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| 8-K - 8-K - CITIZENS REPUBLIC BANCORP, INC. | d288461d8k.htm |
 Investor Presentation
Fourth Quarter 2011
Exhibit 99.1 |
 2
Safe Harbor Statement
Discussions and statements in this presentation 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, without
limitation,
risks
and
uncertainties
detailed
from
time
to
time
in
Citizens’
filings
with
the Securities and Exchange Commission.
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 presentation 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. |
 Who
We Are |
 4
Who We Are
Established in 1871
57
th
largest bank holding
company in the U.S. ranked
by assets
–
$9.5 billion assets and
$7.4 billion deposits
–
Presence in 3 Upper
Midwest states with 219
branches and 248 ATMs
Increased market share in
49% of our counties since
2008
Number of new clients grew
8% in 2011
80% of revenue is Michigan
based
Company Overview
219 Branches / 248 ATMs |
 5
How We Deliver Our Service
Core Banking
86% of revenue
Retail consumer
Commercial clients up to $5 million loan size
Treasury Management: 36% of commercial clients use TM
services
Public Funds: focus on generating lasting relationships rather
than temporary deposits
Preferred SBA Lender: dedicated group to fast track process –
48 hour average time to approval
Mortgage: almost 20% of closings are directly from branch to call
center
Indirect marine and RV lending
Investment Center: introduce single service CD clients to
financial consultants
Corporate Banking
10% of revenue
Asset Based Lending
Corporate
Specialty healthcare focus in assisted living & skilled nursing
Wealth Management
4% of revenue
Personal Trust
Employee Benefits
Institutional Trust |
 Local
Delivery of Service Local teams focus on delivery of :
Client service
Closing pipeline opportunities
Referring business
6
Client
Local
Advisory
Board
Commercial
Banker
Mortgage
Loan
Officer
Public
Funds
Officer
Branch
Manager
Treasury
Management
Officer
Investment
Consultant
Wealth
Business
Development
Officer |
 Where We’ve Been |
 8
Strategically Managed Through Cycle
Acquired Michigan-based bank with heavy real
estate concentrations in late 2006
Economic downturn and challenging Michigan
economy resulted in elevated credit costs
Employed strategies to reduce balance sheet risk
Enhanced capital
–
suspended dividend (1Q08)
–
$200 million common equity raise (3Q08)
–
$300 million TARP issuance (4Q08)
–
exchanged sub debt & trust preferred for $200
million of common equity (3Q09) |
 9
Successful Leaders in Key Roles
Name
Title
Held
Position
Since
Cathy Nash
Chief Executive Officer
Feb. 09
Lisa McNeely
Chief Financial Officer
Aug. 10
Mark Widawski
Chief Credit Officer
Feb. 09
Brian Boike
Treasurer
Oct. 09
Judi Klawinski
Director of Core Banking
Oct. 09
Ray Green
Director of Corporate Banking
May 10
Joe Czopek
Controller
Oct. 09
Ken Duetsch
Director of Wealth Management
Aug. 11 |
 Since
2009, focused on clients/revenue while working through credit issues
10
Revenue Focus
Problem Asset Resolution Focus
Strengthened franchise
value
Eliminated uncertainty
around credit
0%
1%
2%
3%
4%
5%
6%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
NPAs / Assets %
CRBC
Peer Median**
Regional Peer Median**
losses, securities (gains)/losses, and any impairment charges (including goodwill,
credit write downs and fair-value adjustments) caused by this economic
cycle. ** Source: SNL Financial MRQ data
$26.6
$20.6
$29.6
$33.1
$34.7
$34.5
$36.2
$32.1
$30.7
$32.8
$37.8
$36.9
$0
$10
$20
$30
$40
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Pre-tax Pre-provision Profit*
* Non-GAAP measure, as defined by management, represents net income (loss)
excluding income tax provision (benefit) provision for loan |
 $12,982
$12,288
$12,072
$11,932
$11,652
$10,834
$10,639
$9,966
$9,724
$9,496
$9,600
$9,463
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Total Assets
1.
Preserved capital by managing assets
2.
Grew and maintained reserve levels in recognition of
portfolio risk
Strategy from 2009 –
2010
11
$0
$100
$200
$300
$400
$500
$600
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Allowance for Loan Losses
Non-Performing Loans |
 Strategy from 2009 –
2010
3.
Aggressively and actively worked out of problem assets
4.
Carefully managed capital levels to allow execution of
problem asset reduction
12
Dec. 31,
2011
Sept. 30,
2011
June 30,
2011
March 31,
2011
Leverage ratio
8.45%
8.21%
7.83%
7.39%
Tier 1 capital ratio
13.51
12.81
12.43
11.90
Total capital ratio
14.84
14.14
13.77
13.24
Tier 1 common
equity (non-GAAP)
7.24
6.77
6.36
5.93
$549
$601
$606
$591
$551
$468
$436
$280
$175
$139
$137
$102
4.4%
5.0%
5.2%
5.1%
4.9%
4.3%
4.1%
2.8%
1.8%
1.5%
1.4%
1.1%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
$0
$100
$200
$300
$400
$500
$600
$700
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Non-Performing Assets
NPAs as a % of Total Assets |
 Where We’re Going |
 Continue to Provide Top Tier Client Service
14
* Surveys conducted by Prime Performance ™
78
80
82
84
86
88
Sep 07
Sep 08
Sep 09
Sep 10
Dec 11
Likelihood to Recommend *
Citizens' Score
PPI Industry Average |
 Rebuild Loan Portfolio
Focused on proven competencies
–
Business owner lending
–
Corporate lending –
structured finance, ABL, healthcare
expertise
–
Indirect marine and RV
15
$8,625
$8,302
$8,097
$7,788
$7,439
$7,138
$6,888
$6,217
$5,704
$5,628
$5,672
$5,530
$4,000
$6,000
$8,000
$10,000
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Loan Portfolio Balances |
 Mitigate Expected Margin Pressure
16
2.74%
2.75%
2.99%
3.13%
3.14%
3.35%
3.32%
3.42%
3.53%
3.56%
3.63%
3.62%
2.00%
2.50%
3.00%
3.50%
4.00%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Net Interest Margin (FTE)
Continue focus on core deposits
Reduce single service CD clients
Manage liquidity levels to reflect
improved credit trends
10,000
12,000
14,000
16,000
18,000
12/31/10
3/31/11
6/30/11
9/30/11
12/31/11
Single Service CD Clients
1,059
936
670
528
835
918
775
488
323
306
261
262
249
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
22% increase in core deposits
Core Deposits
Retail CDs
Brokered CDs
0
100
200
300
400
500
600
700
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Fed Funds Sold (average) |
 Reserve Reductions Follow Improved Metrics
17
Reserve model is historical looking; 3Q and 4Q
2011 credit metrics significantly improved over
prior periods
Ensure reserves reflect reduced portfolio risk and
support growth initiatives
Difference of reserves at 3.12% vs. 2% peer
median is $62 million
0%
1%
2%
3%
4%
5%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Loan Loss Reserves / Loans %
CRBC
Peer Median*
Regional Peer Median*
* Source: SNL Financial MRQ data |
 Report Consistent Profits
18
* Excludes discontinued operations
Reprice and add new fee income
streams to replace lost revenue from
regulatory changes
* Non-GAAP measure. See Appendix for reconciliation.
Continue prudent expense
management while adding key
revenue generating positions
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Income (Loss) before Tax*
(49)
(359)
(69)
(68)
(85)
(35)
(57)
(103)
(69)
14
20
21
400
350
300
250
0
50
200
150
50
-
-
-
100
-
-
-
-
-
-
5,000
10,000
15,000
20,000
25,000
30,000
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Operating Non-Interest Income*
Service charges on deposit accounts
ATM network fees & Bankcard fees
Other non-interest income*
$0
$10
$20
$30
$40
$50
$60
$70
$80
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Salaries and Employee Benefits
Other Expenses
Operating Non-Interest Expense* |
 Report Consistent Profits
19
Consistent profitability will allow us to
–
Resume treasury and trust preferred dividends
–
Harvest our $300+ million deferred tax asset
–
Rebuild tangible common equity
–
Examine TARP repayment options |
 20
2011 Highlights
3 consecutive quarters of consistent profits
–
NIM increased to 3.58%, up 27 basis points from 2010
–
Fee income from core banking services remained solid
–
Maintained control over operating expenses
Loan growth in focused areas of expertise
–
5% growth in C&I portfolio
–
6% growth Indirect portfolio
Significantly improved credit trends
($ in millions)
12/31/10
12/31/11
% Change
Delinquent loans
$98.4
$47.7
-
52%
as a % of portfolio
1.58%
0.86%
-46%
Non-performing loans
$213.9
$87.4
-59%
as a % of portfolio
3.44%
1.58%
-54%
Non-performing assets
$280.2
$102.2
-64%
as a % of assets
2.81%
1.08%
-62%
Net charge offs
$435.8
$262.1
-40%
Provision expense
$392.9
$138.8
-65% |
 $26.6
$20.6
$29.6
$33.1
$34.7
$34.5
$36.2
$32.1
$30.7
$32.8
$37.8
$36.9
$0
$10
$20
$30
$40
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Pre-tax Pre-provision Profit*
Solid Core Earnings
21
2.74%
2.75%
2.99%
3.13%
3.14%
3.35%
3.32%
3.42%
3.53%
3.56%
3.63%
3.62%
2.00%
2.20%
2.40%
2.60%
2.80%
3.00%
3.20%
3.40%
3.60%
3.80%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Net Interest Margin (FTE)
$109.9
$137.5
$138.2
$0
$20
$40
$60
$80
$100
$120
$140
$160
2009
2010
2011
Pre-tax Pre-provision Profit*
2.90%
3.31%
3.58%
2.00%
2.20%
2.40%
2.60%
2.80%
3.00%
3.20%
3.40%
3.60%
3.80%
2009
2010
2011
Net Interest Margin (FTE) |
 Efficiency Ratio Trends
22
70.16%
76.84%
79.23%
70.89%
68.39%
70.40%
64.19%
68.22%
67.09%
63.85%
59.89%
61.39%
50%
55%
60%
65%
70%
75%
80%
85%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Quarterly Efficiency Ratio
Peer Data Source: SNL Financial
75.58%
67.73%
63.05%
50%
55%
60%
65%
70%
75%
80%
2009
2010
2011
Annual Efficiency Ratio
Revenue per FTE of $207,200 is better than peer
median of $204,500
Salary & benefits expense per FTE of $62,500 is better
than peer median of $73,000 |
    Organically Growing Strong Capital Position
23
0%
2%
4%
6%
8%
10%
12%
14%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
-GAAP)
Accelerated
resolution of
over $920
million of
problem
assets
Total Capital
Tier 1 Capital
Tier 1 Common (non |
 Rebuilding Loan Portfolio
24
Focused on prudently growing in areas of
expertise
–
Business owner lending
–
Corporate lending –
structured finance, asset-based
lending, healthcare
–
Indirect marine and RV
$0
$100
$200
$300
$400
$500
$600
$700
$800
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Loan Production
Commercial
Consumer |
 25
Positioned for Growth
Successfully managed through credit cycle with a
strategic focus on revenue generation and problem
asset resolutions
Strategically focused into 2012 to
–
Continue providing top tier client service
–
Rebuild loan portfolio
–
Mitigate expected margin pressure
–
Evaluate reserve levels
–
Report consistent profitability |
 26
Appendix |
 27
Upper Midwest Franchise
MSA
Rank
Number
of
Branches
Total
Deposits
($000)
% of
Franchise
% Market
Share
Michigan:
Flint, MI
1
20
1,529,744
20.4
40.48
Detroit-Warren-Livonia, MI
11
31
1,154,717
15.4
1.28
Saginaw-Saginaw Township North,
1
15
589,977
7.9
29.97
Lansing-East Lansing, MI
3
14
521,070
6.9
10.42
Jackson, MI
2
8
373,118
5.0
24.57
Bay City, MI
3
5
212,226
2.8
20.34
Ann Arbor, MI
11
6
208,963
2.8
3.37
Cadillac, MI
1
7
188,460
2.5
35.99
Owosso, MI
3
6
135,722
1.8
20.54
Sturgis, MI
3
4
107,782
1.4
15.76
Alpena, MI
1
2
94,514
1.3
27.74
Houghton, MI
3
3
87,682
1.2
13.87
Total Michigan
8
155
6,024,966
80.3
3.82
Non-Michigan:
Cleveland-Elyria-Mentor, OH
17
12
321,077
4.3
0.64
Green Bay, WI
9
9
218,449
2.9
3.29
Appleton, WI
11
6
159,161
2.1
4.10
Stevens Point, WI
5
2
92,474
1.2
7.83
Platteville, WI
8
4
74,056
1.0
6.32
Total Non-Michigan
60
1,480,553
19.7
Source: SNL Financial as of 6/30/11 |
 28
Continued Stabilization and Diversification
in Michigan’s Economy
Source: U.S. Bureau of Labor Statistics
Michigan Nonfarm Employment
(seasonally adjusted)
Michigan Employment by Industry
November 2011
November 2001
$ 000s
%
$ 000s
%
Trade, Transportation, and Utilities
660.4 16.6%
782.8 17.2%
Government
636.4 16.0%
710.3 15.6%
Professional Services
558.0 14.0%
596.6 13.1%
Health Care
554.9 13.9%
463.8 10.2%
Other Manufacturing
374.7
9.4%
503.7 11.1%
Leisure and Hospitality
356.0
8.9%
384.7
8.4%
Motor Vehicle
201.7
5.1%
369.3
8.1%
Financial Activities
187.4
4.7%
209.3
4.6%
Other Services
169.9
4.3%
176.5
3.9%
Construction
134.5
3.4%
210.9
4.6%
Education Services
91.0
2.3%
65.1
1.4%
Information
54.6
1.4%
72.8
1.6%
Mining and Logging
7.8
0.2%
9.3
0.2%
Total Nonfarm
3,987.3
4,555.1
Total Manufacturing
576.4
14.5%
873.0
19.2%
in thousands
3,500
3,600
3,700
3,800
3,900
4,000
4,100
4,200
4,300
Michigan Nonfarm Employment (Seasonally Adjusted)
Trend |
 29
Continued Stabilization and Diversification
in Michigan’s Economy
Source: U.S. Bureau of Labor Statistics and Freddie Mac
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Unemployment Trends
US Unemployment
MI Unemployment
-0.20
-0.15
-0.10
-0.05
0.00
0.05
0.10
0.15
Freddie Mac House Price Index
Michigan
United States |
 30
(in millions)
1Q11
2Q11
3Q11
4Q11
Income(loss) from continuing operations
(68.7)
$
$24.2
$32.9
$18.2
Income tax (benefit) provision
0.1
(10.3)
(12.6)
2.5
Provision for loan losses
88.7
17.6
17.5
15.0
Investment securities (gains) losses
0.4
1.0
(0.0)
(0.0)
Net losses (gains) on LHFS
1.1
(1.2)
(2.0)
0.2
Losses on ORE
9.1
1.4
1.2
1.1
Fair-value adjustment on BOLI
(0.1)
0.0
0.4
(0.1)
Fair-value adjustment on swaps
0.1
0.1
0.3
(0.0)
Pre-Tax Pre-Provision Profit
(1)
$30.7
$32.8
$37.8
$36.9
Last 12 Months
$138.2
Core Earnings Strength
(1)
Non-GAAP
measure,
as
defined
by
management,
represents
total
revenue
(total
net
interest
income
and
non-interest
income)
excluding any securities gains/losses, fair value adjustments on
loans held for sale, interest rate swaps, and bank owned
life insurance, less non-interest expense excluding any goodwill impairment
charges, credit write downs, fair value adjustments and special
assessments. Pre-Tax Pre-Provision Profit (non-GAAP)
|
 31
(in millions)
2009
2010
2011
Income (loss) from continuing operations
($505.7)
($289.1)
$6.7
Income tax (benefit) provision
(29.6)
12.9
(20.2)
Provision for loan losses
323.8
392.9
138.8
Goodwill impairment charge
256.3
-
-
Net loss on debt extinguishment
15.9
-
-
Investment securities (gains) losses
(0.0)
(13.9)
1.3
FDIC special assessment
5.4
-
-
Net losses (gains) on LHFS
20.1
20.6
(1.8)
Losses on ORE
23.3
13.4
12.8
Fair-value adjustment on BOLI
(0.1)
(0.1)
0.2
Fair-value adjustment on swaps
0.6
0.8
0.4
Pre-Tax Pre-Provision Profit
(1)
$109.9
$137.5
$138.2
Core Earnings Strength
Pre-Tax Pre-Provision Profit (non-GAAP)
(1)
Non-GAAP
measure,
as
defined
by
management,
represents
total
revenue
(total
net
interest
income
and
non-interest
income)
excluding any securities gains/losses, fair value adjustments on
loans held for sale, interest rate swaps, and bank owned
life insurance, less non-interest expense excluding any goodwill impairment
charges, credit write downs, fair value adjustments and special
assessments. |
 32
Quarterly Non-Interest Income Trends
(in thousands)
4Q 10
1Q 11
2Q 11
3Q 11
4Q 11
Service charges on deposit accounts
$10,072
$9,429
$9,753
$10,362
$9,724
Trust fees
4,135
3,923
3,811
3,622
3,747
Mortgage and other loan income
3,109
2,942
1,883
2,089
2,705
Brokerage and investment fees
1,264
1,108
1,533
1,188
1,243
ATM network user fees
1,825
1,755
1,926
1,993
1,837
Bankcard fees
2,325
2,238
2,468
2,482
2,468
Net (losses) gains on loans held for sale
(3,069)
(1,106)
1,179
1,952
(217)
Investment securities gains (losses)
(171)
(383)
(993)
3
38
Other income
4,538
3,237
1,765
736
2,818
Total Non-Interest Income (GAAP)
$24,028
$23,143
$23,325
$24,427
$24,363
Investment securities gains (losses)
$171
$383
$993
(3)
$
(38)
$
Net (losses) gains on loans held for sale
3,069
1,106
(1,179)
(1,952)
217
Fair value adjustment on BOLI
(105)
(100)
48
385
(100)
Fair value adjustment on swaps
(535)
114
77
268
(46)
Operating Non-interest Income
(Non-GAAP)
$26,628
$24,646
$23,264
$23,125
$24,396 |
 33
Annual Non-Interest Income Trends
(in thousands)
2009
2010
2011
Service charges on deposit accounts
$42,116
$40,336
$39,268
Trust fees
14,784
15,603
15,103
Mortgage and other loan income
12,393
10,486
9,620
Brokerage and investment fees
5,194
4,579
5,072
ATM network user fees
6,283
7,057
7,511
Bankcard fees
7,714
8,859
9,656
Net (losses) gains on loans held for sale
(20,086)
(20,617)
1,808
Net loss on debt extinguishment
(15,929)
-
-
Investment securities gains (losses)
5
13,896
(1,336)
Other income
10,659
14,460
8,555
Total Non-Interest Income (GAAP)
$63,133
$94,659
$95,257
Net loss on debt extinguishment
$15,929
-
$
-
$
Investment securities gains (losses)
(5)
(13,896)
1,336
Net (losses) gains on loans held for sale
20,086
20,617
(1,808)
Fair value adjustment on BOLI
(144)
(67)
233
Fair value adjustment on swaps
606
782
413
Operating Non-interest Income
(Non-GAAP)
$99,605
$102,095
$95,431 |
 34
Quarterly Non-Interest Expense Trends
(in thousands)
4Q 10
1Q 11
2Q 11
3Q 11
4Q 11
Salaries and employee benefits
$32,294
$31,018
$31,265
$30,280
$30,952
Occupancy
6,834
7,562
6,047
6,125
6,326
Professional services
2,945
2,219
2,407
2,394
2,311
Equipment
3,355
3,052
2,841
2,918
3,326
Data processing services
4,636
4,352
4,247
3,823
3,709
Advertising and public relations
1,512
569
1,802
2,179
1,298
Postage and delivery
1,075
1,116
1,120
1,142
1,165
Other loan expenses
5,431
5,255
3,314
3,941
3,497
Losses on other real estate (ORE)
930
9,122
1,355
1,210
1,081
ORE expenses
1,653
1,768
1,029
529
995
Intangible asset amortization
851
828
778
732
688
Other expense
15,718
14,795
13,239
10,138
11,292
Total Non-Interest Expense (GAAP)
$77,234
$81,656
$69,444
$65,411
$66,640
Fair-value adjustment on ORE
930
9,122
1,355
1,210
1,081
Operating Non-Interest Expense
(Non-GAAP)
$76,304
$72,534
$68,089
$64,201
$65,559 |
 35
Annual Non-Interest Expense Trends
(in thousands)
2009
2010
2011
Salaries and employee benefits
$135,389
$126,384
$123,514
Occupancy
26,723
26,963
26,059
Professional services
11,877
10,550
9,331
Equipment
11,714
12,482
12,136
Data processing services
17,692
18,734
16,131
Advertising and public relations
7,113
6,530
5,848
Postage and delivery
5,525
4,571
4,543
Other loan expenses
24,553
20,311
16,007
Losses on other real estate (ORE)
23,312
13,438
12,768
ORE expenses
4,389
4,970
4,322
Intangible asset amortization
7,036
3,923
3,027
Goodwill impairment
256,272
-
-
Other expense
53,544
58,231
49,464
Total Non-Interest Expense (GAAP)
$585,139
$307,087
$283,150
Goodwill impairment
256,272
$
-
$
-
$
FDIC Special Assessment
5,351
-
-
Fair-value adjustment on ORE
23,312
13,438
12,768
Operating Non-Interest Expense
(Non-GAAP)
$300,204
$293,649
$270,382 |
 36
($ in millions)
Market
% of
Credit Rating
Value
Total
Gov't & Agency
2,489
$
88.9%
AAA
82
2.9%
AA
151
5.4%
A
33
1.2%
BAA1, BAA2 & BAA3
22
0.8%
BA1 & Lower
1
-
Non-rated
22
0.8%
Total
2,800
$
100.0%
•
Over $2.0 billion in unpledged securities
•
No OTTI concerns
•
Over 70% of portfolio are GNMA securities
purchased over the last 2 –
3 years
($ in millions)
Book
Market
TEY*
Duration
Type
Value
Value
(%)
(years)
MBS Agency
785
$
824
$
3.33%
3.31
CMO - Agency
285
291
2.23%
2.03
CMO - Non-agency
79
74
3.49%
2.30
Municipals
116
123
6.57%
3.16
Total Available for Sale
1,265
$
1,312
$
3.39%
2.94
MBS Agency
989
$
1,019
$
2.84%
3.96
CMO - Agency
350
356
2.54%
2.85
Municipals
105
113
6.30%
3.52
Total Held to Maturity
1,444
$
1,488
$
3.02%
3.66
Total Investment Securities
2,709
$
2,800
$
3.19%
3.33
Investment Portfolio at December 31, 2011
* Taxable equivalent yield, except for Municipal yields which are before tax
effect Effective Management of Securities Portfolio Provides
Source of Liquidity |
 37
($ in millions)
3/31/09
6/30/09
9/30/09
12/31/09
3/31/10
6/30/10
9/30/10
12/31/10
3/31/11
6/30/11
9/30/11
12/31/11
Tier 1 capital
$ 1,161
$ 1,079
$ 1,133
$ 1,067
$ 980
$ 952
$ 886
$ 777
$ 706
$ 727
$ 758
$ 773
Qualifying LLR
121
117
113
109
104
96
92
83
76
74
75
73
Qualifying capital securities
75
75
10
10
7
7
7
7
3
3
3
3
Total risk-based capital
$ 1,357
$ 1,271
$ 1,257
$ 1,186
$ 1,091
$ 1,055
$ 985
$ 867
$ 785
$ 805
$ 836
$ 850
Tier 1 capital
$ 1,161
$ 1,079
$ 1,133
$ 1,067
$ 980
$ 952
$ 886
$ 777
$ 706
$ 727
$ 758
$ 773
Qualifying capital securities
(175)
(175)
(74)
(74)
(74)
(74)
(74)
(74)
(74)
(74)
(74)
(74)
Preferred stock
(268)
(269)
(270)
(272)
(274)
(275)
(277)
(278)
(280)
(282)
(283)
(285)
Tier 1 common equity
$ 718
$ 635
$ 789
$ 721
$ 632
$ 603
$ 535
$ 425
$ 352
$ 371
$ 401
$ 415
Total Capital Ratio
14.21%
13.91%
14.23%
13.93%
13.49%
14.17%
13.80%
13.51%
13.24%
13.77%
14.14%
14.84%
Tier 1 Capital Ratio
12.16%
11.81%
12.83%
12.52%
12.12%
12.79%
12.41%
12.11%
11.90%
12.43%
12.81%
13.51%
Tier 1 Leverage Ratio
9.32%
8.68%
9.63%
9.21%
8.47%
8.72%
8.50%
7.71%
7.39%
7.83%
8.21%
8.45%
Tier 1 Common Ratio *
7.52%
6.95%
8.94%
8.47%
7.82%
8.10%
7.50%
6.62%
5.93%
6.36%
6.77%
7.24%
TCE to TA *
5.53%
5.09%
6.71%
6.16%
5.54%
5.83%
5.34%
4.20%
3.59%
4.05%
4.31%
4.47%
TA - tangible assets
* Non-GAAP
TCE - tangible common equity
Maintaining Strong Capital Levels |
 38
Non-GAAP Common Equity Ratios
($ in thousands)
4Q 10
1Q11
2Q11
3Q11
4Q11
Total assets
$9,966
$9,724
$9,496
$9,600
$9,463
Goodwill
(318)
(318)
(318)
(318)
(318)
Other intangible assets
(11)
(10)
(9)
(8)
(7)
Tangible assets
$9,637
$9,396
$9,169
$9,274
$9,137
Total shareholders' equity
$1,012
$945
$980
$1,009
$1,020
Goodwill
(318)
(318)
(318)
(318)
(318)
Other intangible assets
(11)
(10)
(9)
(8)
(7)
Tangible equity
$683
$618
$653
$683
$694
Preferred stock
(278)
(280)
(282)
(283)
(285)
Tangible common equity
$405
$338
$371
$400
$409
Total shareholders' equity
$1,012
$945
$980
$1,009
$1,020
Qualifying capital securities
74
74
74
74
74
Goodwill
(318)
(318)
(318)
(318)
(318)
Accumulated other comprehensive income
20
14
1
1
6
Other assets
(1)
(11)
(10)
(9)
(8)
(7)
Total Tier 1 capital (regulatory)
$777
$706
$728
$758
$773
Qualifying capital securities
(74)
(74)
(74)
(74)
(74)
Preferred stock
(278)
(280)
(282)
(283)
(285)
Total Tier 1 common equity (non-GAAP)
$425
$352
$372
$401
$415
Net risk-weighted assets (regulatory)
(1)
$6,417
$5,930
$5,850
$5,913
$5,723
Tangible common equity to tangilbe assets ratio
4.20%
3.59%
4.05%
4.31%
4.47%
Tier 1 common equity ratio (non-GAAP)
6.62%
5.95%
6.36%
6.77%
7.24%
(1)
Other assets deducted from Tier 1 capital and risk-weighted assets consist of
intangible assets (excluding goodwill) |
 $0
$20
$40
$60
$80
$100
$120
$140
$160
$180
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
39
Proactive Credit Management
$0
$50
$100
$150
$200
$250
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
30-89 Day Past Due
Portfolio Balances
Non-Performing Loans
$0
$2,000
$4,000
$6,000
$8,000
$10,000
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
($ in millions)
Net Charge-Offs
C&I
Owner Occupied Income
Producing Land Hold, Land Dev. & Const. Residential Mtg
Consumer $0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11 |
 $0
$5
$10
$15
$20
$25
$30
$35
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
$0
$20
$40
$60
$80
$100
$120
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
$0
$10
$20
$30
$40
$50
$60
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
40
Commercial & Industrial Portfolio
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
30-89 Day Past Due
Portfolio Balances
($ in millions)
Non-Performing Loans
Net Charge-Offs
C&I
Small Business |
 41
Commercial Portfolio Size Characteristics
< $5 million
$5 - $10 million
> $10 million
Total
Total Commercial Portfolio
Total (millions)
2,046
$
566
$
475
$
3,088
$
# of loans
7,318
81
31
7,430
Average loan size
$280,000
$6,990,000
$15,336,000
$416,000
Delinquencies
Total (millions)
7
$
-
$
-
$
7
$
# of loans
41
-
-
41
Average loan size
$178,000
-
$
-
$
$178,000
Nonperforming Loans
Total (millions)
62
$
-
$
-
$
62
$
# of loans
250
-
-
250
Average loan size
$249,000
-
$
-
$
$249,000
Loan size category: |
 $0
$40
$80
$120
$160
$200
$240
$280
$320
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
$0
$20
$40
$60
$80
$100
$120
$140
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
42
Commercial Real Estate Portfolio
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
$2,800
$3,200
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
30-89 Day Past Due
Portfolio Balances
($ in millions)
Owner Occupied
Income Producing
Land Hold, Land Development & Construction
Non-Performing Loans
$0
$20
$40
$60
$80
$100
$120
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Net Charge-Offs |
 43
Commercial Real Estate Portfolio
By Collateral
By Region
21%
19%
15%
14%
8%
4%
2%
2%
1%
14%
Retail
Medical
Warehouse/
Industrial
Office
Multi-Family
Hotel
Mixed Use
Gas Station/ C.Store
Residential
Other (<2%)
34%
39%
16%
6%
5%
Southeast
Michigan
Greater
Michigan
Ohio
Wisconsin
Other |
 44
Consumer Portfolio
$0
$20
$40
$60
$80
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
30-89 Day Past Due *
Portfolio Balances
Non-Performing Loans *
Net Charge-Offs *
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
($ in millions)
$0
$20
$40
$60
$80
$100
$120
$140
$160
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
$0
$20
$40
$60
$80
$100
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
* Other direct included with Home Equity
Indirect
Other Direct
Home Equity
Residential Mortgage |
 45
Consumer Portfolio Profiles
Home Equity
$36,700 avg
loan size
Indirect
(1)
$23,300 avg
loan size
(1) Indirect loans are RV and marine only (no auto)
Consumer Portfolio
Strong refreshed FICO scores
739 Home Equity
738 Indirect
722 Other Direct
43% of home equity is first lien position
Indirect NPLs have been less than
$2.6 million, or 0.33% of total,
throughout the cycle
Other
Direct
$18,500 avg
loan size
Residential Mortgage Portfolio
$169,000 average loan size
722 refreshed FICO score
64% average original LTV
Seasoned portfolio –
53% originated
2004 or earlier
Foreclosures are handled by PHH;
Michigan does not follow a judicial
foreclosure process
Michigan
84%
Ohio
6%
Wisconsin
4%
Other
6% |
 46
Non-Performing Loans
Commercial
Real Estate
$45.3
51.8%
Commercial
$16.9
19.4%
Residential
Mortgage
$11.3
12.9%
($ in millions)
Direct
Consumer
$12.1
13.9%
$87.4 million or 1.58% of portfolio
Indirect
Consumer
$1.0
1.1%
Loans 90+
Accruing
$0.8
0.9%
Loan loss reserve = $172.7
million
Allowance for loan losses to
NPLs = 197.6%
Specific portion of allowance =
$7 million
ALLL coverage of remaining
NPLs = 447% |
 47
(in millions)
1Q11
2Q11
3Q11
4Q11
Beginning NPAs
$280.2
$175.2
$139.4
$136.9
Commercial:
Additions
29.5
24.4
23.9
13.3
Payments
(55.7)
(15.2)
(11.0)
(8.0)
Returned to accruing status
(4.4)
(3.5)
(0.3)
-
Charge-Offs/ OREO writedown
(68.4)
(19.6)
(6.3)
(12.7)
Consumer - net change
(5.9)
(21.9)
(8.8)
(27.3)
Ending NPAs
$175.2
$139.4
$136.9
$102.2
Aggressive Non-Performing Asset Management
Quarterly Non-Performing Asset Activity |
 48
Peer Groups
Company Name
Ticker
Company Name
Ticker
Associated Banc-Corp
ASBC
Huntington Bancshares Incorporated
HBAN
Comerica Incorporated
CMA
KeyCorp
KEY
Commerce Bancshares, Inc.
CBSH
MB Financial, Inc.
MBFI
Fifth Third Bancorp
FITB
Old National Bancorp
ONB
First Midwest Bancorp, Inc.
FMBI
PNC Financial Services Group, Inc.
PNC
FirstMerit Corporation
FMER
TCF Financial Corporation
TCB
Flagstar Bancorp, Inc.
FBC
Wintrust Financial Corporation
WTFC
Company Name
Ticker
Company Name
Ticker
Associated Banc-Corp
ASBC
MB Financial, Inc.
MBFI
BancorpSouth, Inc.
BXS
National Penn Bancshares, Inc.
NPBC
Chemical Financial Corporation
CHFC
Old National Bancorp
ONB
Commerce Bancshares, Inc.
CBSH
Park National Corporation
PRK
Cullen/Frost Bankers, Inc.
CFR
Sterling Financial Corporation
STSA
F.N.B. Corporation
FNB
Susquehanna Bancshares, Inc.
SUSQ
First Citizens BancShares, Inc.
FCNCA
TFS Financial Corporation (MHC)
TFSL
First Midwest Bancorp, Inc.
FMBI
Trustmark Corporation
TRMK
FirstMerit Corporation
FMER
UMB Financial Corporation
UMBF
Flagstar Bancorp, Inc.
FBC
Valley National Bancorp
VLY
Fulton Financial Corporation
FULT
Wintrust Financial Corporation
WTFC
Regional Peers
Selected Peers |
 www.citizensbanking.com |