Citizens Republic Bancorp, Inc. (CRBC) Q1 2012 Earnings Call April 27, 2012 10:00 AM ET Executives Kristine Brenner – Director, IR Cathleen Nash – President and CEO Lisa McNeely – EVP and CFO Mark Widawski – EVP and Chief Credit Officer Brian Boike – SVP and Treasurer Analysts Terry McEvoy – Oppenheimer & Company John Barber – KBW Matthew Schultheis – Boenning & Scattergood Presentation Operator
Previous Statements by CRBC
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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’ll turn the call over to our President and Chief Executive Officer, Cathy Nash. Cathy? Cathleen Nash Thank you, Kristine. We are pleased to report our fourth consecutive quarterly profit. Net income attributable to common shareholders for the first quarter was $19 million or $0.47 per share. A substantial improvement in earnings was primarily due to significantly reduced credit costs, which are reflective of the continued improvements in our credit quality metrics. Provision expense fell by 44% from last quarter. As we announced in our press release, we expect to reverse the valuation allowance against our deferred tax asset next quarter. Lisa will talk more about that in a moment. Changes in our balance sheet continue to positively reflect our strategic focuses. We were able to improve our deposit mix and funding cost by growing core deposits 5% during the quarter and 9% over the last year. Time deposits are down 24% from last year as we continue to strategically reduce single service and brokered CDs. Our strategic focus on C&I lending led to another strong quarter of growth in this line of businesses – in this line of business, excuse me, where balance is up over 7% compared to December. Compared to the first quarter of last year, C&I loans are up over 22%. Our indirect loan originations were also strong with a portfolio up almost 6% compared to the first quarter of last year. Mark will provide more detail about this focus. Our commercial real estate and residential mortgage portfolios continue to decline as we had planned and discussed in previous calls.
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. Read the rest of this transcript for free on seekingalpha.com