AKRON, Ohio, Oct. 23 /PRNewswire-FirstCall/ -- FirstMerit Corporation
(Nasdaq: FMER) today announced third quarter 2007 net income of $30.3
million, or $0.38 per diluted share. This compares with $31.2 million, or
$0.39 per diluted share, for the prior-year quarter. Returns on average
common equity ("ROE") and average assets ("ROA") for the third quarter 2007
were 13.71% and 1.16%, respectively, compared with 13.93% and 1.22% for the
prior-year quarter.
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For the first nine months of 2007, the Company reported net income of
$91.6 million, or $1.14 per diluted share, compared with $88.8 million, or
$1.11 per diluted share. ROE and ROA were 14.11% and 1.19%, respectively,
compared with 13.45% and 1.18% for the prior-year period.
"Our primary goal is to generate increased returns and build long-term
shareholder value at FirstMerit. One of our main objectives in the
near-term is to continue the solid momentum that we have established in
improving and maintaining asset quality. We believe we will achieve this by
executing on our enhanced underwriting and portfolio management
procedures," said Paul G. Greig, Chairman and Chief Executive Officer of
FirstMerit.
"I am satisfied with our credit performance this quarter that includes
a declining level of nonperforming assets and year-to-date reduction in our
net charge-off levels." Mr. Greig continued, "The Company also is directing
efforts toward quality organic growth with prudent and effective balance
sheet management. I am pleased with the relative stability in the third
quarter net interest margin given today's interest rate environment along
with rising deposit costs associated with renewed consumer preference for
higher cost deposit products."
Net interest margin was 3.61% for the third quarter of 2007 compared
with 3.62% for the second quarter of 2007 and 3.68% for the third quarter
of 2006. The Company experienced a slight contraction in the net interest
margin during the third quarter of 2007, compared with the second quarter
of 2007, reflecting rising deposit costs from increased certificate of
deposit balances. Overall incremental deposit cost increases were largely
offset by increased yields on the investment securities portfolio. During
the third quarter the Company earned higher returns from the investment
securities portfolio as cash flows from maturing investments were
reinvested into similar instruments with higher yields and slightly longer
terms. The decrease in net interest margin compared with the third quarter
of 2006 reflected both a shift in consumer preference for higher-costing
term deposit products as well as increased deposit costs due to the
scheduled upward repricing of renewing and new term deposit products.
Net interest income on a fully tax-equivalent ("FTE") basis was $86.6
million in the third quarter of 2007 compared with $85.6 million in the
second quarter of 2007 and $85.9 million in the third quarter of 2006. The
increase in FTE net interest income compared with the second quarter of
2007 reflected growth in average earning assets of $27.4 million, or 0.29%,
offset partly by net interest margin contraction of one basis point. The
increase in FTE net interest income compared with the third quarter of 2006
was driven by a $263.5 million, or 2.85%, increase in average earning
assets, offset by seven basis points of net interest margin contraction.
Average loans for the third quarter of 2007 increased $9.0 million, or
0.13%, compared with the second quarter of 2007. Average commercial loans
grew $22.8 million, or 0.59%, compared with the second quarter of 2007,
offsetting a $10.7 million, or 0.35%, decrease in average consumer loans;
comprised of mortgage, installment, home equity, credit card and leases.
Compared with the third quarter of 2006, average loans increased $167.2
million, or 2.44%, led by a $193.2 million, or 5.26%, increase in average
commercial loans. Average investments for the third quarter of 2007
increased $15.8 million, or 0.65%, compared with the second quarter of
2007. Compared with the third quarter of 2006, average investments
increased $95.3 million, or 4.04%. Average investments represent 23.70% of
average assets for the third quarter of 2007, compared with 23.64% and
23.28% for the second quarter of 2007 and the third quarter of 2006,
respectively.
Average deposits in the third quarter of 2007 were $7.5 billion, a
decrease of $35.2 million, or 0.47%, compared with the second quarter of
2007. Growth in certificates and other time deposits of $91.9 million, or
3.02%, was offset by decreases of $127.2 million in core deposit account
balances comprised of demand-non-interest bearing, demand-interest bearing
and savings and money market accounts; with savings and money market
accounts decreasing $69.6 million, or 3.03%, and demand-interest bearing
accounts decreasing $49.7 million, or 6.50%.
Customer preference for higher yielding deposit product reduced the
concentration of core deposits during the third quarter of 2007 resulting
in higher deposit costs. A majority of the increase in deposit costs was
offset by increased income earned from the investment portfolio. During the
quarter the Company added higher-yielding investment securities to the
balance sheet replacing maturing investments with lower yields and
supporting the net interest margin against further contraction pressure.
Compared with the third quarter of 2006, average deposits increased
$124.1 million, or 1.69%. Average certificates and other time deposits
increased $233.9 million, or 8.05%.
Noninterest income net of securities transactions for the third quarter
of 2007 was $49.1 million, compared with $48.9 million in the second
quarter of 2007, an increase of $0.2 million, or 0.40%. Compared with the
third quarter of 2006, noninterest income decreased $0.2 million, or 0.44%.
Noninterest income, net of securities gains, as a percentage of net revenue
for the third quarter of 2007 was 36.20% compared with 36.37% for the
second quarter of 2007 and 36.50% for the third 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 third quarter of 2007, noninterest expense was $84.0 million,
an increase of $2.7 million, or 3.26%, from the second quarter of 2007 and
an increase of $7.0 million, or 9.15%, from the third quarter of 2006. The
increase primarily resulted from a $4.1 million operating loss related to a
customer check-kiting fraud. FirstMerit is cooperating with authorities
conducting a criminal investigation and intends to pursue appropriate legal
recourse. Going forward the Company expects its normalized run rate of
expenses to resume at levels more in line with the first and second
quarters of 2007.
Net charge-offs totaled $7.9 million, or 0.45% of average portfolio
loans, in the third quarter of 2007, $7.6 million, or 0.43% of average
portfolio loans, in the second quarter of 2007 and $11.6 million, or 0.67%
of average portfolio loans, in the third quarter of 2006.
Nonperforming assets totaled $34.2 million at September 30, 2007,
compared with $37.0 million on June 30, 2007 and $72.5 million on September
30, 2006. Nonperforming assets at September 30, 2007 represented 0.49% of
period-end loans plus other real estate, compared with 0.52% at June 30,
2007 and 1.05% at September 30, 2006.
The provision for loan losses was $7.3 million in the third quarter of
2007, compared with $10.0 million in the second quarter of 2007 and $12.6
million in the third quarter of 2006.
The allowance for loan losses totaled $93.8 million at September 30,
2007, an increase of $5.1 million from September 30, 2006. At September 30,
2007, the allowance for loan losses was 1.34% of period-end loans compared
with 1.28% at September 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 1.44% at September 30, 2007, compared
with 1.37% at September 30, 2006. The allowance for credit losses to
nonperforming loans was 339.04% at September 30, 2007 compared with 153.94%
on September 30, 2006.
FirstMerit's total assets at September 30, 2007 were $10.4 billion, an
increase of $155.1 million, or 1.51%, compared with December 31, 2006 and
an increase of $189.8 million, or 1.86%, compared with September 30, 2006.
The increase from December 31, 2006, was driven by commercial loan growth
of $193.9 million, or 5.25%, offset by a $45.5 million, or 47.79% reduction
in loans held for sale. The increase in total assets compared with
September 30, 2006, was driven by commercial loan growth of $154.3 million,
or 4.13%, and growth in the investment securities portfolio of $126.9
million, or 5.35%, offsetting a $46.7 million, or 6.25%, decrease in home
equity loans and a $33.4 million, or 5.44%, decrease in mortgage loans.
Total deposits were $7.4 billion at September 30, 2007, a decrease of
$90.6 million, or 1.21%, from December 31, 2006, and an increase of $18.7
million, or 0.25%, from September 30, 2006. Core deposits, which exclude
all time deposits, totaled $4.3 billion at September 30, 2007, a decrease
of $198.8 million, or 4.40%, from December 31, 2006 and a decrease of $96.4
million, or 2.18%, from September 30, 2006.
Shareholders' equity was $884.9 million at September 30, 2007 and the
Company's capital position remains strong as tangible equity to assets was
7.24%. The common dividend per share paid in the third quarter 2007 was
$0.29.
Third Quarter 2007 Conference Call
FirstMerit's senior management will host an earnings conference call
this afternoon at 2:00 p.m. Eastern time to provide an overview of third
quarter results and highlights. To participate in the conference call,
please dial (888) 693-3477 ten minutes before start time and provide the
reservation number: 9353039. A replay of the conference call will be
available at approximately 4:30 p.m., on October 23, 2007 through October
30, 2007, by dialing (877) 519-4471, and entering the PIN: 9353039.
About FirstMerit: FirstMerit Corporation is a diversified financial
services company headquartered in Akron, Ohio, with assets of $10.4 billion
as of September 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.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited)
(Dollars in thousands) Quarters
2007 2007 2007
EARNINGS 3rd Qtr 2nd Qtr 1st Qtr
Net interest income FTE (a) $86,582 $85,593 $83,218
Provision for loan losses 7,324 9,967 4,210
Other income 49,124 48,930 48,876
Other expenses 84,030 81,375 81,526
FTE adjustment (a) 1,428 1,368 1,212
Net income 30,262 29,885 31,421
Diluted EPS 0.38 0.37 0.39
PERFORMANCE RATIOS
Return on average assets (ROA) 1.16% 1.16% 1.24%
Return on average common equity (ROE) 13.71% 13.75% 14.91%
Net interest margin FTE (a) 3.61% 3.62% 3.58%
Efficiency ratio 61.76% 60.33% 61.55%
Number of full-time equivalent employees 2,704 2,725 2,751
MARKET DATA
Book value/common share $11.00 $10.71 $10.78
Period-end common share mkt value 19.76 20.93 21.11
Market as a % of book 180% 195% 196%
Cash dividends/common share $0.29 $0.29 $0.29
Common stock dividend payout ratio 76.32% 78.38% 74.36%
Average basic common shares 80,467 80,426 80,113
Average diluted common shares 80,561 80,570 80,298
Period end common shares 80,467 80,477 80,112
Common shares repurchased 22,473 36,159 27,011
Common stock market capitalization $1,590,028 $1,684,384 $1,691,164
ASSET QUALITY
Gross charge-offs $12,347 $10,609 $9,424
Net charge-offs 7,945 7,580 3,507
Allowance for loan losses 93,811 94,432 92,045
Reserve for unfunded lending commitments 7,409 6,553 6,746
Nonperforming assets (NPAs) 34,199 37,038 32,664
Net charge-offs/average loans ratio 0.45% 0.43% 0.21%
Net charge-offs and allowance
related to loans held for sale/average
loans ratio 0.45% 0.43% 0.21%
Allowance for loan losses/period-end
loans 1.34% 1.34% 1.32%
Allowance for credit losses/period-end
loans 1.44% 1.43% 1.42%
NPAs/loans and other real estate 0.49% 0.52% 0.47%
Allowance for loan
losses/nonperforming loans 314.22% 295.08% 331.93%
Allowance for credit
losses/nonperforming loans 339.04% 315.56% 356.26%
CAPITAL & LIQUIDITY
Period-end tangible equity to assets 7.24% 7.00% 7.07%
Average equity to assets 8.45% 8.45% 8.32%
Average equity to loans 12.49% 12.45% 12.35%
Average loans to deposits 93.74% 93.18% 92.47%
AVERAGE BALANCES
Assets $10,360,739 $10,319,454 $10,276,241
Deposits 7,479,960 7,515,205 7,481,969
Loans 7,011,776 7,002,750 6,918,636
Earning assets 9,513,230 9,485,819 9,437,418
Shareholders' equity 875,720 871,554 854,713
ENDING BALANCES
Assets $10,407,765 $10,429,099 $10,347,121
Deposits 7,408,296 7,474,466 7,701,202
Loans 7,014,389 7,052,390 6,951,631
Goodwill 139,245 139,245 139,245
Intangible assets 2,200 2,422 2,644
Earning assets 9,563,541 9,545,752 9,447,346
Total shareholders' equity 884,877 862,265 863,641
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 4th Qtr 3rd Qtr
Net interest income FTE (a) $84,502 $85,850
Provision for loan losses 44,235 12,612
Other income 48,332 49,341
Other expenses 83,987 76,983
FTE adjustment (a) 919 763
Net income 6,117 31,204
Diluted EPS 0.07 0.39
PERFORMANCE RATIOS
Return on average assets (ROA) 0.24% 1.22%
Return on average common equity (ROE) 2.66% 13.93%
Net interest margin FTE (a) 3.58% 3.68%
Efficiency ratio 63.06% 56.78%
Number of full-time equivalent employees 2,755 2,769
MARKET DATA
Book value/common share $10.56 $11.28
Period-end common share mkt value 24.14 23.17
Market as a % of book 229% 205%
Cash dividends/common share $0.29 $0.29
Common stock dividend payout ratio 414.29% 74.36%
Average basic common shares 80,091 80,066
Average diluted common shares 80,316 80,262
Period end common shares 80,101 80,072
Common shares repurchased 15,876 0
Common stock market capitalization $1,933,638 $1,855,268
ASSET QUALITY
Gross charge-offs $22,323 $15,453
Net charge-offs 18,559 11,584
Allowance for loan losses 91,342 88,755
Reserve for unfunded lending commitments 6,294 6,307
Nonperforming assets (NPAs) 64,177 72,464
Net charge-offs/average loans ratio 1.06% 0.67%
Net charge-offs and allowance related
to loans held for sale/average loans ratio 1.40% 0.67%
Allowance for loan losses/period-end loans 1.33% 1.28%
Allowance for credit losses/period-end loans 1.42% 1.37%
NPAs/loans and other real estate 0.93% 1.05%
Allowance for loan losses/nonperforming loans 168.03% 143.73%
Allowance for credit losses/nonperforming loans 179.60% 153.94%
CAPITAL & LIQUIDITY
Period-end tangible equity to assets 6.96% 7.55%
Average equity to assets 8.91% 8.77%
Average equity to loans 13.17% 12.99%
Average loans to deposits 92.97% 93.05%
AVERAGE BALANCES
Assets $10,227,154 $10,138,856
Deposits 7,440,331 7,355,877
Loans 6,917,572 6,844,593
Earning assets 9,374,223 9,249,769
Shareholders' equity 911,348 888,841
ENDING BALANCES
Assets $10,252,572 $10,217,968
Deposits 7,498,921 7,389,633
Loans 6,878,873 6,917,347
Goodwill 139,245 139,245
Intangible assets 2,865 3,088
Earning assets 9,382,033 9,344,841
Total shareholders' equity 846,111 903,383
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 September 30, December 31, September 30,
audited financial statements) 2007 2006 2006
ASSETS
Cash and due from banks $193,721 $200,204 $196,116
Investment securities (at fair
value) and federal funds sold 2,499,406 2,407,888 2,372,484
Loans held for sale 49,746 95,272 55,010
Loans:
Commercial loans 3,887,985 3,694,121 3,733,734
Mortgage loans 579,954 608,008 613,332
Installment loans 1,633,231 1,619,747 1,622,355
Home equity loans 701,565 731,473 748,307
Credit card loans 142,986 147,553 140,143
Leases 68,668 77,971 59,476
Total loans 7,014,389 6,878,873 6,917,347
Less allowance for loan losses (93,811) (91,342) (88,755)
Net loans 6,920,578 6,787,531 6,828,592
Premises and equipment, net 116,552 122,954 121,008
Goodwill 139,245 139,245 139,245
Intangible assets 2,200 2,865 3,088
Accrued interest receivable and
other assets 486,317 496,613 502,425
Total assets $10,407,765 $10,252,572 $10,217,968
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits:
Demand-non-interest bearing $1,413,167 $1,455,097 $1,419,002
Demand-interest bearing 703,045 799,571 784,226
Savings and money market
accounts 2,207,356 2,267,686 2,216,732
Certificates and other time
deposits 3,084,728 2,976,567 2,969,673
Total deposits 7,408,296 7,498,921 7,389,633
Securities sold under agreements
to repurchase 1,531,215 1,261,821 1,269,040
Wholesale borrowings 403,438 464,227 509,129
Accrued taxes, expenses, and
other liabilities 179,939 181,492 146,783
Total liabilities 9,522,888 9,406,461 9,314,585
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
September 30, 2007, December
31, 2006 and September 30,
2006 127,937 127,937 127,937
Capital surplus 99,727 106,916 106,182
Accumulated other comprehensive
loss (66,352) (79,508) (38,143)
Retained earnings 1,019,656 998,079 1,015,249
Treasury stock, at cost,
11,559,284, 11,925,803 and
11,954,829 shares at
September 30, 2007, December 31,
2006 and September 30, 2006,
respectively (296,091) (307,313) (307,842)
Total shareholders' equity 884,877 846,111 903,383
Total liabilities and shareholders'
equity $10,407,765 $10,252,572 $10,217,968
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
(Unaudited) Quarterly Periods
(Dollars in thousands) September 30, June 30, March 31,
2007 2007 2007
ASSETS
Cash and due from banks $180,426 $177,524 $179,566
Investment securities/fed funds
sold 2,455,777 2,440,015 2,429,539
Loans held for sale 45,677 43,054 89,243
Loans:
Commercial loans 3,868,235 3,845,395 3,749,067
Mortgage loans 586,911 596,758 607,602
Installment loans 1,640,380 1,636,669 1,622,324
Home equity loans 704,499 711,113 717,806
Credit card loans 143,312 141,294 143,853
Leases 68,439 71,521 77,984
Total loans 7,011,776 7,002,750 6,918,636
Less allowance for loan losses 94,393 92,298 91,256
Net loans 6,917,383 6,910,452 6,827,380
Total earning assets 9,513,230 9,485,819 9,437,418
Premises and equipment, net 117,970 119,818 121,988
Accrued interest receivable and
other assets 643,506 628,591 628,525
TOTAL ASSETS $10,360,739 $10,319,454 $10,276,241
LIABILITIES
Deposits:
Demand-non-interest bearing $1,400,848 $1,408,827 $1,389,455
Demand-interest bearing 714,216 763,907 756,678
Savings and money market accounts 2,224,048 2,293,567 2,284,549
Certificates and other time
deposits 3,140,848 3,048,904 3,051,287
Total deposits 7,479,960 7,515,205 7,481,969
Securities sold under agreements to
repurchase 1,555,235 1,458,982 1,352,961
Wholesale borrowings 256,356 280,914 399,638
Total funds 9,291,551 9,255,101 9,234,568
Accrued taxes, expenses and other
liabilities 193,468 192,799 186,960
Total liabilities 9,485,019 9,447,900 9,421,528
SHAREHOLDERS' EQUITY
Preferred stock - - -
Common stock 127,937 127,937 127,937
Capital surplus 100,511 102,355 107,178
Accumulated other comprehensive
(loss) income (77,215) (72,170) (76,926)
Retained earnings 1,020,979 1,012,675 1,003,605
Treasury stock (296,492) (299,243) (307,081)
Total shareholders' equity 875,720 871,554 854,713
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $10,360,739 $10,319,454 $10,276,241
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
(Unaudited) Quarterly Periods
(Dollars in thousands) December 31, September 30,
2006 2006
ASSETS
Cash and due from banks $175,735 $185,628
Investment securities/fed funds sold 2,410,879 2,360,494
Loans held for sale 45,772 44,682
Loans:
Commercial loans 3,730,110 3,674,988
Mortgage loans 614,204 619,542
Installment loans 1,625,962 1,592,917
Home equity loans 738,630 755,044
Credit card loans 144,351 139,117
Leases 64,315 62,985
Total loans 6,917,572 6,844,593
Less allowance for loan losses 88,175 87,127
Net loans 6,829,397 6,757,466
Total earning assets 9,374,223 9,249,769
Premises and equipment, net 121,956 120,088
Accrued interest receivable and other
assets 643,415 670,498
TOTAL ASSETS $10,227,154 $10,138,856
LIABILITIES
Deposits:
Demand-non-interest bearing $1,413,682 $1,407,653
Demand-interest bearing 767,430 794,886
Savings and money market accounts 2,267,268 2,246,386
Certificates and other time deposits 2,991,951 2,906,952
Total deposits 7,440,331 7,355,877
Securities sold under agreements to
repurchase 1,269,873 1,357,746
Wholesale borrowings 446,950 367,640
Total funds 9,157,154 9,081,263
Accrued taxes, expenses and other
liabilities 158,652 168,752
Total liabilities 9,315,806 9,250,015
SHAREHOLDERS' EQUITY
Preferred stock - -
Common stock 127,937 127,937
Capital surplus 106,339 105,587
Accumulated other comprehensive
(loss) income (36,045) (52,601)
Retained earnings 1,020,518 1,015,749
Treasury stock (307,401) (307,831)
Total shareholders' equity 911,348 888,841
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $10,227,154 $10,138,856
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT CORPORATION AND
SUBSIDIARIES Three months ended
(Dollars in thousands) September 30, 2007
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks $180,426
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 1,949,851 22,011 4.48%
Obligations of states and political
subdivisions (tax exempt) 265,608 4,079 6.09%
Other securities and federal funds sold 240,318 4,078 6.73%
Total investment securities and
federal funds sold 2,455,777 30,168 4.87%
Loans held for sale 45,677 789 6.85%
Loans 7,011,776 133,102 7.53%
Total earning assets 9,513,230 164,059 6.84%
Allowance for loan losses (94,393)
Other assets 761,476
Total assets $10,360,739
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing $1,400,848 -- --
Demand - interest bearing 714,216 1,677 0.93%
Savings and money market accounts 2,224,048 13,501 2.41%
Certificates and other time deposits 3,140,848 38,464 4.86%
Total deposits 7,479,960 53,642 2.85%
Securities sold under agreements to
repurchase 1,555,235 19,514 4.98%
Wholesale borrowings 256,356 4,321 6.69%
Total interest bearing liabilities 7,890,703 77,477 3.90%
Other liabilities 193,468
Shareholders' equity 875,720
Total liabilities and shareholders'
equity $10,360,739
Net yield on earning assets $9,513,230 86,582 3.61%
Interest rate spread 2.94%
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) September 30, 2006
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks $185,628
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 1,993,447 20,012 3.98%
Obligations of states and political
subdivisions (tax exempt) 114,805 1,925 6.65%
Other securities and federal funds sold 252,242 3,924 6.17%
Total investment securities and
federal funds sold 2,360,494 25,861 4.35%
Loans held for sale 44,682 812 7.21%
Loans 6,844,593 129,111 7.48%
Total earning assets 9,249,769 155,784 6.68%
Allowance for loan losses (87,127)
Other assets 790,586
Total assets $10,138,856
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing $1,407,653 -- --
Demand - interest bearing 794,886 2,241 1.12%
Savings and money market accounts 2,246,386 13,188 2.33%
Certificates and other time deposits 2,906,952 32,881 4.49%
Total deposits 7,355,877 48,310 2.61%
Securities sold under agreements to
repurchase 1,357,746 15,878 4.64%
Wholesale borrowings 367,640 5,746 6.20%
Total interest bearing liabilities 7,673,610 69,934 3.62%
Other liabilities 168,752
Shareholders' equity 888,841
Total liabilities and shareholders'
equity $10,138,856
Net yield on earning assets $9,249,769 85,850 3.68%
Interest rate spread 3.06%
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 Quarters ended Nine months ended
data) September 30, September 30,
2007 2006 2007 2006
Interest income:
Interest and fees on loans,
including held for sale $133,860 $129,890 $396,025 $371,080
Interest and dividends on
investment securities and
federal funds sold 28,771 25,131 83,000 75,283
Total interest income 162,631 155,021 479,025 446,363
Interest expense:
Interest on deposits:
Demand-interest bearing 1,677 2,241 5,472 7,186
Savings and money market
accounts 13,501 13,188 41,499 36,015
Certificates and other time
deposits 38,464 32,881 111,269 88,308
Interest on securities sold
under agreements to repurchase 19,514 15,878 54,304 40,758
Interest on wholesale borrowings 4,321 5,746 15,096 17,306
Total interest expense 77,477 69,934 227,640 189,573
Net interest income 85,154 85,087 251,385 256,790
Provision for loan losses 7,324 12,612 21,501 31,877
Net interest income after
provision for loan losses 77,830 72,475 229,884 224,913
Other income:
Trust department income 5,657 5,721 17,349 16,859
Service charges on deposits 17,003 19,250 50,307 53,326
Credit card fees 11,679 11,251 34,490 33,400
ATM and other service fees 3,306 3,301 9,566 9,682
Bank owned life insurance income 3,735 3,042 10,193 11,338
Investment services and insurance 3,007 2,631 8,120 7,809
Investment securities gains, net - 2 1 22
Loan sales and servicing income 1,411 1,731 8,760 6,009
Other operating income 3,326 2,412 8,144 8,371
Total other income 49,124 49,341 146,930 146,816
Other expenses:
Salaries, wages, pension and
employee benefits 41,332 43,248 127,370 133,000
Net occupancy expense 6,188 6,002 19,395 18,671
Equipment expense 2,958 3,097 8,893 8,969
Stationery, supplies and postage 2,463 2,423 7,048 7,279
Bankcard, loan processing and
other costs 7,222 7,459 22,299 20,703
Professional services 2,923 5,470 12,277 11,971
Amortization of intangibles 222 222 667 667
Other operating expense 20,722 9,062 48,982 42,840
Total other expenses 84,030 76,983 246,931 244,100
Income before federal
income tax expense 42,924 44,833 129,883 127,629
Federal income tax expense 12,662 13,629 38,315 38,800
Net income $30,262 $31,204 $91,568 $88,829
Other comprehensive income (loss),
net of taxes
Unrealized securities' holding
gain (loss), net of taxes $16,383 $23,868 $11,445 $5,468
Unrealized hedging gain (loss),
net of taxes (1,537) 3 (909) (747)
Minimum pension liability
adjustment, net of taxes 875 - 2,621 -
Less: reclassification
adjustment for securities'
gains losses realized in net
income, net of taxes - 1 1 14
Total other comprehensive income
(loss), net of taxes 15,721 23,870 13,156 4,707
Comprehensive income $45,983 $55,074 $104,724 $93,536
Net income applicable to common
shares $30,262 $31,204 $91,568 $88,829
Net income used in diluted EPS
calculation $30,266 $31,209 $91,580 $88,844
Weighted average number of common
shares outstanding - basic 80,467 80,066 80,337 80,140
Weighted average number of common
shares outstanding - diluted 80,561 80,262 80,483 80,365
Basic earnings per share $0.38 $0.39 $1.14 $1.11
Diluted earnings per share $0.38 $0.39 $1.14 $1.11
Dividend per share $0.29 $0.29 $0.87 $0.85
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME---LINKED
QUARTERS
(Unaudited)
(Dollars in thousands, Quarterly Results
except share data) 2007 2007 2007 2006 2006
3rd Q 2nd Q 1st Q 4th Q 3rd Q
Interest and fees on
loans, including held
for sale $133,860 $132,076 $130,089 $131,683 $129,890
Interest and dividends
- securities and
federal funds sold 28,771 27,383 26,846 25,795 25,131
Total interest
income 162,631 159,459 156,935 157,478 155,021
Interest on deposits:
Demand-interest
bearing 1,677 1,876 1,919 2,031 2,241
Savings and money
market accounts 13,501 13,992 14,006 14,068 13,188
Certificates and
other time deposits 38,464 36,725 36,080 35,569 32,881
Securities sold
under agreements
to repurchase 19,514 18,005 16,785 15,393 15,878
Wholesale borrowings 4,321 4,636 6,139 6,834 5,746
Total interest
expense 77,477 75,234 74,929 73,895 69,934
Net interest income 85,154 84,225 82,006 83,583 85,087
Provision for loan losses 7,324 9,967 4,210 44,235 12,612
Net interest income
after provision
for loan losses 77,830 74,258 77,796 39,348 72,475
Other income:
Trust department income 5,657 6,096 5,596 5,794 5,721
Service charges on
deposits 17,003 17,055 16,249 18,198 19,250
Credit card fees 11,679 11,712 11,099 11,325 11,251
ATM and other service
fees 3,306 3,189 3,071 3,135 3,301
Bank owned life
insurance income 3,735 3,290 3,168 3,001 3,042
Investment services
and insurance 3,007 2,660 2,453 2,011 2,631
Investment securities
gains (losses), net - 1 - - 2
Loan sales and
servicing income 1,411 1,911 5,438 1,504 1,731
Other operating income 3,326 3,016 1,802 3,364 2,412
Total other income 49,124 48,930 48,876 48,332 49,341
Other expenses:
Salaries, wages,
pension and employee
benefits 41,332 43,538 42,500 43,700 43,248
Net occupancy expense 6,188 6,521 6,686 6,143 6,002
Equipment expense 2,958 2,851 3,084 3,030 3,097
Stationery, supplies
and postage 2,463 2,252 2,333 2,633 2,423
Bankcard, loan
processing and other
costs 7,222 7,607 7,470 7,508 7,459
Professional services 2,923 4,525 4,829 5,000 5,470
Amortization of
intangibles 222 222 223 222 222
Other operating expense 20,722 13,859 14,401 15,751 9,062
Total other expenses 84,030 81,375 81,526 83,987 76,983
Income before income tax
expense 42,924 41,813 45,146 3,693 44,833
Federal income taxes 12,662 11,928 13,725 (2,424) 13,629
Net income $30,262 $29,885 $31,421 $6,117 $31,204
Other comprehensive
income (loss), net of
taxes 15,721 (10,745) 8,180 (41,365) 23,870
Comprehensive income $45,983 $19,140 $39,601 $(35,248) $55,074
Net income applicable to
common shares 30,262 29,885 31,421 6,117 31,204
Adjusted net income used
in diluted EPS
calculation 30,266 29,889 31,425 6,121 31,209
Weighted-average common
shares - basic 80,467 80,426 80,113 80,091 80,066
Weighted-average common
shares - diluted 80,561 80,570 80,298 80,316 80,262
Basic net income per share $0.38 $0.37 $0.39 $0.07 $0.39
Diluted net income per
share $0.38 $0.37 $0.39 $0.07 $0.39
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
Sept 30 June 30 Mar 31
Allowance for Credit Losses 2007 2007 2007
Allowance for loan losses, beginning
of period $94,432 $92,045 $91,342
Allowance related to loans held for
sale - - -
Provision for loan losses 7,324 9,967 4,210
Charge-offs 12,347 10,609 9,424
Recoveries 4,402 3,029 5,917
Net charge-offs 7,945 7,580 3,507
Allowance for loan losses, end of
period $93,811 $94,432 $92,045
Reserve for unfunded lending
commitments, beginning of period $6,553 $6,746 $6,294
Provision for credit losses 856 (193) 452
Reserve for unfunded lending
commitments, end of period $7,409 $6,553 $6,746
Allowance for Credit Losses $101,220 $100,985 $98,791
Ratios
Provision for loan losses as a % of
average loans 0.41% 0.57% 0.25%
Provision for credit losses as a % of
average loans 0.05% -0.01% 0.03%
Net charge-offs as a % of average
loans 0.45% 0.43% 0.21%
Net charge-offs and allowance related
to loans held for sale as a % of
average loans 0.45% 0.43% 0.21%
Allowance for loan losses as a % of
period-end loans 1.34% 1.34% 1.32%
Allowance for credit losses as a % of
period-end loans 1.44% 1.43% 1.42%
Allowance for loan losses as a % of
nonperforming loans 314.22% 295.08% 331.93%
Allowance for credit losses as a % of
nonperforming loans 339.04% 315.56% 356.26%
Asset Quality
Impaired loans:
Nonaccrual $20,165 $20,877 $17,049
Other nonperforming loans:
Nonaccrual 9,690 11,125 10,681
Total nonperforming loans 29,855 32,002 27,730
Other real estate ("ORE") 4,344 5,036 4,934
Total nonperforming assets ("NPAs") $34,199 $37,038 $32,664
NPAs as % of period-end loans + ORE 0.49% 0.52% 0.47%
Past due 90 days or more & accruing
interest $13,107 $10,536 $15,209
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
Dec 31 Sep 30 Dec 31
Allowance for Credit Losses 2006 2006 2006
Allowance for loan losses, beginning
of period $88,755 $87,727 $90,661
Allowance related to loans held for
sale (23,089) - (23,089)
Provision for loan losses 44,235 12,612 76,112
Charge-offs 22,323 15,453 70,728
Recoveries 3,764 3,869 18,386
Net charge-offs 18,559 11,584 52,342
Allowance for loan losses, end of
period $91,342 $88,755 $91,342
Reserve for unfunded lending
commitments, beginning of period $6,307 $5,716 $6,072
Provision for credit losses (13) 591 222
Reserve for unfunded lending
commitments, end of period $6,294 $6,307 $6,294
Allowance for Credit Losses $97,636 $95,062 $97,636
Ratios
Provision for loan losses as a % of
average loans 2.54% 0.73% 1.12%
Provision for credit losses as a % of
average loans 0.00% 0.03% 0.00%
Net charge-offs as a % of average
loans 1.06% 0.67% 0.77%
Net charge-offs and allowance related
to loans held for sale as a % of
average loans 1.40% 0.67% 1.11%
Allowance for loan losses as a % of
period-end loans 1.33% 1.28% 1.33%
Allowance for credit losses as a % of
period-end loans 1.42% 1.37% 1.42%
Allowance for loan losses as a % of
nonperforming loans 168.03% 143.73% 168.03%
Allowance for credit losses as a % of
nonperforming loans 179.60% 153.94% 179.60%
Asset Quality
Impaired loans:
Nonaccrual $45,045 $52,621 $45,045
Other nonperforming loans:
Nonaccrual 9,317 9,132 9,317
Total nonperforming loans 54,362 61,753 54,362
Other real estate ("ORE") 9,815 10,711 9,815
Total nonperforming assets ("NPAs") $64,177 $72,464 $64,177
NPAs as % of period-end loans + ORE 0.93% 1.05% 0.93%
Past due 90 days or more & accruing
interest $16,860 $15,311 $16,860
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands)
2007 2007 2007 2006 2006
QUARTERLY OTHER INCOME DETAIL 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Trust department income $5,657 $6,096 $5,596 $5,794 $5,721
Service charges on deposits 17,003 17,055 16,249 18,198 19,250
Credit card fees 11,679 11,712 11,099 11,325 11,251
ATM and other service fees 3,306 3,189 3,071 3,135 3,301
Bank owned life insurance
income 3,735 3,290 3,168 3,001 3,042
Investment services and
insurance 3,007 2,660 2,453 2,011 2,631
Investment securities gains
(losses), net - 1 - - 2
Loan sales and servicing income 1,411 1,911 5,438 1,504 1,731
Other operating income 3,326 3,016 1,802 3,364 2,412
Total Other Income $49,124 $48,930 $48,876 $48,332 $49,341
QUARTERLY OTHER EXPENSES 2007 2007 2007 2006 2006
DETAIL 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Salaries, wages, pension and
employee benefits $41,332 $43,538 $42,500 $43,700 $43,248
Net occupancy expense 6,188 6,521 6,686 6,143 6,002
Equipment expense 2,958 2,851 3,084 3,030 3,097
Taxes, other than federal
income taxes 1,984 1,655 1,662 1,753 (7,703)
Stationery, supplies and
postage 2,463 2,252 2,333 2,633 2,423
Bankcard, loan processing and
other costs 7,222 7,607 7,470 7,508 7,459
Advertising 3,332 1,260 1,420 798 1,152
Professional services 2,923 4,525 4,829 5,000 5,470
Telephone 1,142 1,094 1,120 1,362 1,138
Amortization of intangibles 222 222 223 222 222
Other operating expense 14,264 9,850 10,199 11,838 14,475
Total Other Expenses $84,030 $81,375 $81,526 $83,987 $76,983
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES - Net Charge-off Detail
(Unaudited)
(Dollars in thousands) Quarters ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
Allowance for loan
losses - beginning of
period $94,432 $87,727 $91,342 $90,661
Loans charged off:
Commercial 3,227 6,731 4,887 22,883
Mortgage 1,510 459 4,068 1,157
Installment 4,531 4,832 13,598 15,386
Home equity 1,095 1,112 3,393 2,878
Credit cards 1,969 2,315 6,393 6,040
Leases 15 4 41 61
Total 12,347 15,453 32,380 48,405
Recoveries:
Commercial 1,105 566 3,994 2,948
Mortgage - 9 8 95
Installment 2,110 2,219 6,316 8,330
Home equity 519 333 1,083 1,018
Credit cards 504 585 1,452 1,619
Manufactured housing 82 102 252 372
Leases 82 55 243 240
Total 4,402 3,869 13,348 14,622
Net charge-offs 7,945 11,584 19,032 33,783
Provision for loan losses 7,324 12,612 21,501 31,877
Allowance related to
loans held for sale - - - -
Allowance for loan
losses - end of period $93,811 $88,755 $93,811 $88,755
Average loans
outstanding $7,011,776 $6,844,593 $6,978,178 $6,758,157
Ratio to average loans:
(Annualized) net
charge-offs 0.45% 0.67% 0.36% 0.67%
(Annualized) net
charge-offs and
allowance related to
loans held for sale 0.45% 0.67% 0.36% 0.67%
Provision for loan losses 0.41% 0.73% 0.41% 0.63%
Loans outstanding -
period-end $7,014,389 $6,917,347 $7,014,389 $6,917,347
Allowance for credit
losses: 101,220 95,062 101,220 95,062
As a multiple of
(annualized) net
charge-offs 3.21 2.07 3.98 2.10
As a multiple of
(annualized) net
charge-offs and allowance
related to loans
held for sale 3.21 2.07 3.98 2.10
Allowance for loan losses:
As a percent of
period-end loans
outstanding 1.34% 1.28% 1.34% 1.28%
As a multiple of
(annualized) net
charge-offs 2.98 1.93 3.69 1.97
As a multiple of
(annualized) net
charge-offs and allowance
related to loans held
for sale 2.98 1.93 3.69 1.97
SOURCE FirstMerit Corporation
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