DBRS Places Citizens Republic Bancorp – Senior at BBB (low); Ratings Under Review Negative

DBRS has today placed the long - and short-term ratings of Citizens Republic Bancorp (Citizens or the Company) and its related entities, including its Issuer & Senior Debt rating of BBB (low), Under Review with Negative Implications.

The review reflects DBRS’s concerns that Citizens continues to struggle with steep asset quality erosion, in light of pressured earnings capacity, and DBRS’s expectation of sustained elevated credit costs and expenses going forward. Heightened credit deterioration within the Company’s commercial real estate portfolio and more recently within its C&I and residential mortgage lending, have placed considerable pressure on Citizen’s capital. It is DBRS’s perception that material amounts of potential losses remain embedded in the Company’s loan portfolios, especially given increasing unemployment and declining real estate valuations. Furthermore, the extremely difficult operating environment, including the weakened economy within Citizen’s footprint, is likely to continue to constrain revenue growth and pressure expenses, limiting improvement in core earnings (income before provisions and taxes).

DBRS’s review will focus on Citizens’ asset quality, franchise strength and prospective financial performance over the near term. In addition, the review will also consider the Company’s capital adequacy along with the potential benefits related to Citizen’s planned capital actions, which are anticipated to occur during Q3 2009.

DBRS notes that a one or two notch downgrade could result if the review suggests performance and metrics are more consistent with a lower rating. DBRS expects to conclude the review within 90 days.

The rating actions follow the Company’s announcement of its $352.6 million loss to common shareholders. The loss reflected a significant $266.4 million goodwill impairment charge and a high $99.9 million provision for loan loss reserves.

Citizens is a diversified financial services company providing a wide range of commercial, consumer, mortgage banking, trust and financial planning services to clients throughout the states of Michigan, Ohio, Wisconsin, Indiana and Iowa. The Company reported $12.3 billion in consolidated assets as of June 30, 2009.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are Rating Banks and Bank Holding Companies Operating in the United States and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments, which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.