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Citizens Republic Bancorp, Inc Management Discusses Q2 2012 Results - Earnings Call Transcript

Core deposit balances increased 9% over last year and continued to represent an important component of our total funding. Core deposits now fund 56% of our balance sheet compared to 42% 2.5 years ago. Time deposits are down 24% from last year as we continue to strategically reduce high cost, single service and broker time deposits.

Our strategic focus on C&I and consumer lending led to another quarter of growth in these lines of business. Today, C&I and consumer loans make up 64% of our loan portfolio, up from 62% last quarter and 57% a year ago. Compared to the second quarter of last year, C&I balances have increased 27%, and Indirect portfolio balances are up over 6%.

As anticipated, income-producing commercial real estate and residential mortgage loan balances continued to decline. Now I'll turn the call over to Lisa and Mark to talk through the details -- the quarter in more detail for you. Lisa?

Lisa T. McNeely

Thanks, Cathy. As Cathy mentioned, we reported net income attributable to common shareholders for the quarter of $297 million, which includes a $277 million tax benefit from eliminating the valuation allowance against our deferred tax asset. Provision expense was $5 million in the second quarter, reflecting continued improvement in our credit metrics. The allowance as a percentage of the portfolio loans was 2.47% at the end of the quarter. With continued improvement in the risk profile of our loan portfolio, we would expect this ratio to gradually move into closer alignment with our peers throughout the remainder of the year.

Net interest margin was 3.6% in the second quarter, up 4 basis points compared to last quarter and the second quarter of last year. In this environment of low interest rates and increased competition for quality earning assets, we have expected the net interest income and margin to be pressured. This quarter, and for the last several quarters, we have been successful in executing balance sheet strategies to mitigate that pressure.

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