EX-99.1 2 d470763dex991.htm PRESENTATION Presentation
Investor Presentation
Fourth 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
58
largest
bank
holding
company in the U.S. ranked by
assets
$9.6 billion assets and $7.2
billion deposits
Presence in 3 Upper
Midwest states with 219
branches and 248 ATMs
Increased market share in 49%
of our counties since 2008
Grew number of new clients by
10%
85% of revenue is Michigan
based
Pending merger with FirstMerit,
expect to close 2Q13
Company Overview
219 Branches / 248 ATMs
th


5
How We Deliver Our Service
Core Banking
87% 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
9% 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


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
$31.8
$0
$10
$20
$30
$40
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
Pre-tax Pre-provision Profit*
Revenue Focus
Problem Asset Resolution Focus
Strengthened franchise
value
Eliminated uncertainty
around credit
0%
1%
2%
3%
4%
5%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q112
2Q12
3Q12
4Q12
NPAs / Assets %
CRBC
Peer Median**
Regional Peer Median**
(in millions)
*
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


Strategy from 2009 –
2010
1.
Preserved capital by managing assets
2.
Grew and maintained reserve levels in recognition of
portfolio risk
11


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
Dec. 31,
2009
Dec. 31,
2010
Dec. 31,
2011
Dec. 31,
2012*
Leverage ratio
9.21%
7.71%
8.45%
9.95%
Tier 1 capital ratio
12.52
12.11
13.51
15.67
Total capital ratio
13.93
13.51
14.84
16.93
Tier 1 common
equity (non-GAAP)
8.47
6.62
7.24
9.24
* Estimate


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
Sep 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
$5,259
$4,000
$6,000
$8,000
$10,000
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
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%
3.50%
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
4Q12
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
12/31/12
Single Service CD Clients
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
4Q12
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
Income (Loss) before Tax*


19
4Q12 Highlights
Reported consistent quarterly profit from banking
operations
Consistent net interest margin at 3.50%
Fee income from core banking services remained solid
Maintained control over operating expenses
Loan growth in focused areas of expertise
7% growth in C&I portfolio since last year
11% growth in Indirect portfolio since last year
Strong origination and pipeline activity in C&I and Indirect
Continued strong credit metrics and core deposit
funding base have created a lower risk profile balance
sheet


Solid Core Earnings
20
2.90%
3.31%
3.58%
3.56%
2.00%
2.20%
2.40%
2.60%
2.80%
3.00%
3.20%
3.40%
3.60%
3.80%
2009
2010
2011
2012
Net Interest Margin (FTE)


Maintained Expense Control
21
70.2%
76.8%
79.2%
70.9%
68.4%
70.4%
64.2%
68.2%
67.1%
63.9%
59.9%
61.4%
65.2%
66.0%
65.2%
66.7%
50%
55%
60%
65%
70%
75%
80%
85%
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
Quarterly Efficiency Ratio
74.21%
67.73%
63.05%
65.75%
50%
55%
60%
65%
70%
75%
80%
2009
2010
2011
2012
Annual Efficiency Ratio


Organically Growing Strong Capital Position
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
4Q12
Total Capital
Tier 1 Capital
Tier 1 Common (non-GAAP)
22
Accelerated
resolution of
over $920
million of
problem
assets


23
Positioned for Growth
Successfully managed through credit cycle with a
strategic focus on revenue generation and problem
asset resolutions
Strategically focused into 2013 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
Nov. 2012
Nov. 2002
$000s
%
$000s
%
Trade, Transportation, and Utilities
663.5
16.5%
763.3
16.8%
Government
630.3
15.6%
717.9
15.8%
Professional Services
578.1
14.3%
606.7
13.4%
Health Care
554.9
13.8%
477.8
10.5%
Other Manufacturing
391.4
9.7%
479.0
10.6%
Leisure and Hospitality
366.3
9.1%
391.1
8.6%
Motor Vehicle
211.1
5.2%
362.0
8.0%
Financial Activities
198.0
4.9%
213.8
4.7%
Other Services
168.7
4.2%
179.2
3.9%
Construction
124.2
3.1%
201.7
4.4%
Education Services
82.8
2.1%
68.2
1.5%
Information
52.5
1.3%
69.1
1.5%
Mining and Logging
7.3
0.2%
8.8
0.2%
Total Nonfarm
4,029.1
4,538.6
Total Manufacturing
602.5
15.0%
841.0
18.5%
in thousands


27
Continued Stabilization and Diversification
in Michigan’s Economy
Source: U.S. Bureau of Labor Statistics and Freddie Mac
Unemployment Trends


28
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)
(in millions)
1Q12
2Q12
3Q12
4Q12
Income(loss) from continuing operations
$24.9
$303.2
$21.0
$23.2
Income tax (benefit) provision
-
(276.8)
1.3
2.5
Provision for loan losses
8.4
5.3
5.2
4.3
Investment securities (gains) losses
-
-
-
-
Net losses (gains) on LHFS
(0.9)
(0.0)
0.2
1.7
(Gains) losses on ORE
(0.4)
(0.2)
0.9
(0.6)
Merger related expenses
-
-
4.4
0.6
Fair-value adjustment on BOLI
(0.2)
0.1
(0.0)
0.0
Fair-value adjustment on swaps
(0.1)
0.1
0.1
(0.1)
Pre-Tax Pre-Provision Profit
(1)
$31.7
$31.7
$33.0
$31.8
Last 12 Months
$128.2


29
(in millions)
2009
2010
2011
2012
Income (loss) from continuing operations
($505.7)
($289.1)
$6.7
$372.3
Income tax (benefit) provision
(29.6)
   
12.9
     
(20.2)
   
(273.0)
 
Provision for loan losses
323.8
   
392.9
   
138.8
   
23.2
     
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)
     
1.0
       
Losses (gains) on ORE
23.3
     
13.4
     
12.8
     
(0.2)
     
Merger related expenses
-
      
-
      
-
      
5.0
       
Fair-value adjustment on BOLI
(0.1)
     
(0.1)
     
0.2
       
(0.1)
     
Fair-value adjustment on swaps
0.6
       
0.8
       
0.4
       
0.0
       
Pre-Tax Pre-Provision Profit
(1)
$109.9
$137.5
$138.2
$128.2
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)
4Q 11
1Q12
2Q12
3Q12
4Q12
Service charges on deposit accounts
$9,724
$8,985
$9,355
$9,554
$9,414
Trust fees
3,747
     
3,602
     
3,582
     
3,635
     
3,782
     
Mortgage and other loan income
2,705
     
1,858
     
1,952
     
2,028
     
2,265
     
Brokerage and investment fees
1,243
     
1,324
     
1,331
     
1,831
     
1,569
     
Card-based and other nondeposit fees
4,305
     
4,265
     
4,444
     
4,431
     
4,367
     
Net (losses) gains on loans held for sale
(217)
       
916
        
6
             
(184)
       
(1,723)
    
Investment securities gains (losses)
38
           
-
         
-
         
-
         
-
         
Other income
2,818
     
3,290
     
1,675
     
2,415
     
2,350
     
Total Non-Interest Income (GAAP)
$24,363
$24,240
$22,345
$23,710
$22,024
Investment securities gains (losses)
(38)
$       
-
$       
-
$       
-
$       
-
$       
Net (losses) gains on loans held for sale
217
        
(916)
       
(6)
            
184
        
1,723
     
Fair value adjustment on BOLI
(100)
       
(205)
       
118
        
(31)
         
47
           
Fair value adjustment on swaps
(46)
         
(61)
         
74
           
83
           
(85)
         
Operating Non-interest Income        
(Non-GAAP)
$24,396
$23,058
$22,531
$23,946
$23,709


31
Annual Non-Interest Income Trends
(in thousands)
2009
2010
2011
2012
Service charges on deposit accounts
$42,116
$40,336
$39,268
$37,308
Trust fees
14,784
   
15,603
     
15,103
     
14,601
    
Mortgage and other loan income
12,393
   
10,486
     
9,620
       
8,104
      
Brokerage and investment fees
5,194
     
4,579
       
5,072
       
6,055
      
Card-based and other nondeposit fees
6,283
     
7,057
       
17,167
     
17,507
    
Bankcard fees
7,714
     
8,859
       
Net (losses) gains on loans held for sale
(20,086)
  
(20,617)
    
1,808
       
(984)
        
Net loss on debt extinguishment
(15,929)
  
-
            
-
            
-
          
Investment securities gains (losses)
5
             
13,896
     
(1,336)
      
-
          
Other income
10,659
   
14,460
     
8,555
       
9,729
      
Total Non-Interest Income (GAAP)
$63,133
$94,659
$95,257
$92,320
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)
      
984
         
Fair value adjustment on BOLI
(144)
       
(67)
            
233
           
(71)
          
Fair value adjustment on swaps
606
        
782
           
413
           
11
           
Operating Non-interest Income   
(Non-GAAP)
$99,605
$102,095
$95,431
$93,244


32
Quarterly Non-Interest Expense Trends
(in thousands)
4Q 11
1Q12
2Q12
3Q12
4Q12
Salaries and employee benefits
$30,952
$33,298
$32,801
$33,589
$33,163
Occupancy
6,326
     
6,696
     
6,140
     
6,129
     
6,031
     
Professional services *
2,311
     
2,023
     
2,465
     
6,806
     
2,478
     
Equipment
3,326
     
3,303
     
2,904
     
2,937
     
2,858
     
Data processing services
3,709
     
4,048
     
3,721
     
4,427
     
4,521
     
Advertising and public relations
1,298
     
1,335
     
1,708
     
1,847
     
1,014
     
Postage and delivery
1,165
     
1,099
     
1,119
     
1,157
     
1,081
     
Other loan expenses
3,497
     
3,186
     
3,266
     
3,121
     
3,650
     
Losses on other real estate (ORE)
1,081
     
(385)
       
(173)
       
941
        
(596)
       
ORE expenses
995
        
450
        
266
        
323
        
220
        
Intangible asset amortization
688
        
578
        
545
        
513
        
484
        
Other expense
11,292
   
11,470
   
11,577
   
10,265
   
10,224
   
Total Non-Interest Expense (GAAP)
$66,640
$67,101
$66,339
$72,055
$65,128
Merger related expenses
-
         
-
         
-
         
4,411
     
597
        
Losses (gains) on ORE
1,081
     
(385)
       
(173)
       
941
        
(596)
       
Operating Non-Interest Expense
(Non-GAAP)
$65,559
$67,486
$66,512
$66,703
$65,127
* Includes merger related expenses


33
Annual Non-Interest Expense Trends
(in thousands)
2009
2010
2011
2012
Salaries and employee benefits
$135,389
$126,384
$123,514
$132,850
Occupancy
26,723
     
26,963
     
26,059
     
24,997
     
Professional services
11,877
     
10,550
     
9,331
       
13,772
     
Equipment
11,714
     
12,482
     
12,136
     
12,001
     
Data processing services
17,692
     
18,734
     
16,131
     
16,717
     
Advertising and public relations
7,113
       
6,530
       
5,848
       
5,904
       
Postage and delivery
5,525
       
4,571
       
4,543
       
4,456
       
Other loan expenses
24,553
     
20,311
     
16,007
     
13,224
     
Losses on other real estate (ORE)
23,312
     
13,438
     
12,768
     
(214)
         
ORE expenses
4,389
       
4,970
       
4,322
       
1,259
       
Intangible asset amortization
7,036
       
3,923
       
3,027
       
2,120
       
Goodwill impairment
256,272
   
-
           
-
           
-
           
Other expense
53,544
     
58,231
     
49,464
     
43,536
     
Total Non-Interest Expense (GAAP)
$585,139
$307,087
$283,150
$270,622
Goodwill impairment
256,272
$
-
$         
-
$         
-
$         
FDIC Special Assessment
5,351
       
-
           
-
           
-
           
Merger-related expenses
-
           
-
           
-
           
5,008
       
Fair-value adjustment on ORE
23,312
     
13,438
     
12,768
     
(214)
         
Operating Non-Interest Expense
(Non-GAAP)
$300,204
$293,649
$270,382
$265,828


34
($ in millions)
Market
% of
Credit Rating
Value
Total
Gov't & Agency
2,711
$   
91.0%
AAA
15
         
0.5%
AA
137
       
4.6%
A
34
         
1.2%
BAA1, BAA2 & BAA3
51
         
1.7%
BA1 & Lower
14
         
0.5%
Non-rated
18
         
0.6%
Total
2,980
$   
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
893
$     
933
$     
2.61%
1.46
     
CMO - Agency
594
      
601
      
1.82%
3.54
     
CMO - Non-agency
60
        
61
        
3.43%
2.52
     
Municipals
97
        
103
      
6.21%
2.50
     
Total Available for Sale
1,644
$  
1,698
$  
2.57%
2.31
     
MBS Agency
844
$     
883
$     
2.99%
2.18
     
CMO - Agency
283
      
293
      
1.96%
1.22
     
Municipals
99
        
106
      
6.00%
3.54
     
Total Held to Maturity
1,226
$  
1,282
$  
2.99%
2.07
     
Total Investment Securities
2,870
$  
2,980
$  
2.75%
2.21
     
Investment Portfolio at December 31, 2012
* Taxable equivalent yield, except for Municipal yields which are before tax effect
Effective Management of Securities Portfolio Provides
Source of Liquidity


35
($ in millions)
12/31/09
12/31/10
3/31/11
6/30/11
9/30/11
12/31/11
3/31/12
6/30/12
9/30/12
12/31/12**
Tier 1 capital
$    1,067
$       777
$    706
$     727
$     758
$      773
$     795
$      860
$      878
$        892
Qualifying LLR
           109
            83
          76
          74
          75
           73
          74
           74
           73
             72
Qualifying capital securities
             10
              7
            3
             3
             3
              3
            -  
             -  
             -  
               -  
  Total risk-based capital
$    1,186
$       867
$    785
$     805
$     836
$      850
$     869
$      934
$      951
$        964
Tier 1 capital
$    1,067
$       777
$    706
$     727
$     758
$      773
$     795
$      860
$      878
$        892
Qualifying capital securities
           (74)
           (74)
        (74)
         (74)
         (74)
          (74)
         (74)
          (74)
          (74)
            (74)
Preferred stock
         (272)
        (278)
      (280)
       (282)
       (283)
        (285)
       (287)
        (289)
        (291)
          (292)
   Tier 1 common equity
$       721
$       425
$    352
$     371
$     401
$      415
$     435
$      497
$      514
$        526
Total Capital Ratio
13.93%
13.51%
13.24%
13.77%
14.14%
14.84%
14.97%
15.96%
16.35%
16.93%
Tier 1 Capital Ratio
12.52%
12.11%
11.90%
12.43%
12.81%
13.51%
13.70%
14.70%
15.09%
15.67%
Tier 1 Leverage Ratio
9.21%
7.71%
7.39%
7.83%
8.21%
8.45%
8.71%
9.77%
9.66%
9.95%
Tier 1 Common Ratio *
8.47%
6.62%
5.93%
6.36%
6.77%
7.24%
7.49%
8.50%
8.83%
9.24%
TCE to TA *
6.16%
4.20%
3.59%
4.05%
4.31%
4.47%
4.68%
7.73%
7.91%
8.15%
** Estimate
TA - tangible assets
* Non-GAAP
TCE - tangible common equity
Maintaining Strong Capital Levels


36
Non-GAAP Common Equity Ratios
($ in thousands)
4Q11
1Q12
2Q12
3Q12
4Q12*
Total assets
$9,463
$9,577
$9,670
$9,725
$9,587
   Goodwill
(318)
       
(318)
       
(318)
       
(318)
       
(318)
       
   Other intangible assets
(7)
            
(7)
            
(6)
            
(6)
            
(5)
            
Tangible assets
$9,137
$9,252
$9,346
$9,401
$9,263
Total shareholders' equity
$1,020
$1,045
$1,336
$1,358
$1,371
   Goodwill
(318)
       
(318)
       
(318)
       
(318)
       
(318)
       
   Other intangible assets
(7)
            
(7)
            
(6)
            
(6)
            
(5)
            
Tangible equity
$694
$720
$1,011
$1,034
$1,047
   Preferred stock
(285)
       
(287)
       
(289)
       
(291)
       
(292)
       
Tangible common equity
$409
$433
$723
$744
$755
Total shareholders' equity
$1,020
$1,045
$1,336
$1,358
$1,371
   Qualifying capital securities
74
           
74
           
74
           
74
           
74
           
   Goodwill
(318)
       
(318)
       
(318)
       
(318)
       
(318)
       
   Disallowed tax assets
-
          
-
          
(236)
       
(235)
       
(242)
       
   Accumulated other comprehensive income
6
             
2
             
10
           
6
             
13
           
   Other assets
(7)
            
(7)
            
(6)
            
(6)
            
(5)
            
Total Tier 1 capital (regulatory)
$773
$795
$860
$878
$892
   Qualifying capital securities
(74)
          
(74)
          
(74)
          
(74)
          
(74)
          
   Preferred stock
(285)
       
(287)
       
(289)
       
(291)
       
(292)
       
Total Tier 1 common equity (non-GAAP)
$415
$435
$497
$514
$526
Net risk-weighted assets (regulatory)
$5,723
$5,804
$5,852
$5,822
$5,695
Tangible common equity to tangible assets ratio
4.47%
4.68%
7.73%
7.91%
8.15%
Tier 1 common equity ratio (non-GAAP)
7.24%
7.49%
8.50%
8.83%
9.24%
(1)
Other assets deducted from Tier 1 capital and risk-weighted assets consist of intangible assets (excluding goodwill)
* Estimate
(¹)
(1)


$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
4Q12
37
Proactive Credit Management
$0
$50
$100
$150
$200
$250
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
30-89 Day Past Due
Portfolio Balances
Non-Performing Loans
($ 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
4Q12
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
4Q12


$0
$5
$10
$15
$20
$25
$30
$35
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
$0
$20
$40
$60
$80
$100
$120
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
$0
$10
$20
$30
$40
$50
$60
1Q092Q093Q094Q091Q102Q103Q104Q101Q112Q113Q114Q111Q122Q123Q124Q12
38
Commercial & Industrial Portfolio
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
30-89 Day Past Due
Portfolio Balances
($ in millions)
Non-Performing Loans
Net Charge-Offs


39
Commercial Portfolio Size Characteristics
< $5 million
$5 - $10 million
> $10 million
Total
Total Commercial Portfolio
Total (millions)
1,823
$       
515
$                  
561
$              
2,899
$    
# of loans
6,791
         
74
                      
37
                   
6,902
       
Average loan size
$268,000
$6,954,000
$15,162,000
$420,000
Delinquencies
Total (millions)
4
$              
-
$                   
-
$               
4
$            
# of loans
33
              
-
                     
-
                 
33
            
Average loan size
$125,000
-
$                   
-
$               
$125,000
Nonperforming Loans
Total (millions)
27
$            
-
$                   
-
$               
27
$          
# of loans
162
            
-
                     
-
                 
162
          
Average loan size
$164,000
-
$                   
-
$               
$164,000
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
4Q12
$0
$20
$40
$60
$80
$100
$120
$140
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
40
Commercial Real Estate Portfolio
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
$2,800
$3,200
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
30-89 Day Past Due
Portfolio Balances
($ in millions)
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
4Q12
Net Charge-Offs


41
Commercial Real Estate Portfolio
35%
42%
14%
4%
5%
Southeast
Michigan
Greater
Michigan
Ohio
Wisconsin
Other
22%
23%
16%
13%
5%
3%
2%
2%
1%
11%
Retail
Medical
Warehouse/
Industrial
Office
Multi-Family
Hotel
Mixed Use
Gas Station/ C.Store
Residential
Other (<1%)
By Collateral
By Region


$0
$20
$40
$60
$80
$100
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
42
Consumer Portfolio
$0
$20
$40
$60
$80
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
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
$3,500
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
($ 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
4Q12
* Other direct included with Home Equity


43
Consumer Portfolio Profiles
Home Equity
$35,900 avg
loan size
Indirect
(1)
$24,300 avg
loan size
(1)  Indirect loans are RV and marine only (no auto)
Consumer Portfolio
Strong refreshed FICO scores
741 Home Equity
742 Indirect
728 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
$19,500 avg
loan size
Residential Mortgage Portfolio
$162,000 average loan size
717 refreshed FICO score
67% 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
$20.5
34.7%
Commercial
$6.2
10.4%
Residential
Mortgage
$17.5
29.7%
($ in millions)
Direct
Consumer
$12.7
21.6%
$59.0 million or 1.12% of portfolio
Indirect
Consumer
$2.1
3.5%
Loans 90+
Accruing
$0.01
Loan loss reserve = $110.4
million
Allowance for loan losses to
NPLs = 187.2%


45
(in millions)
1Q12
2Q12
3Q12
4Q12
Beginning NPAs
$102.2
$90.6
$94.0
$86.2
Commercial:
   Additions
14.0
    
23.8
    
4.6
      
4.8
      
   Payments
(5.1)
     
(12.0)
   
(21.0)
   
(7.9)
     
   Returned to accruing status
(3.9)
     
(0.5)
     
(1.3)
     
-
      
   Charge-Offs/ OREO writedown
(13.1)
   
(6.0)
     
(6.2)
     
(5.8)
     
Consumer - net change
(3.9)
     
3.4
      
3.6
      
4.1
      
Held For Sale - net change
0.9
      
(2.4)
     
15.8
    
(13.5)
   
OREO - net change
(0.6)
     
(3.0)
     
(3.1)
     
0.1
      
Ending NPAs
$90.6
$94.0
$86.2
$68.0
Aggressive Non-Performing Asset Management
Quarterly Non-Performing Asset Activity
*
* 2Q12 inflows and 3Q12 outflows include a single $14 million relationship
*


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