Fitch Affirms FirstMerit's Ratings; Assigns 'BBB+' Sub Debt Rtg to Bank Sub.

Business Editors

NEW YORK--(BUSINESS WIRE)--Jan. 27, 2003

Fitch Ratings has affirmed the ratings of FirstMerit Corporation (FMER) and its principal banking subsidiary, FirstMerit Bank, NA (the Bank). Additionally, Fitch Ratings has assigned a subordinated debt rating of 'BBB+' to the Bank. The affirmation and assignment is reflective of the company maintaining its solid earnings performance while reducing its risk profile. A complete list of FMER's ratings is listed below.

FMER's earnings remain healthy despite the negative impact of higher loan loss provisioning. FMER's financial profile is anchored by its sizable commercial and consumer loan portfolios and material core-deposit base, both of which contribute to a solid NIM, one of the key drivers of its performance. Nonetheless, it should be noted that a continuation of lower interest rates could prolong recent NIM pressure, as the company's balance sheet is slightly asset sensitive.

Asset quality is viewed as sound despite higher charge-offs and NPAs, which are mostly attributable to a few problematic loan types, namely manufactured housing, indirect auto, and modestly sized C&I loans (predominantly capital goods manufacturers and commercial printers). Nonetheless, FMER has taken steps to improve the risk profile of its loan book by running off exposures to higher risk manufactured housing loans and auto leases. Additionally, the company has taken steps to improve risk management and credit oversight, through the addition of key personnel, tightening of underwriting standards and centralization of certain consumer underwriting functions. However, notably, FMER's portfolio still contains some exposure to the afore-mentioned problematic areas, which could continue to cause some moderate volatility in credit quality over the near to intermediate term. That said, reserve coverage is adequate.

Regulatory capital levels have been trending upward and are considered sound. Further, we would expect this capital trend to continue and would not anticipate FMER to leverage its balance sheet or aggressively pursue its common stock buyback program. The current capital mix includes relatively minimal levels of common equity substitutes.

FirstMerit Corporation

--Short-term 'F1';

--Long-term 'A-';

--Individual 'B';

--Support '5';

--Long-term Rating Outlook Stable.

FirstMerit Bank, NA

--Long-term 'A-';

--Short-term 'F1';

--Short-term deposit 'F1';

--Long-term deposit 'A';

--Subordinated 'BBB+';

--Individual 'B';

--Support '5';

--Long-term Rating Outlook Stable.