 Investor Presentation
Third Quarter 2012
Exhibit 99.1 |
 2
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. |
 Who
We Are |
 4
Who We Are
Established in 1871
57
largest bank holding
company in the U.S. ranked by
assets
–
$9.7 billion assets and $7.3
billion deposits
–
Presence in 3 Upper
Midwest states with 219
branches and 249 ATMs
Increased market share in 49%
of our counties since 2008
Growing number of new clients
10% annually
80% of revenue is Michigan
based
Pending merger with FirstMerit,
expect to close 2Q13
Company Overview
219 Branches / 249 ATMs
th |
 5
How We Deliver Our Service
Core Banking
86% of revenue
Retail consumer
Commercial clients up to $5 million loan size
Treasury Management: 31% 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
Corporate Banking
10% of revenue
Asset Based Lending
Corporate
Specialty healthcare focus in assisted living & skilled nursing
Wealth Management
4% of revenue
Personal Trust
Employee Benefits
Institutional Trust |
 Local
Delivery of Service Local teams focus on delivery of :
Client service
Closing pipeline opportunities
Referring business
6
Client
Local
Advisory
Board
Commercial
Banker
Mortgage
Loan
Officer
Public
Funds
Officer
Branch
Manager
Treasury
Management
Officer
Investment
Consultant
Wealth
Business
Development
Officer |
 Where We’ve Been |
 8
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) |
 9
Successful Leaders in Key Roles
Name
Title
Held
Position
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 |
 Since
2009, focused on clients/revenue while working through credit issues
10
$26.6
$20.6
$29.6
$33.1
$34.7
$34.5
$36.2
$32.1
$30.7
$32.8
$37.8
$36.9
$31.7
$31.7
$33.0
$0
$10
$20
$30
$40
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Pre-tax Pre-provision Profit*
Revenue Focus
Problem Asset Resolution Focus
Strengthened franchise
value
Eliminated uncertainty
around credit
* 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
0%
1%
2%
3%
4%
5%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q112
2Q12
3Q122
NPAs / Assets %
CRBC
Peer Median**
Regional Peer Median**
(in millions) |
 Strategy from 2009 –
2010
1.
Preserved capital by managing assets
2.
Grew and maintained reserve levels in recognition of
portfolio risk
11
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Total Assets
$12,982
$12,288
$12,072
$11,932
$11,652
$10,834
$10,639
$9,966
$9,724
$9,496
$9,600
$9,463
$9,577
$9,670
$9,725
$0
$100
$200
$300
$400
$500
$600
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Allowance for Loan Losses
Non-Performing Loans |
 Strategy from 2009 –
2010
3.
Aggressively and actively worked out of problem assets
4.
Carefully managed capital levels to allow execution of
problem asset reduction
12
Sept. 30,
2011
Dec. 31,
2011
March 31,
2012
June 30,
2012
Sept 30,
2012
Leverage ratio
8.21%
8.45%
8.71%
9.77%
9.66%
Tier 1 capital ratio
12.81
13.51
13.70
14.70
15.09
Total capital ratio
14.14
14.84
14.97
15.96
16.35
Tier 1 common
equity (non-GAAP)
6.77
7.24
7.49
8.50
8.83
$549
$601
$606
$591
$551
$468
$436
$280
$175
$139
$137
$102
$91
$94
$86
4.4%
5.0%
5.2%
5.1%
4.9%
4.3%
4.1%
2.8%
1.8%
1.5%
1.4%
1.1%
1.0%
1.0%
0.9%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
$0
$100
$200
$300
$400
$500
$600
$700
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Non-Performing Assets
NPAs as a % of Total Assets |
 Focused on Growth |
 Continue to Provide Top Tier Client Service
14
* Surveys conducted by Prime Performance ™
76
78
80
82
84
86
88
90
Sep 07
Sep 08
Sep 09
Sep 10
Sep 11
June 12
Likelihood to Recommend *
Citizens' Score
PPI Industry Average |
 Rebuild Loan Portfolio
Focused on proven competencies
–
Business owner lending
–
Corporate lending –
structured finance, ABL, healthcare
expertise
–
Indirect marine and RV
15
$8,625
$8,302
$8,097
$7,788
$7,439
$7,138
$6,888
$6,217
$5,704
$5,628
$5,672
$5,530
$5,528
$5,522
$5,431
$4,000
$6,000
$8,000
$10,000
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Loan Portfolio Balances
(in millions) |
 Mitigate Expected Margin Pressure
16
2.74%
2.75%
2.99%
3.13%
3.14%
3.35%
3.32%
3.42%
3.53%
3.56%
3.63%
3.62%
3.56%
3.60%
3.57%
2.00%
2.50%
3.00%
3.50%
4.00%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Net Interest Margin (FTE)
Continue focus on core deposits
Reduce single service CD clients
Manage liquidity levels to reflect
improved credit trends
10,000
12,000
14,000
16,000
18,000
12/31/10
3/31/11
6/30/11
9/30/11
12/31/11
3/31/12
6/30/12
9/30/12
Single Service CD Clients
0
100
200
300
400
500
600
700
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Fed Funds Sold (average)
(in millions) |
 Reserve Reductions Follow Improved Metrics
17
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
0%
1%
2%
3%
4%
5%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Loan Loss Reserves / Loans %
CRBC
Peer Median*
Regional Peer Median*
* Source: SNL Financial MRQ data |
 Report Consistent Profits
18
* Excludes discontinued operations
Reprice and add new fee income
streams to replace lost revenue from
regulatory changes
* Non-GAAP measure. See Appendix for reconciliation.
Continue prudent expense
management while adding key
revenue generating positions
$0
$10
$20
$30
$40
$50
$60
$70
$80
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Operating Non-Interest Expense*
Salaries and Employee Benefits
Other Expenses
-
5,000
10,000
15,000
20,000
25,000
30,000
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Operating Non-Interest Income*
Service charges on deposit accounts
Card-based and other nondeposit fees
Other
non-interest
income*
(49)
(359)
(69)
(68)
(85)
(35)
(57)
(103)
(69)
14
20
21
25
26
22
-400
-350
-300
-250
-200
-150
-100
-50
0
50
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Income (Loss) before Tax* |
 19
3Q12 Highlights
Announced merger with FirstMerit Corporation
(NASDAQ: FMER); Expect to close 2Q13
Reported consistent quarterly profit from banking
operations
–
Consistent net interest margin at 3.57%
–
Fee income from core banking services remained solid
–
Maintained control over operating expenses
Loan growth in focused areas of expertise
–
10% growth in C&I portfolio since last year
–
9% growth in Indirect portfolio since last year
–
Strong origination and pipeline activity in C&I and Indirect
Credit trends showed continued stability and
improvement |
 Solid
Core Earnings 20
2.74%
2.75%
2.99%
3.13%
3.14%
3.35%
3.32%
3.42%
3.53%
3.56%
3.63%
3.62%
3.56%
3.60%
3.57%
2.00%
2.20%
2.40%
2.60%
2.80%
3.00%
3.20%
3.40%
3.60%
3.80%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Net Interest Margin (FTE)
2.90%
3.31%
3.58%
2.00%
2.20%
2.40%
2.60%
2.80%
3.00%
3.20%
3.40%
3.60%
3.80%
2009
2010
2011
Net Interest Margin (FTE)
$26.6
$20.6
$29.6
$33.1
$34.7
$34.5
$36.2
$32.1
$30.7
$32.8
$37.8
$36.9
$31.7
$31.7
$33.0
$0
$10
$20
$30
$40
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Pre
-tax Pre
-provision Profit*
$109.9
$137.5
$138.2
$0
$20
$40
$60
$80
$100
$120
$140
$160
2009
2010
2011
Pre
-tax Pre
-provision Profit* |
 Efficiency Ratio Trends
21
70.16%
76.84%
79.23%
70.89%
68.39%
70.40%
64.19%
68.22%
67.09%
63.85%
59.89%
61.39%
65.20%
65.99%
65.20%
50%
55%
60%
65%
70%
75%
80%
85%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Quarterly Efficiency Ratio
Peer Data Source: SNL Financial
74.21%
67.73%
63.05%
50%
55%
60%
65%
70%
75%
80%
2009
2010
2011
Annual Efficiency Ratio
Revenue per FTE of $207,000 is in line with peer median
of $210,000
Salary & benefits expense per FTE of $62,500 is better
than peer median of $72,200 |
 Organically Growing Strong Capital Position
22
Accelerated
resolution
of over
$920 million
of problem
assets
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Total Capital
Tier 1 Capital
Tier 1 Common (non-GAAP) |
 23
Positioned for Growth
Successfully managed through credit cycle with a
strategic focus on revenue generation and problem
asset resolutions
Strategically focused in 2012 to
–
Continue providing top tier client service
–
Rebuild loan portfolio
–
Mitigate expected margin pressure
–
Evaluate reserve levels
–
Report consistent profitability
Pending merger with FirstMerit Corporation (NASDAQ:
FMER) expected to close 2Q13 |
 24
Appendix |
 25
Upper Midwest Franchise
MSA
Rank
Number
of
Branches
Total
Deposits
($000)
% of
Franchise
% Market
Share
Michigan:
Flint, MI
1
21
1,413,395
19.2
37.84
Detroit-Warren-Livonia, MI
11
31
1,155,621
15.7
1.19
Saginaw-Saginaw Township North,
1
15
614,662
8.4
30.60
Lansing-East Lansing, MI
3
14
527,318
7.2
10.13
Jackson, MI
2
8
372,527
5.1
23.76
Bay City, MI
3
5
216,496
2.9
20.69
Ann Arbor, MI
12
6
211,446
2.9
3.17
Cadillac, MI
1
7
192,242
2.6
36.30
Owosso, MI
3
6
139,177
1.9
20.48
Sturgis, MI
3
4
101,110
1.4
15.27
Total Michigan
8
156
5,923,119
80.7
3.55
Non-Michigan:
Green Bay, WI
5
10
286,993
3.9
4.85
Cleveland-Elyria-Mentor, OH
18
12
279,794
3.8
0.56
Appleton, WI
12
5
105,395
1.4
2.77
Stevens Point, WI
5
2
88,627
1.2
6.89
Platteville, WI
9
4
70,793
1.0
6.02
Total Non-Michigan
60
1,419,936
19.3
Source: SNL Financial as of 6/30/12 |
 26
Continued Stabilization and Diversification
in Michigan’s Economy
Source: U.S. Bureau of Labor Statistics
Michigan Nonfarm Employment
Michigan Employment by Industry
Sept. 2012
Sept. 2002
$000s
%
$000s
%
Trade, Transportation, and Utilities
647.4
16.1%
753.5
16.6%
Government
612.4
15.2%
684.9
15.1%
Professional Services
576.5
14.4%
610.3
13.5%
Health Care
552.8
13.8%
475.3
10.5%
Leisure and Hospitality
391.7
9.8%
414.3
9.2%
Other Manufacturing
391.6
9.8%
484.8
10.7%
Motor Vehicle
210.0
5.2%
360.5
8.0%
Financial Activities
200.1
5.0%
213.7
4.7%
Other Services
168.5
4.2%
180.4
4.0%
Construction
130.8
3.3%
210.9
4.7%
Education Services
73.4
1.8%
60.9
1.3%
Information
52.9
1.3%
68.5
1.5%
Mining and Logging
7.8
0.2%
8.9
0.2%
Total Nonfarm
4,015.9
4,526.9
Total Manufacturing
601.6
15.0%
845.3
18.7%
in thousands
3,500
3,600
3,700
3,800
3,900
4,000
4,100
4,200
4,300
Michigan NonFarm Employment (Seasonally Adjusted)
Trend |
 27
Continued Stabilization and Diversification
in Michigan’s Economy
Unemployment Trends
Source: U.S. Bureau of Labor Statistics and Freddie Mac
Freddie Mac House Price Index |
 28
(in millions)
4Q11
1Q12
2Q12
3Q12
Income(loss) from continuing operations
$18.2
$24.9
$303.2
$21.0
Income tax (benefit) provision
2.5
-
(276.8)
1.3
Provision for loan losses
15.0
8.4
5.3
5.2
Investment securities (gains) losses
-
-
-
-
Net losses (gains) on LHFS
0.2
(0.9)
(0.0)
0.2
(Gains) losses on ORE
1.1
(0.4)
(0.2)
0.9
Merger related expenses
-
-
-
4.4
Fair-value adjustment on BOLI
(0.1)
(0.2)
0.1
(0.0)
Fair-value adjustment on swaps
(0.0)
(0.1)
0.1
0.1
Pre-Tax Pre-Provision Profit
(1)
$36.9
$31.7
$31.7
$33.0
Last 12 Months
$133.4
Core Earnings Strength
(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 insurance, less non-interest expense excluding any goodwill impairment
charges, credit write downs, fair value adjustments and special
assessments. Pre-Tax Pre-Provision Profit (non-GAAP)
|
 29
(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
Core Earnings Strength
Pre-Tax Pre-Provision Profit (non-GAAP)
(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 insurance, less non-interest expense excluding any goodwill impairment
charges, credit write downs, fair value adjustments and special
assessments. |
 30
Quarterly Non-Interest Income Trends
(in thousands)
3Q 11
4Q 11
1Q12
2Q12
3Q12
Service charges on deposit accounts
$10,362
$9,724
$8,985
$9,355
$9,554
Trust fees
3,622
3,747
3,602
3,582
3,635
Mortgage and other loan income
2,089
2,705
1,858
1,952
2,028
Brokerage and investment fees
1,188
1,243
1,324
1,331
1,831
Card-based and other nondeposit fees
4,475
4,305
4,265
4,444
4,431
Net (losses) gains on loans held for sale
1,952
(217)
916
6
(184)
Investment securities gains (losses)
3
38
-
-
-
Other income
736
2,818
3,290
1,675
2,415
Total Non-Interest Income (GAAP)
$24,427
$24,363
$24,240
$22,345
$23,710
Investment securities gains (losses)
(3)
$
(38)
$
-
$
-
$
-
$
Net (losses) gains on loans held for sale
(1,952)
217
(916)
(6)
184
Fair value adjustment on BOLI
385
(100)
(205)
118
(31)
Fair value adjustment on swaps
268
(46)
(61)
74
83
Operating Non-interest Income
(Non-GAAP)
$23,125
$24,396
$23,058
$22,531
$23,946 |
 31
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
(Non-GAAP)
$99,605
$102,095
$95,431 |
 32
Quarterly Non-Interest Expense Trends
(in thousands)
3Q 11
4Q 11
1Q12
2Q12
3Q12
Salaries and employee benefits
$30,280
$30,952
$33,298
$32,801
$33,589
Occupancy
6,125
6,326
6,696
6,140
6,129
Professional services *
2,394
2,311
2,023
2,465
6,806
Equipment
2,918
3,326
3,303
2,904
2,937
Data processing services
3,823
3,709
4,048
3,721
4,427
Advertising and public relations
2,179
1,298
1,335
1,708
1,847
Postage and delivery
1,142
1,165
1,099
1,119
1,157
Other loan expenses
3,941
3,497
3,186
3,266
3,121
Losses on other real estate (ORE)
1,210
1,081
(385)
(173)
941
ORE expenses
529
995
450
266
323
Intangible asset amortization
732
688
578
545
513
Other expense
10,138
11,292
11,470
11,577
10,265
Total Non-Interest Expense (GAAP)
$65,411
$66,640
$67,101
$66,339
$72,055
Merger related expenses
-
-
-
-
4,411
Losses (gains) on ORE
1,210
1,081
(385)
(173)
941
Operating Non-Interest Expense
(Non-GAAP)
$64,201
$65,559
$67,486
$66,512
$66,703
* Includes merger related expenses |
 33
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
(Non-GAAP)
$300,204
$293,649
$270,382 |
 34
($ in millions)
Market
% of
Credit Rating
Value
Total
Gov't & Agency
2,634
$
90.2%
AAA
25
0.9%
AA
139
4.8%
A
41
1.4%
BAA1, BAA2 & BAA3
59
2.0%
BA1 & Lower
2
0.1%
Non-rated
19
0.7%
Total
2,919
$
100.0%
•
Over $2.2 billion in unpledged securities
•
No OTTI concerns
•
Over 70% of portfolio are GNMA securities
purchased over the last 2 –
3 years
($ in millions)
Book
Market
TEY*
Duration
Type
Value
Value
(%)
(years)
MBS Agency
971
$
1,019
$
2.73%
1.43
CMO - Agency
340
347
2.29%
1.70
CMO - Non-agency
65
65
3.45%
2.74
Municipals
104
110
6.26%
2.98
Total Available for Sale
1,480
$
1,541
$
2.91%
1.66
MBS Agency
907
$
955
$
3.00%
2.04
CMO - Agency
305
314
1.94%
1.08
Municipals
102
109
6.01%
3.26
Total Held to Maturity
1,314
$
1,378
$
2.99%
1.91
Total Investment Securities
2,794
$
2,919
$
2.95%
1.77
Investment Portfolio at September 30, 2012
* Taxable equivalent yield, except for Municipal yields which are before tax
effect Effective Management of Securities Portfolio Provides
Source of Liquidity |
 35
Maintaining Strong Capital Levels
($ in millions)
9/30/10
12/31/10
3/31/11
6/30/11
9/30/11
12/31/11
3/31/12
6/30/12
9/30/12
Tier 1 capital
$ 886
$ 777
$ 706
$ 727
$ 758
$ 773
$ 795
$ 860
$ 878
Qualifying LLR
92
83
76
74
75
73
74
74
73
Qualifying
capital
securities
7
7
3
3
3
3
-
-
-
Total risk-based capital
$ 985
$ 867
$ 785
$ 805
$ 836
$ 850
$ 869
$ 934
$ 951
Tier 1 capital
$ 886
$ 777
$ 706
$ 727
$ 758
$ 773
$ 795
$ 860
$ 878
Qualifying capital securities
(74)
(74)
(74)
(74)
(74)
(74)
(74)
(74)
(74)
Preferred stock
(277)
(278)
(280)
(282)
(283)
(285)
(287)
(289)
(291)
Tier 1 common equity
$ 535
$ 425
$ 352
$ 371
$ 401
$ 415
$ 435
$ 497
$ 514
Total Capital Ratio
13.80%
13.51%
13.24%
13.77%
14.14%
14.84%
14.97%
15.96%
16.35%
Tier 1 Capital Ratio
12.41%
12.11%
11.90%
12.43%
12.81%
13.51%
13.70%
14.70%
15.09%
Tier 1 Leverage Ratio
8.50%
7.71%
7.39%
7.83%
8.21%
8.45%
8.71%
9.77%
9.66%
Tier 1 Common Ratio *
7.50%
6.62%
5.93%
6.36%
6.77%
7.24%
7.49%
8.50%
8.83%
TCE to TA *
5.34%
4.20%
3.59%
4.05%
4.31%
4.47%
4.68%
7.73%
7.91%
TA -
tangible assets
* Non-GAAP
TCE -
tangible common equity |
 36
Non-GAAP Common Equity Ratios
(1)
Other assets deducted from Tier 1 capital and risk-weighted assets consist of
intangible assets (excluding goodwill) ($ in thousands)
3Q11
4Q11
1Q12
2Q12
3Q12
Total assets
$9,600
$9,463
$9,577
$9,670
$9,725
Goodwill
(318)
(318)
(318)
(318)
(318)
Other intangible assets
(8)
(7)
(7)
(6)
(6)
Tangible assets
$9,274
$9,137
$9,252
$9,346
$9,401
Total shareholders' equity
$1,009
$1,020
$1,045
$1,336
$1,358
Goodwill
(318)
(318)
(318)
(318)
(318)
Other intangible assets
(8)
(7)
(7)
(6)
(6)
Tangible equity
$683
$694
$720
$1,011
$1,034
Preferred stock
(283)
(285)
(287)
(289)
(291)
Tangible common equity
$400
$409
$433
$723
$744
Total shareholders' equity
$1,009
$1,020
$1,045
$1,336
$1,358
Qualifying capital securities
74
74
74
74
74
Goodwill
(318)
(318)
(318)
(318)
(318)
Disallowed tax assets
-
-
-
(236)
(235)
Accumulated other comprehensive income
1
6
2
10
6
Other assets
(1)
(8)
(7)
(7)
(6)
(6)
Total Tier 1 capital (regulatory)
$758
$773
$795
$860
$878
Qualifying capital securities
(74)
(74)
(74)
(74)
(74)
Preferred stock
(283)
(285)
(287)
(289)
(291)
Total Tier 1 common equity (non-GAAP)
$401
$415
$435
$497
$514
Net
risk-weighted
assets
(regulatory)
(1)
$5,913
$5,723
$5,804
$5,852
$5,822
Tangible common equity to tangilbe assets ratio
4.31%
4.47%
4.68%
7.73%
7.91%
Tier 1 common equity ratio (non-GAAP)
6.77%
7.24%
7.49%
8.50%
8.83% |
 $0
$20
$40
$60
$80
$100
$120
$140
$160
$180
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
37
Proactive Credit Management
$0
$50
$100
$150
$200
$250
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
30-89 Day Past Due
Portfolio Balances
Non-Performing Loans
($ in millions)
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
C&I
Owner Occupied
Income Producing
Land Hold, Land Dev. & Const.
Residential Mtg
Consumer
Net Charge-Offs
$0
$2,000
$4,000
$6,000
$8,000
$10,000
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12 |
 $0
$5
$10
$15
$20
$25
$30
$35
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
$0
$20
$40
$60
$80
$100
$120
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
38
Commercial & Industrial Portfolio
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
30-89 Day Past Due
Portfolio Balances
($ in millions)
C&I
Small Business
Non-Performing Loans
Net Charge-Offs |
 39
Commercial Portfolio Size Characteristics
< $5 million
$5 -
$10 million
> $10 million
Total
Total Commercial Portfolio
Total (millions)
1,927
$
529
$
568
$
3,025
$
# of loans
6,903
76
37
7,016
Average loan size
$279,000
$6,961,000
$15,360,000
$431,000
Delinquencies
Total (millions)
7
$
-
$
-
$
7
$
# of loans
19
-
-
19
Average loan size
$346,000
-
$
-
$
$346,000
Nonperforming Loans
Total (millions)
36
$
-
$
-
$
36
$
# of loans
178
-
-
178
Average loan size
$200,000
-
$
-
$
$200,000
Loan size category: |
 $0
$40
$80
$120
$160
$200
$240
$280
$320
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
$0
$20
$40
$60
$80
$100
$120
$140
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
40
Commercial Real Estate Portfolio
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
$2,800
$3,200
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
30-89 Day Past Due
Portfolio Balances
($ in millions)
Owner Occupied
Income Producing
Land Hold, Land Development & Construction Non-Performing Loans
$0
$20
$40
$60
$80
$100
$120
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Net Charge-Offs |
 41
Commercial Real Estate Portfolio
32%
43%
16%
4%
5%
Southeast
Michigan
Greater
Michigan
Ohio
Wisconsin
Other
By Region
By Collateral
22%
23%
15%
13%
7%
3%
2%
2%
1%
11%
Retail
Medical
Warehouse/
Industrial
Office
Multi-Family
Hotel
Mixed Use
Gas Station/ C.Store
Residential
Other (<1%) |
 $0
$20
$40
$60
$80
$100
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
42
Consumer Portfolio
$0
$20
$40
$60
$80
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
30-89 Day Past Due *
Portfolio Balances
Non-Performing Loans *
Net Charge-Offs *
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
($ in millions)
$0
$20
$40
$60
$80
$100
$120
$140
$160
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
Indirect
Other Direct
Home Equity
Residential Mortgage
* Other direct included with Home Equity
|
 43
Consumer Portfolio Profiles
Home Equity
$36,000 avg
loan size
Indirect
(1)
$24,200 avg
loan size
(1) Indirect loans are RV and marine only (no auto)
Consumer Portfolio
Strong refreshed FICO scores
741 Home Equity
741 Indirect
727 Other Direct
45% of home equity is first lien position
Indirect NPLs have been less than
$2.6 million, or 0.33% of total,
throughout the cycle
Other
Direct
$19,700 avg
loan size
Residential Mortgage Portfolio
$164,000 average loan size
719 refreshed FICO score
66% average original LTV
Seasoned portfolio –
52% originated
2004 or earlier
Foreclosures are handled by PHH;
Michigan does not follow a judicial
foreclosure process
Michigan
84%
Ohio
6%
Wisconsin
4%
Other
6% |
 44
Non-Performing Loans
Commercial
Real Estate
$26.4
41.3%
Commercial
$9.2
14.4%
Residential
Mortgage
$15.3
23.9%
($ in millions)
Direct
Consumer
$10.6
16.5%
$63.8 million or 1.18% of portfolio
Indirect
Consumer
$2.4
3.7%
Loans 90+
Accruing
$0.01
Loan loss reserve = $122.1
million
Allowance for loan losses to
NPLs = 191.3% |
 45
Aggressive Non-Performing Asset Management
Quarterly Non-Performing Asset Activity
*
* 2Q12 inflows and 3Q12 outflows include a single $14 million relationship
*
(in millions)
4Q11
1Q12
2Q12
3Q12
Beginning NPAs
$136.9
$102.2
$90.6
$94.0
Commercial:
Additions
13.3
14.0
23.8
4.6
Payments
(10.3)
(5.1)
(12.0)
(21.0)
Returned to accruing status
(0.0)
(3.9)
(0.5)
(1.3)
Charge-Offs/ OREO writedown
(10.4)
(13.1)
(6.0)
(6.2)
Consumer -
net change
(5.3)
(3.9)
3.4
3.6
Held For Sale -
net change
(17.8)
0.9
(2.4)
15.8
OREO -
net change
(4.2)
(0.6)
(3.0)
(3.1)
Ending NPAs
$102.2
$90.6
$94.0
$86.2 |
 46
Peer Groups
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
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
Regional Peers
Selected Peers |
 www.citizensbanking.com
|