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    Stock Alert for Citizens Republic Bancorp Inc. (CRBC)

    Citizens Republic Bancorp Inc. (CRBC) is a diversified banking and financial services company that is registered as a bank holding company. CRBC provides a range of banking and financial services to individuals and businesses through its subsidiaries Citizens Bank and F&M Bank, Iowa. The Company operates in three divisions: Specialty Commercial, Regional Banking and Wealth Management. These services include deposit products, such as checking, savings and money market accounts, and loan products, such as business, personal, residential and commercial mortgage loans, and other consumer-oriented financial services, such as individual retirement account (IRA) accounts and safe deposit and night depository facilities. Automated Teller Machines (ATMs), which provide around the clock banking services to customers, are installed in many locations in the corporation’s service areas. As of December 31, 2008, the Company operated 233 offices and 266 ATM locations.

    Citizens Republic Bancorp was founded in 1871 and is based in Flint, Michigan.

    Share Statistics (Jul-23-10) FY

    2007

    FY

    2008

    %

    Chg

    Q4 2008 Q4 2009 %

    Chg

    Symbol CRBC Revenue, $Mn 930.5M 802.7M 13.7% 183.4M 151.2M 17.6%
    Current price $0.93 Gross marg. n/a n/a n/a n/a n/a n/a
    52wk Range: $1.50-0.48 Oper. Margin 41.7% 9.5% 77.2% n/a n/a n/a
    Avg Vol (3m): 5,570,020 Net margin 26.4% -112.7% 526.9% n/a -42.8% n/a
    Market Cap. 366.90M
    Shares Outst. 394.4M EPS, $ 1.33 -4.30 423.3% -1.56 -0.18 88.5%

    Source: Reuters.com, SEC Filings.

    Financial Summary

    CRBC announced a net loss from continuing operations of $44.5 million for the three months ended June 30, 2010, compared with net losses of $76.0 million for the first quarter of 2010 and $336.9 million for the second quarter of 2009. The second quarter of 2009 included a non-cash and non-tax-deductible goodwill impairment charge of $256.3 million. After incorporating the $5.2 million net income from discontinued operations and the $5.4 million accrued but unpaid dividend to the preferred shareholder, CRBC reported a net loss attributable to common shareholders of $44.7 million for the three months ended June 30, 2010, compared with $90.3 million for the first quarter of 2010 and $352.6 million for the second quarter of 2009. Diluted net loss from continued operations per share was $0.12, compared with $0.21 for the first quarter of 2010 and $2.73 for the second quarter of 2009. The diluted net loss per share was based on average shares outstanding of 393.8 million for the quarters ended June 30, 2010, and March 31, 2010, and 125.5 million for the quarter ended June 30, 2009. For the six months ended June 30, 2010, CRBC recorded a net loss from continuing operations of $120.5 million compared with a net loss from continuing operations of $382.5 million for the same period of 2009.

    Discontinued Operations

    As a result of the sale of CRBC’s wholly owned subsidiary, F&M Bank-Iowa during the second quarter of 2010, the financial condition and operating results for this subsidiary have been segregated from the financial condition and operating results of CRBC’s continuing operations throughout this release and, as such, are presented as a discontinued operation. While all prior periods have been revised retrospectively to align with this treatment, these changes do not affect CRBC reported consolidated financial condition or net income for any of the prior periods.

    Key Points in the Quarter:

    • • Net interest margin for the second quarter of 2010 was 3.35% compared with 3.14% for the first quarter of 2010.
    • • The pre-tax pre-provision profit for the second quarter of 2010 totaled $34.5 million, compared with $34.7 million for the first quarter of 2010.
    • • CRBC held short-term (liquid) assets at June 30, 2010, of $621.1 million, a decrease of $139.7 million or 18.4% from March 31, 2010. CRBC’s parent company cash totaled $158.6 million at June 30, 2010, compared with $109.8 million at March 31, 2010.
    • • All of CRBC’s regulatory capital ratios continue to exceed the “well-capitalized” designation. As of June 30, 2010, CRBC’s estimated capital ratios were as follows:

    o Tier 1 capital – 12.74%

    o Total capital – 14.12%

    o Tier 1 leverage – 8.68%

    o Tier 1 common equity – 8.07%

    o Tangible equity to tangible assets – 8.45%

    o Tangible common equity to tangible assets – 5.83%

    • • Total delinquent loans at June 30, 2010, were $111.7 million, or 1.57% of total loans, a decrease of $31.4 million or 21.9% from March 31, 2010. Total watchlist loans decreased for the third consecutive quarter to $1.3 billion at June 30, 2010, an improvement of $34.7 million or 2.5% over March 31, 2010. Total nonperforming assets at June 30, 2010, were $472.6 million, a decrease of $83.6 million or 15.0% from March 31, 2010.
    • • During the second quarter of 2010, CRBC completed a bulk sale of nonperforming residential mortgage loans held for sale and residential other real estate (“ORE”) with a book value of $36.6 million. As a result, CRBC recorded a $5.8 million loss from additional fair-value adjustments on these assets during the second quarter of 2010.
    • • The allowance for loan losses at June 30, 2010, totaled $321.8 million or 4.51% of portfolio loans, compared with $322.4 million or 4.33% at March 31, 2010. The provision for loan losses for the second quarter of 2010 was $70.6 million, compared with $101.4 million for the first quarter of 2010. Net charge-offs for the second quarter of 2010 totaled $71.2 million, compared with $117.9 million for the first quarter of 2010.
    • • CRBC recorded an $8.1 million net gain on the sale of $249.9 million in available for sale investment securities designated during the second quarter of 2010.
    • • On July 19, 2010, CRBC received a non-compliance notice from The Nasdaq Stock Market because the minimum bid price of the Company’s common stock has been below $1.00 per share for 30 consecutive business days.

    Balance Sheet

    Total assets at June 30, 2010, were $10.8 billion, a decrease of $818.0 million or 7.0% from March 31, 2010, and a decrease of $1.5 billion or 11.8% from June 30, 2009. The declines were primarily due to the sale of F&M during the second quarter of 2010 and reductions in total portfolio loans due to lower customer demand.

    Money market investments at June 30, 2010, totaled $621.1 million, a decrease of $139.7 million or 18.4% from March 31, 2010, and an increase of $76.5 million or 14.0% over June 30, 2009. The decrease from March 31, 2010, was primarily the result of using the funds to payoff maturing wholesale funding. The increase over June 30, 2009, was primarily the result of holding excess short-term funds with the Federal Reserve as a result of continued strong deposits, coupled with a lower demand for loans from creditworthy clients.

    Investment securities at June 30, 2010, totaled $2.2 billion, essentially unchanged from March 31, 2010, and an increase of $42.1 million or 2.0% over June 30, 2009. As part of its capital strategy, CRBC sold $249.9 million of adjustable rate mortgage-backed securities and private label collateralized mortgage obligation (“CMO”) bonds, using the proceeds to purchase GNMA securities. The sales resulted in an $8.1 million net gain and strengthened CRBC’s capital position by improving the risk profile of the investment portfolio.

    The decreases in total commercial loans were primarily the result of lower customer demand from creditworthy clients, pay-downs as a result of normal client activity, and charge-offs. Also contributing to the decrease from June 30, 2009, was the transfer of nonperforming land hold, land development and construction loans to loans held for sale during the fourth quarter of 2009. The declines in residential mortgage loans were primarily the result of transferring nonperforming residential mortgage loans to loans held for sale at the end of the first quarter of 2010, pay-downs from normal client activity, and charge-offs. More than 90% of new mortgage originations are sold into the secondary market, resulting in minimal new loans being retained in the residential mortgage portfolio. The decreases in direct consumer loans, which are primarily home equity loans, were due to lower consumer demand. Indirect consumer loans, which are primarily marine and recreational vehicle loans, fluctuate throughout the year due to seasonal demand. After taking this fluctuation into account, the indirect consumer loan portfolio is essentially unchanged from March 31, 2010, and June 30, 2009.

    Loans held for sale at June 30, 2010, were $57.2 million, a decrease of $50.5 million or 46.9% from March 31, 2010, and a decrease of $19.8 million or 25.7% from June 30, 2009. The decrease from March 31, 2010, was primarily the result of the aforementioned bulk loan sale of nonperforming residential mortgage loans, which were transferred to loans held for sale at the end of the first quarter of 2010 in anticipation of this sale. The variance from both prior periods also reflects declines due to customer pay-downs, workout activities, write-downs to reflect further fair-value declines for the underlying collateral, and transfers to ORE.

    Total deposits at June 30, 2010, were $8.2 billion, a decrease of $258.9 million or 3.1% from March 31, 2010 and a decrease of $304.2 million or 3.6% from June 30, 2009. Core deposits, which exclude all time deposits, totaled $4.8 billion at June 30, 2010, essentially unchanged from March 31, 2010, and an increase of $109.8 million or 2.3% over June 30, 2009. The increase over June 30, 2009, was primarily the result of clients holding higher balances in transaction accounts and retail customers shifting balances from time deposits to core deposits throughout 2009. Time deposits totaled $3.4 billion at June 30, 2010, a decrease of $225.0 million or 6.2% from March 31, 2010, and a decrease of $414.0 million or 10.8% from June 30, 2009. The decrease from March 31, 2010, was primarily the result of a planned reduction in brokered time deposits. The decrease from June 30, 2009, was primarily the result of the shift in funding mix.

    Other interest-bearing liabilities, which include federal funds purchased and securities sold under agreements to repurchase, other short-term borrowings, and long-term debt, totaled $1.2 billion at June 30, 2010, a decrease of $128.9 million or 9.4% from March 31, 2010, and a decrease of $743.8 million or 37.5% from June 30, 2009. The decreases were primarily the result of a scheduled reduction in securitized funding. Additionally, the decrease from June 30, 2009, incorporated the result of exchanging $209.1 million in long-term debt for CRBC’s common stock in the third quarter of 2009.

    Capital Adequacy and Liquidity

    Shareholders’ equity at June 30, 2010, totaled $1.2 billion, a decrease of $26.7 million or 2.1% from March 31, 2010, and essentially unchanged from June 30, 2009. The decrease was primarily the result of net losses incurred. The lack of variance from June 30, 2009, was a result of the effect of common equity generated in the third quarter of 2009 through the issuance of common stock for debt offsetting the effect of net losses incurred.

    CRBC continues to maintain a strong capital position, and its regulatory capital ratios are above “well-capitalized” standards, as evidenced by the following key capital ratios.

    Financial Strength (Jul-23-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 0.00 4.71 0.75
    Current Ratio (MRQ) 0.00 8.48 0.91
    Long-Term Debt to Equity(MRQ) 107.50 96.43 100.79 112.91
    Total Debt to Equity (MRQ) 110.16 313.34 267.53 176.21

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among five polled investment analysts. Against the Citizens Republic Bancorp Inc company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 1 0 4 0 0 0
    4 weeks ago 1 0 3 0 0 0
    2 months ago 1 0 3 0 0 0
    3 months ago 1 0 3 0 0 0
    Last year 1 0 4 0 0 0

    The four analysts offering 12-month price targets for CRBC have a median target of 1.00, with a high estimate of 1.60 and a low estimate of 0.80. The median estimate represents a 24.22% increase from the last price of 0.805.

    Source: www.ft.com

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    EARNINGS (per share)
    Quarter Ending Sep-10 4 -0.09 -0.01 -0.17
    Quarter Ending Dec-10 4 -0.08 0.00 -0.15
    Year Ending Dec-10 5 -0.49 -0.31 -0.75 -1.03
    Year Ending Dec-11 4 -0.04 0.21 -0.20 0.10
    LT Growth Rate (%) 2 6.50 8.00 5.00 6.00

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=CRBC.W

    Investment Highlights

    CRBC operates as the bank holding company for Citizens Bank and F&M Bank Iowa, which provide banking and financial services to individuals and businesses in Michigan, Wisconsin, Ohio, Iowa and Indiana.

    The Company operates in four divisions: Regional Banking, Specialty Consumer, Specialty Commercial and Wealth Management.

    The Regional Banking division provides a range of lending, depository and other related financial services to businesses and individual consumers. This division offers direct loans; home equity loans and lines of credit; checking, savings and money market accounts; certificates of deposit; and fixed and variable annuities, as well as private banking services.

    The Specialty Consumer division provides marine and recreational vehicle loans to consumers.

    The Specialty Commercial division provides lending, depository and related financial services to commercial real estate developers, owners of multi-unit commercial properties, middle-market companies, and local governments and municipalities. It offers commercial mortgages, real estate construction lending, term loans, revolving credit arrangements, inventory and accounts receivable financing, and letters of credit; and noncredit services, including deposit accounts, treasury management, corporate cash management, international banking services, advice and assistance in the placement of securities and financial planning.

    The Wealth Management division offers asset management, financial planning, estate settlement and administration, and credit and deposit products and services, as well as trust and investment services. This division also offers retail mutual funds and other securities, variable and fixed annuities, personal disability and life insurance products, and brokerage services.

    Source: http://www.citizensbanking.com/

    Technical Analysis

    Source: http://stockcharts.com

    CRBC is trading near its upper Bollinger Band. This suggests that the stock price is high relative to its recent price action.

    CRBC’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below zero, which suggests that the underlying moving averages are bearish.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Jul23-2010 symbol Share, $ $ Mn 2010 2011 2010 2011
    Chemical Financial Corp. CHFC 21.24 507.73M 53.05 n/a 2.67 n/a
    Wintrust Financial Corp. WTFC 32.02 995.04M 12.74 n/a 1.66 n/a
    MBT Financial Corp. MBTF 1.70 27.56M n/a n/a 0.55 n/a
    Regional Bank Median 510.11M 32.89 n/a 1.62 n/a
    Citizens Republic Bancorp Inc. CRBC 0.93 366.90M n/a n/a 0.75 n/a

    Source: Thomson Financial

    Insider Trading Activity

    NET SHARES PURCHASE ACTIVITY

    Inside Purchases – Last 6 Months

    Shares Transaction
    Purchases 64,042 5
    Sales n/a 0
    Net Shares Purchased (Sold) 64,042 5
    Total Insider Shares Held 2.69M n/a
    % Net Shares Purchased (Sold) 2.4% n/a

    Net Institutional Purchases — Prior Qtr to Latest Qtr
    Shares
    Net Shares Purchased (Sold) (56,212,400)
    % Change in Institutional Shares Held (30.56%)

    Source: Yahoo Finance

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