Exhibit 99.1
Exhibit 99.1
Investor Presentation
First Quarter 2012
Safe Harbor Statement
Discussions and statements in this presentation that are not statements of historical fact (including without limitation statements that include terms such as “will,” “may,” “should,” “believe,” “expect,” “anticipate,” “estimate,” “project”, “intend,” and “plan”) and statements regarding Citizens’ future financial and operating results, plans, objectives, expectations and intentions, are forward-looking statements that involve risks and uncertainties, many of which are beyond Citizens’ control or are subject to change. No forward–looking statement is a guarantee of future performance and actual results could differ materially.
Factors that could cause or contribute to such differences include, without limitation, risks and uncertainties detailed from time to time in Citizens’ filings with the Securities and Exchange Commission.
Other factors not currently anticipated may also materially and adversely affect Citizens’ results of operations, cash flows, financial position and prospects. There can be no assurance that future results will meet expectations. While Citizens believes that the forward-looking statements in this presentation are reasonable, you should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. Citizens does not undertake, and expressly disclaims any obligation to update or alter any statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
2 |
|
Who We Are
Who We Are
219 Branches / 248 ATMs
Company Overview
Established in 1871
57th largest bank holding company in the U.S. ranked by assets
$9.6 billion assets and $7.5 billion deposits
Presence in 3 Upper Midwest states with 219 branches and 248 ATMs
Increased market share in 49% of our counties since 2008
Growing number of new clients at 9% annually
80% of revenue is Michigan based
4 |
|
How We Deliver Our Service
Core Banking 86% of revenue
Corporate Banking 10% of revenue
Wealth Management 4% of revenue
Retail consumer
Commercial clients up to $5 million loan size
Treasury Management: 35% of commercial clients use TM services
Public Funds: focus on generating lasting relationships rather than temporary deposits
Preferred SBA Lender: dedicated specialists to fast track process. Expertise in other state and local loan programs.
Mortgage: accommodate and sell
Indirect marine and RV lending
Investment Center: introduce single service CD clients to financial consultants
Asset Based Lending
Corporate
Specialty healthcare focus in assisted living & skilled nursing
Personal Trust
Employee Benefits
Institutional Trust
5 |
|
Local Delivery of Service
Local teams focus on delivery of :
Client service
Closing pipeline opportunities
Referring business
Where We’ve Been
Strategically Managed Through Cycle
Acquired Michigan-based bank with heavy real estate concentrations in late 2006 Economic downturn and challenging Michigan economy resulted in elevated credit costs Employed strategies to reduce balance sheet risk Enhanced capital
suspended dividend (1Q08)
$200 million common equity raise (3Q08)
$300 million TARP issuance (4Q08)
exchanged sub debt & trust preferred for $200 million of common equity (3Q09)
8 |
|
Successful Leaders in Key Roles
Held
Position
Name
Title
Since
Cathy Nash Chief Executive Officer Feb. 09
Lisa McNeely Chief Financial Officer Aug. 10
Mark Widawski Chief Credit Officer Feb. 09
Brian Boike Treasurer Oct. 09
Judi Klawinski Director of Core Banking Oct. 09
Ray Green Director of Corporate Banking May 10
Joe Czopek Controller Oct. 09
Ken Duetsch Director of Wealth Management Aug. 11
9
Since 2009, focused on clients/revenue while working through credit issues
Non-GAAP measure, as defined by management, represents net income (loss) excluding income tax provision (benefit) provision for loan losses, securities (gains)/losses, and any impairment charges (including goodwill, credit write downs and fair-value adjustments) caused by this economic cycle.
Source: SNL Financial MRQ data
Revenue Focus
Problem Asset Resolution Focus
$40 Pre-tax Pre-provision Profit*
$36.2 $37.8 $36.9
$34.7 $34.5
$33.1 $32.8
$32.1 $ 30.7 $31.7
$29.6 $30
$26.6
$20.6 millions) $20 (in $10
$0
1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12
NPAs / Assets %
5% 4% 3% 2% 1% 0%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q112
CRBC Peer Median** Regional Peer Median**
Strengthened franchise value
Eliminated uncertainty around credit
10
Strategy from 2009 – 2010
2. Grew and maintained reserve levels in recognition of portfolio risk
1. Preserved capital by managing assets
$14,000 $12,982 Total Assets
$12,288 $12,072 $11,932 $11,652
$12,000 $10,834 $10,639
$10,000 $9,966 $9,724 $9,496 $9,600 $9,463 $9,577
millions) $8,000
$6,000
(in
$4,000
$2,000
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
$600 Allowance for Loan Losses Non-Performing Loans
$500
$400
millions) $300
(in $200
$100
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
11
Strategy from 2009 – 2010
4. Carefully managed capital levels to allow execution of problem asset reduction
March 31, Dec. 31, Sept. 30, June 30, March 31,
2012 2011 2011 2011 2011
Leverage ratio 8.71% 8.45% 8.21% 7.83% 7.39%
Tier 1 capital ratio 13.70 13.51 12.81 12.43 11.90
Total capital ratio 14.97 14.84 14.14 13.77 13.24
Tier 1 common equity 7.49 7.24 6.77 6.36 5.93
(non-GAAP)
3. Aggressively and actively worked out of problem assets
$700 6.0%
5.2% |
| 5.1% |
5.0% |
| 4.9% |
$600 4.4% $601 $606 $591 4.3% 4.1% 5.0%
$500 $549 $551
4.0%
$468
$400 $436 2.8%
millions) 3.0%
$300
(in $280 1.8% 1.5% 1.4% 2.0%
$200
1.1% |
| 1.0% |
$175 1.0%
$100 $139 $137
$102 $91
$0 0.0%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Non-Performing Assets NPAs as a % of Total Assets
12
Where We’re Going
Continue to Provide Top Tier Client Service
Likelihood to Recommend*
88 |
|
86 |
|
84 |
|
82 |
|
80 |
|
78 |
|
Sep 07 Sep 08 Sep 09 Sep 10 Mar 12
Citizens’ Score PPI Industry Average
* |
| Surveys conducted by Prime Performance ™ 14 |
Rebuild Loan Portfolio
$10,000 Loan Portfolio Balances
$8,625
$8,302 $8,097
$8,000 $7,788
$7,439
$7,138
millions) $6,888
$6,217
(in
$6,000 $5,704 $5,628 $5,672 $5,530 $5,528
$4,000
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Focused on proven competencies
Business owner lending
Corporate lending – structured finance, ABL, healthcare expertise
Indirect marine and RV
15
Mitigate Expected Margin Pressure
4.00% |
| Net Interest Margin (FTE) |
3.63% |
| 3.62% |
3.53% |
| 3.56% 3.56% |
3.50% |
| 3.35% 3.32% 3.42% |
3.13% |
| 3.14% |
2.99%
3.00%
2.74% |
| 2.75% |
2.50%
2.00%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Continue focus on core deposits Reduce single service CD clients
9,000 28% increase in core deposits
8,000 1,059 936 670 528 835 918 775 488
7,000 323 306 261 262 249 224
6,000 3,308 3,220 3,171 2,970 2,862 2,734 2,651 2,664 2,530 2,369 2,187 2,059 1,952 1,809
5,000
millions) 4,000
(in 3,000
2,000 4,263 4,552 4,686 4,891 4,804 4,829 4,796 4,949 4,874 5,017 4,997 5,219 5,194 5,457
1,000
0
Core Deposits Retail CDs Brokered CDs
18,000 Single Service CD Clients
16,000
14,000
12,000
10,000
12/31/10 3/31/11 6/30/11 9/30/11 12/31/11 3/31/12
Manage liquidity levels to reflect improved credit trends
Fed Funds Sold (average)
700
600
500
400
millions) 300
(in 200
100
0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
16
Reserve Reductions Follow Improved Metrics
5% 4% 3% 2% 1% 0%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q112
CRBC Peer Median* Regional Peer Median*
Reserve model is historical looking; future modeling will continue to reflect significantly improved credit metrics
Ensure reserves reflect reduced portfolio risk and support growth initiatives
Difference of reserves at 2.77% vs. 2% peer median is $42 million
* Source: SNL Financial MRQ data
17
Report Consistent Profits
Reprice and add new fee income Continue prudent expense
streams to replace lost revenue from management while adding key
regulatory changes revenue generating positions
Income (Loss) before Tax*
50 |
| 14 20 21 |
0
-50(35)
-100(49)(69)(68)(85)(57)(69)
-150(103)
millions) -200
(in -250
-300
-350
-400(359)
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
* |
| Excludes discontinued operations |
30,000 Operating Non-Interest Income*
25,000
20,000
thousands)15,000
10,000
(in
5,000
-
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Service charges on deposit accounts ATM network fees & Bankcard fees Other non-interest income*
Operating Non-Interest Expense*
$80
$70
$60
millions) $50
(in $40
$30
$20
$10
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Salaries and Employee Benefits Other Expenses
* |
| Non-GAAP measure. See Appendix for reconciliation. |
18
Report Consistent Profits
Consistent profitability will allow us to
Resume treasury and trust preferred dividends
Harvest our $300 million deferred tax asset
Rebuild tangible common equity
Examine TARP repayment options
19
1Q12 Highlights
4th consecutive quarter of consistent profit
Consistent net interest margin at 3.56%
Fee income from core banking services remained solid
Maintained control over operating expenses
Loan growth in focused areas of expertise
7% growth in C&I portfolio
Strong origination and pipeline activity in C&I and Indirect
Credit trends continue to improve
($ in millions) 12/31/11 3/31/12% Change
Delinquent loans $47.7 $40.0—16%
as a % of portfolio 0.86% 0.72% -16%
Non-performing loans $87.4 $75.5 -16%
as a % of portfolio 1.57% 1.37% -13%
Non-performing assets $102.2 $90.6 -11%
as a % of assets 1.08% 0.95% -12%
Net charge offs $32.6 $28.1 -14%
Provision expense $15.0 $8.4 -44%
20
Solid Core Earnings
$40 Pre-tax Pre-provision Profit* $37.8 $36.9
$36.2
$34.7 |
| $34.5 |
$33.1 |
| $32.1 $32.8 $31.7 |
$29.6 |
| $30.7 |
$30
$26.6
$20.6
millions) $20
(in
$10
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
3.80% |
| Net Interest Margin (FTE) |
3.63% |
| 3.62% |
3.60% |
| 3.53% 3.56% 3.56% |
3.42%
3.40% |
| 3.35% 3.32% |
3.20% |
| 3.13% 3.14% |
2.99%
3.00%
2.80% |
| 2.74% 2.75% |
2.60%
2.40%
2.20%
2.00%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
$160 Pre-tax Pre-provision Profit*
$140 $137.5 $138.2
$120 $109.9
$100
millions) $80
(in $60
$40
$20
$0
2009 2010 2011
3.80% |
| Net Interest Margin (FTE) |
3.58%
3.60%
3.40% |
| 3.31% |
3.20%
3.00% |
| 2.90% |
2.80%
2.60%
2.40%
2.20%
2.00%
2009 2010 2011
21
Efficiency Ratio Trends
Revenue per FTE of $207,200 is in line with peer median of $208,000
Salary & benefits expense per FTE of $62,500 is better than peer median of $72,200
Peer Data Source: SNL Financial
85% Quarterly Efficiency Ratio
80% 79.23%
76.84%
75%
70.16% |
| 70.89% 70.40% |
70% 68.39% 68.22%
67.09%
65.20%
65% 64.19% 63.85%
61.39%
59.89%
60%
55%
50%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
80% Annual Efficiency Ratio
75% 74.21%
70%
67.73%
65% 63.05%
60%
55%
50%
2009 2010 2011
22
Organically Growing Strong Capital Position
16%
14%
12%
10%
8%
Accelerated
6% resolution
of over
4% $920 million
of problem
2% assets
0%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Total Capital Tier 1 Capital Tier 1 Common (non-GAAP)
Focused on prudently growing in areas of expertise
Business owner lending
Corporate lending – structured finance, asset-based lending, healthcare
Indirect marine and RV
23
Rebuilding Loan Portfolio
Loan Production
$800
$700
$600
millions) $500
(in $400
$300
$200
$100
$0
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Commercial Consumer
24
Positioned for Growth
Successfully managed through credit cycle with a strategic focus on revenue generation and problem asset resolutions
Strategically focused into 2012 to
Continue providing top tier client service
Rebuild loan portfolio
Mitigate expected margin pressure
Evaluate reserve levels
Report consistent profitability
25
Appendix
26
Upper Midwest Franchise
Number Total
of Deposits% of% Market
MSA Rank Branches($000) Franchise Share
Michigan:
Flint, MI 1 20 1,529,744 20.4 40.48
Detroit-Warren-Livonia, MI 11 31 1,154,717 15.4 1.28
Saginaw-Saginaw Township North, 1 15 589,977 7.9 29.97
Lansing-East Lansing, MI 3 14 521,070 6.9 10.42
Jackson, MI 2 8 373,118 5.0 24.57
Bay City, MI 3 5 212,226 2.8 20.34
Ann Arbor, MI 11 6 208,963 2.8 3.37
Cadillac, MI 1 7 188,460 2.5 35.99
Owosso, MI 3 6 135,722 1.8 20.54
Sturgis, MI 3 4 107,782 1.4 15.76
Alpena, MI 1 2 94,514 1.3 27.74
Houghton, MI 3 3 87,682 1.2 13.87
Total Michigan 8 155 6,024,966 80.3 3.82
Non-Michigan:
Cleveland-Elyria-Mentor, OH 17 12 321,077 4.3 0.64
Green Bay, WI 9 9 218,449 2.9 3.29
Appleton, WI 11 6 159,161 2.1 4.10
Stevens Point, WI 5 2 92,474 1.2 7.83
Platteville, WI 8 4 74,056 1.0 6.32
Total Non-Michigan 60 1,480,553 19.7
Source: SNL Financial as of 6/30/11
27
Continued Stabilization and Diversification in Michigan’s Economy
Source: U.S. Bureau of Labor Statistics
Michigan Nonfarm Employment
(seasonally adjusted)
Michigan Employment by Industry
March 2012 March 2002
$000s% $000s%
Trade, Transportation, and Utilities 634.7 16.1% 738.8 16.7%
Government 628.7 16.0% 709.2 16.0%
Professional Services 560.1 14.2% 582.3 13.1%
Health Care 547.6 13.9% 465.9 10.5%
Other Manufacturing 381.6 9.7% 487.3 11.0%
Leisure and Hospitality 358.1 9.1% 375.6 8.5%
Motor Vehicle 209.6 5.3% 362.9 8.2%
Financial Activities 193.3 4.9% 210.7 4.7%
Other Services 168.3 4.3% 177.4 4.0%
Construction 105.5 2.7% 180.6 4.1%
Education Services 83.4 2.1% 65.1 1.5%
Information 53.0 1.3% 72.2 1.6%
Mining and Logging 6.8 0.2% 8.1 0.2%
Total Nonfarm 3,930.7 4,436.1
Total Manufacturing 591.2 15.0% 850.2 19.2%
28
Continued Stabilization and Diversification in Michigan’s Economy
Unemployment Trends
Freddie Mac House Price Index
Source: U.S. Bureau of Labor Statistics and Freddie Mac
Core Earnings Strength
Pre-Tax Pre-Provision Profit (non-GAAP)
(in millions) 2Q11 3Q11 4Q11 1Q12
Income(loss) from continuing operations $24.2 $32.9 $18.2 $24.9
Income tax (benefit) provision(10.3)(12.6) 2.5 -
Provision for loan losses 17.6 17.5 15.0 8.4
Investment securities (gains) losses 1.0(0.0)(0.0) -
Net losses (gains) on LHFS(1.2)(2.0) 0.2(0.9)
(Gains) losses on ORE 1.4 1.2 1.1(0.4)
Fair-value adjustment on BOLI 0.0 0.4(0.1)(0.2)
Fair-value adjustment on swaps 0.1 0.3(0.0)(0.1)
Pre-Tax Pre-Provision Profit (1) $32.8 $37.8 $36.9 $31.7
Last 12 Months $139.1
(1) Non-GAAP measure, as defined by management, represents total revenue (total net interest income and non-interest income)
excluding any securities gains/losses, fair value adjustments on loans held for sale, interest rate swaps, and bank owned
life adjustmentsinsurance,andless special non-interest assessments. expense excluding any goodwill impairment charges, credit write downs, fair value 30
Core Earnings Strength
Pre-Tax Pre-Provision Profit (non-GAAP)
(in millions) 2009 2010 2011
Income (loss) from continuing operations($505.7)($289.1) $6.7
Income tax (benefit) provision(29.6) 12.9(20.2)
Provision for loan losses 323.8 392.9 138.8
Goodwill impairment charge 256.3—-
Net loss on debt extinguishment 15.9—-
Investment securities (gains) losses(0.0)(13.9) 1.3
FDIC special assessment 5.4—-
Net losses (gains) on LHFS 20.1 20.6(1.8)
Losses on ORE 23.3 13.4 12.8
Fair-value adjustment on BOLI(0.1)(0.1) 0.2
Fair-value adjustment on swaps 0.6 0.8 0.4
Pre-Tax Pre-Provision Profit (1) $109.9 $137.5 $138.2
(1) Non-GAAP measure, as defined by management, represents total revenue (total net interest income and non-interest income)
excluding any securities gains/losses, fair value adjustments on loans held for sale, interest rate swaps, and bank owned
life adjustments insurance, and less special non-interest assessments. expense excluding any goodwill impairment charges, credit write downs, fair value 31
Quarterly Non-Interest Income Trends
(in thousands) 1Q 11 2Q 11 3Q 11 4Q 11 1Q12
Service charges on deposit accounts $9,429 $9,753 $10,362 $9,724 $8,985
Trust fees 3,923 3,811 3,622 3,747 3,602
Mortgage and other loan income 2,942 1,883 2,089 2,705 1,858
Brokerage and investment fees 1,108 1,533 1,188 1,243 1,324
ATM network user fees 1,755 1,926 1,993 1,837 1,808
Bankcard fees 2,238 2,468 2,482 2,468 2,457
Net (losses) gains on loans held for sale(1,106) 1,179 1,952(217) 916
Investment securities gains (losses)(383)(993) 3 38 -
Other income 3,237 1,765 736 2,818 3,290
Total Non-Interest Income (GAAP) $23,143 $23,325 $24,427 $24,363 $24,240
Investment securities gains (losses) $383 $993 $(3) $(38) $ -
Net (losses) gains on loans held for sale 1,106(1,179)(1,952) 217(916)
Fair value adjustment on BOLI(100) 48 385(100)(205)
Fair value adjustment on swaps 114 77 268(46)(61)
Operating Non-interest Income $24,646 $23,264 $23,125 $24,396 $23,058
(Non-GAAP)
32
Annual Non-Interest Income Trends
(in thousands) 2009 2010 2011
Service charges on deposit accounts $42,116 $40,336 $39,268
Trust fees 14,784 15,603 15,103
Mortgage and other loan income 12,393 10,486 9,620
Brokerage and investment fees 5,194 4,579 5,072
ATM network user fees 6,283 7,057 7,511
Bankcard fees 7,714 8,859 9,656
Net (losses) gains on loans held for sale(20,086)(20,617) 1,808
Net loss on debt extinguishment(15,929)—-
Investment securities gains (losses) 5 13,896(1,336)
Other income 10,659 14,460 8,555
Total Non-Interest Income (GAAP) $63,133 $94,659 $95,257
Net loss on debt extinguishment $15,929 $—$ -
Investment securities gains (losses)(5)(13,896) 1,336
Net (losses) gains on loans held for sale 20,086 20,617(1,808)
Fair value adjustment on BOLI(144)(67) 233
Fair value adjustment on swaps 606 782 413
Operating Non-interest Income $99,605 $102,095 $95,431
(Non-GAAP)
33
Quarterly Non-Interest Expense Trends
(in thousands) 1Q 11 2Q 11 3Q 11 4Q 11 1Q12
Salaries and employee benefits $31,018 $31,265 $30,280 $30,952 $33,298
Occupancy 7,562 6,047 6,125 6,326 6,696
Professional services 2,219 2,407 2,394 2,311 2,023
Equipment 3,052 2,841 2,918 3,326 3,303
Data processing services 4,352 4,247 3,823 3,709 4,048
Advertising and public relations 569 1,802 2,179 1,298 1,335
Postage and delivery 1,116 1,120 1,142 1,165 1,099
Other loan expenses 5,255 3,314 3,941 3,497 3,186
Losses on other real estate (ORE) 9,122 1,355 1,210 1,081(385)
ORE expenses 1,768 1,029 529 995 450
Intangible asset amortization 828 778 732 688 578
Other expense 14,795 13,239 10,138 11,292 11,470
Total Non-Interest Expense (GAAP) $81,656 $69,444 $65,411 $66,640 $67,101
Losses (gains) on ORE 9,122 1,355 1,210 1,081(385)
Operating Non-Interest Expense $72,534 $68,089 $64,201 $65,559 $67,486
(Non-GAAP)
34
Annual Non-Interest Expense Trends
(in thousands) 2009 2010 2011
Salaries and employee benefits $135,389 $126,384 $123,514
Occupancy 26,723 26,963 26,059
Professional services 11,877 10,550 9,331
Equipment 11,714 12,482 12,136
Data processing services 17,692 18,734 16,131
Advertising and public relations 7,113 6,530 5,848
Postage and delivery 5,525 4,571 4,543
Other loan expenses 24,553 20,311 16,007
Losses on other real estate (ORE) 23,312 13,438 12,768
ORE expenses 4,389 4,970 4,322
Intangible asset amortization 7,036 3,923 3,027
Goodwill impairment 256,272—-
Other expense 53,544 58,231 49,464
Total Non-Interest Expense (GAAP) $585,139 $307,087 $283,150
Goodwill impairment $ 256,272 $—$ -
FDIC Special Assessment 5,351—-
Fair-value adjustment on ORE 23,312 13,438 12,768
Operating Non-Interest Expense $300,204 $293,649 $270,382
(Non-GAAP)
35
Effective Management of Securities Portfolio Provides Source of Liquidity
Investment Portfolio at March 31, 2012
($ in millions)
Book Market TEY* Duration
Type Value Value(%)(years)
MBS Agency $ 965 $ 1,005 3.07% 3.65
CMO—Agency 289 296 3.00% 3.00
CMO—Non-agency 74 73 3.56% 5.33
Municipals 112 118 6.25% 2.86
Total Available for Sale $ 1,440 $ 1,492 3.33% 3.55
MBS Agency $ 934 $ 967 3.12% 3.38
CMO—Agency 337 344 2.37% 4.27
Municipals 103 111 5.95% 3.27
Total Held to Maturity $ 1,374 $ 1,422 3.15% 3.59
Total Investment Securities $ 2,814 $ 2,914 3.24% 3.57
Over $2.2 billion in unpledged securities
No OTTI concerns
Over 70% of portfolio are GNMA securities purchased over the last 2 – 3 years
* |
| Taxable equivalent yield, except for Municipal yields which are before tax effect |
($ in millions)
Market% of
Credit Rating Value Total
Gov’t & Agency $ 2,613 89.6%
AAA 27 0.9%
AA 153 5.3%
A 47 1.6%
BAA1, BAA2 & BAA3 53 1.8%
BA1 & Lower 1 -
Non-rated 20 0.7%
Total $ 2,914 100.0%
36
Maintaining Strong Capital Levels
($ in millions) 3/31/10 6/30/10 9/30/10 12/31/10 3/31/11 6/30/11 9/30/11 12/31/11 3/31/12
Tier 1 capital $ 980 $ 952 $ 886 $ 777 $ 706 $ 727 $ 758 $ 773 $ 795
Qualifying LLR 104 96 92 83 76 74 75 73 74
Qualifying capital securities 7 7 7 7 3 3 3 3 -
Total risk-based capital $ 1,091 $ 1,055 $ 985 $ 867 $ 785 $ 805 $ 836 $ 850 $ 869
Tier 1 capital $ 980 $ 952 $ 886 $ 777 $ 706 $ 727 $ 758 $ 773 $ 795
Qualifying capital securities(74)(74)(74)(74)(74)(74)(74)(74)(74)
Preferred stock(274)(275)(277)(278)(280)(282)(283)(285)(287)
Tier 1 common equity $ 632 $ 603 $ 535 $ 425 $ 352 $ 371 $ 401 $ 415 $ 435
Total Capital Ratio 13.49% 14.17% 13.80% 13.51% 13.24% 13.77% 14.14% 14.84% 14.97%
Tier 1 Capital Ratio 12.12% 12.79% 12.41% 12.11% 11.90% 12.43% 12.81% 13.51% 13.70%
Tier 1 Leverage Ratio 8.47% 8.72% 8.50% 7.71% 7.39% 7.83% 8.21% 8.45% 8.71%
Tier 1 Common Ratio * 7.82% 8.10% 7.50% 6.62% 5.93% 6.36% 6.77% 7.24% 7.49%
TCE to TA * 5.54% 5.83% 5.34% 4.20% 3.59% 4.05% 4.31% 4.47% 4.68%
* |
| Non-GAAP |
TCE—tangible common equity
TA—tangible assets
37
Non-GAAP Common Equity Ratios
($ in thousands) 4Q 10 1Q11 2Q11 3Q11 4Q11 1Q12
Total assets $9,966 $9,724 $9,496 $9,600 $9,463 $9,577
Goodwill(318)(318)(318)(318)(318)(318)
Other intangible assets(11)(10)(9)(8)(7)(7)
Tangible assets $9,637 $9,396 $9,169 $9,274 $9,137 $9,252
Total shareholders’ equity $1,012 $945 $980 $1,009 $1,020 $1,045
Goodwill(318)(318)(318)(318)(318)(318)
Other intangible assets(11)(10)(9)(8)(7)(7)
Tangible equity $683 $618 $653 $683 $694 $720
Preferred stock(278)(280)(282)(283)(285)(287)
Tangible common equity $405 $338 $371 $400 $409 $433
Total shareholders’ equity $1,012 $945 $980 $1,009 $1,020 $1,045
Qualifying capital securities 74 74 74 74 74 74
Goodwill(318)(318)(318)(318)(318)(318)
Accumulated other comprehensive income 20 14 1 1 6 2
Other assets (1)(11)(10)(9)(8)(7)(7)
Total Tier 1 capital (regulatory) $777 $706 $728 $758 $773 $795
Qualifying capital securities(74)(74)(74)(74)(74)(74)
Preferred stock(278)(280)(282)(283)(285)(287)
Total Tier 1 common equity (non-GAAP) $425 $352 $372 $401 $415 $435
Net risk-weighted assets (regulatory) (1) $6,417 $5,930 $5,850 $5,913 $5,723 $5,800
Tangible common equity to tangilbe assets ratio 4.20% 3.59% 4.05% 4.31% 4.47% 4.68%
Tier 1 common equity ratio (non-GAAP) 6.62% 5.93% 6.36% 6.77% 7.24% 7.49%
(1) Other assets deducted from Tier 1 capital and risk-weighted assets consist of intangible assets (excluding goodwill) 38
Proactive Credit Management
($ in millions) Portfolio Balances
$10,000
$8,000
$6,000
$4,000
$2,000
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
30-89 Day Past Due
$250
$200
$150
$100
$50
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Non-Performing Loans
$550
$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Net Charge-Offs
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
C&I owner occupied income producing, landhold, land Dev & Const Residential Mtg consumer
39
Commercial & Industrial Portfolio
($ in millions) Portfolio Balances
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
30-89 Day Past Due
$60
$50
$40
$30
$20
$10
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Non-Performing Loans
$120
$100
$80
$60
$40
$20
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Net Charge-Offs
$35
$30
$25
$20
$15
$10
$5
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
C&I Small Business
40
Commercial Portfolio Size Characteristics
Loan size category: < $5 million $5—$10 million > $10 million Total
Total Commercial Portfolio
Total (millions) $ 1,966 $ 618 $ 560 $ 3,144
# of loans 7,172 88 37 7,297
Average loan size $274,000 $7,018,000 $15,139,000 $431,000
Delinquencies
Total (millions) $ 10 $—$—$ 10
# of loans 50—- 50
Average loan size $193,000 $—$—$193,000
Nonperforming Loans
Total (millions) $ 54 $—$—$ 54
# of loans 219—- 219
Average loan size $248,000 $—$—$248,000
41
Commercial Real Estate Portfolio
Owner Occupied Income Producing Land Hold, Land Development & Construction
($ in millions) Portfolio Balances
$3,200
$2,800
$2,400
$2,000
$1,600
$1,200
$800
$400
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
30-89 Day Past Due
$140
$120
$100
$80
$60
$40
$20
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Non-Performing Loans
$320
$280
$240
$200
$160
$120
$80
$40
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Net Charge-Offs
$120
$100
$80
$60
$40
$20
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
42
Commercial Real Estate Portfolio
By Region
By Collateral
5% 6%
33% 17%
39%
14% 21% 1% 2% 2% 4%
8%
19%
14%
15%
Retail
Medical
Warehouse/ Industrial Office
Multi-Family Hotel Mixed Use Gas Station/ C.Store Residential Other (<1%)
South east michigan
Greater Michigan
Ohio
Wisconsin
Other
43
Consumer Portfolio
($ in millions) Portfolio Balances
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
30-89 Day Past Due *
$80
$60
$40
$20
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Non-Performing Loans *
$160
$140
$120
$100
$80
$60
$40
$20
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Net Charge-Offs *
$100
$80
$60
$40
$20
$0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Indirect Other Direct Home Equity Residential Mortgage
* |
| Other direct included with Home Equity |
44
Consumer Portfolio Profiles
Residential Mortgage Portfolio
$166,000 average loan size
721 refreshed FICO score
65% average original LTV
Seasoned portfolio – 53% originated 2004 or earlier
Foreclosures are handled by PHH; Michigan does not follow a judicial foreclosure process
Ohio
6%
Michigan
Wisconsin
84%
4%
Other
6%
Consumer Portfolio
Strong refreshed FICO scores
739 Home Equity
738 Indirect
723 Other Direct
43% of home equity is first lien position
Indirect NPLs have been less than $2.6 million, or 0.33% of total, throughout the cycle
Home Equity
$36,400 avg
loan size
Indirect (1)
$23,300 avg
loan size
Other
Direct
$19,000 avg
loan size
(1) Indirect loans are RV and marine only (no auto)
45
Non-Performing Loans
$75.5 million or 1.37% of portfolio
($ in millions)
Commercial Loan loss reserve = $153.0
Real Estate
$39.6 million
52.5%
Allowance for loan losses to NPLs = 202.6%
Residential Commercial Mortgage
$14.6
$11.1
19.4%
Direct 14.7% Consumer $8.9
11.8%
Loans 90+ Accruing
Indirect $0.2 Consumer 0.2% $1.0 1.4%
46
Aggressive Non-Performing Asset Management
Quarterly Non-Performing Asset Activity
(in millions) 2Q11 3Q11 4Q11 1Q12
Beginning NPAs $175.2 $139.4 $136.9 $102.2
Commercial:
Additions 24.4 23.9 13.3 14.0
Payments(15.2)(11.0)(8.0)(11.7)
Returned to accruing status(3.5)(0.3) - -
Charge-Offs/ OREO writedown(19.6)(6.3)(12.7)(10.3)
Consumer-net change(21.9)(8.8)(27.3)(3.6)
Ending NPAs $139.4 $136.9 $102.2 $90.6
47
Peer Groups
Regional Peers
Company Name Ticker Company Name Ticker
Associated Banc-Corp ASBC Huntington Bancshares Incorporated HBAN
Comerica Incorporated CMA KeyCorp KEY
Commerce Bancshares, Inc. CBSH MB Financial, Inc. MBFI
Fifth Third Bancorp FITB Old National Bancorp ONB
First Midwest Bancorp, Inc. FMBI PNC Financial Services Group, Inc. PNC
FirstMerit Corporation FMER TCF Financial Corporation TCB
Flagstar Bancorp, Inc. FBC Wintrust Financial Corporation WTFC
Selected Peers
Company Name Ticker Company Name Ticker
Associated Banc-Corp ASBC MB Financial, Inc. MBFI
BancorpSouth, Inc. BXS National Penn Bancshares, Inc. NPBC
Chemical Financial Corporation CHFC Old National Bancorp ONB
Commerce Bancshares, Inc. CBSH Park National Corporation PRK
Cullen/Frost Bankers, Inc. CFR Sterling Financial Corporation STSA
F.N.B. Corporation FNB Susquehanna Bancshares, Inc. SUSQ
First Citizens BancShares, Inc. FCNCA TFS Financial Corporation (MHC) TFSL
First Midwest Bancorp, Inc. FMBI Trustmark Corporation TRMK
FirstMerit Corporation FMER UMB Financial Corporation UMBF
Flagstar Bancorp, Inc. FBC Valley National Bancorp VLY
Fulton Financial Corporation FULT Wintrust Financial Corporation WTFC
48
www.citizensbanking.co m