[CITIZENS BANKING CORPORATION LETTERHEAD]
EXHIBIT 99.1
FOR IMMEDIATE RELEASE CONTACT: Charles D. Christy
Chief Financial Officer
(810) 237-4200
TRADED: NASDAQ
SYMBOL: CBCF
OCTOBER 18, 2002
CITIZENS BANKING CORPORATION
THIRD QUARTER RESULTS AND DIVIDEND ANNOUNCEMENT
FLINT, MICHIGAN --- Citizens Banking Corporation announced a third quarter net
loss of $45.9 million, or $1.03 per diluted share. This compares with net income
of $28.0 million, or $0.60 per diluted share for the same quarter of 2001. The
third quarter loss was largely a result of an incremental provision for loan
losses of $80 million, a previously announced special charge of $13.8 million
and other charges of $9.4 million. The after tax effect of these unusual items
was $67.1 million or $1.50 per diluted share. For the nine months ended
September 30, 2002, net income totaled $3.5 million, or $0.08 per share compared
with net income of $78.9 million, or $1.69 per share for the nine month period
ending September 30, 2001.
The $80 million incremental loan loss provision was recorded primarily in
response to an unusually high amount of commercial credits that deteriorated to
charge-offs during the quarter, as well as increases in nonperforming and
impaired commercial credits. Higher loss factors based on more recent loan loss
experience also had an effect on the provision.
On September 26, 2002, Citizens announced a special charge of $13.8 million
($9.0 after tax) to cover the costs of restructuring its consumer, business and
wealth management lines of business. Today, Citizens is announcing the results
of several other initiatives undertaken during the third quarter to improve its
credit risk profile and strengthen its financial position. "We have taken a
number of dramatic actions designed to improve our company and to grow earnings.
These are the right steps to strengthen our balance sheet, recognize the impact
of the economy on our loan portfolio and put us in a position to capitalize on
the strategic restructuring of our lines of business," stated William R.
Hartman, president and CEO.
KEY ACTIONS IN THE QUARTER:
- - We completed an in-depth review of the loan portfolio. As a result of this
review, we enhanced our credit risk criteria that should benefit future
credit quality and modified our loan loss allocation methodology experience
factors.
- - We launched restructuring initiatives within our three major lines of
business (consumer banking, business banking and wealth management) to
enable us to compete more effectively, reduce layers of management, be more
customer oriented, and better position us to grow core deposits and loans.
We streamlined operations and implemented new cost reduction initiatives
aimed at improving core earnings and operating efficiency, as part of our
restructuring efforts.
- - We made an important change to the consumer banking structure by
reinstating the branch manager concept in our retail delivery network. This
decision supports the practice of one contact person for all client service
needs.
- - We strengthened our management team with a combination of our veterans and
new talent from outside the Company, including a consumer banking manager,
a head of operations and technology and a chief financial officer.
- - We prepaid $75 million of high cost FHLB debt to improve balance sheet
flexibility, further reduce our funding costs and improve our interest rate
sensitivity.
- - We recorded other third quarter charges of $9.4 million including a $3.3
million penalty for the aforementioned FHLB debt retirement, a $2.0 million
contribution to Citizens' charitable trust; market valuation adjustments
including: $979,000 in other real estate, $668,000 of mortgage-related
securities premium, $650,000 in life insurance cash surrender values,
$662,000 in equity investments; $406,000 to record additional depreciation
on obsolete assets; and other losses of $658,000.
Discussing the actions taken during the third quarter, Hartman noted, "Even
after the special charges and loan loss provision, our capital position remains
strong. In light of our capital position and earnings outlook, the Board of
Directors has again declared the quarterly dividend of $0.285 per common share."
BALANCE SHEET
Citizens' total assets at September 30, 2002 were $7.614 billion, a decrease of
$65 million or .85% from December 31, 2001. Loans declined $248 million from
year end 2001 caused primarily by a $229 million decline in the mortgage loan
portfolio. Mortgage loans declined as Citizens continued selling the majority of
its current mortgage loan production into the secondary market due to the low
interest rate environment. During the third quarter, Citizens securitized $14.2
million of current fixed rate mortgage loan production and $50.8 million in
seasoned fixed and adjustable rate mortgage loans and is currently holding these
securities within its investment portfolio. During the second quarter, Citizens
securitized $63.5 million in seasoned adjustable rate mortgage (ARM) loans and
subsequently sold these securities at a $2.4 million gain.
Commercial loan balances have remained flat since December 31, 2001 due to
weaker demand caused by the sluggish economy, particularly within the
manufacturing sector in Citizens' markets. Consumer loans, other than mortgage
loans, have increased $49 million from year end, due to growth in home equity
lending. Deposits have remained essentially flat from year end 2001 as growth in
core deposits was offset by a decline in brokered and large denomination time
deposits as part of Citizens' strategy to reduce higher cost funding. In
addition, Citizens prepaid $75 million in high cost Federal Home Loan Bank debt
at the end of the third quarter.
NET INTEREST MARGIN AND NET INTEREST INCOME
Net interest margin declined to 4.40% in the third quarter compared to 4.45% in
the second quarter of 2002 and 4.44% in the third quarter of 2001. The decline
in net interest margin is primarily attributable to the amortization of
additional premium on mortgage related obligations within Citizens' investment
portfolio. The additional amortization of $0.7 million (included in other
charges) was caused by faster repayments on these mortgage-related instruments
due to the high rate of refinances in the mortgage industry. The prepayment of
some high cost Federal Home Loan Bank advances at the end of the third quarter
will have a positive effect on net interest margin and interest rate sensitivity
beginning in the fourth quarter. Net interest income declined $3.1 million in
the third quarter of 2002 compared to the same period a year ago. The decline is
primarily attributable to a lower level of earning assets caused by a decline in
loan balances, particularly mortgage loans.
On a year to date basis, net interest margin improved to 4.43% in the first nine
months of 2002 from 4.27% in the same period a year ago. The improvement
resulted from significantly lower funding costs as the cost of interest bearing
liabilities declined 168 basis points to 2.83% in the first nine months of 2002
from 4.51% in the same period of 2001. Despite the improvement in net interest
margin, net interest income declined $4.8 million to $225.6 million during this
period due primarily to a lower level of earning assets.
NONINTEREST INCOME
Noninterest income totaled $19.7 million during the third quarter, down $15
million or 43% from the same quarter in 2001. Excluding the $11.0 million gain
on the sale of NYCE stock during the third quarter of 2001, the $2.3 million
decline in bankcard fees due to the second quarter 2002 sale of the merchant
services business and the $1.6 million of other charges recorded in the third
quarter of 2002, noninterest income was essentially flat in the third quarter of
2002 compared to 2001. Trust fees declined $724,000 or 14.2% due to a 19.4%
decline in trust assets under administration primarily from weak equity markets.
NONINTEREST INCOME - CONTINUED
Service charges on deposit accounts decreased $340,000 due to a decline in
overdraft fees. Mortgage and other loan income increased $88,000 or 3% for the
quarter compared to the same period in 2001 and brokerage and investment fees
were up $307,000 or 15%. Other charges recorded in noninterest income are
comprised of market value adjustments of $650,000 in life insurance cash
surrender values and $662,000 in equity investments, and other losses of
$275,000.
For the nine months ended September 30, 2002 noninterest income declined $16.4
million from the same period of 2001 to $75.1 million. Higher gains from sales
of assets in 2001 than in 2002 of $11.2 million as well as other charges of $1.6
million in 2002 accounted for $12.8 million of this decline. Bankcard fees
declined $3.7 million reflecting the second quarter 2002 sale of the merchant
services business and the second quarter 2001 sale of the Michigan credit card
portfolio. Trust fees declined $1.6 million due to a 14.7% decline in trust
assets under administration while deposit service charges decreased $1.1
million. Brokerage and investment fees increased $1.1 million, and mortgage and
other loan income increased $430,000, partially offsetting the decline.
OPERATING EXPENSES
Operating expenses for the quarter were $79.5 million, compared to $64.3 million
for the third quarter of 2001. Excluding the special charge of $13.8 million in
connection with the restructuring initiatives set forth above and other charges
of $7.1 million, operating expenses declined $5.6 million or 8.8% in the current
quarter over the same period of 2001. Bankcard expenses decreased $2.2 million
due to the aforementioned sale of the merchant services business. Intangible
asset amortization declined $1.8 million from 2001 due to the adoption of a new
accounting standard that eliminated goodwill amortization. Data processing
service fees were down $430,000 or 12.3% to $3,066,000.
Other charges recorded in operating expenses included a $3.3 million prepayment
penalty on high cost FHLB advances, a $2.0 million contribution to Citizens'
charitable trust, a $1.0 million valuation allowance on other real estate owned,
$406,000 in additional depreciation on equipment to be retired early and
$383,000 in losses and other items.
For the nine months ending September 30, 2002 noninterest expenses, excluding
the special charge of $13.8 million and $7.1 million of other charges, decreased
$9.2 million from the same period of the prior year. The decrease was due to
lower intangible asset amortization of $5.4 million, lower bankcard expenses of
$3.4 million and decreased data processing costs of $518,000. Partially
offsetting these decreases were higher compensation expenses of $914,000 and
professional services of $655,000. Higher professional fees were the result of
the engagement of banking industry consultants to assist in the restructuring.
CREDIT QUALITY
The $80 million incremental loan loss provision resulted from an unusually high
amount of commercial credits that deteriorated to charge-off during the quarter
as well as increases in nonperforming impaired credits within Citizens'
commercial loan portfolio during the third quarter of 2002. Loan charge-offs
during the quarter totaled $65.5 million, of which $62.0 million were from the
commercial loan portfolio. Charge-offs of $37.0 million, comprising nearly 60%
of the commercial loan net charge-offs, related to seven customers. The loan
charge-offs were from a variety of industries, including automotive
manufacturing and packaging, heavy construction, health supplement products and
real estate development.
Nonperforming assets increased to $108.0 million at September 30, 2002, up from
$87.8 million at June 30, 2002. As a result of the higher loan charge-offs and
nonperforming asset levels, and the impact of recent loan loss history on the
loan loss allowance formula, the provision for loan losses increased to $89.3
million during the quarter compared to $8.5 million in the same quarter of last
year.
The reserve for loan losses increased to $104.2 million or 1.89% of loans from
$80.4 million, or 1.45% of loans, at June 30, 2002. "Many of our commercial
clients have been negatively affected by a weak economy that has yet to show
significant signs of recovery. Consequently, business expansion plans have been
curtailed, inventory levels have been reduced and our clients' ability to repay
their debt, in some cases, has been compromised," remarked Hartman.
CREDIT QUALITY - CONTINUED
"In addition to adjustments to our reserves, our new business banking structure
will place the company's most qualified client contact staff closer to the
clients they serve and will provide them with the credit and decision-making
support they need to serve their clients more quickly and efficiently. This
support begins with the placement of credit officers in the field to work
directly with the commercial sales staff. Another benefit to the new structure
is the implementation of an automated credit approval process to improve our
credit underwriting for small business lending. Bringing all of the elements for
quality decision making to the beginning of the credit process should provide us
with an improved early warning process," commented Hartman.
DIVIDEND ANNOUNCEMENT
The Board of Directors of Citizens Banking Corporation declared a cash dividend
of $0.285 per share of common stock. The dividend is payable on November 6,
2002, to shareholders of record on October 25, 2002.
EARNINGS OUTLOOK
Citizens is anticipating fourth quarter earnings per share of $0.48 to $0.51
with modest growth off that base in 2003. After management's initiatives become
more fully implemented in the first half of 2003, the Company expects earnings
growth to accelerate and targets a 7% to 10% earnings per share growth in 2004
compared to 2003.
OTHER NEWS
Citizens also announced the addition of two new officers to its management team.
Roy Eon was appointed executive vice president and head of Citizens' operations
and technology division on July 29, 2002. Prior to joining Citizens, Eon was
manager of operations and technology for First Merchants Corporation in Muncie,
Indiana. He also spent 16 years with Bank One in a variety of operations
positions and was named national manager of Bank One's deposit operations in
1997.
Also, Charles D. Christy was appointed to the position of chief financial
officer and executive vice president on September 3, 2002. Christy was with Bank
One Corporation from 1991 until joining Citizens, serving in several Bank One
units as either the chief financial officer or treasurer. Most recently, he was
director of strategy and acquisitions for Bank One's investment management
group.
As part of the Board's original management succession plan, William R. Hartman,
president and CEO, has been appointed to the additional post of chairman of the
board, effective January 17, 2003, succeeding the retiring Robert J. Vitito.
SAFE HARBOR STATEMENT
Discussions in this release that are not statements of historical fact
(including statements in the "Earnings Outlook" and statements that include
terms such as "believe", "expect", and "anticipate") are forward-looking
statements that involve risks and uncertainties, and the Company's actual future
results could materially differ from those discussed. Factors that could cause
or contribute to such differences include, but are not limited to, the Company's
future lending and collections experience, the effects of acquisitions and the
ability to integrate acquired operations, market acceptance of the Company's
products and services, competition from other institutions and unanticipated
changes in the competitive environment, changes in the banking industry and its
regulation, needs for technological change, relationships with third party
vendors and clients, the effect of terrorist attacks and potential attacks and
other factors, including those which are discussed in the Company's filings with
the Securities and Exchange Commission.
Other factors not currently anticipated by management may also materially and
adversely affect Citizens' results of operations. Citizens does not undertake,
and expressly disclaims any obligation, to update or alter its forward-looking
statements whether as a result of new information, future events or otherwise,
except as required by applicable law.
####
(Financial highlights follow)
Visit our Web site at http://www.citizensonline.com
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, December 31,
(in thousands) 2002 2001(1)
ASSETS
Cash and due from banks $ 221,218 $ 224,416
Money market investments:
Federal funds sold -- 891
Interest-bearing deposits with banks 2,498 3,455
Term federal funds sold -- --
---------- ----------
Total money market investments 2,498 4,346
Securities available-for-sale:
Taxable 1,051,678 864,516
Nontaxable 449,049 433,180
---------- ----------
Total securities 1,500,727 1,297,696
Mortgage loans held for sale 121,288 150,443
Loans 5,524,023 5,771,963
Less: Allowance for loan losses (104,158) (80,299)
---------- ----------
Net loans 5,419,865 5,691,664
Premises and equipment 122,006 128,805
Goodwill 54,785 54,785
Other intangible assets 23,858 26,191
Other assets 147,592 100,529
---------- ----------
TOTAL ASSETS $7,613,837 $7,678,875
---------- ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $ 888,642 $ 903,900
Interest-bearing deposits 5,015,080 5,061,226
---------- ----------
Total deposits 5,903,722 5,965,126
Federal funds purchased and securities sold
under agreements to repurchase 281,676 233,077
Other short-term borrowings 166,662 81,353
Other liabilities 64,027 72,756
Long-term debt 529,497 629,099
---------- ----------
Total liabilities 6,945,584 6,981,411
SHAREHOLDERS' EQUITY
Preferred stock - no par value:
Common stock - no par value: 135,833 155,720
Retained earnings 486,762 521,191
Other accumulated comprehensive net income 45,658 20,553
---------- ----------
Total shareholders' equity 668,253 697,464
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $7,613,837 $7,678,875
========== ==========
(1) Certain amounts have been reclassified to conform with current year
presentation.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands, except per share amounts) 2002 2001(1) 2002 2001(1)
INTEREST INCOME
Interest and fees on loans $ 95,924 $121,137 $292,912 $381,614
Interest and dividends on investment securities:
Taxable 14,150 12,973 41,121 44,562
Nontaxable 5,319 5,499 16,038 16,238
Money market investments 165 797 755 1,810
-------- -------- -------- --------
Total interest income 115,558 140,406 350,826 444,224
-------- -------- -------- --------
INTEREST EXPENSE
Deposits 31,725 48,653 99,160 164,314
Short-term borrowings 1,007 4,761 2,876 24,821
Long-term debt 7,644 8,732 23,240 24,784
-------- -------- -------- --------
Total interest expense 40,376 62,146 125,276 213,919
-------- -------- -------- --------
NET INTEREST INCOME 75,182 78,260 225,550 230,305
Provision for loan losses 89,250 8,500 103,900 18,911
-------- -------- -------- --------
Net interest income (loss) after provision for loan losses (14,068) 69,760 121,650 211,394
-------- -------- -------- --------
NONINTEREST INCOME
Service charges on deposit accounts 6,620 6,960 19,767 20,844
Trust fees 4,372 5,096 14,260 15,860
Mortgage and other loan income 2,928 2,840 9,825 9,395
Brokerage and investment fees 2,337 2,030 7,020 5,933
Bankcard fees 672 2,922 5,359 9,032
Investment securities gains 45 49 (12) 400
Gain on sale of assets -- 11,017 7,836 19,012
Other 2,760 3,793 11,020 10,983
-------- -------- -------- --------
Total noninterest income 19,734 34,707 75,075 91,459
-------- -------- -------- --------
NONINTEREST EXPENSE
Salaries and employee benefits 32,218 32,304 96,262 95,348
Equipment 5,167 4,655 14,981 14,686
Occupancy 4,307 4,174 13,506 13,554
Professional services 3,524 3,646 9,713 9,058
Data processing services 3,066 3,496 9,441 9,959
Intangible asset amortization 725 2,530 2,174 7,590
Bankcard expense 134 2,334 3,787 7,178
Special charge 13,807 -- 13,807 --
Other 16,597 11,131 38,586 33,224
-------- -------- -------- --------
Total noninterest expense 79,545 64,270 202,257 190,597
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (73,879) 40,197 (5,532) 112,256
Income tax provision (benefit) (27,950) 12,235 (9,045) 33,341
-------- -------- -------- --------
NET INCOME (LOSS) $(45,929) $ 27,962 $ 3,513 $ 78,915
-------- -------- -------- --------
NET INCOME (LOSS) PER SHARE:
Basic $ (1.03) $ 0.60 $ 0.08 $ 1.70
Diluted (1.03) 0.60 0.08 1.69
AVERAGE SHARES OUTSTANDING:
Basic 44,610 46,102 44,819 46,321
Diluted 44,610 46,670 45,295 46,799
(1) Certain amounts have been reclassified to conform with current year
presentation.
SELECTED QUARTERLY INFORMATION
CITIZENS BANKING CORPORATION AND SUBSIDIARIES
<Table>
<Caption>
3RD QTR 2002 2ND QTR 2002 1ST QTR 2002 4TH QTR 2001 3RD QTR 2001 2
SUMMARY OF OPERATIONS (THOUSANDS)
Interest income (1) $115,558 $116,993 $118,275 $129,335 $140,406
Interest expense 40,376 41,584 43,316 51,659 62,146
Net interest income 75,182 75,409 74,959 77,676 78,260
Provision for loan losses 89,250 9,400 5,250 7,496 8,500
Net interest income (loss) after provision for loan (14,068) 66,009 69,709 70,180 69,760
losses
Noninterest income before securities gains (1) 19,689 28,238 24,724 25,599 34,658
Investment securities gains 45 2,377 2 423 49
Noninterest expense before special charge (1) 65,738 61,521 61,191 60,586 64,270
Special charge 13,807 -- -- -- --
Income tax provision (benefit) (27,950) 9,764 9,141 9,874 12,235
Net income (loss) (45,929) 25,339 24,103 25,742 27,962
--------------------------------------------------------------------------
AT PERIOD END (MILLIONS)
Total assets $ 7,614 $ 7,547 $ 7,482 $ 7,679 $ 7,715
Total earning assets 7,149 7,160 7,102 7,224 7,304
Total loans 5,524 5,567 5,613 5,772 5,866
Total deposits 5,904 5,866 5,861 5,965 5,890
Total shareholders' equity 668 715 700 697 721
--------------------------------------------------------------------------
AVERAGE BALANCES (MILLIONS)
Total assets $ 7,616 $ 7,533 $ 7,565 $ 7,701 $ 7,809
Total earning assets 7,194 7,150 7,157 7,287 7,388
Total loans 5,577 5,536 5,623 5,786 5,918
Total deposits 5,951 5,900 5,924 5,930 5,944
Total shareholders' equity 711 702 701 708 713
Shareholders' equity / assets 9.34% 9.32% 9.27% 9.19% 9.13%
--------------------------------------------------------------------------
CREDIT QUALITY STATISTICS (THOUSANDS)
Nonaccrual loans $ 98,732 $ 77,624 $ 67,998 $ 68,793 $ 66,875
Loans 90 or more days past due and still accruing 1,260 1,207 3,176 4,168 4,665
Restructured loans -- 336 336 337 171
-------- -------- -------- -------- --------
Total nonperforming loans 99,992 79,167 71,510 73,298 71,711
Other repossessed assets acquired (ORAA) 8,025 8,621 8,600 5,947 7,325
-------- -------- -------- -------- --------
Total nonperforming assets $108,017 $ 87,788 $ 80,110 $ 79,245 $ 79,036
======== ======== ======== ======== ========
Allowance for loan losses $104,158 $ 80,447 $ 80,425 $ 80,299 $ 81,355
Allowance for loan losses ratio 1.89% 1.45% 1.43% 1.39% 1.39%
Allowance for loan losses as a percent of
nonperforming assets 96.43 91.64 100.39 101.33 102.93
Allowance for loan losses as a percent of
nonperforming loans 104.17 101.62 112.47 109.55 113.45
Nonperforming assets as a percent of loans plus ORAA 1.95 1.57 1.43 1.37 1.35
Nonperforming assets as a percent of total assets 1.42 1.16 1.07 1.03 1.02
Net loans charged off as a percent of average loans
(annualized) 4.70 0.68 0.37 0.57 0.57
Net loans charged off (000) $ 65,539 $ 9,378 $ 5,124 $ 8,312 $ 8,496
--------------------------------------------------------------------------
PER COMMON SHARE DATA
Net Income (loss):
Basic ($1.03) $ 0.57 $ 0.53 $ 0.57 $ 0.60
Diluted (1.03) 0.56 0.53 0.56 0.60
Dividends 0.285 0.285 0.275 0.275 0.275
Market Value:
High $ 29.43 $ 33.88 $ 33.20 $ 34.02 $ 32.75
Low 23.35 27.82 30.67 27.70 27.30
Close 24.17 28.98 32.47 32.88 32.08
Book value 14.97 16.02 15.55 15.46 15.77
Shares outstanding, end of period (000) 44,631 44,624 45,028 45,098 45,742
--------------------------------------------------------------------------
PERFORMANCE RATIOS (ANNUALIZED)
Net interest margin (FTE) 4.40% 4.45% 4.45% 4.48% 4.44%
Return on average assets (2.39) 1.35 1.29 1.33 1.42
Return on average shareholders' equity (25.63) 14.48 13.94 14.42 15.56
Efficiency ratio (2) 58.64 60.40 59.22 57.06 60.86
--------------------------------------------------------------------------
</Table>
(1) Third quarter amounts for 2002 include other charges as follows: $701,000 in
interest income, $1,587,000 in noninterest income, and $7,068,000 in
noninterest expense.
(2) Excludes nonrecurring gains, special and other charges.
FINANCIAL SUMMARY AND COMPARISON
CITIZENS BANKING CORPORATION AND SUBSIDIARIES SEPTEMBER 30
2002 2001 % CHANGE
- ---------------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS (THOUSANDS)
Interest income (1) $350,826 $444,224 (21.0)%
Interest expense 125,276 213,919 (41.4)
Net interest income 225,550 230,305 (2.1)
Provision for loan losses 103,900 18,911 449.4
Net interest income after provision for loan losses 121,650 211,394 (42.5)
Noninterest income before securities gains (1) 72,651 85,687 (15.2)
Investment securities gains 2,424 5,772 (58.0)
Noninterest expense before special charge (1) 188,450 190,597 (1.1)
Special charge 13,807 -- --
Income tax provision (benefit) (9,045) 33,341 (127.1)
Net income 3,513 78,915 (95.5)
- ---------------------------------------------------------------------------------------------------------------------------
AT PERIOD END (MILLIONS)
Total assets $7,614 $7,715 (1.3)%
Total earning assets 7,149 7,304 (2.1)
Total loans 5,524 5,866 (5.8)
Total deposits 5,904 5,890 0.2
Total shareholders' equity 668 721 (7.4)
- ---------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES (MILLIONS)
Total assets $7,571 $8,015 (5.5)%
Total earning assets 7,167 7,585 (5.5)
Total loans 5,578 6,084 (8.3)
Total deposits 5,925 6,034 (1.8)
Total shareholders' equity 705 701 0.6
Shareholders' equity / assets 9.31 % 8.75 % 6.4
- ---------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA
Net Income:
Basic $0.08 $1.70 (95.3)%
Diluted 0.08 1.69 (95.3)
Dividends 0.845 0.810 4.3
Market Value:
High $33.88 $32.75 3.5
Low 23.35 23.69 (1.4)
Close 24.17 32.08 (24.7)
Book value 14.97 15.77 (5.1)
Tangible book value per share 13.21 14.01 (5.7)
Shares outstanding, end of period (000) 44,631 45,742 (2.4)
- ---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS (ANNUALIZED)
Net interest margin (FTE) (2) 4.43 % 4.27 % 3.7 %
Return on average assets 0.06 1.32 (95.5)
Return on average shareholders' equity 0.67 15.05 (95.5)
Net loans charged off as a percent of average loans 1.91 0.39 389.7
- ---------------------------------------------------------------------------------------------------------------------------
(1) Amounts for 2002 include other charges as follows: $701,000 in interest
income, $1,587,000 in noninterest income, and $7,068,000 in noninterest
expense.
(2) Average rates are presented on an annual basis and include taxable
equivalent adjustments to interest income of $10,843,000 and $11,132,000
for the nine months ended September 30, 2002 and 2001, respectively, based
on a tax rate of 35%.
NONINTEREST INCOME AND NONINTEREST EXPENSES (UNAUDITED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES
Quarter Ended
--------------------------------------------------------------------------
Sept 30 Jun 30 Mar 31 Dec 31 Sept 30
(in thousands) 2002 2002 2002 2001 2001
- ----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Service charges on deposit accounts $ 6,620 $ 6,515 $ 6,632 $ 6,929 $ 6,960
Trust fees 4,372 5,030 4,858 5,168 5,096
Mortgage and other loan income 2,928 2,872 4,025 3,764 2,840
Brokerage and investment fees 2,337 2,633 2,050 2,224 2,030
Bankcard fees 672 1,929 2,758 2,767 2,922
Other 4,347 3,859 4,401 3,954 3,793
----------- ----------- ------------ ----------- ------------
Total fees and other income 21,276 22,838 24,724 24,806 23,641
Investment securities gains (losses) 45 (59) 2 423 49
----------- ----------- ------------ ----------- ------------
Total before nonrecurring gains and other
charges 21,321 22,779 24,726 25,229 23,690
----------- ----------- ------------ ----------- ------------
Nonrecurring gains:
Gain on sale of NYCE stock -- -- -- -- 11,017
Gain on sale of bank -- -- -- 793 --
Gain on sale of merchant business -- 5,400 -- -- --
Gain on securitized mortgages -- 2,436 -- -- --
Other charges:
Equity investment write-down (662) -- -- -- --
Cash surrender value adjustment (650) -- -- -- --
Other losses (275) -- -- -- --
----------- ----------- ------------ ----------- ------------
Total nonrecurring gains and other charges (1,587) 7,836 -- 793 11,017
----------- ----------- ------------ ----------- ------------
TOTAL NONINTEREST INCOME $ 19,734 $ 30,615 $ 24,726 $ 26,022 $ 34,707
=========== =========== ============ =========== ============
OPERATING EXPENSES:
Salaries and employee benefits $ 32,218 $ 31,844 $ 32,200 $ 30,930 $ 32,304
Equipment 4,761 4,956 4,858 4,631 4,655
Occupancy 4,307 4,584 4,615 4,159 4,174
Professional services 3,524 3,354 2,835 3,219 3,646
Data processing services 3,066 3,250 3,125 3,142 3,496
Intangible asset amortization 725 724 725 2,525 2,530
Bankcard expense 134 1,571 2,082 2,130 2,334
Other 9,935 11,238 10,751 9,850 11,131
----------- ----------- ------------ ----------- ------------
Total before special and other charges 58,670 61,521 61,191 60,586 64,270
----------- ----------- ------------ ----------- ------------
Special charge 13,807 -- -- -- --
Other charges:
Prepayment penalty on debt 3,300 -- -- -- --
Contribution to charitable trust 2,000 -- -- -- --
O.R.E. valuation adjustment 979 -- -- -- --
Additional depreciation on equipment 406 -- -- -- --
Other losses 383 -- -- -- --
----------- ----------- ------------ ----------- ------------
Total special and other charges 20,875 -- -- -- --
----------- ----------- ------------ ----------- ------------
TOTAL NONINTEREST EXPENSES $ 79,545 $ 61,521 $ 61,191 $ 60,586 $ 64,270
=========== =========== ============ =========== ============
AVERAGE BALANCES, YIELDS AND RATES
THREE MONTHS ENDED
------------------------------------------------------------------------------
9/30/2002 6/30/2002 9/30/2001
------------------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
(in thousands) BALANCE RATE (1) BALANCE RATE (1) BALANCE RATE (1)
- -------------------------------------------------------------------------------------------------------------------------
EARNING ASSETS
Money market investments $ 41,538 1.55% $ 54,620 1.69% $ 88,729 3.54%
Investment securities(2):
Taxable 1,009,300 5.61 1,001,223 5.83 801,660 6.47
Tax-exempt 416,550 7.86 418,178 7.85 429,847 7.87
Mortgage loans held for sale 82,804 8.29 99,097 7.52 107,323 11.42
Loans:
Commercial 3,376,664 6.20 3,348,395 6.39 3,418,443 7.78
Real estate 681,658 7.03 702,178 7.23 973,129 7.38
Direct consumer 848,198 7.63 830,479 7.84 820,329 8.82
Indirect consumer 670,960 8.18 654,580 8.24 705,582 8.75
---------- ---------- ----------
Total earning assets 7,127,672 6.65 7,108,750 6.80 7,345,042 7.80
NONEARNING ASSETS
Cash and due from banks 182,153 172,645 205,544
Investment security fair value 65,960 41,128 43,086
adjustment
Other nonearning assets 321,965 290,302 297,228
Allowance for loan losses (82,244) (80,246) (81,807)
---------- ---------- ----------
Total assets $7,615,506 $7,532,579 $7,809,093
========== ========== ==========
INTEREST-BEARING LIABILITIES
Deposits:
Demand deposits $1,151,589 1.64 $1,115,440 1.63 $ 805,186 2.15
Savings deposits 1,374,149 1.19 1,350,890 1.17 1,420,092 2.14
Time deposits 2,539,356 3.57 2,581,794 3.79 2,829,613 5.14
Short-term borrowings 249,531 1.60 213,653 1.69 420,964 4.48
Long-term debt 615,124 4.93 629,671 4.98 638,912 5.42
---------- ---------- ----------
Total interest-bearing liabilities 5,929,749 2.70 5,891,448 2.83 6,114,767 4.03
NONINTEREST-BEARING LIABILITIES AND
SHAREHOLDERS' EQUITY
Demand deposits 886,387 851,867 888,822
Other liabilities 88,392 87,341 92,450
Shareholders' equity 710,978 701,923 713,054
---------- ---------- ----------
Total liabilities and
shareholders' equity $7,615,506 $7,532,579 $7,809,093
========== ========== ==========
NET INTEREST SPREAD 3.95% 3.97% 3.77%
NET INTEREST INCOME AS A PERCENT OF 4.40% 4.45% 4.44%
EARNING ASSETS
NINE MONTHS ENDED
---------------------------------------------------
9/30/2002 9/30/2001
--------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
(in thousands) BALANCE RATE (1) BALANCE RATE (1)
- ----------------------------------------------------------------------------------------------------------
EARNING ASSETS
Money market investments $ 68,843 1.45% $ 57,878 4.15%
Investment securities(2):
Taxable 943,410 5.81 902,479 6.58
Tax-exempt 418,108 7.87 417,406 7.98
Mortgage loans held for sale 109,458 7.66 89,247 9.49
Loans:
Commercial 3,355,483 6.38 3,466,813 8.18
Real estate 729,941 7.11 1,073,629 7.53
Direct consumer 832,054 7.86 842,184 9.33
Indirect consumer 660,943 8.25 701,266 8.77
---------- ----------
Total earning assets 7,118,240 6.79 7,550,902 8.05
NONEARNING ASSETS
Cash and due from banks 180,701 201,724
Investment security fair value adjustment 48,796 34,572
Other nonearning assets 304,525 308,930
Allowance for loan losses (81,146) (81,245)
---------- ----------
Total assets $7,571,116 $8,014,883
========== ==========
INTEREST-BEARING LIABILITIES
Deposits:
Demand deposits $1,112,259 1.61 $ 682,672 1.94
Savings deposits 1,364,617 1.18 1,501,233 2.63
Time deposits 2,584,035 3.81 2,967,714 5.63
Short-term borrowings 231,807 1.66 610,607 5.42
Long-term debt 624,349 4.98 581,552 5.70
---------- ----------
Total interest-bearing liabilities 5,917,067 2.83 6,343,778 4.51
NONINTEREST-BEARING LIABILITIES AND SHAREHOLDERS'
EQUITY
Demand deposits 864,238 882,677
Other liabilities 85,273 87,894
Shareholders' equity 704,538 700,534
---------- ----------
Total liabilities and shareholders' equity $7,571,116 $8,014,883
========== ==========
NET INTEREST SPREAD 3.96% 3.54%
NET INTEREST INCOME AS A PERCENT OF EARNING ASSETS 4.43% 4.27%
(1) Average rates are presented on an annual basis and include taxable
equivalent adjustments to interest income.
(2) For presentation in this table, average balances and the corresponding
average rates for investment securities are based upon historical cost,
adjusted for amortization of premiums and accretion of discounts.