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Citizens Republic Bancorp, Inc. Q1 2010 Earnings Call Transcript

Citizens Republic Bancorp, Inc. Q1 2010 Earnings Call Transcript

Citizens Republic Bancorp, Inc. (CRBC)

Q1 2010 Earnings Call

April 23, 2010; 10:00am ET


Cathy Nash - President & Chief Executive Officer

Charlie Christy - Chief Financial Officer

Mark Widawski - Chief Credit Officer

Brian Boike - Treasurer

Kristine Brenner - Investor Relations


Terry McEvoy - Oppenheimer & Co

Eileen Rooney - Keefe Bruyette & Woods Inc.



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Good day everyone and welcome to today’s program. (Operator Instructions) It’s now my pleasure to turn the conference over to Kristine Brenner.

Kristine Brenner

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» Citizens Republic Bancorp, Inc. Q4 2009 Earnings Call Transcript
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Thank you Beth, and good morning. Welcome to the Citizens Republic Bank Corp first quarter conference call. This call is being recorded and a telephone replay will be available through April 30. This call is also being simulcast live on our website

, where it will be archived for 90 days.

I have with me this morning Cathy Nash, President and Chief Executive Officer; Charlie Christy, Chief Financial Officer; and Mark Widawski, Chief Credit Officer, all who may have comments to share with you this morning. Brian Boike, our Treasurer is also here to answer questions. After management concludes their prepared remarks, we will open the line up for questions from research analysts.

During this conference call, statements maybe made that are not historical facts, such as those regarding Citizen’s future, financial and operating results, plans, objectives, expectations and intentions. Such forward-looking statements are subject to risks and uncertainties, which include but are not limited to those discussed in Citizens’ annual and quarterly reports filed with the SEC.

Forward-looking statements are not guarantees of future performance, and actual results could differ materially. These forward-looking statements reflect management’s judgment as of today, and we expressly disclaim any obligation to update or revise information contained in these statements in the future.

Now, I’d like to turn the call over to our President and Chief Executive Officer, Cathy Nash. Cathy.

Cathy Nash

Thanks Kristine. I appreciate those of you who have joint us on the call today. I’ll make some opening remarks and then Charlie will take us through the performance details, and Mark will cover the credit performance.

Although there was some noise this quarter in our results, we are pleased with the improvement in our pretax, pre provision core operating earning, but let me explain the items causing the noise and then talk about some of the highlights for the quarter.

First, at the end of the quarter we decided to see non-performing residential loans. In the past we said that we would carefully consider bulk sales because of their impact to capital. We also have noted our concern with the residential mortgage portfolio, and recent trends have done nothing to raise our concern.

Last week Realty Track

recorded that the number of US homes taken over by banks jumped 35% in the first quarter from the year ago. In addition household-facing foreclosure grew 16% in the same period, and 7% from the last three months of 2009.

Since we continue to see extensions and redemptions periods increase severity and for increases in our carrying cost, we came to the conclusion that selling these loans now and recognizing losses earlier is better for us in the long run. Even with the sale let me emphases that we are still inline with the credit forecast we established for ourselves early last year.

Second, with the pending sale of F&M Bank, our Iowa franchised which we expect to close later today, we have removed all of their results and have shown them as discontinued operations in all periods recording. In the first quarter our results reflect the fair value adjustments that we needed to record in anticipation of the sale. If you remember, the sale of our Iowa subsidiary will increase our holing company cash by about $50 million.

Now let me cover some highlights of the quarter. Our pretax, pre-provision core earnings are up $1.6 million or 5% over the fourth quarter, just $34.7 million. This was despite a shrinking loan portfolio, which was down about 4.5% from last quarter. It also does not include the $6 million gain we had from our investment securities sale.

The improvement we saw was due to a slight improvement in non-interest income, as well as lower levels of non-inters expense as we continue to benefit from the strategic alignment we discussed in the past. Our net interest margin improved slightly to 314 basis points. This is the fourth quarter in a row where we saw improvements.

On the credit side I’m pleased to report we had another quarter of improved metrics. Our delinquencies are down for the second straight quarter. Total delinquent loans are $143 million or 1.92% of the portfolio compared to $155 million or 1.98% at the end of the fourth quarter.

Our watch list has declined again this quarter in terms of absolute dollars. As a percent, the loan portfolio was up slightly because our total loans declined. Our total non-performing assets decreased. Total non-performing assets were $556 million at the end of March, compared to $594 million at the end of December.

On the deposit side, our core deposits are up slightly over last quarter. In this economic environment when consumers and small business are struggling, we are pleased that we’ve been able to grow our core deposits. We’ve added over 9200 new clients so far this quarter, and we’ve had some of the next retentions rates in the industry. I think this reflects our success in marking sure we stayed focused on our clients despite the economic challenges.

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