“As the business climate shifts, the more

our stability will set us apart.”

-William E. Stansifer, Executive Vice President & Chief Credit Policy  Officer

temming from a conservative credit culture, FirstMerit’s steady performance gives our shareholders confidence. Lending to small and mid-size businesses remains one of FirstMerit’s most important and profitable activities. Providing direct, personal service through a long-tenured staff of community bankers has earned us relationships with over 25% of northeast Ohio’s businesses. To maintain a competitive edge on the mega-banks, we also offer specialty credit products and services, like cash management and leasing, through corporate support units, complementing our one-on-one community-based relationships.

We do a great deal of lending to consumers as well. While we centrally underwrite our consumer loans, equity lines and credit cards, our community-based relationship bankers make the final decision based on their informed judgment.

The chart above shows the strength of our credit quality and its consistency. The heart of our philosophy is to avoid excesses. We stay close to home. Even with recent acquisitions, virtually all our borrowers are located no more than an hour’s drive from a FirstMerit office. We limit concentrations in certain higher risk categories, such as real estate investment trusts (REITs), purchased participations and strip retail developments. We limit how much exposure we’ll allow to a single customer.

The makeup of our loan portfolio reflects the markets we’re in and the types of core loans we want on our books. We hold proportionately fewer residential mortgages today and more higher-yielding commercial and consumer loans. With the acquisition of Signal Corp, we also inherited a significant portfolio of manufactured housing loans, which we will limit to no more than 10% of earning assets.

FirstMerit takes pride not in just its credit card business, but in the closely allied merchant processing and debit card businesses as well. Our card portfolio comes to us through our branch offices. We don’t mail solicitations across the country. Our debit card business, which we introduced three years ago, has been a strong contributor to fee income, as the table above shows.

Conventional wisdom says the strong economic run the market has enjoyed for the past nine years will eventually slow. There’s likely to be some fallout among commercial businesses that have competed so fiercely with one another during this run. At FirstMerit, we understand the business. We feel we’re well prepared to deal with the ups and downs that are inevitable in any business.