Second Quarter Highlights
- Diluted earnings per share of $0.35
- Net income of $27.7 million
- Return on average common equity of 12.75%
- Return on average assets of 1.10%
AKRON, Ohio, July 20 /PRNewswire-FirstCall/ -- FirstMerit Corporation
(Nasdaq: FMER) today announced second quarter 2006 net income of $27.7
million, or $0.35 per diluted share. This compares with $36.1 million, or
$0.43 per diluted share, for the second quarter 2005. Returns on average
common equity ("ROE") and average assets ("ROA") for second quarter were
12.75% and 1.10%, respectively, compared with 15.07% and 1.40% for the
second quarter 2005.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001220/FIRSTMERITLOGO)
For the first six months of 2006, the Company reported net income of
$57.6 million, or $0.72 per diluted share, compared with $66.2 million, or
$0.79 per diluted share, for the first six months of 2005.
Paul G. Greig, President and Chief Executive Officer, said, "During my
first two months, at FirstMerit I visited all of our regions, met with all
of our people and a significant number of our customers. I am extremely
impressed with our high level of customer service which is essential to the
successful execution of our super community banking model. Building on the
foundation I saw, we have undertaken a number of actions to make us a
stronger company, enhance our relationships with customers, and improve
revenue growth and efficiency. The major change was reorganizing around
business segments, with business segment leaders reporting to me. This
increases our company's focus on commercial banking and better supports
commercial and small business revenue generation. We also realigned the
structure of our retail branch system, placing profitability and service
responsibility on branch managers and incenting them on those key
measures."
In commenting on the quarter, Greig said, "In addition to absorbing
costs associated with the organizational improvements, we also experienced
higher credit-related costs driven by a single $4.6 million after-tax
charge-off. Given the underlying credit indicators for the quarter, we
believe this charge-off to be more of an anomaly than indicative of future
trends. Over the past few years FirstMerit has delivered on its commitment
to restoring credit quality and lowering net charge-offs and I expect
overall progress to continue in 2006."
Total revenue, defined as net interest income on a fully tax-equivalent
("FTE") basis plus noninterest income net of securities transactions,
totaled $138.5 million for the second quarter 2006, compared with $138.6
million reported in the second quarter 2005. FTE net interest income was
$86.4 million for the second quarter 2006, a decline of $2.1 million, or
2.32%, compared with the year-ago quarter. During the quarter the net
interest margin expanded 4 basis points to 3.78%, compared with the second
quarter 2005.
The Company expanded its net interest margin amidst a challenging
interest rate environment by taking advantage of opportunities within its
flexibly structured investment portfolio. For the second quarter 2006,
average investment securities accounted for 23.80% of average assets,
compared with 27.44% for the second quarter 2005. The $441.6 million, or
15.58%, reduction in the securities portfolio supported a $300.0 million,
or 15.92%, reduction of average borrowed funds, along with $129.3 million,
or 1.96%, growth in the average loan portfolio. Average commercial loan
growth of $168.1 million, or 4.89%, and average home equity loan growth of
$68.1 million, or 9.68%, offset declining average balances in the mortgage,
installment and lease portfolios.
Noninterest income excluding securities transactions totaled $52.1
million for the second quarter 2006, compared with $50.1 million for the
second quarter 2005, an increase of $2.0 million, or 3.90%. Credit card
fees increased $1.0 million, or 9.08%, and service charges increased $0.2
million, or 1.18%. Compared with the first quarter 2006, credit card fees
increased $0.8 million, or 7.56%, and deposit service charges rose $1.9
million, or 12.10%.
Noninterest expense totaled $85.2 million for the second quarter 2006,
compared with $79.4 million for the second quarter 2005. Salary, wages,
pension and employee benefits increased $5.4 million, or 12.99%, driven
primarily by share-based compensation expense of $3.4 million.
Additionally, expenses related to organizational restructurings also
increased overall non interest expense during the quarter. The
organizational changes are part of the Company's initiatives to improve
efficiency and generate revenue through a realigned and streamlined
business structure.
Net charge-offs totaled $13.0 million in the second quarter 2006,
compared with $10.3 million for the second quarter 2005, or 0.78% and 0.62%
of average loans, respectively. The Company's longer term trend of
improving charge-off levels was interrupted by costs related to a credit
relationship that accounted for $6.6 million of the quarter's total net
charge-offs. The Company expects to return to its trend of lower charge-off
levels for the balance of 2006. As of June 30, 2006, nonperforming assets
were $58.8 million, or 0.86%, of period-end loans plus other real estate,
compared with $54.0 million, or 0.82%, at June 30, 2005. Nonperforming
assets declined $14.2 million, or 19.41%, from March 31, 2006.
The Company recorded $13.2 million of loan loss provision in the second
quarter 2006, compared with loan loss provision of $6.0 million in the
second quarter 2005. On June 30, 2006, criticized commercial assets
accounted for 6.93% of total commercial loans, compared with criticized
commercial asset levels of 7.59% on June 30, 2005.
At June 30 2006, the allowance for loan losses was 1.29% of loans,
compared with 1.36% at December 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 1.37% at June 30, 2006, compared with 1.45% at December 31,
2005.
Assets at June 30, 2006, totaled $10.3 billion, equivalent to $10.3
billion total at June 30, 2005. Period-end loan growth of $194.4 million,
or 2.94%, was driven by a $236.9 million, or 6.90% increase in the
commercial lending portfolio, offsetting declines in the mortgage,
installment and leasing portfolios.
Deposits totaled $7.4 billion at June 30, 2006, an increase of $228.4
million, or 3.18% from June 30, 2005. Non interest bearing demand deposit
accounts (DDA) increased $26.8 million, or 1.86% over that time. For the
second quarter of 2006, average deposits increased $104.2 million, or
1.42%, compared with the second quarter of 2005.
Shareholders' equity was $870.7 million at June 30, 2006. The Company's
capital position remains strong as tangible equity to assets was 7.20% at
quarter-end. The common dividend per share paid in the second quarter 2006
was $0.28, a $0.01 increase from the second quarter 2005.
Second Quarter 2006
Conference Call: FirstMerit Corporation will host a conference call
today, July 20, 2006, at 2 P.M. EDT.
To participate in the conference, please dial (877) 493-9121 ten
minutes before start time and provide the reservation number 7617207.
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 $10.3 billion as of June 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., FirstMerit Credit Life
Insurance Company, 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: Tom O'Malley
(330) 384-7109
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
(Dollars in thousands)
2006 2006 2005
EARNINGS 2nd Qtr 1st Qtr 4th Qtr
Net interest income FTE (a) $86,377 86,563 88,152
Provision for loan losses 13,159 6,106 16,260
Other income 52,078 45,397 47,586
Other expenses 85,218 81,899 79,274
FTE adjustment (a) 647 590 650
Net income 27,661 29,964 27,656
Diluted EPS 0.35 0.37 0.34
PERFORMANCE RATIOS
Return on average assets (ROA) 1.10% 1.20% 1.07%
Return on average common equity (ROE) 12.75% 13.67% 11.52%
Net interest margin FTE (a) 3.78% 3.80% 3.73%
Efficiency ratio 61.39% 61.90% 58.26%
Number of full-time equivalent
employees 2,986 3,104 3,057
MARKET DATA
Book value/common share $10.88 10.91 11.39
Period-end common share mkt value 20.94 24.66 25.91
Market as a % of book 193% 226% 228%
Cash dividends/common share $0.28 0.28 0.28
Common stock dividend payout ratio 80.00% 75.68% 82.35%
Average basic common shares 79,983 80,374 82,786
Average diluted common shares 80,203 80,648 83,082
Period end common shares 80,058 79,766 82,335
Common shares repurchased 1,329 2,618,588 1,228,293
Common stock market capitalization $1,676,415 1,967,030 2,133,300
ASSET QUALITY
Gross charge-offs $18,038 14,914 22,736
Net charge-offs 13,021 9,178 18,379
Allowance for loan losses 87,727 87,589 90,661
Reserve for unfunded lending commitments 5,716 5,853 6,072
Nonperforming assets (NPAs) 58,786 72,941 72,257
Net charge-off/average loans ratio 0.78% 0.56% 1.09%
Allowance for loan losses/period-end loans 1.29% 1.31% 1.36%
Allowance for credit losses/period-
end loans 1.37% 1.40% 1.45%
NPAs/loans and other real estate 0.86% 1.09% 1.08%
Allowance for loan losses/nonperforming
loans 174.80% 136.22% 145.61%
Allowance for credit
losses/nonperforming loans 186.19% 145.32% 155.36%
CAPITAL & LIQUIDITY
Period-end tangible equity to assets 7.20% 7.31% 7.94%
Average equity to assets 8.66% 8.79% 9.33%
Average equity to loans 12.93% 13.27% 14.22%
Average loans to deposits 90.63% 91.58% 92.11%
AVERAGE BALANCES
Assets $10,051,623 10,111,553 10,211,619
Deposits 7,426,029 7,313,509 7,273,980
Loans 6,730,531 6,697,732 6,699,997
Earning assets 9,174,008 9,245,882 9,368,139
Shareholders' equity 870,234 888,818 952,715
ENDING BALANCES
Assets $10,254,773 10,100,717 10,154,359
Deposits 7,402,239 7,510,562 7,233,650
Loans 6,804,769 6,672,102 6,667,327
Goodwill 139,245 139,245 139,245
Intangible assets 3,311 3,533 3,756
Earning assets 9,315,062 9,193,741 9,256,389
Total shareholders' equity 870,698 870,552 937,580
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
(Dollars in thousands)
2005 2005
EARNINGS 3rd Qtr 2nd Qtr
Net interest income FTE (a) 88,347 88,432
Provision for loan losses 9,974 5,972
Other income 47,846 50,095
Other expenses 78,926 79,397
FTE adjustment (a) 641 655
Net income 36,594 36,145
Diluted EPS 0.43 0.43
PERFORMANCE RATIOS
Return on average assets (ROA) 1.41% 1.40%
Return on average common equity (ROE) 14.90% 15.07%
Net interest margin FTE (a) 3.70% 3.74%
Efficiency ratio 57.81% 57.14%
Number of full-time equivalent
employees 3,073 3,078
MARKET DATA
Book value/common share 11.65 11.69
Period-end common share mkt value 26.79 26.11
Market as a % of book 230% 223%
Cash dividends/common share 0.28 0.27
Common stock dividend payout ratio 65.12% 62.79%
Average basic common shares 83,489 83,603
Average diluted common shares 83,978 83,890
Period end common shares 83,442 83,522
Common shares repurchased 178,872 145,143
Common stock market capitalization 2,235,411 2,180,759
ASSET QUALITY
Gross charge-offs 14,207 15,422
Net charge-offs 10,002 10,278
Allowance for loan losses 92,780 92,808
Reserve for unfunded lending
commitments 5,857 5,785
Nonperforming assets (NPAs) 51,398 53,985
Net charge-off/average loans ratio 0.60% 0.62%
Allowance for loan losses/period-end
loans 1.39% 1.40%
Allowance for credit losses/period-
end loans 1.47% 1.49%
NPAs/loans and other real estate 0.77% 0.82%
Allowance for loan
losses/nonperforming loans 221.46% 208.74%
Allowance for credit
losses/nonperforming loans 235.44% 221.76%
CAPITAL & LIQUIDITY
Period-end tangible equity to assets 8.18% 8.19%
Average equity to assets 9.46% 9.32%
Average equity to loans 14.66% 14.58%
Average loans to deposits 91.73% 90.16%
AVERAGE BALANCES
Assets 10,295,827 10,329,167
Deposits 7,245,562 7,321,860
Loans 6,646,112 6,601,204
Earning assets 9,465,288 9,489,431
Shareholders' equity 974,147 962,239
ENDING BALANCES
Assets 10,285,329 10,313,955
Deposits 7,352,026 7,173,857
Loans 6,685,462 6,610,385
Goodwill 139,245 139,245
Intangible assets 3,978 4,200
Earning assets 9,419,355 9,491,957
Total shareholders' equity 972,348 976,016
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 BALANCE SHEETS
(In thousands)
(Unaudited, except December 31, 2005,
which is derived from the audited June 30, December 31, June 30,
financial statements) 2006 2005 2005
ASSETS
Cash and due from banks $228,690 225,953 201,240
Investment securities (at fair
value) 2,436,086 2,546,496 2,828,127
Federal funds sold 25,000 - 890
Loans held for sale 49,207 42,566 52,555
Loans:
Commercial loans 3,659,687 3,519,483 3,422,758
Mortgage loans 618,560 628,581 634,777
Installment loans 1,561,757 1,524,355 1,601,022
Home equity loans 763,585 778,697 737,207
Credit card loans 136,966 145,592 138,335
Leases 64,214 70,619 76,286
Total loans 6,804,769 6,667,327 6,610,385
Less allowance for loan losses (87,727) (90,661) (92,808)
Net loans 6,717,042 6,576,666 6,517,577
Premises and equipment, net 119,233 120,420 118,038
Goodwill 139,245 139,245 139,245
Intangible assets 3,311 3,756 4,200
Accrued interest receivable and
other assets 536,959 499,257 452,083
Total assets $10,254,773 10,154,359 10,313,955
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-non-interest bearing $1,466,628 1,523,731 1,439,800
Demand-interest bearing 842,354 830,248 834,315
Savings and money market accounts 2,261,557 2,304,177 2,350,829
Certificates and other time
deposits 2,831,700 2,575,494 2,548,913
Total deposits 7,402,239 7,233,650 7,173,857
Securities sold under agreements to
repurchase 1,156,346 1,426,037 1,699,337
Wholesale borrowings 658,720 401,104 333,627
Accrued taxes, expenses, and other
liabilities 166,770 155,988 131,118
Total liabilities 9,384,075 9,216,779 9,337,939
Commitments and contingencies
Shareholders' equity:
Preferred stock, without par
value:
authorized and unissued
7,000,000 shares -- -- --
Preferred stock, Series A,
without par value:
designated 800,000 shares; none
outstanding -- -- --
Convertible preferred stock,
Series B, without par value:
designated 220,000 shares; none
outstanding -- -- --
Common stock, without par value:
authorized 300,000,000 shares;
issued 92,026,350 at
June 30, 2006, December 31,
2005 and June 30, 2005 127,937 127,937 127,937
Capital surplus 105,397 108,210 108,736
Accumulated other comprehensive
loss (62,013) (42,850) (19,651)
Retained earnings 1,007,346 994,487 977,052
Treasury stock, at cost,
11,968,035, 9,691,424 and
8,504,487 shares at June 30,
2006, December 31, 2005
and June 30, 2005, respectively (307,969) (250,204) (218,058)
Total shareholders' equity 870,698 937,580 976,016
Total liabilities and shareholders'
equity $10,254,773 10,154,359 10,313,955
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) June 30, March 31, December 31,
2006 2006 2005
ASSETS
Cash and due from banks $188,915 194,042 192,189
Investment securities/fed funds sold 2,392,208 2,500,021 2,619,248
Loans held for sale 51,269 48,129 48,894
Loans:
Commercial loans 3,603,083 3,567,263 3,519,807
Mortgage loans 626,476 630,702 637,877
Installment loans 1,526,094 1,513,938 1,556,212
Home equity loans 772,196 775,728 772,757
Credit card loans 137,545 141,821 142,743
Leases 65,137 68,280 70,601
Total loans 6,730,531 6,697,732 6,699,997
Less allowance for loan losses (a) 86,583 90,229 91,916
Net loans 6,643,948 6,607,503 6,608,081
Total earning assets 9,174,008 9,245,882 9,368,139
Premises and equipment, net 119,666 120,155 117,387
Accrued interest receivable and other
assets 655,617 641,703 625,820
TOTAL ASSETS $10,051,623 10,111,553 10,211,619
LIABILITIES
Deposits:
Demand-non-interest bearing $1,455,229 1,462,671 1,488,679
Demand-interest bearing 865,563 848,209 817,009
Savings and money market accounts 2,280,657 2,292,865 2,332,528
Certificates and other time
deposits 2,824,580 2,709,764 2,635,764
Total deposits 7,426,029 7,313,509 7,273,980
Securities sold under agreements to
repurchase 1,212,470 1,295,178 1,443,740
Wholesale borrowings 371,309 433,257 375,167
Total funds 9,009,808 9,041,944 9,092,887
Accrued taxes, expenses and other
liabilities (a) 171,581 180,791 166,017
Total liabilities 9,181,389 9,222,735 9,258,904
SHAREHOLDERS' EQUITY
Preferred stock - - -
Common stock 127,937 127,937 127,937
Capital surplus 104,477 108,330 108,303
Accumulated other comprehensive
(loss) income (54,132) (44,150) (39,834)
Retained earnings 1,001,647 998,173 994,301
Treasury stock (309,695) (301,472) (237,992)
Total shareholders' equity 870,234 888,818 952,715
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $10,051,623 10,111,553 10,211,619
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Quarterly Periods
(Unaudited)
(Dollars in thousands) September 30, June 30,
2005 2005
ASSETS
Cash and due from banks 197,412 197,548
Investment securities/fed funds sold 2,764,724 2,833,818
Loans held for sale 54,452 54,409
Loans:
Commercial loans 3,441,231 3,434,946
Mortgage loans 641,532 641,865
Installment loans 1,594,801 1,601,775
Home equity loans 754,492 704,054
Credit card loans 140,873 137,919
Leases 73,183 80,645
Total loans 6,646,112 6,601,204
Less allowance for loan losses (a) 91,852 96,342
Net loans 6,554,260 6,504,862
Total earning assets 9,465,288 9,489,431
Premises and equipment, net 117,471 118,392
Accrued interest receivable and other
assets 607,508 620,138
TOTAL ASSETS 10,295,827 10,329,167
LIABILITIES
Deposits:
Demand-non-interest bearing 1,457,487 1,470,673
Demand-interest bearing 838,549 834,708
Savings and money market accounts 2,333,331 2,370,280
Certificates and other time
deposits 2,616,195 2,646,199
Total deposits 7,245,562 7,321,860
Securities sold under agreements to
repurchase 1,478,857 1,385,644
Wholesale borrowings 442,035 498,088
Total funds 9,166,454 9,205,592
Accrued taxes, expenses and other
liabilities (a) 155,226 161,336
Total liabilities 9,321,680 9,366,928
SHAREHOLDERS' EQUITY
Preferred stock - -
Common stock 127,937 127,937
Capital surplus 108,564 108,559
Accumulated other comprehensive
(loss) income (25,682) (26,883)
Retained earnings 982,419 968,408
Treasury stock (219,091) (215,782)
Total shareholders' equity 974,147 962,239
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 10,295,827 10,329,167
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT CORPORATION AND
SUBSIDIARIES Three months ended
(Dollars in thousands) June 30, 2006
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks $188,915
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 2,054,338 20,102 3.92%
Obligations of states and political
subdivisions (tax exempt) 88,144 1,490 6.78%
Other securities and federal funds
sold 249,726 3,823 6.14%
Total investment securities and
federal funds sold 2,392,208 25,415 4.26%
Loans held for sale 51,269 512 4.01%
Loans 6,730,531 122,990 7.33%
Total earning assets 9,174,008 148,917 6.51%
Allowance for loan losses (86,583)
Other assets 775,283
Total assets $10,051,623
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing $1,455,229 -- --
Demand - interest bearing 865,563 2,583 1.20%
Savings and money market accounts 2,280,657 12,079 2.12%
Certificates and other time deposits 2,824,580 29,326 4.16%
Total deposits 7,426,029 43,988 2.38%
Securities sold under agreements to
repurchase 1,212,470 12,957 4.29%
Wholesale borrowings 371,309 5,595 6.04%
Total interest bearing liabilities 7,554,579 62,540 3.32%
Other liabilities 171,581
Shareholders' equity 870,234
Total liabilities and shareholders'
equity $10,051,623
Net yield on earning assets $9,174,008 86,377 3.78%
Interest rate spread 3.19%
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) June 30, 2005
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks 197,548
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 2,478,319 23,722 3.84%
Obligations of states and political
subdivisions (tax exempt) 99,756 1,673 6.73%
Other securities and federal funds
sold 255,743 3,037 4.76%
Total investment securities and
federal funds sold 2,833,818 28,432 4.02%
Loans held for sale 54,409 804 5.93%
Loans 6,601,204 105,196 6.39%
Total earning assets 9,489,431 134,432 5.68%
Allowance for loan losses (96,342)
Other assets 738,530
Total assets 10,329,167
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing 1,470,673 -- --
Demand - interest bearing 834,708 1,230 0.59%
Savings and money market accounts 2,370,280 7,517 1.27%
Certificates and other time deposits 2,646,199 20,696 3.14%
Total deposits 7,321,860 29,443 1.61%
Securities sold under agreements to
repurchase 1,385,644 10,624 3.08%
Wholesale borrowings 498,088 5,933 4.78%
Total interest bearing liabilities 7,734,919 46,000 2.39%
Other liabilities 161,336
Shareholders' equity 962,239
Total liabilities and shareholders'
equity 10,329,167
Net yield on earning assets 9,489,431 88,432 3.74%
Interest rate spread 3.30%
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 Six months ended
(In thousands except per share data) June 30, June 30,
2006 2005 2006 2005
Interest income:
Interest and fees on loans,
including held for sale $123,450 105,975 241,190 206,124
Interest and dividends on
investment securities and federal
funds sold 24,820 27,802 50,152 55,494
Total interest income 148,270 133,777 291,342 261,618
Interest expense:
Interest on deposits:
Demand-interest bearing 2,583 1,230 4,945 2,186
Savings and money market accounts 12,079 7,517 22,827 13,892
Certificates and other time
deposits 29,326 20,696 55,427 41,296
Interest on securities sold under
agreements to repurchase 12,957 10,624 24,880 19,465
Interest on wholesale borrowings 5,595 5,933 11,560 10,992
Total interest expense 62,540 46,000 119,639 87,831
Net interest income 85,730 87,777 171,703 173,787
Provision for loan losses 13,159 5,972 19,265 17,586
Net interest income after
provision for loan losses 72,571 81,805 152,438 156,201
Other income:
Trust department income 5,744 5,684 11,138 11,189
Service charges on deposits 18,010 17,800 34,076 32,620
Credit card fees 11,478 10,523 22,149 19,934
ATM and other service fees 3,273 3,298 6,381 6,257
Bank owned life insurance income 5,310 3,024 8,296 6,098
Investment services and insurance 2,581 2,828 5,178 5,686
Manufactured housing income 35 40 38 142
Investment securities gains, net 4 (25) 20 1,847
Loan sales and servicing income 2,833 1,520 4,278 2,653
Other operating income 2,810 5,403 5,921 8,608
Total other income 52,078 50,095 97,475 95,034
Other expenses:
Salaries, wages, pension and
employee benefits 46,721 41,351 89,752 80,744
Net occupancy expense 6,120 5,881 12,669 12,417
Equipment expense 2,914 3,002 5,872 6,187
Stationery, supplies and postage 2,403 2,484 4,856 4,945
Bankcard, loan processing and other
costs 7,417 5,444 13,244 11,168
Professional services 3,738 3,843 6,501 5,993
Amortization of intangibles 222 222 445 445
Other operating expense 15,683 17,170 33,778 33,409
Total other expenses 85,218 79,397 167,117 155,308
Income before federal income
tax expense 39,431 52,503 82,796 95,927
Federal income tax expense 11,770 16,358 25,171 29,694
Net income $27,661 36,145 57,625 66,233
Other comprehensive income (loss),
net of taxes
Unrealized securities' holding
losses, net of taxes (8,652) 18,111 (18,400) (4,493)
Unrealized hedging gain (loss), net
of taxes 37 538 (750) 556
Minimum pension liability
adjustment, net of taxes - (122) - (305)
Less: reclassification adjustment
for securities' gains losses
realized in net income,
net of taxes 3 (16) 13 1,201
Total other comprehensive income
(loss), net of taxes (8,618) 18,543 (19,163) (5,443)
Comprehensive income $19,043 54,688 38,462 60,790
Net income applicable to common
shares $27,661 36,145 57,625 66,233
Net income used in diluted EPS
calculation $27,666 36,152 57,635 66,247
Weighted average number of common
shares outstanding - basic 79,983 83,603 80,177 83,849
Weighted average number of common
shares outstanding - diluted 80,203 83,890 80,420 84,187
Basic earnings per share $0.35 0.43 0.72 0.79
Diluted earnings per share $0.35 0.43 0.72 0.79
Dividend per share $0.28 0.27 0.56 0.54
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 2006 2005 2005 2005
2nd Q 1st Q 4th Q 3rd Q 2nd Q
Interest and fees on
loans, including
held for sale $123,450 117,740 115,850 111,169 105,975
Interest and dividends -
securities and federal
funds sold 24,820 25,332 26,109 26,700 27,802
Total interest income 148,270 143,072 141,959 137,869 133,777
Interest on deposits:
Demand-interest bearing 2,583 2,362 1,953 1,732 1,230
Savings and money market
accounts 12,079 10,748 10,352 8,700 7,517
Certificates and other
time deposits 29,326 26,101 23,831 21,637 20,696
Securities sold under
agreements to
repurchase 12,957 11,923 13,423 12,535 10,624
Wholesale borrowings 5,595 5,965 4,898 5,559 5,933
Total interest expense 62,540 57,099 54,457 50,163 46,000
Net interest income 85,730 85,973 87,502 87,706 87,777
Provision for loan losses 13,159 6,106 16,260 9,974 5,972
Net interest income
after provision for
loan losses 72,571 79,867 71,242 77,732 81,805
Other income:
Trust department income 5,744 5,394 5,430 5,515 5,684
Service charges on deposits 18,010 16,066 17,884 18,561 17,800
Credit card fees 11,478 10,671 10,601 10,437 10,523
ATM and other service fees 3,273 3,108 3,157 3,453 3,298
Bank owned life insurance
income 5,310 2,986 3,092 3,074 3,024
Investment services and
insurance 2,581 2,597 2,696 2,226 2,828
Manufactured housing
income 35 3 3 3 40
Investment securities
gains (losses), net 4 16 39 40 (25)
Loan sales and servicing
income 2,833 1,445 1,668 2,076 1,520
Other operating income 2,810 3,111 3,016 2,461 5,403
Total other income 52,078 45,397 47,586 47,846 50,095
Other expenses:
Salaries, wages, pension
and employee benefits 46,721 43,031 40,790 42,149 41,351
Net occupancy expense 6,120 6,549 5,746 5,567 5,881
Equipment expense 2,914 2,958 4,152 2,962 3,002
Stationery, supplies and
postage 2,403 2,453 2,546 2,559 2,484
Bankcard, loan processing
and other costs 7,417 5,827 7,042 5,802 5,444
Professional services 3,738 2,763 3,389 2,632 3,843
Amortization of
intangibles 222 223 222 222 222
Other operating expense 15,683 18,095 15,387 17,033 17,170
Total other expenses 85,218 81,899 79,274 78,926 79,397
Income before income tax
expense 39,431 43,365 39,554 46,652 52,503
Federal income taxes 11,770 13,401 11,898 10,058 16,358
Net income $27,661 29,964 27,656 36,594 36,145
Other comprehensive income
(loss), net of taxes (8,618) (10,545) (8,927) (14,272) 18,540
Comprehensive income $19,043 19,419 18,729 22,322 54,685
Net income applicable to
common shares 27,661 29,964 27,656 36,594 36,145
Adjusted net income used in
diluted EPS calculation 27,666 29,969 27,659 36,601 36,152
Weighted-average common
shares - basic 79,983 80,374 82,786 83,489 83,603
Weighted-average common
shares - diluted 80,203 80,648 83,082 83,978 83,890
Basic net income per share $0.35 0.37 0.33 0.44 0.43
Diluted net income per share $0.35 0.37 0.34 0.43 0.43
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
June 30 Mar 31 Dec 31
Allowance for Credit Losses 2006 2006 2005
Allowance for loan losses,
beginning of period $87,589 90,661 92,780
Allowance related to loans sold - - -
Provision for loan losses 13,159 6,106 16,260
Charge-offs 18,038 14,914 22,736
Recoveries 5,017 5,736 4,357
Net charge-offs 13,021 9,178 18,379
Allowance for loan losses,
end of period $87,727 87,589 90,661
Reserve for unfunded lending
commitments, beginning of period $5,853 6,072 5,857
Provision for credit losses (137) (219) 215
Reserve for unfunded lending
commitments, end of period $5,716 5,853 6,072
Allowance for Credit Losses $93,443 93,442 96,733
Ratios
Provision for loan losses as a % of
average loans 0.78% 0.37% 0.96%
Provision for credit losses as a % of
average loans -0.01% -0.01% 0.01%
Net charge-offs as a % of average
loans 0.78% 0.56% 1.09%
Allowance for loan losses as a % of
period-end loans 1.29% 1.31% 1.36%
Allowance for credit losses as a % of
period-end loans 1.37% 1.40% 1.45%
Allowance for loan losses as a % of
nonperforming loans 174.80% 136.22% 145.61%
Allowance for credit losses as a % of
nonperforming loans 186.19% 145.32% 155.36%
Asset Quality
Impaired loans:
Nonaccrual $41,927 56,258 54,176
Other nonperforming loans:
Nonaccrual 8,261 8,044 8,086
Total nonperforming loans 50,188 64,302 62,262
Other real estate ("ORE") 8,598 8,639 9,995
Total nonperforming assets ("NPAs") $58,786 72,941 72,257
NPAs as % of period-end loans + ORE 0.86% 1.09% 1.08%
Past due 90 days or more & accruing
interest $16,483 18,640 17,931
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)
Annual
Quarterly Periods Period
Sep 30 June 30 Dec 31
Allowance for Credit Losses 2005 2005 2005
Allowance for loan losses,
beginning of period 92,808 97,115 97,296
Allowance related to loans sold - - -
Provision for loan losses 9,974 5,971 43,820
Charge-offs 14,207 15,422 69,105
Recoveries 4,205 5,144 18,650
Net charge-offs 10,002 10,278 50,455
Allowance for loan losses,
end of period 92,780 92,808 90,661
Reserve for unfunded lending
commitments, beginning of period 5,785 6,479 5,774
Provision for credit losses 72 (694) 298
Reserve for unfunded lending
commitments, end of period 5,857 5,785 6,072
Allowance for Credit Losses 98,637 98,593 96,733
Ratios
Provision for loan losses as a % of
average loans 0.60% 0.36% 0.66%
Provision for credit losses as a % of
average loans 0.00% -0.04% 0.00%
Net charge-offs as a % of average
loans 0.60% 0.62% 0.76%
Allowance for loan losses as a % of
period-end loans 1.39% 1.40% 1.36%
Allowance for credit losses as a % of
period-end loans 1.48% 1.49% 1.45%
Allowance for loan losses as a % of
nonperforming loans 221.46% 208.74% 145.61%
Allowance for credit losses as a % of
nonperforming loans 235.44% 221.76% 155.36%
Asset Quality
Impaired loans:
Nonaccrual 34,144 38,124 54,176
Other nonperforming loans:
Nonaccrual 7,751 6,336 8,086
Total nonperforming loans 41,895 44,460 62,262
Other real estate ("ORE") 9,503 9,525 9,995
Total nonperforming assets ("NPAs") 51,398 53,985 72,257
NPAs as % of period-end loans + ORE 0.77% 0.82% 1.08%
Past due 90 days or more & accruing
interest 21,451 17,969 17,931
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands)
2006 2006 2005 2005 2005
QUARTERLY OTHER INCOME DETAIL 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
Trust department income $5,744 5,394 5,430 5,515 5,684
Service charges on deposits 18,010 16,066 17,884 18,561 17,800
Credit card fees 11,478 10,671 10,601 10,437 10,523
ATM and other service fees 3,273 3,108 3,157 3,453 3,298
Bank owned life insurance income 5,310 2,986 3,092 3,074 3,024
Investment services and insurance 2,581 2,597 2,696 2,226 2,828
Manufactured housing income 35 3 3 3 40
Investment securities gains
(losses), net 4 16 39 40 (25)
Loan sales and servicing income 2,833 1,445 1,668 2,076 1,520
Other operating income 2,810 3,111 3,016 2,461 5,403
Total Other Income $52,078 45,397 47,586 47,846 50,095
2006 2006 2005 2005 2005
QUARTERLY OTHER EXPENSES DETAIL 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
Salaries, wages, pension and
employee benefits $46,721 43,031 40,790 42,149 41,351
Net occupancy expense 6,120 6,549 5,746 5,567 5,881
Equipment expense 2,914 2,958 4,152 2,962 3,002
Taxes, other than federal income
taxes 1,802 1,819 1,578 849 880
Stationery, supplies and postage 2,403 2,453 2,546 2,559 2,484
Bankcard, loan processing and
other costs 7,417 5,827 7,042 5,802 5,444
Advertising 2,369 2,766 1,415 1,863 3,182
Professional services 3,738 2,763 3,389 2,632 3,843
Telephone 1,094 1,128 1,136 1,206 1,095
Amortization of intangibles 222 223 222 222 222
Other operating expense 10,418 12,382 11,258 13,115 12,013
Total Other Expenses $85,218 81,899 79,274 78,926 79,397
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES - Net Charge-off Detail
(Unaudited)
(Dollars in thousands) Quarters ended Six months ended
June 30, June 30,
2006 2005 2006 2005
Allowance for loan losses -
beginning of period $87,589 97,115 90,661 97,296
Loans charged off:
Commercial 10,086 4,502 16,152 8,653
Mortgage 325 415 698 682
Installment 4,524 6,514 10,554 14,057
Home equity 1,146 571 1,766 1,323
Credit cards 1,951 2,662 3,725 5,082
Leases 6 758 57 2,365
Total 18,038 15,422 32,952 32,162
Recoveries:
Commercial 945 1,184 2,382 2,212
Mortgage 30 52 86 107
Installment 2,965 2,580 6,111 5,305
Home equity 307 318 685 611
Credit cards 585 734 1,034 1,310
Manufactured housing 84 147 185 355
Leases 101 129 270 189
Total 5,017 5,144 10,753 10,089
Net charge-offs 13,021 10,278 22,199 22,073
Provision for loan losses 13,159 5,971 19,265 17,585
Allowance for loan
losses - end of period $87,727 92,808 87,727 92,808
Average loans
outstanding $6,730,531 6,601,204 6,714,222 6,546,926
Ratio to average loans:
(Annualized) net
charge-offs 0.78% 0.62% 0.67% 0.68%
Provision for loan losses 0.78% 0.36% 0.58% 0.54%
Loans outstanding -
period-end $6,804,769 6,610,385 6,804,769 6,610,385
Allowance for credit losses: 93,443 98,593 93,443 98,593
As a multiple of
(annualized) net
charge-offs 1.79 2.39 2.09 2.21
Allowance for loan losses:
As a percent of
period-end loans
outstanding 1.29% 1.40% 1.29% 1.40%
As a multiple of
(annualized) net
charge-offs 1.68 2.25 1.96 2.09
SOURCE FirstMerit Corporation
back to top
