EXHIBIT 99.1
CITIZENS BANKING CORPORATION
328 S. Saginaw Street
Flint, Michigan 48502-1943
(810) 766-7500
FOR IMMEDIATE RELEASE
[CITIZENS LOGO] July 11, 2003
CITIZENS BANKING CORPORATION
ANNOUNCES SECOND QUARTER RESULTS
FLINT, MICHIGAN --- Citizens Banking Corporation announced net income of
$13,214,000 or $0.30 per diluted share for the three months ended June 30, 2003,
compared to net income of $25,339,000 or $0.56 per diluted share in the same
quarter of 2002 and net income of $15,058,000 or $0.34 per share in the first
quarter of 2003. Returns on average assets and average equity during the second
quarter were 0.68% and 8.29%, respectively, compared with 1.35% and 14.48% in
the second quarter of 2002. For the six months ended June 30, 2003, net income
was $28,272,000 or $0.65 per diluted share, compared to $49,442,000 or $1.09 per
diluted share for the same period of 2002.
"As a result of the continued economic slowness and the fraud related losses we
experienced in the fourth and first quarters, we conducted a thorough review of
our commercial loan portfolio which has included collateral field audits and an
in-depth risk rating review. As expected, commercial loan charge-offs for this
quarter were lower than those of last quarter. We have taken provision expense
in excess of the reduced charge-off level as a result of this risk rating review
and the continued application of our enhanced internal risk rating process.
Based on this review, our new credit processes and credit administration
procedures, we now expect charge-offs and loan loss provision in the third and
fourth quarters to be less than $12 million per quarter," stated William R.
Hartman, chairman, president and CEO.
Preliminary analysis of the collateral field audits which were initiated in late
March have created numerous opportunities with our customers to clarify
borrowing base requirements and to improve their internal reporting
capabilities. Analyzed results have not uncovered any further instances of
fraudulent reporting. However, Citizens has, in several situations, chosen to
exit a lending relationship with a client, principally due to their
unwillingness to amend or upgrade internal reporting. Citizens expects to
complete the analysis of these 162 field examinations within the third quarter.
Regular audits of receivable and inventory collateral will remain a standard
practice going forward.
The second quarter provision for loan losses of $25.7 million represented a
35.1% increase over the first quarter of 2003, and resulted from risk rating
downgrades in the commercial portfolio which drove additional formula reserves.
In addition to the collateral field audits, Citizens conducted a review of
higher risk "pass" rated credits to confirm risk ratings of these loans. As a
result of this review and our enhanced risk rating process, Citizens downgraded
approximately $348 million of commercial loans resulting in additional provision
requirements of $18.5 million this quarter. "We believe these initiatives
conservatively position us to deal with the protracted impact of the economy
upon the financial performance of our commercial customers," Hartman commented.
KEY ACTIONS IN THE QUARTER:
- - Citizens Bank Wealth Management, N.A. formed strategic alliances with SEI
Investments and EnvestnetPMC, Inc. in May. These alliances will expand
product offerings and provide upgraded systems and technology in the wealth
management line of business. "The new alliances will expand our
comprehensive wealth management capabilities and allow us to be the premier
provider of investment products and services in our markets while improving
the efficiency of our wealth management line of business," explained
Hartman.
- - Citizens' home equity line of credit campaign yielded favorable results
with over 3,500 new accounts being opened with balances in excess of $105
million. Overall home equity loans have increased 24% or approximately $120
million over the comparable quarter in 2002.
- - Citizens issued approximately $25 million of floating rate, 30 year trust
preferred securities, initially set at 4.16%. These trust preferred
securities qualify as Tier 1 regulatory capital and will improve Citizens'
Tier 1, total capital and leverage capital ratios.
- - Citizens' new checking campaign, "Perfect Fit", is yielding positive
results with over 9,200 new accounts being opened representing nearly $54
million in deposit balances.
BALANCE SHEET
Citizens' total assets at June 30, 2003 were $7.786 billion, an increase of
$21.0 million or 0.27% compared with March 31, 2003 and an increase of $264
million or 3.5% compared with December 31, 2002. Although total assets at June
30, 2003 were virtually unchanged from March 31, 2003 levels, average assets for
the second quarter increased $355 million from first quarter 2003 levels. Total
average assets increased as Citizens expanded its investment securities
portfolio beginning near the end of the first quarter to offset the effects of
weak loan demand and the prospect of net interest margin pressure from continued
low interest rates. Loans declined $16 million or 0.3% from March 31, 2003 and
$146 million or 2.7% compared with December 31, 2002. The decline in loans from
year-end 2002 was caused by a decrease in commercial and mortgage loans,
partially offset by an increase in consumer loans.
Commercial loans decreased $179 million or 5.4% at June 30, 2003 compared with
December 31, 2002 due to lower demand for commercial credit in the still
sluggish economy, increased activity in fixed-rate loan refinancing and paydowns
and proactive identification and reduction of exposure on credits with the
potential to deteriorate. The decline occurred primarily in Citizens' Michigan
and Wisconsin markets, and to a lesser extent, the Iowa market. Mortgage loans
declined $41 million or 6.6% at June 30, 2003 from year end 2002 due to the
continued sale of most new mortgage loan production into the secondary market
and record high refinancing activity causing prepayment of existing portfolio
loans in the historically low interest rate environment.
Consumer loans increased $74 million or 4.9% at June 30, 2003 compared to
December 31, 2002 due to the success of the home equity campaign. Home equity
loans increased 13.2% from year-end 2002 (a 26.5% annualized growth rate) and
comprised $73 million of the $74 million increase in consumer loans. A $19
million increase in indirect consumer loans at June 30, 2003 compared with year
end 2002 was largely offset by an $18 million decrease in other direct
(non--home equity) loans.
"Our recent home equity line of credit campaign has been very successful
producing account originations at a rate more than two times normal for such
loans. Additionally, we plan to conduct one or two more such campaigns over the
balance of this year," commented Wayne G. Schaeffer, executive vice president
and consumer banking manager.
Total deposits decreased $277 million to $5.660 billion at June 30, 2003
compared with $5.937 billion at December 31, 2002. The decline in deposits
occurred largely within time deposits, and to a lesser extent, savings deposits
as clients sought higher yielding investment alternatives in the low interest
rate environment. In the second quarter of 2003 Citizens began a marketing
campaign promoting its "Perfect Fit" checking account products to increase
growth in interest bearing and non-interest bearing checking accounts. Initial
results have been very favorable with new account openings double the normal
rate.
NET INTEREST MARGIN AND NET INTEREST INCOME
Net interest margin declined to 4.17% in the second quarter of 2003 compared to
4.33% in the first quarter of 2003 and 4.45% in the second quarter of 2002. The
decrease in net interest margin in the second quarter of 2003 compared to the
first quarter is related to Citizens' asset-sensitive interest rate risk
position and the continued low interest rate environment. The low level of
interest rates is generating increased refinancing of fixed rate commercial
loans and high mortgage loan and mortgage-related investment securities
prepayments. Origination of new home equity credits at lower ("teaser") interest
rates than existing loans in the consumer portfolio has contributed to the
decline in net interest margin. The second quarter 2003 net interest margin was
also affected by Citizens' strategy to expand the investment portfolio beginning
late in the first quarter of 2003. Citizens purchased mortgage backed securities
and collateralized mortgage obligations with average lives of three to five
years and an average duration of two to four years, resulting in interest
spreads up to 250 basis points over funding sources. This increased net interest
income yet reduced the net interest margin percentage in the second quarter.
Net interest margin declined to 4.25% from 4.45% for the six months ended June
30, 2003 compared to the same period of the prior year. The decline in net
interest margin for the six month period compared to the prior year was due to a
four basis point decline in the net interest spread and a 16 basis point decline
in the contribution of net noninterest bearing funding sources (noninterest
bearing liabilities and shareholders'
2
equity less nonearning assets). Net noninterest bearing funding sources declined
in the first half of 2003 compared to the same period of the prior year due to
the investment in bank owned life insurance in the third quarter of 2002, a
decline in shareholders' equity and the issuance of subordinated debt in the
first quarter of 2003.
Net interest income increased $1.4 million to $72.9 million in the second
quarter of 2003 compared to $71.5 million in the first quarter of 2003 due to an
increase in average earning assets. Average earning assets increased in the
second quarter due to the aforementioned expansion of the investment portfolio
beginning at the end of the first quarter 2003. Compared to the second quarter
of 2002, net interest income declined $2.5 million in the current quarter due to
a decrease in the net interest margin partially offset by an increase in earning
assets. For the first six months of 2003, net interest income declined $5.9
million due to a .20% decline in net interest margin partially offset by an
increase in earning assets.
With the recent decline in short term interest rates in response to the Federal
Reserve's action to lower the Federal Funds rate, as well as increased
prepayments in the investment portfolio, Citizens expects some continued
contraction of net interest margin in future quarters. Net interest income is
anticipated to decline in future quarters along with the lower net interest
margin.
NONINTEREST INCOME
Noninterest income for the second quarter of 2003 was $24.8 million, a decrease
of $5.8 million or 18.8% from the second quarter of 2002. Noninterest income for
the six months ended June 30, 2003 was $48.1 million compared to $55.3 million
in the first six months of 2002, a decrease of $7.2 million or 13.0%. The
decline in both the three and six month periods ended June 30, 2003 reflected
lower bankcard fees, trust fees, and brokerage and investment fees. Gains
recorded in the second quarter of 2002 of $5.4 million from the sale of our
merchant services business and $2.4 million from the sale of securitized
mortgages also contributed to the decline. Higher deposit service charges and
mortgage banking revenue partially offset the decline. Compared to the first
quarter of 2003, noninterest income increased $1.6 million or 6.7% reflecting
increases in all major categories including deposit service charges, trust fees,
mortgage and other loan income, and brokerage and investment fees.
Service charges on deposit accounts were up $1.0 million for both the three and
six-month periods ended June 30, 2003 compared to the same periods in 2002. The
increase reflected higher overdraft fee revenue due to the implementation of
additional fees, a new overdraft monitoring system and fewer waived fees. "Last
year we began an extensive review of the consumer bank business line, assisted
by banking industry consultants. The recommendations that have been implemented
are resulting in significant increases in fee income from service charges on
deposit accounts as well as a reduction in expense for staffing and other costs
of operations," Schaeffer remarked.
Bankcard fees declined $1.1 million or 57.8% for the quarter and $3.1 million or
67.0% for the first six months of 2003 compared to the same periods in 2002. The
decline in both periods resulted from the sale of the merchant services business
in the second quarter of 2002.
Trust fees for the quarter, decreased $0.7 million, or 14.0% compared to the
second quarter of 2002 and were down $1.3 million or 13.6% in the first six
months of 2003 compared to the same periods in 2002. These fees are based
primarily on the market value of assets under administration. Trust fees
declined since the second quarter of 2002 principally as a result of the decline
in the equity markets. Trust fee revenue, however, grew by $104,000 or 2.5% in
the second quarter of 2003 over the first quarter of 2003 due primarily to the
recent improvement in the equity markets. Total trust assets under
administration were $2.62 billion at June 30, 2003, down $112 million from June
30, 2002, but up $142 million from March 31, 2003.
Brokerage and investment fees declined $0.7 million or 27.3% for the quarter and
$1.0 million or 21.4% for the six months ended June 30, 2003 compared to the
same periods of 2002. The decline reflects slower retail sales of fixed annuity
products.
Mortgage and other loan income increased $2.5 million or 88.3% in the second
quarter of 2003 and $3.7 million or 53.2% in the first half of 2003 compared to
the same period of 2002 due to higher mortgage banking revenue. The increase in
mortgage banking revenue was primarily due to higher gains on the sale of
mortgage loans and the related servicing rights. A strong mortgage origination
market, spurred by low mortgage interest rates, helped push total mortgage
originations to $490 million in the second quarter, compared with $350 million
in the first quarter of 2003 and $228 million in the second quarter of 2002.
3
The majority of all new mortgage loan origination along with the related
servicing was sold in the secondary market.
Other noninterest income was up $1.0 million and $1.3 million for the three and
six months periods ended June 30, 2003, respectively compared to the same
periods of 2002, principally due to an increase in life insurance income and
title insurance fees. Higher life insurance income reflects the purchase of $78
million of separate account bank owned life insurance in the third quarter of
2002. Title insurance fees increased due to higher mortgage origination volume.
Citizens currently expects a decrease in noninterest income for 2003 as compared
to 2002 due primarily to sale of the merchant services business in 2002. The
gain of $5.4 million recorded in 2002 for this sale, as well as the loss of
revenue from the business, is expected to decrease noninterest income by
approximately $8.7 million in 2003. Based on the current economic and interest
rate environment, the remaining components of noninterest income are anticipated
to increase slightly on a collective basis in 2003 over full year 2002 levels.
NONINTEREST EXPENSE
Noninterest expense for the second quarter was $56.4 million compared to $61.5
million for the second quarter of 2002 and $56.6 million for the first quarter
of 2003, a decline of $5.1 million or 8.4% from the second quarter of 2002 and
$0.2 million or 0.4% from first quarter 2003. For the six months ended June 30,
2003, total noninterest expense decreased $9.8 million or 8.0% to $112.9 million
compared to the same period in 2002. The decline in both the three and six month
periods reflected decreases in nearly all the major components of noninterest
expense partially offset by an increase in professional services.
Salaries and employee benefits decreased $0.4 million or 1.4% for the quarter
and $2.5 million or 4.0% for the six months ended June 30, 2003 compared to the
same periods of 2002. Salary and benefit costs were down due to the
restructuring initiatives announced during the third quarter of 2002, which
included branch closures and reduced staff. Citizens had 2,376 full time
equivalent employees at June 30, 2003, down from 2,695 at June 30, 2002.
Equipment expenses decreased $1.1 million or 21.9% for the quarter, and $1.8
million or 18.1% for the six month period ended June 30, 2003, compared to the
same periods of 2002, as a result of lower depreciation expense and improved
pricing from new or renegotiated maintenance contracts.
Advertising and public relations expense decreased $1.2 million or 66.4% for the
quarter from the second quarter of 2002 and $1.0 million or 27.5% for the
six-month period ended June 30, 2003 compared to the same periods a year ago due
to fewer media-intensive marketing campaigns in the second quarter of 2003.
Bankcard expense declined $1.5 million or 94.2% for the quarter and $3.5 million
or 95.0% for the six month period ended June 30, 2003 compared to the same
periods of 2002 due to the sale of Citizens' merchant services business in the
second quarter of 2002.
Professional services increased $0.6 million or 18.0% for the quarter and $1.5
million or 23.9% for the six months ended June 30, 2003, compared to the same
periods of 2002 as a result of higher legal costs related to loan collection
efforts, recruiting fees, and costs associated with engagement of banking
industry consultants assisting in the restructuring and line of business focus.
Other noninterest expense decreased $1.0 million, or 11.8% for the quarter and
$2.1 million or 13.0% for the six months ended June 30, 2003 compared to the
same periods in 2002 due to declines in telephone, stationery and supplies
expense, and other losses primarily as a result of fewer branch locations and
staff due to the restructuring and business line reorganization. A payment of
$0.5 million in the first quarter of 2002 for partial settlement of an early
contract termination fee associated with the sale of the merchant services
business also contributed to the decline in 2003.
During 2002, noninterest expense included special and other significant charges
of $20.5 million relating to restructuring and other key actions previously
reported, which are not expected to recur in 2003. Citizens expects the
remaining components of noninterest expense on a collective basis to decrease in
2003 from 2002 levels due to anticipated cost savings from the restructuring
announced in September 2002 and other ongoing strategic initiatives.
4
CREDIT QUALITY
Nonperforming assets totaled $96.6 million or 1.24% of assets, at June 30, 2003,
representing an increase of $3.3 million or 3.5% from first quarter 2003 levels.
The allowance for loan losses increased to $126.0 million or 2.38% of loans,
from $112.4 million or 2.12% of loans at March 31, 2003. Net loans charged off
during the quarter totaled $12.0 million or 0.92% of average loans (annualized),
compared with $16.1 million in the first quarter of 2003 and $9.4 million in the
second quarter of 2002. Nonperforming assets are anticipated to decline slowly
from June 30, 2003 levels.
OTHER NEWS
Citizens announced on May 20,2003 agreements with SEI Investments and
EnvestnetPMC, Inc., two nationally known providers of asset management and
investment technology solutions, and Citizens Bank Wealth Management N.A., the
trust bank subsidiary of Citizens Banking Corporation. EnvestnetPMC will provide
the bank's wealth management clients with a broader range of mutual fund
products. Using their state-of-the-art web-based platform, Citizens will be able
to offer its wealth management clients more mutual funds family choices,
advanced research capabilities and sophisticated portfolio modeling. Through SEI
Investments the bank will offer additional individual securities to its
personal, business and institutional wealth management clients. SEI will provide
Citizens with advanced financial planning software, state-of-the-art research
and sophisticated client profiling tools. Additionally, Citizens will use SEI's
automated and centralized trust accounting services, which includes an advanced
statement solution and other processing functions.
On June 6, 2003, Citizens consolidated six of its branch offices (five Michigan
offices and one Wisconsin office) as part of its ongoing effort to improve the
efficiency of the retail delivery network.
During the second quarter of 2003, Citizens repurchased a total of 125,200
shares of its stock at an average price of $24.37. Since the stock repurchase
program was announced in October 2001, Citizens has repurchased 2,503,200 shares
at an average price of $28.19. As of June 30, 2003, 496,800 shares remain to be
purchased under the current program.
CONFERENCE CALL ANNOUNCEMENT
William R. Hartman, chairman, president and CEO, Charles D. Christy, CFO and
John D. Schwab, chief credit officer, will review the quarter's results in a
conference call for investors and analysts beginning at 10:00 AM EDT ON MONDAY,
JULY 14, 2003.
To participate in the conference call, please call the number below
approximately 10 minutes prior to the scheduled conference time:
US/Canada Dial-In Number: (800) 374-2419 International Dial-In Number:
(706) 634-1073 Conference ID: 1457415 Conference Name: "Citizens Banking
Corporation 2nd Quarter Earnings" R.S.V.P. is not required. A playback of the
conference call will be available after 2:00pm EDT through July 21, 2003, by
dialing US/Canada Dial-In Number: (800) 642-1687 or International Dial-In
Number: (706) 645-9291 conference ID: 1457415. Also, the call can be accessed
via Citizens' web site at www.CitizensOnline.com through the Investor Relations
section by clicking on Presentations or directly at
http://www.snl.com/Interactive/IR/presentations.asp?IID=100175. This release and
other statistical information referenced on the call will be posted on the web
site.
THE ANALYST CONFERENCE CALL PREVIOUSLY SCHEDULED FOR FRIDAY, JULY 18, 2003, HAS
BEEN CANCELED AS A RESULT OF THE RESCHEDULED JULY 14, 2003 CALL.
5
CORPORATE PROFILE
Citizens Banking Corporation is a diversified financial services company
providing a full range of commercial, consumer, mortgage banking, trust and
financial planning services to a broad client base. Citizens operates 182
branch, private banking, and financial center locations throughout Michigan,
Wisconsin, Iowa, and in suburban Chicago, Illinois.
CONTACT: Charles D. Christy
Chief Financial Officer
(810) 237-4200
Charlie.Christy@cbcf-net.com
CONTACT: Ryan P. Mathews
VP Investor Relations
(810) 257-2489
Ryan.Mathews@cbcf-net.com
TRADED: NASDAQ
SYMBOL: CBCF
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, adverse
changes in the Company's loan and lease portfolios and the resulting credit
risk-related losses and expenses, the Company's future lending and collections
experience and the potential inadequacy of the Company's loan loss reserves,
interest rate fluctuations and other adverse changes in economic or financial
market conditions, the potential inability to hedge certain risks economically,
adverse changes in competition and pricing environments, the Company's potential
failure to maintain or improve loan quality levels and origination volume, the
Company's potential inability to continue to attract core deposits, the
potential lack of market acceptance of the Company's products and services,
adverse changes in the Company's relationship with major customers,
unanticipated technological changes that require major capital expenditures,
adverse changes in applicable laws and regulatory requirements, unanticipated
environmental liabilities or costs, the Company's potential inability to
integrate acquired operations or complete our restructuring, the effects of
terrorist attacks and potential attacks, the Company's success in managing the
risks involved in the foregoing, and other risks and uncertainties detailed from
time to time in the company's filings with the Securities and Exchange
Commission.
Other factors not currently anticipated by management may also materially and
adversely affect the Company's results of operations. The Company 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
6
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Citizens Banking Corporation and Subsidiaries
JUNE 30, December 31,
(in thousands) 2003 2002(1)
- -----------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 205,709 $ 171,864
Money market investments:
Federal funds sold 4,000 69,000
Interest-bearing deposits with banks 2,380 2,332
----------- -----------
Total money market investments 6,380 71,332
Securities available-for-sale:
Taxable 1,471,776 1,021,668
Tax-exempt 432,309 435,613
----------- -----------
Total securities 1,904,085 1,457,281
Mortgage loans held for sale 136,429 160,743
Loans 5,287,249 5,432,561
Less: Allowance for loan losses (125,992) (109,467)
----------- -----------
Net loans 5,161,257 5,323,094
Premises and equipment 113,545 117,704
Goodwill 54,785 54,785
Other intangible assets 18,413 19,862
Bank owned life insurance 79,462 78,434
Other assets 105,859 66,935
----------- -----------
TOTAL ASSETS $ 7,785,924 $ 7,522,034
=========== ===========
LIABILITIES
Noninterest-bearing deposits $ 904,447 $ 900,674
Interest-bearing deposits 4,755,312 5,036,239
----------- -----------
Total deposits 5,659,759 5,936,913
Federal funds purchased and securities sold
under agreements to repurchase 437,418 223,289
Other short-term borrowings 27,397 79,062
Other liabilities 74,525 32,988
Long-term debt 947,657 599,313
----------- -----------
Total liabilities 7,146,756 6,871,565
SHAREHOLDERS' EQUITY
Preferred stock - no par value
Common stock - no par value 101,723 112,253
Retained earnings 499,044 495,570
Other accumulated comprehensive net income 38,401 42,646
----------- -----------
Total shareholders' equity 639,168 650,469
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,785,924 $ 7,522,034
=========== ===========
(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 Six Months Ended
June 30, June 30,
(in thousands, except per share amounts) 2003 2002(1) 2003 2002(1)
- ------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $ 82,519 $ 96,825 $ 167,023 $ 196,988
Interest and dividends on investment securities:
Taxable 17,106 14,602 31,540 26,971
Tax-exempt 5,037 5,335 10,221 10,719
Money market investments 21 231 108 590
--------- --------- --------- ---------
Total interest income 104,683 116,993 208,892 235,268
--------- --------- --------- ---------
INTEREST EXPENSE
Deposits 22,522 32,865 47,559 67,435
Short-term borrowings 1,414 904 2,034 1,869
Long-term debt 7,827 7,815 14,873 15,596
--------- --------- --------- ---------
Total interest expense 31,763 41,584 64,466 84,900
--------- --------- --------- ---------
NET INTEREST INCOME 72,920 75,409 144,426 150,368
Provision for loan losses 25,650 9,400 44,642 14,650
--------- --------- --------- ---------
Net interest income after provision for loan losses 47,270 66,009 99,784 135,718
--------- --------- --------- ---------
NONINTEREST INCOME
Service charges on deposit accounts 7,549 6,515 14,139 13,147
Trust fees 4,324 5,030 8,544 9,888
Mortgage and other loan income 5,409 2,872 10,563 6,897
Brokerage and investment fees 1,914 2,633 3,682 4,683
Bankcard fees 814 1,929 1,549 4,687
Investment securities gains (losses) 11 (59) 59 (57)
Gain on sale of merchant business --- 5,400 --- 5,400
Gain on securitized mortgages --- 2,436 --- 2,436
Other 4,826 3,859 9,598 8,260
--------- --------- --------- ---------
Total noninterest income 24,847 30,615 48,134 55,341
--------- --------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits 31,400 31,844 61,512 64,044
Equipment 3,869 4,956 8,038 9,814
Occupancy 4,314 4,584 9,009 9,199
Professional services 3,959 3,354 7,667 6,189
Data processing services 3,058 3,250 6,374 6,375
Postage and delivery 1,683 1,757 3,361 3,515
Advertising and public relations 623 1,856 2,672 3,687
Bankcard expense 91 1,571 182 3,653
Other 7,364 8,349 14,127 16,236
--------- --------- --------- ---------
Total noninterest expense 56,361 61,521 112,942 122,712
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 15,756 35,103 34,976 68,347
Income tax provision 2,542 9,764 6,704 18,905
--------- --------- --------- ---------
NET INCOME $ 13,214 $ 25,339 $ 28,272 $ 49,442
========= ========= ========= =========
NET INCOME PER SHARE:
Basic $ 0.30 $ 0.57 $ 0.65 $ 1.10
Diluted 0.30 0.56 0.65 1.09
AVERAGE SHARES OUTSTANDING:
Basic 43,248 44,789 43,376 44,925
Diluted 43,478 45,282 43,612 45,462
(1) Certain amounts have been reclassified to conform with current year
presentation.
SELECTED QUARTERLY INFORMATION
Citizens Banking Corporation and Subsidiaries
2ND QTR 2003 1ST QTR 2003 4TH QTR 2002 3RD QTR 2002 2ND QTR 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Summary of Operations (thousands)
Interest income (1) $ 104,683 $ 104,209 $ 112,558 $ 115,558 $ 116,993
Interest expense 31,763 32,703 36,326 40,376 41,584
Net interest income 72,920 71,506 76,232 75,182 75,409
Provision for loan losses 25,650 18,992 16,300 89,250 9,400
Net interest income (loss) after provision
for loan losses 47,270 52,514 59,932 (14,068) 66,009
Noninterest income (1) (2) 24,847 23,287 26,701 19,734 30,615
Noninterest expense (1) 56,361 56,581 57,126 79,545 61,521
Income tax provision (benefit) 2,542 4,162 7,982 (27,950) 9,764
Net income (loss) 13,214 15,058 21,525 (45,929) 25,339
- -----------------------------------------------------------------------------------------------------------------------------------
AT PERIOD END (MILLIONS)
Total assets $ 7,786 $ 7,765 $ 7,522 $ 7,614 $ 7,547
Total earning assets 7,334 7,285 7,122 7,149 7,160
Total loans 5,287 5,303 5,433 5,524 5,567
Total deposits 5,660 5,812 5,937 5,904 5,866
Total shareholders' equity 639 640 650 668 715
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES (MILLIONS)
Total assets $ 7,809 $ 7,454 $ 7,564 $ 7,616 $ 7,533
Total earning assets 7,387 7,043 7,141 7,194 7,150
Total loans 5,253 5,343 5,470 5,577 5,536
Total deposits 5,723 5,853 5,922 5,951 5,900
Total shareholders' equity 639 643 654 711 702
Shareholders' equity / assets 8.18 % 8.63 % 8.65 % 9.34 % 9.32 %
- -----------------------------------------------------------------------------------------------------------------------------------
CREDIT QUALITY STATISTICS (THOUSANDS)
Nonaccrual loans $ 87,928 $ 84,107 $ 86,717 $ 98,732 $ 77,624
Loans 90 or more days past due and still accruing 607 990 860 1,260 1,207
Restructured loans --- --- --- --- 336
--------- --------- --------- --------- ---------
Total nonperforming loans 88,535 85,097 87,577 99,992 79,167
Other repossessed assets acquired (ORAA) 8,044 8,226 8,094 8,025 8,621
--------- --------- --------- --------- ---------
Total nonperforming assets $ 96,579 $ 93,323 $ 95,671 $ 108,017 $ 87,788
========= ========= ========= ========= =========
Allowance for loan losses $ 125,992 $ 112,385 $ 109,467 $ 104,158 $ 80,447
Allowance for loan losses ratio 2.38 % 2.12 % 2.02 % 1.89 % 1.45 %
Allowance for loan losses as a percent of
nonperforming assets 130.45 120.43 114.42 96.43 91.64
Allowance for loan losses as a percent of
nonperforming loans 142.31 132.07 125.00 104.17 101.62
Nonperforming assets as a percent of loans plus ORAA 1.82 1.76 1.76 1.95 1.57
Nonperforming assets as a percent of total assets 1.24 1.20 1.27 1.42 1.16
Net loans charged off as a percent of average
loans (annualized) 0.92 1.20 0.80 4.70 0.68
Net loans charged off (000) $ 12,043 $ 16,074 $ 10,991 $ 65,539 $ 9,378
- -----------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA
Net Income (loss):
Basic $ 0.30 $ 0.35 $ 0.49 $ (1.03) $ 0.57
Diluted 0.30 0.34 0.48 (1.03) 0.56
Dividends 0.285 0.285 0.285 0.285 0.285
Market Value:
High $ 28.17 $ 26.05 $ 26.46 $ 29.43 $ 33.88
Low 21.72 23.58 21.25 23.35 27.82
Close 27.01 23.62 24.78 24.17 28.98
Book value 14.77 14.79 14.88 14.97 16.02
Shares outstanding, end of period (000) 43,260 43,299 43,702 44,631 44,624
- -----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS (ANNUALIZED)
Net interest margin (FTE) 4.17 % 4.33 % 4.49 % 4.40 % 4.45 %
Return on average assets 0.68 0.82 1.13 (2.39) 1.35
Return on average shareholders' equity 8.29 9.50 13.06 (25.63) 14.48
Efficiency ratio (3) 55.96 57.71 54.00 58.64 60.40
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Third quarter amounts for 2002 include other charges of $701,000 in
interest income, $1,587,000 in noninterest income, $7,068,000 in
noninterest expense and a special charge of $13,807,000 in noninterest
expense.
(2) Second quarter 2002 includes net investment securities gains of $2,377,000
and gain on sale of merchant business of $5,400,000 in noninterest income.
(3) Excludes nonrecurring gains, special and other charges.
FINANCIAL SUMMARY AND COMPARISON FOR THE SIX MONTHS ENDED
CITIZENS BANKING CORPORATION AND SUBSIDIARIES JUNE 30,
2003 2002 % CHANGE
- -------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS (THOUSANDS)
Interest income $208,892 $235,268 (11.2)%
Interest expense 64,466 84,900 (24.1)
Net interest income 144,426 150,368 (4.0)
Provision for loan losses 44,642 14,650 204.7
Net interest income after provision for loan losses 99,784 135,718 (26.5)
Noninterest income (1) 48,134 55,341 (13.0)
Noninterest expense 112,942 122,712 (8.0)
Income tax provision 6,704 18,905 (64.5)
Net income 28,272 49,442 (42.8)
- -------------------------------------------------------------------------------------------
AT PERIOD END (MILLIONS)
Total assets $ 7,786 $ 7,547 3.2 %
Total earning assets 7,334 7,160 2.4
Total loans 5,287 5,567 (5.0)
Total deposits 5,660 5,866 (3.5)
Total shareholders' equity 639 715 (10.6)
- -------------------------------------------------------------------------------------------
AVERAGE BALANCES (MILLIONS)
Total assets $ 7,633 $ 7,549 1.1 %
Total earning assets 7,216 7,154 0.9
Total loans 5,297 5,579 (5.1)
Total deposits 5,788 5,912 (2.1)
Total shareholders' equity 641 701 (8.6)
Shareholders' equity / assets 8.40 % 9.29 % (9.6)
- -------------------------------------------------------------------------------------------
PER COMMON SHARE DATA
Net Income:
Basic $ 0.65 $ 1.10 (40.9)%
Diluted 0.65 1.09 (40.4)
Dividends 0.570 0.560 1.8
Market Value:
High $ 28.17 $ 33.88 (16.9)
Low 21.72 27.82 (21.9)
Close 27.01 28.98 (6.8)
Book value 14.77 16.02 (7.8)
Tangible book value 13.08 14.24 (8.1)
Shares outstanding, end of period (000) 43,260 44,624 (3.1)
- -------------------------------------------------------------------------------------------
PERFORMANCE RATIOS (ANNUALIZED)
Net interest margin (FTE) (2) 4.25 % 4.45 % (4.5)%
Return on average assets 0.75 1.32 (43.2)
Return on average shareholders' equity 8.89 14.22 (37.5)
Net loans charged off as a percent of average loans 1.06 0.52 103.8
(1) Amounts for 2002 include net investment securities gains of $2,379,000 and
gain on sale of merchant business of $5,400,000 in noninterest income.
(2) Net interest margin is presented on an annual basis and includes taxable
equivalent adjustments to interest income of $6,829,000 and $7,253,000 for
the six months ended June 30, 2003 and 2002, respectively, based on a tax
rate of 35%.
NONINTEREST INCOME AND NONINTEREST EXPENSE (UNAUDITED)
CITIZENS BANKING CORPORATION AND SUBSIDIARIES
Quarter Ended
------------------------------------------------------------------
June 30 Mar 31 Dec 31 Sept 30 Jun 30
(in thousands) 2003 2003 2002 2002 2002
- ---------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Service charges on deposit accounts $ 7,549 $ 6,590 $ 6,689 $ 6,620 $ 6,515
Trust fees 4,324 4,220 4,696 4,372 5,030
Mortgage and other loan income 5,409 5,154 7,020 2,928 2,872
Brokerage and investment fees 1,914 1,768 2,482 2,337 2,633
Bankcard fees 814 735 783 672 1,929
Other 4,826 4,772 5,019 4,347 3,859
-------- -------- -------- -------- --------
Total fees and other income 24,836 23,239 26,689 21,276 22,838
Investment securities gains (losses) 11 48 12 45 (59)
-------- -------- -------- -------- --------
Total before significant gains and charges 24,847 23,287 26,701 21,321 22,779
-------- -------- -------- -------- --------
Significant gains (charges):
Sale of merchant business --- --- --- --- 5,400
Gains on sale of securitized mortgages --- --- --- --- 2,436
Writedown of equity investment --- --- --- (662) ---
Cash surrender value adjustment --- --- --- (650) ---
Other charges --- --- --- (275) ---
-------- -------- -------- -------- --------
Total significant items --- --- --- (1,587) 7,836
-------- -------- -------- -------- --------
TOTAL NONINTEREST INCOME $ 24,847 $ 23,287 $ 26,701 $ 19,734 $ 30,615
======== ======== ======== ======== ========
NONINTEREST EXPENSE:
Salaries and employee benefits $ 31,400 $ 30,112 $ 30,585 $ 32,218 $ 31,844
Equipment 3,869 4,169 4,888 4,761 4,956
Occupancy 4,314 4,695 4,349 4,307 4,584
Professional services 3,959 3,708 5,077 3,524 3,354
Data processing services 3,058 3,316 3,200 3,066 3,250
Postage and delivery 1,683 1,678 1,745 1,860 1,757
Advertising and public relations 623 2,049 (423) 1,848 1,856
Bankcard expense 91 91 92 134 1,571
Other 7,585 6,863 8,018 6,883 8,349
-------- -------- -------- -------- --------
Total before significant charges 56,582 56,681 57,531 58,601 61,521
-------- -------- -------- -------- --------
Significant charges:
Special charge (221) (100) (405) 13,807 ---
Prepayment penalty on FHLB advances --- --- --- 3,300 ---
Contribution to charitable trust --- --- --- 2,000 ---
O.R.E. valuation adjustment --- --- --- 979 ---
Additional equipment depreciation --- --- --- 406 ---
Other charges --- --- --- 452 ---
-------- -------- -------- -------- --------
Total significant items (221) (100) (405) 20,944 ---
-------- -------- -------- -------- --------
TOTAL NONINTEREST EXPENSE $ 56,361 $ 56,581 $ 57,126 $ 79,545 $ 61,521
======== ======== ======== ======== ========
AVERAGE BALANCES, YIELDS AND RATES
THREE MONTHS ENDED
-----------------------------------------------------------------------------
06/30/03 03/31/03 06/30/02
-----------------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
(in thousands) BALANCE RATE (1) BALANCE RATE (1) BALANCE RATE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
EARNING ASSETS
Money market investments $ 7,715 0.61 % $ 31,069 1.13 % $ 54,620 1.69 %
Investment securities(2):
Taxable 1,484,937 4.61 1,061,281 5.44 1,001,223 5.83
Tax-exempt 396,288 7.83 405,524 7.87 418,178 7.85
Mortgage loans held for sale 183,545 5.70 138,275 5.85 99,097 7.52
Loans:
Commercial 3,169,230 5.74 3,256,707 5.84 3,348,395 6.39
Real estate 548,778 6.19 587,692 6.34 702,178 7.23
Direct consumer 890,033 6.59 857,422 6.92 830,479 7.84
Indirect consumer 644,677 7.49 640,807 7.80 654,580 8.24
------------ ------------ -----------
Total earning assets 7,325,203 5.91 6,978,777 6.23 7,108,750 6.80
NONEARNING ASSETS
Cash and due from banks 163,210 171,491 172,645
Investment security fair value adjustment 62,182 64,090 41,128
Other nonearning assets 376,946 354,558 290,302
Allowance for loan losses (118,463) (114,692) (80,246)
------------ ------------ -----------
Total assets $ 7,809,078 $ 7,454,224 $ 7,532,579
============ ============ ===========
INTEREST-BEARING LIABILITIES
Deposits:
Interest-bearing demand $ 1,289,092 0.96 $ 1,314,615 1.14 $ 1,115,440 1.63
Savings deposits 1,355,646 0.79 1,369,434 0.86 1,350,890 1.17
Time deposits 2,209,352 3.05 2,316,693 3.22 2,581,794 3.79
Short-term borrowings 476,878 1.19 214,786 1.17 213,653 1.69
Long-term debt 877,184 3.58 690,122 4.13 629,671 4.98
------------ ------------ -----------
Total interest-bearing liabilities 6,208,152 2.05 5,905,650 2.24 5,891,448 2.83
NONINTEREST-BEARING LIABILITIES AND SHAREHOLDERS'
EQUITY
Noninterest-bearing demand 869,347 851,929 851,867
Other liabilities 92,470 53,284 87,341
Shareholders' equity 639,109 643,361 701,923
------------ ------------ -----------
Total liabilities and shareholders' equity $ 7,809,078 $ 7,454,224 $ 7,532,579
============ ============ ===========
INTEREST SPREAD 3.86 % 3.99 % 3.97 %
Contribution of noninterest bearing sources of funds 0.31 0.34 0.48
---- ---- ----
NET INTEREST INCOME AS A PERCENT OF EARNING ASSETS 4.17 % 4.33 % 4.45 %
SIX MONTHS ENDED
----------------------------------------------------
06/30/03 06/30/02
----------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
(in thousands) BALANCE RATE (1) BALANCE RATE (1)
- -----------------------------------------------------------------------------------------------------------------------
EARNING ASSETS
Money market investments $ 19,327 1.02 % $ 70,263 1.68 %
Investment securities(2):
Taxable 1,274,279 4.95 922,378 5.85
Tax-exempt 400,880 7.85 418,899 7.87
Mortgage loans held for sale 161,035 5.76 123,007 7.44
Loans:
Commercial 3,212,727 5.79 3,344,717 6.47
Real estate 568,128 6.27 754,483 7.15
Direct consumer 873,819 6.75 823,849 7.99
Indirect consumer 642,753 7.64 655,852 8.29
---------- ----------
Total earning assets 7,152,948 6.07 7,113,448 6.86
NONEARNING ASSETS
Cash and due from banks 167,327 179,963
Investment security fair value adjustment 63,131 40,072
Other nonearning assets 365,813 295,659
Allowance for loan losses (116,588) (80,588)
---------- ----------
Total assets $7,632,631 $7,548,554
=========== ==========
INTEREST-BEARING LIABILITIES
Deposits:
Interest-bearing demand $1,301,783 1.05 $1,092,268 1.60
Savings deposits 1,362,502 0.82 1,359,772 1.18
Time deposits 2,262,726 3.14 2,606,745 3.93
Short-term borrowings 346,556 1.18 222,798 1.69
Long-term debt 784,170 3.82 629,039 5.00
---------- ----------
Total interest-bearing liabilities 6,057,737 2.15 5,910,622 2.90
NONINTEREST-BEARING LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing demand 860,686 852,980
Other liabilities 72,985 83,687
Shareholders' equity 641,223 701,265
---------- ----------
Total liabilities and shareholders' equity $7,632,631 $7,548,554
=========== ==========
INTEREST SPREAD 3.92 % 3.96 %
Contribution of noninterest bearing sources of funds 0.33 0.49
---- ----
NET INTEREST INCOME AS A PERCENT OF EARNING ASSETS 4.25 % 4.45 %
(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.
NONPERFORMING ASSETS
CITIZENS BANKING CORPORATION AND SUBSIDIARIES
Quarter Ended
--------------------------------------------------------------------
June 30 Mar 31 Dec 31 Sept 30 Jun 30
(in thousands) 2003 2003 2002 2002 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial(1)
Commercial $ 52,760 $ 49,275 50,231 48,374 34,541
Commercial real estate 19,568 20,433 19,301 28,488 20,722
Small business 1,466 1,459 813 588 1,392
--------- --------- --------- --------- ---------
Total commercial 73,794 71,167 70,345 77,450 56,655
Consumer:
Direct 3,208 3,416 3,704 3,512 3,726
Indirect 1,094 1,646 1,803 1,657 1,581
Mortgage 9,832 7,878 10,865 16,113 15,662
Loans 90 days or more past due and still accruing 607 990 860 1,260 1,207
Restructured loans --- --- --- --- 336
--------- --------- --------- --------- ---------
Total Nonperforming Loans 88,535 85,097 87,577 99,992 79,167
Other Repossessed Assets Acquired 8,044 8,226 8,094 8,025 8,621
--------- --------- --------- --------- ---------
Total Nonperforming Assets $ 96,579 $ 93,323 $ 95,671 $ 108,017 $ 87,788
========= ========= ========= ========= =========
(1)Changes in commercial nonperforming assets for the
quarter (in millions):
Inflows $ 36.3 $ 22.7 $ 27.6 $ 51.1 $ 20.3
Outflows (33.7) (21.9) (34.7) (30.3) (10.6)
--------- --------- --------- --------- ---------
Net change $ 2.6 $ 0.8 $ (7.1) $ 20.8 $ 9.7
========= ========= ========= ========= =========
SUMMARY OF LOAN LOSS EXPERIENCE
CITIZENS BANKING CORPORATION AND SUBSIDIARIES
Quarter Ended
----------------------------------------------------------------------
June 30 Mar 31 Dec 31 Sept 30 Jun 30
(in thousands) 2003 2003 2002 2002 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses - beginning of period $112,385 $109,467 $104,158 $ 80,447 $ 80,425
Provision for loan losses 25,650 18,992 16,300 89,250 9,400
Charge-offs:
Commercial 7,577 14,133 10,058 56,042 7,046
Commercial real estate 4,321 955 159 5,452 ---
Small business 273 264 159 1,596 106
-------- -------- -------- -------- --------
Total commercial 12,171 15,352 10,376 63,090 7,152
Real estate mortgage 76 625 1,745 229 ---
Consumer - Direct 1,790 1,748 1,474 2,478 1,911
Consumer - Indirect 2,152 2,511 2,582 2,035 1,900
-------- -------- -------- -------- --------
Total charge-offs 16,189 20,236 16,177 67,832 10,963
-------- -------- -------- -------- --------
Recoveries:
Commercial 2,115 2,032 3,862 1,004 390
Commercial real estate 623 465 45 11 ---
Small business 93 362 86 50 14
-------- -------- -------- -------- --------
Total commercial 2,831 2,859 3,993 1,065 404
Real estate mortgage 8 1 --- 11 ---
Consumer - Direct 479 439 400 463 434
Consumer - Indirect 828 863 793 754 747
-------- -------- -------- -------- --------
Total recoveries 4,146 4,162 5,186 2,293 1,585
-------- -------- -------- -------- --------
Net charge-offs 12,043 16,074 10,991 65,539 9,378
-------- -------- -------- -------- --------
Allowance for loan losses - end of period $125,992 $112,385 $109,467 $104,158 $ 80,447
======== ======== ======== ======== ========
For the Quarter Ended 06/30/03 For the Six Months Ended 06/30/03
-------------------------------------------------------- -----------------------------------------------------
Consumer - Consumer - Consumer - Consumer -
Commercial Real estate Direct Indirect Total Commercial Real estate Direct Indirect Total
-------------------------------------------------------- -----------------------------------------------------
Charge-offs:
Michigan $ 6,671 $ 11 $ 1,160 $ 2,152 $ 9,994 $20,142 $ 744 $ 2,275 $ 4,663 $27,824
Wisconsin 4,875 65 527 --- 5,467 6,338 (129) 1,044 --- 7,253
Iowa 229 --- 89 --- 318 647 86 183 --- 916
Illinois 396 --- 14 --- 410 396 --- 36 --- 432
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total charge-offs 12,171 76 1,790 2,152 16,189 27,523 701 3,538 4,663 36,425
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Recoveries:
Michigan 1,910 --- 321 821 3,052 3,410 --- 646 1,680 5,736
Wisconsin 813 --- 107 --- 920 2,021 1 206 --- 2,228
Iowa 40 8 33 --- 81 51 8 40 --- 99
Illinois 68 --- 18 7 93 208 --- 26 11 245
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total recoveries 2,831 8 479 828 4,146 5,690 9 918 1,691 8,308
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net charge-offs $ 9,340 $ 68 $ 1,311 $ 1,324 $12,043 $21,833 $ 692 $ 2,620 $ 2,972 $28,117
======= ======= ======= ======= ======= ======= ======= ======= ======= =======