<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1998
COMMISSION FILE NUMBER 0-10161
FIRSTMERIT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-1339938
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
III CASCADE PLAZA, 7TH FLOOR, AKRON, OHIO 44308-1103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(330) 996-6300
(TELEPHONE NUMBER)
OUTSTANDING SHARES OF COMMON STOCK,
AS OF MARCH 31, 1998
61,245,221
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 SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
<PAGE> 2
FIRSTMERIT CORPORATION
PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
- - - -----------------------------
The following statements included in the quarterly unaudited report to
shareholders are incorporated by reference:
Consolidated Balance Sheets as of March 31, 1998, December 31, 1997
and March 31, 1997
Consolidated Statements of Income and Comprehensive Income for the
three months ended March 31, 1998 and 1997
Consolidated Statements of Changes in Shareholders' Equity for the
year ended December 31, 1997 and for the three months ended March 31,
1998
Consolidated Statements of Cash Flows for the three months ended
March 31, 1998 and 1997
Notes to Consolidated Financial Statements as of March 31, 1998,
December 31, 1997, and March 31, 1997
Management's Discussion and Analysis of Financial Conditions as of
March 31, 1998, December 31, 1997 and March 31, 1997 and Results of
Operations for the quarters ended March 31, 1998 and 1997 and for the
year ended December 31, 1997.
<PAGE> 3
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands)
(Unaudited) (Unaudited)
March 31 December 31 March 31
- - - ------------------------------------------------------------------------------------------------------------
1998 1997 1997
<S> <C> <C> <C>
ASSETS
Investment securities $ 1,166,734 1,116,787 1,102,487
Federal funds sold 100 33,100 17,100
Commercial loans 1,611,071 1,553,707 1,444,943
Mortgage loans 833,454 852,482 935,249
Installment loans 925,452 922,227 909,192
Home Equity loans 248,718 250,513 204,559
Credit card loans 90,867 103,041 88,004
Tax-free loans 8,741 8,947 14,508
Leases 140,710 143,958 154,020
------------------------------------
Loans less unearned income 3,859,013 3,834,875 3,750,475
Less allowance for possible loan losses 56,039 53,774 49,637
------------------------------------
Net loans 3,802,974 3,781,101 3,700,838
Cash and due from banks 179,437 166,742 217,568
Premises and equipment, net 100,560 99,765 100,713
Accrued interest receivable and other assets 117,379 109,966 86,305
------------------------------------
$ 5,367,184 5,307,461 5,225,011
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-non-interest bearing $ 739,519 769,187 718,390
Demand-interest bearing 474,535 470,601 454,547
Savings 1,303,677 1,278,933 1,296,023
Certificates and other time deposits 1,728,400 1,736,490 1,651,048
------------------------------------
Total deposits 4,246,131 4,255,211 4,120,008
Securities sold under agreements to repurchase
and other borrowings 517,956 441,755 504,257
------------------------------------
Total funds 4,764,087 4,696,966 4,624,265
Accrued taxes, expenses, and other liabilities 87,716 80,159 79,531
------------------------------------
Total liabilities 4,851,803 4,777,125 4,703,796
Shareholders' equity:
Series preferred stock, without par value:
authorized and unissued 7,000,000 shares - - -
Common stock, without par value:
authorized 80,000,000 shares; issued 68,142,674,
68,127,314 and 67,850,258 shares, respectively 110,197 110,069 108,688
Treasury stock, 6,897,453, 6,159,845 and 4,577,612 shares,
respectively (133,609) (108,734) (68,207)
Accumulated other comprehensive income 1,879 3,246 (7,876)
Retained earnings 536,914 525,755 488,610
------------------------------------
Total shareholders' equity 515,381 530,336 521,215
------------------------------------
$ 5,367,184 5,307,461 5,225,011
=====================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
FIRSTMERIT CORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEETS
- - - ----------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Quarters
---------------------------------------------------------------
1998 1997
-------------- ----------------------------------------------
1st 4th 3rd 2nd 1st
- - - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment securities $ 1,128,798 1,072,571 1,070,448 1,091,932 1,148,175
Federal funds sold 3,479 136,589 18,417 17,686 7,404
Commercial loans 1,580,524 1,534,687 1,509,609 1,485,582 1,409,832
Mortgage loans 849,138 850,065 892,428 934,125 941,633
Installment loans 918,595 929,092 948,031 925,216 880,395
Home Equity loans 249,277 246,329 236,532 219,711 199,881
Credit card loans 96,613 94,244 88,954 87,108 88,657
Tax free loans 8,798 10,430 12,593 13,891 14,816
Leases 141,999 144,661 147,722 152,745 157,036
--------------------------------------------------------------
Loans less unearned income 3,844,944 3,809,508 3,835,869 3,818,378 3,692,250
Less allowance for possible
loan losses 55,428 52,910 51,530 50,471 49,666
--------------------------------------------------------------
Net loans 3,789,516 3,756,598 3,784,339 3,767,907 3,642,584
Cash and due from banks 173,618 180,071 178,440 179,243 183,034
Premises and equipment, net 100,268 99,659 100,495 100,487 101,606
Accrued interest receivable
and other assets 112,969 112,944 111,536 101,854 79,602
--------------------------------------------------------------
$ 5,308,648 5,358,432 5,263,675 5,259,109 5,162,405
===============================================================
LIABILITIES
Deposits:
Demand-non-interest bearing $ 745,761 756,838 741,827 738,417 711,995
Demand-interest bearing 466,334 452,685 447,256 447,398 446,893
Savings 1,284,677 1,275,827 1,273,592 1,283,787 1,288,069
Certificates and other time
deposits 1,731,546 1,733,328 1,728,686 1,696,932 1,647,357
--------------------------------------------------------------
Total deposits 4,228,318 4,218,678 4,191,361 4,166,534 4,094,314
Securities sold under agreements to
repurchase and other borrowings 456,187 502,553 466,525 495,178 454,334
--------------------------------------------------------------
Total funds 4,684,505 4,721,231 4,657,886 4,661,712 4,548,648
Accrued taxes, expenses and
other liabilities 92,164 111,439 89,185 85,395 87,938
--------------------------------------------------------------
Total liabilities 4,776,669 4,832,670 4,747,071 4,747,107 4,636,586
SHAREHOLDERS' EQUITY 531,979 525,762 516,604 512,002 525,819
--------------------------------------------------------------
$ 5,308,648 5,358,432 5,263,675 5,259,109 5,162,405
==============================================================
</TABLE>
<PAGE> 5
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
- - - ----------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
(In thousands except per share data)
Quarters Ended
March 31,
1998 1997
-----------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 84,718 80,600
Interest and dividends on securities:
Taxable 16,398 16,756
Exempt from Federal income taxes 986 1,120
Interest on Federal funds sold 47 86
-----------------------
Total interest income 102,149 98,562
-----------------------
Interest expense:
Interest on deposits:
Demand-interest bearing 1,435 1,767
Savings 8,022 7,303
Certificates and other time deposits 22,916 21,676
Interest on securities sold under agreements
to repurchase and other borrowings 5,676 5,312
-----------------------
Total interest expense 38,049 36,058
-----------------------
Net interest income 64,100 62,504
Provision for possible loan losses 5,463 4,161
-----------------------
Net interest income after provision
for possible loan losses 58,637 58,343
-----------------------
Other income:
Trust department income 3,415 3,111
Service charges on depositors' accounts 6,885 6,507
Credit card fees 4,009 2,960
Service fees - other 2,038 1,978
Securities gains 1,548 463
Loan sales and servicing 1,573 1,123
Other operating income 4,185 3,434
-----------------------
Total other income 23,653 19,576
-----------------------
82,290 77,919
-----------------------
Other expenses:
Salaries, wages, pension and employee benefits 23,827 22,981
Net occupancy expense 4,176 4,661
Equipment expense 3,181 3,497
Other operating expense 19,600 16,608
-----------------------
Total other expenses 50,784 47,747
-----------------------
Income before Federal income taxes 31,506 30,172
Federal income taxes 9,541 9,939
-----------------------
Net income $ 21,965 20,233
=======================
Other comprehensive income, net of tax
Unrealized gain (losses) on available-
for-sale securities (1,367) (5,659)
-----------------------
Comprehensive Income $ 20,598 14,574
=======================
Per share data based on average number of
shares outstanding:
Net Income - basic $ 0.36 0.32
=======================
Net Income - diluted $ 0.35 0.32
=======================
Dividends paid $ 0.16 0.145
Weighted-average shares outstanding - basic 61,731,556 63,695,444
Weighted-average shares outstanding - diluted 62,576,989 64,222,751
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- - - ----------------------------------------------------------
Year Ended December 31, 1997 and
Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
(In Thousands)
-------------------------------------------------------------------------
Accumulated
Other Total
Common Treasury Comprehensive Retained Shareholders'
Stock Stock Income Earnings Equity
-------- ------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $107,343 (59,258) (2,217) 477,839 523,707
Net Income - - - 86,363 86,363
Cash dividends ($0.61 per share) - - - (38,447) (38,447)
Stock options exercised 2,726 - - - 2,726
Treasury shares purchased - (49,476) - - (49,476)
Market adjustment investment securities - - 5,463 - 5,463
-------- ------- ------ ------- -------
Balance at December 31, 1997 $110,069 (108,734) 3,246 525,755 530,336
======== ======== ====== ======= =======
Net Income - - - 21,965 21,965
Cash dividends ($0.16 per share) - - - (10,806) (10,806)
Stock options exercised 128 - - - 128
Treasury shares purchased - (24,875) - - (24,875)
Market adjustment investment securities - - (1,367) - (1,367)
-------- ------- ------ ------- -------
Balance at March 31, 1998 - Unaudited $110,197 (133,609) 1,879 536,914 515,381
======== ======== ====== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997
- - - -------------------------------------------
<TABLE>
<CAPTION>
(In thousands)
-------------------------
1998 1997
-------------------------
Operating Activities
- - - --------------------
<S> <C> <C>
Net income $21,965 20,233
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 5,463 4,161
Provision for depreciation and amortization 2,627 2,595
Amortization of investment securities premiums, net 347 1,267
Amortization of income for lease financing (2,603) (3,403)
Gains on sales of investment securities, net (1,548) (463)
Increase (decrease) of deferred federal income taxes (795) 10,531
Increase in interest receivable (1,170) (995)
Increase (decrease) in interest payable 124 (689)
Amortization of values ascribed to acquired intangibles 356 467
Other decreases (3,851) 5,205
--------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 20,915 38,909
--------------------------
Investing Activities
- - - ---------------------
Dispositions of investment securities:
Available-for-sale - sales 161,685 73,687
Available-for-sale - maturities 53,789 50,352
Purchases of investment securities available-for-sale (260,107) (48,514)
Net (increase) decrease in federal funds sold 33,000 (1,550)
Net (increase) decrease in loans and leases, except sales (24,733) (94,934)
Sales of loans - -
Purchases of premises and equipment (3,490) (3,394)
Sales of premises and equipment 68 2,225
--------------------------
NET CASH USED BY INVESTING ACTIVITIES (39,788) (22,128)
--------------------------
Financing Activities
- - - --------------------
Net decrease in demand, NOW and savings deposits (990) (90,273)
Net increase (decrease) in time deposits (8,090) 5,406
Net increase in securities sold under repurchase
agreements and other borrowings 76,201 80,556
Cash dividends (10,806) (9,462)
Purchase of treasury shares (24,875) (8,949)
Proceeds from exercise of stock options 128 1,345
--------------------------
NET CASH USED (PROVIDED) BY FINANCING ACTIVITIES 31,568 (21,377)
Decrease (increase) in cash and cash equivalents 12,695 (4,596)
Cash and cash equivalents at beginning of year 166,742 222,164
--------------------------
Cash and cash equivalents at end of year $179,437 217,568
==========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
- - - --------------------------------------------------
Cash paid during the year for:
Interest, net of amounts capitalized $19,116 69,250
Income taxes $6,000 15,462
=========================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
FIRSTMERIT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements March 31, 1998, December 31, 1997 and
March 31, 1997
1. Organization - FirstMerit Corporation ("Corporation"), is a bank holding
company whose principal assets are the common stock of its wholly owned
subsidiary, FirstMerit Bank, N. A. In addition FirstMerit Corporation owns all
of the common stock of Citizens Investment Corporation, Citizens Savings
Corporation of Stark County, FirstMerit Community Development Corporation, and
FirstMerit Credit Life Insurance Company. On September 1, 1997, First National
Bank of Ohio changed its name to FirstMerit Bank, N. A. As of October 14, 1997,
The Old Phoenix National Bank of Medina and EST National Bank were merged into
FirstMerit Bank, N. A. As of March 21, 1998, Citizens National Bank, Peoples
National Bank, and Peoples Bank, N. A. were merged into FirstMerit Bank, N.A.
2. Acquisitions - On October 8, 1997, the Corporation acquired three branches
from First Western Bancorp. The acquisition added $46.7 million of deposits and
closed January 16, 1998. The acquisition expands market share in Lake County, an
important market for the Corporation.
On November 2, 1997, the Corporation signed an agreement to acquire
CoBancorp Inc., a bank holding company headquartered in Elyria, Ohio with
consolidated assets of approximately $666 million. CoBancorp Inc. will be merged
with and into the Corporation. The merger is expected to provide the Corporation
with the leading deposit market share in Lorain county as well as provide access
into the growing Columbus, Ohio market. Based on the Corporation's December 31,
1997 closing price of $28.37 per share, the value of the transaction is
approximately $174.3 million.
In connection with the merger, the Corporation plans to issue between
3.6 million and 4.3 million shares of its common stock. The Corporation's Board
of Directors approved the repurchase of up to 4.3 million shares of the
Corporation's common stock associated with the merger. Subsequent to the
approval, however, the Corporation suspended this stock repurchase program.
The CoBancorp Inc. merger is expected to close on May 22, 1998 subject to
customary conditions. The merger is structured as a tax-free exchange for
CoBancorp Inc. shareholders receiving shares of the Corporation, and will be
accounted for as a purchase transaction.
<PAGE> 9
On April 5, 1998, the Corporation signed a definitive agreement for the
acquisition of Security First Corp., a $678 million holding company
headquartered in Mayfield Heights, Ohio. Subsidiaries of Security First Corp.
include Security Federal Savings & Loan Association of Cleveland and First
Federal Savings Bank of Kent. The company operates 14 branch offices throughout
six counties in Northeast Ohio. Under terms of the agreement, the transaction
will be structured as a tax-free exchange at a fixed exchange ratio of 0.8855
shares of FirstMerit stock for each share of Security First Corp. Based on
FirstMerit's April 3, 1998 closing price of $33.06 per share, the transaction
is valued at $29.28 per share, for a total value of $256 million. The
acquisition, which will be accounted for as a pooling of interests, is expected
to close by the end of the third quarter 1998, subject to customary conditions
for closing including regulatory and Security First Corp. shareholder approval.
The Corporation's previously announced stock repurchase programs have been
suspended as of April 5, 1998.
3. Earnings per Share - The reconciliation of the numerator and denominator of
basic earnings per share ("EPS") with that of diluted EPS is presented as
follows:
<TABLE>
<CAPTION>
Income Shares
(Numerator) (Denominator) Per Share Amount
<S> <C> <C> <C>
THREE MONTHS ENDED
MARCH 31, 1998:
Basic EPS:
Net income $21,965 61,731,556 $0.36
Effect of dilutive stock
options 845,433
Diluted EPS:
Net income plus assumed
exercising of options
$21,965 62,576,989 $0.35
THREE MONTHS ENDED
MARCH 31, 1997:
Basic EPS:
Net income $20,233 63,695,444 $0.32
Effect of dilutive stock
options 527,307
Diluted EPS:
Net income plus assumed
exercising of options $20,233 64,222,751 $0.32
</TABLE>
4. Comprehensive Income - As of January 1, 1998, the Corporation adopted
Financial Accounting Standards Board (FASB) Statement No. 130, "Reporting
Comprehensive Income." Statement No. 130 establishes new rules for reporting and
display of comprehensive income and its components; however, the adoption of
Statement No. 130 has no effect on the Corporation's net income, shareholders'
equity, or earnings per share. Statement No. 130 requires unrealized gains or
losses on available-for-sale securities, which prior to adoption were reported
separately in shareholders' equity, to be included in "other comprehensive
income." Prior period financial information has been restated to reflect
implementation of Statement No. 130.
<PAGE> 10
5. New Accounting Standards - In June 1997, the FASB issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which is
effective for fiscal years beginning after December 15, 1997, but is not
required to be applied to interim period financial statements in the year of
adoption. Statement No. 131 changes the way public companies report segment
information in annual financial statements and also requires those companies to
report selected segment information in interim financial reports to
shareholders.
In February 1998, the FASB issued Statement No. 132, "Employer's Disclosures
about Pensions and Other Post Retirement Benefits." Statement No. 132 revises
employer's disclosures about pension and other post retirement benefit plans
but does not change the measure of recognition of those plans. The statement
standardizes the disclosure requirements to the extent practicable, requires
additional information on changes in the benefit obligations and the fair value
of plan assets that will aid financial analysis, and eliminates certain
disclosures that are no longer useful. Statement No. 132 is effective for
fiscal years beginning after December 15, 1997. Interim period application in
the year of adoption is not required.
6. Management believes the interim consolidated financial statements reflect all
adjustments consisting only of normal recurring accruals, necessary for fair
presentation of the March 31, 1998 and March 31, 1997 statements of condition
and the results of operations for the quarters ended March 31, 1998 and 1997.
7. The Corporation cautions that any forward looking statements contained in
this report, in a report incorporated by reference to this report or made by
management of the Corporation, involve risks and uncertainties and are subject
to change based upon various factors. Actual results could differ materially
from those expressed or implied. Reference is made to the section titled
"Forward-looking Statements" in the Corporation's Form 10-K for the period
ended December 31, 1997.
<PAGE> 11
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Average Consolidated Balance Sheet, Fully-tax Equivalent Interest Rates and
Interest Differential
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months ended March 31, Year ended December 31,
-------------------------------- ----------------------------
1998 1997
-------------------------------- ----------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment securities $ 1,128,798 18,008 6.47% 1,095,505 71,126 6.49%
Federal funds sold 3,479 47 5.48% 41,636 2,250 5.40%
Loans, net of unearned income 3,844,944 84,811 8.95% 3,789,231 337,661 8.91%
Less allowance for possible loan losses 55,428 51,155
----------- --------- ---------- ---------
Net loans 3,789,516 84,811 - 3,738,076 337,661 -
Cash and due from banks 173,618 - - 176,697 - -
Other assets 213,237 - - 201,871 - -
----------- --------- ---------- ---------
Total assets $ 5,308,648 102,866 - 5,253,785 411,037 -
=========== =========== ========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-
non-interest bearing $ 745,761 - - 733,394 - -
Demand-
interest bearing 466,334 1,435 1.25% 448,976 6,467 1.44%
Savings 1,284,677 8,022 2.53% 1,279,859 30,839 2.41%
Certificates and other time deposits 1,731,546 22,916 5.37% 1,701,886 91,406 5.37%
----------- --------- ----- ---------- --------
Total deposits 4,228,318 32,373 3.11% 4,164,115 128,712 3.09%
Federal funds purchased, securities sold
under agreements to repurchase and 456,187 5,676 5.05% 477,454 23,657 4.95%
other borrowings
Other liabilities 92,164 - 92,598 -
Shareholders' equity 531,979 - 519,618 -
---------- --------- ----------- ---------
Total liabilities and shareholders' equity $ 5,308,648 38,049 - 5,253,785 152,369 -
========== ========= ========== =========
Total earning assets $ 4,977,221 102,866 8.38% 4,926,372 411,037 8.34%
========== =========== ========== =========
Total interest bearing liabilities $ 3,938,744 38,049 3.92% 3,908,175 152,369 3.90%
========== =========== ========== =========
Net yield on earning assets 64,817 5.28% 258,668 5.25%
========== ====== ========== ======
Interest rate spread 4.46% 4.44%
====== ======
<CAPTION>
Three Months ended March 31,
-------------------------------
1997
-------------------------------
Average Average
Balance Interest Rate
-------------------------------
<S> <C> <C> <C>
ASSETS
Investment securities 1,148,175 18,604 6.57%
Federal funds sold 7,404 86 4.71%
Loans, net of unearned income 3,692,250 80,733 8.87%
Less allowance for possible loan losses 49,666
----------------------
Net loans 3,642,584 80,733 -
Cash and due from banks 183,034 - -
Other assets 181,208 - -
----------------------
Total assets 5,162,405 99,423 -
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand-
non-interest bearing 711,995 - -
Demand-
interest bearing 446,893 1,767 1.60%
Savings 1,288,069 7,303 2.30%
Certificates and other time deposits 1,647,357 21,676 5.34%
----------------------
Total deposits 4,094,314 30,746 3.05%
Federal funds purchased, securities sold
under agreements to repurchase and 454,334 5,312 4.74%
other borrowings
Other liabilities 87,938 -
Shareholders' equity 525,819 -
----------------------
Total liabilities and shareholders' equity 5,162,405 36,058 -
======================
Total earning assets 4,847,829 99,423 8.32%
======================
Total interest bearing liabilities 3,836,653 36,058 3.81%
======================
Net yield on earning assets 63,365 5.30%
=========== ======
Interest rate spread 4.51%
======
</TABLE>
*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> 12
RESULTS OF OPERATIONS
FirstMerit Corporation's net income for the quarter was $22.0 million,
up 8.6 percent from the $20.2 million earned for the same quarter last year.
Return on average equity (ROE) and return on average assets (ROA) for
the first quarter of 1998 were 16.75 percent and 1.68 percent, respectively.
This compares favorably to an ROE and ROA of 15.61 percent and 1.59 percent,
respectively, reported for the prior year quarter.
Net interest income on a fully tax-equivalent basis for the first
quarter of 1998 was $64.8 million, up 2.3 percent above the level reported for
the same 1997 period. For this quarter compared to the prior year quarter,
growth in earning assets more than offset the slight decline in net interest
margin. Average earning assets were $5.0 billion, up 2.7 percent from the 1997
first quarter. Compared to the prior year quarter, net interest margin declined
two basis points, from 5.30 percent to 5.28 percent this quarter, as a result of
increased funding costs.
Excluding securities gains/losses, non-interest income was $22.1
million, a gain of 15.7 percent above the $19.1 million reported the prior year
quarter. Much of this improvement came from credit card fees, which rose 35
percent, loan sales and servicing income, up 40 percent, and other fee income,
up 21.9 percent. The increase from loan sales and servicing was a result of
higher volume at FirstMerit Mortgage Corporation and the sale of residential
real estate loans to continue the restructure of loan mix toward higher yielding
commercial and consumer credits. As a percent of net revenue, non-interest
income was 25.4 percent compared to 23.2 percent in the first quarter of 1997.
Non-interest expenses totaled $50.8 million, up 6.4 percent from first
quarter 1997. Of this $3 million increase, salaries contributed $1.2 million,
bankcard and loan processing, $1.6 million and professional services, $1.0
million. Improvements were experienced in benefits expense, occupancy and
equipment expense, and advertising. The first quarter 1998 efficiency ratio was
57.75 percent compared to 57.32 percent the prior year.
The provision for loan losses grew 31 percent above year earlier
levels, $5.5 million versus $4.2 million, reflecting the continuing shift in
FirstMerit's loan portfolio from residential real estate loans to commercial and
consumer loans, which historically have exhibited higher loss rates.
Non-performing assets were 0.45 percent of total loans and other real estate
compared to 0.30 percent a year ago. The loan loss reserve rose to 1.45 percent
of total loans at quarter end, compared to 1.32 percent for the prior year
quarter.
<PAGE> 13
Period-end loan growth was 2.9 percent above 1997 levels, derived
mainly from growth in commercial loans. Keeping pace with loan growth, deposits
increased 3.0 percent in the same period.
Total shareholders' equity at March 31, 1998 was $515.4 million, a 1.1
percent decline from $521.2 at 1998 first quarter end. Earnings of $88 million
over the preceding twelve-month period were more than offset by cash dividends
of $40 million and the reduction in equity caused by the results of stock
buyback activity.
Basic earnings per share for the first quarter were $0.36 compared to
$0.32 for the same quarter in 1997. The components of change in per share income
for the quarters ended March 31, 1998 and 1997 are summarized in the following
table:
CHANGES IN BASIC EARNINGS PER SHARE
-----------------------------------
<TABLE>
<CAPTION>
Three months ended
March 31,
1998/1997
------------------------------
<S> <C>
Net income per share March 31, 1997 $0.32
Increases (decreases) due to:
Net interest income - taxable equivalent 0.02
Provision for possible loan losses (0.02)
Other income 0.07
Other expenses (0.05)
Federal income taxes - taxable equivalent 0.01
Change from difference in beginning and ending shares
outstanding 0.01
------------------------------
Net change in net income per share 0.04
------------------------------
Net income per share March 31, 1998 $0.36
==============================
</TABLE>
NET INTEREST INCOME
Net interest income, the Corporation's principal source of earnings, is
the difference between the interest income generated by earning assets
(primarily loans and investment securities) and the total interest paid on
interest bearing funds (primarily deposits and other borrowings). For the
purpose of this discussion, net interest income is presented on a fully-taxable
equivalent ("FTE") basis, to provide a comparison among types of interest
earning assets. That is, interest on tax-free securities and tax-exempt loans
has been restated as if such interest were taxed at the
<PAGE> 14
statutory Federal income tax rate of 35%, adjusted for the non-deductible
portion of interest expense incurred to acquire the tax-free assets.
Net interest income FTE for the quarter ended March 31, 1998 was $64.8
million compared to $63.4 million for the same period one year ago, an increase
of $1.4 million or 2.3%. The rise in net interest income occurred because the
increase in interest income outpaced higher interest expense.
First quarter FTE interest income was $102.9 million compared to $99.4
million for the three months ended March 31, 1997. The increase in interest
income was due to average loan balances that were $152.7 million higher than
last year's and an average loan yield of 8.95%, 8 basis points better than the
8.87% earned for the year ago period. In total, higher loan balances and
improved yields offset a decline of $596,000 in investment income, compared to
the same quarter last year. Lower investment outstandings resulted in a decline
of $309,000 of investment income while a lower yield lessened income by
$287,000. Even though the Corporation earned less investment income, the fact
that liquidated investments funded higher yielding loans created an overall
benefit to interest income and, ultimately, earnings.
Interest expense for the 1998 first quarter was $38.0 million, 6% more
than the $36.1 million recorded last year. The increase in interest expense of
$1.9 million was due to higher Certificate of Deposits (CDs) volume and higher
rates paid on money market accounts (included in the savings category throughout
this document) and CDs. The cost of funds rate increased from 3.81% for the
March 31, 1997 quarter to 3.92% this year as the Corporation paid higher rates
on money market accounts, other borrowings and CDs. Compared to the same quarter
last year, the loan growth was funded primarily by CDs.
The following schedule illustrates in more detail the change in net
interest income FTE by rate and volume components for both interest earning
assets and interest bearing liabilities.
<PAGE> 15
CHANGES IN NET INTEREST DIFFERENTIAL -
FULLY-TAX EQUIVALENT RATE/VOLUME ANALYSIS
(DOLLARS IN THOUSANDS)
Quarters ended
March 31,
1998 and 1997
Increase (Decrease)
Interest Income/Expense
<TABLE>
<CAPTION>
----------------------------------------------- ------------------ ----------------------- --------------------------
Volume Rate Total
----------------------------------------------- ------------------ ----------------------- --------------------------
INTEREST INCOME
----------------------------------------------- ------------------ ----------------------- --------------------------
<S> <C> <C> <C>
Investment Securities $(309) (287) (596)
----------------------------------------------- ------------------ ----------------------- --------------------------
Loans 3,368 710 4,078
----------------------------------------------- ------------------ ----------------------- --------------------------
Federal funds sold (53) 14 (39)
----------------------------------------------- ------------------ ----------------------- --------------------------
Total interest income 2,948 495 3,443
----------------------------------------------- ------------------ ----------------------- --------------------------
----------------------------------------------- ------------------ ----------------------- --------------------------
INTEREST EXPENSE
----------------------------------------------- ------------------ ----------------------- --------------------------
Interest on deposits:
----------------------------------------------- ------------------ ----------------------- --------------------------
Demand-interest bearing 60 (392) (332)
----------------------------------------------- ------------------ ----------------------- --------------------------
Savings (21) 740 719
----------------------------------------------- ------------------ ----------------------- --------------------------
Certificates and other
----------------------------------------------- ------------------ ----------------------- --------------------------
time deposits 1,114 126 1,240
----------------------------------------------- ------------------ ----------------------- --------------------------
Federal funds purchased & other
borrowings 23 341 364
----------------------------------------------- ------------------ ----------------------- --------------------------
Total interest expense $1,176 815 1,991
----------------------------------------------- ------------------ ----------------------- --------------------------
----------------------------------------------- ------------------ ----------------------- --------------------------
Net interest income $1,772 (320) 1,452
----------------------------------------------- ------------------ ----------------------- --------------------------
</TABLE>
NET INTEREST MARGIN
The net interest margin, net interest income FTE divided by average
earning assets, is affected by changes in the level of earning assets, the
proportion of earning assets funded by non-interest bearing liabilities, the
interest rate spread, and changes in the corporate tax rates. A meaningful
comparison of the net interest margin requires an adjustment for the changes in
the statutory Federal income tax rate noted above. The schedule below shows the
relationship of the tax equivalent adjustment and the net interest margin.
<PAGE> 16
NET INTEREST MARGIN
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Quarters Ended
March 31,
-----------------------------------
1998 1997
-----------------------------------
<S> <C> <C>
Net interest income per
financial statements $64,100 62,504
Tax equivalent adjustment 717 861
-----------------------------------
Net interest income - FTE $64,817 63,365
===================================
Average earning assets $4,977,221 4,847,829
===================================
Net interest margin 5.28% 5.30%
===================================
</TABLE>
The following comparisons and analysis is based on balances provided in
the Average Consolidated Balance Sheet, Fully-tax Equivalent Interest Rates and
Interest Differential schedule found just after the Notes to the Consolidated
Financial Statements. Average loans outstanding for the quarter ended March 31,
1998 were $3.8 billion up $152.7 million, or 4% percent, from $3.7 billion for
the same quarter last year. Growth occurred in commercial, installment, home
equity, and credit card loans while mortgage and lease outstandings declined. As
stated in last year's annual report and recent Form 10Qs, the Corporation has
continued to change its loan mix with more focus on higher yielding commercial
and consumer credits and a lower relative concentration in mortgage lending.
Average outstanding loans, as a percentage of average earning assets, for the
current and prior year first quarters were 77.25% and 76.16%, respectively.
Average total deposits were $4.2. billion for the first quarter
compared to $4.1 billion for the three months ended March 31, 1997. Overall, the
ratio of each average deposit and borrowed fund category to total interest
bearing funds changed little during the last twelve months. The following
percentage changes in individual deposit and borrowed fund categories occurred:
average certificates and other time deposits increased from 42.9% of total
interest bearing funds for the quarter ended March 31, 1997 to 44.0% for the
1998 first quarter; average savings deposits decreased from 33.6% of interest
bearing funds for the first quarter last year to 32.6% for the same current year
three-month period; and both average interest bearing demand deposits
<PAGE> 17
and borrowed funds increased from 11.6% of interest bearing funds for the first
quarter last year to 11.8% for the three months ended March 31, 1998. As stated
earlier in the Net Interest Income section of this analysis, an increase in CD
volume and higher rates paid on money market accounts, compared to the 1997
first quarter, were the biggest contributors to higher costs of funds.
During the first quarter 1998, interest bearing liabilities funded
79.1% of average earning assets compared to 80.0% one year ago. The small
decline in use of interest bearing liabilities as a loan and investment security
funding source helped lower cost of funds even though the overall net interest
margin increased two basis points.
OTHER INCOME
Other income, excluding securities' sales, for the quarter ended March
31, 1998 was $22.1 million, up $3.0 million from the $19.1 million earned during
the same period last year.
The following increases in noninterest fee income occurred during the
quarter: trust department income for the first quarter was $3.4 million or 9.8%
higher than the $3.1 million earned one year ago; service charges on depositors'
accounts increased 5.8% to $6.9 million from $6.5 million for last year's first
quarter; credit card fees rose 35.4% to $4.0 million for the quarter compared to
$3.0 million for the three months ended March 31, 1997; higher loan origination
volume and the related servicing increased gains from loan sales and servicing
to $1.6 million, 40.0% above last year's $1.1 million; gains on securities were
$1.5 million, 2.3 times more than the $0.5 million recorded for last year's
first quarter; and other operating income was $4.1 million, 21.9% more than the
year ago period. Included in the $751,000 increase in other operating income was
a full three month's worth of investment earnings on Bank Owned Life Insurance
(BOLI) compared to one and one-half month's investment income last year, and
higher automated teller machine (ATM) interchange fees charged to the non
FirstMerit customers' banks when non FirstMerit customers use FirstMerit ATMs.
Other income is especially important to banks as fee revenue provides a
source of earnings not sensitive to the interest rate environment. The
Corporation continues to search out and act upon new noninterest income
opportunities. The timing of loan and securities sales, and the related gains or
losses, is influenced by changes in market interest rates, loan demand, and
deposit withdrawals.
OTHER EXPENSES
Other expenses were $50.8 for the first quarter, an increase of $3.0
million or 6.3%, over the $47.8 million recorded last year. Higher operating
costs, offset by higher core net interest income and increased fee income,
resulted in a slight rise in the efficiency ratio from 57.32% for the three
months ended March 31, 1997 to 57.75%
<PAGE> 18
for the 1998 first quarter. The 57.75% efficiency ratio indicates that for
every one dollar of pretax profit earned, 57.75 cents were used to cover
operating expenses.
Salaries, wages, pension and employee benefits, the largest component
of other expenses, rose $846,000 or 3.7% compared to the first quarter last
year. The increase was mainly attributable to annual merit increases. Among the
other components of operating expenses: net occupancy costs were down $485,000,
equipment expense dropped $316,000, and other operating expense was up $3.0
million. Other operating costs were up $1.6 million largely due to loan
processing expenses paid to an outside party to service FirstMerit's mortgage
loan portfolio, and an additional $1.0 million paid to consultants and companies
that provided outsourced services.
FINANCIAL CONDITIONS
INVESTMENT SECURITIES
The Corporation's policy is to classify all investments as
available-for-sale. This classification provides more flexibility to respond,
through the portfolio, to changes in market interest rates, or to increases in
loan demand or deposit withdrawals.
The book value and market value of investment securities classified as
available-for-sale are as follows:
<TABLE>
<CAPTION>
March 31, 1998
--------------
Gross Gross
Book Unrealized Unrealized Market
Value Gains Losses Value
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and U.S. Government agency
obligations $600,972 1,697 $3,207 599,462
Obligations of state and
political subdivisions 86,686 445 -- 87,131
Mortgage-backed securities 383,940 3,528 757 386,711
Other securities 92,246 1,245 61 93,430
---------------- ---------------- ---------------- ----------------
$1,163,844 6,915 $4,025 1,166,734
================ ================ ================ ================
Book Value Market Value
---------------- ----------------
Due in one year or less $110,356 110,221
Due after one year through five years 238,908 240,052
Due after five years through ten years 182,293 182,620
Due after ten years 632,287 633,841
---------------- ----------------
$1,163,844 1,166,734
================ ================
</TABLE>
The book value and market value of investment securities including
mortgage-backed securities and derivatives at March 31, 1998, by contractual
maturity,
<PAGE> 19
are shown in the table preceding this paragraph. Expected maturities will differ
from contractual maturities based on the issuers' right to call or prepay
obligations with or without call or prepayment penalties.
The carrying value of investment securities pledged to secure trust and
public deposits and for purposes required or permitted by law amounted to
approximately $684.0 million at March 31, 1998, $830.1 million at December 31,
1997 and $701.3 million at March 31, 1997.
Securities with remaining maturities over five years reflected in the
foregoing schedule consist of mortgage and asset backed securities. These
securities are purchased within an overall strategy to maximize future earnings
taking into account an acceptable level of interest rate risk. While the
maturities of these mortgage and asset backed securities are beyond five years,
these instruments provide periodic principal payments and include securities
with adjustable interest rates, reducing the interest rate risk associated with
longer term investments.
LOANS
Total loans outstanding at March 31, 1998 amounted to $3.9 billion
compared to $3.8 billion at December 31, 1997 and March 31, 1997. As previously
stated in the Net Interest Margin section, the mix of loans has changed toward
higher yielding commercial and consumer credits, with less emphasis on
residential mortgages. For the first three months of 1998, loans have increased
at an annualized growth rate of 2.6%. The loan to funds ratio, one measure of
the Corporation's liquidity, measured 81.0% at March 31, 1998 compared to 81.6%
at December 31, 1997 and 81.1% at March 31, 1997.
ASSET QUALITY
Total nonperforming assets (non-accrual and restructured loans and
other real estate loans) amounted to $17.3 million at March 31, 1998 or 0.45% of
total loans and other real estate. At December 31, 1997, nonperforming assets
totaled $13.6 or 0.35% of outstanding loans and other real estate compared to
$11.4 million or 0.30% of outstanding loans and other real estate at March 31,
1997. Impaired loans are loans for which, based on current information or
events, it is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement. Impaired loans must be
valued based on the present value of the loans' expected future cash flows at
the loans' effective interest rates, at the loans' observable market prices, or
the fair value of the underlying collateral. Under the Corporation's credit
policies and practices, and in conjunction with accounting standards, all
nonaccrual and restructured commercial, agricultural, construction, and
commercial real estate loans, meet the definition of impaired loans.
<PAGE> 20
<TABLE>
<CAPTION>
(Dollars in thousands)
March 31, December 31, March 31,
1998 1997 1997
---------------------- --------------------- ------------
<S> <C> <C> <C>
Impaired Loans:
Non-accrual $14,380 11,185 9,165
Restructured 88 89 92
-----------------------------------------------------------------------------------------------------------
Total impaired loans 14,468 11,274 9,257
--------------- --------------------- -------------------
Other Loans:
Non-accrual 2,005 1,434 1,177
Restructured 0 0 0
-----------------------------------------------------------------------------------------------------------
Total other nonperforming loans 2,005 1,434 1,177
-----------------------------------------------------------------------------------------------------------
Total nonperforming loans 16,473 12,708 10,434
-----------------------------------------------------------------------------------------------------------
Other real estate (ORE) 807 908 928
--------------- --------------------- -------------------
Total nonperforming assets $17,280 13,616 11,362
===========================================================================================================
Loans past due 90 days or more $11,478 11,166 8,757
accruing interest
===========================================================================================================
Total nonperforming assets as a 0.45% 0.35% 0.30%
percent of total loans and ORE
===========================================================================================================
</TABLE>
There is no concentration of loans in any particular industry or group
of industries. Most of the Corporation's business activity is with customers
located within the State of Ohio.
ALLOWANCE FOR LOAN LOSSES
The allowance for possible loan losses at March 31, 1998 totaled $56.0
million or 1.45% of total loans outstanding compared to $53.8 million or 1.40%
and $49.6 million or 1.32% at December 31, 1997 and March 31, 1997,
respectively.
<PAGE> 21
<TABLE>
<CAPTION>
(Dollars in thousands)
March 31, December 31, March 31,
1998 1997 1997
--------------------- ----------------------- ---------------------
<S> <C> <C> <C>
Allowance - beginning of period $53,774 49,336 49,336
Loans charged off:
Commercial, financial, agricultural 232 1,618 308
Installment to individuals 5,458 23,779 6,167
Real estate 47 574 188
Lease financing 183 1,290 259
Total charge-offs 5,920 27,261 6,922
Recoveries:
Commercial, financial, agricultural 368 1,121 787
Installment to individuals 1,966 8,386 2,115
Real estate 332 123 25
Lease financing 56 476 135
Total recoveries 2,722 10,106 3,062
Net charge-offs 3,198 17,155 3,860
Provision for possible loan losses 5,463 21,593 4,161
--------------------- ----------------------- ---------------------
Allowance - end of period 56,039 53,774 49,637
===================== ======================= ====================
Net charge-offs as a percent
of average loans 0.34% 0.45% 0.42%
Allowance for possible loan losses:
As a percent of loans and ORE
outstanding at end of
period 1.45% 1.40% 1.32%
As a multiple of net
charge offs 4.32X 3.13X 3.17x
</TABLE>
The Corporation's Credit Policy Division manages credit risk by
establishing common credit policies for its subsidiary banks, participating in
approval of their largest loans, conducting reviews of their loan portfolios,
providing them with centralized
<PAGE> 22
consumer underwriting, collections and loan operation services, and overseeing
their loan workouts. The Corporation's objective is to minimize losses from its
commercial lending activities and to maintain consumer losses at acceptable
levels that are stable and consistent with growth and profitability objectives.
DEPOSITS
The following schedule illustrates the change in composition of the
average balances of deposits and average rates paid for the noted periods.
<TABLE>
<CAPTION>
(Dollars in Thousands)
Three months and year ended
-------------------------------------------------------------------------------
March 31, 1998 December 31, 1997 March 31, 1997
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
Demand Deposits -
non-interest bearing $745,761 - 733,394 - 711,995 -
Demand Deposits -
interest bearing 466,334 1.25% 448,976 1.44% 446,893 1.60%
Savings Deposits 1,284,677 2.53% 1,279,859 2.41% 1,288,069 2.30%
Certificates and other
time deposits 1,731,546 5.37% 1,701,886 5.37% 1,647,357 5.34%
--------------- -------------- --------------
$4,228,318 3.11% 4,164,115 3.09% 4,094,314 3.05%
=============== ============== ==============
</TABLE>
The following table summarizes the certificates and other time deposits
in amounts of $100,000 or more as of March 31, 1998 by time remaining until
maturity.
<TABLE>
<CAPTION>
Amount
Maturing in:
<S> <C>
Under 3 months $244,949
3 to 12 months 115,449
Over 12 months 33,464
----------------
$393,862
================
</TABLE>
<PAGE> 23
CAPITAL RESOURCES
Shareholders' equity at March 31, 1998 totaled $515.4 million compared
to $530.3 million at December 31, 1997 and $521.2 million at March 31, 1997.
The following table reflects the various measures of capital:
(Dollars in thousands)
<TABLE>
<CAPTION>
As of As of As of
March 31, December 31, March 31,
1998 1997 1997
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Total equity $515,381 9.60% 530,336 9.99% 521,215 9.98%
Common equity 515,381 9.60% 530,336 9.99% 521,215 9.98%
Tangible common equity (a) 513,064 9.57% 527,771 9.95% 517,722 9.92%
Tier 1 capital (b) 495,469 11.02% 516,388 12.30% 527,134 12.39%
Total risk-based capital (c) 551,508 12.27% 568,886 13.55% 576,771 13.56%
Leverage (d) 495,469 9.37% 516,388 9.66% 527,134 10.21%
</TABLE>
(a) Common equity less all intangibles; computed as a ratio to total assets
less intangible assets.
(b) Shareholders' equity minus net unrealized holding gains on equity
securities, plus or minus net unrealized holding losses or gains on
available for sale debt securities, less goodwill; computed as a ratio to
risk-adjusted assets, as defined in the 1992 risk-based capital guidelines.
(c) Tier 1 capital plus qualifying loan loss allowance, computed as a ratio to
risk-adjusted assets, as defined in the 1992 risk-based capital guidelines.
(d) Tier 1 capital; computed as a ratio to the latest quarter's average assets
less goodwill.
The risk-based capital guidelines issued by the Federal Reserve Bank in
1988 require banks to maintain capital equal to 8% of risk-adjusted assets
effective December 31, 1993. At March 31, 1998 the Corporation's risk-based
capital equaled 12.27% of risk adjusted assets, far exceeding the minimum
guidelines.
The cash dividend of $0.16 paid in the first quarter has an indicated
annual rate of $0.64 per share.
<PAGE> 24
PART II. - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
27 Financial Data Schedule
3(a) Amended and Restated Articles of Incorporation of
FirstMerit Corporation (incorporated by reference
from Exhibit 3(a) to the Form 8-K filed by the
registrant on April 9, 1998)
3(b) Amended and Restated Code of Regulations of
FirstMerit Corporation (incorporated by reference
from Exhibit 3(b) to the Form 8-K filed by the
registrant on April 9, 1998)
4 Shareholders Rights Agreement dated October 21, 1993,
between FirstMerit Corporation and FirstMerit Bank,
N.A., as amended and restated July 18, 1996
(incorporated by reference from Exhibit 4 to the
Form 8-A/A filed by the registrant on July 18, 1996)
(B) FORM 8-K
None
<PAGE> 25
SIGNATURES
Pursuant to the requirements 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.
FIRSTMERIT CORPORATION
By:/s/Jack R. Gravo
---------------------------------------------
Jack R. Gravo, Executive Vice
President/ Finance & Administration
DATE: May 14, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000354869
<NAME> FIRSTMERIT CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 179,437
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,166,734
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 1,166,734
<LOANS> 3,859,013
<ALLOWANCE> 56,039
<TOTAL-ASSETS> 5,367,184
<DEPOSITS> 4,246,131
<SHORT-TERM> 517,956
<LIABILITIES-OTHER> 87,716
<LONG-TERM> 0
0
0
<COMMON> (23,412)
<OTHER-SE> 538,793
<TOTAL-LIABILITIES-AND-EQUITY> 5,367,184
<INTEREST-LOAN> 84,668
<INTEREST-INVEST> 17,384
<INTEREST-OTHER> 97
<INTEREST-TOTAL> 102,149
<INTEREST-DEPOSIT> 32,373
<INTEREST-EXPENSE> 38,049
<INTEREST-INCOME-NET> 64,100
<LOAN-LOSSES> 5,463
<SECURITIES-GAINS> 1,548
<EXPENSE-OTHER> 50,784
<INCOME-PRETAX> 31,506
<INCOME-PRE-EXTRAORDINARY> 31,506
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,965
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.35
<YIELD-ACTUAL> 5.28
<LOANS-NON> 16,385
<LOANS-PAST> 11,478
<LOANS-TROUBLED> 88
<LOANS-PROBLEM> 35,509
<ALLOWANCE-OPEN> 53,774
<CHARGE-OFFS> 5,920
<RECOVERIES> 2,722
<ALLOWANCE-CLOSE> 56,039
<ALLOWANCE-DOMESTIC> 56,039
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
