FirstMerit Corporation and Subsidiaries

The amortized cost and market value of investment securities including mortgage-backed securities at December 31, 1999, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities based on the issuers’ rights to call or prepay obligations with or without call or prepayment penalties.

Proceeds from sales of investment securities during the years 1999, 1998 and 1997 were $723,164 and $687,720 and $309,451, respectively. Gross gains of $10,032, $8,513 and $3,771 and gross losses of $1,505, $1,728 and $657 were realized on these sales, respectively.

The carrying value of investment securities pledged to secure trust and public deposits and for purposes required or permitted by law amounted to $1,739,657 and $1,180,126 at December 31, 1999 and December 31, 1998, respectively.

4. Loans

Loans consist of the following:

The Corporation grants loans principally to customers located within the State of Ohio.

Information with respect to impaired loans is as follows:

Earned interest on impaired loans is recognized as income is collected.

The Corporation makes loans to officers on the same terms and conditions as made available to all employees and to directors on substantially the same terms and conditions as transactions with other parties. An analysis of loan activity with related parties for the years ended December 31, 1999, 1998 and 1997 is summarized as follows:

5. Allowance for Possible Loan Losses

Transactions in the allowance for possible loan losses are summarized as follows:

6. Manufactured Housing Income

The Corporation, through its subsidiary Mobile Consultants, Inc. (MCi), has sold certain manufactured housing finance contracts (MHF contracts) to various financial institutions while retaining the collection and recovery aspect of servicing. The amount of MHF contracts serviced as just described totaled $374.5 million, $396.2 million and $430.1 million at December 31, 1999, 1998 and 1997, respectively. At the time MCi sells an MHF contract to an unaffiliated financial institution, approximately one-third of the fee collected is recorded as a “manufactured housing brokerage fee” and the remaining two-thirds of the fee is deposited into escrow accounts and available to offset potential prepayment or credit losses (MCi reserves). The undiscounted balance of the MCi reserves was $25.1 million, $34.7 million and $46.4 million as of December 31, 1999, 1998 and 1997, respectively. During 1999, approximately 575 MHF contracts totaling $19.7 million were sold generating $1.3 million in manufactured housing brokerage fees. In addition, 1,425 land home loans were sold in 1999, generating $2.4 million in manufactured housing brokerage fees.