SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~March 31,~~June 30, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER 0-10161

FIRSTMERIT CORPORATION

(Exact name of registrant as specified in its charter)


OHIO		~~34-1339938~~
(State or other jurisdiction of incorporation or organization)		34-1339938 (IRS Employer Identification
~~incorporation or organization)~~		Number)

III CASCADE PLAZA, 7TH FLOOR, AKRON, OHIO
44308-1103

(Address of principal executive offices)

(330) 996-6300
(Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YESþNOo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerþ Accelerated filero Non-accelerated filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YESoNOþ

As of ~~April 30,~~July 31, 2007, ~~80,465,009~~80,463,729 shares, without par value, were outstanding.

TABLE OF CONTENTS


	PART I — FINANCIAL INFORMATION
	ITEM 1. ~~Financial Statements~~FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 1A. RISK FACTORS
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS
SIGNATURES
EX-3.1
EX-3.2
EX-31.1
EX-31.2
EX-32.1

PART I — FINANCIAL INFORMATION

ITEM 1. ~~Financial Statements~~FINANCIAL STATEMENTS

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


(In thousands)
(Unaudited, except December 31, 2006, which is derived from the	March 31,			December 31,			March 31,
(In thousands) (Unaudited, except December 31, 2006, which is derived from the										June 30,			December 31,			June 30,
audited financial statements)	2007			2006			2006			2007			2006			2006

ASSETS
Cash and due from banks	$	242,470			200,204			206,912		$	210,722		$	200,204		$	228,690
Investment securities (at fair value) and federal funds sold		2,447,426			2,407,888			2,460,321			2,442,906			2,407,888			2,461,086
Loans held for sale		48,289			95,272			61,318			50,456			95,272			49,207
Loans:
Commercial loans		3,800,125			3,694,121			3,562,968			3,898,943			3,694,121			3,659,687
Mortgage loans		598,390			608,008			625,514			586,612			608,008			618,560
Installment loans		1,628,531			1,619,747			1,509,714			1,641,790			1,619,747			1,561,757
Home equity loans		709,964			731,473			772,308			712,021			731,473			763,585
Credit card loans		138,183			147,553			135,916			141,162			147,553			136,966
Leases		76,438			77,971			65,682			71,862			77,971			64,214

Total loans		6,951,631			6,878,873			6,672,102			7,052,390			6,878,873			6,804,769
Less allowance for loan losses		(92,045	)		(91,342	)		(87,589	)		(94,432	)		(91,342	)		(87,727	)

Net loans		6,859,586			6,787,531			6,584,513			6,957,958			6,787,531			6,717,042
Premises and equipment, net		120,556			122,954			119,571			118,294			122,954			119,233
Goodwill		139,245			139,245			139,245			139,245			139,245			139,245
Intangible assets		2,644			2,865			3,533			2,422			2,865			3,311
Accrued interest receivable and other assets		486,905			496,613			525,304			507,096			496,613			536,959

Total assets	$	10,347,121			10,252,572			10,100,717		$	10,429,099		$	10,252,572		$	10,254,773


LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand-non-interest bearing	$	1,463,039			1,455,097			1,465,168		$	1,424,892		$	1,455,097		$	1,466,628
Demand-interest bearing		779,790			799,571			923,491			755,931			799,571			842,354
Savings and money market accounts		2,333,907			2,267,686			2,320,360			2,262,828			2,267,686			2,261,557
Certificates and other time deposits		3,124,466			2,976,567			2,801,543			3,030,815			2,976,567			2,831,700

Total deposits		7,701,202			7,498,921			7,510,562			7,474,466			7,498,921			7,402,239

Securities sold under agreements to repurchase		1,380,591			1,261,821			1,272,362			1,302,175			1,261,821			1,156,346
Wholesale borrowings		208,744			464,227			285,143			578,659			464,227			658,720
Accrued taxes, expenses, and other liabilities		192,943			181,492			162,098			211,534			181,492			166,770

Total liabilities		9,483,480			9,406,461			9,230,165			9,566,834			9,406,461			9,384,075

Commitments and contingencies
Shareholders’ equity:
Preferred stock, without par value: authorized and unissued 7,000,000 shares		—			—			—
Preferred stock, Series A, without par value: designated 800,000 shares; none outstanding		—			—			—
Convertible preferred stock, Series B, without par value: designated 220,000 shares; none outstanding		—			—			—
Common stock, without par value: authorized 300,000,000 shares; issued 92,026,350 at March 31, 2007, December 31, 2006 and March 31, 2006		127,937			127,937			127,937
Commitments and contingencies Shareholders’ equity:
Preferred stock, without par value:
authorized and unissued 7,000,000 shares											—			—			—
Preferred stock, Series A, without par value:
designated 800,000 shares; none outstanding											—			—			—
Convertible preferred stock, Series B, without par value:
designated 220,000 shares; none outstanding											—			—			—
Common stock, without par value: authorized 300,000,000 shares; issued 92,026,350 at June 30, 2007, December 31, 2006 and June 30, 2006											127,937			127,937			127,937
Capital surplus		108,073			106,916			108,958			100,700			106,916			105,397
Accumulated other comprehensive loss		(71,328	)		(79,508	)		(53,395	)		(82,073	)		(79,508	)		(62,013	)
Retained earnings		1,006,207			998,079			1,002,035			1,012,699			998,079			1,007,346
Treasury stock, at cost, 11,914,435, 11,925,803 and 12,257,585 shares at March 31, 2007, December 31, 2006 and March 31, 2006, respectively		(307,248	)		(307,313	)		(314,983	)
Treasury stock, at cost, 11,548,911, 11,925,803 and 11,968,035 shares at June 30, 2007, December 31, 2006 and June 30, 2006, respectively											(296,998	)		(307,313	)		(307,969	)

Total shareholders’ equity		863,641			846,111			870,552			862,265			846,111			870,698

Total liabilities and shareholders’ equity	$	10,347,121			10,252,572			10,100,717		$	10,429,099		$	10,252,572		$	10,254,773

The accompanying notes are an integral part of the consolidated financial statements.

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


	Quarters ended
(Unaudited)	March 31,					Quarters ended						Six months ended
(In thousands except per share data)	2007		2006			June 30,						June 30,
						2007			2006			2007			2006
Interest income:
Interest and fees on loans, including held for sale	$	130,089		117,740		$	132,076		$	123,450		$	262,165		$	241,190
Interest and dividends on investment securities and federal funds sold		26,846		25,332			27,383			24,820			54,229			50,152

Total interest income		156,935		143,072			159,459			148,270			316,394			291,342

Interest expense:
Interest on deposits:
Demand-interest bearing		1,919		2,362			1,876			2,583			3,795			4,945
Savings and money market accounts		14,006		10,748			13,992			12,079			27,998			22,827
Certificates and other time deposits		36,080		26,101			36,725			29,326			72,805			55,427
Interest on securities sold under agreements to repurchase		16,785		11,923			18,005			12,957			34,790			24,880
Interest on wholesale borrowings		6,139		5,965			4,636			5,595			10,775			11,560

Total interest expense		74,929		57,099			75,234			62,540			150,163			119,639

Net interest income		82,006		85,973			84,225			85,730			166,231			171,703
Provision for loan losses		4,210		6,106			9,967			13,159			14,177			19,265

Net interest income after provision for loan losses		77,796		79,867			74,258			72,571			152,054			152,438

Other income:
Trust department income		5,596		5,394			6,096			5,744			11,692			11,138
Service charges on deposits		16,249		16,066			17,055			18,010			33,304			34,076
Credit card fees		11,099		10,671			11,712			11,478			22,811			22,149
ATM and other service fees		3,071		3,108			3,189			3,273			6,260			6,381
Bank owned life insurance income		3,168		2,986			3,290			5,310			6,458			8,296
Investment services and insurance		2,453		2,597			2,660			2,581			5,113			5,178
Investment securities gains, net		—		16			1			4			1			20
Loan sales and servicing income		5,438		1,445			1,911			2,833			7,349			4,278
Other operating income		1,802		3,114			3,016			2,845			4,818			5,959

Total other income		48,876		45,397			48,930			52,078			97,806			97,475

Other expenses:
Salaries, wages, pension and employee benefits		42,500		43,031			43,538			46,721			86,038			89,752
Net occupancy expense		6,686		6,549			6,521			6,120			13,207			12,669
Equipment expense		3,084		2,958			2,851			2,914			5,935			5,872
Stationery, supplies and postage		2,333		2,453			2,252			2,403			4,585			4,856
Bankcard, loan processing and other costs		7,470		5,827			7,607			7,417			15,077			13,244
Professional services		4,829		2,763			4,525			3,738			9,354			6,501
Amortization of intangibles		223		223			222			222			445			445
Other operating expense		14,401		18,095			13,859			15,683			28,260			33,778

Total other expenses		81,526		81,899			81,375			85,218			162,901			167,117

Income before federal income tax expense		45,146		43,365			41,813			39,431			86,959			82,796
Federal income tax expense		13,725		13,401			11,928			11,770			25,653			25,171

Net income	$	31,421		29,964		$	29,885		$	27,661		$	61,306		$	57,625


Other comprehensive income (loss), net of taxes
Unrealized securities’ holding gain (loss), net of taxes	$	8,113		(9,748	)	$	(13,051	)	$	(8,652	)	$	(4,938	)	$	(18,400	)
Unrealized hedging gain (loss), net of taxes		67		(787	)		561			37			628			(750	)
Minimum pension liability adjustment, net of taxes							1,746			—			1,746			—
Less: reclassification adjustment for securities’ gains losses realized in net income, net of taxes		—		10			1			3			1			13

Total other comprehensive income (loss), net of taxes		8,180		(10,545	)		(10,745	)		(8,618	)		(2,565	)		(19,163	)

Comprehensive income	$	39,601		19,419		$	19,140		$	19,043		$	58,741		$	38,462

Net income applicable to common shares	$	31,421		29,964		$	29,885		$	27,661		$	61,306		$	57,625

Net income used in diluted EPS calculation	$	31,425		29,969		$	29,889		$	27,666		$	61,314		$	57,635

Weighted average number of common shares outstanding — basic		80,113		80,374			80,426			79,983			80,270			80,177

Weighted average number of common shares outstanding — diluted		80,298		80,648			80,570			80,203			80,433			80,420

Basic earnings per share	$	0.39		0.37		$	0.37		$	0.35		$	0.76		$	0.72

Diluted earnings per share	$	0.39		0.37		$	0.37		$	0.35		$	0.76		$	0.72

Dividend per share	$	0.29		0.28		$	0.29		$	0.28		$	0.58		$	0.56

The accompanying notes are an integral part of the consolidated financial statements.

FIRSTMERIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three months ended March 31,
	2007			2006			Six months ended June 30,
(Unaudited)	(In thousands)						2007			2006
(In thousands)

Operating Activities
Net income	$	31,421			29,964		$	61,306		$	57,625
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		4,210			6,106			14,177			19,265
Provision for depreciation and amortization		3,823			3,609			7,668			7,251
Amortization of investment securities premiums, net		218			827			265			1,464
Accretion of income for lease financing		(1,158	)		(990	)		(2,213	)		(1,941	)
Gains on sales and calls of investment securities, net		—			(16	)		(1	)		(20	)
Decrease in interest receivable		1,759			2,032			664			1,912
Increase in interest payable		9,138			6,602			2,661			7,620
Increase in prepaid assets		(5,367	)		(3,668	)		(5,676	)		(4,337	)
Decrease in accounts payable		(4,007	)		(4,007	)
Increase in taxes payable		7,997			8,048
Increase in other receivables		(280	)		(9,919	)
Decrease (increase) in other assets		135			(3,510	)
Increase in bank owned life insurance								(5,294	)		(4,278	)
Originations of loans held for sale		(52,339	)		(80,924	)		(120,360	)		(167,936	)
Proceeds from sales of loans, primarily mortgage loans sold in the secondary mortgage markets		48,639			67,487			114,297			161,653
Losses on sales of loans, net		35			343
(Gains) losses on sales of loans, net								231			(358	)
Amortization of intangible assets		223			223			445			445
Other changes		6,223			(10,531	)		12,264			(1,885	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		50,670			11,676			80,434			76,480
Investing Activities
Dispositions of investment securities:
Available-for-sale — sales		—			—			2			—
Available-for-sale — maturities		177,244			101,060			350,431			255,007
Purchases of available-for-sale investment securities		(205,005	)		(2,709	)		(349,586	)		(174,370	)
Net decrease in federal funds sold		—			(28,000	)
Net increase in federal funds sold								(16,000	)		(25,000	)
Net increase in loans and leases, excluding sales		(22,137	)		(18,621	)		(138,137	)		(170,541	)
Purchases of premises and equipment		(1,436	)		(4,218	)		(3,322	)		(8,017	)
Sales of premises and equipment		11			1,458			314			1,953

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(51,323	)		48,970
NET CASH USED IN INVESTING ACTIVITIES								(156,298	)		(120,968	)
Financing Activities
Net (decrease) increase in demand accounts		(11,839	)		34,680
Net increase in savings and money market accounts		66,221			16,183
Net decrease in demand accounts								(73,845	)		(44,997	)
Net decrease in savings and money market accounts								(4,858	)		(42,620	)
Net increase in certificates and other time deposits		147,899			226,049			54,248			256,206
Net increase (decrease) in securities sold under agreements to repurchase		118,770			(153,675	)		40,354			(269,691	)
Net decrease in wholesale borrowings		(255,483	)		(115,961	)
Net increase in wholesale borrowings								114,432			257,616
Cash dividends — common		(23,293	)		(22,416	)		(46,686	)		(44,766	)
Purchase of treasury shares		(134	)		(65,413	)		(231	)		(65,430	)
Proceeds from exercise of stock options, conversion of debentures or conversion of preferred stock		778			866			2,968			907

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		42,919			(79,687	)
NET CASH PROVIDED BY FINANCING ACTIVITIES								86,382			47,225

Increase (decrease) in cash and cash equivalents		42,266			(19,041	)
Increase in cash and cash equivalents								10,518			2,737
Cash and cash equivalents at beginning of period		200,204			225,953			200,204			225,953

Cash and cash equivalents at end of period	$	242,470			206,912		$	210,722		$	228,690


SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized	$	38,840			31,193		$	83,955		$	69,702

Federal income taxes	$	—			20		$	17,703		$	25,150

The accompanying notes are an integral part of the consolidated financial statements.

FirstMerit Corporation and Subsidiaries

Notes to Consolidated Financial Statements
~~March 31,~~June 30, 2007(Unaudited)(Dollars in thousands except per share data)

1.Company Organization and Financial Presentation — FirstMerit Corporation (“Corporation”) is a bank holding company whose principal asset is the common stock of its wholly-owned subsidiary, FirstMerit Bank, N. A. The Corporation’s other subsidiaries include Citizens Savings Corporation of Stark County, FirstMerit Capital Trust I, FirstMerit Community Development Corporation, FMT, Inc., SF Development Corp and Realty Facility Holdings XV, L.L.C.

The consolidated balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date. The accompanying unaudited interim financial statements reflect all adjustments (consisting only of normally recurring accruals) that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted in accordance with the rules of the Securities and Exchange Commission (“SEC”). The consolidated financial statements of the Corporation as of ~~March 31,~~June 30, 2007 and 2006 are not necessarily indicative of the results that may be achieved for the full fiscal year or for any future period. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 31, 2006.

Certain previously reported amounts have been reclassified to conform to the current reporting presentation.

2.Recent Accounting Pronouncements ~~-During~~—During February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Standards (“SFAS”) No. 156 “Accounting for Servicing of Financial Assets,” which amends SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” with respect to the accounting for separately recognized servicing assets and servicing liabilities. This statement requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value. Should a company not elect to use the fair value method for subsequent measurement, the company would continue to use the amortization method previously required by SFAS No. 140, under which the servicing asset or servicing liability is amortized and periodically evaluated for impairment. SFAS No. 156 permits, but does not require, the subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value. Management has not elected to use the fair value method for subsequent measurement.

During February 2006, the FASB issued SFAS No. 155 “Accounting for Certain Hybrid Financial Instruments” which amends SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” and SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of ~~Liabilities~~Liabilities” (“SFAS 155”).” This statement permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. It also clarifies which interest-only strips and

principal-only strips are not subject to the requirements of SFAS No. 133 and establishes a requirement to

evaluate interests in securitized financial assets to identify interests that contain an embedded derivative requiring bifurcation. SFAS 155 was effective for all financial instruments acquired or issued after January 1, 2007. The adoption of SFAS ~~No.~~ 155 did not have a material impact on the Corporation’s consolidated financial condition or results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” (“SFAS 159”) which permits companies to elect to measure certain eligible items at fair value. Subsequent unrealized gains and losses on those items will be reported in earnings. Upfront costs and fees related to those items will be reported in earnings as incurred and not deferred.

SFAS 159 is effective for fiscal years beginning after November 15, 2007. If a company elects to apply the provision of ~~the~~ SFAS 159 to eligible items existing at that date, the effect of the remeasurement to fair value will be reported as a cumulative effect adjustment to the opening balance of retained earnings. Retrospective application will not be permitted. The Corporation is currently assessing whether it will elect to use the fair value option for any of its eligible items.

On July 13, 2006, the FASB issued FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes (“FIN 48”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109 “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have a material impact on the Corporation’s consolidated financial condition or results of operations.

During September 2006, the FASB issued SFAS No. 157, “Fair Value ~~Measurements~~Measurements” (“SFAS 157”).” This standard establishes a standard definition for fair value, establishes a framework under generally accepted accounting principles for measuring fair value and expands disclosure requirements for fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Corporation is currently assessing the impact of adopting SFAS 157.

3.Investment Securities — All investment securities of the Corporation are classified as available-for-sale. The available-for-sale classification provides the Corporation with more flexibility to respond, through the portfolio, to changes in market interest rates, or to increases in loan demand or deposit withdrawals.

The components of investment securities are as follows:


										June 30, 2007
	March 31, 2007											Gross		Gross
			Gross		Gross					Amortized		Unrealized		Unrealized			Fair
	Amortized		Unrealized		Unrealized			Fair		Cost		Gains		Losses			Value
	Cost		Gains		Losses			Value
Available for sale:
U.S. Government agency obligations	$	735,352		465		(10,891	)		724,926	$	688,323	$	1	$	(12,970	)	$	675,354
Obligations of state and political subdivisions		250,288		1,740		(341	)		251,687		257,462		582		(4,237	)		253,807
Mortgage-backed securities		1,250,795		939		(30,454	)		1,221,280		1,303,488		539		(40,312	)		1,263,715
Other securities		245,658		4,866		(991	)		249,533		232,382		3,437		(1,789	)		234,030

	$	2,482,093		8,010		(42,677	)		2,447,426	$	2,481,655	$	4,559	$	(59,308	)	$	2,426,906


					Book Value		Fair Value
	Book Value		Fair Value
Due in one year or less	$	331,159		328,221	$	260,413	$	258,678
Due after one year through five years		1,566,567		1,531,164		1,518,903		1,474,200
Due after five years through ten years		306,800		305,353		426,532		419,522
Due after ten years		277,567		282,688		275,807		274,506

	$	2,482,093		2,447,426	$	2,481,655	$	2,426,906


										December 31, 2006
	December 31, 2006											Gross		Gross
			Gross		Gross					Amortized		Unrealized		Unrealized			Fair
	Amortized		Unrealized		Unrealized			Fair		Cost		Gains		Losses			Value
	Cost		Gains		Losses			Value
Available for sale:
U.S. Government agency obligations	$	846,517		72		(14,670	)		831,919	$	846,517	$	72	$	(14,670	)	$	831,919
Obligations of state and political subdivisions		195,054		1,872		(128	)		196,798		195,054		1,872		(128	)		196,798
Mortgage-backed securities		1,164,205		625		(36,778	)		1,128,052		1,164,205		625		(36,778	)		1,128,052
Other securities		249,261		3,282		(1,424	)		251,119		249,261		3,282		(1,424	)		251,119

	$	2,455,037		5,851		(53,000	)		2,407,888	$	2,455,037	$	5,851	$	(53,000	)	$	2,407,888


	Amortized		Fair		Amortized Cost		Fair Value
	Cost		Value
Due in one year or less	$	376,918		373,502	$	376,918	$	373,502
Due after one year through five years		1,580,074		1,534,847		1,580,074		1,534,847
Due after five years through ten years		274,173		271,978		274,173		271,978
Due after ten years		223,872		227,561		223,872		227,561

	$	2,455,037		2,407,888	$	2,455,037	$	2,407,888


										June 30, 2006
	March 31, 2006											Gross		Gross
			Gross		Gross					Amortized		Unrealized		Unrealized			Fair
	Amortized		Unrealized		Unrealized			Fair		Cost		Gains		Losses			Value
	Cost		Gains		Losses			Value
Available for sale:
U.S. Government agency obligations	$	897,301		—		(25,723	)		871,578	$	959,392	$	—	$	(26,827	)	$	932,565
Obligations of state and political subdivisions		86,087		1,306		(52	)		87,341		103,376		780		(514	)		103,642
Mortgage-backed securities		1,276,435		534		(51,644	)		1,225,325		1,213,682		153		(61,615	)		1,152,220
Other securities		246,922		3,210		(2,055	)		248,077		247,375		2,752		(2,468	)		247,659

	$	2,506,745		5,050		(79,474	)		2,432,321	$	2,523,825	$	3,685	$	(91,424	)	$	2,436,086


			Fair		Book Value		Fair Value
	Book Value		Value
Due in one year or less	$	239,163		235,966	$	352,238	$	347,932
Due after one year through five years		2,053,462		1,980,443		1,967,860		1,885,006
Due after five years through ten years		102,303		101,510		73,518		71,832
Due after ten years		111,817		114,402		130,209		131,316

	$	2,506,745		2,432,321	$	2,523,825	$	2,436,086

Expected maturities will differ from contractual maturities based on the issuers’ rights to call or prepay obligations with or without call or prepayment penalties. Securities with remaining maturities over five years consist of mortgage and asset backed securities.

The carrying amount of investment securities pledged to secure trust and public deposits and for purposes required or permitted by law amounted to approximately ~~$2.0~~$1.9 billion at ~~March 31,~~June 30, 2007, $1.8 billion at December 31, 2006 and ~~$2.0~~$1.8 billion at ~~March 31,~~June 30, 2006.

At ~~March 31,~~June 30, 2007, December 31, 2006 and ~~March 31,~~June 30, 2006, the Corporation’s investment in Federal Reserve Bank (“FRB”) common stock was $8.7 million, ~~$8.6~~$8.7 million and $8.6 million, respectively. At ~~March 31,~~June 30, 2007, December 31, 2006 and ~~March 31,~~June 30, 2006, the Corporation’s investment in Federal Home Loan Bank (“FHLB”) stock amounted to $114.5 million, $114.5 million and ~~$109.6~~$111.2 million, respectively and is included in other securities in the preceding table. FRB and FHLB stock are classified as a restricted investment, carried at cost, and their value is determined by the ultimate recoverability of par value.

The following tables show the unrealized losses that have not been recognized as other-than-temporary in accordance with FASB Staff Position (“FSP”) No. FAS 115-1. Management believes that due to the credit-worthiness of the issuers and the fact that the Corporation has the intent and the ability to hold the securities for the period necessary to recover the cost of the securities, the decline in the fair values is temporary in nature.


	At March 31, 2007															At June 30, 2007
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized					Unrealized					Unrealized					Unrealized
Description of Securities	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses			Fair Value		Losses			Fair Value		Losses			Fair Value		Losses

U.S. Government agency obligations	$	—		—			654,413		(10,891	)		654,413		(10,891	)	$	116,007	$	(1,544	)	$	547,974	$	(11,426	)	$	663,981	$	(12,970	)
Obligations of states and political subdivisions		75,178		(309	)		1,721		(32	)		76,899		(341	)		184,245		(4,176	)		1,693		(61	)		185,938		(4,237	)
Mortgage-backed securities		47,960		(123	)		961,547		(30,331	)		1,009,507		(30,454	)		271,790		(4,523	)		905,440		(35,789	)		1,177,230		(40,312	)
Other securities		9,729		(50	)		49,635		(941	)		59,364		(991	)		18,127		(353	)		48,405		(1,436	)		66,532		(1,789	)

Total temporarily impaired securities	$	132,867		(482	)		1,667,316		(42,195	)		1,800,183		(42,677	)	$	590,169	$	(10,596	)	$	1,503,512	$	(48,712	)	$	2,093,681	$	(59,308	)


	At December 31, 2006															At December 31, 2006
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized					Unrealized					Unrealized					Unrealized
Description of Securities	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses			Fair Value		Losses			Fair Value		Losses			Fair Value		Losses

U.S. Government agency obligations	$	69,934		(66	)		711,861		(14,603	)		781,795		(14,669	)	$	69,934	$	(66	)	$	711,861	$	(14,603	)	$	781,795	$	(14,669	)
Obligations of states and political subdivisions		30,926		(96	)		1,722		(32	)		32,648		(128	)		30,926		(96	)		1,722		(32	)		32,648		(128	)
Mortgage-backed securities		43,585		(12	)		1,015,354		(36,767	)		1,058,939		(36,779	)		43,585		(12	)		1,015,354		(36,767	)		1,058,939		(36,779	)
Other securities		9,790		(9	)		59,918		(1,415	)		69,708		(1,424	)		9,790		(9	)		59,918		(1,415	)		69,708		(1,424	)

Total temporarily impaired securities	$	154,235		(183	)		1,788,855		(52,817	)		1,943,090		(53,000	)	$	154,235	$	(183	)	$	1,788,855	$	(52,817	)	$	1,943,090	$	(53,000	)


	At March 31, 2006															At June 30, 2006
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized					Unrealized					Unrealized					Unrealized
Description of Securities	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses			Fair Value		Losses			Fair Value		Losses			Fair Value		Losses

U.S. Government agency obligations		132,033		(3,760	)		739,545		(21,963	)		871,578		(25,723	)	$	141,141	$	(738	)	$	761,424	$	(26,089	)	$	902,565	$	(26,827	)
Obligations of states and political subdivisions		1,934		(3	)		2,939		(49	)		4,873		(52	)		30,268		(426	)		2,261		(88	)		32,529		(514	)
Mortgage-backed securities		166,710		(4,629	)		1,007,795		(47,015	)		1,174,505		(51,644	)		96,579		(2,495	)		1,024,252		(59,120	)		1,120,831		(61,615	)
Other securities		57,288		(1,574	)		21,655		(481	)		78,943		(2,055	)		40,210		(1,718	)		38,809		(750	)		79,019		(2,468	)

Total temporarily impaired securities	$	357,965		(9,966	)		1,771,934		(69,508	)		2,129,899		(79,474	)	$	308,198	$	(5,377	)	$	1,826,746	$	(86,047	)	$	2,134,944	$	(91,424	)

4.Allowance for loan losses (“ALL”) — The Corporation’s Credit Policy Division manages credit risk by establishing common credit policies for its subsidiary bank, participating in approval of its loans, conducting reviews of loan portfolios, providing centralized consumer underwriting, collections and loan operation services, and overseeing loan workouts. The Corporation’s objective is to minimize losses from its commercial lending activities and to maintain consumer losses at acceptable levels that are stable and consistent with growth and profitability objectives.

The activity within the ALL for the three months ended ~~March 31,~~June 30, 2007 and 2006 and the full year ended December 31, 2006 is shown in the following table:


												Six		Six
								Quarter		Quarter		months		months
	Quarter ended		Year Ended			Quarter ended		ended		ended		ended		ended		Year Ended
	March 31,		December 31,			March 31,		June 30,		June 30,		June 30,		June 30,		December 31,
	2007		2006			2006		2007		2006		2007		2006		2006
Allowance for loan losses-beginning of period	$	91,342		90,661			90,661	$	92,045	$	87,589	$	91,342	$	90,661	$	90,661
Loans charged off:
Commercial		448		32,628			6,066		1,212		10,086		1,660		16,152		32,628
Mortgage		990		1,670			373		1,568		325		2,558		698		1,670
Installment		4,746		20,682			6,030		4,321		4,524		9,067		10,554		20,682
Home equity		820		3,847			620		1,478		1,146		2,298		1,766		3,847
Credit cards		2,399		8,294			1,774		2,025		1,951		4,424		3,725		8,294
Leases		21		3,607			51		5		6		26		57		3,607

Total charge-offs		9,424		70,728			14,914		10,609		18,038		20,033		32,952		70,728

Recoveries:
Commercial		2,878		3,734			1,437		11		945		2,889		2,382		3,734
Mortgage		8		142			56		—		30		8		86		142
Installment		2,114		10,340			3,146		2,092		2,965		4,206		6,111		10,340
Home equity		257		1,293			378		307		307		564		685		1,293
Credit cards		474		2,123			449		474		585		948		1,034		2,123
Manufactured housing		112		451			169		96		84		170		185		451
Leases		74		303			101		49		101		161		270		303

Total recoveries		5,917		18,386			5,736		3,029		5,017		8,946		10,753		18,386

									7,580		13,021		11,087		22,199		52,342
Net charge-offs		3,507		52,342			9,178
Allowance related to loans held for sale		—		(23,089	)		—		—		—		—		—		(23,089	)
Provision for loan losses		4,210		76,112			6,106		9,967		13,159		14,177		19,265		76,112

Allowance for loan losses-end of period	$	92,045		91,342			87,589	$	94,432	$	87,727	$	94,432	$	87,727	$	91,342

Note 1 (Summary of Significant Accounting Policies) and Note 4 (Allowance for Loan Losses) in the 2006 Form 10-K, more fully describe the components of the allowance for loan loss model.

5.Goodwill and Intangible Assets — The following table summarizes goodwill and intangible assets:


																			At June 30, 2007						At December 31, 2006						At June 30, 2006
	At March 31, 2007						At December 31, 2006						At March 31, 2006						Gross		Accumulated		Net		Gross		Accumulated		Net		Gross		Accumulated		Net
	Gross		Accumulated		Net		Gross		Accumulated		Net		Gross		Accumulated		Net		Amount		Amortization		Amount		Amount		Amortization		Amount		Amount		Amortization		Amount
	Amount		Amortization		Amount		Amount		Amortization		Amount		Amount		Amortization		Amount
Amortizable intangible assets:

Deposit base intangible assets	$	10,137		7,492		2,645		10,137		7,270		2,867		10,137		6,603		3,534	$	10,137		7,715	$	2,422	$	10,137		7,272	$	2,865	$	10,137		6,826	$	3,311


Unamortizable intangible assets:

Goodwill	$	139,245				139,245		139,245				139,245		139,245				139,245	$	139,245			$	139,245	$	139,245			$	139,245	$	139,245			$	139,245

Amortization expense for intangible assets was $0.22 million for both quarters ended ~~March 31,~~June 30, 2007 and 2006. The following table shows the estimated future amortization expense for deposit base intangible assets based on existing asset balances at ~~March 31,~~June 30, 2007:

For the years ended:


December 31, 2007	$	889	$	889
December 31, 2008		573		573
December 31, 2009		347		347
December 31, 2010		347		347
December 31, 2011 and beyond		489		266

	$	2,645	$	2,422

During the fourth quarter of 2006, the Corporation conducted its annual impairment testing as required by SFAS No. 142 “Goodwill and Other Intangible Assets,” and concluded that goodwill was not impaired.

6.Earnings per share — The reconciliation between basic and diluted earnings per share (“EPS”) is calculated using the treasury stock method and presented as follows:


									Six		Six
	Quarter ended		Quarter ended		Quarter ended		Quarter ended		months ended		months ended
	March 31,		March 31,		June 30,		June 30,		June 30,		June 30,
	2007		2006		2007		2006		2007		2006
BASIC EPS:
Net income applicable to common shares	$	31,421		29,964	$	29,885	$	27,661	$	61,306	$	57,625


Average common shares outstanding		80,113		80,374		80,426		79,983		80,270		80,177


Net income per share — basic	$	0.39		0.37	$	0.37	$	0.35	$	0.76	$	0.72


DILUTED EPS:

Net income available to common shares	$	31,421		29,964	$	29,885	$	27,661	$	61,306	$	57,625
Add: interest expense on convertible bonds		4		5		4		5		8		10

	$	31,425		29,969	$	29,889	$	27,666	$	61,314	$	57,635

Avg common shares outstanding		80,113		80,374		80,426		79,983		80,270		80,177
Add: Equivalents from stock options and restricted stock		139		224		99		170		118		193
Add: Equivalents-convertible bonds		46		50		44		50		45		50

Average common shares and equivalents outstanding		80,298		80,648		80,569		80,203		80,433		80,420


Net income per common share — diluted	$	0.39		0.37	$	0.37	$	0.35	$	0.76	$	0.72

For the quarters ended ~~March 31,~~June 30, 2007 and 2006, options to purchase ~~6.6~~6.5 million and ~~6.1~~6.7 million shares, respectively, were outstanding, but not included in the computation of diluted earnings per share because they were antidilutive.

On January 20, 2006 the Corporation entered into an accelerated share repurchase arrangement with Goldman, Sachs & Co. to repurchase 2.5 million common shares. The initial price paid per common share was $25.97. The repurchased common shares were subject to a volume weighted average share price during the repurchase period that ended on March 29, 2006. The 103,728 shares received by the Corporation as a purchase price adjustment at settlement, as well as the repurchased common shares, were reflected in treasury stock on the consolidated balance sheet to be used solely to satisfy the obligations of the Corporation under its various employee stock option, thrift savings, purchase programs or other corporate purposes.

7.Segment Information — Management monitors the Corporation’s results by an internal ~~profitability~~performance measurement system, which provides lines of business results and key performance measures. The profitability measurement system is based on internal management methodologies designed to produce consistent results and reflect the underlying economics of the businesses. The development and application of these methodologies is a dynamic process. Accordingly, these measurement tools and assumptions may be revised periodically to reflect methodological, product, and/or management organizational changes. Further, these tools measure financial results that support the strategic objectives and internal organizational structure of the Corporation. Consequently, the information presented is not necessarily comparable with similar information for other financial institutions.

A description of each business, selected financial performance, and the methodologies used to measure financial performance are presented below.

	•		Commercial —The commercial line of business provides a full range of lending, depository, and related financial services to middle-market corporate, industrial, financial, small business, government and leasing clients. Commercial also includes the personal business of commercial loan clients as well as the “micro business” lines. Products and services offered include commercial loans such as term loans, revolving credit arrangements, inventory and accounts receivable financing, commercial mortgages, real estate construction lending and letters of credit.

	•		Retail —The retail line of business includes consumer lending and deposit gathering and residential mortgage loan origination and ~~services.~~servicing. Retail offers a variety of retail financial products and services including direct and indirect installment loans, debit and credit cards, home equity loans and lines of credit, residential mortgage loans, deposit products, fixed and variable annuities and ATM network services. ~~Consumer loans are composed of home equity lines of credit (“HELOC”), automobile, personal, marine and recreational vehicle loans.~~ Deposit products include checking, savings, money market accounts and certificates of deposit.

	•		Wealth ~~Services~~ —The wealth ~~services~~ line of business offers a broad array of asset management, private banking, financial planning, estate settlement and administration, credit and deposit products and services. Trust and investment services include personal trust and planning, investment management, estate settlement and administration services. Retirement plan services focus on investment management and fiduciary activities. Brokerage and insurance delivers retail mutual funds, other securities, variable and fixed annuities, personal disability and life insurance products and brokerage services. Private banking provides credit, deposit and asset management solutions for affluent clients.

	•		Other —The other line of business includes activities that are not directly attributable to one of the three principal lines of business. Included in the ~~other~~Other category are the parent company, eliminations ~~company,~~companies, community development operations, the treasury group, which includes the securities portfolio, wholesale funding and asset liability management activities, and the economic impact of certain assets, capital and support function not specifically identifiable with the three primary lines of business.

The accounting policies of the lines of businesses are the same as those of the Corporation described in Note 1 (Summary of Significant Accounting Policies) to the 2006 Form 10-K. Funds transfer pricing is used in the determination of net interest income by assigning a

cost for funds used or credit for funds provided to assets and liabilities within each business unit.

Assets and liabilities are match-funded based on their maturity, prepayment and/or repricing characteristics. As a result the three primary lines of business are generally insulated from changes in interest rates. Changes in net interest income due to changes in rates are reported in Other by the treasury group. Capital has been allocated on an economic risk basis. Loans and lines of credit have been allocated capital based upon their respective credit risk. Asset management holdings in the Wealth segment have been allocated capital based upon their respective market risk related to assets under management. Normal business operating risk has been allocated to each line of business by the level of noninterest expense. Mismatch between asset and liability cash flow as well as interest rate risk for ~~MSRs~~MSR and the origination business franchise value have been allocated capital based upon their respective asset/liability management risk. The provision for loan losses is allocated based upon the actual net charge-offs of each respective line of business, adjusted for loan growth and changes in risk profile. Noninterest income and expenses directly attributable to a line of business are assigned to that line of business. Expenses for centrally provided services are allocated to the business line by various activity based cost formulas.

Prior to 2007, the Corporation managed its operations through the major line of business “Supercommunity Banking.” To improve revenue growth and profitability as well as enhance our relationships with customers, Management has moved to a line of business model during the first quarter of 2007. Accordingly, prior period information has been reclassified to reflect this change.

The ~~following table shows selected segment information.~~

FirstMerit
March 31, 2007 Commerical Retail Wealth Other Consolidated
OPERATIONS (thousands) :

Net interest income $ 36,675 47,881 4,473 (7,023 ) 82,006
Provision for loan losses 4,842 1,824 648 (3,104 ) 4,210
Other income 13,355 24,709 8,486 2,326 48,876
Other expenses 20,917 49,136 8,997 2,476 81,526
Net income 15,778 14,059 2,154 (570 ) 31,421
AVERAGES (millions) :

Assets $ 3,708,447 3,018,319 343,791 3,205,684 10,276,241
Loans 3,695,244 2,859,872 343,064 20,456 6,918,636
Earnings assets 3,765,170 2,909,330 343,332 2,419,586 9,437,418
Deposits 1,874,705 4,756,877 432,496 417,891 7,481,969
Shareholders’ equity 248,149 196,020 47,340 363,204 854,713

FirstMerit
December 31, 2006 Commerical Retail Wealth Other Consolidated
OPERATIONS:

Net interest income $ 148,486 202,203 18,151 (28,467 ) 340,373
Provision for loan losses 50,535 19,266 2,143 4,168 76,112
Other income 37,370 109,393 33,503 14,882 195,148
Other expenses 80,739 201,830 36,717 8,801 328,087
Net income 35,478 58,826 8,317 (7,675 ) 94,946
AVERAGES:

Assets $ 3,546,402 3,020,874 337,529 3,225,310 10,130,115
Loans 3,568,265 2,860,371 335,170 34,531 6,798,337
Earnings assets 3,600,199 2,911,837 335,180 2,414,076 9,261,292
Deposits 2,022,503 4,702,581 389,937 269,125 7,384,146
Shareholders’ equity 250,145 216,464 47,838 375,482 889,929

FirstMerit
March 31, 2006 Commerical Retail Wealth Other Consolidated
OPERATIONS:

Net interest income $ 36,051 50,567 4,344 (4,989 ) 85,973
Provision for loan losses 5,614 1,443 (139 ) (812 ) 6,106
Other income 8,562 25,198 8,230 3,407 45,397
Other expenses 19,657 50,760 8,934 2,548 81,899
Net income 12,572 15,315 2,456 (379 ) 29,964
AVERAGE:

Assets $ 3,451,259 3,005,255 336,688 3,318,710 10,111,912
Loans 3,474,279 2,846,190 329,657 47,596 6,697,722
Earnings assets 3,506,828 2,899,080 329,690 2,510,285 9,245,883
Deposits 2,070,828 4,699,076 358,302 185,302 7,313,508
Economic Capital 241,573 213,209 48,628 385,408 888,818

~~The~~ Corporation’s business is conducted solely in the United States of America. The following tables present a summary of financial results as of and for the ~~three-month~~quarter and six-month periods ended ~~March 31,~~June 30, 2007 and 2006 and the full year ended December 31, 2006:


																			FirstMerit
	Commercial				Retail				Wealth				Other						Consolidated
June 30, 2007	2nd Qtr		YTD		2nd Qtr		YTD		2nd Qtr		YTD		2nd Qtr			YTD			2nd Qtr		YTD
OPERATIONS:
Net interest income	$	38,093	$	74,693	$	48,348	$	96,243	$	4,462	$	8,935	$	(6,678	)	$	(13,640	)	$	84,225	$	166,231
Provision for loan losses		339		5,195		7,213		9,037		1,103		1,751		1,312			(1,806	)		9,967		14,177
Other income		9,027		22,382		26,728		51,401		9,021		17,507		4,154			6,516			48,930		97,806
Other expenses		19,860		40,783		46,143		95,210		9,068		18,065		6,304			8,843			81,375		162,901
Net income		18,427		34,141		14,090		28,153		2,152		4,306		(4,784	)		(5,294	)		29,885		61,306
AVERAGES :
Assets	$	3,744,584	$	3,724,129	$	3,002,953	$	3,009,817	$	344,442	$	344,117	$	3,227,475		$	3,223,214		$	10,319,454	$	10,301,277
Loans		3,775,949		3,733,418		2,847,434		2,853,051		343,417		343,242		35,950			31,388			7,002,750		6,961,099
Earnings assets		3,802,735		3,781,655		2,896,433		2,902,278		343,414		343,373		2,443,237			2,434,620			9,485,819		9,461,926
Deposits		1,912,058		1,893,484		4,813,926		4,785,559		442,597		437,574		346,624			382,061			7,515,205		7,498,678
Economic Capital		246,948		248,180		191,141		193,463		48,307		47,822		385,158			373,716			871,554		863,181


										FirstMerit
Full Year	Commercial		Retail		Wealth		Other			Consolidated
December 31, 2006	YTD		YTD		YTD		YTD			YTD

OPERATIONS:
Net interest income	$	148,502	$	202,292	$	18,192	$	(28,613	)	$	340,373
Provision for loan losses		50,545		19,265		2,142		4,160			76,112
Other income		37,350		109,383		33,502		14,913			195,148
Other expenses		76,246		196,204		35,915		19,722			328,087
Net income		38,389		62,534		8,864		(14,841	)		94,946
AVERAGES:
Assets	$	3,543,088	$	3,019,254	$	337,528	$	3,230,145		$	10,130,015
Loans		3,565,105		2,859,247		335,169		38,817			6,798,338
Earnings assets		3,597,040		2,910,712		335,180		2,418,360			9,261,292
Deposits		2,022,510		4,702,580		389,937		269,119			7,384,146
Economic Capital		250,011		216,268		47,838		375,812			889,929


																			FirstMerit
	Commercial				Retail				Wealth				Other						Consolidated
June 30, 2006	2nd Qtr		YTD		2nd Qtr		YTD		2nd Qtr		YTD		2nd Qtr			YTD			2nd Qtr		YTD

OPERATIONS:
Net interest income	$	36,872	$	72,941	$	51,080	$	101,644	$	4,571	$	8,956	$	(6,793	)	$	(11,838	)	$	85,730	$	171,703
Provision for loan losses		9,523		15,156		1,841		3,284		760		621		1,035			204			13,159		19,265
Other income		10,375		18,937		28,144		53,341		8,604		16,834		4,955			8,363			52,078		97,475
Other expenses		20,391		40,054		52,384		103,076		9,225		18,158		3,218			5,829			85,218		167,117
Net income		11,266		23,834		16,249		31,606		2,074		4,557		(1,928	)		(2,372	)		27,661		57,625
AVERAGE:
Assets	$	3,516,198	$	3,481,952	$	2,994,491	$	2,999,044	$	329,646	$	333,147	$	3,211,288		$	3,262,977		$	10,051,623	$	10,077,120
Loans		3,537,962		3,504,411		2,834,882		2,839,980		328,966		329,310		28,721			40,521			6,730,531		6,714,222
Earnings assets		3,570,283		3,536,845		2,889,577		2,893,778		328,966		329,326		2,385,182			2,449,797			9,174,008		9,209,746
Deposits		2,082,448		2,076,687		4,739,758		4,719,529		386,297		372,377		217,526			201,364			7,426,029		7,369,957
Economic Capital		249,933		245,704		218,405		215,692		48,429		48,527		353,467			369,675			870,234		879,598

8.Accounting for Derivatives — The Corporation follows the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 149, in accounting for its derivative activities.

At ~~March 31,~~June 30, 2007 the Corporation had various interest rate swaps in place that were accounted for as fair value hedges under SFAS No. 133 since their purpose is to “swap” fixed interest rate liabilities and assets to a variable interest rate basis. Substantially all of the interest rate swaps are associated with the Corporation’s fixed-rate commercial loan swap program that was initiated during the first quarter of 2003 and the remaining interest rate swaps convert the fixed interest rate of commercial real estate construction loans and the fixed interest rate of manditorily redeemable preferred securities to a variable interest rate basis. All of the interest rate swaps associated with the fixed-rate commercial loan swap program qualify for the “shortcut method of accounting” as prescribed in SFAS No. 133. The shortcut method of accounting requires that the hedge and the hedged item meet certain qualifying criteria. If the swap qualifies for the shortcut method of accounting, no hedge ineffectiveness can be assumed, and the need to test for ongoing effectiveness is eliminated. For hedges that qualify for the shortcut method of accounting, the fair value of the swap and the fair value of the hedged item are recorded on the balance sheets. The remaining hedges do not meet all the criteria necessary to be considered for the shortcut method of accounting. Therefore, the long-haul method of accounting is utilized. The long-haul method of accounting requires periodic testing of hedge effectiveness with the portion of the hedge deemed to be ineffective reported in other operating expense.

During the first quarter of 2007, the Corporation entered into forward swap agreements which, in effect, fixed the borrowing costs of certain variable rate liabilities in the future. These transactions do not qualify for the short-cut method of accounting under SFAS No. 133, as previously discussed. The Corporation classifies these transactions as cash flow hedges, with any hedge ineffectiveness being reported in other operating expense. It is anticipated that the hedges will prove to be effective. A correlation analysis performed at quarter-end verified that the hedges were effective.

Additionally, in the normal course of business, the Corporation sells originated mortgage loans into the secondary mortgage loan markets. The Corporation maintains a risk management program to protect and manage interest-rate risk and pricing associated with its mortgage commitment pipeline. The Corporation’s mortgage commitment pipeline included interest-rate lock commitments (“IRLCs”) that have been extended to borrowers who have applied for loan

funding and met certain defined credit and underwriting standards. During the term of the IRLCs, the Corporation is exposed to interest-rate risk, in that the value of the IRLCs may change significantly before the loans close. To mitigate this interest-rate risk, the Corporation enters into various derivatives by selling loans forward to investors using forward commitments. In accordance with SFAS No. 133, the Corporation classifies and accounts for IRLCs as nondesignated derivatives that are recorded at fair value with changes in value recorded to current earnings. The forward sale commitments used to manage the risk on the IRLCs are also classified and accounted for as nondesignated derivatives and, therefore, recorded at fair value

with changes recorded to current earnings. During 2003, the Corporation implemented a SFAS No. 133 hedging program for its mortgage loan warehouse to gain protection for the changes in fair value of the mortgage loan warehouse and the forward commitments. As such, both the mortgage loan warehouse and the forward commitments are accounted for utilizing the long-haul method of accounting and any hedge ineffectiveness is reported in other operating expense.

9.Benefit Plans — The Corporation sponsors several qualified and nonqualified pension and other postretirement benefit plans for certain of its employees. The net periodic benefit cost is based on estimated values provided by outside actuaries. The components of net periodic benefit cost are as follows:


							Pension Benefits
	Pension Benefits												Six			Six
	Quarter ended			Quarter ended			Quarter ended			Quarter ended			months ended			months ended
	March 31,			March 31,			June 30,			June 30,			June 30,			June 30,
	2007			2006			2007			2006			2007			2006
Components of Net Periodic Pension Cost
Service Cost	$	1,866			1,771		$	1,866		$	1,771		$	3,733		$	3,542
Interest Cost		2,414			2,282			2,414			2,282			4,828			4,564
Expected return on assets		(2,796	)		(2,837	)		(2,796	)		(2,837	)		(5,592	)		(5,674	)
Amortization of unrecognized prior service costs		41			45			41			45			81			90
Cumulative net loss		1,337			1,479			1,337			1,480			2,673			2,960

Net periodic pension cost	$	2,862			2,740		$	2,862		$	2,741		$	5,723		$	5,482


							Postretirement Benefits
	Postretirement Benefits												Six			Six
	Quarter ended			Quarter ended			Quarter ended			Quarter ended			months ended			months ended
	March 31,			March 31,			June 30,			June 30,			June 30,			June 30,
	2007			2006			2007			2006			2007			2006
Components of Net Periodic Postretirement Cost
Service Cost	$	222			187		$	222		$	187		$	444		$	374
Interest Cost		434			415			434			416			868			831
Amortization of unrecognized prior service costs		(135	)		(135	)		(135	)		(135	)		(271	)		(270	)
Cumulative net loss		102			107			102			107			204			214

Net periodic postretirement cost	$	623			574		$	623		$	575		$	1,245		$	1,149

The Corporation is not required and does not anticipate making a contribution to the defined benefit pension plan during 2007.

On May 18, 2006 the Corporation’s Board of Directors approved freezing the current defined benefit pension plan for non-vested employees and closed it to new entrants after December 31, 2006. Participants vested in the current pension plan as of December 31, 2006 will remain participants in the existing pension plan. A new defined contribution plan was also approved for non-vested employees and new hires as of January 1, 2007. These plan amendments qualified as a curtailment of the defined benefit pension plan, the impact of which

was a $1.4 million gain that was recognized by a direct reduction of the plan’s cumulative net loss with no impact on 2006 year end earnings. During the quarter and six months ended ~~March 31,~~June 30, 2007, $0.3 million and $0.7 million, respectively was expensed relating to the new defined contribution plan.

10.Contingencies — The nature of the Corporation’s business results in a certain amount of litigation. Accordingly, the Corporation and its subsidiaries are subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. Management, after consultation with legal counsel, is of the opinion that the ultimate liability of such pending matters will not have a material effect on the Corporation’s financial condition and results of
operations.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential

~~FIRSTMERIT CORPORATION AND SUBSIDIARIES~~


	Three months ended								Year ended								Three months ended								Three months ended								Year ended									Three months ended
	March 31, 2007								December 31, 2006								March 31, 2006								June 30, 2007								December 31, 2006									June 30, 2006
FIRSTMERIT CORPORATION																									Average					Average			Average						Average			Average					Average
AND SUBSIDIARIES																									Balance			Interest		Rate			Balance				Interest		Rate			Balance			Interest		Rate
	Average					Average			Average					Average			Average					Average
(Dollars in thousands)	Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate
ASSETS
Cash and due from banks	$	179,566								186,029								194,042							$	177,524							$	186,029								$	188,915
Investment securities and federal funds sold:
U.S. Treasury securities and U.S. Government agency obligations (taxable)		1,955,704			20,222		4.19	%		2,050,736			81,207		3.96	%		2,161,306			20,850		3.91	%		1,936,833			20,359		4.22	%		2,050,736				81,207		3.96	%		2,054,338			20,102		3.92	%
Obligations of states and political subdivisions (tax exempt)		222,381			3,382		6.17	%		114,548			7,390		6.45	%		90,622			1,527		6.83	%		256,153			3,883		6.08	%		114,548				7,390		6.45	%		88,144			1,490		6.78	%
Other securities and federal funds sold		251,454			4,421		7.13	%		250,221			15,264		6.10	%		248,093			3,526		5.76	%		247,029			4,477		7.27	%		250,221				15,264		6.10	%		249,726			3,823		6.14	%


Total investment securities and federal funds sold		2,429,539			28,025		4.68	%		2,415,505			103,861		4.30	%		2,500,021			25,903		4.20	%
Total investment securities federal funds sold																										2,440,015			28,719		4.72	%		2,415,505				103,861		4.30	%		2,392,208			25,415		4.26	%

Loans held for sale		89,243			763		3.47	%		47,449			3,153		6.65	%		48,129			762		6.42	%		43,054			739		6.88	%		47,449				3,153		6.65	%		51,269			512		4.01	%
Loans		6,918,636			129,359		7.58	%		6,798,338			499,746		7.35	%		6,697,732			116,997		7.08	%		7,002,750			131,369		7.52	%		6,798,338				499,746		7.35	%		6,730,531			122,990		7.33	%


Total earning assets		9,437,418			158,147		6.80	%		9,261,292			606,760		6.55	%		9,245,882			143,662		6.30	%		9,485,819			160,827		6.80	%		9,261,292				606,760		6.55	%		9,174,008			148,917		6.51	%

Allowance for loan losses		(91,256	)							(88,020	)							(90,229	)							(92,298	)							(88,020	)								(86,583	)
Other assets		750,513								770,714								761,858								748,409								770,714									775,283


Total assets	$	10,276,241								10,130,015								10,111,553							$	10,319,454							$	10,130,015								$	10,051,623


LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand — non-interest bearing	$	1,389,455			—		—			1,434,539			—		—			1,462,671			—		—		$	1,408,827			—		—		$	1,434,539				—		—		$	1,455,229			—		—
Demand — interest bearing		756,678			1,919		1.03	%		818,735			9,217		1.13	%		848,209			2,362		1.13	%		763,907			1,876		0.99	%		818,735				9,217		1.13	%		865,563			2,583		1.20	%
Savings and money market accounts		2,284,549			14,006		2.49	%		2,271,654			50,083		2.20	%		2,292,865			10,748		1.90	%		2,293,567			13,992		2.45	%		2,271,654				50,083		2.20	%		2,280,657			12,079		2.12	%
Certificates and other time deposits		3,051,287			36,080		4.80	%		2,859,218			123,877		4.33	%		2,709,764			26,101		3.91	%		3,048,904			36,725		4.83	%		2,859,218				123,877		4.33	%		2,824,580			29,326		4.16	%


Total deposits		7,481,969			52,005		2.82	%		7,384,146			183,177		2.48	%		7,313,509			39,211		2.17	%		7,515,205			52,593		2.81	%		7,384,146				183,177		2.48	%		7,426,029			43,988		2.38	%

Securities sold under agreements to repurchase		1,352,961			16,785		5.03	%		1,283,951			56,151		4.37	%		1,295,178			11,923		3.73	%		1,458,982			18,005		4.95	%		1,283,951				56,151		4.37	%		1,212,470			12,957		4.29	%
Wholesale borrowings		399,638			6,139		6.23	%		404,723			24,140		5.96	%		433,257			5,965		5.58	%		280,914			4,636		6.62	%		404,723				24,140		5.96	%		371,309			5,595		6.04	%


Total interest bearing liabilities		7,845,113			74,929		3.87	%		7,638,281			263,468		3.45	%		7,579,273			57,099		3.06	%		7,846,274			75,234		3.85	%		7,638,281				263,468		3.45	%		7,554,579			62,540		3.32	%
																																				��
Other liabilities		186,960								167,266								180,791								192,799								167,266									171,581

Shareholders’ equity		854,713								889,929								888,818								871,554								889,929									870,234


Total liabilities and shareholders’ equity	$	10,276,241								10,130,015								10,111,553							$	10,319,454							$	10,130,015								$	10,051,623


Net yield on earning assets	$	9,437,418			83,218		3.58	%		9,261,292			343,292		3.71	%		9,245,882			86,563		3.80	%	$	9,485,819			85,593		3.62	%	$	9,261,292				343,292		3.71	%	$	9,174,008			86,377		3.78	%


Interest rate spread							2.93	%							3.10	%							3.25	%							2.95	%								3.10	%							3.19	%


Note:		Interest income on tax-exempt securities and loans has been adjusted to a fully-taxable equivalent basis. Nonaccrual loans have been included in the average balances.

AVERAGE CONSOLIDATED BALANCE SHEETS (Unaudited)
Fully-tax Equivalent Interest Rates and Interest Differential


	Six months ended								Year ended								Six months ended
	June 30, 2007								December 31, 2006								June 30, 2006
FIRSTMERIT CORPORATION	Average					Average			Average					Average			Average					Average
AND SUBSIDIARIES	Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate

(Dollars in thousands)

ASSETS
Cash and due from banks	$	178,539							$	186,029							$	191,465
Investment securities and federal funds sold:
U.S. Treasury securities and U.S. Government agency obligations (taxable)		1,946,216			40,583		4.21	%		2,050,736			81,207		3.96	%		2,107,527			40,951		3.92	%
Obligations of states and political subdivisions (tax exempt)		239,361			7,267		6.12	%		114,548			7,390		6.45	%		89,376			3,018		6.81	%
Other securities and federal funds sold		249,229			8,896		7.20	%		250,221			15,264		6.10	%		248,913			7,350		5.95	%


Total investment securities and federal funds sold		2,434,806			56,746		4.70	%		2,415,505			103,861		4.30	%		2,445,816			51,319		4.23	%

Loans held for sale		66,021			1,501		4.58	%		47,449			3,153		6.65	%		49,708			1,597		6.48	%
Loans		6,961,099			260,727		7.55	%		6,798,338			499,746		7.35	%		6,714,222			239,663		7.20	%

Total earning assets		9,461,926			318,974		6.80	%		9,261,292			606,760		6.55	%		9,209,746			292,579		6.41	%

Allowance for loan losses		(91,780	)							(88,020	)							(88,396	)
Other assets		752,592								770,714								764,305


Total assets	$	10,301,277							$	10,130,015							$	10,077,120


LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand — non-interest bearing	$	1,399,194			—		—		$	1,434,539			—		—		$	1,458,807			—		—
Demand — interest bearing		760,312			3,795		1.01	%		818,735			9,217		1.13	%		856,934			4,945		1.16	%
Savings and money market accounts		2,289,083			27,998		2.47	%		2,271,654			50,083		2.20	%		2,286,727			22,827		2.01	%
Certificates and other time deposits		3,050,089			72,805		4.81	%		2,859,218			123,877		4.33	%		2,767,489			55,427		4.04	%

Total deposits		7,498,678			104,598		2.81	%		7,384,146			183,177		2.48	%		7,369,957			83,199		2.28	%

Securities sold under agreements to repurchase		1,406,264			34,790		4.99	%		1,283,951			56,151		4.37	%		1,253,596			24,880		4.00	%
Wholesale borrowings		340,122			10,775		6.39	%		404,723			24,140		5.96	%		402,111			11,560		5.80	%

Total interest bearing liabilities		7,845,870			150,163		3.86	%		7,638,281			263,468		3.45	%		7,566,857			119,639		3.19	%

Other liabilities		193,032								167,266								171,858

Shareholders’ equity		863,181								889,929								879,598

Total liabilities and shareholders’ equity	$	10,301,277							$	10,130,015							$	10,077,120


Net yield on earning assets	$	9,461,926			168,811		3.60	%	$	9,261,292			343,292		3.71	%	$	9,209,746			172,940		3.79	%


Interest rate spread							2.94	%							3.10	%							3.22	%


Note:		Interest income on tax-exempt securities and loans has been adjusted to a fully-taxable equivalent basis. Nonaccrual loans have been included in the average balances.

SUMMARY

~~The~~FirstMerit Corporation ~~recorded first~~reported second quarter 2007 net income of ~~$31.4~~$29.9 million, or ~~$0.39~~$0.37 per diluted share. This compares with ~~$30.0~~$27.7 million, or ~~$0.37~~$0.35 per diluted share, for the prior-year quarter.

~~Return~~ Returns on average common equity (“ROE”) and average assets (“ROA”) for the ~~first~~second quarter 2007 were ~~14.91%~~13.75% and ~~1.24%~~1.16%, respectively, compared with ~~13.67%~~12.75% and ~~1.20%~~1.10% for the prior-year quarter.

For the first six months of 2007, the Company reported net income of $61.3 million, or $0.76 per diluted share, compared with $57.6 million, or $0.72 per diluted share. ROE and ROA were 14.32% and 1.20%, respectively, compared with 13.21% and 1.15% for the prior-year period.

Net interest margin was ~~3.58%~~3.62% for the ~~first~~second quarter of 2007 compared with 3.58% for the ~~fourth~~first quarter of ~~2006~~2007 and ~~3.80%~~3.78% for the ~~first~~second quarter of 2006. The ~~Corporation maintained a stable~~Company’s expanding net interest margin during the ~~first~~second quarter of 2007, compared with the ~~fourth~~first quarter of ~~2006, by reinvesting maturing~~2007, reflects increasing investment portfolio ~~securities at higher~~securities’ yields and ~~managing the costs of core deposits.~~declining funding costs. The decrease in net interest margin compared with the ~~first~~second quarter of 2006 ~~reflects both a~~reflected the shift in consumer preference for ~~higher-yielding~~higher-costing term deposit products as well as increased deposit costs ~~from~~due to a higher interest rate environment.

Net interest income on a fully tax-equivalent (“FTE”) basis was $85.6 million in the second quarter of 2007 compared with $83.2 million in the first quarter of 2007 ~~compared with $84.5~~and $86.4 million in the ~~fourth quarter of 2006 and $86.6 million in the first~~second quarter of 2006. The decrease in FTE net interest income compared with the fourth quarter 2006 resulted from fewer days in the quarter while average earning assets grew $63.2 million, or 0.67%, along with a stable net interest margin. The increase ~~in earning assets was primarily driven by growth in the investment portfolio. The decrease~~ in FTE net interest income compared with the first quarter of 2007 reflected net interest margin expansion and modest average earning asset growth of $48.4 million, or 0.51%. The decrease in FTE net interest income compared with the second quarter of 2006 resulted from ~~lower~~ net interest margin contraction, partly offset by an increase in average earning ~~assets.~~assets of $311.8 million, or 3.40%.

Average loans for the second quarter of 2007 increased $84.1 million, or 1.22%, compared with the first quarter of 2007. Average commercial loans grew $96.3 million, or 2.57%, during the period offsetting a $5.8 million, or 0.19%, decrease in the average consumer portfolio of loans and a $6.5 million, or 8.29%, decrease in average leases. Compared with the ~~first~~second quarter of 2006, average loans increased ~~3.30% and~~$272.2 million, or 4.04%, led by a $242.3 million, or 6.73%, increase in average commercial loans. Average investments for the second quarter of 2007 increased $10.5 million, or 0.43%, compared with the first quarter of 2007. Compared with the second quarter of 2006, average investments ~~decreased 2.82%~~increased $47.8 million, or 2.00%. Average investments represent 23.64% of average assets for the second quarter of 2007, compared with 23.64% and 23.80% for the first quarter of 2007 and the second quarter of 2006, respectively.

Average deposits in the second quarter of 2007 were $7.5 billion, an increase of $33.2 million, or 0.44%, compared with the first quarter of 2007. The growth came solely from increased transaction account categories, namely in demand-non-interest bearing deposits which rose $19.4 million, or 1.4%, resulting in an increased core deposit mix. The increased composition of core deposits contributed to lower funding costs and an expanded net interest margin for the quarter. Compared with the second quarter of 2006, average deposits increased

$89.2 million, or 1.20%. Average certificates and other time deposits increased $224.3 million, or 7.94%, reflecting consumer preference for higher-yielding term deposits.

Noninterest income net of securities transactions for the ~~first~~second quarter of 2007 was $48.9 million, ~~an increase of $0.5~~compared with $48.9 million ~~or 1.13% from the fourth quarter of 2006 and an increase of $3.5 million or 7.70% from the first quarter of 2006. In~~in the first quarter of 2007 ~~the Corporation completed a~~which included net gains of $3.5 million from previously ~~announced~~disclosed asset ~~sale that contributed $4.1 million to~~sales. Excluding loan sales and servicing income, ~~offset~~which declined $3.5 million compared with the first quarter of 2007, all other fee income categories increased in the second quarter of 2007. The primary growth in fee income came from service charges on deposits, which increased $0.8 million, or 4.96%, compared with the first quarter of 2007 and credit card fees, which increased $0.6 million, or 5.52%.

Compared with the second quarter of 2006, noninterest income decreased $3.1 million, or 6.04%. The year-over-year quarterly comparison is impacted by ~~a $0.5~~$3.3 million ~~loss on~~in noninterest income reported in the ~~sale~~second quarter of ~~other real estate recorded~~2006 and identified by the Corporation as related to one-time events reported in ~~operating~~loan sales and servicing income ~~for the quarter. Other~~and bank owned life insurance. Noninterest income, net of securities gains, as a percentage of net revenue for the first quarter of 2007 was ~~37.00%~~36.37% compared with ~~36.39%~~37.00% for ~~fourth~~the first quarter of ~~2006~~2007 and ~~34.39%~~37.61% for the ~~first~~second quarter of 2006. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.

~~Noninterest~~For the second quarter of 2007, noninterest expense ~~for~~was $81.4 million, a decrease of $0.2 million, or 0.19%, from the first quarter of 2007 ~~was $81.5 million, a decrease of $2.5 million, or 2.93%, from the fourth quarter of 2006~~ and a decrease of ~~$0.4~~$3.8 million, or ~~0.46%~~4.51%, from the ~~first~~second quarter of 2006.

Net charge-offs totaled $7.6 million, or 0.43% of average portfolio loans, in the second quarter of 2007, $3.5 million, or 0.21%, of average portfolio loans, in the first quarter of 2007 ~~compared with $9.2~~and $13.0 million, or ~~0.56%,~~0.78% of average portfolio loans, in the ~~first~~second quarter of 2006.

Nonperforming assets totaled $37.0 million at June 30, 2007, compared with $32.7 million aton March 31, 2007 ~~a decrease of $31.5~~and $58.8 million ~~or 49.1%, compared with December 31, 2006 and a decrease of $40.2 million, or~~

~~55.22%, compared with March 31,~~on June 30, 2006. ~~The asset sale completed during the first quarter of 2007 included $31.0 million of nonperforming assets.~~ Nonperforming assets at ~~March 31,~~June 30, 2007 represented ~~0.47%~~0.52% of period-end loans plus other real estate, compared with ~~0.93% at December 31, 2006 and 1.09%~~0.47% at March 31, 2007 and 0.86% at June 30, 2006.

The provision for loan losses ~~decreased to~~was $10.0 million in the second quarter of 2007, compared with $4.2 million in the first quarter of 2007 ~~compared with $44.2~~and $13.2 million in the ~~fourth quarter of 2006 and $6.1 million in the first~~second quarter of 2006. ~~In the fourth quarter of 2006, the Corporation’s higher~~The provision for loan losses ~~was impacted~~exceeded net charge-offs by ~~its decision~~$2.4 million to ~~sell $73.7 million of commercial loans included~~support balance sheet growth in the ~~asset sales completed during the first~~second quarter of 2007.

The allowance for loan losses totaled ~~$92.0~~$94.4 million at ~~March 31,~~June 30, 2007, an increase of ~~$0.7~~$2.4 million and ~~$4.5~~$6.7 million from ~~December~~March 31, ~~2006~~2007 and ~~March 31,~~June 30, 2006, respectively. At ~~March 31,~~June 30, 2007, the allowance for loan losses was ~~1.32%~~1.34% of period-end loans compared with ~~1.33% at December 31, 2006 and 1.31%~~1.32% at March 31, 2007 and 1.29% at June 30, 2006. The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments. For comparative purposes the allowance for credit losses as a percentage of period end loans was 1.43% at June 30, 2007, compared with 1.42% at March 31, 2007 ~~compared with 1.42%~~and 1.37% at ~~December 31, 2006 and 1.40% at March 31,~~June 30, 2006. The allowance for credit losses to nonperforming loans ~~increased to~~was 315.56% at June 30, 2007 compared with 356.26% aton March 31, 2007 ~~compared with 179.60%~~and 186.19% on ~~December 31, 2006 and 145.32% on March 31,~~June 30, 2006.

The Corporation’s total assets at ~~March 31,~~June 30, 2007 were ~~$10.3~~$10.4 billion, an increase of ~~$94.5~~$82.0 million, or ~~0.92%, compared with December 31, 2006 and an increase of $246.4 million, or 2.44%~~0.79%, compared with March 31, 2007 and an increase of $174.3 million, or 1.70%, compared with June 30, 2006. The increase from ~~December~~March 31, ~~2006~~2007, was ~~due to continued~~driven by commercial loan growth of $98.8 million, or 2.60%, offsetting a $6.5 million, or 0.21%, decrease in consumer loans and a $4.5 million, or 5.99%, decrease in the ~~commercial loan portfolio, which increased $106.0 million, or 2.87%, and offset decreases in the consumer~~lease portfolio. Commercial loan growth of ~~$237.1~~$239.2 million, or ~~6.66%~~6.54%, ~~drove a majority of the~~supported overall asset growth from ~~March 31,~~June 30, 2006.

Total deposits were ~~$7.7~~$7.5 billion at June 30, 2007, a decrease of $226.7 million, or 2.94%, from March 31, 2007, ~~an increase of $202.3 million, or 2.70% from December 31, 2006,~~ and an increase of ~~$190.6~~$72.2 million, or ~~2.54%~~0.98%, from ~~March 31,~~June 30, 2006. Core deposits, which exclude all time deposits, totaled ~~$4.6~~$4.4 billion at June 30, 2007, a decrease of $133.1 million, or 2.91%, from March 31, 2007 ~~an increase of $54.4 million or 1.20% from December 31, 2006~~ and a decrease of ~~$132.3~~$126.9 million, or ~~2.81%~~2.78%, from ~~March 31,~~June 30, 2006.

Shareholders’ equity was ~~$863.6~~$862.3 million at ~~March 31,~~June 30, 2007 and the Corporation’s capital position remains strong as tangible equity to assets was ~~7.07%~~7.00%. The common dividend per share paid in the ~~first~~second quarter 2007 was $0.29.

RESULTS OF OPERATION

Net Interest Income

Net interest income, the Corporation’s principal source of earnings, is the difference between interest income generated by earning assets (primarily loans and investment securities) and interest paid on interest-bearing funds (namely customer deposits, securities sold under agreements to repurchase and wholesale borrowings). Net interest income for the quarter ended ~~March 31,~~June 30, 2007 was ~~$82.0~~$84.2 million compared to ~~$86.0~~$85.7 million for the ~~three~~quarter ended June 30, 2006. Net interest income for the six months ended ~~March 31,~~June 30, 2007 was $166.2 million compared to $171.7 million for the six months ended June 30, 2006. For the purpose of this remaining discussion, net interest income is presented on an FTE basis, to provide a comparison among all types of interest earning assets. That is, interest on tax-free securities and tax-exempt loans has been restated as if such interest were taxed at the statutory Federal income tax rate of 35%, adjusted for the non-deductible portion of interest expense incurred to acquire the tax-free assets. Net interest income presented on an FTE basis is a non-GAAP financial measure widely used by financial services organizations. The FTE adjustment was ~~$1.2~~$1.4 million and $0.6 million for the quarters ending March 31, 2007 and 2006, respectively. The FTE adjustment was $2.6��million and $1.2 million for the six months ending June 30, 2007 and 2006, respectively.

FTE net interest income for the quarter ended ~~March 31,~~June 30, 2007 was ~~$83.3~~$85.6 million compared to ~~$86.6~~$86.4 million for the three months ended ~~March 31,~~June 30, 2006. The ~~$3.3~~$0.8 million decrease in FTE net interest income occurred because the ~~$17.8~~$12.7 million increase in interest expense, compared to the same quarter last year, was more than the ~~$14.5~~$11.9 million increase in interest income during the same period.

In a similar analysis, FTE net interest income for the six months ended June 30, 2007 was $168.8 million compared to $172.9 million for the six months ended June 30, 2006. The $4.1 million decrease in FTE net interest income occurred because the $30.5 million increase in interest expense, compared to the same quarter last year, was more than the $26.4 million increase in interest income during the same period.

As illustrated in the following rate/volume analysis table, interest income and interest expense both increased due to the rising interest rate environment.


	Quarters ended March 31, 2007 and 2006
	Increases (Decreases)									Quarters ended June 30, 2007 and 2006									Six months ended June 30, 2007 and 2006
RATE/VOLUME ANALYSIS	Volume			Rate			Total			Increases (Decreases)									Increases (Decreases)
(Dollars in thousands)		Volume			Rate			Total			Volume			Rate			Total
INTEREST INCOME — FTE
Investment securities	$	(158	)		2,231			2,073		$	1,266		$	2,029		$	3,295		$	1,109		$	4,259		$	5,368
Loans held for sale		457			(456	)		1			(93	)		320			227			443			(539	)		(96	)
Loans		3,946			8,416			12,362			5,055			3,324			8,379			8,998			12,066			21,064
Federal funds sold		41			8			49			7			2			9			48			11			59

Total interest income — FTE	$	4,286			10,199			14,485		$	6,235		$	5,675		$	11,910		$	10,598		$	15,797		$	26,395

INTEREST EXPENSE
Demand deposits-interest bearing	$	(242	)		(201	)		(443	)	$	(282	)	$	(425	)	$	(707	)	$	(523	)	$	(627	)	$	(1,150	)
Savings and money market accounts		(39	)		3,297			3,258			69			1,844			1,913			24			5,147			5,171
Certificates of deposits and other time deposits		3,556			6,423			9,979			2,453			4,946			7,399			6,037			11,341			17,378
Securities sold under agreements to repurchase		553			4,309			4,862			2,866			2,182			5,048			3,277			6,633			9,910
Wholesale borrowings		(484	)		658			174			(1,455	)		496			(959	)		(1,892	)		1,107			(785	)

Total interest expense	$	3,344			14,486			17,830		$	3,651		$	9,043		$	12,694		$	6,923		$	23,601		$	30,524

Net interest income — FTE	$	942			(4,287	)		(3,345	)	$	2,584		$	(3,368	)	$	(784	)	$	3,675		$	(7,804	)	$	(4,129	)

As illustrated in the preceding table, the increased amount of interest income recorded in the 2007 ~~first~~second quarter compared to the same 2006 period was primarily ~~rate~~volume driven as higher ~~yields on loans~~loan balances increased interest income by ~~$8.4~~$5.1 million during those periods. The table also depicts a ~~similar~~ three-month increase of $6.4 million in interest expense ~~again~~primarily caused by ~~the continued rise in interest rates from 2006 through the first quarter of 2007. The~~ higher rates paid on customer ~~deposits and securities sold under agreements to repurchase~~deposits. The six-month changes were primarily rate driven as the higher yield on loans increased interest income by $12.1 million while the increase in ~~the 2007 quarter compared to the same 2006 period~~rates on deposits increased interest expense by ~~$13.8~~$15.9 million.

Net Interest Margin

The following table provides 2007 FTE net interest income and net interest margin totals as well as 2006 comparative amounts:


	Quarters ended
	March 31,						Quarters ended June 30,						Six months ended June 30,
(Dollars in thousands)	2007			2006			2007			2006			2007			2006

Net interest income	$	82,006			85,973		$	84,225		$	85,730		$	166,231		$	171,703
Tax equivalent adjustment		1,212			590			1,368			647			2,580			1,237

Net interest income — FTE	$	83,218			86,563		$	85,593		$	86,377		$	168,811		$	172,940


Average earning assets	$	9,437,418			9,245,882		$	9,485,819		$	9,174,008		$	9,461,926		$	9,209,746

Net interest margin — FTE		3.58	%		3.80	%		3.62	%		3.78	%		3.60	%		3.79	%

Average loans outstanding for the current year and prior year ~~first~~second quarters totaled ~~$6.9~~$7.0 billion and $6.7 billion, respectively. Increases in average loan balances from ~~first~~second quarter 2006 to the ~~first~~second quarter of 2007 occurred in commercial, installment loans, credit card loans, and leases, while mortgage loans and home equity loans declined. Efforts to grow loans outstanding continue to be tempered by the less than robust economy that currently exists in the Corporation’s primary lending areas.

Specific changes in average loans outstanding, compared to the ~~first~~second quarter 2006, were as follows: commercial loans were up ~~$181.8~~$242.3 million or ~~5.10%~~6.73%; installment loans, both direct and indirect rose ~~$108.4~~$110.6 million or ~~7.16%~~7.25%; credit card loans rose ~~$2.0~~$3.7 million or ~~1.43%~~2.73%; leases increased ~~$9.7~~$6.4 million or ~~14.21%~~9.80%; mortgage loans were down ~~$23.1million~~$29.7 million or ~~3.66%~~4.74%; and home equity loans were down ~~$57.9~~$61.1 million, or ~~7.47%~~7.91%. The majority of fixed-rate mortgage loan originations are sold to investors through the secondary mortgage loan market. Average outstanding loans for the 2007 and 2006 ~~first~~second quarters equaled ~~73.31%~~73.82% and ~~72.44%~~73.37% of average earning assets, respectively.

Average deposits were $7.5 billion during the 2007 ~~first~~second quarter, up ~~$168.5~~$89.2 million, or ~~2.30%~~1.20%, from the same period last year. For the quarter ended ~~March 31,~~June 30, 2007, average core deposits (which are defined as checking accounts, savings accounts and money market savings products) decreased ~~$173.1million,~~$135.1 million, or ~~3.76%~~2.94%, and represented ~~59.22%~~59.43% of total average deposits, compared to ~~62.95%~~61.96% for the 2006 ~~first~~second quarter. Average certificates of deposit (“CDs”) increased ~~$341.5~~$224.3 million, or ~~12.60%~~7.94%, compared to the prior year quarter due to marketing promotions

during the 2007 ~~first~~second quarter. The decrease in core deposits and the corresponding increase in CD’s represent the consumer preference for longer term, higher yielding deposits. Average wholesale borrowings decreased ~~$33.6~~$90.4 million and as a percentage of total interest-bearing funds equaled ~~5.09%~~3.58% for the 2007 ~~first~~second quarter and ~~5.72%~~4.92% for the same quarter one year ago. Securities sold under agreements to repurchase increased ~~$57.8~~$246.5 million, and as a percentage of total interest bearing funds equaled ~~17.25%~~18.59% for the 2007 ~~first~~second quarter and ~~17.09%~~16.05% for the 2006 ~~first~~second quarter. Average interest-bearing liabilities funded ~~83.13%~~82.72% of average earning assets in the current year quarter and ~~81.97%~~82.35% during the quarter ended ~~March 31,~~June 30, 2006.

Other Income

Other (non-interest) income for the quarter totaled $48.9 million, ~~an increase~~a decrease of ~~$3.5~~$3.1 million from the ~~$45.4~~$52.1 million earned during the same period one year ago. Other income for the six months ended June 30, 2007 totaled $97.8 million an increase of $0.3 million from the $97.5 million earned during the six months ended June 30, 2006.

Other income, net of securities gains, as a percentage of net revenue for the first quarter was ~~37.00%~~36.37%, compared to ~~34.39%~~37.61% for the same quarter one year ago. Net revenue is defined as net interest income, on a FTE basis, plus other income, less gains from securities sales.

The primary changes in other income for the 2007 ~~first~~second quarter as compared to the ~~first~~second quarter of 2006, were as follows: trust department income was ~~$5.6~~$6.1 million, up ~~3.74%~~6.13%; credit card fees increased $0.2 million, or 2.04%; service charges on deposit accounts totaled ~~$16.2~~$17.1 million, ~~up 1.14%~~down 5.30% due in part to new fee ~~strategies; credit card fees increased $0.4 million, or 4.01%;~~strategies implemented in the second quarter of 2006; loan sales and servicing income was ~~$5.4,~~$1.9, a decrease of $0.9 million, primarily attributable to the continued slow down in mortgage originations; bank owned life insurance income was down $2.0 million due to $2.75 million death proceeds received in the second quarter of 2006; investment services and insurance fees increased $0.1 million, or 3.06%; there were no significant sales of investment securities during the second quarter of 2007 or 2006; and other operating income was up $0.2 million, or 6.01%.

The primary changes in other income for the six months ended June 30, 2007 as compared to the six months ended June 30, 2006, were as follows: trust department income was up $0.6 million, or 4.97%; credit card fees increased $0.7 million, or 2.99%; service charges on deposit accounts totaled $33.3 million, down 2.27% due in part to new fee strategies implemented in the second quarter of 2006; loan sales and servicing income was $7.3 million, an increase of ~~$4.0~~$3.1 million, primarily attributable to the $4.1 million gain on sale from the commercial loan sale which occurred during the first quarter 2007; investment services and insurance fees decreased $0.1 million, or ~~5.54%~~1.26%; there were no significant sales of investment securities during the first quarter of 2007 or 2006; and other operating income was down ~~$1.3~~$1.1 million ~~or 42.13%~~ primarily due to losses ~~that were~~ incurred on the sale of other real estate during the first quarter of 2007 and gains on venture capital and ~~the sale of~~ other real estate sales that occurred in the first quarter of 2006.

A significant component of loan sales and servicing income is the income derived from mortgage servicing activities. The following is a summary of changes in capitalized mortgage servicing rights (“MSRs”), net of accumulated amortization and valuation allowance, included in the unaudited consolidated balance sheets:

~~Mortgage Servicing Rights~~

Quarter ended Quarter ended Quarter ended Quarter ended Quarter ended
March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2007 2006 2006 2006 2006
Balance at beginning of period $ 19,575 19,777 20,025 19,945 19,971
Addition of mortgage servicing rights 477 593 524 814 723
Amortization (686 ) (795 ) (772 ) (734 ) (773 )
Changes in valuation allowance — — — — 24

Balance at end of period $ 19,366 19,575 19,777 20,025 19,945


	Quarter ended			Quarter ended			Quarter ended			Quarter ended			Quarter ended
	June 30,			March 31,			December 31,			September 30,			June 30,
(Dollars in thousands)	2007			2007			2006			2006			2006

Balance at beginning of period	$	19,366		$	19,575		$	19,777		$	20,025		$	19,945
Addition of mortgage servicing rights		674			477			593			524			814
Amortization		(653	)		(686	)		(795	)		(772	)		(734	)
Changes in valuation allowance		—			—			—			—			—

Balance at end of period	$	19,387		$	19,366		$	19,575		$	19,777		$	20,025

On a quarterly basis, the Corporation assesses its MSRs for impairment based on their current fair value. As required, the Corporation disaggregates its MSRs portfolio based on loan type and interest rate which are the predominant risk characteristics of the underlying loans. If any impairment results after current market assumptions are applied, the value of the servicing rights is reduced through the use of a valuation allowance. There was no valuation allowance at ~~March 31,~~June 30, 2007, December 31, 2006 and ~~March 31,~~June 30, 2006. The MSRs are amortized over the period of and in proportion to the estimated net servicing revenues.

These MSR balances represent the rights to service approximately $2.0 billion of mortgage loans for all periods at ~~March 31,~~June 30, 2007, December 31, 2006, and ~~March 31,~~June 30, 2006. The portfolio primarily consists of conventional mortgages.

The Corporation continues to focus upon non-interest income (fee income) as a means by which to diversify revenue.

Other Expenses

Other (non-interest) expenses totaled ~~$81.5~~$81.4 million for the ~~first~~second quarter 2007 compared to ~~$81.9~~$85.2 million for the same 2006 quarter, a decrease of ~~$0.4~~$3.8 million, or ~~0.46%~~4.51%. Other expenses totaled $162.9 million for the six months ended June 30, 2007 compared to $167.1 million for the six months ended June 30, 2006 quarter, a decrease of $4.2 million, or 2.52%.

For the three months ended ~~March 31,~~June 30, 2007, decreases in operating costs compared to the ~~first~~second quarter 2006 occurred as follows: salaries,wages, pension and employee benefits fell ~~$0.5~~$3.2 million, primarily due to the reduction of staff from the branch ~~restructurings;~~restructurings being realized in 2007 and the one time expense for the accelerated vesting of retirement eligible executives in the 2006 second quarter equity grants; bankcard, loan processing and other costs ~~decreased $1.6 million, primarily attributable to the corresponding decrease in loan sales and servicing income due the drop mortgage loan originations;~~increased $0.2 million; professional services increased ~~$2.1~~$0.8 million due in part to the consulting services necessary to remediate bank secrecy act issues; other operating expense decreased ~~$3.7~~$1.8 million primarily attributable to a ~~$1.3~~$1.1 million reduction in marketing expense and various other expense reductions due to the cost reduction strategy initiated during the fourth quarter of 2006.

For the six months ended June 30, 2007, decreases in operating costs compared to the first six months of 2006 occurred as follows: salaries,wages, pension and employee benefits fell $3.7 million, primarily due to the reduction of staff from the branch restructurings being realized in 2007 and the one time expense for the accelerated vesting of retirement eligible executives in

the 2006 second quarter equity grants; bankcard, loan processing and other costs increased $1.8 million, primarily attributable to the losses associated with credit card fraud; professional services increased $5.5 million due in part to the consulting services necessary to remediate bank secrecy act issues; other operating expense decreased $5.5 million primarily attributable to a $3.1 million reduction in marketing expense and various other expense reductions due to the cost reduction strategy initiated during the fourth quarter of 2006.

The efficiency ratio of 61.55% for ~~first~~second quarter 2007 ~~declined 78~~increased 16 basis points over the efficiency ratio of ~~60.77%~~61.39% recorded for the ~~first~~second quarter, 2006. The efficiency ratio for the three months ended ~~March 31,~~June 30, 2007 indicates 61.55 cents of operating costs were spent in order to generate each dollar of net revenue.

Federal Income Taxes

Federal income tax expense was ~~$13.7~~$11.9 million and ~~$13.4~~$11.8 million for the quarters ended ~~March 31,~~June 30, 2007 and 2006, respectively. The effective federal income tax rate for the ~~first~~second quarter 2007 was ~~30.4%~~28.53%, compared to ~~30.90%~~29.85% for the same quarter 2006. For the six months ended June 30, 2007 and 2006, respectively, the effective tax rate was 29.50% and 30.40%. Additional federal income tax information is contained in Note 11 (Federal Income Taxes) in the 2006 Form 10-K.

The Corporation adopted FIN 48 “Accounting for Uncertainty in Income Taxes” on January 1, 2007. Under FIN 48 a liability was created for any unrecognized tax benefits. This liability would have been included in the contractual obligations table in December 31, 2006 Form 10-K MD&A. Current liabilities related to FIN 48 for ~~March 31,~~June 30, 2007 are $2.0 million. It is the Corporation’s policy to accrue interest and penalties in accrued taxes and recognized in the consolidated statements of income and comprehensive income as income taxes. This was also the Corporation’s policy prior to the adoption of FIN 48.

FINANCIAL CONDITION

Investment Securities

The ~~March 31,~~June 30, 2007 amortized cost and market value of investment securities, including mortgage-backed securities, by average remaining term, are included in Note 3 (Investment Securities) to the unaudited consolidated financial statements included in this report.

These securities are purchased within an overall strategy to maximize future earnings, taking into account an acceptable level of interest rate risk. While the maturities of the mortgage and asset-backed securities are beyond five years, these instruments provide periodic principal payments and include securities with adjustable interest rates, reducing the interest rate risk associated with longer-term investments.

Allowance for Credit Losses

The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments.


	Quarter ended			Year Ended			Quarter ended			Quarter ended			Year Ended			Quarter ended
Allowance for Loan Losses	March 31,			December 31,			March 31,			June 30,			December 31,			June 30,
(In thousands)	2007			2006			2006
(In thousands)										2007			2006			2006
Allowance for loan losses-beginning of period	$	91,342			90,661			90,661		$	92,045		$	90,661		$	87,589
Provision for loan losses		4,210			76,112			6,106			9,967			76,112			13,159
Net charge-offs		(3,507	)		(52,342	)		(14,914	)		(7,580	)		(52,342	)		(18,038	)
Allowance related to loans held for sale/sold		—			(23,089	)		5,736			—			(23,089	)		5,017

Allowance for loan losses-end of period	$	92,045			91,342			87,589		$	94,432		$	91,342		$	87,727


Reserve for Unfunded Lending Commitments

Balance at beginning of period	$	6,294			6,072			6,072		$	6,746		$	6,072		$	5,853
Provision for credit losses		452			222			(219	)		(193	)		222			(137	)

Balance at end of period	$	6,746			6,294			5,853		$	6,553		$	6,294		$	5,716


Allowance for Credit Losses	$	98,791			97,636			93,442		$	100,985		$	97,636		$	93,443

Annualized net charge-offs and allowance related to loans held for sale/sold as a % of average loans		0.21	%		1.11	%		0.56	%		0.43	%		1.11	%		0.78	%

Annualized net charge-offs as a % of average loans		0.21	%		0.77	%		0.56	%		0.43	%		0.77	%		0.78	%


Allowance for loan losses:
As a percentage of loans outstanding		1.32	%		1.33	%		1.31	%		1.34	%		1.33	%		1.29	%

As a percentage of nonperforming loans		331.93	%		168.03	%		136.22	%		295.08	%		168.03	%		174.80	%

As a multiple of annualized net charge offs		6.47	X		1.75	X		2.35	X		3.11	X		1.75	X		1.68	X


Allowance for credit losses:
As a percentage of loans outstanding		1.42	%		1.42	%		1.40	%		1.43	%		1.42	%		1.37	%

As a percentage of nonperforming loans		356.26	%		179.60	%		145.32	%		315.56	%		179.60	%		186.19	%

As a multiple of annualized net charge offs and allowance related to loans held for sale		6.95	X		1.21	X		2.51	X		3.32	X		1.21	X		1.79	X

The allowance for credit losses increased ~~$1.2 million from December 31, 2006 to March 31, 2007, and increased $5.3~~$2.2 million from March 31, 2007 to ~~March 31, 2006.~~June 30, 2007, and increased $7.5 million from June 30, 2006 to June 30, 2007. The increase for both periods was attributable to additional reserves that were established to address identified risks associated with the slow down in the housing markets and the decline in residential and commercial real estate values. The following tables show the overall trend in increased credit quality for consumer loans and decreased credit quality for commercial loans by specific asset and risk categories.


	At March 31, 2007																At June 30, 2007
	Loan Type																Loan Type
	Commercial		Commercial R/E				Installment		Home Equity		Credit Card		Res Mortgage
Allowance for Loan Losses Components:	Loans		Loans		Leases		Loans		Loans		Loans		Loans		Total
Allowance for																	Commercial		Commercial R/E				Installment		Home Equity		Credit Card		Res Mortgage
Loan Losses Components:																	Loans		Loans		Leases		Loans		Loans		Loans		Loans		Total
(In thousands)
Individually Impaired Loan Component:
Loan balance	$	2,570		9,386		—		—		—		—		—		11,956	$	5,182	$	11,592	$	—	$	—	$	—	$	—	$	—	$	16,774
Allowance		916		581		—		—		—		—		—		1,497		1,923		1,961		—		—		—		—		—		3,884
Collective Loan Impairment Components:
Credit risk-graded loans
Grade 1 loan balance		29,110		2,771		3,549										35,430		26,422		201		3,751										30,374
Grade 1 allowance		75		2		11										88		71		1		12										84
Grade 2 loan balance		181,706		117,614		8,412										307,732		209,454		118,195		9,295										336,944
Grade 2 allowance		958		456		52										1,466		1,105		549		56										1,710
Grade 3 loan balance		411,436		358,167		33,958										803,561		450,814		395,098		30,280										876,192
Grade 3 allowance		2,210		1,993		214										4,417		2,367		2,770		183										5,320
Grade 4 loan balance		931,535		1,522,062		27,285										2,480,882		934,386		1,535,885		27,577										2,497,848
Grade 4 allowance		16,940		17,699		604										35,243		15,961		18,785		565										35,311
Grade 5 (Special Mention) loan balance		74,121		93,310		57										167,488		56,842		93,186		54										150,082
Grade 5 allowance		4,592		4,072		3										8,667		3,489		4,129		3										7,621
Grade 6 (Substandard) loan balance		39,337		26,522		1,752										67,611		41,334		19,653		83										61,070
Grade 6 allowance		5,422		2,761		217										8,400		6,051		2,109		11										8,171
Grade 7 (Doubtful) loan balance		384		94		—										478		559		140		—										699
Grade 7 allowance		127		13		—										140		160		18		—										178
Consumer loans based on payment status:
Current loan balances						1,279		1,612,565		706,657		133,580		575,502		3,029,583						705		1,629,548		709,097		137,341		561,590		3,038,281
Current loans allowance						5		13,880		2,962		3,222		4,195		24,264						2		13,340		3,677		3,246		4,326		24,591
30 days past due loan balance						76		10,764		2,509		1,799		7,260		22,408						80		8,109		1,598		1,458		10,962		22,207
30 days past due allowance						1		997		365		654		329		2,346						1		768		295		536		544		2,144
60 days past due loan balance						61		3,005		686		1,013		1,508		6,273						31		2,759		1,095		816		2,504		7,205
60 days past due allowance						2		809		248		588		214		1,861						1		769		483		481		405		2,139
90+ days past due loan balance						9		2,197		112		1,791		14,120		18,229						6		1,374		231		1,547		11,556		14,714
90+ days past due allowance						1		1,068		66		1,527		994		3,656						1		668		170		1,354		1,086		3,279

Total loans	$	1,670,199		2,129,926		76,438		1,628,531		709,964		138,183		598,390		6,951,631	$	1,724,993	$	2,173,950	$	71,862	$	1,641,790	$	712,021	$	141,162	$	586,612	$	7,052,390

Total Allowance for Loan Losses	$	31,240		27,577		1,110		16,754		3,641		5,991		5,732		92,045	$	31,127	$	30,322	$	835	$	15,545	$	4,625	$	5,617	$	6,361	$	94,432


	At December 31, 2006																At December 31, 2006
	Loan Type																Loan Type
	Commercial		Commercial R/E				Installment		Home Equity		Credit Card		Res Mortgage
Allowance for Loan Losses Components:	Loans		Loans		Leases		Loans		Loans		Loans		Loans		Total
Allowance for																	Commercial		Commercial R/E				Installment		Home Equity		Credit Card		Res Mortgage
Loan Losses Components:																	Loans		Loans		Leases		Loans		Loans		Loans		Loans		Total
(In thousands)
Individually Impaired Loan Component:
Loan balance	$	19,394		41,889		—		—		—		—		—		61,283	$	19,394	$	41,889	$	—	$	—	$	—	$	—	$	—	$	61,283
Allowance		973		515		—		—		—		—		—		1,488		973		515		—		—		—		—		—		1,488
Collective Loan Impairment Components:
Credit risk-graded loans
Grade 1 loan balance		28,350		2,789		3,526										34,665		28,350		2,789		3,526										34,665
Grade 1 allowance		82		2		12										96		82		2		12										96
Grade 2 loan balance		144,084		109,238		8,927										262,249		144,084		109,238		8,927										262,249
Grade 2 allowance		757		412		55										1,224		757		412		55										1,224
Grade 3 loan balance		377,713		366,903		33,115										777,731		377,713		366,903		33,115										777,731
Grade 3 allowance		2,235		1,902		229										4,366		2,235		1,902		229										4,366
Grade 4 loan balance		859,458		1,512,529		28,072										2,400,059		859,458		1,512,529		28,072										2,400,059
Grade 4 allowance		16,555		17,124		643										34,322		16,555		17,124		643										34,322
Grade 5 (Special Mention) loan balance		57,281		100,657		96										158,034		57,281		100,657		96										158,034
Grade 5 allowance		3,351		4,163		5										7,519		3,351		4,163		5										7,519
Grade 6 (Substandard) loan balance		42,771		30,604		2,196										75,571		42,771		30,604		2,196										75,571
Grade 6 allowance		5,598		3,118		257										8,973		5,598		3,118		257										8,973
Grade 7 (Doubtful) loan balance		442		19		—										461		442		19		—										461
Grade 7 allowance		150		3		—										153		150		3		—										153
Consumer loans based on payment status:
Current loan balances						1,802		1,600,560		728,302		142,598		576,927		3,050,189						1,802		1,600,560		728,302		142,598		576,927		3,050,189
Current loans allowance						6		15,058		2,499		3,578		3,201		24,342						6		15,058		2,499		3,578		3,201		24,342
30 days past due loan balance						171		13,165		2,084		1,977		11,813		29,210						171		13,165		2,084		1,977		11,813		29,210
30 days past due allowance						2		1,245		236		725		399		2,607						2		1,245		236		725		399		2,607
60 days past due loan balance						30		4,340		523		1,122		4,840		10,855						30		4,340		523		1,122		4,840		10,855
60 days past due allowance						1		1,180		150		660		524		2,515						1		1,180		150		660		524		2,515
90+ days past due loan balance						36		1,682		564		1,856		14,428		18,566						36		1,682		564		1,856		14,428		18,566
90+ days past due allowance						4		823		266		1,628		1,016		3,737						4		823		266		1,628		1,016		3,737

Total loans	$	1,529,493		2,164,628		77,971		1,619,747		731,473		147,553		608,008		6,878,873	$	1,529,493	$	2,164,628	$	77,971	$	1,619,747	$	731,473	$	147,553	$	608,008	$	6,878,873

Total Allowance for Loan Losses	$	29,701		27,239		1,214		18,306		3,151		6,591		5,140		91,342	$	29,701	$	27,239	$	1,214	$	18,306	$	3,151	$	6,591	$	5,140	$	91,342


	At March 31, 2006																At June 30, 2006
	Loan Type																Loan Type
	Commercial		Commercial R/E				Installment		Home Equity		Credit Card		Res Mortgage				Commercial		Commercial R/E				Installment		Home Equity		Credit Card			Res Mortgage
Allowance for Loan Losses Components:	Loans		Loans		Leases		Loans		Loans		Loans		Loans		Total		Loans		Loans		Leases		Loans		Loans		Loans			Loans		Total
(In thousands)
Individually Impaired Loan Component:
Loan balance	$	23,822		22,742				—		—		—		—		46,564	$	17,099	$	16,772	$	—	$	—	$	—	$	—		$	—	$	33,871
Allowance		8,338		2,194				—		—		—		—		10,532		4,773		2,650		—		—		—		—			—		7,423
Collective Loan Impairment Components:
Credit risk-graded loans
Grade 1 loan balance		18,654		1,525		—										20,179		18,140		2,558		—											20,698
Grade 1 allowance		76		2		—										78		74		4		—											78
Grade 2 loan balance		127,550		93,836		3,373										224,759		122,432		94,050		13,653											230,135
Grade 2 allowance		1,020		314		30										1,364		974		375		121											1,470
Grade 3 loan balance		292,279		325,591		8,198										626,068		333,361		359,740		17,110											710,211
Grade 3 allowance		2,008		1,449		209										3,666		2,645		1,742		142											4,529
Grade 4 loan balance		894,716		1,535,663		45,717										2,476,096		939,873		1,532,492		26,727											2,499,092
Grade 4 allowance		15,399		11,089		878										27,366		17,114		13,080		862											31,056
Grade 5 (Special Mention) loan balance		63,877		52,743		168										116,788		60,153		58,771		124											119,048
Grade 5 allowance		3,315		1,162		10										4,487		3,314		1,731		8											5,053
Grade 6 (Substandard) loan balance		56,843		52,220		2,901										111,964		53,004		50,664		2,573											106,241
Grade 6 allowance		6,335		2,833		360										9,528		5,950		3,157		320											9,427
Grade 7 (Doubtful) loan balance		582		325		—										907		317		261		—											578
Grade 7 allowance		183		31		—										214		121		39		—											160
Consumer loans based on payment status:
Current loan balances						5,015		1,492,098		768,903		131,267		599,300		2,996,583						3,683		1,547,435		760,963		132,392			591,280		3,035,753
Current loans allowance						66		16,820		2,283		3,663		947		23,779						34		16,026		1,689		3,566			893		22,208
30 days past due loan balance						261		12,218		1,992		2,143		10,661		27,275						204		8,847		1,545		1,708			11,544		23,848
30 days past due allowance						8		1,076		159		823		91		2,157						4		787		99		646			96		1,632
60 days past due loan balance						44		3,590		1,152		1,153		2,223		8,162						129		3,131		631		1,157			3,986		9,034
60 days past due allowance						5		928		254		717		60		1,964						12		809		107		710			115		1,753
90+ days past due loan balance						5		1,808		261		1,353		13,330		16,757						11		2,344		446		1,709	��		11,750		16,260
90+ days past due allowance						1		861		99		1,252		241		2,454						2		1,072		129		1,576			159		2,938

Total loans	$	1,478,323		2,084,645		65,682		1,509,714		772,308		135,916		625,514		6,672,102	$	1,544,379	$	2,115,308	$	64,214	$	1,561,757	$	763,585	$	136,966		$	618,560	$	6,804,769

Total Allowance for Loan Losses	$	36,674		19,074		1,567		19,685		2,795		6,455		1,339		87,589	$	34,965	$	22,778	$	1,505	$	18,694	$	2,024	$	6,498		$	1,263	$	87,727

Total charge-offs were ~~$9.4~~$10.6 million for the quarter ended ~~March 31,~~June 30 2007, down ~~$5.5~~$7.4 million, or ~~36.81%~~24.3%, from the year ago quarter. Criticized commercial assets (“individually impaired,” “special mention,” “substandard” and “doubtful”) decreased ~~$28.7~~$31.1 million and accounted for ~~6.30%~~5.71% of total commercial loans for the 2007 ~~first~~second quarter compared with criticized commercial asset levels of ~~7.47%~~6.93% at ~~March 31,~~June 30, 2006.

~~Installment~~Commercial charge-offs were down ~~$1.3~~$14.5 million ~~from~~over the prior year second quarter ~~reflecting~~primarily as a result of the ~~minimal negative residual impact from~~loan sale that occurred in the ~~October 2005 bankruptcy legislative change.~~first quarter 2007. Loans past due 90 days or more accruing interest were down ~~$1.7~~$4.7 million or ~~9.79%~~30.73% from the linked quarter ended December 31, 2006 and down ~~$3.4~~$5.9 million or ~~18.41%~~36.08% from year ago quarter ended ~~March 31,~~June 30, 2006 reflecting the favorable trends in the retail portfolio.

Loans

Total loans outstanding at ~~March 31,~~June 30, 2007 were ~~$7.0~~$7.1 billion compared to $6.9 billion at December 31, 2006 and ~~$6.7~~$6.8 billion at ~~March 31,~~June 30, 2006.

The commercial loan portfolio for the 2007 first quarter increased by ~~6.66%~~6.54% over the prior year ~~first~~second quarter, but continues to be impacted by lower demand for credit in the Corporation’s regions. While the Corporation originated ~~$58.6~~$83.9 million of mortgage loans in the ~~first~~second quarter 2007, compared to ~~$94.4~~$116.3 million in same quarter of 2006, and $380.8 million for the full year ended December 31, 2006, the majority of these loans were fixed rate mortgages which were sold with servicing rights retained. Further discussion of the Corporation’s loan mix strategy as well as changes in average balances for the quarter ended ~~March 31,~~June 30, 2007 compared to the quarter ended ~~March 31,~~June 30, 2006 can be found under the Net Interest Income sub-caption in this report.


	As of		As of		As of		As of		As of		As of
	March 31,		December 31,		March 31,		June 30,		December 31,		June 30,
(Dollars in thousands)	2007		2006		2006		2007		2006		2006

Commercial loans	$	3,800,125		3,694,121		3,562,968	$	3,898,943	$	3,694,121	$	3,659,687
Mortgage loans		598,390		608,008		625,514		586,612		608,008		618,560
Installment loans		1,628,531		1,619,747		1,509,714		1,641,790		1,619,747		1,561,757
Home equity loans		709,964		731,473		772,308		712,021		731,473		763,585
Credit card loans		138,183		147,553		135,916		141,162		147,553		136,966
Leases		76,438		77,971		65,682		71,862		77,971		64,214

Total Loans	$	6,951,631		6,878,873		6,672,102
Total loans							$	7,052,390	$	6,878,873	$	6,804,769

Expected cash flow and interest rate information for commercial loans is presented in the following table:


	As of		As of
	March 31, 2007		June 30, 2007
	(Dollars in thousands)		(Dollars in thousands)
Due in one year or less	$	1,692,099	$	1,782,255
Due after one year but within five years		1,745,403		1,721,036
Due after five years		362,623		395,652

Totals	$	3,800,125	$	3,898,943


Due after one year with a predetermined fixed interest rate	$	978,813	$	1,001,658
Due after one year with a floating interest rate		1,129,213		1,115,030

Totals	$	2,108,026	$	2,116,688

The Corporation has an interest rate hedge strategy in place that swaps fixed interest rate commercial real estate loans to a variable interest rate basis. At ~~March 31,~~June 30, 2007, ~~$534.3~~$556.2 million

of fixed rate commercial real estate loans were hedged. This strategy is more fully described in Footnote 8, Accounting for Derivatives, in these consolidated financial statements.

The following table summarizes the Corporation’s nonperforming assets:


	March 31,			December 31,			March 31,			June 30,			December 31,			June 30,
	2007			2006			2006			2007			2006			2006
	(Dollars in thousands)										(Dollars in thousands)
Nonperforming commercial loans	$	17,049			45,045			56,258		$	20,877		$	45,045		$	41,927
Other nonaccrual loans:		10,681			9,317			8,044			11,125			9,317			8,261

Total nonperforming loans		27,730			54,362			64,302			32,002			54,362			50,188
Other real estate (“ORE”)		4,934			9,815			8,639			5,036			9,815			8,598

Total nonperforming assets	$	32,664			64,177			72,941		$	37,038		$	64,177		$	58,786


Loans past due 90 day or more accruing interest	$	15,209			16,860			18,640		$	10,536		$	16,860		$	16,483

Total nonperforming assets as a percentage of total loans and ORE		0.47	%		0.93	%		1.09	%		0.52	%		0.93	%		0.86	%

The allowance for credit losses covers nonperforming loans by ~~356.26%~~315.56% at ~~March 31,~~June 30, 2007 compared to ~~145.32%~~186.19% at the end of the prior year quarter. This increase is primarily attributable to the decrease in nonperforming commercial loans. See Note 1 (Summary of Significant Accounting Policies) of the 2006 Form 10-K, as amended for a summary of the Corporation’s nonaccrual and charge-off policies.

The following table is a nonaccrual commercial loan flow analysis:


	Period End															Period End
(Dollars in thousands)	1Q07			4Q06			3Q06			2Q06			1Q06			2Q07			1Q07			4Q06			3Q06			2Q06

Nonaccrual commercial loans beginning of period	$	45,045			52,621			41,927			56,258			54,176		$	17,049		$	45,045		$	52,621		$	41,927		$	56,258

Credit Actions:
New		5,983			27,087			31,619			6,652			10,259			7,579			5,983			27,087			31,619			6,652
Loan and lease losses		—			(24,592	)		(4,006	)		(1,927	)		(3,385	)		—			—			(24,592	)		(4,006	)		(1,927	)
Charged down		(448	)		(3,616	)		(2,725	)		(5,079	)		(2,681	)		(1,055	)		(448	)		(3,616	)		(2,725	)		(5,079	)
Return to accruing status		—			(3,985	)		(773	)		(2,260	)		(368	)		—			—			(3,985	)		(773	)		(2,260	)
Payments and tranfers to ORE		(7,199	)		(2,470	)		(13,421	)		(2,864	)		(1,743	)		(142	)		(7,199	)		(2,470	)		(13,421	)		(2,864	)
Sales		(26,332	)		—			—			(8,853	)		—			(2,397	)		(26,332	)		—			—			(8,853	)

Nonaccrual commercial loans end of period	$	17,049			45,045			52,621			41,927			56,258		$	20,877		$	17,049		$	45,045		$	52,621		$	41,927

Nonaccrual commercial loans have decreased ~~$39.2~~$21.1 million from the second quarter of 2006 and increased $3.8 million from the first quarter of ~~2006 and decreased $28.0 million from the fourth quarter of 2006.~~2007. As reflected above, $26.3 million of nonaccrual loans were sold in March 2007.

Deposits

The following schedule illustrates the change in composition of the average balances of deposits and average rates paid for the noted periods:


																Quarter Ended					Year Ended					Quarter Ended
	Quarter Ended					Year Ended					Quarter Ended					June 30, 2007					December 31, 2006					June 30, 2006
	March 31, 2007					December 31, 2006					March 31, 2006					Average		Average			Average		Average			Average		Average
	Average		Average			Average		Average			Average		Average			Balance		Rate			Balance		Rate			Balance		Rate
	Balance		Rate			Balance		Rate			Balance		Rate			(Dollars in thousands)
	(Dollars in thousands)
Non-interest DDA	$	1,389,455		—			1,434,539		—			1,462,671		—		$	1,408,827		—		$	1,434,539		—		$	1,455,229		—
Interest-bearing DDA		756,678		1.03	%		818,735		1.13	%		848,209		1.13	%		763,907		0.99	%		818,735		1.13	%		865,563		1.20	%
Savings and money market accounts		2,284,549		2.49	%		2,271,654		2.20	%		2,292,865		1.90	%
Savings and money market																	2,293,567		2.45	%		2,271,654		2.20	%		2,280,657		2.12	%
CDs and other time deposits		3,051,287		4.80	%		2,859,218		4.33	%		2,709,764		3.91	%		3,048,904		4.83	%		2,859,218		4.33	%		2,824,580		4.16	%

Total customer deposits		7,481,969		2.82	%		7,384,146		2.48	%		7,313,509		2.17	%		7,515,205		2.81	%		7,384,146		2.48	%		7,426,029		2.38	%

Securities sold under agreements to repurchase		1,352,961		5.03	%		1,283,951		4.37	%		1,295,178		3.73	%		1,458,982		4.95	%		1,283,951		4.37	%		1,212,470		4.29	%
Wholesale borrowings		399,638		6.23	%		404,723		5.96	%		433,257		5.58	%		280,914		6.62	%		404,723		5.96	%		371,309		6.04	%

Total funds	$	9,234,568					9,072,820					9,041,944				$	9,255,101				$	9,072,820				$	9,009,808

Interest-bearing and non-interest-bearing demand deposits, on a combined basis, averaged ~~$2.1~~$2.2 billion during the 2007 ~~first~~second quarter, down ~~$164.7~~$148.1 million, or ~~7.13%~~6.38%, from the ~~first~~second quarter 2006. Savings deposits, including money market savings accounts, averaged $2.3 billion, ~~$8.3~~$12.9 million or ~~0.36% lower~~0.57% higher than the year ago quarter. The sum of demand and savings accounts, often referred to as “core deposits,” dropped ~~$173.1~~$135.1 million, or ~~3.76%~~2.94%, and represented ~~59.22%~~59.43% of total average deposits for the ~~first~~second quarter 2007, compared to ~~62.95%~~61.96% last year. The drop was attributable to intense competition for core deposits within the Corporation’s regional banking areas.

During the 2007 ~~first~~second quarter, the weighted-average yield paid on interest-bearing core deposits at ~~2.09%~~2.07% was 4221 basis points more than last year’s average core deposits rate. Average CDs, still the largest individual component of deposits, totaled ~~$3.1~~$3.0 billion for the ~~first~~second quarter, up ~~12.60%~~7.94% from the same quarter last year. Average rates paid on CDs rose 4750 basis points from 4.33% in the 2006 quarter to ~~4.80%~~4.83% this year. On a percentage basis, average CDs were ~~38.89%~~38.86% and ~~35.75%~~37.39%, respectively, of total interest-bearing funds for the ~~March 31,~~June 30, 2007 and 2006 quarters.

Securities sold under agreements to repurchase increased to ~~17.25%~~18.59% of interest-bearing funds during the three months ended ~~March 31,~~June 30, 2007 from ~~17.09%~~16.05% for the ~~March 31,~~June 30, 2006 quarter.

Interest-bearing liabilities funded ~~83.13%~~82.72% of average earning assets during the quarter ended ~~March 31,~~June 30, 2007 and ~~81.97%~~82.35% during the quarter ended ~~March 31,~~June 30, 2006. Wholesale funds decreased to ~~5.09%~~3.58% of interest-bearing funds during the ~~first~~second quarter 2007 from ~~5.72%~~4.92% in the year ago quarter. In summary, the decrease in average core deposits during the quarter compared to the same period in 2006 was partially offset by the decrease in higher rate wholesale borrowings.

The funding mix from higher priced wholesale borrowings towards less expensive CDs has helped to mitigate the effect of the flat yield curve and support the net interest margin.

The following table summarizes scheduled maturities of CDs of $100 thousand or more (“Jumbo CDs”) that were outstanding as of ~~March 31,~~June 30, 2007:


Maturing in:			Amount
			(In thousands)
	Amount
Maturing in:	(In thousands)
Under 3 months	$	652,562	$	472,878
3 to 6 months		324,573		216,604
6 to 12 months		213,563		137,797
Over 1 year through 3 years		121,080		65,577
Over 3 years		20,778		15,059

	$	1,332,556	$	907,915

Market Risk

Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices and commodity prices, including the correlation among these factors and their volatility. The Corporation is primarily exposed to interest rate risk as a result of offering a wide array of financial products to its customers.

Changes in market interest rates may result in changes in the fair market value of the Corporation’s financial instruments, cash flows, and net interest income. The Corporation seeks to achieve consistent growth in net interest income and capital while managing volatility arising from shifts in market interest rates. The Asset and Liability Committee (“ALCO”) oversees market risk management, establishing risk measures, limits, and policy guidelines for managing the amount of interest rate risk and its effect on net interest income and capital. According to these policies, responsibility for measuring and the management of interest rate risk resides in the Corporate Treasury function.

Interest rate risk on the Corporation’s consolidated balance sheets consists of reprice, option, and basis risks. Reprice risk results from differences in the maturity, or repricing, of asset and liability portfolios. Option risk arises from “embedded options” present in many financial instruments such as loan prepayment options, deposit early withdrawal options and interest rate options. These options allow customers opportunities to benefit when market interest rates change, which typically results in higher net revenue for the Corporation. Basis risk refers to the potential for changes in the underlying relationship between market rates or indices, which subsequently result in a narrowing of profit spread on an earning asset or liability. Basis risk is also present in administered rate liabilities, such as interest-bearing checking

accounts, savings accounts and money market accounts where historical pricing relationships to market rates may change due to the level or directional change in market interest rates.

The interest rate risk position is measured and monitored using risk management tools, including earnings simulation modeling and economic value of equity sensitivity analysis, which capture both near-term and long-term interest rate risk exposures. Combining the results from

these separate risk measurement processes allows a reasonably comprehensive view of short-term and long-term interest rate risk in the Corporation.

Earnings simulation involves forecasting net interest earnings under a variety of scenarios, including changes in the level of interest rates, the shape of the yield curve, and spreads between market interest rates. The sensitivity of net interest income to changes in interest rates is measured using numerous interest rate scenarios, including shocks, gradual ramps, curve flattening, curve steepening and forecasts of likely interest rate scenarios. Presented below is the Corporation’s interest rate risk profile as of ~~March 31,~~June 30, 2007 and 2006:

Immediate Change in Rates and Resulting Percentage Increase/(Decrease) in Net Interest Income:

-200 basis points -100 basis points +100 basis points +200 basis points
March 31, 2007 (2.77 %) (0.94 %) 0.04 % (0.15 %)
March 31, 2006 (4.08 %) (1.14 %) (0.36 %) (1.00 %)


	-200 basis points			-100 basis points			+100 basis points			+200 basis points

June 30, 2007		(1.83	%)		(0.45	%)		0.15	%		0.05	%
June 30, 2006		(1.89	%)		0.08	%		0.07	%		(0.05	%)

Modeling the sensitivity of net interest earnings to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process. To the extent that actual performance is different than what was assumed, actual net interest earnings sensitivity may be different than projected. The assumptions used in the models are management’s best estimate based on studies conducted by ALCO. ALCO uses a data-warehouse to study interest rate risk at a transactional level and uses various ad-hoc reports to refine assumptions continuously. Assumptions and methodologies regarding administered rate liabilities (e.g., savings, money market and interest-bearing checking accounts), balance trends, and repricing relationships reflect management’s best estimate of expected behavior, and these assumptions are reviewed regularly.

The Corporation also has longer-term interest rate risk exposure, which may not be appropriately measured by earnings sensitivity analysis. ALCO uses economic value of equity, or EVE, sensitivity analysis to study the impact of long-term cash flows on earnings and capital. Economic value of equity involves discounting present values of all cash flows on the balance sheet and off balance sheet items under different interest rate scenarios. The discounted present value of all cash flows represents the Corporation’s economic value of equity. The analysis requires modifying the expected cash flows in each interest rate scenario, which will impact the discounted present value. The amount of base-case measurement and its sensitivity to shifts in the yield curve allow management to measure longer-term repricing and option risk in the balance sheet. Presented below is the Corporation’s EVE profile as of ~~March 31,~~June 30, 2007 and 2006:

Immediate Change in Rates and Resulting Percentage Increase/(Decrease) in EVE:

-200 basis points -100 basis points +100 basis points +200 basis points
March 31, 2007 (10.58 %) (3.48 %) (0.03 %) (1.34 %)
March 31, 2006 (7.08 %) (1.22 %) 0.22 % (0.70 %)


	-200 basis points			-100 basis points			+100 basis points			+200 basis points

June 30, 2007		(8.56	%)		(2.46	%)		(0.30	%)		(1.94	%)
June 30, 2006		(6.44	%)		(1.20	%)		2.37	%		1.84	%

Capital Resources

Shareholders’ equity at ~~March 31,~~June 30, 2007 totaled ~~$863.6~~$862.3 million compared to $846.1 million at December 31, 2006 and ~~$870.6~~$870.7 million at ~~March 31,~~June 30, 2006.

The following table reflects the various measures of capital:


	March 31,				December 31,				March 31,				June 30,				December 31,				June 30,
	2007				2006				2006				2007				2006				2006
	(Dollars in thousands)																(Dollars in thousands)
Consolidated
Total equity	$	863,641	8.35	%		846,111	8.25	%		870,552	8.62	%	$	862,265	8.27	%	$	846,111	8.25	%	$	870,698	8.49	%
Common equity		863,641	8.35	%		846,111	8.25	%		870,552	8.62	%		862,265	8.27	%		846,111	8.25	%		870,698	8.49	%
Tangible common equity (a)		721,752	7.07	%		704,001	6.96	%		727,774	7.31	%		720,598	7.00	%		704,001	6.96	%		728,142	7.20	%
Tier 1 capital (b)		814,530	10.25	%		804,959	10.07	%		802,619	9.89	%		824,121	10.12	%		804,959	10.07	%		811,605	9.91	%
Total risk-based capital (c)		975,098	12.27	%		993,716	12.44	%		1,017,051	12.53	%		986,341	12.12	%		993,716	12.44	%		995,630	12.15	%
Leverage (d)		814,530	8.00	%		804,959	7.95	%		802,619	8.00	%	$	824,121	8.07	%	$	804,959	7.95	%	$	811,605	8.13	%

Bank Only
Total equity	$	724,564	7.01	%		704,047	6.87	%		707,544	7.01	%	$	720,421	6.91	%	$	704,047	6.87	%	$	706,647	6.90	%
Common equity		724,564	7.01	%		704,047	6.87	%		707,544	7.01	%		720,421	6.91	%		704,047	6.87	%		706,647	6.90	%
Tangible common equity (a)		582,675	5.72	%		561,937	5.56	%		564,766	5.68	%		578,754	5.63	%		561,937	5.56	%		564,091	5.58	%
Tier 1 capital (b)		765,795	9.65	%		750,912	9.41	%		728,795	9.00	%		770,146	9.47	%		750,912	9.41	%		736,787	9.01	%
Total risk-based capital (c)		923,391	11.64	%		936,720	11.74	%		940,498	11.61	%		929,321	11.43	%		936,720	11.74	%		918,006	11.22	%
Leverage (d)	$	765,795	7.53	%		750,912	7.42	%		728,795	7.28	%	$	770,146	7.55	%	$	750,912	7.42	%	$	736,787	7.39	%


(a)		Common equity less all intangibles; computed as a ratio to total assets less intangible assets.

(b)		Shareholders’ equity minus net unrealized holding gains on equity securities, plus or minus net unrealized holding losses or gains on available-for-sale debt securities, less goodwill; computed as a ratio to risk-adjusted assets, as defined in the 1992 risk-based capital guidelines.

(c)		Tier 1 capital plus qualifying loan loss allowance, computed as a ratio to risk-adjusted assets, as defined in the 1992 risk-based capital guidelines.

(d)		Tier 1 capital; computed as a ratio to the latest quarter’s average assets less goodwill.

The risk-based capital guidelines issued by the Federal Reserve Bank in 1988 require banks to maintain adequate capital equal to 8% of risk-adjusted assets effective December 31,

1993. At ~~March 31,~~June 30, 2007, the Corporation’s risk-based capital equaled ~~12.27%~~12.12% of risk-adjusted assets, exceeding minimum guidelines.

The cash dividend of $0.29 per share paid in the ~~first~~second quarter has an indicated annual rate of $1.16 per share.

Liquidity Risk Management

Liquidity risk is the possibility of the Corporation being unable to meet current and future financial obligations in a timely manner. Liquidity is managed to ensure stable, reliable and cost-effective sources of funds to satisfy demand for credit, deposit withdrawals and investment opportunities. The Corporation considers core earnings, strong capital ratios and credit quality essential for maintaining high credit ratings, which allow the Corporation cost-effective access to market-based liquidity. The Corporation relies on a large, stable core deposit base and a diversified base of wholesale funding sources to manage liquidity risk.

The Treasury Group is responsible for identifying, measuring and monitoring the Corporation’s liquidity profile. The position is evaluated daily, weekly and monthly by analyzing the composition of all funding sources, reviewing projected liquidity commitments by future month and identifying sources and uses of funds. The Treasury Group also prepares a contingency funding plan that details the potential erosion of funds in the event of a systemic financial market crisis or institutional-specific stress. In addition, the overall management of the Corporation’s liquidity position is integrated into retail deposit pricing policies to ensure a stable core deposit base.

The Corporation’s primary source of liquidity is its core deposit base, raised through its retail branch system, along with unencumbered, or unpledged, investment securities. The Corporation also has available unused wholesale sources of liquidity, including advances from the Federal Home Loan Bank of Cincinnati, issuance through dealers in the capital markets and access to certificates of deposit issued through brokers. Liquidity is also provided by unencumbered, or unpledged, investment securities that totaled ~~$439.4~~$582.2 million at ~~March 31,~~June 30, 2007.

Funding Trends for the Quarter-During the three months ended ~~March 31,~~June 30, 2007, total average deposits increased ~~$41.6~~$33.2 million from the previous quarter and ~~$47.3~~$118.7 million of higher rate wholesale borrowings were repaid.

Parent Company Liquidity — The Corporation manages its liquidity principally through dividends from the bank subsidiary. During the quarter ended ~~March 31,~~June, 2007, FirstMerit Bank paid ~~$20.0~~$24.0 million in dividends to FirstMerit Corporation. As of ~~March 31,~~June 30, 2007, FirstMerit Bank had an additional ~~$34.6~~$40.5 million available to pay dividends without regulatory approval.

Critical Accounting Policies

The accounting and reporting policies of the Corporation are in accordance with accounting principles generally accepted within the United States of America and conform to general practices within the banking industry. Accounting and reporting policies for the

allowance for loan losses, income taxes, mortgage servicing rights, derivative instruments and hedging activities, and pension and postretirement benefits are deemed critical since they involve the use of estimates and require significant management judgments. Application of assumptions different than those used by management could result in material changes in the Corporation’s financial position or results of operations. Note 1 (Summary of Significant Accounting Policies) and Note 4 (Allowance for Loan Losses), as described in the 2006 Form 10-K, provide detail with regard to the Corporation’s methodology and reporting of the allowance for loan losses.

Additional information for income tax accounting is contained within Note 1, as well as in Note 11 (Federal Income Taxes) as described in the 2006 Form 10-K. Accounting for mortgage servicing rights was also discussed in the 2006 Form 10-K in Note 1 and Note 6 (Mortgage Servicing Rights and Mortgage Servicing Activity). Derivative instruments and hedging activities are described more fully in Note 9 (Accounting for Derivatives) in these consolidated financial statements, as well as Note 1, Note 16 (Fair Value Disclosure of Financial Instruments), and Note 17 (Financial Instruments with Off-Balance-Sheet Risk) of the 2006 Form 10-K. A description of the plans and the assumptions used to estimate the liabilities for pension and postretirement benefits is described in Note 12 (Benefit Plans) to the 2006 Form 10-K as well as Note 10 (Benefit Plans) in the consolidated financial statements included in this report.

Off-Balance Sheet Arrangements

A detailed discussion of the Corporation’s off-balance sheet arrangements, including swaps, hedges, forward swap agreements, IRLCs, TBA securities, options and swaptions is included in Note 8 (Accounting for Derivatives) to the consolidated financial statements included in this report and in Note 17 to the 2006 Form 10-K. There have been no significant changes since December 31, 2006.

Forward-looking Safe-harbor Statement

The Corporation cautions that any forward-looking statements contained in this report, in a report incorporated by reference to this report or made by management of the Corporation, involve risks and uncertainties and are subject to change based upon various factors. Actual results could differ materially from those expressed or implied. Reference is made to the section titled “Forward-looking Statements” in the Corporation’s 2006 Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Market Risk Section in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 4. CONTROLS AND PROCEDURES

Management, including the Corporation’s Chief Executive Officer and Chief Financial Officer, has made an evaluation of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.

During the period covered by the report, there was no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer have concluded, as of the end of the period covered by this report, that the Corporation’s disclosure controls and procedures are effective.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, the Corporation is at all times subject to pending and threatened legal actions, some for which the relief or damages sought are substantial. Although the Corporation is not able to predict the outcome of such actions, after reviewing pending and threatened actions with counsel, ~~management~~Management believes that the outcome of any or all such actions will not have a material adverse effect on the results of operations or shareholders’ equity of the Corporation.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those disclosed in our 2006 Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Not applicable.

(b) Not applicable.

(c) The following table provides information with respect to purchases the Corporation made of its common shares during the ~~first~~second quarter of the 2007 fiscal year:

Total Number of Maximum
Shares Purchased Number of Shares
as Part of Publicly that May Yet be
Total Number of Average Price Announced Plans Purchased Under
Shares Purchased Paid per Share or Programs (1) Plans or Programs
Balance as of December 31, 2006:
396,272

January 1, 2007 - January 31, 2007 130 $ 24.14 — 396,272
February 1, 2007 - February 28, 2007 207 22.52 — 396,272
March 1, 2007 - March 31, 2007 26,674 24.32 — 396,272

Balance as of March 31, 2007:
27,011 $ 24.30 0 396,272


					Total Number of		Maximum
					Shares Purchased		Number of Shares
					as Part of Publicly		that May Yet Be
	Total Number of		Average Price		Announced Plans		Purchased Under
	Shares Purchased		Paid per Share		or Programs (1)		Plans or Programs

Balance as of March 31, 2007								396,272

April 1, 2007 - April 30, 2007		16,182	$	20.86		—		396,272
May 1, 2007 - May 31, 2007		8,371		24.38		—		396,272
June 1, 2007 - June 30, 2007		11,606		21.90		—		396,272

Balance as of June 30, 2007:		36,159	$	22.01		0		396,272


(1)		On January 19, 2006, the Board of Directors authorized the repurchase of up to 3 million shares (the “New Repurchase Plan”). The New Repurchase Plan, which has no expiration date, superseded all other repurchase programs, including that authorized by the Board of Directors on July 15, 2004


		~~(the~~ (the “Prior Repurchase Plan”). The Corporation had purchased all of the shares it was authorized to acquire under the Prior Repurchase Plan.


(2)		~~27,011~~36,159 of these common shares were either: (1) delivered by the option holder with respect to the exercise of stock options; (2) in the case of restricted shares of common stock, shares were withheld to pay income taxes or other tax liabilities with respect to the vesting of restricted shares; or (3) shares were returned upon the resignation of the restricted shareholder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

~~None~~(a) The Corporation held its Annual Meeting of Shareholders on April 18, 2007, for which the Board of Directors solicited proxies.

(b) Four Class I Directors were elected at the Annual Meeting for terms expiring at the 2010 Annual Meeting of Shareholders, with the following voting results:


				Authority
	For		Against	Withheld

Richard Colella		58,887,816	*		10,391,458
R J. Michael Hochschwender		60,000,246	*		9,279,028

Phillip A. Lloyd, II		59,015,263	*		10,264,011
Richard N. Seaman		59,987,320	*		9,291,954


*		Proxies provide that shareholders may either cast a vote for, or abstain from voting for, directors.

Continuing Class II Directors serving until the 2008 Annual Meeting of Shareholders are Karen S. Belden, R. Cary Blair, Robert W. Briggs and Clifford J. Isroff.

Continuing Class III Directors serving until the 2009 Annual Meeting of Shareholders are John C. Blickle, Gina D. France, Paul G. Greig and Terry L. Haines.

(1) Amendment of Article X of Amended and Restated Code of Regulations:


Votes For	Votes Against	Abstentions

60,661,457	8,029,882	587,926

(2) Ratification of the selection of Ernst & Young LLP as independent registered public

accountants of the Corporation for the year ending December 31, 2007:


Votes For	Votes Against	Abstentions
68,309,864	688,744	276,799

(3) Amendment of Article Seventh of Amended and Restated Articles of Incorporation:


Votes For	Votes Against	Abstentions
66,622,522	1,975,392	681,351

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a)Exhibits


Exhibit
Number

3.1		Second Amended and Restated Articles of Incorporation of FirstMerit ~~Corporation, as amended (incorporated by reference from Exhibit 3.1 to the Form 10-K/A filed by the Registrant on April 29, 1999.)~~Corporation.

3.2		Second Amended and Restated Code of Regulations of FirstMerit ~~Corporation (incorporated by reference from Exhibit 3(b) to the Form 8-K filed by the registrant on April 9, 1998)~~

~~10.1~~		~~Retirement Agreement with Robert P. Brecht (incorporated by reference from Exhibit 10.39 to the Form 10-K filed by the Registrant on February 28, 2007).~~Corporation.

31.1		Rule 13a-14(a)/Section 302 Certification of Paul G. Greig, Chief Executive Officer of FirstMerit Corporation

31.2		Rule 13a-14(a)/Section 302 Certification of Terrence E. Bichsel, Executive Vice President and Chief Financial Officer of FirstMerit Corporation

32.1		Rule 13a-14(b)/Section 906 Certifications of Paul G. Greig, Chief Executive Officer of FirstMerit Corporation, and Terrence E. Bichsel, Executive Vice President and Chief Financial Officer of FirstMerit Corporation

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	FIRSTMERIT CORPORATION		~~FIRSTMERIT CORPORATION~~
	By:	/s/ TERRENCE E. BICHSEL
					Terrence E. Bichsel, Executive Vice President
		~~By:~~		~~/s/ TERRENCE E. BICHSEL~~
			~~Terrence E. Bichsel, Executive Vice President~~ and Chief Financial Officer
			~~(duly~~ (duly authorized officer of registrant and principal financial officer)

~~Date: May 3, 2007~~

Date: August 3, 2007


										FirstMerit
March 31, 2007	Commerical		Retail		Wealth		Other			Consolidated
OPERATIONS (thousands) :
Net interest income	$	36,675		47,881		4,473		(7,023	)		82,006
Provision for loan losses		4,842		1,824		648		(3,104	)		4,210
Other income		13,355		24,709		8,486		2,326			48,876
Other expenses		20,917		49,136		8,997		2,476			81,526
Net income		15,778		14,059		2,154		(570	)		31,421
AVERAGES (millions) :
Assets	$	3,708,447		3,018,319		343,791		3,205,684			10,276,241
Loans		3,695,244		2,859,872		343,064		20,456			6,918,636
Earnings assets		3,765,170		2,909,330		343,332		2,419,586			9,437,418
Deposits		1,874,705		4,756,877		432,496		417,891			7,481,969
Shareholders’ equity		248,149		196,020		47,340		363,204			854,713