SCHEDULE 14A

          PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 (AMENDMENT NO.  )

     Filed by the registrant [X]

     Filed by a party other than the registrant [ ]

     Check the appropriate box:

     [ ] Preliminary proxy statement.       [ ] Confidential, for use of the
                                                Commission only (as permitted by
                                                Rule 14a-6(e)(2)).

     [X] Definitive proxy statement.

     [ ] Definitive additional materials.

     [ ] Soliciting material pursuant to Section 240.14a-12

                          CITIZENS BANKING CORPORATION
- --------------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)

- --------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of filing fee (check the appropriate box):

     [X] No fee required.

     [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
         0-11.

     (1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------

     (2) Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------

     (3) Per unit price or other underlying value of transaction computed
         pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
         filing fee is calculated and state how it was determined):

- --------------------------------------------------------------------------------

     (4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------

     (5) Total fee paid:

- --------------------------------------------------------------------------------

     [ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------

     [ ] Check box if any part of the fee is offset as provided by Exchange Act
         Rule 0-11(a)(2) and identify the filing for which the offsetting fee
         was paid previously. Identify the previous filing by registration
         statement number, or the form or schedule and the date of its filing.

     (1) Amount Previously Paid:

- --------------------------------------------------------------------------------

     (2) Form, Schedule or Registration Statement No.:

- --------------------------------------------------------------------------------

     (3) Filing Party:

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     (4) Date Filed:

- --------------------------------------------------------------------------------

[LOGO]


                                                   THOMAS W. GALLAGHER
                                                   General Counsel and Secretary


            NOTICE OF ANNUAL MEETING OF SHAREHOLDERS, APRIL 16, 2002

To the Shareholders of Citizens Banking Corporation:

         Notice is hereby given that the annual meeting of shareholders of
Citizens Banking Corporation (the "Corporation") will be held in the
Presidential Ball Room located in the Holiday Inn, Gateway Centre, Flint,
Michigan, on Tuesday, April 16, 2002, at 10:00 a.m., local time, for the
following purposes:

         (1) To elect four (4) Class I directors to serve a three (3) year term
and until their successors are duly elected and qualify;

         (2) To approve the Citizens Banking Corporation Stock Compensation
Plan; and

         (3) To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.

         THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE DIRECTORS
NOMINATED AND FOR THE PROPOSAL DESCRIBED IN THE PROXY STATEMENT.

         Shareholders of record of the Corporation's common stock outstanding at
the close of business on February 28, 2002 are entitled to notice of and to vote
at the meeting.

         You are invited to attend this meeting. Please date, sign and return
your proxy promptly in the enclosed, stamped envelope whether or not you plan to
be present at the meeting. In the alternative you may vote via the Internet or
by telephone by following the procedures set forth on the enclosed proxy card.
You may still vote in person if you attend the meeting.

                                          By Order of the Board of Directors


                                          /s/ Thomas W. Gallagher
                                          Thomas W. Gallagher
                                          General Counsel and Secretary


Flint, Michigan
March 13, 2002



                          Citizens Banking Corporation
                            328 South Saginaw Street
                              Flint, Michigan 48502

- --------------------------------------------------------------------------------
                                 PROXY STATEMENT
- -------------------------------------------------------------------------------

         This proxy statement is furnished in connection with the solicitation
of proxies by the board of directors of Citizens Banking Corporation (the
"Corporation") to be used at the annual meeting of shareholders of the
Corporation and any adjournments thereof. The annual meeting will be held on
April 16, 2002 at the time and place and for the purposes set forth in the
accompanying notice of annual meeting of shareholders.

         This proxy statement, the proxy and the notice of annual meeting of
shareholders are first being provided to shareholders on or about March 13,
2002.

         The shareholders of the common stock of the Corporation ("Common
Stock") as of the close of business on February 28, 2002 will be entitled to be
present and to vote at the meeting. Each share is entitled to one vote on each
matter to be voted upon at the meeting. On February 28, 2002, there were
45,056,627 shares of Common Stock outstanding and entitled to vote. The
Corporation has no other class of stock issued and outstanding at this time that
is entitled to vote at the meeting. The board of directors requests that you
execute and return the proxy promptly, whether or not you plan to attend the
meeting. Instead of returning signed proxy cards, shareholders of record can
vote their shares over the Internet, or by calling a specially designated
telephone number. These Internet and telephone voting procedures are designed to
authenticate shareholders' identities, allow shareholders to give their voting
instructions and confirm that shareholders' instructions have been recorded
properly. Specific instructions for shareholders of record that wish to use the
Internet or telephone voting procedures are included on the enclosed proxy card.
Shareholders who vote via the Internet or by telephone do not need to mail their
proxy cards. Any proxy may be revoked by the person giving it at any time before
it is exercised by giving written notice of such revocation to the secretary of
the Corporation, by executing a later dated proxy or by voting in person at the
annual meeting.

         THE SHARES REPRESENTED BY PROPERLY EXECUTED PROXIES WILL BE VOTED IN
ACCORDANCE WITH THE INSTRUCTIONS PROVIDED THEREIN AND WHERE NO INSTRUCTIONS ARE
GIVEN, WILL BE VOTED IN FAVOR OF THE ELECTION OF THE CLASS I NOMINEES IDENTIFIED
HEREIN AND IN FAVOR OF THE PROPOSAL TO APPROVE THE STOCK COMPENSATION PLAN (THE
"PLAN"). Directors are elected by the affirmative vote of a plurality of the
votes cast at the meeting. For purposes of determining the number of votes cast
with respect to the election of directors, only those cast "for" are included.
Withheld votes are counted only for purposes of determining whether a quorum is
present at the annual meeting. Approval of the Plan requires the affirmative
vote of the holders of a majority of the shares of Common Stock voting on this
proposal. Abstentions and broker non-votes will not be counted and have no
effect with respect to this proposal.

         The cost of soliciting proxies will be borne by the Corporation.
Proxies will be solicited primarily by mail. The Corporation has, however,
retained the firm of Georgeson Shareholder Communications, Inc., specialists in
proxy solicitation, to solicit proxies on its behalf from brokers, bank
nominees, and other institutional holders of its stock at an anticipated cost of
$8,500 plus certain out-of-pocket expenses. Proxies may also be solicited by
directors, officers and other employees of the Corporation and its subsidiaries
personally, and by telephone, facsimile, or other means. No additional
compensation will be paid to directors, officers, or employees for any such
solicitation nor is any such solicitation expected to result in more than a
minimal cost to the Corporation. Arrangements may also be made directly by the
Corporation with banks, brokerage houses, custodians, nominees and fiduciaries
to forward solicitation material to the beneficial owners of stock held of
record by them and to obtain authorization for the execution of proxies. The
Corporation may reimburse such institutional holders for reasonable expenses
incurred by them in connection therewith.

         The persons named in the proxy to represent shareholders who are
present by proxy at the meeting are Joseph P. Day and James L. Wolohan.


                 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

         The table below includes all of the shareholders of the Corporation
known by the Corporation to beneficially own more than five percent of its
Common Stock as of February 28, 2002.



                                                                                                                           COMMON
                                                                                                                           STOCK
                                                                                                                        BENEFICIALLY
                                                                                                                         OWNED AS A
                                                                                                                       PERCENTAGE OF
                          COMMON STOCK             INVESTMENT POWER                            VOTING POWER             OUTSTANDING
 NAME AND ADDRESS OF      BENEFICIALLY    ----------------------------------       ----------------------------------      COMMON
  BENEFICIAL OWNER           OWNED          SOLE          SHARED       NONE          SOLE          SHARED       NONE        STOCK
                                                                                              
CenTra, Inc.
12225 Stephens
Warren, Michigan
48089(1)/                  3,310,088      3,193,045      117,043       -0-         3,193,045       117,043       -0-         7.3%

Citizens Bank
328 S. Saginaw St.
Flint, Michigan
48502(2)/                  3,218,975        817,701      738,310    1,662,964      1,431,966     1,711,329     75,680        7.1%



     -------------------

     (1)/The information furnished for CenTra, Inc. is based upon data which
     have been supplied to the Corporation by CenTra, Inc. As set forth in the
     table, CenTra, Inc. shares investment and voting power with respect to
     117,043 shares. Such powers are shared with the Manuel J. Moroun Trust
     under agreement dated March 4, 1977, for the benefit of Manuel J. Moroun.

     (2)/As fiduciary, Citizens Bank, a wholly owned subsidiary of the
     Corporation, will not vote the shares held by it in trusts or estates
     unless the governing document requires Citizens Bank to exercise such
     power. Shares held in all other trusts or estates shall not be voted unless
     a co-fiduciary unrelated to the Bank votes the shares.

                                       2

                        SECURITY OWNERSHIP OF MANAGEMENT

                  The following table sets forth the number of shares of the
         Corporation's Common Stock beneficially owned as of February 28, 2002,
         together with the percentage of the outstanding shares which such
         ownership represents, by (i) each director and nominee for election to
         the board of directors, (ii) each executive officer and former
         executive officer named in the Summary Compensation Table under
         "Executive Compensation" and (iii) all directors and executive officers
         of the Corporation as a group. The information with respect to
         directors and executive officers has been obtained from the respective
         individuals and is reported in accordance with the beneficial ownership
         rules of the Securities and Exchange Commission (the "Commission")
         under which a person may be deemed to be the beneficial owner of a
         security if such person has or shares voting power or investment power
         with respect to such security or has the right to acquire such
         ownership within the next 60 days. Accordingly, the amounts shown in
         the following table do not purport to represent beneficial ownership
         for any purpose other than compliance with the Commission's reporting
         requirements.



                                                                                                             COMMON STOCK
                                                                                                        BENEFICIALLY OWNED AS A
                                     COMMON STOCK         SOLE VOTING AND        SHARED VOTING AND     PERCENTAGE OF OUTSTANDING
                                 BENEFICIALLY OWNED(1)/ DISPOSITIVE POWER(1)/    DISPOSITIVE POWER           COMMON STOCK
              NAME
                                                                                           
Edward P. Abbott                          22,154                 22,011                   143                       *
Jonathan E. Burroughs II(2)/             305,230                262,132                43,098                       *
Joseph P. Day                             11,765                  8,265                 3,500                       *
Richard J. Dolinski                        3,000                  3,000                   ---                       *
John W. Ennest                           229,266                229,266                   ---                       *
Lawrence O. Erickson                     442,218                  7,975               434,243                       *
William R. Hartman(3)/                    20,000                 20,000                   ---                       *
John W. Johnson                           55,738                 36,414                19,324                       *
Benjamin W. Laird                          3,530                  3,530                   ---                       *
Stephen J. Lazaroff                       30,428                 30,428                   ---                       *
Wayne G. Schaeffer                       107,225                 96,717                10,508                       *
William C. Shedd                          12,538                 12,538                   ---                       *
James M. Van Tiflin                       29,353                 29,353                   ---                       *
Robert J. Vitito                         434,106                328,489               105,617                       *
Ada C. Washington                          8,656                  8,656                   ---                       *
Jack S. Werner                            58,576                 57,076                 1,500                       *
Kendall B. Williams                       11,032                 10,962                    70                       *
James L. Wolohan(4)/                      25,191                 13,500                11,691                       *

All directors and executive
officers as a group (23)(5)/           2,187,390              1,530,602               656,788                      4.9%



     * Represents holdings of less than one percent.

     (1)/The directors and officers listed in the table have the right to
     purchase the following number of shares pursuant to options which are
     exercisable currently or become exercisable within the next 60 days: Edward
     P. Abbott -- 4,500; Jonathan E. Burroughs -- 6,000; Joseph P. Day -- 7,500;
     Richard J. Dolinski -- 1,500; John W. Ennest -- 115,640; Lawrence O.
     Erickson -- 7,500; William R. Hartman - 0; John W. Johnson - 0; Benjamin W.
     Laird -- 1,500; Stephen J. Lazaroff -- 6,000; Wayne G. Schaeffer -- 96,717;
     William C. Shedd -- 4,500; James M. Van Tiflin -- 29,287; Robert J. Vitito
     -- 272,700; Ada C. Washington -- 6,000; Jack S. Werner -- 53,130; Kendall
     B. Williams -- 7,500; James L. Wolohan -- 7,500.


                                       3


     (2)/The shares shown for Mr. Burroughs include 38,050 shares held in the
     Burroughs' Memorial Trust, for which Mr. Burroughs is one of 5 trustees.
     Mr. Burroughs disclaims beneficial ownership of such shares.

     (3)/The shares shown for Mr. Hartman are restricted shares awarded to him
     under the Plan in connection with his appointment as president and chief
     executive officer of the Corporation. The award is subject to shareholder
     approval of the Plan by shareholders at the annual meeting and will be void
     if such approval is not received. In general, assuming approval of the Plan
     and his continued employment, the transfer restrictions on 20% of these
     shares will lapse on May 26, 2002 and thereafter the restrictions on the
     remaining 80% of the shares will lapse in four equal annual installments
     beginning February 25, 2003.

     (4)/The shares shown for Mr. Wolohan include 11,691 shares held by the
     Wolohan Family Foundation, of which Mr. Wolohan is a trustee. Mr. Wolohan
     disclaims beneficial ownership of such shares.

     (5)/The directors and executive officers disclaim beneficial ownership of
     49,741 of these shares. See also notes 2, 3 and 4.

                                       4

                              ELECTION OF DIRECTORS

         In accordance with the Corporation's restated articles of
incorporation, the board of directors is divided into three classes. Each year,
on a rotating basis, the terms of office of the directors in one of the three
classes will expire. Successors to the class of directors whose terms have
expired will be elected for a three-year term. The directors whose terms expire
at the 2002 annual meeting of shareholders ("Class I directors") are Edward P.
Abbott, Hugo E. Braun Jr., Jonathan E. Burroughs II, Lawrence O. Erickson,
William J. Hank and Robert J. Vitito. Four nominees will be elected as Class I
directors at the 2002 annual meeting of shareholders. The board of directors has
nominated Messrs. Abbott, Burroughs, Erickson and Vitito for election. Messrs.
Braun and Hank will not stand for re-election at this year's annual meeting of
shareholders pursuant to the Corporation's Retirement Policy for Directors. The
term for the Class I directors will expire at the 2005 annual meeting of
shareholders or upon the election and qualification of their successors. If any
of the nominees should be unable to serve, the proxies may be voted for the
election of such other person or persons as the board of directors may recommend
or the number of directors will be automatically reduced by the number of
nominees unable to serve if no substitute is recommended by the board of
directors.

         On the basis of information presently available to the board of
directors, only the four persons named above as nominees will be nominated for
election as directors. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
EACH OF THE NOMINEES.

         The name and age of each nominee and incumbent director, positions and
offices currently held with the Corporation and its subsidiaries, his or her
five-year business experience, and the year each became a director of the
Corporation, according to information furnished by such nominees and incumbent
directors, are set forth below.

                                     CLASS I
                        NOMINEES TO SERVE THREE (3) YEARS



                                                                                            BUSINESS EXPERIENCE DURING THE
                                                                                            PAST FIVE YEARS, DIRECTORSHIPS
                                                                             SERVED          IN CERTAIN CORPORATIONS, AND
                                                                          CONTINUOUSLY      PRINCIPAL OCCUPATION IF OTHER
                                          POSITIONS AND OFFICES WITH     AS A DIRECTOR        THAN CURRENT POSITION WITH
        NAME                    AGE    CORPORATION AND ITS SUBSIDIARIES  OF CORPORATION    CORPORATION AND ITS SUBSIDIARIES
                                                                             
Edward P. Abbott                 62    Director of Corporation and            1982       President and Chief Executive
                                       Director of Citizens Bank.                        Officer, Abbott's Meat, Inc., a
                                                                                         wholesale and retail meat
                                                                                         distributor.
Jonathan E.                      59    Director of Corporation and            1986       President, JEB Enterprises, an
    Burroughs II                       Director of Citizens Bank.                        investment consulting firm.
Lawrence O. Erickson             66    Director of Corporation and            1993       Chief Executive Officer, Four-Way
                                       Director of Citizens Bank.                        Tool & Die, Inc., an engineering
                                                                                         consulting firm for metal stamping
                                                                                         fabrication and tool manufacturing.
Robert J. Vitito                59     Chairman of the Board of               1991
                                       Corporation and of Citizens
                                       Bank.




                                       5

                                    CLASS II
                  CONTINUING DIRECTORS -- TERM EXPIRING IN 2003



                                                                                              BUSINESS EXPERIENCE DURING THE
                                                                                              PAST FIVE YEARS, DIRECTORSHIPS
                                                                             SERVED             IN CERTAIN CORPORATIONS, AND
                                                                        CONTINUOUSLY AS        PRINCIPAL OCCUPATION IF OTHER
                                        POSITIONS AND OFFICES WITH       A DIRECTOR OF           THAN CURRENT POSITION WITH
       NAME                   AGE    CORPORATION AND ITS SUBSIDIARIES     CORPORATION        CORPORATION AND ITS SUBSIDIARIES
                                                                           
Joseph P. Day                  62    Director of Corporation and              1992        President, Banner Engineering & Sales,
                                     Director of Citizens Bank.                           Inc., a combustion engineering and
                                                                                          manufacturing firm.

John W. Ennest                 59    Vice Chairman of the Board and           1991
                                     Chief Financial Officer and
                                     Treasurer of Corporation; Vice
                                     Chairman of the Board and Chief
                                     Financial Officer of Citizens
                                     Bank.

Benjamin W. Laird              52    Director of Corporation,                 2001        Attorney, Godfrey & Kahn, S.C.
                                     Director of Citizens Bank and
                                     Director of F&M Bank-Wisconsin.

Ada C. Washington              51    Director of Corporation and              1997        Community volunteer.
                                     Director of Citizens Bank.

James L. Wolohan               50    Director of Corporation and              1997        Chairman, President and Chief
                                     Director of Citizens Bank.                           Executive Officer of Wolohan Lumber
                                                                                          Co., a retailer of lumber, building
                                                                                          materials and home improvement
                                                                                          products.





                                       6

                                   CLASS III (1)
                  CONTINUING DIRECTORS -- TERM EXPIRING IN 2004



                                                                                              BUSINESS EXPERIENCE DURING THE
                                                                                              PAST FIVE YEARS, DIRECTORSHIPS
                                                                             SERVED             IN CERTAIN CORPORATIONS, AND
                                                                        CONTINUOUSLY AS        PRINCIPAL OCCUPATION IF OTHER
                                        POSITIONS AND OFFICES WITH       A DIRECTOR OF           THAN CURRENT POSITION WITH
       NAME                   AGE    CORPORATION AND ITS SUBSIDIARIES     CORPORATION        CORPORATION AND ITS SUBSIDIARIES
                                                                           
Richard J. Dolinski            61        Director of Corporation and           2001        President and Chief Executive
                                         Director of Citizens Bank.                        Officer, Dolinski Associates,
                                                                                           Inc., a management consulting firm.

Stephen J. Lazaroff            48        Director of Corporation and           1997        President, Diversified Precision
                                         Director of Citizens Bank.                        Products, Inc., a special cutting
                                                                                           tool manufacturer serving the
                                                                                           automotive and hydraulic fittings
                                                                                           industries.

William C. Shedd               62        Director of Corporation and           1982        Member of the law firm Shedd,
                                         Director of Citizens Bank.                        Fraiser & Grossman, PLLC from
                                                                                           November 2001 to present. Of counsel to
                                                                                           the law firm of Winegarden, Shedd,
                                                                                           Haley, Lindholm & Robertson, PLC from
                                                                                           December 1999 to November 2001.
                                                                                           Previously an attorney and partner with
                                                                                           such firm.

Kendall B. Williams            49        Director of Corporation and           1992        Attorney and Counselor,
                                         Director of Citizens Bank.                        The Williams Firm, P.C.
                                                                                           Previously an attorney with Gault
                                                                                           Davison, P.C. from January 1980 to
                                                                                           September 1997.



1/At its April 16, 2002 meeting, the board of directors intends to expand Class
III by creating one vacancy and appointing William R. Hartman, President and
Chief Executive Officer of the Corporation to fill that vacancy for a term
expiring at the 2004 annual meeting of shareholders.

                                        7


         MEETINGS OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS

         During 2001, 6 meetings of the board of directors of the Corporation
were held. During such period, all incumbent directors attended at least 75% of
the aggregate of the number of meetings of the board of directors and the number
of meetings held by the committees on which they serve.

         The Corporation has several committees on which members of the board of
directors serve, including a compensation and human resources committee, a
directors nominating committee, and an audit committee. The audit committee
meets quarterly and on call when needed, and the compensation and human
resources committee and directors nominating committee meet on call.

         The COMPENSATION AND HUMAN RESOURCES COMMITTEE met 5 times during 2001
and is currently comprised of the following directors: Lawrence O. Erickson;
Stephen J. Lazaroff; Kendall B. Williams; and James L. Wolohan. The
responsibilities of the committee include approval of all aspects of corporate
executive compensation and administration of the Corporation's compensation and
benefits plans.

         The DIRECTORS NOMINATING COMMITTEE met 1 time during 2001 and is
currently comprised of the following directors: Robert J. Vitito, chairman;
Jonathan E. Burroughs II; Lawrence O. Erickson; and Stephen J. Lazaroff. The
responsibilities of the committee are: to determine a desirable balance of
expertise among board members; to identify qualified candidates to fill board
positions; to provide aid in attracting qualified candidates to the board of
directors; to recommend the slate of director nominees to the board of directors
for inclusion in the Corporation's proxy statement for election by the
shareholders at the annual meetings; to consider director nominees proposed by
shareholders; and to handle such other matters as may be properly delegated to
the committee by the board of directors. Shareholders proposing director
nominees at any annual meeting of shareholders must provide written notice of
such intention, along with certain information regarding the proponent and the
nominees as provided in the bylaws, to the secretary of the Corporation at least
90 days prior to an annual shareholders meeting for which such nominations are
proposed. If the annual meeting date has been advanced to a date earlier than
the last Thursday in January then notice of such intention must be given within
10 days after the first public disclosure of the date of the annual meeting.
With respect to an election to be held at a special meeting of shareholders,
such notice must be given by the close of business on the seventh day following
the date on which notice of such meeting is first given to shareholders.

         The AUDIT COMMITTEE met 4 times during 2001 and is currently comprised
of the following directors: Edward P. Abbott, chairman; Joseph P. Day; Richard
J. Dolinski; Benjamin W. Laird; and William C. Shedd. The responsibilities of
the committee are primarily to oversee the Corporation's financial reporting
process, and also include oversight of the internal accounting controls for and
internal audit function of the Corporation and its subsidiaries; recommending to
the board of directors the independent auditors to be retained to conduct the
annual audit of the Corporation; reviewing the annual audit plan with the
independent auditors and the internal auditors; oversight of the Corporation's
legal, compliance, and ethics policies; and reviewing the results of the
internal and independent audits of the Corporation.

                                       8


                          REPORT OF THE AUDIT COMMITTEE

         In accordance with its written charter adopted by the board of
directors, the audit committee of the board of directors (the "Audit Committee")
assists the board of directors in fulfilling its responsibility for oversight of
the quality and integrity of the accounting, auditing and financial reporting
practices of the Corporation. Each Audit Committee member is "independent," as
defined in Rule 4200(a)(14) of the National Association of Securities Dealers'
Listing Standards.

         The Audit Committee received and reviewed a statement from the
independent auditors describing all relationships between the auditors and the
Corporation that might bear on the auditors' independence, as required by
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," discussed with the auditors any relationships that may impact
their objectivity and independence and satisfied itself as to the auditors'
independence.

         The Audit Committee discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees," and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Audit Committee also discussed the results of the
internal audit examinations.

         The Audit Committee reviewed and discussed the audited financial
statements of the Corporation as of and for the year ended December 31, 2001
with management and the independent auditors.

         Based on the above-mentioned review and discussions with management and
the independent auditors, the Audit Committee recommended to the board of
directors that the Corporation's audited financial statements be included in its
Annual Report on Form 10-K for the year ended December 31, 2001 for filing with
the Commission. The Audit Committee also recommended the reappointment of the
independent auditors.

         The Audit Committee of the Board of Directors:
         Edward P. Abbott, Chairman
         Joseph P. Day
         Richard J. Dolinski
         Benjamin W. Laird
         William C. Shedd

                                       9


                            COMPENSATION OF DIRECTORS

         During 2001, directors of the Corporation were paid an annual retainer
of $14,500 plus the sum of $1,000 for attendance at each meeting of the board of
directors. Non-officer directors were paid $600 for each committee meeting
attended with the exception of the committee chairpersons who were paid $1,000.
Committee members who are also employees of the Corporation do not receive fees
for committee meeting attendance.

         Throughout 2001, the Corporation also maintained the Stock Option Plan
for Directors (the "Director Plan"). Pursuant to the provisions of the Director
Plan, each nonemployee director serving on the board of directors immediately
following the annual meeting of shareholders receives an automatic grant of a
non-qualified stock option to purchase 1,500 shares of Common Stock at an
exercise price equal to the fair market value per share of Common Stock on the
date of the annual meeting of shareholders. Each such option becomes exercisable
six months following the grant date and expires five years after grant. On April
17, 2001, pursuant to the Director Plan, nonemployee directors received a stock
option grant to purchase 1,500 shares of Common Stock of the Corporation at an
exercise price of $25.72 per share. As discussed below, if the proposal to
approve the new Plan is approved, it is anticipated that the Director Plan will
be terminated and that any future grants of options to directors will be made
under the Plan.

                   PROPOSAL TO APPROVE STOCK COMPENSATION PLAN

         Stock-based compensation is a key element of the Corporation's
compensation program for management and was previously administered through the
Third Amended and Restated Stock Option Plan, which expired on January 16, 2002.
The board of directors unanimously approved the Stock Compensation Plan on
January 18, 2002, subject to shareholder approval. The purpose of the new Plan
is to attract and retain highly competent, effective and loyal employees and
non-employee directors to further the growth and profitable operation of the
Corporation. The stock-based compensation granted under the Plan will help to
further align the interests of the recipients with the long-term interests of
shareholders and the Corporation and encourage greater efforts on behalf of the
Corporation. The approval by shareholders of the Plan will permit the
Corporation to continue to grant stock-based compensation to executives and will
make additional shares available for grants to non-employee directors should the
board of directors deem such grants appropriate in the exercise of its fiduciary
duty.

         If the Plan is approved by shareholders, the board of directors intends
to terminate the Director Plan and to make no further grants thereunder.
Although the board of directors has made no determination as to future grants to
directors under the Plan, the Plan would permit the board of directors to make
periodic grants under the Plan comparable to those currently being made under
the Director Plan.

         GENERAL. The Plan provides for the grant of nonqualified stock options,
incentive stock options, restricted stock, restricted stock units and
performance awards at any time prior to January 18, 2012. A total of 7,000,000
shares of Common Stock have been set aside for issuance under the Plan, but only
2,000,000 of these may be issued in connection with grants of restricted stock,
restricted stock units and performance awards. These amounts are subject to
adjustment for stock splits and certain other corporate events. Approximately
2,400 full time employees and 11 non-employee directors of the Corporation and
its affiliates are eligible to receive grants under the Plan.

                                       10





         ADMINISTRATION. The Plan will be administered by the Compensation and
Human Resources Committee of the Board (the "Compensation Committee") or any
other committee of two or more non-employee directors who also constitute
"outside directors" as defined under Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"). The Compensation Committee has the power to
select the recipients of awards, although it may delegate to one or more
officers or managers the authority to grant awards and to otherwise act with
respect to awards made to participants who are not officers or directors of the
Corporation for purposes of Section 16 of the Securities Exchange Act of 1934.
Unless otherwise specified in the Plan, the Compensation Committee also has
broad power to determine the terms of awards and to change such terms in various
ways subsequent to grant, including among others, accelerating the
exercisability of options or lapse of transfer restrictions, waiving or
modifying performance conditions and transfer restrictions, and extending the
post-termination exercise period of options. The Compensation Committee may
amend or terminate the Plan at any time without shareholder approval, though
legal and regulatory requirements restrict its ability to amend the Plan without
shareholder approval when the amendment would increase the number of shares
available under the Plan or change the provisions relating to eligibility for
grants.

         OPTIONS. Options granted under the Plan may be either incentive stock
options under Section 422 of the Code or nonqualified stock options. The terms
of options granted under the Plan will be set forth in an agreement between the
Corporation and the recipient and will be determined by the Compensation
Committee, unless specified in the Plan. The exercise price will not be less
than the fair market value of the shares on the date of grant. The fair market
value per share of the Common Stock on February 28, 2002 was $32.15. The
exercise price must be at least 110% of fair market value if the recipient is
the holder of more than 10% of the Corporation's stock. An option granted under
the Plan cannot be repriced, by amending the related option agreement, or
replaced, by canceling the option and substantially contemporaneously granting
or agreeing to grant a new option with a lower exercise price, without
shareholder approval.

         Options granted under the Plan become exercisable at such times as the
Compensation Committee may determine and will expire not later than ten years
after grant. The aggregate fair market value, determined on the grant date, of
stock with respect to which incentive stock options may first become exercisable
for a holder during any calendar year may not exceed $100,000. The maximum
number of shares that may be subject to option grants under the Plan to any
salaried employee during any two-year period is 500,000 (subject to adjustment
for stock splits and other corporate events). Payment for shares to be acquired
upon exercise of options granted under the Plan may be made in cash, by check
or, at the discretion of the Compensation Committee, as set forth in the related
option agreement, a holder may exercise an option through a cashless exercise
procedure whereby the holder provides an option exercise notice to the
Corporation and simultaneously irrevocably instructs a broker to sell a
sufficient number of the shares from the option exercise to pay the option
exercise price and accompanying taxes. In addition, at the Compensation
Committee's discretion, shares held by the holder for at least six months may be
tendered to the Corporation to pay the exercise price and tax withholding
obligations, if any.

         RESTRICTED STOCK AWARDS AND RESTRICTED STOCK UNITS. The Plan also
provides for the grant of restricted shares or restricted stock units. A
restricted stock unit is the right to receive restricted shares or an equivalent
value in cash. Restricted shares and restricted stock units will initially be
non-transferable but will become transferable upon fulfillment of conditions
established by the Compensation Committee at the time of grant. An award of
restricted stock or restricted stock units may also be subject to vesting or
other restrictions, which may include performance goals. All of the terms
relating to vesting or other restrictions, including performance goals, and the
termination of the restriction period relating to a restricted stock award or
restricted stock unit, will be determined by the Compensation Committee and set
forth in the agreement relating to such restricted stock award or restricted
stock unit. The holder of


                                       11



restricted shares or shares subject to a restricted stock unit will have rights
as a shareholder of the Corporation, including the right to vote and receive
dividends with respect to such shares.

         PERFORMANCE AWARDS. The Plan also provides for the grant of performance
awards. A performance award is a right, contingent upon the attainment of
performance goals within a specified performance period, to receive shares of
Common Stock, which may be restricted stock, or the fair market value of such
shares in cash. All of the terms relating to the satisfaction of performance
goals, the length of any performance period, the amount of any performance award
granted, the amount of any payment or transfer to be made pursuant to any
performance award, and any other terms and conditions of any performance award,
including the effect upon such award of termination of the recipient's status as
an employee or director, will be determined by the Compensation Committee and
included in an agreement between the recipient and the Corporation.

         CHANGE IN CONTROL AND TERMINATION. Unless otherwise provided in the
applicable agreement, any portion of an option which is not yet exercisable will
be forfeited if the holder's status as an employee and director is terminated
for any reason, and any portion of a restricted stock grant or restricted stock
unit which is not yet transferable and any portion of a performance share award
with respect to which performance goals have not yet been achieved will be
forfeited if the holder's status as an employee and director is terminated for
any reason other than death, disability or retirement. Unless the relevant
agreement otherwise provides, the exercisable portion of an option will
terminate at various times after the holder's status as an employee and director
terminates, based upon the reason for the termination. If status is terminated
for cause, any unexercised portion of an option immediately terminates. If
status terminates due to death or disability, then the option is exercisable
until the earlier of the date the option would otherwise have terminated and the
first anniversary of such death or disability. If the option is a nonqualified
stock option and (1) status terminates due to retirement, or (2) the holder is a
party to a change in control agreement with the Corporation and status is
terminated involuntarily or constructively as provided in that agreement, then
the exercisable portion of the option may be exercised until the option would
otherwise have expired in the absence of termination. If status terminates for
any other reason, then the option terminates when the option otherwise expires
or three months after termination of status, whichever is earlier. The
Committee, however, has discretion under the Plan to accelerate the
exercisability of options, extend the exercise period of an option (but not past
the tenth anniversary of the grant date) and waive the restrictions or
conditions applicable to restricted stock, restricted stock units or performance
share awards, and such acceleration and waiver will occur automatically upon a
"change in control" of the Company (as defined in the Plan). Unless the relevant
agreement otherwise provides, if the holder's status as an employee and director
is terminated due to death, disability or retirement, then restrictions on any
portion of a restricted stock grant or restricted stock unit which is not yet
transferable will lapse and performance requirements as to any portion of a
performance share award with respect to which performance goals have not yet
been achieved will be deemed satisfied.

         INCOME TAX CONSEQUENCES. Under the Code as now in effect, at the time
an incentive stock option is granted or exercised, the holder will not be deemed
to have received any income, and the Corporation will not be entitled to a
deduction. The difference between the exercise price and the fair market value
of the shares on the date of exercise is a tax preference item, which may
subject the holder to the alternative minimum tax in the year of exercise. The
holder of an incentive stock option generally will be accorded capital gain or
loss treatment on the disposition of the stock acquired upon exercise, provided
the disposition occurs more than two years after the date of grant and more than
one year after exercise. A holder who disposes of shares acquired by exercise of
an incentive stock option prior to the expiration of the foregoing holding
periods realizes ordinary income upon the disposition equal to the difference
between the exercise price and the lesser of the fair market value of the shares
on the date of exercise or the disposition price. To the extent ordinary income
is recognized by the holder, the Corporation is


                                       12


permitted to deduct a corresponding amount as compensation expense. Upon the
exercise of a nonqualified stock option, a holder will generally recognize
ordinary income equal to the difference between the exercise price and the fair
market value of the stock on the date of exercise. Upon withholding for income
and employment taxes, the Corporation will receive a corresponding compensation
deduction. When the holder disposes of the shares acquired upon exercise of the
option, any amount received in excess of the fair market value of the shares on
the date of exercise will be treated as capital gain. A participant who receives
a restricted stock, restricted stock unit or performance share award recognizes
ordinary income equal to the fair market value of the stock on the date the
restrictions lapse, in the case of restricted stock and restricted stock units,
or the date on which any cash payment is received, as applicable, and, upon
withholding for income and employment taxes, the Corporation will receive a
compensation tax deduction equal to the ordinary income realized by the
participant.

         RECENT GRANTS. In connection with his appointment as president and
chief executive officer, William R. Hartman was granted a nonqualified stock
option under the Plan to purchase 225,000 shares of the Corporation's Common
Stock at an exercise price of $31.99 per share, which was the fair market value
of the Common Stock on the date of grant. Such options will become 100% vested
after five years from the date of grant, but may vest earlier on a graduated
basis in accordance with a pre-determined option vesting schedule. Such vesting
schedule is based upon a rolling four quarter diluted earnings per share ("EPS")
target for the Corporation (excluding extraordinary gains and losses) with a
minimum vesting of 2% upon the Corporation's achieving EPS of $2.26 and 100%
vesting upon achieving EPS of $2.83. In the event of a change in control of the
Corporation, the options will immediately become exercisable in full. The option
expires ten years after grant. Mr. Hartman's employment agreement provides that
in 2003, the Corporation will grant to him nonqualified stock options to
purchase an additional 225,000 shares.

         In addition, Mr. Hartman was awarded 20,000 shares of restricted stock.
In general, assuming approval of the Plan and his continued employment, the
transfer restrictions on 20% of these shares will lapse on May 26, 2002 and
thereafter the restrictions on the remaining 80% of the shares will lapse in
four equal annual installments beginning February 25, 2003. Such awards are
subject to shareholder approval of the Plan and will be void if such approval is
not received. No options or restricted shares have been granted under the Plan
to any other persons.

         THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL
OF THIS PROPOSAL.


                                       13






                               EXECUTIVE OFFICERS

         The following information is provided for those officers currently
designated as executive officers by the Corporation's board of directors and
includes the president, chief financial officer, controller, and secretary of
the Corporation, officers of the Corporation who are in charge of principal
business units, divisions or functions, and officers of the Corporation or its
subsidiaries who perform significant policy making functions for the
Corporation.



                                                                                                  YEAR BECAME
                                                                                             EXECUTIVE OFFICER OF
        NAME                      AGE              FIVE-YEAR BUSINESS EXPERIENCE                THE CORPORATION
                                                                                    
Richard T. Albee                  58     Executive Vice President of Corporation (April                1996
                                         1999 to present); Executive Vice President of
                                         Citizens Bank (December 1997 to present); Senior
                                         Vice President of Citizens Bank (April 1994 to
                                         December 1997).

Daniel E. Bekemeier               45     Senior Vice President, Controller and Chief                   1996
                                         Accounting Officer of Corporation (April 2001 to
                                         present); Senior Vice President and Controller
                                         of Citizens Bank (April 1995 to present);
                                         Treasurer and Manager of Citizens Bank Consumer
                                         Finance, LLC (September 2000 to present);
                                         Treasurer and Manager of Citizens Bank Mortgage
                                         Company, LLC and its predecessor (October 1997
                                         to present).

Nicholas J. Cilfone               51     Executive Vice President of Corporation (April                1985
                                         1999 to present); Senior Vice President of
                                         Corporation (August 1988 to April 1999);
                                         Executive Vice President of Citizens Bank (June
                                         1996 to present); President and Manager of
                                         Citizens Bank Mortgage Company, LLC and its
                                         predecessor (October 1997 to present).

Gary P. Drainville                52     Executive Vice President of Corporation and of                1985
                                         Citizens Bank (December 1993 to present);
                                         President of CB Wealth Management, N.A. (March
                                         1, 2002 to present).

John W. Ennest                    59     Vice Chairman of the Board of Corporation                     1983
                                         (October 1991 to present); Chief Financial
                                         Officer and Treasurer of Corporation (July 1994
                                         to present); Vice Chairman of the Board and
                                         Chief Financial Officer of Citizens Bank (June
                                         1996 to present) Chairman of the Board, Citizens
                                         Bank--Illinois, N.A. (August 1992 to May 1999).



                                       14





                                                                                                  YEAR BECAME
                                                                                             EXECUTIVE OFFICER OF
        NAME                      AGE              FIVE-YEAR BUSINESS EXPERIENCE                THE CORPORATION
                                                                                    
Thomas W. Gallagher               49     General Counsel of Corporation (August 1988 to                1989
                                         present); Secretary of Corporation (January 1989
                                         to present); General Counsel and Secretary of
                                         Citizens Bank (August 1988 to present);
                                         Secretary and Manager of Citizens Bank Consumer
                                         Finance, LLC (September 2000 to present);
                                         Secretary and Manager of Citizens Bank Mortgage
                                         Company, LLC (October 1997 to present).

William R. Hartman                53     President and Chief Executive Officer of                      2002
                                         Corporation and Chairman, President and Chief
                                         Executive Officer of Citizens Bank (February
                                         2002 to present).

Wayne G. Schaeffer                55     Executive Vice President of Corporation                       1987
                                         (December 1993 to present); President --
                                         Southeast Region, Citizens Bank (June 1996 to
                                         present); President and Manager of Citizens Bank
                                         Consumer Finance, LLC (September 2000 to
                                         present).

Thomas C. Shafer                  43     Executive Vice President and Senior Credit                    1996
                                         Officer of Corporation (April 1999 to present);
                                         Executive Vice President and Senior Credit
                                         Officer of Citizens Bank (June 1996 to present).

James M. Van Tiflin               54     Executive Vice President of Corporation (April                1996
                                         1999 to present); President -- Mid Michigan
                                         Region, Citizens Bank (June 1996 to present);
                                         President of F&M Bank--Wisconsin (August 2001 to
                                         present).

Robert J. Vitito                  59     Chairman of the Board of Corporation (April 1999              1986
                                         to present); President and Chief Executive
                                         Officer of Corporation (April 1996 to February
                                         2002); Chairman, President and Chief Executive
                                         Officer of Citizens Bank (May 1996 to February
                                         2002).




                                       15




                                                                                                  YEAR BECAME
                                                                                             EXECUTIVE OFFICER OF
        NAME                      AGE              FIVE-YEAR BUSINESS EXPERIENCE                THE CORPORATION
                                                                                    
Jack S. Werner                    54     Executive Vice President of Corporation (April                1996
                                         1999 to present); President -- Northern Region,
                                         Citizens Bank (June 1996 to present).  Chairman
                                         of Citizens Bank--Illinois, N.A. (May 1999 to
                                         present); President of F&M Bank--Iowa (August
                                         2001 to present).



         Citizens Bank, Citizens Bank-Illinois, N.A., F&M Bank-Wisconsin, F&M
Bank-Iowa and CB Wealth Management, N.A. are wholly-owned subsidiaries of the
Corporation.


                                       16





                             EXECUTIVE COMPENSATION

         The following table provides certain summary information concerning
compensation paid or accrued by the Corporation and its subsidiaries, to or on
behalf of the Corporation's Chief Executive Officer, each of the four other most
highly compensated executive officers who were serving as such at December 31,
2001 and one other former executive officer (such current and former officers
are referred to as the "Named Officers") of the Corporation for the fiscal years
ended December 31, 1999, 2000, and 2001:

                           SUMMARY COMPENSATION TABLE



- -----------------------------------------------------------------------------------------------------------------------------------
                                                    ANNUAL COMPENSATION                LONG TERM
                                                                                     COMPENSATION
     NAME AND PRINCIPAL
         POSITION

                                             ----------------------------------------------------------
                                                                                                                ALL OTHER
                                               SALARY ($)         BONUS ($)            OPTIONS/               COMPENSATION(1)/ ($)
                                     YEAR                                               SARS(#)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                             
Robert J. Vitito(2)/                 2001        516,950          264,532              116,000                   32,180
Chairman, President and              2000        489,999           52,376              114,000                   32,580
  Chief Executive Officer            1999        425,046            - 0 -               80,000                   26,126

- -----------------------------------------------------------------------------------------------------------------------------------
John W. Ennest                       2001        288,765           88,597               33,700                   32,180
Vice Chairman, Treasurer             2000        281,036           19,491               32,000                   32,580
    and Chief Financial              1999        272,850           53,195               23,000                   26,247
    Officer
- -----------------------------------------------------------------------------------------------------------------------------------
Wayne G. Schaeffer                   2001        200,707           65,516               27,400                    8,651
Executive Vice President             2000        187,078           14,413               30,000                    8,253
                                     1999        176,073           39,337               22,000                    8,050

- -----------------------------------------------------------------------------------------------------------------------------------
James M. Van Tiflin                  2001        192,621           72,068               22,100                    8,267
Executive Vice President             2000        172,937           12,436               26,000                    8,214
                                     1999        162,383           42,428               18,500                    7,989
- -----------------------------------------------------------------------------------------------------------------------------------
Jack S. Werner                       2001        178,423           66,952               19,400                    8,841
Executive Vice President             2000        160,950           11,663               20,000                    8,841
                                     1999        145,659           36,603               11,000                    9,026
- -----------------------------------------------------------------------------------------------------------------------------------
John W. Johnson(3)/                  2001        165,982            - 0 -               25,000                  547,373(3)
President -- F&M                     2000        265,865           10,000               30,000                    8,685
Bank-Wisconsin
- -----------------------------------------------------------------------------------------------------------------------------------


     (1)/The amounts set forth in the "All Other Compensation" column for 2001
     represent: (i) matching contributions on behalf of each of the Named
     Officers to the Corporation's Section 401(k) Plan in the amount of $7,875,
     except for Mr. Johnson whose matching contribution was in the amount of
     $7,469; (ii) insurance payments with respect to term life insurance as
     follows: Mr. Vitito $1,805, Mr. Ennest $1,805, Mr. Schaeffer $776, Mr. Van
     Tiflin $392, Mr. Werner $966 and Mr. Johnson $467; (iii) director fees in
     the amount of $22,500 paid to each of Messrs. Vitito and Ennest for
     services as a director of the Corporation; and (iv) severance payments paid
     or to be paid to Mr. Johnson in the amount of $539,437 (see note 3 below).

                                       17



     (2)/Effective February 25, 2002, Mr. Vitito retired as president and chief
     executive officer of the Corporation. Mr. Vitito continues to serve as
     chairman of the board.

     (3)/Mr. Johnson became an executive officer of the Corporation in January
     2000. His employment with the Corporation was terminated on July 19, 2001
     pursuant to the provisions of a release and settlement agreement entered
     into on July 19, 2001. Pursuant to such arrangement, Mr. Johnson is
     entitled to receive a total of $539,437, which will be paid in bi-weekly
     installments of $10,373.80 from July 21, 2001 through July 24, 2003. For
     purposes of determining whether to include Mr. Johnson in the table, the
     payments made to him under this agreement during 2001 were treated as
     salary but were reflected in the "All Other Compensation" column.


                                       18


STOCK OPTION GRANTS

         The following table contains information concerning the grant of stock
options under the Corporation's Third Amended Stock Option Plan (the "Option
Plan") to the Named Officers during 2001.



- -------------------------------------------------------------------------------------------------------------------
                                    OPTION/SAR GRANTS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------------------------------------------
                                    INDIVIDUAL GRANTS(1)/
- ---------------------------------------------------------------------------------------

                         NUMBER OF      % OF TOTAL
                        SECURITIES       OPTIONS/                                         POTENTIAL REALIZABLE
                        UNDERLYING         SARS                                          VALUE AT ASSUMED ANNUAL
                         OPTIONS        GRANTED TO         EXERCISE OR                     RATE OF STOCK PRICE
                          /SARS        EMPLOYEES IN        BASE PRICE       EXPIRATION        APPRECIATION FOR
        NAME            GRANTED (#)     FISCAL YEAR          ($/SH)            DATE             OPTION TERM(2)/
                                                                                        ---------------------------
                                                                                             5%($)          10%($)
- -------------------------------------------------------------------------------------------------------------------
                                                                                       
R.J. Vitito              116,000           18.41%             25.42            5/22/11    1,854,434      4,699,500


J.W. Ennest               33,700            5.35%             25.42            5/22/11      538,745      1,365,286


W.G. Schaeffer            27,400            4.35%             25.42            5/22/11      438,030      1,110,054


J.M. Van Tiflin           22,100            3.51%             25.42            5/22/11      353,302        895,336


J.S. Werner               19,400            3.08%             25.42            5/22/11      310,138        785,951


J.W. Johnson              25,000            3.97%             25.42            5/22/11      399,663      1,012,823
- -------------------------------------------------------------------------------------------------------------------



(1)/These stock options are nonqualified stock options granted May 22, 2001
pursuant to the Option Plan. The options are exercisable in whole or in part
during the term thereof once vested, beginning November 22, 2001. Generally,
such options will become 100% vested after 5 years from the date of grant, but
may vest earlier on a graduated basis in accordance with a pre-determined option
vesting schedule. Such vesting schedule is based upon a rolling four quarter
diluted earnings per share ("EPS") target for the Corporation (excluding
extraordinary gains and losses) with a minimum vesting of 2% upon the
Corporation's achieving EPS of $2.12 and 100% vesting upon achieving EPS of
$2.66. In the event of a change in control of the Corporation, the options will
immediately become exercisable in full.

(2)/Such "potential realizable values" represent the value of such options at
the end of their term, assuming a 5% and 10% appreciation in the price of the
Common Stock compounded annually over the term without discounting for
inflation. The actual value of such options is dependent upon actual
appreciation in the market price of the Common Stock during the term of the
options.



19




OPTION/SAR EXERCISES AND HOLDINGS

         The following table provides information, with respect to the Named
Officers, about the exercise of options and/or stock appreciation rights
("SARs") during the last fiscal year, and the unexercised options and SARs held
as of the end of the fiscal year.

               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                      AND FISCAL YEAR-END OPTION/SAR VALUES



- -------------------------------------------------------------------------------------------------------------------
                                                          NUMBER OF SECURITIES
                         SHARES                          UNDERLYING UNEXERCISED        VALUE OF UNEXERCISED IN-THE-
                      ACQUIRED ON        VALUE           OPTIONS/SARS AT FISCAL           MONEY OPTIONS/SARS AT
       NAME           EXERCISE (#)   REALIZED ($)             YEAR END (#)                FISCAL YEAR END ($)(1)/
                                                       -------------------------        ---------------------------
                                                       EXERCISABLE  UNEXERCISABLE        EXERCISABLE  UNEXERCISABLE
- -------------------------------------------------------------------------------------------------------------------
                                                                                    
R.J. Vitito              91,108      1,107,248          272,700          226,800       2,329,318       2,105,472
J.W. Ennest              91,876      1,125,003          115,640           65,410       1,165,905         598,105
W.G. Schaeffer           23,454        210,656           96,717           58,133         949,104         537,843
J.M. Van Tiflin          64,740        526,932           24,732           48,328          73,241         456,162
J.S. Werner               9,300        145,841           53,130           37,020         551,213         360,016
J.W. Johnson             11,142         77,390            - 0 -            - 0 -           - 0 -           - 0 -
- -------------------------------------------------------------------------------------------------------------------


(1)/The value set forth in the table was calculated by subtracting the exercise
price of the options from the closing price of the Common Stock at year end and
then multiplying the difference by the number of shares subject to such options.

PENSION PLANS

         Through the end of 2001, the Corporation provided pension benefits to
participating employees under a final average pay defined benefit pension plan.
Effective January 1, 2002, this plan was changed to a cash balance defined
benefit pension plan. Although benefits earned through December 31, 2001 under
the final pay pension plan will be protected as minimum benefits, all future
benefits will be earned under the cash balance pension plan. Certain of the
Named Officers also have supplemental retirement arrangements. These programs
are described below.

         FINAL AVERAGE PAY PENSION PLAN. Under the final average pay pension
plan, retirement benefits payable as a life annuity at the normal retirement age
of 65 were based on a participant's average monthly compensation and years of
service. Compensation was averaged over the 60 consecutive months of the
participant's last 120 months in which he or she received the greatest amount.
Compensation was defined as the participant's base salary, exclusive of bonuses,
overtime, and fringe benefits, but included the participant's 401(k) salary
reduction contributions. However, annual compensation over the federal tax law
limit was not considered. That limit for 2001 was $170,000. Benefits were not
subject to offset for Social Security or other benefits.


                                       20


         The following table shows the estimated annual pension benefits payable
to the Named Officers at normal retirement age under the final average pay
pension plan, based on remuneration that is covered under the plan and years of
service with the Corporation and its subsidiaries.

                               PENSION PLAN TABLE



- -------------------------------------------------------------------------------------------------

                                           YEARS OF CREDITED SERVICE
                                           -------------------------
    REMUNERATION
                           15             20              25              30              35
- -------------------------------------------------------------------------------------------------
                                                                     
      $125,000            $29,000       $39,000        $49,000         $59,000         $69,000
       150,000             36,000        48,000         60,000          72,000          84,000
       175,000             43,000        57,000         71,000          86,000         100,000
       200,000             50,000        66,000         83,000          99,000         116,000
- -------------------------------------------------------------------------------------------------



         The law in effect throughout 2001 limited remuneration considered for
benefit purposes to $170,000. Covered remuneration for the Named Executives who
participated in this plan is $164,000 for Messrs. Vitito, Ennest, and Schaeffer,
$162,048 for Mr. Van Tiflin and $143,620 for Mr. Werner. The estimated credited
years of service for each named executive are as follows: Mr. Vitito, 34; Mr.
Ennest, 19; Mr. Schaeffer, 18; Mr. Van Tiflin, 27; and Mr. Werner, 26. Mr.
Johnson did not participate in this plan.

         CASH BALANCE PENSION PLAN. As of January 1, 2002, each participant's
age 65 lifetime annuity benefit under the final average pay pension plan was
converted to a present value amount, based on stated assumptions of life
expectancy and interest rates. This amount was then increased by 5% as a special
one-time plan inception contribution, yielding each participant's January 1,
2002 opening cash balance in the cash balance pension plan, which is shown on
the plan's records as a bookkeeping account.

         At the close of each subsequent year of participation in the plan, an
employee's cash balance plan account is credited with two amounts. First, there
is a credit of 4% of the participant's total compensation earned for the year.
For this purpose, compensation includes a participant's base salary, plus
bonuses, overtime and taxable fringe benefits, as well as any elective salary
reduction contribution made by the participant to the Corporation's 401(k) plan.
However, the plan does not consider annual compensation in excess of the federal
tax law limit, which will be $200,000 for 2002. Participants who are age 35 or
older with at least 10 years of service as of December 31, 2001 also will
receive an additional annual transition credit as follows: ages 35-39 0.5%; ages
40-44 1.5%; ages 45-49 2.5%; and ages 50 and older 3.0%. Second, each
participant's bookkeeping account as of January 1 of each year is credited with
interest at an assumed rate equal to the 30-year U.S. Treasury bond rate in
effect for November of the previous year. The rate for November 2001 was 5.12%,
which is the rate that will be used for 2002.



                                       21



         Participants in the cash balance plan are entitled to a lump sum
distribution of their accumulated bookkeeping account upon retirement or may
elect to have this balance transferred to one of various lifetime annuity
options using the plan's stated actuarial assumptions for the age at which
payments are to begin. There is no offset for Social Security or other benefits.
Estimated lump sum benefits, based on projected future earnings and interest
rates, and corresponding annual lifetime annuity amounts, payable at age 65 to
each of the Named Officers (other than Mr. Johnson), are as follows:



- --------------------------------------------------------------------------------------------------------------------
                NAME                   PROJECTED LUMP SUM CASH BALANCE PLAN      ALTERNATIVE ANNUAL LIFE ANNUITY
                                                 BENEFIT AT AGE 65                      BENEFIT AT AGE 65
- --------------------------------------------------------------------------------------------------------------------
                                                                                       
R.J Vitito                                          $1,040,048                               $97,308
J.W. Ennest                                           $613,016                               $53,688
W.G. Schaeffer                                        $608,783                               $58,992
J.M. Van Tiflin                                       $896,771                               $86,016
J.S. Werner                                           $798,925                               $76,632
- --------------------------------------------------------------------------------------------------------------------


         Mr. Johnson participates exclusively in a separate cash balance pension
plan for former F&M Bancorporation employees. Benefits are computed in the same
manner as described above, but starting with the plan's inception in 2000 (and
with no transition credits for persons age 35 and older). Mr. Johnson's
compensation for plan purposes as of the end of 2001 is $170,000. His estimated
lump sum benefit at normal retirement age of 65, based on projected future
earnings and the applicable Treasury rate, is $17,399, which he could elect to
convert to an annual annuity for life of $1,524.

         The Corporation has an agreement with each of Mr. Vitito and Mr. Ennest
providing that they will be entitled to receive a supplemental benefit from the
Corporation if the sum of their pension benefits under the plans described above
and Social Security retirement benefits at age 65 do not equal a stated minimum
amount. That amount is 60% for Mr. Vitito, and 50% for Mr. Ennest, of their
average annual base salary and bonus over the consecutive 36-month period in
which they received the highest compensation during their final 60 months of
employment, with appropriate percentage reductions in the event of their
retirement before age 65. For Messrs. Vitito and Ennest, these minimum benefits
payable annually for life at age 65 are estimated to be $349,781 and $167,322,
respectively. If their pension and Social Security benefits exceed these
amounts, no supplemental benefits are payable.

CHANGE IN CONTROL AND SEVERANCE AGREEMENTS

         The Corporation has change in control agreements with each of the Named
Officers, except for Mr. Johnson, whose agreement terminated upon his separation
from employment in July 2001. Each agreement provides severance benefits to the
Named Officer if there is a change in control of the Corporation and the Named
Officer's employment with the Corporation is actually or constructively
terminated at any time within three months prior to or on the date of such
change in control, or within twenty-four months thereafter. A "change in
control" of the Corporation is generally defined as the acquisition by any
person or group of 20% or more of the outstanding Common Stock in a transaction
which has not been approved by a majority of the board of directors, a
liquidation or dissolution of the Corporation, a sale of substantially all of
the assets of the Corporation, a merger, consolidation or combination in which
the shareholders of the Corporation immediately before such a transaction do not
continue to control more than 65% of the voting power of the resulting entity
or, under certain circumstances, a change in the majority of the members of the
board of directors within a two-year period. A Named Officer's employment is
deemed to have been constructively terminated following a change in control if
(i) there is a significant reduction in the scope of the Named Officer's
authority or in the extent of

                                       22


such Officer's powers, functions, duties or responsibilities, (ii) there is a
reduction in the Named Officer's rate of compensation, (iii) fringe benefits are
not provided to such Named Officer on a basis commensurate with other executives
of the Corporation, or (iv) there are changes in the Named Officer's
responsibilities which would require moving such Officer's job location outside
of lower Michigan.

         Each Agreement continues until two years after a change in control of
the Corporation and generally provides severance benefits of a lump-sum payment
equal to three years salary and three years bonus plus medical, dental and life
insurance coverage for a period of three years. Further, each Agreement provides
for additional payments to make the Named Officer whole, on an after-tax basis,
for any excise tax imposed by Section 4999 of the Code. Any Named Officer whose
employment is terminated and who thereafter receives the benefits provided under
such change in control agreement may not, for a period of twenty-four months
following termination of employment, accept employment, consult for or otherwise
assist any other financial institution which conducts business from a location
within fifty (50) miles of any location of the Corporation or its subsidiary
banks.

         The employment of Mr. John W. Johnson, as president of the
Corporation's subsidiary bank, F&M Bank-Wisconsin, was terminated on July 19,
2001, pursuant to the provisions of a release and settlement agreement. Under
such agreement, Mr. Johnson is entitled to receive a total of $539,437, which
will be paid in bi-weekly installments of $10,373.80 from July 21, 2001 through
July 24, 2003. Such bi-weekly installment payments will be reduced by 50% in the
event and beginning at such time as Mr. Johnson obtains comparable employment.
In exchange for the foregoing, Mr. Johnson has agreed to a release of all claims
against the Corporation and to a two year non-compete and non-solicitation
provision.


                                       23



                   COMPENSATION AND HUMAN RESOURCES COMMITTEE
                        REPORT ON EXECUTIVE COMPENSATION

         The compensation and human resources committee of the board of
directors of the Corporation presently consists of four directors who are not
employed by the Corporation and are not eligible to participate in any of the
Corporation's benefit plans other than the Stock Option Plan for Directors. Mr.
Hugo E. Braun, Jr. formerly chairman of the Compensation Committee, retired
March 12, 2002 pursuant to the Corporation's retirement policy for directors.
The following report is submitted by the Compensation Committee.

OVERVIEW AND PHILOSOPHY

         The Compensation Committee, pursuant to authority delegated by the
board of directors of the Corporation, is responsible for determining and
implementing compensation and benefit systems for executive officers and other
employees of the Corporation. The Compensation Committee determines the annual
salaries and other compensation for executive officers based upon
recommendations from the Corporation's chief executive officer, as well as
information from the Corporation's human resources department and independent
outside consultants. With respect to the compensation of the Corporation's chief
executive officer, in addition to the utilization of the Corporation's human
resources department and independent outside consultants, the members of the
board of directors also provide input and recommendations. The Compensation
Committee's determinations relating to executive compensation are intended to:

         *     align the financial interests of the executive officers with the
               long-term interests of the Corporation's shareholders;

         *     attract and retain high performing executive officers to lead the
               Corporation to greater levels of profitability; and

         *     motivate executive officers to attain the Corporation's
               performance goals by placing a significant portion of such
               officers' financial reward at risk relative to achievement of
               Corporate goals.

         In furtherance of these objectives, the compensation package structured
for the Corporation's executive officers has three primary components: base
compensation (including salary, pension, welfare benefits and perquisites),
annual cash bonus awards, which may be made under the Management Incentive Plan
("MIP") or otherwise, for performance during the year, and long term,
stock-based compensation generally awarded under the Corporation's Third Amended
Stock Option Plan (the "Option Plan"). The Option Plan expired in January of
this year. However, a new stock compensation plan (the "Plan") has been approved
by the board of directors of the Corporation subject to approval by the
shareholders at the 2002 annual meeting. Like the Option Plan, the Plan provides
for stock-based compensation and is intended to motivate participants and
promote the long-term growth and profitable operation of the Corporation.


                                       24



BASE COMPENSATION

         Given the Compensation Committee's continuing emphasis on
performance-based long-term and short-term compensation, base compensation for
executive officers has been established by the Compensation Committee at
competitive levels based upon information available to the Compensation
Committee relating to compensation for corresponding executive positions at
similarly situated financial institutions, some of which are included in the 50
Bank Index shown in the Shareholder Return Graph. Executive officer salaries are
evaluated by the Compensation Committee on a periodic basis utilizing
information from independent outside compensation consultants, the Corporation's
human resources department and the Corporation's chief executive officer. Input
from the members of the Corporation's board of directors is utilized with
respect to the salary of the chief executive officer. To determine the actual
base salary for each executive officer, the Compensation Committee also takes
into account individual performance, experience, and unique contributions or
needs for certain expertise required by the Corporation.

         Base Compensation of Chief Executive Officer. The Compensation
Committee reviewed Mr. Vitito's performance for 2000 in December of that year
and awarded him a 5.5% merit increase effective December 29, 2000. In support of
such increase, the Compensation Committee noted his significant contribution to
the management and oversight of the conversions of the multiple operating
systems of the various subsidiary banks of F&M Bancorporation, Inc. ("F&M")
which had been acquired by the Corporation during the previous year. The
Compensation Committee noted that, during the year, a total of 23 F&M banks were
converted onto the Corporation's operating systems and that the management and
employees of the F&M banks were trained on such systems and in offering bank
products reflective of the corporate standard. Moreover, the Compensation
Committee noted that, during 2000, significant progress was made under Mr.
Vitito's direction to unify the culture of F&M with that of the Corporation by
redefining job descriptions at the F&M banks and by evaluating and standardizing
salary ranges and certain key employee fringe benefits.

BONUS COMPENSATION

         All of the Corporation's executive officers participate in the MIP. The
MIP is designed to motivate participating officers of the Corporation and its
subsidiaries to achieve strategic goals; to strengthen links between pay and
performance; and to align management more closely with the interests of
shareholders. The amount of an individual's MIP award is a function of (i) the
midpoint of the salary range for the individual's position, (ii) the
"participation rate" established by the Compensation Committee for the
individual (15% for lower level executive officers to 50% for the Chief
Executive Officer), (iii) the performance of the Corporation, and (iv) the
extent to which the individual achieved agreed-upon objectives for the year. As
a general practice under the MIP, no amounts will be awarded unless the
Corporation's earnings target for the year equals or exceeds 96.5% of the
earnings target approved by the Corporation's board of directors for that year.
At such level, awards will be made at 50% of the targeted bonus amount. Award
payouts will increase as the Corporation's earnings increase up to an amount not
to exceed 150% of the targeted bonus amount.

         Chief Executive Officer Award. Mr. Vitito received an award of $264,532
under the MIP for his 2001 performance on the same basis as the other executive
officers. Mr. Vitito's primary individual MIP objective was to have the
Corporation's earnings reach the 2001 profit plan target. The Compensation
Committee noted that the Corporation's earnings during 2001 exceeded any year in
history and achieved the 2001 profit plan target. With respect to financial
performance, the Compensation Committee also noted that the value of the Common
Stock had risen approximately 13% during the course of the year. Other
significant individual objectives of Mr. Vitito under the MIP included balance
sheet restructuring


                                       25


initiatives, such as selling of the credit card portfolio as well as the F&M
Bank-Minnesota franchise and the securitization of a $247 million portfolio of
seasoned mortgage loans. With respect to restructuring the balance sheet, the
Compensation Committee also noted that under Mr. Vitito's direction, the
majority of new mortgage loan production of the Corporation was sold into the
secondary market throughout 2001 and the commercial loan portfolios of the F&M
subsidiary banks were decreased in size in a transition process which involved
refocusing these portfolios to target markets consistent with the Corporation's
overall business strategy. The Compensation Committee noted that Mr. Vitito's
efforts to restructure the Corporation's balance sheet during 2001 effectively
reduced the Corporation's interest rate risk and decreased its reliance on
borrowed funds. Moreover the Compensation Committee emphasized the savings and
efficiencies that will be achieved prospectively through the Corporation's
divestiture of its credit card portfolio and its only bank in Minnesota. The
Compensation Committee concluded that because Mr. Vitito had achieved the profit
plan target for 2001 as well as all of his individual objectives, he was
entitled to receive 100% of his targeted bonus.

LONG-TERM STOCK-BASED COMPENSATION

         The Option Plan and the Plan provide for a variety of different types
of compensation arrangements, such as stock options, restricted stock, and stock
appreciation rights, which increase in value as the value of the Common Stock
increases. The purpose of these and similar long-term compensation arrangements
is to more closely align the financial interests of executive officers and other
key employees with the long-term interests of the Corporation's shareholders by
linking a significant portion of their compensation directly to stock price
growth or decline.

         In furtherance of such purpose, the Compensation Committee generally
makes annual grants to executive officers of stock options with an exercise
price equal to the fair market value of the Common Stock on the date of grant.
Such options vest and generally become exercisable as the Corporation's EPS
increases in accordance with a vesting schedule pertaining to such option
grants. The Compensation Committee has adopted option grant guidelines to
reflect competitive practices of other similarly situated financial
institutions. These guidelines, implemented by the Compensation Committee with
the assistance of the Corporation's outside compensation consultants, employ a
modified Black-Scholes option valuation model to estimate the present value of
long-term incentive compensation for corresponding executive positions at
similarly situated and performing financial institutions. A similar analysis is
performed to determine the comparative value of an option to be awarded. Based
upon this information and other information concerning compensation practices
within the financial services industry, an appropriate participation rate is
assigned for each of the executive officers in the Plan. The option grant size
for each executive officer is then determined by dividing the product of the
position's salary mid-point and participation rate by the derived fair market
value of an option to be awarded under the Plan, subject to being increased or
decreased by the Compensation Committee based upon its evaluation of the
officer's individual performance.

         Chief Executive Officer Long Term Compensation. Mr. Vitito received an
option grant from the Compensation Committee in the amount of 116,000 shares
during 2001 in accordance with the formula described above.




                                       26


         Deductibility of Executive Compensation. Section 162(m) of the Code
restricts the deductibility of executive compensation paid to the Corporation's
Chief Executive Officer and any of the four other most highly compensated
executive officers at the end of any fiscal year to not more than $1,000,000 in
annual compensation (including gain from the exercise of certain stock option
grants). Certain performance-based compensation is exempt from this limitation
if it complies with the various conditions described in Section 162(m). The
Option Plan and the Plan contain a restriction on the number of options that may
be granted which is intended to cause compensation realized in connection with
the exercise of options granted under the Option Plan or the Plan to comply with
these conditions and be exempt from the Section 162(m) restriction on
deductibility.

         The Compensation Committee does not believe that other components of
the Corporation's compensation program are likely to result in payments to any
executive officer in any year which would be subject to the restriction on
deductibility and has concluded that no further action with respect to
qualifying such compensation for deductibility is necessary at this time. The
Compensation Committee intends to continue to evaluate from time to time the
advisability of qualifying future executive compensation programs for exemption
from the Section 162(m) restriction on deductibility.

LAWRENCE O. ERICKSON                              JAMES L. WOLOHAN

KENDALL B. WILLIAMS                               STEPHEN J. LAZAROFF



                                       27


                               SHAREHOLDER RETURN

         Set forth below is a graph which summarizes the cumulative return
experienced by the Corporation's shareholders over the past five years compared
with the S&P 500 Index and the Keefe, Bruyette & Woods, Inc. 50 Bank Index. Such
presentation assumes that the value of the investment in the Corporation's
Common Stock and each index was $100 on December 31, 1996 and that all dividends
were reinvested.


                            Cumulative Total Returns
                       Five Years Ended December 31, 2001
                                Value At Year End

                                  [LINE GRAPH]




                            1996        1997        1998        1999        2000        2001
                            ----        ----        ----        ----        ----        ----
                                                                      
Citizens                    $100        $169        $169        $116        $158        $185
KBW 50                      $100        $146        $158        $153        $183        $176
S&P 500                     $100        $133        $171        $208        $189        $166



                                       28


                      COMPENSATION COMMITTEE INTERLOCKS AND
                     CERTAIN TRANSACTIONS AND RELATIONSHIPS

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         Messrs. Hugo E. Braun Jr., Lawrence O. Erickson, Stephen J. Lazaroff,
Kendall B. Williams, and James L. Wolohan served on the Compensation Committee
throughout the last completed fiscal year. None of these individuals are or have
been employees of the Corporation. Mr. Braun has retired from the Compensation
Committee and the Corporation's board of directors effective March 12, 2002
pursuant to the Corporation's retirement policy for directors.

         Former Compensation Committee member Braun is a partner in the law firm
of Braun Kendrick Finkbeiner, which rendered legal services during 2001 to the
Corporation's Michigan banking subsidiary, Citizens Bank. Citizens Bank plans to
employ this firm for additional services in 2002.

OTHER TRANSACTIONS WITH OFFICERS AND DIRECTORS

         During 2001, the banking subsidiaries of the Corporation had, and
expect to have in the future, banking transactions, in the ordinary course of
business, with directors, officers and their associates. Except as set forth
below, these transactions were made on substantially the same terms, including
interest rate charges and collateral requirements, as comparable transactions
made with unrelated parties prevailing at the time of such transactions and did
not involve more than the normal risk of collectability or present other
unfavorable features.

         In connection with its acquisition of F&M, the Corporation assumed
certain obligations of F&M relative to F&M's Officers' Stock Purchase Plan (the
"F&M Purchase Plan"). To facilitate stock ownership by management, the F&M
Purchase Plan included provisions which permitted F&M to make loans for the
purchase of shares of F&M common stock. Such loans were secured by shares of F&M
common stock with a market value equal to at least 110% of the loan at the date
of the loan and for a term of either three or five years, as selected by the
executive. The F&M Purchase Plan was terminated effective December 31, 2000. No
new loans or renewals of existing loans have been made since that date. Loans
under the F&M Purchase Plan totaling in excess of $60,000 to persons who are or
were directors or executive officers of the Corporation at anytime during the
last fiscal year and which were outstanding as of December 31, 2001 are as
follows:



- ----------------------------------------------------------------------------------------------------------------------
             NAME                    HIGHEST BALANCE(1)/              INTEREST RATE                  MATURITY
- ----------------------------------------------------------------------------------------------------------------------
                                                                                       
    Gail E. Janssen
    Former Director                      $369,627                       5.58%                      04/29/03
- ----------------------------------------------------------------------------------------------------------------------

    John W. Johnson                      $ 18,000                       4.81%                      05/20/02
    Former President --                  $ 35,564                       5.32%                      08/13/02
    F&M Bank-Wisconsin                   $ 11,595                       5.45%                      08/04/03
                                         $ 10,545                       5.03%                      10/19/03
                                         $ 17,575                       4.74%                      03/29/04
- ----------------------------------------------------------------------------------------------------------------------


(1)/Highest balance since January 1, 2001 and also represents the balance as of
February 28, 2002.

                                       29


During 2001, the firm of Winegarden, Shedd, Haley, Lindholm & Robertson, of
which director William C. Shedd served of counsel, rendered legal services to
Citizens Bank. Citizens Bank expects to employ this firm for additional services
in 2002.

             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Under the securities laws of the United States, the Corporation's
directors, executive officers and any persons holding more than 10% of the
Common Stock (collectively, the "Reporting Persons") are required to report
their ownership of the Common Stock and any changes in that ownership to the
Commission. Specific due dates for these reports have been established and
pursuant to applicable rules, the Corporation is required to report in its proxy
statement any failure to file by these due dates. Based on certifications
received from the Reporting Persons and on copies of the reports that such
persons have filed with the Commission, all required reports of Reporting
Persons have been timely filed with the Commission for 2001, except that one
Form 4 relating to one transaction for each of directors Laird, Lazaroff and
Weeks was filed late.


                    INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

GENERAL

         In 2001, Ernst & Young LLP performed audit and audit related services
for the Corporation and its subsidiaries which included examination of the
consolidated financial statements of the Corporation, and consultation with the
Corporation and its subsidiaries on accounting and reporting matters. The Audit
Committee has recommended the appointment of Ernst & Young LLP as independent
auditors for 2002 and the board of directors is expected to approve the
appointment of Ernst & Young LLP at the board's April 2002 meeting.
Representatives of Ernst & Young LLP will attend the annual meeting, will have
an opportunity to make a statement and will be available to answer questions
that may be asked by shareholders.

FEES

         AUDIT FEES. Ernst & Young LLP billed the Corporation a total of
$400,000 for professional services in connection with the audit of the 2001
financial statements and review of the quarterly financial statements during the
year.

         FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. Ernst &
Young LLP was not engaged and did not bill the Corporation for operating,
designing or supervising the Corporation's computer, financial or information
systems during 2001.

         ALL OTHER FEES. Ernst & Young LLP billed the Corporation a total of
$2,072,433 for other services rendered during 2001 consisting of $1,383,785 for
audit related services pertaining to the outsourcing of certain financial and
credit audit procedures and $688,648 pertaining to tax and non audit advisory
services. The Audit Committee does not consider the provision of the services
described above by Ernst & Young LLP to be incompatible with the maintenance of
Ernst & Young LLP's independence.


                                       30


                              SHAREHOLDER PROPOSALS

         Any proposal by a shareholder of the Corporation to be considered for
inclusion in the proxy statement for the 2003 annual meeting must be received by
Thomas W. Gallagher, the secretary of the Corporation, by the close of business
on November 13, 2002. In addition to applicable rules of the Commission for
inclusion of shareholder proposals in the Corporation's proxy statement, the
Corporation's bylaws provide that, in order for a shareholder proposal to be
properly brought before the annual meeting, written notice of such proposal must
be given by the shareholder to the secretary of the Corporation, either by
personal delivery or by United States mail, postage prepaid, not later than 90
days in advance of such meeting. If the annual meeting date has been advanced to
a date earlier than the last Thursday in January, then in order to be brought
properly before the annual meeting, notice of such proposal must be given within
10 days after the first public disclosure of the date of such meeting in
accordance with the procedures set forth in the Corporation's bylaws. The
Corporation also expects the persons named as proxies for the 2003 annual
meeting of shareholders to use their discretionary voting authority, to the
extent permitted by law, with respect to any proposal presented at that meeting
by a shareholder who does not provide the Corporation with written notice of
such proposal during the period provided in the Corporation's bylaws.


                                  ANNUAL REPORT

         Appendix A to this proxy statement contains the information required to
be included in an annual report pursuant to the rules of the Commission,
including audited financial statements, management's discussion and analysis of
financial condition, and results of operations and five year selected financial
data. Upon request, the Corporation will provide without charge a copy of its
annual report on Form 10-K.

                                  OTHER MATTERS

         The board of directors is not aware of any other matters which may come
before the meeting. However, should any such matters properly come before the
meeting, it is the intention of the persons named in the accompanying proxy to
vote in accordance with their judgment on such matters.

                                                CITIZENS BANKING CORPORATION

                                                /s/ Thomas W. Gallagher
                                                Thomas W. Gallagher
                                                General Counsel and Secretary


Flint, Michigan
March 13, 2002



                                       31

                                                                      Appendix A

















                          CITIZENS BANKING CORPORATION



                            ANNUAL REPORT INFORMATION





                               TABLE OF CONTENTS



                                                                                  
I.       Financial Review including
           Management's Discussion and Analysis.........................................      3

              Five-Year Summary of Selected Financial Data..............................      3
              Mergers, Acquisitions, Divestitures and Other Initiatives.................      4
              Financial Highlights......................................................      4
              Lines of Business Reporting...............................................      5
              Net Interest Income.......................................................      6
              Provision and Allowance for Loan Losses...................................      9
              Noninterest Income .......................................................     11
              Noninterest Expense.......................................................     12
              Federal Income Taxes......................................................     12
              Financial Condition.......................................................     12
              Liquidity and Debt Capacity and Interest Rate Risk .......................     18
              Interest Rate Sensitivity.................................................     20
              Recent Accounting Pronouncements..........................................     20
              Forward-Looking Statements................................................     20
              Selected Quarterly Information............................................     21
              Year Ended December 31, 2000
                Compared with 1999......................................................     22

II.      Consolidated Financial Statements..............................................     23

              Consolidated Balance Sheets...............................................     23
              Consolidated Statements of Income.........................................     24
              Consolidated Statements of Changes
                in Shareholders' Equity.................................................     25
              Consolidated Statements of Cash Flows.....................................     26

III.     Notes to Consolidated Financial Statements.....................................     27

IV.      Report of Independent Auditors.................................................     46

V.       Report of Management...........................................................     47



                                      A-2


MANAGEMENT'S DISCUSSION AND ANALYSIS
CITIZENS BANKING CORPORATION AND SUBSIDIARIES



- ---------------------------------------------------------------------------------------------------------------------------------
TABLE 1. FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA (1)

(in thousands, except per share data)                         2001          2000           1999          1998           1997
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                        
FOR THE YEAR
    Net interest income                                      $ 307,981      $ 314,874     $ 309,642     $ 292,424      $ 274,134
    Provision for loan losses                                   26,407         20,983        24,675        16,528         20,511
    Noninterest income before securities gains (losses)        111,286         90,344        85,044        71,413         59,692
    Investment securities gains (losses)                         6,195            ---        (3,052)          475           (572)
    Noninterest expense before special charges                 251,183        242,221       236,778       218,219        208,921
    Special charge                                                 ---         15,541        40,198           ---         23,734
    Income taxes                                                43,215         35,813        27,989        39,283         25,197
    Net income                                                 104,657         90,660        61,994        90,282         54,891
    Cash dividends (2)                                          50,158         48,108        30,035        22,991         19,286

PER COMMON SHARE DATA
    Net income:
      Basic                                                     $ 2.27         $ 1.92        $ 1.29        $ 1.86         $ 1.17
      Diluted                                                     2.25           1.91          1.28          1.84           1.15
    Cash dividends (2)                                           1.085          1.015         0.915          0.82           0.74
    Book value, end of year                                      15.46          14.62         13.32         14.07          12.93
    Market value, end of year                                    32.88          29.06         22.38         33.75          34.50

AT YEAR END
    Assets                                                 $ 7,678,875    $ 8,405,091   $ 7,899,357    $6,930,533     $6,630,974
    Loans                                                    5,922,406      6,422,806     5,917,483     5,264,706      5,074,230
    Deposits                                                 5,965,126      6,244,141     6,128,998     5,772,792      5,514,313
    Long-term debt                                             629,099        471,117       127,104       226,171        179,191
    Shareholders' equity                                       697,464        679,979       633,669       680,501        610,775

AVERAGE FOR THE YEAR
    Assets                                                 $ 7,935,843    $ 8,073,021   $ 7,342,167    $6,792,829     $6,439,737
    Earning assets                                           7,510,332      7,584,932     6,875,643     6,367,284      6,033,874
    Loans                                                    6,109,111      6,202,157     5,528,963     5,159,584      4,843,507
    Deposits                                                 6,008,096      6,121,373     5,906,664     5,616,894      5,359,464
    Interest-bearing deposits                                5,126,928      5,175,252     5,002,135     4,787,143      4,602,093
    Repurchase agreements and other short-term borrowings      538,673        920,323       478,920       202,639        259,040
    Long-term debt                                             596,380        303,597       210,289       228,969        144,306
    Shareholders' equity                                       702,381        650,251       672,227       655,034        597,242

FINANCIAL RATIOS
    Return on average:
    Shareholders' equity                                         14.90%         13.94%         9.22%        13.78%          9.19%
      Earning assets                                              1.39           1.20          0.90          1.42           0.91
      Assets                                                      1.32           1.12          0.84          1.33           0.85
    Average shareholders' equity/avg. assets                      8.85           8.05          9.16          9.64           9.27
    Dividend payout ratio (2)                                    47.93          53.06         59.13         40.49          61.21
    Net interest margin (FTE)                                     4.32           4.32          4.68          4.78           4.73
    Tier I leverage                                               7.79           7.11          7.21          8.95           8.00
    Risk-based Tier I capital ratio                               9.87           9.05          9.22         11.01          10.50
    Risk-based Total capital ratio                               11.12          10.30         10.47         12.26          11.76
- ---------------------------------------------------------------------------------------------------------------------------------


(1)  Except as indicated, all financial data have been restated for stock splits
     and pooling of interests transactions. Results of operations for
     acquisitions accounted for as purchases have been included effective with
     the respective dates of acquisition.

(2)  Cash dividends and cash dividends per share are for Citizens Banking
     Corporation only, not restated for pooling of interests.



                                      A-3

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES

       The following commentary presents Management's discussion and analysis of
Citizens Banking Corporations' (Citizens) financial condition and results of
operations. All financial data have been restated to give effect to mergers
accounted for on a pooling of interests basis and stock splits in previous
periods. The results of other acquisitions, accounted for as purchases, have
been included effective with the respective dates of acquisition.


MERGERS, ACQUISITIONS, DIVESTITURES AND OTHER INITIATIVES
       MERGERS, ACQUISITIONS AND DIVESTITURES
       In November 2001, Citizens sold F&M Bank-Minnesota with assets of $27
million. The bank was Citizens' sole location in Minnesota.
       On May 12, 2000, Citizens purchased three Jackson, Michigan offices of
Great Lakes National Bank. The purchase added approximately $31 million in
deposits for which Citizens paid a premium of $3.9 million. On October 8, 1999,
Citizens completed the acquisition of seventeen former Bank One offices located
in the northern section of Michigan's Lower Peninsula. The purchase added
approximately $88 million in loans and $442 million in deposits. Citizens paid a
premium of $36.1 million or 10.13% of certain core deposits. These transactions
were accounted for as purchases.
       On November 1, 1999, Citizens merged with F&M Bancorporation, Inc. (F&M),
a $2.7 billion bank holding company headquartered in Kaukauna, Wisconsin. As
part of the merger, Citizens issued 21.0 million shares of its common stock,
based on a fixed exchange ratio of 1.303, for all of the outstanding shares of
F&M. This transaction was accounted for as a pooling of interests.

       SPECIAL CHARGES AND OTHER ONE-TIME COSTS
       During 2000, conversion and integration efforts resulting from the merger
with F&M were completed. Net costs of $12.3 million ($7.4 million after-tax)
incurred to complete these efforts (including system conversions, business unit
integration, branch closures and other items) were recorded in noninterest
expense as the "Special Charge". The net costs included reversals of prior year
business restructuring reserves of $6.2 million, pre-tax, due to successful
settlement of a contract with a former vendor of F&M and favorable experience in
employee separations.
       In the fourth quarter of 2000, Citizens recorded an additional pre-tax
charge of $3.2 million ($2.1 million after-tax) consisting of restructuring
costs of $2.0 million and asset impairment and other charges of $1.2 million
associated with corporate and organizational re-engineering initiatives. The
restructuring plans include reorganization of Citizens' trust and investment
management business into one nationally chartered trust bank, streamlining of
Citizens' community bank organizational structure, consolidation of its direct
and indirect lending operations, and exiting of certain unprofitable indirect
lending dealer relationships. These initiatives were completed by year-end 2001.
       In 1999, the Special Charge included a fourth quarter pre-tax charge of
$40.2 million consisting of $36.3 million ($25.9 million after-tax) in
merger-related integration costs and $3.9 million ($2.5 million after-tax) of
restructuring and other costs related to separate strategic initiatives and
impairment write-offs.
       Merger-related integration costs included employee termination benefits
of $7.1 million, transaction costs of $5.6 million, contract termination and
other conversion costs (primarily recognition of obligations under existing
contractual agreements related to system conversions) of $13.6 million,
asset-related write-downs of $1.5 million, a $2.1 million write-down of impaired
goodwill at an F&M bank, a $2.5 million contribution to Citizens' Charitable
Trust for the acquired entities and other transaction related costs of $3.9
million. Restructuring plans related to the strategic initiatives, approved in
the fourth quarter of 1999, included realignment of Citizens' branch network,
including closure of selected branches in Michigan and Illinois, and transfer of
certain financial and credit audit functions to a third party.
       Also, in the fourth quarter of 1999, Citizens recorded $6.8 million ($4.4
million after-tax) of additional provision for loan losses and $3.6 million
($2.4 million after-tax) of securities losses related to the F&M merger. The
additional loan loss provision was provided to conform F&M's allowance to that
which results from applying Citizens' allowance methodology and credit risk
standards to F&M's loan portfolio. The security losses resulted from the sale of
$122.8 million of securities to reposition the portfolios of Citizens and F&M
after the merger to normalize investment exposure and reduce overall interest
rate risk.
       At year-end 2001 Citizens' Special Charge reserve was fully utilized.
Total deductions to the Special Charge reserve were $3.3 million in 2001, and
$16.0 million in 2000 and $22.8 million in 1999. Included in these deductions
were cash payments of $3.3 million, $9.7 million and $15.4 million in 2001, 2000
and 1999, respectively. See Note 3 to the Consolidated Financial Statements for
additional information regarding the Special Charges in 2000 and 1999.


FINANCIAL HIGHLIGHTS
       Citizens reported net income of $104.7 million, or $2.25 per diluted
share in 2001, compared with $90.7 million, or $1.91 per diluted share in 2000.
Net income increased 15.4% over the prior year while net income per diluted
share increased 17.8%. The corresponding returns on average assets and equity
were 1.32% and 14.90%, respectively, in 2001, as compared with 1.12% and 13.94%
in 2000. Net income for 2001 included after tax gains of $13.5 million or $0.29
per share from sales of securitized mortgage loans, sale of NYCE stock, sale of
credit card assets and the sale of F&M Bank-Minnesota. Net income for 2000
included after-tax merger, restructuring and other charges of $9.5 million, or
$0.20 per diluted share.


                                      A-4


       The improvement in net income reflects increased noninterest income
partially offset by lower net interest income, a higher loan loss provision and
higher noninterest expenses. Net interest income decreased 2.2% in 2001 from
2000. The decline in net interest income in 2001 was primarily due to a decline
in earning assets as a result of balance sheet restructuring. Noninterest
income, before nonrecurring gains of $19.8 million in 2001 (see Noninterest
Income table on page 11), reflects increases in mortgage fees, title insurance
fees, deposit account revenues, annuity sales and bankcard fees, partially
offset by a decline in trust fees. Operating noninterest expense, excluding a
special charge of $15.5 million in 2000, increased 3.7%.
       Average shareholders' equity was $702.4 million or 8.85% of total average
assets for 2001, compared with $650.3 million or 8.05% for 2000. At December 31,
2001, Citizens' risk-based capital levels exceeded all regulatory requirements
to be designated "well capitalized".
       An analysis of the major components of net income in 2001, 2000 and 1999
is presented below. Additional data on Citizens' performance during the past
five years appear in Table 1, "Five-Year Summary of Selected Financial Data".



- -----------------------------------------------------------------------------------------------------------------------------------

                                                                                           Year Ended December 31,
                                                                           --------------------------------------------------------
(in thousands)                                                                2001                  2000                 1999
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                             
Interest income                                                             $  573,559            $ 622,008           $541,559
Interest expense                                                               265,578              307,134            231,917
                                                                            ----------            ---------           --------
  Net interest income                                                          307,981              314,874            309,642
Provision for loan losses                                                       26,407               20,983             17,875
Noninterest income                                                              97,676               90,344             79,895
Noninterest expense                                                            251,183              242,221            230,683
Income taxes                                                                    36,878               41,890             43,825
                                                                            ----------            ---------           --------
NET INCOME BEFORE NONRECURRING ITEMS                                            91,189              100,124             97,154
                                                                            ----------            ---------           --------
Nonrecurring gains on sale of equity investments and assets                     19,805                  ---              5,693
Nonrecurring expenses, special charges and merger related expenses:
   Special charge                                                                  ---               15,541             40,198
   Other merger related expenses                                                   ---                  ---             10,396
   Check kiting fraud loss                                                         ---                  ---              6,095
Tax expense (benefit) on nonrecurring items                                      6,337               (6,077)           (15,836)
                                                                            ----------            ---------           --------
   Subtotal                                                                     13,468               (9,464)           (35,160)
                                                                            ----------            ---------           --------
NET INCOME AS REPORTED                                                      $  104,657            $  90,660           $ 61,994
                                                                            ==========            =========           ========
- -----------------------------------------------------------------------------------------------------------------------------------


LINES OF BUSINESS REPORTING
Citizens is managed along the following business lines: Commercial Banking,
Retail Banking, Financial Services, F&M and Other. A description of each
business, selected financial performance and the methodologies used to measure
financial performance are presented in Note 18 to the Consolidated Financial
Statements. Prior year amounts have been restated to reflect the current
business unit structure and cost allocation methodology. The following table
summarizes net income by line of business for each of the last three years:



- -------------------------------------------------------------
                                       Net Income
                               ------------------------------
(in thousands)                   2001       2000      1999
- -------------------------------------------------------------
                                           
Commercial Banking             $ 35,723   $ 35,789  $ 30,410
Retail Banking                   40,409     33,401    20,430
Financial Services                6,508      6,354     4,794
F&M                              20,065     25,967    11,202
Other                             1,952    (10,851)   (4,842)
                               --------   --------  --------
   Total                       $104,657   $ 90,660  $ 61,994
                               ========   ========  ========
- -------------------------------------------------------------


       Commercial Banking net income in 2001 was consistent with the prior year
as higher net interest income and noninterest income were offset by an increased
provision for loan losses and higher operating expenses. Net interest income
increased due to higher average commercial loan balances in 2001. The
improvement in noninterest income reflects greater deposit service charges and
increased cash management fees. The increased loan loss provision is the result
of higher loan charge-offs. Operating expenses increased due to higher
compensation and loan collection costs.
       Retail Banking net income improved due to increased noninterest income,
nonrecurring gains on sale of assets and a lower provision for loan losses
offset, in part, by a decline in net interest income and higher operating
expenses. The growth in noninterest income before nonrecurring gains reflects
increased mortgage income from higher mortgage loan origination volume and
increased sales of new mortgage production into the secondary market.
Noninterest income also increased due to greater title insurance fees and higher
annuity sales by licensed retail bankers. In 2001, nonrecurring gains from the
sale of securitized mortgages and the sale of the



                                      A-5

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES

Michigan-based credit card portfolio totaled $5.2 million after tax. The
provision for loan loss declined due to lower net charge-offs in the indirect
loan and credit card portfolio. The decline in net interest income was due in
part to the sale of the Michigan-based credit card portfolio in June 2001 and
narrower interest spreads on retail deposits due to the lower interest rate
environment. Net interest income also declined as a result of lower average
balances in the mortgage portfolio. Mortgage loan balances declined due to the
securitization and sale of $247 million of seasoned mortgage loans in the first
half of 2001 and the sale of most new mortgage loan production throughout 2001.
       Financial Services net income improved slightly in 2001 despite lower
revenue as operating expenses decreased more than the decline in noninterest
income. Noninterest income decreased due to lower trust and brokerage revenues.
Trust fees were impacted by the weak equity markets, which reduced asset values
upon which fees are based. Lower transaction volume led to the decline in
brokerage revenue. Operating expenses decreased due to lower volume-oriented
incentive compensation and efficiencies achieved from the strategic realignment
of the financial services organizational structure.
       The decline in net income at F&M reflects lower net interest income, a
higher provision for loan losses and higher operating expenses, partially offset
by an increase in noninterest income. The decrease in net interest income
resulted from a decline in earning assets and a lower net interest margin. The
higher loan loss provision resulted primarily from an increase in commercial
loan net charge-offs.
       Net income in the Other category was favorably affected by an improvement
in net interest income. Net interest income improved due to a decline in the
cost of borrowed funds. The lower cost of borrowed funds resulted from the
decrease in interest rates and a reduced reliance on borrowed funds due to the
balance sheet restructuring activities. Net income was also favorably affected
by a nonrecurring gain of $7.2 million after tax, on the sale of NYCE stock, an
ATM network provider in which Citizens held an equity position.


NET INTEREST INCOME
The primary source of Citizens' traditional banking revenue is net interest
income. Net interest income is the difference between interest income on earning
assets, such as loans and securities, and interest expense on liabilities,
including interest-bearing deposits and borrowings, used to fund those assets.
Net interest income is affected by market interest rates on both earning assets
and interest-bearing liabilities, the level of earning assets being funded by
interest-bearing liabilities, noninterest-bearing liabilities and equity, and
the volume and composition of earning assets and funding sources. Other factors,
such as Federal Reserve Board monetary policy and changes in tax laws, may also
have an impact on changes in net interest income from one period to another.
       Net interest income, on a fully-taxable equivalent basis, decreased 1.9%
to $322.8 million in 2001 from $329.0 million in 2000. A lower level of earning
assets led to the decline. Earning assets were lower during 2001 due to balance
sheet restructuring initiated to reduce interest rate risk and decrease reliance
on borrowed funds. This balance sheet restructuring included the securitization
and sale of $247 million of seasoned mortgage loans, the sale of most new
mortgage loan production into the secondary market, the sale of the $30 million
Michigan-based credit card portfolio, and the sale of the $27 million F&M
Bank-Minnesota. Additionally, Citizens limited growth in its indirect lending
portfolio and refocused the commercial loan portfolio in Wisconsin to
de-emphasize certain types of commercial real estate lending. This resulted in
lower earning assets in 2001 but improved net interest margin throughout the
year. Net interest margin improved from 4.10% in the fourth quarter of 2000 to
4.48% in the fourth quarter of 2001. For the full year, net interest margin was
4.32%, unchanged from the prior year. An analysis of how changes in volume and
rates have affected net interest income for the years ended December 31, 2001
and 2000 is presented in Table 2. A detailed analysis of net interest income,
with average balances and related interest rates for the past three years,
appears in Table 3.
     Interest income declined $48.4 million in 2001 due primarily to the lower
interest rate environment and, to a lesser extent, the balance sheet
restructuring. Yields on commercial loans were particularly impacted by lower
interest rates as many of these loans vary directly with the prime interest
rate. The prime rate was reduced 475 basis points throughout 2001 in response to
the slower economy and Federal Reserve Board monetary policy. Certain consumer
home equity loan yields, which vary with prime, were also negatively affected by
the lower interest rate environment. The ratio of average loans to total earning
assets declined slightly in 2001 to 81.3% from 81.8% in the prior year.
Investment securities, including money market investments, comprise the
remaining 18.7% of earning assets, up from 18.2% in 2000. The average yield on
earning assets decreased to 7.87% in 2001 from 8.36% in 2000.
     Interest expense decreased $41.5 million in 2001 reflecting the lower
interest rate environment and the reduction in borrowed funds due to the balance
sheet restructuring. The average rates paid on all categories of interest
bearing liabilities, except interest bearing demand deposits, decreased
significantly in 2001 from the prior year reflecting the lower interest rate
environment. Average rates paid on interest bearing demand accounts increased
due to growth of a highly successful new product offering with a tiered rate
structure, which pays higher rates of interest. Average interest bearing
deposits declined $48.3 million or 0.9% in 2001 from the prior year as clients
sought higher yielding investment alternatives such as fixed and variable
annuities offered through Citizens' retail and brokerage units and to a lesser
extent the sale of F&M Bank-Minnesota. Average short-term and long-term
borrowings comprised 18.1% of interest bearing liabilities in 2001 down from
19.1% in the prior year. Average short-term borrowings declined



                                      A-6

$381.6 million as Citizens reduced reliance on borrowed funds through the
balance sheet restructuring and extended maturities of borrowed funds as long
term debt in the lower interest rate environment.



- ---------------------------------------------------------------------------------------------------------------------------------
TABLE 2. ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE

                                             2001 COMPARED TO 2000                               2000 Compared to 1999
                                  ---------------------------------------------        ------------------------------------------
                                                         INCREASE (DECREASE)                                Increase (Decrease)
Year Ended December 31                                    DUE TO CHANGE IN                                    Due to Change in
                                      NET            --------------------------          Net            -------------------------
(in thousands)                     CHANGE(1)          RATE            VOLUME(2)        Change(1)          Rate          Volume(2)
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
INTEREST INCOME:
    Money market investments        $  2,091         $   (120)        $  2,211         $ (2,298)        $    493         $ (2,791)
    Investment securities:
      Taxable                         (9,107)            (653)          (8,454)           6,536            4,409            2,127
      Tax-exempt                       1,365               21            1,344            3,199             (163)           3,362
    Loans:
      Commercial                      (9,614)         (32,461)          22,847           67,166            9,684           57,482
      Real estate                    (27,914)            (943)         (26,971)          (8,734)             190           (8,924)
      Consumer                        (5,270)          (4,384)            (886)          14,580            1,724           12,856
                                    --------         --------         --------         --------         --------         --------
        Total                        (48,449)         (38,540)          (9,909)          80,449           16,337           64,112
                                    --------         --------         --------         --------         --------         --------
INTEREST EXPENSE:
    Deposits:
      Demand                           5,495            2,774            2,721             (479)            (522)              43
      Savings                        (20,410)         (16,786)          (3,624)           5,718            4,439            1,279
      Time                            (9,293)         (10,473)           1,180           27,027           13,916           13,111
    Short-term borrowings            (31,074)         (10,060)         (21,014)          34,840            6,767           28,073
    Long-term debt                    13,726           (2,866)          16,592            8,111            2,129            5,982
                                    --------         --------         --------         --------         --------         --------
        Total                        (41,556)         (37,411)          (4,145)          75,217           26,729           48,488
                                    --------         --------         --------         --------         --------         --------
NET INTEREST INCOME                 $ (6,893)        $ (1,129)        $ (5,764)        $  5,232         $(10,392)        $ 15,624
                                    ========         ========         ========         ========         ========         ========
- ---------------------------------------------------------------------------------------------------------------------------------


(1)  Changes are based on actual interest income and do not reflect taxable
     equivalent adjustments.

(2)  Rate/Volume variances are allocated to changes due to volume.



                                      A-7

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES





TABLE 3. AVERAGE BALANCES/NET INTEREST INCOME/AVERAGE RATES

                                                      2001                          2000                            1999
                                      -------------------------------- -------------------------------- ----------------------------
Year Ended December 31                   AVERAGE              AVERAGE   Average               Average   Average              Average
(in millions)                            BALANCE  INTEREST(1) RATE(2)   Balance  Interest(1)  Rate(2)   Balance  Interest(1) Rate(2)
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
EARNING ASSETS
Money market investments               $   65.9    $   2.3      3.50%  $    4.1   $    0.3     5.67% $     48.3   $   2.5     5.24%
Investment securities (3):
    Taxable                               877.1       57.1      6.51    1,007.0       66.2     6.57       974.6      59.6     6.12
    Tax-exempt                            419.2       21.7      7.97      393.2       20.3     7.96       328.3      17.2     8.04
Loans (4):
    Commercial                          3,440.8      269.7      7.93    3,178.2      279.3     8.89     2,525.1     212.1     8.51
    Real estate mortgage                1,133.1       85.9      7.57    1,488.7      113.8     7.64     1,601.9     122.6     7.65
    Consumer                            1,535.2      136.8      8.91    1,535.2      142.1     9.26     1,401.9     127.5     9.10
                                       --------    -------             --------   --------           ----------   -------
    Total earning assets (3)            7,471.3      573.6      7.87    7,606.4      622.0     8.36     6,880.1     541.5     8.05

NONEARNING ASSETS
Cash and due from banks                   201.8                           222.6                           231.3
Premises and equipment                    132.5                           141.5                           135.1
Investment security
    fair value adjustment                  39.0                           (21.5)                           (4.5)
Other assets                              172.4                           204.2                           171.6
Allowance for loan losses                 (81.2)                          (80.2)                          (71.4)
                                       --------                        --------                      ----------
    Total assets                       $7,935.8                        $8,073.0                      $  7,342.2
                                       ========                        ========                      ==========

INTEREST-BEARING LIABILITIES
Deposits:
    Interest-bearing demand            $  744.8       14.0      1.88   $  581.5        8.5     1.46  $    578.5       9.0     1.55
    Savings                             1,474.5       34.8      2.36    1,701.7       55.2     3.24     1,751.6      49.5     2.83
    Time                                2,907.6      156.2      5.37    2,892.1      165.4     5.72     2,672.0     138.4     5.18
Short-term borrowings                     538.7       27.5      5.09      920.3       58.5     6.36       478.9      23.7     4.95
Long-term debt                            596.4       33.2      5.57      303.6       19.5     6.41       210.3      11.3     5.40
                                       --------    -------             --------   --------           ----------   -------
    Total interest-bearing liabilities  6,262.0      265.6      4.24    6,399.2      307.1     4.80     5,691.3     231.9     4.07

NONINTEREST-BEARING LIABILITIES
AND  SHAREHOLDERS' EQUITY
Demand deposits                           881.2                           946.1                           904.6
Other liabilities                          90.3                            77.5                            74.1
Shareholders' equity                      702.4                           650.2                           672.2
                                       --------                        --------                      ----------
    Total liabilities and
       shareholders' equity            $7,935.8                        $8,073.0                      $  7,342.2
                                       ========                        ========                      ==========
NET INTEREST INCOME                                $ 308.0                        $  314.9                        $ 309.6
                                                   =======                        ========                        =======
NET INTEREST INCOME AS A
PERCENT OF EARNING ASSETS                                       4.32%                          4.32%                          4.68%
- ------------------------------------------------------------------------------------------------------------------------------------


(1)  Interest income is shown on an unadjusted basis and therefore does not
     include taxable equivalent adjustments.

(2)  Average rates include taxable equivalent adjustments to interest income of
     $14,835,000, $14,097,000, and $12,204,000 for the years ended December 31,
     2001, 2000, and 1999, respectively, based on a 35% tax rate.

(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.

(4)  Nonaccrual loans are included in average balances.



                                      A-8




- --------------------------------------------------------------------------------------------------------------------------------
TABLE 4. SUMMARY OF LOAN LOSS EXPERIENCE

Year Ended December 31 (in thousands)                   2001             2000            1999            1998            1997
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
Allowance for loan losses - January 1              $    80,070      $    76,397     $    69,740     $    67,010     $    59,029
Allowance of acquired (sold) banks and branches           (240)              --           2,400           1,745           1,329
Provision for loan losses                               26,407           20,983          24,675          16,528          20,511
CHARGE-OFFS:
   Commercial                                           18,265           10,920           8,675           4,557           4,555
   Real estate                                             189              169             436             359             861
   Consumer                                             14,278           14,359          17,751          14,879          13,064
                                                   -----------      -----------     -----------     -----------     -----------
     Total charge-offs                                  32,732           25,448          26,862          19,795          18,480
                                                   -----------      -----------     -----------     -----------     -----------
RECOVERIES:
   Commercial                                            1,950            3,577           2,483           1,387           1,581
   Real estate                                              47               45             149              28              12
   Consumer                                              4,797            4,516           3,812           2,837           3,028
                                                   -----------      -----------     -----------     -----------     -----------
     Total recoveries                                    6,794            8,138           6,444           4,252           4,621
                                                   -----------      -----------     -----------     -----------     -----------
Net charge-offs                                         25,938           17,310          20,418          15,543          13,859
                                                   -----------      -----------     -----------     -----------     -----------
Allowance for loan losses - December 31            $    80,299      $    80,070     $    76,397     $    69,740     $    67,010
                                                   ===========      ===========     ===========     ===========     ===========
Loans outstanding at year-end                      $ 5,922,406      $ 6,422,806     $ 5,917,483     $ 5,264,706     $ 5,074,230
Average loans outstanding                            6,109,111        6,202,157       5,528,963       5,159,584       4,843,507
Ratio of allowance for loan losses
  to loans outstanding at year-end                        1.36%            1.25%           1.29%           1.32%           1.32%
Ratio of net loans charged off as a
  percentage of average loans outstanding                 0.42             0.28            0.37            0.30            0.29
- --------------------------------------------------------------------------------------------------------------------------------


PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses represents a charge against income and a
corresponding increase in the allowance for loan losses. The provision for loan
losses was $26.4 million in 2001, up from $21.0 million in 2000. Net charge-offs
in 2001 as a percentage of average loans were 0.42%, compared with 0.28% in
2000. The increase is the result of higher net charge-offs in the commercial
loan portfolio, particularly in the F&M markets. A summary of Citizens' loan
loss experience from 1997 through 2001 appears in Table 4.
       The allowance for loan losses at December 31, 2001 was $80.3 million, or
1.36% of loans, compared with $80.1 million, or 1.25% of loans at the end of
2000. At December 31, 2001, the allowance equaled 109.6% of nonperforming loans,
compared with 130.5% at year-end 2000. The decline in the ratio of allowance for
loan losses to nonperforming loans primarily reflects increases in nonperforming
commercial and commercial real estate loans in 2001. The increase in
nonperforming loans in these categories is reflected in the allowance for loan
losses through specific and formula based allocations, as discussed below under
the caption "Allowance Policy and Methodology".
       The allowance also incorporates the results of measuring impaired loans
as provided in Statement of Financial Accounting Standards (SFAS) No. 114,
"Accounting by Creditors for Impairment of a Loan". At December 31, 2001 total
impaired loans were $62.1 million and the associated impairment allowance was
$10.4 million, compared with $52.9 million and $5.1 million, respectively, at
December 31, 2000.
       Citizens' maintains what management believes is an adequate allowance for
possible loan losses to meet presently known credit risks in the loan portfolio.
Citizens' loan portfolio has no significant concentrations in any one industry
nor any exposure in foreign loans. Citizens has generally not extended credit to
finance highly leveraged transactions nor does it intend to do so in the future.
Employment levels and other economic conditions in Citizens' local markets may
have a significant impact on the level of credit losses. Management continues to
identify and devote attention to credits that may not be performing as well as
expected. Nonperforming loans are further discussed in the section titled
"Nonperforming Assets".

       ALLOWANCE POLICY AND METHODOLOGY
       Citizens maintains an allowance for credit losses to absorb losses
inherent in the loan portfolio. The allowance analysis is based on a regular,
quarterly assessment of the probable losses inherent in the loan portfolios. The
methodology for measuring the adequacy of the allowance relies on several key
elements, which include specific allowances for identified problem loans,
reserves by formula and the unallocated allowance.


                                      A-9



MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES




- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 5. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES(1)
                                   2001                 2000                1999                 1998                  1997
                             -----------------    -----------------    -----------------    -----------------    -----------------

                                          LOAN                 Loan                Loan                  Loan                Loan
December 31 (in millions)     AMOUNT    PERCENT(2) Amount    Percent(2) Amount   Percent(2)  Amount    Percent(2) Amount  Percent(2)
- ------------------------------------------------------------------------------------------------------------------------------------

                                                                                               
Commercial                   $  42.0      54.8%   $  35.2      51.9%   $  21.3      48.6%   $  19.2      45.8%   $  16.7      40.7%
Real estate construction         0.5       3.7        1.1       3.7        0.8       3.2        0.3       2.8        0.2       2.2
Real estate mortgage             3.5      16.4        5.9      20.0        6.0      24.3        8.2      26.9        7.9      28.4
Consumer                        16.2      25.1       16.4      24.4       23.5      23.9       21.4      24.5       18.0      28.7
                             -------   -------    -------   -------    -------   -------    -------   -------    -------   -------
       Total allocated          62.2     100.0%      58.6     100.0%      51.6     100.0%      49.1     100.0%      42.8     100.0%
                                       =======              =======              =======               =======             =======
Unallocated                     18.1                 21.5                 24.8                 20.6                 24.2
                             -------              -------              -------              -------              -------
       Total                  $ 80.3               $ 80.1               $ 76.4               $ 69.7               $ 67.0
                             =======              =======              =======              =======              =======

====================================================================================================================================



(1)  The allocation of the allowance for loan losses in the above table is based
     upon ranges of estimates and is not intended to imply either limitations on
     the usage of the allowance or precision of the specific amounts. Citizens
     and its subsidiaries do not view the allowance for loan losses as being
     divisible among the various categories of loans. The entire allowance is
     available to absorb any future losses without regard to the category or
     categories in which the charged-off loans are classified.
(2)  Percentage reflects the ratio of outstanding loans by category to total
     outstanding loans at the end of the respective year.

       Specific allowances are established in cases where management has
identified significant conditions or circumstances related to a credit that
management believes indicate it is probable that a loss has been or will be
incurred. Credits are identified based on quarterly reviews by our Credit Risk
department of all commercial and commercial real estate loans over a fixed
dollar amount where the internal credit rating is at or below a predetermined
classification. The allowance amount is determined by analyzing the financial
condition, collateral value and other qualitative factors as well as by a method
prescribed by SFAS No. 114, "Accounting by Creditors for Impairment of a Loan".

       The formula allowance is calculated by applying loss factors to
outstanding loans (excluding specifically identified credits) based on loan
type, accrual status and internal risk grade of such loans and pools of loans.
Minimum loss factors for criticized loan categories are consistent with
regulatory agency factors. Loss factors for non-criticized loan categories are
determined based on historical (generally three-year) averages adjusted
quarterly for recent loss experience in the specific portfolios. In addition,
adjustments are made to any loss factor used in the computation of the formula
allowance in the event that, in management's judgment, significant factors which
affect the collectibility of the portfolio as of the valuation date, are not
reflected in the loss factors.

       The unallocated portion of the allowance is determined based upon
management's evaluation of various conditions, the effects of which are not
directly measured in the determination of the specific and formula allowances.
The evaluation of the inherent loss with respect to these conditions is subject
to a higher degree of uncertainty because they are not identified with specific
problem credits. The conditions evaluated in connection with the unallocated
allowance at December 31, 2001, included general economic and business
conditions in Citizens' key lending markets, the level and composition of
nonperforming loans, underwriting standards within specific portfolio segments,
specific industry conditions within portfolio segments, collateral values, loan
volumes and concentrations, regulatory examination results, internal credit
examination results and other factors. Management reviews these conditions
quarterly in discussion with Citizens' senior credit officers. To the extent
that any of these conditions is evidenced by a specifically identifiable problem
credit or portfolio segment, as of the evaluation date, management's estimate of
the effect of such condition may be reflected as a specific allowance,
applicable to such specific credit or portfolio segment. Where any of these
conditions is not evidenced by a specifically identifiable problem credit or
portfolio segment, as of the evaluation date, management's evaluation of the
probable loss related to such condition is reflected in the unallocated
allowance. An allocation of the allowance for loan losses by major loan type at
year-end for each of the last five years is presented in Table 5.

       CHANGES IN THE ALLOWANCE ALLOCATION

       The total "allocated" portion of the allowance for loan losses increased
$3.6 million in 2001. This included an increase of $4.0 million in the specific
allowance due to growth in the commercial and commercial real estate portfolios
as well as increases in both the level of impaired loans and the degree of the
impairment. The formula based allocated allowance decreased $0.4 million
reflecting primarily a lower allocation factor for 2001 in the mortgage
portfolio, offset in part, by an increase in classified credits.

       At December 31, 2001, the allocated portion of the allowance for credit
losses included $29.8 million related to classified credits, compared to $21.0
million at December 31, 2000. Classified credits are those that are internally
risk rated, special mention, or 8, substandard, or doubtful. Credits considered
a loss are charged off. Special mention credits are potentially weak, as the
borrower has begun to exhibit deteriorating trends which, if not corrected,
could jeopardize



                                      A-10





repayment of the loan and result in further downgrade. Substandard credits have
well-defined weaknesses which, if not corrected, could jeopardize the full
satisfaction of the debt. A credit classified as "doubtful" has critical
weaknesses that make full collection improbable.

       The allocation methods used for December 31, 2001 and 2000 were
consistent. As shown in Table 5, the allocation of the allowance for loan losses
related to commercial and commercial real estate loans, increased $6.8 million
to $42.0 million at December 31, 2001 from the prior year-end. The increase was
a function of changes in the commercial and commercial real estate category,
including: a greater amount of loans in criticized categories and a
corresponding increase in specific allocations in 2001 compared to 2000.
Nonperforming commercial and commercial real estate loans increased to $48.0
million, or 1.5% of total commercial loans, at year-end 2001 from $37.2 million,
or 1.1%, a year ago. Commercial real estate loans represented $11.1 million in
2001 and $12.5 million in 2000 of such nonperforming loans. Management believes
the risk of loss in the commercial real estate nonperforming loans is
significantly less than the total principal balance, due to the nature of the
underlying collateral and the value of such collateral to the total credit
exposure. These loans are generally for owner-occupied properties and do not
rely on the performance of the real estate market to generate funds for
repayment.

       The amount allocated to residential construction and real estate loans at
December 31, 2001 decreased to 5.0% of the allowance for loan losses from 8.7%
in 2000. This decrease was predominately a function of lower loan balances from
balance sheet restructuring efforts in 2001 and a reduction in the allocation
factor. Nonperforming loans in this portfolio remained essentially the same from
the prior year and historical loss ratios in this portfolio are very low.

       The decrease in amount allocated to the consumer loan portfolio in 2001
was predominantly a function of the sale of $30 million of credit card
receivables in mid 2001 and fewer net loan losses in the remaining consumer
portfolio for the year ended December 31, 2001. Nonperforming consumer loans
comprised 0.54% of total consumer loans at year-end 2001, up from 0.45% a year
ago. Management expects net loan charge-offs in this portfolio to remain stable,
primarily due to a risk-adjusted pricing structure and aggressive collection
efforts.

       At December 31, 2001, the unallocated allowance decreased $3.4 million
from the previous year-end because management believed that the inherent losses
related to certain conditions, described previously under the caption "Allowance
Policy and Methodology" considered in its evaluation of the unallocated
allowance at December 31, 2000 had been recognized through charge-off, had been
reflected in the formula or specific allowance, or had declined.


NONINTEREST INCOME

Noninterest income, before nonrecurring items and securities gains and losses,
increased to $96.9 million in 2001 from $90.3 million in 2000, an improvement of
7.2%. On this same basis, noninterest income accounted for 23.9% of total
operating revenue in 2001, compared with 22.3% in 2000. The increase is
primarily due to higher mortgage loan originations and the subsequent sale of
those mortgages in the secondary market.

- --------------------------------------------------------------------------------




NONINTEREST INCOME
                                       Year Ended
                                       December 31,            Changes in 2001
                                  ----------------------   ------------------------
(in thousands)                      2001        2000         Amount        Percent
- -----------------------------------------------------------------------------------

                                                                 
Service charges
 on deposit accounts              $ 27,773     $ 26,260     $  1,513          5.8%
 Trust fees                         21,028       24,253       (3,225)       (13.3)
Mortgage and
  other loan income                 13,159        4,997        8,162        163.3
Bankcard fees                       11,799       11,258          541          4.8
Brokerage and
  investment fees                    8,157        7,693          464          6.0
ATM network user fees                3,448        3,202          246          7.7
Cash management services             2,855        2,651          204          7.7
Title insurance fees                 1,906        1,121          785         70.0
Other                                6,728        8,909       (2,181)       (24.5)
                                  --------     --------      -------
TOTAL FEES & OTHER INCOME           96,853       90,344        6,509          7.2
Securities gains                       823           --          823           --
                                  --------     --------      -------
TOTAL BEFORE
  NONRECURRING ITEMS                97,676       90,344        7,332          8.1
Equity investment gain              11,017           --       11,017           --
Gain on securitized mortgages        5,372           --        5,372           --
Gain on sale of credit card          2,623           --        2,623           --
Gain on sale of bank                   793           --          793           --
                                  --------     --------     --------
TOTAL NONINTEREST INCOME          $117,481     $ 90,344     $ 27,137         30.0
                                  ========     ========     ========


===============================================================================


       Service charges on deposit accounts increased $1.5 million or 5.8%
reflecting new marketing strategies and pricing structures. Trust fees were down
$3.2 million in 2001 as the value of managed assets upon which fees are based
declined due to the weak equity markets. Total trust assets under administration
were $3.162 billion at December 31, 2001 compared to $3.448 billion at December
31, 2000. Mortgage and other loan income was up $8.2 million, or 163.3% in 2001
due to higher gains on the sale of loans. Mortgage originations totaled $1.1
billion in 2001 compared to $457 million in 2000. The majority of all new
mortgage loan originations were sold in the secondary market during 2001
resulting in higher gains on the sale of such loans and the related servicing.
The higher mortgage loan volume also resulted in increased title insurance fees
of 70.0% in 2001 over the comparable period in 2000. Bankcard fees increased
4.8% in 2001 generated by higher volume of debit card and merchant transactions,
offset in part by lower credit card fees due to the midyear sale of the Michigan
credit card portfolio. Brokerage and investment fees increased 6.0% to $8.2
million in 2001 compared to $7.7 million in 2000 due to successful



                                      A-11





MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES

retail efforts.

       Citizens recorded a gain of $5.4 million from the sale of $247 million of
securitized mortgage loans in the first half of 2001. This sale was part of
Citizens' strategy to restructure the balance sheet to decrease reliance on
borrowed funds and minimize interest rate risk. In addition to the gain on sale
of securitized mortgages, Citizens recorded net gains of $823,000 on other
investment securities during 2001. As presented in Note 5 to the Consolidated
Financial Statements, Citizens realized gross gains on sale of investment
securities of $6.2 million and gross losses of $7,000 in 2001. In 2000 gross
realized gains of $67,000 were offset by losses realized of $67,000.

       Nonrecurring income in 2001 consisted of a $793,000 gain on the sale of
F&M Bank-Minnesota, $2.6 million gain on sale of credit card assets, the
aforementioned $5.4 million gain from the securitization and subsequent sale of
$247 million of portfolio mortgage loans and a gain on the sale of NYCE stock of
$11.0 million. NYCE Corporation was an ATM network provider in which Citizens
held an equity interest.


NONINTEREST EXPENSE

Excluding the Special Charge in 2000, noninterest expense increased $9.0
million, or 3.7%, to $251.2 million in 2001 from $242.2 million in the prior
year. Increased incentive-based compensation, pension costs and professional
service expenses generated the majority of the increase.

       Salaries and employee benefits increased $3.7 million, or 3.0%, in 2001
over 2000 due to normal merit increases, higher incentive-based compensation and
increased pension costs. Occupancy costs were up $943,000 or 5.6% due to
increased maintenance and energy costs. Professional services increased $2.2
million, or 21.7% due to higher legal costs associated with loan and other
collection activities, increased technology support costs at F&M and other
Corporate initiatives. Postage and delivery expenses increased 11.9% due to
centralization of the check processing operations and outsourcing of the cash
vault function. Partially offsetting this increase were reductions in staffing
costs. Telephone and stationery and supplies expense decreased $2.0 million due
to efficiencies from the F&M merger and expense reduction initiatives. Other
expenses increased to $19.2 million in 2001 from $17.3 million in the prior year
primarily due to an increase of $1.6 million in forgery, fraud and other losses.

       The Special Charge in 2000 included $12.3 million of merger-related
integration costs and an additional $3.2 million of restructuring and other
costs associated with separate strategic initiatives and impairment write-offs.
These charges are more fully described under the caption "Mergers, Acquisitions,
Divestitures and Other Initiatives" on page 4 of this report and in Note 3 of
the Consolidated Financial Statements. All initiatives in respect to these
Special Charges were completed by December 31, 2001.

- --------------------------------------------------------------------------------




NONINTEREST EXPENSE

                                      Year Ended
                                      December 31,                 Changes in 2001
                               --------------------------   ------------------------------
(in thousands)                     2001           2000           Amount      Percent
- ------------------------------------------------------------------------------------------

                                                                   
Salaries and
  employee benefits             $126,278        $122,577        $  3,701        3.0%
Equipment                         19,317          19,264              53        0.3
Occupancy                         17,713          16,770             943        5.6
Data processing services          13,101          12,608             493        3.9
Professional services             12,277          10,088           2,189       21.7
Intangible asset
  amortization                    11,063          10,733             330        3.1
Bankcard fees                      9,308           8,959             349        3.9
Postage and delivery               7,746           6,924             822       11.9
Telephone                          5,556           6,364            (808)     (12.7)
Advertising and
  public relations                 5,219           5,034             185        3.7
Stationery and supplies            4,426           5,602          (1,176)     (21.0)
Other                             19,179          17,298           1,881       10.9
                                --------        --------        --------
  SUBTOTAL                       251,183         242,221           8,962        3.7
Special Charge                        --          15,541         (15,541)    (100.0)
                                --------        --------        --------
TOTAL NONINTEREST
  EXPENSE                       $251,183        $257,762        $ (6,579)      (2.6)
                                ========        ========        ========



- --------------------------------------------------------------------------------


FEDERAL INCOME TAXES

Income tax expense was $43.2 million in 2001, an increase of 20.7% over the 2000
total of $35.8 million. The increase reflected higher pre-tax earnings. The
Corporation's effective tax rate was 29.2% in 2001 and 28.3% in 2000. The
Corporation's effective tax rate is lower than the statutory tax rate due to
tax-exempt interest income.


FINANCIAL CONDITION

Proper management of the volume and composition of Citizens' earning assets and
funding sources is essential for ensuring strong and consistent earnings
performance, maintaining adequate liquidity and limiting exposure to risks
caused by changing market conditions. Citizens' investment securities portfolio
is structured to provide a source of liquidity through maturities and generate
an income stream with relatively low levels of principal risk. Loans comprise
the largest component of earning assets and are Citizens' highest yielding
assets. Client deposits are the primary source of funding for earning assets
while short-term debt and other managed sources of funds are utilized as market
conditions and liquidity needs change.

       Average total assets for 2001 were $7.936 billion, a decrease of $137
million or 1.7% from 2000. Average earning assets as a percent of average total
assets was 94.6% for 2001, up from 94.0% in 2000. Average loans comprised 77.0%
of average assets during 2001, up slightly from 76.8% in 2000. Interest-bearing
deposits comprised 81.9% of average interest-bearing liabilities for 2001,
increasing from 80.9% in 2000. The ratio of average noninterest-bearing deposits
to average deposits decreased to 14.7% in 2001, from 15.5% in 2000.



                                      A-12





       INVESTMENT SECURITIES AND MONEY MARKET INVESTMENTS

       Average investment securities, including money market investments,
comprised 18.7% of total average earning assets in 2001, up from 18.2% in 2000.
The increase is consistent with the overall balance sheet restructuring
initiatives and the decline in loans as a percentage of earning assets.

       Mortgage-backed assets declined $22.4 million or 3.7% in 2001 as
prepayment rates increased on these securities in the declining rate
environment. State and municipal securities were purchased during 2001 due to
their higher tax equivalent yields and Citizens' capacity to utilize tax-exempt
income. At December 31, 2001, state and municipal securities represented 35.2%
of total investment securities, compared with 31.1% in the prior year. Other
securities, consisting primarily of Federal Reserve stock, Federal Home Loan
Bank stock and privately issued asset-backed securities, remained virtually
unchanged from 2000 as a percentage of total investment securities.

       Money market investments primarily federal funds sold and government
money market investments averaged $65.9 million for 2001, up from $4.1 million
in 2000. The amount of funds invested in these assets is based on the present
and anticipated interest rate environment, liquidity needs and other economic
factors.

       Citizens' present policies with respect to the classification of
investments in debt and equity securities are discussed in Note 1 to the
Consolidated Financial Statements. A summary of investment securities available
for sale at December 31, 2001 and 2000 is presented below. Maturities and
average yields of available for sale securities at year-end 2001 is presented in
Table 6. As of December 31, 2001, the estimated aggregate fair value of
Citizens' investment securities portfolio was $34.3 million above amortized cost
consisting of gross unrealized gains of $36.9 million and gross unrealized
losses of $2.6 million. A summary of estimated fair values and unrealized gains
and losses for the major components of the investment securities portfolio is
provided in Note 5 to the Consolidated Financial Statements.

- --------------------------------------------------------------------------------





AVAILABLE FOR SALE SECURITIES                         Balances                            Changes in 2001
                                          ------------------------------            ----------------------------
Year Ended December 31 (in thousands)          2001              2000                   Amount         Percent
- -----------------------------------------------------------------------------------------------------------------

                                                                                           
U.S. Treasury                             $    8,163         $   21,490              $  (13,327)        (62.0)%
Federal agencies
  Mortgage-backed securities                 565,393            582,618                 (17,225)         (3.0)
  Other agencies                             166,236            269,127                (102,891)        (38.2)
State and municipal:
  Taxable                                     10,776             12,257                  (1,481)        (12.1)
  Tax-exempt                                 433,180            418,518                  14,662           3.5
Mortgage and asset-backed                     10,558             15,755                  (5,197)        (33.0)
Other securities                              65,200             64,343                     857           1.3
                                          ----------         ----------              ----------
   Total                                  $1,259,506         $1,384,108              $ (124,602)         (9.0)
                                          ==========         ==========              ==========

==================================================================================================================
- ------------------------------------------------------------------------------------------------------------------






TABLE 6. MATURITIES AND AVERAGE YIELDS OF AVAILABLE FOR SALE SECURITIES AT
DECEMBER 31, 2001

                                      U.S. Treasury and
                                      Federal Agency(1)                  State and Municipal(1), (2)
                             ---------------------------------  ------------------------------------------

                               Amortized    Fair                  Amortized       Fair
(in millions)                    Cost       Value       Yield        Cost         Value        Yield
- ----------------------------------------------------------------------------------------------------------
                                                                            
Due within one year          $  114.6    $  115.7       4.96%        $18.8       $   19.1          7.80%
One to five years               493.6       515.6       6.60          79.1           82.3          7.71
Five to ten years                94.7        94.3       6.92         157.6          163.5          8.00
After ten years                  14.3        14.2       4.98         176.9          179.1          7.46
                             --------    --------                 --------       --------
    Total                    $  717.2    $  739.8       6.35      $  432.4       $  444.0          7.66
                             ========    ========                 ========       ========       =======
Average maturity (3)                         3.62 yrs                                7.63 yrs.



                                         Other(1)                                Total
                          ----------------------------------  --------------------------------------------
                           Amortized      Fair                  Amortized          Fair
                             Cost         Value      Yield         Cost            Value          Yield
                          --------------------------------------------------------------------------------

                                                                               
Due within one year         $  4.3      $   4.7       6.27%       $  137.7      $   139.5         5.39%
One to five years              7.7          6.0       5.70           580.4          603.9         6.74
Five to ten years              1.4          2.5       5.46           253.7          260.3         7.58
After ten years               62.2         62.5       6.21           253.4          255.8         7.02
                            ------      -------                  ---------      ---------
    Total                   $ 75.6      $  75.7       6.18       $ 1,225.2      $ 1,259.5         6.82
                            ======      =======                  =========      =========

Average maturity (3)                                  3.25 yrs.                                   5.09 yrs.

==================================================================================================================
(1)  Maturities for Federal agency, collateralized mortgage obligations and
     asset-backed securities are based upon projections of independent cash flow
     models. Maturities for state and municipal securities incorporate early
     call features, if applicable.

(2)  Yields for state and municipal securities are calculated on a tax
     equivalent basis using a 35% tax rate.

(3)  Average maturity information excludes Federal Reserve and Federal Home Loan
     Bank stocks with no stated maturity.





                                      A-13





MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES




- ------------------------------------------------------------------------------------------------------------------------------------

TABLE 7. LOAN PORTFOLIO

(in millions)                                  2001            2000             1999             1998             1997
- ------------------------------------------------------------------------------------------------------------------------------------

LOANS OUTSTANDING AT DECEMBER 31
                                                                                               
  Commercial                               $  1,923.4       $  2,127.2       $  1,822.4       $  1,619.9       $  1,370.3
  Commercial real estate                      1,323.0          1,205.0          1,053.0            790.5            694.0
  Real estate construction                      216.0            235.1            185.4            149.5            113.5
  Real estate mortgage                          971.5          1,282.8          1,440.1          1,417.9          1,439.4
  Consumer                                    1,488.5          1,572.7          1,416.6          1,286.9          1,457.0
                                           ----------       ----------       ----------       ----------       ----------
    Total                                  $  5,922.4       $  6,422.8       $  5,917.5       $  5,264.7       $  5,074.2
                                           ==========       ==========       ==========       ==========       ==========


LOAN MATURITIES AND INTEREST RATE SENSITIVITY AT DECEMBER 31, 2001

                                             Within           One to         After
                                            One Year        Five Years     Five Years            Total
- ---------------------------------------------------------------------------------------------------------------

                                                                                  
Commercial and commercial real estate      $  1,363.7        $  1,669.6      $  213.1          $  3,246.4
Real estate construction                        216.0                --            --               216.0
                                           ----------        ----------      --------          ----------
   Total                                   $  1,579.7        $  1,669.6      $  213.1          $  3,462.4
                                           ==========        ==========      ========          ==========
Loans above:
   With floating interest rates            $    994.5        $    414.9      $   96.4          $  1,505.8
   With predetermined interest rates            585.2           1,254.7         116.7             1,956.6
                                           ----------        ----------      --------          ----------
       Total                               $  1,579.7        $  1,669.6      $  213.1          $  3,462.4
                                           ==========        ==========      ========          ==========
===============================================================================================================




       LOANS

       Citizens extends credit primarily within the local markets of its banking
subsidiaries located in Michigan, Wisconsin, Iowa and Illinois. Citizens' loan
portfolio contains no loans to foreign governments, enterprises or foreign
operations of domestic companies and is widely diversified by borrowers with no
concentration within a single industry that exceeds 10% of total loans. Loan
balances at December 31 and an analysis of the maturity and interest rate
sensitivity of commercial and real estate construction loans is presented above.

       Total loans decreased $500.4 million or 7.8% in 2001 with average loans
comprising 81.3% of total average earning assets during 2001, as compared with
81.8% during 2000. Commercial and commercial real estate loans decreased $85.8
million, or 2.6%, in 2001 from year-end 2000. A reduction of $182.0 million in
commercial loans occurred within the F&M markets as a result of business loan
portfolio restructuring and the implementation of Citizens' credit standards and
loan structuring criteria in these markets. Commercial loans in the Michigan
market grew 4.9% in 2001 from the prior year-end, a slower rate than the
previous year due to the slowing economy. Residential mortgage loan balances
declined $311.3 million, or 24.3% in 2001 from the prior year-end. The decline
in mortgage loans reflects the securitization and sale of $247 million of
portfolio mortgage loans and the sale of new mortgage loan production into the
secondary market as part of the balance sheet restructuring initiatives.

       Consumer loans, which include installment and home equity loans,
decreased $84.2 million, or 5.4%, to $1.489 billion at year-end 2001. The
decline in consumer loans reflects the sale of $30 million of credit card
assets, declines in the indirect lending portfolio and decreased direct auto
loans, partially offset by growth in home equity loans.

       At December 31, 2001 and 2000, $257.9 million and $362.3 million,
respectively, of residential real estate loans originated and subsequently sold
in the secondary market were being serviced by Citizens bank. Capitalized
servicing rights relating to the service loans totaled $1.7 million at December
31, 2001 and $2.7 million at year-end 2000.

       NONPERFORMING ASSETS

       A five-year history of nonperforming assets is presented in Table 8.
Nonperforming assets are comprised of nonaccrual, restructured loans and
repossessed assets. Although these assets have more than a normal risk of loss,
they will not necessarily result in a higher level of losses in the future.
Nonperforming assets totaled $79.2 million as of December 31, 2001, an increase
of 19.5% from the year-end 2000 balance of $66.3 million. As a percentage of
total assets, nonperforming assets increased to 1.03% at December 31, 2001, from
0.79% at December 31, 2000. The increase is primarily attributable to higher
nonperforming commercial loans at the F&M Banks.



                                      A-14




- ------------------------------------------------------------------------------------------------------------------------

TABLE 8.  NONPERFORMING ASSETS AND PAST DUE LOANS

December 31 (in thousands)                               2001         2000          1999         1998          1997
- ------------------------------------------------------------------------------------------------------------------------
                                                                                               

NONPERFORMING LOANS(1),(2)
  Nonaccrual
   Less than 30 days past due                          $ 6,528       $ 7,237       $ 1,661       $ 2,016       $ 5,128
   From 30 to 89 days past due                           5,218         7,297           772         1,641         2,021
   90 or more days past due                             57,047        44,881        26,498        31,485        28,813
                                                       -------       -------       -------       -------       -------
     Total                                              68,793        59,415        28,931        35,142        35,962
   90 days past due and still accruing                   4,168           889         2,139         2,474         3,022
   Restuctured (1)                                         337         1,068             9           114           446
                                                       -------       -------       -------       -------       -------
     Total nonperforming loans                          73,298        61,372        31,079        37,730        39,430
OTHER REPOSSESSED ASSETS ACQUIRED                        5,947         4,917         4,039         4,790         4,869
                                                       -------       -------       -------       -------       -------
     Total nonperforming assets                        $79,245       $66,289       $35,118       $42,520       $44,299
                                                       =======       =======       =======       =======       =======

Nonperforming assets as a percent of total loans
   plus other repossessed assets acquired                 1.34%         1.03%         0.59%         0.81%         0.87%
Nonperforming assets as a percent of total assets         1.03          0.79          0.45          0.61          0.67

NONPERFORMING LOANS BY TYPE
   Commercial                                          $47,978       $37,229       $18,005       $19,830       $23,031
   Real estate mortgage                                 17,304        17,057         7,366         8,032         9,487
   Consumer                                              8,016         7,086         5,708         9,868         6,912
                                                       -------       -------       -------       -------       -------
     Total                                             $73,298       $61,372       $31,079       $37,730       $39,430
                                                       =======       =======       =======       =======       =======

========================================================================================================================




(1) Nonperforming loans include loans on which interest is being recognized only
    upon receipt (nonaccrual), those on which interest has been renegotiated to
    lower than market rates because of the financial condition of the borrowers
    (restructured), and loans 90 days past due and still accruing.

(2) Gross interest income that would have been recorded in 2001 for nonaccrual
    and restructured loans, as of December 31, 2001, assuming interest had been
    accrued throughout the year in accordance with original terms was $6.392
    million. The comparable 2000 and 1999 totals were $4.953 million, and $3.383
    million, respectively. Interest collected on these loans and included in
    income was $3.344 million in 2001, $3.045 million in 2000 and $1.861 million
    in 1999. Therefore, on a net basis, total income foregone due to these loans
    was $3.048 million in 2001, $1.908 million in 2000 and $1.522 million in
    1999.

       Nonperforming commercial and commercial real estate loans increased to
$48.0 million at year-end 2001 from $37.2 million a year ago. These loans
comprised 65.5% of total nonperforming loans at December 31, 2001, compared with
60.7% in 2000. Commercial real estate loans represented $11.1 million in 2001
and $12.5 million in 2000 of such nonperforming loans. The increase in
nonperforming commercial and commercial real estate loans is reflected in the
allowance for loan losses through specific and formula based loss allocations as
of December 31, 2001. The loss allocation for commercial and commercial real
estate loans increased $6.8 million to $42.0 million at December 31, 2001 from
the prior year-end. Management believes, as previously stated, that the risk of
loss in the commercial real estate nonperforming loans is significantly less
than the total principal balance, due to the nature of the underlying collateral
and the value of such collateral to the total credit exposure. These loans are
generally for owner-occupied properties and do not rely on the performance of
the real estate market to generate funds for repayment.

       The consumer portfolio is comprised of automobile, personal, marine and
other recreational vehicle, home equity and credit card loans of which
automobile and home equity comprise 50.0% of 2001 average balances. At December
31, 2001, consumer loans represented 10.9% of nonperforming loans, down from
11.5% in 2000.

       Citizens maintains formal policies and procedures to control and monitor
credit risk within these portfolios. Based upon present information, management
believes the allowance for loan losses is adequate to meet presently known
credit risks.

       The level and composition of nonperforming assets are affected by
economic conditions in Citizens' local markets. Nonperforming assets,
charge-offs and provisions for loan losses tend to decline in a strong economy
and increase in a weak economy, potentially impacting Citizens' results. In
addition to loans classified as nonperforming, management carefully monitors
other credits that are current in terms of principal and interest payments but,
in management's opinion, may deteriorate in quality if economic conditions
change. As of December 31, 2001, such loans amounted to $78.9 million or 1.3% of
total loans compared with $70.2 million or 1.1% of total loans as of December
31, 2000. These loans are primarily commercial and commercial real estate loans
made in the normal course of business and do not represent a concentration in
any one industry.

       Under Citizens' credit policies and practices, a loan is placed on
nonaccrual status when there is doubt regarding


                                      A-15





MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES



collection of principal or interest, or when principal or interest is past due
90 days or more and the loan is not well secured and in the process of
collection. Interest accrued but not collected is reversed and charged against
income when the loan is placed on nonaccrual status. A loan is considered
impaired when management determines it is probable that all the principal and
interest due under the contractual terms of the loans may not be collected. In
most instances, impairment is measured based on the fair value of the underlying
collateral. Impairment may also be measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate.
Citizens maintains a valuation allowance for impaired loans. Interest income on
impaired nonaccrual loans is recognized on a cash basis. Interest income on all
other impaired loans is recorded on an accrual basis.

       Certain of Citizens' nonperforming loans included in Table 8 are
considered to be impaired. Citizens measures impairment on all large balance
nonaccrual commercial and commercial real estate loans. Certain large balance
accruing loans rated substandard or lower are also measured for impairment.
Impairment losses are included in the provision for loan losses. The policy does
not apply to large groups of smaller balance homogeneous loans that are
collectively evaluated for impairment, except for those loans restructured under
a troubled debt restructuring. Loans collectively evaluated for impairment
include certain smaller balance commercial loans, consumer loans, residential
real estate loans, and credit card loans, and are not included in the impaired
loan data in the following paragraphs.

       At December 31, 2001, loans considered to be impaired totaled $62.1
million of which $43.5 million were on a nonaccrual basis. Included within this
amount is $39.8 million of impaired loans for which the related allowance for
loan losses is $10.4 million and $22.3 million of impaired loans for which fair
value exceeded the recorded investment in the loan. The average recorded
investment in impaired loans during the year ended December 31, 2001 was
approximately $78.0 million. For the year ended December 31, 2001, Citizens
recognized interest income of $3.3 million on impaired loans. Cash collected on
nonaccrual impaired loans totaled $3.1 million which was applied to principal.

       At December 31, 2000, loans considered to be impaired totaled $52.9
million of which $36.3 million were on a nonaccrual basis. Included with this
amount is $32.5 million of impaired loans for which the related allowance for
loan losses is $5.1 million and $20.4 million of impaired loans for which the
fair value exceeded the recorded investment in the loan. The average recorded
investment in impaired loans during the year ended December 31, 2000 was
approximately $38.9 million. For the year ended December 31, 2000, Citizens
recognized interest income of $2.5 million on impaired loans. Cash collected on
nonaccrual impaired loans totaled $2.3 million of which $1.2 million was applied
to principal and $1.1 million was recognized using the cash basis method of
income recognition.

       During 2001, Citizens' banking subsidiaries received a normally scheduled
examination by their governing regulatory agencies. There was no material
reclassification of assets as nonperforming resulting from these examinations.




- ----------------------------------------------------------------------------------------------------------------------------

TABLE 9. AVERAGE DEPOSITS
                                                 2001                      2000                     1999
                                         --------------------     ----------------------   ----------------------
                                          AVERAGE    AVERAGE        Average     Average       Average     Average
Year Ended December 31 (in millions)      BALANCE     RATE          Balance      Rate         Balance      Rate
- ---------------------------------------------------------------   ----------------------   ----------------------

                                                                                       
Noninterest-bearing demand              $    881.2        --%     $    946.1        --%     $    904.6         --%
Interest-bearing demand                      744.8      1.88           581.5      1.46           578.5       1.55
Savings                                    1,474.5      2.36         1,701.7      3.24         1,751.6       2.83
Time                                       2,907.6      5.37         2,892.1      5.72         2,672.0       5.18
                                        ----------                ----------                ----------

  Total                                 $  6,008.1      3.41      $  6,121.4      3.74      $  5,906.7       3.33
                                        ==========                ==========                ==========
============================================================================================================================



       DEPOSITS

       Average deposit balances and rates for the past three years are
summarized in Table 9. Total average deposits were 1.9% lower in 2001 as
compared with 2000. Time and interest bearing demand deposits increased while
savings deposits and noninterest bearing demand deposits decreased. Average
interest-bearing demand balances increased 28.1% in 2001 versus the prior year
primarily due to growth of a highly successful new product offering which pays
higher rates of interest. Time deposits increased 0.5% in 2001 as compared with
2000 primarily due to an increase in average brokered deposit balances. Savings
accounts and noninterest bearing demand deposits declined 13.4% and 6.9%,
respectively, in 2001 due to a shift in client preferences, particularly in
F&M's Wisconsin market, from noninterest bearing demand and money market savings
accounts to the new higher-rate interest bearing demand product. The overall
average rate for the deposit portfolio declined in 2001 to 3.41% from 3.74% in
2000. The decrease was the result of the lower interest rate environment in
2001. As of December 31, 2001, certificates of deposits of $100,000 or more
accounted for approximately 13.7% of total deposits. The maturities of these
deposits are summarized in Table 10.



                                      A-16






- --------------------------------------------------------------------------------

TABLE 10. MATURITY OF TIME CERTIFICATES OF DEPOSIT OF
$100,000 OR MORE AT DECEMBER 31, 2001


(in thousands)
- --------------------------------------------------------------------------------


                                             
Three months or less                             $314,552
After three but within six months                  90,901
After six but within twelve months                261,996
After twelve months                               150,926
                                                ---------
Total                                            $818,375
                                                =========




================================================================================


       Citizens gathers deposits primarily from the local markets of its banking
subsidiaries and has not traditionally relied on purchased deposits for any
significant funding. Brokered deposits and time deposits greater than $100,000
declined $219 million at December 31, 2001 from the prior year end due to the
balance sheet restructuring initiatives. Citizens will continue to evaluate the
use of alternative funding sources such as brokered deposits as funding needs
change. Management continues to promote relationship driven core deposit growth
and stability through focused marketing efforts and competitive pricing
strategies.

       BORROWED FUNDS

       Short-term borrowings are comprised primarily of Federal funds purchased,
securities sold under agreements to repurchase, FHLB advances and Treasury Tax
and Loan notes. Total short-term borrowings averaged $538.7 million in 2001 or
8.6% of total average interest-bearing liabilities, compared with $920.3 million
or 14.4% during 2000. The decline in short-term borrowings is a result of the
balance sheet restructuring and the extension of debt maturities in the lower
interest rate environment. See Note 10 to the Consolidated Financial Statements
for additional information on short-term borrowings.

       As of December 31, 2001, Citizens' Parent company maintained a $75
million short-term revolving credit facility with three unaffiliated banks,
which had an unused commitment of $45 million. The current facility will mature
on August 29, 2002 and is expected to renew at that time. The interest rate on
the $30 million outstanding at December 31, 2001 reprices daily and is based on
the Federal funds rate. The Parent company services the debt's principal and
interest payments with dividends from the subsidiary banks. The agreement also
requires Citizens to maintain certain financial covenants. Citizens is in full
compliance with all debt covenants as of December 31, 2001.

       Long-term debt comprised primarily of FHLB notes, accounted for $596.4
million, or 9.5%, of average interest-bearing funds during 2001 increasing from
$303.6 million or 4.7% during 2000. This increase reflects an extension of
wholesale funding maturities in the low interest rate environment. A summary of
long-term debt balances as of December 31, 2001 and 2000 appears in Note 11 to
the Consolidated Financial Statements. Borrowed funds are expected to remain an
important, reliable and cost-effective funding vehicle for Citizens and its
subsidiary banks.

       CAPITAL RESOURCES

       Citizens continues to maintain a strong capital position which supports
its current needs and provides a sound foundation to support further expansion.
At December 31, 2001, shareholders' equity was $697.5 million, compared with
$680.0 million at December 31, 2000. Book value per common share at December 31,
2001 and 2000 was $15.46 and $14.62, respectively.

       Citizens has consistently maintained regulatory capital ratios at or
above the "well-capitalized" standards and all bank subsidiaries of Citizens
have sufficient capital to maintain a well-capitalized designation. Citizens'
capital ratios for the past three years are presented below.

- --------------------------------------------------------------------------------



                  Regulatory Minimum
                 ----------------------
                             "Well-            December 31,
                                       ----------------------------
                 Required  Capitalized"  2001     2000      1999
- -------------------------------------------------------------------

Risk based:
                                             
Tier 1 capital       4.00%     6.00%      9.87%     9.05%    9.22%
Total capital        8.00     10.00      11.12     10.30    10.47

Tier 1 leverage      4.00      5.00       7.79      7.11     7.21

- -------------------------------------------------------------------



       During 2001, Citizens maintained two stock repurchase plans. The stock
repurchase plan initiated in May 2000 allowed for the repurchase of up to
3,000,000 shares of common stock for general bank purposes. As of December 31,
2000, 1,234,100 shares had been purchased under this plan. Citizens purchased
the remaining 1,765,900 shares under this plan in 2001. In October 2001, a new
plan was approved to repurchase up to an additional 3,000,000 shares of Citizens
common stock for general corporate purposes. At December 31, 2001, 187,700
shares of common stock had been purchased under this plan. For the year ended
December 31, 2001 a total of 1,953,600 shares were purchased under the plans at
an average price of $29.94.

       Citizens declared cash dividends of $1.085 per share in 2001, an increase
of 6.9% over 2000 dividends of $1.015 per share. Citizens has paid dividends
every year since 1892 except for several years during the depression of the
1930's.





                                      A-17



MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES


LIQUIDITY AND DEBT CAPACITY

The liquidity position of Citizens is monitored for its subsidiaries and its
Parent company to ensure that funds are available at a reasonable cost to meet
financial commitments, to finance business expansion and to take advantage of
unforeseen opportunities. Citizens' subsidiary banks derive liquidity primarily
through core deposit growth, maturity of money market investments, and maturity
and sale of investment securities and loans. Additionally, Citizens' subsidiary
banks have access to market borrowing sources on an unsecured, as well as a
collateralized basis, for both short-term and long-term purposes including, but
not limited to, the Federal Reserve and Federal Home Loan Banks where the
subsidiary banks are members. Another source of liquidity is the ability of
Citizens' Parent company to borrow funds on both a short-term and long-term
basis. The parent has established borrowing facilities with a group of
unaffiliated banks and has used portions of this revolving credit agreement for
various corporate purposes. Proactive management of Citizens' liquidity capacity
and generation has increased sources of funds and borrowing capacities enabling
Citizens and its subsidiary banks to operate effectively, safely and with
improved profitably.

       The subsidiary banks manage liquidity to meet client cash flow needs
while maintaining funds available for loan and investment opportunities. As
discussed in Note 19 to the Consolidated Financial Statements, the Federal
Reserve Bank requires Citizens' banking subsidiaries to maintain certain
noninterest-bearing deposits with the Federal Reserve Bank. These balance
requirements averaged $41.9 million and $56.8 million during 2001 and 2000,
respectively, and were primarily satisfied with cash balances maintained by
Citizens' subsidiaries. The liquidity of the Parent company is managed to
provide funds to pay dividends to shareholders, service debt, invest in
subsidiaries and to satisfy other operating requirements. The primary source of
liquidity for the Parent company is dividends and returns of investment from its
subsidiaries. During 2001, the Parent company received $107.4 million in
dividends from subsidiaries and paid $50.2 million in dividends to its
shareholders. Despite the higher level of dividends to the Parent, all Citizens'
subsidiary banks maintained sufficient capital to be designated well
capitalized.

       As discussed in Note 19 to the Consolidated Financial Statements,
approximately $24.8 million was available as of January 1, 2002 for payment to
the Parent company as dividends by Citizens' banking subsidiaries without
further regulatory approval. Amounts earned by subsidiaries in 2002 will also
become available for such dividend payments. Additional amounts may be available
for payment subject to regulatory approval.

       Citizens' long-term debt to equity ratio was 90.2% as of December 31,
2001 compared to 69.3% in 2000. Changes in long-term debt during 2001 are
discussed in the section titled "Borrowed Funds". Management believes that
Citizens has sufficient liquidity and capacity sources to meet presently known
cash flow requirements arising from ongoing business transactions.


INTEREST RATE RISK

Interest rate risk generally arises when the maturity or repricing structure of
Citizens' assets and liabilities differ significantly. Asset/liability
management, used by Citizens to address such risk, is the process of developing,
testing and implementing strategies that seek to maximize net interest income,
maintain sufficient liquidity and minimize exposure to significant changes in
interest rates. This process includes monitoring contractual and expected
repricing of assets and liabilities as well as forecasting earnings under
different interest rate scenarios and balance sheet structures. Generally,
management seeks a structure that insulates net interest income from large
swings attributable to changes in market interest rates. Table 11 depicts
Citizens' asset/liability static sensitivity (GAP) as of December 31, 2001 and
2000.
       As shown, Citizens' interest rate risk position at December 31, 2001 is
asset sensitive in the less than one-year time frame with rate sensitive assets
exceeding rate sensitive liabilities by $308.5 million. Application of GAP
theory would suggest that with such a position Citizens' net interest income
could decline if interest rates fall; i.e., assets are likely to reprice faster
than liabilities, resulting in a decrease in net income in a declining rate
environment. Conversely, net income could increase in a rising rate environment.
Net interest income is not only affected by the level and direction of interest
rates, but also by the shape of the yield curve, relationships between interest
sensitive instruments and key driver rates, as well as balance sheet growth and
the timing of changes in these variables.

       Management is continually reviewing its interest rate risk position and
modifying its strategies based on projections to minimize the impact of future
interest rate changes. While traditional GAP analysis does not always
incorporate adjustments for the magnitude or timing of non-contractual
repricing, Table 11 does incorporate appropriate adjustments as indicated in
footnotes 1 and 2 to the table. Because of these and other inherent limitations
of any GAP analysis, management utilizes net interest income simulation modeling
as its primary tool to evaluate the impact of changes in interest rates and
balance sheet strategies. Management uses these simulations to develop
strategies that can limit interest rate risk and provide liquidity to meet
client loan demand and deposit preferences.




                                      A-18

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
CITIZEN'S BANKCORP CORPORATION AND SUBSIDIARIES




- ------------------------------------------------------------------------------------------------------------------------------------

TABLE 11. INTEREST RATE SENSITIVITY                                                                     TOTAL
                                                            0 - 3          4 - 6          7 - 12        WITHIN            1 - 5
(dollars in millions)                                       Months        Months           Months       1 YEAR            Years
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
DECEMBER 31, 2001
    RATE SENSITIVE ASSETS(1)
      Loans and leases                                   $   2,486.5    $     271.4     $     516.5     $   3,274.4    $   2,175.6
      Investment securities                                     95.5           21.5            47.1           164.1          568.0
      Short-term investments                                    42.5             --              --              --           42.5
                                                         -----------    -----------     -----------     -----------    -----------
      Total                                              $   2,624.5    $     292.9     $     563.6     $   3,481.0    $   2,743.6
                                                         ===========    ==========      ==========      ==========     ===========
    RATE SENSITIVE LIABILITIES
      Deposits (2)                                       $     873.6    $     666.4     $   1,192.5     $   2,732.5    $   2,029.2
      Other interest bearing liabilities                       320.2           19.7           100.1           440.0          221.0
                                                         -----------    -----------     -----------     -----------    -----------
      Total                                              $   1,193.8    $     686.1     $   1,292.6     $   3,172.5    $   2,250.2
                                                         ===========    ==========      ==========      ==========     ===========

    Period GAP (3)                                       $   1,430.7    $    (393.2)    $    (729.0)    $     308.5    $     493.4
    Cumulative GAP                                           1,430.7        1,037.5           308.5           801.9        1,219.7
    Cumulative GAP to total assets                             18.63%         13.51%           4.02%           4.02%         10.44%
    Multiple of rate sensitive assets to liabilities            2.20           0.43            0.44            1.10           1.22



- --------------------------------------------------------------------------------
                                                        Over
                                                      5 Years        Total
- --------------------------------------------------------------------------------
DECEMBER 31, 2001
    RATE SENSITIVE ASSETS(1)
                                                            
  Loans and leases                                   $   472.4    $   5,922.4
  Investment securities                                  527.4        1,259.5
  Short-term investments                                    --           42.5
                                                     ---------    -----------
  Total                                              $   999.8    $   7,224.4
                                                     =========    ===========
RATE SENSITIVE LIABILITIES
  Deposits (2)                                       $   299.5    $   5,061.2
  Other interest bearing liabilities                     282.5          943.5
                                                     ---------    -----------
  Total                                              $   582.0    $   6,004.7
                                                     =========    ===========

Period GAP (3)                                       $   417.8    $   1,219.7
Cumulative GAP
Cumulative GAP to total assets                           15.88%         15.88%
Multiple of rate sensitive assets to liabilities          1.72           1.20

====================================================================================================================================


                                                                                                

DECEMBER 31, 2000
    RATE SENSITIVE ASSETS(1)
      Loans and leases                                  $   2,128.9   $   350.2    $     669.6    $   3,148.7    $   2,581.4
      Investment securities                                    64.1        40.1           30.0          134.2          589.7
      Short-term investments                                   27.5          --             --             --           27.5
                                                        -----------   ---------    -----------    -----------    -----------
      Total                                             $   2,220.5   $   390.3    $     699.6    $   3,310.4    $   3,171.1
                                                        ===========   =========    ===========    ===========    ===========
    RATE SENSITIVE LIABILITIES
      Deposits (2)                                      $     990.2   $   842.5    $   1,414.2    $   3,246.9    $   1,799.6
      Other interest bearing liabilities                    1,029.1        75.0          210.2        1,314.3           81.5
                                                        -----------   ---------    -----------    -----------    -----------
      Total                                             $   2,019.3   $   917.5    $   1,624.4    $   4,561.2    $   1,881.1
                                                        ===========   =========    ===========    ===========    ===========

    Period GAP (3)                                      $     201.2   $  (527.2)   $    (924.8)   $  (1,250.8)   $   1,290.0
    Cumulative GAP                                            201.2      (326.0)      (1,250.8)                         39.2
    Cumulative GAP to total assets                             2.39%      (3.88)%       (14.88)%       (14.88)%         0.47%
    Multiple of rate sensitive assets to liabilities           1.10        0.43           0.43           0.73           1.69



                                                               

DECEMBER 31, 2000
    RATE SENSITIVE ASSETS(1)
      Loans and leases                                  $     692.7   $   6,422.8
      Investment securities                                   660.2       1,384.1
      Short-term investments                                     --          27.5
                                                        -----------   -----------
      Total                                             $   1,352.9   $   7,834.4
                                                        ===========   ===========
    RATE SENSITIVE LIABILITIES
      Deposits (2)                                      $     223.7   $   5,270.2
      Other interest bearing liabilities                        8.6       1,404.4
                                                        -----------   -----------
      Total                                             $     232.3   $   6,674.6
                                                        ===========   ===========

    Period GAP (3)                                          1,120.6   $   1,159.8
    Cumulative GAP                                          1,159.8
    Cumulative GAP to total assets                            13.80%        13.80%
    Multiple of rate sensitive assets to liabilities           5.82          1.17



================================================================================

(1) Incorporates prepayment projections for certain assets which may shorten the
    time frame for repricing or maturity compared to contractual runoff.

(2) Includes interest bearing savings and demand deposits without contractual
    maturities of $770 million in the less than one year category and $1.636
    billion in the over one year category as of December 31, 2001. The same
    amounts as of December 31, 2000 were $779 million and $1.414 billion,
    respectively. This runoff is based on historical trends, which reflects
    industry standards.

(3) GAP is the excess of rate sensitive assets (liabilities).


                                      A-19




INTEREST RATE SENSITIVITY

A number of measures are used to monitor and manage interest rate risk,
including income simulation and interest sensitivity GAP analyses. An income
simulation model is management's primary tool used to assess the direction and
magnitude of variations in net interest income resulting from changes in
interest rates. Key assumptions in the model include prepayment speeds on
various loan and investment assets; cash flows and maturities of financial
instruments held for purposes other than trading; changes in market conditions,
loan volumes, and pricing; deposit sensitivity; client preferences; and
management's financial capital plans. These assumptions are inherently
uncertain, subject to fluctuation and revision in a dynamic environment and, as
a result, the model cannot precisely estimate net interest income nor exactly
predict the impact of higher or lower interest rates on net interest income.
Actual results will differ from simulated results due to timing, magnitude, and
frequency of balance sheet component and interest rate changes, differences in
client behavior, market conditions and management strategies, among other
factors.

       Results of the multiple simulations done as of December 31, 2001 suggest
that Citizens could expect net interest income to decrease by $3.7 million (if
asset and liability balances remain static and interest rates gradually decline
by 200 basis points over the next twelve months) and, to increase by $8.3
million (if asset and liability balances remain static and interest rates
gradually increase by 200 basis points over the next twelve months) from 2001
levels of net interest income. These variances in net interest income were well
within Citizens' policy parameters established to manage such risk. Management
performed a large number of net interest income simulations using varying
balance sheet scenarios and differing interest rate environments. The model
results presented herein are intended to illustrate the potential variation in
net interest income from the indicated changes in interest rates, and not to
project future levels of net interest income. In addition to changes in interest
rates, the level of future net interest income is also dependent on a number of
other variables, including the growth, composition and absolute levels of
deposits, loans, and other earning assets and interest bearing liabilities,
economic and competitive conditions, client preferences and other factors.


RECENT ACCOUNTING PRONOUNCEMENTS

       Please refer to Note 4 of the Consolidated Financial Statements "Recent
Accounting Pronouncements".

FORWARD-LOOKING STATEMENTS

The foregoing disclosure contains "forward-looking statements" within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934,
both as amended, with respect to expectations for future periods. These forward
looking statements involved are subject to risk and uncertainties that could
cause actual results to differ. These risks and uncertainties include
unanticipated changes in the competitive environment and relationships with
third party vendors and clients and certain other factors discussed in this
report. Management believes that the expectations used in the forward looking
statements are reasonable, however actual results may vary significantly.





                                      A-20






- -------------------------------------------------------------------------------------------------------------------------

TABLE 12. SELECTED QUARTERLY INFORMATION
                                                                       2001                                 2000
                                            ----------------------------------------- -----------------------------------
(in thousands except, per share data)          FOURTH        THIRD       SECOND        FIRST        Fourth       Third
- -------------------------------------------------------------------------------------------------------------------------

                                                                                           
Interest income                              $ 129,335    $ 140,406    $ 147,260    $ 156,558    $ 161,169    $ 160,347
Interest expense                                51,659       62,146       70,835       80,938       84,909       80,722
Net interest income                             77,676       78,260       76,425       75,620       76,260       79,625
Provision for loan losses                        7,496        8,500        6,362        4,049        5,895        4,642
Noninterest income before
     securities gains (losses) (1)              25,599       34,658       28,587       22,442       23,015       23,215
Investment securities gains (losses) (2)           423           49        3,504        2,219            6           (5)
Noninterest expense before special charge       60,586       64,270       63,616       62,711       57,579       61,670
Special charges (3)                                 --           --           --           --        8,352          (99)
Net income (loss)                               25,742       27,962       27,148       23,805       20,355       25,729

PER SHARE OF COMMON STOCK
Net income (loss):
    Basic                                         0.57         0.60         0.59         0.51         0.44         0.54
    Diluted                                       0.56         0.60         0.58         0.51         0.44         0.54
Cash dividends declared                          0.275        0.275        0.275        0.260        0.260        0.260
Market value:(4)
    High                                         34.02        32.75        30.55        29.38        29.81        23.94
    Low                                          27.70        27.30        24.51        23.69        21.19        16.00
    Close                                        32.88        32.08        29.25        26.69        29.06        23.00




- ------------------------------------------------------------------------
                                                          2000
                                                   Second       First
- ------------------------------------------------------------------------


                                                   
Interest income                              $ 153,406    $ 147,086
Interest expense                                73,878       67,625
Net interest income                             79,528       79,461
Provision for loan losses                        5,162        5,284
Noninterest income before
     securities gains (losses) (1)              22,819       21,295
Investment securities gains (losses) (2)            --           (1)
Noninterest expense before special charge       61,928       61,044
Special charges (3)                              3,289        3,999
Net income (loss)                               22,691       21,885

PER SHARE OF COMMON STOCK
Net income (loss):
    Basic                                         0.48         0.46
    Diluted                                       0.47         0.46
Cash dividends declared                          0.260        0.235
Market value:(4)
    High                                         20.00        22.50
    Low                                          16.00        15.50
    Close                                        16.23        19.50



================================================================================

(1) Noninterest income in 2001 includes a $2.6 million gain on the sale of the
    credit card portfolio in the second quarter, an $11.0 million gain on sale
    of NYCE stock in the third quarter and a $793,000 gain on the sale of F&M
    Bank-Minnesota in the fourth quarter.

(2) In 2001 investment securities gains include $2.1 million in the first
    quarter and $3.3 million in the second quarter from the securitization of
    mortgages and subsequent sale of mortgage-backed securities.

(3) Special charges in 2000 includes restructuring, conversion, integration and
    other non-recurring costs incurred in connection with mergers, acquisitions
    and other corporate initiatives.

(4) Citizens Banking Corporation common stock is traded on the National Market
    tier of the Nasdaq stock market (trading symbol: CBCF). At December 31,
    2001, there were approximately 16,354 shareholders of the Corporation's
    common stock.











                                      A-21


MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
CITIZEN'S BANKCORP CORPORATION AND SUBSIDIARIES





YEAR ENDED DECEMBER 31, 2000 COMPARED WITH 1999

Citizens reported net income of $90.7 million, or $1.91 per diluted share, in
2000 compared with $62.0 million, or $1.28 per diluted share, in 1999. Net
income included after-tax merger, restructuring, conversion and other
non-recurring items of $9.5 million in 2000 and $35.2 million in 1999. Returns
on average assets and equity were 1.12% and 13.94%, respectively, in 2000, as
compared with 0.84% and 9.22% in 1999. Excluding nonrecurring items, the
increase in net income in 2000 reflects improvement in net interest income from
growth in earning assets and higher noninterest income, partially offset, by
higher loan loss provision and noninterest expense.

       Net interest income increased 1.7% in 2000 to $314.9 million as compared
with $309.6 million in 1999. Higher levels of earning assets, particularly
commercial and commercial real estate loans, partially offset by an increase in
short-term borrowings and a lower net interest margin, led to the increase in
2000. Yields on earning assets increased to 8.36%, from 8.05% in 1999 reflecting
a rising interest rate environment in the first half of 2000 and a favorable
shift in the earning asset mix to higher yielding loans. Loan growth outpaced
deposit growth and Citizens used short-term FHLB advances and other purchased
funds to support the higher level of earning assets. This change in the funding
mix increased average borrowings to 19.1% of interest-bearing liabilities in
2000, up from 12.1% in 1999. Higher rates paid on interest-bearing deposits and
long-term debt increased the cost of interest-bearing funding sources to 4.80%
in 2000 from 4.07% in 1999. Net interest margin declined to 4.32% in 2000 as
compared with 4.68% in 1999.

       The provision for loan losses decreased to $21.0 million in 2000 from
$24.7 million in 1999. The 1999 provision included a $6.8 million special
provision to conform F&M's allowance for loan losses to Citizens' methodology
and credit risk standards. Net loan charge-offs to average total loans decreased
nine basis points to 0.28% as compared to 0.37% in 1999. The improvement is the
result of lower net charge-offs in Citizens' indirect consumer loan portfolio
and to a lessor extent, lower net charge-offs at the F&M banks. The allowance
for loan losses as a percentage of total loans was 1.25% at December 31, 2000
compared to 1.29% at the end of 1999.

       Noninterest income, before nonrecurring income and securities gains and
losses, increased to $90.3 million in 2000 from $79.9 million in 1999, an
improvement of 13.1%. On the same basis, noninterest income accounted for 22.3%
of total operating revenues in 2000, compared with 20.5% in 1999. Noninterest
income increased $10.4 million from 1999 primarily due to growth in deposit
service charges, trust fees, bankcard fees and brokerage and investment fees.

       Excluding nonrecurring items, noninterest expense increased $11.5 million
or 5.0% to $242.2 million in 2000, up from $230.7 million in 1999. Growth from
the October 1999 and May 2000 branch purchases, partially offset by efficiencies
achieved in 2000 from the conversion and integration of F&M and other cost
savings initiatives, generated most of the increase. Compensation was unchanged
from 1999 as the full year effect of additional staff from the branch purchases,
higher health care costs and increased incentive pay were offset by decreased
staffing levels at F&M and lower pension costs. Occupancy and equipment expenses
were up a combined $4.0 million or 12.4%, due to the branch purchases and
installation of new equipment and operating systems at F&M. Higher data
processing costs reflect increased processing volumes and new services and
information technology costs associated with the branch purchases and conversion
of F&M onto Citizens' operating systems. Professional services were up due to
the outsourcing in 2000 of Citizens' computer technology support functions and
certain financial and credit audit procedures. Intangible asset amortization
increased due to additional goodwill from the branch purchases and bankcard fees
were higher due to additional transaction volume and costs from the full year
effect of outsourcing bankcard operations in 1999.

       Citizens had total average assets of $8.073 billion during 2000, up from
1999 average assets of $7.342 billion. Total loans increased $505.3 million or
8.5% in 2000 with average loans comprising 81.8% of total earning assets in
2000, up from 80.4% in 1999. Growth occurred primarily in the commercial loan
and commercial real estate portfolios due to enhanced sales efforts and strong
loan demand. Average investment securities, including money market investments,
comprised 18.2% of total average earning assets in 2000, down from 19.6% in
1999.
       Total average deposits were 3.6% higher in 2000 as compared with 1999.
Average short-term borrowings, comprised primarily of FHLB advances, Federal
funds purchased, and securities sold under agreements to repurchase; averaged
$920.3 million in 2000, or 14.4% of total average interest-bearing liabilities,
compared with $478.9 million or 8.4% during 1999. The increase reflects
additional borrowings to fund growth in loans and other earning assets.
Long-term debt accounted for $303.6 million or 4.7% of average interest-bearing
funds during 2000, increasing from $210.3 million or 3.7% in 1999. Average
shareholders' equity was $650.2 million in 2000, a 3.3% decrease over the 1999
average of $672.2 million.




                                      A-22

- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
CITIZENS BANKING CORPORATION AND SUBSIDIARIES



                                                                                                      December 31,
(in thousands, except share amounts)                                                            2001             2000
- ----------------------------------------------------------------------------------------------------------------------------
                                                                                                         
ASSETS
   Cash and due from banks                                                                   $    224,416      $    318,115
   Money market investments:
     Interest-bearing deposits with banks                                                           3,455             2,547
     Short-term government fund                                                                    38,190               ---
     Federal funds sold                                                                               891            24,986
                                                                                             ------------      ------------
        Total money market investments                                                             42,536            27,533
   Securities available for sale (amortized cost $1,225,230 in 2001; $1,366,063 in 2000)        1,259,506         1,384,108
   Loans:
     Commercial                                                                                 3,246,380         3,332,156
     Real estate construction                                                                     216,041           235,096
     Real estate mortgage                                                                         971,533         1,282,834
     Consumer                                                                                   1,488,452         1,572,720
                                                                                             ------------      ------------
        Total loans                                                                             5,922,406         6,422,806
     Less: Allowance for loan losses                                                              (80,299)          (80,070)
                                                                                             ------------      ------------
        Net loans                                                                               5,842,107         6,342,736
   Premises and equipment                                                                         128,805           137,094
   Intangible assets                                                                               79,405            90,808
   Other assets                                                                                   102,100           104,697
                                                                                             ------------      ------------
        TOTAL ASSETS                                                                         $  7,678,875      $  8,405,091
                                                                                             ============      ============
LIABILITIES
   Noninterest-bearing deposits                                                              $    903,900      $    973,938
   Interest-bearing deposits                                                                    5,061,226         5,270,203
                                                                                             ------------      ------------
        Total deposits                                                                          5,965,126         6,244,141
   Federal funds purchased and securities sold
     under agreements to repurchase                                                               233,077           394,466
   Other short-term borrowings                                                                     81,353           538,784
   Other liabilities                                                                               72,756            76,604
   Long-term debt                                                                                 629,099           471,117
                                                                                             ------------      ------------
        Total liabilities                                                                       6,981,411         7,725,112
SHAREHOLDERS' EQUITY
   Preferred stock - no par value:
       Authorized - 5,000,000 shares; Issued - none
   Common stock - no par value:
       Authorized - 100,000,000 shares
       Issued and outstanding - 45,097,614 in 2001; 46,510,111 in 2000                            155,720           201,549
   Retained earnings                                                                              521,191           466,692
   Other accumulated comprehensive net income                                                      20,553            11,738
                                                                                             ------------      ------------
       Total shareholders' equity                                                                 697,464           679,979
                                                                                             ------------      ------------
        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                           $  7,678,875      $  8,405,091
                                                                                             ============      ============

- ----------------------------------------------------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.


                                      A - 23



- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
CITIZENS BANKING CORPORATION AND SUBSIDIARIES



(in thousands, except share amounts)                                                 2001               2000                1999
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              
INTEREST INCOME
  Interest and fees on loans                                                     $   492,437        $   535,235        $    462,223
  Interest and dividends on investment securities:
    Taxable                                                                           57,083             66,190              59,654
    Tax-exempt                                                                        21,715             20,350              17,151
  Money market investments                                                             2,324                233               2,531
                                                                                 -----------        -----------        ------------
      Total interest income                                                          573,559            622,008             541,559
INTEREST EXPENSE
  Deposits                                                                           204,929            229,137             196,871
  Short-term borrowings                                                               27,458             58,532              23,692
  Long-term debt                                                                      33,191             19,465              11,354
                                                                                 -----------        -----------        ------------
      Total interest expense                                                         265,578            307,134             231,917
                                                                                 -----------        -----------        ------------
NET INTEREST INCOME                                                                  307,981            314,874             309,642
Provision for loan losses                                                             26,407             20,983              24,675
                                                                                 -----------        -----------        ------------
      Net interest income after provision for loan losses                            281,574            293,891             284,967
                                                                                 -----------        -----------        ------------
NONINTEREST INCOME
  Service charges on deposit accounts                                                 27,773             26,260              21,378
  Trust fees                                                                          21,028             24,253              21,701
  Mortgage and other loan income                                                      13,159              4,997               6,078
  Bankcard fees                                                                       11,799             11,258               9,163
  Brokerage and investment fees                                                        8,157              7,693               4,325
  Investment securities gains (losses)                                                 6,195               --                (3,052)
  Equity security gains                                                               11,017               --                 5,693
  Gain on sale of credit card assets                                                   2,623               --                  --
  Gain on sale of bank                                                                   793               --                  --
  Other                                                                               14,937             15,883              16,706
                                                                                 -----------        -----------        ------------
      Total noninterest income                                                       117,481             90,344              81,992
                                                                                 -----------        -----------        ------------
NONINTEREST EXPENSE
  Salaries and employee benefits                                                     126,278            122,577             122,572
  Equipment                                                                           19,317             19,264              16,645
  Occupancy                                                                           17,713             16,770              15,414
  Data processing fees                                                                13,101             12,608               9,924
  Professional services                                                               12,277             10,088               7,330
  Intangible asset amortization                                                       11,063             10,733               8,363
  Bankcard fees                                                                        9,308              8,959               7,477
  Postage and delivery                                                                 7,746              6,924               5,985
  Telephone                                                                            5,556              6,364               5,601
  Advertising and public relations                                                     5,219              5,034               5,223
  Stationery and supplies                                                              4,426              5,602               5,674
  Special charges                                                                       --               15,541              40,198
  Other                                                                               19,179             17,298              26,570
                                                                                 -----------        -----------        ------------
      Total noninterest expense                                                      251,183            257,762             276,976
                                                                                 -----------        -----------        ------------
INCOME BEFORE INCOME TAXES                                                           147,872            126,473              89,983
Income taxes                                                                          43,215             35,813              27,989
                                                                                 -----------        -----------        ------------
NET INCOME                                                                       $   104,657        $    90,660        $     61,994
                                                                                 ===========        ===========        ============
NET INCOME PER SHARE:
  Basic                                                                          $      2.27        $      1.92        $       1.29
  Diluted                                                                               2.25               1.91                1.28
AVERAGE SHARES OUTSTANDING:
  Basic                                                                           46,085,405         47,310,375          48,169,121
  Diluted                                                                         46,589,962         47,542,815          48,617,207

- --------------------------------------------------------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.


                                      A - 24



- -----------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
CITIZENS BANKING CORPORATION AND SUBSIDIARIES

                                                                                                  Accumulated
                                                                                                     Other
                                                                Common         Retained          Comprehensive
(in thousands, except per share amounts)                         Stock         Earnings          Income (loss)     Total
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                     
BALANCE - JANUARY 1, 1999                                    $  276,439      $  396,516          $   7,546       $ 680,501

  Net income                                                                     61,994                             61,994
  Net unrealized loss on securities available-for-sale,
    net of tax effect of $13,913                                                                   (24,989)        (24,989)
                                                                                                                 ---------
      Total comprehensive income                                                                                    37,005
  Exercise of stock options, net of
    shares purchased                                              3,349                                              3,349
  Cash dividends - $0.915 per share                                             (30,035)                           (30,035)
  Cash dividends of pooled company, pre-merger                                  (11,766)                           (11,766)
  Shares acquired for retirement                                (53,866)                                           (53,866)
  Pre-merger transactions of pooled company                       1,050           7,431                              8,481
                                                             ----------      ----------          ---------       ---------
BALANCE - DECEMBER 31, 1999                                     226,972         424,140            (17,443)        633,669

  Net income                                                                     90,660                             90,660
  Net unrealized gain on securities available-for-sale,
    net of tax effect of $15,718                                                                    29,181          29,181
                                                                                                                 --------
      Total comprehensive income                                                                                   119,841
  Exercise of stock options, net of
    shares purchased                                              1,879                                              1,879
  Cash dividends - $1.015 per share                                             (48,108)                           (48,108)
  Shares acquired for retirement                                (27,302)                                           (27,302)
                                                             ----------      ----------          ---------       ---------
BALANCE - DECEMBER 31, 2000                                     201,549         466,692             11,738         679,979

  Net income                                                                    104,657                            104,657
  Net unrealized gain on securities available-for-sale,
    net of tax effect of $5,690                                                                      10,542
  Minimum pension liability                                                                          (1,727)
                                                                                                 ----------
      Total comprehensive income                                                                      8,815          8,815
  Exercise of stock options, net of
    shares purchased                                             12,662                                             12,662
  Cash dividends - $1.085 per share                                            (50,158)                            (50,158)
  Shares acquired for retirement                                (58,491)                                           (58,491)
                                                             ----------      ----------          ---------       ---------
BALANCE - DECEMBER 31, 2001                                  $  155,720      $  521,191          $  20,553       $ 697,464
                                                             ==========      ==========          =========       =========
- -----------------------------------------------------------------------------------------------------------------------------


See Notes to Consolidated Financial Statements.


                                     A - 25



- ---------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
CITIZENS BANKING CORPORATION AND SUBSIDIARIES
                                                                                                     YEAR ENDED DECEMBER 31,

(in thousands)                                                                              2001             2000             1999
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 
OPERATING ACTIVITIES:
  Net income                                                                              $ 104,657       $  90,660       $  61,994
  Adjustments to reconcile net income to net cash provided by
    operating activities:
      Provision for loan losses                                                              26,407          20,983          24,675
      Depreciation and amortization                                                          16,241          15,995          14,148
      Amortization of goodwill and other intangibles                                         11,063          10,733           8,363
      Intangible asset impairment                                                                --              --           2,349
      Deferred income tax (credit)                                                             (279)          3,585          (7,953)
      Net amortization on investment securities                                                (563)           (147)          2,743
      Investment securities losses (gains)                                                   (6,195)             --           3,052
      Loans originated for sale                                                            (824,449)       (132,878)       (117,603)
      Proceeds from sales of mortgage loans held for sale                                   831,138         134,020         120,283
      Gains from loan sales                                                                  (6,689)         (1,142)         (2,471)
      Donation of equity security                                                                --           1,116              --
      Gains on sale of equity securities, credit card assets and bank                       (14,433)             --          (5,693)
      Accrued merger related and other charges                                               (3,337)        (14,050)         17,387
      Other                                                                                  (4,720)             87          (9,592)
                                                                                          ---------       ---------       ---------
           Net cash provided by operating activities                                        128,841         128,962         111,682
INVESTING ACTIVITIES:
  Net (increase) decrease in money market investments                                       (15,003)         36,270          45,745
  Securities available-for-sale:
    Proceeds from sales                                                                     297,492           6,755          85,288
    Proceeds from maturities                                                                352,369         183,185         373,228
    Purchases                                                                              (502,261)       (131,311)       (697,238)
  Securities held-to-maturity:
    Proceeds from maturities                                                                     --              --          25,304
    Purchases                                                                                    --              --         (71,454)
  Sale of credit card assets                                                                 29,454
  Net (increase) decrease in loans and leases                                               444,768        (522,569)       (520,999)
  Net increase in properties and equipment                                                   (7,952)        (10,519)        (20,221)
  Proceeds from sale of equity securities, credit card assets and bank                       14,433              --           5,693
  Acquisitions (net of cash acquired)                                                            --          26,008         317,214
                                                                                          ---------       ---------       ---------
          Net cash used by investing activities                                             613,300        (412,181)       (457,440)
FINANCING ACTIVITIES:
  Net increase (decrease) in demand and savings deposits                                    143,669        (231,753)       (115,749)
  Net increase (decrease) in time deposits                                                 (422,684)        315,889         (70,131)
  Net increase (decrease) in short-term borrowings                                         (618,820)         (4,029)        751,888
  Proceeds from issuance of long-term debt                                                  183,182         740,150          58,598
  Principal reductions in long-term debt                                                    (25,200)       (396,137)       (157,665)
  Cash dividends paid                                                                       (50,158)        (48,108)        (41,801)
  Proceeds from stock options exercised                                                      12,662           1,879           3,349
  Shares acquired for retirement                                                            (58,491)        (27,302)        (53,866)
                                                                                          ---------       ---------       ---------
          Net cash provided by financing activities                                        (835,840)        350,589         374,623
                                                                                          ---------       ---------       ---------
Net increase (decrease) in cash and due from banks                                          (93,699)         67,370          28,865
Cash and due from banks at beginning of period                                              318,115         250,745         221,880
                                                                                          ---------       ---------       ---------
Cash and due from banks at end of period                                                  $ 224,416       $ 318,115       $ 250,745
                                                                                          =========       =========       =========

Supplemental Cash Flow Information:
  Interest paid                                                                           $ 278,979       $ 297,396       $ 233,689
  Income taxes paid                                                                          40,481          30,647          38,444

- ---------------------------------------------------------------------------------------------------------------------------------


See Notes to Consolidated Financial Statements.


                                     A - 26


NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Citizens Banking Corporation (Citizens)
and its subsidiaries conform to generally accepted accounting principles in the
United States. Management makes estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from these estimates. The following describes Citizens'
policies:

       CONSOLIDATION: The Consolidated Financial Statements include the accounts
of Citizens and its subsidiaries after elimination of all material intercompany
transactions and accounts.

       INVESTMENT SECURITIES: Citizens classifies all debt and equity securities
as available for sale. Available for sale securities are reported at fair value
with unrealized gains and losses included in shareholders' equity. In the event
that an investment security is sold, the adjusted cost of the specific security
sold is used to compute the applicable gain or loss.

       ALLOWANCE FOR LOAN LOSSES: Citizens maintains an allowance for credit
losses to absorb losses inherent in the loan portfolio. The allowance is based
on a regular, quarterly assessment of the probable losses inherent in the loan
portfolios. The allowance is increased by the provision charged to income and
reduced by the amount charged-off, net of recoveries. Citizens' methodology for
measuring the adequacy of the allowance relies on several key elements, which
include specific allowances for identified problem loans, reserves by formula
and the unallocated allowance.

       Specific allowances are established in cases where management has
identified significant conditions or circumstances related to a credit that
management believes indicate it is probable that a loss has been or will be
incurred. The specific credit allocations are based on a regular analysis of all
commercial and commercial mortgage loans over a fixed dollar amount where the
internal credit rating is at or below a predetermined classification. The
allowance amount is determined by analyzing the financial condition, collateral
value and other qualitative factors as well as by a method prescribed by
Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan".

       The formula allowance is calculated by applying loss factors to
outstanding loans (excluding specifically identified credits) based on loan
type, accrual status and internal risk grade of such loans and pools of loans.
Minimum loss factors for criticized loan categories are consistent with
regulatory agency factors. For non-criticized loan categories loss factors are
determined based on historical averages (generally three-year) adjusted
quarterly for recent loss experience in the specific portfolios.

       The unallocated portion of the allowance is determined based upon
management's assessment of general economic conditions, as well as specific
economic factors in the individual markets in which Citizens operates. This
determination inherently involves a higher degree of uncertainty and considers
current risk factors that may not have yet manifested themselves in the
Company's specific allowances or in the historical loss factors used to
determine the formula allowances.

       The allowance also incorporates the results of measuring impaired loans
as provided in SFAS No. 114. Reserve allocations established for impaired loans
are determined based on the fair value of the investment measured using either
the present value of expected future cash flows discounted at the initial
effective interest rate on the loan, the observable market price of the loan, or
the fair value of the collateral if the loan is collateral dependent. A loan is
considered impaired when management determines it is probable that all the
principal and interest due under the contractual terms of the loan will not be
collected.

       PREMISES AND EQUIPMENT: Premises and equipment, including leasehold
improvements, are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed principally on a
straight-line basis and are charged to expense over the lesser of the estimated
useful life of the assets or lease term. Maintenance and repairs as well as
gains and losses on dispositions are charged to expense as incurred.

       OTHER REAL ESTATE: Other real estate includes properties acquired in
satisfaction of a debt. These properties are carried at the lower of cost or
fair value, net of estimated costs to sell, based upon current appraised value.
Losses arising from the acquisition of such properties are charged against the
allowance for loan losses. Subsequent valuation adjustments and gains or losses
on disposal of these properties are charged to other expenses as incurred.

       INTANGIBLE ASSETS: Goodwill, the excess of cost over the fair value of
net identifiable tangible and intangible assets acquired in acquisitions
accounted for as purchases, is amortized on a straight-line basis over periods
ranging from 10 to 20 years. The carrying amount of goodwill is reviewed for
impairment as events or changes in facts and circumstances warrant. Impairment
of goodwill is evaluated by geographic region and is based on a comparison of
the recorded balance of goodwill to the applicable discounted cash flows over
the remaining amortization period of the associated goodwill. To the extent that
impairment may exist, the current carrying amount is reduced by the estimated
shortfall. Effective January 1, 2002 with the adoption of Statement of Financial
Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets",
goodwill will no longer be amortized. See Note 4. Recent Accounting
Pronouncements, "Accounting for Goodwill and Other Intangible Assets."



                                     A - 27


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       LOAN SALES AND SERVICING RIGHTS: Gains and losses on the sales of loans
are determined using the specific-identification method. When servicing is
retained, the servicing rights are amortized in proportion to, and over the
period of, estimated net servicing revenues. Impairment of servicing rights is
assessed based on the fair value of those rights. Fair values are estimated
using discounted cash flows based on a current market interest rate. For
purposes of measuring impairment, the rights are stratified by rate in the
quarter in which the related loans were sold.

       INCOME TAXES: Citizens and its subsidiaries file a consolidated federal
income tax return. Income tax expense is based on income as reported in the
Consolidated Statements of Income. When income and expenses are recognized in
different periods for tax purposes, applicable deferred taxes are provided in
the Consolidated Financial Statements.

       LOAN INTEREST AND FEE INCOME: Interest on loans is generally accrued and
credited to income based upon the principal amount outstanding. Loans are placed
on nonaccrual status when the collection of principal or interest is considered
doubtful, or payment of principal or interest is past due 90 days or more and
the loan is not well secured and in the process of collection. When these loans
(including a loan impaired) are placed on nonaccrual status, all interest
previously accrued but unpaid is reversed against current year interest income.
Interest payments received on nonaccrual loans are credited to income if future
collection of principal is probable. Loans are normally restored to accrual
status when interest and principal payments are current and it is believed that
the financial condition of the borrower has improved to the extent that future
principal and interest payments will be met on a timely basis. Loan origination
fee income, net of direct origination costs and certain incremental direct
costs, is deferred and amortized as a yield adjustment over the estimated term
of the related loans by methods that approximate the level yield method.


       NET INCOME PER SHARE: Basic net income per share is based on net income
divided by the weighted average number of shares outstanding in each period.
Diluted net income per share shows the dilutive effect of additional common
shares issuable upon the assumed exercise of stock options granted under
Citizens' stock option plans, using the treasury stock method.

       CASH FLOWS: For purposes of reporting cash flows, cash and cash
equivalents include cash on hand and amounts due from banks.

       RECLASSIFICATIONS: Certain amounts have been reclassified to conform to
the current year presentation.


NOTE 2. MERGERS, ACQUISITIONS AND DIVESTITURES

In November 2001, Citizens sold F&M Bank-Minnesota with assets of $27 million.
The bank was Citizens' sole location in Minnesota.

       On May 12, 2000, Citizens purchased three Jackson, Michigan offices of
Great Lakes National Bank. The purchase added approximately $31 million in
deposits, for which Citizens paid a premium of $3.9 million. On October 8, 1999,
Citizens acquired seventeen offices of Bank One located in the northern section
of Michigan's Lower Peninsula. This purchase added approximately $88 million in
loans and $442 million in deposits, for which Citizens paid a premium of $36.1
million or 10.13% of certain core deposits. These transactions were accounted
for as purchases; accordingly, the financial statements include their results of
operations only since the acquisition dates.

       On November 1, 1999, Citizens acquired F&M Bancorporation, Inc. (F&M) a
$2.7 billion bank holding company headquartered in Kaukauna, Wisconsin. As part
of the acquisition, Citizens issued 21 million shares of its common stock, based
on a fixed exchange ratio of 1.303, for all of the outstanding shares of F&M.
This transaction was accounted for as a pooling of interests and, accordingly,
all periods presented include the results of F&M.



                                     A - 28

NOTE 3. MERGER, BUSINESS RESTRUCTURING AND OTHER CHARGES

       The following provides details on reserve activity in 2001, 2000 and 1999
in connection with mergers, business restructuring and other charges associated
with various corporate initiatives.



- ------------------------------------------------------------------------------------------------------------------------------------
                                            Contract
                                          termination                           Goodwill &
                              Employee     and other               Facilities  core deposit   Equity    Charitable
                            benefits and  conversion  Professional    and        premium     investment   trust
(in thousands)                severance      costs       fees       equipment  write-downs  write-down contribution  Other    Total
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                
FOURTH QUARTER 1999 CHARGE  $  7,482      $ 13,598    $  6,345     $ 3,355     $  2,349     $ 520      $ 2,500     $ 4,049 $ 40,198
Amount Utilized:
  Cash Payments                 (144)       (4,241)     (5,711)                                         (2,500)     (2,788) (15,384)
  Noncash                         --            --          --      (3,355)      (2,349)     (520)          --      (1,203)  (7,427)
                            --------      --------     -------     -------     --------     -----      -------     ------- --------
RESERVE BALANCE AT
  DECEMBER 31, 1999            7,338         9,357         634          --           --        --           --          58   17,387
Additional 4th Qtr. Reserve    1,962                                                                                          1,962
Amount Utilized:
  Cash Payments               (3,660)       (5,387)       (607)                                                        (30)  (9,684)
  Noncash                     (2,324)       (3,951)        (25)         --           --        --           --         (28)  (6,328)
                            --------      --------     -------     -------     --------     -----      -------     ------- --------
RESERVE BALANCE AT
  DECEMBER 31, 2000            3,316            19           2          --           --        --           --          --    3,337
Amount Utilized:
  Cash Payments               (3,316)          (19)         (2)                                                              (3,337)
  Noncash                         --            --          --          --           --        --           --          --       --
                            --------      --------     -------     -------     --------     -----      -------     ------- --------
RESERVE BALANCE AT
  DECEMBER 31, 2001         $     --      $     --     $    --     $    --     $     --     $  --      $    --     $    -- $     --
                            ========      ========     =======     =======     ========     =====      =======     ======= ========

- ------------------------------------------------------------------------------------------------------------------------------------


       In the fourth quarter of 1999, Citizens recorded a pre-tax charge of
$40.2 million consisting of $36.3 million ($25.9 million after-tax) in
merger-related integration costs and $3.9 million ($2.5 million after-tax) of
restructuring and other costs related to separate strategic initiatives and
impairment write-offs. The charge was recorded as a separate component of
noninterest expense, the "Special Charge."

       Merger-related integration costs recorded included employee termination
benefits, transaction costs, contract termination and other conversion costs
(primarily recognition of obligations under existing contractual agreements
related to system conversions), asset-related write-downs, a write-down of
impaired goodwill at an F&M bank, a contribution to Citizens' Charitable Trust
for the acquired entities and other transaction related costs. Restructuring and
other costs for non-merger activities consisted of employee termination benefits
of $0.4 million, professional fees of $0.7 million, asset related write-downs of
$1.8 million, and other costs of $0.1 million for strategic initiatives approved
in the fourth quarter of 1999 as well as a write-down of a core deposit premium
from a previous acquisition of $0.3 million and a loss for an other than
temporary decline in the market value of an equity investment of $0.5 million.
The approved initiatives included realignment of Citizens branch network,
including closure of selected branches in Michigan and Illinois, and transfer of
certain financial and credit audit functions to a third party.

       Also, in the fourth quarter of 1999, Citizens recorded $6.8 million ($4.4
million after-tax) of additional provision for loan losses and $3.6 million
($2.4 million after-tax) of securities losses related to the F&M merger. The
additional loan loss provision was provided to conform F&M's allowance to that
which results from applying Citizens' allowance methodology and credit risk
standards to F&M's loan portfolio. The security losses resulted from the sale of
$122.8 million of securities to reposition the portfolios of Citizens and F&M
after the merger to normalize investment exposure and reduce overall interest
rate risk.

       In 2000, net merger-related integration costs of $12.3 million ($7.4
million after-tax) were charged to the Special Charge for system conversions,
business unit integration, branch closures and other items associated with the
F&M merger. Included in this amount were reversals of prior year business
restructuring reserves of $6.2 million due to successful settlement of a
contract with a former vendor of F&M and favorable experience in employee
separations. All system conversion activities related to the F&M merger were
completed in 2000.

       In the fourth quarter of 2000, Citizens recorded an additional pre-tax
charge of $3.2 million ($2.1 million after-tax) for restructuring costs of $2.0
million and asset impairment and other charges of $1.2 million associated with



                                     A - 29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

new corporate and organizational re-engineering initiatives. The restructuring
plans included reorganization of Citizens' trust and investment management
business into one nationally chartered trust bank, streamlining of the Company's
community bank organizational structure, consolidation of its direct and
indirect lending operations, and exiting of certain unprofitable indirect
lending dealer relationships. These initiatives were completed by year-end 2001.

       As shown in the table above, total deductions to Citizens' Special Charge
reserve were $3.3 million in 2001, $16.0 million in 2000 and $22.8 million in
1999. Included in these deductions were cash payments of $3.3 million, $9.7
million and $15.4 million in 2001, 2000 and 1999, respectively.

       The components of the Special Charges in 2000 and 1999 recorded in
noninterest expense were as follows:



(in thousands)                                             2000            1999
- --------------------------------------------------------------------------------
                                                                  
MERGER, RESTRUCTURING & OTHER COSTS
 RELATED TO 1999 ACQUISITIONS &
 STRATEGIC INITIATIVES APPROVED IN 1999
Employee salaries, benefits & severance                  $  2,098       $  7,482
Contract termination and
 other conversion costs                                     9,981         13,598
Professional fees                                             477          6,345
Charitable Trust contribution                                  --          2,500
Other merger integration costs                              3,838          2,845
Asset impairment and other writeoffs:
 Facilities and equipment                                   1,207          3,355
 Goodwill & core deposit premium                               --          2,349
 Other real estate                                             --            964
 Equity investment                                             --            520
 Other writeoffs                                              982            240
Changes in 1999 reserve estimates:
 Contract settlement less than
  amount accrued                                           (3,900)            --
Changes in benefits and
  severance estimates                                      (2,324)            --
                                                         --------       --------
        Subtotal                                           12,359         40,198
ADDITIONAL RESTRUCTURING & OTHER COSTS
 FOR STRATEGIC INITIATIVES APPROVED IN 2000
Employee benefits and severance                             1,962             --
Software & equipment writeoffs                                654             --
Professional fees                                             463             --
Other                                                         103             --
                                                         --------       --------
        Subtotal                                            3,182             --
                                                         --------       --------
        Total                                            $ 15,541       $ 40,198
                                                         ========       ========

- --------------------------------------------------------------------------------


No special charges were recorded in 2001.

NOTE 4. RECENT ACCOUNTING PRONOUNCEMENTS
       ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," as amended,
establishes accounting and reporting standards for hedging activities and for
derivative instruments, including certain derivative instruments embedded in
other contracts. This statement requires a company to recognize all derivatives
as either assets or liabilities in its balance sheet and measure those
instruments at fair value. Citizens adopted this statement as amended effective
January 1, 2001. At year-end 2001, Citizens did not have any outstanding
material derivatives or hedging activities. Therefore the impact of adopting the
provisions of this statement on Citizens' financial position, results of
operations and cash flow was not material.

       ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES: SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities--A Replacement
of FASB Statement 125" was issued in September 2000 and replaces SFAS No. 125.
SFAS No. 140, like SFAS No. 125, establishes accounting and reporting standards
to assist in determining when to recognize or derecognize financial assets and
liabilities in the financial statements after a transfer of financial assets has
occurred. SFAS 140, however, requires certain additional disclosures related to
transferred assets and is more restrictive in defining what constitutes a
qualified special purpose entity (QSPE) as well as when transfers to a QSPE will
be accorded sales treatment. SFAS No. 140 is effective for transfers occurring
after March 31, 2001. The expanded disclosures, however, are effective for years
ending after December 15, 2000, but are not required to be applied to prior
periods. There was no impact to Citizens upon adoption of this statement as
Citizens does not use unconsolidated special purpose entities.

       ACCOUNTING FOR BUSINESS COMBINATIONS: SFAS No. 141, "Business
Combinations" supercedes APB Opinion No. 16, "Business Combinations", and FASB
No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises",
establishes financial accounting and reporting for all business combinations.
This statement requires all business combinations be accounted for by a single
method, the purchase method. The statement also requires that intangible assets
be recognized apart from goodwill if they meet certain criteria and the
disclosure of the primary reasons for the business combination and the
allocation of the purchase price paid to the assets acquired and liabilities
assumed by major balance sheet caption. The statement is effective for all
business combinations initiated after June 30, 2001. Citizens adopted this
statement July 1, 2001 and will apply its provisions to any future business
combination.



                                     A - 30


       ACCOUNTING FOR GOODWILL AND OTHER INTANGIBLE ASSETS: SFAS No. 142,
"Goodwill and Other Intangible Assets" - a replacement of APB Opinion No. 17,
"Intangible Assets", addresses how intangible assets should be accounted for
that are acquired outside of a business combination and also addresses how
intangibles should be accounted for once the intangibles have been initially
recognized in the financial statements. The statement no longer assumes a finite
life for all intangibles, but now requires that intangible assets with
indefinite lives be tested at least annually for impairment with impairment
losses recognized immediately and intangible assets with finite lives be
amortized over an appropriate period. Citizens has adopted this statement
effective January 1, 2002. Citizens anticipates no impairment under Statement
No. 142. The effect of this statement will be to reduce goodwill amortization by
$7.2 million ($5.4 million after tax) in 2002 from the prior year.

NOTE 5. INVESTMENT SECURITIES

The amortized cost, estimated fair value and gross unrealized gains and losses
of investment securities follow:



- ------------------------------------------------------------------------------------------------------------------------------------
                                               DECEMBER 31, 2001                                      December 31, 2000
                             --------------------------------------------------- ---------------------------------------------------
                                             ESTIMATED       GROSS      GROSS                   Estimated       Gross        Gross
                               AMORTIZED       FAIR       UNREALIZED  UNREALIZED    Amortized      Fair      Unrealized   Unrealized
(in thousands)                    COST         VALUE         GAINS      LOSSES        Cost        Value        Gains        Losses
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                
AVAILABLE FOR SALE:
 U.S. Treasury               $    7,949   $    8,163   $      214   $       --   $   21,555   $   21,490   $       27   $       92
 Federal agencies:
  Mortgage-backed               551,377      565,393       14,714          698      579,096      582,618        5,659        2,137
  Other                         157,921      166,236        8,316            1      264,348      269,127        5,205          426
 State and municipal            432,425      443,956       13,378        1,847      420,835      430,775       11,925        1,985
 Mortgage and asset-backed       10,448       10,558          170           60       15,884       15,755            9          138
 Other                           65,110       65,200           90           --       64,345       64,343            4            6
                             ----------   ----------   ----------   --------     ----------   ----------   ----------   ----------
Total available for sale     $1,225,230   $1,259,506   $   36,882   $    2,606   $1,366,063   $1,384,108   $   22,829   $    4,784
                             ==========   ==========   ==========   ==========   ==========   ==========   ==========   ==========

- ------------------------------------------------------------------------------------------------------------------------------------


       The amortized cost and estimated fair value of debt securities by
contractual maturity at December 31, 2001 are shown below.



- --------------------------------------------------------
                                            Estimated
                            Amortized         Fair
 (in thousands)                Cost           Value
- --------------------------------------------------------
                                     
Due within one year         $   57,419     $   57,877
One to five years              175,845        189,789
Five to ten years              191,407        194,878
After ten years                176,869        179,060
                            ----------     ----------
                               601,540        621,604
Equity securities               61,865         61,951
Mortgage and asset-backed
  securities                   561,825        575,951
                            ----------     ----------
  Total                     $1,225,230     $1,259,506
                            ==========     ==========

- --------------------------------------------------------


       Sales of investment securities resulted in realized gains and losses as
follows:



- ------------------------------------------------------------
                                 Year Ended December 31,
(in thousands)                 2001        2000      1999
- ------------------------------------------------------------
                                         
Securities gains             $  6,202    $   67   $     561
Securities losses                  (7)      (67)     (3,613)
                             --------    ------   ---------
Net gain (loss)              $  6,195    $  ---   $  (3,052)
                             ========    ======   =========

- ------------------------------------------------------------


       Securities with amortized cost of $799.3 million at December 31, 2001,
and $530.4 million at December 31, 2000, were pledged to secure public deposits,
repurchase agreements, and other liabilities. Except for obligations of the U.S.
Government and its agencies, no holdings of securities of any single issuer
exceeded 10% of consolidated shareholders' equity at December 31, 2001 or 2000.



                                     A - 31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6. LOANS AND NONPERFORMING ASSETS

Citizens extends credit primarily within the Midwestern states of Michigan,
Wisconsin, Illinois and Iowa. In Michigan the primary market includes most parts
of the Lower Peninsula. In Wisconsin the primary market area is the Fox Valley
region extending from Green Bay to Appleton to Oshkosh as well as northeastern
and southwestern Wisconsin. Other primary market areas are central Iowa and the
western suburban market of Chicago, Illinois. Citizens seeks to limit its credit
risk by establishing guidelines to review its aggregate outstanding commitments
and loans to particular borrowers, industries and geographic areas. Collateral
is secured based on the nature of the credit and management's credit assessment
of the customer.

      Citizens' loan portfolio is widely diversified by borrowers with no
concentration within a single industry that exceeds 10% of total loans. Citizens
has no loans to foreign countries and generally does not participate in large
national loan syndications or highly leveraged transactions. Most of Citizens'
commercial real estate loans consist of mortgages on owner-occupied properties.
Those borrowers are involved in business activities other than real estate, and
the sources of repayment are not dependent on the performance of the real estate
market.

       A summary of nonperforming assets follows:



- --------------------------------------------------------------
                                               December 31,
(in thousands)                                2001      2000
- --------------------------------------------------------------
                                                
Nonperforming loans:
  Nonaccrual                                $68,793   $59,415
  Loans 90 days past due (still accruing)     4,168       889
  Restructured                                  337     1,068
                                            -------   -------
        Total nonperforming loans            73,298    61,372
Other real estate                             4,463     3,734
Other assets acquired by repossession         1,484     1,183
                                            -------   -------
        Total nonperforming assets          $79,245   $66,289
                                            =======   =======

- --------------------------------------------------------------


       The effect of nonperforming loans on interest income follows:



- --------------------------------------------------------------
                                    Year Ended December 31,
(in thousands)                    2001       2000       1999
- --------------------------------------------------------------
                                               
Interest income:
At original contract rates      $6,392      $4,953      $3,383
As actually recognized           3,344       3,045       1,861
                                ------      ------      ------
  Interest foregone             $3,048      $1,908      $1,522
                                ======      ======      ======

- --------------------------------------------------------------


       There are no significant commitments outstanding to lend additional funds
to clients whose loans were classified as nonaccrual or restructured at December
31, 2001.

       At December 31, 2001, loans considered to be impaired totaled $62.1
million of which $43.5 million were on a nonaccrual basis. Included within this
amount is $39.8 million of impaired loans for which the related allowance for
loan losses is $10.4 million and $22.3 million of impaired loans for which fair
value exceeded the recorded investment in the loan. The average recorded
investment in impaired loans during the year ended December 31, 2001 was
approximately $78.0 million. For the year ended December 31, 2001, Citizens
recognized interest income of $3.3 million on impaired loans. Cash collected on
nonaccrual impaired loans totaled $3.1 million which was applied to principal.

       At December 31, 2000, loans considered to be impaired totaled $52.9
million of which $36.3 million were on a nonaccrual basis. Included with this
amount is $32.5 million of impaired loans for which the related allowance for
loan losses is $5.1 million and $20.4 million of impaired loans for which the
fair value exceeded the recorded investment in the loan. The average recorded
investment in impaired loans during the year ended December 31, 2000 was
approximately $38.9 million. For the year ended December 31, 2000, Citizens
recognized interest income of $2.5 million on impaired loans. Cash collected on
nonaccrual impaired loans totaled $2.3 million of which $1.2 million was applied
to principal and $1.1 million was recognized using the cash basis method of
income recognition.

       Certain directors and executive officers of Citizens and its significant
subsidiaries, including their families and entities in which they have 10% or
more ownership, were clients of the banking subsidiaries. Total loans to these
clients aggregated $13.2 million and $19.1 million at December 31, 2001 and
2000, respectively. During 2001, new loans of $4.5 million were made and
repayments totaled $10.4 million. Substantially all such loans were made in the
ordinary course of business on substantially the same terms, including interest
rates and collateral, as those for comparable transactions with unrelated
parties and did not involve more than normal risk of collectibility.

       The consolidated financial statements do not include loans serviced for
others, which totaled $257.9 million and $362.3 million at December 31, 2001 and
2000, respectively. The carrying value of mortgage servicing rights approximates
fair value at December 31, 2001 and 2000. At year-end 2000, Citizens recognized
impairment of $260,000 on mortgage servicing rights to mark them to market.

       Changes in originated mortgage servicing rights for the years ended
December 31 were as follows:



(in thousands)                                 2001                2000
- -----------------------------------------------------------------------------
                                                           
Balance - January 1                           $ 2,680            $ 3,335
  Mortgage servicing rights capitalized            --                161
  Amortization                                   (947)              (556)
  Impairment loss                                  --               (260)
                                              -------            -------
Balance - December 31                         $ 1,733            $ 2,680
                                              =======            =======

- -----------------------------------------------------------------------------






                                     A - 32


NOTE 7. ALLOWANCE FOR LOAN LOSSES

A summary of changes in the allowance for loan losses follows:



- -------------------------------------------------------------------------------
(in thousands)                         2001           2000           1999
- -------------------------------------------------------------------------------
                                                         
Balance - January 1                 $ 80,070       $ 76,397       $ 69,740
  Allowance of acquired (sold)
        banks and branches              (240)            --          2,400
  Provision for loan losses           26,407         20,983         24,675
  Charge-offs                        (32,732)       (25,448)       (26,862)
  Recoveries                           6,794          8,138          6,444
                                    --------       --------       --------
        Net charge-offs              (25,938)       (17,310)       (20,418)
                                    --------       --------       --------
Balance - December 31               $ 80,299       $ 80,070       $ 76,397
                                    ========       ========       ========

- -------------------------------------------------------------------------------


NOTE 8. PREMISES AND EQUIPMENT

A summary of premises and equipment follows:



- -------------------------------------------------------------
                                      December 31,
(in thousands)                   2001            2000
- -------------------------------------------------------------
                                        
Land                          $  21,806       $  21,812
Buildings                       146,775         142,814
Leasehold improvements            5,750           6,221
Furniture and equipment         124,939         132,026
                              ---------       ---------
                                299,270         302,873
Accumulated depreciation
  and amortization             (170,465)       (165,779)
                              ---------       ---------
Total                         $ 128,805       $ 137,094
                              =========       =========

- -------------------------------------------------------------


       Certain branch facilities and equipment are leased under various
operating leases. Total rental expense, including expenses related to these
operating leases, was $4.8 million in 2001, $4.8 million in 2000 and $4.1
million in 1999. Future minimum rental commitments under non-cancelable
operating leases are as follows at December 31, 2001: $4.3 million in 2002, $3.5
million in 2003, $1.6 million in 2004, $1.1 million in 2005, $0.8 million in
2006, and $2.2 million after 2006.

NOTE 9. DEPOSITS

A summary of deposits follows:



- ---------------------------------------------------------------
                                         December 31,
(in thousands)                       2001            2000
- ---------------------------------------------------------------
                                           
Noninterest-bearing demand       $  903,900      $  973,938
Interest-bearing demand             995,191         574,029
Savings                           1,411,429       1,618,884
Time deposits over $100,000         818,375         971,251
Other time deposits               1,836,231       2,106,039
                                 ----------      ----------
        Total                    $5,965,126      $6,244,141
                                 ==========      ==========

- ---------------------------------------------------------------


       Excluded from total deposits are demand deposit account overdrafts, which
have been reclassified as loans. At December 31, 2001 and 2000, these overdrafts
totaled $5.6 million and $7.4 million, respectively. Time deposits with
remaining maturities of one year or more are $686.9 million at December 31,
2001. The maturities of these time deposits are as follows: $441.9 million in
2003, $156.7 million in 2004, $52.4 million in 2005, $28.9 million in 2006 and
$7.0 million after 2006.

NOTE 10. SHORT-TERM BORROWINGS

Short-term borrowings consist of Federal funds purchased and securities sold
under agreements to repurchase, Federal Home Loan Bank (FHLB) borrowings, other
bank borrowings, and demand notes to the U.S. Treasury. Federal funds purchased
are overnight borrowings from other financial institutions. Securities sold
under agreements to repurchase are secured transactions done principally with
clients and generally mature within thirty days.

       Information relating to federal funds purchased and securities sold under
agreements to repurchase follows:



- -----------------------------------------------------------------------------
(in thousands)                    2001            2000          1999
- -----------------------------------------------------------------------------
                                                     
At December 31:
  Balance                       $233,077       $394,466       $276,805
  Weighted average
        interest rate paid          1.81%          6.35%          5.20%
During the year:
  Maximum outstanding
        at any month-end        $354,612       $540,652       $326,339
  Daily average                  242,945        305,402        256,718
  Weighted average
        interest rate paid          4.32%          6.18%          4.74%

- -----------------------------------------------------------------------------



                                     A - 33


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       A significant amount of short-term borrowings also consisted of FHLB
advances and lines of credit to Citizens' subsidiary banks. Information relating
to short-term FHLB borrowings follows:



- ------------------------------------------------------------------------------
(in thousands)                     2001          2000           1999
- ------------------------------------------------------------------------------
                                                     
At December 31:
  Balance                       $     --       $450,074       $555,874
  Weighted average
        interest rate paid            --           6.54%          5.34%
During the year:
  Maximum outstanding
        at any month-end        $425,200       $622,874       $555,874
Daily average                    222,310        581,467        196,055
Weighted average
        interest rate paid          6.25%          6.47%          5.26%

- ------------------------------------------------------------------------------


       Citizens' Parent company maintains a short-term line of credit with three
unaffiliated banks totaling $75 million. The interest rate on the outstanding
balance of $30 million at December 31, 2001 reprices daily and is based upon the
Federal funds rate. Interest is payable monthly and the remaining principal is
due in August 2002. The Parent company services the debt's principal and
interest payments with dividends from the subsidiary banks. The agreement also
requires Citizens to maintain certain financial covenants. Citizens is in full
compliance with all debt covenants as of December 31, 2001.


NOTE 11. LONG-TERM DEBT

A summary of long-term debt follows:



- -------------------------------------------------------------
                                           December 31,
(in thousands)                           2001       2000
- -------------------------------------------------------------
                                            
CITIZENS SUBSIDIARIES:
  FHLB Notes                           $628,818   $ 470,767
  Other                                     281         350
                                       --------   ---------
Total long-term debt                   $629,099   $ 471,117
                                       ========   =========

- -------------------------------------------------------------


       Long-term advances from the FHLB are at fixed and variable rates ranging
from 2.13% to 7.73% and have original maturities ranging from three to fifteen
years. Interest is paid monthly. At December 31, 2001 and 2000, qualifying
mortgage loans of $899 million and $1.3 billion, respectively, as well as FHLB
stock collateralized long and short-term advances from the FHLB.

       Maturities of long-term debt during the next five years follow:



- --------------------------------------------------------------
(in thousands)
- --------------------------------------------------------------
                                                 
2002                                                $ 125,729
2003                                                  101,209
2004                                                      973
2005                                                  120,769
2006                                                      981
Over 5 Years                                          279,438
                                                    ---------
  Total                                             $ 629,099
                                                    =========

- --------------------------------------------------------------


NOTE 12. EMPLOYEE BENEFIT PLANS

       PENSION AND POSTRETIREMENT BENEFITS: Citizens maintains defined benefit
pension plans covering the majority of its employees, and postretirement benefit
plans for retirees that include health care benefits and life insurance
coverage. Pension retirement benefits are based on the employee's length of
service and salary levels. Actuarially determined pension costs are charged to
current operations. It is Citizens' policy to fund pension costs in an amount
sufficient to meet or exceed the minimum funding requirements of applicable laws
and regulations, plus such additional amounts as Citizens deems appropriate up
to that allowable by federal tax regulations.

       Citizens also maintains nonqualified supplemental benefit plans for
certain key employees. These plans are provided for by charges to earnings
sufficient to meet the projected benefit obligation. The defined pension
benefits provided under these plans are unfunded and any payments to plan
participants are made by Citizens.

       Effective January 1, 2002 the defined benefit plan for Citizens' Michigan
and Illinois employees (CBC Plan) was amended to provide for a new cash balance
pension benefit. This amendment increased the projected benefit obligation of
the CBC Plan by $1.1 million. Full-time employees that retire within the next
five years with at least 10 years of service under the CBC Plan may elect to
receive a benefit under the old formula, which is, in part, based on the
employees' final five-year average base pay.

       In 2000, Citizens changed its pension plan benefit for its F&M employees.
Previously only two of the 24 former F&M banks provided defined benefit plans to
their employees. Effective January 1, 2000, Citizens extended coverage to
substantially all F&M employees. These employees receive a pension benefit under
a new cash balance plan. The assets and benefit obligation liabilities of the
two previous F&M Plans were rolled into the new plan. A plan amendment to
retroactively provide benefits as of January 1, 2000 increased the projected
benefit obligation by $0.8 million.

       Citizens' postretirement benefit plan, as amended, is available to
full-time employees who retire at normal retirement age, were age 50 prior to
January 1, 1993 and have




                                     A - 34

at least 15 years of credited service under Citizens' defined benefit pension
plan. The medical portion of the plan is contributory to the participants. The
life insurance coverage is noncontributory and provided on a reducing basis for
5 years. Those retired prior to January 1, 1993 receive benefits provided by the
plan prior to its amendment. That plan included dental care, had some retiree
contribution requirements, and had less restrictive eligibility requirements.

       The following information summarizes activity in Citizens' pension and
postretirement benefit plans.



- ----------------------------------------------------------------------------------------------------
                                                 Pension                        Postretirement
                                                 Benefits                         Benefits
                                        ------------------------------------------------------------
(in thousands)                              2001           2000             2001            2000
- ----------------------------------------------------------------------------------------------------
                                                                            
CHANGE IN BENEFIT OBLIGATION
Benefit obligation,
 beginning of year                      $ 63,825        $ 47,846        $ 15,613        $ 14,423
Benefit obligation of former
 F&M plans, January 1                         --           6,621              --              --
Service cost                               2,988           2,922              12              12
Interest cost                              4,878           4,420           1,148           1,094
Participant contribution                      --              --             304             150
Actuarial (gains) losses                   3,916           3,453             160           1,285
Plan amendments                            1,123           2,561              --              --
Benefits paid                             (3,200)         (3,998)         (1,523)         (1,351)
                                        --------        --------        --------        --------
Benefit obligation,
 end of year                            $ 73,530        $ 63,825        $ 15,714        $ 15,613
                                        ========        ========        ========        ========

CHANGE IN PLAN ASSETS
Fair value of plan assets,
 beginning of year                      $ 69,036        $ 63,647        $     --        $     --
Actual return
 on plan assets                           (3,813)            943              --              --
Employer contribution                      1,439             288           1,219           1,201
Participant contribution                      --              --             304             150
Assets of F&M plans                           --           8,260              --              --
Expenses paid                               (335)           (104)             --              --
Benefits paid                             (3,200)         (3,998)         (1,523)         (1,351)
                                        --------        --------        --------        --------
Fair value of plan
 assets, end of year                    $ 63,127        $ 69,036        $     --        $     --
                                        ========        ========        ========        ========
RECONCILIATION OF FUNDED STATUS

(Under)/Over funded                     $(10,403)       $  5,211        $(15,714)       $(15,613)
Unrecognized:
 Net transition asset -
    16 yr amortization                       (42)           (163)             --              --
 Prior service
    cost (benefit)                         3,404           2,908             (37)            (42)
 Net actuarial (gain) loss                 4,001         (11,544)            930             793
Adjustment to recognize
 minimum liability                        (5,961)             --              --              --
                                        --------        --------        --------        --------
Net amount recognized
 in the consolidated
 balance sheets                         $ (9,001)       $ (3,588)       $(14,821)       $(14,862)
                                        ========        ========        ========        ========

- ----------------------------------------------------------------------------------------------------


       Pension plan assets consisted primarily of mutual and money market funds,
and listed bonds and equity securities, including $686,000 and $606,000 of
Citizens common stock at December 31, 2001 and 2000, respectively.

       The accrued pension benefit cost shown above includes the pension
liabilities for plans where accumulated plan benefits exceed assets. In 2001,
all plans had accumulated plan benefits in excess of assets. In 2000, only the
supplemental benefit plans were under funded. The projected benefit obligation
and accumulated benefit obligation for these plans were approximately $5.2 and
$4.7 million, respectively, as of December 31, 2000. During 2000, the
supplemental benefit plans were amended to enhance the benefit for active
employees. This amendment increased Citizens' projected benefit obligation at
December 31, 2000 by $1.8 million.

       The assumptions used in determining the actuarial present value of the
benefit obligations and the net periodic pension expense follow:



- ---------------------------------------------------------------------
                                  Pension            Postretirement
                                 Benefits               Benefits
                            -----------------     -------------------
                             2001      2000        2001     2000
- ---------------------------------------------------------------------
                                               
WEIGHTED-AVERAGE
  ASSUMPTIONS
  DECEMBER 31
Discount rate               7.25%      7.75%      7.25%     7.75%
Expected return on
  plan assets               9.75       9.75         --        --
Rate of compensation
  increase                    (1)        (1)        --        --

- ---------------------------------------------------------------------


(1)  Scaled by age of plan participant - 9.00% at age 24 or under declining
     to 4.00% at age 50 or older.

       Prior service pension costs are amortized on a straight-line basis over
the average remaining service period of employees expected to receive benefits
under the plans. For postretirement health care benefit plans, Citizens assumed
a constant 5% annual health care cost trend rate in 2001 and for all future
years. This assumption can have a significant effect on the amounts reported. A
one-percentage-point change in assumed health care cost trend rates would have
the following effects:



- ----------------------------------------------------------------
                                 One Percentage  One Percentage
(in thousands)                   Point Increase  Point Decrease
- ---------------------------------------------------------------
                                           
Effect on total of service and
  interest cost components          $   97           $  (86)
Effect on the postretirement
  benefit obligation                 1,389           (1,234)

- ---------------------------------------------------------------




                                     A - 35


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       The components of net periodic benefit cost charged to operations each
year for all plans follow:



- ------------------------------------------------------------------------------------
                                                    Year Ended December 31,
(in thousands)                                2001            2000            1999
- ------------------------------------------------------------------------------------
                                                                  
DEFINED BENEFIT PENSION PLANS
  Service cost                             $ 2,988         $ 2,922         $ 2,304
  Interest cost                              4,878           4,420           4,018
  Expected return on plan assets            (6,873)         (6,568)         (5,554)
  Amortization of unrecognized:
    Net transition asset                      (123)           (218)           (218)
    Prior service cost                         626             180             114
    Net actuarial gain                        (586)           (808)           (464)
                                           -------         -------         -------
        Net pension cost (income)              910             (72)            200
                                           -------         -------         -------
POSTRETIREMENT BENEFIT PLANS
  Service cost                                  12              12              12
  Interest cost                              1,148           1,094             919
  Amortization of unrecognized:
    Prior service cost                          (5)           (385)           (460)
    Net actuarial gain                          --              --             (57)
                                           -------         -------         -------
        postretirement
        benefit cost                         1,155             721             414
                                           -------         -------         -------
DEFINED CONTRIBUTION RETIREMENT
AND 401(K) PLANS
  Employer contributions                     2,850           3,584           4,662
                                           -------         -------         -------
        Total periodic benefit cost        $ 4,915         $ 4,233         $ 5,276
                                           =======         =======         =======

- ------------------------------------------------------------------------------------


       In the third quarter of 1999, Citizens adopted an alternative
market-related value methodology for pension plan assets to better reflect plan
asset earnings, a component of pension expense, in 1999 and future years. The
change reduced 1999 annual pension expense by approximately $556,000.

       DEFINED CONTRIBUTION SAVINGS AND RETIREMENT PLANS: Substantially all
employees are eligible to contribute a portion of their pre-tax salary to a
defined contribution 401(k) savings plan. Under the plan, employee contributions
are partially matched by Citizens. The employer matching contribution is 75
percent of the first 6% (100 percent of the first 3% plus 50 percent of the next
3%) of each eligible employee's qualifying salary contributed to the plan. In
addition, one third of these matching contributions are used to fund a
postretirement medical savings account established within the plan for each
contributing employee. Plan assets from a defined contribution 401(k) savings
plan and an Employee Stock Ownership Plan maintained by F&M and one of its
subsidiaries prior to the merger were transferred into Citizens' plan during
2000. Employer matching contributions for the F&M 401(k) savings plan were based
on the company's return on equity and incorporated a discretionary
profit-sharing contribution.

NOTE 13. INCOME TAXES
Significant components of income taxes are as follows:



- ----------------------------------------------------------------------
                                         Year Ended December 31,
(in thousands)                      2001         2000           1999
- ----------------------------------------------------------------------
                                                    
Current tax expense:
  Federal                       $  42,926     $  31,773      $ 33,870
  State                               568           455         2,072
                                ---------     ---------      --------
Total current tax expense          43,494        32,228        35,942
Deferred tax expense (credit)        (279)        3,585        (7,953)
                                ---------     --------       --------
Total income tax expense        $  43,215     $  35,813      $ 27,989
                                =========     =========      ========

- ----------------------------------------------------------------------


Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
Citizens' deferred tax assets and liabilities as of December 31, 2001 and 2000
follow:



- --------------------------------------------------------------------
(in thousands)                                 2001          2000
- --------------------------------------------------------------------
                                                     
Deferred tax assets:
  Allowance for loan losses                 $29,349        $29,211
  Accrued special charges                        --          1,227
  Accrued postemployment
    benefits other than pensions              5,288          5,395
  Other deferred tax assets                   9,366          7,794
                                            -------        -------
         Deferred tax assets                 44,003         43,627
                                            -------        -------
Deferred tax liabilities:
  Tax over book depreciation                  4,212          4,551
  Acquisition premium on loans                4,027          3,689
  Net unrealized gains on securities         11,067          6,306
  Other deferred tax liabilities              3,949          3,851
                                            -------        -------
        Deferred tax liabilities             23,255         18,397
                                            -------        -------
        Net deferred tax assets             $20,748        $25,230
                                            =======        =======

- --------------------------------------------------------------------


       A reconciliation of income tax expense to the amount computed by applying
the federal statutory rate of 35% to income before income taxes follows:



- --------------------------------------------------------------------------------
                                              Year Ended December 31,
(in thousands)                         2001             2000             1999
- --------------------------------------------------------------------------------
                                                              
Tax at federal statutory rate
   applied to income before
   income taxes                      $ 51,755         $ 44,266         $ 31,494
Increase (decrease) in taxes
   resulting from:
        Tax-exempt interest            (8,793)          (8,229)          (7,230)
        Other                             253             (224)           3,725
                                     --------         --------         --------
   Total income tax expense          $ 43,215         $ 35,813         $ 27,989
                                     ========         ========         ========

- --------------------------------------------------------------------------------



                                     A - 36



NOTE 14. EARNINGS PER SHARE

A reconciliation of the numerators and denominators of the basic and diluted
earnings per share computations follows:



- --------------------------------------------------------------------------------
                                              Year Ended December 31,
(in thousands)                          2001          2000          1999
- -------------------------------------------------------------------------------
                                                          
NUMERATOR:
  Numerator for basic and
  dilutive earnings per share --
  net income available to
  common shareholders               $ 104,657       $ 90,660       $ 61,994
                                    =========       ========       ========

DENOMINATOR:
  Denominator for basic
  earnings per share --
  weighted average shares              46,085         47,310         48,169
  Effect of dilutive
  securities - potential
  conversion of employee
  stock options                           505            233            448
                                    ---------       --------       --------
  Denominator for diluted
  earnings per share --
  adjusted weighted-average
  shares and assumed                   46,590         47,543         48,617
                                    =========       ========       ========

BASIC EARNINGS PER SHARE            $    2.27       $   1.92       $   1.29
                                    =========       ========       ========

DILUTED EARNINGS PER SHARE          $    2.25       $   1.91       $   1.28
                                    =========       ========       ========

- --------------------------------------------------------------------------------


       All employee stock options were dilutive except for options granted in
1998 and 1999. See Note 15 for additional disclosures regarding employee stock
options.

NOTE 15. SHAREHOLDERS' EQUITY

       RIGHTS AGREEMENT: Citizens is a party to a Rights Agreement, dated May
23, 2000, designed to protect shareholders from unfair takeover offers by
encouraging a potential buyer to negotiate with Citizens' board prior to
attempting a takeover. Owners of Citizens' common shares have been granted
rights under the Rights Agreement to purchase one one-thousandth of a share of
Series B Preferred Stock at an exercise price of $65, subject to adjustment. The
rights are not exercisable or separately tradable until after a public
announcement that a person or group, without board approval, has acquired 15% or
more of Citizens' common shares or has commenced a tender offer to do so. If a
person or group acquires 15% or more of the common shares, the rights (other
than those held by the acquiror, which become void) become exercisable to
purchase common shares having a fair value of $130 for $65, or the board may
exchange one common share for each outstanding right (other than those held by
the acquiror). If the acquiror merges Citizens into another entity, the rights
become exercisable for common shares of the surviving entity having a fair value
of $130 for $65. The rights are redeemable by the board at any time prior to May
23, 2010 for $.001 per right. The Rights Agreement may be amended by the board
without shareholder or right holder approval at any time prior to the
acquisition by a person or group of 15% or more of the common shares. The rights
will cause substantial dilution to a person or group attempting to acquire
Citizens without action by Citizens' board to deactivate the rights.

       STOCK REPURCHASE PLANS: Citizens purchased shares under a stock
repurchase program initiated May 2000. This program authorized Citizens to
purchase up to 3,000,000 shares for treasury. During the year, 1,765,900 shares
were purchased under this plan, completing that program. Citizens initiated a
new stock repurchase program of 3,000,000 shares in October 2001. A total of
187,700 shares were purchased under this program through year-end. For the year
ended December 31, 2001, a total of 1,953,600 shares were purchased under the
plans at an average price of $29.94. As of December 31, 2001, there were
2,812,300 shares available for purchase under the current program. The treasury
shares have been accorded the accounting treatment as if retired.

       STOCK OPTION PLAN: Citizens' stock option plan, as amended and restated
in April 1997, authorizes the granting of incentive and nonqualified stock
options, tandem stock appreciation rights, restricted stock and performance
share grants to key employees. Aggregate grants under the plan may not exceed
3,000,000 shares within any six-year period and are limited annually to 3% of
Citizens' outstanding common stock as of the first day of the year, plus any
unused shares that first become available for grants in the prior year. The
exercise price of all options granted under the plan is equal to the market
price of Citizens' stock on the date of grant.

       Options may be granted until January 16, 2002 and expire ten years from
the date of grant. Options granted since April 1992 are exercisable subject to a
predetermined vesting schedule based on achievement of certain return on average
asset or earnings per share targets. At December 31, 2001, options outstanding
under the plan totaled 2,502,940 shares of which 1,115,941 shares are
exercisable subject to future achievement of the performance targets. These
options become exercisable after five years if the performance targets are not
met. Canceled or expired options become available for future grants.

       OTHER STOCK OPTIONS: On May 18, 2000, Citizens granted stock options to
all employees who did not receive grants under the key employee stock option
plan. Each full-time employee received 200 shares and each part-time employee
received 100 shares. The $16.66 exercise price of the grant was the market price
of Citizens' stock on the grant date. The options are exercisable subject to
Citizens achieving $2.65 earnings per share on a rolling four-quarter basis or
three years, whichever comes first. No shares of this option grant are yet
exercisable. The options expire ten years from


                                     A - 37


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the date of grant. A total of 550,700 shares were granted of which 398,900
shares were outstanding as of December 31, 2001.

       Citizens maintains a stock option plan for its directors. Under this
plan, each non-employee director of Citizens serving on the board immediately
following an annual meeting of shareholders receives an option grant of 1,500
shares. Options outstanding under the plan totaled 90,000 shares as of December
31, 2001. Other stock options of Citizens include those granted by F&M to its
directors and key employees and converted into Citizens' options at the time of
the merger. A total of 51,033 shares of these options were outstanding at
year-end 2001.

       Citizens has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options as permitted by
Financial Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation." Under APB 25, no compensation expense is recognized
by Citizens because the exercise price of the stock options equals the market
price of the underlying stock on the date of grant.

       Statement 123 requires certain pro forma disclosures regarding net income
and earnings per share as if Citizens had accounted for its stock options under
the fair value method of that statement. The following table provides these
disclosures along with significant assumptions used to estimate the fair value
of these options:



- ------------------------------------------------------------------------------------------
                                            2001               2000               1999
- ------------------------------------------------------------------------------------------
                                                                    
Pro forma amounts:
  Net income (in thousands)        $      102,808         $   89,020         $   60,590
  Net income per share:
        Basic                                2.23               1.88               1.26
        Diluted                              2.21               1.87               1.25
Assumptions:
  Dividend yield                              3.5%               3.5%               3.0%
  Expected volatility                        28.0%              25.0%              19.5%
  Risk-free interest rate                    5.02%              6.80%              5.59%
  Expected lives                            5 YRS.             5 yrs.             5 yrs.

- ------------------------------------------------------------------------------------------


A summary of stock option transactions under the plans for 2001, 2000 and 1999
follows:



- ---------------------------------------------------------------------------------------------------------------------------
                                               Options                                            Option Price
                                -------------------------------------               ---------------------------------------
                                  Available                                           Per Share
                                  for Grant               Outstanding                  Range                      Average
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                                    
January 1, 1999                    845,402                 2,128,461                $  5.40-36.31               $   20.33
  Authorized                       201,237                        --                           --                      --
  Granted                         (455,229)                  455,229                  22.93-32.59                   29.99
  Exercised                             --                  (287,906)                  5.40-27.51                   11.70
  Canceled                          29,287                   (29,287)                 24.85-35.63                   31.88
                                ----------                ----------                -------------               ---------
December 31, 1999                  620,697                 2,266,497                   5.40-36.31                   23.22
  Authorized                       803,897                        --                           --                      --
  Granted                       (1,224,350)                1,224,350                  16.66-16.91                   16.67
  Exercised                             --                  (158,544)                  5.40-21.83                   12.32
  Canceled                          52,336                  (141,299)                 16.66-35.63                   20.54
                                ----------                ----------                -------------               ---------
December 31, 2000                  252,580                 3,191,004                   8.50-36.31                   21.36
  AUTHORIZED                       566,858                        --                           --                      --
  GRANTED                         (651,200)                  651,200                  25.42-25.72                   25.43
  EXERCISED                             --                  (591,602)                  8.50-28.21                   18.07
  CANCELED                         117,277                  (207,729)                 16.66-36.31                   20.45
                                ----------                ----------                -------------               ---------
DECEMBER 31, 2001                  285,515                 3,042,873                $ 11.75-36.31               $   22.94
                                ==========                ==========                =============               =========

- ---------------------------------------------------------------------------------------------------------------------------




                                     A - 38


The following table summarizes information on stock options outstanding as of
December 31, 2001:



        ---------------------------------------------------------------------------------------------------------

                                            Options Outstanding                           Options Exercisable
                                ---------------------------------------------        ----------------------------
                                              Weighted-
                                               Average           Weighted-                           Weighted-
                                              Remaining           Average                            Average
             Range               Amount         Life           Exercise Price         Amount       Exercise Price
        ---------------------------------------------------------------------------------------------------------
                                                                                    
        $ 11.75 - 17.00        1,007,535        8.0 years       $   16.54              194,350          $16.03
          17.00 - 25.00          717,801        4.5                 20.22              717,801           20.22
          25.00 - 36.31        1,317,537        7.8                 29.31              615,881           31.22
                               ---------                                             --------
        $ 11.75 - 36.31        3,042,873        7.1                 22.94            1,528,032           24.12
      -----------------------------------------------------------------------------------------------------------



NOTE 16. COMMITMENTS AND CONTINGENT LIABILITIES
The Consolidated Financial Statements do not reflect various loan commitments
(unfunded loans and unused lines of credit) and letters of credit originated in
the normal course of business. Loan commitments are made to accommodate the
financial needs of clients. Generally, new loan commitments do not extend beyond
90 days and unused lines of credit are reviewed at least annually. Letters of
credit guarantee future payment of client financial obligations to third
parties. They are issued primarily for services provided or to facilitate the
shipment of goods, and generally expire within one year. Both arrangements have
essentially the same level of credit risk as that associated with extending
loans to clients and are subject to Citizens' normal credit policies. Inasmuch
as these arrangements generally have fixed expiration dates or other termination
clauses, most expire unfunded and do not necessarily represent future liquidity
requirements. Collateral is obtained based on management's assessment of the
client and may include receivables, inventories, real property and equipment.
       Amounts available to clients under loan commitments and letters of credit
follow:



- -------------------------------------------------------------

                                   December 31,
(in thousands)                         2001         2000
- -------------------------------------------------------------
                                            
LOAN COMMITMENTS
  AND LETTERS OF CREDIT:
Commitments to extend credit        $ 1,683,239   $1,699,174
Standby letters of credit                53,718       55,469
Commercial letters of credit             91,807       95,385
- -------------------------------------------------------------


       Loan commitments outstanding include $75.6 million of credit card
commitments and $263.2 million of home equity credit lines in 2001. The same
amounts for 2000 were $247.4 million and $230.0 million, respectively.

       Citizens and its subsidiaries are parties to litigation arising in the
ordinary course of business. Management believes that the aggregate liability,
if any, resulting from these proceedings would not have a material effect on
Citizens' consolidated financial position.


NOTE 17. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosure About Fair
Value of Financial Instruments". Where quoted market prices are not available,
as is the case for a significant portion of Citizens' financial instruments, the
fair values are based on estimates using present value or other valuation
techniques. These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. Accordingly, the
derived fair value estimates presented herein cannot be substantiated by
comparison to independent markets and are not necessarily indicative of the
amounts Citizens could realize in a current market exchange.
       In addition, the fair value estimates are based on existing on- and
off-balance sheet financial instruments without attempting to estimate the value
of anticipated future business and the value of assets and liabilities that are
not considered financial instruments. For example, Citizens has a substantial
trust department that contributes net fee income annually. The trust department
is not considered a financial instrument and its value has not been incorporated
into the fair value estimates. Other significant assets and liabilities that are
not considered financial assets or liabilities include Citizens' brokerage
network, net deferred tax asset, premises and equipment, goodwill and deposit
based intangibles. In addition, tax ramifications related to the recognition of
unrealized gains and losses such as those within the investment securities
portfolio can also have a significant effect on estimated fair values and have
not been considered in the estimates. Accordingly, the aggregate fair value
amounts do not represent the underlying value of Citizens.

                                      A-39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair values of Citizens' financial instruments follow:



- ---------------------------------------------------------------------------------------------------------------------------------

                                                                        DECEMBER 31, 2001                 December 31, 2000
                                                                    ---------------------------       ---------------------------

                                                                     CARRYING       ESTIMATED          Carrying       Estimated
(in millions)                                                         AMOUNT       FAIR VALUE           Amount       Fair Value
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                           
Financial assets:
   Cash and money market investments                                  $   267.0      $   267.0          $   345.6      $   345.6
   Investment securities                                                1,259.5        1,259.5            1,384.1        1,384.1
   Net loans                                                            5,842.1        5,965.8            6,342.7        6,376.5
Financial liabilities:
   Deposits                                                             5,965.1        6,008.6            6,244.1        6,256.4
   Short-term borrowings                                                  314.4          314.6              933.3          933.5
   Long-term debt                                                         629.1          648.0              471.1          471.5
Off-balance sheet financial instrument liabilities:
   Loan commitments                                                         ---            3.2                ---            2.5
   Standby and commercial letters of credit                                 ---            0.7                ---            0.8

- ---------------------------------------------------------------------------------------------------------------------------------



       The various methods and assumptions used by Citizens in estimating fair
value for its financial instruments are set forth below:

       CASH AND MONEY MARKET INVESTMENTS: The carrying amounts reported in the
balance sheet for cash and money market investments approximate those assets'
fair values because they mature within six months and do not present
unanticipated credit concerns.

       INVESTMENT SECURITIES: The carrying amounts reported in the balance sheet
for investment securities approximate those assets' fair values as all
investment securities are classified as available for sale. SFAS No. 115
requires securities carried in the available for sale category to be carried at
fair value - see Note 5. The fair values are based on quoted market prices,
where available. If quoted market prices are not available, fair values are
based on quoted market prices of comparable instruments.

       LOANS RECEIVABLE: Fair values are estimated for portfolios of loans with
similar financial characteristics. Loans are segregated by type such as
commercial, commercial real estate, residential mortgage, credit card, and other
consumer. Each loan category is further segmented into fixed and variable-rate
interest types and for certain categories by performing and nonperforming. For
performing variable-rate loans that reprice frequently (within twelve months)
and with no significant change in credit risk, fair values are based on carrying
values. Similarly, for credit card loans with no significant credit concerns and
average interest rates approximating current market origination rates, the
carrying amount is a reasonable estimate of fair value. Fair values of other
loans (e.g., fixed-rate commercial, commercial real estate, residential mortgage
and other consumer loans) are estimated by discounting the future cash flows
using interest rates currently being offered by Citizens for loans with similar
terms and remaining maturities (new loan rates). Management believes the risk
factor embedded in the new loan rates adequately represents the credit risk
within the portfolios. Fair values for nonperforming loans are estimated after
giving consideration to credit risk and estimated cash flows and discount rates
based on available market and specific borrower information. The carrying amount
of accrued interest for all loan types approximates its fair value.

       DEPOSIT LIABILITIES: Under SFAS 107, the fair value of demand deposits
(e.g., interest and noninterest checking, passbook savings and certain types of
money market accounts) are, by definition, equal to the amount payable on demand
at the reporting date (i.e., their carrying amounts). Fair values for
certificates of deposit are based on the discounted value of contractual cash
flows. The discount rate is estimated using the rates currently offered for
certificates of similar remaining maturities.

       SHORT-TERM BORROWINGS: The carrying amounts of federal funds purchased,
securities sold under agreement to repurchase and other short-term borrowings
approximate their fair values.

       LONG-TERM DEBT: The carrying value of Citizens' variable-rate long-term
debt approximates its fair value. The fair value of fixed-rate long-term debt is
estimated using discounted cash flow analyses, based on Citizens' current
incremental borrowing rates for similar types of borrowing arrangements.

       LOAN COMMITMENTS AND LETTERS OF CREDIT: The fair value of loan
commitments and letter of credit guarantees is based on fees currently charged
to enter into similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.


                                      A-40

NOTE 18. LINES OF BUSINESS

The financial performance of Citizens is monitored by an internal profitability
measurement system, which provides line of business results and key performance
measures. The profitability measurement system is based on internal management
methodologies designed to produce consistent results and reflect the underlying
economics of the businesses. The development and application of these
methodologies is a dynamic process. Accordingly, these measurement tools and
assumptions may be revised periodically to reflect methodological, product,
and/or management organizational changes. Further, these policies measure
financial results that support the strategic objectives and internal
organizational structure of Citizens. Consequently, the information presented is
not necessarily comparable with similar information for other institutions.

       Citizens is managed along the following business lines: Commercial
Banking, Retail Banking, Financial Services, F&M and Other.

       COMMERCIAL BANKING: Commercial Banking provides a full range of credit
and related financial services to middle market corporate, small business,
government and leasing clients. Products and services offered include commercial
loans, commercial mortgages, small business loans, letters of credit, deposit
accounts, cash management and international trade services.

       RETAIL BANKING: Retail Banking includes consumer lending and deposit
gathering, electronic banking and residential mortgage loan origination and
servicing. This line of business offers a variety of retail financial products
and services including deposit accounts, direct and indirect installment loans,
debit and credit cards, home equity lines of credit, residential mortgage loans,
fixed and variable annuities and ATM network services.

       FINANCIAL SERVICES: Financial Services provides commercial and retail
clients with private banking, trust and investment, retirement plan, and
brokerage and insurance services. Private banking focuses on high net-worth
customers and offers a broad array of asset management, estate settlement and
administration, deposit and credit products. Trust and investment includes
personal trust and planning services, investment management services, estate
settlement, administration and advises the Golden Oak family of mutual funds.
Retirement plan services focus on investment management and fiduciary activities
with special emphasis on 401(k) plans. The brokerage and insurance businesses
deliver Citizens' retail mutual funds, other securities, variable and fixed
annuities, personal disability and life insurance products and discounted
brokerage services.

       F&M: F&M provides a full range of consumer and commercial banking
services to individuals, and commercial and agricultural businesses, in
Wisconsin and Iowa through a network of branch locations. Products and services
offered include deposit accounts; commercial, commercial mortgage, agricultural,
small business, residential mortgage and consumer loans; financial planning and
trust; brokerage, insurance, ATM, credit card and cash management services.

       OTHER: All other includes activities that are not directly attributable
to one of the four major lines of business. Included in this category is the
parent company, Citizens' securities portfolio and asset liability management
activities, inter-company eliminations, and the economic impact of certain
assets, capital and support functions not specifically identifiable with the
four primary lines of business.
       The accounting policies on the individual business units are the same as
those of Citizens described in Note 1 to the Consolidated Financial Statements.
Funds transfer pricing is used in the determination of net interest income by
assigning a cost for funds used or credit for funds provided to assets and
liabilities within each business unit. Assets and liabilities are match-funded
based on their maturity, prepayment and/or repricing characteristics. As a
result, the Commercial, Retail and Financial Services units are largely
insulated from changes in interest rates. Changes in net interest income due to
changes in interest rates are reported in Citizens' Treasury unit, which is a
component of "Other". Changes in net interest income due to changes in interest
rates for F&M are included in the operating income of F&M. Noninterest income
and expenses directly attributable to a line of business are assigned to that
business. Expenses for centrally provided services are allocated to the business
lines as follows: product processing and technology expenditures are allocated
based on standard unit costs applied to actual volume measurements; corporate
overhead is allocated based on the ratio of a line of business' noninterest
expenses to total noninterest expenses incurred by all business lines. The
provision for loan losses was allocated in an amount based primarily upon the
actual net charge-offs of each respective line of business, adjusted for loan
growth and changes in risk profile. Selected segment information is included in
the following table.


                                      A-41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



- ------------------------------------------------------------------------------------------------------------------------------------

LINE OF BUSINESS INFORMATION                                                                       Net Income
                                                                                                     Before
                                                                                                       Non-       Non-
                                           Commercial    Retail    Financial                        recurring  recurring
(in thousands)                               Banking     Banking    Services     F&M     Other        Items       Items       Total
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
EARNINGS SUMMARY - 2001
Net interest income (taxable equivalent)   $  92,714   $ 125,418   $   1,140  $  94,000  $   9,544  $ 322,816  $      --  $ 322,816
Provision for loan losses                      6,949       7,046          --     13,033       (621)    26,407         --     26,407
                                           ---------   ---------   ---------  ---------  ---------  ---------  ---------  ---------
  Net interest income after provision         85,765     118,372       1,140     80,967     10,165    296,409         --    296,409
Noninterest income                            13,777      40,532      23,139     19,326        902     97,676     19,805    117,481
Noninterest expense                           44,584     104,732      14,267     70,580     17,020    251,183         --    251,183
                                           ---------   ---------   ---------  ---------  ---------  ---------  ---------  ---------
  Income (loss) before income taxes           54,958      54,172      10,012     29,713     (5,953)   142,902     19,805    162,707
Income tax expense (taxable equivalent)       19,235      18,960       3,504     10,758       (744)    51,713      6,337     58,050
                                           ---------   ---------   ---------  ---------  ---------  ---------  ---------  ---------
  Net income (loss)                        $  35,723   $  35,212   $   6,508  $  18,955  $  (5,209) $  91,189  $  13,468  $ 104,657
Allocation of nonrecurring items                  --       5,197          --      1,110      7,161               (13,468)        --
                                           ---------   ---------   ---------  ---------  ---------             ---------  ---------
  Net income (loss)                        $  35,723   $  40,409   $   6,508  $  20,065  $   1,952             $      --  $ 104,657
                                           =========   =========   =========  =========  =========             =========  =========

AVERAGE ASSETS (IN MILLIONS)               $   2,128   $   2,804   $       9  $   2,633  $     363                        $   7,936
                                           =========   =========   =========  =========  =========                        =========

- -----------------------------------------------------------------------------------------------------------------------------------
EARNINGS SUMMARY - 2000
Net interest income (taxable equivalent)   $  91,718   $ 132,582   $   1,330  $ 104,177  $    (857) $ 328,950  $      --  $ 328,950
Provision for loan losses                      6,044      10,278        --        4,103        558     20,983         --     20,983
                                           ---------   ---------   ---------  ---------  ---------  ---------  ---------  ---------
  Net interest income after provision         85,674     122,304       1,330    100,074     (1,415)   307,967         --    307,967
Noninterest income                            12,352      31,914      26,618     16,633      2,827     90,344         --     90,344
Noninterest expense                           42,965     102,834      18,174     63,733     14,515    242,221     15,541    257,762
                                           ---------   ---------   ---------  ---------  ---------  ---------  ---------  ---------
  Income (loss) before income taxes           55,061      51,384       9,774     52,974    (13,103)   156,090    (15,541)   140,549
Income tax expense (taxable equivalent)       19,272      17,983       3,420     19,335     (4,044)    55,966     (6,077)    49,889
                                           ---------   ---------   ---------  ---------  ---------  ---------  ---------  ---------
  Net income (loss)                        $  35,789   $  33,401   $   6,354  $  33,639  $  (9,059) $ 100,124  $  (9,464) $  90,660
Allocation of special charge and
 related items                                    --          --          --     (7,672)    (1,792)                9,464         --
                                           ---------   ---------   ---------  ---------  ---------              ---------  ---------
  Net income (loss)                        $  35,789   $  33,401   $   6,354  $  25,967  $ (10,851)            $      --  $  90,660
                                           =========   =========   =========  =========  =========             =========  =========

AVERAGE ASSETS (IN MILLIONS)               $   2,025   $   2,596   $      17  $   2,745  $     690                        $   8,073
                                           =========   =========   =========  =========  =========                        =========

- -----------------------------------------------------------------------------------------------------------------------------------
EARNINGS SUMMARY - 1999
Net interest income (taxable equivalent)   $  76,788   $ 112,889   $   1,357  $ 110,718  $  20,095  $ 321,847  $      --  $ 321,847
Provision for loan losses                      1,708      14,256        --        2,975     (1,064)    17,875      6,800     24,675
                                           ---------   ---------   ---------  ---------  ---------  ---------  ---------  ---------
  Net interest income after provision         75,080      98,633       1,357    107,743     21,159    303,972     (6,800)   297,172
Noninterest income                            10,526      28,500      24,177     15,994      6,391     85,588      2,097     87,685
Noninterest expense                           38,821      95,703      18,159     63,002     21,093    236,778     46,293    283,071
                                           ---------   ---------   ---------  ---------  ---------  ---------  ---------  ---------
  Income (loss) before income taxes           46,785      31,430       7,375     60,735      6,457    152,782    (50,996)   101,786
Income tax expense (taxable equivalent)       16,375      11,000       2,581     22,785      2,887     55,628    (15,836)    39,792
                                           ---------   ---------   ---------  ---------  ---------  ---------  ---------  ---------
  Net income (loss)                        $  30,410   $  20,430   $   4,794  $  37,950  $   3,570  $  97,154  $ (35,160) $  61,994
Allocation of special charge and
 related items                                    --          --          --    (26,748)    (8,412)               35,160         --
                                           ---------   ---------   ---------  ---------  ---------             ---------  ---------
  Net income (loss)                        $  30,410   $  20,430   $   4,794  $  11,202  $  (4,842)            $      --  $  61,994
                                           =========   =========   =========  =========  =========             =========  =========

AVERAGE ASSETS (IN MILLIONS)               $   1,655   $   2,138   $      16  $   2,602  $     931                        $   7,342
                                           =========   =========   =========  =========  =========                        =========

- -----------------------------------------------------------------------------------------------------------------------------------




                                      A-42

NOTE 19. REGULATORY MATTERS
The Federal Reserve Bank requires Citizens' banking subsidiaries to maintain
certain noninterest-bearing deposits. These reserve balances vary depending upon
the level of client deposits in the subsidiary banks. During 2001 and 2000, the
average reserve balances were $41.9 million and $56.8 million, respectively.
       The bank subsidiaries are also subject to limitations under banking laws
on extensions of credit to members of the affiliate group and on dividends that
can be paid to Citizens. Generally extensions of credit are limited to 10% to
any one affiliate and 20% in aggregate to all affiliates of a subsidiary bank's
capital and surplus (net assets) as defined. Unless prior regulatory approval is
obtained, dividends declared in any calendar year may not exceed the retained
net profit, as defined, of that year plus the retained net profit of the
preceding two years. At January 1, 2002, the bank subsidiaries could distribute
to Citizens approximately $24.8 million in dividends without regulatory
approval. Their 2002 net income will also become available for such dividends.
       Citizens and its banking subsidiaries are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, specific
capital guidelines must be met that involve quantitative measures of the assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors.
       Quantitative measures established by regulation to ensure capital
adequacy require Citizens and its banking subsidiaries to maintain minimum
amounts and ratios (set forth in the table below) of total and Tier 1 capital to
risk-weighted assets (as defined in the regulations), and of Tier 1 capital to
average assets (as defined). Management believes, as of December 31, 2001, that
Citizens and its banking subsidiaries meet all capital adequacy requirements to
which it is subject.
       As of December 31, 2001, the most recent notification from the Federal
Reserve Board categorized Citizens and its banking subsidiaries as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized Citizens and its banking subsidiaries must
maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios
as set forth in the table. There are no conditions or events since that
notification that management believes would result in a change.






- -----------------------------------------------------------------------------------------------------------------

RISK BASED CAPITAL REQUIREMENTS                                                        To Be Well Capitalized
                                                               For Capital             Under Prompt Corrective
                                         Actual             Adequacy Purposes              Action Provisions
                                    ----------------  -----------------------------  ----------------------------
(in thousands)                        Amount   Ratio    Amount        Ratio             Amount          Ratio
- -----------------------------------------------------------------------------------------------------------------
                                                                               
CITIZENS BANKING CORPORATION
AS OF DECEMBER 31, 2001:
     Total Capital to risk
        weighted assets (1)         $ 669,332  11.1%  $ 481,512  greater than or     $ 601,889   greater than or
                                                                   equal to 8.0%                   equal to 10.0%
     Tier 1 Capital to risk
        weighted assets (1)          594,033    9.9    240,756   greater than or       361,134   greater than or
                                                                   equal to 4.0                    equal to 6.0
     Tier 1 Leverage (2)             594,033    7.8    304,854   greater than or       381,068   greater than or
                                                                   equal to 4.0                    equal to 5.0

As of December 31, 2000:
     Total Capital to risk
         weighted assets (1)       $ 659,901   10.3%  $ 512,362   greater than or    $ 640,453   greater than or
                                                                   equal to 8.0%                   equal to 10.0%

     Tier 1 Capital to risk
        weighted assets (1)          579,844    9.1    256,181   greater than or      384,272   greater than or
                                                                   equal to 4.0                  equal to 6.0

     Tier 1 Leverage (2)             579,844    7.1    326,142   greater than or      407,677   greater than or
                                                                   equal to 4.0                   equal to 5.0

CITIZENS BANK
AS OF DECEMBER 31, 2001:
     Total Capital to risk
        weighted assets (1)         $ 425,456  10.4%  $ 327,353   greater than or    $ 409,191   greater than or
                                                                   equal to 8.0%                   equal to 10.0%
     Tier 1 Capital to
        risk weighted assets (1)      374,294    9.2    163,676   greater than or      245,515   greater than or
                                                                   equal to 4.0                    equal to 6.0
     Tier 1 Leverage (2)              374,294    7.5    199,801   greater than or      249,751   greater than or
                                                                   equal to 4.0                    equal to 5.0
As of December 31, 2000:
     Total Capital to
        risk weighted assets (1)    $ 435,996  10.6%  $ 330,086   greater than or    $ 412,608   greater than or
                                                                   equal to 8.0%                   equal to 10.0%
     Tier 1 Capital to
        risk weighted assets (1)      384,417    9.3    165,043   greater than or      247,565   greater than or
                                                                   equal to 4.0                    equal to 6.0
     Tier 1 Leverage (2)              384,417    7.5    205,479   greater than or      256,849   greater than or
                                                                   equal to 4.0                    equal to 5.0
- -----------------------------------------------------------------------------------------------------------------


  (1) Total Capital is comprised of Tier 1 Capital plus a portion of the
      allowance for loan losses. Tier 1 Capital consists of total equity less
      unrealized gains and losses accumulated in other comprehensive income,
      certain intangible assets and adjustments related to the valuation of
      mortgage servicing assets.

  (2) Tier 1 Capital to quarterly average assets

                                      A-43

NOTE 20. CITIZENS BANKING CORPORATION (PARENT ONLY) STATEMENTS



- ------------------------------------------------------------------------------------------------------------------------------

BALANCE SHEETS
CITIZENS BANKING CORPORATION (PARENT ONLY)
                                                                                                          December 31,
(in thousands)                                                                                         2001          2000
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                                             
ASSETS
  Cash                                                                                               $        5    $        5
  Money market investments                                                                                2,969         7,916
  Investment securities                                                                                      73            63
  Investment in subsidiaries - principally banks                                                        719,422       715,726
  Goodwill - net                                                                                            265         1,061
  Other assets                                                                                            5,349         5,771
                                                                                                     ----------    ----------
TOTAL ASSETS                                                                                         $  728,083    $  730,542
                                                                                                     ==========    ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
  Short-term revolving credit                                                                        $   30,000     $  48,000
  Other liabilities                                                                                         619         2,563
                                                                                                     ----------     ---------
  Total liabilities                                                                                      30,619        50,563
  Shareholders' equity                                                                                  697,464       679,979
                                                                                                     ----------     ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                           $  728,083     $ 730,542
                                                                                                     ==========     =========
- ------------------------------------------------------------------------------------------------------------------------------




- ------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF INCOME
CITIZENS BANKING CORPORATION (PARENT ONLY)
                                                                                               Year Ended December 31,
(in thousands)                                                                            2001           2000          1999
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                                            
INCOME
  Dividends from subsidiaries - principally banks                                       $107,400       $ 79,400      $ 54,686
  Interest from bank subsidiary                                                               32             18           193
  Service fees from bank subsidiaries                                                      9,435          9,517         9,668
  Equity security gain                                                                    11,017            ---         5,693
  Other                                                                                      890            646           205
                                                                                        --------       --------      --------
  Total                                                                                  128,774         89,581        70,445
                                                                                        --------       --------      --------
EXPENSES
  Interest                                                                                 1,904          3,099         1,486
  Amortization of goodwill                                                                   796            796           796
  Salaries and employee benefits                                                           9,955          9,333         9,780
  Service fees paid to bank subsidiaries                                                   1,265          1,215         1,156
  Special charge                                                                             ---           (211)        3,464
  Other noninterest expense                                                                3,888          1,884         1,474
                                                                                        --------         ------      --------
  Total                                                                                   17,808         16,116        18,156
                                                                                        --------        -------      --------
Income before income taxes and equity in undistributed earnings of subsidiaries          110,966         73,465        52,289
Income tax benefit                                                                        (1,197)         2,727           846
Equity in undistributed earnings of subsidiaries                                          (5,112)        14,468         8,859
                                                                                        --------       --------      --------
NET INCOME                                                                              $104,657       $ 90,660      $ 61,994
                                                                                        ========       ========      ========
- ------------------------------------------------------------------------------------------------------------------------------




                                      A-44




- ----------------------------------------------------------------------------------------------------------------------------

STATEMENTS OF CASH FLOWS
CITIZENS BANKING CORPORATION (PARENT ONLY)
                                                                                           Year Ended December 31,
(in thousands)                                                                        2001          2000           1999
- ----------------------------------------------------------------------------------------------------------------------------
                                                                                                          
OPERATING ACTIVITIES
 Net income                                                                          $ 104,657      $ 90,660       $ 61,994
 Adjustments to reconcile net income to net cash
  provided by operating activities:
 Amortization of goodwill                                                                  796           796            796
 Equity security gain                                                                  (11,017)          ---         (5,693)
 Accrued merger related charges                                                            ---           ---          1,669
 Equity in undistributed earnings of subsidiaries                                        5,112       (14,468)        (8,859)
 Other                                                                                  (1,525)       (2,657)        (3,114)
                                                                                       -------      --------        -------
     Net cash provided by operating activities                                          98,023        74,331         46,793
                                                                                       -------      --------        -------
INVESTING ACTIVITIES
 Net decrease in interest-bearing deposit at subsidiary bank                               ---           ---          4,500
 Net (increase) decrease in money market investments                                     4,947        (6,814)         6,333
 Purchases of investment securities                                                        ---           (19)        (5,996)
 Proceeds from sales and maturities of investment securities                               ---            33          5,995
 Proceeds from sale of Magic Line, Inc. stock                                              ---           ---          5,693
 Proceeds from sale of NYCE stock                                                       11,017           ---            ---
                                                                                        -------     --------       --------
     Net cash provided (used) by investing activities                                   15,964        (6,800)        16,525
                                                                                        -------     --------       --------
FINANCING ACTIVITIES
 Proceeds from short-term borrowings                                                     6,000         6,000         42,000
 Principal reductions in short-term borrowings                                         (24,000)          ---            ---
 Proceeds from issuance of long-term debt                                                  ---           ---         22,000
 Principal reductions in long-term debt                                                    ---           ---        (35,000)
 Cash dividends paid                                                                   (50,158)      (48,108)       (41,801)
 Proceeds from stock options exercised                                                  12,662         1,879          3,349
 Shares acquired for retirement                                                        (58,491)      (27,302)       (53,866)
                                                                                     ---------      --------       --------
     Net cash used by financing activities                                            (113,987)      (67,531)       (63,318)
                                                                                     ---------      --------       --------
Net increase in cash                                                                       ---           ---            ---
Cash at beginning of year                                                                    5             5              5
                                                                                     ---------      --------       --------
Cash at end of year                                                                  $       5      $      5       $      5
                                                                                     =========      ========       ========

- ----------------------------------------------------------------------------------------------------------------------------





                                     A - 45




REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



BOARD OF DIRECTORS CITIZENS BANKING CORPORATION

         We have audited the accompanying consolidated balance sheets of
Citizens Banking Corporation and subsidiaries as of December 31, 2001 and 2000,
and the related consolidated statements of income, changes in shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
our audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Citizens Banking Corporation and subsidiaries at December 31, 2001 and 2000, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.


Ernst & Young LLP

Detroit, Michigan
January 17, 2002



                                      A-46



REPORT OF MANAGEMENT



MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

         Management is responsible for the preparation of the Consolidated
Financial Statements and all other financial information appearing in this
Annual Report. The Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles in the United States.

SYSTEM OF INTERNAL CONTROLS

         Citizens maintains a system of internal controls designed to provide
reasonable assurance that assets are safe-guarded and that the financial records
are reliable for preparing Consolidated Financial Statements. The selection and
training of qualified personnel and the establishment and communication of
accounting and administrative policies and procedures are elements of this
control system. The effectiveness of the internal control system is monitored by
a program of internal audit and by independent certified public accountants
("independent auditors").

         Management recognizes that the cost of a system of internal controls
should not exceed the benefits derived and that there are inherent limitations
to be considered in the potential effectiveness of any system. Management
believes Citizens' system provides the appropriate balance between costs of
controls and the related benefits.

AUDIT COMMITTEE OF THE BOARD

         The Audit Committee of the Board of Directors, comprised entirely of
outside directors, recommends the independent auditors who are engaged upon
approval by the Board of Directors. The committee meets regularly with the
internal auditor and the independent auditors to review timing and scope of
audits and review audit reports. The internal auditor and the independent
auditors have free access to the Audit Committee.

INDEPENDENT AUDITORS

         The Consolidated Financial Statements in this Annual Report have been
audited by Citizens' independent auditors, Ernst & Young LLP, for the purpose of
determining that the Consolidated Financial Statements are free of material
misstatement. Their audit considered Citizens' internal control structure to the
extent necessary to determine the scope of their auditing procedures.


/s/ John W. Ennest                         /s/ Robert J. Vitito


John W. Ennest                             Robert J. Vitito
Vice Chairman,                             Chairman,
Chief Financial Officer and Treasurer      President and Chief Executive Officer





                                     A - 47

[CITIZENS LOGO]                                  MEETING OF STOCKHOLDERS
                                                 OF CITIZENS BANKING CORPORATION
                                                 April 16, 2002
                                                 10:00 a.m.
                                                 Presidential Ballroom
                                                 Holiday Inn, Gateway Centre
                                                 Flint, Michigan
MR A SAMPLE
DESIGNATION (IF ANY)
ADD 1
ADD 2                                            HOLDER ACCOUNT NUMBER
ADD 3
ADD 4                                            C 1234567890  J N T
ADD 5
ADD 6

MAP TO ANNUAL MEETING:

    HOLIDAY INN GATEWAY CENTRE
    US 23/HILL ROAD
    FLINT, MICHIGAN 48507
    (PARK IN REAR FOR CONFERENCE CENTRE)

                                     [MAP]

- -  FROM NORTH: I-75 South to South U.S. 23. Exit Hill Road (East).

- -  FROM EAST AND WEST: I-69 to I-75 South to U.S. 23 South.
   Exit Hill Road (East).

- -  FROM WEST: I-94 to U.S. 23 North. Exit Hill Road (East).

- -  FROM SOUTH: I-75 North to I-475 North to Hill Road (West).
   Exit Hill Road west (left)


[CITIZENS LOGO]                                        CONTROL NUMBER

                                                       000000 0000000000 0  0000

                                                       000000000.000 ext
                                                       000000000.000 ext
[ ] Mark this box with an X if you have made           000000000.000 ext
    changes to your name or address                    000000000.000 ext
    details below.                                     000000000.000 ext
                                                       000000000.000 ext
[BAR CODE]                                             000000000.000 ext

MR A SAMPLE                                            HOLDER ACCOUNT NUMBER
DESIGNATION (IF ANY)                                   C 1234567890  J N T
ADD 1
ADD 2
ADD 3
ADD 4
ADD 5
ADD 6

Use a black pen. Mark X inside  [X]
the grey areas as shown in this
example.

- --------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD
- --------------------------------------------------------------------------------



[A] ELECTION OF DIRECTORS          PLEASE REFER TO THE REVERSE SIDE FOR INTERNET AND TELEPHONE VOTING INSTRUCTIONS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED.

1. Election of Directors-- Class I (three year term):

                                          FOR       WITHHOLD

01 - Edward P. Abbott                     [ ]         [ ]

02 - Jonathan E. Burroughs II             [ ]         [ ]

03 - Lawrence O. Erickson                 [ ]         [ ]

04 - Robert J. Vitito                     [ ]         [ ]

[B] PROPOSAL
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE STOCK COMPENSATION PLAN.
                                                       FOR    AGAINST    ABSTAIN

2. Proposal to approve stock compensation plan         [ ]      [ ]        [ ]


Do not mail future summary annual reports              [ ]
for this account. Another is received at
this household.

[C] AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR INSTRUCTIONS TO BE EXECUTED.
Please sign exactly as your name appears hereon. When shares are held by joint tenants, both must sign. When signing as Attorney,
Executor, Personal Representative, Administrator, Trustee or Guardian, please give full title as such. If signing on behalf of a
corporation, please sign in full corporate name by President or other authorized officer. If signing on behalf of a partnership,
please sign in partnership name by authorized person.

Signature 1                                   Signature 2                                    Date (dd/mm/yyyy)
- ---------------------------------------       ----------------------------------------       ------------------------------------


- ---------------------------------------       ----------------------------------------       ------------------------------------
[ ] A5051                                     1 U P X                                                                   007MND  +



- --------------------------------------------------------------------------------
 PROXY - CITIZENS BANKING CORPORATION
- --------------------------------------------------------------------------------

 PROXY BY THE BOARD OF DIRECTORS
 FOR THE ANNUAL MEETING OF SHAREHOLDERS -- APRIL 16, 2002

 The undersigned shareholder of Citizens Banking Corporation (the "Corporation")
 hereby appoints Joseph P. Day and James L. Wolohan, or either of them, my
 proxies or proxy, with full power of substitution to vote all shares of stock
 of the Corporation that the undersigned would be entitled to vote at the annual
 meeting of shareholders of the Corporation to be held in the Presidential
 Ballroom located in the Holiday Inn, Gateway Centre, Flint, Michigan, on
 Tuesday, April 16, 2002, at 10:00 a.m. local time, and at any adjournments
 thereof upon the proposal to approve the stock compensation plan proposed by
 the board of directors and upon the election of directors as set forth on the
 reverse side of this proxy, all of whom are being proposed by the board of
 directors, and in their discretion, upon such other matters as may properly
 come before the meeting including the election of any person to the board of
 directors where a nominee named in the proxy statement dated March 13, 2002 is
 unable to serve or, for good cause, will not serve. UNLESS A CONTRARY
 INSTRUCTION IS PROVIDED, THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED FOR
 THE PROPOSAL TO APPROVE THE STOCK COMPENSATION PLAN AND FOR EACH NOMINEE NAMED
 ON THE REVERSE SIDE OF THIS PROXY.

 For participants in the Corporation's Amended and Restated Section 401(k) Plan
 ("Plan"), this card also provides voting instructions to the Trustee under the
 Plan for the undersigned's allowable portion, if any, of the total number of
 shares of common stock of the Corporation held by such Plan as indicated on the
 reverse side hereof. These voting instructions are solicited and will be
 carried out in accordance with the applicable provisions of the Plan.

 The undersigned acknowledges receipt of the notice of annual meeting of
 shareholders and the proxy statement dated March 13, 2002 and ratifies all that
 the proxies or either of them or their substitutes may lawfully do or cause to
 be done by virtue hereof and revokes all former proxies.

 (Continued and to be signed on reverse side.)

                                                                SEE REVERSE SIDE

 VOTE YOUR SHARES BY PHONE OR OVER THE INTERNET

 We encourage you to vote by telephone or over the internet. These are two quick
 and easy methods to vote your shares that are available 24 hours a day, seven
 days a week, and your vote is recorded as if you mailed in your proxy card.
 Below are instructions on how to vote by telephone and over the internet.
 Voting by one of these convenient methods will also save the Corporation money.

 We also ask you to notify the Corporation if you are receiving multiple copies
 of the summary annual report at your household. You can do so by checking the
 box under the proposal section of the proxy card if you are mailing in your
 proxy card, by following the prompt if you are voting by telephone, or by
 clicking the appropriate box on the electronic internet proxy card. If you do
 so, the Corporation can save money by reducing the number of summary annual
 reports it must print and mail.



TELEPHONE VOTING INSTRUCTIONS:                                                INTERNET VOTING INSTRUCTIONS:
                                                                           
- - Call toll free 888-515-6262 in the United States or Canada any              - Go to the following web site:
  time on a touch tone telephone. There is NO CHARGE for this call.             WWW.COMPUTERSHARE.COM/US/PROXY

- - Enter the six-digit CONTROL NUMBER located on the upper right               - Enter the information requested on your proxy
  the reverse side and follow the telephone prompts.                            screen, corner of including your 6-digit CONTROL
                                                                                NUMBER located on the upper right corner of the
                                                                                reverse side
</Table>

 REMINDER

 Dear Shareholder(s):

 Enclosed you will find material relating to the Corporation's 2002 annual
 meeting of shareholders. The notice of the annual meeting and proxy statement
 describes the formal business to be transacted at the meeting, as summarized on
 the attached proxy card.

 Whether or not you expect to attend the annual meeting, please complete and
 return promptly the attached proxy card in the accompanying envelope, which
 requires no postage if mailed in the United States, or cast your vote by
 telephone, or by internet, using the instructions detailed. Please remember
 that your vote is important to us. We look forward to hearing from you.

 Sincerely,


 Ryan P. Mathews
 Investor Relations Manager

IF YOU VOTE BY TELEPHONE OR THE INTERNET, DO NOT MAIL BACK YOUR PROXY CARD.

THANK YOU FOR VOTING                                                      007MOD