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WASHINGTON, D.C. 20549

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

FIRSTMERIT CORPORATION

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, NO PAR VALUE

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

     State the approximate aggregate market value of the voting stock held by non-affiliates of the registrant as of February 15, 2002: $2,320,519,666.

     Indicate the number of shares outstanding of registrant’s common stock as of February 15, 2002: 84,845,326 shares of common stock, without par value.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Proxy Statement of FirstMerit Corporation, dated March 8, 2002, in Part III.

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PART I

Overview

      Registrant, FirstMerit Corporation (“FirstMerit” or the “Corporation”), is a $10.2 billion 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 (the “BHCA”). 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. The principal executive offices of FirstMerit are located at III Cascade Plaza, Akron, Ohio 44308, and its telephone number is (330) 996-6300.

      At December 31, 2001, FirstMerit Bank, N.A., one of the Corporation’s principal subsidiaries (“FirstMerit Bank”), operated a network of 157 full service banking offices and 175 automated teller machines. Its offices span a total of 21 counties in Ohio, including Ashland, Ashtabula, Crawford, Cuyahoga, Delaware, Erie, Franklin, Geauga, Huron, Knox, Lake, Lorain, Madison, Medina, Portage, Richland, Seneca, Stark, Summit, Wayne and Wood Counties, and Lawrence County in Pennsylvania. In its principal market in Northeastern Ohio, FirstMerit serves over 500,000 households and businesses in the 16th largest consolidated metropolitan statistical area (“MSA”) in the country (which combines the primary MSAs for Cleveland, Lorain/ Elyria and Akron, Ohio).

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.

      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 two regional divisions, being a northern and southern division, which are further divided into nine 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/ Wayne County (Wooster); FirstMerit Bank/ New Castle, Pennsylvania; and FirstMerit Bank/ Western Region. 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 and debit cards, rental of safe deposit boxes, letters of credit, leasing, securities brokerage and life insurance products. 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 principal direct operating subsidiaries other than FirstMerit Bank include FirstMerit Credit Life Insurance Company and FirstMerit Community Development Corporation. FirstMerit Credit Life Insurance Company was formed in 1985 to underwrite credit life and credit accident and health insurance in connection

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      FirstMerit Bank is the parent corporation of 16 wholly-owned subsidiaries. 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 securities brokerage services to customers of FirstMerit Bank and other FirstMerit subsidiaries.

      In connection with the acquisition of Signal Corp (“Signal”), which was merged with and into FirstMerit on February 12, 1999, FirstMerit acquired Mobile Consultants, Inc. (“MCI”), a broker and servicer of manufactured housing finance contracts. Ownership of MCI was transferred to FirstMerit Bank on November 30, 1999 for business and regulatory purposes. On October 31, 2001, FirstMerit Bank announced it had ceased making new manufactured housing loan originations, but would continue to service existing loan contracts until maturity.

      FirstMerit Bank is also the parent corporation of Abell & Associates, Inc. (“Abell”) and FirstMerit Insurance Agency, Inc. Abell, a nationally-known life insurance and financial consulting firm acquired in May 1997, 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, concentrating on funding for corporate liability issues. FirstMerit Insurance Agency, Inc. became a subsidiary of FirstMerit Bank when FirstMerit acquired Great Northern Financial Corporation. FirstMerit Insurance Agency, Inc.’s license to sell life insurance products and annuities was activated 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 most recently completed its acquisition of Signal Corp in 1999.

      FirstMerit believes strategic acquisitions have strengthened and will continue to further strengthen its competitive position in the northeastern and central Ohio markets and have broadened the financial services it can offer to its customers. FirstMerit believes it has significant experience in integrating acquired businesses and continues to explore acquisition opportunities that would meet its objectives.

      Signal Corp Acquisition. On February 12, 1999, Signal merged with and into FirstMerit in a tax-free, stock-for-stock exchange (the “Signal Merger”). Signal was a bank holding company, which had as its primary wholly-owned subsidiaries: Signal Bank, N.A., a national bank; Summit Bank, N.A., a national bank; First Federal Savings Bank of New Castle, a federal savings bank; and MCI. At the time of the acquisition, Signal had total assets of $1.95 billion, total deposits of $1.38 billion, and stockholders’ equity of $137.8 million. All shares of Signal common stock issued and outstanding immediately prior to the effective time were converted into the right to receive 1.32 shares of FirstMerit Common Stock. FirstMerit issued approximately 16.8 million shares of Common Stock and approximately 214,000 Shares of FirstMerit 6 1/2% Cumulative Convertible Preferred Stock,

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Competition

      The financial services industry is highly competitive. FirstMerit and its subsidiaries (the “Subsidiaries”) compete with other local, regional and national providers of financial services such as other bank holding companies, commercial banks, savings associations, credit unions, consumer and commercial finance companies, equipment leasing companies, brokerage institutions, money market funds and insurance companies. The Subsidiaries’ primary financial institution competitors include Bank One, National City Bank, KeyBank, Firstar Bank and Fifth Third Bank.

      Under the Gramm-Leach-Bliley Act, effective March 11, 2000 (the “GLB Act”), securities firms and insurance companies that elect to become financial holding companies may acquire banks and other financial institutions. The Gramm-Leach-Bliley Act may significantly change the competitive environment in which FirstMerit and its Subsidiaries conduct business. The financial services industry is also likely to become more competitive as further technological advances enable more companies to provide financial services. These technological advances may diminish the importance of depository institutions and other financial intermediaries in the transfer of funds between parties. Mergers between financial institutions within Ohio and in neighboring states have added competitive pressure, which pressure has intensified due to interstate banking which became permissible under the Interstate Banking and Branching Efficiency Act of 1994. FirstMerit competes in its markets by offering quality and innovative services at competitive prices.

REGULATION AND SUPERVISION

Introduction

      FirstMerit, its banking subsidiary and many of its nonbanking subsidiaries are subject to extensive regulation by federal and state agencies. The regulation of bank holding companies and their subsidiaries is intended primarily for the protection of depositors, federal deposit insurance funds and the banking system as a whole and not for the protection of security holders.

      As discussed in more detail below, this regulatory environment, among other things, may restrict FirstMerit’s ability to diversify into certain areas of financial services, acquire depository institutions in certain states and pay dividends on its capital stock. It may also require FirstMerit to provide financial support to its banking subsidiary, maintain capital balances in excess of those desired by management and pay higher deposit insurance premiums as a result of the deterioration in the financial condition of depository institutions in general.

Regulatory Agencies

      Bank Holding Company. FirstMerit, as a bank holding company, is subject to regulation under the BHCA and to inspection, examination and supervision by the Board of Governors of the Federal Reserve System (“Federal Reserve Board”) under the BHCA.

      Subsidiary Bank. FirstMerit’s national banking subsidiary is subject to regulation and examination primarily by the Office of the Comptroller of the Currency (“OCC”) and secondarily by the Federal Reserve Board and the Federal Deposit Insurance Corporation (“FDIC”).

      Nonbank Subsidiaries. Many of FirstMerit’s nonbank subsidiaries also are subject to regulation by the Federal Reserve Board and other applicable federal and state agencies. FirstMerit’s brokerage subsidiary is regulated by the Securities and Exchange Commission (“SEC”), the National Association of Securities Dealers, Inc. and state securities regulators. FirstMerit’s insurance subsidiaries are subject to regulation by applicable state insurance regulatory agencies. Other nonbank subsidiaries of FirstMerit are subject to the laws and regulations of both the federal government and the various states in which they conduct business.

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      Securities and Exchange Commission and Nasdaq. FirstMerit is also under the jurisdiction of the SEC and certain state securities commissions for matters relating to the offering and sale of its securities. FirstMerit is subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as administered by the SEC. FirstMerit is listed on The Nasdaq Stock Market under the trading symbol “FMER,” and is subject to the rules of Nasdaq.

Bank Holding Company Activities

      Interstate Banking. Under the Riegle-Neal Interstate Banking and Branching Act (“Riegle-Neal Act”), a bank holding company may acquire banks in states other than its home state, subject to any state requirement that the bank has been organized and operating for a minimum period of time, not to exceed five years, and the requirement that the bank holding company not control, prior to or following the proposed acquisition, more than 10% of the total amount of deposits of insured depository institutions nationwide or, unless the acquisition is the bank holding company’s initial entry into the state, more than 30% of such deposits in the state, or such lesser or greater amount set by the state.

      The Riegle-Neal Act also authorizes banks to merge across state lines, thereby creating interstate branches. States were permitted for a period of time to opt out of the interstate merger authority provided by the Riegle-Neal Act and, by doing so, prohibit interstate mergers in the state. FirstMerit will be unable to consolidate its banking operations in one state with those of another state if either state in question has opted out of the Riegle-Neal Act. Banks are also permitted to acquire and to establish de novo branches in other states where authorized under the laws of those states.

      Regulatory Approval. In determining whether to approve a proposed bank acquisition, federal banking regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the Community Reinvestment Act of 1977.

Dividend Restrictions

      FirstMerit is a legal entity separate and distinct from its subsidiary bank and other subsidiaries. Its principal source of funds to pay dividends on its common and preferred stock and debt service on its debt is dividends from its subsidiaries. Various federal and state statutory provisions and regulations limit the amount of dividends that FirstMerit Bank may pay without regulatory approval. Dividends payable by a national bank are limited to the lesser of the bank’s undivided profits and the bank’s retained net income for the current year plus its retained net income for the preceding two years (less any required transfers to capital surplus) up to the date of any dividend declaration in the current calendar year.

      Federal bank regulatory agencies have the authority to prohibit FirstMerit Bank from engaging in unsafe or unsound practices in conducting its business. The payment of dividends, depending on the financial condition of the bank, could be deemed an unsafe or unsound practice. The ability of FirstMerit Bank to pay dividends in the future is currently influenced, and could be further influenced, by bank regulatory policies and capital guidelines.

Holding Company Structure

      Transfer of Funds from Banking Subsidiary. FirstMerit’s banking subsidiary is subject to restrictions under federal law that limit the transfer of funds or other items of value from this subsidiary to FirstMerit and its nonbanking subsidiaries, including affiliates, whether in the form of loans and other extensions of credit, investments and asset purchases, or as other transactions involving the transfer of value from a subsidiary to an affiliate or for the benefit of an affiliate. Unless an exemption applies, these transactions by a banking subsidiary with a single affiliate are limited to 10% of the subsidiary bank’s capital and surplus and, with respect to all covered transactions with affiliates in the aggregate, to 20% of the subsidiary bank’s capital and surplus. Moreover, loans and extensions of credit to affiliates generally are required to be secured in specified amounts. A bank’s transactions with its nonbank affiliates are also generally required to be on arm’s-length terms.

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      Source of Strength Doctrine. Under current Federal Reserve Board policy, FirstMerit is expected to act as a source of financial and managerial strength to its subsidiary bank and, under appropriate circumstances, to commit resources to support such subsidiary bank. This support could be required at times when FirstMerit might not have the resources to provide it. In addition, the OCC may order the pro rata assessment of FirstMerit if the capital of its national bank subsidiary were to become impaired. If FirstMerit failed to pay the assessment within three months, the OCC could order the sale of its stock in the national bank subsidiary to cover the deficiency.

      Capital loans from FirstMerit to its subsidiary bank are subordinate in right of payment to deposits and certain other indebtedness of the subsidiary bank. In the event of FirstMerit’s bankruptcy, any commitment by FirstMerit to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

      Depositor Preference. The Federal Deposit Insurance Act (“FDI Act”) provides that, in the event of the “liquidation or other resolution” of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver will have priority over other general unsecured claims against the institution. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, nondeposit creditors, including FirstMerit, with respect to any extensions of credit they have made to such insured depository institution.

      Liability of Commonly Controlled Institutions. FirstMerit Bank is insured by the FDIC. FDIC-insured depository institutions can be held liable for any loss incurred, or reasonably expected to be incurred, by the FDIC due to the default of an FDIC-insured depository institution controlled by the same bank holding company, or for any assistance provided by the FDIC to an FDIC-insured depository institution controlled by the same bank holding company that is in danger of default. “Default” means generally the appointment of a conservator or receiver. “In danger of default” means generally the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance.

Capital Requirements

      General. FirstMerit is subject to risk-based capital requirements and guidelines imposed by the Federal Reserve Board. These are substantially similar to the capital requirements and guidelines imposed by the OCC and the FDIC on the depository institutions under their jurisdictions. For this purpose, a depository institution’s or holding company’s assets, and some of its specified off-balance sheet commitments and obligations, are assigned to various risk categories. A depository institution’s or holding company’s capital, in turn, is classified in one of three tiers, depending on type:

      FirstMerit, like other bank holding companies, currently is required to maintain Tier 1 capital and “total capital” (the sum of Tier 1, Tier 2 and Tier 3 capital) equal to at least 4% and 8%, respectively, of its total risk-weighted assets (including various off-balance-sheet items, such as standby letters of credit). For a holding company to be considered “well capitalized” for regulatory purposes, its Tier 1 and total capital ratios must be 6% and 10% on a risk-adjusted basis, respectively. At December 31, 2001, FirstMerit met both requirements, with Tier 1 and total capital equal to 9.09% and 12.07% of its respective total risk-weighted assets.

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      Federal Reserve Board, FDIC and OCC rules require FirstMerit to incorporate market and interest rate risk components into its risk-based capital standards. Under these market risk requirements, capital is allocated to support the amount of market risk related to a financial institution’s ongoing trading activities.

      The Federal Reserve Board also requires bank holding companies to maintain a minimum “leverage ratio” (Tier 1 capital to adjusted total assets) of 3% if the holding company has the highest regulatory rating and meets other requirements, or of 3% plus an additional “cushion” of at least 100 to 200 basis points (one to two percentage points) if the holding company does not meet these requirements. FirstMerit’s leverage ratio at December 31, 2001 was 7.75%.

      The Federal Reserve Board may set capital requirements higher than the minimums described above for holding companies whose circumstances warrant it. For example, holding companies experiencing or anticipating significant growth may be expected to maintain capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. The Federal Reserve Board has also indicated that it will consider a “tangible Tier 1 capital leverage ratio” (deducting all intangibles) and other indications of capital strength in evaluating proposals for expansion or new activities.

      FirstMerit Bank is subject to similar risk-based and leverage capital requirements adopted by its applicable federal banking agency. FirstMerit’s management believes that FirstMerit Bank meets all capital requirements to which it is subject.

      Failure to meet capital requirements could subject a bank to a variety of enforcement remedies, including the termination of deposit insurance by the FDIC, and to restrictions on its business, which are described under the next paragraph.

      Federal Deposit Insurance Corporation Improvement Act of 1991. The Federal Deposit Insurance Corporation Improvement Act of 1991 (the “FDICIA”), among other things, identifies five capital categories for insured depository institutions: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. It requires U.S. federal bank regulatory agencies to implement systems for “prompt corrective action” for insured depository institutions that do not meet minimum capital requirements based on these categories. The FDICIA imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the category in which an institution is classified. Unless a bank or thrift is well capitalized, it is subject to restrictions on its ability to offer brokered deposits and on other aspects of its operations. The FDICIA generally prohibits a bank from paying any dividend or making any capital distribution or paying any management fee to its holding company if the bank would thereafter be undercapitalized. An undercapitalized bank or thrift must develop a capital restoration plan, and its parent holding company must guarantee the bank’s or thrift’s compliance with the plan up to the lesser of 5% of the bank’s or thrift’s assets at the time it became undercapitalized and the amount needed to comply with the plan.

      As of December 31, 2001, FirstMerit believes that its bank subsidiary was well capitalized, based on the prompt corrective action ratios and guidelines described above. A bank’s capital category is determined solely for the purpose of applying the OCC’s (or the FDIC’s) prompt corrective action regulations, and the capital category may not constitute an accurate representation of the bank’s overall financial condition or prospects for other purposes.

Deposit Insurance Assessments

      Through the Bank Insurance Fund (“BIF”), the FDIC insures the deposits of FirstMerit’s depository institution subsidiary up to prescribed limits for each depositor. The amount of FDIC assessments paid by each BIF member institution is based on its relative risk of default as measured by regulatory capital ratios and other factors. Specifically, the assessment rate is based on the institution’s capitalization risk category and supervisory subgroup category. An institution’s capitalization risk category is based on the FDIC’s determination of whether the institution is well capitalized, adequately capitalized or less than adequately capitalized. An institution’s supervisory subgroup category is based on the FDIC’s assessment of the financial condition of the institution and the probability that FDIC intervention or other corrective action will be required.

      The BIF assessment rate currently ranges from zero to 27 cents per $100 of domestic deposits. The FDIC may increase or decrease the assessment rate schedule on a semi-annual basis. An increase in the BIF assessment

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      All FDIC-insured depository institutions must pay an annual assessment to provide funds for the payment of interest on bonds issued by the Financing Corporation, a federal corporation chartered under the authority of the Federal Housing Finance Board. The bonds, commonly referred to as FICO bonds, were issued to capitalize the Federal Savings and Loan Insurance Corporation. The FDIC established the FICO assessment rates effective for the fourth quarter of 2001 at approximately $.018 per $100 annually for BIF-assessable deposits. The FICO assessments are adjusted quarterly to reflect changes in the assessment bases of the FDIC’s insurance funds and do not vary depending on a depository institution’s capitalization or supervisory evaluations.

      FDIC-insured depository institutions pay an assessment rate equal to the rate assessed on deposits insured by the Savings Association Insurance Fund.

Fiscal And Monetary Policies

      FirstMerit’s business and earnings are affected significantly by the fiscal and monetary policies of the federal government and its agencies. FirstMerit is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the United States. Among the instruments of monetary policy available to the Federal Reserve are (a) conducting open market operations in United States government securities, (b) changing the discount rates of borrowings of depository institutions, (c) imposing or changing reserve requirements against depository institutions’ deposits, and (d) imposing or changing reserve requirements against certain borrowing by banks and their affiliates. These methods are used in varying degrees and combinations to affect directly the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. For that reason alone, the policies of the Federal Reserve Board have a material effect on the earnings of FirstMerit.

Privacy Provisions of Gramm-Leach-Bliley Act

      Under the GLB Act federal banking regulators were required to adopt rules that will limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. Federal banking regulators issued final rules on May 10, 2000. The rules were effective November 13, 2000, but compliance was optional until July 1, 2001. The privacy provisions of the GLB Act affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.

Future Legislation

      Various legislation, including proposals to change substantially the financial institution regulatory system and to expand or contract the powers of banking institutions and bank holding companies, is from time to time introduced in Congress. This legislation may change banking statutes and the operating environment of FirstMerit and its subsidiaries in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. FirstMerit cannot predict whether any of this potential legislation will be enacted, and if enacted, the effect that it, or any implementing regulations, would have on the financial condition or results of operations of FirstMerit or any of its subsidiaries.

      To the extent that the previous information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the full text of those provisions. Also, such statutes, regulations and policies are continually under review by Congress and state legislatures and federal and state regulatory agencies. A change in

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Summary Results of Operations and Core Earnings

      FirstMerit’s net income totaled $116.3 million, or $1.35 per diluted share, compared with $159.8 million, or $1.80 per diluted share for 2000. Excluding the cumulative effect of a change in accounting method, related to securitized asset residual interests, and a restructure charge associated with the Corporation’s exit from the manufactured housing lending business, core earnings totaled $163.7 million, or $1.90 per diluted share.

      Core earnings are not considered to be in accordance with generally accepted accounting principles. They are presented to help identify operating trends, for better comparison with periods in which no unusual or one-time events occurred, and may not be comparable to similarly titled results reported by other companies. Core results are described in more detail throughout this document.

      On a fully-tax equivalent basis, net interest income for 2001 totaled $395.1 million, 4% higher than last year’s $380.1 million. The net interest margin for 2001 was 4.20% compared with 3.93% in 2000.

      Net revenue was $574.2 million in 2001, up $30.7 million or 5.7%, from 2000 levels. Growth in fee income and the net interest margin more than offset the decline in earning assets. Excluding gains from the sale of securities, noninterest income was $179.1 million, 10% above year-ago results.

      Noninterest expenses were $328.6 million in 2001 versus $275.2 million in 2000. When costs associated with the fourth quarter restructure charge are excluded, 2001 noninterest expenses totaled $286.7 million. The “lower is better” efficiency ratio improved from 48.69% in 2000 to 48.09% for 2001. The ratio means it took 48.09 cents of operating costs to support the generation of each dollar of net income.

      Year-end assets were $10.2 billion, the same as last year. Total loans at December 31, 2001 were $7.4 billion, up slightly from last year’s ending balance of $7.2 billion. Even though total loan outstandings did not change much, the mix of loans improved with a greater amount of higher-yielding commercial and consumer loans, and fewer single-family mortgages.

      Total deposits were $7.5 billion at December 31, 2001, down marginally from last year. Similar to the loan portfolio, the mix of deposits at the end of 2001 was more favorable than that of the prior year. That is, less expensive core deposits, defined as total deposits less certificates of deposit (“CDs”), increased while higher-costing CDs decreased.

      The 2001 loan loss provision was $61.8 million and included a $14.5 million charge associated with the exit from the manufactured housing lending business. The loan loss provision for 2000 totaled $32.7 million. The increase in the loan loss provision corresponded with an increase in nonperforming loans. At year-ends 2001 and 2000, the allowance as a percent of outstanding loans totaled 1.70% and 1.50%, respectively. At December 31, 2001, non-performing assets as a percent of loans and ORE were 0.91% compared with 0.50% at December 31, 2000.

      Shareholders’ equity ended the year at $910.8 million. Common Stock dividends were $80.0 million, up from $76.2 million in 2000.

ITEM 2. PROPERTIES

FirstMerit Corporation

      FirstMerit’s executive offices and certain holding company operational facilities, totaling approximately 88,000 square feet, are located in a seven-story office building located at III Cascade in downtown Akron, Ohio. In early 2001, FirstMerit Bank sold its interest in the partnership which owned this building. At this same time, FirstMerit Bank entered into a five-year lease for the building with the new, third party owner. As part of the transaction, FirstMerit Bank was granted an option to acquire the building. The building is the subject of a ground lease with the City of Akron as the lessor of the land.

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      The facilities owned or leased by FirstMerit and its Subsidiaries are considered by management to be adequate, and neither the location nor unexpired term of any lease is considered material to the business of FirstMerit.

FirstMerit Bank

      The principal executive offices of FirstMerit Bank are located in a 28-story main office building located at 106 South Main Street, Akron, Ohio, which is owned by FirstMerit Bank. FirstMerit Bank/ Akron is the principal tenant of the building occupying approximately 117,469 square feet of the building, with the remaining portion leased to tenants unrelated to FirstMerit Bank. The properties occupied by 102 of FirstMerit Bank’s other branches are owned by FirstMerit Bank, while the properties occupied by its remaining 55 branches are leased with various expiration dates. There is no mortgage debt owing on any of the above property owned by FirstMerit Bank. FirstMerit Bank also owns automated teller machines, on-line teller terminals and other computers and related equipment for use in its business. In 1996 FirstMerit Bank completed major renovations to its main office building. FirstMerit Bank renovated all space which it occupies in the building, as well as all public areas.

      FirstMerit Bank also owns 19.5 acres near downtown Akron, on which is located FirstMerit’s Operations Center. The Operations Center is occupied and operated by FirstMerit Services Division, an operating division of FirstMerit Bank. The Operations Center primarily provides computer and communications technology-based services to FirstMerit and the Subsidiaries, and also markets its services to non-affiliated institutions. There is no mortgage debt owing on the Operations Center property. In connection with its Operations Center, the Services Division has a disaster recovery center at a remote site on leased property.

      The Trust and the Organizational & Development Departments of FirstMerit Bank are located in Main Place, a four-story office building located in downtown Akron. These departments occupy approximately 31,830 square feet of leased space in Main Place.

ITEM 3. LEGAL PROCEEDINGS

      In the normal course of business, FirstMerit is at all times subject to pending and threatened legal actions, some for which the relief or damages sought are substantial. After reviewing pending and threatened actions with counsel, management believes that the outcome of such actions will not have a material adverse effect on the results of operations or stockholders’ equity of FirstMerit. FirstMerit is not able to predict whether the outcome of such actions may or may not have a material adverse effect on results of operations in a particular future period as the time and amount of any resolution of such actions and its relationship to the future results of operations are not known.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matters were submitted to a vote of security holders in the fourth quarter of 2001.

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      The following persons are the executive officers of FirstMerit as of December 31, 2001. Unless otherwise designated, they are officers of FirstMerit, and unless otherwise stated, they have held their indicated positions for the past five years.

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      The outstanding shares of FirstMerit Common Stock are quoted on The Nasdaq Stock Market National Market System under the trading symbol FMER. The following table contains bid and cash dividend information for FirstMerit Common Stock for the two most recent fiscal years:

Stock Performance and Dividends⁽¹⁾

(1)	This table sets forth the high and low closing bid quotations, dividend rates and book values per share for the calendar periods indicated. These quotations furnished by the National Quotations Bureau Incorporated, represent prices between dealers, do not include retail markup, markdowns, or commissions, and may not represent actual transaction prices.
(2)	Based upon number of shares outstanding at the end of each quarter.

      On December 31, 2001 there were approximately 10,188 shareholders of record of FirstMerit Common Stock.

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FIRSTMERIT CORPORATION AND SUBSIDIARIES

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*	Fully-tax equivalent basis
(a)	The 2001 net income, provision for loan losses, other income, other expenses, and profitability ratios shown include the effects of a one-time restructuring charge related to the exit of the manufactured housing finance business of $41.1 million, after taxes. The specific income statement classifications affected by the charge, as shown in the preceding table, were as follows: other income $2.3 million, other expenses $41.9 million, and the provision for loan losses $14.5 million. Net income for 2001 was also reduced by a cumulative effect of a change in accounting for securitized retained interest assets of $6.3 million, after taxes. Results excluding these charges can be found in the “Earnings Summary” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 6 to the consolidated financial statements.

The 1999 net income, provision for possible loan losses, and profitability ratios shown include 1) merger-related expenses associated with the Signal pooling-of-interests acquisition of $32.3 million after taxes, and 2) an extraordinary charge from early extinguishment of Signal debt prior to the Signal merger.

The 1998 net income, provision for possible loan losses, and profitability ratios shown include 1) merger-related expenses associated with the Security First pooling-of-interests acquisition of $12.8 million after taxes, 2) merger costs from the Signal’s acquisition of First Shenango of $3.0 million after taxes, 3) a loss from the sale of a subsidiary of $5.5 million after taxes, and 4) an $18.8 million after-tax valuation charge related to residual interest on manufactured housing asset-backed securities.

      The following commentary presents Management’s discussion and analysis of the Corporation’s financial condition and results of operations. The review highlights the principal factors affecting earnings and the significant changes in balance sheet items for the years 2001, 2000 and 1999. Financial information for prior years is presented when appropriate. The objective of this financial review is to enhance the reader’s understanding of the accompanying tables and charts, the consolidated financial statements, notes to financial statements, and financial statistics appearing elsewhere in this report. Where applicable, this discussion also reflects Management’s insights of known events and trends that have or may reasonably be expected to have a material effect on the Corporation’s operations and financial condition.

      All financial data has been restated to give effect to acquisitions accounted for on a pooling of interests basis and stock splits in previous periods. The results of other bank and branch acquisitions, accounted for as purchases, have been included effective with the respective dates of acquisition.

Earnings Summary

      FirstMerit’s net income for 2001 was $116.3 million, or $1.35 per diluted share. This compares with net income of $159.8 million, or $1.80 per diluted share, for 2000. Core 2001 earnings, which exclude the impact of an after-tax charge of $41.1 million taken in the fourth quarter to exit the manufactured housing finance business, and an after-tax charge of $6.3 million resulting from new asset-backed residual interest accounting rules, totaled $163.7 million, or $1.90 per diluted share. Core earnings per share, at $1.90, were 5.6% higher than last year’s earnings per share of $1.80.

      Net income for the fourth quarter was $1.8 million, or $0.02 per diluted share, compared with $40.0 million and $0.45, respectively, for 2000. Excluding the restructure charge, core earnings and core earnings per diluted share for the fourth quarter of 2001 were $43.0 million, and $0.50, respectively.

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      The fourth quarter after-tax charge to exit the manufactured housing finance business includes: $9.9 million to shut down Mobile Consultants, Inc., the manufactured housing loan subsidiary; $21.1 million to reflect a change in assumptions related to loan loss severity; $9.4 million to additional loan loss reserves; and $0.7 million for severance costs. A further breakout of these costs can be found in the Other Income, Other Expenses, and Allowance for Loan Losses sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as in Note 6 to the consolidated financial statements.

      On a core basis, full-year 2001 returns on average common equity (“ROE”) and average assets (“ROA”) were 17.8% and 1.61%, respectively, compared with 18.6% and 1.54% for 2000. For 2001, reported ROE and ROA were 12.65% and 1.14%, respectively. For the fourth quarter alone, core ROE and ROA were 18.1% and 1.66%, respectively, compared with 17.8% and 1.54% for the prior year.

      Core net revenue, excluding gains from the sale of securities, totaled $576.8 million for the year, an increase of 6.1% above the $543.5 million earned in 2000. Net interest income for 2001 reached $395.1 million, up 4.0% over the $380.1 million reported the prior year, as margin expansion more than offset the 2.6% decline in average earning assets. The net interest margin averaged 4.20% for the year, compared with 3.93% for 2000, gradually improving throughout the course of the year from the low point of 3.79% reported in the third quarter of 2000 to a high of 4.41% achieved in the fourth quarter of this year.

      Excluding gains from the sale of investment securities, core noninterest income was $181.6 million, an increase of 11.2% primarily from higher service charges on deposits (up 12.0%), income from bank-owned life insurance (up 203%), and from the $5.6 million gain from the sale of a partnership interest. Fee income as a percent of net revenue was 31.5% for the current year compared with 30.1% in 2000.

      Core noninterest expense rose 4.2% for the year, from $275.2 million to $286.7 million. Excluding bankcard and other processing costs needed to support a higher level of processing activity (up $5.8 million, or 30%), core noninterest expense increased a modest 2.2%. The efficiency ratio improved to 48.1% for the full year, and 47.8% for the most recent quarter, compared with 48.7% and 49.9%, respectively, for 2000. Reported noninterest expense for 2001, which includes the fourth quarter restructure charge associated with the exit from the manufactured housing lending business, totaled $328.6 million.

      Year-end 2001 assets totaled $10.2 billion, virtually unchanged from prior year levels. Period-end loans rose 2%, with a continuing shift away from mortgages held in portfolio, which declined 24.7%, from 11.7% of the portfolio at year-end 2000 to its present level of 8.6%. Mortgage banking activity reached record levels for the year, with $733 million of mortgage loans closed and $637 million sold into the secondary market. Higher-yielding consumer and commercial loans grew 5.6%.

      Total deposits declined 1% to $7.5 billion, but the mix changed substantially. Core deposits, defined as total deposits less certificates of deposit, increased 7% and now account for 51% of total deposits, compared with 47% the prior year, reflecting the success of several market-rate sensitive deposit products.

      During 2001, the core loan loss provision was $47.3 million, with $15.1 million added in the fourth quarter, compared with $32.7 million taken in 2000. Additional reserves of $14.5 million were taken in the fourth quarter to cover any deterioration in the manufactured housing portfolio resulting from the decision to exit this business. As a result of the additional reserves taken, the allowance for loan losses now stands at 1.70%, compared with 1.50% at year-end 2000. Net charge-offs were $44.9 million for 2001, or 0.61% of average loans outstanding, compared with 0.40% for 2000. Nonperforming assets to loans and other real estate were 0.91% compared with 0.50% a year ago. Reserve coverage of nonperforming assets was 218% at December 31, 2001.

      Shareholders’ equity was $910.8 million at year-end 2001. Average equity to assets was 9.05% for 2001 compared to 8.31% for 2000. Common dividends per share were $0.93 for full year 2001. At year end, there were 84,991,286 common shares outstanding.

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*

Core earnings for 2001 exclude after-tax restructure charges associated with the Corporation’s exit from the manufactured housing lending business of $41.1 million, and the cumulative effect of a change in accounting principle, associated with the impairment of a retained interest in securitized manufactured housing assets, of $6.3 million, after taxes. Core earnings for 1999 exclude after-tax merger-related costs of $32.3 million, associated with the February 1999 acquisition of Signal Corp, and an extraordinary charge of $5.8 million, net of taxes, due to extinguishment of debt. See Note 2 to the Consolidated Financial Statements for further details. Core earnings, as presented throughout this document, are not in accordance with generally accepted accounting principles, as such, they are considered “Non-GAAP,” but are provided to allow more consistent trend identification and better comparison with recurring GAAP results from other reporting periods. Core earnings, as defined by the Corporation, may not be directly comparable to similarly titled results provided by other companies.

Supercommunity Banking Results

      The Corporation’s operations are managed along its major line of business, Supercommunity Banking. Note 16 to the consolidated financial statements provides performance data for this line of business as well as summary information by product and service group.

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Net Interest Income

      Net interest income, the difference between interest and loan fee income on earning assets and the interest paid on deposits and borrowed funds, is the principal source of earnings for the Corporation. Throughout this discussion net interest income is presented on a fully-taxable equivalent (“FTE”) basis which restates interest on tax-exempt securities and loans as if such interest were subject to federal income tax at the statutory rate.

      Net interest income is affected by market interest rates on both earning assets and interest bearing liabilities, the level of earning assets being funded by interest bearing liabilities, non-interest bearing liabilities and equity, and the growth in earning assets. The following table shows the allocation to assets, the source of funding and their respective interest spreads.

*	Yield on earning assets

      Net interest income, on a fully-tax equivalent basis, increased $15.0 million, or 4.0%, to $395.1 million in 2001 compared to $380.1 million in 2000 and $388.2 million in 1999. The increase from 2000 occurred because the decline in interest expense outpaced the decline in interest income. Specifically, interest expense fell $79.8 million while interest income dropped $64.8 million. The overall lower interest rate environment in 2001, compared with the prior year, had the following effect on interest-bearing assets and liabilities.

      The average yield on earning assets dropped 46 basis points from 8.23% in 2000 to 7.77% in 2001 lowering interest income by $52.0 million. Lower outstanding balances on total average earning assets caused interest income to decrease $12.8 million from year-ago levels. Average loan outstandings were $8.1 million higher than last year, but lower rates earned on the loans lessened interest income by $39.8 million. A combination of lower securities balances, as well as a lower yield earned on those balances, decreased 2001 securities interest income by $27.0 million.

      The decline in interest expense was primarily rate-driven as lower interest rates paid on customer deposits and wholesale borrowings accounted for $59.6 million, or 75%, of the decrease in interest expense compared to last year. As discussed in the deposits and wholesale borrowings section of management’s discussion and analysis of financial condition and operating results, the Corporation placed less reliance on certificates of deposits and wholesale borrowings to fund loans and operations in 2001. Specifically, average outstandings for certificates of deposits (“CDs”) and wholesale borrowings lessened interest expense in 2001 by $8.7 million and

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      The following table illustrates the specific year-over-year impact to net interest income based on changes in the rate and volume components of interest-earning assets and interest-bearing liabilities.

CHANGES IN NET INTEREST DIFFERENTIAL —

Note: The variance created by a combination of rate and volume has been allocated entirely to the volume column.

      The net interest margin is calculated by dividing net interest income FTE by average earning assets. As with net interest income, the net interest margin is affected by the level and mix of earning assets, the proportion of earning assets funded by non-interest bearing liabilities, and the interest rate spread. In addition, the net interest margin is impacted by changes in federal income tax rates and regulations as they affect the tax equivalent adjustment.

      The net interest margin for 2001 was 4.20% compared to 3.93% in 2000 and 4.41% in 1999. As discussed in the previous section, the increase in the net interest margin during 2001 was primarily a result of lower interest rates paid on customer deposits and wholesale borrowings outpacing lower yields earned on loans and securities.

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Other Income

      Excluding securities gains, other income totaled $179.1 million in 2001, an increase of $15.7 million, or 9.6%, from 2000 and $32.9 million, or 22.5%, from 1999. Explanations for the most significant changes in the components of other income are discussed immediately after the following table.