<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, 1996
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 identification no.)
incorporation or organization)
III CASCADE PLAZA, 7TH FLOOR, AKRON, OHIO 44308 (330) 996-6300
(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 February 1, 1997: $1,093,842,488.
Indicate the number of shares outstanding of registrant's common stock as
of February 1, 1997: 31,910,209 Shares of Common Stock, No Par Value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of FirstMerit Corporation,
dated February 26, 1997, 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, 1996, 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
CONSOLIDATED BALANCE SHEETS
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investment securities (at market value)............................ $1,187,524 1,403,059
Federal funds sold................................................. 15,550 12,575
Loans.............................................................. 3,655,998 3,770,366
Less allowance for possible loan losses............................ 49,336 46,840
---------- ---------
Net loans....................................................... 3,606,662 3,723,526
---------- ---------
Total earning assets............................................ 4,809,736 5,139,160
---------- ---------
Cash and due from banks............................................ 222,164 287,671
Premises and equipment, net........................................ 102,139 94,158
Accrued interest receivable and other assets....................... 93,941 75,532
---------- ---------
$5,227,980 5,596,521
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-non-interest bearing..................................... $ 799,771 810,948
Demand-interest bearing......................................... 450,187 432,409
Savings......................................................... 1,309,275 1,454,876
Certificates and other time deposits............................ 1,645,642 1,803,692
---------- ---------
Total deposits.................................................. 4,204,875 4,501,925
---------- ---------
Securities sold under agreements to repurchase and other
borrowings...................................................... 423,701 486,958
Accrued taxes, expenses, and other liabilities..................... 75,697 64,757
---------- ---------
Total liabilities............................................... 4,704,273 5,053,640
---------- ---------
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 33,859,875 and 33,614,487 shares, respectively.......... 107,343 103,861
Treasury stock, 1,903,482 and 122,870 shares, respectively...... (59,258) (2,963)
Net unrealized holding (losses) on available for sale
securities..................................................... (2,217) (1,292)
Retained earnings............................................... 477,839 443,275
---------- ---------
Total shareholders' equity...................................... 523,707 542,881
---------- ---------
$5,227,980 5,596,521
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans............................... $330,309 325,763 274,498
Interest and dividends on investment securities:
Taxable............................................... 75,498 82,836 86,941
Exempt from federal income taxes...................... 5,004 6,347 7,411
-------- -------- --------
80,502 89,183 94,352
Interest on federal funds sold........................... 934 1,681 2,168
-------- -------- --------
Total interest income................................. 411,745 416,627 371,018
-------- -------- --------
Interest expense:
Interest on deposits:
Demand-interest bearing............................... 7,839 9,202 10,429
Savings............................................... 32,446 38,438 43,372
Certificates and other time deposits.................. 95,379 97,518 68,528
Interest on securities sold under agreements to
repurchase and other borrowings....................... 25,109 35,775 17,852
-------- -------- --------
Total interest expense................................ 160,773 180,933 140,181
-------- -------- --------
Net interest income................................... 250,972 235,694 230,837
Provision for possible loan losses......................... 17,751 19,763 4,624
-------- -------- --------
Net interest income after provision for possible loan
losses.............................................. 233,221 215,931 226,213
-------- -------- --------
Other income:
Trust department......................................... 12,182 10,712 13,423
Service charges on deposits.............................. 24,372 20,622 20,482
Credit card fees......................................... 11,415 9,372 8,254
Investment securities gains (losses), net................ (1,776) 539 653
Other operating income................................... 36,303 27,272 27,844
-------- -------- --------
Total other income.................................... 82,496 68,517 70,656
-------- -------- --------
Other expenses:
Salaries, wages, pension and employee benefits........... 94,554 107,735 98,749
Net occupancy expense.................................... 17,468 16,598 13,446
Equipment expense........................................ 12,894 13,417 12,231
Other operating expenses................................. 84,786 90,029 68,984
-------- -------- --------
Total other expenses.................................. 209,702 227,779 193,410
-------- -------- --------
Income before federal income taxes and extraordinary
item................................................ 106,015 56,669 103,459
Federal income taxes....................................... 35,075 30,950 32,110
-------- -------- --------
Income before extraordinary item...................... 70,940 25,719 71,349
-------- -------- --------
Extraordinary item -- gain on disposition of assets after
business combination (net of income tax effect of
$3,015).................................................. -- 5,599 --
-------- -------- --------
Net income............................................ $ 70,940 31,318 71,349
======== ======== ========
Weighted average number of common shares outstanding....... 32,608 33,454 33,289
======== ======== ========
Per share data based on average number of shares
outstanding:
Income before extraordinary item...................... $ 2.18 0.77 2.14
Extraordinary item.................................... -- 0.17 --
-------- -------- --------
Net income per share....................................... $ 2.18 0.94 2.14
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
--------------------------------------------------------------------
NET UNREALIZED
HOLDING (LOSSES) TOTAL
COMMON TREASURY AVAILABLE-FOR- RETAINED SHAREHOLDERS'
STOCK STOCK SALE SECURITIES EARNINGS EQUITY
-------- -------- ------------------- -------- -------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993..... $ 96,593 (601) -- 404,129 500,121
Net income..................... -- -- -- 71,349 71,349
Cash dividends ($.98 per
share)...................... -- -- -- (28,836) (28,836)
Stock options exercised........ 3,983 -- -- -- 3,983
Treasury shares purchased...... -- (93) -- -- (93)
Market adjustment investment
securities.................. -- -- (23,205) -- (23,205)
-------- ------- ------- ------- -------
Balance at December 31, 1994..... 100,576 (694) (23,205) 446,642 523,319
Net income..................... -- -- -- 31,318 31,318
Cash dividends ($1.02 per
share)...................... -- -- -- (35,299) (35,299)
Stock options exercised........ 3,285 -- -- -- 3,285
Treasury shares purchased...... -- (2,269) -- -- (2,269)
Market adjustment investment
securities.................. -- -- 21,913 -- 21,913
Acquisition adjustment of
fiscal year................. -- -- -- 614 614
-------- ------- ------- ------- -------
Balance at December 31, 1995..... 103,861 (2,963) (1,292) 443,275 542,881
Net income..................... -- -- -- 70,940 70,940
Cash dividends ($1.10 per
share)...................... -- -- -- (36,376) (36,376)
Stock options exercised........ 3,482 -- -- -- 3,482
Treasury shares purchased...... -- (56,295) -- -- (56,295)
Market adjustment investment
securities.................. -- -- (925) -- (925)
Acquisition adjustment of
fiscal year................. -- -- -- -- 0
-------- ------- ------- ------- -------
Balance at December 31, 1996..... $107,343 (59,258) (2,217) 477,839 523,707
======== ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 70,940 31,318 71,349
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for possible loan losses..................... 17,751 19,763 4,624
Provision for depreciation and amortization............ 10,120 8,862 8,353
Amortization of investment securities premiums, net.... 4,491 2,592 3,188
Amortization of income for lease financing............. (12,656) (8,586) (6,810)
(Gains) losses on sales of investment securities,
net.................................................. 1,776 (539) (653)
Extraordinary gain on dispositions..................... -- (5,599) --
Gain on sale of affiliate branches..................... (13,210) -- --
Deferred federal income taxes.......................... 15,549 2,305 11,172
(Increase) decrease in interest receivable............. 2,657 2,356 (5,002)
Increase in interest payable........................... 183 5,913 3,698
Amortization of values ascribed to acquired
intangibles.......................................... 3,148 3,153 3,878
Other increases (decreases)............................ (28,508) 41,282 (22,043)
--------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 72,241 102,820 71,752
--------- -------- --------
INVESTING ACTIVITIES
Dispositions of investment securities:
Available-for-sale -- sales............................... 343,600 98,688 56,673
Held-to-maturity -- maturities............................ -- 432,729 389,234
Available-for-sale -- maturities.......................... 301,468 200,895 184,294
Purchases of investment securities held-to-maturity......... -- (55,507) (263,518)
Purchases of investment securities available-for-sale....... (437,223) (437,840) (435,630)
Net (increase) decrease in federal funds sold............... (2,975) 1,125 60,888
Net (increase) decrease in loans and leases................. 111,769 (82,646) (549,033)
Purchases of premises and equipment......................... (22,405) (27,949) (17,255)
Sales of premises and equipment............................. 4,304 16,766 3,234
Sales of affiliate branches................................. 13,210 -- --
--------- -------- --------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES............ 311,748 146,259 (571,113)
--------- -------- --------
FINANCING ACTIVITIES
Net decrease in demand, NOW and savings deposits............ (139,000) (143,226) (21,539)
Net increase (decrease) in time deposits.................... (158,050) 103,694 133,315
Net increase (decrease) in securities sold under repurchase
agreements and other borrowings........................... (63,257) (125,666) 412,726
Cash dividends.............................................. (36,376) (35,299) (28,836)
Purchase of treasury shares................................. (56,295) (2,269) (93)
Proceeds from exercise of stock options..................... 3,482 3,285 3,983
--------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES............ (449,496) (199,481) 499,556
Increase (decrease) in cash and cash equivalents............ (65,507) 49,598 195
--------- -------- --------
Cash and cash equivalents at beginning of year.............. 287,671 238,073 237,878
--------- -------- --------
Cash and cash equivalents at end of year.................... $ 222,164 287,671 238,073
========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Amortized cost of the held-to-maturity investment portfolio
transferred to the available-for-sale portfolio........... $ -- 578,624 --
========= ======== ========
Cash paid during the year for:
Interest, net of amounts capitalized................... $ 91,158 100,740 97,836
Income taxes........................................... $ 18,293 22,099 31,100
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRSTMERIT CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1996, 1995 AND 1994
(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. 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: Citizens Investment Corporation, Citizens National Bank,
Citizens Savings Corporation of Stark County, EST National Bank, First
National Bank of Ohio, FirstMerit Community Development Corporation,
FirstMerit Credit Life Insurance Company, Old Phoenix National Bank of
Medina, Peoples Bank, N.A., and Peoples National Bank. The results of
operations of two former wholly-owned subsidiaries, FirstMerit Bank,
N.A. and FirstMerit Trust Company, N.A., are included in the
consolidated statements of income through December 30, 1996. These
former subsidiaries were sold December 31, 1996. All significant
intercompany balances and transactions have been eliminated in
consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and related notes. Actual results could differ from those
estimates.
(c) Investment Securities
Debt and equity securities are 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 as 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 December 31, 1995, the Corporation designated the entire
investment portfolio as available-for-sale. Classification as
available-for-sale allows the Corporation to sell securities to fund
liquidity and manage the Corporation's interest rate risk.
Prior to December 31, 1995, the Corporation had designated a portion
of its investment portfolio as held-to-maturity. The Corporation does
not maintain a trading account.
(d) 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.
(e) 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.
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
(f) Loans
Impaired loans are loans for which, based on current information or
events, it is probable that the Corporation will be unable to collect
all amounts due according to the contractual terms of the loan
agreement. Impaired loans are valued based on the present value of the
loans' expected future cash flows at the loans' effective interest
rates, at the loans' observable market price, or the fair value of the
loan collateral.
(g) 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
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.
(h) 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 judgement, deserve current recognition.
(i) 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.
(j) Mortgage Servicing Fees
The Corporation generally records loan administration fees earned for
servicing loans for investors as income is collected. Earned servicing
fees and late fees related to delinquent loan payments are also
recorded as income is collected.
(k) 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.
(l) 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
represent 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.
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
(m) 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.
(n) 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.
(o) Reclassifications
Certain previously reported amounts have been reclassified to conform
to the current reporting presentation.
2. ACQUISITIONS
On January 31, 1995, the Corporation acquired The CIVISTA Corporation, a
savings and loan holding company headquartered in Canton, Ohio ("CIVISTA"), in
exchange for approximately 6,513,119 shares of the Corporation's common stock.
The transaction was accounted for as a pooling of interests. As a result of
CIVISTA's fiscal year which ended September 30, the Corporation made an
acquisition adjustment to shareholders' equity of $614, which represented
CIVISTA's net income for the three month period ended December 31, 1994. The
accompanying consolidated financial statements for all periods presented have
been restated to account for the acquisition.
Details of the results of operations of the previously separate
corporations including CIVISTA operating results for its fiscal year ended
September 30, 1994 are as follows:
<TABLE>
<CAPTION>
FIRSTMERIT
CORPORATION CIVISTA COMBINED
----------- ------- --------
<S> <C> <C> <C>
Interest income..................................... $ 316,809 54,209 371,018
Net interest income................................. $ 200,932 29,905 230,837
Net income.......................................... $ 60,301 11,048 71,349
</TABLE>
The Corporation incurred a one-time charge of approximately $16.2 million
($0.48 per share) in the first quarter of 1995 related to the loss of certain
tax benefits as a result of converting CIVISTA's thrift operations to national
bank operations as well as other expenses related to the merger.
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.
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
3. INVESTMENT SECURITIES
Investment securities are composed of:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
December 31, 1996
Available for sale:
U.S. Treasury securities and U.S. Government
agency obligations......................... $ 660,199 1,517 5,975 655,741
Obligations of state and political
subdivisions............................... 93,694 547 654 93,587
Mortgage-backed securities................... 324,818 2,458 1,999 325,277
Other securities............................. 112,224 1,434 739 112,919
---------- ------ ------ ---------
$1,190,935 5,956 9,367 1,187,524
========== ====== ====== =========
December 31, 1995
Available for sale:
U.S. Treasury securities and U.S. Government
agency obligations......................... $ 870,412 3,852 9,297 864,967
Obligations of state and political
subdivisions............................... 108,435 914 507 108,842
Mortgage-backed securities................... 329,099 4,163 1,706 331,556
Other securities............................. 97,101 1,152 559 97,694
---------- ------ ------ ---------
$1,405,047 10,081 12,069 1,403,059
========== ====== ====== =========
</TABLE>
Effective December 31, 1995, the Corporation transferred all
held-to-maturity investments to available-for-sale. As a result of this
transfer, unrealized holding losses on available-for-sale securities were
reduced by the after-tax amount of $1.2 million.
The amortized cost and market value of investment securities including
mortgage-backed securities at December 31, 1996, 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>
AMORTIZED MARKET
COST VALUE
---------- ---------
<S> <C> <C>
Due in one year or less.............................................. $ 151,358 151,300
Due after one year through five years................................ 358,652 358,860
Due after five years................................................. 129,067 128,186
through ten years.................................................. 551,858 549,178
---------- ---------
$1,190,935 1,187,524
========== =========
</TABLE>
Proceeds from sales of investment securities during the years December 31,
1996 and 1995 were $343,600 and $98,688, respectively. Gross gains of $2,003 and
$1,384 and gross losses of $3,779 and $845 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
$724,886 and $741,185 at December 31, 1996 and 1995, respectively.
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
4. LOANS
Loans consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
---------- ---------
<S> <C> <C>
Commercial, financial and agricultural............................... $ 748,858 588,864
Loans to individuals, net of unearned income......................... 811,561 777,990
Real estate.......................................................... 1,936,342 2,223,561
Lease financing...................................................... 159,237 179,951
---------- ---------
$3,655,998 3,770,366
========== =========
</TABLE>
The Corporation grants loans principally to customers located within the
State of Ohio.
Information with respect to impaired loans is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
------ -----
<S> <C> <C>
Impaired Loans........................................................... $9,671 8,921
Allowance for Possible Loan Losses....................................... $1,913 676
Interest Recognized...................................................... $ 622 55
====== =====
</TABLE>
Earned interest on impaired loans is recognized as income is collected.
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 years ended December 31, 1996 and
1995 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Aggregate amount at beginning of year.................................. $ 34,173 46,311
Additions (deductions):
New loans............................................................ 16,549 14,493
Repayments........................................................... (10,235) (9,446)
Changes in directors and their affiliations.......................... (3,412) (17,185)
-------- -------
Aggregate amount at end of year........................................ $ 37,075 34,173
======== =======
</TABLE>
5. ALLOWANCE FOR POSSIBLE LOAN LOSSES
Transactions in the allowance for possible loan losses are summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year............................... $ 46,840 35,834 35,030
Additions (deductions):
Provision for possible loan
losses................................................ 17,751 19,763 4,624
Loans charged off........................................ (20,841) (12,925) (7,695)
Recoveries on loans previously charged off............... 5,975 4,168 3,875
Decrease from sale of subsidiary......................... (389) -- --
-------- -------- --------
Balance at end of year..................................... $ 49,336 $ 46,840 $ 35,834
======== ======== ========
</TABLE>
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
6. MORTGAGE SERVICING RIGHTS AND MORTGAGE SERVICING
In accordance with Statement of Financial Accounting Standards No. 122
"Accounting for Mortgage Servicing Rights," when the Corporation intends to sell
originated or purchased loans and retain the related servicing rights, it
allocates a portion of the total costs of the loans to the servicing rights
based on estimated fair value. Fair value is estimated based on market prices,
when available, or the present value of future net servicing income, adjusted
for such factors as discount rates and prepayments. Servicing rights are
amortized over the average life of the loans using the straight-line method.
The components of mortgage servicing rights are as follows:
<TABLE>
<S> <C>
Balance at January 1, 1996, net....................................... $ 15
Additions............................................................. 2,434
Scheduled amortization................................................ (148)
Less: allowance for impairment........................................ 0
------
Balance at December 31, 1996.......................................... $2,301
======
</TABLE>
In 1996, the Corporation's income before federal income taxes was increased
by approximately $2.3 million as a result of the adoption of SFAS No. 122. The
consolidated financial statements for 1995 and 1994 were prepared in accordance
with Statement of Financial Accounting Standards No. 65 "Accounting for Certain
Mortgage Banking Activities," which provided for servicing rights to be recorded
on purchased loans, but not originated loans.
SFAS No. 122 also requires the Corporation to assess its capitalized
servicing rights for impairment based on their current fair value. As permitted
by SFAS No. 122, the Corporation disaggregates its servicing rights portfolio
based on loan type and interest rate which are the predominant risk
characteristics of the underlying loans. If any impairment results after current
market assumptions are applied, the value of the servicing rights is reduced
through the use of a valuation allowance.
At December 31, 1996 and 1995, the Corporation serviced for others
approximately $871 million and $717 million, respectively. The following table
provides servicing information for 1996:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Balance January 1, 1996............................................ $ 716,852
Additions:
Loans originated and sold to investors........................... 126,861
Existing loans sold to investors................................. 167,746
Reductions:
Sale of servicing rights......................................... --
Loans sold servicing released.................................... --
Regular amortization, prepayments and foreclosures............... (140,402)
---------
Balance December 31, 1996.......................................... $ 871,057
=========
</TABLE>
7. RESTRICTIONS ON CASH AND DIVIDENDS
The average balance on deposit with the Federal Reserve Bank to satisfy
reserve requirements amounted to $7,306 during 1996. 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,
1996, cash and due from banks included $5,155 deposited with the Federal Reserve
Bank and other banks for these reasons.
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
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 1997 are restricted by the regulatory agencies
principally to the total of 1997 net income. Regulatory approval must be
obtained for the payment of dividends of any greater amount.
8. PREMISES AND EQUIPMENT
The components of premises and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, ESTIMATED
--------------------- USEFUL
1996 1995 LIVES
-------- -------- ---------
<S> <C> <C> <C>
Land...................................................... $ 11,425 11,450 --
Buildings................................................. 81,642 82,012 10-35 yrs
Equipment................................................. 58,126 55,926 3-15 yrs
Leasehold improvements.................................... 13,124 13,346 1-20 yrs
-------- ------- --------
164,317 162,734
Less accumulated depreciation and amortization............ 62,178 68,576
-------- -------
$102,139 94,158
======== =======
</TABLE>
Amounts included in other expenses for depreciation and amortization
aggregated $10,120, $8,862 and $8,353 for the years ended December 31, 1996,
1995 and 1994, respectively.
At December 31, 1996, the Corporation was obligated for rental commitments
under noncancelable operating leases on branch offices and equipment as follows:
<TABLE>
<CAPTION>
YEARS ENDING LEASE
DECEMBER 31, COMMITMENTS
- - ------------ -----------
<S> <C>
1997 $ 8,389
1998 7,405
1999 6,532
2000 4,065
2001 4,570
2002-2009 12,304
-------
$43,265
=======
</TABLE>
Rentals paid under noncancelable operating leases amounted to $8,819,
$9,574 and $7,325 in 1996, 1995 and 1994, respectively.
9. CERTIFICATES AND OTHER TIME DEPOSITS
The aggregate amounts of certificates and other time deposits of $100 and
over at December 31, 1996 and 1995 were $271,634 and $230,429, respectively.
Interest expense on these certificates and time deposits amounted to $13,016 in
1996, $14,360 in 1995, and $9,406 in 1994.
10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWINGS
At December 31, 1996 and 1995, securities sold under agreements to
repurchase totaled $368,566 and $336,083, respectively. The average balance of
securities sold under agreements to repurchase and other borrowings for the
years ended December 31, 1996 and 1995, amounted to $515,556 and $609,247,
respectively. In 1996, the weighted average annual interest rate amounted to
4.87%, compared to 5.87% in 1995. The maximum amount of these borrowings at any
month end amounted to $608,782 in 1996 and $740,586 in 1995.
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
At December 31, 1996, and 1995, the Corporation had $55,135 and $75,875,
respectively, of Federal Home Loan Bank ("FHLB") advances. The 1996 balance
includes: $37,000 that have maturities within one year with interest rates of
5.38% to 6.15%; $12,017 with maturities over one year to five years with
interest rates of 4.65% to 6.40%; and $6,118 over five years with interest rates
of 4.75% to 8.10%.
Residential mortgage loans totaling $82,702 and $107,813 at December 31,
1996 and 1995, respectively, were pledged to secure FHLB advances.
11. FEDERAL INCOME TAXES
Federal income taxes are comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Taxes currently payable....................................... $19,526 31,660 20,938
Deferred expense.............................................. 15,549 2,305 11,172
------- ------ ------
$35,075 33,965 32,110
</TABLE>
Actual Federal income tax expense differs from expected Federal income tax
as shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Statutory rate.................................................. 35.0% 35.0% 35.0%
Increase (decrease) in rate due to:
Interest income on tax-exempt securities and tax-free loans,
net........................................................ -1.9% -3.8% -3.0%
Goodwill amortization......................................... 1.5% 0.9% 0.7%
Reduction to excess tax reserves.............................. -1.4% -0.4% -3.0%
Exercise of options at acquisition............................ 0.0% -0.3% -2.0%
Loan loss recapture at acquisition............................ 0.0% 19.0% 3.0%
Merger expenses at acquisition................................ 0.0% 1.4% 0.0%
Other......................................................... -0.1% 0.2% 0.3%
----- ----- -----
Effective tax rates............................................. 33.1% 52.0% 31.0%
===== ===== =====
</TABLE>
For 1996, 1995 and 1994, the deferred income tax expense results from
temporary differences in the recognition of income and expense for Federal
income tax and financial reporting purposes. The sources and tax effect of these
temporary differences are presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Loan loss provision........................................... $ 6,323 (2,205) (254)
Depreciation.................................................. (232) 375 (72)
Deferred loan fees, net....................................... 631 1,487 261
Leasing....................................................... 6,708 8,442 9,638
FAS 106 postretirement benefits............................... (1,012) (434) (755)
FAS 87 pension expense........................................ 1,678 (1,767) 491
FHLB stock dividends.......................................... 844 771 (265)
Severance costs............................................... 1,315 (1,315) --
Valuation reserves............................................ 675 (526) (929)
Other......................................................... (1,381) (2,523) 3,057
------- ------ ------
Total deferred income tax..................................... $15,549 2,305 11,172
======= ====== ======
</TABLE>
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Principal components of the Corporation's net deferred tax (liability) are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Excess of book loan provision over tax loan provision.................. $ 5,254 11,577
Excess of tax depreciation over book depreciation...................... (3,858) (4,090)
Leasing book basis income over tax basis............................... (28,014) (21,306)
Deferred loan fees tax basis income over book basis.................... 930 1,561
Postretirement book basis expense over tax basis....................... 3,684 2,672
Pension book basis expense over tax basis.............................. 121 1,799
FHLB stock book basis over tax basis................................... (3,930) (3,086)
Security portfolio tax basis over book basis........................... 1,192 695
Severance costs book basis over tax basis.............................. -- 1,315
Valuation reserves book basis over tax basis........................... 780 1,455
Other.................................................................. 3,075 1,694
-------- --------
Total net deferred tax (liability)..................................... ($20,766) (5,714)
======== ========
</TABLE>
12. 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.
The following table sets forth the plans' funded status and amounts
recognized in the Corporation's consolidated financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $49,703, $48,567 and $44,114, respectively......... $(55,222) (54,780) (46,845)
======== ======= =======
Projected benefit obligation............................... (70,119) (73,926) (64,788)
Plan assets at fair value, primarily U.S. government
obligations, corporate bonds and investments in equity
funds................................................. 71,929 67,035 67,042
-------- ------- -------
Plan assets in excess of projected benefit obligation...... 1,810 (6,891) 2,254
Unrecognized net gains (losses)............................ (3,215) 675 (3,223)
Unrecognized prior service cost............................ 3,311 3,340 4,103
Remaining unrecognized net asset being amortized over
employees' average remaining service life................ (999) (1,206) (832)
-------- ------- -------
Prepaid (accrued) pension cost............................. $ 907 (4,082) 2,302
======== ======= =======
Expected long-term rate of return on assets................ 9.00% 9.00% 9.00%
Weighted-average discount rate............................. 7.50% 7.25% 8.25%
Rate of increase in future compensation levels............. 4.75% 4.75% 5.00%
======== ======= =======
</TABLE>
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Net pension cost consists of the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost.................................................. $ 3,728 3,290 3,729
Interest cost on projected benefit obligation................. 4,978 5,175 4,902
Actual return on plan assets.................................. (3,827) (8,563) (963)
Net total of other components................................. (2,197) 2,976 (4,347)
------- ------ ------
Net periodic pension cost..................................... $ 2,682 2,878 3,321
======= ====== ======
</TABLE>
The Corporation maintains a savings plan under Section 401(k) of the
Internal Revenue Code, covering substantially all full-time and part-time
employees after six months of continuous employment. Under the plan, employee
contributions are partially matched by the Corporation. Such matching becomes
vested when the employee reaches five years of credited service. Total savings
plan expense was $2,108, $2,294 and $1,874 for 1996, 1995 and 1994,
respectively.
13. 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.
The cost of postretirement benefits expected to be provided to current and
future retirees is accrued over those employees' service periods. Prior to 1993,
postretirement benefits were accounted for on a cash basis. In addition to
recognizing the cost of benefits for the current period, recognition is being
provided for the cost of benefits earned in prior service periods (the
transition obligation). The Corporation has elected to amortize the transition
obligation by charges to income over a twenty year period on a straight line
basis.
The following table sets forth the plan's status and amounts recognized in
the Corporation's consolidated financial statements.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $(20,259) (15,691)
Fully eligible actives................................... (2,882) (5,628)
Other actives............................................ (7,747) (8,166)
-------- -------
Total accumulated postretirement benefit obligation........ (30,888) (29,485)
Unrecognized prior net loss................................ 6,394 5,622
Unrecognized prior service costs........................... -- 647
Unrecognized transition obligation......................... 13,129 16,156
-------- -------
Accrued postretirement benefit cost........................ $(11,365) (7,060)
======== =======
</TABLE>
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Net postretirement benefit cost includes:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Service cost............................................... $ 945 811
Interest cost.............................................. 2,133 2,107
Actual return on plan assets............................... -- --
Amortization of transition obligation...................... 821 950
Net of other amortization and deferrals.................... 323 --
------ -----
Net periodic postretirement cost........................... $4,222 3,868
====== =====
</TABLE>
The following actuarial assumptions effect the determination of these
amounts:
<TABLE>
<CAPTION>
PLAN YEAR JANUARY 1,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Expected long-term rate of return on assets........... N/A N/A
Weighted-average discount rate........................ 7.25% 7.25%
Medical trend rates:
Pre-65.............................................. 12.4%-6.0% 13.3%-6.0%
Post-65............................................. 11.8%-6.1% 12.5%-6.1%
</TABLE>
Shown below is the impact of a 1% increase in the medical trend rates
(i.e., pre-65, 13.9% for 1996 grading down to 7.0% in 2002; post-65, 13.2%
grading down to 7.1% in 2027). This information is required disclosure under
SFAS No. 106.
<TABLE>
<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................... $ 3,029 3,139 3.6%
Accumulated postretirement benefit obligation
for health care benefits................... $ 28,152 29,560 5.0%
</TABLE>
14. STOCK OPTIONS
The 1992 Stock Option Program provides incentive and non-qualified stock
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 Option
Plan and these options are 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
and options granted as non-qualified stock options have terms established by the
Compensation Committee of the Board and approved by the non-employee directors
of the Board. Options are cancelable within defined periods based upon the
reason for termination of employment.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." This statement defines a fair value based method of accounting
for an employee stock option or similar equity instrument. The statement does,
however, allow an entity to continue to measure compensation cost for those
plans using the intrinsic value based
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees."
In 1996 the Corporation adopted provisions of SFAS No. 123 by providing
disclosures of the pro forma effect on net income and earnings per share that
would result if the fair value compensation element were to be recognized as
expense. The following table shows the pro forma earnings and earnings per share
for 1996 and 1995 along with significant assumptions used in determining the
fair value of the compensation amounts.
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Pro forma amounts:
Net income.......................................... $ 67,825 30,377
Earnings per share.................................. 2.08 0.91
Assumptions:
Dividend yield...................................... 4.4% 4.4%
Expected volatility................................. 23.3% 23.7%
Risk free interest rate............................. 5.2%-6.7% 6.3%-7.3%
Expected lives...................................... 5-6 yrs. 5 yrs.
</TABLE>
A summary of stock option activity for the last three years follows:
<TABLE>
<CAPTION>
SHARES
------------------------- RANGE OF
AVAILABLE OPTION PRICE
FOR GRANT OUTSTANDING PER SHARE
---------- ---------- --------------
<S> <C> <C> <C>
Balance
December 31, 1993.............................. 1,505,560 839,745 $ 4.32 - 24.19
Exercised................................... -- (57,544) 4.32 - 24.13
Granted..................................... (73,590) 73,590 23.25 - 23.50
--------- -------- --------------
Balance
December 31, 1994.............................. 1,431,970 855,791 4.32 - 24.19
Canceled.................................... (495,190) --
Exercised................................... -- (420,883) 4.32 - 24.13
Granted..................................... (119,450) 119,450 22.50 - 26.25
--------- -------- --------------
Balance
December 31, 1995.............................. 817,330 554,358 4.32 - 24.19
Canceled.................................... -- (13,290)
Exercised................................... -- (172,520) 4.32 - 24.19
Granted..................................... (578,990) 578,990 29.50 - 33.94
--------- -------- --------------
Balance
December 31, 1996.............................. 238,340 947,538 $ 4.61 - 33.94
--------- -------- --------------
</TABLE>
The Employee Stock Purchase Plan provides full-time and part-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
12,512 and 12,752 shares issued in 1996 and 1995, respectively.
15. PARENT COMPANY
Condensed financial information of FirstMerit Corporation (Parent Company
only) is as follows:
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
CONDENSED BALANCE SHEETS 1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Cash and due from banks.................................... $ 21,897 4,866
Investment securities...................................... 1,161 1,036
Loans to subsidiaries...................................... 40,789 104,017
Investment in subsidiaries, at equity in underlying value
of their net assets...................................... 430,708 433,571
Net loans.................................................. 30,179 --
Goodwill................................................... 267 400
Other assets............................................... 10,386 10,363
-------- -------
$535,387 554,253
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued and other liabilities.............................. $ 11,680 11,372
Shareholders' equity....................................... 523,707 542,881
-------- -------
$535,387 554,253
======== =======
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
CONDENSED STATEMENTS OF INCOME 1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Income:
Cash dividends from subsidiaries........................... $ 73,800 87,400 44,916
Other income............................................... 60,348 37,069 23,423
-------- ------- ------
134,148 124,469 68,339
Interest and other expenses................................ 59,970 59,652 29,988
-------- ------- ------
Income before federal income tax benefit and equity in
undistributed income of subsidiaries..................... 74,178 64,817 38,351
Federal income tax (benefit)............................... (1,189) 5,215 (4,103)
-------- ------- ------
75,367 59,602 42,454
Equity in undistributed income (loss) of subsidiaries,
including extraordinary gain in 1995 of $5,599........... (4,427) (28,284) 28,895
-------- ------- ------
$ 70,940 31,318 71,349
======== ======= ======
</TABLE>
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
CONDENSED STATEMENTS OF INCOME 1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Operating activities:
Net income................................................. $ 70,940 31,318 71,349
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed income of subsidiaries............. 4,427 28,284 (28,895)
Gain on sale of assets -- FMER Bank, N.A................... (490) -- --
Cash received on FMER Bank, N.A. sale...................... 13,060 -- --
Addition to Provision for loan losses...................... -- 1,100 --
Other...................................................... 3,396 12,190 (11,467)
--------- ------- -------
Net cash provided by operating activities.................. 91,333 72,892 30,987
--------- ------- -------
Investing activities:
Proceeds from maturities of investment securities.......... -- 10,262 3,544
Loans to subsidiaries...................................... 63,228 (47,954) (5,497)
Payments for investments in and advances to subsidiaries... -- -- (11,000)
Repayments for investments in/advances to subsidiaries..... -- -- 1,171
Net increase in loans...................................... (31,208) -- --
Purchases of investment securities......................... (133) (196) (993)
--------- ------- -------
Net cash (used) provided by investing activities........... 31,887 (37,888) (12,775)
--------- ------- -------
Financing activities:
Cash dividends............................................. (36,376) (35,299) (28,836)
Proceeds from exercise of stock options.................... 3,482 3,285 3,890
Purchase of treasury shares................................ (56,295) (2,269) (93)
Loans made to First National Bank of Ohio.................. (17,000) -- --
--------- ------- -------
Net cash used by financing activities...................... (106,189) (34,283) (25,039)
--------- ------- -------
Net increase (decrease) in cash and cash equivalents....... 17,031 721 (6,734)
Cash and cash equivalents at beginning of year............. 4,866 4,145 10,879
--------- ------- -------
Cash and cash equivalents at end of year................... $ 21,897 4,866 4,145
========= ======= =======
</TABLE>
16. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
Disclosures of fair value information about certain financial instruments,
whether or not recognized in the consolidated balance sheets are provided as
follows. 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 non-financial
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 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.
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
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.
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.
The estimated fair values of the Corporation's financial instruments based
on the assumptions described above are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1996 1995
------------------------ -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Financial assets:
Investment securities...................... $1,187,524 1,187,524 1,403,059 1,403,059
Federal funds sold......................... 15,550 15,550 12,575 12,575
Net loans.................................. 3,606,662 3,585,534 3,723,526 3,704,374
Cash and due from banks.................... 222,164 222,164 287,671 287,671
Accrued interest receivable................ 23,489 23,489 35,584 35,584
Financial liabilities:
Deposits................................... 4,204,875 4,209,789 4,501,925 4,514,823
Securities sold under agreements to
repurchase and other borrowings......... 423,701 423,852 486,958 486,809
Accrued interest payable................... 16,433 16,433 16,252 16,252
Unrecognized financial instruments:
Commitments to extend credit............... -- -- -- --
Standby letters of credit and financial
guarantees written...................... -- -- -- --
Loans sold with recourse................... -- -- -- --
</TABLE>
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
17. 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.
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 non-performance
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
obligations as it does for on-balance-sheet instruments.
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.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
---------- ---------
<S> <C> <C>
Commitments to extend credit................................. $1,295,118 1,015,723
========== =========
Standby letters of credit and financial guarantees written... $ 89,404 75,898
========== =========
Loans sold with recourse..................................... $ 1,361 1,702
========== =========
</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 counter party. 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 $30,965 and $35,427 at December 31, 1996 and 1995, respectively,
the remaining guarantees extend in varying amounts through 2020. 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.
18. EXTRAORDINARY GAIN AND UNUSUAL CHARGES
During the third quarter, the corporation recorded a one-time Savings
Association Insurance Fund ("SAIF") recapitalization charge that totaled $10.2
million. The charge was mandated by legislation passed by Congress and signed
into law September 30, 1996.
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
During 1995, the Corporation recognized an extraordinary gain of $5,599,
net of taxes of $3,015, from the sale of several apartment complexes formerly
owned by a CIVISTA subsidiary.
Other 1995 unusual charges included the following items: a) fees, expenses,
and lost tax benefits of $16,214 related to the acquisitions of CIVISTA; b) an
expense of $2,199 related to an early retirement program; and c) a reengineering
plan that was implemented to improve the overall operating effectiveness of the
Corporation, improve productivity within the branch network and centralize
operational functions previously handled by affiliate banks. The charges
associated with this plan totaled $17,838 on a pre-tax basis, the components of
which were as follows: $6,584 in adjustments to the value of buildings,
equipment and other assets; $2,875 increase to reserves; $4,688 in severance
costs; and $3,691 in consulting, sales training, and merchandising expenses
consistent with the launch of FirstMerit's new retail emphasis. The severance
charge relates to a management and employee staff reduction of approximately 400
people. As of December 31, 1996, implementation of the reengineering plan that
began in 1995 was completed.
19. 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.
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
20. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial and per share data for the years ended December 31,
1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
QUARTERS
--------------------------------------------
FIRST SECOND THIRD FOURTH
-------- ------- ------- -------
IN THOUSANDS (EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total interest income.............. 1996 $101,627 103,385 104,362 102,371
==== ======== ======= ======= =======
1995 $102,866 104,793 104,801 104,167
==== ======== ======= ======= =======
Net interest income................ 1996 $ 60,390 63,505 63,928 63,149
==== ======== ======= ======= =======
1995 $ 58,507 57,709 59,285 60,193
==== ======== ======= ======= =======
Provision for possible loan
losses........................... 1996 $ 2,957 3,170 3,485 8,139
==== ======== ======= ======= =======
1995 $ 2,712 2,586 2,820 11,645
==== ======== ======= ======= =======
Income (loss) before federal income
taxes............................ 1996 $ 28,817 28,679 19,835 28,684
==== ======== ======= ======= =======
1995 $ 18,100 19,026 24,916 (5,373)
==== ======== ======= ======= =======
Extraordinary item, net of tax
effect........................... 1996 -- -- -- --
==== ======== ======= ======= =======
1995 -- -- -- 5,599
==== ======== ======= ======= =======
Net income......................... 1996 $ 19,253 19,221 13,447 19,019
==== ======== ======= ======= =======
1995 $ (1,184) 12,664 16,649 3,189
==== ======== ======= ======= =======
Income (loss) per share before
extraordinary item............... 1996 $ 0.58 0.59 0.42 0.59
==== ======== ======= ======= =======
1995 $ (0.04) 0.38 0.50 (0.07)
==== ======== ======= ======= =======
Extraordinary item, net of tax
effect, per share................ 1996 -- -- -- --
==== ======== ======= ======= =======
1995 -- -- -- 0.17
==== ======== ======= ======= =======
Net income per share............... 1996 $ 0.58 0.59 0.42 0.59
==== ======== ======= ======= =======
1995 $ (0.04) 0.38 0.50 0.10
==== ======== ======= ======= =======
</TABLE>
21. 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,
subject to certain conditions, the Rights would be distributed after either of
the following events: (1) a person acquires 10% or more of the Common Stock of
the Corporation, or (2) the commencement of a tender offer that would result in
a change in the ownership of 10% 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. Subject to certain conditions, the
Corporation may redeem the Rights for $0.01 per Right.
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRSTMERIT CORPORATION AND SUBSIDIARIES
22. REGULATORY MATTERS
The Corporation is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory -- and possibly additional
discretionary -- actions by regulators that, if undertaken, could have a
material effect on the Corporation's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Corporation must meet specific capital guidelines that involve quantitative
measures of the Corporation's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Corporation's
capital amounts and classification are also subject to quantitative judgments by
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Corporation to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital to risk-weighted assets and of Tier I
capital to average assets. Management believes, as of December 31, 1996, that
the Corporation meets all capital adequacy requirements to which it is subject.
The capital terms used in this note to the consolidated financial statements are
defined in the regulations as well as in the "Capital Resources" section of
Management's Discussion and Analysis of financial condition and results of
operations.
As of December 31, 1996, the most recent notification from the Office of
the Comptroller of the Currency ("OCC") categorized the Corporation as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Corporation must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the
table. In Management's opinion there are no conditions or events since the OCC's
notification that have changed the Corporation's categorization as well
capitalized.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
PER CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURCHASES ACTION PROVISIONS
------------------ -------------------- ---------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ----- ---------- ----- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital
(to Risk Weighted Assets)........ $573,247 13.82% *331,861 *8.0% *414,826 *10.0%
Tier I Capital
(to Risk Weighted Amount)........ $523,911 12.63% *165,931 *4.0% *248,896 *6.0%
Tier I Capital
(to Average Assets).............. $523,911 5.63% *217,575 *4.0% *271,893 *5.0%
<FN>
* greater than or equal to
</TABLE>
<PAGE> 26
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/ JOHN R. COCHRAN /s/ JACK R. GRAVO
JOHN R. COCHRAN JACK R. GRAVO
President and Chief Executive Vice President
Executive Officer Finance and Administration
<PAGE> 27
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of FirstMerit
Corporation and subsidiaries as of December 31, 1996 and 1995, 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, 1996.
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 statements 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, 1996 and 1995 and the results of
their operations and their cash flows for each of the years in the three year
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand
Akron, OH
January 16, 1997
<PAGE> 28
AVERAGE CONSOLIDATED BALANCE SHEETS, FULLY-TAX EQUIVALENT INTEREST RATES AND
INTEREST DIFFERENTIAL
FIRSTMERIT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------
1996 1995 1994
------------------------------- ------------------------------ ------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
---------- -------- ------- --------- -------- ------- --------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment securities:
U.S. Treasury securities
and U.S. Government
agency obligations
(taxable)............. $1,110,581 69,010 6.21% 1,218,604 75,759 6.22% 1,289,286 74,960 5.81%
Obligations of states
and political
subdivisions (tax-
exempt)............... 100,630 7,404 7.36 122,244 9,369 7.66 145,199 11,011 7.58%
Other securities........ 99,977 6,489 6.49 106,176 7,077 6.67 190,239 11,981 6.30%
---------- ------- --------- ------- --------- -------
Total investment
securities........ 1,311,188 82,903 6.32 1,447,024 92,205 6.37 1,624,724 97,952 6.03%
Federal funds sold........ 19,233 934 4.86 22,011 1,681 7.64 55,126 2,168 3.93%
Loans..................... 3,812,900 330,951 8.68 3,818,486 326,581 8.55 3,350,162 275,488 8.22%
Less allowance for
possible loan losses.... 47,392 -- -- 37,923 -- -- 36,040 -- --
---------- ------- --------- ------- --------- -------
Net loans........... 3,765,508 330,951 8.79 3,780,563 326,581 8.64 3,314,122 275,488 8.31%
---------- ------- --------- ------- --------- -------
Total earning
assets............ 5,095,929 414,788 8.14 5,249,598 420,467 8.01 4,993,972 375,608 7.52%
------- ------- -------
Cash and due from banks... 207,533 220,787 204,513
Other assets.............. 175,020 184,426 187,273
---------- --------- ---------
Total assets........ $5,478,482 5,654,811 5,385,758
========== ========= =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand -- non-interest
bearing............... $ 745,102 -- -- 725,287 -- -- 666,469 -- --
Demand -- interest
bearing............... 447,524 7,839 1.75 426,608 9,202 2.16 460,994 10,429 2.26%
Savings................. 1,399,011 32,446 2.32 1,514,374 38,438 2.54 1,710,909 43,372 2.54%
Certificates and other
time deposits......... 1,772,150 95,379 5.38 1,782,817 97,518 5.47 1,607,616 68,528 4.26%
---------- ------- --------- ------- --------- -------
Total deposits...... 4,363,787 135,664 3.11 4,449,086 145,158 3.26 4,445,988 122,329 2.75%
Federal funds purchased,
securities sold under
agreements to repurchase
and other borrowings.... 515,556 25,109 4.87 609,247 35,775 5.87 374,351 17,853 4.77%
---------- ------- --------- ------- --------- -------
Total interest
bearing
liabilities....... 4,134,241 160,773 3.89 4,333,046 180,933 4.18 4,153,870 140,182 3.37%
---------- ------- --------- ------- ---------
Other liabilities......... 71,240 68,440 50,559
Shareholders' equity...... 527,899 528,038 514,860
---------- --------- ---------
Total liabilities
and shareholders'
equity............ $5,478,482 5,654,811 5,385,758
========== ========= =========
Net yield on earning
assets.................. 254,015 4.98 239,534 4.56 235,426 4.71
======= ==== ======= ==== ======= ====
Interest rate spread...... 4.25 3.83 4.15
==== ==== ====
Income on tax-exempt
securities and loans.... 6,241 8,034 10,454
======= ======= =======
</TABLE>
- - ---------------
Notes: Interest income on tax-exempt securities and loans have been adjusted to
a fully-taxable equivalent basis.
Non-accrual loans have been included in the average balances.
<PAGE> 29
FIRSTMERIT CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
REPORT ON AUDITS OF FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<PAGE> 30
CONTENTS
PAGE
----
Report of Independent Accountants................................... 1
Financial Statements:
Statements of Net Assets Available for Plan Benefits
at December 31, 1996 and 1995................................. 2
Statements of Changes in Net Assets Available for Plan
Benefits for the years ended December 31, 1996 and
1995.......................................................... 3
Notes to Financial Statements....................................... 4-5
FIRSTMERIT CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
<PAGE> 31
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, 1996 and 1995 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, 1996 and 1995 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
April 14, 1997
<PAGE> 32
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
--------------- ---------------
<S> <C> <C>
Cash $ 169,828 $ 118,479
Receivable from employees 14,161 13,198
Receivable from employer - 24,528
--------------- ---------------
183,989 156,205
Investment in FirstMerit Corporation common
stock, at fair value 897,866 734,490
--------------- ---------------
Net assets available for plan benefits $ 1,081,855 $ 890,695
=============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
FIRSTMERIT CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
<PAGE> 33
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the years ended December 31, 1996 and 1995
1996 1995
----------------- -----------------
<S> <C> <C>
Additions to plan assets attributable to:
Employee contributions $ 360,854 $ 310,278
Employer contributions 61,851 36,301
Dividend income 29,898 25,775
Net appreciation (depreciation) in fair value of
FirstMerit Corporation common stock 88,628 128,081
----------------- -----------------
Total additions 541,231 500,435
----------------- -----------------
Deductions to plan assets attributable to:
Benefits paid to participants 318,349 205,827
Dividends paid to participants 31,722 25,755
----------------- -----------------
Total deductions 350,071 231,582
----------------- -----------------
Net increase 191,160 268,853
Net assets available for plan benefits, beginning of year 890,695 621,842
----------------- -----------------
Net assets available for plan benefits, end of year $ 1,081,855 $ 890,695
================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 34
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. As of January 1, 1996, contributions may
also include reinvestment of dividends. 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 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. As of
January 1, 1996, the Plan was amended to require that upon termination,
employees will automatically receive their Plan assets.
FIRSTMERIT CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
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.
FIRSTMERIT CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
<PAGE> 36
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.
USE OF ESTIMATES: The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual
results may differ from those estimates.
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS: Management has determined that the
carrying amount of financial instruments, as reported on the statement
of net assets available for Plan benefits, approximates fair value.
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.
<PAGE> 37
FIRSTMERIT CORPORATION AND SUBSIDIARIES
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
REPORT ON AUDITS OF FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
for the years ended December 31, 1996 and 1995
<PAGE> 38
<TABLE>
<CAPTION>
INDEX OF FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
<S> <C>
PAGES
Report of Independent Accountants.................................................................. 1
Financial Statements:
Statements of Net Assets Available for Plan Benefits at December 31, 1996 and 1995............. 2
Statements of Changes in Net Assets Available for Plan Benefits for the years
ended December 31, 1996 and 1995 ............................................................. 3
Notes to Financial Statements.................................................................. 4-8
Supplemental Schedules:
Assets Held for Investment as of December 31, 1996............................................ 9
Transactions or Series of Transactions in Excess of 5% of the Current Value of
Plan Assets .................................................................................. 10
</TABLE>
FIRSTMERIT CORPORATION AND SUBSIDIARIES
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<PAGE> 39
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 Employees' Salary Savings Retirement
Plan (the Plan) as of December 31, 1996 and 1995, 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, 1996 and 1995, 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 and 10 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 11, 1997
<PAGE> 40
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
<S> <C> <C>
Mutual funds:
Federated Government Obligations Fund $ 1,170 $ 133,401
Federated Short/Intermediate Government Fund 893,257 841,341
Federated Capital Preservation Fund 2,557,366 2,576,585
Fidelity Advisor Series IV Ltd. Term Bond Fund 980,163 921,724
Fidelity Advisor Equity Portfolio Growth Fund 3,855,632 2,977,691
Fidelity Blue Chip Growth Fund 4,403,645 3,603,369
Fidelity Overseas Fund 1,388,084 1,130,681
Newpoint Equity Fund 1,954,353 1,451,931
----------------- -----------------
16,033,670 13,636,723
----------------- -----------------
FirstMerit Corporation Common Stock 32,496,061 26,372,280
----------------- -----------------
Total 48,529,731 40,009,003
----------------- -----------------
Cash 143,978 98,354
Receivable from participants 133,638
Receivable from employers 82,399
Loans to participants 334,416 169,548
----------------- -----------------
694,431 267,902
----------------- -----------------
Net assets available for plan benefits $ 49,224,162 $ 40,276,905
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<PAGE> 41
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
<S> <C> <C>
Additions:
Contributions:
Participants' contributions $ 3,617,325 $ 3,547,691
Employers' contributions 2,234,702 2,233,162
----------------- -----------------
5,852,027 5,780,853
----------------- -----------------
Investment income:
Interest 19,406 10,321
Dividends 1,333,178 1,160,095
Net realized gain and unrealized appreciation (depreciation) of investments 5,917,287 6,127,616
----------------- -----------------
7,269,871 7,298,032
----------------- -----------------
Assets received from new participants 61,004 1,044,452
----------------- -----------------
Total additions 13,182,902 14,123,337
----------------- -----------------
Deductions:
Withdrawals by former participants 4,235,645 3,687,741
----------------- -----------------
Total deductions 4,235,645 3,687,741
----------------- -----------------
Excess of additions over deductions 8,947,257 10,435,596
----------------- -----------------
Net assets available for plan benefits at beginning of period 40,276,905 29,841,309
----------------- -----------------
Net assets available for plan benefits at end of period $ 49,224,162 $ 40,276,905
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN:
The following brief description of the FirstMerit Corporation and
Subsidiaries (FirstMerit) 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, Peoples Bank N.A.,
FirstMerit Trust Co. N.A., EST National Bank, and Citizens National Bank
(effective February 1, 1995) (the "employers") 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
The Plan permits each participant to contribute from one percent
to fiftee 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.
The Plan also includes a Retiree Medical Matching Program
whereby each employer makes additional matching contributions equal to
50% of the participant's voluntary pretax employee contributions which
do not exceed three percent of the participant's basic compensation.
Participants will become vested in the Retiree Medical Matching Program
upon achieving five years of service or upon attaining normal
retirement age.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<PAGE> 43
NOTES TO FINANCIAL STATEMENTS
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.
The Plan allows each participant to direct their contributions 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%. Employer matching contributions are
invested solely in FirstMerit Corporation common stock purchased on the
open market by the trustee.
D. Payment of Benefits:
Distributions to participants are 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 participant's
life expectancy at the date such payments commence, if less.
E. Administrative Expenses
All expenses associated with administering the Plan, including the
trustee's 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. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and related notes. Actual results could differ from
those estimates.
C. Investments
Investments in securities are stated at current value. The current
value of marketable securities is based on quotations obtained from
national securities exchanges.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<PAGE> 44
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Summary of Significant Accounting Policies, Continued:
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.
Securities transactions are recognized on the trade date (the date
the order to buy or sell is executed).
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 these
investments.
D. Risk and Uncertainties: The Plan generates a significant portion
of its revenues from investments in domestic and international mutual
funds, bonds and FirstMerit corporation common stock. As a result, the
Plan's revenues and net assets available for plan benefits could vary
based on the performance of the financial markets.
E. Fair Value Disclosure of Financial Instruments: Management has
determined that the carrying amount of financial instruments, as
reported on the Statement of Net Assets Available for Plan Benefits,
approximates fair value.
3. Investments:
During 1996 and 1995, the Plan's investments (including investments
bought, sold, and held during the period) appreciated (depreciated) in
value as follows:
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
<S> <C> <C>
Mutual funds:
Federated Short/Intermediate Government $ (7,236) $ 21,338
Fidelity Advisor Series IV Ltd. Term Bond (30,222) 41,586
Fidelity Advisor Equity Portfolio Growth 282,228 549,719
Fidelity Blue Chip Growth Fund 187,783 386,868
Fidelity Overseas Fund 56,036 64,283
Newpoint Equity Fund 127,461 258,306
FirstMerit Corporation Common Stock 3,868,260 3,783,432
---------------- ----------------
Total $ 4,484,310 $ 5,105,532
================ ================
</TABLE>
<PAGE> 45
4. Federal Income Taxes:
The Plan and Trust qualify under Section 401 of the Internal Revenue Code
and the Trust is exempt from federal income taxes under Section 501(a).
The plan obtained its latest determination letter on November 13, 1995,
in which the Internal Revenue Service stated that the plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code. The plan has been amended since receiving the
determination letter. However, the plan administrator and the plan's tax
counsel believe that the plan is currently designed and being operated in
compliance with the applicable requirements of the Internal Revenue Code.
Therefore, no provision for income taxes has been included in the plan's
financial statements.
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 employers.
6. Acquisition:
Effective January 1, 1995, FirstMerit Corporation acquired CIVISTA
Corporation located in Canton, Ohio. The 401(k) plan of the CIVISTA
Corporation was merged into the FirstMerit Corporation and Subsidiaries
Employees' Salary Savings Retirement Plan effective February 1, 1996.
FIRSTMERIT CORPORATION AND SUBSIDIARIES
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<PAGE> 46
7. STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS BY FUND:
for the year ended December 31, 1996
<TABLE>
<CAPTION>
Federated Fidelity Fidelity
FirstMerit Short/ Federated Advisor Advisor
Corporation Intermediate Capital Series IV Equity Fidelity
Common Government Preservation Ltd. Term Portfolio Blue Chip
Stock Fund Fund Fund Bond Fund Growth Fund Growth Fund
-------------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Additions:
Contributions:
Participants' contributions $ 1,148,157 $ 114,497 $ 318,106 $ 134,178 $ 649,831 $ 599,000
Employers' contributions 2,234,702
-------------- ------------ ------------ ------------ ------------ -------------
3,382,859 114,497 318,106 134,178 649,831 599,000
-------------- ------------ ------------ ------------ ------------ -------------
Investment income:
Interest 19,407
Dividends 989,092 44,596 145,278 63,356 32,468 34,778
Net unrealized appreciation
(depreciation) of investments 4,536,434 (6,715) (28,553) 487,291 529,616
-------------- ------------ ------------ ------------ ------------ -------------
5,544,933 37,881 145,278 34,803 519,759 564,394
-------------- ------------ ------------ ------------ ------------ -------------
Assets received from new participants 5,205 10,925 4,877 14,316 15,009
-------------- ------------ ------------ ------------ ------------ -------------
Total additions 8,932,997 152,378 474,309 173,858 1,183,906 1,178,403
-------------- ------------ ------------ ------------ ------------ -------------
Deductions:
Withdrawals by former participants 2,514,917 100,463 493,528 115,419 305,965 378,127
-------------- ------------ ------------ ------------ ------------ -------------
Total deductions 2,514,917 100,463 493,528 115,419 305,965 378,127
Excess of additions over deductions 6,418,080 51,915 (19,219) 58,439 877,941 800,276
-------------- ------------ ------------ ------------ ------------ -------------
Net assets available for plan benefits at 26,773,583 841,341 2,576,585 921,724 2,977,691 3,603,369
beginning of period
-------------- ------------ ------------ ------------ ------------ -------------
Net assets available for plan benefits at end
of period $ 33,191,663 $ 893,256 $ 2,557,366 $ 980,163 $ 3,855,632 $ 4,403,645
============== ============ ============ ============ ============ =============
<CAPTION>
Fidelity
Overseas Newpoint
Fund Equity Fund Total
------------- ------------ ---------------
<S> <C> <C> <C>
Additions:
Contributions:
Participants' contributions $ 264,406 $ 389,150 $ 3,617,325
Employers' contributions 2,234,702
------------- ------------ ---------------
264,406 389,150 5,852,027
------------- ------------ ---------------
Investment income:
Interest 19,407
Dividends 16,110 7,498 1,333,176
Net unrealized appreciation
(depreciation) of investments 141,979 257,236 5,917,288
------------- ------------ ---------------
158,089 264,734 7,269,871
------------- ------------ ---------------
Assets received from new participants 3,304 7,368 61,004
------------- ------------ ---------------
Total additions 425,799 661,252 13,182,902
------------- ------------ ---------------
Deductions:
Withdrawals by former participants 168,396 158,830 4,235,645
------------- ------------ ---------------
Total deductions 168,396 158,830 4,235,645
Excess of additions over deductions 257,403 502,422 8,947,257
------------- ------------ ---------------
Net assets available for plan benefits at
beginning of period 1,130,681 1,451,931 40,276,905
------------- ------------ ---------------
Net assets available for plan benefits at end
of period $ 1,388,084 $ 1,954,353 $ 49,224,162
============= ============ ===============
Note: The FirstMerit Corporation Common Stock Fund includes cash, receivables from participants and employers and loans to
participants.
</TABLE>
FIRSTMERIT CORPORATION AND SUBSIDIARIES
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<PAGE> 47
ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1996
<TABLE>
<CAPTION>
Current
Cost Value
----------------- -----------------
<S> <C> <C>
Mutual Funds:
Federated Government Obligations Funds - 1,169.88 units $ 1,170 $ 1,170
Federated Short/Intermediate Government - 86,304.99 units 888,201 893,257
Federated Capital Preservation - 255,736.55 units 2,557,366 2,557,366
Fidelity Advisor Series IV ltd. Term Bond - 93,260.08 units 972,279 980,163
Fidelity Advisor Equity Portfolio Growth - 90,699.41 units 3,016,666 3,855,632
Fidelity Blue Chip Growth - 134,709.23 units 3,825,969 4,403,645
Fidelity Overseas Fund - 45,009.20 units 1,294,817 1,388,084
Newpoint Equity Fund - 137,436.95 units 1,564,268 1,954,353
----------------- -----------------
14,120,736 16,033,670
FirstMerit Corporation Common Stock - 915,382 shares 20,622,443 32,496,061
Cash 143,978 143,978
Receivable from participants 133,638 133,638
Receivable from employers 82,399 82,399
Loans to participants 334,416 334,416
----------------- -----------------
$ 35,437,610 $ 49,224,162
================= =================
</TABLE>
FIRSTMERIT CORPORATION AND SUBSIDIARIES
EMPLOYEES' SALARY SAVINGS RETIREMENT PLAN
<PAGE> 48
ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS
December 31, 1996
<TABLE>
<CAPTION>
Number Number of Purchase Selling Cost of Gain
Asset Description of Shares Transactions Price Price Asset on Sale
- - ---------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------
Category 3: Series of transactions
in same security exceeds 5% of value
<S> <C> <C> <C> <C> <C> <C>
FirstMerit Corporation Common Stock
Issue: 337915102 145,415 100 $ 4,569,006
FirstMerit Corporation Common Stock
Issue: 337915102 75,697 171 $ 2,305,665 $ 1,638,470 $ 667,195
Federated Government Obligations Fund
Issue: 60934N104 4,442,415 152 4,442,415
Federated Government Obligations Fund
Issue: 60934N104 4,574,653 196 4,574,653 4,574,653
</TABLE>
<PAGE> 49
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, 1996 and 1995
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Changes in Shareholders'
Equity Years ended December 31, 1996, 1995,
and 1994
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Years ended December 31, 1996, 1995 and 1994
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, 1996 and 1995
Statements of Changes in Net Assets Available for
FirstMerit Corporation Employee Stock
Purchase Plan Benefits for the years ended
December 31, 1996 and 1995
Notes to Financial Statements
Report of Independent Accountants
<PAGE> 50
Statements of Net Assets Available for FirstMerit
Corporation and Subsidiaries Employees'
Salary Savings Retirement Plan Benefits
December 31, 1996 and 1995
Statements of Changes in Net Assets Available for
FirstMerit Corporation and Subsidiaries
Employees' Salary Savings Retirement Plan
Benefits for the years ended December 31,
1996 and 1995
Notes to Financial Statements
<PAGE> 51
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 29th day of April, 1997.
FIRSTMERIT CORPORATION
By: /s/ Jack R. Gravo
--------------------------------
Jack R. Gravo, Executive Vice President,
Finance and Administration (Principal
Financial Officer and Principal
Accounting Officer)
<PAGE> 52
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 16, 1997, relating to the consolidated balance
sheets of FirstMerit Corporation and subsidiaries as of December 31, 1996 and
1995, 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,
1996; (ii) our report dated April 14, 1997, relating to the Statements of Net
Assets Available for Plan Benefits of Employee Stock Purchase Plan at December
31, 1996 and 1995 and the Statements of Changes in Net Assets Available for
Plan Benefits for the years then ended; and (iii) our report dated April 11,
1997, relating to the Statements of Net Assets Available for Plan Benefits of
Employee's Salary Savings Retirement Plan at December 31, 1996 and 1995, 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 29, 1997
