2007 EPS of $1.53 Represents 29.7% Increase over Prior Year
4Q07 EPS of $0.39 is 2.6% Increase over 3Q07
AKRON, Ohio, Jan. 22 /PRNewswire-FirstCall/ -- FirstMerit Corporation
(Nasdaq: FMER) today announced fourth quarter 2007 net income of $31.5
million, or $0.39 per diluted share. This compares with $6.1 million, or
$0.07 per diluted share, for the prior-year quarter. For the full year
2007, the Company reported net income of $123.0 million, or $1.53 per
diluted share, compared with $94.9 million, or $1.18 per diluted share in
2006.
(Logo: http://www.newscom.com/cgi-bin/prnh/20070920/CLTU138LOGO )
Returns on average common equity ("ROE") and average assets ("ROA") for
the fourth quarter 2007 were 13.87% and 1.21%, respectively, compared with
2.66% and 0.24% for the prior-year quarter.
Both fourth quarter and full year 2006 results were affected by the
sale of $80.9 million of commercial assets in transactions completed during
the first quarter of 2007.
"I am very pleased with the energy and execution of our personnel this
past year. We are positioned to face a challenging environment and build
from our successes by executing our business strategy. For the quarter, our
credit performance remained sound, our net interest margin expanded, our
revenue grew, and expenses were well controlled, said Paul G. Greig,
Chairman and Chief Executive Officer of FirstMerit Corporation.
Mr. Greig continued, "We advanced on our primary objective of improving
and restoring credit quality this year. Many elements beyond the sale of
commercial assets, executed during the first quarter of 2007, factored into
this improvement. Over the past year, we strengthened our portfolio
management practices and procedures, changed the management structure of
the credit department, added key personnel and aligned incentives
throughout the organization to focus on credit quality."
Net interest margin was 3.66% for the fourth quarter of 2007 compared
with 3.61% for the third quarter of 2007 and 3.58% for the fourth quarter
of 2006. The increases in net interest margin compared with the prior and
year-ago quarters were led by decreases in funding costs. During the fourth
quarter of 2007 the Company increased its average core deposits, which
excludes time deposits, by $58.7 million, or 1.35%, and decreased
certificates of deposits $198.9 million, or 6.33%.
The Company's deposit composition mix shift to a higher concentration
of core deposits contributed to lower funding costs and an increased net
interest margin. Despite the lower interest rate environment, the Company's
investment portfolio yields increased in the fourth quarter of 2007, to
4.99%, compared with 4.87% in the third quarter of 2007, and 4.39% in the
fourth quarter of 2006. The increased investment portfolio yields partly
offset lower loan portfolio yields this quarter. For the full year 2007,
net interest margin was 3.62% compared with 3.71% for 2006.
Net interest income on a fully tax-equivalent ("FTE") basis was $87.6
million in the fourth quarter 2007 compared with $86.6 million in the third
quarter of 2007 and $84.5 million in the fourth quarter of 2006. The
increase in FTE net interest income compared with the third quarter 2007
resulted from expansion in the net interest margin, which offset a decrease
in average earning assets. Net interest margin expansion and average
earning asset growth led to increased FTE net interest income compared with
the fourth quarter of 2006. Compared with the fourth quarter of 2006,
average earning assets increased $119.0 million, or 1.27%. FTE net interest
income for the full year 2007 was $343.0 million, compared with $343.3
million in 2006. In 2007 average earning assets increased $221.5 million,
or 2.39%, compared with 2006. Average loans grew $173.1 million, or 2.55%,
driven by $181.5 million, or 4.98%, growth in average commercial loans.
Noninterest income net of securities transactions for the fourth
quarter of 2007 was $48.9 million, a decrease of $0.3 million, or 0.52%,
from the third quarter of 2007 and an increase of $0.5 million, or 1.12%,
from the fourth quarter of 2006. For the full year 2007, noninterest income
net of securities transactions totaled $195.8 million, an increase of $0.7
million, or 0.35%, compared with $195.1 million for 2006. Reflective of a
strong fee base, other income, net of securities gains, as a percentage of
net revenue for the fourth quarter of 2007 was 35.80% compared with 36.20%
for third quarter of 2007 and 36.39% for the fourth quarter of 2006. For
the full year 2007, other income, net of securities gains, as a percentage
of net revenue was 36.34% compared with 36.24% for 2006. Net revenue is
defined as net interest income, on a FTE basis, plus other income, less
gains from securities sales.
Noninterest expense for the fourth quarter of 2007 was $83.3 million, a
decrease of $0.7 million, or 0.87%, from the third quarter of 2007 and a
decrease of $0.7 million, or 0.82%, from the fourth quarter of 2006.
Noninterest expense in the fourth quarter included $2.4 million of Visa
contingency accrual related to Visa Inc. litigation matters that FirstMerit
and other Visa member banks have direct and potential exposure to share
with Visa. For the full year 2007, noninterest expenses totaled $330.2
million, an increase of $2.1 million, or 0.65%, compared with $328.1
million for the full year 2006.
Net charge-offs totaled $8.9 million, or 0.51% of average loans, in the
fourth quarter of 2007 compared with $7.9 million, or 0.45% of average
loans, in the third quarter 2007 and $18.6 million, or 1.06% of average
loans, in the fourth quarter of 2006.
Nonperforming assets totaled $37.3 million at December 31, 2007, an
increase of $3.1 million, or 8.96%, compared with September 30, 2007 and a
decrease of $26.9 million, or 41.94%, compared with December 31, 2006. Of
the December 31, 2007 total, $2.3 million represents both vacant land no
longer considered for branch expansion and executive relocation property
not related to loan portfolios. Nonperforming assets at December 31, 2007
represented 0.53% of period-end loans plus other real estate compared with
0.49% at September 30, 2007 and 0.93% at December 31, 2006.
The provision for loan losses increased to $9.3 million in the fourth
quarter of 2007 compared with $7.3 million in the third quarter of 2007.
For the prior-year quarter, the provision for loan losses was $44.2
million, reflecting the Company's preparation to sell $73.7 million of
commercial loans during the first quarter of 2007. For the full year of
2007, the provision for loan losses was $30.8 million, compared with $76.1
million for 2006.
The allowance for loan losses totaled $94.2 million at December 31,
2007, an increase of $0.4 million and $2.9 million from September 30, 2007
and December 31, 2006, respectively. At December 31, 2007, the allowance
for loan losses was 1.35% of period-end loans compared with 1.34% at
September 30, 2007 and 1.33% at December 31, 2006. The allowance for credit
losses is the sum of the allowance for loan losses and the reserve for
unfunded lending commitments. For comparative purposes the allowance for
credit losses was 1.45% at December 31, 2007 compared with 1.44% at
September 30, 2007 and 1.42% at December 31, 2006. The allowance for credit
losses to nonperforming loans was 323.22% at December 31, 2007, compared
with 339.04% on September 30, 2007, and 179.60% on December 31, 2006.
FirstMerit's total assets at December 31, 2007 were $10.4 billion, a
decrease of $0.5 million, or 0.01%, compared with September 30, 2007 and an
increase of $154.7 million, or 1.51%, compared with December 31, 2006.
Total deposits were $7.3 billion at December 31, 2007, a decrease of
$76.6 million, or 1.03%, from September 30, 2007 and a decrease of 167.2
million, or 2.23%, from December 31, 2006. Core deposits, totaled $4.5
billion at December 31, 2007, an increase of $182.0 million, or 4.21%, from
September 30, 2007 and a decrease of $16.8 million, or 0.37%, from December
31, 2006. Commercial customer investment sweeps increased $158.1 million,
or 20.74%, at December 31, 2007, compared with December 31, 2006.
Mr. Greig commented on the Company's capital management strategies, "In
the fourth quarter we continued our long history of dividend payments that
are so highly valued by our shareholders. Additionally, we increased our
capital position this quarter which, relative to peer banks on a tangible
basis, is significantly stronger. Our current capital levels are in
alignment with our commitment to managing risk, improving profitability and
increasing shareholder value."
Shareholders' equity was $904.8 million at December 31, 2007, compared
with $846.1 million at December 31, 2006, and the Company retains its
strong capital position as tangible equity to assets was 7.44%. The common
dividend per share paid in the fourth quarter 2007 was $0.29. For the full
year 2007, the common dividend per share paid was $1.16 compared with $1.14
in 2006, an increase per share of $0.02, or 1.75%.
Fourth Quarter 2007 Conference Call
FirstMerit will host an earnings conference call on January 22, 2008,
at 2:00 p.m. Eastern time to provide an overview of fourth 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:
30449862. A replay of the conference call will be available at
approximately 4:30 p.m., on January 22, 2008 through January 29, 2008, by
dialing (800) 642-1687, and entering the PIN: 30449862.
FirstMerit Corporation is a diversified financial services company
headquartered in Akron, Ohio, with assets of $10.4 billion as of December
31, 2007 and 160 banking offices and 176 ATMs in 25 Ohio and Western
Pennsylvania counties. FirstMerit provides a complete range of banking and
other financial services to consumers and businesses through its core
operations. Principal wholly-owned subsidiaries include: FirstMerit Bank,
N.A., FirstMerit Mortgage Corporation, FirstMerit Title Agency, Ltd., and
FirstMerit Community Development Corporation.
Forward-Looking Statement
This release contains forward-looking statements relating to present or
future trends or factors affecting the banking industry, and specifically
the financial condition and results of operations, including without
limitation, statements relating to the earnings outlook of the Company, as
well as its operations, markets and products. Actual results could differ
materially from those indicated. Among the important factors that could
cause results to differ materially are interest rate changes, continued
softening in the economy, which could materially impact credit quality
trends and the ability to generate loans, changes in the mix of the
Company's business, competitive pressures, changes in accounting, tax or
regulatory practices or requirements and those risk factors detailed in the
Company's periodic reports and registration statements filed with the
Securities and Exchange Commission. The Company undertakes no obligation to
release revisions to these forward-looking statements or reflect events or
circumstances after the date of this release.
Analysts and Media: Thomas P. O'Malley (330) 384-7109
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
(Dollars in thousands)
2007 2007 2007
EARNINGS 4th Qtr 3rd Qtr 2nd Qtr
Net interest income FTE (a) $87,647 $86,582 $85,593
Provision for loan losses 9,334 7,324 9,967
Other income 49,993 49,124 48,930
Other expenses 83,295 84,030 81,375
FTE adjustment (a) 1,486 1,428 1,368
Net income 31,459 30,262 29,885
Diluted EPS 0.39 0.38 0.37
PERFORMANCE RATIOS
Return on average assets (ROA) 1.21% 1.16% 1.16%
Return on average common equity
(ROE) 13.87% 13.71% 13.75%
Net interest margin FTE (a) 3.66% 3.61% 3.62%
Efficiency ratio 60.85% 61.76% 60.33%
Number of full-time equivalent
employees 2,688 2,704 2,725
MARKET DATA
Book value/common share $11.24 $11.00 $10.71
Period-end common share mkt value 20.01 19.76 20.93
Market as a % of book 178% 180% 195%
Cash dividends/common share $0.29 $0.29 $0.29
Common stock dividend payout ratio 74.36% 76.32% 78.38%
Average basic common shares 80,477 80,467 80,426
Average diluted common shares 80,595 80,561 80,570
Period end common shares 80,482 80,467 80,477
Common shares repurchased 6,066 22,473 36,159
Common stock market capitalization $1,610,445 $1,590,028 $1,684,384
ASSET QUALITY
Gross charge-offs $11,768 $12,347 $10,609
Net charge-offs 8,940 7,945 7,580
Allowance for loan losses 94,205 93,811 94,432
Reserve for unfunded lending
commitments 7,394 7,409 6,553
Nonperforming assets (NPAs) 37,262 34,199 37,038
Net charge-offs/average loans ratio 0.51% 0.45% 0.43%
Net charge-offs and allowance
related to loans held for sale/
average loans ratio 0.51% 0.45% 0.43%
Allowance for loan losses/period-
end loans 1.35% 1.34% 1.34%
Allowance for credit losses/period-
end loans 1.45% 1.44% 1.43%
NPAs/loans and other real estate 0.53% 0.49% 0.52%
Allowance for loan
losses/nonperforming loans 299.70% 314.22% 295.08%
Allowance for credit
losses/nonperforming loans 323.22% 339.04% 315.56%
CAPITAL & LIQUIDITY
Period-end tangible equity to
assets 7.44% 7.24% 7.00%
Average equity to assets 8.72% 8.45% 8.45%
Average equity to loans 12.94% 12.49% 12.45%
Average loans to deposits 94.71% 93.74% 93.18%
AVERAGE BALANCES
Assets $10,313,707 $10,360,739 $10,319,454
Deposits 7,339,827 7,479,960 7,515,205
Loans 6,951,544 7,011,776 7,002,750
Earning assets 9,493,271 9,513,230 9,485,819
Shareholders' equity 899,624 875,720 871,554
ENDING BALANCES
Assets $10,407,230 $10,407,765 $10,429,099
Deposits 7,331,739 7,408,296 7,474,466
Loans 7,001,886 7,014,389 7,052,390
Goodwill 139,245 139,245 139,245
Intangible assets 1,977 2,200 2,422
Earning assets 9,509,680 9,563,541 9,545,752
Total shareholders' equity 904,786 884,877 862,265
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
(Dollars in thousands)
2007 2006
EARNINGS 1st Qtr 4th Qtr
Net interest income FTE (a) $83,218 $84,502
Provision for loan losses 4,210 44,235
Other income 48,876 48,332
Other expenses 81,526 83,987
FTE adjustment (a) 1,212 919
Net income 31,421 6,117
Diluted EPS 0.39 0.07
PERFORMANCE RATIOS
Return on average assets (ROA) 1.24% 0.24%
Return on average common equity (ROE) 14.91% 2.66%
Net interest margin FTE (a) 3.58% 3.58%
Efficiency ratio 61.55% 63.06%
Number of full-time equivalent
employees 2,751 2,755
MARKET DATA
Book value/common share $10.78 $10.56
Period-end common share mkt value 21.11 24.14
Market as a % of book 196% 229%
Cash dividends/common share $0.29 $0.29
Common stock dividend payout ratio 74.36% 414.29%
Average basic common shares 80,113 80,091
Average diluted common shares 80,298 80,316
Period end common shares 80,112 80,101
Common shares repurchased 27,011 15,876
Common stock market capitalization $1,691,164 $1,933,638
ASSET QUALITY
Gross charge-offs $9,424 $22,323
Net charge-offs 3,507 18,559
Allowance for loan losses 92,045 91,342
Reserve for unfunded lending
commitments 6,746 6,294
Nonperforming assets (NPAs) 32,664 64,177
Net charge-offs/average loans ratio 0.21% 1.06%
Net charge-offs and allowance related
to loans held for sale/average loans
ratio 0.21% 1.40%
Allowance for loan losses/period-end
loans 1.32% 1.33%
Allowance for credit losses/period-
end loans 1.42% 1.42%
NPAs/loans and other real estate 0.47% 0.93%
Allowance for loan
losses/nonperforming loans 331.93% 168.03%
Allowance for credit
losses/nonperforming loans 356.26% 179.60%
CAPITAL & LIQUIDITY
Period-end tangible equity to assets 7.07% 6.96%
Average equity to assets 8.32% 8.91%
Average equity to loans 12.35% 13.17%
Average loans to deposits 92.47% 92.97%
AVERAGE BALANCES
Assets $10,276,241 $10,227,154
Deposits 7,481,969 7,440,331
Loans 6,918,636 6,917,572
Earning assets 9,437,418 9,374,223
Shareholders' equity 854,713 911,348
ENDING BALANCES
Assets $10,347,121 $10,252,572
Deposits 7,701,202 7,498,921
Loans 6,951,631 6,878,873
Goodwill 139,245 139,245
Intangible assets 2,644 2,865
Earning assets 9,447,346 9,382,033
Total shareholders' equity 863,641 846,111
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.
CONSOLIDATED BALANCE SHEETS
FIRSTMERIT CORPORATION AND SUBSIDIARIES
December 31,
ASSETS 2007 2006
(In thousands)
Cash and due from banks $207,335 $200,204
Investment securities (at market
value) and federal funds sold 2,460,453 2,407,888
Loans held for sale 47,341 95,272
Loans:
Commercial loans 3,906,448 3,694,121
Mortgage loans 577,219 608,008
Installment loans 1,598,832 1,619,747
Home equity loans 691,922 731,473
Credit card loans 153,732 147,553
Leases 73,733 77,971
Total loans 7,001,886 6,878,873
Allowance for loan losses (94,205) (91,342)
Net loans 6,907,681 6,787,531
Premises and equipment, net 113,993 122,954
Goodwill 139,245 139,245
Other intangible assets 1,977 2,865
Accrued interest receivable and
other assets 529,205 496,613
Total assets $10,407,230 $10,252,572
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-non-interest bearing $1,482,480 $1,455,097
Demand-interest bearing 727,966 799,571
Savings and money market accounts 2,295,147 2,267,686
Certificates and other time
deposits 2,826,146 2,976,567
Total deposits 7,331,739 7,498,921
Securities sold under agreements to
repurchase 1,256,080 1,261,821
Wholesale borrowings 705,121 464,227
Accrued taxes, expenses, and other
liabilities 209,504 181,492
Total liabilities 9,502,444 9,406,461
Commitments and contingencies
Shareholders' equity:
Preferred stock, without par value:
authorized and unissued
7,000,000 shares --- ---
Preferred stock, Series A,
without par value:
designated 800,000 shares; none
outstanding --- ---
Convertible preferred stock,
Series B, without par value:
designated 220,000 shares; none
outstanding --- ---
Common stock, without par value:
authorized 300,000,000 shares;
issued 92,026,350 at
December 31, 2007 and 2006 127,937 127,937
Capital surplus 100,028 106,916
Accumulated other comprehensive loss (55,276) (79,508)
Retained earnings 1,027,775 998,079
Treasury stock, at cost,
11,543,882 and 11,925,803
shares, at December 31, 2007
and 2006, respectively (295,678) (307,313)
Total shareholders' equity 904,786 846,111
Total liabilities and shareholders'
equity $10,407,230 $10,252,572
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
(Unaudited) Quarterly Periods
(Dollars in
thousands) December 31, September 30, June 30, March 31, December 31,
2007 2007 2007 2007 2006
ASSETS
Cash and due
from banks $175,164 $180,426 $177,524 $179,566 $175,735
Investment
securities/
fed funds sold 2,494,975 2,455,777 2,440,015 2,429,539 2,410,879
Loans held
for sale 46,752 45,677 43,054 89,243 45,772
Loans:
Commercial
loans 3,839,242 3,868,235 3,845,395 3,749,067 3,730,110
Mortgage loans 581,370 586,911 596,758 607,602 614,204
Installment
loans 1,615,035 1,640,380 1,636,669 1,622,324 1,625,962
Home equity
loans 696,259 704,499 711,113 717,806 738,630
Credit card
loans 149,466 143,312 141,294 143,853 144,351
Leases 70,172 68,439 71,521 77,984 64,315
Total loans 6,951,544 7,011,776 7,002,750 6,918,636 6,917,572
Less allowance
for loan losses 92,667 94,393 92,298 91,256 88,175
Net loans 6,858,877 6,917,383 6,910,452 6,827,380 6,829,397
Total earning
assets 9,493,271 9,513,230 9,485,819 9,437,418 9,374,223
Premises and
equipment, net 115,673 117,970 119,818 121,988 121,956
Accrued interest
receivable and
other assets 622,266 643,506 628,591 628,525 643,415
TOTAL ASSETS $10,313,707 $10,360,739 $10,319,454 $10,276,241 $10,227,154
LIABILITIES
Deposits:
Demand-non-
interest
bearing $1,435,358 $1,400,848 $1,408,827 $1,389,455 $1,413,682
Demand-
interest
bearing 699,675 714,216 763,907 756,678 767,430
Savings and
money market
accounts 2,262,818 2,224,048 2,293,567 2,284,549 2,267,268
Certificates
and other
time
deposits 2,941,976 3,140,848 3,048,904 3,051,287 2,991,951
Total
deposits 7,339,827 7,479,960 7,515,205 7,481,969 7,440,331
Securities sold
under agreements
to repurchase 1,517,241 1,555,235 1,458,982 1,352,961 1,269,873
Wholesale
borrowings 369,685 256,356 280,914 399,638 446,950
Total funds 9,226,753 9,291,551 9,255,101 9,234,568 9,157,154
Accrued taxes,
expenses and
other
liabilities 187,330 193,468 192,799 186,960 158,652
Total
liabilities 9,414,083 9,485,019 9,447,900 9,421,528 9,315,806
SHAREHOLDERS' EQUITY
Preferred stock - - - - -
Common stock 127,937 127,937 127,937 127,937 127,937
Capital surplus 99,749 100,511 102,355 107,178 106,339
Accumulated other
comprehensive
(loss) income (60,430) (77,215) (72,170) (76,926) (36,045)
Retained
earnings 1,028,170 1,020,979 1,012,675 1,003,605 1,020,518
Treasury
stock (295,802) (296,492) (299,243) (307,081) (307,401)
Total
shareholders'
equity 899,624 875,720 871,554 854,713 911,348
TOTAL LIABILITIES
AND
SHAREHOLDERS'
EQUITY $10,313,707 $10,360,739 $10,319,454 $10,276,241 $10,227,154
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT CORPORATION AND
SUBSIDIARIES Three months ended
(Dollars in thousands) December 31, 2007
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks $175,164
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 1,977,627 22,949 4.60%
Obligations of states and political
subdivisions (tax exempt) 276,989 4,249 6.09%
Other securities and federal funds
sold 240,359 4,154 6.86%
Total investment securities and
federal funds sold 2,494,975 31,352 4.99%
Loans held for sale 46,752 760 6.45%
Loans 6,951,544 127,343 7.27%
Total earning assets 9,493,271 159,455 6.66%
Allowance for loan losses (92,667)
Other assets 737,939
Total assets $10,313,707
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing $1,435,358 -- --
Demand - interest bearing 699,675 1,352 0.77%
Savings and money market accounts 2,262,818 12,667 2.22%
Certificates and other time deposits 2,941,976 35,290 4.76%
Total deposits 7,339,827 49,309 2.67%
Securities sold under agreements to
repurchase 1,517,241 16,994 4.44%
Wholesale borrowings 369,685 5,505 5.91%
Total interest bearing liabilities 7,791,395 71,808 3.66%
Other liabilities 187,330
Shareholders' equity 899,624
Total liabilities and
shareholders' equity $10,313,707
Net yield on earning assets $9,493,271 87,647 3.66%
Interest rate spread 3.00%
FIRSTMERIT CORPORATION AND
SUBSIDIARIES Year ended
(Dollars in thousands) December 31, 2006
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks $186,029
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 2,050,736 81,207 3.96%
Obligations of states and political
subdivisions (tax exempt) 114,548 7,390 6.45%
Other securities and federal funds
sold 250,221 15,264 6.10%
Total investment securities and
federal funds sold 2,415,505 103,861 4.30%
Loans held for sale 47,449 3,153 6.65%
Loans 6,798,338 499,746 7.35%
Total earning assets 9,261,292 606,760 6.55%
Allowance for loan losses (88,020)
Other assets 770,714
Total assets $10,130,015
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing 1,434,539 -- --
Demand - interest bearing 818,735 9,217 1.13%
Savings and money market accounts 2,271,654 50,083 2.20%
Certificates and other time deposits 2,859,218 123,877 4.33%
Total deposits 7,384,146 183,177 2.48%
Securities sold under agreements to
repurchase 1,283,951 56,151 4.37%
Wholesale borrowings 404,723 24,140 5.96%
Total interest bearing liabilities 7,638,281 263,468 3.45%
Other liabilities 167,266
Shareholders' equity 889,929
Total liabilities and
shareholders' equity $10,130,015
Net yield on earning assets $9,261,292 343,292 3.71%
Interest rate spread 3.10%
FIRSTMERIT CORPORATION AND
SUBSIDIARIES Three months ended
(Dollars in thousands) December 31, 2006
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks $175,735
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 1,996,290 20,246 4.02%
Obligations of states and political
subdivisions (tax exempt) 163,815 2,448 5.93%
Other securities and federal funds
sold 250,774 3,987 6.31%
Total investment securities and
federal funds sold 2,410,879 26,681 4.39%
Loans held for sale 45,772 743 6.44%
Loans 6,917,572 130,973 7.51%
Total earning assets 9,374,223 158,397 6.70%
Allowance for loan losses (88,175)
Other assets 765,371
Total assets $10,227,154
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing $1,413,682 -- --
Demand - interest bearing 767,430 2,031 1.05%
Savings and money market accounts 2,267,268 14,068 2.46%
Certificates and other time deposits 2,991,951 35,569 4.72%
Total deposits 7,440,331 51,668 2.76%
Securities sold under agreements to
repurchase 1,269,873 15,393 4.81%
Wholesale borrowings 446,950 6,834 6.07%
Total interest bearing liabilities 7,743,472 73,895 3.79%
Other liabilities 158,652
Shareholders' equity 911,348
Total liabilities and
shareholders' equity $10,227,154
Net yield on earning assets $9,374,223 84,502 3.58%
Interest rate spread 2.92%
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.
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT CORPORATION
AND SUBSIDIARIES Twelve months ended Twelve months ended
(Dollars in thousands) December 31, 2007 December 31, 2006
Average Average Average Average
Balance Interest Rate Balance Interest Rate
ASSETS
Cash and due
from banks $178,164 186,029
Investment
securities and
federal funds sold:
U.S. Treasury
securities and U.S.
Government agency
obligations
(taxable) 1,955,049 85,544 4.38% 2,050,736 81,207 3.96%
Obligations of
states and
political
subdivisions
(tax exempt) 255,461 15,595 6.10% 114,548 7,390 6.45%
Other securities
and federal funds
sold 244,749 17,127 7.00% 250,221 15,264 6.10%
Total investment
securities and
federal funds
sold 2,455,259 118,266 4.82% 2,415,505 103,861 4.30%
Loans held for sale 56,036 3,050 5.44% 47,449 3,153 6.65%
Loans 6,971,464 521,172 7.48% 6,798,338 499,746 7.35%
Total earning
assets 9,482,759 642,488 6.78% 9,261,292 606,760 6.55%
Allowance for loan
losses (92,662) (88,020)
Other assets 750,527 770,714
Total assets $10,318,788 10,130,015
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand -
non-interest
bearing $1,408,726 -- -- 1,434,539 -- --
Demand - interest
bearing 733,410 6,824 0.93% 818,735 9,217 1.13%
Savings and money
market accounts 2,266,070 54,166 2.39% 2,271,654 50,083 2.20%
Certificates and
other time
deposits 3,045,715 146,559 4.81% 2,859,218 123,877 4.33%
Total deposits 7,453,921 207,549 2.78% 7,384,146 183,177 2.48%
Securities sold
under agreements
to repurchase 1,471,785 71,298 4.84% 1,283,951 56,151 4.37%
Wholesale borrowings 326,460 20,601 6.31% 404,723 24,140 5.96%
Total interest
bearing
liabilities 7,843,440 299,448 3.82% 7,638,281 263,468 3.45%
Other liabilities 191,096 167,266
Shareholders' equity 875,526 889,929
Total liabilities
and
shareholders'
equity $10,318,788 10,130,015
Net yield on earning
assets $9,482,759 343,040 3.62% 9,261,292 343,292 3.71%
Interest rate spread 2.96% 3.10%
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 Twelve months ended
(In thousands except per share
data) December 31, December 31,
2007 2006 2007 2006
Interest income:
Interest and fees on loans,
including held for sale $128,078 $131,683 $524,103 $502,763
Interest and dividends on
investment securities and
federal funds sold 29,891 25,795 112,891 101,078
Total interest income 157,969 157,478 636,994 603,841
Interest expense:
Interest on deposits:
Demand-interest bearing 1,352 2,031 6,824 9,217
Savings and money market
accounts 12,667 14,068 54,166 50,083
Certificates and other time
deposits 35,290 35,569 146,559 123,877
Interest on securities sold
under agreements to repurchase 16,994 15,393 71,298 56,151
Interest on wholesale borrowings 5,505 6,834 20,601 24,140
Total interest expense 71,808 73,895 299,448 263,468
Net interest income 86,161 83,583 337,546 340,373
Provision for loan losses 9,334 44,235 30,835 76,112
Net interest income after
provision for loan losses 76,827 39,348 306,711 264,261
Other income:
Trust department income 5,896 5,794 23,245 22,653
Service charges on deposits 17,067 18,198 67,374 71,524
Credit card fees 12,012 11,325 46,502 44,725
ATM and other service fees 3,055 3,135 12,621 12,817
Bank owned life insurance income 3,283 3,001 13,476 14,339
Investment services and
insurance 3,121 2,011 11,241 9,820
Investment securities gains, net 1,122 - 1,123 22
Loan sales and servicing income 1,551 1,504 10,311 7,513
Other operating income 2,886 3,364 11,030 11,735
Total other income 49,993 48,332 196,923 195,148
Other expenses:
Salaries, wages, pension and
employee benefits 43,087 43,700 170,457 176,700
Net occupancy expense 6,284 6,143 25,679 24,814
Equipment expense 2,886 3,030 11,779 11,999
Stationery, supplies and postage 2,388 2,633 9,436 9,912
Bankcard, loan processing and
other costs 7,482 7,508 29,781 28,211
Professional services 3,588 5,000 15,865 16,971
Amortization of intangibles 222 222 889 889
Other operating expense 17,358 15,751 66,340 58,591
Total other expenses 83,295 83,987 330,226 328,087
Income before federal
income tax expense 43,525 3,693 173,408 131,322
Federal income tax expense 12,066 (2,424) 50,381 36,376
Net income $31,459 $6,117 $123,027 $94,946
Other comprehensive income (loss),
net of taxes
Unrealized securities' holding
gain (loss), net of taxes $11,271 $2,516 $22,716 $7,984
Unrealized hedging gain (loss),
net of taxes (340) - (1,249) (747)
Minimum pension liability
adjustment, net of taxes 874 (43,881) 3,495 (2,559)
Less: reclassification
adjustment for securities'
gains losses realized in net
income,
net of taxes 729 - 730 14
Total other comprehensive income
(loss), net of taxes 11,076 (41,365) 24,232 4,664
Comprehensive income $42,535 $(35,248) $147,259 $99,610
Net income applicable to common
shares $31,459 $6,117 $123,027 $94,946
Net income used in diluted EPS
calculation $31,463 $6,121 $123,043 $94,964
Weighted average number of common
shares outstanding - basic 80,477 80,091 80,372 80,128
Weighted average number of common
shares outstanding - diluted 80,595 80,316 80,510 80,352
Basic earnings per share $0.39 $0.07 $1.53 $1.18
Diluted earnings per share $0.39 $0.07 $1.53 $1.18
Dividend per share $0.29 $0.29 $1.16 $1.14
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME---LINKED
QUARTERS
(Unaudited) Quarterly Results
(Dollars in thousands,
except share data) 2007 2007 2007 2007 2006
4th Q 3rd Q 2nd Q 1st Q 4th Q
Interest and fees on
loans, including held
for sale $128,078 $133,860 $132,076 $130,089 $131,683
Interest and dividends
- securities and
federal funds sold 29,891 28,771 27,383 26,846 25,795
Total interest
income 157,969 162,631 159,459 156,935 157,478
Interest on deposits:
Demand-interest
bearing 1,352 1,677 1,876 1,919 2,031
Savings and money
market accounts 12,667 13,501 13,992 14,006 14,068
Certificates and
other time deposits 35,290 38,464 36,725 36,080 35,569
Securities sold
under agreements
to repurchase 16,994 19,514 18,005 16,785 15,393
Wholesale borrowings 5,505 4,321 4,636 6,139 6,834
Total interest
expense 71,808 77,477 75,234 74,929 73,895
Net interest income 86,161 85,154 84,225 82,006 83,583
Provision for loan
losses 9,334 7,324 9,967 4,210 44,235
Net interest income
after provision
for loan losses 76,827 77,830 74,258 77,796 39,348
Other income:
Trust department
income 5,896 5,657 6,096 5,596 5,794
Service charges on
deposits 17,067 17,003 17,055 16,249 18,198
Credit card fees 12,012 11,679 11,712 11,099 11,325
ATM and other service
fees 3,055 3,306 3,189 3,071 3,135
Bank owned life
insurance income 3,283 3,735 3,290 3,168 3,001
Investment services
and insurance 3,121 3,007 2,660 2,453 2,011
Investment securities
gains (losses), net 1,122 - 1 - -
Loan sales and
servicing income 1,551 1,411 1,911 5,438 1,504
Other operating income 2,886 3,326 3,016 1,802 3,364
Total other income 49,993 49,124 48,930 48,876 48,332
Other expenses:
Salaries, wages,
pension and employee
benefits 43,087 41,332 43,538 42,500 43,700
Net occupancy expense 6,284 6,188 6,521 6,686 6,143
Equipment expense 2,886 2,958 2,851 3,084 3,030
Stationery, supplies
and postage 2,388 2,463 2,252 2,333 2,633
Bankcard, loan
processing and other
costs 7,482 7,222 7,607 7,470 7,508
Professional services 3,588 2,923 4,525 4,829 5,000
Amortization of
intangibles 222 222 222 223 222
Other operating
expense 17,358 20,722 13,859 14,401 15,751
Total other
expenses 83,295 84,030 81,375 81,526 83,987
Income before income tax
expense 43,525 42,924 41,813 45,146 3,693
Federal income taxes 12,066 12,662 11,928 13,725 (2,424)
Net income $31,459 $30,262 $29,885 $31,421 $6,117
Other comprehensive
income (loss), net of
taxes 11,076 15,721 (10,745) 8,180 (41,365)
Comprehensive income $42,535 $45,983 $19,140 $39,601 $(35,248)
Net income applicable to
common shares 31,459 30,262 29,885 31,421 6,117
Adjusted net income used
in diluted EPS
calculation 31,463 30,266 29,889 31,425 6,121
Weighted-average common
shares - basic 80,477 80,467 80,426 80,113 80,091
Weighted-average common
shares - diluted 80,595 80,561 80,570 80,298 80,316
Basic net income per
share $0.39 $0.38 $0.37 $0.39 $0.07
Diluted net income per
share $0.39 $0.38 $0.37 $0.39 $0.07
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited, except December 31, 2006 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
Quarterly Periods
Dec 31 Sept 30 June 30
Allowance for Credit Losses 2007 2007 2007
Allowance for loan losses, beginning
of period $93,811 $94,432 $92,045
Allowance related to loans held for
sale - - -
Provision for loan losses 9,334 7,324 9,967
Charge-offs 11,768 12,347 10,609
Recoveries 2,828 4,402 3,029
Net charge-offs 8,940 7,945 7,580
Allowance for loan losses, end of
period $94,205 $93,811 $94,432
Reserve for unfunded lending
commitments, beginning of period $7,409 $6,553 $6,746
Provision for credit losses (15) 856 (193)
Reserve for unfunded lending
commitments, end of period $7,394 $7,409 $6,553
Allowance for Credit Losses $101,599 $101,220 $100,985
Ratios
Provision for loan losses as a % of
average loans 0.53% 0.41% 0.57%
Provision for credit losses as a % of
average loans 0.00% 0.05% -0.01%
Net charge-offs as a % of average
loans 0.51% 0.45% 0.43%
Net charge-offs and allowance related
to loans held for sale as a % of
average loans 0.51% 0.45% 0.43%
Allowance for loan losses as a % of
period-end loans 1.35% 1.34% 1.34%
Allowance for credit losses as a % of
period-end loans 1.45% 1.44% 1.43%
Allowance for loan losses as a % of
nonperforming loans 299.70% 314.22% 295.08%
Allowance for credit losses as a % of
nonperforming loans 323.22% 339.04% 315.56%
Asset Quality
Impaired loans:
Nonaccrual $21,513 $20,165 $20,877
Other nonperforming loans:
Nonaccrual 9,920 9,690 11,125
Total nonperforming loans 31,433 29,855 32,002
Other real estate ("ORE") 5,829 4,344 5,036
Total nonperforming assets ("NPAs") $37,262 $34,199 $37,038
NPAs as % of period-end loans + ORE 0.53% 0.49% 0.52%
Past due 90 days or more & accruing
interest $11,702 $13,107 $10,536
Annual
Quarterly Periods Period
Mar 31 Dec 31 Dec 31
Allowance for Credit Losses 2007 2006 2006
Allowance for loan losses, beginning
of period $91,342 $88,755 $90,661
Allowance related to loans held for
sale - (23,089) (23,089)
Provision for loan losses 4,210 44,235 76,112
Charge-offs 9,424 22,323 70,728
Recoveries 5,917 3,764 18,386
Net charge-offs 3,507 18,559 52,342
Allowance for loan losses, end of
period $92,045 $91,342 $91,342
Reserve for unfunded lending
commitments, beginning of period $6,294 $6,307 $6,072
Provision for credit losses 452 (13) 222
Reserve for unfunded lending
commitments, end of period $6,746 $6,294 $6,294
Allowance for Credit Losses $98,791 $97,636 $97,636
Ratios
Provision for loan losses as a % of
average loans 0.25% 2.54% 1.12%
Provision for credit losses as a % of
average loans 0.03% 0.00% 0.00%
Net charge-offs as a % of average
loans 0.21% 1.06% 0.77%
Net charge-offs and allowance related
to loans held for sale as a % of average
loans 0.21% 1.40% 1.11%
Allowance for loan losses as a % of
period-end loans 1.32% 1.33% 1.33%
Allowance for credit losses as a % of
period-end loans 1.42% 1.42% 1.42%
Allowance for loan losses as a % of
nonperforming loans 331.93% 168.03% 168.03%
Allowance for credit losses as a % of
nonperforming loans 356.26% 179.60% 179.60%
Asset Quality
Impaired loans:
Nonaccrual $17,049 $45,045 $45,045
Other nonperforming loans:
Nonaccrual 10,681 9,317 9,317
Total nonperforming loans 27,730 54,362 54,362
Other real estate ("ORE") 4,934 9,815 9,815
Total nonperforming assets ("NPAs") $32,664 $64,177 $64,177
NPAs as % of period-end loans + ORE 0.47% 0.93% 0.93%
Past due 90 days or more & accruing
interest $15,209 $16,860 $16,860
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands)
2007 2007 2007 2007 2006
QUARTERLY OTHER INCOME DETAIL 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
Trust department income $5,896 $5,657 $6,096 $5,596 $5,794
Service charges on deposits 17,067 17,003 17,055 16,249 18,198
Credit card fees 12,012 11,679 11,712 11,099 11,325
ATM and other service fees 3,055 3,306 3,189 3,071 3,135
Bank owned life insurance income 3,283 3,735 3,290 3,168 3,001
Investment services and insurance 3,121 3,007 2,660 2,453 2,011
Investment securities gains
(losses), net 1,122 - 1 - -
Loan sales and servicing income 1,551 1,411 1,911 5,438 1,504
Other operating income 2,886 3,326 3,016 1,802 3,364
Total Other Income $49,993 $49,124 $48,930 $48,876 $48,332
2007 2007 2007 2007 2006
QUARTERLY OTHER EXPENSES DETAIL 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
Salaries, wages, pension and
employee benefits $43,087 $41,332 $43,538 $42,500 $43,700
Net occupancy expense 6,284 6,188 6,521 6,686 6,143
Equipment expense 2,886 2,958 2,851 3,084 3,030
Taxes, other than federal income
taxes 1,274 1,984 1,655 1,662 1,753
Stationery, supplies and postage 2,388 2,463 2,252 2,333 2,633
Bankcard, loan processing and
other costs 7,482 7,222 7,607 7,470 7,508
Advertising 2,989 3,332 1,260 1,420 798
Professional services 3,588 2,923 4,525 4,829 5,000
Telephone 1,006 1,142 1,094 1,120 1,362
Amortization of intangibles 222 222 222 223 222
Other operating expense 12,089 14,264 9,850 10,199 11,838
Total Other Expenses $83,295 $84,030 $81,375 $81,526 $83,987
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES - Net Charge-off Detail
(Unaudited)
(Dollars in thousands) Quarters ended Year ended
December 31, December 31,
2007 2006 2007 2006
Allowance for loan
losses - beginning of
period $93,811 88,755 91,342 90,661
Loans charged off:
Commercial 2,969 9,745 7,856 32,628
Mortgage 958 513 5,026 1,670
Installment 4,745 5,296 18,343 20,682
Home equity 758 969 4,151 3,847
Credit cards 2,104 2,254 8,497 8,294
Leases - 3,546 41 3,607
Overdrafts 234 - 234 -
Total 11,768 22,323 44,148 70,728
Recoveries:
Commercial 357 786 4,351 3,734
Mortgage 36 47 44 142
Installment 1,705 2,010 8,021 10,340
Home equity 182 275 1,265 1,293
Credit cards 390 504 1,842 2,123
Manufactured housing 71 79 323 451
Leases 43 63 286 303
Overdrafts 44 - 44 -
Total 2,828 3,764 16,176 18,386
Net charge-offs 8,940 18,559 27,972 52,342
Provision for loan
losses 9,334 44,235 30,835 76,112
Allowance related to
loans held for sale - (23,089) - (23,089)
Allowance for loan
losses - end of period $94,205 91,342 94,205 91,342
Average loans
outstanding $6,951,544 6,917,572 6,971,464 6,798,338
Ratio to average loans:
(Annualized) net
charge-offs 0.51% 1.06% 0.40% 0.77%
(Annualized) net
charge-offs and
allowance related to
loans held for sale 0.51% 1.40% 0.40% 1.11%
Provision for loan
losses 0.53% 2.54% 0.44% 1.12%
Loans outstanding -
period-end $7,001,886 6,878,873 7,001,886 6,878,873
Allowance for credit
losses: 101,599 97,636 101,599 97,636
As a multiple of
(annualized) net
charge-offs 2.86 1.33 3.63 1.87
As a multiple of
(annualized) net
charge-offs and
allowance related to
loans held for sale 2.86 1.01 3.63 1.29
Allowance for loan
losses:
As a percent of
period-end loans
outstanding 1.35% 1.33% 1.35% 1.33%
As a multiple of
(annualized) net
charge-offs 2.66 1.24 3.37 1.75
As a multiple of
(annualized) net
charge-offs and
allowance related
to loans held for sale 2.66 0.94 3.37 1.21
SOURCE FirstMerit Corporation
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