | | 1,471,785 | | | | 71,298 | | | | 4.84 | % | | | 1,458,982 | | | | 18,005 | | | | 4.95 | % |
Wholesale borrowings | | | 711,132 | | | | 6,243 | | | | 3.53 | % | | | 326,460 | | | | 20,601 | | | | 6.31 | % | | | 280,914 | | | | 4,636 | | | | 6.62 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total interest bearing liabilities | | | 7,844,233 | | | | 48,240 | | | | 2.47 | % | | | 7,843,440 | | | | 299,448 | | | | 3.82 | % | | | 7,846,274 | | | | 75,234 | | | | 3.85 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other liabilities | | | 204,626 | | | | | | | | | | | | 191,096 | | | | | | | | | | | | 192,799 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shareholders’ equity | | | 952,769 | | | | | | | | | | | | 875,526 | | | | | | | | | | | | 871,554 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 10,520,469 | | | | | | | | | | | $ | 10,318,788 | | | | | | | | | | | $ | 10,319,454 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net yield on earning assets | | $ | 9,704,252 | | | | 88,956 | | | | 3.69 | % | | $ | 9,482,759 | | | | 343,040 | | | | 3.62 | % | | $ | 9,485,819 | | | | 85,593 | | | | 3.62 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest rate spread | | | | | | | | | | | 3.22 | % | | | | | | | | | | | 2.96 | % | | | | | | | | | | | 2.95 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
Note: | | Interest income on tax-exempt securities and loans has been adjusted to a fully-taxable equivalent basis. Nonaccrual loans have been included in the average balances. |
8
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | |
| | Quarters ended | | | Six months ended | |
(Unaudited) | | June 30, | | | June 30, | |
(In thousands except per share data) | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
Interest income: | | | | | | | | | | | | | | | | |
Interest and fees on loans, including held for sale | | $ | 106,516 | | | $ | 132,076 | | | $ | 222,804 | | | $ | 262,165 | |
Interest and dividends on investment securities and federal funds sold | | | 29,255 | | | | 27,383 | | | | 58,491 | | | | 54,229 | |
| | | | | | | | | | | | |
Total interest income | | | 135,771 | | | | 159,459 | | | | 281,295 | | | | 316,394 | |
| | | | | | | | | | | | |
Interest expense: | | | | | | | | | | | | | | | | |
Interest on deposits: | | | | | | | | | | | | | | | | |
Demand-interest bearing | | | 591 | | | | 1,876 | | | | 1,555 | | | | 3,795 | |
Savings and money market accounts | | | 6,500 | | | | 13,992 | | | | 16,143 | | | | 27,998 | |
Certificates and other time deposits | | | 26,587 | | | | 36,725 | | | | 58,574 | | | | 72,805 | |
Interest on securities sold under agreements to repurchase | | | 8,319 | | | | 18,005 | | | | 19,861 | | | | 34,790 | |
Interest on wholesale borrowings | | | 6,243 | | | | 4,636 | | | | 13,332 | | | | 10,775 | |
| | | | | | | | | | | | |
Total interest expense | | | 48,240 | | | | 75,234 | | | | 109,465 | | | | 150,163 | |
| | | | | | | | | | | | |
Net interest income | | | 87,531 | | | | 84,225 | | | | 171,830 | | | | 166,231 | |
Provision for loan losses | | | 14,565 | | | | 9,967 | | | | 26,086 | | | | 14,177 | |
| | | | | | | | | | | | |
Net interest income after provision for loan losses | | | 72,966 | | | | 74,258 | | | | 145,744 | | | | 152,054 | |
| | | | | | | | | | | | |
Other income: | | | | | | | | | | | | | | | | |
Trust department income | | | 5,824 | | | | 6,096 | | | | 11,274 | | | | 11,692 | |
Service charges on deposits | | | 16,028 | | | | 17,055 | | | | 30,764 | | | | 33,304 | |
Credit card fees | | | 12,146 | | | | 11,712 | | | | 23,303 | | | | 22,811 | |
ATM and other service fees | | | 2,770 | | | | 3,189 | | | | 5,564 | | | | 6,260 | |
Bank owned life insurance income | | | 3,217 | | | | 3,290 | | | | 6,418 | | | | 6,458 | |
Investment services and insurance | | | 2,790 | | | | 2,660 | | | | 5,655 | | | | 5,113 | |
Investment securities gains, net | | | 47 | | | | 1 | | | | 571 | | | | 1 | |
Loan sales and servicing income | | | 1,885 | | | | 1,911 | | | | 3,276 | | | | 7,349 | |
Gain on Visa, Inc. redemption | | | — | | | | — | | | | 7,898 | | | | — | |
Other operating income | | | 4,051 | | | | 3,016 | | | | 6,889 | | | | 4,818 | |
| | | | | | | | | | | | |
Total other income | | | 48,758 | | | | 48,930 | | | | 101,612 | | | | 97,806 | |
| | | | | | | | | | | | |
Other expenses: | | | | | | | | | | | | | | | | |
Salaries, wages, pension and employee benefits | | | 44,364 | | | | 43,538 | | | | 87,429 | | | | 86,038 | |
Net occupancy expense | | | 6,204 | | | | 6,521 | | | | 12,958 | | | | 13,207 | |
Equipment expense | | | 5,842 | | | | 6,328 | | | | 12,036 | | | | 12,773 | |
Stationery, supplies and postage | | | 2,242 | | | | 2,252 | | | | 4,567 | | | | 4,585 | |
Bankcard, loan processing and other costs | | | 7,356 | | | | 7,607 | | | | 14,600 | | | | 15,077 | |
Professional services | | | 2,581 | | | | 4,525 | | | | 4,468 | | | | 9,354 | |
Amortization of intangibles | | | 177 | | | | 222 | | | | 400 | | | | 445 | |
Other operating expense | | | 11,784 | | | | 10,382 | | | | 25,326 | | | | 21,422 | |
| | | | | | | | | | | | |
Total other expenses | | | 80,550 | | | | 81,375 | | | | 161,784 | | | | 162,901 | |
| | | | | | | | | | | | |
Income before federal income tax expense | | | 41,174 | | | | 41,813 | | | | 85,572 | | | | 86,959 | |
Federal income tax expense | | | 12,021 | | | | 11,928 | | | | 24,976 | | | | 25,653 | |
| | | | | | | | | | | | |
Net income | | $ | 29,153 | | | $ | 29,885 | | | $ | 60,596 | | | $ | 61,306 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Other comprehensive income, net of taxes | | | | | | | | | | | | | | | | |
Unrealized securities’ holding gain, net of taxes | | $ | (22,119 | ) | | $ | (13,051 | ) | | $ | (10,510 | ) | | $ | (4,938 | ) |
Unrealized hedging (loss) gain, net of taxes | | | 1,419 | | | | 561 | | | | 786 | | | | 628 | |
Minimum pension liability adjustment, net of taxes | | | 873 | | | | 1,746 | | | | 1,746 | | | | 1,746 | |
Less: reclassification adjustment for securities’ gain realized in net income, net of taxes | | | 31 | | | | 1 | | | | 371 | | | | 1 | |
| | | | | | | | | | | | |
Total other comprehensive income, net of taxes | | | (19,858 | ) | | | (10,745 | ) | | | (8,349 | ) | | | (2,565 | ) |
| | | | | | | | | | | | |
Comprehensive income | | $ | 9,295 | | | $ | 19,140 | | | $ | 52,247 | | | $ | 58,741 | |
| | | | | | | | | | | | |
Net income applicable to common shares | | $ | 29,153 | | | $ | 29,885 | | | $ | 60,596 | | | $ | 61,306 | |
| | | | | | | | | | | | |
Net income used in diluted EPS calculation | | $ | 29,154 | | | $ | 29,889 | | | $ | 60,601 | | | $ | 61,314 | |
| | | | | | | | | | | | |
Weighted average number of common shares outstanding — basic | | | 80,855 | | | | 80,426 | | | | 80,755 | | | | 80,270 | |
| | | | | | | | | | | | |
Weighted average number of common shares outstanding — diluted | | | 80,898 | | | | 80,570 | | | | 80,812 | | | | 80,433 | |
| | | | | | | | | | | | |
Basic earnings per share | | $ | 0.36 | | | $ | 0.37 | | | $ | 0.75 | | | $ | 0.76 | |
| | | | | | | | | | | | |
Diluted earnings per share | | $ | 0.36 | | | $ | 0.37 | | | $ | 0.75 | | | $ | 0.76 | |
| | | | | | | | | | | | |
Dividend per share | | $ | 0.29 | | | $ | 0.29 | | | $ | 0.58 | | | $ | 0.58 | |
| | | | | | | | | | | | |
9
| | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME—LINKED QUARTERS | | |
| | | | | | | | | | | | | | | | | | | | |
| | Quarterly Results | |
(Unaudited) | | 2008 | | | 2008 | | | 2007 | | | 2007 | | | 2007 | |
(Dollars in thousands, except share data) | | 2nd Q | | | 1st Q | | | 4th Q | | | 3rd Q | | | 2nd Q | |
Interest and fees on loans, including held for sale | | $ | 106,516 | | | $ | 116,288 | | | $ | 128,078 | | | $ | 133,860 | | | $ | 132,076 | |
Interest and dividends — securities and federal funds sold | | | 29,255 | | | | 29,236 | | | | 29,891 | | | | 28,771 | | | | 27,383 | |
| | | | | | | | | | | | | | | |
Total interest income | | | 135,771 | | | | 145,524 | | | | 157,969 | | | | 162,631 | | | | 159,459 | |
| | | | | | | | | | | | | | | |
Interest on deposits: | | | | | | | | | | | | | | | | | | | | |
Demand-interest bearing | | | 591 | | | | 964 | | | | 1,352 | | | | 1,677 | | | | 1,876 | |
Savings and money market accounts | | | 6,500 | | | | 9,643 | | | | 12,667 | | | | 13,501 | | | | 13,992 | |
Certificates and other time deposits | | | 26,587 | | | | 31,987 | | | | 35,290 | | | | 38,464 | | | | 36,725 | |
Securities sold under agreements to repurchase | | | 8,319 | | | | 11,542 | | | | 16,994 | | | | 19,514 | | | | 18,005 | |
Wholesale borrowings | | | 6,243 | | | | 7,089 | | | | 5,505 | | | | 4,321 | | | | 4,636 | |
| | | | | | | | | | | | | | | |
Total interest expense | | | 48,240 | | | | 61,225 | | | | 71,808 | | | | 77,477 | | | | 75,234 | |
| | | | | | | | | | | | | | | |
Net interest income | | | 87,531 | | | | 84,299 | | | | 86,161 | | | | 85,154 | | | | 84,225 | |
Provision for loan losses | | | 14,565 | | | | 11,521 | | | | 9,334 | | | | 7,324 | | | | 9,967 | |
| | | | | | | | | | | | | | | |
Net interest income after provision for loan losses | | | 72,966 | | | | 72,778 | | | | 76,827 | | | | 77,830 | | | | 74,258 | |
| | | | | | | | | | | | | | | |
Other income: | | | | | | | | | | | | | | | | | | | | |
Trust department income | | | 5,824 | | | | 5,450 | | | | 5,896 | | | | 5,657 | | | | 6,096 | |
Service charges on deposits | | | 16,028 | | | | 14,736 | | | | 17,067 | | | | 17,003 | | | | 17,055 | |
Credit card fees | | | 12,146 | | | | 11,157 | | | | 12,012 | | | | 11,679 | | | | 11,712 | |
ATM and other service fees | | | 2,770 | | | | 2,794 | | | | 3,055 | | | | 3,306 | | | | 3,189 | |
Bank owned life insurance income | | | 3,217 | | | | 3,201 | | | | 3,283 | | | | 3,735 | | | | 3,290 | |
Investment services and insurance | | | 2,790 | | | | 2,865 | | | | 3,121 | | | | 3,007 | | | | 2,660 | |
Investment securities gains (losses), net | | | 47 | | | | 524 | | | | 1,122 | | | | — | | | | 1 | |
Loan sales and servicing income | | | 1,885 | | | | 1,391 | | | | 1,551 | | | | 1,411 | | | | 1,911 | |
Gain on Visa, Inc. redemption | | | — | | | | 7,898 | | | | — | | | | — | | | | — | |
Other operating income | | | 4,051 | | | | 2,838 | | | | 2,886 | | | | 3,326 | | | | 3,016 | |
| | | | | | | | | | | | | | | |
Total other income | | | 48,758 | | | | 52,854 | | | | 49,993 | | | | 49,124 | | | | 48,930 | |
| | | | | | | | | | | | | | | |
Other expenses: | | | | | | | | | | | | | | | | | | | | |
Salaries, wages, pension and employee benefits | | | 44,364 | | | | 43,065 | | | | 43,087 | | | | 41,332 | | | | 43,538 | |
Net occupancy expense | | | 6,204 | | | | 6,754 | | | | 6,284 | | | | 6,188 | | | | 6,521 | |
Equipment expense | | | 5,842 | | | | 6,194 | | | | 6,239 | | | | 6,389 | | | | 6,328 | |
Stationery, supplies and postage | | | 2,242 | | | | 2,325 | | | | 2,388 | | | | 2,463 | | | | 2,252 | |
Bankcard, loan processing and other costs | | | 7,356 | | | | 7,244 | | | | 7,482 | | | | 7,222 | | | | 7,607 | |
Professional services | | | 2,581 | | | | 1,887 | | | | 3,588 | | | | 2,923 | | | | 4,525 | |
Amortization of intangibles | | | 177 | | | | 223 | | | | 222 | | | | 222 | | | | 222 | |
Other operating expense | | | 11,784 | | | | 13,542 | | | | 14,005 | | | | 17,291 | | | | 10,382 | |
| | | | | | | | | | | | | | | |
Total other expenses | | | 80,550 | | | | 81,234 | | | | 83,295 | | | | 84,030 | | | | 81,375 | |
| | | | | | | | | | | | | | | |
Income before income tax expense | | | 41,174 | | | | 44,398 | | | | 43,525 | | | | 42,924 | | | | 41,813 | |
Federal income taxes | | | 12,021 | | | | 12,955 | | | | 12,066 | | | | 12,662 | | | | 11,928 | |
| | | | | | | | | | | | | | | |
Net income | | $ | 29,153 | | | $ | 31,443 | | | $ | 31,459 | | | $ | 30,262 | | | $ | 29,885 | |
| | | | | | | | | | | | | | | |
Other comprehensive income (loss), net of taxes | | | (19,858 | ) | | | 11,509 | | | | 23,267 | | | | 15,721 | | | | (10,745 | ) |
| | | | | | | | | | | | | | | |
Comprehensive income | | $ | 9,295 | | | $ | 42,952 | | | $ | 54,726 | | | $ | 45,983 | | | $ | 19,140 | |
| | | | | | | | | | | | | | | |
Net income applicable to common shares | | $ | 29,153 | | | $ | 31,443 | | | $ | 31,459 | | | $ | 30,262 | | | $ | 29,885 | |
| | | | | | | | | | | | | | | |
Adjusted net income used in diluted EPS calculation | | $ | 29,154 | | | $ | 31,447 | | | $ | 31,463 | | | $ | 30,266 | | | $ | 29,889 | |
| | | | | | | | | | | | | | | |
Weighted-average common shares — basic | | | 80,855 | | | | 80,655 | | | | 80,477 | | | | 80,467 | | | | 80,426 | |
| | | | | | | | | | | | | | | |
Weighted-average common shares — diluted | | | 80,898 | | | | 80,722 | | | | 80,595 | | | | 80,561 | | | | 80,570 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Basic net income per share | | $ | 0.36 | | | $ | 0.39 | | | $ | 0.39 | | | $ | 0.38 | | | $ | 0.37 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Diluted net income per share | | $ | 0.36 | | | $ | 0.39 | | | $ | 0.39 | | | $ | 0.38 | | | $ | 0.37 | |
| | | | | | | | | | | | | | | |
10
| | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES ASSET QUALITY INFORMATION | | |
(Unaudited, except December 31, 2007 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Quarterly Periods | | | Annual Period | |
| | Jun 30 | | | Mar 31 | | | Dec 31 | | | Sept 30 | | | June 30 | | | Dec 31 | |
| | 2008 | | | 2008 | | | 2007 | | | 2007 | | | 2007 | | | 2007 | |
Allowance for Credit Losses | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses, beginning of period | | $ | 94,411 | | | $ | 94,205 | | | $ | 93,811 | | | $ | 94,432 | | | $ | 92,045 | | | $ | 91,342 | |
Provision for loan losses | | | 14,565 | | | | 11,521 | | | | 9,334 | | | | 7,324 | | | | 9,967 | | | | 30,835 | |
Charge-offs | | | 14,830 | | | | 14,669 | | | | 11,768 | | | | 12,347 | | | | 10,609 | | | | 44,148 | |
Recoveries | | | 4,093 | | | | 3,354 | | | | 2,828 | | | | 4,402 | | | | 3,029 | | | | 16,176 | |
| | | | | | | | | | | | | | | | | | |
Net charge-offs | | | 10,737 | | | | 11,315 | | | | 8,940 | | | | 7,945 | | | | 7,580 | | | | 27,972 | |
| | | | | | | | | | | | | | | | | | |
Allowance for loan losses, end of period | | $ | 98,239 | | | $ | 94,411 | | | $ | 94,205 | | | $ | 93,811 | | | $ | 94,432 | | | $ | 94,205 | |
| | | | | | | | | | | | | | | | | | |
Reserve for unfunded lending commitments, beginning of period | | $ | 7,903 | | | $ | 7,394 | | | $ | 7,409 | | | $ | 6,553 | | | $ | 6,746 | | | $ | 6,294 | |
Provision for credit losses | | | (593 | ) | | | 509 | | | | (15 | ) | | | 856 | | | | (193 | ) | | | 1,100 | |
| | | | | | | | | | | | | | | | | | |
Reserve for unfunded lending commitments, end of period | | $ | 7,310 | | | $ | 7,903 | | | $ | 7,394 | | | $ | 7,409 | | | $ | 6,553 | | | $ | 7,394 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for Credit Losses | | $ | 105,549 | | | $ | 102,314 | | | $ | 101,599 | | | $ | 101,220 | | | $ | 100,985 | | | $ | 101,599 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Ratios | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Provision for loan losses as a % of average loans | | | 0.82 | % | | | 0.66 | % | | | 0.53 | % | | | 0.41 | % | | | 0.57 | % | | | 0.44 | % |
Provision for credit losses as a % of average loans | | | -0.03 | % | | | 0.03 | % | | | 0.00 | % | | | 0.05 | % | | | -0.01 | % | | | 0.02 | % |
Net charge-offs as a % of average loans | | | 0.60 | % | | | 0.65 | % | | | 0.51 | % | | | 0.45 | % | | | 0.43 | % | | | 0.40 | % |
Allowance for loan losses as a % of period-end loans | | | 1.36 | % | | | 1.33 | % | | | 1.35 | % | | | 1.34 | % | | | 1.34 | % | | | 1.35 | % |
Allowance for credit losses as a % of period-end loans | | | 1.46 | % | | | 1.45 | % | | | 1.45 | % | | | 1.44 | % | | | 1.43 | % | | | 1.45 | % |
Allowance for loan losses as a % of nonperforming loans | | | 268.52 | % | | | 318.89 | % | | | 299.70 | % | | | 314.22 | % | | | 295.08 | % | | | 299.70 | % |
Allowance for credit losses as a % of nonperforming loans | | | 288.50 | % | | | 345.59 | % | | | 323.22 | % | | | 339.04 | % | | | 315.56 | % | | | 323.22 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Asset Quality | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Impaired loans: | | | | | | | | | | | | | | | | | | | | | | | | |
Nonaccrual | | $ | 26,702 | | | $ | 19,777 | | | $ | 21,513 | | | $ | 20,165 | | | $ | 20,877 | | | $ | 21,513 | |
Other nonperforming loans: | | | | | | | | | | | | | | | | | | | | | | | | |
Nonaccrual | | | 9,884 | | | | 9,829 | | | | 9,920 | | | | 9,690 | | | | 11,125 | | | | 9,920 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total nonperforming loans | | | 36,586 | | | | 29,606 | | | | 31,433 | | | | 29,855 | | | | 32,002 | | | | 31,433 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other real estate (“ORE”) | | | 5,053 | | | | 5,695 | | | | 5,829 | | | | 4,344 | | | | 5,036 | | | | 5,829 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total nonperforming assets (“NPAs”) | | $ | 41,639 | | | $ | 35,301 | | | $ | 37,262 | | | $ | 34,199 | | | $ | 37,038 | | | $ | 37,262 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
NPAs as % of period-end loans + ORE | | | 0.57 | % | | | 0.50 | % | | | 0.53 | % | | | 0.49 | % | | | 0.52 | % | | | 0.53 | % |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Past due 90 days or more & accruing interest | | $ | 10,654 | | | $ | 10,931 | | | $ | 11,702 | | | $ | 13,107 | | | $ | 10,536 | | | $ | 11,702 | |
| | | | | | | | | | | | | | | | | | |
11
| | |
FIRSTMERIT CORPORATION NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL | | |
(Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | |
| | 2008 | | | 2008 | | | 2007 | | | 2007 | | | 2007 | |
QUARTERLY OTHER INCOME DETAIL | | 2nd Qtr | | | 1st Qtr | | | 4th Qtr | | | 3rd Qtr | | | 2nd Qtr | |
| | | | | | | | | | | | | | | | | | | | |
Trust department income | | $ | 5,824 | | | $ | 5,450 | | | $ | 5,896 | | | $ | 5,657 | | | $ | 6,096 | |
Service charges on deposits | | | 16,028 | | | | 14,736 | | | | 17,067 | | | | 17,003 | | | | 17,055 | |
Credit card fees | | | 12,146 | | | | 11,157 | | | | 12,012 | | | | 11,679 | | | | 11,712 | |
ATM and other service fees | | | 2,770 | | | | 2,794 | | | | 3,055 | | | | 3,306 | | | | 3,189 | |
Bank owned life insurance income | | | 3,217 | | | | 3,201 | | | | 3,283 | | | | 3,735 | | | | 3,290 | |
Investment services and insurance | | | 2,790 | | | | 2,865 | | | | 3,121 | | | | 3,007 | | | | 2,660 | |
Investment securities gains (losses), net | | | 47 | | | | 524 | | | | 1,122 | | | | — | | | | 1 | |
Loan sales and servicing income | | | 1,885 | | | | 1,391 | | | | 1,551 | | | | 1,411 | | | | 1,911 | |
Visa redemption | | | — | | | | 7,898 | | | | — | | | | — | | | | — | |
Other operating income | | | 4,051 | | | | 2,838 | | | | 2,886 | | | | 3,326 | | | | 3,016 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total Other Income | | $ | 48,758 | | | $ | 52,854 | | | $ | 49,993 | | | $ | 49,124 | | | $ | 48,930 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | 2008 | | | 2008 | | | 2007 | | | 2007 | | | 2007 | |
QUARTERLY OTHER EXPENSES DETAIL | | 2nd Qtr | | | 1st Qtr | | | 4th Qtr | | | 3rd Qtr | | | 2nd Qtr | |
| | | | | | | | | | | | | | | | | | | | |
Salaries, wages, pension and employee benefits | | $ | 44,364 | | | $ | 43,065 | | | $ | 43,087 | | | $ | 41,332 | | | $ | 43,538 | |
Net occupancy expense | | | 6,204 | | | | 6,754 | | | | 6,284 | | | | 6,188 | | | | 6,521 | |
Equipment expense | | | 5,842 | | | | 6,194 | | | | 6,239 | | | | 6,389 | | | | 6,328 | |
Taxes, other than federal income taxes | | | 1,701 | | | | 1,702 | | | | 1,274 | | | | 1,984 | | | | 1,655 | |
Stationery, supplies and postage | | | 2,242 | | | | 2,325 | | | | 2,388 | | | | 2,463 | | | | 2,252 | |
Bankcard, loan processing and other costs | | | 7,356 | | | | 7,244 | | | | 7,482 | | | | 7,222 | | | | 7,607 | |
Advertising | | | 2,489 | | | | 2,666 | | | | 2,989 | | | | 3,332 | | | | 1,260 | |
Professional services | | | 2,581 | | | | 1,887 | | | | 3,588 | | | | 2,923 | | | | 4,525 | |
Telephone | | | 994 | | | | 1,019 | | | | 1,006 | | | | 1,142 | | | | 1,094 | |
Amortization of intangibles | | | 177 | | | | 223 | | | | 222 | | | | 222 | | | | 222 | |
Other operating expense | | | 6,600 | | | | 8,155 | | | | 8,736 | | | | 10,833 | | | | 6,373 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total Other Expenses | | $ | 80,550 | | | $ | 81,234 | | | $ | 83,295 | | | $ | 84,030 | | | $ | 81,375 | |
| | | | | | | | | | | | | | | |
12
| | |
FIRSTMERIT CORPORATION AND SUBSIDIARIES ALLOWANCE FOR LOAN LOSSES — Net Charge-off Detail | | |
| | | | | | | | | | | | | | | | | | | | |
| | Quarters ended | | | Year ended | | | Six months ended | |
(Unaudited) | | June 30, | | | December 31, | | | June 30, | |
(Dollars in thousands) | | 2008 | | | 2007 | | | 2007 | | | 2008 | | | 2007 | |
|
Allowance for loan losses — beginning of period | | $ | 94,411 | | | $ | 92,045 | | | $ | 91,342 | | | $ | 94,205 | | | $ | 91,342 | |
Loans charged off: | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 3,718 | | | | 1,212 | | | | 7,856 | | | | 7,171 | | | | 1,660 | |
Mortgage | | | 1,229 | | | | 1,568 | | | | 5,026 | | | | 2,509 | | | | 2,558 | |
Installment | | | 5,620 | | | | 4,321 | | | | 18,343 | | | | 11,624 | | | | 9,067 | |
Home equity | | | 1,226 | | | | 1,478 | | | | 4,151 | | | | 2,292 | | | | 2,298 | |
Credit cards | | | 2,500 | | | | 2,025 | | | | 8,497 | | | | 4,793 | | | | 4,424 | |
Leases | | | — | | | | 5 | | | | 41 | | | | — | | | | 26 | |
Overdrafts | | | 537 | | | | — | | | | 234 | | | | 1,110 | | | | — | |
| | | | | | | | | | | | | | | |
Total | | | 14,830 | | | | 10,609 | | | | 44,148 | | | | 29,499 | | | | 20,033 | |
| | | | | | | | | | | | | | | |
Recoveries: | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 1,032 | | | | 11 | | | | 4,351 | | | | 1,754 | | | | 2,889 | |
Mortgage | | | 7 | | | | — | | | | 44 | | | | 39 | | | | 8 | |
Installment | | | 2,099 | | | | 2,092 | | | | 8,021 | | | | 3,841 | | | | 4,206 | |
Home equity | | | 142 | | | | 307 | | | | 1,265 | | | | 242 | | | | 564 | |
Credit cards | | | 557 | | | | 474 | | | | 1,842 | | | | 1,016 | | | | 948 | |
Manufactured housing | | | 54 | | | | 96 | | | | 323 | | | | 126 | | | | 170 | |
Leases | | | 31 | | | | 49 | | | | 286 | | | | 69 | | | | 161 | |
Overdrafts | | | 171 | | | | — | | | | 44 | | | | 360 | | | | — | |
| | | | | | | | | | | | | | | |
Total | | | 4,093 | | | | 3,029 | | | | 16,176 | | | | 7,447 | | | | 8,946 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Net charge-offs | | | 10,737 | | | | 7,580 | | | | 27,972 | | | | 22,052 | | | | 11,087 | |
Provision for loan losses | | | 14,565 | | | | 9,967 | | | | 30,835 | | | | 26,086 | | | | 14,177 | |
| | | | | | | | | | | | | | | |
Allowance for loan losses — end of period | | $ | 98,239 | | | $ | 94,432 | | | $ | 94,205 | | | $ | 98,239 | | | $ | 94,432 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Average loans outstanding | | $ | 7,140,627 | | | $ | 7,002,750 | | | $ | 6,971,464 | | | $ | 7,082,279 | | | $ | 6,961,099 | |
| | | | | | | | | | | | | | | |
Ratio to average loans: | | | | | | | | | | | | | | | | | | | | |
(Annualized) net charge-offs | | | 0.60 | % | | | 0.43 | % | | | 0.40 | % | | | 0.63 | % | | | 0.32 | % |
| | | | | | | | | | | | | | | |
Provision for loan losses | | | 0.82 | % | | | 0.57 | % | | | 0.44 | % | | | 0.74 | % | | | 0.41 | % |
| | | | | | | | | | | | | | | |
Loans outstanding — period-end | | $ | 7,240,882 | | | $ | 7,052,390 | | | $ | 7,001,886 | | | $ | 7,240,882 | | | $ | 7,052,390 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses: | | $ | 105,549 | | | $ | 100,985 | | | $ | 101,599 | | | $ | 105,549 | | | $ | 100,985 | |
| | | | | | | | | | | | | | | |
As a multiple of (annualized) net charge-offs | | | 2.44 | | | | 3.32 | | | | 3.63 | | | | 2.38 | | | | 4.52 | |
| | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | |
As a percent of period-end loans outstanding | | | 1.36 | % | | | 1.34 | % | | | 1.35 | % | | | 1.36 | % | | | 1.34 | % |
| | | | | | | | | | | | | | | |
As a multiple of (annualized) net charge-offs | | | 2.27 | | | | 3.11 | | | | 3.37 | | | | 2.22 | | | | 4.22 | |
| | | | | | | | | | | | | | | |
13