Market Overview

Citizens Republic Bancorp Reports Solid Third Quarter Results

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FLINT, Mich., Oct. 25, 2012 /PRNewswire/ -- 

  • Net income attributable to common shareholders was $15 million or $0.37 per share for the third quarter, which includes over $4 million in pre-tax merger-related expenses
  • Credit metric trends reflect continued stability and improved performance across the loan portfolio
  • Pre-tax, pre-provision profit remained strong at $33 million
  • Announced agreement to merge with FirstMerit Corporation in a stock-for-stock transaction

Citizens Republic Bancorp, Inc. (Nasdaq: CRBC) announced net income attributable to common shareholders of $14.9 million or $0.37 per diluted share for the three months ended September 30, 2012, compared to $297.1 million or $7.35 per diluted share for last quarter, and $27.2 million or $0.68 per diluted share for the third quarter of last year.  For the first nine months of this year, Citizens recorded net income attributable to common shareholders of $330.9 million or $8.19 per share compared to a net loss of $28.7 million or $0.73 per share for the same period of 2011.  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.

"Last month we announced that we entered into a definitive merger agreement with FirstMerit Corporation.  We are excited about the transaction which creates a unique, contiguous, Midwest franchise of significant size and scale.  Until the transaction closes, we continue to successfully execute our strategic initiatives, driving our consistent earnings and organically growing our strong capital position," commented Cathleen Nash, president and chief executive officer.

Balance Sheet

Total assets increased modestly from last quarter. Increases in the investment securities portfolio and money market investments more than offset decreases in the loan portfolio.  Citizens continues to focus on C&I and consumer lending. Over the past year, growth within the C&I and indirect consumer portfolios helped to mitigate balance reductions in the commercial real estate and residential mortgage portfolios. 

Total deposit balances grew slightly, as growth in low cost core deposit balances was partially offset by strategic reductions in more expensive single service and brokered time deposits. These initiatives have resulted in core deposit growth of 6% and a 23% reduction in time deposits compared to September 30, 2011.

Capital

Citizens continues to grow capital organically through earnings and maintains a strong capital position.






Capital Ratios

Regulatory

Minimum for "Well-

September 30,

June 30,

September 30,


Capitalized"

2012

2012

2011

Leverage ratio

5.00%


9.66%

9.77%

8.21%

Tier 1 capital ratio

6.00


15.09

14.70

12.81

Total capital ratio

10.00


16.35

15.96

14.14

Tier 1 common equity (non-GAAP)



8.83

8.50

6.77

Tangible equity to tangible assets (non-GAAP)



11.00

10.82

7.36

Tangible common equity to tangible assets (non-GAAP)


7.91

7.73

4.31













 

Net Interest Income and Margin

Net interest margin was 3.57% in the third quarter, a three basis point decrease from last quarter and a six basis point decrease from the third quarter of last year. The decreases were a result of the continued low interest rate environment and competitive pressures on our loan portfolio, partially offset by reduced funding costs.  Year to date, net interest margin increased one basis point over last year to 3.58%.

Net interest income for the third quarter of 2012 was $75.8 million, consistent with last quarter and a decrease of $3.0 million from the third quarter of last year.  The decrease from the third quarter of last year reflects lower net interest margin and a reduction in average earning assets.  For the nine months ended September 30, 2012, net interest income decreased $7.5 million or 3% compared to the same period last year due to a reduction in average earning assets.

Credit Quality

Credit quality benefits from proactive credit management as well as returning economic stability.

  • Total delinquencies decreased 3% from last quarter to $31.6 million and currently represent 0.58% of portfolio loans.
  • Nonperforming assets were $86.2 million at the end of September 2012, an 8% decrease from the end of June 2012 and a decrease of 37% from September 30 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 third quarter decreased to $19.2 million, compared to $22.2 million last quarter and $33.4 million in the third quarter of last year.  The provision for loan losses was $5.2 million in the third quarter, substantially the same as the second quarter of 2012. 
  • The allowance for loan losses was $122.1 million or 2.25% of portfolio loans at September 30, 2012, compared to $136.1 million or 2.47% at the end of the prior quarter, and $190.4 million or 3.36% at the end of the third quarter last year.
Noninterest Income and Expense

Citizens' focus on services and products helps support a stable base of fee income.  Total noninterest income increased $1.4 million over last quarter and decreased $0.7 million compared to the third quarter last year.

  • Service charges were consistent with the second quarter of 2012.  Service charges on deposit accounts were down 8% compared to the third quarter of last year primarily as a result of regulatory changes.
  • Brokerage and investment fees were up 38% compared to last quarter and 54% compared to the third quarter of 2011 due to focused efforts to increase accounts and sales.
  • Minimal losses on loans held for sale were realized this quarter compared to gains in prior periods.
  • Other income increased compared to last quarter primarily due to higher unrealized gains on deferred compensation, which was offset in noninterest expense.

Noninterest expense increased $5.7 million over last quarter and $6.6 million over the third quarter of last year, primarily due to merger-related expenses and ORE losses.

  • Professional services increased compared to prior periods as a result of merger-related expenses of $4.4 million.
  • Overall, credit costs remained consistent.  However, losses on ORE increased $1.1 million during the quarter primarily related to a writedown on a single commercial ORE property.
  • Salaries and employee benefit costs increased compared to last quarter due to higher deferred compensation expense.
  • Data processing services increased over prior periods as a negotiated reduction in expense expired.

Year to date, noninterest expense decreased $11.0 million from 2011 as lower credit costs were partially offset by higher salaries and employee benefits and merger-related expenses.

Income Taxes and Deferred Tax Asset

Citizens recorded income tax expense of $1.3 million for the third quarter of 2012, compared to a benefit of $12.6 million for the third quarter of 2011.  For the first nine months of 2012, the income tax benefit totaled $275.5 million, compared with a benefit of $22.8 million for the same period of 2011.  The tax benefit for the three months ended September 30, 2011 was largely due to Citizens recording a receivable as a result of a revocation of a tax election.  The increase in tax benefit for the nine months ended September 30, 2012 was primarily the result of eliminating the valuation allowance against our deferred tax asset.  

Conference Call

Citizens' senior management will review the quarter's results in a conference call at 10:00 a.m. ET on Friday, October 26, 2012A live audio webcast is available on Citizens' investor relations page at www.citizensbanking.com 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 www.citizensbanking.com, 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 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, and Wisconsin with 219 offices and 249 ATMs.  Citizens is the largest bank holding company headquartered in Michigan with roots dating back to 1871 and is the 57th largest bank holding company headquartered in the United States.  More information about Citizens is available at www.citizensbanking.com

Safe Harbor Statement

Discussions and statements in this release that are not statements of historical fact, including without limitation, statements that include terms such as "will," "may," "should," "believe," "expect," "anticipate," "estimate," "project," "intend," and "plan," and statements regarding Citizens' future financial and operating results, plans, objectives, expectations and intentions, are forward-looking statements that involve risks and uncertainties, many of which are beyond Citizens' control or are subject to change.  No forward-looking statement is a guarantee of future performance and actual results could differ materially. 

Factors that could cause or contribute to 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 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, Inc.










September 30,


June 30,


September 30,

(in thousands)


2012


2012


2011

Assets








Cash and due from banks


$    162,705


$     145,432


$      147,418


Money market investments


223,818


203,861


283,018


Investment Securities:








    Securities available for sale, at fair value


1,541,567


1,480,290


1,307,977


    Securities held to maturity, at amortized cost








      (fair value of $1,378,310, $1,349,429 and $1,491,048, respectively)


1,313,504


1,296,164


1,454,873


           Total investment securities


2,855,071


2,776,454


2,762,850


FHLB and Federal Reserve stock


122,123


122,123


123,696


Portfolio loans:








    Commercial and industrial


1,688,996


1,711,411


1,531,492


    Commercial real estate


1,335,601


1,417,409


1,643,901


           Total commercial


3,024,597


3,128,820


3,175,393


    Residential mortgage


570,295


588,144


654,561


    Direct consumer


865,777


881,070


954,831


    Indirect consumer


970,235


923,714


887,542


           Total portfolio loans


5,430,904


5,521,748


5,672,327


    Less: Allowance for loan losses


(122,125)


(136,120)


(190,354)


           Net portfolio loans


5,308,779


5,385,628


5,481,973


Loans held for sale


30,062


14,518


30,221


Premises and equipment


92,005


93,646


98,954


Goodwill


318,150


318,150


318,150


Other intangible assets


5,792


6,305


8,116


Bank owned life insurance


222,610


221,965


219,248


Other assets


383,675


382,411


126,544


 Total assets


$  9,724,790


$  9,670,493


$    9,600,188

Liabilities 








Noninterest-bearing deposits


$  1,854,715


$  1,796,531


$    1,621,451


Interest-bearing demand deposits


1,092,679


1,025,305


945,458


Savings deposits


2,574,642


2,607,718


2,652,267


Core deposits


5,522,036


5,429,554


5,219,176


Time deposits


1,780,929


1,858,155


2,320,728


          Total deposits


7,302,965


7,287,709


7,539,904


Federal funds purchased and securities sold








      under agreements to repurchase


42,796


39,169


40,599


Other short-term borrowings


---


---


640


Other liabilities


168,351


154,718


154,232


Long-term debt


852,481


853,042


855,670


Total liabilities


8,366,593


8,334,638


8,591,045

Shareholders' Equity








Preferred stock - no par value


290,580


288,723


283,360


Common stock - no par value


1,436,925


1,435,920


1,433,765


Retained deficit


(363,659)


(378,520)


(706,907)


Accumulated other comprehensive loss


(5,649)


(10,268)


(1,075)


Total shareholders' equity


1,358,197


1,335,855


1,009,143


  Total liabilities and shareholders' equity


$  9,724,790


$  9,670,493


$    9,600,188

















 

 










Consolidated Statements of Operations (Unaudited)









Citizens Republic Bancorp, Inc.


Three Months Ended


Nine Months Ended



September 30,


September 30,

(in thousands, except per share amounts)


2012


2011


2012


2011










Interest Income









   Interest and fees on loans


$   73,376


$   77,212


$ 222,205


$ 235,600

   Interest and dividends on investment securities:









      Taxable


16,034


20,508


49,356


60,664

      Tax-exempt


2,157


2,613


6,610


8,412

   Dividends on FHLB and Federal Reserve stock


1,196


974


3,487


3,143

   Money market investments


152


168


481


670

      Total interest income


92,915


101,475


282,139


308,489

Interest Expense









   Deposits


8,779


13,528


29,243


44,945

   Short-term borrowings


11


20


42


57

   Long-term debt


8,320


9,086


25,251


28,426

      Total interest expense


17,110


22,634


54,536


73,428

Net Interest Income


75,805


78,841


227,603


235,061

Provision for loan losses


5,195


17,481


18,891


123,801

      Net interest income after provision for loan losses


70,610


61,360


208,712


111,260

Noninterest Income









   Service charges on deposit accounts


9,554


10,362


27,894


29,544

   Trust fees


3,635


3,622


10,818


11,356

   Mortgage and other loan income


2,028


2,089


5,839


6,915

   Brokerage and investment fees


1,831


1,188


4,486


3,829

   Card-based and other nondeposit fees


4,431


4,475


13,140


12,862

   Net (losses) gains on loans held for sale


(184)


1,952


739


2,025

   Investment securities gains (losses)


---


3


---


(1,373)

   Other income


2,415


736


7,380


5,737

      Total noninterest income


23,710


24,427


70,296


70,895

Noninterest Expense









   Salaries and employee benefits


33,589


30,280


99,687


92,563

   Occupancy


6,129


6,125


18,965


19,734

   Professional services


6,806


2,394


11,294


7,020

   Equipment


2,937


2,918


9,144


8,811

   Data processing services


4,427


3,823


12,196


12,422

   Advertising and public relations


1,847


2,179


4,890


4,550

   Postage and delivery


1,157


1,142


3,375


3,378

   Other loan expenses


3,121


3,941


9,574


12,510

   Losses on other real estate (ORE)


941


1,210


382


11,687

   ORE expenses


323


529


1,039


3,326

   Intangible asset amortization


513


732


1,636


2,338

   Other expense


10,265


10,138


33,312


38,172

      Total noninterest expense


72,055


65,411


205,494


216,511

Income (Loss) before Income Taxes 


22,265


20,376


73,514


(34,356)

Income tax provision (benefit)


1,274


(12,568)


(275,514)


(22,779)

Net Income (Loss)


20,991


32,944


349,028


(11,577)

Dividend on redeemable preferred stock


(6,130)


(5,761)


(18,127)


(17,088)

Net Income (Loss) Attributable to Common Shareholders


$   14,861


$   27,183


$ 330,901


$  (28,665)

Net Income (Loss) Per Common Share:









   Basic


$      0.37


$      0.68


$      8.19


$     (0.73)

   Diluted


0.37


0.68


8.19


(0.73)

Average Common Shares Outstanding: 









   Basic


39,489


39,433


39,469


39,418

   Diluted


39,489


39,433


39,469


39,418



















 

 



















Selected Quarterly Information (Unaudited)





Three Months Ended






September 30,



June 30,



March 31,



December 31,



September 30,


(in thousands, except per share amounts)

2012



2012



2012



2011



2011


Summary of Operations















Net interest income

$           75,805



$      75,680



$      76,119



$        78,049



$        78,841


Provision for loan losses

5,195



5,299



8,397



15,007



17,481


Noninterest income

23,710



22,345



24,240



24,363



24,427


Noninterest expense

72,055



66,339



67,101



66,640



65,411


Income before income taxes

22,265



26,387



24,861



20,765



20,376


Income tax provision (benefit)(1)

1,274



(276,789)



---



2,521



(12,568)


Net income

20,991



303,176



24,861



18,244



32,944


Net income attributable to common shareholders (2)

14,861



297,134



18,906



12,347



27,183


Taxable equivalent adjustment

1,503



1,532



1,571



1,670



1,827

















Per Common Share Data (3) 















Net income:















      Basic

$               0.37



$          7.35



$          0.47



$            0.31



$            0.68


      Diluted 

0.37



7.35



0.47



0.31



0.68


Common book value

26.36



25.85



18.83



18.24



18.03


Tangible book value (non-GAAP)

25.53



24.97



17.88



17.24



16.96


Tangible common book value (non-GAAP)

18.36



17.84



10.75



10.16



9.92


Shares outstanding, end of period (4)

40,508,823



40,504,637



40,247,241



40,260,213



40,255,758

















At Period End















Assets

$       9,724,790



$  9,670,493



$  9,577,346



$    9,462,849



$    9,600,188


Earning assets

8,600,731



8,588,343



8,774,119



8,680,995



8,824,183


Portfolio loans

5,430,904



5,521,748



5,528,063



5,529,535



5,672,327


Allowance for loan losses

122,125



136,120



153,007



172,726



190,354


Deposits

7,302,965



7,287,709



7,490,362



7,394,941



7,539,904


Long-term debt

852,481



853,042



853,599



854,185



855,670


Shareholders' equity

1,358,197



1,335,855



1,044,619



1,019,537



1,009,143


Average for the Quarter















Assets

$       9,723,587



$  9,429,050



$  9,521,386



$    9,523,184



$    9,596,275


Earning assets

8,638,390



8,622,067



8,750,078



8,761,435



8,856,072


Portfolio loans

5,501,400



5,517,726



5,508,528



5,632,432



5,663,058


Allowance for loan losses

135,968



152,154



172,509



190,163



206,119


Deposits

7,323,753



7,317,653



7,441,693



7,452,137



7,546,615


Long-term debt

852,776



853,333



853,912



856,206



862,479


Shareholders' equity

1,345,817



1,061,519



1,028,494



1,017,082



991,602

















Financial Ratios (annualized)














Return on average assets

0.86

%


12.93

%


1.05

%


0.76

%


1.36

%

Return on average shareholders' equity

6.20



114.87



9.72



7.12



13.18


Average shareholders' equity / average assets

13.84



11.26



10.80



10.68



10.33


Net interest margin (FTE) (5)

3.57



3.60



3.56



3.62



3.63


Efficiency ratio (non-GAAP)(6)

65.20



65.99



65.20



61.39



59.89


Allowance for loan losses as a percent of portfolio loans

2.25



2.47



2.77



3.12



3.36


Allowance for loan losses as a percent of nonperforming loans(7)

191.29



161.53



202.56



197.56



190.09


Allowance for loan losses as a percent of nonperforming assets(7)

141.69



144.85



168.87



168.97



139.01


Nonperforming loans as a percent of portfolio loans(7)

1.18



1.53



1.37



1.58



1.77


Nonperforming assets as a percent of total loans plus ORAA(7)(8)

1.58



1.69



1.63



1.84



2.39


Nonperforming assets as a percent of total assets(7)

0.89



0.97



0.95



1.08



1.43


Ratio of net charge-offs during period to average portfolio loans

1.39



1.62



2.05



2.30



2.34


Leverage ratio

9.66



9.77



8.71



8.45



8.21


Tier 1 capital ratio

15.09



14.70



13.70



13.51



12.81


Total capital ratio

16.35



15.96



14.97



14.84



14.14

















(1)Second quarter 2012 benefit is directly related to the restoration of the deferred tax asset.

(2)Net income attributable to common shareholders includes a non-cash dividend to preferred shareholders of $6.0 million in the third, second, and first quarters of  2012 and $5.9 million, and $5.8 million in the fourth, and third quarters of 2011.

(3) Earnings per share in the second quarter of 2012 includes a tax benefit of $6.85 per share related to restoring the deferred tax asset.

(4)Includes participating shares which are restricted stock units and restricted shares.

(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)Efficiency ratio (non-GAAP) is calculated as follows: (Noninterest expense-Losses on other real estate ("ORE")-ORE expenses-Intangible amortization-Merger related expenses)/(Net interest income+Taxable equivalent adjustment+Total noninterst income-Investment securities gains(losses)).

(7)Nonperforming loans/assets exclude troubled debt restructurings (TDRs) that are on an accrual status and performing in accordance with their modified terms.

(8)Other real estate assets acquired (ORAA) include loans held for sale.

 












Loan Portfolios

(in thousands)

September 30, 2012


June 30, 2012


March 31, 2012


December 31, 2011


September 30, 2011













Land hold

$               4,984


$              5,119


$              5,387


$               6,542


$            6,818


Land development

7,521


7,006


7,226


13,104


22,232


Construction

6,689


4,591


6,410


5,847


5,410


Income producing

767,202


803,546


877,461


913,755


975,262


Owner-occupied

549,205


597,147


590,575


605,113


634,179


  Total commercial real estate

1,335,601


1,417,409


1,487,059


1,544,361


1,643,901


Commercial and industrial

1,688,996


1,711,411


1,657,140


1,543,529


1,531,492


  Total commercial

3,024,597


3,128,820


3,144,199


3,087,890


3,175,393













Residential mortgage

570,295


588,144


611,166


637,245


654,561


Direct consumer

865,777


881,070


903,238


933,314


954,831


Indirect consumer

970,235


923,714


869,460


871,086


887,542


  Total consumer

2,406,307


2,392,928


2,383,864


2,441,645


2,496,934


Total portfolio loans

$         5,430,904


$       5,521,748


$       5,528,063


$         5,529,535


$      5,672,327
























 


Delinquency Rates By Loan Portfolio












September 30, 2012

June 30, 2012

March 31, 2012

December 31, 2011

September 30, 2011

30 to 89 days past due 

(in thousands)

$

% of Portfolio


$

% of Portfolio


$

% of Portfolio


$

% of Portfolio


$

% of Portfolio


















Land hold

$          ---

---

%

$          ---

---

%

$          ---

---

%

$         21

0.32

%

$           ---

---

%

Land development

---

---


---

---


130

1.81


---

---


216

0.97


Construction

---

---


---

---


---

---


---

---


---

---


Income producing

1,104

0.14


1,519

0.19


1,447

0.16


2,508

0.27


3,325

0.34


Owner-occupied

4,598

0.84


936

0.16


5,177

0.88


2,345

0.39


5,817

0.92


  Total commercial real estate

5,702

0.43


2,455

0.17


6,754

0.45


4,874

0.32


9,358

0.57


Commercial and industrial

880

0.05


1,565

0.09


2,887

0.17


2,454

0.16


2,594

0.17


  Total commercial

6,582

0.22


4,020

0.13


9,641

0.31


7,328

0.24


11,952

0.38


















Residential mortgage

6,029

1.06


7,731

1.31


7,568

1.24


9,544

1.50


9,079

1.39


Direct consumer

11,435

1.32


12,396

1.41


14,002

1.55


17,810

1.91


18,629

1.95


Indirect consumer

7,514

0.77


8,504

0.92


8,780

1.01


13,067

1.50


9,898

1.12


  Total consumer

24,978

1.04


28,631

1.20


30,350

1.27


40,421

1.66


37,606

1.51


Total delinquent loans

$   31,560

0.58


$   32,651

0.59


$   39,991

0.72


$   47,749

0.86


$     49,558

0.87


































 

































Nonperforming Assets                              












September 30, 2012

June 30, 2012

March 31, 2012

December 31, 2011

September 30, 2011

(in thousands)

$

% of Portfolio


$

% of Portfolio


$

% of Portfolio


$

% of Portfolio


$

% of Portfolio


















Land hold

$        326

6.54

%

$        326

6.37

%

$          ---

---

%

$          ---

---

%

$         167

2.45

%

Land development

3

0.04


3

0.05


207

2.87


213

1.62


12

0.05


Construction

---

---


---

---


150

2.34


150

2.57


257

4.76


Income producing

12,904

1.68


19,408

2.42


18,566

2.12


21,171

2.32


23,227

2.38


Owner-occupied

13,146

2.39


18,187

3.05


20,716

3.51


23,798

3.93


27,540

4.34


  Total commercial real estate

26,379

1.98


37,924

2.68


39,639

2.67


45,332

2.94


51,203

3.11


Commercial and industrial

9,190

0.54


21,676

1.27


14,629

0.88


16,946

1.10


18,536

1.21


  Total nonaccruing commercial

35,569

1.18


59,600

1.90


54,268

1.73


62,278

2.02


69,739

2.20


















Residential mortgage

15,271

2.68


13,474

2.29


11,137

1.82


11,312

1.78


13,074

2.00


Direct consumer

10,552

1.22


9,263

1.05


8,895

0.98


12,115

1.30


14,704

1.54


Indirect consumer

2,391

0.25


1,875

0.20


1,074

0.12


953

0.11


1,256

0.14


  Total nonaccruing consumer

28,214

1.17


24,612

1.03


21,106

0.89


24,380

1.00


29,034

1.16


    Total nonaccruing loans

63,783

1.17


84,212

1.53


75,374

1.37


86,658

1.57


98,773

1.74


Loans 90+ days still accruing

60

---


59

---


164

---


770

0.01


1,368

0.02


  Total nonperforming portfolio loans

63,843

1.18


84,271

1.53


75,538

1.37


87,428

1.58


100,141

1.77


Nonperforming held for sale

16,650



887



3,264



2,372



20,134



Other repossessed assets acquired

5,700



8,817



11,803



12,422



16,665



  Total nonperforming assets

$   86,193



$   93,975



$   90,605



$ 102,222



$   136,940



















Restructured loans still accruing

$   21,433



$   18,187



$   17,911



$   32,347



$     12,206



















































Commercial inflows

$     4,572



$   23,828



$   14,027



$   13,269



$     23,901



Commercial outflows

(28,603)



(18,496)



(22,037)



(20,730)



(17,611)



Net change

$  (24,031)



$     5,332



$    (8,010)



$    (7,461)



$      6,290



















































Net Charge-Offs

Three Months Ended


September 30, 2012

June 30, 2012

March 31, 2012

December 31, 2011

September 30, 2011

(in thousands)

$

% of Portfolio*


$

% of Portfolio*


$

% of Portfolio*


$

% of Portfolio*


$

% of Portfolio*


















Land hold

$          ---

---

%

$        (58)

(4.58)

%

$          ---

---

%

$        (33)

(2.00)

%

$           ---

---

%

Land development

(8)

(0.45)


100

5.76


(83)

(4.64)


3,079

93.21


43

0.76


Construction

(21)

(1.24)


14

1.24


(101)

(6.33)


(4)

(0.24)


(5)

(0.34)


Income producing

2,582

1.34


3,100

1.55


4,151

1.90


11,924

5.18


3,156

1.28


Owner-occupied

1,891

1.37


2,384

1.61


2,537

1.73


5,791

3.80


2,129

1.33


  Total commercial real estate

4,444

1.32


5,540

1.57


6,504

1.76


20,757

5.33


5,323

1.28


Commercial and industrial

5,363

1.26


5,249

1.23


3,029

0.74


1,032

0.27


1,225

0.32


  Total commercial

9,807

1.29


10,789

1.39


9,533

1.22


21,789

2.80


6,548

0.82


















Residential mortgage

2,515

1.75


3,506

2.40


5,076

3.34


1,170

0.73


18,364

11.13


Direct consumer

4,790

2.20


5,666

2.59


10,935

4.87


6,930

2.95


5,710

2.37


Indirect consumer

2,078

0.85


2,225

0.97


2,572

1.19


2,746

1.25


2,797

1.25


  Total consumer

9,383

1.55


11,397

1.92


18,583

3.14


10,846

1.76


26,871

4.27


  Total net charge-offs

$   19,190

1.39


$   22,186

1.62


$   28,116

2.05


$   32,635

2.30


$     33,419

2.34


















* Represents an annualized rate.
















 

 



Summary of Loan Loss Experience








Three Months Ended 









September 30,


June 30,


March 31,


December 31,


September 30,


(in thousands)




2012


2012


2012


2011


2011

















Allowance for loan losses - beginning of period


$        136,120


$      153,007


$      172,726


$      190,354


$      206,292

















Provision for loan losses




5,195


5,299


8,397


15,007


17,481

















Charge-offs:















Commercial and industrial




4,552


3,667


2,388


1,489


994



Small business




1,039


2,271


1,265


399


1,132



Commercial real estate




5,452


8,093


8,997


21,581


5,860



Total commercial




11,043


14,031


12,650


23,470


7,986



Residential mortgage




3,261


3,972


5,210


1,366


18,369



Direct consumer




6,067


7,168


11,527


7,544


6,398



Indirect consumer




3,172


3,157


3,251


3,229


3,430



Total charge-offs




23,543


28,328


32,638


35,609


36,183

















Recoveries:















Commercial and industrial




108


577


376


609


721



Small business




120


112


248


248


180



Commercial real estate




1,008


2,553


2,493


824


537



Total commercial




1,236


3,242


3,117


1,681


1,438



Residential mortgage




746


466


134


197


5



Direct consumer




1,277


1,502


592


613


688



Indirect consumer




1,094


932


679


483


633



Total recoveries




4,353


6,142


4,522


2,974


2,764

















Net charge-offs




19,190


22,186


28,116


32,635


33,419
































Allowance for loan losses - end of period


$        122,125


$      136,120


$      153,007


$      172,726


$      190,354
































 

Non-GAAP Reconciliation







September 30,

June 30,

March 31,

December 31,

September 30,

(in thousands)

2012

2012

2012

2011

2011

Efficiency Ratio (non-GAAP)






Net interest income (A)

$        75,805

$      75,680

$      76,119

$       78,049

$        78,841

Taxable equivalent adjustment (B)

1,503

1,532

1,571

1,670

1,827

Investment securities gains (losses) (C)

---

---

---

38

3

Noninterest income (D)

23,710

22,345

24,240

24,363

24,427

Noninterest expense (E)

72,055

66,339

67,101

66,640

65,411

(Gains) losses on ORE and ORE expenses (F)

1,264

93

65

2,076

1,739

Intangible amortization (G)

513

545

578

688

732

Merger-related expenses (H)

4,411

---

---

---

---

Efficiency ratio:  (E-F-G-H)/(A+B-C+D)(non-GAAP)

65.20%

65.99%

65.20%

61.39%

59.89%







Tangible Common Equity to Tangible Assets (non-GAAP)






Total assets

$   9,724,790

$ 9,670,493

$ 9,577,346

$  9,462,849

$    9,600,188

Goodwill

(318,150)

(318,150)

(318,150)

(318,150)

(318,150)

Other intangible assets

(5,792)

(6,305)

(6,850)

(7,428)

(8,116)

Tangible assets (non-GAAP)

$   9,400,848

$ 9,346,038

$ 9,252,346

$  9,137,271

$    9,273,922







Total shareholders' equity

$   1,358,197

$ 1,335,855

$ 1,044,619

$  1,019,537

$    1,009,143

Goodwill

(318,150)

(318,150)

(318,150)

(318,150)

(318,150)

Other intangible assets

(5,792)

(6,305)

(6,850)

(7,428)

(8,116)

Tangible equity (non-GAAP)

$   1,034,255

$ 1,011,400

$    719,619

$     693,959

$       682,877







Tangible equity

$   1,034,255

$ 1,011,400

$    719,619

$     693,959

$       682,877

Preferred stock

(290,580)

(288,723)

(286,901)

(285,114)

(283,360)

Tangible common equity (non-GAAP)

$      743,675

$    722,677

$    432,718

$     408,845

$       399,517







Tier 1 Common Equity (non-GAAP)






Total shareholders' equity

$   1,358,197

$ 1,335,855

$ 1,044,619

$  1,019,537

$    1,009,143

Qualifying capital securities

73,667

73,667

73,667

73,667

73,667

Goodwill

(318,150)

(318,150)

(318,150)

(318,150)

(318,150)

Accumulated other comprehensive loss

5,649

10,268

1,955

5,820

1,075

Disallowed deferred tax asset

(235,461)

(235,529)

---

---

---

Other intangible assets

(5,792)

(6,305)

(6,850)

(7,428)

(8,116)

Tier 1 capital (regulatory)

$      878,110

$    859,806

$    795,241

$     773,446

$       757,619







Tier 1 capital (regulatory)

$      878,110

$    859,806

$    795,241

$     773,446

$       757,619

Qualifying capital securities

(73,667)

(73,667)

(73,667)

(73,667)

(73,667)

Preferred stock

(290,580)

(288,723)

(286,901)

(285,114)

(283,360)

Total Tier 1 common equity (non-GAAP)

$      513,863

$    497,416

$    434,673

$     414,665

$       400,592







Net risk-weighted assets (regulatory)

$   5,821,748

$ 5,851,871

$ 5,803,811

$  5,723,333

$    5,912,527







Equity to assets

13.97%

13.81%

10.91%

10.77%

10.51%

Tier 1 common equity(non-GAAP)

8.83

8.50

7.49

7.24

6.77

Tangible equity to tangible assets(non-GAAP)

11.00

10.82

7.78

7.59

7.36

Tangible common equity to tangible assets(non-GAAP)

7.91

7.73

4.68

4.47

4.31













 

 







Non-GAAP Reconciliation






Adjusted earnings per share


Nine Months Ended




September 30,


 (in thousands, except per share amounts)


2012


2011








Earnings per Share






Diluted net income (loss) per share


$            8.19


$           (0.73)


Restoration of the deferred tax asset


6.82


---


Diluted net income (loss) per share (non-GAAP)


$            1.37


$           (0.73)








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 (loss)


$       349,028


$       (11,577)


Restoration of the deferred tax asset


(275,484)


---


Net income (loss) (non-GAAP)


73,544


(11,577)


Dividend on redeemable preferred stock


(18,127)


(17,088)


Net income (loss) attributable to common shareholders (non-GAAP)


55,417


(28,665)


Net income allocated to participating securities


1,268


---


Net income (loss) after allocation to participating securities (non-GAAP)


$        54,149


$       (28,665)








Denominator:






Weighted average shares outstanding for basic and dilutive earnings per common share


39,469


39,418








Basic net income (loss) per common share (non-GAAP)


$            1.37


$           (0.73)


Diluted net income (loss) per common share (non-GAAP)


1.37


(0.73)














 



Pre-tax pre-provision profit (non-GAAP)

Three Months Ended

 (in thousands)

 September 30,

 2012


 June 30, 2012


March 31,

2012


December 31,

2011


September 30, 

2011