FirstMerit Corporation Reports Second Quarter 2011 EPS of $0.27 Per Share

News provided by

Jul 26, 2011, 07:30 ET

AKRON, Ohio, July 26, 2011 /PRNewswire/ --

Quarterly Highlights include:

49th consecutive quarter of profitability
Solid linked-quarter credit trends supported by $12.9 million, or 11.45%, decline in non-performing assets and $1.4 million, or 8.09%, decline in net charge-offs to 0.89% of average loans from prior quarter
Average commercial loan growth of $111.8 million, or 2.45%, from prior quarter
Average core deposit growth of $406.4 million, or 4.67%, from prior quarter
Strong tangible common equity ratio at 7.79%

FirstMerit Corporation (Nasdaq: FMER) reported second quarter 2011 net income of $29.8 million, or $0.27 per diluted share. This compares with $27.6 million, or $0.25 per diluted share, for the first quarter of 2011 and $31.5 million, or $0.32 per diluted share, for the second quarter 2010.

(Logo: http://photos.prnewswire.com/prnh/20070920/CLTU138LOGO )

Returns on average common equity ("ROE") and average assets ("ROA") for the second quarter 2011 were 7.78% and 0.82%, respectively, compared with 7.37% and 0.78% for the first quarter of 2011 and 11.21% and 0.94% for the second quarter 2010.

"Our second quarter results reflect continued improvement in our credit quality as well as strong results in Chicago," said Paul G. Greig, chairman, president and CEO of FirstMerit Corporation. "Year-to-date, commercial loan originations in Chicago of $189.4 million have eclipsed that market's total commercial loan production in all of 2010. Additionally, I am pleased with the progress we showed this quarter on our initiatives to reduce expense. We remain focused on cost control and improving the overall efficiency of the bank.

"The economic recovery continues on a very modest pace but we are taking advantage of every opportunity for organic growth," Mr. Greig added. "By capitalizing on disruption in our largest markets, we are adding new business and profitable customer relationships to grow shareholder value."

Net interest margin was 3.77% for the second quarter of 2011 compared with 4.00% for the first quarter of 2011 and 4.02% for the second quarter of 2010. The decline in net interest margin in both periods was due to earning asset yields migrating lower in the quarter. This is attributable to the current interest rate environment producing lower yields on new loan originations and the reinvestment of security cash flows into the investment portfolio at rates below historic averages.

Average loans, not including covered loans, during the second quarter of 2011 increased $71.5 million, or 0.99%, compared with the first quarter of 2011 and $112.0 million, or 1.56%, compared with the second quarter of 2010. Overall loan growth was driven by an increase in average commercial loans of $111.8 million, or 2.45%, over the prior quarter and an increase of $289.3 million, or 6.61% over the year-ago quarter. Average covered loan balances including the indemnification asset were $1.8 billion, $1.9 billion, and $1.3 billion at June 30, 2011, March 31, 2011, and June 30, 2010, respectively.

Average deposits during the second quarter of 2011 increased $144.9 million, or 1.28%, compared with the first quarter of 2011 and increased $864.3 million, or 8.15%, compared with the second quarter of 2010. During the second quarter of 2011, the Corporation increased its average core deposits, which excludes time deposits, by $406.4 million, or 4.67%, compared with the first quarter of 2011, and $1.6 billion, or 20.54%, compared with the second quarter of 2010. Average time deposits decreased $261.4 million, or 9.96%, from the first quarter of 2011 and decreased $686.6 million, or 22.51% from the second quarter of 2010. The change in deposit mix over the prior quarter is due to the Corporation's strategy to retain the acquired depository customers and move them from certificate of deposit accounts into core deposit accounts.

Average investments during the second quarter of 2011 increased $203.1 million, or 5.94%, compared with the first quarter of 2011 and increased $246.6 million, or 7.30%, over the second quarter of 2010. The increase in the second quarter of 2011 average investments, compared with the first quarter of 2011, is due to the purchase of $390.5 million in securities in the second quarter of 2011.

Net interest income on a fully tax-equivalent ("FTE") basis was $119.5 million in the second quarter 2011 compared with $123.9 million in the first quarter of 2011 and $118.8 million in the second quarter of 2010. Compared with the first quarter of 2011, average earning assets increased $163.4 million, or 1.30%, and increased $863.8 million, or 7.28%, compared to the second quarter of 2010.

Noninterest income net of securities transactions for the second quarter of 2011 was $50.6 million, a decrease of $2.2 million, or 4.08%, from the first quarter of 2011 and a decrease of $2.0 million, or 3.72%, from the second quarter of 2010.

The decrease in other income for the second quarter of 2011 compared to the first quarter of 2011 was driven by lower mortgage revenue, including loan sales and servicing, down $2.4 million from the prior quarter and lower bank owned life insurance income, down $2.2 million from the prior quarter. Other income, net of securities gains, as a percentage of net revenue for the second quarter of 2011 was 29.75% compared with 29.86% for first quarter of 2011 and 30.67% for the second quarter of 2010. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.

Noninterest expense for the second quarter of 2011 was $110.1 million, a decrease of $4.4 million, or 3.82%, from the first quarter of 2011 and an increase of $4.3 million, or 4.11%, from the second quarter of 2010. The decrease in noninterest expense for the second quarter of 2011 compared with the first quarter of 2011 was driven by lower salary and benefits as well as reduced other expenses. For the three months ended June 30, 2011, increases in operating expenses compared to the second quarter of 2010 were primarily attributable to increased salary and benefits as a result of the three 2010 acquisitions.

During the second quarter of 2011, the Corporation reported an efficiency ratio of 64.39%, compared with 64.46% for the first quarter of 2011 and 61.30% for the second quarter of 2010.

Net charge-offs, excluding acquired loans, totaled $15.6 million, or 0.89% of average loans, excluding acquired loans, in the second quarter of 2011 compared with $17.0 million, or 0.99% of average loans, in the first quarter of 2011 and $19.8 million, or 1.15% of average loans, in the second quarter of 2010.

Nonperforming assets totaled $99.8 million at June 30, 2011, a decrease of $12.9 million compared with March 31, 2011 and a decrease of $9.9 million compared with June 30, 2010. Nonperforming assets at June 30, 2011 represented 1.38% of period-end loans plus other real estate, excluding acquired loans, compared with 1.61% at March 31, 2011 and 1.62% at June 30, 2010.

The allowance for noncovered loan losses, totaled $109.2 million at June 30, 2011, a decrease of $5.5 million from March 31, 2011. At June 30, 2011, the allowance for loan losses noncovered was 1.51% of period-end loans compared with 1.64% at March 31, 2011, and 1.75% at December 31, 2010. The allowance for credit losses is the sum of the allowance for noncovered loan losses, and the reserve for unfunded lending commitments. For comparative purposes the allowance for credit losses was 1.59% of period-end loans, excluding acquired loans, at June 30, 2011, compared with 1.74% at March 31, 2011 and 1.85% at December 31, 2010. The allowance for credit losses to nonperforming loans was 158.30% at June 30, 2011, compared with 147.38% at March 31, 2011 and 126.51% at December 31, 2010.

The Corporation's total assets at June 30, 2011 were $14.3 billion, a decrease of $119.0 million inclusive of intangible assets, or 0.82%, compared with March 31, 2011 and a decrease of $173.9 million, or 1.20%, compared with June 30, 2010. Total loans, excluding covered loans, did not significantly change compared with March 31, 2011 and June 30, 2010. The decrease in total assets compared with June 30, 2010, is attributed the decline in the covered loan portfolio as expected as there were no new acquisitions of loans subject to loss share agreements after the quarter ended June 30, 2010. The covered loan portfolio will continue to decline, through payoffs, charge-offs, termination or expiration of loss share coverage, unless the Corporation acquires additional loans subject to loss share agreements in the future.

Total deposits were $11.3 billion at June 30, 2011, a decrease of $55.0 million, or 0.48%, from March 31, 2011 and a decrease of $174.2 million, or 1.51%, from June 30, 2010. Core deposits totaled $9.1 billion at June 30, 2011, an increase of $162.5 million, or 1.82%, from March 31, 2011 and an increase of $1.4 billion, or 18.16%, from June 30, 2010. The increase in core deposits compared with June 30, 2010 is due to the Corporation's strategy to move customers from certificate of deposit accounts into core deposit products.

Shareholders' equity was $1.6 billion at June 30, 2011, compared with $1.5 billion at March 31, 2011 and June 30, 2010. The Corporation maintained a strong capital position as tangible common equity to assets was 7.79% at June 30, 2011, compared with 7.50% and 7.35% at March 31, 2011 and June 30, 2010, respectively. The common dividend per share paid in the second quarter 2011 was $0.16.

Acquisitions and Integration

The three 2010 acquisitions of First Bank, George Washington and Midwest were considered business combinations and accounted for under FASB Accounting Standard Codification 805, Business Combinations (ASC 805). All acquired assets and liabilities were recorded at their estimated fair values as of the date of acquisition and identifiable intangible assets were recorded at their estimated fair value. As of June 30, 2011, the one year measurement period has expired for all three acquisitions. During the one year measurement period, material adjustments to acquisition date estimated fair values were recorded in the period in which the acquisition occurred and, as a result, previously reported results may have changed. Certain reclassifications of prior periods' amount may also be made to conform to the current period's presentation and would have no effect on previously reported net income amounts.

Second Quarter 2011 Conference Call

FirstMerit Corporation senior management will host an earnings conference call today at 2:00 p.m. (Eastern Time) to provide an overview of second quarter 2011 results and highlights. To participate in the conference call, please dial (888) 693-3477 ten minutes before start time and provide the reservation number: 83562786. A replay of the conference call will be available at approximately 5:00 p.m. (Eastern Time) on July 26, 2011 through August 9, 2011 by dialing (855) 859-2056, and entering the PIN: 83562786.

About FirstMerit Corporation

FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $14.3 billion as of June 30, 2011 and 207 banking offices and 213 ATM locations in Ohio, Western Pennsylvania and the Chicago area. FirstMerit Corporation 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.

Subsequent Events

The Corporation is required under generally accepted accounting principles to evaluate subsequent events through the filing of the June 30, 2011 consolidated financial statements on Form 10-Q. As a result, the Corporation will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of June 30, 2011 and will adjust amounts preliminarily reported, if necessary.

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 Corporation, 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 Corporation's business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Corporation's periodic reports and registration statements filed with the Securities and Exchange Commission. The Corporation undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.

FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited)						Quarters
(Dollars in thousands)
		2011		2011		2010		2010		2010
EARNINGS		2nd Qtr		1st Qtr		4th Qtr		3rd Qtr		2nd Qtr
Net interest income FTE (a)	$	119,484	$	123,940	$	129,971	$	125,514	$	118,817
Provision for noncovered loan losses		10,138		17,018		19,816		18,108		20,366
Provision for covered loan losses		7,481		5,331		3,572		593		267
Other income		51,491		52,756		54,311		55,135		53,209
Other expenses		110,068		114,445		122,452		120,670		105,723
FTE adjustment (a)		2,041		2,116		2,107		2,021		2,050
Net income		29,763		27,560		27,030		28,996		31,493
Diluted EPS		0.27		0.25		0.25		0.27		0.32

PERFORMANCE RATIOS
Return on average assets (ROA)		0.82%		0.78%		0.74%		0.79%		0.94%
Return on average common equity (ROE)		7.78%		7.37%		7.04%		7.60%		11.21%
Net interest margin FTE (a)		3.77%		4.00%		4.14%		3.96%		4.02%
Efficiency ratio		64.39%		64.46%		65.95%		66.26%		61.30%
Number of full-time equivalent employees		3,028		3,056		3,058		3,093		3,095

MARKET DATA
Book value/common share	$	14.19	$	13.98	$	13.86	$	13.95	$	13.87
Period-end common share mkt value		16.51		17.07		19.79		18.32		17.13
Market as a % of book		116%		122%		143%		131%		124%
Cash dividends/common share	$	0.16	$	0.16	$	0.16	$	0.16	$	0.16
Common stock dividend payout ratio		59.26%		64.00%		64.41%		60.03%		50.00%
Average basic common shares		109,138		108,769		108,807		108,793		98,968
Average diluted common shares		109,139		108,770		108,808		108,794		98,969
Period end common shares		109,241		108,734		108,817		108,803		108,786
Common shares repurchased		45		91		9		4		46
Common stock market capitalization	$	1,803,569	$	1,856,089	$	2,153,479	$	1,993,276	$	1,863,504

ASSET QUALITY (excluding acquired loans)
Gross charge-offs	$	20,958	$	22,812	$	27,553	$	25,817	$	24,967
Net charge-offs		15,641		17,018		21,654		19,923		19,829
Allowance for loan losses noncovered		109,187		114,690		114,690		116,528		118,343
Reserve for unfunded lending commitments		5,799		7,202		8,849		7,864		6,812
Nonperforming assets (NPAs) (b)		99,846		112,759		123,502		115,267		109,781
Net charge-offs/average loans ratio (b)		0.89%		0.99%		1.25%		1.17%		1.15%
Allowance for loan losses noncovered/period-end loans (b)		1.51%		1.64%		1.65%		1.72%		1.75%
Allowance for credit losses/period-end loans (b)		1.59%		1.74%		1.78%		1.84%		1.85%
NPAs/loans and other real estate (b)		1.38%		1.61%		1.78%		1.70%		1.62%
Allowance for loan losses noncovered/nonperforming loans		150.31%		138.67%		109.56%		111.00%		119.62%
Allowance for credit losses/nonperforming loans		158.30%		147.38%		118.01%		118.49%		126.51%

CAPITAL & LIQUIDITY
Period-end tangible common equity to assets		7.79%		7.50%		7.59%		7.54%		7.35%
Average equity to assets		10.59%		10.62%		10.51%		10.38%		8.39%
Average equity to total loans (c)		17.36%		17.14%		17.15%		16.93%		13.68%
Average total loans to deposits (c)		77.05%		78.14%		78.00%		78.25%		77.73%

AVERAGE BALANCES
Assets	$	14,481,208	$	14,270,871	$	14,493,060	$	14,587,126	$	13,426,271
Deposits		11,464,738		11,319,809		11,388,423		11,425,740		10,600,401
Loans, excluding acquired loans (c)		7,080,109		6,963,389		6,868,222		6,781,123		6,810,582
Acquired loans, including covered loans (c)		1,753,942		1,881,540		2,014,361		2,160,075		1,429,388
Earning assets		12,724,269		12,560,913		12,466,629		12,579,486		11,860,439
Shareholders' equity		1,533,855		1,516,227		1,523,078		1,513,527		1,127,017

ENDING BALANCES
Assets	$	14,347,557	$	14,466,509	$	14,134,714	$	14,354,086	$	14,521,473
Deposits		11,340,939		11,395,946		11,268,006		11,271,416		11,515,171
Loans, excluding acquired loans (c)		7,216,015		6,989,973		6,937,142		6,776,098		6,779,941
Acquired loans, including covered loans (c)		1,707,887		1,800,525		1,953,093		2,117,505		2,239,301
Goodwill		460,044		460,044		460,044		460,044		460,044
Intangible assets		9,325		9,868		10,411		11,416		12,422
Earning assets		12,926,211		12,659,414		12,427,936		12,507,979		12,680,627
Total shareholders' equity		1,550,387		1,519,957		1,507,715		1,517,892		1,505,345

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.
(b) - As required by current accounting guidance, the acquired loans and other real estate from First Bank, George Washington Savings Bank and Midwest Bank & Trust Company were recorded at fair value with no carryover of the related allowances. The ratio of our allowance for loan and credit losses and NPAs do not include these loans and other real estate.
(c) - Excludes loss share receivable of $239 million, $266 million, $289 million, $342 million and $344 million as of June 30, 2011, March 31, 2011, December 31, 2010, September 30, 2010, and June 30, 2010, respectively.

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited, except December 31, 2010, which is derived from the audited financial statements)
					June 30,		December 31,		June 30,
					2011		2010		2010
ASSETS
	Cash and due from banks			$	191,965	$	157,415	$	221,851
	Interest bearing-deposits in banks				32,113		365,698		398,664
		Total cash and cash equivalents			224,078		523,113		620,515
	Investment securities
		Held-to-maturity			80,857		59,962		65,160
		Available-for-sale			3,498,272		2,987,040		3,067,552
		Other investments			160,805		160,752		160,222
	Loans held for sale				22,951		41,340		24,733
	Noncovered loans:
		Commercial loans			4,808,305		4,527,497		4,335,392
		Mortgage loans			400,661		403,843		430,550
		Installment loans			1,259,072		1,308,860		1,370,400
		Home equity loans			738,719		749,378		762,288
		Credit card loans			143,828		149,506		146,253
		Leases			57,634		63,004		58,555
			Total noncovered loans		7,408,219		7,202,088		7,103,438
			Allowance for noncovered loan losses		(109,187)		(114,690)		(118,343)
			Net noncovered loans		7,299,032		7,087,398		6,985,095
		Covered loans (includes loss share receivable of $239 million, $289 million, and $344 million at June 30, 2011, December 31, 2010 and June 30, 2010, respectively.)			1,755,107		1,976,754		2,259,522
			Allowance for covered loan losses		(33,360)		(13,733)		-
			Net covered loans		1,721,747		1,963,021		2,259,522
			Net loans		9,020,779		9,050,419		9,244,617
		Premises and equipment, net			191,674		197,866		169,563
		Goodwill			460,044		460,044		460,044
		Intangible assets			9,325		10,411		12,422
		Other real estate covered by FDIC loss share			58,502		54,710		50,461
		Accrued interest receivable and other assets			620,270		589,057		646,184
			Total assets	$	14,347,557	$	14,134,714	$	14,521,473

LIABILITIES AND SHAREHOLDERS' EQUITY
	Deposits:
		Demand-non-interest bearing		$	2,944,117	$	2,790,550	$	2,621,994
		Demand-interest bearing			842,280		868,404		718,891
		Savings and money market accounts			5,305,584		4,811,784		4,353,579
		Certificates and other time deposits			2,248,958		2,797,268		3,820,707
			Total deposits		11,340,939		11,268,006		11,515,171

		Federal funds purchased and securities sold under agreements to repurchase			809,570		777,585		744,055
		Wholesale borrowings			325,133		326,007		474,963
		Accrued taxes, expenses, and other liabilities			321,528		255,401		281,939
			Total liabilities		12,797,170		12,626,999		13,016,128
		Commitments and contingencies
		Shareholders' equity
			Common stock, without par value:
			authorized 300,000,000 shares; issued 115,121,731, 115,121,731 and
			115,121,731 at June 30, 2011, December 31, 2010 and
			June 30, 2010, respectively		127,937		127,937		127,937
			Capital surplus		477,449		485,567		483,958
			Accumulated other comprehensive loss		(9,145)		(26,103)		(4,517)
			Retained earnings		1,103,608		1,080,900		1,059,418
			Treasury stock, at cost, 5,880,692, 6,305,218 and 6,335,809
			shares at June 30, 2011, December 31, 2010 and June 30, 2010,
			respectively		(149,462)		(160,586)		(161,451)
			Total shareholders' equity		1,550,387		1,507,715		1,505,345
Total liabilities and shareholders' equity				$	14,347,557	$	14,134,714	$	14,521,473

FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
(Unaudited)		Quarterly Periods
(Dollars in thousands)
		June 30,		March 31,		December 31,		September 30,		June 30,
		2011		2011		2010		2010		2010

ASSETS
Cash and cash equivalents	$	588,487	$	520,602	$	809,828	$	821,713	$	762,781
Investment securities
Held-to-maturity		79,012		64,212		64,287		63,364		64,650
Available-for-sale		3,382,943		3,194,751		3,012,983		3,049,056		3,131,787
Other investments		160,811		160,752		160,756		158,591		179,735
Loans held for sale		18,512		22,574		39,174		21,659		18,827
Noncovered loans:
Commercial loans		4,665,550		4,553,777		4,445,691		4,336,631		4,376,274
Mortgage loans		398,702		403,758		403,334		421,087		438,243
Installment loans		1,270,589		1,294,156		1,331,130		1,363,248		1,377,748
Home equity loans		736,117		741,596		754,270		762,626		763,943
Credit card loans		143,528		146,526		146,744		146,863		145,880
Leases		58,607		61,768		62,115		58,223		59,049
Total noncovered loans		7,273,093		7,201,581		7,143,284		7,088,678		7,161,137
Covered loans and loss share receivable		1,809,898		1,917,043		2,046,145		2,198,138		1,304,303
Total loans		9,082,991		9,118,624		9,189,429		9,286,816		8,465,440
Less: total allowance for loan losses		143,721		134,064		119,924		113,062		116,436
Net loans		8,939,270		8,984,560		9,069,505		9,173,754		8,349,004

Total earning assets		12,724,269		12,560,913		12,466,629		12,579,486		11,860,439

Premises and equipment, net		192,584		195,296		195,915		172,712		167,009
Accrued interest receivable and other assets		1,119,589		1,128,124		1,140,612		1,126,277		752,478
								0		0
TOTAL ASSETS	$	14,481,208	$	14,270,871	$	14,493,060	$	14,587,126	$	13,426,271


LIABILITIES
Deposits:
Demand-non-interest bearing	$	2,998,090	$	2,874,884	$	2,816,850	$	2,730,483	$	2,496,826
Demand-interest bearing		824,125		841,545		857,960		858,168		775,031
Savings and money market accounts		5,279,353		4,978,773		4,710,682		4,502,779		4,278,756
Certificates and other time deposits		2,363,170		2,624,607		3,002,931		3,334,311		3,049,788

Total deposits		11,464,738		11,319,809		11,388,423		11,425,741		10,600,401

Federal funds purchased and securities sold under
agreements to repurchase		884,244		848,169		904,163		928,607		843,652
Wholesale borrowings		325,057		325,296		368,397		443,890		526,963

Total funds		12,674,039		12,493,274		12,660,983		12,798,238		11,971,016
Accrued taxes, expenses and other liabilities		273,314		261,370		308,999		275,361		328,238

Total liabilities		12,947,353		12,754,644		12,969,982		13,073,599		12,299,254

SHAREHOLDERS' EQUITY
Common stock		127,937		127,937		127,937		127,937		127,937
Capital surplus		479,078		486,907		485,126		484,197		127,143
Accumulated other comprehensive loss		(16,402)		(26,703)		(9,867)		(2,332)		(15,913)
Retained earnings		1,095,270		1,089,554		1,080,809		1,065,001		1,051,308
Treasury stock		(152,028)		(161,468)		(160,927)		(161,276)		(163,458)

Total shareholders' equity		1,533,855		1,516,227		1,523,078		1,513,527		1,127,017

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	14,481,208	$	14,270,871	$	14,493,060	$	14,587,126	$	13,426,271

FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Fully Tax-equivalent Interest Rates and Interest Differential
(Unaudited)
(Dollars in thousands)

		Three months ended				Year ended				Three months ended

		June 30, 2011				December 31, 2010				June 30, 2010

		Average		Average		Average		Average		Average		Average
		Balance	Interest	Rate		Balance	Interest	Rate		Balance	Interest	Rate

ASSETS
Cash and cash equivalents	$	588,487			$	728,723			$	762,781
Investment securities and federal funds sold:
U.S. Treasury securities and U.S. Government
agency obligations (taxable)		2,958,993	19,942	2.70%		2,554,538	87,019	3.41%		2,708,609	23,462	3.47%
Obligations of states and political subdivisions
(tax exempt)		368,790	4,905	5.33%		348,832	20,505	5.88%		349,424	5,184	5.95%
Other securities and federal funds sold		294,983	2,235	3.04%		300,700	8,508	2.83%		318,139	2,139	2.70%
Total investment securities and federal funds sold		3,622,766	27,082	3.00%		3,204,070	116,032	3.62%		3,376,172	30,785	3.66%

Loans held for sale		18,512	221	4.79%		23,612	1,162	4.92%		18,827	239	5.09%
Noncovered loans, covered loans and loss share receivable		9,082,991	107,956	4.77%		8,529,303	433,308	5.08%		8,465,440	109,840	5.20%

Total earning assets		12,724,269	135,259	4.26%		11,756,985	550,502	4.68%		11,860,439	140,864	4.76%

Total allowance for loan losses		(143,721)				(116,118)				(116,436)
Other assets		1,312,173				1,154,761				919,487

Total assets	$	14,481,208			$	13,524,351			$	13,426,271

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing	$	2,998,090	--	--	$	2,550,849	--	--	$	2,496,826	--	--
Demand - interest bearing		824,125	177	0.09%		794,497	751	0.09%		775,031	149	0.08%
Savings and money market accounts		5,279,353	7,398	0.56%		4,303,815	31,912	0.74%		4,278,756	7,873	0.74%
Certificates and other time deposits		2,363,170	5,606	0.95%		2,801,270	32,713	1.17%		3,049,788	9,510	1.25%

Total deposits		11,464,738	13,181	0.46%		10,450,431	65,376	0.63%		10,600,401	17,532	0.66%

Securities sold under agreements to repurchase		884,244	940	0.43%		907,015	4,477	0.49%		843,652	1,404	0.67%
Wholesale borrowings		325,057	1,653	2.04%		510,799	13,998	2.74%		526,963	3,111	2.37%

Total interest bearing liabilities		9,675,949	15,774	0.65%		9,317,396	83,851	0.90%		9,474,190	22,047	0.93%

Other liabilities		273,314				340,485				328,238

Shareholders' equity		1,533,855				1,315,621				1,127,017

Total liabilities and shareholders' equity	$	14,481,208			$	13,524,351			$	13,426,271


Net yield on earning assets	$	12,724,269	119,485	3.77%	$	11,756,985	466,651	3.97%	$	11,860,439	118,817	4.02%

Interest rate spread				3.61%				3.78%				3.82%

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)
(Dollars in thousands except per share data)					Quarters ended				Six months ended
					June 30,				June 30,
					2011		2010		2011		2010
Interest income:
	Interest and fees on loans, including held for sale			$	107,904	$	109,924	$	222,460	$	193,569
	Investment securities
		Taxable			22,176		25,602		43,661		50,472
		Tax-exempt			3,137		3,288		6,332		6,627
		Total investment securities interest			25,313		28,890		49,993		57,099
			Total interest income		133,217		138,814		272,453		250,668
Interest expense:
	Interest on deposits:
		Demand-interest bearing			177		149		361		301
		Savings and money market accounts			7,398		7,873		15,243		15,474
		Certificates and other time deposits			5,606		9,510		12,433		15,916
	Interest on securities sold under agreements to repurchase				940		1,404		1,855		2,531
	Interest on wholesale borrowings				1,653		3,111		3,292		9,285
		Total interest expense			15,774		22,047		33,184		43,507
		Net interest income			117,443		116,767		239,269		207,161
Provision for noncovered loan losses					10,138		20,366		27,156		45,859
Provision for covered loan losses					7,481		267		12,812		267
		Net interest income after provision for loan losses			99,824		96,134		199,301		161,035
Other income:
	Trust department income				5,863		5,574		11,377		10,855
	Service charges on deposits				15,712		17,737		30,622		33,103
	Credit card fees				13,510		12,242		25,717		23,800
	ATM and other service fees				3,063		2,844		5,980		5,353
	Bank owned life insurance income				3,015		2,886		8,256		8,538
	Investment services and insurance				1,972		2,535		4,419		4,463
	Investment securities gains, net				889		651		889		651
	Loan sales and servicing income				2,609		2,975		7,621		6,212
	Gain on George Washington acquisition				-		-		-		1,041
	Other operating income				4,858		5,765		9,366		9,093
		Total other income			51,491		53,209		104,247		103,109
Other expenses:
	Salaries, wages, pension and employee benefits				56,713		51,899		116,583		100,055
	Net occupancy expense				8,086		7,680		16,680		14,820
	Equipment expense				6,816		6,735		13,652		12,785
	Stationery, supplies and postage				2,750		2,696		5,455		5,389
	Bankcard, loan processing and other costs				8,266		7,663		15,829		15,481
	Professional services				5,940		7,845		11,734		13,082
	Amortization of intangibles				543		669		1,086		903
	FDIC expense				4,581		4,416		8,947		8,181
	Other operating expense				16,373		16,120		34,548		29,040
		Total other expenses			110,068		105,723		224,514		199,736
			Income before federal income tax expense		41,247		43,620		79,034		64,408
Federal income tax expense					11,484		12,127		21,710		17,525
			Net income	$	29,763	$	31,493	$	57,324	$	46,883

Other comprehensive income, net of taxes
	Unrealized securities' holding gain, net of taxes			$	17,198	$	16,889	$	17,536	$	21,365
	Less: reclassification adjustment for securities' gain realized in
		income, net of taxes			578		423		578		423
	Total other comprehensive gain, net of taxes				16,620		16,466		16,958		20,942
		Comprehensive income		$	46,383	$	47,959	$	74,282	$	67,825
	Net income applicable to common shares			$	29,763	$	31,493	$	57,324	$	46,883
	Net income used in diluted EPS calculation			$	29,763	$	31,493	$	57,324	$	46,883
Weighted average number of common shares outstanding - basic					109,138		98,968		108,954		93,400
Weighted average number of common shares outstanding - diluted					109,139		98,969		108,955		93,403
Basic earnings per share				$	0.27	$	0.32	$	0.53	$	0.50
Diluted earnings per share				$	0.27	$	0.32	$	0.53	$	0.50
Dividend per share				$	0.16	$	0.16	$	0.32	$	0.32

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME---LINKED QUARTERS
(Unaudited)
(Dollars in thousands, except share data)
		Quarterly Results
		2011		2011		2010		2010		2010
		2nd Qtr		1st Qtr		4th Qtr		3rd Qtr		2nd Qtr

Interest and fees on loans, including held for sale	$	107,904	$	114,555	$	121,651	$	118,543	$	109,924
Interest and dividends - securities and federal funds sold		25,313		24,680		24,714		26,794		28,890
Total interest income		133,217		139,235		146,365		145,337		138,814
Interest on deposits:
Demand-interest bearing		177		184		198		252		149
Savings and money market accounts		7,398		7,845		8,145		8,294		7,873
Certificates and other time deposits		5,606		6,827		7,209		9,588		9,510
Securities sold under agreements to repurchase		940		915		960		986		1,404
Wholesale borrowings		1,653		1,640		1,989		2,724		3,111
Total interest expense		15,774		17,411		18,501		21,844		22,047
Net interest income		117,443		121,824		127,864		123,493		116,767
Provision for noncovered loan losses		10,138		17,018		19,816		18,108		20,366
Provision for covered loan losses		7,481		5,331		3,572		593		267
Net interest income after provision for loan losses		99,824		99,475		104,476		104,792		96,134
Other income:
Trust department income		5,863		5,514		5,627		5,469		5,574
Service charges on deposits		15,712		14,910		15,938		16,859		17,737
Credit card fees		13,510		12,207		12,678		12,532		12,242
ATM and other service fees		3,063		2,917		2,910		2,996		2,844
Bank owned life insurance income		3,015		5,241		3,192		3,219		2,886
Investment services and insurance		1,972		2,447		2,300		2,688		2,535
Investment securities gains, net		889		0		146		58		651
Loan sales and servicing income		2,609		5,012		9,221		4,006		2,975
Gain on George Washington acquisition		0		0		0		0		0
Other operating income		4,858		4,508		2,299		7,308		5,765
Total other income		51,491		52,756		54,311		55,135		53,209
Other expenses:
Salaries, wages, pension and employee benefits		56,713		59,871		62,331		58,930		51,899
Net occupancy expense		8,086		8,594		9,236		8,608		7,680
Equipment expense		6,816		6,836		7,549		7,330		6,735
Stationery, supplies and postage		2,750		2,705		3,183		2,865		2,696
Bankcard, loan processing and other costs		8,266		7,562		7,810		8,281		7,663
Professional services		5,940		5,793		7,731		8,544		7,845
Amortization of intangibles		543		543		1,006		1,006		669
FDIC expense		4,581		4,366		4,342		5,267		4,416
Other operating expense		16,373		18,175		19,264		19,839		16,120
Total other expenses		110,068		114,445		122,452		120,670		105,723
Income before income tax expense		41,247		37,786		36,335		39,257		43,620
Federal income taxes		11,484		10,226		9,305		10,261		12,127
Net income	$	29,763	$	27,560	$	27,030	$	28,996	$	31,493
Other comprehensive income (loss), net of taxes		16,620		338		(21,188)		(398)		16,466
Comprehensive income	$	46,383	$	27,898	$	5,842	$	28,598	$	47,959
Net income applicable to common shares	$	29,763	$	27,560	$	27,030	$	28,996	$	31,493
Adjusted net income used in diluted EPS calculation	$	29,763	$	27,560	$	27,030	$	28,996	$	31,493
Weighted-average common shares outstanding - basic		109,138		108,769		108,807		108,793		98,968
Weighted-average common shares outstanding - diluted		109,139		108,770		108,808		108,794		98,969

Basic net income per share	$	0.27	$	0.25	$	0.25	$	0.27	$	0.32

Diluted net income per share	$	0.27	$	0.25	$	0.25	$	0.27	$	0.32

FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION (Excluding Acquired Assets)
(Unaudited, except December 31, 2010 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
		Quarterly Periods										Annual Period

		June 30,		March 31,		December 31,		September 30,		June 30,		December 31,
Allowance for Credit Losses		2011		2011		2010		2010		2010		2010

Allowance for noncovered loan losses, beginning of period	$	114,690	$	114,690	$	116,528	$	118,343	$	117,806	$	115,092
Provision for noncovered loan losses		10,138		17,018		19,816		18,108		20,366		83,783
Charge-offs		20,958		22,812		27,553		25,817		24,967		104,532
Recoveries		5,317		5,794		5,899		5,894		5,138		20,347
Net charge-offs		15,641		17,018		21,654		19,923		19,829		84,185
Allowance for noncovered loan losses, end of period	$	109,187	$	114,690	$	114,690	$	116,528	$	118,343	$	114,690
Reserve for unfunded lending commitments,
beginning of period	$	7,202	$	8,849	$	7,864	$	6,812	$	6,337	$	5,751
Provision for / (relief of) credit losses		(1,403)		(1,647)		985		1,052		475		3,098
Reserve for unfunded lending commitments, end of period	$	5,799	$	7,202	$	8,849	$	7,864	$	6,812	$	8,849

Allowance for Credit Losses	$	114,986	$	121,892	$	123,539	$	124,392	$	125,155	$	123,539

Ratios (a)

Provision for loan losses as a % of average loans		0.57%		0.99%		1.14%		1.06%		1.20%		1.23%
Provision for / (relief of) credit losses as a % of average loans		-0.08%		-0.10%		0.06%		0.06%		0.03%		0.05%
Net charge-offs as a % of average loans		0.89%		0.99%		1.25%		1.17%		1.15%		1.23%
Allowance for loan losses as a % of period-end loans		1.51%		1.64%		1.65%		1.72%		1.75%		1.65%
Allowance for credit losses as a % of period-end loans		1.59%		1.74%		1.78%		1.84%		1.85%		1.78%
Allowance for loan losses as a % of nonperforming loans		150.31%		138.67%		109.56%		111.00%		119.62%		109.56%
Allowance for credit losses as a % of nonperforming loans		158.30%		147.38%		118.01%		118.49%		126.51%		118.01%


Asset Quality (a)

Impaired loans:
Nonaccrual	$	63,688	$	71,246	$	89,828	$	91,646	$	84,535	$	89,828
Other nonperforming loans:
Nonaccrual		8,951		11,460		14,859		13,331		14,394		14,859

Total nonperforming loans		72,639		82,706		104,687		104,977		98,929		104,687

Other real estate ("ORE")		27,207		30,053		18,815		10,290		10,852		18,815

Total nonperforming assets ("NPAs")	$	99,846	$	112,759	$	123,502	$	115,267	$	109,781	$	123,502

NPAs as % of period-end loans + ORE		1.38%		1.61%		1.78%		1.70%		1.62%		1.78%

Past due 90 days or more & accruing interest	$	10,424	$	5,652	$	22,017	$	36,895	$	36,932	$	22,017

(a) Excludes acquired loans and loss share receivable with a period end balance of $1.7 billion, $2.1 billion and $2.3 billion, $2.5 billion and $2.6 billion at June 30, 2011, March 31, 2011, December 31, 2010, September 30, 2010 and June 30,2010, respectively, and ORE covered by an FDIC loss share with a period end balance of $58.5 million, $58.7 million, $54.7 million, $53.5 million and $50.5 million at June 30, 2011, March 31, 2011, December 31, 2010, September 30, 2010 and June 30, 2010, respectively, which, as required by current accounting guidance, were recorded at fair value on the date of acquisition.

FIRSTMERIT CORPORATION AND SUBSIDIARIES
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands)

		2011		2011		2010		2010		2010
QUARTERLY OTHER INCOME DETAIL		2nd Qtr		1st Qtr		4th Qtr		3rd Qtr		2nd Qtr

Trust department income	$	5,863	$	5,514	$	5,627	$	5,469	$	5,574
Service charges on deposits		15,712		14,910		15,938		16,859		17,737
Credit card fees		13,510		12,207		12,678		12,532		12,242
ATM and other service fees		3,063		2,917		2,910		2,996		2,844
Bank owned life insurance income		3,015		5,241		3,192		3,219		2,886
Investment services and insurance		1,972		2,447		2,300		2,688		2,535
Investment securities gains, net		889		0		146		58		651
Loan sales and servicing income		2,609		5,012		9,221		4,006		2,975
Gain on George Washington acquisition		0		0		0		0		0
Other operating income		4,858		4,508		2,299		7,308		5,765

Total Other Income	$	51,491	$	52,756	$	54,311	$	55,135	$	53,209


		2011		2011		2010		2010		2010
QUARTERLY OTHER EXPENSES DETAIL		2nd Qtr		1st Qtr		4th Qtr		3rd Qtr		2nd Qtr

Salaries, wages, pension and employee benefits	$	56,713	$	59,871	$	62,331	$	58,930	$	51,899
Net occupancy expense		8,086		8,594		9,236		8,608		7,680
Equipment expense		6,816		6,836		7,549		7,330		6,735
Taxes, other than federal income taxes		922		1,960		2,021		1,680		2,236
Stationery, supplies and postage		2,750		2,705		3,183		2,865		2,696
Bankcard, loan processing and other costs		8,266		7,562		7,810		8,281		7,663
Advertising		2,287		2,384		3,094		2,488		2,407
Professional services		5,940		5,793		7,731		8,544		7,845
Telephone		1,462		1,486		1,579		1,561		1,267
Amortization of intangibles		543		543		1,006		1,006		669
Hedge termination		0		0		0		0		0
FDIC expense		4,581		4,366		4,342		5,267		4,416
Other operating expense		11,702		12,345		12,570		14,110		10,210

Total Other Expenses	$	110,068	$	114,445	$	122,452	$	120,670	$	105,723

FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES NONCOVERED - Net Charge-off Detail
(Unaudited)
(Dollars in thousands)
		Quarters ended				Year ended		Six months ended
		June 30,				December 31,		June 30,
		2011		2010		2010		2011		2010

Allowance for loan losses noncovered - beginning of period	$	114,690	$	117,806	$	115,092	$	114,690	$	115,092
Loans charged off:
Commercial		8,219		6,942		39,766		16,143		15,837
Mortgage		1,351		1,395		5,156		3,015		3,041
Installment		6,202		8,430		34,054		14,293		17,235
Home equity		2,115		2,761		7,912		4,271		4,831
Credit cards		2,297		4,010		13,577		4,615		8,178
Leases		127		617		896		127		637
Overdrafts		647		812		3,171		1,306		1,403
Total		20,958		24,967		104,532		43,770		51,162
Recoveries:
Commercial		528		430		1,952		1,136		802
Mortgage		29		38		263		118		63
Installment		3,700		3,081		13,047		7,388		5,098
Home equity		322		444		1,599		789		701
Credit cards		557		608		2,199		1,204		1,081
Manufactured housing		18		55		156		49		86
Leases		2		229		267		34		238
Overdrafts		161		253		864		393		485
Total		5,317		5,138		20,347		11,111		8,554

Net charge-offs		15,641		19,829		84,185		32,659		42,608
Provision for noncovered loan losses		10,138		20,366		83,783		27,156		45,859
Allowance for noncovered loan losses - end of period	$	109,187	$	118,343	$	114,690	$	109,187	$	118,343

Average loans (a)	$	7,080,109	$	6,810,582	$	6,818,962	$	7,022,092	$	6,810,923
Ratio to average loans (a):
(Annualized) net charge-offs		0.89%		1.15%		1.23%		0.94%		1.26%
Provision for loan losses		0.57%		1.20%		1.23%		0.78%		1.36%
Loans, period-end (excluding acquired loans) (a)	$	7,216,015	$	6,779,941	$	6,937,142	$	7,216,015	$	6,779,941

Allowance for credit losses (a):	$	114,986	$	125,155	$	123,539	$	114,986	$	125,155
As a multiple of (annualized) net charge-offs		1.83		1.57		1.47		1.75		1.46
Allowance for loan losses (a):
As a percent of period-end loans		1.51%		1.75%		1.65%		1.51%		1.75%
As a multiple of (annualized) net charge-offs		1.74		1.49		1.36		1.66		1.38

(a) Excludes acquired loans and loss share receivable.

FirstMerit Corporation
Analysts: Thomas O'Malley/Investor Relations Officer
Phone: 330.384.7109
Media Contact: Robert Townsend/Media Relations Officer
Phone: 330.384.7075

SOURCE FirstMerit Corporation

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

440k+
Newsrooms &
Influencers

9k+
Digital Media
Outlets

270k+
Journalists
Opted In

GET STARTED

Browse News Releases

News Releases Overview

Multimedia Gallery

Multimedia Gallery Overview

Trending Topics

FirstMerit Corporation Reports Second Quarter 2011 EPS of $0.27 Per Share

News provided by

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

Contact PR Newswire

Products

About

My Services