EX-99.1 2 k86819exv99w1.txt PRESS RELEASE, DATED JULY 15, 2004 [CITIZENS BANKING CORPORATION LOGO] EXHIBIT 99.1 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 JULY 15, 2004 CITIZENS BANKING CORPORATION ANNOUNCES SECOND QUARTER 2004 RESULTS FLINT, MICHIGAN --- Citizens Banking Corporation announced net income of $18,722,000 for the three months ended June 30, 2004, compared with net income of $13,214,000 in the same quarter of 2003 and net income of $17,443,000 in the first quarter of 2004. Diluted net income per share was $0.43, an increase of 43.3% compared with $0.30 per diluted share for the same quarter of last year, and an increase of 7.5% compared with $0.40 per diluted share for the first quarter of 2004. Annualized returns on average assets and average equity during the second quarter were 0.97% and 12.00%, respectively, compared with 0.68% and 8.29% in the second quarter of 2003. For the six months ended June 30, 2004, net income was $36,165,000 or $0.83 per diluted share compared with net income of $28,272,000 or $0.65 per diluted share for the same period of 2003. "Once again, improved credit quality led the way toward a solid quarter of results. We are also pleased with the continued quality growth in our home equity portfolio and the progress being made in our fee-based businesses," stated William R. Hartman, chairman, president and CEO. "The implementation of our `Achieving the Vision' initiatives continues to be well on track enabling us to better serve clients and improve performance," Hartman continued. KEY HIGHLIGHTS IN THE QUARTER: o Provision for loan losses declined to $4.5 million compared with $7.0 million in the first quarter of 2004 and $25.7 million in the same quarter of 2003. Net charge-offs declined to $4.4 million in the second quarter compared with $6.8 million in the first quarter of 2004 and $12.0 million in the same quarter of 2003. o Nonperforming assets decreased $4.2 million or 6.7% to $58.2 million at June 30, 2004 compared with the first quarter and decreased $38.4 million or 39.7% compared with the second quarter of 2003. Both nonperforming assets and net charge-offs are now at their lowest levels in more than three years. o Compared with the prior quarter, all major categories of fee income increased, led by significantly higher deposit service charges, increased brokerage and investment fees, higher mortgage and other loan income, and higher trust fees and bankcard fees. o Citizens designated certain securities for sale during the quarter, generating a loss of $2.1 million. The proceeds from the sale will be reinvested in higher yielding securities, which should benefit net interest income in future periods. o Home equity loans outstanding grew $59.7 million or 7.3% during the second quarter and $247.3 million or 39.5% compared with June 30, 2003 as a result of four successful campaigns completed over the past year. o Although total deposits declined, market rate savings product promotions contributed to core deposit growth, generating $52 million in new core deposits in the second quarter and $92 million in the first six months of 2004. o Citizens introduced a new business checking suite of products offering tiered bundled pricing, internet access, and image rendered checks. At quarter end 1,180 new business checking accounts had been opened, resulting in $16.1 million in new core deposits. o o Consumer and Wealth Management lines of business collaborated in a brokerage sales campaign generating $34 million in brokerage and investment sales and $1.4 million in fee income. o Mortgage closing volumes declined to $217 million compared with $491 million in the same quarter of 2003, indicative of the increasing interest rate environment. o Citizens announced the opening of its second major Oakland County hub facility in Novi as part of the Oakland County initiative. BALANCE SHEET Citizens' total assets at June 30, 2004 were $7.748 billion, an increase of $36.8 million or 0.5% compared with December 31, 2003 and an increase of $55.5 million or .7% from March 31, 2004. Total assets increased due to growth in portfolio loans. Portfolio loans increased $44.4 million or 0.8% compared with year end 2003 and $90.2 million or 1.7% compared with March 31, 2004 as consumer loans, excluding mortgage loans, increased, while mortgage and commercial loans declined. Consumer loans, excluding mortgage loans, increased $168.1 million or 9.5% at June 30, 2004 compared with December 31, 2003 due to strong growth in home equity loans. Home equity loans increased $124 million or 16.6% in the six months ended June 30, 2004. The recreational vehicle and marine segments of the indirect loan portfolio also experienced strong growth due to higher seasonal demand in the second quarter. Compared with June 30, 2003, consumer loans excluding mortgage loans increased $343.7 million or 21.6%. Compared with June 30, 2003, home equity loans grew $247.3 million or 39.5% as a result of successful loan campaigns and indirect loans grew $125.1 million or 18.5%, due to growth in the recreational vehicle and marine segments. The recreational vehicle and marine segments increased due to higher volume from the addition of new dealers, continued emphasis on relationships with existing dealers and lower liquidations. Since year end 2003, mortgage loans declined $24.1 million or 4.9% to $470.5 million. The decline in the mortgage portfolio occurred due to normal 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 $217 million in the second quarter of 2004 compared with $491 million in the second quarter of 2003. New mortgage loan production was spurred during the second quarter of 2003 by a strong refinance market as a result of the low interest rate environment. Compared with June 30, 2003, mortgage loans declined $111.5 million or 19.2% at June 30, 2004 as a result of prepayments from refinancing activity. Commercial loans decreased $99.6 million or 3.3% at June 30, 2004 compared with December 31, 2003, due to lower demand for commercial credit, high repayment activity and continued reduction of exposure on credits not meeting Citizens' risk parameters. The decline moderated in the second quarter as commercial loans decreased only $9.1 million compared with the $90.5 million reduction in the first quarter of 2004. Continued declines in Citizens' Wisconsin and Iowa markets during the second quarter of 2004 were nearly offset by accelerating growth in Michigan's Oakland County market. Compared with June 30, 2003, commercial loans declined $229.3 million or 7.4% at June 30, 2004. Deposits decreased $80.8 million to $5.361 billion at June 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 $222 million to $1.738 billion at June 30, 2004 compared with $1.960 billion at December 31, 2003. Core deposits, which exclude time deposits, totaled $3.623 billion at June 30, 2004 an increase of $140.8 million or 4.0% compared with December 31, 2003 and an increase of $65.2 million or 1.8% compared with March 31, 2004. The increase in core deposits occurred primarily as a result of the growth in a new market rate savings product, and to a lesser extent, growth in noninterest checking deposits. A decline in interest-bearing checking deposits partially offset the increase in other core deposits. CREDIT QUALITY Nonperforming assets totaled $58.2 million at June 30, 2004, a decrease of $4.2 million or 6.7% compared with March 31, 2004 and a decrease of $38.4 million or 39.7% compared with June 30, 2003 levels. Nonperforming assets represent 1.10% of total loans at June 30, 2004 compared with 1.20% at March 31, 2004 and 1.82% at June 30, 2003. Loans added to the commercial nonperforming asset category increased to $17.3 million for the quarter compared with $11.7 million in the first quarter of 2004 while loans removed from that category totaled $23.2 million for the quarter compared with $25.1 million in the first quarter of 2004. The allowance for loan losses totaled $123.8 million or 2.34% of loans at June 30, 2004, consistent with both the March 31, 2004 level of $123.7 million or 2.38% of loans and the December 31, 2003 level of $123.5 million or 2.36% of loans. Net charge-offs declined to $4.4 million in the second quarter of 2004 compared with $6.8 million in the prior quarter and $12.0 million in the second quarter of 2003. The decline in net charge-offs compared with both the first quarter of 2004 and the second quarter of the prior year was due primarily to lower net charge-offs in the commercial loan portfolio, and to a lesser extent, lower consumer loan net charge-offs. The provision for loan losses decreased to $4.5 million in the second quarter of 2004 compared with $7.0 million in the first quarter and $25.6 million in the second quarter of 2003. The decline in the provision for loan losses reflects the lower level of net charge-offs, the decline in nonperforming assets and fewer risk rating downgrades on commercial credits during the quarter. Citizens anticipates both net charge-offs and provision expense to be slightly higher in the third quarter than in the second quarter of 2004, due to the unusually low level of consumer loan charge-offs in the second quarter. NET INTEREST MARGIN AND NET INTEREST INCOME Net interest margin declined to 3.98% in the second quarter of 2004 compared with 4.01% in the prior quarter and 4.17% in the second quarter of 2003. The decline in net interest margin compared with the first quarter of 2004 was due to slightly lower yields on earning assets, primarily fixed rate commercial and consumer loans, partially offset by a two basis point decline in the cost of interest-bearing liabilities. The decrease in net interest margin compared with the second quarter of 2003 resulted from 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 investment securities. For the six months ended June 30, 2004, net interest margin declined to 3.99% compared with 4.25% for the same period of 2003. Net interest income decreased $3.7 million to $69.2 million in the second quarter of 2004 compared with $72.9 million in the same quarter of 2003 and increased $0.9 million compared with $68.3 million in the first quarter of 2004. The decrease in net interest income compared with the second quarter of 2003 resulted from the aforementioned decline in the net interest margin and lower average earning assets. The increase in net interest income compared with the first quarter of 2004 resulted from an increase in average earning assets as both loans and investment securities balances increased, partially offset by the aforementioned three basis point decline in the net interest margin. For the six months ended June 30, 2004, net interest income declined $6.9 million to $137.5 million compared with the same period of the prior year due to the decline in net interest margin, partially offset by higher earning assets. Earning assets increased due to the $500 million expansion of the investment portfolio which began late in the first quarter of 2003. Excluding the effects of the Illinois Bank sale, which is expected to close in the third quarter, Citizens anticipates its net interest income in the third and fourth quarters to be slightly higher than the second quarter level due to an increased volume of earning assets. NONINTEREST INCOME Noninterest income for the second quarter of 2004 declined $2.0 million to $22.8 million compared with the second quarter of 2003. The decrease occurred as a result of a $2.1 million loss on investment securities designated for sale during the second quarter. The market value of these available-for-sale securities was below cost due to an increase in market interest rates. The anticipated proceeds of approximately $75 million from the sale of these agency-backed collateralized mortgage obligation securities are expected to be reinvested into securities with a more favorable prepayment risk profile at higher yields, which should benefit net interest income in future periods. Compared with the prior quarter, all major categories of fee income increased, led by significantly higher deposit service charges, increased brokerage and investment fees, higher mortgage and other loan income, and higher trust fees and bankcard fees. Fees and other income totaled $24.8 million for the second quarter of 2004, unchanged from the same quarter of the prior year and an increase of $2.3 million from the prior quarter. Fees and other income for the second quarter includes a $500,000 gain from the sale of a branch property that was previously anticipated to close in the third quarter. Noninterest income for the six months ended June 30, 2004 decreased $2.8 million to $45.3 million compared with $48.1 million in the first six months of 2003 due largely to the $2.1 million loss on the sale of investment securities in the second quarter of 2004. A significant decline in mortgage and other loan income in the first six months of 2004 compared with the same period of 2003 was mostly offset by sharply higher deposit service charges, increased brokerage and investment fees, and higher trust and bankcard fees. Deposit service charges for the second quarter of 2004 increased $1.5 million or 20.1% to $9.1 million compared with the second quarter of 2003. For the six month period ended June 30, 2004, deposit service charges increased $3.0 million or 21.0% to $17.1 million compared with the same period in 2003. Initiatives implemented over the last twelve months have improved the revenue generated from overdrafts and, to a lesser extent, other monthly transaction-based charges. Trust fees increased $0.2 million or 4.7% to $4.5 million in the second quarter of 2004 compared with $4.3 million in the second quarter of 2003, and increased $0.3 million or 3.4% to $8.8 million in the first six months of 2004 compared with $8.5 million in the same period in 2003. The second quarter and year-to-date increases in trust fees were primarily due to stronger financial markets and Citizens' sales and sales management processes implemented in the first quarter of 2004, which are focused on relationship management and new business development strategies. Total trust assets under administration increased $6 million to $2.626 billion at June 30, 2004 from $2.620 billion at June 30, 2003. Mortgage and other loan income declined $2.4 million or 43.7% to $3.0 million in the second quarter of 2004 compared with the second quarter of 2003. For the six months ended June 30, 2004, mortgage and other loan income declined $5.3 million or 49.8% to $5.3 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 six months ended June 30, 2004 compared with the same periods of the prior year. Loans sold declined $527 million to $198 million in the six month period ended June 30, 2004 compared with the same period of the prior year. Brokerage and investment fees increased $0.7 million or 38.5% to $2.7 million in the second quarter of 2004 compared with the second quarter of 2003, and increased $0.8 million or 20.4% to $4.4 million in the first six months of 2004 compared with the same period in 2003. The increases in brokerage and investment fees were primarily due to the successful brokerage sales campaign previously mentioned. Excluding the effects of the Illinois Bank sale which is expected to close in the third quarter, and excluding the effects of the second quarter securities loss and gain on sale of the branch property, Citizens anticipates total noninterest income in the third and fourth quarters to be comparable to slightly higher than the second quarter level. NONINTEREST EXPENSE Noninterest expense increased $5.7 million or 10.3% to $62.1 million in the second quarter of 2004 compared with $56.4 million in the second quarter of 2003 and increased $1.6 million or 2.6% compared with $60.5 million in the first quarter of 2004. The increase from the second quarter of the prior year was due to higher costs in all categories of noninterest expense except equipment. The increase in noninterest expense from the prior quarter was due to higher compensation, professional fees, postage and delivery and loan fee expenses. For the six month period ended June 30, 2004, noninterest expense increased $9.7 million or 8.6% to $122.7 million compared with the same period in 2003. Nearly all categories of noninterest expense increased with the exception of equipment and stationery and supplies. Salaries and employee benefits increased $1.8 million and $3.6 million for the three and six month periods ended June 30, 2004, respectively, compared with the same periods of the prior year. Salary expense increased in Oakland County by $1.0 million and $2.3 million in the three and six month periods, respectively, due to the previously announced Oakland County expansion initiative. Employee benefits increased in both the three and six month periods due to higher pension and other employee benefits expenses. Normal salary merit increases were offset by a reduction in staffing levels. Citizens had 2,272 full time equivalent employees at June 30, 2004, down from 2,376 at June 30, 2003. Occupancy costs increased $0.6 million and $1.3 million for the three and six month periods ended June 30, 2004, respectively, compared with the same periods of the prior year. Building rent and other occupancy costs increased $0.2 million and $0.3 million for the three and six month periods, respectively, due to the opening of new branches and an administrative office in Oakland County. Building repair increased $0.1 million and $0.3 million in the three and six month periods, respectively, 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 $0.3 million and $0.7 million in the three and six month periods, respectively, largely due to higher maintenance, energy and real estate tax expenses. Advertising and public relations expense increased $1.4 million and $1.5 million for the three and six month periods ended June 30, 2004, respectively, compared with the same periods of the prior year. Advertising to support Citizens' Oakland County initiative accounted for $1.0 million and deposit-focused promotions accounted for $0.5 million of the six month period increase. Other loan fee expense increased $0.5 million in both the three and six month periods ended June 30, 2004 compared with the same periods of the prior year. Loan fee expenses increased due to a higher provision for losses on unfunded loan commitments, waiver of certain client-paid mortgage loan fees and lower deferral of mortgage loan expenses due to the lower mortgage loan origination volume. Data processing services increased $0.4 million and $0.7 million for the three and six month periods ended June 30, 2004, respectively, compared with the same periods of the prior year. The increase in both periods is due to higher 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. These increases were partially offset by lower processing costs in both periods on Citizens' core loan and deposit systems. Professional services expense increased $0.3 million and $0.5 million for the three and six month periods ended June 30, 2004, respectively, due to higher legal and other professional fees related to loan collection activity, and higher audit costs related to new control evaluation procedures to comply with section 404 of the Sarbanes-Oxley Act. Equipment expense decreased $0.2 million and $0.7 million, and telephone expense increased $0.3 million and $0.7 million for the three and six month periods ended June 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 $0.4 million and $1.6 million for the three and six month periods ended June 30, 2004, respectively, compared with the same periods of the prior year. Contributing to the increases were higher non-credit related losses of $0.3 million and $0.8 million for the three and six month periods ended June 30, 2004, respectively, due to higher losses in the current year periods and an unusually low level of such losses in the prior year periods. In addition, training and travel expenses increased $0.3 and $0.6 million in the three and six month periods, respectively, while lower deferred loan origination costs also increased other expenses by $0.3 million and $0.5 million in the three and six month periods, respectively. Partially offsetting these increases were lower expenses for other real estate which declined $0.5 million and $0.7 million in the three and six month periods, respectively. Excluding the effects of the Illinois Bank sale which is expected to close in the third quarter, Citizens anticipates that noninterest expense in the third and fourth quarters will remain comparable to the second quarter level. OAKLAND COUNTY Citizens continued its expansion in Oakland County, Michigan, in June with the opening of its second major hub facility, located in the Novi Centre at Haggerty Centre II in Novi. Similar to the Troy hub opened in February 2004, this facility houses commercial banking, commercial real estate lending, business banking, mortgage banking, and wealth management, as well as a new temporary branch. A new stand-alone bank branch will be constructed on property adjacent to Novi Centre. Citizens announced in November 2003 that its Oakland County expansion would include the two new hub offices and the eventual opening of as many as 10 to 14 new branches. Three locations are now complete with plans for an additional three this year. CONSOLIDATION OF CHARTERS On July 9, 2004, Citizens Banking Corporation announced that the company had filed applications with the Federal Reserve Bank of Chicago and the State of Michigan Office of Financial and Insurance Services to consolidate its Michigan and Wisconsin subsidiary banks. Upon completion of the consolidation, F&M Bank -- Wisconsin will become part of Citizens' Michigan subsidiary bank. The resulting bank will be regulated as a State of Michigan, Federal Reserve member bank. Although the consolidation is not expected to have a significant effect on Citizens' financial statements, Charles D. Christy, chief financial officer, said the consolidation of the charters will create a more efficient banking franchise by allowing the combined banks to operate as a single entity. "The consolidation will eliminate the need for separate regulatory reporting and separate accounting and financial tracking by the two banks," Christy said. "This action also will allow the company to make more efficient use of its capital." The consolidation of charters was driven more by the decision making and operational efficiencies gained than by any new cost reductions. Most of the cost reductions were achieved in 2000 when Citizens converted F&M's operating systems to a common platform. All clients of the Wisconsin and Michigan banks will be notified of the consolidation following Federal Reserve and State of Michigan approval, which is expected to take 60 to 90 days. The corporation's F&M Bank-Iowa franchise was not included in the consolidation at this time because of certain legal and regulatory issues that exist in the state of Iowa. ILLINOIS BANK SALE As previously announced Citizens entered 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. The sale is expected to close in the third quarter of 2004. 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 a similar return. As such, the sale is anticipated to have a negligible impact on future earnings per share. Citizens Bank--Illinois, N.A. has approximately $79 million of loans, $159 million of deposits and $179 million of total assets as of June 30, 2004. INITIATIVES Over the past 18 months Citizens has chartered over 70 significant initiatives critical to the achievement of its corporate vision. Of the more than 70 "Achieving the Vision" (ATV) initiatives, 47 have been completed, 23 are in process with 15 of the 23 having a projected completion date prior to year end. Five initiatives were completed in the second quarter including enhanced voice communications and Human Resource selection, compensation and learning alignment. Active initiatives address among other things, growth, product development, process improvement, service quality and improved technology. ATV project office manager, Karen Magidsohn, notes "Developing effective change as a core competency is important to the success of our corporation. The ATV initiatives not only bring the vision to life, they are helping build that core competency. Over 400 staff members have been involved in these change initiatives, including all members of the Leadership team." 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 August 4, 2004, to shareholders of record on July 26, 2004. OTHER NEWS Citizens' new brand introduced in November of last year in Oakland County, is being unveiled to the rest of Michigan. During the week of June 2, retail and commercial households in Michigan received a special mailer introducing the new brand of Citizens. This mailer touched on some of the major changes clients will see, such as signage, new logos on their statements, new checks and check cards, advertising and a redesigned web site. The message this mailer conveys to clients is simple: "fresh new look, same great bank." Additionally, Citizens is continuing to plan for the rollout of the new brand in Wisconsin and Iowa in 2005. During the second quarter of 2004, Citizens repurchased a total of 108,000 shares of its stock at an average price of $30.02. Since the stock repurchase program was announced in October 2001, Citizens has repurchased 2,955,200 shares at an average price of $28.32. As of June 30, 2004, 3,044,800 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, John D. Schwab, chief credit officer, 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 10:00 AM EDT ON FRIDAY, JULY 16, 2004. A live audio web cast is available at http://viavid.net/dce.aspx?sid=00001CA3 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: 8318484 Conference Name: "Citizens Banking Corporation 2nd Quarter Earnings" R.S.V.P. is not required. A playback of the conference call will be available after 2:00pm EDT through July 30, 2004, by dialing US/Canada Dial-In Number: (800) 642-1687 or International Dial-In Number: (706) 645-9291 conference ID: 8318484. 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, 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, 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 JUNE 30, December 31, (in thousands) 2004 2003 ------------------------------------------------------------------------------------------------------------------------------ ASSETS Cash and due from banks $ 173,117 $ 182,545 Interest-bearing deposits with banks 2,169 2,223 Securities available-for-sale: Taxable 1,527,613 1,536,145 Tax-exempt 405,944 429,056 ----------- ----------- Total securities available-for-sale 1,933,557 1,965,201 Securities held-to-maturity (fair value of $41,232 and $19,913, respectively) 42,523 19,857 Mortgage loans held for sale 36,994 44,677 Loans 5,290,078 5,245,702 Less: Allowance for loan losses (123,805) (123,545) ----------- ----------- Net loans 5,166,273 5,122,157 Premises and equipment 118,675 112,784 Goodwill 54,785 54,785 Other intangible assets 15,482 16,932 Bank owned life insurance 81,452 80,461 Other assets 122,880 109,448 ----------- ----------- TOTAL ASSETS $ 7,747,907 $ 7,711,070 =========== =========== LIABILITIES Noninterest-bearing deposits $ 919,924 $ 882,429 Interest-bearing deposits 4,441,510 4,559,838 ----------- ----------- Total deposits 5,361,434 5,442,267 Federal funds purchased and securities sold under agreements to repurchase 700,279 588,593 Other short-term borrowings 47,641 43,077 Other liabilities 79,415 65,112 Long-term debt 931,390 936,859 ----------- ----------- Total liabilities 7,120,159 7,075,908 SHAREHOLDERS' EQUITY Preferred stock - no par value Common stock - no par value 99,333 100,314 Retained earnings 523,581 512,045 Accumulated other comprehensive income 4,834 22,803 ----------- ----------- Total shareholders' equity 627,748 635,162 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,747,907 $ 7,711,070 =========== =========== ------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) CITIZENS BANKING CORPORATION AND SUBSIDIARIES Three Months Ended Six Months Ended June 30, June 30, (in thousands, except per share amounts) 2004 2003 2004 2003 ------------------------------------------------------------------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans $ 74,073 $ 82,519 $ 147,779 $ 167,023 Interest and dividends on investment securities: Taxable 16,021 17,107 31,463 31,541 Tax-exempt 5,279 5,045 10,523 10,229 Money market investments 2 12 4 99 --------- --------- --------- --------- Total interest income 95,375 104,683 189,769 208,892 --------- --------- --------- --------- INTEREST EXPENSE Deposits 15,892 22,522 32,343 47,559 Short-term borrowings 1,798 1,414 3,070 2,034 Long-term debt 8,467 7,827 16,810 14,873 --------- --------- --------- --------- Total interest expense 26,157 31,763 52,223 64,466 --------- --------- --------- --------- NET INTEREST INCOME 69,218 72,920 137,546 144,426 Provision for loan losses 4,500 25,650 11,500 44,642 --------- --------- --------- --------- Net interest income after provision for loan losses 64,718 47,270 126,046 99,784 --------- --------- --------- --------- NONINTEREST INCOME Service charges on deposit accounts 9,069 7,549 17,111 14,139 Trust fees 4,528 4,324 8,838 8,544 Mortgage and other loan income 3,047 5,409 5,303 10,563 Brokerage and investment fees 2,651 1,914 4,433 3,682 Bankcard fees 911 814 1,694 1,549 Other 4,650 4,826 9,989 9,598 --------- --------- --------- --------- Total fees and other income 24,856 24,836 47,368 48,075 Investment securities gains (losses) (2,053) 11 (2,053) 59 --------- --------- --------- --------- Total noninterest income 22,803 24,847 45,315 48,134 NONINTEREST EXPENSE Salaries and employee benefits 33,185 31,400 65,124 61,512 Occupancy 4,922 4,314 10,264 9,009 Equipment 3,668 3,869 7,310 8,038 Professional services 4,281 3,959 8,209 7,667 Data processing services 3,440 3,058 7,086 6,374 Postage and delivery 1,862 1,683 3,418 3,361 Advertising and public relations 2,038 623 4,183 2,672 Telephone 1,451 1,135 2,985 2,310 Stationery and supplies 916 873 1,758 1,768 Other loan fees 1,631 1,146 2,760 2,287 Other 4,749 4,301 9,580 7,944 --------- --------- --------- --------- Total noninterest expense 62,143 56,361 122,677 112,942 --------- --------- --------- --------- INCOME BEFORE INCOME TAXES 25,378 15,756 48,684 34,976 Income tax provision 6,656 2,542 12,519 6,704 --------- --------- --------- --------- NET INCOME $ 18,722 $ 13,214 $ 36,165 $ 28,272 ========= ========= ========= ========= NET INCOME PER SHARE: Basic 0.43 0.30 0.83 0.65 Diluted 0.43 0.30 0.83 0.65 AVERAGE SHARES OUTSTANDING: Basic 43,292 43,248 43,303 43,376 Diluted 43,752 43,478 43,806 43,612 -------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------- SELECTED QUARTERLY INFORMATION CITIZENS BANKING CORPORATION AND SUBSIDIARIES 2ND QTR 2004 1ST QTR 2004 4TH QTR 2003 3RD QTR 2003 2ND QTR 2003 --------------------------------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS (THOUSANDS) Interest income $ 95,375 $ 94,394 $ 97,398 $ 99,687 $ 104,683 Interest expense 26,157 26,066 26,720 28,533 31,763 Net interest income 69,218 68,328 70,678 71,154 72,920 Provision for loan losses 4,500 7,000 8,020 10,300 25,650 Net interest income after provision for loan losses 64,718 61,328 62,658 60,854 47,270 Total fees and other income 24,856 22,512 21,629 25,012 24,836 Investment securities gains (losses) (2,053) -- 2 42 11 Noninterest expense 62,143 60,534 60,446 59,600 56,361 Income tax provision 6,656 5,863 5,769 6,703 2,542 Net income 18,722 17,443 18,074 19,605 13,214 --------------------------------------------------------------------------------------------------------------------- AT PERIOD END (MILLIONS) Total assets $ 7,748 $ 7,692 $ 7,711 $ 7,787 $ 7,789 Total earning assets 7,305 7,279 7,278 7,356 7,334 Total loans 5,290 5,200 5,246 5,226 5,287 Total deposits 5,361 5,461 5,442 5,482 5,660 Total shareholders' equity 628 654 635 634 639 --------------------------------------------------------------------------------------------------------------------- AVERAGE BALANCES (MILLIONS) Total assets $ 7,769 $ 7,640 $ 7,697 $ 7,812 $ 7,809 Total earning assets 7,338 7,228 7,279 7,378 7,387 Total loans 5,269 5,197 5,220 5,183 5,253 Total deposits 5,435 5,474 5,481 5,610 5,723 Total shareholders' equity 628 644 626 620 639 Shareholders' equity / assets 8.08 % 8.43 % 8.13 % 7.94 % 8.18 % --------------------------------------------------------------------------------------------------------------------- CREDIT QUALITY STATISTICS (THOUSANDS) Nonaccrual loans $ 48,191 $ 54,565 $ 68,744 $ 83,278 $ 87,928 Loans 90 or more days past due and still accruing 298 201 345 601 607 Restructured loans 52 52 -- -- -- --------- --------- --------- --------- --------- Total nonperforming loans 48,541 54,818 69,089 83,879 88,535 Other repossessed assets acquired (ORAA) 9,673 7,592 7,943 7,350 8,044 --------- --------- --------- --------- --------- Total nonperforming assets $ 58,214 $ 62,410 $ 77,032 $ 91,229 $ 96,579 ========= ========= ========= ========= ========= Allowance for loan losses $ 123,805 $ 123,703 $ 123,545 $ 123,265 $ 123,302 Allowance for loan losses ratio 2.34 % 2.38 % 2.36 % 2.36 % 2.33 % Allowance for loan losses as a percent of nonperforming assets 212.67 198.21 160.38 135.12 127.67 Allowance for loan losses as a percent of nonperforming loans 255.05 225.66 178.82 146.96 139.27 Nonperforming assets as a percent of loans plus ORAA 1.10 1.20 1.47 1.74 1.82 Nonperforming assets as a percent of total assets 0.75 0.81 1.00 1.17 1.24 Net loans charged off as a percent of average loans (annualized) 0.33 0.53 0.59 0.80 0.92 Net loans charged off (000) $ 4,398 $ 6,842 $ 7,740 $ 10,337 $ 12,043 --------------------------------------------------------------------------------------------------------------------- PER COMMON SHARE DATA Net Income (loss): Basic $ 0.43 $ 0.40 $ 0.42 $ 0.45 $ 0.30 Diluted 0.43 0.40 0.41 0.45 0.30 Dividends 0.285 0.285 0.285 0.285 0.285 Market Value: High $ 33.99 $ 34.00 $ 34.26 $ 28.01 $ 28.17 Low 28.31 31.55 26.41 24.77 21.72 Close 31.05 32.63 32.72 26.41 27.01 Book value 14.51 15.09 14.69 14.67 14.77 Shares outstanding, end of period (000) 43,263 43,343 43,242 43,220 43,260 --------------------------------------------------------------------------------------------------------------------- PERFORMANCE RATIOS (ANNUALIZED) Net interest margin (FTE) 3.98 % 4.01 % 4.07 % 4.06 % 4.17 % Return on average assets 0.97 0.92 0.93 1.00 0.68 Return on average shareholders' equity 12.00 10.89 11.45 12.55 8.29 Efficiency ratio (1) 63.78 64.26 63.16 59.90 55.74 ---------------------------------------------------------------------------------------------------------------------

(1) Excludes investment securities gains (losses)

------------------------------------------------------------------------------------------------------------------- FINANCIAL SUMMARY AND COMPARISON FOR THE SIX MONTHS ENDED CITIZENS BANKING CORPORATION AND SUBSIDIARIES JUNE 30, 2004 2003 % CHANGE ------------------------------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS (THOUSANDS) Interest income $ 189,769 $ 208,892 (9.2)% Interest expense 52,223 64,466 (19.0) Net interest income 137,546 144,426 (4.8) Provision for loan losses 11,500 44,642 (74.2) Net interest income after provision for loan losses 126,046 99,784 26.3 Total fees and other income 47,368 48,075 (1.5) Investment securities gains (losses) (2,053) 59 N/M Noninterest expense 122,677 112,942 8.6 Income tax provision 12,519 6,704 86.7 Net income 36,165 28,272 27.9 ------------------------------------------------------------------------------------------------------------------- AT PERIOD END (MILLIONS) Total assets $ 7,748 $ 7,789 (0.5)% Total earning assets 7,305 7,334 (0.4) Total loans 5,290 5,287 0.1 Total deposits 5,361 5,660 (5.3) Total shareholders' equity 628 639 (1.8) ------------------------------------------------------------------------------------------------------------------- AVERAGE BALANCES (MILLIONS) Total assets $ 7,705 $ 7,633 0.9 % Total earning assets 7,283 7,216 0.9 Total loans 5,233 5,297 (1.2) Total deposits 5,455 5,788 (5.8) Total shareholders' equity 636 641 (0.8) Shareholders' equity / assets 8.25% 8.40% (1.7) ------------------------------------------------------------------------------------------------------------------- PER COMMON SHARE DATA Net Income: Basic $ 0.83 $ 0.65 27.7 % Diluted 0.83 0.65 27.7 Dividends 0.570 0.570 0.0 Market Value: High $ 34.00 $ 28.17 20.7 Low 28.31 21.72 30.3 Close 31.05 27.01 15.0 Book value 14.51 14.77 (1.8) Tangible book value 12.89 13.08 (1.5) Shares outstanding, end of period (000) 43,263 43,260 0.0 ------------------------------------------------------------------------------------------------------------------- PERFORMANCE RATIOS (ANNUALIZED) Net interest margin (FTE) (1) 3.99 % 4.25 % (6.1)% Return on average assets 0.94 0.75 25.3 Return on average shareholders' equity 11.44 8.89 28.7 Net loans charged off as a percent of average loans 0.43 1.06 (59.4) -------------------------------------------------------------------------------------------------------------------

(1) Net interest margin is presented on an annual basis and includes taxable equivalent adjustments to interest income of $6,718,000 and $6,829,000 for the six months ended June 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 -------------------------------------------------------------------------- June 30 Mar 31 Dec 31 Sept 30 June 30 (in thousands) 2004 2004 2003 2003 2003 ---------------------------------------------------------------------------------------------------------------------- NONINTEREST INCOME: Service charges on deposit accounts $ 9,069 $ 8,042 $ 8,074 $ 7,703 $ 7,549 Trust fees 4,528 4,310 4,615 4,368 4,324 Mortgage and other loan income 3,047 2,256 2,079 5,404 5,409 Brokerage and investment fees 2,651 1,782 1,705 2,333 1,914 Bankcard fees 911 783 732 761 814 Other income 4,650 5,339 4,424 4,443 4,826 -------- -------- -------- -------- -------- Total fees and other income 24,856 22,512 21,629 25,012 24,836 Investment securities gains (losses) (2,053) -- 2 42 11 -------- -------- -------- -------- -------- TOTAL NONINTEREST INCOME $ 22,803 $ 22,512 $ 21,631 $ 25,054 $ 24,847 ======== ======== ======== ======== ======== NONINTEREST EXPENSE: Salaries and employee benefits $ 33,185 $ 31,939 $ 29,774 $ 31,036 $ 31,400 Occupancy 4,922 5,342 5,112 4,328 4,314 Equipment 3,668 3,642 3,989 4,060 3,869 Professional services 4,281 3,928 5,202 4,946 3,959 Data processing services 3,440 3,646 3,145 3,225 3,058 Postage and delivery 1,862 1,556 1,796 1,739 1,683 Advertising and public relations 2,038 2,145 1,719 1,395 623 Telephone 1,451 1,534 1,314 1,169 1,135 Stationery and supplies 916 842 1,256 911 873 Other loan fees 1,631 1,129 1,192 1,360 1,146 Special charge -- -- -- (370) (221) Other expense 4,749 4,831 5,947 5,801 4,522 -------- -------- -------- -------- -------- TOTAL NONINTEREST EXPENSE $ 62,143 $ 60,534 $ 60,446 $ 59,600 $ 56,361 ======== ======== ======== ======== ======== ----------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------- AVERAGE BALANCES, YIELDS AND RATES THREE MONTHS ENDED ------------------------------------------------------------------------------------- JUNE 30, 2004 MARCH 31, 2004 JUNE 30, 2003 ------------------------------------------------------------------------------------- AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE (in thousands) BALANCE RATE (1) BALANCE RATE (1) BALANCE (2) RATE (1)(2) --------------------------------------------------------------------------------------------------------------------------------- EARNING ASSETS Money market investments $ 1,904 0.38 % $ 1,977 0.48 % $ 7,715 0.61 % Investment securities (3): Taxable 1,579,623 4.06 1,528,829 4.04 1,484,937 4.61 Tax-exempt 427,115 7.61 421,589 7.65 396,288 7.83 Mortgage loans held for sale 43,839 6.10 31,885 5.53 183,545 5.70 Loans: Commercial 2,900,981 5.38 2,920,584 5.40 3,164,230 5.75 Real estate 483,023 5.74 496,450 5.76 548,778 6.19 Direct consumer 1,114,663 5.51 1,040,543 5.70 890,033 6.59 Indirect consumer 769,978 6.73 739,210 6.89 649,677 7.43 ------------ ------------ ----------- Total earning assets 7,321,126 5.41 7,181,067 5.47 7,325,203 5.91 NONEARNING ASSETS Cash and due from banks 161,584 160,763 163,210 Investment security fair value adjustment 17,220 47,041 62,182 Other nonearning assets 394,071 377,037 376,946 Allowance for loan losses (125,200) (125,637) (118,463) ------------ ------------ ----------- Total assets $ 7,768,801 $ 7,640,271 $ 7,809,078 ============ ============ =========== INTEREST-BEARING LIABILITIES Deposits: Interest-bearing demand $ 1,315,875 0.72 $ 1,358,556 0.73 $ 1,289,092 0.96 Savings deposits 1,383,164 0.64 1,288,269 0.52 1,355,646 0.79 Time deposits 1,818,784 2.50 1,955,036 2.53 2,209,352 3.05 Short-term borrowings 687,927 1.05 508,252 1.00 476,878 1.19 Long-term debt 935,479 3.64 938,677 3.57 877,184 3.58 ------------ ------------ ----------- Total interest-bearing liabilities 6,141,229 1.71 6,048,790 1.73 6,208,152 2.05 NONINTEREST-BEARING LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest-bearing demand 917,203 872,200 869,347 Other liabilities 82,768 75,116 92,470 Shareholders' equity 627,601 644,165 639,109 ------------ ------------ ----------- Total liabilities and shareholders $ 7,768,801 $ 7,640,271 $ 7,809,078 ' equity ============ ============ =========== INTEREST SPREAD 3.70 % 3.74 % 3.86 % Contribution of noninterest bearing sources of funds 0.28 0.27 0.31 ---- ---- ---- NET INTEREST INCOME AS A PERCENT OF EARNING ASSETS 3.98 % 4.01 % 4.17 % ---------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED JUNE 30, --------------------------------------------------------- 2004 2003 --------------------------------------------------------- AVERAGE AVERAGE AVERAGE AVERAGE (in thousands) BALANCE RATE (1) BALANCE (2) RATE (1)(2) --------------------------------------------------------------------------------------------------------------------------------- EARNING ASSETS Money market investments $ 1,941 0.43 % $ 19,327 1.02 % Investment securities (3): Taxable 1,554,226 4.05 1,274,279 4.95 Tax-exempt 424,352 7.63 400,880 7.85 Mortgage loans held for sale 37,892 5.86 161,035 5.76 Loans: Commercial 2,910,782 5.39 3,209,850 5.80 Real estate 489,707 5.75 568,128 6.27 Direct consumer 1,077,603 5.60 873,819 6.75 Indirect consumer 754,594 6.81 645,630 7.61 ----------- ----------- Total earning assets 7,251,097 5.44 7,152,948 6.07 NONEARNING ASSETS Cash and due from banks 161,174 167,327 Investment security fair value adjustment 32,131 63,131 Other nonearning assets 385,553 365,813 Allowance for loan losses (125,419) (116,588) ----------- ----------- Total assets $ 7,704,536 $ 7,632,631 =========== =========== INTEREST-BEARING LIABILITIES Deposits: Interest-bearing demand $ 1,337,216 0.73 $ 1,301,783 1.05 Savings deposits 1,335,716 0.42 1,362,502 0.82 Time deposits 1,886,910 2.52 2,262,726 3.14 Short-term borrowings 598,090 1.03 346,556 1.18 Long-term debt 937,078 3.61 784,170 3.82 ----------- ----------- Total interest-bearing liabilities 6,095,010 1.72 6,057,737 2.15 NONINTEREST-BEARING LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest-bearing demand 894,704 860,686 Other liabilities 78,939 72,985 Shareholders' equity 635,883 641,223 ----------- ----------- Total liabilities and shareholders' equity $ 7,704,536 $ 7,632,631 =========== =========== INTEREST SPREAD 3.72 % 3.92 % Contribution of noninterest bearing sources of funds 0.27 0.33 ---- ---- NET INTEREST INCOME AS A PERCENT OF EARNING ASSETS 3.99 % 4.25 % ---------------------------------------------------------------------------------------------------------------------------------

(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 ---------------------------------------------------------------------- June Mar 31 Dec 31 Sept 30 June 30 (in thousands) 2004 2004 2003 2003 2003 ----------------------------------------------------------------------------------------------------------------------------- Commercial(1) Commercial $18,066 $24,359 $37,171 $51,158 $52,760 Commercial real estate 14,982 15,310 16,385 17,379 19,568 Small business 2,749 2,052 1,603 1,648 1,466 ------- ------- ------- ------- ------- Total commercial 35,797 41,721 55,159 70,185 73,794 Consumer: Direct 4,042 3,471 3,177 3,291 3,208 Indirect 655 1,087 1,247 1,625 1,094 Mortgage 7,697 8,286 9,161 8,177 9,832 Loans 90 days or more past due and still accruing 298 201 345 601 607 Restructured loans 52 52 -- -- -- ------- ------- ------- ------- ------- Total Nonperforming Loans 48,541 54,818 69,089 83,879 88,535 Other Reposessed Assets Acquired 9,673 7,592 7,943 7,350 8,044 ------- ------- ------- ------- ------- Total Nonperforming Assets $58,214 $62,410 $77,032 $91,229 $96,579 ======= ======= ======= ======= ======= ----------------------------------------------------------------------------------------------------------------------------- (1)Changes in commercial nonperforming assets for the quarter (in millions): Inflows $ 17.3 $ 11.7 $ 17.8 $ 21.1 $ 36.3 Outflows (23.2) (25.1) (32.8) (24.7) (33.7) ------- ------- ------- ------- ------- Net change $ (5.9) $ (13.4) $ (15.0) $ (3.6) $ 2.6 ======= ======= ======= ======= ======= -----------------------------------------------------------------------------------------------------------------------------

SUMMARY OF LOAN LOSS EXPERIENCE CITIZENS BANKING CORPORATION AND SUBSIDIARIES Quarter Ended -------------------------------------------------------------------------- June 30 Mar 31 Dec 31 Sept 30 June 30 (in thousands) 2004 2004 2003 2003 2003 -------------------------------------------------------------------------------------------------------------------------------- Allowance for loan losses - beginning of period $123,703 $123,545 $123,265 $123,302 $109,695 Provision for loan losses 4,500 7,000 8,020 10,300 25,650 Charge-offs: Commercial 2,982 5,703 7,323 9,539 7,577 Commercial real estate 1,918 1,151 2,276 1,531 4,321 Small business 167 218 551 348 273 -------- -------- -------- -------- -------- Total commercial 5,067 7,072 10,150 11,418 12,171 Real estate mortgage 305 193 320 213 76 Consumer - Direct 1,220 1,630 1,388 1,628 1,790 Consumer - Indirect 1,630 1,891 2,580 1,941 2,152 -------- -------- -------- -------- -------- Total charge-offs 8,222 10,786 14,438 15,200 16,189 -------- -------- -------- -------- -------- Recoveries: Commercial 2,202 2,332 4,452 2,882 2,115 Commercial real estate 225 432 927 595 623 Small business 107 17 165 139 93 -------- -------- -------- -------- -------- Total commercial 2,534 2,781 5,544 3,616 2,831 Real estate mortgage 23 13 -- 27 8 Consumer - Direct 560 438 461 504 479 Consumer - Indirect 707 712 693 716 828 -------- -------- -------- -------- -------- Total recoveries 3,824 3,944 6,698 4,863 4,146 -------- -------- -------- -------- -------- Net charge-offs 4,398 6,842 7,740 10,337 12,043 -------- -------- -------- -------- -------- Allowance for loan losses - end of period $123,805 $123,703 $123,545 $123,265 $123,302 ======== ======== ======== ======== ======== Reserve for loan commitments - end of period $ 3,000 $ 2,757 $ 2,690 $ 2,690 $ 2,690 ======== ======== ======== ======== ======== --------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------- For the Quarter Ended June 30, 2004 ----------------------------------------------------------------------- Consumer - Consumer - Commercial Real estate Direct Indirect Total ----------------------------------------------------------------------- Charge-offs: Michigan $ 1,218 $ 136 $ 737 $ 1,630 $ 3,721 Wisconsin 2,853 121 302 -- 3,276 Iowa 531 48 159 -- 738 Illinois 465 -- 22 -- 487 ------- ------- ------- ------- ------- Total charge-offs 5,067 305 1,220 1,630 8,222 ------- ------- ------- ------- ------- Recoveries: Michigan 1,567 9 362 693 2,631 Wisconsin 918 -- 141 -- 1,059 Iowa 49 14 31 -- 94 Illinois -- -- 26 14 40 ------- ------- ------- ------- ------- Total recoveries 2,534 23 560 707 3,824 ------- ------- ------- ------- ------- Net charge-offs $ 2,533 $ 282 $ 660 $ 923 $ 4,398 ======= ======= ======= ======= ======= ----------------------------------------------------------------------------------------------------

----------------------------------------------------------------------- For the Six Months Ended June 30, 2004 ----------------------------------------------------------------------- Consumer - Consumer - Commercial Real estate Direct Indirect Total ----------------------------------------------------------------------- Charge-offs: Michigan $ 4,637 $ 166 $ 2,033 $ 3,521 $10,357 Wisconsin 5,786 227 521 -- 6,534 Iowa 1,099 105 240 -- 1,444 Illinois 617 -- 56 -- 673 ------- ------- ------- ------- ------- Total charge-offs 12,139 498 2,850 3,521 19,008 ------- ------- ------- ------- ------- Recoveries: Michigan 2,829 9 663 1,400 4,901 Wisconsin 2,054 13 253 -- 2,320 Iowa 324 14 50 -- 388 Illinois 108 -- 32 19 159 ------- ------- ------- ------- ------- Total recoveries 5,315 36 998 1,419 7,768 ------- ------- ------- ------- ------- Net charge-offs $ 6,824 $ 462 $ 1,852 $ 2,102 $11,240 ======= ======= ======= ======= ======= --------------------------------------------------------------------------------------------------------