UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2008.
 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 Street, Flint, Michigan
    
    48502(Address of Principal Executive Offices)
    
    (ZIP Code)
  Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Exchange on Which RegisteredCommon Stock, no par value
    
    The NASDAQ Global Select Market®7.50% Trust Preferred Securities (issued by Citizens Funding Trust I)
    
    New York Stock ExchangePreferred Stock Purchase Rights
    
    The NASDAQ Global Select Market®
 Securities registered pursuant to Section 12(g) of the Act: none
 o þ
 o þ
 þ o
 o
  Large
accelerated
filer oAccelerated
filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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CITIZENS REPUBLIC BANCORP, INC.
2008 Annual Report on Form 10-K
 TABLE OF CONTENTS
 PagePART IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    13Item 1B.
    
    Unresolved Staff Comments
    
    
    23Item 2.
    
    Properties
    
    
    23Item 3.
    
    Legal Proceedings
    
    
    23Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    23PART IIItem 5.
    
    Market for the
Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
    
    
    24Item 6.
    
    Selected Financial Data
    
    
    26Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    28Overview
    
    
    28Critical Accounting Policies
    
    
    32Recent Accounting Pronouncements
    
    
    37Recent Developments
    
    
    37Results of Operations
    
    
    38Financial Condition
    
    
    47Liquidity Risk Management
    
    
    64Interest Rate Risk
    
    
    66Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    68Item 8.
    
    Financial Statements and Supplementary Data
    
    
    68Consolidated Balance Sheets
    
    
    69Consolidated Statements of Income
    
    
    70Consolidated Statements of Changes in Shareholders Equity
    
    
    71Consolidated Statements of Cash Flows
    
    
    72Notes to Consolidated Financial Statements
    
    
    73Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    118Item 9A.
    
    Controls and Procedures
    
    
    118Item 9B.
    
    Other Information
    
    
    121PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    121Item 11.
    
    Executive Compensation
    
    
    121Item 12.
    
    Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    121Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    122Item 14.
    
    Principal Accounting Fees and Services
    
    
    122PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    123SIGNATURES
    
    
    124EXHIBIT INDEX
    
    
    126
 2




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PART I
 
 ITEM 1. BUSINESS
 SM www.citizensbanking.com www.sec.gov.
 GENERAL
   Total
    
    DatePrincipal
    
    Number of
    
    Assets
    
    Acquired /Subsidiary
    
    Office
    
    Offices
    
    (in millions)
    
    EstablishedCitizens Bank (a)
    
    Flint, MI
    
    
    222
    
    
    $
    12,258.3
    
    
    
    1871F&M Bank  Iowa (a)
    
    Marshalltown, IA
    
    
    11
    
    
    
    481.3
    
    
    
    11/01/99Citizens Bank Wealth Management, N.A.
    
    Flint, MI
    
    
    (b
    )
    
    
    (b
    )
    
    
    03/01/02
 
 (a)
    
    Consolidated totals include its non-bank subsidiaries. F&M Bank  Iowa had total trust
assets under administration of $25.0 million at December 31, 2008.(b)
    
    Citizens Bank Wealth Management, N.A. conducts business at most Citizens Bank locations and
had total assets under administration of $1.9 billion at December 31, 2008.  3




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SUBSEQUENT EVENTS
   GEOGRAPHIC
LOCATIONS
  PRINCIPAL
SOURCES OF REVENUE
  Year Ended Decembe 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006Interest and fees on loans
    
    $
    586,073
    
    
    $
    684,047
    
    
    $
    399,469Interest and dividends on investment securities, money
market investments, FHLB and Federal Reserve stock
    
    
    114,838
    
    
    
    123,864
    
    
    
    72,883Noninterest income
    
    
    101,742
    
    
    
    122,568
    
    
    
    90,627Total revenues
    
    $
    802,653
    
    
    $
    930,479
    
    
    $
    562,979
  4




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LINES OF BUSINESS
  
    
    Specialty Commercial Specialty Commercial includes the commercial real estate, public
funds, and asset-based lending teams. These groups provide a full range of lending,
depository, and related financial services to commercial real estate developers, owners of
multi-unit commercial properties, middle-market companies, and local governments and
municipalities. Products and services offered include commercial mortgages, real estate
construction lending, term loans, revolving credit arrangements, inventory and accounts
receivable financing, and letters of credit. Noncredit services for these customers include
deposit accounts, treasury management, corporate cash management, international banking
services, advice and assistance in the placement of securities, and financial planning.
    
    Regional Banking Regional Banking includes the consumer, residential mortgage, commercial
and industrial, small business, private banking and treasury management teams. These groups
provide a wide range of lending, depository, and other related financial services to both
businesses and individual consumers. The products and services offered to consumer clients
include: direct loans, home equity loans and lines of credit, residential mortgage loans,
checking, savings and money market accounts, debit and credit cards, ATM network services,
certificates of deposit, and fixed and variable annuities, as well as private banking services
for affluent clients. The products and services offered to commercial clients include: term
loans, revolving credit arrangements, inventory and accounts receivable financing, commercial
mortgages, letters of credit, and small business loans. Noncredit services for commercial
clients include deposit accounts, treasury management, corporate cash management,
international banking services, advice and assistance in the placement of securities, and
financial planning.
    
    Wealth Management Wealth Management offers a broad array of asset management, financial
planning, estate settlement and administration, credit and deposit products and services.
Trust and investment services include personal trust and planning, investment management,
estate settlement and administration services. Retirement plan services focus on investment
management and fiduciary activities with special emphasis on 401(k) plans. Brokerage and
insurance delivers retail mutual funds, other securities, variable and fixed annuities,
personal disability and life insurance products and discounted brokerage services.
    
    Other Activities that are not directly attributable to one of the three primary business
lines are included in the Other business line. Included in this category are the Holding
Company; indirect consumer lending; shared services unit; Citizens treasury unit, including
the securities portfolio, short-term borrowing and asset/liability management activities;
inter-company eliminations; and the economic impact of certain assets, capital and support
functions not specifically identifiable with the three primary lines of business.
   5




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COMPETITION
     SUPERVISION AND REGULATION
 General
    6




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Payment of Dividends
    Capital Adequacy and Prompt Corrective Action
  7




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
    
    prohibiting the payment of principal and interest on subordinated debt;
    
    prohibiting the holding company from making distributions without prior regulatory
approval;
    
    placing limits on asset growth and restrictions on activities;
    
    placing additional restrictions on transactions with affiliates;
    
    restricting the interest rate the institution may pay on deposits;
    
    prohibiting the institution from accepting deposits from correspondent banks; and
    
    in the most severe cases, appointing a conservator or receiver for the institution.
    8




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FDIC Insurance Assessments
    Interstate Banking
  Transactions with Affiliates
  Loans to Insiders
  9




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Community Reinvestment Act
  Fair Lending and Consumer Laws
    Gramm-Leach-Bliley Act of 1999
   10




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Anti-Money Laundering and the USA Patriot Act of 2001
   EESA and Troubled Asset Relief Capital Purchase Program
  11




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American Recovery and Reinvestment Act
     12




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Temporary Liquidity Guarantee Program
  ECONOMIC FACTORS AND MONETARY POLICY
  ENVIRONMENTAL MATTERS
  
 ITEM 1A. RISK FACTORS
  13




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We face 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 our net income to decline and could have a negative impact on our capital and financial
position.
  
    
    the duration of the loan;
    
    credit risks of a particular borrower;
    
    changes in economic and industry conditions; and
    
    in the case of a collateralized loan, the potential inadequacy of the value of the
collateral in the event of default, such as has resulted from the deterioration in commercial
and residential real estate values.
    14




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While we attempt to manage the risk from changes in market interest rates, interest rate risk
management techniques are not exact. In addition, we may not be able to economically hedge our
interest rate risk. A rapid or substantial increase or decrease in interest rates could adversely affect our net interest
income and results of operations.
    Difficult economic conditions have adversely affected the banking industry and financial markets
generally and may significantly affect our business, financial condition, and results of
operations.
    15




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
    
    Inability of our borrowers to make timely repayments of their loans, or decreases in value
of real estate collateral securing the payment of such loans resulting in significant credit
losses.
    
    Increased regulation of our industry, including heightened legal standards, and regulatory
requirements or expectations in connection with EESA and ARRA or future legislation.
Compliance with such regulation will likely increase our costs and may limit our ability to
pursue business opportunities. In addition, compensation restrictions associated with EESA,
ARRA, or similar future legislation may affect our ability to attract and retain key
management personnel.
    
    Possible changes to bankruptcy laws could result in the loss of all or part of our security
interest in mortgage loans (so-called cramdown provisions) or other foreclosure moratorium
laws.
    
    Further disruptions in the capital markets or other events including actions by rating
agencies and deteriorating investor expectations may result in an inability to borrow at
favorable terms or at all from other financial institutions.
 An economic downturn, and the negative economic effects caused by terrorist attacks, potential
attacks and other destabilizing events, would likely contribute to the deterioration of the quality
of our loan portfolio and could reduce our customer base, our level of deposits, and demand for our
financial products such as loans.
   If we are 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), our cost of funds will increase, adversely
affecting the ability to generate the funds necessary for lending operations, reducing net interest
margin and negatively affecting results of operations.
   16




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Increased competition with other financial institutions or an adverse change in our relationship
with a number of major customers could reduce our 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. If we lend to customers who are less likely to pay in order to
maintain historical origination levels, we may not be able to maintain current loan quality levels.
     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 our operations or
dispose of an operating unit could have a negative effect on our goodwill or other intangible
assets such that we may need to record an impairment charge, which could have a material adverse
impact on our results of operations.
  17




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We may not realize our deferred income tax assets.
  Our stock price can be volatile.
  
    
    Actual or anticipated negative variations in quarterly results of operations;
    
    Negative recommendations by securities analysts;
    
    Poor operating and stock price performance of other companies that investors deem
comparable to us;
    
    News reports relating to negative trends, concerns and other issues in the financial
services industry;
    
    Negative perceptions in the marketplace regarding us and/or our competitors;
    
    New technology used, or services offered, by competitors;
    
    Significant acquisitions or business combinations, strategic partnerships, joint ventures
or capital commitments by or involving us or our competitors;
    
    Our failure to integrate acquisitions or realize anticipated benefits from acquisitions;
    
    Adverse changes in government regulations; and
    
    Geopolitical conditions such as acts or threats of terrorism or military conflicts.
  The trading volume in our common stock is less than that of other larger financial services
companies.
  18




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If our stock does not continue to be traded on an established exchange, an active trading market
may not continue and the trading price of our stock may decline.
   An investment in our common stock is not an insured deposit.
  We may be adversely affected by the soundness of other financial institutions.
  We 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.
  19




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We are party to various lawsuits incidental to our 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 we are unable to
adequately invest in and implement new technology-driven products and services, we may not be able
to compete effectively, or the cost to provide products and services may increase significantly.
  Our business may be adversely affected by the highly regulated environment in which we operate.
Changes in banking or tax laws, regulations, and regulatory practices at either the federal or
state level may adversely affect us, including our ability to offer new products and services,
obtain financing, pay dividends from our subsidiaries to our Holding Company, attract deposits, or
make loans at satisfactory spreads. Such changes may also result in the imposition of additional
costs.
  The products and services offered by the banking industry and customer expectations regarding them
are subject to change. We attempt to respond to perceived customer needs and expectations by
offering new products and services, which are often costly to develop and market initially. A lack
of market acceptance of these products and services would have a negative effect on financial
condition and results of operations.
  20




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As a bank holding company that conducts substantially all of our operations through our
subsidiaries, the ability of our Holding Company to pay dividends, repurchase our shares or to
repay our indebtedness depends upon the results of operations of our subsidiaries and their ability
to pay dividends to our Holding Company. Dividends paid by these subsidiaries are subject to
limits imposed by federal and state law.
    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 our results of operations and financial condition.
  Our business continuity plans or data security systems could prove to be inadequate, resulting in a
material interruption in, or disruption to, our business and a negative impact on our results of
operations.
 21




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Our vendors could fail to fulfill their contractual obligations, resulting in a material
interruption in, or disruption to, our business and a negative impact on our results of operations.
   
    
    If an existing agreement expires or a certain service is discontinued by a vendor, then we
may not be able to continue to offer our customers the same breadth of products and our
operating results would likely suffer unless we are able to find an alternate supply of a
similar service.
    
    Agreements we may negotiate in the future may commit us to certain minimum spending
obligations. It is possible we will not be able to create the market demand to meet such
obligations.
    
    If market demand for our products increases suddenly, our current vendors might not be able
to fulfill our commercial needs, which would require us to seek new arrangements or new
sources of supply, and may result in substantial delays in meeting market demand.
    
    We may not be able to control or adequately monitor the quality of services we receive from
our vendors. Poor quality services could damage our reputation with our customers.
  Our potential inability to integrate acquired operations could have a negative effect on our
expenses and results of operations.
  Our controls and procedures may fail or be circumvented which could have a material adverse effect
on our business, results of operations and financial condition.
  22




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Our articles of incorporation and bylaws as well as certain banking laws may have an anti-takeover
effect.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  23




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 SM
  Dividends
    
    
    Common StockDeclared
    
    
    Price Range
    
    
    ClosingPer Share
    
    
    High
    
    
    Low
    
    
    Price2008First quarter
    
    $
    0.290
    
    
    $
    14.74
    
    
    $
    10.41
    
    
    $
    12.43Second quarter
    
    
    
    
    
    
    13.97
    
    
    
    2.67
    
    
    
    2.82Third quarter
    
    
    
    
    
    
    11.00
    
    
    
    1.75
    
    
    
    3.08Fourth quarter
    
    
    
    
    
    
    4.75
    
    
    
    1.34
    
    
    
    2.98Year
    
    $
    0.290
    
    
    $
    14.74
    
    
    $
    1.34
    
    
    $
    2.982007First quarter
    
    $
    0.290
    
    
    $
    26.95
    
    
    $
    21.97
    
    
    $
    22.16Second quarter
    
    
    0.290
    
    
    
    22.50
    
    
    
    18.02
    
    
    
    18.30Third quarter
    
    
    0.290
    
    
    
    20.38
    
    
    
    15.01
    
    
    
    16.11Fourth quarter
    
    
    0.290
    
    
    
    17.37
    
    
    
    13.00
    
    
    
    14.51Year
    
    $
    1.160
    
    
    $
    26.95
    
    
    $
    13.00
    
    
    $
    14.51
  Stock Performance Graph
  24




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CRBC
    
    KBW 50
    
    S&P 50012/31/2003
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.012/31/2004
    
    
    108.7
    
    
    
    110.0
    
    
    
    110.812/31/2005
    
    
    91.3
    
    
    
    111.3
    
    
    
    116.312/31/2006
    
    
    91.2
    
    
    
    132.9
    
    
    
    134.612/31/2007
    
    
    53.3
    
    
    
    102.3
    
    
    
    142.012/31/2008
    
    
    11.2
    
    
    
    55.8
    
    
    
    89.5
 Issuer Repurchases of Equity Securities
 Total Number of
    
    Maximum Number ofShares Purchased as
    
    Shares That May YetPart of Publicly
    
    Be Purchased UnderTotal Number of
    
    Average Price Paid
    
    Announced Plans or
    
    The Plans or ProgramsPeriod
    
    Shares Purchased
    
    Per Share
    
    Programs
    
    (b)October 2008
    
    
    68
    (a)
    
    
    4.72
    
    
    
    
    
    
    
    1,241,154November 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,241,154December 2008
    
    
    58
    (a)
    
    
    2.95
    
    
    
    
    
    
    
    1,241,154Total
    
    
    126
    
    
    
    3.90
    
    
    
    
    
    
    
    1,241,154
 
 (a)
    
    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. 25




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(b)
    
    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 preferred shares, and is
also subject to limitations that may be imposed by applicable securities laws and regulations
and the rules of the NASDAQ Global Select Market®. 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 6. SELECTED FINANCIAL DATA
   26




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Five Year Summary of Selected Financial Data
 (in thousands, except per share data)
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004For The YearNet interest income
    
    $
    348,932
    
    
    $
    382,179
    
    
    $
    263,120
    
    
    $
    275,749
    
    
    $
    271,698Provision for loan losses(1)
    
    
    282,054
    
    
    
    45,177
    
    
    
    11,265
    
    
    
    1,109
    
    
    
    21,609Total fees and other income (2)
    
    
    101,743
    
    
    
    122,593
    
    
    
    97,728
    
    
    
    89,435
    
    
    
    92,971Investment securities losses (3)
    
    
    (1
    )
    
    
    (25
    )
    
    
    (7,101
    )
    
    
    (8,927
    )
    
    
    (1,513
    )Noninterest expense(4)
    
    
    490,702
    
    
    
    327,423
    
    
    
    259,827
    
    
    
    243,042
    
    
    
    260,278Income tax provision (benefit) from continuing operations
    
    
    70,970
    
    
    
    31,305
    
    
    
    19,319
    
    
    
    31,581
    
    
    
    19,590Income (loss) from continuing operations
    
    
    (393,052
    )
    
    
    100,842
    
    
    
    63,336
    
    
    
    80,525
    
    
    
    61,679Discontinued operations (after tax) (5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,418Net income (loss) (6)
    
    
    (393,052
    )
    
    
    100,842
    
    
    
    63,336
    
    
    
    80,525
    
    
    
    76,097Net income (loss) attributable to common shareholders (7)
    
    
    (405,016
    )
    
    
    100,842
    
    
    
    63,336
    
    
    
    80,525
    
    
    
    76,097Cash dividends
    
    
    21,959
    
    
    
    87,798
    
    
    
    49,530
    
    
    
    49,311
    
    
    
    49,286Per Common Share DataIncome (loss) from continuing operations:Basic
    
    $
    (4.30
    )
    
    $
    1.34
    
    
    $
    1.48
    
    
    $
    1.87
    
    
    $
    1.43Diluted
    
    
    (4.30
    )
    
    
    1.33
    
    
    
    1.47
    
    
    
    1.85
    
    
    
    1.41Discontinued operations:Basic
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.33Diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.33Net income (loss):Basic
    
    $
    (4.30
    )
    
    $
    1.34
    
    
    $
    1.48
    
    
    $
    1.87
    
    
    $
    1.76Diluted
    
    
    (4.30
    )
    
    
    1.33
    
    
    
    1.47
    
    
    
    1.85
    
    
    
    1.74Cash dividends
    
    
    0.290
    
    
    
    1.160
    
    
    
    1.155
    
    
    
    1.140
    
    
    
    1.140Common shareholders equity
    
    
    10.60
    
    
    
    20.84
    
    
    
    20.58
    
    
    
    15.28
    
    
    
    15.13Tangible book value (8)
    
    
    5.69
    
    
    
    10.20
    
    
    
    9.65
    
    
    
    13.75
    
    
    
    13.55Market value, end of year
    
    
    2.98
    
    
    
    14.51
    
    
    
    26.50
    
    
    
    27.75
    
    
    
    34.35At Year End, Continuing OperationsAssets
    
    $
    13,086,016
    
    
    $
    13,505,983
    
    
    $
    14,002,612
    
    
    $
    7,750,688
    
    
    $
    7,704,633Portfolio loans (9)
    
    
    9,102,598
    
    
    
    9,501,244
    
    
    
    9,231,082
    
    
    
    5,616,119
    
    
    
    5,393,365Deposits
    
    
    9,052,406
    
    
    
    8,301,925
    
    
    
    8,698,061
    
    
    
    5,473,839
    
    
    
    5,299,760Long-term debt
    
    
    2,192,623
    
    
    
    2,939,510
    
    
    
    2,638,964
    
    
    
    1,004,914
    
    
    
    948,521Shareholders equity
    
    
    1,601,321
    
    
    
    1,577,880
    
    
    
    1,557,686
    
    
    
    656,463
    
    
    
    654,302At Year End, CombinedAssets
    
    $
    13,086,016
    
    
    $
    13,505,983
    
    
    $
    14,002,612
    
    
    $
    7,750,688
    
    
    $
    7,704,633Portfolio loans (9)
    
    
    9,102,598
    
    
    
    9,501,244
    
    
    
    9,231,082
    
    
    
    5,616,119
    
    
    
    5,393,365Deposits
    
    
    9,052,406
    
    
    
    8,301,925
    
    
    
    8,698,061
    
    
    
    5,473,839
    
    
    
    5,299,760Long-term debt
    
    
    2,192,623
    
    
    
    2,939,510
    
    
    
    2,638,964
    
    
    
    1,004,914
    
    
    
    948,521Shareholders equity
    
    
    1,601,321
    
    
    
    1,577,880
    
    
    
    1,557,686
    
    
    
    656,463
    
    
    
    654,302Average For The Year, Continuing OperationsAssets
    
    $
    13,241,553
    
    
    $
    13,320,121
    
    
    $
    7,704,231
    
    
    $
    7,776,522
    
    
    $
    7,583,979Earning assets
    
    
    11,894,796
    
    
    
    11,851,100
    
    
    
    7,250,843
    
    
    
    7,348,168
    
    
    
    7,164,365Portfolio loans (9)
    
    
    9,433,952
    
    
    
    9,212,066
    
    
    
    5,657,476
    
    
    
    5,493,280
    
    
    
    5,210,817Deposits
    
    
    8,715,210
    
    
    
    8,168,893
    
    
    
    5,587,967
    
    
    
    5,286,390
    
    
    
    5,277,670Interest-bearing deposits
    
    
    7,592,236
    
    
    
    7,029,198
    
    
    
    4,666,387
    
    
    
    4,355,337
    
    
    
    4,379,150Repurchase agreements andother short-term borrowings
    
    
    318,404
    
    
    
    721,086
    
    
    
    374,088
    
    
    
    812,642
    
    
    
    653,442Long-term debt
    
    
    2,520,181
    
    
    
    2,728,181
    
    
    
    995,940
    
    
    
    937,182
    
    
    
    934,550Shareholders equity
    
    
    1,558,414
    
    
    
    1,549,961
    
    
    
    660,996
    
    
    
    653,004
    
    
    
    639,631Average For The Year, CombinedAssets
    
    $
    13,241,553
    
    
    $
    13,320,121
    
    
    $
    7,704,231
    
    
    $
    7,776,522
    
    
    $
    7,683,334Earning assets
    
    
    11,894,796
    
    
    
    11,851,100
    
    
    
    7,250,843
    
    
    
    7,348,168
    
    
    
    7,259,660Portfolio loans (9)
    
    
    9,433,952
    
    
    
    9,212,066
    
    
    
    5,657,476
    
    
    
    5,493,280
    
    
    
    5,259,303Deposits
    
    
    8,715,210
    
    
    
    8,168,893
    
    
    
    5,587,967
    
    
    
    5,286,390
    
    
    
    5,375,297Interest-bearing deposits
    
    
    7,592,236
    
    
    
    7,029,198
    
    
    
    4,666,387
    
    
    
    4,355,337
    
    
    
    4,460,391Repurchase agreements and
other short-term borrowings
    
    
    318,404
    
    
    
    721,086
    
    
    
    374,088
    
    
    
    812,642
    
    
    
    655,472Long-term debt
    
    
    2,520,181
    
    
    
    2,728,181
    
    
    
    995,940
    
    
    
    937,182
    
    
    
    934,550Shareholders equity
    
    
    1,558,414
    
    
    
    1,549,961
    
    
    
    660,996
    
    
    
    653,004
    
    
    
    639,631
 27




---



##### 



Five Year Summary of Selected Financial Data (Continued)
 (in thousands, except per share data)
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004Financial Ratios, Continuing OperationsReturn on average:Shareholders equity
    
    
    (25.22
    %)
    
    
    6.51
    %
    
    
    9.58
    %
    
    
    12.33
    %
    
    
    9.64
    %Earning assets
    
    
    (3.30
    )
    
    
    0.85
    
    
    
    0.87
    
    
    
    1.10
    
    
    
    0.86Assets
    
    
    (2.97
    )
    
    
    0.76
    
    
    
    0.82
    
    
    
    1.04
    
    
    
    0.81Ratio of earnings to fixed charges(10)
    
    
    
    
    
    
    1.77
    
    
    
    2.31
    
    
    
    2.76
    
    
    
    2.84Average shareholders equity/avg. assets
    
    
    11.77
    
    
    
    11.64
    
    
    
    8.58
    
    
    
    8.40
    
    
    
    8.43Dividend payout ratio
    
    
    (5.59
    )
    
    
    87.07
    
    
    
    78.20
    
    
    
    61.24
    
    
    
    79.91Net interest margin (FTE) (11)
    
    
    3.09
    
    
    
    3.38
    
    
    
    3.81
    
    
    
    3.94
    
    
    
    3.99Tier I leverage ratio (12)
    
    
    9.66
    
    
    
    7.53
    
    
    
    7.22
    
    
    
    7.98
    
    
    
    7.84Tier I risk-based capital ratio
    
    
    12.21
    
    
    
    9.18
    
    
    
    9.41
    
    
    
    9.94
    
    
    
    9.96Total risk-based capital ratio
    
    
    14.49
    
    
    
    11.66
    
    
    
    11.90
    
    
    
    13.22
    
    
    
    13.32Financial Ratios, CombinedReturn on average:Shareholders equity
    
    
    (25.22
    %)
    
    
    6.51
    %
    
    
    9.58
    %
    
    
    12.33
    %
    
    
    11.90
    %Earning assets
    
    
    (3.30
    )
    
    
    0.85
    
    
    
    0.87
    
    
    
    1.10
    
    
    
    1.05Assets
    
    
    (2.97
    )
    
    
    0.76
    
    
    
    0.82
    
    
    
    1.04
    
    
    
    0.99Average shareholders equity/avg. assets
    
    
    11.77
    
    
    
    11.64
    
    
    
    8.58
    
    
    
    8.40
    
    
    
    8.32Dividend payout ratio
    
    
    (5.59
    )
    
    
    87.07
    
    
    
    78.20
    
    
    
    61.24
    
    
    
    64.77Net interest margin (FTE) (11)
    
    
    3.09
    
    
    
    3.38
    
    
    
    3.81
    
    
    
    3.94
    
    
    
    3.99Tier I leverage ratio (12)
    
    
    9.66
    
    
    
    7.53
    
    
    
    7.22
    
    
    
    7.98
    
    
    
    7.84Tier I risk-based capital ratio
    
    
    12.21
    
    
    
    9.18
    
    
    
    9.41
    
    
    
    9.94
    
    
    
    9.96Total risk-based capital ratio
    
    
    14.49
    
    
    
    11.66
    
    
    
    11.90
    
    
    
    13.22
    
    
    
    13.32
 
 (1)
    
    Provision for loan losses in 2005 includes a $9.1 million insurance settlement relating to a claim for recovery of fraud losses suffered in connection with two
loans made by the Corporation and subsequently charged-off in 2002 and 2003.(2)
    
    Total fees and other income includes $9.4 million in fair-value adjustments on loans held for sale in 2008 and a charge of $3.6 million related to a fair-value change
in CD swap derivatives in 2005.(3)
    
    Investment securities losses includes a $7.2 million other-than-temporary impairment charge related to the balance sheet restructuring as a result of the Republic
merger in 2006 and losses of $9.0 million on the sale of investment securities in 2005.(4)
    
    Noninterest expense includes a goodwill impairment charge of $178.1 million and fair-value adjustments on ORE properties of $8.1 million in 2008, restructuring
and merger-related expenses of $8.2 million in 2007 and
$11.3 million in 2006 related to the Republic merger.(5)
    
    Discontinued operations in 2004 includes an after-tax gain of $12.8 million for the sale of the Illinois bank subsidiary.(6)
    
    Net income (loss) includes a deferred tax valuation allowance of $136.6 million in 2008.(7)
    
    Net income (loss) attributable to common shareholders includes the following non-cash items in 2008: $0.2 million dividend on redeemable preferred stock
and $11.7 million deemed dividend on convertible preferred stock.(8)
    
    Tangible book value is an estimate of a companys worth if it was liquidated because it removes the effect of goodwill and intangible assets. The calculation, using ending balances is as follows: (Common shareholders equity  Goodwill  Intangible assets)/Common shares outstanding.(9)
    
    Balances exclude loans held for sale.(10)
    
    Earnings represent net income from continuing operations before income tax provision. Fixed charges, excluding interest on deposits, include interest on short-term
borrowings and long term debt, amortization of debt expense and one-third of net rental expense (which we believe is representative of the interest factor). For the
year ended December 31, 2008, earnings were insufficient to cover fixed charges by $322.1 million.(11)
    
    Net interest margin includes taxable equivalent adjustments to interest income of $18.4 million, $18.5 million, $13.7 million, $13.4 million and $13.2 million
for the years ended December 31, 2008, 2007, 2006, 2005 and 2004, respectively, based on a tax rate of 35%.(12)
    
    In 2006, the Tier I leverage ratio is calculated using ending assets instead of average assets due to the Republic merger on December 29, 2006. 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  28




---



##### 



ForwardLooking Statements
   
 OVERVIEW
 Nature of Citizens Business
     29




---



##### 



Performance Summary
  Table
1. Three Year Summary of Net Income Components
 Year Ended December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006Interest income
    
    $
    700,911
    
    
    $
    807,911
    
    
    $
    472,352Interest expense
    
    
    351,979
    
    
    
    425,732
    
    
    
    209,232Net interest income
    
    
    348,932
    
    
    
    382,179
    
    
    
    263,120Provision for loan losses
    
    
    282,054
    
    
    
    45,177
    
    
    
    11,265Noninterest income
    
    
    101,742
    
    
    
    122,568
    
    
    
    90,627Noninterest expense
    
    
    490,702
    
    
    
    327,423
    
    
    
    259,827Income tax provision
    
    
    70,970
    
    
    
    31,305
    
    
    
    19,319Net income (loss)
    
    
    (393,052
    )
    
    
    100,842
    
    
    
    63,336Deemed dividend on convertible preferred stock
    
    
    (11,737
    )
    
    
    
    
    
    
    Dividend on redeemable preferred stock
    
    
    (227
    )
    
    
    
    
    
    
    Net income (loss) attributable to common shareholders
    
    $
    (405,016
    )
    
    $
    100,842
    
    
    $
    63,336Pre-tax pre-provision core operating earningsNet income (loss)
    
    $
    (393,052
    )
    
    $
    100,842
    
    
    $
    63,336Income tax provision
    
    
    70,970
    
    
    
    31,305
    
    
    
    19,319Provision for loan losses
    
    
    282,054
    
    
    
    45,177
    
    
    
    11,265Goodwill impairment charge
    
    
    178,089
    
    
    
    
    
    
    
    Fair value adjustment on loans held for sale
    
    
    9,373
    
    
    
    508
    
    
    
    Fair value adjustment on ORE
    
    
    8,063
    
    
    
    (866
    )
    
    
    439Fair value adjustment on bank owned life insurance
    
    
    3,447
    
    
    
    
    
    
    
    Loss on auction rate securities repurchase
    
    
    2,406
    
    
    
    
    
    
    
    (Gain) loss related to Visa USA shares
    
    
    (2,124
    )
    
    
    872
    
    
    
    SFAS 157 mark-to-market on swaps
    
    
    (1,287
    )
    
    
    
    
    
    
    Captive insurance impairment charge
    
    
    1,053
    
    
    
    
    
    
    
    Impairment writedown on investment securities
    
    
    
    
    
    
    
    
    
    
    7,163Expenses related to merger activities but not treated as
restructuring or merger-related
    
    
    
    
    
    
    10,142
    
    
    
    6,322Restructuring and merger related expenses
    
    
    
    
    
    
    8,247
    
    
    
    11,324Loss on 1998 venture capital investment in limited partnership
    
    
    
    
    
    
    1,085
    
    
    
    Gain on sale of Royal Oak, Michigan downtown office
    
    
    
    
    
    
    
    
    
    
    (2,906
    )Contribution to Citizens charitable foundation
    
    
    
    
    
    
    
    
    
    
    1,450Pre-tax pre-provision core operating earnings
    
    $
    158,992
    
    
    $
    197,312
    
    
    $
    117,712
  30




---



##### 




    
    Net interest income for 2008 declined $33.2 million or 8.7% compared with 2007 and the net
interest margin percentage decreased from 3.38% to 3.09% during the same period. The decrease
in net interest income was primarily the result of lower net interest margin, partially offset
by an increase in average earning assets of $41.0 million. The increase in average earning
assets was primarily the result of an increase in commercial loan balances and money market
investments balances, partially offset by a decrease in investment securities balances as well
as decreases in the residential mortgage and direct consumer loan portfolios. The margin
compression was primarily the result of deposit price competition, the transfer of loans to
nonperforming status, and an increase in funding costs related to extending short-term
borrowings, partially offset by expanding commercial and consumer loan spreads and retail time
deposits repricing to a lower rate.
    
    The provision for loan losses increased $236.9 million over 2007 primarily due to
significantly higher commercial real estate net charge-offs and migration of commercial real
estate loans to nonperforming loan status. Total net charge-offs increased $139.2 million in
2008 to $190.1 million or 2.01% of average portfolio loans outstanding compared with $50.9
million or 0.55% for 2007. The increase was primarily the result of higher charge-offs on
commercial real estate loans due to declining real estate values and general economic
deterioration in the Midwest.
    
    Noninterest income decreased $20.8 million or 17.0% compared with 2007. The decrease was
primarily the result of a higher net loss on loans held for sale ($8.9 million), lower other
income ($5.2 million), lower mortgage and other loan income ($4.6 million), lower trust fees
($2.1 million), and a net decrease from minor
changes in several other categories, partially offset by higher bankcard fees ($1.3 million).
In addition, the
 31




---



##### 



other income category includes a $2.1 million gain due to Citizens receipt of
proceeds from the partial redemption of its Visa shares.
    
    Noninterest expense increased $163.3 million or 49.9% compared with 2007. The increase was
primarily the result of a $178.1 million goodwill impairment charge, higher ORE expenses,
profits, and losses, net ($10.7 million, including the $5.0 million fair-value adjustment on
ORE, which occurred in the second quarter of 2008), and higher other loan expenses ($7.9
million). The increases were partially offset by the general decline in all other expense
categories due to cost savings and efficiencies implemented during 2007 and 2008 as well as
the effect of restructuring and merger-related expenses ($8.2 million) incurred in 2007.
    
    Income tax expense increased $39.7 million over the same period of 2007. The increase was
primarily the result of recording a $136.6 million valuation allowance against deferred tax
assets, partially offset by the effect of lower pre-tax income, excluding the non-tax
deductible goodwill impairment charge recorded in the second quarter of 2008.
 
 CRITICAL ACCOUNTING POLICIES
  Allowance for Loan Losses
   32




---



##### 



33




---



##### 



Goodwill
      34




---



##### 



Pension and Postretirement Benefits
    35




---



##### 



Fair Value Measurements
  Derivative Financial Instruments and Hedging Activities
   Income Taxes
  36




---



##### 



RECENT ACCOUNTING PRONOUNCEMENTS
  
 RECENT DEVELOPMENTS
 Issuances of Capital in 2008
    Goodwill Impairment Charge
  37




---



##### 



Significant Developments in 2007 and 2006
 Republic Merger and Branch Sale
  
    
    $154.9 million in cash
    
    $885.0 million in value from 32.7 million Citizens common shares valued for accounting
purposes at $27.03 per share; and
    
    the exchange of Republic unvested restricted stock and outstanding stock options and
warrants for Citizens restricted stock and stock options valued for accounting purposes at
$12.3 million.
   Strategic Business Alliance for the Mortgage Operations and Secondary Marketing Functions
  Enhanced Trust Preferred Securities
  
 RESULTS OF OPERATIONS
 NET INTEREST INCOME
  38




---



##### 



Table 2. Average Balances/Net Interest Income/Average Rates
 2008
    
    
    2007
    
    
    2006Year Ended December 31
    
    Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(in thousands)
    
    Balance
    
    
    Interest(1)
    
    
    Rate(2)
    
    
    Balance
    
    
    Interest (1)
    
    
    Rate (2)
    
    
    Balance
    
    
    Interest (1)
    
    
    Rate (2)Earning AssetsMoney market investments
    
    $
    40,551
    
    
    $
    384
    
    
    
    0.95
    %
    
    $
    1,940
    
    
    $
    104
    
    
    
    5.37
    %
    
    $
    2,862
    
    
    $
    119
    
    
    
    4.17
    %Investment securities (3):Taxable
    
    
    1,503,983
    
    
    
    78,089
    
    
    
    5.19
    
    
    
    1,726,042
    
    
    
    88,078
    
    
    
    5.10
    
    
    
    1,077,475
    
    
    
    48,950
    
    
    
    4.54Tax-exempt
    
    
    673,395
    
    
    
    29,096
    
    
    
    6.65
    
    
    
    671,753
    
    
    
    29,268
    
    
    
    6.70
    
    
    
    449,068
    
    
    
    21,113
    
    
    
    7.23FHLB and Federal Reserve stock
    
    
    148,806
    
    
    
    7,269
    
    
    
    4.89
    
    
    
    137,676
    
    
    
    6,414
    
    
    
    4.66
    
    
    
    56,700
    
    
    
    2,701
    
    
    
    4.76Portfolio Loans (4):Commercial and industrial
    
    
    2,656,982
    
    
    
    144,025
    
    
    
    5.52
    
    
    
    2,138,853
    
    
    
    155,182
    
    
    
    7.38
    
    
    
    1,727,232
    
    
    
    124,676
    
    
    
    7.35Commercial real estate
    
    
    3,104,815
    
    
    
    200,071
    
    
    
    6.45
    
    
    
    3,103,082
    
    
    
    238,240
    
    
    
    7.68
    
    
    
    1,447,789
    
    
    
    103,669
    
    
    
    7.16Residential mortgage
    
    
    1,334,706
    
    
    
    81,610
    
    
    
    6.11
    
    
    
    1,490,447
    
    
    
    98,678
    
    
    
    6.62
    
    
    
    540,737
    
    
    
    31,343
    
    
    
    5.80Direct consumer
    
    
    1,507,073
    
    
    
    101,509
    
    
    
    6.74
    
    
    
    1,638,084
    
    
    
    127,768
    
    
    
    7.80
    
    
    
    1,099,110
    
    
    
    82,804
    
    
    
    7.53Indirect consumer
    
    
    830,376
    
    
    
    56,067
    
    
    
    6.75
    
    
    
    841,600
    
    
    
    56,881
    
    
    
    6.76
    
    
    
    842,608
    
    
    
    56,032
    
    
    
    6.65Total portfolio loans
    
    
    9,433,952
    
    
    
    583,282
    
    
    
    6.21
    
    
    
    9,212,066
    
    
    
    676,749
    
    
    
    7.38
    
    
    
    5,657,476
    
    
    
    398,524
    
    
    
    7.09Loans held for sale
    
    
    87,565
    
    
    
    2,791
    
    
    
    3.19
    
    
    
    97,744
    
    
    
    7,298
    
    
    
    7.42
    
    
    
    16,378
    
    
    
    945
    
    
    
    5.77Total earning assets (3)
    
    
    11,888,252
    
    
    
    700,911
    
    
    
    6.05
    
    
    
    11,847,221
    
    
    
    807,911
    
    
    
    6.98
    
    
    
    7,259,959
    
    
    
    472,352
    
    
    
    6.70Nonearning AssetsCash and due from banks
    
    
    203,431
    
    
    
    
    
    
    
    
    
    
    
    198,908
    
    
    
    
    
    
    
    
    
    
    
    159,501Bank premises and equipment
    
    
    126,255
    
    
    
    
    
    
    
    
    
    
    
    136,135
    
    
    
    
    
    
    
    
    
    
    
    119,572Investment security
fair value adjustment
    
    
    6,544
    
    
    
    
    
    
    
    
    
    
    
    3,879
    
    
    
    
    
    
    
    
    
    
    
    (9,116
    )Other nonearning assets
    
    
    1,206,143
    
    
    
    
    
    
    
    
    
    
    
    1,307,126
    
    
    
    
    
    
    
    
    
    
    
    288,928Allowance for loan losses
    
    
    (189,072
    )
    
    
    
    
    
    
    
    
    
    
    (173,148
    )
    
    
    
    
    
    
    
    
    
    
    (114,613
    )Total assets
    
    $
    13,241,553
    
    
    
    
    
    
    
    
    
    
    $
    13,320,121
    
    
    
    
    
    
    
    
    
    
    $
    7,704,231Interest-Bearing LiabilitiesDeposits:Interest-bearing demand
    
    
    771,735
    
    
    
    5,076
    
    
    
    0.66
    
    
    
    831,983
    
    
    
    5,742
    
    
    
    0.69
    
    
    
    779,803
    
    
    
    5,051
    
    
    
    0.65Savings deposits
    
    
    2,551,570
    
    
    
    44,046
    
    
    
    1.73
    
    
    
    2,188,296
    
    
    
    63,942
    
    
    
    2.92
    
    
    
    1,478,492
    
    
    
    38,848
    
    
    
    2.63Time deposits
    
    
    4,268,931
    
    
    
    171,761
    
    
    
    4.02
    
    
    
    4,008,919
    
    
    
    187,510
    
    
    
    4.68
    
    
    
    2,408,092
    
    
    
    103,233
    
    
    
    4.29Short-term borrowings
    
    
    318,404
    
    
    
    8,029
    
    
    
    2.52
    
    
    
    721,086
    
    
    
    34,316
    
    
    
    4.76
    
    
    
    374,088
    
    
    
    16,017
    
    
    
    4.28Long-term debt
    
    
    2,520,181
    
    
    
    123,067
    
    
    
    4.88
    
    
    
    2,728,181
    
    
    
    134,222
    
    
    
    4.92
    
    
    
    995,940
    
    
    
    46,083
    
    
    
    4.63Total
interest-bearing liabilities
    
    
    10,430,821
    
    
    
    351,979
    
    
    
    3.37
    
    
    
    10,478,465
    
    
    
    425,732
    
    
    
    4.06
    
    
    
    6,036,415
    
    
    
    209,232
    
    
    
    3.47Noninterest-Bearing Liabilities
and Shareholders EquityNoninterest-bearing demand
    
    
    1,122,974
    
    
    
    
    
    
    
    
    
    
    
    1,139,695
    
    
    
    
    
    
    
    
    
    
    
    921,580Other liabilities
    
    
    129,344
    
    
    
    
    
    
    
    
    
    
    
    152,000
    
    
    
    
    
    
    
    
    
    
    
    85,240Shareholders equity
    
    
    1,558,414
    
    
    
    
    
    
    
    
    
    
    
    1,549,961
    
    
    
    
    
    
    
    
    
    
    
    660,996Total liabilities and
shareholders equity
    
    $
    13,241,553
    
    
    
    
    
    
    
    
    
    
    $
    13,320,121
    
    
    
    
    
    
    
    
    
    
    $
    7,704,231Net Interest Income
    
    
    
    
    
    $
    348,932
    
    
    
    
    
    
    
    
    
    
    $
    382,179
    
    
    
    
    
    
    
    
    
    
    $
    263,120Interest Spread(5)
    
    
    
    
    
    
    
    
    
    
    2.68
    %
    
    
    
    
    
    
    
    
    
    
    2.92
    %
    
    
    
    
    
    
    
    
    
    
    3.23
    %Contribution
of noninterest bearing sources of funds
    
    
    
    
    
    
    
    
    
    
    0.41
    
    
    
    
    
    
    
    
    
    
    
    0.46
    
    
    
    
    
    
    
    
    
    
    
    0.58Net Interest Margin(5)(6)
    
    
    
    
    
    
    
    
    
    
    3.09
    %
    
    
    
    
    
    
    
    
    
    
    3.38
    %
    
    
    
    
    
    
    
    
    
    
    3.81
    %
 
 (1)
    
    Interest income is shown on an unadjusted basis and therefore does not include taxable
equivalent adjustments.(2)
    
    Average rates include taxable equivalent adjustments to interest income of $18.4 million,
$18.5 million, and $13.7 million for the years ended December 31, 2008, 2007, and 2006, respectively,
based on a 35% tax rate.(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.(5)
    
    The interest spread and net interest margin are presented on a tax-equivalent basis.(6)
    
    Because noninterest-bearing funding sources, demand deposits, other liabilities and
shareholders equity also support earning assets, the net interest margin exceeds the interest spread.   39




---



##### 



40




---



##### 



Table 3. Analysis of Changes in Interest Income and Interest Expense
 2008 Compared to 2007
    
    
    2007 Compared to 2006Increase (Decrease)
    
    
    
    
    
    
    Increase (Decrease)Year Ended December 31
    
    Net
    
    
    Due to Change in
    
    
    Net
    
    
    Due to Change in(in thousands)
    
    Change(1)
    
    
    Rate(2)
    
    
    Volume(2)
    
    
    Change(1)
    
    
    Rate (2)
    
    
    Volume(2)Interest Income:Money market investments
    
    $
    280
    
    
    $
    (154
    )
    
    $
    434
    
    
    $
    (15
    )
    
    $
    29
    
    
    $
    (44
    )Investment securities:Taxable
    
    
    (9,989
    )
    
    
    1,517
    
    
    
    (11,506
    )
    
    
    39,128
    
    
    
    6,649
    
    
    
    32,479Tax-exempt
    
    
    (172
    )
    
    
    (243
    )
    
    
    71
    
    
    
    8,155
    
    
    
    (1,646
    )
    
    
    9,801FHLB and Federal Reserve
stock
    
    
    855
    
    
    
    321
    
    
    
    534
    
    
    
    3,713
    
    
    
    (61
    )
    
    
    3,774Loans:Commercial and industrial
    
    
    (11,157
    )
    
    
    (44,331
    )
    
    
    33,174
    
    
    
    30,506
    
    
    
    645
    
    
    
    29,861Commercial real estate
    
    
    (38,169
    )
    
    
    (38,304
    )
    
    
    135
    
    
    
    134,571
    
    
    
    7,994
    
    
    
    126,577Residential mortgage
    
    
    (17,068
    )
    
    
    (7,212
    )
    
    
    (9,856
    )
    
    
    67,335
    
    
    
    5,044
    
    
    
    62,291Direct consumer
    
    
    (26,259
    )
    
    
    (16,677
    )
    
    
    (9,582
    )
    
    
    44,964
    
    
    
    3,021
    
    
    
    41,943Indirect consumer
    
    
    (814
    )
    
    
    (178
    )
    
    
    (636
    )
    
    
    849
    
    
    
    916
    
    
    
    (67
    )Total portfolio loans
    
    
    (93,467
    )
    
    
    (106,702
    )
    
    
    13,235
    
    
    
    278,225
    
    
    
    17,620
    
    
    
    260,605Loans held for sale
    
    
    (4,507
    )
    
    
    (3,814
    )
    
    
    (693
    )
    
    
    6,353
    
    
    
    355
    
    
    
    5,998Total
    
    
    (107,000
    )
    
    
    (109,075
    )
    
    
    2,075
    
    
    
    335,559
    
    
    
    22,946
    
    
    
    312,613Interest Expense:Deposits:Interest-bearing demand
    
    
    (666
    )
    
    
    (271
    )
    
    
    (395
    )
    
    
    691
    
    
    
    342
    
    
    
    349Savings
    
    
    (19,896
    )
    
    
    (29,314
    )
    
    
    9,418
    
    
    
    25,094
    
    
    
    4,749
    
    
    
    20,345Time
    
    
    (15,749
    )
    
    
    (27,540
    )
    
    
    11,791
    
    
    
    84,277
    
    
    
    10,154
    
    
    
    74,123Short-term borrowings
    
    
    (26,287
    )
    
    
    (12,053
    )
    
    
    (14,234
    )
    
    
    18,299
    
    
    
    1,963
    
    
    
    16,336Long-term debt
    
    
    (11,155
    )
    
    
    (1,313
    )
    
    
    (9,842
    )
    
    
    88,139
    
    
    
    3,094
    
    
    
    85,045Total
    
    
    (73,753
    )
    
    
    (70,491
    )
    
    
    (3,262
    )
    
    
    216,500
    
    
    
    20,302
    
    
    
    196,198Net Interest Income
    
    $
    (33,247
    )
    
    $
    (38,584
    )
    
    $
    5,337
    
    
    $
    119,059
    
    
    $
    2,644
    
    
    $
    116,415
 
 (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. 2008 compared with 2007
  2007 compared with 2006
  41




---



##### 



PROVISION FOR LOAN LOSSES
  2008 compared with 2007
  2007 compared with 2006
  NONINTEREST INCOME
  Noninterest Income
 Year Ended December 31,
    
    
    $ Change
    
    
    % Change(dollars in thousands)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2008-2007
    
    
    2007-2006
    
    
    2008-2007
    
    
    2007-2006Service charges on deposit
accounts
    
    $
    47,470
    
    
    $
    48,051
    
    
    $
    37,709
    
    
    $
    (581
    )
    
    $
    10,342
    
    
    
    (1.2
    )%
    
    
    27.4
    %Trust fees
    
    
    17,967
    
    
    
    20,106
    
    
    
    19,465
    
    
    
    (2,139
    )
    
    
    641
    
    
    
    (10.6
    )
    
    
    3.3Mortgage and other loan income
    
    
    11,443
    
    
    
    16,021
    
    
    
    9,270
    
    
    
    (4,578
    )
    
    
    6,751
    
    
    
    (28.6
    )
    
    
    72.8Brokerage and investment fees
    
    
    7,109
    
    
    
    7,901
    
    
    
    6,995
    
    
    
    (792
    )
    
    
    906
    
    
    
    (10.0
    )
    
    
    12.9ATM network user fees
    
    
    6,319
    
    
    
    6,283
    
    
    
    4,011
    
    
    
    36
    
    
    
    2,272
    
    
    
    0.6
    
    
    
    56.7Bankcard fees
    
    
    7,440
    
    
    
    6,124
    
    
    
    4,567
    
    
    
    1,316
    
    
    
    1,557
    
    
    
    21.5
    
    
    
    34.1Gains (losses) on loans held
for sale
    
    
    (9,373
    )
    
    
    (508
    )
    
    
    
    
    
    
    (8,865
    )
    
    
    (508
    )
    
    
    N/M
    
    
    
    Investment securities losses
    
    
    (1
    )
    
    
    (25
    )
    
    
    (7,101
    )
    
    
    24
    
    
    
    7,076
    
    
    
    97.7
    
    
    
    99.7Other
    
    
    13,368
    
    
    
    18,615
    
    
    
    15,711
    
    
    
    (5,247
    )
    
    
    2,904
    
    
    
    (28.2
    )
    
    
    18.5Total noninterest income
    
    $
    101,742
    
    
    $
    122,568
    
    
    $
    90,627
    
    
    $
    (20,826
    )
    
    $
    31,941
    
    
    
    (17.0
    )%
    
    
    35.2
    %
 
 N/M  Not meaningful 2008 compared with 2007
  42




---



##### 



2007 compared with 2006
   NONINTEREST EXPENSE
  Noninterest Expense
 Year Ended December 31,
    
    
    $ Change
    
    
    % Change(dollars in thousands)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2008-2007
    
    
    2007-2006
    
    
    2008-2007
    
    
    2007-2006Salaries and employee benefits
    
    $
    158,193
    
    
    $
    175,895
    
    
    $
    132,400
    
    
    $
    (17,702
    )
    
    $
    43,495
    
    
    
    (10.1
    )%
    
    
    32.9
    %Occupancy
    
    
    28,592
    
    
    
    30,971
    
    
    
    22,288
    
    
    
    (2,379
    )
    
    
    8,683
    
    
    
    (7.7
    )
    
    
    39.0Professional services
    
    
    15,184
    
    
    
    18,031
    
    
    
    15,344
    
    
    
    (2,847
    )
    
    
    2,687
    
    
    
    (15.8
    )
    
    
    17.5Equipment
    
    
    12,966
    
    
    
    14,650
    
    
    
    14,691
    
    
    
    (1,684
    )
    
    
    (41
    )
    
    
    (11.5
    )
    
    
    (0.3
    )Data processing services
    
    
    16,470
    
    
    
    16,234
    
    
    
    14,989
    
    
    
    236
    
    
    
    1,245
    
    
    
    1.5
    
    
    
    8.3Advertising and public relations
    
    
    5,897
    
    
    
    7,282
    
    
    
    5,881
    
    
    
    (1,385
    )
    
    
    1,401
    
    
    
    (19.0
    )
    
    
    23.8Postage and delivery
    
    
    7,342
    
    
    
    7,800
    
    
    
    6,095
    
    
    
    (458
    )
    
    
    1,705
    
    
    
    (5.9
    )
    
    
    28.0Other loan expenses
    
    
    13,381
    
    
    
    5,518
    
    
    
    4,446
    
    
    
    7,863
    
    
    
    1,072
    
    
    
    142.5
    
    
    
    24.1ORE expenses, profits, and losses, net
    
    
    11,008
    
    
    
    325
    
    
    
    1,031
    
    
    
    10,683
    
    
    
    (706
    )
    
    
    N/M
    
    
    
    (68.5
    )Intangible asset amortization
    
    
    9,132
    
    
    
    11,534
    
    
    
    2,899
    
    
    
    (2,402
    )
    
    
    8,635
    
    
    
    (20.8
    )
    
    
    297.9Goodwill impairment
    
    
    178,089
    
    
    
    
    
    
    
    
    
    
    
    178,089
    
    
    
    
    
    
    
    
    
    
    
    Restructuring and merger related
expenses
    
    
    
    
    
    
    8,247
    
    
    
    11,324
    
    
    
    (8,247
    )
    
    
    (3,077
    )
    
    
    (100.0
    )
    
    
    (27.2
    )Other
    
    
    34,448
    
    
    
    30,936
    
    
    
    28,439
    
    
    
    3,512
    
    
    
    2,497
    
    
    
    11.4
    
    
    
    8.8Total noninterest expense
    
    $
    490,702
    
    
    $
    327,423
    
    
    $
    259,827
    
    
    $
    163,279
    
    
    $
    67,596
    
    
    
    49.9
    %
    
    
    26.0
    %
 
 N/M  Not meaningful 2008 compared with 2007
  43




---



##### 



2007 compared with 2006
   FEDERAL AND STATE INCOME TAXES
   44




---



##### 



LINE OF BUSINESS RESULTS
  Net Income(in thousands)
    
    2008
    
    
    2007
    
    
    2006Specialty Commercial
    
    $
    (264,620
    )
    
    $
    27,666
    
    
    $
    3,719Regional Banking
    
    
    40,267
    
    
    
    82,265
    
    
    
    68,352Wealth Management
    
    
    547
    
    
    
    3,327
    
    
    
    2,550Other
    
    
    (169,246
    )
    
    
    (12,416
    )
    
    
    (11,285
    )Net income (loss)
    
    $
    (393,052
    )
    
    $
    100,842
    
    
    $
    63,336
 2008 compared with 2007
    45




---



##### 



2007 compared with 2006
     46




---



##### 



FINANCIAL CONDITION
 TOTAL ASSETS
  MONEY MARKET INVESTMENTS AND INVESTMENT SECURITIES
  Investment Securities
 December 31 (in thousands)
    
    2008
    
    
    2007
    
    
    2006Available for Sale:U.S. Treasury
    
    $
    
    
    
    $
    
    
    
    $
    39,854Federal agencies
    
    
    257,445
    
    
    
    304,074
    
    
    
    436,315Collaterized mortgage obligations
    
    
    471,010
    
    
    
    586,954
    
    
    
    791,739Mortgage-backed securities
    
    
    973,961
    
    
    
    670,565
    
    
    
    994,767State and municipal securities
    
    
    538,761
    
    
    
    569,466
    
    
    
    575,907Other securities
    
    
    7,595
    
    
    
    1,105
    
    
    
    874Total
    
    $
    2,248,772
    
    
    $
    2,132,164
    
    
    $
    2,839,456Held to Maturity:State and municipal securities
    
    $
    138,575
    
    
    $
    129,126
    
    
    $
    109,744Total Investments
    
    $
    2,387,347
    
    
    $
    2,261,290
    
    
    $
    2,949,200
    47




---



##### 



Table 4. Maturity Distribution of Investment Securities Portfolio (1)
 Due Within
    
    
    One to
    
    
    Five to
    
    
    AfterOne Year
    
    
    Five Years
    
    
    Ten Years
    
    
    Ten Years
    
    
    TotalDecember 31, 2008
    
    
    
    
    
    Avg.
    
    
    
    
    
    
    Avg.
    
    
    
    
    
    
    Avg.
    
    
    
    
    
    
    Avg.
    
    
    
    
    
    
    Avg.(in thousands)
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldSecurities Available for Sale:(2)Federal Agency securities (3)
    
    $
    75,567
    
    
    
    4.66
    %
    
    $
    146,386
    
    
    
    4.99
    %
    
    $
    35,492
    
    
    
    5.22
    %
    
    $
    
    
    
    
    
    %
    
    $
    257,445
    
    
    
    4.92
    %Collateralized mortgage obligations (3)(4)
    
    
    37,991
    
    
    
    4.70
    
    
    
    388,896
    
    
    
    5.01
    
    
    
    44,078
    
    
    
    4.88
    
    
    
    45
    
    
    
    6.87
    
    
    
    471,010
    
    
    
    4.97Mortgage-backed securities (3)(4)
    
    
    4,062
    
    
    
    6.25
    
    
    
    420,957
    
    
    
    5.03
    
    
    
    504,033
    
    
    
    5.02
    
    
    
    44,909
    
    
    
    5.49
    
    
    
    973,961
    
    
    
    5.05State and municipal securities (3)(5)
    
    
    49,635
    
    
    
    7.88
    
    
    
    138,280
    
    
    
    7.11
    
    
    
    207,902
    
    
    
    6.35
    
    
    
    142,944
    
    
    
    6.01
    
    
    
    538,761
    
    
    
    6.59Other Securities (3)
    
    
    7,274
    
    
    
    1.02
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    321
    
    
    
    3.60
    
    
    
    7,595
    
    
    
    1.13Total securitiesAvailable for Sale
    
    $
    174,529
    
    
    
    5.46
    %
    
    $
    1,094,519
    
    
    
    5.26
    %
    
    $
    791,505
    
    
    
    5.36
    %
    
    $
    188,219
    
    
    
    5.89
    %
    
    $
    2,248,772
    
    
    
    5.36
    %Securities Held to Maturity:(6)State and municipal securities (3)(5)
    
    $
    
    
    
    
    
    %
    
    $
    3,482
    
    
    
    5.94
    %
    
    $
    41,103
    
    
    
    6.18
    %
    
    $
    93,990
    
    
    
    6.27
    %
    
    
    138,575
    
    
    
    6.23
    %Total securitiesHeld to Maturity
    
    $
    
    
    
    
    
    %
    
    $
    3,482
    
    
    
    5.94
    %
    
    $
    41,103
    
    
    
    6.18
    %
    
    $
    93,990
    
    
    
    6.27
    %
    
    $
    138,575
    
    
    
    6.23
    %
 
 (1)
    
    This table excludes stock holdings of the Federal Home Loan Bank and Federal Reserve.(2)
    
    Amount for Securities Available for Sale is the Estimated Fair Market Value(3)
    
    Yields are based on amortized cost.(4)
    
    Maturity distributions for collateralized mortgage obligations and mortgage-backed securities are based on estimated average lives.(5)
    
    Average yields on tax-exempt obligations have been computed on a tax equivalent basis, based on a 35% federal tax rate.(6)
    
    Amount for Securities Held to Maturity is the amortized cost.  48




---



##### 



LOAN PORTFOLIO
   Table 5. Portfolio Loans (1)
 (in millions)
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004Portfolio Loans Outstanding at December 31Commercial and industrial
    
    $
    2,602.3
    
    
    $
    2,557.1
    
    
    $
    2,004.9
    
    
    $
    1,688.1
    
    
    $
    1,633.8Commercial real estate
    
    
    2,565.9
    
    
    
    2,549.6
    
    
    
    2,442.5
    
    
    
    1,190.4
    
    
    
    1,153.0Real estate construction
    
    
    398.9
    
    
    
    547.6
    
    
    
    678.1
    
    
    
    211.7
    
    
    
    102.9Total commercial
    
    
    5,567.1
    
    
    
    5,654.3
    
    
    
    5,125.5
    
    
    
    3,090.2
    
    
    
    2,889.7Residential mortgage
    
    
    1,262.8
    
    
    
    1,445.2
    
    
    
    1,543.5
    
    
    
    539.8
    
    
    
    508.2Direct consumer
    
    
    1,452.2
    
    
    
    1,572.3
    
    
    
    1,721.4
    
    
    
    1,142.0
    
    
    
    1,169.6Indirect consumer
    
    
    820.5
    
    
    
    829.4
    
    
    
    840.6
    
    
    
    844.1
    
    
    
    825.9Total
    
    $
    9,102.6
    
    
    $
    9,501.2
    
    
    $
    9,231.0
    
    
    $
    5,616.1
    
    
    $
    5,393.4
 Portfolio Loan Maturities and Interest Rate Sensitivity at December 31, 2008
 Within
    
    
    One to
    
    
    AfterOne Year
    
    
    Five Years
    
    
    Five Years
    
    
    TotalCommercial and industrial
    
    $
    1,439.1
    
    
    $
    953.5
    
    
    $
    209.7
    
    
    $
    2,602.3Commercial real estate
    
    
    681.0
    
    
    
    1,543.7
    
    
    
    341.2
    
    
    
    2,565.9Real estate construction
    
    
    239.0
    
    
    
    119.7
    
    
    
    40.2
    
    
    
    398.9Total commercial
    
    $
    2,359.1
    
    
    $
    2,616.9
    
    
    $
    591.1
    
    
    $
    5,567.1Loans above:With floating interest rates
    
    $
    1,721.7
    
    
    $
    1,324.4
    
    
    $
    412.6
    
    
    $
    3,458.7With predetermined interest rates
    
    
    637.4
    
    
    
    1,292.5
    
    
    
    178.5
    
    
    
    2,108.4Total
    
    $
    2,359.1
    
    
    $
    2,616.9
    
    
    $
    591.1
    
    
    $
    5,567.1
 
 (1)
    
    Excludes mortgage loans held for sale  Commercial and Industrial.
 49




---



##### 



Commercial Real Estate.
   Real Estate Construction.
 50




---



##### 



Residential Mortgage Loans .
  Residential Mortgage Loan Balances By Category
 December 31 (in thousands)
    
    2008
    
    
    2007Fixed Rate Mortgages
    
    $
    423,698
    
    
    $
    436,264Adjustable Rate Mortgages
    
    
    795,482
    
    
    
    915,935Construction Mortgages
    
    
    43,661
    
    
    
    93,015Total
    
    $
    1,262,841
    
    
    $
    1,445,214
  Residential Mortgage Loan Originations
 (In thousands)
    
    2008
    
    
    2007Fixed Rate Mortgages
    
    $
    273,901
    
    
    $
    521,737Adjustable Rate Mortgages
    
    
    48,593
    
    
    
    99,109Construction Mortgages
    
    
    20,325
    
    
    
    63,442Total
    
    $
    342,819
    
    
    $
    684,288
 51




---



##### 



Direct Consumer.
   Indirect Consumer.
  LOANS HELD FOR SALE
  52




---



##### 



CREDIT RISK MANAGEMENT
   
    
    Implemented a more regimented commercial real estate management function by centralizing
the portfolio management team under the Chief Credit Officer. The team is lead by a manager
with extensive workout experience and is now staffed with more extensively experienced real
estate bankers, adding more depth and breadth to this function. Additionally, the team
implemented new reporting metrics and procedures to more closely monitor the servicing
performance of pass and watchlist real estate loans in the commercial portfolio, including the
age of appraisals, adherence to lot release schedules, rent roll updates, construction costs
within forecasts, and that guarantor liquidity is affirmed by current financial statements; in
short, that all aspects of the transactions are current and performing according to terms;
    
    Expanded the size and focus of the special loans workout team to be more proactive in
managing accruing watchlist credits, nonperforming loans, loans held for sale, and other real
estate owned properties. This team drives the quarterly watchlist review process, which
evaluates and drives the workout strategy behind all watch credits. In 2008, the team
expanded their focus to conduct quarterly pass loan reviews on high exposure credits, assisted
in the review of automotive-related clients to identify potential geographic and sector
weakness, and developed ongoing strategies for the pass credits to help mitigate the
transition to nonperforming status;
    
    Analyzed Citizens commercial automobile-related exposure through various forward-looking
potential stress scenarios;
    
    Tightened underwriting criteria for consumer loans, which rely heavily on credit-scoring
model results, to include:
 
    
    Home equity loans: reduced maximum loan-to-value, or LTV, to 80% for primary residences
and 70% for secondary residences and discontinued lending on rental properties;
    
    Indirect loans: increased credit score cutoffs to improve collateral positioning and
reduce risk, increased pricing spreads, and reduced advance rates.
 
    
    Expanded the quarterly review of non-watch credits to include commercial and industrial
relationships. Coupled with the continuation of reviewing the non-watch commercial real
estate relationships, these practices enable Citizens to validate obligor ratings and exposure
management strategies;
    
    Transitioned mortgage servicing and collection activities to PHH Mortgage, a nationally
recognized servicing agent; and
    
    Streamlined collection and modification programs for residential mortgage loans to mitigate
foreclosures more effectively.
 53




---



##### 



NONPERFORMING ASSETS
  54




---



##### 



Table 6. Nonperforming Assets and Past Due Loans
 December 31 (in thousands)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Nonperforming Portfolio Loans(2)NonaccrualLess than 30 days past due
    
    $
    35,168
    
    
    $
    8,133
    
    
    $
    4,305
    
    
    $
    4,206
    
    
    $
    2,761From 30 to 89 days past due
    
    
    25,257
    
    
    
    11,617
    
    
    
    1,413
    
    
    
    1,136
    
    
    
    3,11890 or more days past due
    
    
    243,868
    
    
    
    165,647
    
    
    
    52,174
    
    
    
    26,798
    
    
    
    36,940Total
    
    
    304,293
    
    
    
    185,397
    
    
    
    57,892
    
    
    
    32,140
    
    
    
    42,81990 days past due and still accruing
    
    
    1,486
    
    
    
    3,650
    
    
    
    767
    
    
    
    238
    
    
    
    40Restructured
    
    
    256
    
    
    
    315
    
    
    
    378
    
    
    
    
    
    
    
    42Total nonperforming portfolio loans
    
    
    306,035
    
    
    
    189,362
    
    
    
    59,037
    
    
    
    32,378
    
    
    
    42,901Nonperforming loans held for sale
    
    
    75,142
    
    
    
    21,676
    
    
    
    22,846
    
    
    
    
    
    
    
    Other Repossessed Assets Acquired
    
    
    58,037
    
    
    
    40,502
    
    
    
    20,165
    
    
    
    7,351
    
    
    
    7,946Total
nonperforming assets(1)(3)
    
    $
    439,214
    
    
    $
    251,540
    
    
    $
    102,048
    
    
    $
    39,729
    
    
    $
    50,847Nonperforming portfolio loans as a percent of
portfolio loans
    
    
    3.34
    %
    
    
    1.99
    %
    
    
    0.64
    %
    
    
    0.58
    %
    
    
    0.80
    %Nonperforming assets as a percent of portfolio loans
plus other repossessed assets acquired
    
    
    4.79
    
    
    
    2.64
    
    
    
    1.10
    
    
    
    0.71
    
    
    
    0.94Nonperforming assets as a percent of total assets
    
    
    3.36
    
    
    
    1.86
    
    
    
    0.73
    
    
    
    0.51
    
    
    
    0.66Nonperforming Portfolio Loans by Type(4)Commercial and industrial
    
    $
    66,285
    
    
    $
    16,581
    
    
    $
    8,843
    
    
    $
    12,118
    
    
    $
    13,816Commercial real estate
    
    
    162,544
    
    
    
    110,159
    
    
    
    14,915
    
    
    
    5,068
    
    
    
    14,464Total commercial
    
    
    228,829
    
    
    
    126,740
    
    
    
    23,758
    
    
    
    17,186
    
    
    
    28,280Residential mortgage
    
    
    59,515
    
    
    
    46,865
    
    
    
    28,428
    
    
    
    8,412
    
    
    
    8,643Direct Consumer
    
    
    15,076
    
    
    
    13,700
    
    
    
    6,041
    
    
    
    4,326
    
    
    
    3,527Indirect Consumer
    
    
    2,615
    
    
    
    2,057
    
    
    
    810
    
    
    
    2,454
    
    
    
    2,451Total
    
    $
    306,035
    
    
    $
    189,362
    
    
    $
    59,037
    
    
    $
    32,378
    
    
    $
    42,901
 
 (1)
    
    Nonperforming loans include loans on which interest is not being recognized (nonaccrual), those on which interest has been renegotiated to
lower than market rates because of the financial condition of the borrowers (restructured), and loans 90 days past due and still accruing.(2)
    
    Gross interest income that would have been recorded in 2008 for nonaccrual and restructured loans, as of December 31, 2008, assuming
interest had been accrued throughout the year in accordance with original terms was $25.1 million. The comparable 2007 and 2006 totals
were $13.6 million, and $2.1 million, respectively. Interest collected on these loans and included in income was $8.0 million in 2008,
$6.3 million in 2007 and $0.6 million in 2006. Therefore, on a net basis, total income foregone due to these loans was $17.1 million in
2008, $7.3 million in 2007 and $1.5 million in 2006.(3)
    
    December 31, 2006 amounts include the following nonperforming asset balances acquired in the Republic merger: Less than 30 days past due
and nonacrual $0.6 million, From 30 to 89 days past due and nonaccrual $0.9 million, 90 days or more past due and nonaccrual $29.2 million,
no 90 days or more past due and still accruing and no restructured loans, nonperforming held for sale $21.6 million, and other repossessed
assets acquired $12.6 million.(4)
    
    December 31, 2006 amounts include the following nonperforming loan balances acquired in the Republic merger: Commercial $0.2 million,
commercial real estate $8.4 million, residential mortgage $19.4 million, direct consumer $2.6 million, indirect consumer $0.1 million.  55




---



##### 



Valuation Reserve(in thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Balances  December 31Impaired loans with valuation reserve
    
    $
    101,671
    
    
    $
    33,651
    
    
    $
    39,885
    
    
    $
    17,769Impaired loans with no valuation reserve
    
    
    87,330
    
    
    
    18,684
    
    
    
    
    
    
    
    Total impaired loans
    
    $
    189,001
    
    
    $
    52,335
    
    
    $
    39,885
    
    
    $
    17,769Impaired loans on nonaccrual basis
    
    $
    189,001
    
    
    $
    52,335
    
    
    $
    39,885
    
    
    $
    17,769Impaired loans on accrual basis
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total impaired loans
    
    $
    189,001
    
    
    $
    52,335
    
    
    $
    39,885
    
    
    $
    17,769Average balance for the year
    
    $
    113,553
    
    
    $
    53,943Interest income recognized for the year
    
    
    
    
    
    
    Cash collected applied to outstanding principal
    
    
    11,163
    
    
    
    2,516
  ALLOWANCE FOR LOAN LOSSES
  56




---



##### 



Table 7. Summary of Loan Loss Experience
 Year Ended December 31 (dollars in thousands)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Allowance for loan losses  January 1
    
    $
    163,353
    
    
    $
    169,104
    
    
    $
    116,400
    
    
    $
    122,184
    
    
    $
    121,350Provision for loan losses
    
    
    282,054
    
    
    
    45,177
    
    
    
    11,265
    
    
    
    1,109
    
    
    
    21,609Charge-offs:Commercial and industrial
    
    
    27,001
    
    
    
    6,123
    
    
    
    4,468
    
    
    
    9,165
    
    
    
    14,137Commercial real estate
    
    
    112,478
    
    
    
    27,194
    
    
    
    2,826
    
    
    
    3,755
    
    
    
    10,445Residential mortgage
    
    
    24,569
    
    
    
    5,141
    
    
    
    1,640
    
    
    
    1,152
    
    
    
    1,060Direct consumer
    
    
    16,995
    
    
    
    11,007
    
    
    
    5,823
    
    
    
    5,290
    
    
    
    5,864Indirect consumer
    
    
    16,889
    
    
    
    10,126
    
    
    
    9,062
    
    
    
    9,485
    
    
    
    7,565Total charge-offs
    
    
    197,932
    
    
    
    59,591
    
    
    
    23,819
    
    
    
    28,847
    
    
    
    39,071Recoveries:Commercial and industrial
    
    
    3,153
    
    
    
    3,144
    
    
    
    3,022
    
    
    
    16,526
    
    
    
    12,355Commercial real estate
    
    
    716
    
    
    
    1,303
    
    
    
    648
    
    
    
    1,195
    
    
    
    1,605Residential mortgage
    
    
    29
    
    
    
    184
    
    
    
    154
    
    
    
    69
    
    
    
    70Direct consumer
    
    
    1,726
    
    
    
    1,723
    
    
    
    1,389
    
    
    
    1,419
    
    
    
    1,669Indirect consumer
    
    
    2,222
    
    
    
    2,309
    
    
    
    2,342
    
    
    
    2,745
    
    
    
    2,597Total recoveries
    
    
    7,846
    
    
    
    8,663
    
    
    
    7,555
    
    
    
    21,954
    
    
    
    18,296Net charge-offs
    
    
    190,086
    
    
    
    50,928
    
    
    
    16,264
    
    
    
    6,893
    
    
    
    20,775Allowance of acquired bank
    
    
    
    
    
    
    
    
    
    
    57,703
    
    
    
    
    
    
    
    Allowance for loan losses  December 31
    
    $
    255,321
    
    
    $
    163,353
    
    
    $
    169,104
    
    
    $
    116,400
    
    
    $
    122,184Allowance for losses on lending-related
commitments  December 31
    
    $
    3,941
    
    
    $
    5,571
    
    
    $
    6,119
    
    
    $
    3,023
    
    
    $
    2,833Portfolio loans outstanding at year-end(1)
    
    $
    9,102,598
    
    
    $
    9,501,244
    
    
    $
    9,231,082
    
    
    $
    5,616,119
    
    
    $
    5,393,365Average portfolio loans outstanding(1)
    
    
    9,433,952
    
    
    
    9,212,066
    
    
    
    5,657,476
    
    
    
    5,493,280
    
    
    
    5,210,817Ratio of allowance for loan losses to
nonperforming loans
    
    
    83.43
    %
    
    
    86.27
    %
    
    
    286.44
    %
    
    
    359.50
    %
    
    
    284.80
    %Ratio of allowance for loan losses to
portfolio loans outstanding at year-end
    
    
    2.80
    
    
    
    1.72
    
    
    
    1.83
    
    
    
    2.07
    
    
    
    2.27Ratio of net loans charged off as a percentage
of average portfolio loans outstanding
    
    
    2.01
    
    
    
    0.55
    
    
    
    0.29
    
    
    
    0.13
    
    
    
    0.40
 
 (1)
    
    Balances exclude mortgage loans held for sale.   57




---



##### 



Table 8. Allocation of the Allowance for Loan Losses (1)
 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofDecember 31
    
    
    
    
    
    Total
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    Total(dollars in millions)
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    LoansSpecific allocated allowance:Commercial (2)
    
    $
    39.9
    
    
    
    
    
    
    $
    17.8
    
    
    
    
    
    
    $
    7.6
    
    
    
    
    
    
    $
    5.1
    
    
    
    
    
    
    $
    15.3Risk allocated allowances:Commercial (2)
    
    
    112.0
    
    
    
    61.2
    %
    
    
    85.4
    
    
    
    59.5
    %
    
    
    94.8
    
    
    
    55.5
    %
    
    
    55.2
    
    
    
    55.1
    %
    
    
    59.2
    
    
    
    53.6
    %Residential mortgage
    
    
    25.4
    
    
    
    13.9
    
    
    
    14.2
    
    
    
    15.2
    
    
    
    15.1
    
    
    
    16.7
    
    
    
    6.3
    
    
    
    9.6
    
    
    
    6.2
    
    
    
    9.4Direct Consumer
    
    
    29.2
    
    
    
    15.9
    
    
    
    16.3
    
    
    
    16.6
    
    
    
    16.7
    
    
    
    18.7
    
    
    
    12.4
    
    
    
    20.3
    
    
    
    6.9
    
    
    
    21.7Indirect Consumer
    
    
    35.9
    
    
    
    9.0
    
    
    
    23.6
    
    
    
    8.7
    
    
    
    25.5
    
    
    
    9.1
    
    
    
    27.5
    
    
    
    15.0
    
    
    
    12.3
    
    
    
    15.3Total risk allocated
allowance
    
    
    202.5
    
    
    
    
    
    
    
    139.5
    
    
    
    
    
    
    
    152.1
    
    
    
    
    
    
    
    101.4
    
    
    
    
    
    
    
    84.6Total allocated
    
    
    242.4
    
    
    
    100.0
    %
    
    
    157.3
    
    
    
    100.0
    %
    
    
    159.7
    
    
    
    100.0
    %
    
    
    106.5
    
    
    
    100.0
    %
    
    
    99.9
    
    
    
    100.0
    %General valuation allowances
    
    
    12.9
    
    
    
    
    
    
    
    6.1
    
    
    
    
    
    
    
    9.4
    
    
    
    
    
    
    
    9.9
    
    
    
    
    
    
    
    22.3Total
    
    $
    255.3
    
    
    
    
    
    
    $
    163.4
    
    
    
    
    
    
    $
    169.1
    
    
    
    
    
    
    $
    116.4
    
    
    
    
    
    
    $
    122.2
 
 (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 and its subsidiaries do 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)
    
    The commercial category includes both commercial and commercial real estate loans. Specific Allocated Allowance.
 Risk Allocated Allowance.
 General Valuation Allowances.
  58




---



##### 



GOODWILL
  DEPOSITS
  Table 9. Average Deposits
 2008
    
    
    2007
    
    
    2006Year Ended December 31
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average(dollars in thousands)
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    RateNoninterest-bearing demand
    
    $
    1,122,974
    
    
    
    
    %
    
    $
    1,139,695
    
    
    
    
    %
    
    $
    921,580
    
    
    
    
    %Interest-bearing demand
    
    
    771,735
    
    
    
    0.66
    
    
    
    831,983
    
    
    
    0.69
    
    
    
    779,803
    
    
    
    0.65Savings
    
    
    2,551,570
    
    
    
    1.73
    
    
    
    2,188,296
    
    
    
    2.92
    
    
    
    1,478,492
    
    
    
    2.63Time
    
    
    4,268,931
    
    
    
    4.02
    
    
    
    4,008,919
    
    
    
    4.68
    
    
    
    2,408,092
    
    
    
    4.29Total
    
    $
    8,715,210
    
    
    
    2.53
    
    
    $
    8,168,893
    
    
    
    3.15
    
    
    $
    5,587,967
    
    
    
    2.63
   Table 10. Maturity of Time Certificates of Deposit of $100,000
or More At December 31, 2008
 (in thousands)Three months or less
    
    $
    414,471After three but within six months
    
    
    255,893After six but within twelve months
    
    
    681,451After twelve months
    
    
    1,081,890Total
    
    $
    2,433,705
  59




---



##### 



BORROWED FUNDS
   CAPITAL RESOURCES
  Regulatory MinimumWell-
    
    
    December 31,Required
    
    
    Capitalized
    
    
    2008
    
    
    2007
    
    
    2006Risk based:Tier 1 capital
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    12.21
    %
    
    
    9.18
    %
    
    
    9.41
    %Total capital
    
    
    8.00
    
    
    
    10.00
    
    
    
    14.49
    
    
    
    11.66
    
    
    
    11.90Tier 1 Leverage (1)
    
    
    4.00
    
    
    
    5.00
    
    
    
    9.66
    
    
    
    7.53
    
    
    
    7.22
 
 (1)
    
    In 2006, the Tier 1 leverage ratio is calculated using ending assets instead of average assets due to the Republic merger on December 29, 2006   60




---



##### 



CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
 Contractual Obligations
  Table 11. Contractual Obligations
 Minimum Payments Due by PeriodAs of December 31, 2008
    
    
    
    
    
    Less than
    
    
    
    
    
    
    
    
    
    
    More than(in thousands)
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    5 yearsDeposits without stated maturities(1)(2)
    
    $
    4,431,645
    
    
    $
    4,431,645
    
    
    $
    
    
    
    $
    
    
    
    $
    Deposits with stated maturities(1)(2)
    
    
    4,618,416
    
    
    
    2,527,366
    
    
    
    1,605,360
    
    
    
    461,238
    
    
    
    24,452Federal Funds Purch and Short Term Repos(1)
    
    
    65,015
    
    
    
    65,015
    
    
    
    
    
    
    
    
    
    
    
    Other Short-term borrowings(1)
    
    
    10,377
    
    
    
    10,377
    
    
    
    
    
    
    
    
    
    
    
    Federal Home Loan Bank borrowings(1)( 2)
    
    
    1,650,261
    
    
    
    118,778
    
    
    
    1,188,861
    
    
    
    500
    
    
    
    342,122Other borrowed debt(1)(2)
    
    
    233,225
    
    
    
    46,000
    
    
    
    30,000
    
    
    
    453
    
    
    
    156,772Subordinated debt(1)(2)
    
    
    300,000
    
    
    
    
    
    
    
    
    
    
    
    125,000
    
    
    
    175,000Purchase obligations
    
    
    48,678
    
    
    
    18,251
    
    
    
    25,934
    
    
    
    4,025
    
    
    
    468Operating leases and non-cancelable contracts
    
    
    29,889
    
    
    
    5,462
    
    
    
    9,130
    
    
    
    6,334
    
    
    
    8,963Total
    
    $
    11,387,506
    
    
    $
    7,222,894
    
    
    $
    2,859,285
    
    
    $
    597,550
    
    
    $
    707,777
 
 (1)
    
    In the banking industry, interest-bearing obligations are principally utilized to fund interest-bearing assets. As such, interest
charges on related contractual obligations were excluded from reported amounts as the potential cash outflows would have
corresponding cash inflows from interest-bearing assets.(2)
    
    This schedule excludes all carrying value adjustments, such as purchase accounting fair value adjustments, hedge accounting
fair value adjustments, and unamortized premiums and discounts, that will not affect future cash payments associated with the
maturity of this debt.  61




---



##### 



Off-Balance Sheet Arrangements
   Table 12. Off Balance Sheet Financial Instruments
 Expected Expiration Dates by PeriodDecember 31,
    
    
    Less than
    
    
    
    
    
    
    
    
    
    
    More than
    
    
    December 31,(in thousands)
    
    2008
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    5 years
    
    
    2007Financial instruments whose
contract amounts represent credit risk:Loan commitments to extend credit
    
    $
    2,048,258
    
    
    $
    1,264,101
    
    
    $
    338,044
    
    
    $
    166,878
    
    
    $
    279,235
    
    
    $
    2,510,255Standby letters of credit
    
    
    247,367
    
    
    
    118,576
    
    
    
    54,251
    
    
    
    38,026
    
    
    
    36,514
    
    
    
    382,860Commercial letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,151Financial instruments subject to interest rate risk:Receive fixed and pay fixed swaps
    
    
    1,005,000
    
    
    
    485,000
    
    
    
    355,000
    
    
    
    165,000
    
    
    
    
    
    
    
    300,000Customer initiated swaps and corresponding offsets
    
    
    1,120,348
    
    
    
    82,508
    
    
    
    284,730
    
    
    
    417,169
    
    
    
    335,941
    
    
    
    713,290Residential mortgage loan applications
with agreed-upon rates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,808Forward commitments to sell residential mortgage loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,030Total
    
    $
    4,420,973
    
    
    $
    1,950,185
    
    
    $
    1,032,025
    
    
    $
    787,073
    
    
    $
    651,690
    
    
    $
    4,000,394
   62




---



##### 



63




---



##### 



LIQUIDITY RISK MANAGEMENT
    64




---



##### 



Credit Ratings
 Moodys
    
    
    
    
    
    DominionStandard &
    
    Investor
    
    Fitch
    
    Bond RatingPoors
    
    Service
    
    Ratings
    
    ServiceCitizens Republic Bancorp
(Holding Company)Long-Term Debt
    
    BBB-
    
    
    A3
    
    
    BBB-
    
    BBBShort-Term Debt
    
    
    A-3
    
    
    
    P-2
    
    
    
    F3
    
    
    R-2 (middle)Trust Preferred
    
    BB
    
    Baa1
    
    BB+
    
    BBB (low)Citizens BankCertificate of Deposit
    
    
    
    
    
    
    A2
    
    
    BBB
    
    BBB (high)F&M Bank-IowaCertificate of Deposit
    
    
    
    
    
    
    
    
    
    BBB
    
    BBB (high)
    65




---



##### 



INTEREST RATE RISK
     66




---



##### 



67




---



##### 



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 68




---



##### 



Consolidated Balance Sheets  Citizens Republic Bancorp and Subsidiaries
 December 31,(in thousands, except share amounts)
    
    2008
    
    
    2007AssetsCash and due from banks
    
    $
    171,695
    
    
    $
    241,104Interest-bearing deposits with banks
    
    
    214,925
    
    
    
    172Investment Securities:Securities available for sale, at fair value
    
    
    2,248,772
    
    
    
    2,132,164Securities held to maturity, at amortized cost
(fair value of $137,846 and $129,366, respectively)
    
    
    138,575
    
    
    
    129,126Total investment securities
    
    
    2,387,347
    
    
    
    2,261,290FHLB and Federal Reserve stock
    
    
    148,764
    
    
    
    148,838Portfolio loans:Commercial and industrial
    
    
    2,602,334
    
    
    
    2,557,152Commercial real estate
    
    
    2,964,721
    
    
    
    3,097,196Total commercial
    
    
    5,567,055
    
    
    
    5,654,348Residential mortgage
    
    
    1,262,841
    
    
    
    1,445,214Direct consumer
    
    
    1,452,166
    
    
    
    1,572,329Indirect consumer
    
    
    820,536
    
    
    
    829,353Total portfolio loans
    
    
    9,102,598
    
    
    
    9,501,244Less: Allowance for loan losses
    
    
    (255,321
    )
    
    
    (163,353
    )Net portfolio loans
    
    
    8,847,277
    
    
    
    9,337,891Loans held for sale
    
    
    91,362
    
    
    
    75,832Premises and equipment
    
    
    124,217
    
    
    
    132,500Goodwill
    
    
    597,218
    
    
    
    775,308Other intangible assets
    
    
    21,414
    
    
    
    30,546Bank owned life insurance
    
    
    218,333
    
    
    
    214,321Other assets
    
    
    263,464
    
    
    
    288,181Total assets
    
    $
    13,086,016
    
    
    $
    13,505,983LiabilitiesNoninterest-bearing deposits
    
    $
    1,143,294
    
    
    $
    1,125,966Interest-bearing demand deposits
    
    
    780,176
    
    
    
    782,889Savings deposits
    
    
    2,504,320
    
    
    
    2,221,813Time deposits
    
    
    4,624,616
    
    
    
    4,171,257Total deposits
    
    
    9,052,406
    
    
    
    8,301,925Federal funds purchased and securities sold
under agreements to repurchase
    
    
    65,015
    
    
    
    488,039Other short-term borrowings
    
    
    10,377
    
    
    
    54,128Other liabilities
    
    
    164,274
    
    
    
    144,501Long-term debt
    
    
    2,192,623
    
    
    
    2,939,510Total liabilities
    
    
    11,484,695
    
    
    
    11,928,103Shareholders EquityPreferred stock  no par value:Authorized
 5,000,000 sharesIssued and outstanding  300,000 shares at 12/31/08, redemption value of $300 million
    
    
    266,088
    
    
    
    Common stock  no par valueAuthorized
 150,000,000 sharesIssued and outstanding  125,996,938 shares at 12/31/08; 75,722,115 shares at 12/31/07
    
    
    1,214,469
    
    
    
    975,446Retained earnings
    
    
    170,358
    
    
    
    597,333Accumulated other comprehensive income
    
    
    (49,594
    )
    
    
    5,101Total shareholders equity
    
    
    1,601,321
    
    
    
    1,577,880Total liabilities and shareholders equity
    
    $
    13,086,016
    
    
    $
    13,505,983
  69




---



##### 



Consolidated Statements of Income  Citizens Republic Bancorp and Subsidiaries
 (in thousands, except per share amounts)
    
    2008
    
    
    2007
    
    
    2006Interest IncomeInterest and fees on loans
    
    $
    586,073
    
    
    $
    684,047
    
    
    $
    399,469Interest and dividends on investment securities:Taxable
    
    
    78,089
    
    
    
    88,078
    
    
    
    48,950Tax-exempt
    
    
    29,096
    
    
    
    29,268
    
    
    
    21,113Dividends on FHLB and Federal Reserve stock
    
    
    7,269
    
    
    
    6,414
    
    
    
    2,701Money market investments
    
    
    384
    
    
    
    104
    
    
    
    119Total interest income
    
    
    700,911
    
    
    
    807,911
    
    
    
    472,352Interest ExpenseDeposits
    
    
    220,883
    
    
    
    257,194
    
    
    
    147,132Short-term borrowings
    
    
    8,029
    
    
    
    34,316
    
    
    
    16,017Long-term debt
    
    
    123,067
    
    
    
    134,222
    
    
    
    46,083Total interest expense
    
    
    351,979
    
    
    
    425,732
    
    
    
    209,232Net Interest Income
    
    
    348,932
    
    
    
    382,179
    
    
    
    263,120Provision for loan losses
    
    
    282,054
    
    
    
    45,177
    
    
    
    11,265Net interest income after provision for loan losses
    
    
    66,878
    
    
    
    337,002
    
    
    
    251,855Noninterest IncomeService charges on deposit accounts
    
    
    47,470
    
    
    
    48,051
    
    
    
    37,709Trust fees
    
    
    17,967
    
    
    
    20,106
    
    
    
    19,465Mortgage and other loan income
    
    
    11,443
    
    
    
    16,021
    
    
    
    9,270Brokerage and investment fees
    
    
    7,109
    
    
    
    7,901
    
    
    
    6,995ATM network user fees
    
    
    6,319
    
    
    
    6,283
    
    
    
    4,011Bankcard fees
    
    
    7,440
    
    
    
    6,124
    
    
    
    4,567Losses on loans held for sale
    
    
    (9,373
    )
    
    
    (508
    )
    
    
    Other
    
    
    13,368
    
    
    
    18,615
    
    
    
    15,711Total fees and other income
    
    
    101,743
    
    
    
    122,593
    
    
    
    97,728Investment securities losses
    
    
    (1
    )
    
    
    (25
    )
    
    
    (7,101
    )Total noninterest income
    
    
    101,742
    
    
    
    122,568
    
    
    
    90,627Noninterest ExpenseSalaries and employee benefits
    
    
    158,193
    
    
    
    175,895
    
    
    
    132,400Occupancy
    
    
    28,592
    
    
    
    30,971
    
    
    
    22,288Professional services
    
    
    15,184
    
    
    
    18,031
    
    
    
    15,344Equipment
    
    
    12,966
    
    
    
    14,650
    
    
    
    14,691Data processing services
    
    
    16,470
    
    
    
    16,234
    
    
    
    14,989Advertising and public relations
    
    
    5,897
    
    
    
    7,282
    
    
    
    5,881Postage and delivery
    
    
    7,342
    
    
    
    7,800
    
    
    
    6,095Other loan expenses
    
    
    13,381
    
    
    
    5,518
    
    
    
    4,446ORE expenses, profits, and losses, net
    
    
    11,008
    
    
    
    325
    
    
    
    1,031Intangible asset amortization
    
    
    9,132
    
    
    
    11,534
    
    
    
    2,899Goodwill impairment
    
    
    178,089
    
    
    
    
    
    
    
    Restructuring and merger related expenses
    
    
    
    
    
    
    8,247
    
    
    
    11,324Other
    
    
    34,448
    
    
    
    30,936
    
    
    
    28,439Total noninterest expense
    
    
    490,702
    
    
    
    327,423
    
    
    
    259,827Income (Loss) Before Income Taxes
    
    
    (322,082
    )
    
    
    132,147
    
    
    
    82,655Income tax provision
    
    
    70,970
    
    
    
    31,305
    
    
    
    19,319Net Income (Loss)
    
    
    (393,052
    )
    
    
    100,842
    
    
    
    63,336Deemed dividend on convertible preferred stock
    
    
    (11,737
    )
    
    
    
    
    
    
    Dividend on redeemable preferred stock
    
    
    (227
    )
    
    
    
    
    
    
    Net Income (Loss) Attributable to Common Shareholders
    
    $
    (405,016
    )
    
    $
    100,842
    
    
    $
    63,336Net Income (Loss) Per Common Share:Basic
    
    $
    (4.30
    )
    
    $
    1.34
    
    
    $
    1.48Diluted
    
    
    (4.30
    )
    
    
    1.33
    
    
    
    1.47Average Common Shares Outstanding:Basic
    
    
    94,155,551
    
    
    
    75,339,430
    
    
    
    42,913,180Diluted
    
    
    94,155,551
    
    
    
    75,578,240
    
    
    
    43,065,294
 70




---



##### 



Consolidated Statements of Changes in Shareholders Equity  Citizens Republic Bancorp and Subsidiaries
 AccumulatedOtherPreferred
    
    
    Common Stock
    
    
    Retained
    
    
    Comprehensive(in thousands, except per share amounts)
    
    Stock
    
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    Income (Loss)
    
    
    TotalBalance  January 1, 2006
    
    
    
    
    
    
    42,968
    
    
    $
    85,526
    
    
    $
    570,483
    
    
    $
    454
    
    
    $
    656,463Comprehensive income, net of tax:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,336
    
    
    
    
    
    
    
    63,336Other comprehensive income:Net unrealized gain on securities available-for-sale,
net of tax effect of $866
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,609Less: Reclassification adjustment for net gains included
in net income, net of tax effect of ($21)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40
    )Net change in unrealized loss on qualifying cash flow
hedges, net of tax effect of ($435)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (808
    )Other comprehensive income total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    761Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,097Proceeds from stock options exercised and restricted stock activity
    
    
    
    
    
    
    304
    
    
    
    3,194
    
    
    
    
    
    
    
    
    
    
    
    3,194Recognition of stock-based compensation
    
    
    
    
    
    
    
    
    
    
    3,766
    
    
    
    
    
    
    
    
    
    
    
    3,766Cash dividends declared on common shares  $1.155 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,530
    )
    
    
    
    
    
    
    (49,530
    )Common shares issues and stock options assumed due to Republic merger
    
    
    
    
    
    
    32,739
    
    
    
    897,234
    
    
    
    
    
    
    
    
    
    
    
    897,234Shares acquired for retirement and purchased for taxes
    
    
    
    
    
    
    (335
    )
    
    
    (8,948
    )
    
    
    
    
    
    
    
    
    
    
    (8,948
    )Adjustment to initially apply FASB 158, net of tax effect of ($4,626)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,590
    )
    
    
    (8,590
    )Balance  December 31, 2006
    
    $
    
    
    
    
    75,676
    
    
    $
    980,772
    
    
    $
    584,289
    
    
    $
    (7,375
    )
    
    $
    1,557,686Comprehensive income, net of tax:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,842
    
    
    
    
    
    
    
    100,842Other comprehensive income:Net unrealized gain on securities available-for-sale,
net of tax effect of $5,380
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,991Less: Reclassification adjustment for net losses included
in net income, net of tax effect of $9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16Net change in unrealized loss on qualifying cash flow
hedges, net of tax effect of ($451)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (838
    )Minimum pension liability, net of tax effect of $1,781
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,307Other comprehensive income total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,476Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,318Proceeds from stock options exercised and restricted stock activity
    
    
    
    
    
    
    709
    
    
    
    4,833
    
    
    
    
    
    
    
    
    
    
    
    4,833Recognition of stock-based compensation
    
    
    
    
    
    
    
    
    
    
    3,355
    
    
    
    
    
    
    
    
    
    
    
    3,355Cash dividends declared on common shares  $1.160 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (87,798
    )
    
    
    
    
    
    
    (87,798
    )Shares acquired for retirement and purchased for taxes
    
    
    
    
    
    
    (663
    )
    
    
    (13,514
    )
    
    
    
    
    
    
    
    
    
    
    (13,514
    )Balance  December 31, 2007
    
    $
    
    
    
    
    75,722
    
    
    $
    975,446
    
    
    $
    597,333
    
    
    $
    5,101
    
    
    $
    1,577,880Comprehensive income, net of tax:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (393,052
    )
    
    
    
    
    
    
    (393,052
    )Other comprehensive income (loss):Net unrealized loss on securities available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46,725
    )Net change in unrealized gain on qualifying cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,578Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,548
    )Other comprehensive income total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,695
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (447,747
    )Issuance of preferred stock (2,408 shares),
net of costs of $6,221
    
    
    114,161
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,161Deemed dividend on convertible preferred stock (See Note 16)
    
    
    11,737
    
    
    
    
    
    
    
    
    
    
    
    (11,737
    )
    
    
    
    
    
    
    Conversion of preferred stock to common stock
    
    
    (125,898
    )
    
    
    30,096
    
    
    
    125,898
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock, net of costs of $4,774
    
    
    
    
    
    
    19,904
    
    
    
    74,844
    
    
    
    
    
    
    
    
    
    
    
    74,844Issuance of redeemable preferred stock and warrant (300,000 shares)
    
    
    265,861
    
    
    
    
    
    
    
    34,139
    
    
    
    
    
    
    
    
    
    
    
    300,000Dividend on redeemable preferred stock
    
    
    227
    
    
    
    
    
    
    
    
    
    
    
    (227
    )
    
    
    
    
    
    
    Proceeds from stock options exercised and restricted stock activity
    
    
    
    
    
    
    307
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    66Recognition of stock-based compensation
    
    
    
    
    
    
    
    
    
    
    4,520
    
    
    
    
    
    
    
    
    
    
    
    4,520Cash dividends declared on common shares  $0.290 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,959
    )
    
    
    
    
    
    
    (21,959
    )Shares purchased for taxes
    
    
    
    
    
    
    (32
    )
    
    
    (444
    )
    
    
    
    
    
    
    
    
    
    
    (444
    )Balance  December 31, 2008
    
    $
    266,088
    
    
    
    125,997
    
    
    $
    1,214,469
    
    
    $
    170,358
    
    
    $
    (49,594
    )
    
    $
    1,601,321
  71




---



##### 



Consolidated Statements of Cash Flows  Citizens Republic Bancorp and Subsidiaries
 Year Ended December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006Operating Activities:Net income (loss)
    
    $
    (393,052
    )
    
    $
    100,842
    
    
    $
    63,336Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Provision for loan losses
    
    
    282,054
    
    
    
    45,177
    
    
    
    11,265Goodwill impairment
    
    
    178,089
    
    
    
    
    
    
    
    Deferred tax asset valuation allowance
    
    
    136,568
    
    
    
    
    
    
    
    Depreciation and software amortization
    
    
    11,646
    
    
    
    13,108
    
    
    
    13,730Amortization of intangibles
    
    
    9,132
    
    
    
    11,534
    
    
    
    2,899Net (increase) decrease in current and deferred income taxes
    
    
    (55,697
    )
    
    
    21,782
    
    
    
    (11,548
    )Amortization and fair value adjustments of purchase accounting mark to market, net
    
    
    (15,588
    )
    
    
    (24,847
    )
    
    
    Fair value adjustment on loans held for sale and other real estate
    
    
    15,341
    
    
    
    
    
    
    
    Discount accretion and amortization of issuance costs on long term debt
    
    
    1,176
    
    
    
    978
    
    
    
    Net (accretion) amortization on investment securities
    
    
    (4,509
    )
    
    
    (4,517
    )
    
    
    83Investment securities losses
    
    
    1
    
    
    
    25
    
    
    
    7,101Loans originated for sale
    
    
    (280,475
    )
    
    
    (504,672
    )
    
    
    (249,806
    )Proceeds from loans held for sale
    
    
    328,500
    
    
    
    590,283
    
    
    
    258,151Net gains from loan sales
    
    
    (6,473
    )
    
    
    (9,036
    )
    
    
    (4,349
    )Net (gain) loss on other real estate
    
    
    2,068
    
    
    
    (866
    )
    
    
    439Excess tax benefits related to stock-based compensation arrangements
    
    
    
    
    
    
    
    
    
    
    (182
    )Recognition of stock-based compensation expense
    
    
    4,520
    
    
    
    3,355
    
    
    
    3,766Restructure and merger related
    
    
    (3,260
    )
    
    
    (34,435
    )
    
    
    (8,925
    )Other
    
    
    (14,962
    )
    
    
    3,512
    
    
    
    (6,126
    )Net cash provided by operating activities
    
    
    195,079
    
    
    
    212,223
    
    
    
    79,834Investing Activities:Net (increase) decrease in money market investments
    
    
    (214,753
    )
    
    
    31
    
    
    
    227Securities available-for-sale:Proceeds from sales
    
    
    3
    
    
    
    364,421
    
    
    
    114Proceeds from maturities and payments
    
    
    453,033
    
    
    
    521,453
    
    
    
    284,599Purchases
    
    
    (610,964
    )
    
    
    (174,633
    )
    
    
    (333,136
    )Securities held-to-maturity:Proceeds from maturities and payments
    
    
    2,505
    
    
    
    
    
    
    
    Purchases
    
    
    (12,777
    )
    
    
    (19,387
    )
    
    
    (27,400
    )Sale of branches, net of cash received
    
    
    
    
    
    
    (163,592
    )
    
    
    Net decrease (increase) in loans and leases
    
    
    99,357
    
    
    
    (339,498
    )
    
    
    (102,124
    )Proceeds from sales of other real estate
    
    
    31,476
    
    
    
    13,385
    
    
    
    5,711Net increase in properties and equipment
    
    
    (6,771
    )
    
    
    (7,043
    )
    
    
    (7,614
    )Acquisition, net of cash received
    
    
    
    
    
    
    
    
    
    
    (105,148
    )Net cash (used) provided by investing activities
    
    
    (258,891
    )
    
    
    195,137
    
    
    
    (284,771
    )Financing Activities:Net increase (decrease) in demand and savings deposits
    
    
    297,122
    
    
    
    (95,886
    )
    
    
    (120,815
    )Net increase (decrease) in time deposits
    
    
    451,391
    
    
    
    (97,431
    )
    
    
    292,986Net (decrease) increase in short-term borrowings
    
    
    (466,613
    )
    
    
    (396,420
    )
    
    
    87,765Proceeds from issuance of long-term debt
    
    
    1,550,000
    
    
    
    1,591,750
    
    
    
    376,283Principal reductions in long-term debt
    
    
    (2,304,165
    )
    
    
    (1,295,537
    )
    
    
    (347,181
    )Net proceeds from issuance of preferred convertible stock
    
    
    114,161
    
    
    
    
    
    
    
    Proceeds from issuance of preferred redeemable stock and warrant
    
    
    300,000
    
    
    
    
    
    
    
    Net proceeds from issuance of common stock
    
    
    74,844
    
    
    
    
    
    
    
    Cash dividends paid on common stock
    
    
    (21,959
    )
    
    
    (87,798
    )
    
    
    (49,530
    )Proceeds from stock options exercised and restricted stock activity
    
    
    66
    
    
    
    4,833
    
    
    
    3,194Excess tax benefits related to stock-based compensation arrangements
    
    
    
    
    
    
    
    
    
    
    182Shares acquired for retirement and purchased for taxes
    
    
    (444
    )
    
    
    (13,514
    )
    
    
    (8,948
    )Net cash (used) provided by financing activities
    
    
    (5,597
    )
    
    
    (390,003
    )
    
    
    233,936Net (decrease) increase in cash and due from banks
    
    
    (69,409
    )
    
    
    17,357
    
    
    
    28,999Cash and due
from banks at beginning of year
    
    
    241,104
    
    
    
    223,747
    
    
    
    194,748Cash and due
from banks at end of year
    
    $
    171,695
    
    
    $
    241,104
    
    
    $
    223,747Supplemental Cash Flow Information:Interest paid
    
    $
    359,685
    
    
    $
    430,064
    
    
    $
    204,523Income taxes
paid (refunds received), net
    
    
    (9,902
    )
    
    
    9,523
    
    
    
    30,867Loans transferred to other real estate owned
    
    
    46,826
    
    
    
    37,868
    
    
    
    6,802Loans transferred to held-for-sale
    
    
    80,044
    
    
    
    
    
    
    
    29,160Held for sale loans transferred to other real estate
    
    
    12,453
    
    
    
    
    
    
    
    Securitization of mortgage loans
    
    
    
    
    
    
    
    
    
    
    214,695Deemed dividend on convertible preferred stock
    
    
    11,737
    
    
    
    
    
    
    
    Dividend on redeemable preferred stock
    
    
    227
    
    
    
    
    
    
    
    Summary of Business Acquisition:Fair value of core deposit intangibles acquired
    
    $
    
    
    
    $
    
    
    
    $
    37,837Goodwill recognized
    
    
    
    
    
    
    
    
    
    
    727,108Stock issued and options assumed due to Republic merger
    
    
    
    
    
    
    
    
    
    
    897,234Assets acquired in Republic merger
    
    
    
    
    
    
    
    
    
    
    5,418,403Liabilities assumed in Republic merger
    
    
    
    
    
    
    
    
    
    
    5,013,703
  72




---



##### 



Citizens Republic Bancorp, Inc.
Notes To Consolidated Financial Statements
December 31, 2008, 2007, and 2006
  Note 1. Summary of Significant Accounting Policies
  Basis of Financial Statement Presentation
     73




---



##### 



Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase
  Investment Securities
  Loans
    74




---



##### 



Allowance for Loan Losses
   Loans Held for Sale
   75




---



##### 



Premises and Equipment
   Other Real Estate Owned
  Bank Owned Life Insurance
  Goodwill and Core Deposit Intangible Assets
   76




---



##### 



Pension and Postretirement Benefits
  Securitizations and Sales of Mortgage Loans
   Fair Value Measurements
  77




---



##### 



Derivative Instruments
      78




---



##### 



Stock-Based Compensation
  Income Taxes
    Net Income per Common Share
  Cash and Cash Equivalents
  79




---



##### 



Reclassifications
  Note 2. Recent Accounting Pronouncements
 Statements of Financial Accounting Standards (SFAS)
 SFAS No. 141 (Revised 2007),  Business Combinations
  SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements  An Amendment of ARB
No. 51
  SFAS No. 161,  Disclosures about Derivative Instruments and Hedging Activities  An Amendment of
FASB Statement No. 133
 a b c
 FASB Staff Position (FSP)
 FSP-SFAS 142-3, Determination of the Useful Life of Intangible Assets
  80




---



##### 



FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities.
  Note 3. Business Restructuring and Other Merger-Related Charges
  Restructuring ReserveSystems/(In thousands)
    
    Personnel
    
    
    Facilities
    
    
    Other
    
    
    TotalBalance December 31, 2006
    
    $
    4,323
    
    
    $
    3,895
    
    
    $
    791
    
    
    $
    9,009Additions
    
    
    2,151
    
    
    
    1,709
    
    
    
    384
    
    
    
    4,244Cash Payments
    
    
    (4,912
    )
    
    
    (1,018
    )
    
    
    (1,175
    )
    
    
    (7,105
    )Other Adjustments
    
    
    
    
    
    
    (3,029
    )
    
    
    
    
    
    
    (3,029
    )Balance December 31, 2007
    
    $
    1,562
    
    
    $
    1,557
    
    
    $
    
    
    
    $
    3,119Cash Payments
    
    
    (1,040
    )
    
    
    (114
    )
    
    
    
    
    
    
    (1,154
    )Other Adjustments
    
    
    (116
    )
    
    
    (14
    )
    
    
    
    
    
    
    (130
    )Balance December 31, 2008
    
    $
    406
    
    
    $
    1,429
    
    
    $
    ---
    
    
    $
    1,835
  81




---



##### 



Merger-related ReserveOtherTransactionSystems/
    
    
    & System(In thousands)
    
    Personnel
    
    
    Professional
    
    
    Facilities
    
    
    Other
    
    
    Reserves
    
    
    TotalBalance December 31, 2006
    
    $
    17,603
    
    
    $
    7,621
    
    
    $
    2,205
    
    
    $
    351
    
    
    $
    9,088
    
    
    $
    36,868Additions
    
    
    1,743
    
    
    
    
    
    
    
    20
    
    
    
    60
    
    
    
    2,180
    
    
    
    4,003Cash Payments
    
    
    (16,023
    )
    
    
    (6,603
    )
    
    
    (1,280
    )
    
    
    (411
    )
    
    
    (11,260
    )
    
    
    (35,577
    )Other Adjustments
    
    
    (2,047
    )
    
    
    (1,018
    )
    
    
    415
    
    
    
    
    
    
    
    4
    
    
    
    (2,646
    )Balance December 31, 2007
    
    $
    1,276
    
    
    $
    
    
    
    $
    1,360
    
    
    $
    
    
    
    $
    12
    
    
    $
    2,648Cash Payments
    
    
    (1,276
    )
    
    
    
    
    
    
    (818
    )
    
    
    
    
    
    
    (12
    )
    
    
    (2,106
    )Other Adjustments
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )Balance December 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    538
    
    
    $
    
    
    
    $
    
    
    
    $
    538
   Note 4. Investment Securities
  December 31, 2008
    
    
    December 31, 2007Estimated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Gross Unrealized
    
    
    Amortized
    
    
    Fair
    
    
    Gross Unrealized(in thousands)
    
    Cost
    
    
    Value
    
    
    Gains
    
    
    Losses
    
    
    Cost
    
    
    Value
    
    
    Gains
    
    
    LossesAvailable For Sale:Federal Agencies
    
    $
    248,819
    
    
    $
    257,445
    
    
    $
    8,626
    
    
    $
    
    
    
    $
    298,177
    
    
    $
    304,074
    
    
    $
    5,897
    
    
    $
    Collateralized Mortgage
Obligations
    
    
    528,626
    
    
    
    471,010
    
    
    
    4,147
    
    
    
    61,763
    
    
    
    587,355
    
    
    
    586,954
    
    
    
    2,278
    
    
    
    2,679Mortgage-backed
    
    
    960,841
    
    
    
    973,961
    
    
    
    13,929
    
    
    
    809
    
    
    
    667,504
    
    
    
    670,565
    
    
    
    5,707
    
    
    
    2,646State and municipal
    
    
    531,625
    
    
    
    538,761
    
    
    
    10,990
    
    
    
    3,854
    
    
    
    560,073
    
    
    
    569,466
    
    
    
    10,336
    
    
    
    943Other
    
    
    7,598
    
    
    
    7,595
    
    
    
    
    
    
    
    3
    
    
    
    1,067
    
    
    
    1,105
    
    
    
    38
    
    
    
    Total available for sale
    
    $
    2,277,509
    
    
    $
    2,248,772
    
    
    $
    37,692
    
    
    $
    66,429
    
    
    $
    2,114,176
    
    
    $
    2,132,164
    
    
    $
    24,256
    
    
    $
    6,268Held to Maturity:State and municipalTotal held to maturity
    
    $
    138,575
    
    
    $
    137,846
    
    
    $
    1,708
    
    
    $
    2,437
    
    
    $
    129,126
    
    
    $
    129,366
    
    
    $
    978
    
    
    $
    738FHLB and Fed Reserve stock
    
    $
    148,764
    
    
    $
    148,764
    
    
    $
    
    
    
    $
    
    
    
    $
    148,838
    
    
    $
    148,838
    
    
    $
    
    
    
    $
    
  82




---



##### 



WeightedAs of December 31, 2008
    
    Within
    
    
    1 to 5
    
    
    5 to 10
    
    
    After 10
    
    
    
    
    
    
    Average(in thousands)
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    Total
    
    
    YieldAvailable for Sale:Federal Agencies
    
    $
    74,595
    
    
    $
    139,739
    
    
    $
    34,485
    
    
    $
    
    
    
    $
    248,819
    
    
    
    4.92
    %Collateralized Mortgage
Obligations
    
    
    37,693
    
    
    
    431,264
    
    
    
    59,621
    
    
    
    48
    
    
    
    528,626
    
    
    
    4.97Mortgage-backed Securities
    
    
    4,062
    
    
    
    415,472
    
    
    
    497,227
    
    
    
    44,080
    
    
    
    960,841
    
    
    
    5.05State and municipal
    
    
    48,713
    
    
    
    133,723
    
    
    
    203,106
    
    
    
    146,083
    
    
    
    531,625
    
    
    
    6.59Other
    
    
    7,274
    
    
    
    
    
    
    
    
    
    
    
    324
    
    
    
    7,598
    
    
    
    1.13Amortized Cost
    
    $
    172,337
    
    
    $
    1,120,198
    
    
    $
    794,439
    
    
    $
    190,535
    
    
    $
    2,277,509Fair Value
    
    $
    174,529
    
    
    $
    1,094,519
    
    
    $
    791,505
    
    
    $
    188,219
    
    
    $
    2,248,772Weighted Average Yield
    
    
    5.46
    %
    
    
    5.26
    %
    
    
    5.36
    %
    
    
    5.89
    %
    
    
    5.36
    %Held to Maturity:State and Municipal
    
    $
    
    
    
    $
    3,482
    
    
    $
    41,103
    
    
    $
    93,990
    
    
    $
    138,575
    
    
    
    6.23
    %Amortized Cost
    
    $
    
    
    
    $
    3,482
    
    
    $
    41,103
    
    
    $
    93,990
    
    
    $
    138,575Fair Value
    
    $
    
    
    
    $
    3,654
    
    
    $
    42,004
    
    
    $
    92,188
    
    
    $
    137,846Weighted Average Yield
    
    
    
    
    
    
    5.94
    %
    
    
    6.18
    %
    
    
    6.27
    %
    
    
    6.23
    %
  83




---



##### 



Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalAs of December 31, 2008
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized(in thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesAvailable For Sale:Collateralized Mortgage
Obligations
    
    $
    231,892
    
    
    $
    61,436
    
    
    $
    3,085
    
    
    $
    327
    
    
    $
    234,977
    
    
    $
    61,763Mortgage-backed
    
    
    74,081
    
    
    
    796
    
    
    
    421
    
    
    
    13
    
    
    
    74,502
    
    
    
    809State and municipal
    
    
    112,353
    
    
    
    3,688
    
    
    
    3,220
    
    
    
    166
    
    
    
    115,573
    
    
    
    3,854Other
    
    
    7
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    3Total available for sale
    
    
    418,333
    
    
    
    65,923
    
    
    
    6,726
    
    
    
    506
    
    
    
    425,059
    
    
    
    66,429Held to Maturity:State and municipal
    
    
    51,896
    
    
    
    1,967
    
    
    
    6,481
    
    
    
    470
    
    
    
    58,377
    
    
    
    2,437Total held to maturity
    
    
    51,896
    
    
    
    1,967
    
    
    
    6,481
    
    
    
    470
    
    
    
    58,377
    
    
    
    2,437Total
    
    $
    470,229
    
    
    $
    67,890
    
    
    $
    13,207
    
    
    $
    976
    
    
    $
    483,436
    
    
    $
    68,866
 Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalAs of December 31, 2007
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized(in thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesAvailable For Sale:Collateralized Mortgage
Obligations
    
    $
    212,274
    
    
    $
    2,165
    
    
    $
    67,253
    
    
    $
    514
    
    
    $
    279,527
    
    
    $
    2,679Mortgage-backed
    
    
    33,102
    
    
    
    219
    
    
    
    115,712
    
    
    
    2,427
    
    
    
    148,814
    
    
    
    2,646State and municipal
    
    
    69,429
    
    
    
    625
    
    
    
    17,596
    
    
    
    318
    
    
    
    87,025
    
    
    
    943Total available for sale
    
    
    314,805
    
    
    
    3,009
    
    
    
    200,561
    
    
    
    3,259
    
    
    
    515,366
    
    
    
    6,268Held to Maturity:State and municipal
    
    
    43,700
    
    
    
    536
    
    
    
    14,230
    
    
    
    202
    
    
    
    57,930
    
    
    
    738Total held to maturity
    
    
    43,700
    
    
    
    536
    
    
    
    14,230
    
    
    
    202
    
    
    
    57,930
    
    
    
    738Total
    
    $
    358,505
    
    
    $
    3,545
    
    
    $
    214,791
    
    
    $
    3,461
    
    
    $
    573,296
    
    
    $
    7,006
   84




---



##### 



Year Ended December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006Proceeds from sales
    
    $
    3
    
    
    $
    364,421
    
    
    $
    114Securities gains
    
    $
    
    
    
    $
    670
    
    
    $
    62Securities losses
    
    
    (1
    )
    
    
    (695
    )
    
    
    (7,163
    )Net Loss
    
    $
    (1
    )
    
    $
    (25
    )
    
    $
    (7,101
    )
 Note 5. Loans, Nonperforming Assets, Allowance for Loan Losses, and Loans Held for Sale
    December 31,(in thousands)
    
    2008
    
    
    2007Nonperforming loans:Nonaccrual
    
    $
    304,293
    
    
    $
    185,397Loans 90 days past due (still accruing)
    
    
    1,486
    
    
    
    3,650Restructured
    
    
    256
    
    
    
    315Total nonperforming portfolio loans
    
    
    306,035
    
    
    
    189,362Nonperforming held for sale
    
    
    75,142
    
    
    
    21,676Other real estate acquired
    
    
    53,835
    
    
    
    38,234Other non-real estate acquired
    
    
    4,202
    
    
    
    2,268Total nonperforming assets
    
    $
    439,214
    
    
    $
    251,540
 85




---



##### 



Year Ended December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006 (1)Interest income:At original contract rates
    
    $
    25,131
    
    
    $
    13,557
    
    
    $
    2,136As actually recognized
    
    
    7,987
    
    
    
    6,307
    
    
    
    615Interest foregone
    
    $
    17,144
    
    
    $
    7,250
    
    
    $
    1,521
 
 (1)
    
    2006 excludes the effect of the Republic merger.  Valuation Reserve(in thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Balances  December 31Impaired loans with valuation reserve
    
    $
    101,671
    
    
    $
    33,651
    
    
    $
    39,885
    
    
    $
    17,769Impaired loans with no valuation reserve
    
    
    87,330
    
    
    
    18,684
    
    
    
    
    
    
    
    Total impaired loans
    
    $
    189,001
    
    
    $
    52,335
    
    
    $
    39,885
    
    
    $
    17,769Impaired loans on nonaccrual basis
    
    $
    189,001
    
    
    $
    52,335
    
    
    $
    39,885
    
    
    $
    17,769Impaired loans on accrual basis
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total impaired loans
    
    $
    189,001
    
    
    $
    52,335
    
    
    $
    39,885
    
    
    $
    17,769Average balance for the year
    
    $
    113,553
    
    
    $
    53,943Interest income recognized for the year
    
    
    
    
    
    
    Cash collected applied to outstanding principal
    
    
    11,163
    
    
    
    2,516
   (in thousands)
    
    2008
    
    
    2007
    
    
    2006Allowance for loan losses  January 1
    
    $
    163,353
    
    
    $
    169,104
    
    
    $
    116,400Provision for loan losses
    
    
    282,054
    
    
    
    45,177
    
    
    
    11,265Charge-offs
    
    
    (197,932
    )
    
    
    (59,591
    )
    
    
    (23,819
    )Recoveries
    
    
    7,846
    
    
    
    8,663
    
    
    
    7,555Net charge-offs
    
    
    (190,086
    )
    
    
    (50,928
    )
    
    
    (16,264
    )Allowance of acquired bank
    
    
    
    
    
    
    
    
    
    
    57,703Allowance for loan losses  December 31
    
    $
    255,321
    
    
    $
    163,353
    
    
    $
    169,104Allowance for losses on
lending-related commitments  December
31
    
    $
    3,941
    
    
    $
    5,571
    
    
    $
    6,119
 86




---



##### 



Loans Held for Sale.
 Note 6. Premises and Equipment
  December 31,(in thousands)
    
    2008
    
    
    2007Land
    
    $
    29,621
    
    
    $
    32,657Buildings
    
    
    168,606
    
    
    
    168,739Leasehold improvements
    
    
    8,805
    
    
    
    8,349Furniture and equipment
    
    
    131,961
    
    
    
    127,667338,993
    
    
    
    337,412Accumulated depreciation and amortization
    
    
    (214,776
    )
    
    
    (204,912
    )Total
    
    $
    124,217
    
    
    $
    132,500
  (in millions)
    
    AmountYear Ending December 31,2009
    
    $
    5.52010
    
    
    5.02011
    
    
    4.12012
    
    
    3.42013
    
    
    2.9Thereafter
    
    
    9.0Total
    
    $
    29.9
 Note 7. Goodwill and Core Deposit Intangible Assets
  87




---



##### 



(in thousands)
    
    SpecialtyCommercial
    
    
    RegionalBanking
    
    
    WealthManagement
    
    
    TotalGoodwillBalance at December 31,2006
    
    $
    179,653
    
    
    $
    600,181
    
    
    $
    1,801
    
    
    $
    781,635Finalize Purchase Accounting Adjustments, Republic Merger
    
    
    (1,612
    )
    
    
    (4,908
    )
    
    
    
    
    
    
    (6,520
    )Tax Benefits on Share Based Payments
    
    
    48
    
    
    
    145
    
    
    
    
    
    
    
    193Balance at December 31,2007
    
    $
    178,089
    
    
    $
    595,418
    
    
    $
    1,801
    
    
    $
    775,308Impairment Loss
    
    
    (178,089
    )
    
    
    
    
    
    
    
    
    
    
    (178,089
    )Tax Benefits on Share Based Payments
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Balance at December 31, 2008
    
    $
    
    
    
    $
    595,417
    
    
    $
    1,801
    
    
    $
    597,218
  December 31,(in thousands)
    
    2008
    
    
    2007Core deposit intangibles
    
    $
    62,835
    
    
    $
    62,835Accumulated amortization
    
    
    (41,421
    )
    
    
    (32,289
    )Total other intangibles
    
    $
    21,414
    
    
    $
    30,546
  (in thousands)
    
    AmountYear ending December 31,2009
    
    $
    7,0362010
    
    
    3,9232011
    
    
    3,0272012
    
    
    2,1202013
    
    
    1,727Thereafter
    
    
    3,581Total
    
    $
    21,414
  88




---



##### 



Note 8. Deposits
  (in millions)
    
    AmountYear ending December 31,2009
    
    $
    1,351.82010
    
    
    476.32011
    
    
    315.92012
    
    
    173.02013
    
    
    96.3Thereafter
    
    
    20.4Total
    
    $
    2,433.7
 Note 9. Short-Term Borrowings
   (in thousands)
    
    2008
    
    2007
    
    2006At December 31:Balance
    
    $
    65,015
    
    
    $
    488,039
    
    
    $
    922,328Weighted average interest rate paid
    
    
    0.46
    %
    
    
    3.88
    %
    
    
    5.06
    %During the year:Maximum outstanding at any month-end
    
    $
    663,804
    
    
    $
    1,275,409
    
    
    $
    922,328Daily average
    
    
    304,931
    
    
    
    654,120
    
    
    
    363,988Weighted average interest rate paid
    
    
    2.54
    %
    
    
    4.91
    %
    
    
    4.81
    %Weighted average interest rate paid, including effects of swaps
    
    
    2.54
    %
    
    
    4.71
    %
    
    
    4.26
    %
 89




---



##### 



Note 10. Long-Term Debt
  December 31,(in thousands)
    
    2008
    
    
    2007Citizens (Parent only):Variable rate promissory notes payable due May 1, 2011
    
    $
    
    
    
    $
    50,000Subordinated debt:5.75% subordinated notes due February 2013
    
    
    120,136
    
    
    
    119,125Variable rate junior subordinated debenture due June 2033
    
    
    25,774
    
    
    
    25,7267.50% junior subordinated debentures due September 2066
    
    
    146,927
    
    
    
    145,971Subsidiaries:Federal Home Loan Bank advances
    
    
    1,666,483
    
    
    
    2,344,636Other borrowed funds
    
    
    233,303
    
    
    
    254,052Total long-term debt
    
    $
    2,192,623
    
    
    $
    2,939,510
     90




---



##### 



(in thousands)
    
    Parent
    
    
    Subsidiaries
    
    
    ConsolidatedYear ending
December 31,2009
    
    $
    
    
    
    $
    164,796
    
    
    $
    164,7962010
    
    
    
    
    
    
    605,243
    
    
    
    605,2432011
    
    
    
    
    
    
    425,022
    
    
    
    425,0222012
    
    
    
    
    
    
    188,663
    
    
    
    188,6632013
    
    
    125,000
    
    
    
    980
    
    
    
    125,980Thereafter
    
    
    175,000
    
    
    
    498,782
    
    
    
    673,782Total
    
    $
    300,000
    
    
    $
    1,883,486
    
    
    $
    2,183,486
 Note 11. Fair Values of Financial Assets and Liabilities
      91




---



##### 



ASSETS AND LIABILITIES RECORDED AT FAIR VALUE ON A RECURRING BASIS
 Investment Securities Available for Sale.
  Derivative Financial Instruments.
 Deferred Compensation Assets.
 92




---



##### 



December 31, 2008(in thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Investment Securities Available for Sale
    
    $
    2,248,772
    
    
    $
    
    
    
    $
    2,242,727
    
    
    $
    6,045Other assets (1)
    
    
    89,586
    
    
    
    5,909
    
    
    
    83,677
    
    
    
    Total Assets
    
    $
    2,338,358
    
    
    $
    5,909
    
    
    $
    2,326,404
    
    
    $
    6,045Other liabilities (2)
    
    $
    44,837
    
    
    $
    
    
    
    $
    44,837
    
    
    $
    
 
 (1)
    
    Includes Derivative Financial Instruments and Deferred Compensation Assets.(2)
    
    Includes Derivative Financial Instruments.  InvestmentSecurities(in thousands)
    
    Available for SaleAssetsBalance at 12/31/07
    
    $
    Purchases included in changes in net assets
    
    
    6,045Balance at 12/31/08
    
    $
    6,045
 ASSETS AND LIABILITIES RECORDED AT FAIR VALUE ON A NONRECURRING BASIS
 Mortgage Servicing Rights
 Loans Held for Sale.
  Impaired Loans.
 93




---



##### 



December 31, 2008(in thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Loans (1)
    
    $
    119,109
    
    
    $
    
    
    
    $
    
    
    
    $
    119,109Commercial Loans Held For Sale (2)
    
    
    48,525
    
    
    
    
    
    
    
    
    
    
    
    48,525Mortgage Loans Held For Sale (3)
    
    
    9,588
    
    
    
    
    
    
    
    
    
    
    
    9,588Total Assets
    

$
    177,222
    
    
$
    
    
    
$
    
    
    
$
    177,222
 
 (1)
    
    Impaired Loans with an initial carrying value of $240.8 million were written
down to their fair value of $119.1 million.(2)
    
    Impaired Loans with an initial carrying value of $78.8 million were written down
to their fair value of $48.5 million.(3)
    
    Nonperforming Mortgage Loans with an initial carrying value of $18.7 million were
written down to their fair value of $9.6 million. Note 12. Fair Values of Financial Instruments
    94




---



##### 



December 31, 2008
    
    December 31, 2007Carrying
    
    Estimated
    
    Carrying
    
    Estimated(in millions)
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair ValueFinancial assets:Cash and money market investments
    
    $
    386.6
    
    
    $
    386.6
    
    
    $
    241.3
    
    
    $
    241.3Securities
    
    
    2,387.3
    
    
    
    2,386.6
    
    
    
    2,261.3
    
    
    
    2,261.5FHLB and Federal Reserve stock
    
    
    148.8
    
    
    
    148.8
    
    
    
    148.8
    
    
    
    148.8Net loans
    
    
    8,847.3
    
    
    
    7,821.7
    
    
    
    9,337.9
    
    
    
    9,580.0Loans held for sale
    
    
    91.4
    
    
    
    91.4
    
    
    
    75.8
    
    
    
    75.8Accrued interest receivable
    
    
    55.7
    
    
    
    55.7
    
    
    
    68.9
    
    
    
    68.9Financial liabilities:Deposits
    
    
    9,052.4
    
    
    
    9,103.4
    
    
    
    8,301.9
    
    
    
    8,304.7Short-term borrowings
    
    
    75.4
    
    
    
    75.4
    
    
    
    542.2
    
    
    
    542.2Long-term debt
    
    
    2,192.6
    
    
    
    2,248.1
    
    
    
    2,939.5
    
    
    
    2,943.9Accrued interest payable
    
    
    20.3
    
    
    
    20.3
    
    
    
    28.3
    
    
    
    28.3Financial instruments with off-balance sheet risk(1):Credit-related financial instruments
    
    
    (0.5
    )
    
    
    (6.1
    )
    
    
    (1.8
    )
    
    
    (1.8
    )Interest rate swap agreements
    
    
    34.1
    
    
    
    34.1
    
    
    
    1.6
    
    
    
    1.6Interest rate lock commitments
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    0.2Forward commitments to sell mortgage loans
    
    
    
    
    
    
    
    
    
    
    (0.5
    )
    
    
    (0.5
    )
 
 (1)
    
    Positive amounts represent
assets, negative amounts represent
liabilities.  Investment Securities Available for Sale and Held to Maturity:
 Net Loans:
 Loans Held For Sale:
 Deposit Liabilities:
 95




---



##### 



Short-Term Borrowings:
 Long-Term Debt:
 Loan Commitments and Letters Of Credit:
 Interest Rate Swap Agreements:
 Interest Rate Lock Commitments and Forward Commitments to Sell Mortgages:
 Note 13. Employee Benefit Plans
 Pension and Postretirement Benefits
     96




---



##### 



Cumulative Balance of December 31,(in thousands)
    
    2008
    
    
    2007Defined Benefit Pension PlansPrior service cost (credit)
    
    $
    199
    
    
    $
    67Net actuarial loss (gain)
    
    
    35,400
    
    
    
    6,710Unrecognized Balance
    
    
    35,599
    
    
    
    6,777Supplemental Pension PlansPrior service cost (credit)
    
    $
    447
    
    
    $
    918Net actuarial loss (gain)
    
    
    (12
    )
    
    
    1,031Unrecognized Balance
    
    
    435
    
    
    
    1,949Postretirement Benefit PlansPrior service cost (credit)
    
    $
    (1,120
    )
    
    $
    (1,261
    )Net actuarial loss (gain)
    
    
    (806
    )
    
    
    (904
    )Unrecognized Balance
    
    
    (1,926
    )
    
    
    (2,165
    )Unrecognized Net Prior Service Cost
    
    
    (474
    )
    
    
    (277
    )Unrecognized Net Actuarial loss
    
    $
    34,582
    
    
    $
    6,837
  Pension
    
    
    Supplemental
    
    
    PostretirementBenefits
    
    
    Pension Plan
    
    
    Benefits(in thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Change in Benefit ObligationProjected benefit obligation, beginning of
year
    
    $
    78,421
    
    
    $
    84,860
    
    
    $
    12,949
    
    
    $
    14,683
    
    
    $
    10,195
    
    
    $
    11,226Service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Interest cost
    
    
    4,586
    
    
    
    4,761
    
    
    
    761
    
    
    
    768
    
    
    
    583
    
    
    
    578Participant contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    307
    
    
    
    397Actuarial (gains) losses
    
    
    (422
    )
    
    
    (1,859
    )
    
    
    (1,022
    )
    
    
    (1,824
    )
    
    
    60
    
    
    
    (794
    )Plan amendments
    
    
    158
    
    
    
    
    
    
    
    
    
    
    
    (163
    )
    
    
    (114
    )
    
    
    153Benefits paid
    
    
    (7,038
    )
    
    
    (9,341
    )
    
    
    (515
    )
    
    
    (515
    )
    
    
    (1,045
    )
    
    
    (1,366
    )Projected benefit obligation, end of year
    
    $
    75,705
    
    
    $
    78,421
    
    
    $
    12,173
    
    
    $
    12,949
    
    
    $
    9,986
    
    
    $
    10,195Accumulated benefit obligation, end of year
    
    $
    75,705
    
    
    $
    78,421
    
    
    $
    11,922
    
    
    $
    11,648
    
    
    $
    9,986
    
    
    $
    10,195Change in Plan AssetsFair value of plan assets, beginning of year
    
    $
    89,656
    
    
    $
    92,027
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    (21,705
    )
    
    
    6,970
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employer contribution
    
    
    
    
    
    
    
    
    
    
    515
    
    
    
    515
    
    
    
    738
    
    
    
    969Participant contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    307
    
    
    
    397Benefits paid
    
    
    (7,037
    )
    
    
    (9,341
    )
    
    
    (515
    )
    
    
    (515
    )
    
    
    (1,045
    )
    
    
    (1,366
    )Fair value of plan assets, end of year
    
    $
    60,914
    
    
    $
    89,656
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Reconciliation of Funded Status(Under)/Over funded status of plan
    
    $
    (14,791
    )
    
    $
    11,236
    
    
    $
    (12,173
    )
    
    $
    (12,949
    )
    
    $
    (9,986
    )
    
    $
    (10,195
    )Net amount recognized in the
consolidated balance sheets
    
    $
    (14,791
    )
    
    $
    11,236
    
    
    $
    (12,173
    )
    
    $
    (12,949
    )
    
    $
    (9,986
    )
    
    $
    (10,195
    )
 97




---



##### 



Year Ended December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006Defined Benefit Pension PlansService cost
    
    $
    
    
    
    $
    
    
    
    $
    3,649Interest cost
    
    
    4,586
    
    
    
    4,761
    
    
    
    4,671Expected return on plan assets
    
    
    (7,601
    )
    
    
    (7,709
    )
    
    
    (7,509
    )Settlement Charge related to lump sum payments
    
    
    
    
    
    
    832
    
    
    
    Curtailment loss
    
    
    
    
    
    
    
    
    
    
    1,097Amortization of unrecognized:Prior service cost
    
    
    26
    
    
    
    11
    
    
    
    191Net actuarial loss
    
    
    194
    
    
    
    499
    
    
    
    974Net pension cost
    
    
    (2,795
    )
    
    
    (1,606
    )
    
    
    3,073Supplemental Pension PlansService cost
    
    $
    
    
    
    $
    
    
    
    $
    842Interest cost
    
    
    761
    
    
    
    768
    
    
    
    641Amortization of unrecognized:Prior service cost
    
    
    471
    
    
    
    167
    
    
    
    Net actuarial loss
    
    
    20
    
    
    
    130
    
    
    
    139Net pension cost
    
    
    1,252
    
    
    
    1,065
    
    
    
    1,622Postretirement Benefit PlansService cost
    
    $
    
    
    
    $
    1
    
    
    $
    4Interest cost
    
    
    583
    
    
    
    578
    
    
    
    516Amortization of unrecognized:Prior service cost
    
    
    (256
    )
    
    
    (256
    )
    
    
    (270
    )Net actuarial gain
    
    
    (37
    )
    
    
    (45
    )
    
    
    (27
    )Net postretirement benefit cost
    
    
    290
    
    
    
    278
    
    
    
    223Defined contribution retirement and 401(k) plansEmployer contributions
    
    
    6,452
    
    
    
    6,533
    
    
    
    3,273Total periodic benefit cost
    
    $
    5,199
    
    
    $
    6,270
    
    
    $
    8,191
  Pension
    
    Supplemental
    
    PostretirementBenefits
    
    Pension Plan
    
    BenefitsDecember 31,
    
    2008
    
    2007
    
    2008
    
    2007
    
    2008
    
    2007Assumptions used to compute projected
benefit obligationDiscount rate
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    6.00
    %Rate of compensation increase
    
    
    
    
    
    
    
    
    
    
    3.00
    %
    
    
    3.00
    %
    
    
    
    
    
    
    Assumptions used to compute net benefit costsDiscount rate
    
    
    6.00
    %
    
    
    5.75
    %
    
    
    6.00
    %
    
    
    5.75
    %
    
    
    6.00
    %
    
    
    5.75
    %Expected return on plan assets
    
    
    8.75
    %
    
    
    8.75
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rate of compensation increase
    
    
    
    
    
    
    
    
    
    
    3.00
    %
    
    
    6.00
    %
    
    
    
    
    
    
    
 98




---



##### 



Projected Benefit PaymentsDefined Benefit
    
    Supplemental
    
    Postretirement(in thousands)
    
    Pension Plan
    
    Pension Plan
    
    Benefit Plan
    
    Total BenefitsYear Ended December 312009
    
    $
    5,483
    
    
    $
    7,957
    
    
    $
    934
    
    
    $
    14,3742010
    
    
    5,219
    
    
    
    501
    
    
    
    948
    
    
    
    6,6682011
    
    
    5,514
    
    
    
    486
    
    
    
    957
    
    
    
    6,9572012
    
    
    5,432
    
    
    
    472
    
    
    
    962
    
    
    
    6,8662013
    
    
    5,407
    
    
    
    456
    
    
    
    989
    
    
    
    6,8522014 to 2018
    
    
    28,608
    
    
    
    1,965
    
    
    
    4,597
    
    
    
    35,170
  Investment Policy and Strategy
 Target
    
    
    Percentage of Plan AssetsDecember 31,
    
    Allocation
    
    
    2008
    
    
    2007Asset Category:Equity securities
    
    
    70
    %
    
    
    66
    %
    
    
    68
    %Debt securities
    
    
    28
    
    
    
    31
    
    
    
    28Cash and Cash
Equivalents
    
    
    2
    
    
    
    3
    
    
    
    4100
    %
    
    
    100
    %
    
    
    100
    %
   One Percentage
    
    One Percentage(in thousands)
    
    Point Increase
    
    Point DecreaseEffect on total of service and interest cost components
    
    $
    42
    
    
    $
    (38
    )Effect on the postretirement benefit obligation
    
    
    785
    
    
    
    (703
    )
 99




---



##### 



Defined Contribution Retirement and 401(k) Plans
 Note 14. Stock-Based Compensation
     Analysis of Stock-Based Compensation ExpenseYear Ended December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006Stock Option Compensation
    
    $
    24
    
    
    $
    34
    
    
    $
    52Restricted Stock Compensation
    
    
    4,496
    
    
    
    3,321
    
    
    
    3,714Stock-based compensation expense before income taxes
    
    
    4,520
    
    
    
    3,355
    
    
    
    3,766Income tax benefit
    
    
    (1,582
    )
    
    
    (1,174
    )
    
    
    (1,318
    )Total stock-based compensation expense after income
taxes
    
    $
    2,938
    
    
    $
    2,181
    
    
    $
    2,448
   100




---



##### 



Options
    
    
    Weighted Average
    
    
    (in thousands)Weighted Average
    
    
    
    Remaining
    
    
    
    Aggregate IntrinsicShares
    
    
    Exercise Price
    
    
    
    Contractual Term
    
    
    
    ValueOutstanding at January 1, 2006
    
    
    3,917,891
    
    
    $
    27.91Granted
    
    
    500
    
    
    
    25.98Share obligations assumed
through merger
    
    
    1,074,488
    
    
    
    14.07Exercised
    
    
    (141,741
    )
    
    
    21.41Forfeitures or Expirations
    
    
    (75,438
    )
    
    
    30.32Outstanding at December 31, 2006
    
    
    4,775,700
    
    
    $
    24.95Exercised
    
    
    (452,863
    )
    
    
    13.57Forfeitures or Expirations
    
    
    (292,795
    )
    
    
    27.75Outstanding at December 31, 2007
    
    
    4,030,042
    
    
    $
    26.03Exercised
    
    
    (12,134
    )
    
    
    11.77Forfeitures or Expirations
    
    
    (567,251
    )
    
    
    25.24Outstanding at December 31, 2008
    
    
    3,450,657
    
    
    $
    26.21
    
    
    3.6 yrs
    
    $
    Exercisable
    
    
    3,448,734
    
    
    $
    26.21
    
    
    3.6 yrs
    
    $
    
   Year Ended December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006Tax benefit realized from reduction of income tax payable:Reduction of goodwill for tax benefit of vested stock options converted in Republic
acquisition and exercised
    
    $
    1
    
    
    $
    904
    
    
    $
    Included in common stock as net stock options exercised
    
    
    (76
    )
    
    
    (106
    )
    
    
    182Tax benefit from vested stock options converted in Republic acquisition and exercised
    
    $
    (75
    )
    
    $
    798
    
    
    $
    182
   101




---



##### 



Weighted-AveragePer Share GrantNumber of Shares
    
    
    Date Fair ValueOutstanding restricted stock at January 1, 2006
    
    
    129,180
    
    
    $
    28.93Granted
    
    
    205,042
    
    
    
    24.25Share obligations assumed through merger
    
    
    101,441
    
    
    
    26.86Vested
    
    
    (134,814
    )
    
    
    28.75Forfeited
    
    
    (7,762
    )
    
    
    25.03Restricted stock at December 31, 2006
    
    
    293,087
    
    
    $
    25.13Granted
    
    
    324,441
    
    
    
    19.38Vested
    
    
    (88,542
    )
    
    
    24.92Forfeited
    
    
    (42,144
    )
    
    
    25.27Restricted stock at December 31, 2007
    
    
    486,842
    
    
    $
    21.32Granted
    
    
    338,995
    
    
    
    8.56Vested
    
    
    (171,197
    )
    
    
    22.02Forfeited
    
    
    (45,608
    )
    
    
    15.80Restricted stock at December 31, 2008
    
    
    609,032
    
    
    $
    14.43
   Note 15. Income Taxes
  Year Ended December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006Current tax expense (benefit):Federal
    
    $
    (19,351
    )
    
    $
    10,913
    
    
    $
    20,335State
    
    
    (684
    )
    
    
    151
    
    
    
    236Total current tax expense
    
    
    (20,035
    )
    
    
    11,064
    
    
    
    20,571Deferred tax expense (benefit)
    
    
    (45,563
    )
    
    
    20,241
    
    
    
    (1,252
    )Establishment of valuation allowance
    
    
    136,568
    
    
    
    
    
    
    
    Total income tax expense
    
    $
    70,970
    
    
    $
    31,305
    
    
    $
    19,319
  102




---



##### 



(in thousands)
    
    2008
    
    
    2007Deferred tax assets:Allowance for loan losses
    
    $
    91,060
    
    
    $
    58,315Accrued postemployment benefits other than pensions
    
    
    4,365
    
    
    
    4,370Deferred compensation
    
    
    9,662
    
    
    
    9,419Accrued expenses
    
    
    9,037
    
    
    
    5,309Net operating loss carryforwards
    
    
    9,621
    
    
    
    1,181Tax credit carryforwards
    
    
    12,483
    
    
    
    2,015Minimum pension liability
    
    
    13,175
    
    
    
    3,533Purchase accounting adjustments
    
    
    21,840
    
    
    
    30,412Unrealized losses on securities and derivatives
    
    
    3,222
    
    
    
    Other deferred tax assets
    
    
    6,329
    
    
    
    6,644Deferred tax assets
    
    
    180,794
    
    
    
    121,198Deferred tax liabilities:Pension
    
    
    8,723
    
    
    
    7,733Acquisition premium on loans
    
    
    3,268
    
    
    
    4,075Tax over book depreciation
    
    
    4,563
    
    
    
    3,243Basis difference in FHLB stock
    
    
    3,618
    
    
    
    3,621Purchase accounting adjustments
    
    
    2,452
    
    
    
    4,806Tax Deductible Goodwill
    
    
    12,183
    
    
    
    10,346Unrealized gains on securities and derivatives
    
    
    
    
    
    
    6,279Mortgage Servicing Rights
    
    
    1,033
    
    
    
    1,109Other deferred tax liabilities
    
    
    1,426
    
    
    
    1,164Deferred tax liabilities
    
    
    37,266
    
    
    
    42,376Net deferred tax assets
    
    
    143,528
    
    
    
    78,822Valuation allowance
    
    
    (155,711
    )
    
    
    Total net deferred tax assets (liabilities)
    
    $
    (12,183
    )
    
    $
    78,822
    103




---



##### 



Year Ended December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006Tax at federal statutory rate applied to income before income taxes
    
    $
    (112,728
    )
    
    $
    46,252
    
    
    $
    28,929Increase (decrease) in taxes resulting from:Tax-exempt income
    
    
    (10,764
    )
    
    
    (10,694
    )
    
    
    (8,180
    )Officers Life Insurance
    
    
    (1,508
    )
    
    
    (2,934
    )
    
    
    (1,288
    )Goodwill Impairment
    
    
    62,331
    
    
    
    
    
    
    
    Establishment of Valuation Allowances
    
    
    136,568
    
    
    
    
    
    
    
    Other
    
    
    (2,929
    )
    
    
    (1,319
    )
    
    
    (142
    )Total income tax expense
    
    $
    70,970
    
    
    $
    31,305
    
    
    $
    19,319
  (in thousands)
    
    2008
    
    
    2007Balance at January 1
    
    $
    7,093
    
    
    $
    6,786Additions based on tax positions related to the current year
    
    
    34
    
    
    
    1,158Additions for tax positions of prior years
    
    
    
    
    
    
    1,244Reductions for tax positions of prior years
    
    
    (1,436
    )
    
    
    (892
    )Reductions due to the statute of limitations
    
    
    
    
    
    
    (269
    )Settlements
    
    
    (3,839
    )
    
    
    (934
    )Balance at December 31
    
    $
    1,852
    
    
    $
    7,093
     104




---



##### 



Jurisdiction
    
    Tax YearsFederal
    
    
    2004 - 2008Indiana
    
    
    2003 - 2008Wisconsin
    
    
    2002 - 2008Iowa
    
    
    2003 - 2008
 Note 16. Shareholders Equity and Earnings Per Share
     105




---



##### 



Year Ended December 31,(in thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2006Numerator:Basic and dilutive earnings per share  net income (loss)
    
    $
    (393,052
    )
    
    $
    100,842
    
    
    $
    63,336Deemed dividend on preferred stock
    
    
    (11,737
    )
    
    
    
    
    
    
    Dividend on redeemable preferred stock
    
    
    (227
    )
    
    
    
    
    
    
    Numerator for basic and dilutive earnings per share 
net income (loss) attributable to common shareholders
    
    $
    (405,016
    )
    
    $
    100,842
    
    
    $
    63,336Denominator:Denominator for basic earnings per share 
weighted average shares
    
    
    94,156
    
    
    
    75,339
    
    
    
    42,913Effect of dilutive securities  potential conversion
of employee stock options and restricted stock awards
    
    
    
    
    
    
    239
    
    
    
    152Denominator for diluted earnings per share 
adjusted weighted-average shares and assumed conversions
    
    
    94,156
    
    
    
    75,578
    
    
    
    43,065Basic earnings per common share
    
    $
    (4.30
    )
    
    $
    1.34
    
    
    $
    1.48Diluted earnings per common share
    
    $
    (4.30
    )
    
    $
    1.33
    
    
    $
    1.47
  Stock Repurchase Program:
 Note 17. Lines of Business
   106




---



##### 




    
    Specialty Commercial -Specialty Commercial includes the commercial real estate, public
funds, and asset-based lending teams. These groups provide a full range of lending,
depository, and related financial services to commercial real estate developers, owners of
multi-unit commercial properties, middle-market companies, local governments and
municipalities. Products and services offered include commercial mortgages, real estate
construction lending, term loans, revolving credit arrangements, inventory and accounts
receivable financing, and letters of credit. Noncredit services for these customers include
deposit accounts, treasury management, corporate cash management, international banking
services, advice and assistance in the placement of securities, and financial planning.
    
    Regional Banking- Regional Banking includes the consumer, residential mortgage, commercial
and industrial, small business, private banking and treasury management teams. These groups
provide a wide range of lending, depository, and other related financial services to both
businesses and individual consumers. The products and services offered to consumer clients
include: direct loans, home equity loans and lines of credit, residential mortgage loans,
checking, savings and money market accounts, debit and credit cards, ATM network services,
certificates of deposit, and fixed and variable annuities, as well as private banking services
for affluent clients. The products and services offered to commercial and industrial clients
include: term loans, revolving credit arrangements, inventory and accounts receivable
financing, commercial mortgages, letters of credit, and small business loans. Noncredit
services for commercial clients include deposit accounts, treasury management, corporate cash
management, international banking services, advice and assistance in the placement of
securities, and financial planning.
    
    Wealth Management- Wealth Management offers a broad array of asset management, financial
planning, estate settlement and administration, credit and deposit products and services.
Trust and investment services include personal trust and planning, investment management,
estate settlement and administration services. Retirement plan services focus on investment
management and fiduciary activities with special emphasis on 401(k) plans. Brokerage and
insurance delivers retail mutual funds, other securities, variable and fixed annuities,
personal disability and life insurance products and discounted brokerage services.
    
    Other -The Other line of business includes activities that are not directly attributable
to one of the primary business lines. Included in this category are the Holding Company;
indirect consumer lending; shared services unit; Citizens treasury unit, including the
securities portfolio, short-term borrowing and asset/liability management activities;
inter-company eliminations; and the economic impact of certain assets, capital and support
functions not specifically identifiable with the three primary lines of business.
  107




---



##### 



Line of Business InformationSpecialty
    
    
    Regional
    
    
    Wealth(in thousands)
    
    Commercial
    
    
    Banking
    
    
    Mgmt
    
    
    Other
    
    
    TotalEarnings
Summary  2008Net interest income (taxable equivalent)
    
    $
    76,064
    
    
    $
    262,035
    
    
    $
    42
    
    
    $
    29,192
    
    
    $
    367,333Provision for loan losses
    
    
    178,902
    
    
    
    57,043
    
    
    
    
    
    
    
    46,109
    
    
    
    282,054Net interest income after provision
    
    
    (102,838
    )
    
    
    204,992
    
    
    
    42
    
    
    
    (16,917
    )
    
    
    85,279Noninterest income
    
    
    (6,662
    )
    
    
    76,423
    
    
    
    25,037
    
    
    
    6,944
    
    
    
    101,742Noninterest expense (1)
    
    
    201,713
    
    
    
    219,467
    
    
    
    24,238
    
    
    
    45,284
    
    
    
    490,702Income before income taxes
    
    
    (311,213
    )
    
    
    61,948
    
    
    
    841
    
    
    
    (55,257
    )
    
    
    (303,681
    )Income tax expense (taxable equivalent)
    
    
    (46,593
    )
    
    
    21,681
    
    
    
    294
    
    
    
    113,989
    
    
    
    89,371Net income (loss)
    
    $
    (264,620
    )
    
    $
    40,267
    
    
    $
    547
    
    
    $
    (169,246
    )
    
    $
    (393,052
    )Average assets(in millions)
    
    $
    2,124
    
    
    $
    5,952
    
    
    $
    13
    
    
    $
    5,153
    
    
    $
    13,242Earnings Summary  2007Net interest income (taxable equivalent)
    
    $
    78,643
    
    
    $
    280,611
    
    
    $
    (45
    )
    
    $
    41,517
    
    
    $
    400,726Provision for loan losses
    
    
    18,190
    
    
    
    14,589
    
    
    
    
    
    
    
    12,398
    
    
    
    45,177Net interest income after provision
    
    
    60,453
    
    
    
    266,022
    
    
    
    (45
    )
    
    
    29,119
    
    
    
    355,549Noninterest income
    
    
    3,463
    
    
    
    79,918
    
    
    
    27,410
    
    
    
    11,777
    
    
    
    122,568Noninterest expense
    
    
    21,353
    
    
    
    219,378
    
    
    
    22,246
    
    
    
    64,446
    
    
    
    327,423Income before income taxes
    
    
    42,563
    
    
    
    126,562
    
    
    
    5,119
    
    
    
    (23,550
    )
    
    
    150,694Income tax expense (taxable equivalent)
    
    
    14,897
    
    
    
    44,297
    
    
    
    1,792
    
    
    
    (11,134
    )
    
    
    49,852Net income
    
    $
    27,666
    
    
    $
    82,265
    
    
    $
    3,327
    
    
    $
    (12,416
    )
    
    $
    100,842Average assets(in millions)
    
    $
    2,098
    
    
    $
    6,119
    
    
    $
    13
    
    
    $
    5,090
    
    
    $
    13,320Earnings Summary  2006Net interest income (taxable equivalent)
    
    $
    15,919
    
    
    $
    222,002
    
    
    $
    194
    
    
    $
    38,722
    
    
    $
    276,837Provision for loan losses
    
    
    302
    
    
    
    5,527
    
    
    
    
    
    
    
    5,436
    
    
    
    11,265Net interest income after provision
    
    
    15,617
    
    
    
    216,475
    
    
    
    194
    
    
    
    33,286
    
    
    
    265,572Noninterest income
    
    
    1,338
    
    
    
    64,136
    
    
    
    25,882
    
    
    
    (729
    )
    
    
    90,627Noninterest expense
    
    
    11,233
    
    
    
    175,453
    
    
    
    22,152
    
    
    
    50,989
    
    
    
    259,827Income before income taxes
    
    
    5,722
    
    
    
    105,158
    
    
    
    3,924
    
    
    
    (18,432
    )
    
    
    96,372Income tax expense (taxable equivalent)
    
    
    2,003
    
    
    
    36,806
    
    
    
    1,374
    
    
    
    (7,147
    )
    
    
    33,036Net income
    
    $
    3,719
    
    
    $
    68,352
    
    
    $
    2,550
    
    
    $
    (11,285
    )
    
    $
    63,336Average assets(in millions)
    
    $
    127
    
    
    $
    4,342
    
    
    $
    11
    
    
    $
    3,224
    
    
    $
    7,704
 
 (1)
    
    Noninterest expense for Specialty Commercial includes the $178.1 million goodwill impairment charge. Note 18. Commitments, Contingent Liabilities and Guarantees
 Commitments:
  108




---



##### 



December 31,
    
    
    December 31,(in thousands)
    
    2008
    
    
    2007Loan commitments and letters of credit:Commitments to extend credit
    
    $
    2,048,258
    
    
    $
    2,510,255Financial standby letters of credit
    
    
    225,675
    
    
    
    355,616Performance standby letters of credit
    
    
    21,692
    
    
    
    27,244Commercial letters of credit
    
    
    
    
    
    
    1,151$
    2,295,625
    
    
    $
    2,894,266
  Contingent Liabilities and Guarantees:
 Purchase Obligations:
 Change in Control Agreements:
 Note 19. Derivatives and Hedging Activities
    109




---



##### 



110




---



##### 



Derivative Financial Instruments:
 December 31,
    
    
    December 31,2008
    
    
    2007Notional
    
    
    Fair
    
    
    Notional
    
    
    Fair(dollars in thousands)
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueReceive fixed swaps (1) (8)
    
    $
    1,005,000
    
    
    $
    32,810
    
    
    $
    300,000
    
    
    $
    1,574Customer initiated swaps and corresponding offsets (2) (8)
    
    
    1,120,348
    
    
    
    1,287
    
    
    
    713,290
    
    
    
    Interest rate lock commitments
    
    
    
    
    
    
    
    
    
    
    24,808
    
    
    
    199Forward mortgage loan contracts
    
    
    
    
    
    
    
    
    
    
    68,030
    
    
    
    (501
    )Total
    
    $
    2,125,348
    
    
    $
    34,097
    
    
    $
    1,106,128
    
    
    $
    1,272
 Derivative Classifications and Hedging Relationships:
 December 31,
    
    
    December 31,2008
    
    
    2007Notional
    
    
    Fair
    
    
    Notional
    
    
    Fair(dollars in thousands)
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueDerivatives Designated as Cash Flow Hedges:Prime Based Loan Hedges (3)
    
    $
    525,000
    
    
    $
    18,626
    
    
    $
    100,000
    
    
    $

    (47
    )LIBOR Based Loan Hedges (4)
    
    
    75,000
    
    
    
    1,796
    
    
    
    
    
    
    
    Derivatives Designated as Fair Value Hedges:Hedging time deposits (5)
    
    
    80,000
    
    
    
    2,931
    
    
    
    50,000
    
    
    
    1,434Hedging long-term debt (6)
    
    
    225,000
    
    
    
    7,631
    
    
    
    150,000
    
    
    
    187Derivatives Not Designated as Hedges:Receive fixed swaps (7)
    
    
    100,000
    
    
    
    1,826
    
    
    
    
    
    
    
    Customer initiated swaps and corresponding offsets (2) (8)
    
    
    1,120,348
    
    
    
    1,287
    
    
    
    713,290
    
    
    
    Total
    
    $
    2,125,348
    
    
    $
    34,097
    
    
    $
    1,013,290
    
    
    $
    1,574
 
 (1)
    
    Fair value includes accrued interest of $1,871 and $1,191 as of December 31, 2008
and December 31, 2007, respectively(2)
    
    Fair value includes accrued interest of $0 as of both December 31, 2008 and December
31, 2007.(3)
    
    Fair value includes accrued interest of $875 and $0 as of December 31, 2008 and
December 31, 2007, respectively(4)
    
    Fair value includes accrued interest of $73 and $0 as of December 31,2008 and
December 31, 2007, respectively.(5)
    
    Fair value includes accrued interest of $576 and $1,196 as of December 31, 2008 and
December 31, 2007, respectively.(6)
    
    Fair value includes accrued interest of $210 and ($4,829) as of December 31, 2008
and December 31, 2007, respectively.(7)
    
    Fair value includes accrued interest of $137 and $0 as of December 31, 2008 and
December 31, 2007, respectively.(8)
    
    Right to reclaim cash collateral under master netting arrangement was $14,403 and $0 as of December 31, 2008 and December
31, 2007, respectively.  Maturities and Interest Rates Exchanged on Swaps:Mature During(dollars in thousands)
    
    2009
    
    2010
    
    2011
    
    2012
    
    2013
    
    After 2013
    
    TotalReceive fixed swaps:Notional amount
    
    $
    485,000
    
    
    $
    110,000
    
    
    $
    245,000
    
    
    $
    165,000
    
    
    $
    
    
    
    $
    
    
    
    $
    1,005,000Receive fixed rate
    
    
    4.85
    %
    
    
    4.76
    %
    
    
    5.31
    %
    
    
    5.83
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    5.11
    %Pay variable rate
    
    
    2.91
    %
    
    
    1.56
    %
    
    
    2.12
    %
    
    
    3.42
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    2.65
    %
 111




---



##### 



Note 20. Regulatory Matters
       112




---



##### 



Risk
Based Capital Requirements
 To Be Well-CapitalizedFor Capital
    
    Under Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action Provisions(in thousands)
    
    Amount
    
    Ratio
    
    Amount
    
    
    
    
    
    Ratio
    
    Amount
    
    
    
    
    
    RatioCitizens Republic BancorpAs of December 31, 2008:Total Capital to risk weighted assets (1)
    
    $
    1,432,080
    
    
    
    14.5
    %
    
    $
    790,628
    
    
    
    ≥
    
    
    
    8.0
    %
    
    $
    988,285
    
    
    
    ≥
    
    
    
    10.0
    %Tier 1 Capital to risk weighted assets (1)
    
    
    1,206,869
    
    
    
    12.2
    
    
    
    395,314
    
    
    
    ≥
    
    
    
    4.0
    
    
    
    592,971
    
    
    
    ≥
    
    
    
    6.0Tier 1 Leverage (2)
    
    
    1,206,869
    
    
    
    9.7
    
    
    
    499,613
    
    
    
    ≥
    
    
    
    4.0
    
    
    
    624,517
    
    
    
    ≥
    
    
    
    5.0As of December 31, 2007:Total Capital to risk weighted assets (1)
    
    $
    1,195,576
    
    
    
    11.7
    %
    
    $
    820,625
    
    
    
    ≥
    
    
    
    8.0
    %
    
    $
    1,025,782
    
    
    
    ≥
    
    
    
    10.0
    %Tier 1 Capital to risk weighted assets (1)
    
    
    941,851
    
    
    
    9.2
    
    
    
    410,313
    
    
    
    ≥
    
    
    
    4.0
    
    
    
    615,469
    
    
    
    ≥
    
    
    
    6.0Tier 1 Leverage (2)
    
    
    941,851
    
    
    
    7.5
    
    
    
    499,994
    
    
    
    ≥
    
    
    
    4.0
    
    
    
    624,993
    
    
    
    ≥
    
    
    
    5.0Citizens BankAs of December 31, 2008:Total Capital to risk weighted assets (1)
    
    $
    1,177,172
    
    
    
    12.1
    %
    
    $
    777,397
    
    
    
    ≥
    
    
    
    8.0
    %
    
    $
    971,746
    
    
    
    ≥
    
    
    
    10.0
    %Tier 1 Capital to risk weighted assets (1)
    
    
    1,054,035
    
    
    
    10.8
    
    
    
    388,698
    
    
    
    ≥
    
    
    
    4.0
    
    
    
    583,048
    
    
    
    ≥
    
    
    
    6.0Tier 1 Leverage (2)
    
    
    1,054,035
    
    
    
    8.7
    
    
    
    487,181
    
    
    
    ≥
    
    
    
    4.0
    
    
    
    608,976
    
    
    
    ≥
    
    
    
    5.0As of December 31, 2007:Total Capital to risk weighted assets (1)
    
    $
    1,124,600
    
    
    
    11.2
    %
    
    $
    801,935
    
    
    
    ≥
    
    
    
    8.0
    %
    
    $
    1,002,419
    
    
    
    ≥
    
    
    
    10.0
    %Tier 1 Capital to risk weighted assets (1)
    
    
    998,783
    
    
    
    10.0
    
    
    
    400,968
    
    
    
    ≥
    
    
    
    4.0
    
    
    
    601,451
    
    
    
    ≥
    
    
    
    6.0Tier 1 Leverage (2)
    
    
    998,783
    
    
    
    8.2
    
    
    
    485,987
    
    
    
    ≥
    
    
    
    4.0
    
    
    
    607,484
    
    
    
    ≥
    
    
    
    5.0
 
 (1)
    
    Total Capital is comprised of Tier 1 Capital, a portion of the allowance for
loan losses and qualifying subordinated debt. Tier 1 Capital consists of total equity and trust
preferred securities less unrealized gains and losses accumulated in other comprehensive income,
certain intangible assets including goodwill and adjustments related to the valuation of mortgage
servicing assets.(2)
    
    Tier 1 Capital to quarterly average assets 113




---



##### 



Note 21. Citizens Republic Bancorp
(Parent Only) Statements
 Balance
Sheets
Citizens Republic Bancorp (Parent Only)
 December 31,(in thousands)
    
    2008
    
    
    2007AssetsCash
    
    $
    7,754
    
    
    $
    Money market investments
    
    
    253,637
    
    
    
    73,839Investment securities
    
    
    6,054
    
    
    
    48Investment in subsidiaries  principally banks
    
    
    1,182,374
    
    
    
    1,207,890Goodwill  net
    
    
    492,488
    
    
    
    654,100Other assets
    
    
    11,671
    
    
    
    30,927Total assets
    
    $
    1,953,978
    
    
    $
    1,966,804Liabilities and Shareholders EquityLong-term debt
    
    $
    292,837
    
    
    $
    340,822Other liabilities
    
    
    59,820
    
    
    
    48,102Total liabilities
    
    
    352,657
    
    
    
    388,924Shareholders equity
    
    
    1,601,321
    
    
    
    1,577,880Total liabilities and shareholders equity
    
    $
    1,953,978
    
    
    $
    1,966,804
 Statements
of IncomeCitizens Republic Bancorp (Parent Only)
 Year Ended December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006IncomeDividends from subsidiaries  principally banks
    
    $
    28,500
    
    
    $
    111,500
    
    
    $
    70,900Interest from bank subsidiary
    
    
    5,368
    
    
    
    3,118
    
    
    
    4,429Service fees from bank subsidiaries
    
    
    14,526
    
    
    
    14,334
    
    
    
    13,277Other
    
    
    (3,257
    )
    
    
    (53
    )
    
    
    176Total
    
    
    45,137
    
    
    
    128,899
    
    
    
    88,782ExpensesInterest
    
    
    23,742
    
    
    
    25,637
    
    
    
    13,119Salaries and employee benefits
    
    
    18,481
    
    
    
    20,922
    
    
    
    17,621Service fees paid to bank subsidiaries
    
    
    955
    
    
    
    2,767
    
    
    
    2,768Restructuring and merger related expenses
    
    
    
    
    
    
    270
    
    
    
    1,426Goodwill impairment
    
    
    161,611
    
    
    
    
    
    
    
    Other noninterest expense
    
    
    2,301
    
    
    
    2,231
    
    
    
    1,596Total
    
    
    207,090
    
    
    
    51,827
    
    
    
    36,530Income (loss) before income taxes and
equity in undistributed earnings of subsidiaries
    
    
    (161,951
    )
    
    
    77,072
    
    
    
    52,252Income tax benefit (provision)
    
    
    (11,785
    )
    
    
    12,650
    
    
    
    6,959Equity in undistributed (dividends in excess of) earnings of subsidiaries
    
    
    (219,316
    )
    
    
    11,120
    
    
    
    4,125Net Income (loss)
    
    $
    (393,052
    )
    
    $
    100,842
    
    
    $
    63,336
 114




---



##### 



Statements of Cash Flows  Citizens Republic Bancorp (Parent Only)
 Year Ended December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006Operating ActivitiesNet income (loss)
    
    $
    (393,052
    )
    
    $
    100,842
    
    
    $
    63,336Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Goodwill impairment
    
    
    161,611
    
    
    
    
    
    
    
    Deferred tax asset valuation allowance
    
    
    20,853
    
    
    
    
    
    
    
    Net (increase) decrease in current and deferred income taxes
    
    
    (18,476
    )
    
    
    21,306
    
    
    
    (468
    )Recognition of stock-based compensation expense
    
    
    4,520
    
    
    
    3,355
    
    
    
    3,766Restructure and merger related
    
    
    (53
    )
    
    
    (27,257
    )
    
    
    Dividends in excess of (equity in undistributed) earnings of subsidiaries
    
    
    219,316
    
    
    
    (11,120
    )
    
    
    (4,125
    )Excess tax benefits related to stock-based compensation arrangements
    
    
    
    
    
    
    
    
    
    
    (182
    )Other
    
    
    (1,147
    )
    
    
    2,821
    
    
    
    (11,812
    )Net cash
(used) provided by operating activities
    
    
    (6,428
    )
    
    
    89,947
    
    
    
    50,515Investing ActivitiesNet (increase) decrease in money market investments
    
    
    (146,441
    )
    
    
    6,588
    
    
    
    9,040Proceeds from sales and maturities of investment securities
    
    
    
    
    
    
    
    
    
    
    107Purchases of investment securities
    
    
    (6,045
    )
    
    
    
    
    
    
    Acquisition, net of cash received
    
    
    
    
    
    
    
    
    
    
    (154,662
    )Investments in and advances to subsidiaries
    
    
    
    
    
    
    1,546
    
    
    
    275Net cash
(used) provided (used) by investing activities
    
    
    (152,486
    )
    
    
    8,134
    
    
    
    (145,240
    )Financing ActivitiesPrincipal reductions in short-term borrowings
    
    
    (50,000
    )
    
    
    (51,790
    )
    
    
    Proceeds from long-term borrowings
    
    
    
    
    
    
    50,000
    
    
    
    150,010Capital contribution to subsidiary bank
    
    
    (250,000
    )
    
    
    
    
    
    
    Net proceeds from issuance of preferred stock-convertible
    
    
    114,161
    
    
    
    
    
    
    
    Net proceeds from issuance of preferred redeemable stock and warrant
    
    
    300,000
    
    
    
    
    
    
    
    Net proceeds from issuance of common stock
    
    
    74,844
    
    
    
    
    
    
    
    Cash dividends paid on common stock
    
    
    (21,959
    )
    
    
    (87,798
    )
    
    
    (49,530
    )Proceeds from stock options exercised and restricted stock activity
    
    
    66
    
    
    
    4,833
    
    
    
    3,194Excess tax benefits related to stock-based compensation arrangements
    
    
    
    
    
    
    
    
    
    
    182Shares acquired for retirement and purchased for taxes
    
    
    (444
    )
    
    
    (13,514
    )
    
    
    (8,948
    )Net cash
provided (used) by financing activities
    
    
    166,668
    
    
    
    (98,269
    )
    
    
    94,908Net increase in cash
    
    
    7,754
    
    
    
    (188
    )
    
    
    183Cash at beginning of year
    
    
    
    
    
    
    188
    
    
    
    5Cash at end of year
    
    $
    7,754
    
    
    $
    
    
    
    $
    188
 115




---



##### 



Note 22. Subsequent Events
   116




---



##### 



Report of Independent Registered Public Accounting Firm
 To the Board of Directors and the Shareholders of Citizens Republic Bancorp, Inc.
      
 117




---



##### 



SELECTED QUARTERLY INFORMATION (unaudited)
 .
 Table 14. Selected Quarterly Information
 (in thousands except,
    

    2008

    

    2007per share data)
    
    Fourth
    
    Third
    
    Second
    
    First
    
    Fourth
    
    Third
    
    Second
    
    FirstInterest income
    
    $
    167,677
    
    
    $
    171,723
    
    
    $
    174,394
    
    
    $
    187,117
    
    
    $
    198,988
    
    
    $
    201,854
    
    
    $
    202,353
    
    
    $
    204,716Interest expense
    
    
    81,990
    
    
    
    84,405
    
    
    
    86,779
    
    
    
    98,805
    
    
    
    106,799
    
    
    
    106,981
    
    
    
    105,576
    
    
    
    106,375Net interest income
    
    
    85,687
    
    
    
    87,318
    
    
    
    87,615
    
    
    
    88,312
    
    
    
    92,188
    
    
    
    94,873
    
    
    
    96,777
    
    
    
    98,341Provision for loan losses
    
    
    118,565
    
    
    
    58,390
    
    
    
    74,480
    
    
    
    30,619
    
    
    
    6,055
    
    
    
    3,765
    
    
    
    31,857
    
    
    
    3,500Total fees and other income
    
    
    15,755
    
    
    
    28,005
    
    
    
    27,058
    
    
    
    30,925
    
    
    
    29,296
    
    
    
    30,596
    
    
    
    31,278
    
    
    
    31,423Investment securities gains (losses)
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    (33
    )Noninterest expense (1)
    
    
    78,611
    
    
    
    74,301
    
    
    
    261,228
    
    
    
    76,562
    
    
    
    78,880
    
    
    
    77,343
    
    
    
    87,490
    
    
    
    83,710Net income (loss) (2)
    
    
    (195,369
    )
    
    
    (7,176
    )
    
    
    (201,634
    )
    
    
    11,127
    
    
    
    27,967
    
    
    
    31,764
    
    
    
    9,619
    
    
    
    31,492Net income (loss) attributable to common
shareholders(3)
    
    
    (195,596
    )
    
    
    (18,913
    )
    
    
    (201,634
    )
    
    
    11,127
    
    
    
    27,967
    
    
    
    31,764
    
    
    
    9,619
    
    
    
    31,492Per Share of Common StockNet income:Basic
    
    
    (1.56
    )
    
    
    (0.20
    )
    
    
    (2.53
    )
    
    
    0.15
    
    
    
    0.37
    
    
    
    0.42
    
    
    
    0.13
    
    
    
    0.42Diluted
    
    
    (1.56
    )
    
    
    (0.20
    )
    
    
    (2.53
    )
    
    
    0.15
    
    
    
    0.37
    
    
    
    0.42
    
    
    
    0.13
    
    
    
    0.41
 
 (1)
    
    Noninterest expense includes a goodwill impairment charge of $178.1 million in the second quarter of 2008, restructuring and merger related expenses of ($0.4) million in
the fourth quarter of 2007, $1.0 million in the third quarter of 2007, $3.4 million in the second quarter of 2007 and $4.2 million in the first quarter of 2007 related to the Republic
merger.(2)
    
    Net income (loss) includes a deferred tax valuation allowance of $136.6 million in the fourth quarter of 2008.(3)
    
    Net income (loss) attributable to common shareholders
includes the following non-cash items: $0.2 million dividend on redeemable preferred stock in the fourth quarter of
2008 and $11.7 million deemed dividend to preferred shareholders in the third quarter of 2008. 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   118




---



##### 



Report on Managements Assessment of Internal Control over Financial Reporting
  
    
    Pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Corporation;
    
    Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with U.S. generally accepted accounting
principles, and that receipts and expenditures of the Corporation are being made only in
accordance with authorizations of management and the directors of the Corporation; and
    
    Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Corporations assets that could have a material effect
on the financial statements.
    -s- Charles D. Christy
    
    -s- Cathleen H. NashCharles D. Christy
Executive Vice President and Chief Financial Officer
    
    Cathleen H. Nash
President and Chief Executive Officer
 Changes in Internal Control over Financial Reporting
  119




---



##### 



Report of Independent Registered Public Accounting Firm
 To the Board of Directors and the Shareholders of Citizens Republic Bancorp, Inc.
        
 120




---



##### 



ITEM 9B. OTHER INFORMATION
  
 Part III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  Equity Compensation Plan Information
  121




---



##### 



Number of sharesremaining available forNumber of shares to
    
    
    
    
    
    
    future issuance underbe issued upon
    
    
    Weighted-average
    
    
    equity compensationexercise of
    
    
    exercise price of
    
    
    plans (excluding sharesPlan Category
    

outstanding
options
    
    

outstanding
options
    
    

reflected
in column (a))(a)
    
    
    (b)
    
    
    
    (c)Equity compensation
plans approved by
shareholders
    
    
    3,051,576
    
    
    $
    27.74
    
    
    
    2,435,446Equity compensation
plans not approved
by shareholders
    
    
    57,200
    (1)
    
    $
    16.66
    
    
    
    Total (2)
    
    
    3,108,776
    
    
    $
    27.54
    
    
    
    2,435,446
 
 (1)
    
    Issued under the All-Employee Plan. Under this plan, on May 18, 2000, Citizens granted stock
options to all employees who did not receive grants under the then existing but since expired
Third Amended Stock Option Plan. Each full-time employee received options for 200 shares of
common stock and each part-time employee received options for 100 shares. The $16.66 exercise
price of the grant was the market price of the common stock on the grant date. The options
became exercisable three years after the date of grant. The options expire ten years from the
date of grant. Options for a total of 550,700 shares were granted of which options for 57,200
shares were outstanding as of December 31, 2008. The plan provides that no further grants may
be made under the plan.(2)
    
    In connection with the Republic merger, Citizens assumed Republics active stock option plans
and 1.1 million shares subject to option grants previously awarded by Republic under those
plans of which options for 341,881 shares were outstanding as of December 31, 2008. Citizens
has not made any awards and does not intend to grant any additional awards under the former
Republic plans. The weighted-average exercise price of the outstanding options is $14.10 per
share. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  122




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##### 



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
   
      At the request of any shareholder, the Corporation will
furnish any exhibit upon the payment of a fee of $0.10 per page to cover the costs of
furnishing the exhibit.
   123




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##### 



SIGNATURES
  
 by

/s/ Cathleen H. Nash
    
    Date:  February 27, 2009Cathleen H. NashPresident and Chief Executive Officer  Signature
    
    Capacity
    
    Date/s/ Charles D. Christy

Charles D. Christy
    
    Executive Vice President and
Chief Financial Officer
    
    February 27, 2009/s/ Cathleen H. Nash
    
    President and Chief Executive Officer
    
    February 27, 2009Cathleen H. Nash/s/ Stephen V. Figliuolo

Stephen V. Figliuolo
    
    Interim Controller and Principal
Accounting Officer
    
    February 27, 2009/s/ William R. Hartman
    
    Chairman
    
    February 27, 2009William R. Hartman/s/ Lizabeth A. Ardisana
    
    Director
    
    February 27, 2009Lizabeth A. Ardisana/s/ George J. Butvilas
    
    Director
    
    February 27, 2009George J. Butvilas/s/ Robert S. Cubbin
    
    Director
    
    February 27, 2009Robert S. Cubbin/s/ Richard J. Dolinski
    
    Director
    
    February 27, 2009Richard J. Dolinski/s/ Gary J. Hurand
    
    Director
    
    February 27, 2009Gary J. Hurand/s/ Dennis J. Ibold
    
    Director
    
    February 27, 2009Dennis J. Ibold
 124




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##### 



SIGNATURES (continued)
 /s/ Benjamin W. Laird
    
    Director
    
    February 27, 2009Benjamin W. Laird/s/ Stephen J. Lazaroff
    
    Director
    
    February 27, 2009Stephen J. Lazaroff/s/ Kendall B. Williams
    
    Director
    
    February 27, 2009Kendall B. Williams/s/ James L. Wolohan
    
    Director
    
    February 27, 2009James L. Wolohan/s/ Steven E. Zack
    
    Director
    
    February 27, 2009Steven E. Zack
 125




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##### 



EXHIBIT INDEX
  ExhibitNo.
    
    Exhibit2.2
    
    Agreement and Plan of Merger, dated as of June 26, 2006, by and between Republic
Bancorp, Inc. and Citizens Republic Bancorp, Inc. (Citizens Form 8-K filed June 30,
2006).3.1
    
    Amended and Restated Articles of Incorporation, as amended through December 10,
2008.3.2
    
    Amended and Restated Bylaws dated as of January 24, 2008. (Citizens Form 8-K filed
January 30, 2008).4.2
    
    Indenture, dated as of January 27, 2003 among Citizens Republic Bancorp, Inc. and
JP Morgan Chase Bank, as Trustee (Citizens registration statement on Form S-4,
registration no. 333-104472).4.3
    
    Registration Rights Agreement, dated as of January 27, 2003 among Citizens Republic
Bancorp, Inc. and Morgan Stanley, Keefe, Bruyette & Woods, Inc., Robert W. Baird & Co.,
Credit Suisse First Boston, Fahnestock & Co. Inc., Howe Barnes Investments, Inc. and
McDonald Investments, as Initial Purchasers (Citizens registration statement on Form
S-4, registration no. 333-104472).4.4
    
    Floating Rate Junior Subordinated Deferrable Interest Debentures dated as of June
26, 2003 (Citizens 2003 Second Quarter Report on Form 10-Q).4.5
    
    Form of Indenture between Republic Bancorp Inc. (Republic) and Wilmington Trust
Company for Republics 8.60% Subordinated Debentures due 2031 (Republics registration
statement on Form S-3, registration no. 333-70062).4.6
    
    Form of Republics 8.60% Subordinated Debenture due 2031 (Republics registration
statement on Form S-3, registration no. 333-70062).4.7
    
    Certificate of Trust of Republic Capital Trust I, a subsidiary of Republic
(Republics registration statement on Form S-3, registration no. 333-70062).4.8
    
    Trust Agreement of Republic Capital Trust I, a subsidiary of Republic (Republics
registration statement on Form S-3, registration no. 333-70062).4.9
    
    Form of Amended and Restated Trust Agreement of Republic Capital Trust I, a
subsidiary of Republic (Republics registration statement on Form S-3, registration no.
333-70062).4.10
    
    Form of Trust Preferred Securities Certificate of Republic Capital Trust I, a
subsidiary of Republic (Republics registration statement on Form S-3, registration no.
333-70062).4.11
    
    Form of Agreement as to Expenses and Liabilities between Republic and Republic
Capital Trust I, a subsidiary of Republic (Republics registration statement on Form
S-3, registration no. 333-70062).4.12
    
    Form of Trust Preferred Securities Guarantee Agreement between Republic and
Wilmington Trust Company (Republics registration statement on Form S-3, registration
no. 333-70062).
 126




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##### 



EXHIBIT INDEX (continued)
 ExhibitNo.
    
    Exhibit4.13
    
    Indenture, dated October 3, 2006, between Citizens Republic Bancorp, Inc. and U.S. Bank
National Association, as Trustee (Citizens Current Report on Form 8-K filed October 3, 2006).4.14
    
    First Supplemental Indenture, dated October 3, 2006, between Citizens Republic Bancorp, Inc.
and U.S. Bank National Association as Trustee (Citizens Current Report on Form 8-K filed on
October 3, 2006).4.15
    
    Amended and Restated Trust Agreement, dated October 3, 2006, among Citizens Republic Bancorp,
Inc., U.S. Bank National Association, as Property Trustee, U.S. Bank Trust National Association as
Delaware Trustee, and Administrative Trustees named therein (Citizens Current Report on Form 8-K
filed October 3, 2006).4.16
    
    Guarantee Agreement, dated October 3, 2006, between Citizens Republic Bancorp, Inc. as
Guarantor and U.S. Bank National Association as Guarantee Trustee (Citizens Current Report on Form
8-K filed October 3, 2006).4.18
    
    Certificate representing the Series A Preferred Stock (Citizens Current Report on Form 8-K
filed June 11, 2008).4.19
    
    Warrant to Purchase up to 17,578,125 shares of common stock, dated December 12, 2008
(Citizens Current Report on Form 8-K filed December 15, 2008).10.1*
    
    Citizens Republic Bancorp, Inc. Second Amended Stock Option Plan (Citizens registration
statement on Form S-8, Registration No. 33-47686).10.2*
    
    Citizens Republic Bancorp, Inc. Third Amended Stock Option Plan (Citizens 1997 Second Quarter
Report on Form 10-Q).10.3*
    
    First Amendment to Citizens Republic Bancorp, Inc. Third Amended Stock Option Plan (Citizens
2000 Second Quarter Report on Form 10-Q).10.4*
    
    Citizens Republic Bancorp, Inc. All-Employee Stock Option Plan (Citizens registration
statement on Form S-8, registration no. 333-40100).10.5*
    
    Citizens Republic Bancorp, Inc. Stock Option Plan for Directors (Citizens registration
statement on Form S-8, registration no. 33-61197).10.6*
    
    First Amendment to Citizens Republic Bancorp, Inc. Stock Option Plan for Directors (Citizens
2000 Second Quarter Report on Form 10-Q).10.7*
    
    Citizens Republic Bancorp, Inc. Stock Compensation Plan (Citizens 2001 Annual Report on Form
10-K).10.8*
    
    Post Effective Amendment No. 1 to Form S-4 on Form S-8 pertaining to F&M Bancorporation, Inc.
1993 Incentive Stock Option Plan and F&M Bancorporation, Inc. 1993 Stock Option Plan for
Non-employee Directors (Citizens registration statement on Form S-8, registration statement no.
333-86569).10.9*
    
    Citizens Republic Bancorp, Inc. Amended and Restated Section 401(k) Plan (Citizens
registration statement on Form S-8, registration no. 333-09455).
 127




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##### 



EXHIBIT INDEX (continued)
 ExhibitNo.
    
    Exhibit10.11*
    
    Citizens Republic Bancorp, Inc. Amended and Restated Directors Deferred Compensation Plan
(Citizens 2002 Annual Report on Form 10-K).10.13
    
    Amended and Restated Declaration of Trust dated as of June 26, 2003 by and among U.S. Bank
National Association, as institutional Trustee, Citizens Republic Bancorp, Inc., as Sponsor, and
William R. Hartman, Charles D. Christy and Thomas W. Gallagher as Administrators (Citizens 2003
Second Quarter Report on Form 10-Q).10.14
    
    Placement Agreement, dated June 16, 2003, between Citizens, Citizens Michigan Statutory Trust
I, FTN Financial Capital Markets and Keefe Bruyette & Woods, Inc. (Citizens 2003 Second Quarter
Report on Form 10-Q).10.15
    
    Guarantee Agreement dated as of June 26, 2003 by and between Citizens Republic Bancorp, Inc.
and U.S. Bank National Association (Citizens 2003 Second Quarter Report on Form 10-Q).10.19*
    
    Employment Agreement, dated as of June 26, 2006, by and between Citizens Republic Bancorp,
Inc. and William R. Hartman (Citizens Current Report on Form 8-K filed June 30, 2006).10.20*
    
    Form of Nonqualified Stock Option Agreement for Non-employee Directors under the Citizens
Republic Bancorp, Inc. Stock Compensation Plan (Citizens 2004 Third Quarter Report on Form 10-Q).10.21*
    
    Form of Nonqualified Stock Option Agreement for Employees under the Citizens Republic
Bancorp, Inc. Stock Compensation Plan (Citizens 2004 Third Quarter Report on Form 10-Q).10.22*
    
    Form of Restricted Stock Agreement under the Citizens Republic Bancorp, Inc. Stock
Compensation Plan (Citizens 2004 Third Quarter Report on Form 10-Q).10.24*
    
    Form of Restricted Stock Agreement (Employee Version) (Citizens Current Report on Form 8-K
filed on June 7, 2005).10.25*
    
    Form of Restricted Stock Agreement (Director Version) (Citizens Current Report on Form
8-K filed on June 7, 2005).10.26*
    
    Form of Stock Option Agreement (Employee Version) (Citizens Current Report on Form 8-K
filed on June 7, 2005).10.27*
    
    Form of Stock Option Agreement (Director Version) (Citizens Current Report on Form 8-K
filed on June 7, 2005).10.28*
    
    Form of Restricted Stock Agreement (Employee Version) (Citizens 2006 Second Quarter Report on
Form 10-Q).10.29*
    
    Form of Restricted Stock Agreement (Director Version) (Citizens 2006 Second Quarter Report on
Form 10-Q).10.30*
    
    2006 Management Incentive Plan (Citizens 2006 Second Quarter Report on Form 10-Q)1.10.31*
    
    Retention Agreement with each of John D. Schwab, Clinton A. Sampson, and Randall J. Peterson,
dated August 16, 2006 (Citizens 2006 Third Quarter Report on Form 10-Q).
 128




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##### 



EXHIBIT INDEX (continued)
 ExhibitNo.
    
    Exhibit10.37*
    
    Form of Restricted Stock Agreement (Employee Version as of May 2007) (Citizens 2007 Second Quarter
Report on Form 10-Q).10.38*
    
    Form of Restricted Stock Agreement (Non-Employee Director Version as of May 2007) (Citizens 2007 Second
Quarter Report on Form 10-Q).10.39*
    
    2007 Management Incentive Plan (Citizens 2007 Second Quarter Report on Form 10-Q)1.10.41*
    
    Form of Amended and Restated Change in Control Agreement between Citizens Republic Bancorp, Inc. and each
of William R. Hartman, Charles D. Christy, Roy A. Eon, Thomas W. Gallagher, Martin E. Grunst, Cathleen H. Nash,
Clinton A. Sampson, and John D. Schwab, dated February 26, 2008 (Citizens Annual Report on Form 10-K for the
year ended December 31, 2007).10.42*
    
    Amended and Restated Change in Control Agreement between Citizens Republic Bancorp, Inc. and Randall J.
Peterson, dated February 26, 2008 (Citizens Annual Report on Form 10-K for the year ended December 31, 2007).10.43*
    
    Supplemental Retirement Benefits Plan For William R. Hartman, dated September 19, 2007 (Citizens Annual
Report on Form 10-K for the year ended December 31, 2007).10.44*
    
    Agreement between Citizens Republic Bancorp, Inc., and Clinton A. Sampson, dated November 4, 2008
(Citizens 2008 Third Quarter Report on Form 10-Q).10.45*
    
    2008 Management Incentive Plan (Citizens Current Report on Form 8-K filed September 17,
2008).110.46*
    
    Letter Agreement between Citizens Republic Bancorp, Inc. and the U.S. Department of the Treasury, dated
December 12, 2008 (Citizens Current Report on Form 8-K filed December 15, 2008).10.47*
    
    Form of Waiver Executed by William R. Hartman, Charles D. Christy, Cathleen H. Nash, John D. Schwab, and
Clinton A. Sampson, dated December 12, 2008 (Citizens Current Report on Form 8-K filed December 15, 2008).10.48*
    
    Form of Consent Executed by William R. Hartman, Charles D. Christy, Cathleen H. Nash, John D. Schwab, and
Clinton A. Sampson, dated December 12, 2008 (Citizens Current Report on Form 8-K filed December 15, 2008).10.49*
    
    Amendment to Stock Compensation Plan as of December 10, 2008.12.1
    
    Statement of ratio of earnings to fixed charges.21
    
    Subsidiaries of the Registrant23
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) under the
Securities Exchange Act of 1934.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) under the
Securities Exchange Act of 1934.
 129




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##### 



*
    
    Current management contracts or compensatory plans or arrangements.1
    
    Portions of this exhibit have been omitted pursuant to Citizens request to the
Secretary of the Securities and Exchange Commission for confidential treatment pursuant to rule
24b-2 under the Securities Exchange Act of 1934, as amended. 130