##### 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, 2011
 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)
 (Former name, former address and former fiscal year, if changed since last report)
 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 29, 2011Common Stock, No Par Value
    
    397,777,045 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
    
    
    32Item 3  Quantitative and Qualitative Disclosures about Market Risk
    
    
    58Item 4  Controls and Procedures
    
    
    58Part II  Other InformationItem 1A  Risk Factors
    
    
    59Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    59Item 3  Defaults Upon Senior Securities
    
    
    59Item 6  Exhibits
    
    
    60Signatures
    
    
    61Exhibit Index
    
    
    62EX-10.63EX-10.64EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



Consolidated Balance Sheets (Unaudited)  Citizens Republic Bancorp, Inc.
 March 31,
    
    
    December 31,
    
    
    March 31,(in thousands, except share amounts)
    
    2011
    
    
    2010
    
    
    2010AssetsCash and due from banks
    
    $
    136,638
    
    
    $
    127,585
    
    
    $
    148,161Money market investments
    
    
    495,562
    
    
    
    409,079
    
    
    
    760,746Investment Securities:Securities available for sale, at fair value
    
    
    2,119,416
    
    
    
    2,049,528
    
    
    
    2,057,599Securities held to maturity, at amortized cost
(fair value of $541,646, $469,421 and $115,484, respectively)
    
    
    547,449
    
    
    
    474,832
    
    
    
    113,259Total investment securities
    
    
    2,666,865
    
    
    
    2,524,360
    
    
    
    2,170,858FHLB and Federal Reserve stock
    
    
    143,873
    
    
    
    143,873
    
    
    
    155,084Portfolio loans:Commercial and industrial
    
    
    1,353,167
    
    
    
    1,474,227
    
    
    
    1,824,801Commercial real estate
    
    
    1,794,284
    
    
    
    2,120,735
    
    
    
    2,768,299Total commercial
    
    
    3,147,451
    
    
    
    3,594,962
    
    
    
    4,593,100Residential mortgage
    
    
    727,304
    
    
    
    756,245
    
    
    
    877,201Direct consumer
    
    
    1,006,424
    
    
    
    1,045,530
    
    
    
    1,174,726Indirect consumer
    
    
    823,019
    
    
    
    819,865
    
    
    
    794,183Total portfolio loans
    
    
    5,704,198
    
    
    
    6,216,602
    
    
    
    7,439,210Less: Allowance for loan losses
    
    
    (224,117
    )
    
    
    (296,031
    )
    
    
    (322,377
    )Net portfolio loans
    
    
    5,480,081
    
    
    
    5,920,571
    
    
    
    7,116,833Loans held for sale
    
    
    38,121
    
    
    
    40,347
    
    
    
    107,772Premises and equipment
    
    
    102,162
    
    
    
    104,714
    
    
    
    108,680Goodwill
    
    
    318,150
    
    
    
    318,150
    
    
    
    318,150Other intangible assets
    
    
    9,626
    
    
    
    10,454
    
    
    
    13,247Bank owned life insurance
    
    
    218,016
    
    
    
    217,757
    
    
    
    216,179Other assets
    
    
    115,019
    
    
    
    148,755
    
    
    
    212,115Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    324,097Total assets
    
    $
    9,724,113
    
    
    $
    9,965,645
    
    
    $
    11,651,922LiabilitiesNoninterest-bearing deposits
    
    $
    1,413,920
    
    
    $
    1,325,383
    
    
    $
    1,239,352Interest-bearing demand deposits
    
    
    956,676
    
    
    
    947,953
    
    
    
    1,057,094Savings deposits
    
    
    2,646,851
    
    
    
    2,600,750
    
    
    
    2,533,002Time deposits
    
    
    2,674,058
    
    
    
    2,852,748
    
    
    
    3,651,750Total deposits
    
    
    7,691,505
    
    
    
    7,726,834
    
    
    
    8,481,198Federal funds purchased and securities sold under agreements to repurchase
    
    
    40,069
    
    
    
    41,699
    
    
    
    30,209Other short-term borrowings
    
    
    690
    
    
    
    620
    
    
    
    2,920Other liabilities
    
    
    139,819
    
    
    
    152,072
    
    
    
    133,893Long-term debt
    
    
    906,629
    
    
    
    1,032,689
    
    
    
    1,337,746Liabilities of discontinued operations
    
    
    
    
    
    
    
    
    
    
    421,562Total liabilities
    
    
    8,778,712
    
    
    
    8,953,914
    
    
    
    10,407,528Shareholders EquityPreferred stock  no par value
Authorized  5,000,000 shares; Issued and outstanding  300,000 at
3/31/11, 12/31/10, and 3/31/10, redemption value of $300 million
    
    
    279,955
    
    
    
    278,300
    
    
    
    273,522Common stock  no par value
Authorized  1,050,000,000 shares at 3/31/11,12/31/10, and 3/31/10;
Issued and outstanding  397,782,546 at 3/31/11, 397,167,137 at 12/31/10
and 394,391,857 at 3/31/10
    
    
    1,432,271
    
    
    
    1,431,829
    
    
    
    1,430,273Retained deficit
    
    
    (752,547
    )
    
    
    (678,242
    )
    
    
    (453,910
    )Accumulated other comprehensive loss
    
    
    (14,278
    )
    
    
    (20,156
    )
    
    
    (5,491
    )Total shareholders equity
    
    
    945,401
    
    
    
    1,011,731
    
    
    
    1,244,394Total liabilities and shareholders equity
    
    $
    9,724,113
    
    
    $
    9,965,645
    
    
    $
    11,651,922
  3




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##### Table of Contents



Consolidated Statements of Operations (Unaudited)  Citizens Republic Bancorp, Inc.
 Three Months EndedMarch 31,(in thousands, except per share amounts)
    
    2011
    
    
    2010Interest IncomeInterest and fees on loans
    
    $
    80,711
    
    
    $
    101,742Interest and dividends on investment securities:Taxable
    
    
    19,610
    
    
    
    18,261Tax-exempt
    
    
    3,086
    
    
    
    5,285Dividends on FHLB and Federal Reserve stock
    
    
    1,125
    
    
    
    1,002Money market investments
    
    
    253
    
    
    
    424Total interest income
    
    
    104,785
    
    
    
    126,714Interest ExpenseDeposits
    
    
    16,375
    
    
    
    29,511Short-term borrowings
    
    
    18
    
    
    
    24Long-term debt
    
    
    9,778
    
    
    
    15,990Total interest expense
    
    
    26,171
    
    
    
    45,525Net Interest Income
    
    
    78,614
    
    
    
    81,189Provision for loan losses
    
    
    88,724
    
    
    
    101,355Net interest loss after provision for loan losses
    
    
    (10,110
    )
    
    
    (20,166
    )Noninterest IncomeService charges on deposit accounts
    
    
    9,429
    
    
    
    9,684Trust fees
    
    
    3,923
    
    
    
    3,795Mortgage and other loan income
    
    
    2,942
    
    
    
    2,589Brokerage and investment fees
    
    
    1,108
    
    
    
    933ATM network user fees
    
    
    1,755
    
    
    
    1,597Bankcard fees
    
    
    2,238
    
    
    
    2,007Net loss on loans held for sale
    
    
    (1,106
    )
    
    
    (7,702
    )Investment securities (losses) gains
    
    
    (383
    )
    
    
    6,016Other income
    
    
    3,237
    
    
    
    3,474Total noninterest income
    
    
    23,143
    
    
    
    22,393Noninterest ExpenseSalaries and employee benefits
    
    
    31,018
    
    
    
    29,947Occupancy
    
    
    7,562
    
    
    
    7,461Professional services
    
    
    2,219
    
    
    
    2,253Equipment
    
    
    3,052
    
    
    
    3,072Data processing services
    
    
    4,352
    
    
    
    4,629Advertising and public relations
    
    
    569
    
    
    
    1,297Postage and delivery
    
    
    1,116
    
    
    
    1,014Other loan expenses
    
    
    5,255
    
    
    
    5,974Losses on other real estate (ORE)
    
    
    9,122
    
    
    
    6,763ORE expenses
    
    
    1,768
    
    
    
    1,190Intangible asset amortization
    
    
    828
    
    
    
    1,130Other expense
    
    
    14,795
    
    
    
    13,373Total noninterest expense
    
    
    81,656
    
    
    
    78,103Loss from Continuing Operations Before Income Taxes
    
    
    (68,623
    )
    
    
    (75,876
    )Income tax provision from continuing operations
    
    
    55
    
    
    
    147Loss from Continuing Operations
    
    
    (68,678
    )
    
    
    (76,023
    )Discontinued operations:Loss from income from discontinued operations (net of income tax)
    
    
    
    
    
    
    (8,973
    )Net Loss
    
    
    (68,678
    )
    
    
    (84,996
    )Dividend on redeemable preferred stock
    
    
    (5,627
    )
    
    
    (5,282
    )Net Loss Attributable to Common Shareholders
    
    $
    (74,305
    )
    
    $
    (90,278
    )Loss Per Share from Continuing OperationsBasic
    
    $
    (0.19
    )
    
    $
    (0.21
    )Diluted
    
    
    (0.19
    )
    
    
    (0.21
    )Loss Per Share from Discontinued OperationsBasic
    
    $
    
    
    
    $
    (0.02
    )Diluted
    
    
    
    
    
    
    (0.02
    )Net Loss Per Common ShareBasic
    
    $
    (0.19
    )
    
    $
    (0.23
    )Diluted
    
    
    (0.19
    )
    
    
    (0.23
    )Average Common Shares OutstandingBasic
    
    
    394,060
    
    
    
    393,779Diluted
    
    
    394,060
    
    
    
    393,779
  4




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##### Table of Contents



Consolidated Statements of Changes in Shareholders Equity (Unaudited)  Citizens Republic Bancorp, Inc.
 AccumulatedOtherPreferred
    
    
    Common Stock
    
    
    Retained
    
    
    Comprehensive(in thousands)
    
    Stock
    
    
    Shares
    
    
    Amount
    
    
    Deficit
    
    
    Income (Loss)
    
    
    TotalBalance at December 31, 2010
    
    $
    278,300
    
    
    
    397,167
    
    
    $
    1,431,829
    
    
    $
    (678,242
    )
    
    $
    (20,156
    )
    
    $
    1,011,731Comprehensive loss, net of tax:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68,678
    )
    
    
    
    
    
    
    (68,678
    )Other comprehensive income (loss):Net unrealized gain on securities available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,418Net change in unrealized loss on qualifying cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,540
    )Other comprehensive income total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,878Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62,800
    )Accrued dividend on redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,972
    )
    
    
    
    
    
    
    (3,972
    )Accretion of preferred stock discount
    
    
    1,655
    
    
    
    
    
    
    
    
    
    
    
    (1,655
    )
    
    
    
    
    
    
    Proceeds from restricted stock activity
    
    
    
    
    
    
    617
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recognition of stock-based compensation
    
    
    
    
    
    
    
    
    
    
    443
    
    
    
    
    
    
    
    
    
    
    
    443Shares purchased for taxes
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Balance  March 31, 2011
    
    $
    279,955
    
    
    
    397,783
    
    
    $
    1,432,271
    
    
    $
    (752,547
    )
    
    $
    (14,278
    )
    
    $
    945,401Balance 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
    )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, Inc.
 Three Months EndedMarch 31,(in thousands)
    
    2011
    
    
    2010Operating Activities:Net Loss
    
    $
    (68,678
    )
    
    $
    (84,996
    )Less: Loss from discontinued operations, net of income tax
    
    
    
    
    
    
    (8,973
    )Loss from continuing operations
    
    
    (68,678
    )
    
    
    (76,023
    )Adjustments to reconcile net loss to net cash provided by operating activities:Provision for loan losses
    
    
    88,724
    
    
    
    101,355Deferred
tax expense
    
    
    55
    
    
    
    147Depreciation and software amortization
    
    
    2,844
    
    
    
    3,041Amortization of intangibles
    
    
    828
    
    
    
    1,130Amortization and fair value adjustments of purchase accounting mark-to-market, net
    
    
    (1,504
    )
    
    
    (2,054
    )Fair value adjustment on loans held for sale and other real estate
    
    
    6,177
    
    
    
    6,897Net amortization on investment securities
    
    
    4,109
    
    
    
    539Investment securities losses (gains)
    
    
    383
    
    
    
    (6,016
    )Loans originated for sale
    
    
    (50,032
    )
    
    
    (37,909
    )Proceeds from loans held for sale
    
    
    61,706
    
    
    
    40,537Net gains from loan sales
    
    
    (1,446
    )
    
    
    (968
    )Net loss on other real estate
    
    
    2,946
    
    
    
    1,150Recognition of stock-based compensation expense
    
    
    443
    
    
    
    502Other
    
    
    (2,133
    )
    
    
    7,376Discontinued operations, net
    
    
    
    
    
    
    (7,508
    )Net cash provided by operating activities
    
    
    44,422
    
    
    
    32,196Investing Activities:Net increase in money market investments
    
    
    (86,483
    )
    
    
    (74,460
    )Securities available-for-sale:Proceeds from sales
    
    
    2,369
    
    
    
    153,463Proceeds from maturities and payments
    
    
    167,857
    
    
    
    306,062Purchases
    
    
    (236,673
    )
    
    
    (432,675
    )Securities held-to-maturity:Proceeds from maturities and payments
    
    
    8,552
    
    
    
    995Purchases
    
    
    (81,621
    )
    
    
    Net decrease in loans and leases
    
    
    337,039
    
    
    
    188,860Proceeds from sales of other real estate
    
    
    15,809
    
    
    
    10,281Net increase in properties and equipment
    
    
    (292
    )
    
    
    (1,018
    )Discontinued operations, net
    
    
    
    
    
    
    10,131Net cash provided by investing activities
    
    
    126,557
    
    
    
    161,639Financing Activities:Net increase in demand and savings deposits
    
    
    143,360
    
    
    
    25,740Net decrease in time deposits
    
    
    (178,689
    )
    
    
    (45,427
    )Net decrease in short-term borrowings
    
    
    (1,560
    )
    
    
    (6,670
    )Principal reductions in long-term debt
    
    
    (125,036
    )
    
    
    (174,912
    )Shares purchased for taxes
    
    
    (1
    )
    
    
    (498
    )Net cash used by financing activities
    
    
    (161,926
    )
    
    
    (201,767
    )Net increase
(decrease) in cash and due from banks
    
    
    9,053
    
    
    
    (7,932
    )Cash and due from banks at beginning of period, continuing operations
    
    
    127,585
    
    
    
    149,049Cash and due from banks at beginning of period, discontinued operations
    
    
    
    
    
    
    7,044Cash and due from banks at beginning of period
    
    
    127,585
    
    
    
    156,093Cash and due from banks at end of period, continuing operations
    
    
    136,638
    
    
    
    143,259Cash and due from banks at end of period, discontinued operations
    
    
    
    
    
    
    4,902Cash and due from banks at end of period
    
    $
    136,638
    
    
    $
    148,161Supplemental Cash Flow Information:Interest paid
    
    $
    25,531
    
    
    $
    55,832Income tax
paid, net of refunds
    
    
    3,000
    
    
    
    Supplemental Disclosures of noncash items:Loans transferred to other real estate owned
    
    
    4,469
    
    
    
    11,961Loans transferred to held-for-sale
    
    
    75,696
    
    
    
    41,054Held for sale loans transferred to other real estate owned
    
    
    184
    
    
    
    538Accrued dividend on redeemable preferred stock
    
    
    3,972
    
    
    
    3,750Accretion of preferred stock discount
    
    
    1,655
    
    
    
    1,532
  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.
 Note 1. Basis of Presentation and Accounting Policies
 www.citizensbanking.com
  Discontinued Operations
  7




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##### Table of Contents



New Accounting Pronouncements
 The Financial Accounting Standards Board (FASB) Accounting Standards Codification (the
Codification or ASC)
 Accounting Standard Update (ASU)
 FASB ASU 2010-28, Intangibles  Goodwill and Other (Topic 350): When to Perform Step 2 of the
Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts
  FASB ASU 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses
  FASB ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about
Fair Value Measurements
  Note 2. Pending Accounting Pronouncements
 FASB ASU 2011-02, Receivables (Topic 310): A Creditors Determination of Whether a Restructuring
Is a Troubled Debt Restructuring
  8




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##### Table of Contents



Note 3. Investment Securities
  March 31, 2011
    
    
    December 31, 2010Estimated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Gross Unrealized
    
    
    Amortized
    
    
    Fair
    
    
    Gross Unrealized(in thousands)
    
    Cost
    
    
    Value
    
    
    Gains
    
    
    Losses
    
    
    Cost
    
    
    Value
    
    
    Gains
    
    
    LossesSecurities available for sale:Federal agencies
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,510
    
    
    $
    5,557
    
    
    $
    47
    
    
    $
    Collateralized mortgage obligations
    
    
    619,985
    
    
    
    624,256
    
    
    
    7,843
    
    
    
    3,572
    
    
    
    596,308
    
    
    
    599,264
    
    
    
    8,181
    
    
    
    5,225Mortgage-backed
    
    
    1,295,977
    
    
    
    1,327,735
    
    
    
    33,807
    
    
    
    2,049
    
    
    
    1,232,571
    
    
    
    1,259,131
    
    
    
    30,661
    
    
    
    4,101State and municipal
    
    
    163,626
    
    
    
    166,510
    
    
    
    3,523
    
    
    
    639
    
    
    
    181,719
    
    
    
    183,584
    
    
    
    3,188
    
    
    
    1,323Other
    
    
    913
    
    
    
    915
    
    
    
    42
    
    
    
    40
    
    
    
    1,985
    
    
    
    1,992
    
    
    
    45
    
    
    
    38Total available for sale
    
    $
    2,080,501
    
    
    $
    2,119,416
    
    
    $
    45,215
    
    
    $
    6,300
    
    
    $
    2,018,093
    
    
    $
    2,049,528
    
    
    $
    42,122
    
    
    $
    10,687Securities held to maturity:Mortgage-backed(1)
    
    $
    438,316
    
    
    $
    429,835
    
    
    $
    
    
    
    $
    8,481
    
    
    $
    363,427
    
    
    $
    356,652
    
    
    $
    
    
    
    $
    6,775State and municipal
    
    
    109,133
    
    
    
    111,811
    
    
    
    3,199
    
    
    
    521
    
    
    
    111,405
    
    
    
    112,769
    
    
    
    2,269
    
    
    
    905Total held to maturity
    
    $
    547,449
    
    
    $
    541,646
    
    
    $
    3,199
    
    
    $
    9,002
    
    
    $
    474,832
    
    
    $
    469,421
    
    
    $
    2,269
    
    
    $
    7,680FHLB and Federal Reserve stock
    
    $
    143,873
    
    
    $
    143,873
    
    
    $
    
    
    
    $
    
    
    
    $
    143,873
    
    
    $
    143,873
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Amortized cost includes adjustments for the unamortized portion of unrealized gains on securities transferred from available for sale.    9




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##### Table of Contents



March 31, 2011Amortized
    
    
    Estimated Fair(in thousands)
    
    Cost
    
    
    ValueSecurities available for sale:State and municipal and otherContractual maturity within one year
    
    $
    25,221
    
    
    $
    25,372After one year through five years
    
    
    25,732
    
    
    
    26,559After five years through ten years
    
    
    67,327
    
    
    
    68,801After ten years
    
    
    45,346
    
    
    
    45,778Subtotal
    
    
    163,626
    
    
    
    166,510Collateralized mortgage obligations and mortgage-backed
    
    
    1,915,962
    
    
    
    1,951,991Other
    
    
    913
    
    
    
    915Total available for sale
    
    $
    2,080,501
    
    
    $
    2,119,416Securities held to maturity:State and municipal and otherContractual maturity within one year
    
    $
    2,958
    
    
    $
    2,996After one year through five years
    
    
    1,153
    
    
    
    1,196After five years through ten years
    
    
    58,291
    
    
    
    60,397After ten years
    
    
    46,731
    
    
    
    47,222Subtotal
    
    
    109,133
    
    
    
    111,811Mortgage-backed
    
    
    438,316
    
    
    
    429,835Total held to maturity
    
    $
    547,449
    
    
    $
    541,646
  Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalMarch 31, 2011
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized(in thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesSecurities available for sale:Collateralized mortgage
obligations
    
    $
    164,383
    
    
    $
    1,918
    
    
    $
    16,250
    
    
    $
    1,654
    
    
    $
    180,633
    
    
    $
    3,572Mortgage-backed
    
    
    320,116
    
    
    
    2,046
    
    
    
    131
    
    
    
    3
    
    
    
    320,247
    
    
    
    2,049State and municipal
    
    
    19,933
    
    
    
    436
    
    
    
    3,297
    
    
    
    203
    
    
    
    23,230
    
    
    
    639Other
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    40
    
    
    
    102
    
    
    
    40Total available for sale
    
    $
    504,432
    
    
    $
    4,400
    
    
    $
    19,780
    
    
    $
    1,900
    
    
    $
    524,212
    
    
    $
    6,300Securities held to maturity:Mortgage-backed
    
    $
    429,835
    
    
    $
    8,481
    
    
    $
    
    
    
    $
    
    
    
    $
    429,835
    
    
    $
    8,481State and municipal
    
    
    14,565
    
    
    
    521
    
    
    
    
    
    
    
    
    
    
    
    14,565
    
    
    
    521Total held to maturity
    
    $
    444,400
    
    
    $
    9,002
    
    
    $
    
    
    
    $
    
    
    
    $
    444,400
    
    
    $
    9,002
 10




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##### Table of Contents



Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalDecember 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
    
    $
    151,618
    
    
    $
    2,417
    
    
    $
    25,726
    
    
    $
    2,808
    
    
    $
    177,344
    
    
    $
    5,225Mortgage-backed
    
    
    293,745
    
    
    
    4,098
    
    
    
    135
    
    
    
    3
    
    
    
    293,880
    
    
    
    4,101State and municipal
    
    
    41,580
    
    
    
    1,138
    
    
    
    3,289
    
    
    
    185
    
    
    
    44,869
    
    
    
    1,323Other
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    38
    
    
    
    102
    
    
    
    38Total available for sale
    
    $
    486,943
    
    
    $
    7,653
    
    
    $
    29,252
    
    
    $
    3,034
    
    
    $
    516,195
    
    
    $
    10,687Securities held to maturity:Mortgage-backed
    
    $
    356,652
    
    
    $
    6,775
    
    
    $
    
    
    
    $
    
    
    
    $
    356,652
    
    
    $
    6,775State and municipal
    
    
    32,082
    
    
    
    905
    
    
    
    
    
    
    
    
    
    
    
    32,082
    
    
    
    905Total held to maturity
    
    $
    388,734
    
    
    $
    7,680
    
    
    $
    
    
    
    $
    
    
    
    $
    388,734
    
    
    $
    7,680
     Note 4. Loans, Nonperforming Assets, Allowance for Loan Losses, and Loans Held for Sale
   11




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##### Table of Contents



Past Due Loans, Nonaccrual Loans and Nonperforming Assets.
   12




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##### Table of Contents



March 31, 2011Loans 90+ Days PastLoans Accruing
    
    
    Due & Still
    
    
    
    
    
    
    
    
    
    
    Current Portfolio
    
    
    Total Portfolio(in thousands)
    
    30-89 Days Past Due
    
    
    Accruing
    
    
    Non-Accruing Loans
    
    
    Total Past Due Loans
    
    
    Loans
    
    
    LoansLand hold
    
    $
    509
    
    
    $
    
    
    
    $
    1,154
    
    
    $
    1,663
    
    
    $
    15,610
    
    
    $
    17,273Land development
    
    
    
    
    
    
    
    
    
    
    78
    
    
    
    78
    
    
    
    22,666
    
    
    
    22,744Construction
    
    
    
    
    
    
    
    
    
    
    395
    
    
    
    395
    
    
    
    22,902
    
    
    
    23,297Income producing
    
    
    4,817
    
    
    
    
    
    
    
    28,250
    
    
    
    33,067
    
    
    
    1,005,607
    
    
    
    1,038,674Owner-occupied
    
    
    1,981
    
    
    
    
    
    
    
    21,738
    
    
    
    23,719
    
    
    
    668,577
    
    
    
    692,296Total commercial real estate
    
    
    7,307
    
    
    
    
    
    
    
    51,615
    
    
    
    58,922
    
    
    
    1,735,362
    
    
    
    1,794,284Commercial and industrial
    
    
    1,454
    
    
    
    660
    
    
    
    19,494
    
    
    
    21,608
    
    
    
    1,012,529
    
    
    
    1,034,137Small business
    
    
    4,723
    
    
    
    
    
    
    
    6,291
    
    
    
    11,014
    
    
    
    308,016
    
    
    
    319,030Total commercial
    
    
    13,484
    
    
    
    660
    
    
    
    77,400
    
    
    
    91,544
    
    
    
    3,055,907
    
    
    
    3,147,451Residential mortgage
    
    
    10,279
    
    
    
    
    
    
    
    30,385
    
    
    
    40,664
    
    
    
    686,640
    
    
    
    727,304Direct consumer
    
    
    17,210
    
    
    
    
    
    
    
    13,043
    
    
    
    30,253
    
    
    
    976,171
    
    
    
    1,006,424Indirect consumer
    
    
    10,187
    
    
    
    
    
    
    
    1,169
    
    
    
    11,356
    
    
    
    811,663
    
    
    
    823,019Total consumer
    
    
    37,676
    
    
    
    
    
    
    
    44,597
    
    
    
    82,273
    
    
    
    2,474,474
    
    
    
    2,556,747Total financing receivables
    
    $
    51,160
    
    
    $
    660
    
    
    $
    121,997
    
    
    $
    173,817
    
    
    $
    5,530,381
    
    
    $
    5,704,198
 December 31, 2010Loans 90+ Days PastLoans Accruing
    
    
    Due & Still
    
    
    
    
    
    
    
    
    
    
    Current Portfolio
    
    
    Total Portfolio(in thousands)
    
    30-89 Days Past Due
    
    
    Accruing
    
    
    Non-Accruing Loans
    
    
    Total Past Due Loans
    
    
    Loans
    
    
    LoansLand hold
    
    $
    2,233
    
    
    $
    
    
    
    $
    3,250
    
    
    $
    5,483
    
    
    $
    22,776
    
    
    $
    28,259Land development
    
    
    216
    
    
    
    
    
    
    
    3,070
    
    
    
    3,286
    
    
    
    31,514
    
    
    
    34,800Construction
    
    
    464
    
    
    
    
    
    
    
    7,472
    
    
    
    7,936
    
    
    
    95,751
    
    
    
    103,687Income producing
    
    
    20,643
    
    
    
    
    
    
    
    62,021
    
    
    
    82,664
    
    
    
    1,088,318
    
    
    
    1,170,982Owner-occupied
    
    
    14,705
    
    
    
    
    
    
    
    42,826
    
    
    
    57,531
    
    
    
    725,476
    
    
    
    783,007Total commercial real estate
    
    
    38,261
    
    
    
    
    
    
    
    118,639
    
    
    
    156,900
    
    
    
    1,963,835
    
    
    
    2,120,735Commercial and industrial
    
    
    5,801
    
    
    
    1,573
    
    
    
    47,508
    
    
    
    54,882
    
    
    
    1,085,645
    
    
    
    1,140,527Small business
    
    
    3,257
    
    
    
    
    
    
    
    10,244
    
    
    
    13,501
    
    
    
    320,199
    
    
    
    333,700Total commercial
    
    
    47,319
    
    
    
    1,573
    
    
    
    176,391
    
    
    
    225,283
    
    
    
    3,369,679
    
    
    
    3,594,962Residential mortgage
    
    
    15,389
    
    
    
    
    
    
    
    22,076
    
    
    
    37,465
    
    
    
    718,780
    
    
    
    756,245Direct consumer
    
    
    22,379
    
    
    
    
    
    
    
    12,562
    
    
    
    34,941
    
    
    
    1,010,589
    
    
    
    1,045,530Indirect consumer
    
    
    13,287
    
    
    
    
    
    
    
    1,279
    
    
    
    14,566
    
    
    
    805,299
    
    
    
    819,865Total consumer
    
    
    51,055
    
    
    
    
    
    
    
    35,917
    
    
    
    86,972
    
    
    
    2,534,668
    
    
    
    2,621,640Total financing receivables
    
    $
    98,374
    
    
    $
    1,573
    
    
    $
    212,308
    
    
    $
    312,255
    
    
    $
    5,904,347
    
    
    $
    6,216,602
 13




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##### Table of Contents



Impaired loans
  14




---



##### Table of Contents



March 31, 2011Unpaid Contractual
    
    
    Recorded Investment
    
    
    Recorded Investment
    
    
    Total Recorded
    
    
    Specific

    
    
    Average Recorded(in thousands)
    
    Principal Balance
    
    
    with No Specific Allowance
    
    
    with Specific Allowance
    
    
    Investment
    
    
    Related Allowance
    
    
    InvestmentNonaccrual loans (impaired)Land hold
    
    $
    553
    
    
    $
    
    
    
    $
    183
    
    
    $
    183
    
    
    $
    22
    
    
    $
    1,095Land development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,341Construction
    
    
    471
    
    
    
    238
    
    
    
    
    
    
    
    238
    
    
    
    
    
    
    
    3,503Income producing
    
    
    27,931
    
    
    
    6,534
    
    
    
    16,570
    
    
    
    23,104
    
    
    
    6,085
    
    
    
    38,783Owner-occupied
    
    
    18,713
    
    
    
    10,296
    
    
    
    3,566
    
    
    
    13,862
    
    
    
    630
    
    
    
    23,176Total commercial real estate
    
    
    47,668
    
    
    
    17,068
    
    
    
    20,319
    
    
    
    37,387
    
    
    
    6,737
    
    
    
    67,898Commercial and industrial
    
    
    26,213
    
    
    
    12,381
    
    
    
    3,963
    
    
    
    16,344
    
    
    
    617
    
    
    
    29,297Small business
    
    
    710
    
    
    
    
    
    
    
    688
    
    
    
    688
    
    
    
    78
    
    
    
    971Total commercial
    
    
    74,591
    
    
    
    29,449
    
    
    
    24,970
    
    
    
    54,419
    
    
    
    7,432
    
    
    
    98,166Residential mortgage
    
    
    10,058
    
    
    
    
    
    
    
    10,058
    
    
    
    10,058
    
    
    
    1,988
    
    
    
    7,627Direct consumer
    
    
    1,119
    
    
    
    
    
    
    
    1,048
    
    
    
    1,048
    
    
    
    114
    
    
    
    1,061Total consumer
    
    
    11,177
    
    
    
    
    
    
    
    11,106
    
    
    
    11,106
    
    
    
    2,102
    
    
    
    8,688Total nonaccrual loans (impaired)
    
    
    85,768
    
    
    
    29,449
    
    
    
    36,076
    
    
    
    65,525
    
    
    
    9,534
    
    
    
    106,854Accrual loans (impaired)Residential mortgage
    
    
    162
    
    
    
    
    
    
    
    162
    
    
    
    162
    
    
    
    31
    
    
    
    162Direct consumer
    
    
    620
    
    
    
    
    
    
    
    620
    
    
    
    620
    
    
    
    70
    
    
    
    361Total accrual loans (impaired)
    
    
    782
    
    
    
    
    
    
    
    782
    
    
    
    782
    
    
    
    101
    
    
    
    523Total impaired loans
    
    $
    86,550
    
    
    $
    29,449
    
    
    $
    36,858
    
    
    $
    66,307
    
    
    $
    9,635
    
    
    $
    107,377
 December
31, 2010Unpaid Contractual
    
    
    Recorded Investment
    
    
    Recorded Investment
    
    
    Total Recorded
    
    
    Specific

    
    
    Average Recorded(in thousands)
    
    Principal Balance
    
    
    with No Specific Allowance
    
    
    with  Specific Allowance
    
    
    Investment
    
    
    Related Allowance
    
    
    InvestmentNonaccrual loans (impaired)Land hold
    
    $
    2,007
    
    
    $
    
    
    
    $
    2,007
    
    
    $
    2,007
    
    
    $
    1,719
    
    
    $
    2,882Land development
    
    
    5,954
    
    
    
    1,224
    
    
    
    1,458
    
    
    
    2,682
    
    
    
    842
    
    
    
    16,526Construction
    
    
    9,151
    
    
    
    
    
    
    
    6,769
    
    
    
    6,769
    
    
    
    1,413
    
    
    
    22,752Income producing
    
    
    76,310
    
    
    
    21,315
    
    
    
    33,145
    
    
    
    54,460
    
    
    
    11,759
    
    
    
    112,214Owner-occupied
    
    
    39,018
    
    
    
    13,153
    
    
    
    19,337
    
    
    
    32,490
    
    
    
    7,786
    
    
    
    50,976Total commercial real estate
    
    
    132,440
    
    
    
    35,692
    
    
    
    62,716
    
    
    
    98,408
    
    
    
    23,519
    
    
    
    205,350Commercial and industrial
    
    
    51,300
    
    
    
    9,357
    
    
    
    32,894
    
    
    
    42,251
    
    
    
    9,298
    
    
    
    45,521Small business
    
    
    1,272
    
    
    
    445
    
    
    
    809
    
    
    
    1,254
    
    
    
    173
    
    
    
    714Total commercial
    
    
    185,012
    
    
    
    45,494
    
    
    
    96,419
    
    
    
    141,913
    
    
    
    32,990
    
    
    
    251,585Residential mortgage
    
    
    5,196
    
    
    
    
    
    
    
    5,196
    
    
    
    5,196
    
    
    
    1,079
    
    
    
    5,129Direct consumer
    
    
    1,127
    
    
    
    
    
    
    
    1,074
    
    
    
    1,074
    
    
    
    115
    
    
    
    1,107Total consumer
    
    
    6,323
    
    
    
    
    
    
    
    6,270
    
    
    
    6,270
    
    
    
    1,194
    
    
    
    6,236Total nonaccrual loans (impaired)
    
    
    191,335
    
    
    
    45,494
    
    
    
    102,689
    
    
    
    148,183
    
    
    
    34,184
    
    
    
    257,821Accrual loans (impaired)Residential mortgage
    
    
    162
    
    
    
    
    
    
    
    162
    
    
    
    162
    
    
    
    31
    
    
    
    163Direct consumer
    
    
    101
    
    
    
    
    
    
    
    101
    
    
    
    101
    
    
    
    15
    
    
    
    26Total accrual loans (impaired)
    
    
    263
    
    
    
    
    
    
    
    263
    
    
    
    263
    
    
    
    46
    
    
    
    189Total impaired loans
    
    $
    191,598
    
    
    $
    45,494
    
    
    $
    102,952
    
    
    $
    148,446
    
    
    $
    34,230
    
    
    $
    258,010
 Credit Quality Indicators.
 15




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##### Table of Contents



Special Mention.Loans classified as special mention have a potential weakness that deserves
managements close attention. If left uncorrected, these potential weaknesses may result in
deterioration of the repayment prospects for the loan or of the institutions credit position
at some future date.
 Substandard. Loans classified as substandard are inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so
classified have a well-defined weakness that jeopardizes the liquidation of the debt. They
are characterized by the distinct possibility that the institution will sustain some loss if
the deficiencies are not corrected.
 Doubtful.Loans classified as doubtful have all the weaknesses inherent in those classified
as substandard, with the added characteristic that the weaknesses make collection or
liquidation for full value, on the basis of currently existing facts, conditions, and values,
highly questionable and improbable. Commercial loans considered doubtful are evaluated for
impairment as part of the specific allocated allowance.
  March 31, 2011(in thousands)
    
    Pass
    
    
    Special Mention
    
    
    Substandard
    
    
    Doubtful
    
    
    TotalLand hold
    
    $
    3,533
    
    
    $
    8,382
    
    
    $
    5,336
    
    
    $
    22
    
    
    $
    17,273Land development
    
    
    12,823
    
    
    
    682
    
    
    
    9,239
    
    
    
    
    
    
    
    22,744Construction
    
    
    18,385
    
    
    
    4,635
    
    
    
    238
    
    
    
    39
    
    
    
    23,297Income producing
    
    
    685,242
    
    
    
    202,405
    
    
    
    144,882
    
    
    
    6,145
    
    
    
    1,038,674Owner-occupied
    
    
    540,822
    
    
    
    64,876
    
    
    
    85,894
    
    
    
    704
    
    
    
    692,296Total commercial real estate
    
    
    1,260,805
    
    
    
    280,980
    
    
    
    245,589
    
    
    
    6,910
    
    
    
    1,794,284Commercial and industrial
    
    
    801,754
    
    
    
    106,382
    
    
    
    125,158
    
    
    
    843
    
    
    
    1,034,137Small business
    
    
    268,790
    
    
    
    24,814
    
    
    
    25,061
    
    
    
    365
    
    
    
    319,030Total commercial
    
    $
    2,331,349
    
    
    $
    412,176
    
    
    $
    395,808
    
    
    $
    8,118
    
    
    $
    3,147,451
 December 31, 2010(in thousands)
    
    Pass
    
    
    Special Mention
    
    
    Substandard
    
    
    Doubtful
    
    
    TotalLand hold
    
    $
    3,611
    
    
    $
    10,126
    
    
    $
    12,803
    
    
    $
    1,719
    
    
    $
    28,259Land development
    
    
    13,057
    
    
    
    693
    
    
    
    20,209
    
    
    
    841
    
    
    
    34,800Construction
    
    
    62,981
    
    
    
    18,809
    
    
    
    20,253
    
    
    
    1,644
    
    
    
    103,687Income producing
    
    
    664,151
    
    
    
    198,323
    
    
    
    296,771
    
    
    
    11,737
    
    
    
    1,170,982Owner-occupied
    
    
    550,074
    
    
    
    81,133
    
    
    
    143,928
    
    
    
    7,872
    
    
    
    783,007Total commercial real estate
    
    
    1,293,874
    
    
    
    309,084
    
    
    
    493,964
    
    
    
    23,813
    
    
    
    2,120,735Commercial and industrial
    
    
    799,823
    
    
    
    140,099
    
    
    
    191,144
    
    
    
    9,461
    
    
    
    1,140,527Small business
    
    
    280,697
    
    
    
    23,483
    
    
    
    28,994
    
    
    
    526
    
    
    
    333,700Total commercial
    
    $
    2,374,394
    
    
    $
    472,666
    
    
    $
    714,102
    
    
    $
    33,800
    
    
    $
    3,594,962
  16




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##### Table of Contents



March 31, 2011(in thousands)
    
    Residential Mortgage
    
    
    Direct Consumer
    
    
    Indirect Consumer
    
    
    Total Consumer LoansPerforming
    
    $
    695,501
    
    
    $
    991,098
    
    
    $
    821,850
    
    
    $
    2,508,449Nonperforming
    
    
    31,803
    
    
    
    15,326
    
    
    
    1,169
    
    
    
    48,298Total
    
    $
    727,304
    
    
    $
    1,006,424
    
    
    $
    823,019
    
    
    $
    2,556,747
 December 31, 2010(in thousands)
    
    Residential Mortgage
    
    
    Direct Consumer
    
    
    Indirect Consumer
    
    
    Total Consumer LoansPerforming
    
    $
    732,309
    
    
    $
    1,031,430
    
    
    $
    818,586
    
    
    $
    2,582,325Nonperforming
    
    
    23,936
    
    
    
    14,100
    
    
    
    1,279
    
    
    
    39,315Total
    
    $
    756,245
    
    
    $
    1,045,530
    
    
    $
    819,865
    
    
    $
    2,621,640
 Allowance for Loan Losses.
 Allowance for
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Allowance forLoan Losses at
    
    
    Provision for
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loan Losses at(in thousands)
    
    December 31, 2010
    
    
    Loan Losses
    
    
    Charge-offs
    
    
    Recoveries
    
    
    Net charge-offs
    
    
    March 31, 2011Commercial and industrial
    
    $
    26,619
    
    
    $
    17,635
    
    
    $
    (29,712
    )
    
    $
    1,603
    
    
    $
    (28,109
    )
    
    $
    16,145Small business
    
    
    16,334
    
    
    
    1,495
    
    
    
    (4,078
    )
    
    
    174
    
    
    
    (3,904
    )
    
    
    13,925Commercial real estate
    
    
    156,623
    
    
    
    56,425
    
    
    
    (118,721
    )
    
    
    913
    
    
    
    (117,808
    )
    
    
    95,240Total commercial
    
    
    199,576
    
    
    
    75,555
    
    
    
    (152,511
    )
    
    
    2,690
    
    
    
    (149,821
    )
    
    
    125,310Residential mortgage
    
    
    47,623
    
    
    
    7,679
    
    
    
    (3,403
    )
    
    
    3
    
    
    
    (3,400
    )
    
    
    51,902Direct consumer
    
    
    32,255
    
    
    
    5,237
    
    
    
    (6,468
    )
    
    
    972
    
    
    
    (5,496
    )
    
    
    31,996Indirect consumer
    
    
    16,577
    
    
    
    253
    
    
    
    (2,472
    )
    
    
    551
    
    
    
    (1,921
    )
    
    
    14,909Total
    
    $
    296,031
    
    
    $
    88,724
    
    
    $
    (164,854
    )
    
    $
    4,216
    
    
    $
    (160,638
    )
    
    $
    224,117
  17




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##### Table of Contents



March 31, 2011Loans Individually
    
    
    Loans Collectively
    
    
    
    
    
    
    TotalEvaluated for
    
    
    Evaluated for
    
    
    
    
    
    
    Allowance for(in thousands)
    
    Impairment
    
    
    Impairment
    
    
    Unallocated
    
    
    Loan LossesCommercial and industrial
    
    $
    617
    
    
    $
    15,528
    
    
    $
    
    
    
    $
    16,145Small business
    
    
    78
    
    
    
    13,847
    
    
    
    
    
    
    
    13,925Commercial real estate
    
    
    6,736
    
    
    
    84,754
    
    
    
    3,750
    
    
    
    95,240Total commercial
    
    
    7,431
    
    
    
    114,129
    
    
    
    3,750
    
    
    
    125,310Residential mortgage
    
    
    2,019
    
    
    
    49,883
    
    
    
    
    
    
    
    51,902Direct consumer
    
    
    185
    
    
    
    31,811
    
    
    
    
    
    
    
    31,996Indirect consumer
    
    
    
    
    
    
    14,909
    
    
    
    
    
    
    
    14,909Total allowance for loan losses
    
    $
    9,635
    
    
    $
    210,732
    
    
    $
    3,750
    
    
    $
    224,117
 December 31, 2010Loans Individually
    
    
    Loans Collectively
    
    
    
    
    
    
    TotalEvaluated for
    
    
    Evaluated for
    
    
    
    
    
    
    Allowance for(in thousands)
    
    Impairment
    
    
    Impairment
    
    
    Unallocated
    
    
    Loan LossesCommercial and industrial
    
    $
    9,298
    
    
    $
    17,321
    
    
    $
    
    
    
    $
    26,619Small business
    
    
    173
    
    
    
    16,161
    
    
    
    
    
    
    
    16,334Commercial real estate
    
    
    23,519
    
    
    
    128,604
    
    
    
    4,500
    
    
    
    156,623Total commercial
    
    
    32,990
    
    
    
    162,086
    
    
    
    4,500
    
    
    
    199,576Residential mortgage
    
    
    1,110
    
    
    
    46,513
    
    
    
    
    
    
    
    47,623Direct consumer
    
    
    130
    
    
    
    32,125
    
    
    
    
    
    
    
    32,255Indirect consumer
    
    
    
    
    
    
    16,577
    
    
    
    
    
    
    
    16,577Total allowance for loan losses
    
    $
    34,230
    
    
    $
    257,301
    
    
    $
    4,500
    
    
    $
    296,031
  18




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##### Table of Contents



March 31, 2011Loans Individually
    
    
    Loans Collectively
    
    
    
    
    
    
    TotalEvaluated for
    
    
    Evaluated for
    
    
    Unearned
    
    
    Recorded(in thousands)
    
    Impairment
    
    
    Impairment
    
    
    (Fees)/Costs
    
    
    InvestmentCommercial and industrial
    
    $
    16,344
    
    
    $
    998,266
    
    
    $
    19,527
    
    
    $
    1,034,137Small business
    
    
    688
    
    
    
    318,158
    
    
    
    184
    
    
    
    319,030Commercial real estate
    
    
    37,387
    
    
    
    1,760,171
    
    
    
    (3,274
    )
    
    
    1,794,284Total commercial
    
    
    54,419
    
    
    
    3,076,595
    
    
    
    16,437
    
    
    
    3,147,451Residential mortgage
    
    
    10,220
    
    
    
    718,804
    
    
    
    (1,720
    )
    
    
    727,304Direct consumer
    
    
    1,668
    
    
    
    1,005,628
    
    
    
    (872
    )
    
    
    1,006,424Indirect consumer
    
    
    
    
    
    
    805,788
    
    
    
    17,231
    
    
    
    823,019Total portfolio loans
    
    $
    66,307
    
    
    $
    5,606,815
    
    
    $
    31,076
    
    
    $
    5,704,198
 December 31, 2010Loans Individually
    
    
    Loans Collectively
    
    
    
    
    
    
    TotalEvaluated for
    
    
    Evaluated for
    
    
    Unearned
    
    
    Recorded(in thousands)
    
    Impairment
    
    
    Impairment
    
    
    (Fees)/Costs
    
    
    InvestmentCommercial and industrial
    
    $
    42,251
    
    
    $
    1,085,404
    
    
    $
    12,872
    
    
    $
    1,140,527Small business
    
    
    1,254
    
    
    
    332,267
    
    
    
    179
    
    
    
    333,700Commercial real estate
    
    
    98,408
    
    
    
    2,024,321
    
    
    
    (1,994
    )
    
    
    2,120,735Total commercial
    
    
    141,913
    
    
    
    3,441,992
    
    
    
    11,057
    
    
    
    3,594,962Residential mortgage
    
    
    5,358
    
    
    
    749,368
    
    
    
    1,519
    
    
    
    756,245Direct consumer
    
    
    1,175
    
    
    
    1,047,286
    
    
    
    (2,931
    )
    
    
    1,045,530Indirect consumer
    
    
    
    
    
    
    802,894
    
    
    
    16,971
    
    
    
    819,865Total portfolio loans
    
    $
    148,446
    
    
    $
    6,041,540
    
    
    $
    26,616
    
    
    $
    6,216,602
 Loans
Held for Sale.
 Note 5. Long-Term Debt
  March 31,
    
    
    December 31,(in thousands)
    
    2011
    
    
    2010Citizens (Parent only):Subordinated debt:5.75% subordinated notes due February 2013
    
    $
    16,973
    
    
    $
    16,932Variable rate junior subordinated debenture due June 2033
    
    
    25,774
    
    
    
    25,7747.50% junior subordinated debentures due September 2066
    
    
    48,479
    
    
    
    48,382Subsidiaries:Federal Home Loan Bank advances
    
    
    711,222
    
    
    
    837,410Other borrowed funds
    
    
    104,181
    
    
    
    104,191Total long-term debt
    
    $
    906,629
    
    
    $
    1,032,689
 19




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##### Table of Contents



Note 6. Income Taxes
  Note 7. Accumulated Other Comprehensive Income (Loss)
  Net UnrealizedNet Unrealized
    
    
    Gain(Loss) OnGain(Loss) On
    
    
    Derivative
    
    
    Pension and Post-(in thousands)
    
    Investments
    
    
    Instruments
    
    
    Retirement
    
    
    TotalBalance at December 31, 2010
    
    $
    3,963
    
    
    $
    7,368
    
    
    $
    (31,487
    )
    
    $
    (20,156
    )Comprehensive income (loss), net of tax:Net lossOther comprehensive (loss) income, net of tax:Net unrealized gain on securities available-for-sale
    
    
    7,801
    
    
    
    
    
    
    
    
    
    
    
    7,801Reclassification adjustment for net loss on securities
included in net income
    
    
    (383
    )
    
    
    
    
    
    
    
    
    
    
    (383
    )Net unrealized loss on qualifying cash flow hedges
    
    
    
    
    
    
    (1,540
    )
    
    
    
    
    
    
    (1,540
    )Other comprehensive income (loss) total
    
    
    7,418
    
    
    
    (1,540
    )
    
    
    
    
    
    
    5,878Balance at March 31, 2011
    
    $
    11,381
    
    
    $
    5,828
    
    
    $
    (31,487
    )
    
    $
    (14,278
    )Balance at December 31, 2009
    
    $
    10,593
    
    
    $
    13,089
    
    
    $
    (30,775
    )
    
    $
    (7,093
    )Comprehensive income (loss), net of tax:Net lossOther comprehensive (loss) income, net of tax:Net unrealized loss on securities available-for-sale
    
    
    (3,717
    )
    
    
    
    
    
    
    
    
    
    
    (3,717
    )Reclassification adjustment for net gain on securities
included in net income
    
    
    6,016
    
    
    
    
    
    
    
    
    
    
    
    6,016Net unrealized loss on qualifying cash flow hedges
    
    
    
    
    
    
    (697
    )
    
    
    
    
    
    
    (697
    )Other comprehensive income (loss) total
    
    
    2,299
    
    
    
    (697
    )
    
    
    
    
    
    
    1,602Balance at March 31, 2010
    
    $
    12,892
    
    
    $
    12,392
    
    
    $
    (30,775
    )
    
    $
    (5,491
    )
  Note 8. Fair Values of Assets and Liabilities
   20




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##### Table of Contents



March 31, 2011
    
    
    December 31, 2010Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimated(in thousands)
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial assets:Cash and due from banks
    
    $
    136,638
    
    
    $
    136,638
    
    
    $
    127,585
    
    
    $
    127,585Money market investments
    
    
    495,562
    
    
    
    495,562
    
    
    
    409,079
    
    
    
    409,079Securities available for sale
    
    
    2,119,416
    
    
    
    2,119,416
    
    
    
    2,049,528
    
    
    
    2,049,528Securities held to maturity
    
    
    547,449
    
    
    
    541,646
    
    
    
    474,832
    
    
    
    469,421FHLB and Federal Reserve stock
    
    
    143,873
    
    
    
    143,873
    
    
    
    143,873
    
    
    
    143,873Net portfolio loans
    
    
    5,480,081
    
    
    
    4,763,621
    
    
    
    5,920,571
    
    
    
    5,157,339Deferred compensation assets
    
    
    10,341
    
    
    
    10,341
    
    
    
    10,951
    
    
    
    10,951Loans held for sale
    
    
    38,121
    
    
    
    38,121
    
    
    
    40,347
    
    
    
    40,347Accrued interest receivable
    
    
    32,545
    
    
    
    32,545
    
    
    
    33,310
    
    
    
    33,310Financial liabilities:Deposits
    
    
    7,691,505
    
    
    
    7,731,530
    
    
    
    7,726,834
    
    
    
    7,778,461Short-term borrowings
    
    
    40,759
    
    
    
    40,759
    
    
    
    42,319
    
    
    
    42,319Long-term debt
    
    
    906,629
    
    
    
    941,416
    
    
    
    1,032,689
    
    
    
    1,071,250Accrued interest payable
    
    
    11,541
    
    
    
    11,541
    
    
    
    10,901
    
    
    
    10,901Financial instruments with off-balance sheet risk(1):Letters of credit(2)
    
    
    (944
    )
    
    
    (3,480
    )
    
    
    (1,357
    )
    
    
    (4,980
    )Derivative instruments
    
    
    247
    
    
    
    247
    
    
    
    1,862
    
    
    
    1,862
 
 (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.
This amount is not included in the net loans estimate of fair value.  21




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##### Table of Contents



Securities Available for Sale.
  Securities Held to Maturity.
 FHLB and Federal Reserve Stock.
 Net Portfolio Loans.
 Deposits.
 Short-Term Borrowings.
 Long-Term Debt.
 Derivative Instruments.
 22




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##### Table of Contents



Deferred Compensation Assets.
 Impaired Loans.
 Loans Held for Sale.
  Other Real Estate.
 Repossessed Assets.
  23




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##### Table of Contents



March 31, 2011(in thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Securities available for sale:Collateralized mortgage obligations
    
    $
    624,256
    
    
    $
    
    
    
    $
    624,246
    
    
    $
    10Mortgage-backed
    
    
    1,327,735
    
    
    
    
    
    
    
    1,327,735
    
    
    
    State and municipal
    
    
    166,510
    
    
    
    
    
    
    
    162,819
    
    
    
    3,691Other
    
    
    915
    
    
    
    
    
    
    
    657
    
    
    
    258Total available for sale
    
    
    2,119,416
    
    
    
    
    
    
    
    2,115,457
    
    
    
    3,959Other assets:Derivatives designated as hedging instruments
    
    
    473
    
    
    
    
    
    
    
    473
    
    
    
    Derivatives not designated as hedging instruments
    
    
    20,614
    
    
    
    
    
    
    
    20,614
    
    
    
    Deferred compensation assets
    
    
    10,341
    
    
    
    7,569
    
    
    
    2,772
    
    
    
    Total other assets
    
    
    31,428
    
    
    
    7,569
    
    
    
    23,859
    
    
    
    Total
    
    $
    2,150,844
    
    
    $
    7,569
    
    
    $
    2,139,316
    
    
    $
    3,959Other liabilities:Derivatives not designated as hedging instruments
    
    $
    20,840
    
    
    $
    
    
    
    $
    20,840
    
    
    $
    Total other liabilities
    
    
    20,840
    
    
    
    
    
    
    
    20,840
    
    
    
    Total
    
    $
    20,840
    
    
    $
    
    
    
    $
    20,840
    
    
    $
    
  Net Realized/Unrealized Gains (Losses)Recorded inBalance at
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    Recorded in Earnings
    
    
    Comprehensive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 31,(in thousands)
    
    2010
    
    
    Realized(1)
    
    
    Unrealized
    
    
    Income (Pretax)
    
    
    Settlements
    
    
    Transfers In
    
    
    Transfers Out
    
    
    2011| | | | | | | |Securities available for saleCollateralized mortgage obligations
    
    $
    11
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (1
    )
    
    $
    
    
    
    $
    
    
    
    $
    10State and municipal
    
    
    3,812
    
    
    
    48
    
    
    
    
    
    
    
    (19
    )
    
    
    (150
    )
    
    
    
    
    
    
    
    
    
    
    3,691Other
    
    
    336
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    258Total
    
    $
    4,159
    
    
    $
    70
    
    
    $
    
    
    
    $
    (19
    )
    
    $
    (251
    )
    
    $
    
    
    
    $
    
    
    
    $
    3,959
 
 (1)
    
    Recorded through Interest Income on the Consolidated Statement of Operations. No
purchases, sales, or issuances for the period.  March 31, 2011
    
    Initial Carrying
    
    
    Fair Value(in thousands)
    
    Value
    
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Impaired loans
    
    $
    172,338
    
    
    $
    21,302
    
    
    $
    
    
    
    $
    
    
    
    $
    21,302Commercial loans held for sale
    
    
    5,379
    
    
    
    3,111
    
    
    
    
    
    
    
    
    
    
    
    3,111Residential mortgage loans held for sale
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other real estate
    
    
    8,753
    
    
    
    4,261
    
    
    
    
    
    
    
    
    
    
    
    4,261Repossessed assets
    
    
    2,571
    
    
    
    1,311
    
    
    
    
    
    
    
    
    
    
    
    1,311Total
    
    $
    189,053
    
    
    $
    29,985
    
    
    $
    
    
    
    $
    
    
    
    $
    29,985
 24




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##### Table of Contents



Note 9. Pension Benefit Cost
  Three Months EndedMarch 31,(in thousands)
    
    2011
    
    
    2010Defined Benefit Pension PlansInterest cost
    
    $
    955
    
    
    $
    1,039Expected return on plan assets
    
    
    (1,018
    )
    
    
    (1,200
    )Amortization of unrecognized:Prior service cost
    
    
    8
    
    
    
    8Net actuarial loss
    
    
    832
    
    
    
    556Net pension cost
    
    
    777
    
    
    
    403Supplemental Pension PlansInterest cost
    
    
    189
    
    
    
    188Amortization of unrecognized:Net actuarial loss
    
    
    5
    
    
    
    3Net pension cost
    
    
    194
    
    
    
    191Postretirement Benefit PlansInterest cost
    
    
    144
    
    
    
    152Amortization of unrecognized:Prior service cost
    
    
    (72
    )
    
    
    (67
    )Net actuarial gain
    
    
    (72
    )
    
    
    (8
    )Net postretirement benefit cost
    
    
    
    
    
    
    77Total periodic benefit cost
    
    $
    971
    
    
    $
    671
   25




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##### Table of Contents



March 31, 2011(in thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Asset CategoryShort-term pooled money fund
    
    $
    2,495
    
    
    $
    
    
    
    $
    2,495
    
    
    $
    Equity securitiesLarge cap (1)
    
    
    19,736
    
    
    
    
    
    
    
    19,736
    
    
    
    Mid-cap
    
    
    5,002
    
    
    
    
    
    
    
    5,002
    
    
    
    Small-cap
    
    
    7,230
    
    
    
    
    
    
    
    7,230
    
    
    
    International equity
    
    
    10,281
    
    
    
    
    
    
    
    10,281
    
    
    
    Fixed income securitiesIntermediate term fixed (2)
    
    
    22,112
    
    
    
    
    
    
    
    22,112
    
    
    
    Total
    
    $
    66,856
    
    
    $
    
    
    
    $
    66,856
    
    
    $
    
 
 (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 10. Stock-Based Compensation
   Three Months EndedMarch 31,(in thousands)
    
    2011
    
    
    2010Restricted stock compensation and restricted stock unit compensation
    
    $
    486
    
    
    $
    502Stock-based compensation expense before income taxes
    
    
    486
    
    
    
    502Income tax benefit (1)
    
    
    (170
    )
    
    
    (176
    )Total stock-based compensation expense after income taxes
    
    $
    316
    
    
    $
    326
 
 (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.  26




---



##### Table of Contents



Weighted-AverageNumber of
    
    
    Per Share GrantShares
    
    
    Date Fair ValueRestricted stock at December 31, 2010
    
    
    3,109,998
    
    
    $
    1.33Granted
    
    
    724,308
    
    
    
    0.81Vested
    
    
    (14,727
    )
    
    
    9.02Forfeited
    
    
    (107,248
    )
    
    
    1.54Restricted stock at March 31, 2011(1)
    
    
    3,712,331
    
    
    $
    1.19
 
 (1)
    
    Includes 273,374 vested shares under restriction prohibiting sale until conditions
are met,
inluding two years from grant date and certain TARP payments are made.  Note 11. Shareholders Equity and Earnings Per Share
   27




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##### Table of Contents



Three Months EndedMarch 31,(in thousands, except per share amounts)
    
    2011
    
    
    2010Numerator:Loss from continuing operations
    
    $
    (68,678
    )
    
    $
    (76,023
    )Dividend on redeemable preferred stock
    
    
    (5,627
    )
    
    
    (5,282
    )Net loss from continuing operations available to common shareholders
    
    
    (74,305
    )
    
    
    (81,305
    )Loss from discontinued operations (net of income tax)
    
    
    
    
    
    
    (8,973
    )Net loss attributable to common shareholders
    
    $
    (74,305
    )
    
    $
    (90,278
    )Denominator:Weighted average shares outstanding
    
    
    397,298
    
    
    
    394,393Less: participating securities included in weighted average shares outstanding
    
    
    (3,238
    )
    
    
    (614
    )Weighted average shares outstanding for basic and dilutive earnings per common share
    
    
    394,060
    
    
    
    393,779Basic loss per common share from continuing operations
    
    $
    (0.19
    )
    
    $
    (0.21
    )Diluted loss per common share from continuing operations
    
    $
    (0.19
    )
    
    $
    (0.21
    )Basic loss per common share from discontinued operations
    
    $
    
    
    
    $
    (0.02
    )Diluted loss per common share from discontinued operations
    
    $
    
    
    
    $
    (0.02
    )Basic net loss per common share
    
    $
    (0.19
    )
    
    $
    (0.23
    )Diluted net loss per common share
    
    $
    (0.19
    )
    
    $
    (0.23
    )
 Note 12. Lines of Business
  28




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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, 2011Net interest income (taxable equivalent)
    
    $
    56,279
    
    
    $
    8,615
    
    
    $
    9,962
    
    
    $
    144
    
    
    $
    5,716
    
    
    $
    80,716Provision for loan losses
    
    
    40,419
    
    
    
    8,222
    
    
    
    40,083
    
    
    
    
    
    
    
    
    
    
    
    88,724Net interest income after provision
    
    
    15,860
    
    
    
    393
    
    
    
    (30,121
    )
    
    
    144
    
    
    
    5,716
    
    
    
    (8,008
    )Noninterest income
    
    
    17,572
    
    
    
    1,435
    
    
    
    (1,557
    )
    
    
    3,923
    
    
    
    1,770
    
    
    
    23,143Noninterest expense
    
    
    57,286
    
    
    
    14,646
    
    
    
    5,588
    
    
    
    2,343
    
    
    
    1,793
    
    
    
    81,656Income (loss) before income taxes
    
    
    (23,854
    )
    
    
    (12,818
    )
    
    
    (37,266
    )
    
    
    1,724
    
    
    
    5,693
    
    
    
    (66,521
    )Income tax expense-taxable equivalent
    
    
    (8,114
    )
    
    
    (4,486
    )
    
    
    (12,992
    )
    
    
    610
    
    
    
    27,139
    
    
    
    2,157Net (loss) income
    
    $
    (15,740
    )
    
    $
    (8,332
    )
    
    $
    (24,274
    )
    
    $
    1,114
    
    
    $
    (21,446
    )
    
    $
    (68,678
    )Average assets(in millions)
    
    $
    3,229
    
    
    $
    1,620
    
    
    $
    1,125
    
    
    $
    17
    
    
    $
    3,908
    
    
    $
    9,899Earnings Summary  Three Months Ended March 31, 2010Net interest income (taxable equivalent)
    
    $
    64,016
    
    
    $
    7,491
    
    
    $
    16,477
    
    
    $
    145
    
    
    $
    (3,583
    )
    
    $
    84,546Provision for loan losses
    
    
    23,067
    
    
    
    35,987
    
    
    
    42,301
    
    
    
    
    
    
    
    
    
    
    
    101,355Net interest income after provision
    
    
    40,949
    
    
    
    (28,496
    )
    
    
    (25,824
    )
    
    
    145
    
    
    
    (3,583
    )
    
    
    (16,809
    )Noninterest income
    
    
    16,478
    
    
    
    (1,023
    )
    
    
    (5,007
    )
    
    
    3,850
    
    
    
    8,095
    
    
    
    22,393Noninterest expense
    
    
    53,023
    
    
    
    13,242
    
    
    
    4,283
    
    
    
    3,082
    
    
    
    4,473
    
    
    
    78,103Income (loss) before income taxes
    
    
    4,404
    
    
    
    (42,761
    )
    
    
    (35,114
    )
    
    
    913
    
    
    
    39
    
    
    
    (72,519
    )Income tax expense-taxable equivalent
    
    
    1,865
    
    
    
    (14,952
    )
    
    
    (11,797
    )
    
    
    326
    
    
    
    28,062
    
    
    
    3,504Net income (loss) from continuing operations
    
    
    2,539
    
    
    
    (27,809
    )
    
    
    (23,317
    )
    
    
    587
    
    
    
    (28,023
    )
    
    
    (76,023
    )Income (loss) from discontinued operations
    
    
    986
    
    
    
    (89
    )
    
    
    162
    
    
    
    78
    
    
    
    (10,110
    )
    
    
    (8,973
    )Net income (loss)
    
    $
    3,525
    
    
    $
    (27,898
    )
    
    $
    (23,155
    )
    
    $
    665
    
    
    $
    (38,133
    )
    
    $
    (84,996
    )Average assets(in millions)
    
    $
    4,513
    
    
    $
    1,861
    
    
    $
    1,700
    
    
    $
    13
    
    
    $
    3,816
    
    
    $
    11,903
 Note 13. Commitments, Contingent Liabilities and Guarantees
   March 31,
    
    
    December 31,(in thousands)
    
    2011
    
    
    2010Loan commitments and letters of credit:Commitments to extend credit
    
    $
    897,321
    
    
    $
    953,340Financial standby letters of credit
    
    
    162,747
    
    
    
    164,640Performance standby letters of credit
    
    
    5,885
    
    
    
    7,015Total loan commitments and letters of credit
    
    $
    1,065,953
    
    
    $
    1,124,995
   29




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##### Table of Contents



Note 14. 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)
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Derivatives designated as hedging instruments
Interest rate products
    
    $
    473
    
    
    $
    1,976
    
    
    $
    
    
    
    $
    Derivatives notdesignated as hedging
instruments
Interest rate products
    
    
    20,614
    
    
    
    26,409
    
    
    
    20,840
    
    
    
    26,523Total derivatives
    
    $
    21,087
    
    
    $
    28,385
    
    
    $
    20,840
    
    
    $
    26,523
 Cash Flow Hedges of Interest Rate Risk
     30




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##### Table of Contents



Derivative Impact on OCI Gain (Loss)
    
    
    Derivative Ineffectiveness Gain (Loss)Location
    
    
    
    
    
    
    
    
    
    
    LocationReclassified in
    
    
    Reclassified from
    
    
    Recognized inDerivatives Relationship
    
    
    
    
    
    
    
    
    
    Statement of
    
    
    Accumulated OCI into
    
    
    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 31,2011
    
    
    2010
    
    
    
    
    
    
    2011
    
    
    2010
    
    
    
    
    
    
    2011
    
    
    2010Cash flow hedges:Interest rate products
    
    $
    18
    
    
    $
    2,554
    
    
    Interest income
    
    $
    1,046
    
    
    $
    2,052Otherincome
    
    
    513
    
    
    
    1,199
    
    
    Otherincome
    
    $
    
    
    
    $
    Total
    
    $
    18
    
    
    $
    2,554
    
    
    
    
    
    
    $
    1,559
    
    
    $
    3,251
    
    
    
    
    
    
    $
    
    
    
    $
    
 Fair Value Hedges of Interest Rate Risk
    Derivative Contract (Loss) Gain
    
    
    Hedged Item Gain (Loss)Location in
    
    
    Three Months Ended
    
    
    Location in
    
    
    Three Months EndedDerivatives Relationship
    
    Statement of
    
    
    March 31,
    
    
    Statement of
    
    
    March 31,(in thousands)
    
    Operations
    
    
    2011
    
    
    2010
    
    
    Operations
    
    
    2011
    
    
    2010Fair value hedges:Interest rate products
    
    Interest expense
    
    $
    (990
    )
    
    $
    89
    
    
    Interest expense
    
    $
    1,460
    
    
    $
    1,524
 Non-designated Hedges
  31




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##### Table of Contents



Amount of (Loss) GainRecognized in Statementof OperationsLocation of (Loss) Gain
    
    
    Three Months EndedDerivatives Relationship
    
    Recognized in
    
    
    March 31,(in thousands)
    
    Statement of Operations
    
    
    2011
    
    
    2010Derivatives notdesignated as hedges  Interest rate products
    
    Other income
    
    $
    (112
    )
    
    $
    (490
    )
 Credit-Risk-Related Contingent Features
     32




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##### Table of Contents



Item 2   Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Selected Quarterly InformationThree Months EndedMarch 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,2011
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2010Summary of Operations (in thousands)Net interest income
    
    $
    78,614
    
    
    $
    81,731
    
    
    $
    81,558
    
    
    $
    84,586
    
    
    $
    81,189Provision for loan losses
    
    
    88,724
    
    
    
    131,296
    
    
    
    89,617
    
    
    
    70,614
    
    
    
    101,355Noninterest income (1)
    
    
    23,143
    
    
    
    24,028
    
    
    
    25,956
    
    
    
    22,282
    
    
    
    22,393Noninterest expense
    
    
    81,656
    
    
    
    77,234
    
    
    
    74,740
    
    
    
    77,010
    
    
    
    78,103Income tax provision from continuing operations
    
    
    55
    
    
    
    3,383
    
    
    
    5,628
    
    
    
    3,700
    
    
    
    147Loss from continuing operations before income taxes
    
    
    (68,678
    )
    
    
    (106,154
    )
    
    
    (62,471
    )
    
    
    (44,456
    )
    
    
    (76,023
    )Income (loss) from discontinued operations (after tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,151
    
    
    
    (8,973
    )Net loss
    
    
    (68,678
    )
    
    
    (106,154
    )
    
    
    (62,471
    )
    
    
    (39,305
    )
    
    
    (84,996
    )Net loss attributable to common shareholders (2)
    
    
    (74,305
    )
    
    
    (111,699
    )
    
    
    (67,922
    )
    
    
    (44,711
    )
    
    
    (90,278
    )Taxable equivalent adjustment
    
    
    2,102
    
    
    
    2,247
    
    
    
    2,372
    
    
    
    2,605
    
    
    
    3,357Per Common Share DataLoss from continuing operations:Basic
    
    $
    (0.19
    )
    
    $
    (0.28
    )
    
    $
    (0.17
    )
    
    $
    (0.12
    )
    
    $
    (0.21
    )Diluted
    
    
    (0.19
    )
    
    
    (0.28
    )
    
    
    (0.17
    )
    
    
    (0.12
    )
    
    
    (0.21
    )Discontinued operations:Basic
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.01
    
    
    $
    (0.02
    )Diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    (0.02
    )Net loss:Basic
    
    $
    (0.19
    )
    
    $
    (0.28
    )
    
    $
    (0.17
    )
    
    $
    (0.11
    )
    
    $
    (0.23
    )Diluted
    
    
    (0.19
    )
    
    
    (0.28
    )
    
    
    (0.17
    )
    
    
    (0.11
    )
    
    
    (0.23
    )Common book value
    
    
    1.67
    
    
    
    1.85
    
    
    
    2.22
    
    
    
    2.37
    
    
    
    2.46Tangible book value (non-GAAP)
    
    
    1.55
    
    
    
    1.72
    
    
    
    2.08
    
    
    
    2.24
    
    
    
    2.28Tangible common book value (non-GAAP)
    
    
    0.85
    
    
    
    1.02
    
    
    
    1.39
    
    
    
    1.54
    
    
    
    1.59Shares outstanding, end of period (000)(3)
    
    
    397,783
    
    
    
    397,167
    
    
    
    397,071
    
    
    
    396,979
    
    
    
    394,392At Period End (millions)Assets
    
    $
    9,724
    
    
    $
    9,966
    
    
    $
    10,639
    
    
    $
    10,834
    
    
    $
    11,328Earning assets
    
    
    9,010
    
    
    
    9,303
    
    
    
    9,932
    
    
    
    10,098
    
    
    
    10,595Portfolio loans
    
    
    5,704
    
    
    
    6,217
    
    
    
    6,888
    
    
    
    7,138
    
    
    
    7,439Allowance for loan losses
    
    
    224
    
    
    
    296
    
    
    
    324
    
    
    
    322
    
    
    
    322Deposits
    
    
    7,692
    
    
    
    7,727
    
    
    
    8,101
    
    
    
    8,222
    
    
    
    8,481Long-term debt
    
    
    907
    
    
    
    1,033
    
    
    
    1,185
    
    
    
    1,211
    
    
    
    1,338Shareholders equity
    
    
    945
    
    
    
    1,012
    
    
    
    1,157
    
    
    
    1,218
    
    
    
    1,244Average for the Quarter (millions)Assets
    
    $
    9,899
    
    
    $
    10,468
    
    
    $
    10,803
    
    
    $
    11,156
    
    
    $
    11,575Earning assets
    
    
    9,231
    
    
    
    9,769
    
    
    
    10,065
    
    
    
    10,432
    
    
    
    10,839Portfolio loans
    
    
    6,051
    
    
    
    6,682
    
    
    
    7,059
    
    
    
    7,318
    
    
    
    7,654Allowance for loan losses
    
    
    295
    
    
    
    324
    
    
    
    322
    
    
    
    322
    
    
    
    336Deposits
    
    
    7,730
    
    
    
    7,965
    
    
    
    8,198
    
    
    
    8,431
    
    
    
    8,544Long-term debt
    
    
    971
    
    
    
    1,160
    
    
    
    1,203
    
    
    
    1,315
    
    
    
    1,450Shareholders equity
    
    
    1,002
    
    
    
    1,145
    
    
    
    1,215
    
    
    
    1,239
    
    
    
    1,323Financial Ratios (annualized)(4)Return on average assets
    
    
    (2.81
    )%
    
    
    (4.02)
    %
    
    
    (2.29)
    %
    
    
    (1.60)
    %
    
    
    (2.66
    )%Return on average shareholders equity
    
    
    (27.79
    )
    
    
    (36.78
    )
    
    
    (20.40
    )
    
    
    (14.40
    )
    
    
    (23.30
    )Average shareholders equity / average assets
    
    
    10.13
    
    
    
    10.94
    
    
    
    11.25
    
    
    
    11.10
    
    
    
    11.43Net interest margin (FTE) (5)
    
    
    3.53
    
    
    
    3.42
    
    
    
    3.32
    
    
    
    3.35
    
    
    
    3.14Efficiency ratio (non-GAAP) (6)
    
    
    78.33
    
    
    
    71.39
    
    
    
    68.02
    
    
    
    75.93
    
    
    
    77.39Allowance for loan losses as a percent of portfolio loans
    
    
    3.93
    
    
    
    4.76
    
    
    
    4.70
    
    
    
    4.51
    
    
    
    4.33Allowance for loan losses as a percent of nonperforming loans
    
    
    165.56
    
    
    
    134.39
    
    
    
    88.98
    
    
    
    83.67
    
    
    
    77.94Allowance for loan losses as a percent of nonperforming assets
    
    
    119.18
    
    
    
    103.30
    
    
    
    73.10
    
    
    
    68.11
    
    
    
    57.96Nonperforming loans as a percent of portfolio loans
    
    
    2.37
    
    
    
    3.54
    
    
    
    5.29
    
    
    
    5.39
    
    
    
    5.56Nonperforming assets as a percent of portfolio loans plus ORAA(7)
    
    
    3.26
    
    
    
    4.55
    
    
    
    6.35
    
    
    
    6.53
    
    
    
    7.32Nonperforming assets as a percent of total assets
    
    
    1.93
    
    
    
    2.88
    
    
    
    4.17
    
    
    
    4.36
    
    
    
    4.91Net loans charged off as a percent of average portfolio loans (annualized)
    
    
    10.77
    
    
    
    9.46
    
    
    
    4.91
    
    
    
    3.90
    
    
    
    6.25Leverage ratio
    
    
    7.39
    
    
    
    7.71
    
    
    
    8.50
    
    
    
    8.72
    
    
    
    8.47Tier 1 capital ratio
    
    
    11.90
    
    
    
    12.11
    
    
    
    12.41
    
    
    
    12.79
    
    
    
    12.12Total capital ratio
    
    
    13.24
    
    
    
    13.51
    
    
    
    13.80
    
    
    
    14.17
    
    
    
    13.49
 
 (1)
    
    Noninterest income includes a gain on investment securities of $8.0 million and $6.0 million in the second and first quarter of 2010.(2)
    
    Net loss attributable to common shareholders includes a non-cash dividend to preferred shareholders of $5.6 million in the first quarter of 2011
and $5.5 million, $5.4 million, $5.4 million and $5.3 million in the fourth, third, second and first quarters of 2010.(3)
    
    Includes participating shares, which are restricted stock units and restricted shares.(4)
    
    Financial ratios are based on continuing operations.(5)
    
    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%.(6)
    
    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 noninterest income - Investment securities (losses) gains).(7)
    
    Other real estate assets acquired (ORAA) include loans held for sale. 33




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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 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.
 34




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##### Table of Contents




    
    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.
    
    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 loss carryforwards.
    
    Citizens stock price can be volatile.
    
    If Citizens common stock fails to meet the listing requirements of NASDAQ and is delisted
from trading on the NASDAQ, the market price of its common stock could be adversely affected.
    
    An investment in Citizens common stock is not an insured deposit.
    
    Citizens may be adversely affected by the soundness of other financial institutions.
    
    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 the
Bank if required by bank regulatory agencies, or if it might otherwise wish to do so, in order
to maintain the Banks capital ratios at acceptable levels.
    
    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 and are restricted by a supervisory
agreement with its regulators.
    
    Our efforts to resolve problem assets in a manner beneficial to the Corporation may not be
successful.
    
    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
 35




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##### Table of Contents



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.
    
    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.
    
    The recently enacted Dodd-Frank Act may adversely impact Citizens results of operations,
financial condition or liquidity.
    
    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 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.
  Critical Accounting Policies
  36




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##### Table of Contents



Use of Non-GAAP Financial Measures
  Net Interest Margin and Efficiency Ratio (non-GAAP financial measures)
  Tangible Equity, Tangible Common Equity and Tier 1 Common Equity Ratios (non-GAAP financial
measures)
  Pre-Tax Pre-Provision Profit (non-GAAP financial measure)
  37




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##### Table of Contents



38




---



##### Table of Contents



Non-GAAP ReconciliationMarch 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,2011
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2010Efficiency Ratio (non-GAAP)(in thousands)Net interest income (A)
    
    $
    78,614
    
    
    $
    81,731
    
    
    $
    81,558
    
    
    $
    84,586
    
    
    $
    81,189Taxable equivalent adjustment (B)
    
    
    2,102
    
    
    
    2,247
    
    
    
    2,372
    
    
    
    2,605
    
    
    
    3,357Investment securities (losses) gain (C)
    
    
    (383
    )
    
    
    (171
    )
    
    
    
    
    
    
    8,051
    
    
    
    6,016Noninterest income (D)
    
    
    23,143
    
    
    
    24,028
    
    
    
    25,956
    
    
    
    22,282
    
    
    
    22,393Noninterest expense (E)
    
    
    81,656
    
    
    
    77,234
    
    
    
    74,740
    
    
    
    77,010
    
    
    
    78,103Efficiency ratio: E/(A+B-C+D) (non-GAAP)
    
    
    78.33
    %
    
    
    71.39
    %
    
    
    68.02
    %
    
    
    75.93
    %
    
    
    77.39
    %Tangible Common Equity to
Tangible Assets (non-GAAP)(in millions)Total assets(1)
    
    $
    9,724
    
    
    $
    9,966
    
    
    $
    10,639
    
    
    $
    10,834
    
    
    $
    11,652Goodwill(2)
    
    
    (318
    )
    
    
    (318
    )
    
    
    (318
    )
    
    
    (318
    )
    
    
    (331
    )Other intangible assets
    
    
    (10
    )
    
    
    (11
    )
    
    
    (11
    )
    
    
    (12
    )
    
    
    (13
    )Tangible assets (non-GAAP)
    
    $
    9,396
    
    
    $
    9,637
    
    
    $
    10,310
    
    
    $
    10,504
    
    
    $
    11,308Total shareholders equity
    
    $
    945
    
    
    $
    1,012
    
    
    $
    1,157
    
    
    $
    1,218
    
    
    $
    1,244Goodwill(2)
    
    
    (318
    )
    
    
    (318
    )
    
    
    (318
    )
    
    
    (318
    )
    
    
    (331
    )Other intangible assets
    
    
    (10
    )
    
    
    (11
    )
    
    
    (11
    )
    
    
    (12
    )
    
    
    (13
    )Tangible equity (non-GAAP)
    
    $
    617
    
    
    $
    683
    
    
    $
    828
    
    
    $
    888
    
    
    $
    900Tangible equity
    
    $
    617
    
    
    $
    683
    
    
    $
    828
    
    
    $
    888
    
    
    $
    900Preferred stock
    
    
    (280
    )
    
    
    (278
    )
    
    
    (277
    )
    
    
    (275
    )
    
    
    (274
    )Tangible common equity (non-GAAP)
    
    $
    337
    
    
    $
    405
    
    
    $
    551
    
    
    $
    613
    
    
    $
    626Tier 1 Common Equity (non-GAAP)(in millions)Total shareholders equity
    
    $
    945
    
    
    $
    1,012
    
    
    $
    1,157
    
    
    $
    1,218
    
    
    $
    1,244Qualifying capital securities
    
    
    74
    
    
    
    74
    
    
    
    74
    
    
    
    74
    
    
    
    74Goodwill(2)
    
    
    (318
    )
    
    
    (318
    )
    
    
    (318
    )
    
    
    (318
    )
    
    
    (331
    )Accumulated other comprehensive loss (income)
    
    
    14
    
    
    
    20
    
    
    
    (16
    )
    
    
    (10
    )
    
    
    6Other intangible assets
    
    
    (10
    )
    
    
    (11
    )
    
    
    (11
    )
    
    
    (12
    )
    
    
    (13
    )Tier 1 capital (regulatory)
    
    $
    705
    
    
    $
    777
    
    
    $
    886
    
    
    $
    952
    
    
    $
    980Tier 1 capital (regulatory)
    
    $
    705
    
    
    $
    777
    
    
    $
    886
    
    
    $
    952
    
    
    $
    980Qualifying capital securities
    
    
    (74
    )
    
    
    (74
    )
    
    
    (74
    )
    
    
    (74
    )
    
    
    (74
    )Preferred stock
    
    
    (280
    )
    
    
    (278
    )
    
    
    (277
    )
    
    
    (275
    )
    
    
    (274
    )Total Tier 1 common equity (non-GAAP)
    
    $
    351
    
    
    $
    425
    
    
    $
    535
    
    
    $
    603
    
    
    $
    632Net risk-weighted assets (regulatory)(3)
    
    $
    5,930
    
    
    $
    6,417
    
    
    $
    7,133
    
    
    $
    7,432
    
    
    $
    8,083Equity to assets
    
    
    9.72
    %
    
    
    10.15
    %
    
    
    10.88
    %
    
    
    11.24
    %
    
    
    10.68
    %Tier 1 common equity (non-GAAP)
    
    
    5.93
    
    
    
    6.62
    
    
    
    7.50
    
    
    
    8.10
    
    
    
    7.82Tangible equity to tangible assets (non-GAAP)
    
    
    6.57
    
    
    
    7.09
    
    
    
    8.03
    
    
    
    8.45
    
    
    
    7.96Tangible common equity to tangible assets (non-GAAP)
    
    
    3.59
    
    
    
    4.20
    
    
    
    5.34
    
    
    
    5.83
    
    
    
    5.54
 
 (1)
    
    Total asset represents assets for continuing operations, as shown on the balance sheet, and includes assets of discontinued operations of $324 million in the
first quarter of 2010.(2)
    
    Goodwill represents goodwill for continuing operations, as shown on the balance sheet, and includes goodwill for discontinued operations of $12.6 million in the
first quarter of 2010.(3)
    
    Net risk-weighted assets (regulatory) for second quarter 2010 were calculated on a combined basis. Written
Agreement with FRBC and OFIR
    Results of Operations
 Summary
   39




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##### Table of Contents




    
    The decrease in net interest income from 2010 was primarily a result of a decrease of $1.6
billion in average earning assets, partially offset by  an increase in net interest margin from
3.14% to 3.53%.
    
    The decrease in the provision for loan losses over 2010 was primarily a result of resolving
$466.2 million and $460.0 million in problem assets through a
combination of bulk sales and individual workouts during  the fourth quarter of 2010 and the first quarter
of 2011, respectively which significantly reduced the outstanding
amount of nonperforming loans and watchlist loans and improved the credit quality of our loan portfolio.
    
    The increase in noninterest income from 2010 was primarily
the result of fewer writedowns to reflect fair-value declines of the
underlying collateral on commercial loans held for sale.
    
    The increase in noninterest expense from 2010 was primarily the result of increased
valuation writedowns and losses incurred as a result of the increase in property dispositions
in the first quarter of 2011.
  Pre-tax pre-provision profit (non-GAAP )
 Three Months EndedMarch 31,
    
    
    December 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,(in thousands)
    
    2011
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2010Loss from continuing operations
    
    $
    (68,678
    )
    
    $
    (106,154
    )
    
    $
    (62,471
    )
    
    $
    (44,456
    )
    
    $
    (76,023
    )Income tax provision from continuing operations
    
    
    55
    
    
    
    3,383
    
    
    
    5,628
    
    
    
    3,700
    
    
    
    147Provision for loan losses
    
    
    88,724
    
    
    
    131,296
    
    
    
    89,617
    
    
    
    70,614
    
    
    
    101,355Net loss on loans held for sale
    
    
    1,106
    
    
    
    3,069
    
    
    
    1,441
    
    
    
    8,405
    
    
    
    7,702Investment securities losses (gains)
    
    
    383
    
    
    
    171
    
    
    
    
    
    
    
    (8,051
    )
    
    
    (6,016
    )Losses on other real estate (ORE)
    
    
    9,122
    
    
    
    930
    
    
    
    1,967
    
    
    
    3,778
    
    
    
    6,763Fair-value adjustment on bank owned life insurance (1)
    
    
    (100
    )
    
    
    (105
    )
    
    
    (159
    )
    
    
    280
    
    
    
    (83
    )Fair-value adjustment on swaps (1)
    
    
    114
    
    
    
    (535
    )
    
    
    202
    
    
    
    279
    
    
    
    836Pre-tax pre-provision profit (non-GAAP)
    
    $
    30,726
    
    
    $
    32,055
    
    
    $
    36,225
    
    
    $
    34,549
    
    
    $
    34,681
 
 (1)
    
    Fair-value adjustment amounts contained in line item Other
income on Consolidated Statements of Operations   40




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##### Table of Contents



Net Interest Income and Net Interest Margin
  Average Balances/Net Interest Income/Average RatesThree Months EndedMarch 31,2011
    
    
    2010Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(in thousands)
    
    Balance
    
    
    Interest(1)
    
    
    Rate(2)
    
    
    Balance
    
    
    Interest (1)
    
    
    Rate (2)Earning AssetsMoney market investments
    
    $
    416,756
    
    
    $
    253
    
    
    
    0.25
    %
    
    $
    696,016
    
    
    $
    424
    
    
    
    0.25
    %Investment securities: (3)Taxable
    
    
    2,313,467
    
    
    
    19,610
    
    
    
    3.39
    
    
    
    1,756,812
    
    
    
    18,261
    
    
    
    4.16Tax-exempt
    
    
    278,679
    
    
    
    3,086
    
    
    
    6.81
    
    
    
    492,968
    
    
    
    5,285
    
    
    
    6.60FHLB and Federal Reserve stock
    
    
    143,873
    
    
    
    1,125
    
    
    
    3.16
    
    
    
    155,084
    
    
    
    1,002
    
    
    
    2.61Portfolio Loans: (4)Commercial and industrial
    
    
    1,422,574
    
    
    
    15,673
    
    
    
    4.59
    
    
    
    1,874,944
    
    
    
    22,047
    
    
    
    4.87Commercial real estate
    
    
    2,045,360
    
    
    
    26,707
    
    
    
    5.30
    
    
    
    2,791,395
    
    
    
    36,049
    
    
    
    5.24Residential mortgage
    
    
    741,818
    
    
    
    8,818
    
    
    
    4.76
    
    
    
    988,859
    
    
    
    11,820
    
    
    
    4.78Direct consumer
    
    
    1,024,979
    
    
    
    15,463
    
    
    
    6.12
    
    
    
    1,201,799
    
    
    
    17,921
    
    
    
    6.05Indirect consumer
    
    
    816,676
    
    
    
    13,681
    
    
    
    6.79
    
    
    
    797,482
    
    
    
    13,509
    
    
    
    6.87Total portfolio loans
    
    
    6,051,407
    
    
    
    80,342
    
    
    
    5.40
    
    
    
    7,654,479
    
    
    
    101,346
    
    
    
    5.39Loans held for sale (4)
    
    
    26,860
    
    
    
    369
    
    
    
    5.50
    
    
    
    83,972
    
    
    
    396
    
    
    
    1.90Total earning assets (3)
    
    
    9,231,042
    
    
    
    104,785
    
    
    
    4.67
    
    
    
    10,839,331
    
    
    
    126,714
    
    
    
    4.85Nonearning AssetsCash and due from banks
    
    
    143,957
    
    
    
    
    
    
    
    
    
    
    
    209,126Bank premises and equipment
    
    
    104,399
    
    
    
    
    
    
    
    
    
    
    
    109,696Investment security fair value adjustment
    
    
    32,229
    
    
    
    
    
    
    
    
    
    
    
    42,462Other nonearning assets
    
    
    682,526
    
    
    
    
    
    
    
    
    
    
    
    710,158Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    328,378Allowance for loan losses
    
    
    (295,232
    )
    
    
    
    
    
    
    
    
    
    
    (335,970
    )Total assets
    
    $
    9,898,921
    
    
    
    
    
    
    
    
    
    
    $
    11,903,181Interest-Bearing LiabilitiesDeposits:Interest-bearing demand deposits
    
    $
    951,770
    
    
    
    548
    
    
    
    0.23
    
    
    $
    1,075,943
    
    
    
    814
    
    
    
    0.31Savings deposits
    
    
    2,629,296
    
    
    
    2,594
    
    
    
    0.40
    
    
    
    2,490,158
    
    
    
    4,215
    
    
    
    0.69Time deposits
    
    
    2,753,306
    
    
    
    13,233
    
    
    
    1.95
    
    
    
    3,709,529
    
    
    
    24,482
    
    
    
    2.68Short-term borrowings
    
    
    41,187
    
    
    
    18
    
    
    
    0.18
    
    
    
    36,542
    
    
    
    24
    
    
    
    0.27Long-term debt
    
    
    971,076
    
    
    
    9,778
    
    
    
    4.08
    
    
    
    1,449,748
    
    
    
    15,990
    
    
    
    4.47Total interest-bearing liabilities
    
    
    7,346,635
    
    
    
    26,171
    
    
    
    1.44
    
    
    
    8,761,920
    
    
    
    45,525
    
    
    
    2.11Noninterest-Bearing Liabilities andShareholders EquityNoninterest-bearing demand
    
    
    1,395,588
    
    
    
    
    
    
    
    
    
    
    
    1,268,583Other liabilities
    
    
    154,408
    
    
    
    
    
    
    
    
    
    
    
    134,510Liabilities of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    415,154Shareholders equity
    
    
    1,002,290
    
    
    
    
    
    
    
    
    
    
    
    1,323,014Total liabilities and shareholders equity
    
    $
    9,898,921
    
    
    
    
    
    
    
    
    
    
    $
    11,903,181Net Interest Income
    
    
    
    
    
    $
    78,614
    
    
    
    
    
    
    
    
    
    
    $
    81,189Interest Spread(5)
    
    
    
    
    
    
    
    
    
    
    3.23
    %
    
    
    
    
    
    
    
    
    
    
    2.74
    %Contribution of noninterest bearing sources of funds
    
    
    
    
    
    
    
    
    
    
    0.30
    
    
    
    
    
    
    
    
    
    
    
    0.40Net Interest Margin(5)(6)
    
    
    
    
    
    
    
    
    
    
    3.53
    %
    
    
    
    
    
    
    
    
    
    
    3.14
    %
 
 (1)
    
    Interest income is shown on actual basis and does not include taxable equivalent adjustments.(2)
    
    Average rates are presented on an annual basis and include taxable equivalent adjustments to interest income of $2.1 million and $3.4 million
for the three months ended March 31, 2011 and 2010, 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.  41




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##### Table of Contents



Analysis of Changes in Interest Income and Interest Expense
 Three Months Ended March 31,Increase (Decrease)2011 compared with 2010
    
    Net
    
    
    Due to Change in(in thousands)
    
    Change(1)
    
    
    Rate(2)
    
    
    Volume(2)Interest Income on Earning Assets:Money market investments
    
    $
    (171
    )
    
    $
    (1
    )
    
    $
    (170
    )Investment securities:Taxable
    
    
    1,349
    
    
    
    (3,762
    )
    
    
    5,111Tax-exempt
    
    
    (2,199
    )
    
    
    169
    
    
    
    (2,368
    )FHLB and Federal Reserve stock
    
    
    123
    
    
    
    199
    
    
    
    (76
    )Loans:Commercial and industrial
    
    
    (6,374
    )
    
    
    (1,321
    )
    
    
    (5,053
    )Commercial real estate
    
    
    (9,342
    )
    
    
    395
    
    
    
    (9,737
    )Residential mortgage loans
    
    
    (3,002
    )
    
    
    (65
    )
    
    
    (2,937
    )Direct consumer
    
    
    (2,458
    )
    
    
    207
    
    
    
    (2,665
    )Indirect consumer
    
    
    172
    
    
    
    (151
    )
    
    
    323Total portfolio loans
    
    
    (21,004
    )
    
    
    (935
    )
    
    
    (20,069
    )Loans held for sale
    
    
    (27
    )
    
    
    377
    
    
    
    (404
    )Total
    
    
    (21,929
    )
    
    
    (3,953
    )
    
    
    (17,976
    )Interest Expense on Interest-Bearing Liabilities:Deposits:Interest-bearing demand deposits
    
    
    (266
    )
    
    
    (179
    )
    
    
    (87
    )Savings deposits
    
    
    (1,621
    )
    
    
    (1,845
    )
    
    
    224Time deposits
    
    
    (11,249
    )
    
    
    (5,773
    )
    
    
    (5,476
    )Short-term borrowings
    
    
    (6
    )
    
    
    (9
    )
    
    
    3Long-term debt
    
    
    (6,212
    )
    
    
    (1,296
    )
    
    
    (4,916
    )Total
    
    
    (19,354
    )
    
    
    (9,102
    )
    
    
    (10,252
    )Net Interest Income
    
    $
    (2,575
    )
    
    $
    5,149
    
    
    $
    (7,724
    )
 
 (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.  42




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##### Table of Contents



Noninterest Income
  Noninterest Income
 Three Months EndedMarch 31,
    
    
    Change in 2011(dollars in thousands)
    
    2011
    
    
    2010
    
    
    Amount
    
    
    PercentService charges on deposit accounts
    
    $
    9,429
    
    
    $
    9,684
    
    
    $
    (255
    )
    
    
    (2.6
    )%Trust fees
    
    
    3,923
    
    
    
    3,795
    
    
    
    128
    
    
    
    3.4Mortgage and other loan income
    
    
    2,942
    
    
    
    2,589
    
    
    
    353
    
    
    
    13.6Brokerage and investment fees
    
    
    1,108
    
    
    
    933
    
    
    
    175
    
    
    
    18.8ATM network user fees
    
    
    1,755
    
    
    
    1,597
    
    
    
    158
    
    
    
    9.9Bankcard fees
    
    
    2,238
    
    
    
    2,007
    
    
    
    231
    
    
    
    11.5Losses on held for sale loans
    
    
    (1,106
    )
    
    
    (7,702
    )
    
    
    6,596
    
    
    
    85.6Investment securities (losses) gains
    
    
    (383
    )
    
    
    6,016
    
    
    
    (6,399
    )
    
    
    N/MOther income
    
    
    3,237
    
    
    
    3,474
    
    
    
    (237
    )
    
    
    (6.8
    )Total noninterest income
    
    $
    23,143
    
    
    $
    22,393
    
    
    $
    750
    
    
    
    3.4
 
 N/M  Not Meaningful  Noninterest Expense
  Noninterest Expense
 Three Months EndedMarch 31,
    
    
    Change in 2011(dollars in thousands)
    
    2011
    
    
    2010
    
    
    Amount
    
    
    PercentSalaries and employee benefits
    
    $
    31,018
    
    
    $
    29,947
    
    
    $
    1,071
    
    
    
    3.6
    %Occupancy
    
    
    7,562
    
    
    
    7,461
    
    
    
    101
    
    
    
    1.4Professional services
    
    
    2,219
    
    
    
    2,253
    
    
    
    (34
    )
    
    
    (1.5
    )Equipment
    
    
    3,052
    
    
    
    3,072
    
    
    
    (20
    )
    
    
    (0.7
    )Data processing services
    
    
    4,352
    
    
    
    4,629
    
    
    
    (277
    )
    
    
    (6.0
    )Advertising and public relations
    
    
    569
    
    
    
    1,297
    
    
    
    (728
    )
    
    
    (56.1
    )Postage and delivery
    
    
    1,116
    
    
    
    1,014
    
    
    
    102
    
    
    
    10.1Other loan expenses
    
    
    5,255
    
    
    
    5,974
    
    
    
    (719
    )
    
    
    (12.0
    )Losses on other real estate (ORE)
    
    
    9,122
    
    
    
    6,763
    
    
    
    2,359
    
    
    
    34.9ORE expenses
    
    
    1,768
    
    
    
    1,190
    
    
    
    578
    
    
    
    48.6Intangible asset amortization
    
    
    828
    
    
    
    1,130
    
    
    
    (302
    )
    
    
    (26.7
    )Other expense
    
    
    14,795
    
    
    
    13,373
    
    
    
    1,422
    
    
    
    10.6Total noninterest expense
    
    $
    81,656
    
    
    $
    78,103
    
    
    $
    3,553
    
    
    
    4.5
  43




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##### Table of Contents



Income Taxes
  Discontinued Operations
  Lines of Business Results
       Financial Condition
  44




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##### Table of Contents



Money Market Investments
  Investment Securities
  Portfolio Loans
  Loan Portfolios
 (in millions)
    
    March 31, 2011
    
    
    December 31, 2010
    
    
    September 30, 2010
    
    
    June 30, 2010
    
    
    March 31, 2010Land hold
    
    $
    17.3
    
    
    $
    28.3
    
    
    $
    37.1
    
    
    $
    37.8
    
    
    $
    39.3Land development
    
    
    22.7
    
    
    
    34.8
    
    
    
    73.8
    
    
    
    84.3
    
    
    
    101.0Construction
    
    
    23.3
    
    
    
    103.7
    
    
    
    155.4
    
    
    
    156.3
    
    
    
    164.4Income producing
    
    
    1,038.7
    
    
    
    1,171.0
    
    
    
    1,382.3
    
    
    
    1,481.7
    
    
    
    1,532.1Owner-occupied
    
    
    692.3
    
    
    
    783.0
    
    
    
    855.1
    
    
    
    886.1
    
    
    
    931.5Total commercial real estate
    
    
    1,794.3
    
    
    
    2,120.8
    
    
    
    2,503.7
    
    
    
    2,646.2
    
    
    
    2,768.3Commercial and industrial
    
    
    1,353.2
    
    
    
    1,474.2
    
    
    
    1,657.4
    
    
    
    1,686.8
    
    
    
    1,824.8Total commercial
    
    
    3,147.5
    
    
    
    3,595.0
    
    
    
    4,161.1
    
    
    
    4,333.0
    
    
    
    4,593.1Residential mortgage
    
    
    727.3
    
    
    
    756.2
    
    
    
    800.5
    
    
    
    858.9
    
    
    
    877.2Direct consumer
    
    
    1,006.4
    
    
    
    1,045.5
    
    
    
    1,091.7
    
    
    
    1,132.2
    
    
    
    1,174.7Indirect consumer
    
    
    823.0
    
    
    
    819.9
    
    
    
    834.7
    
    
    
    814.0
    
    
    
    794.2Total consumer
    
    
    2,556.7
    
    
    
    2,621.6
    
    
    
    2,726.9
    
    
    
    2,805.1
    
    
    
    2,846.1Total portfolio loans
    
    $
    5,704.2
    
    
    $
    6,216.6
    
    
    $
    6,888.0
    
    
    $
    7,138.1
    
    
    $
    7,439.2
  Underwriting
  45




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##### Table of Contents



46




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##### Table of Contents



Credit Quality
   
    
    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, net
of recoveries.
 47




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##### Table of Contents



Delinquency Rates By Loan Portfolio
 March 31, 2011
    
    
    December 31, 2010
    
    
    September 30, 2010
    
    
    June 30, 2010
    
    
    March 31, 201030 to 89 days past due
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of(in millions)
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    PortfolioLand hold
    
    $
    0.5
    
    
    
    2.95
    %
    
    $
    2.2
    
    
    
    7.90
    %
    
    $
    
    
    
    
    
    %
    
    $
    1.3
    
    
    
    3.34
    %
    
    $
    0.6
    
    
    
    1.64
    %Land development
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    0.62
    
    
    
    4.5
    
    
    
    6.04
    
    
    
    2.0
    
    
    
    2.43
    
    
    
    3.0
    
    
    
    3.00Construction
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.45
    
    
    
    2.4
    
    
    
    1.53
    
    
    
    6.4
    
    
    
    4.07
    
    
    
    0.9
    
    
    
    0.55Income producing
    
    
    4.8
    
    
    
    0.46
    
    
    
    20.7
    
    
    
    1.76
    
    
    
    35.2
    
    
    
    2.55
    
    
    
    22.9
    
    
    
    1.55
    
    
    
    51.7
    
    
    
    3.37Owner-occupied
    
    
    2.0
    
    
    
    0.29
    
    
    
    14.7
    
    
    
    1.88
    
    
    
    18.3
    
    
    
    2.14
    
    
    
    16.4
    
    
    
    1.85
    
    
    
    13.6
    
    
    
    1.46Total commercial real estate
    
    
    7.3
    
    
    
    0.41
    
    
    
    38.3
    
    
    
    1.80
    
    
    
    60.4
    
    
    
    2.41
    
    
    
    49.0
    
    
    
    1.85
    
    
    
    69.8
    
    
    
    2.52Commercial and industrial
    
    
    6.2
    
    
    
    0.46
    
    
    
    9.0
    
    
    
    0.61
    
    
    
    23.8
    
    
    
    1.43
    
    
    
    10.3
    
    
    
    0.61
    
    
    
    15.1
    
    
    
    0.83Total commercial
    
    
    13.5
    
    
    
    0.43
    
    
    
    47.3
    
    
    
    1.32
    
    
    
    84.2
    
    
    
    2.02
    
    
    
    59.3
    
    
    
    1.37
    
    
    
    84.9
    
    
    
    1.85Residential mortgage
    
    
    10.3
    
    
    
    1.41
    
    
    
    15.4
    
    
    
    2.03
    
    
    
    14.6
    
    
    
    1.82
    
    
    
    20.8
    
    
    
    2.42
    
    
    
    21.5
    
    
    
    2.45Direct consumer
    
    
    17.2
    
    
    
    1.71
    
    
    
    22.4
    
    
    
    2.14
    
    
    
    20.5
    
    
    
    1.88
    
    
    
    20.2
    
    
    
    1.79
    
    
    
    21.9
    
    
    
    1.86Indirect consumer
    
    
    10.2
    
    
    
    1.24
    
    
    
    13.3
    
    
    
    1.62
    
    
    
    12.2
    
    
    
    1.46
    
    
    
    11.4
    
    
    
    1.40
    
    
    
    14.8
    
    
    
    1.86Total consumer
    
    
    37.7
    
    
    
    1.47
    
    
    
    51.1
    
    
    
    1.95
    
    
    
    47.3
    
    
    
    1.73
    
    
    
    52.4
    
    
    
    1.87
    
    
    
    58.2
    
    
    
    2.05Total delinquent loans
    
    $
    51.2
    
    
    
    0.90
    
    
    $
    98.4
    
    
    
    1.58
    
    
    $
    131.5
    
    
    
    1.91
    
    
    $
    111.7
    
    
    
    1.57
    
    
    $
    143.1
    
    
    
    1.92
   Commercial Watchlist
 March 31, 2011
    
    
    December 31, 2010
    
    
    September 30, 2010
    
    
    June 30, 2010
    
    
    March 31, 2010Accruing loans only
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of(in millions)
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    PortfolioLand hold
    
    $
    12.7
    
    
    
    73.41
    %
    
    $
    21.5
    
    
    
    76.35
    %
    
    $
    27.6
    
    
    
    74.32
    %
    
    $
    27.8
    
    
    
    73.58
    %
    
    $
    29.0
    
    
    
    73.73
    %Land development
    
    
    9.9
    
    
    
    43.28
    
    
    
    18.7
    
    
    
    53.66
    
    
    
    45.4
    
    
    
    61.54
    
    
    
    40.5
    
    
    
    47.97
    
    
    
    50.4
    
    
    
    49.95Construction
    
    
    4.6
    
    
    
    19.89
    
    
    
    33.2
    
    
    
    32.05
    
    
    
    46.5
    
    
    
    29.90
    
    
    
    52.5
    
    
    
    33.61
    
    
    
    54.4
    
    
    
    33.07Income producing
    
    
    325.8
    
    
    
    31.37
    
    
    
    444.5
    
    
    
    37.96
    
    
    
    543.7
    
    
    
    39.33
    
    
    
    553.9
    
    
    
    37.38
    
    
    
    523.5
    
    
    
    34.17Owner-occupied
    
    
    136.6
    
    
    
    19.73
    
    
    
    196.9
    
    
    
    25.15
    
    
    
    225.7
    
    
    
    26.40
    
    
    
    224.1
    
    
    
    25.29
    
    
    
    237.0
    
    
    
    25.44Total commercial real estate
    
    
    489.6
    
    
    
    27.29
    
    
    
    714.8
    
    
    
    33.71
    
    
    
    888.9
    
    
    
    35.50
    
    
    
    898.8
    
    
    
    33.96
    
    
    
    894.3
    
    
    
    32.31Commercial and industrial
    
    
    267.0
    
    
    
    19.73
    
    
    
    347.2
    
    
    
    23.55
    
    
    
    432.8
    
    
    
    26.11
    
    
    
    445.5
    
    
    
    26.41
    
    
    
    484.7
    
    
    
    26.56Total watchlist loans
    
    $
    756.6
    
    
    
    24.04
    
    
    $
    1,062.0
    
    
    
    29.54
    
    
    $
    1,321.7
    
    
    
    31.76
    
    
    $
    1,344.3
    
    
    
    31.02
    
    
    $
    1,379.0
    
    
    
    30.02
  48




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##### Table of Contents



Nonperforming Assets
 March 31, 2011
    
    
    December 31, 2010
    
    
    September 30, 2010
    
    
    June 30, 2010
    
    
    March 31, 2010% of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of(in millions)
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    PortfolioLand hold
    
    $
    1.2
    
    
    
    6.68
    %
    
    $
    3.2
    
    
    
    11.50
    %
    
    $
    5.6
    
    
    
    15.13
    %
    
    $
    5.2
    
    
    
    13.76
    %
    
    $
    4.9
    
    
    
    12.49
    %Land development
    
    
    0.1
    
    
    
    0.35
    
    
    
    3.1
    
    
    
    8.82
    
    
    
    16.0
    
    
    
    21.64
    
    
    
    22.3
    
    
    
    26.48
    
    
    
    27.1
    
    
    
    26.86Construction
    
    
    0.4
    
    
    
    1.70
    
    
    
    7.5
    
    
    
    7.21
    
    
    
    27.4
    
    
    
    17.65
    
    
    
    25.0
    
    
    
    15.99
    
    
    
    35.2
    
    
    
    21.39Income producing
    
    
    28.2
    
    
    
    2.72
    
    
    
    62.0
    
    
    
    5.30
    
    
    
    147.7
    
    
    
    10.69
    
    
    
    148.4
    
    
    
    10.02
    
    
    
    144.0
    
    
    
    9.40Owner-occupied
    
    
    21.7
    
    
    
    3.14
    
    
    
    42.8
    
    
    
    5.47
    
    
    
    63.3
    
    
    
    7.40
    
    
    
    59.5
    
    
    
    6.71
    
    
    
    89.0
    
    
    
    9.56Total commercial real estate
    
    
    51.6
    
    
    
    2.88
    
    
    
    118.6
    
    
    
    5.59
    
    
    
    260.0
    
    
    
    10.39
    
    
    
    260.4
    
    
    
    9.84
    
    
    
    300.2
    
    
    
    10.85Commercial and industrial
    
    
    25.8
    
    
    
    1.91
    
    
    
    57.8
    
    
    
    3.92
    
    
    
    61.5
    
    
    
    3.71
    
    
    
    67.0
    
    
    
    3.97
    
    
    
    69.7
    
    
    
    3.82Total nonaccruing commercial
    
    
    77.4
    
    
    
    2.46
    
    
    
    176.4
    
    
    
    4.91
    
    
    
    321.5
    
    
    
    7.73
    
    
    
    327.4
    
    
    
    7.56
    
    
    
    369.9
    
    
    
    8.05Residential mortgage
    
    
    30.4
    
    
    
    4.18
    
    
    
    22.1
    
    
    
    2.92
    
    
    
    16.9
    
    
    
    2.11
    
    
    
    31.0
    
    
    
    3.61
    
    
    
    17.6
    
    
    
    2.01Direct consumer
    
    
    13.0
    
    
    
    1.30
    
    
    
    12.5
    
    
    
    1.20
    
    
    
    15.5
    
    
    
    1.42
    
    
    
    18.7
    
    
    
    1.65
    
    
    
    16.5
    
    
    
    1.41Indirect consumer
    
    
    1.2
    
    
    
    0.14
    
    
    
    1.3
    
    
    
    0.16
    
    
    
    1.7
    
    
    
    0.20
    
    
    
    1.5
    
    
    
    0.18
    
    
    
    2.4
    
    
    
    0.30Total nonaccruing consumer
    
    
    44.6
    
    
    
    1.74
    
    
    
    35.9
    
    
    
    1.37
    
    
    
    34.1
    
    
    
    1.25
    
    
    
    51.2
    
    
    
    1.82
    
    
    
    36.5
    
    
    
    1.28Total nonaccruing loans
    
    
    122.0
    
    
    
    2.14
    
    
    
    212.3
    
    
    
    3.42
    
    
    
    355.6
    
    
    
    5.16
    
    
    
    378.6
    
    
    
    5.30
    
    
    
    406.4
    
    
    
    5.46Loans 90+ days still accruing
    
    
    0.7
    
    
    
    0.01
    
    
    
    1.6
    
    
    
    0.03
    
    
    
    1.6
    
    
    
    0.02
    
    
    
    1.5
    
    
    
    0.02
    
    
    
    2.4
    
    
    
    0.03Restructured loans still accruing
    
    
    12.7
    
    
    
    0.22
    
    
    
    6.4
    
    
    
    0.10
    
    
    
    7.0
    
    
    
    0.10
    
    
    
    4.6
    
    
    
    0.06
    
    
    
    4.8
    
    
    
    0.06Total nonperforming portfolio loans
    
    
    135.4
    
    
    
    2.37
    
    
    
    220.3
    
    
    
    3.54
    
    
    
    364.2
    
    
    
    5.29
    
    
    
    384.7
    
    
    
    5.39
    
    
    
    413.6
    
    
    
    5.56Nonperforming held for sale
    
    
    30.4
    
    
    
    
    
    
    
    24.1
    
    
    
    
    
    
    
    38.4
    
    
    
    
    
    
    
    44.0
    
    

    
    

    
    
    
    95.3Other repossessed assets acquired
    
    
    22.2
    
    
    
    
    
    
    
    42.2
    
    
    
    
    
    
    
    40.7
    
    
    
    
    
    
    
    43.9
    
    
    
    

    
    
    
    47.3Total nonperforming assets
    
    $
    188.0
    
    
    
    
    
    
    $
    286.6
    
    
    
    
    
    
    $
    443.3
    
    
    
    
    
    
    $
    472.6

    
    
    
    

    
    
    $
    556.2Commercial inflows
    
    $
    29.5
    
    
    
    
    
    
    $
    110.9
    
    
    
    
    
    
    $
    95.6
    
    
    
    
    
    
    $
    75.9

    
    
    
    

    
    
    $
    124.8Commercial outflows
    
    
    (128.5
    )
    
    
    
    
    
    
    (256.0
    )
    
    
    
    
    
    
    (101.5
    )
    
    
    
    
    
    
    (118.6
    )

    
    
    
    

    
    
    (74.8
    )Net change
    
    $
    (99.0
    )
    
    
    
    
    
    $
    (145.1
    )
    
    
    
    
    
    $
    (5.9
    )
    
    
    
    
    
    $
    (42.7
    )

    
    
    
    

    
    $
    50.0
   49




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##### Table of Contents



Net Charge-Offs
 Three Months EndedMarch 31, 2011
    
    
    December 31, 2010
    
    
    September 30, 2010
    
    
    June 30, 2010
    
    
    March 31, 2010% of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    
    
    
    % of(in millions)
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    PortfolioLand hold
    
    $
    4.9
    
    
    
    N/M
    %
    
    $
    5.2
    
    
    
    73.54
    %
    
    $
    0.3
    
    
    
    3.30
    %
    
    $
    0.4
    
    
    
    3.72
    %
    
    $
    
    
    
    
    
    %Land development
    
    
    4.4
    
    
    
    79.15
    
    
    
    19.7
    
    
    
    N/M
    
    
    
    9.0
    
    
    
    48.29
    
    
    
    9.8
    
    
    
    46.68
    
    
    
    0.1
    
    
    
    0.49Construction
    
    
    5.6
    
    
    
    97.09
    
    
    
    10.0
    
    
    
    38.44
    
    
    
    0.4
    
    
    
    1.10
    
    
    
    8.7
    
    
    
    22.23
    
    
    
    
    
    
    
    Income producing
    
    
    77.6
    
    
    
    30.30
    
    
    
    64.2
    
    
    
    21.74
    
    
    
    30.8
    
    
    
    8.85
    
    
    
    12.6
    
    
    
    3.41
    
    
    
    7.6
    
    
    
    2.01Owner-occupied
    
    
    25.3
    
    
    
    14.80
    
    
    
    18.1
    
    
    
    9.16
    
    
    
    4.8
    
    
    
    2.21
    
    
    
    18.9
    
    
    
    8.57
    
    
    
    6.9
    
    
    
    3.01Total commercial real estate
    
    
    117.8
    
    
    
    26.63
    
    
    
    117.2
    
    
    
    21.92
    
    
    
    45.3
    
    
    
    7.18
    
    
    
    50.4
    
    
    
    7.63
    
    
    
    14.6
    
    
    
    2.13Commercial and industrial
    
    
    32.0
    
    
    
    9.59
    
    
    
    26.0
    
    
    
    7.01
    
    
    
    6.8
    
    
    
    1.62
    
    
    
    11.4
    
    
    
    2.71
    
    
    
    12.9
    
    
    
    2.86Total commercial
    
    
    149.8
    
    
    
    19.30
    
    
    
    143.2
    
    
    
    15.81
    
    
    
    52.1
    
    
    
    4.97
    
    
    
    61.8
    
    
    
    5.72
    
    
    
    27.5
    
    
    
    2.43Residential mortgage
    
    
    3.4
    
    
    
    1.90
    
    
    
    6.1
    
    
    
    3.20
    
    
    
    23.3
    
    
    
    11.57
    
    
    
    0.6
    
    
    
    0.29
    
    
    
    80.1
    
    
    
    37.05Direct consumer
    
    
    5.5
    
    
    
    2.21
    
    
    
    7.1
    
    
    
    2.70
    
    
    
    9.8
    
    
    
    3.56
    
    
    
    5.5
    
    
    
    1.96
    
    
    
    7.1
    
    
    
    2.44Indirect consumer
    
    
    1.9
    
    
    
    0.95
    
    
    
    2.9
    
    
    
    1.39
    
    
    
    2.2
    
    
    
    1.05
    
    
    
    3.3
    
    
    
    1.61
    
    
    
    3.2
    
    
    
    1.63Total consumer
    
    
    10.8
    
    
    
    1.72
    
    
    
    16.1
    
    
    
    2.43
    
    
    
    35.3
    
    
    
    5.14
    
    
    
    9.4
    
    
    
    1.35
    
    
    
    90.4
    
    
    
    12.88Total net charge-offs
    
    $
    160.6
    
    
    
    10.77
    
    
    $
    159.3
    
    
    
    9.46
    
    
    $
    87.4
    
    
    
    4.91
    
    
    $
    71.2
    
    
    
    3.90
    
    
    $
    117.9
    
    
    
    6.25
 
 *
    
    Represents an annualized rate.     Analysis of Allowance for Loan Losses
 Three Months EndedMarch 31,(in thousands)
    
    2011
    
    
    2010Allowance for loan losses  beginning of period
    
    $
    296,031
    
    
    $
    338,940Provision for loan losses
    
    
    88,724
    
    
    
    101,355Charge-offs
    
    
    164,854
    
    
    
    121,571Recoveries
    
    
    4,216
    
    
    
    3,653Net charge-offs
    
    
    160,638
    
    
    
    117,918Allowance for loan losses  end of period
    
    $
    224,117
    
    
    $
    322,377Portfolio loans outstanding at period end (1)
    
    $
    5,704,198
    
    
    $
    7,439,210Average portfolio loans outstanding during period (1)
    
    
    6,051,407
    
    
    
    7,654,479Allowance for loan losses as a percentage of portfolio loans
    
    
    3.93
    %
    
    
    4.33
    %Net loans charged off as a percent of average portfolio loans (annualized)
    
    
    10.77
    
    
    
    6.25
 
 (1)
    
    Balances exclude loans held for sale.  50




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51




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##### Table of Contents



Allocation of the Allowance for Loan Losses (1)
 March 31, 2011
    
    
    December 31, 2010
    
    
    March 31, 2010Related
    
    
    
    
    
    
    Related
    
    
    
    
    
    
    Related(in millions)
    
    ALLL
    
    
    NPL(2)
    
    
    ALLL
    
    
    NPL (2)
    
    
    ALLL
    
    
    NPL (2)Specific allocated allowance:Commercial and industrial
    
    $
    0.7
    
    
    $
    17.0
    
    
    $
    9.5
    
    
    $
    43.5
    
    
    $
    9.4
    
    
    $
    49.4Commercial real estate
    
    
    6.7
    
    
    
    37.4
    
    
    
    23.5
    
    
    
    98.4
    
    
    
    71.4
    
    
    
    263.4Residential mortgage
    
    
    2.0
    
    
    
    10.2
    
    
    
    1.1
    
    
    
    5.4
    
    
    
    1.4
    
    
    
    5.8Direct Consumer
    
    
    0.2
    
    
    
    1.7
    
    
    
    0.1
    
    
    
    1.2
    
    
    
    0.1
    
    
    
    1.1Total specific allocated allowance
    
    
    9.6
    
    
    
    66.3
    
    
    
    34.2
    
    
    
    148.5
    
    
    
    82.3
    
    
    
    319.7Risk allocated allowance:Commercial and industrial
    
    
    29.4
    
    
    
    9.9
    
    
    
    33.5
    
    
    
    16.3
    
    
    
    34.7
    
    
    
    22.7Commercial real estate (CRE)
    
    
    84.7
    
    
    
    22.7
    
    
    
    99.1
    
    
    
    22.7
    
    
    
    110.8
    
    
    
    36.8Incremental risk allocated allowance  CRE
    
    
    
    
    
    
    
    
    
    
    29.5
    
    
    
    
    
    
    
    
    
    
    
    Total commercial
    
    
    114.1
    
    
    
    32.6
    
    
    
    162.1
    
    
    
    39.0
    
    
    
    145.5
    
    
    
    59.5Residential mortgage
    
    
    49.9
    
    
    
    21.6
    
    
    
    46.5
    
    
    
    18.6
    
    
    
    16.2
    
    
    
    15.1Direct Consumer
    
    
    31.8
    
    
    
    13.7
    
    
    
    32.1
    
    
    
    12.9
    
    
    
    33.9
    
    
    
    16.5Indirect Consumer
    
    
    14.9
    
    
    
    1.2
    
    
    
    16.6
    
    
    
    1.3
    
    
    
    37.4
    
    
    
    2.8Total risk allocated allowance
    
    
    210.7
    
    
    
    69.1
    
    
    
    257.3
    
    
    
    71.8
    
    
    
    233.0
    
    
    
    93.9Total allocated allowance
    
    
    220.3
    
    
    
    135.4
    
    
    
    291.5
    
    
    
    220.3
    
    
    
    315.3
    
    
    
    413.6General valuation allowances
    
    
    3.8
    
    
    
    
    
    
    
    4.5
    
    
    
    
    
    
    
    7.1
    
    
    
    Total allowance
    
    $
    224.1
    
    
    $
    135.4
    
    
    $
    296.0
    
    
    $
    220.3
    
    
    $
    322.4
    
    
    $
    413.6ALLL as a percentage of NPLSpecific allocated allowance:Commercial and industrial
    
    
    4.1
    %
    
    
    
    
    
    
    21.8
    %
    
    
    
    
    
    
    19.1
    %Commercial real estate
    
    
    18.0
    
    
    
    
    
    
    
    23.9
    
    
    
    
    
    
    
    27.1Residential mortgage
    
    
    19.8
    
    
    
    
    
    
    
    20.7
    
    
    
    
    
    
    
    24.1Direct Consumer
    
    
    11.0
    
    
    
    
    
    
    
    11.0
    
    
    
    
    
    
    
    10.1Total specific allocated allowance
    
    
    14.5
    
    
    
    
    
    
    
    23.1
    
    
    
    
    
    
    
    25.8Risk allocated allowance:Commercial and industrial
    
    
    296.1
    
    
    
    
    
    
    
    205.1
    
    
    
    
    
    
    
    153.1Commercial real estate (3)
    
    
    372.8
    
    
    
    
    
    
    
    566.2
    
    
    
    
    
    
    
    300.7Total commercial
    
    
    349.5
    
    
    
    
    
    
    
    415.2
    
    
    
    
    
    
    
    244.5Residential mortgage
    
    
    231.1
    
    
    
    
    
    
    
    250.4
    
    
    
    
    
    
    
    107.4Direct Consumer
    
    
    232.9
    
    
    
    
    
    
    
    248.6
    
    
    
    
    
    
    
    205.2Indirect Consumer
    
    
    N/M
    
    
    
    
    
    
    
    N/M
    
    
    
    
    
    
    
    N/MTotal risk allocated allowance
    
    
    305.1
    
    
    
    
    
    
    
    358.2
    
    
    
    
    
    
    
    248.0TotalGeneral valuation allowancesTotal
    
    
    165.6
    
    
    
    
    
    
    
    134.4
    
    
    
    
    
    
    
    77.9ALLL as a percentage of portfolio loans(4)Risk allocated allowance:(5)Commercial and industrial
    
    
    2.2
    
    
    
    
    
    
    
    2.3
    
    
    
    
    
    
    
    2.0Commercial real estate (3)
    
    
    4.8
    
    
    
    
    
    
    
    6.4
    
    
    
    
    
    
    
    4.4Total commercial
    
    
    3.7
    
    
    
    
    
    
    
    4.7
    
    
    
    
    
    
    
    3.4Residential mortgage
    
    
    7.0
    
    
    
    
    
    
    
    6.2
    
    
    
    
    
    
    
    1.9Direct Consumer
    
    
    3.2
    
    
    
    
    
    
    
    3.1
    
    
    
    
    
    
    
    2.9Indirect Consumer
    
    
    1.8
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    4.7Total risk allocated allowance
    
    
    3.7
    
    
    
    
    
    
    
    4.2
    
    
    
    
    
    
    
    3.3TotalGeneral valuation allowancesTotal allowance
    
    
    3.9
    
    
    
    
    
    
    
    4.8
    
    
    
    
    
    
    
    4.3
 
  (1)
    
    The allocation of the allowance for loan losses in the above table is based upon ranges of estimates and is not
intended to imply either limitations on the usage of the allowance or precision of the specific amounts. Citizens does
not view the allowance for loan losses as being divisible among the various categories of loans. The entire allowance
is available to absorb any future losses without regard to the category or categories in which the charged-off loans
are classified.(2)
    
    Related NPL amounts in risk allocated allowances include restructured loans and still accruing and loans 90+ days past
due and still accruing but classified as nonperforming.(3)
    
    Commercial real estate includes an incremental risk allocated allowance  CRE of $29.5 million in the fourth quarter of
2010.(4)
    
    The portfolio balance of the loans with a specific allocated allowance is equal to the related NPL for said loans.(5)
    
    Portfolio loans only include loan balances evaluated for risk allocated allowance. 52




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Total Allowance for Loan Losses.
   Specific Allocated Allowance.
 Risk Allocated Allowance.
 General Valuation Allowance.
 Loans Held for Sale
  53




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Deposits
   Borrowed Funds
   Capital Resources
   Regulatory
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ExcessMinimum for
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital overWell-
    
    
    March 31,
    
    
    December 31,
    
    
    March 31,
    
    
    MinimumCapital Ratios
    
    Capitalized
    
    
    2011
    
    
    2010
    
    
    2010
    
    
    (in millions)Leverage ratio
    
    
    5.00
    %
    
    
    7.39
    %
    
    
    7.71
    %
    
    
    8.47
    %
    
    $
    228.3Tier 1 capital ratio
    
    
    6.00
    
    
    
    11.90
    
    
    
    12.11
    
    
    
    12.12
    
    
    
    349.6Total capital ratio
    
    
    10.00
    
    
    
    13.24
    
    
    
    13.51
    
    
    
    13.49
    
    
    
    191.8Tier 1 common equity (non-GAAP)
    
    
    
    
    
    
    5.93
    
    
    
    6.62
    
    
    
    7.82Tangible equity to tangible assets (non-GAAP)
    
    
    
    
    
    
    6.57
    
    
    
    7.09
    
    
    
    7.96Tangible
common equity to tangible assets(non-GAAP)
    
    
    
    
    
    
    3.59
    
    
    
    4.20
    
    
    
    5.54
 54




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Contractual Obligations and Off-Balance Sheet Arrangements
  Liquidity and Liquidity Risk Management
    55




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Credit Ratings
    
    Moodys
    
    
    Fitch RatingsCitizens Republic Bancorp (Holding Company)Long-term Issuer
    
    
    B2 (ON)
    
    
    
    CCC10/1/2009
    
    
    
    2/4/2011Short-term/Commercial Paper
    
    
    NP(ON)
    
    
    
    C10/1/2009
    
    
    
    2/4/2011Trust Preferred
    
    
    Caa2 (ON)
    
    
    
    C1/28/2010
    
    
    
    2/4/2011Citizens BankCertificate of Deposit
    
    
    Ba3 (ON)
    
    
    
    B-10/1/2009
    
    
    
    2/4/2011
 
 Ratings Watch Action Legend: (WP) Watch Positive, (WN) Watch Negative,
(WU) Watch Uncertain, (WR) Watch Removed, (OP) Outlook Positive, (ON) Outlook
Negative, (OS) Outlook Stable, (OD) Outlook Developing     56




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Interest Rate Risk
      57




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   58




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Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Period
    

Total
Number ofShares Purchased(1)
    

Average
PricePaid Per Share
    

Total
Number of SharesPurchased as Part ofPublicly AnnouncedPlans or Programs
    
    Maximum
Number ofShares That MayYet Be PurchasedUnder The
Plansor Programs(2)January 2011
    
    819
    
    $0.69
    
    
    
    1,241,154February 2011
    
    
    
    
    
    
    
    1,241,154March 2011
    
    832
    
    0.89
    
    
    
    1,241,154Total
    
    1,651
    
    $0.79
    
    
    
    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, by
the Written Agreement 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
  59




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Item 6. Exhibits
  60




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##### Table of Contents



SIGNATURES
  Date: May 5, 2011
    CITIZENS REPUBLIC BANCORP, INC.By
    /s/ Lisa T. McNeelyLisa T. McNeelyChief Financial Officer
(principal financial officer and duly authorized officer) 61




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##### Table of Contents



10-Q EXHIBIT INDEX
  Exhibit No.
    
    Description10.63
    
    Amendment to the Amended and Restated Citizens Republic Bancorp Deferred Compensation
Plan for Executives10.64
    
    Amendment to the Amended and Restated Citizens Republic Bancorp Deferred Compensation
Plan for Directors31.1
    
    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
 62