CITIZENS REPUBLIC BANCORP INC 
By FLINT, Mich., April 28, 2011 /PRNewswire/ -- Citizens Republic Bancorp, Inc. (Nasdaq: CRBC) announced today a net loss from continuing operations of $68.7 million for the three months ended March 31, 2011, compared with net losses of $106.2 million for the fourth quarter of 2010 and $76.0 million for the first quarter of 2010. After incorporating the $5.6 million accrued but unpaid dividend to the preferred shareholder, Citizens reported a net loss attributable to common shareholders of $74.3 million for the three months ended March 31, 2011, compared with $111.7 million for the fourth quarter of 2010 and $90.3 million for the first quarter of 2010. Results for the first quarter of 2010 included a net loss from discontinued operations of $9.0 million. Diluted net loss from continuing operations per share was $0.19 for the three months ended March 31, 2011, compared with $0.28 for the fourth quarter of 2010 and $0.21 for the first quarter of 2010.
"During the quarter, we substantially completed our accelerated plan to resolve problem assets that we announced last October. The execution of that plan was right in line with our expectations," commented Cathleen Nash, president and chief executive officer.
"We have recognized dramatic credit quality improvement by reducing the level of non-performing assets by 58%, watch list loans by 43% and delinquent loans by 61% over the last six months. With this phase behind us, we can focus more of our energy on growing the company. Net interest margin increased another 11 basis points this quarter. We continue to realize consistent core deposit growth, strong liquidity and solid capital ratios. We are in a strong position to meet our expectations of third quarter profitability," added Ms. Nash.
Key Highlights of the Quarter:
-- Problem asset resolution work substantially complete
-- Provision for loan losses fell to $89 million, declining 32% from the
fourth quarter of 2010
-- Nonperforming assets decreased by $99 million from December 31, 2010.
New inflows were under $30 million, the lowest level in over four years
-- Total 30-89 day delinquencies were down $47 million and ended the
quarter at 0.90% of the portfolio, the lowest level since 2006
-- Core deposits remain strong, increasing from the previous quarter and a
year ago, representing 65% of total deposits at March 31, 2011
-- Net interest margin increased to 3.53%, up 11 basis points from December
31, 2010 and 39 basis points from March 31, 2010
Balance Sheet
Total assets at March 31, 2011 were $9.7 billion, a decrease of $241.5 million or 2.4% from December 31, 2010 and a decrease of $1.9 billion or 16.5% from March 31, 2010. The declines were primarily due to reductions in total portfolio loans as a result of the accelerated resolution of problem assets. The decrease from March 31, 2010 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 March 31, 2011 totaled $495.6 million, an increase of $86.5 million or 21.1% from December 31, 2010 and a decrease of $265.2 million or 34.9% from March 31, 2010. The increase from December 31, 2010 was directly related to reinvesting a portion of the loan portfolio paydowns into money market investments. The decrease from March 31, 2010 was primarily the result of using money market investments to payoff maturing wholesale funding.
Investment securities at March 31, 2011 totaled $2.7 billion, an increase of $142.5 million or 5.6% from December 31, 2010 and an increase of $496.0 million or 22.8% over March 31, 2010. 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.
March December
Loan Portfolios 31, 31,
(in millions) 2011 2010
------------- ---- ----
Land hold $17.3 $28.3
Land development 22.7 34.8
Construction 23.3 103.7
Income producing 1,038.7 1,171.0
Owner-occupied 692.3 783.0
Total commercial real
estate 1,794.3 2,120.8
Commercial and
industrial 1,353.2 1,474.2
Total commercial 3,147.5 3,595.0
Residential mortgage 727.3 756.2
Direct consumer 1,006.4 1,045.5
Indirect consumer 823.0 819.9
----- -----
Total consumer 2,556.7 2,621.6
------- -------
Total portfolio loans $5,704.2 $6,216.6
======== ========
September March
Loan Portfolios 30, June 30, 31,
(in millions) 2010 2010 2010
------------- ---- ---- ----
Land hold $37.1 $37.8 $39.3
Land development 73.8 84.3 101.0
Construction 155.4 156.3 164.4
Income producing 1,382.3 1,481.7 1,532.1
Owner-occupied 855.1 886.1 931.5
Total commercial real
estate 2,503.7 2,646.2 2,768.3
Commercial and
industrial 1,657.4 1,686.8 1,824.8
Total commercial 4,161.1 4,333.0 4,593.1
Residential mortgage 800.5 858.9 877.2
Direct consumer 1,091.7 1,132.2 1,174.7
Indirect consumer 834.7 814.0 794.2
----- ----- -----
Total consumer 2,726.9 2,805.1 2,846.1
------- ------- -------
Total portfolio loans $6,888.0 $7,138.1 $7,439.2
======== ======== ========
Decreases in total portfolio loans in the first quarter of 2011 compared to the prior quarters reflect the results of the accelerated problem asset resolution ($460.0 million), paydowns as a result of normal client activity, and charge-offs.
Core deposits, which exclude all time deposits, totaled $5.0 billion at March 31, 2011, an increase of $143.4 million or 2.9% over December 31, 2010 and an increase of $188.0 million or 3.9% over March 31, 2010. Time deposits totaled $2.7 billion at March 31, 2011, a decrease of $178.7 million or 6.3% from December 31, 2010 and a decrease of $977.7 million or 26.8% from March 31, 2010. Total deposits at March 31, 2011 were $7.7 billion, essentially unchanged from December 31, 2010 and a decrease of $789.7 million or 9.3% from March 31, 2010. Changes in deposits were the result of a continued focus on core deposits and a strategic reduction of single service high cost and brokered deposits. The change from December 31, 2010 also reflects the year end seasonal increase in public funds balances.
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 $947.4 million at March 31, 2011, a decrease of $127.6 million or 11.9% from December 31, 2010 and a decrease of $423.5 million or 30.9% from March 31, 2010. The decreases were the result of a strategic reduction in securitized funding.
Capital Adequacy and Liquidity
Shareholders' equity at March 31, 2011 totaled $945.4 million, a decrease of $66.3 million or 6.6% from December 31, 2010 and a decrease of $299.0 million or 24.0% from March 31, 2010. 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 by the following key capital ratios.
Capital Ratios Regulatory March 31,
Minimum
for
"Well-
Capitalized"
2011
----
Leverage ratio 5.00% 7.39%
Tier 1 capital ratio 6.00 11.90
Total capital ratio 10.00 13.24
Tier 1 common equity (non-GAAP) 5.93
Tangible equity to tangible assets
(non-GAAP) 6.57
Tangible common equity to tangible
assets (non-GAAP) 3.59
December Excess
Capital Ratios 31, March 31, Capital
over Minimum
(in
millions)
2010 2010
---- ----
Leverage ratio 7.71% 8.47% $228,283
Tier 1 capital ratio 12.11 12.12 $349,571
Total capital ratio 13.51 13.49 $191,830
Tier 1 common equity (non-GAAP) 6.62 7.82
Tangible equity to tangible assets
(non-GAAP) 7.09 7.96
Tangible common equity to tangible
assets (non-GAAP) 4.20 5.54
Citizens maintains a strong liquidity position, with substantial on- and off-balance sheet liquidity sources and a stable funding base comprised of approximately 79% deposits, 9% long-term debt, 10% equity, and 2% short-term liabilities.
Net Interest Margin and Net Interest Income
Net interest margin was 3.53% for the first quarter of 2011 compared with 3.42% for the fourth quarter of 2010 and 3.14% for the first quarter of 2010. The increase in net interest margin over both prior periods was the result of 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 and lower reinvestment rates in the loan and investment portfolios.
Net interest income was $78.6 million for the first quarter of 2011, a decrease of $3.1 million or 3.8% from the fourth quarter of 2010, and a decrease of $2.6 million or 3.2% from the first quarter of 2010. The decreases were the result of lower average earning assets, partially offset by the effects of the higher net interest margin.
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 March 31, December 31,
Portfolio 2011 2010
30 to 89 days past due $ % of $ % of
(in millions) --- Portfolio --- Portfolio
------------- --------- ---------
Land hold $0.5 2.95% $2.2 7.90%
Land --- --- 0.2 0.62
development
Construction --- --- 0.5 0.45
Income producing 4.8 0.46 20.7 1.76
Owner-occupied 2.0 0.29 14.7 1.88
--- ----
Total commercial 7.3 0.41 38.3 1.80
real estate
Commercial and 6.2 0.46 9.0 0.61
industrial --- ---
Total commercial 13.5 0.43 47.3 1.32
Residential 10.3 1.41 15.4 2.03
mortgage
Direct consumer 17.2 1.71 22.4 2.14
Indirect consumer 10.2 1.24 13.3 1.62
---- ----
Total consumer 37.7 1.47 51.1 1.95
---- ----
Total $51.2 0.90 $98.4 1.58
delinquent ===== =====
loans
Delinquency Rates By Loan September 30,
Portfolio 2010 June 30, 2010
30 to 89 days past due $ % of $ % of
(in millions) --- Portfolio --- Portfolio
------------- --------- ---------
Land hold $--- --- % $1.3 3.34%
Land 4.5 6.04 2.0 2.43
development
Construction 2.4 1.53 6.4 4.07
Income producing 35.2 2.55 22.9 1.55
Owner-occupied 18.3 2.14 16.4 1.85
---- ----
Total commercial 60.4 2.41 49.0 1.85
real estate
Commercial and 23.8 1.43 10.3 0.61
industrial ---- ----
Total commercial 84.2 2.02 59.3 1.37
Residential 14.6 1.82 20.8 2.42
mortgage
Direct consumer 20.5 1.88 20.2 1.79
Indirect consumer 12.2 1.46 11.4 1.40
---- ----
Total consumer 47.3 1.73 52.4 1.87
---- ----
Total $131.5 1.91 $111.7 1.57
delinquent ====== ======
loans
Delinquency Rates By Loan
Portfolio March 31, 2010
30 to 89 days past due $ % of
(in millions) --- Portfolio
------------- ---------
Land hold $0.6 1.64%
Land 3.0 3.00
development
Construction 0.9 0.55
Income producing 51.7 3.37
Owner-occupied 13.6 1.46
----
Total commercial 69.8 2.52
real estate
Commercial and 15.1 0.83
industrial ----
Total commercial 84.9 1.85
Residential 21.5 2.45
mortgage
Direct consumer 21.9 1.86
Indirect consumer 14.8 1.86
----
Total consumer 58.2 2.05
----
Total $143.1 1.92
delinquent ======
loans
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 since December 2006 that 30-89 day past due loans have been below 1% of total portfolio loan balances.
As part of its overall credit underwriting and review process and loss mitigation strategy, Citizens carefully monitors commercial credits that are current in terms of principal and interest payments but may deteriorate in quality. 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. Watchlist loans that are in nonperforming status are included in the nonperforming assets table below.
March 31, December 31,
Commercial Watchlist 2011 2010
Accruing loans only $ % of $ % of
(in millions) --- Portfolio --- Portfolio
-------------------- --------- ---------
Land hold $12.7 73.41% $21.5 76.35%
Land 9.9 43.28 18.7 53.66
development
Construction 4.6 19.89 33.2 32.05
Income producing 325.8 31.37 444.5 37.96
Owner-occupied 136.6 19.73 196.9 25.15
----- -----
Total commercial 489.6 27.29 714.8 33.71
real estate
Commercial and 267.0 19.73 347.2 23.55
industrial ----- -----
Total $756.6 24.04 $1,062.0 29.54
watchlist ====== ========
loans
September 30,
Commercial Watchlist 2010 June 30, 2010
Accruing loans only $ % of $ % of
(in millions) --- Portfolio --- Portfolio
------------- --------- ---------
Land hold $27.6 74.32% $27.8 73.58%
Land 45.4 61.54 40.5 47.97
development
Construction 46.5 29.90 52.5 33.61
Income producing 543.7 39.33 553.9 37.38
Owner-occupied 225.7 26.40 224.1 25.29
----- -----
Total commercial 888.9 35.50 898.8 33.96
real estate
Commercial and 432.8 26.11 445.5 26.41
industrial ----- -----
Total $1,321.7 31.76 $1,344.3 31.02
watchlist ======== ========
loans
March 31,
Commercial Watchlist 2010
Accruing loans only $ % of
(in millions) --- Portfolio
------------- ---------
Land hold $29.0 73.73%
Land 50.4 49.95
development
Construction 54.4 33.07
Income producing 523.5 34.17
Owner-occupied 237.0 25.44
-----
Total commercial 894.3 32.31
real estate
Commercial and 484.7 26.56
industrial -----
Total $1,379.0 30.02
watchlist ========
loans
Watchlist credits declined $305.4 million from December 31, 2010 and $622.4 million from March 31, 2010 to $756.6 million at March 31, 2011, the lowest level since December 2006. The decrease was primarily due to the accelerated problem asset resolution initiatives along with a decrease in the level of new inflows.
March 31, December 31,
Nonperforming Assets 2011 2010
(in millions) $ % of $ % of
------------- --- Portfolio --- Portfolio
--------- ---------
Land hold $1.2 6.68% $3.2 11.50%
Land 0.1 0.35 3.1 8.82
development
Construction 0.4 1.70 7.5 7.21
Income producing 28.2 2.72 62.0 5.30
Owner-occupied 21.7 3.14 42.8 5.47
---- ----
Total commercial 51.6 2.88 118.6 5.59
real estate
Commercial and 25.8 1.91 57.8 3.92
industrial ---- ----
Total nonaccruing 77.4 2.46 176.4 4.91
commercial
Residential 30.4 4.18 22.1 2.92
mortgage
Direct consumer 13.0 1.30 12.5 1.20
Indirect consumer 1.2 0.14 1.3 0.16
--- ---
Total 44.6 1.74 35.9 1.37
nonaccruing
consumer
Total nonaccruing 122.0 2.14 212.3 3.42
loans
Loans 90+ days 0.7 0.01 1.6 0.03
still accruing
Restructured 12.7 0.22 6.4 0.10
loans ---- ---
still
accruing
Total nonperforming 135.4 2.37 220.3 3.54
portfolio
loans
Nonperforming 30.4 24.1
held
for
sale
Other 22.2 42.2
repossessed ---- ----
assets
acquired
Total $188.0 $286.6
nonperforming ====== ======
assets
Commercial inflows $29.5 $110.9
Commercial outflows (128.5) (256.0)
------ ------
Net change $(99.0) $(145.1)
====== =======
September 30,
Nonperforming Assets 2010 June 30, 2010
(in millions) $ % of $ % of
------------- --- Portfolio --- Portfolio
--------- ---------
Land hold $5.6 15.13% $5.2 13.76%
Land 16.0 21.64 22.3 26.48
development
Construction 27.4 17.65 25.0 15.99
Income producing 147.7 10.69 148.4 10.02
Owner-occupied 63.3 7.40 59.5 6.71
---- ----
Total commercial 260.0 10.39 260.4 9.84
real estate
Commercial and 61.5 3.71 67.0 3.97
industrial ---- ----
Total nonaccruing 321.5 7.73 327.4 7.56
commercial
Residential 16.9 2.11 31.0 3.61
mortgage
Direct consumer 15.5 1.42 18.7 1.65
Indirect consumer 1.7 0.20 1.5 0.18
--- ---
Total 34.1 1.25 51.2 1.82
nonaccruing
consumer
Total nonaccruing 355.6 5.16 378.6 5.30
loans
Loans 90+ days 1.6 0.02 1.5 0.02
still accruing
Restructured 7.0 0.10 4.6 0.06
loans --- ---
still
accruing
Total nonperforming 364.2 5.29 384.7 5.39
portfolio
loans
Nonperforming 38.4 44.0
held
for
sale
Other 40.7 43.9
repossessed ---- ----
assets
acquired
Total $443.3 $472.6
nonperforming ====== ======
assets
Commercial inflows $95.6 $75.9
Commercial outflows (101.5) (118.6)
------ ------
Net change $(5.9) $(42.7)
===== ======
March 31,
Nonperforming Assets 2010
(in millions) $ % of
------------- --- Portfolio
---------
Land hold $4.9 12.49%
Land 27.1 26.86
development
Construction 35.2 21.39
Income producing 144.0 9.40
Owner-occupied 89.0 9.56
----
Total commercial 300.2 10.85
real estate
Commercial and 69.7 3.82
industrial ----
Total nonaccruing 369.9 8.05
commercial
Residential 17.6 2.01
mortgage
Direct consumer 16.5 1.41
Indirect consumer 2.4 0.30
---
Total 36.5 1.28
nonaccruing
consumer
Total nonaccruing 406.4 5.46
loans
Loans 90+ days 2.4 0.03
still accruing
Restructured 4.8 0.06
loans ---
still
accruing
Total nonperforming 413.6 5.56
portfolio
loans
Nonperforming 95.3
held
for
sale
Other 47.3
repossessed ----
assets
acquired
Total $556.2
nonperforming ======
assets
Commercial inflows $124.8
Commercial outflows (74.8)
-----
Net change $50.0
=====
Nonperforming assets decreased from December 31, 2010 and March 31, 2010, primarily due to the accelerated problem asset resolution initiatives. In addition, nonperforming commercial inflows dropped to $29.5 million, the lowest level since December 2006. The nonperforming commercial loan outflows were $128.5 million in the first quarter of 2011, primarily due to a combination of individual workouts and a bulk sale. In addition, the decrease in nonperforming held for sale assets from the first quarter of 2010 was primarily the result of the movement of certain residential nonperforming loans to held for sale in the first quarter of 2010, that were subsequently sold in the second quarter of 2010. This marks the sixth consecutive quarter of declines in nonperforming loans, as well as the first time since September 2008 that nonperforming loans as a percent of total portfolio loans have been below 3%.
Net Charge-Offs Three Months Ended
March 31, 2011 December 31, 2010
(in millions) $ % of $ % of
------------- --- Portfolio* --- Portfolio*
---------- ----------
Land hold $4.9 N/M % $5.2 73.54%
Land 4.4 79.15 19.7 N/M
development
Construction 5.6 97.09 10.0 38.44
Income producing 77.6 30.30 64.2 21.74
Owner-occupied 25.3 14.80 18.1 9.16
---- ----
Total 117.8 26.63 117.2 21.92
commercial
real
estate
Commercial and 32.0 9.59 26.0 7.01
industrial ---- ----
Total commercial 149.8 19.30 143.2 15.81
Residential 3.4 1.90 6.1 3.20
mortgage
Direct consumer 5.5 2.21 7.1 2.70
Indirect consumer 1.9 0.95 2.9 1.39
--- ---
Total consumer 10.8 1.72 16.1 2.43
---- ----
Total $160.6 10.77 $159.3 9.46
net ====== ======
charge-offs
Net Charge-Offs Three Months Ended
September 30,
2010 June 30, 2010
(in millions) $ % of $ % of
------------- --- Portfolio* --- Portfolio*
---------- ----------
Land hold $0.3 3.30% $0.4 3.72%
Land 9.0 48.29 9.8 46.68
development
Construction 0.4 1.10 8.7 22.23
Income producing 30.8 8.85 12.6 3.41
Owner-occupied 4.8 2.21 18.9 8.57
--- ----
Total 45.3 7.18 50.4 7.63
commercial
real
estate
Commercial and 6.8 1.62 11.4 2.71
industrial --- ----
Total commercial 52.1 4.97 61.8 5.72
Residential 23.3 11.57 0.6 0.29
mortgage
Direct consumer 9.8 3.56 5.5 1.96
Indirect consumer 2.2 1.05 3.3 1.61
--- ---
Total consumer 35.3 5.14 9.4 1.35
---- ---
Total $87.4 4.91 $71.2 3.90
net ===== =====
charge-offs
Net Charge-Offs Three Months Ended
March 31, 2010
(in millions) $ % of
------------- --- Portfolio*
----------
Land hold $--- --- %
Land 0.1 0.49
development
Construction --- ---
Income producing 7.6 2.01
Owner-occupied 6.9 3.01
---
Total 14.6 2.13
commercial
real
estate
Commercial and 12.9 2.86
industrial ----
Total commercial 27.5 2.43
Residential 80.1 37.05
mortgage
Direct consumer 7.1 2.44
Indirect consumer 3.2 1.63
---
Total consumer 90.4 12.88
----
Total $117.9 6.25
net ======
charge-offs
* Represents an annualized rate.
N/M - Not Meaningful
Net charge-offs in the first quarter of 2011 were essentially unchanged from the fourth quarter of 2010. The increase in net charge-offs compared to the first quarter of 2010 was primarily the result of the resolution of certain problem assets through both bulk sale and individual workout efforts.
The following table summarizes the allocation of the allowance for loan losses for specific allocated, risk allocated, and general valuation allowances by loan type.
Allocation of the Allowance for Loan Losses(1)
March 31, December 31, March 31,
2011 2010 2010
---------- ------------- ----------
Related Related Related
NPL NPL
(in millions) ALLL NPL (2) ALLL (2) ALLL (2)
------------- ---- ------- ---- ---- ---- ----
Specific allocated
allowance:
Commercial and
industrial $0.7 $17.0 $9.5 $43.5 $9.4 $49.4
Commercial real
estate 6.7 37.4 23.5 98.4 71.4 263.4
Residential
mortgage 2.0 10.2 1.1 5.4 1.4 5.8
Direct Consumer 0.2 1.7 0.1 1.2 0.1 1.1
--- --- --- --- --- ---
Total specific
allocated
allowance 9.6 66.3 34.2 148.5 82.3 319.7
Risk allocated
allowance:
Commercial and
industrial 29.4 9.9 33.5 16.3 34.7 22.7
Commercial real
estate (CRE) 84.7 22.7 99.1 22.7 110.8 36.8
Incremental risk
allocated
allowance -CRE --- --- 29.5 --- --- ---
--- --- ---- --- --- ---
Total commercial 114.1 32.6 162.1 39.0 145.5 59.5
Residential
mortgage 49.9 21.6 46.5 18.6 16.2 15.1
Direct Consumer 31.8 13.7 32.1 12.9 33.9 16.5
Indirect Consumer 14.9 1.2 16.6 1.3 37.4 2.8
---- --- ---- --- ---- ---
Total risk
allocated
allowance 210.7 69.1 257.3 71.8 233.0 93.9
----- ---- ----- ---- ----- ----
Total 220.3 135.4 291.5 220.3 315.3 413.6
General valuation
allowances 3.8 --- 4.5 --- 7.1 ---
--- --- --- --- --- ---
Total $224.1 $135.4 $296.0 $220.3 $322.4 $413.6
====== ====== ====== ====== ====== ======
(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 past due and still
accruing but classified as nonperforming.
The allowance for loan losses was $224.1 million or 165.6% of nonperforming portfolio loans at March 31, 2011, compared with $296.0 million or 134.4% at December 31, 2010 and $322.4 million or 77.9% at March 31, 2010. The decreases in amounts 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. In addition, the $29.5 million of incremental risk allocated reserves established at December 31, 2010 to incorporate the impact of Citizens' initiatives to resolve problem assets has been eliminated, as the resolution initiatives were substantially completed during the first quarter of 2011.
The allowance as a percentage of nonperforming loans at March 31, 2011 increased from December 31, 2010 and March 31, 2010 primarily as a result of the allowance for loan losses declining at a slower pace than the decline in nonperforming loans. While nonperforming loans declined over both periods, other offsetting factors that affect the risk allocated allowance such as historical loss experience, the continued depressed values in the real estate market, and other credit metrics result in a higher proportionate allowance.
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 $88.7 million in the first quarter of 2011, compared with $131.3 million in the fourth quarter of 2010 and $101.4 million in the first quarter of 2010. The decreases in the provision were primarily due to the decline in the required allowance for loan losses as a result of the previously mentioned improvements in credit quality.
Noninterest Income
Noninterest income for the first quarter of 2011 was $23.1 million, a decrease of $0.9 million or 3.7% from the fourth quarter of 2010 and an increase of $0.8 million or 3.3% over the first quarter of 2010. The change from the fourth quarter of 2010 was due to a reduction in income from swap terminations, offset by better execution on loans held for sale. The increase from the first quarter of 2010 was due largely to better execution on loans held for sale.
Noninterest Expense
Noninterest expense for the first quarter of 2011 was $81.7 million, an increase of $4.4 million or 5.7% from the fourth quarter of 2010 and an increase of $3.6 million or 4.5% from the first quarter of 2010. The increases in noninterest expense over both prior periods were primarily the result of increased valuation writedowns and losses incurred as a result of the increase in property dispositions in the first quarter of 2011. This was partially offset by a net decline in most other noninterest expense categories as a result of various expense management initiatives implemented throughout the company.
.
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
March
(in thousands) 31, December 31,
-------------- 2011 2010
---- ----
Loss from continuing operations $(68,678) $(106,154)
Income tax provision from continuing
operations 55 3,383
Provision for loan losses 88,724 131,296
Net loss on loans held for sale 1,106 3,069
Investment securities losses (gains) 383 171
Losses on other real estate (ORE) 9,122 930
Fair-value adjustment on bank owned life
insurance (1) (100) (105)
Fair-value adjustment on swaps (1) 114 (535)
Pre-tax pre-provision profit (non-GAAP) $30,726 $32,055
======= =======
Pre-tax pre-provision profit
(non-GAAP ) Three Months Ended
March
(in thousands) September 30, June 30, 31,
-------------- 2010 2010 2010
---- ---- ----
Loss from continuing operations $(62,471) $(44,456) $(76,023)
Income tax provision from
continuing operations 5,628 3,700 147
Provision for loan losses 89,617 70,614 101,355
Net loss on loans held for sale 1,441 8,405 7,702
Investment securities losses
(gains) --- (8,051) (6,016)
Losses on other real estate (ORE) 1,967 3,778 6,763
Fair-value adjustment on bank
owned life insurance (1) (159) 280 (83)
Fair-value adjustment on swaps (1) 202 279 836
Pre-tax pre-provision profit
(non-GAAP) $36,225 $34,549 $34,681
======= ======= =======
(1) Fair-value adjustment amounts contained in line item "Other
income" on Consolidated Statements of Operations
Conference Call
Citizens' senior management will review the quarter's results in a conference call at 10:00 a.m. ET on Friday, April 29, 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 May 6, 2011. To listen to the replay, please dial (800) 723-0394.
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 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 2010 and 2011 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 2010 full year results, the total cash compensation award linked to PTPP was $1.1 million. 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. The total potential cash compensation award linked to PTPP for 2011 is $0.9 million.
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 220 offices and 249 ATMs. Citizens is the largest bank holding company headquartered in Michigan with roots dating back to 1871 and is the 55(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 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, Inc.
March December
31, 31, March 31,
(in thousands) 2011 2010 2010
-------------- ---- ---- ----
Assets
Cash and due from banks $136,638 $127,585 $148,161
Money market investments 495,562 409,079 760,746
Investment Securities:
Securities available for
sale, at fair value 2,119,416 2,049,528 2,057,599
Securities held to
maturity, at amortized
cost
(fair value of $541,646,
$469,421 and $115,484,
respectively) 547,449 474,832 113,259
------- ------- -------
Total investment
securities 2,666,865 2,524,360 2,170,858
FHLB and Federal Reserve
stock 143,873 143,873 155,084
Portfolio loans:
Commercial and industrial 1,353,167 1,474,227 1,824,801
Commercial real estate 1,794,284 2,120,735 2,768,299
--------- --------- ---------
Total commercial 3,147,451 3,594,962 4,593,100
Residential mortgage 727,304 756,245 877,201
Direct consumer 1,006,424 1,045,530 1,174,726
Indirect consumer 823,019 819,865 794,183
------- ------- -------
Total portfolio loans 5,704,198 6,216,602 7,439,210
Less: Allowance for loan
losses (224,117) (296,031) (322,377)
-------- -------- --------
Net portfolio loans 5,480,081 5,920,571 7,116,833
Loans held for sale 38,121 40,347 107,772
Premises and equipment 102,162 104,714 108,680
Goodwill 318,150 318,150 318,150
Other intangible assets 9,626 10,454 13,247
Bank owned life insurance 218,016 217,757 216,179
Other assets 115,019 148,755 212,115
Assets of discontinued
operations --- --- 324,097
--- --- -------
Total assets $9,724,113 $9,965,645 $11,651,922
========== ========== ===========
Liabilities
Noninterest-bearing
deposits $1,413,920 $1,325,383 $1,239,352
Interest-bearing demand
deposits 956,676 947,953 1,057,094
Savings deposits 2,646,851 2,600,750 2,533,002
Time deposits 2,674,058 2,852,748 3,651,750
--------- --------- ---------
Total deposits 7,691,505 7,726,834 8,481,198
Federal funds purchased
and securities sold
under agreements to
repurchase 40,069 41,699 30,209
Other short-term
borrowings 690 620 2,920
Other liabilities 139,819 152,072 133,893
Long-term debt 906,629 1,032,689 1,337,746
Liabilities of
discontinued operations --- --- 421,562
--- --- -------
Total liabilities 8,778,712 8,953,914 10,407,528
Shareholders' Equity
Preferred stock -no par
value 279,955 278,300 273,522
Common stock -no par
value 1,432,271 1,431,829 1,430,273
Retained deficit (752,547) (678,242) (453,910)
Accumulated other
comprehensive loss (14,278) (20,156) (5,491)
------- ------- ------
Total shareholders' equity 945,401 1,011,731 1,244,394
------- --------- ---------
Total liabilities and
shareholders' equity $9,724,113 $9,965,645 $11,651,922
========== ========== ===========
Consolidated Statements of Operations (Unaudited)
Three Months
Citizens Republic Bancorp, Inc. Ended
March 31,
(in thousands, except per share amounts) 2011 2010
---------------------------------------- ---- ----
Interest Income
Interest and fees on loans $80,711 $101,742
Interest and dividends on investment
securities:
Taxable 19,610 18,261
Tax-exempt 3,086 5,285
Dividends on FHLB and Federal Reserve stock 1,125 1,002
Money market investments 253 424
--- ---
Total interest income 104,785 126,714
------- -------
Interest Expense
Deposits 16,375 29,511
Short-term borrowings 18 24
Long-term debt 9,778 15,990
----- ------
Total interest expense 26,171 45,525
------ ------
Net Interest Income 78,614 81,189
Provision for loan losses 88,724 101,355
------ -------
Net interest loss after provision for loan
losses (10,110) (20,166)
------- -------
Noninterest Income
Service charges on deposit accounts 9,429 9,684
Trust fees 3,923 3,795
Mortgage and other loan income 2,942 2,589
Brokerage and investment fees 1,108 933
ATM network user fees 1,755 1,597
Bankcard fees 2,238 2,007
Net loss on loans held for sale (1,106) (7,702)
Investment securities (losses) gains (383) 6,016
Other income 3,237 3,474
----- -----
Total noninterest income 23,143 22,393
Noninterest Expense
Salaries and employee benefits 31,018 29,947
Occupancy 7,562 7,461
Professional services 2,219 2,253
Equipment 3,052 3,072
Data processing services 4,352 4,629
Advertising and public relations 569 1,297
Postage and delivery 1,116 1,014
Other loan expenses 5,255 5,974
Losses on other real estate (ORE) 9,122 6,763
ORE expenses 1,768 1,190
Intangible asset amortization 828 1,130
Other expense 14,795 13,373
------ ------
Total noninterest expense 81,656 78,103
------ ------
Loss from Continuing Operations Before Income
Taxes (68,623) (75,876)
Income tax provision from continuing operations 55 147
--- ---
Loss from Continuing Operations (68,678) (76,023)
Discontinued operations:
Loss from discontinued operations (net of
income tax) --- (8,973)
--- ------
Net Loss (68,678) (84,996)
Dividend on redeemable preferred stock (5,627) (5,282)
------ ------
Net Loss Attributable to Common Shareholders $(74,305) $(90,278)
======== ========
Loss Per Share from Continuing Operations
Basic $(0.19) $(0.21)
Diluted (0.19) (0.21)
Loss Per Share from Discontinued Operations
Basic $--- $(0.02)
Diluted --- (0.02)
Net Loss Per Common Share:
Basic $(0.19) $(0.23)
Diluted (0.19) (0.23)
Average Common Shares Outstanding:
Basic 394,060 393,779
Diluted 394,060 393,779
Selected Quarterly Information
Three Months Ended
March December
31, 31,
2011 2010
---- ----
Summary of Operations (in thousands)
Net interest income $78,614 $81,731
Provision for loan losses 88,724 131,296
Noninterest income (1) 23,143 24,028
Noninterest expense 81,656 77,234
Income tax provision from continuing operations 55 3,383
Loss from continuing operations before income
taxes (68,678) (106,154)
Income (loss) from discontinued operations
(after tax) --- ---
Net loss (68,678) (106,154)
Net loss attributable to common shareholders
(2) (74,305) (111,699)
Taxable equivalent adjustment 2,102 2,247
Per Common Share Data
Loss from continuing operations:
Basic $(0.19) $(0.28)
Diluted (0.19) (0.28)
Discontinued operations:
Basic $--- $---
Diluted --- ---
Net loss:
Basic $(0.19) $(0.28)
Diluted (0.19) (0.28)
Common book value 1.67 1.85
Tangible book value (non-GAAP) 1.55 1.72
Tangible common book value (non-GAAP) 0.85 1.02
Shares outstanding, end of period (000)(3) 397,783 397,167
At Period End (millions)
Assets $9,724 $9,966
Earning assets 9,010 9,303
Portfolio loans 5,704 6,217
Allowance for loan losses 224 296
Deposits 7,692 7,727
Long-term debt 907 1,033
Shareholders' equity 945 1,012
--------------------
Average for the Quarter (millions)
Assets $9,899 $10,468
Earning assets 9,231 9,769
Portfolio loans 6,051 6,682
Allowance for loan losses 295 324
Deposits 7,730 7,965
Long-term debt 971 1,160
Shareholders' equity 1,002 1,145
Financial Ratios (annualized)(4)
Return on average assets (2.81)% (4.02)%
Return on average shareholders' equity (27.79) (36.78)
Average shareholders' equity / average assets 10.13 10.94
Net interest margin (FTE) (5) 3.53 3.42
Efficiency ratio (non-GAAP) (6) 78.33 71.39
Allowance for loan losses as a percent of
portfolio loans 3.93 4.76
Allowance for loan losses as a percent of
nonperforming loans 165.56 134.39
Allowance for loan losses as a percent of
nonperforming assets 119.18 103.30
Nonperforming loans as a percent of portfolio
loans 2.37 3.54
Nonperforming assets as a percent of portfolio
loans plus ORAA(7) 3.26 4.55
Nonperforming assets as a percent of total
assets 1.93 2.88
Net loans charged off as a percent of average
portfolio loans (annualized) 10.77 9.46
Leverage ratio 7.39 7.71
Tier 1 capital ratio 11.90 12.11
Total capital ratio 13.24 13.51
Three Months Ended
September June March
30, 30, 31,
2010 2010 2010
---- ---- ----
Summary of Operations (in thousands)
Net interest income $81,558 $84,586 $81,189
Provision for loan losses 89,617 70,614 101,355
Noninterest income (1) 25,956 22,282 22,393
Noninterest expense 74,740 77,010 78,103
Income tax provision from continuing
operations 5,628 3,700 147
Loss from continuing operations before
income taxes (62,471) (44,456) (76,023)
Income (loss) from discontinued
operations (after tax) --- 5,151 (8,973)
Net loss (62,471) (39,305) (84,996)
Net loss attributable to common
shareholders (2) (67,922) (44,711) (90,278)
Taxable equivalent adjustment 2,372 2,605 3,357
Per Common Share Data
Loss from continuing operations:
Basic $(0.17) $(0.12) $(0.21)
Diluted (0.17) (0.12) (0.21)
Discontinued operations:
Basic $--- $0.01 $(0.02)
Diluted --- 0.01 (0.02)
Net loss:
Basic $(0.17) $(0.11) $(0.23)
Diluted (0.17) (0.11) (0.23)
Common book value 2.22 2.37 2.46
Tangible book value (non-GAAP) 2.08 2.24 2.28
Tangible common book value (non-GAAP) 1.39 1.54 1.59
Shares outstanding, end of period
(000)(3) 397,071 396,979 394,392
At Period End (millions)
Assets $10,639 $10,834 $11,328
Earning assets 9,932 10,098 10,595
Portfolio loans 6,888 7,138 7,439
Allowance for loan losses 324 322 322
Deposits 8,101 8,222 8,481
Long-term debt 1,185 1,211 1,338
Shareholders' equity 1,157 1,218 1,244
--------------------
Average for the Quarter (millions)
Assets $10,803 $11,156 $11,575
Earning assets 10,065 10,432 10,839
Portfolio loans 7,059 7,318 7,654
Allowance for loan losses 322 322 336
Deposits 8,198 8,431 8,544
Long-term debt 1,203 1,315 1,450
Shareholders' equity 1,215 1,239 1,323
Financial Ratios (annualized)(4)
Return on average assets (2.29)% (1.60)% (2.66)%
Return on average shareholders' equity (20.40) (14.40) (23.30)
Average shareholders' equity /average
assets 11.25 11.10 11.43
Net interest margin (FTE) (5) 3.32 3.35 3.14
Efficiency ratio (non-GAAP) (6) 68.02 75.93 77.39
Allowance for loan losses as a percent
of portfolio loans 4.70 4.51 4.33
Allowance for loan losses as a percent
of nonperforming loans 88.98 83.67 77.94
Allowance for loan losses as a percent
of nonperforming assets 73.10 68.11 57.96
Nonperforming loans as a percent of
portfolio loans 5.29 5.39 5.56
Nonperforming assets as a percent of
portfolio loans plus ORAA(7) 6.35 6.53 7.32
Nonperforming assets as a percent of
total assets 4.17 4.36 4.91
Net loans charged off as a percent of
average portfolio loans (annualized) 4.91 3.90 6.25
Leverage ratio 8.50 8.72 8.47
Tier 1 capital ratio 12.41 12.79 12.12
Total capital ratio 13.80 14.17 13.49
(1) Noninterest income includes a gain on investment securities of
$8.0 million and $6.0 million in the second and first quarter of
2010.
(2) Net loss attributable to common shareholders includes a non-cash
dividend to preferred shareholders of $5.6 million in the first
quarter of 2011 and $5.5 million, $5.4 million, $5.4 million and
$5.3 million in the fourth, third, second and first quarters of
2010.
(3) Includes participating shares, which are restricted stock units
and restricted shares.
(4) Financial ratios are based on continuing operations.
(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) The Efficiency Ratio 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).
(7) Other real estate assets acquired ("ORAA") include loans held for
sale.
Non-GAAP Reconciliation
March December
31, 31,
2011 2010
---- ----
Efficiency Ratio (non-GAAP) (in thousands)
Net interest income (A) $78,614 $81,731
Taxable equivalent adjustment (B) 2,102 2,247
Investment securities (losses) gain (C) (383) (171)
Noninterest income (D) 23,143 24,028
Noninterest expense (E) 81,656 77,234
Efficiency ratio: (E)/(A+B-C+D) (non-GAAP) 78.33% 71.39%
Ending Balances (in millions)
Tangible Common Equity to Tangible Assets
(in millions)
Total assets(1) $9,724 $9,966
Goodwill(2) (318) (318)
Other intangible assets (10) (11)
--- ---
Tangible assets (non-GAAP) $9,396 $9,637
====== ======
Total shareholders' equity $945 $1,012
Goodwill(2) (318) (318)
Other intangible assets (10) (11)
--- ---
Tangible equity (non-GAAP) $617 $683
==== ====
Tangible equity $617 $683
Preferred stock (280) (278)
---- ----
Tangible common equity (non-GAAP) $337 $405
==== ====
Tier 1 Common Equity (in millions)
Total shareholders' equity $945 $1,012
Qualifying capital securities 74 74
Goodwill(2) (318) (318)
Accumulated other comprehensive loss
(income) 14 20
Other intangible assets (10) (11)
--- ---
Tier 1 capital (regulatory) $705 $777
==== ====
Tier 1 capital (regulatory) $705 $777
Qualifying capital securities (74) (74)
Preferred stock (280) (278)
---- ----
Total Tier 1 common equity (non-GAAP) $351 $425
==== ====
Net risk-weighted assets (regulatory)(3) $5,930 $6,417
Equity to assets 9.72% 10.15%
Tier 1 common equity (non-GAAP) 5.93 6.62
Tangible equity to tangible assets (non-
GAAP) 6.57 7.09
Tangible common equity to tangible assets
(non-GAAP) 3.59 4.20
Non-GAAP Reconciliation
September June March
30, 30, 31,
2010 2010 2010
---- ---- ----
Efficiency Ratio (non-GAAP) (in thousands)
Net interest income (A) $81,558 $84,586 $81,189
Taxable equivalent adjustment (B) 2,372 2,605 3,357
Investment securities (losses) gain (C) --- 8,051 6,016
Noninterest income (D) 25,956 22,282 22,393
Noninterest expense (E) 74,740 77,010 78,103
Efficiency ratio: (E)/(A+B-C+D) (non-GAAP) 68.02% 75.93% 77.39%
Ending Balances (in millions)
Tangible Common Equity to Tangible Assets
(in millions)
Total assets(1) $10,639 $10,834 $11,652
Goodwill(2) (318) (318) (331)
Other intangible assets (11) (12) (13)
--- --- ---
Tangible assets (non-GAAP) $10,310 $10,504 $11,308
======= ======= =======
Total shareholders' equity $1,157 $1,218 $1,244
Goodwill(2) (318) (318) (331)
Other intangible assets (11) (12) (13)
--- --- ---
Tangible equity (non-GAAP) $828 $888 $900
==== ==== ====
Tangible equity $828 $888 $900
Preferred stock (277) (275) (274)
---- ---- ----
Tangible common equity (non-GAAP) $551 $613 $626
==== ==== ====
Tier 1 Common Equity (in millions)
Total shareholders' equity $1,157 $1,218 $1,244
Qualifying capital securities 74 74 74
Goodwill(2) (318) (318) (331)
Accumulated other comprehensive loss
(income) (16) (10) 6
Other intangible assets (11) (12) (13)
--- --- ---
Tier 1 capital (regulatory) $886 $952 $980
==== ==== ====
Tier 1 capital (regulatory) $886 $952 $980
Qualifying capital securities (74) (74) (74)
Preferred stock (277) (275) (274)
---- ---- ----
Total Tier 1 common equity (non-GAAP) $535 $603 $632
==== ==== ====
Net risk-weighted assets (regulatory)(3) $7,133 $7,432 $8,083
Equity to assets 10.88% 11.24% 10.68%
Tier 1 common equity (non-GAAP) 7.50 8.10 7.82
Tangible equity to tangible assets (non-
GAAP) 8.03 8.45 7.96
Tangible common equity to tangible assets
(non-GAAP) 5.34 5.83 5.54
(1) Total assets represent 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.
(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.
(3) Net risk-weighted assets (regulatory) for second quarter 2010
were calculated on a combined basis.
Noninterest Income and Noninterest Expense
March December
31, 31,
(in thousands) 2011 2010
-------------- ---- ----
Service charges on deposit
accounts $9,429 $10,072
Trust fees 3,923 4,135
Mortgage and other loan
income 2,942 3,109
Brokerage and investment
fees 1,108 1,264
ATM network user fees 1,755 1,825
Bankcard fees 2,238 2,325
Net loss on loans held for
sale (1,106) (3,069)
Investment securities
(losses) gains (383) (171)
Other income 3,237 4,538
----- -----
Total noninterest income $23,143 $24,028
======= =======
Salaries and employee
benefits $31,018 $32,294
Occupancy 7,562 6,834
Professional services 2,219 2,945
Equipment 3,052 3,355
Data processing services 4,352 4,636
Advertising and public
relations 569 1,512
Postage and delivery 1,116 1,075
Other loan expenses 5,255 5,431
Losses on other real estate
(ORE) 9,122 930
ORE expenses 1,768 1,653
Intangible asset
amortization 828 851
Other expense 14,795 15,718
------ ------
Total noninterest expense $81,656 $77,234
======= =======
Three Months
Ended
June March
September 30, 30, 31,
(in thousands) 2010 2010 2010
-------------- ---- ---- ----
Service charges on deposit
accounts $10,609 $9,971 $9,684
Trust fees 3,837 3,836 3,795
Mortgage and other loan
income 2,590 2,198 2,589
Brokerage and investment
fees 1,060 1,322 933
ATM network user fees 1,864 1,771 1,597
Bankcard fees 2,261 2,266 2,007
Net loss on loans held for
sale (1,441) (8,405) (7,702)
Investment securities
(losses) gains --- 8,051 6,016
Other income 5,176 1,272 3,474
----- ----- -----
Total noninterest income $25,956 $22,282 $22,393
======= ======= =======
Salaries and employee
benefits $32,740 $31,403 $29,947
Occupancy 6,529 6,139 7,461
Professional services 2,737 2,615 2,253
Equipment 3,076 2,979 3,072
Data processing services 4,702 4,767 4,629
Advertising and public
relations 1,605 2,116 1,297
Postage and delivery 1,187 1,295 1,014
Other loan expenses 4,355 4,551 5,974
Losses on other real estate
(ORE) 1,967 3,778 6,763
ORE expenses 1,327 800 1,190
Intangible asset
amortization 908 1,034 1,130
Other expense 13,607 15,533 13,373
------ ------ ------
Total noninterest expense $74,740 $77,010 $78,103
======= ======= =======
Summary of Loan Loss Experience
Three Months Ended
March December
31, 31,
(in thousands) 2011 2010
Allowance for loan losses - beginning of period $296,031 $324,046
Provision for loan losses 88,724 131,296
Charge-offs:
Commercial and industrial 29,712 24,634
Small business 4,078 2,747
Commercial real estate 118,721 119,986
------- -------
Total commercial 152,511 147,367
Residential mortgage 3,403 6,141
Direct consumer 6,468 7,701
Indirect consumer 2,472 3,647
----- -----
Total charge-offs 164,854 164,856
------- -------
Recoveries:
Commercial and industrial 1,603 1,017
Small business 174 309
Commercial real estate 913 2,813
--- -----
Total commercial 2,690 4,139
Residential mortgage 3 42
Direct consumer 972 587
Indirect consumer 551 777
--- ---
Total recoveries 4,216 5,545
----- -----
Net charge-offs 160,638 159,311
------- -------
Allowance for loan losses - end of period $224,117 $296,031
======== ========
Three Months Ended
September June March
30, 30, 31,
(in thousands) 2010 2010 2010
Allowance for loan losses -
beginning of period $321,841 $322,377 $338,940
Provision for loan losses 89,617 70,614 101,355
Charge-offs:
Commercial and industrial 6,083 10,943 12,356
Small business 2,061 1,398 1,169
Commercial real estate 45,910 51,183 15,976
------ ------ ------
Total commercial 54,054 63,524 29,501
Residential mortgage 23,353 705 80,729
Direct consumer 10,256 5,907 7,528
Indirect consumer 2,808 4,028 3,813
----- ----- -----
Total charge-offs 90,471 74,164 121,571
------ ------ -------
Recoveries:
Commercial and industrial 1,321 899 623
Small business 89 38 46
Commercial real estate 579 829 1,319
--- --- -----
Total commercial 1,989 1,766 1,988
Residential mortgage 15 80 583
Direct consumer 452 386 453
Indirect consumer 603 782 629
--- --- ---
Total recoveries 3,059 3,014 3,653
----- ----- -----
Net charge-offs 87,412 71,150 117,918
------ ------ -------
Allowance for loan losses -end of
period $324,046 $321,841 $322,377
======== ======== ========
Average Balances, Yields and Rates
Three Months Ended
March 31, 2011
Average Average
(in thousands) Balance Rate
-------------- ------- ----
Earning Assets
Money market investments $416,756 0.25%
Investment securities:
Taxable 2,313,467 3.39
Tax-exempt 278,679 6.81
FHLB and Federal Reserve stock 143,873 3.16
Portfolio loans:
Commercial and industrial 1,422,574 4.59
Commercial real estate 2,045,360 5.30
Residential mortgage 741,818 4.76
Direct consumer 1,024,979 6.12
Indirect consumer 816,676 6.79
-------
Total portfolio loans 6,051,407 5.40
Loans held for sale 26,860 5.50
------
Total earning assets 9,231,042 4.67
Nonearning Assets
Cash and due from banks 143,957
Premises and equipment 104,399
Investment security fair value
adjustment 32,229
Other nonearning assets 682,526
Assets of discontinued operations ---
Allowance for loan losses (295,232)
--------
Total assets $9,898,921
==========
Interest-Bearing Liabilities
Deposits:
Interest-bearing demand deposits $951,770 0.23
Savings deposits 2,629,296 0.40
Time deposits 2,753,306 1.95
Short-term borrowings 41,187 0.18
Long-term debt 971,076 4.08
-------
Total interest-bearing liabilities 7,346,635 1.44
Noninterest-Bearing Liabilities and
Shareholders' Equity
Noninterest-bearing demand 1,395,588
Other liabilities 154,408
Liabilities of discontinued
operations ---
Shareholders' equity 1,002,290
---------
Total liabilities and shareholders'
equity $9,898,921
==========
Interest Spread 3.23%
Contribution of noninterest bearing
sources of funds 0.30
Net Interest Margin 3.53%
====
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 demand 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%
====
Three Months Ended
March 31, 2010
Average Average
(in thousands) Balance Rate
-------------- ------- ----
Earning Assets
Money market investments $696,016 0.25%
Investment securities:
Taxable 1,756,812 4.16
Tax-exempt 492,968 6.60
FHLB and Federal Reserve stock 155,084 2.61
Portfolio loans:
Commercial and industrial 1,874,944 4.87
Commercial real estate 2,791,395 5.24
Residential mortgage 988,859 4.78
Direct consumer 1,201,799 6.05
Indirect consumer 797,482 6.87
-------
Total portfolio loans 7,654,479 5.39
Loans held for sale 83,972 1.90
------
Total earning assets 10,839,331 4.85
Nonearning Assets
Cash and due from banks 209,126
Premises and equipment 109,696
Investment security fair value
adjustment 42,462
Other nonearning assets 710,158
Assets of discontinued operations 328,378
Allowance for loan losses (335,970)
--------
Total assets $11,903,181
===========
Interest-Bearing Liabilities
Deposits:
Interest-bearing demand deposits $1,075,943 0.31
Savings deposits 2,490,158 0.69
Time deposits 3,709,529 2.68
Short-term borrowings 36,542 0.27
Long-term debt 1,449,748 4.47
---------
Total interest-bearing liabilities 8,761,920 2.11
Noninterest-Bearing Liabilities and
Shareholders' Equity
Noninterest-bearing demand 1,268,583
Other liabilities 134,510
Liabilities of discontinued
operations 415,154
Shareholders' equity 1,323,014
---------
Total liabilities and shareholders'
equity $11,903,181
===========
Interest Spread 2.74%
Contribution of noninterest bearing
sources of funds 0.40
Net Interest Margin 3.14%
====
SOURCE Citizens Republic Bancorp, Inc.
