EXHIBIT 99.1
FOR IMMEDIATE RELEASE
JANUARY 15, 2004
CITIZENS BANKING CORPORATION
FOURTH QUARTER RESULTS AND DIVIDEND ANNOUNCEMENT
FLINT, MICHIGAN --- Citizens Banking Corporation announced net income of
$18,074,000 or $0.41 per diluted share for the three months ended December 31,
2003, compared to net income of $21,525,000 or $0.48 per diluted share in the
same quarter of 2002. The decrease in net income was attributable to lower net
interest income, as the net interest margin declined in the continued low
interest rate environment, and was also attributable to a decline in mortgage
banking income resulting from significantly lower mortgage origination volume.
Higher noninterest expense also contributed to the decline in net income. The
provision for loan losses decreased, as credit quality improved, partially
offsetting the decline in revenue and the increase in noninterest expense.
Returns on average assets and average equity during the fourth quarter were
0.93% and 11.45%, respectively, compared with 1.13% and 13.06%, in the fourth
quarter of 2002.
For the year ended December 31, 2003, Citizens recorded net income of
$65,951,000 or $1.51 per diluted share compared to $25,038,000 or $0.56 per
diluted share for 2002, an increase of 163% and 170%, respectively. The increase
in net income for 2003 was due primarily to the actions taken in the third
quarter of 2002 to restructure the company along its three major lines of
business and improve its credit quality risk profile. Those actions resulted in
an $89.3 million loan loss provision and special and other charges of $23.2
million in the third quarter of 2002. For the full year 2003, the provision for
loan losses declined $57.2 million to $63.0 million compared with $120.2 million
in 2002. Noninterest expense declined $26.4 million as a result of the prior
year special and other charges and, to a lesser extent, lower compensation
expense. Returns on average assets and average equity for the year were 0.86%
and 10.44%, respectively, compared with 0.33% and 3.62% for 2002.
"We're pleased to generate another solid quarter of credit quality improvement,"
stated William R. Hartman, chairman, president and CEO. "With a 15.6% decrease
from last quarter, non-performing loans are now at the lowest level in seven
quarters. Net charge-offs declined 25% from last quarter to $7.7 million, also
the lowest level in seven quarters. We expect to make continued progress in
credit quality during 2004, in addition to completing many more of the strategic
initiatives of our achieving the vision project," Hartman continued.
KEY HIGHLIGHTS OF THE QUARTER:
- - The provision for loan losses and net charge-offs continued to trend
downward in the fourth quarter. The provision for loan losses declined by
22% to $8.0 million and net charge-offs decreased 25% to $7.7 million for
the fourth quarter compared to the third quarter 2003.
- - Nonperforming assets decreased $14.2 million or 15.6% to $77.0 million from
third quarter 2003 levels, representing 1.47% of total loans, down from
1.76% a year ago and 1.74% last quarter. Commercial nonperforming asset
inflows slowed to $17.8 million for the quarter from $21.1 million in the
third quarter of 2003 while outflows totaled $32.8 million.
- - Citizens' consumer banking line of business completed two successful
product campaigns during the fourth quarter. The Home Equity campaign
resulted in $100 million of new home equity loans
representing outstanding balances of over $66 million. A checking account
promotion resulted in over 8,000 new checking accounts with balances in
excess of $41 million.
- - Citizens Bank Wealth Management, N.A. successfully completed the conversion
of its trust and investment accounting systems and operations and the
conversion of its retirement services recordkeeping systems and operations.
- - Citizens' treasury management business unit successfully implemented a
full-service wholesale and retail image-enabled lockbox to process client
receivables and introduced significant enhancements to its commercial
internet banking solution during the quarter.
BALANCE SHEET
Citizens' total assets at December 31, 2003 were $7.711 billion, a decrease of
$76 million or 0.98% from September 30, 2003 and an increase of $186 million or
2.5% from December 31, 2002. Total assets increased from December 31, 2002
levels due to the expansion of the investment portfolio in the first half of
2003 partially offset by a decline in loans and mortgage loans held for sale.
Total assets declined from September 30, 2003 levels due to a decrease in
mortgage loans held for sale.
Loans increased $19.3 million or 0.37% from September 30, 2003 and decreased
$186.9 million or 3.4% from December 31, 2002. Commercial loan balances
decreased $44.2 million or 1.5% from September 30, 2003 and $308.3 million or
9.4% from December 31, 2002 resulting from increased activity in fixed-rate loan
refinancing and paydowns, lower demand for commercial credit and earlier
identification and reduction of exposure on credits with the potential to
deteriorate. The decline in the fourth quarter occurred in Citizens' Wisconsin
market and the overall decline for 2003 occurred in all markets.
Consumer loans, excluding mortgage loans, increased $58.0 million or 3.4% from
September 30, 2003 and $250.0 million or 16.5% from December 31, 2002. Home
equity loans increased $69.0 million or 10.2% from September 30, 2003 and $196.5
million or 35.6% from December 31, 2002. Three very successful home equity
marketing campaigns conducted during the second, third and fourth quarters drove
the exceptional growth in this product line. Other direct loans declined $12.1
million and $34.4 million compared with September 30, 2003 and December 31,
2002, respectively, as a result of higher prepayments due to the low interest
rate environment. Indirect loans increased $1.1 million and $87.9 million
compared with September 30, 2003 and December 31, 2002, respectively, as a
result of capturing a greater share from Citizens' existing dealer base.
Mortgage loans remained virtually flat at December 31, 2003 compared with
September 30, 2003 levels, but declined $128.6 million from December 31, 2002 as
most new origination volume was sold into the secondary market. Mortgage
origination volume increased during 2003 as Citizens continued to benefit from
the favorable interest rate environment with refinance business comprising a
majority of the volume. For 2003, closed mortgage volume was approximately $1.44
billion, a record volume for Citizens, compared to $1.27 billion in 2002.
Total deposits were $5.442 billion as of December 31, 2003, compared to $5.482
billion as of September 30, 2003, and $5.937 billion as of December 31, 2002, a
decrease of 0.7% and 8.3% respectively. This decline reflects Citizens' less
aggressive deposit pricing posture during the lower interest rate environment
which caused retail and other CDs to decline by $421.7 million at December 31,
2003 compared with December 31, 2002. Core deposits increased $3.6 million at
December 31, 2003 compared with September 30, 2003 as a result of a retail
deposit campaign.
CREDIT QUALITY
Nonperforming assets totaled $77.0 million or 1.0% of assets, at December 31,
2003, representing a decrease of $14.2 million or 15.6% from September 30, 2003
levels and $18.6 million or 19.5% from December 31, 2002 levels. The allowance
for loan losses increased to $123.5 million or 2.36% of loans at December 31,
2003 compared with $106.8 million at December 31, 2002. The allowance for loan
losses as a percent of nonperforming loans increased to 178.8% compared to
147.0% at September 30, 2003 and 121.9% at December 31, 2002. Net loans charged
off during the quarter totaled $7.7 million or 0.59% of average loans
(annualized), compared with $10.3 million in the third quarter of 2003 and $11.0
million in the fourth quarter of 2002. The provision for loan losses declined to
$8.0 million in the fourth quarter compared with $16.3 million in the fourth
quarter of 2002 and $10.3 million in the third quarter of 2003, reflecting the
decline in net charge-offs and improvement in nonperforming loans.
The continued improvement in credit quality in the second half of 2003 reflects
the results of Citizens' commitment to proactive risk identification and
management strategies and strengthened underwriting and approval practices.
"During the fourth quarter, we created a Major Credit Exposure Review function,
reporting to the chief credit officer, providing us improved management of both
industry and individual customer loan concentrations," John D. Schwab, EVP and
chief credit officer commented. "We believe this step will further strengthen
our portfolio risk management capabilities and enable more proactive management
of exposure and concentrations."
NET INTEREST MARGIN AND NET INTEREST INCOME
Net interest margin was 4.07% in the fourth quarter of 2003 compared to 4.06% in
the third quarter of 2003 and 4.49% in the fourth quarter of 2002. The small
increase in net interest margin in the fourth quarter of 2003 compared to the
third quarter is the result of lower purchase premium amortization expense on
mortgage related securities, and lower funding costs, largely offset by yield
declines on fixed rate loans. The decline in net purchase premium amortization
expense from the third quarter to the fourth quarter of 2003 was $1.5 million.
The decline in funding costs was driven primarily by the CD portfolio, with much
smaller contributions from transaction and savings products and long-term debt.
For the twelve months ended December 31, 2003 net interest margin declined to
4.15% from 4.45% compared to the prior year. This decline is attributable to the
asset sensitive position held prior to the second quarter of 2003, accelerated
prepayments in both the fixed rate commercial loan portfolio and the mortgage
related securities portfolio, plus a mix shift in earning assets from loans to
lower yielding securities.
Net interest income decreased $0.5 million in the fourth quarter of 2003
compared to the third quarter of 2003, due to slightly lower earning assets.
Average earning assets decreased $99 million in the fourth quarter compared with
the previous quarter as declines in mortgages held for sale and the commercial
loan portfolio more than offset growth in consumer loan and investment security
balances. Compared to the fourth quarter of 2002, net interest income declined
$5.6 million due to a decrease in the net interest margin partially offset by an
increase of $138 million in earning assets. For the full year 2003, net interest
income declined $15.5 million from the prior year due to a 30 basis point
decline in net interest margin partially offset by an increase of $112 million
in earning assets. Citizens expects its net interest margin in the first quarter
of 2004 to be flat to slightly lower compared to fourth quarter 2003 levels.
NONINTEREST INCOME
Noninterest income for the three months ended December 31, 2003 totaled $21.6
million, a decrease of $5.1 million, or 19.0%, from the same period in 2002. The
decrease was the result of a $4.9 million decline in mortgage income from
significantly lower mortgage loan origination volume. Mortgage loan origination
volume totaled $158 million in the fourth quarter of 2003, as compared to $468
million in the fourth quarter of 2002. Brokerage and investment fees declined
$0.8 million due to lower retail sales of fixed annuity products. Deposit
service charges increased $1.4 million from higher consumer and commercial
overdraft fee income, partially offsetting the decline in mortgage and brokerage
and investment fee income. Trust fees were down $81,000 or 1.7% to $4.6 million
from the same quarter a year ago. Total trust assets under administration were
$2.866 billion at December 31, 2003, an increase of $311.0 million from December
31, 2002, and an increase of $259.0 million from September 30, 2003.
Noninterest income for the year ended December 31, 2003 was $94.8 million
compared to $101.8 million in 2002, a decline of $7.0 million. Gains of $7.8
million recorded in the second quarter of 2002 resulting from the sale of
securitized mortgages and the sale of the merchant services business accounted
for the decline. Additionally, bankcard fees declined $3.1 million in 2003
compared to the prior year due to the June 2002 sale of the merchant services
business. Brokerage and investment fees declined $1.8 million in 2003 compared
to 2002, as a result of lower retail sales of fixed annuity products. Trust fees
declined $1.4 million in 2003 compared with the prior year due to lower average
asset levels resulting from the decline in the financial markets during the
latter half of 2002 and the first quarter of 2003, and client attrition. Service
charges on deposit accounts increased $3.5 million in 2003 compared to the prior
year due to higher overdraft fee income. Mortgage and other loan income
increased $1.2 million due to higher volume of mortgage loan originations for
the full year 2003. Other noninterest income increased $2.4 million in 2003
compared with the prior year due in part to the third quarter 2002 charge of
$1.6 million and increased life insurance income as a result of the purchase of
$78 million of bank owned life insurance in the third quarter of 2002. Citizens
expects noninterest income levels in the first quarter of 2004 to be slightly
higher than fourth quarter 2003 levels.
NONINTEREST EXPENSE
Noninterest expense for the quarter ended December 31, 2003 was $60.4 million,
up 5.8% from $57.1 million in the fourth quarter of 2002. Advertising and public
relations expenses increased $2.1 million for the quarter due in part to
Citizens previously announced expansion into Oakland County, Michigan. New
home equity and checking account promotions implemented in the fourth quarter of
2003 also contributed to the increase. Occupancy expense increased $0.8 million
reflecting higher maintenance costs and expenses related to a fourth quarter
2003 capital investment of $1.7 million in branch renovations. The additional
expense of approximately $0.2 million related to these renovations in the
quarter was due to a change in Citizens' capitalization policy incorporating
higher capitalization thresholds on new expenditures. Partially offsetting the
increased occupancy costs were the favorable effects of fewer branch locations
as a result of the third quarter 2002 restructuring. Other noninterest expense
increased $1.2 million for the quarter due in part to system implementation
costs of $0.4 million associated with new strategic alliances between our trust
bank subsidiary, Citizens Bank Wealth Management N.A. and three third party
vendors, SEI Investments, EnvestnetPMC and EPIC Advisors, Inc. Salaries and
employee benefits expense decreased $0.8 million for the quarter, net of $0.3
million of severance costs for the aforementioned trust bank strategic
alliances, due to lower staffing levels resulting from the third quarter of 2002
restructuring initiatives and normal attrition. Equipment expenses decreased
$0.9 million due to lower depreciation expense as Citizens accelerated, in the
fourth quarter of 2002, its depreciation on certain branch and ATM equipment
scheduled for early retirement in the first half of 2003.
For the year ending December 31, 2003, noninterest expense decreased $26.4
million or 10.2% from 2002. The decline was primarily attributable to a special
charge of $13.4 million recorded in the second half of 2002 to restructure
Citizens' three major lines of business (consumer banking, commercial banking
and wealth management) and $7.1 million of other charges recorded in the third
quarter of 2002. The $7.1 million of other charges included a $3.3 million
prepayment penalty on high cost FHLB debt, a $2.0 million contribution to
Citizens' charitable trust, a $1.0 million market valuation adjustment to other
real estate, $0.4 million of additional equipment depreciation and other charges
of $0.4 million.
The decline in noninterest expense for the year also reflected reductions in
salaries and employee benefits, equipment expense and bankcard expense. Salaries
and employee benefits were down $4.5 million for the twelve months ended
December 31, 2003 for the same reasons as they were down for the quarter.
Citizens' had 2,342 full time equivalent employees at December 31, 2003, down
from 2,520 at December 31, 2002, a 7.1% decline. Equipment expenses decreased
$3.8 million due to lower depreciation and improved pricing from new or
renegotiated maintenance contracts. A $0.4 million charge in the third quarter
of 2002 for additional depreciation on equipment to be retired early (mentioned
previously above) also contributed to the decrease. Bankcard expense declined
$3.5 million as Citizens sold its merchant services business in the second
quarter of 2002.
These decreases were partially offset by increases in professional services,
advertising and public relations costs and system implementation and severance
costs. Professional services were up $3.0 million for the year reflecting higher
legal costs related to loan collection efforts, increased executive recruiting
and relocation costs, implementation costs for Citizens' new INEA Performance
Management software, additional costs associated with engagement of banking
industry consultants who assisted in the restructuring and costs incurred for
the collateral field audit initiative begun in March of 2003. Advertising and
public relations expenses increased $0.7 million due to Citizens' recently
announced expansion into Oakland County, Michigan and several new home equity
and checking account promotions during the year. These additional promotion
costs were offset, in part, by a more focused marketing strategy, seeking higher
promotional exposure at lower costs. System implementation and severance costs
for 2003 totaled $1.2 million and $0.6 million, respectively, for the
aforementioned trust bank strategic alliances.
For the first quarter of 2004, Citizens anticipates that noninterest expense
will increase slightly due to the continuation of process improvement
initiatives, ongoing staff training and expected advertising and other
expenditures related to the expansion in Oakland County.
INITIATIVES
Citizens completed 29 initiatives during 2003 as part of its `Achieving the
Vision' project. Some of the key projects included a significant upgrade to and
testing of the business continuity and contingency plan; a check imaging and
archival system; significant enhancements to the branch wide area network;
systems and product enhancements; many branch facility improvements; and a
significant number of process and procedural improvements to enhance controls
and productivity.
"As part of the `Achieving the Vision' initiative and to enable us to be more
market driven, new market teams are being formed to ensure maximum teamwork
across lines of business. Seven pilot teams have been active since October 1,
2003, and nine new teams will become active in January 2004. The teams will
focus on deposit and loan growth within each market, fee income growth, and
improving teamwork across lines of business to create a more seamless approach
to client service, while managing their interest margin
and credit quality. We also remain committed to strongly supporting the
communities we serve," informed Roy A. Eon, EVP and head of operations and
technology.
"I am pleased to announce that during 2003, over 2,200 staff members attended
Citizens University I, an internal school established to educate participants on
Citizens' Vision and how to implement its six components," commented Hartman.
"And over 500 managers within the organization attended Citizens University II,
which assists managers with coaching, staff development and performance
appraisals that more closely align with our Corporate objectives," he continued.
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 February 4,
2004, to shareholders of record on January 23, 2004.
OTHER NEWS
Citizens Banking Corporation announced on November 24, 2003, a major expansion
in Oakland County, Michigan. The company intends to make a capital investment of
$35 to $40 million and to open as many as 10 to 14 new branches, including two
hub offices over the next 24 months. This initiative will significantly add to
the Bank's current Oakland County presence of seven branches, increase its staff
by up to 180 employees, give local bankers greater authority to act quickly on
loan applications and other decisions, and give the marketplace convenient
access to bankers. "Oakland County presents us with a unique opportunity to grow
our business banking portfolio, wealth management clients, and establish
Citizens Bank as a leading commercial bank in the market," remarked Hartman.
The company also announced that it plans to open its first location connected
with the expansion initiative early in the first quarter of 2004. This initial
location at 900 Tower Drive, a premier landmark site in the heart of Troy's
Northfield Corporate Campus, will encompass a new bank branch and administrative
office space and will serve as one of two major Citizens Bank hubs in Oakland
County. The 900 Tower Building will carry the Citizens Bank mark atop the
building.
In late November, Citizens Bank Wealth Management, N.A. successfully completed
the conversion of its trust and investment accounting systems and operations
with SEI Investments. Furthermore, the conversion of its retirement services
recordkeeping systems and operations was completed with EPIC Advisors, Inc. "The
completion of these conversions will enable us to leverage our previously
announced strategic relationships with SEI Investments, EnvestnetPMC, Inc., and
EPIC Advisors, Inc. to offer our wealth management clients a broader range of
mutual fund family choices, access to separately managed accounts with
specialized portfolio managers, state of the art research capabilities, and
sophisticated client profiling and portfolio modeling tools," commented James A.
Schmelter, EVP and head of wealth management.
During the fourth quarter of 2003, Citizens repurchased a total of 167,200
shares of its stock at an average price of $30.77. For the year, Citizens
repurchased 810,800 shares at an average price of $26.30. As of December 31,
2003, 254,600 shares remain to be purchased under the October 2001 three million
share repurchase program and an additional three million shares are authorized
for repurchase under a new plan, approved in October 2003.
CONFERENCE CALL ANNOUNCEMENT
As previously announced, William R. Hartman, chairman, president and CEO,
Charles D. Christy, CFO, John D. Schwab, chief credit officer, Martin E. Grunst,
treasurer and Daniel E. Bekemeier, chief accounting officer will review the
quarter's results in a conference call for investors and analysts beginning at
10:00AM EST ON FRIDAY, JANUARY 16, 2004.
A live audio web cast is available at http://viavid.net/dce.aspx?sid=000018D6 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 #
4605043 Conference Name: "Citizens Banking Corporation 4th Quarter Earnings"
R.S.V.P. is not required.
A playback of the conference call will be available after 2:00pm EST through
January 23, 2004, by dialing US/Canada Dial-In Number: (800) 642-1687 or
International Dial-In Number: (706) 645-9291 conference ID: 4605043. Also, the
call can be accessed via Citizens' web site, through the Investor Relations
section at www.citizensonline.com.
CORPORATE PROFILE
Citizens Banking Corporation is a diversified financial services company
providing a full range of commercial, consumer, mortgage banking, trust and
financial planning services to a broad client base. Citizens operates 176
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 that include terms such as "believe", "expect", and
"anticipate") are forward-looking statements that involve risks and
uncertainties, and our 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 our loan portfolios (including losses
due to fraud and economic factors) and the resulting credit risk-related losses
and expenses, our future lending and collections experience and the potential
inadequacy of our loan loss reserves, interest rate fluctuations and the effects
on net interest income of changes in our interest rate risk position, other
adverse changes in economic or financial market conditions, the potential
inability to hedge certain risks economically, adverse changes in competition
and pricing environments, our potential failure to maintain or improve loan
quality levels and origination volume, our potential inability to continue to
attract core deposits, the potential lack of market acceptance of our new wealth
management capabilities and our products and services, adverse changes in our
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, our
potential inability to complete our restructuring, the effects of terrorist
attacks and potential attacks, our success in managing the risks involved in the
foregoing, and other risks and uncertainties detailed from time to time in our
filings with the Securities and Exchange Commission.
Other factors not currently anticipated by management may also materially and
adversely affect our results of operations. We do not undertake, and expressly
disclaim any obligation, to update or alter our 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
DECEMBER 31, December 31,
(in thousands) 2003 2002(1)
- -----------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 182,545 $ 171,864
Money market investments:
Federal funds sold --- 69,000
Interest-bearing deposits with banks 2,223 2,332
------------ ------------
Total money market investments 2,223 71,332
Securities available-for-sale:
Taxable 1,536,145 1,021,668
Tax-exempt 429,056 435,613
------------ ------------
Total securities available-for-sale 1,965,201 1,457,281
Securities held-to-maturity (fair value of $19,913 ) 19,857 ---
Mortgage loans held for sale 44,677 160,743
Loans 5,245,702 5,432,561
Less: Allowance for loan losses (123,545) (106,777)
------------ ------------
Net loans 5,122,157 5,325,784
Premises and equipment 112,784 117,704
Goodwill 54,785 54,785
Other intangible assets 16,932 19,862
Bank owned life insurance 80,461 78,434
Other assets 109,448 66,935
------------ ------------
TOTAL ASSETS $ 7,711,070 $ 7,524,724
============ ============
LIABILITIES
Noninterest-bearing deposits $ 882,429 $ 900,674
Interest-bearing deposits 4,559,838 5,036,239
------------ ------------
Total deposits 5,442,267 5,936,913
Federal funds purchased and securities sold
under agreements to repurchase 588,593 223,289
Other short-term borrowings 43,077 79,062
Other liabilities 65,112 35,678
Long-term debt 936,859 599,313
------------ ------------
Total liabilities 7,075,908 6,874,255
SHAREHOLDERS' EQUITY
Preferred stock - no par value
Common stock - no par value 100,314 112,253
Retained earnings 512,045 495,570
Other accumulated comprehensive net income 22,803 42,646
------------ ------------
Total shareholders' equity 635,162 650,469
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,711,070 $ 7,524,724
============ ============
(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 Twelve Months Ended
December 31, December 31,
(in thousands, except per share amounts) 2003 2002(1) 2003 2002(1)
- ------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $ 76,345 $ 92,900 $ 323,739 $ 385,812
Interest and dividends on investment securities:
Taxable 15,836 14,326 61,631 55,447
Tax-exempt 5,214 5,263 20,502 21,301
Money market investments 3 69 105 824
---------- ---------- ---------- ----------
Total interest income 97,398 112,558 405,977 463,384
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits 17,039 28,689 83,449 127,849
Short-term borrowings 1,463 1,157 4,960 4,033
Long-term debt 8,218 6,480 31,310 29,720
---------- ---------- ---------- ----------
Total interest expense 26,720 36,326 119,719 161,602
---------- ---------- ---------- ----------
NET INTEREST INCOME 70,678 76,232 286,258 301,782
Provision for loan losses 8,020 16,300 62,962 120,200
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 62,658 59,932 223,296 181,582
---------- ---------- ---------- ----------
NONINTEREST INCOME
Service charges on deposit accounts 8,074 6,689 29,916 26,456
Trust fees 4,615 4,696 17,527 18,956
Mortgage and other loan income 2,079 7,020 18,046 16,845
Brokerage and investment fees 1,705 2,482 7,720 9,502
Bankcard fees 732 783 3,042 6,142
Investment securities gains 2 12 103 ---
Gain on sale of merchant business --- --- --- 5,400
Gain on securitized mortgages --- --- --- 2,436
Other 4,424 5,019 18,465 16,039
---------- ---------- ---------- ----------
Total noninterest income 21,631 26,701 94,819 101,776
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits 29,774 30,585 122,322 126,847
Equipment 3,989 4,888 16,087 19,869
Occupancy 5,112 4,349 18,449 17,855
Professional services 5,202 5,077 17,815 14,790
Data processing services 3,145 3,200 12,744 12,641
Postage and delivery 1,796 1,745 6,896 7,120
Advertising and public relations 1,719 (423) 5,786 5,112
Telephone 1,314 1,176 4,793 5,279
Stationery and supplies 1,256 1,011 3,935 4,032
Bankcard expense 117 92 378 3,879
Special charge --- (405) (691) 13,402
Prepayment penalty on FHLB advances --- --- --- 3,300
Contribution to charitable trust --- --- --- 2,000
Other 7,022 5,831 24,474 23,257
---------- ---------- ---------- ----------
Total noninterest expense 60,446 57,126 232,988 259,383
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 23,843 29,507 85,127 23,975
Income tax provision (benefit) 5,769 7,982 19,176 (1,063)
---------- ---------- ---------- ----------
NET INCOME $ 18,074 $ 21,525 $ 65,951 $ 25,038
========== ========== ========== ==========
NET INCOME PER SHARE:
Basic $ 0.42 $ 0.49 $ 1.52 $ 0.56
Diluted 0.41 0.48 1.51 0.56
AVERAGE SHARES OUTSTANDING:
Basic 43,237 44,178 43,304 44,657
Diluted 43,714 44,425 43,609 45,077
(1) Certain amounts have been reclassified to conform with current year
presentation.
SELECTED QUARTERLY INFORMATION
Citizens Banking Corporation and Subsidiaries
4TH QTR 2003 3RD QTR 2003 2ND QTR 2003 1ST QTR 2003 4TH QTR 2002
- ----------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS (THOUSANDS)
Interest income $ 97,398 $ 99,687 $104,683 $104,209 $112,558
Interest expense 26,720 28,533 31,763 32,703 36,326
Net interest income 70,678 71,154 72,920 71,506 76,232
Provision for loan losses 8,020 10,300 25,650 18,992 16,300
Net interest income after provision for loan losses 62,658 60,854 47,270 52,514 59,932
Noninterest income 21,631 25,054 24,847 23,287 26,701
Noninterest expense 60,446 59,600 56,361 56,581 57,126
Income tax provision 5,769 6,703 2,542 4,162 7,982
Net income 18,074 19,605 13,214 15,058 21,525
AT PERIOD END (MILLIONS)
Total assets $ 7,711 $ 7,787 $ 7,789 $ 7,768 $ 7,525
Total earning assets 7,278 7,356 7,334 7,285 7,122
Total loans 5,246 5,226 5,287 5,303 5,433
Total deposits 5,442 5,482 5,660 5,812 5,937
Total shareholders' equity 635 634 639 640 650
AVERAGE BALANCES (MILLIONS)
Total assets $ 7,697 $ 7,812 $ 7,809 $ 7,454 $ 7,564
Total earning assets 7,279 7,378 7,387 7,043 7,141
Total loans 5,220 5,183 5,253 5,343 5,470
Total deposits 5,481 5,610 5,723 5,853 5,922
Total shareholders' equity 626 620 639 643 654
Shareholders' equity / assets 8.13 % 7.94 % 8.18 % 8.63 % 8.65 %
CREDIT QUALITY STATISTICS (THOUSANDS)
Nonaccrual loans $ 68,744 $ 83,278 $ 87,928 $ 84,107 $ 86,717
Loans 90 or more days past due and still accruing 345 601 607 990 860
Restructured loans --- --- --- --- ---
-------- -------- -------- -------- --------
Total nonperforming loans 69,089 83,879 88,535 85,097 87,577
Other repossessed assets acquired (ORAA) 7,943 7,350 8,044 8,226 8,094
-------- -------- -------- -------- --------
Total nonperforming assets $ 77,032 $ 91,229 $ 96,579 $ 93,323 $ 95,671
======== ======== ======== ======== ========
Allowance for loan losses $123,545 $123,265 $123,302 $109,695 $106,777
Allowance for loan losses ratio 2.36 % 2.36 % 2.33 % 2.07 % 1.97 %
Allowance for loan losses as a percent of nonperforming
assets 160.38 135.12 127.67 117.54 111.61
Allowance for loan losses as a percent of nonperforming
loans 178.82 146.96 139.27 128.91 121.92
Nonperforming assets as a percent of loans plus ORAA 1.47 1.74 1.82 1.76 1.76
Nonperforming assets as a percent of total assets 1.00 1.17 1.24 1.20 1.27
Net loans charged off as a percent of average loans
(annualized) 0.59 0.80 0.92 1.20 0.80
Net loans charged off (000) $ 7,740 $ 10,337 $ 12,043 $ 16,074 $ 10,991
PER COMMON SHARE DATA
Net Income (loss):
Basic $ 0.42 $ 0.45 $ 0.30 $ 0.35 $ 0.49
Diluted 0.41 0.45 0.30 0.34 0.48
Dividends 0.285 0.285 0.285 0.285 0.285
Market Value:
High $ 34.26 $ 28.01 $ 28.17 $ 26.05 $ 26.46
Low 26.41 24.77 21.72 23.58 21.25
Close 32.72 26.41 27.01 23.62 24.78
Book value 14.69 14.67 14.77 14.79 14.88
Shares outstanding, end of period (000) 43,242 43,220 43,260 43,299 43,702
PERFORMANCE RATIOS (ANNUALIZED)
Net interest margin (FTE) 4.07 % 4.06 % 4.17 % 4.33 % 4.49 %
Return on average assets 0.93 1.00 0.68 0.82 1.13
Return on average shareholders' equity 11.45 12.55 8.29 9.50 13.06
Efficiency ratio 63.16 59.90 55.74 57.58 53.61
FINANCIAL SUMMARY AND COMPARISON FOR THE TWELVE MONTHS ENDED
CITIZENS BANKING CORPORATION AND SUBSIDIARIES DECEMBER 31,
2003 2002 % CHANGE
- ----------------------------------------------------------------------------------------------------
Summary of Operations (thousands)
Interest income (1) $ 405,977 $ 463,384 (12.4)%
Interest expense 119,719 161,602 (25.9)
Net interest income 286,258 301,782 (5.1)
Provision for loan losses 62,962 120,200 (47.6)
Net interest income after provision for loan losses 223,296 181,582 23.0
Noninterest income (1) 94,819 101,776 (6.8)
Noninterest expense (1) 232,988 259,383 (10.2)
Income tax provision (benefit) 19,176 (1,063) (1,904.0)
Net income 65,951 25,038 163.4
AT PERIOD END (MILLIONS)
Total assets $ 7,711 $ 7,525 2.5 %
Total earning assets 7,278 7,122 2.2
Total loans 5,246 5,433 (3.4)
Total deposits 5,442 5,937 (8.3)
Total shareholders' equity 635 650 (2.3)
AVERAGE BALANCES (MILLIONS)
Total assets $ 7,694 $ 7,569 1.7 %
Total earning assets 7,273 7,161 1.6
Total loans 5,249 5,531 (5.1)
Total deposits 5,666 5,924 (4.4)
Total shareholders' equity 632 692 (8.7)
Shareholders' equity / assets 8.21 % 9.14 % (10.2)
PER COMMON SHARE DATA
Net Income:
Basic $ 1.52 $ 0.56 171.4 %
Diluted 1.51 0.56 169.6
Dividends 1.140 1.130 0.9
Market Value:
High $ 34.26 $ 33.88 1.1
Low 21.72 21.25 2.2
Close 32.72 24.78 32.0
Book value 14.69 14.88 (1.2)
Tangible book value 13.03 13.18 (1.1)
Shares outstanding, end of period (000) 43,242 43,702 (1.1)
PERFORMANCE RATIOS (ANNUALIZED)
Net interest margin (FTE) (2) 4.15 % 4.45 % (6.7)%
Return on average assets 0.86 0.33 160.6
Return on average shareholders' equity 10.44 3.62 188.4
Net loans charged off as a percent of average loans 0.88 1.64 (46.3)
(1) 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 $13,402,000 in noninterest expense. Noninterest income
for 2002 also includes gains on securitized mortgages of $2,436,000 and
gain on sale of merchant business of $5,400,000.
(2) Net interest margin is presented on an annual basis and includes taxable
equivalent adjustments to interest income of $13,508,000 and $14,470,000
for the twelve months ended December 31, 2003 and 2002, respectively, based
on a tax rate of 35%.
NONINTEREST INCOME AND NONINTEREST EXPENSE (UNAUDITED)
Citizens Banking Corporation and Subsidiaries
Quarter Ended
---------------------------------------------------------------
Dec 31 Sept 30 June 30 Mar 31 Dec 31
(in thousands) 2003 2003 2003 2003 2002
- --------------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Service charges on deposit accounts $ 8,074 $ 7,703 $ 7,549 $ 6,590 $ 6,689
Trust fees 4,615 4,368 4,324 4,220 4,696
Mortgage and other loan income 2,079 5,404 5,409 5,154 7,020
Brokerage and investment fees 1,705 2,333 1,914 1,768 2,482
Bankcard fees 732 761 814 735 783
Investment securities gains 2 42 11 48 12
Other income 4,424 4,443 4,826 4,772 5,019
-------- -------- -------- -------- --------
TOTAL NONINTEREST INCOME $ 21,631 $ 25,054 $ 24,847 $ 23,287 $ 26,701
======== ======== ======== ======== ========
NONINTEREST EXPENSE:
Salaries and employee benefits $ 29,774 $ 31,036 $ 31,400 $ 30,112 $ 30,585
Equipment 3,989 4,060 3,869 4,169 4,888
Occupancy 5,112 4,328 4,314 4,695 4,349
Professional services 5,202 4,946 3,959 3,708 5,077
Data processing services 3,145 3,225 3,058 3,316 3,200
Postage and delivery 1,796 1,739 1,683 1,678 1,745
Advertising and public relations 1,719 1,395 623 2,049 (423)
Telephone 1,314 1,169 1,135 1,175 1,176
Stationery and supplies 1,256 911 873 895 1,011
Bankcard expense 117 79 91 91 92
Special charge --- (370) (221) (100) (405)
Other expense 7,022 7,082 5,577 4,793 5,831
-------- -------- -------- -------- --------
TOTAL NONINTEREST EXPENSE $ 60,446 $ 59,600 $ 56,361 $ 56,581 $ 57,126
======== ======== ======== ======== ========
AVERAGE BALANCES, YIELDS AND RATES
THREE MONTHS ENDED
-----------------------------------------------------------------------
12/31/03 09/30/03 12/31/02
-----------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
(in thousands) BALANCE RATE (1) BALANCE RATE (1) BALANCE RATE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
EARNING ASSETS
Money market investments $ 2,539 0.51 % $ 3,927 0.30 % $ 20,977 1.29 %
Investment securities(2):
Taxable 1,542,775 4.11 1,526,583 3.73 998,895 5.74
Tax-exempt 418,438 7.67 401,302 7.76 411,981 7.86
Mortgage loans held for sale 64,950 5.47 234,793 5.26 175,952 6.56
Loans:
Commercial 2,982,849 5.46 3,049,878 5.61 3,307,039 6.08
Real estate 493,989 5.56 481,337 6.34 636,805 6.77
Direct consumer 996,486 5.96 937,133 6.27 855,908 7.35
Indirect consumer 746,443 6.99 714,302 7.24 669,897 7.97
----------- ----------- ----------
Total earning assets 7,248,469 5.53 7,349,255 5.61 7,077,454 6.53
NONEARNING ASSETS
Cash and due from banks 165,477 183,214 181,858
Investment security fair value adjustment 30,907 28,909 64,028
Other nonearning assets 377,429 375,185 347,451
Allowance for loan losses (125,420) (124,964) (106,720)
----------- ----------- ----------
Total assets $ 7,696,862 $ 7,811,599 $7,564,071
=========== =========== ==========
INTEREST-BEARING LIABILITIES
Deposits:
Interest-bearing demand $ 1,340,511 0.73 $ 1,334,765 0.75 $1,253,900 1.46
Savings deposits 1,262,141 0.47 1,332,519 0.55 1,360,296 0.99
Time deposits 1,976,708 2.63 2,054,257 2.84 2,422,243 3.39
Short-term borrowings 576,496 1.01 561,427 1.05 309,203 1.48
Long-term debt 938,005 3.48 937,941 3.51 610,717 4.21
----------- ----------- ----------
Total interest-bearing liabilities 6,093,861 1.74 6,220,909 1.84 5,956,359 2.42
NONINTEREST-BEARING LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing demand 901,383 888,440 885,903
Other liabilities 75,624 82,150 67,674
Shareholders' equity 625,994 620,100 654,135
----------- ----------- ----------
Total liabilities and shareholders' equity $ 7,696,862 $ 7,811,599 $7,564,071
=========== =========== ==========
INTEREST SPREAD 3.79 % 3.77 % 4.11 %
Contribution of noninterest bearing sources of funds 0.28 0.29 0.38
---- ---- ----
NET INTEREST INCOME AS A PERCENT OF EARNING ASSETS 4.07 % 4.06 % 4.49 %
TWELVE MONTHS ENDED
--------------------------------------------------
12/31/03 12/31/02
--------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
(in thousands) BALANCE RATE (1) BALANCE RATE (1)
- -------------------------------------------------------------------------------------------------------------------------------
EARNING ASSETS
Money market investments $ 11,214 0.94 % $ 50,599 1.61 %
Investment securities(2):
Taxable 1,405,549 4.38 963,574 5.75
Tax-exempt 405,412 7.78 416,563 7.87
Mortgage loans held for sale 155,407 5.54 146,434 6.27
Loans:
Commercial 3,112,311 5.66 3,343,273 6.31
Real estate 527,565 6.12 686,250 7.24
Direct consumer 920,696 6.39 838,067 7.73
Indirect consumer 688,350 7.32 663,200 8.18
----------- -----------
Total earning assets 7,226,504 5.80 7,107,960 6.72
NONEARNING ASSETS
Cash and due from banks 170,865 180,993
Investment security fair value adjustment 46,383 52,636
Other nonearning assets 371,105 315,344
Allowance for loan losses (120,926) (87,592)
----------- -----------
Total assets $ 7,693,931 $ 7,569,341
=========== ===========
INTEREST-BEARING LIABILITIES
Deposits:
Interest-bearing demand $ 1,319,858 0.89 $ 1,147,960 1.57
Savings deposits 1,329,648 0.67 1,363,528 1.14
Time deposits 2,138,088 2.94 2,543,255 3.71
Short-term borrowings 458,673 1.08 251,315 1.60
Long-term debt 861,704 3.63 620,913 4.79
----------- -----------
Total interest-bearing liabilities 6,107,971 1.96 5,926,971 2.73
NONINTEREST-BEARING LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing demand 877,939 869,699
Other liabilities 75,961 80,837
Shareholders' equity 632,060 691,834
----------- -----------
Total liabilities and shareholders' equity $ 7,693,931 $ 7,569,341
=========== ===========
INTEREST SPREAD 3.84 % 3.99 %
Contribution of noninterest bearing sources of funds 0.31 0.46
---- ----
NET INTEREST INCOME AS A PERCENT OF EARNING ASSETS 4.15 % 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
--------------------------------------------------------------
Dec 31 Sept 30 June 30 Mar 31 Dec 31
(in thousands) 2003 2003 2003 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Commercial(1)
Commercial $ 37,171 $ 51,158 $ 52,760 $ 49,275 50,231
Commercial real estate 16,385 17,379 19,568 20,433 19,301
Small business 1,603 1,648 1,466 1,459 813
-------- -------- -------- -------- --------
Total commercial 55,159 70,185 73,794 71,167 70,345
Consumer:
Direct 3,177 3,291 3,208 3,416 3,704
Indirect 1,247 1,625 1,094 1,646 1,803
Mortgage 9,161 8,177 9,832 7,878 10,865
Loans 90 days or more past due and still accruing 345 601 607 990 860
Restructured loans --- --- --- --- ---
-------- -------- -------- -------- --------
Total Nonperforming Loans 69,089 83,879 88,535 85,097 87,577
Other Reposessed Assets Acquired 7,943 7,350 8,044 8,226 8,094
-------- -------- -------- -------- --------
Total Nonperforming Assets $ 77,032 $ 91,229 $ 96,579 $ 93,323 $ 95,671
======== ======== ======== ======== ========
(1) Changes in commercial nonperforming assets for the quarter (in millions):
Inflows $ 17.8 $ 21.1 $ 36.3 $ 22.7 $ 27.6
Outflows (32.8) (24.7) (33.7) (21.9) (34.7)
-------- -------- -------- -------- --------
Net change $ (15.0) $ (3.6) $ 2.6 $ 0.8 $ (7.1)
======== ======== ======== ======== ========
SUMMARY OF LOAN LOSS EXPERIENCE
Citizens Banking Corporation and Subsidiaries
Quarter Ended
-------------------------------------------------------------
Dec 31 Sept 30 June 30 Mar 31 Dec 31
(in thousands) 2003 2003 2003 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses - beginning of period $125,955 $125,992 $112,385 $109,467 $104,158
Less: Reserve for loan commitments 2,690 2,690 2,690 2,690 2,690
-------- -------- -------- -------- --------
Restated Allowance for loan losses - beginning of period 123,265 123,302 109,695 106,777 101,468
Provision for loan losses 8,020 10,300 25,650 18,992 16,300
Charge-offs:
Commercial 7,323 9,539 7,577 14,133 10,058
Commercial real estate 2,276 1,531 4,321 955 159
Small business 551 348 273 264 159
-------- -------- -------- -------- --------
Total commercial 10,150 11,418 12,171 15,352 10,376
Real estate mortgage 320 213 76 625 1,745
Consumer - Direct 1,388 1,628 1,790 1,748 1,474
Consumer - Indirect 2,580 1,941 2,152 2,511 2,582
-------- -------- -------- -------- --------
Total charge-offs 14,438 15,200 16,189 20,236 16,177
-------- -------- -------- -------- --------
Recoveries:
Commercial 4,452 2,882 2,115 2,032 3,862
Commercial real estate 927 595 623 465 45
Small business 165 139 93 362 86
-------- -------- -------- -------- --------
Total commercial 5,544 3,616 2,831 2,859 3,993
Real estate mortgage --- 27 8 1 ---
Consumer - Direct 461 504 479 439 400
Consumer - Indirect 693 716 828 863 793
-------- -------- -------- -------- --------
Total recoveries 6,698 4,863 4,146 4,162 5,186
-------- -------- -------- -------- --------
Net charge-offs 7,740 10,337 12,043 16,074 10,991
-------- -------- -------- -------- --------
Restated Allowance for loan losses - end of period $123,545 $123,265 $123,302 $109,695 $106,777
======== ======== ======== ======== ========
Reserve for loan commitments - end of period $ 2,690 $ 2,690 $ 2,690 $ 2,690 $ 2,690
======== ======== ======== ======== ========
For the Quarter Ended 12/31/03
----------------------------------------------------------
Consumer - Consumer -
Commercial Real estate Direct Indirect Total
----------------------------------------------------------
Charge-offs:
Michigan $ 4,455 $ 125 $ 1,031 $ 2,580 $ 8,191
Wisconsin 3,113 188 273 --- 3,574
Iowa 1,821 7 58 --- 1,886
Illinois 761 --- 26 --- 787
------- ------- ------- ------- -------
Total charge-offs 10,150 320 1,388 2,580 14,438
------- ------- ------- ------- -------
Recoveries:
Michigan 3,859 --- 276 689 4,824
Wisconsin 1,445 --- 138 --- 1,583
Iowa 120 --- 41 --- 161
Illinois 120 --- 6 4 130
------- ------- ------- ------- -------
Total recoveries 5,544 - 461 693 6,698
------- ------- ------- ------- -------
Net charge-offs $ 4,606 $ 320 $ 927 $ 1,887 $ 7,740
======= ======= ======= ======= =======
For the Year Ended 12/31/03
----------------------------------------------------------
Consumer - Consumer -
Commercial Real estate Direct Indirect Total
----------------------------------------------------------
Charge-offs:
Michigan $31,322 $ 975 $ 4,588 $ 9,184 $46,069
Wisconsin 13,744 118 1,554 --- 15,416
Iowa 2,618 141 331 --- 3,090
Illinois 1,407 --- 81 --- 1,488
------- ------- ------- ------- -------
Total charge-offs 49,091 1,234 6,554 9,184 66,063
------- ------- ------- ------- -------
Recoveries:
Michigan 9,541 --- 1,298 3,079 13,918
Wisconsin 4,359 22 434 --- 4,815
Iowa 195 14 115 --- 324
Illinois 755 --- 36 21 812
------- ------- ------- ------- -------
Total recoveries 14,850 36 1,883 3,100 19,869
------- ------- ------- ------- -------
Net charge-offs $34,241 $ 1,198 $ 4,671 $ 6,084 $46,194
======= ======= ======= ======= =======