After three straight years of losses, Citizens Republic Bancorp Inc. in Flint, Mich., reported its second-straight profitable quarter for the three months that ended Sept. 30, thanks largely to improved asset quality and a double-digit increase in commercial and industrial loans.

The  $9.6 billion-asset company said after the markets closed Thursday that it earned $27 million, or 68 cents per share, in the quarter, compared to a loss of $67.9 million, or $1.72 per share in the same quarter last year.

Excluding a $13 million tax benefit that added 32 cents per share, Citizens earned 36 cents per share, double what analysts at Keefe, Bruyette & Woods Inc. had forecast.
 
This marks the second straight quarter that Citizens Republic has surprised analysts. Last quarter it earned 46 cents per share when analysts predicted it would lose 23 cents.

In a news release, the company said that its nonperforming assets fell by 66% year over year, to $149 million, and that chargeoffs declined 62%, to $33.4 million. With asset quality improving, Citizens was able to reduce its loan-loss provision by 80%, to $17.5 million.

Though total loans have declined in the last year, Citizens noted that it grew commercial loans by 13% during the quarter, to $1.5 billion, which led to its first quarterly increase in portfolio loans in three years.

In a research note Friday, Keefe, Bruyette & Woods analyst John Barber said that Citizens' results  "exceeded expectations nearly across the board.

"We believe the company's second consecutive quarter of profitability coupled with improving core underlying trends should help [Citizens] build the case that it has returned to sustainable profitability," Barber wrote. Investors, too, appeared pleased with the results. In heavy trading, Citizens' shares climbed 4.2% Friday, to close at $9.14.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.