FMER » Topics » Earnings Summary

These excerpts taken from the FMER 10-K filed Feb 18, 2009.
Earnings Summary
 
FirstMerit Corporation reported fourth quarter 2008 net income of $29.1 million, or $0.36 per diluted share. This compares with $29.8 million, or $0.37 per diluted share, for the third quarter 2008 and $31.5 million, or $0.39 per diluted share, for the fourth quarter 2007. For the full year 2008, the Company reported net income of $119.5 million, or $1.48 per diluted share, compared with $123.0 million, or $1.53 per diluted share in 2007.
 
Returns on average common equity (“ROE”) and average assets (“ROA”) for the fourth quarter 2008 were 12.47% and 1.08%, respectively, compared with 12.73% and 1.12%, respectively, for the third quarter 2008 and 13.87% and 1.21% for the fourth quarter 2007.
 
Average loans during the fourth quarter of 2008 increased $83.9 million, or 1.15%, compared with the third quarter of 2008 and increased $414.7 million, or 5.97%, compared with the fourth quarter of 2007. Increases in the respective periods were due to average commercial loan growth of $104.2 million, or 2.50%, and $433.9 million, or 11.30%.
 
Average deposits were $7.7 billion during the fourth quarter of 2008, up $346.2 million, or 4.73%, compared with the third quarter of 2008, and an increase of $332.7 million, or 4.53%, compared with the fourth quarter of 2007. For the fourth quarter 2008, average core deposits (which are defined as checking accounts, savings accounts and money market savings products) increased $202.6 million, or 4.41%, compared with the third quarter 2008 and $403.0 million, or 9.16%, compared with the fourth quarter 2007. Core deposits represented 62.57% of total average deposits, compared with 62.76% for the third quarter 2008 and 59.92% for the fourth quarter 2007. The increase in both periods reflects success stemming from strategic retail and business marketing campaigns for core deposits within the Corporation’s regional banking areas.
 
The Corporation’s investment portfolio yield increased in the fourth quarter of 2008, to 5.01%, compared with 4.97% in the third quarter of 2008, and increased from 4.99% in the fourth quarter of 2007. The increased investment portfolio yields contributed to net interest margin expansion in both periods.
 
Net interest margin was 3.82% for the fourth quarter of 2008 compared with 3.78% for the third quarter of 2008 and 3.66% for the fourth quarter of 2007. Lower funding costs supported margin expansion over both periods.
 
Net interest income on a fully tax-equivalent (“FTE”) basis was $94.9 million in the fourth quarter 2008 compared with $92.7 million in the third quarter of 2008 and $87.6 million in the fourth quarter of 2007. The increases in FTE net interest income compared with those two periods resulted from expansion in the net interest margin due to decreased liability costs.
 
Noninterest income net of securities transactions for the fourth quarter of 2008 was $51.2 million, an increase of $4.2 million, or 8.95%, from the third quarter of 2008 and an increase of $2.4 million, or 4.85%, from the fourth quarter of 2007. In the fourth quarter of 2008 the Corporation recorded $5.8 million of other income from the sale of Class B Visa Inc. stock. Noninterest income, net of securities gains, as a percentage of net revenue for the fourth quarter of 2008 was 35.07% compared with 33.67% for third quarter of 2008 and 35.80% for the fourth quarter of 2007. Net revenue is defined as net interest income, on an FTE basis, plus other income, less gains from securities sales.


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Noninterest expense for the fourth quarter of 2008 was $88.2 million, an increase of $7.6 million, or 9.47%, from the third quarter of 2008 and an increase of $4.9 million, or 5.94%, from the fourth quarter of 2007. In the fourth quarter of 2008 the Corporation recorded $4.0 million of other expense related to an accrual for litigation, $0.4 million in severance cost from a reduction in force during the quarter and $1.1 million related to foreclosed property. For 2008, operating expenses increased $0.4 million, or 0.12%, compared with 2007, reflecting the success of the Corporation’s strategy to fully rationalize costs throughout the organization. For the fourth quarter of 2008, the efficiency ratio was 60.34%, compared with 57.64% for the third quarter of 2008 and 60.85% for the fourth quarter of 2007.
 
Net charge-offs totaled $15.2 million, or 0.82% of average loans, in the fourth quarter of 2008 compared with $11.8 million, or 0.64% of average loans, in the third quarter 2008 and $8.9 million, or 0.51% of average loans, in the fourth quarter of 2007.
 
Nonperforming assets totaled $57.5 million at December 31, 2008, an increase of $14.0 million, or 32.27%, compared with September 30, 2008. Nonperforming assets at December 31, 2008 represented 0.77% of period-end loans plus other real estate compared with 0.59% at September 30, 2008.
 
The allowance for loan losses totaled $103.8 million at December 31, 2008, an increase of $1.8 million from September 30, 2008. At December 31, 2008, the allowance for loan losses was 1.40% of period-end loans compared with 1.38% at September 30, 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 1.49% at December 31, 2008 compared with 1.47% at September 30, 2008. The allowance for credit losses to nonperforming loans was 211.38% at December 31, 2008, compared with 281.28% at September 30, 2008.
 
The Corporation’s total assets at December 31, 2008 were $11.1 billion, an increase of $415.2 million, or 3.89%, compared with September 30, 2008 and an increase of $699.4 million, or 6.72%, compared with December 31, 2007. Investment securities increased $322.6 million, or 13.17%, and commercial loans increased $79.7 million, or 1.86%, compared with September 30, 2008. Commercial loans increased $446.3 million, or 11.42%, compared with December 31, 2007, contributing to the majority of asset growth over the prior year period.
 
Total deposits were $7.6 billion at December 31, 2008, an increase of $167.1 million, or 2.25%, from September 30, 2008 and an increase of $265.9 million, or 3.63%, from December 31, 2007. Core deposits totaled $4.8 billion at December 31, 2008, an increase of $225.6 million, or 4.91%, from September 30, 2008 and an increase of $310.9 million, or 6.90%, from December 31, 2007.
 
Shareholders’ equity was $937.8 million at December 31, 2008, compared with $926.1 million at September 30, 2008, and $917.0 million at December 31, 2007. The Corporation maintained a strong capital position as tangible common equity to assets was 7.27% at December 31, 2008, compared with 7.45% at September 30, 2008 and 7.56% at December 31, 2007. The common dividend per share paid in the fourth quarter 2008 was $0.29.
 
On January 9, 2009, FirstMerit completed the sale to the Treasury of $125.0 million of newly issued FirstMerit non-voting preferred shares as part of the CPP. All of the proceeds from this sale of the Series A Preferred Shares and the Warrant by FirstMerit to the Treasury will qualify as Tier I capital for regulatory purposes. The additional capital would have increased its Tier 1 capital ratio to 11.49% at December 31, 2008, and increased its total capital ratio to 13.09% at December 31, 2008.
 
Earnings Summary
 
FirstMerit Corporation reported fourth quarter 2008 net income of $29.1 million, or $0.36 per diluted share. This compares with $29.8 million, or $0.37 per diluted share, for the third quarter 2008 and $31.5 million, or $0.39 per diluted share, for the fourth quarter 2007. For the full year 2008, the Company reported net income of $119.5 million, or $1.48 per diluted share, compared with $123.0 million, or $1.53 per diluted share in 2007.
 
Returns on average common equity (“ROE”) and average assets (“ROA”) for the fourth quarter 2008 were 12.47% and 1.08%, respectively, compared with 12.73% and 1.12%, respectively, for the third quarter 2008 and 13.87% and 1.21% for the fourth quarter 2007.
 
Average loans during the fourth quarter of 2008 increased $83.9 million, or 1.15%, compared with the third quarter of 2008 and increased $414.7 million, or 5.97%, compared with the fourth quarter of 2007. Increases in the respective periods were due to average commercial loan growth of $104.2 million, or 2.50%, and $433.9 million, or 11.30%.
 
Average deposits were $7.7 billion during the fourth quarter of 2008, up $346.2 million, or 4.73%, compared with the third quarter of 2008, and an increase of $332.7 million, or 4.53%, compared with the fourth quarter of 2007. For the fourth quarter 2008, average core deposits (which are defined as checking accounts, savings accounts and money market savings products) increased $202.6 million, or 4.41%, compared with the third quarter 2008 and $403.0 million, or 9.16%, compared with the fourth quarter 2007. Core deposits represented 62.57% of total average deposits, compared with 62.76% for the third quarter 2008 and 59.92% for the fourth quarter 2007. The increase in both periods reflects success stemming from strategic retail and business marketing campaigns for core deposits within the Corporation’s regional banking areas.
 
The Corporation’s investment portfolio yield increased in the fourth quarter of 2008, to 5.01%, compared with 4.97% in the third quarter of 2008, and increased from 4.99% in the fourth quarter of 2007. The increased investment portfolio yields contributed to net interest margin expansion in both periods.
 
Net interest margin was 3.82% for the fourth quarter of 2008 compared with 3.78% for the third quarter of 2008 and 3.66% for the fourth quarter of 2007. Lower funding costs supported margin expansion over both periods.
 
Net interest income on a fully tax-equivalent (“FTE”) basis was $94.9 million in the fourth quarter 2008 compared with $92.7 million in the third quarter of 2008 and $87.6 million in the fourth quarter of 2007. The increases in FTE net interest income compared with those two periods resulted from expansion in the net interest margin due to decreased liability costs.
 
Noninterest income net of securities transactions for the fourth quarter of 2008 was $51.2 million, an increase of $4.2 million, or 8.95%, from the third quarter of 2008 and an increase of $2.4 million, or 4.85%, from the fourth quarter of 2007. In the fourth quarter of 2008 the Corporation recorded $5.8 million of other income from the sale of Class B Visa Inc. stock. Noninterest income, net of securities gains, as a percentage of net revenue for the fourth quarter of 2008 was 35.07% compared with 33.67% for third quarter of 2008 and 35.80% for the fourth quarter of 2007. Net revenue is defined as net interest income, on an FTE basis, plus other income, less gains from securities sales.


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Noninterest expense for the fourth quarter of 2008 was $88.2 million, an increase of $7.6 million, or 9.47%, from the third quarter of 2008 and an increase of $4.9 million, or 5.94%, from the fourth quarter of 2007. In the fourth quarter of 2008 the Corporation recorded $4.0 million of other expense related to an accrual for litigation, $0.4 million in severance cost from a reduction in force during the quarter and $1.1 million related to foreclosed property. For 2008, operating expenses increased $0.4 million, or 0.12%, compared with 2007, reflecting the success of the Corporation’s strategy to fully rationalize costs throughout the organization. For the fourth quarter of 2008, the efficiency ratio was 60.34%, compared with 57.64% for the third quarter of 2008 and 60.85% for the fourth quarter of 2007.
 
Net charge-offs totaled $15.2 million, or 0.82% of average loans, in the fourth quarter of 2008 compared with $11.8 million, or 0.64% of average loans, in the third quarter 2008 and $8.9 million, or 0.51% of average loans, in the fourth quarter of 2007.
 
Nonperforming assets totaled $57.5 million at December 31, 2008, an increase of $14.0 million, or 32.27%, compared with September 30, 2008. Nonperforming assets at December 31, 2008 represented 0.77% of period-end loans plus other real estate compared with 0.59% at September 30, 2008.
 
The allowance for loan losses totaled $103.8 million at December 31, 2008, an increase of $1.8 million from September 30, 2008. At December 31, 2008, the allowance for loan losses was 1.40% of period-end loans compared with 1.38% at September 30, 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 1.49% at December 31, 2008 compared with 1.47% at September 30, 2008. The allowance for credit losses to nonperforming loans was 211.38% at December 31, 2008, compared with 281.28% at September 30, 2008.
 
The Corporation’s total assets at December 31, 2008 were $11.1 billion, an increase of $415.2 million, or 3.89%, compared with September 30, 2008 and an increase of $699.4 million, or 6.72%, compared with December 31, 2007. Investment securities increased $322.6 million, or 13.17%, and commercial loans increased $79.7 million, or 1.86%, compared with September 30, 2008. Commercial loans increased $446.3 million, or 11.42%, compared with December 31, 2007, contributing to the majority of asset growth over the prior year period.
 
Total deposits were $7.6 billion at December 31, 2008, an increase of $167.1 million, or 2.25%, from September 30, 2008 and an increase of $265.9 million, or 3.63%, from December 31, 2007. Core deposits totaled $4.8 billion at December 31, 2008, an increase of $225.6 million, or 4.91%, from September 30, 2008 and an increase of $310.9 million, or 6.90%, from December 31, 2007.
 
Shareholders’ equity was $937.8 million at December 31, 2008, compared with $926.1 million at September 30, 2008, and $917.0 million at December 31, 2007. The Corporation maintained a strong capital position as tangible common equity to assets was 7.27% at December 31, 2008, compared with 7.45% at September 30, 2008 and 7.56% at December 31, 2007. The common dividend per share paid in the fourth quarter 2008 was $0.29.
 
On January 9, 2009, FirstMerit completed the sale to the Treasury of $125.0 million of newly issued FirstMerit non-voting preferred shares as part of the CPP. All of the proceeds from this sale of the Series A Preferred Shares and the Warrant by FirstMerit to the Treasury will qualify as Tier I capital for regulatory purposes. The additional capital would have increased its Tier 1 capital ratio to 11.49% at December 31, 2008, and increased its total capital ratio to 13.09% at December 31, 2008.
 
Earnings
Summary



 



FirstMerit Corporation reported fourth quarter 2008 net
income of $29.1 million, or $0.36 per diluted share. This
compares with $29.8 million, or $0.37 per diluted share,
for the third quarter 2008 and $31.5 million, or $0.39 per
diluted share, for the fourth quarter 2007. For the full year
2008, the Company reported net income of $119.5 million, or
$1.48 per diluted share, compared with $123.0 million, or
$1.53 per diluted share in 2007.


 



Returns on average common equity (“ROE”) and average
assets (“ROA”) for the fourth quarter 2008 were 12.47%
and 1.08%, respectively, compared with 12.73% and 1.12%,
respectively, for the third quarter 2008 and 13.87% and 1.21%
for the fourth quarter 2007.


 



Average loans during the fourth quarter of 2008 increased
$83.9 million, or 1.15%, compared with the third quarter of
2008 and increased $414.7 million, or 5.97%, compared with
the fourth quarter of 2007. Increases in the respective periods
were due to average commercial loan growth of
$104.2 million, or 2.50%, and $433.9 million, or
11.30%.


 



Average deposits were $7.7 billion during the fourth
quarter of 2008, up $346.2 million, or 4.73%, compared with
the third quarter of 2008, and an increase of
$332.7 million, or 4.53%, compared with the fourth quarter
of 2007. For the fourth quarter 2008, average core deposits
(which are defined as checking accounts, savings accounts and
money market savings products) increased $202.6 million, or
4.41%, compared with the third quarter 2008 and
$403.0 million, or 9.16%, compared with the fourth quarter
2007. Core deposits represented 62.57% of total average
deposits, compared with 62.76% for the third quarter 2008 and
59.92% for the fourth quarter 2007. The increase in both periods
reflects success stemming from strategic retail and business
marketing campaigns for core deposits within the
Corporation’s regional banking areas.


 



The Corporation’s investment portfolio yield increased in
the fourth quarter of 2008, to 5.01%, compared with 4.97% in the
third quarter of 2008, and increased from 4.99% in the fourth
quarter of 2007. The increased investment portfolio yields
contributed to net interest margin expansion in both periods.


 



Net interest margin was 3.82% for the fourth quarter of 2008
compared with 3.78% for the third quarter of 2008 and 3.66% for
the fourth quarter of 2007. Lower funding costs supported margin
expansion over both periods.


 



Net interest income on a fully tax-equivalent (“FTE”)
basis was $94.9 million in the fourth quarter 2008 compared
with $92.7 million in the third quarter of 2008 and
$87.6 million in the fourth quarter of 2007. The increases
in FTE net interest income compared with those two periods
resulted from expansion in the net interest margin due to
decreased liability costs.


 



Noninterest income net of securities transactions for the fourth
quarter of 2008 was $51.2 million, an increase of
$4.2 million, or 8.95%, from the third quarter of 2008 and
an increase of $2.4 million, or 4.85%, from the fourth
quarter of 2007. In the fourth quarter of 2008 the Corporation
recorded $5.8 million of other income from the sale of
Class B Visa Inc. stock. Noninterest income, net of
securities gains, as a percentage of net revenue for the fourth
quarter of 2008 was 35.07% compared with 33.67% for third
quarter of 2008 and 35.80% for the fourth quarter of 2007. Net
revenue is defined as net interest income, on an FTE basis, plus
other income, less gains from securities sales.





21





 






Noninterest expense for the fourth quarter of 2008 was
$88.2 million, an increase of $7.6 million, or 9.47%,
from the third quarter of 2008 and an increase of
$4.9 million, or 5.94%, from the fourth quarter of 2007. In
the fourth quarter of 2008 the Corporation recorded
$4.0 million of other expense related to an accrual for
litigation, $0.4 million in severance cost from a reduction
in force during the quarter and $1.1 million related to
foreclosed property. For 2008, operating expenses increased
$0.4 million, or 0.12%, compared with 2007, reflecting the
success of the Corporation’s strategy to fully rationalize
costs throughout the organization. For the fourth quarter of
2008, the efficiency ratio was 60.34%, compared with 57.64% for
the third quarter of 2008 and 60.85% for the fourth quarter of
2007.


 



Net charge-offs totaled $15.2 million, or 0.82% of average
loans, in the fourth quarter of 2008 compared with
$11.8 million, or 0.64% of average loans, in the third
quarter 2008 and $8.9 million, or 0.51% of average loans,
in the fourth quarter of 2007.


 



Nonperforming assets totaled $57.5 million at
December 31, 2008, an increase of $14.0 million, or
32.27%, compared with September 30, 2008. Nonperforming
assets at December 31, 2008 represented 0.77% of period-end
loans plus other real estate compared with 0.59% at
September 30, 2008.


 



The allowance for loan losses totaled $103.8 million at
December 31, 2008, an increase of $1.8 million from
September 30, 2008. At December 31, 2008, the
allowance for loan losses was 1.40% of period-end loans compared
with 1.38% at September 30, 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 1.49% at
December 31, 2008 compared with 1.47% at September 30,
2008. The allowance for credit losses to nonperforming loans was
211.38% at December 31, 2008, compared with 281.28% at
September 30, 2008.


 



The Corporation’s total assets at December 31, 2008
were $11.1 billion, an increase of $415.2 million, or
3.89%, compared with September 30, 2008 and an increase of
$699.4 million, or 6.72%, compared with December 31,
2007. Investment securities increased $322.6 million, or
13.17%, and commercial loans increased $79.7 million, or
1.86%, compared with September 30, 2008. Commercial loans
increased $446.3 million, or 11.42%, compared with
December 31, 2007, contributing to the majority of asset
growth over the prior year period.


 



Total deposits were $7.6 billion at December 31, 2008,
an increase of $167.1 million, or 2.25%, from
September 30, 2008 and an increase of $265.9 million,
or 3.63%, from December 31, 2007. Core deposits totaled
$4.8 billion at December 31, 2008, an increase of
$225.6 million, or 4.91%, from September 30, 2008 and
an increase of $310.9 million, or 6.90%, from
December 31, 2007.


 



Shareholders’ equity was $937.8 million at
December 31, 2008, compared with $926.1 million at
September 30, 2008, and $917.0 million at
December 31, 2007. The Corporation maintained a strong
capital position as tangible common equity to assets was 7.27%
at December 31, 2008, compared with 7.45% at
September 30, 2008 and 7.56% at December 31, 2007. The
common dividend per share paid in the fourth quarter 2008 was
$0.29.


 



On January 9, 2009, FirstMerit completed the sale to the
Treasury of $125.0 million of newly issued FirstMerit
non-voting preferred shares as part of the CPP. All of the
proceeds from this sale of the Series A Preferred Shares
and the Warrant by FirstMerit to the Treasury will qualify as
Tier I capital for regulatory purposes. The additional
capital would have increased its Tier 1 capital ratio to
11.49% at December 31, 2008, and increased its total
capital ratio to 13.09% at December 31, 2008.


 




These excerpts taken from the FMER 10-K filed Feb 22, 2008.
Earnings Summary
 
FirstMerit Corporation reported fourth quarter 2007 net income of $31.5 million, or $0.39 per diluted share. This compares with $6.1 million, or $0.07 per diluted share, for the prior-year quarter. For the full year 2007, the Company reported net income of $123.0 million, or $1.53 per diluted share, compared with $94.9 million, or $1.18 per diluted share in 2006.
 
Returns on average common equity (“ROE”) and average assets (“ROA”) for the fourth quarter 2007 were 13.87% and 1.21%, respectively, compared with 2.66% and 0.24% for the prior-year quarter.
 
Both fourth quarter and full year 2006 results were affected by the sale of $80.9 million of commercial assets in transactions completed during the first quarter of 2007.
 
Net interest margin was 3.66% for the fourth quarter of 2007 compared with 3.61% for the third quarter of 2007 and 3.58% for the fourth quarter of 2006. The increases in net interest margin compared with the prior and year-ago quarters were led by decreases in funding costs. During the fourth quarter of 2007 the Corporation increased its average core deposits, which excludes time deposits, by $58.7 million, or 1.35%, and decreased certificates of deposits $198.9 million, or 6.33%.
 
The Corporation’s deposit composition mix shift to a higher concentration of core deposits contributed to lower funding costs and an increased net interest margin. Despite the lower interest rate environment, the Corporation’s investment portfolio yields increased in the fourth quarter of 2007, to 4.99%, compared with 4.87% in the third quarter of 2007, and 4.39% in the fourth quarter of 2006. The increased investment portfolio yields partly offset lower loan portfolio yields this quarter. For the full year 2007, net interest margin was 3.62% compared with 3.71% for 2006.
 
Net interest income on a fully tax-equivalent (“FTE”) basis was $87.6 million in the fourth quarter 2007 compared with $86.6 million in the third quarter of 2007 and $84.5 million in the fourth quarter of 2006. The increase in FTE net interest income compared with the third quarter 2007 resulted from expansion in the net interest margin, which offset a decrease in average earning assets. Net interest margin expansion and average earning asset growth led to increased FTE net interest income compared with the fourth quarter of 2006. Compared with the fourth quarter of 2006, average earning assets increased $119.0 million, or 1.27%. FTE net interest income for the full year 2007 was $343.0 million, compared with $343.3 million in 2006. In 2007 average earning assets increased $221.5 million, or 2.39%, compared with 2006. Average loans grew $173.1 million, or 2.55%, driven by $181.5 million, or 4.98%, growth in average commercial loans.
 
Noninterest income net of securities transactions for the fourth quarter of 2007 was $48.9 million, a decrease of $0.3 million, or 0.52%, from the third quarter of 2007 and an increase of $0.5 million, or 1.12%, from the fourth quarter of 2006. For the full year 2007, noninterest income net of securities transactions totaled $195.8 million, an increase of $0.7 million, or 0.35%, compared with $195.1 million for 2006. Reflective of a strong fee base, other income, net of securities gains, as a percentage of net revenue for the fourth quarter of 2007 was 35.80% compared with 36.20% for third quarter of 2007 and 36.39% for the fourth quarter of 2006. For the full year 2007, other income, net of securities gains, as a percentage of net revenue was 36.34% compared with 36.24% for 2006. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.


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Table of Contents

Noninterest expense for the fourth quarter of 2007 was $83.3 million, a decrease of $0.7 million, or 0.87%, from the third quarter of 2007 and a decrease of $0.7 million, or 0.82%, from the fourth quarter of 2006. Noninterest expense in the fourth quarter included $2.3 million of Visa contingency accrual related to Visa Inc. litigation matters that FirstMerit and other Visa member banks have direct and potential exposure to share with Visa. For the full year 2007, noninterest expenses totaled $330.2 million, an increase of $2.1 million, or 0.65%, compared with $328.1 million for the full year 2006.
 
Net charge-offs totaled $8.9 million, or 0.51% of average loans, in the fourth quarter of 2007 compared with $7.9 million, or 0.45% of average loans, in the third quarter 2007 and $18.6 million, or 1.06% of average loans, in the fourth quarter of 2006.
 
Nonperforming assets totaled $37.3 million at December 31, 2007, an increase of $3.1 million, or 8.96%, compared with September 30, 2007 and a decrease of $26.9 million, or 41.94%, compared with December 31, 2006. Of the December 31, 2007 total, $2.3 million represents both vacant land no longer considered for branch expansion and executive relocation property not related to loan portfolios. Nonperforming assets at December 31, 2007 represented 0.53% of period-end loans plus other real estate compared with 0.49% at September 30, 2007 and 0.93% at December 31, 2006.
 
The provision for loan losses increased to $9.3 million in the fourth quarter of 2007 compared with $7.3 million in the third quarter of 2007. For the prior-year quarter, the provision for loan losses was $44.2 million, reflecting the Corporation’s preparation to sell $73.7 million of commercial loans during the first quarter of 2007. For the full year of 2007, the provision for loan losses was $30.8 million, compared with $76.1 million for 2006.
 
The allowance for loan losses totaled $94.2 million at December 31, 2007, an increase of $0.4 million and $2.9 million from September 30, 2007 and December 31, 2006, respectively. At December 31, 2007, the allowance for loan losses was 1.35% of period-end loans compared with 1.34% at September 30, 2007 and 1.33% at December 31, 2006. The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments. For comparative purposes the allowance for credit losses was 1.45% at December 31, 2007 compared with 1.44% at September 30, 2007 and 1.42% at December 31, 2006. The allowance for credit losses to nonperforming loans was 323.22% at December 31, 2007, compared with 339.04% on September 30, 2007, and 179.60% on December 31, 2006.
 
Total assets at December 31, 2007 were $10.4 billion, a decrease of $0.5 million, or 0.01%, compared with September 30, 2007 and an increase of $154.7 million, or 1.51%, compared with December 31, 2006.
 
Total deposits were $7.3 billion at December 31, 2007, a decrease of $76.6 million, or 1.03%, from September 30, 2007 and a decrease of 167.2 million, or 2.23%, from December 31, 2006. Core deposits, totaled $4.5 billion at December 31, 2007, an increase of $182.0 million, or 4.21%, from September 30, 2007 and a decrease of $16.8 million, or 0.37%, from December 31, 2006. Commercial customer investment sweeps increased $158.1 million, or 20.74%, at December 31, 2007, compared with December 31, 2006.
 
Shareholders’ equity was $904.8 million at December 31, 2007, compared with $846.1 million at December 31, 2006, and the Company retains its strong capital position as tangible equity to assets was 7.44%. The common dividend per share paid in the fourth quarter 2007 was $0.29. For the full year 2007, the common dividend per share paid was $1.16 compared with $1.14 in 2006, an increase per share of $0.02, or 1.75%.
 
Earnings
Summary



 



FirstMerit Corporation reported fourth quarter 2007 net
income of $31.5 million, or $0.39 per diluted share. This
compares with $6.1 million, or $0.07 per diluted share, for
the prior-year quarter. For the full year 2007, the Company
reported net income of $123.0 million, or $1.53 per diluted
share, compared with $94.9 million, or $1.18 per diluted
share in 2006.


 



Returns on average common equity (“ROE”) and average
assets (“ROA”) for the fourth quarter 2007 were 13.87%
and 1.21%, respectively, compared with 2.66% and 0.24% for the
prior-year quarter.


 



Both fourth quarter and full year 2006 results were affected by
the sale of $80.9 million of commercial assets in
transactions completed during the first quarter of 2007.


 



Net interest margin was 3.66% for the fourth quarter of 2007
compared with 3.61% for the third quarter of 2007 and 3.58% for
the fourth quarter of 2006. The increases in net interest margin
compared with the prior and year-ago quarters were led by
decreases in funding costs. During the fourth quarter of 2007
the Corporation increased its average core deposits, which
excludes time deposits, by $58.7 million, or 1.35%, and
decreased certificates of deposits $198.9 million, or 6.33%.


 



The Corporation’s deposit composition mix shift to a higher
concentration of core deposits contributed to lower funding
costs and an increased net interest margin. Despite the lower
interest rate environment, the Corporation’s investment
portfolio yields increased in the fourth quarter of 2007, to
4.99%, compared with 4.87% in the third quarter of 2007, and
4.39% in the fourth quarter of 2006. The increased investment
portfolio yields partly offset lower loan portfolio yields this
quarter. For the full year 2007, net interest margin was 3.62%
compared with 3.71% for 2006.


 



Net interest income on a fully tax-equivalent (“FTE”)
basis was $87.6 million in the fourth quarter 2007 compared
with $86.6 million in the third quarter of 2007 and
$84.5 million in the fourth quarter of 2006. The increase
in FTE net interest income compared with the third quarter 2007
resulted from expansion in the net interest margin, which offset
a decrease in average earning assets. Net interest margin
expansion and average earning asset growth led to increased FTE
net interest income compared with the fourth quarter of 2006.
Compared with the fourth quarter of 2006, average earning assets
increased $119.0 million, or 1.27%. FTE net interest income
for the full year 2007 was $343.0 million, compared with
$343.3 million in 2006. In 2007 average earning assets
increased $221.5 million, or 2.39%, compared with 2006.
Average loans grew $173.1 million, or 2.55%, driven by
$181.5 million, or 4.98%, growth in average commercial
loans.


 



Noninterest income net of securities transactions for the fourth
quarter of 2007 was $48.9 million, a decrease of
$0.3 million, or 0.52%, from the third quarter of 2007 and
an increase of $0.5 million, or 1.12%, from the fourth
quarter of 2006. For the full year 2007, noninterest income net
of securities transactions totaled $195.8 million, an
increase of $0.7 million, or 0.35%, compared with
$195.1 million for 2006. Reflective of a strong fee base,
other income, net of securities gains, as a percentage of net
revenue for the fourth quarter of 2007 was 35.80% compared with
36.20% for third quarter of 2007 and 36.39% for the fourth
quarter of 2006. For the full year 2007, other income, net of
securities gains, as a percentage of net revenue was 36.34%
compared with 36.24% for 2006. Net revenue is defined as net
interest income, on a FTE basis, plus other income, less gains
from securities sales.





17





Table of Contents






Noninterest expense for the fourth quarter of 2007 was
$83.3 million, a decrease of $0.7 million, or 0.87%,
from the third quarter of 2007 and a decrease of
$0.7 million, or 0.82%, from the fourth quarter of 2006.
Noninterest expense in the fourth quarter included
$2.3 million of Visa contingency accrual related to Visa
Inc. litigation matters that FirstMerit and other Visa member
banks have direct and potential exposure to share with Visa. For
the full year 2007, noninterest expenses totaled
$330.2 million, an increase of $2.1 million, or 0.65%,
compared with $328.1 million for the full year 2006.


 



Net charge-offs totaled $8.9 million, or 0.51% of average
loans, in the fourth quarter of 2007 compared with
$7.9 million, or 0.45% of average loans, in the third
quarter 2007 and $18.6 million, or 1.06% of average loans,
in the fourth quarter of 2006.


 



Nonperforming assets totaled $37.3 million at
December 31, 2007, an increase of $3.1 million, or
8.96%, compared with September 30, 2007 and a decrease of
$26.9 million, or 41.94%, compared with December 31,
2006. Of the December 31, 2007 total, $2.3 million
represents both vacant land no longer considered for branch
expansion and executive relocation property not related to loan
portfolios. Nonperforming assets at December 31, 2007
represented 0.53% of period-end loans plus other real estate
compared with 0.49% at September 30, 2007 and 0.93% at
December 31, 2006.


 



The provision for loan losses increased to $9.3 million in
the fourth quarter of 2007 compared with $7.3 million in
the third quarter of 2007. For the prior-year quarter, the
provision for loan losses was $44.2 million, reflecting the
Corporation’s preparation to sell $73.7 million of
commercial loans during the first quarter of 2007. For the full
year of 2007, the provision for loan losses was
$30.8 million, compared with $76.1 million for 2006.


 



The allowance for loan losses totaled $94.2 million at
December 31, 2007, an increase of $0.4 million and
$2.9 million from September 30, 2007 and
December 31, 2006, respectively. At December 31, 2007,
the allowance for loan losses was 1.35% of period-end loans
compared with 1.34% at September 30, 2007 and 1.33% at
December 31, 2006. The allowance for credit losses is the
sum of the allowance for loan losses and the reserve for
unfunded lending commitments. For comparative purposes the
allowance for credit losses was 1.45% at December 31, 2007
compared with 1.44% at September 30, 2007 and 1.42% at
December 31, 2006. The allowance for credit losses to
nonperforming loans was 323.22% at December 31, 2007,
compared with 339.04% on September 30, 2007, and 179.60% on
December 31, 2006.


 



Total assets at December 31, 2007 were $10.4 billion,
a decrease of $0.5 million, or 0.01%, compared with
September 30, 2007 and an increase of $154.7 million,
or 1.51%, compared with December 31, 2006.


 



Total deposits were $7.3 billion at December 31, 2007,
a decrease of $76.6 million, or 1.03%, from
September 30, 2007 and a decrease of 167.2 million, or
2.23%, from December 31, 2006. Core deposits, totaled
$4.5 billion at December 31, 2007, an increase of
$182.0 million, or 4.21%, from September 30, 2007 and
a decrease of $16.8 million, or 0.37%, from
December 31, 2006. Commercial customer investment sweeps
increased $158.1 million, or 20.74%, at December 31,
2007, compared with December 31, 2006.


 



Shareholders’ equity was $904.8 million at
December 31, 2007, compared with $846.1 million at
December 31, 2006, and the Company retains its strong
capital position as tangible equity to assets was 7.44%. The
common dividend per share paid in the fourth quarter 2007 was
$0.29. For the full year 2007, the common dividend per share
paid was $1.16 compared with $1.14 in 2006, an increase per
share of $0.02, or 1.75%.


 




This excerpt taken from the FMER 10-K filed Feb 28, 2007.
Earnings Summary
 
FirstMerit reported fourth quarter 2006 net income of $6.1 million, or $0.07 per diluted share. This compares with $27.7 million, or $0.34 per diluted share, for the prior-year quarter. For the full year 2006, the Company reported net income of $94.9 million, or $1.18 per diluted share, compared with $ 130.5 million, or $1.56 per share in 2005.
 
Both fourth quarter and full year 2006 results were affected by the Corporation’s decision in December 2006 to sell $80.9 million of commercial assets in a transaction to be completed during the first quarter of 2007. FirstMerit intends to sell $73.7 million of commercial loans and $7.2 million of other real estate during the first quarter of 2007. Approximately two-thirds of the assets to be sold are loans originated before June 2003. These assets have been reclassified as “held-for-sale” on the Corporation’s balance sheet at December 31, 2006. The allowance associated with the loans held for sale is $23.1 million and an additional reserve of $2.2 million for other real estate. Of the $64.2 million of nonperforming assets (0.93% of period-end loans and other real estate) at December 31, 2006, $31.0 million are held-for-sale. These held-for-sale nonperforming assets are expected to be sold before March 31, 2007.
 
Returns on average common equity (“ROE”) and average assets (“ROA”) for the fourth quarter 2006 were 2.66% and 0.24%, respectively, compared with 11.52% and 1.07% for the prior-year quarter.
 
Net interest margin was 3.58% for the fourth quarter of 2006 compared with 3.68% for the third quarter of 2006 and 3.73% for the fourth quarter of 2005. The decrease in net interest margin compared with the third quarter of 2006 resulted from an increase in deposit costs attributed to shifts in the deposit portfolio from lower-cost transaction products to time deposits. The decrease in net interest margin compared with the fourth quarter of 2005 reflected a similar shift in consumer preference for higher-yielding deposit products as well as increased pricing pressure from a rising interest rate environment. For the full year 2006, net interest margin declined to 3.71% compared with 3.73% for 2005, as the Corporation’s flexibly structured balance sheet provided opportunity to mitigate rising interest rates by shifting a portion of the investment portfolio into higher-yielding loans and paying off higher-cost borrowings.
 
Net interest income on a fully tax-equivalent (“FTE”) basis was $84.5 million in the fourth quarter 2006 compared with $85.9 million in the third quarter of 2006 and $88.2 million in the fourth quarter of 2005. The decrease in FTE net interest income compared with the third quarter 2006 resulted from net interest margin pressure, partially offset by an increase in average earning assets. The increase in earning assets was driven by loan growth in the commercial portfolio and the Corporation’s decision to increase the size of the investment portfolio given the higher interest rate environment. The decrease in FTE net interest income compared with the fourth quarter of 2005 resulted from lower net interest margin. FTE net interest income for the full year 2006 was $343.3 million, down from the $351.6 million in 2005. The Corporation executed a balance sheet restructuring initiative preventing additional margin pressure during the year. Average earning assets decreased $173.4 million during 2006, resulting from a $355.9 million reduction in the average investment portfolio. The majority of run-off in the securities portfolio was used to fund loan growth; average loans increased $187.8 million. The Corporation also used proceeds from maturing investments to pay down higher-cost borrowings.
 
Noninterest income net of securities transactions for the fourth quarter of 2006 was $48.3 million, a decrease of $1.0 million or 2.0% from the third quarter of 2006 and an increase of $0.8 million or 1.7% from the fourth quarter of 2005. For the full year 2006, noninterest income net of securities transactions totaled $195.1 million, an increase of


17


 

$6.6 million or 3.5% from the $188.5 million in the same period of 2005. The increase from the prior year was primarily the result of higher service charges and credit card fees. Other income, net of securities gains, as a percentage of net revenue for the fourth quarter of 2006 was 36.39% compared with 36.50% for third quarter of 2006 and 35.04% for the fourth quarter of 2005. For the full year 2006, other income, net of securities gains, as a percentage of net revenue was 36.24% compared with 34.90% for 2005. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.
 
Noninterest expense for the fourth quarter of 2006 was $84.0 million, an increase of $7.0 million or 9.1% from the third quarter of 2006 and an increase of $4.7 million or 5.9% from the fourth quarter of 2005. For the full year 2006, noninterest expenses totaled $328.1 million, an increase of $14.6 million or 4.7% from $313.5 million for the same period of 2005. This increase is the result of higher salaries, wages, pension and employee benefits as well as higher professional services.
 
Net charge-offs totaled $18.6 million or 1.06% of average portfolio loans in the fourth quarter of 2006 compared with $11.6 million or 0.67% of average portfolio loans in the third quarter 2006 and $18.4 million or 1.09% of average portfolio loans in the fourth quarter of 2005. Additionally the allowance for loan losses was reduced by $23.1 million or 1.32% of average portfolio loans; the amount related to loans classified as held for sale.
 
Nonperforming assets totaled $64.2 million at December 31, a decrease of $8.3 million or 11.4% compared with September 30, 2006 and a decrease of $8.1 million or 11.2% compared with December 31, 2005. Nonperforming assets at December 31, 2006 and September 30, 2006 include loans held for sale of $26.1 million and $7.1 million, respectively. Additionally, $5.0 of other real estate will be included in the loan sale scheduled for the first quarter of 2007. Nonperforming assets at December 31, 2006 represented 0.93% of period-end loans plus other real estate compared with 1.05% at September 30, 2006 and 1.08% at December 31, 2005.
 
The provision for loan losses increased to $44.2 million in the fourth quarter of 2006 compared with $12.6 million in the third quarter of 2006 and $16.3 million in the fourth quarter of 2005. For the full year of 2006, the provision for loan losses was $76.1 million, compared with $43.8 million for 2005. The increases are primarily related to the Corporation’s intention to sell $73.7 million of commercial loans during the first quarter of 2007, as previously discussed.
 
The allowance for loan losses totaled $91.3 million at December 31, 2006, an increase of $2.6 million and $0.7 million from September 30, 2006 and December 31, 2005, respectively. At December 31, 2006, the allowance for loan losses was 1.33% of period-end loans compared with 1.28% at September 30, 2006 and 1.36% at December 31, 2005. 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 1.42% at December 31, 2006 compared with 1.37% at September 30, 2006 and 1.45% at December 31, 2005. The allowance for credit losses to nonperforming loans increased to 179.60% at December 31, 2006 compared with 153.94% on September 30, 2006 and 155.36% on December 31, 2005.
 
FirstMerit’s total assets at December 31, 2006 were $10.3 billion, an increase of $34.6 million or 0.34% compared with September 30, 2006 and an increase of $98.2 million or 0.97% compared with December 31, 2005. The increase from September 30, 2006 was principally due to an increase in commercial loans and in the investment securities portfolio. The increase over December 31, 2005 was due to growth in portfolio loans, primarily in the commercial portfolio of $174.6 million, or 4.96%. The majority of the loan growth over that time period was funded by cash flow from the Company’s maturing investment securities portfolio as part of a strategy to shift the mix of earning assets into higher yield categories.
 
Total deposits were $7.5 billion at December 31, 2006, an increase of $109.3 million or 1.48% from September 30, 2006 an increase of $265.3 million or 3.67% from December 31, 2005. Core deposits, which exclude all time deposits, totaled $4.5 billion at December 31, 2006, an increase of $102.4 million or 2.32% from September 30, 2006 and a decrease of $135.8 million or 2.92% from December 31, 2005. Compared with September 30, 2006, the increase reflects new pricing initiatives aimed at capturing new transaction account balances. Compared with December 31, 2005, the decrease reflects a shift in customer preference for time deposit accounts with higher yields.
 
Shareholders’ equity was $846.1 million at December 31, 2006 and the Corporation’s capital position remains strong as tangible equity to assets was 6.96%. The adoption of the new accounting pronouncement for “Employers’


18


 

Accounting for Defined Benefit Pension and Other Postretirement Plans” reduced other comprehensive income, a component of shareholders’ equity, by $46.4 million. The common dividend per share paid in the fourth quarter 2006 was $0.29. For the full year 2006, the common dividend per share paid was $1.14 compared with $1.10 for the same period of 2005, an increase per share of $0.04, or 3.64%.
 
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