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FirstMerit Corporation and Subsidiaries
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8. Restrictions on Cash and Dividends
The average balance on deposit with the Federal Reserve Bank to satisfy reserve requirements amounted to $28,724 during 1999. The level of this balance is based upon amounts and types of customers’ deposits held by the banking subsidiaries of the Corporation. In addition, deposits are maintained with other banks at levels determined by Management based upon the volumes of activity and prevailing interest rates to compensate for check-clearing, safekeeping, collection and other bank services performed by these banks. At December 31, 1999, cash and due from banks included $6,565 deposited with the Federal Reserve Bank and other banks for these reasons.
Dividends paid by the subsidiaries are the principal source of funds to enable the payment of dividends by the Corporation to its shareholders. These payments by the subsidiaries in 1999 are restricted by the regulatory agencies principally to the total of 1999 net income. Regulatory approval must be obtained for the payment of dividends of any greater amount.
The components of premises and equipment are as follows:
Amounts included in other expenses for depreciation and amortization aggregated $15,774, $16,790 and $14,302 for the years ended 1999, 1998 and 1997, respectively.
At December 31, 1999, the Corporation was obligated for rental commitments under noncancelable operating leases on branch offices and equipment as follows:
Rentals paid under noncancelable operating leases amounted to $9,859, $8,426 and $8,446 in 1999, 1998 and 1997, respectively.
10. Certificates and Other Time Deposits
The aggregate amounts of certificates and other time deposits of $100 and over at year-end 1999 and 1998 were $1,002,495 and $804,806, respectively. Interest expense on these certificates and time deposits amounted to $31,873 in 1999, $54,355 in 1998 and $32,528 in 1997.
11. Securities Sold Under Agreements to Repurchase and Other Borrowings
In total, the average balance of securities sold under agreements to repurchase and other borrowings for the years ended 1999, 1998 and 1997 amounted to $1,666,025, $1,063,848 and $1,055,938, respectively. In 1999, the weighted average annual interest rate amounted to 5.16%, compared to 6.00% in 1998 and 5.61% in 1997. The maximum amount of these borrowings at any month end totaled $2,281,243 during 1999, $1,179,734 in 1998 and $1,196,824 during 1997.
The debt components and their respective terms are as follows:
At year-ends 1999, 1998 and 1997, securities sold under agreements to repurchase totaled $1,473,774, $489,373, and $473,647, respectively. The average annual interest rate for these instruments was 4.79%, compared to 4.78% in 1998 and 4.91% in 1997.
At year-ends 1999,
1998, and 1997, the Corporation had $646,322, $586,117 and $386,425, respectively,
of Federal Home Loan Bank advances outstanding. The advance balances outstanding
at year-end 1999 included: $343,683 with maturities within one year, $135,116
with maturities from one to five years and $167,523 with maturities over
five years. The FHLB advances have interest rates that range from
4.24% to 8.10%.
At year-end 1999, the Corporation had outstanding balances on lines of credit with two financial institutions totaling $22,000 and $130,000, respectively. As of year-end 1999, the unused portions of these lines totaled $8,000 and $20,000, respectively. The interest rates on these lines were 6.08% and 6.64%, respectively. At year-end 1998, the outstanding balances on these lines were $23,000 and $10,000 with corresponding interest rates of 6.00% and 5.93%, respectively. The interest rates on these lines of credit are variable and approximate one-month LIBOR plus 25 basis points and one-month LIBOR plus 45 basis points, respectively. The lines of credit discussed previously have a financial requirement whereby the Corporation must maintain a risk-based capital level commensurate with that of a well capitalized institution. The Corporation was in compliance with these requirements as of December 31, 1999.
At year-ends 1999, 1998 and 1997, the Corporation had $6,061, $6,541 and $47,340 respectively of convertible subordinated debentures outstanding. The first of two sets of convertible bonds totaled $1,041 at year-end 1999, consists of 15 year, 6.25% debentures issued in a public offering in 1993 by Security First. These bonds mature May 5, 2008 and may be redeemed by the bondholders any time prior to maturity. The second set of bonds totaled $5,000 at year-end 1999, carry an interest rate of 9.125%, were issued by Signal Corp and are due in 2004.
At year-ends 1999, 1998 and 1997, other borrowings totaled $3,086, $8,173 and $28,418, respectively. These borrowings carry interest rates ranging from 4.96% through 12.00%.
Residential mortgage loans totaling $1.1 billion, $437 million and $580 million at year-ends 1999, 1998 and 1997, respectively, were pledged to secure Federal Home Loan Bank (“FHLB”) advances. FANNIE MAE (“FNMA”) Preferred Stock of approximately $19.5 million and preferred stock of another financial institution totaling $14.5 million were pledged against the line of credit outstanding of $22.0 million at year-end 1999. FNMA Preferred Stock of approximately $28.2 million and preferred stock of another financial institution totaling $4.3 million were pledged against the line of credit outstanding of $23.0 million at year-end 1998.
Effective July 16, 1999, the Corporation entered into agreements to issue senior, medium or subordinated notes with maturities ranging from 30 days to 5 years or more. The aggregate principal amount outstanding at any one time may not exceed $1.0 billion and these notes will be offered only to institutional investors. No amounts are outstanding under the terms of these agreements at December 31, 1999.
