The management team at FirstMerit Bank was initially skeptical about executing a loan sale to bring its non-performing assets back in line with its peer group.

A $10 billion commercial bank serving the Midwest, FirstMerit had never considered a loan sale, but needed to tackle the problems caused by aggressive lending and the subsequent downturn in the Ohio economy several years ago.

Once FirstMerit made the decision to implement a sale, it never looked back. FirstMerit held a "beauty contest" among several advisors and selected DebtX, which then sold the loans at a price higher than originally anticipated.

"Our first loan sale with DebtX was successful enough that we conducted a larger sale two quarters later," said David Lucht, Executive Vice President and Chief Credit Officer of FirstMerit. "Both transactions significantly reduced our non-performing loans, improved the credit profile of the bank, and largely eliminated a drag on earnings. DebtX met our expectations for the inherent value of the loans. We were terrifically pleased with the liquidity that this sales channel provided."

FirstMerit hired DebtX in late 2003 to help sell $33.6 million in performing and non-performing loans collateralized by properties in Ohio, Pennsylvania and Indiana. The loans included a wide range of Commercial & Industrial (C&I), Commercial Real Estate (CRE) and residential debt.

DebtX's full-service loan sale advisors managed the entire process for FirstMerit. DebtX evaluated and established initial pricing of the loan portfolio, and then used its electronic exchange to facilitate online due diligence and to conduct a highly competitive online auction.

"We think we got better price execution by using DebtX," Lucht said. "DebtX also tried to find investors with an appetite for a particular asset class. Another benefit we liked is that when an institution won the bid, it immediately put down a 10 percent deposit, with the rest due at closing. There is assurance that you will get execution once you get the bid."

Executive Vice President Tom Goodwin said DebtX allowed FirstMerit to market its loans to a much wider audience of buyers than it could have otherwise. "The result is that the bidding for FirstMerit's loans became very competitive and investors bid significantly above the reserve price."

Following on the success of its initial loan sale, FirstMerit then sold a larger pool of non-performing loans in the second quarter of 2004. FirstMerit offered $38.5 million in C&I, CRE and residential loans.

"FirstMerit's loan sales served the dual purpose of eliminating non-performers and diversifying its portfolio by selling some performing loans, which represented high concentrations of certain at-risk loan types," Goodwin said. "DebtX does both of these kinds of sales for many institutions across the country. With FirstMerit, DebtX provided a seamless, turnkey process that ultimately delivered loan sale proceeds substantially above the reserve price."

For more information about DebtX's full-service loan sale programs, please contact Bill Looney, 617-531-3402.