November 13, 2008 / 1:47 PM / 10 years ago

UPDATE 1-FirstMerit gets preliminary nod for Treasury funding

Nov 13 (Reuters) - Bank holding company FirstMerit Corp FMER.O said it had received a preliminary approval for $248 million funding under the U.S. Treasury’s capital purchase program, but was still considering whether to accept it.

Speaking at the Sandler O’Neill conference, FirstMerit’s chief executive, Paul Greig, said taking the capital would primarily help as “an insurance policy against unforeseen severe downturn in the economy.”

The second advantage would be the ability to do a merger and acquisition transaction.

“Candidly, those two reasons are a bit of a conflict because if you do a deal, you are not going to have the excess capital to withstand a severe downturn in the economy,” he added.

Potential restrictions on dividend and executive compensation were the disadvantages, as restrictions on executive compensation would give the company potentially a problem in retaining and attracting talent in the future, Greig said.

“We are carefully weighing these issues,” he added. Shares of FirstMerit closed at $19.82 Wednesday on Nasdaq. (Reporting by Amiteshwar Singh in Bangalore; Editing by Amitha Rajan)

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