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FirstMerit Reports Fourth Quarter 2010 EPS of $0.25 Per Share

FirstMerit Corporation. (PRNewsFoto/FirstMerit Corporation) (PRNewsFoto/)

News provided by

FirstMerit Corporation

Feb 01, 2011, 07:30 ET

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AKRON, Ohio, Feb. 1, 2011 /PRNewswire/ --  

Quarterly Highlights include:

  • 47th consecutive quarter of profitability
  • Commercial loan growth of $182.7 million compared with prior quarter
  • Net interest margin expansion to 4.14%
  • Core deposit growth of $407.3 million compared with prior quarter
  • Increase in tangible common equity to 7.46%

FirstMerit Corporation (Nasdaq: FMER) reported fourth quarter 2010 net income of $27.0 million, or $0.25 per diluted share.  This compares with $29.0 million, or $0.27 per diluted share, for the third quarter 2010 and $14.5 million, or $0.17 per diluted share, for the fourth quarter 2009.   For the full year 2010, the Corporation reported net income of $102.9 million, or $1.02 per diluted share, compared with $82.2 million, or $0.90 per diluted share in 2009.  

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

Returns on average common equity ("ROE") and average assets ("ROA") for the fourth quarter 2010 were 7.04% and 0.74%, respectively, compared with 7.60% and 0.79%, respectively, for the third quarter 2010 and 5.38% and 0.54% for the fourth quarter 2009.  ROE and ROA for the year ended December 31, 2010 were 7.82% and 0.76% respectively, compared with 8.09% and 0.76%, respectively, for the year ended December 31, 2009.  

"Our continued focus on the fundamentals of sound banking drove FirstMerit's solid and profitable performance in the fourth quarter and throughout 2010," said Paul G. Greig, chairman, president and CEO of FirstMerit Corporation. "During the fourth quarter we produced our 47th consecutive profitable quarter; successfully converted our Midwest Bank and Trust acquisition in Chicago; continued the integration of three Chicago acquisitions into the FirstMerit franchise; and further penetrated the Chicago and Northeast Ohio markets, taking advantage of the opportunities created by market disruption in both regions. We achieved these results by leveraging our strong balance sheet, our rich culture built around our superior customer service and disciplined growth strategies which support the execution of our super community bank model."

Net interest margin was 4.14% for the fourth quarter of 2010 compared with 3.96% for the third quarter of 2010 and 3.64% for the fourth quarter of 2009.  Expansion in the net interest margin in both the prior and year-ago quarters were driven primarily by increased loan volume and lower certificate of deposit product balances.  The Corporation continues to successfully execute its strategy of increasing core deposits while shifting the deposit mix away from high-cost certificate of deposit products.  Lower yields on average investment securities compared with both prior and year-ago quarters partly offset the respective, 18 and 50 basis point expansion in net interest margin over those periods.  During the quarter, the Corporation reinvested maturing securities into shorter-duration investments to maintain balance sheet liquidity.  

Average loans, not including covered loans, during the fourth quarter of 2010 increased $54.6 million, or 0.77%, compared with the third quarter of 2010 and also increased  $194.3 million, or 2.80%, compared with the fourth quarter of 2009.  Average commercial loans, not including covered loans, drove the growth over both time periods, increasing $109.1 million, or 2.51%, compared with the prior quarter, and $386.8 million, or 9.53%, compared with the fourth quarter of 2009.  Average covered loan balances including the indemnification assets were $2.0 billion during the fourth quarter of 2010.

Average deposits were $11.4 billion during the fourth quarter of 2010, down $37.3 million, or 0.33%, compared with the third quarter of 2010, and up $4.0 billion, or 53.95%, compared with the fourth quarter of 2009.  During the fourth quarter 2010, average core deposits, which excludes time deposits, increased $294.1 million, or 3.63%, compared with the third quarter 2010 and $2.5 billion, or 43.19%, compared with the fourth quarter 2009.  Average time deposits decreased $331.4 million, or 9.94%, and increased $1.5 billion, or 94.8%, respectively, over prior and year-ago quarters, demonstrating the Corporation's success in shifting the deposit mix and lowering funding costs.  

Average investments decreased $33.0 million, or 1.01%, compared with the third quarter of 2010 and increased $488.8 million, or 17.78% compared with the fourth quarter of 2009.  The increase in the fourth quarter of 2010 average investments compared with the year-ago quarter, is due to the purchase of $575.0 million of securities in the first quarter of 2010 as a result of the First Bank acquisition.  

Net interest income on a fully tax-equivalent ("FTE") basis was $130.0 million in the fourth quarter 2010 compared with $125.5 million in the third quarter of 2010 and $89.2 million in the fourth quarter of 2009.  

Noninterest income net of securities transactions for the fourth quarter of 2010 was $54.2 million, a decrease of $0.9 million, or 1.66%, from the third quarter of 2010 and an increase of $3.4 million, or 6.69%, from the fourth quarter of 2009.  

Other income, net of securities gains, as a percentage of net revenue for the fourth quarter of 2010 was 29.42% compared with 30.50% for third quarter of 2010 and 36.28% for the fourth quarter of 2009.  Net revenue is defined as net interest income, on an FTE basis, plus other income, less gains from securities sales.

Noninterest expense for the fourth quarter of 2010 was $122.5 million, an increase of $1.8 million, or 1.48%, from the third quarter of 2010 and an increase of $27.6 million, or 29.05%, from the fourth quarter of 2009.  One-time expenses associated with data processing conversions and related expenses for acquisitions totaled $3.7 million in the fourth quarter of 2010.

During the fourth quarter of 2010, the Corporation reported an efficiency ratio of 65.95%, compared with 66.26% for the third quarter of 2010 and 67.74% for the fourth quarter of 2009.

Net charge-offs totaled $21.7 million, or 1.25% of average loans in the fourth quarter of 2010, excluding acquired loans,  compared with $19.9 million, or 1.17% of average loans, in the third quarter 2010 and $31.2 million, or 1.79% of average loans, in the fourth quarter of 2009.  

Nonperforming assets totaled $123.5 million at December 31, 2010, an increase of $8.2 million, or 7.14%, compared with September 30, 2010. Nonperforming assets at December 31, 2010 represented 1.78% of period-end loans plus other real estate compared with 1.70% at September 30, 2010 and 1.48% at December 31, 2009.

The allowance for noncovered loan losses totaled $114.7 million at December 31, 2010.   At December 31, 2010, the allowance for noncovered loan losses was 1.65% of period-end loans compared with 1.72% at September 30, 2010 and 1.68% at December 31, 2009.  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 1.78% at December 31, 2010 compared with 1.84% at September 30, 2010 and 1.77% at December 31, 2009.  The allowance for credit losses to nonperforming loans was 118.01% at December 31, 2010, compared with 118.49% at September 30, 2010 and 131.82% at December 31, 2009.

The Corporation's total assets at December 31, 2010 were $14.1 billion, a decrease of $216.6 million, or 1.51%, compared with September 30, 2010 and an increase of $3.6 billion, or 34.13%, compared with December 31, 2009.  The primary increase in total assets compared with December 31, 2009 is attributed to the three 2010 acquisitions that increased total loans, including a loss share receivable of $288.6 million, by $2.8 billion as of December 31, 2010.

Total deposits were $11.3 billion at December 31, 2010, a decrease of $3.4 million, or 0.03%, from September 30, 2010 and an increase of $3.8 billion, or 49.92%, from December 31, 2009.  The increase in total deposits over December 31, 2009 was driven by the Corporation's expansion strategy in Chicago.  Core deposits totaled $8.5 billion at December 31, 2010, an increase of $407.3 million, or 5.05% from September 30, 2010 and an increase of $2.3 billion, or 37.61%, from December 31, 2009. Deposit retention rates for the three acquired Chicago institutions at December 31, 2010, are as follows:  First Bank, 94.9%; George Washington, 96.8%; and Midwest, 91.1% (excluding brokered certificate of deposits, Certificate of Deposit Account Registry Services balances and internet certificate of deposits).

Shareholders' equity was $1.51 billion at December 31, 2010, compared with $1.52 billion at September 30, 2010, and $1.07 billion at December 31, 2009.  The Corporation maintained a strong capital position as tangible common equity to assets was 7.46% at December 31, 2010, compared with 7.41% at September 30, 2010 and 8.89% at December 31, 2009.  The common cash dividend per share paid in the fourth quarter 2010 was $0.16.

Mr. Greig said, "Our dedication to disciplined capital management has allowed us to maintain one of the strongest balance sheets in the industry and has provided us with the ability to generate positive returns for our shareholders throughout the economic downturn."

Acquisitions and Integration

The First Bank, George Washington and Midwest acquisitions 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. Estimated fair values are considered preliminary and, in accordance with ASC 805, are subject to change up to one year after the acquisition date. This allows for adjustments to the initial purchase entries if additional information relative to closing date fair values becomes available, and we continue to analyze our estimates of the fair values of the assets acquired and the liabilities assumed. Material adjustments to acquisition date estimated fair values are recorded in the period in which the acquisition occurred and, as a result, previously reported results are subject to change. Certain reclassifications of prior periods' amounts may also be made to conform to the current period's presentation and would have no effect on previously reported net income amounts.

During the quarter ended December 31, 2010, we obtained additional information that resulted in changes to certain acquisition-data fair value estimates relating to the Midwest acquisition. These purchase accounting adjustments have resulted in an increase to goodwill of approximately $18.7 million which was recognized for the Midwest acquisition in the quarter ended June 30, 2010. Prior period amounts appropriately reflect these adjustments.

Fourth Quarter 2010 Conference Call

FirstMerit (Nasdaq: FMER) senior management will host an earnings conference call on February 1, 2011 at 2:00 p.m. (Eastern Time) to provide an overview of fourth 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: 39868207. A replay of the conference call will be available at approximately 5:00 p.m. (Eastern Time) on February 1, 2011 through February 14, 2011 by dialing (800) 642-1687, and entering the PIN: 39868207.

About FirstMerit Corporation

FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $14.1 billion as of December 31, 2010 and 207 banking offices and 220 ATMs in Ohio, Western Pennsylvania, and Chicago areas. 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.

Subsequent Events

The Corporation is required under generally accepted accounting principles to evaluate subsequent events through the filing of the December 31, 2010 consolidated financial statements on Form 10-K. As a result, the Corporation will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of December 31, 2010 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

Analysts: Thomas O'Malley/Investor Relations Officer

Phone: 330.384.7109

Media Contact: Robert Townsend/Media Relations Officer

Phone: 330.384.7075

FIRSTMERIT CORPORATION AND SUBSIDIARIES

Consolidated Financial Highlights

(Unaudited)







Quarters





(Dollars in thousands)















2010


2010


2010


2010


2009

EARNINGS



4th Qtr


3rd Qtr


2nd Qtr


1st Qtr


4th Qtr

Net interest income FTE (a)


$

129,971

$

125,514

$

118,817

$

92,348

$

89,171

Provision for noncovered loan losses



19,816


18,108


20,366


25,493


29,960

Provision for covered loan losses



3,572


593


             -  


             -  


             -  

Other income



54,311


55,135


53,209


49,900


52,701

Other expenses



122,452


120,670


105,723


94,013


94,885

FTE adjustment (a)



2,107


2,021


2,050


1,954


1,793

Net income



27,030


28,996


31,493


15,390


14,478

Diluted EPS



0.25


0.27


0.32


0.18


0.17













PERFORMANCE RATIOS












Return on average assets (ROA)



0.74%


0.79%


0.94%


0.55%


0.54%

Return on average common equity (ROE)



7.04%


7.60%


11.21%


5.71%


5.38%

Net interest margin FTE (a)



4.14%


3.96%


4.02%


3.72%


3.64%

Efficiency ratio



65.95%


66.26%


61.30%


65.93%


67.74%

Number of full-time equivalent employees



3,058


3,093


3,095


2,723


2,495













MARKET DATA












Book value/common share


$

13.86

$

13.95

$

13.87

$

12.69

$

12.25

Period-end common share mkt value



19.79


18.32


17.13


21.57


20.14

Market as a % of book



143%


131%


124%


170%


164%

Cash dividends/common share


$

0.16

$

0.16

$

0.16

$

0.16

$

0.16

Common stock dividend payout ratio



64.41%


60.03%


50.00%


88.89%


94.12%

Average basic common shares



108,807


108,793


98,968


87,771


86,149

Average diluted common shares



108,808


108,794


98,969


87,777


86,157

Period end common shares



108,817


108,803


108,786


90,810


87,004

Common shares repurchased



9


4


46


115


35

Common stock market capitalization


$

2,153,479

$

1,993,276

$

1,863,504

$

1,958,772

$

1,752,261













ASSET QUALITY (excluding acquired loans)












Gross charge-offs


$

27,553

$

25,817

$

24,967

$

26,195

$

34,232

Net charge-offs



21,654


19,923


19,829


22,779


31,220

Allowance for noncovered loan losses



114,690


116,528


118,343


117,806


115,092

Reserve for unfunded lending commitments



8,849


7,864


6,812


6,337


5,751

Nonperforming assets (NPAs) (b)



123,502


115,267


109,781


123,320


101,001

Net charge-offs/average loans ratio (b)



1.25%


1.17%


1.15%


1.36%


1.79%

Allowance for noncovered loan losses/period-end loans (b)



1.65%


1.72%


1.75%


1.72%


1.68%

Allowance for credit losses/period-end loans (b)



1.78%


1.84%


1.85%


1.82%


1.77%

NPAs/loans and other real estate (b)



1.78%


1.70%


1.62%


1.80%


1.48%

Allowance for noncovered loan losses/nonperforming loans



109.56%


111.00%


119.62%


105.14%


125.55%

Allowance for credit losses/nonperforming loans



118.01%


118.49%


126.51%


110.80%


131.82%













CAPITAL & LIQUIDITY












Period-end tangible common equity to assets



7.46%


7.41%


7.23%


7.91%


8.89%

Average equity to assets



10.51%


10.38%


8.40%


9.63%


10.11%

Average equity to total loans (c)



17.15%


16.93%


13.68%


15.39%


15.37%

Average total loans to deposits (c)



78.00%


78.25%


77.73%


85.18%


93.94%













AVERAGE BALANCES












Assets


$

14,492,149

$

14,586,207

$

13,424,825

$

11,357,110

$

10,559,231

Deposits



11,388,423


11,425,740


10,600,401


8,340,796


7,397,592

Loans, excluding acquired loans (c)



6,868,222


6,781,123


6,810,582


6,812,647


6,932,566

Acquired loans, including covered loans (c)



2,014,361


2,160,075


1,429,388


291,651


16,419

Earning assets



12,466,629


12,579,486


11,860,439


10,076,565


9,714,193

Shareholders' equity



1,523,078


1,513,527


1,127,017


1,093,568


1,068,013













ENDING BALANCES












Assets


$

14,136,908

$

14,353,515

$

14,520,554

$

12,324,589

$

10,539,902

Deposits



11,268,006


11,271,416


11,515,171


9,370,009


7,515,796

Loans, excluding acquired loans (c)



6,937,142


6,776,098


6,779,941


6,836,451


6,835,425

Acquired loans, including covered loans (c)



1,953,093


2,119,504


2,244,737


533,888


88,064

Goodwill



479,099


479,099


479,099


187,945


139,598

Intangible assets



10,411


11,416


12,422


5,659


1,158

Earning assets



12,427,936


12,507,979


12,680,627


10,775,434


9,685,155

Total shareholders' equity



1,507,715


1,517,892


1,505,345


1,152,721


1,065,627













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 $289 million, $318.4 million, $319.8 million and $88.0 million as of December 31, 2010, September 30, 2010, June 30, 2010 and March 31, 2010, respectively.

FIRSTMERIT CORPORATION AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS













(Dollars in thousands)


December 31,

(Unaudited, except December 31, 2009, which is derived from the audited financial statements)


2010


2009

ASSETS






Cash and due from banks

$

523,113

$

161,033


Investment securities







Held-to-maturity


59,962


50,686



Available-for-sale


2,987,040


2,565,264



Other investments


160,752


128,888


Loans held for sale


41,340


16,828


Noncovered loans:







Commercial loans


4,527,497


4,066,522



Mortgage loans


403,843


463,416



Installment loans


1,308,860


1,425,373



Home equity loans


749,378


753,112



Credit card loans


149,506


153,525



Leases


63,004


61,541




Total noncovered loans


7,202,088


6,923,489




Allowance for noncovered loan losses


   (114,690)


   (115,092)




Net noncovered loans


7,087,398


6,808,397



Covered loans (includes loss share receivable of $289 million)


1,976,754


              -  




Allowance for covered loan losses


(13,733)


              -  




Net loans covered


1,963,021


              -  




Net loans


9,050,419


6,808,397



Premises and equipment, net


197,866


125,205



Goodwill


479,099


139,598



Intangible assets


10,411


1,158



Other real estate covered by FDIC loss share


54,710


              -  



Accrued interest receivable and other assets


572,196


542,845




Total assets

$

14,136,908

$

10,539,902









LIABILITIES AND SHAREHOLDERS' EQUITY






Deposits:







Demand-non-interest bearing

$

2,790,550

$

2,069,921



Demand-interest bearing


868,404


677,448



Savings and money market accounts


4,811,784


3,408,109



Certificates and other time deposits


2,797,268


1,360,318




Total deposits


11,268,006


7,515,796











Federal funds purchased and securities sold under agreements to repurchase


777,585


996,345



Wholesale borrowings


326,007


740,105



Accrued taxes, expenses, and other liabilities


257,595


222,029




Total liabilities


12,629,193


9,474,275



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 115,121,731 and 93,633,871 at December 31, 2010 and 2009, respectively


127,937


127,937




Capital surplus


485,567


88,573




Accumulated other comprehensive loss


(26,103)


(25,459)




Retained earnings


1,080,900


1,043,625




   Treasury stock, at cost, 6,305,218 and 6,629,995 shares, at December 31, 2010 and 2009, respectively


(160,586)


(169,049)




Total shareholders' equity


1,507,715


1,065,627

Total liabilities and shareholders' equity

$

14,136,908

$

10,539,902

FIRSTMERIT CORPORATION AND SUBSIDIARIES 

AVERAGE CONSOLIDATED BALANCE SHEETS



Quarterly Periods

(Unaudited)











(Dollars in thousands)


December 31,


September 30,


June 30,


March 31,


December 31,



2010


2010


2010


2010


2009












ASSETS











Cash and due from banks

$

      809,828

$

      821,713

$

      762,781

$

      521,666

$

      167,608

Investment securities











  Held-to-maturity


        64,287


        63,364


        64,650


        56,322


        43,228

  Available-for-sale


   3,012,983


   3,049,056


   3,131,787


   2,731,639


   2,577,759

  Other investments


      160,756


      158,591


      179,735


      129,658


      128,214

Loans held for sale


        39,174


        21,659


        18,827


        14,538


        16,007

Noncovered loans:











 Commercial loans


   4,445,691


   4,336,631


   4,376,274


   4,197,663


   4,058,851

 Mortgage loans


      403,334


      421,087


      438,243


      454,525


      472,829

 Installment loans


   1,331,130


   1,363,248


   1,377,748


   1,402,552


   1,449,091

 Home equity loans


      754,270


      762,626


      763,943


      757,094


      756,478

 Credit card loans


      146,744


      146,863


      145,880


      150,117


      151,233

 Leases


        62,115


        58,223


        59,049


        60,430


        60,503

   Total noncovered loans


   7,143,284


   7,088,678


   7,161,137


   7,022,381


   6,948,985

Covered loans and loss share receivable


   2,046,145


   2,198,138


   1,304,303


      122,027


                -  

   Total loans


   9,189,429


   9,286,816


   8,465,440


   7,144,408


   6,948,985

   Less: allowance for loan losses


      119,924


      113,062


      116,436


      115,031


      113,438

   Net loans


   9,069,505


   9,173,754


   8,349,004


   7,029,377


   6,835,547












Total earning assets


 12,466,629


 12,579,486


 11,860,439


 10,076,565


   9,714,193












Premises and equipment, net


      195,915


      172,712


      167,009


      141,405


      126,073

Accrued interest receivable and other assets


   1,139,701


   1,125,358


      751,032


      732,505


      664,795












TOTAL ASSETS

$

 14,492,149

$

 14,586,207

$

 13,424,825

$

 11,357,110

$

 10,559,231























LIABILITIES











Deposits:











 Demand-non-interest bearing

$

   2,816,850

$

   2,730,483

$

   2,496,826

$

   2,146,969

$

   2,028,977

 Demand-interest bearing


      857,960


      858,168


      775,031


      687,233


      651,381

 Savings and money market accounts


   4,710,682


   4,502,779


   4,278,756


   3,709,246


   3,175,825

 Certificates and other time deposits


   3,002,931


   3,334,311


   3,049,788


   1,797,348


   1,541,409












   Total deposits


 11,388,423


 11,425,741


 10,600,401


   8,340,796


   7,397,592












Federal funds purchased and securities sold under agreements to repurchase


      904,163


      928,607


      843,652


      951,927


   1,076,199

Wholesale borrowings


      368,397


      443,890


      526,963


      708,414


      762,023












   Total funds


 12,660,983


 12,798,238


 11,971,016


 10,001,137


   9,235,814

Accrued taxes, expenses and other liabilities


      308,088


      274,442


      326,792


      262,405


      255,404












   Total liabilities


 12,969,071


 13,072,680


 12,297,808


 10,263,542


   9,491,218












SHAREHOLDERS' EQUITY











Preferred stock


                -  


                -  


                -  


                -  


                -  

Common stock


      127,937


      127,937


      127,937


      127,937


      127,937

Common stock warrant


                -  


                -  


                -  


                -  


                -  

Capital surplus


      485,126


      484,197


      127,143


      106,350


        74,213

Accumulated other comprehensive loss


        (9,867)


        (2,332)


      (15,913)


      (20,593)


        (9,266)

Retained earnings


   1,080,809


   1,065,001


   1,051,308


   1,049,774


   1,047,097

Treasury stock


    (160,927)


    (161,276)


    (163,458)


    (169,900)


    (171,968)












   Total shareholders' equity


   1,523,078


   1,513,527


   1,127,017


   1,093,568


   1,068,013












TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

 14,492,149

$

 14,586,207

$

 13,424,825

$

 11,357,110

$

 10,559,231

FIRSTMERIT CORPORATION AND SUBSIDIARIES 

AVERAGE CONSOLIDATED BALANCE SHEETS

Fully Tax-equivalent Interest Rates and Interest Differential























Three months ended


Three months ended



December 31, 2010


December 31, 2009














(Unaudited)


Average




Average


Average




Average

(Dollars in thousands)


Balance


Interest


Rate


Balance


Interest


Rate














ASSETS













Cash and due from banks

$

809,828





$

167,608





Investment securities and federal funds sold:













    U.S. Treasury securities and U.S. Government













         agency obligations (taxable)


2,579,880


19,337


2.97%


2,224,704


23,348


4.16%

    Obligations of states and political subdivisions (tax













         exempt)


352,330


5,073


5.71%


331,098


5,021


6.02%

    Other securities and federal funds sold


305,816


2,158


2.80%


193,399


1,799


3.69%

         Total investment securities and federal













          funds sold


3,238,026


26,568


3.26%


2,749,201


30,168


4.35%














Loans held for sale


39,174


470


4.76%


16,007


204


5.06%

Noncovered loans, covered loans and loss share













    receivable


9,189,429


121,434


5.24%


6,948,985


81,762


4.67%

         Total earning assets


12,466,629


148,472


4.72%


9,714,193


112,134


4.58%














Allowance for loan losses


(119,924)






(113,438)





Other assets


1,335,616






790,868


















         Total assets

$

14,492,149





$

10,559,231


















LIABILITIES AND SHAREHOLDERS' EQUITY













Deposits:













    Demand - non-interest bearing

$

2,816,850


         -  


     -  

$

2,028,977


         -  


     -  

    Demand - interest bearing


857,960


198


0.09%


651,381


149


0.09%

    Savings and money market accounts


4,710,682


8,145


0.69%


3,175,825


6,880


0.86%

    Certificates and other time deposits


3,002,931


7,209


0.95%


1,541,409


8,413


2.17%














         Total deposits


11,388,423


15,552


0.54%


7,397,592


15,442


0.83%














Securities sold under agreements to repurchase


904,163


960


0.42%


1,076,199


1,268


0.47%

Wholesale borrowings


368,397


1,989


2.14%


762,023


6,253


3.26%














         Total interest bearing liabilities


9,844,133


18,501


0.75%


7,206,837


22,963


1.26%














Other liabilities


308,088






255,404


















Shareholders' equity


1,523,078






1,068,013


















         Total liabilities and shareholders' equity

$

14,492,149





$

10,559,231































Net yield on earning assets

$

12,466,629


129,971


4.14%

$

9,714,193


89,171


3.64%














Interest rate spread






3.98%






3.32%














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.

FIRST MERIT CORPORATION AND SUBSIDIARIES 

AVERAGE CONSOLIDATED BALANCE SHEETS

Fully Tax-equivalent Interest Rates and Interest Differential























Twelve months ended


Twelve months ended



December 31, 2010


December 31, 2009














(Unaudited)


Average




Average


Average




Average

(Dollars in thousands)


Balance


Interest


Rate


Balance


Interest


Rate














ASSETS













Cash and due from banks

$

728,723





$

183,215





Investment securities and federal funds sold:













    U.S. Treasury securities and U.S. Government     agency obligations (taxable)


2,554,538


87,019


3.41%


2,222,771


97,871


4.40%

    Obligations of states and political subdivisions (tax













         exempt)


348,832


20,505


5.88%


321,919


19,718


6.13%

    Other securities and federal funds sold


300,700


8,508


2.83%


204,272


8,394


4.11%

         Total investment securities and federal













          funds sold


3,204,070


116,032


3.62%


2,748,962


125,983


4.58%














Loans held for sale


23,612


1,162


4.92%


19,289


1,032


5.35%

Noncovered loans, covered loans and loss share receivable


8,529,303


433,308


5.08%


7,156,983


339,381


4.74%

         Total earning assets


11,756,985


550,502


4.68%


9,925,234


466,396


4.70%














Allowance for loan losses


(116,118)






(108,017)





Other assets


1,153,192






793,062


















         Total assets

$

13,522,782





$

10,793,494


















LIABILITIES AND SHAREHOLDERS' EQUITY













Deposits:













    Demand - non-interest bearing

$

2,550,849


         -  


0.00%

$

1,910,171


         -  


0.00%

    Demand - interest bearing


794,497


751


0.09%


656,367


600


0.09%

    Savings and money market accounts


4,303,815


31,912


0.74%


2,886,842


23,472


0.81%

    Certificates and other time deposits


2,801,270


32,713


1.17%


2,056,208


54,610


2.66%














         Total deposits


10,450,431


65,376


0.63%


7,509,588


78,682


1.05%














Securities sold under agreements to repurchase


907,015


4,477


0.49%


1,013,167


4,764


0.47%

Wholesale borrowings


510,799


13,998


2.74%


952,979


27,317


2.87%














         Total interest bearing liabilities


9,317,396


83,851


0.90%


7,565,563


110,763


1.46%














Other liabilities


338,916






267,835


















Shareholders' equity


1,315,621






1,049,925


















         Total liabilities and shareholders' equity

$

13,522,782





$

10,793,494































Net yield on earning assets

$

11,756,985


466,651


3.97%

$

9,925,234


355,633


3.58%














Interest rate spread






3.78%






3.24%














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)


Quarters ended



Twelve months ended

(Dollars in thousands except per share data)


December 31,



December 31,






2010



2009



2010



2009

Interest income:










Interest and fees on loans, including held for sale

$

121,651


$

81,907


$

433,763


$

340,236


Investment securities












Taxable


21,495


25,146



95,527



106,265



Tax-exempt


3,219


3,288



13,080



13,026



Total investment securities interest


24,714


28,434



108,607



119,291




Total interest income


146,365



110,341



542,370



459,527

Interest expense:










Interest on deposits:












Demand-interest bearing


198


149



751



600



Savings and money market accounts


8,145


6,880



31,912



23,472



Certificates and other time deposits


7,209


8,413



32,713



54,610


Interest on securities sold under agreements to repurchase


960



1,268



4,477



4,764


Interest on wholesale borrowings


1,989



6,253



13,998



27,317



Total interest expense


18,501


22,963



83,851



110,763



Net interest income


127,864


87,378



458,519



348,764

Provision for noncovered loan losses


19,816



29,960



83,783



98,433

Provision for covered loan losses


3,572



         -  



4,432



         -  



Net interest income after provision for loan losses


104,476


57,418



370,304



250,331

Other income:










Trust department income


5,627



5,374



21,951



20,683


Service charges on deposits


15,938



16,568



65,900



63,366


Credit card fees


12,678



12,049



49,010



46,512


ATM and other service fees


2,910



2,730



11,259



11,110


Bank owned life insurance income


3,192



4,524



14,949



13,740


Investment services and insurance


2,300



2,322



9,451



10,008


Investment securities gains, net


146



1,934



855



6,037


Loan sales and servicing income


9,221



2,947



19,440



12,954


Gain on George Washington acquisition


         -  



         -  



1,041



         -  


Gain on post medical retirement curtailment


         -  



         -  



         -  



9,543


Other operating income


2,299



4,253



18,700



16,348



Total other income


54,311


52,701



212,556



210,301

Other expenses:










 Salaries, wages, pension and employee benefits


62,331



45,748



221,316



175,906


 Net occupancy expense


9,236



5,631



32,665



24,099


 Equipment expense


7,549



6,445



27,664



24,301


 Stationery, supplies and postage


3,183



2,414



11,438



8,907


 Bankcard, loan processing and other costs


7,810



8,215



31,572



31,467


 Professional services


7,731



6,098



29,357



16,414


 Amortization of intangibles


1,006



87



2,914



347


 FDIC expense


4,342



3,160



17,790



16,510


 Other operating expense


19,264



17,087



68,144



54,866



Total other expenses


122,452


94,885



442,860



352,817




Income before federal income tax expense


36,335



15,234



140,000



107,815

Federal income tax expense


9,305



756



37,091



25,645




Net income

$

27,030


$

14,478


$

102,909


$

82,170
















Other comprehensive income, net of taxes










Unrealized securities' holding gain (loss), net of taxes

$

(21,560)


$

(9,880)


$

(555)


$

38,994


Unrealized hedging loss, net of taxes


         -  



         -  



         -  



(94)


Less: reclassification adjustment for securities' gain realized in












income, net of taxes


95


2,618



556



3,924


Minimum pension liability adjustment, net of taxes


467



3,899



467



3,068


Total other comprehensive gain (loss), net of taxes


(21,188)



(8,599)



(644)



38,044



Comprehensive income

$

5,842


$

5,879


$

102,265


$

120,214


Net income applicable to common shares

$

27,030


$

14,478


$

102,909


$

75,799


Net income used in diluted EPS calculation

$

27,030


$

14,478


$

102,909


$

75,799

Weighted average number of common shares outstanding - basic


108,807



86,149



101,163



84,678

Weighted average number of common shares outstanding - diluted


108,808



86,157



101,165



84,686

Basic earnings per share

$

0.25


$

0.17


$

1.02


$

0.90

Diluted earnings per share

$

0.25


$

0.17


$

1.02


$

0.90

Stock dividend per share


0.00%



0.00%



0.00%



0.73%

Dividend per share

$

0.16


$

0.16


$

0.64


$

0.77

FIRSTMERIT CORPORATION AND SUBSIDIARIES   

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME---LINKED QUARTERS

























Quarterly Results

(Unaudited)


2010


2010


2010


2010


2009

(Dollars in thousands, except share data)


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr


4th Qtr












Interest and fees on loans, including held for sale

$

121,651

$

118,543

$

109,924

$

83,645

$

81,907

Interest and dividends - securities and federal funds sold


24,714


26,794


28,890


28,209


28,434

         Total interest income


146,365


145,337


138,814


111,854


110,341

Interest on deposits:











    Demand-interest bearing


198


252


149


152


149

    Savings and money market accounts


8,145


8,294


7,873


7,601


6,880

    Certificates and other time deposits


7,209


9,588


9,510


6,406


8,413

    Securities sold under agreements to repurchase


960


986


1,404


1,127


1,268

    Wholesale borrowings


1,989


2,724


3,111


6,174


6,253

         Total interest expense


18,501


21,844


22,047


21,460


22,963

         Net interest income


127,864


123,493


116,767


90,394


87,378

Provision for noncovered loan losses


19,816


18,108


20,366


25,493


29,960

Provision for covered loan losses


3,572


593


267


         -  


         -  

    Net interest income after provision for loan losses


104,476


104,791


96,134


64,901


57,418

Other income:











    Trust department income


5,627


5,469


5,574


5,281


5,374

    Service charges on deposits


15,938


16,859


17,737


15,366


16,568

    Credit card fees


12,678


12,532


12,242


11,558


12,049

    ATM and other service fees


2,910


2,996


2,844


2,509


2,730

    Bank owned life insurance income


3,192


3,219


2,886


5,652


4,524

    Investment services and insurance


2,300


2,688


2,535


1,928


2,322

    Investment securities gains, net


146


58


651


         -  


1,934

    Loan sales and servicing income


9,221


4,006


2,975


3,237


2,947

   Gain on George Washington acquisition


         -  


         -  


         -  


1,041


         -  

   Other operating income


2,299


7,308


5,765


3,328


4,253

         Total other income


54,311


55,135


53,209


49,900


52,701

Other expenses:











    Salaries, wages, pension and employee benefits


62,331


58,930


51,899


48,156


45,748

    Net occupancy expense


9,236


8,608


7,680


7,140


5,631

    Equipment expense


7,549


7,330


6,735


6,050


6,445

    Stationery, supplies and postage


3,183


2,865


2,696


2,693


2,414

    Bankcard, loan processing and other costs


7,810


8,281


7,663


7,818


8,215

    Professional services


7,731


8,544


7,845


5,237


6,098

    Amortization of intangibles


1,006


1,006


669


234


87

    FDIC expense


4,342


5,267


4,416


3,765


3,160

    Other operating expense


19,264


19,840


16,120


12,920


17,087

         Total other expenses


122,452


120,670


105,723


94,013


94,885

Income before income tax expense


36,335


39,257


43,620


20,788


15,234

Federal income taxes


9,305


10,261


12,127


5,398


756

    Net income

$

27,030

$

28,996

$

31,493

$

15,390

$

14,478

Other comprehensive income (loss), net of taxes


(21,188)


(398)


16,466


4,476


(18,022)

    Comprehensive income

$

5,842

$

28,598

$

47,959

$

19,866

$

(3,544)

Net income applicable to common shares

$

27,030

$

28,996

$

31,493

$

15,390

$

14,478

Adjusted net income used in diluted EPS calculation

$

27,030

$

28,996

$

31,493

$

15,390

$

14,478

Weighted-average common shares - basic


108,807


108,793


98,968


87,771


86,149

Weighted-average common shares - diluted


108,808


108,794


98,969


87,777


86,157












Basic net income per share

$

0.25

$

0.27

$

0.32

$

0.18

$

0.17












Diluted net income per share

$

0.25

$

0.27

$

0.32

$

0.18

$

0.17

FIRSTMERIT CORPORATION AND SUBSIDIARIES 

ASSET QUALITY INFORMATION














(Unaudited, except December 31, 2009 annual period which













  is derived from the audited financial statements)













(Dollars in thousands, except ratios)


Quarterly Periods


Annual Period
















December 31,


September 30,


June 30,


March 31,


December 31,


December 31,  



2010


2010


2010


2010


2009


2009

 Allowance for Credit Losses


























Allowance for noncovered loan losses, beginning of period

$

116,528

$

118,343

$

117,806

$

115,092

$

116,352

$

103,757

Provision for noncovered loan losses


19,816


18,108


20,366


25,493


29,960


98,433

Charge-offs


27,553


25,817


24,967


26,195


34,232


99,713

Recoveries


5,899


5,894


5,138


3,416


3,012


12,615

 Net charge-offs


21,654


19,923


19,829


22,779


31,220


87,098

Allowance for noncovered loan losses, end of period

$

114,690

$

116,528

$

118,343

$

117,806

$

115,092

$

115,092

Reserve for unfunded lending commitments,













  beginning of period

$

7,864

$

6,812

$

6,337

$

5,751

$

4,470

$

6,588

Provision for credit losses


985


1,052


475


586


1,281


(837)

Reserve for unfunded lending commitments,













  end of period

$

8,849

$

7,864

$

6,812

$

6,337

$

5,751

$

5,751














Allowance for Credit Losses

$

123,539

$

124,392

$

125,155

$

124,143

$

120,843

$

120,843














Ratios (a)


























Provision for loan losses as a % of average loans


1.14%


1.06%


1.20%


1.52%


1.71%


1.38%

Provision for credit losses as a % of average loans


0.06%


0.06%


0.03%


0.03%


0.07%


-0.01%

Net charge-offs as a % of average loans


1.25%


1.17%


1.15%


1.36%


1.79%


1.22%

Allowance for loan losses as a % of period-end loans


1.65%


1.72%


1.75%


1.72%


1.68%


1.58%

Allowance for credit losses as a % of period-end loans


1.78%


1.84%


1.85%


1.82%


1.77%


1.66%

Allowance for loan losses as a % of nonperforming loans


109.56%


111.00%


119.62%


105.14%


125.55%


125.55%

Allowance for credit losses as a % of nonperforming loans


118.01%


118.49%


126.51%


110.80%


131.82%


131.82%



























Asset Quality (a)


























Impaired loans:













 Nonaccrual

$

89,828

$

91,646

$

84,535

$

94,798

$

74,033

$

74,033

Other nonperforming loans:













 Nonaccrual


14,859


13,331


14,394


17,245


17,639


17,639














Total nonperforming loans


104,687


104,977


98,929


112,043


91,672


91,672














Other real estate ("ORE")


18,815


10,290


10,852


11,277


9,329


9,329














Total nonperforming assets ("NPAs")

$

123,502

$

115,267

$

109,781

$

123,320

$

101,001

$

101,001














NPAs as % of period-end loans + ORE


1.78%


1.70%


1.62%


1.80%


1.48%


1.39%














Past due 90 days or more & accruing interest

$

22,017

$

36,895

$

36,932

$

21,099

$

35,025

$

35,025














(a) Excludes acquired loans and loss share receivable with a period end balance of $2.3 billion, $2.5 billion, $2.6 billion and $.6 million at December 31, 2010, September 30, 2010, June 30,2010 and March 31, 2010, respectively,  and ORE covered by an FDIC loss share with a period end balance of $54.7 million, $53.5 million, $50.5 million and $22.8 million at December 31, 2010, September 30, 2010, June 30, 2010, and March 31, 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)













2010


2010


2010


2010


2009



4th Qtr


3rd Qtr


2nd Qtr


1st Qtr


4th Qtr

QUARTERLY OTHER INCOME DETAIL






















Trust department income

$

5,627

$

5,469

$

5,574

$

5,281

$

5,374

Service charges on deposits


15,938


16,859


17,737


15,366


16,568

Credit card fees


12,678


12,532


12,242


11,558


12,049

ATM and other service fees


2,910


2,996


2,844


2,509


2,730

Bank owned life insurance income


3,192


3,219


2,886


5,652


4,524

Investment services and insurance


2,300


2,688


2,535


1,928


2,322

Investment securities gains, net


146


58


651


       -  


1,934

Loan sales and servicing income


9,221


4,006


2,975


3,237


2,947

Gain on George Washington acquisition


         -  


         -  


         -  


1,041


       -  

Other operating income


2,299


7,308


5,765


3,328


4,253












    Total Other Income

$

54,311

$

55,135

$

53,209

$

49,900

$

52,701

























2010


2010


2010


2010


2009

QUARTERLY OTHER EXPENSES DETAIL


4th Qtr


3rd Qtr


2nd Qtr


1st Qtr


4th Qtr












Salaries, wages, pension and employee benefits

$

62,331

$

58,930

$

51,899

$

48,156

$

45,748

Net occupancy expense


9,236


8,608


7,680


7,140


5,631

Equipment expense


7,549


7,330


6,735


6,050


6,445

Taxes, other than federal income taxes


2,021


1,680


2,236


1,938


1,593

Stationery, supplies and postage


3,183


2,865


2,696


2,693


2,414

Bankcard, loan processing and other costs


7,810


8,281


7,663


7,818


8,215

Advertising


3,094


2,488


2,407


1,592


1,510

Professional services


7,731


8,544


7,845


5,237


6,098

Telephone


1,579


1,561


1,267


1,133


1,039

Amortization of intangibles


1,006


1,006


669


234


87

Hedge termination


         -  


         -  


         -  


       -  


3,877

FDIC expense


4,342


5,267


4,416


3,765


3,160

Other operating expense


12,570


14,110


10,210


8,257


9,068












    Total Other Expenses

$

122,452

$

120,670

$

105,723

$

94,013

$

94,885

FIRSTMERIT CORPORATION AND SUBSIDIARIES









ALLOWANCE FOR LOAN LOSSES NONCOVERED - Net Charge-off Detail















(Unaudited)









(Dollars in thousands)


Quarters ended


Year ended



December 31,


December 31,



2010


2009


2010


2009










Allowance for noncovered loan losses - beginning of period

$

116,528

$

116,352

$

115,092

$

103,757

Loans charged off:









 Commercial


13,225


17,793


39,766


39,685

 Mortgage


962


1,267


5,156


4,960

 Installment


8,665


8,562


34,054


31,622

 Home equity


1,158


2,257


7,912


7,200

 Credit cards


2,497


3,511


13,577


13,558

 Leases


204


94


896


97

 Overdrafts


842


748


3,171


2,591

   Total


27,553


34,232


104,532


99,713

Recoveries:









 Commercial


647


369


1,952


890

 Mortgage


62


10


263


270

 Installment


4,003


1,802


13,047


8,329

 Home equity


417


199


1,599


494

 Credit cards


518


421


2,199


1,710

 Manufactured housing


34


49


156


171

 Leases


27


4


267


57

 Overdrafts


191


158


864


694

   Total


5,899


3,012


20,347


12,615










Net charge-offs


21,654


31,220


84,185


87,098

Provision for noncovered loan losses


19,816


29,960


83,783


98,433

Allowance for noncovered loan losses-end of period

$

114,690

$

115,092

$

114,690

$

115,092










Average loans (a)

$

6,868,222

$

6,932,566

$

6,818,962

$

7,152,845

Ratio to average loans (a):









 (Annualized) net charge-offs


1.25%


1.79%


1.23%


1.22%

 Provision for loan losses


1.14%


1.71%


1.23%


1.38%

Loans, period-end (a)

$

6,937,142

$

6,835,425


6,937,142

$

6,835,425










Allowance for credit losses (a):

$

123,539

$

120,843

$

123,539

$

120,843

 As a multiple of (annualized) net charge-offs


1.44


0.98


1.47


1.39

Allowance for noncovered loan losses (a):









 As a percent of period-end noncovered loans


1.65%


1.68%


1.65%


1.68%

 As a multiple of (annualized) net noncovered charge-offs


1.34


0.93


1.36


1.32










(a) Excludes acquired loans and loss share receivable.

SOURCE FirstMerit Corporation

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