EX-99.1 2 l42489exv99w1.htm EX-99.1 exv99w1
EXHIBIT 99.1
(FIRSTMERIT CORPORATION LOGO)
FOR IMMEDIATE RELEASE
FirstMerit Corporation
Analyst: Thomas O’Malley/Investor Relations Officer
Phone: 330.384.7109
Media Contact: Robert Townsend/Media Relations Officer
Phone: 330.384.7075
FirstMerit Corporation Reports First Quarter 2011 EPS of $0.25 Per Share
Quarterly Highlights include:
  •   48th consecutive quarter of profitability
 
  •   Solid linked-quarter credit trends supported by $10.7 million, or 8.70%, decline in non-performing assets and $4.6 million, or 21.41%, decline in net charge-offs, to 0.99% of average loans.
 
  •   Annualized average commercial loan growth of 9.86%
 
  •   Core deposit growth of $458.8 million
 
  •   Strong tangible common equity ratio at 7.50%
     Akron, Ohio (April 26, 2011) — FirstMerit Corporation (Nasdaq: FMER) reported first quarter 2011 net income of $27.6 million, or $0.25 per diluted share. This compares with $27.0 million, or $0.25 per diluted share, for the fourth quarter of 2010 and $15.4 million, or $0.18 per diluted share, for the first quarter 2010.
     Returns on average common equity (“ROE”) and average assets (“ROA”) for the first quarter 2011 were 7.37% and 0.78%, respectively, compared with 7.04% and 0.74% for the fourth quarter of 2010 and 5.71% and 0.55% for the first quarter 2010.
     “With our focus on disciplined credit management and underwriting, FirstMerit’s credit metrics have been superior throughout the cycle and our performance in the first quarter of 2011 continues to benefit from strong credit quality,” said Paul G. Greig, chairman, president and CEO of FirstMerit Corporation. “Our solid financial results this quarter are marked by a number of highlights, including lower net charge-offs and non-performing assets and continued growth in commercial loans and core deposits. Our success is built upon our proven super community bank model, reinforced by our strong, well-capitalized balance sheet.”
     Net interest margin was 4.00% for the first quarter of 2011 compared with 4.14% for the fourth quarter of 2010 and 3.72% for the first quarter of 2010. The decline in net interest margin compared with the prior quarter was a result of declining average loan balances in the covered loan portfolio. The decline in the covered loan portfolio is to be expected as there were no new acquisitions of loans subject to loss share agreements after the quarter ended June 30, 2010. The covered loan portfolio will continue to decline, through payoffs, charge-offs, termination or expiration of loss share coverage, unless the Corporation acquires additional loans subject

 

 

FirstMerit Corporation Reports First Quarter 2011 EPS Results
to loss share agreements in the future. Expansion in the net interest margin compared with the year ago quarter was driven primarily by the increase in average earning assets as a result of the Midwest acquisition in the quarter ended June 30, 2011.
     Average loans, not including covered loans, during the first quarter of 2011 increased $58.3 million, or 0.82%, compared with the fourth quarter of 2010 and increased $179.2 million, or 2.55%, compared with the first quarter of 2010. Compared with the first quarter of 2010, average commercial loans, not including covered loans, increased $356.1 million or 8.48%. Average covered loan balances including the indemnification asset were $1.9 billion, $2.0 billion, and $0.1 billion at March 31, 2011, December 31, 2010, and March 31, 2010, respectively.
     The overall mix of deposits improved in the quarter ended March 31, 2011. Average deposits during the first quarter of 2011 decreased $68.6 million, or 0.60%, compared with the fourth quarter of 2010 and increased $3.0 billion, or 35.72%, compared with the first quarter of 2010. The increase year over year was primarily due to the additional deposits assumed in the Midwest acquisition in the quarter ended June 30, 2010. During the first quarter of 2011, the Corporation increased its average core deposits, which excludes time deposits, by $309.7 million, or 3.69%, compared with the fourth quarter of 2010, and $2.2 billion, or 32.88%, compared with the first quarter of 2010. Average time deposits decreased $378.3 million, or 12.60%, from the fourth quarter of 2010 and increased $0.8 million, or 46.03% from the first quarter of 2010. The change in deposit mix over the prior quarter is due to the Corporation’s strategy to retain the acquired depository customers and move them from certificate of deposit accounts into core deposit accounts.
     Average investments during the first quarter of 2011 increased $181.7 million, or 5.61%, compared with the fourth quarter of 2010 and increased $502.1 million, or 17.21%, over the first quarter of 2010. The increase in the first quarter of 2011 average investments, compared with the fourth quarter of 2010, is due to the purchase of $400.0 million of securities in the first quarter of 2011.
     Net interest income on a fully tax-equivalent (“FTE”) basis was $123.9 million in the first quarter 2011 compared with $130.0 million in the fourth quarter of 2010 and $92.3 million in the first quarter of 2010. Compared with the fourth quarter of 2010, average earning assets increased $94.3 million, or 0.76%, and increased $2.5 billion, or 24.65%, compared to the first quarter of 2010.
     Noninterest income net of securities transactions for the first quarter of 2011 was $52.8 million, a decrease of $1.4 million, or 2.60%, from the fourth quarter of 2010 and an increase of $2.9 million, or 5.72%, from the first quarter of 2010.
     The decrease in other income for the first quarter of 2011 compared to the fourth quarter of of 2010 was driven by lower mortgage revenue, including loan sales and servicing, down $4.2 million from the prior quarter. In the fourth quarter of 2010, the Corporation experienced significantly high levels of fee income from loan sales and servicing related to increased origination activity in 2010.
     Other income, net of securities gains, as a percentage of net revenue for the first quarter of 2011 was 29.86% compared with 29.42% for fourth quarter of 2010 and 35.08% for the first quarter of 2010. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.
     Noninterest expense for the first quarter of 2011 was $114.4 million, a decrease of $8.0 million, or 6.54%, from the fourth quarter of 2010 and an increase of $20.4 million, or 21.73%, from the first quarter of

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FirstMerit Corporation Reports First Quarter 2011 EPS Results
2010. For the three months ended March 31, 2011, increases in operating expenses compared to the first quarter of 2010 were primarily attributable to increased salary and benefits as a result of the three 2010 acquisitions.
     During the first quarter of 2011, the Corporation reported an efficiency ratio of 64.46%, compared with 65.95% for the fourth quarter of 2010 and 65.93% for the first quarter of 2010.
     Net charge-offs, excluding acquired loans, totaled $17.0 million, or 0.99% of average loans, excluding acquired loans, in the first quarter of 2011 compared with $21.7 million, or 1.25% of average loans, in the fourth quarter of 2010 and $22.8 million, or 1.36% of average loans, in the first quarter of 2010.
     Nonperforming assets totaled $112.8 million at March 31, 2011, a decrease of $10.7 million compared with December 31, 2010 and a decrease of $10.6 million compared with March 31, 2010. Nonperforming assets at March 31, 2011 represented 1.61% of period-end loans plus other real estate, excluding acquired loans, compared with 1.78% at December 31, 2010 and 1.80% at March 31, 2010.
     The allowance for noncovered loan losses, totaled $114.7 million at March 31, 2011 and December 31, 2010. At March 31, 2011, the allowance for noncovered loan losses was 1.64% of period-end loans compared with 1.65% at December 31, 2010, and 1.72% at March 31, 2010. The allowance for credit losses is the sum of the allowance for noncovered loan losses, and the reserve for unfunded lending commitments. For comparative purposes the allowance for credit losses was 1.74% of period-end loans, excluding acquired loans, at March 31, 2011, compared with 1.78% at December 31, 2010 and 1.82% at March 31, 2010. The allowance for credit losses to nonperforming loans was 147.38% at March 31, 2011, compared with 118.01% at December 31, 2010 and 110.80% at March 31, 2010.
     The Corporation’s total assets at March 31, 2011 were $14.5 billion, an increase of $331.8 million, or 2.35%, compared with December 31, 2010 and an increase of $2.1 billion, or 17.38%, compared with March 31, 2010. Total loans, excluding acquired loans, did not significantly change compared with December 31, 2010 and March 31, 2010. The increase in total assets compared with March 31, 2010, is attributed to the three 2010 acquisitions.
     Total deposits were $11.4 billion at March 31, 2011, an increase of $127.9 million, or 1.14%, from December 31, 2010 and an increase of $2.0 billion, or 21.62%, from March 31, 2010. The increase in total deposits over March 31, 2010 was driven primarily by deposits acquired in the Midwest acquisition in the quarter ended June 30, 2010. Core deposits totaled $8.9 billion at March 31, 2011, an increase of $0.5 billion, or 5.42%, from December 31, 2010 and an increase of $1.9 billion, or 27.42%, from March 31, 2010. The increase in core deposits over the prior quarter is due to the Corporation’s strategy to retain acquired depository customers and move them from certificate of deposit accounts into core deposit products.
     Shareholders’ equity was $1.5 billion at March 31, 2011 and December 31, 2010 compared with $1.2 billion at March 31, 2010. The Corporation maintained a strong capital position as tangible common equity to assets was 7.50% at March 31, 2011, compared with 7.59% and 7.91% at December 31, 2010 and March 31, 2010, respectively. The common dividend per share paid in the first quarter 2011 was $0.16.
Acquisitions and Integration

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FirstMerit Corporation Reports First Quarter 2011 EPS Results
     The three 2010 acquisitions of First Bank, George Washington and Midwest were considered business combinations and accounted for under FASB Accounting Standard Codification 805, Business Combinations (ASC 805). All acquired assets and liabilities were recorded at their estimated fair values as of the date of acquisition and identifiable intangible assets were recorded at their estimated fair value. Estimated fair values of the acquired assets and liabilities of Midwest are considered preliminary and are subject to change up to one year after the acquisition date. This one year measurement period allows for adjustments to the initial purchase entries if additional information relative to closing date fair values becomes available. The one year measurement period for the First Bank and George Washington acquisitions expired in the quarter ended March 31, 2011. Material adjustments to acquisition date estimated fair values have been recorded in the period in which the acquisition occurred and, as a result, previously reported results are subject to change. Certain reclassifications of prior periods’ amounts may also be made to conform to the current period’s presentation and would have no effect on previously reported net income amounts.
     During the quarter ended March 31, 2011, we obtained additional information that resulted in changes to certain acquisition-data fair value estimates relating to the Midwest acquisition. These purchase accounting adjustments have resulted in a decrease to goodwill of $19.1 million to $272.1 million as of June 30, 2010. Prior period amounts appropriately reflect these adjustments.
First Quarter 2011 Conference Call
     FirstMerit Corporation senior management will host an earnings conference call today at 2:00 p.m. (Eastern Time) to provide an overview of first quarter 2011 results and highlights. To participate in the conference call, please dial (888) 693-3477 ten minutes before start time and provide the reservation number: 59604216. A replay of the conference call will be available at approximately 5:00 p.m. (Eastern Time) on April 26, 2011 through May 10, 2011 by dialing (800) 642-1687, and entering the PIN: 59604216.
About FirstMerit Corporation
     FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $14.5 billion as of March 31, 2011 and 207 banking offices and 220 ATMs in Ohio, Western Pennsylvania and the Chicago area. FirstMerit Corporation 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.
Subsequent Events
     The Corporation is required under generally accepted accounting principles to evaluate subsequent events through the filing of the March 31, 2011 consolidated financial statements on Form 10-Q. As a result, the Corporation will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of March 31, 2011 and will adjust amounts preliminarily reported, if necessary.
Forward-Looking Statement

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FirstMerit Corporation Reports First Quarter 2011 EPS Results
     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 Corporation, 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 Corporation’s business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Corporation’s periodic reports and registration statements filed with the Securities and Exchange Commission. The Corporation 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 Reports First Quarter 2011 EPS Results
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands)
                                         
    Quarters
    2011   2010   2010   2010   2010
    1st Qtr   4th Qtr   3rd Qtr   2nd Qtr   1st Qtr
 
EARNINGS
                                        
Net interest income FTE (a)
   $ 123,940     $ 129,971     $ 125,514     $ 118,817     $ 92,348  
Provision for noncovered loan losses
     17,018       19,816       18,108       20,366       25,493  
Provision for covered loan losses
     5,331       3,572       593       267       —  
Other income
     52,756       54,311       55,135       53,209       49,900  
Other expenses
     114,445       122,452       120,670       105,723       94,013  
FTE adjustment (a)
     2,116       2,107       2,021       2,050       1,954  
Net income
     27,560       27,030       28,996       31,493       15,390  
Diluted EPS
     0.25       0.25       0.27       0.32       0.18  
 
                                        
PERFORMANCE RATIOS
                                        
Return on average assets (ROA)
     0.78 %     0.74 %     0.79 %     0.94 %     0.55 %
Return on average common equity (ROE)
     7.37 %     7.04 %     7.60 %     11.21 %     5.71 %
Net interest margin FTE (a)
     4.00 %     4.14 %     3.96 %     4.02 %     3.72 %
Efficiency ratio
     64.46 %     65.95 %     66.26 %     61.30 %     65.93 %
Number of full-time equivalent employees
     3,056       3,058       3,093       3,095       2,723  
 
                                        
MARKET DATA
                                        
Book value/common share
   $ 13.98     $ 13.86     $ 13.95     $ 13.87     $ 12.69  
Period-end common share mkt value
     17.07       19.79       18.32       17.13       21.57  
Market as a % of book
     122 %     143 %     131 %     124 %     170 %
Cash dividends/common share
   $ 0.16     $ 0.16     $ 0.16     $ 0.16     $ 0.16  
Common stock dividend payout ratio
     64.00 %     64.41 %     60.03 %     50.00 %     88.89 %
Average basic common shares
     108,769       108,807       108,793       98,968       87,771  
Average diluted common shares
     108,770       108,808       108,794       98,969       87,777  
Period end common shares
     108,734       108,817       108,803       108,786       90,810  
Common shares repurchased
     91       9       4       46       115  
Common stock market capitalization
   $ 1,856,089     $ 2,153,479     $ 1,993,276     $ 1,863,504     $ 1,958,772  
 
                                        
ASSET QUALITY (excluding acquired loans)
                                        
Gross charge-offs
   $ 22,812     $ 27,553     $ 25,817     $ 24,967     $ 26,195  
Net charge-offs
     17,018       21,654       19,923       19,829       22,779  
Allowance for loan losses noncovered
     114,690       114,690       116,528       118,343       117,806  
Reserve for unfunded lending commitments
     7,202       8,849       7,864       6,812       6,337  
Nonperforming assets (NPAs) (b)
     112,759       123,502       115,267       109,781       123,320  
Net charge-offs/average loans ratio (b)
     0.99 %     1.25 %     1.17 %     1.15 %     1.36 %
Allowance for noncovered loan losses/period-end loans (b)
     1.64 %     1.65 %     1.72 %     1.75 %     1.72 %
Allowance for credit losses/period-end loans (b)
     1.74 %     1.78 %     1.84 %     1.85 %     1.82 %
NPAs/loans and other real estate (b)
     1.61 %     1.78 %     1.70 %     1.62 %     1.80 %
Allowance for noncovered loan losses/nonperforming loans
     138.67 %     109.56 %     111.00 %     119.62 %     105.14 %
Allowance for credit losses/nonperforming loans
     147.38 %     118.01 %     118.49 %     126.51 %     110.80 %
 
                                        
CAPITAL & LIQUIDITY
                                        
Period-end tangible common equity to assets
     7.50 %     7.59 %     7.54 %     7.35 %     7.91 %
Average equity to assets
     10.62 %     10.51 %     10.38 %     8.39 %     9.63 %
Average equity to total loans (c)
     17.14 %     17.15 %     16.93 %     13.68 %     15.39 %
Average total loans to deposits (c)
     78.14 %     78.00 %     78.25 %     77.73 %     85.18 %
 
                                        
AVERAGE BALANCES
                                        
Assets
   $ 14,270,871     $ 14,493,060     $ 14,587,126     $ 13,426,271     $ 11,357,110  
Deposits
     11,319,809       11,388,423       11,425,741       10,600,401       8,340,796  
Loans, excluding acquired loans (c)
     6,963,389       6,868,222       6,781,123       6,810,582       6,812,647  
Acquired loans, including covered loans (c)
     1,881,540       2,014,361       2,160,075       1,429,388       291,651  
Earning assets
     12,560,913       12,466,629       12,579,486       11,860,439       10,076,565  
Shareholders’ equity
     1,516,227       1,523,078       1,513,527       1,127,017       1,093,568  
 
                                        
ENDING BALANCES
                                        
Assets
   $ 14,466,509     $ 14,134,714     $ 14,354,086     $ 14,521,473     $ 12,324,589  
Deposits
     11,395,946       11,268,006       11,271,416       11,515,171       9,370,009  
Loans, excluding acquired loans (c)
     6,989,973       6,937,142       6,776,098       6,779,941       6,836,451  
Acquired loans, including covered loans (c)
     1,800,525       1,953,093       2,119,504       2,244,737       533,888  
Goodwill
     460,044       460,044       460,044       460,044       187,945  
Intangible assets
     9,868       10,411       11,416       12,422       5,659  
Earning assets
     12,659,414       12,427,936       12,507,979       12,680,627       10,775,434  
Total shareholders’ equity
     1,519,957       1,507,715       1,517,892       1,505,345       1,152,721  
 
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)  —  As required by current accounting guidance, the acquired loans and other real estate from First Bank, George Washington Savings Bank and Midwest Bank & Trust Company were recorded at fair value with no carryover of the related allowances. The ratio of our allowance for loan and credit losses and NPAs do not include these loans and other real estate.
 
(c)  —  Excludes loss share receivable of $266 million, $289 million, $318.4 million, $319.8 million and $88.0 million as of March 31, 2011, December 31, 2010, September 30, 2010, June 30, 2010 and March 31, 2010, respectively.

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FirstMerit Corporation Reports First Quarter 2011 EPS Results
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited, except December 31, 2010, which is derived from the
audited financial statements)
                         
    March 31,     December 31,     March 31,  
    2011     2010     2010  
ASSETS
                        
Cash and due from banks
   $ 168,528     $ 157,415     $ 171,793  
Interest-bearing deposits in banks
     470,253       365,698       550,145  
 
                  
Total cash and cash equivalents
     638,781       523,113       721,938  
Investment securities
                        
Held-to-maturity
     65,923       59,962       67,256  
Available-for-sale
     3,362,751       2,987,040       3,101,740  
Other investments
     160,818       160,752       132,043  
Loans held for sale
     13,443       41,340       16,009  
Noncovered loans:
                        
Commercial loans
     4,565,376       4,527,497       4,389,859  
Mortgage loans
     399,380       403,843       447,575  
Installment loans
     1,282,170       1,308,860       1,382,522  
Home equity loans
     736,947       749,378       766,073  
Credit card loans
     141,864       149,506       145,029  
Leases
     60,487       63,004       59,464  
 
                  
Total noncovered loans
     7,186,224       7,202,088       7,190,522  
Allowance for noncovered loan losses
     (114,690 )     (114,690 )     (117,806 )
 
                  
Net noncovered loans
     7,071,534       7,087,398       7,072,716  
Covered loans (includes loss share receivable of $266 million)
     1,870,255       1,976,754       267,864  
Allowance for covered loan losses
     (28,405 )     (13,733 )     —  
 
                  
Net covered loans
     1,841,850       1,963,021       267,864  
Net loans
     8,913,384       9,050,419       7,340,580  
Premises and equipment, net
     192,630       197,866       164,408  
Goodwill
     460,044       460,044       187,945  
Intangible assets
     9,868       10,411       5,659  
Other real estate covered by FDIC loss share
     58,688       54,710       22,754  
Accrued interest receivable and other assets
     590,179       589,057       564,257  
 
                  
Total assets
   $ 14,466,509     $ 14,134,714     $ 12,324,589  
 
                  
 
                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                        
Deposits:
                        
Demand-non-interest bearing
   $ 2,925,088     $ 2,790,550     $ 2,217,714  
Demand-interest bearing
     815,593       868,404       686,503  
Savings and money market accounts
     5,188,815       4,811,784       4,103,657  
Certificates and other time deposits
     2,466,450       2,797,268       2,362,135  
 
                  
Total deposits
     11,395,946       11,268,006       9,370,009  
 
                  
Federal funds purchased and securities sold under agreements to repurchase
     952,995       777,585       896,330  
Wholesale borrowings
     325,046       326,007       677,715  
Accrued taxes, expenses, and other liabilities
     272,565       255,401       227,814  
 
                  
Total liabilities
     12,946,552       12,626,999       11,171,868  
 
                  
Commitments and contingencies
                        
Shareholders’ equity:
                        
Preferred stock, without par value:
                        
Preferred stock, Series A, without par value:
                        
Convertible preferred stock, Series B, without par value:
                        
Common stock, without par value:
                        
authorized 300,000,000 shares; issued 115,121,731, 115,121,731 and 97,521,571 at March 31, 2011, December 31, 2010 and March 31, 2010, respectively
     127,937       127,937       127,937  
Capital surplus
     488,770       485,567       171,330  
Accumulated other comprehensive loss
     (25,765 )     (26,103 )     (20,983 )
Retained earnings
     1,091,160       1,080,900       1,045,195  
Treasury stock, at cost, 6,387,924, 6,305,218 and 6,711,936 shares at March 31, 2011, December 31, 2010 and March 31, 2010, respectively
     (162,145 )     (160,586 )     (170,758 )
 
                  
Total shareholders’ equity
     1,519,957       1,507,715       1,152,721  
 
                  
Total liabilities and shareholders’ equity
   $ 14,466,509     $ 14,134,714     $ 12,324,589  
 
                  

Page 7

 

FirstMerit Corporation Reports First Quarter 2011 EPS Results
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
                                         
    Quarterly Periods  
    March 31,     December 31,     September 30,     June 30,     March 31,  
    2011     2010     2010     2010     2010  
 
                                        
ASSETS
                                        
Cash and cash equivalents
   $ 520,602     $ 809,828     $ 821,713     $ 762,781     $ 521,666  
Investment securities
                                        
Held-to-maturity
     64,212       64,287       63,364       64,650       56,322  
Available-for-sale
     3,194,751       3,012,983       3,049,056       3,131,787       2,731,639  
Other investments
     160,752       160,756       158,591       179,735       129,658  
Loans held for sale
     22,574       39,174       21,659       18,827       14,538  
Noncovered loans:
                                        
Commercial loans
     4,553,777       4,445,691       4,336,631       4,376,274       4,197,663  
Mortgage loans
     403,758       403,334       421,087       438,243       454,525  
Installment loans
     1,294,156       1,331,130       1,363,248       1,377,748       1,402,552  
Home equity loans
     741,596       754,270       762,626       763,943       757,094  
Credit card loans
     146,526       146,744       146,863       145,880       150,117  
Leases
     61,768       62,115       58,223       59,049       60,430  
 
                              
Total noncovered loans
     7,201,581       7,143,284       7,088,678       7,161,137       7,022,381  
Covered loans and loss share receivable
     1,917,043       2,046,145       2,198,138       1,304,303       122,027  
 
                              
Total loans
     9,118,624       9,189,429       9,286,816       8,465,440       7,144,408  
Less: total allowance for loan losses
     134,064       119,924       113,062       116,436       115,031  
 
                              
Net loans
     8,984,560       9,069,505       9,173,754       8,349,004       7,029,377  
 
                                        
Total earning assets
     12,560,913       12,466,629       12,579,486       11,860,439       10,076,565  
 
                                        
Premises and equipment, net
     195,296       195,915       172,712       167,009       141,405  
Accrued interest receivable and other assets
     1,128,124       1,140,612       1,126,277       752,478       732,505  
 
                              
TOTAL ASSETS
   $ 14,270,871     $ 14,493,060     $ 14,587,126     $ 13,426,271     $ 11,357,110  
 
                              
 
                                        
LIABILITIES
                                        
Deposits:
                                        
Demand-non-interest bearing
   $ 2,874,884     $ 2,816,850     $ 2,730,483     $ 2,496,826     $ 2,146,969  
Demand-interest bearing
     841,545       857,960       858,168       775,031       687,233  
Savings and money market accounts
     4,978,773       4,710,682       4,502,779       4,278,756       3,709,246  
Certificates and other time deposits
     2,624,607       3,002,931       3,334,311       3,049,788       1,797,348  
 
                              
 
                                        
Total deposits
     11,319,809       11,388,423       11,425,741       10,600,401       8,340,796  
 
                                        
Federal funds purchased and securities sold under agreements to repurchase
     848,169       904,163       928,607       843,652       951,927  
Wholesale borrowings
     325,296       368,397       443,890       526,963       708,414  
 
                              
 
                                        
Total funds
     12,493,274       12,660,983       12,798,238       11,971,016       10,001,137  
Accrued taxes, expenses and other liabilities
     261,370       308,999       275,361       328,238       262,405  
 
                              
 
                                        
Total liabilities
     12,754,644       12,969,982       13,073,599       12,299,254       10,263,542  
 
                                        
SHAREHOLDERS’ EQUITY
                                        
Common stock
     127,937       127,937       127,937       127,937       127,937  
Capital surplus
     486,907       485,126       484,197       127,143       106,350  
Accumulated other comprehensive loss
     (26,703 )     (9,867 )     (2,332 )     (15,913 )     (20,593 )
Retained earnings
     1,089,554       1,080,809       1,065,001       1,051,308       1,049,774  
Treasury stock
     (161,468 )     (160,927 )     (161,276 )     (163,458 )     (169,900 )
 
                              
 
                                        
Total shareholders’ equity
     1,516,227       1,523,078       1,513,527       1,127,017       1,093,568  
 
                              
 
                                        
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 14,270,871     $ 14,493,060     $ 14,587,126     $ 13,426,271     $ 11,357,110  
 
                              

Page 8

 

FirstMerit Corporation Reports First Quarter 2011 EPS Results
AVERAGE CONSOLIDATED BALANCE SHEETS
Fully Tax-equivalent Interest Rates and Interest Differential
(Unaudited)
(Dollars in thousands)
                                                                         
    Three months ended     Year ended     Three months ended  
    March 31, 2011     December 31, 2010     March 31, 2010  
    Average             Average     Average             Average     Average             Average  
    Balance     Interest     Rate     Balance     Interest     Rate     Balance     Interest     Rate  
             
 
                                                                        
ASSETS
                                                                        
Cash and cash equivalents
   $ 520,602                     $ 728,723                     $ 521,666                  
Investment securities and federal funds sold:
                                                                        
U.S. Treasury securities and U.S. Government agency obligations (taxable)
     2,783,053       19,368       2.82 %     2,554,538       87,019       3.41 %     2,377,729       22,909       3.91 %
Obligations of states and political subdivisions (tax exempt)
     357,511       5,030       5.71 %     348,832       20,505       5.88 %     344,899       5,139       6.04 %
Other securities and federal funds sold
     279,151       2,117       3.08 %     300,700       8,508       2.83 %     194,991       1,986       4.13 %
 
                                                            
Total investment securities and federal funds sold
     3,419,715       26,515       3.14 %     3,204,070       116,032       3.62 %     2,917,619       30,034       4.17 %
 
                                                                        
Loans held for sale
     22,574       274       4.92 %     23,612       1,162       4.92 %     14,538       184       5.13 %
Noncovered loans, covered loans and loss share receivable
     9,118,624       114,562       5.10 %     8,529,303       433,308       5.08 %     7,144,408       83,590       4.75 %
 
                                                                        
 
                                                            
Total earning assets
     12,560,913       141,351       4.56 %     11,756,985       550,502       4.68 %     10,076,565       113,808       4.58 %
 
                                                                        
Total allowance for loan losses
     (134,064 )                     (116,118 )                     (115,031 )                
Other assets
     1,323,420                       1,154,761                       869,604                  
 
                                                                  
 
                                                                        
Total assets
   $ 14,270,871                     $ 13,524,351                     $ 11,352,804                  
 
                                                                  
 
                                                                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                                                        
Deposits:
                                                                        
Demand — non-interest bearing
   $ 2,874,884       —       —     $ 2,550,849       —       —     $ 2,146,969       —       —  
Demand — interest bearing
     841,545       184       0.09 %     794,497       751       0.09 %     687,233       152       0.09 %
Savings and money market accounts
     4,978,773       7,845       0.64 %     4,303,815       31,912       0.74 %     3,709,246       7,601       0.83 %
Certificates and other time deposits
     2,624,607       6,827       1.05 %     2,801,270       32,713       1.17 %     1,797,348       6,406       1.45 %
 
                                                            
 
                                                                        
Total deposits
     11,319,809       14,856       0.53 %     10,450,431       65,376       0.63 %     8,340,796       14,159       0.69 %
 
                                                                        
Securities sold under agreements to repurchase
     848,169       915       0.44 %     907,015       4,477       0.49 %     951,927       1,127       0.48 %
Wholesale borrowings
     325,296       1,640       2.04 %     510,799       13,998       2.74 %     708,414       6,174       3.53 %
 
                                                            
 
                                                                        
Total interest bearing liabilities
     9,618,390       17,411       0.73 %     9,317,396       83,851       0.90 %     7,854,168       21,460       1.11 %
 
                                                                        
Other liabilities
     261,370                       340,485                       262,405                  
 
                                                                        
Shareholders’ equity
     1,516,227                       1,315,621                       1,093,568                  
 
                                                                  
 
                                                                        
Total liabilities and shareholders’ equity
   $ 14,270,871                     $ 13,524,351                     $ 11,357,110                  
 
                                                                  
 
                                                                        
Net yield on earning assets
   $ 12,560,913       123,940       4.00 %   $ 11,756,985       466,651       3.97 %   $ 10,076,565       92,348       3.72 %
 
                                                      
 
                                                                        
Interest rate spread
                     3.83 %                     3.78 %                     3.47 %
 
                                                                  
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.

Page 9

 

FirstMerit Corporation Reports First Quarter 2011 EPS Results
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands except per share data)
                 
    Quarters ended  
    March 31,  
    2011     2010  
 
                
Interest income:
                
Interest and fees on loans, including held for sale
   $ 114,555     $ 83,645  
Investment securities
                
Taxable
     21,485       24,870  
Tax-exempt
     3,195       3,339  
 
            
Total investment securities interest
     24,680       28,209  
Total interest income
     139,235       111,854  
 
            
Interest expense:
                
Interest on deposits:
                
Demand-interest bearing
     184       152  
Savings and money market accounts
     7,845       7,601  
Certificates and other time deposits
     6,827       6,406  
Interest on securities sold under agreements to repurchase
     915       1,127  
Interest on wholesale borrowings
     1,640       6,174  
 
            
Total interest expense
     17,411       21,460  
 
            
Net interest income
     121,824       90,394  
Provision for noncovered loan losses
     17,018       25,493  
Provision for covered loan losses
     5,331       —  
 
            
Net interest income after provision for loan losses
     99,475       64,901  
 
            
Other income:
                
Trust department income
     5,514       5,281  
Service charges on deposits
     14,910       15,366  
Credit card fees
     12,207       11,558  
ATM and other service fees
     2,917       2,509  
Bank owned life insurance income
     5,241       5,652  
Investment services and insurance
     2,447       1,928  
Loan sales and servicing income
     5,012       3,237  
Gain on George Washington acquistion
     —       1,041  
Other operating income
     4,508       3,328  
 
            
Total other income
     52,756       49,900  
 
            
Other expenses:
                
Salaries, wages, pension and employee benefits
     59,871       48,156  
Net occupancy expense
     8,594       7,140  
Equipment expense
     6,836       6,050  
Stationery, supplies and postage
     2,705       2,693  
Bankcard, loan processing and other costs
     7,562       7,818  
Professional services
     5,793       5,237  
Amortization of intangibles
     543       234  
FDIC expense
     4,366       3,765  
Other operating expense
     18,175       12,920  
 
            
Total other expenses
     114,445       94,013  
 
            
Income before federal income tax expense
     37,786       20,788  
Federal income tax expense
     10,226       5,398  
 
            
Net income
   $ 27,560     $ 15,390  
 
            
 
                
Other comprehensive income, net of taxes
                
Unrealized securities’ holding gain, net of taxes
   $ 338     $ 4,476  
Unrealized hedging loss, net of taxes
     —       —  
Less: reclassification adjustment for securities’ gain realized in income, net of taxes
     —       —  
Minimum pension liability adjustment, net of taxes
     —       —  
 
            
Total other comprehensive gain, net of taxes
     338       4,476  
 
            
Comprehensive income
   $ 27,898     $ 19,866  
 
            
Net income applicable to common shares
   $ 27,560     $ 15,390  
 
            
Net income used in diluted EPS calculation
   $ 27,560     $ 15,390  
 
            
Weighted average number of common shares outstanding — basic
     108,769       87,771  
 
            
Weighted average number of common shares outstanding — diluted
     108,770       87,777  
 
            
Basic earnings per share
   $ 0.25     $ 0.18  
 
            
Diluted earnings per share
   $ 0.25     $ 0.18  
 
            
Dividend per share
   $ 0.16     $ 0.16  
 
            

Page 10

 

FirstMerit Corporation Reports First Quarter 2011 EPS Results
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME—LINKED QUARTERS
(Unaudited)
(Dollars in thousands, except share data)
                                         
    Quarterly Results  
    2011     2010     2010     2010     2010  
    1st Qtr     4th Qtr     3rd Qtr     2nd Qtr     1st Qtr  
 
                                        
Interest and fees on loans, including held for sale
   $ 114,555     $ 121,651     $ 118,543     $ 109,924     $ 83,645  
Interest and dividends — securities and federal funds sold
     24,680       24,714       26,794       28,890       28,209  
 
                              
Total interest income
     139,235       146,365       145,337       138,814       111,854  
 
                              
Interest on deposits:
                                        
Demand-interest bearing
     184       198       252       149       152  
Savings and money market accounts
     7,845       8,145       8,294       7,873       7,601  
Certificates and other time deposits
     6,827       7,209       9,588       9,510       6,406  
Securities sold under agreements to repurchase
     915       960       986       1,404       1,127  
Wholesale borrowings
     1,640       1,989       2,724       3,111       6,174  
 
                              
Total interest expense
     17,411       18,501       21,844       22,047       21,460  
 
                              
Net interest income
     121,824       127,864       123,493       116,767       90,394  
Provision for noncovered loan losses
     17,018       19,816       18,108       20,366       25,493  
Provision for covered loan losses
     5,331       3,572       593       267       —  
 
                              
Net interest income after provision for loan losses
     99,475       104,476       104,792       96,134       64,901  
 
                              
Other income:
                                        
Trust department income
     5,514       5,627       5,469       5,574       5,281  
Service charges on deposits
     14,910       15,938       16,859       17,737       15,366  
Credit card fees
     12,207       12,678       12,532       12,242       11,558  
ATM and other service fees
     2,917       2,910       2,996       2,844       2,509  
Bank owned life insurance income
     5,241       3,192       3,219       2,886       5,652  
Investment services and insurance
     2,447       2,300       2,688       2,535       1,928  
Investment securities gains, net
     —       146       58       651       —  
Loan sales and servicing income
     5,012       9,221       4,006       2,975       3,237  
Gain on George Washington acquisition
     —       —       —       —       1,041  
Other operating income
     4,508       2,299       7,308       5,765       3,328  
 
                              
Total other income
     52,756       54,311       55,135       53,209       49,900  
 
                              
Other expenses:
                                        
Salaries, wages, pension and employee benefits
     59,871       62,331       58,930       51,899       48,156  
Net occupancy expense
     8,594       9,236       8,608       7,680       7,140  
Equipment expense
     6,836       7,549       7,330       6,735       6,050  
Stationery, supplies and postage
     2,705       3,183       2,865       2,696       2,693  
Bankcard, loan processing and other costs
     7,562       7,810       8,281       7,663       7,818  
Professional services
     5,793       7,731       8,544       7,845       5,237  
Amortization of intangibles
     543       1,006       1,006       669       234  
FDIC expense
     4,366       4,342       5,267       4,416       3,765  
Other operating expense
     18,175       19,264       19,839       16,120       12,920  
 
                              
Total other expenses
     114,445       122,452       120,670       105,723       94,013  
 
                              
Income before income tax expense
     37,786       36,335       39,257       43,620       20,788  
Federal income taxes
     10,226       9,305       10,261       12,127       5,398  
 
                              
Net income
   $ 27,560     $ 27,030     $ 28,996     $ 31,493     $ 15,390  
 
                              
Other comprehensive income (loss), net of taxes
     338       (21,188 )     (398 )     16,466       4,476  
 
                              
Comprehensive income
   $ 27,898     $ 5,842     $ 28,598     $ 47,959     $ 19,866  
 
                              
Net income applicable to common shares
   $ 27,560     $ 27,030     $ 28,996     $ 31,493     $ 15,390  
 
                              
Adjusted net income used in diluted EPS calculation
   $ 27,560     $ 27,030     $ 28,996     $ 31,493     $ 15,390  
 
                              
Weighted-average common shares — basic
     108,769       108,807       108,793       98,968       87,771  
 
                              
Weighted-average common shares — diluted
     108,770       108,808       108,794       98,969       87,777  
 
                              
 
                                        
Basic net income per share
   $ 0.25     $ 0.25     $ 0.27     $ 0.32     $ 0.18  
 
                              
 
                                        
Diluted net income per share
   $ 0.25     $ 0.25     $ 0.27     $ 0.32     $ 0.18  
 
                              

Page 11

 

FirstMerit Corporation Reports First Quarter 2011 EPS Results
ASSET QUALITY INFORMATION (Excluding Acquired Assets)
(Unaudited, except December 31, 2010 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
                                                 
    Quarterly Periods     Annual Period  
    March 31,     December 31,     September 30,     June 30,     March 31,     December 31,  
    2011     2010     2010     2010     2010     2010  
Allowance for Credit Losses
                                                
 
                                                
Allowance for noncovered loan losses, beginning of period
   $ 114,690     $ 116,528     $ 118,343     $ 117,806     $ 115,092     $ 115,092  
Provision for noncovered loan losses
     17,018       19,816       18,108       20,366       25,493       83,783  
Charge-offs
     22,812       27,553       25,817       24,967       26,195       104,532  
Recoveries
     5,794       5,899       5,894       5,138       3,416       20,347  
 
                                    
Net charge-offs
     17,018       21,654       19,923       19,829       22,779       84,185  
 
                                    
Allowance for noncovered loan losses, end of period
   $ 114,690     $ 114,690     $ 116,528     $ 118,343     $ 117,806     $ 114,690  
 
                                    
Reserve for unfunded lending commitments, beginning of period
   $ 8,849     $ 7,864     $ 6,812     $ 6,337     $ 5,751     $ 5,751  
Provision for credit losses
     (1,647 )     985       1,052       475       586       3,098  
 
                                    
Reserve for unfunded lending commitments, end of period
   $ 7,202     $ 8,849     $ 7,864     $ 6,812     $ 6,337     $ 8,849  
 
                                    
 
                                                
Allowance for Credit Losses
   $ 121,892     $ 123,539     $ 124,392     $ 125,155     $ 124,143     $ 123,539  
 
                                    
 
                                                
Ratios (a)
                                                
 
                                                
Provision for loan losses as a % of average loans
     0.99 %     1.14 %     1.06 %     1.20 %     1.52 %     1.23 %
Provision for credit losses as a % of average loans
     -0.10 %     0.06 %     0.06 %     0.03 %     0.03 %     0.05 %
Net charge-offs as a % of average loans
     0.99 %     1.25 %     1.17 %     1.15 %     1.36 %     1.23 %
Allowance for loan losses as a % of period-end loans
     1.64 %     1.65 %     1.72 %     1.75 %     1.72 %     1.65 %
Allowance for credit losses as a % of period-end loans
     1.74 %     1.78 %     1.84 %     1.85 %     1.82 %     1.78 %
Allowance for loan losses as a % of nonperforming loans
     138.67 %     109.56 %     111.00 %     119.62 %     105.14 %     109.56 %
Allowance for credit losses as a % of nonperforming loans
     147.38 %     118.01 %     118.49 %     126.51 %     110.80 %     118.01 %
 
                                                
Asset Quality (a)
                                                
 
                                                
Impaired loans:
                                                
Nonaccrual
   $ 71,246     $ 89,828     $ 91,646     $ 84,535     $ 94,798     $ 89,828  
Other nonperforming loans:
                                                
Nonaccrual
     11,460       14,859       13,331       14,394       17,245       14,859  
 
                                    
 
                                                
Total nonperforming loans
     82,706       104,687       104,977       98,929       112,043       104,687  
 
                                                
Other real estate (“ORE”)
     30,053       18,815       10,290       10,852       11,277       18,815  
 
                                    
 
                                                
Total nonperforming assets (“NPAs”)
   $ 112,759     $ 123,502     $ 115,267     $ 109,781     $ 123,320     $ 123,502  
 
                                    
 
                                                
NPAs as % of period-end loans + ORE
     1.61 %     1.78 %     1.70 %     1.62 %     1.80 %     1.78 %
 
                                    
 
                                                
Past due 90 days or more & accruing interest
   $ 5,652     $ 22,017     $ 36,895     $ 36,932     $ 21,099     $ 22,017  
 
                                    
 
(a)   Excludes acquired loans and loss share receivable with a period end balance of $2.1 billion, $2.3 billion, $2.5 billion, $2.6 billion and $.6 million at March 31, 2011, December 31, 2010, September 30, 2010, June 30,2010 and March 31, 2010, respectively, and ORE covered by an FDIC loss share with a period end balance of $58.7 million, $54.7 million, $53.5 million, $50.5 million and $22.8 million at March 31, 2011, December 31, 2010, September 30, 2010, June 30, 2010 and March 31, 2010, respectively, which, as required by current accounting guidance, were recorded at fair value on the date of acquisition.

Page 12

 

FirstMerit Corporation Reports First Quarter 2011 EPS Results
NONINTEREST INCOME AND NONINTEREST
EXPENSE DETAIL
(Unaudited)
(Dollars in thousands)
                                         
    2011     2010     2010     2010     2010  
QUARTERLY OTHER INCOME DETAIL   1st Qtr     4th Qtr     3rd Qtr     2nd Qtr     1st Qtr  
 
                                        
Trust department income
   $ 5,514     $ 5,627     $ 5,469     $ 5,574     $ 5,281  
Service charges on deposits
     14,910       15,938       16,859       17,737       15,366  
Credit card fees
     12,207       12,678       12,532       12,242       11,558  
ATM and other service fees
     2,917       2,910       2,996       2,844       2,509  
Bank owned life insurance income
     5,241       3,192       3,219       2,886       5,652  
Investment services and insurance
     2,447       2,300       2,688       2,535       1,928  
Investment securities gains, net
     —       146       58       651       —  
Loan sales and servicing income
     5,012       9,221       4,006       2,975       3,237  
Gain on George Washington acquisition
     —       —       —       —       1,041  
Other operating income
     4,508       2,299       7,308       5,765       3,328  
 
                                        
 
                              
Total Other Income
   $ 52,756     $ 54,311     $ 55,135     $ 53,209     $ 49,900  
 
                              
                                         
    2011     2010     2010     2010     2010  
QUARTERLY OTHER EXPENSES DETAIL   1st Qtr     4th Qtr     3rd Qtr     2nd Qtr     1st Qtr  
 
                                        
Salaries, wages, pension and employee benefits
   $ 59,871     $ 62,331     $ 58,930     $ 51,899     $ 48,156  
Net occupancy expense
     8,594       9,236       8,608       7,680       7,140  
Equipment expense
     6,836       7,549       7,330       6,735       6,050  
Taxes, other than federal income taxes
     1,960       2,021       1,680       2,236       1,938  
Stationery, supplies and postage
     2,705       3,183       2,865       2,696       2,693  
Bankcard, loan processing and other costs
     7,562       7,810       8,281       7,663       7,818  
Advertising
     2,384       3,094       2,488       2,407       1,592  
Professional services
     5,793       7,731       8,544       7,845       5,237  
Telephone
     1,486       1,579       1,561       1,267       1,133  
Amortization of intangibles
     543       1,006       1,006       669       234  
FDIC expense
     4,366       4,342       5,267       4,416       3,765  
Other operating expense
     12,345       12,570       14,110       10,210       8,257  
 
                                        
 
                              
Total Other Expenses
   $ 114,445     $ 122,452     $ 120,670     $ 105,723     $ 94,013  
 
                              

Page 13

 

FirstMerit Corporation Reports First Quarter 2011 EPS Results
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES NONCOVERED — Net Charge-off Detail
(Unaudited)
(Dollars in thousands)
                         
    Quarters ended     Year ended  
    March 31,     December 31,  
    2011     2010     2010  
 
                        
Allowance for noncovered loan losses — beginning of period
   $ 114,690     $ 115,092     $ 115,092  
Loans charged off:
                        
Commercial
     7,924       8,895       39,766  
Mortgage
     1,664       1,646       5,156  
Installment
     8,091       8,805       34,054  
Home equity
     2,156       2,070       7,912  
Credit cards
     2,318       4,168       13,577  
Leases
     —       20       896  
Overdrafts
     659       591       3,171  
 
                  
Total
     22,812       26,195       104,532  
 
                  
Recoveries:
                        
Commercial
     608       372       1,952  
Mortgage
     89       25       263  
Installment
     3,688       2,017       13,047  
Home equity
     467       257       1,599  
Credit cards
     647       473       2,199  
Manufactured housing
     31       31       156  
Leases
     32       9       267  
Overdrafts
     232       232       864  
 
                  
Total
     5,794       3,416       20,347  
 
                  
 
                        
Net charge-offs
     17,018       22,779       84,185  
Provision for noncovered loan losses
     17,018       25,493       83,783  
 
                  
Allowance for noncovered loan losses — end of period
   $ 114,690     $ 117,806     $ 114,690  
 
                  
 
                        
Average loans (a)
   $ 6,963,389     $ 6,812,647     $ 6,818,962  
 
                  
Ratio to average loans (a):
                        
(Annualized) net noncovered charge-offs
     0.99 %     1.36 %     1.23 %
 
                  
Provision for noncovered loan losses
     0.99 %     1.52 %     1.23 %
 
                  
Noncovered Loans, period-end (excluding acquired loans) (a)
   $ 6,989,973     $ 6,836,451     $ 6,937,142  
 
                  
 
                        
Allowance for credit losses (a):
   $ 121,892     $ 124,143     $ 123,539  
 
                  
As a multiple of (annualized) net noncovered charge-offs
     1.77       1.34       1.47  
 
                  
Allowance for noncovered loan losses (a):
                        
As a percent of period-end loans
     1.64 %     1.72 %     1.65 %
 
                  
As a multiple of (annualized) net noncovered charge-offs
     1.66       1.28       1.36  
 
                  
 
(a)   Excludes acquired loans and loss share receivable.

Page 14