##### Table of Contents



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, 2010
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission
File Number 001-33063
 CITIZENS REPUBLIC BANCORP, INC.
 
  MICHIGAN
    
    38-2378932(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    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 Capital Market®7.50% Trust Preferred Securities (issued by Citizens Funding Trust I)
    
    New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act: none
 o þ
 o þ
 þ o
 §  o o
 § o o
  Large accelerated filer o
Accelerated filer þ
Non-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.
 2010 Annual Report on Form 10-K
 TABLE OF CONTENTS
 PagePART IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    16Item 1B.
    
    Unresolved Staff Comments
    
    
    27Item 2.
    
    Properties
    
    
    27Item 3.
    
    Legal Proceedings
    
    
    28PART IIItem 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    28Item 6.
    
    Selected Financial Data
    
    
    30Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    32Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    73Item 8.
    
    Financial Statements and Supplementary Data
    
    
    73Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    128Item 9A.
    
    Controls and Procedures
    
    
    128Item 9B.
    
    Other Information
    
    
    132PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    132Item 11.
    
    Executive Compensation
    
    
    132Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    132Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    133Item 14.
    
    Principal Accounting Fees and Services
    
    
    133PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    134SIGNATURES
    
    
    135EXHIBIT INDEX
    
    
    137EX-10.7EX-21EX-23EX-31.1EX-31.2EX-32.1EX-32.2EX-99.1EX-99.2
  2




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##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
 ® www.citizensbanking.com www.sec.gov
 GENERAL
  RECENT DEVELOPMENTS
     3




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##### Table of Contents



GEOGRAPHIC LOCATIONS
  PRINCIPAL SOURCES OF REVENUE
  Year Ended December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2008Interest and fees on loans
    
    $
    390,587
    
    
    $
    449,067
    
    
    $
    575,977Interest and dividends on investment securities, money
market investments, FHLB and Federal Reserve stock
    
    
    93,857
    
    
    
    104,343
    
    
    
    108,922Noninterest income
    
    
    94,659
    
    
    
    63,133
    
    
    
    96,577Total revenues
    
    $
    579,103
    
    
    $
    616,543
    
    
    $
    781,476
  LINES OF BUSINESS
  4




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##### Table of Contents



COMPETITION
     SUPERVISION AND REGULATION
 General
    5




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Written Agreement with FRBC and OFIR
   
    
    Allowance for Loan and Lease Losses  The Bank was required to eliminate from its
books, by charge-off or collection, all assets or portions of assets classified as a
loss in the most recent Asset Quality Examination and that had not already been
previously collected in full or charged off. There were no such assets required to be
eliminated at such date.
    
    Compliance Committee  The boards of directors were required to appoint a joint
compliance committee (Compliance Committee) to monitor and coordinate compliance with
the provisions of the Written Agreement. The Compliance Committee is required to meet,
at a minimum, on a monthly basis and report its findings to the boards of directors.
  
    
    Management Staffing Needs  The boards were required to complete an assessment of
the Banks management and staffing needs and within 30 days later, submit a plan to the
FRBC and OFIR that included their findings and conclusions and the specific actions the
boards will take to strengthen management.
    
    Credit Risk Management Practices  The Bank was required to submit a plan to
strengthen credit risk management practices, including steps to reduce or mitigate the
risk of concentrations of credit.
    
    Credit Administration  The Bank was required to submit a program to enhance credit
administration that addresses, considers and includes, at a minimum, standards for the
modification of construction loans and the appropriate use of deficiency notes.
    
    Asset Improvement  The Bank was required to submit a plan designed to improve
Citizens position through repayment, amortization, liquidation, additional collateral
or other means on other real estate owned (OREO) and on past due, classified or
problem loans meeting certain conditions. Also, for any subsequently acquired OREO and
any loans satisfying any of these conditions in the future, Citizens is required to
submit a plan to improve Citizens position on the loan within 30 days of such
acquisition or classification and must submit subsequent progress reports on all such
plans within 30 days after the end of each calendar quarter.
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
    
    Allowance for Loan and Lease Losses  The Bank was required to review and revise
the allowance for loan and lease losses (ALLL) methodology in order to ensure
consistency with relevant supervisory guidance and submit a description of the revised
methodology to the FRBC and OFIR.
    
    Capital Plan  The Holding Company and the Bank were required to submit an
acceptable plan to maintain sufficient capital that addresses, considers, and includes,
at a minimum, the Holding Companys and the Banks current and future capital
requirements, adequacy of the Banks capital,the source and timing of
additional funds to fulfill the Holding Companys and the Banks future capital
requirements, and the requirement of the Holding Company to serve as a source of
strength to the Bank.
    
    Liquidity Position Management  The Holding Company and the Bank were required to
submit a plan to the regulators to enhance management of the Banks liquidity position
and a revised contingency plan that identifies available sources of liquidity and
includes adverse scenario planning.
    
    Interest Rate Management  The Holding Company and the Bank were required to submit
a plan to improve interest rate risk management practices that are appropriate for the
size and complexity of the organization.
  
    
    Allowance for Loan and Lease Losses  The Bank was required to submit an acceptable
written program for the maintenance of an adequate ALLL, to be reviewed by the Banks
board of directors on at least a quarterly basis with reports regarding the review
submitted to the FRBC and OFIR within 30 days after the end of each calendar quarter.
    
    Earnings Plan and Budget  The Bank was required to submit a business plan and
budget for the remainder of 2010 to improve the Banks earnings and overall condition.
   
    
    Criticized Loans  The Written Agreement requires additional internal review and
approval of renewal, extension or restructurings of certain criticized credits and
certification of such review and approval.
    
    Allowance for Loan and Lease Losses  The Bank is required, within 30 days from the
receipt of any federal or state report of examination, to charge off all assets
classified as loss unless otherwise approved in writing by the FRBC and OFIR.
    
    Capital Plan Compliance  Once the capital plan is approved by the regulators, the
Holding Company and the Bank must notify the regulators within 30 days after the end of
each calendar quarter in which any of their capital ratios fall below the minimum
ratios set forth in the plan. Management is required to monitor adherence to the
capital plan and make monthly reports to the boards of directors.
    
    Annual Business Plan and Budget  A business plan and budget for each calendar year
subsequent to 2010 shall be submitted to the FRBC and OFIR in December prior to the
beginning of that calendar year.
    
    Compliance with Laws  The Holding Company and the Bank must comply with applicable
regulations relating to prior notice of director and senior executive officer
appointments and relating to restrictions on indemnification and severance payments.
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
    
    Progress Reports  Within 30 days after the end of each calendar quarter, the Bank
is required to submit to the FRBC and OFIR written progress reports detailing its
compliance efforts.
    
    Negative Covenants  The Holding Company and the Bank are generally prohibited from
paying dividends, the Holding Company is prohibited frompaying interest or
principal on subordinated debentures or trust preferred securities, the Bank is
generally prohibited from transferring funds to the Holding Company, the Holding
Company is prohibited from incurring, increasing, or guaranteeing debt and generally
prohibited from purchasing or redeeming any shares of the Holding Companys stock, in
each case without prior regulatory approval.
    Payment of Dividends
    8




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Capital Adequacy and Prompt Corrective Action
   Significantly
    
    CriticallyWell
    
    Adequately
    
    Under
    
    Under
    
    UnderCapitalized
    
    Capitalized
    
    Capitalized
    
    Capitalized
    
    CapitalizedTotal Capital to risk weighted assets (1)
    
    >
    10
    %
    
    >
    8
    %
    
    <
    8
    %
    
    <
    6
    %Tier 1 Capital to risk weighted assets (1)
    
    >
    6
    
    
    >
    4
    
    
    <
    4
    
    
    <
    3Tier 1 Leverage (2)
    
    >
    5
    
    
    >
    4
    
    
    <
    4
    
    
    <
    3Tangible equity to total assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    <
    2
    %
 
 (1)
    
    Total Capital is comprised of Tier 1 Capital, a portion of the allowance for loan losses and qualifying subordinated debt. Tier 1 Capital is calculated as follows: total shareholders equity + trust
preferred securities  goodwill  accumulated other comprehensive income (loss)  other intangible assets.(2)
    
    Tier 1 Capital to quarterly average assets.   
    
    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.
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FDIC Insurance Assessments
    Temporary Liquidity Guarantee Program
  Interstate Banking
  10




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##### Table of Contents



Transactions with Affiliates
  Loans to Insiders
  Community Reinvestment Act
  Fair Lending and Consumer Laws
   11




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Gramm-Leach-Bliley Act of 1999
      Anti-Money Laundering and the USA Patriot Act of 2001
  12




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EESA and Troubled Asset Relief Capital Purchase Program
    American Recovery and Reinvestment Act
   13




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Dodd-Frank Wall Street Reform and Consumer Protection Act
  
    
    Centralize responsibility for consumer financial protection by creating a new agency, the
Consumer Financial Protection Bureau, responsible for implementing, examining, and enforcing
compliance with federal consumer financial laws.
    
    Create the Financial Stability Oversight Council that will recommend to the Federal Reserve
increasingly strict rules for capital, leverage, liquidity, risk management and other
requirements as companies grow in size and complexity.
    
    Provide mortgage reform provisions regarding a customers ability to repay, restricting
variable-rate lending by requiring that the ability to repay variable-rate loans be determined
by using the maximum rate that will apply during the first five years of a variable-rate loan
term, and making more loans subject to provisions for higher cost loans, new disclosures, and
certain other revisions.
    
    Change the assessment base for federal deposit insurance from the amount of insured
deposits to consolidated assets less tangible capital, eliminate the ceiling on the size of
the Deposit Insurance Fund (DIF), and increase the floor on the size of the DIF, which
generally will require an increase in the level of assessments for institutions with assets in
excess of $10 billion.
    
    Make permanent the $250,000 limit for federal deposit insurance and provide unlimited
federal deposit insurance until January 1, 2013 for non-interest bearing demand transaction
accounts at all insured depository institutions.
    
    Implement corporate governance revisions, including with regard to executive compensation
and proxy access by shareholders, that apply to all public companies, not just financial
institutions.
    
    Repeal the federal prohibitions on the payment of interest on demand deposits, thereby
permitting depository institutions to pay interest on business transaction and other accounts.
    
    Amend the Electronic Fund Transfer Act (EFTA) to, among other things, give the Federal
Reserve the authority to establish rules regarding interchange fees charged for electronic
debit transactions by payment card issuers having assets over $10 billion and to enforce a new
statutory requirement that such fees be reasonable and proportional to the actual cost of a
transaction to the issuer.
    
    Require or permit the federal banking agencies to adopt regulations affecting banking
institutions capital requirements in a number of respects, including potentially more
stringent capital requirements.
 14




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Basel III
    ECONOMIC FACTORS AND MONETARY POLICY
  ENVIRONMENTAL MATTERS
  15




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ITEM 1A. RISK FACTORS
  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 operating results 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.
   16




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Our core lending and other businesses continue to be adversely affected by the historic weakness in
the national and regional economies in which we operate, particularly Michigan. Our ability to
generate earnings and maintain regulatory capital ratios at acceptable levels at our Holding
Company and the Bank depends substantially on developments in those economies. Also, our potential
inability to comply with applicable laws, regulations and regulatory policies or standards due to
the effects of these conditions on our results of operations and financial condition may result in
heightened regulatory scrutiny and require us to take actions to protect depositors that are not in
the best interests of our shareholders.
  
    
    A substantial amount of our lending business originates in Michigan. Of our total
portfolio loans, approximately 70% are to borrowers located, or secured by properties, in
Michigan and approximately 10% are to borrowers located, or secured by properties, in Ohio.
These states have been severely and disproportionately affected by the recent economic
downturn. Unemployment rates in these states have been substantially higher than the
national average and real estate collateral values have fallen significantly.
    
    Our ability to return to a positive net income is largely dependent upon our future
credit costs. Our loan portfolios-particularly our commercial real estate and residential
mortgage loan portfolios, which have accounted for a disproportionate amount of our loan
loss provisions since the fourth quarter of 2008-continue to be adversely affected by
economic conditions and the ongoing correction in real estate prices in our markets.
Despite the progress made in the latter parts of 2010, a significant portion of our
commercial loan portfolio continues to be classified as nonperforming loans or watchlist
loans. The latter are loans that have migrated within our loan rating system to a level
that requires increased oversight. We attempt to maintain an appropriate allowance for
loan losses to provide for potential losses in our loan portfolios. In view of the
weakness and uncertainties in the national and regional economies in which we operate and
the inherent difficulty in predicting future events, we may find it necessary to continue
to take loan loss provisions in future periods in amounts that substantially exceed loan
loss provisions in prior periods in order to maintain our allowance for loan losses at a
level we deem appropriate.
  17




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Our business may be adversely affected by the highly regulated environment in which we operate.
Changes in applicable laws, regulations, and regulatory practices at either the federal or state
level may result in the imposition of additional costs or restrict our ability to operate our
business in the manner most beneficial to our shareholders.
    18




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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.
    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.
  19




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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.
     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.
 20




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##### Table of Contents



If the FDIC raises the assessment rate charged to its insured financial institutions, our FDIC
insurance premium may increase and this could have a negative effect on our expenses and results of
operations.
    We may not realize our deferred income tax assets and loss carryforwards.
   21




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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;
    
    Adverse changes in interest rate;
    
    Adverse changes in the real estate market;
    
    Negative economic news;
    
    Adverse changes in government regulations;
    
    Delisting of our common stock from NASDAQ; and
    
    Geopolitical conditions such as acts or threats of terrorism or military conflicts.
  If our common stock fails to meet the listing requirements of NASDAQ and is delisted from trading
on the NASDAQ, the market price of our common stock could be adversely affected.
   22




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An investment in our common stock is not an insured deposit.
  We may be adversely affected by the soundness of other financial institutions.
  In order to maintain and strengthen our capital base, we may need to raise additional capital in
transactions that may be highly dilutive to our common shareholders. If such capital becomes
needed, our failure to raise additional capital could have serious consequences for our business.
     Our Holding Company may not have sufficient resources to make capital contributions to the Bank if
required by bank regulatory agencies, or if we might otherwise wish to do so, in order to maintain
the Banks capital ratios at acceptable levels.
 23




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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 and are restricted by a supervisory agreement with our regulators.
   Our efforts to resolve problem assets in a manner beneficial to the Corporation may not be
successful.
  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.
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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.
  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 our financial
condition and results of operations.
  We may not be able to attract and retain skilled people. If we were to lose key employees, we may
experience a disruption in our relationship with certain customers.
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The recently enacted Dodd-Frank Act may adversely impact Citizens results of operations, financial
condition or liquidity.
  New accounting or tax pronouncements or interpretations may be issued by the accounting profession,
regulators or other government bodies which could change existing accounting methods. Changes in
accounting methods could negatively impact 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.
  26




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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 controls and procedures may fail or be circumvented which could have a material adverse effect
on our business, results of operations and financial condition.
  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
  27




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ITEM 3. LEGAL PROCEEDINGS
   
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
   28




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Common StockPrice Range
    
    ClosingHigh
    
    Low
    
    Price2010First quarter
    
    $
    1.19
    
    
    $
    0.66
    
    
    $
    1.14Second quarter
    
    
    1.50
    
    
    
    0.80
    
    
    
    0.85Third quarter
    
    
    1.07
    
    
    
    0.74
    
    
    
    0.90Fourth quarter
    
    
    1.00
    
    
    
    0.55
    
    
    
    0.62Year
    
    
    1.50
    
    
    
    0.55
    
    
    
    0.622009First quarter
    
    $
    3.26
    
    
    $
    0.65
    
    
    $
    1.55Second quarter
    
    
    2.25
    
    
    
    0.71
    
    
    
    0.71Third quarter
    
    
    1.18
    
    
    
    0.50
    
    
    
    0.76Fourth quarter
    
    
    0.78
    
    
    
    0.48
    
    
    
    0.69Year
    
    
    3.26
    
    
    
    0.48
    
    
    
    0.69
  Stock Performance Graph
  
 2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010CRBC
    
    $
    100.00
    
    
    $
    99.81
    
    
    $
    58.40
    
    
    $
    12.27
    
    
    $
    2.84
    
    
    $
    2.53KRX
    
    
    100.00
    
    
    
    108.54
    
    
    
    84.75
    
    
    
    69.10
    
    
    
    53.83
    
    
    
    64.79SPX
    
    
    100.00
    
    
    
    115.76
    
    
    
    122.11
    
    
    
    77.00
    
    
    
    97.31
    
    
    
    141.48
  29




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Issuer Repurchases of Equity Securities
 Total Number of
    
    
    Maximum Number ofShares Purchased as
    
    
    Shares That May YetTotal Number of
    
    
    
    
    
    
    Part of Publicly
    
    
    Be Purchased UnderShares Purchased
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    The Plans or ProgramsPeriod
    
    (1)
    
    
    Per Share
    
    
    Programs
    
    
    (2)October 2010
    
    
    1,998
    
    
    $
    0.68
    
    
    
    
    
    
    
    1,241,154November 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,241,154December 2010
    
    
    897
    
    
    
    0.62
    
    
    
    
    
    
    
    1,241,154Total
    
    
    2,895
    
    
    $
    0.66
    
    
    
    
    
    
    
    1,241,154
 
 (1)
    
    Shares repurchased in connection with taxes due from employees as a result of the vesting of certain restricted
share awards in accordance with the related grant agreements. These repurchases were not part of the repurchase
program approved in October 2003.(2)
    
    In October 2003, the Board of Directors approved the repurchase of 3,000,000 shares of common stock from time to
time in the market. There is no expiration date for the repurchase program. The repurchase of shares is generally
prohibited, with certain exceptions, by the CPP Letter Agreement while Treasury continues to hold the related TARP
Preferred Stock, by the Written Agreement and by the terms of Citizens outstanding trust preferred securities, and
is also subject to limitations that may be imposed by applicable securities laws and regulations and the rules of
NASDAQ. The timing of the purchases and the number of shares to be bought at any one time also depend on market
conditions and Citizens capital requirements. There can be no assurance that Citizens will repurchase the
remaining shares authorized to be repurchased. 
 ITEM 6.
    
    SELECTED FINANCIAL DATA
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Five Year Summary of Selected Financial Data
 (in thousands, except per share data)
    
    2010
    
    2009
    
    2008
    
    2007
    
    2006For The YearNet interest income
    
    $
    329,064
    
    
    $
    310,449
    
    
    $
    343,039
    
    
    $
    376,397
    
    
    $
    254,881Provision for loan losses
    
    
    392,882
    
    
    
    323,820
    
    
    
    280,961
    
    
    
    45,573
    
    
    
    13,308Noninterest income(1)
    
    
    94,659
    
    
    
    63,133
    
    
    
    96,577
    
    
    
    118,292
    
    
    
    86,753Noninterest expense(2)
    
    
    307,087
    
    
    
    585,139
    
    
    
    482,312
    
    
    
    319,401
    
    
    
    251,496Income tax provision (benefit) from
continuing operations
    
    
    12,858
    
    
    
    (29,633
    )
    
    
    70,970
    
    
    
    30,332
    
    
    
    17,000(Loss) income from continuing operations
before income taxes
    
    
    (276,246
    )
    
    
    (535,377
    )
    
    
    (323,657
    )
    
    
    129,715
    
    
    
    76,829(Loss) Income from discontinued
operations (after tax)(3)
    
    
    (3,821
    )
    
    
    (8,469
    )
    
    
    1,575
    
    
    
    1,460
    
    
    
    3,507Net (loss) income
    
    
    (292,925
    )
    
    
    (514,213
    )
    
    
    (393,052
    )
    
    
    100,842
    
    
    
    63,336Net (loss) income attributable to common
shareholders(4)
    
    
    (314,610
    )
    
    
    (533,990
    )
    
    
    (405,016
    )
    
    
    100,842
    
    
    
    63,336Cash dividends
    
    
    
    
    
    
    
    
    
    
    21,959
    
    
    
    87,798
    
    
    
    49,530Taxable equivalent adjustment
    
    
    10,582
    
    
    
    15,574
    
    
    
    17,444
    
    
    
    17,578
    
    
    
    12,764Per Common Share Data(Loss) income from continuing operations:Basic
    
    $
    (0.79
    )
    
    $
    (2.71
    )
    
    $
    (4.32
    )
    
    $
    1.31
    
    
    $
    1.39Diluted
    
    
    (0.79
    )
    
    
    (2.71
    )
    
    
    (4.32
    )
    
    
    1.31
    
    
    
    1.39(Loss) income from discontinued
operations:Basic
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    0.02
    
    
    $
    0.02
    
    
    $
    0.08Diluted
    
    
    (0.01
    )
    
    
    (0.04
    )
    
    
    0.02
    
    
    
    0.02
    
    
    
    0.08Net (loss) income:Basic
    
    $
    (0.80
    )
    
    $
    (2.75
    )
    
    $
    (4.30
    )
    
    $
    1.33
    
    
    $
    1.47Diluted
    
    
    (0.80
    )
    
    
    (2.75
    )
    
    
    (4.30
    )
    
    
    1.33
    
    
    
    1.47Cash dividends
    
    
    
    
    
    
    
    
    
    
    0.290
    
    
    
    1.160
    
    
    
    1.155Common book value
    
    
    1.85
    
    
    
    2.69
    
    
    
    10.60
    
    
    
    20.84
    
    
    
    20.58Tangible book value(5)
    
    
    1.72
    
    
    
    2.50
    
    
    
    7.80
    
    
    
    10.20
    
    
    
    9.65Tangible common book value(6)
    
    
    1.02
    
    
    
    1.81
    
    
    
    5.69
    
    
    
    10.20
    
    
    
    9.65Shares outstanding(7)
    
    
    397,167
    
    
    
    394,397
    
    
    
    125,997
    
    
    
    75,722
    
    
    
    75,676Market value, end of year
    
    
    0.62
    
    
    
    0.69
    
    
    
    2.98
    
    
    
    14.51
    
    
    
    26.50At Year EndAssets
    
    $
    9,965,645
    
    
    $
    11,595,670
    
    
    $
    12,724,678
    
    
    $
    13,173,502
    
    
    $
    13,628,531Earning assets
    
    
    9,302,825
    
    
    
    10,864,446
    
    
    
    11,655,879
    
    
    
    11,694,841
    
    
    
    12,160,164Portfolio loans
    
    
    6,216,602
    
    
    
    7,787,905
    
    
    
    8,963,175
    
    
    
    9,332,248
    
    
    
    9,131,610Allowance for loan loss
    
    
    296,031
    
    
    
    338,940
    
    
    
    252,938
    
    
    
    161,635
    
    
    
    166,794Deposits
    
    
    7,726,834
    
    
    
    8,500,763
    
    
    
    8,630,250
    
    
    
    7,935,876
    
    
    
    8,351,598Long-term debt
    
    
    1,032,689
    
    
    
    1,512,987
    
    
    
    2,193,066
    
    
    
    2,940,015
    
    
    
    2,641,554Shareholders equity
    
    
    1,011,731
    
    
    
    1,331,036
    
    
    
    1,601,321
    
    
    
    1,577,880
    
    
    
    1,557,686Average For The YearAssets
    
    $
    10,997,062
    
    
    $
    12,126,968
    
    
    $
    12,911,620
    
    
    $
    12,982,524
    
    
    $
    7,324,087Earning assets
    
    
    10,272,769
    
    
    
    11,237,214
    
    
    
    11,600,954
    
    
    
    11,556,008
    
    
    
    6,923,491Portfolio loans
    
    
    7,175,649
    
    
    
    8,349,387
    
    
    
    9,274,707
    
    
    
    9,033,317
    
    
    
    5,451,750Allowance for loan loss
    
    
    325,844
    
    
    
    304,016
    
    
    
    186,828
    
    
    
    171,059
    
    
    
    111,363Deposits
    
    
    8,282,629
    
    
    
    8,509,676
    
    
    
    8,351,683
    
    
    
    7,829,747
    
    
    
    5,250,118Long-term debt
    
    
    1,280,839
    
    
    
    1,904,455
    
    
    
    2,520,604
    
    
    
    2,728,876
    
    
    
    980,365Shareholders equity
    
    
    1,229,945
    
    
    
    1,444,733
    
    
    
    1,558,414
    
    
    
    1,549,961
    
    
    
    660,996Financial RatiosReturn on average assets
    
    
    (2.66
    )%
    
    
    (4.24
    )%
    
    
    (3.04
    )%
    
    
    0.78
    %
    
    
    0.86
    %Return on average shareholders equity
    
    
    (23.82
    )
    
    
    (35.59
    )
    
    
    (25.22
    )
    
    
    6.51
    
    
    
    9.58Average shareholders equity/average
assets
    
    
    11.18
    
    
    
    11.91
    
    
    
    12.07
    
    
    
    11.94
    
    
    
    9.02Dividend payout ratio
    
    
    
    
    
    
    
    
    
    
    (5.59
    )
    
    
    87.07
    
    
    
    78.20Net interest margin (FTE)(8)
    
    
    3.31
    
    
    
    2.90
    
    
    
    3.10
    
    
    
    3.41
    
    
    
    3.87Efficiency ratio (non-GAAP)(9)
    
    
    73.04
    
    
    
    84.51
    
    
    
    66.56
    
    
    
    62.34
    
    
    
    69.64Allowance for loan losses as a percent
of portfolio loans
    
    
    4.76
    
    
    
    4.35
    
    
    
    2.82
    
    
    
    1.73
    
    
    
    1.83Allowance for loan losses as a percent
of nonperforming loans
    
    
    134.39
    
    
    
    71.43
    
    
    
    82.92
    
    
    
    85.70
    
    
    
    289.44Allowance for loan losses as a percent
of nonperforming assets
    
    
    103.30
    
    
    
    57.05
    
    
    
    57.76
    
    
    
    64.49
    
    
    
    165.75Nonperforming loans as a percent of
portfolio loans
    
    
    3.54
    
    
    
    6.09
    
    
    
    3.40
    
    
    
    2.02
    
    
    
    0.63Nonperforming assets as a percent of
portfolio loans plus ORAA(10)
    
    
    4.55
    
    
    
    7.50
    
    
    
    4.81
    
    
    
    2.65
    
    
    
    1.09Nonperforming assets as a percent of
total assets
    
    
    2.88
    
    
    
    5.12
    
    
    
    3.44
    
    
    
    1.90
    
    
    
    0.74Net loans charged off as a percent of
average portfolio loans
    
    
    6.07
    
    
    
    2.85
    
    
    
    2.04
    
    
    
    0.56
    
    
    
    0.29Leverage ratio
    
    
    7.71
    
    
    
    9.21
    
    
    
    9.66
    
    
    
    7.53
    
    
    
    7.22Tier I capital ratio
    
    
    12.11
    
    
    
    12.52
    
    
    
    12.21
    
    
    
    9.18
    
    
    
    9.41Total capital ratio
    
    
    13.51
    
    
    
    13.93
    
    
    
    14.49
    
    
    
    11.66
    
    
    
    11.90
 
 (1)
    
    Noninterest income includes a gain on investment securities of $13.9 million in 2010, a net loss on debt extinguishment of $15.9 million in 2009 and a
fair-value adjustment on loans held for sale of $20.6 million, $20.1 million and $9.4 million in 2010, 2009 and 2008, respectively.(2)
    
    Noninterest expense includes a goodwill impairment of $256.3 million and $178.1 million in 2009 and 2008, respectively: fair-value adjustments on other real
estate (ORE) properties of $13.4 million, $23.3 million and $8.1 million in 2010, 2009 and 2008, respectively; and restructuring and Republic merger-related
expenses of $8.2 million and $11.3 million in 2007 and 2006, respectively.(3)
    
    On April 23, 2010, Citizens completed a stock purchase agreement with Great Western Bank whereby Great Western Bank acquired all of the stock of Citizens
wholly owned subsidiary, F&M, in exchange for $50.0 million in cash.(4)
    
    Net loss attributable to common shareholders includes a non cash dividend to preferred shareholders of $21.7 million and $19.8 million in 2010 and 2009,
respectively; $0.2 million dividend on redeemable preferred stock and $11.7 million deemed dividend on convertible preferred stock in 2008.(5)
    
    Tangible book value is an estimate of a companys worth, if it was liquidated, to shareholders. The calculation using ending balances is as follows:
(Shareholders equity   Goodwill  Intangible assets)/Common shares outstanding.(6)
    
    Tangible common book value is an estimate of a companys worth, if it was liquidated, to common shareholders. The calculation using ending balances is as
follows: (Shareholders equity  Preferred stock  Goodwill  Intangible assets)/Common shares outstanding.(7)
    
    See Note 14 for additional information on Citizens 2009 exchange of common stock for subordinated debt.(8)
    
    Net interest margin includes taxable equivalent adjustments to interest income based on a tax rate of 35%.(9)
    
    Efficiency ratio (non-GAAP) is calculated as follows: (Noninterest expense  Goodwill impairment)/(Net interest income + Taxable equivalent adjustment + Total
noninterest income  Investment securities gains (losses)).(10)
    
    Other real estate assets acquired (ORAA) includes loans held for sale. 31




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##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  ForwardLooking Statements
   OVERVIEW
 Nature
of Citizens Business
   32




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Use of Non-GAAP Financial Measures
  Net Interest Margin and Efficiency Ratio (non-GAAP financial measures)
  Tangible Equity, Tangible Common Equity and Tier 1 Common Equity Ratios (non-GAAP financial
measures)
  33




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Pre-tax Pre-Provision Profit (non-GAAP financial measure)
   ,
  34




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##### Table of Contents



Non-GAAP Reconciliation2010
    
    
    2009
    
    
    2008Efficiency Ratio (non-GAAP)(in thousands)Net interest income (A)
    
    $
    329,064
    
    
    $
    310,449
    
    
    $
    343,039Taxable equivalent adjustment (B)
    
    
    10,582
    
    
    
    15,574
    
    
    
    17,444Investment securities gain (C)
    
    
    13,896
    
    
    
    5
    
    
    
    (1
    )Noninterest income (D)
    
    
    94,659
    
    
    
    63,133
    
    
    
    96,577Noninterest expense (E)
    
    
    307,087
    
    
    
    585,139
    
    
    
    482,312Goodwill impairment (F)
    
    
    
    
    
    
    256,272
    
    
    
    178,089Efficiency ratio: (E-F)/(A+B-C+D) (non-GAAP)
    
    
    73.04
    %
    
    
    84.51
    %
    
    
    66.56
    %Ending Balances(in millions)Tangible Common Equity to Tangible Assets (non-GAAP)Total assets
    
    $
    9,966
    
    
    $
    11,932
    
    
    $
    13,086Goodwill(1)
    
    
    (318
    )
    
    
    (331
    )
    
    
    (597
    )Other intangible assets
    
    
    (10
    )
    
    
    (14
    )
    
    
    (21
    )Tangible assets (non-GAAP)
    
    $
    9,637
    
    
    $
    11,587
    
    
    $
    12,468Total shareholders equity
    
    $
    1,012
    
    
    $
    1,331
    
    
    $
    1,601Goodwill(1)
    
    
    (318
    )
    
    
    (331
    )
    
    
    (597
    )Other intangible assets
    
    
    (10
    )
    
    
    (14
    )
    
    
    (21
    )Tangible equity (non-GAAP)
    
    $
    683
    
    
    $
    986
    
    
    $
    983Tangible equity
    
    $
    683
    
    
    $
    986
    
    
    $
    983Preferred stock
    
    
    (278
    )
    
    
    (272
    )
    
    
    (266
    )Tangible common equity (non-GAAP)
    
    $
    405
    
    
    $
    714
    
    
    $
    717Tier 1 Common Equity (non-GAAP)Total shareholders equity
    
    $
    1,012
    
    
    $
    1,331
    
    
    $
    1,601Qualifying capital securities
    
    
    74
    
    
    
    73
    
    
    
    174Goodwill(1)
    
    
    (318
    )
    
    
    (331
    )
    
    
    (597
    )Accumulated other comprehensive (income) loss
    
    
    20
    
    
    
    7
    
    
    
    50Other intangible assets
    
    
    (10
    )
    
    
    (14
    )
    
    
    (21
    )Tier 1 capital (regulatory)
    
    $
    777
    
    
    $
    1,066
    
    
    $
    1,207Tier 1 capital (regulatory)
    
    $
    777
    
    
    $
    1,066
    
    
    $
    1,207Qualifying capital securities
    
    
    (74
    )
    
    
    (73
    )
    
    
    (174
    )Preferred stock
    
    
    (278
    )
    
    
    (272
    )
    
    
    (266
    )Total Tier 1 common equity (non-GAAP)
    
    $
    425
    
    
    $
    721
    
    
    $
    767Net risk-weighted assets (regulatory)
    
    $
    6,417
    
    
    $
    8,516
    
    
    $
    9,883Equity to assets
    
    
    10.15
    %
    
    
    11.16
    %
    
    
    12.24
    %Tier 1 common equity (non-GAAP)
    
    
    6.62
    
    
    
    8.47
    
    
    
    7.76Tangible equity to tangible assets (non-GAAP)
    
    
    7.09
    
    
    
    8.51
    
    
    
    7.88Tangible common equity to tangible assets (non-GAAP)
    
    
    4.20
    
    
    
    6.16
    
    
    
    5.75
 
 (1)
    
    Goodwill represents goodwill for Continuing Operations, as shown on the balance sheet, and includes
goodwill for Discontinued Operations of $12.6 million in 2009 and 2008. 35




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Performance Summary
  Three Year Summary of Net Income Components(in thousands)
    
    2010
    
    
    2009
    
    
    2008Interest income
    
    $
    484,444
    
    
    $
    553,410
    
    
    $
    684,899Interest expense
    
    
    155,380
    
    
    
    242,961
    
    
    
    341,860Net interest income
    
    
    329,064
    
    
    
    310,449
    
    
    
    343,039Provision for loan losses
    
    
    392,882
    
    
    
    323,820
    
    
    
    280,961Noninterest income
    
    
    94,659
    
    
    
    63,133
    
    
    
    96,577Noninterest expense
    
    
    307,087
    
    
    
    585,139
    
    
    
    482,312Income tax provision (benefit) from continuing operations
    
    
    12,858
    
    
    
    (29,633
    )
    
    
    70,970Income (loss) from discontinued operations net of income tax
    
    
    (3,821
    )
    
    
    (8,469
    )
    
    
    1,575Net loss
    
    
    (292,925
    )
    
    
    (514,213
    )
    
    
    (393,052
    )Deemed dividend on convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    (11,737
    )Dividend on redeemable preferred stock
    
    
    (21,685
    )
    
    
    (19,777
    )
    
    
    (227
    )Net loss attributable to common shareholders
    
    $
    (314,610
    )
    
    $
    (533,990
    )
    
    $
    (405,016
    )Pre-tax pre-provision profit (non-GAAP)Loss from continuing operations
    
    $
    (289,104
    )
    
    $
    (505,744
    )
    
    $
    (394,627
    )Income tax provision (benefit) from continuing operations
    
    
    12,858
    
    
    
    (29,633
    )
    
    
    70,970Provision for loan losses
    
    
    392,882
    
    
    
    323,820
    
    
    
    280,961Net loss on loans held for sale
    
    
    20,617
    
    
    
    20,086
    
    
    
    9,373Net loss on debt extinguishment
    
    
    
    
    
    
    15,929
    
    
    
    Investment securities (gains) losses
    
    
    (13,896
    )
    
    
    (5
    )
    
    
    1Losses on other real estate (ORE)
    
    
    13,438
    
    
    
    23,312
    
    
    
    8,098Goodwill impairment
    
    
    
    
    
    
    256,272
    
    
    
    178,089(Gain) related to Visa USA shares(1)
    
    
    
    
    
    
    
    
    
    
    (2,124
    )Fair value adjustment on bank owned life insurance (1)
    
    
    (67
    )
    
    
    (144
    )
    
    
    3,447Fair-value adjustment on swaps (1)
    
    
    782
    
    
    
    606
    
    
    
    (1,287
    )FDIC special assessment(2)
    
    
    
    
    
    
    5,351
    
    
    
    Loss on auction rate securities repurchase(2)
    
    
    
    
    
    
    
    
    
    
    2,406Captive
insurance impairment
charge(2)
    
    
    
    
    
    
    
    
    
    
    1,053Pre-tax pre-provision profit (non-GAAP)
    
    $
    137,510
    
    
    $
    109,850
    
    
    $
    156,360
 
 (1)
    
    Amounts contained in line item Other income on Consolidated Statements of
Operations(2)
    
    Amounts contained in line item Other expense on Consolidated Statements of
Operations  
    
    The increase in net interest income from 2009 was primarily a result of an increase
in net interest margin from 2.90% to 3.31%, partially offset by a decrease of $964.4
million in average earning assets. The increase in net interest margin over the
comparable period in 2009 was primarily the result of expanding commercial and consumer
loan spreads, declining deposit costs, reductions in high-cost funding, and wholesale
funding repricing to lower fixed rates, partially offset by the effect of replacing
declining loan balances with lower-yielding investment securities and money market
investments. The decrease in average earning assets was due to weak loan demand in the
current Midwest economic environment and the effects of the accelerated problem asset
resolution initiatives undertaken in 2010, partially offset by an increase in investment
securities and money market investments.
 
    
    The increase in the provision for loan losses over 2009 was primarily a result of
higher net charge-offs primarily due to the additional charge-offs related to the bulk sales and individual
workouts of nonperforming commercial and residential mortgage loans throughout 2010 as well
as an incremental risk allocated
 36




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allowance recorded during the fourth quarter of 2010. As a result, total net
charge-offs increased $198.0 million or 83.2% over 2009 to 6.07% of average portfolio loans
outstanding compared with 2.85% for 2009.
 
    
    The increase in noninterest income from 2009 was primarily due to a net loss on
debt extinguishment ($15.9 million) in connection with the exchange offers completed in
the third quarter of 2009 as well as higher gains on investment securities of $13.9
million in 2010.
 
    
    The decrease in noninterest expense from 2009 was primarily the result of the
goodwill impairment charge of $256.3 million in the second quarter of 2009, lower losses
on other real estate ($9.9 million), lower salaries and employee benefits ($9.0 million),
and lower other loan expenses ($4.2 million), partially offset by higher other expense.
The decline in losses on other real estate was primarily the result of fewer writedowns
compared to 2009 to reflect fair-value declines for the underlying collateral. The
decline in salaries and employee benefits was primarily due to lower staffing levels in
2010 and suspending employer contributions to the 401(k) plan in 2009. Lower other loan
expense was primarily the result of lower commercial and residential mortgage origination
volume and foreclosure-related expenses. Other expense increased primarily due to higher
overall FDIC insurance.
 
    
    The increase in the income tax expense from 2009 was primarily the result of
alternative minimum tax calculations.
 
    
    The increase in pre-tax pre-provision profit from 2009 was primarily the result of
higher net interest income (primarily due to an increase in net interest margin), higher
noninterest income (primarily due to interest rate swap income recognition) and lower
noninterest expense (due to lower losses on other real estate and lower salaries and
employee benefits, partially offset by higher FDIC insurance expense).
  CRITICAL ACCOUNTING POLICIES
  Allowance for Loan Losses
  37




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38




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Goodwill
    39




---



##### Table of Contents



Fair Value Measurements
   Pension and Postretirement Benefits
  40




---



##### Table of Contents



Income Taxes
   41




---



##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS
  SIGNIFICANT DEVELOPMENTS IN 2010
      SIGNIFICANT DEVELOPMENTS IN 2009 AND 2008
 Goodwill Impairment Charges
  42




---



##### Table of Contents



Exchange of Common Stock for Long-Term Debt
  Issuances of Capital in 2008
    RESULTS OF OPERATIONS
 NET INTEREST INCOME
  43




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##### Table of Contents



Average Balances/Net Interest Income/Average Rates
 2010
    
    
    2009
    
    
    2008Year 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
    
    $
    605,217
    
    
    $
    1,501
    
    
    
    0.25
    %
    
    $
    502,584
    
    
    $
    1,257
    
    
    
    0.25
    %
    
    $
    38,993
    
    
    $
    374
    
    
    
    0.96
    %Investment securities (3):Taxable
    
    
    1,901,195
    
    
    
    72,545
    
    
    
    3.82
    
    
    
    1,571,960
    
    
    
    73,796
    
    
    
    4.69
    
    
    
    1,412,012
    
    
    
    73,566
    
    
    
    5.21Tax-exempt
    
    
    366,044
    
    
    
    16,035
    
    
    
    6.74
    
    
    
    585,036
    
    
    
    25,074
    
    
    
    6.59
    
    
    
    640,330
    
    
    
    27,771
    
    
    
    6.67FHLB and Federal Reserve stock
    
    
    154,959
    
    
    
    3,776
    
    
    
    2.44
    
    
    
    152,762
    
    
    
    4,216
    
    
    
    2.76
    
    
    
    147,585
    
    
    
    7,211
    
    
    
    4.89Portfolio Loans (4):Commercial and industrial
    
    
    1,728,712
    
    
    
    81,069
    
    
    
    4.80
    
    
    
    2,183,525
    
    
    
    100,573
    
    
    
    4.70
    
    
    
    2,587,687
    
    
    
    140,008
    
    
    
    5.50Commercial real estate
    
    
    2,631,901
    
    
    
    139,307
    
    
    
    5.30
    
    
    
    2,905,011
    
    
    
    153,921
    
    
    
    5.30
    
    
    
    3,079,603
    
    
    
    198,364
    
    
    
    6.44Residential mortgage
    
    
    867,500
    
    
    
    43,862
    
    
    
    5.06
    
    
    
    1,135,289
    
    
    
    57,121
    
    
    
    5.03
    
    
    
    1,319,198
    
    
    
    80,607
    
    
    
    6.11Direct consumer
    
    
    1,133,691
    
    
    
    68,794
    
    
    
    6.07
    
    
    
    1,313,718
    
    
    
    79,581
    
    
    
    6.06
    
    
    
    1,457,842
    
    
    
    98,150
    
    
    
    6.73Indirect consumer
    
    
    813,845
    
    
    
    55,629
    
    
    
    6.84
    
    
    
    811,844
    
    
    
    55,144
    
    
    
    6.79
    
    
    
    830,377
    
    
    
    56,068
    
    
    
    6.75Total portfolio loans
    
    
    7,175,649
    
    
    
    388,661
    
    
    
    5.44
    
    
    
    8,349,387
    
    
    
    446,340
    
    
    
    5.37
    
    
    
    9,274,707
    
    
    
    573,197
    
    
    
    6.21Loans held for sale (4)
    
    
    69,705
    
    
    
    1,926
    
    
    
    2.76
    
    
    
    75,485
    
    
    
    2,727
    
    
    
    3.61
    
    
    
    87,327
    
    
    
    2,780
    
    
    
    3.18Total earning assets
    
    
    10,272,769
    
    
    
    484,444
    
    
    
    4.82
    
    
    
    11,237,214
    
    
    
    553,410
    
    
    
    5.06
    
    
    
    11,600,954
    
    
    
    684,899
    
    
    
    6.05Nonearning AssetsCash and due from banks
    
    
    163,203
    
    
    
    
    
    
    
    
    
    
    
    158,568
    
    
    
    
    
    
    
    
    
    
    
    195,012Bank premises and equipment
    
    
    107,382
    
    
    
    
    
    
    
    
    
    
    
    114,667
    
    
    
    
    
    
    
    
    
    
    
    119,228Investment securityfair value adjustment
    
    
    54,451
    
    
    
    
    
    
    
    
    
    
    
    19,725
    
    
    
    
    
    
    
    
    
    
    
    5,463Other nonearning assets
    
    
    725,101
    
    
    
    
    
    
    
    
    
    
    
    900,810
    
    
    
    
    
    
    
    
    
    
    
    1,177,791Assets of discontinued operations
    
    
    108,615
    
    
    
    
    
    
    
    
    
    
    
    356,141
    
    
    
    
    
    
    
    
    
    
    
    329,933Allowance for loan losses
    
    
    (325,844
    )
    
    
    
    
    
    
    
    
    
    
    (304,016
    )
    
    
    
    
    
    
    
    
    
    
    (186,828
    )Total assets
    
    $
    11,105,677
    
    
    
    
    
    
    
    
    
    
    $
    12,483,109
    
    
    
    
    
    
    
    
    
    
    $
    13,241,553Interest-Bearing LiabilitiesDeposits:Interest-bearing demand
    
    
    1,008,871
    
    
    
    2,741
    
    
    
    0.27
    
    
    
    929,152
    
    
    
    3,958
    
    
    
    0.43
    
    
    
    725,305
    
    
    
    4,701
    
    
    
    0.65Savings deposits
    
    
    2,561,596
    
    
    
    15,785
    
    
    
    0.62
    
    
    
    2,521,100
    
    
    
    19,661
    
    
    
    0.78
    
    
    
    2,475,644
    
    
    
    42,856
    
    
    
    1.73Time deposits
    
    
    3,405,281
    
    
    
    80,000
    
    
    
    2.35
    
    
    
    3,867,946
    
    
    
    127,892
    
    
    
    3.31
    
    
    
    4,060,786
    
    
    
    163,488
    
    
    
    4.03Short-term borrowings
    
    
    36,744
    
    
    
    80
    
    
    
    0.22
    
    
    
    51,291
    
    
    
    193
    
    
    
    0.38
    
    
    
    305,047
    
    
    
    7,944
    
    
    
    2.60Long-term debt
    
    
    1,280,839
    
    
    
    56,774
    
    
    
    4.43
    
    
    
    1,904,455
    
    
    
    91,257
    
    
    
    4.79
    
    
    
    2,520,604
    
    
    
    122,871
    
    
    
    4.87Total interest-bearing
liabilities
    
    
    8,293,331
    
    
    
    155,380
    
    
    
    1.87
    
    
    
    9,273,944
    
    
    
    242,961
    
    
    
    2.62
    
    
    
    10,087,386
    
    
    
    341,860
    
    
    
    3.39Noninterest-Bearing Liabilities
and Shareholders Equity
    
    
    1,306,881Noninterest-bearing demand
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,191,478
    
    
    
    
    
    
    
    
    
    
    
    1,089,948Other liabilities
    
    
    146,669
    
    
    
    
    
    
    
    
    
    
    
    155,401
    
    
    
    
    
    
    
    
    
    
    
    127,170Liabilities of discontinued operations
    
    
    128,851
    
    
    
    
    
    
    
    
    
    
    
    417,553
    
    
    
    
    
    
    
    
    
    
    
    378,635Shareholders equity
    
    
    1,229,945
    
    
    
    
    
    
    
    
    
    
    
    1,444,733
    
    
    
    
    
    
    
    
    
    
    
    1,558,414Total liabilities and
shareholders equity
    
    $
    11,105,677
    
    
    
    
    
    
    
    
    
    
    $
    12,483,109
    
    
    
    
    
    
    
    
    
    
    $
    13,241,553Net Interest Income
    
    
    
    
    
    $
    329,064
    
    
    
    
    
    
    
    
    
    
    $
    310,449
    
    
    
    
    
    
    
    
    
    
    $
    343,039Interest Spread(5)
    
    
    
    
    
    
    
    
    
    
    2.95
    
    
    
    
    
    
    
    
    
    
    
    2.44
    
    
    
    
    
    
    
    
    
    
    
    2.66Contribution of noninterest bearing sources of funds
    
    
    
    
    
    
    
    
    
    
    0.36
    
    
    
    
    
    
    
    
    
    
    
    0.46
    
    
    
    
    
    
    
    
    
    
    
    0.44Net Interest Margin(5)(6)
    
    
    
    
    
    
    
    
    
    
    3.31
    %
    
    
    
    
    
    
    
    
    
    
    2.90
    %
    
    
    
    
    
    
    
    
    
    
    3.10
    %
 
 (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 $10.6
million, $15.6 million, and $17.4 million for the years ended December 31, 2010, 2009,
and 2008,
respectively, based on a tax rate of 35%.(3)
    
    For presentation in this table, average balances and the corresponding
average rates for investment securities are based upon historical cost,
adjusted for amortization of premiums and accretion of discounts.(4)
    
    Nonaccrual loans are included in average balances for each applicable loan
category.(5)
    
    The interest spread and net interest margin are presented on a tax-equivalent
basis.(6)
    
    Because noninterest-bearing funding sources, demand deposits, other liabilities and
shareholders equity also support earning assets, the net interest margin exceeds the
interest spread. 2010 compared with 2009
  2009 compared with 2008
  
 44




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##### Table of Contents



Analysis of Changes in Interest Income and Interest Expense
 2010 Compared to 2009
    
    
    2009 Compared to 2008Increase (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 on Earning Assets:Money market investments
    
    $
    244
    
    
    $
    (11
    )
    
    $
    255
    
    
    $
    883
    
    
    $
    (467
    )
    
    $
    1,350Investment securities:Taxable
    
    
    (1,251
    )
    
    
    (15,179
    )
    
    
    13,928
    
    
    
    230
    
    
    
    (7,663
    )
    
    
    7,893Tax-exempt
    
    
    (9,039
    )
    
    
    543
    
    
    
    (9,582
    )
    
    
    (2,697
    )
    
    
    (324
    )
    
    
    (2,373
    )FHLB and Federal Reserve stock
    
    
    (440
    )
    
    
    (500
    )
    
    
    60
    
    
    
    (2,995
    )
    
    
    (3,240
    )
    
    
    245Loans:Commercial and industrial
    
    

    (19,504
    )
    
    
    1,794
    
    
    
    (21,298
    )
    
    
    (39,435
    )
    
    
    (19,051
    )
    
    
    (20,384
    )Commercial real estate
    
    
    (14,614
    )
    
    
    (158
    )
    
    
    (14,456
    )
    
    
    (44,443
    )
    
    
    (33,553
    )
    
    
    (10,890
    )Residential mortgage
    
    
    (13,259
    )
    
    
    279
    
    
    
    (13,538
    )
    
    
    (23,486
    )
    
    
    (13,124
    )
    
    
    (10,362
    )Direct consumer
    
    
    (10,787
    )
    
    
    137
    
    
    
    (10,924
    )
    
    
    (18,569
    )
    
    
    (9,220
    )
    
    
    (9,349
    )Indirect consumer
    
    
    485
    
    
    
    349
    
    
    
    136
    
    
    
    (924
    )
    
    
    443
    
    
    
    (1,367
    )Total portfolio loans
    
    
    (57,679
    )
    
    
    2,401
    
    
    
    (60,080
    )
    
    
    (126,857
    )
    
    
    (74,505
    )
    
    
    (52,352
    )Loans held for sale
    
    
    (801
    )
    
    
    (604
    )
    
    
    (197
    )
    
    
    (53
    )
    
    
    349
    
    
    
    (402
    )Total
    
    
    (68,966
    )
    
    
    (13,350
    )
    
    
    (55,616
    )
    
    
    (131,489
    )
    
    
    (85,850
    )
    
    
    (45,639
    )Interest Expense on Interest Bearing Liabilities:Deposits:Interest-bearing demand
    
    
    (1,217
    )
    
    
    (1,533
    )
    
    
    316
    
    
    
    (743
    )
    
    
    (1,853
    )
    
    
    1,110Savings
    
    
    (3,876
    )
    
    
    (4,187
    )
    
    
    311
    
    
    
    (23,195
    )
    
    
    (23,964
    )
    
    
    769Time
    
    
    (47,892
    )
    
    
    (33,889
    )
    
    
    (14,003
    )
    
    
    (35,596
    )
    
    
    (28,032
    )
    
    
    (7,564
    )Short-term borrowings
    
    
    (113
    )
    
    
    (68
    )
    
    
    (45
    )
    
    
    (7,751
    )
    
    
    (3,924
    )
    
    
    (3,827
    )Long-term debt
    
    
    (34,483
    )
    
    
    (6,424
    )
    
    
    (28,059
    )
    
    
    (31,614
    )
    
    
    (1,744
    )
    
    
    (29,870
    )Total
    
    
    (87,581
    )
    
    
    (46,101
    )
    
    
    (41,480
    )
    
    
    (98,899
    )
    
    
    (59,517
    )
    
    
    (39,382
    )Net Interest Income
    
    $
    18,615
    
    
    $
    32,751
    
    
    $
    (14,136
    )
    
    $
    (32,590
    )
    
    $
    (26,333
    )
    
    $
    (6,257
    )
 
 (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. 2010 compared with 2009
  45




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##### Table of Contents



2009 compared with 2008
  PROVISION FOR LOAN LOSSES
  NONINTEREST INCOME
  Noninterest Income
 Year Ended December 31,
    
    
    $ Change
    
    
    % Change(in thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2010-2009
    
    
    2009-2008
    
    
    2010-2009
    
    
    2009-2008Service charges on deposit accounts
    
    $
    40,336
    
    
    $
    42,116
    
    
    $
    45,623
    
    
    $
    (1,780
    )
    
    $
    (3,507
    )
    
    
    (4.2
    )%
    
    
    (7.7
    )%Trust fees
    
    
    15,603
    
    
    
    14,784
    
    
    
    17,697
    
    
    
    819
    
    
    
    (2,913
    )
    
    
    5.5
    
    
    
    (16.5
    )Mortgage and other loan income
    
    
    10,486
    
    
    
    12,393
    
    
    
    11,315
    
    
    
    (1,907
    )
    
    
    1,078
    
    
    
    (15.4
    )
    
    
    9.5Brokerage and investment fees
    
    
    4,579
    
    
    
    5,194
    
    
    
    6,866
    
    
    
    (615
    )
    
    
    (1,672
    )
    
    
    (11.8
    )
    
    
    (24.4
    )ATM network user fees
    
    
    7,057
    
    
    
    6,283
    
    
    
    6,023
    
    
    
    774
    
    
    
    260
    
    
    
    12.3
    
    
    
    4.3Bankcard fees
    
    
    8,859
    
    
    
    7,714
    
    
    
    7,212
    
    
    
    1,145
    
    
    
    502
    
    
    
    14.8
    
    
    
    7.0Net loss on loans held for sale
    
    
    (20,617
    )
    
    
    (20,086
    )
    
    
    (9,373
    )
    
    
    (531
    )
    
    
    (10,713
    )
    
    
    (2.6
    )
    
    
    (114.3
    )Net loss on debt extinguishment
    
    
    
    
    
    
    (15,929
    )
    
    
    
    
    
    
    15,929
    
    
    
    (15,929
    )
    
    
    N/M
    
    
    
    N/MInvestment securities gains (losses)
    
    
    13,896
    
    
    
    5
    
    
    
    (1
    )
    
    
    13,891
    
    
    
    6
    
    
    
    N/M
    
    
    
    N/MOther income
    
    
    14,460
    
    
    
    10,659
    
    
    
    11,215
    
    
    
    3,801
    
    
    
    (556
    )
    
    
    35.7
    
    
    
    (5.0
    )Total noninterest income
    
    $
    94,659
    
    
    $
    63,133
    
    
    $
    96,577
    
    
    $
    31,526
    
    
    $
    (33,444
    )
    
    
    49.9
    
    
    
    (34.6
    )
 
 N/M
    
     Not meaningful 2010 compared with 2009
  46




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##### Table of Contents



2009 compared with 2008
  NONINTEREST EXPENSE
  Noninterest Expense
 Year Ended December 31,
    
    
    $ Change
    
    
    % Change(in thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2010-2009
    
    
    2009-2008
    
    
    2010-2009
    
    
    2009-2008Salaries and employee benefits
    
    $
    126,384
    
    
    $
    135,389
    
    
    $
    153,176
    
    
    $
    (9,005
    )
    
    $
    (17,787
    )
    
    
    (6.7
    )%
    
    
    (11.6
    )%Occupancy
    
    
    26,963
    
    
    
    26,723
    
    
    
    27,422
    
    
    
    240
    
    
    
    (699
    )
    
    
    0.9
    
    
    
    (2.5
    )Professional services
    
    
    10,550
    
    
    
    11,877
    
    
    
    15,013
    
    
    
    (1,327
    )
    
    
    (3,136
    )
    
    
    (11.2
    )
    
    
    (20.9
    )Equipment
    
    
    12,482
    
    
    
    11,714
    
    
    
    12,633
    
    
    
    768
    
    
    
    (919
    )
    
    
    6.6
    
    
    
    (7.3
    )Data processing services
    
    
    18,734
    
    
    
    17,692
    
    
    
    16,197
    
    
    
    1,042
    
    
    
    1,495
    
    
    
    5.9
    
    
    
    9.2Advertising and public relations
    
    
    6,530
    
    
    
    7,113
    
    
    
    5,857
    
    
    
    (583
    )
    
    
    1,256
    
    
    
    (8.2
    )
    
    
    21.4Postage and delivery
    
    
    4,571
    
    
    
    5,525
    
    
    
    6,960
    
    
    
    (954
    )
    
    
    (1,435
    )
    
    
    (17.3
    )
    
    
    (20.6
    )Other loan expenses
    
    
    20,311
    
    
    
    24,553
    
    
    
    13,297
    
    
    
    (4,242
    )
    
    
    11,256
    
    
    
    (17.3
    )
    
    
    84.7Losses on other real estate (ORE)
    
    
    13,438
    
    
    
    23,312
    
    
    
    8,098
    
    
    
    (9,874
    )
    
    
    15,214
    
    
    
    (42.4
    )
    
    
    N/MORE expenses
    
    
    4,970
    
    
    
    4,389
    
    
    
    2,944
    
    
    
    581
    
    
    
    1,445
    
    
    
    13.2
    
    
    
    49.1Intangible asset amortization
    
    
    3,923
    
    
    
    7,036
    
    
    
    9,132
    
    
    
    (3,113
    )
    
    
    (2,096
    )
    
    
    (44.2
    )
    
    
    (23.0
    )Goodwill impairment
    
    
    
    
    
    
    256,272
    
    
    
    178,089
    
    
    
    (256,272
    )
    
    
    78,183
    
    
    
    N/M
    
    
    
    43.9Other expense
    
    
    58,231
    
    
    
    53,544
    
    
    
    33,494
    
    
    
    4,687
    
    
    
    20,050
    
    
    
    8.8
    
    
    
    59.9Total noninterest expense
    
    $
    307,087
    
    
    $
    585,139
    
    
    $
    482,312
    
    
    $
    (278,052
    )
    
    $
    102,827
    
    
    
    (47.5
    )
    
    
    21.3Memo: NIE without Goodwill impact
    
    $
    307,087
    
    
    $
    328,867
    
    
    $
    304,223
    
    
    $
    (21,780
    )
    
    $
    24,644
    
    
    
    (6.6
    )
    
    
    8.1
 
 N/M
    
     Not meaningful 2010 compared with 2009
  2009 compared with 2008
  47




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##### Table of Contents



FDIC insurance premiums
    FEDERAL AND STATE INCOME TAXES
     48




---



##### Table of Contents



LINE OF BUSINESS RESULTS
  Net
(Loss) Income by Line of Business
 (in thousands)
    
    2010
    
    
    2009
    
    
    2008Regional Banking
    
    $
    (10,299
    )
    
    $
    (160,676
    )
    
    $
    17,379Specialty Consumer
    
    
    (58,880
    )
    
    
    (66,336
    )
    
    
    (35,644
    )Specialty Commercial
    
    
    (98,990
    )
    
    
    (70,880
    )
    
    
    (174,030
    )Wealth Management
    
    
    3,142
    
    
    
    2,592
    
    
    
    449Other
    
    
    (124,077
    )
    
    
    (210,444
    )
    
    
    (202,781
    )Net loss
    
    $
    (289,104
    )
    
    $
    (505,744
    )
    
    $
    (394,627
    )
 2010 compared with 2009
      49




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##### Table of Contents



2009 compared with 2008
     FINANCIAL CONDITION
 TOTAL ASSETS
  MONEY MARKET INVESTMENTS AND INVESTMENT SECURITIES
  50




---



##### Table of Contents



Investment Securities
 December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2008Securities available for sale, at fair valueFederal agencies
    
    $
    5,557
    
    
    $
    138,644
    
    
    $
    246,769Collaterized mortgage obligations
    
    
    599,264
    
    
    
    382,943
    
    
    
    422,620Mortgage-backed
    
    
    1,259,131
    
    
    
    1,093,598
    
    
    
    895,380State and municipal
    
    
    183,584
    
    
    
    443,663
    
    
    
    528,069Other
    
    
    1,992
    
    
    
    17,946
    
    
    
    7,595Total available for sale
    
    
    2,049,528
    
    
    
    2,076,794
    
    
    
    2,100,433Securities held to maturity, at amortized costMortgage-backed
    
    
    363,427
    
    
    
    
    
    
    
    State and municipal
    
    
    111,405
    
    
    
    114,249
    
    
    
    115,757Total held to maturity
    
    
    474,832
    
    
    
    114,249
    
    
    
    115,757Total investment securities
    
    $
    2,524,360
    
    
    $
    2,191,043
    
    
    $
    2,216,190
    51




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##### Table of Contents



Maturity Distribution of Investment Securities Portfolio (1)
 Due Within
    
    
    One to
    
    
    Five to
    
    
    AfterOne Year
    
    
    Five Years
    
    
    Ten Years
    
    
    Ten Years
    
    
    TotalDecember 31, 2010
    
    
    
    
    
    Avg.
    
    
    
    
    
    
    Avg.
    
    
    
    
    
    
    Avg.
    
    
    
    
    
    
    Avg.
    
    
    
    
    
    
    Avg.(in thousands)
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldSecurities available for sale, at fair value(2)Federal agencies(3)
    
    $
    5,557
    
    
    
    5.31
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    5,557
    
    
    
    5.31
    %Collateralized mortgage obligations (3)
    
    
    13,538
    
    
    
    4.75
    
    
    
    504,050
    
    
    
    3.58
    
    
    
    81,446
    
    
    
    3.33
    
    
    
    230
    
    
    
    5.91
    
    
    
    599,264
    
    
    
    3.57Mortgage-backed(3)
    
    
    33,465
    
    
    
    4.78
    
    
    
    482,131
    
    
    
    4.52
    
    
    
    731,241
    
    
    
    3.36
    
    
    
    12,294
    
    
    
    4.35
    
    
    
    1,259,131
    
    
    
    3.84State and municipal(4)
    
    
    25,904
    
    
    
    4.83
    
    
    
    33,815
    
    
    
    4.66
    
    
    
    75,570
    
    
    
    4.31
    
    
    
    48,295
    
    
    
    3.93
    
    
    
    183,584
    
    
    
    6.58Other
    
    
    1,637
    
    
    
    1.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    355
    
    
    
    3.80
    
    
    
    1,992
    
    
    
    1.50Total securities available for sale
    
    $
    80,101
    
    
    
    4.75
    
    
    $
    1,019,996
    
    
    
    4.05
    
    
    $
    888,257
    
    
    
    3.44
    
    
    $
    61,174
    
    
    
    4.02
    
    
    $
    2,049,528
    
    
    
    4.01Securities held to maturity, at amortized cost(2)Mortgage-backed(3)
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    41,481
    
    
    
    3.75
    %
    
    $
    321,946
    
    
    
    3.72
    %
    
    $
    363,427
    
    
    
    3.72
    %State and municipal(4)
    
    
    2,781
    
    
    
    4.16
    
    
    
    1,510
    
    
    
    4.03
    
    
    
    56,873
    
    
    
    4.08
    
    
    
    50,241
    
    
    
    4.10
    
    
    
    111,405
    
    
    
    6.20Total securities held to maturity
    
    $
    2,781
    
    
    
    4.16
    
    
    $
    1,510
    
    
    
    4.03
    
    
    $
    98,354
    
    
    
    3.94
    
    
    $
    372,187
    
    
    
    3.77
    
    
    $
    474,832
    
    
    
    3.81
 
 (1)
    
    This table excludes stock holdings of the Federal Home Loan Bank and Federal
Reserve.(2)
    
    Yields are based on amortized cost.(3)
    
    Maturity distributions for collateralized mortgage obligations and
mortgage-backed securities are based on estimated average lives.(4)
    
    Average yields on tax-exempt obligations have been computed on a tax equivalent
basis, based on a 35% federal tax rate.  LOAN PORTFOLIO
   52




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Portfolio Loans
 (in millions)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Portfolio Loans Outstanding at December 31Commercial and industrial
    
    $
    1,474.2
    
    
    $
    1,921.8
    
    
    $
    2,541.0
    
    
    $
    2,487.3
    
    
    $
    1,921.4Commercial real estate
    
    
    2,120.8
    
    
    
    2,811.5
    
    
    
    2,947.0
    
    
    
    3,067.2
    
    
    
    3,154.5Total commercial
    
    
    3,595.0
    
    
    
    4,733.3
    
    
    
    5,488.0
    
    
    
    5,554.5
    
    
    
    5,075.9Residential mortgage
    
    
    756.2
    
    
    
    1,025.2
    
    
    
    1,248.6
    
    
    
    1,428.3
    
    
    
    1,523.5Direct consumer
    
    
    1,045.5
    
    
    
    1,224.2
    
    
    
    1,406.1
    
    
    
    1,520.0
    
    
    
    1,691.6Indirect consumer
    
    
    819.9
    
    
    
    805.2
    
    
    
    820.5
    
    
    
    829.4
    
    
    
    840.6Total portfolio loans
    
    $
    6,216.6
    
    
    $
    7,787.9
    
    
    $
    8,963.2
    
    
    $
    9,332.2
    
    
    $
    9,131.6
 Commercial Loan Maturities and Interest Rate Sensitivity at December 31, 2010
 Within
    
    
    One to
    
    
    AfterOne Year
    
    
    Five Years
    
    
    Five Years
    
    
    TotalCommercial and industrial
    
    $
    467.4
    
    
    $
    869.1
    
    
    $
    137.7
    
    
    $
    1,474.2Commercial real estate
    
    
    747.0
    
    
    
    1,145.4
    
    
    
    228.4
    
    
    
    2,120.8Total commercial
    
    $
    1,214.4
    
    
    $
    2,014.5
    
    
    $
    366.1
    
    
    $
    3,595.0Loans above:With floating interest rates
    
    $
    762.7
    
    
    $
    1,290.0
    
    
    $
    256.9
    
    
    $
    2,309.7With predetermined interest rates
    
    
    451.7
    
    
    
    724.5
    
    
    
    109.2
    
    
    
    1,285.3Total
    
    $
    1,214.4
    
    
    $
    2,014.5
    
    
    $
    366.1
    
    
    $
    3,595.0
  Commercial and Industrial.
 Commercial Real Estate.
  53




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##### Table of Contents



Real Estate Construction.
  Residential Mortgage Loans .
   54




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##### Table of Contents



Residential Mortgage Loan Balances By Category
 December 31,(in thousands)
    
    2010
    
    
    2009Fixed rate
    
    $
    249,301
    
    
    $
    333,361Adjustable rate
    
    
    495,597
    
    
    
    674,040Construction
    
    
    11,347
    
    
    
    17,847Total
    
    $
    756,245
    
    
    $
    1,025,248
 Residential Mortgage Loan Origination Volume
 (in thousands)
    
    2010
    
    
    2009Fixed rate
    
    $
    185,136
    
    
    $
    290,504Adjustable rate
    
    
    7,368
    
    
    
    2,399Construction(1)
    
    
    3,571
    
    
    
    3,878Total
    
    $
    196,075
    
    
    $
    296,781
 
 (1)
    
    All construction mortgages are retained by Citizens in the
residential mortgage portfolio.  Direct Consumer.
  Indirect Consumer.
 55




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##### Table of Contents



LOANS HELD FOR SALE
   UNDERWRITING
    56




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##### Table of Contents



CREDIT RISK MANAGEMENT
   57




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##### Table of Contents



Commercial Watchlist
  December 31,2010
    
    
    2009
    
    
    2008% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of(in millions)
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    PortfolioLand Hold
    
    $
    21.5
    
    
    
    76.35
    %
    
    $
    24.8
    
    
    
    68.99
    %
    
    $
    18.5
    
    
    
    41.08
    %Land Development
    
    
    18.7
    
    
    
    53.66
    
    
    
    86.7
    
    
    
    83.66
    
    
    
    47.7
    
    
    
    37.39Construction
    
    
    33.2
    
    
    
    32.05
    
    
    
    63.5
    
    
    
    35.68
    
    
    
    74.8
    
    
    
    28.50Income Producing
    
    
    444.5
    
    
    
    37.96
    
    
    
    521.4
    
    
    
    34.44
    
    
    
    400.7
    
    
    
    25.81Owner-Occupied
    
    
    196.9
    
    
    
    25.15
    
    
    
    247.2
    
    
    
    25.22
    
    
    
    177.5
    
    
    
    18.49Total Commercial Real Estate
    
    
    714.8
    
    
    
    33.71
    
    
    
    943.6
    
    
    
    33.56
    
    
    
    719.2
    
    
    
    24.40Commercial and Industrial
    
    
    347.2
    
    
    
    23.55
    
    
    
    473.0
    
    
    
    24.61
    
    
    
    433.9
    
    
    
    17.08Total Watchlist Loans
    
    $
    1,062.0
    
    
    
    29.54
    
    
    $
    1,416.6
    
    
    
    29.93
    
    
    $
    1,153.1
    
    
    
    21.01
   58




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##### Table of Contents



Delinquency
Rates By Loan Portfolio
  December 31,2010
    
    
    2009
    
    
    2008% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of(in millions)
    
    $
    
    
    Portfolio
    
    
    $
    
    
    Portfolio
    
    
    $
    
    
    PortfolioLand Hold
    
    $
    2.2
    
    
    
    7.90
    %
    
    $
    0.6
    
    
    
    1.56
    %
    
    $
    3.9
    
    
    
    8.69
    %Land Development
    
    
    0.2
    
    
    
    0.62
    
    
    
    4.7
    
    
    
    4.56
    
    
    
    4.9
    
    
    
    3.89Construction
    
    
    0.5
    
    
    
    0.45
    
    
    
    1.7
    
    
    
    0.95
    
    
    
    27.3
    
    
    
    10.38Income Producing
    
    
    20.7
    
    
    
    1.76
    
    
    
    40.8
    
    
    
    2.70
    
    
    
    76.7
    
    
    
    4.94Owner-Occupied
    
    
    14.7
    
    
    
    1.88
    
    
    
    25.0
    
    
    
    2.55
    
    
    
    37.5
    
    
    
    3.91Total Commercial Real Estate
    
    
    38.3
    
    
    
    1.80
    
    
    
    72.8
    
    
    
    2.59
    
    
    
    150.3
    
    
    
    5.10Commercial and Industrial
    
    
    9.0
    
    
    
    0.61
    
    
    
    16.9
    
    
    
    0.88
    
    
    
    54.0
    
    
    
    2.13Total Commercial Loans
    
    
    47.3
    
    
    
    1.32
    
    
    
    89.7
    
    
    
    1.90
    
    
    
    204.3
    
    
    
    3.72Residential Mortgage
    
    
    15.4
    
    
    
    2.03
    
    
    
    22.0
    
    
    
    2.14
    
    
    
    38.8
    
    
    
    3.10Direct Consumer
    
    
    22.4
    
    
    
    2.14
    
    
    
    26.5
    
    
    
    2.16
    
    
    
    25.0
    
    
    
    1.78Indirect Consumer
    
    
    13.3
    
    
    
    1.62
    
    
    
    16.3
    
    
    
    2.02
    
    
    
    18.5
    
    
    
    2.25Total Consumer Loans
    
    
    51.1
    
    
    
    1.95
    
    
    
    64.8
    
    
    
    2.12
    
    
    
    82.3
    
    
    
    2.37Total Delinquent Loans
    
    $
    98.4
    
    
    
    1.58
    
    
    $
    154.5
    
    
    
    1.98
    
    
    $
    286.6
    
    
    
    3.20
  NONPERFORMING ASSETS
  59




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##### Table of Contents



Nonperforming Assets and Past Due Loans
 December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Nonperforming Portfolio Loans(1)NonaccrualLess than 30 days past due
    
    $
    46,419
    
    
    $
    89,235
    
    
    $
    35,157
    
    
    $
    8,062
    
    
    $
    4,305From 30 to 89 days past due
    
    
    27,450
    
    
    
    63,261
    
    
    
    25,209
    
    
    
    11,520
    
    
    
    1,40790 or more days past due
    
    
    138,439
    
    
    
    316,361
    
    
    
    242,930
    
    
    
    165,065
    
    
    
    50,769Total
    
    
    212,308
    
    
    
    468,857
    
    
    
    303,296
    
    
    
    184,647
    
    
    
    56,481Loans 90 days or more past due and still accruing
    
    
    1,573
    
    
    
    3,039
    
    
    
    1,486
    
    
    
    3,636
    
    
    
    767Restructured loans and still accruing
    
    
    6,392
    
    
    
    2,629
    
    
    
    256
    
    
    
    315
    
    
    
    378Total nonperforming portfolio loans
    
    
    220,273
    
    
    
    474,525
    
    
    
    305,038
    
    
    
    188,598
    
    
    
    57,626Nonperforming loans held for sale
    
    
    24,073
    
    
    
    65,189
    
    
    
    74,938
    
    
    
    21,676
    
    
    
    22,846Other
repossessed assets acquired (ORAA)
    
    
    42,216
    
    
    
    54,394
    
    
    
    57,938
    
    
    
    40,360
    
    
    
    20,160Total nonperforming assets (2)
    
    $
    286,562
    
    
    $
    594,108
    
    
    $
    437,914
    
    
    $
    250,634
    
    
    $
    100,632Nonperforming loans as a percent of
portfolio loans
    
    
    3.54
    %
    
    
    6.09
    %
    
    
    3.40
    %
    
    
    2.02
    %
    
    
    0.63
    %Nonperforming assets as a percent of portfolio loans
plus ORAA (4)
    
    
    4.55
    
    
    
    7.50
    
    
    
    4.81
    
    
    
    2.65
    
    
    
    1.09Nonperforming assets as a percent of total assets (5)
    
    
    2.88
    
    
    
    5.12
    
    
    
    3.44
    
    
    
    1.90
    
    
    
    0.74Nonperforming Portfolio Loans by Type(1)(3)Commercial and industrial
    
    $
    59,830
    
    
    $
    86,284
    
    
    $
    66,275
    
    
    $
    16,497
    
    
    $
    8,578Commercial real estate
    
    
    121,120
    
    
    
    236,551
    
    
    
    162,125
    
    
    
    110,159
    
    
    
    14,915Total commercial
    
    
    180,950
    
    
    
    322,835
    
    
    
    228,400
    
    
    
    126,656
    
    
    
    23,493Residential mortgage
    
    
    23,936
    
    
    
    126,509
    
    
    
    59,238
    
    
    
    46,333
    
    
    
    27,486Direct Consumer
    
    
    14,108
    
    
    
    22,551
    
    
    
    14,785
    
    
    
    13,552
    
    
    
    5,837Indirect Consumer
    
    
    1,279
    
    
    
    2,630
    
    
    
    2,615
    
    
    
    2,057
    
    
    
    810Total nonperforming portfolio loans
    
    $
    220,273
    
    
    $
    474,525
    
    
    $
    305,038
    
    
    $
    188,598
    
    
    $
    57,626
 
 (1)
    
    Refer to Note 4 for a summary of interest income foregone on nonaccrual and
restructured loans, as of December 31, 2010.(2)
    
    December 31, 2006 amounts include the following nonperforming asset balances acquired
in the Republic merger: Less than 30 days past due and nonaccrual $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.(3)
    
    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.(4)
    
    Other real estate assets acquired (ORAA) includes loans held for sale.(5)
    
    Total assets exclude assets from discontinued operations.   60




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##### Table of Contents



ALLOWANCE FOR LOAN LOSSES
  Summary of Loan Loss Experience
 December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Allowance for loan losses at January 1
    
    $
    338,940
    
    
    $
    252,938
    
    
    $
    161,635
    
    
    $
    166,794
    
    
    $
    111,886Provision for loan losses
    
    
    392,882
    
    
    
    323,820
    
    
    
    280,961
    
    
    
    45,573
    
    
    
    13,308Charge-offs:Commercial and industrial
    
    
    54,015
    
    
    
    59,311
    
    
    
    23,671
    
    
    
    4,633
    
    
    
    3,462Small business
    
    
    7,375
    
    
    
    4,525
    
    
    
    3,065
    
    
    
    1,490
    
    
    
    999Commercial real estate
    
    
    233,056
    
    
    
    123,247
    
    
    
    112,478
    
    
    
    27,194
    
    
    
    2,826Total commercial
    
    
    294,446
    
    
    
    187,083
    
    
    
    139,214
    
    
    
    33,317
    
    
    
    7,287Residential mortgage
    
    
    110,928
    
    
    
    18,964
    
    
    
    24,438
    
    
    
    5,064
    
    
    
    1,638Direct consumer
    
    
    31,392
    
    
    
    24,388
    
    
    
    16,657
    
    
    
    10,838
    
    
    
    5,614Indirect consumer
    
    
    14,295
    
    
    
    21,234
    
    
    
    16,889
    
    
    
    10,126
    
    
    
    9,061Total charge-offs
    
    
    451,061
    
    
    
    251,669
    
    
    
    197,198
    
    
    
    59,345
    
    
    
    23,600Recoveries:Commercial and industrial
    
    
    3,860
    
    
    
    5,783
    
    
    
    2,732
    
    
    
    2,679
    
    
    
    2,599Small business
    
    
    483
    
    
    
    590
    
    
    
    175
    
    
    
    450
    
    
    
    408Commercial real estate
    
    
    5,540
    
    
    
    3,580
    
    
    
    715
    
    
    
    1,303
    
    
    
    639Total commercial
    
    
    9,883
    
    
    
    9,953
    
    
    
    3,622
    
    
    
    4,432
    
    
    
    3,646Residential mortgage
    
    
    720
    
    
    
    33
    
    
    
    29
    
    
    
    183
    
    
    
    150Direct consumer
    
    
    1,877
    
    
    
    1,537
    
    
    
    1,667
    
    
    
    1,688
    
    
    
    1,359Indirect consumer
    
    
    2,790
    
    
    
    2,328
    
    
    
    2,222
    
    
    
    2,310
    
    
    
    2,342Total recoveries
    
    
    15,270
    
    
    
    13,851
    
    
    
    7,540
    
    
    
    8,613
    
    
    
    7,497Net charge-offs
    
    
    435,791
    
    
    
    237,818
    
    
    
    189,658
    
    
    
    50,732
    
    
    
    16,103Allowance of acquired bank
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,703Allowance for loan losses at December 31
    
    $
    296,031
    
    
    $
    338,940
    
    
    $
    252,938
    
    
    $
    161,635
    
    
    $
    166,794Allowance for losses on lending-related commitments  December 31
    
    $
    1,933
    
    
    $
    3,118
    
    
    $
    3,836
    
    
    $
    5,465
    
    
    $
    6,046Portfolio loans at year-end (1)
    
    
    6,216,602
    
    
    
    7,787,905
    
    
    
    8,963,175
    
    
    
    9,332,248
    
    
    
    9,131,610Average portfolio loans (1)
    
    
    7,175,649
    
    
    
    8,349,387
    
    
    
    9,274,707
    
    
    
    9,033,317
    
    
    
    5,451,750Allowance for loan losses as a percent of nonperforming loans
    
    
    134.39
    %
    
    
    71.43
    %
    
    
    82.92
    %
    
    
    85.70
    %
    
    
    289.44
    %Allowance for loan losses as a percent of portfolio loans at year-end
    
    
    4.76
    
    
    
    4.35
    
    
    
    2.82
    
    
    
    1.73
    
    
    
    1.83Net loans charged off as a percent of average portfolio loans
    
    
    6.07
    
    
    
    2.85
    
    
    
    2.04
    
    
    
    0.56
    
    
    
    0.29
 
 (1)
    
    Balances exclude loans held for sale.  61




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62




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##### Table of Contents



Allocation of the Allowance for Loan Losses (1)
 December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Related
    
    
    
    
    
    
    Related
    
    
    
    
    
    
    Related
    
    
    
    
    
    
    Related
    
    
    
    
    
    
    Related(in millions)
    
    ALLL
    
    
    NPL(2)
    
    
    ALLL
    
    
    NPL (2)
    
    
    ALLL
    
    
    NPL (2)
    
    
    ALLL
    
    
    NPL (2)
    
    
    ALLL
    
    
    NPL (2)Specific allocated allowance:Commercial and industrial
    
    $
    9.5
    
    
    $
    43.5
    
    
    $
    16.3
    
    
    $
    65.2
    
    
    $
    16.8
    
    
    $
    49.0
    
    
    $
    1.8
    
    
    $
    2.7
    
    
    $
    5.3
    
    
    $
    13.7Commercial real estate
    
    
    23.5
    
    
    
    98.4
    
    
    
    29.6
    
    
    
    208.3
    
    
    
    23.1
    
    
    
    141.6
    
    
    
    16.1
    
    
    
    49.6
    
    
    
    2.3
    
    
    
    7.0Residential mortgage
    
    
    1.1
    
    
    
    5.4
    
    
    
    6.9
    
    
    
    30.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Direct Consumer
    
    
    0.1
    
    
    
    1.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total specific allocated allowance
    
    
    34.2
    
    
    
    148.5
    
    
    
    52.8
    
    
    
    304.4
    
    
    
    39.9
    
    
    
    190.6
    
    
    
    17.9
    
    
    
    52.3
    
    
    
    7.6
    
    
    
    20.7Risk allocated allowance:Commercial and industrial
    
    
    33.5
    
    
    
    16.3
    
    
    
    40.2
    
    
    
    21.8
    
    
    
    19.0
    
    
    
    17.2
    
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    *Commercial real estate (CRE)
    
    
    99.1
    
    
    
    22.7
    
    
    
    116.4
    
    
    
    27.6
    
    
    
    91.7
    
    
    
    20.6
    
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    *Incremental risk allocated allowance  CRE
    
    
    29.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total commercial
    
    
    162.1
    
    
    
    39.0
    
    
    
    156.6
    
    
    
    49.4
    
    
    
    110.7
    
    
    
    37.8
    
    
    
    84.5
    
    
    
    74.3
    
    
    
    93.1
    
    
    
    2.8Residential mortgage
    
    
    46.5
    
    
    
    18.6
    
    
    
    50.6
    
    
    
    95.6
    
    
    
    25.2
    
    
    
    59.2
    
    
    
    14.0
    
    
    
    46.3
    
    
    
    14.8
    
    
    
    27.5Direct Consumer
    
    
    32.1
    
    
    
    12.9
    
    
    
    33.0
    
    
    
    22.0
    
    
    
    28.3
    
    
    
    14.8
    
    
    
    15.7
    
    
    
    13.6
    
    
    
    16.4
    
    
    
    5.8Indirect Consumer
    
    
    16.6
    
    
    
    1.3
    
    
    
    39.5
    
    
    
    3.1
    
    
    
    35.9
    
    
    
    2.6
    
    
    
    23.6
    
    
    
    2.1
    
    
    
    25.5
    
    
    
    0.8Total risk allocated allowance
    
    
    257.3
    
    
    
    71.8
    
    
    
    279.7
    
    
    
    170.1
    
    
    
    200.1
    
    
    
    114.4
    
    
    
    137.8
    
    
    
    136.3
    
    
    
    149.8
    
    
    
    36.9Total
    
    
    291.5
    
    
    
    220.3
    
    
    
    332.5
    
    
    
    474.5
    
    
    
    240.0
    
    
    
    305.0
    
    
    
    155.7
    
    
    
    188.6
    
    
    
    157.4
    
    
    
    57.6General valuation allowances
    
    
    4.5
    
    
    
            
    
    
    
    6.4
    
    
    
            
    
    
    
    12.9
    
    
    
            
    
    
    
    5.9
    
    
    
            
    
    
    
    9.4
    
    
    
            Total
    
    $
    296.0
    
    
    $
    220.3
    
    
    $
    338.9
    
    
    $
    474.5
    
    
    $
    252.9
    
    
    $
    305.0
    
    
    $
    161.6
    
    
    $
    188.6
    
    
    $
    166.8
    
    
    $
    57.6ALLL as a percentage of NPLSpecific allocated allowance:Commercial and industrial
    
    
    21.8
    %
    
    
    
    
    
    
    25.0
    %
    
    
    
    
    
    
    34.3
    %
    
    
    
    
    
    
    65.5
    %
    
    
    
    
    
    
    38.3
    %Commercial real estate
    
    
    23.9
    
    
    
    
    
    
    
    14.2
    
    
    
    
    
    
    
    16.3
    
    
    
    
    
    
    
    32.5
    
    
    
    
    
    
    
    32.7Residential mortgage
    
    
    20.7
    
    
    
    
    
    
    
    22.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Direct Consumer
    
    
    11.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total specific allocated allowance
    
    
    23.1
    
    
    
    
    
    
    
    17.3
    
    
    
    
    
    
    
    20.9
    
    
    
    
    
    
    
    34.2
    
    
    
    
    
    
    
    36.4Risk allocated allowance:Commercial and industrial
    
    
    205.1
    
    
    
    
    
    
    
    184.4
    
    
    
    
    
    
    
    110.1
    
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    *Commercial real estate (CRE)
    
    
    436.4
    
    
    
    
    
    
    
    421.9
    
    
    
    
    
    
    
    446.6
    
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    *Incremental risk allocated allowance  CRE
    
    
    N/M
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total commercial
    
    
    415.2
    
    
    
    
    
    
    
    317.0
    
    
    
    
    
    
    
    293.1
    
    
    
    
    
    
    
    113.7
    
    
    
    
    
    
    
    N/MResidential mortgage
    
    
    250.4
    
    
    
    
    
    
    
    53.0
    
    
    
    
    
    
    
    42.5
    
    
    
    
    
    
    
    30.2
    
    
    
    
    
    
    
    53.9Direct Consumer
    
    
    248.6
    
    
    
    
    
    
    
    149.7
    
    
    
    
    
    
    
    191.6
    
    
    
    
    
    
    
    116.2
    
    
    
    
    
    
    
    280.7Indirect Consumer
    
    
    N/M
    
    
    
    
    
    
    
    N/M
    
    
    
    
    
    
    
    N/M
    
    
    
    
    
    
    
    N/M
    
    
    
    
    
    
    
    N/MTotal risk allocated allowance
    
    
    358.2
    
    
    
    
    
    
    
    164.4
    
    
    
    
    
    
    
    174.9
    
    
    
    
    
    
    
    101.2
    
    
    
    
    
    
    
    406.1Total
    
    
    134.4
    
    
    
    
    
    
    
    71.4
    
    
    
    
    
    
    
    82.9
    
    
    
    
    
    
    
    85.7
    
    
    
    
    
    
    
    289.4ALLL as a percentage of portfolio loans(3)Risk allocated allowance: (4)Commercial and industrial
    
    
    2.3
    
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    *Commercial real estate (CRE)
    
    
    4.9
    
    
    
    
    
    
    
    4.5
    
    
    
    
    
    
    
    3.3
    
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    *Incremental risk allocated allowance  CRE
    
    
    N/M
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total commercial
    
    
    4.7
    
    
    
    
    
    
    
    3.5
    
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    1.8Residential mortgage
    
    
    6.2
    
    
    
    
    
    
    
    5.1
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    1.0Direct Consumer
    
    
    3.1
    
    
    
    
    
    
    
    2.7
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    1.0Indirect Consumer
    
    
    2.0
    
    
    
    
    
    
    
    4.9
    
    
    
    
    
    
    
    4.4
    
    
    
    
    
    
    
    2.8
    
    
    
    
    
    
    
    3.0Total risk allocated allowance
    
    
    4.2
    
    
    
    
    
    
    
    3.7
    
    
    
    
    
    
    
    2.3
    
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    1.6Total allowance
    
    
    4.8
    
    
    
    
    
    
    
    4.4
    
    
    
    
    
    
    
    2.8
    
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    1.8
 
  (1)
    
    The allocation of the allowance for loan losses in the above table is based upon
ranges of estimates and is not intended to imply either limitations on the usage of the
allowance or precision of the specific amounts. Citizens does not view the allowance for
loan losses as being divisible among the various categories of loans. The entire
allowance is available to absorb any future losses without regard to the category or
categories in which the charged-off loans are classified.(2)
    
    Related NPL amounts in risk allocated allowances include restructured loans and
still accruing and loans 90+ days past due and still accruing but classified as
nonperforming.(3)
    
    The portfolio balance of the loans with a specific allocated allowance is equal to
the related NPL for said loans.(4)
    
    Portfolio loans only include loan balances evaluated for risk allocated allowance.*
    
    Prior to March 31, 2008, Citizens methodology for calculating the allowance
for loan loss combined the commercial and industrial and commercial real estate loan
types. As such, Citizens does not have the appropriate level of detail to accurately
segregate the risk allocated allowance for these loan types for December 31, 2007 and
December 31, 2006. 63




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##### Table of Contents



Total Allowance for Loan Losses.
   Specific Allocated Allowance.
   Risk Allocated Allowance.
  General Valuation Allowance.
 64




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##### Table of Contents



GOODWILL
  DEPOSITS
  Average Deposits
 2010
    
    
    2009
    
    
    2008Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average(in thousands)
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    RateNoninterest-bearing deposits
    
    $
    1,306,881
    
    
    
    
    %
    
    $
    1,191,478
    
    
    
    
    %
    
    $
    1,089,948
    
    
    
    
    %Interest-bearing demand deposits
    
    
    1,008,871
    
    
    
    0.27
    
    
    
    929,152
    
    
    
    0.43
    
    
    
    725,305
    
    
    
    0.65Savings deposits
    
    
    2,561,596
    
    
    
    0.62
    
    
    
    2,521,100
    
    
    
    0.78
    
    
    
    2,475,644
    
    
    
    1.73Time deposits
    
    
    3,405,281
    
    
    
    2.35
    
    
    
    3,867,946
    
    
    
    3.31
    
    
    
    4,060,786
    
    
    
    4.03Total deposits
    
    $
    8,282,629
    
    
    
    1.19
    
    
    $
    8,509,676
    
    
    
    1.78
    
    
    $
    8,351,683
    
    
    
    2.53
   65




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##### Table of Contents



Maturity of Time Certificates of Deposit of  $100,000 or more at December 31, 2010
 (in thousands)Three months or less
    
    $
    175,544After three but within six months
    
    
    176,606After six but within twelve months
    
    
    199,585After twelve months
    
    
    585,581Total
    
    $
    1,137,316
  BORROWED FUNDS
   CAPITAL RESOURCES
  Regulatory MinimumAdequately
    
    
    Well-
    
    
    December 31,Capitalized
    
    
    Capitalized
    
    
    2010
    
    
    2009
    
    
    2008Risk based:Tier 1 capital
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    12.11
    %
    
    
    12.52
    %
    
    
    12.21
    %Total capital
    
    
    8.00
    
    
    
    10.00
    
    
    
    13.51
    
    
    
    13.93
    
    
    
    14.49Tier 1 Leverage
    
    
    4.00
    
    
    
    5.00
    
    
    
    7.71
    
    
    
    9.21
    
    
    
    9.66
  66




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##### Table of Contents



CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
 Contractual Obligations
  Contractual Obligations
 Minimum Payments Due by PeriodDecember 31, 2010
    
    
    
    
    
    Less than
    
    
    
    
    
    
    
    
    
    
    More than(in thousands)
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    5 yearsDeposits without stated maturities(1)(2)
    
    $
    4,887,092
    
    
    $
    4,887,092
    
    
    $
    
    
    
    $
    
    
    
    $
    Deposits with stated maturities(1)(2)
    
    
    2,839,377
    
    
    
    1,568,419
    
    
    
    913,815
    
    
    
    352,682
    
    
    
    4,461Fed funds purchased and securities sold under
agreements to repurchase(1)
    
    
    41,699
    
    
    
    41,699
    
    
    
    
    
    
    
    
    
    
    
    Other short-term borrowings(1)
    
    
    620
    
    
    
    620
    
    
    
    
    
    
    
    
    
    
    
    FHLB borrowings(1)( 2)
    
    
    829,013
    
    
    
    175,000
    
    
    
    61,946
    
    
    
    540,000
    
    
    
    52,067Other borrowed debt(1)(2)
    
    
    104,134
    
    
    
    
    
    
    
    
    
    
    
    61,625
    
    
    
    42,509Subordinated debt(1)(2)
    
    
    91,717
    
    
    
    
    
    
    
    17,266
    
    
    
    
    
    
    
    74,451Purchase obligations
    
    
    122,038
    
    
    
    50,286
    
    
    
    56,602
    
    
    
    12,728
    
    
    
    2,422Operating leases and non-cancelable contracts
    
    
    28,759
    
    
    
    5,879
    
    
    
    9,753
    
    
    
    5,289
    
    
    
    7,838Total
    
    $
    8,944,449
    
    
    $
    6,728,995
    
    
    $
    1,059,382
    
    
    $
    972,324
    
    
    $
    183,748
 
 (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.   Off-Balance Sheet Arrangements
  67
    Table of Contents     Off-Balance Sheet Financial Instruments
 Expected Expiration Dates by PeriodDecember 31,
    
    
    Less than
    
    
    
    
    
    
    
    
    
    
    More than
    
    
    December 31,(in thousands)
    
    2010
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    5 years
    
    
    2009Financial instruments whose
contract amounts represent credit risk:Loan commitments to extend credit
    
    $
    953,340
    
    
    $
    593,472
    
    
    $
    124,321
    
    
    $
    94,547
    
    
    $
    141,000
    
    
    $
    1,334,690Standby letters of credit
    
    
    171,655
    
    
    
    97,060
    
    
    
    30,694
    
    
    
    21,033
    
    
    
    22,868
    
    
    
    236,006Commercial letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23Financial instruments subject to interest rate risk:Receive fixed and pay fixed swaps
    
    
    330,000
    
    
    
    320,000
    
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    845,000Customer initiated swaps and corresponding offsets
    
    
    765,507
    
    
    
    136,351
    
    
    
    371,641
    
    
    
    113,823
    
    
    
    143,692
    
    
    
    1,040,336Total
    
    $
    2,220,502
    
    
    $
    1,146,883
    
    
    $
    536,656
    
    
    $
    229,403
    
    
    $
    307,560
    
    
    $
    3,456,055
       68
    Table of Contents      LIQUIDITY RISK MANAGEMENT
    69




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##### Table of Contents



Credit Ratings
    
    Moodys
    
    Fitch RatingsCitizens Republic Bancorp (Holding Company)Long-term Issuer
    
    B2 (ON)
    
    CCC10/1/2009
    
    2/4/2011Short-term/Commercial Paper
    
    NP (ON)
    
    C10/1/2009
    
    2/4/2011Trust Preferred
    
    Caa2 (ON)
    
    C1/28/2010
    
    2/4/2011Citizens BankCertificate of Deposit
    
    Ba3 (ON)
    
    B-10/1/2009
    
    2/4/2011
 
 Ratings Watch Action Legend: (WP) Watch Positive, (WN) Watch Negative, (WU) Watch
Uncertain, (WR) Watch Removed, (OP) Outlook Positive, (ON) Outlook Negative, (OS) Outlook Stable, (OD) Outlook Developing     70




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INTEREST RATE RISK
   71




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##### Table of Contents



72




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 73




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##### Table of Contents



Consolidated Balance Sheets
Citizens Republic Bancorp, Inc.
 December 31,(in thousands, except share amounts)
    
    2010
    
    
    2009AssetsCash and due from banks
    
    $
    127,585
    
    
    $
    156,093Money Market Investments
    
    
    409,079
    
    
    
    686,285Investment Securities:Securities available for sale, at fair value
    
    
    2,049,528
    
    
    
    2,076,794Securities
held to maturity, at amortized cost (fair value of $469,421 and $116,368, respectively)
    
    
    474,832
    
    
    
    114,249Total investment securities
    
    
    2,524,360
    
    
    
    2,191,043FHLB and Federal Reserve stock
    
    
    143,873
    
    
    
    155,084Portfolio loans:Commercial and industrial
    
    
    1,474,227
    
    
    
    1,921,755Commercial real estate
    
    
    2,120,735
    
    
    
    2,811,539Total commercial
    
    
    3,594,962
    
    
    
    4,733,294Residential mortgage
    
    
    756,245
    
    
    
    1,025,248Direct consumer
    
    
    1,045,530
    
    
    
    1,224,182Indirect consumer
    
    
    819,865
    
    
    
    805,181Total portfolio loans
    
    
    6,216,602
    
    
    
    7,787,905Less: Allowance for loan losses
    
    
    (296,031
    )
    
    
    (338,940
    )Net portfolio loans
    
    
    5,920,571
    
    
    
    7,448,965Loans held for sale
    
    
    40,347
    
    
    
    80,219Premises and equipment
    
    
    104,714
    
    
    
    110,703Goodwill
    
    
    318,150
    
    
    
    318,150Other intangible assets
    
    
    10,454
    
    
    
    14,378Bank owned life insurance
    
    
    217,757
    
    
    
    220,190Other assets
    
    
    148,755
    
    
    
    214,560Assets of discontinued operations
    
    
    
    
    
    
    335,961Total assets
    
    $
    9,965,645
    
    
    $
    11,931,631LiabilitiesNoninterest-bearing deposits
    
    $
    1,325,383
    
    
    $
    1,288,303Interest-bearing demand deposits
    
    
    947,953
    
    
    
    1,055,290Savings deposits
    
    
    2,600,750
    
    
    
    2,460,114Time deposits
    
    
    2,852,748
    
    
    
    3,697,056Total deposits
    
    
    7,726,834
    
    
    
    8,500,763Federal
funds purchased and securities sold under agreements to repurchase
    
    
    41,699
    
    
    
    32,900Other short-term borrowings
    
    
    620
    
    
    
    6,900Other liabilities
    
    
    152,072
    
    
    
    124,718Long-term debt
    
    
    1,032,689
    
    
    
    1,512,987Liabilities of discontinued operations
    
    
    
    
    
    
    422,327Total liabilities
    
    
    8,953,914
    
    
    
    10,600,595Shareholders EquityPreferred stock  no par value:Authorized  5,000,000 shares; Issued and outstanding  300,000 at 12/31/10
and 12/31/09, redemption value of $300 million
    
    
    278,300
    
    
    
    271,990Common stock  no par valueAuthorized  1,050,000,000 shares at 12/31/10 and 12/31/09;Issued and outstanding  397,167,137 at 12/31/10 and 394,397,406 at 12/31/09
    
    
    1,431,829
    
    
    
    1,429,771Retained deficit
    
    
    (678,242
    )
    
    
    (363,632
    )Accumulated other comprehensive loss
    
    
    (20,156
    )
    
    
    (7,093
    )Total shareholders equity
    
    
    1,011,731
    
    
    
    1,331,036Total liabilities and shareholders equity
    
    $
    9,965,645
    
    
    $
    11,931,631
  74




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##### Table of Contents



Consolidated Statements of Operations
Citizens Republic Bancorp, Inc.
 (in thousands, except per share amounts)
    
    2010
    
    
    2009
    
    
    2008Interest IncomeInterest and fees on loans
    
    $
    390,587
    
    
    $
    449,067
    
    
    $
    575,977Interest and dividends on investment securities:Taxable
    
    
    72,545
    
    
    
    73,796
    
    
    
    73,566Tax-exempt
    
    
    16,035
    
    
    
    25,074
    
    
    
    27,771Dividends on FHLB and Federal Reserve stock
    
    
    3,776
    
    
    
    4,216
    
    
    
    7,211Money market investments
    
    
    1,501
    
    
    
    1,257
    
    
    
    374Total interest income
    
    
    484,444
    
    
    
    553,410
    
    
    
    684,899Interest ExpenseDeposits
    
    
    98,526
    
    
    
    151,511
    
    
    
    211,045Short-term borrowings
    
    
    80
    
    
    
    193
    
    
    
    7,944Long-term debt
    
    
    56,774
    
    
    
    91,257
    
    
    
    122,871Total interest expense
    
    
    155,380
    
    
    
    242,961
    
    
    
    341,860Net Interest Income
    
    
    329,064
    
    
    
    310,449
    
    
    
    343,039Provision for loan losses
    
    
    392,882
    
    
    
    323,820
    
    
    
    280,961Net interest (loss) income after provision for loan losses
    
    
    (63,818
    )
    
    
    (13,371
    )
    
    
    62,078Noninterest IncomeService charges on deposit accounts
    
    
    40,336
    
    
    
    42,116
    
    
    
    45,623Trust fees
    
    
    15,603
    
    
    
    14,784
    
    
    
    17,697Mortgage and other loan income
    
    
    10,486
    
    
    
    12,393
    
    
    
    11,315Brokerage and investment fees
    
    
    4,579
    
    
    
    5,194
    
    
    
    6,866ATM network user fees
    
    
    7,057
    
    
    
    6,283
    
    
    
    6,023Bankcard fees
    
    
    8,859
    
    
    
    7,714
    
    
    
    7,212Net loss on loans held for sale
    
    
    (20,617
    )
    
    
    (20,086
    )
    
    
    (9,373
    )Net loss on debt extinguishment
    
    
    
    
    
    
    (15,929
    )
    
    
    Investment securities gains (losses)
    
    
    13,896
    
    
    
    5
    
    
    
    (1
    )Other income
    
    
    14,460
    
    
    
    10,659
    
    
    
    11,215Total noninterest income
    
    
    94,659
    
    
    
    63,133
    
    
    
    96,577Noninterest ExpenseSalaries and employee benefits
    
    
    126,384
    
    
    
    135,389
    
    
    
    153,176Occupancy
    
    
    26,963
    
    
    
    26,723
    
    
    
    27,422Professional services
    
    
    10,550
    
    
    
    11,877
    
    
    
    15,013Equipment
    
    
    12,482
    
    
    
    11,714
    
    
    
    12,633Data processing services
    
    
    18,734
    
    
    
    17,692
    
    
    
    16,197Advertising and public relations
    
    
    6,530
    
    
    
    7,113
    
    
    
    5,857Postage and delivery
    
    
    4,571
    
    
    
    5,525
    
    
    
    6,960Other loan expenses
    
    
    20,311
    
    
    
    24,553
    
    
    
    13,297Losses on other real estate (ORE)
    
    
    13,438
    
    
    
    23,312
    
    
    
    8,098ORE expenses
    
    
    4,970
    
    
    
    4,389
    
    
    
    2,944Intangible asset amortization
    
    
    3,923
    
    
    
    7,036
    
    
    
    9,132Goodwill impairment
    
    
    
    
    
    
    256,272
    
    
    
    178,089Other expense
    
    
    58,231
    
    
    
    53,544
    
    
    
    33,494Total noninterest expense
    
    
    307,087
    
    
    
    585,139
    
    
    
    482,312Loss from Continuing Operations Before Income Taxes
    
    
    (276,246
    )
    
    
    (535,377
    )
    
    
    (323,657
    )Income tax provision (benefit) from continuing operations
    
    
    12,858
    
    
    
    (29,633
    )
    
    
    70,970Loss from Continuing Operations
    
    
    (289,104
    )
    
    
    (505,744
    )
    
    
    (394,627
    )Discontinued operations:(Loss) income from discontinued operations (net of income tax)
    
    
    (3,821
    )
    
    
    (8,469
    )
    
    
    1,575Net Loss
    
    
    (292,925
    )
    
    
    (514,213
    )
    
    
    (393,052
    )Deemed dividend on convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    (11,737
    )Dividend on redeemable preferred stock
    
    
    (21,685
    )
    
    
    (19,777
    )
    
    
    (227
    )Net Loss Attributable to Common Shareholders
    
    $
    (314,610
    )
    
    $
    (533,990
    )
    
    $
    (405,016
    )Loss Per Share from Continuing OperationsBasic
    
    $
    (0.79
    )
    
    $
    (2.71
    )
    
    $
    (4.32
    )Diluted
    
    
    (0.79
    )
    
    
    (2.71
    )
    
    
    (4.32
    )(Loss) Income Per Share from Discontinued OperationsBasic
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    0.02Diluted
    
    
    (0.01
    )
    
    
    (0.04
    )
    
    
    0.02Net Loss Per Common Share:Basic
    
    $
    (0.80
    )
    
    $
    (2.75
    )
    
    $
    (4.30
    )Diluted
    
    
    (0.80
    )
    
    
    (2.75
    )
    
    
    (4.30
    )Average Common Shares Outstanding:Basic
    
    
    393,921
    
    
    
    193,833
    
    
    
    94,156Diluted
    
    
    393,921
    
    
    
    193,833
    
    
    
    94,156
  75




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##### Table of Contents



Consolidated Statements of Changes in Shareholders Equity
Citizens Republic Bancorp, Inc.
 AccumulatedRetained
    
    
    OtherPreferred
    
    
    Common Stock
    
    
    Earnings
    
    
    Comprehensive(in thousands, except per share amounts)
    
    Stock
    
    
    Shares
    
    
    Amount
    
    
    (Deficit)
    
    
    Income (Loss)
    
    
    TotalBalance at January 1, 2008
    
    $
    
    
    
    
    75,722
    
    
    $
    975,446
    
    
    $
    597,333
    
    
    $
    5,101
    
    
    $
    1,577,880Comprehensive loss, net of tax:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (393,052
    )
    
    
    
    
    
    
    (393,052
    )Other comprehensive income (loss):Net unrealized loss on securities available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46,725
    )Net unrealized gain on qualifying cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,578Net change in unrecognized pension and post retirement costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    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 at December 31, 2008
    
    $
    266,088
    
    
    
    125,997
    
    
    $
    1,214,469
    
    
    $
    170,358
    
    
    $
    (49,594
    )
    
    $
    1,601,321Comprehensive loss, net of tax:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (514,213
    )
    
    
    
    
    
    
    (514,213
    )Other comprehensive income (loss):Net unrealized gain on securities available-for-sale,
net of tax effect of ($24,572)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,626Net unrealized loss on qualifying cash flow hedges,
net of tax effect of $3,478
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,459
    )Net change in unrecognized pension
and post retirement costs, net of tax effect of ($1,795)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,334Other comprehensive income total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,501Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (471,712
    )Exchange of subordinated debt and trust preferred
stock for common stock, net of costs of $6,368
    
    
    
    
    
    
    268,216
    
    
    
    213,569
    
    
    
    
    
    
    
    
    
    
    
    213,569Dividends on redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,875
    )
    
    
    
    
    
    
    (13,875
    )Accretion of preferred stock discount
    
    
    5,902
    
    
    
    
    
    
    
    
    
    
    
    (5,902
    )
    
    
    
    
    
    
    Proceeds from restricted stock activity
    
    
    
    
    
    
    235
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recognition of stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,803
    
    
    
    
    
    
    
    
    
    
    
    1,803Shares purchased for taxes
    
    
    
    
    
    
    (51
    )
    
    
    (70
    )
    
    
    
    
    
    
    
    
    
    
    (70
    )Balance
 December 31, 2009
    
    $
    271,990
    
    
    
    394,397
    
    
    $
    1,429,771
    
    
    $
    (363,632
    )
    
    $
    (7,093
    )
    
    $
    1,331,036Comprehensive loss, net of tax:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (292,925
    )
    
    
    
    
    
    
    (292,925
    )Other comprehensive income (loss):Net unrealized loss on securities
available-for-sale net of tax effect of $1,715
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,311
    )Net unrealized gain on securities transferred
from available-for-sale to held-to-maturity, net of tax effect of ($912)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,693Amortization of unrealized gain on securities
transferred to held-to-maturity, net of tax effect of $6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )Net unrealized loss on qualifying cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,721
    )Net change in unrecognized pension and post retirement costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (712
    )Other comprehensive total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,063
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (305,988
    )Accretion of preferred stock discount
    
    
    6,310
    
    
    
    
    
    
    
    
    
    
    
    (6,310
    )
    
    
    
    
    
    
    Accrued dividend on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,375
    )
    
    
    
    
    
    
    (15,375
    )Proceeds from restricted stock activity
    
    
    
    
    
    
    2,799
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recognition of stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,086
    
    
    
    
    
    
    
    
    
    
    
    2,086Shares purchased for taxes
    
    
    
    
    
    
    (29
    )
    
    
    (28
    )
    
    
    
    
    
    
    
    
    
    
    (28
    )Balance  December 31, 2010
    
    $
    278,300
    
    
    
    397,167
    
    
    $
    1,431,829
    
    
    $
    (678,242
    )
    
    $
    (20,156
    )
    
    $
    1,011,731
  76




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##### Table of Contents



Consolidated Statements of Cash Flows
Citizens Republic Bancorp, Inc.
 Year Ended December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2008Operating Activities:Net loss
    
    $
    (292,925
    )
    
    $
    (514,213
    )
    
    $
    (393,052
    )Less: (Loss) income from discontinued operations, net of income tax
    
    
    (3,821
    )
    
    
    (8,469
    )
    
    
    1,575Loss from continuing operations
    
    
    (289,104
    )
    
    
    (505,744
    )
    
    
    (394,627
    )Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Provision for loan losses
    
    
    392,882
    
    
    
    323,820
    
    
    
    280,961Goodwill impairment
    
    
    
    
    
    
    256,272
    
    
    
    178,089Net increase in deferred tax asset valuation allowance
    
    
    52,597
    
    
    
    79,788
    
    
    
    136,568Net decrease in current and deferred income taxes
    
    
    (24,357
    )
    
    
    (94,616
    )
    
    
    (55,697
    )Depreciation and software amortization
    
    
    12,215
    
    
    
    12,026
    
    
    
    11,273Amortization of intangibles
    
    
    3,923
    
    
    
    7,036
    
    
    
    9,132Amortization and fair value adjustments of purchase accounting mark to market, net
    
    
    (8,030
    )
    
    
    (10,270
    )
    
    
    (15,590
    )Fair value adjustment on loans held for sale and other real estate
    
    
    14,939
    
    
    
    26,307
    
    
    
    15,185Discount accretion and amortization of issuance costs on long term debt
    
    
    531
    
    
    
    1,062
    
    
    
    1,176Net amortization (accretion) on investment securities
    
    
    8,376
    
    
    
    403
    
    
    
    (4,412
    )Investment securities (gains) losses
    
    
    (13,896
    )
    
    
    (5
    )
    
    
    1Net loss on debt extinguishment
    
    
    
    
    
    
    15,929
    
    
    
    Loans originated for sale
    
    
    (193,313
    )
    
    
    (292,575
    )
    
    
    (271,393
    )Proceeds from loans held for sale
    
    
    192,122
    
    
    
    302,892
    
    
    
    318,980Net gains from loan sales
    
    
    (4,318
    )
    
    
    (7,066
    )
    
    
    (6,351
    )Net loss on other real estate
    
    
    1,399
    
    
    
    2,653
    
    
    
    2,068Recognition of stock-based compensation expense
    
    
    2,086
    
    
    
    1,803
    
    
    
    4,520Restructure and merger related
    
    
    
    
    
    
    
    
    
    
    (3,260
    )Other
    
    
    32,674
    
    
    
    (6,093
    )
    
    
    (12,907
    )Discontinued operations, net
    
    
    10,706
    
    
    
    2,383
    
    
    
    1,363Net cash provided by operating activities
    
    
    191,432
    
    
    
    116,005
    
    
    
    195,079Investing Activities:Net decrease (increase) in money market investments
    
    
    277,206
    
    
    
    (480,682
    )
    
    
    (205,481
    )Securities available-for-sale:Proceeds from sales
    
    
    417,582
    
    
    
    1,945
    
    
    
    3Proceeds from maturities and payments
    
    
    873,768
    
    
    
    619,680
    
    
    
    434,380Purchases
    
    
    (1,469,007
    )
    
    
    (537,561
    )
    
    
    (531,298
    )Securities held-to-maturity:Proceeds from maturities and payments
    
    
    4,847
    
    
    
    1,508
    
    
    
    2,505Purchases
    
    
    (183,802
    )
    
    
    
    
    
    
    (9,732
    )Net decrease in loans and leases
    
    
    1,125,985
    
    
    
    879,692
    
    
    
    70,136Proceeds from sales of other real estate
    
    
    53,542
    
    
    
    43,347
    
    
    
    31,476Net increase in properties and equipment
    
    
    (6,381
    )
    
    
    (6,830
    )
    
    
    (6,696
    )Proceeds from sale of discontinued operations, net
    
    
    35,369
    
    
    
    
    
    
    
    Discontinued operations, net
    
    
    312,402
    
    
    
    11,330
    
    
    
    (44,184
    )Net cash provided (used) by investing activities
    
    
    1,441,511
    
    
    
    532,429
    
    
    
    (258,891
    )Financing Activities:Net increase in demand and savings deposits
    
    
    70,379
    
    
    
    540,414
    
    
    
    302,233Net (decrease) increase in time deposits
    
    
    (844,891
    )
    
    
    (671,306
    )
    
    
    390,173Net increase (decrease) in short-term borrowings
    
    
    2,519
    
    
    
    (24,691
    )
    
    
    (461,078
    )Proceeds from issuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    1,550,000Principal reductions in long-term debt
    
    
    (476,134
    )
    
    
    (475,191
    )
    
    
    (2,304,065
    )Proceeds from issuance of preferred redeemable stock and warrant
    
    
    
    
    
    
    
    
    
    
    300,000Net proceeds from issuance of common stock
    
    
    
    
    
    
    
    
    
    
    74,844Net proceeds from issuance of preferred convertible stock
    
    
    
    
    
    
    
    
    
    
    114,161Cash dividends paid on common stock
    
    
    
    
    
    
    
    
    
    
    (21,959
    )Cash dividends paid on preferred stock
    
    
    
    
    
    
    (13,875
    )
    
    
    Proceeds from stock options exercised and restricted stock activity
    
    
    
    
    
    
    
    
    
    
    66Shares acquired for retirement and purchased for taxes
    
    
    (28
    )
    
    
    (70
    )
    
    
    (444
    )Discontinued operations, net
    
    
    (420,340
    )
    
    
    (12,273
    )
    
    
    50,472Net cash used by financing activities
    
    
    (1,668,495
    )
    
    
    (656,992
    )
    
    
    (5,597
    )Net decrease in cash and due from banks
    
    
    (35,552
    )
    
    
    (8,558
    )
    
    
    (69,409
    )Cash and cash equivalents at beginning of period, continuing operations
    
    
    156,093
    
    
    
    163,499
    
    
    
    217,808Cash and cash equivalents at beginning of period, discontinued operations
    
    
    7,044
    
    
    
    8,196
    
    
    
    23,296Cash and due from banks at beginning of period
    
    
    163,137
    
    
    
    171,695
    
    
    
    241,104Cash and cash equivalents at end of period, continuing operations
    
    
    127,585
    
    
    
    156,093
    
    
    
    163,499Cash and cash equivalents at end of period, discontinued operations
    
    
    
    
    
    
    7,044
    
    
    
    8,196Cash and due from banks at end of period
    
    $
    127,585
    
    
    $
    163,137
    
    
    $
    171,695Supplemental Cash Flow Information:Interest paid
    
    $
    154,288
    
    
    $
    252,793
    
    
    $
    349,304Income tax refunds, net
    
    
    (16,214
    )
    
    
    (14,426
    )
    
    
    (10,528
    )Supplemental Disclosures of noncash itemsExchange of long-term debt for common stock
    
    
    
    
    
    
    209,067
    
    
    
    Exchange of subordinated debt and preferred stock for common stock
    
    
    
    
    
    
    (219,937
    )
    
    
    Loans transferred to other real estate owned
    
    
    38,056
    
    
    
    53,320
    
    
    
    46,826Loans transferred to held-for-sale
    
    
    112,070
    
    
    
    35,221
    
    
    
    80,044Held for sale loans transferred to other real estate
    
    
    17,063
    
    
    
    13,167
    
    
    
    12,453Deemed dividend on convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    11,737Accrued dividend on redeembable preferred stock
    
    
    15,375
    
    
    
    
    
    
    
    Accretion of preferred stock discount
    
    
    6,310
    
    
    
    5,902
    
    
    
    227
  77




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##### Table of Contents



Citizens Republic Bancorp, Inc.
 Notes To Consolidated Financial Statements  December 31, 2010, 2009, and 2008
  Note 1. Summary of Significant Accounting Policies
  Basis of Financial Statement Presentation
     78




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##### Table of Contents



Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to
Repurchase
  Investment Securities
   Loans
   79




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##### Table of Contents



Allowance for Loan Losses
     Loans Held for Sale
  80




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##### Table of Contents



Premises and Equipment
   Other Real Estate Owned
  Bank Owned Life Insurance
  Goodwill and Core Deposit Intangible Assets
   81




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##### Table of Contents



Pension and Postretirement Benefits
  Fair Value Measurements
    82




---



##### Table of Contents



Derivative Instruments
        83




---



##### Table of Contents



Income Taxes
    Stock-Based Compensation
  Net Income per Common Share
  84




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##### Table of Contents



Cash and Cash Equivalents
  Reclassifications
  Note 2. Pending Accounting Pronouncements
 Accounting Standard Update (ASU)
 Statements of Financial Accounting Standards (SFAS)
 FASB ASU 2011-01, Receivables (Topic 310): Deferral of the Effective Date of Disclosures
about Troubled Debt Restructurings in Update No. 2010-20
  FASB ASU 2010-28, Intangibles  Goodwill and Other (Topic 350): When to Perform Step 2 of
the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts
  FASB ASU 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses
  FASB ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures
about Fair Value Measurements
  85




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##### Table of Contents



Note 3. Investment Securities
  December 31, 2010
    
    
    December 31, 2009Estimated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Gross Unrealized
    
    
    Amortized
    
    
    Fair
    
    
    Gross Unrealized(in thousands)
    
    Cost
    
    
    Value
    
    
    Gains
    
    
    Losses
    
    
    Cost
    
    
    Value
    
    
    Gains
    
    
    LossesSecurities available for sale:Federal agencies
    
    $
    5,510
    
    
    $
    5,557
    
    
    $
    47
    
    
    $
    
    
    
    $
    135,793
    
    
    $
    138,644
    
    
    $
    2,851
    
    
    $
    Collateralized mortgage obligations
    
    
    596,308
    
    
    
    599,264
    
    
    
    8,181
    
    
    
    5,225
    
    
    
    393,143
    
    
    
    382,943
    
    
    
    5,138
    
    
    
    15,338Mortgage-backed
    
    
    1,232,571
    
    
    
    1,259,131
    
    
    
    30,661
    
    
    
    4,101
    
    
    
    1,061,015
    
    
    
    1,093,598
    
    
    
    33,791
    
    
    
    1,208State and municipal
    
    
    181,719
    
    
    
    183,584
    
    
    
    3,188
    
    
    
    1,323
    
    
    
    432,795
    
    
    
    443,663
    
    
    
    11,544
    
    
    
    676Other
    
    
    1,985
    
    
    
    1,992
    
    
    
    45
    
    
    
    38
    
    
    
    17,951
    
    
    
    17,946
    
    
    
    6
    
    
    
    11Total available for sale
    
    $
    2,018,093
    
    
    $
    2,049,528
    
    
    $
    42,122
    
    
    $
    10,687
    
    
    $
    2,040,697
    
    
    $
    2,076,794
    
    
    $
    53,330
    
    
    $
    17,233Securities held to maturity:Mortgage-backed(1)
    
    $
    363,427
    
    
    $
    356,652
    
    
    $
    
    
    
    $
    6,775
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    State and municipal
    
    
    111,405
    
    
    
    112,769
    
    
    
    2,269
    
    
    
    905
    
    
    
    114,249
    
    
    
    116,368
    
    
    
    2,531
    
    
    
    412Total held to maturity
    
    $
    474,832
    
    
    $
    469,421
    
    
    $
    2,269
    
    
    $
    7,680
    
    
    $
    114,249
    
    
    $
    116,368
    
    
    $
    2,531
    
    
    $
    412FHLB and
Federal Reserve stock
    
    $
    143,873
    
    
    $
    143,873
    
    
    $
    
    
    
    $
    
    
    
    $
    155,084
    
    
    $
    155,084
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Amortized cost includes adjustments for the unamortized portion of
unrealized gains on securities transferred from available for sale.    86




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##### Table of Contents



December 31, 2010Amortized
    
    
    Estimated Fair(in thousands)
    
    Cost
    
    
    ValueSecurities available for sale:Federal agencies and state and municipalContractual maturity within one year
    
    $
    31,089
    
    
    $
    31,461After one year through five years
    
    
    32,954
    
    
    
    33,815After five years through ten years
    
    
    74,359
    
    
    
    75,570After ten years
    
    
    48,827
    
    
    
    48,295Subtotal
    
    
    187,229
    
    
    
    189,141Collateralized mortgage obligations and mortgage-backed
    
    
    1,828,879
    
    
    
    1,858,395Other
    
    
    1,985
    
    
    
    1,992Total available for sale
    
    $
    2,018,093
    
    
    $
    2,049,528Securities held to maturity:State and municipalContractual maturity within one year
    
    $
    2,781
    
    
    $
    2,817After one year through five years
    
    
    1,510
    
    
    
    1,567After five years through ten years
    
    
    56,873
    
    
    
    58,535After ten years
    
    
    50,241
    
    
    
    49,850Subtotal
    
    
    111,405
    
    
    
    112,769Mortgage-backed
    
    
    363,427
    
    
    
    356,652Total held to maturity
    
    $
    474,832
    
    
    $
    469,421
  87




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##### Table of Contents



Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalDecember 31, 2010
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized(in thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesSecurities available for sale:Collateralized mortgage obligations
    
    $
    151,618
    
    
    $
    2,417
    
    
    $
    25,726
    
    
    $
    2,808
    
    
    $
    177,344
    
    
    $
    5,225Mortgage-backed
    
    
    293,745
    
    
    
    4,098
    
    
    
    135
    
    
    
    3
    
    
    
    293,880
    
    
    
    4,101State and municipal
    
    
    41,580
    
    
    
    1,138
    
    
    
    3,289
    
    
    
    185
    
    
    
    44,869
    
    
    
    1,323Other
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    38
    
    
    
    102
    
    
    
    38Total available for sale
    
    $
    486,943
    
    
    $
    7,653
    
    
    $
    29,252
    
    
    $
    3,034
    
    
    $
    516,195
    
    
    $
    10,687Securities held to maturity:Mortgage-backed
    
    $
    356,652
    
    
    $
    6,775
    
    
    $
    
    
    
    $
    
    
    
    $
    356,652
    
    
    $
    6,775State and municipal
    
    
    32,082
    
    
    
    905
    
    
    
    
    
    
    
    
    
    
    
    32,082
    
    
    
    905Total held to maturity
    
    $
    388,734
    
    
    $
    7,680
    
    
    $
    
    
    
    $
    
    
    
    $
    388,734
    
    
    $
    7,680
 Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalDecember 31, 2009
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized(in thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesSecurities available for sale:Collateralized mortgage obligations
    
    $
    51,983
    
    
    $
    452
    
    
    $
    146,024
    
    
    $
    14,886
    
    
    $
    198,007
    
    
    $
    15,338Mortgage-backed
    
    
    109,134
    
    
    
    1,202
    
    
    
    251
    
    
    
    6
    
    
    
    109,385
    
    
    
    1,208State and municipal
    
    
    29,055
    
    
    
    401
    
    
    
    9,323
    
    
    
    275
    
    
    
    38,378
    
    
    
    676Other
    
    
    
    
    
    
    
    
    
    
    312
    
    
    
    11
    
    
    
    312
    
    
    
    11Total available for sale
    
    $
    190,172
    
    
    $
    2,055
    
    
    $
    155,910
    
    
    $
    15,178
    
    
    $
    346,082
    
    
    $
    17,233Securities held to maturity:State and municipalTotal held to maturity
    
    $
    16,778
    
    
    $
    284
    
    
    $
    1,438
    
    
    $
    128
    
    
    $
    18,216
    
    
    $
    412
   88




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##### Table of Contents



Note 4. Loans, Nonperforming Assets, Allowance for Loan Losses, and Loans Held for Sale
   Past Due Loans, Nonaccrual Loans and Nonperforming Assets.
 89




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##### Table of Contents



December 31,(in thousands)
    
    2010
    
    
    2009Nonperforming portfolio loans:Landhold
    
    $
    3,250
    
    
    $
    4,818Land Development
    
    
    3,070
    
    
    
    950Construction
    
    
    7,472
    
    
    
    25,237Income Producing
    
    
    62,021
    
    
    
    121,457Owner Occupied
    
    
    42,826
    
    
    
    83,439Total commercial real estate
    
    
    118,639
    
    
    
    235,901Commercial & industrial
    
    
    47,508
    
    
    
    71,184Small Business
    
    
    10,244
    
    
    
    12,777Total nonaccuring commercial loans
    
    
    176,391
    
    
    
    319,862Residential mortgage
    
    
    22,076
    
    
    
    125,081Direct consumer
    
    
    12,562
    
    
    
    21,293Indirect consumer
    
    
    1,279
    
    
    
    2,621Total nonaccruing consumer loans
    
    
    35,917
    
    
    
    148,995Total nonaccrual loans
    
    
    212,308
    
    
    
    468,857Loans 90 days or more past due and still accruing
    
    
    1,573
    
    
    
    3,039Restructured loans and still accruing
    
    
    6,392
    
    
    
    2,629Total nonperforming portfolio loans
    
    
    220,273
    
    
    
    474,525Nonperforming loans held for sale
    
    
    24,073
    
    
    
    65,189Other repossessed assets acquired
    
    
    42,216
    
    
    
    54,394Total nonperforming assets
    
    $
    286,562
    
    
    $
    594,108
   90




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##### Table of Contents



Loans
    
    
    Loans 90+Accruing
    
    
    Days Past
    
    
    
    
    
    
    
    
    
    
    Current30-89 Days
    
    
    Due & Still
    
    
    Non-Accruing
    
    
    Total Past
    
    
    Portfolio
    
    
    Total Portfolio(in thousands)
    
    Past Due
    
    
    Accruing
    
    
    Loans
    
    
    Due Loans
    
    
    Loans
    
    
    LoansLand hold
    
    $
    2,233
    
    
    $
    
    
    
    $
    3,250
    
    
    $
    5,483
    
    
    $
    22,776
    
    
    $
    28,259Land development
    
    
    216
    
    
    
    
    
    
    
    3,070
    
    
    
    3,286
    
    
    
    31,514
    
    
    
    34,800Construction
    
    
    464
    
    
    
    
    
    
    
    7,472
    
    
    
    7,936
    
    
    
    95,751
    
    
    
    103,687Income producing
    
    
    20,643
    
    
    
    
    
    
    
    62,021
    
    
    
    82,664
    
    
    
    1,088,318
    
    
    
    1,170,982Owner-occupied
    
    
    14,705
    
    
    
    
    
    
    
    42,826
    
    
    
    57,531
    
    
    
    725,476
    
    
    
    783,007Total commercial real estate
    
    
    38,261
    
    
    
    
    
    
    
    118,639
    
    
    
    156,900
    
    
    
    1,963,835
    
    
    
    2,120,735Commercial and industrial
    
    
    5,801
    
    
    
    1,573
    
    
    
    47,508
    
    
    
    54,882
    
    
    
    1,085,645
    
    
    
    1,140,527Small Business
    
    
    3,257
    
    
    
    
    
    
    
    10,244
    
    
    
    13,501
    
    
    
    320,199
    
    
    
    333,700Total commercial loans
    
    
    47,319
    
    
    
    1,573
    
    
    
    176,391
    
    
    
    225,283
    
    
    
    3,369,679
    
    
    
    3,594,962Residential mortgage
    
    
    15,389
    
    
    
    
    
    
    
    22,076
    
    
    
    37,465
    
    
    
    718,780
    
    
    
    756,245Direct consumer
    
    
    22,379
    
    
    
    
    
    
    
    12,562
    
    
    
    34,941
    
    
    
    1,010,589
    
    
    
    1,045,530Indirect consumer
    
    
    13,287
    
    
    
    
    
    
    
    1,279
    
    
    
    14,566
    
    
    
    805,299
    
    
    
    819,865Total consumer loans
    
    
    51,055
    
    
    
    
    
    
    
    35,917
    
    
    
    86,972
    
    
    
    2,534,668
    
    
    
    2,621,640Total financing receivables
    
    $
    98,374
    
    
    $
    1,573
    
    
    $
    212,308
    
    
    $
    312,255
    
    
    $
    5,904,347
    
    
    $
    6,216,602
 Impaired loans
  UnpaidContractual
    
    
    Recorded
    
    
    Recorded
    
    
    
    
    
    
    
    
    
    
    AveragePrincipal
    
    
    Investment with
    
    
    Investment with
    
    
    Total Recorded
    
    
    Related
    
    
    Recorded(in thousands)
    
    Balance
    
    
    No Allowance
    
    
    Allowance
    
    
    Investment
    
    
    Allowance
    
    
    InvestmentNonaccrual
loans (impaired)Land Hold
    
    $
    2,007
    
    
    $
    
    
    
    $
    2,007
    
    
    $
    2,007
    
    
    $
    1,719
    
    
    $
    2,882Land Development
    
    
    5,954
    
    
    
    1,224
    
    
    
    1,458
    
    
    
    2,682
    
    
    
    842
    
    
    
    16,526Construction
    
    
    9,151
    
    
    
    
    
    
    
    6,769
    
    
    
    6,769
    
    
    
    1,413
    
    
    
    22,752Income Producing
    
    
    76,310
    
    
    
    21,315
    
    
    
    33,145
    
    
    
    54,460
    
    
    
    11,759
    
    
    
    112,214Owner-occupied
    
    
    39,018
    
    
    
    13,153
    
    
    
    19,337
    
    
    
    32,490
    
    
    
    7,786
    
    
    
    50,976Total commercial real estate
    
    
    132,440
    
    
    
    35,692
    
    
    
    62,716
    
    
    
    98,408
    
    
    
    23,519
    
    
    
    205,350Commercial and industrial
    
    
    51,300
    
    
    
    9,357
    
    
    
    32,894
    
    
    
    42,251
    
    
    
    9,298
    
    
    
    45,521Small Business
    
    
    1,272
    
    
    
    445
    
    
    
    809
    
    
    
    1,254
    
    
    
    173
    
    
    
    714Total commercial
    
    
    185,012
    
    
    
    45,494
    
    
    
    96,419
    
    
    
    141,913
    
    
    
    32,990
    
    
    
    251,585Residential mortgage
    
    
    5,196
    
    
    
    
    
    
    
    5,196
    
    
    
    5,196
    
    
    
    1,079
    
    
    
    5,129Direct consumer
    
    
    1,127
    
    
    
    
    
    
    
    1,074
    
    
    
    1,074
    
    
    
    115
    
    
    
    1,107Total consumer loans
    
    
    6,323
    
    
    
    
    
    
    
    6,270
    
    
    
    6,270
    
    
    
    1,194
    
    
    
    6,236Total
nonaccrual loans (impaired)
    
    
    191,335
    
    
    
    45,494
    
    
    
    102,689
    
    
    
    148,183
    
    
    
    34,184
    
    
    
    257,821Accrual
loans (impaired)Residential Mortgage
    
    
    162
    
    
    
    
    
    
    
    162
    
    
    
    162
    
    
    
    31
    
    
    
    163Direct consumer
    
    
    101
    
    
    
    
    
    
    
    101
    
    
    
    101
    
    
    
    15
    
    
    
    26Total
accrual loans (impaired)
    
    
    263
    
    
    
    
    
    
    
    263
    
    
    
    263
    
    
    
    46
    
    
    
    189Total
    
    $
    191,598
    
    
    $
    45,494
    
    
    $
    102,952
    
    
    $
    148,446
    
    
    $
    34,230
    
    
    $
    258,010
 91




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Credit Quality Indicators.
 Special Mention.
 Substandard
 Doubtful.
  Special(in thousands)
    
    Pass
    
    
    Mention
    
    
    Substandard
    
    
    Doubtful
    
    
    TotalLand Hold
    
    $
    3,611
    
    
    $
    10,126
    
    
    $
    12,803
    
    
    $
    1,719
    
    
    $
    28,259Land Development
    
    
    13,057
    
    
    
    693
    
    
    
    20,209
    
    
    
    841
    
    
    
    34,800Construction
    
    
    62,981
    
    
    
    18,809
    
    
    
    20,253
    
    
    
    1,644
    
    
    
    103,687Income Producing
    
    
    664,151
    
    
    
    198,323
    
    
    
    296,771
    
    
    
    11,737
    
    
    
    1,170,982Owner Occupied
    
    
    550,074
    
    
    
    81,133
    
    
    
    143,928
    
    
    
    7,872
    
    
    
    783,007Total Commercial Real Estate
    
    
    1,293,874
    
    
    
    309,084
    
    
    
    493,964
    
    
    
    23,813
    
    
    
    2,120,735Commercial & Industrial
    
    
    799,823
    
    
    
    140,099
    
    
    
    191,144
    
    
    
    9,461
    
    
    
    1,140,527Small Business
    
    
    280,697
    
    
    
    23,483
    
    
    
    28,994
    
    
    
    526
    
    
    
    333,700Total
    
    $
    2,374,394
    
    
    $
    472,666
    
    
    $
    714,102
    
    
    $
    33,800
    
    
    $
    3,594,962
  TotalDirect
    
    
    Indirect
    
    
    Residential
    
    
    Consumer(in thousands)
    
    Consumer
    
    
    Consumer
    
    
    Mortgage
    
    
    LoansPerforming
    
    $
    1,031,430
    
    
    $
    818,586
    
    
    $
    732,309
    
    
    $
    2,582,325Nonperforming
    
    
    14,100
    
    
    
    1,279
    
    
    
    23,936
    
    
    
    39,315Total
    
    $
    1,045,530
    
    
    $
    819,865
    
    
    $
    756,245
    
    
    $
    2,621,640
 92




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##### Table of Contents



Allowance for Loan Losses.
 (in thousands)
    
    2010
    
    
    2009
    
    
    2008Allowance for loan losses  January 1
    
    $
    338,940
    
    
    $
    252,938
    
    
    $
    161,635Provision for loan losses
    
    
    392,882
    
    
    
    323,820
    
    
    
    280,961Charge-offs
    
    
    (451,061
    )
    
    
    (251,669
    )
    
    
    (197,198
    )Recoveries
    
    
    15,270
    
    
    
    13,851
    
    
    
    7,540Net charge-offs
    
    
    (435,791
    )
    
    
    (237,818
    )
    
    
    (189,658
    )Allowance for loan losses  December 31
    
    $
    296,031
    
    
    $
    338,940
    
    
    $
    252,938Allowance for losses on lending-related commitments  December 31
    
    $
    1,933
    
    
    $
    3,118
    
    
    $
    3,836
  Loans individually
    
    
    Loans collectively
    
    
    
    
    
    
    Totalevaluated for
    
    
    evaluated for
    
    
    
    
    
    
    Allowance for(in thousands)
    
    impairment
    
    
    impairment
    
    
    Unallocated
    
    
    Loan LossesCommercial and Industrial
    
    $
    9,298
    
    
    $
    17,321
    
    
    $
    
    
    
    $
    26,619Small Business
    
    
    173
    
    
    
    16,161
    
    
    
    
    
    
    
    16,334Commercial Real Estate
    
    
    23,519
    
    
    
    128,604
    
    
    
    4,500
    
    
    
    156,623Residential Mortgage
    
    
    1,110
    
    
    
    46,513
    
    
    
    
    
    
    
    47,623Direct Consumer
    
    
    130
    
    
    
    32,125
    
    
    
    
    
    
    
    32,255Indirect Consumer
    
    
    
    
    
    
    16,577
    
    
    
    
    
    
    
    16,577Total Allowance for Loan Losses
    
    $
    34,230
    
    
    $
    257,301
    
    
    $
    4,500
    
    
    $
    296,031
  Loans individually
    
    
    Loans collectively
    
    
    
    
    
    
    Totalevaluated for
    
    
    evaluated for
    
    
    Unearned
    
    
    Recorded(in thousands)
    
    impairment
    
    
    impairment
    
    
    (Fees)/Costs
    
    
    InvestmentCommercial and Industrial
    
    $
    42,251
    
    
    $
    1,085,404
    
    
    $
    12,872
    
    
    $
    1,140,527Small Business
    
    
    1,254
    
    
    
    332,267
    
    
    
    179
    
    
    
    333,700Commercial Real Estate
    
    
    98,408
    
    
    
    2,024,321
    
    
    
    (1,994
    )
    
    
    2,120,735Residential Mortgage
    
    
    5,358
    
    
    
    749,368
    
    
    
    1,519
    
    
    
    756,245Direct Consumer
    
    
    1,175
    
    
    
    1,047,286
    
    
    
    (2,931
    )
    
    
    1,045,530Indirect Consumer
    
    
    
    
    
    
    802,894
    
    
    
    16,971
    
    
    
    819,865Total Loans
    
    $
    148,446
    
    
    $
    6,041,540
    
    
    $
    26,616
    
    
    $
    6,216,602
 Loans Serviced for Others.
 93




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##### Table of Contents



Loans Held for Sale.
 Note 5. Premises and Equipment
  December 31,(in thousands)
    
    2010
    
    2009Land
    
    $
    27,063
    
    
    $
    27,063Buildings
    
    
    154,765
    
    
    
    153,165Leasehold improvements
    
    
    13,764
    
    
    
    13,718Furniture and equipment
    
    
    131,566
    
    
    
    127,342327,158
    
    
    
    321,288Accumulated depreciation and amortization
    
    
    (222,444
    )
    
    
    (210,585
    )Total
    
    $
    104,714
    
    
    $
    110,703
  Rental(in thousands)
    
    Commitments2011
    
    $
    5,8792012
    
    
    5,2992013
    
    
    4,4542014
    
    
    3,0302015
    
    
    2,258Thereafter
    
    
    7,839Total
    
    $
    28,759
 Note 6. Goodwill and Core Deposit Intangible Assets
  Regional
    
    
    Wealth
    
    
    Total(in thousands)
    
    Banking
    
    
    Management
    
    
    GoodwillBalance at December 31, 2008
    
    $
    572,621
    
    
    $
    1,801
    
    
    $
    574,422Impairment Loss
    
    
    (256,272
    )
    
    
    
    
    
    
    (256,272
    )Balance at December 31, 2009 and
December 31, 2010
    
    $
    316,349
    
    
    $
    1,801
    
    
    $
    318,150
 94




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##### Table of Contents



December 31,(in thousands)
    
    2010
    
    2009Core deposit intangibles
    
    $
    62,835
    
    
    $
    62,835Accumulated amortization
    
    
    (52,381
    )
    
    
    (48,457
    )Total other intangibles
    
    $
    10,454
    
    
    $
    14,378
  IntangibleAmortization(in thousands)
    
    Expense2011
    
    $
    3,0272012
    
    
    2,1202013
    
    
    1,7272014
    
    
    1,4202015
    
    
    1,179Thereafter
    
    
    981Total
    
    $
    10,454
  95




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##### Table of Contents



Note 7. Deposits
  (in millions)
    
    Deposit Maturities2011
    
    $
    551.72012
    
    
    271.32013
    
    
    191.82014
    
    
    75.62015
    
    
    46.2Thereafter
    
    
    0.7Total
    
    $
    1,137.3
 Note 8. Short-Term Borrowings
   (in thousands)
    
    2010
    
    2009
    
    2008At December 31:Balance
    
    $
    41,699
    
    
    $
    32,900
    
    
    $
    55,676Weighted average interest rate paid
    
    
    0.18
    %
    
    
    0.34
    %
    
    
    0.46
    %During the year:Maximum outstanding at any month-end
    
    $
    42,334
    
    
    $
    52,025
    
    
    $
    650,653Daily average
    
    
    34,683
    
    
    
    42,077
    
    
    
    292,068Weighted average interest rate paid
    
    
    0.23
    %
    
    
    0.37
    %
    
    
    2.62
    %Weighted average interest rate paid, including effects of swaps
    
    
    0.23
    
    
    
    0.37
    
    
    
    2.62
 96




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##### Table of Contents



Note 9. Long-Term Debt
  December 31,(in thousands)
    
    2010
    
    
    2009Citizens (Parent only):Subordinated debt:5.75% subordinated notes due February 2013
    
    $
    16,932
    
    
    $
    16,773Variable rate junior subordinated debenture due June 2033
    
    
    25,774
    
    
    
    25,7747.50% junior subordinated debentures due September 2066
    
    
    48,382
    
    
    
    48,010Subsidiaries:Federal Home Loan Bank advances
    
    
    837,410
    
    
    
    1,318,200Other borrowed funds
    
    
    104,191
    
    
    
    104,230Total long-term debt
    
    $
    1,032,689
    
    
    $
    1,512,987
      97




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##### Table of Contents



(in thousands)
    
    Parent
    
    
    Subsidiaries
    
    
    Consolidated2011
    
    $
    
    
    
    $
    175,022
    
    
    $
    175,0222012
    
    
    
    
    
    
    61,971
    
    
    
    61,9712013
    
    
    17,266
    
    
    
    27
    
    
    
    17,2932014
    
    
    
    
    
    
    125,030
    
    
    
    125,0302015
    
    
    
    
    
    
    476,658
    
    
    
    476,658Thereafter
    
    
    74,451
    
    
    
    94,440
    
    
    
    168,891Total
    
    $
    91,717
    
    
    $
    933,148
    
    
    $
    1,024,865
 Note 10. Fair Values of Assets and Liabilities
    98




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##### Table of Contents



Level 1  Valuation is based upon quoted prices for identical instruments in active
markets.Level 2  Valuation is based upon quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets that are not
active, and model-based valuation techniques for which all significant assumptions are
observable in the market.Level 3  Valuation is generated from model-based techniques that use at least one
significant assumption not observable in the market. These unobservable assumptions
reflect estimates that market participants would use in pricing the asset or liability.
Valuation techniques include use of discounted cash flow models and similar techniques.
  December 31, 2010
    
    December 31, 2009Carrying
    
    Estimated
    
    Carrying
    
    Estimated(in thousands)
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair ValueFinancial assets:Cash and due from banks
    
    $
    127,585
    
    
    $
    127,585
    
    
    $
    156,093
    
    
    $
    156,093Money market investments
    
    
    409,079
    
    
    
    409,079
    
    
    
    686,285
    
    
    
    686,285Securities available for sale
    
    
    2,049,528
    
    
    
    2,049,528
    
    
    
    2,076,794
    
    
    
    2,076,794Securities held to maturity
    
    
    474,832
    
    
    
    469,421
    
    
    
    114,249
    
    
    
    116,368FHLB and Federal Reserve stock
    
    
    143,873
    
    
    
    143,873
    
    
    
    155,084
    
    
    
    155,084Net portfolio loans
    
    
    5,920,571
    
    
    
    5,157,339
    
    
    
    7,448,965
    
    
    
    6,447,963Deferred compensation assets
    
    
    10,951
    
    
    
    10,951
    
    
    
    11,138
    
    
    
    11,138Loans held for sale
    
    
    40,347
    
    
    
    40,347
    
    
    
    80,219
    
    
    
    80,219Accrued interest receivable
    
    
    33,310
    
    
    
    33,310
    
    
    
    41,387
    
    
    
    41,387Financial liabilities:Deposits
    
    
    7,726,834
    
    
    
    7,778,461
    
    
    
    8,500,763
    
    
    
    8,534,799Short-term borrowings
    
    
    42,319
    
    
    
    42,319
    
    
    
    39,800
    
    
    
    39,800Long-term debt
    
    
    1,032,689
    
    
    
    1,071,250
    
    
    
    1,512,987
    
    
    
    1,565,649Accrued interest payable
    
    
    10,901
    
    
    
    10,901
    
    
    
    9,808
    
    
    
    9,808Financial instruments with off-balance sheet risk(1):Letters of credit(2)
    
    
    (1,357
    )
    
    
    (4,980
    )
    
    
    (913
    )
    
    
    (5,185
    )Derivative instruments
    
    
    1,862
    
    
    
    1,862
    
    
    
    17,959
    
    
    
    17,959
 
 (1)
    
    Positive amounts represent assets, whereas negative amounts represent liabilities.(2)
    
    The carrying amount for letters of credit is part of the total carrying amount of net loans. It is shown here separately to
disclose the estimated fair value which is based on a discounted cash flow method utilizing current market pricing. This
amount is not included in the net loans estimate of fair value.  Securities Available for Sale.
 99




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##### Table of Contents



Securities Held to Maturity.
 FHLB and Federal Reserve Stock .
 Net Portfolio Loans.
 Deposits.
 Short-Term Borrowings.
 Long-Term Debt.
 Derivative Instruments.
 Deferred Compensation Assets.
 100




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##### Table of Contents



Impaired Loans.
 Residential Mortgage Loans Held for Sale .
 Mortgage Servicing Rights .
 Other Real Estate.
 Repossessed Assets.
   101




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##### Table of Contents



December 31, 2010(in thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Securities available for sale:Federal agencies
    
    $
    5,557
    
    
    $
    
    
    
    $
    5,557
    
    
    $
    Collateralized mortgage obligations
    
    
    599,264
    
    
    
    
    
    
    
    599,253
    
    
    
    11Mortgage-backed
    
    
    1,259,131
    
    
    
    
    
    
    
    1,259,131
    
    
    
    State and municipal
    
    
    183,584
    
    
    
    
    
    
    
    179,772
    
    
    
    3,812Other
    
    
    1,992
    
    
    
    
    
    
    
    1,656
    
    
    
    336Total securities available for sale
    
    
    2,049,528
    
    
    
    
    
    
    
    2,045,369
    
    
    
    4,159Other assets:Derivatives designated as hedging instruments
    
    
    1,976
    
    
    
    
    
    
    
    1,976
    
    
    
    Derivatives not designated as hedging instruments
    
    
    26,409
    
    
    
    
    
    
    
    26,409
    
    
    
    Deferred compensation assets
    
    
    10,951
    
    
    
    7,654
    
    
    
    3,297
    
    
    
    Total other assets
    
    
    39,336
    
    
    
    7,654
    
    
    
    31,682
    
    
    
    Total
    
    $
    2,088,864
    
    
    $
    7,654
    
    
    $
    2,077,051
    
    
    $
    4,159Other liabilities:Derivative not designated as hedging instruments
    
    $
    26,523
    
    
    $
    
    
    
    $
    26,523
    
    
    $
    Total other liabilities
    
    
    26,523
    
    
    
    
    
    
    
    26,523
    
    
    
    Total
    
    $
    26,523
    
    
    $
    
    
    
    $
    26,523
    
    
    $
    
  Net Realized/Unrealized Gains (Losses)Recorded inBalance at
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Purchases, Sales
    
    
    Transfers In
    
    
    Balance atDecember 31,
    
    
    Recorded in Earnings
    
    
    Comprehensive
    
    
    Issuances and
    
    
    and /or Out
    
    
    December 31,(in thousands)
    
    2009
    
    
    Realized(1)
    
    
    Unrealized
    
    
    Income (Pretax)
    
    
    Settlements, Net
    
    
    of Level 3
    
    
    2010Securities available for saleCollateralized mortgage obligations
    
    $
    15
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (4
    )
    
    $
    
    
    
    $
    11State and municipal
    
    
    5,353
    
    
    
    156
    
    
    
    
    
    
    
    58
    
    
    
    (1,755
    )
    
    
    
    
    
    
    3,812Other
    
    
    323
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    336Total available for sale
    
    $
    5,691
    
    
    $
    169
    
    
    $
    
    
    
    $
    58
    
    
    $
    (1,759
    )
    
    $
    
    
    
    $
    4,159
 
 (1)
    
    Recorded through Interest Income on the Consolidated Statement of Operations.  December 31, 2010
    
    Initial Carrying
    
    
    Fair Value(in thousands)
    
    Value
    
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Impaired loans
    
    $
    402,539
    
    
    $
    89,478
    
    
    $
    
    
    
    $
    
    
    
    $
    89,478Commercial loans held for sale
    
    
    22,774
    
    
    
    3,866
    
    
    
    
    
    
    
    
    
    
    
    3,866Residential mortgage loans held for sale
    
    
    11,460
    
    
    
    4,018
    
    
    
    
    
    
    
    
    
    
    
    4,018Mortgage servicing rights
    
    
    1,608
    
    
    
    1,504
    
    
    
    
    
    
    
    
    
    
    
    1,504Other real estate
    
    
    20,072
    
    
    
    10,266
    
    
    
    
    
    
    
    
    
    
    
    10,266Repossessed assets
    
    
    3,983
    
    
    
    2,032
    
    
    
    
    
    
    
    
    
    
    
    2,032Total
    
    $
    462,436
    
    
    $
    111,164
    
    
    $
    
    
    
    $
    
    
    
    $
    111,164
 102




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Note 11. Employee Benefit Plans
 Pension and Postretirement Benefits
     Cumulative Balanceat December 31,(in thousands)
    
    2010
    
    
    2009Defined Benefit Pension PlansPrior service cost
    
    $
    174
    
    
    $
    198Net actuarial loss
    
    
    34,100
    
    
    
    32,906Unrecognized balance
    
    
    34,274
    
    
    
    33,104Supplemental Pension PlansPrior service cost
    
    
    
    
    
    
    Net actuarial loss
    
    
    896
    
    
    
    534Unrecognized balance
    
    
    896
    
    
    
    534Postretirement Benefit PlansPrior service credit
    
    
    (1,783
    )
    
    
    (1,678
    )Net actuarial gain
    
    
    (1,901
    )
    
    
    (1,186
    )Unrecognized balance
    
    
    (3,684
    )
    
    
    (2,864
    )Unrecognized net prior service credit
    
    $
    (1,609
    )
    
    $
    (1,480
    )Unrecognized net actuarial loss
    
    $
    33,095
    
    
    $
    32,254
  103




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Pension
    
    
    Supplemental
    
    
    PostretirementBenefits
    
    
    Pension Plan
    
    
    Benefits(in thousands)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Change in Benefit ObligationProjected benefit obligation, beginning of year
    
    $
    74,007
    
    
    $
    75,705
    
    
    $
    5,292
    
    
    $
    12,173
    
    
    $
    9,295
    
    
    $
    9,986Interest cost
    
    
    4,132
    
    
    
    4,366
    
    
    
    264
    
    
    
    588
    
    
    
    398
    
    
    
    571Participant contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    337Actuarial losses (gains)
    
    
    5,841
    
    
    
    1,126
    
    
    
    400
    
    
    
    488
    
    
    
    (951
    )
    
    
    10Plan amendments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (398
    )
    
    
    (241
    )Benefits paid
    
    
    (5,698
    )
    
    
    (7,190
    )
    
    
    (515
    )
    
    
    (7,957
    )
    
    
    (1,128
    )
    
    
    (1,368
    )Projected benefit obligation, end of year
    
    $
    78,282
    
    
    $
    74,007
    
    
    $
    5,441
    
    
    $
    5,292
    
    
    $
    7,628
    
    
    $
    9,295Accumulated benefit obligation, end of year
    
    $
    78,282
    
    
    $
    74,007
    
    
    $
    5,441
    
    
    $
    5,292
    
    
    $
    7,628
    
    
    $
    9,295Change in Plan AssetsFair value of plan assets, beginning of year
    
    $
    64,121
    
    
    $
    60,914
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    7,235
    
    
    
    10,397
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employer contribution
    
    
    
    
    
    
    
    
    
    
    515
    
    
    
    7,957
    
    
    
    716
    
    
    
    1,031Participant contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    337Benefits paid
    
    
    (5,698
    )
    
    
    (7,190
    )
    
    
    (515
    )
    
    
    (7,957
    )
    
    
    (1,128
    )
    
    
    (1,368
    )Fair value of plan assets, end of year
    
    $
    65,658
    
    
    $
    64,121
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Reconciliation of Funded StatusUnderfunded status of plan
    
    $
    (12,624
    )
    
    $
    (9,886
    )
    
    $
    (5,441
    )
    
    $
    (5,292
    )
    
    $
    (7,628
    )
    
    $
    (9,295
    )Net amount recognized in the
consolidated balance sheets
    
    $
    (12,624
    )
    
    $
    (9,886
    )
    
    $
    (5,441
    )
    
    $
    (5,292
    )
    
    $
    (7,628
    )
    
    $
    (9,295
    )
    104




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##### Table of Contents



(in thousands)
    
    2010
    
    
    2009
    
    
    2008Defined Benefit Pension PlansInterest cost
    
    $
    4,132
    
    
    $
    4,366
    
    
    $
    4,586Expected return on plan assets
    
    
    (4,814
    )
    
    
    (6,282
    )
    
    
    (7,601
    )Amortization of unrecognized:Prior service cost
    
    
    26
    
    
    
    26
    
    
    
    26Net actuarial loss
    
    
    2,200
    
    
    
    1,261
    
    
    
    194Net pension cost
    
    
    1,544
    
    
    
    (629
    )
    
    
    (2,795
    )Supplemental Pension Plans
    
    
    
    
    
    
    
    
    
    
    Interest cost
    
    
    264
    
    
    
    588
    
    
    
    761Settlement charge related to lump sum payments
    
    
    
    
    
    
    455
    
    
    
    Curtailment loss
    
    
    
    
    
    
    941
    
    
    
    Amortization of unrecognized:Prior service cost
    
    
    
    
    
    
    
    
    
    
    471Net actuarial loss
    
    
    18
    
    
    
    12
    
    
    
    20Net pension cost
    
    
    282
    
    
    
    1,996
    
    
    
    1,252Postretirement Benefit PlansInterest cost
    
    
    398
    
    
    
    571
    
    
    
    583Amortization of unrecognized:Prior service cost
    
    
    (289
    )
    
    
    (267
    )
    
    
    (256
    )Net actuarial gain
    
    
    (199
    )
    
    
    (31
    )
    
    
    (37
    )Net postretirement benefit cost
    
    
    (90
    )
    
    
    273
    
    
    
    290Total pension and postretirement benefit cost
    
    
    1,736
    
    
    
    1,640
    
    
    
    (1,253
    )Defined contribution retirement and 401(k)
plansEmployer contributions
    
    
    
    
    
    
    2,253
    
    
    
    6,452Total periodic benefit cost
    
    $
    1,736
    
    
    $
    3,893
    
    
    $
    5,199
  Pension
    
    
    Supplemental
    
    
    PostretirementBenefits
    
    
    Pension Plan
    
    
    Benefits2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Assumptions used to compute projected
benefit obligationDiscount rate
    
    
    5.00
    %
    
    
    5.75
    %
    
    
    4.50
    %
    
    
    5.25
    %
    
    
    4.50
    %
    
    
    5.25
    %Assumptions used to compute net benefit costsDiscount rate
    
    
    5.75
    
    
    
    6.00
    
    
    
    5.25
    
    
    
    5.25
    
    
    
    5.25
    
    
    
    6.00Expected return on plan assets
    
    
    7.20
    
    
    
    8.25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rate of compensation increase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.00
    
    
    
    
    
    
    
    
  105




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##### Table of Contents



DefinedBenefitPension
    
    
    Supplemental
    
    
    Postretirement(in thousands)
    
    Plan
    
    
    Pension Plan
    
    
    Benefit Plan
    
    
    Total Benefits2011
    
    $
    5,415
    
    
    $
    515
    
    
    $
    711
    
    
    $
    6,6412012
    
    
    5,113
    
    
    
    498
    
    
    
    718
    
    
    
    6,3292013
    
    
    5,046
    
    
    
    481
    
    
    
    702
    
    
    
    6,2292014
    
    
    5,354
    
    
    
    463
    
    
    
    697
    
    
    
    6,5142015
    
    
    5,210
    
    
    
    421
    
    
    
    685
    
    
    
    6,3162016 to 2020
    
    
    26,947
    
    
    
    1,831
    
    
    
    3,113
    
    
    
    31,891Total
    
    $
    53,085
    
    
    $
    4,209
    
    
    $
    6,626
    
    
    $
    63,920
  Investment Policy and Strategy
  Target
    
    
    December 31, 2010Allocation
    
    
    AllocationAsset Category:Equity securities
    
    
    60
    %
    
    
    65
    %Debt securities
    
    
    34
    
    
    
    31Short-term
pooled money
fund
    
    
    6
    
    
    
    4100
    %
    
    
    100
    %
   106




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##### Table of Contents



December 31, 2010(in thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Asset CategoryShort-term pooled money fund
    
    $
    2,839
    
    
    $
    
    
    
    $
    2,839
    
    
    $
    Equity securitiesLarge cap (1)
    
    
    19,567
    
    
    
    
    
    
    
    19,567
    
    
    
    Mid-cap
    
    
    5,241
    
    
    
    
    
    
    
    5,241
    
    
    
    Small-cap
    
    
    7,499
    
    
    
    
    
    
    
    7,499
    
    
    
    International Equity
    
    
    10,568
    
    
    
    
    
    
    
    10,568
    
    
    
    Fixed income securitiesIntermediate term fixed
(2)
    
    
    19,944
    
    
    
    
    
    
    
    19,944
    
    
    
    Total
    
    $
    65,658
    
    
    $
    
    
    
    $
    65,658
    
    
    $
    
 
 (1)
    
    This category is comprised of not actively managed low-cost equity index funds that track the S&P 500 and
Russell 1000.(2)
    
    This category represents investment grade bonds of U.S. issuers from diverse industries.   One Percentage
    
    One Percentage(in thousands)
    
    Point Increase
    
    Point DecreaseEffect on total of service and interest cost components
    
    $
    26
    
    
    $
    (24
    )Effect on the postretirement benefit obligation
    
    
    544
    
    
    
    (490
    )
 Defined Contribution Retirement and 401(k) Plans
 Note 12. Stock-Based Compensation
   107




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##### Table of Contents



(in thousands)
    
    2010
    
    
    2009
    
    
    2008Stock option compensation
    
    $
    
    
    
    $
    11
    
    
    $
    24Restricted stock compensation
    
    
    2,193
    
    
    
    1,792
    
    
    
    4,496Stock-based compensation expense before income taxes
    
    
    2,193
    
    
    
    1,803
    
    
    
    4,520Income tax benefit (1)
    
    
    (768
    )
    
    
    (631
    )
    
    
    (1,582
    )Total stock-based compensation expense after income taxes
    
    $
    1,425
    
    
    $
    1,172
    
    
    $
    2,938
 
 (1)
    
    The income tax benefit is calculated based on the statutory rate. Due to the fact that Citizens has a valuation
allowance, the income tax benefit may not be realized. Refer to Note 13 for additional information.   108




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##### Table of Contents



OptionsWeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term in Years
    
    
    ValueOutstanding at January 1, 2008
    
    
    4,030,042
    
    
    $
    26.03Exercised
    
    
    (12,134
    )
    
    
    11.77Forfeitures or Expirations
    
    
    (567,251
    )
    
    
    25.24Outstanding at December 31, 2008
    
    
    3,450,657
    
    
    
    26.21Forfeitures or Expirations
    
    
    (383,909
    )
    
    
    26.15Outstanding at December 31, 2009
    
    
    3,066,748
    
    
    
    26.22Forfeitures or Expirations
    
    
    (783,660
    )
    
    
    23.41Outstanding at December 31, 2010
    
    
    2,283,088
    
    
    $
    27.18
    
    
    
    2.2
    
    
    $
    Exercisable
    
    
    2,283,088
    
    
    $
    27.18
    
    
    
    2.2
    
    
    $
    
   (in thousands)
    
    2010
    
    
    2009
    
    
    2008Tax benefit realized from reduction of income tax payable:Reduction of goodwill for tax benefit of vested stock options
converted in Republic acquisition and exercised
    
    $
    
    
    
    $
    
    
    
    $
    1Included in common stock as net stock options exercised
    
    
    
    
    
    
    
    
    
    
    (76
    )Tax benefit from vested stock options converted in Republic
acquisition and exercised
    
    $
    
    
    
    $
    
    
    
    $
    (75
    )
  109




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##### Table of Contents



Weighted-AverageNumber of
    
    
    Per Share GrantShares
    
    
    Date Fair ValueRestricted stock at January 1, 2008
    
    
    486,842
    
    
    $
    21.32Granted
    
    
    338,995
    
    
    
    8.56Vested
    
    
    (171,197
    )
    
    
    22.02Forfeited
    
    
    (45,608
    )
    
    
    15.80Restricted stock at December 31, 2008
    
    
    609,032
    
    
    
    14.43Granted
    
    
    384,818
    
    
    
    1.29Vested
    
    
    (225,151
    )
    
    
    15.58Forfeited
    
    
    (149,940
    )
    
    
    12.31Restricted stock at December 31, 2009
    
    
    618,759
    
    
    
    6.35Granted
    
    
    3,092,602
    
    
    
    1.17Vested
    
    
    (307,294
    )
    
    
    6.62Forfeited
    
    
    (294,069
    )
    
    
    1.88Restricted stock at December 31, 2010
    
    
    3,109,998
    
    
    $
    1.33
  Note 13. Income Taxes
  (in thousands)
    
    2010
    
    
    2009
    
    
    2008Current tax expense (benefit):Federal
    
    $
    12,337
    
    
    $
    (7,993
    )
    
    $
    (19,351
    )State
    
    
    (67
    )
    
    
    (554
    )
    
    
    (684
    )Total current tax expense (benefit)
    
    
    12,270
    
    
    
    (8,547
    )
    
    
    (20,035
    )Deferred tax benefit(1)
    
    
    (52,009
    )
    
    
    (100,874
    )
    
    
    (45,563
    )Valuation allowance(1)
    
    
    52,597
    
    
    
    79,788
    
    
    
    136,568Total income tax expense (benefit)
    
    $
    12,858
    
    
    $
    (29,633
    )
    
    $
    70,970
 
 (1)
    
    In 2010, the gross amount of the deferred tax benefit and valuation
allowance expense was $113.4 million and $114.0 million, respectively. The carrying
value of these amounts was reduced by $61.4 million to reflect the estimated
realizability of certain loss carryforwards due to Section 382 limitations noted
below.   110




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##### Table of Contents



December 31,(in thousands)
    
    2010
    
    
    2009Deferred tax assets:Allowance for loan losses
    
    $
    105,763
    
    
    $
    122,804Accrued postemployment benefits other than pensions
    
    
    4,114
    
    
    
    4,419Deferred compensation
    
    
    5,271
    
    
    
    6,057Accrued expenses
    
    
    3,119
    
    
    
    4,176Loss carryforwards
    
    
    153,866
    
    
    
    91,378Tax credit carryforwards
    
    
    15,521
    
    
    
    3,411Minimum pension liability
    
    
    11,628
    
    
    
    11,379Purchase accounting adjustments
    
    
    12,248
    
    
    
    16,830Other deferred tax assets
    
    
    10,087
    
    
    
    12,281Deferred tax assets
    
    
    321,617
    
    
    
    272,735Deferred tax liabilities:Pension
    
    
    8,411
    
    
    
    8,998Acquisition premium on loans
    
    
    1,240
    
    
    
    2,193Fixed assets
    
    
    790
    
    
    
    1,852Basis difference in FHLB stock
    
    
    3,251
    
    
    
    3,637Purchase accounting adjustments
    
    
    474
    
    
    
    975Tax deductible goodwill
    
    
    14,574
    
    
    
    13,986Unrealized gains on securities and derivatives
    
    
    13,266
    
    
    
    17,872Mortgage servicing rights
    
    
    537
    
    
    
    747Other deferred tax liabilities
    
    
    734
    
    
    
    962Deferred tax liabilities
    
    
    43,277
    
    
    
    51,222Net deferred tax assets
    
    
    278,340
    
    
    
    221,513Valuation allowance
    
    
    (292,914
    )
    
    
    (235,499
    )Net deferred tax liabilities
    
    $
    (14,574
    )
    
    $
    (13,986
    )
      111




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##### Table of Contents



(in thousands)
    
    2010
    
    
    2009
    
    
    2008Tax at federal statutory rate (35%) applied to income before income taxes
    
    $
    (96,686
    )
    
    $
    (190,466
    )
    
    $
    (112,728
    )Increase (decrease) in taxes resulting from:Tax-exempt income
    
    
    (6,387
    )
    
    
    (9,803
    )
    
    
    (10,764
    )Officers life insurance
    
    
    (1,277
    )
    
    
    (1,114
    )
    
    
    (1,508
    )Goodwill impairment
    
    
    
    
    
    
    93,266
    
    
    
    62,331Valuation allowance
    
    
    112,821
    
    
    
    79,788
    
    
    
    136,568Other
    
    
    4,387
    
    
    
    (1,304
    )
    
    
    (2,929
    )Total income tax expense (benefit)
    
    $
    12,858
    
    
    $
    (29,633
    )
    
    $
    70,970
  (in thousands)
    
    2010
    
    
    2009
    
    
    2008Balance at January 1
    
    $
    1,522
    
    
    $
    1,852
    
    
    $
    7,093Additions based on tax positions related to the current year
    
    
    
    
    
    
    
    
    
    
    34Reductions for tax positions of prior years
    
    
    (430
    )
    
    
    (28
    )
    
    
    (1,436
    )Reductions due to the statute of limitations
    
    
    (766
    )
    
    
    (302
    )
    
    
    Settlements
    
    
    
    
    
    
    
    
    
    
    (3,839
    )Balance at December 31
    
    $
    326
    
    
    $
    1,522
    
    
    $
    1,852
    Jurisdiction
    
    Tax YearsFederal
    
    
    2009 - 2010State
    
    
    2002 - 2010
 Note 14. Shareholders Equity and Earnings Per Share
   112




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113




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(in thousands, except per share amounts)
    
    2010
    
    
    2009
    
    
    2008Numerator:Loss from continuing operations
    
    $
    (289,104
    )
    
    $
    (505,744
    )
    
    $
    (394,627
    )Deemed dividend on convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    (11,737
    )Dividend on redeemable preferred stock
    
    
    (21,685
    )
    
    
    (19,777
    )
    
    
    (227
    )Net loss from continuing operations allocated to common shareholders
    
    
    (310,789
    )
    
    
    (525,521
    )
    
    
    (406,591
    )(Loss) income from discontinued operations (net of income tax)
    
    
    (3,821
    )
    
    
    (8,469
    )
    
    
    1,575Net loss attributable to common shareholders
    
    $
    (314,610
    )
    
    $
    (533,990
    )
    
    $
    (405,016
    )Denominator:Weighted average shares outstanding
    
    
    396,155
    
    
    
    194,577
    
    
    
    94,731Less: participating securities included in weighted average shares outstanding
    
    
    (2,234
    )
    
    
    (744
    )
    
    
    (575
    )Weighted average shares outstanding for basic and dilutive earnings per common share
    
    
    393,921
    
    
    
    193,833
    
    
    
    94,156Basic loss per common share from continuing operations
    
    $
    (0.79
    )
    
    $
    (2.71
    )
    
    $
    (4.32
    )Diluted loss per common share from continuing operations
    
    
    (0.79
    )
    
    
    (2.71
    )
    
    
    (4.32
    )Basic (loss) earnings per common share from discontinued operations
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    0.02Diluted (loss) earnings per common share from discontinued operations
    
    
    (0.01
    )
    
    
    (0.04
    )
    
    
    0.02Basic net loss per common share
    
    $
    (0.80
    )
    
    $
    (2.75
    )
    
    $
    (4.30
    )Diluted net loss per common share
    
    
    (0.80
    )
    
    
    (2.75
    )
    
    
    (4.30
    )
 Stock Repurchase Program:
  114




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Net unrealizedNet unrealized
    
    
    gain (loss) ongain (loss) on
    
    
    derivative
    
    
    Pension and(in thousands)
    
    investments
    
    
    instruments
    
    
    post-retirement
    
    
    TotalBalance at January 1, 2008
    
    $
    11,692
    
    
    $
    (30
    )
    
    $
    (6,561
    )
    
    $
    5,101Other comprehensive (loss) income, net of tax:Net unrealized loss on securities available-for-sale
    
    
    (46,726
    )
    
    
    
    
    
    
    
    
    
    
    (46,726
    )Reclassification adjustment for net loss on securities
included in net income
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Net unrealized gain on qualifying cash flow hedges
    
    
    
    
    
    
    19,578
    
    
    
    
    
    
    
    19,578Net change in unrecognized pension and post
retirement costs
    
    
    
    
    
    
    
    
    
    
    (27,548
    )
    
    
    (27,548
    )Other comprehensive (loss) income total
    
    
    (46,725
    )
    
    
    19,578
    
    
    
    (27,548
    )
    
    
    (54,695
    )Balance at December 31, 2008
    
    
    (35,033
    )
    
    
    19,548
    
    
    
    (34,109
    )
    
    
    (49,594
    )Other comprehensive income (loss), net of tax:Net unrealized gain on securities available-for-sale,
net of tax effect of ($24,572)
    
    
    45,631
    
    
    
    
    
    
    
    
    
    
    
    45,631Reclassification adjustment for net gain on securities
included in net income
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (5
    )Net unrealized loss on qualifying cash flow hedges,
net of tax effect of $3,478
    
    
    
    
    
    
    (6,459
    )
    
    
    
    
    
    
    (6,459
    )Net change in unrecognized pension and post
retirement costs, net of tax effect of ($1,795)
    
    
    
    
    
    
    
    
    
    
    3,334
    
    
    
    3,334Other comprehensive income (loss) total
    
    
    45,626
    
    
    
    (6,459
    )
    
    
    3,334
    
    
    
    42,501Balance at December 31, 2009
    
    
    10,593
    
    
    
    13,089
    
    
    
    (30,775
    )
    
    
    (7,093
    )Other comprehensive (loss) income, net of tax:Net unrealized loss on securities available-for-sale
net of tax effect of $1,715
    
    
    5,585
    
    
    
    
    
    
    
    
    
    
    
    5,585Reclassification adjustment for net gain on securities
included in net income
    
    
    (13,896
    )
    
    
    
    
    
    
    
    
    
    
    (13,896
    )Net unrealized gain on securities transferred from
available-for-sale
to held-to-maturity, net of tax effect of ($912)
    
    
    1,693
    
    
    
    
    
    
    
    
    
    
    
    1,693Amortization of unrealized gain on securities
transferred
to held-to-maturity, net of tax effect of $6
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    (12
    )Net unrealized loss on qualifying cash flow hedges
    
    
    
    
    
    
    (5,721
    )
    
    
    
    
    
    
    (5,721
    )Net change in unrecognized pension and post
retirement costs
    
    
    
    
    
    
    
    
    
    
    (712
    )
    
    
    (712
    )Other comprehensive loss total
    
    
    (6,630
    )
    
    
    (5,721
    )
    
    
    (712
    )
    
    
    (13,063
    )Balance at December 31, 2010
    
    $
    3,963
    
    
    $
    7,368
    
    
    $
    (31,487
    )
    
    $
    (20,156
    )
 Note 15. Lines of Business
   
    
    Regional Banking Regional Banking provides a wide range of lending, depository, and other
related financial services to both individual consumers and businesses. The products and
services offered to consumer clients include: direct loans, home equity loans and lines of
credit, checking, savings and money market accounts, certificates of deposit, and fixed and
variable annuities, as well as private banking services for affluent clients. Citizens
partners with outside providers to offer to consumer clients the availability of nationwide
ATM, debit, and credit card networks as well as mortgage origination services. The
transaction-based income and expense associated with these services are included in Regional
Banking. 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
 115




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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.
 
    
    Specialty Consumer Specialty Consumer includes the indirect consumer and the residential
mortgage portfolios. The indirect lending team partners with dealerships across the Midwest
to provide primarily marine and recreational vehicle loans to consumers. As nearly all of new
mortgage volume is originated through the Regional Banking delivery channel and sold into the
secondary market, the residential mortgage loan portfolio residing in Specialty Consumer
consists primarily of historical loan production as well as the minimal new production that is
retained.
 
    
    Specialty Commercial Specialty Commercial provides 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.
 
    
    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;
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 four primary lines of business.
  116




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Regional
    
    
    Specialty
    
    
    Specialty
    
    
    Wealth(in thousands)
    
    Banking
    
    
    Consumer
    
    
    Commercial
    
    
    Mgmt
    
    
    Other
    
    
    TotalEarnings Summary  2010Net interest income (taxable equivalent)
    
    $
    257,975
    
    
    $
    32,804
    
    
    $
    62,364
    
    
    $
    676
    
    
    $
    (14,173
    )
    
    $
    339,646Provision for loan losses
    
    
    126,166
    
    
    
    81,597
    
    
    
    185,119
    
    
    
    
    
    
    
    
    
    
    
    392,882Net interest income after provision
    
    
    131,809
    
    
    
    (48,793
    )
    
    
    (122,755
    )
    
    
    676
    
    
    
    (14,173
    )
    
    
    (53,236
    )Noninterest income
    
    
    65,379
    
    
    
    (1,711
    )
    
    
    (13,321
    )
    
    
    20,545
    
    
    
    23,767
    
    
    
    94,659Noninterest expense
    
    
    211,306
    
    
    
    40,080
    
    
    
    15,996
    
    
    
    16,349
    
    
    
    23,356
    
    
    
    307,087Income before income taxes
    
    
    (14,118
    )
    
    
    (90,584
    )
    
    
    (152,072
    )
    
    
    4,872
    
    
    
    (13,762
    )
    
    
    (265,664
    )Income tax expense (taxable equivalent)
    
    
    (3,819
    )
    
    
    (31,704
    )
    
    
    (53,082
    )
    
    
    1,730
    
    
    
    110,315
    
    
    
    23,440Net (loss) income from continuing operations
    
    
    (10,299
    )
    
    
    (58,880
    )
    
    
    (98,990
    )
    
    
    3,142
    
    
    
    (124,077
    )
    
    
    (289,104
    )Income (loss) from discontinued operations
    
    
    850
    
    
    
    (137
    )
    
    
    175
    
    
    
    102
    
    
    
    (4,811
    )
    
    
    (3,821
    )Net (loss) income
    
    $
    (9,449
    )
    
    $
    (59,017
    )
    
    $
    (98,815
    )
    
    $
    3,244
    
    
    $
    (128,888
    )
    
    $
    (292,925
    )Average assets(in millions)
    
    $
    3,816
    
    
    $
    1,763
    
    
    $
    1,551
    
    
    $
    15
    
    
    $
    3,852
    
    
    $
    10,997Earnings Summary  2009Net interest income (taxable equivalent)
    
    $
    268,036
    
    
    $
    25,494
    
    
    $
    64,062
    
    
    $
    582
    
    
    $
    (32,150
    )
    
    $
    326,024Provision for loan losses
    
    
    104,505
    
    
    
    80,127
    
    
    
    139,188
    
    
    
    
    
    
    
    
    
    
    
    323,820Net interest income after provision
    
    
    163,531
    
    
    
    (54,633
    )
    
    
    (75,126
    )
    
    
    582
    
    
    
    (32,150
    )
    
    
    2,204Noninterest income
    
    
    69,666
    
    
    
    31
    
    
    
    (16,449
    )
    
    
    19,954
    
    
    
    (10,069
    )
    
    
    63,133Noninterest expense (1)
    
    
    478,378
    
    
    
    47,454
    
    
    
    17,411
    
    
    
    16,517
    
    
    
    25,379
    
    
    
    585,139Income before income taxes
    
    
    (245,181
    )
    
    
    (102,056
    )
    
    
    (108,986
    )
    
    
    4,019
    
    
    
    (67,598
    )
    
    
    (519,802
    )Income tax expense (taxable equivalent)
    
    
    (84,505
    )
    
    
    (35,720
    )
    
    
    (38,106
    )
    
    
    1,427
    
    
    
    142,846
    
    
    
    (14,058
    )Net (loss) income from continuing operations
    
    
    (160,676
    )
    
    
    (66,336
    )
    
    
    (70,880
    )
    
    
    2,592
    
    
    
    (210,444
    )
    
    
    (505,744
    )(Loss) income from discontinued operations
    
    
    (7,279
    )
    
    
    (370
    )
    
    
    (496
    )
    
    
    260
    
    
    
    (584
    )
    
    
    (8,469
    )Net (loss) income
    
    $
    (167,955
    )
    
    $
    (66,706
    )
    
    $
    (71,376
    )
    
    $
    2,852
    
    
    $
    (211,028
    )
    
    $
    (514,213
    )Average assets(in millions)
    
    $
    4,562
    
    
    $
    2,111
    
    
    $
    1,684
    
    
    $
    12
    
    
    $
    3,758
    
    
    $
    12,127Earnings Summary  2008Net interest income (taxable equivalent)
    
    $
    265,736
    
    
    $
    33,542
    
    
    $
    64,112
    
    
    $
    40
    
    
    $
    (2,947
    )
    
    $
    360,483Provision for loan losses
    
    
    95,323
    
    
    
    58,645
    
    
    
    126,993
    
    
    
    
    
    
    
    
    
    
    
    280,961Net interest income after provision
    
    
    170,413
    
    
    
    (25,103
    )
    
    
    (62,881
    )
    
    
    40
    
    
    
    (2,947
    )
    
    
    79,522Noninterest income
    
    
    73,560
    
    
    
    655
    
    
    
    (7,606
    )
    
    
    24,524
    
    
    
    5,444
    
    
    
    96,577Noninterest expense (1)
    
    
    214,874
    
    
    
    30,387
    
    
    
    197,123
    
    
    
    23,837
    
    
    
    16,091
    
    
    
    482,312Income before income taxes
    
    
    29,099
    
    
    
    (54,835
    )
    
    
    (267,610
    )
    
    
    727
    
    
    
    (13,594
    )
    
    
    (306,213
    )Income tax expense (taxable equivalent)
    
    
    11,720
    
    
    
    (19,191
    )
    
    
    (93,580
    )
    
    
    278
    
    
    
    189,187
    
    
    
    88,414Net income (loss) from continuing operations
    
    
    17,379
    
    
    
    (35,644
    )
    
    
    (174,030
    )
    
    
    449
    
    
    
    (202,781
    )
    
    
    (394,627
    )Income (loss) from discontinued operations
    
    
    2,943
    
    
    
    (25
    )
    
    
    
    
    
    
    74
    
    
    
    (1,417
    )
    
    
    1,575Net income (loss)
    
    $
    20,322
    
    
    $
    (35,669
    )
    
    $
    (174,030
    )
    
    $
    523
    
    
    $
    (204,198
    )
    
    $
    (393,052
    )Average assets(in millions)
    
    $
    5,280
    
    
    $
    2,308
    
    
    $
    1,972
    
    
    $
    13
    
    
    $
    3,339
    
    
    $
    12,912
 
 (1)
    
    Noninterest expense includes the $256.3 million goodwill
impairment charge for Regional Banking in 2009 and $178.1 million
for Specialty Commercial in 2008. Note 16. Commitments, Contingent Liabilities and Guarantees
 Commitments:
 117




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December 31,(in thousands)
    
    2010
    
    
    2009Loan commitments and letters of credit:Commitments to extend credit
    
    $
    953,340
    
    
    $
    1,334,690Financial standby letters of credit
    
    
    164,640
    
    
    
    228,483Performance standby letters of credit
    
    
    7,015
    
    
    
    7,523Commercial letters of credit
    
    
    
    
    
    
    23Total loan commitments and letters of credit
    
    $
    1,124,995
    
    
    $
    1,570,719
   Contingent Liabilities and Guarantees:
  Purchase Obligations:
 Change in Control Agreements:
 118




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##### Table of Contents



Note 17. Derivatives and Hedging Activities
 Risk Management Objective of Using Derivatives
  Fair Values of Derivative Instruments on the Consolidated Balance Sheets
  Other Assets
    
    
    Other LiabilitiesDecember 31,
    
    
    December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Derivatives designated as hedging instrumentsInterest rate products
    
    $
    1,976
    
    
    $
    17,279
    
    
    $
    
    
    
    $
    Derivatives notdesignated as hedging instrumentsInterest rate products
    
    
    26,409
    
    
    
    29,775
    
    
    
    26,523
    
    
    
    29,095Total derivatives
    
    $
    28,385
    
    
    $
    47,054
    
    
    $
    26,523
    
    
    $
    29,095
 Cash Flow Hedges of Interest Rate Risk
    119




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Derivative Impact on OCI gain (loss)
    
    
    Derivative Ineffectiveness gain (loss)Location
    
    
    
    
    
    
    
    
    
    
    LocationReclassified in
    
    
    Reclassified from
    
    
    Recognized inDerivatives Relationship
    
    
    
    
    
    
    
    
    
    Statement of
    
    
    Accumulated OCI into
    
    
    Statement of(in thousands)
    
    Recognized in OCI
    
    
    Operations
    
    
    Statement of Operations
    
    
    Operations
    
    
    AmountDecember 31,
    
    
    
    
    
    
    December 31,
    
    
    
    
    
    
    December 31,2010
    
    
    2009
    
    
    
    
    
    
    2010
    
    
    2009
    
    
    
    
    
    
    2010
    
    
    2009Cash flow hedges:Interest rate products
    
    $
    6,684
    
    
    $
    2,936
    
    
    Interest income
    
    $
    8,252
    
    
    $
    12,629Other income
    
    
    4,153
    
    
    
    244
    
    
    Other income
    
    $
    321
    
    
    $
    Total
    
    $
    6,684
    
    
    $
    2,936
    
    
    
    
    
    
    $
    12,405
    
    
    $
    12,873
    
    
    
    
    
    
    $
    321
    
    
    $
    
 Fair Value Hedges of Interest Rate Risk
    Derivative Contract (Loss) Gain
    
    
    Hedged Item Gain (Loss)Location in
    
    
    
    
    
    
    
    
    
    
    Location inDerivatives Relationship
    
    Statement of
    
    
    
    
    
    
    
    
    
    
    Statement of(in thousands)
    
    Operations
    
    
    2010
    
    
    2009
    
    
    Operations
    
    
    2010
    
    
    2009Fair value hedges:Interest rate products
    
    Interest expense
    
    $
    (3,023
    )
    
    $
    (3,846
    )
    
    Interest expense
    
    $
    8,829
    
    
    $
    10,151
 Non-designated Hedges
  120




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Amount of (Loss)Gain Recognized inStatement ofOperationsLocation of (Loss) GainDerivatives Relationship
    
    Recognized in Statement of(in thousands)
    
    Operations
    
    
    2010
    
    
    2009Derivatives notdesignated
as hedgesInterest rate products
    
    Other income
    
    $
    (306
    )
    
    $
    (661
    )
 Credit-Risk Related Contingent Features
     121




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Note 18. Regulatory Matters
         122




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Actual
    
    
    Adequately Capitalized
    
    
    Well-Capitalized(in thousands)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioCitizens Republic BancorpAs of December 31, 2010:Total Capital to risk weighted assets (1)
    
    $
    866,562
    
    
    
    13.5
    %
    
    $
    513,248
      ≥
    
    
    8.0
    %
    
    $
    641,560
      ≥
    
    
    10.0
    %Tier 1 Capital to risk weighted assets (1)
    
    
    776,772
    
    
    
    12.1
    
    
    
    256,624
      ≥
    
    
    4.0
    
    
    
    384,936
      ≥
    
    
    6.0Tier 1 Leverage (2)
    
    
    776,772
    
    
    
    7.7
    
    
    
    403,142
      ≥
    
    
    4.0
    
    
    
    503,927
      ≥
    
    
    5.0As of December 31, 2009:Total Capital to risk weighted assets (1)
    
    
    1,186,174
    
    
    
    13.9
    
    
    
    681,270
      ≥
    
    
    8.0
    
    
    
    851,587
      ≥
    
    
    10.0Tier 1 Capital to risk weighted assets (1)
    
    
    1,066,414
    
    
    
    12.5
    
    
    
    340,635
      ≥
    
    
    4.0
    
    
    
    510,952
      ≥
    
    
    6.0Tier 1 Leverage (2)
    
    
    1,066,414
    
    
    
    9.2
    
    
    
    463,376
      ≥
    
    
    4.0
    
    
    
    579,220
      ≥
    
    
    5.0Citizens BankAs of December 31, 2010:Total Capital to risk weighted assets (1)
    
    $
    819,343
    
    
    
    12.8
    %
    
    $
    512,115
      ≥
    
    
    8.0
    %
    
    $
    640,144
      ≥
    
    
    10.0
    %Tier 1 Capital to risk weighted assets (1)
    
    
    736,635
    
    
    
    11.5
    
    
    
    256,057
      ≥
    
    
    4.0
    
    
    
    384,086
      ≥
    
    
    6.0Tier 1 Leverage (2)
    
    
    736,635
    
    
    
    7.3
    
    
    
    402,687
      ≥
    
    
    4.0
    
    
    
    503,359
      ≥
    
    
    5.0As of December 31, 2009:Total Capital to risk weighted assets (1)
    
    
    1,024,154
    
    
    
    12.3
    
    
    
    666,647
      ≥
    
    
    8.0
    
    
    
    833,309
      ≥
    
    
    10.0Tier 1 Capital to risk weighted assets (1)
    
    
    917,063
    
    
    
    11.0
    
    
    
    333,324
      ≥
    
    
    4.0
    
    
    
    499,986
      ≥
    
    
    6.0Tier 1 Leverage (2)
    
    
    917,063
    
    
    
    8.2
    
    
    
    449,080
      ≥
    
    
    4.0
    
    
    
    561,350
      ≥
    
    
    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 is calculated as
follows: total shareholders equity + trust preferred
securities - goodwill -
accumulated other comprehensive income (loss) - other intangible assets.(2)
    
    Tier 1 Capital to quarterly average assets. 123




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##### Table of Contents



NOTE 19. Citizens Republic Bancorp (Parent Only) Statements
 Balance Sheets
Citizens Republic Bancorp, Inc. (Parent Only)
 December 31,(in thousands)
    
    2010
    
    
    2009AssetsCash
    
    $
    6,990
    
    
    
    2,957Money market investments
    
    
    61,107
    
    
    
    107,713Investment securities
    
    
    3,779
    
    
    
    5,295Investment in subsidiaries  principally banks
    
    
    821,091
    
    
    
    1,058,109Goodwill  continuing operations
    
    
    238,077
    
    
    
    238,077Goodwill  discontinued operations
    
    
    
    
    
    
    12,595Other assets
    
    
    9,111
    
    
    
    12,297Total assets
    
    $
    1,140,155
    
    
    $
    1,437,043Liabilities and Shareholders EquityLong-term debt
    
    $
    91,088
    
    
    $
    90,557Other liabilities
    
    
    37,336
    
    
    
    15,450Total liabilities
    
    
    128,424
    
    
    
    106,007Shareholders equity
    
    
    1,011,731
    
    
    
    1,331,036Total liabilities and shareholders equity
    
    $
    1,140,155
    
    
    $
    1,437,043
 Statements of Income  Citizens Republic Bancorp, Inc. (Parent Only)
 Year Ended December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2008IncomeDividends from subsidiaries
    
    $
    
    
    
    $
    
    
    
    $
    28,500Interest on taxable investment securities
    
    
    284
    
    
    
    289
    
    
    
    Interest from bank subsidiary
    
    
    1,830
    
    
    
    4,118
    
    
    
    5,368Service fees from bank subsidiaries
    
    
    14,438
    
    
    
    13,825
    
    
    
    14,526Other
    
    
    884
    
    
    
    (15,286
    )
    
    
    (3,257
    )Total
    
    
    17,436
    
    
    
    2,946
    
    
    
    45,137ExpensesInterest
    
    
    6,190
    
    
    
    17,722
    
    
    
    23,742Salaries and employee benefits
    
    
    16,499
    
    
    
    17,817
    
    
    
    18,481Service fees paid to bank subsidiaries
    
    
    955
    
    
    
    955
    
    
    
    955Goodwill impairment
    
    
    
    
    
    
    231,614
    
    
    
    161,611Other noninterest expense
    
    
    1,507
    
    
    
    1,490
    
    
    
    2,299Total
    
    
    25,151
    
    
    
    269,598
    
    
    
    207,088Loss before income taxes and
equity in undistributed earnings of subsidiaries
    
    
    (7,715
    )
    
    
    (266,652
    )
    
    
    (161,951
    )Income tax benefit (provision)
    
    
    1,715
    
    
    
    2,620
    
    
    
    11,785Equity in undistributed net loss of subsidiaries
    
    
    (283,104
    )
    
    
    (241,712
    )
    
    
    (220,891
    )Loss from continuing operations
    
    
    (289,104
    )
    
    
    (505,744
    )
    
    
    (394,627
    )(Loss) income from discontinued operations, net of income tax
    
    
    (3,821
    )
    
    
    (8,469
    )
    
    
    1,575Net loss
    
    
    (292,925
    )
    
    
    (514,213
    )
    
    
    (393,052
    )Deemed dividend on convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    (11,737
    )Dividend on redeemable preferred stock
    
    
    (21,685
    )
    
    
    (19,777
    )
    
    
    (227
    )Net loss attributable to common shareholders
    
    $
    (314,610
    )
    
    $
    (533,990
    )
    
    $
    (405,016
    )
 124




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##### Table of Contents



Statements of Cash Flows  Citizens Republic Bancorp, Inc. (Parent Only)
 Year Ended December 31,(in thousands)
    
    2010
    
    
    2009
    
    
    2008Operating ActivitiesNet loss
    
    $
    (292,925
    )
    
    $
    (514,213
    )
    
    $
    (393,052
    )Less: (Loss) income from discontinued operations, net of income tax
    
    
    (3,821
    )
    
    
    (8,469
    )
    
    
    1,575Loss from continuing operations
    
    
    (289,104
    )
    
    
    (505,744
    )
    
    
    (394,627
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Goodwill impairment
    
    

    
    
    
    
    241,817
    
    
    
    161,611Deferred tax asset valuation allowance
    
    
    1,733
    
    
    
    (1,020
    )
    
    
    20,853Net decrease (increase) in current and deferred income taxes
    
    
    2,253
    
    
    
    70
    
    
    
    (18,476
    )Decrease in long term debt interest
    
    
    
    
    
    
    (2,919
    )
    
    
    (720
    )Increase (Decrease) in pension non-qualified
    
    
    160
    
    
    
    (6,874
    )
    
    
    (738
    )Net loss on debt extinguishment
    
    
    
    
    
    
    15,929
    
    
    
    Recognition of stock-based compensation expense
    
    
    2,086
    
    
    
    1,803
    
    
    
    4,520Restructure and merger-related expense
    
    
    
    
    
    
    
    
    
    
    (53
    )Decrease in equity in undistributed net loss of subsidiaries
    
    
    283,104
    
    
    
    241,712
    
    
    
    191,762Other
    
    
    1,417
    
    
    
    (6,458
    )
    
    
    27,865Discontinued operations, net
    
    
    5,934
    
    
    
    (8,469
    )
    
    
    1,575Net cash provided (used) by operating activities
    
    
    7,583
    
    
    
    (30,153
    )
    
    
    (6,428
    )Investing ActivitiesNet decrease (increase) in money market investments
    
    
    46,606
    
    
    
    112,534
    
    
    
    (146,441
    )Sales (purchases) of investment securities
    
    
    1,541
    
    
    
    767
    
    
    
    (6,045
    )Proceeds from sale of discontinued operations
    
    
    48,331
    
    
    
    
    
    
    
    Net cash provided (used) by investing activities
    
    
    96,478
    
    
    
    113,301
    
    
    
    (152,486
    )Financing ActivitiesNet decrease in short-term borrowings
    
    
    
    
    
    
    
    
    
    
    (50,000
    )Capital contribution to subsidiary bank
    
    
    (100,000
    )
    
    
    (74,000
    )
    
    
    (250,000
    )Net proceeds from issuance of preferred convertible stock
    
    
    
    
    
    
    
    
    
    
    114,161Net proceeds from issuance of preferred redeemable stock and warrant
    
    
    
    
    
    
    
    
    
    
    300,000Net proceeds from issuance of common stock
    
    
    
    
    
    
    
    
    
    
    74,844Cash dividends paid on common stock
    
    
    
    
    
    
    
    
    
    
    (21,959
    )Cash dividends paid on preferred stock
    
    
    
    
    
    
    (13,875
    )
    
    
    Proceeds from stock options exercised and restricted stock activity
    
    
    
    
    
    
    
    
    
    
    66Shares acquired for retirement and purchased for taxes
    
    
    (28
    )
    
    
    (70
    )
    
    
    (444
    )Net cash (used) provided by financing activities
    
    
    (100,028
    )
    
    
    (87,945
    )
    
    
    166,668Net increase (decrease) in cash and due from banks
    
    
    4,033
    
    
    
    (4,797
    )
    
    
    7,754Cash and due from banks at beginning of year
    
    
    2,957
    
    
    
    7,754
    
    
    
    Cash and due from banks at end of year
    
    $
    6,990
    
    
    $
    2,957
    
    
    $
    7,754
 125




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##### Table of Contents



Note 20. Discontinued Operations
   December 31,(in thousands)
    
    2009AssetsCash and due from banks
    
    $
    7,045Money market investments
    
    
    19,878Investment securities
    
    
    171,115FHLB and Federal Reserve stock
    
    
    1,193Net portfolio loans
    
    
    114,523Loans held for sale
    
    
    241Goodwill
    
    
    12,594Other assets
    
    
    9,372Assets of discontinued operations
    
    $
    335,961LiabilitiesDeposits
    
    $
    408,577Short-term borrowings
    
    
    11,263Long-term debt
    
    
    500Other liabilities
    
    
    1,987Liabilities of discontinued operations
    
    $
    422,327
  (in thousands)
    
    2010
    
    2009
    
    2008Interest income
    
    $
    4,409
    
    
    $
    15,269
    
    
    $
    16,012Interest expense
    
    
    1,844
    
    
    
    8,350
    
    
    
    10,120Net interest income
    
    
    2,565
    
    
    
    6,919
    
    
    
    5,892Provision for loan losses
    
    
    608
    
    
    
    2,135
    
    
    
    1,093Noninterest income
    
    
    (3,258
    )
    
    
    4,288
    
    
    
    5,164Noninterest expense
    
    
    2,190
    
    
    
    17,883
    
    
    
    8,388Income tax expense (benefit) from discontinued operations
    
    
    330
    
    
    
    (342
    )
    
    
    Net (loss) income from discontinued operations
    
    $
    (3,821
    )
    
    $
    (8,469
    )
    
    $
    1,575
  126




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 To the Board of Directors and the Shareholders of Citizens Republic Bancorp, Inc.
     
 Detroit, Michigan
March 1, 2011
 127




---



##### Table of Contents



SELECTED QUARTERLY INFORMATION (unaudited)
 .
 Selected Quarterly Information
 2010
    
    2009(in thousands except, per share amounts)
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    FirstInterest income
    
    $
    114,024
    
    
    $
    118,761
    
    
    $
    124,945
    
    
    $
    126,714
    
    
    $
    132,084
    
    
    $
    137,171
    
    
    $
    138,324
    
    
    $
    145,831Interest expense
    
    
    32,293
    
    
    
    37,203
    
    
    
    40,359
    
    
    
    45,525
    
    
    
    50,172
    
    
    
    58,158
    
    
    
    64,281
    
    
    
    70,350Net interest income
    
    
    81,731
    
    
    
    81,558
    
    
    
    84,586
    
    
    
    81,189
    
    
    
    81,912
    
    
    
    79,013
    
    
    
    74,043
    
    
    
    75,481Provision for loan losses
    
    
    131,296
    
    
    
    89,617
    
    
    
    70,614
    
    
    
    101,355
    
    
    
    84,007
    
    
    
    77,393
    
    
    
    98,935
    
    
    
    63,485Noninterest income(1)
    
    
    24,028
    
    
    
    25,956
    
    
    
    22,282
    
    
    
    22,393
    
    
    
    14,274
    
    
    
    10,696
    
    
    
    19,898
    
    
    
    18,265Noninterest expense (2)
    
    
    77,234
    
    
    
    74,740
    
    
    
    77,010
    
    
    
    78,103
    
    
    
    81,369
    
    
    
    81,466
    
    
    
    343,248
    
    
    
    79,056Loss income from continuing operations
    
    
    (106,154
    )
    
    
    (62,471
    )
    
    
    (44,456
    )
    
    
    (76,023
    )
    
    
    (65,883
    )
    
    
    (57,403
    )
    
    
    (336,916
    )
    
    
    (45,542
    )Discontinued operations (after tax)(3)
    
    
    
    
    
    
    
    
    
    
    5,151
    
    
    
    (8,973
    )
    
    
    1,155
    
    
    
    480
    
    
    
    (10,497
    )
    
    
    393Net loss
    
    
    (106,154
    )
    
    
    (62,471
    )
    
    
    (39,305
    )
    
    
    (84,996
    )
    
    
    (64,728
    )
    
    
    (56,923
    )
    
    
    (347,413
    )
    
    
    (45,149
    )Dividend on redeemable preferred stock
    
    
    (5,545
    )
    
    
    (5,451
    )
    
    
    (5,406
    )
    
    
    (5,282
    )
    
    
    (5,253
    )
    
    
    (5,224
    )
    
    
    (5,196
    )
    
    
    (4,103
    )Net loss attributable to common shareholders
    
    
    (111,699
    )
    
    
    (67,922
    )
    
    
    (44,711
    )
    
    
    (90,278
    )
    
    
    (69,981
    )
    
    
    (62,147
    )
    
    
    (352,609
    )
    
    
    (49,252
    )Shares outstanding (end of period)
    
    
    397,167
    
    
    
    397,071
    
    
    
    396,979
    
    
    
    394,392
    
    
    
    394,397
    
    
    
    394,470
    
    
    
    126,258
    
    
    
    126,299Loss Per Share from Continuing OperationsBasic
    
    $
    (0.28
    )
    
    $
    (0.17
    )
    
    $
    (0.12
    )
    
    $
    (0.21
    )
    
    $
    (0.18
    )
    
    $
    (0.49
    )
    
    $
    (2.73
    )
    
    $
    (0.40
    )Diluted
    
    
    (0.28
    )
    
    
    (0.17
    )
    
    
    (0.12
    )
    
    
    (0.21
    )
    
    
    (0.18
    )
    
    
    (0.49
    )
    
    
    (2.73
    )
    
    
    (0.40
    )Income (Loss) Per Share from Discontinued
OperationsBasic
    
    $
    
    
    
    $
    
    
    
    $
    0.01
    
    
    $
    (0.02
    )
    
    $
    
    
    
    $
    0.01
    
    
    $
    (0.08
    )
    
    $
    0.01Diluted
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    (0.02
    )
    
    
    
    
    
    
    0.01
    
    
    
    (0.08
    )
    
    
    0.01Net loss Per Common Share:Basic
    
    $
    (0.28
    )
    
    $
    (0.17
    )
    
    $
    (0.11
    )
    
    $
    (0.23
    )
    
    $
    (0.18
    )
    
    $
    (0.48
    )
    
    $
    (2.81
    )
    
    $
    (0.39
    )Diluted
    
    
    (0.28
    )
    
    
    (0.17
    )
    
    
    (0.11
    )
    
    
    (0.23
    )
    
    
    (0.18
    )
    
    
    (0.48
    )
    
    
    (2.81
    )
    
    
    (0.39
    )
 
 (1)
    
    Noninterest income includes a gain on investment securities of $8.0 million and $6.0
million in the second and the first quarter of 2010, respectively and fair-value
adjustments on loans held for sale of $3.1 million, $1.4 million, $8.4 million and $7.7
million in the fourth, third, second and first quarters of 2010, respectively. A net loss
on debt extinguishment of $15.9 million was included in noninterest income in the third
quarter of 2009 and fair-value adjustments on loans held for sale of $8.7 million, $0.9
million, $4.4 million and $6.2 million in the fourth, third, second and first quarters of
2009, respectively.(2)
    
    Noninterest expense includes $0.9 million, $2.0 million, $3.8 million and $6.8
million in fair-value adjustments on other real estate (ORE) properties in the
fourth, third, second and first quarters of 2010 and $8.1 million, $3.9 million, $3.3
million and $8.0 million in the fourth, third, second and first quarters of 2009,
respectively. A goodwill impairment charge of $256.3 million was included in
noninterest expense in the second quarter of 2009.(3)
    
    In April 2010, Citizens finalized the sale of its wholly owned subsiiary, F&M to
Great Western Bank. As a result, we have accounted for F&M as discontinued operations. 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  128




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##### Table of Contents



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- Lisa T. McNeely
    
    -s- Cathleen H.NashLisa T. McNeely
Executive Vice President and Chief Financial Officer
    
    Cathleen H. Nash
President and Chief Executive Officer
 129




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  130




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 To the Board of Directors and the Shareholders of Citizens Republic Bancorp, Inc.
       
 131




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##### Table of Contents



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
    132




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##### Table of Contents



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
    
    
    2,283,088

(1)
    
    $
    27.18
    
    
    
    17,171,355
 
 (1)
    
    Options for 198,837 Citizens common shares with a
weighted-average exercise price of $15.59 per share were outstanding
under the assumed Republic plans as of December 31, 2010 and are included in the
table. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  133




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    1. Financial Statements:
 The following Consolidated Financial Statements of Citizens and Report of Independent
Registered Public Accounting Firm on Consolidated Financial Statements are
incorporated by reference under Item 8 Financial Statements and Supplementary Data
of this document:
 Consolidated Balance Sheets
Consolidated Statements of
Operations
Consolidated Statements of Changes in
Shareholders Equity 
Consolidated Statements of
Cash Flows
Notes to Consolidated Financial
Statements
Selected Quarterly
Information
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
 2. Financial Statement Schedules:
 All schedules are omitted  see Item 15(c) below.
 3. Exhibits:
 The exhibits listed on the Exhibit Index of this report are filed herewith and are
incorporated herein by reference.
 (b)
    
    Exhibits:
 The exhibits listed on the Exhibit Index of this report are filed herewith and are
incorporated herein by reference. 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.
 (c)
    
    Financial Statement Schedules
 All financial statement schedules normally required by regulation S-X are omitted since
they are either not applicable or the required information is shown in the Consolidated
Financial Statements or Notes thereto.
 134




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##### Table of Contents



SIGNATURES
  
 by /s/ Cathleen H. Nash

Cathleen H. Nash 
President and Chief Executive Officer
    
    Date: March 1, 2011
  Signature
    
    Capacity
    
    Date/s/ Lisa T. McNeely
    
    Chief Financial Officer
    
    March 1, 2011Lisa T. McNeely
    
    (principal financial officer)/s/ Cathleen H. Nash
    
    President and Chief Executive Officer
    
    March 1, 2011Cathleen H. Nash
    
    (principal executive officer)/s/ Joseph C. Czopek
    
    Controller and
    
    March 1, 2011Joseph C. Czopek
    
    Principal Accounting Officer/s/Lizabeth A. Ardisana
    
    Director
    
    March 1, 2011Lizabeth A. Ardisana/s/George J. Butvilas
    
    Director
    
    March 1, 2011George J. Butvilas/s/Robert S. Cubbin
    
    Director
    
    March 1, 2011Robert S. Cubbin/s/ Richard J. Dolinski
    
    Director
    
    March 1, 2011Richard J. Dolinski/s/ Gary J. Hurand
    
    Director
    
    March 1, 2011Gary J. Hurand/s/Dennis J. Ibold
    
    Director
    
    March 1, 2011Dennis J. Ibold
 135




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##### Table of Contents



SIGNATURES (continued)
 /s/ Benjamin W. Laird
    
    Director
    
    March 1, 2011Benjamin W. Laird/s/ Stephen J. Lazaroff
    
    Director
    
    March 1, 2011Stephen J. Lazaroff/s/ Kendall B. Williams
    
    Director
    
    March 1, 2011Kendall B. Williams/s/ James L. Wolohan
    
    Chairman of the Board
    
    March 1, 2011James L. WolohanSteven E. Zack
    
    Director
    
    March 1, 2011Steven E. Zack
 136




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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).2.3
    
    Stock Purchase Agreement, dated as of January 29, 2010, by and between
Citizens Republic Bancorp, Inc. and Great Western Bank (Citizens Form 8-K filed
February 2, 2010).3.1
    
    Amended and Restated Articles of Incorporation of Citizens Republic Bancorp,
Inc., as amended as of September 17, 2009 (Citizens 2009 Third Quarter Report on
Form 10-Q).3.2
    
    Bylaws of Citizens Republic Bancorp, Inc., amended and restated as of
September 24, 2009 (Citizens 2009 Third Quarter Report on Form 10-Q).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).
 137




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##### Table of Contents



EXHIBIT INDEX (continued)
 ExhibitNo.
    
    Exhibit4.11
    
    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).4.13
    
    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).10.2*
    
    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).
 138




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##### Table of Contents



EXHIBIT INDEX (continued)
 ExhibitNo.
    
    Exhibit10.8*
    
    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).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).
 139




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##### Table of Contents



EXHIBIT INDEX (continued)
 ExhibitNo.
    
    Exhibit10.29*
    
    Form of Restricted Stock Agreement (Director Version) (Citizens 2006 Second Quarter Report on
Form 10-Q).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).10.37*
    
    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).10.41*
    
    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).10.44*
    
    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 2010 Second Quarter Report on Form 10-Q).10.46*
    
    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).10.50*
    
    Letter Agreement dated January 22, 2009, between Citizens Republic Bancorp, Inc. and Cathleen H.
Nash (Citizens Current Report on Form 8-K filed on January 23, 2009).10.52*
    
    Form of Long Term Incentive Award Agreement, dated January 29, 2009 (Citizens 2009 First Quarter
Report on Form 10-Q).10.54*
    
    Form of Indemnification Agreement with Directors, dated as of September 24, 2009, between Citizens
Republic Bancorp, Inc. and each of Lizabeth A. Ardisana, George J. Butvilas, Robert S. Cubbin,
Richard J. Dolinski, Gary J. Hurand, Dennis J. Ibold, Benjamin W. Laird, Stephen J. Lazaroff,
Cathleen H. Nash, Kendall B. Williams, James L. Wolohan, and Steven E. Zack (Citizens 2009
Third Quarter Report on Form 10-Q).10.55*
    
    Amended and Restated Deferred Compensation Plan for Directors (Citizens Annual Report on Form
10-K for the year ended December 31, 2009).10.56*
    
    Amended and Restated Deferred Compensation Plan for Executives (Citizens Annual Report on
Form 10-K for the year ended December 31, 2009).
 140




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##### Table of Contents



EXHIBIT INDEX (continued)
 ExhibitNo.
    
    Exhibit10.57*
    
    Citizens Republic Bancorp, Inc. Stock Compensation Plan (Amended, Restated and Renamed
Effective March 19, 2010) (Citizens Form 8-K filed on May 10, 2010).10.58
    
    Written Agreement by and among Citizens Republic Bancorp, Inc., Citizens Bank,
the Federal Reserve Bank of Chicago, and the Michigan Office of Financial and
Insurance Regulation, dated July 28, 2010 (Citizens 2010 Second Quarter Report on
Form 10-Q ).10.59*
    
    Form of Salary Stock Agreement with Cathleen H. Nash and Judith L. Klawinski (2010)
(Citizens 2010 Third Quarter Report on Form 10-Q).10.60*
    
    Form of Long-Term Incentive Restricted Stock Agreement with Cathleen H. Nash, Judith
L. Klawinski and Thomas C. Shafer relating to 2010 incentive award (Citizens 2010
Third Quarter Report on Form 10-Q).10.61*
    
    Form of Long-Term Incentive Restricted Stock Unit Agreement with Thomas W. Gallagher
relating to 2010 incentive award (Citizens 2010 Third Quarter Report on Form 10-Q).10.62*
    
    Form of Amended and Restated Change in Control Agreement with Cathleen H. Nash,
Judith L. Klawinski and Thomas W. Gallagher (2010) (Citizens 2010 Third Quarter
Report on Form 10-Q).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 1934.99.1
    
    Certification of Chief Executive Officer pursuant to Section 111(b)(4) of the
Emergency Economic Stabilization Act of 2008.99.2
    
    Certification of Chief Financial Officer pursuant to Section 111(b)(4) of the
Emergency Economic Stabilization Act of 2008.
 
 *
    
    Current management contracts or compensatory plans or arrangements. 141




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