FirstMerit Reports Second Quarter 2008 EPS of $0.36 Per Share
Tue Jul 22, 7:30 AMAKRON, Ohio, July 22 /PRNewswire-FirstCall/ -- FirstMerit Corporation (Nasdaq: FMER) today announced second quarter 2008 net income of $29.2 million, or $0.36 per diluted share. This compares with $31.4 million, or $0.39 per diluted share, for the first quarter 2008 and $29.9 million, or $0.37 per diluted share, for the second quarter 2007.
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Returns on average common equity ("ROE") and average assets ("ROA") for the second quarter 2008 were 12.31% and 1.11%, respectively, compared with 13.56% and 1.22%, respectively, for the first quarter 2008 and 13.75% and 1.16% for the second quarter 2007.
"Our second quarter financial results reflect the many initiatives that we have taken over the past several quarters to increase revenues, control expenses, and improve our credit quality. We are pleased to report revenue gains supported by net interest margin expansion, solid credit quality, continued capital strength and expense management," said Paul G. Greig, Chairman and Chief Executive Officer of FirstMerit Corporation. "Our unwavering focus on executing our super community banking model is generating positive results amidst a challenging environment. We believe our competitive array of financial services and products combined with our excellence in customer service will increase profitability and enhance shareholder value over the longer term."
Mr. Greig continued, "Commercial loan growth continued the strong momentum established in the first quarter. Relative economic stability and emerging opportunities in our markets are providing us a foundation to grow the balance sheet. Importantly, incentives within the organization remain aligned with maintaining a high standard of credit quality and the profitable expansion and penetration of our customer base."
Net interest margin was 3.69% for the second quarter of 2008 compared with 3.60% for the first quarter of 2008 and 3.62% for the second quarter of 2007. Reduced funding costs compared with the first quarter of 2008 and the second quarter of 2007 due to an increased composition of lower cost core deposits along with lower liability pricing from a falling interest rate environment supported margin expansion over both periods.
Average loans during the second quarter of 2008 increased $116.7 million, or 1.66%, compared with the first quarter of 2008 and increased $137.9 million, or 1.97%, compared with the second quarter of 2007. Increases in the respective periods were driven by average commercial loan growth of $127.7 million, or 3.24%, and $223.9 million, or 5.82%.
During the second quarter of 2008 the Company increased its average core deposits, which excludes time deposits, by $127.2 million, or 2.85%, compared with the first quarter of 2008, and $128.8 million, or 2.88%, compared with the second quarter of 2007.
The Company's investment portfolio yield decreased slightly in the second quarter of 2008, to 4.90%, compared with 4.91% in the first quarter of 2008, and increased from 4.72% in the second quarter of 2007. The increased investment portfolio yields compared with the second quarter of 2007 positively impacted the year-over-year increase in the net interest margin.
Net interest income on a fully tax-equivalent ("FTE") basis was $89.0 million in the second quarter 2008 compared with $85.7 million in the first quarter of 2008 and $85.6 million in the second quarter of 2007. The increases in FTE net interest income compared with those two periods resulted from expansion in the net interest margin driven by the aforementioned decrease in liability pricing.
Noninterest income net of securities transactions for the second quarter of 2008 was $48.7 million, a decrease of $3.6 million, or 6.92%, from the first quarter of 2008 and a decrease of $0.2 million, or 0.45%, from the second quarter of 2007. Included in noninterest income in the first quarter 2008 is a $7.9 million gain from the partial redemption of Visa, Inc. shares.
Excluding the $7.9 million gain from the partial redemption of Visa, Inc. shares, noninterest income net of securities transactions increased $4.3 million, or 9.63%. The primary changes in other income for the second quarter of 2008 compared to the first quarter of 2008, were as follows: service charges on deposits increased $1.3 million, or 8.77%, other operating income increased $1.2 million, or 42.7%, and credit card fees increased $1.0 million, or 8.86%.
Other income, net of securities gains, as a percentage of net revenue for the second quarter of 2008 was 35.38% compared with 37.91% for first quarter of 2008 and 36.37% for the second quarter of 2007. 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 2008 was $80.6 million, a decrease of $0.7 million, or 0.84%, from the first quarter of 2008 and a decrease of $0.8 million, or 1.01%, from the second quarter of 2007. Compared with the second quarter of 2007, professional services fell $1.9 million, down 42.96% due in part to the consulting services necessary to remediate Bank Secrecy Act issues performed in 2007 which were completed during the first quarter of 2008.
Net charge-offs totaled $10.7 million, or 0.60% of average loans, in the second quarter of 2008 compared with $11.3 million, or 0.65% of average loans, in the first quarter 2008 and $7.6 million, or 0.43% of average loans, in the second quarter of 2007.
Nonperforming assets totaled $41.6 million at June 30, 2008, an increase of $6.3 million, or 17.95%, compared with March 31, 2008. Nonperforming assets at June 30, 2008 represented 0.57% of period-end loans plus other real estate compared with 0.50% at March 31, 2008.
The allowance for loan losses totaled $98.2 million at June 30, 2008, an increase of $3.8 million from March 31, 2008. The increase was attributable to additional reserves that were established to address identified risks associated with the slow down in the housing markets and the decline in residential and commercial real estate values. At June 30, 2008, the allowance for loan losses was 1.36% of period-end loans compared with 1.33% at March 31, 2008. The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments. For comparative purposes the allowance for credit losses was 1.46% at June 30, 2008 compared with 1.45% at March 31, 2008. The allowance for credit losses to nonperforming loans was 288.50% at June 30, 2008, compared with 345.59% at March 31, 2008.
FirstMerit's total assets at June 30, 2008 were $10.6 billion, an increase of $48.0 million, or 0.46%, compared with March 31, 2008 and an increase of $135.7 million, or 1.30%, compared with June 30, 2007. Commercial loan growth of $116.1 million, or 2.89%, compared with March 31, 2008, and $237.3 million, or 6.09%, compared with June 30, 2007, provided the overall asset growth over both periods.
Total deposits were $7.3 billion at June 30, 2008, a decrease of $145.5 million, or 1.96%, from March 31, 2008 and a decrease of $197.3 million, or 2.64%, from June 30, 2007. The decrease compared with both periods was driven by a strategic reduction in the reliance on large brokered and consumer CDs to lower funding costs. Core deposits totaled $4.6 billion at June 30, 2008, an increase of $75.3 million, or 1.65%, from March 31, 2008 and an increase of $200.0 million, or 4.49%, from June 30, 2007.
Shareholders' equity was $924 million at June 30, 2008, compared with $937 million at March 31, 2008, and $862 million at June 30, 2007. The Company maintained a strong capital position as tangible equity to assets was 7.52% at June 30, 2008, compared with 7.68% and 7.00% at March 31, 2008 and June 30, 2007, respectively. The common dividend per share paid in the second quarter 2008 was $0.29.
Second quarter 2008 Conference Call
FirstMerit will host an earnings conference call on July 22, 2008, at 2:00 p.m. EDT to provide an overview of second 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: 56237375. A replay of the conference call will be available at approximately 5:00 p.m., on July 22, 2008 through July, 29, 2008, by dialing (800) 642-1687, and entering the PIN: 56237375.
FirstMerit Corporation is a diversified financial services company headquartered in Akron, Ohio, with assets of $10.6 billion as of June 30, 2008 and 160 banking offices and 175 ATMs in 25 Ohio and Western Pennsylvania counties. FirstMerit provides a complete range of banking and other financial services to consumers and businesses through its core operations. Principal wholly-owned subsidiaries include: FirstMerit Bank, N.A., FirstMerit Mortgage Corporation, FirstMerit Title Agency, Ltd., and FirstMerit Community Development Corporation.
Forward-Looking Statement
This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Company, as well as its operations, markets and products. Actual results could differ materially from those indicated. Among the important factors that could cause results to differ materially are interest rate changes, continued softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Company's business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Company's periodic reports and registration statements filed with the Securities and Exchange Commission. The Company undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
(Dollars in thousands)
2008 2008 2007
EARNINGS 2nd Qtr 1st Qtr 4th Qtr
Net interest income FTE (a) $88,956 $85,695 $87,647
Provision for loan losses 14,565 11,521 9,334
Other income 48,758 52,854 49,993
Other expenses 80,550 81,234 83,295
FTE adjustment (a) 1,425 1,396 1,486
Net income 29,153 31,443 31,459
Diluted EPS 0.36 0.39 0.39
PERFORMANCE RATIOS
Return on average assets (ROA) 1.11% 1.22% 1.21%
Return on average common equity (ROE) 12.31% 13.56% 13.87%
Net interest margin FTE (a) 3.69% 3.60% 3.66%
Efficiency ratio 58.38% 58.69% 60.85%
Number of full-time equivalent
employees 2,679 2,676 2,688
MARKET DATA
Book value/common share $11.43 $11.59 $11.39
Period-end common share mkt value 16.31 20.66 20.01
Market as a % of book 143% 178% 176%
Cash dividends/common share $0.29 $0.29 $0.29
Common stock dividend payout ratio 80.56% 74.36% 74.36%
Average basic common shares 80,855 80,655 80,477
Average diluted common shares 80,898 80,722 80,595
Period end common shares 80,846 80,879 80,482
Common shares repurchased 34,380 5,426 6,066
Common stock market capitalization $1,318,598 $1,670,960 $1,610,445
ASSET QUALITY
Gross charge-offs $14,830 $14,669 $11,768
Net charge-offs 10,737 11,315 8,940
Allowance for loan losses 98,239 94,411 94,205
Reserve for unfunded lending
commitments 7,310 7,903 7,394
Nonperforming assets (NPAs) 41,639 35,301 37,262
Net charge-offs/average loans ratio 0.60% 0.65% 0.51%
Allowance for loan losses/period-
end loans 1.36% 1.33% 1.35%
Allowance for credit losses/period-
end loans 1.46% 1.45% 1.45%
NPAs/loans and other real estate 0.57% 0.50% 0.53%
Allowance for loan
losses/nonperforming loans 268.52% 318.89% 299.70%
Allowance for credit
losses/nonperforming loans 288.50% 345.59% 323.22%
CAPITAL & LIQUIDITY
Period-end tangible equity to
assets 7.52% 7.68% 7.56%
Average equity to assets 9.06% 8.98% 8.72%
Average equity to loans 13.34% 13.27% 12.94%
Average loans to deposits 97.29% 95.82% 94.71%
AVERAGE BALANCES
Assets $10,520,469 $10,388,359 $10,313,707
Deposits 7,339,506 7,330,097 7,339,827
Loans 7,140,627 7,023,928 6,951,544
Earning assets 9,704,252 9,581,121 9,493,271
Shareholders' equity 952,769 932,405 899,624
ENDING BALANCES
Assets $10,564,752 $10,516,828 $10,400,666
Deposits 7,277,184 7,422,678 7,331,739
Loans 7,240,882 7,072,797 7,001,886
Goodwill 139,245 139,245 139,245
Intangible assets 1,577 1,754 1,977
Earning assets 9,724,859 9,688,270 9,509,680
Total shareholders' equity 924,429 937,439 916,977
NOTES:
(a) - Net interest income on a fully tax-equivalent ("FTE") basis restates
interest on tax-exempt securities and loans as if such interest were
subject to federal income tax at the statutory rate. Net interest income
on an FTE basis is not an accounting principle generally accepted in the
United States of America.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Financial Highlights
(Unaudited) Quarters
(Dollars in thousands)
2007 2007
EARNINGS 3rd Qtr 2nd Qtr
Net interest income FTE (a) $86,582 $85,593
Provision for loan losses 7,324 9,967
Other income 49,124 48,930
Other expenses 84,030 81,375
FTE adjustment (a) 1,428 1,368
Net income 30,262 29,885
Diluted EPS 0.38 0.37
PERFORMANCE RATIOS
Return on average assets (ROA) 1.16% 1.16%
Return on average common equity (ROE) 13.71% 13.75%
Net interest margin FTE (a) 3.61% 3.62%
Efficiency ratio 61.76% 60.33%
Number of full-time equivalent employees 2,704 2,725
MARKET DATA
Book value/common share $11.00 $10.71
Period-end common share mkt value 19.76 20.93
Market as a % of book 180% 195%
Cash dividends/common share $0.29 $0.29
Common stock dividend payout ratio 76.32% 78.38%
Average basic common shares 80,467 80,426
Average diluted common shares 80,561 80,570
Period end common shares 80,467 80,477
Common shares repurchased 22,473 36,159
Common stock market capitalization $1,590,028 $1,684,384
ASSET QUALITY
Gross charge-offs $12,347 $10,609
Net charge-offs 7,945 7,580
Allowance for loan losses 93,811 94,432
Reserve for unfunded lending commitments 7,409 6,553
Nonperforming assets (NPAs) 34,199 37,038
Net charge-offs/average loans ratio 0.45% 0.43%
Allowance for loan losses/period-end loans 1.34% 1.34%
Allowance for credit losses/period-end loans 1.44% 1.43%
NPAs/loans and other real estate 0.49% 0.52%
Allowance for loan
losses/nonperforming loans 314.22% 295.08%
Allowance for credit
losses/nonperforming loans 339.04% 315.56%
CAPITAL & LIQUIDITY
Period-end tangible equity to assets 7.24% 7.00%
Average equity to assets 8.45% 8.45%
Average equity to loans 12.49% 12.45%
Average loans to deposits 93.74% 93.18%
AVERAGE BALANCES
Assets $10,360,739 $10,319,454
Deposits 7,479,960 7,515,205
Loans 7,011,776 7,002,750
Earning assets 9,513,230 9,485,819
Shareholders' equity 875,720 871,554
ENDING BALANCES
Assets $10,407,765 $10,429,099
Deposits 7,408,296 7,474,466
Loans 7,014,389 7,052,390
Goodwill 139,245 139,245
Intangible assets 2,200 2,422
Earning assets 9,563,541 9,545,752
Total shareholders' equity 884,877 862,265
NOTES:
(a) - Net interest income on a fully tax-equivalent ("FTE") basis restates
interest on tax-exempt securities and loans as if such interest were
subject to federal income tax at the statutory rate. Net interest income
on an FTE basis is not an accounting principle generally accepted in the
United States of America.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited, except December 31,
2007, which is derived from the June 30, December 31, June 30,
audited financial statements) 2008 2007 2007
ASSETS
Cash and due from banks $195,930 $207,335 $210,722
Investment securities (at fair
value) and federal funds sold 2,469,692 2,460,453 2,442,906
Loans held for sale 14,285 47,341 50,456
Loans:
Commercial loans 4,136,273 3,906,448 3,898,943
Mortgage loans 569,516 577,219 586,612
Installment loans 1,619,383 1,598,832 1,641,790
Home equity loans 697,729 691,922 712,021
Credit card loans 146,727 153,732 141,162
Leases 71,254 73,733 71,862
Total loans 7,240,882 7,001,886 7,052,390
Less allowance for loan losses (98,239) (94,205) (94,432)
Net loans 7,142,643 6,907,681 6,957,958
Premises and equipment, net 126,021 130,469 133,493
Goodwill 139,245 139,245 139,245
Intangible assets 1,577 1,977 2,422
Accrued interest receivable and
other assets 475,359 506,165 491,897
Total assets $10,564,752 $10,400,666 $10,429,099
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits:
Demand-non-interest bearing $1,576,584 $1,482,480 1,424,892
Demand-interest bearing 698,829 727,966 755,931
Savings and money market
accounts 2,367,825 2,295,147 2,262,828
Certificates and other time
deposits 2,633,946 2,826,146 3,030,815
Total deposits 7,277,184 7,331,739 7,474,466
Securities sold under agreements
to repurchase 1,239,925 1,256,080 1,302,175
Wholesale borrowings 953,759 705,121 578,659
Accrued taxes, expenses, and
other liabilities 169,455 190,749 211,534
Total liabilities 9,640,323 9,483,689 9,566,834
Commitments and contingencies
Shareholders' equity:
Preferred stock, without par
value:
authorized and unissued
7,000,000 shares -- -- --
Preferred stock, Series A,
without par value:
designated 800,000 shares;
none outstanding -- -- --
Convertible preferred stock,
Series B, without par value:
designated 220,000 shares;
none outstanding -- -- --
Common stock, without par
value:
authorized 300,000,000
shares; issued 92,026,350 at
June 30, 2008, December 31,
2007 and June 30, 2007 127,937 127,937 127,937
Capital surplus 93,267 100,028 100,700
Accumulated other comprehensive
loss (51,434) (43,085) (82,073)
Retained earnings 1,041,473 1,027,775 1,012,699
Treasury stock, at cost,
11,180,046, 11,543,882 and
11,548,911 shares at June 30,
2008, December 31, 2007 and June
30, 2007, respectively (286,814) (295,678) (296,998)
Total shareholders' equity 924,429 916,977 862,265
Total liabilities and shareholders'
equity $10,564,752 $10,400,666 $10,429,099
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Quarterly Periods
(Unaudited)
(Dollars in thousands) June 30, March 31, December 31,
2008 2008 2007
ASSETS
Cash and due from banks $173,044 $171,028 $175,164
Investment securities/fed funds
sold 2,515,546 2,508,125 2,494,975
Loans held for sale 48,079 49,068 46,752
Loans:
Commercial loans 4,069,305 3,941,573 3,839,242
Mortgage loans 577,178 584,000 581,370
Installment loans 1,584,825 1,587,267 1,615,035
Home equity loans 692,567 686,603 696,259
Credit card loans 147,242 150,575 149,466
Leases 69,510 73,910 70,172
Total loans 7,140,627 7,023,928 6,951,544
Less allowance for loan losses 94,002 93,804 92,667
Net loans 7,046,625 6,930,124 6,858,877
Total earning assets 9,704,252 9,581,121 9,493,271
Premises and equipment, net 126,488 128,185 132,129
Accrued interest receivable and
other assets 610,687 601,829 605,810
TOTAL ASSETS $10,520,469 $10,388,359 $10,313,707
LIABILITIES
Deposits:
Demand-non-interest bearing $1,518,841 $1,446,889 $1,435,358
Demand-interest bearing 709,922 702,115 699,675
Savings and money market accounts 2,366,296 2,318,899 2,262,818
Certificates and other time
deposits 2,744,447 2,862,194 2,941,976
Total deposits 7,339,506 7,330,097 7,339,827
Securities sold under agreements to
repurchase 1,312,436 1,310,364 1,517,241
Wholesale borrowings 711,132 618,572 369,685
Total funds 9,363,074 9,259,033 9,226,753
Accrued taxes, expenses and other
liabilities 204,626 196,921 187,330
Total liabilities 9,567,700 9,455,954 9,414,083
SHAREHOLDERS' EQUITY
Preferred stock - - -
Common stock 127,937 127,937 127,937
Capital surplus 92,313 96,048 99,749
Accumulated other comprehensive
(loss) income (40,757) (32,170) (60,430)
Retained earnings 1,059,840 1,032,036 1,028,170
Treasury stock (286,564) (291,446) (295,802)
Total shareholders' equity 952,769 932,405 899,624
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $10,520,469 $10,388,359 $10,313,707
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
Quarterly Periods
(Unaudited)
(Dollars in thousands) September 30, June 30,
2007 2007
ASSETS
Cash and due from banks $180,426 $177,524
Investment securities/fed funds sold 2,455,777 2,440,015
Loans held for sale 45,677 43,054
Loans:
Commercial loans 3,868,235 3,845,395
Mortgage loans 586,911 596,758
Installment loans 1,640,380 1,636,669
Home equity loans 704,499 711,113
Credit card loans 143,312 141,294
Leases 68,439 71,521
Total loans 7,011,776 7,002,750
Less allowance for loan losses 94,393 92,298
Net loans 6,917,383 6,910,452
Total earning assets 9,513,230 9,485,819
Premises and equipment, net 133,303 135,255
Accrued interest receivable and other
assets 628,173 613,154
TOTAL ASSETS $10,360,739 $10,319,454
LIABILITIES
Deposits:
Demand-non-interest bearing $1,400,848 $1,408,827
Demand-interest bearing 714,216 763,907
Savings and money market accounts 2,224,048 2,293,567
Certificates and other time
deposits 3,140,848 3,048,904
Total deposits 7,479,960 7,515,205
Securities sold under agreements to
repurchase 1,555,235 1,458,982
Wholesale borrowings 256,356 280,914
Total funds 9,291,551 9,255,101
Accrued taxes, expenses and other
liabilities 193,468 192,799
Total liabilities 9,485,019 9,447,900
SHAREHOLDERS' EQUITY
Preferred stock - -
Common stock 127,937 127,937
Capital surplus 100,511 102,355
Accumulated other comprehensive
(loss) income (77,215) (72,170)
Retained earnings 1,020,979 1,012,675
Treasury stock (296,492) (299,243)
Total shareholders' equity 875,720 871,554
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $10,360,739 $10,319,454
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Three months ended
(Dollars in thousands) June 30, 2008
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks $173,044
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 2,021,209 23,609 4.70%
Obligations of states and political
subdivisions (tax exempt) 279,757 4,270 6.14%
Other securities and federal funds
sold 214,580 2,777 5.21%
Total investment securities and
federal funds sold 2,515,546 30,656 4.90%
Loans held for sale 48,079 651 5.45%
Loans 7,140,627 105,889 5.96%
Total earning assets 9,704,252 137,196 5.69%
Allowance for loan losses (94,002)
Other assets 737,175
Total assets $10,520,469
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing $1,518,841 -- --
Demand - interest bearing 709,922 591 0.33%
Savings and money market accounts 2,366,296 6,500 1.10%
Certificates and other time deposits 2,744,447 26,587 3.90%
Total deposits 7,339,506 33,678 1.85%
Securities sold under agreements to
repurchase 1,312,436 8,319 2.55%
Wholesale borrowings 711,132 6,243 3.53%
Total interest bearing liabilities 7,844,233 48,240 2.47%
Other liabilities 204,626
Shareholders' equity 952,769
Total liabilities and shareholders'
equity $10,520,469
Net yield on earning assets $9,704,252 88,956 3.69%
Interest rate spread 3.22%
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.
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Year ended
(Dollars in thousands) December 31, 2007
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks $178,164
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 1,955,049 85,544 4.38%
Obligations of states and political
subdivisions (tax exempt) 255,461 15,595 6.10%
Other securities and federal funds
sold 244,749 17,127 7.00%
Total investment securities and
federal funds sold 2,455,259 118,266 4.82%
Loans held for sale 56,036 3,050 5.44%
Loans 6,971,464 521,172 7.48%
Total earning assets 9,482,759 642,488 6.78%
Allowance for loan losses (92,662)
Other assets 750,527
Total assets $10,318,788
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing $1,408,726 -- --
Demand - interest bearing 733,410 6,824 0.93%
Savings and money market accounts 2,266,070 54,166 2.39%
Certificates and other time deposits 3,045,715 146,559 4.81%
Total deposits 7,453,921 207,549 2.78%
Securities sold under agreements to
repurchase 1,471,785 71,298 4.84%
Wholesale borrowings 326,460 20,601 6.31%
Total interest bearing liabilities 7,843,440 299,448 3.82%
Other liabilities 191,096
Shareholders' equity 875,526
Total liabilities and shareholders'
equity $10,318,788
Net yield on earning assets $9,482,759 343,040 3.62%
Interest rate spread 2.96%
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.
AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Three months ended
(Dollars in thousands) June 30, 2007
Average Average
Balance Interest Rate
ASSETS
Cash and due from banks $177,524
Investment securities and federal
funds sold:
U.S. Treasury securities and U.S.
Government agency obligations
(taxable) 1,936,833 20,359 4.22%
Obligations of states and political
subdivisions (tax exempt) 256,153 3,883 6.08%
Other securities and federal funds
sold 247,029 4,477 7.27%
Total investment securities and
federal funds sold 2,440,015 28,719 4.72%
Loans held for sale 43,054 739 6.88%
Loans 7,002,750 131,369 7.52%
Total earning assets 9,485,819 160,827 6.80%
Allowance for loan losses (92,298)
Other assets 748,409
Total assets $10,319,454
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand - non-interest bearing $1,408,827 -- --
Demand - interest bearing 763,907 1,876 0.99%
Savings and money market accounts 2,293,567 13,992 2.45%
Certificates and other time deposits 3,048,904 36,725 4.83%
Total deposits 7,515,205 52,593 2.81%
Securities sold under agreements to
repurchase 1,458,982 18,005 4.95%
Wholesale borrowings 280,914 4,636 6.62%
Total interest bearing liabilities 7,846,274 75,234 3.85%
Other liabilities 192,799
Shareholders' equity 871,554
Total liabilities and shareholders'
equity $10,319,454
Net yield on earning assets $9,485,819 85,593 3.62%
Interest rate spread 2.95%
Note: Interest income on tax-exempt securities and loans has been
adjusted to a fully-taxable equivalent basis. Nonaccrual loans have
been included in the average balances.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands except per share Quarters ended Six months ended
data) June 30, June 30,
2008 2007 2008 2007
Interest income:
Interest and fees on loans,
including held for sale $106,516 $132,076 $222,804 $262,165
Interest and dividends on
investment securities and
federal funds sold 29,255 27,383 58,491 54,229
Total interest income 135,771 159,459 281,295 316,394
Interest expense:
Interest on deposits:
Demand-interest bearing 591 1,876 1,555 3,795
Savings and money market
accounts 6,500 13,992 16,143 27,998
Certificates and other time
deposits 26,587 36,725 58,574 72,805
Interest on securities sold
under agreements to
repurchase 8,319 18,005 19,861 34,790
Interest on wholesale
borrowings 6,243 4,636 13,332 10,775
Total interest expense 48,240 75,234 109,465 150,163
Net interest income 87,531 84,225 171,830 166,231
Provision for loan losses 14,565 9,967 26,086 14,177
Net interest income after
provision for loan losses 72,966 74,258 145,744 152,054
Other income:
Trust department income 5,824 6,096 11,274 11,692
Service charges on deposits 16,028 17,055 30,764 33,304
Credit card fees 12,146 11,712 23,303 22,811
ATM and other service fees 2,770 3,189 5,564 6,260
Bank owned life insurance
income 3,217 3,290 6,418 6,458
Investment services and
insurance 2,790 2,660 5,655 5,113
Investment securities gains,
net 47 1 571 1
Loan sales and servicing
income 1,885 1,911 3,276 7,349
Gain on Visa, Inc. redemption - - 7,898 -
Other operating income 4,051 3,016 6,889 4,818
Total other income 48,758 48,930 101,612 97,806
Other expenses:
Salaries, wages, pension and
employee benefits 44,364 43,538 87,429 86,038
Net occupancy expense 6,204 6,521 12,958 13,207
Equipment expense 5,842 6,328 12,036 12,773
Stationery, supplies and
postage 2,242 2,252 4,567 4,585
Bankcard, loan processing and
other costs 7,356 7,607 14,600 15,077
Professional services 2,581 4,525 4,468 9,354
Amortization of intangibles 177 222 400 445
Other operating expense 11,784 10,382 25,326 21,422
Total other expenses 80,550 81,375 161,784 162,901
Income before federal
income tax expense 41,174 41,813 85,572 86,959
Federal income tax expense 12,021 11,928 24,976 25,653
Net income $29,153 $29,885 $60,596 $61,306
Other comprehensive income, net
of taxes
Unrealized securities'
holding gain, net of taxes $(22,119) $(13,051) $(10,510) $(4,938)
Unrealized hedging (loss)
gain, net of taxes 1,419 561 786 628
Minimum pension liability
adjustment, net of taxes 873 1,746 1,746 1,746
Less: reclassification
adjustment for securities'
gain realized in net income,
net of taxes 31 1 371 1
Total other comprehensive
income, net of taxes (19,858) (10,745) (8,349) (2,565)
Comprehensive income $9,295 $19,140 $52,247 $58,741
Net income applicable to
common shares $29,153 $29,885 $60,596 $61,306
Net income used in diluted EPS
calculation $29,154 $29,889 $60,601 $61,314
Weighted average number of
common shares outstanding -
basic 80,855 80,426 80,755 80,270
Weighted average number of
common shares outstanding -
diluted 80,898 80,570 80,812 80,433
Basic earnings per share $0.36 $0.37 $0.75 $0.76
Diluted earnings per share $0.36 $0.37 $0.75 $0.76
Dividend per share $0.29 $0.29 $0.58 $0.58
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME---LINKED
QUARTERS
(Unaudited) Quarterly Results
(Dollars in thousands,
except share data) 2008 2008 2007 2007 2007
2nd Q 1st Q 4th Q 3rd Q 2nd Q
Interest and fees on
loans, including held
for sale $106,516 $116,288 $128,078 $133,860 $132,076
Interest and dividends
- securities and
federal funds sold 29,255 29,236 29,891 28,771 27,383
Total interest
income 135,771 145,524 157,969 162,631 159,459
Interest on deposits:
Demand-interest
bearing 591 964 1,352 1,677 1,876
Savings and money
market accounts 6,500 9,643 12,667 13,501 13,992
Certificates and
other time deposits 26,587 31,987 35,290 38,464 36,725
Securities sold
under agreements
to repurchase 8,319 11,542 16,994 19,514 18,005
Wholesale borrowings 6,243 7,089 5,505 4,321 4,636
Total interest
expense 48,240 61,225 71,808 77,477 75,234
Net interest income 87,531 84,299 86,161 85,154 84,225
Provision for loan
losses 14,565 11,521 9,334 7,324 9,967
Net interest income
after provision
for loan losses 72,966 72,778 76,827 77,830 74,258
Other income:
Trust department
income 5,824 5,450 5,896 5,657 6,096
Service charges on
deposits 16,028 14,736 17,067 17,003 17,055
Credit card fees 12,146 11,157 12,012 11,679 11,712
ATM and other service
fees 2,770 2,794 3,055 3,306 3,189
Bank owned life
insurance income 3,217 3,201 3,283 3,735 3,290
Investment services
and insurance 2,790 2,865 3,121 3,007 2,660
Investment securities
gains (losses), net 47 524 1,122 - 1
Loan sales and
servicing income 1,885 1,391 1,551 1,411 1,911
Gain on Visa, Inc.
redemption - 7,898 - - -
Other operating income 4,051 2,838 2,886 3,326 3,016
Total other income 48,758 52,854 49,993 49,124 48,930
Other expenses:
Salaries, wages,
pension and employee
benefits 44,364 43,065 43,087 41,332 43,538
Net occupancy expense 6,204 6,754 6,284 6,188 6,521
Equipment expense 5,842 6,194 6,239 6,389 6,328
Stationery, supplies
and postage 2,242 2,325 2,388 2,463 2,252
Bankcard, loan
processing and other
costs 7,356 7,244 7,482 7,222 7,607
Professional services 2,581 1,887 3,588 2,923 4,525
Amortization of
intangibles 177 223 222 222 222
Other operating
expense 11,784 13,542 14,005 17,291 10,382
Total other
expenses 80,550 81,234 83,295 84,030 81,375
Income before income tax
expense 41,174 44,398 43,525 42,924 41,813
Federal income taxes 12,021 12,955 12,066 12,662 11,928
Net income $29,153 $31,443 $31,459 $30,262 $29,885
Other comprehensive
income (loss), net of
taxes (19,858) 11,509 23,267 15,721 (10,745)
Comprehensive income $9,295 $42,952 $54,726 $45,983 $19,140
Net income applicable to
common shares $29,153 $31,443 $31,459 $30,262 $29,885
Adjusted net income used
in diluted EPS
calculation $29,154 $31,447 $31,463 $30,266 $29,889
Weighted-average common
shares - basic 80,855 80,655 80,477 80,467 80,426
Weighted-average common
shares - diluted 80,898 80,722 80,595 80,561 80,570
Basic net income per
share $0.36 $0.39 $0.39 $0.38 $0.37
Diluted net income per
share $0.36 $0.39 $0.39 $0.38 $0.37
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited, except December 31, 2007 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
Quarterly Periods
Allowance for Credit Jun 30 Mar 31 Dec 31 Sept 30 June 30
Losses 2008 2008 2007 2007 2007
Allowance for loan
losses, beginning of
period $94,411 $94,205 $93,811 $94,432 $92,045
Provision for loan
losses 14,565 11,521 9,334 7,324 9,967
Charge-offs 14,830 14,669 11,768 12,347 10,609
Recoveries 4,093 3,354 2,828 4,402 3,029
Net charge-offs 10,737 11,315 8,940 7,945 7,580
Allowance for loan
losses, end of period $98,239 $94,411 $94,205 $93,811 $94,432
Reserve for unfunded
lending commitments,
beginning of period $7,903 $7,394 $7,409 $6,553 $6,746
Provision for credit
losses (593) 509 (15) 856 (193)
Reserve for unfunded
lending commitments,
end of period $7,310 $7,903 $7,394 $7,409 $6,553
Allowance for Credit
Losses $105,549 $102,314 $101,599 $101,220 $100,985
Ratios
Provision for loan
losses as a % of
average loans 0.82% 0.66% 0.53% 0.41% 0.57%
Provision for credit
losses as a % of
average loans -0.03% 0.03% 0.00% 0.05% -0.01%
Net charge-offs as a %
of average loans 0.60% 0.65% 0.51% 0.45% 0.43%
Allowance for loan
losses as a % of
period-end loans 1.36% 1.33% 1.35% 1.34% 1.34%
Allowance for credit
losses as a % of
period-end loans 1.46% 1.45% 1.45% 1.44% 1.43%
Allowance for loan
losses as a % of
nonperforming loans 268.52% 318.89% 299.70% 314.22% 295.08%
Allowance for credit
losses as a % of
nonperforming loans 288.50% 345.59% 323.22% 339.04% 315.56%
Asset Quality
Impaired loans:
Nonaccrual $26,702 $19,777 $21,513 $20,165 $20,877
Other nonperforming
loans:
Nonaccrual 9,884 9,829 9,920 9,690 11,125
Total nonperforming
loans 36,586 29,606 31,433 29,855 32,002
Other real estate
("ORE") 5,053 5,695 5,829 4,344 5,036
Total nonperforming
assets ("NPAs") $41,639 $35,301 $37,262 $34,199 $37,038
NPAs as % of period-end
loans + ORE 0.57% 0.50% 0.53% 0.49% 0.52%
Past due 90 days or more
& accruing interest $10,654 $10,931 $11,702 $13,107 $10,536
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited, except December 31, 2007 annual period which
is derived from the audited financial statements)
(Dollars in thousands, except ratios)
Annual Period
Dec 31
Allowance for Credit Losses 2007
Allowance for loan losses, beginning of period $91,342
Provision for loan losses 30,835
Charge-offs 44,148
Recoveries 16,176
Net charge-offs 27,972
Allowance for loan losses, end of period $94,205
Reserve for unfunded lending commitments, beginning of
period $6,294
Provision for credit losses 1,100
Reserve for unfunded lending commitments, end of period $7,394
Allowance for Credit Losses $101,599
Ratios
Provision for loan losses as a % of average loans 0.44%
Provision for credit losses as a % of average loans 0.02%
Net charge-offs as a % of average loans 0.40%
Allowance for loan losses as a % of period-end loans 1.35%
Allowance for credit losses as a % of period-end loans 1.45%
Allowance for loan losses as a % of nonperforming loans 299.70%
Allowance for credit losses as a % of nonperforming loans 323.22%
Asset Quality
Impaired loans:
Nonaccrual $21,513
Other nonperforming loans:
Nonaccrual 9,920
Total nonperforming loans 31,433
Other real estate ("ORE") 5,829
Total nonperforming assets ("NPAs") $37,262
NPAs as % of period-end loans + ORE 0.53%
Past due 90 days or more & accruing
interest $11,702
FIRSTMERIT CORPORATION
NONINTEREST INCOME AND NONINTEREST EXPENSE DETAIL
(Unaudited)
(Dollars in thousands)
2008 2008 2007 2007 2007
QUARTERLY OTHER INCOME DETAIL 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
Trust department income $5,824 $5,450 $5,896 $5,657 $6,096
Service charges on deposits 16,028 14,736 17,067 17,003 17,055
Credit card fees 12,146 11,157 12,012 11,679 11,712
ATM and other service fees 2,770 2,794 3,055 3,306 3,189
Bank owned life insurance
income 3,217 3,201 3,283 3,735 3,290
Investment services and
insurance 2,790 2,865 3,121 3,007 2,660
Investment securities gains
(losses), net 47 524 1,122 - 1
Loan sales and servicing
income 1,885 1,391 1,551 1,411 1,911
Visa redemption - 7,898 - - -
Other operating income 4,051 2,838 2,886 3,326 3,016
Total Other Income $48,758 $52,854 $49,993 $49,124 $48,930
QUARTERLY OTHER EXPENSES 2008 2008 2007 2007 2007
DETAIL 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
Salaries, wages, pension and
employee benefits $44,364 $43,065 $43,087 $41,332 $43,538
Net occupancy expense 6,204 6,754 6,284 6,188 6,521
Equipment expense 5,842 6,194 6,239 6,389 6,328
Taxes, other than federal
income taxes 1,701 1,702 1,274 1,984 1,655
Stationery, supplies and
postage 2,242 2,325 2,388 2,463 2,252
Bankcard, loan processing and
other costs 7,356 7,244 7,482 7,222 7,607
Advertising 2,489 2,666 2,989 3,332 1,260
Professional services 2,581 1,887 3,588 2,923 4,525
Telephone 994 1,019 1,006 1,142 1,094
Amortization of intangibles 177 223 222 222 222
Other operating expense 6,600 8,155 8,736 10,833 6,373
Total Other Expenses $80,550 $81,234 $83,295 $84,030 $81,375
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES - Net Charge-off Detail
(Unaudited)
(Dollars in thousands) Quarters ended Year ended
June 30, December 31,
2008 2007 2007
Allowance for loan losses - beginning
of period $94,411 $92,045 $91,342
Loans charged off:
Commercial 3,718 1,212 7,856
Mortgage 1,229 1,568 5,026
Installment 5,620 4,321 18,343
Home equity 1,226 1,478 4,151
Credit cards 2,500 2,025 8,497
Leases - 5 41
Overdrafts 537 - 234
Total 14,830 10,609 44,148
Recoveries:
Commercial 1,032 11 4,351
Mortgage 7 - 44
Installment 2,099 2,092 8,021
Home equity 142 307 1,265
Credit cards 557 474 1,842
Manufactured housing 54 96 323
Leases 31 49 286
Overdrafts 171 - 44
Total 4,093 3,029 16,176
Net charge-offs 10,737 7,580 27,972
Provision for loan losses 14,565 9,967 30,835
Allowance for loan losses - end of
period $98,239 $94,432 $94,205
Average loans outstanding $7,140,627 $7,002,750 $6,971,464
Ratio to average loans:
(Annualized) net charge-offs 0.60% 0.43% 0.40%
Provision for loan losses 0.82% 0.57% 0.44%
Loans outstanding - period-end $7,240,882 $7,052,390 $7,001,886
Allowance for credit losses: $105,549 $100,985 $101,599
As a multiple of (annualized) net
charge-offs 2.44 3.32 3.63
Allowance for loan losses:
As a percent of period-end loans
outstanding 1.36% 1.34% 1.35%
As a multiple of (annualized) net
charge-offs 2.27 3.11 3.37
FIRSTMERIT CORPORATION AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES - Net Charge-off Detail
(Unaudited)
(Dollars in thousands) Six months ended
June 30,
2008 2007
Allowance for loan losses - beginning
of period $94,205 $91,342
Loans charged off:
Commercial 7,171 1,660
Mortgage 2,509 2,558
Installment 11,624 9,067
Home equity 2,292 2,298
Credit cards 4,793 4,424
Leases - 26
Overdrafts 1,110 -
Total 29,499 20,033
Recoveries:
Commercial 1,754 2,889
Mortgage 39 8
Installment 3,841 4,206
Home equity 242 564
Credit cards 1,016 948
Manufactured housing 126 170
Leases 69 161
Overdrafts 360 -
Total 7,447 8,946
Net charge-offs 22,052 11,087
Provision for loan losses 26,086 14,177
Allowance for loan losses - end of
period $98,239 $94,432
Average loans outstanding $7,082,279 $6,961,099
Ratio to average loans:
(Annualized) net charge-offs 0.63% 0.32%
Provision for loan losses 0.74% 0.41%
Loans outstanding - period-end $7,240,882 $7,052,390
Allowance for credit losses: $105,549 $100,985
As a multiple of (annualized) net
charge-offs 2.38 4.52
Allowance for loan losses:
As a percent of period-end loans
outstanding 1.36% 1.34%
As a multiple of (annualized) net
charge-offs 2.22 4.22
FirstMerit Corporation
Analysts/Media Contact: Thomas O'Malley
Director Corporate Communications/Investor Relations Officer
Phone: 330.384.7109
SOURCE FirstMerit Corporation
37.19 (0.36%)
