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Citizens Republic Bancorp's CEO Discusses Q1 2012 Results - Earnings Call Transcript

I’ll now turn the call over to Lisa and Mark to talk through the quarter in more detail. Lisa?

Lisa McNeely

Thanks, Cathy. As Cathy mentioned, we reported net income attributable to common shareholders for the quarter of $19 million. Provision expense of $8 million in the first quarter was $6.6 million less than last quarter as our credit metrics continue to improve. As the risk profile of our loan portfolio continues to improve, we would expect our allowance for loan loss reserve coverage to continue to move into closer alignment with our peers over the coming quarters.

Net interest margin was 3.56% in the first quarter, down 6 basis points compared to last quarter and up 3 basis points from the first quarter of last year. As we’ve said in the past, we expected our margin to be pressured given the low interest rate environment and substantial competition for quality earning assets. We have been successful in mitigating the majority of that pressure by maintaining disciplined loan pricing, decreasing non-performing assets, and excess on-balance sheet liquidity, and reducing our cost of funds.

Since the first quarter of 2011, interest bearing deposit costs have been reduced by 29 basis points. Compared to the fourth quarter, we were able to reduce these costs by 8 basis points. Similarly, our overall cost of funds fell by 6 and 24 basis points over fourth quarter and first quarter of last year respectively.

The reductions in these costs are the result of our bankers’ continued focus on growing core deposits and consistently carrying out our client relationship pricing strategy. Non-interest income was consistent with last quarter at $24 million. Gains from loans held-for-sale offset decreases in service charges.

Service charge income was right in line with our expectations as first quarter transaction levels generally trend down from the fourth quarter. We had worked diligently to offset the negative regulatory impact on our fee income as our bankers work with clients to fully utilize our competitively priced products that meet our clients’ transaction needs. We continue to focus on services and products that help provide a stable base of fee income.

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