NEW YORK (TheStreet) -- Long-term investors are looking at a golden opportunity to load up on shares of FirstMerit (FMER) of Akron, Ohio, according to Oppenheimer analyst Terry McEvoy, who sees 32% upside potential for the shares over the next 18 months.

Shares of the bank have pulled back 11% this year through Tuesday's close at $19.76, which the analyst attributes in part to "confusion" over the comments from FirstMerit executives last week about the company's outlook for 2014.

FirstMerit had $23.9 billion in total assets as of Dec. 31, with 412 branches in Ohio, Michigan, Wisconsin, Illinois and Pennsylvania. The company last April completed its acquisition of Citizens Republic Bancorp of Flint, Mich., which brought on $9.6 billion in assets and 219 branches. FirstMerit also has undergone a major expansion in the Chicago market, picking up 46 branches in the area during 2010.

The company cut expenses in 2013 by consolidating eight branches and CEO Paul Greig said last week that FirstMerit would consolidate another 26 branches during the first half of 2014.

Greig, during FirstMerit's earnings call on Jan. 28, said the bank's actions to cut costs would lead this year to "total additional expense reduction of $18 million on a full-year run rate and raise the total merger cost savings from $59 million to $77 million, or an increase of 31%," according to a transcript provided by Thomson Reuters.

"We initially forecast merger-related cost savings of 22% of Citizens' expense base. These additional expense reductions increase the total cost savings to 29% of their original expense base," Greig added.

FirstMerit's outlook for 2014 includes loan growth "in the 5% range," Chief Financial Officer Terry Bischel said during the call.

"Excluding one-time expenses, non-interest expense should be down about 4% from the fourth quarter to the first quarter as we recognize a full quarter's impact of the cost synergies from the system conversion," Bischel added. He expects a seasonal increase in expenses of about 1.5% during the second quarter, and said expenses for the fourth quarter of 2014 "should be under the first-quarter level, having absorbed merit increases, investments, and volume-related increases."

In addition to the expense savings, investors may have overlooked "the reclassification of $46M of cash flow from the Citizens' loan portfolio from non-accretable to accretable. These acquired loans are performing better than originally assumed, providing a boost to net interest income over the next three years," McEvoy wrote in a note to clients on Wednesday.

FirstMerit reported fourth-quarter earnings of $57.2 million, or 33 cents a share, increasing from $40.7 million, or 23 cents a share, in the third quarter, and $38.2 million, or 35 cents a share, in the fourth quarter of 2012. The third-quarter results included $33.4 million in one-time merger related expenses.

The bank reported that its average loans -- excluding acquired loans -- grew 7% during the fourth quarter to $9.989 billion, with average commercial loans growing 6% to $6.526 billion. Average total loans, including loans acquired through the Citizens Republic Bancorp deal and from failed banks sold by the Federal Deposit Insurance Corp. grew by 1% during the fourth quarter to $14.282 billion.

FirstMerit's return on average assets for the fourth quarter was 0.94%, compared to 1.03% during the fourth quarter of 2012. The company's return on average tangible common equity was 12.96% during the fourth quarter, declining slightly from 13.01% a year earlier.

FirstMerit's shares trade for 12.0 times the consensus 2015 earnings estimate of $1.65 a share, among analysts polled by Thomson Reuters. The consensus 2014 EPS estimate is $1.53 a share, rising from EPS of $1.18 during 2013.

McEvoy rates FirstMerit "outperform," with a 12-to-18 month price target of $26.00. He's ahead of the consensus, estimating the company will earn $1.60 a share this year, with EPS growing to $1.70 in 2015.

"Following their sell-off this year, the shares of FMER trade at a noticeable discount to the peer group (regional banks with assets of $10-$50B)," the analyst wrote.

FirstMerit's shares were down 1% in morning trading Wednesday to $19.57.

This chart shows the performance of FirstMerit's stock against the KBW Bank Index (I:BKX) and S&P 500 (^GSPC) since the end of 2011:

data by YCharts

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.