FirstMerit Corporation and Subsidiaries

Selected Financial Data (continued)

* Core earnings are defined as net income excluding merger-related expenses associated with recent acquisitions, a loss on the sale of a subsidiary, and extraordinary items. These material unusual items which are excluded from core earnings totaled $38.1 million in 1999 and $21.3 million in 1998, on an after-tax basis. Core results for 1998 do not exclude a valuation charge related to residual interest on manufactured housing asset-backed securities. See Note 2 to the Consolidated Financial Statements for further details.

Supercommunity Banking Results

The Corporation’s operations are managed along its major line of business, Supercommunity Banking. Note 17 to the consolidated financial statements provides performance data for this line of business as well as summary information by product and service group.

Net Interest Income

Net interest income, the difference between interest and loan fee income on earning assets and the interest paid on deposits and borrowed funds, is the principal source of earnings for the Corporation. Throughout this discussion net interest income is presented on a fully tax-equivalent (FTE) basis which restates interest on tax-exempt securities and loans as if such interest were subject to federal income tax at the statutory rate.

Net interest income is affected by market interest rates on both earning assets and interest bearing liabilities, the level of earning assets being funded by interest bearing liabilities, non-interest bearing liabilities and equity, and the growth in earning assets. The following table shows the allocation to assets, the source of funding and their respective interest spreads.

*Yield on earning assets

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