DBRS Downgrades Citizens Republic Bancorp Sr Debt to B (high); Ratings Under Review Negative

DBRS has today downgraded the ratings of Citizens Republic Bancorp, Inc. (Citizens or the Company), and its related entities, including its Issuer & Senior debt rating to B (high) from BBB (low). At the same time, DBRS downgraded Citizens’ banking subsidiaries’ Deposits & Senior debt ratings to BB from BBB. All ratings remain Under Review with Negative implications.

The rating actions reflect DBRS’s concerns that Citizens continues to struggle with steep asset quality erosion, in light of a deteriorating capital position and pressured earnings capacity. 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 the Company. It is DBRS’s perception that material amounts of potential losses remain embedded in Citizen’s loan portfolios, especially given increasing unemployment and declining real estate valuations, within its footprint.

DBRS comments that the ability of the Company’s capital to absorb future expected credit losses is severely constrained. DBRS recognizes the capital benefits of Citizens exchange offering for its subordinated and trust preferred securities. The ability of the Company to improve its loss absorption capacity for the intermediate term, however, is principally reliant upon its ability to raise capital through other sources including the U.S. Treasury Capital Assistance Program (CAP), the sale of assets or additional issuances of common stock.

DBRS notes that the extremely difficult operating environment, including the weakened economy within Citizen’s footprint, is likely to continue to constrain revenue growth and pressure expenses while limiting improvement in core earnings.

DBRS will continue to focus on Citizens’ ability to raise additional capital to offset anticipated substantial intermediate term credit costs and expenses related to its severe asset quality erosion. DBRS notes that a multiple-notch downgrade may result if Citizen’s fails to raise additional capital over the near term.

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.