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Citizens Republic Bank CEO Discusses Q3 2010 Results - Earnings Call Transcript

Citizens Republic Bank CEO Discusses Q3 2010 Results - Earnings Call Transcript

Citizens Republic Bank (



Q3 2010 Earnings Conference Call

October 29, 2010 10:00 am EST


Cathleen H. Nash - President and Chief Executive

Lisa McNeely - Chief Financial Officer,

Mark Widowski - Chief Credit Office

Brian Boike - Citizens Republic Bancorp – Treasurer


Brett Scheiner - FBR Capital Markets and Co.

John Barber - Keefe, Bruyette & Woods

Greg Ketron - Citigroup Global Market

Terry McEvoy - Oppenheimer & Co. Inc.

Jason O'Donnell - Boenning & Scattergood Inc.

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Good day and welcome to the Citizens Republic Bancorp Third Quarter conference call. All lines are in a listen only mode; later you will have the opportunity to ask questions during the question and answer session. Please note this call is being recorded. I will now turn the call over to Christine Brenner. Please go ahead.


ristine Brenner

Thank you and good morning, welcome to the Citizens Republic Bancorp's Third Quarter Conference Call. This call is being recorded and the telephone replay will be available through November 5th. This call is also being simulcast live on our website at where it'll be archived for 90 days. I have with me Cassie Nash, President and Chief Executive Officer, Lisa McNealy Chief Financial Officer, and Mark Widowski, Chief Credit Officer who all has comments to share with you this morning. Brian Boike, our treasurer is also here to answer questions. After management concludes the prepared remarks we will open the line up for questions from research analysts. During this conference call statements may be made that are not historical facts. Such as those regarding Citizens' future and financial operating results, plans, objectives, expectations and attention.

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 as 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, judgment as of today and we expressly disclaim any obligation to update or revise information contained in these statements in the future.

Now, I’ll turn the call over to our President and CEO, Cathy Nash. Cathy.


hleen H



Thank you, Kristine. We continue to move through this credit cycle as we work our way back to profitability. In this call we'll cover the highlights for you and then I'll spend a little time talking about our efforts to accelerate that work. Our pre-tax, pre-provision profit came in at $36 million for the quarter and that included some seasonal positive impacts.

As we've said in the past, we continue to expect PP&P to trend around $30 million per quarter. In general, we continue to see improving credit trends but we also continue to see elongation of the economic cycle having a negative impact on some of clients. Full non-performing loans were down for the quarter but this came primarily as a result of transferring residential mortgage, non-performing loans, to help for sale at the end of the quarter.

I'll talk more about that in just a minute. Total 30 to 89 day delinquencies increased by $19. 8 million compared to last quarter. This increase was driven by a couple of specific credits that Mark will detail. Overall our 30 to 89 day bucket is almost $54 million dollars lower than it was a year ago. While the Michigan economy has seen stabilization it continues to take time to organically work through our problem credits.

As we've discussed in the past we proactively manage our stretched credit to mitigate potential losses and aggressively pursue paths to reduce our overall problem level at asset levels. We continually evaluate different assets disposition strategies including organic workouts, discrete note sales and bulk sales.

Last year at this time our total non-performing assets were over $600 million at the end of this quarter they totaled just over $440 million. Over the past year we've also improved our reserve coverage of MPA to 73% from 66%. Although we are really pleased with the work our special loans group has done we believe we have an opportunity to accelerate that work even further.

Late in the third quarter we saw an opportunity for another bulk sale of non-performing residential mortgages, so we transferred a portion to held for sale. This move accelerates the loss recognition on the stressed assets in that portfolio and is representative of the aggressive opportunistic approach we are taking towards the disposition of troubled assets. We continually monitor the markets for disposition of troubled assets and wave that disposition against the value of organically working the (inaudible).

Taking into consideration all of the various carrying costs. With the recent improvement and the liquidity of these markets we are able to achieve wholesale values that are compelling when compared to the costs and uncertainty around continuing to hold the assets. We expect that our accelerated initiative will reduce our exposure to certain problem asset classes and real estate in general and ultimately reduce volatility in our results.

Accelerating our work to reduce the current credit overhang will bring more clarity around our credit outlook. Reduced volatility in our results and along with our continued focus on generating solid pre-tax, pre-provision profit to get us on a more certain path to profitability. I'm now going to allow Lisa and Mark to talk about the details of the quarter and then I'll finish up with more of our plans for the future, Lisa?

Lisa T



Thank you, Cathy. The net loss from the quarter was $62.5 million which is an increase over last quarters net loss of $44 million. Increased provision expense reflecting more to accelerate stress asset resolutions was a primary reason for the increased loss over the prior quarter. As Cathy mentioned our pre-tax, pre-provision income continues to be strong at $36 million for the quarter. In the third quarter we experienced higher seasonal non-interest income fluctuations also, our results reflect timing reductions in our non-interest income or non-interest expense.

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