<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
=====================================
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
COMMISSION FILE NUMBER 0-10161
AMENDMENT NO. 1
FIRSTMERIT CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 34-1339938
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
III CASCADE PLAZA, 7TH FLOOR, AKRON, OHIO 44308 (216) 384-8000
(Address of principal executive offices) (Zip code) (Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days. YES [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the approximate aggregate market value of the voting stock held
by non-affiliates of the registrant as of April 21, 1995: $667,142,505
Indicate the number of shares outstanding of registrant's common
stock as of April 21, 1995: 33,345,796 Shares of Common Stock, No Par Value.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Proxy Statement of FirstMerit Corporation,
dated March 2, 1995, in Part III.
<PAGE> 2
The undersigned registrant hereby amends the following items of its
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 on Form 10-K for the fiscal year ended December 31, 1994, for the purpose
of furnishing the financial statements for the FirstMerit Corporation Employee
Stock Purchase Plan and the FirstMerit Corporation and Subsidiaries Employees'
Salary Savings Retirement Plan:
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<PAGE> 3
<TABLE>
CONSOLIDATED BALANCE SHEETS
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investment securities, market value $1,358,336 and $1,356,092,
respectively.................................................... $1,377,508 1,340,213
Federal funds sold................................................. 3,851 68,050
Loans.............................................................. 3,179,926 2,631,216
Less allowance for possible loan losses............................ 33,108 32,338
---------- ----------
Net loans..................................................... 3,146,818 2,598,878
---------- ----------
Total earning assets.......................................... 4,528,177 4,007,141
---------- ----------
Cash and due from banks............................................ 222,527 225,226
Premises and equipment, net........................................ 77,319 71,271
Accrued interest receivable and other assets....................... 96,134 76,645
---------- ----------
$4,924,157 4,380,283
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand--non-interest bearing.................................... $ 733,171 694,610
Demand--interest bearing........................................ 346,924 329,150
Savings......................................................... 1,324,442 1,403,784
Certificates and other time deposits............................ 1,458,289 1,318,068
---------- ----------
Total deposits................................................ 3,862,826 3,745,612
---------- ----------
Securities sold under agreements to repurchase and other
borrowings...................................................... 602,822 185,571
Accrued taxes, expenses, and other liabilities..................... 26,971 31,940
---------- ----------
Total liabilities............................................. 4,492,619 3,963,123
---------- ----------
Commitments and contingencies...................................... -- --
Shareholders' equity:
Preferred stock, without par value:
authorized and unissued 7,000,000 shares...................... -- --
Common stock, without par value:
authorized 80,000,000 shares; issued 27,166,271 and 27,131,471
shares, respectively......................................... 88,012 84,241
Net unrealized holding losses on available-for-sale
securities..................................................... (23,205) --
Retained earnings............................................... 366,731 332,919
---------- ----------
Total shareholders' equity.................................... 431,538 417,160
---------- ----------
$4,924,157 4,380,283
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans............................... $233,642 219,692 229,776
Interest and dividends on investment securities:
Taxable............................................... 73,960 74,401 82,038
Exempt from federal income taxes...................... 7,411 7,804 8,388
-------- -------- --------
81,371 82,205 90,426
Interest on federal funds sold........................... 1,796 2,692 3,395
-------- -------- --------
Total interest income............................... 316,809 304,589 323,597
-------- -------- --------
Interest expense:
Interest on deposits:
Demand--interest bearing.............................. 7,242 7,371 8,861
Savings............................................... 34,716 37,650 39,874
Certificates and other time deposits.................. 57,278 57,884 77,972
Interest on securities sold under agreements to
repurchase and other borrowings....................... 16,641 6,882 7,404
-------- -------- --------
Total interest expense.............................. 115,877 109,787 134,111
-------- -------- --------
Net interest income................................. 200,932 194,802 189,486
Provision for possible loan losses......................... 4,461 7,239 17,657
-------- -------- --------
Net interest income after provision for possible
loan losses...................................... 196,471 187,563 171,829
-------- -------- --------
Other income:
Trust department......................................... 13,423 9,907 9,103
Service charges on deposits.............................. 19,674 20,687 20,089
Credit card fees......................................... 8,226 7,987 7,317
Investment securities gains (losses), net................ (76) 29 1,368
Other operating income................................... 15,629 16,710 14,074
-------- -------- --------
Total other income.................................. 56,876 55,320 51,951
-------- -------- --------
253,347 242,883 223,780
-------- -------- --------
Other expenses:
Salaries and wages....................................... 66,030 62,578 57,564
Pension and employee benefits............................ 20,622 19,399 15,370
Net occupancy expense.................................... 12,738 11,619 10,731
Equipment expense........................................ 9,978 10,697 10,167
Other operating expenses................................. 57,618 56,474 52,958
-------- -------- --------
Total other expenses................................ 166,986 160,767 146,790
-------- -------- --------
Income before federal income taxes.................. 86,361 82,116 76,990
Federal income taxes....................................... 26,060 26,556 23,717
-------- -------- --------
Net income.......................................... $ 60,301 55,560 53,273
======== ======== ========
Weighted average number of common shares outstanding....... 27,152 27,101 27,040
======== ======== ========
Net income per share....................................... $ 2.22 2.05 1.97
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<CAPTION>
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
--------------------------------------------------------------
NET UNREALIZED
HOLDING LOSSES TOTAL
COMMON AVAILABLE-FOR- RETAINED SHAREHOLDERS'
STOCK SURPLUS SALE SECURITIES EARNINGS EQUITY
------- ------- --------------- -------- -------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991......... $42,537 39,674 -- 269,021 351,232
Net income......................... -- -- -- 53,273 53,273
Cash dividends ($.79 per share).... -- -- -- (21,449) (21,449)
Stock options exercised............ 122 697 -- -- 819
------- ------- ------- -------- --------
Balance at December 31, 1992......... 42,659 40,371 -- 300,845 383,875
Net income......................... -- -- -- 55,560 55,560
Cash dividends ($.87 per share).... -- -- -- (23,486) (23,486)
Stock options exercised............ 1,211 -- -- -- 1,211
Elimination of par value........... 40,371 (40,371) -- -- --
------- ------- ------- -------- --------
Balance at December 31, 1993......... 84,241 -- -- 332,919 417,160
Net income......................... -- -- -- 60,301 60,301
Cash dividends ($.98 per share).... -- -- -- (26,489) (26,489)
Stock options exercised............ 3,771 -- -- -- 3,771
Market adjustment investment
securities...................... -- -- (23,205) -- (23,205)
------- ------- ------- -------- --------
Balance at December 31, 1994......... $88,012 -- (23,205) 366,731 $431,538
======= ======= ======= ======== ========
</TABLE>
On December 15, 1994, the shareholders of the Corporation approved
amendments to its Articles of Incorporation to increase the authorized common
stock from 40 million to 80 million shares and to increase the authorized
preferred stock from 3.5 million to 7.0 million shares.
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 60,301 55,560 53,273
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses.............................. 4,461 7,239 17,657
Provision for depreciation and amortization............ 7,543 6,723 7,050
Amortization of investment securities premiums, net.... 2,863 6,171 5,411
Amortization of income for lease financing............. (6,810) (2,620) (1,649)
(Loss) gains on sales of investment securities, net.... 76 (29) (1,368)
Deferred federal income taxes.......................... 11,209 (109) (3,860)
(Increase) decrease in interest receivable............. (5,501) 2,984 4,356
Increase (decrease) in interest payable................ 3,714 (1,227) (7,464)
Amortization of values ascribed to acquired
intangibles.......................................... 3,878 3,485 3,539
Other increases (decreases)............................ (25,258) 171 7,842
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 56,476 78,348 84,787
--------- --------- ---------
INVESTING ACTIVITIES
Dispositions of investment securities:
Available-for-sale--sales................................. 49,257 28,072 96,912
Held-to-maturity--maturities.............................. 389,234 -- --
Available-for-sale--maturities............................ 113,657 689,598 485,817
Purchases of investment securities held-to-maturity......... (263,518) -- --
Purchases of investment securities available-for-sale....... (364,569) (732,231) (694,049)
Net (increase) decrease in federal funds sold............... 64,199 28,132 (10,519)
Net increase in loans and leases............................ (545,591) (102,153) (66,060)
Purchases of premises and equipment......................... (16,802) (10,449) (5,569)
Sales of premises and equipment............................. 3,211 1,578 1,070
--------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES....................... (570,922) (97,453) (192,398)
--------- --------- ---------
FINANCING ACTIVITIES
Net increase (decrease) in demand, NOW and savings
deposits.................................................. (23,007) 153,112 350,615
Net increase (decrease) in time deposits.................... 140,221 (111,436) (204,411)
Net increase in securities sold under repurchase agreements
and other borrowings...................................... 417,251 10,394 3,648
Cash dividends.............................................. (26,489) (23,486) (21,449)
Proceeds from exercise of stock options..................... 3,771 1,211 819
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 511,747 29,795 129,222
Increase (decrease) in cash and cash equivalents............ (2,699) 10,690 21,611
Cash and cash equivalents at beginning of year.............. 225,226 214,536 192,925
--------- --------- ---------
Cash and cash equivalents at end of year.................... $ 222,527 225,226 214,536
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest, net of amount capitalized....................... $ 73,527 74,555 90,612
Income taxes.............................................. 27,424 28,900 24,954
========= ========= =========
<FN>
*Note -- The investment portfolio was not classified as held-to-maturity or
available-for-sale until fiscal year beginning 1994. The investment securities
cash flow information for fiscal years 1993 and 1992 is classified as
available-for-sale in the above analysis.
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRSTMERIT CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1994, 1993 AND 1992
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of FirstMerit Corporation and its
subsidiaries (the "Corporation") conform to generally accepted accounting
principles and to general practices within the banking industry. On December 15,
1994 the shareholders approved a change in the name of the Corporation from
First Bancorporation of Ohio to FirstMerit Corporation. The Corporation's
activities are considered to be a single industry segment for financial
reporting purposes. The following is a description of the more significant
accounting policies:
(a) Principles of Consolidation
The consolidated financial statements include the accounts of
FirstMerit Corporation (the "Parent Company") and its wholly-owned
subsidiaries: First National Bank of Ohio, The Old Phoenix National
Bank of Medina, Elyria Savings & Trust National Bank, The First
National Bank in Massillon, Peoples National Bank, Peoples Bank, N.A.,
Life Savings Bank, FSB, FBOH Credit Life Insurance Company, FBOH
Community Development Corporation and Bancorp Trust Co., N.A. All
significant intercompany balances and transactions have been eliminated
in consolidation.
(b) Investment Securities
The Corporation adopted Statement of Financial Accounting Standards No.
115 in 1994. The statement requires debt and equity securities to be
classified as held-to-maturity, available-for-sale, or trading.
Securities classified as held-to-maturity are measured at amortized or
historical cost, securities available-for-sale and trading at fair
value. Adjustment to fair value of the securities available-for-sale,
in the form of unrealized holding gains and losses, is excluded from
earnings and reported net of tax amount in a separate component of
shareholders' equity. Adjustment to fair value of securities classified
as trading is included in earnings. Gains or losses on the sales of
investment securities are recognized upon realization and are
determined by the specific identification method.
Effective January 1, 1994, the Corporation designated the core portion
of its investment portfolio as held-to-maturity. This core portfolio is
characterized by securities that will provide satisfactory earnings
over a relatively wide band of interest rate movement and time frame.
The Corporation has the ability to hold investment securities to
maturity and it is Management's intent to hold these securities to
maturity. The remaining investment securities were designated as
available-for-sale because these securities may be sold under certain
circumstances to fund liquidity and to manage the Corporation's
interest rate risk. The Corporation does not maintain a trading
account.
(c) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, balances on deposit
with correspondent banks and checks in the process of collection.
(d) Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation is computed on the straight-line and
declining-balance methods over the estimated useful lives of the
assets. Amortization of leasehold improvements is computed on the
straight-line method based on lease terms or useful lives, whichever is
less.
(e) Interest and Fees on Loans
Interest income on loans is generally accrued on the principal balances
of loans outstanding using the "simple-interest" method. Loan
origination fees and certain direct origination costs are deferred and
5
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
amortized, generally over the contractual life of the related loans
using a level yield method. Interest is not accrued on loans for which
circumstances indicate collection is questionable.
(f) Provision for Possible Loan Losses
The provision for possible loan losses charged to operating expenses is
determined based on Management's evaluation of the loan portfolios and
the adequacy of the allowance for possible loan losses under current
economic conditions and such other factors which, in Management's
judgment, deserve current recognition.
(g) Lease Financing
The Corporation leases equipment to customers on both a direct and
leveraged lease basis. The net investment in financing leases includes
the aggregate amount of lease payments to be received and the estimated
residual values of the equipment, less unearned income and non-recourse
debt pertaining to leveraged leases. Income from lease financing is
recognized over the lives of the leases on an approximate level rate of
return on the unrecovered investment. Residual values of leased assets
are reviewed on an annual basis for reasonableness. Declines in
residual values judged to be other than temporary are recognized in the
period such determinations are made.
(h) Federal Income Taxes
The Corporation follows the asset and liability method of accounting
for income taxes. Deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing
assets and liabilities. The effect of a change in tax rates is
recognized in income in the period of the enactment date.
(i) Value Ascribed To Acquired Intangibles
The value ascribed to acquired intangibles, including core deposit
premiums, results from the excess of cost over fair value of net assets
acquired in acquisitions of financial institutions. Such values are
being amortized over periods ranging from 10 to 25 years, which
represents the estimated remaining lives of the long term interest
bearing assets acquired. Amortization is generally computed on an
accelerated basis based on the expected reduction in the carrying value
of such acquired assets. If no significant amount of long term interest
bearing assets is acquired, such value is amortized over the estimated
life of the acquired deposit base, with amortization periods ranging
from 10 to 15 years.
(j) Trust Department Assets and Income
Property held by the Corporation in a fiduciary or other capacity for
trust customers is not included in the accompanying consolidated
financial statements, since such items are not assets of the
Corporation. Trust income is reported generally on a cash basis which
approximates the accrual basis of accounting.
(k) Per Share Data
The per share data is based on the weighted average number of shares of
common stock and common stock equivalents outstanding during each year,
adjusted to reflect the two-for-one stock split of August 30, 1993.
(l) Reclassifications
Certain previously reported amounts have been reclassified to conform
to the current reporting presentation.
6
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
2. ACQUISITIONS
Great Northern Financial Corporation, a savings and loan holding company
located in Barberton, Ohio, was acquired on April 22, 1994 in exchange for
approximately 1,882,440 shares of the Corporation's common stock. The
transaction was accounted for as a pooling of interests. The accompanying
consolidated financial statements for all periods presented have been restated
to account for the acquisition.
<TABLE>
Details of the results of operations of the previously separate
corporations for the periods prior to combination are as follows:
<CAPTION>
GREAT
NORTHERN
FIRSTMERIT FINANCIAL
CORPORATION CORPORATION COMBINED
----------- ----------- --------
<S> <C> <C> <C>
For the Three Months Ended March 31, 1994
(unaudited):
Interest income...................................... $ 65,955 6,531 72,486
Net interest income.................................. $ 45,006 2,695 47,701
Net income........................................... $ 14,073 812 14,885
========== ========= ========
For the Year Ended December 31, 1993:
Interest income...................................... $ 277,720 26,869 304,589
Net interest income.................................. $ 184,489 10,313 194,802
Net income........................................... $ 55,205 355 55,560
========== ========= ========
For the Year Ended December 31, 1992:
Interest income...................................... $ 294,884 28,713 323,597
Net interest income.................................. $ 179,979 9,507 189,486
Net income........................................... $ 50,700 2,573 53,273
========== ========= ========
</TABLE>
On August 10, 1994 FirstMerit Corporation entered into an Agreement of
Affiliation and Plan of Merger with The CIVISTA Corporation, a savings and loan
holding company headquartered in Canton, Ohio ("CIVISTA"). The agreement
provided that all outstanding shares and options of CIVISTA would be exchanged
for approximately 6,513,119 shares of the Corporation's common stock.
<TABLE>
On January 31, 1995, the Corporation completed the acquisition of CIVISTA
in a transaction that has been accounted for as a pooling of interests. Pro
forma combined unaudited operating results for the two companies for the three
years ended December 31, 1994 are summarized below:
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Interest income..................................... $371,018 361,208 385,088
Net interest income................................. $230,837 226,059 217,683
Net income.......................................... $ 71,349 68,632 62,830
Net income per share................................ $ 2.13 2.07 1.90
</TABLE>
7
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
3. INVESTMENT SECURITIES
<TABLE>
Investment securities are composed of:
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET CARRYING
COST GAINS LOSSES VALUE VALUE
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
December 31, 1994
Held to maturity:
U.S. Treasury securities and
U.S. Government agency
obligations.................. $ 462,315 41 17,174 445,182 462,315
Obligations of state and
political subdivisions....... 129,280 1,489 662 130,107 129,280
Mortgage-backed securities...... 97,135 607 2,860 94,882 97,135
Other securities................ 36,482 37 650 35,869 36,482
---------- ---------- ---------- --------- ---------
725,212 2,174 21,346 706,040 725,212
---------- ---------- ---------- --------- ---------
Available for sale:
U.S. Treasury securities and
U.S. Government agency
obligations.................. 509,938 55 28,329 481,664 481,664
Obligations of state and
political subdivisions....... -- -- -- -- --
Mortgage-backed securities...... 120,569 12 5,074 115,507 115,507
Other securities................ 57,494 1 2,370 55,125 55,125
---------- ---------- ---------- --------- ---------
688,001 68 35,773 652,296 652,296
---------- ---------- ---------- --------- ---------
$1,413,213 2,242 57,119 1,358,336 1,377,508
========= ========= ========= ======== ========
December 31, 1993
U.S. Treasury securities and
U.S. Government agency
obligations.................. 782,971 7,424 2,197 788,198 782,971
Obligations of state and
political subdivisions....... 147,673 2,768 250 150,191 147,673
Mortgage-backed securities...... 336,963 7,333 632 343,664 336,963
Other securities................ 72,606 1,542 109 74,039 72,606
---------- ---------- ---------- --------- ---------
$1,340,213 19,067 3,188 1,356,092 1,340,213
========= ========= ========= ======== ========
</TABLE>
The amortized cost and market value of investment securities including
mortgage-backed securities at December 31, 1994, by contractual maturity, are
shown below. Expected maturities will differ from contractual maturities based
on the issuers' rights to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------------------------------------
AVAILABLE FOR SALE HELD TO MATURITY
--------------------- ---------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Due in one year or less........................ $ 68,641 68,326 220,159 219,024
Due after one year through five years.......... 149,604 143,962 287,764 278,279
Due after five years through ten years......... 28,360 27,260 78,994 76,087
Due after ten years............................ 441,396 412,748 138,295 132,650
--------- ------- --------- -------
$688,001 652,296 725,212 706,040
========= ======= ========= =======
</TABLE>
8
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Proceeds from sales of investment securities during the years ended
December 31, 1994 and 1993 were $49,257 and $28,072, respectively. Gross gains
of $96 and $109 and gross losses of $172 and $80 were realized on these sales,
respectively.
The carrying value of investment securities pledged to secure trust and
public deposits and for purposes required or permitted by law amounted to
$883,320 and $614,533 at December 31, 1994 and 1993, respectively.
4. LOANS
<TABLE>
Loans consist of the following:
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
---------- ---------
<S> <C> <C>
Commercial, financial and agricultural..................... $ 467,428 430,118
Loans to individuals, net of unearned income of $2,616 and
$590, respectively....................................... 776,757 608,615
Real estate................................................ 1,777,082 1,535,801
Lease financing............................................ 158,659 56,682
---------- ---------
$3,179,926 2,631,216
========= =========
</TABLE>
At December 31, 1994 and 1993, the Corporation serviced loans for others
aggregating $433,903 and $396,027, respectively.
The Corporation grants loans principally to customers located within the
state of Ohio.
<TABLE>
The Corporation makes loans to officers and directors on substantially the
same terms and conditions as transactions with other parties. An analysis of
loan activity with related parties for the year ended December 31, 1994 is
summarized as follows:
<S> <C>
Aggregate amount at beginning of year........................... $42,570
Additions (deductions):
New loans.................................................. 62,203
Repayments................................................. (43,771)
Changes in directors and their affiliations................ (15,001)
-------
Aggregate amount at end of year................................. $46,001
=======
</TABLE>
5. ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
Transactions in the allowance for possible loan losses are summarized as
follows:
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1994 1993 1992
------- ------ -------
<S> <C> <C> <C>
Balance at beginning of year................................... $32,338 29,695 25,262
Additions (deductions):
Provision for possible loan losses........................ 4,461 7,239 17,657
Loans charged off......................................... (7,566) (8,595) (17,363)
Recoveries on loans previously charged off................ 3,875 3,999 4,139
------- ------ -------
Balance at end of year......................................... $33,108 32,338 29,695
======= ====== =======
</TABLE>
9
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
6. RESTRICTIONS ON CASH AND DIVIDENDS
The average balance on deposit with the Federal Reserve Bank to satisfy
reserve requirements amounted to $16,943 during 1994. The level of this balance
is based upon amounts and types of customers' deposits held by the banking
subsidiaries of the Corporation. In addition, deposits are maintained with other
banks at levels determined by Management based upon the volumes of activity and
prevailing interest rates to compensate for check-clearing, safekeeping,
collection and other bank services performed by these banks. At December 31,
1994, cash and due from banks included $20,079 deposited with the Federal
Reserve Bank and other banks for these reasons.
Dividends paid by the subsidiaries are the principal source of funds to
enable the payment of dividends by the Corporation to its shareholders. These
payments by the subsidiaries in 1995 are restricted by the regulatory agencies
principally to the total of 1995 net income plus $25,048, representing the
undistributed net income of the past two calendar years. Regulatory approval
must be obtained for the payment of dividends of any greater amount.
7. PREMISES AND EQUIPMENT
<TABLE>
The components of premises and equipment are as follows:
<CAPTION>
DECEMBER 31, ESTIMATED
-------------------- USEFUL
1994 1993 LIVES
-------- ------- ----------
<S> <C> <C> <C>
Land........................................................ $ 10,760 10,487 --
Buildings................................................... 74,615 72,142 10-50 yrs
Equipment................................................... 62,184 57,929 3-50 yrs
Leasehold improvements...................................... 11,303 10,903 1-40 yrs
-------- -------
158,862 151,461
Less accumulated depreciation and amortization.............. 81,543 80,190
-------- -------
$ 77,319 71,271
======== =======
Amounts included in other expenses for depreciation and amortization
aggregated $7,543, $6,723 and $7,050 for the years ended December 31, 1994, 1993
and 1992, respectively.
</TABLE>
<TABLE>
At December 31, 1994, the Corporation was obligated for rental commitments
under noncancellable operating leases on branch offices and equipment as
follows:
<CAPTION>
YEARS
ENDING
DECEMBER LEASE
31, COMMITMENTS
- ---------- -----------
<S> <C>
1995 $ 5,891
1996 4,892
1997 4,573
1998 4,131
1999 3,795
2000-2013 16,964
-----------
$40,246
============
Rentals paid under noncancellable operating leases amounted to $6,163,
$4,823 and $3,824 in 1994, 1993 and 1992, respectively.
</TABLE>
10
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
8. CERTIFICATES AND OTHER TIME DEPOSITS
The aggregate amount of certificates and other time deposits of $100 and
over at December 31, 1994 and 1993 was $209,330 and $132,387, respectively.
Interest expense on these certificates and deposits amounted to $8,541 in 1994,
$5,504 in 1993, and $6,645 in 1992.
9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWINGS
At December 31, 1994 and 1993, securities sold under agreements to
repurchase totaled $467,393 and $185,571, respectively. The average balance of
securities sold under agreements to repurchase and other borrowings for the
years ended December 31, 1994 and 1993, amounted to $358,831 and $187,705,
respectively. In 1994 the weighted average annual interest rate amounted to
4.64%, compared to 3.67% in 1993. The maximum amount of these borrowings at any
month end amounted to $595,024 in 1994 and $215,768 in 1993.
At December 31, 1994, the Corporation had $135,429 of Federal Home Loan
Bank advances of which: $100,116 have maturities within one year with interest
rates of 5.90% to 8.75%; $28,850 with maturities over one year to five years
with interest rates of 4.65% to 8.40%; and $6,463 over five years with interest
rates of 4.75% to 8.05%.
10. FEDERAL INCOME TAXES
<TABLE>
Federal income taxes are comprised of the following:
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1994 1993 1992
------- ------ ------
<S> <C> <C> <C>
Taxes currently payable......................................... $14,851 26,665 27,577
Deferred expense (benefit)...................................... 11,209 106 (3,860)
Adjustment to deferred taxes as a result of the 1994 rate
increase...................................................... -- (215) --
------- ------ ------
$26,060 26,556 23,717
======= ====== ======
</TABLE>
<TABLE>
The effective federal income tax rate differs from the statutory federal
income tax rate as shown below:
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory rate........................................................ 35% 35% 34%
Decrease (increase) in rate due to:
Interest income on tax-exempt securities and tax-free loans, net.... 4 4 5
Exercise of options at acquisition.................................. 3 -- --
Thrift loss reserve recapture....................................... (4) -- --
Reduction to excess tax reserves.................................... 3 -- --
Other............................................................... (1) (1) (2)
---- ---- ----
Effective tax rate.................................................... 30% 32% 31%
==== ==== ====
</TABLE>
11
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<TABLE>
For 1994, 1993 and 1992 the deferred federal income tax provision (benefit)
results from temporary differences in the recognition of income and expense for
federal income tax and financial reporting purposes. The sources and tax effects
of these temporary differences are presented below:
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1993 1992
------- ----- ------
<S> <C> <C> <C>
Loan loss provision..................................... $ (254) (672) (1,474)
Deferred loan fees, net................................. 261 (88) (504)
Leasing................................................. 9,638 1,172 136
Pension expense......................................... 491 686 (635)
Postretirement benefits................................. (755) (834) (20)
Other, net.............................................. 1,828 (158) (1,363)
------- ----- ------
$11,209 106 (3,860)
======= ===== ======
</TABLE>
<TABLE>
Principal components of the Corporation's net deferred tax asset are
summarized as follows:
<CAPTION>
DECEMBER 31,
------------------
1994 1993
------- ------
<S> <C> <C>
Excess of book loan provision over tax loan provision..................... $ 9,963 9,709
Excess of tax depreciation over book depreciation......................... (2,931) (3,073)
Leasing book basis income over tax basis.................................. (12,864) (3,226)
Deferred loan fees tax basis income over book basis....................... 2,048 2,309
Postretirement book basis expense over tax basis.......................... 1,609 854
Security portfolio tax basis over book basis.............................. 12,167 --
Other..................................................................... (2,622) (161)
------- ------
$ 7,370 6,412
======= ======
</TABLE>
11. BENEFIT PLANS
The Corporation has a defined benefit pension plan covering substantially
all of its employees. In general, benefits are based on years of service and the
employee's compensation. The Corporation's funding policy is to contribute
annually the maximum amount that can be deducted for federal income tax
reporting purposes. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned in the
future.
A supplemental non-qualified, non-funded pension plan for certain officers
is also maintained and is being provided for by charges to earnings sufficient
to meet the projected benefit obligation. The pension cost for this plan is
based on substantially the same actuarial methods and economic assumptions as
those used for the defined benefit pension plan.
12
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the Corporation's consolidated financial statements:
<CAPTION>
DECEMBER 31,
--------------------------------
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Actuarial present value of benefit obligations: Accumulated
benefit obligation, including vested benefits of $40,530,
$42,021 and $35,116, respectively........................ ($43,229) (45,459) (36,822)
======== ======= =======
Projected benefit obligation............................... ($57,853) (61,840) (53,879)
Plan assets at fair value, primarily U.S. government
obligations, corporate bonds and investments in equity
funds.................................................... 62,440 63,419 55,683
-------- ------- -------
Plan assets in excess of projected benefit obligation...... 4,587 1,579 1,804
Unrecognized net gains..................................... (5,859) (2,428) (3,150)
Unrecognized prior service cost............................ 4,928 3,326 1,768
Remaining unrecognized net asset being amortized over
employees' average remaining service life................ (1,061) (2,172) (2,833)
-------- ------- -------
Prepaid (accrued) pension cost............................. $ 2,595 305 (2,411)
======== ======= =======
Expected long-term rate of return on assets................ 9.00% 9.00% 8.50%
Weighted-average discount rate............................. 8.25% 7.50% 8.50%
Rate of increase in future compensation levels............. 5.00% 5.00% 6.50%
======== ======= =======
</TABLE>
<TABLE>
Net pension cost consists of the following components:
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Service cost.................................................... $3,164 2,724 2,353
Interest cost on projected benefit obligation................... 4,473 4,211 4,077
Actual return on plan assets.................................... (849) (6,805) (4,392)
Net total of other components................................... (4,126) 2,185 (36)
------ ------ ------
Net periodic pension cost....................................... $2,662 2,315 2,002
====== ====== ======
</TABLE>
The Corporation maintains a savings plan under Section 401(k) of the
Internal Revenue Code, covering substantially all full-time employees after one
year of continuous employment. Under the plan, employee contributions are
partially matched by the Corporation. Such matching becomes vested when the
employee reaches three years of credited service. Total savings plan expense was
$1,874, $1,740 and $1,945 for 1994, 1993 and 1992, respectively.
12. POSTRETIREMENT MEDICAL AND LIFE INSURANCE PLAN
The Corporation has a benefit plan which presently provides postretirement
medical and life insurance for retired employees. Effective January 1, 1993 the
plan was changed to limit the Corporation's medical contribution to 200% of the
1993 level for employees who retire after January 1, 1993. The Corporation
reserves the right to terminate or amend the plan at any time.
On January 1, 1993, the Corporation implemented Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers Accounting for Postretirement
Benefits Other Than Pensions." This statement requires that the cost of
postretirement benefits expected to be provided to current and future retirees
be
13
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
accrued over those employees' service periods. In addition to recognizing the
cost of benefits for the current period, SFAS No. 106 requires recognition of
the cost of benefits earned in prior service periods (the transition
obligation). Prior to 1993, postretirement benefits were accounted for on a cash
basis. As of January 1, 1993, the Corporation's accumulated postretirement
benefit obligation (also its transition obligation) totalled approximately $19
million. The Corporation, as permitted by SFAS No. 106, has elected to amortize
the transition obligation by charges to income over a twenty year period on a
straight line basis.
<TABLE>
The following table sets forth the plan's status and amounts recognized in
the Corporation's consolidated financial statements.
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................... $(13,740) (13,484)
Fully eligible actives..................................... (4,320) (3,275)
Other actives.............................................. (6,165) (5,778)
-------- --------
Total accumulated postretirement benefit obligation.......... (24,225) (22,537)
Unrecognized prior net loss.................................. 2,553 2,473
Unrecognized prior service costs............................. -- --
Unrecognized transition obligation........................... 17,106 18,057
-------- --------
Accrued postretirement benefit cost.......................... $ (4,566) (2,007)
======== ========
</TABLE>
<TABLE>
Net postretirement benefit cost includes:
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1994 1993
------ -----
<S> <C> <C>
Service cost...................................................... $ 742 494
Interest cost..................................................... 1,829 1,573
Actual return on plan assets...................................... -- --
Amortization of transition obligation............................. 950 950
Net of other amortization and deferrals........................... 133 --
------ -----
Net periodic postretirement cost.................................. $3,654 3,017
====== =====
</TABLE>
<TABLE>
The following actuarial assumptions affect the determination of these
amounts:
<CAPTION>
PLAN YEAR JANUARY 1,
--------------------------
1994 1993
----------- -----------
<S> <C> <C>
Expected long-term rate of return on assets.............. N/A N/A
Weighted-average discount rate........................... 8.25% 7.50%
Medical trend rates:
Pre-65................................................. 13.8%-6.0% 14.3%-6.0%
Post-65................................................ 13.0%-6.1% 13.5%-6.1%
</TABLE>
14
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<TABLE>
Shown below is the impact of a 1% increase in the medical trend rates
(i.e., pre-65, 14.8% for 1994 grading down to 7.0% in 2002; post-65 grading down
to 7.1% in 2027). This information is required disclosure under SFAS No. 106.
<CAPTION>
CURRENT TREND %
TREND +1% CHANGE
------- ------ ------
<S> <C> <C> <C>
Aggregate of the service and interest components of net
periodic postretirement health care benefit cost............. $2,252 2,354 +4.5%
Accumulated postretirement benefit obligation for health care
benefits..................................................... $21,885 23,286 +6.4%
</TABLE>
13. STOCK OPTIONS
The 1992 Stock Option Program provides incentive and non-qualified options
to certain key employees for up to 1,000,000 common shares of the Corporation.
In addition, the 1992 Directors Stock Option Program provides for the granting
of non-qualified stock options to certain non-employee directors of the
Corporation for which 100,000 common shares of the Corporation have been
reserved. Options under these 1992 Programs are not exercisable for at least six
months from date of grant.
Options continue to be outstanding under the 1982 Incentive Stock Options
Plan as amended in 1986, and these options are all fully exercisable.
Options under these plans are granted at 100% of the fair market value.
Options granted as incentive stock options must be exercised within ten years;
options granted as non-qualified stock options shall have terms established by a
committee of the Board. Options are cancellable within defined periods of time
based upon the reason for termination of employment.
<TABLE>
A summary of stock option activity for the years ended December 31, 1994,
1993 and 1992 follows:
<CAPTION>
SHARES
----------------------
AVAILABLE OUT- RANGE OF OPTION
FOR GRANT STANDING PRICE PER SHARE
--------- -------- ---------------
<S> <C> <C> <C>
Balance December 31, 1991............................. 79,150 301,220 $8.59 - 16.54
Add'l shares reserved............................... 1,100,000 --
Cancelled........................................... -- (5,480) 10.82 - 16.54
Exercised........................................... -- (78,060) 8.59 - 19.13
Granted............................................. (88,700) 88,700 18.50 - 19.13
--------- -------- ---------------
Balance December 31, 1992............................. 1,090,450 306,380 8.59 - 19.13
Cancelled........................................... -- (1,400)
Exercised........................................... -- (53,600) 8.59 - 24.13
Granted............................................. (80,080) 80,080 24.13 - 24.19
--------- -------- ---------------
Balance December 31, 1993............................. 1,010,370 331,460 10.82 - 24.19
Cancelled........................................... -- --
Exercised........................................... -- (34,800) 10.82 - 24.13
Granted............................................. (73,590) 73,590 23.25 - 23.50
--------- -------- ---------------
Balance December 31, 1994............................. 936,780 370,250 $10.82 - 24.19
======== ======= ===============
</TABLE>
The Employee Stock Purchase Plan provides full-time employees of the
Corporation the opportunity to acquire common shares on a payroll deduction
basis. Of the 200,000 shares available under the Plan, there were 12,762 and
10,946 shares issued in 1994 and 1993, respectively.
15
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
14. PARENT COMPANY
<TABLE>
Condensed financial information of FirstMerit Corporation (Parent Company
only) is as follows:
<CAPTION>
DECEMBER 31,
--------------------
CONDENSED BALANCE SHEETS 1994 1993
-------- -------
<S> <C> <C>
ASSETS
Cash and due from banks................................................. $ 3,795 10,756
Investment securities................................................... 840 1,390
Loans to subsidiaries................................................... 56,063 50,566
Investment in subsidiaries, at equity in underlying value of their net
assets................................................................ 361,897 353,930
Goodwill................................................................ 687 974
Other assets............................................................ 13,884 5,117
-------- -------
$437,166 422,733
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued and other liabilities........................................... $ 5,628 5,573
Shareholders' equity.................................................... 431,538 417,160
-------- -------
$437,166 422,733
======== =======
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
CONDENSED STATEMENTS OF INCOME 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Income:
Cash dividends from subsidiaries............................ $42,400 56,264 51,307
Other income................................................ 20,287 17,673 13,877
------- ------- -------
62,687 73,937 65,184
Interest and other expenses................................... 26,561 23,577 19,364
------- ------- -------
Income before federal income tax benefit and equity in
undistributed income of subsidiaries........................ 36,126 50,360 45,820
Federal income tax benefit.................................... (4,001) (1,867) (1,773)
------- ------- -------
40,127 52,227 47,593
Equity in undistributed income of subsidiaries................ 20,174 3,333 5,680
------- ------- -------
Net income.................................................... $60,301 55,560 53,273
======= ======= =======
</TABLE>
16
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
CONDENSED STATEMENTS OF CASH FLOWS 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Operating activities:
Net income.................................................... $60,301 55,560 53,273
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed income of subsidiaries.............. (20,174) (3,333) (5,680)
Other....................................................... (8,417) 1,122 3,415
------- ------- -------
Net cash provided by operating activities..................... 31,710 53,349 51,008
------- ------- -------
Investing activities:
Proceeds from maturities of investment securities............. 544 428 --
Loans to subsidiaries......................................... (5,497) (22,352) (29,214)
Payments for investments in and advances to subsidiaries...... (11,000) -- --
Purchases of investment securities............................ -- -- (568)
------- ------- -------
Net cash used by investing activities......................... (15,953) (21,924) (29,782)
------- ------- -------
Financing activities:
Cash dividends................................................ (26,489) (23,486) (21,449)
Proceeds from exercise of stock options....................... 3,771 1,211 819
------- ------- -------
Net cash used by financing activities......................... (22,718) (22,275) (20,630)
------- ------- -------
Net increase (decrease) in cash and cash equivalents.......... (6,961) 9,150 596
Cash and cash eqivalents at beginning of year................. 10,756 1,606 1,010
------- ------- -------
Cash and cash equivalents at end of year...................... $ 3,795 10,756 1,606
======= ======= =======
</TABLE>
15. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosures of fair value
information about certain financial instruments, whether or not recognized in
the consolidated balance sheets. Instruments for which quoted market prices are
not available are valued based on estimates using present value or other
valuation techniques whose results are significantly affected by the assumptions
used, including discount rates and future cash flows. Accordingly, the values so
derived, in many cases, may not be indicative of amounts that could be realized
in immediate settlement of the instrument. Also, certain financial instruments
and all nonfinancial instruments are excluded from these disclosure
requirements. For these and other reasons, the aggregate fair value amounts
presented below are not intended to represent the underlying value of the
Corporation.
The following methods and assumptions were used to estimate the fair values
of each class of financial instrument presented:
Investment securities -- Fair values are based on quoted market
prices, or for certain fixed maturity securities not actively traded
estimated values are obtained from independent pricing services.
Federal funds sold -- The carrying amount is considered a reasonable
estimate of fair value.
Net loans -- Fair value for loans with interest rates that fluctuate
as current rates change are generally valued at carrying amounts with an
appropriate discount for any credit risk. Fair values of other types of
loans are estimated by discounting the future cash flows using the current
rates for which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.
Cash and due from banks -- The carrying amount is considered a
reasonable estimate of fair value.
17
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Accrued interest receivable -- The carrying amount is considered a
reasonable estimate of fair value.
Deposits -- The carrying amount is considered a reasonable estimate of
fair value for demand and savings deposits and other variable rate deposit
accounts. The fair values for fixed maturity certificates of deposit and
other time deposits are estimated using the rates currently offered for
deposits of similar remaining maturities.
Securities sold under agreements to repurchase and other
borrowings -- Fair values are estimated using rates currently available to
the Corporation for similar types of borrowing transactions.
Accrued interest payable -- The carrying amount is considered a
reasonable estimate of fair value.
Commitments to extend credit -- The fair value of commitments to
extend credit is estimated using the fees currently charged to enter into
similar arrangements, taking into account the remaining terms of the
agreements, the creditworthiness of the counterparties, and the difference,
if any, between current interest rates and the committed rates.
Standby letters of credit and financial guarantees written -- Fair
values are based on fees currently charged for similar agreements or on the
estimated cost to terminate or otherwise settle the obligations.
Loans sold with recourse -- Fair value is estimated based on the
present value of the estimated future liability in the event of default.
<TABLE>
The estimated fair values of the Corporation's financial instruments based
on the assumptions described above are as follows:
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1994 1993
----------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Financial assets:
Investment securities....................... $1,377,508 1,358,336 1,340,213 1,356,092
Federal funds sold.......................... 3,851 3,851 68,050 68,050
Net loans................................... 3,146,818 3,054,214 2,598,878 2,626,164
Cash and due from banks..................... 222,527 222,527 225,226 225,226
Accrued interest receivable................. 33,436 33,436 26,766 26,766
Financial liabilities:
Deposits.................................... 3,862,826 3,827,079 3,745,612 3,761,654
Securities sold under agreements to
repurchase and other borrowings.......... 602,822 605,418 185,571 187,046
Accrued interest payable.................... 10,157 10,157 5,830 5,830
Unrecognized financial instruments:
Commitments to extend credit................ -- -- -- --
Standby letters of credit and financial
guarantees written....................... -- -- -- --
Loans sold with recourse.................... -- -- -- --
</TABLE>
16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Corporation is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit,
standby letters of credit, financial guarantees, and loans sold with recourse.
18
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
These instruments involve, to varying degrees, elements recognized in the
consolidated balance sheets. The contract or notional amount of these
instruments reflect the extent of involvement the Corporation has in particular
classes of financial instruments.
The Corporation's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit and
standby letters of credit and financial guarantees written is represented by the
contractual notional amount of those instruments. The Corporation uses the same
credit policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
<TABLE>
Unless noted otherwise, the Corporation does not require collateral or
other security to support financial instruments with credit risk. The following
table sets forth financial instruments whose contract amounts represent credit
risk:
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
-------- -------
<S> <C> <C>
Commitments to extend credit.................................. $908,805 802,461
======== =======
Standby letters of credit and financial guarantees written.... $ 52,357 51,784
======== =======
Loans sold with recourse...................................... $ 2,016 2,434
======== =======
</TABLE>
Commitments to extend credit are agreements to lend to a customer provided
there is no violation of any condition established in the contract. Commitments
generally are extended at the then prevailing interest rates, have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Corporation evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained if deemed necessary by the
Corporation upon extension of credit is based on Management's credit evaluation
of the counterparty. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, and income-producing commercial
properties. Standby letters of credit and financial guarantees written are
conditional commitments issued by the Corporation to guarantee the performance
of a customer to a third party. Those guarantees are primarily issued to support
public and private borrowing arrangements, including commercial paper, bond
financing and similar transactions. Except for short term guarantees of $20,842
and $22,635 at December 31, 1994 and 1993, respectively, the remaining
guarantees extend in varying amounts through 2008. The credit risk involved in
issuing letters of credit is essentially the same as that involved in extending
loan facilities to customers. Collateral held varies, but may include marketable
securities, equipment and real estate. In recourse arrangements, the Corporation
accepts 100% recourse. By accepting 100% recourse, the Corporation is assuming
the entire risk of loss due to borrower default. The Corporation's exposure to
credit loss, if the borrower completely failed to perform and if the collateral
or other forms of credit enhancement all prove to be of no value, is represented
by the notional amount less any allowance for possible loan losses. The
Corporation uses the same credit policies originating loans which will be sold
with recourse as it does for any other type of loan.
17. CONTINGENCIES
The nature of the Corporation's business results in a certain amount of
litigation. Accordingly, FirstMerit Corporation and its subsidiaries are subject
to various pending and threatened lawsuits in which claims for monetary damages
are asserted. Management, after consultation with legal counsel, is of the
opinion that the ultimate liability of such pending matters would not have a
material effect on the Corporation's financial condition or results of
operations.
During 1991, a law suit was filed in federal court against First National
Bank of Ohio ("Bank"), a subsidiary of the Parent Company, alleging conversion
and negligence in the deposit of funds. The suit sought
19
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
actual damages against the Bank plus punitive damages, interest, costs,
attorney's fees and other relief. Law suits brought in state court by other
claimants based on the same deposits have been stayed. Management, after
consultation with legal counsel, believes that the possibility of a multiple
recovery by both the federal court and state court plaintiffs is unlikely and
the maximum exposure for damages approximates $7.3 million.
During 1993, the federal court granted the Bank's motion for summary
judgement. As a result, that suit was dismissed. The plaintiff in that suit
subsequently filed a notice of appeal. The Bank is vigorously seeking to have
the favorable federal judgement affirmed on appeal. The Corporation continues to
believe the Bank has meritorious defenses to all claims.
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
Quarterly financial and per share data for the years ended December 31,
1994 and 1993 are summarized as follows:
<CAPTION>
QUARTERS
----------------------------------------
FIRST SECOND THIRD FOURTH
------- ------ ------ ------
IN THOUSANDS (EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total interest income............1994 $72,486 75,641 81,541 87,141
==== ======= ====== ====== ======
1993 $77,019 77,159 75,415 74,996
==== ======= ====== ====== ======
Net interest income..............1994 $47,701 49,600 51,202 52,429
==== ======= ====== ====== ======
1993 $48,026 49,327 48,323 49,126
==== ======= ====== ====== ======
Provision for possible loan
losses.........................1994 $ 1,323 844 1,158 1,136
==== ======= ====== ====== ======
1993 $ 1,965 1,914 1,653 1,707
==== ======= ====== ====== ======
Income before federal income
taxes..........................1994 $21,289 21,341 21,316 22,415
==== ======= ====== ====== ======
1993 $20,014 21,560 22,339 18,203
==== ======= ====== ====== ======
Net income.......................1994 $14,885 14,987 15,053 15,376
==== ======= ====== ====== ======
1993 $13,986 14,954 14,989 11,631
==== ======= ====== ====== ======
Net income per share.............1994 $ .55 .55 .55 .57
==== ======= ====== ====== ======
1993 $ .52 .55 .55 .43
==== ======= ====== ====== ======
</TABLE>
19. SHAREHOLDER RIGHTS PLAN
The Corporation has in effect a shareholder rights plan ("Plan"). The Plan
provides that each share of Common Stock has one right attached. Under the Plan,
the Rights would be distributed after either of the following events: (1) a
person acquires 15% or more of the Common Stock of the Corporation, except if
pursuant to a tender offer on terms determined by a majority of the "Continuing
Directors" to be fair; or (2) the commencement of a tender offer that would
result in a change in the ownership of 15% or more of the Common Stock. After
such an event, each Right would entitle the holder to purchase shares of Series
A Preferred Stock of the Corporation. The Corporation may redeem the Rights for
$0.01 per Right.
20
<PAGE> 23
MANAGEMENT'S REPORT
The management of FirstMerit Corporation is responsible for the preparation
and accuracy of the financial information presented in this annual report. These
consolidated financial statements were prepared in accordance with generally
accepted accounting principles, based on the best estimates and judgement of
management.
The Corporation maintains a system of internal controls designed to provide
reasonable assurance that assets are safeguarded, that transactions are executed
in accordance with the Corporation's authorization and policies, and that
transactions are properly recorded so as to permit preparation of financial
statements that fairly present the financial position and results of operations
in conformity with generally accepted accounting principles. These systems and
controls are reviewed by our internal auditors and independent auditors.
The Audit Committee of the Board of Directors is composed of only outside
directors and has the responsibility for the recommendation of the independent
auditors for the Corporation. The Audit Committee meets regularly with
management, internal auditors and our independent auditors to review accounting,
auditing and financial matters. The independent auditors and the internal
auditors have free access to the Audit Committee.
/s/ HOWARD L. FLOOD /s/ GARY J. ELEK
HOWARD L. FLOOD GARY J. ELEK
President and Chief Senior Vice President
Executive Officer and Treasurer
21
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
FirstMerit Corporation:
We have audited the accompanying consolidated balance sheets of FirstMerit
Corporation (formerly First Bancorporation of Ohio) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the years in the
three year period ended December 31, 1994. These consolidated financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FirstMerit
Corporation and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the years in the three year
period ended December 31, 1994 in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand, L.L.P.
Akron, Ohio
January 17, 1995 (except for Note 2, as to which the date is January 31, 1995)
22
<PAGE> 25
FIRSTMERIT CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
FINANCIAL STATEMENTS
for the years ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
CONTENTS
Page
----
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Financial Statements:
Statements of Net Assets Available for Plan Benefits
at December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . 2
Statements of Changes in Net Assets Available for Plan Benefits
for the years ended December 31, 1994 and 1993 . . . . . . . . . . 3
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5
</TABLE>
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of the
FirstMerit Corporation
Employee Stock Purchase Plan:
We have audited the accompanying statements of net assets available for
plan benefits of the FirstMerit Corporation Employee Stock Purchase Plan (the
"Plan") as of December 31, 1994 and 1993 and the related statements of changes
in net assets available for plan benefits for the years then ended. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits as of
December 31, 1994 and 1993 and the changes in net assets available for plan
benefits for the years then ended in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand, L.L.P.
Akron, Ohio
March 24, 1995
1
<PAGE> 27
FIRSTMERIT CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 1994 AND 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
---------- ----------
<S> <C> <C>
Cash $ 143,301 $ 132,120
Investment in FirstMerit Corporation common
shares, at fair value 478,541 267,150
---------- ----------
Net assets available for plan benefits $ 621,842 $ 399,270
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial
statements.
2
<PAGE> 28
FIRSTMERIT CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the years ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Additions to plan assets attributable to:
Employee contributions $ 294,036 $ 253,702
Employer contributions 25,963
Dividend income 17,692 7,074
Net (depreciation) appreciation in fair value of FirstMerit Corporation
common shares (9,428) 74,198
----------- -----------
Total additions 328,263 334,974
----------- -----------
Deductions to plan assets attributable to:
Benefits paid to participants 87,999 30,988
Dividends paid to participants 17,692 7,074
----------- -----------
Total deductions 105,691 38,062
----------- -----------
Net increase 222,572 296,912
Net assets available for plan benefits, beginning of year 399,270 102,358
----------- -----------
Net assets available for plan benefits, end of year $ 621,842 $ 399,270
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial
statements.
3
<PAGE> 29
FIRSTMERIT CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
1. PLAN DESCRIPTION:
The following brief description of the FirstMerit Corporation (the
"Corporation") Employee Stock Purchase Plan (the "Plan") is provided for
general information purposes only. Participants should refer to the Prospectus
for more complete information.
GENERAL: The Board of Directors of the Corporation established the Plan on
February 13, 1992 which was approved by the shareholders at the annual meeting
on April 8, 1992. The Plan provides eligible full-time employees of the
Corporation with the opportunity to acquire the Corporation's Common Shares on
a payroll deduction basis.
CONTRIBUTIONS: Contributions to the Plan consist of participant payroll
deductions, post tax, of a specific dollar amount up to five percent of
the participant's compensation. The election to participate in the Plan must
be completed on or before 15 business days prior to the commencement of a
semiannual grant period. The semiannual grant dates are July 2 and January 2.
All contributions to the Plan are maintained by the Trust and Financial
Services Division of First National Bank of Ohio. First National Bank of Ohio
is a subsidiary of the Corporation, as well as the trustee of the Plan.
VESTING: Participant's are 100% vested in their account balances at all times.
PURCHASES OF COMMON SHARES: Under the Plan, up to 200,000 of the Corporation's
Common Shares may be issued, subject to adjustment in the event of certain
transactions affecting the Corporation's capital structure. Each participant
in the Plan on a semiannual grant date is granted the option to purchase, from
such funds as contributed by the participant, whole Common Shares of the
Corporation at the option price of 85% of the fair market value of such shares
valued as of the business day immediately preceding the semiannual grant date.
Shares of Common stock granted pursuant to the Plan may be authorized but
issued shares, shares now or hereafter held in the treasury of the Company, or
shares purchased on the open market. When shares are purchased on the open
market, the employer must reimburse the plan for 15% of the purchase price
through employer contributions. All such Common Shares acquired on behalf of a
participant under the Plan are maintained on a book entry basis on the records
of the Corporation in an account for the participant.
ELIGIBILITY: Any person who has been employed by the Corporation or any of its
subsidiaries for at least six months and who currently is employed on a
regular full-time basis (any person customarily employed at least 20 hours per
week) is eligible to participate in the Plan. Executive officers of the
Corporation are not considered eligible employees.
4
<PAGE> 30
FIRSTMERIT CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. PLAN DESCRIPTION, CONTINUED:
TRANSFERABILITY: Rights to purchase Common Shares under the Plan are not
transferable, except by will or the laws of descent of distribution, and
they may not be subjected to any lien or liability. Options expire on
termination of employment for any reason other than disability or leave of
absence. No participant may purchase shares under the Plan if, after the
purchase, the participant would own more than 5% of the outstanding Common
Shares of the Corporation. In addition, no participant may purchase
shares exceeding $25,000 in fair market value in any one calendar year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION: The accompanying financial statements have
been prepared on an accrual basis in accordance with generally accepted
accounting principles.
INVESTMENTS: The investment in the Corporation's common shares is
valued at fair market value using readily available published market
values.
The Plan presents in the statements of changes in net assets available for
plan benefits the net appreciation (depreciation) in the fair value of its
investments which consists of the realized gains or losses and the
unrealized appreciation (depreciation) on those investments.
ADMINISTRATIVE EXPENSES: Administrative expenses of the plan are paid by
the Corporation.
3. RIGHT TO TERMINATE:
Although it has not expressed any interest to do so, the Corporation has
the right to terminate the Plan at any time. In the event of Plan
termination all assets in the Plan must be used solely for distributions
to Plan participants.
4. INCOME TAX STATUS:
The Plan is a non-qualified plan under the Internal Revenue Code.
The Plan is not exempt from federal income taxes.
5
<PAGE> 31
FIRSTMERIT CORPORATION AND SUBSIDIARIES
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
FINANCIAL STATEMENTS
for the years ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
Index of Financial Statements and Supplemental Schedules
Pages
-----
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . 1
Financial Statements:
Statements of Nets Assets Available for Plan Benefits
December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . 2
Statement of Changes in Net Assets Available for Plan Benefits
for the years ended December 31, 1994 and 1993 . . . . . . . . . 3
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-8
Supplemental Schedules:
Assets Held for Investment as of December 31, 1994 . . . . . . . . . . . 9
Transactions or Series of Transactions in Excess of 5% of the
Current Value of Plan Assets . . . . . . . . . . . . . . . . . . 10-11
</TABLE>
<PAGE> 32
Report of Independent Accountants
The Board of Directors
FirstMerit Corporation
We have audited the statements of net assets available for plan benefits of the
FirstMerit Corporation and Subsidiaries Employeee Salary Savings Retirement
Plan (the Plan) as of December 31, 1994 and 1993, and the related statements of
changes in net assets available for plan benefits for the years then ended.
These financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan
as of December 31, 1994 and 1993, and the changes in net assets available for
plan benefits for the years then ended, in conformity with generally
accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary schedules included on
pages 9 through 11 are presented for purposes of additional analysis and are
not a required part of the basic financial statements, but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplementary information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects, in relation to the basic
financial statements taken as a whole.
/s/ Coopers & Lybrand, L.L.P.
Akron, Ohio
April 7, 1995
1
<PAGE> 33
FIRSTMERIT CORPORATION
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<TABLE>
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 1994 and 1993
<CAPTION>
1994 1993
-------------- --------------
<S> <C> <C>
Investments at current value:
U.S. Government agencies:
U.S. Treasury notes $ - $ 2,822,435
Federal Home Loan Banks - 748,048
-------------- --------------
- 3,570,483
-------------- --------------
Mutual funds:
Federated Government Obligations Fund 375,734 -
Federated Short/Intermediate Government Fund 673,605 -
Federated Capital Preservation Fund 2,671,383 792,088
Frank Russell Investment Company Capital Guaranteed Fund - 1,088,810
Frank Russell Investment Company International Securities Fund - 310,441
Fidelity Advisor Series IV Ltd. Term Bond Fund 745,310 -
Fidelity Advisor Equity Portfolio Income Fund - 1,076,464
Fidelity Advisor Equity Portfolio Growth Fund 1,720,000 326,863
Fidelity Blue Chip Growth Fund 2,291,744 1,353,626
Fidelity Overseas Fund 926,556 -
Portage FDS Government Money Market Fund - 603,959
Newpoint Equity Fund 863,370 -
-------------- --------------
10,267,702 5,552,251
-------------- --------------
Commonwealth Life Insurance Company Guaranteed Investment
Contracts - 601,052
FirstMerit Corporation Common Stock 19,443,625 15,826,200
-------------- --------------
Total 29,711,327 25,549,986
-------------- --------------
Cash/(Bank Overdraft) 60,744 (3,820)
Accrued interest and other assets 69,238 77,631
-------------- --------------
129,982 73,811
-------------- --------------
Net assets available for plan benefits $ 29,841,309 $ 25,623,797
============== ==============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
<PAGE> 34
FIRSTMERIT CORPORATION
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the years ended December 31, 1994 and 1993
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Additions:
Contributions:
Participants' contributions $ 3,305,292 $ 2,805,876
Employers' contributions 1,940,567 1,722,117
----------- -----------
5,245,859 4,527,993
----------- -----------
Investment income:
Interest 165,443 215,004
Dividends 847,851 590,134
Net unrealized (depreciation) appreciation of investments (1,006,697) 1,861,584
----------- -----------
6,597 2,666,722
----------- -----------
Assets received from new participants 1,357,303 -
----------- -----------
Total additions 6,609,759 7,194,715
----------- -----------
Deductions:
Withdrawals by former participants 2,392,247 1,243,673
Other - (55)
----------- -----------
Total deductions 2,392,247 1,243,618
----------- -----------
Excess of additions over deductions 4,217,512 5,951,097
----------- -----------
Net assets available for plan benefits at beginning of period 25,623,797 19,672,700
----------- -----------
Net assets available for plan benefits at end of period $29,841,309 $25,623,797
=========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE> 35
FIRSTMERIT CORPORATION
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN:
The following brief description of the FirstMerit Corporation
(FirstMerit) and Subsidiaries Employees' Salary Savings Retirement
Plan (the Plan) provides only general information. Participants should
refer to the Plan Agreement for a more complete description of the
Plan's provisions.
A. GENERAL
The Board of Directors of FirstMerit Corporation established this
defined contribution plan as of October 1, 1985. The Plan covers
all employees of FirstMerit, First National Bank of Ohio, The Old
Phoenix National Bank of Medina, Peoples National Bank (effective
July 1, 1989), The First National Bank in Massillon (effective
April 1, 1990), Peoples Bank (effective January 1, 1991),
Bancorp Trust Co., N.A. (effective January 1, 1991), Life Savings
Bank, FSB, and Elyria Savings & Trust National Bank who have one
year of service and have attained the age of 21. The Plan is
subject to certain provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
B. CONTRIBUTIONS
In 1988, the Plan allowed each participant to contribute from two
percent to six percent (in one percent increments) of
compensation. The Plan was amended July 1, 1989 to increase the
maximum participant contribution to ten percent. The Plan was
further amended on January 1, 1990 to allow each participant to
contribute from one percent to fifteen percent of compensation.
Such contributions are known as voluntary pretax employee
contributions. A participant's voluntary pretax contributions
and earnings are immediately vested and non-forfeitable.
Each employer contributes as a matching contribution an amount
equal to 50 percent of the participant's voluntary pretax
contribution. The employer will not make a matching contribution
with respect to any portion of a participant voluntary pretax
contribution that exceeds six percent of the participant's basic
compensation. These employer matching contributions and earnings
are immediately vested and non-forfeitable.
In January 1993, the Plan was amended to include a Retiree
Medical Matching Program. This program provided for each employer
to make additional matching contributions equal to 50% of the
participants voluntary pretax employee contributions which do not
exceed three percent of the participants basic compensation.
Participants will become vested in the Retiree Medical Matching
Program upon achieving five years of service or upon attaining
normal retirement age.
4
<PAGE> 36
FIRSTMERIT CORPORATION
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. DESCRIPTION OF THE PLAN, CONTINUED:
C. PARTICIPANTS' ACCOUNTS
First National Bank of Ohio (a subsidiary of FirstMerit), as the
trustee for the Plan, maintains separate accounts for each
participant. For the period of January 1, 1994 to September 31,
1994, each participant could direct his contributions be invested
in FirstMerit Corporation common stock, a fixed income fund, an
equity fund, a guaranteed income fund or a combination thereof
with the minimum investment in any option of 25 percent.
Effective October 1, 1994, the Plan was amended to allow each
participant to direct his contributions be invested in FirstMerit
Corporation common stock, a stable value fund, a short-term
government bond fund, an intermediate bond fund, a high-quality,
large capitalized stock fund, a blue chip growth fund, a growth
stock fund, an international stock fund, or a combination thereof
with the minimum investment in any option of 5 percent. Employer
matching contributions are invested solely in FirstMerit
Corporation common stock purchased on the open market by the
trustee.
D. PAYMENT OF BENEFITS:
Distribution to participants is made by one or more of the
following methods (1) a single lump-sum payment, in cash; or (2)
payments in equal or nearly equal monthly, quarterly, semi-annual,
or annual installments over any period not exceeding 10 years or
the participants' life expectancy at the date such payments
commence, if less.
E. ADMINISTRATIVE EXPENSES
All expenses associated with administering the Plan, including the
trustees' fees and brokerage commissions on purchases of and
transfers between Investment Funds, are paid by the Corporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. BASIS OF PRESENTATION
The accompanying financial statements have been prepared on an
accrual basis in accordance with generally accepted accounting
principles.
B. INVESTMENTS
Investments in securities are stated at current value. The
current value of marketable securities is based on quotations
obtained from national securities exchanges.
The current value of the investments in the mutual funds is based
upon the number of units held by the Plan at December 31 and the
current value of each unit based upon quotations and bids obtained
from national securities exchanges on the securities in the funds.
Investments in Insurance Company Guaranteed Investment Contracts
were recorded at the guaranteed value (contribution and interest)
of plan assets for 1993.
5
<PAGE> 37
FIRSTMERIT CORPORATION
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Securities transactions are recognized on the trade date (the date
the order to buy or sell is executed).
The Plan presents in the Statement of Changes in Net Assets the net
appreciation (depreciation) in the fair value of its investments which
consists of the realized gains or losses and the unrealized
appreciation (depreciation) on these investments.
3. INVESTMENTS:
During 1994 and 1993, the Plan's investments (including investments
bought, sold, and held during the period) appreciated (depreciated) in
value as follows:
<TABLE>
<CAPTION>
1994 1993
------------- ------------
<S> <C> <C>
Investments at current value:
U.S. Government agencies:
U.S. Treasury notes $ (97,062) $ 33,655
Federal Home Loan Banks (47,606) (408)
Mutual funds:
Federated Government Obligations - -
Federated Short-Interm Government (9,046) -
Federated Capital Preserve - -
Frank Russell Investment Company Capital Guaranteed Fund (153,810) 50,242
Frank Russell Investment Company Equity Income Fund - (6,586)
Frank Russell Investment Company International Securities Fund (35,307) 70,551
Frank Russell Investment Company Quantitative Equity Fund - (32,068)
Fidelity Advisor Series IV Ltd. Term Bond (3,480) -
Fidelity Advisor Equity Portfolio Income (36,465) 36,464
Fidelity Advisor Equity Portfolio Growth (40,972) 3,615
Fidelity Blue Chip Growth Fund (25,763) (8,598)
Fidelity Overseas Fund (27,052) -
Newpoint Equity Fund 4,315 -
FirstMerit Corporation Common Stock (1,193,627) 1,350,250
------------- ------------
Total $ (1,665,875) $ 1,497,117
============= ============
</TABLE>
4. FEDERAL INCOME TAXES:
The Plan and Trust qualify under Section 401 of the Internal Revenue
Code and the Trust is exempt federal income taxes under Section 501(a).
5. PLAN TERMINATION:
Although they have not expressed any intent to do so, the Plan may be
terminated by unanimous action of the Boards of Directors of the
participating employees.
6
<PAGE> 38
FIRSTMERIT CORPORATION
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. Acquisition:
Effective April 22, 1994, FirstMerit Corporation acquired Great Northern
Financial Services Agency, Inc. located in Barberton, Ohio. The 401(k)
plan of Great Northern Financial Services Agency, Inc. was merged into
the FirstMerit Corporation and Subsidiaries Employees' Salary Savings
Retirement Plan effective April 22, 1994.
Effective April 1, 1995, the former employees of the Civista Corporation
became eligible for participation in the FirstMerit Corporation and
Subsidiaries Employees' Salary Savings Retirement Plan.
7
<PAGE> 39
FIRSTMERIT CORPORATION
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<TABLE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS BY FUND:
<CAPTION>
Federated Federated
FirstMerit Short-Interm Capital
Conmmon Government Preservation
Fixed Fund Equity Fund GIC Stock Fund Fund Fund
---------- ----------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Additions:
Contributions:
Participants' contributions $ 451,778 $ 659,996 $ 318,847 $ 1,242,586 $ 31,293 $ 102,813
Employers' contributions 1,940,567
---------- ---------- ---------- ----------- -------- ----------
451,778 659,996 318,847 3,183,153 31,293 102,813
---------- ---------- ---------- ----------- -------- ----------
Investment Income:
Interest 165,443
Dividends 57,400 48,453 686,352 5,096 26,452
Net unrealized (depreciation)
appreciation of Investments (186,296) 130,092 (1,093,315) (9,046)
---------- ---------- ---------- ----------- -------- ----------
(20,853) 187,492 48,453 (406,963) (3,950) 26,452
---------- ---------- ---------- ----------- -------- ----------
Assets received from new
participants 199,153 366,222 290,536 501,392
---------- ---------- ---------- ----------- -------- ----------
Total additions 630,078 1,213,710 657,836 3,277,582 27,343 129,265
---------- ---------- ---------- ----------- -------- ----------
Deductions:
Withdrawals by former
participants 220,203 424,733 229,499 1,204,789 556 297,616
---------- ---------- ---------- ----------- -------- ----------
Excess of additions over
deductions 409,875 788,977 428,337 2,072,793 26,787 (168,351)
---------- ---------- ---------- ----------- -------- ----------
Net assets available for plan
benefits at beginning of period 3,644,294 5,552,251 601,052 15,826,200
---------- ---------- ---------- ----------- -------- ----------
Subtotal 4,054,169 6,341,228 1,029,389 17,898,993 26,787 (168,351)
Transfers for plan amendment (4,054,169) (6,341,228) (1,029,389) 2,050,348 646,818 2,839,734
---------- ---------- ---------- ----------- -------- ----------
Net assets available for plan
benefits at end of period $ 0 $ 0 $ 0 $19,949,341 $673,605 $2,671,383
========== ========== ========== =========== ======== ==========
Total participants with account
balances 2,552 520 1,123
=========== ======== ==========
<CAPTION>
Fidelity Advisor Fidelity
Series IV Ltd. Fidelity Advisor Blue Chip Fidelity Newpoint
Term Bond Equity Portfolio Growth Overseas Equity
Fund Growth Fund Fund Fund Fund Total
-------------- ---------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Additions:
Contributions:
Participants' contributions $ 41,440 $ 137,197 $ 179,232 $ 77,178 $ 62,932 $ 3,305,292
Employers' contributions 1,940,567
-------------- ---------------- ------------- ----------- ----------- -----------
41,440 137,197 179,232 77,178 62,932 5,245,859
-------------- ---------------- ------------- ----------- ----------- -----------
Investment Income:
Interest 165,443
Dividends 6,067 15,558 2,473 847,851
Net unrealized (depreciation)
appreciation of Investments (3,499) 12,922 150,414 (12,242) 4,273 (1,006,697)
-------------- ---------------- ------------- ----------- ----------- -----------
2,568 28,480 150,414 (12,242) 6,746 6,597
-------------- ---------------- ------------- ----------- ----------- -----------
Assets received from new
participants 1,357,303
-------------- ---------------- ------------- ----------- ----------- -----------
Total additions 44,008 165,677 329,646 64,936 69,678 6,609,759
-------------- ---------------- ------------- ----------- ----------- -----------
Deductions:
Withdrawals by former
participants 532 3,449 8,449 1,094 1,327 2,392,247
-------------- ---------------- ------------- ----------- ----------- -----------
Excess of additions over
deductions 43,476 162,228 321,197 63,842 68,351 4,217,512
-------------- ---------------- ------------- ----------- ----------- -----------
Net assets available for plan
benefits at beginning of period 25,623,797
-------------- ---------------- ------------- ----------- ----------- -----------
Subtotal 43,476 162,228 321,197 63,842 68,351 29,841,309
Transfers for plan amendment 701,834 1,557,772 1,970,547 862,714 795,019
-------------- ---------------- ------------- ----------- ----------- -----------
Net assets available for plan
benefits at end of period $ 745,310 $ 1,720,000 $ 2,291,744 $ 926,556 $ 863,370 $29,841,309
============== ================ ============= =========== =========== ===========
Total participants with account
balances 565 1,140 1,409 851 859 2,552
============== ================ ============= =========== =========== ===========
<FN>
Note: The FirstMerit Corporation Common Stock Fund includes the Federated
Government Obligations Fund, cash, and accrued Interest and other assets.
</TABLE>
8
<PAGE> 40
FIRSTMERIT CORPORATION
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<TABLE>
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1994
<CAPTION>
Current
Cost Value
------------ ------------
<S> <C> <C>
Mutual Funds:
Federated Government Obligations Funds - 375,733.61 units $ 375,734 $ 375,734
Federated Short Interm Government - 66,627.61 units 682,650 673,605
Federated Capital Preserve - 267,138.33 units 2,671,383 2,671,383
Fidelity Advisor Series IV ltd. Term Bond - 72,642.28 units 748,790 745,310
Fidelity Advisor Series I Equity Growth - 72,642.28 units 1,712,982 1,720,000
Fidelity Blue Chip Growth - 88,313.84 units 2,288,720 2,291,744
Fidelity Overseas Fund - 33,939.78 units 953,606 926,556
Newpoint Equity Fund - 87,121.06 units 859,055 863,370
------------ ------------
10,292,920 10,267,702
------------ ------------
FirstMerit Corporation Common Stock - 785,601 shares 15,221,698 19,443,625
------------ ------------
$ 25,514,618 $ 29,711,327
============ ============
</TABLE>
9
<PAGE> 41
FIRST MERIT CORPORATION
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<TABLE>
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
for the year ended December 31, 1994
<CAPTION>
Number Number of Purchase Selling Cost of Gain (Loss)
Asset Description of Shares Transactions Price Price Asset on Sale
- -------------------------------------------- --------- ------------ ---------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Category 1: Any single transaction within
the plan year that exceeds 5% value
Federated Capital Preservation Fund
Issue: 140411109 208,704 1 $ 2,087,043
Fidelity Advisor Equity Portfolio Growth Fund
Issue: 315805101 54,573 1 $ 1,549,865
Fidelity Advisor Equity Portfolio Income Fund
Issue: 315808105 83,924 1 $ 1,359,574 $ 1,250,000 $ 109,574
Fidelity Blue Chip Growth Fund
Issue: 316389303 80,687 1 $ 2,090,612
Fidelity Blue Chip Growth Fund
Issue: 306389303 65,974 1 $ 1,704,780 $ 1,573,582 $ 131,198
Federated Government Obligations Fund
Issue: 60934N104 1,635,629 1 $ 1,635,629
Newpoint Equity Fund
Issue: 735999203 1,474,284 1 $ 1,474,284 $ 1,474,284
U.S. Treasury Bills 09/29/94
Issue: 91279N42 1,435,000 1 $ 1,431,456 $ 1,431,456
U.S. Treasury Bills 09/29/94
Issue: 91279N42 1,590,000 1 $ 1,585,170
U.S. Treasury Bills 09/29/94
Issue: 91279N42 1,590,ODO 1 $ 1,585,170 $ 1,585,170
Category 3: Series of transactions in
same security exceed 5% of value
Federated Capital Preservation Fund
Issue: 140411109 21,327 28 $ 213,269
Federated Capital Preservation Fund
Issue: 140411109 42,101 26 $ 421,014 $ 421,014
Fidelity Advisory Equity Portfolio Growth Fund
Issue: 315805101 7,517 27 $ 218,207
Fidelity Advisor Equity Portfolio Growth Fund
Issue: 315805101 13,086 13 $ 374,525 $ 333,964 $ 45,061
</TABLE>
10
<PAGE> 42
FIRSTMERIT CORPORATION
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<TABLE>
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
for the year ended December 31, 1994
<CAPTION>
Number Number of Purchase Selling Cost of Gain (Loss)
Asset Description of Shares Transactions Price Price Asset on Sale
- -------------------------------------------- --------- ------------ ---------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Fidelity Advisor Equity Portfolio Income Fund
Issue: 315805101 13,567 4 $ 210,000
Fidelity Blue Chip Growth Fund
Issue: 316389303 18,330 30 $ 465,916
Fidelity Blue Chip Growth Fund 734 13 $ 19,066 $ 19,063 $ 3
Issue: 316389303
FirstMerit Corporation Common Stock
Issue: 318677101 212,477 58 $ 5,432,895
FirstMerit Corporation Common Stock
Issue: 318677101 13,526 35 $ 318,477 $ 259,169 $ 59,308
Federated Government Obligations Fund
Issue: 60934N104 729,458 27 $ 729,458
Federated Govemment Obligations Fund 1,989,354 10 $ 1,989,354 $ 1,989,354
Issue: 60934N104
Newpoint Government Money Market Fund
Issue: 735686206 2,263,922 87 $ 2,263,922
Newpoint Government Money Market Fund
Issue: 735686206 2,473,603 51 $ 2,473,603 $ 2,473,603
Newpoint Government Money Market Fund
Issue: 735999203 5,477,968 101 $ 5,477,968
Newpoint Government Money Market Fund
Issue: 735999203 4,397,963 96 $ 4,397,963 $ 4,397,963
U.S. Treasury Bills 09/29/94
Issue: 912794N42 2,310,000 4 $ 2,304,841
U.S. Treasury Bills 09/29/94
Issue: 912794N42 875,000 2 $ 873,385 $ 873,385
<FN>
Note: Category 3 transactions do not include those identified under Category 1.
</TABLE>
11
<PAGE> 43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following Financial Statements appear in Part II of this
Report:
Consolidated Balance Sheets
December 31, 1994 and 1993
Consolidated Statements of Income
Years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Changes in Shareholders' Equity
Years ended December 31, 1994, 1993, and 1992
Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Years ended December 31, 1994, 1993 and 1992
Management's Report
Independent Auditors' Report
Report of Independent Accountants
Statements of Net Assets Available for FirstMerit
Corporation Employee Stock Purchase Plan
Benefits at December 31, 1994 and 1993
Statements of Changes in Net Assets Available for FirstMerit
Corporation Employee Stock Purchase Plan Benefits
for the years ended December 31, 1994 and 1993
Report of Independent Accountants
Statements of Net Assets Available for FirstMerit
Corporation and Subsidiaries Employees' Salary
Savings Retirement Plan Benefits December 31,
1994 and 1993
Statements of Changes in Net Assets Available for FirstMerit
Corporation and Subsidiaries Employees' Salary
Savings Retirement Plan Benefits for the years
ended December 31, 1994 and 1993
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Akron, State of Ohio, on the 27th day of April, 1995.
FIRSTMERIT CORPORATION
By: /s/ Gary J. Elek
--------------------------------------
Gary J. Elek, Senior Vice President
and Treasurer (Principal Financial Officer
and Principal Accounting Officer)
<PAGE> 45
EXHIBIT INDEX
Exhibit
No. ITEM
----------------------------------------------------------
23 Consent of Coopers & Lybrand, L.L.P.
<PAGE> 1
EXHIBIT 23
The Board of Directors
FirstMerit Corporation
We consent to the incorporation by reference in the Registration
Statement Nos. 33-7266, 33-47074, 33-47147, 33-57076, and 33-57557 on Forms
S-8, of (i) our report dated January 17, 1995, except for Note 2, as to which
the date is January 31, 1995, relating to the consolidated balance sheets of
FirstMerit Corporation and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1994
(ii) our report dated March 24, 1995, relating to the Statements of Net Assets
Available for Plan Benefits at December 31, 1994 and 1993 and the Statements of
Changes in Net Assets Available for Plan Benefits for the years then ended; and
(iii) our report dated April 7, 1995, relating to the Statements of Net Assets
Available for Plan Benefits December 31, 1994 and 1993, and the Statements of
Changes in Net Assets Available for Plan Benefits for the years then ended; all
of such reports appear in Amendment No. 1 to the annual report on Form 10-K of
FirstMerit Corporation.
/s/ Coopers & Lybrand, L.L.P.
Akron, Ohio
April 27, 1995
