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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AUGUST 31, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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FIRSTMERIT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
OHIO 34-1339938
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
III CASCADE PLAZA, AKRON, OHIO 44308 (330) 996-6300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
TERRY E. PATTON
SENIOR VICE PRESIDENT AND SECRETARY
FIRSTMERIT CORPORATION
III CASCADE PLAZA, AKRON, OHIO 44308 (330) 996-6300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
KEVIN C. O'NEIL JOHN C. VORYS
J. BRET TREIER Vorys, Sater, Seymour and Pease LLP
Brouse & McDowell, L.P.A. 52 East Gay Street
500 First National Tower P.O. Box 1008
Akron, Ohio 44308 Columbus, Ohio 43216-1008
(330) 535-5711 (614) 464-6400
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES TO AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock,
without par value(2)......... 1,380,000 shares(3) $23.875 $32,947,500 $9,720
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee based
upon the average of the high and low prices of the common stock, without par
value, of the Registrant as reported on The Nasdaq Stock Market on August
25, 1998, in accordance with Rule 457(c) of the General Rules and
Regulations under the Securities Act of 1933, as amended.
(2) Includes associated rights under the FirstMerit Shareholder Rights Agreement
(the "Rights"). Until the occurrence of certain prescribed events, the
Rights are not exercisable, are evidenced by the certificates representing
the FirstMerit Common Stock, and trade with the FirstMerit Common Stock.
(3) Includes 180,000 shares which are being registered in connection with an
over-allotment option granted to the Underwriters.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Filed Pursuant To Rule 424(b)(1)
Registration No. 333-
SUBJECT TO COMPLETION, DATED AUGUST 31, 1998
PROSPECTUS
LOGO
[FIRSTMERIT LOGO]
1,200,000 SHARES
COMMON STOCK
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This Prospectus relates to the offer and sale (the "Offering") by
FirstMerit Corporation, an Ohio corporation ("FirstMerit"), of 1,200,000 shares
of its common stock, without par value (the "Common Stock").
The outstanding shares of Common Stock are, and the shares of FirstMerit
Common Stock offered hereby will be, quoted on The Nasdaq Stock Market
("Nasdaq") under FirstMerit's symbol, "FMER." The closing sales price of
FirstMerit Common Stock reported on Nasdaq on August 26, 1998 was $23.625 per
share. See "Market Price and Dividend Information."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OF FIRSTMERIT OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR BANK
DEPOSITS, ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING OR NONBANKING
AFFILIATE OF FIRSTMERIT AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) FIRSTMERIT(2)
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<S> <C> <C> <C>
Per Share.................. $ $ $
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Total(3)................... $ $ $
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(1) For information regarding indemnification of the Underwriters, see
"UNDERWRITING."
(2) Before deducting expenses estimated at $ payable by
FirstMerit.
(3) FirstMerit has granted the Underwriters a 30-day option to purchase up to
180,000 additional shares of Common Stock on the same terms per share solely
to cover over-allotments, if any. If such option is exercised in full, the
total Price to Public will be $ , the total Underwriting
Discounts and Commissions will be $ and the total Proceeds to
FirstMerit will be $ . See "UNDERWRITING."
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The Common Stock is being offered by the Underwriters as set forth under
"UNDERWRITING" herein. It is expected that the shares will be ready for delivery
through the facilities of The Depository Trust Company in New York, New York, on
or about September , 1998 against payment therefor in immediately available
funds.
MCDONALD & COMPANY KEEFE, BRUYETTE & WOODS, INC.
SECURITIES, INC.
September , 1998
<PAGE> 3
[LOGO]
FIRSTMERIT Markets*
*Pro forma basis assuming closing of Security First and Signal mergers
Graphic contains map showing relevant geographic market area
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ STOCK
MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
<PAGE> 4
AVAILABLE INFORMATION
FirstMerit is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). FirstMerit has filed with
the Commission a Registration Statement on Form S-3, including all amendments
and exhibits thereto (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), relating to the shares of Common Stock
offered hereby. As permitted by the rules and regulations of the Commission,
this Prospectus omits certain information, exhibits and undertakings contained
in the Registration Statement. Reference is made to the Registration Statement
and to the exhibits thereto for further information. Statements contained herein
concerning such documents are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference.
The Registration Statement and the exhibits thereto, as well as the
reports, proxy statements and other information filed with the Commission by
FirstMerit under the Exchange Act, may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material may also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains an Internet worldwide web site that contains reports, proxy
and information statements and other information regarding issuers, such as
FirstMerit, which file electronically with the Commission. The address of that
site is http://www.sec.gov. In addition, reports, proxy statements and other
information concerning FirstMerit may be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates certain documents of FirstMerit by reference
which are not presented herein or delivered herewith. These documents (without
exhibits, unless such exhibits are specifically incorporated by reference into
this Prospectus) are available without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon written
or oral request. Requests for such documents should be directed to Terry E.
Patton, Secretary, FirstMerit Corporation, III Cascade Plaza, Akron, Ohio 44308
(telephone number (330) 996-6300).
FirstMerit will send the requested documents by first-class mail within one
business day of the receipt of the request. In order to ensure timely delivery
of the documents, any request should be made by September , 1998. Persons
requesting copies of exhibits to such documents that are not specifically
incorporated by reference in such documents will be charged the costs of
reproduction and mailing of such exhibits.
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<PAGE> 5
The following documents filed with the Commission under the Exchange Act by
FirstMerit are hereby incorporated by reference into this Prospectus: (a)
FirstMerit's Annual Report on Form 10-K for the year ended December 31, 1997
filed with the Commission on February 24, 1998, as amended by Form 10-K/A filed
with the Commission on April 30, 1998; (b) the portions of FirstMerit's Proxy
Statement for the Annual Meeting of Shareholders held April 8, 1998 that have
been incorporated by reference in the FirstMerit Annual Report on Form 10-K for
the year ended December 31, 1997; (c) FirstMerit's Quarterly Reports on Form
10-Q for the period ended March 31, 1998 filed with the Commission on May 14,
1998, and for the period ended June 30, 1998 filed with the Commission on August
14, 1998, as amended by Form 10-Q/A filed with the Commission on August 26,
1998; (d) FirstMerit's Current Reports on Form 8-K filed with the Commission on
April 9, 1998, May 22, 1998, June 22, 1998 and August 31, 1998; (e) FirstMerit's
Registration Statement on Form S-4 filed with the Commission on June 22, 1998;
and (f) the description of the Common Stock contained in (i) FirstMerit's
Registration Statement on Form S-14 (No. 2-73592), filed with the Commission on
August 5, 1981 and incorporated by reference in FirstMerit's Current Report on
Form 8-K, filed with the Commission on January 15, 1982, in lieu of Form 8-B, to
report FirstMerit's status as a successor issuer pursuant to Rule 12g-3(a) (file
no. 0-10161), (ii) amendments updating such description filed with the
Commission on FirstMerit's Quarterly Report on Form 10-Q for the period ended
June 30, 1984 and FirstMerit's Current Report on Form 8-K dated May 11, 1988,
and (iii) the description of the rights issued pursuant to the FirstMerit
Shareholders Rights Agreement, dated as of October 23, 1993, by and between
FirstMerit and FirstMerit Bank, N.A., as rights agent, contained in FirstMerit's
Registration Statement on Form 8-A with respect thereto dated November 1, 1993,
as amended and restated and filed with the Commission on June 22, 1998 (and any
further amendment or report filed for the purpose of updating the description).
All documents filed by FirstMerit under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the date of
the termination of the Offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which is also
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement, as so modified or superseded,
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus. The information relating to FirstMerit contained in this
Prospectus should be read together with the information in the documents
incorporated by reference.
FORWARD-LOOKING STATEMENTS
This Prospectus (including information included or incorporated by
reference herein) contains certain "forward-looking" statements within the
meaning of Section 27A of the Securities Act and 21E of the Exchange Act and is
subject to the safe harbor created thereby. Such statements relate to the
financial condition, results of operations, plans, objectives, future
performance and business of FirstMerit. These forward-looking statements involve
certain risks and uncertainties and may relate to future operating results of
FirstMerit and the companies it is acquiring, as described herein under
"BUSINESS OF FIRSTMERIT -- Recent Transactions." Factors that may cause actual
results to differ materially from those contemplated by such forward-looking
statements include, among others, the following possibilities: (1) expected cost
savings from the acquisitions not being fully realized or realized within the
expected time frame; (2) revenues following the acquisitions being lower than
expected; (3) competitive pressure in the banking industry increasing
significantly; (4) costs or difficulties related to the integration of the
acquired businesses being greater than expected; (5) changes in the interest
rate environment resulting in reduced margins; (6) general economic conditions,
either nationally or regionally, being less favorable than expected, resulting
in, among other things, a deterioration in credit quality; (7) legislation or
regulatory requirements or changes adversely affecting the businesses in which
FirstMerit is engaged; (8) changes in business conditions and inflation; and (9)
changes in the securities markets. The forward-looking earnings estimates
included in this Prospectus have not been examined or compiled by the
independent public accountants of FirstMerit nor have such accountants applied
any procedures thereto. Accordingly, such accountants do not express an opinion
or any other form of assurance on them.
4
<PAGE> 6
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus and the documents incorporated herein by reference. This summary
is not intended to be a summary of all information relating to the Offering and
should be read in conjunction with, and is qualified in its entirety by
reference to, the more detailed information contained elsewhere in this
Prospectus, including the documents incorporated by reference in this
Prospectus.
FIRSTMERIT
FirstMerit is a bank holding company organized in 1981 under the laws of
the State of Ohio and registered under the Bank Holding Company Act of 1956, as
amended ("BHCA"). FirstMerit's principal subsidiaries include FirstMerit Bank,
N.A. ("FirstMerit Bank"), FirstMerit Credit Life Insurance Company and
FirstMerit Community Development Corporation. Although FirstMerit is primarily a
banking organization, its direct and indirect nonbanking subsidiaries also
provide securities brokerage services, corporate and personal trust services,
equipment lease financing, insurance and other financial services.
FirstMerit Bank serves a 14 county area in northeastern and central Ohio.
As part of its community banking philosophy, FirstMerit Bank has divided its
markets into eight geographic areas each headed by its own President and local
community board. This strategy allows FirstMerit to deliver a broad line of
financial products and services with a community orientation and a high level of
personal service. With a network of 158 full service banking offices and 194
automated teller machines, FirstMerit Bank serves over 400,000 households and
businesses in the 14th largest consolidated MSA in the country (which combines
the primary MSAs for Cleveland, Lorain/Elyria, and Akron, Ohio). FirstMerit Bank
has the leading market share in Summit, Medina, Stark and Lorain counties in
Ohio. Following the consummation of its two pending acquisitions of Security
First Corp., Mayfield Heights, Ohio ("Security First"), and Signal Corp,
Wooster, Ohio ("Signal"), FirstMerit Bank will also have the leading market
share in Wayne County, Ohio and will have one of the three highest market share
positions in 11 of the 21 counties in which it operates. See "BUSINESS OF
FIRSTMERIT -- Recent Transactions."
For the year ended December 31, 1997 and the six months ended June 30,
1998, FirstMerit had a return on average assets of 1.64% and 1.69%,
respectively, a return on average equity of 16.62% and 16.90%, respectively, and
an efficiency ratio of 55.60% and 57.15%, respectively. As of June 30, 1998,
FirstMerit had total assets of $6.2 billion, total deposits of $4.9 billion and
total shareholders' equity of $646.0 million. On a pro forma basis giving effect
to the acquisitions of Security First and Signal, FirstMerit would have had
total assets of $8.8 billion, total deposits of $6.7 billion and total
shareholders' equity of $854.1 million as of June 30, 1998. See "BUSINESS OF
FIRSTMERIT--Overview."
THE OFFERING
Common Stock offered by FirstMerit...... 1,200,000 shares(1)
Common Stock to be outstanding
immediately after the Offering.......... 69,522,670 shares(2)
Nasdaq symbol........................... FMER
Use of Proceeds......................... FirstMerit intends to use the net
proceeds from the Offering for
general corporate purposes. The
Offering will also allow the
acquisition of Security First to
be treated as a pooling-of-
interests for accounting purposes.
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(1) Does not include up to 180,000 shares of Common Stock which may be sold by
FirstMerit upon exercise of the Underwriters' over-allotment option.
(2) Based on shares of Common Stock outstanding as of August 25, 1998. Excludes
(i) 1.7 million treasury shares; (ii) 3.8 million shares of Common Stock
reserved for issuance under FirstMerit's employee stock plans; (iii)
approximately 7.8 million shares of Common Stock expected to be issued in
FirstMerit's pending acquisition of Security First as described under
"BUSINESS OF FIRSTMERIT--Recent Transactions;" and (iv) approximately 17.9
million shares of Common Stock expected to be issued in FirstMerit's pending
acquisition of Signal as described under "BUSINESS OF FIRSTMERIT--Recent
Transactions."
5
<PAGE> 7
RECENT TRANSACTIONS
FirstMerit's strategy for growth includes strengthening market share in its
existing markets, expanding into complementary markets and broadening its
product offerings. Consistent with this strategy, FirstMerit recently concluded
the acquisition of CoBancorp Inc. ("CoBancorp"), the parent of PremierBank &
Trust and Jefferson Savings Bank, on May 22, 1998. In addition, FirstMerit
entered into an agreement to acquire Security First, the parent of Security
Federal Savings and Loan Association of Cleveland and First Federal Savings Bank
of Kent, on April 5, 1998, and entered into an agreement to acquire Signal, the
parent of Signal Bank, N.A., Summit Bank, N.A., First Federal Savings Bank of
New Castle, Pennsylvania, and Mobile Consultants, Inc., on August 10, 1998.
FirstMerit intends to consummate the Security First and Signal transactions in
the last quarter of 1998 and the first quarter of 1999, respectively. FirstMerit
believes that these acquisitions will further strengthen its competitive
position in the northeastern and central Ohio markets and will broaden the
financial services it can offer to its customers. See "BUSINESS OF FIRSTMERIT --
Recent Transactions."
Consummation of the Offering is not subject to the consummation of any
pending acquisition.
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BUSINESS OF FIRSTMERIT
OVERVIEW
FirstMerit is a bank holding company organized in 1981 under the laws of
the State of Ohio and registered under the BHCA. FirstMerit employed
approximately 2,900 full- and part-time employees as of June 30, 1998.
FirstMerit's principal business consists of owning and supervising its
affiliates. Although FirstMerit directs the overall policies of its affiliates,
including lending practices and financial resources, most day-to-day affairs are
managed by their respective officers.
At June 30, 1998, FirstMerit Bank operated a network of 158 full service
banking offices and 194 automated teller machines. Its offices span a total of
14 counties in Ohio, including Ashtabula, Cuyahoga, Delaware, Erie, Franklin,
Geauga, Lake, Lorain, Madison, Medina, Portage, Stark, Summit and Wayne
Counties. This market area has over 400,000 households and businesses and is the
14th largest consolidated MSA in the country (which combines the primary MSAs
for Cleveland, Lorain/Elyria and Akron, Ohio). FirstMerit Bank has the leading
market share in Summit, Medina, Stark and Lorain counties in Ohio. Following the
consummation of the two pending acquisitions of Security First and Signal,
FirstMerit Bank will also have the leading market share in Wayne County, Ohio,
and will have one of the three highest market share positions in 11 of the 21
counties in which it operates.
For the year ended December 31, 1997 and the six months ended June 30,
1998, FirstMerit had a return on average assets of 1.64% and 1.69%,
respectively, a return on average equity of 16.62% and 16.90%, respectively, and
an efficiency ratio of 55.60% and 57.15%, respectively. As of June 30, 1998,
FirstMerit had total assets of $6.2 billion, total deposits of $4.9 billion and
total stockholders' equity of $646.0 million. On a pro forma basis giving effect
to the acquisitions of Security First and Signal, FirstMerit as of June 30, 1998
would have had total assets of $8.8 billion, total deposits of $6.7 billion and
total shareholders' equity of $854.1 million.
The principal executive offices of FirstMerit are located at III Cascade
Plaza, Akron, Ohio 44308, and its telephone number is (330) 996-6300.
SUBSIDIARIES AND OPERATIONS
Through its affiliates, FirstMerit operates primarily as a regional banking
organization, providing a wide range of banking, fiduciary, financial, insurance
and investment services to corporate, institutional and individual customers
throughout northeastern and central Ohio. FirstMerit's largest subsidiary is
FirstMerit Bank into which FirstMerit has merged all of its subsidiary banks.
FirstMerit Bank engages in commercial and consumer banking in its
respective geographic markets. Commercial and consumer banking generally
consists of the acceptance of a variety of demand, savings and time deposits and
the granting of commercial and consumer loans for the financing of both real and
personal property. As part of its community banking philosophy, FirstMerit Bank
has divided its markets into eight geographic areas which are designated as
follows: FirstMerit Bank/Akron, FirstMerit Bank/Citizens (Canton), FirstMerit
Bank/Cleveland, FirstMerit Bank/Columbus, FirstMerit Bank/Elyria, FirstMerit
Bank/Old Phoenix (Medina), FirstMerit Bank/Wooster and FirstMerit Bank/Peoples
(Mentor). Each of these regional operations is headed by a president and local
community board. This strategy allows FirstMerit Bank to deliver a broad line of
financial products and services with a community orientation and a high level of
personal service. FirstMerit can therefore offer a wide range of specialized
services tailored to specific markets in addition to the full range of customary
banking products and services. These services include personal and corporate
trust services, personal financial services, cash management services and
international banking services.
Other services provided by FirstMerit Bank or its affiliates include
automated banking programs, credit cards, rental of safe deposit boxes, letters
of credit, leasing, discount brokerage and credit life insurance. FirstMerit
Bank also operates a trust department, which offers estate and trust services.
The majority of its customers is comprised of consumers and small and medium
size businesses. FirstMerit Bank is not engaged in lending outside the
continental United States and is not dependent upon any one significant customer
or specific industry.
FirstMerit's non-banking direct and indirect subsidiaries provide insurance
sales services, credit life, credit accident and health insurance, securities
brokerage services, equipment lease financing and other financial services.
FirstMerit's direct subsidiaries other than FirstMerit Bank include FirstMerit
Credit Life Insurance
7
<PAGE> 9
Company, FirstMerit Community Development Corporation, Citizens Investment
Corporation and Citizens Savings Corporation of Stark County. FirstMerit Credit
Life Insurance Company was formed in 1985 to underwrite credit life and credit
accident and health insurance in connection with the extension of credit to its
customers. FirstMerit Community Development Corporation was organized in 1994 to
further FirstMerit's efforts in identifying the credit needs of its lending
communities and meeting the requirements of the Community Reinvestment Act
("CRA"). Congress enacted CRA to ensure that financial institutions meet the
deposit and credit needs of their communities. Through a community development
corporation, financial institutions can fulfill these requirements by
nontraditional activities such as acquiring, rehabilitating or investing in real
estate in low to moderate income neighborhoods, and promoting the development of
small business.
FirstMerit Bank is the parent corporation of several wholly-owned Ohio
corporations. In 1995, FirstMerit Mortgage Corporation ("FirstMerit Mortgage"),
which is located in Canton, Ohio, was organized and capitalized. FirstMerit
Mortgage originates residential mortgage loans and provides mortgage loan
servicing for itself and FirstMerit Bank. In 1993, FirstMerit Leasing Company
("FirstMerit Leasing") and FirstMerit Securities, Inc. ("FirstMerit Securities")
were organized. FirstMerit Leasing provides equipment lease financing and
related services, while FirstMerit Securities offers discount brokerage services
to customers of FirstMerit Bank and other FirstMerit subsidiaries.
FirstMerit Bank is also the parent corporation of Abell & Associates, Inc.,
a nationally-known life insurance and financial consulting firm acquired in May
1997, and FirstMerit Insurance Agency, Inc. Abell & Associates assists in the
design and funding of estate plans, corporate succession plans and executive
compensation plans. The firm also does consulting work for law and accounting
firms, as well as individual corporations, designing funding for corporate
liability issues. FirstMerit Insurance Agency, Inc. became a subsidiary of
FirstMerit Bank when FirstMerit acquired Great Northern Financial Corporation in
1994. FirstMerit Insurance Agency, Inc.'s license to sell life insurance
products and annuities was reactivated in 1997.
Although FirstMerit is a corporate entity legally separate and distinct
from its affiliates, bank holding companies such as FirstMerit, which are
subject to the BHCA, are expected to act as a source of financial strength for
their subsidiary banks. The principal source of FirstMerit's income is dividends
from its subsidiaries. There are certain regulatory restrictions on the extent
to which financial institution subsidiaries can pay dividends or otherwise
supply funds to FirstMerit.
RECENT TRANSACTIONS
FirstMerit engages in discussions concerning possible acquisitions of other
financial institutions and financial services companies on a regular basis.
FirstMerit also periodically acquires branches and deposits in its principal
markets. FirstMerit's strategy for growth includes strengthening market share in
its existing markets, expanding into complementary markets and broadening its
product offerings. Consistent with this strategy, FirstMerit has announced three
strategic transactions in the last ten months.
CoBancorp Acquisition. FirstMerit completed the acquisition of CoBancorp,
Elyria, Ohio, the parent of PremierBank & Trust and Jefferson Savings Bank, on
May 22, 1998 (the "CoBancorp Merger"). FirstMerit had entered into an Agreement
of Affiliation and Plan of Merger with CoBancorp on November 2, 1997. Under the
terms of the CoBancorp Merger, CoBancorp shareholders had a right to elect to
exchange their common stock for either Common Stock of FirstMerit, cash, or a
combination of Common Stock and cash, provided that no less than 30% nor more
than 49% of the total transaction value could be paid in cash. The CoBancorp
Merger was structured as a tax-free exchange for CoBancorp shareholders who
received FirstMerit Common Stock, and was accounted for as a purchase
transaction. At the effective time of the CoBancorp Merger, based upon the
average closing price of FirstMerit's Common Stock of $29.375 per share over a
specified period, the value of the transaction on such date was approximately
$174.1 million. In connection with the CoBancorp Merger, FirstMerit issued
approximately 3.9 million shares of Common Stock, paid $50.0 million in cash
(based upon the CoBancorp shareholder elections and allocations), and assumed
merger-related liabilities of approximately $9.6 million. The transaction
created goodwill of approximately $136.6 million that will be amortized
primarily over 25 years.
Security First Acquisition. On April 5, 1998, FirstMerit entered into an
Agreement of Affiliation and Plan of Merger with Security First, the parent
company of Security Federal Savings and Loan Association of Cleveland
8
<PAGE> 10
and First Federal Savings Bank of Kent. Pursuant to the merger agreement,
Security First will merge with and into FirstMerit in a tax-free,
stock-for-stock exchange, with FirstMerit as the surviving corporation (the
"Security First Merger"). Under the terms of the merger agreement, all shares of
Security First common stock issued and outstanding immediately prior to the
effective time of the Security First Merger shall be converted into the right to
receive 0.8855 of a share of FirstMerit Common Stock. Based on the closing price
of the Common Stock on June 30, 1998 of $29.125 per share, the value of the
transaction on such date was approximately $227.2 million, assuming the issuance
of approximately 7.8 million shares of Common Stock for Security First shares,
options and convertible debentures.
The Security First Merger, which will be accounted for as a
pooling-of-interests, is expected to close early in the fourth quarter of 1998.
The merger agreement has been approved by the Boards of Directors of both
companies. Consummation of the Security First Merger is subject to certain
customary conditions. Security First has also granted FirstMerit an option to
acquire up to 19.9% of Security First common stock under certain conditions.
At the time FirstMerit announced the Security First Merger, FirstMerit also
announced the termination of a previously initiated stock repurchase program. In
order for the Security First Merger to be treated as a pooling-of-interests for
accounting purposes, FirstMerit must reissue approximately 1.2 million shares of
Common Stock (intended to be issued through the Offering), prior to the
effective time of the Security First Merger.
Signal Acquisition. On August 10, 1998, FirstMerit signed a definitive
agreement to acquire Signal, a $1.9 billion holding company headquartered in
Wooster, Ohio (the "Signal Merger"). Principal subsidiaries of Signal include
Signal Bank, N.A., Summit Bank, N.A., First Federal Savings Bank of New Castle
(Pennsylvania), and Mobile Consultants, Inc. The Signal Merger will allow
FirstMerit to increase its market share in several key northern and central Ohio
communities and will mark FirstMerit's entrance into western Pennsylvania.
Under the terms of the agreement, each share of Signal common stock will be
converted into the right to receive 1.32 shares of FirstMerit Common Stock, and
each share of Signal preferred stock will be converted into an equivalent class
of FirstMerit preferred stock. Based on the closing price of the Common Stock on
August 10, 1998, of $28.19 per share, the transaction, which will be accounted
for as a pooling-of-interests, is valued at $470.0 million. The acquisition has
been approved by the Boards of Directors of both companies and is subject to
approval by FirstMerit's and Signal's shareholders as well as regulatory
authorities. Signal has granted FirstMerit an option to acquire up to 19.9% of
Signal's common stock under certain conditions and certain shareholders of
Signal have also agreed to vote for the proposed merger. The transaction is
expected to close in the first quarter of 1999.
Summary. On a pro forma basis, including Security First and Signal,
FirstMerit would have had total assets, deposits and shareholders' equity of
$8.8 billion, $6.7 billion and $854.1 million, respectively, as of June 30,
1998. Assuming the issuance of 7.8 million shares of Common Stock in connection
with the Security First Merger, and 17.9 million shares of FirstMerit Common
Stock in connection with the Signal Merger, and based upon the total outstanding
shares of Common Stock as of June 30, 1998, FirstMerit would have had
approximately 92.3 million shares outstanding and approximately 12,650
shareholders.
The Offering will be consummated prior to the closing of the Security First
and Signal mergers, and the closing of the Security First Merger is conditioned
upon completion of the Offering which is necessary for that transaction to be
treated as a pooling-of-interests for accounting purposes. There can be no
assurance that the Security First and Signal mergers will be consummated as
planned.
FirstMerit believes that these acquisitions have and will further
strengthen its competitive position in the northeastern and central Ohio markets
and will broaden the financial services it can offer to its customers.
FirstMerit believes it has significant experience in integrating acquired
businesses. FirstMerit continues to explore acquisition opportunities that would
meet its objectives.
9
<PAGE> 11
USE OF PROCEEDS
The net proceeds to FirstMerit from the sale of the shares of Common Stock
offered hereby are estimated to be $ million (after deducting estimated
expenses and underwriting discounts and commissions), and will be used by
FirstMerit as working capital for general corporate purposes. The Offering will
facilitate FirstMerit's ability to treat the acquisition of Security First as a
pooling-of-interests for accounting purposes.
MARKET PRICE AND DIVIDEND INFORMATION
The following table sets forth, for the periods indicated, the high and low
sales prices of the Common Stock as reported on Nasdaq and cash dividends per
share of Common Stock declared.
<TABLE>
<CAPTION>
PRICE RANGE
---------------- DIVIDENDS
HIGH LOW PER SHARE
---- --- ---------
<S> <C> <C> <C>
Year Ended December 31, 1996
1st Quarter............................................... $16.25 $13.88 $0.135
2nd Quarter............................................... 16.00 15.00 0.135
3rd Quarter............................................... 16.00 14.13 0.135
4th Quarter............................................... 18.00 15.63 0.145
Year Ended December 31, 1997
1st Quarter............................................... 21.38 17.38 0.145
2nd Quarter............................................... 25.25 19.25 0.145
3rd Quarter............................................... 27.00 22.63 0.160
4th Quarter............................................... 30.75 24.88 0.160
Year Ended December 31, 1998
1st Quarter............................................... 34.38 25.88 0.160
2nd Quarter............................................... 33.75 27.25 0.160
3rd Quarter (through August 25, 1998)..................... 30.88 23.44 N/A
</TABLE>
On August 25, 1998, there were approximately 7,695 holders of record of
Common Stock. The closing sale price of the Common Stock as of August 25, 1998
was $23.78 per share.
10
<PAGE> 12
CAPITALIZATION
The following table sets forth (a) the actual capitalization of FirstMerit
as of June 30, 1998, (b) the adjusted pro forma capitalization to give effect to
the pending acquisitions of Signal and Security First described under "BUSINESS
OF FIRSTMERIT -- Recent Transactions," and (c) the adjusted pro forma
capitalization to give effect to the sale of the shares of Common Stock offered
hereby at an assumed net offering price of $22.41 per share (based on the
closing price on Nasdaq on August 25, 1998), after deducting estimated
underwriting discounts and commissions and offering expenses payable by
FirstMerit and assuming no exercise of the Underwriters' overallotment option.
<TABLE>
<CAPTION>
JUNE 30, 1998
-----------------------------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
ACTUAL FOR ACQUISITIONS(1) FOR OFFERING
------ ------------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total long-term debt............................... $ -- $ 354,139 $ 354,139
Stockholders' equity:(1)(2)
Preferred stock, without par value............... -- 9,917 9,917
Common stock, without par value.................. 110,197 120,458 120,458
Capital surplus.................................. 25,919 102,377 109,787
Retained earnings................................ 550,558 634,140 634,140
Unrealized gains on securities available for
sale.......................................... 3,059 3,996 3,996
Treasury stock................................... (43,720) (43,720) (24,238)
-------- ---------- ----------
Total stockholders' equity......................... 646,013 827,168 854,060
-------- ---------- ----------
Total capitalization............................... $646,013 $1,181,307 $1,208,199
======== ========== ==========
CAPITAL RATIOS:
Tier 1 capital to risk-weighted assets............. 9.68% 9.47% 9.82%
Total risk-based capital........................... 10.93% 11.32% 11.66%
Leverage capital ratio............................. 8.75% 8.14% 8.45%
</TABLE>
- ---------------
(1) Assumes pooling-of-interests accounting for pending Security First and
Signal mergers.
(2) Excludes 3.8 million shares of Common Stock reserved for issuance under
FirstMerit's employee stock plans.
11
<PAGE> 13
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present, for FirstMerit and Signal, selected
consolidated financial data for the five year period ended December 31, 1997,
and for Security First, selected consolidated financial data for the five year
period ended March 31, 1998. Information presented for years ended 1997 and
prior thereto for Security First is based on its fiscal years ended March 31,
1998, 1997, 1996, 1995 and 1994. Selected consolidated financial data for the
six month periods ended June 30, 1998 and 1997 is also presented for FirstMerit,
Security First and Signal. The selected consolidated financial data presented is
unaudited, except for the following fiscal year end information: Statement of
Income Data, Per Share Data and Balance Sheet Data.
The information for FirstMerit has been derived from the consolidated
financial statements of FirstMerit, including the unaudited consolidated
financial statements of FirstMerit incorporated in this Prospectus by reference
to FirstMerit's Quarterly Report on Form 10-Q for the period ended June 30,
1998, as amended by Form 10-Q/A filed on August 26, 1998, and the audited
consolidated financial statements of FirstMerit incorporated in this Prospectus
by reference to FirstMerit's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended by Form 10-K/A filed on April 30, 1998, and should
be read in conjunction therewith and with the notes thereto. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE."
The information for Security First has been derived from the consolidated
financial statements of Security First, including the unaudited financial
statements for the three month period ended June 30, 1998, and the audited
consolidated financial statements of Security First for the year ended March 31,
1998, and should be read in conjunction therewith and with the notes thereto.
Information presented for the years ended 1997 and prior is based on Security
First's fiscal years ended March 31, 1998, 1997, 1996, 1995 and 1994.
Information presented for the six months ended June 30, 1998 and 1997 represents
the results of Security First's fiscal fourth quarters ended March 31 added to
results for Security First's fiscal first quarters ended June 30. That is, the
six-month periods ended June 30, 1998 and 1997 represent results from January 1
to June 30.
The information for Signal has been derived from the consolidated financial
statements of Signal, including the incorporated audited consolidated restated
financial statements of Signal for the year ended December 31, 1997 and the
incorporated unaudited interim financial statements for the six month period
ended June 30, 1998, and should be read in conjunction therewith and with the
notes thereto.
Historical results are not necessarily indicative of results to be expected
for any future period. With respect to FirstMerit, results for the six month
period ended June 30, 1998 are not necessarily indicative of results which may
be expected for any other interim period or for the year as a whole. See
"BUSINESS OF FIRSTMERIT -- Recent Transactions" for information concerning
FirstMerit's pending acquisitions of Security First and Signal.
12
<PAGE> 14
FIRSTMERIT CORPORATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Interest income...................... $ 211,708 $ 200,777 $ 407,825 $ 411,745 $ 416,627 $ 371,018 $ 361,208
Interest expense..................... 79,421 74,032 152,369 160,773 180,933 140,181 135,149
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income.................. 132,287 126,745 255,456 250,972 235,694 230,837 226,059
Provision for possible loan losses... 10,906 9,194 21,593 17,751 19,763 4,624 8,056
Non-interest income.................. 50,207 39,394 83,578 82,496 68,517 70,656 71,909
Non-interest expense................. 104,973 95,326 191,080 209,702 227,779 193,410 187,945
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes........... 66,615 61,619 126,361 106,015 56,669 103,459 101,967
Provision for federal income tax..... 20,505 20,067 39,998 35,075 30,950 32,110 33,335
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income before extraordinary
item............................... 46,110 41,552 86,363 70,940 25,719 71,349 68,632
Extraordinary item (net of tax
effect)............................ 5,599
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................... $ 46,110 $ 41,552 $ 86,363 $ 70,940 $ 31,318 $ 71,349 $ 68,632
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:(1)
Net income -- basic.................. $ 0.74 $ 0.66 $ 1.38 $ 1.09 $ 0.47 $ 1.07 $ 1.03
Net income -- diluted................ 0.73 0.65 1.36 1.08 0.47 1.07 1.03
Dividends............................ 0.32 0.29 0.61 0.55 0.51 0.49 0.44
Book value........................... 9.91 8.37 8.56 8.19 8.10 7.86 7.52
BALANCE SHEET DATA:
Total assets......................... $6,179,390 $5,317,118 $5,307,461 $5,227,908 $5,596,621 $5,722,573 $5,179,298
Loans................................ 4,295,933 3,877,685 3,834,875 3,655,998 3,770,366 3,687,889 3,135,866
Allowance for possible loan losses... 65,749 50,893 53,774 49,336 46,840 35,834 35,030
Securities........................... 1,327,598 1,072,734 1,116,787 1,187,524 1,403,059 1,610,360 1,579,651
Deposits............................. 4,878,882 4,202,816 4,255,211 4,204,875 4,501,925 4,541,457 4,429,681
Borrowings........................... 547,368 514,680 441,755 423,701 486,958 612,624 199,898
Shareholders' equity................. 646,013 517,160 530,336 523,707 542,881 523,319 500,121
PERFORMANCE RATIOS:(2)
Return on average assets............. 1.69% 1.61% 1.64% 1.29% 0.55% 1.32% 1.34%
Return on average equity............. 16.90% 16.37% 16.62% 13.44% 5.93% 13.86% 14.30%
Net interest margin.................. 5.25% 5.31% 5.25% 4.94% 4.53% 4.68% 4.90%
Interest rate spread................. 4.45% 4.56% 4.44% 4.18% 3.78% 4.15% 4.38%
Non-interest income to average
assets............................. 1.84% 1.53% 1.59% 1.51% 1.21% 1.31% 1.41%
Non-interest expense to average
assets............................. 3.84% 3.70% 3.64% 3.83% 4.03% 3.59% 3.67%
Efficiency ratio(3).................. 57.15% 56,56% 55.60% 59.10% 65,65% 62.14% 60.72%
ASSET QUALITY RATIOS:
Non-performing loans to total
loans.............................. 0.37% 0.27% 0.35% 0.29% 0.37% 0.70% 0.85%
Non-performing assets to total
assets............................. 0.26% 0.19% 0.26% 0.20% 0.25% 0.27% 0.26%
Allowance for possible loan losses to
total loans........................ 1.53% 1.31% 1.40% 1.35% 1.24% 0.97% 1.12%
Allowance for possible loan losses to
non-performing loans............... 438.77% 521.66% 423.15% 471.75% 364.80% 229.00% 192.30%
Net charge-offs to average
loans(2)........................... 0.36% 0.41% 0.45% 0.40% 0.23% 0.11% 0.15%
CAPITAL RATIOS(4):
Shareholders' equity to total
assets............................. 10.45% 9.73% 9.99% 10.02% 9.70% 9.14% 9.66%
Leverage ratio(5).................... 8.75% 9.89% 9.66% 9.63% 9.66% 9.53% 9.43%
Tier 1 capital to risk-weighted
assets............................. 9.68% 11.79% 12.30% 12.63% 14.53% 15.32% 16.18%
</TABLE>
- ---------------
(1) Per share data has been restated to reflect all stock dividends and stock
splits.
(2) Ratios for the six months ended June 30, 1998 and 1997 are stated on an
annualized basis.
(3) The efficiency ratio is equal to non-interest expense less amortization of
intangible assets divided by net interest income plus non-interest income
less gains or losses on securities transactions.
(4) Ratios are calculated based on period-end balances.
(5) Leverage ratio is computed as a ratio of period-end assets less goodwill.
13
<PAGE> 15
SECURITY FIRST CORP.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) YEARS ENDED MARCH 31,
----------------------- --------------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Interest income...................... $ 28,703 $ 26,289 $ 55,715 $ 49,178 $ 43,593 $ 39,410 $ 38,578
Interest expense..................... 14,922 13,928 29,566 25,563 22,608 18,123 18,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income.................. 13,781 12,361 26,149 23,615 20,985 21,287 20,578
Provision for possible loan losses... 168 118 310 323 377 582 695
Non-interest income.................. 1,012 844 1,758 1,698 1,699 1,418 1,518
Non-interest expense................. 6,775 6,528 13,306 15,209 13,367 12,009 11,386
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes........... 7,850 6,559 14,291 9,781 8,940 10,114 10,015
Provision for federal income tax..... 2,738 2,220 4,980 3,371 3,334 3,414 3,433
Cumulative effect of accounting
change............................. 1,168
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................... $ 5,112 $ 4,339 $ 9,311 $ 6,410 $ 5,606 $ 6,700 $ 7,750
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:(1)
Net income -- basic.................. $ 0.67 $ 0.58 $ 1.23 $ 0.86 $ 0.78 $ 0.93 $ 1.40
Net income -- diluted................ 0.60 0.52 1.11 0.78 0.70 0.82 1.15
Dividends............................ 0.17 0.15 0.32 0.28 0.27 0.21 0.12
Book value........................... 8.77 8.12 8.56 7.92 7.35 6.90 7.33
BALANCE SHEET DATA:
Total assets......................... $ 696,462 $ 653,226 $ 685,482 $ 634,761 $ 547,227 $ 507,751 $ 476,910
Loans and mortgage-backed
securities......................... 632,105 586,096 629,303 570,498 478,906 435,119 402,926
Allowance for possible loan losses... 5,287 5,018 5,189 4,968 4,572 4,283 3,973
Securities........................... 28,107 34,923 21,318 35,555 40,782 45,245 46,786
Deposits............................. 511,183 464,976 508,157 445,182 410,737 393,314 387,776
Borrowings........................... 109,195 120,100 105,107 123,700 76,858 59,347 47,513
Shareholders' equity................. 68,943 61,541 64,679 59,435 54,381 50,209 36,701
PERFORMANCE RATIOS:(2)
Return on average assets............. 1.48% 1.36% 1.39% 1.07% 1.07% 1.37% 1.64%
Return on average equity............. 15.62% 14.61% 14.92% 11.33% 10.64% 14.58% 23.23%
Net interest margin.................. 4.15% 4.02% 4.05% 4.12% 4.16% 4.57% 4.56%
Interest rate spread................. 3.81% 3.68% 3.70% 3.78% 3.80% 4.30% 4.39%
Non-interest income to average
assets............................. 0.29% 0.26% 0.26% 0.28% 0.32% 0.29% 0.32%
Non-interest expense to average
assets............................. 1.96% 2.04% 1.98% 2.55% 2.54% 2.46% 2.41%
Efficiency ratio(3).................. 45.47% 48.76% 47.29% 49.52% 55.19% 50.18% 51.03%
ASSET QUALITY RATIOS:
Non-performing loans to total
loans.............................. 0.68% 0.31% 0.46% 0.29% 0.53% 0.76% 0.92%
Non-performing assets to total
assets............................. 0.62% 0.28% 0.42% 0.26% 0.47% 0.70% 0.83%
Allowance for possible loan losses to
total loans........................ 0.83% 0.85% 0.82% 0.87% 0.95% 0.98% 0.99%
Allowance for possible loan losses to
non-performing loans............... 122.38% 274.50% 178.50% 302.37% 180.85% 128.70% 107.82%
Net charge-offs (recoveries) to
average loans(2)................... 0.01% 0.01% 0.01% (0.01%) 0.02% 0.07% 0.15%
CAPITAL RATIOS(4)(5):
Shareholders' equity to total
assets............................. 9.90% 9.42% 9.44% 9.36% 9.94% 9.89% 7.70%
Leverage ratio(6).................... 7.64% 7.92% 7.45% 7.92% 8.42% 8.74% 7.87%
Tier 1 capital to risk-weighted
assets............................. 10.69% 11.40% 10.21% 11.39% 12.65% 13.24% 11.76%
</TABLE>
- ---------------------------
(1) Per share data has been restated to reflect all stock dividends and stock
splits.
(2) Ratios for the six months ended June 30, 1998 and 1997 are stated on an
annualized basis.
(3) The efficiency ratio is equal to non-interest expense less amortization of
intangible assets divided by net interest income plus non-interest income
less gains or losses on securities transactions.
(4) Ratios are calculated based on period-end balances.
(5) Capital ratios for Security First's principal subsidiary, Security Federal
Savings & Loan, only.
(6) Leverage ratio is computed as a ratio of period-end assets less goodwill.
14
<PAGE> 16
SIGNAL CORP
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:(1)
Interest income................... $ 68,368 $ 53,912 $ 119,653 $ 101,169 $ 88,709 $ 72,709 $ 66,235
Interest expense.................. 43,391 34,707 76,512 63,007 53,765 39,945 36,809
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income............... 24,977 19,205 43,141 38,162 34,944 32,764 29,426
Provision for possible loan
losses.......................... 3,234 657 1,615 1,259 918 801 1,848
Non-interest income............... 15,240 11,926 30,075 18,957 5,133 3,719 7,152
Non-interest expense.............. 32,775 15,832 41,479 35,451 19,781 18,787 16,656
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes........ 4,208 14,642 30,122 20,409 19,378 16,895 18,074
Provision for federal income
tax............................. 1,831 5,037 11,088 7,549 6,853 5,601 6,271
Cumulative effect of accounting
change.......................... 451
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................ $ 2,377 $ 9,605 $ 19,034 $ 12,860 $ 12,525 $ 11,294 $ 12,254
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:(2)
Net income -- basic............... $ 0.18 $ 1.01 $ 1.93 $ 1.29 $ 1.30 $ 1.21 $ 1.14
Net income -- diluted............. 0.18 0.82 1.57 1.09 1.08 1.01 1.00
Dividends......................... 0.20 0.17 0.34 0.30 0.27 0.22 0.14
Book value........................ 12.51 14.07 13.43 14.91 16.80 15.71 14.91
BALANCE SHEET DATA:
Total assets...................... $1,912,225 $1,614,566 $1,832,387 $1,486,168 $1,279,391 $1,147,607 $ 979,632
Loans............................. 1,226,851 979,214 1,166,938 922,009 769,086 685,862 522,908
Allowance for possible loan
losses.......................... 10,191 7,487 8,773 5,783 5,466 5,904 6,745
Securities........................ 483,690 487,225 452,222 399,714 423,927 414,345 358,338
Deposits.......................... 1,305,086 932,204 1,256,896 939,538 828,447 752,484 706,358
Borrowings........................ 417,097 524,540 394,968 398,868 313,192 273,180 168,379
Shareholders' equity.............. 155,912 136,149 152,597 128,341 124,156 113,127 95,936
PERFORMANCE RATIOS:(3)
Return on average assets.......... 0.25% 1.26% 1.14% 0.92% 1.04% 0.95% 1.23%
Return on average equity.......... 3.07% 14.58% 13.56% 10.08% 10.54% 9.30% 13.11%
Net interest margin............... 2.84% 2.64% 2.77% 2.85% 2.99% 3.25% 3.36%
Interest rate spread.............. 2.54% 2.29% 2.41% 2.50% 2.54% 2.89% 3.04%
Non-interest income to average
assets.......................... 1.61% 1.56% 1.80% 1.35% 0.43% 0.36% 0.78%
Non-interest expense to average
assets.......................... 3.47% 2.08% 2.49% 2.52% 1.64% 1.80% 1.82%
Efficiency ratio(4)............... 60.01% 48.72% 52.55% 51.33% 48.39% 51.50% 45.54%
ASSET QUALITY RATIOS:
Non-performing loans to total
loans........................... 0.61% 0.59% 0.73% 0.64% 0.45% 0.88% 1.23%
Non-performing assets to total
assets.......................... 0.40% 0.36% 0.47% 0.40% 0.28% 0.53% 0.73%
Allowance for possible loan losses
to total loans.................. 0.82% 0.76% 0.75% 0.63% 0.70% 0.85% 1.16%
Allowance for possible loan losses
to non-performing loans......... 134% 130% 103% 98% 154% 97% 94%
Net charge-offs to average
loans(2)........................ 0.31% 0.09% 0.11% 0.11% 0.18% 0.26% 0.14%
CAPITAL RATIOS(5):
Shareholders' equity to total
assets.......................... 8.15% 8.43% 8.33% 8.64% 9.70% 9.86% 9.79%
Leverage ratio(6)................. 8.91% N/A 5.23% N/A N/A N/A N/A
Tier 1 capital to risk-weighted
assets.......................... 11.77% N/A 8.18% N/A N/A N/A N/A
</TABLE>
- ---------------
N/A -- Not available.
(1) Results for the six months ended June 30, 1998 contain certain merger
charges and other non-recurring items.
(2) Per share data has been restated to reflect all stock dividends and stock
splits.
(3) Ratios for the six months ended June 30, 1998 and 1997 are stated on an
annualized basis.
(4) The efficiency ratio is equal to non-interest expense less amortization of
intangible assets divided by net interest income plus non-interest income
less gains or losses on securities transactions.
(5) Ratios are calculated based on period-end balances.
(6) Leverage ratio is computed as a ratio of period-end assets less goodwill.
15
<PAGE> 17
HISTORICAL FINANCIAL DATA
The following Signal balance sheet information as of December 31, 1997, and
income statement information for the periods ended June 30, 1998 and December
31, 1997 have been derived from the consolidated financial statements of Signal
incorporated by reference from FirstMerit's Current Report on Form 8-K filed
with the Commission on August 31, 1998.
SIGNAL CORP
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
-----------------
(IN THOUSANDS)
<S> <C>
ASSETS:
Cash and due from banks..................................... $ 34,393
Investment securities....................................... 452,222
Loans held for sale......................................... 90,379
Loans and leases receivable................................. 1,175,711
Allowance for possible loan losses.......................... (8,773)
Accrued interest receivable and other assets................ 88,455
----------
Total assets...................................... $1,832,387
==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits.................................................... $1,256,896
Short-term borrowings....................................... 124,275
Long-term debt.............................................. 270,693
Other liabilities........................................... 27,926
----------
Total liabilities................................. 1,679,790
----------
Shareholders' equity:
Preferred stock........................................... 9,917
Common stock.............................................. 9,748
Treasury stock............................................ (7,984)
Additional paid-in capital................................ 63,725
Retained earnings......................................... 75,947
Securities equity valuation............................... 1,244
----------
Total shareholders' equity........................ 152,597
----------
Total liabilities and shareholders' equity........ $1,832,387
==========
</TABLE>
SIGNAL CORP
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
----------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Interest income............................................. $68,368 $119,653
Interest expense............................................ 43,391 76,512
------- --------
Net interest income....................................... 24,977 43,141
Allowance for possible loan losses.......................... 3,234 1,615
------- --------
Net interest income after allowance for possible loan
losses................................................. 21,743 41,526
------- --------
Other income................................................ 15,240 30,075
Other expenses.............................................. 32,775 41,479
------- --------
Income before income taxes................................ 4,208 30,122
------- --------
Provision for income taxes.................................. 1,831 11,088
------- --------
Net income.................................................. 2,377 19,034
Preferred stock dividends................................... 349 1,584
------- --------
Net income applicable to common shares...................... $ 2,028 $ 17,450
======= ========
Net income per common share................................. $ 0.18 $ 1.93
Net income per diluted share................................ $ 0.18 $ 1.57
Weighted-average basic common shares outstanding............ 11,339 9,051
Weighted-average diluted common shares outstanding.......... 11,339 12,151
</TABLE>
16
<PAGE> 18
COMPARATIVE PER SHARE DATA (UNAUDITED)
For the periods indicated, the following table sets forth common share book
value, cash dividends paid, and net income (unaudited) of (a) FirstMerit on a
historical basis, (b) Signal on a historical basis, (c) Security First on a
historical basis, (d) FirstMerit, Security First and Signal on a pro forma
combined basis, and (e) FirstMerit, Security First and Signal on a pro forma
combined adjusted basis that gives effect to the Offering. The pro forma data in
the table assumes that each of the acquisitions of Security First and Signal are
treated as a pooling-of-interests for accounting purposes. The pro forma
dividends per share are assumed to be the same as FirstMerit's historical
dividends per share. The selected annual historical data for each entity
coincides with their respective fiscal years, which were years ended December 31
for FirstMerit and Signal and years ended March 31 for Security First, and the
selected unaudited interim historical financial data for each entity, including
Security First, is based on the six month periods ended June 30, 1998 and 1997.
Information presented for years ended 1997 and prior thereto for Security First
is based on its fiscal years ended March 31, 1998, 1997, 1996, 1995 and 1994.
Upon consummation of the mergers, the fiscal year of the combined company will
be December 31. Accordingly, historical financial statements of the combined
company subsequent to the Security First and Signal mergers will include the
financial information of Security First on a calendar year basis.
The following information should be read in conjunction with the historical
selected financial information of FirstMerit, CoBancorp, Security First and
Signal and the pro forma condensed combined financial information giving effect
to the Security First and Signal mergers included elsewhere in the Prospectus.
THE INFORMATION PRESENTED BELOW IS NOT NECESSARILY INDICATIVE OF THE
RESULTS WHICH ACTUALLY WOULD HAVE BEEN OBTAINED IF THE SECURITY FIRST AND SIGNAL
MERGERS OR THE OFFERING HAD BEEN CONSUMMATED IN THE PAST OR WHICH MAY BE
OBTAINED IN THE FUTURE.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED
---------------- -----------------------
1998 1997 1997 1996 1995
------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
HISTORICAL PER SHARE DATA:
FIRSTMERIT
Net income per basic common share.......................... $ 0.74 $ 0.66 $1.38 $1.09 $0.47
Net income per diluted common share........................ 0.73 0.65 1.36 1.08 0.47
Cash dividends paid per common share....................... 0.32 0.29 0.61 0.55 0.51
Book value per common share (period end)................... 9.91 8.29 8.56 8.19 8.10
SECURITY FIRST
Net income per basic common share.......................... 0.67 0.58 1.23 0.86 0.78
Net income per diluted common share........................ 0.60 0.52 1.11 0.78 0.70
Cash dividends paid per common share....................... 0.17 0.15 0.32 0.28 0.27
Book value per common share (period end)................... 8.77 8.12 8.56 7.92 7.35
SIGNAL(1)
Net income per basic common share.......................... 0.18 1.01 1.93 1.29 1.30
Net income per diluted common share........................ 0.18 0.82 1.57 1.09 1.08
Cash dividends paid per common share....................... 0.20 0.17 0.34 0.30 0.27
Book value per common share (period end)................... 12.51 14.07 13.43 14.91 16.80
PRO FORMA COMBINED
Net income per basic common share(2)(3).................... 0.59 0.63 1.30 1.06 0.57
Net income per diluted common share(2)(3).................. 0.59 0.60 1.24 1.02 0.55
Cash dividends paid per common share(4).................... 0.32 0.29 0.61 0.55 0.51
Book value per common share (period end)................... 9.07 8.54 9.01 8.41 8.33
PRO FORMA COMBINED ADJUSTED
Net income per basic common share(2)(3).................... 0.59 0.62 1.28 1.05 0.49
Net income per diluted common share(2)(3).................. 0.58 0.60 1.22 1.01 0.48
Cash dividends paid per common share(4).................... 0.32 0.29 0.61 0.55 0.51
Book value per common share (period end)................... 9.24 8.73 9.20 8.61 8.53
</TABLE>
- ---------------
(1) Signal's results for the six months ended June 30, 1998, contain certain
merger charges and other non-recurring items.
(2) FirstMerit actual cash dividends per share used in pro forma combined
presentation.
(3) The Pro Forma Condensed Combined net income and Pro Forma Condensed Combined
net income per basic and diluted share excludes $724,000 of extraordinary
expenses (net of tax) for merger related costs included in the December 31,
1997 CoBancorp financial statements.
(4) The Pro Forma Condensed Combined net income and Pro Forma Condensed Combined
net income per basic and diluted share excludes $5.6 million of
extraordinary income (net of tax) on the disposition of assets after
business acquisition included in the December 31, 1995 FirstMerit financial
statements.
17
<PAGE> 19
PRO FORMA FINANCIAL INFORMATION
The pro forma condensed combined financial statements include (i) the
CoBancorp Merger consummated on May 22, 1998, (ii) the pending merger of
Security First, contemplated to be completed in the fourth quarter of 1998,
(iii) the pending merger of Signal, contemplated to be completed during the
first quarter 1999, and (iv) the reissuance of 1.2 million shares of Common
Stock pursuant to the Offering. Purchase accounting was used for the completed
CoBancorp Merger, and pooling-of-interest accounting is used on the pro forma
information presented for the Security First and Signal mergers.
CoBancorp is already included in the balance sheet of FirstMerit as of June
30, 1998. The pro forma condensed combined income statements for the six months
ended June 30, 1998 and 1997, and December 31, 1997 include operating results of
CoBancorp as if the CoBancorp Merger were consummated at the beginning of each
of those periods. Results of FirstMerit for the six months ended June 30, 1998
already include the results of CoBancorp for the period May 22, 1998
(consummation) to June 30, 1998. The balance sheet and income statement
adjustments shown are based on management estimates, for pro forma presentation,
of costs associated with the mergers and issuances of shares of Common Stock.
FirstMerit cost estimates are forward-looking. Readers are cautioned that the
type and amount of actual costs incurred could vary materially from these
estimates if future developments differ from the underlying assumptions used by
management in determining the current estimate of these costs. See
"FORWARD-LOOKING STATEMENTS."
The unaudited pro forma balance sheet information is not necessarily
indicative of the actual financial position that would have existed had the
merger of CoBancorp been consummated on June 30, 1997 or December 31, 1997, and
had the Security First and Signal mergers been consummated on June 30, 1998 and
1997, and the years ended December 31, 1997, 1996 and 1995, or that may exist in
the future. The unaudited pro forma income statement information is not
necessarily indicative of the results that would have occurred had any of the
CoBancorp, Security First or Signal mergers been consummated on the dates
indicated or that may be achieved in the future. Assuming the consummation of
the Security First and Signal mergers, the actual financial position and results
of operations will differ, perhaps significantly, from the pro forma amounts
reflected herein because of a variety of factors, including changes in value and
changes in operating results between the dates of the pro forma financial data
and the date on which the Security First and Signal mergers take place.
18
<PAGE> 20
PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
ACQUISITION AND
OFFERING PRO FORMA
FIRSTMERIT SECURITY FIRST SIGNAL ADJUSTMENTS COMBINED
---------- -------------- ---------- -------------------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment securities.... $1,327,598 $ 29,501 $ 483,690 $1,840,789
Federal funds sold....... 10,600 7,500 18,100
Net loans................ 4,230,184 630,422 1,280,197 $(24,100)(1) 6,116,703
Cash and due from
banks................. 216,443 11,968 44,557 26,892(2) 299,860
Premises and equipment,
net................... 118,120 8,355 22,701 149,176
Accrued interest and
other assets.......... 276,445 8,716 81,080 23,600(1) 389,841
---------- -------- ---------- -------- ----------
Total assets $6,179,390 $696,462 $1,912,225 $ 26,392 $8,814,469
========== ======== ========== ======== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Deposits................. $4,878,882 $511,183 $1,305,086 $6,695,151
Securities sold under
agreement to
repurchase and other
borrowings............ 547,368 111,727 417,097 1,076,192
Accrued taxes, expenses
and other
liabilities........... 107,127 4,609 34,130 $ 43,200(1) 189,066
---------- -------- ---------- -------- ----------
Total liabilities 5,533,377 627,519 1,756,313 43,200 7,960,409
Preferred stock.......... 9,917 9,917
Common stock............. 110,197 79 11,747 (1,565)(3) 120,458
Capital surplus.......... 25,919 17,614 58,844 7,410(2) 109,787
Accumulated other
comprehensive
income................ 3,059 937 3,996
Retained earnings........ 550,558 51,250 76,032 (43,700)(1) 634,140
1,565(3)
Treasury stock........... (43,720) (1,565) 19,482(2) (24,238)
---------- -------- ---------- -------- ----------
Total
shareholders'
equity 646,013 68,943 155,912 (16,808) 854,060
---------- -------- ---------- -------- ----------
Total liabilities
and
shareholders'
equity $6,179,390 $696,462 $1,912,225 $ 26,392 $8,814,469
========== ======== ========== ======== ==========
</TABLE>
See accompanying notes to pro forma condensed combined financial information.
19
<PAGE> 21
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1998
------------------------------------------------------------------------------------------------
FIRSTMERIT ADJUSTMENTS
AND FOR ISSUANCE
COBANCORP OF 1.2 MILLION
PRO FORMA PRO FORMA SECURITY SHARES OF
FIRSTMERIT COBANCORP ADJUSTMENTS COMBINED FIRST SIGNAL COMMON STOCK
----------- --------- ----------- ---------- ----------- --------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income...... $ 211,708 $ 18,634 $ (48)(4) $ 230,897 $ 28,703 $ 68,368
603(4)
Interest expense..... 79,421 11,380 1,283(4) 93,163 14,922 43,391
1,079(4)
---------- --------- ------- ---------- --------- --------- ---------
Net interest
income........... 132,287 7,254 (1,807)(4) 137,734 13,781 24,977
Provision for loan
losses............. 10,906 100 11,006 168 3,234
---------- --------- ------- ---------- --------- --------- ---------
Net interest income
after provision
for loan
losses........... 121,381 7,154 (1,807) 126,728 13,613 21,743
Other income......... 50,207 2,646 52,853 1,012 15,240
Other expenses....... 104,973 6,670 374(4) 114,454 6,775 32,775
2,437(4)
---------- --------- ------- --------- --------- ---------
Income before
income taxes..... 66,615 3,130 (4,618) 65,127 7,850 4,208
Federal income
taxes.............. 20,505 1,096 (1,616)(5) 19,984 2,738 1,831
---------- --------- ------- ---------- --------- --------- ---------
Net income......... $ 46,110 $ 2,035 $(3,002) $ 45,143 $ 5,112 $ 2,377
========== ========= ======= ========== ========= ========= =========
Adjustments to net
income to
calculate:
Basic net income..... (348)
Diluted net income... 128
Per share data:
Net
income -- basic.... $ 0.74 $ 0.58 $ 0.68 $ 0.67 $ 0.18
Net
income -- diluted.. $ 0.73 $ 0.58 $ 0.67 $ 0.60 $ 0.18
Average common shares
outstanding --
basic.............. 62,282,099 3,481,800 66,147,593(6) 7,652,501 11,339,173 1,200,000
Average common shares
outstanding --
diluted............ 63,143,349 3,535,828 67,068,825(6) 8,666,508 11,339,173 1,200,000
<CAPTION>
PRO FORMA
COMBINED
<S> <C>
Interest income...... $ 327,700
Interest expense..... 151,208
----------
Net interest
income........... 176,492
Provision for loan
losses............. 14,408
----------
Net interest income
after provision
for loan
losses........... 162,084
Other income......... 69,105
Other expenses....... 154,004
----------
Income before
income taxes..... 77,185
Federal income
taxes.............. 24,553
----------
Net income......... $ 52,632
==========
Adjustments to net
income to
calculate:
Basic net income..... (348)
Diluted net income... 128
Per share data:
Net
income -- basic.... $ 0.59
Net
income -- diluted.. $ 0.58
Average common shares
outstanding --
basic.............. 89,091,591(7)
Average common shares
outstanding --
diluted............ 90,910,726(7)
</TABLE>
See accompanying notes to pro forma condensed combined financial information.
20
<PAGE> 22
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
--------------------------------------------------
FIRSTMERIT
AND
COBANCORP
PRO FORMA PRO FORMA
FIRSTMERIT COBANCORP ADJUSTMENTS COMBINED
----------- --------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income...... $ 200,777 $ 23,377 $ (61)(4) $ 224,861
768(4)
Interest expense..... 74,032 9,081 1,635(4) 86,123
1,375(4)
---------- --------- ------- ----------
Net interest
income........... 126,745 14,296 (2,303)(4) 138,738
Provision for loan
losses............. 9,194 150 9,344
---------- --------- ------- ----------
Net interest income
after provision
for loan
losses........... 117,551 14,146 (2,303) 129,394
Other income......... 39,394 3,651 43,045
Other expenses....... 95,326 14,098 477(4) 113,007
3,106(4)
---------- --------- ------- ----------
Income before
income taxes..... 61,619 3,699 (5,886) 59,432
Federal income
taxes.............. 20,067 736 (2,060)(5) 18,743
---------- --------- ------- ----------
Net income......... $ 41,552 $ 2,963 $(3,826) $ 40,689
========== ========= ======= ==========
Adjustments to net
income to
calculate:
Basic net income...
Diluted net
income...........
Per share data:
Net
income -- basic.... $ 0.66 $ 0.86 $ 0.61
Net
income -- diluted.. $ 0.65 $ 0.85 $ 0.60
Average common shares
outstanding --
basic.............. 63,296,726 3,445,348 67,121,751(6)
Average common shares
outstanding --
diluted............ 63,851,138 3,499,376 67,736,145(6)
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
--------------------------------------------------------
ADJUSTMENTS
FOR ISSUANCE
OF 1.2 MILLION
SECURITY SHARES OF PRO FORMA
FIRST SIGNAL COMMON STOCK COMBINED
----------- --------- ----------------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income...... $ 26,289 $ 53,912 $ 305,062
Interest expense..... 13,928 34,707 134,758
--------- --------- --------- ----------
Net interest
income........... 12,361 19,205 170,304
Provision for loan
losses............. 118 657 10,119
--------- --------- --------- ----------
Net interest income
after provision
for loan
losses........... 12,243 18,548 160,185
Other income......... 844 11,926 55,815
Other expenses....... 6,528 15,832 135,367
--------- --------- --------- ----------
Income before
income taxes..... 6,559 14,642 80,633
Federal income
taxes.............. 2,220 5,037 26,000
--------- --------- --------- ----------
Net income......... $ 4,339 $ 9,605 $ 54,633
========= ========= ========= ==========
Adjustments to net
income to
calculate:
Basic net income... (809) (809)
Diluted net
income........... 189 189
Per share data:
Net
income -- basic.... $ 0.58 $ 1.01 $ 0.62
Net
income -- diluted.. $ 0.52 $ 0.82 $ 0.60
Average common shares
outstanding --
basic.............. 7,501,849 8,708,451 1,200,000 86,459,794(7)
Average common shares
outstanding --
diluted............ 8,740,342 11,670,792 1,200,000 92,081,164(7)
</TABLE>
See accompanying notes to pro forma condensed combined financial information.
21
<PAGE> 23
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED 1997
--------------------------------------------------
FIRSTMERIT
AND
COBANCORP
PRO FORMA PRO FORMA
FIRSTMERIT COBANCORP ADJUSTMENTS COMBINED
----------- --------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income...... $ 407,825 $ 48,141 $ (121)(4) $ 457,381
1,536(4)
Interest expense..... 152,369 19,087 3,269(4) 177,475
2,750(4)
---------- --------- ------- ----------
Net interest
income........... 255,456 29,054 (4,604)(4) 279,906
Provision for loan
loses.............. 21,593 225 21,818
---------- --------- ------- ----------
Net interest income
after provision
for loan
losses........... 233,863 28,829 (4,604) 258,088
Other income......... 83,578 8,203 91,781
Other expenses....... 191,080 29,941 954(4) 228,187
6,212(4)
---------- --------- ------- ----------
Income before
taxes............ 126,361 7,091 (11,770) 121,682
Federal income
taxes.............. 39,998 1,567 (4,120)(5) 37,445
---------- --------- ------- ----------
Net income......... $ 86,363 $ 5,524 $(7,650) $ 84,237
========== ========= ======= ==========
Adjustments to net
income to
calculate:
Basic net income...
Diluted net
income...........
Per share data:
Net income -- basic.. $ 1.38 $ 1.60(8) $ 1.27(8)
Net
income -- diluted.. $ 1.36 $ 1.58(8) $ 1.25(8)
Average common shares
outstanding --
basic.............. 62,717,185 3,455,010 66,552,937(6)
Average common shares
outstanding --
diluted............ 63,537,328 3,497,150 67,419,864(6)
<CAPTION>
FOR THE YEAR ENDED 1997
----------------------------------------------------------
ADJUSTMENTS
FOR ISSUANCE
OF 1.2 MILLION
SECURITY SHARES OF PRO FORMA
FIRST SIGNAL COMMON STOCK COMBINED
----------- ---------- ------------------ ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income...... $ 55,715 $ 119,653 $ 632,749
Interest expense..... 29,566 76,512 283,553
--------- ---------- --------- ----------
Net interest
income........... 26,149 43,141 349,196
Provision for loan
loses.............. 310 1,615 23,743
--------- ---------- --------- ----------
Net interest income
after provision
for loan
losses........... 25,839 41,526 325,453
Other income......... 1,758 30,075 123,614
Other expenses....... 13,306 41,479 282,972
--------- ---------- --------- ----------
Income before
taxes............ 14,291 30,122 166,095
Federal income
taxes.............. 4,980 11,089 53,514
--------- ---------- --------- ----------
Net income......... $ 9,311 $ 19,033 $ 112,581
========= ========== ========= ==========
Adjustments to net
income to
calculate:
Basic net income... (1,584) (1,584)
Diluted net
income........... 334 334
Per share data:
Net income -- basic.. $ 1.23 $ 1.93 $ 1.28(8)
Net
income -- diluted.. $ 1.11 $ 1.57 $ 1.22(8)
Average common shares
outstanding --
basic.............. 7,552,329 9,050,918 1,200,000 86,387,736(7)
Average common shares
outstanding --
diluted............ 8,718,437 12,151,159 1,200,000 92,379,570(7)
</TABLE>
See accompanying notes to pro forma condensed combined financial information.
22
<PAGE> 24
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED 1996
-----------------------------------------------------------------------
ADJUSTMENTS
FOR ISSUANCE
OF 1.2 MILLION
SECURITY SHARES OF PRO FORMA
FIRSTMERIT FIRST SIGNAL COMMON STOCK COMBINED
----------- --------- ---------- ------------------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Interest income............ $ 411,745 $ 49,178 $ 101,169 $ 562,092
Interest expense........... 160,773 25,563 63,007 249,344
---------- --------- ---------- --------- ----------
Net interest income...... 250,972 23,615 38,162 312,748
Provision for loan
losses................... 17,751 323 1,259 19,333
---------- --------- ---------- --------- ----------
Net interest income after
provision for loan
losses................ 233,221 23,292 36,903 293,415
Other income............... 86,048 1,698 18,957 106,703
Net securities gains
(losses)................. (1,776) (1,776)
Other expenses............. 209,702 15,209 35,451 260,361
---------- --------- ---------- --------- ----------
Income before income
taxes................. 106,015 9,781 20,409 136,205
Federal income taxes....... 35,075 3,371 7,549 45,995
---------- --------- ---------- --------- ----------
Net income............... $ 70,940 $ 6,410 $ 12,860 $ 90,210
========== ========= ========== ========= ==========
Adjustments to net income
to calculate:
Basic net income......... (1,696) (1,696)
Diluted net income....... 391 391
Per share data:
Net income -- basic........ $ 1.09 $ 0.86 $ 1.29 $ 1.05
Net income -- diluted...... $ 1.08 $ 0.78 $ 1.09 $ 1.01
Average common shares
outstanding -- basic..... 65,215,132 7,434,891 8,670,249 1,200,000 84,443,457(7)
Average common shares
outstanding -- diluted... 65,468,213 8,695,436 11,828,502 1,200,000 89,981,644(7)
</TABLE>
See accompanying notes to pro forma condensed combined financial information.
23
<PAGE> 25
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED 1995
----------------------------------------------------------------------
ADJUSTMENTS
FOR ISSUANCE
OF 1.2 MILLION
SECURITY SHARES OF PRO FORMA
FIRSTMERIT FIRST SIGNAL COMMON STOCK COMBINED
---------- --------- ---------- ------------------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Interest income................... $ 416,627 $ 43,593 $ 88,709 $ 548,929
Interest expense.................. 180,933 22,608 53,765 257,306
---------- --------- ---------- --------- ----------
Net interest income............. 235,694 20,985 34,944 291,623
Provision for loan losses......... 19,763 377 918 21,058
---------- --------- ---------- --------- ----------
Net interest income after
provision for loan losses..... 215,931 20,608 34,026 270,565
Other income...................... 68,517 1,699 5,133 75,349
Other expenses.................... 227,779 13,367 19,781 260,928
---------- --------- ---------- --------- ----------
Income before income taxes &
extraordinary item............ 56,669 8,940 19,378 84,986
Federal income taxes.............. 30,950 3,334 6,853 41,136
---------- --------- ---------- --------- ----------
Net income...................... $ 25,719(9) $ 5,606 $ 12,525 $ 43,850(9)
========== ========= ========== ========= ==========
Adjustments to net income to
calculate:
Basic net income................ (1,786) (1,786)
Diluted net income.............. 391 391
Per share data:
Net income -- basic(9)............ $ 0.38 $ 0.78 $ 1.30 $ 0.49
Net income -- diluted(9).......... $ 0.38 $ 0.70 $ 1.08 $ 0.48
Average common shares
outstanding -- basic............ 66,908,906 7,169,640 8,286,052 1,200,000 85,395,211(7)
Average common shares
outstanding -- diluted.......... 67,138,260 8,514,312 11,559,897 1,200,000 91,136,747(7)
</TABLE>
See accompanying notes to pro forma condensed combined financial information.
24
<PAGE> 26
NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1
Pursuant to their respective merger agreements and consistent with
generally accepted accounting principles, FirstMerit, Security First and Signal
expect that costs incurred to effect the mergers, which would include
transaction costs of the mergers and costs to combine operations, will be
deducted in determining net income in the period in which they are incurred.
Adjustments to conform the accounting policies of the entities are reflected in
these Pro Forma Condensed Combined Financial Statements (Unaudited) and are
discussed in these notes. The pro forma financial statements do not give effect
to any cost savings which may be realized in connection with the consolidation
of the respective operations of FirstMerit, Security First and Signal.
Transaction costs of the mergers and costs to combine operations are
expected to approximate $67.3 million on a pre-tax basis. The Pro Forma
Condensed Combined Statements of Income (Unaudited) do not reflect these
charges. The Pro Forma Condensed Combined Balance Sheet (Unaudited) reflects
these charges at that amount. It is anticipated that these charges will be
incurred and recognized by FirstMerit, Security First and Signal and
substantially paid by the first quarter of 1999. The following table provides
details of the estimated charges by type of cost:
<TABLE>
<CAPTION>
ESTIMATED RANGE OF COSTS
---------------------------------------
SECURITY PRE-TAX POST-TAX
TYPES OF COSTS FIRST SIGNAL COMBINED COMBINED
-------------- -------- ------ -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Severance and relocation................................ $ 1.0 $ 5.7 $ 6.7 $ 4.4
Allowance for loan losses............................... 7.3 16.8 24.1 15.7
Professional fees....................................... 4.0 10.0 14.0 9.1
Branch closings and real estate transactions............ 2.0 8.6 10.6 6.9
Systems................................................. .3 3.7 4.0 2.6
Other................................................... .5 7.4 7.9 5.0
----- ----- ----- -----
$15.1 $52.2 $67.3 $43.7
===== ===== ===== =====
</TABLE>
NOTE 2
This adjustment reflects the issuance of 1.2 million shares of FirstMerit
Common Stock in conjunction with the Offering. The share price used for total
proceeds was $22.41 which includes estimated underwriting discounts, commissions
and Offering expenses payable by FirstMerit. These shares were reissued out of
Treasury Stock at their approximate LIFO value of $16.235 per share.
NOTE 3
These reclassifications conform the acquired entities' capital structures
to that of FirstMerit.
25
<PAGE> 27
NOTE 4
The purchase accounting adjustments related to the CoBancorp Merger
reflected in the Pro Forma Condensed Combined Statements of Income (Unaudited)
are summarized as follows:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1998
THROUGH
AMORTIZATION MAY 22, 1998 SIX MONTHS ENDED YEAR ENDED
PERIOD (CONSUMMATION) JUNE 30, 1997 DECEMBER 31, 1997
------------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Interest Income
Amortization of investment
securities adjustment........ 3 years $ (48) $ (61) $ (121)
Amortization of loan portfolio
adjustment................... 7 years 603 768 1,536
Interest Expense
Amortization of deposit
liabilities adjustment....... 3 years (1,283) (1,635) (3,269)
Imputed interest to fund cash
component of purchase
price........................ (1,079) (1,375) (2,750)
Other Expenses
Amortization of incremental
intangibles.................. 10 & 25 years (2,437) (3,106) (6,212)
Amortization of fixed asset
adjustments.................. 10 years (374) (477) (954)
Federal tax benefit of pro forma
adjustments..................... 1,616 2,060 4,120
------- ------- -------
Net decrease to pro forma combined
net income...................... $(3,002) $(3,826) $(7,650)
======= ======= =======
</TABLE>
NOTE 5
Income tax expense on pro forma adjustments is reflected using a 35.0% tax
rate.
NOTE 6
As permitted by the Agreement of Affiliation and Plan of Merger and for
purposes of the pro forma calculations, 70% of CoBancorp shares of common stock
were converted at an exchange rate of 1.586 shares of FirstMerit Common Stock
for each share of CoBancorp common stock.
NOTE 7
For purposes of the pro forma calculations, (i) all Security First shares
of common stock were converted at a fixed exchange ratio of 0.8855 shares of
FirstMerit Common Stock, and (ii) all Signal shares of common stock were
converted at a fixed exchange ratio of 1.32 shares of FirstMerit Common Stock.
NOTE 8
The Pro Forma Condensed Combined net income and Pro Forma Condensed
Combined net income per basic and diluted share excludes $724,000 of
extraordinary expenses (net of tax) for merger related costs included in the
December 31, 1997 CoBancorp financial statements.
NOTE 9
The Pro Forma Condensed Combined net income and Pro Forma Condensed
Combined net income per basic and diluted share excludes $5.6 million of
extraordinary income (net of tax) on the disposition of assets after business
acquisition included in the December 31, 1995 FirstMerit financial statements.
26
<PAGE> 28
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each of the underwriters (the "Underwriters")
named below has severally agreed to purchase, and FirstMerit has agreed to sell
to such Underwriter, the number of shares of Common Stock set forth opposite the
name of such Underwriter.
<TABLE>
<CAPTION>
NAME OF UNDERWRITER NUMBER OF SHARES
------------------- ----------------
<S> <C>
McDonald & Company Securities, Inc. ........................
Keefe, Bruyette & Woods, Inc. ..............................
--------
========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby if any such shares are taken.
The Underwriters propose to offer part of the shares directly to the public
at the public offering price set forth on the cover page of this Prospectus and
part of the shares to certain dealers at a price which represents a concession
not in excess of $ per share under the public offering price. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other dealers. After the initial
offering of shares to the public, the public offering price and such concessions
may be changed by the Underwriters.
The offering of the shares of Common Stock is made for delivery when, as
and if accepted by the Underwriters and subject to prior sale and to withdrawal
or cancellation of the offer without notice. The Underwriters reserve the right
to reject any offer for the purchase of the shares of Common Stock.
FirstMerit has granted to the Underwriters an option, exercisable at any
time during the 30-day period from the date of this Prospectus, to purchase up
to an aggregate of 180,000 additional shares of Common Stock at the public
offering price set forth on the cover page hereof less underwriting discounts
and commissions. The Underwriters may exercise such option to purchase
additional shares solely for the purpose of covering over-allotments, if any,
incurred in connection with the sale of the Common Stock offered hereby. To the
extent such option is exercised, each Underwriter will become obligated, subject
to certain conditions, to purchase a number of additional shares proportionate
to such Underwriter's initial amount reflected in the preceding table.
FirstMerit has agreed that it will not, without the prior written consent
of McDonald & Company Securities, Inc., for a period of 90 days after the date
of this Prospectus, offer, sell or contract to sell, or otherwise dispose of or
enter into any transaction which is designed to, or might reasonably be expected
to, result in the disposition (whether by actual disposition or effective
economic disposition due to cash settlement or otherwise) by FirstMerit or any
affiliate of FirstMerit or any person in privity with FirstMerit or any
affiliate of FirstMerit, directly or indirectly, including but not limited to
officers and directors of FirstMerit or announce the offering of, any other
shares of Common Stock or any securities convertible into, or exchangeable for,
shares of Common Stock (except for the issuance of shares of Common Stock
pursuant to existing stock option, purchase and compensation plans, or upon
conversion of any currently outstanding convertible securities or the issuance
of shares of Common Stock as consideration for the acquisition of one or more
businesses including the acquisitions of Signal and Security First), or sell or
grant options, rights or warrants with respect to any shares of Common Stock
(other than the grant of options pursuant to existing stock option, purchase and
compensation plans), otherwise than in accordance with the Underwriting
Agreement or as contemplated in this Prospectus.
FirstMerit and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids
27
<PAGE> 29
for and purchase of the Common Stock so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
the Common Stock in the open market in order to cover syndicate short positions.
Penalty bids permit the Underwriters to reclaim a selling concession from a
syndicate member when the Common Stock originally sold by such syndicate member
is purchased in a stabilizing transaction or syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Common Stock
to be higher than it would otherwise be in the absence of such transactions.
These transactions may be effected on Nasdaq or otherwise and, if commenced, may
be discontinued at any time.
From time to time in the ordinary course of their respective businesses,
certain of the Underwriters and their respective affiliates have engaged in and
may in the future engage in commercial and/or investment banking transactions
with FirstMerit and its affiliates.
TRANSFER AGENT
FirstMerit's transfer agent is FirstMerit Bank, N.A., Corporate Trust
Department, 121 South Main Street, Suite 200, Akron, Ohio 44308-1444; telephone
number (330) 384-7202.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for FirstMerit by Brouse & McDowell, L.P.A., 500 First National Tower,
Akron, Ohio 44308. Philip A. Lloyd II is a shareholder of Brouse & McDowell,
L.P.A., and a director of FirstMerit. Kevin C. O'Neil is a shareholder of Brouse
& McDowell, L.P.A. Due to their involvement in this transaction, Messrs. Lloyd
and O'Neil are required to disclose their beneficial ownership of shares of
FirstMerit Common Stock, which is approximately 331,643 and 3,022 shares,
respectively. Certain matters will be passed upon for the Underwriters by Vorys,
Sater, Seymour and Pease LLP, 52 East Gay Street, Columbus, Ohio 43216.
EXPERTS
The consolidated financial statements of FirstMerit incorporated in this
Prospectus by reference to the FirstMerit Annual Report on Form 10-K for the
year ended December 31, 1997, as amended by the Form 10-K/A, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of Signal as of December 31, 1997 and
1996, and for the years then ended have been incorporated by reference in this
Prospectus in reliance on the report of KPMG Peat Marwick LLP, independent
certified public accountants, given on the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of Signal (fka FirstFederal Financial
Services Corp.) for the year ended December 31, 1995 (which are included in the
consolidated restated financial statements of Signal for the same period) have
been incorporated by reference in this Prospectus in reliance on the report of
Deloitte & Touche LLP, independent certified public accountants, given on the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of First Shenango Bancorp, Inc. as of
December 31, 1997 and 1996 and for each of the years in the three year period
ended December 31, 1997 (which are included in the consolidated restated
financial statements of Signal for the same periods), have been incorporated by
reference in this Prospectus in reliance upon the report of Ernst & Young LLP,
independent auditors given on the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of Security First as of March 31,
1998 and 1997, and for each of the three years in the period ended March 31,
1998, incorporated by reference in this Prospectus have been audited by Deloitte
& Touche LLP, independent auditors, and stated in their report, appearing in
Appendix C to Part 1 of Registration Statement No. 333-57439 on Form S-4 of
FirstMerit Corporation filed on June 22, 1998 which is incorporated by reference
herein, and has been so incorporated in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
28
<PAGE> 30
- ------------------------------------------------------------
- ------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY FIRSTMERIT OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT RELATES
IN ANY STATE OR TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN
SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................... 3
Incorporation of Certain Documents by
Reference................................ 3
Forward-Looking Statements................. 4
Prospectus Summary......................... 5
Business of FirstMerit..................... 7
Use of Proceeds............................ 10
Market Price and Dividend Information...... 10
Capitalization............................. 11
Selected Consolidated Financial Data....... 12
Historical Financial Data.................. 16
Comparative Per Share Data (Unaudited)..... 17
Pro Forma Financial Information............ 18
Underwriting............................... 27
Transfer Agent............................. 28
Legal Matters.............................. 28
Experts.................................... 28
</TABLE>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
LOGO
LOGO
1,200,000 SHARES
COMMON STOCK
---------------------
PROSPECTUS
---------------------
MCDONALD & COMPANY
SECURITIES, INC.
KEEFE, BRUYETTE & WOODS, INC.
September , 1998
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 31
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of expenses in connection with the
issuance and distribution of the securities being registered, other than
underwriting discounts and commissions:
<TABLE>
<S> <C>
Commission registration fees................................ $ 9,720
Nasdaq National Market listing fee.......................... 17,500
NASD filing fee............................................. 3,795
Blue Sky fees and expenses.................................. 5,000*
Printing and engraving expenses............................. 80,000*
Transfer agent and registrar fee and expenses............... *
Attorneys fees and expenses................................. 25,000*
Accounting fees and expenses................................ 50,000*
Miscellaneous............................................... 1,000*
-----------
Total............................................. *
===========
</TABLE>
- ---------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Article Sixth of the Amended and Restated Articles of
Incorporation of FirstMerit, FirstMerit may indemnify any director or officer,
any former director or officer of FirstMerit and any person who is or has served
at the request of FirstMerit as a director, officer or trustee of another
corporation, partnership, joint venture, trust or other enterprise (and his
heirs, executors and administrators) against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him by reason of the fact that he is or was such director, officer
or trustee in connection with any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative, to the
full extent permitted by applicable law, as the same may be in effect from time
to time. The indemnification provided for therein is not deemed to restrict the
right of FirstMerit to (i) indemnify employees, agents and others as permitted
by such law, (ii) purchase and maintain insurance or provide similar protection
on behalf of directors, officers or such other persons against liabilities
asserted against them or expenses incurred by them arising out of their service
to FirstMerit, and (iii) enter into agreements with such directors, officers,
employees, agents or others indemnifying them against any and all liabilities
(or such lesser indemnification as may be provided in such agreements) asserted
against them or incurred by them arising out of their service to FirstMerit.
The rights provided in Article Sixth are in addition to any rights provided
by contract or as a matter of law. Ohio Revised Code Section 1701.13(E) includes
indemnification provisions similar to Article Sixth. Section 1701.13(E) of the
Ohio Revised Code provides that a corporation may indemnify or agree to
indemnify any person who was or is a party, or is threatened to be made a party,
to any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, other than an action by or in
the right of the corporation, by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, trustee, officer, employee,
member, manager, or agent of another corporation, domestic or foreign, nonprofit
or for profit, a limited liability company, or a partnership, joint venture,
trust, or other enterprise, against expenses, including attorney's fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, if he had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit, or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful. Section 1701.13(E)(2) further specifies that a corporation may
indemnify or agree to indemnify any person who was or is a party, or is
threatened to be made a
II-1
<PAGE> 32
party, to any threatened, pending, or completed action or suit by or in the
right of the corporation to procure a judgment in its favor, by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a limited liability
company, or a partnership, joint venture, trust, or other enterprise, against
expenses, including attorney's fees, actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of (a) any claim, issue, or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation unless, and only to the extent, that the court of
common pleas or the court in which such action or suit was brought determines,
upon application, that, despite the adjudication of liability, but in view of
all the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses as the court of common pleas or such other court
shall deem proper, and (b) any action or suit in which the only liability
asserted against a director is pursuant to Section 1701.95 of the Ohio Revised
Code concerning unlawful loans, dividends and distribution of assets. In
addition, Section 1701.13(E) requires a corporation to pay any expenses,
including attorney's fees, of a director in defending an action, suit, or
proceeding referred to above as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, upon receipt of an undertaking
by or on behalf of the director in which he agrees to both (i) repay such amount
if it is proved by clear and convincing evidence that his action or failure to
act involved an act or omission undertaken with deliberate intent to cause
injury to the corporation or undertaken with reckless disregard for the best
interests of the corporation and (ii) reasonably cooperate with the corporation
concerning the action, suit, or proceeding.
Section 1701.13(E) further authorizes a corporation to enter into contracts
regarding indemnification and to purchase and maintain insurance on behalf of
any director, trustee, officer, employee or agent for any liability asserted
against him or arising out of his status as such. FirstMerit presently has
contracts with each of its directors and key officers and maintains insurance
for the benefit of persons entitled to indemnification.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
DOCUMENT EXHIBIT
-------- -------
<S> <C>
Form of Underwriting Agreement.............................. 1*
Opinion of Brouse & McDowell, L.P.A......................... 5
Consent of Brouse & McDowell, L.P.A. (included in Exhibit
5)........................................................ 23(a)
Consent of PricewaterhouseCoopers LLP ...................... 23(b)
Consent of KPMG Peat Marwick LLP............................ 23(c)
Consent of Deloitte & Touche LLP............................ 23(d)
Consent of Deloitte & Touche LLP............................ 23(e)
Consent of Ernst & Young LLP................................ 23(f)
Power of Attorney........................................... 24
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a
II-2
<PAGE> 33
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(c) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Akron, State of Ohio, on the 31st day of August,
1998.
FirstMerit Corporation
By: /s/ John R. Cochran
------------------------------------
John R. Cochran, Chairman and
Chief Executive Officer
II-4
<PAGE> 35
Pursuant to the requirements of the Securities Exchange Act of 1933, this
registration statement has been signed on the 31st day of August, 1998, by the
following persons (including a majority of the Board of Directors of the
registrant) in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ John R. Cochran Chairman and Chief Executive Officer
- ------------------------------------------------------ (Principal Executive Officer) and Director
John R. Cochran
/s/ Jack R. Gravo Executive Vice President, Finance and
- ------------------------------------------------------ Administration (Principal Financial Officer
Jack R. Gravo and Principal Accounting Officer)
Karen S. Belden* Director
- ------------------------------------------------------
Karen S. Belden
R. Cary Blair* Director
- ------------------------------------------------------
R. Cary Blair
John C. Blickle* Director
- ------------------------------------------------------
John C. Blickle
Director
- ------------------------------------------------------
Sid A. Bostic
Robert W. Briggs* Director
- ------------------------------------------------------
Robert W. Briggs
Richard Colella* Director
- ------------------------------------------------------
Richard Colella
Elizabeth A. Dalton* Director
- ------------------------------------------------------
Elizabeth A. Dalton
Terry L. Haines* Director
- ------------------------------------------------------
Terry L. Haines
Clifford J. Isroff* Director
- ------------------------------------------------------
Clifford J. Isroff
Philip A. Lloyd II* Director
- ------------------------------------------------------
Philip A. Lloyd II
Robert G. Merzweiler* Director
- ------------------------------------------------------
Robert G. Merzweiler
Stephen E. Myers* Director
- ------------------------------------------------------
Stephen E. Myers
Roger T. Read* Director
- ------------------------------------------------------
Roger T. Read
Justin T. Rogers, Jr.* Director
- ------------------------------------------------------
Justin T. Rogers, Jr.
Richard N. Seaman* Director
- ------------------------------------------------------
Richard N. Seaman
Director
- ------------------------------------------------------
Jerry M. Wolf
</TABLE>
* The undersigned, by signing his name hereto, does sign and execute this
registration statement on behalf of each of the indicated officers and directors
of FirstMerit Corporation pursuant to a Power of Attorney executed by each such
officer and director and filed with this registration statement.
/s/ Kevin C. O'Neil
--------------------------------------
Kevin C. O'Neil, Attorney-in-Fact
August 31, 1998
II-5
<PAGE> 36
EXHIBIT INDEX
<TABLE>
<CAPTION>
DOCUMENT EXHIBIT
-------- -------
<S> <C>
Form of Underwriting Agreement.............................. 1*
Opinion of Brouse & McDowell, L.P.A......................... 5
Consent of Brouse & McDowell, L.P.A.(included in Exhibit
5)........................................................ 23(a)
Consent of PricewaterhouseCoopers LLP ...................... 23(b)
Consent of KPMG Peat Marwick LLP............................ 23(c)
Consent of Deloitte & Touche LLP............................ 23(d)
Consent of Deloitte & Touche LLP............................ 23(e)
Consent of Ernst & Young LLP................................ 23(f)
Power of Attorney........................................... 24
</TABLE>
- ---------------
* To be filed by amendment.
II-6
<PAGE> 1
EXHIBIT 5
BROUSE & MCDOWELL L.P.A.
A LEGAL PROFESSIONAL ASSOCIATION
500 FIRST NATIONAL TOWER
AKRON, OHIO 44308
August 31, 1998
FirstMerit Corporation
III Cascade Plaza, 7th Floor
Akron, Ohio 44308
Gentlemen:
We have acted as legal counsel to FirstMerit Corporation, an Ohio
corporation ("FirstMerit" or "Company") in connection with the offer and sale by
the Company of up to 1,380,000 shares of its common stock, without par value
("Common Stock"), in accordance with the Underwriting Agreement between the
Company and representatives of the several Underwriters named therein.
In providing our opinions herein, reference is made to the registration
statement on Form S-3 dated as of the date of this opinion, and any amendments
thereto (the"Registration Statement"), as filed with the Securities and Exchange
Commission ("Commission"). Unless otherwise defined in this letter, all
capitalized terms have the same meanings as set forth in the Registration
Statement. Our opinion is provided to you as a legal opinion only, and not as a
guaranty or warranty, and is limited to the specific transactions, documents and
matters described above.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
the Registration Statement, and such other agreements, certificates and
documents as we have deemed necessary or appropriate in order to enable us to
render the opinions below. In our examination, we have assumed the genuineness
of all signatures, the legal capacity of all natural persons, the authority of
all persons signing documents, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified, conformed or photostatic copies and the authenticity of the
originals of such copies. We also assume that the transactions described in the
Registration Statement will be carried out in accordance with the terms therein
described.
We are of the opinion that:
<PAGE> 2
FirstMerit Corporation
August 31, 1998
Page 2
1. The Company is a corporation organized and existing in good standing
under the laws of the State of Ohio.
2. The shares of Common Stock that may be issued or transferred and
sold pursuant to the Registration Statement are duly authorized, and will be,
when issued or transferred and sold in accordance with the Registration
Statement and the prospectus comprising a part thereof, validly issued, fully
paid and nonassessable.
Our opinion is based on the law, judicial decisions, and such other
legal authorities as we have deemed necessary or appropriate for purposes of our
opinion, as each exists as of the date of this opinion. Existing laws may be
changed by legislation or promulgation of regulations or may be interpreted
differently than they are at present by courts, and such changes may alter the
conclusions reached in this opinion. No opinion is rendered with respect to any
issue or matter not expressly stated herein. In addition, our conclusions are
based upon the law currently in effect, which is subject to change on a
prospective or retroactive basis. If any assumption or representation described
above is not true, correct and complete, or in the event of a change in law
adversely affecting the conclusions reached in this letter, our opinion shall be
void and of no force or effect.
We disclaim any undertaking to advise you of changes which hereafter
may be brought to our attention, including any change in the law, whether by
legislative or regulatory action, judicial interpretation or otherwise, or of
any change of facts as they presently exist.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement filed by the Company to effect the registration of the
Shares and any amendments thereto, and to the reference to this firm under the
caption "Legal Matters" in the prospectus comprising a part of the Registration
Statement.
Very truly yours,
BROUSE & McDOWELL L.P.A.
/s/ Brouse & McDowell
<PAGE> 1
Exhibit 23(b)
Consent of PricewaterhouseCoopers LLP
We consent to incorporation by reference in Registration Statement (Form S-3),
of our report dated January 15, 1998, relating to the consolidated balance
sheets of FirstMerit Corporation and subsidiaries as of December 31, 1997 and
1996, 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, 1997, which report appears in the 1997 Annual Report on Form 10-K of
FirstMerit Corporation, as amended by Form 10-K/A filed on April 30, 1998. We
also consent to the reference to our firm under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
Akron, Ohio
August 31, 1998
<PAGE> 1
Exhibit 23(c)
Consent of KPMG Peat Marwick LLP
We consent to the incorporation by reference in the registration statement on
Form S-3 of FirstMerit Corporation of our report dated February 6, 1998, except
as to note 1 (Stock Dividend), which is as of April 22, 1998, and note 15,
which is as of June 29, 1998, with respect to the consolidated balance sheets
of Signal Corp and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for the years then ended, which report appears in the Form 8-K of
FirstMerit Corporation dated August 31, 1998, and to the reference of our firm
under the heading "Experts" in the registration statement on Form S-3.
Our report refers to the adoption of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," in 1997.
/s/ KPMG Peat Marwick LLP
Cleveland, Ohio
August 28, 1998
<PAGE> 1
Exhibit 23(d)
Consent of Deloitte & Touche LLP
We consent to the incorporation by reference in this Registration Statement of
FirstMerit Corporation on Form S-3 of our report dated January 26, 1996,
related to Signal Corp (formerly known as FirstFederal Financial Services Corp)
for the year ended December 31, 1995 appearing in Form 8-K dated August 31, 1998
of FirstMerit Corporation and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Columbus, Ohio
August 27, 1998
<PAGE> 1
Exhibit 23(e)
Consent of Deloitte & Touche LLP
We consent to the incorporation by reference in this Registration Statement of
FirstMerit Corporation on Form S-3 of our report dated April 22, 1998,
appearing in Appendix C to Part 1 (Prospectus and Proxy Statement) of
Registration Statement No. 333-57439 on Form S-4 of FirstMerit Corporation
filed on June 22, 1998. We also consent to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
August 31, 1998
<PAGE> 1
Exhibit 23(f)
Consent of Ernst & Young LLP
We consent to the reference to our firm under the captions "Experts" in the
Registration Statement (Form S-3) and related Prospectus of FirstMerit
Corporation for the registration of 1,380,000 shares of its common stock and to
the incorporation by reference therein of our report dated February 6, 1998,
with respect to the consolidated balance sheets of First Shenango Bancorp, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, changes in shareholder's equity, and cash flows for each
of the years in the three year period ended December 31, 1997 included in
FirstMerit Corporation's Form 8-K dated August 31, 1998 filed with the
Securities and Exchange Commission.
/s/ Ernst & Young
Pittsburgh Pennsylvania
August 27, 1998
<PAGE> 1
Exhibit 24
FIRSTMERIT CORPORATION
LIMITED POWER OF ATTORNEY
REGISTRATION STATEMENT ON FORM S-3
The undersigned directors and officers of FirstMerit Corporation (the
"Company") hereby constitute and appoint Terry E. Patton, and/or Kevin C.
O'Neil, and each of them, with full power of substitution and resubstitution, as
attorneys or attorney of the undersigned, to execute and file under the
Securities Act of 1933 a Registration Statement on Form S-3 relating to the
registration of shares of the Common Stock of the Company, and any and all
amendments and exhibits thereto, including pre-and post-effective amendments,
and any and all applications or other documents to be filed with the Securities
and Exchange Commission, National Association of Securities Dealers and any
state securities agencies pertaining to such registration, with full power and
authority to do and perform any and all acts and things whatsoever necessary,
appropriate or desirable to be done in the premises, or in the name, place and
stead of the said directors and officers, hereby ratifying and approving the
acts of said attorneys and any of them and any such substitute.
Effective the 18th day of June, 1998, unless otherwise indicated below.
<TABLE>
<S> <C>
/s/ John R. Cochran /s/ Jack R. Gravo
- ------------------------------------ ----------------------------------------------------
John R. Cochran Jack R. Gravo
Chairman and Chief Executive Officer Executive Vice President, Finance and Administration
(Chief Financial Officer and Chief Accounting Officer)
/s/ Karen S. Belden /s/ R. Cary Blair
- ------------------------------------ ----------------------------------------------------
Karen S. Belden, Director R. Cary Blair, Director
/s/ John C. Blickle
- ------------------------------------ ----------------------------------------------------
John C. Blickle, Director Sid A. Bostic, Director
/s/ Robert W. Briggs /s/ Richard Colella
- ------------------------------------ ----------------------------------------------------
Robert W. Briggs, Director Richard Colella, Director
/s/ Elizabeth A. Dalton /s/ Terry L. Haines
- ------------------------------------ ----------------------------------------------------
Elizabeth A. Dalton, Director Terry L. Haines, Director
/s/ Clifford J. Isroff /s/ Philip A. Lloyd, II
- ------------------------------------ ----------------------------------------------------
Clifford J. Isroff, Director Philip A. Lloyd, II, Director
/s/ Robert G. Merzweiler /s/ Stephen E. Myers
- ------------------------------------ ----------------------------------------------------
Robert G. Merzweiler, Director Stephen E. Myers, Director
/s/ Roger T. Read /s/ Justin T. Rogers
- ------------------------------------ ----------------------------------------------------
Roger T. Read, Director Justin T. Rogers, Director
/s/ Richard N. Seaman
- ------------------------------------
Richard N. Seaman, Director
</TABLE>
