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FirstMerit Corporation and Subsidiaries
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On February 12, 1999, The Corporation completed the acquisition of Signal Corp, a $1.9 billion bank holding company headquartered in Wooster, Ohio. Principal subsidiaries of Signal Corp included Signal Bank, N. A., Summit Bank, N. A., First Federal Savings Bank of New Castle (Pennsylvania), and Mobile Consultants, Inc. Under terms of the agreement, the fixed exchange ratio was 1.32 shares of FirstMerit common stock for each share of Signal common stock and one share of FirstMerit preferred stock for each Signal preferred stock. Based on the closing price of $25.00 per share on February 12, 1999, the value of the transaction was approximately $436 million. The transaction was accounted for as a pooling-of-interests.
In conjunction with this merger, the Corporation incurred pre-tax costs of $52.8 million during 1999. The components of the merger-related costs and the conforming accounting adjustments were as follows: $7.8 million severance and employee related benefits; $7.0 million conversion and contract termination costs; $8.9 million in professional services fees; $9.9 million of other operating costs; a conforming accounting entry to the provision for possible loan losses of $10.2 million, and an extraordinary charge of $9.0 million related to early extinguishment of debt. The after-tax effect of the merger-related and conforming expenses totaled approximately $38.1 million, or $0.42 per diluted share. As of December 31, 1999, the unpaid liabilities associated with these costs, as shown in the following table, totaled approximately $1.1 million, most of which is classified as other operating expenses and relates to resolution of duplicate facilities.
Investment securities are composed of the following:
