CITIZENS REPUBLIC BANCORP INC 
By FLINT, Mich., Jan. 27, 2011 /PRNewswire/ -- Citizens Republic Bancorp, Inc. (Nasdaq: CRBC) announced today a net loss from continuing operations of $106.2 million for the three months ended December 31, 2010, compared with net losses of $62.5 million for the third quarter of 2010 and $65.9 million for the fourth quarter of 2009. After incorporating the $5.5 million accrued but unpaid dividend to the preferred shareholder, Citizens reported a net loss attributable to common shareholders of $111.7 million for the three months ended December 31, 2010, compared with $67.9 million for the third quarter of 2010 and $70.0 million for the fourth quarter of 2009. Results for the fourth quarter of 2009 included net income from discontinued operations of $1.2 million. Diluted net loss from continuing operations per share was $0.28 for the three months ended December 31, 2010, compared with $0.17 for the third quarter of 2010 and $0.18 for the fourth quarter of 2009. For the year ended December 31, 2010, Citizens recorded a net loss from continuing operations of $289.1 million compared with a net loss from continuing operations of $505.7 million for 2009.
"Last quarter we announced a plan to accelerate the workout of certain problem assets. We are pleased with the execution of that plan during the fourth quarter and expect to substantially complete it during the first quarter of 2011," commented Cathleen H. Nash, president and chief executive officer.
"We reduced the level of non-performing assets by 35% during the quarter. Our watchlist declined by almost 20% and delinquencies are down 25% and at their lowest level since December 2006. We have significantly reduced our balance sheet risk while maintaining strong regulatory capital levels. Our strong reserve for loan losses supports the remaining work we have to do this year," added Ms. Nash.
"We produced solid operating results for the quarter. Net interest margin increased 10 basis points to 3.42% compared to last quarter. Pre-tax pre-provision profit totaled $32 million for the fourth quarter," continued Ms. Nash.
"We are very pleased with the progress we made during 2010 in working through the stressed loans in our portfolio. Non-performing assets at the end of the year are at half the level of last year. Our actions should allow us to regain quarterly profitability by the third quarter of 2011," Ms. Nash concluded.
Key Points in the Quarter:
-- In an effort to reduce overall problem asset levels, Citizens resolved
$466.2 million of problem assets in the fourth quarter of 2010 through a
combination of bulk sales and individual workouts, recording a provision
for loan losses of $131.3 million and net charge-offs of $159.3 million.
-- Total delinquent loans at December 31, 2010 were $98.4 million, or 1.58%
of total portfolio loans, a decrease of $33.1 million or 25.2% from
September 30, 2010. Total nonperforming assets at December 31, 2010
were $286.6 million, a decrease of $156.7 million or 35.3% from
September 30, 2010.
-- Net interest margin for the fourth quarter of 2010 was 3.42% compared
with 3.32% for the third quarter of 2010.
-- Pre-tax pre-provision profit (non-GAAP) for the fourth quarter of 2010
totaled $32.1 million, compared with $36.2 million for the third quarter
of 2010.
Balance Sheet
Total assets at December 31, 2010 were $10.0 billion, a decrease of $673.3 million or 6.3% from September 30, 2010 and a decrease of $2.0 billion or 16.5% from December 31, 2009. The declines were primarily due to reductions in total portfolio loans as a result of the accelerated resolution of problem assets, customer loan paydowns, loan charge-offs and weak customer demand. The decrease from 2009 was also due to the sale of Citizens' wholly-owned subsidiary, F&M Bank-Iowa ("F&M") during the second quarter of 2010.
Money market investments at December 31, 2010 totaled $409.1 million, a decrease of $121.1 million or 22.8% from September 30, 2010 and a decrease of $277.2 million or 40.4% from December 31, 2009. The decreases were primarily the result of using money market investments to payoff maturing wholesale funding.
Investment securities at December 31, 2010 totaled $2.5 billion, an increase of $153.9 million or 6.5% from September 30, 2010 and an increase of $333.3 million or 15.2% over December 31, 2009. Increases in investment securities were largely due to reinvesting a portion of the loan portfolio paydowns.
The following table displays total portfolio loans at quarter end for each of the last five quarters. The following definitions are provided to clarify the types of loans included in each of the commercial real estate segments identified in the table. Land hold loans are secured by undeveloped land which has been acquired for future development. Land development loans are secured by land undergoing infrastructure improvements to create finished marketable lots for commercial or residential construction. Construction loans are secured by commercial, retail and residential real estate in the construction phase with the intent to be sold or become an income producing property. Income producing loans are secured by non-owner occupied real estate leased to one or more tenants. Owner occupied loans are secured by real estate occupied by the owner.
December September March December
Loan Portfolios 31, 30, June 30, 31, 31,
--------------- 2010 2010 2010 2010 2009
(in millions) ---- ---- ---- ---- ----
-------------
Land hold $28.3 $37.1 $37.8 $39.3 $35.9
Land development 34.8 73.8 84.3 101.0 103.6
Construction 103.7 155.4 156.3 164.4 177.9
Income producing 1,171.0 1,382.3 1,481.7 1,532.1 1,514.0
Owner-occupied 783.0 855.1 886.1 931.5 980.1
Total commercial real
estate 2,120.8 2,503.7 2,646.2 2,768.3 2,811.5
Commercial and
industrial 1,474.2 1,657.4 1,686.8 1,824.8 1,921.8
Total commercial 3,595.0 4,161.1 4,333.0 4,593.1 4,733.3
Residential mortgage 756.2 800.5 858.9 877.2 1,025.2
Direct consumer 1,045.5 1,091.7 1,132.2 1,174.7 1,224.2
Indirect consumer 819.9 834.7 814.0 794.2 805.2
----- ----- ----- ----- -----
Total consumer 2,621.6 2,726.9 2,805.1 2,846.1 3,054.6
Total portfolio loans $6,216.6 $6,888.0 $7,138.1 $7,439.2 $7,787.9
======== ======== ======== ======== ========
Decreases in total portfolio loans in the fourth quarter of 2010 compared to the prior quarters reflect the efforts of the accelerated problem asset resolution initiatives undertaken during that quarter, continued weak customer demand from credit-worthy clients, paydowns as a result of normal client activity, and charge-offs. In addition, the decline from December 31, 2009 in residential mortgage loans was primarily the result of transferring nonperforming residential mortgage loans to loans held for sale at the end of the first and third quarters of 2010. More than 90% of new mortgage originations are sold into the secondary market, resulting in minimal new loans being retained in the residential mortgage portfolio.
Loans held for sale at December 31, 2010 were $40.3 million, a decrease of $11.8 million or 22.7% from September 30, 2010 and a decrease of $39.9 million or 49.7% from December 31, 2009. The decrease from September 30, 2010 was primarily the result of a bulk loan sale of nonperforming residential mortgage loans with a book value of $9.3 million in the fourth quarter of 2010, which were transferred to loans held for sale at the end of the third quarter of 2010. The variance from both prior periods reflects declines due to the sale of commercial loans held for sale, customer paydowns, workout activities, writedowns to reflect further fair-value declines for the underlying collateral, and transfers to ORE.
Core deposits, which exclude all time deposits, totaled $4.9 billion at December 31, 2010, essentially the same levels that existed at September 30, 2010 and December 31, 2009. Time deposits totaled $2.9 billion at December 31, 2010, a decrease of $298.9 million or 9.5% from September 30, 2010 and a decrease of $844.3 million or 22.8% from December 31, 2009. The decrease from September 30, 2010 was primarily the result of a strategic reduction in brokered time deposits and rate sensitive single service retail time deposits. The decrease from December 31, 2009 was due to the aforementioned factors and retail customers shifting balances from time deposits to savings accounts. As a result of these changes in deposit balances, total deposits at December 31, 2010 were $7.7 billion, a decrease of $374.1 million or 4.6% from September 30, 2010 and a decrease of $773.9 million or 9.1% from December 31, 2009.
Other interest-bearing liabilities, which include federal funds purchased and securities sold under agreements to repurchase, other short-term borrowings, and long-term debt, totaled $1.1 billion at December 31, 2010, a decrease of $153.4 million or 12.5% from September 30, 2010 and a decrease of $477.8 million or 30.8% from December 31, 2009. The decreases were the result of a strategic reduction in long-term debt.
Capital Adequacy and Liquidity
Shareholders' equity at December 31, 2010 totaled $1.0 billion, a decrease of $145.3 million or 12.6% from September 30, 2010 and a decrease of $319.3 million or 24.0% from December 31, 2009. The decreases were primarily the result of net losses incurred.
Citizens continues to maintain a strong capital position, and its regulatory capital ratios are above "well-capitalized" standards, as evidenced in the table below.
Capital December September Excess
Ratios Regulatory 31, 30, June 30, Capital
Minimum
for 2010 2010 2010 over Minimum
"Well- (in
Capitalized" millions)
Leverage
ratio 5.00% 7.71% 8.50% 8.72% $272.8
Tier 1
capital
ratio 6.00 12.11 12.41 12.79 391.8
Total
capital
ratio 10.00 13.50 13.80 14.17 224.9
Tier 1
common
equity
(non-
GAAP) 6.62 7.50 8.10
Tangible
equity to
tangible
assets
(non-
GAAP) 7.09 8.03 8.45
Tangible
common
equity to
tangible
assets
(non-
GAAP) 4.20 5.34 5.83
Citizens maintains a strong liquidity position, with substantial on- and off-balance sheet liquidity sources and a stable funding base comprised of approximately 78% deposits, 11% long-term debt, 10% equity, and 1% short-term liabilities. Citizens' loan-to-deposit ratio, another measure of liquidity, continues to improve with levels of 80.5%, 85.0%, and 91.6% at December 31, 2010, September 30, 2010, and December 31, 2009, respectively, as a result of the decrease in outstanding loans. Securities available-for-sale and money market investments could be sold for cash to provide additional liquidity if necessary. Citizens' parent company cash totaled $68.1 million at December 31, 2010 as compared with $109.8 million at December 31, 2009. The decrease was primarily the result of contributing $100.0 million from the parent company to the bank during the third quarter of 2010. This decrease was partially offset by $50.0 million in cash received as a result of completing the sale of F&M during the second quarter of 2010.
Net Interest Margin and Net Interest Income
Net interest margin was 3.42% for the fourth quarter of 2010 compared with 3.32% for the third quarter of 2010 and 3.13% for the fourth quarter of 2009. For the year ended December 31, 2010, net interest margin was 3.31%, compared with 2.90% for the same period of 2009. The increase in net interest margin over the third quarter of 2010 was primarily the result of declining deposit costs, the repricing of fixed rate funding to a lower rate, and reduced costs of carrying non-performing loans, partially offset by lower reinvestment rates in the investment and loan portfolios. The increases in net interest margin in the three months and year ended December 31, 2010 over the comparable periods in 2009 were primarily the result of expanding commercial and consumer loan spreads, declining deposit costs, reductions in high-cost funding, and wholesale funding repricing to lower fixed rates, partially offset by the effect of replacing declining loan balances with lower-yielding investment securities and money market investments.
Net interest income was $81.7 million for the fourth quarter of 2010, essentially unchanged over the third quarter of 2010 and the fourth quarter of 2009. For the year ended December 31, 2010, net interest income was $329.1 million, an increase of $18.6 million or 6.0% over the same period of 2009. The increase over 2009 was primarily the result of the higher net interest margin, partially offset by decreases in average earning assets. The decreases in average earning assets were due to weak loan demand in the current Midwest economic environment, partially offset by increases in investment securities and money market investments.
Credit Quality
The quality of Citizens' loan portfolio is impacted by numerous factors, including the economic environment in the markets in which Citizens operates. Citizens carefully monitors its loans in an effort to identify and mitigate any potential credit quality issues and losses in a proactive manner. Citizens performs quarterly reviews of the non-watch commercial credit portfolio focusing on industry segments and asset classes that have or may be expected to experience stress due to economic conditions. This process seeks to validate the credit's risk rating, underwriting structure and exposure management under current and stressed economic scenarios while strengthening these relationships and improving communication with these clients.
The following tables represent four qualitative aspects of the loan portfolio that illustrate the overall level of quality and risk inherent in the loan portfolio.
-- Delinquency Rates by Loan Portfolio - Loans where the contractual
payment is 30 to 89 days past due and interest is still accruing. While
these loans are actively worked to bring them current, past due loan
trends may be a leading indicator of potential future nonperforming
loans and charge-offs.
-- Commercial Watchlist - Commercial loans that, while still accruing
interest, we believe may be at risk due to general economic conditions
or changes in a borrower's financial status and therefore require
increased oversight. Watchlist loans that are in nonperforming status
are included in the nonperforming assets table below.
-- Nonperforming Assets - Loans that are in nonaccrual status, loans past
due 90 days or more on which interest is still accruing, restructured
loans, nonperforming loans that are held for sale, and other repossessed
assets acquired. The commercial loans included in this table are
reviewed as part of the watchlist process in addition to the loans
displayed in the commercial watchlist table below.
-- Net Charge-Offs - The portion of loans that have been charged-off during
each quarter.
Delinquency Rates By Loan December 31, September 30,
Portfolio 2010 2010
30 to 89 days past due $ % of $ % of
---------------------- --- Portfolio --- Portfolio
(in millions) --------- ---------
-------------------------
Land hold $2.2 7.90% $--- --- %
Land development 0.2 0.62 4.5 6.04
Construction 0.5 0.45 2.4 1.53
Income producing 20.7 1.76 35.2 2.55
Owner-occupied 14.7 1.88 18.3 2.14
---- ----
Total commercial real
estate 38.3 1.80 60.4 2.41
Commercial and industrial 9.0 0.61 23.8 1.43
--- ----
Total commercial 47.3 1.32 84.2 2.02
Residential mortgage 15.4 2.03 14.6 1.82
Direct consumer 22.4 2.14 20.5 1.88
Indirect consumer 13.3 1.62 12.2 1.46
---- ----
Total consumer 51.1 1.95 47.3 1.73
---- ----
Total delinquent loans $98.4 1.58 $131.5 1.91
===== ======
Delinquency Rates By Loan March 31,
Portfolio June 30, 2010 2010
30 to 89 days past due $ % of $ % of
------------------------- --- Portfolio --- Portfolio
(in millions) --------- ---------
-------------
Land hold $1.3 3.34% $0.6 1.64%
Land development 2.0 2.43 3.0 3.00
Construction 6.4 4.07 0.9 0.55
Income producing 22.9 1.55 51.7 3.37
Owner-occupied 16.4 1.85 13.6 1.46
---- ----
Total commercial real
estate 49.0 1.85 69.8 2.52
Commercial and industrial 10.3 0.61 15.1 0.83
---- ----
Total commercial 59.3 1.37 84.9 1.85
Residential mortgage 20.8 2.42 21.5 2.45
Direct consumer 20.2 1.79 21.9 1.86
Indirect consumer 11.4 1.40 14.8 1.86
---- ----
Total consumer 52.4 1.87 58.2 2.05
---- ----
Total delinquent loans $111.7 1.57 $143.1 1.92
====== ======
Delinquency Rates By Loan December 31,
Portfolio 2009
30 to 89 days past due $ % of
------------------------- --- Portfolio
(in millions) ---------
-------------
Land hold $0.6 1.56%
Land development 4.7 4.56
Construction 1.7 0.95
Income producing 40.8 2.70
Owner-occupied 25.0 2.55
----
Total commercial real
estate 72.8 2.59
Commercial and industrial 16.9 0.88
----
Total commercial 89.7 1.90
Residential mortgage 22.0 2.14
Direct consumer 26.5 2.16
Indirect consumer 16.3 2.02
----
Total consumer 64.8 2.12
----
Total delinquent loans $154.5 1.98
======
The decreases in total delinquencies were primarily the result of continued emphasis on proactively managing and resolving delinquent commercial and consumer loans. This marks the first time in four years that 30-89 day delinquent loans have been less than $100 million.
As part of its overall credit underwriting and review process and loss mitigation strategy, Citizens carefully monitors commercial and commercial real estate credits that are current in terms of principal and interest payments but may deteriorate in quality as economic conditions decline. Commercial relationship officers monitor their clients' financial condition and initiate changes in loan ratings based on their findings. Loans that have migrated within the loan rating system to a level that requires increased oversight are considered watchlist loans (generally consistent with the regulatory definition of special mention, substandard, and doubtful loans) and include loans that are accruing or nonperforming (included in the other tables in this section). Citizens utilizes the watchlist process as a proactive credit risk management practice to help mitigate the migration of commercial loans to nonperforming status and potential loss. Once a loan is placed on the watchlist, it is reviewed quarterly by the chief credit officer, senior credit officers, senior market managers, and commercial relationship officers to assess cash flows, collateral valuations, guarantor liquidity, and other pertinent trends. During these meetings, action plans are implemented or reviewed to address emerging problem loans or to remove loans from the portfolio. Additionally, loans viewed as substandard or doubtful are transferred to Citizens' special loans or small business workout groups and are subjected to more intensive monitoring and workout activity.
December 31, September 30,
Commercial Watchlist 2010 2010
Accruing loans only $ % of $ % of
------------------- --- Portfolio --- Portfolio
(in millions) --------- ---------
-------------
Land hold $21.5 76.35% $27.6 74.32%
Land development 18.7 53.66 45.4 61.54
Construction 33.2 32.05 46.5 29.90
Income producing 444.5 37.96 543.7 39.33
Owner-occupied 196.9 25.15 225.7 26.40
----- -----
Total commercial real estate 714.8 33.71 888.9 35.50
Commercial and industrial 347.2 23.55 432.8 26.11
----- -----
Total watchlist loans $1,062.0 29.54 $1,321.7 31.76
======== ========
Commercial Watchlist June 30, 2010 March 31, 2010
Accruing loans only $ % of $ % of
------------------- --- Portfolio --- Portfolio
(in millions) --------- ---------
-------------
Land hold $27.8 73.58% $29.0 73.73%
Land development 40.5 47.97 50.4 49.95
Construction 52.5 33.61 54.4 33.07
Income producing 553.9 37.38 523.5 34.17
Owner-occupied 224.1 25.29 237.0 25.44
----- -----
Total commercial real estate 898.8 33.96 894.3 32.31
Commercial and industrial 445.5 26.41 484.7 26.56
----- -----
Total watchlist loans $1,344.3 31.02 $1,379.0 30.02
======== ========
December 31,
Commercial Watchlist 2009
Accruing loans only $ % of
------------------- --- Portfolio
(in millions) ---------
-------------
Land hold $24.8 68.99%
Land development 86.7 83.66
Construction 63.5 35.68
Income producing 521.4 34.44
Owner-occupied 247.2 25.22
-----
Total commercial real estate 943.6 33.56
Commercial and industrial 473.0 24.61
-----
Total watchlist loans $1,416.6 29.93
========
Watchlist credits declined $259.7 million from the third quarter of 2010, primarily due to the accelerated resolution of problem assets in the fourth quarter, along with a decrease in the level of new inflows. Watchlist credits as of December 31, 2010 declined $354.6 million from the previous year, primarily as a result of the aforementioned resolution activities.
December 31, September 30,
Nonperforming Assets 2010 2010
(in millions) $ % of $ % of
------------- --- Portfolio --- Portfolio
--------- ---------
Land hold $3.2 11.50% $5.6 15.13%
Land development 3.1 8.82 16.0 21.64
Construction 7.5 7.21 27.4 17.65
Income producing 62.0 5.30 147.7 10.69
Owner-occupied 42.8 5.47 63.3 7.40
---- ----
Total commercial real estate 118.6 5.59 260.0 10.39
Commercial and industrial 57.8 3.92 61.5 3.71
---- ----
Total nonaccruing commercial 176.4 4.91 321.5 7.73
Residential mortgage 22.1 2.92 16.9 2.11
Direct consumer 12.5 1.20 15.5 1.42
Indirect consumer 1.3 0.16 1.7 0.20
--- ---
Total nonaccruing consumer 35.9 1.37 34.1 1.25
Total nonaccruing loans 212.3 3.42 355.6 5.16
Loans 90+ days still accruing 1.6 0.03 1.6 0.02
Restructured loans still
accruing 6.4 0.10 7.0 0.10
--- ---
Total nonperforming portfolio
loans 220.3 3.54 364.2 5.29
Nonperforming held for sale 24.1 38.4
Other repossessed assets
acquired 42.2 40.7
---- ----
Total nonperforming assets $286.6 $443.3
====== ======
Commercial inflows $110.9 $95.6
Commercial outflows (256.0) (101.5)
Net change $(145.1) $(5.9)
======= =====
Nonperforming Assets June 30, 2010 March 31, 2010
(in millions) $ % of $ % of
------------- --- Portfolio --- Portfolio
--------- ---------
Land hold $5.2 13.76% $4.9 12.49%
Land development 22.3 26.48 27.1 26.86
Construction 25.0 15.99 35.2 21.39
Income producing 148.4 10.02 144.0 9.40
Owner-occupied 59.5 6.71 89.0 9.56
---- ----
Total commercial real estate 260.4 9.84 300.2 10.85
Commercial and industrial 67.0 3.97 69.7 3.82
---- ----
Total nonaccruing commercial 327.4 7.56 369.9 8.05
Residential mortgage 31.0 3.61 17.6 2.01
Direct consumer 18.7 1.65 16.5 1.41
Indirect consumer 1.5 0.18 2.4 0.30
--- ---
Total nonaccruing consumer 51.2 1.82 36.5 1.28
Total nonaccruing loans 378.6 5.30 406.4 5.46
Loans 90+ days still accruing 1.5 0.02 2.4 0.03
Restructured loans still
accruing 4.6 0.06 4.8 0.06
--- ---
Total nonperforming portfolio
loans 384.7 5.39 413.6 5.56
Nonperforming held for sale 44.0 95.3
Other repossessed assets
acquired 43.9 47.3
---- ----
Total nonperforming assets $472.6 $556.2
====== ======
Commercial inflows $75.9 $124.8
Commercial outflows (118.6) (74.8)
Net change $(42.7) $50.0
====== =====
December 31,
Nonperforming Assets 2009
(in millions) $ % of
------------- --- Portfolio
---------
Land hold $4.8 13.42%
Land development 1.0 0.92
Construction 25.2 14.19
Income producing 121.5 8.02
Owner-occupied 83.4 8.51
----
Total commercial real estate 235.9 8.39
Commercial and industrial 84.0 4.37
----
Total nonaccruing commercial 319.9 6.76
Residential mortgage 125.1 12.20
Direct consumer 21.3 1.74
Indirect consumer 2.6 0.33
---
Total nonaccruing consumer 149.0 4.88
Total nonaccruing loans 468.9 6.02
Loans 90+ days still accruing 3.0 0.04
Restructured loans still
accruing 2.6 0.03
---
Total nonperforming portfolio
loans 474.5 6.09
Nonperforming held for sale 65.2
Other repossessed assets
acquired 54.4
----
Total nonperforming assets $594.1
======
Commercial inflows $101.0
Commercial outflows (150.1)
Net change $(49.1)
======
Nonperforming assets decreased from the third quarter of 2010 and fourth quarter of 2009, primarily due to our efforts to reduce overall problem asset levels and work through our stressed commercial real estate and residential mortgage portfolios. The nonperforming commercial loan outflows were $256.0 million in the fourth quarter of 2010, primarily due to a combination of individual workouts and a bulk sale. In addition, the decrease in nonperforming held for sale assets in the fourth quarter of 2010 was primarily the result of the aforementioned bulk sale of residential loans.
Net Charge-Offs Three Months Ended
December 31, September 30,
2010 2010
(in millions) $ % of $ % of
------------- --- Portfolio* --- Portfolio*
---------- ----------
Land hold $5.2 73.54% $0.3 3.30%
Land development 19.7 N/M 9.0 48.29
Construction 10.0 38.44 0.4 1.10
Income producing 64.2 21.74 30.8 8.85
Owner-occupied 18.1 9.16 4.8 2.21
---- ---
Total commercial real estate 117.2 21.92 45.3 7.18
Commercial and industrial 26.0 7.01 6.8 1.62
---- ---
Total commercial 143.2 15.81 52.1 4.97
Residential mortgage 6.1 3.20 23.3 11.57
Direct consumer 7.1 2.70 9.8 3.56
Indirect consumer 2.9 1.39 2.2 1.05
--- ---
Total consumer 16.1 2.43 35.3 5.14
---- ----
Total net charge-offs $159.3 9.46 $87.4 4.91
====== =====
Net Charge-Offs Three Months Ended
June 30, 2010 March 31, 2010
(in millions) $ % of $ % of
------------- --- Portfolio* --- Portfolio*
---------- ----------
Land hold $0.4 3.72% $--- --- %
Land development 9.8 46.68 0.1 0.49
Construction 8.7 22.23 --- ---
Income producing 12.6 3.41 7.6 2.01
Owner-occupied 18.9 8.57 6.9 3.01
---- ---
Total commercial real estate 50.4 7.63 14.6 2.13
Commercial and industrial 11.4 2.71 12.9 2.86
---- ----
Total commercial 61.8 5.72 27.5 2.43
Residential mortgage 0.6 0.29 80.1 37.05
Direct consumer 5.5 1.96 7.1 2.44
Indirect consumer 3.3 1.61 3.2 1.63
--- ---
Total consumer 9.4 1.35 90.4 12.88
--- ----
Total net charge-offs $71.2 3.90 $117.9 6.25
===== ======
Net Charge-Offs Three Months Ended
December 31,
2009
(in millions) $ % of
------------- --- Portfolio*
----------
Land hold $5.6 62.32%
Land development 9.7 36.97
Construction 9.5 21.21
Income producing 13.2 3.45
Owner-occupied 2.5 1.01
---
Total commercial real estate 40.5 5.71
Commercial and industrial 22.4 4.63
----
Total commercial 62.9 5.27
Residential mortgage 6.0 2.33
Direct consumer 6.1 1.97
Indirect consumer 6.3 3.10
---
Total consumer 18.4 2.39
----
Total net charge-offs $81.3 4.05
=====
* Represents an annualized rate.
N/M - Not Meaningful
The increases in net charge-offs as compared with the third quarter of 2010 and the fourth quarter of 2009 were primarily the result of the resolution of certain problem assets through both bulk sale and individual workout efforts. Approximately $62.0 million in charge-offs were related to the transfer of certain nonperforming commercial loans to held for sale during the fourth quarter of 2010 that were then subsequently sold.
Allocation of the Allowance for Loan Losses(1)
December 31, 2010
(in millions) Allowance Related % of % of
Portfolio
------------- Amount NPL(2) NPL (3)
------ ------ --- ----------
Specific allocated
allowance:
Commercial and industrial $9.5 $43.5 21.8%
Commercial real estate 23.5 98.4 23.9
Residential mortgage 1.1 5.4 20.7
Direct consumer 0.1 1.2 11.0
--- ---
Total specific allocated
allowance 34.2 148.5 23.1
Risk allocated allowance:
Commercial and industrial 33.5 16.3 205.0 2.3%
Commercial real estate
(CRE) 99.1 22.7 436.4 4.9
Incremental risk
allocated allowance -
CRE 29.5 --- N/M N/M
Residential mortgage 46.5 18.6 250.4 6.2
Direct consumer 32.1 12.9 248.6 3.1
Indirect consumer 16.6 1.3 N/M 2.0
---- ---
Total risk allocated
allowance 257.3 71.8 358.2 4.2
----- ----
Total 291.5
General valuation
allowance 4.5
---
Total $296.0 $220.3 134.4 4.8
====== ======
September 30, 2010
(in millions) Allowance Related % of % of
Portfolio
------------- Amount NPL(2) NPL (3)
------ ------ --- ----------
Specific allocated
allowance:
Commercial and industrial $11.2 $44.3 25.3%
Commercial real estate 48.7 230.7 21.1
Residential mortgage 1.0 4.9 19.9
Direct consumer --- --- ---
--- ---
Total specific allocated
allowance 60.9 279.9 21.7
Risk allocated allowance:
Commercial and industrial 46.0 18.8 244.9 2.9%
Commercial real estate
(CRE) 116.1 31.8 365.1 5.1
Incremental risk
allocated allowance -
CRE --- --- N/M N/M
Residential mortgage 47.3 15.6 303.0 5.9
Direct consumer 31.2 16.4 190.5 2.9
Indirect consumer 17.4 1.7 N/M 2.1
---- ---
Total risk allocated
allowance 258.0 84.3 306.2 3.9
----- ----
Total 318.9
General valuation
allowance 5.1
---
Total $324.0 $364.2 89.0 4.7
====== ======
December 31, 2009
(in millions) Allowance Related % of % of
Portfolio
------------- Amount NPL(2) NPL (3)
------ ------ --- ----------
Specific allocated
allowance:
Commercial and industrial $16.3 $65.2 25.0%
Commercial real estate 29.6 208.3 14.2
Residential mortgage 6.9 30.9 22.4
Direct consumer --- --- ---
--- ---
Total specific allocated
allowance 52.8 304.4 17.3
Risk allocated allowance:
Commercial and industrial 40.2 21.8 184.4 2.2%
Commercial real estate
(CRE) 116.4 27.6 421.9 4.5
Incremental risk
allocated allowance -
CRE --- --- N/M N/M
Residential mortgage 50.6 95.6 53.0 5.1
Direct consumer 33.0 22.0 149.7 2.7
Indirect consumer 39.5 3.1 N/M 4.9
---- ---
Total risk allocated
allowance 279.7 170.1 164.4 3.7
----- -----
Total 332.5
General valuation
allowance 6.4
---
Total $338.9 $474.5 71.4 4.4
====== ======
N/M - Not Meaningful
(1) The allocation of the allowance for loan losses in the above
table is based upon ranges of estimates and is not intended to imply
either limitations on the usage of the allowance or precision of the
specific amounts. Citizens does not view the allowance for loan
losses as being divisible among the various categories of loans.
The entire allowance is available to absorb any future losses
without regard to the category or categories in which the charged-
off loans are classified.
(2) Related NPL amounts in risk allocated allowances include
restructured loans and still accruing and loans 90+ days still
accruing but classified as nonperforming.
(3) The portfolio balance of the loans with a specific allocated
allowance is equal to the Related NPL for said loans.
The allowance for loan losses was $296.0 million or 134.4% of nonperforming portfolio loans at December 31, 2010, compared with $324.0 million or 89.0% at September 30, 2010 and $338.9 million or 71.4% at December 31, 2009. The decreases in amount were primarily the result of an overall decrease in loan balances, an improvement in risk mix of the commercial portfolio, and the continuing stability in both portfolio and economic trends, as well as lower reserves identified for specific commercial loans. These decreases were partially offset by an incremental risk allocated allowance recorded in the fourth quarter of 2010 associated with the accelerated workout of commercial real estate loans.
The allowance as a percentage of nonperforming loans at December 31, 2010 increased from September 30, 2010 and December 31, 2009 primarily as a result of loss reserves having remained relatively stable while nonperforming loans declined 35.3% and 51.8%, respectively. While nonperforming loans declined over both periods, other factors that affect the risk allocated allowance such as credit metrics, delinquencies, the depressed real estate market and the accelerated workout of commercial real estate loans made it appropriate to maintain the allowance at this level.
After determining what Citizens believes is an appropriate allowance for loan losses based on the risk in the portfolio, the provision for loan losses is calculated as a result of the net effect of the quarterly change in the allowance for loan losses and the quarterly net charge-offs. The provision for loan losses was $131.3 million in the fourth quarter of 2010, compared with $89.6 million in the third quarter of 2010 and $84.0 million in the fourth quarter of 2009. The increases were primarily due to the additional charge-offs related to the aforementioned sale of nonperforming commercial loans and the incremental risk allocated allowance during the fourth quarter of 2010.
Noninterest Income
Noninterest income for the fourth quarter of 2010 was $24.0 million, a decrease of $1.9 million or 7.4% from the third quarter of 2010 and an increase of $9.8 million or 68.3% over the fourth quarter of 2009. Noninterest income for the year ended December 31, 2010 totaled $94.7 million, an increase of $31.5 million or 49.9% over the same period of 2009.
The decrease in noninterest income over the third quarter of 2010 included higher losses on loans held for sale, a decrease in other income and lower deposit service charges, partially offset by higher mortgage and other loan income and higher trust fees. The increase in losses on loans held for sale was primarily the result of the sale of commercial real estate loans in the fourth quarter of 2010, partially offset by a gain on the sale of residential mortgage loans in the same quarter. The decrease in other income was primarily the result of lower unrealized gains on deferred compensation plans and interest income received in the third quarter of 2010 for refunds of previous years' tax returns, partially offset by an increase in interest rate swap income recognition in the fourth quarter of 2010. The decrease in service charges on deposit accounts was primarily the result of lower customer transaction volume. The increase in mortgage and other loan income was primarily the result of higher residential mortgage origination volume. The increase in trust fees was directly related to improved conditions in the debt and equity markets.
The increase in noninterest income over the fourth quarter of 2009 was primarily the result of lower losses on loans held for sale and an increase in other income. The decrease in losses on loans held for sale was primarily the result of additional writedowns incurred in the fourth quarter of 2009 to reflect market-value declines for the underlying collateral. The increase in other income was primarily the result of interest rate swap income recognition.
The increase in noninterest income over the year ended 2009 was primarily a result of the net loss on the extinguishment of debt in connection with the exchange offers completed on September 30, 2009 as well as higher gains on investment securities in 2010.
Noninterest Expense
Noninterest expense for the fourth quarter of 2010 was $77.2 million, an increase of $2.5 million or 3.3% from the third quarter of 2010 and a decrease of $4.1 million or 5.1% from the fourth quarter of 2009. Noninterest expense for the year ended December 31, 2010 totaled $307.1 million, a decrease of $278.1 million or 47.5% from the same period of 2009. The year ended December 31, 2009 included a $256.3 million goodwill impairment charge.
The increase in noninterest expense from the third quarter of 2010 was primarily the result of higher other expense and higher other loan expense, partially offset by a decrease in losses on other real estate. The increase in other expenses was primarily the result of a reduction of telephone expense incurred in the third quarter of 2010 related to a refund of excise tax on telephone expenses incurred prior to 2006, higher fraud and other losses and additional use tax expense. The increase in other loan expense was primarily the result of higher provision for off-balance sheet credit losses as well as higher mortgage processing fees as a result of higher residential mortgage origination volume. The decline in losses on other real estate was primarily the result of additional writedowns incurred in the third quarter of 2010 to reflect fair-value declines for the underlying collateral.
The decrease in noninterest expense from the fourth quarter of 2009 was primarily the result of lower losses on other real estate, partially offset by increases in salaries and employee expense and occupancy expense. The decline in losses on other real estate was primarily the result of additional writedowns incurred in the fourth quarter of 2009 to reflect fair-value declines for the underlying collateral. The increase in salaries and benefits was primarily the result of higher severance expense and benefits related to those agreements, higher commission-based compensation, as well as higher pension costs.
The decrease in noninterest expense in the year ended December 31, 2010 compared to 2009 was primarily the result of the goodwill impairment charge of $256.3 million in the second quarter of 2009, lower salaries and employee benefits, and lower other loan expenses. The decline in salaries and employee benefits was primarily due to lower staffing levels in 2010 and suspending employer contributions to the 401(k) plan in 2009. Lower other loan expense was primarily the result of lower commercial and residential mortgage origination volume and foreclosure-related expenses.
Citizens had 2,026 full-time equivalent employees at December 31, 2010 compared with 2,039 at September 30, 2010 and 2,053 at December 31, 2009.
Income Tax Provision (Benefit)
The income tax provision for the fourth quarter of 2010 was $3.4 million, compared with a provision of $5.6 million for the third quarter of 2010 and a benefit of $3.3 million for the fourth quarter of 2009. Income tax provision for the year ended December 31, 2010 totaled $12.9 million, compared with a benefit of $29.6 million from the same period of 2009. The variances were primarily the result of alternative minimum tax calculations.
Pre-Tax Pre-Provision Profit (non-GAAP)
The following table displays pre-tax pre-provision profit (non-GAAP) for each of the last five quarters.
Pre-Tax Pre-Provision
Profit (non-GAAP ) Three Months Ended
December September
(in thousands) 31, 30, June 30,
-------------- 2010 2010 2010
---- ---- ----
Loss from continuing
operations $(106,154) $(62,471) $(44,456)
Income tax provision
(benefit) from continuing
operations 3,383 5,628 3,700
Provision for loan losses 131,296 89,617 70,614
Investment securities losses
(gains) 171 --- (8,051)
Fair-value adjustment on
loans held for sale 3,069 1,441 8,405
Fair-value adjustment on ORE 930 1,967 3,778
Fair-value adjustment on
bank owned life insurance
(1) (105) (159) 280
Fair-value adjustment on
swaps (1) (535) 202 279
Pre-Tax Pre-Provision
Profit (non-GAAP) $32,055 $36,225 $34,549
======= ======= =======
Pre-Tax Pre-Provision Profit (non-
GAAP ) Three Months Ended
March December
(in thousands) 31, 31,
-------------- 2010 2009
---- ----
Loss from continuing operations $(76,023) $(65,883)
Income tax provision (benefit) from
continuing operations 147 (3,307)
Provision for loan losses 101,355 84,007
Investment securities losses (gains) (6,016) ---
Fair-value adjustment on loans held
for sale 7,702 8,724
Fair-value adjustment on ORE 6,763 8,089
Fair-value adjustment on bank owned
life insurance (1) (83) (19)
Fair-value adjustment on swaps (1) 836 1,449
Pre-Tax Pre-Provision Profit (non-
GAAP) $34,681 $33,060
======= =======
(1)Fair-value adjustment amounts contained in line item "Other
income" on Consolidated Statements of Operations
Other Developments
On January 19, 2011, Citizens received a notice from The Nasdaq Stock Market stating that the minimum bid price of Citizens' common stock continued to be below $1.00 per share and that Citizens had therefore not regained compliance with Nasdaq Marketplace Rule 5450(a)(1) following receipt of the previously disclosed initial notification of noncompliance from The Nasdaq Stock Market, dated July 19, 2010. The notification letter does not affect the listing of Citizens' common stock on The Nasdaq Capital Market at this time and it will continue to trade under the symbol CRBC.
The notification letter states that Citizens will be afforded an additional 180 calendar days, or until July 18, 2011, to regain compliance with the minimum closing bid price requirement. To regain compliance, the closing bid price of Citizens' common stock must meet or exceed $1.00 per share for at least ten consecutive business days. If Citizens does not regain compliance by July 18, 2011, Nasdaq will provide a written notification that Citizens' common stock will be delisted. Citizens may appeal the determination to delist at that time and submit a plan of compliance to The Nasdaq Stock Market, which would temporarily stay any delisting action.
Citizens intends to actively monitor the bid price for its common stock and is considering available options to resolve the deficiency and regain compliance with the Nasdaq minimum bid price requirement.
Conference Call
Citizens' senior management will review the quarter's results in a conference call at 10:00 a.m. ET on Friday, January 28, 2011. A live audio webcast is available on Citizens' investor relations page at www.citizensbanking.com or by calling (800) 862-9098 (conference ID: Citizens Republic). To participate in the conference call, please connect approximately 10 minutes prior to the scheduled conference time.
The call will be archived for 90 days at www.citizensbanking.com. In addition, a digital recording will be available approximately two hours after the completion of the conference call until February 4, 2011. To listen to the replay, please dial (800) 723-0528.
Discontinued Operations
As a result of the sale of Citizens' wholly-owned subsidiary, F&M during the second quarter of 2010, the financial condition and operating results for this subsidiary have been segregated from the financial condition and operating results of Citizens' continuing operations throughout this release and, as such, are presented as a discontinued operation. While all prior periods have been revised retrospectively to align with this treatment, these changes do not affect Citizens' reported consolidated financial condition or net income for any of the prior periods.
Use of Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this release includes non-GAAP financial measures such as tangible equity to tangible assets ratio, tangible common equity to tangible assets ratio, Tier 1 common equity ratio, pre-tax pre-provision profit, net interest margin, and the efficiency ratio. Citizens believes these non-GAAP financial measures provide additional information that is useful to investors in understanding the underlying performance of Citizens, its business, and performance trends and such measures help facilitate performance comparisons with others in the banking industry. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. Readers should be aware of these limitations and should be cautious as to their use of such measures. To mitigate these limitations, Citizens has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and to ensure that Citizens' performance is properly reflected to facilitate consistent period-to-period comparisons. Although Citizens believes the above non-GAAP financial measures disclosed in this release enhance investors' understanding of its business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for GAAP basis financial measures.
Tangible Equity, Tangible Common Equity and Tier 1 Common Equity Ratios (non-GAAP financial measures)
Citizens believes the exclusion of goodwill and other intangible assets to create "tangible assets" and "tangible equity" facilitates the comparison of period to period results for ongoing business operations. Citizens' management internally assesses the company's performance based, in part, on these non-GAAP financial measures. The tangible common equity ratio and Tier 1 common equity ratio have become a focus of some investors and management believes that these ratios may assist investors in analyzing Citizens' capital position absent the effects of intangible assets and preferred stock. Because tangible common equity and Tier 1 common equity are not formally defined by GAAP or codified in the federal banking regulations, these measures are considered to be non-GAAP financial measures. Because analysts and banking regulators may assess Citizens' capital adequacy using tangible common equity and Tier 1 common equity, Citizens believes that it is useful to provide investors the ability to assess its capital adequacy on the same bases. Tier 1 common equity is often expressed as a percentage of net risk-weighted assets. Under the risk-based capital framework, a bank's balance sheet assets and credit equivalent amounts of off-balance sheet items are assigned to one of four broad risk categories. The aggregated dollar amount in each category is then multiplied by the risk weight assigned to that category. The resulting weighted values from each of the four categories are added together and this sum is the risk-weighted assets total that, as adjusted, comprises the denominator of certain risk-based capital ratios. Tier 1 capital is then divided by this denominator (net risk-weighted assets) to determine the Tier 1 capital ratio. Adjustments are made to Tier 1 capital to arrive at Tier 1 common equity as shown in the Non-GAAP Reconciliation Table later in this release. The amounts disclosed as net risk-weighted assets are calculated consistent with banking regulatory requirements.
Pre-tax Pre-Provision Profit (non-GAAP financial measure)
Pre-tax pre-provision profit ("PTPP"), as defined by Citizens' management represents total revenue (total net interest income and noninterest income) excluding any securities gains/losses, fair-value adjustments on loans held for sale, interest rate swaps, and bank owned life insurance, less noninterest expense excluding any goodwill impairment charges, credit writedowns, fair-value adjustments and special assessments. While certain of these items are an integral part of Citizens' banking operations, in each case, the excluded items are items that management believes are particularly impacted by economic stress or significant changes in the credit cycle and are therefore likely to make it more difficult to understand our underlying performance trends and the ability of our banking operations to generate revenue. Net interest income, noninterest income and noninterest expense are all calculated in accordance with GAAP and are presented in the consolidated statement of operations. While noninterest income and noninterest expense are adjusted for the specific items listed above in the calculation of PTPP, these adjustments represent the excluded items in their entirety for each period presented to better facilitate period to period comparisons.
Viewed together with Citizens' GAAP results, PTPP provides management, investors and others with a useful metric to evaluate and better understand trends in Citizens' period-to-period earnings power and ability to generate capital to cover credit losses, in each case exclusive of the effects of the current and recent economic stress and the credit cycle. As recent results for the banking industry demonstrate, loan charge-offs, related credit provision, and credit writedowns can vary significantly from period to period, making a measure that helps isolate the impact of credit costs on profitability all the more important to investors. The "Credit Quality" section of this release isolates the challenges and issues related to the credit quality of Citizens' loan portfolio and their impact on Citizens' earnings as reflected in the provision for loan losses.
A portion of the compensation awarded to Citizens' Named Executive Officers and certain other management employees for their performance in 2009 and 2010 is measured against a PTPP performance target (as defined above) as Citizens believes that PTPP is a key measurement that helps keep revenue generation as a focus for its business and a particularly valuable measure during challenging credit cycles. Based on 2009 full-year results, the total cash compensation award linked to PTPP was $0.1 million. Additionally during 2009, approximately 234,000 shares of restricted stock were granted, which vest only if both the PTPP performance condition and the GAAP net income performance condition are met. Based on 2010 full year results, the total potential cash compensation award linked to PTPP is $1.1 million, payable in early 2011. Additionally, during 2010, approximately 1,129,000 shares of restricted stock and restricted stock units were granted which have a two-year vesting period based partially on PTPP results and partially on total provision expense. The grants are designed so that a portion of the compensation is based on provision expense while the remainder does not depend on management's performance with regard to managing loan losses, securities impairments, and other asset impairments.
Like all non-GAAP metrics, PTPP's usefulness is inherently limited. Because Citizens' calculation of PTPP may differ from the calculation of similar measures used by other bank holding companies, PTPP should be used to determine and evaluate period to period trends in Citizens' performance and in comparison to Citizens' loan charge-offs, related credit provision, and credit writedowns, rather than in comparison to non-GAAP metrics used by other companies. In addition, investors should bear in mind that income tax expense (benefit), the provision for loan losses, and the other items excluded from revenues and expenses in the PTPP calculation are recurring and integral expenses to Citizens' banking operations, and that these expenses will still accrue under GAAP, thereby reducing GAAP earnings and, ultimately, shareholders' equity.
Net Interest Margin and Efficiency Ratio (non-GAAP financial measures)
In accordance with industry standards, certain designated net interest income amounts are presented on a taxable equivalent basis, including the calculation of net interest margin and the efficiency ratio. Citizens believes the presentation of net interest margin on a taxable equivalent basis using a 35% effective tax rate allows comparability of net interest margin with industry peers by eliminating the effect of the differences in portfolios attributable to the proportion represented by both taxable and tax-exempt investments. See the Selected Quarterly Information Table, the Non-GAAP Reconciliation Table, and the Average Balances, Yields and Rates Table later in this release for additional information.
Corporate Profile
Citizens Republic Bancorp, Inc. is a diversified financial services company providing a wide range of commercial, consumer, mortgage banking, trust and financial planning services to a broad client base. Citizens serves communities in Michigan, Ohio, Wisconsin, and Indiana with 218 offices and 252 ATMs. Citizens is the largest bank holding company headquartered in Michigan with roots dating back to 1871 and is the 52(nd) largest bank holding company headquartered in the United States. More information about Citizens is available at www.citizensbanking.com.
Safe Harbor Statement
Discussions and statements in this release that are not statements of historical fact, including without limitation, statements that include terms such as "will," "may," "should," "believe," "expect," "anticipate," "estimate," "project," "intend," and "plan," and statements regarding Citizens' future financial and operating results, plans, objectives, expectations and intentions, are forward-looking statements that involve risks and uncertainties, many of which are beyond Citizens' control or are subject to change. No forward-looking statement is a guarantee of future performance and actual results could differ materially. As an example, although we expect to substantially complete our problem assets resolution efforts in the first quarter of 2011, clients may be unwilling or unable to repay Citizens on a timely basis or renegotiate their loans, or there may be no market for Citizens to exit these loans or economic conditions could result in a more significant increase in nonperforming loans than expected. If any of these conditions occurs, Citizens may not be able to substantially complete the resolution of problem assets during the expected time frame, which could have a negative impact on its capital, results of operations and financial position, and could delay Citizens' return to profitability.
Other factors that could cause or contribute to actual results differing materially for Citizens' expectations include risks and uncertainties detailed from time to time in Citizens' annual and quarterly filings with the SEC, which are available at the SEC's web site www.sec.gov. Other factors not currently anticipated may also materially and adversely affect Citizens' results of operations, cash flows, financial position and prospects. There can be no assurance that future results will meet expectations. While Citizens believes that the forward-looking statements in this release are reasonable, you should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. Citizens does not undertake, and expressly disclaims any obligation to update or alter any statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Consolidated Balance Sheets (Unaudited)
Citizens Republic Bancorp and Subsidiaries
December September December
31, 30, 31,
(in thousands) 2010 2010 2009
-------------- ---- ---- ----
Assets
Cash and due from banks $127,585 $142,025 $156,093
Money market investments 409,079 530,169 686,285
Investment Securities:
Securities available for
sale, at fair value 2,049,528 2,258,452 2,076,794
Securities held to
maturity, at amortized
cost
(fair value of $469,421,
$118,155 and $116,368,
respectively) 474,832 112,029 114,249
------- ------- -------
Total investment
securities 2,524,360 2,370,481 2,191,043
FHLB and Federal Reserve
stock 143,873 157,304 155,084
Portfolio loans:
Commercial and industrial 1,474,227 1,657,383 1,921,755
Commercial real estate 2,120,735 2,503,685 2,811,539
--------- --------- ---------
Total commercial 3,594,962 4,161,068 4,733,294
Residential mortgage 756,245 800,521 1,025,248
Direct consumer 1,045,530 1,091,704 1,224,182
Indirect consumer 819,865 834,712 805,181
------- ------- -------
Total portfolio loans 6,216,602 6,888,005 7,787,905
Less: Allowance for loan
losses (296,031) (324,046) (338,940)
-------- -------- --------
Net portfolio loans 5,920,571 6,563,959 7,448,965
Loans held for sale 40,347 52,191 80,219
Premises and equipment 104,714 106,272 110,703
Goodwill 318,150 318,150 318,150
Other intangible assets 10,454 11,306 14,378
Bank owned life insurance 217,757 218,056 220,190
Other assets 148,755 168,991 214,560
Assets of discontinued
operations --- --- 335,961
--- --- -------
Total assets $9,965,645 $10,638,904 $11,931,631
========== =========== ===========
Liabilities
Noninterest-bearing
deposits $1,325,383 $1,297,579 $1,288,303
Interest-bearing demand
deposits 947,953 947,126 1,055,290
Savings deposits 2,600,750 2,704,589 2,460,114
Time deposits 2,852,748 3,151,652 3,697,056
--------- --------- ---------
Total deposits 7,726,834 8,100,946 8,500,763
Federal funds purchased
and securities sold
under agreements to
repurchase 41,699 42,334 32,900
Other short-term
borrowings 620 710 6,900
Other liabilities 152,072 152,531 124,718
Long-term debt 1,032,689 1,185,322 1,512,987
Liabilities of
discontinued operations --- --- 422,327
--- --- -------
Total liabilities 8,953,914 9,481,843 10,600,595
Shareholders' Equity
Preferred stock -no par
value 278,300 276,676 271,990
Common stock -no par
value 1,431,829 1,431,314 1,429,771
Retained deficit (678,242) (566,543) (363,632)
Accumulated other
comprehensive (loss)
income (20,156) 15,614 (7,093)
------- ------ ------
Total shareholders' equity 1,011,731 1,157,061 1,331,036
--------- --------- ---------
Total liabilities and
shareholders' equity $9,965,645 $10,638,904 $11,931,631
========== =========== ===========
Citizens Republic Bancorp and Three Months
Subsidiaries Ended
December 31,
(in thousands, except per share amounts) 2010 2009
---------------------------------------- ---- ----
Interest Income
Interest and fees on loans $91,785 $107,730
Interest and dividends on investment
securities:
Taxable 17,603 17,333
Tax-exempt 3,304 5,903
Dividends on FHLB and Federal Reserve
stock 1,013 750
Money market investments 319 368
--- ---
Total interest income 114,024 132,084
------- -------
Interest Expense
Deposits 19,587 32,027
Short-term borrowings 19 33
Long-term debt 12,687 18,112
------ ------
Total interest expense 32,293 50,172
------ ------
Net Interest Income 81,731 81,912
Provision for loan losses 131,296 84,007
------- ------
Net interest loss after provision for
loan losses (49,565) (2,095)
------- ------
Noninterest Income
Service charges on deposit accounts 10,072 10,826
Trust fees 4,135 4,211
Mortgage and other loan income 3,109 2,556
Brokerage and investment fees 1,264 1,061
ATM network user fees 1,825 1,631
Bankcard fees 2,325 1,879
Net loss on loans held for sale (3,069) (8,724)
Net loss on debt extinguishment --- ---
Investment securities (losses) gains (171) ---
Other income 4,538 834
----- ---
Total noninterest income 24,028 14,274
Noninterest Expense
Salaries and employee benefits 32,294 30,012
Occupancy 6,834 6,155
Professional services 2,945 2,991
Equipment 3,355 2,988
Data processing services 4,636 4,772
Advertising and public relations 1,512 1,551
Postage and delivery 1,075 1,286
Other loan expenses 5,431 5,631
Losses on other real estate (ORE) 930 8,089
ORE expenses 1,653 1,281
Intangible asset amortization 851 1,173
Goodwill impairment --- ---
Other expense 15,718 15,440
------ ------
Total noninterest expense 77,234 81,369
------ ------
Loss from Continuing Operations Before
Income Taxes (102,771) (69,190)
Income tax provision (benefit) from
continuing operations 3,383 (3,307)
----- ------
Loss from Continuing Operations (106,154) (65,883)
Discontinued operations:
Income (loss) from discontinued
operations (net of income tax) --- 1,155
--- -----
Net Loss (106,154) (64,728)
Dividend on redeemable preferred stock (5,545) (5,253)
------ ------
Net Loss Attributable to Common
Shareholders $(111,699) $(69,981)
========= ========
Loss Per Share from Continuing
Operations
Basic $(0.28) $(0.18)
Diluted (0.28) (0.18)
Loss Per Share from Discontinued
Operations
Basic $--- $---
Diluted --- ---
Net Loss Per Common Share:
Basic $(0.28) $(0.18)
Diluted (0.28) (0.18)
Average Common Shares Outstanding:
Basic 394,044 393,774
Diluted 394,044 393,774
Citizens Republic Bancorp and Twelve Months
Subsidiaries Ended
December 31,
(in thousands, except per share amounts) 2010 2009
---------------------------------------- ---- ----
Interest Income
Interest and fees on loans $390,587 $449,067
Interest and dividends on investment
securities:
Taxable 72,545 73,796
Tax-exempt 16,035 25,074
Dividends on FHLB and Federal Reserve
stock 3,776 4,216
Money market investments 1,501 1,257
----- -----
Total interest income 484,444 553,410
------- -------
Interest Expense
Deposits 98,526 151,511
Short-term borrowings 80 193
Long-term debt 56,774 91,257
------ ------
Total interest expense 155,380 242,961
------- -------
Net Interest Income 329,064 310,449
Provision for loan losses 392,882 323,820
------- -------
Net interest loss after provision for
loan losses (63,818) (13,371)
------- -------
Noninterest Income
Service charges on deposit accounts 40,336 42,116
Trust fees 15,603 14,784
Mortgage and other loan income 10,486 12,393
Brokerage and investment fees 4,579 5,194
ATM network user fees 7,057 6,283
Bankcard fees 8,859 7,714
Net loss on loans held for sale (20,617) (20,086)
Net loss on debt extinguishment --- (15,929)
Investment securities (losses) gains 13,896 5
Other income 14,460 10,659
------ ------
Total noninterest income 94,659 63,133
Noninterest Expense
Salaries and employee benefits 126,384 135,389
Occupancy 26,963 26,723
Professional services 10,550 11,877
Equipment 12,482 11,714
Data processing services 18,734 17,692
Advertising and public relations 6,530 7,113
Postage and delivery 4,571 5,525
Other loan expenses 20,311 24,553
Losses on other real estate (ORE) 13,438 23,312
ORE expenses 4,970 4,389
Intangible asset amortization 3,923 7,036
Goodwill impairment --- 256,272
Other expense 58,231 53,544
------ ------
Total noninterest expense 307,087 585,139
------- -------
Loss from Continuing Operations Before
Income Taxes (276,246) (535,377)
Income tax provision (benefit) from
continuing operations 12,858 (29,633)
------ -------
Loss from Continuing Operations (289,104) (505,744)
Discontinued operations:
Income (loss) from discontinued
operations (net of income tax) (3,821) (8,469)
------ ------
Net Loss (292,925) (514,213)
Dividend on redeemable preferred stock (21,685) (19,777)
------- -------
Net Loss Attributable to Common
Shareholders $(314,610) $(533,990)
========= =========
Loss Per Share from Continuing
Operations
Basic $(0.79) $(2.71)
Diluted (0.79) (2.71)
Loss Per Share from Discontinued
Operations
Basic $(0.01) $(0.04)
Diluted (0.01) (0.04)
Net Loss Per Common Share:
Basic $(0.80) $(2.75)
Diluted (0.80) (2.75)
Average Common Shares Outstanding:
Basic 393,921 193,833
Diluted 393,921 193,833
December September June
31, 30, 30,
2010 2010 2010
---- ---- ----
Summary of Operations (in thousands)
Net interest income $81,731 $81,558 $84,586
Provision for loan losses 131,296 89,617 70,614
Noninterest income (1) 24,028 25,956 22,282
Noninterest expense 77,234 74,740 77,010
Income tax provision (benefit) from
continuing operations 3,383 5,628 3,700
Loss from continuing operations (106,154) (62,471) (44,456)
Discontinued operations (after tax) --- --- 5,151
Net loss (106,154) (62,471) (39,305)
Net loss attributable to common shareholders
(2) (111,699) (67,922) (44,711)
Taxable equivalent adjustment, continuing
operations 2,247 2,372 2,605
Per Common Share Data
Net loss from continuing operations:
Basic $(0.28) $(0.17) $(0.12)
Diluted (0.28) (0.17) (0.12)
Discontinued operations:
Basic $--- $--- $0.01
Diluted --- --- 0.01
Net loss:
Basic $(0.28) $(0.17) $(0.11)
Diluted (0.28) (0.17) (0.11)
Common book value 1.85 2.22 2.37
Tangible book value (non-GAAP) 1.72 2.08 2.24
Tangible common book value (non-GAAP) 1.02 1.39 1.54
Shares outstanding, end of period (000) 397,167 397,071 396,979
At Period End, Continuing Operations (in
millions)
Assets $9,966 $10,639 $10,834
Earning assets 9,303 9,932 10,098
Portfolio loans 6,217 6,888 7,138
Allowance for loan losses 296 324 322
Deposits 7,727 8,101 8,222
Shareholders' equity 1,012 1,157 1,218
--------------------
Average for the Quarter, Continuing
Operations (in millions)
Assets $10,468 $10,803 $11,156
Earning assets 9,769 10,065 10,432
Portfolio loans 6,682 7,059 7,318
Allowance for loan losses 324 322 322
Deposits 7,965 8,198 8,431
Shareholders' equity 1,145 1,215 1,239
Financial Ratios, Continuing Operations
(annualized)
Return on average assets (4.02)% (2.29)% (1.60)%
Return on average shareholders' equity (36.78) (20.40) (14.40)
Average shareholders' equity / average assets 10.94 11.25 11.10
Net interest margin (FTE) (3) 3.42 3.32 3.35
Efficiency ratio (non-GAAP) (4) 71.39 68.02 75.93
Allowance for loan losses as a percent of
portfolio loans 4.76 4.70 4.51
Allowance for loan losses as a percent of
nonperforming loans 134.39 88.98 83.67
Allowance for loan losses as a percent of
nonperforming assets 103.30 73.10 68.11
Nonperforming loans as a percent of portfolio
loans 3.54 5.29 5.39
Nonperforming assets as a percent of
portfolio loans plus ORAA (5) 4.55 6.35 6.53
Nonperforming assets as a percent of total
assets 2.88 4.17 4.36
Net loans charged off as a percent of average
portfolio loans (annualized) 9.46 4.91 3.90
Leverage ratio 7.71 8.50 8.72
Tier 1 capital ratio 12.11 12.41 12.79
Total capital ratio 13.50 13.80 14.17
March December
31, 31,
2010 2009
---- ----
Summary of Operations (in thousands)
Net interest income $81,189 $81,912
Provision for loan losses 101,355 84,007
Noninterest income (1) 22,393 14,274
Noninterest expense 78,103 81,369
Income tax provision (benefit) from
continuing operations 147 (3,307)
Loss from continuing operations (76,023) (65,883)
Discontinued operations (after tax) (8,973) 1,155
Net loss (84,996) (64,728)
Net loss attributable to common shareholders
(2) (90,278) (69,981)
Taxable equivalent adjustment, continuing
operations 3,357 3,721
Per Common Share Data
Net loss from continuing operations:
Basic $(0.21) $(0.18)
Diluted (0.21) (0.18)
Discontinued operations:
Basic $(0.02) $---
Diluted (0.02) ---
Net loss:
Basic $(0.23) $(0.18)
Diluted (0.23) (0.18)
Common book value 2.46 2.69
Tangible book value (non-GAAP) 2.28 2.50
Tangible common book value (non-GAAP) 1.59 1.81
Shares outstanding, end of period (000) 394,392 394,397
At Period End, Continuing Operations (in
millions)
Assets $11,328 $11,596
Earning assets 10,595 10,864
Portfolio loans 7,439 7,788
Allowance for loan losses 322 339
Deposits 8,481 8,501
Shareholders' equity 1,244 1,331
--------------------
Average for the Quarter, Continuing
Operations (in millions)
Assets $11,575 $11,616
Earning assets 10,839 10,874
Portfolio loans 7,654 7,964
Allowance for loan losses 336 337
Deposits 8,544 8,353
Shareholders' equity 1,323 1,392
Financial Ratios, Continuing Operations
(annualized)
Return on average assets (2.66)% (2.25)%
Return on average shareholders' equity (23.30) (18.77)
Average shareholders' equity / average assets 11.43 11.99
Net interest margin (FTE) (3) 3.14 3.13
Efficiency ratio (non-GAAP) (4) 77.39 81.45
Allowance for loan losses as a percent of
portfolio loans 4.33 4.35
Allowance for loan losses as a percent of
nonperforming loans 77.94 71.43
Allowance for loan losses as a percent of
nonperforming assets 57.96 57.05
Nonperforming loans as a percent of portfolio
loans 5.56 6.09
Nonperforming assets as a percent of
portfolio loans plus ORAA (5) 7.32 7.50
Nonperforming assets as a percent of total
assets 4.91 5.12
Net loans charged off as a percent of average
portfolio loans (annualized) 6.25 4.05
Leverage ratio 8.47 9.21
Tier 1 capital ratio 12.12 12.52
Total capital ratio 13.49 13.93
(1) Noninterest income includes a gain on investment securities of
$8.0 million and $6.0 million in the second and the first quarter of
2010, respectively.
(2) Net loss attributable to common shareholders includes a non-
cash dividend to preferred shareholders of $5.5 million, $5.4
million, $5.3 million and $5.4 million in the fourth, third, second
and first quarters of 2010, respectively, and $5.3 million in the
fourth quarter of 2009.
(3) Net interest margin is presented on an annual basis, includes
taxable equivalent adjustments to interest income and is based on a
tax rate of 35%.
(4) The Efficiency ratio (non-GAAP) measures how efficiently a bank
spends its revenues. The formula is: (Noninterest expense -
Goodwill impairment)/(Net interest income + taxable equivalent
adjustment + Total noninterest income - Investment securities
(losses) gains).
(5) Other real estate assets acquired ("ORAA") includes loans held
for sale.
Non-GAAP Reconciliation
December September June March December
31, 30, 30, 31, 31,
2010 2010 2010 2010 2009
---- ---- ---- ---- ----
Efficiency Ratio (non-
GAAP) (in thousands)
Net interest income (A) $81,731 $81,558 $84,586 $81,189 $81,912
Taxable equivalent
adjustment (B) 2,247 2,372 2,605 3,357 3,721
Investment securities
(losses) gain (C) (171) --- 8,051 6,016 ---
Noninterest income (D) 24,028 25,956 22,282 22,393 14,274
Noninterest expense (E) 77,234 74,740 77,010 78,103 81,369
Efficiency ratio: E/
(A+B-C+D) (non-GAAP) 71.39% 68.02% 75.93% 77.39% 81.45%
Ending Balances (in
millions)
Tangible Common Equity
to Tangible Assets
Total assets(1) $9,966 $10,639 $10,834 $11,652 $11,932
Goodwill(2) (318) (318) (318) (331) (331)
Other intangible assets (11) (11) (12) (13) (14)
--- --- --- --- ---
Tangible assets (non-
GAAP) $9,637 $10,310 $10,504 $11,308 $11,587
====== ======= ======= ======= =======
Total shareholders'
equity $1,012 $1,157 $1,218 $1,244 $1,331
Goodwill(2) (318) (318) (318) (331) (331)
Other intangible assets (11) (11) (12) (13) (14)
--- --- --- --- ---
Tangible equity (non-
GAAP) $683 $828 $888 $900 $986
==== ==== ==== ==== ====
Tangible equity $683 $828 $888 $900 $986
Preferred stock (278) (277) (275) (274) (272)
---- ---- ---- ---- ----
Tangible common equity
(non-GAAP) $405 $551 $613 $626 $714
==== ==== ==== ==== ====
Tier 1 Common Equity
Total shareholders'
equity $1,012 $1,157 $1,218 $1,244 $1,331
Qualifying capital
securities 74 74 74 74 74
Goodwill(2) (318) (318) (318) (331) (331)
Accumulated other
comprehensive loss
(income) 20 (16) (10) 6 7
Other intangible assets (11) (11) (12) (13) (14)
--- --- --- --- ---
Tier 1 capital
(regulatory) $777 $886 $952 $980 $1,067
==== ==== ==== ==== ======
Tier 1 capital
(regulatory) $777 $886 $952 $980 $1,067
Qualifying capital
securities (74) (74) (74) (74) (74)
Preferred stock (278) (277) (275) (274) (272)
---- ---- ---- ---- ----
Total Tier 1 common
equity (non-GAAP) $425 $535 $603 $632 $721
==== ==== ==== ==== ====
Net risk-weighted
assets (regulatory)(3) $6,417 $7,133 $7,432 $8,083 $8,541
Equity to assets 10.15% 10.88% 11.24% 10.68% 11.16%
Tier 1 common equity
(non-GAAP) 6.62 7.50 8.10 7.82 8.47
Tangible equity to
tangible assets (non-
GAAP) 7.09 8.03 8.45 7.96 8.51
Tangible common equity
to tangible assets
(non-GAAP) 4.20 5.34 5.83 5.54 6.16
(1) Total asset represents assets for continuing operations, as
shown on the balance sheet, and includes assets of discontinued
operations of $324 million in the first quarter of 2010 and $336
million in the fourth quarter of 2009.
(2) Goodwill represents goodwill for continuing operations, as shown
on the balance sheet, and includes goodwill for discontinued
operations of $12.6 million in the first quarter of 2010 and the
fourth quarter of 2009.
(3) Net risk-weighted assets (regulatory) for second quarter 2010
and fourth quarter 2009 were calculated on a combined basis.
Noninterest Income and Noninterest Expense
Three Months Ended
December September March December
31, 30, June 30, 31, 31,
(in thousands) 2010 2010 2010 2010 2009
-------------- ---- ---- ---- ---- ----
Service charges on
deposit accounts $10,072 $10,609 $9,971 $9,684 $10,826
Trust fees 4,135 3,837 3,836 3,795 4,211
Mortgage and other loan
income 3,109 2,590 2,198 2,589 2,556
Brokerage and
investment fees 1,264 1,060 1,322 933 1,061
ATM network user fees 1,825 1,864 1,771 1,597 1,631
Bankcard fees 2,325 2,261 2,266 2,007 1,879
Net loss on loans held
for sale (3,069) (1,441) (8,405) (7,702) (8,724)
Investment securities
(losses) gains (171) --- 8,051 6,016 ---
Other income 4,538 5,176 1,272 3,474 834
----- ----- ----- ----- ---
Total noninterest
income $24,028 $25,956 $22,282 $22,393 $14,274
======= ======= ======= ======= =======
Salaries and employee
benefits $32,294 $32,740 $31,403 $29,947 $30,012
Occupancy 6,834 6,529 6,139 7,461 6,155
Professional services 2,945 2,737 2,615 2,253 2,991
Equipment 3,355 3,076 2,979 3,072 2,988
Data processing
services 4,636 4,702 4,767 4,629 4,772
Advertising and public
relations 1,512 1,605 2,116 1,297 1,551
Postage and delivery 1,075 1,187 1,295 1,014 1,286
Other loan expenses 5,431 4,355 4,551 5,974 5,631
Losses on other real
estate (ORE) 930 1,967 3,778 6,763 8,089
ORE expenses 1,653 1,327 800 1,190 1,281
Intangible asset
amortization 851 908 1,034 1,130 1,173
Other expense 15,718 13,607 15,533 13,373 15,440
------ ------ ------ ------ ------
Total noninterest
expense $77,234 $74,740 $77,010 $78,103 $81,369
======= ======= ======= ======= =======
Average Balances, Yields and Rates Three Months Ended
December 31, 2010
Average Average
(in thousands) Balance Rate
-------------- ------- ----
Earning Assets
Money market investments $512,068 0.25%
Investment securities:
Taxable 2,076,584 3.39
Tax-exempt 300,838 6.76
FHLB and Federal Reserve stock 150,871 2.67
Portfolio loans:
Commercial and industrial 1,583,285 4.67
Commercial real estate 2,422,033 5.31
Residential mortgage 778,572 4.90
Direct consumer 1,068,615 6.11
Indirect consumer 829,969 6.84
-------
Total portfolio loans 6,682,474 5.43
Loans held for sale 45,993 7.72
------
Total earning assets 9,768,828 4.73
Nonearning Assets
Cash and due from banks 146,433
Premises and equipment 105,509
Investment security fair value
adjustment 63,711
Other nonearning assets 707,579
Assets of discontinued operations ---
Allowance for loan losses (323,742)
--------
Total assets $10,468,318
===========
Interest-Bearing Liabilities
Deposits:
Interest-bearing demand deposits $941,221 0.24
Savings deposits 2,629,442 0.49
Time deposits 3,035,501 2.06
Short-term borrowings 41,591 0.18
Long-term debt 1,159,760 4.34
---------
Total interest-bearing liabilities 7,807,515 1.64
Noninterest-Bearing Liabilities and
Shareholders' Equity
Noninterest-bearing deposits 1,358,685
Other liabilities 156,920
Liabilities of discontinued operations ---
Shareholders' equity 1,145,198
---------
Total liabilities and shareholders'
equity $10,468,318
===========
Interest Spread 3.09
Contribution of noninterest bearing
sources of funds 0.33
----
Net Interest Margin 3.42%
====
Average Balances, Yields and Rates Three Months Ended
September 30, 2010
Average Average
(in thousands) Balance Rate
-------------- ------- ----
Earning Assets
Money market investments $560,792 0.25%
Investment securities:
Taxable 1,911,268 3.78
Tax-exempt 321,256 6.73
FHLB and Federal Reserve stock 157,304 1.86
Portfolio loans:
Commercial and industrial 1,685,249 4.70
Commercial real estate 2,595,787 5.34
Residential mortgage 839,455 4.89
Direct consumer 1,112,768 6.03
Indirect consumer 825,885 6.82
-------
Total portfolio loans 7,059,144 5.42
Loans held for sale 55,054 2.14
------
Total earning assets 10,064,818 4.79
Nonearning Assets
Cash and due from banks 154,119
Premises and equipment 106,503
Investment security fair value
adjustment 65,693
Other nonearning assets 733,974
Assets of discontinued operations ---
Allowance for loan losses (321,865)
--------
Total assets $10,803,242
===========
Interest-Bearing Liabilities
Deposits:
Interest-bearing demand deposits $975,588 0.26
Savings deposits 2,591,083 0.63
Time deposits 3,318,137 2.24
Short-term borrowings 36,888 0.22
Long-term debt 1,202,901 4.51
---------
Total interest-bearing liabilities 8,124,597 1.82
Noninterest-Bearing Liabilities and
Shareholders' Equity
Noninterest-bearing deposits 1,312,957
Other liabilities 150,601
Liabilities of discontinued operations ---
Shareholders' equity 1,215,087
---------
Total liabilities and shareholders'
equity $10,803,242
===========
Interest Spread 2.97
Contribution of noninterest bearing
sources of funds 0.35
----
Net Interest Margin 3.32%
====
Average Balances, Yields and Rates Three Months Ended
December 31, 2009
Average Average
(in thousands) Balance Rate
-------------- ------- ----
Earning Assets
Money market investments $583,586 0.25%
Investment securities:
Taxable 1,562,019 4.44
Tax-exempt 551,140 6.59
FHLB and Federal Reserve stock 155,084 1.93
Portfolio loans:
Commercial and industrial 1,973,499 4.88
Commercial real estate 2,882,787 5.24
Residential mortgage 1,045,893 4.73
Direct consumer 1,246,596 6.04
Indirect consumer 815,261 6.81
-------
Total portfolio loans 7,964,036 5.37
Loans held for sale 58,611 3.78
------
Total earning assets 10,874,476 4.97
Nonearning Assets
Cash and due from banks 152,384
Premises and equipment 111,808
Investment security fair value
adjustment 47,741
Other nonearning assets 766,842
Assets of discontinued operations 349,377
Allowance for loan losses (336,763)
--------
Total assets $11,965,865
===========
Interest-Bearing Liabilities
Deposits:
Interest-bearing demand deposits $1,022,155 0.38
Savings deposits 2,468,012 0.70
Time deposits 3,604,488 2.94
Short-term borrowings 46,097 0.29
Long-term debt 1,607,566 4.47
---------
Total interest-bearing liabilities 8,748,318 2.28
Noninterest-Bearing Liabilities and
Shareholders' Equity
Noninterest-bearing deposits 1,258,832
Other liabilities 143,348
Liabilities of discontinued operations 422,882
Shareholders' equity 1,392,485
---------
Total liabilities and shareholders'
equity $11,965,865
===========
Interest Spread 2.69
Contribution of noninterest bearing
sources of funds 0.44
----
Net Interest Margin 3.13%
====
Average Balances, Yields and Rates Twelve Months Ended
December 31,
2010
Average Average
(in thousands) Balance Rate
-------------- ------- ----
Earning Assets
Money market investments $605,217 0.25%
Investment securities
Taxable 1,901,195 3.82
Tax-exempt 366,044 6.74
FHLB and Federal Reserve stock 154,959 2.44
Portfolio loans:
Commercial and industrial 1,728,712 4.80
Commercial real estate 2,631,901 5.30
Residential mortgage 867,500 5.06
Direct consumer 1,133,691 6.07
Indirect consumer 813,845 6.84
-------
Total portfolio loans 7,175,649 5.44
Loans held for sale 69,705 2.76
------
Total earning assets 10,272,769 4.82
Nonearning Assets
Cash and due from banks 163,203
Premises and equipment 107,382
Investment security fair value adjustment 54,451
Other nonearning assets 725,101
Assets of discontinued operations 108,615
Allowance for loan losses (325,844)
--------
Total assets $11,105,677
===========
Interest-Bearing Liabilities
Deposits:
Interest-bearing demand deposits $1,008,871 0.27
Savings deposits 2,561,596 0.62
Time deposits 3,405,281 2.35
Short-term borrowings 36,744 0.22
Long-term debt 1,280,839 4.43
---------
Total interest-bearing liabilities 8,293,331 1.87
Noninterest-Bearing Liabilities and
Shareholders' Equity
Noninterest-bearing deposits 1,306,881
Other liabilities 146,669
Liabilities of discontinued operations 128,851
Shareholders' equity 1,229,945
---------
Total liabilities and shareholders'
equity $11,105,677
===========
Interest Spread 2.95
Contribution of noninterest bearing
sources of funds 0.36
----
Net Interest Margin 3.31%
====
Average Balances, Yields and Rates Twelve Months Ended
December 31,
2009
Average Average
(in thousands) Balance Rate
-------------- ------- ----
Earning Assets
Money market investments $502,584 0.25%
Investment securities
Taxable 1,571,960 4.69
Tax-exempt 585,036 6.59
FHLB and Federal Reserve stock 152,762 2.76
Portfolio loans:
Commercial and industrial 2,183,525 4.70
Commercial real estate 2,905,011 5.30
Residential mortgage 1,135,289 5.03
Direct consumer 1,313,718 6.06
Indirect consumer 811,844 6.79
-------
Total portfolio loans 8,349,387 5.37
Loans held for sale 75,485 3.61
------
Total earning assets 11,237,214 5.06
Nonearning Assets
Cash and due from banks 158,568
Premises and equipment 114,667
Investment security fair value adjustment 19,725
Other nonearning assets 900,810
Assets of discontinued operations 356,141
Allowance for loan losses (304,016)
--------
Total assets $12,483,109
===========
Interest-Bearing Liabilities
Deposits:
Interest-bearing demand deposits $929,152 0.43
Savings deposits 2,521,100 0.78
Time deposits 3,867,946 3.31
Short-term borrowings 51,291 0.38
Long-term debt 1,904,455 4.79
---------
Total interest-bearing liabilities 9,273,944 2.62
Noninterest-Bearing Liabilities and
Shareholders' Equity
Noninterest-bearing deposits 1,191,478
Other liabilities 155,401
Liabilities of discontinued operations 417,553
Shareholders' equity 1,444,733
---------
Total liabilities and shareholders'
equity $12,483,109
===========
Interest Spread 2.44
Contribution of noninterest bearing
sources of funds 0.46
----
Net Interest Margin 2.90%
====
Summary of Loan Loss Experience
Three Months Ended
December June
31, September 30, 30,
(in thousands) 2010 2010 2010
-------------- ---- ---- ----
Allowance for loan losses -
beginning of period $324,046 $321,841 $322,377
Provision for loan losses 131,296 89,617 70,614
Charge-offs:
Commercial and industrial 24,634 6,083 10,943
Small business 2,747 2,061 1,398
Commercial real estate 119,986 45,910 51,183
------- ------ ------
Total commercial 147,367 54,054 63,524
Residential mortgage 6,141 23,353 705
Direct consumer 7,701 10,256 5,907
Indirect consumer 3,647 2,808 4,028
----- ----- -----
Total charge-offs 164,856 90,471 74,164
------- ------ ------
Recoveries:
Commercial and industrial 1,017 1,321 899
Small business 309 89 38
Commercial real estate 2,813 579 829
----- --- ---
Total commercial 4,139 1,989 1,766
Residential mortgage 42 15 80
Direct consumer 587 452 386
Indirect consumer 777 603 782
--- --- ---
Total recoveries 5,545 3,059 3,014
----- ----- -----
Net charge-offs 159,311 87,412 71,150
------- ------ ------
Allowance for loan losses -end of
period $296,031 $324,046 $321,841
======== ======== ========
Reserve for loan commitments -end
of period $1,933 $1,933 $2,522
====== ====== ======
Summary of Loan Loss Experience
Three Months Ended
March December
31, 31,
(in thousands) 2010 2009
-------------- ---- ----
Allowance for loan losses -
beginning of period $338,940 $336,270
Provision for loan losses 101,355 84,007
Charge-offs:
Commercial and industrial 12,356 23,103
Small business 1,169 1,640
Commercial real estate 15,976 41,096
------ ------
Total commercial 29,501 65,839
Residential mortgage 80,729 6,031
Direct consumer 7,528 6,502
Indirect consumer 3,813 6,873
----- -----
Total charge-offs 121,571 85,245
------- ------
Recoveries:
Commercial and industrial 623 1,887
Small business 46 345
Commercial real estate 1,319 656
----- ---
Total commercial 1,988 2,888
Residential mortgage 583 21
Direct consumer 453 409
Indirect consumer 629 590
--- ---
Total recoveries 3,653 3,908
----- -----
Net charge-offs 117,918 81,337
------- ------
Allowance for loan losses -end of
period $322,377 $338,940
======== ========
Reserve for loan commitments -end
of period $2,624 $3,118
====== ======
SOURCE Citizens Republic Bancorp, Inc.
