Looking Beyond Citizens Republic's Earnings

After 12 consecutive quarters of losses, Citizens Republic Bancorp (NAS: CRBC) finally pulled itself out of the red last quarter. The regional bank has been showing improvements in its credit quality and other important areas. Therefore, I decided to take a closer look and find out whether it deserves a place in my portfolio.

Credit quality is improving. Citizens' nonperforming assets decreased for the seventh consecutive quarter, declining by 19.1% from the first quarter. Provision for loan losses and net chargeoffs reduced significantly by 80% and almost 78%, respectively. However, there was a slight decline in net interest income owing to lower average earning assets.

But, as savvy investors, we need to look at earnings and beyond to decide whether a stock is worth investing in. Let's narrow things down by comparing the company with its closest peers along a few important parameters:

  • Price/earnings (P/E) ratio: This ratio helps us look at a company's earnings relative to its price and determine how cheap or expensive the stock is.

  • The price-to-book (P/B) ratio: Widely linked with value investing and a relevant metric for banks and other asset-heavy companies, P/B gives us a clear idea about a stock's value and indicates value opportunities.

  • The tier 1 capital ratio: This metric, which divides the core equity capital by the bank's total risk-weighted assets, is a crucial ratio for measuring a bank's capital adequacy and its ability to stay afloat during bad times. It compares equity and reserves with total risk-weighted assets.

  • The dividend yield: A stream of dividends can act like a cushion during market downturns. This metric shows how much a company is paying out relative to its price.

Take a look at the table below to get a better understanding of how Citizens Republic fares in terms of valuation when compared with its peers.


Forward P/E*


Tier 1 Capital Ratio

Dividend Yield

Citizens Republic





First Midwest Bancorp (NAS: FMBI)





Wintrust Financial (NAS: WTFC)





Huntington Bancshares (NAS: HBAN)





Source: Capital IQ, a Standard & Poor's company. *Based on 2012 earnings estimates.

The bank has managed to return to profitability on the back of sound asset quality. And its strong operations make me feel that there is room for growth. As is evident from the table, Citizens has the lowest P/E and P/B among its peers. This suggests that the market hasn't factored in the advantages of its falling bad loan percentage. This bank could really be an opportunity for Foolish investors.

The Foolish bottom line
Besides being attractively priced, the bank also has strong capital position. I would suggest Fools keep tabs on its operations, as I feel this stock reveals strong potential for growth. A convenient way to do this and stay ahead of most investors is to add these stocks to your Watchlist:

At the time thisarticle was published Fool contributor Zeeshan Siddique does not own any of the stocks mentioned in the article.The Motley Fool owns shares of Huntington Bancshares. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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