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Press release from PR Newswire

Citizens Republic Bancorp Reports Fourth Quarter Earnings

Tuesday, January 22, 2013

Citizens Republic Bancorp Reports Fourth Quarter Earnings07:30 EST Tuesday, January 22, 2013FLINT, Mich., Jan. 22, 2013 /PRNewswire/ --Net income attributable to common shareholders for the quarter increased 15% compared to last quarter and 38% compared to the fourth quarter of 2011 For the full year, net income attributable to common shareholders was $348 million or $8.61 per share Continued strong credit metrics and a solid core deposit funding base have created a lower risk profile balance sheet Pre-tax, pre-provision profit remained strong at $32 million Citizens Republic Bancorp, Inc. (Nasdaq: CRBC) announced net income attributable to common shareholders of $17.0 million or $0.42 per diluted share for the three months ended December 31, 2012, compared to $14.9 million or $0.37 per diluted share for last quarter, and $12.3 million or $0.31 per diluted share for the fourth quarter of last year.  For the year ended December 31, 2012, Citizens recorded net income attributable to common shareholders of $347.9 million or $8.61 per share compared to a net loss of $16.3 million or $0.41 per share for the prior year.  Year to date 2012 results include a $275.5 million or $6.82 per share tax benefit related to the elimination of the valuation allowance against the deferred tax asset in the second quarter. "We are pleased with our 2012 earnings results, which reflect our bankers' persistent execution of our strategic initiatives. Our success during 2012 allowed us to complete our key priorities including terminating our written regulatory agreement and restoring our deferred tax asset. In addition, we are in the midst of paying our accrued trust preferred dividends and our TARP obligation will be repaid through our pending merger with FirstMerit. We are proud of the hard work and dedication of everyone at Citizens as together we have addressed the many challenges from the last several years, and have emerged as a stronger banking franchise," commented Cathleen Nash, president and chief executive officer."While we continue to execute on our priorities, we are also looking ahead to our combination with FirstMerit as we create a premier Midwest banking franchise providing enhanced products and services to our clients and significant long-term value to our shareholders," added Nash.Balance SheetCitizens continues to enjoy a strong core deposit funding base. Core deposits of $5.4 billion at December 31, 2012 decreased slightly from the third quarter as a result of an expected seasonal reduction in public funds balances, but increased $255.8 million, or 4.9% from December 31, 2011. Time deposits decreased $69.5 million, or 3.9%, from the third quarter and $490.0 million, or 22.3%, from the fourth quarter of 2011 due to the intentional non-renewal of high cost rate sensitive retail and brokered balances.Total assets decreased $138.1 million from the third quarter as a reduction in loan portfolio balances was partially offset by an increase in investment securities balances. Over the past year, growth within the C&I and indirect consumer portfolios helped to partially mitigate balance reductions in the commercial real estate, residential mortgage, and direct consumer portfolios.  Citizens continues to emphasize C&I and consumer lending as key components of its strategic plan.CapitalCitizens continues to grow capital organically through earnings and maintains a strong capital position.Capital RatiosDecember 31,September 30,December 31,2012*20122011Leverage ratio9.95%9.66%8.45%Tier 1 capital ratio15.6715.0913.51Total capital ratio16.9316.3514.84Tier 1 common equity (non-GAAP)9.248.837.24Tangible equity to tangible assets (non-GAAP)11.3011.007.59Tangible common equity to tangible assets (non-GAAP)8.157.914.47* EstimateNet Interest Income and Margin Net interest margin was 3.50% in the fourth quarter, a seven basis point decrease from last quarter and a twelve basis point decrease from the fourth quarter of last year.  The decreases were driven by the continued low interest rate environment, which has resulted in reduced yields on our earning assets. The negative effects on asset yields were partially offset by a more advantageous funding mix and reduced funding costs. In the fourth quarter the negative pressures were also somewhat offset by an increase in commercial loan fees collected with the restructuring of several larger client relationships.  For the year ended December 31, 2012, net interest margin decreased two basis points over the prior year to 3.56%. Net interest income for the fourth quarter was $73.2 million, a reduction of $2.6 million from last quarter and a decrease of $4.9 million from the fourth quarter of last year.  The decreases from both periods are result of both lower average earning assets and margin compression.  For the year ended December 31, 2012, net interest income decreased $12.3 million compared to 2011 primarily due to a reduction in average earning assets. Credit QualityCredit quality continued its strong performance.  Total delinquencies remained stable at 0.6% of portfolio loans.   Nonperforming assets were $68.0 million, a 21% decrease from the end of September and a 33% decrease from December of last year due to proactively managing and resolving delinquent commercial and consumer loans and improving the risk profile of the loan portfolio. Net charge-offs for the fourth quarter decreased to $16.0 million, compared to $19.2 million last quarter and $32.6 million in the fourth quarter of last year.  The provision for loan losses was $4.3 million in the fourth quarter, a decrease from $5.2 million in the third quarter and $15.0 million in the fourth quarter of the prior year.  The allowance for loan losses was $110.4 million or 2.10% of portfolio loans at December 31, 2012, compared to $122.1 million or 2.25% at the end of the prior quarter, and $172.7 million or 3.12% at the end of the prior year. Noninterest Income and ExpenseTotal noninterest income was $22.0 million, a reduction of $1.7 million from the third quarter and a reduction of $2.3 million from the fourth quarter of last year. For the full year, noninterest income was $92.3 million; a decrease of $2.9 million compared to 2011.Service charges decreased slightly from both the third quarter of 2012 and fourth quarter of last year.  For the full year, service charges on deposit accounts decreased 5% compared last year as clients changed behavior relative to penalty fees and product choices. Brokerage and investment fees decreased $0.3 million compared to the prior quarter, however due to focused efforts to increase performance; fees increased 26% over the fourth quarter of last year, and improved 19% for the full year. Other income decreased compared to last quarter primarily due to lower gains on deferred compensation. The fourth quarter includes a $2.7 million charge related to one commercial loan relationship in the held for sale portfolio, that was partially offset by gains. Noninterest expense was $6.9 million less than last quarter and $1.5 million lower than the fourth quarter of last year.Professional services were $4.3 million lower than last quarter due to a reduction in merger related expenses. Citizens experienced an overall recovery in ORE during the quarter compared to losses in both the third quarter of this year and the fourth quarter of 2011. For the year ended December 31, 2012, noninterest expense decreased $12.5 million or 4% from 2011 as lower credit related expenses were partially offset by higher salaries and employee benefits and merger-related expenses.Income Taxes and Deferred Tax AssetThe income tax benefit for 2012 totaled $273.0 million, compared with a benefit of $20.3 million for 2011.  The majority of the tax benefit in 2012 was recorded in the second quarter as the result of eliminating the valuation allowance against our deferred tax asset.   Conference CallCitizens' senior management will review the quarter's results in a conference call at 12:00 p.m. Eastern Time on Tuesday, January 22, 2013.  A live audio webcast is available on Citizens' investor relations page at or by calling (866) 952-1906 (conference ID: Citizens Republic).  To listen to the conference call, please connect approximately 10 minutes prior to the scheduled conference time.  A recording will be available approximately two hours after the completion of the conference call at, where it will be archived for 90 days.Use of Non-GAAP Financial Measures In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this release includes non-GAAP financial measures such as tangible equity to tangible assets ratio, tangible common equity to tangible assets ratio, Tier 1 common equity ratio, pre-tax pre-provision profit, net interest margin, the efficiency ratio, and adjusted earnings per share.  Citizens believes these non-GAAP financial measures provide additional information that is useful to investors in understanding the underlying performance of Citizens, its business and performance trends, and such measures help facilitate performance comparisons with others in the banking industry.  Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited.  Readers should be aware of these limitations and should be cautious as to their use of such measures.  To mitigate these limitations, Citizens has procedures in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety to ensure that Citizens' performance is properly reflected to facilitate consistent period-to-period comparisons.  Although Citizens believes the above non-GAAP financial measures disclosed in this release enhance investors' understanding of its business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for GAAP basis financial measures.  See our related Form 8-K for further discussion regarding these non-GAAP financial measures. Corporate ProfileCitizens 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, and Wisconsin with 219 offices and 248 ATMs.  Citizens is the largest bank holding company headquartered in Michigan with roots dating back to 1871 and is the 58th largest bank holding company headquartered in the United States.  More information about Citizens is available at   Safe Harbor Statement Discussions and statements in this release that are not statements of historical fact, including without limitation, statements that include terms such as "will," "may," "should," "believe," "expect," "anticipate," "estimate," "project," "intend," and "plan," and statements regarding Citizens' future financial and operating results, plans, objectives, expectations and intentions, are forward-looking statements that involve risks and uncertainties, many of which are beyond Citizens' control or are subject to change.  No forward-looking statement is a guarantee of future performance and actual results could differ materially.  Factors that could cause or contribute to actual results differing materially from Citizens' expectations include the risks and uncertainties detailed from time to time in Citizens' annual and quarterly filings with the SEC, which are available at the SEC's website  Other factors not currently anticipated may also materially and adversely affect Citizens' results of operations, cash flows, financial position and prospects.  There can be no assurance that future results will meet expectations.  While Citizens believes that the forward-looking statements in this release are reasonable, you should not place undue reliance on any forward-looking statement.  In addition, these statements speak only as of the date made.  Citizens does not undertake, and expressly disclaims, any obligation to update or alter any statements, whether as a result of new information, future events or otherwise, except as required by applicable law.Consolidated Balance Sheets (Unaudited)Citizens Republic Bancorp, Inc.December 31,September 30,December 31,(in thousands)201220122011AssetsCash and due from banks$    173,510$     162,705$      153,418Money market investments186,349223,818313,632Investment Securities:    Securities available for sale, at fair value1,697,6251,541,5671,312,733    Securities held to maturity, at amortized cost      (fair value of $1,282,244, $1,378,310 and $1,487,550, respectively)1,226,2681,313,5041,444,054           Total investment securities2,923,8932,855,0712,756,787FHLB and Federal Reserve stock126,763122,123117,943Portfolio loans:    Commercial and industrial1,656,2921,688,9961,543,529    Commercial real estate1,242,3481,335,6011,544,361           Total commercial2,898,6403,024,5973,087,890    Residential mortgage546,513570,295637,245    Direct consumer844,240865,777933,314    Indirect consumer969,583970,235871,086           Total portfolio loans5,258,9765,430,9045,529,535    Less: Allowance for loan losses(110,439)(122,125)(172,726)           Net portfolio loans5,148,5375,308,7795,356,809Loans held for sale10,71930,06210,402Premises and equipment90,29192,00597,970Goodwill318,150318,150318,150Other intangible assets5,3085,7927,428Bank owned life insurance223,235222,610220,280Deferred tax assets272,891268,347---Other assets107,037115,328110,030Total assets$  9,586,683$  9,724,790$    9,462,849Liabilities Noninterest-bearing deposits$  1,754,248$  1,854,715$    1,614,311Interest-bearing demand deposits1,100,7631,092,679951,590Savings deposits2,594,3782,574,6422,627,665Core deposits5,449,3895,522,0365,193,566Time deposits1,711,3961,780,9292,201,375          Total deposits7,160,7857,302,9657,394,941Federal funds purchased and securities sold      under agreements to repurchase42,74742,79640,098Other liabilities161,736168,351154,088Long-term debt850,910852,481854,185Total liabilities8,216,1788,366,5938,443,312Shareholders' EquityPreferred stock - no par value292,473290,580285,114Common stock - no par value1,437,8771,436,9251,434,803Retained deficit(346,632)(363,659)(694,560)Accumulated other comprehensive loss(13,213)(5,649)(5,820)Total shareholders' equity1,370,5051,358,1971,019,537Total liabilities and shareholders' equity$  9,586,683$  9,724,790$    9,462,849 Consolidated Statements of Operations (Unaudited)Citizens Republic Bancorp, Inc.Three Months EndedTwelve Months EndedDecember 31,December 31,(in thousands, except per share amounts)2012201120122011Interest Income   Interest and fees on loans$   71,578$   77,146$ 293,782$ 312,746   Interest and dividends on investment securities:      Taxable14,55618,61763,91279,281      Tax-exempt2,1012,3888,71110,800   Dividends on FHLB and Federal Reserve stock1,4101,0094,8974,152   Money market investments145170626840      Total interest income89,79099,330371,928407,819Interest Expense   Deposits8,21712,38237,45957,327   Short-term borrowings11215379   Long-term debt8,3928,87833,64437,303      Total interest expense16,62021,28171,15694,709Net Interest Income73,17078,049300,772313,110Provision for loan losses4,31415,00723,204138,808      Net interest income after provision for loan losses68,85663,042277,568174,302Noninterest Income   Service charges on deposit accounts9,4149,72437,30839,268   Trust fees3,7823,74714,60115,103   Mortgage and other loan income2,2652,7058,1049,620   Brokerage and investment fees1,5691,2436,0555,072   Card-based and other nondeposit fees4,3674,30517,50717,167   Net (losses) gains on loans held for sale(1,723)(217)(984)1,808   Investment securities gains (losses)---38---(1,336)   Other income2,3502,8189,7298,555      Total noninterest income22,02424,36392,32095,257Noninterest Expense   Salaries and employee benefits33,16330,952132,850123,514   Occupancy6,0316,32624,99726,059   Professional services2,4782,31113,7729,331   Equipment2,8583,32612,00112,136   Data processing services4,5213,70916,71716,131   Advertising and public relations1,0141,2985,9045,848   Postage and delivery1,0811,1654,4564,543   Other loan expenses3,6503,49713,22416,007   (Gains) losses on other real estate (ORE)(596)1,081(214)12,768   ORE expenses2209951,2594,322   Intangible asset amortization4846882,1203,027   Other expense10,22411,29243,53649,464      Total noninterest expense65,12866,640270,622283,150Income (Loss) before Income Taxes 25,75220,76599,266(13,591)Income tax provision (benefit)2,5052,521(273,009)(20,258)Net Income23,24718,244372,2756,667Dividend on redeemable preferred stock(6,220)(5,897)(24,347)(22,985)Net Income (Loss) Attributable to Common Shareholders$   17,027$   12,347$ 347,928$  (16,318)Net Income (Loss) Per Common Share:   Basic$      0.42$      0.31$      8.61$     (0.41)   Diluted0.420.318.61(0.41)Average Common Shares Outstanding:    Basic39,49139,43339,47539,422   Diluted39,49139,43339,47539,422 Selected Quarterly Information (Unaudited)Three Months EndedDecember 31,September 30,June 30,March 31,December 31,(in thousands, except per share amounts)20122012201220122011Summary of OperationsNet interest income$         73,170$      75,805$      75,680$        76,119$        78,049Provision for loan losses4,3145,1955,2998,39715,007Noninterest income22,02423,71022,34524,24024,363Noninterest expense65,12872,05566,33967,10166,640Income before income taxes25,75222,26526,38724,86120,765Income tax provision (benefit) from continuing operations2,5051,274(276,789)---2,521Net income23,24720,991303,17624,86118,244Net income attributable to common shareholders17,02714,861297,13418,90612,347Taxable equivalent adjustment, continuing operations1,4681,5031,5321,5711,670Per Common Share DataNet income:      Basic$            0.42$          0.37$          7.35$            0.47$            0.31      Diluted 0.420.377.350.470.31Common book value26.6226.3625.8518.8318.24Tangible book value (non-GAAP)25.8525.5324.9717.8817.24Tangible common book value (non-GAAP)18.6318.3617.8410.7510.16Shares outstanding, end of period (1)40,497,89040,508,82340,504,63740,247,24140,260,213At Period EndAssets$    9,586,683$  9,724,790$  9,670,493$    9,577,346$    9,462,849Earning assets8,453,5138,600,7318,588,3438,774,1198,680,995Portfolio loans5,258,9765,430,9045,521,7485,528,0635,529,535Allowance for loan losses110,439122,125136,120153,007172,726Deposits7,160,7857,302,9657,287,7097,490,3627,394,941Long-term debt850,910852,481853,042853,599854,185Shareholders' equity1,370,5051,358,1971,335,8551,044,6191,019,537Average for the QuarterAssets$    9,604,447$  9,723,587$  9,429,050$    9,521,386$    9,523,184Earning assets8,506,3338,638,3908,622,0678,750,0788,761,435Portfolio loans5,317,7715,501,4005,517,7265,508,5285,632,432Allowance for loan losses121,998135,968152,154172,509190,163Deposits7,181,6547,323,7537,317,6537,441,6937,452,137Long-term debt851,723852,776853,333853,912856,206Shareholders' equity1,364,2501,345,8171,061,5191,028,4941,017,082Financial Ratios (annualized)(2)Return on average assets0.96%0.86%12.93%1.05%0.76%Return on average shareholders' equity6.786.20114.879.727.12Average shareholders' equity / average assets14.2013.8411.2610.8010.68Net interest margin (FTE) (3)3.503.573.603.563.62Efficiency ratio (non-GAAP) (4)66.6565.2065.9965.2061.39Allowance for loan losses as a percent of portfolio loans2.102.252.472.773.12Allowance for loan losses as a percent of nonperforming loans187.15191.29161.53202.56197.56Allowance for loan losses as a percent of nonperforming assets162.38141.69144.85168.87168.97Nonperforming loans as a percent of portfolio loans1.121.181.531.371.58Nonperforming assets as a percent of total loans plus ORAA(5)1.291.581.691.631.84Nonperforming assets as a percent of total assets0.710.890.970.951.08Ratio of net charge-offs during period to average portfolio loans1.201.391.622.052.30Leverage ratio9.959.669.778.718.45Tier 1 capital ratio15.6715.0914.7013.7013.51Total capital ratio16.9316.3515.9614.9714.84(1)Includes participating shares which are restricted stock units and restricted shares.(2)Financial ratios are based upon continuing operations.(3)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%.(4)The efficiency ratio measures how efficiently a bank spends its revenues.  The formula is: (noninterest expense - goodwill impairment)/(net interest income + taxable equivalent adjustment + total noninterest income - investment securities gains (losses)).(5)Other real estate assets acquired ("ORAA") include loans held for sale. Loan Portfolios (in thousands)December 31, 2012September 30, 2012June 30, 2012March 31, 2012December 31, 2011Land hold$             4,366$               4,984$              5,119$              5,387$               6,542Land development6,2587,5217,0067,22613,104Construction8,8606,6894,5916,4105,847Income producing689,765767,202803,546877,461913,755Owner-occupied533,099549,205597,147590,575605,113  Total commercial real estate1,242,3481,335,6011,417,4091,487,0591,544,361Commercial and industrial1,656,2921,688,9961,711,4111,657,1401,543,529  Total commercial2,898,6403,024,5973,128,8203,144,1993,087,890Residential mortgage546,513570,295588,144611,166637,245Direct consumer844,240865,777881,070903,238933,314Indirect consumer969,583970,235923,714869,460871,086  Total consumer2,360,3362,406,3072,392,9282,383,8642,441,645Total portfolio loans$       5,258,976$         5,430,904$       5,521,748$       5,528,063$         5,529,535 Delinquency Rates By Loan PortfolioDecember 31, 2012September 30, 2012June 30, 2012March 31, 2012December 31, 201130 to 89 days past due (in thousands)$% of Portfolio$% of Portfolio$% of Portfolio$% of Portfolio$% of PortfolioLand hold$          ------%$          ------%$          ------%$          ------%$         210.32%Land development------------------1301.81------Construction------------------------------Income producing1,4700.211,1040.141,5190.191,4470.162,5080.27Owner-occupied6950.134,5980.849360.165,1770.882,3450.39  Total commercial real estate2,1650.175,7020.432,4550.176,7540.454,8740.32Commercial and industrial1,9490.128800.051,5650.092,8870.172,4540.16  Total commercial4,1140.146,5820.224,0200.139,6410.317,3280.24Residential mortgage7,6411.406,0291.067,7311.317,5681.249,5441.50Direct consumer13,3541.5811,4351.3212,3961.4114,0021.5517,8101.91Indirect consumer8,3560.867,5140.778,5040.928,7801.0113,0671.50  Total consumer29,3511.2424,9781.0428,6311.2030,3501.2740,4211.66Total delinquent loans$   33,4650.64$   31,5600.58$   32,6510.59$   39,9910.72$   47,7490.86Nonperforming Assets                              December 31, 2012September 30, 2012June 30, 2012March 31, 2012December 31, 2011(in thousands)$% of Portfolio$% of Portfolio$% of Portfolio$% of Portfolio$% of PortfolioLand hold$        2916.67%$        3266.54%$        3266.37%$          ------%$          ------%Land development30.0430.0430.052072.872131.62Construction------------------1502.341502.57Income producing8,1171.1812,9041.6819,4082.4218,5662.1221,1712.32Owner-occupied12,0682.2613,1462.3918,1873.0520,7163.5123,7983.93  Total commercial real estate20,4791.6526,3791.9837,9242.6839,6392.6745,3322.94Commercial and industrial6,1620.379,1900.5421,6761.2714,6290.8816,9461.10  Total nonaccruing commercial26,6410.9235,5691.1859,6001.9054,2681.7362,2782.02Residential mortgage17,5003.2015,2712.6813,4742.2911,1371.8211,3121.78Direct consumer12,7201.5110,5521.229,2631.058,8950.9812,1151.30Indirect consumer2,0830.212,3910.251,8750.201,0740.129530.11  Total nonaccruing consumer32,3031.3728,2141.1724,6121.0321,1060.8924,3801.00    Total nonaccruing loans58,9441.1263,7831.1784,2121.5375,3741.3786,6581.57Loans 90+ days still accruing68---60---59---164---7700.01  Total nonperforming portfolio loans59,0121.1263,8431.1884,2711.5375,5381.3787,4281.58Nonperforming held for sale3,19016,6508873,2642,372Other repossessed assets acquired5,8115,7008,81711,80312,422  Total nonperforming assets$   68,013$   86,193$   93,975$   90,605$ 102,222Restructured loans still accruing$   21,033$   21,433$   18,187$   17,911$   32,347Commercial inflows$     4,769$     4,572$   23,828$   14,027$   13,269Commercial outflows(13,697)(28,603)(18,496)(22,037)(20,730)Net change$    (8,928)$  (24,031)$     5,332$    (8,010)$    (7,461)Net Charge-OffsThree Months EndedDecember 31, 2012September 30, 2012June 30, 2012March 31, 2012December 31, 2011(in thousands)$% of Portfolio*$% of Portfolio*$% of Portfolio*$% of Portfolio*$% of Portfolio*Land hold$        13312.10%$          ------%$        (58)(4.58)%$          ------%$        (33)(2.00)%Land development(14)(0.89)(8)(0.45)1005.76(83)(4.64)3,07993.21Construction(1)(0.04)(21)(1.24)141.24(101)(6.33)(4)(0.24)Income producing1,6600.962,5821.343,1001.554,1511.9011,9245.18Owner-occupied9160.681,8911.372,3841.612,5371.735,7913.80  Total commercial real estate2,6940.864,4441.325,5401.576,5041.7620,7575.33Commercial and industrial7430.185,3631.265,2491.233,0290.741,0320.27  Total commercial3,4370.479,8071.2910,7891.399,5331.2221,7892.80Residential mortgage4,0242.932,5151.753,5062.405,0763.341,1700.73Direct consumer5,6142.654,7902.205,6662.5910,9354.876,9302.95Indirect consumer2,9251.202,0780.852,2250.972,5721.192,7461.25  Total consumer12,5632.129,3831.5511,3971.9218,5833.1410,8461.76  Total net charge-offs$   16,0001.20$   19,1901.39$   22,1861.62$   28,1162.05$   32,6352.30* Represents an annualized rate. Summary of Loan Loss ExperienceThree Months Ended December 31,September 30,June 30,March 31,December 31,(in thousands)20122012201220122011Allowance for loan losses - beginning of period$      122,125$      136,120$      153,007$      172,726$      190,354Provision for loan losses4,3145,1955,2998,39715,007Charge-offs:Commercial and industrial7934,5523,6672,3881,489Small business1,5561,0392,2711,265399Commercial real estate3,1005,4528,0938,99721,581Total commercial5,44911,04314,03112,65023,470Residential mortgage4,6123,2613,9725,2101,366Direct consumer6,7986,0677,16811,5277,544Indirect consumer3,8353,1723,1573,2513,229Total charge-offs20,69423,54328,32832,63835,609Recoveries:Commercial and industrial1,038108577376609Small business568120112248248Commercial real estate4061,0082,5532,493824Total commercial2,0121,2363,2423,1171,681Residential mortgage588746466134197Direct consumer1,1841,2771,502592613Indirect consumer9101,094932679483Total recoveries4,6944,3536,1424,5222,974Net charge-offs16,00019,19022,18628,11632,635Allowance for loan losses - end of period$      110,439$      122,125$      136,120$      153,007$      172,726 Non-GAAP ReconciliationDecember 31,September 30,June 30,March 31,December 31,(in thousands)20122012201220122011Efficiency Ratio (non-GAAP)Net interest income (A)$         73,170$         75,805$      75,680$       76,119$        78,049Taxable equivalent adjustment (B)1,4681,5031,5321,5711,670Investment securities gains (C)------------38Noninterest income (D)22,02423,71022,34524,24024,363Noninterest expense (E)65,12872,05566,33967,10166,640(Gains) losses on ORE and ORE expenses (F)(376)1,26493652,076Intangible amortization (G)484513545578688Merger-related expenses (H)5974,411---------Efficiency ratio:  (E-F-G-H)/(A+B-C+D)(non-GAAP)66.65%65.20%65.99%65.20%61.39%Tangible Common Equity to Tangible Assets (non-GAAP)Total assets$     9,586,683$    9,724,790$ 9,670,493$  9,577,346$    9,462,849Goodwill(318,150)(318,150)(318,150)(318,150)(318,150)Other intangible assets(5,308)(5,792)(6,305)(6,850)(7,428)Tangible assets (non-GAAP)$     9,263,225$    9,400,848$ 9,346,038$  9,252,346$    9,137,271Total shareholders' equity$     1,370,505$    1,358,197$ 1,335,855$  1,044,619$    1,019,537Goodwill(318,150)(318,150)(318,150)(318,150)(318,150)Other intangible assets(5,308)(5,792)(6,305)(6,850)(7,428)Tangible equity (non-GAAP)$     1,047,047$    1,034,255$ 1,011,400$     719,619$       693,959Tangible equity$     1,047,047$    1,034,255$ 1,011,400$     719,619$       693,959Preferred stock(292,473)(290,580)(288,723)(286,901)(285,114)Tangible common equity (non-GAAP)$        754,574$       743,675$    722,677$     432,718$       408,845Tier 1 Common Equity (non-GAAP)Total shareholders' equity$     1,370,505$    1,358,197$ 1,335,855$  1,044,619$    1,019,537Qualifying capital securities73,66773,66773,66773,66773,667Goodwill(318,150)(318,150)(318,150)(318,150)(318,150)Accumulated other comprehensive loss13,2135,64910,2681,9555,820Disallowed deferred tax asset(241,535)(235,461)(235,529)------Other intangible assets(5,308)(5,792)(6,305)(6,850)(7,428)Tier 1 capital (regulatory)$        892,392$       878,110$    859,806$     795,241$       773,446Tier 1 capital (regulatory)$        892,392$       878,110$    859,806$     795,241$       773,446Qualifying capital securities(73,667)(73,667)(73,667)(73,667)(73,667)Preferred stock(292,473)(290,580)(288,723)(286,901)(285,114)Total Tier 1 common equity (non-GAAP)$        526,252$       513,863$    497,416$     434,673$       414,665Net risk-weighted assets (regulatory)$     5,695,254$    5,821,748$ 5,851,871$  5,803,811$    5,723,333Equity to assets14.30%13.97%13.81%10.91%10.77%Tier 1 common equity(non-GAAP)9.248.838.507.497.24Tangible equity to tangible assets(non-GAAP)11.3011.0010.827.787.59Tangible common equity to tangible assets(non-GAAP)8.157.917.734.684.47 Non-GAAP ReconciliationAdjusted Earnings Per ShareTwelve Months EndedDecember 31, (in thousands, except per share amounts)20122011Earnings Per ShareDiluted net income (loss) per share$            8.61$           (0.41)Restoration of the deferred tax asset6.82---Diluted net income (loss) per share (non-GAAP)$            1.79$           (0.41)An itemized reconciliation between net income on a GAAP basis and net income excluding the benefit of restoring the deferred tax asset (non-GAAP) follows:Numerator:Net income$       372,275$          6,667Restoration of the deferred tax asset(275,484)---Net income (non-GAAP)96,7916,667Dividend on redeemable preferred stock(24,347)(22,985)Net income (loss) attributable to common shareholders (non-GAAP)72,444(16,318)Net income allocated to participating securities1,694---Net income (loss) after allocation to participating securities (non-GAAP)$        70,750$       (16,318)Denominator:Weighted average shares outstanding for basic and dilutive earnings per common share39,47539,422Basic net income (loss) per common share (non-GAAP)$            1.79$           (0.41)Diluted net income (loss) per common share (non-GAAP)1.79(0.41) Pre-tax pre-provision profit (non-GAAP)Three Months Ended (in thousands) December 31, 2012 September 30, 2012 June 30, 2012March 31, 2012December 31, 2011Net income$        23,247$        20,991$   303,176$      24,861$        18,244Income tax provision (benefit)2,5051,274(276,789)---2,521Provision for loan losses4,3145,1955,2998,39715,007Net losses (gains) on loans held for sale1,723184(6)(916)217Investment securities gains------------(38)Losses (gains) on other real estate (ORE)(596)941(173)(385)1,081Merger-related expenses(1)5974,411---------Fair-value adjustment on bank owned life insurance(2)47(31)118(205)(100)Fair-value adjustment on swaps (2)(85)8374(61)(46)  Pre-tax pre-provision profit (non-GAAP)$        31,752$        33,048$    31,699$      31,691$        36,886(1)Merger-related expenses are contained in line item "Professional services" on Consolidated Statements of Operations.(2)Fair-value adjustment amounts contained in line item "Other income" on Consolidated Statements of Operations. Noninterest Income and Noninterest Expense Three Months EndedDecember 31,September 30,June 30,March 31,December 31,(in thousands)20122012201220122011Service charges on deposit accounts$              9,414$           9,554$           9,355$           8,985$           9,724Trust fees3,7823,6353,5823,6023,747Mortgage and other loan income2,2652,0281,9521,8582,705Brokerage and investment fees1,5691,8311,3311,3241,243Card-based and other nondeposit fees4,3674,4314,4444,2654,305Net gains (losses) on loans held for sale(1,723)(184)6916(217)Investment securities gains------------38Other income2,3502,4151,6753,2902,818Total noninterest income$            22,024$         23,710$         22,345$         24,240$         24,363Salaries and employee benefits$            33,163$         33,589$         32,801$         33,298$         30,952Occupancy6,0316,1296,1406,6966,326Professional services(1)2,4786,8062,4652,0232,311Equipment2,8582,9372,9043,3033,326Data processing services4,5214,4273,7214,0483,709Advertising and public relations1,0141,8471,7081,3351,298Postage and delivery1,0811,1571,1191,0991,165Other loan expenses3,6503,1213,2663,1863,497(Gains) losses on other real estate (ORE)(596)941(173)(385)1,081ORE expenses220323266450995Intangible asset amortization484513545578688Other expense10,22410,26511,57711,47011,292Total noninterest expense$            65,128$         72,055$         66,339$         67,101$         66,640(1)Includes merger-related expenses of $0.6 million and $4.4 million in the three months ended December 31, 2012 and September 30, 2012, respectively. Average Balances, Yields and RatesThree Months EndedDecember 31, 2012September 30, 2012December 31, 2011AverageAverageAverageAverageAverageAverage(in thousands)BalanceRateBalanceRateBalanceRateEarning AssetsMoney market investments$              232,2090.25%$       238,4920.25%$       273,7140.25%Investment securities:Taxable2,610,8992.232,557,7932.512,481,0943.00Tax-exempt200,6716.44205,5726.46225,0936.53FHLB and Federal Reserve stock124,8974.50122,1233.90123,5083.25Portfolio loans:Commercial and industrial1,637,6905.701,713,3825.421,539,8115.32Commercial real estate1,292,8064.771,382,8734.811,620,4795.02Residential mortgage559,1134.25580,0024.36647,4914.55Direct consumer855,3865.69873,0575.81943,4455.98Indirect consumer972,7765.99952,0866.05881,2066.58Total portfolio loans5,317,7715.375,501,4005.335,632,4325.45Loans held for sale19,8862.4813,0103.4025,5943.12 Total earning assets8,506,3334.278,638,3904.368,761,4354.59Nonearning AssetsCash and due from banks144,432145,961141,138Premises and equipment91,26092,77598,526Investment security fair value adjustment58,23454,80746,065Other nonearning assets926,186927,622666,183Allowance for loan losses(121,998)(135,968)(190,163)Total assets$           9,604,447$    9,723,587$    9,523,184Interest-Bearing LiabilitiesDeposits:Interest-bearing demand deposits$           1,067,5750.12$    1,073,2940.13$       937,0240.18Savings deposits2,572,1070.182,602,2160.202,645,8210.31Time deposits1,741,8461.531,825,1441.552,269,2331.73Short-term borrowings44,8170.1045,9740.1045,0200.19Long-term debt851,7233.93852,7763.89856,2064.12Total interest-bearing liabilities6,278,0681.056,399,4041.066,753,3041.25Noninterest-Bearing Liabilities and  Shareholders' EquityNoninterest-bearing demand 1,800,1261,823,0991,600,059Other liabilities162,003155,267152,739Shareholders' equity1,364,2501,345,8171,017,082Total liabilities and shareholders' equity$           9,604,447$    9,723,587$    9,523,184Interest Spread3.22%3.29%3.33%Contribution of noninterest bearing sources of funds0.280.280.29Net Interest Margin3.50%3.57%3.62%Average Balances, Yields and RatesTwelve Months Ended December 31, 20122011AverageAverageAverageAverage(in thousands)BalanceRateBalanceRateEarning AssetsMoney market investments$       251,1690.25%$       340,4820.25%Investment securities:Taxable2,573,7402.482,444,5393.24Tax-exempt207,7266.45250,0986.64FHLB and Federal Reserve stock121,1074.04132,1013.14Portfolio loans:Commercial and industrial1,647,8135.541,438,2925.13Commercial real estate1,415,1414.921,776,2925.12Residential mortgage591,9464.32700,2574.65Direct consumer884,7455.82981,3966.04Indirect consumer921,4296.15856,2796.65Total portfolio loans5,461,0745.405,752,5165.45Loans held for sale14,0913.2826,4513.52 Total earning assets8,628,9074.388,946,1874.64Nonearning AssetsCash and due from banks143,639142,721Premises and equipment93,953101,009Investment security fair value adjustment54,14944,712Other nonearning assets795,051663,477Allowance for loan losses(145,566)(228,509)Total assets$    9,570,133$    9,669,597Interest-Bearing LiabilitiesDeposits:Interest-bearing demand deposits$    1,026,0980.14$       953,1870.21Savings deposits2,639,8030.222,636,4220.35Time deposits1,902,3971.582,489,7031.85Short-term borrowings41,6760.1342,7600.18Long-term debt852,9323.94898,5014.15Total interest-bearing liabilities6,462,9061.107,020,5731.35Noninterest-Bearing Liabilities and  Shareholders' EquityNoninterest-bearing demand 1,747,5441,503,430Other liabilities158,816151,833Shareholders' equity1,200,867993,761Total liabilities and shareholders' equity$    9,570,133$    9,669,597Interest Spread3.28%3.29%Contribution of noninterest bearing sources of funds0.280.29Net Interest Margin3.56%3.58%SOURCE Citizens Republic Bancorp, Inc.For further information: Kristine D. Brenner, Director of Investor Relations, +1-810-257-2506,