AKRON, Ohio, July 24 /PRNewswire-FirstCall/ -- FirstMerit Corporation
(Nasdaq: FMER) today announced second quarter 2007 net income of $29.9
million, or $0.37 per diluted share. This compares with $27.7 million, or
$0.35 per diluted share, for the prior-year quarter. Returns on average
common equity ("ROE") and average assets ("ROA") for the second quarter
2007 were 13.75% and 1.16%, respectively, compared with 12.75% and 1.10%
for the prior-year quarter.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001220/FIRSTMERITLOGO )
For the first six months of 2007, the Company reported net income of
$61.3 million, or $0.76 per diluted share, compared with $57.6 million, or
$0.72 per diluted share, for the first six months of 2006. ROE and ROA were
14.32% and 1.20%, respectively, compared with 13.21% and 1.15% for the
prior-year period.
"The improvements in loan portfolio management practices we have made
over the past year has laid a solid foundation for growth and for building
shareholder value," said Paul G. Greig, Chairman and Chief Executive
Officer of FirstMerit. "I am pleased to report that in the second quarter
we saw solid, sequential commercial loan growth, as well as a
quarter-to-quarter increase in net interest margin and continued tight
expense control."
"While incentives tied to credit quality improvement are embedded
deeply throughout the organization, our bankers are competing for-and are
being rewarded for-bringing in profitable and sound new business. Winning
and deepening relationships in our markets are critical elements of our
strategy to build a sustainable and consistent high-quality earnings stream
for our shareholders."
Net interest margin was 3.62% for the second quarter of 2007 compared
with 3.58% for the first quarter of 2007 and 3.78% for the second quarter
of 2006. The Company's expanding net interest margin during the second
quarter of 2007, compared with the first quarter of 2007, reflects
increasing investment portfolio securities' yields and declining funding
costs. The decrease in net interest margin compared with the second quarter
of 2006 reflected the shift in consumer preference for higher-costing term
deposit products as well as increased deposit costs due to a higher
interest rate environment.
Net interest income on a fully tax-equivalent ("FTE") basis was $85.6
million in the second quarter of 2007 compared with $83.2 million in the
first quarter of 2007 and $86.4 million in the second quarter of 2006. The
increase in FTE net interest income compared with the first quarter of 2007
reflected net interest margin expansion and modest average earning asset
growth of $48.4 million, or 0.51%. The decrease in FTE net interest income
compared with the second quarter of 2006 resulted from net interest margin
contraction, partly offset by an increase in average earning assets of
$311.8 million, or 3.40%.
Average loans for the second quarter of 2007 increased $84.1 million,
or 1.22%, compared with the first quarter of 2007. Average commercial loans
grew $96.3 million, or 2.57%, during the period offsetting a $5.8 million,
or 0.19%, decrease in the average consumer portfolio of loans and a $6.5
million, or 8.29%, decrease in average leases. Compared with the second
quarter of 2006, average loans increased $272.2 million, or 4.04%, led by a
$242.3 million, or 6.73%, increase in average commercial loans. Average
investments for the second quarter of 2007 increased $10.5 million, or
0.43%, compared with the first quarter of 2007. Compared with the second
quarter of 2006, average investments increased $47.8 million, or 2.00%.
Average investments represent 23.64% of average assets for the second
quarter of 2007, compared with 23.64% and 23.80% for the first quarter of
2007 and the second quarter of 2006, respectively.
Average deposits in the second quarter of 2007 were $7.5 billion, an
increase of $33.2 million, or 0.44%, compared with the first quarter of
2007. The growth came solely from increased transaction account categories,
namely in demand-non-interest bearing deposits which rose $19.4 million, or
1.4%, resulting in an increased core deposit mix. The increased composition
of core deposits contributed to lower funding costs and an expanded net
interest margin for the quarter. Compared with the second quarter of 2006,
average deposits increased $89.2 million, or 1.20%. Average certificates
and other time deposits increased $224.3 million, or 7.94%, reflecting
consumer preference for higher-yielding term deposits.
Noninterest income net of securities transactions for the second
quarter of 2007 was $48.9 million, compared with $48.9 million in the first
quarter of 2007 which included net gains of $3.5 million from previously
disclosed asset sales. Excluding loan sales and servicing income, which
declined $3.5 million compared with the first quarter of 2007, all other
fee income categories increased in the second quarter of 2007. The primary
growth in fee income came from service charges on deposits, which increased
$0.8 million, or 4.96%, compared with the first quarter of 2007 and credit
card fees, which increased $0.6 million, or 5.52%.
Compared with the second quarter of 2006, noninterest income decreased
$3.1 million, or 6.04%. The year-over-year quarterly comparison is impacted
by $3.3 million in noninterest income reported in the second quarter of
2006 and identified by the Company as related to one-time events reported
in loan sales and servicing income and bank owned life insurance.
Noninterest income, net of securities gains, as a percentage of net revenue
for the first quarter of 2007 was 36.37% compared with 37.00% for the first
quarter of 2007 and 37.61% for the second quarter of 2006. Net revenue is
defined as net interest income, on a FTE basis, plus other income, less
gains from securities sales.
For the second quarter of 2007, noninterest expense was $81.4 million,
a decrease of $0.2 million, or 0.19%, from the first quarter of 2007 and a
decrease of $3.8 million, or 4.51%, from the second quarter of 2006.
Mr. Greig added, "Our expense levels came in as expected this quarter
and we will continue to scrutinize all categories within noninterest
expense to achieve greater efficiencies in our operations."
Net charge-offs totaled $7.6 million, or 0.43% of average portfolio
loans, in the second quarter of 2007, $3.5 million, or 0.21% of average
portfolio loans, in the first quarter of 2007 and $13.0 million, or 0.78%
of average portfolio loans, in the second quarter of 2006.
Nonperforming assets totaled $37.0 million at June 30, 2007, compared
with $32.7 million on March 31, 2007 and $58.8 million on June 30, 2006.
Nonperforming assets at June 30, 2007 represented 0.52% of period-end loans
plus other real estate, compared with 0.47% at March 31, 2007 and 0.86% at
June 30, 2006.
The provision for loan losses was $10.0 million in the second quarter
of 2007, compared with $4.2 million in the first quarter of 2007 and $13.2
million in the second quarter of 2006. The provision for loan losses
exceeded net charge-offs by $2.4 million to support balance sheet growth in
the second quarter of 2007.
The allowance for loan losses totaled $94.4 million at June 30, 2007,
an increase of $2.4 million and $6.7 million from March 31, 2007 and June
30, 2006, respectively. At June 30, 2007, the allowance for loan losses was
1.34% of period-end loans compared with 1.32% at March 31, 2007 and 1.29%
at June 30, 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 as a percentage of
period end loans was 1.43% at June 30, 2007, compared with 1.42% at March
31, 2007 and 1.37% at June 30, 2006. The allowance for credit losses to
nonperforming loans was 315.56% at June 30, 2007 compared with 356.26% on
March 31, 2007 and 186.19% on June 30, 2006.
FirstMerit's total assets at June 30, 2007 were $10.4 billion, an
increase of $82.0 million, or 0.79%, compared with March 31, 2007 and an
increase of $174.3 million, or 1.70%, compared with June 30, 2006. The
increase from March 31, 2007, was driven by commercial loan growth of $98.8
million, or 2.60%, offsetting a $6.5 million, or 0.21%, decrease in
consumer loans and a $4.5 million, or 5.99%, decrease in the lease
portfolio. Commercial loan growth of $239.2 million, or 6.54%, supported
overall asset growth from June 30, 2006.
Total deposits were $7.5 billion at June 30, 2007, a decrease of $226.7
million, or 2.94%, from March 31, 2007, and an increase of $72.2 million,
or 0.98%, from June 30, 2006. Core deposits, which exclude all time
deposits, totaled $4.4 billion at June 30, 2007, a decrease of $133.1
million, or 2.91%, from March 31, 2007 and a decrease of $126.9 million, or
2.78%, from June 30, 2006.
Shareholders' equity was $862.3 million at June 30, 2007 and the
Company's capital position remains strong as tangible equity to assets was
7.00%. The common dividend per share paid in the second quarter 2007 was
$0.29.
Second Quarter 2007 Conference Call
FirstMerit's senior management will host an earnings conference call on
July 24, 2007, at 2:00 p.m. Eastern time to provide an overview of second
quarter results and highlights. To participate in the conference call,
please dial 866-425-6191 ten minutes before start time and provide the
reservation number: 9031144. A replay of the conference call will be
available at approximately 4:30 p.m., on July 24, 2007 through July 31,
2007, by dialing 877-519-4471, and entering the PIN: 9031144.
About FirstMerit
FirstMerit Corporation is a diversified financial services company
headquartered in Akron, Ohio, with assets of $10.4 billion as of June 30,
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)
(Dollars in thousands) Quarters
2007 2007 2006
EARNINGS 2nd Qtr 1st Qtr 4th Qtr
Net interest income FTE (a) $85,593 $83,218 $84,502
Provision for loan losses 9,967 4,210 44,235
Other income 48,930 48,876 48,332
Other expenses 81,375 81,526 83,987
FTE adjustment (a) 1,368 1,212 919
Net income 29,885 31,421 6,117
Diluted EPS 0.37 0.39 0.07
PERFORMANCE RATIOS
Return on average assets (ROA) 1.16% 1.24% 0.24%
Return on average common equity
(ROE) 13.75% 14.91% 2.66%
Net interest margin FTE (a) 3.62% 3.58% 3.58%
Efficiency ratio 60.33% 61.55% 63.06%
Number of full-time equivalent
employees 2,725 2,751 2,755
MARKET DATA
Book value/common share $10.71 $10.78 $10.56
Period-end common share mkt value 20.93 21.11 24.14
Market as a % of book 195% 196% 229%
Cash dividends/common share $0.29 $0.29 $0.29
Common stock dividend payout ratio 78.38% 74.36% 414.29%
Average basic common shares 80,426 80,113 80,091
Average diluted common shares 80,570 80,298 80,316
Period end common shares 80,477 80,112 80,101
Common shares repurchased 36,159 27,011 15,876
Common stock market capitalization $1,684,384 $1,691,164 $1,933,638
ASSET QUALITY
Gross charge-offs $10,609 $9,424 $22,323
Net charge-offs 7,580 3,507 18,559
Allowance for loan losses 94,432 92,045 91,342
Reserve for unfunded lending
commitments 6,553 6,746 6,294
Nonperforming assets (NPAs) 37,038 32,664 64,177
Net charge-offs/average loans ratio 0.43% 0.21% 1.06%
Net charge-offs and allowance
related to loans held for sale/average
loans ratio 0.43% 0.21% 1.40%
Allowance for loan losses/period-
end loans 1.34% 1.32% 1.33%
Allowance for credit losses/period-
end loans 1.43% 1.42% 1.42%
NPAs/loans and other real estate 0.52% 0.47% 0.93%
Allowance for loan
losses/nonperforming loans 295.08% 331.93% 168.03%
Allowance for credit
losses/nonperforming loans 315.56% 356.26% 179.60%
CAPITAL & LIQUIDITY
Period-end tangible equity to
assets 7.00% 7.07% 6.96%
Average equity to assets 8.45% 8.32% 8.91%
Average equity to loans 12.45% 12.35% 13.17%
Average loans to deposits 93.18% 92.47% 92.97%
AVERAGE BALANCES
Assets $10,319,454 $10,276,241 $10,227,154
Deposits 7,515,205 7,481,969 7,440,331
Loans 7,002,750 6,918,636 6,917,572
Earning assets 9,485,819 9,437,418 9,374,223
Shareholders' equity 871,554 854,713 911,348
ENDING BALANCES
Assets $10,429,099 $10,347,121 $10,252,572
Deposits 7,474,466 7,701,202 7,498,921
Loans 7,052,390 6,951,631 6,878,873
Goodwill 139,245 139,245 139,245
Intangible assets 2,422 2,644 2,865
Earning assets 9,545,752 9,447,346 9,382,033
Total shareholders' equity 862,265 863,641 846,111
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.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands) Quarters
2006 2006
EARNINGS 3rd Qtr 2nd Qtr
Net interest income FTE (a) $85,850 $86,377
Provision for loan losses 12,612 13,159
Other income 49,341 52,078
Other expenses 76,983 85,218
FTE adjustment (a) 763 647
Net income 31,204 27,661
Diluted EPS 0.39 0.35
PERFORMANCE RATIOS
Return on average assets (ROA) 1.22% 1.10%
Return on average common equity (ROE) 13.93% 12.75%
Net interest margin FTE (a) 3.68% 3.78%
Efficiency ratio 56.78% 61.39%
Number of full-time equivalent
employees 2,769 2,986
MARKET DATA
Book value/common share $11.28 $10.88
Period-end common share mkt value 23.17 20.94
Market as a % of book 205% 193%
Cash dividends/common share $0.29 $0.28
Common stock dividend payout ratio 74.36% 80.00%
Average basic common shares 80,066 79,983
Average diluted common shares 80,262 80,203
Period end common shares 80,072 80,058
Common shares repurchased 0 1,329
Common stock market capitalization $1,855,268 $1,676,415
ASSET QUALITY
Gross charge-offs $15,453 $18,038
Net charge-offs 11,584 13,021
Allowance for loan losses 88,755 87,727
Reserve for unfunded lending
commitments 6,307 5,716
Nonperforming assets (NPAs) 72,464 58,786
Net charge-offs/average loans ratio 0.67% 0.78%
Net charge-offs and allowance related
to loans held for sale/average loans
ratio 0.67% 0.78%
Allowance for loan losses/period-end
loans 1.28% 1.29%
Allowance for credit losses/period-
end loans 1.37% 1.37%
NPAs/loans and other real estate 1.05% 0.86%
Allowance for loan
losses/nonperforming loans 143.73% 174.80%
Allowance for credit
losses/nonperforming loans 153.94% 186.19%
CAPITAL & LIQUIDITY
Period-end tangible equity to assets 7.55% 7.20%
Average equity to assets 8.77% 8.66%
Average equity to loans 12.99% 12.93%
Average loans to deposits 93.05% 90.63%
AVERAGE BALANCES
Assets $10,138,856 $10,051,623
Deposits 7,355,877 7,426,029
Loans 6,844,593 6,730,531
Earning assets 9,249,769 9,174,008
Shareholders' equity 888,841 870,234
ENDING BALANCES
Assets $10,217,968 $10,254,773
Deposits 7,389,633 7,402,239
Loans 6,917,347 6,804,769
Goodwill 139,245 139,245
Intangible assets 3,088 3,311
Earning assets 9,344,841 9,315,062
Total shareholders' equity 903,383 870,698
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,
2006, which is derived from the June 30, December 31, June 30,
audited financial statements) 2007 2006 2006
ASSETS
Cash and due from banks $210,722 $200,204 $228,690
Investment securities (at fair
value) and federal funds sold 2,442,906 2,407,888 2,461,086
Loans held for sale 50,456 95,272 49,207
Loans:
Commercial loans 3,898,943 3,694,121 3,659,687
Mortgage loans 586,612 608,008 618,560
Installment loans 1,641,790 1,619,747 1,561,757
Home equity loans 712,021 731,473 763,585
Credit card loans 141,162 147,553 136,966
Leases 71,862 77,971 64,214
Total loans 7,052,390 6,878,873 6,804,769
Less allowance for loan losses (94,432) (91,342) (87,727)
Net loans 6,957,958 6,787,531 6,717,042
Premises and equipment, net 118,294 122,954 119,233
Goodwill 139,245 139,245 139,245
Intangible assets 2,422 2,865 3,311
Accrued interest receivable and
other assets 507,096 496,613 536,959
Total assets $10,429,099 $10,252,572 $10,254,773
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-non-interest bearing $1,424,892 $1,455,097 $1,466,628
Demand-interest bearing 755,931 799,571 842,354
Savings and money market
accounts 2,262,828 2,267,686 2,261,557
Certificates and other time
deposits 3,030,815 2,976,567 2,831,700
Total deposits 7,474,466 7,498,921 7,402,239
Securities sold under agreements
to repurchase 1,302,175 1,261,821 1,156,346
Wholesale borrowings 578,659 464,227 658,720
Accrued taxes, expenses, and
other liabilities 211,534 181,492 166,770
Total liabilities 9,566,834 9,406,461 9,384,075
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, 2007, December 31,
2006 and June 30, 2006 127,937 127,937 127,937
Capital surplus 100,700 106,916 105,397
Accumulated other comprehensive
loss (82,073) (79,508) (62,013)
Retained earnings 1,012,699 998,079 1,007,346
Treasury stock, at cost,
11,548,911, 11,925,803 and
11,968,035 shares at June 30,
2007, December 31, 2006 and
June 30, 2006, respectively (296,998) (307,313) (307,969)
Total shareholders' equity 862,265 846,111 870,698
Total liabilities and shareholders'
equity $10,429,099 $10,252,572 $10,254,773
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
(Unaudited) Quarterly Periods
(Dollars in thousands) June 30, March 31, December 31,
2007 2007 2006
ASSETS
Cash and due from banks $177,524 $179,566 $175,735
Investment securities/fed funds
sold 2,440,015 2,429,539 2,410,879
Loans held for sale 43,054 89,243 45,772
Loans:
Commercial loans 3,845,395 3,749,067 3,730,110
Mortgage loans 596,758 607,602 614,204
Installment loans 1,636,669 1,622,324 1,625,962
Home equity loans 711,113 717,806 738,630
Credit card loans 141,294 143,853 144,351
Leases 71,521 77,984 64,315
Total loans 7,002,750 6,918,636 6,917,572
Less allowance for loan losses 92,298 91,256 88,175
Net loans 6,910,452 6,827,380 6,829,397
Total earning assets 9,485,819 9,437,418 9,374,223
Premises and equipment, net 119,818 121,988 121,956
Accrued interest receivable and
other assets 628,591 628,525 643,415
TOTAL ASSETS $10,319,454 $10,276,241 $10,227,154
LIABILITIES
Deposits:
Demand-non-interest bearing $1,408,827 $1,389,455 $1,413,682
Demand-interest bearing 763,907 756,678 767,430
Savings and money market accounts 2,293,567 2,284,549 2,267,268
Certificates and other time
deposits 3,048,904 3,051,287 2,991,951
Total deposits 7,515,205 7,481,969 7,440,331
Securities sold under agreements to
repurchase 1,458,982 1,352,961 1,269,873
Wholesale borrowings 280,914 399,638 446,950
Total funds 9,255,101 9,234,568 9,157,154
Accrued taxes, expenses and other
liabilities 192,799 186,960 158,652
Total liabilities 9,447,900 9,421,528 9,315,806
SHAREHOLDERS' EQUITY
Preferred stock -- -- --
Common stock 127,937 127,937 127,937
Capital surplus 102,355 107,178 106,339
Accumulated other comprehensive
(loss) income (72,170) (76,926) (36,045)
Retained earnings 1,012,675 1,003,605 1,020,518
Treasury stock (299,243) (307,081) (307,401)
Total shareholders' equity 871,554 854,713 911,348
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $10,319,454 $10,276,241 $10,227,154
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Quarterly Periods
(Unaudited)
(Dollars in thousands) September 30, June 30,
2006 2006
ASSETS
Cash and due from banks $185,628 $188,915
Investment securities/fed funds sold 2,360,494 2,392,208
Loans held for sale 44,682 51,269
Loans:
Commercial loans 3,674,988 3,603,083
Mortgage loans 619,542 626,476
Installment loans 1,592,917 1,526,094
Home equity loans 755,044 772,196
Credit card loans 139,117 137,545
Leases 62,985 65,137
Total loans 6,844,593 6,730,531
Less allowance for loan losses 87,127 86,583
Net loans 6,757,466 6,643,948
Total earning assets 9,249,769 9,174,008
Premises and equipment, net 120,088 119,666
Accrued interest receivable and other
assets 670,498 655,617
TOTAL ASSETS $10,138,856 $10,051,623
LIABILITIES
Deposits:
Demand-non-interest bearing $1,407,653 $1,455,229
Demand-interest bearing 794,886 865,563
Savings and money market accounts 2,246,386 2,280,657
Certificates and other time
deposits 2,906,952 2,824,580
Total deposits 7,355,877 7,426,029
Securities sold under agreements to
repurchase 1,357,746 1,212,470
Wholesale borrowings 367,640 371,309
Total funds 9,081,263 9,009,808
Accrued taxes, expenses and other
liabilities 168,752 171,581
Total liabilities 9,250,015 9,181,389
SHAREHOLDERS' EQUITY
Preferred stock -- --
Common stock 127,937 127,937
Capital surplus 105,587 104,477
Accumulated other comprehensive
(loss) income (52,601) (54,132)
Retained earnings 1,015,749 1,001,647
Treasury stock (307,831) (309,695)
Total shareholders' equity 888,841 870,234
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $10,138,856 $10,051,623
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, 2007
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks $177,524
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 1,936,833 20,359 4.22%
Obligations of states and political
subdivisions (tax exempt) 256,153 3,883 6.08%
Other securities and federal funds
sold 247,029 4,477 7.27%
Total investment securities and
federal funds sold 2,440,015 28,719 4.72%
Loans held for sale 43,054 739 6.88%
Loans 7,002,750 131,369 7.52%
Total earning assets 9,485,819 160,827 6.80%
Allowance for loan losses (92,298)
Other assets 748,409
Total assets $10,319,454
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing $1,408,827 -- --
Demand - interest bearing 763,907 1,876 0.99%
Savings and money market accounts 2,293,567 13,992 2.45%
Certificates and other time deposits 3,048,904 36,725 4.83%
Total deposits 7,515,205 52,593 2.81%
Securities sold under agreements to
repurchase 1,458,982 18,005 4.95%
Wholesale borrowings 280,914 4,636 6.62%
Total interest bearing liabilities 7,846,274 75,234 3.85%
Other liabilities 192,799
Shareholders' equity 871,554
Total liabilities and shareholders'
equity $10,319,454
Net yield on earning assets $9,485,819 85,593 3.62%
Interest rate spread 2.95%
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
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%
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%
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)
(In thousands except per share data) Quarters ended Six months ended
June 30, June 30,
2007 2006 2007 2006
Interest income:
Interest and fees on loans,
including held for sale $132,076 $123,450 $262,165 $241,190
Interest and dividends on
investment securities and
federal funds sold 27,383 24,820 54,229 50,152
Total interest income 159,459 148,270 316,394 291,342
Interest expense:
Interest on deposits:
Demand-interest bearing 1,876 2,583 3,795 4,945
Savings and money market
accounts 13,992 12,079 27,998 22,827
Certificates and other time
deposits 36,725 29,326 72,805 55,427
Interest on securities sold
under agreements to repurchase 18,005 12,957 34,790 24,880
Interest on wholesale borrowings 4,636 5,595 10,775 11,560
Total interest expense 75,234 62,540 150,163 119,639
Net interest income 84,225 85,730 166,231 171,703
Provision for loan losses 9,967 13,159 14,177 19,265
Net interest income after
provision for loan losses 74,258 72,571 152,054 152,438
Other income:
Trust department income 6,096 5,744 11,692 11,138
Service charges on deposits 17,055 18,010 33,304 34,076
Credit card fees 11,712 11,478 22,811 22,149
ATM and other service fees 3,189 3,273 6,260 6,381
Bank owned life insurance income 3,290 5,310 6,458 8,296
Investment services and
insurance 2,660 2,581 5,113 5,178
Investment securities gains, net 1 4 1 20
Loan sales and servicing income 1,911 2,833 7,349 4,278
Other operating income 3,016 2,845 4,818 5,959
Total other income 48,930 52,078 97,806 97,475
Other expenses:
Salaries, wages, pension and
employee benefits 43,538 46,721 86,038 89,752
Net occupancy expense 6,521 6,120 13,207 12,669
Equipment expense 2,851 2,914 5,935 5,872
Stationery, supplies and postage 2,252 2,403 4,585 4,856
Bankcard, loan processing and
other costs 7,607 7,417 15,077 13,244
Professional services 4,525 3,738 9,354 6,501
Amortization of intangibles 222 222 445 445
Other operating expense 13,859 15,683 28,260 33,778
Total other expenses 81,375 85,218 162,901 167,117
Income before federal
income tax expense 41,813 39,431 86,959 82,796
Federal income tax expense 11,928 11,770 25,653 25,171
Net income $29,885 $27,661 $61,306 $57,625
Other comprehensive income (loss),
net of taxes
Unrealized securities' holding
gain (loss), net of taxes $(13,051) $(8,652) $(4,938) $(18,400)
Unrealized hedging gain (loss),
net of taxes 561 37 628 (750)
Minimum pension liability
adjustment, net of taxes 1,746 -- 1,746 --
Less: reclassification
adjustment for securities'
gains losses realized in net
income, net of taxes 1 3 1 13
Total other comprehensive income
(loss), net of taxes (10,745) (8,618) (2,565) (19,163)
Comprehensive income $19,140 $19,043 $58,741 $38,462
Net income applicable to common
shares $29,885 $27,661 $61,306 $57,625
Net income used in diluted EPS
calculation $29,889 $27,666 $61,314 $57,635
Weighted average number of common
shares outstanding - basic 80,426 79,983 80,270 80,177
Weighted average number of common
shares outstanding - diluted 80,570 80,203 80,433 80,420
Basic earnings per share $0.37 $0.35 $0.76 $0.72
Diluted earnings per share $0.37 $0.35 $0.76 $0.72
Dividend per share $0.29 $0.28 $0.58 $0.56
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME---LINKED
QUARTERS
(Unaudited)
(Dollars in thousands, Quarterly Results
except share data) 2007 2007 2006 2006 2006
2nd Q 1st Q 4th Q 3rd Q 2nd Q
Interest and fees on
loans, including held
for sale $132,076 $130,089 $131,683 $129,890 $123,450
Interest and dividends
- securities and
federal funds sold 27,383 26,846 25,795 25,131 24,820
Total interest
income 159,459 156,935 157,478 155,021 148,270
Interest on deposits:
Demand-interest
bearing 1,876 1,919 2,031 2,241 2,583
Savings and money
market accounts 13,992 14,006 14,068 13,188 12,079
Certificates and
other time deposits 36,725 36,080 35,569 32,881 29,326
Securities sold
under agreements
to repurchase 18,005 16,785 15,393 15,878 12,957
Wholesale borrowings 4,636 6,139 6,834 5,746 5,595
Total interest
expense 75,234 74,929 73,895 69,934 62,540
Net interest income 84,225 82,006 83,583 85,087 85,730
Provision for loan
losses 9,967 4,210 44,235 12,612 13,159
Net interest income
after provision
for loan losses 74,258 77,796 39,348 72,475 72,571
Other income:
Trust department
income 6,096 5,596 5,794 5,721 5,744
Service charges on
deposits 17,055 16,249 18,198 19,250 18,010
Credit card fees 11,712 11,099 11,325 11,251 11,478
ATM and other service
fees 3,189 3,071 3,135 3,301 3,273
Bank owned life
insurance income 3,290 3,168 3,001 3,042 5,310
Investment services
and insurance 2,660 2,453 2,011 2,631 2,581
Investment securities
gains (losses), net 1 -- -- 2 4
Loan sales and
servicing income 1,911 5,438 1,504 1,731 2,833
Other operating income 3,016 1,802 3,364 2,412 2,845
Total other income 48,930 48,876 48,332 49,341 52,078
Other expenses:
Salaries, wages,
pension and employee
benefits 43,538 42,500 43,700 43,248 46,721
Net occupancy expense 6,521 6,686 6,143 6,002 6,120
Equipment expense 2,851 3,084 3,030 3,097 2,914
Stationery, supplies
and postage 2,252 2,333 2,633 2,423 2,403
Bankcard, loan
processing and other
costs 7,607 7,470 7,508 7,459 7,417
Professional services 4,525 4,829 5,000 5,470 3,738
Amortization of
intangibles 222 223 222 222 222
Other operating
expense 13,859 14,401 15,751 9,062 15,683
Total other
expenses 81,375 81,526 83,987 76,983 85,218
Income before income tax
expense 41,813 45,146 3,693 44,833 39,431
Federal income taxes 11,928 13,725 (2,424) 13,629 11,770
Net income $29,885 $31,421 $6,117 $31,204 $27,661
Other comprehensive
income (loss), net of
taxes (10,745) 8,180 (41,365) 23,870 (8,618)
Comprehensive income $19,140 $39,601 $(35,248) $55,074 $19,043
Net income applicable to
common shares 29,885 31,421 6,117 31,204 27,661
Adjusted net income used
in diluted EPS
calculation 29,889 31,425 6,121 31,209 27,666
Weighted-average common
shares - basic 80,426 80,113 80,091 80,066 79,983
Weighted-average common
shares - diluted 80,570 80,298 80,316 80,262 80,203
Basic net income per
share $0.37 $0.39 $0.07 $0.39 $0.35
Diluted net income per
share $0.37 $0.39 $0.07 $0.39 $0.35
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
30-Jun 31-Mar 31-Dec
Allowance for Credit Losses 2007 2007 2006
Allowance for loan losses, beginning
of period $92,045 $91,342 $88,755
Allowance related to loans held for
sale -- -- (23,089)
Provision for loan losses 9,967 4,210 44,235
Charge-offs 10,609 9,424 22,323
Recoveries 3,029 5,917 3,764
Net charge-offs 7,580 3,507 18,559
Allowance for loan losses, end of
period $94,432 $92,045 $91,342
Reserve for unfunded lending
commitments, beginning of period $6,746 $6,294 $6,307
Provision for credit losses (193) 452 (13)
Reserve for unfunded lending
commitments, end of period $6,553 $6,746 $6,294
Allowance for Credit Losses $100,985 $98,791 $97,636
Ratios
Provision for loan losses as a % of
average loans 0.57% 0.25% 2.54%
Provision for credit losses as a % of
average loans -0.01% 0.03% 0.00%
Net charge-offs as a % of average
loans 0.43% 0.21% 1.06%
Net charge-offs and allowance related
to loans held for sale as a % of
average loans 0.43% 0.21% 1.40%
Allowance for loan losses as a % of
period-end loans 1.34% 1.32% 1.33%
Allowance for credit losses as a % of
period-end loans 1.43% 1.42% 1.42%
Allowance for loan losses as a % of
nonperforming loans 295.08% 331.93% 168.03%
Allowance for credit losses as a % of
nonperforming loans 315.56% 356.26% 179.60%
Asset Quality
Impaired loans:
Nonaccrual $20,877 $17,049 $45,045
Other nonperforming loans:
Nonaccrual 11,125 10,681 9,317
Total nonperforming loans 32,002 27,730 54,362
Other real estate ("ORE") 5,036 4,934 9,815
Total nonperforming assets ("NPAs") $37,038 $32,664 $64,177
NPAs as % of period-end loans + ORE 0.52% 0.47% 0.93%
Past due 90 days or more & accruing
interest $10,536 $15,209 $16,860
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)
Annual
Quarterly Periods Period
Sep 30 June 30 Dec 31
Allowance for Credit Losses 2006 2006 2006
Allowance for loan losses, beginning
of period $87,727 $87,589 $90,661
Allowance related to loans held for
sale -- -- (23,089)
Provision for loan losses 12,612 13,159 76,112
Charge-offs 15,453 18,038 70,728
Recoveries 3,869 5,017 18,386
Net charge-offs 11,584 13,021 52,342
Allowance for loan losses, end of
period $88,755 $87,727 $91,342
Reserve for unfunded lending
commitments, beginning of period $5,716 $5,853 $6,072
Provision for credit losses 591 (137) 222
Reserve for unfunded lending
commitments, end of period $6,307 $5,716 $6,294
Allowance for Credit Losses $95,062 $93,443 $97,636
Ratios
Provision for loan losses as a % of
average loans 0.73% 0.78% 1.12%
Provision for credit losses as a % of
average loans 0.03% -0.01% 0.00%
Net charge-offs as a % of average
loans 0.67% 0.78% 0.77%
Net charge-offs and allowance related
to loans held for sale as a % of
average loans 0.67% 0.78% 1.11%
Allowance for loan losses as a % of
period-end loans 1.28% 1.29% 1.33%
Allowance for credit losses as a % of
period-end loans 1.37% 1.37% 1.42%
Allowance for loan losses as a % of
nonperforming loans 143.73% 174.80% 168.03%
Allowance for credit losses as a % of
nonperforming loans 153.94% 186.19% 179.60%
Asset Quality
Impaired loans:
Nonaccrual $52,621 $41,927 $45,045
Other nonperforming loans:
Nonaccrual 9,132 8,261 9,317
Total nonperforming loans 61,753 50,188 54,362
Other real estate ("ORE") 10,711 8,598 9,815
Total nonperforming assets ("NPAs") $72,464 $58,786 $64,177
NPAs as % of period-end loans + ORE 1.05% 0.86% 0.93%
Past due 90 days or more & accruing
interest $15,311 $16,483 $16,860
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands)
QUARTERLY OTHER INCOME 2007 2007 2006 2006 2006
DETAIL 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
Trust department income $6,096 $5,596 $5,794 $5,721 $5,744
Service charges on deposits 17,055 16,249 18,198 19,250 18,010
Credit card fees 11,712 11,099 11,325 11,251 11,478
ATM and other service fees 3,189 3,071 3,135 3,301 3,273
Bank owned life insurance
income 3,290 3,168 3,001 3,042 5,310
Investment services and
insurance 2,660 2,453 2,011 2,631 2,581
Investment securities gains
(losses), net 1 - - 2 4
Loan sales and servicing
income 1,911 5,438 1,504 1,731 2,833
Other operating income 3,016 1,802 3,364 2,412 2,845
Total Other Income $48,930 $48,876 $48,332 $49,341 $52,078
QUARTERLY OTHER EXPENSES 2007 2007 2006 2006 2006
DETAIL 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
Salaries, wages, pension and
employee benefits $43,538 $42,500 $43,700 $43,248 $46,721
Net occupancy expense 6,521 6,686 6,143 6,002 6,120
Equipment expense 2,851 3,084 3,030 3,097 2,914
Taxes, other than federal
income taxes 1,655 1,662 1,753 (7,703) 1,802
Stationery, supplies and
postage 2,252 2,333 2,633 2,423 2,403
Bankcard, loan processing and
other costs 7,607 7,470 7,508 7,459 7,417
Advertising 1,260 1,420 798 1,152 2,369
Professional services 4,525 4,829 5,000 5,470 3,738
Telephone 1,094 1,120 1,362 1,138 1,094
Amortization of intangibles 222 223 222 222 222
Other operating expense 9,850 10,199 11,838 14,475 10,418
Total Other Expenses $81,375 $81,526 $83,987 $76,983 $85,218
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,
2007 2006 2007 2006
Allowance for loan
losses - beginning of
period $92,045 $87,589 $91,342 $90,661
Loans charged off:
Commercial 1,212 10,086 1,660 16,152
Mortgage 1,568 325 2,558 698
Installment 4,321 4,524 9,067 10,554
Home equity 1,478 1,146 2,298 1,766
Credit cards 2,025 1,951 4,424 3,725
Leases 5 6 26 57
Total 10,609 18,038 20,033 32,952
Recoveries:
Commercial 11 945 2,889 2,382
Mortgage -- 30 8 86
Installment 2,092 2,965 4,206 6,111
Home equity 307 307 564 685
Credit cards 474 585 948 1,034
Manufactured housing 96 84 170 185
Leases 49 101 161 270
Total 3,029 5,017 8,946 10,753
Net charge-offs 7,580 13,021 11,087 22,199
Provision for loan
losses 9,967 13,159 14,177 19,265
Allowance related to
loans held for sale -- -- -- --
Allowance for loan
losses - end of period $94,432 $87,727 $94,432 $87,727
Average loans
outstanding $7,002,750 $6,730,531 $6,961,099 $6,714,222
Ratio to average loans:
(Annualized) net
charge-offs 0.43% 0.78% 0.32% 0.67%
(Annualized) net
charge-offs and
allowance related to loans
held for sale 0.43% 0.78% 0.32% 0.67%
Provision for loan
losses 0.57% 0.78% 0.41% 0.58%
Loans outstanding -
period-end $7,052,390 $6,804,769 $7,052,390 $6,804,769
Allowance for credit
losses: 100,985 93,443 100,985 93,443
As a multiple of
(annualized) net
charge-offs 3.32 1.79 4.52 2.09
As a multiple of
(annualized) net
charge-offs and
allowance related to
loans held for sale 3.32 1.79 4.52 2.09
Allowance for loan
losses:
As a percent of period-end
loans outstanding 1.34% 1.29% 1.34% 1.29%
As a multiple of
(annualized) net
charge-offs 3.11 1.68 4.22 1.96
As a multiple of
(annualized) net
charge-offs and allowance
related to loans
held for sale 3.11 1.68 4.22 1.96
SOURCE FirstMerit Corporation
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