EX-99.1 2 k84842exv99w1.txt PRESS RELEASE, DATED APRIL 22, 2004 EXHIBIT 99.1 [CITIZENS LOGO] FOR IMMEDIATE RELEASE CONTACT: Charles D. Christy Chief Financial Officer (810) 237-4200 Charlie.Christy@cbcf-net.com CONTACT: Ryan P. Mathews VP Investor Relations (810) 257-2489 Ryan.Mathews@cbcf-net.com TRADED: NASDAQ SYMBOL: CBCF APRIL 22, 2004 CITIZENS BANKING CORPORATION ANNOUNCES FIRST QUARTER 2004 RESULTS FLINT, MICHIGAN --- Citizens Banking Corporation announced net income of $17,443,000 or $0.40 per diluted share for the three months ended March 31, 2004, an increase of $2,385,000 or 15.8% compared to net income of $15,058,000 or $0.34 per diluted share in the same quarter of 2003. The increase in net income for the quarter compared to the first quarter of 2003 was due to a lower provision for loan losses partially offset by lower net interest income and noninterest income, and higher noninterest expense. Returns on average assets and average equity during the first quarter were 0.92% and 10.89%, respectively, compared with 0.82% and 9.50% in the first quarter of 2003. "We're pleased that the continued improvement in our credit quality has enabled us to achieve earnings improvement over the first quarter of 2003. Both nonperforming assets and loan charge-offs are now at their lowest levels in eight quarters. We are continuing to make progress on our strategic initiatives which are generating increased levels of consumer loans and deposits," remarked William R. Hartman, chairman, president and CEO. KEY HIGHLIGHTS OF THE QUARTER: o Nonperforming assets decreased $14.6 million or 19.0% to $62.4 million compared with year end 2003 and $30.9 million or 33.1% compared with March 31, 2003 levels. Nonperforming assets represent 1.20% of total loans compared with 1.47% at year end 2003 and 1.76% at March 31, 2003. Loans added to the commercial nonperforming asset category decreased to $11.7 million for the quarter compared with $17.8 million in the fourth quarter of 2003 while loans removed from that category totaled $25.1 million for the quarter compared to $32.8 million in the fourth quarter of 2003. o Provision for loan losses declined to $7.0 million compared with $8.0 million in the fourth quarter of 2003 and $19.0 million in the same quarter of 2003. Net charge-offs declined to $6.8 million in the first quarter compared with $7.7 million in the prior quarter and $16.1 million in the same quarter a year ago. o Citizens executed two successful home equity loan campaigns in the first quarter of 2004 resulting in $308 million in new applications. Home equity loans grew $64.3 million or 8.6% in the first quarter of 2004 and $253 million or 45.1% in the twelve months ended March 31, 2004. o Citizens opened nearly 7,500 new checking accounts during the first quarter, representing a 60% increase in the number of accounts opened compared with the same period in 2003. o Two new offices were opened during the first quarter as part of Citizens' aggressive Oakland County expansion initiative BALANCE SHEET Citizens' total assets at March 31, 2004 were $7.692 billion, a decrease of $19 million or 0.2% compared with December 31, 2003 and a decrease of $76 million or 1.0% compared with March 31, 2003. Total assets declined due to a decrease in portfolio loans and mortgage loans held for sale, offset in part by higher investment securities balances. Portfolio loans decreased $45.8 million or 0.9% and $102.7 million or 1.9% compared with December 31, 2003 and March 31, 2003, respectively. Commercial loans declined $90.5 million from December 31, 2003 and $319.8 million from March 31, 2003 due to lower demand for commercial credit, high repayment activity and continued reduction of exposure on credits not meeting Citizens' risk parameters. Consumer loans, excluding mortgage loans, increased $63.8 million and $338.5 million compared with December 31, 2003 and March 31, 2003, respectively. Compared with March 31, 2003, home equity loans increased $253.0 million or 45.1% due to the success of four major campaigns over the last 12 months. Indirect loans increased $108.9 million or 17.2% compared with March 31, 2003 as a result of strong growth in the marine and recreational vehicle segments. Other direct loans decreased $23.4 million compared with March 31, 2003. Compared with December 31, 2003, home equity loans increased $64.3 million while indirect and other direct loan balances remained relatively flat. Mortgage loans declined $19.1 million and $121.3 million compared with December 31, 2003 and March 31, 2003 levels, respectively. Mortgage loans declined due to continued loan refinance and repayment activity and Citizens' strategy to sell most new mortgage loan production into the secondary market. Closed mortgage volume declined to $107 million compared with $351 million in the first quarter of 2003 as mortgage rates moved higher and slowed refinance activity early in the first quarter of 2004. Mortgage loans sold declined to $70 million in the first quarter of 2004 compared with $305 million in the same quarter of the prior year. Deposits increased $18.7 million compared with December 31, 2003 as a result of several deposit account campaigns during the first quarter. A checking account promotion that began in early February generated nearly 7,500 new accounts during the quarter, representing a 60% increase in the number of accounts opened compared with the same period in 2003. Additionally, a two-week market rate savings product promotion resulted in $40 million of new deposits. Compared with March 31, 2003, deposits declined $350.8 million as a result of a decline in time deposits, reflecting Citizens' less aggressive pricing posture during the lower interest rate environment. CREDIT QUALITY Nonperforming assets totaled $62.4 million or 0.81% of total assets at March 31, 2004, representing a decrease of $14.6 million or 19.0% compared with December 31, 2003 and $30.9 million or 33.1% compared with March 31, 2003. During the first quarter of 2004, Citizens sold one of its two largest nonperforming assets and received a significant cash payment on the other, reducing nonperforming assets by a total of $8.4 million on these two credits alone. In addition, exposures on various other nonperforming assets were reduced, recovered, or paid current by the borrower. The allowance for loan losses totaled $123.7 million or 2.38% of loans at March 31, 2004, consistent with the December 31, 2003 level of $123.5 million or 2.36% of loans and $14.0 million higher compared with $109.7 million or 2.07% of loans at March 31, 2003. The allowance for loan losses as a percent of nonperforming loans increased to 226% at March 31, 2004 compared with 179% at December 31, 2003 and 129% at March 31, 2003. Net charge-offs declined to $6.8 million in the first quarter of 2004 compared with $7.7 million in the prior quarter and $16.1 million in the same quarter a year ago. The significant decline in net charge-offs compared with the first quarter of 2003 is largely due to an $11.5 million charge-off on a single commercial credit in the first quarter of 2003. The provision for loan losses declined to $7.0 million compared with $8.0 million in the fourth quarter of 2003 and $19.0 million in the same quarter of 2003. The decline in the provision for loan losses reflects the lower level of net charge-offs, the reduction in nonperforming assets and fewer risk rating downgrades on commercial credits during the quarter. Citizens expects both net charge-offs and provision expense to be lower in the second quarter than in the first quarter of 2004. NET INTEREST MARGIN AND NET INTEREST INCOME Net interest margin declined to 4.01% in the first quarter of 2004 compared with 4.07% in the prior quarter and 4.33% in the first quarter of 2003. The decline in net interest margin compared with the fourth quarter of 2003 was due to slightly lower yields on earning assets, primarily fixed rate commercial and consumer loans, and to a lesser extent, investment securities, while the overall cost of funds remained constant. The decrease in net interest margin from the first quarter of 2003 was due to declines in yields on all earning asset categories as a result of the lower interest rate environment as well as a mix shift in earning assets from loans to lower yielding securities. The decrease in earning asset yields from the first quarter of 2003 was partially offset by a 44 basis point decline in funding costs as the cost of all funding sources declined in the lower interest rate environment. Net interest income decreased $2.4 million in the first quarter of 2004 compared to the prior quarter due to the aforementioned decline in the net interest margin and lower average earning assets. Average earning assets declined $51 million as decreases in commercial loans and mortgage loans held for sale more than offset growth in home equity loans. Compared to the first quarter of 2003, net interest income decreased $3.2 million as a 32 basis point decline in the net interest margin more than offset the $185 million increase in earning assets. Citizens anticipates its net interest income in the second quarter of 2004 to be comparable with the first quarter and expects net interest income to grow during the second half of 2004 due to a higher volume of earning assets. NONINTEREST INCOME Noninterest income for the quarter was $22.5 million, a decrease of $0.8 million or 3.3% from the first quarter of 2003. The decrease reflects a decline in mortgage income from a lower volume of mortgage loan originations and sales, partially offset by increases in deposit service charges, trust fees and other income. Mortgage income decreased $2.9 million in the first quarter of 2004 compared with the same quarter of 2003 as mortgage origination volume decreased $244 million to $107 million due to lower refinance activity, and consequently, mortgage loan sales declined $235 million to $70 million. Deposit service charges increased $1.5 million due to higher overdraft fee income, a result of initiatives put in place throughout 2003. Other noninterest income increased $0.6 million due to gains from the sale of former branch and other bank premises in the first quarter of 2004. Trust fees increased $90,000 or 2.1% to $4.3 million in the quarter ending March 31, 2004, from $4.2 million in the same quarter of 2003. Total trust assets under administration increased $395 million to $2.873 billion at March 31, 2004 from $2.478 billion at March 31, 2003. The increases in both trust fees and trust assets under administration were due to stronger financial markets and Citizens' new sales process implemented in January 2004, which is focused on relationship management and new business development strategies. "We generated organic growth within our investment management and trust business in the first quarter as a result of a significant increase in sales and a continued trend of slowing attrition in the existing book of investment management business," commented James A. Schmelter, executive vice president and head of wealth management. Compared to the fourth quarter of 2003, noninterest income increased $0.9 million or 4.1% due to an increase in mortgage income of $0.2 million, an increase in other noninterest income of $0.9 million due to gains from the sale of former branch and other bank premises, partially offset by a decline in trust fees of $0.3 million due to seasonally higher trust income in the fourth quarter of 2003. Citizens anticipates noninterest income in the second quarter of 2004 to be slightly higher than the first quarter level and expects noninterest income to increase in the second half of the year. NONINTEREST EXPENSE Noninterest expense for the quarter was $60.5 million, nearly flat compared to $60.4 million in the fourth quarter of 2003 and an increase of $3.9 million compared to $56.6 million for the first quarter of 2003. The increase compared with the same period of the prior year was due to higher salaries and employee benefits, occupancy expense, data processing services, professional services and other noninterest expense, partially offset by lower equipment expense. For the quarter, salaries and employee benefits increased $1.8 million or 6.1% compared to the same period in 2003 due to higher salaries and recruiting--related incentives in Oakland County of $0.7 million and $0.6 million, respectively, and higher severance costs of $0.4 million. Normal merit and other compensation increases were largely offset by decreases resulting from a lower level of staff. Citizens had 2,302 full time equivalent employees at March 31, 2004, down from 2,415 at March 31, 2003. Occupancy expense increased $0.6 million, or 13.8%, in the first quarter compared to the same quarter of the prior year. Building rent and other occupancy costs increased $0.2 million due to the January 2004 opening of a new branch and administrative office in Oakland County, the first location in connection with the expansion initiative. Building repair increased $0.2 million due to a change in Citizens' capitalization policy during the fourth quarter of 2003 incorporating higher capitalization thresholds on new expenditures. Other occupancy costs increased $0.2 million due to higher maintenance, energy and real estate tax expenses. Data processing services increased $0.3 million, or 10.0%, in the first quarter compared to the same quarter of the prior year. The increase is due to processing costs related to the fourth quarter 2003 system implementation of the new trust and investment accounting systems and operations with SEI Investments and retirement services recordkeeping systems and operations with EPIC Advisors, Inc. Professional services expense increased $0.2 million or 5.9% during the first quarter compared to the same quarter a year ago due in part to higher audit costs related to implementation of new control evaluation procedures to comply with section 404 of the Sarbanes-Oxley Act. Equipment expense decreased $0.5 million or 12.6%, while telephone expense increased $0.4 million or 30.6%, compared to the same quarter a year ago due to reclassification of data transmission costs from equipment expense to telephone expense in connection with a new services contract. Other noninterest expense increased $1.2 million or 32.6% compared to the same quarter of the prior year. The major factors contributing to the increase were higher non-credit related losses of $0.5 million as a result of a loss recovery and an unusually low level of such losses in the first quarter of the prior year, increased travel and training costs of $0.2 million, and higher state taxes of $0.2 million. Noninterest expense in the second quarter of 2004 is anticipated to remain comparable to the first quarter level, and increase slightly in the second half of 2004 due to additional costs related to new locations in Oakland County. OAKLAND COUNTY On February 18, 2004, Citizens Bank announced the opening of its first major hub facility in Oakland County, the 900 Tower Building located in Troy's Northfield Corporate Campus. During the ribbon-cutting celebration, Thomas C. Shafer, regional president, Southeast Michigan, commented, "We are selecting convenient, high-visibility locations for our new branches and we intend to be a competitive player in the market by offering superior customer service, integrated products and services, and technologically advanced banking facilities." The 19,000 square-foot facility includes a new Citizens Bank branch and administrative office space and serves as one of two planned major bank hubs in the county. The new location is expected to create up to an additional 45 direct employment positions. Another new Oakland county branch opened in the Springfield Township Square, in Springfield Township near Clarkston, Michigan, on March 11, 2004. The new proto-type branch provides clients with features such as a drive-up and walk-up ATM, extended weekday and Saturday office hours and onsite access to a wider array of financial products and services. ILLINOIS BANK SALE On April 2, 2004 Citizens announced the signing of a definitive agreement to sell its subsidiary -- Citizens Bank-Illinois, N.A. -- to Metropolitan Bank Group, Inc., of Chicago, Ill., in a cash transaction valued at $26,250,000. Metropolitan Bank Group, a privately held company with assets of $2 billion, operates seven community banks with a total of 56 branches and more than 90 ATM locations in the Chicago area. "While the suburban Chicago market is growing and vibrant, we've made the strategic decision to focus our delivery systems where we have more locations and market influence," said Hartman. The sale is expected to close in the third quarter of 2004, subject to regulatory approval. Citizens expects to realize a gain of approximately $12 million on the sale, and anticipates re-deploying the proceeds into one or more strategic alternatives to achieve an equal or somewhat greater return. As such, the sale is anticipated to have a neutral to slightly positive impact on future earnings per share. INITIATIVES At the beginning of this year, Citizens identified and prioritized 23 key initiatives to be completed as part of its corporate vision. The initiatives include commercial loan process redesign, deployment of a quick-close home equity process, document imaging, and enhanced voice communication systems. Roy Eon, executive vice president and head of information and technology stated, "Improving our information technology to enhance customer service and efficiency will continue to be a high priority for us in 2004. Initiatives identified include enterprise contact management, network and desktop upgrades, and improving our server management tools." Citizens introduced new product features for its commercial deposit clients in the first quarter, including positive pay (an anti-fraud service) and interest rate risk management products. In addition, Citizens enhanced its commercial deposit account reconciliation features and business express (Internet banking) capabilities. "During the quarter we initiated our company-wide sales and sales management initiative across all lines of business and geographies," commented Hartman. "We are fully committed to a highly disciplined, rigorous sales and sales management process and are beginning to see increased levels of activities and opportunities." DIVIDEND ANNOUNCEMENT The Board of Directors of Citizens Banking Corporation declared a cash dividend of $0.285 per share of common stock. The dividend is payable on May 12, 2004, to shareholders of record on May 3, 2004. OTHER NEWS Lizabeth Ardisana was appointed on March 16, 2004, to the Board of Directors of Citizens Banking Corporation. Ardisana is principal owner and CEO of ASG Renaissance, a technical and communication services firm headquartered in Dearborn, Michigan. As CEO of ASG Renaissance, she is responsible for the company's operations and financial management. She also manages the company's consulting services department and works directly with clients, providing consulting and management support on a variety of projects. During the first quarter of 2004, Citizens repurchased a total of 101,800 shares of its stock at an average price of $33.27. Since the stock repurchase program was announced in October 2001, Citizens has repurchased 2,847,200 shares at an average price of $28.46. As of March 31, 2004, 3,152,800 shares remain to be purchased under programs approved by the Board. CONFERENCE CALL ANNOUNCEMENT William R. Hartman, chairman, president and CEO, Charles D. Christy, CFO, Martin E. Grunst, treasurer and Daniel E. Bekemeier, chief accounting officer will review the quarter's results in a conference call for investors and analysts beginning at 10:00AM EST ON FRIDAY, APRIL 23, 2004. A live audio web cast is available at http://viavid.net/dce.aspx?sid=00001AD0 To participate in the conference call, please call the number below approximately 10 minutes prior to the scheduled conference time: US/Canada Dial-In Number: (800) 374-2419 International Dial-In Number: (706) 634-1073 Conference ID #6448422 Conference Name: "Citizens Banking Corporation 1st Quarter Earnings" R.S.V.P. is not required. A playback of the conference call will be available after 2:00pm EST through April 30, 2004, by dialing US/Canada Dial-In Number: (800) 642-1687 or International Dial-In Number: (706) 645-9291 conference ID: 6448422. Also, a playback of the call can be accessed via Citizens' web site, through the Investor Relations section at www.citizensonline.com. CORPORATE PROFILE Citizens Banking Corporation is a diversified financial services company providing a full range of commercial, consumer, mortgage banking, trust and financial planning services to a broad client base. Citizens operates 177 branch, private banking, and financial center locations throughout Michigan, Wisconsin, Iowa, and in suburban Chicago, Illinois. SAFE HARBOR STATEMENT Discussions in this release that are not statements of historical fact (including statements that include terms such as "may," "should," "believe," "expect," "anticipate," "estimate," "intend," and "plan") are forward-looking statements that involve risks and uncertainties, and Citizens' actual future results could materially differ from those discussed. Factors that could cause or contribute to such differences include, without limitation, adverse changes in Citizens' loan and lease portfolios and the resulting credit risk-related losses and expenses (including losses due to fraud and economic factors), Citizens' future lending and collections experience and the potential inadequacy of Citizens' loan loss reserves, interest rate fluctuations and the effects on net interest income of changes in Citizens' interest rate risk position, other adverse changes in economic or financial market conditions, the potential inability to hedge certain risks economically, adverse changes in competition and pricing environments, Citizens' potential failure to maintain or improve loan quality levels and origination volume, Citizens' potential inability to continue to attract core deposits, the potential lack of market acceptance of Citizens' products and services, adverse changes in Citizens' relationship with major customers, unanticipated technological changes that require major capital expenditures, adverse changes in applicable laws and regulatory requirements, impairment of the ability of the banking subsidiaries to pay dividends to the holding company parent, changes in accounting rules that negatively impact results of operations or capital, unanticipated environmental liabilities or costs, Citizens' potential inability to integrate acquired operations or complete its restructuring, Citizens' potential inability to successfully expand its Oakland county operations, the effects of terrorist attacks and potential attacks, and Citizens' success in managing the risks involved in the foregoing, and other risks and uncertainties detailed from time to time in its filings with the Securities and Exchange Commission. Other factors not currently anticipated by management may also materially and adversely affect Citizens' results of operations. There can be no assurance that the future results will meet expectations. While Citizens believes that its forward-looking statements 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 its forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. #### (Financial highlights follow) Visit our Web site at http://www.CitizensOnline.com -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (UNAUDITED) CITIZENS BANKING CORPORATION AND SUBSIDIARIES

MARCH 31, December 31, (in thousands) 2004 2003 ------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 156,220 $ 182,545 Interest-bearing deposits with banks 1,253 2,223 Securities available-for-sale: Taxable 1,581,346 1,536,145 Tax-exempt 427,964 429,056 ----------- ----------- Total securities available-for-sale 2,009,310 1,965,201 Securities held-to-maturity (fair value of $30,172 and $19,913, respectively) 30,104 19,857 Mortgage loans held for sale 37,205 44,677 Loans 5,199,911 5,245,702 Less: Allowance for loan losses (123,703) (123,545) ----------- ----------- Net loans 5,076,208 5,122,157 Premises and equipment 116,531 112,784 Goodwill 54,785 54,785 Other intangible assets 16,207 16,932 Bank owned life insurance 80,896 80,461 Other assets 113,702 109,448 ----------- ----------- TOTAL ASSETS $ 7,692,421 $ 7,711,070 =========== =========== LIABILITIES Noninterest-bearing deposits $ 891,342 $ 882,429 Interest-bearing deposits 4,569,590 4,559,838 ----------- ----------- Total deposits 5,460,932 5,442,267 Federal funds purchased and securities sold under agreements to repurchase 542,206 588,593 Other short-term borrowings 17,169 43,077 Other liabilities 76,843 65,112 Long-term debt 941,089 936,859 ----------- ----------- Total liabilities 7,038,239 7,075,908 SHAREHOLDERS' EQUITY Preferred stock - no par value Common stock - no par value 100,982 100,314 Retained earnings 517,143 512,045 Other accumulated comprehensive net income 36,057 22,803 ----------- ----------- Total shareholders' equity 654,182 635,162 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,692,421 $ 7,711,070 =========== =========== -------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) CITIZENS BANKING CORPORATION AND SUBSIDIARIES

Three Months Ended March 31, (in thousands, except per share amounts) 2004 2003 ---------------------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans $ 73,706 $ 84,504 Interest and dividends on investment securities: Taxable 15,442 14,434 Tax-exempt 5,244 5,184 Money market investments 2 87 -------- -------- Total interest income 94,394 104,209 -------- -------- INTEREST EXPENSE Deposits 16,451 25,037 Short-term borrowings 1,272 620 Long-term debt 8,343 7,046 -------- -------- Total interest expense 26,066 32,703 -------- -------- NET INTEREST INCOME 68,328 71,506 Provision for loan losses 7,000 18,992 -------- -------- Net interest income after provision for loan losses 61,328 52,514 -------- -------- NONINTEREST INCOME Service charges on deposit accounts 8,042 6,590 Trust fees 4,310 4,220 Mortgage and other loan income 2,256 5,154 Brokerage and investment fees 1,782 1,768 Bankcard fees 783 735 Investment securities gains --- 48 Other 5,339 4,772 -------- -------- Total noninterest income 22,512 23,287 -------- -------- NONINTEREST EXPENSE Salaries and employee benefits 31,939 30,112 Occupancy 5,342 4,695 Equipment 3,642 4,169 Professional services 3,928 3,708 Data processing services 3,646 3,316 Postage and delivery 1,556 1,678 Advertising and public relations 2,145 2,049 Telephone 1,534 1,175 Stationery and supplies 842 895 Other loan fees 1,129 1,142 Other 4,831 3,642 -------- -------- Total noninterest expense 60,534 56,581 -------- -------- INCOME BEFORE INCOME TAXES 23,306 19,220 Income tax provision 5,863 4,162 -------- -------- NET INCOME $ 17,443 $ 15,058 ======== ======== NET INCOME PER SHARE: Basic 0.40 0.35 Diluted 0.40 0.34 AVERAGE SHARES OUTSTANDING: Basic 43,315 43,505 Diluted 43,860 43,748 ----------------------------------------------------------------------------------

-------------------------------------------------------------------------------- SELECTED QUARTERLY INFORMATION CITIZENS BANKING CORPORATION AND SUBSIDIARIES

1ST QTR 2004 4TH QTR 2003 3RD QTR 2003 2ND QTR 2003 1ST QTR 2003 ------------------------------------------------------------------------------------------------------------------------------------ SUMMARY OF OPERATIONS (THOUSANDS) Interest income $ 94,394 $ 97,398 $ 99,687 $104,683 $104,209 Interest expense 26,066 26,720 28,533 31,763 32,703 Net interest income 68,328 70,678 71,154 72,920 71,506 Provision for loan losses 7,000 8,020 10,300 25,650 18,992 Net interest income after provision for loan losses 61,328 62,658 60,854 47,270 52,514 Noninterest income 22,512 21,631 25,054 24,847 23,287 Noninterest expense 60,534 60,446 59,600 56,361 56,581 Income tax provision 5,863 5,769 6,703 2,542 4,162 Net income 17,443 18,074 19,605 13,214 15,058 ------------------------------------------------------------------------------------------------------------------------------------ AT PERIOD END (MILLIONS) Total assets $ 7,692 $ 7,711 $ 7,787 $ 7,789 $ 7,768 Total earning assets 7,279 7,278 7,356 7,334 7,285 Total loans 5,200 5,246 5,226 5,287 5,303 Total deposits 5,461 5,442 5,482 5,660 5,812 Total shareholders' equity 654 635 634 639 640 ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE BALANCES (MILLIONS) Total assets $ 7,640 $ 7,697 $ 7,812 $ 7,809 $ 7,454 Total earning assets 7,228 7,279 7,378 7,387 7,043 Total loans 5,191 5,220 5,183 5,253 5,343 Total deposits 5,474 5,481 5,610 5,723 5,853 Total shareholders' equity 644 626 620 639 643 Shareholders' equity / assets 8.43% 8.13% 7.94% 8.18% 8.63% ------------------------------------------------------------------------------------------------------------------------------------ CREDIT QUALITY STATISTICS (THOUSANDS) Nonaccrual loans $ 54,565 $ 68,744 $ 83,278 $ 87,928 $ 84,107 Loans 90 or more days past due and still accruing 201 345 601 607 990 Restructured loans 52 --- --- --- --- -------- -------- -------- -------- -------- Total nonperforming loans 54,818 69,089 83,879 88,535 85,097 Other repossessed assets acquired (ORAA) 7,592 7,943 7,350 8,044 8,226 -------- -------- -------- -------- -------- Total nonperforming assets $ 62,410 $ 77,032 $ 91,229 $ 96,579 $ 93,323 ======== ======== ======== ======== ======== Allowance for loan losses $123,703 $123,545 $123,265 $123,302 $109,695 Allowance for loan losses ratio 2.38% 2.36% 2.36% 2.33% 2.07% Allowance for loan losses as a percent of nonperforming assets 198.21 160.38 135.12 127.67 117.54 Allowance for loan losses as a percent of nonperforming loans 225.66 178.82 146.96 139.27 128.91 Nonperforming assets as a percent of loans plus ORAA 1.20 1.47 1.74 1.82 1.76 Nonperforming assets as a percent of total assets 0.81 1.00 1.17 1.24 1.20 Net loans charged off as a percent of average loans (annualized) 0.53 0.59 0.80 0.92 1.20 Net loans charged off (000) $ 6,842 $ 7,740 $ 10,337 $ 12,043 $ 16,074 ------------------------------------------------------------------------------------------------------------------------------------ PER COMMON SHARE DATA Net Income (loss): Basic $ 0.40 $ 0.42 $ 0.45 $ 0.30 $ 0.35 Diluted 0.40 0.41 0.45 0.30 0.34 Dividends 0.285 0.285 0.285 0.285 0.285 Market Value: High $ 34.00 $ 34.26 $ 28.01 $ 28.17 $ 26.05 Low 31.55 26.41 24.77 21.72 23.58 Close 32.63 32.72 26.41 27.01 23.62 Book value 15.09 14.69 14.67 14.77 14.79 Shares outstanding, end of period (000) 43,343 43,242 43,220 43,260 43,299 ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE RATIOS (ANNUALIZED) Net interest margin (FTE) 4.01% 4.07% 4.06% 4.17% 4.33% Return on average assets 0.92 0.93 1.00 0.68 0.82 Return on average shareholders' equity 10.89 11.45 12.55 8.29 9.50 Efficiency ratio 64.26 63.16 59.90 55.74 57.58 ------------------------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------- FINANCIAL SUMMARY AND COMPARISON CITIZENS BANKING CORPORATION AND SUBSIDIARIES

FOR THE THREE MONTHS ENDED MARCH 31, 2004 2003 % CHANGE ------------------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS (THOUSANDS) Interest income $ 94,394 $104,209 (9.4)% Interest expense 26,066 32,703 (20.3) Net interest income 68,328 71,506 (4.4) Provision for loan losses 7,000 18,992 (63.1) Net interest income after provision for loan losses 61,328 52,514 16.8 Noninterest income 22,512 23,287 (3.3) Noninterest expense 60,534 56,581 7.0 Income tax provision 5,863 4,162 40.9 Net income 17,443 15,058 15.8 ---------------------------------------------------------------------------------------------------- AT PERIOD END (MILLIONS) Total assets $ 7,692 $ 7,768 (1.0)% Total earning assets 7,279 7,285 (0.1) Total loans 5,200 5,303 (1.9) Total deposits 5,461 5,812 (6.0) Total shareholders' equity 654 640 2.2 ---------------------------------------------------------------------------------------------------- AVERAGE BALANCES (MILLIONS) Total assets $ 7,640 $ 7,454 2.5% Total earning assets 7,228 7,043 2.6 Total loans 5,191 5,343 (2.8) Total deposits 5,474 5,853 (6.5) Total shareholders' equity 644 643 0.2 Shareholders' equity / assets 8.43% 8.63% (2.3)% ---------------------------------------------------------------------------------------------------- PER COMMON SHARE DATA Net Income: Basic $ 0.40 $ 0.35 14.3% Diluted 0.40 0.34 17.6 Dividends 0.285 0.285 0.0 Market Value: High $ 34.00 $ 26.05 30.5 Low 31.55 23.58 33.8 Close 32.63 23.62 38.1 Book value 15.09 14.79 2.0 Tangible book value 13.46 13.08 2.9 Shares outstanding, end of period (000) 43,343 43,299 0.1 ---------------------------------------------------------------------------------------------------- PERFORMANCE RATIOS (ANNUALIZED) Net interest margin (FTE) (1) 4.01% 4.33% (7.4)% Return on average assets 0.92 0.82 12.2 Return on average shareholders' equity 10.89 9.50 14.6 Net loans charged off as a percent of average loans 0.53 1.20 (55.8) ----------------------------------------------------------------------------------------------------

(1) Net interest margin is presented on an annual basis and includes taxable equivalent adjustments to interest income of $3,362,000 and $3,476,000 for the three months ended March 31, 2004 and 2003, respectively, based on a tax rate of 35%. -------------------------------------------------------------------------------- NONINTEREST INCOME AND NONINTEREST EXPENSE (UNAUDITED) CITIZENS BANKING CORPORATION AND SUBSIDIARIES

Quarter Ended -------------------------------------------------------------- Mar 31 Dec 31 Sept 30 June 30 Mar 31 (in thousands) 2004 2003 2003 2003 2003 ------------------------------------------------------------------------------------------------------ NONINTEREST INCOME: Service charges on deposit accounts $ 8,042 $ 8,074 $ 7,703 $ 7,549 $ 6,590 Trust fees 4,310 4,615 4,368 4,324 4,220 Mortgage and other loan income 2,256 2,079 5,404 5,409 5,154 Brokerage and investment fees 1,782 1,705 2,333 1,914 1,768 Bankcard fees 783 732 761 814 735 Investment securities gains --- 2 42 11 48 Other income 5,339 4,424 4,443 4,826 4,772 -------- -------- -------- -------- -------- TOTAL NONINTEREST INCOME $ 22,512 $ 21,631 $ 25,054 $ 24,847 $ 23,287 ======== ======== ======== ======== ======== NONINTEREST EXPENSE: Salaries and employee benefits $ 31,939 $ 29,774 $ 31,036 $ 31,400 $ 30,112 Occupancy 5,342 5,112 4,328 4,314 4,695 Equipment 3,642 3,989 4,060 3,869 4,169 Professional services 3,928 5,202 4,946 3,959 3,708 Data processing services 3,646 3,145 3,225 3,058 3,316 Postage and delivery 1,556 1,796 1,739 1,683 1,678 Advertising and public relations 2,145 1,719 1,395 623 2,049 Telephone 1,534 1,314 1,169 1,135 1,175 Stationery and supplies 842 1,256 911 873 895 Other loan fees 1,129 1,192 1,360 1,146 1,142 Special charge --- --- (370) (221) (100) Other expense 4,831 5,947 5,801 4,522 3,742 -------- -------- -------- -------- -------- TOTAL NONINTEREST EXPENSE $ 60,534 $ 60,446 $ 59,600 $ 56,361 $ 56,581 ======== ======== ======== ======== ======== ------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------ AVERAGE BALANCES/NET INTEREST INCOME/AVERAGE RATES THREE MONTHS ENDED ------------------------------------------------------------------------------- 3/31/2004 12/31/2003 3/31/2003 ------------------------------------------------------------------------------- AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE (in thousands) BALANCE RATE (1) BALANCE RATE (1) BALANCE RATE (1) ------------------------------------------------------------------------------------------------------------------------------ EARNING ASSETS Money market investments $ 1,977 0.48 % $ 2,539 0.51 % $ 31,069 1.13 % Investment securities(2): Taxable 1,528,829 4.04 1,542,775 4.11 1,061,281 5.44 Tax-exempt 421,589 7.65 418,438 7.67 405,524 7.87 Mortgage loans held for sale 37,307 4.73 64,950 5.47 138,275 5.85 Loans: Commercial 2,920,584 5.40 2,982,849 5.46 3,256,707 5.84 Real estate mortgage 491,028 5.82 493,989 5.56 587,692 6.34 Direct consumer 1,040,543 5.70 996,486 5.96 857,422 6.92 Indirect consumer 739,210 6.89 746,443 6.99 640,807 7.80 ----------- ----------- ----------- Total earning assets 7,181,067 5.47 7,248,469 5.53 6,978,777 6.23 NONEARNING ASSETS Cash and due from banks 160,763 165,477 171,491 Investment security fair value adjustment 47,041 30,907 64,090 Othernonearning assets 377,037 377,429 354,558 Allowance for loan losses (125,637) (125,420) (114,692) ----------- ----------- ----------- Total assets $ 7,640,271 $ 7,696,862 $ 7,454,224 =========== =========== =========== INTEREST-BEARING LIABILITIES Deposits: Interest-bearing demand $ 1,358,556 0.73 $ 1,340,511 0.73 $ 1,314,615 1.14 Savings 1,288,269 0.52 1,262,141 0.47 1,369,434 0.86 Time 1,955,036 2.53 1,976,708 2.63 2,316,693 3.22 Short-term borrowings 508,252 1.00 576,496 1.01 214,786 1.17 Long-term debt 938,677 3.57 938,005 3.48 690,122 4.13 ----------- ----------- ----------- Total interest-bearing liabilities 6,048,790 1.73 6,093,861 1.74 5,905,650 2.24 NONINTEREST-BEARING LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest-bearing demand 872,200 901,383 851,929 Other liabilities 75,116 75,624 53,284 Shareholders' equity 644,165 625,994 643,361 ----------- ----------- ----------- Total liabilities and shareholders' equity $ 7,640,271 $ 7,696,862 $ 7,454,224 =========== =========== =========== INTEREST SPREAD 3.74 % 3.79 % 3.99 % Contribution of noninterest bearing sources of funds 0.27 0.28 0.34 ---- ---- ---- NET INTEREST INCOME AS A PERCENT OF EARNING ASSETS 4.01 % 4.07 % 4.33 % ------------------------------------------------------------------------------------------------------------------------------

(1) Average rates are presented on an annual basis and include taxable equivalent adjustments to interest income. (2) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortiztion of premiums and accretion of discounts.

------------------------------------------------------------------------------------------------------------------------------------ NONPERFORMING ASSETS CITIZENS BANKING CORPORATION AND SUBSIDIARIES Quarter Ended ------------------------------------------------------------------------------ Mar 31 Dec 31 Sept 30 June 30 Mar 31 (in thousands) 2004 2003 2003 2003 2003 ------------------------------------------------------------------------------------------------------------------------------------ Commercial(1) Commercial $ 24,359 $ 37,171 $ 51,158 $ 52,760 $ 49,275 Commercial real estate 15,310 16,385 17,379 19,568 20,433 Small business 2,052 1,603 1,648 1,466 1,459 -------- -------- -------- -------- -------- Total commercial 41,721 55,159 70,185 73,794 71,167 Consumer: Direct 3,471 3,177 3,291 3,208 3,416 Indirect 1,087 1,247 1,625 1,094 1,646 Mortgage 8,286 9,161 8,177 9,832 7,878 Loans 90 days or more past due and still accruing 201 345 601 607 990 Restructured loans 52 --- --- --- --- -------- -------- -------- -------- -------- Total Nonperforming Loans 54,818 69,089 83,879 88,535 85,097 Other Repossessed Assets Acquired 7,592 7,943 7,350 8,044 8,226 -------- -------- -------- -------- -------- Total Nonperforming Assets $ 62,410 $ 77,032 $ 91,229 $ 96,579 $ 93,323 ======== ======== ======== ======== ======== ------------------------------------------------------------------------------------------------------------------------------------

(1)Changes in commercial nonperforming assets for the quarter (in millions): Inflows $ 11.7 $ 17.8 $ 21.1 $ 36.3 $ 22.7 Outflows (25.1) (32.8) (24.7) (33.7) (21.9) ------- ------ ------ ------ ------ Net change $ (13.4) $ (15.0) $ (3.6) $ 2.6 $ 0.8 ======== ======= ====== ====== ======

------------------------------------------------------------------------------------------------------ SUMMARY OF LOAN LOSS EXPERIENCE CITIZENS BANKING CORPORATION AND SUBSIDIARIES Quarter Ended ----------------------------------------------------- Mar 31 Dec 31 Sept 30 June 30 Mar 31 (in thousands) 2004 2003 2003 2003 2003 ------------------------------------------------------------------------------------------------------ Allowance for loan losses - beginning of period $123,545 $123,265 $123,302 $109,695 $106,777 Provision for loan losses 7,000 8,020 10,300 25,650 18,992 Charge-offs: Commercial 5,703 7,323 9,539 7,577 14,133 Commercial real estate 1,151 2,276 1,531 4,321 955 Small business 218 551 348 273 264 -------- -------- -------- -------- -------- Total commercial 7,072 10,150 11,418 12,171 15,352 Real estate mortgage 193 320 213 76 625 Consumer - Direct 1,630 1,388 1,628 1,790 1,748 Consumer - Indirect 1,891 2,580 1,941 2,152 2,511 -------- -------- -------- -------- -------- Total charge-offs 10,786 14,438 15,200 16,189 20,236 -------- -------- -------- -------- -------- Recoveries: Commercial 2,332 4,452 2,882 2,115 2,032 Commercial real estate 432 927 595 623 465 Small business 17 165 139 93 362 -------- -------- -------- -------- -------- Total commercial 2,781 5,544 3,616 2,831 2,859 Real estate mortgage 13 --- 27 8 1 Consumer - Direct 438 461 504 479 439 Consumer - Indirect 712 693 716 828 863 -------- -------- -------- -------- -------- Total recoveries 3,944 6,698 4,863 4,146 4,162 -------- -------- -------- -------- -------- Net charge-offs 6,842 7,740 10,337 12,043 16,074 -------- -------- -------- -------- -------- Allowance for loan losses - end of period $123,703 $123,545 $123,265 $123,302 $109,695 ======== ======== ======== ======== ======== Reserve for loan commitments - end of period $ 2,757 $ 2,690 $ 2,690 $ 2,690 $ 2,690 ======== ======== ======== ======== ======== ------------------------------------------------------------------------------------------------------

---------------------------------------------------------------- For the Quarter Ended 03/31/04 ---------------------------------------------------------------- Consumer - Consumer - Commercial Real estate Direct Indirect Total ---------------------------------------------------------------- Charge-offs: Michigan $ 3,419 $ 30 $ 1,296 $ 1,891 $ 6,636 Wisconsin 2,933 106 219 --- 3,258 Iowa 568 57 81 --- 706 Illinois 152 --- 34 --- 186 ------- ------- ------- ------- ------- Total charge-offs 7,072 193 1,630 1,891 10,786 ------- ------- ------- ------- ------- Recoveries: Michigan 1,262 --- 302 707 2,271 Wisconsin 1,136 13 112 --- 1,261 Iowa 275 --- 18 --- 293 Illinois 108 --- 6 5 119 ------- ------- ------- ------- ------- Total recoveries 2,781 13 438 712 3,944 ------- ------- ------- ------- ------- Net charge-offs $ 4,291 $ 180 $ 1,192 $ 1,179 $ 6,842 ======= ======= ======= ======= ======= --------------------------------------------------------------------------------------------