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8-K - FORM 8-K - CITIZENS REPUBLIC BANCORP, INC. | k48808e8vk.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
CONTACTS |
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Charles D. Christy
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Kristine D. Brenner | |
EVP & Chief Financial Officer
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Director of Investor Relations | |
(810) 237-4200
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(810) 257-2506 | |
Charlie.Christy@citizensbanking.com
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Kristine.Brenner@citizensbanking.com |
CITIZENS REPUBLIC BANCORP ANNOUNCES FOURTH QUARTER 2009 RESULTS
FLINT, MICHIGAN, January 28, 2010 Citizens Republic Bancorp, Inc. (NASDAQ: CRBC) announced
today a net loss of $64.7 million for the three months ended December 31, 2009, compared with $56.9
million for the third quarter of 2009 and $195.4 million for the fourth quarter of 2008. After
incorporating the $5.3 million dividend to the preferred shareholder, Citizens reported a net loss
attributable to common shareholders of $70.0 million for the three months ended December 31, 2009.
Diluted net loss per share was $0.18, compared with $0.48 for the third quarter of 2009 and $1.56
for the fourth quarter of 2008. The diluted net loss per share was based on average shares
outstanding of 393.8 million, 128.5 million, and 125.4 million at December 31, 2009, September 30,
2009, and December 31, 2008, respectively. The results for the fourth quarter of 2008 included a
non-cash valuation allowance of $136.6 million against deferred tax assets. For the year ended
December 31, 2009, Citizens recorded a net loss of $514.2 million compared with a net loss of
$393.1 million for 2008.
We continue to perform as we expected at this point in the economic cycle. We are aggressively
managing the credits in our watchlist and nonperforming categories in order to mitigate future
losses. We continue to maintain a strong balance sheet with robust loan loss reserves of 4.33% of
portfolio loans, excess liquidity, and capital ratios above the regulatory well-capitalized
minimums, commented Cathleen H. Nash, president and chief executive officer.
We think the road to economic recovery will be slower in Michigan than the rest of the country
given the higher level of unemployment and job loss, but Michigan will recover. As we move into
2010, we have confidence that we will benefit from the aggressive credit steps weve taken over the
last three years and the conservative, steadfast approach weve maintained in managing our capital.
With the strength of our balance sheet, the conviction and dedication of our employees, and our
loyal clients, we believe the company will benefit from a stabilizing economy throughout 2010,
said Ms. Nash.
Key Points in the Quarter:
| Net interest margin for the fourth quarter of 2009 was 3.13% compared with 2.97% for the third quarter of 2009. The increase in net interest margin was primarily the result of expanding loan spreads, declining deposit costs, and lower interest expense due to the issuance of common stock for debt late in the third quarter of 2009. | |
| The pre-tax pre-provision core operating earnings for the fourth quarter of 2009 totaled $34.5 million, an increase of $4.0 million or 13.1% over the third quarter of 2009. The increase was primarily the result of a $3.1 million improvement in net interest income. | |
| Citizens continues to hold short-term (liquid) assets at December 31, 2009 of $706.2 million, a significant increase of $172.6 million or 32.4% over September 30, 2009 and $491.2 million over December 31, 2008. Citizens parent company cash resources totaled $114.9 million at December 31, 2009 as compared with $124.1 million at September 30, 2009. | |
| Total delinquent loans at December 31, 2009 were $155.3 million, or 1.96% of total loans, a decrease of $30.8 million or 16.6% from September 30, 2009 and a decrease of $135.3 million or 46.6% from December 31, 2008. Total watchlist loans decreased for the first time in seven quarters by $99.4 million or 6.5% to $1.4 billion at December 31, 2009. Total nonperforming assets at December 31, 2009 were $595.1 million, a decrease of $12.9 million or 2.1% from September 30, 2009. |
| The allowance for loan losses at December 31, 2009 increased to $342.4 million or 4.33% of portfolio loans, compared with $339.7 million or 4.13% at September 30, 2009. The provision for loan losses for the fourth quarter of 2009 was $84.2 million, compared with $77.8 million for the third quarter of 2009. The increase in the provision for loan losses was primarily due to higher net charge-offs. Net charge-offs for the fourth quarter of 2009 totaled $81.5 million, compared with $71.5 million for the third quarter of 2009. | |
| All of Citizens regulatory capital ratios continue to exceed the well-capitalized designation. As of December 31, 2009, Citizens estimated capital ratios were as follows: |
o | Tier 1 capital 12.49% | ||
o | Total capital 13.89% | ||
o | Tier 1 leverage 9.21% | ||
o | Tier 1 common equity 8.44% | ||
o | Tangible equity to tangible assets 8.51% | ||
o | Tangible common equity to tangible assets 6.16% |
| Citizens will suspend the dividend payments on its trust preferred securities and on its Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the TARP Preferred Stock), issued to the U.S. Department of the Treasury. This action will preserve $4.9 million in cash on a quarterly basis and reduces the need for Citizens to raise additional capital. |
Balance Sheet
Total assets at December 31, 2009 were $11.9 billion, a decrease of $140.1 million or 1.2% from
September 30, 2009 and a decrease of $1.2 billion or 8.8% from December 31, 2008. The declines
were primarily due to reductions in total portfolio loans, partially offset by higher money market
investments. Additionally, the decline from December 31, 2008 was impacted by a non-cash and
non-tax-deductible goodwill impairment charge recorded in the second quarter of 2009.
Money market investments at December 31, 2009 totaled $706.2 million, an increase of $172.6 million
over September 30, 2009 and an increase of $491.2 million over December 31, 2008. The increases
were primarily the result of holding excess short-term funds with the Federal Reserve as a result
of continued deposit growth, coupled with a decline in demand for loans from credit-worthy clients.
Investment securities at December 31, 2009 totaled $2.4 billion, essentially unchanged from
September 30, 2009 and December 31, 2008.
The following table displays total portfolio loans at quarter end for each of the last five
quarters. The following definitions are provided to clarify the types of loans included in each of
the commercial real estate segments identified in the table. Land hold loans are secured by
undeveloped land which has been acquired for future development. Land development loans are
secured by land undergoing infrastructure improvements to create finished marketable lots for
commercial or residential construction. Construction loans are secured by commercial, retail and
residential real estate in the construction phase with the intent to be sold or become an income
producing property. Income producing loans are secured by non-owner occupied real estate leased to
one or more tenants. Owner occupied loans are secured by real estate occupied by the owner for
ongoing operations.
2
Loan Portfolios
(in millions) | Dec 31, 2009 | Sep 30, 2009 | Jun 30, 2009 | Mar 31, 2009 | Dec 31, 2008 | |||||||||||||||
Land Hold |
$ | 35.9 | $ | 52.0 | $ | 54.9 | $ | 54.2 | $ | 45.0 | ||||||||||
Land Development |
108.9 | 129.7 | 123.1 | 121.2 | 132.7 | |||||||||||||||
Construction |
177.9 | 214.8 | 230.4 | 257.7 | 263.5 | |||||||||||||||
Income Producing |
1,518.4 | 1,509.7 | 1,534.5 | 1,558.2 | 1,556.2 | |||||||||||||||
Owner-Occupied |
985.6 | 992.4 | 979.5 | 953.0 | 967.3 | |||||||||||||||
Total Commercial Real Estate |
2,826.7 | 2,898.6 | 2,922.4 | 2,944.3 | 2,964.7 | |||||||||||||||
Commercial and Industrial |
1,976.1 | 2,099.8 | 2,198.3 | 2,394.4 | 2,602.4 | |||||||||||||||
Total Commercial Loans |
4,802.8 | 4,998.4 | 5,120.7 | 5,338.7 | 5,567.1 | |||||||||||||||
Residential Mortgage |
1,036.5 | 1,084.8 | 1,145.0 | 1,208.0 | 1,262.8 | |||||||||||||||
Direct Consumer |
1,261.4 | 1,308.3 | 1,351.5 | 1,405.6 | 1,452.2 | |||||||||||||||
Indirect Consumer |
805.2 | 825.3 | 808.3 | 802.1 | 820.5 | |||||||||||||||
Total Consumer Loans |
3,103.1 | 3,218.4 | 3,304.8 | 3,415.7 | 3,535.5 | |||||||||||||||
Total Loans |
$ | 7,905.9 | $ | 8,216.8 | $ | 8,425.5 | $ | 8,754.4 | $ | 9,102.6 | ||||||||||
The decreases in total commercial loans were primarily the result of a decline in customer demand
from credit-worthy clients, paydowns as a result of normal client activity, and charge-offs. Also
contributing to the decrease from September 30, 2009 was the transfer of $55.5 million of
nonperforming land hold, land development, and construction loans to loans held for sale ($35.2
million after market-value adjustments) during the fourth quarter of 2009. The declines in
residential mortgage loans were primarily the result of paydowns from normal client activity and
charge-offs. More than 90% of new mortgage originations are sold into the secondary market,
resulting in minimal new loans being retained in the residential mortgage portfolio. The decreases
in direct consumer loans, which are primarily home equity loans were due to weak consumer demand.
Indirect consumer loans, which are primarily marine and recreational vehicle loans, fluctuate
throughout the year due to seasonal demand. After taking this fluctuation into account, the
indirect consumer loan portfolio is essentially unchanged from September 30, 2009 and December 31,
2008.
Loans held for sale at December 31, 2009 were $80.5 million, an increase of $19.0 million or
30.9% over September 30, 2009 and a decrease of $10.9 million or 11.9% from December 31, 2008. The
increase over September 30, 2009 was primarily the result of transferring the aforementioned
nonperforming land hold, land development, and construction loans from the loan portfolio at
fair-market value. The variance from both prior periods also reflects a decline in commercial
loans held for sale due to customer paydowns, workout activities, writedowns to reflect
market-value declines for the underlying collateral, and transfers to ORE.
Goodwill at December 31, 2009 was $330.7 million, unchanged from September 30, 2009 and a decrease
of $266.5 million from December 31, 2008. The decrease was due to a non-cash and
non-tax-deductible goodwill impairment charge recorded in the second quarter of 2009. Citizens
performed its annual impairment test during the fourth quarter of 2009 and concluded that no
additional impairment was indicated. There can be no assurance, however, that future testing will
not result in additional material impairment charges due to further developments in the banking
industry, financial markets, or Citizens markets.
Total deposits at December 31, 2009 were $8.9 billion, an increase of $117.5 million or 1.3% over
September 30, 2009 and a decrease of $143.1 million or 1.6% from December 31, 2008. Core deposits,
which exclude all time deposits, totaled $5.0 billion at December 31, 2009, a decrease of $70.2
million or 1.4% from September 30, 2009 and an increase of $579.6 million or 13.1% over December
31, 2008. The decrease from September 30, 2009 was primarily the result of seasonal declines in
public fund
3
customer deposits. The increase over December 31, 2008 was primarily the result of
clients holding higher balances in transaction accounts due to changes in FDIC coverage thresholds,
and a shift in funding mix from customer time deposits. Time deposits totaled $3.9 billion at
December 31, 2009, an increase of $187.6 million or 5.1% over September 30, 2009 and a decrease of
$722.7 million or 15.6% from December 31, 2008. The increase over September 30, 2009 was primarily
the result of the timing of replacing called brokered time deposits. The decrease from December
31, 2008 was primarily the result of a shift in funding mix from customer time deposits to core
deposits throughout 2009.
Other interest-bearing liabilities, which include federal funds purchased and securities sold under
agreements to repurchase, other short-term borrowings, and long-term debt, totaled $1.6 billion at
December 31, 2009, a decrease of $166.1 million or 9.6% from September 30, 2009 and a decrease of
$703.5 million or 31.0% from December 31, 2008. The decreases were primarily the result of a
planned reduction in wholesale funding due to Citizens strong liquidity position. Additionally,
the decrease from December 31, 2008 incorporated the result of exchanging $209.1 million in
long-term debt for Citizens common stock in the third quarter of 2009.
Capital Adequacy and Liquidity
Shareholders equity at December 31, 2009 totaled $1.3 billion, a decrease of $72.4 million or 5.2%
from September 30, 2009 and a decrease of $270.3 million or 16.9% from December 31, 2008. The
decreases were primarily the result of the net losses incurred during 2009. The decrease from
December 31, 2008 was partially offset by $197.6 million of common equity generated in the third
quarter of 2009 issuance of common stock for debt.
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.
Regulatory | Excess Capital | |||||||||||||||||||
Minimum for | over Minimum | |||||||||||||||||||
Well-Capitalized | 12/31/09 | 9/30/09 | 6/30/09 | (in millions) | ||||||||||||||||
Tier 1 capital ratio* |
6.00 | % | 12.49 | % | 12.83 | % | 11.81 | % | $ | 554.0 | ||||||||||
Total capital ratio* |
10.00 | 13.89 | 14.23 | 13.91 | 332.4 | |||||||||||||||
Tier 1 leverage ratio* |
5.00 | 9.21 | 9.63 | 8.68 | 487.5 | |||||||||||||||
Tier 1 common equity ratio* |
8.44 | 8.94 | 6.95 | |||||||||||||||||
Tangible equity to tangible assets |
8.51 | 9.01 | 7.34 | |||||||||||||||||
Tangible common equity to tangible assets |
6.16 | 6.71 | 5.09 |
* | December 31, 2009 is an estimate |
Citizens maintains a strong liquidity position due to its on-balance sheet liquidity sources
and very stable funding base comprised of approximately 75% deposits, 13% long-term debt, 11%
equity, and 1% short-term liabilities. Citizens also has access to high levels of untapped
liquidity through collateral-based borrowing capacity provided by portions of both the loan and
investment securities portfolios. Also, securities available-for-sale and $706.2 million of money
market investments could be sold for cash to provide additional liquidity, if necessary. Citizens
parent company cash resources totaled $114.9 million at December 31, 2009 as compared with $124.1
million at September 30, 2009.
In light of the net losses over the last several quarters, Citizens has determined, in consultation
with the Federal Reserve Bank of Chicago as required by regulatory policy, to defer regularly
scheduled quarterly interest payments of $1.1 million on its outstanding junior subordinated
debentures relating to its two trust preferred securities, which will defer dividend payments to
those security holders, and will also be suspending regular quarterly cash dividend payments of
$3.8 million on its TARP Preferred Stock. Deferral of these payments is expected to preserve a
total of $4.9 million of cash each quarter. Citizens has demonstrated it has sufficient cash and
liquidity to pay the scheduled dividends on its TARP Preferred Stock and interest payments on the
debentures underlying the trust preferred securities, but is taking these actions to support and
preserve its capital position in light of economic conditions and to lessen the need for raising
any additional capital. Citizens intends to reevaluate the deferral of these payments periodically
and, in consultation with its regulators, will consider reinstating these payments when
appropriate.
4
Under the terms of the junior subordinated debentures and trust documents, Citizens is allowed to
defer payments of interest for a specified number of quarterly periods without default, but such
amounts will continue to accrue. Also during the deferral period, Citizens generally may not pay
cash dividends on or purchase its common stock or preferred stock, including the TARP Preferred
Stock. Dividend payments on the TARP Preferred Stock may be deferred without default, but the
dividend is cumulative and may eventually give the holder board representation rights.
Net Interest Margin and Net Interest Income
Net interest margin was 3.13% for the fourth quarter of 2009 compared with 2.97% for the third
quarter of 2009 and 3.03% for the fourth quarter of 2008. The increase in net interest margin over
the third quarter of 2009 was primarily the result of expanding loan spreads, declining deposit
costs, and lower interest expense due to the debt exchange for common stock late in the third
quarter of 2009.
The increase in net interest margin over the fourth quarter of 2008 was primarily the result of
lower interest expense on long-term debt, expanding commercial and consumer loan spreads and retail
time deposits repricing to a lower rate, partially offset by deposit price competition, the
movement of loans to nonperforming status, and an increase in short-term investments to provide
additional on-balance sheet liquidity. For the year ended December 31, 2009, net interest margin
was 2.89% compared with 3.09% for the same period of 2008 as a result of deposit price competition,
the transfer of loans to nonperforming status, and an increase in short-term investments to provide
additional on-balance sheet liquidity. The decrease was partially offset by expanding commercial
and consumer loan spreads and retail time deposits repricing to a lower rate.
Net interest income was $83.9 million for the fourth quarter of 2009, an increase of $3.1 million
or 3.8% over the third quarter of 2009, and a decrease of $1.8 million or 2.0% from the fourth
quarter of 2008. The increase over the third quarter of 2009 was primarily due to the increase in
net interest margin, partially offset by a $174.8 million decrease in average earning assets due to
lower demand in the current Midwest economic environment.
The decrease in net interest income compared with the fourth quarter of 2008 was primarily due to a
$686.2 million decrease in average earning assets, partially offset by higher net interest margin.
The decrease in average earning assets was the result of a decrease in loan portfolio balances due
to lower demand in the current Midwest economic environment, partially offset by an increase in
investment securities and money market investments. For the year ended December 31, 2009, net
interest income declined to $317.4 million compared with $348.9 million for 2008 as a result of the
lower net interest margin and a $332.5 million decrease in average earning assets due to the
aforementioned factors.
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 each such credits 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.
| Table 1 Delinquency Rates by Loan Portfolio This table illustrates the loans where the contractual payment is 30 to 89 days past due and interest is still accruing. While these loans are actively worked to bring them current, past due loan trends may be a leading indicator of potential future nonperforming loans and charge-offs. | |
| Table 2 Commercial Watchlist This table illustrates the commercial loans that, while still accruing interest, we believe may be at risk due to general economic conditions or changes in a borrowers financial status and therefore require increased oversight. Watchlist loans that are in nonperforming status are included in Table 3 below. |
5
| Table 3 Nonperforming Assets This table illustrates the loans that are in nonaccrual status, loans past due 90 days or more on which interest is still accruing, restructured loans, nonperforming loans that are held for sale, and other repossessed assets acquired. The commercial loans included in this table are reviewed as part of the watchlist process in addition to the loans displayed in Table 2. | |
| Table 4 Net Charge-Offs This table illustrates the portion of loans that have been charged-off during each quarter. |
Table 1 Delinquency Rates By Loan Portfolio
30 to 89 days Past Due | Dec 31, 2009 | Sep 30, 2009 | Jun 30, 2009 | Mar 31, 2009 | Dec 31, 2008 | |||||||||||||||||||||||||||||||||||
% of | % of | % of | % of | % of | ||||||||||||||||||||||||||||||||||||
(dollars in millions) | $ | Portfolio | $ | Portfolio | $ | Portfolio | $ | Portfolio | $ | Portfolio | ||||||||||||||||||||||||||||||
Land Hold |
$ | 0.6 | 1.56 | % | $ | 1.4 | 2.61 | % | $ | 3.5 | 6.38 | % | $ | 3.7 | 6.83 | % | $ | 3.9 | 8.67 | % | ||||||||||||||||||||
Land Development |
4.7 | 4.34 | 12.0 | 9.29 | 1.3 | 1.06 | 11.1 | 9.16 | 5.2 | 3.92 | ||||||||||||||||||||||||||||||
Construction |
1.7 | 0.95 | 12.1 | 5.64 | 1.7 | 0.74 | 16.7 | 6.48 | 27.3 | 10.36 | ||||||||||||||||||||||||||||||
Income Producing |
40.8 | 2.69 | 44.9 | 2.97 | 50.0 | 3.26 | 64.2 | 4.12 | 76.7 | 4.93 | ||||||||||||||||||||||||||||||
Owner-Occupied |
25.0 | 2.53 | 24.4 | 2.46 | 15.6 | 1.59 | 37.4 | 3.92 | 37.5 | 3.88 | ||||||||||||||||||||||||||||||
Total Commercial Real Estate |
72.8 | 2.57 | 94.8 | 3.27 | 72.1 | 2.47 | 133.1 | 4.52 | 150.6 | 5.08 | ||||||||||||||||||||||||||||||
Commercial and Industrial |
17.0 | 0.86 | 20.2 | 0.96 | 34.0 | 1.55 | 47.1 | 1.97 | 56.5 | 2.17 | ||||||||||||||||||||||||||||||
Total Commercial Loans |
89.8 | 1.87 | 115.0 | 2.30 | 106.1 | 2.07 | 180.2 | 3.38 | 207.1 | 3.72 | ||||||||||||||||||||||||||||||
Residential Mortgage |
22.2 | 2.15 | 30.3 | 2.80 | 27.7 | 2.42 | 25.9 | 2.14 | 39.5 | 3.13 | ||||||||||||||||||||||||||||||
Direct Consumer |
27.0 | 2.14 | 24.5 | 1.87 | 23.3 | 1.72 | 20.4 | 1.45 | 25.5 | 1.76 | ||||||||||||||||||||||||||||||
Indirect Consumer |
16.3 | 2.02 | 16.3 | 1.98 | 14.6 | 1.81 | 14.7 | 1.83 | 18.5 | 2.25 | ||||||||||||||||||||||||||||||
Total Consumer Loans |
65.5 | 2.11 | 71.1 | 2.21 | 65.6 | 1.98 | 61.0 | 1.79 | 83.5 | 2.36 | ||||||||||||||||||||||||||||||
Total Delinquent Loans |
$ | 155.3 | 1.96 | % | $ | 186.1 | 2.26 | % | $ | 171.7 | 2.04 | % | $ | 241.2 | 2.76 | % | $ | 290.6 | 3.19 | % | ||||||||||||||||||||
The decreases in total delinquencies were primarily the result of continued emphasis on
proactively managing delinquent commercial loans.
As part of its overall credit underwriting and review process and loss mitigation strategy,
Citizens carefully monitors commercial and commercial real estate credits that are current in terms
of principal and interest payments but may deteriorate in quality as economic conditions decline.
Commercial relationship officers monitor their clients financial condition and initiate changes in
loan ratings based on their findings. Loans that have migrated within the loan rating system to a
level that requires increased oversight are considered watchlist loans (generally consistent with
the regulatory definition of special mention, substandard, and doubtful loans) and include loans
that are accruing (see Table 2) or nonperforming (see Table 3). 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 an even higher level of
monitoring and workout activity.
6
Table 2 Commercial Watchlist
Accruing loans only | Dec 31, 2009 | Sep 30, 2009 | Jun 30, 2009 | Mar 31, 2009 | Dec 31, 2008 | |||||||||||||||||||||||||||||||||||
% of | % of | % of | % of | % of | ||||||||||||||||||||||||||||||||||||
(dollars in millions) | $ | Portfolio | $ | Portfolio | $ | Portfolio | $ | Portfolio | $ | Portfolio | ||||||||||||||||||||||||||||||
Land Hold |
$ | 24.8 | 68.99 | % | $ | 29.0 | 55.76 | % | $ | 18.1 | 32.97 | % | $ | 15.7 | 28.97 | % | $ | 18.5 | 41.11 | % | ||||||||||||||||||||
Land Development |
88.0 | 80.78 | 93.6 | 72.12 | 83.6 | 67.91 | 62.4 | 51.49 | 49.3 | 37.15 | ||||||||||||||||||||||||||||||
Construction |
63.5 | 35.68 | 90.4 | 42.10 | 90.3 | 39.19 | 86.6 | 33.60 | 74.8 | 28.39 | ||||||||||||||||||||||||||||||
Income Producing |
521.9 | 34.37 | 519.6 | 34.42 | 458.9 | 29.91 | 421.9 | 27.08 | 401.0 | 25.77 | ||||||||||||||||||||||||||||||
Owner-Occupied |
247.3 | 25.09 | 277.3 | 27.94 | 274.4 | 28.01 | 224.2 | 23.53 | 178.4 | 18.44 | ||||||||||||||||||||||||||||||
Total Commercial Real Estate |
945.5 | 33.45 | 1,009.9 | 34.84 | 925.3 | 31.66 | 810.8 | 27.54 | 722.0 | 24.35 | ||||||||||||||||||||||||||||||
Commercial and Industrial |
475.3 | 24.05 | 510.3 | 24.30 | 532.9 | 24.24 | 479.7 | 20.03 | 436.8 | 16.78 | ||||||||||||||||||||||||||||||
Total Watchlist Loans |
$ | 1,420.8 | 29.58 | % | $ | 1,520.2 | 30.41 | % | $ | 1,458.2 | 28.48 | % | $ | 1,290.5 | 24.17 | % | $ | 1,158.8 | 20.82 | % | ||||||||||||||||||||
The decrease in accruing watchlist loans from September 30, 2009 was primarily the result of
upgrading numerous commercial and industrial loans made to clients related to the automotive
industry as well as loans migrating to nonperforming status exceeding new watchlist loans. Many of
the automotive industry commercial and industrial relationships had been proactively downgraded in
the first half of 2009 due to the uncertainty in the automotive industry at that time. Since some
of these credits have continued to perform, they warranted an upgrade during the fourth quarter of
2009. The increase over December 31, 2008 was primarily the result of proactive commercial real
estate downgrades as Citizens closely monitors borrowers repayment capacity in this environment
and the aforementioned proactive commercial and industrial downgrades in the first half of 2009.
Table 3 Nonperforming Assets
Dec 31, 2009 | Sep 30, 2009 | Jun 30, 2009 | Mar 31, 2009 | Dec 31, 2008 | ||||||||||||||||||||||||||||||||||||
% of | % of | % of | % of | % of | ||||||||||||||||||||||||||||||||||||
(dollars in millions) | $ | Portfolio | $ | Portfolio | $ | Portfolio | $ | Portfolio | $ | Portfolio | ||||||||||||||||||||||||||||||
Land Hold |
$ | 4.8 | 13.42 | % | $ | 13.3 | 25.56 | % | $ | 13.1 | 23.86 | % | $ | 12.0 | 22.14 | % | $ | 10.4 | 23.11 | % | ||||||||||||||||||||
Land Development |
1.2 | 1.06 | 13.7 | 10.52 | 15.1 | 12.27 | 14.6 | 12.05 | 23.4 | 17.63 | ||||||||||||||||||||||||||||||
Construction |
25.2 | 14.19 | 33.7 | 15.70 | 36.0 | 15.63 | 26.5 | 10.28 | 18.3 | 6.94 | ||||||||||||||||||||||||||||||
Income Producing |
121.5 | 8.00 | 126.7 | 8.39 | 139.4 | 9.08 | 116.3 | 7.46 | 78.6 | 5.05 | ||||||||||||||||||||||||||||||
Owner-Occupied |
83.4 | 8.47 | 70.2 | 7.07 | 72.0 | 7.35 | 66.5 | 6.98 | 31.8 | 3.29 | ||||||||||||||||||||||||||||||
Total Commercial Real Estate |
236.1 | 8.35 | 257.6 | 8.89 | 275.6 | 9.43 | 235.9 | 8.01 | 162.5 | 5.48 | ||||||||||||||||||||||||||||||
Commercial and Industrial |
84.0 | 4.25 | 111.5 | 5.31 | 91.8 | 4.18 | 83.7 | 3.50 | 64.6 | 2.48 | ||||||||||||||||||||||||||||||
Total Nonaccruing Commercial Loans |
320.1 | 6.67 | 369.1 | 7.38 | 367.4 | 7.17 | 319.6 | 5.99 | 227.1 | 4.08 | ||||||||||||||||||||||||||||||
Residential Mortgage |
125.7 | 12.13 | 106.5 | 9.82 | 103.3 | 9.02 | 84.6 | 7.00 | 59.5 | 4.71 | ||||||||||||||||||||||||||||||
Direct Consumer |
21.4 | 1.70 | 21.6 | 1.65 | 20.3 | 1.50 | 21.0 | 1.49 | 15.1 | 1.04 | ||||||||||||||||||||||||||||||
Indirect Consumer |
2.6 | 0.32 | 2.6 | 0.31 | 1.4 | 0.17 | 2.0 | 0.25 | 2.6 | 0.32 | ||||||||||||||||||||||||||||||
Total Nonaccruing Consumer Loans |
149.7 | 4.82 | 130.7 | 4.06 | 125.0 | 3.78 | 107.6 | 3.15 | 77.2 | 2.18 | ||||||||||||||||||||||||||||||
Total Nonaccruing Loans |
469.8 | 5.94 | 499.8 | 6.08 | 492.4 | 5.84 | 427.2 | 4.88 | 304.3 | 3.34 | ||||||||||||||||||||||||||||||
Loans 90+ days still accruing |
3.0 | 0.04 | 0.6 | 0.01 | 0.8 | 0.01 | 1.0 | 0.01 | 1.5 | 0.02 | ||||||||||||||||||||||||||||||
Restructured loans still accruing |
2.6 | 0.03 | 1.1 | 0.01 | 2.5 | 0.03 | 0.4 | 0.00 | 0.2 | 0.00 | ||||||||||||||||||||||||||||||
Total Nonperforming Portfolio Loans |
475.4 | 6.01 | % | 501.5 | 6.10 | % | 495.7 | 5.88 | % | 428.6 | 4.90 | % | 306.0 | 3.36 | % | |||||||||||||||||||||||||
Nonperforming Held for Sale |
65.3 | 44.5 | 54.3 | 64.6 | 75.2 | |||||||||||||||||||||||||||||||||||
Other Repossessed Assets Acquired |
54.4 | 62.0 | 54.7 | 57.4 | 58.0 | |||||||||||||||||||||||||||||||||||
Total Nonperforming Assets |
$ | 595.1 | $ | 608.0 | $ | 604.7 | $ | 550.6 | $ | 439.2 | ||||||||||||||||||||||||||||||
The decrease in nonperforming assets from September 30, 2009 was primarily the result of the
aforementioned market-value adjustment of $20.3 million associated with transferring $55.5 million
of nonperforming commercial real estate loans to loans held for sale during the fourth quarter of
2009. Also contributing to the decrease was a decline in commercial and industrial loans due to
net charge-offs exceeding new loans migrating to nonperforming status, which was partially offset
by an increase in residential mortgage loans due to the effects of the national mortgage
foreclosure moratorium earlier in
7
2009. The increase over December 31, 2008 was primarily the
result of deterioration in the real estate secured portfolios and general economic conditions in
the Midwest during 2009. Nonperforming assets at December 31, 2009 represented 7.48% of total
loans plus other repossessed assets acquired compared with 7.34% at September 30, 2009 and 4.79% at
December 31, 2008. Nonperforming commercial loan inflows were $101.2 million in the fourth quarter
of 2009 compared with $94.2 million in the third quarter of 2009 and $155.5 million in the fourth
quarter of 2008. The nonperforming commercial loan inflows for the fourth quarter of 2009 included
$25.3 million of loans proactively moved to nonperforming status by the respective relationship
officer prior to the loans becoming 90 days past due compared with $46.1 million proactively moved
during the third quarter of 2009.
Nonperforming commercial loan outflows were $150.2 million in the fourth quarter of 2009 compared
with $93.0 million in the third quarter of 2009 and $99.2 million in the fourth quarter of 2008.
The fourth quarter 2009 outflows included $10.4 million in loans that returned to accruing status,
$35.3 million in loan payoffs and paydowns, $44.1 million in charged-off loans, $55.5 million
transferred to loans held for sale, and $4.9 million transferred to other repossessed assets
acquired.
Table 4 Net Charge-Offs
Three Months Ended | ||||||||||||||||||||||||||||||||||||||||
Dec 31, 2009 | Sep 30, 2009 | Jun 30, 2009 | Mar 31, 2009 | Dec 31, 2008 | ||||||||||||||||||||||||||||||||||||
% of | % of | % of | % of | % of | ||||||||||||||||||||||||||||||||||||
(dollars in millions) | $ | Portfolio** | $ | Portfolio** | $ | Portfolio** | $ | Portfolio** | $ | Portfolio** | ||||||||||||||||||||||||||||||
Land Hold |
$ | 5.6 | 62.84 | % | $ | 0.5 | 4.02 | % | $ | 0.6 | 4.37 | % | $ | | | % | $ | 4.6 | 40.89 | % | ||||||||||||||||||||
Land Development |
9.7 | 35.46 | 1.4 | 4.19 | 2.4 | 7.80 | 6.3 | 20.79 | 5.8 | 17.48 | ||||||||||||||||||||||||||||||
Construction |
9.5 | 21.38 | 0.9 | 1.63 | 5.8 | 10.07 | 2.0 | 3.10 | 10.7 | 16.24 | ||||||||||||||||||||||||||||||
Income Producing |
13.2 | 3.47 | 24.5 | 6.50 | 12.6 | 3.28 | 7.8 | 2.00 | 21.7 | 5.58 | ||||||||||||||||||||||||||||||
Owner-Occupied |
2.5 | 1.03 | 4.6 | 1.85 | 7.9 | 3.23 | 2.4 | 1.01 | 3.1 | 1.28 | ||||||||||||||||||||||||||||||
Total Commercial Real Estate |
40.5 | 5.73 | 31.9 | 4.40 | 29.3 | 4.01 | 18.5 | 2.51 | 45.9 | 6.19 | ||||||||||||||||||||||||||||||
Commercial and Industrial |
22.5 | 4.56 | 20.1 | 3.84 | 6.8 | 1.24 | 8.0 | 1.34 | 21.9 | 3.37 | ||||||||||||||||||||||||||||||
Total Commercial Loans |
63.0 | 5.25 | 52.0 | 4.16 | 36.1 | 2.82 | 26.5 | 1.99 | 67.8 | 4.87 | ||||||||||||||||||||||||||||||
Residential Mortgage |
6.0 | 2.32 | 10.0 | 3.67 | 2.2 | 0.77 | 0.8 | 0.26 | 1.6 | 0.51 | ||||||||||||||||||||||||||||||
Direct Consumer |
6.2 | 1.97 | 6.3 | 1.92 | 6.5 | 1.92 | 4.4 | 1.25 | 5.9 | 1.63 | ||||||||||||||||||||||||||||||
Indirect Consumer |
6.3 | 3.12 | 3.2 | 1.56 | 4.4 | 2.18 | 5.0 | 2.49 | 5.7 | 2.78 | ||||||||||||||||||||||||||||||
Total Consumer Loans |
18.5 | 2.38 | 19.5 | 2.42 | 13.1 | 1.59 | 10.2 | 1.19 | 13.2 | 1.49 | ||||||||||||||||||||||||||||||
Total Net Charge-offs |
$ | 81.5 | 4.00 | % | $ | 71.5 | 3.41 | % | $ | 49.2 | 2.30 | % | $ | 36.7 | 1.67 | % | $ | 81.0 | 3.48 | % | ||||||||||||||||||||
** | Represents an annualized rate. |
The increase in net charge-offs over the third quarter of 2009 was primarily the result of the
aforementioned $20.3 million market-value adjustment related to the transfer of commercial real
estate loans to loans held for sale status.
The allowance for loan losses was $342.4 million or 4.33% of portfolio loans at December 31, 2009,
compared with $339.7 million or 4.13% at September 30, 2009 and $255.3 million or 2.80% at December
31, 2008. The increases were primarily the result of an increase in the loss migration rates and
extended duration for commercial real estate, residential mortgage and consumer loans. The
allowance for loan losses at December 31, 2009 represents 143.3% of net loans charged-off during
2009, which was Citizens highest year of charge-offs ever recorded. Based on current conditions
and expectations, Citizens believes that the allowance for loan losses is adequate to address the
estimated loan losses inherent in the existing loan portfolio at December 31, 2009.
After determining what Citizens believes is an adequate 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 $84.2 million in the fourth quarter of 2009, compared with $77.8 million in the
third quarter of 2009 and $118.6 million in the fourth quarter of 2008. The increase over the
third quarter of 2009 was primarily due to continued migration of residential mortgage loans to
nonperforming loan status and higher net charge-offs. This migration, and evaluation of the
underlying collateral supporting these loans, caused an increase in the allowance for loan losses
due to the higher likelihood that portions of these loans may eventually be charged-off. The
decrease from the fourth quarter of 2008 was primarily the result of four large commercial
charge-offs during the fourth quarter of 2008.
8
Noninterest Income
Noninterest income for the fourth quarter of 2009 was $15.4 million, an increase of $3.5 million or
29.9% over the third quarter of 2009 and a decrease of $0.4 million or 2.4% from the fourth quarter
of 2008. Noninterest income for the year ended December 31, 2009 totaled $67.4 million, a decrease
of $34.3 million or 33.7% from 2008.
The increase in noninterest income over the third quarter of 2009 was primarily the result of the
net loss on the extinguishment of debt in connection with the exchange offers completed in the
third quarter of 2009 ($15.9 million), partially offset by higher losses on loans held for sale
($7.9 million), lower other income ($3.5 million), and lower mortgage and other loan income ($0.7
million). The increase in losses on loans held for sale was primarily the result of additional
writedowns to reflect market-value declines for the underlying collateral. The decrease in other
income was primarily the result of receiving the proceeds for an insurance claim on a previous
branch office during the third quarter of 2009, exiting the holding companys 2006 capital
investment in a limited partnership during the third quarter of 2009, a decrease in swap income
recognition resulting from changes in the related credit spreads, and a decrease in the deferred
compensation asset. The decrease in mortgage and other loan income was primarily the result of
lower customer transaction volume.
The decrease in noninterest income from the fourth quarter of 2008 was primarily due to higher
losses on loans held for sale ($2.9 million), partially offset by higher other income ($2.1
million). The increase in losses on loans held for sale was primarily the result of additional
writedowns to reflect market-value declines for the underlying collateral. The increase in other
income was primarily due to higher swap income recognition resulting from changes in the related
credit spreads and higher revenue on bank owned life insurance policies resulting from lower market
interest rates in the fourth quarter of 2008.
The decrease in noninterest income from the full year of 2008 was primarily due to the net loss on
debt extinguishment ($15.9 million) and higher net losses on loans held for sale ($10.7 million)
due to the aforementioned factors, as well as lower service charges on deposit accounts ($3.5
million), and lower trust fees ($2.9 million). The decrease in service charges on deposit accounts
was primarily the result of a decline in customer transaction volume. The decrease in trust fees
was primarily the result of negative market conditions.
Noninterest Expense
Noninterest expense for the fourth quarter of 2009 was $83.2 million, essentially unchanged from
the third quarter of 2009 and an increase of $4.6 million or 5.8% over the fourth quarter of 2008.
Noninterest expense for the year ended December 31, 2009 totaled $603.0 million, an increase of
$112.3 million or 22.9% over 2008.
While noninterest expense for the fourth quarter of 2009 was essentially unchanged from the third
quarter of 2009, decreases in salaries and employee benefits ($7.6 million) and other loan expenses
($0.9 million) were substantially offset by increases in other expenses ($5.2 million) and other
real estate (ORE) expenses ($3.9 million). The decline in salaries and employee benefits was
primarily the result of lower severance expense and benefits related to those agreements as well as
lower commission-based compensation and a reduction in annual performance-based incentives due to
overall corporate performance for 2009. The decline in other loan expenses was primarily the
result of lower foreclosure expenses associated with repossessing collateral underlying commercial
and residential real estate loans. The increase in other expenses was primarily the result of
higher FDIC insurance premiums, an arbitration award payout, and losses related to mortgage
indemnification payments. The increase in ORE
expenses was primarily the result of higher carrying costs related to holding the ORE properties
and additional market-value declines on ORE assets.
The increase in noninterest expense over the fourth quarter of 2008 was primarily the result of
higher ORE expenses ($8.0 million) and other expense ($4.4 million), partially offset by lower
salaries and employee benefits ($6.3 million), as well as a net decline in all other noninterest
expense categories. The increases in ORE expenses and other expense were primarily the result of
the aforementioned factors. The decrease in salaries and employee benefits was primarily due to
lower staffing levels and suspending employer contributions to the 401(k) plan in 2009, as well as
the aforementioned compensation related factors. The net decline in all other noninterest expense
categories was primarily the result of various expense management initiatives implemented
throughout the company.
9
Salary costs included severance expense of $0.3 million for the fourth quarter of 2009, compared
with $1.5 million for the third quarter of 2009, and $1.2 million for the fourth quarter of 2008.
Citizens had 2,125 full-time equivalent employees at December 31, 2009 compared with 2,173 at
September 30, 2009 and 2,232 at December 31, 2008.
The increase in noninterest expense over the full year of 2008 was primarily the result of a higher
goodwill impairment charge ($88.4 million), as well as higher other expense ($20.3 million), ORE
expense ($16.8 million), and other loan expense ($11.5 million), partially offset by lower salaries
and employee benefits ($19.0 million), and a net decline in all other noninterest expense
categories due to the aforementioned factors.
Income Tax Benefit
The income tax benefit for the fourth quarter of 2009 was $3.3 million, compared with $11.7 million
for the third quarter of 2009 and a tax expense of $99.6 million for the fourth quarter of 2008.
For the year ended December 31, 2009, the income tax benefit totaled $30.0 million compared with a
tax expense of $71.0 million for 2008. The increase over the third quarter of 2009 was primarily
the result of changes in other comprehensive income. The decreases in the tax expense from the
fourth quarter of 2008 and the full-year of 2008 were primarily the result of recording a valuation
allowance of $136.6 million against deferred tax assets during the fourth quarter of 2008.
Pre-Tax Pre-Provision Core Operating Earnings
The following table displays pre-tax pre-provision core operating earnings for each of the last
five quarters.
Pre-Tax Pre-Provision Core Operating Earnings
Three Months Ended | ||||||||||||||||||||
Dec 31 | Sep 30 | Jun 30 | Mar 31 | Dec 31 | ||||||||||||||||
(in thousands) | 2009 | 2009 | 2009 | 2009 | 2008 | |||||||||||||||
Net Loss |
$ | (64,728 | ) | $ | (56,923 | ) | $ | (347,413 | ) | $ | (45,149 | ) | $ | (195,369 | ) | |||||
Income tax (benefit) provision |
(3,345 | ) | (11,747 | ) | (11,415 | ) | (3,467 | ) | 99,634 | |||||||||||
Provision for loan losses |
84,192 | 77,783 | 99,962 | 64,017 | 118,565 | |||||||||||||||
Goodwill impairment |
| | 266,474 | | | |||||||||||||||
Net loss on debt extinguishment |
| 15,929 | | | | |||||||||||||||
FDIC special assessment |
| | 5,565 | | | |||||||||||||||
Fair-value writedown on loans held for sale |
8,724 | 859 | 4,350 | 6,152 | 5,865 | |||||||||||||||
Fair-value writedown on ORE |
8,227 | 3,934 | 3,306 | 7,985 | 602 | |||||||||||||||
Fair-value (write-up)/writedown on bank owned life insurance |
(19 | ) | (360 | ) | | 235 | 2,896 | |||||||||||||
Loss on auction rate securities repurchase |
| | | | 2,406 | |||||||||||||||
Mark-to-market on swaps |
1,449 | 1,018 | 583 | (2,444 | ) | 2,414 | ||||||||||||||
Captive insurance impairment charge |
| | | | 1,053 | |||||||||||||||
Pre-Tax Pre-Provision Core Operating Earnings |
$ | 34,500 | $ | 30,493 | $ | 21,412 | $ | 27,329 | $ | 38,066 | ||||||||||
The increase over the third quarter of 2009 was primarily the result of higher net interest
income (due to the increase in net interest margin) and lower noninterest expense (primarily due to
lower salaries and employee benefits), partially offset by lower noninterest income (due to lower
other income). The decrease from the fourth quarter of 2008 was primarily the result of lower net
interest income (due to fewer earning assets) and lower noninterest income (due to a net minor
reduction in most categories). Noninterest expense for the fourth quarter of 2009 was essentially
unchanged from the fourth quarter of 2008 due to various expense management initiatives implemented
throughout the company.
Analyst Conference Call
Cathleen H. Nash, president and CEO, Charles D. Christy, EVP and CFO, Mark W. Widawski, EVP and
chief credit officer, and Brian D. J. Boike, SVP and treasurer, will review the quarters results
in a conference call for analysts and investors at 10:00 a.m. ET on Friday, January 29, 2010.
10
A live audio webcast is available on Citizens investor relations page at www.citizensbanking.com
or by calling (800) 862-9098 (conference ID: Citizens Republic). To participate in the conference
call, please connect approximately 10 minutes prior to the scheduled conference time.
The call will be archived for 90 days at www.citizensbanking.com. In addition, a digital recording
will be available approximately two hours after the completion of the conference call until
February 5, 2010. To listen to the replay, please dial (800) 839-3612.
Use of Non-GAAP Financial Measures
In addition to results presented in accordance with 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 core operating earnings, net
interest margin, and the efficiency ratio. Citizens believes these non-GAAP financial measures
provide information useful to investors in understanding the underlying operational performance of
the company, its business, and performance trends and facilitates 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. To mitigate these limitations, Citizens has
procedures in place to ensure that these measures are calculated using the appropriate GAAP or
regulatory components and to ensure that the capital performance is properly reflected to
facilitate period-to-period comparisons. Although Citizens believes the above non-GAAP financial
measures 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
Additionally, Citizens believes the exclusion of goodwill and other intangible assets to create
average tangible assets and average tangible equity facilitates the comparison of results for
ongoing business operations. Citizens management internally assesses the companys 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 these same
bases. Tier 1 common equity is often expressed as a percentage of net risk-weighted assets. Under
the risk-based capital framework, a banks 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, comprised 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. The amounts disclosed as net risk-weighted assets are calculated consistent with
banking regulatory requirements.
Pre-tax Pre-Provision Core Operating Earnings
Pre-tax pre-provision core operating earnings, as defined by management, represents net income
(loss) excluding income tax provision (benefit), the provision for loan losses, and any impairment
charges or special assessments (including goodwill, credit writedowns, fair-value adjustments, and
FDIC special assessments). Citizens believes presenting pre-tax pre-provision core operating
earnings provides investors with the ability to better understand Citizens underlying operating
trends separate from the direct effects of the impairment charges, net loss on debt extinguishment,
credit issues, fair value adjustments, challenges inherent in the real estate downturn and other
economic cycle issues and displays a consistent core operating earnings trend before the impact of
these challenges. The Credit
Quality section of this earnings 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.
11
Net Interest Margin and Efficiency Ratio
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
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.
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 as Citizens Bank and
in Iowa as F&M Bank, with 229 offices and 267 ATMs. Citizens Republic Bancorp is the largest bank
holding company headquartered in Michigan with roots dating back to 1871 and is the 47th
largest bank holding company headquartered in the United States. More information about Citizens
Republic Bancorp 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
such differences include the risks and uncertainties detailed elsewhere in this release and from
time to time in Citizens Form 10-K and Form 10-Q filings with the SEC, which are available at the
SECs 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.
12
Consolidated Balance Sheets (Unaudited)
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
December 31, | September 30, | December 31, | ||||||||||
(in thousands) | 2009 | 2009 | 2008 | |||||||||
Assets |
||||||||||||
Cash and due from banks |
$ | 163,137 | $ | 164,537 | $ | 171,695 | ||||||
Money Market Investments |
706,163 | 533,540 | 214,925 | |||||||||
Investment Securities: |
||||||||||||
Securities available for sale, at fair value |
2,225,065 | 2,235,323 | 2,248,772 | |||||||||
Securities held to maturity, at amortized cost
(fair value of $139,665, $144,440 and $137,846, respectively) |
137,094 | 137,087 | 138,575 | |||||||||
Total investment securities |
2,362,159 | 2,372,410 | 2,387,347 | |||||||||
FHLB and Federal Reserve stock |
156,278 | 156,278 | 148,764 | |||||||||
Portfolio loans: |
||||||||||||
Commercial and industrial |
1,976,105 | 2,099,779 | 2,602,334 | |||||||||
Commercial real estate |
2,826,741 | 2,898,593 | 2,964,721 | |||||||||
Total commercial |
4,802,846 | 4,998,372 | 5,567,055 | |||||||||
Residential mortgage |
1,036,443 | 1,084,872 | 1,262,841 | |||||||||
Direct consumer |
1,261,389 | 1,308,279 | 1,452,166 | |||||||||
Indirect consumer |
805,181 | 825,316 | 820,536 | |||||||||
Total portfolio loans |
7,905,859 | 8,216,839 | 9,102,598 | |||||||||
Less: Allowance for loan losses |
(342,370 | ) | (339,694 | ) | (255,321 | ) | ||||||
Net portfolio loans |
7,563,489 | 7,877,145 | 8,847,277 | |||||||||
Loans held for sale |
80,459 | 61,445 | 91,362 | |||||||||
Premises and equipment |
117,095 | 120,647 | 124,217 | |||||||||
Goodwill |
330,744 | 330,744 | 597,218 | |||||||||
Other intangible assets |
14,377 | 15,551 | 21,414 | |||||||||
Bank owned life insurance |
220,190 | 219,802 | 218,333 | |||||||||
Other assets |
217,540 | 219,677 | 263,464 | |||||||||
Total assets |
$ | 11,931,631 | $ | 12,071,776 | $ | 13,086,016 | ||||||
Liabilities |
||||||||||||
Noninterest-bearing deposits |
$ | 1,330,707 | $ | 1,270,170 | $ | 1,143,294 | ||||||
Interest-bearing demand deposits |
1,114,863 | 1,199,559 | 780,176 | |||||||||
Savings deposits |
2,561,819 | 2,607,838 | 2,504,320 | |||||||||
Time deposits |
3,901,951 | 3,714,302 | 4,624,616 | |||||||||
Total deposits |
8,909,340 | 8,791,869 | 9,052,406 | |||||||||
Federal funds purchased and securities sold
under agreements to repurchase |
43,780 | 52,632 | 64,072 | |||||||||
Other short-term borrowings |
7,283 | 7,307 | 10,377 | |||||||||
Other liabilities |
126,705 | 145,790 | 164,274 | |||||||||
Long-term debt |
1,513,487 | 1,670,748 | 2,193,566 | |||||||||
Total liabilities |
10,600,595 | 10,668,346 | 11,484,695 | |||||||||
Shareholders Equity |
||||||||||||
Preferred stock no par value |
271,990 | 270,487 | 266,088 | |||||||||
Common stock no par value |
1,429,771 | 1,429,657 | 1,214,469 | |||||||||
Retained (deficit) earnings |
(363,632 | ) | (293,650 | ) | 170,358 | |||||||
Accumulated other comprehensive loss |
(7,093 | ) | (3,064 | ) | (49,594 | ) | ||||||
Total shareholders equity |
1,331,036 | 1,403,430 | 1,601,321 | |||||||||
Total liabilities and shareholders equity |
$ | 11,931,631 | $ | 12,071,776 | $ | 13,086,016 | ||||||
13
Consolidated Statements of Operations (Unaudited)
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(in thousands, except per share amounts) | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Interest Income |
||||||||||||||||
Interest and fees on loans |
$ | 109,494 | $ | 138,794 | $ | 456,347 | $ | 586,073 | ||||||||
Interest and dividends on investment securities: |
||||||||||||||||
Taxable |
18,964 | 19,770 | 80,437 | 78,089 | ||||||||||||
Tax-exempt |
6,210 | 7,174 | 26,340 | 29,096 | ||||||||||||
Dividends on FHLB and Federal Reserve stock |
761 | 1,761 | 4,255 | 7,269 | ||||||||||||
Money market investments |
382 | 178 | 1,300 | 384 | ||||||||||||
Total interest income |
135,811 | 167,677 | 568,679 | 700,911 | ||||||||||||
Interest Expense |
||||||||||||||||
Deposits |
33,715 | 53,170 | 159,798 | 220,883 | ||||||||||||
Short-term borrowings |
42 | 190 | 227 | 8,191 | ||||||||||||
Long-term debt |
18,119 | 28,630 | 91,286 | 122,905 | ||||||||||||
Total interest expense |
51,876 | 81,990 | 251,311 | 351,979 | ||||||||||||
Net Interest Income |
83,935 | 85,687 | 317,368 | 348,932 | ||||||||||||
Provision for loan losses |
84,192 | 118,565 | 325,955 | 282,054 | ||||||||||||
Net interest income (loss) after provision for loan losses |
(257 | ) | (32,878 | ) | (8,587 | ) | 66,878 | |||||||||
Noninterest Income |
||||||||||||||||
Service charges on deposit accounts |
11,299 | 11,714 | 43,927 | 47,470 | ||||||||||||
Trust fees |
4,287 | 4,062 | 15,082 | 17,967 | ||||||||||||
Mortgage and other loan income |
2,571 | 1,807 | 12,609 | 11,443 | ||||||||||||
Brokerage and investment fees |
1,142 | 1,606 | 5,445 | 7,109 | ||||||||||||
ATM network user fees |
1,713 | 1,514 | 6,607 | 6,319 | ||||||||||||
Bankcard fees |
1,946 | 1,898 | 7,972 | 7,440 | ||||||||||||
Losses on loans held for sale |
(8,724 | ) | (5,865 | ) | (20,086 | ) | (9,373 | ) | ||||||||
Net loss on debt extinguishment |
| | (15,929 | ) | | |||||||||||
Other income |
1,147 | (982 | ) | 11,794 | 13,367 | |||||||||||
Total noninterest income |
15,381 | 15,754 | 67,421 | 101,742 | ||||||||||||
Noninterest Expense |
||||||||||||||||
Salaries and employee benefits |
30,865 | 37,194 | 139,193 | 158,193 | ||||||||||||
Occupancy |
6,424 | 7,214 | 27,820 | 28,592 | ||||||||||||
Professional services |
3,014 | 3,644 | 11,996 | 15,184 | ||||||||||||
Equipment |
3,058 | 3,156 | 11,989 | 12,966 | ||||||||||||
Data processing services |
4,855 | 3,748 | 18,017 | 16,470 | ||||||||||||
Advertising and public relations |
1,563 | 1,304 | 7,146 | 5,897 | ||||||||||||
Postage and delivery |
1,364 | 1,931 | 5,844 | 7,342 | ||||||||||||
Other loan expenses |
5,619 | 5,367 | 24,913 | 13,381 | ||||||||||||
Other real estate (ORE) expenses |
9,507 | 1,547 | 27,852 | 11,008 | ||||||||||||
Intangible asset amortization |
1,173 | 2,126 | 7,036 | 9,132 | ||||||||||||
Goodwill impairment |
| | 266,474 | 178,089 | ||||||||||||
Other expense |
15,755 | 11,380 | 54,741 | 34,448 | ||||||||||||
Total noninterest expense |
83,197 | 78,611 | 603,021 | 490,702 | ||||||||||||
Loss Before Income Taxes |
(68,073 | ) | (95,735 | ) | (544,187 | ) | (322,082 | ) | ||||||||
Income tax (benefit) provision |
(3,345 | ) | 99,634 | (29,974 | ) | 70,970 | ||||||||||
Net Loss |
(64,728 | ) | (195,369 | ) | (514,213 | ) | (393,052 | ) | ||||||||
Deemed dividend on convertible preferred stock |
| | | (11,737 | ) | |||||||||||
Dividend on redeemable preferred stock |
(5,253 | ) | (227 | ) | (19,777 | ) | (227 | ) | ||||||||
Net Loss Attributable to Common Shareholders |
$ | (69,981 | ) | $ | (195,596 | ) | $ | (533,990 | ) | $ | (405,016 | ) | ||||
Net Loss Per Common Share: |
||||||||||||||||
Basic |
$ | (0.18 | ) | $ | (1.55 | ) | $ | (2.74 | ) | $ | (4.28 | ) | ||||
Diluted |
(0.18 | ) | (1.56 | ) | (2.75 | ) | (4.30 | ) | ||||||||
Cash Dividends Declared Per Common Share |
| | | 0.29 | ||||||||||||
Average Common Shares Outstanding: |
||||||||||||||||
Basic |
393,774 | 125,385 | 193,833 | 94,156 | ||||||||||||
Diluted |
393,785 | 125,403 | 193,853 | 94,170 |
14
Selected Quarterly Information
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
4th Qtr 2009 | 3rd Qtr 2009 | 2nd Qtr 2009 | 1st Qtr 2009 | 4th Qtr 2008 | ||||||||||||||||
Summary of Operations (thousands) |
||||||||||||||||||||
Net interest income |
$ | 83,935 | $ | 80,885 | $ | 75,601 | $ | 76,946 | $ | 85,687 | ||||||||||
Provision for loan losses |
84,192 | 77,783 | 99,962 | 64,017 | 118,565 | |||||||||||||||
Noninterest income (1) |
15,381 | 11,842 | 20,966 | 19,233 | 15,754 | |||||||||||||||
Noninterest expense (2) |
83,197 | 83,614 | 355,433 | 80,778 | 78,611 | |||||||||||||||
Income tax (benefit) provision (3) |
(3,345 | ) | (11,747 | ) | (11,415 | ) | (3,467 | ) | 99,634 | |||||||||||
Net loss |
(64,728 | ) | (56,923 | ) | (347,413 | ) | (45,149 | ) | (195,369 | ) | ||||||||||
Net loss attributable to common shareholders (4) |
(69,981 | ) | (62,147 | ) | (352,609 | ) | (49,252 | ) | (195,596 | ) | ||||||||||
Taxable equivalent adjustment |
3,932 | 3,961 | 4,220 | 4,337 | 4,519 | |||||||||||||||
Per Common Share Data |
||||||||||||||||||||
Net Loss: |
||||||||||||||||||||
Basic |
$ | (0.18 | ) | $ | (0.48 | ) | $ | (2.79 | ) | $ | (0.39 | ) | $ | (1.55 | ) | |||||
Diluted |
(0.18 | ) | (0.48 | ) | (2.81 | ) | (0.39 | ) | (1.56 | ) | ||||||||||
Market value |
0.69 | 0.76 | 0.71 | 1.55 | 2.98 | |||||||||||||||
Common book value |
2.69 | 2.87 | 7.57 | 10.29 | 10.60 | |||||||||||||||
Tangible book value |
2.50 | 2.68 | 6.95 | 7.53 | 7.80 | |||||||||||||||
Shares outstanding, end of period (000) |
394,397 | 394,470 | 126,258 | 126,299 | 125,997 | |||||||||||||||
At Period End, (millions) |
||||||||||||||||||||
Assets |
$ | 11,932 | $ | 12,072 | $ | 12,288 | $ | 12,982 | $ | 13,086 | ||||||||||
Earning assets |
11,169 | 11,284 | 11,534 | 11,885 | 11,974 | |||||||||||||||
Portfolio loans |
7,906 | 8,217 | 8,426 | 8,754 | 9,103 | |||||||||||||||
Allowance for loan losses |
342 | 340 | 333 | 283 | 255 | |||||||||||||||
Deposits |
8,909 | 8,792 | 8,913 | 9,120 | 9,052 | |||||||||||||||
Shareholders equity |
1,331 | 1,403 | 1,225 | 1,567 | 1,601 | |||||||||||||||
Average Balances, (millions) |
||||||||||||||||||||
Assets |
$ | 11,966 | $ | 12,129 | $ | 12,774 | $ | 13,080 | $ | 13,074 | ||||||||||
Earning assets |
11,190 | 11,365 | 11,711 | 11,967 | 11,877 | |||||||||||||||
Portfolio loans |
8,084 | 8,311 | 8,604 | 8,908 | 9,267 | |||||||||||||||
Allowance for loan losses |
340 | 334 | 292 | 260 | 225 | |||||||||||||||
Deposits |
8,762 | 8,786 | 8,995 | 9,117 | 8,998 | |||||||||||||||
Shareholders equity |
1,392 | 1,228 | 1,557 | 1,607 | 1,559 | |||||||||||||||
Financial Ratios (annualized) |
||||||||||||||||||||
Return on average assets |
(2.15 | )% | (1.86 | )% | (10.91 | )% | (1.40 | )% | (5.94 | )% | ||||||||||
Return on average shareholders equity |
(18.44 | ) | (18.40 | ) | (89.50 | ) | (11.40 | ) | (49.86 | ) | ||||||||||
Average shareholders equity / average assets |
11.64 | 10.12 | 12.19 | 12.28 | 11.92 | |||||||||||||||
Net interest margin (FTE) (5) |
3.13 | 2.97 | 2.73 | 2.73 | 3.03 | |||||||||||||||
Efficiency ratio (6) |
80.58 | 86.48 | 88.26 | 80.36 | 74.19 | |||||||||||||||
Allowance for loan losses as a percent of portfolio loans |
4.33 | 4.13 | 3.96 | 3.23 | 2.80 | |||||||||||||||
Allowance for loan losses as a percent of nonperforming
loans |
72.01 | 67.74 | 67.25 | 65.94 | 83.43 | |||||||||||||||
Nonperforming loans as a percent of portfolio loans |
6.01 | 6.10 | 5.88 | 4.90 | 3.36 | |||||||||||||||
Nonperforming assets as a percent of portfolio loans plus
ORAA |
7.48 | 7.34 | 7.13 | 6.25 | 4.79 | |||||||||||||||
Nonperforming assets as a percent of total assets |
4.99 | 5.04 | 4.92 | 4.24 | 3.36 | |||||||||||||||
Net loans charged off as a percent of average portfolio
loans |
4.00 | 3.41 | 2.30 | 1.67 | 3.48 | |||||||||||||||
(1) | Noninterest income includes a net loss on debt extinguishment of $15.9 million in the third quarter of 2009. | |
(2) | Noninterest expense includes a goodwill impairment charge of $266.5 million in the second quarter of 2009. | |
(3) | Income tax (benefit) provision includes a deferred tax valuation allowance of $136.6 million in the fourth quarter of 2008. | |
(4) | Net loss attributable to common shareholders includes the following non-cash items: $5.2 million dividend to preferred shareholders in fourth, third and second quarter of 2009, $4.1 million dividend to preferred shareholders in first quarter 2009 and $0.2 million accretion of redeemable preferred stock in the fourth quarter of 2008. | |
(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 fees and other income). |
15
Financial Summary and Comparison
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
Twelve months ended | ||||||||||||
December 31, | ||||||||||||
2009 | 2008 | % Change | ||||||||||
Summary of Operations (thousands) |
||||||||||||
Net interest income |
$ | 317,368 | $ | 348,932 | (9.0 | )% | ||||||
Provision for loan losses |
325,955 | 282,054 | 15.6 | |||||||||
Noninterest income (1) |
67,421 | 101,742 | (33.7 | ) | ||||||||
Noninterest expense (2) |
603,021 | 490,702 | 22.9 | |||||||||
Income tax (benefit) provision (3) |
(29,974 | ) | 70,970 | (142.2 | ) | |||||||
Net loss |
(514,213 | ) | (393,052 | ) | 30.8 | |||||||
Net loss attributable to common shareholders (4) |
(533,990 | ) | (405,016 | ) | 31.8 | |||||||
Taxable equivalent adjustment |
16,450 | 18,402 | (10.6 | ) | ||||||||
Per Common Share Data |
||||||||||||
Net Loss: |
||||||||||||
Basic |
$ | (2.74 | ) | $ | (4.28 | ) | (36.0 | )% | ||||
Diluted |
(2.75 | ) | (4.30 | ) | (36.0 | ) | ||||||
Cash dividends |
| 0.29 | (100.0 | ) | ||||||||
Market Value |
0.69 | 2.98 | (76.8 | ) | ||||||||
Common book value |
2.69 | 10.60 | (74.6 | ) | ||||||||
Tangible book value |
2.50 | 7.80 | (67.9 | ) | ||||||||
Shares outstanding, end of period (000) |
394,397 | 125,997 | 313.0 | |||||||||
At Period End (millions) |
||||||||||||
Assets |
$ | 11,932 | $ | 13,086 | (8.8 | )% | ||||||
Earning assets |
11,169 | 11,974 | (6.7 | ) | ||||||||
Portfolio loans |
7,906 | 9,103 | (13.1 | ) | ||||||||
Allowance for loan losses |
342 | 255 | 34.1 | |||||||||
Deposits |
8,909 | 9,052 | (1.6 | ) | ||||||||
Shareholders equity |
1,331 | 1,601 | (16.9 | ) | ||||||||
Average For The Year (millions) |
||||||||||||
Assets |
$ | 12,483 | $ | 13,242 | (5.7 | )% | ||||||
Earning assets |
11,556 | 11,888 | (2.8 | ) | ||||||||
Portfolio loans |
8,474 | 9,434 | (10.2 | ) | ||||||||
Allowance for loan losses |
307 | 189 | 62.4 | |||||||||
Deposits |
8,914 | 8,715 | 2.3 | |||||||||
Shareholders equity |
1,445 | 1,558 | (7.3 | ) | ||||||||
Financial Ratios (annualized) |
||||||||||||
Return on average assets |
(4.12) | % | (2.97 | )% | 38.7 | % | ||||||
Return on average shareholders equity |
(35.59 | ) | (25.22 | ) | 41.1 | |||||||
Average shareholders equity / average assets |
11.57 | 11.77 | (1.7 | ) | ||||||||
Net interest margin (FTE) (5) |
2.89 | 3.09 | (6.5 | ) | ||||||||
Efficiency ratio (6) |
83.88 | 66.64 | 25.9 | |||||||||
Allowance for loan losses as a percent of portfolio loans |
4.33 | 2.80 | 54.6 | |||||||||
Allowance for loan losses as a percent of nonperforming loans |
72.01 | 83.43 | (13.7 | ) | ||||||||
Nonperforming loans as a percent of portfolio loans |
6.01 | 3.36 | 79.1 | |||||||||
Nonperforming assets as a percent of portfolio loans plus ORAA |
7.48 | 4.79 | 56.1 | |||||||||
Nonperforming assets as a percent of total assets |
4.99 | 3.36 | 48.8 | |||||||||
Net loans charged off as a percent of average portfolio loans |
2.82 | 2.01 | 40.3 |
(1) | Noninterest income includes a net loss on debt extinguishment of $15.9 million in the third quarter of 2009. | |
(2) | Noninterest expense includes a goodwill impairment charge of $266.5 million and $178.1 million in the second quarter of 2009 and 2008, respectively. | |
(3) | Income tax (benefit) provision includes a deferred tax valuation allowance of $136.6 million in the fourth quarter of 2008. | |
(4) | Net loss attributable to common shareholders includes dividends on redeemable preferred stock in the amount of $19.8 million in 2009 and $ 0.2 million dividend on redeemable preferred stock and $11.7 million deemed dividend on convertible preferred stock in 2008. | |
(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 + Noninterest income). |
16
Non-GAAP Reconciliation
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
(dollars in thousands) | Dec 31, 2009 | Sep 30, 2009 | Jun 30, 2009 | Mar 31, 2009 | Dec 31, 2008 | |||||||||||||||
Net Interest Income (A) |
$ | 83,935 | $ | 80,885 | $ | 75,601 | $ | 76,946 | $ | 85,687 | ||||||||||
Taxable Equivalent Adjustment (B) |
3,932 | 3,961 | 4,220 | 4,337 | 4,519 | |||||||||||||||
Noninterest Income (C) |
15,381 | 11,842 | 20,966 | 19,233 | 15,754 | |||||||||||||||
Noninterest Expense (D) |
83,197 | 83,614 | 355,433 | 80,778 | 78,611 | |||||||||||||||
Goodwill Impairment (E) |
| | 266,474 | | | |||||||||||||||
Efficiency Ratio: (D-E)/(A+B+C) |
80.58 | % | 86.48 | % | 88.26 | % | 80.36 | % | 74.19 | % | ||||||||||
Ending Balances (millions) |
||||||||||||||||||||
Tangible Common Equity to Tangible Assets |
||||||||||||||||||||
Total assets |
$ | 11,932 | $ | 12,072 | $ | 12,288 | $ | 12,982 | $ | 13,086 | ||||||||||
Goodwill |
(331 | ) | (331 | ) | (331 | ) | (597 | ) | (597 | ) | ||||||||||
Other intangible assets |
(14 | ) | (16 | ) | (17 | ) | (19 | ) | (21 | ) | ||||||||||
Tangible assets |
$ | 11,587 | $ | 11,725 | $ | 11,940 | $ | 12,366 | $ | 12,468 | ||||||||||
Total shareholders equity |
$ | 1,331 | $ | 1,403 | $ | 1,225 | $ | 1,567 | $ | 1,601 | ||||||||||
Goodwill |
(331 | ) | (331 | ) | (331 | ) | (597 | ) | (597 | ) | ||||||||||
Other intangible assets |
(14 | ) | (16 | ) | (17 | ) | (19 | ) | (21 | ) | ||||||||||
Tangible equity |
$ | 986 | $ | 1,056 | $ | 877 | $ | 951 | $ | 983 | ||||||||||
Tangible equity |
$ | 986 | $ | 1,056 | $ | 877 | $ | 951 | $ | 983 | ||||||||||
Preferred Stock |
(272 | ) | (270 | ) | (269 | ) | (268 | ) | (266 | ) | ||||||||||
Tangible common equity |
$ | 714 | $ | 787 | $ | 608 | $ | 683 | $ | 717 | ||||||||||
Tier 1 Common Equity |
||||||||||||||||||||
Total shareholders equity |
$ | 1,331 | $ | 1,403 | $ | 1,225 | $ | 1,567 | $ | 1,601 | ||||||||||
Qualifying capital securities |
74 | 74 | 175 | 175 | 175 | |||||||||||||||
Goodwill |
(331 | ) | (331 | ) | (331 | ) | (597 | ) | (597 | ) | ||||||||||
Accumulated other comprehensive loss |
7 | 3 | 27 | 35 | 50 | |||||||||||||||
Other assets (1) |
(14 | ) | (16 | ) | (17 | ) | (19 | ) | (21 | ) | ||||||||||
Tier 1 capital (regulatory) |
$ | 1,067 | $ | 1,133 | $ | 1,079 | $ | 1,161 | $ | 1,208 | ||||||||||
Tier 1 capital (regulatory) |
$ | 1,067 | $ | 1,133 | $ | 1,079 | $ | 1,161 | $ | 1,208 | ||||||||||
Qualifying capital securities |
(74 | ) | (74 | ) | (175 | ) | (175 | ) | (175 | ) | ||||||||||
Preferred Stock |
(272 | ) | (270 | ) | (269 | ) | (268 | ) | (266 | ) | ||||||||||
Total Tier 1 common equity (non-GAAP) |
$ | 721 | $ | 789 | $ | 635 | $ | 718 | $ | 767 | ||||||||||
Net risk-weighted assets (regulatory) (1) * |
$ | 8,541 | $ | 8,835 | $ | 9,138 | $ | 9,550 | $ | 9,883 | ||||||||||
Equity to Assets |
11.16 | % | 11.63 | % | 9.97 | % | 12.07 | % | 12.24 | % | ||||||||||
Tangible Equity to Tangible Assets |
8.51 | 9.01 | 7.34 | 7.69 | 7.88 | |||||||||||||||
Tangible Common Equity to Tangible Assets |
6.16 | 6.71 | 5.09 | 5.53 | 5.75 | |||||||||||||||
Tier 1 Common Equity * |
8.44 | 8.94 | 6.95 | 7.52 | 7.76 |
(1) | Other assets deducted from Tier 1 capital and risk-weighted assets consist of intangible assets (excluding goodwill) | |
* | December 31, 2009 is an estimate |
17
Noninterest Income and Noninterest Expense (Unaudited)
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
Three Months Ended | ||||||||||||||||||||
Dec 31 | Sep 30 | Jun 30 | Mar 31 | Dec 31 | ||||||||||||||||
(in thousands) | 2009 | 2009 | 2009 | 2009 | 2008 | |||||||||||||||
NONINTEREST INCOME: |
||||||||||||||||||||
Service charges on deposit accounts |
$ | 11,299 | $ | 11,524 | $ | 10,836 | $ | 10,268 | $ | 11,714 | ||||||||||
Trust fees |
4,287 | 3,911 | 3,464 | 3,419 | 4,062 | |||||||||||||||
Mortgage and other loan income |
2,571 | 3,244 | 3,715 | 3,079 | 1,807 | |||||||||||||||
Brokerage and investment fees |
1,142 | 1,527 | 1,450 | 1,327 | 1,606 | |||||||||||||||
ATM network user fees |
1,713 | 1,775 | 1,665 | 1,454 | 1,514 | |||||||||||||||
Bankcard fees |
1,946 | 2,039 | 2,093 | 1,894 | 1,898 | |||||||||||||||
Losses on loans held for sale |
(8,724 | ) | (859 | ) | (4,350 | ) | (6,152 | ) | (5,865 | ) | ||||||||||
Net loss on debt extinguishment |
| (15,929 | ) | | | | ||||||||||||||
Other income |
1,147 | 4,610 | 2,093 | 3,944 | (982 | ) | ||||||||||||||
TOTAL NONINTEREST INCOME |
$ | 15,381 | $ | 11,842 | $ | 20,966 | $ | 19,233 | $ | 15,754 | ||||||||||
NONINTEREST EXPENSE: |
||||||||||||||||||||
Salaries and employee benefits |
$ | 30,865 | $ | 38,461 | $ | 35,950 | $ | 33,917 | $ | 37,194 | ||||||||||
Occupancy |
6,424 | 6,711 | 6,762 | 7,923 | 7,214 | |||||||||||||||
Professional services |
3,014 | 3,063 | 2,783 | 3,136 | 3,644 | |||||||||||||||
Equipment |
3,058 | 3,032 | 3,049 | 2,850 | 3,156 | |||||||||||||||
Data processing services |
4,855 | 4,542 | 4,346 | 4,274 | 3,748 | |||||||||||||||
Advertising and public relations |
1,563 | 1,885 | 2,274 | 1,425 | 1,304 | |||||||||||||||
Postage and delivery |
1,364 | 1,379 | 1,526 | 1,575 | 1,931 | |||||||||||||||
Other loan expenses |
5,619 | 6,496 | 6,861 | 5,937 | 5,367 | |||||||||||||||
Other real estate (ORE) expenses |
9,507 | 5,568 | 4,417 | 8,360 | 1,547 | |||||||||||||||
Intangible asset amortization |
1,173 | 1,874 | 1,952 | 2,037 | 2,126 | |||||||||||||||
Goodwill impairment |
| | 266,474 | | | |||||||||||||||
Other expense |
15,755 | 10,603 | 19,039 | 9,344 | 11,380 | |||||||||||||||
TOTAL NONINTEREST EXPENSE |
$ | 83,197 | $ | 83,614 | $ | 355,433 | $ | 80,778 | $ | 78,611 | ||||||||||
18
Average Balances, Yields and Rates
Three Months Ended | ||||||||||||||||||||||||
December 31, 2009 | September 30, 2009 | December 31, 2008 | ||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||
(dollars in thousands) | Balance | Rate | Balance | Rate | Balance | Rate | ||||||||||||||||||
Earning Assets |
||||||||||||||||||||||||
Money market investments |
$ | 606,423 | 0.25 | % | $ | 520,021 | 0.25 | % | $ | 122,574 | 0.58 | % | ||||||||||||
Investment securities: |
||||||||||||||||||||||||
Taxable |
1,703,092 | 4.45 | 1,705,017 | 4.57 | 1,567,930 | 5.04 | ||||||||||||||||||
Tax-exempt |
582,253 | 6.56 | 605,709 | 6.55 | 670,015 | 6.59 | ||||||||||||||||||
FHLB and Federal Reserve stock |
156,277 | 1.94 | 156,278 | 4.07 | 148,765 | 4.71 | ||||||||||||||||||
Portfolio loans |
||||||||||||||||||||||||
Commercial and industrial |
2,027,163 | 4.91 | 2,142,996 | 4.82 | 2,665,081 | 5.21 | ||||||||||||||||||
Commercial real estate |
2,899,293 | 5.25 | 2,899,786 | 5.28 | 3,031,173 | 6.26 | ||||||||||||||||||
Residential mortgage |
1,057,279 | 4.73 | 1,121,185 | 4.91 | 1,271,909 | 5.89 | ||||||||||||||||||
Direct consumer |
1,284,574 | 6.05 | 1,327,455 | 6.05 | 1,466,810 | 6.38 | ||||||||||||||||||
Indirect consumer |
815,261 | 6.81 | 819,409 | 6.83 | 832,379 | 6.81 | ||||||||||||||||||
Total portfolio loans |
8,083,570 | 5.38 | 8,310,831 | 5.39 | 9,267,352 | 5.98 | ||||||||||||||||||
Loans held for sale |
58,802 | 3.78 | 67,342 | 5.44 | 100,011 | 1.37 | ||||||||||||||||||
Total earning assets |
11,190,417 | 4.97 | 11,365,198 | 5.07 | 11,876,647 | 5.78 | ||||||||||||||||||
Nonearning Assets |
||||||||||||||||||||||||
Cash and due from banks |
159,313 | 169,806 | 193,667 | |||||||||||||||||||||
Bank premises and equipment |
118,395 | 121,255 | 124,195 | |||||||||||||||||||||
Investment security fair value adjustment |
53,996 | 34,395 | (25,650 | ) | ||||||||||||||||||||
Other nonearning assets |
783,933 | 772,327 | 1,129,453 | |||||||||||||||||||||
Allowance for loan losses |
(340,189 | ) | (334,469 | ) | (224,674 | ) | ||||||||||||||||||
Total assets |
$ | 11,965,865 | $ | 12,128,512 | $ | 13,073,638 | ||||||||||||||||||
Interest-Bearing Liabilities |
||||||||||||||||||||||||
Deposits: |
||||||||||||||||||||||||
Interest-bearing demand |
$ | 1,077,678 | 0.39 | % | $ | 1,085,860 | 0.43 | % | $ | 752,477 | 0.64 | % | ||||||||||||
Savings deposits |
2,571,267 | 0.70 | 2,601,632 | 0.69 | 2,545,445 | 1.35 | ||||||||||||||||||
Time deposits |
3,815,260 | 2.93 | 3,850,019 | 3.19 | 4,559,987 | 3.78 | ||||||||||||||||||
Short-term borrowings |
57,765 | 0.29 | 59,420 | 0.25 | 79,359 | 0.95 | ||||||||||||||||||
Long-term debt |
1,608,066 | 4.47 | 1,900,492 | 4.91 | 2,325,208 | 4.90 | ||||||||||||||||||
Total interest-bearing liabilities |
9,130,036 | 2.25 | 9,497,423 | 2.51 | 10,262,476 | 3.18 | ||||||||||||||||||
Noninterest-Bearing Liabilities and Shareholders Equity |
||||||||||||||||||||||||
Noninterest-bearing demand |
1,297,934 | 1,248,434 | 1,140,337 | |||||||||||||||||||||
Other liabilities |
145,410 | 154,973 | 111,863 | |||||||||||||||||||||
Shareholders equity |
1,392,485 | 1,227,682 | 1,558,962 | |||||||||||||||||||||
Total liabilities and shareholders equity |
$ | 11,965,865 | $ | 12,128,512 | $ | 13,073,638 | ||||||||||||||||||
Interest Spread |
2.72 | % | 2.56 | % | 2.60 | % | ||||||||||||||||||
Contribution of noninterest bearing sources of funds |
0.41 | 0.41 | 0.43 | |||||||||||||||||||||
Net Interest Margin |
3.13 | % | 2.97 | % | 3.03 | % |
19
Average Balances, Yields and Rates
Twelve Months Ended December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Average | Average | Average | Average | |||||||||||||
(dollars in thousands) | Balance | Rate | Balance | Rate | ||||||||||||
Earning Assets |
||||||||||||||||
Money market investments |
$ | 519,224 | 0.25 | % | $ | 40,551 | 0.95 | % | ||||||||
Investment securities: |
||||||||||||||||
Taxable |
1,715,605 | 4.69 | 1,503,983 | 5.19 | ||||||||||||
Tax-exempt |
617,070 | 6.57 | 673,395 | 6.65 | ||||||||||||
FHLB and Federal Reserve stock |
153,951 | 2.76 | 148,806 | 4.89 | ||||||||||||
Portfolio loans |
||||||||||||||||
Commercial and industrial |
2,237,534 | 4.72 | 2,656,982 | 5.52 | ||||||||||||
Commercial real estate |
2,921,569 | 5.31 | 3,104,815 | 6.45 | ||||||||||||
Residential mortgage |
1,147,921 | 5.04 | 1,334,706 | 6.11 | ||||||||||||
Direct consumer |
1,355,078 | 6.07 | 1,507,073 | 6.74 | ||||||||||||
Indirect consumer |
811,844 | 6.79 | 830,376 | 6.75 | ||||||||||||
Total portfolio loans |
8,473,946 | 5.38 | 9,433,952 | 6.21 | ||||||||||||
Loans held for sale |
75,925 | 3.61 | 87,565 | 3.19 | ||||||||||||
Total earning assets |
11,555,721 | 5.06 | 11,888,252 | 6.05 | ||||||||||||
Nonearning Assets |
||||||||||||||||
Cash and due from banks |
165,294 | 203,431 | ||||||||||||||
Bank premises and equipment |
121,392 | 126,255 | ||||||||||||||
Investment security fair value adjustment |
24,524 | 6,544 | ||||||||||||||
Other nonearning assets |
923,149 | 1,206,143 | ||||||||||||||
Allowance for loan losses |
(306,971 | ) | (189,072 | ) | ||||||||||||
Total assets |
$ | 12,483,109 | $ | 13,241,553 | ||||||||||||
Interest-Bearing Liabilities |
||||||||||||||||
Deposits: |
||||||||||||||||
Interest-bearing demand |
$ | 979,590 | 0.43 | % | $ | 771,735 | 0.66 | % | ||||||||
Savings deposits |
2,610,246 | 0.78 | 2,551,570 | 1.73 | ||||||||||||
Time deposits |
4,097,896 | 3.30 | 4,268,931 | 4.02 | ||||||||||||
Short-term borrowings |
61,638 | 0.37 | 317,404 | 2.58 | ||||||||||||
Long-term debt |
1,904,955 | 4.79 | 2,521,181 | 4.87 | ||||||||||||
Total interest-bearing liabilities |
9,654,325 | 2.60 | 10,430,821 | 3.37 | ||||||||||||
Noninterest-Bearing Liabilities and Shareholders Equity |
||||||||||||||||
Noninterest-bearing demand |
1,226,079 | 1,122,974 | ||||||||||||||
Other liabilities |
157,972 | 129,344 | ||||||||||||||
Shareholders equity |
1,444,733 | 1,558,414 | ||||||||||||||
Total liabilities and shareholders equity |
$ | 12,483,109 | $ | 13,241,553 | ||||||||||||
Interest Spread |
2.46 | % | 2.68 | % | ||||||||||||
Contribution of noninterest bearing sources of funds |
0.43 | 0.41 | ||||||||||||||
Net Interest Margin |
2.89 | % | 3.09 | % |
20
Nonperforming Assets
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
Three Months Ended | ||||||||||||||||||||
Dec 31 | Sep 30 | Jun 30 | Mar 31 | Dec 31 | ||||||||||||||||
(in thousands) | 2009 | 2009 | 2009 | 2009 | 2008 | |||||||||||||||
Commercial and industrial |
$ | 84,014 | $ | 111,500 | $ | 91,825 | $ | 83,716 | $ | 64,573 | ||||||||||
Commercial real estate |
236,103 | 257,574 | 275,607 | 235,921 | 162,544 | |||||||||||||||
Total commercial (1) |
320,117 | 369,074 | 367,432 | 319,637 | 227,117 | |||||||||||||||
Residential mortgage |
125,672 | 106,557 | 103,263 | 84,596 | 59,515 | |||||||||||||||
Direct consumer |
21,343 | 21,588 | 20,277 | 20,993 | 15,049 | |||||||||||||||
Indirect consumer |
2,621 | 2,559 | 1,370 | 2,012 | 2,612 | |||||||||||||||
Loans 90 days or more past due and still accruing |
3,039 | 570 | 805 | 1,015 | 1,486 | |||||||||||||||
Restructured loans and still accruing |
2,629 | 1,141 | 2,556 | 360 | 256 | |||||||||||||||
Total nonperforming portfolio loans |
475,421 | 501,489 | 495,703 | 428,613 | 306,035 | |||||||||||||||
Nonperforming held for sale |
65,247 | 44,480 | 54,273 | 64,604 | 75,142 | |||||||||||||||
Other Repossessed Assets Acquired |
54,394 | 61,993 | 54,728 | 57,411 | 58,037 | |||||||||||||||
Total nonperforming assets |
$ | 595,062 | $ | 607,962 | $ | 604,704 | $ | 550,628 | $ | 439,214 | ||||||||||
(1) | Changes in commercial nonperforming loans (including restructured loans) for the quarter (in millions): |
Inflows |
$ | 101.2 | $ | 94.2 | $ | 133.7 | $ | 173.0 | $ | 155.5 | ||||||||||
Outflows |
(150.2 | ) | (93.0 | ) | (85.9 | ) | (80.4 | ) | (99.2 | ) | ||||||||||
Net change |
$ | (49.0 | ) | $ | 1.2 | $ | 47.8 | $ | 92.6 | $ | 56.3 | |||||||||
Summary of Loan Loss Experience
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
Three Months Ended | ||||||||||||||||||||
Dec 31 | Sep 30 | Jun 30 | Mar 31 | Dec 31 | ||||||||||||||||
(in thousands) | 2009 | 2009 | 2009 | 2009 | 2008 | |||||||||||||||
Allowance for loan losses beginning of period |
$ | 339,694 | $ | 333,369 | $ | 282,647 | $ | 255,321 | $ | 217,727 | ||||||||||
Provision for loan losses |
84,192 | 77,783 | 99,962 | 64,017 | 118,565 | |||||||||||||||
Charge-offs: |
||||||||||||||||||||
Commercial and industrial |
24,755 | 21,141 | 9,845 | 8,108 | 22,813 | |||||||||||||||
Commercial real estate |
41,160 | 32,076 | 31,645 | 18,977 | 46,058 | |||||||||||||||
Total commercial |
65,915 | 53,217 | 41,490 | 27,085 | 68,871 | |||||||||||||||
Residential mortgage |
6,031 | 9,968 | 2,161 | 804 | 1,565 | |||||||||||||||
Direct consumer |
6,613 | 6,756 | 6,826 | 4,707 | 6,239 | |||||||||||||||
Indirect consumer |
6,873 | 3,812 | 5,041 | 5,507 | 6,299 | |||||||||||||||
Total charge-offs |
85,432 | 73,753 | 55,518 | 38,103 | 82,974 | |||||||||||||||
Recoveries: |
||||||||||||||||||||
Commercial and industrial |
2,236 | 1,000 | 3,028 | 128 | 904 | |||||||||||||||
Commercial real estate |
656 | 214 | 2,316 | 404 | 151 | |||||||||||||||
Total commercial |
2,892 | 1,214 | 5,344 | 532 | 1,055 | |||||||||||||||
Residential mortgage |
21 | 6 | 4 | 3 | 2 | |||||||||||||||
Direct consumer |
413 | 485 | 325 | 334 | 385 | |||||||||||||||
Indirect consumer |
590 | 590 | 605 | 543 | 561 | |||||||||||||||
Total recoveries |
3,916 | 2,295 | 6,278 | 1,412 | 2,003 | |||||||||||||||
Net charge-offs |
81,516 | 71,458 | 49,240 | 36,691 | 80,971 | |||||||||||||||
Allowance for loan losses end of period |
$ | 342,370 | $ | 339,694 | $ | 333,369 | $ | 282,647 | $ | 255,321 | ||||||||||
Reserve for loan commitments end of period |
$ | 3,166 | $ | 3,571 | $ | 4,001 | $ | 4,158 | $ | 3,941 | ||||||||||
21