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8-K - FORM 8-K - CITIZENS REPUBLIC BANCORP, INC. | k49455e8vk.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
CONTACT
Kristine D. Brenner
Director of Investor Relations
(810) 257-2506
kristine.brenner@citizensbanking.com
Kristine D. Brenner
Director of Investor Relations
(810) 257-2506
kristine.brenner@citizensbanking.com
Citizens Republic Bancorp Announces Second Quarter 2010 Results
FLINT, MICHIGAN, July 22, 2010 - Citizens Republic Bancorp, Inc. (Citizens, Nasdaq: CRBC)
announced today a net loss from continuing operations of $44.5 million for the three months ended
June 30, 2010, compared with net losses of $76.0 million for the first quarter of 2010 and $336.9
million for the second quarter of 2009. The second quarter of 2009 included a non-cash and
non-tax-deductible goodwill impairment charge of $256.3 million. After incorporating the $5.2
million net income from discontinued operations and the $5.4 million accrued but unpaid dividend to
the preferred shareholder, Citizens reported a net loss attributable to common shareholders of
$44.7 million for the three months ended June 30, 2010, compared with $90.3 million for the first
quarter of 2010 and $352.6 million for the second quarter of 2009. Diluted net loss from continued
operations per share was $0.12, compared with $0.21 for the first quarter of 2010 and $2.73 for the
second quarter of 2009. The diluted net loss per share was based on average shares outstanding of
393.8 million for the quarters ended June 30, 2010 and March 31, 2010, and 125.5 million for the
quarter ended June 30, 2009. For the six months ended June 30, 2010, Citizens recorded a net loss
from continuing operations of $120.5 million compared with a net loss from continuing operations of
$382.5 million for the same period of 2009.
We are pleased to report better financial results, another quarter of solid pre-tax pre-provision
profit, improved credit metrics across the board, and much stronger capital ratios. Our results
reflect the conservative, disciplined approach weve maintained in managing through this cycle,
commented Cathleen H. Nash, president and chief executive officer. As we announced back in
February, we have been expecting to receive a written agreement from our regulators. Today we
received a draft of the written agreement and we do not anticipate that compliance with the terms
will have an adverse impact on our operations, said Ms. Nash.
Discontinued Operations
As a result of the sale of Citizens wholly-owned subsidiary, F&M Bank-Iowa (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.
Key Points in the Quarter:
| Net interest margin for the second quarter of 2010 was 3.35% compared with 3.14% for the first quarter of 2010. | |
| The pre-tax pre-provision profit for the second quarter of 2010 totaled $34.5 million, compared with $34.7 million for the first quarter of 2010. | |
| Citizens held short-term (liquid) assets at June 30, 2010 of $621.1 million, a decrease of $139.7 million or 18.4% from March 31, 2010. Citizens parent company cash totaled $158.6 million at June 30, 2010, compared with $109.8 million at March 31, 2010. | |
| All of Citizens regulatory capital ratios continue to exceed the well-capitalized designation. As of June 30, 2010, Citizens estimated capital ratios were as follows: |
| Tier 1 capital 12.74% |
1
| Total capital 14.12% | ||
| Tier 1 leverage 8.68% | ||
| Tier 1 common equity 8.07% | ||
| Tangible equity to tangible assets 8.45% | ||
| Tangible common equity to tangible assets 5.83% |
| Total delinquent loans at June 30, 2010 were $111.7 million, or 1.57% of total loans, a decrease of $31.4 million or 21.9% from March 31, 2010. Total watchlist loans decreased for the third consecutive quarter to $1.3 billion at June 30, 2010, an improvement of $34.7 million or 2.5% over March 31, 2010. Total nonperforming assets at June 30, 2010 were $472.6 million, a decrease of $83.6 million or 15.0% from March 31, 2010. | |
| During the second quarter of 2010, Citizens completed a bulk sale of nonperforming residential mortgage loans held for sale and residential other real estate (ORE) with a book value of $36.6 million. As a result, Citizens recorded a $5.8 million loss from additional fair-value adjustments on these assets during the second quarter of 2010. | |
| The allowance for loan losses at June 30, 2010 totaled $321.8 million or 4.51% of portfolio loans, compared with $322.4 million or 4.33% at March 31, 2010. The provision for loan losses for the second quarter of 2010 was $70.6 million, compared with $101.4 million for the first quarter of 2010. Net charge-offs for the second quarter of 2010 totaled $71.2 million, compared with $117.9 million for the first quarter of 2010. | |
| Citizens recorded an $8.1 million net gain on the sale of $249.9 million in available for sale investment securities designated during the second quarter of 2010. | |
| On July 19, 2010, Citizens received a non-compliance notice from The Nasdaq Stock Market because the minimum bid price of Citizens common stock has been below $1.00 per share for 30 consecutive business days. |
Balance Sheet
Total assets at June 30, 2010 were $10.8 billion, a decrease of $818.0 million or 7.0% from
March 31, 2010 and a decrease of $1.5 billion or 11.8% from June 30, 2009. The
declines were primarily due to the sale of F&M during the second quarter of 2010 and reductions in
total portfolio loans due to lower customer demand.
Money market investments at June 30, 2010 totaled $621.1 million, a decrease of $139.7 million or
18.4% from March 31, 2010 and an increase of $76.5 million or 14.0% over June 30, 2009. The
decrease from March 31, 2010 was primarily the result of using the funds to payoff maturing
wholesale funding. The increase over June 30, 2009 was primarily the result of holding excess
short-term funds with the Federal Reserve as a result of continued strong deposits, coupled with a
lower demand for loans from credit-worthy clients.
Investment securities at June 30, 2010 totaled $2.2 billion, essentially unchanged from March 31,
2010 and an increase of $42.1 million or 2.0% over June 30, 2009. As part of its capital strategy,
Citizens sold $249.9 million of adjustable rate mortgage-backed securities and private label
collateralized mortgage obligation (CMO) bonds, using the proceeds to purchase GNMA securities.
The sales resulted in an $8.1 million net gain and strengthened Citizens capital position by
improving the risk profile of the investment portfolio.
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.
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Loan Portfolios | June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
(in millions) | 2010 | 2010 | 2009 | 2009 | 2009 | |||||||||||||||
Land hold
|
$ | 37.8 | $ | 39.3 | $ | 35.9 | $ | 52.0 | $ | 54.9 | ||||||||||
Land development
|
84.3 | 101.0 | 103.6 | 124.5 | 117.8 | |||||||||||||||
Construction
|
156.3 | 164.4 | 177.9 | 214.8 | 229.5 | |||||||||||||||
Income producing
|
1,481.7 | 1,532.1 | 1,514.0 | 1,504.1 | 1,530.8 | |||||||||||||||
Owner-occupied
|
886.1 | 931.5 | 980.1 | 986.4 | 972.8 | |||||||||||||||
Total commercial real estate
|
2,646.2 | 2,768.3 | 2,811.5 | 2,881.8 | 2,905.8 | |||||||||||||||
Commercial and industrial
|
1,686.8 | 1,824.8 | 1,921.8 | 2,047.2 | 2,145.5 | |||||||||||||||
Total commercial loans
|
4,333.0 | 4,593.1 | 4,733.3 | 4,929.0 | 5,051.3 | |||||||||||||||
Residential mortgage
|
858.9 | 877.2 | 1,025.2 | 1,073.3 | 1,132.2 | |||||||||||||||
Direct consumer
|
1,132.2 | 1,174.7 | 1,224.2 | 1,269.2 | 1,310.3 | |||||||||||||||
Indirect consumer
|
814.0 | 794.2 | 805.2 | 825.3 | 808.3 | |||||||||||||||
Total consumer loans
|
2,805.1 | 2,846.1 | 3,054.6 | 3,167.8 | 3,250.8 | |||||||||||||||
Total loans
|
$ | 7,138.1 | $ | 7,439.2 | $ | 7,787.9 | $ | 8,096.8 | $ | 8,302.1 | ||||||||||
The decreases in total commercial loans were primarily the result of lower customer demand
from credit-worthy clients, paydowns as a result of normal client activity, and
charge-offs. Also contributing to the decrease from June 30, 2009 was the transfer of
nonperforming land hold, land development, and construction loans to loans held for sale during the
fourth quarter of 2009. The declines in residential mortgage loans were primarily the result of
transferring nonperforming residential mortgage loans to loans held for sale at the end of the
first quarter of 2010, 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 lower 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 March 31, 2010 and June 30, 2009.
Loans held for sale at June 30, 2010 were $57.2 million, a decrease of $50.5 million or 46.9% from
March 31, 2010 and a decrease of $19.8 million or 25.7% from June 30, 2009. The decrease from
March 31, 2010 was primarily the result of the aforementioned bulk loan sale of nonperforming
residential mortgage loans, which were transferred to loans held for sale at the end of the first
quarter of 2010 in anticipation of this sale. The variance from both prior periods also reflects
declines due to customer paydowns, workout activities, writedowns to reflect further fair-value
declines for the underlying collateral, and transfers to ORE.
Total deposits at June 30, 2010 were $8.2 billion, a decrease of $258.9 million or 3.1% from
March 31, 2010 and a decrease of $304.2 million or 3.6% from June 30, 2009. Core deposits, which
exclude all time deposits, totaled $4.8 billion at June 30, 2010, essentially unchanged from March
31, 2010 and an increase of $109.8 million or 2.3% over June 30, 2009. The increase over June 30,
2009 was primarily the result of clients holding higher balances in transaction accounts and retail
customers shifting balances from time deposits to core deposits throughout 2009. Time deposits
totaled $3.4 billion at June 30, 2010, a decrease of $225.0 million or 6.2% from March 31, 2010 and
a decrease of $414.0 million or 10.8% from June 30, 2009. The decrease from March 31, 2010 was
primarily the result of a planned reduction in brokered time deposits. The decrease from June 30,
2009 was primarily the result of the shift in funding mix.
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 $1.2 billion at
June 30, 2010, a decrease of $128.9 million or 9.4% from March 31, 2010 and a decrease of $743.8
million or 37.5% from June 30, 2009. The decreases were primarily the result of a scheduled
reduction in
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securitized funding. Additionally, the decrease from June 30, 2009 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 June 30, 2010 totaled $1.2 billion, a decrease of $26.7 million or
2.1% from March 31, 2010 and essentially unchanged from June 30, 2009. The decrease was primarily
the result of net losses incurred. The lack of variance from June 30, 2009 was a result of the
effect of common equity generated in the third quarter of 2009 through the issuance of common stock
for debt offsetting the effect 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.
Regulatory | Excess | |||||||||||||||||||
Minimum for | Capital over | |||||||||||||||||||
Well- | June 30, | March 31, | December 31, | Minimum | ||||||||||||||||
Capitalized | 2010 | 2010 | 2009 | (in millions) | ||||||||||||||||
Tier 1 capital ratio |
6.00 | % | 12.74 | % | 12.12 | % | 12.52 | % | $ | 502.8 | ||||||||||
Total capital ratio |
10.00 | 14.12 | 13.49 | 13.93 | 307.4 | |||||||||||||||
Tier 1 leverage ratio |
5.00 | 8.68 | 8.47 | 9.21 | 403.2 | |||||||||||||||
Tier 1 common equity ratio (non-GAAP) |
8.07 | 7.82 | 8.47 | |||||||||||||||||
Tangible equity to tangible assets (non-GAAP) |
8.45 | 7.96 | 8.51 | |||||||||||||||||
Tangible common equity to tangible assets (non-GAAP) |
5.83 | 5.54 | 6.16 |
Citizens maintains a strong liquidity position due to its on-balance sheet liquidity sources
and very stable funding base comprised of approximately 76% deposits, 11% long-term debt, 11%
equity, and 2% short-term liabilities. Citizens loan-to-deposit ratio, another measure of
liquidity, continues to improve with levels of 86.8%, 87.7%, and 97.4% at June 30, 2010, March 31,
2010, and June 30, 2009, respectively. 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 money market
investments can be sold for cash to provide additional liquidity, if necessary. Citizens parent
company cash totaled $158.6 million at June 30, 2010 as compared with $109.8 million at December
31, 2009. The increase was primarily the result of receiving $50.0 million in cash as a result of
completing the sale of F&M during the second quarter of 2010.
Net Interest Margin and Net Interest Income
Net interest margin was 3.35% for the second quarter of 2010 compared with 3.14% for the first
quarter of 2010 and 2.75% for the second quarter of 2009. For the six months ended June 30, 2010,
net interest margin was 3.24%, compared with 2.75% for the same period of 2009. The increase in
net interest margin over the first quarter of 2010 was primarily the result of declining deposit
costs as well as reductions in high-cost funding and low-yielding assets, partially offset by a
reduction in the total investment portfolio yield. The increases in net interest margin over both
2009 time periods were primarily the result of expanding commercial and consumer loan spreads,
declining deposit costs, and lower interest expense on long-term debt due to the debt exchange in
the third quarter of 2009. The increases were partially offset by the effect of replacing the
declining loan balances with lower-yielding investment securities and money market investments.
Net interest income was $84.6 million for the second quarter of 2010, an increase of $3.4 million
or 4.2% over the first quarter of 2010, and an increase of $10.5 million or 14.2% over the second
quarter of 2009. For the six months ended June 30, 2010, net interest income was $165.8 million,
compared with $149.5 million for the same period of 2009. The increases were primarily the result
of the higher net interest margin, partially offset by decreases in average earning assets. The
decreases in average earning assets were primarily due to lower loan demand in the current Midwest
economic environment, partially offset by increases in investment securities and money market
investments.
Credit Quality
The quality of Citizens loan portfolio is impacted by numerous factors, including the economic
environment in the markets in which Citizens operates. Citizens carefully monitors its loans in an effort to
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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.
| Delinquency Rates by Loan Portfolio Loans where the contractual payment is 30 to 89 days past due and interest is still accruing. While these loans are actively worked to bring them current, past due loan trends may be a leading indicator of potential future nonperforming loans and charge-offs. | |
| Commercial Watchlist Commercial loans that, while still accruing interest, we believe may be at risk due to general economic conditions or changes in a borrowers financial status and therefore require increased oversight. Watchlist loans that are in nonperforming status are included in the nonperforming assets table below. | |
| Nonperforming Assets Loans that are in nonaccrual status, loans past due 90 days or more on which interest is still accruing, restructured loans, nonperforming loans that are held for sale, and other repossessed assets acquired. The commercial loans included in this table are reviewed as part of the watchlist process in addition to the loans displayed in the commercial watchlist table below. | |
| Net Charge-Offs The portion of loans that have been charged-off during each quarter. |
Delinquency Rates By Loan Portfolio | June 30, 2010 | March 31, 2010 | December 31, 2009 | September 30, 2009 | June 30, 2009 | |||||||||||||||||||||||||||||||||||
30 to 89 days past due | % of | % of | % of | % of | % of | |||||||||||||||||||||||||||||||||||
(in millions) | $ | Portfolio | $ | Portfolio | $ | Portfolio | $ | Portfolio | $ | Portfolio | ||||||||||||||||||||||||||||||
Land hold |
$ | 1.3 | 3.34 | % | $ | 0.6 | 1.64 | % | $ | 0.6 | 1.56 | % | $ | 1.4 | 2.61 | % | $ | 3.5 | 6.38 | % | ||||||||||||||||||||
Land development |
2.0 | 2.43 | 3.0 | 3.00 | 4.7 | 4.56 | 12.0 | 9.67 | 1.3 | 1.10 | ||||||||||||||||||||||||||||||
Construction |
6.4 | 4.07 | 0.9 | 0.55 | 1.7 | 0.95 | 12.1 | 5.64 | 1.7 | 0.74 | ||||||||||||||||||||||||||||||
Income producing |
22.9 | 1.55 | 51.7 | 3.37 | 40.8 | 2.70 | 44.9 | 2.98 | 50.0 | 3.27 | ||||||||||||||||||||||||||||||
Owner-occupied |
16.4 | 1.85 | 13.6 | 1.46 | 25.0 | 2.55 | 24.4 | 2.47 | 15.6 | 1.60 | ||||||||||||||||||||||||||||||
Total commercial real estate |
49.0 | 1.85 | 69.8 | 2.52 | 72.8 | 2.59 | 94.8 | 3.29 | 72.1 | 2.48 | ||||||||||||||||||||||||||||||
Commercial and industrial |
10.3 | 0.61 | 15.1 | 0.83 | 16.9 | 0.88 | 20.2 | 0.98 | 34.0 | 1.58 | ||||||||||||||||||||||||||||||
Total commercial loans |
59.3 | 1.37 | 84.9 | 1.85 | 89.7 | 1.90 | 115.0 | 2.33 | 106.1 | 2.10 | ||||||||||||||||||||||||||||||
Residential mortgage |
20.8 | 2.42 | 21.5 | 2.45 | 22.0 | 2.14 | 30.0 | 2.80 | 27.7 | 2.45 | ||||||||||||||||||||||||||||||
Direct consumer |
20.2 | 1.79 | 21.9 | 1.86 | 26.5 | 2.16 | 24.1 | 1.90 | 22.8 | 1.74 | ||||||||||||||||||||||||||||||
Indirect consumer |
11.4 | 1.40 | 14.8 | 1.86 | 16.3 | 2.02 | 16.3 | 1.98 | 14.6 | 1.81 | ||||||||||||||||||||||||||||||
Total consumer loans |
52.4 | 1.87 | 58.2 | 2.05 | 64.8 | 2.12 | 70.4 | 2.22 | 65.1 | 2.00 | ||||||||||||||||||||||||||||||
Total delinquent loans |
$ | 111.7 | 1.57 | $ | 143.1 | 1.92 | $ | 154.5 | 1.98 | $ | 185.4 | 2.29 | $ | 171.2 | 2.06 | |||||||||||||||||||||||||
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 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.
5
Commercial Watchlist | June 30, 2010 | March 31, 2010 | December 31, 2009 | September 30, 2009 | June 30, 2009 | |||||||||||||||||||||||||||||||||||
Accruing loans only | % of | % of | % of | % of | % of | |||||||||||||||||||||||||||||||||||
(in millions) | $ | Portfolio | $ | Portfolio | $ | Portfolio | $ | Portfolio | $ | Portfolio | ||||||||||||||||||||||||||||||
Land hold |
$ | 27.8 | 73.58 | % | $ | 29.0 | 73.73 | % | $ | 24.8 | 68.99 | % | $ | 29.0 | 55.76 | % | $ | 18.1 | 32.97 | % | ||||||||||||||||||||
Land development |
40.5 | 47.97 | 50.4 | 49.95 | 86.7 | 83.66 | 92.1 | 73.92 | 82.0 | 69.64 | ||||||||||||||||||||||||||||||
Construction |
52.5 | 33.61 | 54.4 | 33.07 | 63.5 | 35.68 | 90.4 | 42.10 | 90.3 | 39.35 | ||||||||||||||||||||||||||||||
Income producing |
553.9 | 37.38 | 523.5 | 34.17 | 521.4 | 34.44 | 519.3 | 34.52 | 458.6 | 29.96 | ||||||||||||||||||||||||||||||
Owner-occupied |
224.1 | 25.29 | 237.0 | 25.44 | 247.2 | 25.22 | 277.2 | 28.10 | 274.4 | 28.21 | ||||||||||||||||||||||||||||||
Total commercial real estate |
898.8 | 33.96 | 894.3 | 32.31 | 943.6 | 33.56 | 1,008.0 | 34.98 | 923.4 | 31.78 | ||||||||||||||||||||||||||||||
Commercial and industrial |
445.5 | 26.41 | 484.7 | 26.56 | 473.0 | 24.61 | 508.0 | 24.81 | 530.3 | 24.72 | ||||||||||||||||||||||||||||||
Total watchlist loans |
$ | 1,344.3 | 31.02 | $ | 1,379.0 | 30.02 | $ | 1,416.6 | 29.93 | $ | 1,516.0 | 30.76 | $ | 1,453.7 | 28.78 | |||||||||||||||||||||||||
The decreases in accruing watchlist loans were primarily the result of proactive credit management actions that downgraded certain commercial real estate loans to nonperforming status and fewer new watchlist loans. The increase in income producing watchlist loans over March 31, 2010 was primarily the result of two relationships totaling $26.2 million. | ||||||||||||||||||||||||||||||||||||||||
June 30, 2010 | March 31, 2010 | December 31, 2009 | September 30, 2009 | June 30, 2009 | ||||||||||||||||||||||||||||||||||||
Nonperforming Assets | % of | % of | % of | % of | % of | |||||||||||||||||||||||||||||||||||
(in millions) | $ | Portfolio | $ | Portfolio | $ | Portfolio | $ | Portfolio | $ | Portfolio | ||||||||||||||||||||||||||||||
Land hold |
$ | 5.2 | 13.76 | % | $ | 4.9 | 12.49 | % | $ | 4.8 | 13.42 | % | $ | 13.3 | 25.56 | % | $ | 13.1 | 23.86 | % | ||||||||||||||||||||
Land development |
22.3 | 26.48 | 27.1 | 26.86 | 1.0 | 0.92 | 13.7 | 10.96 | 15.1 | 12.82 | ||||||||||||||||||||||||||||||
Construction |
25.0 | 15.99 | 35.2 | 21.39 | 25.2 | 14.19 | 33.7 | 15.70 | 36.0 | 15.69 | ||||||||||||||||||||||||||||||
Income producing |
148.4 | 10.02 | 144.0 | 9.40 | 121.5 | 8.02 | 126.7 | 8.42 | 139.4 | 9.11 | ||||||||||||||||||||||||||||||
Owner-occupied |
59.5 | 6.71 | 89.0 | 9.56 | 83.4 | 8.51 | 70.1 | 7.11 | 71.3 | 7.33 | ||||||||||||||||||||||||||||||
Total commercial real estate |
260.4 | 9.84 | 300.2 | 10.85 | 235.9 | 8.39 | 257.5 | 8.94 | 274.9 | 9.46 | ||||||||||||||||||||||||||||||
Commercial and industrial |
67.0 | 3.97 | 69.7 | 3.82 | 84.0 | 4.37 | 111.5 | 5.44 | 91.8 | 4.28 | ||||||||||||||||||||||||||||||
Total nonaccruing commercial loans |
327.4 | 7.56 | 369.9 | 8.05 | 319.9 | 6.76 | 369.0 | 7.49 | 366.7 | 7.26 | ||||||||||||||||||||||||||||||
Residential mortgage |
31.0 | 3.61 | 17.6 | 2.01 | 125.1 | 12.20 | 106.0 | 9.88 | 102.7 | 9.07 | ||||||||||||||||||||||||||||||
Direct consumer |
18.7 | 1.65 | 16.5 | 1.41 | 21.3 | 1.74 | 21.4 | 1.68 | 20.2 | 1.54 | ||||||||||||||||||||||||||||||
Indirect consumer |
1.5 | 0.18 | 2.4 | 0.30 | 2.6 | 0.33 | 2.6 | 0.31 | 1.4 | 0.17 | ||||||||||||||||||||||||||||||
Total nonaccruing consumer loans |
51.2 | 1.82 | 36.5 | 1.28 | 149.0 | 4.88 | 130.0 | 4.10 | 124.3 | 3.82 | ||||||||||||||||||||||||||||||
Total nonaccruing loans |
378.6 | 5.30 | 406.4 | 5.46 | 468.9 | 6.02 | 499.0 | 6.16 | 491.0 | 5.91 | ||||||||||||||||||||||||||||||
Loans 90+ days still accruing |
1.5 | 0.02 | 2.4 | 0.03 | 3.0 | 0.04 | 0.6 | 0.01 | 0.8 | 0.01 | ||||||||||||||||||||||||||||||
Restructured loans and still accruing |
4.6 | 0.06 | 4.8 | 0.06 | 2.6 | 0.03 | 1.1 | 0.01 | 2.5 | 0.03 | ||||||||||||||||||||||||||||||
Total nonperforming portfolio loans |
384.7 | 5.39 | 413.6 | 5.56 | 474.5 | 6.09 | 500.7 | 6.18 | 494.3 | 5.95 | ||||||||||||||||||||||||||||||
Nonperforming held for sale |
44.0 | 95.3 | 65.2 | 44.4 | 54.2 | |||||||||||||||||||||||||||||||||||
Other repossessed assets acquired |
43.9 | 47.3 | 54.4 | 61.9 | 54.6 | |||||||||||||||||||||||||||||||||||
Total nonperforming assets |
$ | 472.6 | $ | 556.2 | $ | 594.1 | $ | 607.0 | $ | 603.1 | ||||||||||||||||||||||||||||||
Commercial inflows |
$ | 75.9 | $ | 124.8 | $ | 101.0 | $ | 94.1 | $ | 133.4 | ||||||||||||||||||||||||||||||
Commercial outflows |
(118.6 | ) | (74.8 | ) | (150.1 | ) | (92.3 | ) | (85.9 | ) | ||||||||||||||||||||||||||||||
Net change |
$ | (42.7 | ) | $ | 50.0 | $ | (49.1 | ) | $ | 1.8 | $ | 47.5 | ||||||||||||||||||||||||||||
The decrease in nonperforming assets from March 31, 2010 was primarily the result of the
aforementioned bulk loan sale of certain residential mortgage assets during the second quarter of
2010 with a book value of $36.6 million, partially offset by an increase in nonperforming
residential mortgage loans primarily due to an accelerated migration of loans to nonperforming
status. The increase in nonperforming residential mortgage loans was primarily the result of the
trailing effects of the economic slowdown on borrowers cash flow. The decrease in nonperforming
assets from June 30, 2009 was primarily the result of the aforementioned bulk loan sale as well as
a general decline in most asset categories as Citizens continued to proactively manage these
assets.
The nonperforming commercial loan inflows for the second quarter of 2010 included $6.0 million of
loans proactively moved to nonperforming status by the respective relationship officer prior to the
loans becoming 90 days past due compared with $43.1 million proactively moved during the first
quarter of 2010. The second quarter 2010 outflows included $16.1 million in loans that returned to
accruing status, $35.9 million in loan payoffs and paydowns, $62.9 million in charged-off loans,
and $3.7 million transferred to other repossessed assets acquired.
6
Three Months Ended | ||||||||||||||||||||||||||||||||||||||||
Net Charge-Offs | June 30, 2010 | March 31, 2010 | December 31, 2009 | September 30, 2009 | June 30, 2009 | |||||||||||||||||||||||||||||||||||
% of | % of | % of | % of | % of | ||||||||||||||||||||||||||||||||||||
(in millions) | $ | Portfolio* | $ | Portfolio* | $ | Portfolio* | $ | Portfolio* | $ | Portfolio* | ||||||||||||||||||||||||||||||
Land hold |
$ | 0.4 | 3.72 | % | $ | | | % | $ | 5.6 | 62.32 | % | $ | 0.5 | 3.98 | % | $ | 0.6 | 4.38 | % | ||||||||||||||||||||
Land development |
9.8 | 46.68 | 0.1 | 0.49 | 9.7 | 36.97 | 1.4 | 4.33 | 2.4 | 8.17 | ||||||||||||||||||||||||||||||
Construction |
8.7 | 22.23 | | | 9.5 | 21.21 | 0.9 | 1.62 | 5.8 | 10.14 | ||||||||||||||||||||||||||||||
Income producing |
12.6 | 3.41 | 7.6 | 2.01 | 13.2 | 3.45 | 24.5 | 6.47 | 12.6 | 3.30 | ||||||||||||||||||||||||||||||
Owner-occupied |
18.9 | 8.57 | 6.9 | 3.01 | 2.5 | 1.01 | 4.6 | 1.85 | 7.4 | 3.03 | ||||||||||||||||||||||||||||||
Total commercial real estate |
50.4 | 7.63 | 14.6 | 2.13 | 40.5 | 5.71 | 31.9 | 4.39 | 28.8 | 3.97 | ||||||||||||||||||||||||||||||
Commercial and industrial |
11.4 | 2.71 | 12.9 | 2.86 | 22.4 | 4.63 | 20.1 | 3.90 | 6.8 | 1.27 | ||||||||||||||||||||||||||||||
Total commercial loans |
61.8 | 5.72 | 27.5 | 2.43 | 62.9 | 5.27 | 52.0 | 4.19 | 35.6 | 2.82 | ||||||||||||||||||||||||||||||
Residential mortgage |
0.6 | 0.29 | 80.1 | 37.05 | 6.0 | 2.33 | 10.0 | 3.68 | 2.2 | 0.78 | ||||||||||||||||||||||||||||||
Direct consumer |
5.5 | 1.96 | 7.1 | 2.44 | 6.1 | 1.97 | 6.1 | 1.92 | 6.4 | 1.95 | ||||||||||||||||||||||||||||||
Indirect consumer |
3.3 | 1.61 | 3.2 | 1.63 | 6.3 | 3.10 | 3.2 | 1.55 | 4.4 | 2.18 | ||||||||||||||||||||||||||||||
Total consumer loans |
9.4 | 1.35 | 90.4 | 12.88 | 18.4 | 2.39 | 19.3 | 2.42 | 13.0 | 1.60 | ||||||||||||||||||||||||||||||
Total net charge-offs |
$ | 71.2 | 3.90 | $ | 117.9 | 6.25 | $ | 81.3 | 4.05 | $ | 71.3 | 3.46 | $ | 48.6 | 2.30 | |||||||||||||||||||||||||
* | Represents an annualized rate. |
The decrease in net charge-offs from the first quarter of 2010 was primarily the result of the
charge-offs related to the transfer of certain nonperforming residential mortgage loans to loans
held for sale during the first quarter of 2010, partially offset by an increase in net charge-offs
on commercial real estate loans. The increase in net charge-offs over the second quarter of 2009
was primarily the result of higher net charge-offs on commercial real estate loans. The increases
in net charge-offs on commercial real estate loans were primarily the result of charging off four
loans totaling $26.6 million during the second quarter of 2010.
The allowance for loan losses was $321.8 million or 4.51% of portfolio loans at June 30, 2010,
compared with $322.4 million or 4.33% at March 31, 2010 and $330.2 million or 3.98% at June 30,
2009. The decrease from June 30, 2009 was primarily the result of the effects of the reduction in
residential mortgage loans due to the aforementioned bulk loan sale and lower reserves identified
for specific commercial and industrial loans, partially offset by an increase in the loss migration
rates and extended duration for commercial real estate, residential mortgage and consumer loans.
This migration, and Citizens evaluation of the underlying collateral fair-values supporting these
loans, increased the allowance for loan losses due to the higher
likelihood of the inherent losses
that existed at June 30, 2010. 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 June 30, 2010.
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 $70.6 million in the second quarter of 2010, compared with $101.4 million in
the first quarter of 2010 and $98.9 million in the second quarter of 2009. The decrease from the
first quarter of 2010 was primarily due to higher charge-offs on residential mortgage loans due to
the aforementioned transfer to loans held for sale during the first quarter of 2010. The decrease
from the second quarter of 2009 was primarily due to the stabilizing trend in credit metrics at
June 30, 2010.
Noninterest Income
Noninterest income for the second quarter of 2010 was $22.3 million, essentially unchanged from the
first quarter of 2010 and an increase of $2.4 million or 12.0% over the second quarter of 2009.
Noninterest income for the six months ended June 30, 2010 totaled $44.7 million, an increase of
$6.5 million or 17.1% over the same period of 2009.
The increase in noninterest income over the second quarter of 2009 was primarily due to the higher
gain on investment securities ($8.0 million), partially offset by higher losses on loans held for
sale ($4.1 million) and lower mortgage and other loan income ($1.4 million). The increase in
losses on loans held for sale was primarily the result of additional writedowns to reflect
fair-value declines for the underlying collateral. The decrease in mortgage and other loan income
was primarily the result of lower residential mortgage origination volume.
7
The increase in noninterest income over the six-month period of 2009 was primarily due to the
higher gain on investment securities ($14.1 million), partially offset by higher losses on loans
held for sale ($5.6 million) and lower mortgage and other loan income ($1.9 million) due to the
aforementioned factors.
Noninterest Expense
Noninterest expense for the second quarter of 2010 was $77.0 million, essentially unchanged
from the first quarter of 2010 and a decrease of $266.2 million from the second quarter of 2009.
The second quarter of 2009 included the aforementioned $256.3 million goodwill impairment charge.
Noninterest expense for the six months ended June 30, 2010 totaled $155.1 million, a decrease of
$267.2 million from the same period of 2009.
The decrease in noninterest expense from the second quarter of 2009 was primarily the result of the
aforementioned goodwill impairment charge ($256.3 million), lower salaries and employee benefits
($3.6 million), lower other expense ($3.1 million), lower other loan expense ($2.2 million), and a
net decline in most other noninterest expense categories. The decline in salaries and employee
benefits was primarily due to lower staffing levels and suspending employer contributions to the
401(k) plan in 2009. The decrease in other expense was primarily the result of a special
industry-wide FDIC premium assessment recorded in the second quarter of 2009. The decrease in
other loan expense was primarily the result of lower origination volume and foreclosure-related
expenses. The net decline in all other noninterest expense categories was primarily the result of
various expense management initiatives implemented throughout the company.
Citizens had 2,050 full-time equivalent employees at June 30, 2010 compared with 2,042 at March 31,
2010 and 2,081 at June 30, 2009.
The decrease in noninterest expense from the six-month period of 2009 was primarily the result of
the aforementioned goodwill impairment charge ($256.3 million), lower salaries and employee
benefits ($6.6 million), and a net decline in most other noninterest expense categories due to the
aforementioned factors.
Discontinued Operations
The income from discontinued operations of $5.2 million for the second quarter of 2010 was
primarily the result of recognizing the unrealized gains associated with the F&M investment
portfolio as of the transaction sale date. The loss from discontinued operations of $10.5 million
for the second quarter of 2009 was primarily the result of the aforementioned goodwill impairment
charge in that quarter.
Income Tax Provision (Benefit)
The income tax provision for the second quarter of 2010 was $3.7 million, compared with a provision
of $0.1 million for the first quarter of 2010 and a benefit of $11.3 million for the second quarter
of 2009. The variances were primarily the result of alternative minimum tax calculations.
Pre-Tax Pre-Provision Profit (non-GAAP)
The following table displays pre-tax pre-provision profit for each of the last five quarters.
8
Pre-Tax Pre-Provision Profit(non-GAAP) | Three Months Ended | |||||||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
(in thousands) | 2010 | 2010 | 2009 | 2009 | 2009 | |||||||||||||||
Loss from continuing operations |
$ | (44,456 | ) | $ | (76,023 | ) | $ | (65,883 | ) | $ | (57,403 | ) | $ | (336,916 | ) | |||||
Income tax (benefit) from continuing operations |
3,700 | 147 | (3,307 | ) | (11,747 | ) | (11,326 | ) | ||||||||||||
Provision for loan losses |
70,614 | 101,355 | 84,007 | 77,393 | 98,935 | |||||||||||||||
Goodwill impairment |
| | | | 256,272 | |||||||||||||||
Net loss on debt extinguishment |
| | | 15,929 | | |||||||||||||||
Investment securities gains |
(8,051 | ) | (6,016 | ) | | | (5 | ) | ||||||||||||
FDIC special assessment |
| | | | 5,351 | |||||||||||||||
Fair-value adjustment on loans held for sale |
8,405 | 7,702 | 8,724 | 860 | 4,350 | |||||||||||||||
Fair-value adjustment on ORE |
3,778 | 6,763 | 8,089 | 3,925 | 3,308 | |||||||||||||||
Fair-value adjustment on bank owned life insurance |
280 | (83 | ) | (19 | ) | (360 | ) | | ||||||||||||
Fair-value adjustment on swaps |
279 | 836 | 1,449 | 1,018 | 583 | |||||||||||||||
Pre-Tax Pre-Provision Profit (non-GAAP) |
$ | 34,549 | $ | 34,681 | $ | 33,060 | $ | 29,615 | $ | 20,552 | ||||||||||
The increase over the second quarter of 2009 was primarily the result of higher net interest
income (due to the increase in net interest margin) and lower noninterest expense (due to various
expense management initiatives implemented throughout the company during 2009).
Other Developments
Citizens Receives Written Supervisory Agreement from Banking Regulators
As previously reported, Citizens and Citizens Bank have been expecting to enter into a written
supervisory agreement with the Federal Reserve Bank of Chicago and the Michigan Office of Financial
and Insurance Regulation as a follow up to recently concluded examinations of the Bank. A draft of
the agreement was submitted by the regulators to the boards of Citizens and the Bank at their
meetings on July 22, 2010, approved by the boards of Citizens and the Bank and executed by Citizens
and the Bank. Citizens expects the FRBC and OFIR to execute the agreement by early August 2010. A
summary of the agreement is included in Citizens Current Report on Form 8-K being filed today with
the Securities and Exchange Commission.
Citizens Receives Nasdaq Notice of Minimum Bid Price Non-Compliance
On July 19, 2010, Citizens received a notice from The Nasdaq Stock Market stating that the minimum
bid price of Citizens common stock was below $1.00 per share for 30 consecutive business days and
that Citizens was therefore not in compliance with Nasdaq Marketplace Rule 5450(a)(1). The
notification letter does not affect the listing of Citizens common stock on The Nasdaq Capital
Market at this time and it will continue to trade under the symbol CRBC.
The notification letter states that Citizens will be afforded 180 calendar days, or until January
18, 2011, to regain compliance with the minimum closing bid price requirement. To regain
compliance, the closing bid price of Citizens common stock must meet or exceed $1.00 per share for
at least ten consecutive business days. If Citizens does not regain compliance by January 18,
2011, Nasdaq will provide a written notification that Citizens common stock will be delisted.
However, Citizens shall be eligible for an
additional 180 calendar day grace period if it meets the initial listing standards, with the
exception of bid price, for The Nasdaq Capital Market.
Citizens
intends to actively monitor the bid price for its common stock and
will consider available options to resolve the deficiency and regain
compliance with the Nasdaq minimum bid price requirement.
Conference Call
Citizens senior management will review the quarters results in a conference call at 10:00
a.m. ET on Friday, July 23, 2010. 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 July 30, 2010. To listen to the replay, please dial (800) 283-4799.
9
Use of Non-GAAP Financial Measures
In addition to results presented in accordance with U.S. 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 additional performance comparisons with others in the banking industry.
Non-GAAP financial measures have inherent limitations. Such measures are not uniformly applied by
Citizens or calculated by other companies in the same manner 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
appropriately 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
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 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 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,
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 (PTPP)
Pre-tax pre-provision profit, as defined by management, represents total revenue excluding any
securities gains/losses, and fair-value adjustments on loans held for sale, interest rate swaps, or
bank owned life insurance, less noninterest expense excluding any goodwill impairment charges,
credit writedowns, fair-value adjustments, and special assessments.
Citizens believes that PTPP is a useful financial measure as it enables investors and others to
assess its ability to generate capital to cover credit losses and other credit-related and/or
impairment charges. Presenting PTPP provides investors with the ability to better understand
Citizens underlying trends separate from the direct volatility of credit-related and/or impairment
charges by allowing investors to measure a banks underlying performance without the differing
geographic and market specific economic pressures on its loan and securities portfolios. By
excluding items that are acutely sensitive to changes in the market and the economic cycle, PTPP
permits period to period comparisons of results on a more consistent basis. 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. Additionally, a portion of the compensation awarded to Citizens Named Executive
Officers and certain other employees for their performance in 2009 and 2010 is measured against a
PTPP benchmark as Citizens believes that PTPP is a key value driver for its business and a
particularly valuable measure during challenging credit cycles.
10
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
using a 35% effective tax rate allows comparability of net interest margin with industry peers by
eliminating the effect of the differences in portfolios attributable to the proportion represented
by both taxable and tax-exempt investments. See the Selected Quarterly Information Table, the
Non-GAAP Reconciliation Table, and the Average Balances, Yields and Rates Table later in this
release for additional information.
Corporate Profile
Citizens Republic Bancorp, Inc. is a diversified financial services company providing a
wide range of commercial, consumer, mortgage banking, trust and financial planning services
to a broad client base. Citizens serves communities in Michigan, Ohio, Wisconsin, and
Indiana with 218 offices and 255 ATMs. Citizens 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 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.
11
Consolidated Balance Sheets (Unaudited)
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
June 30, | March 31, | June 30, | ||||||||||
(in thousands) | 2010 | 2010 | 2009 | |||||||||
Assets |
||||||||||||
Cash and due from banks |
$ | 148,084 | $ | 148,161 | $ | 158,573 | ||||||
Money market investments |
621,071 | 760,746 | 544,573 | |||||||||
Investment securities: |
||||||||||||
Securities available for sale, at fair value |
2,071,208 | 2,057,599 | 2,027,607 | |||||||||
Securities held to maturity, at amortized cost
(fair value of $115,832, $115,484 and $114,295, respectively) |
112,734 | 113,259 | 114,248 | |||||||||
Total investment securities |
2,183,942 | 2,170,858 | 2,141,855 | |||||||||
FHLB and Federal Reserve stock |
157,304 | 155,084 | 155,084 | |||||||||
Portfolio loans: |
||||||||||||
Commercial and industrial |
1,686,769 | 1,824,801 | 2,145,481 | |||||||||
Commercial real estate |
2,646,241 | 2,768,299 | 2,905,795 | |||||||||
Total commercial |
4,333,010 | 4,593,100 | 5,051,276 | |||||||||
Residential mortgage |
858,920 | 877,201 | 1,132,236 | |||||||||
Direct consumer |
1,132,147 | 1,174,726 | 1,310,248 | |||||||||
Indirect consumer |
814,038 | 794,183 | 808,311 | |||||||||
Total portfolio loans |
7,138,115 | 7,439,210 | 8,302,071 | |||||||||
Less: Allowance for loan losses |
(321,841 | ) | (322,377 | ) | (330,217 | ) | ||||||
Net portfolio loans |
6,816,274 | 7,116,833 | 7,971,854 | |||||||||
Loans held for sale |
57,245 | 107,772 | 77,084 | |||||||||
Premises and equipment |
107,405 | 108,680 | 114,742 | |||||||||
Goodwill |
318,150 | 318,150 | 318,150 | |||||||||
Other intangible assets |
12,214 | 13,247 | 17,425 | |||||||||
Bank owned life insurance |
217,113 | 216,179 | 219,290 | |||||||||
Other assets |
195,073 | 212,115 | 212,179 | |||||||||
Assets of discontinued operations |
| 324,097 | 357,539 | |||||||||
Total assets |
$ | 10,833,875 | $ | 11,651,922 | $ | 12,288,348 | ||||||
Liabilities |
||||||||||||
Noninterest-bearing deposits |
$ | 1,269,905 | $ | 1,239,352 | $ | 1,193,870 | ||||||
Interest-bearing demand deposits |
998,676 | 1,057,094 | 928,221 | |||||||||
Savings deposits |
2,526,972 | 2,533,002 | 2,563,638 | |||||||||
Time deposits |
3,426,769 | 3,651,750 | 3,840,817 | |||||||||
Total deposits |
8,222,322 | 8,481,198 | 8,526,546 | |||||||||
Federal funds purchased and securities sold
under agreements to repurchase |
30,082 | 30,209 | 35,745 | |||||||||
Other short-term borrowings |
700 | 2,920 | 13,829 | |||||||||
Other liabilities |
151,880 | 133,893 | 150,680 | |||||||||
Long-term debt |
1,211,147 | 1,337,746 | 1,936,173 | |||||||||
Liabilities of discontinued operations |
| 421,562 | 400,223 | |||||||||
Total liabilities |
9,616,131 | 10,407,528 | 11,063,196 | |||||||||
Shareholders Equity |
||||||||||||
Preferred stock no par value |
275,084 | 273,522 | 269,013 | |||||||||
Common stock no par value |
1,430,877 | 1,430,273 | 1,215,021 | |||||||||
Retained deficit |
(498,621 | ) | (453,910 | ) | (231,503 | ) | ||||||
Accumulated other comprehensive income (loss) |
10,404 | (5,491 | ) | (27,379 | ) | |||||||
Total shareholders equity |
1,217,744 | 1,244,394 | 1,225,152 | |||||||||
Total liabilities and shareholders equity |
$ | 10,833,875 | $ | 11,651,922 | $ | 12,288,348 | ||||||
12
Consolidated Statements of Operations (Unaudited)
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(in thousands, except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Interest Income |
||||||||||||||||
Interest and fees on loans |
$ | 100,980 | $ | 112,684 | $ | 202,722 | $ | 229,969 | ||||||||
Interest and dividends on investment securities: |
||||||||||||||||
Taxable |
18,600 | 18,398 | 36,861 | 38,690 | ||||||||||||
Tax-exempt |
3,932 | 6,407 | 9,217 | 13,043 | ||||||||||||
Dividends on FHLB and Federal Reserve stock |
1,026 | 519 | 2,028 | 1,879 | ||||||||||||
Money market investments |
407 | 316 | 831 | 574 | ||||||||||||
Total interest income |
124,945 | 138,324 | 251,659 | 284,155 | ||||||||||||
Interest Expense |
||||||||||||||||
Deposits |
25,910 | 40,051 | 55,421 | 84,816 | ||||||||||||
Short-term borrowings |
17 | 47 | 41 | 131 | ||||||||||||
Long-term debt |
14,432 | 24,183 | 30,422 | 49,684 | ||||||||||||
Total interest expense |
40,359 | 64,281 | 85,884 | 134,631 | ||||||||||||
Net Interest Income |
84,586 | 74,043 | 165,775 | 149,524 | ||||||||||||
Provision for loan losses |
70,614 | 98,935 | 171,969 | 162,420 | ||||||||||||
Net interest income after provision for loan losses |
13,972 | (24,892 | ) | (6,194 | ) | (12,896 | ) | |||||||||
Noninterest Income |
||||||||||||||||
Service charges on deposit accounts |
9,971 | 10,399 | 19,655 | 20,255 | ||||||||||||
Trust fees |
3,836 | 3,402 | 7,631 | 6,720 | ||||||||||||
Mortgage and other loan income |
2,198 | 3,612 | 4,787 | 6,655 | ||||||||||||
Brokerage and investment fees |
1,322 | 1,365 | 2,255 | 2,660 | ||||||||||||
ATM network user fees |
1,771 | 1,578 | 3,368 | 2,963 | ||||||||||||
Bankcard fees |
2,266 | 2,029 | 4,273 | 3,863 | ||||||||||||
Losses on loans held for sale |
(8,405 | ) | (4,350 | ) | (16,107 | ) | (10,502 | ) | ||||||||
Investment securities gains |
8,051 | 5 | 14,067 | 5 | ||||||||||||
Other income |
1,272 | 1,858 | 4,746 | 5,544 | ||||||||||||
Total noninterest income |
22,282 | 19,898 | 44,675 | 38,163 | ||||||||||||
Noninterest Expense |
||||||||||||||||
Salaries and employee benefits |
31,403 | 34,953 | 61,350 | 67,983 | ||||||||||||
Occupancy |
6,139 | 6,529 | 13,600 | 14,121 | ||||||||||||
Professional services |
2,615 | 2,760 | 4,868 | 5,853 | ||||||||||||
Equipment |
2,979 | 2,983 | 6,051 | 5,767 | ||||||||||||
Data processing services |
4,767 | 4,265 | 9,396 | 8,459 | ||||||||||||
Advertising and public relations |
2,116 | 2,266 | 3,413 | 3,684 | ||||||||||||
Postage and delivery |
1,295 | 1,451 | 2,309 | 2,942 | ||||||||||||
Other loan expenses |
4,551 | 6,789 | 10,525 | 12,651 | ||||||||||||
Other real estate (ORE) expenses |
4,578 | 4,418 | 12,531 | 12,783 | ||||||||||||
Intangible asset amortization |
1,034 | 1,952 | 2,164 | 3,989 | ||||||||||||
Goodwill impairment |
| 256,272 | | 256,272 | ||||||||||||
Other expense |
15,533 | 18,610 | 28,906 | 27,800 | ||||||||||||
Total noninterest expense |
77,010 | 343,248 | 155,113 | 422,304 | ||||||||||||
Loss from Continuing Operations Before Income Taxes |
(40,756 | ) | (348,242 | ) | (116,632 | ) | (397,037 | ) | ||||||||
Income tax provision (benefit) from continuing operations |
3,700 | (11,326 | ) | 3,847 | (14,579 | ) | ||||||||||
Loss from Continuing Operations |
(44,456 | ) | (336,916 | ) | (120,479 | ) | (382,458 | ) | ||||||||
Discontinued Operations: |
||||||||||||||||
Income (loss) from discontinued operations (net of income tax) |
5,151 | (10,497 | ) | (3,822 | ) | (10,104 | ) | |||||||||
Net Loss |
(39,305 | ) | (347,413 | ) | (124,301 | ) | (392,562 | ) | ||||||||
Dividend on redeemable preferred stock |
(5,406 | ) | (5,196 | ) | (10,688 | ) | (9,299 | ) | ||||||||
Net Loss Attributable to Common Shareholders |
$ | (44,711 | ) | $ | (352,609 | ) | $ | (134,989 | ) | $ | (401,861 | ) | ||||
Earnings Per Share from Continuing Operations |
||||||||||||||||
Basic |
$ | (0.12 | ) | $ | (2.73 | ) | $ | (0.33 | ) | $ | (3.12 | ) | ||||
Diluted |
(0.12 | ) | (2.73 | ) | (0.33 | ) | (3.12 | ) | ||||||||
Earnings Per Share from Discontinued Operations |
||||||||||||||||
Basic |
$ | 0.01 | $ | (0.08 | ) | $ | (0.01 | ) | $ | (0.08 | ) | |||||
Diluted |
0.01 | (0.08 | ) | (0.01 | ) | (0.08 | ) | |||||||||
Net Loss Per Common Share: |
||||||||||||||||
Basic |
$ | (0.11 | ) | $ | (2.81 | ) | $ | (0.34 | ) | $ | (3.20 | ) | ||||
Diluted |
(0.11 | ) | (2.81 | ) | (0.34 | ) | (3.20 | ) | ||||||||
Average Common Shares Outstanding: |
||||||||||||||||
Basic |
393,815 | 125,459 | 393,797 | 125,430 | ||||||||||||
Diluted |
393,815 | 125,459 | 393,797 | 125,430 |
See notes to consolidated financial statements.
13
Selected Quarterly Information (Unaudited)
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
2010 | 2010 | 2009 | 2009 | 2009 | ||||||||||||||||
Summary of Operations (thousands) |
||||||||||||||||||||
Net interest income |
$ | 84,586 | $ | 81,189 | $ | 81,913 | $ | 79,012 | $ | 74,043 | ||||||||||
Provision for loan losses |
70,614 | 101,355 | 84,007 | 77,393 | 98,935 | |||||||||||||||
Noninterest income (1) |
22,282 | 22,393 | 14,274 | 10,696 | 19,898 | |||||||||||||||
Noninterest expense (2) |
77,010 | 78,103 | 81,369 | 81,466 | 343,248 | |||||||||||||||
Income tax provision (benefit) from continuing operations |
3,700 | 147 | (3,307 | ) | (11,747 | ) | (11,326 | ) | ||||||||||||
Net loss from continuing operations |
(44,456 | ) | (76,023 | ) | (65,883 | ) | (57,403 | ) | (336,916 | ) | ||||||||||
Discontinued operations (net of income tax) |
5,151 | (8,973 | ) | 1,155 | 480 | (10,497 | ) | |||||||||||||
Net loss |
(39,305 | ) | (84,996 | ) | (64,729 | ) | (56,923 | ) | (347,413 | ) | ||||||||||
Net loss attributable to common shareholders (3) |
(44,711 | ) | (90,278 | ) | (69,981 | ) | (62,147 | ) | (352,609 | ) | ||||||||||
Taxable equivalent adjustment, continuing operations |
2,605 | 3,357 | 3,721 | 3,745 | 3,997 | |||||||||||||||
Taxable equivalent adjustment, combined |
2,656 | 3,556 | 3,932 | 3,961 | 4,220 | |||||||||||||||
Per Common Share Data |
||||||||||||||||||||
Net loss from continuing operations: |
||||||||||||||||||||
Basic |
$ | (0.12 | ) | $ | (0.21 | ) | $ | (0.18 | ) | $ | (0.49 | ) | $ | (2.73 | ) | |||||
Diluted |
(0.12 | ) | (0.21 | ) | (0.18 | ) | (0.49 | ) | (2.73 | ) | ||||||||||
Discontinued operations: |
||||||||||||||||||||
Basic |
$ | 0.01 | $ | (0.02 | ) | $ | 0.00 | $ | 0.01 | $ | (0.08 | ) | ||||||||
Diluted |
0.01 | (0.02 | ) | 0.00 | 0.01 | (0.08 | ) | |||||||||||||
Net loss: |
||||||||||||||||||||
Basic |
$ | (0.11 | ) | $ | (0.23 | ) | $ | (0.18 | ) | $ | (0.48 | ) | $ | (2.81 | ) | |||||
Diluted |
(0.11 | ) | (0.23 | ) | (0.18 | ) | (0.48 | ) | (2.81 | ) | ||||||||||
Common book value |
2.37 | 2.46 | 2.69 | 2.87 | 7.57 | |||||||||||||||
Tangible book value |
2.23 | 2.28 | 2.50 | 2.68 | 6.95 | |||||||||||||||
Tangible common book value |
1.54 | 1.59 | 1.81 | 1.99 | 4.82 | |||||||||||||||
Shares outstanding, end of period (000) |
397,059 | 394,392 | 394,397 | 394,470 | 126,258 | |||||||||||||||
At Period End, Continuing Operations (millions) |
||||||||||||||||||||
Assets |
$ | 10,834 | $ | 11,328 | $ | 11,596 | $ | 11,717 | $ | 11,931 | ||||||||||
Earning assets |
10,098 | 10,595 | 10,864 | 10,964 | 11,207 | |||||||||||||||
Portfolio loans |
7,138 | 7,439 | 7,788 | 8,097 | 8,302 | |||||||||||||||
Allowance for loan losses |
322 | 322 | 339 | 336 | 330 | |||||||||||||||
Deposits |
8,222 | 8,481 | 8,501 | 8,389 | 8,527 | |||||||||||||||
Shareholders equity |
1,218 | 1,244 | 1,331 | 1,403 | 1,225 | |||||||||||||||
At Period End, Combined (millions) |
||||||||||||||||||||
Assets |
$ | 10,834 | $ | 11,652 | $ | 11,932 | $ | 12,072 | $ | 12,288 | ||||||||||
Earning assets |
10,098 | 10,890 | 11,169 | 11,284 | 11,534 | |||||||||||||||
Portfolio loans |
7,138 | 7,543 | 7,906 | 8,217 | 8,426 | |||||||||||||||
Allowance for loan losses |
322 | 326 | 342 | 340 | 333 | |||||||||||||||
Deposits |
8,222 | 8,892 | 8,909 | 8,792 | 8,913 | |||||||||||||||
Shareholders equity |
1,218 | 1,244 | 1,331 | 1,403 | 1,225 | |||||||||||||||
Average for the Quarter, Continuing Operations (millions) |
||||||||||||||||||||
Assets |
$ | 11,156 | $ | 11,575 | $ | 11,616 | $ | 11,773 | $ | 12,407 | ||||||||||
Earning assets |
10,432 | 10,839 | 10,874 | 11,041 | 11,387 | |||||||||||||||
Portfolio loans |
7,318 | 7,654 | 7,964 | 8,191 | 8,478 | |||||||||||||||
Allowance for loan losses |
322 | 336 | 337 | 331 | 289 | |||||||||||||||
Deposits |
8,431 | 8,544 | 8,353 | 8,392 | 8,590 | |||||||||||||||
Shareholders equity |
1,239 | 1,323 | 1,392 | 1,228 | 1,557 | |||||||||||||||
Average for the Quarter, Combined (millions) |
||||||||||||||||||||
Assets |
$ | 11,267 | $ | 11,903 | $ | 11,966 | $ | 12,129 | $ | 12,774 | ||||||||||
Earning assets |
10,535 | 11,135 | 11,190 | 11,365 | 11,711 | |||||||||||||||
Portfolio loans |
7,344 | 7,768 | 8,084 | 8,311 | 8,604 | |||||||||||||||
Allowance for loan losses |
323 | 339 | 340 | 334 | 292 | |||||||||||||||
Deposits |
8,535 | 8,947 | 8,762 | 8,786 | 8,995 | |||||||||||||||
Shareholders equity |
1,239 | 1,323 | 1,392 | 1,228 | 1,557 | |||||||||||||||
Financial Ratios, Continuing Operations (annualized) |
||||||||||||||||||||
Return on average assets |
(1.60) | % | (2.66 | )% | (2.25 | )% | (1.93 | )% | (10.89 | )% | ||||||||||
Return on average shareholders equity |
(14.40 | ) | (23.30 | ) | (18.77 | ) | (18.55 | ) | (86.80 | ) | ||||||||||
Average shareholders equity / average assets |
11.10 | 11.43 | 11.99 | 10.43 | 12.55 | |||||||||||||||
Net interest margin (FTE) (4) |
3.35 | 3.14 | 3.13 | 2.99 | 2.75 | |||||||||||||||
Efficiency ratio (non-GAAP) (5) |
70.35 | 73.03 | 81.45 | 87.17 | 88.81 | |||||||||||||||
Allowance for loan losses as a percent of portfolio loans |
4.51 | 4.33 | 4.35 | 4.15 | 3.98 | |||||||||||||||
Allowance for loan losses as a percent of nonperforming loans |
83.67 | 77.94 | 71.43 | 67.16 | 66.80 | |||||||||||||||
Allowance for loan losses as a percent of nonperforming assets |
68.11 | 57.96 | 57.05 | 55.40 | 54.75 | |||||||||||||||
Nonperforming loans as a percent of portfolio loans |
5.39 | 5.56 | 6.09 | 6.18 | 5.95 | |||||||||||||||
Nonperforming assets as a percent of portfolio loans plus ORAA |
6.58 | 7.43 | 7.58 | 7.44 | 7.22 | |||||||||||||||
Nonperforming assets as a percent of total assets |
4.36 | 4.91 | 5.12 | 5.18 | 5.05 | |||||||||||||||
Net loans charged off as a percent of average portfolio loans (annualized) |
3.90 | 6.25 | 4.05 | 3.46 | 2.30 | |||||||||||||||
Financial Ratios, Combined (annualized) |
||||||||||||||||||||
Return on average assets |
(1.40) | % | (2.90 | )% | (2.15 | )% | (1.86 | )% | (10.91 | )% | ||||||||||
Return on average shareholders equity |
(12.73 | ) | (26.05 | ) | (18.44 | ) | (18.40 | ) | (89.50 | ) | ||||||||||
Average shareholders equity / average assets |
10.99 | 11.11 | 11.64 | 10.12 | 12.19 | |||||||||||||||
Net interest margin (FTE) (4) |
3.34 | 3.14 | 3.13 | 2.97 | 2.73 | |||||||||||||||
Efficiency ratio (non-GAAP) (5) |
66.78 | 79.87 | 80.58 | 86.48 | 88.26 | |||||||||||||||
Allowance for loan losses as a percent of portfolio loans |
4.51 | 4.32 | 4.33 | 4.13 | 3.96 | |||||||||||||||
Allowance for loan losses as a percent of nonperforming loans |
83.67 | 78.61 | 72.01 | 67.74 | 67.25 | |||||||||||||||
Allowance for loan losses as a percent of nonperforming assets |
68.11 | 58.48 | 57.54 | 55.87 | 55.13 | |||||||||||||||
Nonperforming loans as a percent of portfolio loans |
5.39 | 5.49 | 6.01 | 6.10 | 5.88 | |||||||||||||||
Nonperforming assets as a percent of portfolio loans plus ORAA |
6.58 | 7.34 | 7.48 | 7.34 | 7.13 | |||||||||||||||
Nonperforming assets as a percent of total assets |
4.36 | 4.78 | 4.99 | 5.04 | 4.92 | |||||||||||||||
Net loans charged off as a percent of average portfolio loans (annualized) |
3.89 | 6.16 | 4.00 | 3.41 | 2.30 | |||||||||||||||
Leverage ratio |
8.68 | 8.47 | 9.21 | 9.63 | 8.68 | |||||||||||||||
Tier 1 capital ratio |
12.74 | 12.12 | 12.52 | 12.83 | 11.81 | |||||||||||||||
Total capital ratio |
14.12 | 13.49 | 13.93 | 14.23 | 13.91 | |||||||||||||||
(1) | Noninterest income includes a gain on investment securities of $8.1 million and $6.0 million in the first and second quarter of 2010, respectively and 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 $256.3 million in the second quarter of 2009. | |
(3) | Net loss attributable to common shareholders includes the following non-cash items: $5.4 million and $5.3 million dividend to preferred shareholders in the first and second quarter of 2010, respectively and $5.2 million in the fourth, third and second quarters of 2009. | |
(4) | 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%. | |
(5) | 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). |
14
Non-GAAP Reconciliation (Unaudited)
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
(in thousands) | 2010 | 2010 | 2009 | 2009 | 2009 | |||||||||||||||
Efficiency Ratio Continuing Operations |
||||||||||||||||||||
Net interest income (A) |
$ | 84,586 | $ | 81,189 | $ | 81,913 | $ | 79,012 | $ | 74,043 | ||||||||||
Taxable equivalent adjustment (B) |
2,605 | 3,357 | 3,721 | 3,745 | 3,997 | |||||||||||||||
Noninterest income (C) |
22,282 | 22,393 | 14,274 | 10,696 | 19,898 | |||||||||||||||
Noninterest expense (D) |
77,010 | 78,103 | 81,369 | 81,466 | 343,248 | |||||||||||||||
Goodwill impairment (E) |
| | | | 256,272 | |||||||||||||||
Efficiency ratio: (D-E)/(A+B+C) |
70.35 | % | 73.03 | % | 81.45 | % | 87.17 | % | 88.81 | % | ||||||||||
Efficiency Ratio Combined Operations |
||||||||||||||||||||
Net interest income (A) |
$ | 85,115 | $ | 83,224 | $ | 83,935 | $ | 80,885 | $ | 75,601 | ||||||||||
Taxable equivalent adjustment (B) |
2,656 | 3,556 | 3,932 | 3,961 | 4,220 | |||||||||||||||
Noninterest income (C) |
28,275 | 13,142 | 15,381 | 11,842 | 20,966 | |||||||||||||||
Noninterest expense (D) |
77,492 | 79,811 | 83,197 | 83,614 | 355,433 | |||||||||||||||
Goodwill impairment (E) |
| | | | 266,474 | |||||||||||||||
Efficiency ratio: (D-E)/(A+B+C) |
66.78 | % | 79.87 | % | 80.58 | % | 86.48 | % | 88.26 | % | ||||||||||
Ending Balances Combined Operations (in millions) |
||||||||||||||||||||
Tangible Common Equity to Tangible Assets |
||||||||||||||||||||
Total assets |
$ | 10,834 | $ | 11,652 | $ | 11,932 | $ | 12,072 | $ | 12,288 | ||||||||||
Goodwill(1) |
(318 | ) | (331 | ) | (331 | ) | (331 | ) | (331 | ) | ||||||||||
Other intangible assets |
(12 | ) | (13 | ) | (14 | ) | (16 | ) | (17 | ) | ||||||||||
Tangible assets (non-GAAP) |
$ | 10,504 | $ | 11,308 | $ | 11,587 | $ | 11,725 | $ | 11,940 | ||||||||||
Total shareholders equity |
$ | 1,218 | $ | 1,244 | $ | 1,331 | $ | 1,403 | $ | 1,225 | ||||||||||
Goodwill(1) |
(318 | ) | (331 | ) | (331 | ) | (331 | ) | (331 | ) | ||||||||||
Other intangible assets |
(12 | ) | (13 | ) | (14 | ) | (16 | ) | (17 | ) | ||||||||||
Tangible equity (non-GAAP) |
$ | 888 | $ | 900 | $ | 986 | $ | 1,056 | $ | 877 | ||||||||||
Tangible equity |
$ | 888 | $ | 900 | $ | 986 | $ | 1,056 | $ | 877 | ||||||||||
Preferred stock |
(275 | ) | (274 | ) | (272 | ) | (270 | ) | (269 | ) | ||||||||||
Tangible common equity (non-GAAP) |
$ | 613 | $ | 626 | $ | 714 | $ | 786 | $ | 608 | ||||||||||
Tier 1 Common Equity |
||||||||||||||||||||
Total shareholders equity |
$ | 1,218 | $ | 1,244 | $ | 1,331 | $ | 1,403 | $ | 1,225 | ||||||||||
Qualifying capital securities |
74 | 74 | 74 | 74 | 175 | |||||||||||||||
Goodwill(1) |
(318 | ) | (331 | ) | (331 | ) | (331 | ) | (331 | ) | ||||||||||
Accumulated other comprehensive (income) loss |
(10 | ) | 6 | 7 | 3 | 27 | ||||||||||||||
Other intangible assets |
(12 | ) | (13 | ) | (14 | ) | (16 | ) | (17 | ) | ||||||||||
Tier 1 capital (regulatory) |
$ | 952 | $ | 980 | $ | 1,067 | $ | 1,133 | $ | 1,079 | ||||||||||
Tier 1 capital (regulatory) |
$ | 952 | $ | 980 | $ | 1,067 | $ | 1,133 | $ | 1,079 | ||||||||||
Qualifying capital securities |
(74 | ) | (74 | ) | (74 | ) | (74 | ) | (175 | ) | ||||||||||
Preferred stock |
(275 | ) | (274 | ) | (272 | ) | (270 | ) | (269 | ) | ||||||||||
Total Tier 1 common equity (non-GAAP) |
$ | 603 | $ | 632 | $ | 721 | $ | 789 | $ | 635 | ||||||||||
Net risk-weighted assets (regulatory) |
$ | 7,460 | $ | 8,083 | $ | 8,541 | $ | 8,835 | $ | 9,138 | ||||||||||
Equity to assets |
11.24 | % | 10.68 | % | 11.16 | % | 11.63 | % | 9.97 | % | ||||||||||
Tangible equity to tangible assets |
8.45 | 7.96 | 8.51 | 9.01 | 7.34 | |||||||||||||||
Tier 1 common equity |
8.07 | 7.82 | 8.47 | 8.94 | 6.95 | |||||||||||||||
Tangible common equity to tangible assets |
5.83 | 5.54 | 6.16 | 6.71 | 5.09 |
(1) | Goodwill represents goodwill for Continuing Operations, as shown on the balance sheet, and goodwill for Discontinued Operations of $12.6 million in the first quarter of 2010, the fourth, third and second quarters of 2009. |
15
Noninterest Income and Noninterest Expense (Unaudited)
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
Three Months Ended | ||||||||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
(in thousands) | 2010 | 2010 | 2009 | 2009 | 2009 | |||||||||||||||
NONINTEREST INCOME: |
||||||||||||||||||||
Service charges on deposit accounts |
$ | 9,971 | $ | 9,684 | $ | 10,826 | $ | 11,035 | $ | 10,399 | ||||||||||
Trust fees |
3,836 | 3,795 | 4,211 | 3,853 | 3,402 | |||||||||||||||
Mortgage and other loan income |
2,198 | 2,589 | 2,556 | 3,182 | 3,612 | |||||||||||||||
Brokerage and investment fees |
1,322 | 933 | 1,061 | 1,473 | 1,365 | |||||||||||||||
ATM network user fees |
1,771 | 1,597 | 1,631 | 1,689 | 1,578 | |||||||||||||||
Bankcard fees |
2,266 | 2,007 | 1,879 | 1,972 | 2,029 | |||||||||||||||
Losses on loans held for sale |
(8,405 | ) | (7,702 | ) | (8,724 | ) | (860 | ) | (4,350 | ) | ||||||||||
Net loss on debt extinguishment |
| | | (15,929 | ) | | ||||||||||||||
Investment securities gains |
8,051 | 6,016 | | | 5 | |||||||||||||||
Other income |
1,272 | 3,474 | 834 | 4,281 | 1,858 | |||||||||||||||
TOTAL NONINTEREST INCOME |
$ | 22,282 | $ | 22,393 | $ | 14,274 | $ | 10,696 | $ | 19,898 | ||||||||||
NONINTEREST EXPENSE: |
||||||||||||||||||||
Salaries and employee benefits |
$ | 31,403 | $ | 29,947 | $ | 30,012 | $ | 37,394 | $ | 34,953 | ||||||||||
Occupancy |
6,139 | 7,461 | 6,155 | 6,447 | 6,529 | |||||||||||||||
Professional services |
2,615 | 2,253 | 2,991 | 3,033 | 2,760 | |||||||||||||||
Equipment |
2,979 | 3,072 | 2,988 | 2,959 | 2,983 | |||||||||||||||
Data processing services |
4,767 | 4,629 | 4,772 | 4,461 | 4,265 | |||||||||||||||
Advertising and public relations |
2,116 | 1,297 | 1,551 | 1,878 | 2,266 | |||||||||||||||
Postage and delivery |
1,295 | 1,014 | 1,286 | 1,297 | 1,451 | |||||||||||||||
Other loan expenses |
4,551 | 5,974 | 5,631 | 6,271 | 6,789 | |||||||||||||||
Other real estate (ORE) expenses and losses |
4,578 | 7,953 | 9,370 | 5,548 | 4,418 | |||||||||||||||
Intangible asset amortization |
1,034 | 1,130 | 1,173 | 1,874 | 1,952 | |||||||||||||||
Goodwill impairment |
| | | | 256,272 | |||||||||||||||
Other expense |
15,533 | 13,373 | 15,440 | 10,304 | 18,610 | |||||||||||||||
TOTAL NONINTEREST EXPENSE |
$ | 77,010 | $ | 78,103 | $ | 81,369 | $ | 81,466 | $ | 343,248 | ||||||||||
16
Average Balances, Yields and Rates
Three Months Ended | ||||||||||||||||||||||||
June 30, 2010 | March 31, 2010 | June 30, 2009 | ||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||
(dollars in thousands) | Balance | Rate | Balance | Rate | Balance | Rate | ||||||||||||||||||
Earning Assets |
||||||||||||||||||||||||
Money market investments |
$ | 654,502 | 0.25 | % | $ | 696,016 | 0.25 | % | $ | 506,755 | 0.25 | % | ||||||||||||
Investment securities: |
||||||||||||||||||||||||
Taxable |
1,856,490 | 4.01 | 1,756,812 | 4.16 | 1,567,411 | 4.70 | ||||||||||||||||||
Tax-exempt |
351,717 | 6.88 | 492,968 | 6.60 | 597,010 | 6.60 | ||||||||||||||||||
FHLB and Federal Reserve stock |
156,597 | 2.62 | 155,084 | 2.61 | 153,189 | 1.36 | ||||||||||||||||||
Portfolio loans |
||||||||||||||||||||||||
Commercial and industrial |
1,775,054 | 4.93 | 1,874,944 | 4.87 | 2,248,057 | 4.51 | ||||||||||||||||||
Commercial real estate |
2,722,843 | 5.29 | 2,791,395 | 5.24 | 2,926,653 | 5.36 | ||||||||||||||||||
Residential mortgage |
865,732 | 5.66 | 988,859 | 4.78 | 1,164,468 | 4.94 | ||||||||||||||||||
Direct consumer |
1,153,278 | 6.09 | 1,201,799 | 6.05 | 1,335,643 | 6.06 | ||||||||||||||||||
Indirect consumer |
801,556 | 6.81 | 797,482 | 6.87 | 803,532 | 6.76 | ||||||||||||||||||
Total portfolio loans |
7,318,463 | 5.54 | 7,654,479 | 5.39 | 8,478,353 | 5.32 | ||||||||||||||||||
Loans held for sale |
94,381 | 1.47 | 83,972 | 1.90 | 83,921 | 3.62 | ||||||||||||||||||
Total earning assets |
10,432,150 | 4.90 | 10,839,331 | 4.85 | 11,386,639 | 5.01 | ||||||||||||||||||
Nonearning Assets |
||||||||||||||||||||||||
Cash and due from banks |
143,924 | 209,126 | 152,299 | |||||||||||||||||||||
Bank premises and equipment |
107,874 | 109,696 | 115,633 | |||||||||||||||||||||
Investment security fair value adjustment |
45,580 | 42,462 | 11,202 | |||||||||||||||||||||
Other nonearning assets |
748,626 | 710,158 | 1,030,040 | |||||||||||||||||||||
Assets of discontinued operations |
110,881 | 328,378 | 366,798 | |||||||||||||||||||||
Allowance for loan losses |
(321,976 | ) | (335,970 | ) | (288,694 | ) | ||||||||||||||||||
Total assets |
$ | 11,267,059 | $ | 11,903,181 | $ | 12,773,917 | ||||||||||||||||||
Interest-Bearing Liabilities |
||||||||||||||||||||||||
Deposits: |
||||||||||||||||||||||||
Interest-bearing demand deposits |
$ | 1,044,580 | 0.28 | % | $ | 1,075,943 | 0.31 | % | $ | 878,379 | 0.46 | % | ||||||||||||
Savings deposits |
2,533,846 | 0.66 | 2,490,158 | 0.69 | 2,583,088 | 0.80 | ||||||||||||||||||
Time deposits |
3,566,321 | 2.36 | 3,709,529 | 2.68 | 3,952,994 | 3.44 | ||||||||||||||||||
Short-term borrowings |
31,897 | 0.21 | 36,542 | 0.27 | 50,602 | 0.37 | ||||||||||||||||||
Long-term debt |
1,314,991 | 4.40 | 1,449,748 | 4.47 | 1,998,935 | 4.85 | ||||||||||||||||||
Total interest-bearing liabilities |
8,491,635 | 1.91 | 8,761,920 | 2.11 | 9,463,998 | 2.72 | ||||||||||||||||||
Noninterest-Bearing Liabilities and Shareholders
Equity |
||||||||||||||||||||||||
Noninterest-bearing demand |
1,286,243 | 1,268,583 | 1,175,714 | |||||||||||||||||||||
Other liabilities |
144,354 | 134,510 | 160,814 | |||||||||||||||||||||
Liabilities of discontinued operations |
106,227 | 415,154 | 416,523 | |||||||||||||||||||||
Shareholders equity |
1,238,600 | 1,323,014 | 1,556,868 | |||||||||||||||||||||
Total liabilities and shareholders equity |
$ | 11,267,059 | $ | 11,903,181 | $ | 12,773,917 | ||||||||||||||||||
Interest Spread |
2.99 | % | 2.74 | % | 2.29 | % | ||||||||||||||||||
Contribution of noninterest bearing sources of funds |
0.36 | 0.40 | 0.46 | |||||||||||||||||||||
Net Interest Margin Continuing Operations |
3.35 | % | 3.14 | % | 2.75 | % |
17
Average Balances, Yields and Rates
Six Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Average | Average | Average | Average | |||||||||||||
(dollars in thousands) | Balance | Rate | Balance | Rate | ||||||||||||
Earning Assets |
||||||||||||||||
Money market investments |
$ | 675,144 | 0.25 | % | $ | 463,732 | 0.25 | % | ||||||||
Investment securities |
||||||||||||||||
Taxable |
1,806,926 | 4.08 | 1,585,011 | 4.88 | ||||||||||||
Tax-exempt |
421,953 | 6.72 | 608,062 | 6.60 | ||||||||||||
FHLB and Federal Reserve stock |
155,845 | 2.62 | 150,402 | 2.51 | ||||||||||||
Portfolio loans |
||||||||||||||||
Commercial and industrial |
1,824,723 | 4.90 | 2,337,515 | 4.57 | ||||||||||||
Commercial real estate |
2,756,930 | 5.27 | 2,926,740 | 5.35 | ||||||||||||
Residential mortgage |
926,955 | 5.19 | 1,194,007 | 5.22 | ||||||||||||
Direct consumer |
1,177,404 | 6.07 | 1,361,103 | 6.07 | ||||||||||||
Indirect consumer |
799,530 | 6.84 | 806,263 | 6.76 | ||||||||||||
Total portfolio loans |
7,485,542 | 5.46 | 8,625,628 | 5.37 | ||||||||||||
Loans held for sale |
89,205 | 1.67 | 88,423 | 2.85 | ||||||||||||
Total earning assets |
10,634,615 | 4.87 | 11,521,258 | 5.10 | ||||||||||||
Nonearning Assets |
||||||||||||||||
Cash and due from banks |
176,345 | 159,128 | ||||||||||||||
Bank premises and equipment |
108,780 | 116,168 | ||||||||||||||
Investment security fair value adjustment |
44,029 | 588 | ||||||||||||||
Other nonearning assets |
729,498 | 1,042,907 | ||||||||||||||
Assets of discontinued operations |
219,029 | 359,660 | ||||||||||||||
Allowance for loan losses |
(328,934 | ) | (273,454 | ) | ||||||||||||
Total assets |
$ | 11,583,362 | $ | 12,926,255 | ||||||||||||
Interest-Bearing Liabilities |
||||||||||||||||
Deposits: |
||||||||||||||||
Interest-bearing demand deposits |
$ | 1,060,175 | 0.29 | % | $ | 827,485 | 0.45 | % | ||||||||
Savings deposits |
2,512,123 | 0.67 | 2,550,984 | 0.86 | ||||||||||||
Time deposits |
3,637,529 | 2.52 | 4,125,170 | 3.52 | ||||||||||||
Short-term borrowings |
34,207 | 0.24 | 55,197 | 0.48 | ||||||||||||
Long-term debt |
1,381,997 | 4.44 | 2,057,629 | 4.86 | ||||||||||||
Total interest-bearing liabilities |
8,626,031 | 2.01 | 9,616,465 | 2.82 | ||||||||||||
Noninterest-Bearing Liabilities and Shareholders
Equity |
||||||||||||||||
Noninterest-bearing demand |
1,277,461 | 1,145,480 | ||||||||||||||
Other liabilities |
139,459 | 162,899 | ||||||||||||||
Liabilities of discontinued operations |
259,837 | 419,797 | ||||||||||||||
Shareholders equity |
1,280,574 | 1,581,614 | ||||||||||||||
Total liabilities and shareholders equity |
$ | 11,583,362 | $ | 12,926,255 | ||||||||||||
Interest Spread |
2.86 | % | 2.28 | % | ||||||||||||
Contribution of noninterest bearing sources of funds |
0.38 | 0.47 | ||||||||||||||
Net Interest Margin Continuing Operations |
3.24 | % | 2.75 | % |
18
Summary of Loan Loss Experience
Citizens Republic Bancorp and Subsidiaries
Citizens Republic Bancorp and Subsidiaries
Three Months Ended | ||||||||||||||||||||
Jun 30 | Mar 31 | Dec 31 | Sep 30 | Jun 30 | ||||||||||||||||
(in thousands) | 2010 | 2010 | 2009 | 2009 | 2009 | |||||||||||||||
Allowance for loan losses beginning of period |
$ | 322,377 | $ | 338,940 | $ | 336,271 | $ | 330,217 | $ | 279,838 | ||||||||||
Provision for loan losses |
70,614 | 101,355 | 84,007 | 77,393 | 98,935 | |||||||||||||||
Charge-offs: |
||||||||||||||||||||
Commercial and industrial |
12,341 | 13,525 | 24,743 | 21,141 | 9,845 | |||||||||||||||
Commercial real estate |
51,183 | 15,976 | 41,096 | 32,076 | 31,098 | |||||||||||||||
Total commercial |
63,524 | 29,501 | 65,839 | 53,217 | 40,943 | |||||||||||||||
Residential mortgage |
705 | 80,729 | 6,031 | 9,969 | 2,160 | |||||||||||||||
Direct consumer |
5,907 | 7,528 | 6,502 | 6,617 | 6,678 | |||||||||||||||
Indirect consumer |
4,028 | 3,813 | 6,873 | 3,812 | 5,040 | |||||||||||||||
Total charge-offs |
74,164 | 121,571 | 85,245 | 73,615 | 54,821 | |||||||||||||||
Recoveries: |
||||||||||||||||||||
Commercial and industrial |
937 | 669 | 2,231 | 995 | 3,023 | |||||||||||||||
Commercial real estate |
829 | 1,319 | 656 | 204 | 2,316 | |||||||||||||||
Total commercial |
1,766 | 1,988 | 2,887 | 1,199 | 5,339 | |||||||||||||||
Residential mortgage |
80 | 583 | 21 | 5 | 4 | |||||||||||||||
Direct consumer |
386 | 453 | 409 | 482 | 317 | |||||||||||||||
Indirect consumer |
782 | 629 | 590 | 590 | 605 | |||||||||||||||
Total recoveries |
3,014 | 3,653 | 3,907 | 2,276 | 6,265 | |||||||||||||||
Net charge-offs |
71,150 | 117,918 | 81,338 | 71,339 | 48,556 | |||||||||||||||
Allowance for loan losses end of period |
$ | 321,841 | $ | 322,377 | $ | 338,940 | $ | 336,271 | $ | 330,217 | ||||||||||
Reserve for loan commitments end of period |
$ | 2,522 | $ | 2,624 | $ | 3,118 | $ | 3,462 | $ | 3,902 | ||||||||||
19