First Quarter Highlights
- Diluted earnings per share of $0.37
- Increase in net interest margin from balance sheet restructuring
initiative
- Average commercial loan growth of 6.6%
- Net income of $30.0 million
- Return on average common equity of 13.67%
- Return on average assets of 1.20%
AKRON, Ohio, April 20 /PRNewswire-FirstCall/ -- FirstMerit Corporation
(Nasdaq: FMER) today announced first quarter 2006 net income of $30.0
million, or $0.37 per diluted share. This compares with $30.1 million, or
$0.36 per diluted share, for the first quarter 2005.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001220/FIRSTMERITLOGO)
Returns on average common equity ("ROE") and average assets ("ROA") for
the first quarter were 13.67% and 1.20%, respectively, compared with 12.48%
and 1.19% for the first quarter 2005.
"We have established five key strategic initiatives -- improving credit
quality, accelerating revenue growth, remixing our balance sheet, operating
more efficiently and effective capital management -- that we believe will
position FirstMerit for strong future performance and growth in shareholder
returns. I am pleased to report that we made solid progress on these
initiatives during the first quarter of 2006," said John R. Cochran,
chairman and CEO.
"Effective execution on our balance sheet restructuring initiative,
which seeks to grow net interest income by reducing lower-yielding
investment securities and growing the higher-yielding loan portfolio,
contributed to a seven basis point expansion in the net interest margin
over the prior and year-ago quarters. While revenues were affected by lower
earning asset levels that resulted from this restructuring strategy, these
measures position FirstMerit for increased revenue growth in the upcoming
quarters, given the realization of balance sheet growth in 2006."
Mr. Cochran continued, "Fee income, excluding securities gains, grew
5.37% year-over-year, with positive results from a number of initiatives
developed in 2005 to boost service charges and credit card fees. First
quarter operating expenses show an increase in our promotional activity
that should translate into loans, deposits and higher fee income during the
balance of the year."
Total revenue, defined as net interest income on a fully tax-equivalent
("FTE") basis plus noninterest income net of securities transactions,
totaled $131.9 million for the first quarter 2006, compared with $129.8
million reported in the first quarter 2005. FTE net interest income was
$86.6 million for the first quarter 2006, a decline of $0.1 million, or
0.14%, compared with the year-ago quarter.
The Company is progressing on its plan to reduce lower-yielding
investment securities from the earning asset mix and generate increased
levels of net interest income from expected loan portfolio growth during
2006. For the first quarter of 2006, average investment securities
accounted for 24.72% of average assets, compared with 28.13% for the first
quarter 2005. Over that time, average loan growth, supported by commercial
growth of $220.8 million, or 6.6%, offset a $376.4 million, or 13.09%,
decrease in investment securities. In the first quarter of 2006, average
loans grew $205.7 million, or 3.17%, and average earning assets declined by
$175.8 million, or 1.87%, compared with the first quarter 2005. The
reduction of the investment portfolio is a key element in the Company's
strategy to grow the balance sheet more profitably.
Noninterest income excluding securities transactions totaled $45.4
million for the first quarter 2006, compared with $43.1 million for the
first quarter 2005, an increase of $2.3 million, or 5.37%. Service charges
increased $1.2 million, or 8.41%, while credit card fees increased $1.3
million, or 13.39%. Compared with the fourth quarter 2005, noninterest
income decreased $2.2 million, or 4.60%, reflecting an absence of seasonal
credit card and deposit account activity.
Noninterest expense totaled $81.9 million for the first quarter 2006,
compared with $75.9 million for the first quarter 2005. Increased employee
benefits expense was the main driver of a $3.6 million, or 9.24% increase
in salaries, wages and pension and employee benefits compared with the
year-ago quarter. During the first quarter 2006, the Company also increased
its marketing expenditures $1.5 million, compared with the first quarter of
2005, by implementing a direct marketing campaign designed to grow
profitable new households. The efficiency ratio for the first quarter 2006
was 61.90%, compared with 58.33% for the first quarter 2005. Net
charge-offs totaled $9.2 million in the first quarter 2006, compared with
$11.8 million for the first quarter 2005, or 0.56% and 0.74% of average
loans, respectively. The $2.6 million, or 22.19%, reduction in net
charge-offs reflects a return for the Company to its trend of improvement
in year over year net charge-offs. As of March 31, 2006, nonperforming
assets were $72.9 million, or 1.09%, of period-end loans plus other real
estate, compared with $72.3 million, or 1.08%, at December 31, 2005, and
$46.7 million, or 0.72%, at March 31, 2005.
The Company recorded $6.1 million of loan loss provision expenses in
the first quarter 2006, compared with loan loss provision expenses of $11.6
million in the first quarter 2005. On March 31, 2006, criticized commercial
assets ("substandard" and "doubtful") accounted for 7.47% of total
commercial loans, compared with criticized commercial asset levels of 9.19%
on March 31, 2005, reflecting a $46.2 million decrease in criticized
commercial credits. For the first quarter of 2006, loan loss provision
expenses were $3.3 million below the level of reported net charge-offs
which includes $3.1 million of charges associated with $9.0 million of
commercial loans the Company intends to sell in the second quarter of 2006.
At March 31 2006, the allowance for loan losses was 1.31% of loans,
compared with 1.36% at December 31, 2005, and 1.49% at March 31, 2005. 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 1.40% at March 31, 2006, compared with
1.45% at December 31, 2005, and 1.59% at March 31, 2005.
Assets at March 31, 2006 totaled $10.1 billion, compared with $10.3
billion at March 31, 2005, representing a decrease of $168.2 million, or
1.64%. Period-end loan growth of $152.1 million, or 2.33%, was driven by a
$180.9 million, or 5.35% increase in the commercial lending portfolio.
Offsetting the growth in the loan portfolio was a $399.7 decrease in the
investment portfolio as part of the Company's emphasis on restructuring the
balance sheet for higher yielding earning asset mix.
Deposits totaled $7.5 billion at March 31, 2006, an increase of $186.0
million, or 2.54%, from $7.3 billion at March 31, 2005. Included in the
total deposit growth is a $111.0 million reduction in brokered CDs.
Noninterest bearing demand deposit accounts (DDA) increased $37.9 million,
or 2.65%. Growth in noninterest interest DDA accounts primarily from new
account acquisitions offset the declines in money market and savings
account balances as customers sought higher returns than traditional
savings investments.
Shareholders' equity was $870.6 million at March 31, 2006. The
Company's capital position remains strong as the tangible equity to assets
ratio was 7.31% at March 31, 2006. The common dividend per share paid in
the first quarter 2006 was $0.28, a $0.01, or 3.7%, increase from the first
quarter 2005. The Company also successfully executed an accelerated share
repurchase program of 2,618,588 shares in the first quarter 2006, which
reduced average diluted shares outstanding by 4.56% from the first quarter
2005.
First Quarter 2006
Conference Call: FirstMerit Corporation will host a conference call on
April 20, 2006, at 2:00 p.m. Eastern time. To participate in the conference
call, please dial (888) 335-5539 ten minutes before start time and provide
the reservation number: 7280148. A replay of the conference call will be
available at approximately 4:30 p.m., on April 20, 2006 through May 19,
2006, by dialing (877) 519-4471, and entering the PIN: 7280148.
The 2006 earnings release will be available at approximately 7:30 a.m.
on the Internet at http://www.firstmerit.com under the Investor Relations portion
of the Web site. Any material non-public information will be posted on the
Web site immediately after the conference call ends.
FirstMerit Corporation is a diversified financial services company
headquartered in Akron, Ohio, with assets of $10.1 billion as of March 30,
2006 and 160 banking offices in 24 Ohio and Western Pennsylvania counties.
FirstMerit provides a complete range of banking and other financial
services to consumers and businesses through its core operations. Principal
wholly- owned subsidiaries include: FirstMerit Bank, N.A., FirstMerit
Mortgage Corporation, FirstMerit Title Agency, Ltd. and FirstMerit
Community Development Corporation.
Forward-Looking Statement
This release contains forward-looking statements relating to present or
future trends or factors affecting the banking industry, and specifically
the financial condition and results of operations, including without
limitation, statements relating to the earnings outlook of the Company, as
well as its operations, markets and products. Actual results could differ
materially from those indicated. Among the important factors that could
cause results to differ materially are interest rate changes, continued
softening in the economy, which could materially impact credit quality
trends and the ability to generate loans, changes in the mix of the
Company's business, competitive pressures, changes in accounting, tax or
regulatory practices or requirements and those risk factors detailed in the
Company's periodic reports and registration statements filed with the
Securities and Exchange Commission. The Company undertakes no obligation to
release revisions to these forward-looking statements or reflect events or
circumstances after the date of this release.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
(Dollars in thousands)
2006 2005 2005
EARNINGS 1st Qtr 4th Qtr 3rd Qtr
Net interest income FTE (a) $86,563 88,152 88,347
Provision for loan losses 6,106 16,260 9,974
Other income 45,397 47,586 47,846
Other expenses 81,899 79,274 78,926
FTE adjustment (a) 590 650 641
Net income 29,964 27,656 36,594
Diluted EPS 0.37 0.34 0.43
PERFORMANCE RATIOS
Return on average assets (ROA) 1.20% 1.07% 1.41%
Return on average common equity (ROE) 13.67% 11.52% 14.90%
Net interest margin FTE (a) 3.80% 3.73% 3.70%
Efficiency ratio 61.90% 58.26% 57.81%
Number of full-time equivalent
employees 3,104 3,057 3,073
MARKET DATA
Book value/common share $10.91 11.39 11.65
Period-end common share mkt value 24.66 25.91 26.79
Market as a % of book 226% 228% 230%
Cash dividends/common share $0.28 0.28 0.28
Common stock dividend payout ratio 75.68% 82.35% 65.12%
Average basic common shares 80,374 82,786 83,489
Average diluted common shares 80,648 83,082 83,978
Period end common shares 79,766 82,335 83,442
Common shares repurchased 2,618,588 1,228,293 178,872
Common stock market capitalization $1,967,030 2,133,300 2,235,411
ASSET QUALITY
Gross charge-offs $14,914 22,736 14,207
Net charge-offs 9,178 18,379 10,002
Allowance for loan losses 87,589 90,661 92,780
Reserve for unfunded lending
commitments 5,853 6,072 5,857
Nonperforming assets (NPAs) 72,941 72,257 51,398
Net charge-off/average loans ratio 0.56% 1.09% 0.60%
Allowance for loan losses/period-end
loans 1.31% 1.36% 1.39%
Allowance for credit losses/period-
end loans 1.40% 1.45% 1.47%
NPAs/loans and other real estate 1.09% 1.08% 0.77%
Allowance for loan
losses/nonperforming loans 136.22% 145.61% 221.46%
Allowance for credit
losses/nonperforming loans 145.32% 155.36% 235.44%
CAPITAL & LIQUIDITY
Period-end tangible equity to assets 7.31% 7.94% 8.18%
Average equity to assets 8.79% 9.33% 9.46%
Average equity to loans 13.27% 14.22% 14.66%
Average loans to deposits 91.58% 92.11% 91.73%
AVERAGE BALANCES
Assets $10,111,553 10,211,619 10,295,827
Deposits 7,313,509 7,273,980 7,245,562
Loans 6,697,732 6,699,997 6,646,112
Earning assets 9,245,882 9,368,139 9,465,288
Shareholders' equity 888,818 952,715 974,147
ENDING BALANCES
Assets $10,100,717 10,154,359 10,285,329
Deposits 7,510,562 7,233,650 7,352,026
Loans 6,672,102 6,667,327 6,685,462
Goodwill 139,245 139,245 139,245
Intangible assets 3,533 3,756 3,978
Earning assets 9,193,741 9,256,389 9,419,355
Total shareholders' equity 870,552 937,580 972,348
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.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
(Dollars in thousands)
2005 2005
EARNINGS 2nd Qtr 1st Qtr
Net interest income FTE (a) 88,432 86,685
Provision for loan losses 5,972 11,614
Other income 50,095 44,939
Other expenses 79,397 75,911
FTE adjustment (a) 655 675
Net income 36,145 30,088
Diluted EPS 0.43 0.36
PERFORMANCE RATIOS
Return on average assets (ROA) 1.40% 1.19%
Return on average common equity (ROE) 15.07% 12.48%
Net interest margin FTE (a) 3.74% 3.73%
Efficiency ratio 57.14% 58.33%
Number of full-time equivalent
employees 3,078 3,081
MARKET DATA
Book value/common share 11.69 11.32
Period-end common share mkt value 26.11 26.76
Market as a % of book 223% 236%
Cash dividends/common share 0.27 0.27
Common stock dividend payout ratio 62.79% 75.00%
Average basic common shares 83,603 84,097
Average diluted common shares 83,890 84,497
Period end common shares 83,522 83,612
Common shares repurchased 145,143 816,208
Common stock market capitalization 2,180,759 2,237,457
ASSET QUALITY
Gross charge-offs 15,422 16,740
Net charge-offs 10,278 11,795
Allowance for loan losses 92,808 97,115
Reserve for unfunded lending
commitments 5,785 6,479
Nonperforming assets (NPAs) 53,985 46,703
Net charge-off/average loans ratio 0.62% 0.74%
Allowance for loan losses/period-end
loans 1.40% 1.49%
Allowance for credit losses/period-
end loans 1.49% 1.59%
NPAs/loans and other real estate 0.82% 0.71%
Allowance for loan
losses/nonperforming loans 208.74% 235.71%
Allowance for credit
losses/nonperforming loans 221.76% 251.44%
CAPITAL & LIQUIDITY
Period-end tangible equity to assets 8.19% 7.93%
Average equity to assets 9.32% 9.56%
Average equity to loans 14.58% 15.06%
Average loans to deposits 90.16% 88.27%
AVERAGE BALANCES
Assets 10,329,167 10,226,765
Deposits 7,321,860 7,354,689
Loans 6,601,204 6,492,044
Earning assets 9,489,431 9,421,693
Shareholders' equity 962,239 977,888
ENDING BALANCES
Assets 10,313,955 10,268,898
Deposits 7,173,857 7,324,551
Loans 6,610,385 6,520,034
Goodwill 139,245 139,245
Intangible assets 4,200 4,424
Earning assets 9,491,957 9,443,226
Total shareholders' equity 976,016 946,731
(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.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited, except December 31, 2005,
which is derived from the March 31, December 31, March 31,
audited financial statements) 2006 2005 2005
ASSETS
Cash and due from banks $206,912 225,953 191,582
Investment securities (at fair
value) and federal funds sold 2,460,321 2,546,496 2,860,021
Loans held for sale 61,318 42,566 63,171
Loans:
Commercial loans 3,562,968 3,519,483 3,382,102
Mortgage loans 625,514 628,581 637,885
Installment loans 1,509,714 1,524,355 1,601,498
Home equity loans 772,308 778,697 677,724
Credit card loans 135,916 145,592 137,044
Leases 65,682 70,619 83,781
Total loans 6,672,102 6,667,327 6,520,034
Less allowance for loan losses (87,589) (90,661) (97,115)
Net loans 6,584,513 6,576,666 6,422,919
Premises and equipment, net 119,571 120,420 118,059
Goodwill 139,245 139,245 139,245
Intangible assets 3,533 3,756 4,424
Accrued interest receivable and
other assets 525,304 499,257 469,477
Total assets $10,100,717 10,154,359 10,268,898
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-non-interest bearing $1,465,168 1,523,731 1,427,307
Demand-interest bearing 923,491 830,248 827,507
Savings and money market accounts 2,320,360 2,304,177 2,379,464
Certificates and other time
deposits 2,801,543 2,575,494 2,690,273
Total deposits 7,510,562 7,233,650 7,324,551
Securities sold under agreements to
repurchase 1,272,362 1,426,037 1,281,745
Wholesale borrowings 285,143 401,104 557,282
Accrued taxes, expenses, and other
liabilities 162,098 155,988 158,589
Total liabilities 9,230,165 9,216,779 9,322,167
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 March 31,
2006 and March 31, 2005 127,937 127,937 127,937
Capital surplus 108,958 108,210 108,903
Accumulated other comprehensive
loss (53,395) (42,850) (38,194)
Retained earnings 1,002,035 994,487 963,618
Treasury stock, at cost,
12,257,585, 9,691,424 and
8,414,363 shares at March 31,
2006, December 31, 2005 and
March 31, 2005, respectively (314,983) (250,204) (215,533)
Total shareholders' equity 870,552 937,580 946,731
Total liabilities and shareholders'
equity $10,100,717 10,154,359 10,268,898
The accompanying notes are an integral part of the consolidated financial
statements.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Quarterly Periods
(Unaudited)
(Dollars in thousands) March 31, Dec. 31, Sept. 30,
2006 2005 2005
ASSETS
Cash and due from banks $194,042 192,189 197,412
Investment securities/fed funds sold 2,500,021 2,619,248 2,764,724
Loans held for sale 48,129 48,894 54,452
Loans:
Commercial loans 3,567,263 3,519,807 3,441,231
Mortgage loans 630,702 637,877 641,532
Installment loans 1,513,938 1,556,212 1,594,801
Home equity loans 775,728 772,757 754,492
Credit card loans 141,821 142,743 140,873
Leases 68,280 70,601 73,183
Total loans 6,697,732 6,699,997 6,646,112
Less allowance for loan losses (a) 90,229 91,916 91,852
Net loans 6,607,503 6,608,081 6,554,260
Total earning assets 9,245,882 9,368,139 9,465,288
Premises and equipment, net 120,155 117,387 117,471
Accrued interest receivable and other
assets 641,703 625,820 607,508
TOTAL ASSETS $10,111,553 10,211,619 10,295,827
LIABILITIES
Deposits:
Demand-non-interest bearing $1,462,671 1,488,679 1,457,487
Demand-interest bearing 848,209 817,009 838,549
Savings and money market accounts 2,292,865 2,332,528 2,333,331
Certificates and other time
deposits 2,709,764 2,635,764 2,616,195
Total deposits 7,313,509 7,273,980 7,245,562
Securities sold under agreements to
repurchase 1,295,178 1,443,740 1,478,857
Wholesale borrowings 433,257 375,167 442,035
Total funds 9,041,944 9,092,887 9,166,454
Accrued taxes, expenses and other
liabilities (a) 180,791 166,017 155,226
Total liabilities 9,222,735 9,258,904 9,321,680
SHAREHOLDERS' EQUITY
Preferred stock - - -
Common stock 127,937 127,937 127,937
Capital surplus 108,330 108,303 108,564
Accumulated other comprehensive
(loss) income (44,150) (39,834) (25,682)
Retained earnings 998,173 994,301 982,419
Treasury stock (301,472) (237,992) (219,091)
Total shareholders' equity 888,818 952,715 974,147
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $10,111,553 10,211,619 10,295,827
(a) As of December 31, 2004, the reserve for unfunded lending commitments
has been reclassified from the allowance for loan losses. Amounts
presented prior to December 31, 2004 have been reclassified to
conform to the current presentation.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Quarterly Periods
(Unaudited)
(Dollars in thousands) June 30, March 31,
2005 2005
ASSETS
Cash and due from banks 197,548 190,740
Investment securities/fed funds sold 2,833,818 2,876,415
Loans held for sale 54,409 53,234
Loans:
Commercial loans 3,434,946 3,346,425
Mortgage loans 641,865 646,528
Installment loans 1,601,775 1,598,953
Home equity loans 704,054 674,913
Credit card loans 137,919 141,440
Leases 80,645 83,785
Total loans 6,601,204 6,492,044
Less allowance for loan losses (a) 96,342 96,438
Net loans 6,504,862 6,395,606
Total earning assets 9,489,431 9,421,693
Premises and equipment, net 118,392 119,916
Accrued interest receivable and other
assets 620,138 590,854
TOTAL ASSETS 10,329,167 10,226,765
LIABILITIES
Deposits:
Demand-non-interest bearing 1,470,673 1,447,226
Demand-interest bearing 834,708 820,974
Savings and money market accounts 2,370,280 2,392,023
Certificates and other time
deposits 2,646,199 2,694,466
Total deposits 7,321,860 7,354,689
Securities sold under agreements to
repurchase 1,385,644 1,326,242
Wholesale borrowings 498,088 412,149
Total funds 9,205,592 9,093,080
Accrued taxes, expenses and other
liabilities (a) 161,336 155,797
Total liabilities 9,366,928 9,248,877
SHAREHOLDERS' EQUITY
Preferred stock - -
Common stock 127,937 127,937
Capital surplus 108,559 108,478
Accumulated other comprehensive
(loss) income (26,883) (16,998)
Retained earnings 968,408 960,740
Treasury stock (215,782) (202,269)
Total shareholders' equity 962,239 977,888
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 10,329,167 10,226,765
(a) As of December 31, 2004, the reserve for unfunded lending commitments
has been reclassified from the allowance for loan losses. Amounts
presented prior to December 31, 2004 have been reclassified to
conform to the current presentation.
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT CORPORATION AND
SUBSIDIARIES Three months ended
(Dollars in thousands) March 31, 2006
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks $194,042
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 2,161,306 20,850 3.91%
Obligations of states and political
subdivisions (tax exempt) 90,622 1,527 6.83%
Other securities and federal funds
sold 248,093 3,526 5.76%
Total investment securities
and federal funds sold 2,500,021 25,903 4.20%
Loans held for sale 48,129 762 6.42%
Loans 6,697,732 116,997 7.08%
Total earning assets 9,245,882 143,662 6.30%
Allowance for loan losses (90,229)
Other assets 761,858
Total assets $10,111,553
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing $1,462,671 -- --
Demand - interest bearing 848,209 2,362 1.13%
Savings and money market accounts 2,292,865 10,748 1.90%
Certificates and other time deposits 2,709,764 26,101 3.91%
Total deposits 7,313,509 39,211 2.17%
Securities sold under agreements to
repurchase 1,295,178 11,923 3.73%
Wholesale borrowings 433,257 5,965 5.58%
Total interest bearing liabilities 7,579,273 57,099 3.06%
Other liabilities 180,791
Shareholders' equity 888,818
Total liabilities and
shareholders' equity $10,111,553
Net yield on earning assets $9,245,882 86,563 3.80%
Interest rate spread 3.25%
Notes: Interest income on tax-exempt securities and loans have 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 Year ended
(Dollars in thousands) December 31, 2005
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks 194,485
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 2,416,360 91,814 3.80%
Obligations of states and political
subdivisions (tax exempt) 99,487 6,707 6.74%
Other securities and federal funds
sold 255,568 12,291 4.81%
Total investment securities and
federal funds sold 2,771,415 110,812 4.00%
Loans held for sale 52,740 2,854 5.41%
Loans 6,610,509 430,402 6.51%
Total earning assets 9,434,664 544,068 5.77%
Allowance for loan losses (94,118)
Other assets 729,398
Total assets 10,264,429
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing 1,466,106 -- --
Demand - interest bearing 827,829 5,871 0.71%
Savings and money market accounts 2,356,813 32,944 1.40%
Certificates and other time deposits 2,647,908 86,764 3.28%
Total deposits 7,298,656 125,579 1.72%
Securities sold under agreements to
repurchase 1,409,135 45,423 3.22%
Wholesale borrowings 431,787 21,449 4.97%
Total interest bearing liabilities 7,673,472 192,451 2.51%
Other liabilities 158,125
Shareholders' equity 966,726
Total liabilities and shareholders'
equity 10,264,429
Net yield on earning assets 9,434,664 351,617 3.73%
Interest rate spread 3.26%
Notes: Interest income on tax-exempt securities and loans have 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 Three months ended
(Dollars in thousands) March 31, 2005
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks 190,740
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 2,518,784 23,818 3.83%
Obligations of states and political
subdivisions (tax exempt) 101,571 1,763 7.04%
Other securities and federal funds
sold 256,060 2,763 4.38%
Total investment securities and
federal funds sold 2,876,415 28,344 4.00%
Loans held for sale 53,234 627 4.78%
Loans 6,492,044 99,546 6.22%
Total earning assets 9,421,693 128,517 5.53%
Allowance for loan losses (96,438)
Other assets 710,770
Total assets 10,226,765
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing 1,447,226 -- --
Demand - interest bearing 820,974 956 0.47%
Savings and money market accounts 2,392,023 6,375 1.08%
Certificates and other time deposits 2,694,466 20,600 3.10%
Total deposits 7,354,689 27,931 1.54%
Securities sold under agreements to
repurchase 1,326,242 8,841 2.70%
Wholesale borrowings 412,149 5,059 4.98%
Total interest bearing liabilities 7,645,854 41,831 2.22%
Other liabilities 155,797
Shareholders' equity 977,888
Total liabilities and shareholders'
equity 10,226,765
Net yield on earning assets 9,421,693 86,686 3.73%
Interest rate spread 3.31%
Notes: Interest income on tax-exempt securities and loans have 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
(In thousands except per share data) March 31,
2006 2005
Interest income:
Interest and fees on loans,
including held for sale $117,740 100,149
Interest and dividends on
investment securities and federal
funds sold 25,332 27,692
Total interest income 143,072 127,841
Interest expense:
Interest on deposits:
Demand-interest bearing 2,362 956
Savings and money market accounts 10,748 6,375
Certificates and other time
deposits 26,101 20,600
Interest on securities sold under
agreements to repurchase 11,923 8,841
Interest on wholesale borrowings 5,965 5,059
Total interest expense 57,099 41,831
Net interest income 85,973 86,010
Provision for loan losses 6,106 11,614
Net interest income after
provision for loan losses 79,867 74,396
Other income:
Trust department income 5,394 5,505
Service charges on deposits 16,066 14,820
Credit card fees 10,671 9,411
ATM and other service fees 3,108 2,959
Bank owned life insurance income 2,986 3,074
Investment services and insurance 2,597 2,858
Manufactured housing income 3 102
Investment securities gains, net 16 1,872
Loan sales and servicing income 1,445 1,133
Other operating income 3,111 3,205
Total other income 45,397 44,939
Other expenses:
Salaries, wages, pension and
employee benefits 43,031 39,393
Net occupancy expense 6,549 6,536
Equipment expense 2,958 3,185
Stationery, supplies and postage 2,453 2,461
Bankcard, loan processing and other
costs 5,827 5,724
Professional services 2,763 2,150
Amortization of intangibles 223 223
Other operating expense 18,095 16,239
Total other expenses 81,899 75,911
Income before income tax
expense 43,365 43,424
Federal income taxes 13,401 13,336
Net income $29,964 30,088
Other comprehensive income (loss),
net of taxes
Unrealized securities' holding
gains (losses), net of taxes (9,748) (22,604)
Unrealized hedging gain (loss), net
of taxes (787) 18
Minimum pension liability
adjustment, net of taxes - (183)
Less: reclassification adjustment
for securities' gains (losses)
realized in net income,
net of taxes 10 1,217
Total other comprehensive income
(loss), net of taxes (10,545) (23,986)
Comprehensive income $19,419 6,102
Net income applicable to common
shares $29,964 30,088
Net income used in diluted EPS
calculation $29,969 30,095
Weighted average number of common
shares outstanding - basic 80,374 84,097
Weighted average number of common
shares outstanding - diluted 80,648 84,497
Basic earnings per share $0.37 0.36
Diluted earnings per share $0.37 0.36
Dividend per share $0.28 0.27
The accompanying notes are an integral part of the consolidated financial
statements.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME---LINKED
QUARTERS
(Unaudited) Quarterly Results
(Dollars in thousands,
except share data) 2006 2005 2005 2005 2005
1st Q 4th Q 3rd Q 2nd Q 1st Q
Interest and fees on
loans, including held for
sale $117,740 115,850 111,169 105,975 100,149
Interest and dividends -
securities and federal
funds sold 25,332 26,109 26,700 27,802 27,692
Total interest income 143,072 141,959 137,869 133,777 127,841
Interest on deposits:
Demand-interest bearing 2,362 1,953 1,732 1,230 956
Savings and money market
accounts 10,748 10,352 8,700 7,517 6,375
Certificates and other
time deposits 26,101 23,831 21,637 20,696 20,600
Securities sold under
agreements to
repurchase 11,923 13,423 12,535 10,624 8,841
Wholesale borrowings 5,965 4,898 5,559 5,933 5,059
Total interest expense 57,099 54,457 50,163 46,000 41,831
Net interest income 85,973 87,502 87,706 87,777 86,010
Provision for loan losses 6,106 16,260 9,974 5,972 11,614
Net interest income
after provision for
loan losses 79,867 71,242 77,732 81,805 74,396
Other income:
Trust department income 5,394 5,430 5,515 5,684 5,505
Service charges on
deposits 16,066 17,884 18,561 17,800 14,820
Credit card fees 10,671 10,601 10,437 10,523 9,411
ATM and other service fees 3,108 3,157 3,453 3,298 2,959
Bank owned life insurance
income 2,986 3,092 3,074 3,024 3,074
Investment services and
insurance 2,597 2,696 2,226 2,828 2,858
Manufactured housing
income 3 3 3 40 102
Investment securities
gains (losses), net 16 39 40 (25) 1,872
Loan sales and servicing
income 1,445 1,668 2,076 1,520 1,133
Other operating income 3,111 3,016 2,461 5,403 3,205
Total other income 45,397 47,586 47,846 50,095 44,939
Other expenses:
Salaries, wages, pension
and employee benefits 43,031 40,790 42,149 41,351 39,393
Net occupancy expense 6,549 5,746 5,567 5,881 6,536
Equipment expense 2,958 4,152 2,962 3,002 3,185
Stationery, supplies and
postage 2,453 2,546 2,559 2,484 2,461
Bankcard, loan processing
and other costs 5,827 7,042 5,802 5,444 5,724
Professional services 2,763 3,389 2,632 3,843 2,150
Amortization of
intangibles 223 222 222 222 223
Other operating expense 18,095 15,387 17,033 17,170 16,239
Total other expenses 81,899 79,274 78,926 79,397 75,911
Income before income tax
expense 43,365 39,554 46,652 52,503 43,424
Federal income taxes 13,401 11,898 10,058 16,358 13,336
Net income $29,964 27,656 36,594 36,145 30,088
Other comprehensive income
(loss), net of taxes (10,545) (8,927) (14,272) 18,540 (23,986)
Comprehensive income $19,419 18,729 22,322 54,685 6,102
Net income applicable to
common shares 29,964 27,656 36,594 36,145 30,088
Adjusted net income used in
diluted EPS calculation 29,969 27,659 36,601 36,152 30,095
Weighted-average common
shares - basic 80,374 82,786 83,489 83,603 84,097
Weighted-average common
shares - diluted 80,648 83,082 83,978 83,890 84,497
Basic net income per share $0.37 0.33 0.44 0.43 0.36
Diluted net income per share $0.37 0.34 0.43 0.43 0.36
Note: Certain prior year balances have been reclassified to conform to
the current year presentation.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited, except December 31, 2005 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
Quarterly Periods
March 31 Dec. 31 Sept. 30
Allowance for Credit Losses 2006 2005 2005
Allowance for loan losses, beginning
of period $90,661 92,780 92,808
Allowance related to loans sold - - -
Provision for loan losses 6,106 16,260 9,974
Charge-offs 14,914 22,736 14,207
Recoveries 5,736 4,357 4,205
Net charge-offs 9,178 18,379 10,002
Allowance for loan losses, end of
period $87,589 90,661 92,780
Reserve for unfunded lending
commitments, beginning of period $6,072 5,857 5,785
Provision for credit losses (219) 215 72
Reserve for unfunded lending
commitments, end of period $5,853 6,072 5,857
Allowance for Credit Losses $93,442 96,733 98,637
Ratios
Provision for loan losses as a % of
average loans 0.37% 0.96% 0.60%
Provision for credit losses as a % of
average loans -0.01% 0.01% 0.00%
Net charge-offs as a % of average
loans 0.56% 1.09% 0.60%
Allowance for loan losses as a % of
period-end loans 1.31% 1.36% 1.39%
Allowance for credit losses as a % of
period-end loans 1.40% 1.45% 1.48%
Allowance for loan losses as a % of
nonperforming loans 136.22% 145.61% 221.46%
Allowance for credit losses as a % of
nonperforming loans 145.32% 155.36% 235.44%
Asset Quality
Impaired loans:
Nonaccrual $56,258 54,176 34,144
Other nonperforming loans:
Nonaccrual 8,044 8,086 7,751
Total nonperforming loans 64,302 62,262 41,895
Other real estate ("ORE") 8,639 9,995 9,503
Total nonperforming assets ("NPAs") $72,941 72,257 51,398
NPAs as % of period-end loans + ORE 1.09% 1.08% 0.77%
Past due 90 days or more & accruing
interest $18,640 17,931 21,451
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited, except December 31, 2005 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
Quarterly Annual
Periods Period
June 30 March 31 Dec. 31
Allowance for Credit Losses 2005 2005 2005
Allowance for loan losses, beginning
of period 97,115 97,296 97,296
Allowance related to loans sold - - -
Provision for loan losses 5,971 11,614 43,820
Charge-offs 15,422 16,740 69,105
Recoveries 5,144 4,945 18,650
Net charge-offs 10,278 11,795 50,455
Allowance for loan losses, end of
period 92,808 97,115 90,661
Reserve for unfunded lending
commitments, beginning of period 6,479 5,774 5,774
Provision for credit losses (694) 705 298
Reserve for unfunded lending
commitments, end of period 5,785 6,479 6,072
Allowance for Credit Losses 98,593 103,594 96,733
Ratios
Provision for loan losses as a % of
average loans 0.36% 0.73% 0.66%
Provision for credit losses as a % of
average loans -0.04% 0.04% 0.00%
Net charge-offs as a % of average
loans 0.62% 0.74% 0.76%
Allowance for loan losses as a % of
period-end loans 1.40% 1.49% 1.36%
Allowance for credit losses as a % of
period-end loans 1.49% 1.59% 1.45%
Allowance for loan losses as a % of
nonperforming loans 208.74% 235.71% 145.61%
Allowance for credit losses as a % of
nonperforming loans 221.76% 251.44% 155.36%
Asset Quality
Impaired loans:
Nonaccrual 38,124 34,207 54,176
Other nonperforming loans:
Nonaccrual 6,336 6,994 8,086
Total nonperforming loans 44,460 41,201 62,262
Other real estate ("ORE") 9,525 5,502 9,995
Total nonperforming assets ("NPAs") 53,985 46,703 72,257
NPAs as % of period-end loans + ORE 0.82% 0.72% 1.08%
Past due 90 days or more & accruing
interest 17,969 22,899 17,931
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands)
2006 2005 2005 2005 2005
QUARTERLY OTHER INCOME DETAIL 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
Trust department income $5,394 5,430 5,515 5,684 5,505
Service charges on deposits 16,066 17,884 18,561 17,800 14,820
Credit card fees 10,671 10,601 10,437 10,523 9,411
ATM and other service fees 3,108 3,157 3,453 3,298 2,959
Bank owned life insurance income 2,986 3,092 3,074 3,024 3,074
Investment services and insurance 2,597 2,696 2,226 2,828 2,858
Manufactured housing income 3 3 3 40 102
Investment securities gains
(losses), net 16 39 40 (25) 1,872
Loan sales and servicing income 1,445 1,668 2,076 1,520 1,133
Other operating income 3,111 3,016 2,461 5,403 3,205
Total Other Income $45,397 47,586 47,846 50,095 44,939
2006 2005 2005 2005 2005
QUARTERLY OTHER EXPENSES DETAIL 1st Qtr 4th Qtr 3 Qtr 2nd Qtr 1st Qtr
Salaries, wages, pension and
employee benefits $43,031 40,790 42,149 41,351 39,393
Net occupancy expense 6,549 5,746 5,567 5,881 6,536
Equipment expense 2,958 4,152 2,962 3,002 3,185
Taxes, other than federal income
taxes 1,819 1,578 849 880 735
Stationery, supplies and postage 2,453 2,546 2,559 2,484 2,461
Bankcard, loan processing and
other costs 5,827 7,042 5,802 5,444 5,724
Advertising 2,766 1,415 1,863 3,182 1,244
Professional services 2,763 3,389 2,632 3,843 2,150
Telephone 1,128 1,136 1,206 1,095 1,119
Amortization of intangibles 223 222 222 222 223
Other operating expense 12,382 11,258 13,115 12,013 13,141
Total Other Expenses $81,899 79,274 78,926 79,397 75,911
Note: Certain prior year balances have been reclassified to conform to
the current year presentation.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES - Net Charge-off Detail
(Unaudited)
(Dollars in thousands) Quarters ended Year ended
March 31, Dec. 31,
2006 2005 2005
Allowance for loan losses - beginning
of period $90,661 97,296 97,296
Loans charged off:
Commercial 6,066 4,151 19,349
Mortgage 373 267 1,721
Installment 6,030 7,543 29,307
Home equity 620 752 4,340
Credit cards 1,774 2,420 11,320
Leases 51 1,607 3,068
Total 14,914 16,740 69,105
Recoveries:
Commercial 1,437 1,028 4,166
Mortgage 56 55 190
Installment 3,146 2,725 9,495
Home equity 378 293 1,302
Credit cards 449 576 2,348
Manufactured housing 169 208 710
Leases 101 60 439
Total 5,736 4,945 18,650
Net charge-offs 9,178 11,795 50,455
Provision for loan losses 6,106 11,614 43,820
Allowance for loan losses - end of
period $87,589 97,115 90,661
Average loans outstanding $6,697,732 6,492,044 6,610,509
Ratio to average loans:
(Annualized) net charge-offs 0.56% 0.74% 0.76%
Provision for loan losses 0.37% 0.73% 0.66%
Loans outstanding - period-end $6,672,102 6,520,034 6,667,237
Allowance for loan losses:
As a percent of period-end loans
outstanding 1.31% 1.49% 1.36%
As a multiple of (annualized) net
charge-offs 2.35 2.03 1.80
SOURCE FirstMerit Corporation
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