EX-99.1 2 k88971exv99w1.txt PRESS RELEASE DATED OCTOBER 21, 2004 EXHIBIT 99.1 [CITIZENS BANKING COPRPORATION LOGO] FOR IMMEDIATE RELEASE CONTACT: Charles D. Christy Chief Financial Officer (810) 237-4200 Charlie.Christy@cbcf-net.com CONTACT: Kathleen Miller Investor Relations (810) 257-2486 Kathleen.Miller@cbcf-net.com TRADED: NASDAQ SYMBOL: CBCF OCTOBER 21, 2004 CITIZENS BANKING CORPORATION ANNOUNCES THIRD QUARTER 2004 RESULTS FLINT, MICHIGAN --- Citizens Banking Corporation announced net income of $19,646,000 for the three months ended September 30, 2004, compared with net income of $19,605,000 in the same quarter of 2003 and net income of $18,722,000 in the second quarter of 2004. Diluted net income per share was $0.45, compared to $0.45 per diluted share for the same quarter of last year and $0.43 per diluted share for the second quarter of 2004. Annualized returns on average assets and average equity during the third quarter were 1.02% and 12.27%, respectively, compared with 1.00% and 12.55% in the third quarter of 2003. For the nine months ended September 30, 2004, net income was $55,811,000 or $1.28 per diluted share compared with net income of $47,877,000 or $1.10 per diluted share for the same period of 2003, an increase of 16.6% in net income and 16.4% in diluted net income per share. "We are pleased with the solid results particularly in view of the many initiatives and transactions completed during the quarter," stated William R. Hartman, chairman, president and CEO. "Despite the sale of our Illinois Bank, prepayment of some high cost FHLB debt, replacement of our broker/dealer, and reorganization of our proprietary Golden Oak Funds, Citizens showed continued improvement in credit quality and reduced noninterest expense resulting in a quarter which was consistent with our expectations." KEY HIGHLIGHTS IN THE QUARTER: - Nonperforming assets are now at their lowest levels in more than three years as they decreased $5.8 million or 10.0% to $52.4 million at September 30, 2004 compared with the second quarter of 2004 and decreased $38.8 million or 42.6% compared with the third quarter of 2003. The allowance for loan losses as a percent of nonperforming loans is now at 290% as compared to 255% in the second quarter of 2004 and 147% in the third quarter of 2003. - The third quarter 2004 provision for loan losses of $5.0 million increased $0.5 million compared with the second quarter of 2004 and declined from $10.3 million or 51% as compared to the third quarter of 2003. Net charge-offs were $5.0 million in the third quarter of 2004 compared with $4.4 million in the second quarter of 2004 and $10.3 million in the third quarter of 2003. - Citizens successfully completed the sale of its Illinois bank subsidiary (the "Illinois Bank") on August 5, 2004 resulting in a gain of $11.7 million. The sale of Citizens' stock investment created a tax benefit which results in an effective tax rate of 3.8% for the quarter and 19.2% year-to-date in 2004. - The gain on the sale of the Illinois Bank as well as the tax benefit allowed Citizens to retire $235 million of high cost Federal Home Loan Bank ("FHLB") debt as a means of reducing funding costs and improving interest rate sensitivity which resulted in a prepayment penalty of $18 million. This retirement and subsequent replacement of the debt with fixed rate debt resulted in a 150 basis point funding cost improvement. - As for the third quarter of 2004, average direct consumer loans comprised of direct installment, home equity, and bankcard loans, increased $187.3 million or 20% from the third quarter of 2003. The home equity loan portfolio average balance increased $220.5 million or 33.9% during the same period while direct installment and bankcard loans decreased. The average bureau score on the home equity volume during the third quarter of 2004 was 740 which illustrates the level of high quality loans being added to the existing portfolio. - Core deposit balances increased a net $38.6 million in the third quarter as compared to the second quarter of 2004 even after the sale of the Illinois Bank which had $102.8 million of core deposits as of August 5, 2004. This represents the fourth consecutive quarter of core deposit growth which has been driven by increases in noninterest bearing deposits and in a new market rate savings product introduced in the fourth quarter of 2003. - Commercial checking balances grew by $17.2 million as a result of a successful campaign promoting the new business checking product suite. - Early in the third quarter, Citizens replaced its broker/dealer services vendor with Independent Financial Marketing Group, Inc. ("IFMG"). The change to IFMG was made in an effort to provide enhanced marketing support, advanced technology, and improved processing capabilities. - On September 29, 2004, Citizens completed the merger of its seven proprietary Golden Oak Funds, into two leading fund groups: Goldman Sachs Asset Management and Federated Mutual Fund Services. The assets of the Golden Oak Funds have been exchanged for shares of the acquiring funds. SALE OF ILLINOIS BANK On August 5, 2004, Citizens completed the sale of its subsidiary bank, Citizens Bank-Illinois, N.A., to Metropolitan Bank Group, Inc., of Chicago, Illinois in a cash transaction valued at $26.25 million. The Illinois Bank had three locations with $173.2 million of assets, $78.5 million of loans and $155.3 million of deposits as of August 5, 2004. Citizens realized a gain of $11.7 million on the transaction. The sale of the Illinois Bank generated a tax loss because Citizens' tax basis in the stock of the Illinois Bank was greater than the Illinois Bank's sale price. PREPAYMENT OF FHLB ADVANCES AND ISSUANCE OF NEW FHLB DEBT Citizens prepaid $235 million of high cost Federal Home Loan Bank advances during the third quarter of 2004. The after-tax effect of the prepayment penalties on the debt largely offset the gain on the sale of the Illinois Bank, resulting in a relatively neutral effect on earnings per share for the third quarter. Additionally, during the third quarter of 2004, Citizens issued $275 million of new FHLB fixed rate advances at approximately 150 basis points less than the retired debt. The improved structure and lower cost is expected to improve Citizens' net interest margin and interest rate sensitivity and to offset the negative impact on future results of operations from the sale of the Illinois Bank. The tax loss from the Illinois Bank sale along with lower pre-tax earnings resulting from the prepayment penalties of FHLB advances contributed to reduced income tax expense for the third quarter. BALANCE SHEET Citizens' total assets at September 30, 2004 were $7.659 billion, a decrease of $51.6 million or 0.7% compared with December 31, 2003 and a decrease of $88.5 million or 1.1% from June 30, 2004. Total assets decreased due to the sale of the Illinois Bank ($173.2 million at the date of sale) and declines in both the investment portfolio and mortgage loans held for sale, partially offset by growth in total portfolio loans. Portfolio loans increased $53.7 million or 1.0% compared with year end 2003 and $9.3 million or 0.2% compared with June 30, 2004 as consumer loans and mortgage loans increased while commercial loans declined. Consumer loans, excluding mortgage loans, increased $207.1 million or 11.7% at September 30, 2004 compared with December 31, 2003 due to a well executed sales process and a number of successful sales campaigns. Since December 31, 2003, home equity loans increased $132.4 million or 17.7% while indirect loans increased $93.8 million or 12.6% due to growth in the recreational vehicle and marine segments from a continued emphasis on service and maintaining strong relationships with existing dealers. The home equity and indirect lending growth has been partially offset by declines in direct installment and bankcard loans of $12.0 million and $7.0 million, respectively, since December 31, 2003. Since year end 2003, portfolio mortgage loans have increased $4.2 million or 0.8% to $498.8 million. The small increase in the mortgage portfolio occurred due to slower repayment and refinance activity coupled with Citizens' strategy to sell most new mortgage loan production into the secondary market. Closed mortgage loan volume declined to $125 million in the third quarter of 2004 compared with $444 million in the third quarter of 2003. New mortgage loan production was spurred during the second and third quarters of 2003 by a strong refinance market as a result of the low interest rate environment. Commercial loans decreased $157.6 million or 5.3% at September 30, 2004 compared with December 31, 2003, due to lower demand for commercial credit, high repayment activity, the sale of the Illinois Bank (which equated to $52.9 million at the date of sale), and continued reduction of exposure on credits not meeting Citizens' risk parameters. Excluding the reduction as a result of the sale of the Illinois Bank, commercial loans declined by $5.1 million in the third quarter of 2004 from the second quarter of 2004. This is the second consecutive quarter that the continued strong growth in Michigan's Oakland County market nearly offset the decline in all of Citizens' other markets and represents the lowest overall quarterly reduction since September 2002. Total deposits decreased $174.9 million or 3.2% to $5.267 billion at September 30, 2004 compared with $5.442 billion at December 31, 2003. The decline in deposits occurred largely within time deposits, reflecting Citizens' less aggressive pricing posture during the low interest rate environment. Time deposits declined $354.4 million to $1.606 billion at September 30, 2004 compared with $1.960 billion at December 31, 2003. Total deposits at the Illinois Bank as of August 5, 2004 were $155.3 million. Core deposits, which exclude time deposits, totaled $3.662 billion at September 30, 2004, an increase of $179.5 million or 5.2% compared with December 31, 2003 and an increase of $38.6 million or 1.1% compared with June 30, 2004. The increase in core deposits occurred largely as a result of the growth in a new market rate savings product, which has increased $435.9 million since December 31, 2003 and $156.3 million from June 30, 2004. Additionally, noninterest bearing deposits have increased $51.4 million since December 31, 2003 and $13.9 million since June 30, 2004. Offsetting these increases were declines in interest-bearing checking deposits and savings account deposits. Total core deposits at the Illinois Bank as of August 5, 2004 were $102.8 million. CREDIT QUALITY Nonperforming assets totaled $52.4 million at September 30, 2004, a decrease of $5.8 million or 10.0% compared with June 30, 2004 and a decrease of $38.8 million or 42.6% compared with September 30, 2003 levels. Nonperforming assets represent 0.99% of total loans plus other repossessed assets acquired at September 30, 2004 compared with 1.10% at June 30, 2004 and 1.74% at September 30, 2003. Loans added to the commercial nonperforming loan category increased to $22.3 million for the quarter compared with $17.3 million in the second quarter of 2004 while loans removed from that category totaled $29.4 million for the third quarter compared with $23.2 million in the second quarter of 2004. The allowance for loan losses totaled $122.2 million or 2.31% of loans at September 30, 2004, consistent with both the June 30, 2004 level of $123.8 million or 2.34% of loans and the December 31, 2003 level of $123.5 million or 2.36% of loans. Net charge-offs increased to $5.0 million in the third quarter of 2004 compared with $4.4 million in the prior quarter and decreased from $10.3 million in the third quarter of 2003. The increase in net charge-offs compared with the second quarter of 2004 was due to an abnormally low net charge-off level for consumer loans during the second quarter of 2004. The decrease from the third quarter of the prior year was due to lower net charge-offs in the commercial loan portfolio. The provision for loan losses increased to $5.0 million in the third quarter of 2004 compared with $4.5 million in the second quarter but decreased from $10.3 million taken in the third quarter of 2003. The changes in the provision for loan losses reflect the changes in the level of net charge-offs as Citizens continues to match loan loss provision to net charge-offs. Citizens anticipates both net charge-offs and provision expense to be approximately the same level in the fourth quarter of 2004 as in the third quarter. NET INTEREST MARGIN AND NET INTEREST INCOME Net interest margin increased to 4.02% in the third quarter of 2004 compared with 3.98% in the prior quarter and 4.03% in the third quarter of 2003. The increase in net interest margin compared with the second quarter of 2004 was due partially to the prepayment of $235 million of high rate FHLB debt and to a lesser extent a benefit from funding costs increasing more slowly than asset yields following the Federal Reserve increases in short term market interest rates. The small decrease in net interest margin compared with the third quarter of 2003 resulted from declines in yields on the loan portfolio, reflecting the normal margin compression in a flat rate environment, substantially offset by lower funding costs and a higher yield in the investment portfolio. For the nine months ended September 30, 2004, net interest margin declined to 4.00% compared with 4.17% for the same period of 2003. Net interest income was $69.3 million in the third quarter of 2004 compared with $69.2 million in the prior quarter and $71.2 million in third quarter of 2003. The increase compared with the prior quarter was driven by a higher net interest margin largely offset by the decline in earning assets resulting from the sale of the Illinois Bank. At August 5, 2004, the earning assets for the Illinois Bank were $169.4 million. The decrease in net interest income compared with the third quarter of 2003 resulted from the aforementioned decline in the net interest margin, sale of the Illinois Bank, and lower average earning assets. For the nine months ended September 30, 2004, net interest income declined $8.7 million to $206.8 million compared with the same period of the prior year due to the decline in net interest margin percentage. In the fourth quarter Citizens anticipates its net interest margin to be slightly higher while its net interest income will be comparable to or slightly lower than the third quarter levels. Earning assets and net interest income in the fourth quarter will fully reflect the August sale of the Illinois Bank. The Illinois Bank contributed $60 million to Citizens' third quarter of 2004 average earning assets. NONINTEREST INCOME Noninterest income for the third quarter of 2004 increased $10.0 million to $35.1 million compared with the third quarter of 2003, and increased $7.2 million to $80.4 million during the first nine months of 2004 compared with the first nine months of 2003. The increases occurred as a result of an $11.7 million gain on the sale of the Illinois Bank, partially offset by a decline in mortgage fees. A significant decline in mortgage and other loan income in the first nine months of 2004 compared to the first nine months of 2003 was partially offset by higher deposit service charges. Deposit service charges for the third quarter of 2004 increased $1.5 million or 19.4% to $9.2 million compared with the third quarter of 2003. For the nine month period ended September 30, 2004, deposit service charges increased $4.5 million or 20.4% to $26.3 million compared with the same period in 2003. Initiatives implemented over the last six quarters have improved the revenue generated from deposit service charges through improved waiver management and slight increases in certain fees. Trust fees decreased $0.1 million or 3.3% to $4.2 million in the third quarter of 2004 compared with the third quarter of 2003 due to the previously mentioned merger of the Golden Oak Funds and a reduction of a large relationship. Trust fees increased $0.1 million or 1.1% to $13.1 million in the first nine months of 2004 compared with the same period in 2003. The year-to-date increase in trust fees was due to stronger financial markets and Citizens' sales and sales management processes implemented in the first quarter of 2004. These new processes are focused on relationship management and new business development strategies. Total trust assets under administration decreased $6.2 million to $2.6 billion at September 30, 2004 compared to September 30, 2003. Mortgage and other loan income declined $3.7 million or 67.6% to $1.8 million in the third quarter of 2004 compared with the third quarter of 2003 as a result of a significant decline in mortgage loan sales due to lower new originations and refinancing activity. For the nine months ended September 30, 2004, mortgage and other loan income declined $8.9 million or 55.8% to $7.1 million compared with the same period in 2003. The decline in revenue is reflective of the decrease in mortgage origination volume in the three and nine months ended September 30, 2004 compared with the same periods of the prior year. Loans originated for sale declined $821 million to $252 million in the nine month period ended September 30, 2004 compared with the same period of the prior year. Brokerage and investment fees decreased $0.6 million or 26.3% to $1.7 million in the third quarter of 2004 compared with the third quarter of 2003 due to a shorter brokerage sales campaign cycle and the previously mentioned IFMG conversion. Brokerage and investment fees increased $0.1 million or 2.3% to $6.2 million in the first nine months of 2004 compared with the same period in 2003. During the second quarter brokerage sales campaign, the Consumer and Wealth Management lines of business collaborated to generate $34 million in brokerage and investment sales and $1.4 million in fee income. These fees are down from the second quarter of 2004 by $0.9 million or 35.2% since a shorter brokerage sales campaign was conducted during the third quarter. Other noninterest income increased $0.7 million for the quarter and $1.1 million for the nine months ended September 30, 2004 compared to the same periods of 2003. In the third quarter of 2004, Citizens' parent company received a distribution of $0.8 million related to venture capital investments made beginning in 1998, in a limited partnership pursuing early stage investment opportunities in technology driven businesses located in the Midwest region of the United States. Additionally, profit on the sales of closed bank premises was $0.3 million and $1.3 million for three and nine month periods, respectively. Offsetting these gains was a reduction of title insurance fee income of $0.4 million and $1.0 million for the three and nine month periods, respectively. Title insurance fee income is down as a result of lower mortgage originations. The third quarter of 2004 included securities gains of $0.5 million reflecting the actual trading of some securities designated for sale during the second quarter of 2004 that generated a $2.1 million loss during that quarter. Excluding the gain of the sale of the Illinois Bank, Citizens anticipates total noninterest income in the fourth quarter to be slightly higher than the third quarter level based on current business trends. NONINTEREST EXPENSE Noninterest expense increased $19.4 million or 32.5% to $79.0 million in the third quarter of 2004 compared with $59.6 million in the third quarter of 2003 and increased $16.9 million or 27.1% compared with $62.1 million in the second quarter of 2004. These increases were primarily due to an $18.0 million prepayment penalty on high cost Federal Home Loan Bank ("FHLB") debt and higher compensation, occupancy, advertising, telephone and other costs resulting from the Oakland County initiative launched during the fourth quarter of 2003. The increase in noninterest expense from the prior quarter was due to the aforementioned prepayment penalty on high cost FHLB debt partially offset by declines in most other categories of noninterest expense. For the nine month period ended September 30, 2004, noninterest expense increased $29.1 million or 16.9% to $201.7 million compared with the same period in 2003 reflecting the same increases due to the prepayment penalty on the FHLB debt and the impact of the Oakland County initiatives. Nearly all categories of noninterest expense increased with the exception of equipment, professional services and postage and delivery. Salaries and employee benefits increased $1.6 million and $5.2 million for the three and nine month periods ended September 30, 2004, respectively, compared with the same periods of the prior year. Salary and benefits expense increased in Oakland County by $1.2 million and $3.9 million in the three and nine month periods, respectively, due to the previously announced Oakland County expansion initiative. Employee benefits increased in both the three and nine month periods due to higher pension, medical and other employee benefits expenses. Normal salary merit increases were offset by a reduction in staffing levels. Citizens had 2,260 full time equivalent employees at September 30, 2004, down from 2,325 at June 30, 2004 and 2,353 at September 30, 2003. Occupancy costs increased $0.5 million and $1.8 million for the three and nine month periods ended September 30, 2004, respectively, compared with the same periods of the prior year. Building rent increased $0.3 million and $0.5 million for the three and nine month periods, respectively, due to the opening of new branches and two regional hubs in Oakland County. Other occupancy costs increased $0.1 million and $1.0 million in the three and nine month periods, respectively, largely due to higher maintenance, insurance, energy and real estate tax expenses. Advertising and public relations expense increased $0.7 million and $2.2 million for the three and nine month periods ended September 30, 2004, respectively, compared with the same periods of the prior year. Advertising to support Citizens' Oakland County initiative accounted for $1.3 million and deposit-focused promotions and the new brand introduction accounted for $0.9 million of the nine month period increase. Other loan fee expense decreased $1.0 million and $0.5 million for the three and nine month periods ended September 30, 2004, respectively, compared with the same periods of the prior year. Loan fee expenses decreased due to a lower provision for losses on unfunded loan commitments and lower mortgage loan expenses due to the lower mortgage loan origination volume. Data processing services were unchanged at $3.2 million for the three month period and increased $0.7 million for the nine month period ended September 30, 2004 compared with the same periods of the prior year. The increase in the nine month period is due to higher processing costs related to the fourth quarter 2003 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. These increases were largely offset in the three month period and were partially offset in the nine month period by lower processing costs on Citizens' core loan and deposit systems. Professional services expense decreased $0.8 million and $0.3 million for the three and nine month periods ended September 30, 2004, respectively, compared with the same periods of the prior year due to lower executive recruiting and relocation costs and a decline in costs associated with banking industry consultants, partially offset by higher costs related to new internal control evaluation procedures to comply with Section 404 of the Sarbanes-Oxley Act. Equipment expense decreased $0.6 million and $1.3 million, and telephone expense increased $0.4 million and $1.0 million for the three and nine month periods ended September 30, 2004, respectively, due to the reclassification of data transmission costs from equipment expense to telephone expense in connection with a new services contract. Other noninterest expense increased $0.8 million and $2.4 million for the three and nine month periods ended September 30, 2004, respectively, compared with the same periods of the prior year. Contributing to the increases for the three and nine month periods ended September 30, 2004, were higher expenses in the current year periods specifically from reconciliation items, including certain tax related items, identified during the current quarter, training and travel expenses and lower deferred loan origination costs, partially offset by lower expenses for other real estate. Service fees are lower both in the quarter and in the nine month period ended September 30, 2004 due to implementation costs associated with Wealth Management's strategic alliances with SEI Investments, EnvestnetPMC, Inc., and EPIC Advisors, Inc. incurred in the third and fourth quarter of 2003. Excluding the effect of the prepayment penalty on FHLB debt, Citizens anticipates that noninterest expense in the fourth quarter will be less than the third quarter level. OAKLAND COUNTY Citizens continued its expansion in Oakland County, Michigan. Two regional hub locations and two new branch facilities are now open with plans for an additional two new branches to open this year. The Oakland County expansion initiative has shown great success since being launched in the fourth quarter of 2003, as evidenced by total loans increasing $196 million or 61.1%, core deposits increasing $49 million or 34.3%, and total full-time equivalent personnel increasing by 50 since the end of the third quarter of 2003. From the second quarter of 2004, total loans increased $56 million to $517 million and core deposits increased $19 million to $192 million as of September 30, 2004. 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 November 10, 2004, to shareholders of record on November 1, 2004. OTHER NEWS On July 26, 2004, the brokerage and investment areas located at Citizens Bank and F&M Bank made exciting moves that will better position the banks to compete with national brokerage firms and in the local investment arena. The new program will be marketed under the new names of Investment Center At Citizens Bank, and Investment Center At F&M Bank. In addition, Citizens replaced its broker/dealer services vendor with Independent Financial Marketing Group, Inc., who will provide marketing support, advanced technology and improved processing capabilities. "IFMG will provide us with resources that will help us grow our brokerage business," said Terrence J. Andrysiak, senior vice president and head of the brokerage area. IFMG has 20 years experience in bank investment and insurance programs nationwide. According to The Ken Kehrer Report, IFMG has been ranked as the #1 distributor of investment and insurance products through banks for five consecutive years (1999-2003). IFMG also recently received the first place overall ranking of third party marketers to banks in the 2003/2004 ABA National Survey of Bank Investment Services. On September 29, 2004, Citizens Bank Wealth Management, N.A. completed its reorganization of the Golden Oak Funds managed by its affiliate CB Capital Management, Inc. into two leading fund groups: Goldman Sachs Asset Management and Federated Mutual Fund Services. The assets of the Golden Oak funds have been exchanged for shares of the acquiring funds. Golden Oak mutual fund portfolios had approximately $450 million in assets under management. "The merger of these funds went extremely well thanks to a cooperative effort between Citizens and its partners," said James A. Schmelter, executive vice president and head of wealth management. "We believe this merger will be very beneficial to Golden Oak shareholders and at the same time will allow us to focus our efforts on providing clients with exceptional service, comprehensive and unbiased financial advice, and best-in-class financial services." During the third quarter of 2004, Citizens repurchased a total of 111,000 shares of its stock at an average price of $31.39. The stock repurchase program announced in October 2001 of 3,000,000 shares was completed on August 12, 2004. Citizens repurchased those shares at an overall average price of $28.56. As of September 30, 2004, 2,924,000 shares remain to be purchased under the new program approved by the Board on October 16, 2003. CONFERENCE CALL ANNOUNCEMENT William R. Hartman, chairman, president and CEO, Charles D. Christy, CFO, John D. Schwab, chief credit officer, and Martin E. Grunst, treasurer will review the quarter's results in a conference call for investors and analysts beginning at 10:00 AM EDT ON FRIDAY, OCTOBER 22, 2004. A live audio web cast is available at http://viavid.net/dce.aspx?sid=00001EE3 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: 1036013 Conference Name: "Citizens Banking Corporation Third Quarter Earnings Call" R.S.V.P. is not required. A playback of the conference call will be available after 2:00pm EDT through October 29, 2004, by dialing US/Canada Dial-In Number: (800) 642-1687 or International Dial-In Number: (706) 645-9291 conference ID: 1036013. 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 180 branch, private banking, and financial center locations throughout Michigan, Wisconsin, and Iowa. SAFE HARBOR STATEMENT Discussions in this release that are not statements of historical fact (including statements that include terms such as "will" "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, Citizens' potential inability to continue to obtain third party financing on favorable terms, 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 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 SEPTEMBER 30, December 31, (in thousands) 2004 2003 ----------- ----------- ASSETS Cash and due from banks $ 166,936 $ 182,545 Interest-bearing deposits with banks 1,933 2,223 Securities available-for-sale: Taxable 1,460,345 1,536,145 Tax-exempt 402,329 429,056 ----------- ----------- Total securities available-for-sale 1,862,674 1,965,201 Securities held-to-maturity (fair value of $49,646 and $19,913, respectively) 48,878 19,857 Mortgage loans held for sale 19,718 44,677 Loans 5,299,428 5,245,702 Less: Allowance for loan losses (122,184) (123,545) ----------- ----------- Net loans 5,177,244 5,122,157 Premises and equipment 117,743 112,784 Goodwill 54,527 54,785 Other intangible assets 14,758 16,932 Bank owned life insurance 82,022 80,461 Other assets 113,017 109,448 ----------- ----------- TOTAL ASSETS $ 7,659,450 $ 7,711,070 =========== =========== LIABILITIES Noninterest-bearing deposits $ 933,864 $ 882,429 Interest-bearing deposits 4,333,475 4,559,838 ----------- ----------- Total deposits 5,267,339 5,442,267 Federal funds purchased and securities sold under agreements to repurchase 707,219 588,593 Other short-term borrowings 44,266 43,077 Other liabilities 64,588 65,112 Long-term debt 926,318 936,859 ----------- ----------- Total liabilities 7,009,730 7,075,908 SHAREHOLDERS' EQUITY Preferred stock - no par value Common stock - no par value 97,882 100,314 Retained earnings 530,896 512,045 Accumulated other comprehensive income 20,942 22,803 ----------- ----------- Total shareholders' equity 649,720 635,162 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,659,450 $ 7,711,070 =========== ===========

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) CITIZENS BANKING CORPORATION AND SUBSIDIARIES Three Months Ended Nine Months Ended September 30, September 30, (in thousands, except per share amounts) 2004 2003 2004 2003 --------- --------- --------- --------- INTEREST INCOME Interest and fees on loans $ 75,470 $ 80,371 $ 223,249 $ 247,394 Interest and dividends on investment securities: Taxable 15,312 14,254 46,775 45,795 Tax-exempt 5,243 5,059 15,766 15,288 Money market investments 4 3 8 102 --------- --------- --------- --------- Total interest income 96,029 99,687 285,798 308,579 --------- --------- --------- --------- INTEREST EXPENSE Deposits 15,634 18,851 47,977 66,410 Short-term borrowings 2,701 1,463 5,771 3,497 Long-term debt 8,393 8,219 25,203 23,092 --------- --------- --------- --------- Total interest expense 26,728 28,533 78,951 92,999 --------- --------- --------- --------- NET INTEREST INCOME 69,301 71,154 206,847 215,580 Provision for loan losses 4,985 10,300 16,485 54,942 --------- --------- --------- --------- Net interest income after provision for loan losses 64,316 60,854 190,362 160,638 --------- --------- --------- --------- NONINTEREST INCOME Service charges on deposit accounts 9,196 7,703 26,307 21,842 Trust fees 4,222 4,368 13,060 12,912 Mortgage and other loan income 1,750 5,404 7,053 15,967 Brokerage and investment fees 1,719 2,333 6,152 6,015 Bankcard fees 853 761 2,547 2,310 Gain on sale of Illinois bank subsidiary 11,650 -- 11,650 -- Other 5,158 4,443 15,147 14,041 --------- --------- --------- --------- Total fees and other income 34,548 25,012 81,916 73,087 Investment securities gains (losses) 534 42 (1,519) 101 --------- --------- --------- --------- Total noninterest income 35,082 25,054 80,397 73,188 NONINTEREST EXPENSE Salaries and employee benefits 32,649 31,036 97,773 92,548 Occupancy 4,859 4,328 15,123 13,337 Professional services 4,131 4,946 12,340 12,613 Equipment 3,486 4,060 10,796 12,098 Data processing services 3,192 3,225 10,278 9,599 Advertising and public relations 2,090 1,395 6,273 4,067 Postage and delivery 1,516 1,739 4,934 5,100 Telephone 1,543 1,169 4,528 3,479 Other loan fees 384 1,360 3,144 3,647 Stationery and supplies 947 911 2,705 2,679 Prepayment penalty on FHLB advances 17,959 -- 17,959 -- Other 6,217 5,431 15,797 13,375 --------- --------- --------- --------- Total noninterest expense 78,973 59,600 201,650 172,542 --------- --------- --------- --------- INCOME BEFORE INCOME TAXES 20,425 26,308 69,109 61,284 Income tax provision 779 6,703 13,298 13,407 --------- --------- --------- --------- NET INCOME $ 19,646 $ 19,605 $ 55,811 $ 47,877 ========= ========= ========= ========= NET INCOME PER SHARE: Basic 0.46 0.45 1.29 1.10 Diluted 0.45 0.45 1.28 1.10 AVERAGE SHARES OUTSTANDING: Basic 43,224 43,227 43,277 43,326 Diluted 43,677 43,501 43,763 43,574

SELECTED QUARTERLY INFORMATION CITIZENS BANKING CORPORATION AND SUBSIDIARIES 3RD QTR 2004 2ND QTR 2004 1ST QTR 2004 ------------ ------------ ------------ SUMMARY OF OPERATIONS (THOUSANDS) Interest income $ 96,029 $ 95,375 $ 94,394 Interest expense 26,728 26,157 26,066 Net interest income 69,301 69,218 68,328 Provision for loan losses 4,985 4,500 7,000 Net interest income after provision for loan losses 64,316 64,718 61,328 Total fees and other income 34,548 24,856 22,512 Investment securities gains (losses) 534 (2,053) -- Noninterest expense 78,973 62,143 60,534 Income tax provision 779 6,656 5,863 Net income 19,646 18,722 17,443 AT PERIOD END (MILLIONS) Total assets $ 7,659 $ 7,748 $ 7,692 Total earning assets 7,233 7,305 7,279 Total loans 5,299 5,290 5,200 Total deposits 5,267 5,361 5,461 Total shareholders' equity 650 628 654 AVERAGE BALANCES (MILLIONS) Total assets $ 7,669 $ 7,769 $ 7,640 Total earning assets 7,235 7,338 7,228 Total loans 5,262 5,269 5,197 Total deposits 5,336 5,435 5,474 Total shareholders' equity 637 628 644 Shareholders' equity / assets 8.31% 8.08% 8.43% CREDIT QUALITY STATISTICS (THOUSANDS) Nonaccrual loans $ 41,706 $ 48,191 $ 54,565 Loans 90 or more days past due and still accruing 324 298 201 Restructured loans 52 52 52 --------- --------- --------- Total nonperforming loans 42,082 48,541 54,818 Other repossessed assets acquired (ORAA) 10,303 9,673 7,592 --------- --------- --------- Total nonperforming assets $ 52,385 $ 58,214 $ 62,410 ========= ========= ========= Allowance for loan losses $ 122,184 $ 123,805 $ 123,703 Allowance for loan losses ratio 2.31% 2.34% 2.38% Allowance for loan losses as a percent of nonperforming assets 233.24 212.67 198.21 Allowance for loan losses as a percent of nonperforming loans 290.35 255.05 225.66 Nonperforming assets as a percent of loans plus ORAA 0.99 1.10 1.20 Nonperforming assets as a percent of total assets 0.68 0.75 0.81 Net loans charged off as a percent of average loans (annualized) 0.38 0.33 0.53 Net loans charged off (000) $ 4,985 $ 4,398 $ 6,842 PER COMMON SHARE DATA Net Income (loss): Basic $ 0.46 $ 0.43 $ 0.40 Diluted 0.45 0.43 0.40 Dividends 0.285 0.285 0.285 Market Value: High $ 33.36 $ 33.99 $ 34.00 Low 29.42 28.31 31.55 Close 32.57 31.05 32.63 Book value 15.03 14.51 15.09 Shares outstanding, end of period (000) 43,234 43,263 43,343 PERFORMANCE RATIOS (ANNUALIZED) Net interest margin (FTE) (1) 4.02% 3.98% 4.01% Return on average assets 1.02 0.97 0.92 Return on average shareholders' equity 12.27 12.00 10.89 Efficiency ratio (2)(3) 63.86 63.78 64.26

SELECTED QUARTERLY INFORMATION CITIZENS BANKING CORPORATION AND SUBSIDIARIES 4TH QTR 2003 3RD QTR 2003 ------------ ------------ SUMMARY OF OPERATIONS (THOUSANDS) Interest income $ 97,398 $ 99,687 Interest expense 26,720 28,533 Net interest income 70,678 71,154 Provision for loan losses 8,020 10,300 Net interest income after provision for loan losses 62,658 60,854 Total fees and other income 21,629 25,012 Investment securities gains (losses) 2 42 Noninterest expense 60,446 59,600 Income tax provision 5,769 6,703 Net income 18,074 19,605 AT PERIOD END (MILLIONS) Total assets $ 7,711 $ 7,787 Total earning assets 7,278 7,356 Total loans 5,246 5,226 Total deposits 5,442 5,482 Total shareholders' equity 635 634 AVERAGE BALANCES (MILLIONS) Total assets $ 7,697 $ 7,812 Total earning assets 7,279 7,378 Total loans 5,220 5,183 Total deposits 5,481 5,610 Total shareholders' equity 626 620 Shareholders' equity / assets 8.13% 7.94% CREDIT QUALITY STATISTICS (THOUSANDS) Nonaccrual loans $ 68,744 $ 83,278 Loans 90 or more days past due and still accruing 345 601 Restructured loans -- -- --------- --------- Total nonperforming loans 69,089 83,879 Other repossessed assets acquired (ORAA) 7,943 7,350 --------- --------- Total nonperforming assets $ 77,032 $ 91,229 ========= ========= Allowance for loan losses $ 123,545 $ 123,265 Allowance for loan losses ratio 2.36% 2.36% Allowance for loan losses as a percent of nonperforming assets 160.38 135.12 Allowance for loan losses as a percent of nonperforming loans 178.82 146.96 Nonperforming assets as a percent of loans plus ORAA 1.47 1.74 Nonperforming assets as a percent of total assets 1.00 1.17 Net loans charged off as a percent of average loans (annualized) 0.59 0.80 Net loans charged off (000) $ 7,740 $ 10,337 PER COMMON SHARE DATA Net Income (loss): Basic $ 0.42 $ 0.45 Diluted 0.41 0.45 Dividends 0.285 0.285 Market Value: High $ 34.26 $ 28.01 Low 26.41 24.77 Close 32.72 26.41 Book value 14.69 14.67 Shares outstanding, end of period (000) 43,242 43,220 PERFORMANCE RATIOS (ANNUALIZED) Net interest margin (FTE) (1) 4.07% 4.03% Return on average assets 0.93 1.00 Return on average shareholders' equity 11.45 12.55 Efficiency ratio (2)(3) 63.16 59.90

(1) Net interest margin is presented on an annual basis, includes taxable equivalent adjustments to interest income and is based on a tax rate of 35%. (2) Efficiency Ratio = Noninterest expense/(Net interest income + Total fees and other income). It measures how efficient a bank spends its revenues. Third quarter 2004 excludes investment securities gains of $534,000, gain on sale of Illinois bank subsidiary of $11,650,000 and prepayment penalty on FHLB advances of $17,959,000. The efficiency ratio would equal 73.67% if the Illinois bank sale and FHLB prepayment penalty were included in the calculation. (3) Second quarter 2004 excludes investment securities losses of ($2,053,000).

FINANCIAL SUMMARY AND COMPARISON FOR THE NINE MONTHS ENDED CITIZENS BANKING CORPORATION AND SUBSIDIARIES SEPTEMBER 30, 2004 2003 % CHANGE --------- --------- --------- SUMMARY OF OPERATIONS (THOUSANDS) Interest income $ 285,798 $ 308,579 (7.4)% Interest expense 78,951 92,999 (15.1) Net interest income 206,847 215,580 (4.1) Provision for loan losses 16,485 54,942 (70.0) Net interest income after provision for loan losses 190,362 160,638 18.5 Total fees and other income 81,916 73,087 12.1 Investment securities gains (losses) (1,519) 101 N/M Noninterest expense 201,650 172,542 16.9 Income tax provision 13,298 13,407 (0.8) Net income 55,811 47,877 16.6 AT PERIOD END (MILLIONS) Total assets $ 7,659 $ 7,787 (1.6)% Total earning assets 7,233 7,356 (1.7) Total loans 5,299 5,226 1.4 Total deposits 5,267 5,482 (3.9) Total shareholders' equity 650 634 2.5 AVERAGE BALANCES (MILLIONS) Total assets $ 7,693 $ 7,693 (0.0)% Total earning assets 7,267 7,271 (0.1) Total loans 5,238 5,259 (0.4) Total deposits 5,415 5,728 (5.5) Total shareholders' equity 636 634 0.4 Shareholders' equity / assets 8.27% 8.24% 0.4 PER COMMON SHARE DATA Net Income: Basic $ 1.29 $ 1.10 17.3% Diluted 1.28 1.10 16.4 Dividends 0.855 0.855 0.0 Market Value: High $ 34.00 $ 28.17 20.7 Low 28.31 21.72 30.3 Close 32.57 26.41 23.3 Book value 15.03 14.67 2.4 Tangible book value 13.43 13.00 3.3 Shares outstanding, end of period (000) 43,234 43,220 0.0 PERFORMANCE RATIOS (ANNUALIZED) Net interest margin (FTE) (1) 4.00% 4.17% (4.1)% Return on average assets 0.97 0.83 16.9 Return on average shareholders' equity 11.72 10.10 16.0 Net loans charged off as a percent of average loans 0.41 0.97 (57.7)

(1) Net interest margin is presented on an annual basis and includes taxable equivalent adjustments to interest income of $10,068,000 and $10,120,000 for the nine months ended September 30, 2004 and 2003, respectively, based on a tax rate of 35%. N/M - not meaningful

NONINTEREST INCOME AND NONINTEREST EXPENSE (UNAUDITED) CITIZENS BANKING CORPORATION AND SUBSIDIARIES Quarter Ended --------------------------------------------------------------------------------- Sept 30 June 30 Mar 31 Dec 31 Sept 30 (in thousands) 2004 2004 2004 2003 2003 -------- -------- -------- -------- -------- NONINTEREST INCOME: Service charges on deposit accounts $ 9,196 $ 9,069 $ 8,042 $ 8,074 $ 7,703 Trust fees 4,222 4,528 4,310 4,615 4,368 Mortgage and other loan income 1,750 3,047 2,256 2,079 5,404 Brokerage and investment fees 1,719 2,651 1,782 1,705 2,333 Bankcard fees 853 911 783 732 761 Gain on sale of Illinois bank subsidiary 11,650 -- -- -- -- Other income 5,158 4,650 5,339 4,424 4,443 -------- -------- -------- -------- -------- Total fees and other income 34,548 24,856 22,512 21,629 25,012 Investment securities gains (losses) 534 (2,053) -- 2 42 -------- -------- -------- -------- -------- TOTAL NONINTEREST INCOME $ 35,082 $ 22,803 $ 22,512 $ 21,631 $ 25,054 ======== ======== ======== ======== ======== NONINTEREST EXPENSE: Salaries and employee benefits $ 32,649 $ 33,185 $ 31,939 $ 29,774 $ 31,036 Occupancy 4,859 4,922 5,342 5,112 4,328 Professional services 4,131 4,281 3,928 5,202 4,946 Equipment 3,486 3,668 3,642 3,989 4,060 Data processing services 3,192 3,440 3,646 3,145 3,225 Advertising and public relations 2,090 2,038 2,145 1,719 1,395 Postage and delivery 1,516 1,862 1,556 1,796 1,739 Telephone 1,543 1,451 1,534 1,314 1,169 Other loan fees 384 1,631 1,129 1,192 1,360 Stationery and supplies 947 916 842 1,256 911 Prepayment penalty on FHLB advances 17,959 -- -- -- -- Other expense 6,217 4,749 4,831 5,947 5,431 -------- -------- -------- -------- -------- TOTAL NONINTEREST EXPENSE $ 78,973 $ 62,143 $ 60,534 $ 60,446 $ 59,600 ======== ======== ======== ======== ========

AVERAGE BALANCES, YIELDS AND RATES THREE MONTHS ENDED SEPTEMBER 30, 2004 JUNE 30, 2004 AVERAGE AVERAGE AVERAGE AVERAGE (in thousands) BALANCE RATE (1) BALANCE RATE (1) ------- -------- ------- -------- EARNING ASSETS Money market investments $ 2,592 0.57% $ 1,904 0.38% Investment securities (3): Taxable 1,491,699 4.11 1,579,623 4.06 Tax-exempt 426,893 7.56 427,115 7.61 Mortgage loans held for sale 21,640 6.35 43,839 6.10 Loans: Commercial 2,829,373 5.50 2,900,981 5.38 Real estate 489,608 5.73 483,023 5.74 Direct consumer 1,124,344 5.57 1,114,663 5.51 Indirect consumer 824,030 6.66 769,978 6.73 ----------- ------------ Total earning assets 7,210,179 5.49 7,321,126 5.41 NONEARNING ASSETS Cash and due from banks 170,013 161,584 Investment security fair value adjustment 24,664 17,220 Other nonearning assets 388,601 394,071 Allowance for loan losses (124,197) (125,200) ----------- ------------ Total assets $ 7,669,260 $ 7,768,801 =========== ============ INTEREST-BEARING LIABILITIES Deposits: Interest-bearing demand $ 1,269,994 0.76 $ 1,315,875 0.72 Savings deposits 1,493,434 0.84 1,383,164 0.64 Time deposits 1,634,243 2.44 1,818,784 2.50 Short-term borrowings 694,850 1.55 687,927 1.05 Long-term debt 923,476 3.62 935,479 3.64 ----------- ------------ Total interest-bearing liabilities 6,015,997 1.77 6,141,229 1.71 NONINTEREST-BEARING LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest-bearing demand 938,155 917,203 Other liabilities 77,905 82,768 Shareholders' equity 637,203 627,601 ------------ ------------ Total liabilities and shareholders' equity $ 7,669,260 $ 7,768,801 ============ ============ INTEREST SPREAD 3.72% 3.70% Contribution of noninterest bearing sources of funds 0.30 0.28 ---- ---- NET INTEREST INCOME AS A PERCENT OF EARNING ASSETS 4.02% 3.98%

AVERAGE BALANCES, YIELDS AND RATES THREE MONTHS ENDED SEPTEMBER 30, 2003 AVERAGE AVERAGE (in thousands) BALANCE (2) RATE (1)(2) ----------- ----------- EARNING ASSETS Money market investments $ 3,927 0.30% Investment securities (3): Taxable 1,526,583 3.73 Tax-exempt 401,302 7.76 Mortgage loans held for sale 234,793 5.26 Loans: Commercial 3,049,878 5.55 Real estate 481,337 6.34 Direct consumer 937,133 6.20 Indirect consumer 714,302 7.16 ------------ Total earning assets 7,349,255 5.57 NONEARNING ASSETS Cash and due from banks 183,214 Investment security fair value adjustment 28,909 Other nonearning assets 375,185 Allowance for loan losses (124,964) ------------ Total assets $ 7,811,599 ============ INTEREST-BEARING LIABILITIES Deposits: Interest-bearing demand $ 1,334,765 0.74 Savings deposits 1,332,519 0.55 Time deposits 2,054,257 2.81 Short-term borrowings 561,427 1.03 Long-term debt 937,941 3.48 ------------ Total interest-bearing liabilities 6,220,909 1.82 NONINTEREST-BEARING LIABILITIES AND SHAREHOLDERS' EQUITY 888,440 Noninterest-bearing demand 82,150 Other liabilities 620,100 Shareholders' equity ------------ $ 7,811,599 Total liabilities and shareholders' equity ============ 3.75% INTEREST SPREAD 0.28 Contribution of noninterest bearing sources of funds ---- 4.03% NET INTEREST INCOME AS A PERCENT OF EARNING ASSETS

NINE MONTHS ENDED SEPTEMBER 30, 2004 2003 AVERAGE AVERAGE AVERAGE AVERAGE (in thousands) BALANCE RATE (1) BALANCE (2) RATE (1)(2) ------- -------- ----------- ----------- EARNING ASSETS Money market investments $ 2,159 0.49% $ 14,137 0.97% Investment securities (3): Taxable 1,533,232 4.07 1,359,305 4.49 Tax-exempt 425,205 7.61 401,022 7.82 Mortgage loans held for sale 32,463 5.97 185,891 5.54 Loans: Commercial 2,883,448 5.43 3,155,940 5.72 Real estate 489,646 5.74 538,880 6.30 Direct consumer 1,093,297 5.59 895,155 6.56 Indirect consumer 777,908 6.75 668,772 7.45 ----------- ----------- Total earning assets 7,237,358 5.46 7,219,102 5.90 NONEARNING ASSETS Cash and due from banks 164,142 172,681 Investment security fair value adjustment 29,624 51,598 Other nonearning assets 386,576 368,973 Allowance for loan losses (125,008) (119,411) ----------- ----------- Total assets $ 7,692,692 $ 7,692,943 =========== =========== INTEREST-BEARING LIABILITIES Deposits: Interest-bearing demand $ 1,314,645 0.74 $ 1,312,898 0.94 Savings deposits 1,388,673 0.68 1,352,398 0.73 Time deposits 1,802,073 2.50 2,192,473 3.03 Short-term borrowings 630,578 1.22 418,967 1.12 Long-term debt 932,511 3.61 835,990 3.69 ----------- ----------- Total interest-bearing liabilities 6,068,480 1.74 6,112,726 2.03 NONINTEREST-BEARING LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest-bearing demand 909,293 870,039 Other liabilities 78,593 76,073 Shareholders' equity 636,326 634,105 ----------- ----------- Total liabilities and shareholders' equity $ 7,692,692 $ 7,692,943 =========== =========== INTEREST SPREAD 3.72% 3.87% Contribution of noninterest bearing sources of funds 0.28 0.30 ---- ---- NET INTEREST INCOME AS A PERCENT OF EARNING ASSETS 4.00% 4.17%

(1) Average rates are presented on an annual basis and include taxable equivalent adjustments to interest income. (2) Certain amounts have been reclassified to conform with current year presentation. (3) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

NONPERFORMING ASSETS CITIZENS BANKING CORPORATION AND SUBSIDIARIES Quarter Ended ----------------------------------------------------------------- Sept 30 June Mar 31 Dec 31 Sept 30 (in thousands) 2004 2004 2004 2003 2003 -------- -------- -------- -------- -------- Commercial(1) Commercial $ 13,491 $ 18,066 $ 24,359 $ 37,171 $ 51,158 Commercial real estate 12,290 14,982 15,310 16,385 17,379 Small business 2,916 2,749 2,052 1,603 1,648 -------- -------- -------- -------- -------- Total commercial 28,697 35,797 41,721 55,159 70,185 Consumer: Direct 3,682 4,042 3,471 3,177 3,291 Indirect 1,158 655 1,087 1,247 1,625 Mortgage 8,169 7,697 8,286 9,161 8,177 Loans 90 days or more past due and still accruing 324 298 201 345 601 Restructured loans 52 52 52 -- -- -------- -------- -------- -------- -------- Total Nonperforming Loans 42,082 48,541 54,818 69,089 83,879 Other Reposessed Assets Acquired 10,303 9,673 7,592 7,943 7,350 -------- -------- -------- -------- -------- Total Nonperforming Assets $ 52,385 $ 58,214 $ 62,410 $ 77,032 $ 91,229 ======== ======== ======== ======== ======== (1)Changes in commercial nonperforming loans for the quarter (in millions): Inflows $ 22.3 $ 17.3 $ 11.7 $ 17.8 $ 21.1 Outflows (29.4) (23.2) (25.1) (32.8) (24.7) -------- -------- -------- -------- -------- Net change $ (7.1) $ (5.9) $ (13.4) $ (15.0) $ (3.6) ======== ======== ======== ======== ========

SUMMARY OF LOAN LOSS EXPERIENCE CITIZENS BANKING CORPORATION AND SUBSIDIARIES Quarter Ended ------------------------------------------------------------------------------- Sept 30 June 30 Mar 31 Dec 31 Sept 30 (in thousands) 2004 2004 2004 2003 2003 --------- --------- --------- --------- --------- Allowance for loan losses - beginning of period $ 123,805 $ 123,703 $ 123,545 $ 123,265 $ 123,302 Less: Allowance of sold bank (1,621) -- -- -- -- Provision for loan losses 4,985 4,500 7,000 8,020 10,300 Charge-offs: Commercial 2,698 2,982 5,703 7,323 9,539 Commercial real estate 1,763 1,918 1,151 2,276 1,531 Small business 518 167 218 551 348 --------- --------- --------- --------- --------- Total commercial 4,979 5,067 7,072 10,150 11,418 Real estate mortgage 324 305 193 320 213 Consumer - Direct 1,471 1,220 1,630 1,388 1,628 Consumer - Indirect 1,888 1,630 1,891 2,580 1,941 --------- --------- --------- --------- --------- Total charge-offs 8,662 8,222 10,786 14,438 15,200 --------- --------- --------- --------- --------- Recoveries: Commercial 2,315 2,202 2,332 4,452 2,882 Commercial real estate 339 225 432 927 595 Small business 29 107 17 165 139 --------- --------- --------- --------- --------- Total commercial 2,683 2,534 2,781 5,544 3,616 Real estate mortgage 34 23 13 -- 27 Consumer - Direct 342 560 438 461 504 Consumer - Indirect 618 707 712 693 716 --------- --------- --------- --------- --------- Total recoveries 3,677 3,824 3,944 6,698 4,863 --------- --------- --------- --------- --------- Net charge-offs 4,985 4,398 6,842 7,740 10,337 --------- --------- --------- --------- --------- Allowance for loan losses - end of period $ 122,184 $ 123,805 $ 123,703 $ 123,545 $ 123,265 ========= ========= ========= ========= ========= Reserve for loan commitments - end of period $ 2,630 $ 3,000 $ 2,757 $ 2,690 $ 2,690 ========= ========= ========= ========= =========

For the Quarter Ended September 30, 2004 Consumer - Consumer - Commercial Real estate Direct Indirect Total ---------- ----------- ---------- ---------- ------ Charge-offs: Michigan $1,869 $ 146 $1,168 $1,888 $5,071 Wisconsin 2,922 100 231 -- 3,253 Iowa 188 78 72 -- 338 Illinois -- -- -- -- -- ------ ------ ------ ------ ------ Total charge-offs 4,979 324 1,471 1,888 8,662 ------ ------ ------ ------ ------ Recoveries: Michigan 1,195 -- 272 615 2,082 Wisconsin 1,271 18 47 -- 1,336 Iowa 76 16 20 -- 112 Illinois 141 -- 3 3 147 ------ ------ ------ ------ ------ Total recoveries 2,683 34 342 618 3,677 ------ ------ ------ ------ ------ Net charge-offs $2,296 $ 290 $1,129 $1,270 $4,985 ====== ====== ====== ====== ======

For the Nine Months Ended September 30, 2004 Consumer - Consumer - Commercial Real estate Direct Indirect Total ---------- ----------- ---------- ---------- ------- Charge-offs: Michigan $ 6,506 $ 312 $ 3,201 $ 5,409 $15,428 Wisconsin 8,708 327 752 -- 9,787 Iowa 1,287 183 312 -- 1,782 Illinois 617 -- 56 -- 673 ------- ------- ------- ------- ------- Total charge-offs 17,118 822 4,321 5,409 27,670 ------- ------- ------- ------- ------- Recoveries: Michigan 4,024 9 935 2,015 6,983 Wisconsin 3,325 31 300 -- 3,656 Iowa 400 30 70 -- 500 Illinois 249 -- 35 22 306 ------- ------- ------- ------- ------- Total recoveries 7,998 70 1,340 2,037 11,445 ------- ------- ------- ------- ------- Net charge-offs $ 9,120 $ 752 $ 2,981 $ 3,372 $16,225 ======= ======= ======= ======= =======