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Returns on average common equity ("ROE") and average assets ("ROA") for the third quarter 2009 were 8.69% and 0.85%, respectively, compared with 6.27% and 0.57% for the second quarter 2009 and 12.73% and 1.12% for the third quarter 2008. Included in the second quarter 2009 results was a $3.7 million after-tax FDIC Special Assessment fee ($0.04 per share). Also included in the second quarter 2009 results was a $4.5 million after-tax expense ($0.06 per share) associated with the unamortized discount on the preferred stock under the TARP program. "In the third quarter FirstMerit again delivered relatively strong financial performance in a very challenging environment. Conditions in our markets mirror the strains of the national economy stemming from job losses and overall contraction. However, our commitment to sound, fundamental banking strategies and appropriate risk management continues to provide consistent returns to our investors," said Paul G. Greig, chairman, president and CEO of FirstMerit Corporation. "This past quarter we increased our loan loss reserve and tangible common equity levels. While our balance sheet is structured to absorb future credit losses given the uncertainty surrounding the timing and magnitude of an economic recovery, its inherent strength also positions us to take advantage of organic growth and strategic acquisition opportunities. This past quarter we demonstrated further success growing core deposits by leveraging our best-in-class consumer and commercial Reality Checking and Savings products. These valuable core deposits continue to provide us with ample liquidity in order to meet our customers' current and future funding needs," added Greig. Net interest margin was 3.61% for the third quarter of 2009 compared with 3.56% for the second quarter of 2009 and 3.78% for the third quarter of 2008. The margin expansion in the quarter was primarily driven by lower funding costs due to a continued shift in deposit mix with increased emphasis on core deposit products and lower certificate of deposit balances. Average loans during the third quarter of 2009 decreased $189.7 million, or 2.62%, compared to the second quarter of 2009 and decreased $225.3 million, or 3.09%, compared with the third quarter of 2008. The fluctuation from second quarter 2009 to third quarter 2009 was due to decreases in commercial loans of $157.3 million or 3.69%, mortgage loans of $21.9 million, or 4.26%, and installment loans of $20.9 million, or 1.38%. The decrease in the third quarter 2009 as compared to third quarter 2008 was due to decreases in commercial loans of $63.2 million, or 1.52%, mortgage loans of $77.2 million, or 13.56%, and installment loans of $125.2 million, or 7.74%. The decrease in average loan volume over both periods reflects the current economic cycle in which business owners and consumers are retrenching on their demand for leverage and borrowing. Business customers continue their trend in inventory and receivable reduction and paying down existing debt to strengthen their balance sheets. Consumer customers are taking a similar approach with lower borrowing demand and increased usage of short-term savings products. Average deposits during the third quarter of 2009 decreased $230.3 million, or 3.02%, compared with the second quarter of 2009 and increased $58.1 million, or 0.79%, compared with the third quarter of 2008. During the third quarter of 2009 the Company increased its average core deposits, which excludes time deposits, by $138.9 million, or 2.58%, compared with the second quarter of 2009, and $913.8 million, or 19.87%, compared with the third quarter of 2008. These results reflect the company's continued success in growing core deposit relationships and deemphasizing a reliance on higher-cost certificate of deposit accounts. The core deposit growth reflects the company's success in building a strong brand name in its core markets and capitalizing on market disruption in northeast Ohio. Average investments decreased $5.4 million, or 0.20%, compared with the second quarter of 2009 and increased $270.7 million, or 11.01%, over the third quarter of 2008. The year-over-year increase is a result of the leverage strategy implemented in the fourth quarter of 2008. Net interest income on a fully tax-equivalent ("FTE") basis was $89.1 million in the third quarter 2009 compared with $88.8 million in the second quarter of 2009 and $92.7 million in the third quarter of 2008. Compared with the second quarter of 2009, average earning assets decreased $198.5 million, or 1.98% and increased $47.0 million or 0.48% compared to the third quarter of 2008. Noninterest income net of securities transactions for the third quarter of 2009 was $48.6 million, a decrease of $1.0 million, or 2.06%, from the second quarter of 2009 and an increase of $1.6 million, or 3.43%, from the third quarter of 2008. The primary changes in these noninterest income categories compared with the third quarter of 2008 were as follows: trust income was $5.1 million, a decrease of $0.5 million; ATM and other service fees was $2.9 million, an increase of $0.2 million; investment services and insurance was $2.5 million, a decrease of $0.4 million; and loan sales and servicing was $3.9 million, an increase of $2.5 million. The increase in loan sales and servicing is primarily attributed to increased mortgage origination and sales volume. Other income, net of securities gains, as a percentage of net revenue for the third quarter of 2009 was 35.32% compared with 35.87% for second quarter of 2009 and 33.67% for the third quarter of 2008. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales. Noninterest expense for the third quarter of 2009 was $84.2 million, a decrease of $6.4 million, or 7.07%, from the second quarter of 2009 and an increase of $3.6 million, or 4.41%, from the third quarter of 2008. Included in the second quarter 2009 expenses was the FDIC Special Assessment pretax fee of $5.1 million. The efficiency ratio for the third quarter of 2009 was 61.05%, compared with 65.34% for the second quarter of 2009 and 57.64% for the third quarter of 2008. Net charge-offs totaled $18.8 million, or 1.05% of average loans, in the third quarter of 2009 compared with $21.6 million, or 1.19% of average loans, in the second quarter 2009 and $11.8 million, or 0.64% of average loans, in the third quarter of 2008. Nonperforming assets totaled $88.9 million at September 30, 2009, an increase of $15.5 million, or 21.17%, compared with June 30, 2009 and an increase of $45.4 million, or 104.37%, compared with September 30, 2008. Nonperforming assets at September 30, 2009 represented 1.26% of period-end loans plus other real estate compared with 1.03% at June 30, 2009 and 0.59% at September 30, 2008. The allowance for loan losses totaled $116.4 million at September 30, 2009, an increase of $5.1 million from June 30, 2009. Given the current economic environment, the Company has continued a strategy to build reserve levels and year-to-date has provided $12.6 million in excess of net charge-offs to the allowance for loan losses. At September 30, 2009, the allowance for loan losses was 1.66% of period-end loans compared with 1.56% at June 30, 2009 and 1.38% at September 30, 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 1.72% at September 30, 2009, compared with 1.64% at June 30, 2009 and 1.47% at September 30, 2008. The allowance for credit losses to nonperforming loans was 153.27% at September 30, 2009, compared with 184.71% at June 30, 2009 and 281.28% at September 30, 2008. The Company's total assets at September 30, 2009 were $10.8 billion, an increase of $64.4 million, or 0.60%, compared with June 30, 2009 and an increase of $76.5 million, or 0.72%, compared with September 30, 2008. Growth in investment securities of $300.8 million, or 12.28%, compared with September 30, 2008, provided the majority of the overall asset growth. Total deposits were $7.3 billion at September 30, 2009, a decrease of $179.9 million, or 2.41%, from June 30, 2009 and a decrease of $159.3 million, or 2.14%, from September 30, 2008. The decrease as compared to both June 30, 2009 and September 30, 2008 was driven by a decrease in certificates and time deposits of 18.12% and 40.40%, respectively, reflecting the company's success remixing the balance sheet and focusing on core deposit growth. Core deposits totaled $5.6 billion at September 30, 2009, an increase of $194.5 million, or 3.61%, from June 30, 2009 and an increase of $988.1 million, or 21.52%, from September 30, 2008. Shareholders' equity was $1,059.2 million at September 30, 2009, compared with $1,022.6 million at June 30, 2009 and $926.1 million at September 30, 2008. The Company increased its strong capital position as tangible common equity to assets was 8.65% at September 30, 2009, compared with 8.36% at June 30, 2009 and, 7.45% at September 30, 2008. The common dividend per share paid in the third quarter 2009 was $0.16 as well as a $0.13 per share dividend of common stock. Third Quarter 2009 Conference Call FirstMerit will host an earnings conference call on October 27, 2009, at 2:00 p.m. EDT to provide an overview of first 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: 34702586. A replay of the conference call will be available at approximately 5:00 p.m., on October 27, 2009 through November 4, 2009, by dialing (800) 642-1687, and entering the PIN: 34702586. About FirstMerit FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $10.8 billion as of September 30, 2009 and 156 banking offices and 179 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.
FirstMerit Corporation
Analysts: Thomas O'Malley/Investor Relations Officer
Phone: 330.384.7109
Media Contact: Robert Townsend/Media Relations Officer
Phone: 330.384.7075
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
(Dollars in thousands) --------
2009 2009 2009
EARNINGS 3rd Qtr 2nd Qtr 1st Qtr
-------- ------- ------- -------
Net interest income FTE (a) $89,079 $88,806 $88,577
Provision for loan losses 23,887 26,521 18,065
Other income 51,567 50,845 55,188
Other expenses 84,165 90,564 83,203
FTE adjustment (a) 1,702 1,691 1,683
Net income 22,763 15,495 29,434
Diluted EPS (b) 0.27 0.13 0.33
PERFORMANCE RATIOS
------------------
Return on average assets (ROA) 0.85% 0.57% 1.07%
Return on average common equity (ROE) 8.69% 6.27% 12.39%
Net interest margin FTE (a) 3.61% 3.56% 3.53%
Efficiency ratio 61.05% 65.34% 57.81%
Number of full-time equivalent
employees 2,522 2,540 2,562
MARKET DATA
-----------
Book value/common share $12.34 $11.99 $11.84
Period-end common share mkt value 19.03 17.00 18.20
Market as a % of book 154% 142% 154%
Cash dividends/common share $0.16 $0.16 $0.29
Common stock dividend payout ratio 59.26% 84.21% 80.56%
Average basic common shares (b) 85,872 84,123 82,514
Average diluted common shares (b) 85,880 84,131 82,523
Period end common shares 85,869 85,266 81,417
Common shares repurchased 13 61 45
Common stock market capitalization $1,634,087 $1,449,522 $1,481,789
ASSET QUALITY
-------------
Gross charge-offs $21,819 $24,726 $18,936
Net charge-offs 18,757 21,556 15,565
Allowance for loan losses 116,352 111,222 106,257
Reserve for unfunded lending
commitments 4,470 6,054 6,019
Nonperforming assets (NPAs) 88,881 73,351 76,243
Net charge-offs/average loans
ratio 1.05% 1.19% 0.86%
Allowance for loan losses/period-
end loans 1.66% 1.56% 1.45%
Allowance for credit losses/period-
end loans 1.72% 1.64% 1.53%
NPAs/loans and other real estate 1.26% 1.03% 1.04%
Allowance for loan losses/
nonperforming loans 147.60% 175.17% 151.35%
Allowance for credit losses/
nonperforming loans 153.27% 184.71% 159.93%
CAPITAL & LIQUIDITY
-------------------
Period-end tangible common equity
to assets 8.65% 8.36% 7.60%
Average equity to assets 9.77% 9.37% 9.66%
Average equity to loans 14.72% 14.07% 14.54%
Average loans to deposits 95.57% 95.17% 96.56%
AVERAGE BALANCES
----------------
Assets $10,629,359 $10,884,228 $11,115,042
Deposits 7,384,507 7,614,826 7,644,118
Loans 7,057,021 7,246,752 7,381,019
Earning assets 9,802,810 10,001,266 10,189,233
Shareholders' equity 1,038,824 1,019,628 1,073,276
ENDING BALANCES
---------------
Assets $10,761,355 $10,696,962 $10,972,176
Deposits 7,271,274 7,451,220 7,678,213
Loans 7,029,648 7,145,146 7,350,763
Goodwill 139,245 139,245 139,245
Intangible assets 1,143 1,229 1,316
Earning assets 9,793,244 9,869,183 10,108,403
Total shareholders' equity 1,059,209 1,022,647 1,084,269
Quarters
--------
2008 2008
EARNINGS 4th Qtr 3rd Qtr
-------- ------- -------
Net interest income FTE (a) $94,855 $92,659
Provision for loan losses 16,986 15,531
Other income 52,795 47,029
Other expenses 88,240 80,609
FTE adjustment (a) 1,617 1,538
Net income 29,136 29,753
Diluted EPS (b) 0.35 0.36
PERFORMANCE RATIOS
------------------
Return on average assets (ROA) 1.08% 1.12%
Return on average common equity (ROE) 12.47% 12.73%
Net interest margin FTE (a) 3.82% 3.78%
Efficiency ratio 60.34% 57.64%
Number of full-time equivalent
employees 2,575 2,614
MARKET DATA
-----------
Book value/common share $11.58 $11.44
Period-end common share mkt value 20.59 21.00
Market as a % of book 178% 184%
Cash dividends/common share $0.29 $0.29
Common stock dividend payout ratio 82.86% 80.56%
Average basic common shares (b) 82,193 82,090
Average diluted common shares (b) 82,202 82,117
Period end common shares 80,960 80,974
Common shares repurchased 19 3
Common stock market capitalization $1,666,966 $1,700,454
ASSET QUALITY
-------------
Gross charge-offs $17,932 $14,957
Net charge-offs 15,236 11,763
Allowance for loan losses 103,757 102,007
Reserve for unfunded lending
commitments 6,588 6,493
Nonperforming assets (NPAs) 57,526 43,491
Net charge-offs/average loans
ratio 0.82% 0.64%
Allowance for loan losses/period-
end loans 1.40% 1.38%
Allowance for credit losses/period-
end loans 1.49% 1.47%
NPAs/loans and other real estate 0.77% 0.59%
Allowance for loan losses/
nonperforming loans 198.76% 264.45%
Allowance for credit losses/
nonperforming loans 211.38% 281.28%
CAPITAL & LIQUIDITY
-------------------
Period-end tangible common equity
to assets 7.27% 7.45%
Average equity to assets 8.66% 8.79%
Average equity to loans 12.62% 12.76%
Average loans to deposits 96.01% 99.40%
AVERAGE BALANCES
----------------
Assets $10,731,029 $10,569,496
Deposits 7,672,560 7,326,364
Loans 7,366,246 7,282,333
Earning assets 9,876,488 9,755,812
Shareholders' equity 929,788 929,495
ENDING BALANCES
---------------
Assets $11,100,026 $10,684,845
Deposits 7,597,679 7,430,556
Loans 7,425,613 7,381,592
Goodwill 139,245 139,245
Intangible assets 1,403 1,490
Earning assets 10,209,602 9,840,951
Total shareholders' equity 937,843 926,078
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.
(b) - Average outstanding shares and per share data restated to reflect
the effect of stock dividends declared April 28, 2009 and August 20, 2009.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited, except December 31,
2008, which is derived from
the audited financial
statements) September 30, December 31, September 30,
2009 2008 2008
------------- ------------ -------------
ASSETS
Cash and due from banks $193,060 $178,406 $186,087
Investment securities
Held-to-maturity 166,663 158,273 161,722
Available-for-sale 2,584,414 2,614,575 2,288,511
Loans held for sale 12,519 11,141 9,126
Loans:
Commercial loans 4,097,252 4,352,730 4,273,065
Mortgage loans 481,336 547,125 559,276
Installment loans 1,481,200 1,574,587 1,613,481
Home equity loans 761,553 733,832 717,887
Credit card loans 147,767 149,745 148,179
Leases 60,540 67,594 69,704
------ ------ ------
Total loans 7,029,648 7,425,613 7,381,592
Less allowance for loan losses (116,352) (103,757) (102,007)
-------- -------- --------
Net loans 6,913,296 7,321,856 7,279,585
Premises and equipment, net 126,416 133,184 128,570
Goodwill 139,245 139,245 139,245
Intangible assets 1,143 1,403 1,490
Accrued interest receivable and
other assets 624,599 541,943 490,509
------- ------- -------
Total assets $10,761,355 $11,100,026 $10,684,845
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-non-interest bearing $1,898,913 $1,637,534 1,540,523
Demand-interest bearing 644,121 666,615 663,924
Savings and money market
accounts 3,035,922 2,512,331 2,386,453
Certificates and other time
deposits 1,692,318 2,781,199 2,839,656
--------- --------- ---------
Total deposits 7,271,274 7,597,679 7,430,556
--------- --------- ---------
Securities sold under agreements
to repurchase 1,350,475 921,390 1,244,200
Wholesale borrowings 749,397 1,344,195 898,720
Accrued taxes, expenses, and other
liabilities 331,000 298,919 185,291
------- ------- -------
Total liabilities 9,702,146 10,162,183 9,758,767
--------- ---------- ---------
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 -- -- --
Fixed-Rate Cumulative Perpetual
Preferred Stock, Series A,
$1,000 liquidation preference;
authorized and issued 125,000
shares -- -- --
Common stock, without par value:
authorized 300,000,000 shares;
issued 92,635,910, 92,026,350 and
92,026,350 at September 30, 2009,
December 31, 2008 and September
30, 2008, respectively. 127,937 127,937 127,937
Capital surplus 68,694 94,802 93,387
Accumulated other comprehensive
loss (7,437) (54,080) (59,190)
Retained earnings 1,042,752 1,053,435 1,047,781
Treasury stock, at cost,
6,767,053, 11,066,108 and
11,052,155 shares at September
30, 2009, December 31, 2008 and
September 30, 2008, respectively (172,737) (284,251) (283,837)
-------- -------- --------
Total shareholders' equity 1,059,209 937,843 926,078
--------- ------- -------
Total liabilities and
shareholders' equity $10,761,355 $11,100,026 $10,684,845
=========== =========== ===========
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Quarterly Periods
-----------------
(Unaudited)
(Dollars in thousands) September 30, June 30, March 31,
2009 2009 2009
------------- ----------- -----------
ASSETS
Cash and due from banks $159,985 $194,381 $209,922
Investment securities
Held-to-maturity 160,084 156,877 161,217
Available-for-sale 2,568,348 2,576,994 2,623,732
Fed funds sold - - 17
Loans held for sale 17,357 20,643 23,248
Loans:
Commercial loans 4,105,778 4,263,114 4,337,108
Mortgage loans 492,089 513,982 536,498
Installment loans 1,492,019 1,512,929 1,558,374
Home equity loans 758,353 749,097 736,956
Credit card loans 149,460 146,589 146,355
Leases 59,322 61,041 65,728
------ ------ ------
Total loans 7,057,021 7,246,752 7,381,019
Less allowance for loan
losses 111,073 104,864 102,533
------- ------- -------
Net loans 6,945,948 7,141,888 7,278,486
Total earning assets 9,802,810 10,001,266 10,189,233
Premises and equipment, net 127,096 129,433 132,156
Accrued interest
receivable and other
assets 650,541 664,012 686,264
------- ------- -------
TOTAL ASSETS $10,629,359 $10,884,228 $11,115,042
=========== =========== ===========
LIABILITIES
Deposits:
Demand-non-interest
bearing $1,947,359 $1,891,792 $1,767,885
Demand-interest bearing 647,712 671,235 655,279
Savings and money market
accounts 2,916,980 2,810,155 2,638,166
Certificates and other
time deposits 1,872,456 2,241,644 2,582,788
--------- --------- ---------
Total deposits 7,384,507 7,614,826 7,644,118
Securities sold under
agreements to repurchase 1,087,875 945,178 941,112
Wholesale borrowings 883,377 1,019,786 1,151,777
------- --------- ---------
Total funds 9,355,759 9,579,790 9,737,007
Accrued taxes, expenses
and other liabilities 234,776 284,810 304,759
------- ------- -------
Total liabilities 9,590,535 9,864,600 10,041,766
SHAREHOLDERS' EQUITY
Preferred stock - 27,850 109,807
Common stock 127,937 127,937 127,937
Common stock warrant - 2,820 4,175
Capital surplus 55,732 63,457 86,872
Accumulated other
comprehensive loss (26,793) (35,569) (49,477)
Retained earnings 1,050,359 1,056,739 1,069,948
Treasury stock (168,411) (223,606) (275,986)
-------- -------- --------
Total shareholders'
equity 1,038,824 1,019,628 1,073,276
--------- --------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $10,629,359 $10,884,228 $11,115,042
=========== =========== ===========
Quarterly Periods
-----------------
(Dollars in thousands) December 31, September 30,
2008 2008
------------ -------------
ASSETS
Cash and due from banks $192,804 $171,370
Investment securities
Held-to-maturity 160,283 159,928
Available-for-sale 2,340,639 2,297,829
Fed funds sold 424 3,674
Loans held for sale 8,896 12,048
Loans:
Commercial loans 4,273,123 4,168,951
Mortgage loans 555,713 569,293
Installment loans 1,596,053 1,617,265
Home equity loans 722,466 709,365
Credit card loans 150,133 147,924
Leases 68,758 69,535
------ ------
Total loans 7,366,246 7,282,333
Less allowance for loan
losses 100,898 98,091
------- ------
Net loans 7,265,348 7,184,242
Total earning assets 9,876,488 9,755,812
Premises and equipment, net 130,511 127,267
Accrued interest
receivable and other
assets 632,124 613,138
------- -------
TOTAL ASSETS $10,731,029 $10,569,496
=========== ===========
LIABILITIES
Deposits:
Demand-non-interest
bearing $1,607,901 $1,545,427
Demand-interest bearing 658,208 678,803
Savings and money market
accounts 2,534,702 2,373,995
Certificates and other
time deposits 2,871,749 2,728,139
--------- ---------
Total deposits 7,672,560 7,326,364
Securities sold under
agreements to repurchase 1,168,438 1,504,011
Wholesale borrowings 766,358 634,226
------- -------
Total funds 9,607,356 9,464,601
Accrued taxes, expenses
and other liabilities 193,885 175,400
------- -------
Total liabilities 9,801,241 9,640,001
SHAREHOLDERS' EQUITY
Preferred stock - -
Common stock 127,937 127,937
Common stock warrant - -
Capital surplus 93,761 93,381
Accumulated other
comprehensive loss (62,018) (54,000)
Retained earnings 1,053,992 1,048,452
Treasury stock (283,884) (286,275)
-------- --------
Total shareholders'
equity 929,788 929,495
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $10,731,029 $10,569,496
=========== ===========
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT
CORPORATION AND
SUBSIDIARIES Three months ended Year ended
---------------- ------------------ ----------
(Dollars in
thousands) September 30, 2009 December 31, 2008
------------------ -----------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
-------- -------- ------- -------- -------- -------
ASSETS
Cash and due from
banks $159,985 $177,089
Investment
securities and
federal funds
sold:
U.S. Treasury
securities and
U.S. Government
agency
obligations
(taxable) 2,210,551 24,115 4.33% 1,985,026 94,260 4.75%
Obligations of
states and
political
subdivisions
(tax exempt) 318,853 4,872 6.06% 294,724 17,910 6.08%
Other
securities and
federal funds
sold 199,028 2,049 4.08% 216,794 11,326 5.22%
------- ----- ------- ------
Total
investment
securities
and federal
funds sold 2,728,432 31,036 4.51% 2,496,544 123,496 4.95%
Loans held for
sale 17,357 230 5.26% 29,419 1,602 5.45%
Loans 7,057,021 84,107 4.73% 7,203,946 434,704 6.03%
--------- ------ --------- -------
Total earning
assets 9,802,810 115,373 4.67% 9,729,909 559,802 5.75%
Allowance for
loan losses (111,073) (96,714)
Other assets 777,637 739,158
------- -------
Total
assets $10,629,359 $10,549,442
=========== ===========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Deposits:
Demand - non-
interest
bearing $1,947,359 -- -- $1,530,021 -- --
Demand -
interest
bearing 647,712 137 0.08% 687,160 2,514 0.37%
Savings and
money market
accounts 2,916,980 5,763 0.78% 2,398,778 29,839 1.24%
Certificates
and other time
deposits 1,872,456 12,284 2.60% 2,801,623 105,853 3.78%
--------- ------ --------- -------
Total
deposits 7,384,507 18,184 0.98% 7,417,582 138,206 1.86%
Securities sold
under agreements
to repurchase 1,087,875 1,286 0.47% 1,343,441 31,857 2.37%
Wholesale
borrowings 883,377 6,824 3.06% 663,109 27,574 4.16%
------- ----- ------- ------
Total
interest
bearing
liabilities 7,408,400 26,294 1.41% 7,894,111 197,637 2.50%
Other liabilities 234,776 189,222
Shareholders'
equity 1,038,824 936,088
--------- -------
Total
liabilities
and
shareholders'
equity $10,629,359 $10,549,442
=========== ===========
Net yield on
earning assets $9,802,810 89,079 3.61% $9,729,909 362,165 3.72%
========== ====== ==== ========== ======= ====
Interest rate
spread 3.26% 3.25%
==== ====
FIRSTMERIT
CORPORATION AND
SUBSIDIARIES Three months ended
---------------- ------------------
(Dollars in
thousands) September 30, 2008
------------------
Average Average
Balance Interest Rate
------- -------- -------
ASSETS
Cash and due from
banks $171,370
Investment securities
and federal funds
sold:
U.S. Treasury
securities and
U.S. Government
agency
obligations
(taxable) 1,943,589 23,374 4.78%
Obligations of
states and
political
subdivisions
(tax exempt) 301,688 4,575 6.03%
Other
securities and
federal funds
sold 216,154 2,780 5.12%
------- -----
Total investment
securities and
federal
funds sold 2,461,431 30,729 4.97%
Loans held for sale 12,048 178 5.88%
Loans 7,282,333 107,781 5.89%
--------- -------
Total earning
assets 9,755,812 138,688 5.66%
Allowance for
loan losses (98,091)
Other assets 740,405
-------
Total assets $10,569,496
===========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Deposits:
Demand - non-
interest
bearing $1,545,427 -- --
Demand -
interest
bearing 678,803 589 0.35%
Savings and
money market
accounts 2,373,995 6,932 1.16%
Certificates
and other time
deposits 2,728,139 23,463 3.42%
--------- ------
Total deposits 7,326,364 30,984 1.68%
Securities sold
under agreements
to repurchase 1,504,011 8,244 2.18%
Wholesale
borrowings 634,226 6,801 4.27%
------- -----
Total
interest
bearing
liabilities 7,919,174 46,029 2.31%
Other liabilities 175,400
Shareholders'
equity 929,495
-------
Total
liabilities
and
shareholders'
equity $10,569,496
===========
Net yield on
earning assets $9,755,812 92,659 3.78%
========== ====== ====
Interest rate spread 3.35%
====
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.
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,
2009 2008 2009 2008
Interest income:
Interest and fees on loans,
including held for sale $84,283 $107,927 $258,329 $330,731
Interest and dividends on
investment securities and federal
funds sold 29,388 29,223 90,857 87,714
------ ------ ------ ------
Total interest income 113,671 137,150 349,186 418,445
------- ------- ------- -------
Interest expense:
Interest on deposits:
Demand-interest bearing 137 589 451 2,144
Savings and money market
accounts 5,763 6,932 16,592 23,075
Certificates and other time
deposits 12,284 23,463 46,197 82,037
Interest on securities sold under
agreements to repurchase 1,286 8,244 3,496 28,105
Interest on wholesale borrowings 6,824 6,801 21,064 20,133
----- ----- ------ ------
Total interest expense 26,294 46,029 87,800 155,494
------ ------ ------ -------
Net interest income 87,377 91,121 261,386 262,951
Provision for loan losses 23,887 15,531 68,473 41,617
------ ------ ------ ------
Net interest income after
provision for loan losses 63,490 75,590 192,913 221,334
------ ------ ------- -------
Other income:
Trust department income 5,081 5,562 15,309 16,836
Service charges on deposits 16,782 16,648 46,798 47,412
Credit card fees 11,711 12,084 34,463 35,387
ATM and other service fees 2,935 2,717 8,380 8,281
Bank owned life insurance income 3,216 3,139 9,216 9,557
Investment services and insurance 2,498 2,899 7,686 8,554
Investment securities gains, net 2,925 - 4,103 571
Loan sales and servicing income 3,881 1,370 10,007 4,646
Gain on Visa Inc. redemption - - - 7,898
Gain on post medical retirement
curtailment - - 9,543 -
Other operating income 2,538 2,610 12,095 9,499
----- ----- ------ -----
Total other income 51,567 47,029 157,600 148,641
------ ------ ------- -------
Other expenses:
Salaries, wages, pension and
employee benefits 43,351 45,043 130,158 132,472
Net occupancy expense 5,739 5,741 18,468 18,699
Equipment expense 5,847 5,962 17,856 17,998
Stationery, supplies and postage 2,167 2,347 6,493 6,914
Bankcard, loan processing and
other costs 7,548 7,497 23,252 22,097
Professional services 3,980 3,966 10,316 8,434
Amortization of intangibles 86 86 260 486
Other operating expense 15,447 9,967 51,129 35,293
------ ----- ------ ------
Total other expenses 84,165 80,609 257,932 242,393
------ ------ ------- -------
Income before federal
income tax expense 30,892 42,010 92,581 127,582
Federal income tax expense 8,129 12,257 24,889 37,233
----- ------ ------ ------
Net income $22,763 $29,753 $67,692 $90,349
======= ======= ======= =======
Other comprehensive income, net of taxes
Unrealized securities' holding
gain (loss), net of taxes $28,172 $(8,978) $50,235 $(19,488)
Unrealized hedging gain (loss),
net of taxes - 347 (94) 1,133
Minimum pension liability
adjustment, net of taxes (277) 875 (831) 2,621
Less: reclassification adjustment
for securities' gain realized in
net income, net of taxes 1,901 - 2,667 371
----- ---- ----- ---
Total other comprehensive gain
(loss), net of taxes 25,994 (7,756) 46,643 (16,105)
------ ------ ------ -------
Comprehensive income $48,757 $21,997 $114,335 $74,244
======= ======= ======== =======
Net income applicable to common
shares $22,763 $29,753 $61,321 $90,349
======= ======= ======= =======
Net income used in diluted EPS
calculation $22,763 $29,753 $61,321 $90,354
======= ======= ======= =======
Weighted average number of common
shares outstanding - basic * 85,872 82,090 84,182 82,015
====== ====== ====== ======
Weighted average number of common
shares outstanding - diluted * 85,880 82,117 84,190 82,062
====== ====== ====== ======
Basic earnings per share * $0.27 $0.36 $0.73 $1.10
===== ===== ===== =====
Diluted earnings per share * $0.27 $0.36 $0.73 $1.10
===== ===== ===== =====
Stock dividend per share 0.72% - 0.73% -
==== ==== ==== ====
Dividend per share $0.16 $0.29 $0.61 $0.87
===== ===== ===== =====
* Average outstanding shares and per share data restated to reflect the
effect of stock dividends declared April 28, 2009 and August 20, 2009.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME---LINKED
QUARTERS
(Unaudited) Quarterly Results
-----------------
(Dollars in thousands, except 2009 2009 2009 2008 2008
share data) 3rd Q 2nd Q 1st Q 4th Q 3rd Q
Interest and fees on loans,
including held for sale $84,283 $86,247 $87,799 $105,463 $107,927
Interest and dividends -
securities and federal
funds sold 29,388 29,912 31,557 29,918 29,223
------ ------ ------ ------ ------
Total interest income 113,671 116,159 119,356 135,381 137,150
------- ------- ------- ------- -------
Interest on deposits:
Demand-interest bearing 137 159 155 370 589
Savings and money market
accounts 5,763 5,452 5,377 6,764 6,932
Certificates and other time
deposits 12,284 15,325 18,588 23,816 23,463
Securities sold under
agreements to repurchase 1,286 1,211 999 3,752 8,244
Wholesale borrowings 6,824 6,897 7,343 7,441 6,801
----- ----- ----- ----- -----
Total interest expense 26,294 29,044 32,462 42,143 46,029
------ ------ ------ ------ ------
Net interest income 87,377 87,115 86,894 93,238 91,121
Provision for loan losses 23,887 26,521 18,065 16,986 15,531
------ ------ ------ ------ ------
Net interest income after
provision for loan
losses 63,490 60,594 68,829 76,252 75,590
------ ------ ------ ------ ------
Other income:
Trust department income 5,081 5,438 4,790 5,291 5,562
Service charges on deposits 16,782 15,853 14,163 15,450 16,648
Credit card fees 11,711 11,668 11,084 11,667 12,084
ATM and other service fees 2,935 2,839 2,606 2,613 2,717
Bank owned life insurance
income 3,216 2,985 3,015 2,451 3,139
Investment services and
insurance 2,498 2,270 2,918 1,949 2,899
Investment securities gains,
net 2,925 1,178 - 1,555 -
Loan sales and servicing
income 3,881 3,791 2,335 2,294 1,370
Gain on Visa Inc. - - - 5,768 -
Gain on post medical
retirement curtailment - - 9,543 - -
Other operating income 2,538 4,823 4,734 3,757 2,610
----- ----- ----- ----- -----
Total other income 51,567 50,845 55,188 52,795 47,029
------ ------ ------ ------ ------
Other expenses:
Salaries, wages, pension and
employee benefits 43,351 44,125 42,682 46,991 45,043
Net occupancy expense 5,739 5,858 6,871 5,950 5,741
Equipment expense 5,847 6,212 5,797 6,139 5,962
Stationery, supplies and
postage 2,167 2,051 2,275 2,458 2,347
Bankcard, loan processing and
other costs 7,548 7,862 7,842 7,359 7,497
Professional services 3,980 2,856 3,480 3,261 3,966
Amortization of intangibles 86 87 87 87 86
Other operating expense 15,447 21,513 14,169 15,995 9,967
------ ------ ------ ------ -----
Total other expenses 84,165 90,564 83,203 88,240 80,609
------ ------ ------ ------ ------
Income before income tax
expense 30,892 20,875 40,814 40,807 42,010
Federal income taxes 8,129 5,380 11,380 11,671 12,257
----- ----- ------ ------ ------
Net income $22,763 $15,495 $29,434 $29,136 $29,753
------- ------- ------- ------- -------
Other comprehensive income
(loss), net of taxes 25,994 5,203 15,446 5,110 (7,756)
------ ----- ------ ----- ------
Comprehensive income $48,757 $20,698 $44,880 $34,246 $21,997
======= ======= ======= ======= =======
Net income applicable to
common shares $22,763 $10,995 $27,563 $29,136 $29,753
======= ======= ======= ======= =======
Adjusted net income used in
diluted EPS calculation $22,763 $10,995 $27,563 $29,136 $29,753
======= ======= ======= ======= =======
Weighted-average common
shares - basic * 85,872 84,123 82,514 82,193 82,090
------ ------ ------ ------ ------
Weighted-average common
shares - diluted * 85,880 84,131 82,523 82,202 82,117
------ ------ ------ ------ ------
Basic net income per share * $0.27 $0.13 $0.33 $0.35 $0.36
===== ===== ===== ===== =====
Diluted net income per share * $0.27 $0.13 $0.33 $0.35 $0.36
===== ===== ===== ===== =====
* Average outstanding shares and per share data restated to reflect the
effect of stock dividends declared April 28, 2009 and August 20, 2009.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited, except December 31, 2008 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
Quarterly Periods
-----------------
Allowance for Credit Sept 30 Jun 30 Mar 31 Dec 31
Losses 2009 2009 2009 2008
-------------------- ------ ------ ------ ------
Allowance for loan
losses, beginning of
period $111,222 $106,257 $103,757 $102,007
Provision for loan
losses 23,887 26,521 18,065 16,986
Charge-offs 21,819 24,726 18,936 17,932
Recoveries 3,062 3,170 3,371 2,696
----- ----- ----- -----
Net charge-offs 18,757 21,556 15,565 15,236
------ ------ ------ ------
Allowance for loan
losses, end of period $116,352 $111,222 $106,257 $103,757
======== ======== ======== ========
Reserve for unfunded
lending commitments,
beginning of period $6,054 $6,019 $6,588 $6,493
Provision for credit
losses (1,584) 35 (569) 95
------ --- ---- ---
Reserve for unfunded
lending commitments,
end of period $4,470 $6,054 $6,019 $6,588
====== ====== ====== ======
Allowance for Credit
Losses $120,822 $117,276 $112,276 $110,345
======== ======== ======== ========
Ratios
-------
Provision for loan
losses as a % of
average loans 1.34% 1.47% 0.99% 0.92%
Provision for credit
losses as a % of
average loans (0.09)% (0.00)% (0.03)% 0.01%
Net charge-offs as a %
of average loans 1.05% 1.19% 0.86% 0.82%
Allowance for loan
losses as a % of period-
end loans 1.66% 1.56% 1.45% 1.40%
Allowance for credit
losses as a % of period-
end loans 1.72% 1.64% 1.53% 1.49%
Allowance for loan
losses as a % of
nonperforming loans 147.60% 175.17% 151.35% 198.76%
Allowance for credit
losses as a % of
nonperforming loans 153.27% 184.71% 159.93% 211.38%
Asset Quality
-------------
Impaired loans:
Nonaccrual $63,357 $48,563 $54,070 $40,195
Other nonperforming loans:
Nonaccrual 15,474 14,929 16,134 12,007
------ ------ ------ ------
Total nonperforming
loans 78,831 63,492 70,204 52,202
Other real estate
("ORE") 10,050 9,859 6,039 5,324
------ ----- ----- -----
Total nonperforming
assets ("NPAs") $88,881 $73,351 $76,243 $57,526
======= ======= ======= =======
NPAs as % of period-end
loans + ORE 1.26% 1.03% 1.04% 0.77%
==== ==== ==== ====
Past due 90 days or
more & accruing
interest $27,764 $22,129 $18,602 $23,928
======= ======= ======= =======
Quarterly Annual
Period Period
--------- ------
Allowance for Credit Sept 30 Dec 31
Losses 2008 2008
-------------------- ------- ------
Allowance for loan
losses, beginning of
period $98,239 $94,205
Provision for loan
losses 15,531 58,603
Charge-offs 14,957 62,388
Recoveries 3,194 13,337
----- ------
Net charge-offs 11,763 49,051
------ ------
Allowance for loan
losses, end of period $102,007 $103,757
======== ========
Reserve for unfunded
lending commitments,
beginning of period $7,310 $7,394
Provision for credit
losses (817) (806)
---- ----
Reserve for unfunded
lending commitments,
end of period $6,493 $6,588
====== ======
Allowance for Credit
Losses $108,500 $110,345
======== ========
Ratios
-------
Provision for loan
losses as a % of
average loans 0.85% 0.81%
Provision for credit
losses as a % of
average loans (0.04)% (0.01)%
Net charge-offs as a %
of average loans 0.64% 0.68%
Allowance for loan
losses as a % of period-
end loans 1.38% 1.40%
Allowance for credit
losses as a % of period-
end loans 1.47% 1.49%
Allowance for loan
losses as a % of
nonperforming loans 264.45% 198.76%
Allowance for credit
losses as a % of
nonperforming loans 281.28% 211.38%
Asset Quality
-------------
Impaired loans:
Nonaccrual $29,245 $40,195
Other nonperforming loans:
Nonaccrual 9,328 12,007
----- ------
Total nonperforming
loans |
