Citizens Republic Bancorp Announces Fourth Quarter 2009 Results

Jan 28, 2010, 16:05 ET from Citizens Republic Bancorp, Inc.

FLINT, Mich., Jan. 28 /PRNewswire-FirstCall/ -- Citizens Republic Bancorp, Inc. (Nasdaq: CRBC) announced today a net loss of $64.7 million for the three months ended December 31, 2009, compared with $56.9 million for the third quarter of 2009 and $195.4 million for the fourth quarter of 2008.  After incorporating the $5.3 million dividend to the preferred shareholder, Citizens reported a net loss attributable to common shareholders of $70.0 million for the three months ended December 31, 2009.  Diluted net loss per share was $0.18, compared with $0.48 for the third quarter of 2009 and $1.56 for the fourth quarter of 2008.  The diluted net loss per share was based on average shares outstanding of 393.8 million, 128.5 million, and 125.4 million at December 31, 2009, September 30, 2009, and December 31, 2008, respectively.  The results for the fourth quarter of 2008 included a non-cash valuation allowance of $136.6 million against deferred tax assets.  For the year ended December 31, 2009, Citizens recorded a net loss of $514.2 million compared with a net loss of $393.1 million for 2008.

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“We continue to perform as we expected at this point in the economic cycle.  We are aggressively managing the credits in our watchlist and nonperforming categories in order to mitigate future losses.  We continue to maintain a strong balance sheet with robust loan loss reserves of 4.33% of portfolio loans, excess liquidity, and capital ratios above the regulatory ’well-capitalized’ minimums,” commented Cathleen H. Nash, president and chief executive officer.

“We think the road to economic recovery will be slower in Michigan than the rest of the country given the higher level of unemployment and job loss, but Michigan will recover.  As we move into 2010, we have confidence that we will benefit from the aggressive credit steps we’ve taken over the last three years and the conservative, steadfast approach we’ve maintained in managing our capital.  With the strength of our balance sheet, the conviction and dedication of our employees, and our loyal clients, we believe the company will benefit from a stabilizing economy throughout 2010,” said Ms. Nash.

Key Points in the Quarter:

  • Net interest margin for the fourth quarter of 2009 was 3.13% compared with 2.97% for the third quarter of 2009.  The increase in net interest margin was primarily the result of expanding loan spreads, declining deposit costs, and lower interest expense due to the issuance of common stock for debt late in the third quarter of 2009.
  • The pre-tax pre-provision core operating earnings for the fourth quarter of 2009 totaled $34.5 million, an increase of $4.0 million or 13.1% over the third quarter of 2009.  The increase was primarily the result of a $3.1 million improvement in net interest income.  
  • Citizens continues to hold short-term (liquid) assets at December 31, 2009 of $706.2 million, a significant increase of $172.6 million or 32.4% over September 30, 2009 and $491.2 million over December 31, 2008.  Citizens’ parent company cash resources totaled $114.9 million at December 31, 2009 as compared with $124.1 million at September 30, 2009.
  • Total delinquent loans at December 31, 2009 were $155.3 million, or 1.96% of total loans, a decrease of $30.8 million or 16.6% from September 30, 2009 and a decrease of $135.3 million or 46.6% from December 31, 2008.  Total watchlist loans decreased for the first time in seven quarters by $99.4 million or 6.5% to $1.4 billion at December 31, 2009.  Total nonperforming assets at December 31, 2009 were $595.1 million, a decrease of $12.9 million or 2.1% from September 30, 2009.
  • The allowance for loan losses at December 31, 2009 increased to $342.4 million or 4.33% of portfolio loans, compared with $339.7 million or 4.13% at September 30, 2009.  The provision for loan losses for the fourth quarter of 2009 was $84.2 million, compared with $77.8 million for the third quarter of 2009.  The increase in the provision for loan losses was primarily due to higher net charge-offs.  Net charge-offs for the fourth quarter of 2009 totaled $81.5 million, compared with $71.5 million for the third quarter of 2009.  
  • All of Citizens’ regulatory capital ratios continue to exceed the “well-capitalized” designation.  As of December 31, 2009, Citizens’ estimated capital ratios were as follows:
    • Tier 1 capital – 12.49%
    • Total capital – 13.89%
    • Tier 1 leverage – 9.21%
    • Tier 1 common equity – 8.44%
    • Tangible equity to tangible assets – 8.51%
    • Tangible common equity to tangible assets – 6.16%
  • Citizens will suspend the dividend payments on its trust preferred securities and on its Fixed Rate Cumulative Perpetual Preferred Stock, Series A (“the TARP Preferred Stock”), issued to the U.S. Department of the Treasury.  This action will preserve $4.9 million in cash on a quarterly basis and reduces the need for Citizens to raise additional capital.  

Balance Sheet

Total assets at December 31, 2009 were $11.9 billion, a decrease of $140.1 million or 1.2% from September 30, 2009 and a decrease of $1.2 billion or 8.8% from December 31, 2008.  The declines were primarily due to reductions in total portfolio loans, partially offset by higher money market investments.  Additionally, the decline from December 31, 2008 was impacted by a non-cash and non-tax-deductible goodwill impairment charge recorded in the second quarter of 2009.

Money market investments at December 31, 2009 totaled $706.2 million, an increase of $172.6 million over September 30, 2009 and an increase of $491.2 million over December 31, 2008.  The increases were primarily the result of holding excess short-term funds with the Federal Reserve as a result of continued deposit growth, coupled with a decline in demand for loans from credit-worthy clients.

Investment securities at December 31, 2009 totaled $2.4 billion, essentially unchanged from September 30, 2009 and December 31, 2008.  

The following table displays total portfolio loans at quarter end for each of the last five quarters. The following definitions are provided to clarify the types of loans included in each of the commercial real estate segments identified in the table.  Land hold loans are secured by undeveloped land which has been acquired for future development.  Land development loans are secured by land undergoing infrastructure improvements to create finished marketable lots for commercial or residential construction.  Construction loans are secured by commercial, retail and residential real estate in the construction phase with the intent to be sold or become an income producing property.  Income producing loans are secured by non-owner occupied real estate leased to one or more tenants.  Owner occupied loans are secured by real estate occupied by the owner for ongoing operations.

    
    
    ------------------------------------------------------------------------
    Loan Portfolios
                          Dec 31,     Sep 30,   Jun 30,    Mar 31,    Dec 31,
     (in millions)         2009        2009      2009       2009       2008
                         --------   --------   --------   --------   --------
    Land Hold              $35.9       $52.0      $54.9      $54.2      $45.0
    Land Development       108.9       129.7      123.1      121.2      132.7
    Construction           177.9       214.8      230.4      257.7      263.5
    Income Producing     1,518.4     1,509.7    1,534.5    1,558.2    1,556.2
    Owner-Occupied         985.6       992.4      979.5      953.0      967.3
                           -----       -----      -----      -----      -----
      Total Commercial
       Real Estate       2,826.7     2,898.6    2,922.4    2,944.3    2,964.7
     Commercial and
      Industrial         1,976.1     2,099.8    2,198.3    2,394.4    2,602.4
                         -------     -------    -------    -------    -------
      Total Commercial
       Loans             4,802.8     4,998.4    5,120.7    5,338.7    5,567.1
    
     Residential
      Mortgage           1,036.5     1,084.8    1,145.0    1,208.0    1,262.8
     Direct Consumer     1,261.4     1,308.3    1,351.5    1,405.6    1,452.2
     Indirect Consumer     805.2       825.3      808.3      802.1      820.5
                           -----       -----      -----      -----      -----
       Total Consumer
        Loans            3,103.1     3,218.4    3,304.8    3,415.7    3,535.5
                         -------     -------    -------    -------    -------
     Total Loans        $7,905.9    $8,216.8   $8,425.5   $8,754.4   $9,102.6
                        ========    ========   ========   ========   ========
    
    ------------------------------------------------------------------------

The decreases in total commercial loans were primarily the result of a decline in customer demand from credit-worthy clients, paydowns as a result of normal client activity, and charge-offs.  Also contributing to the decrease from September 30, 2009 was the transfer of $55.5 million of nonperforming land hold, land development, and construction loans to loans held for sale ($35.2 million after market-value adjustments) during the fourth quarter of 2009.  The declines in residential mortgage loans were primarily the result of paydowns from normal client activity and charge-offs.  More than 90% of new mortgage originations are sold into the secondary market, resulting in minimal new loans being retained in the residential mortgage portfolio.  The decreases in direct consumer loans, which are primarily home equity loans were due to weak consumer demand.  Indirect consumer loans, which are primarily marine and recreational vehicle loans, fluctuate throughout the year due to seasonal demand.  After taking this fluctuation into account, the indirect consumer loan portfolio is essentially unchanged from September 30, 2009 and December 31, 2008.      

Loans held for sale at December 31, 2009 were $80.5 million, an increase of $19.0 million or 30.9% over September 30, 2009 and a decrease of $10.9 million or 11.9% from December 31, 2008.  The increase over September 30, 2009 was primarily the result of transferring the aforementioned nonperforming land hold, land development, and construction loans from the loan portfolio at fair-market value.  The variance from both prior periods also reflects a decline in commercial loans held for sale due to customer paydowns, workout activities, writedowns to reflect market-value declines for the underlying collateral, and transfers to ORE.    

Goodwill at December 31, 2009 was $330.7 million, unchanged from September 30, 2009 and a decrease of $266.5 million from December 31, 2008.  The decrease was due to a non-cash and non-tax-deductible goodwill impairment charge recorded in the second quarter of 2009.  Citizens performed its annual impairment test during the fourth quarter of 2009 and concluded that no additional impairment was indicated.  There can be no assurance, however, that future testing will not result in additional material impairment charges due to further developments in the banking industry, financial markets, or Citizens’ markets.

Total deposits at December 31, 2009 were $8.9 billion, an increase of $117.5 million or 1.3% over September 30, 2009 and a decrease of $143.1 million or 1.6% from December 31, 2008.  Core deposits, which exclude all time deposits, totaled $5.0 billion at December 31, 2009, a decrease of $70.2 million or 1.4% from September 30, 2009 and an increase of $579.6 million or 13.1% over December 31, 2008.  The decrease from September 30, 2009 was primarily the result of seasonal declines in public fund customer deposits.  The increase over December 31, 2008 was primarily the result of clients holding higher balances in transaction accounts due to changes in FDIC coverage thresholds, and a shift in funding mix from customer time deposits.  Time deposits totaled $3.9 billion at December 31, 2009, an increase of $187.6 million or 5.1% over September 30, 2009 and a decrease of $722.7 million or 15.6% from December 31, 2008.  The increase over September 30, 2009 was primarily the result of the timing of replacing called brokered time deposits.  The decrease from December 31, 2008 was primarily the result of a shift in funding mix from customer time deposits to core deposits throughout 2009.    

Other interest-bearing liabilities, which include federal funds purchased and securities sold under agreements to repurchase, other short-term borrowings, and long-term debt, totaled $1.6 billion at December 31, 2009, a decrease of $166.1 million or 9.6% from September 30, 2009 and a decrease of $703.5 million or 31.0% from December 31, 2008.  The decreases were primarily the result of a planned reduction in wholesale funding due to Citizens’ strong liquidity position.  Additionally, the decrease from December 31, 2008 incorporated the result of exchanging $209.1 million in long-term debt for Citizens’ common stock in the third quarter of 2009.  

Capital Adequacy and Liquidity

Shareholders’ equity at December 31, 2009 totaled $1.3 billion, a decrease of $72.4 million or 5.2% from September 30, 2009 and a decrease of $270.3 million or 16.9% from December 31, 2008.  The decreases were primarily the result of the net losses incurred during 2009.  The decrease from December 31, 2008 was partially offset by $197.6 million of common equity generated in the third quarter of 2009 issuance of common stock for debt.

Citizens continues to maintain a strong capital position, and its regulatory capital ratios are above “well-capitalized” standards, as evidenced by the following key capital ratios.

    
    
    ------------------------------------------------------------------------
                                                                   Excess
                         Regulatory                                Capital
                          Minimum for                                over
                           "Well-                                  Minimum
                         Capitalized"  12/31/09 9/30/09 6/30/09 (in millions)
    ------------------------------------------------------------------------
    Tier 1 capital ratio*   6.00%       12.49%   12.83%  11.81%   $554.0
    Total capital ratio*   10.00        13.89    14.23   13.91     332.4
    Tier 1 leverage ratio*  5.00         9.21     9.63    8.68     487.5
    Tier 1 common
     equity ratio*                       8.44     8.94    6.95
    Tangible equity to
     tangible assets                     8.51     9.01    7.34
    Tangible common
     equity to tangible
     assets                              6.16     6.71    5.09
            
    * December 31, 2009 is an estimate
    ------------------------------------------------------------------------
    

Citizens maintains a strong liquidity position due to its on-balance sheet liquidity sources and very stable funding base comprised of approximately 75% deposits, 13% long-term debt, 11% equity, and 1% short-term liabilities.  Citizens also has access to high levels of untapped liquidity through collateral-based borrowing capacity provided by portions of both the loan and investment securities portfolios.  Also, securities available-for-sale and $706.2 million of money market investments could be sold for cash to provide additional liquidity, if necessary.  Citizens’ parent company cash resources totaled $114.9 million at December 31, 2009 as compared with $124.1 million at September 30, 2009.

In light of the net losses over the last several quarters, Citizens has determined, in consultation with the Federal Reserve Bank of Chicago as required by regulatory policy, to defer regularly scheduled quarterly interest payments of $1.1 million on its outstanding junior subordinated debentures relating to its two trust preferred securities, which will defer dividend payments to those security holders, and will also be suspending regular quarterly cash dividend payments of $3.8 million on its TARP Preferred Stock.  Deferral of these payments is expected to preserve a total of $4.9 million of cash each quarter.  Citizens has demonstrated it has sufficient cash and liquidity to pay the scheduled dividends on its TARP Preferred Stock and interest payments on the debentures underlying the trust preferred securities, but is taking these actions to support and preserve its capital position in light of economic conditions and to lessen the need for raising any additional capital.  Citizens intends to reevaluate the deferral of these payments periodically and, in consultation with its regulators, will consider reinstating these payments when appropriate.

Under the terms of the junior subordinated debentures and trust documents, Citizens is allowed to defer payments of interest for a specified number of quarterly periods without default, but such amounts will continue to accrue.  Also during the deferral period, Citizens generally may not pay cash dividends on or purchase its common stock or preferred stock, including the TARP Preferred Stock.  Dividend payments on the TARP Preferred Stock may be deferred without default, but the dividend is cumulative and may eventually give the holder board representation rights.

Net Interest Margin and Net Interest Income

Net interest margin was 3.13% for the fourth quarter of 2009 compared with 2.97% for the third quarter of 2009 and 3.03% for the fourth quarter of 2008.  The increase in net interest margin over the third quarter of 2009 was primarily the result of expanding loan spreads, declining deposit costs, and lower interest expense due to the debt exchange for common stock late in the third quarter of 2009.

The increase in net interest margin over the fourth quarter of 2008 was primarily the result of lower interest expense on long-term debt, expanding commercial and consumer loan spreads and retail time deposits repricing to a lower rate, partially offset by deposit price competition, the movement of loans to nonperforming status, and an increase in short-term investments to provide additional on-balance sheet liquidity.  For the year ended December 31, 2009, net interest margin was 2.89% compared with 3.09% for the same period of 2008 as a result of deposit price competition, the transfer of loans to nonperforming status, and an increase in short-term investments to provide additional on-balance sheet liquidity.  The decrease was partially offset by expanding commercial and consumer loan spreads and retail time deposits repricing to a lower rate.

Net interest income was $83.9 million for the fourth quarter of 2009, an increase of $3.1 million or 3.8% over the third quarter of 2009, and a decrease of $1.8 million or 2.0% from the fourth quarter of 2008.  The increase over the third quarter of 2009 was primarily due to the increase in net interest margin, partially offset by a $174.8 million decrease in average earning assets due to lower demand in the current Midwest economic environment.  

The decrease in net interest income compared with the fourth quarter of 2008 was primarily due to a $686.2 million decrease in average earning assets, partially offset by higher net interest margin.  The decrease in average earning assets was the result of a decrease in loan portfolio balances due to lower demand in the current Midwest economic environment, partially offset by an increase in investment securities and money market investments.  For the year ended December 31, 2009, net interest income declined to $317.4 million compared with $348.9 million for 2008 as a result of the lower net interest margin and a $332.5 million decrease in average earning assets due to the aforementioned factors.

Credit Quality

The quality of Citizens’ loan portfolio is impacted by numerous factors, including the economic environment in the markets in which Citizens operates.  Citizens carefully monitors its loans in an effort to identify and mitigate any potential credit quality issues and losses in a proactive manner.  Citizens performs quarterly reviews of the non-watch commercial credit portfolio focusing on industry segments and asset classes that have or may be expected to experience stress due to economic conditions.  This process seeks to validate each such credit’s risk rating, underwriting structure and exposure management under current and stressed economic scenarios while strengthening these relationships and improving communication with these clients.  

The following tables represent four qualitative aspects of the loan portfolio that illustrate the overall level of quality and risk inherent in the loan portfolio.

  • Table 1 – Delinquency Rates by Loan Portfolio – This table illustrates the loans where the contractual payment is 30 to 89 days past due and interest is still accruing.  While these loans are actively worked to bring them current, past due loan trends may be a leading indicator of potential future nonperforming loans and charge-offs.
  • Table 2 – Commercial Watchlist – This table illustrates the commercial loans that, while still accruing interest, we believe may be at risk due to general economic conditions or changes in a borrower’s financial status and therefore require increased oversight.  Watchlist loans that are in nonperforming status are included in Table 3 below.  
  • Table 3 – Nonperforming Assets – This table illustrates the loans that are in nonaccrual status, loans past due 90 days or more on which interest is still accruing, restructured loans, nonperforming loans that are held for sale, and other repossessed assets acquired.  The commercial loans included in this table are reviewed as part of the watchlist process in addition to the loans displayed in Table 2.  
  • Table 4 – Net Charge-Offs – This table illustrates the portion of loans that have been charged-off during each quarter.
    
    
    ------------------------------------------------------------------------
      Table 1 --Delinquency Rates By Loan Portfolio
    
     30 to 89 days
      Past Due             Dec 31, 2009       Sep 30, 2009       Jun 30, 2009
                         ----------------  ----------------  ----------------
     (dollars in                  % of             % of               % of
      millions)          $      Portfolio    $   Portfolio      $  Portfolio
                        ---     ---------   ---   --------     --- ----------
    Land Hold          $0.6       1.56%    $1.4      2.61%    $3.5    6.38%
    Land Development    4.7       4.34     12.0      9.29      1.3    1.06
    Construction        1.7       0.95     12.1      5.64      1.7    0.74
    Income
     Producing         40.8       2.69     44.9      2.97     50.0    3.26
    Owner-Occupied     25.0       2.53     24.4      2.46     15.6    1.59
                       ---------------     --------------    -------------  
    Total Commercial
       Real Estate     72.8       2.57     94.8      3.27     72.1    2.47
    Commercial and
     Industrial        17.0       0.86     20.2      0.96     34.0    1.55
                       ---------------     --------------    -------------  
    Total Commercial
       Loans           89.8       1.87    115.0      2.30    106.1    2.07
    
    Residential
     Mortgage          22.2       2.15     30.3      2.80     27.7    2.42
    Direct Consumer    27.0       2.14     24.5      1.87     23.3    1.72
    Indirect
     Consumer          16.3       2.02     16.3      1.98     14.6    1.81
                       ---------------     --------------    -------------
      Total Consumer
       Loans           65.5       2.11     71.1      2.21     65.6    1.98
                       ---------------     --------------    -------------
      Total
       Delinquent                                                             
       Loans         $155.3       1.96%  $186.1       2.26% $171.7    2.04%
                     ======              ======             ======
    
    
    30 to 89 days Past Due               Mar 31, 2009       Dec 31, 2008
                                         ------------       ------------
                                                % of               % of
     (dollars in millions)              $     Portfolio     $    Portfolio
                                       ---    ---------    ---   ---------
    Land Hold                         $3.7      6.83%     $3.9      8.67%
    Land Development                  11.1      9.16       5.2       3.92
    Construction                      16.7      6.48      27.3      10.36
    Income Producing                  64.2      4.12      76.7       4.93
    Owner-Occupied                    37.4      3.92      37.5       3.88
                                      --------------      ---------------
    Total Commercial Real Estate     133.1      4.52     150.6       5.08
     Commercial and Industrial        47.1      1.97      56.5       2.17
                                      --------------      ---------------
      Total Commercial Loans         180.2      3.38     207.1       3.72
    
     Residential Mortgage             25.9      2.14      39.5       3.13
     Direct Consumer                  20.4      1.45      25.5       1.76
     Indirect Consumer                14.7      1.83      18.5       2.25
                                      --------------      ---------------
      Total Consumer Loans            61.0      1.79      83.5       2.36
                                      --------------      ---------------
                                                                   
      Total Delinquent Loans        $241.2      2.76%    $290.6      3.19%
                                    ======               ======
    
    ------------------------------------------------------------------------

The decreases in total delinquencies were primarily the result of continued emphasis on proactively managing delinquent commercial loans.

As part of its overall credit underwriting and review process and loss mitigation strategy, Citizens carefully monitors commercial and commercial real estate credits that are current in terms of principal and interest payments but may deteriorate in quality as economic conditions decline.  Commercial relationship officers monitor their clients’ financial condition and initiate changes in loan ratings based on their findings.  Loans that have migrated within the loan rating system to a level that requires increased oversight are considered watchlist loans (generally consistent with the regulatory definition of special mention, substandard, and doubtful loans) and include loans that are accruing (see Table 2) or nonperforming (see Table 3).  Citizens utilizes the watchlist process as a proactive credit risk management practice to help mitigate the migration of commercial loans to nonperforming status and potential loss.  Once a loan is placed on the watchlist, it is reviewed quarterly by the chief credit officer, senior credit officers, senior market managers, and commercial relationship officers to assess cash flows, collateral valuations, guarantor liquidity, and other pertinent trends.  During these meetings, action plans are implemented or reviewed to address emerging problem loans or to remove loans from the portfolio.  Additionally, loans viewed as substandard or doubtful are transferred to Citizens’ special loans or small business workout groups and are subjected to an even higher level of monitoring and workout activity.  

    
    
    ------------------------------------------------------------------------
    Table 2 -- Commercial Watchlist
    
     Accruing loans only         
                       Dec 31, 2009         Sep 30, 2009      Jun 30, 2009
                      ----------------    ----------------   --------------
     (dollars in               % of               % of                % of
      millions)        $     Portfolio      $   Portfolio      $   Portfolio
                      ----------------    ---------------    ---------------
    Land Hold         $24.8     68.99%    $29.0    55.76%    $18.1    32.97%
     Land Development  88.0     80.78      93.6    72.12      83.6    67.91
     Construction      63.5     35.68      90.4    42.10      90.3    39.19
     Income
      Producing       521.9     34.37     519.6    34.42     458.9    29.91
     Owner-
      Occupied        247.3     25.09     277.3    27.94     274.4    28.01
                     ----------------    ----------------    ---------------
       Total
        Commercial
        Real
        Estate        945.5    33.45    1,009.9    34.84     925.3    31.66
     Commercial
      and
      Industrial      475.3    24.05      510.3    24.30     532.9    24.24
                    ----------------    ----------------    ---------------   
    Total
        Watchlist
        Loans      $1,420.8    29.58%  $1,520.2    30.41% $1,458.2    28.48%
                   ========            ========           ========
    
    
    Accruing loans only                 Mar 31, 2009        Dec 31, 2008
                                    ------------------- -------------------
                                                % of                % of
     (dollars in millions)               $    Portfolio      $    Portfolio
                                    ------------------- -------------------
     Land Hold                         $15.7     28.97%    $18.5     41.11%
     Land Development                   62.4     51.49      49.3     37.15
     Construction                       86.6     33.60      74.8     28.39
     Income Producing                  421.9     27.08     401.0     25.77
     Owner-Occupied                    224.2     23.53     178.4     18.44
                                    ------------------- -------------------
    Total Commercial Real Estate       810.8     27.54     722.0     24.35
     Commercial and Industrial         479.7     20.03     436.8     16.78
                                    ------------------- -------------------
       Total Watchlist Loans        $1,290.5     24.17% $1,158.8     20.82%
                                    ========            ========
    ------------------------------------------------------------------------
    

The decrease in accruing watchlist loans from September 30, 2009 was primarily the result of upgrading numerous commercial and industrial loans made to clients related to the automotive industry as well as loans migrating to nonperforming status exceeding new watchlist loans.  Many of the automotive industry commercial and industrial relationships had been proactively downgraded in the first half of 2009 due to the uncertainty in the automotive industry at that time.  Since some of these credits have continued to perform, they warranted an upgrade during the fourth quarter of 2009.  The increase over December 31, 2008 was primarily the result of proactive commercial real estate downgrades as Citizens closely monitors borrowers’ repayment capacity in this environment and the aforementioned proactive commercial and industrial downgrades in the first half of 2009.  

    
    
    ------------------------------------------------------------------------
    Table 3 -- Nonperforming Assets
    
                           Dec 31, 2009     Sep 30, 2009      Jun 30, 2009
                       ----------------- -----------------  ----------------- 
    (dollars in                 % of              % of              % of
      millions)           $   Portfolio    $    Portfolio    $    Portfolio
                       ----------------- -----------------  -----------------
    Land Hold           $4.8   13.42%    $13.3   25.56%    $13.1      23.86%
    Land Development     1.2    1.06      13.7   10.52      15.1      12.27
    Construction        25.2   14.19      33.7   15.70      36.0      15.63
    Income
     Producing         121.5    8.00     126.7    8.39     139.4       9.08
    Owner-Occupied      83.4    8.47      70.2    7.07      72.0       7.35
                       ----------------- -----------------  -----------------
      Total Commercial
       Real
       Estate          236.1    8.35     257.6    8.89     275.6       9.43
    Commercial and
     Industrial         84.0    4.25     111.5    5.31      91.8       4.18
                       ----------------- -----------------  -----------------
      Total
       Nonaccruing
       Commercial
       Loans           320.1    6.67     369.1    7.38     367.4       7.17
    
     Residential
      Mortgage         125.7   12.13     106.5    9.82     103.3       9.02
     Direct Consumer    21.4    1.70      21.6    1.65      20.3       1.50
     Indirect
      Consumer           2.6    0.32       2.6    0.31       1.4       0.17
                       ----------------- -----------------  -----------------
      Total
       Nonaccruing
       Consumer
       Loans           149.7    4.82     130.7    4.06     125.0       3.78
        Total
         Nonaccruing
         Loans         469.8    5.94     499.8    6.08     492.4       5.84
     Loans 90+
      days still
      accruing           3.0    0.04       0.6    0.01       0.8       0.01
     Restructured
      loans still
      accruing           2.6    0.03       1.1    0.01       2.5       0.03
                       ----------------- -----------------  -----------------
      Total
       Nonperforming
       Portfolio                                                         
       Loans           475.4    6.01%    501.5    6.10%    495.7       5.88%
    Nonperforming
     Held for Sale      65.3              44.5              54.3
    Other Repossessed
     Assets Acquired    54.4              62.0              54.7
                      ------            ------            ------
      Total 
       Nonperforming
       Assets         $595.1            $608.0            $604.7
                      ======            ======            ======
    
    
                                            Mar 31, 2009      Dec 31, 2008
                                         ---------------    ----------------
                                                 % of                % of
     (dollars in millions)                 $   Portfolio      $    Portfolio
                                         ---------------    ---------------- 
    Land Hold                            $12.0    22.14%    $10.4      23.11%
    Land Development                      14.6    12.05      23.4      17.63
    Construction                          26.5    10.28      18.3       6.94
    Income Producing                     116.3     7.46      78.6       5.05
    Owner-Occupied                        66.5     6.98      31.8       3.29
                                         ---------------    -----------------
      Total Commercial Real Estate       235.9     8.01     162.5       5.48
    Commercial and Industrial             83.7     3.50      64.6       2.48
                                         ---------------    -----------------
      Total Nonaccruing Commercial
       Loans                             319.6     5.99     227.1       4.08
    
    Residential Mortgage                  84.6     7.00      59.5       4.71
    Direct Consumer                       21.0     1.49      15.1       1.04
    Indirect Consumer                      2.0     0.25       2.6       0.32
                                         ---------------    -----------------
      Total Nonaccruing Consumer Loans   107.6     3.15      77.2       2.18
        Total Nonaccruing Loans          427.2     4.88     304.3       3.34
    Loans 90+ days still accruing          1.0     0.01       1.5       0.02
    Restructured loans still accruing      0.4     0.00       0.2       0.00
                                         ---------------    -----------------
      Total Nonperforming Portfolio                                
       Loans                             428.6     4.90%    306.0       3.36%
    Nonperforming Held for Sale           64.6               75.2
    Other Repossessed Assets Acquired     57.4               58.0
                                        ------             ------
      Total Nonperforming Assets        $550.6             $439.2
                                        ======             ======
    
    ------------------------------------------------------------------------

The decrease in nonperforming assets from September 30, 2009 was primarily the result of the aforementioned market-value adjustment of $20.3 million associated with transferring $55.5 million of nonperforming commercial real estate loans to loans held for sale during the fourth quarter of 2009.  Also contributing to the decrease was a decline in commercial and industrial loans due to net charge-offs exceeding new loans migrating to nonperforming status, which was partially offset by an increase in residential mortgage loans due to the effects of the national mortgage foreclosure moratorium earlier in 2009.  The increase over December 31, 2008 was primarily the result of deterioration in the real estate secured portfolios and general economic conditions in the Midwest during 2009.  Nonperforming assets at December 31, 2009 represented 7.48% of total loans plus other repossessed assets acquired compared with 7.34% at September 30, 2009 and 4.79% at December 31, 2008.  Nonperforming commercial loan inflows were $101.2 million in the fourth quarter of 2009 compared with $94.2 million in the third quarter of 2009 and $155.5 million in the fourth quarter of 2008.  The nonperforming commercial loan inflows for the fourth quarter of 2009 included $25.3 million of loans proactively moved to nonperforming status by the respective relationship officer prior to the loans becoming 90 days past due compared with $46.1 million proactively moved during the third quarter of 2009.  

Nonperforming commercial loan outflows were $150.2 million in the fourth quarter of 2009 compared with $93.0 million in the third quarter of 2009 and $99.2 million in the fourth quarter of 2008.  The fourth quarter 2009 outflows included $10.4 million in loans that returned to accruing status, $35.3 million in loan payoffs and paydowns, $44.1 million in charged-off loans, $55.5 million transferred to loans held for sale, and $4.9 million transferred to other repossessed assets acquired.  

    
    
    ------------------------------------------------------------------------
    Table 4 -- Net Charge-Offs           Three Months Ended
    
                          Dec 31, 2009      Sep 30, 2009      Jun 30, 2009
                        ----------------  ----------------   ---------------
    (dollars in               % of                % of            % of
      millions)          $  Portfolio**    $    Portfolio**  $  Portfolio**
                        ---------------   -----------------  ---------------
    
    Land Hold           $5.6    62.84%     $0.5    4.02%      $0.6    4.37%
    Land Development     9.7    35.46       1.4    4.19        2.4    7.80
    Construction         9.5    21.38       0.9    1.63        5.8   10.07
    Income Producing    13.2     3.47      24.5    6.50       12.6    3.28
    Owner-Occupied       2.5     1.03       4.6    1.85        7.9    3.23
                        ---------------   -----------------  ---------------
      Total Commercial
       Real Estate      40.5     5.73      31.9    4.40       29.3     4.01
    Commercial and
     Industrial         22.5     4.56      20.1    3.84        6.8     1.24
                        ---------------   -----------------  ---------------
      Total Commercial
       Loans            63.0     5.25      52.0    4.16       36.1     2.82
    Residential
     Mortgage            6.0     2.32      10.0    3.67        2.2     0.77
    Direct
     Consumer            6.2     1.97       6.3    1.92        6.5     1.92
    Indirect 
     Consumer            6.3     3.12       3.2    1.56        4.4     2.18
                        ---------------   -----------------  ---------------
      Total Consumer 
       Loans            18.5     2.38      19.5    2.42        13.1    1.59
                        ---------------   -----------------  ---------------
      Total Net
       Charge-offs     $81.5     4.00%    $71.5    3.41%       $49.2    2.30%
                       =====              =====                =====
    
    
    
                               Mar 31, 2009              Dec 31, 2008
                           -------------------        ----------------------
     (dollars in                    % of                          % of
      millions)              $    Portfolio**          $        Portfolio**
                           -------------------        ----------------------  
     Land Hold             $---          --- %        $4.6           40.89 %
     Land Development       6.3        20.79           5.8           17.48
     Construction           2.0         3.10          10.7           16.24
     Income Producing       7.8         2.00          21.7            5.58
     Owner-Occupied         2.4         1.01           3.1            1.28
                           -------------------        ----------------------
       Total Commercial
        Real Estate        18.5         2.51          45.9            6.19
     Commercial and
      Industrial            8.0         1.34          21.9            3.37
                           -------------------        ----------------------
       Total Commercial
        Loans              26.5         1.99          67.8            4.87
    
     Residential
      Mortgage              0.8         0.26           1.6            0.51
     Direct Consumer        4.4         1.25           5.9            1.63
     Indirect Consumer      5.0         2.49           5.7            2.78
                           -------------------        ----------------------
    
       Total Consumer
        Loans              10.2         1.19          13.2            1.49
                           -------------------        ----------------------
       Total Net Charge-
        offs              $36.7         1.67 %       $81.0           3.48 %
                          =====                      =====
    
     **  Represents an annualized rate.
    ------------------------------------------------------------------------

The increase in net charge-offs over the third quarter of 2009 was primarily the result of the aforementioned $20.3 million market-value adjustment related to the transfer of commercial real estate loans to loans held for sale status.  

The allowance for loan losses was $342.4 million or 4.33% of portfolio loans at December 31, 2009, compared with $339.7 million or 4.13% at September 30, 2009 and $255.3 million or 2.80% at December 31, 2008.  The increases were primarily the result of an increase in the loss migration rates and extended duration for commercial real estate, residential mortgage and consumer loans.  The allowance for loan losses at December 31, 2009 represents 143.3% of net loans charged-off during 2009, which was Citizens’ highest year of charge-offs ever recorded.  Based on current conditions and expectations, Citizens believes that the allowance for loan losses is adequate to address the estimated loan losses inherent in the existing loan portfolio at December 31, 2009.

After determining what Citizens believes is an adequate allowance for loan losses based on the risk in the portfolio, the provision for loan losses is calculated as a result of the net effect of the quarterly change in the allowance for loan losses and the quarterly net charge-offs.  The provision for loan losses was $84.2 million in the fourth quarter of 2009, compared with $77.8 million in the third quarter of 2009 and $118.6 million in the fourth quarter of 2008.  The increase over the third quarter of 2009 was primarily due to continued migration of residential mortgage loans to nonperforming loan status and higher net charge-offs.  This migration, and evaluation of the underlying collateral supporting these loans, caused an increase in the allowance for loan losses due to the higher likelihood that portions of these loans may eventually be charged-off.  The decrease from the fourth quarter of 2008 was primarily the result of four large commercial charge-offs during the fourth quarter of 2008.  

Noninterest Income

Noninterest income for the fourth quarter of 2009 was $15.4 million, an increase of $3.5 million or 29.9% over the third quarter of 2009 and a decrease of $0.4 million or 2.4% from the fourth quarter of 2008.  Noninterest income for the year ended December 31, 2009 totaled $67.4 million, a decrease of $34.3 million or 33.7% from 2008.

The increase in noninterest income over the third quarter of 2009 was primarily the result of the net loss on the extinguishment of debt in connection with the exchange offers completed in the third quarter of 2009 ($15.9 million), partially offset by higher losses on loans held for sale ($7.9 million), lower other income ($3.5 million), and lower mortgage and other loan income ($0.7 million). The increase in losses on loans held for sale was primarily the result of additional writedowns to reflect market-value declines for the underlying collateral.  The decrease in other income was primarily the result of receiving the proceeds for an insurance claim on a previous branch office during the third quarter of 2009, exiting the holding company’s 2006 capital investment in a limited partnership during the third quarter of 2009, a decrease in swap income recognition resulting from changes in the related credit spreads, and a decrease in the deferred compensation asset.  The decrease in mortgage and other loan income was primarily the result of lower customer transaction volume.

The decrease in noninterest income from the fourth quarter of 2008 was primarily due to higher losses on loans held for sale ($2.9 million), partially offset by higher other income ($2.1 million).  The increase in losses on loans held for sale was primarily the result of additional writedowns to reflect market-value declines for the underlying collateral.  The increase in other income was primarily due to higher swap income recognition resulting from changes in the related credit spreads and higher revenue on bank owned life insurance policies resulting from lower market interest rates in the fourth quarter of 2008.  

The decrease in noninterest income from the full year of 2008 was primarily due to the net loss on debt extinguishment ($15.9 million) and higher net losses on loans held for sale ($10.7 million) due to the aforementioned factors, as well as lower service charges on deposit accounts ($3.5 million), and lower trust fees ($2.9 million).  The decrease in service charges on deposit accounts was primarily the result of a decline in customer transaction volume.  The decrease in trust fees was primarily the result of negative market conditions.  

Noninterest Expense

Noninterest expense for the fourth quarter of 2009 was $83.2 million, essentially unchanged from the third quarter of 2009 and an increase of $4.6 million or 5.8% over the fourth quarter of 2008.  Noninterest expense for the year ended December 31, 2009 totaled $603.0 million, an increase of $112.3 million or 22.9% over 2008.  

While noninterest expense for the fourth quarter of 2009 was essentially unchanged from the third quarter of 2009, decreases in salaries and employee benefits ($7.6 million) and other loan expenses ($0.9 million) were substantially offset by increases in other expenses ($5.2 million) and other real estate (ORE) expenses ($3.9 million).  The decline in salaries and employee benefits was primarily the result of lower severance expense and benefits related to those agreements as well as lower commission-based compensation and a reduction in annual performance-based incentives due to overall corporate performance for 2009.  The decline in other loan expenses was primarily the result of lower foreclosure expenses associated with repossessing collateral underlying commercial and residential real estate loans.  The increase in other expenses was primarily the result of higher FDIC insurance premiums, an arbitration award payout, and losses related to mortgage indemnification payments.  The increase in ORE expenses was primarily the result of higher carrying costs related to holding the ORE properties and additional market-value declines on ORE assets.          

The increase in noninterest expense over the fourth quarter of 2008 was primarily the result of higher ORE expenses ($8.0 million) and other expense ($4.4 million), partially offset by lower salaries and employee benefits ($6.3 million), as well as a net decline in all other noninterest expense categories.  The increases in ORE expenses and other expense were primarily the result of the aforementioned factors.  The decrease in salaries and employee benefits was primarily due to lower staffing levels and suspending employer contributions to the 401(k) plan in 2009, as well as the aforementioned compensation related factors.  The net decline in all other noninterest expense categories was primarily the result of various expense management initiatives implemented throughout the company.

Salary costs included severance expense of $0.3 million for the fourth quarter of 2009, compared with $1.5 million for the third quarter of 2009, and $1.2 million for the fourth quarter of 2008.  Citizens had 2,125 full-time equivalent employees at December 31, 2009 compared with 2,173 at September 30, 2009 and 2,232 at December 31, 2008.  

The increase in noninterest expense over the full year of 2008 was primarily the result of a higher goodwill impairment charge ($88.4 million), as well as higher other expense ($20.3 million), ORE expense ($16.8 million), and other loan expense ($11.5 million), partially offset by lower salaries and employee benefits ($19.0 million), and a net decline in all other noninterest expense categories due to the aforementioned factors.

Income Tax Benefit

The income tax benefit for the fourth quarter of 2009 was $3.3 million, compared with $11.7 million for the third quarter of 2009 and a tax expense of $99.6 million for the fourth quarter of 2008. For the year ended December 31, 2009, the income tax benefit totaled $30.0 million compared with a tax expense of $71.0 million for 2008. The increase over the third quarter of 2009 was primarily the result of changes in other comprehensive income.  The decreases in the tax expense from the fourth quarter of 2008 and the full-year of 2008 were primarily the result of recording a valuation allowance of $136.6 million against deferred tax assets during the fourth quarter of 2008.  

Pre-Tax Pre-Provision Core Operating Earnings

The following table displays pre-tax pre-provision core operating earnings for each of the last five quarters.

    
    
    -------------------------------------------------------------------------
    Pre-Tax Pre-Provision Core Operating Earnings 
    -------------------------------------------------------------------------
                                        Three Months Ended
                     --------------------------------------------------------
                       Dec 31    Sep 30       Jun 30     Mar 31      Dec 31
    (in thousands)      2009      2009         2009       2009        2008
    -------------------------------------------------------------------------
    Net Loss         $(64,728)  $(56,923)   $(347,413)  $(45,149)   $(195,369)
    Income tax 
     (benefit)
     provision         (3,345)   (11,747)     (11,415)    (3,467)      99,634
    Provision for loan
     losses            84,192     77,783       99,962     64,017      118,565
    Goodwill impairment   ---        ---      266,474        ---          ---
    Net loss on debt
     extinguishment       ---     15,929          ---        ---          ---
    FDIC special
     assessment           ---        ---        5,565        ---          ---
    Fair-value
     writedown on loans
     held for sale      8,724        859        4,350       6,152       5,865
    Fair-value
     writedown on ORE   8,227      3,934        3,306       7,985         602
    Fair-value (write-
     up)/writedown on
     bank owned life
     insurance            (19)      (360)         ---         235       2,896
    Loss on auction rate
     securities
     repurchase           ---        ---          ---         ---       2,406
    Mark-to-market on
     swaps              1,449      1,018          583      (2,444)      2,414
    Captive insurance
     impairment charge    ---        ---          ---         ---       1,053
                    ---------------------------------------------------------
    Pre-Tax Pre-Provision 
     Core Operating 
     Earnings         $34,500    $30,493      $21,412     $27,329     $38,066
                    =========================================================
    
    -------------------------------------------------------------------------

The increase over the third quarter of 2009 was primarily the result of higher net interest income (due to the increase in net interest margin) and lower noninterest expense (primarily due to lower salaries and employee benefits), partially offset by lower noninterest income (due to lower other income).  The decrease from the fourth quarter of 2008 was primarily the result of lower net interest income (due to fewer earning assets) and lower noninterest income (due to a net minor reduction in most categories).  Noninterest expense for the fourth quarter of 2009 was essentially unchanged from the fourth quarter of 2008 due to various expense management initiatives implemented throughout the company.

Analyst Conference Call

Cathleen H. Nash, president and CEO, Charles D. Christy, EVP and CFO, Mark W. Widawski, EVP and chief credit officer, and Brian D. J. Boike, SVP and treasurer, will review the quarter’s results in a conference call for analysts and investors at 10:00 a.m. ET on Friday, January 29, 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 February 5, 2010.  To listen to the replay, please dial (800) 839-3612.

Use of Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this release includes non-GAAP financial measures such as tangible equity to tangible assets ratio, tangible common equity to tangible assets ratio, Tier 1 common equity ratio, pre-tax pre-provision core operating earnings, net interest margin, and the efficiency ratio.  Citizens believes these non-GAAP financial measures provide information useful to investors in understanding the underlying operational performance of the company, its business, and performance trends and facilitates performance comparisons with others in the banking industry.   Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited.  To mitigate these limitations, Citizens has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components and to ensure that the capital performance is properly reflected to facilitate period-to-period comparisons.  Although Citizens believes the above non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for GAAP basis financial measures.  

Tangible Equity, Tangible Common Equity and Tier 1 Common Equity Ratios

Additionally, Citizens believes the exclusion of goodwill and other intangible assets to create “average tangible assets” and “average tangible equity” facilitates the comparison of results for ongoing business operations.  Citizens’ management internally assesses the company’s performance based, in part, on these non-GAAP financial measures.  The tangible common equity ratio and Tier 1 common equity ratio have become a focus of some investors and management believes that these ratios may assist investors in analyzing Citizens’ capital position absent the effects of intangible assets and preferred stock.  Because tangible common equity and Tier 1 common equity are not formally defined by GAAP or codified in the federal banking regulations, these measures are considered to be non-GAAP financial measures.  Because analysts and banking regulators may assess Citizens’ capital adequacy using tangible common equity and Tier 1 common equity, Citizens believes that it is useful to provide investors the ability to assess its capital adequacy on these same bases.  Tier 1 common equity is often expressed as a percentage of net risk-weighted assets.  Under the risk-based capital framework, a bank’s balance sheet assets and credit equivalent amounts of off-balance sheet items are assigned to one of four broad risk categories.  The aggregated dollar amount in each category is then multiplied by the risk weight assigned to that category.  The resulting weighted values from each of the four categories are added together and this sum is the risk-weighted assets total that, as adjusted, comprised the denominator of certain risk-based capital ratios.  Tier 1 capital is then divided by this denominator (net risk-weighted assets) to determine the Tier 1 capital ratio.  Adjustments are made to Tier 1 capital to arrive at Tier 1 common equity.  The amounts disclosed as net risk-weighted assets are calculated consistent with banking regulatory requirements.

Pre-tax Pre-Provision Core Operating Earnings

Pre-tax pre-provision core operating earnings, as defined by management, represents net income (loss) excluding income tax provision (benefit), the provision for loan losses, and any impairment charges or special assessments (including goodwill, credit writedowns, fair-value adjustments, and FDIC special assessments).  Citizens believes presenting pre-tax pre-provision core operating earnings provides investors with the ability to better understand Citizens’ underlying operating trends separate from the direct effects of the impairment charges, net loss on debt extinguishment, credit issues, fair value adjustments, challenges inherent in the real estate downturn and other economic cycle issues and displays a consistent core operating earnings trend before the impact of these challenges.  The ”Credit Quality” section of this earnings release isolates the challenges and issues related to the credit quality of Citizens’ loan portfolio and their impact on Citizens’ earnings as reflected in the provision for loan losses.

Net Interest Margin and Efficiency Ratio

In accordance with industry standards, certain designated net interest income amounts are presented on a taxable equivalent basis, including the calculation of net interest margin and the efficiency ratio.  Citizens believes the presentation of net interest margin on a taxable equivalent basis allows comparability of net interest margin with industry peers by eliminating the effect of the differences in portfolios attributable to the proportion represented by both taxable and tax-exempt investments.  

Corporate Profile

Citizens Republic Bancorp, Inc. is a diversified financial services company providing a wide range of commercial, consumer, mortgage banking, trust and financial planning services to a broad client base.  Citizens serves communities in Michigan, Ohio, Wisconsin, and Indiana as Citizens Bank and in Iowa as F&M Bank, with 229 offices and 267 ATMs.  Citizens Republic Bancorp is the largest bank holding company headquartered in Michigan with roots dating back to 1871 and is the 47th largest bank holding company headquartered in the United States.  More information about Citizens Republic Bancorp is available at www.citizensbanking.com.    

Safe Harbor Statement

Discussions and statements in this release that are not statements of historical fact, including without limitation statements that include terms such as “will,” “may,” “should,” “believe,” “expect,” “anticipate,” “estimate,” “project,” “intend,” and “plan,” and statements regarding Citizens’ future financial and operating results, plans, objectives, expectations and intentions, are forward-looking statements that involve risks and uncertainties, many of which are beyond Citizens’ control or are subject to change.  No forward-looking statement is a guarantee of future performance and actual results could differ materially.  Factors that could cause or contribute to such differences include the risks and uncertainties detailed elsewhere in this release and from time to time in Citizens’ Form 10-K and Form 10-Q filings with the SEC, which are available at the SEC’s web site www.sec.gov. Other factors not currently anticipated may also materially and adversely affect Citizens’ results of operations, cash flows, financial position and prospects.  There can be no assurance that future results will meet expectations.  While Citizens believes that the forward-looking statements in this release are reasonable, you should not place undue reliance on any forward-looking statement.  In addition, these statements speak only as of the date made.  Citizens does not undertake, and expressly disclaims any obligation to update or alter any statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

    
    
    -------------------------------------------------------------------------
    Consolidated Balance Sheets (Unaudited)
    Citizens Republic Bancorp and Subsidiaries
                                        
                                   December 31,  September 30, December 31,
    (in thousands)                    2009          2009          2008
    -------------------------------------------------------------------------
    Assets
      Cash and due from banks        $163,137     $164,537      $171,695
      Money Market Investments        706,163      533,540       214,925
      Investment Securities:
          Securities available
           for sale, at fair
           value                    2,225,065    2,235,323     2,248,772
          Securities held to
           maturity, at amortized 
           cost (fair value of
           $139,665, $144,440
           and $137,846,
           respectively)              137,094      137,087       138,575
                                  -----------  -----------   -----------
            Total investment
             securities             2,362,159    2,372,410     2,387,347
      FHLB and Federal
       Reserve stock                  156,278      156,278       148,764
      Portfolio loans:
          Commercial and
           industrial               1,976,105    2,099,779     2,602,334
          Commercial real estate    2,826,741    2,898,593     2,964,721
                                  -----------  -----------   -----------
                 Total commercial   4,802,846    4,998,372     5,567,055
          Residential mortgage      1,036,443    1,084,872     1,262,841
          Direct consumer           1,261,389    1,308,279     1,452,166
          Indirect consumer           805,181      825,316       820,536
                                  -----------  -----------   -----------    
          Total portfolio loans     7,905,859    8,216,839     9,102,598
          Less: Allowance for
           loan losses               (342,370)    (339,694)     (255,321)
                                  -----------  -----------   -----------
          Net portfolio loans       7,563,489    7,877,145     8,847,277
      Loans held for sale              80,459       61,445        91,362
      Premises and equipment          117,095      120,647       124,217
      Goodwill                        330,744      330,744       597,218
      Other intangible assets          14,377       15,551        21,414
      Bank owned life insurance       220,190      219,802       218,333
      Other assets                    217,540      219,677       263,464
                                  -----------  -----------   -----------
          Total assets            $11,931,631  $12,071,776   $13,086,016
                                  ===========  ===========   ===========
    Liabilities
      Noninterest-bearing
       deposits                    $1,330,707   $1,270,170    $1,143,294
      Interest-bearing
       demand deposits              1,114,863    1,199,559       780,176
      Savings deposits              2,561,819    2,607,838     2,504,320
      Time deposits                 3,901,951    3,714,302     4,624,616
                                  -----------  -----------   -----------
          Total deposits            8,909,340    8,791,869     9,052,406
      Federal funds purchased and
       securities sold under 
       agreements to repurchase        43,780       52,632        64,072
      Other short-term
       borrowings                       7,283        7,307        10,377
      Other liabilities               126,705      145,790       164,274
      Long-term debt                1,513,487    1,670,748     2,193,566
                                  -----------  -----------   -----------
          Total liabilities        10,600,595   10,668,346    11,484,695
    Shareholders' Equity
      Preferred stock -no
       par value                      271,990      270,487       266,088
      Common stock -no par
       value                        1,429,771    1,429,657     1,214,469
      Retained (deficit)
       earnings                      (363,632)    (293,650)      170,358
      Accumulated other
       comprehensive loss              (7,093)      (3,064)      (49,594)
                                  -----------  -----------   ----------- 
          Total shareholders'
           equity                   1,331,036    1,403,430     1,601,321
                                  -----------  -----------   -----------
          Total liabilities and
           shareholders' equity   $11,931,631  $12,071,776   $13,086,016
                                  ===========  ===========   ===========
                                  
    -------------------------------------------------------------------------
    
    
    -------------------------------------------------------------------------
    Consolidated Statements of Operations (Unaudited)
    Citizens Republic Bancorp and Subsidiaries          
    
                             Three Months Ended     Twelve Months Ended 
    (in thousands, except       December 31,          December 31,
     per share amounts)     2009         2008       2009        2008
    -------------------------------------------------------------------------
    Interest Income
      Interest and fees 
       on loans           $109,494     $138,794   $456,347    $586,073
      Interest and
       dividends on
       investment
       securities:
        Taxable             18,964       19,770     80,437      78,089
        Tax-exempt           6,210        7,174     26,340      29,096
      Dividends on FHLB 
       and Federal Reserve 
       stock                   761        1,761      4,255       7,269
      Money market 
       investments             382          178      1,300         384
                         ---------    ---------  ---------   ---------
         Total interest 
          income           135,811      167,677    568,679     700,911
                         ---------    ---------  ---------   ---------
    Interest Expense
    
      Deposits              33,715       53,170    159,798     220,883
      Short-term borrowings     42          190        227       8,191
      Long-term debt        18,119       28,630     91,286     122,905
                         ---------    ---------  ---------   ---------
         Total interest 
          expense           51,876       81,990    251,311     351,979
                         ---------    ---------  ---------   ---------
    Net Interest Income     83,935       85,687    317,368     348,932
    Provision for loan 
     losses                 84,192      118,565    325,955     282,054
                         ---------    ---------  ---------   ---------
         Net interest
          income (loss)
          after provision
          for loan losses     (257)     (32,878)    (8,587)     66,878
                         ---------    ---------  ---------   ---------
    Noninterest Income
      Service charges on 
       deposit accounts     11,299       11,714     43,927      47,470
      Trust fees             4,287        4,062     15,082      17,967
      Mortgage and other 
       loan income           2,571        1,807     12,609      11,443
      Brokerage and 
       investment fees       1,142        1,606      5,445       7,109
      ATM network user fees  1,713        1,514      6,607       6,319
      Bankcard fees          1,946        1,898      7,972       7,440
      Losses on loans held  
       for sale             (8,724)      (5,865)   (20,086)     (9,373)
      Net loss on debt 
       extinguishment            -            -    (15,929)          -
      Other income           1,147         (982)    11,794      13,367
                         ---------    ---------  ---------   ---------
         Total noninterest  
          income            15,381       15,754     67,421     101,742
    Noninterest Expense
    
      Salaries and employee 
       benefits             30,865       37,194    139,193     158,193
      Occupancy              6,424        7,214     27,820      28,592
      Professional 
       services              3,014        3,644     11,996      15,184
      Equipment              3,058        3,156     11,989      12,966
      Data processing 
       services              4,855        3,748     18,017      16,470
      Advertising and 
       public relations      1,563        1,304      7,146       5,897
      Postage and delivery   1,364        1,931      5,844       7,342
      Other loan expenses    5,619        5,367     24,913      13,381
      Other real estate 
       (ORE) expenses        9,507        1,547     27,852      11,008
      Intangible asset 
       amortization          1,173        2,126      7,036       9,132
      Goodwill impairment       --           --    266,474     178,089
      Other expense         15,755       11,380     54,741      34,448
                         ---------    ---------  ---------   ---------
         Total noninterest 
          expense           83,197       78,611    603,021     490,702
                         ---------    ---------  ---------   ---------
    Loss Before Income 
     Taxes                 (68,073)     (95,735)  (544,187)   (322,082)
    Income tax (benefit) 
     provision              (3,345)      99,634    (29,974)     70,970
                         ---------    ---------  ---------   ---------
    Net Loss               (64,728)    (195,369)  (514,213)   (393,052)
    Deemed dividend on 
     convertible preferred 
     stock                     ---          ---        ---     (11,737)
    Dividend on redeemable 
     preferred stock        (5,253)        (227)   (19,777)       (227)
                         ---------    ---------  ---------   ---------
    Net Loss Attributable 
     to Common 
     Shareholders         $(69,981)   $(195,596) $(533,990)  $(405,016)
                          ========    =========  =========   =========
    Net Loss Per Common
     Share:
      Basic                 $(0.18)      $(1.55)    $(2.74)     $(4.28)
      Diluted                (0.18)       (1.56)     (2.75)      (4.30)
    Cash Dividends Declared 
     Per Common Share          ---          ---        ---        0.29
    Average Common Shares
     Outstanding:
      Basic                393,774      125,385    193,833      94,156
      Diluted              393,785      125,403    193,853      94,170
    
    -------------------------------------------------------------------------
    
    
    -------------------------------------------------------------------------
    Selected Quarterly Information
    Citizens Republic Bancorp and Subsidiaries
                                                    
                              4th Qtr 2009    3rd Qtr 2009      2nd Qtr 2009  
    -------------------------------------------------------------------------
    Summary of Operations
     (thousands)
    Net interest income        $83,935           $80,885            $75,601
    Provision for loan losses   84,192            77,783             99,962
    Noninterest income (1)      15,381            11,842             20,966
    Noninterest expense (2)     83,197            83,614            355,433
    Income tax (benefit)
     provision (3)              (3,345)          (11,747)           (11,415)
    Net loss                   (64,728)          (56,923)          (347,413)
    Net loss attributable to
     common shareholders (4)   (69,981)          (62,147)          (352,609)
    Taxable equivalent
     adjustment                  3,932             3,961              4,220
    -------------------------------------------------------------------------
    Per Common Share Data
    
    Net Loss:
          Basic                 $(0.18)           $(0.48)            $(2.79)
          Diluted                (0.18)            (0.48)             (2.81)
    Market value                  0.69              0.76               0.71
    Common book value             2.69              2.87               7.57
    Tangible book value           2.50              2.68               6.95
    Shares outstanding, end
     of period (000)           394,397           394,470            126,258
    -------------------------------------------------------------------------
    At Period End, (millions)
    
    Assets                     $11,932           $12,072            $12,288
    Earning assets              11,169            11,284             11,534
    Portfolio loans              7,906             8,217              8,426
    Allowance for loan losses      342               340                333
    Deposits                     8,909             8,792              8,913
    Shareholders' equity         1,331             1,403              1,225
    -------------------------------------------------------------------------
    Average Balances, (millions)
    
    Assets                     $11,966           $12,129            $12,774
    Earning assets              11,190            11,365             11,711
    Portfolio loans              8,084             8,311              8,604
    Allowance for loan losses      340               334                292
    Deposits                     8,762             8,786              8,995
    Shareholders' equity         1,392             1,228              1,557
    -------------------------------------------------------------------------
    Financial Ratios (annualized)
    
    Return on average assets     (2.15)%           (1.86)%           (10.91)%
    Return on average
     shareholders' equity       (18.44)           (18.40)            (89.50)
    Average shareholders'
     equity /average assets      11.64             10.12              12.19
    Net interest margin 
     (FTE) (5)                    3.13              2.97               2.73
    Efficiency ratio (6)         80.58             86.48              88.26
    Allowance for loan
     losses as a percent of
     portfolio loans              4.33              4.13               3.96
    Allowance for loan
     losses as a percent of
     nonperforming loans         72.01             67.74              67.25
    Nonperforming loans as a
     percent of portfolio loans   6.01              6.10               5.88
    Nonperforming assets as a
     percent of portfolio loans
     plus ORAA                    7.48              7.34               7.13
    Nonperforming assets as a
     percent of total assets      4.99              5.04               4.92
    Net loans charged off as a 
     percent of average portfolio 
     loans                        4.00              3.41               2.30
    
    
                                          1st Qtr 2009   4th Qtr 2008
    -------------------------------------------------------------------------
    Summary of Operations (thousands)
    Net interest income                      $76,946        $85,687
    Provision for loan losses                 64,017        118,565
    Noninterest income (1)                    19,233         15,754
    Noninterest expense (2)                   80,778         78,611
    Income tax (benefit) provision (3)        (3,467)        99,634
    Net loss                                 (45,149)      (195,369)
    Net loss attributable to common
     shareholders (4)                        (49,252)      (195,596)
    Taxable equivalent adjustment              4,337          4,519
    -------------------------------------------------------------------------
    Per Common Share Data
    
    Net Loss:
          Basic                               $(0.39)        $(1.55)
          Diluted                              (0.39)         (1.56)
    Market value                                1.55           2.98
    Common book value                          10.29          10.60
    Tangible book value                         7.53           7.80
    Shares outstanding, end of period (000)  126,299        125,997
    -------------------------------------------------------------------------
    At Period End, (millions)
    
    Assets                                   $12,982        $13,086
    Earning assets                            11,885         11,974
    Portfolio loans                            8,754          9,103
    Allowance for loan losses                    283            255
    Deposits                                   9,120          9,052
    Shareholders' equity                       1,567          1,601
    -------------------------------------------------------------------------
    Average Balances, (millions)
    
    Assets                                   $13,080        $13,074
    Earning assets                            11,967         11,877
    Portfolio loans                            8,908          9,267
    Allowance for loan losses                    260            225
    Deposits                                   9,117          8,998
    Shareholders' equity                       1,607          1,559
    -------------------------------------------------------------------------
    Financial Ratios (annualized)
    
    Return on average assets                  (1.40)%       (5.94)%
    Return on average shareholders' equity    (11.40)        (49.86)
    Average shareholders' equity /average
     assets                                    12.28          11.92
    Net interest margin (FTE) (5)               2.73           3.03
    Efficiency ratio (6)                       80.36          74.19
    Allowance for loan losses as a percent
     of portfolio loans                         3.23           2.80
    Allowance for loan losses as a percent
     of nonperforming loans                    65.94          83.43
    Nonperforming loans as a percent of
     portfolio loans                            4.90           3.36
    Nonperforming assets as a percent of
     portfolio loans plus ORAA                  6.25           4.79
    Nonperforming assets as a percent of
     total assets                               4.24           3.36
    Net loans charged off as a percent of
     average portfolio loans                    1.67           3.48
    
    -------------------------------------------------------------------------
    (1) Noninterest income includes a net loss on debt extinguishment of $15.9
    million in the third quarter of 2009.
    (2) Noninterest expense includes a goodwill impairment charge of $266.5
    million in the second quarter of 2009.
    (3) Income tax (benefit) provision includes a deferred tax valuation
    allowance of $136.6 million in the fourth quarter of 2008.
    (4) Net loss attributable to common shareholders includes the following
    non-cash items: $5.2 million dividend to preferred shareholders in fourth,
    third and second quarter of 2009, $4.1 million dividend to preferred
    shareholders in first quarter 2009 and $0.2 million accretion of
    redeemable preferred stock in the fourth quarter of 2008.
    (5) Net interest margin is presented on an annual basis, includes taxable
    equivalent adjustments to interest income and is based on a tax rate of
    35%.
    (6) The Efficiency Ratio measures how efficiently a bank spends its
    revenues.  The formula is: (Noninterest expense- Goodwill Impairment)/(Net
    interest income + Taxable equivalent adjustment + Total fees and other
    income).
    
    
    -------------------------------------------------------------------------
    Financial Summary and Comparison                  
    Citizens Republic Bancorp and Subsidiaries
                                        Twelve months ended
                                            December 31,
                                         2009        2008        % Change
    -------------------------------------------------------------------------
    Summary of Operations (thousands)
    Net interest income                $317,368    $348,932        (9.0)%
    Provision for loan losses           325,955     282,054        15.6
    Noninterest income (1)               67,421     101,742       (33.7)
    Noninterest expense (2)             603,021     490,702        22.9
    Income tax (benefit) provision (3)  (29,974)     70,970      (142.2)
    Net loss                           (514,213)   (393,052)       30.8
    Net loss attributable to common 
     shareholders (4)                  (533,990)   (405,016)       31.8
    Taxable equivalent adjustment        16,450      18,402       (10.6)
    -------------------------------------------------------------------------
    Per Common Share Data
    
    Net Loss:
          Basic                          $(2.74)     $(4.28)      (36.0)%
          Diluted                         (2.75)      (4.30)      (36.0)
    Cash dividends                            -        0.29      (100.0)
    Market Value                           0.69        2.98       (76.8)
    Common book value                      2.69       10.60       (74.6)
    Tangible book value                    2.50        7.80       (67.9)
    Shares outstanding,
     end of period (000)                394,397     125,997       313.0
    -------------------------------------------------------------------------
    At Period End (millions)
    
    Assets                              $11,932     $13,086        (8.8)%
    Earning assets                       11,169      11,974        (6.7)
    Portfolio loans                       7,906       9,103       (13.1)
    Allowance for loan
     losses                                 342         255        34.1
    Deposits                              8,909       9,052        (1.6)
    Shareholders' equity                  1,331       1,601       (16.9)
    -------------------------------------------------------------------------
    Average For The Year (millions)
    
    Assets                              $12,483     $13,242        (5.7)%
    Earning assets                       11,556      11,888        (2.8)
    Portfolio loans                       8,474       9,434       (10.2)
    Allowance for loan
     losses                                 307         189        62.4
    Deposits                              8,914       8,715         2.3
    Shareholders' equity                  1,445       1,558        (7.3)
    -------------------------------------------------------------------------
    Financial Ratios (annualized)
    
    Return on average assets              (4.12)%     (2.97)%      38.7 %
    Return on average shareholders' 
     equity                              (35.59)     (25.22)       41.1
    Average shareholders' equity / 
     average assets                       11.57       11.77        (1.7)
    Net interest margin (FTE) (5)          2.89        3.09        (6.5)
    Efficiency ratio (6)                  83.88       66.64        25.9
    Allowance for loan losses 
     as a percent of portfolio loans       4.33        2.80        54.6
    Allowance for loan losses as a 
     Percent of nonperforming loans       72.01       83.43       (13.7)
    Nonperforming loans as a percent 
     of portfolio loans                    6.01        3.36        79.1
    Nonperforming assets as a percent of
     portfolio loans plus ORAA             7.48        4.79        56.1
    Nonperforming assets
     as a percent of total assets          4.99        3.36        48.8
    Net loans charged off as a percent of
     average portfolio loans               2.82        2.01        40.3
    
    -------------------------------------------------------------------------
    (1) Noninterest income includes a net loss on debt extinguishment of $15.9
    million in the third quarter of 2009.
    (2) Net income (loss) attributable to common shareholders includes the
    following non-cash items: $0.2 million accretion of redeemable preferred
    stock in the  Noninterest expense includes a goodwill impairment charge of
    $266.5 million and $178.1 million in the second quarter of 2009 and
    2008, respectively.
    (3) Income tax (benefit) provision includes a deferred tax valuation
    allowance of $136.6 million in the fourth quarter of 2008.
    (4) Net loss attributable to common shareholders includes dividends on
    redeemable preferred stock in the amount of $19.8 million in 2009 and
    $0.2 million dividend on redeemable preferred stock and $11.7 million
    deemed dividend on convertible preferred stock in 2008.
    (5) Net interest margin is presented on an annual basis, includes taxable
    equivalent adjustments to interest income and is based on a tax rate of
    35%.
    (6) The Efficiency Ratio measures how efficiently a bank spends its
    revenues.  The formula is: (Noninterest expense-Goodwill Impairment)/(Net
    interest income + Taxable equivalent adjustment + Noninterest income).
    
    
    -------------------------------------------------------------------------
    Non-GAAP Reconciliation
    Citizens Republic Bancorp and Subsidiaries
    
    (dollars in                Dec 31,   Sep 30,  Jun 30,  Mar 31,    Dec 31,
     thousands)                 2009      2009     2009     2009       2008
    -------------------------------------------------------------------------
    Net Interest Income (A)   $83,935    $80,885  $75,601   $76,946   $85,687
    Taxable Equivalent
     Adjustment (B)             3,932      3,961    4,220     4,337     4,519
    Noninterest Income (C)     15,381     11,842   20,966    19,233    15,754
    Noninterest Expense (D)    83,197     83,614  355,433    80,778    78,611
    Goodwill Impairment (E)       ---        ---  266,474       ---       ---
    Efficiency Ratio:
      (D-E)/(A+B+C)             80.58%     86.48%   88.26%    80.36%    74.19%
    Ending Balances (millions)
    Tangible Common Equity to
     Tangible Assets
    Total assets              $11,932    $12,072  $12,288   $12,982   $13,086
    Goodwill                     (331)      (331)    (331)     (597)     (597)
    Other intangible assets       (14)       (16)     (17)      (19)      (21)
                              -------    -------  -------   -------   -------
      Tangible assets         $11,587    $11,725  $11,940   $12,366   $12,468
                              =======    =======  =======   =======   =======
                              
    Total shareholders'
     equity                    $1,331     $1,403   $1,225    $1,567    $1,601
    Goodwill                     (331)      (331)    (331)     (597)     (597)
    Other intangible assets       (14)       (16)     (17)      (19)      (21)
                              -------    -------  -------   -------   -------
      Tangible equity            $986     $1,056     $877      $951      $983
                              =======    =======  =======   =======   =======
    
    Tangible equity              $986     $1,056     $877      $951      $983
    Preferred Stock              (272)      (270)    (269)     (268)     (266)
                              -------    -------  -------   -------   -------
      Tangible common
       equity                    $714       $787     $608      $683      $717
                              =======    =======  =======   =======   =======
    Tier 1 Common Equity
    Total shareholders'
     equity                    $1,331     $1,403   $1,225    $1,567    $1,601
    Qualifying capital
     securities                    74         74      175       175       175
    Goodwill                     (331)      (331)    (331)     (597)     (597)
    Accumulated other
     comprehensive loss             7          3       27        35        50
    Other assets (1)              (14)       (16)     (17)      (19)      (21)
                                  ---        ---      ---       ---       ---
      Tier 1 capital
       (regulatory)            $1,067     $1,133   $1,079    $1,161    $1,208
                              =======    =======  =======   =======   =======
    Tier 1 capital
     (regulatory)              $1,067     $1,133   $1,079    $1,161    $1,208
    Qualifying
     capital
     securities                   (74)       (74)    (175)     (175)     (175)
    Preferred Stock              (272)      (270)    (269)     (268)     (266)
                              -------    -------  -------   -------   -------
      Total Tier 1
       common equity
       (non-GAAP)                $721       $789     $635      $718      $767
                              =======    =======  =======   =======   =======
      Net risk-weighted assets
       (regulatory) (1) *      $8,541     $8,835   $9,138    $9,550    $9,883
    
    Equity to Assets            11.16%     11.63%    9.97%    12.07%    12.24%
    Tangible Equity
     to Tangible Assets          8.51       9.01     7.34      7.69      7.88
    Tangible Common Equity to
     Tangible Assets             6.16       6.71     5.09      5.53      5.75
    Tier 1 Common Equity *       8.44       8.94     6.95      7.52      7.76
    
    
    -------------------------------------------------------------------------
    (1) Other assets deducted from Tier 1 capital and risk-weighted assets
    consist of intangible assets (excluding goodwill)
    
    * December 31, 2009 is an estimate
    -------------------------------------------------------------------------
    
    
    -------------------------------------------------------------------------
    Noninterest Income and Noninterest Expense (Unaudited)
    Citizens Republic Bancorp and Subsidiaries
    
                                       Three Months Ended
                        -----------------------------------------------------
                          Dec 31    Sep 30   Jun 30    Mar 31   Dec 31
    (in thousands)         2009      2009     2009      2009     2008
    -------------------------------------------------------------------------
    NONINTEREST INCOME:
    Service charges on
     deposit accounts   $11,299   $11,524    $10,836  $10,268 $11,714
    Trust fees            4,287     3,911      3,464    3,419   4,062
    Mortgage and other
     loan income          2,571     3,244      3,715    3,079   1,807
    Brokerage and
     investment fees      1,142     1,527      1,450    1,327   1,606
    ATM network user
     fees                 1,713     1,775      1,665    1,454   1,514
    Bankcard fees         1,946     2,039      2,093    1,894   1,898
    Losses on loans
     held for sale       (8,724)     (859)    (4,350)  (6,152) (5,865)
    Net loss on debt
     extinguishment         ---   (15,929)       ---      ---     ---  
    Other income          1,147     4,610      2,093    3,944    (982)
                        -------   -------    -------  ------- -------
    TOTAL NONINTEREST
     INCOME             $15,381   $11,842    $20,966  $19,233 $15,754
                        =======   =======    =======  ======= =======
    NONINTEREST EXPENSE:
    Salaries and
     employee benefits  $30,865   $38,461    $35,950  $33,917 $37,194
    Occupancy             6,424     6,711      6,762    7,923   7,214
    Professional
     services             3,014     3,063      2,783    3,136   3,644
    Equipment             3,058     3,032      3,049    2,850   3,156
    Data processing
     services             4,855     4,542      4,346    4,274   3,748
    Advertising and
     public relations     1,563     1,885      2,274    1,425   1,304
    Postage and
     delivery             1,364     1,379      1,526    1,575   1,931
    Other loan expenses   5,619     6,496      6,861    5,937   5,367
    Other real estate
     (ORE) expenses       9,507     5,568      4,417    8,360   1,547
    Intangible asset
     amortization         1,173     1,874      1,952    2,037   2,126
    Goodwill impairment     ---       ---    266,474      ---     ---
    Other expense        15,755    10,603     19,039    9,344  11,380
                         -------   -------    -------  ------- -------
    TOTAL NONINTEREST
     EXPENSE            $83,197   $83,614   $355,433  $80,778 $78,611
                        =======   =======    =======  ======= =======
    
    -------------------------------------------------------------------------
    
    
    ------------------------------------------------------------------------
    Average Balances, Yields and Rates
                                         Three Months Ended
                       -----------------------------------------------------
                         December 31,    September 30,        December 31, 
                            2009             2009                 2008
                      ------------------------------------------------------
                      Average  Average  Average  Average  Average  Average
                      Balance   Rate    Balance   Rate     Balance   Rate
    (dollars in thousands)                                                   
    ------------------------------------------------------------------------
    Earning Assets
      Money market
       investments       $606,423  0.25%   $520,021  0.25%   $122,574   0.58%
     Investment 
      securities:
        Taxable         1,703,092  4.45   1,705,017  4.57   1,567,930   5.04
        Tax-exempt        582,253  6.56     605,709  6.55     670,015   6.59
      FHLB and Federal
       Reserve stock      156,277  1.94     156,278  4.07     148,765   4.71
     Portfolio loans
        Commercial and
         industrial     2,027,163  4.91   2,142,996  4.82   2,665,081   5.21
        Commercial 
         real
         estate         2,899,293  5.25   2,899,786  5.28   3,031,173   6.26
        Residential
         mortgage       1,057,279  4.73   1,121,185  4.91   1,271,909   5.89
        Direct 
         consumer       1,284,574  6.05   1,327,455  6.05   1,466,810   6.38
        Indirect 
         consumer         815,261  6.81     819,409  6.83     832,379   6.81
                      -----------       -----------       -----------
     
         Total portfolio
          loans         8,083,570  5.38   8,310,831  5.39   9,267,352   5.98
      Loans held for
       sale                58,802  3.78      67,342  5.44     100,011   1.37
                      -----------       -----------       -----------
           Total 
            earning
            assets     11,190,417  4.97  11,365,198  5.07  11,876,647   5.78
    Nonearning Assets
      Cash and due 
       From banks         159,313           169,806           193,667
      Bank premises and
       equipment          118,395           121,255           124,195
      Investment
       security fair
       value adjustment    53,996            34,395           (25,650)
      Other nonearning
       assets             783,933           772,327         1,129,453
      Allowance for
       loan losses       (340,189)         (334,469)         (224,674)
                      -----------       -----------       -----------
         Total 
          assets      $11,965,865       $12,128,512       $13,073,638
                      ===========       ===========       ===========
    Interest-Bearing 
     Liabilities
      Deposits:
        Interest-
         bearing
         demand        $1,077,678  0.39%  $1,085,860   0.43%  $752,477   0.64%
        Savings 
         deposits       2,571,267  0.70    2,601,632   0.69  2,545,445   1.35
        Time 
         deposits       3,815,260  2.93    3,850,019   3.19  4,559,987   3.78
      Short-term
       borrowings          57,765  0.29       59,420   0.25     79,359   0.95
      Long-term debt    1,608,066  4.47    1,900,492   4.91  2,325,208   4.90
                      -----------        -----------       -----------
    
       Total interest-
        bearing
        liabilities     9,130,036  2.25    9,497,423   2.51  10,262,476  3.18
    Noninterest-
     Bearing
     Liabilities and
     Shareholders' 
     Equity
      Noninterest-
       bearing demand   1,297,934          1,248,434          1,140,337
      Other liabilities   145,410            154,973            111,863
      Shareholders'
       equity           1,392,485          1,227,682          1,558,962
                      -----------        -----------        -----------
        Total 
         liabilities
         and
         shareholders'
         equity       $11,965,865        $12,128,512        $13,073,638
                      ===========        ===========        ===========
    
    Interest Spread                2.72%               2.56%             2.60%
    Contribution of 
     noninterest
     bearing sources 
     of funds                      0.41                0.41              0.43
                                   ----                ----              ----
    Net Interest Margin            3.13%               2.97%             3.03%
    -------------------------------------------------------------------------
    
    
    
    ------------------------------------------------------------------------
    Average Balances, Yields and Rates
                                 Twelve Months Ended December 31,
                            ----------------------------------------------- 
                                     2009                     2008
                            -----------------------------------------------
                               Average    Average       Average      Average
    (dollars in thousands)     Balance      Rate        Balance       Rate
    ------------------------------------------------------------------------
    Earning Assets
     Money market 
      investments               $519,224     0.25%       $40,551       0.95%
     Investment securities:
       Taxable                 1,715,605     4.69      1,503,983       5.19
       Tax-exempt                617,070     6.57        673,395       6.65
     FHLB and Federal Reserve
      stock                      153,951     2.76        148,806       4.89
     Portfolio loans
       Commercial and 
        industrial             2,237,534     4.72      2,656,982       5.52
       Commercial real 
        estate                 2,921,569     5.31      3,104,815       6.45
       Residential mortgage    1,147,921     5.04      1,334,706       6.11
       Direct consumer         1,355,078     6.07      1,507,073       6.74
    
       Indirect consumer         811,844     6.79        830,376       6.75
                             -----------             -----------
    
         Total portfolio 
          loans                8,473,946     5.38      9,433,952       6.21
     Loans held for sale          75,925     3.61         87,565       3.19
                             -----------             -----------
           Total earning 
            assets            11,555,721     5.06     11,888,252       6.05
    Nonearning Assets
     Cash and due from banks     165,294                 203,431
     Bank premises and 
      equipment                  121,392                 126,255
     Investment security fair
      value adjustment            24,524                   6,544
     Other nonearning assets     923,149               1,206,143
     Allowance for loan losses  (306,971)               (189,072)
                             -----------             -----------
       Total assets          $12,483,109             $13,241,553
                             ===========             ===========
    Interest-Bearing 
     Liabilities
      Deposits:
       Interest-bearing 
        demand                  $979,590     0.43%      $771,735       0.66%
       Savings deposits        2,610,246     0.78      2,551,570       1.73
       Time deposits           4,097,896     3.30      4,268,931       4.02
       Short-term borrowings      61,638     0.37        317,404       2.58
       Long-term debt          1,904,955     4.79      2,521,181       4.87
                             -----------             -----------
         Total interest-
          bearing
          liabilities          9,654,325     2.60     10,430,821       3.37
    Noninterest-Bearing
     Liabilities and
     Shareholders' Equity
       Noninterest-bearing 
        demand                 1,226,079               1,122,974
       Other liabilities         157,972                 129,344
       Shareholders' equity    1,444,733               1,558,414
                             -----------             -----------
    
         Total liabilities 
          and shareholders' 
          equity             $12,483,109             $13,241,553
                             ===========             ===========
    Interest Spread                          2.46%                     2.68%
    Contribution of 
     noninterest
     bearing sources 
     of funds                                0.43                      0.41
                                             ----                      ----
    Net Interest Margin                      2.89%                     3.09%
    ------------------------------------------------------------------------
    
    
    ------------------------------------------------------------------------
    Nonperforming Assets
    Citizens Republic Bancorp and Subsidiaries
                                     Three Months Ended
                      ------------------------------------------------------
                      Dec 31    Sep 30    Jun 30     Mar 31      Dec 31
    (in thousands)     2009      2009      2009       2009        2008
    ------------------------------------------------------------------------
    Commercial and
     industrial      $84,014   $111,500   $91,825    $83,716      $64,573
    Commercial real
     estate          236,103    257,574   275,607    235,921      162,544
                     -------    -------   -------    -------      -------
      Total 
       commercial(1) 320,117    369,074   367,432   319,637       227,117
    Residential
     mortgage        125,672    106,557   103,263    84,596        59,515
    Direct consumer   21,343     21,588    20,277    20,993        15,049
    Indirect consumer  2,621      2,559     1,370     2,012         2,612
    Loans 90 days or
     more past due and
     still accruing    3,039        570       805     1,015         1,486
    Restructured loans
     and still
     accruing          2,629      1,141     2,556       360           256
                     -------    -------   -------    -------      -------
      Total
       nonperforming
       portfolio 
       loans         475,421    501,489   495,703   428,613       306,035
      Nonperforming 
       Held for sale  65,247     44,480    54,273    64,604        75,142
    Other Repossessed
     Assets Acquired  54,394     61,993    54,728    57,411        58,037
                     -------    -------   -------    -------      -------
      Total
       nonperforming
       assets       $595,062   $607,962  $604,704  $550,628      $439,214
                    ========   ========  ========  ========      ========
    
    ------------------------------------------------------------------------
    (1)  Changes in commercial nonperforming loans (including restructured 
    loans) for the quarter (in millions):
    
      Inflows         $101.2      $94.2     $133.7   $173.0        $155.5
      Outflows        (150.2)     (93.0)     (85.9)   (80.4)        (99.2)
                      ------      -----      -----    -----         -----
      Net change      $(49.0)      $1.2      $47.8    $92.6         $56.3
                      ======       ====      =====    =====         =====
    -----------------------------------------------------------------------
    
    
    -----------------------------------------------------------------------
    Summary of Loan Loss Experience
    Citizens Republic Bancorp and Subsidiaries
    
                                           Three Months Ended
                             ----------------------------------------------
                             Dec 31   Sep 30    Jun 30    Mar 31    Dec 31
    (in thousands)            2009     2009      2009      2009      2008
    -----------------------------------------------------------------------
    Allowance for loan losses -
     beginning of
     period                 $339,694  $333,369  $282,647  $255,321 $217,727
    Provision for loan
      losses                  84,192    77,783    99,962    64,017  118,565
    Charge-offs:
       Commercial
        and industrial        24,755    21,141     9,845     8,108   22,813
       Commercial real
        estate                41,160    32,076    31,645    18,977   46,058
                              ------    ------    ------    ------   ------
        Total commercial      65,915    53,217    41,490    27,085   68,871
       Residential mortgage    6,031     9,968     2,161       804    1,565
      Direct consumer          6,613     6,756     6,826     4,707    6,239
      Indirect consumer        6,873     3,812     5,041     5,507    6,299
                              ------    ------    ------    ------   ------
          Total charge-
           offs               85,432    73,753    55,518    38,103   82,974
                              ------    ------    ------    ------   ------
    Recoveries:
       Commercial and
        industrial             2,236     1,000     3,028       128      904
       Commercial real estate    656       214     2,316       404      151
                              ------    ------    ------    ------   ------ 
    Total commercial           2,892     1,214     5,344       532    1,055
      Residential mortgage        21         6         4         3        2
      Direct consumer            413       485       325       334      385
      Indirect consumer          590       590       605       543      561
                              ------    ------    ------    ------   ------
          Total recoveries     3,916     2,295     6,278     1,412    2,003
                              ------    ------    ------    ------   ------
    Net charge- offs          81,516    71,458    49,240    36,691   80,971
                              ------    ------    ------    ------   ------
    Allowance for loan 
     losses - end 
     of period              $342,370  $339,694  $333,369  $282,647 $255,321
                            ========  ========  ========  ======== ========
    Reserve for loan
     commitments -
     end of period            $3,166    $3,571    $4,001    $4,158   $3,941
                            ========  ========  ========  ======== ========

SOURCE Citizens Republic Bancorp, Inc.



RELATED LINKS

http://www.citizensbanking.com