SUMMARY

This summary highlights the material information from this document. It may not contain all of the information that is important to you. FirstMerit and Citizens urge you to carefully read the entire document and the other documents to which you are referred in order to fully understand the merger and the related transactions, including the risk factors set forth on page 15. See “Where You Can Find More Information” on page 267. Each item in this summary refers to the page of this document on which that subject is discussed in more detail. FirstMerit and Citizens have included page references parenthetically to direct you to a more complete description of the topics presented in this summary.

In the Merger, Citizens Shareholders Will Have a Right to Receive 1.37 shares of FirstMerit Common Stock (page 107)

FirstMerit and Citizens are proposing the merger of Citizens and FirstMerit. If the merger is completed, Citizens will merge with and into FirstMerit, with FirstMerit being the surviving corporation and Citizens common stock will no longer be publicly traded. Under the terms of the merger agreement, holders of Citizens common stock will have a right to receive 1.37 shares of FirstMerit common stock for each share of Citizens common stock held immediately prior to the merger. FirstMerit will not issue any fractional shares of FirstMerit common stock in the merger. Instead, a holder of Citizens common stock who otherwise would have received a fraction of a share of FirstMerit common stock will receive an amount in cash rounded to the nearest cent. This cash amount will be determined by multiplying the fractional share interest of FirstMerit common stock to which the holder would otherwise be entitled by the aggregate volume weighted average per share price, rounded to two decimal points, of FirstMerit common stock on the Nasdaq as reported by Bloomberg L.P. for the twenty consecutive business days in which shares are traded on the Nasdaq in the period immediately preceding the third business day before the date of the closing of the merger.

Example: If you hold 150 shares of Citizens common stock, you will have a right to receive 205 shares of FirstMerit common stock and a cash payment instead of the 0.5 of a share of FirstMerit common stock that you otherwise would have received.

The merger agreement between FirstMerit and Citizens governs the merger. The merger agreement is included in this document as Appendix A. Please read the merger agreement carefully. All descriptions in this summary and elsewhere in this document of the terms and conditions of the merger are qualified by reference to the merger agreement.

What Holders of Citizens Stock Options, Restricted Shares, Restricted Stock Units and Other Equity-Based Awards Will Receive (page 107)

Upon completion of the merger, each outstanding option to acquire Citizens common stock granted under any Citizens equity plan will convert automatically into an option to purchase a number of shares of FirstMerit common stock equal to the number of shares of Citizens common stock underlying such Citizens stock option immediately prior to the merger multiplied by the exchange ratio (rounded to the nearest whole share), with an exercise price that equals the exercise price of such Citizens stock option or similar right immediately prior to the merger divided by the exchange ratio (rounded to the nearest cent) and otherwise on the same terms and conditions as were in effect immediately prior to the completion of the merger.

At the time of the merger each outstanding restricted stock unit of Citizens common stock, and each common stock equivalent unit denominated in shares of Citizens common stock, whether denominated as restricted stock, salary stock or retainer stock, will be converted automatically into a fully vested right to receive, on the same terms and conditions as were in effect immediately prior to the completion of the merger, a number of shares of FirstMerit common stock equal to the number of shares of Citizens common stock underlying such Citizens stock unit immediately prior to the merger multiplied by the exchange ratio (rounded to the nearest whole share).

 

Treatment of Citizens TARP Preferred Stock and TARP Warrant in the Merger (page 108)

On February 19, 2013, FirstMerit agreed with the United States Department of the Treasury (the “Treasury”) to purchase from the Treasury each share of Fixed Rate Cumulative Perpetual Preferred Stock Series A (the “Citizens TARP Preferred Stock”) issued and outstanding immediately prior to the merger’s effective time for an aggregate amount equal to (a) the aggregate liquidation preference of the Citizens TARP Preferred Stock plus (b) all accrued, cumulated and unpaid dividends owing by Citizens on the Citizens TARP Preferred Stock. The Treasury has granted to Citizens a proxy to vote all shares of the Citizens TARP Preferred Stock in favor of the merger, subject to a majority of Citizens’ common stock voting in favor of the merger. The purchase of all of the Citizens TARP Preferred Stock is subject to customary closing conditions, including prior Federal Reserve approval, which First Merit is seeking in connection with the Federal Reserve approvals needed for the merger. Unless purchased by Citizens or FirstMerit at or prior to the effective time of the merger, the outstanding warrant (the “Citizens TARP Warrant”) to purchase Citizens common stock, which was issued on December 12, 2008 to the Treasury will be converted into a warrant to purchase FirstMerit common stock, subject to appropriate adjustments to reflect the exchange ratio of 1.37.

The Merger is Intended to Be Tax-Free to Citizens Shareholders as to the Shares of FirstMerit Common Stock They Receive (page 103)

The merger is intended to be treated as a reorganization within the meaning of Section 368(a) of the Code, and it is a condition to the respective obligations of FirstMerit and Citizens to complete the merger that each of FirstMerit and Citizens receive legal opinions to that effect from their respective counsel. Accordingly, the merger generally will be tax-free to you for United States federal income tax purposes as to the shares of FirstMerit common stock you receive in the merger, except for any gain or loss that may result from the receipt of cash instead of fractional shares of FirstMerit common stock that you would otherwise be entitled to receive.

The United States federal income tax consequences described above may not apply to all holders of Citizens common stock. Your tax consequences will depend on your individual situation. Accordingly, you are strongly urged to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.

Accounting Treatment of Merger (page 103)

The merger will be accounted for by FirstMerit as a “purchase,” as that term is used under U.S. generally accepted accounting principles, for accounting and financial reporting purposes.

Comparative Market Prices and Share Information (page 106)

FirstMerit common stock is quoted on the Nasdaq under the symbol “FMER.” Citizens common stock is quoted on the Nasdaq under the symbol “CRBC.” The following table shows the closing sale prices of FirstMerit common stock and Citizens common stock as reported on the Nasdaq on September 12, 2012, the last trading day before FirstMerit and Citizens announced the merger, and on February 27, 2013, the last practicable trading day before the distribution of this document. This table also shows the implied value of the merger consideration proposed for each share of Citizens common stock, which was calculated by multiplying the closing price of FirstMerit common stock on those dates by the exchange ratio of 1.37.

 

		FirstMerit Common  Stock				Citizens Common  Stock				Implied Value of One Share of Citizens Common Stock
September 12, 2012		$	17.16			$	19.87			$	23.51
February 27, 2013		$	15.35			$	20.73			$	21.03

The market price of FirstMerit common stock and Citizens common stock will fluctuate prior to the merger and the market price of FirstMerit common stock will continue to fluctuate after the merger. Citizens shareholders

 

and FirstMerit shareholders are urged to obtain current market quotations for the shares prior to making any decision with respect to the merger.

RBC Capital Markets Has Provided an Opinion to the FirstMerit Board of Directors Regarding the Merger Consideration (page 84 and Appendix B)

On September 12, 2012, representatives of RBC Capital Markets (“RBCCM”) delivered RBCCM’s oral opinion, subsequently confirmed in writing, to FirstMerit’s board of directors, to the effect that, as of such date and based upon and subject to the factors and assumptions made, procedures followed, matters considered and limits of the review undertaken by RBCCM set forth therein, the exchange ratio provided for in the merger agreement was fair, from a financial point of view, to FirstMerit. The full text of RBCCM’s written opinion, dated as of September 12, 2012, sets forth, among other things, the factors and assumptions made, procedures followed, matters considered and limits of the review undertaken by RBCCM in connection with the opinion, a copy of which is attached as Appendix B to this joint proxy statement/prospectus. RBCCM provided its opinion for the information and assistance of FirstMerit’s board of directors in connection with the merger. All advice and opinions (written or oral) rendered by RBCCM were intended for the use and benefit of FirstMerit’s board of directors in connection with the board of directors’ consideration of the proposed merger.

Opinion of Citizens’ Financial Advisor (page 76 and Appendix C)

At the meeting of the Citizens board of directors on September 12, 2012, J.P. Morgan Securities LLC (“J.P. Morgan”) rendered its oral opinion to the board of directors (which was subsequently confirmed in writing by delivery of J.P. Morgan’s written opinion dated the same date) to the effect that, as of such date and based upon and subject to the various factors, assumptions and limitations set forth in its written opinion, the exchange ratio in the merger was fair, from a financial point of view, to the holders of Citizens common stock.

The full text of the written opinion of J.P. Morgan dated September 12, 2012, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limits on the review undertaken in rendering its opinion, is attached as Appendix C to this joint proxy statement/prospectus and is incorporated herein by reference. Citizens shareholders are urged to read this opinion carefully and in its entirety. J.P. Morgan’s written opinion is addressed to the board of directors of Citizens, is directed only to the exchange ratio in the merger and does not constitute a recommendation to any shareholder of Citizens or FirstMerit as to how such shareholder should vote with respect to the merger or any other matter.

The Citizens Board of Directors Recommends that Holders of Citizens Common Stock Vote “FOR” the Citizens Merger Proposal (page 44)

The Citizens board of directors believes that the merger is in the best interests of Citizens and its shareholders and has approved the merger agreement. The Citizens board of directors recommends that holders of Citizens common stock vote “FOR” the Citizens Merger Proposal. For the factors considered by Citizens’ board in deciding to approve the merger agreement, see “The Merger—Citizens’ Reasons for the Merger; Recommendation of the Citizens Board of Directors” beginning on page 71.

The Citizens Board of Directors Recommends that Holders of Citizens Common Stock Vote “FOR” the Citizens Merger-Related Compensation Proposal (page 44)

The Citizens board of directors believes that the compensation to be paid to Citizens’ named executive officers in connection with the merger is in the best interests of Citizens and its shareholders. Approval of this proposal is not a condition to the consummation of the merger and the vote on this proposal will not be binding on Citizens or FirstMerit. The Citizens board of directors recommends that holders of Citizens common stock vote “FOR”, on an advisory basis, the Citizens Merger-Related Compensation Proposal to approve the payment of the compensation to Citizens’ named executive officers in connection with the merger.

 

The FirstMerit Board of Directors Recommends that FirstMerit Shareholders Vote “FOR” the FirstMerit Merger Proposal (page 35)

The FirstMerit board of directors believes that the merger is in the best interests of FirstMerit and its shareholders and has adopted and approved the merger and the merger agreement. The FirstMerit board of directors recommends that FirstMerit shareholders vote “FOR” the FirstMerit Merger Proposal. For the factors considered by FirstMerit’s board in deciding to adopt and approve the merger agreement, see “The Merger— FirstMerit’s Reasons for the Merger; Recommendation of the FirstMerit Board of Directors” on page 75.

The FirstMerit Board of Directors Recommends that FirstMerit Shareholders Vote “FOR” the FirstMerit Stock Issuance Proposal (page 35)

The FirstMerit board of directors believes that the issuance of FirstMerit common stock is in the best interests of FirstMerit and its shareholders and has adopted and approved the issuance in accordance with the terms of the merger agreement. The FirstMerit board of directors recommends that FirstMerit shareholders vote “FOR” the FirstMerit Stock Issuance Proposal. For the factors considered by FirstMerit’s board in deciding to adopt and approve the issuance of FirstMerit common stock, see “The Merger—FirstMerit’s Reasons for the Merger; Recommendation of the FirstMerit Board of Directors” on page 75.

The FirstMerit Board of Directors Recommends that Holders of FirstMerit Common Stock Vote “FOR” the FirstMerit Merger-Related Compensation Proposal (page 36)

The FirstMerit board of directors believes that the compensation to be paid to FirstMerit named executive officers, if any, in connection with the merger is in the best interests of FirstMerit and its shareholders. Approval of this proposal is not a condition to the consummation of the merger and the vote on this proposal will not be binding on FirstMerit or Citizens. The FirstMerit board of directors recommends that holders of FirstMerit common stock vote “FOR”, on an advisory basis, the FirstMerit Merger-Related Compensation Proposal to approve the payment of the compensation to FirstMerit’s named executive officers in connection with the merger.

Citizens’ Directors and Executive Officers May Receive Additional Benefits from the Merger (page 97)

When considering the information contained in this joint proxy statement/prospectus, including the recommendation of Citizens’ board of directors to vote to approve the merger agreement, Citizens shareholders should be aware that Citizens’ executive officers and members of Citizens’ board of directors may have interests in the merger that are different from, or in addition to, those of Citizens shareholders generally. Citizens’ board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be approved by Citizens’ shareholders. For information concerning these interests, please see the discussion under the caption “The Merger—Interests of Certain Citizens Directors and Executive Officers in the Merger” on page 97.

FirstMerit’s Directors and Executive Officers May Receive Additional Benefits from the Merger (page 99)

When considering the information contained in this joint proxy statement/prospectus, including the recommendation of FirstMerit’s board of directors to vote to adopt the merger agreement, FirstMerit shareholders should be aware that FirstMerit’s executive officers and members of FirstMerit’s board of directors may have interests in the merger that are different from, or in addition to, those of FirstMerit shareholders generally. FirstMerit’s board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be approved by FirstMerit’s shareholders. For information concerning these interests, please see the discussion under the caption “The Merger—Interests of Certain FirstMerit Directors and Executive Officers in the Merger” on page 99.

 

Holders of Citizens Common Stock Do Not Have Dissenters’ Rights (page 96)

Dissenters’ rights are statutory rights that, if applicable, enable shareholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary transaction. Dissenters’ rights are available in only very limited circumstances under the Michigan Business Corporation Act (the “MBCA”). Under the MBCA, the holders of Citizens common stock are not entitled to dissenters’ rights in the merger because shares of Citizens common stock are listed on a national securities exchange. For more information, see “The Merger—Dissenters’ Rights” on page 96.

Holders of FirstMerit Common Stock Do Not Have Dissenters’ Rights (page 96)

Dissenters’ rights are statutory rights that, if applicable, enable shareholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary transaction. Under the Ohio Revised Code, shareholders are not entitled to relief as dissenting shareholders if the shares of the corporation for which the dissenting shareholder would otherwise be entitled to relief are listed on a national securities exchange as of the day immediately preceding the date on which the vote on the proposal is taken at the meeting of the shareholders and immediately following the effective time of the merger. Because FirstMerit common stock is listed on the Nasdaq, a national securities exchange, and because the proposed merger otherwise satisfies the foregoing requirements, holders of FirstMerit common stock will not be entitled to dissenters’ appraisal rights in the merger. For more information, see “The Merger—Dissenters’ Rights” on page 96.

Conditions That Must Be Satisfied or Waived for the Merger to Occur (page 120)

Currently, FirstMerit and Citizens expect to complete the merger during the second quarter of 2013. As more fully described in this document and in the merger agreement, the completion of the merger depends on a number of conditions being satisfied or, where legally permissible, waived. These conditions include, among others, receipt of the requisite approvals of each company’s common shareholders, receipt of the approval of the holder of the Citizens TARP Preferred Stock, the receipt of all required regulatory approvals, the effectiveness of the registration statement on Form S-4 of which this joint proxy statement/prospectus is a part and the absence of a stop order or proceedings initiated or threatened in writing by the SEC for that purpose, the absence of any order, decree, judgment, injunction or other ruling by a governmental authority which prevents or prohibits consummation of the merger, the purchase by FirstMerit of the Citizens TARP Preferred Stock, the accuracy of the representations and warranties of Citizens and FirstMerit as of the effective time of the merger, subject to, in most cases, applicable materiality qualifiers, and the receipt of legal opinions by each company regarding the United States federal income tax treatment of the merger.

FirstMerit and Citizens cannot be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

Termination of the Merger Agreement (page 122)

Citizens and FirstMerit may mutually agree to terminate the merger agreement before completing the merger, even after Citizens shareholder approval and/or FirstMerit shareholder approval, as long as the termination is approved by each of the Citizens and FirstMerit boards of directors.

The merger agreement may also be terminated and the merger abandoned at any time prior to the effective time by either party in the following circumstances:

 

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if the merger has not been completed on or before June 12, 2013; provided that such date shall be extended to September 12, 2013 under certain circumstances, unless the failure to complete the merger by that date is primarily due to the breach of the merger agreement by the party seeking to terminate the merger agreement;

 

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if there has been a final, non-appealable order, decree, ruling or other action permanently restraining or prohibiting the transactions contemplated by the merger agreement;

 

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if the requisite shareholder vote in connection with the merger agreement is not obtained at the FirstMerit shareholder meeting (or any adjournment or postponement thereof);

 

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if the requisite shareholder vote in connection with the merger agreement is not obtained at the Citizens shareholder meeting (or any adjournment or postponement thereof) or the requisite Citizens TARP Preferred Stock shareholder vote in connection with the merger agreement is not obtained;

 

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if prior to receipt of the other party’s shareholder approval, that other party, its board or any committee of its board (1) withdraws, or modifies or qualifies in a manner adverse to FirstMerit or Citizens, as applicable, or refuses to make, the recommendation that its shareholders approve the merger agreement or adopts, approves, recommends, endorses or otherwise declares advisable certain business combination proposals, (2) fails to oppose or recommends a third-party tender or exchange offer, (3) materially breaches its non-solicitation obligations under the merger agreement in any respect adverse to the non-breaching party, or (4) materially breaches its obligation to call, give notice of, convene and hold its special shareholders’ meeting;

 

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in order to enter into an agreement with respect to a third party superior proposal; or

 

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if there is a breach of the merger agreement that would result in the failure of any of the closing conditions and cannot or has not been cured by June 12, 2013 (or if extended, September 12, 2013).

Expenses and Termination Fees (page 123)

In general, each of FirstMerit and Citizens will be responsible for its own expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, subject to specific exceptions discussed in this document. Upon termination of the merger agreement under specified circumstances, FirstMerit or Citizens may be required to pay the other party a termination fee of $37.5 million and to reimburse its reasonable out of pocket expenses. See “The Merger Agreement—Termination Fee” beginning on page 123 for a complete discussion of the circumstances under which termination fees will be required to be paid.

Regulatory Approvals Required for the Merger (page 96)

Citizens and FirstMerit have agreed to use their reasonable best efforts to obtain all regulatory approvals, including all antitrust clearances, required to complete the transactions contemplated by the merger agreement. These approvals include approval from or notices to the Board of Governors of the Federal Reserve System, or the Federal Reserve, for the merger of FirstMerit and Citizens, and the Office of the Comptroller of the Currency, or the OCC, for approval of merging Citizens Bank with and into FirstMerit Bank. FirstMerit and Citizens have filed applications and notifications to obtain the required regulatory approvals. FirstMerit has already obtained the consent of the FDIC. Although FirstMerit and Citizens do not know of any reason why they cannot obtain the remaining regulatory approvals in a timely manner, they cannot be certain when or if they will obtain them.

FirstMerit Board of Directors Following Completion of the Merger (page 109)

Upon completion of the merger, the number of directors constituting FirstMerit’s board of directors will be increased by two, to 15 members, and two current directors of Citizens, who are yet to be determined, will be appointed to complete the larger board. Information about the current FirstMerit directors and executive officers can be found in the documents under the heading “FirstMerit SEC Filings” in the section entitled “Where You Can Find More Information” on page 267.

The Rights of Citizens Shareholders Will Change as a Result of the Merger (page 188)

The rights of Citizens shareholders are governed by Michigan law, as well as the Citizens amended and restated articles of incorporation, as amended (which are referred to as the Citizens restated articles), and the Citizens

 

bylaws. After completion of the merger, the rights of former Citizens shareholders who receive FirstMerit common stock in the merger will be governed by Ohio law and FirstMerit’s second amended and restated articles of incorporation, as amended (which are referred to as the FirstMerit articles of incorporation) and the FirstMerit second amended and restated code of regulations (which are referred to as the FirstMerit regulations). This document contains descriptions of the material differences in shareholder rights under the heading “Comparison of Shareholders’ Rights” beginning on page 188.

FirstMerit Will Hold its Annual Meeting on April 5, 2013 (page 32)

The FirstMerit annual meeting will be held on April 5, 2013, at 10:00 a.m., local time, at FirstMerit Tower, 7th Floor, 106 South Main Street, Akron, Ohio 44308. At the annual meeting, FirstMerit shareholders will be asked to:

 

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adopt the merger agreement as such agreement may be amended from time to time (the “FirstMerit Merger Proposal”);

 

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approve the issuance of the shares of FirstMerit common stock to Citizens shareholders pursuant to the merger agreement (the “FirstMerit Stock Issuance Proposal”);

 

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approve, on an advisory basis only, the payment of certain compensation to FirstMerit’s named executive officers in connection with the merger (the “FirstMerit Merger-Related Compensation Proposal”);

 

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approve the adjournment of the annual meeting, on one or more occasions, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of the annual meeting to approve the foregoing proposal (the “FirstMerit Adjournment Proposal”);

 

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adopt a proposal to elect thirteen directors;

 

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adopt a proposal to ratify the appointment of Ernst & Young LLP as FirstMerit’s independent registered public accounting firm for the fiscal year ending December 31, 2013;

 

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adopt a proposal to approve, on an advisory basis, the compensation of FirstMerit’s named executive officers;

 

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adopt a proposal to approve the FirstMerit Corporation 2013 Annual Incentive Plan; and

 

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adopt a proposal to transact such other business as may properly come before the meeting or any adjournments thereof.

Record Date. The close of business on February 20, 2013 has been fixed as the record date for determining the FirstMerit shareholders entitled to receive notice of and to vote at the annual meeting. At that time, 109,661,053 shares of FirstMerit common stock were outstanding, held by approximately 7,024 holders of record.

Required Vote. Approval of the FirstMerit Merger Proposal requires the affirmative vote of a majority of the voting power of the outstanding shares of FirstMerit common stock. Therefore, assuming that a quorum is present, your failure to vote or an abstention will have the effect of a vote against the FirstMerit Merger Proposal.

Approval of the FirstMerit Stock Issuance Proposal requires the affirmative vote of a majority of the votes cast on the matter. Therefore, assuming that a quorum is present, your failure to vote or an abstention will have no effect on the FirstMerit Stock Issuance Proposal.

Approval of the FirstMerit Merger-Related Compensation Proposal is a non-binding, advisory vote that requires the affirmative vote by a majority of the votes entitled to vote on the proposal present or represented by proxy at the annual meeting. Abstentions will have the same effect as a vote against the FirstMerit Merger-Related Compensation Proposal, but broker non-votes will have no effect on the outcome of any vote on the FirstMerit Merger-Related Compensation Proposal.

 

Whether or not a quorum is present, the FirstMerit Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of FirstMerit common stock present or represented at the annual meeting. Abstentions will have the same effect as a vote against a proposal to adjourn the annual meeting, but broker non-votes will have no effect on the outcome of any vote on the FirstMerit Adjournment Proposal.

Election of the director nominees requires the affirmative vote of holders of a plurality of the shares of FirstMerit common stock entitled to vote on the proposal present or represented by proxy at the annual meeting. Broker non-votes and proxies marked “WITHHOLD AUTHORITY” will not be counted toward the election of directors or toward the election of individual nominees and, thus, will have no effect other than that they will be counted for establishing a quorum.

The proposal to ratify the appointment of FirstMerit’s independent registered public accounting firm requires the affirmative vote of holders of a majority of the shares of FirstMerit common stock entitled to vote on the proposal present or represented by proxy at the annual meeting. Abstentions will be counted as present and entitled to vote for purposes of this proposal and, thus, will have the same effect as a vote against the proposal. Because the vote to ratify the appointment of Ernst & Young LLP is considered “routine,” your broker or other nominee will be able to vote your shares with respect to this proposal without your instructions.

The proposal to approve the resolution regarding the compensation of FirstMerit’s named executive officers requires the affirmative vote, on an advisory basis only, of holders of a majority of the shares of FirstMerit common stock entitled to vote on the proposal present or represented by proxy at the annual meeting. Broker non-votes will not be counted for the purpose of determining whether the proposal has been approved. Abstentions will be counted as present and entitled to vote for purposes this proposal and, thus, will have the same effect as a vote against the proposal.

The proposal to approve FirstMerit Corporation’s 2013 Annual Incentive Plan requires the affirmative vote of holders of a majority of the shares of FirstMerit common stock entitled to vote on the proposal present or represented by proxy at the annual meeting. Broker non-votes will not be counted for the purpose of determining whether the proposal has been approved. Abstentions will be counted as present and entitled to vote for purposes of this proposal and, thus, will have the same effect as a vote against the proposal.

As of the record date, directors and executive officers of FirstMerit had the right to vote 2,430,454 shares of FirstMerit common stock, or approximately 2.22% of the outstanding FirstMerit common stock entitled to be voted at the annual meeting. FirstMerit currently expects that each of these individuals will vote their shares of FirstMerit common stock in favor of the proposals to be presented at the annual meeting.

Citizens Will Hold its Special Meeting on April 5, 2013 (page 41)

The Citizens special meeting will be held on April 5, 2013, at 10:00 a.m., local time, at Citizens’ headquarters, 328 South Saginaw Street, Flint, Michigan 48502. At the special meeting, Citizens shareholders will be asked to:

 

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approve the merger agreement as such agreement may be amended from time to time (the “Citizens Merger Proposal”);

 

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approve, on an advisory basis only, the payment of certain compensation to Citizens’ named executive officers in connection with the merger (the “Citizens Merger-Related Compensation Proposal”); and

 

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approve a proposal granting the Citizens board the right to adjourn, postpone or continue the special meeting, on one or more occasions, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of the special meeting to approve the merger agreement proposal (the “Citizens Adjournment Proposal”).

Record Date. Only holders of record at the close of business on February 20, 2013 will be entitled to vote at the special meeting. Each share of Citizens common stock is entitled to one vote. As of the record date, there were 40,488,867 shares of Citizens common stock entitled to vote at the special meeting.

 

Required Vote. Approval of the Citizens Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares entitled to vote at the meeting. Because the required vote is based on the number of shares entitled to vote, an abstention will have the same effect as a vote against the proposal.

The approval of the Citizens Merger-Related Compensation Proposal is a non-binding, advisory vote that requires the affirmative vote by a majority of the votes cast by shareholders, assuming that a quorum is present. An abstention will have no effect on the proposal.

The approval of the Citizens Adjournment Proposal requires the affirmative vote by a majority of the votes cast by shareholders, assuming that a quorum is present. An abstention will have no effect on the proposal.

As of the record date, directors and executive officers of Citizens had the right to vote 560,799 shares of Citizens common stock, or approximately 1.4% of the outstanding Citizens common stock entitled to be voted at the special meeting. Citizens currently expects that each of these individuals will vote their shares of Citizens common stock in favor of the proposals to be presented at the special meeting. FirstMerit holds 20 shares of Citizens common stock as non-discretionary agent. FirstMerit does not control how those shares are voted.

Information about the Companies (page 125)

FirstMerit Corporation

At December 31, 2012, FirstMerit Bank, N.A., FirstMerit’s principal subsidiary, operated a network of 196 banking offices and 203 automated teller machines. Its offices span a total of 24 counties in Ohio (including Ashland, Ashtabula, Crawford, Cuyahoga, Delaware, Erie, Fairfield, Franklin, Geauga, Holmes, Huron, Knox, Lake, Lorain, Lucas, Madison, Medina, Portage, Richland, Seneca, Stark, Summit, Wayne and Wood ), 6 counties in Illinois (including Cook, DuPage, Kane, Lake, McHenry, and Will), and Lawrence County in Pennsylvania. In its principal market in Northeastern Ohio, FirstMerit serves nearly 437,000 retail households and commercial businesses in the 16th largest consolidated metropolitan statistical area in the United States by population (which combines the primary metropolitan statistical areas for Cleveland-Elyria-Mentor, Akron, and Ashtabula Ohio). FirstMerit also operates 44 branches in the Chicago, Illinois area, which is the third largest metropolitan statistical area in the United States by population (the Chicago-Naperville-Joliet, IL-IN-WI area) with a population of over 9.7 million, where it serves approximately 53,000 retail households and commercial businesses. FirstMerit and its direct and indirect subsidiaries had 2,836 employees at December 31, 2012. The principal executive offices of FirstMerit are located at III Cascade Plaza, Akron, Ohio 44308, and its telephone number is (330) 996-6300.

FirstMerit operates primarily through FirstMerit Bank and its other subsidiaries, providing a wide range of banking, fiduciary, financial, insurance and investment services to corporate, institutional and individual customers throughout Ohio, Western Pennsylvania and Chicago, Illinois.

Additional information about FirstMerit and its subsidiaries is included in documents incorporated by reference in this document. See “Where You Can Find More Information” on page 267.

Citizens Republic Bancorp, Inc.

Citizens is a diversified banking and financial services company that provides a full range of banking, financial services and wealth management services to individuals and businesses through its subsidiary, Citizens Bank. Citizens conducts operations through 219 offices and 248 ATM locations throughout Michigan, Wisconsin, and Ohio. As of December 31, 2012, Citizens’ total assets were approximately $9.6 billion and its total shareholders’ equity was approximately $1.4 billion. The principal executive offices of Citizens are located at 328 South Saginaw Street, Flint, Michigan 48502, and its telephone number is (810) 766-7500.

 

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF FIRSTMERIT

Set forth below are highlights from FirstMerit’s consolidated financial data as of and for the years ended December 31, 2008 through December 31, 2012. In the opinion of FirstMerit management, this information reflects all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of this data for those dates. You should read this information in conjunction with FirstMerit’s consolidated financial statements and related notes included in FirstMerit’s Annual Report on Form 10-K for the year ended December 31, 2012, which is incorporated by reference in this document and from which this information is derived. See “Where You Can Find More Information” on page 267. You should not assume the results of operations for any past periods indicate results for any future period.

 

		Years ended December 31,
		2012				2011				2010				2009				2008
		(Dollars in thousands, except per share data)
Results of Operations
Interest income		$	510,683			$	538,256			$	542,370			$	459,527			$	553,826
Conversion to fully-tax equivalent			11,158				9,687				9,082				6,869				5,976
Interest income*			521,841				547,943				551,452				466,396				559,802
Interest expense			38,853				58,629				83,851				110,763				197,637
Net interest income*			482,988				489,314				467,601				355,633				362,165
Provision for loan losses			54,698				74,388				88,215				98,433				58,603
Net interest income after provision for loan losses*			428,290				414,926				379,386				257,200				303,562
Other income			223,604				224,757				212,556				210,301				201,436
Other expenses			453,613				464,345				442,860				352,817				330,633
Income before federal income taxes*			198,281				175,338				149,082				114,684				174,365
Federal income taxes			53,017				46,093				37,091				25,645				48,904
Fully-tax equivalent adjustment			11,158				9,687				9,082				6,869				5,976
Federal income taxes*			64,175				55,780				46,173				32,514				54,880
Net income		$	134,106			$	119,558			$	102,909			$	82,170			$	119,485
Per share:
Basic net income**		$	1.22			$	1.10			$	1.02			$	0.90			$	1.46
Diluted net income**		$	1.22			$	1.10			$	1.02			$	0.90			$	1.46
Cash dividends		$	0.64			$	0.64			$	0.64			$	0.77			$	1.16
Performance Ratios
Return on total average assets			0.92	%			0.82	%			0.76	%			0.76	%			1.13	%
Return on average common shareholders’ equity			8.34	%			7.72	%			7.82	%			8.09	%			12.76	%
Net interest margin—tax-equivalent basis			3.69	%			3.84	%			3.98	%			3.58	%			3.72	%
Efficiency ratio			64.28	%			65.74	%			64.76	%			62.95	%			58.78	%
Book value per common share		$	15.00			$	14.33			$	13.86			$	12.25			$	11.58
Average shareholders’ equity to total average assets			11.00	%			10.68	%			9.73	%			9.73	%			8.87	%
Dividend payout ratio			52.46	%			58.18	%			62.75	%			85.56	%			79.45	%
Balance Sheet Data
Total assets (at year end)		$	14,913,012			$	14,441,702			$	14,134,714			$	10,539,902			$	11,100,026
Long-term debt (at year end)			136,883				203,462				326,007				740,105				1,344,195
Daily averages:
Total assets		$	14,620,627			$	14,495,330			$	13,524,351			$	10,794,350			$	10,549,442
Earning assets			13,072,691				12,728,724				11,756,985				9,925,234				9,729,909
Deposits and other funds			12,679,543				12,637,139				11,868,245				9,475,734				9,424,132
Shareholders’ equity			1,608,108				1,548,353				1,315,621				1,049,925				936,088

 

*	Fully tax-equivalent basis

**	Average outstanding shares and per share data restated to reflect the effect of stock dividends declared April 28, 2009 and August 20, 2009.

 

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF CITIZENS

Set forth below are highlights from Citizens consolidated financial data as of and for the years ended December 31, 2008 through December 31, 2012. In the opinion of Citizens management, this information reflects all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of this data for those dates. You should read this information in conjunction with Citizens’ consolidated financial statements and related notes for the year ended December 31, 2012 which appear in this document under the heading “Index to Citizens Financial Statements” on page F-1. You should not assume the results of operations for any past periods indicate results for any future period.

 

		Years Ended December 31,
		2012				2011				2010				2009				2008
		(Dollars in thousands, except per share data)
Results of Operations:
Interest income		$	371,928			$	407,819			$	484,444			$	553,410			$	684,899
Conversion to fully-tax equivalent			6,074				7,482				10,582				15,574				17,444
Interest income*			378,002				415,301				495,026				568,984				702,343
Interest expense			71,156				94,709				155,380				242,961				341,860
Net interest income*			306,846				320,592				339,646				326,023				360,483
Provision for loan losses			23,204				138,808				392,882				323,820				280,961
Net interest income (loss) after provision for loan losses*			283,642				181,784				(53,236	)			2,203				79,522
Other income			92,320				95,257				94,659				63,133				96,577
Other expenses			270,622				283,150				307,087				585,139				482,312
Income (loss) before federal income taxes*			105,340				(6,109	)			(265,664	)			(519,803	)			(306,213	)
Federal income taxes			(273,009	)			(20,258	)			12,858				(29,633	)			70,970
Fully-tax equivalent adjustment			6,074				7,482				10,582				15,574				17,444
Federal income taxes*			(266,935	)			(12,776	)			23,440				(14,059	)			88,414
Net income (loss) from continuing operations			372,275				6,667				(289,104	)			(505,744	)			(394,627	)
(Loss) income from discontinued operations (net of income tax)			—				—				(3,821	)			(8,469	)			1,575
Net income (loss)			372,275				6,667				(292,925	)			(514,213	)			(393,052	)
Deemed dividend on convertible preferred stock			—				—				—				—				(11,737	)
Dividend on redeemable preferred stock			(24,347	)			(22,985	)			(21,685	)			(19,777	)			(227	)
Net income (loss) attributable to common shareholders		$	347,928			$	(16,318	)		$	(314,610	)		$	(533,990	)		$	(405,016	)
Per Share:
Income (loss) from continuing operations:
Basic net income		$	8.61			$	(0.41	)		$	(7.89	)		$	(27.11	)		$	(43.20	)
Diluted net income		$	8.61			$	(0.41	)		$	(7.89	)		$	(27.11	)		$	(43.20	)
Income (loss) from discontinued operations:
Basic net income		$	—			$	—			$	(0.10	)		$	(0.44	)		$	0.17
Diluted net income		$	—			$	—			$	(0.10	)		$	(0.44	)		$	0.17

 

		Years Ended December 31,
		2012				2011				2010				2009				2008
		(Dollars in thousands, except per share data)
Net income (loss):
Basic net income		$	8.61			$	(0.41	)		$	(7.99	)		$	(27.55	)		$	(43.03	)
Diluted net income		$	8.61			$	(0.41	)		$	(7.99	)		$	(27.55	)		$	(43.03	)
Cash dividends		$	—			$	—			$	—			$	—			$	2.90
TARP dividends paid		$	—			$	—			$	—			$	19,777			$	277
TARP dividends accrued, unpaid			48,534				31,546				15,375				—				—
Deemed dividend on convertible preferred stock			—				—				—				—				11,737
Performance Ratios:
Return on total average assets			3.89	%			0.07	%			(2.66	)%			(4.24	)%			(3.04	)%
Return on average common shareholders’ equity			40.82				0.94				(30.28	)			(43.02	)			(26.14	)
Net interest margin—tax-equivalent basis			3.56				3.58				3.31				2.90				3.10
Efficiency ratio			65.75				63.05				67.73				74.21				62.61
Book value per common share			26.62				18.24				18.47				26.85				105.97
Average shareholders’ equity to total average assets			12.55				10.28				11.18				11.91				12.07
Dividend payout ratio			—				—				—				—				(0.07	)
Balance Sheet Data
Total assets (at year end)		$	9,586,683			$	9,462,849			$	9,965,645			$	11,595,670			$	12,724,678
Long-term debt (at year end)			850,910				854,185				1,032,689				1,512,987				2,193,066
Daily averages:
Total assets			9,570,133				9,669,597				10,997,062				12,126,968				12,911,620
Earning assets			8,628,907				8,946,187				10,272,769				11,237,214				11,600,954
Deposits and other funds			7,315,842				7,582,742				8,282,629				8,509,676				8,351,683
Shareholders’ equity			1,200,867				993,761				1,229,945				1,444,733				1,558,414

 

*	Fully tax-equivalent basis.

 

UNAUDITED SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following table shows unaudited pro forma financial information about the financial condition and results of operations, including per share data, after giving effect to the merger, the planned conversion of the Citizens TARP Preferred Stock, the planned payment in full of the accrued interest on the Citizens junior subordinated debentures associated with the Citizens Trust Preferred Securities and the issuance by FirstMerit of preferred equity and debt. The unaudited pro forma financial information assumes that the merger is accounted for under the purchase method of accounting, and that the assets and liabilities of Citizens will be recorded by FirstMerit at their respective fair values as of the date the merger is completed. The unaudited pro forma condensed combined balance sheet gives effect to the transactions as if the transactions had occurred on December 31, 2012. The unaudited pro forma condensed combined income statements for the year ended on December 31, 2012 and the year ended December 31, 2011 give effect to the transactions as if the transactions had become effective at January 1, 2011. The unaudited selected pro forma combined financial information has been derived from and should be read in conjunction with the consolidated financial statements and the related notes of FirstMerit, which are incorporated in this document by reference, the consolidated financial statements and the related notes of Citizens, which are included elsewhere in this document, and the more detailed unaudited pro forma condensed combined financial information, including the notes thereto, appearing elsewhere in this document. See “Where You Can Find More Information” on page 267, “Index to Citizens Financial Statements” on page F-1 and “Unaudited Pro Forma Condensed Combined Financial Information” on page 53.

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company had the companies actually been combined at the beginning of each period presented, nor the impact of possible business model changes. The unaudited pro forma condensed combined financial information also does not consider any potential effects of changes in market conditions on revenues, expense efficiencies, asset dispositions, and share repurchases, among other factors. In addition, as explained in more detail in the accompanying notes to the “Unaudited Pro Forma Condensed Combined Financial Information” on page 53, the preliminary allocation of the pro forma purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment and may vary significantly from the actual purchase price allocation that will be recorded upon completion of the merger.

 

(in thousands)		Year Ended December 31, 2012				Year Ended December 31, 2011
Income Statement
Net interest income		$	797,130			$	817,265
Provision for loan losses			77,902				213,196
Net interest income after provision for loan losses			719,228				604,069
Other income			315,924				320,014
Other expense			732,375				755,635
Income before income tax expense			302,777				168,448
Income tax expense (benefit)			(214,584	)			31,243
Net income			517,361				137,205
Preferred stock dividends			(5,875	)			(5,875	)
Net income to common shareholders		$	511,486			$	131,330
		As of December 31, 2012
Balance Sheet
Cash and cash equivalents		$	614,484
Net loans			14,537,865
Total Assets			24,341,250
Deposits			18,964,210
Borrowings			2,494,726
Total Shareholders Equity			2,588,802