##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2010
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission file Number 001-33063
 CITIZENS REPUBLIC BANCORP, INC.
  MICHIGAN
    
    38-2378932(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 328 S. Saginaw St., Flint, Michigan
    
    48502(Address of principal executive offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller
reporting company)
 o þ
   Class
    
    Outstanding at April 30, 2010Common Stock, No Par Value
    
    394,387,749 Shares




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##### 



Citizens Republic Bancorp, Inc.
 PagePart I  Financial Information (unaudited)Item 1 - Financial Statements (unaudited)Consolidated Balance Sheets
    
    3Consolidated Statements of Operations
    
    4Consolidated Statements of Changes in Shareholders Equity
    
    5Consolidated Statements of Cash Flows
    
    6Notes to Consolidated Financial Statements
    
    7Item 2 - Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    27Item 3 - Quantitative and Qualitative Disclosures about Market Risk
    
    47Item 4 - Controls and Procedures
    
    47Part II  Other InformationItem 1A  Risk Factors
    
    47Item 2 -Unregistered Sales of Equity Securities and Use of Proceeds
    
    48Item 3  Defaults Upon Senior Securities
    
    48Item 6 - Exhibits
    
    48Signatures
    
    49Exhibit Index
    
    50EX-31.1EX-31.2EX-32.1




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##### Table of Contents



Consolidated Balance Sheets (Unaudited)
Citizens Republic Bancorp and Subsidiaries
 March 31,
    
    
    December 31,
    
    
    March 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2009AssetsCash and due from banks
    
    $
    148,161
    
    
    $
    156,093
    
    
    $
    158,199Money market investments
    
    
    760,746
    
    
    
    686,285
    
    
    
    480,656Investment Securities:Securities available for sale, at fair value
    
    
    2,057,599
    
    
    
    2,076,794
    
    
    
    2,106,298Securities held to maturity, at amortized cost
(fair value of $115,484, $116,368 and $115,962, respectively)
    
    
    113,259
    
    
    
    114,249
    
    
    
    115,756Total investment securities
    
    
    2,170,858
    
    
    
    2,191,043
    
    
    
    2,222,054FHLB and Federal Reserve stock
    
    
    155,084
    
    
    
    155,084
    
    
    
    147,584Portfolio loans:Commercial and industrial
    
    
    1,824,801
    
    
    
    1,921,755
    
    
    
    2,339,028Commercial real estate
    
    
    2,768,299
    
    
    
    2,811,539
    
    
    
    2,927,094Total commercial
    
    
    4,593,100
    
    
    
    4,733,294
    
    
    
    5,266,122Residential mortgage
    
    
    877,201
    
    
    
    1,025,248
    
    
    
    1,194,384Direct consumer
    
    
    1,174,726
    
    
    
    1,224,182
    
    
    
    1,361,958Indirect consumer
    
    
    794,183
    
    
    
    805,181
    
    
    
    802,116Total portfolio loans
    
    
    7,439,210
    
    
    
    7,787,905
    
    
    
    8,624,580Less: Allowance for loan losses
    
    
    (322,377
    )
    
    
    (338,940
    )
    
    
    (279,838
    )Net portfolio loans
    
    
    7,116,833
    
    
    
    7,448,965
    
    
    
    8,344,742Loans held for sale
    
    
    107,772
    
    
    
    80,219
    
    
    
    89,231Premises and equipment
    
    
    108,680
    
    
    
    110,703
    
    
    
    115,990Goodwill
    
    
    318,150
    
    
    
    318,150
    
    
    
    574,421Other intangible assets
    
    
    13,247
    
    
    
    14,378
    
    
    
    19,377Bank owned life insurance
    
    
    216,179
    
    
    
    220,190
    
    
    
    218,917Other assets
    
    
    212,115
    
    
    
    214,560
    
    
    
    253,183Assets of discontinued operations
    
    
    324,097
    
    
    
    335,961
    
    
    
    357,936Total assets
    
    $
    11,651,922
    
    
    $
    11,931,631
    
    
    $
    12,982,290LiabilitiesNoninterest-bearing deposits
    
    $
    1,239,352
    
    
    $
    1,288,303
    
    
    $
    1,144,812Interest-bearing demand deposits
    
    
    1,057,094
    
    
    
    1,055,290
    
    
    
    818,715Savings deposits
    
    
    2,533,002
    
    
    
    2,460,114
    
    
    
    2,588,761Time deposits
    
    
    3,651,750
    
    
    
    3,697,056
    
    
    
    4,155,774Total deposits
    
    
    8,481,198
    
    
    
    8,500,763
    
    
    
    8,708,062Federal funds purchased and securities sold
under agreements to repurchase
    
    
    30,209
    
    
    
    32,900
    
    
    
    44,196Other short-term borrowings
    
    
    2,920
    
    
    
    6,900
    
    
    
    13,413Other liabilities
    
    
    133,893
    
    
    
    124,718
    
    
    
    161,176Long-term debt
    
    
    1,337,746
    
    
    
    1,512,987
    
    
    
    2,064,991Liabilities of discontinued operations
    
    
    421,562
    
    
    
    422,327
    
    
    
    423,079Total liabilities
    
    
    10,407,528
    
    
    
    10,600,595
    
    
    
    11,414,917Shareholders EquityPreferred stock  no par value
Authorized - 5,000,000 shares; Issued and outstanding - 300,000 at 3/31/10,
12/31/09, and 3/31/09, redemption value of $300 million
    
    
    273,522
    
    
    
    271,990
    
    
    
    267,566Common stock  no par value
Authorized - 150,000,000 shares; Issued and outstanding - 394,391,857 at 3/31/10,
394,397,406 at 12/31/09, and 126,298,743 at 3/31/09
    
    
    1,430,273
    
    
    
    1,429,771
    
    
    
    1,214,173Retained (deficit) earnings
    
    
    (453,910
    )
    
    
    (363,632
    )
    
    
    121,106Accumulated other comprehensive loss
    
    
    (5,491
    )
    
    
    (7,093
    )
    
    
    (35,472
    )Total shareholders equity
    
    
    1,244,394
    
    
    
    1,331,036
    
    
    
    1,567,373Total liabilities and shareholders equity
    
    $
    11,651,922
    
    
    $
    11,931,631
    
    
    $
    12,982,290
  3




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##### Table of Contents



Consolidated Statements of Operations (Unaudited)
Citizens Republic Bancorp and Subsidiaries
 Three Months EndedMarch 31,(in thousands, except per share amounts)
    
    2010
    
    
    2009Interest IncomeInterest and fees on loans
    
    $
    101,742
    
    
    $
    117,285Interest and dividends on investment securities:Taxable
    
    
    18,261
    
    
    
    20,292Tax-exempt
    
    
    5,285
    
    
    
    6,636Dividends on FHLB and Federal Reserve stock
    
    
    1,002
    
    
    
    1,360Money market investments
    
    
    424
    
    
    
    258Total interest income
    
    
    126,714
    
    
    
    145,831Interest ExpenseDeposits
    
    
    29,511
    
    
    
    44,765Short-term borrowings
    
    
    24
    
    
    
    84Long-term debt
    
    
    15,990
    
    
    
    25,501Total interest expense
    
    
    45,525
    
    
    
    70,350Net Interest Income
    
    
    81,189
    
    
    
    75,481Provision for loan losses
    
    
    101,355
    
    
    
    63,485Net interest (loss) income after provision for loan losses
    
    
    (20,166
    )
    
    
    11,996Noninterest IncomeService charges on deposit accounts
    
    
    9,684
    
    
    
    9,856Trust fees
    
    
    3,795
    
    
    
    3,318Mortgage and other loan income
    
    
    2,589
    
    
    
    3,043Brokerage and investment fees
    
    
    933
    
    
    
    1,295ATM network user fees
    
    
    1,597
    
    
    
    1,385Bankcard fees
    
    
    2,007
    
    
    
    1,834Losses on loans held for sale
    
    
    (7,702
    )
    
    
    (6,152
    )Investment securities gains
    
    
    6,016
    
    
    
    Other income
    
    
    3,474
    
    
    
    3,686Total noninterest income
    
    
    22,393
    
    
    
    18,265Noninterest ExpenseSalaries and employee benefits
    
    
    29,947
    
    
    
    33,030Occupancy
    
    
    7,461
    
    
    
    7,592Professional services
    
    
    2,253
    
    
    
    3,093Equipment
    
    
    3,072
    
    
    
    2,784Data processing services
    
    
    4,629
    
    
    
    4,194Advertising and public relations
    
    
    1,297
    
    
    
    1,418Postage and delivery
    
    
    1,014
    
    
    
    1,491Other loan expenses
    
    
    5,974
    
    
    
    5,862Other real estate (ORE) expenses and losses
    
    
    7,953
    
    
    
    8,365Intangible asset amortization
    
    
    1,130
    
    
    
    2,037Other expense
    
    
    13,373
    
    
    
    9,190Total noninterest expense
    
    
    78,103
    
    
    
    79,056Loss from Continuing Operations Before Income Taxes
    
    
    (75,876
    )
    
    
    (48,795
    )Income tax provision (benefit) from continuing operations
    
    
    147
    
    
    
    (3,253
    )Loss from Continuing Operations
    
    
    (76,023
    )
    
    
    (45,542
    )Discontinued operations:(Loss) income from discontinued operations (net of income tax)
    
    
    (8,973
    )
    
    
    393Net Loss
    
    
    (84,996
    )
    
    
    (45,149
    )Dividend on redeemable preferred stock
    
    
    (5,282
    )
    
    
    (4,103
    )Net Loss Attributable to Common Shareholders
    
    $
    (90,278
    )
    
    $
    (49,252
    )Earnings Per Share from Continuing OperationsBasic
    
    $
    (0.21
    )
    
    $
    (0.40
    )Diluted
    
    
    (0.21
    )
    
    
    (0.40
    )Earnings Per Share from Discontinued OperationsBasic
    
    $
    (0.02
    )
    
    $
    0.01Diluted
    
    
    (0.02
    )
    
    
    0.01Net Loss Per Common Share:Basic
    
    $
    (0.23
    )
    
    $
    (0.39
    )Diluted
    
    
    (0.23
    )
    
    
    (0.39
    )Average Common Shares Outstanding:Basic
    
    
    393,779
    
    
    
    125,400Diluted
    
    
    393,779
    
    
    
    125,400
  4




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##### Table of Contents



Consolidated Statements of Changes in Shareholders Equity (Unaudited)
Citizens Republic Bancorp and Subsidiaries
 AccumulatedRetained
    
    
    OtherPreferred
    
    
    Common Stock
    
    
    Earnings
    
    
    Comprehensive(in thousands, except per share amounts)
    
    Stock
    
    
    Shares
    
    
    Amount
    
    
    (Deficit)
    

    Income (Loss)
    
    
    TotalBalance at December 31, 2008
    
    $
    266,088
    
    
    
    125,997
    
    
    $
    1,214,469
    
    
    $
    170,358
    
    
    $
    (49,594
    )
    
    $
    1,601,321Comprehensive loss, net of tax:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,149
    )
    
    
    
    
    
    
    (45,149
    )Other comprehensive income (loss):Net unrealized gain on securities
available-for-sale, net
of tax effect of ($10,143)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,838Net change in unrealized loss on
qualifying cash flow
hedges, net of tax effect of $652
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,212
    )Net change in unrecognized pension and
post
retirement costs, net of tax
effect of $1,887
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,504
    )Other comprehensive income total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,122Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,027
    )Cash dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,625
    )
    
    
    
    
    
    
    (2,625
    )Accretion of preferred stock discount
    
    
    1,478
    
    
    
    
    
    
    
    
    
    
    
    (1,478
    )
    
    
    
    
    
    
    Proceeds from restricted stock activity
    
    
    
    
    
    
    312
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recognition of stock-based compensation
    
    
    
    
    
    
    
    
    
    
    (275
    )
    
    
    
    
    
    
    
    
    
    
    (275
    )Shares purchased for taxes
    
    
    
    
    
    
    (10
    )
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    (21
    )Balance  March 31, 2009
    
    $
    267,566
    
    
    
    126,299
    
    
    $
    1,214,173
    
    
    $
    121,106
    
    
    $
    (35,472
    )
    
    $
    1,567,373Balance at December 31, 2009
    
    $
    271,990
    
    
    
    394,397
    
    
    $
    1,429,771
    
    
    $
    (363,632
    )
    
    $
    (7,093
    )
    
    $
    1,331,036Comprehensive loss, net of tax:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84,996
    )
    
    
    
    
    
    
    (84,996
    )Other comprehensive income (loss):Net unrealized gain on securities
available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,299Net change in unrealized loss on
qualifying cash
flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (697
    )Net change in unrecognized pension and
post
retirement costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,602Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,395
    )Accrued dividend on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,750
    )
    
    
    
    
    
    
    (3,750
    )Accretion of preferred stock discount
    
    
    1,532
    
    
    
    
    
    
    
    
    
    
    
    (1,532
    )
    
    
    
    
    
    
    Proceeds from restricted stock activity
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recognition of stock-based compensation
    
    
    
    
    
    
    
    
    
    
    502
    
    
    
    
    
    
    
    
    
    
    
    502Balance  March 31, 2010
    
    $
    273,522
    
    
    
    394,392
    
    
    $
    1,430,273
    
    
    $
    (453,910
    )
    
    $
    (5,491
    )
    
    $
    1,244,394
  5




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##### Table of Contents



Consolidated Statements of Cash Flows (Unaudited)  Citizens Republic Bancorp and Subsidiaries
 Three Months EndedMarch 31,(in thousands)
    
    2010
    
    
    2009Operating Activities:Net loss
    
    $
    (84,996
    )
    
    $
    (45,149
    )(Loss)/income from discontinued operations, net of tax
    
    
    (8,973
    )
    
    
    393Loss from continuing operations
    
    
    (76,023
    )
    
    
    (45,542
    )Adjustments to reconcile net income to net cash provided by
operating activities:Provision for loan losses
    
    
    101,355
    
    
    
    63,485Depreciation and software amortization
    
    
    3,041
    
    
    
    2,866Amortization of intangibles
    
    
    1,130
    
    
    
    2,037Net decrease (increase) in current and deferred income taxes
    
    
    147
    
    
    
    (3,359
    )Amortization and fair value adjustments of purchase accounting mark-to-market, net
    
    
    (2,054
    )
    
    
    (2,690
    )Fair value adjustment on loans held for sale and other real estate
    
    
    6,897
    
    
    
    13,153Discount accretion and amortization of issuance costs on long term debt
    
    
    133
    
    
    
    302Net amortization (accretion) on investment securities
    
    
    539
    
    
    
    (587
    )Investment securities gains
    
    
    (6,016
    )
    
    
    Loans originated for sale
    
    
    (37,909
    )
    
    
    (100,288
    )Proceeds from loans held for sale
    
    
    40,537
    
    
    
    94,579Net gains from loan sales
    
    
    (968
    )
    
    
    (2,204
    )Net loss on other real estate
    
    
    1,150
    
    
    
    79Recognition of stock-based compensation
    
    
    502
    
    
    
    (275
    )Discontinued operations, net
    
    
    (7,508
    )
    
    
    1,550Other
    
    
    7,244
    
    
    
    (5,046
    )Net cash provided by operating activities
    
    
    32,197
    
    
    
    18,060Investing Activities:Net increase in money market investments
    
    
    (74,460
    )
    
    
    (275,052
    )Securities available-for-sale:Proceeds from sales
    
    
    153,463
    
    
    
    Proceeds from maturities and payments
    
    
    306,062
    
    
    
    167,446Purchases
    
    
    (432,675
    )
    
    
    (144,144
    )Securities held-to-maturity:Proceeds from maturities and payments
    
    
    995
    
    
    
    Net decrease in loans and leases
    
    
    188,860
    
    
    
    295,700Proceeds from sales of other real estate
    
    
    10,281
    
    
    
    5,688Net increase in properties and equipment
    
    
    (1,018
    )
    
    
    (1,550
    )Discontinued operations, net
    
    
    10,131
    
    
    
    926Net cash provided by investing activities
    
    
    161,639
    
    
    
    49,014Financing Activities:Net increase in demand and savings deposits
    
    
    25,740
    
    
    
    288,994Net decrease in time deposits
    
    
    (45,427
    )
    
    
    (211,422
    )Net decrease in short-term borrowings
    
    
    (6,670
    )
    
    
    (6,882
    )Principal reductions in long-term debt
    
    
    (174,912
    )
    
    
    (128,171
    )Cash dividends paid on preferred stock
    
    
    
    
    
    
    (2,625
    )Shares acquired for retirement and purchased for taxes
    
    
    (498
    )
    
    
    (21
    )Discontinued operations, net
    
    
    
    
    
    
    (12,247
    )Net cash used by financing activities
    
    
    (201,767
    )
    
    
    (72,374
    )Net decrease in cash and due from banks
    
    
    (7,932
    )
    
    
    (5,300
    )Cash and due from banks at beginning of period
    
    
    156,093
    
    
    
    163,499Cash and due from banks at end of period
    
    $
    148,161
    
    
    $
    158,199Supplemental Cash Flow Information:Interest paid
    
    $
    55,832
    
    
    $
    72,482Income tax refund, net
    
    
    
    
    
    
    (108
    )Loans transferred to other real estate owned
    
    
    12,499
    
    
    
    8,786Loans transferred to held for sale
    
    
    41,054
    
    
    
    Held for sale loans transferred to other real estate
    
    
    
    
    
    
    4,546Dividend on redeemable preferred stock
    
    
    1,532
    
    
    
    1,478
 6




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##### Table of Contents



Part I  Financial Information
 
 Item 1   Consolidated Financial Statements
 
 Notes to Consolidated Financial Statements (Unaudited)  Citizens Republic Bancorp, Inc. and Subsidiaries
 Note 1. Basis of Presentation and Accounting Policies
 www.citizensbanking.com
  Discontinued Operations
  New Accounting Pronouncements
 The Financial Accounting Standards Board (FASB) Accounting Standards Codification TM (the Codification or ASC)
Accounting Standard Update (ASU)
Statements of Financial Accounting Standards (SFAS)
 FASB ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about
Fair Value Measurements
  7




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##### Table of Contents



SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (subsequently codified by ASU 2009-17,
Consolidations  Topic 810)
  SFAS No. 166, Accounting for Transfers of Financial Assets (subsequently codified by ASU 2009-16,
Transfers and Servicing  Topic 860)
  Note 2. Pending Accounting Pronouncements
 FASB ASU 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit
Derivatives
  Note 3. Investment Securities
  March 31, 2010
    
    
    December 31, 2009Estimated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Gross Unrealized
    
    
    Amortized
    
    
    Fair
    
    
    Gross Unrealized(in thousands)
    
    Cost
    
    
    Value
    
    
    Gains
    
    
    Losses
    
    
    Cost
    
    
    Value
    
    
    Gains
    
    
    LossesSecurities available for sale:Federal agencies
    
    $
    80,653
    
    
    $
    82,416
    
    
    $
    1,763
    
    
    $
    
    
    
    $
    135,793
    
    
    $
    138,644
    
    
    $
    2,851
    
    
    $
    Collateralized mortgage obligations
    
    
    444,518
    
    
    
    438,284
    
    
    
    5,676
    
    
    
    11,910
    
    
    
    393,143
    
    
    
    382,943
    
    
    
    5,138
    
    
    
    15,338Mortgage-backed
    
    
    1,233,755
    
    
    
    1,271,547
    
    
    
    38,229
    
    
    
    437
    
    
    
    1,061,015
    
    
    
    1,093,598
    
    
    
    33,791
    
    
    
    1,208State and municipal
    
    
    259,655
    
    
    
    264,602
    
    
    
    5,767
    
    
    
    820
    
    
    
    432,795
    
    
    
    443,663
    
    
    
    11,544
    
    
    
    676Other
    
    
    740
    
    
    
    750
    
    
    
    10
    
    
    
    
    
    
    
    17,951
    
    
    
    17,946
    
    
    
    6
    
    
    
    11Total available for sale
    
    $
    2,019,321
    
    
    $
    2,057,599
    
    
    $
    51,445
    
    
    $
    13,167
    
    
    $
    2,040,697
    
    
    $
    2,076,794
    
    
    $
    53,330
    
    
    $
    17,233Securities held to maturity:State and municipalTotal held to maturity
    
    $
    113,259
    
    
    $
    115,484
    
    
    $
    2,563
    
    
    $
    338
    
    
    $
    114,249
    
    
    $
    116,368
    
    
    $
    2,531
    
    
    $
    412FHLB and Fed Reserve stock
    
    $
    155,084
    
    
    $
    155,084
    
    
    $
    
    
    
    $
    
    
    
    $
    155,084
    
    
    $
    155,084
    
    
    $
    
    
    
    $
    
 8




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##### Table of Contents



March 31, 2010
    
    Amortized
    
    
    Estimated Fair(in thousands)
    
    Cost
    
    
    ValueSecurities available for sale:Federal agencies and state and municipalContractual maturity within one year
    
    $
    114,166
    
    
    $
    116,575After one year through five years
    
    
    66,267
    
    
    
    68,081After five years through ten years
    
    
    86,238
    
    
    
    88,354After ten years
    
    
    73,637
    
    
    
    74,008Subtotal
    
    
    340,308
    
    
    
    347,018Collateralized mortgage obligations and mortgage-backed
    
    
    1,678,273
    
    
    
    1,709,831Other
    
    
    740
    
    
    
    750Total available for sale
    
    $
    2,019,321
    
    
    $
    2,057,599Securities held to maturity:State and municipalAfter one year through five years
    
    $
    2,447
    
    
    $
    2,569After five years through ten years
    
    
    46,703
    
    
    
    48,096After ten years
    
    
    64,109
    
    
    
    64,819Total held to maturity
    
    $
    113,259
    
    
    $
    115,484
  Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalMarch 31, 2010
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized(in thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesSecurities available for sale:Collateralized mortgage obligations
    
    $
    63,465
    
    
    $
    627
    
    
    $
    123,116
    
    
    $
    11,283
    
    
    $
    186,581
    
    
    $
    11,910Mortgage-backed
    
    
    159,299
    
    
    
    431
    
    
    
    243
    
    
    
    6
    
    
    
    159,542
    
    
    
    437State and municipal
    
    
    25,339
    
    
    
    393
    
    
    
    6,288
    
    
    
    427
    
    
    
    31,627
    
    
    
    820Total available for sale
    
    $
    248,103
    
    
    $
    1,451
    
    
    $
    129,647
    
    
    $
    11,716
    
    
    $
    377,750
    
    
    $
    13,167Securities held to maturity:State and municipalTotal held to maturity
    
    $
    14,097
    
    
    $
    232
    
    
    $
    1,470
    
    
    $
    106
    
    
    $
    15,567
    
    
    $
    338Total
    
    $
    262,200
    
    
    $
    1,683
    
    
    $
    131,117
    
    
    $
    11,822
    
    
    $
    393,317
    
    
    $
    13,505
 9




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##### Table of Contents



Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalDecember 31, 2009
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized(in thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesSecurities available for sale:Collateralized mortgage obligations
    
    $
    51,983
    
    
    $
    452
    
    
    $
    146,024
    
    
    $
    14,886
    
    
    $
    198,007
    
    
    $
    15,338Mortgage-backed
    
    
    109,134
    
    
    
    1,202
    
    
    
    251
    
    
    
    6
    
    
    
    109,385
    
    
    
    1,208State and municipal
    
    
    29,055
    
    
    
    401
    
    
    
    9,323
    
    
    
    275
    
    
    
    38,378
    
    
    
    676Other
    
    
    
    
    
    
    
    
    
    
    312
    
    
    
    11
    
    
    
    312
    
    
    
    11Total available for sale
    
    $
    190,172
    
    
    $
    2,055
    
    
    $
    155,910
    
    
    $
    15,178
    
    
    $
    346,082
    
    
    $
    17,233Securities held to maturity:State and municipalTotal held to maturity
    
    $
    16,778
    
    
    $
    284
    
    
    $
    1,438
    
    
    $
    128
    
    
    $
    18,216
    
    
    $
    412Total
    
    $
    206,950
    
    
    $
    2,339
    
    
    $
    157,348
    
    
    $
    15,306
    
    
    $
    364,298
    
    
    $
    17,645
     10




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##### Table of Contents



Note 4. Allowance for Loan Losses and Impaired Loans
  Three Months EndedMarch 31,(in thousands)
    
    2010
    
    
    2009Allowance for loan losses  beginning of period
    
    $
    338,940
    
    
    $
    252,938Provision for loan losses
    
    
    101,355
    
    
    
    63,485Charge-offs:Commercial and industrial
    
    
    13,525
    
    
    
    8,108Commercial real estate
    
    
    15,976
    
    
    
    18,977Total commercial
    
    
    29,501
    
    
    
    27,085Residential mortgage
    
    
    80,729
    
    
    
    804Direct consumer
    
    
    7,528
    
    
    
    4,591Indirect consumer
    
    
    3,813
    
    
    
    5,507Charge-offs
    
    
    121,571
    
    
    
    37,987Recoveries:Commercial
    
    
    669
    
    
    
    124Commercial real estate
    
    
    1,319
    
    
    
    403Total commercial
    
    
    1,988
    
    
    
    527Residential mortgage
    
    
    583
    
    
    
    3Direct consumer
    
    
    453
    
    
    
    329Indirect consumer
    
    
    629
    
    
    
    543Recoveries
    
    
    3,653
    
    
    
    1,402Net charge-offs
    
    
    117,918
    
    
    
    36,585Allowance for loan losses  end of period
    
    $
    322,377
    
    
    $
    279,838
  Balances
    
    
    Loan Loss ReserveMarch 31,
    
    
    December 31,
    
    
    March 31,
    
    
    December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009BalancesImpaired loans with loan loss reserve
    
    $
    226,541
    
    
    $
    162,962
    
    
    $
    82,215
    
    
    $
    52,840Impaired loans with no loan loss reserve
    
    
    93,162
    
    
    
    141,408
    
    
    
    
    
    
    
    Total impaired loans
    
    $
    319,703
    
    
    $
    304,370
    
    
    $
    82,215
    
    
    $
    52,840Impaired loans on nonaccrual basis
    
    $
    319,141
    
    
    $
    304,370
    
    
    $
    82,138
    
    
    $
    52,840Impaired loans on accrual basis
    
    
    562
    
    
    
    
    
    
    
    77
    
    
    
    Total impaired loans
    
    $
    319,703
    
    
    $
    304,370
    
    
    $
    82,215
    
    
    $
    52,840
  11




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##### Table of Contents



Note 5. Goodwill
   Regional
    
    
    Wealth
    
    
    Total(in thousands)
    
    Banking
    
    
    Management
    
    
    GoodwillBalance at December 31, 2008
    
    $
    572,620
    
    
    $
    1,801
    
    
    $
    574,421Impairment Loss
    
    
    (256,271
    )
    
    
    
    
    
    
    (256,271
    )Balance at December 31, 2009 andMarch 31, 2010
    
    $
    316,349
    
    
    $
    1,801
    
    
    $
    318,150
 Note 6. Long-Term Debt
  March 31,
    
    
    December 31,(in thousands)
    
    2010
    
    
    2009Citizens (Parent only):Subordinated debt:5.75% subordinated notes due February 2013
    
    $
    16,811
    
    
    $
    16,773Variable rate junior subordinated debenture due June 2033
    
    
    25,774
    
    
    
    25,7747.50% junior subordinated debentures due September 2066
    
    
    48,104
    
    
    
    48,010Subsidiaries:FHLB advances
    
    
    1,142,836
    
    
    
    1,318,200Other borrowed funds
    
    
    104,221
    
    
    
    104,230Total long-term debt
    
    $
    1,337,746
    
    
    $
    1,512,987
  Note 7. Income Taxes
   12




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##### Table of Contents



Note 8. Accumulated Other Comprehensive Income
  Three Months EndedMarch 31,(in thousands)
    
    2010
    
    
    2009Balance at beginning of period
    
    $
    (7,093
    )
    
    $
    (49,594
    )Net unrealized (loss) gain on securities available for sale for the
quarter, net of tax effect of ($10,143) in 2009
    
    
    (3,717
    )
    
    
    18,838Less: Reclassification adjustment for net gains on securities
included in net income for the quarter
    
    
    6,016
    
    
    
    Net change in unrealized loss on cash flow hedges for the
quarter, net of tax effect of $652 in 2009
    
    
    (697
    )
    
    
    (1,212
    )Net change in unrecognized pension and postretirement costs,
net of tax effect of $1,887 in 2009
    
    
    
    
    
    
    (3,504
    )Accumulated other comprehensive loss, net of tax
    
    $
    (5,491
    )
    
    $
    (35,472
    )
  Note 9. Fair Values of Assets and Liabilities
     13




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##### Table of Contents



March 31, 2010
    
    
    December 31, 2009Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimated(in thousands)
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial assets:Cash and due from banks
    
    $
    148,161
    
    
    $
    148,161
    
    
    $
    156,093
    
    
    $
    156,093Money market investments
    
    
    760,746
    
    
    
    760,746
    
    
    
    686,285
    
    
    
    686,285Securities available for sale
    
    
    2,057,599
    
    
    
    2,057,599
    
    
    
    2,076,794
    
    
    
    2,076,794Securities held to maturity
    
    
    113,259
    
    
    
    115,484
    
    
    
    114,249
    
    
    
    116,368FHLB and Federal Reserve stock
    
    
    155,084
    
    
    
    155,084
    
    
    
    155,084
    
    
    
    155,084Net portfolio loans
    
    
    7,116,833
    
    
    
    6,301,831
    
    
    
    7,448,965
    
    
    
    6,447,963Deferred compensation assets
    
    
    11,247
    
    
    
    11,247
    
    
    
    11,138
    
    
    
    11,138Loans held for sale
    
    
    107,772
    
    
    
    107,772
    
    
    
    80,219
    
    
    
    80,219Accrued interest receivable
    
    
    39,072
    
    
    
    39,072
    
    
    
    41,387
    
    
    
    41,387Assets of discontinued operations
    
    
    324,097
    
    
    
    324,097
    
    
    
    
    
    
    
    Financial liabilities:Deposits
    
    
    8,481,198
    
    
    
    8,517,946
    
    
    
    8,500,763
    
    
    
    8,534,799Short-term borrowings
    
    
    33,129
    
    
    
    33,129
    
    
    
    39,800
    
    
    
    39,800Long-term debt
    
    
    1,337,746
    
    
    
    1,375,988
    
    
    
    1,512,987
    
    
    
    1,565,649Accrued interest payable
    
    
    10,197
    
    
    
    10,197
    
    
    
    9,808
    
    
    
    9,808Liabilities of discontinued operations
    
    
    421,562
    
    
    
    421,562
    
    
    
    
    
    
    
    Financial instruments with off-balance sheet risk(1):Letters of credit(2)
    
    
    (716
    )
    
    
    (5,132
    )
    
    
    (913
    )
    
    
    (5,185
    )Derivative instruments
    
    
    17,758
    
    
    
    17,758
    
    
    
    17,959
    
    
    
    17,959
 
 (1)
    
    Positive amounts represent assets, whereas negative amounts represent liabilities.(2)
    
    The carrying amount for letters of credit is part of the total carrying amount of net loans. It is shown here separately
to disclose the estimated fair value which is based on a discounted cash flow method utilizing current market pricing.  Securities Available for Sale.
  14




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##### Table of Contents



Securities Held to Maturity.
 FHLB and Federal Reserve Stock.
 Net Portfolio Loans.
 Deposits.
 Short-Term Borrowings.
 Long-Term Debt.
 Derivative Instruments.
 Deferred Compensation Assets.
 15




---



##### Table of Contents



Impaired Loans.
 Residential Mortgage Loans Held for Sale.
 Other Real Estate.
 Repossessed Assets.
 Assets from Discontinued Operations.
   16




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##### Table of Contents



March 31, 2010(in thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Securities available for sale:Federal agencies
    
    $
    82,416
    
    
    $
    
    
    
    $
    82,416
    
    
    $
    Collateralized mortgage obligations
    
    
    438,284
    
    
    
    
    
    
    
    438,270
    
    
    
    14Mortgage-backed
    
    
    1,271,547
    
    
    
    
    
    
    
    1,271,547
    
    
    
    State and municipal
    
    
    264,602
    
    
    
    
    
    
    
    259,371
    
    
    
    5,231Other
    
    
    750
    
    
    
    
    
    
    
    424
    
    
    
    326Total securities available for sale
    
    
    2,057,599
    
    
    
    
    
    
    
    2,052,028
    
    
    
    5,571Other assets:Derivatives designated as hedging
    
    
    16,294
    
    
    
    
    
    
    
    16,294
    
    
    
    Derivatives not designated as hedging
    
    
    32,252
    
    
    
    
    
    
    
    32,252
    
    
    
    Deferred compensation assets
    
    
    11,247
    
    
    
    7,422
    
    
    
    3,825
    
    
    
    Total other assets
    
    
    59,793
    
    
    
    7,422
    
    
    
    52,371
    
    
    
    Total assets at fair value
    
    $
    2,117,392
    
    
    $
    7,422
    
    
    $
    2,104,399
    
    
    $
    5,571Other liabilities:Derivatives not designated as hedging
    
    $
    30,788
    
    
    $
    
    
    
    $
    30,788
    
    
    $
    Total other liabilities
    
    
    30,788
    
    
    
    
    
    
    
    30,788
    
    
    
    Total liabilities at fair value
    
    $
    30,788
    
    
    $
    
    
    
    $
    30,788
    
    
    $
    
  Net Realized/Unrealized Gains (Losses)Recorded inOther
    
    
    Purchases, Sales
    
    
    TransfersDecember 31,
    
    
    Recorded in Earnings
    
    
    Comprehensive
    
    
    Issuances and
    
    
    In/(Out)
    
    
    March 31,(in thousands)
    
    2009
    
    
    Realized
    
    
    Unrealized
    
    
    Income (Pre-tax)
    
    
    Settlements, Net
    
    
    of Level 3, Net
    
    
    2010Securities available for saleCollateralized
mortgage
obligations
    
    $
    15
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (1
    )
    
    $
    
    
    
    $
    14State and municipal
    
    
    5,353
    
    
    
    20
    
    
    
    
    
    
    
    25
    
    
    
    (167
    )
    
    
    
    
    
    
    5,231Other
    
    
    323
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    326Total
securities available for sale
    
    $
    5,691
    
    
    $
    23
    
    
    $
    
    
    
    $
    25
    
    
    $
    (168
    )
    
    $
    
    
    
    $
    5,571
  March 31, 2010
    
    Initial Carrying
    
    
    Fair Value(in thousands)
    
    Value
    
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Impaired loans
    
    $
    229,764
    
    
    $
    142,351
    
    
    $
    
    
    
    $
    
    
    
    $
    142,351Commercial loans held for sale
    
    
    18,953
    
    
    
    14,202
    
    
    
    
    
    
    
    
    
    
    
    14,202Residential mortgage loans held for sale
    
    
    117,233
    
    
    
    44,286
    
    
    
    
    
    
    
    
    
    
    
    44,286Other real estate
    
    
    24,841
    
    
    
    13,009
    
    
    
    
    
    
    
    
    
    
    
    13,009Repossessed assets
    
    
    2,708
    
    
    
    1,219
    
    
    
    
    
    
    
    
    
    
    
    1,219Assets from discontinued operations
    
    
    334,277
    
    
    
    324,097
    
    
    
    
    
    
    
    
    
    
    
    324,097Total assets
    
    $
    727,776
    
    
    $
    539,164
    
    
    $
    
    
    
    $
    
    
    
    $
    539,164
 17




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##### Table of Contents



Note 10. Pension Benefit Cost
  Three Months EndedMarch 31,(in thousands)
    
    2010
    
    
    2009Defined Benefit Pension PlansInterest cost
    
    $
    1,039
    
    
    $
    1,105Expected return on plan assets
    
    
    (1,200
    )
    
    
    (1,570
    )Prior service cost
    
    
    8
    
    
    
    8Net actuarial loss
    
    
    556
    
    
    
    335Net pension cost
    
    
    403
    
    
    
    (122
    )Supplemental Pension PlansInterest cost
    
    
    188
    
    
    
    189Curtailment loss
    
    
    
    
    
    
    941Amortization of unrecognized:Net actuarial loss
    
    
    3
    
    
    
    3Net pension cost
    
    
    191
    
    
    
    1,133Postretirement Benefit PlansInterest cost
    
    
    152
    
    
    
    152Amortization of unrecognized:Prior service cost
    
    
    (67
    )
    
    
    (67
    )Net actuarial gain
    
    
    (8
    )
    
    
    (8
    )Net postretirement benefit cost
    
    
    77
    
    
    
    77Total pension and postretirement benefit cost
    
    
    671
    
    
    
    1,088Defined contribution retirement and 401K PlansEmployer contributions
    
    
    
    
    
    
    1,305Total periodic benefit cost
    
    $
    671
    
    
    $
    2,393
   18




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##### Table of Contents



March 31, 2010(in thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Asset CategoryShort-term pooled money fund
    
    $
    1,229
    
    
    $
    
    
    
    $
    1,229
    
    
    $
    Equity securitiesLarge cap (1)
    
    
    19,488
    
    
    
    
    
    
    
    19,488
    
    
    
    Mid-cap
    
    
    5,056
    
    
    
    
    
    
    
    5,056
    
    
    
    Small-cap
    
    
    7,188
    
    
    
    
    
    
    
    7,188
    
    
    
    International equity
    
    
    9,566
    
    
    
    
    
    
    
    9,566
    
    
    
    Fixed income securitiesIntermediate term fixed (2)
    
    
    22,682
    
    
    
    
    
    
    
    22,682
    
    
    
    Total
    
    $
    65,209
    
    
    $
    
    
    
    $
    65,209
    
    
    $
    
 
 (1)
    
    This category is comprised of not actively managed low-cost equity index funds that track the S&P 500 and
Russell 1000.(2)
    
    This category represents investment grade bonds of U.S. issuers from diverse industries. Note 11. Stock-Based Compensation
   Three Months EndedMarch 31,(in thousands)
    
    2010
    
    
    2009Stock option compensation
    
    $
    
    
    
    $
    4Restricted stock compensation
    
    
    502
    
    
    
    (279
    )Stock-based compensation expense before income taxes
    
    
    502
    
    
    
    (275
    )Income tax benefit (1)
    
    
    (176
    )
    
    
    96Total stock-based compensation expense after income taxes
    
    $
    326
    
    
    $
    (179
    )
 
 (1)
    
    The income tax benefit is calculated based on the statutory rate.
Due to the fact that Citizens has a valuation allowance, the income tax benefit may
not be realized. 19




---



##### Table of Contents



Weighted-AveragePer Share GrantNumber of Shares
    
    
    Date Fair ValueRestricted stock at December 31, 2009
    
    
    618,759
    
    
    $
    6.35Vested
    
    
    (463
    )
    
    
    9.63Forfeited
    
    
    (5,375
    )
    
    
    10.21Restricted stock at March 31, 2010
    
    
    612,921
    
    
    $
    6.31
  Note 12. Shareholders Equity and Earnings Per Share
    20




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##### Table of Contents



Three Months EndedMarch 31,(in thousands, except per share amounts)
    
    2010
    
    
    2009Numerator:Loss from continuing operations
    
    $
    (76,023
    )
    
    $
    (45,542
    )Dividend on redeemable preferred stock
    
    
    (5,282
    )
    
    
    (4,103
    )Net loss from continuing operations available to common shareholders
    
    
    (81,305
    )
    
    
    (49,645
    )(Loss) income from discontinued operations (net of income tax)
    
    
    (8,973
    )
    
    
    393Net loss attributable to common shareholders
    
    $
    (90,278
    )
    
    $
    (49,252
    )Denominator:Weighted average shares outstanding
    
    
    394,393
    
    
    
    126,198Less: participating securities included in weighted average shares outstanding
    
    
    (614
    )
    
    
    (798
    )Weighted average shares outstanding for basic and dilutive earnings per common share
    
    
    393,779
    
    
    
    125,400Basic earnings per common share from continuing operations
    
    $
    (0.21
    )
    
    $
    (0.40
    )Diluted earnings per common share from continuing operations
    
    $
    (0.21
    )
    
    $
    (0.40
    )Basic earnings per common share from discontinued operations
    
    $
    (0.02
    )
    
    $
    0.01Diluted earnings per common share from discontinued operations
    
    $
    (0.02
    )
    
    $
    0.01Basic net loss per common share
    
    $
    (0.23
    )
    
    $
    (0.39
    )Diluted net loss per common share
    
    $
    (0.23
    )
    
    $
    (0.39
    )
 Note 13. Lines of Business
  21




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##### Table of Contents



Regional
    
    
    Specialty
    
    
    Specialty
    
    
    Wealth(in thousands)
    
    Banking
    
    
    Consumer
    
    
    Commercial
    
    
    Mgmt
    
    
    Other
    
    
    TotalEarnings Summary  Three Months Ended March 31, 2010Net interest income (taxable equivalent)
    
    $
    64,007
    
    
    $
    7,491
    
    
    $
    16,477
    
    
    $
    154
    
    
    $
    (3,583
    )
    
    $
    84,546Provision for loan losses
    
    
    23,067
    
    
    
    35,987
    
    
    
    42,301
    
    
    
    
    
    
    
    
    
    
    
    101,355Net interest loss after provision
    
    
    40,940
    
    
    
    (28,496
    )
    
    
    (25,824
    )
    
    
    154
    
    
    
    (3,583
    )
    
    
    (16,809
    )Noninterest income
    
    
    15,545
    
    
    
    (1,023
    )
    
    
    (5,007
    )
    
    
    4,783
    
    
    
    8,095
    
    
    
    22,393Noninterest expense
    
    
    52,137
    
    
    
    13,242
    
    
    
    4,283
    
    
    
    3,968
    
    
    
    4,473
    
    
    
    78,103Income (loss) from continuing operations before income taxes
    
    
    4,348
    
    
    
    (42,761
    )
    
    
    (35,114
    )
    
    
    969
    
    
    
    39
    
    
    
    (72,519
    )Income tax provision (taxable equivalent)
    
    
    1,522
    
    
    
    (14,966
    )
    
    
    (12,290
    )
    
    
    339
    
    
    
    28,899
    
    
    
    3,504Net income (loss) from continuing operations
    
    
    2,826
    
    
    
    (27,795
    )
    
    
    (22,824
    )
    
    
    630
    
    
    
    (28,860
    )
    
    
    (76,023
    )Income (loss) from discontinued operations
    
    
    983
    
    
    
    (89
    )
    
    
    162
    
    
    
    81
    
    
    
    (10,110
    )
    
    
    (8,973
    )Net income (loss)
    
    $
    3,809
    
    
    $
    (27,884
    )
    
    $
    (22,662
    )
    
    $
    711
    
    
    $
    (38,970
    )
    
    $
    (84,996
    )Average assets(in millions)
    
    $
    4,513
    
    
    $
    1,861
    
    
    $
    1,700
    
    
    $
    13
    
    
    $
    3,816
    
    
    $
    11,903Earnings Summary  Three Months Ended March 31, 2009(1)Net interest income (taxable equivalent)
    
    $
    65,071
    
    
    $
    6,975
    
    
    $
    15,151
    
    
    $
    119
    
    
    $
    (7,724
    )
    
    $
    79,592Provision for loan losses
    
    
    22,683
    
    
    
    15,070
    
    
    
    25,732
    
    
    
    
    
    
    
    
    
    
    
    63,485Net interest income after provision
    
    
    42,388
    
    
    
    (8,095
    )
    
    
    (10,581
    )
    
    
    119
    
    
    
    (7,724
    )
    
    
    16,107Noninterest income
    
    
    16,867
    
    
    
    93
    
    
    
    (5,780
    )
    
    
    4,607
    
    
    
    2,478
    
    
    
    18,265Noninterest expense
    
    
    54,209
    
    
    
    13,233
    
    
    
    4,371
    
    
    
    3,990
    
    
    
    3,253
    
    
    
    79,056Income (loss) from continuing operations before income taxes
    
    
    5,046
    
    
    
    (21,235
    )
    
    
    (20,732
    )
    
    
    736
    
    
    
    (8,499
    )
    
    
    (44,684
    )Income tax provision (taxable equivalent)
    
    
    1,766
    
    
    
    (7,432
    )
    
    
    (7,256
    )
    
    
    257
    
    
    
    13,523
    
    
    
    858Net income (loss) from continuing operations
    
    
    3,280
    
    
    
    (13,803
    )
    
    
    (13,476
    )
    
    
    479
    
    
    
    (22,022
    )
    
    
    (45,542
    )Income (loss) from discontinued operations
    
    
    448
    
    
    
    (26
    )
    
    
    
    
    
    
    55
    
    
    
    (84
    )
    
    
    393Net income (loss)
    
    $
    3,728
    
    
    $
    (13,829
    )
    
    $
    (13,476
    )
    
    $
    534
    
    
    $
    (22,106
    )
    
    $
    (45,149
    )Average assets(in millions)
    
    $
    5,601
    
    
    $
    2,281
    
    
    $
    1,707
    
    
    $
    11
    
    
    $
    3,480
    
    
    $
    13,080
 
 (1)
    
    Certain amounts have been reclassified to conform to current year presentation. Note 14. Commitments, Contingent Liabilities and Guarantees
   March 31,
    
    
    December 31,(in thousands)
    
    2010
    
    
    2009Loan commitments and letters of credit:Commitments to extend credit
    
    $
    1,222,477
    
    
    $
    1,334,690Financial standby letters of credit
    
    
    194,539
    
    
    
    228,483Performance standby letters of credit
    
    
    7,794
    
    
    
    7,546Total loan commitments and letters of credit
    
    $
    1,424,810
    
    
    $
    1,570,719
  22




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##### Table of Contents



Note 15. Derivatives and Hedging Activities
 Risk Management Objective of Using Derivatives
  Fair Values of Derivative Instruments on the Consolidated Balance Sheets
  Other Assets
    
    
    Other LiabilitiesMarch 31,
    
    
    December 31,
    
    
    March 31,
    
    
    December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Derivatives designated as hedging instrumentsInterest rate products
    
    $
    16,294
    
    
    $
    17,279
    
    
    $
    
    
    
    $
    Derivatives notdesignated as hedging instrumentsInterest rate products
    
    
    32,252
    
    
    
    29,775
    
    
    
    30,788
    
    
    
    29,095Total derivatives
    
    $
    48,546
    
    
    $
    47,054
    
    
    $
    30,788
    
    
    $
    29,095
 Cash Flow Hedges of Interest Rate Risk
    23




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##### Table of Contents



Derivative Impact on OCI gain (loss)
    
    
    Derivative Ineffectiveness gain (loss)LocationDerivatives
    
    
    
    
    
    
    
    
    
    Reclassified in
    
    Reclassified from
    
    
    Location RecognizedRelationship
    
    
    
    
    
    
    
    
    
    Statement of
    
    Accumulated OCI into
    
    
    in Statement of(in thousands)
    
    Recognized in OCI
    
    
    Operations
    
    Statement of Operations
    
    
    Operations
    
    AmountThree Months Ended
    
    
    
    
    Three Months Ended
    
    
    
    
    Three Months EndedMarch 31,
    
    
    
    
    March 31,
    
    
    
    
    March 31,2010
    
    
    2009
    
    
    
    
    2010
    
    
    2009
    
    
    
    
    2010
    
    
    2009Cash flow hedges:Interest rate
products
    
    $
    2,554
    
    
    $
    1,896
    
    
    Interest income
    
    $
    2,052
    
    
    $
    3,433Other income
    
    
    1,199
    
    
    
    327
    
    
    Other income
    
    $
    
    
    
    $
    (78
    )Total
    
    $
    2,554
    
    
    $
    1,896
    
    
    
    
    $
    3,251
    
    
    $
    3,760
    
    
    
    
    $
    
    
    
    $
    (78
    )
 Fair Value Hedges of Interest Rate Risk
    Derivative Contract (Loss) Gain
    
    
    Hedged Item Gain (Loss)Derivatives
    
    Location in
    
    Three Months Ended
    
    
    Location in
    
    Three Months EndedRelationship
    
    Statement of
    
    March 31,
    
    
    Statement of
    
    March 31,(in thousands)
    
    Operations
    
    2010
    
    
    2009
    
    
    Operations
    
    2010
    
    
    2009Fair value hedges:Interest rate products
    
    Interest expense
    
    $
    89
    
    
    $
    313
    
    
    Interest expense
    
    $
    1,524
    
    
    $
    1,920
 Non-designated Hedges
  24




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##### Table of Contents



Amount of (Loss) Gain Recognized in StatementLocation of (Loss)
    
    of OperationsGain Recognized in
    
    Three Months EndedDerivatives Relationship
    
    Statement of
    
    March 31,(in thousands)
    
    Operations
    
    2010
    
    
    2009Derivatives not
designated as hedgesInterest rate products
    
    Other income
    
    $(490)

    
    
    $2,444
 Credit-Risk-Related Contingent Features
     Note 16. Discontinued Operations
  25




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##### Table of Contents



March 31,
    
    
    December 31,(in thousands)
    
    2010
    
    
    2009AssetsCash and due from banks
    
    $
    4,902
    
    
    $
    7,045Money market investments
    
    
    32,871
    
    
    
    19,878Investment Securities:
    
    
    161,214
    
    
    
    171,115FHLB and Federal Reserve stock
    
    
    1,193
    
    
    
    1,193Net portfolio loans
    
    
    100,789
    
    
    
    114,523Loans held for sale
    
    
    163
    
    
    
    241Goodwill
    
    
    12,594
    
    
    
    12,594Other assets
    
    
    10,371
    
    
    
    9,372Assets of discontinued operations
    
    $
    324,097
    
    
    $
    335,961LiabilitiesDeposits
    
    $
    410,370
    
    
    $
    408,577Short-term borrowings
    
    
    8,973
    
    
    
    11,263Long-term debt
    
    
    500
    
    
    
    500Other liabilities
    
    
    1,719
    
    
    
    1,987Liabilities of discontinued operations
    
    $
    421,562
    
    
    $
    422,327
 Three Months EndedMarch 31,(in thousands)
    
    2010
    
    
    2009Interest income
    
    $
    3,494
    
    
    $
    3,858Interest expense
    
    
    1,459
    
    
    
    2,392Net interest income
    
    
    2,035
    
    
    
    1,466Provision for loan losses
    
    
    48
    
    
    
    532Noninterest income
    
    
    (9,251
    )
    
    
    967Noninterest expense
    
    
    1,709
    
    
    
    1,722Income tax (benefit) from discontinued operations
    
    
    
    
    
    
    (214
    )Net (loss) income from discontinued operations
    
    $
    (8,973
    )
    
    $
    393
   26




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##### Table of Contents



Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
 Selected Quarterly Information (Unaudited)
Citizens Republic Bancorp and Subsidiaries
 March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,2010
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Summary of Operations (thousands)Net interest income
    
    $
    81,189
    
    
    $
    81,913
    
    
    $
    79,012
    
    
    $
    74,043
    
    
    $
    75,481Provision for loan losses
    
    
    101,355
    
    
    
    84,007
    
    
    
    77,393
    
    
    
    98,935
    
    
    
    63,485Noninterest income (1)
    
    
    22,393
    
    
    
    14,273
    
    
    
    10,697
    
    
    
    19,898
    
    
    
    18,265Noninterest expense (2)
    
    
    78,103
    
    
    
    81,370
    
    
    
    81,466
    
    
    
    343,248
    
    
    
    79,056Income tax provision (benefit) from continuing operations
    
    
    147
    
    
    
    (3,811
    )
    
    
    (11,187
    )
    
    
    (11,004
    )
    
    
    (3,253
    )Net loss from continuing operations
    
    
    (76,023
    )
    
    
    (65,380
    )
    
    
    (57,963
    )
    
    
    (337,238
    )
    
    
    (45,542
    )Discontinued operations (after tax)
    
    
    (8,973
    )
    
    
    651
    
    
    
    1,040
    
    
    
    (10,175
    )
    
    
    393Net loss
    
    
    (84,996
    )
    
    
    (64,729
    )
    
    
    (56,923
    )
    
    
    (347,413
    )
    
    
    (45,149
    )Net loss attributable to common shareholders (3)
    
    
    (90,278
    )
    
    
    (69,981
    )
    
    
    (62,147
    )
    
    
    (352,609
    )
    
    
    (49,252
    )Taxable equivalent adjustment, continuing operations
    
    
    3,357
    
    
    
    3,721
    
    
    
    3,745
    
    
    
    3,997
    
    
    
    4,111Taxable equivalent adjustment, combined
    
    
    3,556
    
    
    
    3,932
    
    
    
    3,961
    
    
    
    4,220
    
    
    
    4,337Per Common Share DataNet loss from continuing operations:Basic
    
    $
    (0.21
    )
    
    $
    (0.18
    )
    
    $
    (0.49
    )
    
    $
    (2.73
    )
    
    $
    (0.40
    )Diluted
    
    
    (0.21
    )
    
    
    (0.18
    )
    
    
    (0.49
    )
    
    
    (2.73
    )
    
    
    (0.40
    )Discontinued operations:Basic
    
    $
    (0.02
    )
    
    $
    0.00
    
    
    $
    0.01
    
    
    $
    (0.08
    )
    
    $
    0.01Diluted
    
    
    (0.02
    )
    
    
    0.00
    
    
    
    0.01
    
    
    
    (0.08
    )
    
    
    0.01Net income (loss):Basic
    
    $
    (0.23
    )
    
    $
    (0.18
    )
    
    $
    (0.48
    )
    
    $
    (2.81
    )
    
    $
    (0.39
    )Diluted
    
    
    (0.23
    )
    
    
    (0.18
    )
    
    
    (0.48
    )
    
    
    (2.81
    )
    
    
    (0.39
    )Common book value
    
    
    2.46
    
    
    
    2.69
    
    
    
    2.87
    
    
    
    7.57
    
    
    
    10.29Tangible book value
    
    
    2.28
    
    
    
    2.50
    
    
    
    2.68
    
    
    
    6.95
    
    
    
    7.53Tangible common book value
    
    
    1.59
    
    
    
    1.81
    
    
    
    1.99
    
    
    
    4.82
    
    
    
    5.41Shares outstanding, end of period (000)
    
    
    394,392
    
    
    
    394,397
    
    
    
    394,470
    
    
    
    126,258
    
    
    
    126,299At Period End, Continuing Operations (millions)Assets
    
    $
    11,328
    
    
    $
    11,596
    
    
    $
    11,717
    
    
    $
    11,931
    
    
    $
    12,624Earning assets
    
    
    10,595
    
    
    
    10,864
    
    
    
    10,964
    
    
    
    11,207
    
    
    
    11,568Portfolio loans
    
    
    7,439
    
    
    
    7,788
    
    
    
    8,097
    
    
    
    8,302
    
    
    
    8,625Allowance for loan losses
    
    
    322
    
    
    
    339
    
    
    
    336
    
    
    
    330
    
    
    
    280Deposits
    
    
    8,481
    
    
    
    8,501
    
    
    
    8,389
    
    
    
    8,527
    
    
    
    8,708Shareholders equity
    
    
    1,244
    
    
    
    1,331
    
    
    
    1,403
    
    
    
    1,225
    
    
    
    1,567At Period End, Combined (millions)Assets
    
    $
    11,652
    
    
    $
    11,932
    
    
    $
    12,072
    
    
    $
    12,288
    
    
    $
    12,982Earning assets
    
    
    10,890
    
    
    
    11,169
    
    
    
    11,284
    
    
    
    11,534
    
    
    
    11,885Portfolio loans
    
    
    7,543
    
    
    
    7,906
    
    
    
    8,217
    
    
    
    8,426
    
    
    
    8,754Allowance for loan losses
    
    
    326
    
    
    
    342
    
    
    
    340
    
    
    
    333
    
    
    
    283Deposits
    
    
    8,892
    
    
    
    8,909
    
    
    
    8,792
    
    
    
    8,913
    
    
    
    9,120Shareholders equity
    
    
    1,244
    
    
    
    1,331
    
    
    
    1,403
    
    
    
    1,225
    
    
    
    1,567Average for the Quarter, Continuing Operations (millions)Assets
    
    $
    11,575
    
    
    $
    11,616
    
    
    $
    11,773
    
    
    $
    12,407
    
    
    $
    12,728Earning assets
    
    
    10,839
    
    
    
    10,874
    
    
    
    11,041
    
    
    
    11,387
    
    
    
    11,657Portfolio loans
    
    
    7,654
    
    
    
    7,964
    
    
    
    8,191
    
    
    
    8,478
    
    
    
    8,775Allowance for loan losses
    
    
    336
    
    
    
    337
    
    
    
    331
    
    
    
    289
    
    
    
    258Deposits
    
    
    8,544
    
    
    
    8,353
    
    
    
    8,392
    
    
    
    8,590
    
    
    
    8,709Shareholders equity
    
    
    1,323
    
    
    
    1,392
    
    
    
    1,228
    
    
    
    1,557
    
    
    
    1,607Average for the Quarter, Combined (millions)Assets
    
    $
    11,903
    
    
    $
    11,966
    
    
    $
    12,129
    
    
    $
    12,774
    
    
    $
    13,080Earning assets
    
    
    11,135
    
    
    
    11,190
    
    
    
    11,365
    
    
    
    11,711
    
    
    
    11,967Portfolio loans
    
    
    7,768
    
    
    
    8,084
    
    
    
    8,311
    
    
    
    8,604
    
    
    
    8,908Allowance for loan losses
    
    
    339
    
    
    
    340
    
    
    
    334
    
    
    
    292
    
    
    
    260Deposits
    
    
    8,947
    
    
    
    8,762
    
    
    
    8,786
    
    
    
    8,995
    
    
    
    9,117Shareholders equity
    
    
    1,323
    
    
    
    1,392
    
    
    
    1,228
    
    
    
    1,557
    
    
    
    1,607Financial Ratios, Continuing Operations (annualized)Return on average assets
    
    
    (2.66)
    %
    
    
    (2.23)
    %
    
    
    (1.95)
    %
    
    
    (10.90
    )%
    
    
    (1.45)
    %Return on average shareholders equity
    
    
    (23.30
    )
    
    
    (18.63
    )
    
    
    (18.73
    )
    
    
    (86.88
    )
    
    
    (11.50
    )Average shareholders equity / average assets
    
    
    11.43
    
    
    
    11.99
    
    
    
    10.43
    
    
    
    12.55
    
    
    
    12.62Net interest margin (FTE) (4)
    
    
    3.14
    
    
    
    3.13
    
    
    
    2.99
    
    
    
    2.75
    
    
    
    2.74Efficiency ratio (5)
    
    
    73.03
    
    
    
    81.45
    
    
    
    87.17
    
    
    
    88.81
    
    
    
    80.79Allowance for loan losses as a percent of portfolio loans
    
    
    4.33
    
    
    
    4.35
    
    
    
    4.15
    
    
    
    3.98
    
    
    
    3.24Allowance for loan losses as a percent of nonperforming loans
    
    
    77.94
    
    
    
    71.43
    
    
    
    67.16
    
    
    
    66.80
    
    
    
    65.47Allowance for loan losses as a percent of nonperforming assets
    
    
    57.96
    
    
    
    57.05
    
    
    
    55.40
    
    
    
    54.75
    
    
    
    50.95Nonperforming loans as a percent of portfolio loans
    
    
    5.56
    
    
    
    6.09
    
    
    
    6.18
    
    
    
    5.95
    
    
    
    4.96Nonperforming assets as a percent of portfolio loans plus ORAA
    
    
    7.43
    
    
    
    7.58
    
    
    
    7.44
    
    
    
    7.22
    
    
    
    6.33Nonperforming assets as a percent of total assets
    
    
    4.91
    
    
    
    5.12
    
    
    
    5.18
    
    
    
    5.05
    
    
    
    4.35Net loans charged off as a percent of average portfolio loans (annualized)
    
    
    6.25
    
    
    
    4.05
    
    
    
    3.46
    
    
    
    2.30
    
    
    
    1.69Financial Ratios, Combined (annualized)Return on average assets
    
    
    (2.90)
    %
    
    
    (2.15)
    %
    
    
    (1.86)
    %
    
    
    (10.91
    )%
    
    
    (1.40)
    %Return on average shareholders equity
    
    
    (26.05
    )
    
    
    (18.44
    )
    
    
    (18.40
    )
    
    
    (89.50
    )
    
    
    (11.40
    )Average shareholders equity / average assets
    
    
    11.11
    
    
    
    11.64
    
    
    
    10.12
    
    
    
    12.19
    
    
    
    12.28Net interest margin (FTE) (4)
    
    
    3.14
    
    
    
    3.13
    
    
    
    2.97
    
    
    
    2.73
    
    
    
    2.73Efficiency ratio (5)
    
    
    79.87
    
    
    
    80.58
    
    
    
    86.48
    
    
    
    88.26
    
    
    
    80.36Allowance for loan losses as a percent of portfolio loans
    
    
    4.32
    
    
    
    4.33
    
    
    
    4.13
    
    
    
    3.96
    
    
    
    3.23Allowance for loan losses as a percent of nonperforming loans
    
    
    78.61
    
    
    
    72.01
    
    
    
    67.74
    
    
    
    67.25
    
    
    
    65.94Allowance for loan losses as a percent of nonperforming assets
    
    
    58.48
    
    
    
    57.54
    
    
    
    55.87
    
    
    
    55.13
    
    
    
    51.33Nonperforming loans as a percent of portfolio loans
    
    
    5.49
    
    
    
    6.01
    
    
    
    6.10
    
    
    
    5.88
    
    
    
    4.90Nonperforming assets as a percent of portfolio loans plus ORAA
    
    
    7.34
    
    
    
    7.48
    
    
    
    7.34
    
    
    
    7.13
    
    
    
    6.25Nonperforming assets as a percent of total assets
    
    
    4.78
    
    
    
    4.99
    
    
    
    5.04
    
    
    
    4.92
    
    
    
    4.24Net loans charged off as a percent of average portfolio loans (annualized)
    
    
    6.16
    
    
    
    4.00
    
    
    
    3.41
    
    
    
    2.30
    
    
    
    1.67Leverage ratio
    
    
    8.47
    
    
    
    9.21
    
    
    
    9.63
    
    
    
    8.68
    
    
    
    9.32Tier 1 capital ratio
    
    
    12.12
    
    
    
    12.52
    
    
    
    12.83
    
    
    
    11.81
    
    
    
    12.16Total capital ratio
    
    
    13.49
    
    
    
    13.93
    
    
    
    14.23
    
    
    
    13.91
    
    
    
    14.21
 
 (1)
    
    Noninterest income includes a gain on investment securities of $6.0 million in the first quarter of 2010 and a net loss on debt extinguishment of $15.9 million in the third quarter of 2009.(2)
    
    Noninterest expense includes a goodwill impairment charge of $256.3 million in the second quarter of 2009.(3)
    
    Net loss attributable to common shareholders includes the following non-cash items: $5.3 million dividend to preferred shareholders in the first quarter of 2010, $5.2 million
in the fourth, third and second quarters of 2009 and $4.1 million in the first quarter of 2009.(4)
    
    Net interest margin is presented on an annual basis, includes taxable equivalent adjustments to interest income and is based on a tax rate of 35%.(5)
    
    The Efficiency Ratio measures how efficiently a bank spends its revenues. The formula is: (Noninterest expense  Goodwill impairment)/(Net interest income +
taxable equivalent adjustment + Total fees and other income). 27




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##### Table of Contents



Introduction
  Discontinued Operations
  Forward  Looking Statements
   
    
    Citizens faces the risk that loan losses, including unanticipated loan losses due to
changes in loan portfolios, fraud and economic factors, could exceed the allowance for loan
losses and that additional increases in the allowance will be required. Additions to the
allowance for loan losses would cause Citizens net income to decline and could have a
negative impact on its capital and financial position.
    
    Citizens core lending and other businesses continue to be adversely affected by the
historic weakness in the national and regional economies in which it operates, particularly
Michigan. Citizens ability to generate earnings and maintain regulatory capital ratios at
acceptable levels at the Holding Company and the bank subsidiaries depends substantially on
developments in those economies. Also, Citizens potential inability to comply with applicable
laws, regulations and regulatory policies or standards due to the effects of these conditions
on its results of operations and financial condition may result in heightened regulatory
scrutiny and require Citizens to take actions to protect depositors that are not in the best
interests of its shareholders.
    
    Citizens business may be adversely affected by the highly regulated environment in which
it operates. Changes in applicable laws, regulations, and regulatory practices at either the
federal or state level may result in the imposition of additional costs or restrict Citizens
ability to operate its business in the manner most beneficial to its shareholders.
    
    While Citizens attempts to manage the risk from changes in market interest rates, interest
rate risk management techniques are not exact. In addition, Citizens may not be able to
economically hedge its interest rate risk. A rapid or substantial increase or decrease in
interest rates could adversely affect Citizens net interest income and results of operations.
    
    The negative economic effects caused by terrorist attacks, potential attacks and other
destabilizing events, would likely contribute to the deterioration of the quality of Citizens
loan portfolio and could reduce its customer base, its level of deposits, and demand for its
financial products such as loans.
    
    If Citizens is unable to continue to attract and retain core deposits, to obtain third
party financing on favorable terms, or to have access to interbank or other liquidity sources
(as a result of rating agency downgrades or other market factors), its cost of funds will
increase, adversely affecting its ability to generate the funds necessary for lending
operations, reducing net interest margin and negatively affecting its results of operations.
 28




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##### Table of Contents




    
    Increased competition with other financial institutions or an adverse change in Citizens
relationship with a number of major customers could reduce its net interest margin and net
income by decreasing the number and size of loans originated, the interest rates charged on
these loans and the fees charged for services to customers.
    
    Events such as significant adverse changes in the business climate, adverse action by a
regulator, unanticipated changes in the competitive environment, and a decision to change
Citizens operations or dispose of an operating unit could have a negative effect on its
goodwill or other intangible assets such that it may need to record an impairment charge,
which could have a material adverse impact on its results of operations.
    
    If the FDIC raises the assessment rate charged to its insured financial institutions,
Citizens FDIC insurance premium may increase, which could have a negative effect on expenses
and results of operations.
    
    Citizens may not realize its deferred income tax assets and certain built-in losses.
    
    Citizens stock price can be volatile.
    
    The trading volume in Citizens common stock is less than that of other larger financial
services companies.
    
    An investment in Citizens common stock is not an insured deposit.
    
    Citizens may be adversely affected by the soundness of other financial institutions.
    
    Citizens could face unanticipated environmental liabilities or costs related to real
property owned or acquired through foreclosure. Compliance with federal, state and local
environmental laws and regulations, including those related to investigation and clean-up of
contaminated sites, could have a negative effect on expenses and results of operations.
    
    Citizens is a party to various lawsuits incidental to its business. Litigation is subject
to many uncertainties such that the expenses and ultimate exposure with respect to many of
these matters cannot be ascertained.
    
    The financial services industry is undergoing rapid technological changes. If Citizens is
unable to adequately invest in and implement new technology-driven products and services, it
may not be able to compete effectively, or the cost to provide products and services may
increase significantly.
    
    The products and services offered by the banking industry and customer expectations
regarding them are subject to change. Citizens attempts to respond to perceived customer needs
and expectations by offering new products and services, which are often costly to develop and
market initially. A lack of market acceptance of these products and services would have a
negative effect on its financial condition and results of operations.
    
    As a bank holding company that conducts substantially all of its operations through its
subsidiaries, the ability of the Holding Company to pay dividends, repurchase its shares or to
repay its indebtedness depends upon the results of operations of its subsidiaries and their
ability to pay dividends to the Holding Company. Dividends paid by these subsidiaries are
subject to limits imposed by federal and state law.
    
    In order to maintain and strengthen its capital base, Citizens may need to raise additional
capital in transactions that may be highly dilutive to its common shareholders. If such
capital becomes needed, Citizens failure to raise additional capital could have serious
consequences for its business.
    
    The Holding Company may not have sufficient resources to make capital contributions to its
bank subsidiaries if required by bank regulatory agencies, or if it might otherwise wish to do
so, in order to maintain the bank subsidiaries capital ratios at acceptable levels.
    
    Citizens may not be able to attract and retain skilled people. If Citizens were to lose
key employees, it may experience a disruption in its relationship with certain customers.
    
    New accounting or tax pronouncements or interpretations may be issued by the accounting
profession, regulators or other government bodies which could change existing accounting
methods. Changes in accounting methods could negatively impact Citizens results of operations
and financial condition.
    
    Citizens business continuity plans or data security systems could prove to be inadequate,
resulting in a material interruption in, or disruption to, its business and a negative impact
on its results of operations.
    
    Citizens vendors could fail to fulfill their contractual obligations, resulting in a
material interruption in, or disruption to, its business and a negative impact on its results
of operations.
    
    Citizens potential inability to integrate companies it may acquire in the future could
have a negative effect on its expenses and results of operations.
    
    Citizens controls and procedures may fail or be circumvented which could have a material
adverse effect on its business, results of operations and financial condition.
    
    Citizens articles of incorporation and bylaws as well as certain banking laws may have an
anti-takeover effect.
 www.sec.gov
 29




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##### Table of Contents



Critical Accounting Policies
  Use of Non-GAAP Financial Measures
  Tangible Equity, Tangible Common Equity and Tier 1 Common Equity Ratios
  30




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##### Table of Contents



Pre-tax Pre-Provision Core Operating Earnings
  Net Interest Margin and Efficiency Ratio
  31




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##### Table of Contents



Non-GAAP Reconciliation (Unaudited)
Citizens Republic Bancorp and Subsidiaries
 March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Efficiency Ratio  Continuing OperationsNet interest income (A)
    
    $
    81,189
    
    
    $
    81,913
    
    
    $
    79,012
    
    
    $
    74,043
    
    
    $
    75,481Taxable equivalent adjustment (B)
    
    
    3,357
    
    
    
    3,721
    
    
    
    3,745
    
    
    
    3,997
    
    
    
    4,111Noninterest income (C)
    
    
    22,393
    
    
    
    14,273
    
    
    
    10,697
    
    
    
    19,898
    
    
    
    18,265Noninterest expense (D)
    
    
    78,103
    
    
    
    81,370
    
    
    
    81,466
    
    
    
    343,248
    
    
    
    79,056Goodwill impairment (E)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256,272
    
    
    
    Efficiency ratio: (D-E)/(A+B+C)
    
    
    73.03
    %
    
    
    81.45
    %
    
    
    87.17
    %
    
    
    88.81
    %
    
    
    80.79
    %Efficiency Ratio  Combined OperationsNet interest income (A)
    
    $
    83,224
    
    
    $
    83,935
    
    
    $
    80,885
    
    
    $
    75,601
    
    
    $
    76,946Taxable equivalent adjustment (B)
    
    
    3,556
    
    
    
    3,932
    
    
    
    3,961
    
    
    
    4,220
    
    
    
    4,337Noninterest income (C)
    
    
    13,142
    
    
    
    15,381
    
    
    
    11,842
    
    
    
    20,966
    
    
    
    19,233Noninterest expense (D)
    
    
    79,811
    
    
    
    83,197
    
    
    
    83,614
    
    
    
    355,433
    
    
    
    80,778Goodwill impairment (E)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    266,474
    
    
    
    Efficiency ratio: (D-E)/(A+B+C)
    
    
    79.87
    %
    
    
    80.58
    %
    
    
    86.48
    %
    
    
    88.26
    %
    
    
    80.36
    %Ending Balances  Combined Operations (in millions)Tangible Common Equity to Tangible AssetsTotal assets
    
    $
    11,652
    
    
    $
    11,932
    
    
    $
    12,072
    
    
    $
    12,288
    
    
    $
    12,982Goodwill(1)
    
    
    (331
    )
    
    
    (331
    )
    
    
    (331
    )
    
    
    (331
    )
    
    
    (597
    )Other intangible assets
    
    
    (13
    )
    
    
    (14
    )
    
    
    (16
    )
    
    
    (17
    )
    
    
    (19
    )Tangible assets (non-GAAP)
    
    $
    11,308
    
    
    $
    11,587
    
    
    $
    11,725
    
    
    $
    11,940
    
    
    $
    12,366Total shareholders equity
    
    $
    1,244
    
    
    $
    1,331
    
    
    $
    1,403
    
    
    $
    1,225
    
    
    $
    1,567Goodwill(1)
    
    
    (331
    )
    
    
    (331
    )
    
    
    (331
    )
    
    
    (331
    )
    
    
    (597
    )Other intangible assets
    
    
    (13
    )
    
    
    (14
    )
    
    
    (16
    )
    
    
    (17
    )
    
    
    (19
    )Tangible equity (non-GAAP)
    
    $
    900
    
    
    $
    986
    
    
    $
    1,056
    
    
    $
    877
    
    
    $
    951Tangible equity
    
    $
    900
    
    
    $
    986
    
    
    $
    1,056
    
    
    $
    877
    
    
    $
    951Preferred stock
    
    
    (274
    )
    
    
    (272
    )
    
    
    (270
    )
    
    
    (269
    )
    
    
    (268
    )Tangible common equity (non-GAAP)
    
    $
    626
    
    
    $
    714
    
    
    $
    786
    
    
    $
    608
    
    
    $
    683Tier 1 Common EquityTotal shareholders equity
    
    $
    1,244
    
    
    $
    1,331
    
    
    $
    1,403
    
    
    $
    1,225
    
    
    $
    1,567Qualifying capital securities
    
    
    74
    
    
    
    74
    
    
    
    74
    
    
    
    175
    
    
    
    175Goodwill(1)
    
    
    (331
    )
    
    
    (331
    )
    
    
    (331
    )
    
    
    (331
    )
    
    
    (597
    )Accumulated other comprehensive loss
    
    
    6
    
    
    
    7
    
    
    
    3
    
    
    
    27
    
    
    
    35Other intangible assets
    
    
    (13
    )
    
    
    (14
    )
    
    
    (16
    )
    
    
    (17
    )
    
    
    (19
    )Tier 1 capital (regulatory)
    
    $
    980
    
    
    $
    1,067
    
    
    $
    1,133
    
    
    $
    1,079
    
    
    $
    1,161Tier 1 capital (regulatory)
    
    $
    980
    
    
    $
    1,067
    
    
    $
    1,133
    
    
    $
    1,079
    
    
    $
    1,161Qualifying capital securities
    
    
    (74
    )
    
    
    (74
    )
    
    
    (74
    )
    
    
    (175
    )
    
    
    (175
    )Preferred stock
    
    
    (274
    )
    
    
    (272
    )
    
    
    (270
    )
    
    
    (269
    )
    
    
    (268
    )Total Tier 1 common equity (non-GAAP)
    
    $
    632
    
    
    $
    721
    
    
    $
    789
    
    
    $
    635
    
    
    $
    718Net risk-weighted assets (regulatory)
    
    $
    8,083
    
    
    $
    8,541
    
    
    $
    8,835
    
    
    $
    9,138
    
    
    $
    9,550Equity to assets
    
    
    10.68
    %
    
    
    11.16
    %
    
    
    11.63
    %
    
    
    9.97
    %
    
    
    12.07
    %Tangible equity to tangible assets
    
    
    7.96
    
    
    
    8.51
    
    
    
    9.01
    
    
    
    7.34
    
    
    
    7.69Tier 1 common equity
    
    
    7.82
    
    
    
    8.47
    
    
    
    8.94
    
    
    
    6.95
    
    
    
    7.52Tangible common equity to tangible assets
    
    
    5.54
    
    
    
    6.16
    
    
    
    6.71
    
    
    
    5.09
    
    
    
    5.53
 
 (1)
    
    Goodwill represents goodwill for Continuing Operations, as shown on the balance sheet, and goodwill for
Discontinued Operations of $12.6 million in the
first quarter of 2010, the fourth, third and second quarters of 2009, and $22.8 million in the first quarter of 2009. 32




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##### Table of Contents



Results of Operations
 Summary
    Pre-Tax Pre-Provision Core Operating Earnings
    
    Three Months EndedDecember 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,(in thousands)
    
    March 31, 2010
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Loss from continuing operations
    
    $
    (76,023
    )
    
    $
    (65,380
    )
    
    $
    (57,963
    )
    
    $
    (337,238
    )
    
    $
    (45,542
    )Income tax (benefit) from continuing operations
    
    
    147
    
    
    
    (3,811
    )
    
    
    (11,187
    )
    
    
    (11,004
    )
    
    
    (3,253
    )Provision for loan losses
    
    
    101,355
    
    
    
    84,007
    
    
    
    77,393
    
    
    
    98,935
    
    
    
    63,485Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256,272
    
    
    
    Net loss on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    15,929
    
    
    
    
    
    
    
    Investment securities gains
    
    
    (6,016
    )
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    FDIC special assessment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,351
    
    
    
    Fair-value adjustment on loans held for sale
    
    
    7,702
    
    
    
    8,724
    
    
    
    860
    
    
    
    4,350
    
    
    
    6,152Fair-value adjustment on ORE
    
    
    6,763
    
    
    
    8,089
    
    
    
    3,925
    
    
    
    3,308
    
    
    
    7,991Fair-value adjustment on bank owned life insurance
    
    
    (83
    )
    
    
    (19
    )
    
    
    (360
    )
    
    
    
    
    
    
    235Fair-value adjustment on swaps
    
    
    836
    
    
    
    1,449
    
    
    
    1,018
    
    
    
    583
    
    
    
    (2,444
    )Pre-Tax Pre-Provision Core Operating Earnings
    
    $
    34,681
    
    
    $
    33,059
    
    
    $
    29,615
    
    
    $
    20,552
    
    
    $
    26,624
    33




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##### Table of Contents



Net Interest Income and Net Interest Margin
  Average Balances/Net Interest Income/Average Rates
 Three Months Ended March 31,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(in thousands)
    
    Balance
    
    
    Interest (1)
    
    
    Rate (2)
    
    
    Balance
    
    
    Interest (1)
    
    
    Rate (2)Earning AssetsMoney market investments
    
    $
    696,016
    
    
    $
    424
    
    
    
    0.25
    %
    
    $
    420,232
    
    
    $
    258
    
    
    
    0.25
    %Investment securities (3):Taxable
    
    
    1,756,812
    
    
    
    18,261
    
    
    
    4.16
    
    
    
    1,602,807
    
    
    
    20,292
    
    
    
    5.06Tax-exempt
    
    
    492,968
    
    
    
    5,285
    
    
    
    6.60
    
    
    
    619,236
    
    
    
    6,636
    
    
    
    6.59FHLB and Federal Reserve stock
    
    
    155,084
    
    
    
    1,002
    
    
    
    2.61
    
    
    
    147,584
    
    
    
    1,360
    
    
    
    3.73Portfolio Loans (4):Commercial and industrial
    
    
    1,874,944
    
    
    
    22,047
    
    
    
    4.87
    
    
    
    2,427,966
    
    
    
    27,191
    
    
    
    4.62Commercial real estate
    
    
    2,791,395
    
    
    
    36,049
    
    
    
    5.24
    
    
    
    2,926,828
    
    
    
    38,494
    
    
    
    5.34Residential mortgage
    
    
    988,859
    
    
    
    11,820
    
    
    
    4.78
    
    
    
    1,223,875
    
    
    
    16,759
    
    
    
    5.48Direct consumer
    
    
    1,201,799
    
    
    
    17,921
    
    
    
    6.05
    
    
    
    1,386,845
    
    
    
    20,833
    
    
    
    6.09Indirect consumer
    
    
    797,482
    
    
    
    13,509
    
    
    
    6.87
    
    
    
    809,025
    
    
    
    13,511
    
    
    
    6.77Total portfolio loans
    
    
    7,654,479
    
    
    
    101,346
    
    
    
    5.39
    
    
    
    8,774,539
    
    
    
    116,788
    
    
    
    5.41Loans held for sale (4)
    
    
    83,972
    
    
    
    396
    
    
    
    1.90
    
    
    
    92,975
    
    
    
    497
    
    
    
    2.15Total earning assets (3)
    
    
    10,839,331
    
    
    
    126,714
    
    
    
    4.85
    
    
    
    11,657,373
    
    
    
    145,831
    
    
    
    5.19Nonearning AssetsCash and due from banks
    
    
    209,126
    
    
    
    
    
    
    
    
    
    
    
    166,033Bank premises and equipment
    
    
    109,696
    
    
    
    
    
    
    
    
    
    
    
    116,708Investment security fair value adjustment
    
    
    42,462
    
    
    
    
    
    
    
    
    
    
    
    (10,144
    )Other nonearning assets
    
    
    710,158
    
    
    
    
    
    
    
    
    
    
    
    1,055,918Assets of discontinued operations
    
    
    328,378
    
    
    
    
    
    
    
    
    
    
    
    352,443Allowance for loan losses
    
    
    (335,970
    )
    
    
    
    
    
    
    
    
    
    
    (258,046
    )Total assets
    
    $
    11,903,181
    
    
    
    
    
    
    
    
    
    
    $
    13,080,285Interest-Bearing LiabilitiesDeposits:Interest-bearing demand deposits
    
    $
    1,075,943
    
    
    
    814
    
    
    
    0.31
    
    
    $
    776,025
    
    
    
    861
    
    
    
    0.45Savings deposits
    
    
    2,490,158
    
    
    
    4,215
    
    
    
    0.69
    
    
    
    2,518,525
    
    
    
    5,792
    
    
    
    0.93Time deposits
    
    
    3,709,529
    
    
    
    24,482
    
    
    
    2.68
    
    
    
    4,299,260
    
    
    
    38,112
    
    
    
    3.60Short-term borrowings
    
    
    36,542
    
    
    
    24
    
    
    
    0.27
    
    
    
    59,843
    
    
    
    84
    
    
    
    0.57Long-term debt
    
    
    1,449,748
    
    
    
    15,990
    
    
    
    4.47
    
    
    
    2,116,974
    
    
    
    25,501
    
    
    
    4.88Total interest-bearing liabilities
    
    
    8,761,920
    
    
    
    45,525
    
    
    
    2.11
    
    
    
    9,770,627
    
    
    
    70,350
    
    
    
    2.92Noninterest-Bearing Liabilities and
Shareholders EquityNoninterest-bearing demand
    
    
    1,268,583
    
    
    
    
    
    
    
    
    
    
    
    1,114,910Other liabilities
    
    
    134,510
    
    
    
    
    
    
    
    
    
    
    
    165,007Liabilities of discontinued operations
    
    
    415,154
    
    
    
    
    
    
    
    
    
    
    
    423,106Shareholders equity
    
    
    1,323,014
    
    
    
    
    
    
    
    
    
    
    
    1,606,635Total liabilities and shareholders equity
    
    $
    11,903,181
    
    
    
    
    
    
    
    
    
    
    $
    13,080,285Net Interest Income
    
    
    
    
    
    $
    81,189
    
    
    
    
    
    
    
    
    
    
    $
    75,481Interest Spread(5)
    
    
    
    
    
    
    
    
    
    
    2.74
    %
    
    
    
    
    
    
    
    
    
    
    2.27
    %Contribution of noninterest bearing sources of funds
    
    
    
    
    
    
    
    
    
    
    0.40
    
    
    
    
    
    
    
    
    
    
    
    0.47Net Interest Margin(5)(6)
    
    
    
    
    
    
    
    
    
    
    3.14
    %
    
    
    
    
    
    
    
    
    
    
    2.74
    %
 
 (1)
    
    Interest income is shown on an unadjusted basis and therefore does not include taxable equivalent adjustments.(2)
    
    Average rates are presented on an annual basis and include taxable equivalent adjustments to interest income of $3.4 million and $4.1 million for the three months ended March 31, 2010 and 2009, respectively, based on a tax
rate of 35%.(3)
    
    For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.(4)
    
    Nonaccrual loans are included in average balances for each applicable loan category.(5)
    
    The interest spread and net interest margin are presented on a tax-equivalent basis.(6)
    
    Net interest margin exceeds the interest spread due to noninterest-bearing funding sources, demand deposits, other liabilities and shareholders equity supporting earning assets.  34




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##### Table of Contents



Analysis of Changes in Interest Income and Interest Expense
 2010 compared with 2009Increase (Decrease)Net
    
    
    Due to Change in(in thousands)
    
    Change(1)
    
    
    Rate (2)
    
    
    Volume(2)Interest Income on Earning Assets:Money market investments
    
    $
    166
    
    
    $
    (2
    )
    
    $
    168Investment securities:Taxable
    
    
    (2,031
    )
    
    
    (3,859
    )
    
    
    1,828Tax-exempt
    
    
    (1,351
    )
    
    
    3
    
    
    
    (1,354
    )FHLB and Federal Reserve stock
    
    
    (358
    )
    
    
    (424
    )
    
    
    66Loans:Commercial and industrial
    
    
    (5,144
    )
    
    
    1,303
    
    
    
    (6,447
    )Commercial real estate
    
    
    (2,445
    )
    
    
    (687
    )
    
    
    (1,758
    )Residential mortgage loans
    
    
    (4,939
    )
    
    
    (1,967
    )
    
    
    (2,972
    )Direct consumer
    
    
    (2,912
    )
    
    
    (152
    )
    
    
    (2,760
    )Indirect consumer
    
    
    (2
    )
    
    
    192
    
    
    
    (194
    )Total portfolio loans
    
    
    (15,442
    )
    
    
    (1,311
    )
    
    
    (14,131
    )Loans held for sale
    
    
    (101
    )
    
    
    (55
    )
    
    
    (46
    )Total
    
    $
    (19,117
    )
    
    $
    (5,648
    )
    
    $
    (13,469
    )Interest Expense on Interest-Bearing Liabilities:Deposits:Interest-bearing demand
    
    $
    (47
    )
    
    $
    (322
    )
    
    $
    275Savings deposits
    
    
    (1,577
    )
    
    
    (1,512
    )
    
    
    (65
    )Time deposits
    
    
    (13,630
    )
    
    
    (8,869
    )
    
    
    (4,761
    )Short-term borrowings
    
    
    (60
    )
    
    
    (35
    )
    
    
    (25
    )Long-term debt
    
    
    (9,511
    )
    
    
    (2,009
    )
    
    
    (7,502
    )Total
    
    $
    (24,825
    )
    
    $
    (12,747
    )
    
    $
    (12,078
    )Net Interest Income
    
    $
    5,708
    
    
    $
    7,099
    
    
    $
    (1,391
    )
 
 (1)
    
    Changes are based on actual interest income and do not reflect taxable equivalent adjustments.(2)
    
    The change in interest not solely due to changes in volume or rates has been allocated in proportion to the absolute dollar amounts of the change in each.  35




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##### Table of Contents



Noninterest Income
  Noninterest Income
    
    Three Months EndedMarch 31,
    
    
    Change in 2010(in thousands)
    
    2010
    
    
    2009
    
    
    Amount
    
    
    PercentService charges on deposit accounts
    
    $
    9,684
    
    
    $
    9,856
    
    
    $
    (172
    )
    
    
    (1.7)
    %Trust fees
    
    
    3,795
    
    
    
    3,318
    
    
    
    477
    
    
    
    14.4Mortgage and other loan income
    
    
    2,589
    
    
    
    3,043
    
    
    
    (454
    )
    
    
    (14.9
    )Brokerage and investment fees
    
    
    933
    
    
    
    1,295
    
    
    
    (362
    )
    
    
    (28.0
    )ATM network user fees
    
    
    1,597
    
    
    
    1,385
    
    
    
    212
    
    
    
    15.3Bankcard fees
    
    
    2,007
    
    
    
    1,834
    
    
    
    173
    
    
    
    9.4Losses on loans held for sale
    
    
    (7,702
    )
    
    
    (6,152
    )
    
    
    (1,550
    )
    
    
    25.2Investment securities gains
    
    
    6,016
    
    
    
    
    
    
    
    6,016
    
    
    
    N/MOther income
    
    
    3,474
    
    
    
    3,686
    
    
    
    (212
    )
    
    
    (5.8
    )Total noninterest income
    
    $
    22,393
    
    
    $
    18,265
    
    
    $
    4,128
    
    
    
    22.6
 
 N/M 
    
    Not Meaningful  Noninterest Expense
  Noninterest Expense
    
    Three Months EndedMarch 31,
    
    
    Change in 2010(in thousands)
    
    2010
    
    
    2009
    
    
    Amount
    
    
    PercentSalaries and employee benefits
    
    $
    29,947
    
    
    $
    33,030
    
    
    $
    (3,083
    )
    
    
    (9.3)
    %Occupancy
    
    
    7,461
    
    
    
    7,592
    
    
    
    (131
    )
    
    
    (1.7
    )Professional services
    
    
    2,253
    
    
    
    3,093
    
    
    
    (840
    )
    
    
    (27.2
    )Equipment
    
    
    3,072
    
    
    
    2,784
    
    
    
    288
    
    
    
    10.3Data processing services
    
    
    4,629
    
    
    
    4,194
    
    
    
    435
    
    
    
    10.4Advertising and public relations
    
    
    1,297
    
    
    
    1,418
    
    
    
    (121
    )
    
    
    (8.5
    )Postage and delivery
    
    
    1,014
    
    
    
    1,491
    
    
    
    (477
    )
    
    
    (32.0
    )Other loan expenses
    
    
    5,974
    
    
    
    5,862
    
    
    
    112
    
    
    
    1.9Other real estate (ORE) expenses and losses
    
    
    7,953
    
    
    
    8,365
    
    
    
    (412
    )
    
    
    (4.9
    )Intangible asset amortization
    
    
    1,130
    
    
    
    2,037
    
    
    
    (907
    )
    
    
    (44.5
    )Other expenses
    
    
    13,373
    
    
    
    9,190
    
    
    
    4,183
    
    
    
    45.5Total noninterest expense
    
    $
    78,103
    
    
    $
    79,056
    
    
    $
    (953
    )
    
    
    (1.2
    )
  Income Taxes
  36




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##### Table of Contents



Loss from Discontinued Operations
  Lines of Business Results
       Financial Condition
  Money Market Investments
  37




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##### Table of Contents



Investment Securities
  Portfolio Loans
  Loan Portfolios
    
    March 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,(in millions)
    
    2010
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Land hold
    
    $
    39.3
    
    
    $
    35.9
    
    
    $
    52.0
    
    
    $
    54.9
    
    
    $
    54.2Land development
    
    
    101.0
    
    
    
    103.6
    
    
    
    124.5
    
    
    
    117.8
    
    
    
    116.3Construction
    
    
    164.4
    
    
    
    177.9
    
    
    
    214.8
    
    
    
    229.5
    
    
    
    256.7Income producing
    
    
    1,532.1
    
    
    
    1,514.0
    
    
    
    1,504.1
    
    
    
    1,530.8
    
    
    
    1,554.1Owner-occupied
    
    
    931.5
    
    
    
    980.1
    
    
    
    986.4
    
    
    
    972.8
    
    
    
    945.8Total commercial real estate
    
    
    2,768.3
    
    
    
    2,811.5
    
    
    
    2,881.8
    
    
    
    2,905.8
    
    
    
    2,927.1Commercial and industrial
    
    
    1,824.8
    
    
    
    1,921.8
    
    
    
    2,047.2
    
    
    
    2,145.5
    
    
    
    2,339.0Total commercial loans
    
    
    4,593.1
    
    
    
    4,733.3
    
    
    
    4,929.0
    
    
    
    5,051.3
    
    
    
    5,266.1Residential mortgage
    
    
    877.2
    
    
    
    1,025.2
    
    
    
    1,073.3
    
    
    
    1,132.2
    
    
    
    1,194.4Direct consumer
    
    
    1,174.7
    
    
    
    1,224.2
    
    
    
    1,269.2
    
    
    
    1,310.3
    
    
    
    1,362.0Indirect consumer
    
    
    794.2
    
    
    
    805.2
    
    
    
    825.3
    
    
    
    808.3
    
    
    
    802.1Total consumer loans
    
    
    2,846.1
    
    
    
    3,054.6
    
    
    
    3,167.8
    
    
    
    3,250.8
    
    
    
    3,358.5Total loans
    
    $
    7,439.2
    
    
    $
    7,787.9
    
    
    $
    8,096.8
    
    
    $
    8,302.1
    
    
    $
    8,624.6
  Credit Quality
  38




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##### Table of Contents




    
    Delinquency Rates by Loan Portfolio  Loans where the contractual payment is 30 to 89 days
past due and interest is still accruing. While these loans are actively worked to bring them
current, past due loan trends may be a leading indicator of potential future nonperforming
loans and charge-offs.
    
    Commercial Watchlist  Commercial loans that, while still accruing interest, Citizens
believes may be at risk due to general economic conditions or changes in a borrowers
financial status and therefore require increased oversight. Watchlist loans that are in
nonperforming status are included in the nonperforming assets table below.
    
    Nonperforming Assets  Loans that are in nonaccrual status, loans past due 90 days or more
on which interest is still accruing, restructured loans, nonperforming loans that are held for
sale, and other repossessed assets acquired. The commercial loans included in this table are
reviewed as part of the watchlist process in addition to the loans displayed in the commercial
watchlist table below.
    
    Net Charge-Offs  The portion of loans that have been charged-off during each quarter.
 Delinquency Rates By Loan Portfolio
    
    March 31, 2010
    
    
    December 31, 2009
    
    
    September 30, 2009
    
    
    June 30, 2009
    
    
    March 31, 200930 to 89 days past due
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of(in millions)
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    PortfolioLand hold
    
    $
    0.6
    
    
    
    1.64
    %
    
    $
    0.6
    
    
    
    1.56
    %
    
    $
    1.4
    
    
    
    2.61
    %
    
    $
    3.5
    
    
    
    6.38
    %
    
    $
    3.7
    
    
    
    6.83
    %Land development
    
    
    3.0
    
    
    
    3.00
    
    
    
    4.7
    
    
    
    4.56
    
    
    
    12.0
    
    
    
    9.67
    
    
    
    1.3
    
    
    
    1.10
    
    
    
    11.1
    
    
    
    9.54Construction
    
    
    0.9
    
    
    
    0.55
    
    
    
    1.7
    
    
    
    0.95
    
    
    
    12.1
    
    
    
    5.64
    
    
    
    1.7
    
    
    
    0.74
    
    
    
    16.7
    
    
    
    6.51Income producing
    
    
    51.7
    
    
    
    3.37
    
    
    
    40.8
    
    
    
    2.70
    
    
    
    44.9
    
    
    
    2.98
    
    
    
    50.0
    
    
    
    3.27
    
    
    
    64.2
    
    
    
    4.13Owner-occupied
    
    
    13.6
    
    
    
    1.46
    
    
    
    25.0
    
    
    
    2.55
    
    
    
    24.4
    
    
    
    2.47
    
    
    
    15.6
    
    
    
    1.60
    
    
    
    37.4
    
    
    
    3.95Total commercial real estate
    
    
    69.8
    
    
    
    2.52
    
    
    
    72.8
    
    
    
    2.59
    
    
    
    94.8
    
    
    
    3.29
    
    
    
    72.1
    
    
    
    2.48
    
    
    
    133.1
    
    
    
    4.55Commercial and industrial
    
    
    15.1
    
    
    
    0.83
    
    
    
    16.9
    
    
    
    0.88
    
    
    
    20.2
    
    
    
    0.98
    
    
    
    34.0
    
    
    
    1.58
    
    
    
    45.7
    
    
    
    1.95Total commercial loans
    
    
    84.9
    
    
    
    1.85
    
    
    
    89.7
    
    
    
    1.90
    
    
    
    115.0
    
    
    
    2.33
    
    
    
    106.1
    
    
    
    2.10
    
    
    
    178.8
    
    
    
    3.39Residential mortgage
    
    
    21.5
    
    
    
    2.45
    
    
    
    22.0
    
    
    
    2.14
    
    
    
    30.0
    
    
    
    2.80
    
    
    
    27.7
    
    
    
    2.45
    
    
    
    25.6
    
    
    
    2.15Direct consumer
    
    
    21.9
    
    
    
    1.86
    
    
    
    26.5
    
    
    
    2.16
    
    
    
    24.1
    
    
    
    1.90
    
    
    
    22.8
    
    
    
    1.74
    
    
    
    20.0
    
    
    
    1.47Indirect consumer
    
    
    14.8
    
    
    
    1.86
    
    
    
    16.3
    
    
    
    2.02
    
    
    
    16.3
    
    
    
    1.98
    
    
    
    14.6
    
    
    
    1.81
    
    
    
    14.7
    
    
    
    1.83Total consumer loans
    
    
    58.2
    
    
    
    2.05
    
    
    
    64.8
    
    
    
    2.12
    
    
    
    70.4
    
    
    
    2.22
    
    
    
    65.1
    
    
    
    2.00
    
    
    
    60.3
    
    
    
    1.80Total loans
    
    $
    143.1
    
    
    
    1.92
    
    
    $
    154.5
    
    
    
    1.98
    
    
    $
    185.4
    
    
    
    2.29
    
    
    $
    171.2
    
    
    
    2.06
    
    
    $
    239.1
    
    
    
    2.77
   39




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##### Table of Contents



Commercial Watchlist
    
    March 31, 2010
    
    
    December 31, 2009
    
    
    September 30, 2009
    
    
    June 30, 2009
    
    
    March 31, 2009Accruing loans only
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of(in millions)
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    PortfolioLand hold
    
    $
    29.0
    
    
    
    73.73
    %
    
    $
    24.8
    
    
    
    68.99
    %
    
    $
    29.0
    
    
    
    55.76
    %
    
    $
    18.1
    
    
    
    32.97
    %
    
    $
    15.7
    
    
    
    28.97
    %Land development
    
    
    50.4
    
    
    
    49.95
    
    
    
    86.7
    
    
    
    83.66
    
    
    
    92.1
    
    
    
    73.92
    
    
    
    82.0
    
    
    
    69.64
    
    
    
    60.9
    
    
    
    52.33Construction
    
    
    54.4
    
    
    
    33.07
    
    
    
    63.5
    
    
    
    35.68
    
    
    
    90.4
    
    
    
    42.10
    
    
    
    90.3
    
    
    
    39.35
    
    
    
    86.6
    
    
    
    33.74Income producing
    
    
    523.5
    
    
    
    34.17
    
    
    
    521.4
    
    
    
    34.44
    
    
    
    519.3
    
    
    
    34.52
    
    
    
    458.6
    
    
    
    29.96
    
    
    
    421.5
    
    
    
    27.12Owner-occupied
    
    
    237.0
    
    
    
    25.44
    
    
    
    247.2
    
    
    
    25.22
    
    
    
    277.2
    
    
    
    28.10
    
    
    
    274.4
    
    
    
    28.21
    
    
    
    223.3
    
    
    
    23.61Total commercial real estate
    
    
    894.3
    
    
    
    32.31
    
    
    
    943.6
    
    
    
    33.56
    
    
    
    1,008.0
    
    
    
    34.98
    
    
    
    923.4
    
    
    
    31.78
    
    
    
    808.0
    
    
    
    27.60Commercial and industrial
    
    
    484.7
    
    
    
    26.56
    
    
    
    473.0
    
    
    
    24.61
    
    
    
    508.0
    
    
    
    24.81
    
    
    
    530.3
    
    
    
    24.72
    
    
    
    478.0
    
    
    
    20.44Total watchlist loans
    
    $
    1,379.0
    
    
    
    30.02
    
    
    $
    1,416.6
    
    
    
    29.93
    
    
    $
    1,516.0
    
    
    
    30.76
    
    
    $
    1,453.7
    
    
    
    28.78
    
    
    $
    1,286.0
    
    
    
    24.42
   
    
    Gross charge-offs against the allowance for loan losses of $74.2 million as a result of
transferring nonperforming residential mortgage loans to loans held for sale at fair-value,
less costs to sell;
    
    A fair value writedown of $1.2 million on existing residential mortgage loans held for sale
(recorded in noninterest income); and
    
    A fair value writedown of $1.6 million on existing residential ORE (recorded in noninterest
expense).
 March 31, 2010
    
    
    December 31, 2009
    
    
    September 30, 2009
    
    
    June 30, 2009
    
    
    March 31, 2009Nonperforming Assets
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of(in millions)
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    PortfolioLand hold
    
    $
    4.9
    
    
    
    12.49
    %
    
    $
    4.8
    
    
    
    13.42
    %
    
    $
    13.3
    
    
    
    25.56
    %
    
    $
    13.1
    
    
    
    23.86
    %
    
    $
    12.0
    
    
    
    22.14
    %Land development
    
    
    27.1
    
    
    
    26.86
    
    
    
    1.0
    
    
    
    0.92
    
    
    
    13.7
    
    
    
    10.96
    
    
    
    15.1
    
    
    
    12.82
    
    
    
    14.6
    
    
    
    12.55Construction
    
    
    35.2
    
    
    
    21.39
    
    
    
    25.2
    
    
    
    14.19
    
    
    
    33.7
    
    
    
    15.70
    
    
    
    36.0
    
    
    
    15.69
    
    
    
    26.5
    
    
    
    10.32Income producing
    
    
    144.0
    
    
    
    9.40
    
    
    
    121.5
    
    
    
    8.02
    
    
    
    126.7
    
    
    
    8.42
    
    
    
    139.4
    
    
    
    9.11
    
    
    
    116.3
    
    
    
    7.48Owner-occupied
    
    
    89.0
    
    
    
    9.56
    
    
    
    83.4
    
    
    
    8.51
    
    
    
    70.1
    
    
    
    7.11
    
    
    
    71.3
    
    
    
    7.33
    
    
    
    66.1
    
    
    
    6.99Total commercial real estate
    
    
    300.2
    
    
    
    10.85
    
    
    
    235.9
    
    
    
    8.39
    
    
    
    257.5
    
    
    
    8.94
    
    
    
    274.9
    
    
    
    9.46
    
    
    
    235.5
    
    
    
    8.04Commercial and industrial
    
    
    69.7
    
    
    
    3.82
    
    
    
    84.0
    
    
    
    4.37
    
    
    
    111.5
    
    
    
    5.44
    
    
    
    91.8
    
    
    
    4.28
    
    
    
    83.4
    
    
    
    3.57Total nonaccruing commercial loans
    
    
    369.9
    
    
    
    8.05
    
    
    
    319.9
    
    
    
    6.76
    
    
    
    369.0
    
    
    
    7.49
    
    
    
    366.7
    
    
    
    7.26
    
    
    
    318.9
    
    
    
    6.06Residential mortgage
    
    
    17.6
    
    
    
    2.01
    
    
    
    125.1
    
    
    
    12.20
    
    
    
    106.0
    
    
    
    9.88
    
    
    
    102.7
    
    
    
    9.07
    
    
    
    84.2
    
    
    
    7.05Direct consumer
    
    
    16.5
    
    
    
    1.41
    
    
    
    21.3
    
    
    
    1.74
    
    
    
    21.4
    
    
    
    1.68
    
    
    
    20.2
    
    
    
    1.54
    
    
    
    20.9
    
    
    
    1.54Indirect consumer
    
    
    2.4
    
    
    
    0.30
    
    
    
    2.6
    
    
    
    0.33
    
    
    
    2.6
    
    
    
    0.31
    
    
    
    1.4
    
    
    
    0.17
    
    
    
    2.0
    
    
    
    0.25Total nonaccruing consumer loans
    
    
    36.5
    
    
    
    1.28
    
    
    
    149.0
    
    
    
    4.88
    
    
    
    130.0
    
    
    
    4.10
    
    
    
    124.3
    
    
    
    3.82
    
    
    
    107.1
    
    
    
    3.19Total nonaccruing loans
    
    
    406.4
    
    
    
    5.46
    
    
    
    468.9
    
    
    
    6.02
    
    
    
    499.0
    
    
    
    6.16
    
    
    
    491.0
    
    
    
    5.91
    
    
    
    426.0
    
    
    
    4.94Loans 90+ days still accruing
    
    
    2.4
    
    
    
    0.03
    
    
    
    3.0
    
    
    
    0.04
    
    
    
    0.6
    
    
    
    0.01
    
    
    
    0.8
    
    
    
    0.01
    
    
    
    1.0
    
    
    
    0.01Restructured loans and still accruing
    
    
    4.8
    
    
    
    0.06
    
    
    
    2.6
    
    
    
    0.03
    
    
    
    1.1
    
    
    
    0.01
    
    
    
    2.5
    
    
    
    0.03
    
    
    
    0.4
    
    
    
    Total nonperforming portfolio loans
    
    
    413.6
    
    
    
    5.56
    
    
    
    474.5
    
    
    
    6.09
    
    
    
    500.7
    
    
    
    6.18
    
    
    
    494.3
    
    
    
    5.95
    
    
    
    427.4
    
    
    
    4.96Nonperforming held for sale
    
    
    95.3
    
    
    
    
    
    
    
    65.2
    
    
    
    
    
    
    
    44.4
    
    
    
    
    
    
    
    54.2
    
    
    
    
    
    
    
    64.5Other repossessed assets acquired
    
    
    47.3
    
    
    
    
    
    
    
    54.4
    
    
    
    
    
    
    
    61.9
    
    
    
    
    
    
    
    54.6
    
    
    
    
    
    
    
    57.3Total nonperforming
 assets
    
    $
    556.2
    
    
    
    
    
    
    $
    594.1
    
    
    
    
    
    
    $
    607.0
    
    
    
    
    
    
    $
    603.1
    
    
    
    
    
    
    $
    549.2Commercial inflows
    
    $
    124.8
    
    
    
    
    
    
    $
    101.0
    
    
    
    
    
    
    $
    94.1
    
    
    
    
    
    
    $
    133.4
    
    
    
    
    
    
    $
    173.0Commercial outflows
    
    
    (74.8
    )
    
    
    
    
    
    
    (150.1
    )
    
    
    
    
    
    
    (92.3
    )
    
    
    
    
    
    
    (85.9
    )
    
    
    
    
    
    
    (80.4
    )Net change
    
    $
    50.0
    
    
    
    
    
    
    $
    (49.1
    )
    
    
    
    
    
    $
    1.8
    
    
    
    
    
    
    $
    47.5
    
    
    
    
    
    
    $
    92.6
 40




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##### Table of Contents



Three Months EndedMarch 31, 2010
    
    
    December 31, 2009
    
    
    September 30, 2009
    
    
    June 30, 2009
    
    
    March 31, 2009Net Charge-Offs
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of(in millions)
    
    $
    
    

Portfolio*
    
    
    $
    
    
    Portfolio*
    
    
    $
    
    
    Portfolio*
    
    
    $
    
    
    Portfolio*
    
    
    $
    
    
    Portfolio*Land hold
    
    $
    
    
    
    
    
    %
    
    $
    5.6
    
    
    
    62.32
    %
    
    $
    0.5
    
    
    
    3.98
    %
    
    $
    0.6
    
    
    
    4.38
    %
    
    $
    
    
    
    
    
    %Land development
    
    
    0.1
    
    
    
    0.49
    
    
    
    9.7
    
    
    
    36.97
    
    
    
    1.4
    
    
    
    4.33
    
    
    
    2.4
    
    
    
    8.17
    
    
    
    6.3
    
    
    
    21.97Construction
    
    
    
    
    
    
    
    
    
    
    9.5
    
    
    
    21.21
    
    
    
    0.9
    
    
    
    1.62
    
    
    
    5.8
    
    
    
    10.14
    
    
    
    2.0
    
    
    
    3.16Income producing
    
    
    7.6
    
    
    
    2.01
    
    
    
    13.2
    
    
    
    3.45
    
    
    
    24.5
    
    
    
    6.47
    
    
    
    12.6
    
    
    
    3.30
    
    
    
    7.8
    
    
    
    2.04Owner-occupied
    
    
    6.9
    
    
    
    3.01
    
    
    
    2.5
    
    
    
    1.01
    
    
    
    4.6
    
    
    
    1.85
    
    
    
    7.4
    
    
    
    3.03
    
    
    
    2.4
    
    
    
    1.03Total commercial real estate
    
    
    14.6
    
    
    
    2.13
    
    
    
    40.5
    
    
    
    5.71
    
    
    
    31.9
    
    
    
    4.39
    
    
    
    28.8
    
    
    
    3.97
    
    
    
    18.5
    
    
    
    2.56Commercial and industrial
    
    
    12.9
    
    
    
    2.86
    
    
    
    22.4
    
    
    
    4.63
    
    
    
    20.1
    
    
    
    3.90
    
    
    
    6.8
    
    
    
    1.27
    
    
    
    8.0
    
    
    
    1.39Total commercial loans
    
    
    27.5
    
    
    
    2.43
    
    
    
    62.9
    
    
    
    5.27
    
    
    
    52.0
    
    
    
    4.19
    
    
    
    35.6
    
    
    
    2.82
    
    
    
    26.5
    
    
    
    2.04Residential mortgage
    
    
    80.1
    
    
    
    37.05
    
    
    
    6.0
    
    
    
    2.33
    
    
    
    10.0
    
    
    
    3.68
    
    
    
    2.2
    
    
    
    0.78
    
    
    
    0.8
    
    
    
    0.27Direct consumer
    
    
    7.1
    
    
    
    2.44
    
    
    
    6.1
    
    
    
    1.97
    
    
    
    6.1
    
    
    
    1.92
    
    
    
    6.4
    
    
    
    1.95
    
    
    
    4.3
    
    
    
    1.28Indirect consumer
    
    
    3.2
    
    
    
    1.63
    
    
    
    6.3
    
    
    
    3.10
    
    
    
    3.2
    
    
    
    1.55
    
    
    
    4.4
    
    
    
    2.18
    
    
    
    5.0
    
    
    
    2.53Total consumer loans
    
    
    90.4
    
    
    
    12.88
    
    
    
    18.4
    
    
    
    2.39
    
    
    
    19.3
    
    
    
    2.42
    
    
    
    13.0
    
    
    
    1.60
    
    
    
    10.1
    
    
    
    1.22Total net charge-offs
    
    $
    117.9
    
    
    
    6.25
    
    
    $
    81.3
    
    
    
    4.05
    
    
    $
    71.3
    
    
    
    3.46
    
    
    $
    48.6
    
    
    
    2.30
    
    
    $
    36.6
    
    
    
    1.69
 
 *
    
    Represents an annualized rate.  41




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Analysis of Allowance for Loan Losses
    
    Three Months EndedMarch 31,(in thousands)
    
    2010
    
    
    2009Allowance for loan losses  beginning of period
    
    $
    338,940
    
    
    $
    252,938Provision for loan losses
    
    
    101,355
    
    
    
    63,485Charge-offs
    
    
    121,571
    
    
    
    37,987Recoveries
    
    
    3,653
    
    
    
    1,402Net charge-offs
    
    
    117,918
    
    
    
    36,585Allowance for loan losses  end of period
    
    $
    322,377
    
    
    $
    279,838Portfolio loans outstanding at period end
    
    $
    7,439,210
    
    
    $
    8,624,580Average portfolio loans outstanding during period
    
    
    7,654,479
    
    
    
    8,774,539Allowance for loan losses as a percentage of portfolio loans
    
    
    4.33
    %
    
    
    3.24
    %Ratio of net charge-offs during period to average portfolio loans (annualized)
    
    
    6.25
    
    
    
    1.69
   Loans Held for Sale
  Goodwill
  Deposits
  42




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##### Table of Contents



Borrowed Funds
   Capital Resources
   RegulatoryMinimum for
    
    
    
    
    
    
    
    
    
    
    
    
    
    Excess CapitalWell-
    
    March 31,
    
    December 31,
    
    March 31,
    
    over MinimumCapital Ratios
    
    Capitalized
    
    2010
    
    2009
    
    2009
    
    (in millions)Leverage ratio
    
    
    5.00
    %
    
    
    8.47
    %
    
    
    9.21
    %
    
    
    9.32
    %
    
    $
    400.9Tier 1 capital ratio
    
    
    6.00
    
    
    
    12.12
    
    
    
    12.52
    
    
    
    12.16
    
    
    
    494.4Total capital ratio
    
    
    10.00
    
    
    
    13.49
    
    
    
    13.93
    
    
    
    14.21
    
    
    
    281.8Tier 1 common equity ratio
    
    
    
    
    
    
    7.82
    
    
    
    8.47
    
    
    
    7.52Tangible equity to tangible assets
    
    
    
    
    
    
    7.96
    
    
    
    8.51
    
    
    
    7.69Tangible common equity to tangible assets
    
    
    
    
    
    
    5.54
    
    
    
    6.16
    
    
    
    5.53
  43




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##### Table of Contents



Contractual Obligations and Off-Balance Sheet Arrangements
  Liquidity and Liquidity Risk Management
    Moodys Investor
    
    Fitch
    
    Dominion BondCredit Ratings
    
    Service
    
    Ratings
    
    Rating ServiceCitizens Republic Bancorp
(Holding Company)Long-Term Debt
    
    B2
    
    B+
    
    B (high)Short-Term Debt
    
    Not Prime
    
    B
    
    R-4Trust Preferred
    
    Caa2
    
    CCC
    
    BCitizens BankCertificate of Deposit
    
    Ba3
    
    BB
    
    BB
  44




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##### Table of Contents



Interest Rate Risk
  45




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##### Table of Contents



46




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1A.
    
    Risk Factors
   47




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##### Table of Contents



Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 Total Number of
    
    
    Maximum Number ofShares Purchased as
    
    
    Shares That May YetPart of Publicly
    
    
    Be Purchased UnderTotal Number of
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    The Plans or ProgramsPeriod
    
    Shares Purchased
    
    
    Per Share
    
    
    Programs
    
    
    (2)January 2010
    
    
    174
    (1)
    
    
    0.69
    
    
    
    
    
    
    
    1,241,154February 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,241,154March 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,241,154Total
    
    
    174
    
    
    
    0.69
    
    
    
    
    
    
    
    1,241,154
 
 (1)
    
    Shares repurchased in connection with taxes due from
employees as a result of the vesting of certain
restricted share awards in accordance with the related
grant agreements. These repurchases were not part of
the repurchase program approved in October 2003.(2)
    
    In October 2003, the Board of Directors approved the
repurchase of 3,000,000 shares of common stock from
time to time in the market. There is no expiration
date for the repurchase program. The repurchase of
shares is generally prohibited, with certain
exceptions, by the CPP Letter Agreement while Treasury
continues to hold the related TARP Preferred Stock and
by the terms of Citizens outstanding trust preferred
securities, and is also subject to limitations that may
be imposed by applicable securities laws and
regulations and the rules of NASDAQ. The timing of the
purchases and the number of shares to be bought at any
one time also depend on market conditions and Citizens
capital requirements. There can be no assurance that
Citizens will repurchase the remaining shares
authorized to be repurchased.  
 Item 3. Defaults Upon Senior Securities
  
 Item 6. Exhibits
 2.3
    
    Stock Purchase Agreement, dated as of January 29, 2010, by and between Citizens
Republic Bancorp, Inc. and Great Western Bank (Citizens Form 8-K filed on February 2,
2010)31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 193431.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 193432.1
    
    Certification pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) of the Securities
Exchange Act of 1934
 48




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SIGNATURES
  CITIZENS REPUBLIC BANCORP, INC.Date: May 6, 2010
    By
    /s/ Charles D. ChristyCharles D. ChristyChief Financial Officer
(principal financial officer and duly authorized officer) 49




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10-Q EXHIBIT INDEX
 Exhibit No.
    
    Description2.3
    
    
    Stock Purchase Agreement, dated as of January 29, 2010, by and between Citizens
Republic Bancorp, Inc. and Great Western Bank (Citizens Form 8-K filed on February 2,
2010)31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 193431.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 193432.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) of the Securities
Exchange Act of 1934
 50