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FirstMerit Corporation and Subsidiaries
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12. FirstMerit Capital Trust Securities
During 1998, FirstMerit Capital Trust I (“FirstMerit Trust”), formerly Signal Capital Trust, was formed to (1) issue and sell $50.0 million of 8.67% Capital Securities, Series A, (“Series A Securities”) (2) to issue common securities, (3) to invest the proceeds in the 8.67% Junior Subordinated Deferrable Interest Debentures, Series A (“Debentures”) and (4) to engage in certain other limited activities. The Series A Securities were issued and sold to investors on February 10, 1998 in a private placement exempt from the Securities Act of 1933. In an exchange offer, FirstMerit Trust exchanged the outstanding Series A Securities for 8.67% Capital Securities, Series B which were registered with the Securities and Exchange Commission in June 1998. The Common Securities are owned solely by the Corporation’s wholly-owned subsidiary, FirstMerit Bank, N.A.
Distributions on the Capital Securities are guaranteed, are cumulative, and began accumulating on February 13, 1998. The distributions are payable semi-annually in arrears on February 15 and August 15 of each year, commencing August 15, 1998 at the annual rate of 8.67% of the liquidation amount of $1,000 per security. The interest payment schedule of the Debentures is identical of that to the Capital Securities, except that so long as the distributions of the Debentures are not in default, as defined in the governing indenture, deferment of the interest payment on the Debentures at any time and from time to time (for an extension period not exceeding ten consecutive semi-annual periods) is permitted. During any extension period, certain actions, including declaring or paying any dividends or distributions, or redeeming or purchasing any capital stock, is prohibited.
Prior to December 31, 1998, the Corporation acquired approximately $17.5 million of the Series B Capital Securities in the open market. From January 1, 1999 through the consummation of the Signal merger on February 12, 1999, the Corporation acquired approximately $11.1 million of the Series B Capital Securities in the open market. The activity and balances resulting from these open-market acquisitions have been appropriately eliminated in the Consolidated Financial Statements and the related Notes.
Federal income taxes are comprised of the following:
Actual federal income tax expense differs from expected federal income tax as shown in the following table:
Principal components of the Corporation’s net deferred tax (liability) are summarized as follows:
