Citizens Stung by Nonperformers

Nonperforming assets continued to rise at an already stressed Citizens Republic Bancorp Inc. of Flint, Mich., in the second quarter, as the Michigan economy deteriorated further.

Nonperformers climbed 10% from the first quarter and 112% from a year earlier, to $604.7 million, contributing to a fifth consecutive loss for the $12.3 billion-asset company.

The second-quarter loss widened by 73% from a year earlier, to $347.4 million, or $2.81 a share.

Though a $266.5 million goodwill impairment charge accounted for most of the loss, Citizens Republic also had a $100 million provision for loan losses. The provision was up 56% from the first quarter and 34% from a year earlier.

Chargeoffs totaled $49.2 million, up 34% from the first quarter, but down 28% from a year earlier.

The company built its loan-loss reserve to 3.96% of total loans, from 3.23% at March 31.

It highlighted a drop in loans delinquent 30 to 89 days. At June 30, the delinquencies were $172 million, down 30% from the first quarter and 10% from a year earlier.

However, its watch list — loans that are still accruing but have shown weakness — grew. At June 30 the list totaled $1.5 billion, up 13% from the first quarter and 47% from a year earlier.

Nonperforming assets made up 7.13% of total loans plus other repossessed assets acquired.

Capital ratios at its Citizens Republic Bank remain well above regulatory minimums, but the company's tangible common equity ratio — a metric that investors watch closely — thinned to 5.09%.

To boost that ratio, the company announced last month that it aims to convert up to $125 million in subordinated debt into common equity. It also disclosed then that it has applied for $290 million through the Capital Assistance Program, created in February.

Of that, as much as $100 million would be used to redeem a third of the preferred shares Citizens Republic sold to the Treasury last year. CAP's main advantage is that preferred shares issued to the government are convertible to common ones.

For reprint and licensing requests for this article, click here.
Community banking Michigan
MORE FROM AMERICAN BANKER