Bolstered by growth in commercial lending and an expansion of its net interest margin, FirstMerit Corp. of Akron, Ohio, beat Wall Street's earnings expectations and sounded a distinct note of optimism.

Despite a higher provision for loan losses, the $10.7 billion-asset company turned a third-quarter profit of $29.8 million, or 37 cents a share. That was down 1.6% from a year earlier but a penny a share better than the average estimate of analysts polled by Thomson Reuters.

"Market disruption within our footprint under the current banking environment presents abundant opportunity to expand our commercial book of business both on the lending and depository side. This has improved the overall growth potential for our franchise," Paul G. Greig, FirstMerit's chairman and chief executive officer, said in a press release Tuesday.

"I am confident that our execution on sound business strategies" will enable the company "to address future challenges related to an uncertain economic environment," Mr. Greig said.

Average loans rose 4% from a year earlier, to $7.2 billion, driven by 8%, or $300 million, growth in commercial lending.

The net interest margin rose 9 basis points from the second quarter and 17 basis points from a year earlier, to 3.78%. The company credited lower cost core deposits and lower liability pricing.

Average core deposits rose 6% from a year earlier, to $4.6 billion.

However, as the loan book grew and Ohio's economy faltered, FirstMerit got stung by credit losses. Its net chargeoffs rose 49% from a year earlier, to $11.8 million, and its loan-loss reserve rose 8%, to $102 million.

Mr. Greig said in the press release that FirstMerit was still considering whether to apply to participate in the Treasury Department's Troubled Assets Relief Program.

"If we choose to participate, the range of the Treasury's preferred investment would be approximately $80 [million] to $250 million," he said. FirstMerit is the only one of Ohio's five largest banks to post a third-quarter profit roughly in line with a year earlier. KeyCorp, National City Corp., and Fifth Third Bancorp posted losses and Huntington Bancshares Inc.'s profit was off 17% from a year earlier.

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