þ		QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OHIO		34-1339938
(State or other jurisdiction of		(IRS Employer Identification
incorporation or organization)		Number)

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

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     As of May 6, 2010, 91,184,700 shares, without par value, were outstanding.

 

 

PART I – FINANCIAL INFORMATION

ITEM 1.		FINANCIAL STATEMENTS

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands)
(Unaudited, except December 31, 2009, which is derived from the		March 31,				December 31,				March 31,
audited financial statements)		2010				2009				2009
ASSETS
Cash and due from banks		$	721,938			$	161,033			$	179,397
Investment securities
Held-to-maturity			67,256				50,686				30,588
Available-for-sale			3,102,407				2,565,943				2,576,637
Other investments			131,376				128,209				128,007
Loans held for sale			16,009				16,828				22,408
Noncovered Loans:
Commercial loans			4,389,859				4,066,522				4,344,915
Mortgage loans			447,575				463,416				524,909
Installment loans			1,382,522				1,425,373				1,533,885
Home equity loans			766,073				753,112				741,073
Credit card loans			145,029				153,525				141,597
Leases			59,464				61,541				64,384
Total noncovered loans			7,190,522				6,923,489				7,350,763
Less: allowance for loan losses			(117,806	)			(115,092	)			(106,257	)
Net noncovered loans			7,072,716				6,808,397				7,244,506
Covered loans (includes loss share receivable of $108 million)			277,315				—				—
Net loans			7,350,031				6,808,397				7,244,506
Premises and equipment, net			164,408				125,205				130,920
Goodwill			187,945				139,598				139,245
Intangible assets			5,659				1,158				1,316
Other real estate covered by FDIC loss share			11,415				—				—
Accrued interest receivable and other assets			565,004				542,845				519,152
Total assets		$	12,323,448			$	10,539,902			$	10,972,176
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand-non-interest bearing		$	2,217,714			$	2,069,921				1,848,200
Demand-interest bearing			686,503				677,448				669,789
Savings and money market accounts			4,103,657				3,408,109				2,763,058
Certificates and other time deposits			2,362,135				1,360,318				2,397,166
Total deposits			9,370,009				7,515,796				7,678,213
Federal funds purchased and securities sold under agreements to repurchase			896,330				996,345				804,525
Wholesale borrowings			677,715				740,105				1,134,152
Accrued taxes, expenses, and other liabilities			224,041				222,029				271,017
Total liabilities			11,168,095				9,474,275				9,887,907
Commitments and contingencies
Shareholders’ equity:
Preferred stock, without par value: authorized and unissued 7,000,000 shares			—				—				—
Preferred stock, Series A, without par value: designated 800,000 shares; none outstanding			—				—				—
Convertible preferred stock, Series B, without par value: designated 220,000 shares; none outstanding			—				—				—
Fixed-Rate Cumulative Perpetual Preferred Stock, Series A, $1,000 liquidation preference; authorized and issued 125,000 shares			—				—				120,622
Common stock, without par value: authorized 300,000,000 shares; issued 97,521,571, 93,633,871 and 92,026,350 at March 31, 2010, December 31, 2009 and March 31, 2009, respectively			127,937				127,937				127,937
Common stock warrant			—				—				4,582
Capital surplus			171,330				88,573				84,876
Accumulated other comprehensive loss			(20,983	)			(25,459	)			(38,634	)
Retained earnings			1,047,827				1,043,625				1,057,681
Treasury stock, at cost, 6,711,936, 6,629,995 and 10,609,284 shares at March 31, 2010, December 31, 2009 and March 31, 2009, respectively			(170,758	)			(169,049	)			(272,795	)
Total shareholders’ equity			1,155,353				1,065,627				1,084,269
Total liabilities and shareholders’ equity		$	12,323,448			$	10,539,902			$	10,972,176

The accompanying notes are an integral part of the consolidated financial statements.

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

		Quarters ended
(Unaudited)		March 31,
(In thousands except per share data)		2010				2009
Interest income:
Interest and fees on loans, including held for sale		$	83,150			$	87,799
Investment securities
Taxable			24,870				28,295
Tax-exempt			3,339				3,262
Total investment securities interest			28,209				31,557
Other earning assets			495				—
Total interest income			111,854				119,356
Interest expense:
Interest on deposits:
Demand-interest bearing			152				155
Savings and money market accounts			7,601				5,377
Certificates and other time deposits			6,406				18,588
Interest on securities sold under agreements to repurchase			1,127				999
Interest on wholesale borrowings			6,174				7,343
Total interest expense			21,460				32,462
Net interest income			90,394				86,894
Provision for loan losses			25,493				18,065
Net interest income after provision for loan losses			64,901				68,829
Other income:
Trust department income			5,281				4,790
Service charges on deposits			15,366				14,163
Credit card fees			11,558				11,084
ATM and other service fees			2,509				2,606
Bank owned life insurance income			5,652				3,015
Investment services and insurance			1,928				2,918
Loan sales and servicing income			3,237				2,335
Gain on acquistion			5,090				—
Gain on post medical retirement curtailment			—				9,543
Other operating income			3,328				4,734
Total other income			53,949				55,188
Other expenses:
Salaries, wages, pension and employee benefits			48,156				42,682
Net occupancy expense			7,140				6,871
Equipment expense			6,050				5,797
Stationery, supplies and postage			2,693				2,275
Bankcard, loan processing and other costs			7,818				7,842
Professional services			5,237				3,480
Amortization of intangibles			234				87
FDIC expense			3,765				2,556
Other operating expense			12,920				11,613
Total other expenses			94,013				83,203
Income before federal income tax expense			24,837				40,814
Federal income tax expense			6,816				11,380
Net income		$	18,021			$	29,434
Other comprehensive income, net of taxes
Unrealized securities’ holding gain, net of taxes		$	4,476			$	15,817
Unrealized hedging loss, net of taxes			—				(94	)
Minimum pension liability adjustment, net of taxes			—				(277	)
Total other comprehensive gain, net of taxes			4,476				15,446
Comprehensive income		$	22,497			$	44,880
Net income applicable to common shares		$	18,021			$	27,563
Net income used in diluted EPS calculation		$	18,021			$	27,563
Weighted average number of common shares outstanding — basic*			87,771				82,514
Weighted average number of common shares outstanding — diluted*			87,777				82,523
Basic earnings per share *		$	0.21			$	0.33
Diluted earnings per share *		$	0.21			$	0.33
Dividend per share		$	0.16			$	0.29

The accompaning notes are an integral part of the consoldiated financial statements.

																		Accumulated
											Common								Other												Total
(Unaudited)		Preferred				Common				Stock				Capital				Comprehensive				Retained				Treasury				Shareholders’
(In thousands)		Stock				Stock				Warrant				Surplus				Income				Earnings				Stock				Equity
Balance at December 31, 2008		$	—			$	127,937			$	—			$	94,802			$	(54,080	)		$	1,053,435			$	(284,251	)		$	937,843
Net income			—				—				—				—				—				67,692				—				67,692
Cash dividends — preferred stock			—				—				—				—				—				(1,789	)			—				(1,789	)
Cash dividends — common stock ($0.61 per share)			—				—				—				—				—				(50,286	)			—				(50,286	)
Stock dividend			—				—				—				5,765				—				(21,718	)			15,953				—
Options exercised (2,400 shares)			—				—				—				(18	)			—				—				58				40
Nonvested (restricted) shares granted (536,058 shares)			—				—				—				(13,154	)			—				—				13,151				(3	)
Treasury shares purchased (118,736 shares)			—				—				—				500				—				—				(2,197	)			(1,697	)
Deferred compensation trust (29,597 shares)			—				—				—				(32	)			—				—				32				—
Share-based compensation			—				—				—				6,270				—				—				—				6,270
Issuance of common stock (3,267,751 shares)			—				—				—				(24,561	)			—				—				84,517				59,956
Issuance of Fixed-Rate Cumulative Perpetual Preferred Stock			120,622				—				4,582				—				—				(204	)			—				125,000
Net unrealized gains on investment securities, net of taxes			—				—				—				—				47,568				—				—				47,568
Unrealized hedging gain, net of taxes			—				—				—				—				(94	)			—				—				(94	)
Minimum pension liability adjustment, net of taxes			—				—				—				—				(831	)			—				—				(831	)
Balance at March 31, 2009		$	120,622			$	127,937			$	4,582			$	69,572			$	(7,437	)		$	1,047,130			$	(172,737	)		$	1,189,669
Balance at December 31, 2009		$	—			$	127,937			$	—			$	88,573			$	(25,459	)		$	1,043,625			$	(169,049	)		$	1,065,627
Net income			—				—				—				—				—				18,021				—				18,021
Cash dividends — common stock ($0.16 per share)			—				—				—				—				—				(13,819	)			—				(13,819	)
Options exercised (29,161 shares)			—				—				—				(185	)			—				—				677				492
Nonvested (restricted) shares granted (4,375 shares)			—				—				—				(99	)			—				—				99				—
Treasury shares purchased (115,477 shares)			—				—				—				523				—				—				(2,509	)			(1,986	)
Deferred compensation trust (8,828 shares)			—				—				—				(24	)			—				—				24				—
Share-based compensation			—				—				—				2,543				—				—				—				2,543
Issuance of common stock (3,887,700 shares)			—				—				—				79,999				—				—				—				79,999
Net unrealized gains on investment securities, net of taxes			—				—				—				—				4,476				—				—				4,476
Balance at March 31, 2010		$	—			$	127,937			$	—			$	171,330			$	(20,983	)		$	1,047,827			$	(170,758	)		$	1,155,353

The accompanying notes are an integral part of the consolidated financial statements.

		Three months ended
(Unaudited)		March 31,
(In thousands)		2010				2009
Operating Activities
Net income		$	18,021			$	29,434
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses			25,493				18,065
Depreciation and amortization			5,277				4,938
Accretion			(3,116	)			(889	)
Amortization of investment securities premiums, net			1,971				851
Post medical retirement curtailment gain			—				(9,543	)
Gain on acquisition			(5,090	)			—
Originations of loans held for sale			(79,771	)			(130,899	)
Proceeds from sales of loans, primarily mortgage loans sold in the secondary mortgage markets			81,893				120,558
Gains on sales of loans, net			(1,303	)			(926	)
Net change in assets and liabilities
(Increase) decrease in interest receivable			(1,633	)			2,589
Increase (decrease) in interest payable			1,415				(421	)
Increase in prepaid assets			(719	)			(5,175	)
Increase (decrease) in accounts payable			2,114				(9,616	)
(Decrease) increase in taxes payable			(4,297	)			6,243
Decrease (increase) in other receivables			741				(24	)
(Increase) decrease in other assets			(5,688	)			68
Other increases (decreases)			8,203				(8,394	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			43,511				16,859
Investing Activities
Dispositions of investment securities:
Available-for-sale — sales			12,161				16,552
Available-for-sale — maturities			153,567				158,998
Purchases of available-for-sale investment securities			(714,255	)			(97,745	)
Net (increase) decrease in loans and leases			(12,299	)			55,776
Purchases of premises and equipment			(2,266	)			(2,619	)
Sales of premises and equipment			—				32
Net cash acquired from acquisitions			931,060				—
NET CASH PROVIDED IN INVESTING ACTIVITIES			367,968				130,994
Financing Activities
Net (decrease) increase in demand accounts			(3,671	)			213,840
Net increase in savings and money market accounts			232,767				250,727
Net increase (decrease) in certificates and other time deposits			18,049				(384,033	)
Net decrease in securities sold under agreements to repurchase			(100,015	)			(116,865	)
Net decrease in wholesale borrowings			(62,390	)			(210,043	)
Net proceeds from issuance of preferred stock			—				125,000
Net proceeds from issuance of common stock			79,999				—
Cash dividends — preferred			—				(1,667	)
Cash dividends — common			(13,819	)			(23,317	)
Purchase of treasury shares			(1,986	)			(542	)
Proceeds from exercise of stock options, conversion of debentures or conversion of preferred stock			492				38
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES			149,426				(146,862	)
Increase in cash and cash equivalents			560,905				991
Cash and cash equivalents at beginning of period			161,033				178,406
Cash and cash equivalents at end of period		$	721,938			$	179,397
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest, net of amounts capitalized		$	12,908			$	13,162
Federal income taxes		$	797			$	—

The accompanying notes are an integral part of the consolidated financial statements.

FirstMerit Corporation and Subsidiaries

Notes to Consolidated Financial Statements
March 31, 2010 (Unaudited) (Dollars in thousands except per share data)

1. Summary of Significant Accounting Policies

     Basis of Presentation — FirstMerit Corporation (“the Parent Company”) is a bank holding company whose principal asset is the common stock of its wholly-owned subsidiary, FirstMerit Bank, N. A. The Parent Company’s other subsidiaries include Citizens Savings Corporation of Stark County, FirstMerit Capital Trust I, FirstMerit Community Development Corporation, FirstMerit Risk Management, Inc., and FMT, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

     The accounting and reporting policies of FirstMerit Corporation and its subsidiaries (the “Corporation”) conform to generally accepted accounting principles (“GAAP”) in the United States of America and to general practices within the financial services industry. Effective July 1, 2009, the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) became the single source of authoritative nongovernmental GAAP. Other than resolving certain minor inconsistencies in current GAAP, the ASC is not intended to change GAAP, but rather to make it easier to review and research GAAP applicable to a particular transaction or specific accounting issue. Technical references to GAAP included in these Notes To Consolidated Financial Statements are provided under the new ASC structure.

     The consolidated balance sheet at December 31, 2009 has been derived from the audited consolidated financial statements at that date. The accompanying unaudited interim financial statements reflect all adjustments (consisting only of normally recurring accruals) that are, in the opinion of Management, necessary for a fair statement of the results for the interim periods presented. No material subsequent events have occurred requiring recognition in the financial statements or disclosure in the notes to the financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted in accordance with the rules of the Securities and Exchange Commission (“SEC”). The consolidated financial statements of the Corporation as of March 31, 2010 and 2009 are not necessarily indicative of the results that may be achieved for the full fiscal year or for any future period. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 31, 2009.

     Certain reclassifications of prior year’s amounts have been made to conform to current year presentation. Such reclassifications had no effect on net earnings.

     Recently Adopted and Issued Accounting Standards — In June 2009, the FASB issued Statement of Financial Accounting Standard (“SFAS”) 166, Accounting for Transfers of Financial Assets – An Amendment of FASB Statement No. 140 which has been codified into ASC 860, Transfers and Servicing (“ASC 860”). This guidance removes the concept of a qualifying special-purpose entity from existing GAAP and removes the exception from applying the accounting and reporting standards within ASC 810, Consolidation (“ASC 810”), to

qualifying special purpose entities. This guidance also establishes conditions for accounting and reporting of a transfer of a portion of a financial asset, modifies the asset sale/de-recognition criteria, and changes how retained interests are initially measured. This guidance is expected to provide greater transparency about transfers of financial assets and a transferor’s continuing involvement, if any, with the transferred assets. This guidance was effective for the Corporation as of January 1, 2010 and it not have an impact on the Corporation’s financial condition and results of operations.

     In June 2009, the FASB issued SFAS 167, Amendments to FASB Interpretation No. 46(R) which was codified in ASC 810. This guidance removes the scope exception for qualifying special-purpose entities, contains new criteria for determining the primary beneficiary of a variable interest entity and increases the frequency of required reassessments to determine whether an entity is the primary beneficiary of a variable interest entity. Enhanced disclosures are also required. This guidance was effective for the Corporation as of January 1, 2010 and it did not have an impact on the Corporation’s financial condition and results of operations.

     FASB ASU 2010-06, Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends ASC 820 to require additional disclosures regarding fair value measurements. Specifically, the ASU requires disclosure of the amounts of significant transfers between Level 1 and Level 2 of the fair value hierarchy and the reasons for these transfers; the reasons for any transfers in or out of Level 3; and information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis. In addition to these new disclosure requirements, the ASU also amends ASC 820 to clarify certain existing disclosure requirements. For example, the ASU clarifies that reporting entities are required to provide fair value measurement disclosures for each class of assets and liabilities. Previously, separate fair value disclosures were required for each major category of assets and liabilities. ASU 2010-06 also clarifies the requirement to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. Except for the requirement to disclose information about purchases, sales, issuances, and settlements in the reconciliation of recurring Level 3 measurements on a gross basis, these disclosures are effective for the quarter ended March 31, 2010 and are incorporated into Note 10 (Fair Value Measurement). The requirement to separately disclose purchases, sales, issuances, and settlements of recurring Level 3 measurements becomes effective for the Corporation for the quarter ended March 31, 2011.

2. Business Combinations

     Asset Based Loans

     On December 16, 2009, FirstMerit Bank, N.A. (the “Bank”), acquired $102.0 million in outstanding principal of asset based lending loans (“ABL Loans”), as well as the staff to service and build new business, from First Bank Business Capital, Inc., (“FBBC”) for $93.2 million in cash. FBBC is a wholly owned subsidiary of First Bank, a Missouri state chartered bank. This acquisition expands the Corporation’s market presence and asset based lending business into the Midwest.

     The purchase was accounted for under the acquisition method in accordance with ASC 805, Business Combinations (“ASC 805”). Accordingly, the ABL Loans and a non-compete

agreement acquired were recorded at their fair values, $92.7 million and $0.1 million, respectively, on the date of acquisition. The Bank recorded goodwill of $0.4 million relating to the ABL Loans and non-compete agreement it acquired. Additional information can be found in Note 5 (Goodwill and Intangible Assets).

     All ABL Loans acquired were performing as of the acquisition date and as of March 31, 2010. The shortfall between the fair value of the ABL Loans acquired and the outstanding principal balance of these loans at the date of acquisition was a $9.3 million discount and will be accreted into interest income over their estimated useful life in accordance with ASC 310, Receivables.

     First Bank Branches

     On February 19, 2010, the Bank completed the acquisition of certain assets and the assumption of certain liabilities with respect to 24 branches of First Bank located in the greater Chicago, Illinois area. This acquisition was accounted for under the acquisition method in accordance with ASC 805. The Bank recognized $1.4 million of acquisition related costs that were expensed in the current period. These costs are included in the line item entitled professional services in the consolidated income statement. Excluding the purchase accounting adjustments, the acquisition included the assumption of approximately $1.2 billion in deposits and the purchase of $301.2 million of loans and $23.0 million in real and personal property associated with the acquired branch locations. The Bank received cash of $832.5 million to assume the net liabilities.

     The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

		Acquired				Fair Value				As Recorded by
		Book Value				Adjustments				FirstMerit Bank, N.A.
Assets
Cash and due from banks		$	3,725			$	—			$	3,725
Loans			301,236				(25,624	)			275,612
Premises and equipment			22,992				18,963				41,955
Goodwill			—				48,347				48,347
Core deposit intangible			—				3,154				3,154
Other assets			941				3,115				4,056
Total assets acquired		$	328,894			$	47,955			$	376,849
Liabilities
Deposits		$	1,199,279			$	7,134			$	1,206,413
Accrued expenses and other liabilities			4,192				(1,271	)			2,921
Total liabilities assumed		$	1,203,471			$	5,863			$	1,209,334

     All loans acquired in the First Bank acquisition were performing as of the acquisition date and as of March 31, 2010. The shortfall between the fair value and the outstanding principal balance of these loans at the date of acquisition was a $25.6 million discount and will be accreted into interest income over their estimated useful life in accordance with ASC 310, Receivables.

     Additional information regarding the goodwill and core deposit intangible acquired in the First Bank acquisition can be found in Note 5 (Goodwill and Intangible Assets).

     Pro forma financial statement information is not presented because the historical results of the First Bank branches acquired are not meaningful or significant to the Corporation’s results.

     George Washington Savings Bank — FDIC Assisted Acquisition

     On February 19, 2010 the Bank acquired certain assets and assumed substantially all of the deposits and certain liabilities of the failed George Washington Savings Bank (“George Washington”), the subsidiary of George Washington Savings Bancorp, through a purchase and assumption agreement with the Federal Deposit Insurance Corporation (“FDIC”). The Illinois Department of Financial and Professional Regulations, Division of Banking, declared George Washington closed on February 19, 2010 and appointed the FDIC as receiver.

     The Bank did not acquire the real estate, banking facilities, furniture and equipment of George Washington as part of the purchase and assumption agreement but has the option to purchase these assets at fair market value from the FDIC. This purchase option expires 90 days after acquisition date, but was extended by the FDIC. Fair market values for the real estate, facilities, furniture and equipment will be based on current appraisals and determined at a later date. The Bank is leasing these facilities and equipment from the FDIC until current appraisals are received and a final purchase decision is made.

     The acquisitions of the net assets of George Washington constitute a business combination as defined by ASC 805 and, accordingly were recorded at their estimated fair value on the date of acquisition. The Bank recognized $0.3 million of acquisition related costs that were expensed in the current period. These costs are included in the line item entitled professional services in the consolidated income statement. The assets acquired and liabilities assumed were recorded at their estimated fair values on the date of acquisition. The estimated fair value of assets acquired exceeded the estimated fair value of liabilities assumed, resulting in a bargain purchase gain of $5.1 million. The Bank and the FDIC are engaged in on-going discussions that may impact which assets and liabilities are ultimately acquired or assumed by the Bank and/or the purchase price. In addition, the tax treatment of FDIC assisted acquisitions is complex and subject to interpretations that may result in future adjustments of deferred taxes as of the acquisition date.

     In connection with the George Washington acquisition, the Bank entered into loss sharing agreements with the FDIC that collectively cover $327.1 million of assets including single family residential mortgage loans, commercial real estate and commercial and industrial loans, and other real estate (collectively referred to as “Covered Assets”). The Bank acquired other George Washington assets that are not covered by the loss sharing agreements with the FDIC including investment securities purchased at fair market value and other tangible assets.

     Pursuant to the terms of the loss sharing agreements, the FDIC is obligated to reimburse the Bank for 80% of losses of up to $172.0 million with respect to the Covered Assets and will reimburse the Bank for 95% of losses that exceed $172.0 million. The Bank will reimburse the FDIC for 80% of recoveries with respect to losses for which the FDIC paid the Bank 80% reimbursement under the loss sharing agreements, and for 95% of recoveries with respect to losses for which the FDIC paid the Bank 95% reimbursement under the loss sharing agreements.

     The amounts covered by the loss sharing agreements are the pre-acquisition book values of the underlying Covered Assets, the contractual balance of acquired unfunded commitments,

and certain future net direct costs incurred in the collection and settlement process. The loss sharing agreements applicable to single family residential mortgage loans provides for FDIC loss sharing and the Bank reimbursement to the FDIC, in each case as described above, for ten years. The loss sharing agreements applicable to commercial loans and securities provides for FDIC loss sharing for five years and the Bank reimbursement to the FDIC for eight years, in each case as described above. The Bank will service the Covered Assets. The expected reimbursements under the loss sharing agreements were recorded on the balance sheet as part of the covered loans acquired at their estimated fair values of $107.6 million on the acquisition date.

     The table below presents a summary of the assets and liabilities purchased in the George Washington acquisition recorded at estimated fair value on the acquisition date. The Bank received a cash payment from the FDIC of approximately $40.2 million to assume the net liabilities. The estimated fair value of assets acquired and cash payment received from the FDIC exceeded the estimated fair value of the liabilities assumed, resulting in a bargain purchase gain of $5.1 million.

		As Recorded				Fair Value				As Recorded by
		by FDIC				Adjustments				FirstMerit Bank, N.A.
Assets
Cash and due from banks		$	57,984			$	—			$	57,984
Investment securities			15,410				—				15,410
Covered Loans
Commercial Loan			256,832				(119,404	)			137,428
Mortgage Loan			24,078				(9,952	)			14,126
Installment Loan			27,218				(7,339	)			19,879
Total covered loans			308,128				(136,695	)			171,433
Loss share receivable			—				107,550				107,550
Total covered loans and loss share receivable											278,983
Core deposit intangible			—				962				962
Covered other real estate			19,021				(7,561	)			11,460
Other assets			3,340				—				3,340
Total assets acquired		$	403,883			$	(35,744	)		$	368,139
Liabilities
Deposits
Noninterest-bearing deposit accounts		$	54,242			$	—			$	54,242
Savings deposits			62,737				—				62,737
Time deposits			278,755				4,921				283,676
Total deposits			395,734				4,921				400,655
Accrued expenses and other liabilities			2,569				—				2,569
Total liabilities assumed		$	398,303			$	4,921			$	403,224

     The operating results of the Corporation for the quarter ended March 31, 2010 include the operating results produced by the George Washington acquisition for the period of February 19, 2010 to March 31, 2010. Due primarily to the Bank acquiring only certain assets and liabilities in the George Washington acquisition, the significant amount of fair value adjustments,

the loss sharing agreements with the FDIC, and on-going discussions with the FDIC that may impact which assets and liabilities are ultimately acquired or assumed by the Bank, historical results from George Washington are not meaningful or significant to the Corporation’s results, and thus no 2010 and 2009 pro forma information is presented.

     The Corporation evaluated loans purchased in conjunction with the acquisition of George Washington for impairment in accordance with the provisions of ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected. In the assessment of credit quality deterioration, Management made numerous assumptions, interpretations and judgments, using internal and third-party credit quality information to determine whether it is probable that the Corporation will be able to collect all contractually required payments. This is a point in time assessment and inherently subjective due to the nature of the available information and judgment involved.

     The Corporation has elected to recognize the accretion of the purchase discount for purchased nonimpaired loans, excluding those with revolving privileges, based on the acquired loan’s expected cash flows, as described in the ASC 310-30. All purchased impaired and nonimpaired loans, excluding those with revolving privileges, are included in the ASC 310-30 financial statement disclosures to these consolidated financial statements. Revolving loans are excluded from purchased impaired loans accounting.

     The outstanding balance of all purchased loans accounted for in accordance with ASC 310-30 in the George Washington acquisition was $268.8 million and $267.2 million, as of February 19, 2010 and March 31, 2010, respectively. As of the acquisition date, the preliminary estimate of contractually required payments receivable, including interest, for all loans accounted for in accordance with ASC 310-30 acquired in the George Washington transaction was $349.4 million. The cash flows expected to be collected as of the acquisition date for these loans were $173.9 million, including interest. These amounts were determined based upon the estimated remaining life of the underlying loans, which includes the effects of estimated prepayments. The fair value of these loans as of the acquisition date was $150.9 million. Interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all purchased impaired and nonimpaired loans accounted for in accordance with ASC 310-30.

     Changes in the carrying amount of accretable yield for purchased loans accounted for in accordance with ASC 310-30 were as follows for the quarter ended March 31, 2010 for George Washington.

						Carrying
		Accretable				Amount of
		Yield				Loans
Balance at the date of acquisition		$	22,999			$	150,870
Accretion			(1,044	)			1,044
Payments, received, net			—				(3,742	)
Balance at end of period		$	21,955			$	148,172

     As of the acquisition date, the estimate of contractually required payments receivable, including interest, for all loans with revolving privileges acquired in the George Washington transaction was $46.3 million. The cash flows expected to be collected as of the acquisition dates for all loans with revolving privileges acquired in the George Washington transaction were $24.8 million, including interest. The fair value at acquisition date of loans with revolving privileges was $20.5 million. The difference between the fair value of the purchased loans with revolving privileges and the outstanding balance is being accreted to interest income over the remaining period the revolving lines are in effect.

3. Investment Securities

     The following tables provide the amortized cost and fair value for the major categories of held-to-maturity and available-for-sale securities. Held-to-maturity securities are carried at amortized cost, which reflects historical cost, adjusted for amortization of premiums and accretion of discounts. Available-for-sale securities are carried at fair value with net unrealized gains or losses reported on an after-tax basis as a component of other comprehensive income in shareholders’ equity.

		March 31, 2010
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
Securities available for sale
Debt Securities
U.S. government agency debentures		$	280,333			$	50			$	(743	)		$	279,640
U.S. States and political subdivisions			288,439				4,964				(417	)			292,986
Residential mortgage-backed securities:
U.S. government agencies			1,653,689				56,189				(299	)			1,709,579
Residential collateralized mortgage-backed securities:
U.S. government agencies			752,443				20,103				(228	)			772,318
Non-agency			20				—				(1	)			19
Corporate debt securities			61,397				—				(17,603	)			43,794
Other debt securities			667				—				—				667
Total debt securities			3,036,988				81,306				(19,291	)			3,099,003
Marketable equity securities			3,404				—				—				3,404
Total securities available for sale		$	3,040,392			$	81,306			$	(19,291	)		$	3,102,407
Securities held to maturity
Debt Securities
U.S. States and political subdivisions		$	67,256			$	—			$	—			$	67,256
Total securities held to maturity		$	67,256			$	—			$	—			$	67,256

		December 31, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
Securities available for sale
Debt Securities
U.S. government agency debentures		$	32,029			$	—			$	(132	)		$	31,897
U.S. States and political subdivisions			289,529				4,984				(394	)			294,119
Residential mortgage-backed securities:
U.S. government agencies			1,557,754				55,325				(1,852	)			1,611,227
Residential collateralized mortgage-backed securities:
U.S. government agencies			566,151				16,394				(238	)			582,307
Non-agency			22				—				—				22
Corporate debt securities			61,385				—				(18,957	)			42,428
Other debt securities			679				—				—				679
Total debt securities			2,507,549				76,703				(21,573	)			2,562,679
Marketable equity securities			3,264				—				—				3,264
Total securities available for sale		$	2,510,813			$	76,703			$	(21,573	)		$	2,565,943
Securities held to maturity
Debt Securities
U.S. States and political subdivisions		$	50,686			$	—			$	—			$	50,686
Total securities held to maturity		$	50,686			$	—			$	—			$	50,686

		March 31, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
Securities available for sale
Debt Securities
U.S. States and political subdivisions		$	288,470			$	3,722			$	(2,416	)		$	289,776
Residential mortgage-backed securities:
U.S. government agencies			1,655,231				44,634				(405	)			1,699,460
Residential collateralized mortgage-backed securities:
U.S. government agencies			522,930				15,106				(164	)			537,872
Non-agency			19,480				—				(404	)			19,076
Corporate debt securities			61,347				—				(34,561	)			26,786
Other debt securities			717				—				—				717
Total debt securities			2,548,175				63,462				(37,950	)			2,573,687
Marketable equity securities			2,950				—				—				2,950
Total securities available for sale		$	2,551,125			$	63,462			$	(37,950	)		$	2,576,637
Securities held to maturity
Debt Securities
U.S. States and political subdivisions		$	30,588			$	—			$	—			$	30,588
Total securities held to maturity		$	30,588			$	—			$	—			$	30,588

     Other investments on the balance sheet include Federal Reserve Bank (“FRB”) and Federal Home Loan Bank (“FHLB”) stock.

		March 31,				December 31,				March 31,
		2010				2009				2009
FRB stock		$	9,064			$	9,064			$	8,862
FHLB stock			122,312				119,145				119,145
Total other investments		$	131,376			$	128,209			$	128,007

     FRB and FHLB stock is classified as a restricted investment, carried at cost and valued based on the ultimate recoverability of par value. Cash and stock dividends received on the stock are reported as interest income. There are no identified events or changes in circumstances that may have a significant adverse effect on these investments carried at cost.

     At March 31, 2009, securities totaling $2.0 billion were pledged to secure trust and public deposits and securities sold under agreements to repurchase and for other purposes required or permitted by law.

Gross Unrealized Losses and Fair Value

     The following table presents the gross unrealized losses and fair value of securities in the securities available-for-sale portfolio by length of time that individual securities in each category had been in a continuous loss position.

		At March 31, 2010
		Less than 12 months												12 months or longer												Total
										Number of												Number of
						Unrealized				Imparied								Unrealized				Imparied								Unrealized
		Fair Value				Losses				Securities				Fair Value				Losses				Securities				Fair Value				Losses
Debt Securities
U.S. government agency debentures		$	232,571			$	(743	)			15			$	—			$	—				—			$	232,571			$	(743	)
U.S. States and political subdivisions			39,342				(417	)			63				—				—				—				39,342				(417	)
Residential mortgage-backed securities:
U.S. government agencies			131,708				(296	)			9				238				(3	)			1				131,946				(299	)
Residential collateralized mortgage-backed securities:
U.S. government agencies			164,827				(228	)			13				—				—				—				164,827				(228	)
Non-agency			4				(1	)			1				—				—				—				4				(1	)
Corporate debt securities			—				—				—				43,794				(17,603	)			8				43,794				(17,603	)
Total temporarily impaired securities		$	568,452			$	(1,685	)			101			$	44,032			$	(17,606	)			9			$	612,484			$	(19,291	)

		At December 31, 2009
		Less than 12 months												12 months or longer												Total
										Number of												Number of
						Unrealized				Imparied								Unrealized				Imparied								Unrealized
		Fair Value				Losses				Securities				Fair Value				Losses				Securities				Fair Value				Losses
Debt Securities
U.S. government agency debentures		$	31,897			$	(132	)			3			$	—			$	—				—			$	31,897			$	(132	)
U.S. States and political subdivisions			39,059				(394	)			65				—				—				—				39,059				(394	)
Residential mortgage-backed securities:
U.S. government agencies			216,014				(1,849	)			15				271				(3	)			2				216,285				(1,852	)
Residential collateralized mortgage-backed securities:
U.S. government agencies			68,513				(238	)			6				—				—				—				68,513				(238	)
Non-agency			5				—				1				—				—				—				5				—
Corporate debt securities			—				—								42,428				(18,957	)			8				42,428				(18,957	)
Total temporarily impaired securities		$	355,488			$	(2,613	)			90			$	42,699			$	(18,960	)			10			$	398,187			$	(21,573	)

		At March 31, 2009
		Less than 12 months												12 months or longer												Total
										Number of												Number of
						Unrealized				Imparied								Unrealized				Imparied								Unrealized
		Fair Value				Losses				Securities				Fair Value				Losses				Securities				Fair Value				Losses
Debt Securities
U.S. States and political subdivisions		$	61,369			$	(1,430	)			104			$	24,427			$	(986	)			39			$	85,796			$	(2,416	)
Residential mortgage-backed securities:
U.S. government agencies			63,876				(401	)			10				347				(4	)			3				64,223				(405	)
Residential collateralized mortgage-backed securities:
U.S. government agencies			10,679				(2	)			1				25,606				(162	)			3				36,285				(164	)
Non-agency			19,052				(404	)			1				—				—				—				19,052				(404	)
Corporate debt securities			—				—				—				26,786				(34,561	)			8				26,786				(34,561	)
Total temporarily impaired securities		$	154,976			$	(2,237	)			116			$	77,166			$	(35,713	)			53			$	232,142			$	(37,950	)