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WASHINGTON, D.C. 20549

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

FIRSTMERIT CORPORATION

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, NO PAR VALUE

     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 the filing requirements for at least the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [ ]

     State the approximate aggregate market value of the voting stock held by non-affiliates of the registrant as of February 14, 2003: $1,652,965,859.

     Indicate the number of shares outstanding of registrant’s common stock as of February 14, 2003: 84,529,797 shares of common stock, without par value.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Proxy Statement of FirstMerit Corporation, dated March 6, 2003, are incorporated by reference in Part III.

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PART I

Overview

      Registrant, FirstMerit Corporation (“FirstMerit” or the “Corporation”), is a $10.7 billion bank holding company organized in 1981 under the laws of the State of Ohio and registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”). FirstMerit’s principal business consists of owning and supervising its affiliates. Although FirstMerit directs the overall policies of its affiliates, including lending practices and financial resources, most day-to-day affairs are managed by their respective officers. The principal executive offices of FirstMerit are located at III Cascade Plaza, Akron, Ohio 44308, and its telephone number is (330) 996-6300.

      At December 31, 2002, FirstMerit Bank, N.A., one of the Corporation’s principal subsidiaries (“FirstMerit Bank”), operated a network of 157 full service banking offices and 174 automated teller machines. Its offices span a total of 21 counties in Ohio, including Ashland, Ashtabula, Crawford, Cuyahoga, Delaware, Erie, Franklin, Geauga, Huron, Knox, Lake, Lorain, Madison, Medina, Portage, Richland, Seneca, Stark, Summit, Wayne and Wood Counties, and Lawrence County in Pennsylvania. In its principal market in Northeastern Ohio, FirstMerit serves over 500,000 households and businesses in the 16th largest consolidated metropolitan statistical area (“MSA”) in the country (which combines the primary MSAs for Cleveland, Lorain/ Elyria and Akron, Ohio).

Subsidiaries and Operations

      Through its affiliates, FirstMerit operates primarily as a regional banking organization, providing a wide range of banking, fiduciary, financial, insurance and investment services to corporate, institutional and individual customers throughout northeastern and central Ohio, and western Pennsylvania. FirstMerit’s largest and principal banking subsidiary is FirstMerit Bank.

      FirstMerit Bank engages in commercial and consumer banking in its respective geographic markets. Commercial and consumer banking generally consists of the acceptance of a variety of demand, savings and time deposits and the granting of commercial and consumer loans for the financing of both real and personal property. As part of its community banking philosophy, FirstMerit Bank has divided its markets into two regional divisions, being a northern and southern division, which are further divided into eight geographic areas designated as follows: FirstMerit Bank/ Akron; FirstMerit Bank/ Citizens (Canton); FirstMerit Bank/ Cleveland; FirstMerit Bank/ Columbus; FirstMerit Bank/ Elyria; FirstMerit Bank/ Old Phoenix (Medina); FirstMerit Bank/ Mid-Ohio; and FirstMerit Bank/ New Castle, Pennsylvania. This strategy allows FirstMerit Bank to deliver a broad line of financial products and services with a community orientation and a high level of personal service. FirstMerit therefore can offer a wide range of specialized services tailored to specific markets in addition to the full range of customary banking products and services. These services include personal and corporate trust services, personal financial services, cash management services and international banking services.

      Other services provided by FirstMerit Bank or its affiliates include automated banking programs, credit and debit cards, rental of safe deposit boxes, letters of credit, leasing, securities brokerage and life insurance products. FirstMerit Bank also operates a trust department, which offers estate and trust services. The majority of its customers is comprised of consumers and small and medium size businesses. FirstMerit Bank is not engaged in lending outside the continental United States and is not dependent upon any one significant customer or specific industry.

      FirstMerit’s non-banking direct and indirect subsidiaries provide insurance sales services, credit life, credit accident and health insurance, securities brokerage services, equipment lease financing and other financial services.

      FirstMerit’s principal direct operating subsidiaries other than FirstMerit Bank include FirstMerit Credit Life Insurance Company and FirstMerit Community Development Corporation. FirstMerit Credit Life Insurance Company was formed in 1985 to underwrite credit life and credit accident and health insurance in connection

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      FirstMerit Bank is the parent corporation of 16 wholly-owned subsidiaries (the “Subsidiaries”). In 1995, FirstMerit Mortgage Corporation (“FirstMerit Mortgage”), which is located in Canton, Ohio, was organized and capitalized. FirstMerit Mortgage originates residential mortgage loans and provides mortgage loan servicing for itself and FirstMerit Bank. In 1993, FirstMerit Leasing Company (“FirstMerit Leasing”) and FirstMerit Securities, Inc. (“FirstMerit Securities”) were organized. FirstMerit Leasing provides equipment lease financing and related services, while FirstMerit Securities offers securities brokerage services to customers of FirstMerit Bank and other FirstMerit subsidiaries.

      FirstMerit Bank is the parent corporation of Mobile Consultants, Inc. (“MCI”), a broker and servicer of manufactured housing finance contracts. MCI was acquired in connection with FirstMerit’s acquisition of Signal Corp (“Signal”) in 1999. FirstMerit Bank announced in 2001 that it had ceased making new manufactured housing loan originations through MCI, but would continue to service existing loan contracts until maturity.

      FirstMerit Bank is also the parent corporation of Abell & Associates, Inc. (“Abell”) and FirstMerit Insurance Agency, Inc. Abell, a nationally-known life insurance and financial consulting firm acquired in May 1997, assists in the design and funding of estate plans, corporate succession plans and executive compensation plans. The firm also does consulting work for law and accounting firms, as well as individual corporations, concentrating on funding for corporate liability issues. FirstMerit Insurance Agency, Inc. became a subsidiary of FirstMerit Bank when FirstMerit acquired Great Northern Financial Corporation. FirstMerit Insurance Agency, Inc.’s license to sell life insurance products and annuities was activated in 1997.

      Although FirstMerit is a corporate entity legally separate and distinct from its affiliates, bank holding companies such as FirstMerit, which are subject to the BHCA, are expected to act as a source of financial strength for their subsidiary banks. The principal source of FirstMerit’s income is dividends from its subsidiaries. There are certain regulatory restrictions on the extent to which financial institution subsidiaries can pay dividends or otherwise supply funds to FirstMerit.

Recent Transactions

      FirstMerit engages in discussions concerning possible acquisitions of other financial institutions and financial services companies on a regular basis. FirstMerit also periodically acquires branches and deposits in its principal markets. FirstMerit’s strategy for growth includes strengthening market share in its existing markets, expanding into complementary markets and broadening its product offerings. FirstMerit’s most recent transaction was its acquisition of Signal in 1999. Signal was a bank holding company, which had as its primary wholly-owned subsidiaries: Signal Bank, N.A., a national bank; Summit Bank, N.A., a national bank; First Federal Savings Bank of New Castle, a federal savings bank; and MCI. At the time of the acquisition, Signal had total assets of $1.95 billion, total deposits of $1.38 billion, and stockholders’ equity of $137.8 million.

      FirstMerit believes strategic acquisitions have strengthened and will continue to further strengthen its competitive position in the northeastern and central Ohio and western Pennsylvania markets and have broadened the financial services it can offer to its customers. FirstMerit believes it has significant experience in integrating acquired businesses and continues to explore acquisition opportunities that would meet its objectives.

Competition

      The financial services industry is highly competitive. FirstMerit and its Subsidiaries compete with other local, regional and national providers of financial services such as other bank holding companies, commercial banks, savings associations, credit unions, consumer and commercial finance companies, equipment leasing companies, brokerage institutions, money market funds and insurance companies. The Subsidiaries’ primary

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      Under the Gramm-Leach-Bliley Act, effective March 11, 2000 (the “GLB Act”), securities firms and insurance companies that elect to become financial holding companies may acquire banks and other financial institutions. The Gramm-Leach-Bliley Act continues to change the competitive environment in which FirstMerit and its Subsidiaries conduct business. The financial services industry is also likely to become more competitive as further technological advances enable more companies to provide financial services. These technological advances may diminish the importance of depository institutions and other financial intermediaries in the transfer of funds between parties. Mergers between financial institutions within Ohio and in other states have added competitive pressure, which pressure has intensified due to continued growth in interstate banking. FirstMerit competes in its markets by offering quality services at competitive prices.

PROMPT FILINGS

      FirstMerit has not filed a Form 10-K, Form 10-Q or Form 8-K with the Securities and Exchange Commission (“SEC”) since new prompt notice requirements became effective for filings made after November 15, 2002. This Form 10-K has been posted on the Company’s website, www.firstmerit.com, on the date of filing with the SEC, and the Company intends to post all future filings of Form 10-K, 10-Q and 8-K on its website on the date of filing with the SEC.

REGULATION AND SUPERVISION

Introduction

      FirstMerit, its banking subsidiary and many of its nonbanking subsidiaries are subject to extensive regulation by federal and state agencies. The regulation of bank holding companies and their subsidiaries is intended primarily for the protection of depositors, federal deposit insurance funds and the banking system as a whole and not for the protection of security holders.

      As discussed in more detail below, this regulatory environment, among other things, may restrict FirstMerit’s ability to diversify into certain areas of financial services, acquire depository institutions in certain states and pay dividends on its capital stock. It also may require FirstMerit to provide financial support to its banking subsidiary, maintain capital balances in excess of those desired by management and pay higher deposit insurance premiums as a result of the deterioration in the financial condition of depository institutions in general.

Regulatory Agencies

      Bank Holding Company. FirstMerit, as a bank holding company, is subject to regulation under the BHCA and to inspection, examination and supervision by the Board of Governors of the Federal Reserve System (“Federal Reserve Board”) under the BHCA.

      Subsidiary Bank. FirstMerit’s national banking subsidiary, FirstMerit Bank, is subject to regulation and examination primarily by the Office of the Comptroller of the Currency (“OCC”) and secondarily by the Federal Deposit Insurance Corporation (“FDIC”).

      Nonbank Subsidiaries. Many of FirstMerit’s nonbank subsidiaries also are subject to regulation by the Federal Reserve Board and other applicable federal and state agencies. FirstMerit’s brokerage subsidiary is regulated by the Securities and Exchange Commission, the National Association of Securities Dealers, Inc. and state securities regulators. FirstMerit’s insurance subsidiaries are subject to regulation by applicable state insurance regulatory agencies. Other nonbank subsidiaries of FirstMerit are subject to the laws and regulations of both the federal government and the various states in which they conduct business.

      Securities and Exchange Commission and Nasdaq. FirstMerit is also under the jurisdiction of the SEC and certain state securities commissions for matters relating to the offering and sale of its securities. FirstMerit is subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as administered by the SEC. FirstMerit is listed on The Nasdaq Stock Market under the trading symbol “FMER,” and is subject to the rules of Nasdaq.

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Bank Holding Company Activities

      Regulatory Approval. In determining whether to approve a proposed bank acquisition, federal banking regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the Community Reinvestment Act of 1977.

      Interstate Banking. Under the Riegle-Neal Interstate Banking and Branching Act (“Riegle-Neal Act”), a bank holding company may acquire banks in states other than its home state, subject to any state requirement that the bank has been organized and operating for a minimum period of time, not to exceed five years, and the requirement that the bank holding company not control, prior to or following the proposed acquisition, more than 10% of the total amount of deposits of insured depository institutions nationwide or, unless the acquisition is the bank holding company’s initial entry into the state, more than 30% of such deposits in the state, or such lesser or greater amount set by the state.

      The Riegle-Neal Act also authorizes banks to merge across state lines, thereby creating interstate branches. States were permitted for a period of time to opt out of the interstate merger authority provided by the Riegle-Neal Act and, by doing so, prohibit interstate mergers in the state. FirstMerit will be unable to consolidate its banking operations in one state with those of another state if either state in question has opted out of the Riegle-Neal Act. Banks also are permitted to acquire and to establish de novo branches in other states where authorized under the laws of those states.

Dividend Restrictions

      FirstMerit is a legal entity separate and distinct from its subsidiary bank and other subsidiaries. FirstMerit’s principal source of funds to pay dividends on its common and preferred stock and debt service on its debt is dividends from these subsidiaries. Various federal and state statutory provisions and regulations limit the amount of dividends that FirstMerit Bank may pay without regulatory approval. Dividends payable by a national bank are limited to the lesser of the bank’s undivided profits and the bank’s retained net income for the current year plus its retained net income for the preceding two years (less any required transfers to capital surplus) up to the date of any dividend declaration in the current calendar year.

      Federal bank regulatory agencies have the authority to prohibit FirstMerit Bank from engaging in unsafe or unsound practices in conducting its business. The payment of dividends, depending on the financial condition of the bank, could be deemed an unsafe or unsound practice. The ability of FirstMerit Bank to pay dividends in the future is currently influenced, and could be further influenced, by bank regulatory policies and capital guidelines.

Holding Company Structure

      Transfer of Funds from Banking Subsidiary. FirstMerit’s banking subsidiary is subject to restrictions under federal law that limit the transfer of funds or other items of value from this subsidiary to FirstMerit and its nonbanking subsidiaries, including affiliates, whether in the form of loans and other extensions of credit, investments and asset purchases, or as other transactions involving the transfer of value from a subsidiary to an affiliate or for the benefit of an affiliate. Unless an exemption applies, these transactions by a banking subsidiary with a single affiliate are limited to 10% of the subsidiary bank’s capital and surplus and, with respect to all covered transactions with affiliates in the aggregate, to 20% of the subsidiary bank’s capital and surplus. Moreover, loans and extensions of credit to affiliates generally are required to be secured in specified amounts. A bank’s transactions with its nonbank affiliates also are generally required to be on arm’s-length terms.

      Source of Strength Doctrine. Under current Federal Reserve Board policy, FirstMerit is expected to act as a source of financial and managerial strength to its subsidiary bank and, under appropriate circumstances, to commit resources to support such subsidiary bank. This support could be required at times when FirstMerit might not have the resources to provide it. In addition, the OCC may order the pro rata assessment of FirstMerit if the capital of its national bank subsidiary were to become impaired. If FirstMerit failed to pay the assessment within three months, the OCC could order the sale of its stock in the national bank subsidiary to cover the deficiency.

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      Capital loans from FirstMerit to its subsidiary bank are subordinate in right of payment to deposits and certain other indebtedness of the subsidiary bank. In the event of FirstMerit’s bankruptcy, any commitment by FirstMerit to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

      Depositor Preference. The Federal Deposit Insurance Act (“FDI Act”) provides that, in the event of the “liquidation or other resolution” of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver will have priority over other general unsecured claims against the institution. If an insured depository institution fails, the insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, nondeposit creditors, including FirstMerit, with respect to any extensions of credit they have made to such insured depository institution.

      Liability of Commonly Controlled Institutions. FirstMerit Bank is insured by the FDIC. FDIC-insured depository institutions can be held liable for any loss incurred, or reasonably expected to be incurred, by the FDIC due to the default of an FDIC-insured depository institution controlled by the same bank holding company, or for any assistance provided by the FDIC to an FDIC-insured depository institution controlled by the same bank holding company that is in danger of default. “Default” means generally the appointment of a conservator or receiver. “In danger of default” means generally the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance.

Capital Requirements

      General. FirstMerit is subject to risk-based capital requirements and guidelines imposed by the Federal Reserve Board. These are substantially similar to the capital requirements and guidelines imposed by the OCC and the FDIC on the depository institutions under their jurisdictions. For this purpose, a depository institution’s or holding company’s assets, and some of its specified off-balance sheet commitments and obligations, are assigned to various risk categories. A depository institution’s or holding company’s capital, in turn, is classified in one of three tiers, depending on type:

      FirstMerit, like other bank holding companies, currently is required to maintain Tier 1 capital and “total capital” (the sum of Tier 1, Tier 2 and Tier 3 capital) equal to at least 4% and 8%, respectively, of its total risk-weighted assets (including various off-balance-sheet items, such as standby letters of credit). For a holding company to be considered “well capitalized” for regulatory purposes, its Tier 1 and total capital ratios must be 6% and 10% on a risk-adjusted basis, respectively. At December 31, 2002, FirstMerit met both requirements, with Tier 1 and total capital equal to 9.65% and 12.63% of its respective total risk-weighted assets.

      Federal Reserve Board, FDIC and OCC rules require FirstMerit to incorporate market and interest rate risk components into its risk-based capital standards. Under these market risk requirements, capital is allocated to support the amount of market risk related to a financial institution’s ongoing trading activities.

      The Federal Reserve Board also requires bank holding companies to maintain a minimum “leverage ratio” (Tier 1 capital to adjusted total assets) of 3% if the holding company has the highest regulatory rating and meets other requirements, or of 3% plus an additional “cushion” of at least 100 to 200 basis points (one to two

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      The Federal Reserve Board may set capital requirements higher than the minimums described above for holding companies whose circumstances warrant it. For example, holding companies experiencing or anticipating significant growth may be expected to maintain capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. The Federal Reserve Board has also indicated that it will consider a “tangible Tier 1 capital leverage ratio” (deducting all intangibles) and other indications of capital strength in evaluating proposals for expansion or new activities.

      FirstMerit Bank is subject to similar risk-based and leverage capital requirements adopted by its applicable federal banking agency. FirstMerit’s management believes that FirstMerit Bank meets all capital requirements to which it is subject.

      Failure to meet capital requirements could subject a bank to a variety of enforcement remedies, including the termination of deposit insurance by the FDIC, and to restrictions on its business, which are described under the next paragraph.

      Federal Deposit Insurance Corporation Improvement Act of 1991. The Federal Deposit Insurance Corporation Improvement Act of 1991 (the “FDICIA”), among other things, identifies five capital categories for insured depository institutions: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. It requires U.S. federal bank regulatory agencies to implement systems for “prompt corrective action” for insured depository institutions that do not meet minimum capital requirements based on these categories. The FDICIA imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the category in which an institution is classified. Unless a bank or thrift is well capitalized, it is subject to restrictions on its ability to offer brokered deposits and on other aspects of its operations. The FDICIA generally prohibits a bank from paying any dividend or making any capital distribution or paying any management fee to its holding company if the bank would thereafter be undercapitalized. An undercapitalized bank or thrift must develop a capital restoration plan, and its parent holding company must guarantee the bank’s or thrift’s compliance with the plan up to the lesser of 5% of the bank’s or thrift’s assets at the time it became undercapitalized and the amount needed to comply with the plan.

      As of December 31, 2002, FirstMerit believes that its bank subsidiary was well capitalized, based on the prompt corrective action ratios and guidelines described above. A bank’s capital category is determined solely for the purpose of applying the OCC’s (or the FDIC’s) prompt corrective action regulations, and the capital category may not constitute an accurate representation of the bank’s overall financial condition or prospects for other purposes.

Deposit Insurance Assessments

      The FDIC insures the deposits of FirstMerit’s depository institution subsidiary through the Bank Insurance Fund (“BIF”), up to prescribed limits for each depositor. The amount of FDIC assessments paid by each BIF member institution is based on its relative risk of default as measured by regulatory capital ratios and other factors. Specifically, the assessment rate is based on the institution’s capitalization risk category and supervisory subgroup category. An institution’s capitalization risk category is based on the FDIC’s determination of whether the institution is well capitalized, adequately capitalized or less than adequately capitalized. An institution’s supervisory subgroup category is based on the FDIC’s assessment of the financial condition of the institution and the probability that FDIC intervention or other corrective action will be required.

      The BIF assessment rate currently ranges from zero to 27 cents per $100 of domestic deposits. The FDIC may increase or decrease the assessment rate schedule on a semi-annual basis. An increase in the BIF assessment rate could have a material adverse effect on FirstMerit’s earnings, depending on the amount of the increase. The FDIC is authorized to terminate a depository institution’s deposit insurance upon a finding by the FDIC that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the institution’s regulatory agency. The termination of deposit insurance for one or more of FirstMerit’s subsidiary depository

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      All FDIC-insured depository institutions must pay an annual assessment to provide funds for the payment of interest on bonds issued by the Financing Corporation, a federal corporation chartered under the authority of the Federal Housing Finance Board. The bonds, commonly referred to as FICO bonds, were issued to capitalize the Federal Savings and Loan Insurance Corporation. The FDIC established the FICO assessment rates effective for the fourth quarter of 2002 at approximately $.017 per $100 annually for BIF-assessable deposits. The FICO assessments are adjusted quarterly to reflect changes in the assessment bases of the FDIC’s insurance funds and do not vary depending on a depository institution’s capitalization or supervisory evaluations.

      FDIC-insured depository institutions pay an assessment rate equal to the rate assessed on deposits insured by the Savings Association Insurance Fund.

Fiscal And Monetary Policies

      FirstMerit’s business and earnings are affected significantly by the fiscal and monetary policies of the federal government and its agencies. FirstMerit is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the United States. Among the instruments of monetary policy available to the Federal Reserve are (a) conducting open market operations in United States government securities, (b) changing the discount rates of borrowings of depository institutions, (c) imposing or changing reserve requirements against depository institutions’ deposits, and (d) imposing or changing reserve requirements against certain borrowing by banks and their affiliates. These methods are used in varying degrees and combinations to affect directly the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. For that reason alone, the policies of the Federal Reserve Board have a material effect on the earnings of FirstMerit.

Privacy Provisions of Gramm-Leach-Bliley Act

      Under the GLB Act, federal banking regulators were required to adopt rules that will limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. The final rules were effective November 13, 2000, but compliance was optional until July 1, 2001. The privacy provisions of the GLB Act affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.

Future Legislation

      Various legislation, including proposals to change substantially the financial institution regulatory system and to expand or contract the powers of banking institutions and bank holding companies, is from time to time introduced in Congress. This legislation may change banking statutes and the operating environment of FirstMerit and its subsidiaries in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. FirstMerit cannot predict whether any of this potential legislation will be enacted, and if enacted, the effect that it, or any implementing regulations, would have on the financial condition or results of operations of FirstMerit or any of its subsidiaries.

      To the extent that the previous information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the full text of those provisions. Also, such statutes, regulations and policies are continually under review by Congress and state legislatures and federal and state regulatory agencies. A change in statutes, regulations or regulatory policies applicable to FirstMerit could have a material effect on the business of FirstMerit.

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Summary Results of Operations

      FirstMerit recorded net income of $154.4 million, or $1.81 per diluted share for the 2002 fiscal year, compared to $116.3 million, or $1.35 per diluted share for the 2001 fiscal year. Included in 2001 results are a one-time fourth quarter after-tax restructuring charge of $41.1 million, or $0.48 per share, associated with the Corporation’s exit from the manufactured housing finance business, and a non-recurring after-tax charge of $6.3 million, or $0.07 per share, taken in the second quarter to reflect the cumulative effect of a change in accounting principle mandated by new asset-backed residual interest accounting rules. Excluding both aforementioned charges, 2001 net income would have been $163.7 million, or $1.91 per diluted share.

      For 2002, returns on average common equity (“ROE”) and average assets (“ROA”) were 16.3% and 1.48%, respectively, compared to 17.8% and 1.61% for 2001, excluding both previously mentioned one-time after-tax charges.

      Total operating revenue, defined as net interest income on a fully tax-equivalent basis plus non-interest income, was $611.4 million for 2002, a 5.9% increase above the $577.6 million reported in 2001. Excluding gains from the sale of securities and the one-time pre-tax restructuring charge of $2.6 million in the fourth quarter of 2001 associated with the Corporation’s exit from the manufactured housing business, operating revenue was $602.9 million in 2002 compared with $576.8 million in 2001, an increase of 4.6%. Fully tax-equivalent net interest income increased 7.6% to $425.0 million from $395.1 million, reflecting the combined impact of a 19 basis point expansion in the net interest margin to 4.39%, and a 2.9% increase in average earnings assets to $9.7 billion.

      Other (“non-interest”) income rose to $186.4 million in 2002, a 2.2% increase over 2001. Excluding gains from the sale of securities and the one-time restructuring charge of $2.6 million in 2001, non-interest income declined 2.0%, to $178.0 million. The major contributors were a 57.8% decline in manufactured housing fee income resulting from the discontinuation of manufactured housing loan originations in the fourth quarter of 2001, as well as the impact of a $4.2 million pre-tax impairment charge on mortgaging service rights taken in the third quarter of 2002 and the inclusion, in 2001, of a $5.6 million gain from the sale of a partnership.

      Other (“non-interest”) expenses declined 13.0% to $287.0 million. Excluding the fourth quarter 2001 pre-tax restructuring charges of $41.9 million related to the exit from manufactured housing, and netting the impact of intangible amortization from 2001 expenses to conform with results presented in 2002 when SFAS 142 was adopted as of January 1, non-interest expense rose 3.2%. The efficiency ratio improved to 47.46% in 2002 from 48.09% in 2001, after adjusting for non-recurring charges taken in 2001.

      Nonperforming assets were 1.24% of period-end loans plus other real estate at the end of 2002, compared with 0.91% at the end of the prior year. Net charge-offs were $98.5 million for 2002, or 1.34% of average loans, compared with 0.61% for 2001. Loans “past due and still accruing interest” ended the year at $43 million, unchanged from 2001 year-end. The loan loss provision was $98.6 million for 2002, up 59.6% from the $61.8 million taken for 2001. The allowance for loan losses as a percentage of year-end loans was unchanged from prior year-end at 1.70%. Further discussion of asset quality is located within the management’s discussion and analysis of financial condition and results of operations section of this report.

      Assets at December 31, 2002 totaled $10.7 billion, a 4.8% increase from December 31, 2001. Growth in investment securities accounted for the increase, partially offset by a 2.3% decline in loans.

      Deposits totaled $7.7 billion at December 31, 2002, an increase of 2.3% over deposits at December 31, 2001. The Corporation reduced its reliance on time deposits by 3.7%. Core deposits, namely demand, savings, and money market accounts, increased 8.1%. Core deposits accounted for 53.5% of deposits, compared to 50.6% last year. Additional deposit information is contained within the management’s discussion and analysis of financial condition and results of operations section of this report.

      Shareholders’ equity was $964.7 million at December 31, 2002. Average equity to average assets was 9.11% for 2002 compared to 9.05% for 2001. Common dividends per share totaled $0.98 in 2002, representing an increase of 5.4% above 2001. During 2002, 908,800 shares were repurchased, and there were 84.5 million shares of common stock outstanding at December 31, 2002.

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ITEM 2. PROPERTIES

FirstMerit Corporation

      FirstMerit’s executive offices and certain holding company operational facilities, totaling approximately 88,000 square feet, are located in a seven-story office building at III Cascade in downtown Akron, Ohio. In early 2001, FirstMerit Bank sold its interest in the partnership which owned this building and entered into a five-year lease for the building with the new, third party owner. As part of the transaction, FirstMerit Bank was granted an option to acquire the building. The building is the subject of a ground lease with the City of Akron as the lessor of the land.

      The facilities owned or leased by FirstMerit and its Subsidiaries are considered by management to be adequate, and neither the location nor unexpired term of any lease is considered material to the business of FirstMerit.

FirstMerit Bank

      The principal executive offices of FirstMerit Bank are located in a 28-story office building at 106 South Main Street, Akron, Ohio, which is owned by FirstMerit Bank. FirstMerit Bank/ Akron is the principal tenant of the building, occupying approximately 140,312 square feet of the building, with the remaining portion leased to tenants unrelated to FirstMerit Bank. The properties occupied by 102 of FirstMerit Bank’s other branches are owned by FirstMerit Bank, while the properties occupied by its remaining 55 branches are leased with various expiration dates. There is no mortgage debt owing on any of the above property owned by FirstMerit Bank. FirstMerit Bank also owns automated teller machines, on-line teller terminals and other computers and related equipment for use in its business.

      FirstMerit Bank also owns 15.5 acres near downtown Akron, on which is located FirstMerit’s Operations Center. The Operations Center is occupied and operated by FirstMerit Services Division, an operating division of FirstMerit Bank. The Operations Center primarily provides computer and communications technology-based services to FirstMerit and the Subsidiaries, and also markets its services to non-affiliated institutions. There is no mortgage debt owing on the Operations Center property. In connection with its Operations Center, the Services Division has a disaster recovery center at a remote site on leased property.

      The Trust and the Organizational & Development Departments of FirstMerit Bank are located in Main Place, a four-story office building located in downtown Akron. These departments occupy approximately 19,296 square feet of leased space in Main Place.

ITEM 3. LEGAL PROCEEDINGS

      In the normal course of business, FirstMerit is at all times subject to pending and threatened legal actions, some for which the relief or damages sought are substantial. After reviewing pending and threatened actions with counsel, management believes that the outcome of such actions will not have a material adverse effect on the results of operations or stockholders’ equity of FirstMerit. FirstMerit is not able to predict whether the outcome of such actions may or may not have a material adverse effect on results of operations in a particular future period as the time and amount of any resolution of such actions and its relationship to the future results of operations are not known.

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

      No matters were submitted to a vote of security holders in the fourth quarter of 2002.

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      The following persons are the executive officers of FirstMerit as of December 31, 2002. Unless otherwise stated, each listed position was held on January 1, 1998.

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      The outstanding shares of FirstMerit Common Stock are quoted on The Nasdaq Stock Market National Market System under the trading symbol FMER. The following table contains bid and cash dividend information for FirstMerit Common Stock for the two most recent fiscal years:

Stock Performance and Dividends⁽¹⁾

(1)	This table sets forth the high and low closing bid quotations, dividend rates and book values per share for the calendar periods indicated. These quotations furnished by the National Quotations Bureau Incorporated, represent prices between dealers, do not include retail markup, markdowns, or commissions, and may not represent actual transaction prices.
(2)	Based upon number of shares outstanding at the end of each quarter.

      On February 10, 2003 there were approximately 9,441 shareholders of record of FirstMerit Common Stock.

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FIRSTMERIT CORPORATION AND SUBSIDIARIES

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*	Fully-tax equivalent basis
(a)	The 2001 net income, provision for loan losses, other income, other expenses, and profitability ratios shown include the effects of a one-time restructuring charge related to the exit of the manufactured housing finance business of $41.1 million, after taxes. The specific income statement classifications affected by the charge, as shown in the preceding table, were as follows: other income $2.6 million, other expenses $41.9 million, and the provision for loan losses $14.5 million. Net income for 2001 also was reduced by a cumulative effect of a change in accounting principle for securitized retained interest assets of $6.3 million, after taxes. Results excluding these charges can be found in the “Earnings Summary” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
	The 1999 net income, provision for loan losses, and profitability ratios shown include 1) merger-related expenses associated with the Signal pooling-of-interests acquisition of $32.3 million after taxes, and 2) an extraordinary charge from early extinguishment of Signal debt prior to the Signal merger of $5.8 million after taxes.
	The 1998 net income, provision for loan losses, and profitability ratios shown include 1) merger-related expenses associated with the Security First pooling-of-interests acquisition of $12.8 million after taxes, 2) merger costs from the Signal’s acquisition of First Shenango of $3.0 million after taxes, 3) a loss from the sale of a subsidiary of $5.5 million after taxes, and 4) an $18.8 million after-tax valuation charge related to residual interest on manufactured housing asset-backed securities.

      The following commentary presents a discussion and analysis of the Corporation’s financial condition and results of operations by its management (“Management”). The review highlights the principal factors affecting earnings and the significant changes in balance sheet items for the years 2002, 2001 and 2000. Financial information for prior years is presented when appropriate. The objective of this financial review is to enhance the reader’s understanding of the accompanying tables and charts, the consolidated financial statements, notes to financial statements, and financial statistics appearing elsewhere in this report. Where applicable, this discussion also reflects Management’s insights of known events and trends that have or may reasonably be expected to have a material effect on the Corporation’s operations and financial condition.

      All financial data has been restated to give effect to acquisitions accounted for on a pooling of interests basis and stock splits in previous periods. The results of other bank and branch acquisitions, accounted for as purchases, have been included effective with the respective dates of acquisition.

Earnings Summary

      The Corporation recorded net income of $154.4 million, or $1.81 per diluted share for the 2002 fiscal year, compared to $116.3 million, or $1.35 per diluted share for the 2001 fiscal year. Included in 2001 results are a one-time fourth quarter after-tax restructuring charge of $41.1 million, or $0.48 per share, associated with the Corporation’s exit from the manufactured housing finance business, and a non-recurring after-tax charge of $6.3 million, or $0.07 per share, taken in the second quarter to reflect the cumulative effect of a change in accounting principle mandated by new asset-backed residual interest accounting rules. Excluding both aforementioned charges, 2001 net income would have been $163.7 million, or $1.90 per diluted share.

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      Fourth quarter 2002 net income of $36.6 million, or $0.43 per diluted share, compares to $1.8 million, or $0.02 per diluted share, for the fourth quarter of 2001. Excluding the one-time after-tax charge of $41.1 million, or $0.48 per share, fourth quarter 2001 net income would have been $43.0 million, or $0.50 per diluted share.

      For 2002, returns on average common equity (“ROE”) and average assets (“ROA”) were 16.3% and 1.48%, respectively, compared to 17.8% and 1.61% for 2001, excluding both previously mentioned one-time after-tax charges. For the 2002 fourth quarter, ROE and ROA were 15.0% and 1.39%, respectively, compared with 18.1% and 1.66% for the prior year quarter, excluding the one-time after-tax restructuring charge of $41.1 million.

      Total operating revenue, defined as net interest income on a fully tax-equivalent basis plus non-interest income, was $611.4 million for 2002, a 5.9% increase above the $577.6 million reported in 2001. Excluding gains from the sale of securities and the one-time pre-tax restructuring charge of $2.6 million in the fourth quarter of 2001 associated with the Corporation’s exit from the manufactured housing business, operating revenue was $602.9 million in 2002 compared with $576.8 million in 2001, an increase of 4.6%. Fully tax-equivalent net interest income increased 7.6% to $425.0 million from $395.1 million, reflecting the combined impact of a 19 basis point expansion in the net interest margin to 4.39%, and a 2.9% increase in average earnings assets to $9.7 billion. The Corporation continues to experience the impact of the low interest rate environment; fourth quarter net interest income was flat compared to the same period last year despite a 2.4% increase in average earning assets. Net interest income is more fully discussed in the management’s discussion and analysis of financial condition and results of operations section of this report.

      Other (“non-interest”) income rose to $186.4 million in 2002, a 2.2% increase over 2001. Excluding gains from the sale of securities and the one-time restructuring charge of $2.6 million in 2001, non-interest income declined 2.0%, to $178.0 million. The major contributors were a 57.8% decline in manufactured housing fee income resulting from the discontinuation of manufactured housing loan originations in the fourth quarter of 2001, as well as the impact of a $4.2 million pre-tax impairment charge on mortgaging service rights taken in the third quarter of 2002 and the inclusion, in 2001, of a $5.6 million gain from the sale of a partnership. The impairment of mortgage servicing rights occurred primarily as a result of lower interest rates which caused higher loan prepayments. For the fourth quarter of this year, excluding gains from the sale of securities and the one-time restructuring charge, non-interest income rose 13% boosted by a 70% improvement in investment services and insurance income combined with a 62% improvement in loan sales and servicing income.

      Other (“non-interest”) expenses declined 13.0% to $287.0 million. Excluding the fourth quarter 2001 pre-tax restructuring charges of $41.9 million related to the exit from manufactured housing, and netting the impact of intangible amortization from 2001 expenses to conform with results presented in 2002 when SFAS 142 was adopted as of January 1, non-interest expense rose 3.2%. The Corporation maintained its strong expense disciplines throughout 2002. The efficiency ratio improved to 47.46% in 2002 from 48.09% in 2001, after adjusting for non-recurring charges taken in 2001.

      Nonperforming assets were 1.24% of period-end loans plus other real estate at the end of 2002, compared with 0.91% at the end of the prior year. Net charge-offs were $98.5 million for 2002, or 1.34% of average loans, compared with 0.61% for 2001. Fourth quarter net charge-offs were $26 million in 2002, compared with $14.9 million in 2001. Loans “90 days past due and still accruing interest” ended the year at $43 million, unchanged from 2001 year-end. The loan loss provision was $98.6 million for 2002, up 59.6% from the $61.8 million taken for 2001. The allowance for loan losses as a percentage of year-end loans was unchanged from prior year-end at 1.70%. Note 4 to the consolidated financial statements provides additional allowance for loan losses information. Asset quality is further discussed in the management’s discussion and analysis of financial condition and results of operations section of this report.

      Assets at December 31, 2002 totaled $10.7 billion, a 4.8% increase from December 31, 2001. Growth in investment securities accounted for the increase, partially offset by a 2.3% decline in loans. Consistent with the Company’s strategy to invest in higher-yielding loans, the loan portfolio continued to shift toward consumer loans, up 4.9%, and away from residential mortgages and manufactured housing, down 12.3% and 11.7%, respectively. Commercial loans declined by 1.6%, impacted by ongoing sluggish economic conditions.

      Deposits totaled $7.7 billion at December 31, 2002, an increase of 2.3% over deposits at December 31, 2001. The Corporation reduced its reliance on time deposits by 3.7%. Core deposits, namely demand, savings,

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      Shareholders’ equity was $964.7 million at December 31, 2002. Average equity to average assets was 9.11% for 2002 compared to 9.05% for 2001. Common dividends per share totaled $0.98 in 2002, representing an increase of 5.4% above 2001. During 2002, 908,800 shares were repurchased, and there were 84.5 million shares of common stock outstanding at December 31, 2002.

Supercommunity Banking Results

      The Corporation’s operations are managed along its major line of business, Supercommunity Banking. Note 15 to the consolidated financial statements provides performance data for this line of business.

Net Interest Income

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

      Net interest income is affected by market interest rates on both earning assets and interest bearing liabilities, the level of earning assets being funded by interest bearing liabilities, non-interest bearing liabilities and equity,

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*	Yield on earning assets

      Net interest income, on an FTE basis, increased $29.8 million, or 7.6%, to $425.0 million in 2002 compared to $395.1 million in 2001 and $380.1 million in 2000. The increase from 2001 occurred because the decline in interest expense outpaced the decline in interest income. Specifically, interest expense fell $109.0 million while interest income dropped $79.2 million. The overall lower interest rate environment in 2002, compared with the prior year, had the following effect on interest-bearing assets and liabilities.

      The average yield on earning assets dropped 104 basis points from 7.77% in 2001 to 6.73% in 2002 lowering interest income by $92.5 million. Higher outstanding balances on total average earning assets caused interest income to increase $13.3 million from year-ago levels. Average balances for investment securities were $14.6 million higher than last year, but lower rates earned on the securities lessened interest income by $22.1 million. Average loan outstandings were down slightly from last year while lower yields earned on the loans, decreased 2002 loan interest income by $68.9 million.

      The decline in interest expense was primarily rate-driven as lower interest rates paid on customer deposits and wholesale borrowings accounted for $104.6 million, or 95.9%, of the decrease in interest expense compared to last year. As discussed in the deposits and wholesale borrowings section of management’s discussion and analysis of financial condition and operating results, the Corporation placed less reliance on certificates of deposits (“CDs”) and wholesale borrowings to fund loans and operations in 2002. Specifically, lower average outstandings for CDs and wholesale borrowings lessened interest expense in 2002 by $3.4 million and $3.3 million, respectively. Lower interest rates paid on these same instruments caused interest expense to decline $59.2 million on CDs and $20.8 million on wholesale borrowings. The cost of funds for the year, as a percentage of average earning assets, decreased 1.23% from 3.57% in 2001 to 2.34% in 2002.

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      The following table illustrates the specific year-over-year impact to net interest income based on changes in the rate and volume components of interest-earning assets and interest-bearing liabilities.

CHANGES IN NET INTEREST DIFFERENTIAL —

Note: The variance created by a combination of rate and volume has been allocated entirely to the volume column.

      The net interest margin is calculated by dividing net interest income FTE by average earning assets. As with net interest income, the net interest margin is affected by the level and mix of earning assets, the proportion of earning assets funded by non-interest bearing liabilities, and the interest rate spread. In addition, the net interest margin is impacted by changes in federal income tax rates and regulations as they affect the tax-equivalent adjustment.

      The net interest margin for 2002 was 4.39% compared to 4.20% in 2001 and 3.93% in 2000. As discussed in the previous section, the increase in the net interest margin during 2002 was primarily a result of lower interest rates paid on customer deposits and wholesale borrowings outpacing lower yields earned on loans and securities.

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Other Income

      Excluding securities gains, other income totaled $178.0 million in 2002, a decrease of $1.1 million, or 0.6%, from 2001, and an increase of $14.6 million, or 8.9% from 2000. Explanations for the most significant changes in the components of other income are discussed immediately after the following table.

      Trust fees decreased $1.1 million, or 5.2%, to $20.0 million in 2002. The decline was mainly attributable to lower revenue earned on accounts whose fees were based on declining stock market valuations.

      Service charges on deposits rose $2.9 million, or 5.4%, compared to last year. These fees are primarily based on the number of accounts, average account balances and customer checking and savings account activity. Credit card fees rose $3.0 million or 8.5% in 2002. The increase in card fees was due to higher debit card volume, increased merchant activity, increased home equity card usage and competitive cash advance and late fees.

      ATM and other service fees declined $2.0 million, or 13.6%, compared to 2001. Lower fees earned on official bank checks as well as lower fees earned on ATM activity were the main reasons for the decline. Investment services and life insurance fees increased $2.0 million, or 18.5% during 2002 as a result of higher commission income based on the success of the Corporation’s campaign to convert maturing CDs into annuity products.

      Loan sales and servicing income was down $2.3 million (19.2%) as a result of pretax impairment charges on mortgage servicing rights taken in the 2002 second and third quarters totaling $5.5 million. Fees from increased mortgage loan originations, as well as gains on sales of conforming single-family mortgage loans to the mortgage loan secondary markets, partially offset the losses incurred from the impairment of mortgage servicing rights.

      Other operating income totaled $13.1 million for 2002. The increase from 2001’s total resulted from a gain from the sale of land, higher loan refinancing fees, and the fact that the 2001 period included a $2.6 million restructure loss associated with the Corporation’s exit from the Manufactured Housing financing business. Excluding securities gains, other income as a percentage of net revenue equaled 29.5% compared to 31.2% in 2001. Net revenue is defined as net interest income on tax-equivalent basis plus other income less securities gains.

Federal Income Tax

      Federal income tax expense totaled $68.0 million in 2002 compared to $57.5 million in 2001, and $72.4 million in 2000. The effective federal income tax rate for 2002 was 30.6%, compared to 33.1% in 2001 and 31.2% in 2000. Further federal income tax information is contained in Note 11 to the consolidated financial statements.

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Other Expenses

      Other expenses were $287.0 million in 2002 compared to $328.6 million in 2001 and $275.2 million in 2000. Excluding restructure charges related to the Corporation’s exit from manufactured housing (“MH”) lending activities, other expenses for 2001 totaled $286.7 million. A break-out of the 2001 restructure charges is shown in the “restructure adjustments” column in the following table. Note 5 to the consolidated financial statements also provides additional information related to these MH costs.

      Expenses in the table that exclude MH exit costs are referred to as “core” expenses throughout this section. Core expenses put 2001 costs on a “like-basis” with costs for the other periods shown. Core expenses are not considered to be in compliance with generally accepted accounting principles (“GAAP”) and, therefore, may not be comparable to similarly titled results presented by other companies.