Citizens Republic Bancorp Reports Solid Third Quarter Results

        Citizens Republic Bancorp Reports Solid Third Quarter Results

PR Newswire

FLINT, Mich., Oct. 25, 2012

FLINT, Mich., Oct. 25, 2012 /PRNewswire/ --

  oNet income attributable to common shareholders was $15 million or $0.37
    per share for the third quarter, which includes over $4 million in pre-tax
    merger-related expenses
  oCredit metric trends reflect continued stability and improved performance
    across the loan portfolio
  oPre-tax, pre-provision profit remained strong at $33 million
  oAnnounced agreement to merge with FirstMerit Corporation in a
    stock-for-stock transaction

Citizens Republic Bancorp, Inc. (Nasdaq: CRBC) announced net income
attributable to common shareholders of $14.9 million or $0.37 per diluted
share for the three months ended September 30, 2012, compared to $297.1
million or $7.35 per diluted share for last quarter, and $27.2 million or
$0.68 per diluted share for the third quarter of last year. For the first
nine months of this year, Citizens recorded net income attributable to common
shareholders of $330.9 million or $8.19 per share compared to a net loss of
$28.7 million or $0.73 per share for the same period of 2011. Year to date
2012 results include a $275.5 million or $6.82 per share tax benefit related
to the elimination of the valuation allowance against the deferred tax asset
in the second quarter.

"Last month we announced that we entered into a definitive merger agreement
with FirstMerit Corporation. We are excited about the transaction which
creates a unique, contiguous, Midwest franchise of significant size and
scale. Until the transaction closes, we continue to successfully execute our
strategic initiatives, driving our consistent earnings and organically growing
our strong capital position," commented Cathleen Nash, president and chief
executive officer.

Balance Sheet

Total assets increased modestly from last quarter. Increases in the investment
securities portfolio and money market investments more than offset decreases
in the loan portfolio. Citizens continues to focus on C&I and consumer
lending. Over the past year, growth within the C&I and indirect consumer
portfolios helped to mitigate balance reductions in the commercial real estate
and residential mortgage portfolios.

Total deposit balances grew slightly, as growth in low cost core deposit
balances was partially offset by strategic reductions in more expensive single
service and brokered time deposits. These initiatives have resulted in core
deposit growth of 6% and a 23% reduction in time deposits compared to
September 30, 2011.

Capital

Citizens continues to grow capital organically through earnings and maintains
a strong capital position.

                       Regulatory
Capital Ratios                            September 30, June 30, September 30,
                       Minimum for "Well-
                       Capitalized"       2012          2012     2011
Leverage ratio         5.00%              9.66%         9.77%    8.21%
Tier 1 capital ratio   6.00               15.09         14.70    12.81
Total capital ratio    10.00              16.35         15.96    14.14
Tier 1 common equity                      8.83          8.50     6.77
(non-GAAP)
Tangible equity to
tangible assets                           11.00         10.82    7.36
(non-GAAP)
Tangible common equity to tangible        7.91          7.73     4.31
assets (non-GAAP)



Net Interest Income and Margin

Net interest margin was 3.57% in the third quarter, a three basis point
decrease from last quarter and a six basis point decrease from the third
quarter of last year. The decreases were a result of the continued low
interest rate environment and competitive pressures on our loan portfolio,
partially offset by reduced funding costs. Year to date, net interest margin
increased one basis point over last year to 3.58%.

Net interest income for the third quarter of 2012 was $75.8 million,
consistent with last quarter and a decrease of $3.0 million from the third
quarter of last year. The decrease from the third quarter of last year
reflects lower net interest margin and a reduction in average earning assets.
For the nine months ended September 30, 2012, net interest income decreased
$7.5 million or 3% compared to the same period last year due to a reduction in
average earning assets.

Credit Quality

Credit quality benefits from proactive credit management as well as returning
economic stability.

  oTotal delinquencies decreased 3% from last quarter to $31.6 million and
    currently represent 0.58% of portfolio loans.
  oNonperforming assets were $86.2 million at the end of September 2012, an
    8% decrease from the end of June 2012 and a decrease of 37% from September
    30 of last year due to proactively managing and resolving delinquent
    commercial and consumer loans and improving the risk profile of the loan
    portfolio.
  oNet charge-offs for the third quarter decreased to $19.2 million, compared
    to $22.2 million last quarter and $33.4 million in the third quarter of
    last year. The provision for loan losses was $5.2 million in the third
    quarter, substantially the same as the second quarter of 2012.
  oThe allowance for loan losses was $122.1 million or 2.25% of portfolio
    loans at September 30, 2012, compared to $136.1 million or 2.47% at the
    end of the prior quarter, and $190.4 million or 3.36% at the end of the
    third quarter last year.

Noninterest Income and Expense

Citizens' focus on services and products helps support a stable base of fee
income. Total noninterest income increased $1.4 million over last quarter and
decreased $0.7 million compared to the third quarter last year.

  oService charges were consistent with the second quarter of 2012. Service
    charges on deposit accounts were down 8% compared to the third quarter of
    last year primarily as a result of regulatory changes.
  oBrokerage and investment fees were up 38% compared to last quarter and 54%
    compared to the third quarter of 2011 due to focused efforts to increase
    accounts and sales.
  oMinimal losses on loans held for sale were realized this quarter compared
    to gains in prior periods.
  oOther income increased compared to last quarter primarily due to higher
    unrealized gains on deferred compensation, which was offset in noninterest
    expense.

Noninterest expense increased $5.7 million over last quarter and $6.6 million
over the third quarter of last year, primarily due to merger-related expenses
and ORE losses.

  oProfessional services increased compared to prior periods as a result of
    merger-related expenses of $4.4 million.
  oOverall, credit costs remained consistent. However, losses on ORE
    increased $1.1 million during the quarter primarily related to a writedown
    on a single commercial ORE property.
  oSalaries and employee benefit costs increased compared to last quarter due
    to higher deferred compensation expense.
  oData processing services increased over prior periods as a negotiated
    reduction in expense expired.

Year to date, noninterest expense decreased $11.0 million from 2011 as lower
credit costs were partially offset by higher salaries and employee benefits
and merger-related expenses.

Income Taxes and Deferred Tax Asset

Citizens recorded income tax expense of $1.3 million for the third quarter of
2012, compared to a benefit of $12.6 million for the third quarter of 2011.
For the first nine months of 2012, the income tax benefit totaled $275.5
million, compared with a benefit of $22.8 million for the same period of
2011. The tax benefit for the three months ended September 30, 2011 was
largely due to Citizens recording a receivable as a result of a revocation of
a tax election. The increase in tax benefit for the nine months ended
September 30, 2012 was primarily the result of eliminating the valuation
allowance against our deferred tax asset.

Conference Call

Citizens' senior management will review the quarter's results in a conference
call at 10:00 a.m. ET on Friday, October 26, 2012. A live audio webcast is
available on Citizens' investor relations page at www.citizensbanking.com or
by calling (866) 952-1906 (conference ID: Citizens Republic). To listen to
the conference call, please connect approximately 10 minutes prior to the
scheduled conference time. A recording will be available approximately two
hours after the completion of the conference call at www.citizensbanking.com,
where it will be archived for 90 days.

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, the efficiency ratio, and adjusted
earnings per share. 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 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. See our related Form 8-K for
further discussion regarding these non-GAAP financial measures.

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, and Wisconsin with 219 offices and 249 ATMs.
Citizens is the largest bank holding company headquartered in Michigan with
roots dating back to 1871 and is the 57^th 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.

Factors that could cause or contribute to actual results differing materially
from Citizens' expectations include the risks and uncertainties detailed from
time to time in Citizens' annual and quarterly filings with the SEC, which are
available at the SEC's website 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, Inc.
                                  September 30,  June 30,       September 30,
(in thousands)                    2012           2012           2011
Assets
 Cash and due from banks          $  162,705   $   145,432  $   147,418
 Money market investments         223,818        203,861        283,018
 Investment Securities:
  Securities available for     1,541,567      1,480,290      1,307,977
 sale, at fair value
  Securities held to
 maturity, at amortized cost
  (fair value of
 $1,378,310, $1,349,429 and       1,313,504      1,296,164      1,454,873
 $1,491,048, respectively)
  Total investment      2,855,071      2,776,454      2,762,850
 securities
 FHLB and Federal Reserve stock   122,123        122,123        123,696
 Portfolio loans:
  Commercial and industrial    1,688,996      1,711,411      1,531,492
  Commercial real estate       1,335,601      1,417,409      1,643,901
  Total commercial      3,024,597      3,128,820      3,175,393
  Residential mortgage         570,295        588,144        654,561
  Direct consumer              865,777        881,070        954,831
  Indirect consumer            970,235        923,714        887,542
  Total portfolio       5,430,904      5,521,748      5,672,327
 loans
  Less: Allowance for loan     (122,125)      (136,120)      (190,354)
 losses
  Net portfolio loans   5,308,779      5,385,628      5,481,973
 Loans held for sale              30,062         14,518         30,221
 Premises and equipment           92,005         93,646         98,954
 Goodwill                         318,150        318,150        318,150
 Other intangible assets          5,792          6,305          8,116
 Bank owned life insurance        222,610        221,965        219,248
 Other assets                     383,675        382,411        126,544
 Total assets                    $ 9,724,790   $ 9,670,493   $  9,600,188
Liabilities
 Noninterest-bearing deposits     $ 1,854,715   $ 1,796,531   $  1,621,451
 Interest-bearing demand          1,092,679      1,025,305      945,458
 deposits
 Savings deposits                 2,574,642      2,607,718      2,652,267
 Core deposits                    5,522,036      5,429,554      5,219,176
 Time deposits                    1,780,929      1,858,155      2,320,728
  Total deposits         7,302,965      7,287,709      7,539,904
 Federal funds purchased and
 securities sold
  under agreements to        42,796         39,169         40,599
 repurchase
 Other short-term borrowings      ---            ---            640
 Other liabilities                168,351        154,718        154,232
 Long-term debt                   852,481        853,042        855,670
 Total liabilities                8,366,593      8,334,638      8,591,045
Shareholders' Equity
 Preferred stock - no par value   290,580        288,723        283,360
 Common stock - no par value      1,436,925      1,435,920      1,433,765
 Retained deficit                 (363,659)      (378,520)      (706,907)
 Accumulated other comprehensive  (5,649)        (10,268)       (1,075)
 loss
 Total shareholders' equity       1,358,197      1,335,855      1,009,143
  Total liabilities and          $ 9,724,790   $ 9,670,493   $  9,600,188
 shareholders' equity





Consolidated Statements
of Operations (Unaudited)
Citizens Republic          Three Months Ended        Nine Months Ended
Bancorp, Inc.
                           September 30,             September 30,
(in thousands, except per  2012         2011         2012         2011
share amounts)
Interest Income
 Interest and fees on    $  73,376   $  77,212   $ 222,205    $ 235,600
loans
 Interest and dividends
on investment securities:
 Taxable              16,034       20,508       49,356       60,664
 Tax-exempt           2,157        2,613        6,610        8,412
 Dividends on FHLB and   1,196        974          3,487        3,143
Federal Reserve stock
 Money market            152          168          481          670
investments
 Total interest       92,915       101,475      282,139      308,489
income
Interest Expense
 Deposits                8,779        13,528       29,243       44,945
 Short-term borrowings   11           20           42           57
 Long-term debt          8,320        9,086        25,251       28,426
 Total interest       17,110       22,634       54,536       73,428
expense
Net Interest Income        75,805       78,841       227,603      235,061
Provision for loan losses  5,195        17,481       18,891       123,801
 Net interest income
after provision for loan   70,610       61,360       208,712      111,260
losses
Noninterest Income
 Service charges on      9,554        10,362       27,894       29,544
deposit accounts
 Trust fees              3,635        3,622        10,818       11,356
 Mortgage and other      2,028        2,089        5,839        6,915
loan income
 Brokerage and           1,831        1,188        4,486        3,829
investment fees
 Card-based and other    4,431        4,475        13,140       12,862
nondeposit fees
 Net (losses) gains on   (184)        1,952        739          2,025
loans held for sale
 Investment securities   ---          3            ---          (1,373)
gains (losses)
 Other income            2,415        736          7,380        5,737
 Total noninterest    23,710       24,427       70,296       70,895
income
Noninterest Expense
 Salaries and employee   33,589       30,280       99,687       92,563
benefits
 Occupancy               6,129        6,125        18,965       19,734
 Professional services   6,806        2,394        11,294       7,020
 Equipment               2,937        2,918        9,144        8,811
 Data processing         4,427        3,823        12,196       12,422
services
 Advertising and public  1,847        2,179        4,890        4,550
relations
 Postage and delivery    1,157        1,142        3,375        3,378
 Other loan expenses     3,121        3,941        9,574        12,510
 Losses on other real    941          1,210        382          11,687
estate (ORE)
 ORE expenses            323          529          1,039        3,326
 Intangible asset        513          732          1,636        2,338
amortization
 Other expense           10,265       10,138       33,312       38,172
 Total noninterest    72,055       65,411       205,494      216,511
expense
Income (Loss) before       22,265       20,376       73,514       (34,356)
Income Taxes
Income tax provision       1,274        (12,568)     (275,514)    (22,779)
(benefit)
Net Income (Loss)          20,991       32,944       349,028      (11,577)
Dividend on redeemable     (6,130)      (5,761)      (18,127)     (17,088)
preferred stock
Net Income (Loss)
Attributable to Common     $  14,861   $  27,183   $ 330,901    $ (28,665)
Shareholders
Net Income (Loss) Per
Common Share:
 Basic                   $   0.37  $   0.68  $   8.19  $   (0.73)
 Diluted                 0.37         0.68         8.19         (0.73)
Average Common Shares
Outstanding:
 Basic                   39,489       39,433       39,469       39,418
 Diluted                 39,489       39,433       39,469       39,418





Selected Quarterly Information (Unaudited)
               Three Months Ended
               September     June 30,      March 31,     December      September
               30,                                       31,           30,
(in thousands,
except per     2012          2012          2012          2011          2011
share amounts)
Summary of
Operations
Net interest   $         $           $           $          $   
income          75,805      75,680       76,119       78,049       78,841
Provision for  5,195         5,299         8,397         15,007        17,481
loan losses
Noninterest    23,710        22,345        24,240        24,363        24,427
income
Noninterest    72,055        66,339        67,101        66,640        65,411
expense
Income before  22,265        26,387        24,861        20,765        20,376
income taxes
Income tax
provision      1,274         (276,789)     ---           2,521         (12,568)
(benefit)^(1)
Net income     20,991        303,176       24,861        18,244        32,944
Net income
attributable
to common      14,861        297,134       18,906        12,347        27,183
shareholders
^(2)
Taxable
equivalent     1,503         1,532         1,571         1,670         1,827
adjustment
Per Common
Share Data
^(3)
Net income:
 Basic    $         $         $         $         $    
                  0.37    7.35         0.47          0.31        0.68
 Diluted 0.37          7.35          0.47          0.31          0.68
Common book    26.36         25.85         18.83         18.24         18.03
value
Tangible book
value          25.53         24.97         17.88         17.24         16.96
(non-GAAP)
Tangible
common book    18.36         17.84         10.75         10.16         9.92
value
(non-GAAP)
Shares
outstanding,   40,508,823    40,504,637    40,247,241    40,260,213    40,255,758
end of period
^(4)
At Period End
Assets         $          $             $             $            $ 
               9,724,790     9,670,493    9,577,346    9,462,849    9,600,188
Earning assets 8,600,731     8,588,343     8,774,119     8,680,995     8,824,183
Portfolio      5,430,904     5,521,748     5,528,063     5,529,535     5,672,327
loans
Allowance for  122,125       136,120       153,007       172,726       190,354
loan losses
Deposits       7,302,965     7,287,709     7,490,362     7,394,941     7,539,904
Long-term debt 852,481       853,042       853,599       854,185       855,670
Shareholders'  1,358,197     1,335,855     1,044,619     1,019,537     1,009,143
equity
Average for
the Quarter
Assets         $          $             $             $            $ 
               9,723,587     9,429,050    9,521,386    9,523,184    9,596,275
Earning assets 8,638,390     8,622,067     8,750,078     8,761,435     8,856,072
Portfolio      5,501,400     5,517,726     5,508,528     5,632,432     5,663,058
loans
Allowance for  135,968       152,154       172,509       190,163       206,119
loan losses
Deposits       7,323,753     7,317,653     7,441,693     7,452,137     7,546,615
Long-term debt 852,776       853,333       853,912       856,206       862,479
Shareholders'  1,345,817     1,061,519     1,028,494     1,017,082     991,602
equity
Financial Ratios
(annualized)
Return on      0.86       %  12.93      %  1.05       %  0.76       %  1.36       %
average assets
Return on
average        6.20          114.87        9.72          7.12          13.18
shareholders'
equity
Average
shareholders'  13.84         11.26         10.80         10.68         10.33
equity /
average assets
Net interest
margin (FTE)   3.57          3.60          3.56          3.62          3.63
^(5)
Efficiency
ratio          65.20         65.99         65.20         61.39         59.89
(non-GAAP)^(6)
Allowance for
loan losses as
a percent of   2.25          2.47          2.77          3.12          3.36
portfolio
loans
Allowance for
loan losses as
a percent of   191.29        161.53        202.56        197.56        190.09
nonperforming
loans^(7)
Allowance for
loan losses as
a percent of   141.69        144.85        168.87        168.97        139.01
nonperforming
assets^(7)
Nonperforming
loans as a
percent of     1.18          1.53          1.37          1.58          1.77
portfolio
loans^(7)
Nonperforming
assets as a
percent of     1.58          1.69          1.63          1.84          2.39
total loans
plus
ORAA^(7)(8)
Nonperforming
assets as a
percent of     0.89          0.97          0.95          1.08          1.43
total
assets^(7)
Ratio of net
charge-offs
during period  1.39          1.62          2.05          2.30          2.34
to average
portfolio
loans
Leverage ratio 9.66          9.77          8.71          8.45          8.21
Tier 1 capital 15.09         14.70         13.70         13.51         12.81
ratio
Total capital  16.35         15.96         14.97         14.84         14.14
ratio
^(1)Second quarter 2012 benefit is directly related to the restoration of the
deferred tax asset.
^(2)Net income attributable to common shareholders includes a non-cash dividend to
preferred shareholders of $6.0 million in the third, second, and first quarters of
2012 and $5.9 million, and $5.8 million in the fourth, and third quarters of 2011.
^(3) Earnings per share in the second quarter of 2012 includes a tax benefit of
$6.85 per share related to restoring the deferred tax asset.
^(4)Includes participating shares which are restricted stock units and restricted
shares.
^(5)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%.
^(6)Efficiency ratio (non-GAAP) is calculated as follows: (Noninterest
expense-Losses on other real estate ("ORE")-ORE expenses-Intangible
amortization-Merger related expenses)/(Net interest income+Taxable equivalent
adjustment+Total noninterst income-Investment securities gains(losses)).
^(7)Nonperforming loans/assets exclude troubled debt restructurings (TDRs) that are
on an accrual status and performing in accordance with their modified terms.
^(8)Other real estate assets acquired (ORAA) include loans held for sale.



Loan Portfolios   September    June 30,    March 31,   December   September
                  30, 2012     2012        2012        31, 2011   30, 2011
(in thousands)
                  $       $       $       $      $     
Land hold           4,984      5,119    5,387          6,818
                                                       6,542
Land development  7,521        7,006       7,226       13,104     22,232
Construction      6,689        4,591       6,410       5,847      5,410
Income producing  767,202      803,546     877,461     913,755    975,262
Owner-occupied    549,205      597,147     590,575     605,113    634,179
 Total
commercial real   1,335,601    1,417,409   1,487,059   1,544,361  1,643,901
estate
Commercial and    1,688,996    1,711,411   1,657,140   1,543,529  1,531,492
industrial
 Total           3,024,597    3,128,820   3,144,199   3,087,890  3,175,393
commercial
Residential       570,295      588,144     611,166     637,245    654,561
mortgage
Direct consumer   865,777      881,070     903,238     933,314    954,831
Indirect consumer 970,235      923,714     869,460     871,086    887,542
 Total consumer  2,406,307    2,392,928   2,383,864   2,441,645  2,496,934
Total portfolio   $        $        $        $      $  
loans             5,430,904    5,521,748   5,528,063   5,529,535  5,672,327



Delinquency
Rates By Loan
Portfolio
               September 30, 2012 June 30, 2012      March 31, 2012     December 31, 2011  September 30, 2011
30 to 89 days
past due      $      % of        $      % of        $      % of        $      % of        $      % of
                      Portfolio          Portfolio          Portfolio          Portfolio          Portfolio
(in thousands)
               $                $                $                $                $  
Land hold           ---       %      ---       %      ---       %   21 0.32      %     ---       %
               ---               ---               ---                                  ---
Land           ---    ---         ---    ---         130    1.81        ---    ---         216    0.97
development
Construction   ---    ---         ---    ---         ---    ---         ---    ---         ---    ---
Income         1,104  0.14        1,519  0.19        1,447  0.16        2,508  0.27        3,325  0.34
producing
Owner-occupied 4,598  0.84        936    0.16        5,177  0.88        2,345  0.39        5,817  0.92
 Total
commercial     5,702  0.43        2,455  0.17        6,754  0.45        4,874  0.32        9,358  0.57
real estate
Commercial and 880    0.05        1,565  0.09        2,887  0.17        2,454  0.16        2,594  0.17
industrial
 Total        6,582  0.22        4,020  0.13        9,641  0.31        7,328  0.24        11,952 0.38
commercial
Residential    6,029  1.06        7,731  1.31        7,568  1.24        9,544  1.50        9,079  1.39
mortgage
Direct         11,435 1.32        12,396 1.41        14,002 1.55        17,810 1.91        18,629 1.95
consumer
Indirect       7,514  0.77        8,504  0.92        8,780  1.01        13,067 1.50        9,898  1.12
consumer
 Total        24,978 1.04        28,631 1.20        30,350 1.27        40,421 1.66        37,606 1.51
consumer
Total          $                 $                 $                 $                 $  
delinquent     31,560 0.58        32,651 0.59        39,991 0.72        47,749 0.86        49,558 0.87
loans



Nonperforming Assets

                              September 30, 2012     June 30, 2012         March 31, 2012        December 31, 2011     September 30, 2011
(in thousands)                $         % of         $        % of         $        % of         $        % of         $        % of
                                        Portfolio             Portfolio             Portfolio             Portfolio             Portfolio
Land hold                     $      6.54       % $     6.37       % $     ---        % $     ---        % $     2.45       %
                              326                   326                   ---                 ---                 167
Land development              3         0.04         3        0.05         207      2.87         213      1.62         12       0.05
Construction                  ---       ---          ---      ---          150      2.34         150      2.57         257      4.76
Income producing              12,904    1.68         19,408   2.42         18,566   2.12         21,171   2.32         23,227   2.38
Owner-occupied                13,146    2.39         18,187   3.05         20,716   3.51         23,798   3.93         27,540   4.34
 Total commercial real       26,379    1.98         37,924   2.68         39,639   2.67         45,332   2.94         51,203   3.11
estate
Commercial and industrial     9,190     0.54         21,676   1.27         14,629   0.88         16,946   1.10         18,536   1.21
 Total nonaccruing           35,569    1.18         59,600   1.90         54,268   1.73         62,278   2.02         69,739   2.20
commercial
Residential mortgage          15,271    2.68         13,474   2.29         11,137   1.82         11,312   1.78         13,074   2.00
Direct consumer               10,552    1.22         9,263    1.05         8,895    0.98         12,115   1.30         14,704   1.54
Indirect consumer             2,391     0.25         1,875    0.20         1,074    0.12         953      0.11         1,256    0.14
 Total nonaccruing consumer  28,214    1.17         24,612   1.03         21,106   0.89         24,380   1.00         29,034   1.16
 Total nonaccruing loans   63,783    1.17         84,212   1.53         75,374   1.37         86,658   1.57         98,773   1.74
Loans 90+ days still accruing 60        ---          59       ---          164      ---          770      0.01         1,368    0.02
 Total nonperforming         63,843    1.18         84,271   1.53         75,538   1.37         87,428   1.58         100,141  1.77
portfolio loans
Nonperforming held for sale   16,650                 887                   3,264                 2,372                 20,134
Other repossessed assets      5,700                  8,817                 11,803                12,422                16,665
acquired
 Total nonperforming assets  $                     $                    $                    $                     $ 
                              86,193                 93,975                90,605                102,222               136,940
Restructured loans still      $                     $                    $                    $                    $  
accruing                      21,433                 18,187                17,911                32,347                12,206
Commercial inflows            $                    $                    $                    $                    $  
                              4,572                  23,828                14,027                13,269                23,901
Commercial outflows           (28,603)               (18,496)              (22,037)              (20,730)              (17,611)
Net change                    $                      $                   $                    $                    $  
                              (24,031)              5,332                 (8,010)              (7,461)              6,290
Net Charge-Offs               Three Months Ended
                              September 30, 2012     June 30, 2012         March 31, 2012        December 31, 2011     September 30, 2011
(in thousands)                $         % of         $        % of         $        % of         $        % of         $        % of
                                        Portfolio*            Portfolio*            Portfolio*            Portfolio*            Portfolio*
Land hold                     $     ---        % $     (4.58)     % $     ---        % $     (2.00)     % $     ---        %
                              ---                   (58)                  ---                (33)                   ---
Land development              (8)       (0.45)       100      5.76         (83)     (4.64)       3,079    93.21        43       0.76
Construction                  (21)      (1.24)       14       1.24         (101)    (6.33)       (4)      (0.24)       (5)      (0.34)
Income producing              2,582     1.34         3,100    1.55         4,151    1.90         11,924   5.18         3,156    1.28
Owner-occupied                1,891     1.37         2,384    1.61         2,537    1.73         5,791    3.80         2,129    1.33
 Total commercial real       4,444     1.32         5,540    1.57         6,504    1.76         20,757   5.33         5,323    1.28
estate
Commercial and industrial     5,363     1.26         5,249    1.23         3,029    0.74         1,032    0.27         1,225    0.32
 Total commercial            9,807     1.29         10,789   1.39         9,533    1.22         21,789   2.80         6,548    0.82
Residential mortgage          2,515     1.75         3,506    2.40         5,076    3.34         1,170    0.73         18,364   11.13
Direct consumer               4,790     2.20         5,666    2.59         10,935   4.87         6,930    2.95         5,710    2.37
Indirect consumer             2,078     0.85         2,225    0.97         2,572    1.19         2,746    1.25         2,797    1.25
 Total consumer              9,383     1.55         11,397   1.92         18,583   3.14         10,846   1.76         26,871   4.27
 Total net charge-offs       $        1.39         $       1.62         $       2.05         $       2.30         $      2.34
                              19,190                 22,186                28,116                32,635                33,419
* Represents an annualized
rate.





Summary of Loan Loss Experience
                                     Three Months Ended
                          September  June 30,  March 31,  December  September
                          30,                             31,       30,
(in thousands)            2012       2012      2012       2011      2011
Allowance for loan        $       $       $        $       $  
losses - beginning of     136,120   153,007  172,726   190,354  206,292
period
Provision for loan        5,195      5,299     8,397      15,007    17,481
losses
Charge-offs:
    Commercial and        4,552      3,667     2,388      1,489     994
    industrial
    Small business        1,039      2,271     1,265      399       1,132
    Commercial real       5,452      8,093     8,997      21,581    5,860
    estate
    Total commercial      11,043     14,031    12,650     23,470    7,986
    Residential           3,261      3,972     5,210      1,366     18,369
    mortgage
    Direct consumer       6,067      7,168     11,527     7,544     6,398
    Indirect consumer     3,172      3,157     3,251      3,229     3,430
    Total charge-offs     23,543     28,328    32,638     35,609    36,183
Recoveries:
    Commercial and        108        577       376        609       721
    industrial
    Small business        120        112       248        248       180
    Commercial real       1,008      2,553     2,493      824       537
    estate
    Total commercial      1,236      3,242     3,117      1,681     1,438
    Residential           746        466       134        197       5
    mortgage
    Direct consumer       1,277      1,502     592        613       688
    Indirect consumer     1,094      932       679        483       633
    Total recoveries      4,353      6,142     4,522      2,974     2,764
Net charge-offs           19,190     22,186    28,116     32,635    33,419
Allowance for loan        $       $       $        $       $  
losses - end of period    122,125   136,120  153,007   172,726  190,354



Non-GAAP Reconciliation
                              September June 30,  March 31, December   September
                              30,                           31,        30,
(in thousands)                2012      2012      2012      2011       2011
Efficiency Ratio (non-GAAP)
Net interest income (A)       $      $       $       $       $   
                              75,805   75,680   76,119   78,049     78,841
Taxable equivalent adjustment 1,503     1,532     1,571     1,670      1,827
(B)
Investment securities gains   ---       ---       ---       38         3
(losses) (C)
Noninterest income (D)        23,710    22,345    24,240    24,363     24,427
Noninterest expense (E)       72,055    66,339    67,101    66,640     65,411
(Gains) losses on ORE and ORE 1,264     93        65        2,076      1,739
expenses (F)
Intangible amortization (G)   513       545       578       688        732
Merger-related expenses (H)   4,411     ---       ---       ---        ---
Efficiency ratio:            65.20%    65.99%    65.20%    61.39%     59.89%
(E-F-G-H)/(A+B-C+D)(non-GAAP)
Tangible Common Equity to
Tangible Assets (non-GAAP)
Total assets                  $        $         $         $          $ 
                              9,724,790 9,670,493 9,577,346 9,462,849 9,600,188
Goodwill                      (318,150) (318,150) (318,150) (318,150)  (318,150)
Other intangible assets       (5,792)   (6,305)   (6,850)   (7,428)    (8,116)
Tangible assets (non-GAAP)    $        $         $         $          $ 
                              9,400,848 9,346,038 9,252,346 9,137,271 9,273,922
Total shareholders' equity    $        $         $         $          $ 
                              1,358,197 1,335,855 1,044,619 1,019,537 1,009,143
Goodwill                      (318,150) (318,150) (318,150) (318,150)  (318,150)
Other intangible assets       (5,792)   (6,305)   (6,850)   (7,428)    (8,116)
Tangible equity (non-GAAP)    $        $         $        $        $   
                              1,034,255 1,011,400 719,619  693,959    682,877
Tangible equity               $        $         $        $        $   
                              1,034,255 1,011,400 719,619  693,959    682,877
Preferred stock               (290,580) (288,723) (286,901) (285,114)  (283,360)
Tangible common equity        $       $        $        $        $   
(non-GAAP)                    743,675  722,677  432,718  408,845    399,517
Tier 1 Common Equity
(non-GAAP)
Total shareholders' equity    $        $         $         $          $ 
                              1,358,197 1,335,855 1,044,619 1,019,537 1,009,143
Qualifying capital securities 73,667    73,667    73,667    73,667     73,667
Goodwill                      (318,150) (318,150) (318,150) (318,150)  (318,150)
Accumulated other             5,649     10,268    1,955     5,820      1,075
comprehensive loss
Disallowed deferred tax asset (235,461) (235,529) ---       ---        ---
Other intangible assets       (5,792)   (6,305)   (6,850)   (7,428)    (8,116)
Tier 1 capital (regulatory)   $       $        $        $        $   
                              878,110  859,806  795,241  773,446    757,619
Tier 1 capital (regulatory)   $       $        $        $        $   
                              878,110  859,806  795,241  773,446    757,619
Qualifying capital securities (73,667)  (73,667)  (73,667)  (73,667)   (73,667)
Preferred stock               (290,580) (288,723) (286,901) (285,114)  (283,360)
Total Tier 1 common equity    $       $        $        $        $   
(non-GAAP)                    513,863  497,416  434,673  414,665    400,592
Net risk-weighted assets      $        $         $         $          $ 
(regulatory)                  5,821,748 5,851,871 5,803,811 5,723,333 5,912,527
Equity to assets              13.97%    13.81%    10.91%    10.77%     10.51%
Tier 1 common                 8.83      8.50      7.49      7.24       6.77
equity(non-GAAP)
Tangible equity to tangible   11.00     10.82     7.78      7.59       7.36
assets(non-GAAP)
Tangible common equity to     7.91      7.73      4.68      4.47       4.31
tangible assets(non-GAAP)





Non-GAAP Reconciliation
Adjusted earnings per share             Nine Months Ended
                                        September 30,
(in thousands, except per share        2012                   2011
amounts)
Earnings per Share
Diluted net income (loss) per share     $      8.19      $     
                                                               (0.73)
Restoration of the deferred tax         6.82                   ---
asset
Diluted net income (loss) per share     $      1.37      $     
(non-GAAP)                                                     (0.73)
An itemized reconciliation between net income on a GAAP basis and net income
excluding the benefit of restoring the deferred tax asset (non-GAAP) follows:
Numerator:
Net income (loss)                       $    349,028        $   
                                                               (11,577)
Restoration of the deferred tax         (275,484)              ---
asset
Net income (loss) (non-GAAP)            73,544                 (11,577)
Dividend on redeemable preferred        (18,127)               (17,088)
stock
Net income (loss) attributable to       55,417                 (28,665)
common shareholders (non-GAAP)
Net income allocated to                 1,268                  ---
participating securities
Net income (loss) after allocation                             $   
to participating securities             $    54,149        (28,665)
(non-GAAP)
Denominator:
Weighted average shares outstanding
for basic and dilutive earnings per     39,469                 39,418
common share
Basic net income (loss) per common      $      1.37      $     
share (non-GAAP)                                               (0.73)
Diluted net income (loss) per           1.37                   (0.73)
common share (non-GAAP)



Pre-tax
pre-provision profit Three Months Ended
(non-GAAP)
                     September                  March    December  September
(in thousands)      30,           June 30,     31,      31,       30,
                                   2012
                     2012                       2012     2011      2011
Net income           $          $  303,176   $       $       $   
                     20,991                     24,861  18,244   32,944
Income tax provision 1,274         (276,789)     ---      2,521     (12,568)
(benefit)
Provision for loan   5,195         5,299         8,397    15,007    17,481
losses
Net losses (gains)
on loans held for    184           (6)           (916)    217       (1,952)
sale
Investment
securities (gains)   ---           ---           ---      (38)      (3)
losses
Losses (gains) on
other real estate    941           (173)         (385)    1,081     1,210
(ORE)
Merger-related       4,411         ---           ---      ---       ---
expenses^(1)
Fair-value
adjustment on bank   (31)          118           (205)    (100)     385
owned life
insurance^(2)
Fair-value
adjustment on swaps  83            74            (61)     (46)      268
^(2)
 Pre-tax            $                        $       $       $   
pre-provision profit 33,048       $   31,699  31,691  36,886   37,765
(non-GAAP)
^(1)Merger-related expenses are contained in line item "Professional services"
on Consolidated Statements of Operations.
^(2)Fair-value adjustment amounts contained in line item "Other income" on
Consolidated Statements of Operations.





Noninterest Income
and Noninterest        Three Months Ended
Expense
                       September    June 30,   March 31,  December   September
                       30,                                31,        30,
(in thousands)         2012         2012       2012       2011       2011
Service charges on     $       $      $      $      $    
deposit accounts        9,554      9,355     8,985     9,724    10,362
Trust fees             3,635        3,582      3,602      3,747      3,622
Mortgage and other     2,028        1,952      1,858      2,705      2,089
loan income
Brokerage and          1,831        1,331      1,324      1,243      1,188
investment fees
Card-based and other   4,431        4,444      4,265      4,305      4,475
nondeposit fees
Gains (losses) on      (184)        6          916        (217)      1,952
loans held for sale
Investment securities  ---          ---        ---        38         3
gains
Other income           2,415        1,675      3,290      2,818      736
Total noninterest      $       $      $      $      $    
income                 23,710      22,345     24,240     24,363     24,427
Salaries and employee  $       $      $      $      $    
benefits               33,589      32,801     33,298     30,952     30,280
Occupancy              6,129        6,140      6,696      6,326      6,125
Professional           6,806        2,465      2,023      2,311      2,394
services^(1)
Equipment              2,937        2,904      3,303      3,326      2,918
Data processing        4,427        3,721      4,048      3,709      3,823
services
Advertising and        1,847        1,708      1,335      1,298      2,179
public relations
Postage and delivery   1,157        1,119      1,099      1,165      1,142
Other loan expenses    3,121        3,266      3,186      3,497      3,941
Losses (gains) on
other real estate      941          (173)      (385)      1,081      1,210
(ORE)
ORE expenses           323          266        450        995        529
Intangible asset       513          545        578        688        732
amortization
Other expense          10,265       11,577     11,470     11,292     10,138
Total noninterest      $       $      $      $      $    
expense                72,055      66,339     67,101     66,640     65,411
^(1)Includes merger-related expenses of $4.4 million in
the three months ended September 30, 2012.





Average Balances,
Yields and Rates
                    Three Months Ended
                    September 30,      June 30, 2012       September 30, 2011
                    2012
                    Average   Average  Average    Average  Average    Average
(in thousands)      Balance   Rate     Balance    Rate     Balance    Rate
Earning Assets
Money market        $              $                $   
investments                 0.25  %  184,670    0.25  %  270,422    0.25    %
                    238,492
Investment
securities:
Taxable             2,557,793 2.51     2,577,646  2.48     2,536,944  3.23
Tax-exempt          205,572   6.46     209,421    6.46     242,494    6.63
FHLB and Federal    122,123   3.90     119,413    3.87     123,906    3.13
Reserve stock
Portfolio loans:
Commercial and      1,713,382 5.42     1,665,640  5.45     1,440,968  5.24
industrial
Commercial real     1,382,873 4.81     1,465,135  5.04     1,678,996  5.07
estate
Residential         580,002   4.36     601,439    4.36     693,494    4.45
mortgage
Direct consumer     873,057   5.81     890,957    5.88     967,443    6.00
Indirect consumer   952,086   6.05     894,555    6.15     882,157    6.56
Total portfolio     5,501,400 5.33     5,517,726  5.40     5,663,058  5.43
loans
Loans held for sale 13,010    3.40     13,191     3.40     19,248     4.44
Total earning      8,638,390 4.36     8,622,067  4.42     8,856,072  4.64
assets
Nonearning Assets
Cash and due from   145,961            141,122             147,044
banks
Premises and        92,775             94,836              99,835
equipment
Investment security
fair value          54,807             53,672              46,558
adjustment
Other nonearning    927,622            669,507             652,885
assets
Allowance for loan  (135,968)          (152,154)           (206,119)
losses
                    $              $                  $ 
Total assets                          9,429,050          9,596,275
                    9,723,587
Interest-Bearing
Liabilities
Deposits:
Interest-bearing    $              $                $   
demand deposits              0.13     988,884    0.14     976,637    0.21
                    1,073,294
Savings deposits    2,602,216 0.20     2,677,524  0.23     2,648,640  0.33
Time deposits       1,825,144 1.55     1,916,294  1.57     2,380,333  1.80
Short-term          45,974    0.10     37,148     0.13     43,445     0.18
borrowings
Long-term debt      852,776   3.89     853,333    3.94     862,479    4.19
Total
interest-bearing    6,399,404 1.06     6,473,183  1.10     6,911,534  1.30
liabilities
Noninterest-Bearing
Liabilities and
Shareholders'
Equity
Noninterest-bearing 1,823,099          1,734,951           1,541,005
demand
Other liabilities   155,267            159,397             152,134
Shareholders'       1,345,817          1,061,519           991,602
equity
Total liabilities   $              $                  $ 
and shareholders'                     9,429,050          9,596,275
equity              9,723,587
Interest Spread               3.29  %             3.32  %             3.34    %
Contribution of
noninterest bearing           0.28                0.28                0.29
sources of funds
Net Interest Margin           3.57  %             3.60  %             3.63    %



Average Balances, Yields and       Nine Months Ended
Rates
                                   September 30,
                                    2012                  2011
                                    Average    Average    Average    Average
(in thousands)                      Balance    Rate       Balance    Rate
Earning Assets
Money market investments            $       0.25    %  $       0.25    %
                                    257,535               362,983
Investment securities:
Taxable                             2,561,262  2.57       2,432,220  3.33
Tax-exempt                          210,096    6.45       258,524    6.67
FHLB and Federal Reserve stock      119,834    3.88       134,998    3.11
Portfolio loans:
Commercial and industrial           1,651,213  5.49       1,404,081  5.07
Commercial real estate              1,456,217  4.97       1,828,800  5.14
Residential mortgage                602,970    4.35       718,039    4.68
Direct consumer                     894,603    5.86       994,185    6.06
Indirect consumer                   904,188    6.20       847,878    6.68
Total portfolio loans               5,509,191  5.40       5,792,983  5.44
Loans held for sale                 12,145     3.72       26,739     3.65
Total earning assets               8,670,063  4.42       9,008,447  4.66
Nonearning Assets
Cash and due from banks             143,373               143,254
Premises and equipment              94,858                101,846
Investment security fair value      52,778                44,256
adjustment
Other nonearning assets             751,020               662,565
Allowance for loan losses           (153,480)             (241,431)
Total assets                        $                    $ 
                                    9,558,612            9,718,937
Interest-Bearing Liabilities
Deposits:
Interest-bearing demand             $         0.15       $       0.22
deposits                            1,012,171            958,634
Savings deposits                    2,662,533  0.24       2,633,255  0.37
Time deposits                       1,956,304  1.60       2,564,001  1.88
Short-term borrowings               40,621     0.14       41,999     0.18
Long-term debt                      853,339    3.95       912,755    4.16
Total interest-bearing              6,524,968  1.12       7,110,644  1.38
liabilities
Noninterest-Bearing Liabilities
and Shareholders' Equity
Noninterest-bearing demand         1,729,889             1,470,866
Other liabilities                   157,746               151,525
Shareholders' equity                1,146,009             985,902
Total liabilities and               $                    $ 
shareholders' equity                9,558,612            9,718,937
Interest Spread                                3.30    %             3.28    %
Contribution of noninterest                    0.28                  0.29
bearing sources of funds
Net Interest Margin                            3.58    %             3.57    %





SOURCE Citizens Republic Bancorp, Inc.

Website: http://www.citizensonline.com
Contact: Kristine D. Brenner, Director of Investor Relations, +1-810-257-2506,
kristine.brenner@citizensbanking.com
 
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