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TheStreet Open House

10 Bank Stocks Trading Below Book Value

Shares of Citizens Republic Bancorp (CRBC) of Flint, Mich. closed at 90 cents Thursday, or 0.6 times tangible book value. Even at that low valuation, shares are up 30% year-to-date.

TARP Status: The company owes $300 million in TARP money and missed its February dividend payment on preferred shares held by the government.

Capital: Despite continued losses, Citizens Republic was still well capitalized as of March 31, with a Tier 1 leverage ratio of 8.47% and a total risk-based capital ratio of 13.49%. During the company's first-quarter conference call, CFO Charles Christy said the company was confident it had "plenty of capital to get us through the rest of the cycle and remain well capitalized," according to a transcript published by Seeking Alpha.

Earnings: Citizens Republic reported a first-quarter net loss to common shareholders of $90 million, or 23 cents a share, following a total 2009 loss of $534 million or $2.75 a share. The first-quarter loss reflected $77 million in credit write-downs in anticipation of a sale of nonperforming mortgages during the second quarter.

Asset Quality: The nonperforming assets ratio was 4.51%, declining slightly from the previous quarter, as the company reported improvements in several asset quality benchmarks. The net charge-off ratio for the first quarter was quite high at 6.01% but reflected the $77 million write-down on the nonperforming mortgages being sold in the second quarter. Loan loss reserves covered 4.2% of total loans, which appeared adequate.

Prospects: Keefe Bruyette & Woods analyst Eileen Rooney has a "Market Perform" or neutral rating on the shares, with a 12-month price target of $1. While Christy said Citizens Republic didn't plan on repaying TARP until the bank was "through the cycle and safely on the road to economic recovery," dilution of the common shares is a clear possibility. The improved asset quality trend and continued risk of dilution support Rooney's rating.

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