Citizens Republic Bancorp Announces First Quarter 2008 Results and Suspends Quarterly...

Citizens Republic Bancorp Announces First Quarter 2008 Results and Suspends
Quarterly Cash Dividend

FLINT, Mich., April 17 /PRNewswire-FirstCall/ -- Citizens Republic
Bancorp, Inc. (Nasdaq: CRBC) announced today net income of $11.1 million for
the three months ended March 31, 2008. The results for the first quarter of
2008 represent a decrease of $16.9 million from the fourth quarter of 2007 net
income of $28.0 million and a decrease of $20.4 million from the first quarter
of 2007 net income of $31.5 million. Diluted net income per share was $0.15,
compared with $0.37 for the fourth quarter of 2007 and $0.41 for the first
quarter of last year. Annualized returns on average assets and average equity
during the first quarter of 2008 were 0.33% and 2.83%, respectively, compared
with 0.83% and 7.11% for the fourth quarter of 2007 and 0.94% and 8.23% for
the first quarter of 2007.
(Logo: http://www.newscom.com/cgi-bin/prnh/20050421/DETH014LOGO )
Core operating earnings, which exclude restructuring and merger-related
expenses and amortization of core deposit intangibles, were $0.17 per diluted
share for the first quarter of 2008, a decrease of $0.22 from the fourth
quarter of 2007 and a decrease of $0.30 from the first quarter of 2007.
Annualized core operating earnings to average tangible assets and annualized
core operating earnings to average tangible equity for the first quarter of
2008 were 0.40% and 6.52%, respectively, compared with 0.93% and 15.32% for
the fourth quarter of 2007 and 1.15% and 19.92% for the first quarter of 2007.
These non-GAAP financial measures are discussed in more detail under "Use of
Non-GAAP Financial Measures" and are reconciled to the related GAAP measures
in the tables on page 15.
In light of the current economic trends and outlook, the Board of
Directors voted to suspend the common stock quarterly cash dividend. This
action will save approximately $22 million in retained earnings quarterly
while providing more capital flexibility.
"While still operating profitably in a difficult economy, we're
disappointed with the decrease in our quarterly earnings. The continued
decline in real estate markets and deterioration in the credit environment was
beyond both our expectations and those of the markets in February and resulted
in an increase to our provision for loan losses," stated William R. Hartman,
chairman, president and chief executive officer. "We believe capital
preservation and maintaining a strong balance sheet are crucial strategies to
weathering the economy, optimizing shareholder value and best positioning our
company for success when conditions improve. Accordingly, we have
strengthened our allowance for loan losses and suspended our dividend rather
than pay the $0.14 per share we announced in February. While dividend
reduction decisions are never easy, this move is the most cost efficient means
of bolstering our capital position in this declining and uncertain environment
and ultimately provides a better return for our shareholders in the long run.
We continue to aggressively pursue additional cost reduction opportunities and
will announce our expense reduction targets in our second quarter earnings
release," continued Hartman.
Key Performance Highlights in the Quarter:

-- Total noninterest expenses decreased $2.3 million or 2.9% from the
fourth quarter of 2007 and decreased $7.1 million or 8.5% from the
first quarter of 2007.
-- Commercial and industrial loans at March 31, 2008 were $2.7 billion,
an increase of $96.6 million or 3.8% over December 31, 2007. Citizens
continues to see high quality, profitable customer demand for
commercial and industrial loans in all of its markets.
-- The provision for loan losses for the first quarter of 2008 was $30.6
million, compared with $6.1 million for the fourth quarter of 2007.
Net charge-offs for the first quarter of 2008 were in line with
expectations and totaled $17.4 million, compared with $19.7 million
for the fourth quarter of 2007. The significant increase in the
provision for loan losses was primarily due to higher than expected
nonperforming loans at March 31, 2008. The allowance for loan losses
as a percent of portfolio loans at March 31, 2008 increased to 1.84%
from 1.72% at December 31, 2007.
-- The 30-89 day loan delinquencies at March 31, 2008 decreased $74.8
million from December 31, 2007 and the commercial watchlist at March
31, 2008 decreased $21.3 million from December 31, 2007. The declines
in both delinquencies and watchlist were primarily a result of
commercial real estate loans migrating to nonperforming status at a
faster rate than new inflows into these categories.
-- Citizens continues to show improvement in treasury management sales,
SBA loan bookings, and wealth management revenue.
-- Treasury management sales totaled $0.5 million for the first
quarter of 2008, essentially unchanged from the fourth quarter of
2007 and an increase of 86.6% over the first quarter of 2007.
-- SBA loan bookings totaled $17.5 million in the first quarter of
2008, an increase of 6.5% over the fourth quarter of 2007 and an
increase of 125.6% over the first quarter of 2007.
-- Brokerage and investment fees totaled $1.9 million for the first
quarter of 2008, a decrease of 5.6% from the fourth quarter of
2007 but an increase of 23.7% over the first quarter of last year.
-- Citizens expanded its strategic business alliance with PHH Mortgage
during the first quarter of 2008 to include servicing the mortgage
portfolio. In connection with this transition, Citizens incurred
employee severance and selected benefits expense of $1.0 million.
-- Citizens recorded a gain of $2.1 million due to the receipt of
proceeds from the partial redemption of its Visa Inc. ("Visa") shares
immediately following the Visa initial public offering and reversed
the liability of $0.9 million recorded in the fourth quarter of 2007,
in connection with Visa's recent litigation, as a result of its
ownership in Visa.

Balance Sheet

Total assets at March 31, 2008 were $13.5 billion, essentially unchanged
from December 31, 2007 and an increase of $222.0 million or 1.7% over March
31, 2007. Total portfolio loans were $9.6 billion at March 31, 2008,
essentially unchanged from December 31, 2007 and an increase of $394.6 million
or 4.3% over March 31, 2007.
Investment securities at March 31, 2008 decreased $42.5 million or 1.9%
from December 31, 2007 to $2.2 billion and decreased $220.1 million or 9.0%
from March 31, 2007. The decreases were primarily the result of using
portfolio cash flow to fund commercial loan growth.
Total commercial loans at March 31, 2008 were $5.8 billion, an increase of
$173.8 million or 3.1% over December 31, 2007 and an increase of $677.3
million or 13.1% over March 31, 2007. The increases were primarily a result
of new relationships in all of Citizens' markets. When compared with March
31, 2007, the increase in commercial and industrial loans also reflects $261.3
million in growth from the Citizens Bank Business Finance division (the
asset-based lending team) due to strong direct demand and several large
corporate client participations. The following table displays historical
commercial loan portfolios by segment:

-----------------------------------------------------------------------
Commercial Loan Portfolio

in millions Mar 31, Dec 31, Sept 30, June 30, March 31,
2008 2007 2007 2007 2007
------------------------------------------------

Land Hold $61.6 $63.8 $78.9 $81.6 $84.3
Land Development 159.2 167.8 161.0 178.7 187.6
Construction 370.7 342.6 376.3 371.2 455.9
Income Producing 1,567.3 1,526.0 1,338.8 1,338.9 1,351.7
Owner-Occupied 1,015.6 997.0 1,113.5 1,115.6 1,077.7
--------- --------- --------- --------- ---------
Total Commercial
Real Estate 3,174.4 3,097.2 3,068.5 3,086.0 3,157.2
Commercial and
Industrial 2,653.8 2,557.1 2,236.2 2,153.2 1,993.7
--------- --------- --------- --------- ---------
Total Commercial
Loans $5,828.2 $5,654.3 $5,304.7 $5,239.2 $5,150.9
========= ========= ========= ========= =========
-----------------------------------------------------------------------

The following definitions are provided to clarify the types of loans
included in each of the commercial real estate segments identified in the
above table. Land hold loans are secured by undeveloped land which is
acquired for future development. Land development loans are secured by land
being actively developed in terms of infrastructure improvements to create
finished marketable lots for commercial or residential construction.
Construction loans are secured by commercial, retail and residential real
estate in the construction phase with the intent to be sold or become an
income producing property. Income producing loans are secured by non-owner
occupied real estate leased to one or more tenants. Owner occupied loans are
secured by real estate occupied by the owner for ongoing operations.
Residential mortgage loans at March 31, 2008 decreased $51.4 million or
3.6% from December 31, 2007 to $1.4 billion and decreased $124.4 million or
8.2% from March 31, 2007. The decreases were primarily the result of weak
consumer demand in Citizens' markets and the sale of more than 70% of new
mortgage originations into the secondary market.
Total consumer loans, which are comprised of direct and indirect loans,
were $2.4 billion at March 31, 2008, a decrease of $50.9 million or 2.1% from
December 31, 2007 and a decrease of $158.3 million or 6.3% from March 31,
2007. Direct consumer loans, which include direct installment, home equity,
and other consumer loans, decreased $40.4 million or 2.6% from December 31,
2007 and decreased $145.9 million or 8.7% from March 31, 2007. The decreases
were due to weak consumer demand, which is being experienced throughout the
industry. Indirect consumer loans, which are primarily marine and
recreational vehicle loans, were $818.9 million at March 31, 2008, essentially
unchanged from December 31, 2007 and March 31, 2007.
Loans held for sale at March 31, 2008 increased $5.7 million or 7.5% over
December 31, 2007 to $81.5 million and decreased $22.4 million or 21.5% from
March 31, 2007. The increase over December 31, 2007 was primarily the result
of higher residential mortgage origination volume awaiting sale in the
secondary market. The decrease from March 31, 2007 was primarily the result
of a $26.0 million consumer loan sale as part of the branch divestiture
completed on April 27, 2007. To a lesser extent, the decline was also due to
a reduction in commercial loans held for sale due to customer paydowns and
adjustments to reflect current fair-market value. These decreases were
partially offset by higher residential mortgage origination volume awaiting
sale in the secondary market.
Total deposits at March 31, 2008 were $8.5 billion, an increase of $185.1
million or 2.2% over December 31, 2007 and essentially unchanged from March
31, 2007. Core deposits, which exclude all time deposits, totaled $4.5
billion at March 31, 2008, an increase of $326.4 million or 7.9% over December
31, 2007 and an increase of $171.2 million or 4.0% over March 31, 2007. The
increases in core deposits were primarily the result of creating a new
on-balance sheet sweep product for Citizens' commercial clients late in 2007
and migration of funds from time deposits to a high-rate savings product.
Additionally, the increase over March 31, 2007 was partially offset by the
aforementioned branch divestiture and the migration of funds from lower-cost
deposits to time deposits with higher yields during 2007. Time deposits
totaled $4.0 billion at March 31, 2008, a decrease of $141.4 million or 3.4%
from December 31, 2007 and a decrease of $145.1 million or 3.5% from March 31,
2007. The decrease from December 31, 2007 was primarily the result of funds
migrating to a high-rate savings product. The decrease from March 31, 2007
was primarily the result of the aforementioned branch divestiture, partially
offset by the migration of funds from lower-cost deposits and some new client
growth during 2007.
Other interest-bearing liabilities, which include federal funds purchased
and securities sold under agreements to repurchase, other short-term
borrowings, and long-term debt, decreased $142.6 million or 4.1% from December
31, 2007 to $3.3 billion and increased $187.8 million or 6.0% over March 31,
2007. The decrease from December 31, 2007 was primarily the result of a shift
in the mix of funding to deposits. The increase over March 31, 2007 was
primarily the result of a shift in mix to fund commercial loan growth.
Net Interest Margin and Net Interest Income
Net interest margin was 3.12% for the first quarter of 2008 compared with
3.26% for the fourth quarter of 2007 and 3.44% for the first quarter of 2007.
The decrease in net interest margin from both prior periods was primarily the
result of deposit price competition resulting in lower spreads and longer
deposit repricing lag-time, a shift in funding mix, continued pricing pressure
on commercial loan spreads, and the movement of loans to nonperforming status,
partially offset by a shift in asset mix from investment securities to higher
yielding commercial loans and an increase in the investment portfolio yield.
The shift in funding mix included funds migrating within the deposit portfolio
from lower cost savings and transaction accounts to higher cost savings and
time deposits and a greater reliance on wholesale funding.
The decrease in net interest margin from the first quarter of 2007 was
primarily due to funds migrating within the deposit portfolio from lower cost
savings and transaction accounts to higher cost savings and time deposits,
pricing pressure on loans, the continued effects of the interest rate
environment, and the movement of commercial loans to nonperforming status,
partially offset by a shift in asset mix from investment securities to higher
yielding commercial loans.
Net interest income was $88.3 million for the first quarter of 2008, a
decrease of $3.9 million or 4.2% from the fourth quarter of 2007 and a
decrease of $10.0 million or 10.2% from the first quarter of 2007. The
decrease from the fourth quarter of 2007 was due to the lower net interest
margin, partially offset by a $110.1 million increase in average earning
assets. The increase in average earning assets was the result of an increase
in commercial and commercial real estate loan balances, partially offset by a
decrease in investment portfolio balances due to maturing balances not being
fully reinvested, and a decrease in residential mortgage and direct consumer
loan portfolio balances due to lower demand in the current Midwest economic
environment. The decrease from the first quarter of 2007 was primarily the
result of the lower net interest margin and a $131.7 million decrease in
average earning assets. The decrease in average earning assets was primarily
the result of the aforementioned branch divestiture and decreases in the
investment portfolio and the residential mortgage and consumer loan
portfolios, partially offset by an increase in commercial loan balances.
Citizens anticipates net interest income for the second quarter of 2008
will be slightly lower than the first quarter of 2008 due to the continued
migration of funds from lower yielding deposit products into higher yielding
deposit products, the continued effects of deposit pricing pressure, and the
Midwest economic environment.
Credit Quality
The quality of Citizens' loan portfolio is impacted by numerous factors,
including the economic environment in the markets in which Citizens operates.
Citizens carefully monitors its loans in an effort to identify, monitor, and
mitigate any potential credit quality issues and losses in a proactive manner.
By consistently monitoring credits and pre-emptively addressing loan issues,
Citizens strives to protect shareholder value through all economic cycles.
The following tables represent four qualitative aspects of the loan portfolio
that illustrate the overall level of quality and risk inherent in the loan
portfolio.
-- Table 1 - Delinquency Rates by Loan Portfolio - This table illustrates
the loans where the contractual payment is 30 to 89 days past due and
interest is still accruing. While these loans are actively worked to
bring them current, past due loan trends may be a leading indicator of
potential future nonperforming loans and charge-offs.
-- Table 2 - Commercial Watchlist - This table illustrates the commercial
loans that are identified during the watchlist process which are still
accruing interest but may be at risk due to general economic
conditions or changes in a borrower's financial status.
-- Table 3 - Nonperforming Assets - This table illustrates the loans
where the contractual payment is 90 days or more past due and interest
is no longer accruing, as well as loans that are held for sale and
other repossessed assets acquired. The commercial loans included in
this table are reviewed as part of the watchlist process in addition
to the loans displayed in Table 2.
-- Table 4 - Net Charge-Offs - This table illustrates the portion of
loans that have been charged-off during each quarter.

-------------------------------------------------------------------------
Table 1 -- Delinquency Rates By Loan Portfolio

30 to 89 days Past Due March 31, December 31, September 30
2008 2007 2007
------------ ------------ ------------
% of % of % of
in millions $ Portfolio $ Portfolio $ Portfolio
-----------------------------------------------

Land Hold $6.6 10.71% $4.6 7.21% $4.2 5.32%
Land Development 16.3 10.24 28.7 17.10 18.4 11.43
Construction 10.5 2.83 31.7 9.25 17.6 4.68
Income Producing 29.3 1.87 54.0 3.54 31.2 2.33
Owner-Occupied 19.0 1.87 20.3 2.04 10.8 0.97
-------------- -------------- --------------
Total Commercial
Real Estate 81.7 2.57 139.3 4.50 82.2 2.68
Commercial and
Industrial 39.9 1.50 39.0 1.53 22.0 0.98
-------------- -------------- --------------
Total Commercial
Loans 121.6 2.09 178.3 3.15 104.2 1.96

Residential Mortgage 33.5 2.40 46.4 3.21 37.7 2.58
Direct Consumer 21.7 1.42 24.3 1.55 21.5 1.34
Indirect Consumer 13.3 1.62 15.9 1.92 14.7 1.73
-------------- -------------- --------------
Total Delinquent
Loans $190.1 1.99% $264.9 2.79% $178.1 1.93%
======= ======= =======

June 30, March 31,
30 to 89 days Past Due 2007 2007
----------- -----------
% of % of
in millions $ Portfolio $ Portfolio
----------------------------------

Land Hold $2.9 3.55% $1.8 2.14%
Land Development 22.7 12.70 1.2 0.64
Construction 11.1 2.99 7.9 1.73
Income Producing 24.1 1.80 4.2 0.31
Owner-Occupied 17.1 1.54 14.7 1.36
--------------- --------------
Total Commercial Real Estate 77.9 2.53 29.8 0.94
Commercial and Industrial 22.7 1.05 27.2 1.36
--------------- --------------
Total Commercial Loans 100.6 1.92 57.0 1.11

Residential Mortgage 38.5 2.58 30.3 2.00
Direct Consumer 19.6 1.20 11.9 0.71
Indirect Consumer 11.6 1.37 12.5 1.50
--------------- --------------
Total Delinquent Loans $170.3 1.85% $111.7 1.22%
======= =======
-------------------------------------------------------------------------

Delinquencies decreased in the commercial real estate and residential
mortgage portfolios and remained relatively constant for the other portfolios.
The decrease in commercial real estate was primarily the result of loans
migrating to nonperforming status. The decrease in residential mortgage loans
was primarily the result of seasonal client behavior and enhancements made to
Citizens' collection process. These portfolios continue to be affected by the
weak Midwest economy and its related impact on real estate values and
development.
As part of the overall credit underwriting and review process, Citizens
carefully monitors commercial and commercial real estate credits that are
current in terms of principal and interest payments but may deteriorate in
quality as economic conditions change. Commercial relationship officers
monitor their clients' financial condition and initiate changes in loan
ratings based on their findings. Loans that have migrated within the loan
rating system to a level that requires increased oversight are considered
watchlist loans (generally consistent with the regulatory definition of
special mention, substandard, and doubtful loans) and include loans that are
in accruing or nonperforming status. Citizens utilizes the watchlist process
as a proactive credit risk management practice to help mitigate the migration
of commercial loans to nonperforming status and potential loss. Once a loan
is placed on the watchlist, it is reviewed quarterly by the chief credit
officer, senior credit officers, senior market managers, and commercial
relationship officers to assess cash flows, collateral valuations, and other
pertinent trends. During these reviews, action plans are reviewed to address
emerging problem loans or develop a specific plan for removing the loans from
the portfolio. Additionally, loans viewed as substandard or doubtful are
transferred to Citizens' Special Loans or small business workout groups and
are subjected to an even higher level of monitoring and workout activity.

-------------------------------------------------------------------------
Table 2 -- Commercial Watchlist

Accruing loans only March 31, December 31, September 30
2008 2007 2007
------------ ------------ ------------
% of % of % of
in millions $ Portfolio $ Portfolio $ Portfolio
-----------------------------------------------
Land Hold $27.7 44.97% $27.1 42.48% $27.0 34.22%
Land Development 55.9 35.11 72.7 43.33 52.3 32.48
Construction 66.7 17.99 90.1 26.30 91.7 24.37
Income Producing 221.3 14.12 225.5 14.78 173.8 12.98
Owner-Occupied 155.8 15.34 153.0 15.35 213.0 19.13
-------------- -------------- --------------
Total Commercial
Real Estate 527.4 16.61 568.4 18.35 557.8 18.18
Commercial and
Industrial 407.1 15.34 387.4 15.15 362.4 16.21
-------------- -------------- --------------
Total Watchlist
Loans $934.5 16.03 $955.8 16.90 $920.2 17.35
======= ======= =======

Accruing loans only June 30, March 31,
2007 2007
----------- -----------
% of % of
in millions $ Portfolio $ Portfolio
------------------------------------

Land Hold $25.2 30.88% $29.3 34.76%
Land Development 73.0 40.85 52.2 27.83
Construction 101.4 27.32 79.5 17.44
Income Producing 161.0 12.02 161.2 11.93
Owner-Occupied 219.4 19.67 217.0 20.14
--------------- --------------
Total Commercial Real Estate 580.0 18.79 539.2 17.08
Commercial and Industrial 359.8 16.71 343.5 17.23
--------------- --------------
Total Watchlist Loans $939.8 17.94 $882.7 17.14%
======= =======
-------------------------------------------------------------------------

As presented in the table above, accruing watchlist loans at March 31,
2008 decreased $21.3 million or 2.2% from December 31, 2007. The decrease was
primarily the result of commercial real estate loans migrating to
nonperforming status, partially offset by an increase in commercial and
industrial loans due to the addition of asset-based lending credits.

-------------------------------------------------------------------------
Table 3 -- Nonperforming Assets

March 31, December 31, September 30
2008 2007 2007
------------ ------------ ------------
% of % of % of
in millions $ Portfolio $ Portfolio $ Portfolio
-----------------------------------------------

Land Hold $5.5 8.93% $4.5 7.05% $3.0 3.80%
Land Development 46.4 29.15 35.6 21.22 40.4 25.09
Construction 51.9 14.00 28.8 8.41 18.6 4.94
Income Producing 40.5 2.58 21.5 1.41 26.5 1.98
Owner-Occupied 23.5 2.31 19.7 1.98 9.0 0.81
-------------- -------------- --------------
Total Commercial
Real Estate 167.8 5.29 110.1 3.55 97.5 3.18
Commercial and
Industrial 20.3 0.76 12.7 0.50 9.4 0.42
-------------- -------------- --------------
Total Commercial
Loans 188.1 3.23 122.8 2.17 106.9 2.02

Residential Mortgage 45.8 3.29 46.9 3.25 32.8 2.25
Direct Consumer 13.5 0.88 13.7 0.87 10.9 0.68
Indirect Consumer 1.7 0.21 2.1 0.25 1.8 0.21
Loans 90+ days still
accruing and restructured 4.4 0.05 3.9 0.04 2.4 0.03
-------------- -------------- --------------
Total Nonperforming
Portfolio Loans 253.5 2.65% 189.4 1.99% 154.8 1.68%
Nonperforming Held for
Sale 22.8 21.6 5.8
Other Repossessed Assets
Acquired 50.3 40.5 30.4
------- ------- -------
Total Nonperforming
Assets $326.6 $251.5 $191.0
======= ======= =======

June 30, March 31,
2007 2007
----------- -----------
% of % of
in millions $ Portfolio $ Portfolio
------------------------------------

Land Hold $0.2 0.25% $0.1 0.12%
Land Development 17.7 9.90 7.9 4.21
Construction 20.9 5.63 8.9 1.95
Income Producing 14.8 1.11 11.9 0.88
Owner-Occupied 7.2 0.65 11.8 1.09
--------------- --------------
Total Commercial Real Estate 60.8 1.97 40.6 1.29
Commercial and Industrial 8.6 0.40 8.8 0.44
--------------- --------------
Total Commercial Loans 69.4 1.32 49.4 0.96

Residential Mortgage 35.4 2.37 30.6 2.02
Direct Consumer 9.1 0.56 8.2 0.49
Indirect Consumer 1.1 0.13 0.6 0.07
Loans 90+ days still
accruing and restructured 1.4 0.02 1.8 0.02
--------------- --------------
Total Nonperforming
Portfolio Loans 116.4 1.26% 90.6 0.99%
Nonperforming Held for Sale 5.1 4.6
Other Repossessed Assets
Acquired 24.9 19.5
------- -------
Total Nonperforming Assets $146.4 $114.7
======= =======
-------------------------------------------------------------------------

Nonperforming assets are comprised of nonaccrual loans, loans past due
over 90 days and still accruing interest, restructured loans, nonperforming
held for sale, and other repossessed assets acquired. Nonperforming assets
totaled $326.6 million at March 31, 2008, an increase of $75.1 million or
29.8% over December 31, 2007 and an increase of $211.9 million over March 31,
2007. The increase over December 31, 2007 was primarily the result of higher
nonperforming commercial real estate loans, which migrated from accruing
watchlist, and higher other repossessed assets acquired which migrated from
the loan portfolio after incurring partial charge-offs. The increase over
March 31, 2007 was primarily the result of transitioning all of Republic's
loan portfolios and underwriting practices to be consistent with Citizens'
credit risk management disciplines, deterioration in the real estate secured
portfolios (particularly commercial) and general economic deterioration in the
Midwest. Nonperforming assets at March 31, 2008 represented 3.39% of total
loans plus other repossessed assets acquired compared with 2.64% at December
31, 2007 and 1.25% at March 31, 2007. Nonperforming commercial loan inflows
were $99.0 million in the first quarter of 2008 compared with $72.1 million in
the fourth quarter of 2007 and $37.4 million in the first quarter of 2007.
Nonperforming commercial loan outflows were $33.7 million in the first quarter
of 2008 compared with $56.2 million in the fourth quarter of 2007 and $10.6
million in the first quarter of 2007. The first quarter of 2008 outflows
consisted of $10.4 million in loans that returned to accruing status, $4.8
million in loan payoffs and paydowns, $10.1 million in charged-off loans, and
$8.4 million transferring to other repossessed assets acquired.

-------------------------------------------------------------------------
Table 4 -- Net Charge-Offs Three Months Ended
-----------------------------------------------
March 31, December 31, September 30
2008 2007 2007
------------ ------------ ------------
% of % of % of
in millions $ Portfolio** $ Portfolio** $ Portfolio
-----------------------------------------------

Land Hold $0.5 3.25% $0.4 2.51% $--- -%
Land Development 6.6 16.58 6.3 15.02 0.4 0.99
Construction 1.2 1.29 1.8 2.10 0.1 0.11
Income Producing 0.9 0.23 2.4 0.63 0.1 0.03
Owner-Occupied (0.1) (0.04) (0.2) (0.08) 0.6 0.22
-------------- -------------- --------------
Total Commercial
Real Estate 9.1 1.15 10.7 1.38 1.2 0.15
Commercial and
Industrial 0.9 0.14 1.4 0.27 0.6 0.12
-------------- -------------- --------------
Total Commercial
Loans 10.0 0.69 12.1 0.94 1.8 0.14

Residential Mortgage 1.8 0.52 2.0 0.53 1.6 0.43
Direct Consumer 3.0 0.79 2.3 0.56 2.6 0.63
Indirect Consumer 2.6 1.27 3.3 1.57 1.9 0.89
-------------- -------------- --------------
Total Net Charge-offs $17.4 0.74% $19.7 0.84% $7.9 0.34%
======= ======= =======

Three Months Ended
------------------------------------
June 30, March 31,
2007 2007
----------- -----------
% of % of
in millions $ Portfolio** $ Portfolio**
------------------------------------

Land Hold $--- -% $- -%
Land Development 6.4 14.33 - -
Construction 4.1 4.43 0.3 0.26
Income Producing 2.3 0.69 - -
Owner-Occupied 0.9 0.32 - -
--------------- --------------
Total Commercial Real Estate 13.7 1.77 0.3 0.04
Commercial and Industrial 1.8 0.35 (0.8) (0.16)
--------------- --------------
Total Commercial Loans 15.5 1.20 (0.5) (0.04)

Residential Mortgage 0.7 0.18 0.8 0.21
Direct Consumer 2.6 0.63 1.7 0.41
Indirect Consumer 1.2 0.59 1.4 0.67
--------------- --------------
Total Net Charge-offs $20.0 0.87% $3.4 0.15%
======= =====

** Represents an annualized rate.
-------------------------------------------------------------------------

Net charge-offs totaled $17.4 million or 0.74% of average portfolio loans
in the first quarter of 2008 compared with $19.7 million or 0.84% of average
portfolio loans in the fourth quarter of 2007 and $3.4 million or 0.15% of
average portfolio loans in the first quarter of 2007. The decrease from the
fourth quarter of 2007 was primarily the result of lower commercial real
estate charge-offs. One residential development credit accounted for
approximately 50% of the total commercial real estate charge offs in the first
quarter of 2008. The increase over the first quarter of 2007 was primarily
the result of the aforementioned increase in commercial real estate
charge-offs due to the continued deterioration of the Midwest economy.
After determining what Citizens believes is an adequate allowance for loan
losses, the provision is calculated as a result of the net effect of the
quarterly change in the allowance for loan losses identified based on the risk
in the portfolio and the quarterly net charge-offs. The provision for loan
losses was $30.6 million in the first quarter of 2008, compared with $6.1
million in the fourth quarter of 2007 and $3.5 million in the first quarter of
2007. The increase over the fourth quarter of 2007 was primarily due to the
higher than expected migration of commercial real estate watchlist loans to
nonperforming status. This migration caused an increase in the allowance for
loan losses due to the higher likelihood that these loans might eventually be
charged-off. The increase over the first quarter of 2007 was primarily the
result of higher commercial real estate charge-offs and higher nonperforming
loans.
The allowance for loan losses totaled $176.5 million or 1.84% of portfolio
loans at March 31, 2008, compared with $163.4 million or 1.72% at December 31,
2007. The increase was primarily the result of higher nonperforming
commercial real estate loans and, to a lesser extent, an increase in the trend
of consumer charge-offs. Based on current conditions and expectations, it is
Citizens' belief that the allowance for loan losses at March 31, 2008 is
adequate to address the estimated loan losses inherent in the existing loan
portfolio considering that over 85% of the nonperforming loans are real estate
related and still carry collateral value and that $61.0 million are consumer
related, which historically migrates to loss at a low rate.
Citizens anticipates net charge-offs for the second quarter of 2008 will
be almost double the amount recognized in the first quarter of 2008 as current
nonperforming loans that can not be successfully remediated are charged-off.
It is Citizens' belief that the specific reserves identified as of March 31,
2008 should align with the anticipated commercial charge-offs. Therefore, the
provision for loan losses for the second quarter of 2008 is expected to be
consistent with the net charge-offs for that quarter in order to align with
the expected level of risk inherent in the loan portfolio. Given the
uncertainties in the Midwest economy and the real estate markets, however,
there can be no assurance that additions to the allowance for loan losses will
not be necessary.
Noninterest Income
Noninterest income for the first quarter of 2008 was $30.9 million, an
increase of $1.6 million or 5.6% over the fourth quarter of 2007 and a
decrease of $0.5 million or 1.5% from the first quarter of 2007. The increase
over the fourth quarter of 2007 was primarily the result of higher other
income ($2.0 million) and higher mortgage and other loan income ($1.2
million), partially offset by a decrease in service charges on deposit
accounts ($0.9 million) and trust fees ($0.4 million). The increase in other
income was primarily the result of a $2.1 million gain due to Citizens'
receipt of proceeds from the partial redemption of its Visa shares in the
first quarter of 2008. The increase in mortgage and other loan income was
primarily the result of gains on the sale of mortgages into the secondary
market due to current interest rate trends and the effects of a reduction in
the fair value of the commercial loans held for sale during the fourth quarter
of 2007. The decrease in service charges on deposit accounts was primarily
due to a seasonal decline in volume. The decrease in trust fees was primarily
the result of the performance of the financial markets in 2008. Total trust
assets under administration were $2.5 billion at March 31, 2008, a decrease of
$0.2 billion from December 31, 2007.
The decrease from the first quarter of 2007 was primarily due to lower
mortgage and other loan income ($2.8 million), partially offset by higher
other income ($1.3 million), bankcard fees ($0.6 million) and brokerage and
investment fees ($0.4 million). The decrease in mortgage and other loan
income was primarily the result of lower mortgage sales during the first
quarter of 2008. The increase in other income was due to the aforementioned
$2.1 million gain related to the partial redemption of its Visa shares.
Bankcard fees increased 47.8% as a result of higher client debit card volume.
The increase in brokerage and investment fees was primarily the result of
promoting Citizens' financial consultants as "retirement income professionals"
through community seminars and targeted mailings, training legacy Republic
branch staff and hiring new financial consultants to support the Republic
franchise on this product line during the first quarter of 2007.
Citizens anticipates total noninterest income for the second quarter of
2008 will be consistent with or slightly higher than the first quarter of 2008
due to an increase in mortgage and other loan income as a result of
implementing the mortgage origination-related services with PHH Mortgage and
higher brokerage and investment fees.
Noninterest Expense
Noninterest expense for the first quarter of 2008 was $76.6 million, a
decrease of $2.3 million or 2.9% from the fourth quarter of 2007 and a
decrease of $7.1 million or 8.5% from the first quarter of 2007. The first
quarter of 2008 included $1.0 million in employee severance and selected
benefits associated with expanding the PHH Mortgage business alliance to
include servicing the entire mortgage portfolio and releasing a $0.9 million
liability accrued in the fourth quarter of 2007, in connection with Visa's
recent litigation, as a result of Citizens' proportionate membership share of
Visa USA. The decrease from the fourth quarter of 2007 was primarily the
result of lower salaries and employee benefits ($1.4 million), professional
services expense ($0.7 million), equipment expense ($0.6 million), and other
loan expenses ($0.5 million), partially offset by higher advertising and
public relations expense ($0.6 million) and data processing services ($0.4
million). The decrease in salaries and employee benefits was primarily the
result of fewer employee separation agreements, lower hospitalization
insurance expense, and $0.8 million in pension expense recorded in the fourth
quarter of 2007 related to a settlement charge as a result of making lump-sum
cash payments to plan participants in exchange for their rights to receive
specified monthly benefits under Citizens' cash balance pension plan. The
decrease in professional services expense was primarily the result of lower
recruiting and consulting expense. The decrease in equipment costs was due to
lower costs associated with branch equipment maintenance and equipment rental
expense. The decrease in other loan expenses was primarily the result of
lower expenses associated with processing commercial loans and lower
provisioning to fund the reserve for unused loan commitments, which fluctuates
with the amount of unadvanced customer lines of credit, partially offset by
higher foreclosure expenses associated with repossessing collateral underlying
commercial and residential real estate loans. The increase in advertising and
public relations expense was primarily the result of running a deposit
generation campaign. The increase in data processing services expense was
primarily the result of increased usage of customer online banking
functionality.
The decrease from the first quarter of 2007 was primarily the result of a
general decline in all expenses due to cost savings and efficiencies
implemented during the second, third, and fourth quarters of 2007 following
completion of the Republic merger as well as the effect of $4.2 million in
restructuring and merger-related expenses incurred in the first quarter of
2007, partially offset by higher other loan expenses ($0.9 million) and other
expense ($0.5 million). The increase in other loan expenses was primarily the
result of higher foreclosure expenses associated with repossessing commercial
and residential real estate loans, partially offset by the aforementioned
lower provisioning to fund the reserve for unused loan commitments. The
increase in other expense was primarily the result of higher ongoing property
management costs for previously repossessed real estate loans, partially
offset by lower state taxes and non-credit related losses.
Salary costs included severance expense of $1.6 million for the first
quarter of 2008, including the aforementioned agreements associated with
Citizens' expanded alliance with PHH Mortgage; $3.0 million for the fourth
quarter of 2007; and $0.4 million for the first quarter of 2007. Citizens had
2,409 full-time equivalent employees at March 31, 2008 compared with 2,501 at
December 31, 2007 and 2,735 at March 31, 2007.
Citizens anticipates total noninterest expense for the second quarter of
2008 will be slightly higher than the first quarter of 2008 due to higher
expenses associated with repossessed commercial and residential real estate.
Income Tax Provision
Citizens anticipates that the effective tax rate for 2008 will be
approximately 18% - 22%. However, the effective tax rate for the first quarter
of 2008 is 7.7% because of favorable developments on a federal tax issue
prevalent in the banking industry. Due to these developments, Citizens was
able to recognize a discrete tax item of $1.5 million from previously
unrecognized tax benefits.
Income tax provision for the first quarter of 2008 was $0.9 million, a
decrease of $7.7 million from the fourth quarter of 2007 and a decrease of
$10.1 million from the first quarter of 2007. The differences are driven by
lower taxable income and the aforementioned $1.5 million discrete item.
Use of Non-GAAP Financial Measures
In addition to results presented in accordance with Generally Accepted
Accounting Principles ("GAAP"), this release includes non-GAAP financial
measures, including those presented on page 1, which are reconciled to GAAP
financial measures on page 15. Citizens believes these non-GAAP financial
measures provide information useful to investors in understanding the
underlying operational performance of the company, its business, and
performance trends and facilitates comparisons with the performance of others
in the banking industry. Specifically, Citizens believes the exclusion of
restructuring and merger-related expenses and intangible asset amortization to
create "core operating earnings" as well as the exclusion of related goodwill
and other intangible assets, net of applicable deferred tax amounts, to create
"average tangible assets," "average tangible equity" and core efficiency ratio
permits evaluation of the effect of the Republic merger on business operations
of the combined company and facilitates a comparison of results for ongoing
business operations. Citizens' management internally assesses the company's
performance based, in part, on these non-GAAP financial measures.
In accordance with industry standards, certain designated net interest
income amounts are presented on a taxable equivalent basis, including the
calculation of net interest margin and the efficiency ratio. Citizens
believes the presentation of net interest margin on a taxable equivalent basis
allows comparability of net interest margin with our industry peers by
eliminating the effect of the differences in portfolios attributable to the
proportion represented by both taxable and tax-exempt investments.
Although Citizens believes the above non-GAAP financial measures enhance
investors' understanding of its business and performance, these non-GAAP
measures should not be considered a substitute for GAAP basis financial
measures.
Other News
Citizens Expands Strategic Business Alliance with PHH Mortgage
During the first quarter of 2008, Citizens expanded its strategic business
alliance with PHH Mortgage to include servicing the entire mortgage portfolio.
Citizens expects to have this fully implemented by the end of June 2008.
Citizens Names Director of Human Resources
On February 25, 2008, Citizens announced that Susan Brockett was hired as
executive vice president and director of human resources. Brockett joins
Citizens with over 30 years experience.
Stock Repurchase Program
During the first quarter of 2008, Citizens did not repurchase any shares
of its stock under the stock repurchase program. As of March 31, 2008, there
were 1,241,154 shares remaining to be purchased under the program approved by
the Board of Directors on October 16, 2003.
Analyst Conference Call
William R. Hartman, chairman, president and CEO, Charles D. Christy, CFO,
John D. Schwab, chief credit officer, and Martin E. Grunst, treasurer will
review the quarter's results in a conference call for analysts and investors
at 10:00 a.m. ET on Friday, April 18, 2008.
A live audio webcast is available at www.citizensbanking.com through the
Investor Relations page or by calling (800) 895-0198 (conference ID: Citizens
Republic). To participate in the conference call, please connect
approximately 10 minutes prior to the scheduled conference time.
The call will be archived for 90 days at www.citizensbanking.com. In
addition, a digital recording will be available approximately two hours after
the completion of the conference call until April 25, 2008. To listen to the
replay, please dial (800) 695-0395.
Corporate Profile
Citizens Republic Bancorp is a diversified financial services company
providing a wide range of commercial, consumer, mortgage banking, trust and
financial planning services to a broad client base. Citizens Republic Bancorp
serves communities in Michigan, Ohio, Wisconsin, and Indiana as Citizens Bank
and in Iowa as F&M Bank, with 239 offices and 265 ATMs. Citizens Republic
Bancorp is the largest bank holding company headquartered in Michigan with
roots dating back to 1871. Citizens Republic Bancorp is the 40th largest bank
holding company headquartered in the United States. More information about
Citizens Republic Bancorp is available at www.citizensbanking.com .
Safe Harbor Statement
Discussions and statements in this release that are not statements of
historical fact, including statements that include terms such as "will,"
"may," "should," "believe," "expect," "anticipate," "estimate," "project,"
"intend," and "plan," including without limitation future financial and
operating results, plans, objectives, expectations and intentions and other
statements that are not historical facts, are forward-looking statements that
involve risks and uncertainties. Any forward-looking statement is not a
guarantee of future performance and actual results could differ materially
from those contained in the forward-looking information.
Factors that could cause or contribute to such differences include,
without limitation, adverse changes in Citizens' loan and lease portfolios
resulting in credit risk-related losses and expenses (including without
limitation losses due to fraud, Michigan automobile-related industry changes
and shortfalls, deterioration in commercial and residential real estate
values, and other economic factors) as well as additional increases in the
allowance for loan losses; fluctuations in market interest rates, the effects
on net interest income of changes in Citizens' interest rate risk position and
the potential inability to hedge interest rate risks economically; adverse
changes in economic or financial market conditions and the economic effects of
terrorist attacks and potential attacks; Citizens' potential inability to
continue to attract core deposits; Citizens' potential inability to continue
to obtain third party financing on favorable terms; adverse changes in
competition, pricing environments or relationships with major customers;
unanticipated expenses and payments relating to litigation brought against
Citizens from time to time; Citizens' potential inability to adequately invest
in and implement products and services in response to technological changes;
adverse changes in applicable laws and regulatory requirements; the potential
lack of market acceptance of Citizens' products and services; changes in
accounting and tax rules and interpretations that negatively impact results of
operations or financial position; the potential inadequacy of Citizens'
business continuity plans or data security systems; the potential failure of
Citizens' external vendors to fulfill their contractual obligations to
Citizens; Citizens' potential inability to integrate acquired operations;
adverse or unanticipated events leading to impairment charges to goodwill or
other intangible assets; unanticipated environmental liabilities or costs;
impairment of the ability of the banking subsidiaries to pay dividends to the
holding company parent; the potential circumvention of Citizens' controls and
procedures; Citizens' success in managing the risks involved in the foregoing;
and other risks and uncertainties detailed from time to time in its filings
with the SEC, which are available at the SEC's web site www.sec.gov . Other
factors not currently anticipated may also materially and adversely affect
Citizens' results of operations, cash flows and financial position. There can
be no assurance that future results will meet expectations. While Citizens
believes that the forward-looking statements in this release 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.

ADD: /FIRST AND FINAL ADD -- CLTH026 -- Citizen's Republic Bancorp Earnings/

Charles D. Christy, EVP & Chief Financial Officer, +1-810-237-4200,
Charlie.Christy@citizensbanking.com, or Kristine D. Brenner, Director of
Investor Relations, +1-810-257-2506, Kristine.Brenner@citizensbanking.com,
both of Citizen's Republic Bancorp/ /FIRST ADD -- FINANCIAL TABLES TO FOLLOW