1





                                  SCHEDULE 14A
                                 (Rule 14a-101)

                    INFORMATION REQUIRED IN PROXY STATEMENT

                            SCHEDULE 14A INFORMATION
          Proxy Statement Pursuant to Section 14(a) of the Securities
                   Exchange Act of 1934 (Amendment No.     )

Filed by the registrant [X]
Filed by a party other than the registrant [ ]

Check the appropriate box:
   
[ ] Preliminary proxy statement       [ ]Confidential, for Use of the Commission
                                         Only (as permitted by Rule 14a-6(e)(2))
    

   
[X]  Definitive proxy statement
    
[ ]  Definitive additional materials
[ ]  Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

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

- -------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14(a)-6(i)(4) and 0-11.
        (1)  Title of each class of securities to which transaction applies:

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

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

- -------------------------------------------------------------------------------
        (4)  Proposed maximum aggregate value of transaction:

- -------------------------------------------------------------------------------
        (5)  Total fee paid:

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

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

        (1)  Amount previously paid:

- -------------------------------------------------------------------------------
        (2)  Form, schedule or registration statement no.:

- -------------------------------------------------------------------------------
        (3)  Filing party:

- -------------------------------------------------------------------------------
        (4)  Date filed:

- -------------------------------------------------------------------------------
   2





                                                                  March 16, 1998



To The Shareholders:

   
      The annual meeting of shareholders of Citizens Banking Corporation will be
held in the Michigan Rooms, located in the Harding Mott University Center at
the University of Michigan-Flint, Flint, Michigan 48502-2186, on Tuesday, 
April 21, 1998, at 10:00 a.m., local time, in accordance with the provisions 
of our bylaws.
    

      You are cordially invited to attend this meeting.  It is important that 
your shares be represented, regardless of the number you own.  Therefore, we
request that you please date, sign and return your proxy promptly in the
enclosed envelope whether or not you plan to attend the meeting.  Voting by
proxy will not affect your ability to attend the meeting or to change your
vote.
        
                                                   Sincerely yours,



                                                   Charles R. Weeks
                                                   Chairman of the Board


   3

                                              THOMAS W. GALLAGHER
                                              Senior Vice President, General
                                              Counsel and Secretary



            NOTICE OF ANNUAL MEETING OF SHAREHOLDERS, APRIL 21, 1998

To the Shareholders of Citizens Banking Corporation:

   
  Notice is hereby given that the annual meeting of shareholders of Citizens
Banking Corporation (the "Corporation") will be held in the Michigan Rooms
located in the Harding Mott University Center at the University of
Michigan-Flint, Flint, Michigan  48502-2186, on Tuesday, April 21, 1998, at 
10:00 a.m., local time, for the following purposes:
    

  (1)  To elect six (6) Class III directors to serve a three (3) year term and
until their successors are duly elected and qualify.

  (2)  To consider and approve an amendment to Article III of the Corporation's
Restated Articles of Incorporation to increase the total authorized common
shares from 40,000,000 shares without par value to 100,000,000 shares without
par value.

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

  THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE DIRECTORS NOMINATED
AND FOR THE PROPOSAL SET FORTH.

  Shareholders of record of the Corporation's common stock outstanding at the
close of business on February 27, 1998 are entitled to notice of and to vote at
the meeting.

  You are invited to attend this meeting.  Please date, sign and return your
proxy promptly in the enclosed, stamped envelope whether or not you plan to be
present at the meeting.  You may still vote in person if you attend the
meeting.

                                          By Order of the Board of Directors



                                          Thomas W. Gallagher
                                          Secretary


Flint, Michigan
March 16, 1998

   4




                          Citizens Banking Corporation
                            328 South Saginaw Street
                             Flint, Michigan  48502

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

  This proxy statement is furnished in connection with the solicitation of
proxies by the board of directors of Citizens Banking Corporation (the
"Corporation") to be used at the annual meeting of shareholders of the
Corporation and any adjournments thereof.  The annual meeting will be held on
April 21, 1998 at the time and place and for the purposes set forth in the
accompanying notice of annual meeting of shareholders.

  This proxy statement, the proxy, and notice of annual meeting of shareholders
are first being provided to shareholders on or about March 16, 1998.

   
  The shareholders of the common stock of the Corporation ("Common Stock") as
of the close of business on February 27, 1998 will be entitled to be present
and to vote at the meeting.  Each share is entitled to one (1) vote on each
matter to be voted upon at the meeting.  On February 27, 1998, there were
28,074,314 shares of Common Stock outstanding and entitled to vote.  The
Corporation has no other class of stock issued and outstanding at this time
that is entitled to vote at the meeting.  The board of directors requests that
you execute and return the proxy promptly, whether or not you plan to attend
the meeting.  Any proxy may be revoked by the person giving it at any time
prior to its being exercised by giving written notice of such revocation to the
secretary of the Corporation, by executing a later dated proxy or by voting in
person at the annual meeting.
    

  All share amounts and option exercise prices in this Proxy Statement have
been adjusted to reflect the 3-for-2 stock split paid on November 18, 1997 to
shareholders of record on October 27, 1997.

  The shares represented by properly executed proxies will be voted in
accordance with the instructions provided therein and where no instructions are
given, will be voted in favor of the proposal and the election of the Class III
nominees identified herein.  For purposes of determining the number of votes
cast with respect to the election of directors, only those cast "for" are
included.  Abstentions and withheld votes are counted only for purposes of
determining whether a quorum is present at the annual meeting and determining
whether the requisite vote is received on the proposal.  Although broker
non-votes and abstentions are not counted, they will have the effect of a vote
against the proposal.

  The costs of soliciting proxies will be borne by the Corporation.  The
solicitation of proxies will be made primarily by mail.  The Corporation has,
however, retained the firm of Kissel-Blake Inc., specialists in proxy
solicitation, to solicit proxies on its behalf from brokers, bank nominees, and
other institutional holders of its stock at an anticipated cost of $7,500.00
plus certain out-of-pocket expenses.  Proxies may also be solicited by
directors, officers, and other employees of the Corporation and its
subsidiaries personally, and by telephone, facsimile, or other means.  No
additional compensation will be paid to directors, officers, or employees for
any such solicitation nor is any such solicitation expected to result in more
than a minimal cost to the Corporation.  Arrangements may also be made directly
by the Corporation with banks, brokerage houses, custodians, nominees, and
fiduciaries to forward solicitation material to the beneficial owners of stock
held of record by them and to obtain authorization for the execution of
proxies.  The Corporation may reimburse such institutional holders for
reasonable expenses incurred by them in connection therewith.

  The persons named in the proxy to represent shareholders who are present by
proxy at the meeting are Victor E. George and Edward P. Abbott.





                                      1





   5

                SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

  The table below includes all of the shareholders of the Corporation known by
the Corporation to beneficially own more than five percent of its Common Stock
as of December 31, 1997.  All share amounts reflect the 3-for-2 stock split
paid on November 18, 1997 to shareholders of record on October 27, 1997




                                                                                                               COMMON
                                                                                                                STOCK
                                                                                                              BENEFICIALLY
                                                                                                              OWNED AS A
                    COMMON STOCK                                                                              PERCENTAGE
                    BENEFICIALLY                                                                                  OF
NAME AND ADDRESS        OWNED                    INVESTMENT POWER                VOTING POWER                 OUTSTANDING
 OF BENEFICIAL                          -----------------------------      ----------------------------         COMMON
    OWNER                               SOLE       SHARED        NONE      SOLE       SHARED       NONE         STOCK
                                                                                                                
                                                                                          
Citizens Bank
328 S. Saginaw St.
Flint, Michigan
485021(1)             3,888,513       1,258,643  2,451,039     178,831   2,111,311    1,660,016    117,186        13.9%

CenTra, Inc.
12225 Stephens
Warren, Michigan
480892(2)             2,901,808       2,801,599    100,209           0   2,801,599      100,209          0        10.3%
                                                                       


___________________
(1) As sole or co-fiduciary, Citizens Bank will generally vote the shares held
by it in trusts or estates in which the indenture creating the same
specifically grants such power.  Shares held in all other trusts or estates in
which the bank acts as co-fiduciary will generally be voted by the other
co-fiduciary or by the bank at the direction of such co-fiduciary.
        
(2) The information furnished for CenTra, Inc. is based upon data which have 
been supplied to the Corporation by CenTra, Inc.  As set forth in the table,
CenTra, Inc. shares investment and voting power with respect to 100,209 shares. 
Such powers are shared with the Manuel J. Moroun Trust under agreement dated
March 4, 1977, for the benefit of Manuel J. Moroun.
        
                                      2

   6





                        SECURITY OWNERSHIP OF MANAGEMENT

        The following table sets forth the number of shares of the Corporation's
    Common Stock beneficially owned as of December 31, 1997, together with the
    percentage of the outstanding shares which such ownership represents, by (i)
    each director and nominee for election to the board of directors, (ii) each
    executive officer named in the Summary Compensation Table under "Executive
    Compensation" and (iii) all directors and executive officers of the
    Corporation as a group.  The information with respect to directors and
    executive officers has been obtained from the respective individuals and is
    reported in accordance with the beneficial ownership rules of the Securities
    and Exchange Commission (the "Commission") under which a person may be
    deemed to be the beneficial owner of a security if such person has or shares
    voting power or investment power with respect to such security or has the
    right to acquire such ownership within the next 60 days.  Accordingly, the
    amounts shown in the following table do not purport to represent beneficial
    ownership for any purpose other than compliance with the Commission's
    reporting requirements.  All share amounts reflect the 3-for-2 stock split
    paid on November 18, 1997 to shareholders of record on October 27, 1997.


   


                                                                                                       
                                                                                                       

                                         COMMON STOCK                                                   COMMON STOCK BENEFICIALLY 
                                      BENEFICIALLY OWNED                                                 OWNED AS A PERCENTAGE OF 
                                      AS OF DECEMBER 31,     SOLE VOTING AND      SHARED VOTING AND      OUTSTANDING COMMON STOCK 
NAME                                         1997           DISPOSITIVE POWER     DISPOSITIVE POWER      AS OF DECEMBER 31, 1997  
                                                                                                           
Edward P. Abbott(1)                          22,147               22,011                    136                  *
Hugo E. Braun Jr.(1)                         24,204               24,204                    - -                  *
Jonathan E. Burroughs II(1)(2)              232,734              228,996                  3,738                  *
Gary O. Clark(3)                            156,259              147,121                  9,138                  *
Joseph P. Day(1)                              5,265                5,265                    - -                  *
John W. Ennest(4)                           279,571              279,571                    - -                  *
Lawrence O. Erickson(1)                     435,359                4,500                430,859                1.6%
Victor E. George(1)                           9,321                9,321                    - -                  *
William J. Hank(5)                          290,343               85,390                204,953                1.0%
Stephen J. Lazaroff                          28,639               25,464                  3,175                  *
William F. Nelson Jr.(1)                     11,478                8,766                  2,712                  *
Wayne G. Schaeffer(6)                       125,577              110,124                 15,453                  *
Gerald Schreiber(7)                          12,222               12,222                    - -                  *
William C. Shedd(1)                          11,849                5,816                  6,033                  *
James E. Truesdell Jr.(1)                    43,263               43,263                    - -                  *
James M. VanTiflin(8)                        75,885               75,885                    - -                  *
Robert J. Vitito(9)                         333,051              262,193                 70,858                1.1%
Ada C. Washington(10)                         1,658                1,658                    - -                  *
Charles R. Weeks(7)                         175,727              169,270                  6,457                  *
Kendall B. Williams(1)                        5,776                4,840                    936                  *
James L. Woloham(7)                          10,550               10,550                    - -                  *
All Directors, Director Nominees          2,716,068            1,938,877                777,191                9.7%
and Executive Officers as a Group       
(28)(11)

    



    * Represents holdings of less than one percent.

    (1) Includes 4,500 exercisable options to purchase Common Stock which were
    granted pursuant to the provisions of the Stock Option Plan for Directors.



                                      3

    
   7



(2)The shares shown for Mr. Burroughs II, include: 42,591 shares held in the
Burroughs' Memorial Trust, to which Mr. Burroughs II serves as one of 5
trustees.  Mr. Burroughs II disclaims  beneficial ownership of such shares.

(3)Includes 74,730 exercisable options to purchase Common Stock.

(4)Includes 195,555 exercisable options to purchase Common Stock.

(5)Includes 3,000 exercisable options to purchase Common Stock which were
granted pursuant to the provisions of the Stock Option Plan for Directors.

(6)Includes 93,634 exercisable options.

(7)Includes 1,500 exercisable options to purchase Common Stock which were
granted pursuant to the provisions of the Stock Option Plan for Directors.

(8)Includes 66,507 exercisable options to purchase Common Stock.

(9)Includes 216,334 exercisable options to purchase Common Stock.

(10)Includes 825 exercisable options to purchase Common Stock which were granted
pursuant to the provisions of the Stock Option Plan for Directors.

   
(11)The directors, director nominees and executive officers disclaim beneficial
ownership of 235,549 of these shares.  Also, of the 2,716,068 shares shown as
being beneficially owned by such group, 1,022,310 represent exercisable options
to purchase Common Stock.
    

                             ELECTION OF DIRECTORS

         In accordance with the Corporation's restated articles of
incorporation, the board of directors is divided into three classes.  Each
year, on a rotating basis, the terms of office of the directors in one of the
three classes will expire.  Successors to the class of directors whose terms
have expired will be elected for a three-year term.  The directors whose terms
expire at the 1998 annual meeting of shareholders ("Class III directors") are
Stephen J. Lazaroff, William F. Nelson Jr., William C. Shedd, James E.
Truesdell Jr., Charles R. Weeks, and Kendall B. Williams.  All of the current
Class III directors have previously been elected as directors by the
shareholders, except Mr. Lazaroff, who was appointed to the board of directors
pursuant to the Agreement and Plan of Merger between the Corporation and CB
Financial Corporation dated January 27, 1997.  The board of directors has
nominated each of these individuals for re-election as Class III Directors at
the 1998 annual meeting of shareholders.  The term for the Class III directors
will expire at the 2001 annual meeting of shareholders or upon the election and
qualification of their successors.  If any of the nominees should be unable to
serve, the proxies may be voted for the election of such other person or
persons as the board of directors may recommend or the number of directors will
be automatically reduced by the number of nominees unable to serve if no
substitute is recommended by the board of directors.

         Six nominees will be elected as Class III directors at the 1998 annual
meeting of shareholders.  On the basis of information presently available to
the board of directors, only the six persons named above as nominees will be
nominated for election as directors.  SHARES REPRESENTED BY PROXIES IN THE
ACCOMPANYING FORM WILL BE VOTED FOR THE ELECTION OF SUCH NOMINEES UNLESS A
CONTRARY DIRECTION IS INDICATED.  The affirmative vote of a majority of the
votes cast at the meeting is required for election.  THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.





                                      4
   8

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



                                   CLASS III
                       NOMINEES TO SERVE THREE (3) YEARS





                                                                                        BUSINESS EXPERIENCE DURING THE
                                                                                         PAST FIVE YEARS, DIRECTORSHIPS
                                                                          SERVED          IN CERTAIN CORPORATIONS, AND
                                                                       CONTINUOUSLY      PRINCIPAL OCCUPATION IF OTHER
                                        POSITIONS AND OFFICES WITH     AS A DIRECTOR       THAN CURRENT POSITION WITH
       NAME                   AGE    CORPORATION AND ITS SUBSIDIARIES  OF CORPORATION   CORPORATION AS ITS SUBSIDIARIES

                                                                           
 Stephen J. Lazaroff            44     Director of Corporation.              1997      President, Diversified Precision
                                                                                       Products, Inc., a special
                                                                                       cutting tool manufacturer
                                                                                       serving the automotive and
                                                                                       hydraulic fittings industries.

 William F. Nelson Jr.          64     Director of Corporation.              1986      President, Director, and Owner,
                                                                                       William F. Nelson Electric,
                                                                                       Inc., an electrical contractor
                                                                                       for commercial and industrial
                                                                                       businesses.

 William C. Shedd               58     Director of Corporation and           1982      Attorney and Partner,
                                       Director of Citizens Bank.                      Winegarden, Shedd, Haley,
                                                                                       Lindholm & Robertson.

 James E. Truesdell Jr.         67     Director of Corporation and           1982      President-Secretary, J. Austin
                                       Director of Citizens Bank.                      Oil Company of Flint, Inc., an
                                                                                       investment and real estate
                                                                                       development firm.

 Charles R. Weeks               63     Chairman of the Board of              1982      Retired President and Chief
                                       Corporation and Director of                     Executive Officer of the
                                       Citizens Bank.                                  Corporation; Director, Wolohan
                                                                                       Lumber Co.

 Kendall B. Williams            45     Director of Corporation and           1992      Attorney and Counselor,
                                       Director of Citizens Bank.                      The Williams Firm, P.C.
                                                                                       Previously an attorney with
                                                                                       Gault Davison, P.C. from January 1980
                                                                                       to September 1997






                                      5
   9




                                    CLASS I
                  CONTINUING DIRECTORS - TERM EXPIRING IN 1999



                                                                                   BUSINESS EXPERIENCE DURING THE
                                                                                   PAST FIVE YEARS, DIRECTORSHIPS
                                                                      SERVED       IN CERTAIN CORPORATIONS, AND
                                                                   CONTINUOUSLY     PRINCIPAL OCCUPATION IF OTHER
                                   POSITIONS AND OFFICES WITH      AS A DIRECTOR     THAN CURRENT POSITION WITH
       NAME               AGE   CORPORATION AND ITS SUBSIDIARIES   OF CORPORATION  CORPORATION AS ITS SUBSIDIARIES
                                                                      
 Edward P. Abbott          58   Director of Corporation and            1982        President and Chief Executive
                                Director of Citizens Bank.                         Officer, Abbott's Meat, Inc., a
                                                                                   wholesale and retail meat
                                                                                   distributor.
                                                                                  
 Hugo E. Braun Jr.         65   Director of Corporation and            1986        Attorney & Partner, Braun
                                Director of Citizens Bank.                         Kendrick Finkbeiner; Director,
                                                                                   Wolohan Lumber Co.

 Jonathan E.               55   Director of Corporation.               1986        President, JEB Enterprises, an
     Burroughs II                                                                  investment consulting firm.
                                                                                  
 Lawrence O. Erickson      62   Director of Corporation and            1993        Chief Executive Officer, Four-Way
                                Director of Citizens Bank.                         Tool & Die, Inc., an engineering
                                                                                   consulting firm for metal
                                                                                   stamping fabrication and tool
                                                                                   manufacturing.
                                                                                  
 William J. Hank           65   Director of Corporation and            1987        Chairman and Chief Executive
                                Director of Citizens Bank -                        Officer, Farnham Investments
                                Illinois, N.A.                                     Group; Retired Executive Vice
                                                                                   President of the Corporation;
                                                                                   Retired Chairman of the Board,
                                                                                   Citizens Bank - Illinois, N.A.
Robert J. Vitito           55   President, Chief Executive             1991       
                                Officer and Director of
                                Corporation; Chairman of the
                                Board, President and Chief
                                Executive Officer of Citizens
                                Bank.






                                      8
   10

                                    CLASS II
                  CONTINUING DIRECTORS - TERM EXPIRING IN 2000





                                                                              BUSINESS EXPERIENCE DURING THE
                                                                              PAST FIVE YEARS, DIRECTORSHIPS
                                                                                IN CERTAIN CORPORATIONS, AND
                        POSITIONS AND OFFICES          SERVED CONTINUOUSLY     PRINCIPAL OCCUPATION IF OTHER
                        WITH CORPORATION AND           AS A DIRECTOR OF         THAN CURRENT POSITION WITH
      NAME         AGE  ITS SUBSIDIARIES               CORPORATION            CORPORATION AND ITS SUBSIDIARIES
                                                                  
Joseph P. Day      58   Director of Corporation              1992            President, Banner Engineering &
                        and Director of Citizens Bank.                       Sales, Inc., a combustion
                                                                             engineering and manufacturing
                                                                             firm.
                                                                       
John W. Ennest     55   Vice Chairman of the                 1991          
                        Board, Chief Financial                         
                        Officer, and Treasurer                         
                        of Corporation; Vice                           
                        Chairman of the Board                          
                        and Chief Financial                            
                        Officer, Citizens Bank;                        
                        Chairman of the Board,                         
                        Citizens Bank -                                
                        Illinois, N.A.                                 
                                                                       
Victor E. George   66   Director of Corporation              1982            Chairman of the Board, Victor
                        and Director of                                      George Oldsmobile, Inc., an
                        Citizens Bank.                                       automobile dealership.
                                                                       
Gerald Schreiber   63   Director of Corporation.             1997            Vice President - Sales,
                                                                             Royalite Co., an electrical
                                                                             wholesale distributor.

Ada C. Washington  47   Director of Corporation              1997            Community Volunteer.
                        and Director of                                
                        Citizens Bank.                                 
                                                                       
James L. Wolohan   46   Director of Corporation              1997            Chairman, President and Chief
                        and Director of                                      Executive Officer of Wolohan
                        Citizens Bank.                                       Lumber Co., a retailer of
                                                                             lumber, building materials and
                                                                             home improvement products;
                                                                             Director, Jacobson Stores, Inc.


                                      7

   11

                             MEETINGS OF DIRECTORS

         During calendar year 1997, 4 regular meetings and 4 special meetings
of the board of directors of the Corporation were held.  During such period,
all incumbent directors attended at least 75% of the aggregate of the number of
meetings of the board of directors and the number of meetings held by the
committees on which they serve.


                      COMMITTEES OF THE BOARD OF DIRECTORS

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

         The AUDIT COMMITTEE met 4 times during 1997 and is currently comprised
of the following outside directors:  James E. Truesdell Jr., chairman; Edward
P. Abbott; Joseph P. Day; William F. Nelson Jr.; and Gerald Schreiber.  The
responsibilities of the committee include oversight of the internal accounting
controls for and internal audit function of the Corporation and its
subsidiaries; recommending to the board of directors the independent auditors
to be retained to conduct the annual audit of the Corporation; reviewing the
annual audit plan with the independent auditors and the internal auditors;
serving as the Compliance Review Committee pursuant to the provisions of the
Corporation's compliance policy; and reviewing the financial results and the
results of the internal and independent audits of the Corporation.

         The COMPENSATION AND BENEFITS COMMITTEE met 7 times during 1997 and is
currently comprised of the following directors:  Hugo E. Braun Jr., chairman;
Lawrence O. Erickson; Victor E. George; James E. Truesdell Jr.; and Kendall B.
Williams.  The responsibilities of the committee include approval of all
aspects of corporate executive compensation and administration of the
Corporation's compensation and benefits plans.

         The DIRECTORS NOMINATING COMMITTEE met 1 time during 1997 and is
currently comprised of the following directors:  Charles R. Weeks, chairman;
Hugo E. Braun Jr.; Jonathan E. Burroughs II; Victor E. George; and Robert J.
Vitito.  The responsibilities of the committee are:  to determine a desirable
balance of expertise among board members; to identify qualified candidates to
fill board positions; to provide aid in attracting qualified candidates to the
board of directors; to recommend the slate of director nominees to the board of
directors for inclusion in the Corporation's proxy statement for election by
the shareholders at the annual meetings; to consider director nominees proposed
by shareholders; and to handle such other matters as may be properly delegated
to the committee by the board of directors.  Shareholders proposing director
nominees at any annual meeting of shareholders shall provide written notice in
accordance with the bylaws of such intention to the secretary of the
Corporation at least ninety days prior to an annual shareholders meeting for
which such nominations are proposed and with respect to an election to be held
at a special meeting of shareholders, such notices must be given by the close
of business on the seventh day following the date on which notice of such
meeting is first given to shareholders.





                                      8
   12



                           COMPENSATION OF DIRECTORS

         During 1997, directors of the Corporation (with the exception of Mr.
Weeks who has a separate arrangement as described below) were paid an annual
retainer of $6,000 plus the sum of $900 for attendance at each meeting of the
board of directors.  Non-officer directors were paid $600 for each committee
meeting attended with the exception of the committee chairpersons who were paid
$900.  Committee member directors who are also employees of the Corporation do
not receive fees for committee meeting attendance.

         The Corporation also maintains the Stock Option Plan for Directors.
Annually during the ten year term of the Plan, each nonemployee director
serving on the board of directors immediately following the annual meeting of
shareholders will receive an automatic grant of a non- qualified stock option
to purchase 1,500 shares of Common Stock at an exercise price equal to the fair
market value per share of Common Stock on the date of the annual meeting of
shareholders.  Each such option will become exercisable six months following
the grant date and expire five years after grant.  On April 15, 1997, pursuant
to the Plan, nonemployee directors received a stock option grant to purchase
1,500 shares of Common Stock of the Corporation at an exercise price of $20.75
per share.

         In April 1996, the Corporation entered into a contractual arrangement
with Mr. Weeks, pursuant to which he agreed to serve as chairman of the board
of the Corporation and as chairman of the executive and nominating committees
of the Corporation's board of directors.  Pursuant to such arrangement, Mr.
Weeks is currently paid an annual fee of $206,000 which is inclusive of any
other annual retainer or meeting fees otherwise normally paid to directors of
the Corporation.  Such fee is paid in quarterly installments in February, May,
August and November of each year until the end of the term of the appointment
on April 30, 1999.  The fee will be increased to $212,180 in May 1998.  In
addition to such fee, Mr. Weeks is entitled to be reimbursed by the Corporation
for reasonable out-of-pocket expenses incurred in his capacity as chairman upon
presentation of an appropriate accounting to the Corporation.  In the event Mr.
Weeks should fail to be re-elected as a director of the Corporation or be
removed as chairman of the board (for reasons other than willful misconduct or
neglect) prior to the expiration of the term of the appointment, Mr. Weeks
would be entitled to one half of the annual fees prorated for the remainder of
the term.  If Mr. Weeks should voluntarily resign as chairman of the board
prior to the expiration of the term, he will forfeit all right to future
payment under the agreement.  In the event of the death or permanent and total
disability of Mr. Weeks, any unpaid fees will be prorated to the date of death
or permanent and total disability.

                    PROPOSAL TO APPROVE AN AMENDMENT TO THE
                 RESTATED ARTICLES OF INCORPORATION TO INCREASE
                     THE NUMBER OF AUTHORIZED COMMON SHARES


         The Restated Articles of Incorporation (the "Articles") presently
authorize 40,000,000 shares of Common Stock, no par value.  As of January 1,
1998, 28,047,518 shares of Common Stock were issued and outstanding and
1,120,165 shares of Common Stock were reserved for issuance pursuant to the
Corporation's benefit plans.

         Proposed Amendment.  The board of directors is seeking approval of an
amendment to the Articles to increase the number of authorized shares of Common
Stock to 100,000,000 shares as set forth in the following shareholder
resolution:





                                      9
   13


                 "RESOLVED, that the Restated Articles of Incorporation of this
                 Corporation be amended by changing Article III so that, as
                 amended, Article III, which sets forth the total authorized
                 capital stock of this Corporation shall read as follows:

                 'The total authorized capital stock is:


                                             
                 1.       Common shares:           100,000,000 shares, no par value
                 2.       Preferred shares:          5,000,000 shares, no par value.'"


   
         Reason for Proposed Amendment.  The proposed additional shares of
Common Stock could be issued for any proper corporate purpose, including the
acquisition of other businesses, the raising of additional capital for use in
the Corporation's business, stock splits, the payment of stock dividends or
other distributions in shares of stock, or in connection with employee stock
incentive programs.  While the Corporation currently has no understandings or
commitments with respect to the issuance of the additional shares of Common
Stock, it is considered advisable to have the authorization to issue such
shares in order to enable the Corporation, as the need may arise, to move 
promptly to take advantage of market conditions and the availability of other 
favorable opportunities without the delay and expense involved in calling a 
special shareholders meeting for such purpose.
    

         The authorization of additional shares of Common Stock will not, by
itself, have any effect on the rights of holders of existing Common Stock.
Depending on the circumstances, any issuance of additional shares of Common
Stock may dilute the present equity ownership of current shareholders.  Holders
of Common Stock have no preemptive rights to participate in any such issuance.

   
         If the proposed amendment to the Articles is approved, the Board of
Directors will have the authority to issue the additional authorized shares or
any part thereof to such persons and for such consideration as it may determine
without further action by the shareholders except as required by law, the
Articles or the rules of the Nasdaq Stock Market or any stock exchange on which
the Corporation's securities may then be listed.  The Nasdaq Stock Market, on 
which the issued shares of Common Stock are listed, currently requires 
shareholder approval as a prerequisite to listing shares in certain limited 
circumstances.
    

   
         It should be noted that while the Corporation has no present plans to
use the additional authorized shares of Common Stock for any particular
purpose, the availability of additional shares of Common Stock could render
more difficult or discourage a takeover attempt.  For example, additional
shares of Common Stock could be issued and sold to purchasers who oppose a
takeover bid which is not in the best interests of the Corporation, its
shareholders and its constituencies or could be issued to increase the
aggregate number of outstanding shares of Common Stock and thereby dilute the
interest of parties attempting to obtain control of the Corporation.  In
connection with any issuance of shares of Common Stock, the board of directors
is required to determine that such issuance would be in the best interests of
the Corporation and its shareholders.  It is possible that such shares could be
sold with or without an option, on the part of the Corporation, to repurchase
such shares, or on the part of the purchaser, to put such shares to the
Corporation.  If used to render more difficult or to discourage a takeover
attempt, the effect of the additional authorized shares of Common Stock might
be (i) to deprive shareholders of an opportunity to sell their stock at a
temporarily higher price as a result of a tender offer or the purchase of
shares by a person seeking to obtain control of the Corporation or (ii) to 
assist incumbent management in retaining its present position.  Such an 
attempt to acquire control is unlikely at the present time, however, in view 
of certain measures currently in place.
    





                                      10
   14



         Certain existing provisions of the Corporation's Articles and its
Amended and Restated Bylaws (the "Bylaws") may under certain circumstances have
anti-takeover effects.  The provisions in the Articles (i) provide that
board of directors shall consist of three classes of directors, each class
serving a staggered three year term; (ii) provide for a two-thirds shareholder
vote to amend, alter, add or repeal certain provisions in the Bylaws; (iii)
provide that corporate actions may be taken without a shareholders' meeting if
written consent setting forth such action is signed by the holders of at least
two-thirds of the outstanding voting stock; and (iv) provide that in the
absence of a two-thirds vote of the continuing directors approving the
transaction, a business combination between the Corporation or a subsidiary and
related person must comply with certain specified conditions including that the
aggregate consideration per share be equal to the highest consideration
previously paid by the related person or his affiliates for any shares; or in
the alternative, the transaction must receive a favorable vote of at least
two-thirds of the outstanding voting shares and a majority of the shares held
by other than such related person.  The provisions in the Bylaws (i) permit
shareholders' meetings to be called by shareholders only upon the request of
the holders of at least two-thirds of the outstanding shares entitled to vote;
(ii) permit a director to be removed from office only for cause upon the
favorable vote of the holders of at least two-thirds of the votes entitled to
be cast; and (iii) require any shareholder intending to make a nomination at an
election meeting to provide specific information regarding the proposed
nominees to the Secretary at least ninety (90) days in advance of the meeting.
None of these Articles or Bylaws provisions may be altered or amended without
the affirmative vote of at least two-thirds of the votes entitled to be cast
unless the amendment is recommended by more than 75% of the directors.

   
         In addition, the board of directors of the Corporation adopted a share
purchase rights plan on July 20, 1990 which may under certain circumstances
have anti-takeover effects.  Specifically, on July 20, 1990, the board of
directors declared a dividend distribution of one Right for each outstanding
share of Common stock of the Corporation.  Each Right entitles the registered
holder to purchase from the Corporation under certain circumstances one
one-hundredth of a share of Series A Preferred Stock at a price of $25 per each
one-hundredth of a share, subject to adjustment to prevent dilution.  In the
event any person or group acquires 15% or more of the outstanding shares of
Common Stock or if certain other events occur involving a potential
change-in-control of the Corporation, each Right will entitle the registered
holder (other than such acquiror) to purchase, for the $25 exercise price,
shares of Common Stock having a market value of $50.
    

         The Corporation is also subject to Chapter 7B of the Michigan Business
Corporation Act which provides that "control shares" of the Corporation
acquired in a "control share acquisition" have no voting rights except as
granted by the shareholders of the Corporation.

         THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO AMEND THE
RESTATED ARTICLES OF INCORPORATION.  A majority of shares outstanding and
entitled to vote at the meeting is required to approve the proposal.
Consequently, abstentions and broker non-votes will have the same effect as a
vote against the proposal.





                                      11
   15




                               EXECUTIVE OFFICERS

     The following information is provided for those officers currently
designated as executive officers by the Corporation's Board of Directors and
includes the President, Chief Financial Officer, Controller, and Secretary of
the Corporation, officers of the Corporation who are in charge of principal
business units, divisions or functions, and officers of the Corporation or its
subsidiaries who perform significant policy making functions for the
Corporation.



                                                           YEAR BECAME
                                                           EXECUTIVE OFFICER OF
       NAME          AGE   FIVE-YEAR BUSINESS EXPERIENCE   THE CORPORATION

Richard T. Albee       54  Executive Vice President of                      1996
                           Citizens Bank (December 1997
                           to present); Senior Vice
                           President of Citizens Bank
                           (April 1994 to present).
                           Also served as President of
                           former subsidiary bank of the
                           Corporation which was
                           consolidated with Citizens
                           Bank (January 1988 to April
                           1994).                                           

Daniel E. Bekemeier    41  Senior Vice President and                        1996
                           Controller of Citizens Bank
                           (April 1995 to present); Vice
                           President and Controller of
                           Citizens Bank (September 1989
                           to April 1995).

Nicholas J. Cilfone    47  Senior Vice President of                         1985
                           Corporation (August 1988 -
                           present); Executive Vice
                           President of Citizens Bank
                           (June 1996 to present).  Also
                           served as Executive Vice
                           President of former
                           subsidiary bank of the
                           Corporation which was
                           consolidated with Citizens
                           Bank (October 1991 to June
                           1996).

Gary O. Clark          56  Executive Vice President of                      1986
                           Corporation (July 1986 -
                           present); President and Chief
                           Executive Officer, Citizens
                           Bank - Illinois, N.A.
                           (February 1994 - present);
                           Senior Executive Vice
                           President, Chief Operating
                           Officer and Senior Credit
                           Officer of Citizens Bank
                           (October 1991 - February
                           1994).

Gary P. Drainville     48  Executive Vice President of                      1985
                           Corporation and of Citizens
                           Bank (December 1993 -
                           present); Director of Human
                           Resources of Corporation and
                           of Citizens Bank (December
                           1985 - June 1996); Senior
                           Vice President of Corporation
                           and of Citizens Bank
                           (December 1985 - December
                           1993)



                                      12



   16



                                                           YEAR BECAME
                                                           EXECUTIVE OFFICER OF
       NAME          AGE   FIVE-YEAR BUSINESS EXPERIENCE   THE CORPORATION

John W. Ennest         55  Vice Chairman of the Board of            1983
                           Corporation (October 1991 -          
                           present); Chief Financial            
                           Officer and Treasurer of             
                           Corporation (July 1994 -             
                           present); Vice Chairman of           
                           the Board and Chief Financial        
                           Officer of Citizens Bank             
                           (June 1996 to present)               
                           Chairman of the Board,               
                           Citizens Bank - Illinois,            
                           N.A. (August 1992 - present);        
                           Chief Executive Officer,             
                           Citizens Bank - Illinois,            
                           N.A. (August 1992 - February         
                           1994).                               

Thomas W. Gallagher    45  Senior Vice President of                 1989
                           Corporation (July 1993 -             
                           present); General Counsel of         
                           Corporation (August 1988 -           
                           present); Secretary of               
                           Corporation (January 1989 -          
                           present); Senior Vice                
                           President and General                
                           Counsel, Citizens Bank               
                           (August 1988 - Present).             

Wayne G. Schaeffer     51  Executive Vice President of              1987
                           Corporation (December 1993 -         
                           Present); Chief Financial            
                           Officer and Treasurer of             
                           Corporation (August 1988 -           
                           July 1994); Senior Vice              
                           President of Corporation             
                           (August 1988 - December              
                           1993);President - Flint,             
                           Citizens Bank (June 1996 to          
                           Present); Senior Executive           
                           Vice President and Chief             
                           Operating Officer, Citizens          
                           Bank (July 1994 - June 1996);        
                           Chief Financial Officer,             
                           Citizens Bank (December 1985         
                           - July 1994); Executive Vice         
                           President, Citizens Bank             
                           (December 1993 - July 1994).         

Thomas C. Shafer       39  Executive Vice President of              1996
                           Citizens Bank (June 1996 to          
                           present); Senior Vice                
                           President of Citizens Bank           
                           (November 1994 to June 1996);        
                           City President, Michigan             
                           National Bank - Flint (April         
                           1992 to November 1994)               
                                                               

James M. VanTiflin     50  President - Saginaw, Citizens            1996
                           Bank (June 1996 to present);         
                           President and Chief Executive        
                           Officer of former subsidiary         
                           bank of the Corporation which        
                           was consolidated with                
                           Citizens Bank (February 1995
                           to June 1996); Executive Vice
                           President of Citizens Bank
                           (August 1992 to February
                           1995).



                                      13


   17


                                                           YEAR BECAME
                                                           EXECUTIVE OFFICER OF
       NAME          AGE   FIVE-YEAR BUSINESS EXPERIENCE   THE CORPORATION

Robert J. Vitito       55  President and Chief Executive        1986
                           Officer of Corporation (April       
                           1996 to present); President         
                           and Chief Administrative            
                           Officer of Corporation (July        
                           1994 - April 1996); Executive       
                           Vice President of Corporation       
                           (July 1986 - July 1994);            
                           Chairman, President and Chief       
                           Executive Officer of Citizens       
                           Bank (May 1996 to Present);         
                           also served as Chairman of          
                           the Board of former                 
                           subsidiary bank of the              
                           Corporation which was               
                           consolidated with Citizens          
                           Bank (January 1987 to June          
                           1996)                               

Jack S. Werner         50  President - Bay City/Midland,        1996
                           Citizens Bank (June 1996 to         
                           present).  Also served as           
                           Chairman and Chief Executive        
                           Officer of former subsidiary        
                           bank of the Corporation which       
                           was consolidated with               
                           Citizens Bank (May 1991 to
                           June 1996).






   
     Citizens Bank and Citizens Bank - Illinois, N.A. are wholly-owned
subsidiaries of the Corporation.
    





                                      14



   18

                             EXECUTIVE COMPENSATION

         The following table provides certain summary information concerning
compensation paid or accrued by the Corporation and its subsidiaries, to or on
behalf of the Corporation's Chief Executive Officer and each of the four other
most highly compensated executive officers during 1997 (the "Named Officers")
of the Corporation (determined as of the end of the last fiscal year) for the
fiscal years ended December 31, 1995, 1996, and 1997:

                           SUMMARY COMPENSATION TABLE




                                                           ANNUAL COMPENSATION              LONG TERM
          NAME AND PRINCIPAL                                                               COMPENSATION
              POSITION                                                                                              ALL OTHER
                                           YEAR        SALARY ($)        BONUS ($)            OPTIONS/           COMPENSATION(2)($)
                                                                                            SARS(#)(1)
                                                                                                       
           Robert J. Vitito                  1997         313,000       168,859              110,667                  22,418
           President and Chief               1996         278,273       143,882               92,433                  20,419
               Executive Officer             1995         241,442       112,864               77,625                  19,916
                                                                      
           John W. Ennest                    1997         252,850        94,870               66,580                  23,596
           Vice Chairman, Treasurer          1996         243,148        72,754               55,533                  20,419
               and Chief Financial           1995         234,414        90,442               75,873                  19,982
               Officer

           Wayne G. Schaeffer                1997         157,000        70,156               39,870                   7,764
           Executive Vice President          1996         141,476        59,778               31,222                   7,653
                                             1995         127,229        55,688               35,377                   5,994
                                           
           Gary O. Clark                     1997         173,000        38,341               26,104                  10,396
           Executive Vice President          1996         164,377        28,216               27,517                  10,084
                                             1995         160,975        35,874               19,747                  17,071

           James M. VanTiflin                1997         145,196        56,765               16,200                   6,462
           President - Saginaw,              1996         132,490        48,369               13,050                   6,138
              Citizens Bank                  1995         126,601        34,936               11,250                   5,721




(1)The numbers of options have been adjusted to reflect the 3-for-2 stock split
paid on November 18, 1997 to shareholders of record on October 27, 1997.

(2)The amounts set forth in the "All Other Compensation" column for 1997
represent: (i) contributions of $7,125 to the Corporation's Amended and
Restated Section 401(k) Plan on behalf of each of the Named Officers (except
Mr. VanTiflin for which the contribution totaled $6,119) to match 1997 pre-tax
elective deferral contributions (included under Salary) made by such
individuals to the Plan; (ii) insurance payments with respect to term life
insurance as follows:  Mr. Vitito $2,093, Mr. Ennest $3,271, Mr. Schaeffer
$639, Mr. Clark $3,271 and Mr. VanTiflin $343; and (iii) $13,200 paid to
Messrs. Vitito and Ennest for services as a director of the Corporation.





                                      15
   19

STOCK OPTION GRANTS

         The following table contains information concerning the grant of stock
options under the Corporation's Third Amended Stock Option Plan (the "Option
Plan") to the Named Officers during 1997:



                                               OPTION/SAR GRANTS IN LAST FISCAL YEAR
                                                         INDIVIDUAL GRANTS


                                        NUMBER OF       % OF TOTAL                                       POTENTIAL REALIZABLE   
                                        SECURITIES       OPTIONS/                                       VALUE AT ASSUMED ANNUAL 
                                        UNDERLYING         SARS                                          RATE OF STOCK PRICE    
                                         OPTIONS        GRANTED TO       EXERCISE OR                       APPRECIATION         
                                          /SARS        EMPLOYEES IN      BASE PRICE     EXPIRATION              FOR             
                      NAME              GRANTED(#)(1)  FISCAL YEAR       ($/SH)(1)         DATE             OPTION TERM(2)       
                                                                                                         5%($)         10%($)   
                                                                                                  
                   R.J. Vitito             73,500(3)      13.17%            21.83        05/29/2007    1,009,218    2,557,559
                                           37,167(4)       6.66%            21.33        06/09/2002      219,062      484,070

                   J.W. Ennest             29,100(3)       5.22%            21.83        05/29/2007      399,568    1,012,584
                                           37,480(4)       6.72%            22.00        06/09/2002      227,810      503,402

                   W.G. Schaeffer          25,050(3)       4.49%            21.83        05/29/2007      343,958      871,658
                                           14,820(4)       2.66%            22.00        06/09/2002       90,078      199,050

                   G.O. Clark               7,500(3)       1.34%            21.83        05/29/2007      102,981      260,975
                                           18,604(4)       3.33%            21.17        06/09/2002      108,795      240,409

                   J.M. VanTiflin          16,200(3)       2.90%            21.83        05/29/2007      222,439      563,707


_______________________
(1)The numbers of shares and exercise prices have been adjusted to reflect the
3-for-2 stock split paid on November 18, 1997 to shareholders of record on
October 27, 1997.

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

(3)These stock options are non-qualified stock options granted pursuant to the
Option Plan.  The options are exercisable in whole or in part during the term
thereof once vested, beginning November 29, 1997.  Generally such options
become vested on a graduated basis in accordance with a pre-determined option
vesting schedule which is based upon a rolling average 4 quarter return on
average assets ratio ("ROA") for the Corporation with a minimum vesting of 10%
upon the Corporation's achieving a 1.09% ROA and a 100% vesting upon the
Corporation's achieving an ROA of 1.25%.

(4)These stock options are non-qualified stock options which were automatically
granted as reload options pursuant to the provisions of the Performance
Partnership Program ("PPP") of the Corporation which was established under the
Option Plan.  Under the PPP, initial grants of non- qualified stock options
("Initial Grants") were made to such participants in 1992 in connection with
their agreement to participate in the





                                      16

   20

PPP.  The provisions of the PPP required a participant to contribute currently
owned shares of Common Stock to the PPP, and to subject such shares together
with shares subsequently acquired under the PPP to certain transfer
restrictions.  Under the PPP, the vested portion of the Initial Grant would be
automatically exercised by the administrator pursuant to an automatic
stock-for-stock exchange procedure utilizing the shares then credited to the
participant's account, provided that the spread between the exercise price and
the fair market value of the Common Stock at such time resulted in a gain of at
least a specified number of shares and at least six months and one day had
lapsed since the last such exercise.  Each time a portion of the Initial Grant
or a subsequently granted reload option was exercised, a participant would
automatically receive an additional reload option to purchase a number of
shares equal to the number of shares received upon exercise less the number of
shares realized as a gain from the transaction.  Reload options became fully
exercisable six months after grant and have an exercise price equal to the fair
market value per share of Common Stock on the date the reload option was
granted.  The "reload option" feature of the PPP was discontinued by the
compensation and benefits committee effective June 30, 1997.  Such action had
the effect of causing all participation in the PPP to cease.

OPTION/SAR EXERCISES AND HOLDINGS

         The following table provides information, with respect to the Named
Officers, about the exercise of options and/or SARs during the last fiscal
year, and the unexercised options and SARs held as of the end of the fiscal
year:



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

                                                                        NUMBER OF SECURITIES
                                        SHARES                         UNDERLYING UNEXERCISED        VALUE OF UNEXERCISED 
                                     ACQUIRED ON       VALUE           OPTIONS/SARS AT FISCAL        IN-THE-MONEY OPTIONS/SARS
                        NAME           EXERCISE       REALIZED                 YEAR END (#)           AT FISCAL YEAR END
                                                                   ------------------------------    --------- ---------------
                                         (#)            ($)                   EXERCISABLE              ($) EXERCISABLE
                                                                                                     
                   R.J. Vitito             52,809       341,073          216,334           59,190      3,770,731       811,502
                   J.W. Ennest             75,720       688,734          195,555           24,871      3,799,627       346,257
                   W.G. Schaeffer          15,969        24,991           93,634           20,869      1,740,577       288,495
                   G.O. Clark              22,638        87,899           74,730            7,425      1,421,749       105,018
                   J.M. VanTiflin           3,000        41,875           66,507           14,193      1,348,018       197,648






                                      17
   21


PENSION PLANS

         The following table shows the estimated annual pension benefits
payable to the Named Officers at normal retirement age 1/ under the
Corporation's qualified defined benefit pension plan, based on remuneration
that is covered under the plan and years of service with the Corporation and
its subsidiaries:

                               PENSION PLAN TABLE



                                                     YEARS OF CREDITED SERVICE
                                                     -------------------------
               REMUNERATION(2)
                                       15           20            25               30             35
                                                                                
                      $ 75,000      $ 16,000     $ 22,000        $ 27,000       $ 33,000       $ 38,000
                       115,000        27,000       36,000          45,000         54,000         64,000
                       155,000        38,000       51,000          63,000         76,000         89,000
                       195,000        49,000       65,000          81,000         98,000        114,000




__________________________________________
(1)Normal retirement age is the later of age 65 or the fifth anniversary of the
participant's entry into the plan.

(2)The law in effect throughout calendar year 1997 limits remuneration
considered for benefit purposes to $160,000.  Messrs. Vitito, Ennest, and Clark
have supplemental plans that pay benefits based upon earnings in excess of the
pension plan limitations, which plans are described below.

   
         A participant's remuneration covered by the Corporation's pension plan
is his or her "average monthly compensation," which is computed over the 60
consecutive months of the participant's last 120 months in which he or she
received the greatest compensation, multiplied by 12 months.  For this purpose,
compensation is defined as the participant's base salary, exclusive of bonuses,
overtime, and fringe benefits, but includes the participant's 401(k) salary
reduction contributions.  Covered remuneration for the named executives as of
the end of the last calendar year is $160,000 for Messrs. Vitito, Ennest,
and Clark, $157,000 for Mr. Schaeffer and $145,196 for Mr. VanTiflin.  The 
estimated credited years of service for each named executive is as follows:  
Mr. Vitito, 30; Mr. Ennest, 15; Mr. Schaeffer, 14; Mr. Clark, 23; and Mr. 
VanTiflin, 23.  Benefits are computed as a straight single life annuity 
beginning at normal retirement age and are not subject to offset for social 
security or other benefits.
    

         The Corporation has an agreement with each of Mr. Vitito, Mr. Ennest
and Mr. Clark which provides that they shall be entitled to receive a
retirement benefit at age 65 equal to 60%, 50% and 55%, respectively, of their
average annual base salary over the consecutive 60-month period in which they
received the highest compensation during their final 120 months of employment
with appropriate percentage reductions in the event of retirement before age
65.  That portion of the retirement benefit not covered by the Corporation's
pension plan and social security are covered by a supplemental retirement
benefits plan.  Under the combined plans, the estimated annual benefits payable
to Mr.  Vitito, Mr. Ennest and Mr. Clark upon retirement at age 65 would be
approximately $263,638, $198,787 and $141,873, respectively.





                                      18
   22
   

CHANGE-IN-CONTROL AGREEMENTS

         The Corporation has entered into change-in-control agreements with
each of the Named Officers except Gary O. Clark.  Each agreement provides 
severance benefits to the Named Officer if there is a change-in-control
of the Corporation and the Named Officer's employment with the Corporation is
actually or constructively terminated within twenty-four (24) months
thereafter.  A "change-in-control" of the Corporation is generally defined as
the acquisition by any person or group of 20% or more of the outstanding Common
Stock in a transaction which has not been approved by a majority of the board
of directors, a liquidation or dissolution of the Corporation, a sale of
substantially all of the assets of the Corporation, or a merger, consolidation
or combination in which the Corporation is not the survivor or, under certain
circumstances, a change in the majority of the members of the board of
directors within a two-year period. A Named Officer's employment is deemed to
have been constructively terminated following a change-in-control if (i) there
is a significant reduction in the scope of the Named Officer's authority or in
the extent of such Officer's powers, functions, duties or responsibilities, or
(ii) there is a reduction in the Named Officer's rate of compensation, or (iii)
fringe benefits are not provided to such Named Officer on a basis commensurate
with other executives of the Corporation, or (iv) there are changes in the
Named Officer's responsibilities which would require moving such Officer's job
location outside of lower Michigan.

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

                   COMPENSATION AND BENEFITS COMMITTEE REPORT
                           ON EXECUTIVE COMPENSATION

         The compensation and benefits committee of the board of directors of
the Corporation (the "Committee") consists of five directors who are not
employed by the Corporation and are not eligible to participate in any of the
Corporation's benefit plans other than the Stock Option Plan for Directors.
The following report is submitted by the Committee.

OVERVIEW AND PHILOSOPHY

         The Committee, pursuant to authority delegated by the board of
directors of the Corporation, is responsible for determining and implementing
compensation and benefit systems for executive officers and other employees of
the Corporation.  The Committee determines the annual salaries and other
compensation for executive officers based upon recommendations from the
Corporation's President and Chief Executive Officer, as well as information
from the Corporation's Human Resources Department and independent outside
consultants.  The Corporation's Chairman provides input and recommendations
    



                                      19
   23

   
with respect to the compensation of the Corporation's President and Chief
Executive Officer.  The Committee's determinations relating to executive
compensation are intended to:

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

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

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

         In furtherance of these objectives, the compensation package
structured for the Corporation's executive officers has three primary
components: base compensation (including salary, pension and welfare benefits
and perquisites), annual cash awards under the Management Incentive Plan
("MIP") for performance during the previous year, and long term, stock-based
compensation generally awarded under the Corporation's Third Amended Stock
Option Plan (the "Option Plan").

BASE COMPENSATION

          Given the Committee's continuing emphasis on performance-based
long-term and short-term compensation, base compensation for executive officers
has been established by the Committee at competitive levels based upon
information available to the Committee relating to compensation for
corresponding executive positions at similarly situated financial institutions.
Executive officer salaries are evaluated by the Committee on a periodic basis
utilizing information from independent outside compensation consultants, the
Corporation's Human Resources Department, and input from the  Corporation's
President and Chief Executive Officer.  Input from the Corporation's Chairman
is utilized with respect to the salary of the President and Chief Executive
Officer.  To determine the actual base salary for each executive officer, the
Committee also takes into account individual performance, experience, and
unique contributions or needs for certain expertise required by the
Corporation.

         Base Compensation of Chief Executive Officer.

         The Committee reviewed Mr. Vitito's performance for 1996 in November
of that year and awarded him a 5.56% merit increase effective January 1, 1997.
In support of such increase, the Committee noted the operational and managerial
efficiencies that have been brought about as a result of Mr. Vitito's
initiative to consolidate the Corporation's Michigan banking franchise into a
single bank and to rename the Corporation's Illinois banking franchise to
provide a common identity with the Michigan Bank.  With regard to such
initiative, the Committee specifically noted that the product standardization,
systems conversions and unified name for the Corporation's banks are expected
to create operational and marketing efficiencies that should contribute
substantially to the Corporation's performance going forward.  Moreover, the
Committee emphasized the effectiveness of the management and corporate
governance structure developed and implemented by Mr. Vitito in connection with
such consolidation to foster the community banking strategies strongly endorsed
by the Board of Directors of the Corporation.  Also in support of the January
1, 1997 increase, the Committee noted that the Corporation had achieved record
earnings in 1996 while continuing to maintain strong credit quality.
    





                                      20
   24
   
MANAGEMENT INCENTIVE PLAN

         All of the Corporation's executive officers participate in the MIP.
The MIP is designed to motivate participating officers of the Corporation and
its subsidiaries to attain goals based upon net earnings of the Corporation and
its subsidiaries and the achievement of individual objectives.  The amount of
an individual's MIP award is a function of (i) the midpoint of the salary range
for the individual's position, (ii) the "participation rate" established by the
Committee for the individual, (iii) the performance of the Corporation or the
subsidiary for which the individual has or shares responsibility, and (iv) the
extent to which the individual achieved agreed-upon objectives for the year.
Each of these factors is described below.

         Midpoint of Salary Range and Participation Rate.  As described under
"Base Compensation," the Committee determines a salary range for each executive
officer's position based upon competitive factors.  Similarly, the Committee
assigns a "participation rate" to each position based on the same factors
ranging from 15% for lower level executive officers to 40% for the Chief
Executive Officer.  The participation rate multiplied by the midpoint of the
individual's salary range is that individual's "Award Base" under the MIP,
which is subject to adjustment based on Corporate and individual performance as
described below.

         Corporate Performance.  As a general practice under the MIP, no
amounts will be awarded unless the Corporation's net earnings for the year
equal or exceed: (i) 90% of the profit plan target approved by the
Corporation's board of directors for that year, and; (ii) 100% of the previous
year's earnings (the greater of these amounts is referred to as the
"Threshold").  Nonrecurring expenses or income items affecting earnings are
evaluated and may be excluded in the discretion of the Committee from the
profit plan earnings calculation to the extent of management's inability to
control such items.  Earnings below the profit plan target, but higher than the
Threshold, automatically reduce the Award Base while earnings above the profit
plan target automatically increase the Award Base.  For 1997, the Corporation's
net operating earnings after excluding a one time third quarter special charge
(discussed below) significantly exceeded 1996 earnings and slightly exceeded
the 1997 profit plan target.

         Individual Objectives.  Individual executive performance also affects
the amount of a participant's individual award.  Annually, each executive
officer establishes objectives, subject to approval by the officer's
supervisor.  Depending upon the extent to which these objectives are achieved
during the year, a participant will be eligible to receive from  0 to 150
percent of the Award Base, adjusted for Corporate performance as described
above.

         
         Chief Executive Officer Award.  Mr. Vitito received an award of
$168,859 under the MIP for his 1997 performance on the same basis as the other
executive officers.  The primary individual MIP objective of Mr. Vitito was to
have the Corporation's earnings reach the 1997 profit plan target.  In
evaluating performance of this objective, the Committee noted that after
excluding from earnings the special third quarter charge attributable to the CB
Financial Corporation acquisition and to the outsourcing of the Corporation's
data processing systems (discussed below), the Corporation's operating earnings
during 1997 exceeded any prior year in it's history and slightly exceeded the
profit plan target for 1997.  The second objective of Mr. Vitito was to
complete, effective July 1, 1997, the acquisition of CB Financial Corporation
and its three subsidiary banks headquartered in Jackson, St. Johns and
Charlevoix, Michigan and to consolidate such banks with and into the
Corporation's Michigan Bank.  In evaluating performance of this objective, the
Committee noted that the acquisition had been completed in a timely manner and
that the acquired banks had been successfully and efficiently integrated into
the Corporation's Michigan Bank with the operating costs of the acquired banks

    

                                      21
   25
   
being reduced more rapidly than contemplated in the related acquisition
analysis.  Further, with regard to such objective, the Committee noted that on
a combined basis, the three banks acquired have added approximately $826
million in additional assets to the Corporation's balance sheet, bringing the
total asset base of the Corporation to approximately $4.4 billion at year-end.
A third significant objective of Mr. Vitito under the MIP was to cause an
analysis to be undertaken to determine whether the Corporation should outsource
its data processing and computer operations and thereafter, if such a strategy
were determined to be in the best interests of the Corporation, to oversee the
selection process of choosing the most appropriate "strategic partner" to
handle the Corporation's data processing and computer operations.  In
evaluating performance of this objective, the Committee noted the thoroughness
of the overall process developed to study the proposal, the quality of the
selection process for determining which company should become the Corporation's
data processing "strategic partner" and once approved, the thoroughness in the
development of the contractual understanding as between the Corporation and the
strategic partner ultimately selected.  The Committee concluded that Mr. Vitito
had fully met the profit plan target for 1997, had successfully acquired and
integrated the CB Financial Corporation banks with and into the operations of
the Corporation's Michigan Bank, and had prudently overseen the data processing
outsourcing project.  Moreover, the Committee noted that the Corporation's
Common Stock had a total return of approximately 69% for the year.  Based upon
the foregoing, the Committee determined that Mr. Vitito was entitled to 115% of
his Award Base.

LONG-TERM STOCK-BASED COMPENSATION

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

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

         Other options received by the executive officers during 1997 were
reload grants made automatically under the provisions of the PPP.  All
participation in the PPP terminated effective June 30, 1997 as a result of the
Committee's determination to discontinue the "reload feature" of the PPP.
    




                                      22
   26
   
         Chief Executive Officer Long Term Compensation.  Mr. Vitito received 
an option grant from the Committee in the amount of 73,500 shares during 1997 
in accordance with the formula described above.  Mr. Vitito also received 
37,167 reload grants made automatically under the provisions of the PPP.

         Deductibility of Executive Compensation.  Section 162(m) of the
Internal Revenue Code of 1986, as amended, restricts the deductibility of
executive compensation paid to the Corporation's Chief Executive Officer and
any of the four other most highly compensated executive officers at the end of
any fiscal year to not more than $1,000,000 in annual compensation (including
gain from the exercise of certain stock option grants).  Certain
performance-based compensation is exempt from this limitation if it complies
with the various conditions described in Section 162(m).  The Option Plan
contains a restriction on the number of options that may be granted which is
intended to cause compensation realized in connection with the exercise of
options granted under the Option Plan to comply with these conditions and be
exempt from the Section 162(m) restriction on deductibility.

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


HUGO E. BRAUN JR.                                VICTOR E. GEORGE

LAWRENCE O. ERICKSON                             JAMES E. TRUSEDELL JR.

KENDALL B. WILLIAMS
    




                                      23
   27

                               SHAREHOLDER RETURN

         Set forth below is a graph which summarizes the cumulative return
experienced by the Corporation's shareholders over the past five years compared
with the S&P 500 Index and the Keefe, Bruyette & Woods, Inc. 50 Bank Index.
Such presentation assumes that the value of the investment in the Corporation's
Common Stock and each index was $100 on December 31, 1992 and that all
dividends were reinvested.


                            Cumulative Total Returns
                       Five Years Ended December 31, 1997

                 Value at Year End

                1992    1993    1994    1995    1996    1997
CITIZENS        $100    $133    $153    $169    $185    $313
KBW 50          $100    $106    $100    $160    $227    $332
S&P 500         $100    $110    $112    $153    $189    $252


   


                                      24
    

   28

                     COMPENSATION COMMITTEE INTERLOCKS AND
                     CERTAIN TRANSACTIONS AND RELATIONSHIPS

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         Messrs. Hugo E. Braun Jr., Lawrence O. Erickson, Victor E. George,
James E. Truesdell Jr., and Kendall B. Williams served on the compensation and
benefits committee of the board of directors of the Corporation throughout the
last completed fiscal year.  None of these individuals are or have been
employees of the Corporation.

         Committee member Braun is a partner in the law firm of Braun Kendrick
Finkbeiner which rendered legal services during 1997 to the Corporation's
Michigan banking subsidiary, Citizens Bank.  Citizens Bank plans to employ this
firm for additional services in 1998.

OTHER TRANSACTIONS WITH OFFICERS AND DIRECTORS

         During 1997 the banking subsidiaries of the Corporation had, and
expect to have in the future, banking transactions, in the ordinary course of
business, with directors, officers and their associates.  These transactions
were made on substantially the same terms, including interest rate charges and
collateral requirements, as comparable transactions made with unrelated parties
prevailing at the time of such transactions and did not involve more than the
normal risk of collectability or present other unfavorable features.

         During 1997, the firm of Winegarden, Shedd, Haley, Lindholm &
Robertson, of which director William C. Shedd is a partner, rendered legal
services to Citizens Bank.  Citizens Bank expects to employ this firm for
additional services in 1998.


            SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

   
         Under the securities laws of the United States, the Corporation's
directors, executive officers, and any persons holding more than 10% of the
Common Stock (collectively, the "Reporting Persons") are required to report
their ownership of the Common Stock and any changes in that ownership to the
Commission and to the Nasdaq Stock Market ("Nasdaq").  Specific due dates for
these reports have been established and pursuant to applicable rules, the
Corporation is required to report in its proxy statement any failure to file by
these due dates.  Based on corporate records and certifications received from
the Reporting Persons, all required reports of Reporting Persons have been
timely filed with the Commission and the Nasdaq except that Gary O. Clark, an
executive officer of the Corporation failed to file on a timely basis two
reports relating to three transactions. Such transactions, however, were
subsequently reported by Mr. Clark on Form 5.  In making these statements,
the Corporation has relied on the written representations of its directors,
executive officers, and its principal shareholder, and on copies of the reports
that such persons have filed with the Commission.




                                      25

    

   29
                    INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

         In 1997, Ernst & Young LLP, performed audit and audit related services
for the Corporation and its subsidiaries which included examination of the
consolidated financial statements of the Corporation, and consultation with the
Corporation and its subsidiaries on accounting and reporting matters.  Upon
recommendation of the audit committee, the board of directors has again
selected Ernst & Young LLP, as independent auditors.  Representatives of Ernst
& Young LLP, will attend the annual meeting, will have an opportunity to make a
statement, and will be available to answer questions that may be asked by
shareholders.


                             SHAREHOLDER PROPOSALS

         Any proposal by a shareholder of the Corporation to be considered for
inclusion in the proxy statement for the 1999 annual meeting must be received
by Thomas W. Gallagher, the secretary of the Corporation, by the close of
business on November 16, 1998.


                                 ANNUAL REPORTS

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


                                 OTHER MATTERS

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

                                               CITIZENS BANKING CORPORATION


                                               Thomas W. Gallagher
                                               Senior Vice President, General
                                               Counsel and Secretary


Flint, Michigan
March 16, 1998

   



                                      26


    

   30
                                                                      APPENDIX A





                          CITIZENS BANKING CORPORATION



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                                      AND
                       CONSOLIDATED FINANCIAL STATEMENTS
   31

                               TABLE OF CONTENTS



I.  Financial Review including                                                
      Management's Discussion and Analysis . . . . . . . . . . . . . . . .    1
                                                                           
          Selected Financial Data  . . . . . . . . . . . . . . . . . . . .    1
          Performance Summary  . . . . . . . . . . . . . . . . . . . . . .    2
          Net Interest Income  . . . . . . . . . . . . . . . . . . . . . .    4
          Provision and Allowance for Loan Losses  . . . . . . . . . . . .    5
          Noninterest Income and Expense . . . . . . . . . . . . . . . . .    6
          Balance Sheet Review . . . . . . . . . . . . . . . . . . . . . .    9
          Liquidity and Debt Capacity, Interest Rate Risk                  
            and Impact of Inflation  . . . . . . . . . . . . . . . . . . .   16
          Year Ended December 31, 1996                                     
            Compared with 1995 . . . . . . . . . . . . . . . . . . . . . .   20
                                                                           
II.   Consolidated Financial Statements  . . . . . . . . . . . . . . . . .   21
                                                                           
          Consolidated Balance Sheets  . . . . . . . . . . . . . . . . . .   21
          Consolidated Statements of Income  . . . . . . . . . . . . . . .   22
          Consolidated Statements of Changes                               
            in Shareholders' Equity  . . . . . . . . . . . . . . . . . . .   23
          Consolidated Statements of Cash Flow . . . . . . . . . . . . . .   24
                                                                           
III.  Notes to Consolidated Financial Statements . . . . . . . . . . . . .   25
                                                                           
IV.   Report of Independent Auditors . . . . . . . . . . . . . . . . . . .   40
                                                                           
V.    Report of Management . . . . . . . . . . . . . . . . . . . . . . . .   41
   32

TABLE 1. SELECTED FINANCIAL DATA (5)




     (in thousands except per share data)      1997            1996          1995(2)           1994          1993(1)
     ----------------------------------------------------------------------------------------------------------------
                                                                                            
     FOR THE YEAR
        Net interest income                $  191,848      $  178,645      $  167,926      $  148,006      $  134,643
        Provision for loan losses              15,332          12,126           7,112           5,837           5,989
        Investment securities gains            
          (losses)                               (787)            611             281           1,099           2,550
        Noninterest income                     47,481          47,393          42,405          39,786          36,578
        Noninterest expense before         
          special charge                      153,427         155,056         150,332         133,767         124,671
        Special charge                         23,734             ---             ---             ---             ---
        Income taxes                           14,541          17,042          14,957          13,279          10,003
        Net income before special          
          charge                               48,771          42,425          38,211          36,008          33,108
        Net income                             31,508          42,425          38,211          36,008          33,108
        Cash dividends                         19,286          17,890          16,131          14,918          13,243

     PER COMMON SHARE DATA (4)
         Net income:
            Basic                          $     1.13      $     1.52      $     1.39      $     1.31      $     1.26
            Diluted                              1.11            1.50            1.36            1.29            1.23
            Diluted before special         
              charge                             1.72            1.50            1.36            1.29            1.23
       Cash dividends                            0.74            0.67            0.60            0.55            0.50
       Book value, end of year                  14.61           14.12           13.50           12.12           11.90
       Market value, end of year                34.50           21.00           19.83           18.50           16.67

     AT YEAR END
       Assets                              $4,439,271      $4,305,973      $4,175,544      $3,424,087      $3,385,003
       Loans                                3,541,619       3,229,809       2,867,427       2,209,340       2,115,678
       Deposits                             3,694,346       3,598,751       3,478,268       2,872,967       2,830,296
       Long-term debt                         108,165          86,826         110,022          11,775          19,394
       Shareholders' equity                   409,842         392,021         374,644         332,739         326,486

     AVERAGE FOR THE YEAR
       Assets                              $4,371,509      $4,212,380      $3,969,702      $3,383,403      $3,212,416
       Earning assets                       4,076,185       3,884,446       3,634,095       3,105,736       2,958,028
       Loans                                3,380,652       3,062,021       2,706,855       2,142,105       1,977,009
       Deposits                             3,647,302       3,515,498       3,297,528       2,840,894       2,694,142
       Interest-bearing deposits            3,081,736       2,950,398       2,750,265       2,359,558       2,268,850
       Repurchase agreements and
         other short-term borrowings          178,267         170,916         152,997         145,592         146,829
       Long-term debt                          90,822          86,788         108,209          16,070          22,111
       Shareholders' equity                   400,715         381,377         354,224         331,674         300,482

     FINANCIAL RATIOS
       Return on average:(3)
         Shareholders' equity                    7.86%          11.12%          10.79%          10.86%          11.02%
         Earning assets                          0.77            1.09            1.05            1.16            1.12
         Assets                                  0.72            1.01            0.96            1.06            1.03
       Average shareholders' equity/ave.
         assets                                  9.17            9.05            8.91            9.80            9.35
       Dividend payout ratio                    61.21           42.17           42.22           41.43           40.00
       Net interest margin (FTE)                 4.86            4.77            4.80            4.99            4.82
       Tier I leverage                           7.98            7.52            7.13            9.49            8.95
       Risk-based capital:
         Tier I capital                          9.78            9.83            9.76           13.74           13.95
         Total capital                          11.03           11.08           11.01           14.98           15.17


(1)      The year 1993 reflects the acquisition of National Bank of Royal Oak
         ("NBRO"), accounted for as a purchase, and includes the related
         results of operations and financial results subsequent to its October
         1, 1993 acquisition date.
(2)      The year 1995 reflects the acquisition of the Michigan affiliates of
         Banc One Corporation accounted for as a purchase, and includes the
         related results of operations and financial results subsequent to the
         February 28, 1995 acquisition date.
(3)      Returns on average shareholders' equity, earning assets and assets
         before the 1997 special charge associated with the CB Financial
         Corporation merger and information technology operations
         reorganization were 12.17%, 1.20% and 1.12%, respectively.
(4)      Per share information is computed, and where necessary, restated to
         comply with Statement of Financial Accounting Standard No. 128
         "Earnings per share" and reflects a three for two stock split effected
         in the form of a dividend paid to shareholders on November 18, 1997.
(5)      All information presented has been restated to reflect the July 1,
         1997 merger with CB Financial Corporation, accounted for as a pooling
         of interests.


                                    Page 1
   33
                              PERFORMANCE SUMMARY

     The following discussion provides a more comprehensive review of the
Corporation's operating results and financial condition than could be obtained
from reading the Consolidated Financial Statements alone.  For the year ended
December 31, 1997, Citizens Banking Corporation earned $31,508,000 or $1.11 per
share.  The results include a third quarter special charge of $23,734,000
($17,263,000 after tax) related to Citizens' July 1, 1997 merger with CB
Financial Corporation and the reorganization of Citizens' information
technology operations.  See further discussion under the caption "Noninterest
Expense" regarding the special charge.  Excluding the special charge, net
income was $48,771,000 or $1.72 per share an increase of 15.0% or $0.22 per
share over 1996 earnings of $42,425,000 or $1.50 per share.  The corresponding
returns on average assets and equity were 1.12% and 12.17%, respectively, as
compared with 1.01% and 11.12% in 1996.  On a post-charge basis, returns on
average assets and equity were 0.72% and 7.86%, respectively.
     Excluding the special charge, the earnings improvement reflects higher net
interest income from strong loan growth and lower noninterest expense due to
cost savings derived from the 1997 merger with CB Financial Corporation and the
1996 consolidation and integration of the Corporation's Michigan banks into one
charter.  Average shareholders' equity was $400.7 million or 9.17% of total
average assets for 1997 compared with $381.4 million or 9.05% for 1996.  The
Corporation's risk-based capital levels exceeded all regulatory requirements.
     On July 1, 1997, the Corporation merged with CB Financial Corporation
headquartered in Jackson, Michigan.  As part of the merger, Citizens issued
6,256,355 shares of its common stock in a tax free exchange for all of the
outstanding shares of CB Financial Corporation.  The merger was accounted for
as a pooling of interests resulting in the restatement of all financial
information presented.
     At the close of business on February 28, 1995, the Corporation purchased
the four Michigan affiliates of Bank One Corporation, located in East Lansing,
Fenton, Sturgis and Ypsilanti, for $115 million in cash.  The transaction was
accounted for as a purchase and the four banks ("acquired banks") were merged
into Citizens Bank headquartered in Flint, Michigan effective immediately after
the acquisition.
     All common stock per share amounts have been adjusted to reflect a
three-for-two stock split effected in the form of a dividend paid to
shareholders on November 18, 1997.
     An analysis of changes in major income statement components in 1997 from
1996 is presented below.  Overall, excluding the special charge, the increase
in net income reflects improvement in net interest income and lower noninterest
expenses, offset, in part, by increases in the provision for loan losses and
income taxes.  Higher levels of earning assets, primarily loans, resulted in
higher net interest income.  Additional data on the Corporation's performance
during the past five years appears in Table 1.




                                            Year Ended December 31,      Changes in 1997
                                           --------------------------  -------------------
(in thousands)                                 1997          1996       Amount    Percent
- ------------------------------------------------------------------------------------------
                                                                      
Interest income                                $335,863      $312,336  $ 23,527       7.5%
Interest expense                                144,015       133,691    10,324       7.7
Net interest income                             191,848       178,645    13,203       7.4
Provision for loan losses                        15,332        12,126     3,206      26.4
Noninterest income                               46,694        48,004    (1,310)     (2.7)
Noninterest expense before special charge       153,427       155,056    (1,629)     (1.1)
Special charge                                   23,734           ---    23,734        (2)
Income taxes                                     14,541        17,042    (2,501)    (14.7)
Net income                                       31,508        42,425   (10,917)    (25.7)
Net income before special charge (1)             48,771        42,425     6,346      15.0


(1) Operating income before 1997 special charge associated with CB Financial
    Corporation merger and information technology reorganization.
(2) Not meaningful

     The following table presents "cash earnings" for the Corporation's most
recent two years.  "Cash earnings" add back the amortization of intangible
assets arising from mergers that were accounted for as a purchase and assumes
that all intangibles were charged off against retained earnings at the original
date of acquisition.  All financial information presented reflects favorable
earnings improvement when adjusted for the intangibles.




CASH EARNINGS SUMMARY (1)
(in thousands except per share amounts)            1997          1996        % Change
- -------------------------------------------------------------------------------------
                                                                       
Cash income before special charge                 $53,290       $47,356        12.5%
Diluted earnings per share                           1.88          1.68        11.9
Book value per share                                12.47         11.46         8.8
Return on average assets                             1.24%         1.15%        7.8
Return on average equity                            16.03         15.55         3.1


(1)  Excludes special charge of $17,263 associated with CB Financial
     Corporation merger and information technology reorganization.

                                    Page 2
   34
TABLE 2. AVERAGE BALANCES/NET INTEREST INCOME/AVERAGE RATES



                                                1997                             1996                            1995
                                    -----------------------------   ------------------------------   -----------------------------
Year Ended December 31              AVERAGE               AVERAGE   Average                Average   Average               Average
(in millions)                       BALANCE  INTEREST(1)  RATE(2)   Balance   Interest(1)  Rate(2)   Balance  Interest(1)  Rate(2)
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                                
EARNING ASSETS
Money market investments:
 Time deposits with banks          $    0.1    $  ---      4.90%    $    1.5    $  0.1      5.62%   $    4.9   $  0.3      5.87% 
 Federal funds sold                    14.5       0.8      5.57         44.9       2.4      5.37        80.5      4.9      6.05  
 Term federal funds sold and                                                                                                     
   other                                5.3       0.3      4.90         25.2       1.3      5.05        50.8      2.7      5.41  
Investment securities(3):                                                                                                        
 Taxable                              510.9      31.8      6.23        568.0      33.7      5.94       607.1     35.4      5.84  
 Nontaxable                           163.5       8.7      8.26        183.1       9.7      8.20       186.6     10.1      8.37  
Loans(4):                                                                                                                        
 Commercial                         1,270.2     111.5      8.89      1,182.0     102.8      8.81     1,088.1     99.0      9.22  
 Real estate mortgage                 778.0      62.8      8.07        677.6      56.2      8.29       544.1     45.5      8.35  
 Consumer                           1,290.5     117.1      9.08      1,148.1     102.4      8.92     1,010.9     88.8      8.79  
 Lease financing                       41.9       2.9      6.87         54.3       3.7      6.79        63.8      4.2      6.55  
                                   --------    ------               --------    ------              --------   ------            
  Total earning assets(3)           4,074.9     335.9      8.39      3,884.7     312.3      8.21     3,636.8    290.9      8.19  
NONEARNING ASSETS                                                                                                                
Cash and due from banks               145.9                            164.4                           169.1                     
Premises and equipment                 72.8                             77.1                            78.4                     
Other assets                          122.5                            125.7                           121.8                     
Allowance for loan losses             (44.6)                           (39.5)                          (36.4)                    
                                   --------                         --------                        --------                     
  Total assets                     $4,371.5                         $4,212.4                        $3,969.7                     
                                   ========                         ========                        ========                     
INTEREST-BEARING LIABILITIES                                                                                                     
Deposits:                                                                                                                        
 Interest-bearing demand           $  381.7       6.1      1.61     $  396.6       7.1      1.79    $  399.3      7.8      1.95  
 Savings                            1,047.5      29.6      2.83      1,077.3      29.3      2.72     1,095.8     30.8      2.81  
 Time                               1,652.5      93.5      5.66      1,476.5      82.8      5.61     1,255.1     68.7      5.48  
Short-term borrowings                 178.3       8.7      4.87        170.9       8.0      4.66       153.0      7.6      4.95  
Long-term debt                         90.8       6.1      6.67         86.8       6.5      7.54       108.2      8.1      7.48  
                                   --------    ------               --------    ------              --------   ------            
  Total interest-bearing                                                                                                         
   liabilities                      3,350.8     144.0      4.30      3,208.1     133.7      4.17     3,011.4    123.0      4.08  

NONINTEREST-BEARING LIABILITIES                                                                                                  
AND  SHAREHOLDERS' EQUITY                                                                                                        
Demand deposits                       565.6                            565.1                           547.3                     
Other liabilities                      54.4                             57.8                            56.8                     
Shareholders' equity                  400.7                            381.4                           354.2                     
                                   --------                         --------                        --------                     
  Total liabilities and                                                                                                          
  shareholders' equity             $4,371.5                         $4,212.4                        $3,969.7                     
                                   ========                         ========                        ========                     
NET INTEREST INCOME                            $191.9                           $178.6                         $167.9            
                                               ======                           ======                         ======            
NET INTEREST INCOME AS A PERCENT                                                                                                 
OF EARNING ASSETS                                          4.86%                            4.77%                          4.80% 
 

(1)  Interest income is shown on an unadjusted basis and therefore
     does not include taxable equivalent adjustments.
(2)  Average rates include taxable equivalent adjustments to
     interest income of  $6,132,000, $6,665,000 and $6,781,000 for the
     years ended December 31, 1997, 1996, and 1995, respectively, based
     on a 35% tax rate.
(3)  For presentation in this table, average balances and the
     corresponding average rates for investment securities are based upon
     historical cost, adjusted for amortization of premiums and accretion
     of discounts.
(4)  Nonaccrual loans are included in average balances.


                                    Page 3
   35

     NET INTEREST INCOME

     The largest segment of the Corporation's operating income is net interest
income, which is the sum of interest and certain fees derived from earning
assets minus interest paid on deposits and other funding sources.  Net interest
income is impacted by changes in the volume and mix of earning assets and
funding sources, market rates of interest, demand for loans and the
availability of deposits.  Other factors, such as Federal Reserve Board
monetary policy and changes in tax laws, may also have an impact on changes in
net interest income from one period to another.
     Average balances and rates on major categories of interest-earning assets
and interest-bearing liabilities during the past three years appear in Table 2.
Total average earning assets were 4.9% higher during 1997 compared with 1996.
The composition of average earning assets changed in 1997 as total average
loans increased $318.6 million to 83.0% of average earning assets from 78.8% in
1996.  Average investment securities including money market investments
represented 17.0% of average earning assets in 1997 compared with 21.2% in
1996.  Total average interest-bearing liabilities increased 4.4% in 1997
compared to 1996, while average noninterest-bearing deposits were unchanged.
     The average yield on earning assets increased to 8.39% from 8.21% in 1996.
The increase resulted from higher yields on investment securities, commercial
and consumer loans and a higher concentration of loans to earning assets.  Real
estate mortgage yields were lower in 1997 as compared to 1996 due to the impact
of third party mortgage servicing costs resulting from the sale of the
Corporation's mortgage servicing rights in the third quarter of 1996.  Cost
savings as a result of this servicing transfer are reflected in non-interest
expense.   Higher interest income due to loan growth was partially offset by
reduced money market and investment securities income as the Corporation
continued to partially fund loan growth with investment assets.  This resulted
in $22.4 million in volume-related increases for interest income when comparing
1997 results with 1996.

TABLE 3. ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE



                                   1997 COMPARED TO 1996                1996 Compared to 1995
                             ----------------------------------  -----------------------------------
                                           INCREASE (DECREASE)                  Increase (Decrease)
                                            DUE TO CHANGE IN                    Due to Change in
Year Ended December 31           NET     ----------------------     Net      -----------------------
(in millions)                 CHANGE(1)    RATE (2)     VOLUME    Change(1)    Rate (2)     Volume
- ----------------------------------------------------------------------------------------------------
                                                                       
INTEREST INCOME:
 Money market investments:
   Time deposits with banks     $(0.1)      $ 0.0       $(0.1)      $(0.2)       $ 0.0       $(0.2)
   Federal funds sold            (1.6)        0.1        (1.7)       (2.5)        (0.5)       (2.0)
   Term federal funds sold       (1.0)        0.0        (1.0)       (1.4)        (0.3)       (1.1)
 Investment securities:
   Taxable                       (1.9)        1.0        (2.9)       (1.7)         0.2        (1.9)
   Tax-exempt                    (1.0)        0.0        (1.0)       (0.4)        (0.2)       (0.2)
 Loans                           29.2         0.1        29.1        27.6         (6.0)       33.6
                                -----       -----       -----       -----        -----       -----
     Total                       23.6         1.2        22.4        21.4         (6.8)       28.2
                                -----       -----       -----       -----        -----       -----
INTEREST EXPENSE:
 Deposits:
   Demand                        (1.0)       (0.5)       (0.5)       (0.7)        (0.6)       (0.1)
   Savings                        0.3         0.1         0.2        (1.5)        (2.3)        0.8
   Time                          10.7         0.3        10.4        14.1          1.5        12.6
 Short-term borrowings            0.7         0.1         0.6         0.4         (0.4)        0.8
 Long-term debt                  (0.4)       (0.3)       (0.1)       (1.6)         0.1        (1.7)
                                -----       -----       -----       -----        -----       -----
     Total                       10.3        (0.3)       10.6        10.7         (1.7)       12.4
                                -----       -----       -----       -----        -----       -----
NET INTEREST INCOME             $13.3       $ 1.5       $11.8       $10.7        $(5.1)      $15.8
                                =====       =====       =====       =====        =====       =====


(1) Changes are based on actual interest income and do not reflect taxable
    equivalent adjustments.
(2) Rate/Volume variances are allocated to changes due to volume.

                                    Page 4

   36



     The cost of interest-bearing liabilities increased 13 basis points to
4.30% in 1997 from 4.17% in 1996.   This increase was attributable to higher
rates on time and savings deposits and short-term borrowings partially offset
by lower rates on demand deposits and long-term borrowings.  Higher yields on
earning assets in 1997 more than offset these increased rates on
interest-bearing liabilities resulting in an improved interest spread on
earning assets (the difference between the average yield on earning assets and
the average rate on interest-bearing liabilities). The net interest margin
increased nine basis points to 4.86% in 1997 from 4.77% in 1996.
     The effect on net interest income of changes in average balances
("volume") and yields and rates ("rate") are quantified in Table 3.  As shown,
net interest income improved $13.3 million in 1997 with $11.8 million of this
due to volume-related increases primarily attributable to loan growth partially
offset by volume-related increases in time deposit interest expense.  Higher
yields on investment securities combined with lower rates for demand deposits
and long-term borrowings partially offset by higher time deposits rates
resulted in a favorable net rate-related variance of $1.5 million.
     Management continually monitors the Corporation's balance sheet to
insulate net interest income from significant swings caused by interest rate
volatility.  If market rates change in 1998, corresponding changes in funding
costs would be considered to avoid any potential negative impact on net
interest income.  The Corporation's policies in this regard are further
discussed in the section titled "Interest Rate Risk".

     PROVISION AND ALLOWANCE FOR LOAN LOSSES

     Management provides for possible loan losses at a level determined
adequate based upon judgements regarding historical loss experience, the
financial condition of borrowers, the size and composition of the loan
portfolio, the level and composition of nonperforming loans, estimated future
net charge-offs, present and anticipated economic conditions and other factors.
A summary of the Corporation's loan loss experience from 1993 through 1997
appears in Table 4.

TABLE 4. SUMMARY OF LOAN LOSS EXPERIENCE


Year Ended December 31 (in thousands)        1997        1996         1995         1994         1993
- --------------------------------------------------------------------------------------------------------
                                                                                      
Allowance for loan losses - January 1    $   42,166   $   38,705   $   28,579   $   26,164   $   22,677 
Allowance of acquired banks                     ---          ---        7,235          289        1,883 
Provision for loan losses                    15,332       12,126        7,112        5,837        5,989 

CHARGE-OFFS:                                                                                            
 Commercial                                   1,486        4,390        3,186        2,198        2,731 
 Real estate(1)                                 541           42           69           82          428 
 Consumer                                    12,272        8,393        4,949        3,434        3,466 
 Lease financing                              1,286           70          519        1,153          182 
                                         ----------   ----------   ----------   ----------   ---------- 
  Total charge-offs                          15,585       12,895        8,723        6,867        6,807 
                                         ----------   ----------   ----------   ----------   ---------- 
RECOVERIES:                                                                                             
 Commercial                                   1,232        1,183        1,593        1,427          683 
 Real estate(1)                                   2           16           22            4          201 
 Consumer                                     2,729        2,985        2,816        1,651        1,450 
 Lease financing                                 35           46           71           74           88 
                                         ----------   ----------   ----------   ----------   ---------- 
  Total recoveries                            3,998        4,230        4,502        3,156        2,422 
                                         ----------   ----------   ----------   ----------   ---------- 
Net charge-offs                              11,587        8,665        4,221        3,711        4,385 
                                         ----------   ----------   ----------   ----------   ---------- 
Allowance for loan losses - December 31  $   45,911   $   42,166   $   38,705   $   28,579   $   26,164 
                                         ==========   ==========   ==========   ==========   ========== 
Loans outstanding at year-end            $3,541,619   $3,229,809   $2,867,427   $2,209,340   $2,115,678 
Average loans outstanding                 3,380,652    3,062,021    2,706,855    2,142,105    1,977,009 
Ratio of allowance for loan losses                                                                      
 to loans outstanding at year-end              1.30%        1.31%        1.35%        1.29%        1.24%
Ratio of net loans charged off as a                                                                     
 percentage of average loans                                                                            
outstanding                                    0.34         0.28         0.16         0.17         0.22 


(1)  Commercial real estate loan balances and related charge-offs and
     recoveries are reflected in the commercial loan category for all years
     except 1993.

                                    Page 5

   37



     Management increased the provision for loan losses in 1997 by $3.2 million
from 1996, primarily due to loan growth of $311.8 million and higher consumer
charge-offs in 1997.  Net loan charge-offs were 0.34% of average loans in 1997,
up from 0.28% in 1996.   Gross charge-offs increased $2.7 million, or 20.9%
from 1996 resulting from higher bankruptcies and repossessions for consumer
loans.  Recoveries on loans previously charged off decreased 5.5% as compared
to the prior year.  At year end, the allowance for loan losses was $45.9
million or 1.30% of total loans, up $3.7 million from December 31, 1996.
     The Corporation maintains formal policies and procedures to control and
monitor credit risk.  Management believes the allowance for loan losses is
adequate to meet presently known credit risks in the loan portfolio.  The
Corporation's loan portfolio has no significant concentrations in any one
industry nor any exposure in foreign loans.  The Corporation has generally not
extended credit to finance highly leveraged transactions nor does it intend to
do so in the future.  Employment levels and other economic conditions in the
Corporation's local markets may have a significant impact on the level of
credit losses.  Management continues to identify and devote attention to
credits that may not be performing as well as expected.  Nonperforming loans
are further discussed in the section titled "Nonperforming Assets".

     NONINTEREST INCOME

     Noninterest income accounted for 19.6% of total operating income or 1.1%
of average assets in 1997, compared with 21.2% and 1.1%, respectively, in 1996.
Noninterest income declined 2.7%, or $1.3 million in 1997 as compared to the
prior year due to the 1996 $1.6 million gain on the sale of the Corporation's
mortgage loan servicing rights and curtailment of the residential mortgage
servicing operations.  Excluding the effects of the sale of mortgage servicing
rights and investment securities gains and losses, noninterest income increased
4.9% in 1997 as compared to 1996.   This increase resulted from enhanced trust
fees, ATM network user fees and cash management services fees.  An analysis of
the components of noninterest income is on the following page.
     Trust fees increased 7.3% in 1997 as compared with 1996 due to increases
in personal trust and employee benefit plan service fees.  The Corporation
offers comprehensive trust services to its clients including investment
management services, in the personal trust, institutional and employee benefit
plan market segments.
     Improved pricing strategies resulted in higher ATM network user fees in
1997 as compared to 1996.  A significant portion of the increase resulted from
the June 1997 implementation of a convenience fee assessed to non-client users
of the Corporation's ATM network.  The 8.1% increase in cash management
services fees is primarily volume related as clients have responded to enhanced
investment options which include various money market mutual funds from which
the Corporation receives a management fee.
     The Corporation realized net losses of $787,000 on sales of investment 
securities during 1997 as compared to net gains of $611,000 during 1996.  As
presented in Note 4 to the Consolidated Financial Statements, gross
realized gains on sales of investment securities amounted to $98,000 in 1997
while gross realized losses amounted to $885,000.  The comparable amounts in
1996 were $660,000 and $49,000, respectively.   Proceeds from sales of
investment securities during 1997 totaled $171.2 million or 25.4% of total
average security holdings compared with $116.2 million or 15.5% in 1996.  The
Corporation sold certain securities to fund loan growth and reposition the
investment portfolio based on the current rate environment.


                                    Page 6

   38
NONINTEREST INCOME



                                         Year Ended
                                        December 31,      Changes in 1997
                                      -----------------  ------------------
(in thousands)                           1997      1996    Amount  Percent
- ---------------------------------------------------------------------------
                                                             
Trust fees                            $15,527   $14,466  $ 1,061       7.3%
Service charges on deposit accounts    12,342    12,481     (139)     (1.1)
Bankcard fees                           7,092     6,780      312       4.6
Brokerage and investment fees           1,782     1,775        7       0.4
Other loan income                       1,746     3,572   (1,826)    (51.1)
ATM network user fees                   2,956     2,211      745      33.7
Cash management services                1,823     1,686      137       8.1
Safe deposit rentals                    1,182     1,255      (73)     (5.8)
Investment securities gains (losses)     (787)      611   (1,398)    (1)
Other                                   3,031     3,167     (136)     (4.3)
                                      -------   -------  -------
 Total noninterest income             $46,694   $48,004  $(1,310)     (2.7)
                                      =======   =======  =======



NONINTEREST EXPENSE                         



                                            Year Ended
                                           December 31,      Changes in 1997
                                        ------------------  ------------------
(in thousands)                              1997      1996   Amount   Percent
- ------------------------------------------------------------------------------
                                                                
Salaries and employee benefits          $ 80,119  $ 81,288  $(1,169)    (1.4)%
Equipment                                 12,327    12,374      (47)    (0.4)
Occupancy                                 11,446    12,153     (707)    (5.8)
Intangible asset amortization              6,098     6,637     (539)    (8.1)
Bankcard fees                              5,152     4,702      450      9.6
Stationery and supplies                    4,042     4,416     (374)    (8.5)
Postage and delivery                       4,387     4,254      133      3.1
Advertising and public relations           3,953     3,946        7      0.2
Taxes, other than income taxes             3,001     3,267     (266)    (8.1)
Consulting and other professional fees     2,733     3,191     (458)   (14.4)
Legal, audit and examination fees          2,318     2,402      (84)    (3.5)
Other loan fees                            3,169     2,922      247      8.5
Special charge                            23,734       ---   23,734     (1)
Other                                     14,682    13,504    1,178      8.7
                                        --------  --------  -------
Total noninterest expense               $177,161  $155,056  $22,105     14.3
                                        ========  ========  =======


(1)  Not meaningful


                                    Page 7
   39


     NONINTEREST EXPENSE

SPECIAL CHARGE
In the third quarter of 1997, the Corporation incurred a special charge of
$23.7 million related to its July 1, 1997, merger with CB Financial Corporation
and the reorganization of Citizens' information technology operations.  The
special charge includes $16.1 million of merger related expenses comprised of
$8.5 million of direct merger and restructuring-related charges and a $7.6
million write-down of goodwill and core deposit intangibles.  This write-down
reflects the impairment of assets related to previous acquisitions of CB
Financial Corporation.  The merger related expenses reflect the cost of
integrating and consolidating branch network and administrative facilities,
severance arrangements, professional services and other expenses directly
related to the merger.
     Also in the third quarter, the Corporation entered into a strategic
arrangement with M & I Data Services of Milwaukee, Wisconsin, as part of its
efforts to upgrade its information technology operations.  This arrangement
will provide the Corporation with the professional expertise and technological
resources necessary to improve its competitive position in a rapidly changing
technological environment.  The Corporation believes it will enhance its
position to quickly respond to the demands of its markets and support future
strategic initiatives.  The strategic arrangement will also address many Year
2000 information systems-related issues.  The third quarter special charge
includes expenses of $7.6 million related to this arrangement, comprised of
up-front conversion and reorganization costs.  See Note 3 for further
discussion on the third quarter special charge.
     The Corporation anticipates that the merger and reorganization will have a
positive effect on its future operating performance.  In addition, the special
charge is not expected to adversely affect current and future dividends.

OTHER NONINTEREST EXPENSES
Excluding the special charge, operating expenses were down 1.1% in 1997 as
compared with 1996.  The decline in operating expenses is primarily
attributable to operating efficiencies achieved from the 1997 merger with CB
Financial Corporation and the 1996 consolidation and integration of the
Corporation's Michigan banks into one bank.  Compensation is the Corporation's
largest noninterest expense and represented the most significant component of
the decline.  Total compensation expense decreased 1.4% to $80.1 million from
$81.3 million in 1996.
     Noninterest expense excluding salaries and benefits and the third quarter
1997 special charge, decreased 0.6%.  The decline is primarily due to lower
costs for occupancy and equipment, stationery and supplies, consulting and
other professional fees, legal, audit and examination fees and intangible asset
amortization.
     Occupancy and equipment cost declines are attributable to lower utility,
maintenance and depreciation costs.  Stationery and supplies, consulting and
other professional fees and legal, audit and examination fees all declined in
1997 due to higher 1996 costs attributed to the consolidation and integration
of the Corporation's Michigan banks into one charter.  Intangible asset
amortization expense declined due to the third quarter 1997 write-down of
goodwill and core deposit intangibles related to previous acquisitions of CB
Financial Corporation.
     Higher loan volumes resulted in additional mortgage appraisal and mortgage
and consumer processing fees.  For mortgages, the additional costs are more
than offset by increases in mortgage application, origination and processing
income collected as a result of higher loan volumes originated in 1997.  This
related income is reflected in the Corporation's net interest income.
     Increases in bankcard expenses resulted from higher costs associated with
the Corporation's outside provider for processing services and enhanced loss
prevention efforts.
     The category "other noninterest expense" increased 8.7% due to higher
voice and data communication costs and data processing fees associated with the
information technology operations arrangement beginning in the third quarter of
1997.  Declines in compensation and equipment costs are expected to offset the
increased data processing fees.


     FEDERAL INCOME TAXES

     Excluding the effect of the special charge, income tax expense was $21.0
million in 1997, an increase of 23.3% over the 1996 total of $17.0 million.
The increase was due to higher pre-tax earnings and lower tax-exempt interest
income in 1997 as compared with 1996.

                                    Page 8

   40


     BALANCE SHEET

     Proper management of the volume and composition of the Corporation's 
earning assets and funding sources is essential for ensuring strong and
consistent earnings performance, maintaining adequate liquidity and limiting
exposure to risks caused by changing market conditions.  The Corporation's
investment securities portfolio is structured to provide a source of liquidity
through maturities and generate an income stream with relatively low levels of
principal risk.  The Corporation does not engage in active securities trading. 
Loans comprise the largest component of earning assets and are the Corporation's
highest yielding assets.  Client deposits are the primary source of funding for
earning assets while short-term debt and other managed sources of funds are
utilized as market conditions and liquidity needs change.
     The Corporation's total assets averaged $4.372 billion for 1997, up $159
million from 1996, primarily due to loan and deposit growth.  The ratio of
average earning assets to total average assets during 1997 was 93.2%, compared
to 92.2% for 1996.   This increase is the result of enhanced cash management
techniques implemented during 1996 and early 1997 which lowered the
Corporation's cash and correspondent bank balances.  Average loans comprised
77.3% of total assets during 1997, up from 72.7% in 1996.  The ratio of average
noninterest-bearing deposits to total deposits decreased from 16.1% in 1996 to
15.5% in 1997.  Interest-bearing deposits comprised 92.0% of total average
interest-bearing liabilities during 1997 unchanged from 1996.  Average
long-term debt also remained unchanged at 2.7% of average interest-bearing
liabilities.

INVESTMENT SECURITIES AND MONEY MARKET INVESTMENTS
Average investment securities, including money market investments, comprised
17.1% of total average earning assets in 1997, down from 21.2% in 1996.  The
overall decline resulted from the use of proceeds from investment securities
sales and maturities to fund loan growth.  A summary of average investment
securities balances during 1997 and 1996 follows:


INVESTMENT SECURITIES  



                                         Average Balances(1)     Changes in 1997
                                         -------------------    ------------------
Year Ended December 31 (in thousands)     1997        1996      Amount    Percent
- ----------------------------------------------------------------------------------
                                                              
U.S. Treasury                            $158,757    $257,436  $(98,679)   (38.3)%
Federal agencies:
 Mortgage-backed                          132,802      91,057    41,745     45.8
 Other                                    183,151     172,334    10,817      6.3
State and municipal:
 Taxable                                   17,213      30,256   (13,043)   (43.1)
 Tax-exempt                               166,428     185,735   (19,307)   (10.4)
Other                                      17,269      13,967     3,302     23.6
                                       ----------  ----------  --------
  Total                                  $675,620    $750,785  $(75,165)   (10.0)
                                       ==========  ==========  ========


(1)  Average balances reflect the estimated fair value of investment securities

     Average investment in U.S. Treasury securities comprised 23.5% of average
total investment securities during 1997, decreasing from 34.3% in 1996.
Average Federal agency mortgage-backed securities, primarily collateralized
mortgage obligations ("CMO's"), and other Federal agency securities increased
45.8% and 6.3%, respectively, in 1997 as proceeds from the maturities of U.S.
Treasuries were used to purchase other securities.  The Corporation continues
to invest in U.S. Treasury and Federal agency securities which offer increased
creditworthiness and liquidity compared with other securities.
     Total state and municipal securities comprised 27.2% of total average 
investment securities during 1997 as compared with 28.8% in 1996.   Purchases 
of these securities remain dependent on the Corporation's capacity to 
effectively utilize tax-exempt income and the availability of such securities 
at attractive yields with acceptable risk characteristics.
     Other securities consisting of Federal Reserve stock, Federal Home Loan
Bank stock, privately issued CMO's and asset backed securities increased 23.6%.
The increase resulted primarily from the purchase of additional Federal
Reserve Bank stock due to the July 1, 1997 CB Financial Corporation merger.

                                    Page 9

   41


     Money market investments, primarily federal funds sold and term federal
funds sold, averaged $19.9 million in 1997, down 72.2% from $71.6 million in
1996.   The amount of funds invested in these assets is based on the present
and anticipated interest rate environment, liquidity needs and other economic
factors.
     The Corporation's present policies with respect to the classification of
investments in debt and equity securities are discussed in Note 1 to the
Consolidated Financial Statements.   An analysis of investment securities at
year-end for each of the last three years is presented in Table 5.  As of
December 31, 1997, the estimated aggregate fair value of the Corporation's
investment securities portfolio was $5.9 million above amortized cost.  At
December 31, 1997 gross unrealized gains were $6.9 million and gross unrealized
losses were $1.0 million.  A summary of estimated fair values and unrealized
gains and losses for the major components of the investment securities
portfolio is provided in Note 4 to the Consolidated Financial Statements.


TABLE 5. ANALYSIS OF INVESTMENT SECURITIES



                            U.S. Treasury and                                                                
                            Federal Agency(1)         State and Municipal(1), (2)         Other(1)                   Total
                        -------------------------     ---------------------------  ---------------------   ------------------------
                       Amortized     Fair             Amortized   Fair             Amortized          Fair   Amortized        Fair
(in millions)          Cost         Value    Yield    Cost        Value   Yield    Cost       Value   Yield  Cost     Value   Yield
- -------------          ----         ------   -----    ----        -----   -----    ----       -----   -----  ----     -----   -----
                                                                                           
AVAILABLE-FOR-SALE:                                                                                          
MATURITES AT                                                                                                 
DECEMBER 31, 1997                                                                                            
DUE WITHIN ONE YEAR     $160.7      $160.9   6.01%   $ 26.3     $ 26.4    7.89%    $ 0.2      $ 0.2  7.86%  $187.2     $187.5  6.53%
ONE TO FIVE YEARS        199.7       200.5   5.86      45.2       46.6    8.80       0.5        0.5  7.89    245.4      247.6  6.38
FIVE TO TEN YEARS         25.0        25.2   7.27      48.0       49.4    8.01       0.2        0.2  7.22     73.2       74.8  7.85
AFTER TEN YEARS            3.3         3.4   7.42      42.9       44.5    8.07      17.4       17.6  7.05     63.6       65.5  7.81
                        ------      ------           ------     ------             -----      -----         ------     ------
 TOTAL                  $388.7      $390.0   5.96    $162.4     $166.9    8.23     $18.3      $18.5  7.12   $569.4     $575.4  6.72
                        ======      ======           ======     ======             =====      =====         ======     ======
 AVERAGE MATURITY                1.92 YRS.                   5.06 YRS.                    3.37 YRS.                 2.85 YRS.

At December 31, 1996                                                                                  
 Total                  $504.6      $502.0           $198.0     $200.9             $14.1      $14.2         $716.7     $717.1  6.49%
                        ======      ======           ======     ======             =====      =====         ======     ======

At December 31, 1995                                                                                  
 Total                  $544.0      $546.9           $219.8     $224.7             $10.9      $11.1         $774.7     $782.6  6.43%
                        ======      ======           ======     ======             =====      =====         ======     ======


(1)  Maturities for Federal agency, collateralized mortgage obligations and
     asset-backed securities are based upon projections of independent cash
     flow models.  Maturities for state and municipal securities incorporate
     early call features, if applicable.
(2)  Yields for state and municipal securities are calculated on a tax
     equivalent basis using a 35% tax rate.

     The Financial Accounting Standards Board Statement No. 119 defines a
derivative as a future, forward, swap, option contract or other financial
instrument with similar characteristics.  The Corporation has not utilized
derivatives or related types of financial instruments except for Federal agency
collateralized mortgage obligations and, therefore, this Statement does not
have a material impact.  The Corporation's policy only allows the purchase of
collateralized mortgage obligations that are composed of mortgage backed
securities issued by a Federal Agency.  Most CMO's purchased are in early
tranches with short average lives.  These tranches are generally classified in
the Planned Amortization Class and have well-defined prepayment assumptions
(Super PAC's).  The Corporation's CMO's are periodically tested to ensure
compliance with guidelines established by the Federal Financial Institutions
Examination Council.

                                   Page 10

   42



LOANS
The Corporation extends credit primarily within the local markets of its two
bank subsidiaries located in Michigan and Illinois.  In Michigan, the market
areas extend along the Interstate 75 corridor from northern suburban Detroit to
the greater Grayling/Gaylord area as well as western suburban Detroit and
central and southwestern Michigan.  During 1997, the Corporation expanded its
market share in Michigan due to the merger with CB Financial Corporation.  The
merger resulted in an expanded presence in the greater Jackson/ Lansing markets
and in northwestern Michigan.  The Illinois affiliate extends credit within the
western suburban market of Chicago.  The Corporation's loan portfolio is widely
diversified by borrowers with no concentration within a single industry that
exceeds 10% of total loans.  The Corporation's respective year end loan
portfolio balances are summarized in Table 6.
     Total loans increased $318.6 million in 1997 with average loans comprising
82.9% of total average earning assets during 1997 as compared with 78.8% during
1996.  As the economy continued to expand in 1997, the Corporation experienced
greater loan demand with total average loans increasing 10.4%.
     Increased demand for business loans in the Corporation's local markets and
improved economic conditions expanded the commercial and commercial real estate
loan portfolio 7.5% in 1997 from 1996 levels.  Average consumer loan balances
increased to $1.291 billion in 1997, or 12.4% over 1996 due to growth in the
Corporation's home equity, vehicle and marine loan portfolios. Average
residential mortgage loan balances increased $100.4 million or 14.8% in 1997,
from $677.6 million in 1996.

TABLE 6. LOAN PORTFOLIO



December 31 (in millions)    1997      1996      1995      1994      1993
- ---------------------------------------------------------------------------
                                                    
Commercial                 $  930.2  $  784.1  $  680.1  $  571.8  $  505.4
Real estate commercial        387.0     393.1     403.3     357.5     344.2
Real estate construction       71.0      71.1      53.3      29.2      44.9
Real estate mortgage          779.6     744.6     579.2     484.1     494.3
Consumer                    1,336.1   1,189.7   1,091.4     689.4     631.3
Lease financing                37.7      47.2      60.1      77.3      95.6
                           --------  --------  --------  --------  --------
 Total                     $3,541.6  $3,229.8  $2,867.4  $2,209.3  $2,115.7
                           ========  ========  ========  ========  ========


NONPERFORMING ASSETS
A five year history of nonperforming assets is presented in Table 7.
Nonperforming assets are comprised of nonaccrual loans, loans 90 days past due
and still accruing, restructured loans and other real estate.  These amounted
to $25.0 million as of December 31, 1997, a decrease of 1.2% from the year-end
1996 balance of $25.3 million.  Nonperforming assets as a percentage of total
assets declined to 0.56% at December 31, 1997, from 0.59% at December 31, 1996,
a decrease of 5.1%.  The decline resulted from the Corporation's continued
management of loan portfolio quality and favorable economic conditions.
     During 1997 consumer loans grew at a faster rate than other segments of
the portfolio.  The consumer portfolio is composed of automobile, personal,
marine, home equity and bankcard loans of which automobile and home equity
comprise 70.1% of the 1997 average balances, a decrease from 71.2% in 1996.
One to four family residential home loans comprise the majority of the real
estate mortgage balances.  The Corporation's commercial real estate portfolio
represents 10.9% of total loans at December 31, 1997 as compared with 12.2% at
year end 1996.  Within this portfolio, nonperforming loans represented 17.7% of
total nonperforming loans at December 31, 1997.  Management believes the risk
of loss on such nonperforming loans is significantly less than the total
principal balance, due to the nature of the underlying collateral.  These loans
are generally for owner-occupied properties and do not rely on the performance
of the real estate market to generate funds for repayment.
     The Corporation maintains formal policies and procedures to control and
monitor credit risk within these portfolios.  Based upon present information,
management believes the allowance for loan losses is adequate to meet presently
known credit risks.

                                   Page 11

   43

TABLE 7.  NONPERFORMING ASSETS AND PAST DUE LOANS



December 31 (in thousands)              1997          1996          1995          1994          1993
- ------------------------------------------------------------------------------------------------------
                                                                                  
NONPERFORMING LOANS(1),(2)
 Nonaccrual
 Less than 30 days past due           $ 5,128        $ 5,555       $ 4,794       $ 5,203       $ 2,518
 From 30 to 89 days past due            2,021          1,370           828         1,421           940
 90 or more days past due              12,840         12,856        14,593        12,595        19,460
                                      -------        -------       -------       -------       -------
  Total                                19,989         19,781        20,215        19,219        22,918
 90 days past due and still accruing    1,185          1,874           849         1,577           643
 Restructured(1)                          446            502           502           299           238
                                      -------        -------       -------       -------       -------
  Total nonperforming loans            21,620         22,157        21,566        21,095        23,799
OTHER REPOSSESSED ASSETS ACQUIRED       3,348          3,118         3,067         3,113         2,933
                                      -------        -------       -------       -------       -------
  Total nonperforming assets          $24,968        $25,275       $24,633       $24,208       $26,732
                                      =======        =======       =======       =======       =======
Nonperforming assets as a percent
 of total loans plus other
 repossessed assets acquired             0.70%          0.78%         0.86%         1.09%         1.26%
Nonperforming assets as a percent
 of total assets                         0.56           0.59          0.59          0.71          0.79

NONPERFORMING LOANS BY TYPE
 Commercial                           $ 8,962        $11,626       $14,244       $16,568       $14,607
 Real Estate(3)                         6,103          4,273         2,688         1,425         5,487
 Consumer                               6,082          4,585         3,286         1,533         1,881
 Lease financing                          473          1,673         1,348         1,569         1,824
                                      -------        -------       -------       -------       -------
   Total                              $21,620        $22,157       $21,566       $21,095       $23,799
                                      =======        =======       =======       =======       =======


(1)  Nonperforming loans include loans on which interest is being recognized
     only upon receipt (nonaccrual), those on which interest has been
     renegotiated to lower than market rates because of the financial condition
     of the borrowers (restructured), and loans 90 days past due and still
     accruing.
(2)  Gross interest income that would have been recorded in 1997 for
     nonaccrual and restructured loans, as of December 31, 1997, assuming
     interest had been accrued throughout the year in accordance with original
     terms was $1.861 million.  The comparable 1996 and 1995 totals were $1.702
     million, and $2.660 million, respectively.  Interest collected on these
     loans and included in income was $0.965 million in 1997, $0.913 million in
     1996 and $1.489 million in 1995.  Therefore, on a net basis, total income
     foregone due to these loans was $0.896 million in 1997, $0.788 million in
     1996 and $1.171 million in 1995.
(3)  1993 nonperforming commercial real estate loan balances have not been
     reclassified into the nonperforming commercial loan category.

     The level and composition of nonperforming assets are affected by economic
conditions in the Corporation's local markets.  Nonperforming assets,
charge-offs and provisions for loan losses tend to decline in a strong economy
and increase in a weak economy, potentially impacting the Corporation's
results.  In addition to nonperforming loans, management carefully monitors
other credits that are current in terms of principal and interest payments but,
in management's opinion, may deteriorate in quality if economic conditions
change.  As of December 31, 1997, such loans amounted to $22.0 million or 0.6%
of total loans compared with $12.6 million or 0.4% of total loans as of
December 31, 1996.  These loans are primarily commercial and commercial real
estate loans made in the normal course of business and do not represent a
concentration in any one industry.  Collectively, these loans and the
nonperforming assets in Table 7 represent 1.3% of total loans as of December
31, 1997 increasing from 1.2% as of December 31, 1996.


                                   Page 12


   44

TABLE 8. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES (1)



                              1997                   1996                 1995                 1994                 1993
                    ----------------------  --------------------  -------------------  -------------------  --------------------
December 31 (in                   LOAN                  Loan                 Loan                 Loan                 Loan
millions)           AMOUNT     PERCENT(2)   Amount   Percent(2)   Amount  Percent(2)   Amount  Percent(2)   Amount  Percent(2)
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                      
Commercial           $10.6        37.2%     $12.0      36.8%      $11.7      37.8%     $11.3        42.1%   $ 9.4      40.2%
Real estate                                                                  
 construction          0.1         2.0        0.1       2.2         0.1       1.8        0.1         1.3      0.2       2.1
Real estate                                                                  
 mortgage              2.0        22.0        1.5      22.7         1.1      20.2        1.0        21.9      1.0      23.4
Consumer              16.0        37.7       15.6      36.8        14.0      38.1        7.5        31.2      7.0      29.8
Lease financing        0.5         1.1        0.5       1.5         1.2       2.1        1.2         3.5      1.1       4.5
                     -----       -----      -----     -----       -----     -----     ------       -----    -----     -----  
 Total allocated      29.2       100.0%      29.7     100.0%       28.2     100.0%      21.1       100.0%    18.7     100.0%
                                 =====                =====                 =====                  =====              =====
Unallocated           16.7                   12.5                  10.5                  7.5                  7.5
                     -----                  -----                 -----               ------                -----
Total                $45.9                  $42.2                 $38.7                $28.6                $26.2
                     =====                  =====                 =====               ======                =====


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


     The following describes the Corporation's policy and related disclosures
for impaired loans. The Corporation maintains a valuation allowance for
impaired loans.  A loan is considered impaired when management determines it is
probable that all the principal and interest due under the contractual terms of
the loan will not be collected.  In most instances, impairment is measured
based on the fair value of the underlying collateral.  Impairment may also be
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate.  Interest income on impaired nonaccrual
loans is recognized on a cash basis.  Interest income on all other impaired
loans is recorded on an accrual basis.
     Certain of the Corporation's nonperforming loans included in Table 7 are
considered to be impaired.  The Corporation measures impairment on all large
balance nonaccrual commercial and commercial real estate loans.  Certain large
balance accruing loans rated substandard or worse are also measured for
impairment.  Impairment losses are included in the provision for loan losses.
The policy does not apply to large groups of smaller balance homogeneous loans
that are collectively evaluated for impairment, except for those loans
restructured under a troubled debt restructuring.  Loans collectively evaluated
for impairment include certain smaller balance commercial loans, consumer
loans, residential real estate loans, and credit card loans, and are not
included in the impaired loan data in the following paragraphs.
     At December 31, 1997, loans considered to be impaired totaled $16.8
million  (of which $9.9 million were on a nonaccrual basis).  Included within
this amount is $6.1 million of impaired loans for which the related allowance
for loan losses is $0.9 million and $10.7 million of impaired loans for which
the fair value exceeded the recorded investment in the loan.  The average
recorded investment in impaired loans during the year ended December  31, 1997
was approximately $18.2 million.  For the year ended December  31, 1997, the
Corporation recognized interest income of $1.5 million which included $1.0
million of interest income recognized using the cash basis method of income
recognition.
     At December 31, 1996, loans considered to be impaired totaled $17.3
million  (of which $10.2 million were on a nonaccrual basis).  Included within
this amount is $7.9 million of impaired loans for which the related allowance
for loan losses is $0.8 million and $8.4 million of impaired loans for which
the fair value exceeded the recorded investment in the loan.  The average
recorded investment in impaired loans during the year ended December  31, 1996
was approximately $20.4 million.  For the year ended December  31, 1996, the
Corporation recognized interest income of $1.7 million which included $0.9
million of interest income recognized using the cash basis method of income
recognition.
     The Corporation maintains policies and procedures to identify and monitor
nonaccrual loans.  A loan is placed on nonaccrual status when there is doubt
regarding collection of principal or interest, or when principal or interest is
past due 90 days or more and the loan is not well secured and in the process of
collection.  Interest accrued but not collected is reversed and charged against
income when the loan is placed on nonaccrual status.
     During 1997, each of the Corporation's banking subsidiaries received a
normally scheduled examination by its governing regulatory agency.  There was
no material reclassification of assets as nonperforming resulting from these
examinations.

                                   Page 13


   45


TABLE 9. AVERAGE DEPOSITS



                                            1997               1996               1995
                                      -----------------  -----------------  -----------------
                                      AVERAGE   AVERAGE  Average   Average  Average   Average
Year Ended December 31 (in millions)  BALANCE    RATE    Balance    Rate    Balance    Rate
- ---------------------------------------------------------------------------------------------
                                                                    
Noninterest-bearing demand            $  565.6     ---   $  565.1     ---   $  547.3     ---
Interest-bearing demand                  381.7    1.61%     396.6    1.79%     399.3    1.95%
Savings                                1,047.5    2.83    1,077.3    2.72    1,095.8    2.81
Time                                   1,652.5    5.66    1,476.5    5.61    1,255.1    5.48
                                      --------           --------           --------
 Total                                $3,647.3    3.54   $3,515.5    3.39   $3,297.5    3.25
                                      ========           ========           ========


DEPOSITS
The Corporation's average deposit balances and rates for the past three years
are summarized in Table 9.  Total average deposits were 3.7% higher in 1997 as
compared with 1996.  Deposit growth was derived primarily from time accounts
which increased 11.9% from 1996 average balances.  Noninterest-bearing demand
accounts comprised 15.5% of total average deposits during 1997, as compared
with 16.1% in 1996.  The shift in deposits from demand and savings accounts to
time accounts reflects changing client liquidity preferences and the desire for
higher yields.  As of December 31, 1997, certificates of deposits of $100,000
or more accounted for approximately 12.4% of total deposits compared with 10.7%
as of December 31, 1996.  The maturities of these deposits are summarized in
Table 10.


TABLE 10. MATURITY OF TIME CERTIFICATES OF DEPOSIT OF $100,000 OR MORE



                                                              December 31,
(in millions)                                                      1997
- --------------------------------------------------------------------------
                                                             
Three months or less                                            $266,760
After three but within six months                                 65,116
After six but within twelve months                                99,301
After twelve months                                               26,100
                                                                --------
 Total                                                          $457,277
                                                                ========


     The Corporation gathers deposits primarily from the local markets of its
banking subsidiaries and has not relied on brokered deposits.  In the third
quarter of 1997, the Corporation obtained approximately $20.0 million in
brokered deposits as an alternative source of funding.  The deposits mature in
intervals over the next three years.  The Corporation will continue to evaluate
the use of alternative funding sources such as brokered deposits as funding
needs change.  Management continues to promote relationship driven core deposit
growth and stability through focused marketing efforts and competitive pricing
strategies.

BORROWED FUNDS
Total short-term borrowings, primarily federal funds purchased, securities sold
under agreements to repurchase and Treasury Tax and Loan notes, averaged $178.3
million or 5.3% of total average interest-bearing liabilities during 1997
compared with $170.9 million or 5.3% during 1996.  Long-term debt accounted for
$90.8 million or 2.7% of average interest-bearing funds during 1997, increasing
from $86.8 million in 1996.
     In 1997, the Corporation's Michigan subsidiary originated three long-term
borrowings with the Federal Home Loan Bank for a total of $70 million.  The
interest rates on the three borrowings range from 5.68% to 6.07% with original
maturities from one to four years.
     To finance the February 28, 1995 acquisition, the Corporation's Parent
company obtained a $115 million seven year amortizing revolving credit
facility.  The interest rates range from 6.38% to 7.65% on the outstanding
balance of $33 million at December 31, 1997.  Of this amount, $7 million will
reprice in March 1998 and $13 million in both September 1998 and March 1999.
The Parent company services the debt's principal and interest payments with
dividends from the subsidiary banks.   The agreement  also requires the
Corporation to maintain certain financial  covenants.  The Corporation is in
full compliance with all debt covenants as of December 31, 1997.
     A summary of long-term debt balances as of December 31, 1997 and 1996
appears in Note 10 to the Consolidated Financial Statements.

                                   Page 14

   46


CAPITAL RESOURCES
Management closely monitors capital levels to provide for current and future
business needs and to comply with regulatory requirements.  Both bank
subsidiaries within the Corporation have sufficient capital to maintain a "well
capitalized" designation, (the FDIC's highest rating). As summarized below, the
Corporation's capital ratios were in excess of regulatory requirements.




                  Regulatory Minimum
                 ----------------------      December 31,
                              "Well    -----------------------
                 Required   Capitalized"  1997   1996    1995
- --------------------------------------------------------------
                                         
Risk based:
 Tier I capital      4.00%      6.00%    9.78%   9.83%   9.76%
 Total capital       8.00      10.00    11.03   11.08   11.01
Tier I leverage      4.00       5.00     7.98    7.52    7.13


     The Corporation declared cash dividends of $0.74 per share in 1997, an
increase of 10.4% over 1996 dividends of $0.67 per share.  Citizens Banking
Corporation or its predecessor, Citizens Commercial & Savings Bank, have paid
dividends every year since 1892 except for several years during the depression
of the 1930's.
     The Corporation initiated a stock repurchase program in November 1987.
Effective January 27, 1997, the Corporation's stock repurchase program was
formally rescinded by its Board of Directors in conjunction with the agreement
to acquire CB Financial Corporation.  Prior to the rescission, a total of
1,891,455 shares had been purchased under this program at an average price of
$10.56 per share.

NEW ACCOUNTING PRONOUNCEMENTS
In September 1996, the Financial Accounting Standards Board issued Statement
No. 125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities".  In December  1996, the  Financial Accounting
Standards Board issued Statement No. 127 which delayed the effective dates of
certain provisions of the original Statement.  The Statements establish
accounting and reporting standards to assist in determining when to recognize or
derecognize financial assets and liabilities in the financial statements after a
transfer of financial assets has occurred.  The Corporation has adopted the
Statements to the extent permitted and will adopt the remaining provisions
effective January 1, 1998. The impact of the adoption is not expected to be
material.
     In March 1997,  the Financial Accounting Standards Board issued Statement
No. 128 "Earnings per Share".  The Statement establishes standards for
computing and presenting earnings per share (EPS), simplifies the standards for
computation and makes the calculation comparable to international standards.
The Statement requires the replacement of primary EPS with basic EPS and
presentment of basic and diluted EPS on the face of the income statement.  The
Corporation adopted the Statement for year end 1997 reporting and has restated
all prior period per common share data.
     In June 1997, the Financial Accounting Standards Board issued Statement
No. 130 "Reporting Comprehensive Income".  The Statement establishes standards
for the reporting and disclosure of comprehensive income and its components in
the financial statements.  Presently, the only component of comprehensive
income not included in net income is unrealized gains or losses on
available-for-sale investment securities.  The Corporation adopted the
Statement for year end 1997 reporting and has restated all prior period
amounts.
     In June 1997, the Financial Accounting Standards Board issued Statement
No. 131 "Disclosure about Segments of an Enterprise and Related Information".
The Statement changes the manner in which public companies report segment
information in annual reports and requires companies to report selected segment
information in interim financial reports.  Public companies will be required to
report financial and descriptive information about the company's operating
segments.  The Statement is effective for fiscal years beginning after December
15, 1997 with reclassification of the financial statements for earlier periods
required for comparative purposes.  The Corporation plans to adopt the
Statement in 1998.

IMPACT OF YEAR 2000
The Year 2000 issue is the result of computer programs which utilize using two
digits rather than four digits to define years for computer calculations.  Any
computer or electronic calculation recognizing a two digit date rather than a
four digit date may incur system failure or miscalculate information when using
a date after December 31, 1999 resulting in potentially serious impairment to
business operations.  The Corporation began addressing the issue in 1996 with
the formation of a task force to identify Year 2000 related issues for any
electronic devices, such as mainframe and microcomputers, using two digits
rather than four digits for the year.  The Corporation believes that it has
identified all Year 2000 noncompliant systems and devices and is working
closely with vendors and third party service providers to address solutions.
Further, during the fall of 1997, formal discussions were initiated with the
Corporation's significant commercial business clients to determine the extent
to which the client's computer systems are vulnerable to Year 2000 failure.

                                   Page 15

   47

     A significant portion of the Corporation's Year 2000 solution included the
strategic arrangement entered into with M&I Data Services in the third quarter
of 1997.  The arrangement allows M&I Data Services information technology
systems to replace most of the Corporation's current systems by the end of
the second quarter of 1998.  M&I has warranted to the Corporation that all
systems to be replaced by M&I Data Services will be Year 2000 compliant by
December 31, 1998.
     The Corporation has not identified any noncompliant systems for which a
solution is not available and which would impair the Corporation's business
operations.  All Year 2000 costs to date have not been material and are being
expensed as incurred.  Anticipated future expenses are not expected to
materially impair future earnings.  The Corporation anticipates that all
material noncompliant systems will be replaced and most testing completed by
December 31, 1998, with the remainder of the testing of the compliance measures
to be completed in early 1999.
     While the Corporation is not aware of any Year 2000 problems for which a
solution is not available, other unanticipated Year 2000 issues could arise and
there can be no assurance that actual results will be comparable to expected
results.  These unanticipated issues may include the ability to identify and
correct all relevant computer codes, the availability and cost of trained
personnel, the impact of Year 2000 on our clients and other uncertainties.

     LIQUIDITY AND DEBT CAPACITY

     The liquidity position of the Corporation is monitored for both
subsidiaries and the Parent company to ensure that funds are available at a
reasonable cost to meet financial commitments, to finance business expansion
and to take advantage of unforeseen opportunities.  The Corporation's
subsidiary banks derive liquidity primarily through core deposit growth and
maturity of money market investments, investment securities and loans.
Additionally, the Corporation's subsidiary banks have access to market
borrowing sources on an unsecured, as well as a collateralized basis, for both
short-term and long-term purposes.  Management has not had to rely on
borrowings from the Federal Reserve to meet liquidity requirements.  Another
source of liquidity is the ability of the Corporation's Parent company to
borrow funds on both a short-term and long-term basis.
     Various techniques are used by the Corporation to measure liquidity,
including ratio analysis.  Some ratios monitored by the Corporation include:
loans to deposits, liquid assets to volatile funding (interest bearing
liabilities plus noninterest bearing deposits less core funding) core funding
(most deposits plus a portion of repurchase agreements and long term debt less
single maturity certificates of deposit) to total funding (volatile funding
plus core funding).   During 1997, the Corporation's strategy to operate at
lower levels of liquid assets to volatile funding and a higher loan to deposit
ratio improved the asset mix, resulting in increased net interest income.  The
Corporation experienced no liquidity or operational problems as a result of the
reduced levels of liquidity.  Management believes that the key to operating at
lower levels of balance sheet liquidity is the establishment and subsequent
utilization of sufficient sources of liquidity.  This has been accomplished by
increased sources of funds and higher capacities enabling the Corporation and
its subsidiary banks to operate effectively, safely and with improved
profitably.  These ratios are summarized below for the last three years.



                                             1997   1996    1995
                                             ----   ----    ----
                                                  
Average loans to deposits                    92.7%  87.1%   82.1%
Liquid assets to volatile               
 funding                                     34.5   74.0   113.9
Core funding to total funding                88.1   89.4    90.3


     The subsidiary banks manage liquidity to meet client cash flow needs while
maintaining funds available for loan and investment opportunities.  As
discussed in Note 18 to the Consolidated Financial Statements, the Federal
Reserve Bank requires the Corporation's banking subsidiaries to maintain
certain noninterest-bearing deposits with the Federal Reserve Bank.  These
balance requirements averaged $28.8 million and $43.0 million during 1997 and
1996, respectively, and were primarily satisfied with cash balances maintained
by the Corporation's subsidiaries.
     The liquidity of the Parent company is managed to provide funds to pay
dividends to shareholders, service debt, invest in subsidiaries and to satisfy
other operating requirements.  The Parent company's primary source of liquidity
is dividends from its subsidiaries.  During 1997, the Parent company received
$21.5 million in dividends from subsidiaries and paid $19.3 million in
dividends to its shareholders.  The amount of the upstream dividends decreased
$32.6 million in 1997 from $56.5 million 1996.  The large 1996 dividend amount
was attributable to the consolidation of the six Michigan chartered banks.
This consolidation allowed the surviving bank greater upstream dividend
capacity while still maintaining sufficient capital.  As discussed in Note 18 
to the Consolidated Financial Statements, no dividend amounts were available 
as of January 1, 1998 for payment to the Parent company as dividends by the
Corporation's banking subsidiaries without further regulatory approval.
Amounts earned by subsidiaries in 1998 may also become available for such
dividend payments.  Additional amounts may be available for payment subject to
regulatory approval.
     The Corporation's long-term debt to equity ratio was 26.4% as of December
31, 1997 compared with 22.1% as of December 31, 1996.  Changes in 


                                   Page 16

   48

long-term debt during 1997 are discussed in the section titled "Borrowed Funds".
Management believes that the Corporation has sufficient liquidity and capacity
sources to meet presently known cash flow requirements arising from ongoing
business transactions.

     INTEREST RATE RISK

     Interest rate risk generally arises when the maturity or repricing
structure of the Corporation's assets and liabilities differ significantly.
Asset/liability management, which among other things addresses such risk, is
the process of developing, testing and implementing strategies that seek to
maximize net interest income, maintain sufficient liquidity and minimize
exposure to significant changes in interest rates.  This process includes
monitoring contractual and expected repricing of assets and liabilities as well
as forecasting earnings under different interest rate scenarios and balance
sheet structures.  Generally, management seeks a structure that insulates net
interest income from large swings attributable to changes in market interest
rates.  Table 11 depicts the Corporation's asset/liability static sensitivity
("GAP") as of December 31, 1997.

TABLE 11. INTEREST RATE SENSITIVITY



                                                                         TOTAL
December 31, 1997                1        2 - 3     4 - 6     7 - 12    WITHIN       1-5      Over
(in millions)                  Month     Months     Months    Months    1 Year      Years    5 Years    Total
- --------------------------------------------------------------------------------------------------------------
                                                                              
RATE SENSITIVE ASSETS(3)    
 Loans and leases             $1,103.3   $ 142.1   $ 183.3   $ 342.0   $1,770.7   $1,249.7   $521.2   $3,541.6
 Investment securities            27.3      22.7      69.2      73.8      193.0      246.1    136.3      575.4
 Short-term investments           12.2       ---       ---       ---       12.2        ---      ---       12.2
                              --------   -------   -------   -------   --------   --------   ------   --------
  Total                       $1,142.8   $ 164.8   $ 252.5   $ 415.8   $1,975.9   $1,495.8   $657.5   $4,129.2
                              ========   =======   =======   =======   ========   ========   ======   ========

RATE SENSITIVE LIABILITIES  
 Deposits (2)                 $  272.1   $ 377.2   $ 423.3   $ 626.3   $1,698.9   $1,208.0   $186.9   $3,093.8
 Short-term borrowings           174.9       ---       ---       ---      174.9        ---      ---      174.9
 Long-Term Debt                    0.4       7.0      30.0      13.1       50.5       55.1      2.6      108.2
                              --------   -------   -------   -------   --------   --------   ------   --------
  TOTAL                       $  447.4   $ 384.2   $ 453.3   $ 639.4   $1,924.3   $1,263.1   $189.5   $3,376.9
                              ========   =======   =======   =======   ========   ========   ======   ========

Period GAP (1)                $  695.4   $(219.4)  $(200.8)  $(223.6)  $   51.6   $  232.7   $468.0   $  752.3
Cumulative GAP                   695.4     476.0     275.2      51.6                 284.3    752.3
Cumulative GAP to           
 Total Assets                    15.66%    10.72%     6.20%     1.16%      1.16%      6.40%   16.95%     16.95%
Multiple of Rate Sensitive  
 Assets to Liabilities            2.55      0.43      0.56      0.65       1.03       1.18     3.47       1.22


(1)  Gap is the excess of rate sensitive assets (liabilities).
(2)  Includes interest bearing savings and demand deposits without contractual
     maturities of $441 million in the less than one year category and $963
     million in the over one year category.  This runoff is based on historical
     trends, which reflects industry standards.
(3)  Incorporates prepayment projections for certain assets which may shorten
     the time frame for repricing or maturity compared to contractual runoff.

     As shown, the Corporation's interest rate risk position is well balanced
in the less than one year time frame with rate sensitive assets exceeding rate
sensitive liabilities by $51.6 million.  This position suggests that the 
Corporation's net interest income may not be significantly impacted by changes
in interest rates over the next 12 months.  Management is continually reviewing
its interest rate risk position and modifying its strategies based on
projections to minimize the impact of future interest rate changes.  While
traditional GAP analysis does not always incorporate adjustments for the
magnitude or timing of noncontractual repricing, Table 11 does incorporate
appropriate adjustments as indicated in footnotes 2 and 3 to the table.  Because
of these and other inherent limitations of any GAP analysis, management utilizes
simulation modeling as its primary tool to evaluate the impact of changes in
interest rates and balance sheet strategies.  Management uses these simulations
to develop strategies that can limit interest rate risk and provide liquidity to
meet client loan demand and deposit preferences.

                                   Page 17
   49


INTEREST RATE SENSITIVITY
A number of measures are used to monitor and manage interest rate risk,
including income simulation and interest sensitivity (GAP) analyses.  An income
simulation model is management's primary tool used to assess the direction and
magnitude of variations in net interest income resulting from changes in
interest rates.  Key assumptions in the model include prepayment speeds on
various loan and investment assets; cash flows and maturities of financial
instruments held for purposes other than trading; changes in market conditions,
loan volumes, and pricing; deposit sensitivity; client preferences; and
management's financial capital plans.  These assumptions are inherently
uncertain, subject to fluctuation and revision in a dynamic environment and, as
a result, the model cannot precisely estimate net interest income or exactly
predict the impact of higher or lower interest rates on net interest income.
Actual results will differ from simulated results due to timing, magnitude, and
frequency of interest rate changes and changes in market conditions and
management strategies, among other factors.
     Results of the multiple simulations done as of December 31, 1997 suggest
that the Corporation could expect net interest income to increase by $200,000
(if the balance sheet does not grow and interest rates gradually decline by 200
basis points over the next twelve months) and, to increase by $2.4 million (if
the balance sheet does not grow and interest rates gradually increase by 200
basis points over the next twelve months) from 1997 levels of net interest
income.  These variances in net interest income were well within the
Corporation's policy parameters established to manage such risk.  Management
performed a large number of net interest income simulations using varying
balance sheet scenarios and differing interest rate environments.  The model
results presented herein are intended to illustrate the potential variation in
net interest income from the indicated changes in interest rates, and not to
project future levels of net interest income.  In addition to changes in
interest rates, the level of future net interest income is also dependent on a
number of other variables, including the growth, composition and absolute
levels of deposits, loans, and other earnings assets and interest bearing
liabilities, economic and competitive conditions, client preferences and other
factors.

TABLE 12. LOAN MATURITIES AND INTEREST RATE SENSITIVITY



                                    Due Within         One to            After     
December 31 (in millions)            One Year        Five Years        Five Years          Total
- ------------------------------------------------------------------------------------------------     
                                                                              
Commercial                            $674.5           $538.5            $104.2          $1,317.2
Real estate construction                43.5             18.2               9.3              71.0
                                      ------           ------            ------          --------
 Total                                $718.0           $556.7            $113.5          $1,388.2
                                      ======           ======            ======          ========
Loans above:                       
 With floating interest rates         $492.4           $190.9             $73.5            $756.8
 With predetermined interest rates     225.6            365.8              40.0             631.4
                                      ------           ------            ------          --------
  Total                               $718.0           $556.7            $113.5          $1,388.2
                                      ======           ======            ======          ========



                                   Page 18

   50


TABLE 13. SELECTED QUARTERLY INFORMATION



                                                             1997                                           1996
                                         ---------------------------------------------    -----------------------------------------
(in thousands except per share data)     FOURTH       THIRD         SECOND     FIRST       Fourth     Third      Second     First
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Interest income                          $85,992     $85,648       $83,996    $80,227     $79,952    $78,764    $77,583    $76,037  
Interest expense                          36,908      36,903        35,858     34,346      34,568     33,309     32,705     33,109  
Net interest income                       49,084      48,745        48,138     45,881      45,384     45,455     44,878     42,928  
Provision for loan losses                  3,135       5,245         3,742      3,210       4,146      3,593      2,351      2,036  
Investment securities gains                                                                                                         
(losses)                                      25        (755)          (33)       (24)         41        134         20        416  
Noninterest income                        12,115      12,422        11,575     11,369      11,581     13,152     11,468     11,192  
Noninterest expense                       37,475      61,340(2)     39,729     38,617      38,608     38,980     39,949     37,519  
Net income (loss)                         14,255      (4,951)(2)    11,315     10,889      10,242     11,498     10,028     10,657  

PER SHARE OF COMMON STOCK(3)                                                                                                        
Net income (loss):                                                                                                                  
  Basic                                     0.51       (0.18)(2)      0.41       0.39        0.37       0.41       0.35       0.38  
  Diluted                                   0.50       (0.18)(2)      0.40       0.39        0.36       0.41       0.35       0.38  
Cash dividends declared                     0.19        0.19          0.19       0.17        0.17       0.17       0.17       0.15  
Market value:(1)                                                                                                                    
 High                                      34.75       29.42         23.83      22.33       21.50      19.67      21.00      21.00  
 Low                                       27.17       22.33         20.33      20.00       19.17      18.17      18.33      19.00  
 Close                                     34.50       29.33         22.83      22.00       21.00      19.09      19.33      20.33  


(1)  Citizens Banking Corporation common stock is traded on the National
     Market tier of the Nasdaq stock market (trading symbol:  CBCF).  At
     December 31, 1997, there were approximately 11,338 shareholders of the
     Corporation's common stock.
(2)  Amounts include special charge associated with CB Financial Corporation
     merger and information technology operations reorganization of $17,263,
     net of tax or $0.61 per diluted share.
(3)  Per share information is computed, and where necessary, restated to
     comply with Statement of Financial Accounting Standard No. 128 "Earnings
     per share" and reflects a three-for-two stock split effected in the form
     of a dividend paid to shareholders on November 18, 1997.


     IMPACT OF INFLATION

     Substantially all of the assets and liabilities of a financial institution
are monetary.  Therefore, inflation generally has a less significant impact on
financial institutions than fluctuations in market interest rates.  Inflation
can lead to accelerated growth in noninterest expenses, which can adversely
impact results of operations.  Additionally, inflation may impact the rate of
deposit growth and necessitate increased growth in equity to maintain a strong
capital position.  Management believes the most significant impact on financial
results is the Corporation's ability to respond to changes in interest rates.


     FORWARD-LOOKING STATEMENTS

     The foregoing disclosure contains "forward-looking statements" within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934,
both as amended, with respect to expectations for future periods.  These
forward looking statements relate to expected savings and effects of the
merger, the Corporation's information systems conversion to M&I Data Services
and the impact of Year 2000, changes all of which are subject to risks and
uncertainties that could cause actual results to differ.  These risks and
uncertainties include unanticipated changes in the competitive environment and
relationships with third party vendors and clients and certain other factors
discussed in this report.

                                   Page 19
   51
     YEAR ENDED DECEMBER 31, 1996 COMPARED WITH 1995

     The following discussion incorporates the restatement of 1995 and 1996
financial information to include the merger of CB Financial Corporation on July
1, 1997 which was accounted for as a pooling of interests.  The 1996 results
reflect a full year of operations as compared with ten months of operations for
the four Michigan affiliates of Banc One Corporation purchased at the close of
business on February 28, 1995.  All common stock per share amounts have been
adjusted to reflect a three-for-two stock split effected in the form of a
dividend paid to shareholders on November 18, 1997.  Citizens Banking
Corporation earned $42,425,000 or $1.50 per diluted share during 1996 as
compared with $38,211,000 or $1.36 per share in 1995.   Net income was up
$4,214,000 or $0.14 per diluted share over the prior year, a 10.3% increase.
Return on average assets increased 5.2% from 0.96% in 1995 to 1.01% in 1996.
Overall, the increase in net income in 1996 reflects improvement in net
interest income and noninterest income offset, in part, by increases in the
provision for loan losses, noninterest expense and income taxes.
     Net interest income for 1996 was $178,645,000, an increase of 6.4% over
1995 net interest income of $167,926,000.  This increase resulted from higher
levels of earning assets partially offset by increased interest bearing
liabilities.  Yields on earning assets increased slightly to 8.21% as compared
with 8.19% in 1995.  Rates paid on funding sources increased nine basis points
to 4.17% due to higher rates paid on time deposits and long-term debt partially
offset by lower rates on interest bearing demand and savings deposits and
short-term borrowings.  As a result, the net interest margin decreased to 4.77%
in 1996 as compared with 4.80% in 1995.
     The provision for loan losses increased to $12,126,000 in 1996 as compared
with $7,112,000 in 1995.  The increase resulted from new loan growth of $362.4
million and higher charge offs.  Net loan charge-offs were 0.28% of average
total loans in 1996, up from 0.16% in 1995.
     Noninterest income accounted for 21.2% of total operating income or 1.1%
of average assets in 1996, increasing from 20.3% or 1.1%, respectively, in
1995.  Noninterest income increased $5,318,000 from 1995 partially attributable
to a full year of earnings of the acquired banks as compared to ten months of
income for 1995.  The third quarter 1996 sale of the Corporation's mortgage
servicing operations resulted in an immediate gain of $1,550,000 related to
loans previously serviced by the Corporation for other investors.  Revenue
increases for trust of 8.6%, brokerage and investment fees of 52.8%, ATM
network user fees of 15.8% and cash management fees of 36.6% when comparing
1996 with 1995 were the result of increased volumes and enhanced marketing
strategies.
     Noninterest expense increased $4,724,000, or 3.1% in 1996, from 1995.  The
increase is partially attributable to a full year of expense of the acquired
banks as compared with 10 months of expense for 1995.  The increase was
partially offset by a decrease in FDIC insurance assessments to $15,000 in 1996
as compared with $3,935,000 in 1995.
     Compensation is the Corporation's largest noninterest expense.  Total
compensation expense increased 5.1% in 1996 as compared to 1995 due to a full
year effect of the acquired banks and higher cost of employee benefits for
pension, workers compensation and medical expense.
     Intangible asset amortization expense increased 11.2% in 1996 as compared
with 1995 due to a full year of amortization attributable to the 1995
acquisition.  Income tax expense for 1996 increased 13.9% compared with 1995.
This increase resulted from higher pretax earnings combined with lower
tax-exempt interest income.
     The Corporation had total average assets of $4.212 billion in 1996, up
from 1995 average assets of  $3.970 billion.  This was primarily due to loan
and core deposit growth and the full year impact of the first quarter 1995
acquisition.  Average loans comprise 78.8% of total earning assets in 1996, up
from 74.5% in 1995.  The growth occurred in the consumer, residential mortgage
and commercial loan portfolios due to improved economic conditions and the full
year effect of the acquisition.  Average investments securities, including
money market investments, decreased to 21.2% of average earning assets in 1996
from  25.5% in 1995.  The decline in investment securities was used to fund new
loan growth.
     Total average deposits were 6.6% higher in 1996 compared with 1995,  due
to higher time deposit balances and the acquisition.  Customer preferences
resulted in deposit balance shifts from interest bearing demand and savings to
time accounts in 1996 as compared with 1995.  Average short-term borrowings,
comprised primarily of securities sold under agreements to repurchase,
increased slightly to 5.3% of average interest-bearing liabilities in 1996 as
compared with 5.1% in 1995.
     Long-term debt accounted for $86.8 million or 2.7% of average
interest-bearing funds during 1996, decreasing from $108.2 million or 3.6% in
1995.  The decrease resulted from 1996 principal payments on the debt used to
finance the first quarter 1995 acquisition.  Average shareholders' equity was
$381.4 million in 1996, a 7.7% increase over the 1995 average of $354.2
million.

                                   Page 20

   52
CONSOLIDATED BALANCE SHEETS
CITIZENS BANKING CORPORATION AND SUBSIDIARIES



                                                                 December 31,
(in thousands except share amounts)                           1997         1996
- -----------------------------------------------------------------------------------
                                                                  
ASSETS
 Cash and due from banks                                   $  168,351   $  182,039
 Money market investments:
  Interest-bearing deposits with banks                            246           83
  Federal funds sold                                              ---        4,500
  Term federal funds sold and other                            11,976       14,288
                                                           ----------   ----------
   Total money market investments                              12,222       18,871
 Investment securities available-for-sale (amortized cost
  $569,440 in 1997; $716,695 in 1996)                         575,382      717,058
 Loans:
  Commercial                                                1,317,213    1,177,098
  Real estate construction                                     71,035       71,125
  Real estate mortgage                                        779,567      744,606
  Consumer                                                  1,336,120    1,189,807
  Lease financing                                              37,684       47,173
                                                           ----------   ----------
   Total loans                                              3,541,619    3,229,809
  Less: Allowance for loan losses                             (45,911)     (42,166)
                                                           ----------   ----------
   Net loans                                                3,495,708    3,187,643
 Premises and equipment                                        69,415       74,859
 Intangible assets                                             60,016       73,684
 Other assets                                                  58,177       51,819
                                                           ----------   ----------
   TOTAL ASSETS                                            $4,439,271   $4,305,973
                                                           ==========   ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
 Noninterest-bearing deposits                              $  600,498   $  580,742
 Interest-bearing deposits                                  3,093,848    3,018,009
                                                           ----------   ----------
   Total deposits                                           3,694,346    3,598,751
 Federal funds purchased and securities sold
  under agreements to repurchase                              141,713      146,903
 Other short-term borrowings                                   33,153       29,902
 Other liabilities                                             52,052       51,570
 Long-term debt                                               108,165       86,826
                                                           ----------   ----------
   Total liabilities                                        4,029,429    3,913,952

SHAREHOLDERS' EQUITY
 Preferred stock - no par value:
  Authorized - 5,000,000 shares
  Issued - none
 Common  stock - no par value:
  Authorized - 40,000,000 shares
  Issued and outstanding - 28,047,518 in 1997;
   27,766,182 in 1996                                         120,274      118,312
 Retained earnings                                            285,706      273,484
 Other accumulated comprehensive net income                     3,862          225
                                                           ----------   ----------
   Total shareholders' equity                                 409,842      392,021
                                                           ----------   ----------
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY              $4,439,271   $4,305,973
                                                           ==========   ==========


See Notes to Consolidated Financial Statements.

                                   Page 21
   53

CONSOLIDATED STATEMENTS OF INCOME
CITIZENS BANKING CORPORATION AND SUBSIDIARIES



(in thousands except share amounts)                                1997          1996           1995
- ------------------------------------------------------------------------------------------------------
                                                                                    
INTEREST INCOME                                                  
 Interest and fees on loans                                      $294,258      $265,139       $237,498
 Interest and dividends on investment securities:                
  Taxable                                                          31,811        33,731         35,441
  Nontaxable                                                        8,721         9,700         10,080
 Money market investments                                           1,073         3,766          7,908
                                                                 --------      --------       --------
   Total interest income                                          335,863       312,336        290,927
                                                                 --------      --------       --------
INTEREST EXPENSE                                                 
 Deposits                                                         129,267       119,185        107,329
 Short-term borrowings                                              8,689         7,959          7,573
 Long-term debt                                                     6,059         6,547          8,099
                                                                 --------      --------       --------
   Total interest expense                                         144,015       133,691        123,001
                                                                 --------      --------       --------
NET INTEREST INCOME                                               191,848       178,645        167,926
Provision for loan losses                                          15,332        12,126          7,112
                                                                 --------      --------       --------
   Net interest income after provision for loan losses            176,516       166,519        160,814
                                                                 --------      --------       --------
NONINTEREST INCOME                                               
 Trust fees                                                        15,527        14,466         13,326
 Service charges on deposit accounts                               12,342        12,481         12,219
 Bankcard fees                                                      7,092         6,780          5,908
 Other loan income                                                  1,746         3,572          2,409
 Investment securities gains (losses)                                (787)          611            281
 Other                                                             10,774        10,094          8,543
                                                                 --------      --------       --------
   Total noninterest income                                        46,694        48,004         42,686
                                                                 --------      --------       --------
NONINTEREST EXPENSE                                              
 Salaries and employee benefits                                    80,119        81,288         77,329
 Equipment                                                         12,327        12,374         12,292
 Occupancy                                                         11,446        12,153         11,562
 Intangible asset amortization                                      6,098         6,637          5,968
 Bankcard fees                                                      5,152         4,702          4,221
 Stationery and supplies                                            4,042         4,416          4,316
 Postage and delivery                                               4,387         4,254          3,911
 Advertising and public relations                                   3,953         3,946          3,103
 Special charge                                                    23,734           ---            ---
 Other                                                             25,903        25,286         27,630
                                                                 --------      --------       --------
   Total noninterest expense                                      177,161       155,056        150,332
                                                                 --------      --------       --------
INCOME BEFORE INCOME TAXES                                         46,049        59,467         53,168
Income taxes                                                       14,541        17,042         14,957
                                                                 --------      --------       --------
NET INCOME                                                       $ 31,508      $ 42,425       $ 38,211
                                                                 ========      ========       ========
NET INCOME PER SHARE:                                            
 Basic                                                           $   1.13      $   1.52       $   1.39
 Diluted                                                             1.11          1.50           1.36

AVERAGE SHARES OUTSTANDING:                                      
 Basic                                                         27,878,990    27,844,341     27,575,118
 Diluted                                                       28,419,676    28,258,591     28,123,783


See Notes to Consolidated Financial Statements.

                                   Page 22
   54
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
CITIZENS BANKING CORPORATION AND SUBSIDIARIES



                                                                                    Accumulated 
                                                                                       Other
                                             Common            Retained            Comprehensive
(in thousands except per share amounts)      Stock             Earnings               Income        Total
- ------------------------------------------------------------------------------------------------------------
                                                                                      
BALANCE - JANUARY 1, 1995                   $118,324           $226,869              $(12,453)     $332,740
 Net income                                                      38,211                              38,211
 Net unrealized gain on securities
  available-for-sale,
  net of tax effect of $9,424                                                          17,587        17,587
                                                                                                   --------
  Total comprehensive income                                                                         55,798
 Exercise of stock options, net of
  shares purchased                             2,237                                                  2,237
 Cash dividends-$0.60 per share                                 (16,131)                            (16,131)
                                            --------           --------              --------      --------
BALANCE - DECEMBER 31, 1995                  120,561            248,949                 5,134       374,644

 Net income                                                      42,425                              42,425
 Net unrealized loss on securities
  available-for-sale,
  net of tax effect of $2,593                                                          (4,909)       (4,909)
                                                                                                   --------
  Total comprehensive income                                                                         37,516
 Exercise of stock options, net of
  shares purchased                             1,523                                                  1,523
 Cash dividends-$0.67 per share                                 (17,890)                            (17,890)
Shares acquired for retirement                (3,772)                                                (3,772)
                                            --------           --------              --------      --------
BALANCE - DECEMBER 31, 1996                  118,312            273,484                   225       392,021
 Net income                                                      31,508                              31,508
 Net unrealized gain on securities
  available-for-sale,
  net of tax effect of $1,942                                                           3,637         3,637
                                                                                                   --------
  Total comprehensive income                                                                         35,145
 Exercise of stock options, net of
  shares purchased                             1,962                                                  1,962
 Cash dividends-$0.74 per share                                 (19,286)                            (19,286)
                                            --------           --------              --------      --------
BALANCE - DECEMBER 31, 1997                 $120,274           $285,706              $  3,862      $409,842
                                            ========           ========              ========      ========


See Notes to Consolidated Financial Statements.

                                   Page 23

   55
CONSOLIDATED STATEMENTS OF CASH FLOWS
CITIZENS BANKING CORPORATION AND SUBSIDIARIES



                                                               YEAR ENDED DECEMBER 31,
(in thousands)                                            1997           1996          1995
- -----------------------------------------------------------------------------------------------
                                                                         
OPERATING ACTIVITIES:                                                              
 Net income                                              $  31,508   $    42,425   $    38,211
 Adjustments to reconcile net income to net cash
  provided by operating activities:
   Provision for loan losses                                15,332        12,126         7,112
   Depreciation                                              8,927         9,335         9,197
   Amortization of goodwill and other intangibles            6,098         6,637         5,968
   Intangible asset impairment                               7,570           ---           ---
   Deferred income tax credit                               (4,714)       (2,391)         (607)
   Net amortization on investment securities                 1,061         2,080         4,015
   Investment securities losses (gains)                        787          (611)         (281)
   Other                                                    (3,104)       (4,508)        6,157
                                                      ------------   -----------   -----------
     Net cash provided by operating activities              63,465        65,093        69,772

INVESTING ACTIVITIES:

 Net (increase) decrease in money market investments         6,649       132,753        (8,557)
 Securities available-for-sale:
  Proceeds from sale                                       171,240       116,190        20,089
  Proceeds from maturity                                   144,916       403,835       208,087
  Purchases                                               (170,749)     (463,394)     (150,735)
 Net increase in loans and leases                         (323,397)     (371,047)     (133,670)
 Purchases of premises and equipment                        (3,483)       (5,408)       (7,879)
 Net cash used for acquisition of subsidiary                   ---           ---       (59,434)
                                                      ------------   -----------   -----------
   Net cash used by investing activities                  (174,824)     (187,071)     (132,099)

FINANCING ACTIVITIES:

 Net decrease in demand and savings deposits               (27,076)      (73,779)     (119,285)
 Net increase in time deposits                             122,671       194,262       183,900
 Net increase (decrease) in short-term borrowings           (1,939)       24,266       (51,400)
 Proceeds from issuance of long-term debt                   70,000        20,000       115,000
 Principal reductions in long-term debt                    (48,661)      (43,196)      (21,309)
 Cash dividends paid                                       (19,286)      (17,890)      (16,131)
 Proceeds from stock options exercised                       1,962         1,523         2,237
 Shares acquired for retirement                                ---        (3,772)          ---
                                                      ------------   -----------   -----------
   Net cash used by financing activities                    97,671       101,414        93,012
                                                      ------------   -----------   -----------
Net increase (decrease) in cash and due from banks         (13,688)      (20,564)       30,685
Cash and due from banks at beginning of year               182,039       202,603       171,918
                                                      ------------   -----------   -----------
Cash and due from banks at end of year                $    168,351   $   182,039   $   202,603
                                                      ============   ===========   ===========
Supplemental cash flow information:
 Interest paid                                        $    146,917   $   136,331   $   114,396
 Income taxes paid                                          17,790        19,560        15,308


See Notes to Consolidated Financial Statements.


                                   Page 24

   56
     NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

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

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

INVESTMENT SECURITIES
Investment securities must be classified into three categories:
held-to-maturity, available-for-sale or trading.  Only those securities
classified as held-to-maturity are reported at amortized cost, with those
available-for-sale and trading reported at fair value with unrealized gains and
losses included in shareholders' equity or income, respectively.  In the event
that an investment security is sold, the adjusted cost of the specific security
sold is used to compute the applicable gain or loss.

ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level considered by management
to be adequate to absorb losses inherent in the loan portfolio.  Management's
evaluation is based on a continuing review of the loan portfolio and includes
consideration of actual loss experience, the financial condition of borrowers,
the size and composition of the loan portfolio, current and anticipated
economic conditions and other pertinent factors.  The allowance is increased by
the provision charged to income and recoveries of  loans previously charged off
and reduced by loans charged off.
     The Corporation establishes a valuation allowance for any loans considered
impaired based on periodic review.  A loan is considered impaired when
management determines it is probable that all the principal and interest due
under the contractual terms of the loan will not be collected.  The impairment
is measured based on the present value of expected future cash flows discounted
at the loan's effective interest rate, the loan's observable market price, or
the fair value of the collateral if the loan is collateral dependent.

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

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

INTANGIBLE ASSETS
Goodwill, the unamortized cost of acquiring subsidiaries in excess of the fair
value of identifiable net assets at the date acquired, is amortized on a
straight line basis over 15 years.  The carrying amount of goodwill is reviewed
as events or changes in facts and circumstances warrant.  The realizability of
goodwill is evaluated by geographic region and is based on a comparison of the
recorded balance of goodwill to the applicable discounted cash flows over the
remaining amortization period of the associated goodwill.  To the extent that
impairment may exist, the current carrying amount is reduced by the estimated
shortfall.

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

LOAN INTEREST AND FEE INCOME
Interest on loans is generally accrued and credited to income based upon the
principal amount outstanding.  Loans are placed on nonaccrual status when
collectibility of principal or interest is considered doubtful, or payment of
principal or interest is past due 90 days or more and the loan is not well
secured and in the process of collection.  When these loans (including a loan
impaired) are placed on nonaccrual status, all 


                                   Page 25



   57
interest previously accrued but unpaid is reversed against current year
interest income.  Interest payments received on nonaccrual loans are credited
to income if future collection of principal is probable.  Loans are
normally restored to accrual status when interest and principal payments are
current and it is believed that the financial condition of the borrower has
improved to the extent that future principal and interest payments will be met
on a timely basis.
     Loan origination fee income, net of direct origination costs and certain
incremental direct costs, is deferred and amortized as a yield adjustment over
the estimated term of the related loans by methods that approximate the level
yield method.  Loan fees on unused commitments and fees related to loans sold
are recognized currently as other income.

NET INCOME PER SHARE
Basic and diluted earnings per share are computed under the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per share,"
adopted by the Corporation in the quarter ended December 31, 1997.  All prior
amounts have been restated.  Basic net income per share is based on net income
divided by the weighted average number of shares outstanding in each period.
Diluted net income per share shows the dilutive effect of additional common
shares issuable under the assumed exercise of stock options granted upon the
Corporation's stock option plans, using the treasury stock method.  The
weighted average number of share has been adjusted for a three for two stock
split effected in the form of a dividend paid to shareholders on November 18,
1997.

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

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

     NOTE 2. ACQUISITION

     On July 1, 1997, the Corporation merged with CB Financial Corporation
headquartered in Jackson,  Michigan.  As part of the merger, Citizens issued
6,256,355 shares of its common stock in a tax free exchange for all of the
outstanding shares of CB Financial Corporation.  The merger was accounted for
as a pooling of interests resulting in the restatement of all financial
information for the periods presented.  The merger resulted in no change in
either entities' fiscal reporting period or in the consolidated shareholder
equity position.  No material intercompany transactions existed between the
companies prior to the merger.  The following presents the separate results of
operations for the six month period ending June 30, 1997 (the latest period
immediately preceding the merger) and the years ending December 31, 1996 and
1995 for CB Financial Corporation and Citizens Banking Corporation:



                                                           For the Year Ended
                                           (unaudited)         December 31,
                                        Six Months Ended   ---------------------
(DOLLARS IN THOUSANDS)                   June 30, 1997      1996        1995
- --------------------------------------------------------------------------------
                                                             
Net Interest Income
            Citizens                         $    77,080  $  146,116  $  137,495
            CB Financial                          16,939      32,508      30,508
                                             -----------  ----------  ----------
            Combined                         $    94,019  $  178,624  $  168,003
                                             ===========  ==========  ==========
Net Income
            Citizens                         $    19,315  $   37,421   $  33,596
            CB Financial                           2,889       5,004       4,615
                                             -----------  ----------  ----------
            Combined                         $    22,204  $   42,425   $  38,211
                                             ===========  ==========  ==========
Diluted net income per
common share
            Citizens                         $      0.88   $    1.70   $   1.53
            CB Financial                            1.03        1.79       1.65
            Combined                                0.79        1.50       1.36


     At the close of business on February 28, 1995, the Corporation purchased
the four Michigan affiliates of Bank One Corporation, located in East Lansing,
Fenton, Sturgis and Ypsilanti, for $115 million in cash.  The transaction was
accounted for as a purchase and the four banks ("acquired banks") were merged
into Citizens Bank headquartered in Flint, Michigan effective immediately after
the acquisition.

     NOTE 3. SPECIAL CHARGE

     The results of operations for the year ended December 31, 1997 reflect a
third quarter special charge of  $23.7 million ($17.3 million after tax)
related to the July 1, 1997 merger with CB Financial Corporation and the
reorganization of Citizens' information technology operations.  The special
charge includes $16.1 million of merger related expenses comprised of $8.5
million of direct merger and restructuring-related charges and a $7.6 million
write-down of goodwill and core deposit intangibles.  This write-down reflects
the impairment of assets related to previous acquisitions of CB Financial
Corporation consummated in the early 1990's.  The goodwill impairment was
measured based on an analysis which estimated the discounted cash flows for CB
Financial Corporation's northern region over the remaining amortization period
of the associated goodwill of approximately twelve and a half years.
Management also performed a qualitative analysis of the recorded balance of
core deposit intangibles within this region.  Based on this analysis the entire
core deposit intangible balance was written off.  The primary indicators of
impairment were higher than anticipated runoff of the region's core deposit
base and operating results that

                                   Page 26

   58

have fallen short of expectations since the intangibles were recorded.  The
merger related expenses reflect the cost of integrating and consolidating branch
network and administrative facilities, severance arrangements, professional
services and other expenses directly related to the merger. 
    Also in the third quarter, the Corporation entered into a strategic 
arrangement with M & I Data Services of Milwaukee, Wisconsin, as part of
its efforts to upgrade its information technology operations.  This arrangement
will provide the Corporation with the professional expertise and technological
resources necessary to improve its competitive position in a rapidly changing
technological environment.  The Corporation believes it will enhance its
position to quickly respond to the demands of its markets and support future
strategic initiatives.  The special charge includes expenses of $7.6 million
related to this arrangement, comprised of up-front conversion and
reorganization costs.  Salary and benefit costs associated with the special
charge were $5.4 million for approximately 140 employees comprised of both
management and operational staff.


The components of the special charge are as follows:   





     
- --------------------------------------------------------------------------------
(IN THOUSANDS)
- --------------------------------------------------------------------------------
                                                                      
Direct merger costs                                                      $ 8,562
Intangible assets impairment                                               7,570
Information technology conversion and reorganization costs                 7,602
                                                                         -------
  Total special charge                                                    23,734
Tax effect of special charge                                               6,471
                                                                         -------
  Net effect                                                             $17,263
                                                                         =======
Diluted loss per share                                                   $  0.61
                                                                         =======


The following presents a summary of the special charge activity:




- -----------------------------------------
(IN THOUSANDS)
- -----------------------------------------
                               
Special charge                    $23,734
Intangible assets impairment       (7,570)
Premises and equipment writedown   (2,773)
Cash payments                      (8,496)
                                  -------
Balance at December 31, 1997      $ 4,895
                                  =======


The remaining balance is comprised primarily of future severence and lease
payments expected to be paid by the end of the fourth quarter of 1998.


     NOTE 4. INVESTMENT SECURITIES

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




                                        DECEMBER 31, 1997                             December 31, 1996
                           --------------------------------------------  --------------------------------------------
                                      ESTIMATED    GROSS       GROSS                Estimated    Gross       Gross
                           AMORTIZED    FAIR     UNREALIZED  UNREALIZED  Amortized    Fair     Unrealized  Unrealized
(in thousands)               COST       VALUE      GAINS       LOSSES      Cost       Value      Gains       Losses
- --------------             ---------  ---------  ----------  ----------  ---------  ---------  ----------  ----------
                                                                                   
U.S. Treasury               $ 78,458   $ 78,805   $     458  $      111   $214,980   $213,934   $     610   $   1,656
Federal agencies:
 Mortgage-backed             142,344    143,173       1,071         242    116,038    115,976         451         513
 Other                       167,949    168,069         498         378    173,592    172,132         191       1,651
State and municipal          162,351    166,876       4,762         237    197,990    200,835       3,393         548
Mortgage and asset-backed        934        959          25         ---      1,486      1,518          32         ---
Other                         17,404     17,500          96         ---     12,609     12,663          54         ---
                           ---------  ---------  ----------  ----------  ---------  ---------  ----------  ----------
 Total                      $569,440   $575,382   $   6,910  $      968   $716,695   $717,058   $   4,731   $   4,368
                           =========  =========  ==========  ==========  =========  =========  ==========  ==========


     The amortized cost and approximate fair value of debt securities at
December 31, 1997 are shown below.




- -----------------------------------------------------------
                                                  Estimated
                                       Amortized    Fair
(in thousands)                           Cost       Value
- -----------------------------------------------------------
                                            
Due within one year                     $129,233   $129,299
One to five years                        175,287    177,193
Five to ten years                         61,381     62,793
After ten years                           42,857     44,465
                                       ---------  ---------
                                         408,758    413,750
Equity securities                         17,404     17,500
Mortgage and asset-backed securities     143,278    144,132
                                       ---------  ---------
  Total                                 $569,440   $575,382
                                       =========  =========


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




- -----------------------------------------------
                     Year Ended December 31,
(in thousands)       1997      1996      1995
- -----------------------------------------------
                              
Securities gains   $    98   $   660   $   285
Securities losses     (885)      (49)       (4)
                   -------   -------   -------
 Net gain (loss)   $  (787)  $   611   $   281
                   =======   =======   =======


     Investment securities must be classified into three categories:
held-to-maturity, available-for-sale or trading.  Only those securities
classified as held-to-maturity are reported at amortized cost, with those
available-for-sale and trading reported at fair value with unrealized gains and
losses included in shareholders' equity or income, respectively.


                                   Page 27



   59


The Corporation currently holds all investment securities in the
available-for-sale category.
     The Financial Accounting Standards Board Statement No. 119 defines a
derivative as a future, forward, swap, option contract or other financial
instrument with similar characteristics.  The Corporation has not utilized
derivatives or related types of financial instruments except for Federal agency
collateralized mortgage obligations and, therefore, this Statement does not
have a material impact.  The Corporation's policy only allows the purchase of
collateralized mortgage obligations that are composed of mortgage backed
securities issued by a Federal Agency.  Most CMO's purchased are in early
tranches with short average lives.  These tranches are generally classified in
the Planned Amortization Class and have well-defined prepayment assumptions
(Super PAC's).  The Corporation's CMO's are periodically tested to ensure
compliance with guidelines established by the Federal Financial Institutions
Examination Council.
     Securities with amortized cost of $217.9 million at December 31, 1997, and
$268.2 million at December 31, 1996, were pledged to secure public deposits,
repurchase agreements, and other liabilities.  Except for obligations of the
U.S. Government and its agencies, no holdings of securities of any single
issuer exceeded 10% of consolidated shareholders' equity at December 31, 1997
or 1996.

     NOTE 5. LOANS AND 
     NONPERFORMING ASSETS

    The Corporation extends credit primarily within the local markets of its two
bank subsidiaries located in Michigan and Illinois.  Within the State of
Michigan, the market areas extend along the Interstate 75 corridor from
northern suburban Detroit to the greater Grayling/Gaylord area with
expansion into western suburban Detroit and central and southwestern Michigan
in 1995. The Illinois affiliate extends credit within the western suburban
market of Chicago.  The Corporation seeks to limit its credit risk by
establishing guidelines to review its aggregate outstanding commitments and
loans to particular borrowers, industries and geographic areas.  Collateral is
secured based on the nature of the credit and management's credit assessment of
the customer. 
     The Corporation's loan portfolio is widely diversified by borrowers with   
no concentration within single industry that exceeds 10% of total loans. The
Corporation has no loans to foreign countries and generally does not participate
in large national loan  syndications or highly leveraged transactions. Most of
the Corporation's commercial real estate loans consist of mortgages on
owner-occupied properties. Those borrowers are involved in business activities
other than real estate, and the sources of repayment are not dependent on the
performance of the real estate market.



     A summary of nonperforming assets follows:




- --------------------------------------------------------------------------------
                                                                  December 31,
(in thousands)                                                   1997     1996
- --------------------------------------------------------------------------------
                                                                   
Nonperforming loans:
 Nonaccrual                                                     $19,989  $19,781
 Loans 90 days past due (still accruing)                          1,185    1,874
 Restructured                                                       446      502
                                                                -------  -------
    Total nonperforming loans                                    21,620   22,157
Other real estate                                                 1,005    1,187
Other assets acquired by repossession                             2,343    1,930
                                                                -------  -------
    Total nonperforming assets                                  $24,968  $25,274
                                                                =======  =======


     The effect of nonperforming loans on interest income follows:




- --------------------------------------------------------------------------------
                                                      Year Ended December 31,
(in thousands)                                        1997      1996      1995
- --------------------------------------------------------------------------------
                                                               
Interest income:
 At original contract rates                           $1,861    $1,702    $2,660
 As actually recognized                                  965       913     1,489
                                                    --------  --------  --------
 Interest foregone                                    $  896    $  788    $1,171
                                                    ========  ========  ========


     There are no significant commitments outstanding to lend additional funds
to clients whose loans were classified as nonaccrual or restructured at
December 31, 1997.
     At December 31, 1997, loans considered to be impaired totaled $16.8
million  (of which $9.9 million were on a nonaccrual basis).  Included within
this amount is $6.1 million of impaired loans for which the related allowance
for loan losses is $0.9 million and $10.7 million of impaired loans for which
the fair value exceeded the recorded investment in the loan.  The average
recorded investment in impaired loans during the year ended December  31, 1997
was approximately $18.2 million.  For the year ended December  31, 1997, the
Corporation recognized interest income of $1.5 million which included $1.0
million of interest income recognized using the cash basis method of income
recognition.
     At December 31, 1996, loans considered to be impaired totaled $16.6
million  (of which $10.1 million were on a nonaccrual basis).  Included within
this amount is $4.7 million of impaired loans for which the related allowance
for loan losses is $0.8 million and $11.9 million of impaired loans for which
the fair value exceeded the recorded investment in the loan.  The average
recorded investment in impaired loans during the year ended December  31, 1996
was approximately $19.9 million.  For the year ended December  31, 1996, the
Corporation recognized interest  income of $1.5 million which included $0.8
million of interest income recognized using the cash basis method of income
recognition.
     Certain directors and executive officers of the Corporation and its
significant subsidiaries, including their families and entities in which they
have 10% or more ownership, were clients of the banking 


                                   Page 28




   60

subsidiaries.  Total these clients aggregated $17.1 million and $12.0 million
at December 31, 1997 and 1996, respectively.  During 1997, new loans of $15.9
million were made and repayments totaled $10.8 million.  All such loans were
made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those for comparable transactions
with unrelated parties and did not involve more than normal risk of
collectibility.

     NOTE 6. ALLOWANCE FOR LOAN LOSSES

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




- --------------------------------------------------------------------------------
(in thousands)                                      1997       1996       1995
- --------------------------------------------------------------------------------
                                                               
Balance - January 1                               $ 42,166   $ 38,705   $28,579
 Allowance of acquired banks                           ---        ---     7,235
 Provision for loan losses                          15,332     12,126     7,112
 Charge-offs                                       (15,585)   (12,895)   (8,723)
 Recoveries                                          3,998      4,230     4,502
                                                  --------   --------   -------
 Net charge-offs                                   (11,587)    (8,665)   (4,221)
                                                  --------   --------   -------
Balance - December 31                             $ 45,911   $ 42,166   $38,705
                                                  ========   ========   =======



     NOTE 7. PREMISES AND EQUIPMENT

     A summary of premises and equipment follows:




- -----------------------------------------------
                              December 31,
(in thousands)              1997       1996
- -----------------------------------------------
                               
Land                      $ 12,655   $ 12,575
Buildings                   83,810     83,714
Leasehold improvements       5,391      5,341
Furniture and equipment     84,552     82,738
                          --------   --------
                           186,408    184,368
Accumulated depreciation
and amortization          (116,993)  (109,509)
                          --------   --------
Total                     $ 69,415   $ 74,859
                          ========   ========


     Certain branch facilities and equipment are leased under various operating
leases. Total rental expense, including expenses related to these operating
leases, was $3.5 million in 1997, $3.4 million in 1996 and $2.6 million in
1995. Future minimum rental commitments under noncancelable operating leases
are as follows at December 31, 1997:  $2.7 million in 1998; $2.6 million in
1999; $2.2 million in 2000; $1.5 million in 2001; $1.1 million in 2002, and
$1.6 million after 2002.



     NOTE 8. DEPOSITS

     A summary of deposits follows:




- ---------------------------------------------------
                                  December 31,
(in thousands)                  1997        1996
- ---------------------------------------------------
                                   
Noninterest-bearing demand   $  600,498  $  580,742
Interest-bearing demand         376,698     394,756
Savings                       1,027,501   1,056,276
Time deposits over $100,000     457,277     386,287
Other time deposits           1,232,372   1,180,690
                             ----------  ----------
 Total                       $3,694,346  $3,598,751
                             ==========  ==========


     Excluded from total deposits are demand deposit account overdrafts which
have been reclassified as loans.  At December 31, 1997 and 1996, these
overdrafts totaled $2.1 million and $1.1 million, respectively.  Time deposits
with remaining maturities of one year or more are $432.0 million at December
31, 1997.  The maturities of these time deposits are as follows:  $264.0
million in 1999, $87.5 million in 2000, $48.5 million in 2001, $18.9 million in
2002 and $13.1 million after 2002.

     NOTE 9. SHORT-TERM BORROWINGS

     Short-term borrowings consist primarily of federal funds purchased and
securities sold under agreements to repurchase.  Federal funds purchased are
overnight borrowings from other financial institutions.  Securities sold under
agreements to repurchase are secured transactions done principally with clients
and generally mature within thirty days.  Other short-term borrowed funds
generally consist only of Federal Home Loan Bank borrowings and demand notes to
the U.S. Treasury.
     Information relating to federal funds purchased and securities sold under
agreements to repurchase follows:




- -------------------------------------------------------------------------------
(in thousands)                                    1997        1996       1995
- --------------------------------------------------------------------------------
                                                              
At December 31:
 Balance                                        $141,713   $146,903   $136,556
 Weighted average
 interest rate paid                                 5.12%      4.43%      4.77%
During the year:
 Maximum outstanding
 at any month-end                               $226,214   $189,504   $152,429
 Daily average                                   145,152    153,193    134,562
 Weighted average
 interest rate paid                                 4.72%      4.56%      4.84%



                                   Page 29





   61

     NOTE 10. LONG-TERM DEBT

     A summary of long-term debt follows:




- ----------------------------------------------------------------------------------
                                                                 December 31,
(in thousands)                                                 1997        1996
- ----------------------------------------------------------------------------------
                                                                  
Citizens Banking Corporation
(Parent only):
 Floating rate term notes:
  Maturing October 1997                                       $     ---   $  1,250
  Revolving credit facility:
  Maturing December 2001                                         32,991     58,435
                                                              ---------   --------
     Total                                                       32,991     59,685
Subsidiaries:
  FHLB Note                                                      70,000     20,000
  Subordinated debt                                               4,179      4,118
  Other                                                             995      3,023
                                                              ---------   --------
     Total                                                       75,174     27,141
                                                              ---------   --------
Total long-term debt                                          $ 108,165   $ 86,826
                                                              =========   ========


     To finance the February 28, 1995 acquisition, the Corporation's Parent
company obtained a $115 million seven year amortizing revolving credit
facility.  The revolving credit facility, maturing in December 2001, is payable
in annual payments of $16.5 million with a final payment of $16 million.  As of
December 31, 1997, the Corporation has repaid the scheduled 1998 and a portion
of the 1999 amount due.  The outstanding balance of $33 million at December 31,
1997 has fixed rates of 6.38% to 7.65%.  Of this amount, $7 million reprices in
March 1998 and $13 million in both September 1998 and March 1999.  Interest is
payable quarterly.  The Parent company services the debt's principal and
interest payments with dividends from the subsidiary banks.   The agreement
also requires the Corporation to maintain certain financial  covenants.  The
Corporation is in full compliance with all debt covenants as of December 31,
1997.
     In 1997, one of the Corporation's subsidiaries originated three long-term
borrowings from the Federal Home Loan Bank.  The first in May 1997, was for $30
million on a one year note at a fixed interest rate of 6.07%.  The second in
September 1997, was for $25 million on a five year note at an interest rate of
5.68% which may reprice on September 30, 1999.  The third in October 1997, was
for $15 million on a two year note at an interest rate of 5.77% which may
reprice on October 19, 1998.  For the latter two borrowings, the interest rate
upon repricing will be based on the three month LIBOR rate.
     The subordinated debt was assumed by the Corporation as part of the 1995
acquisition and is payable on April 15, 2003.  Interest is payable semiannually
at a fixed rate of 6.72%.  Subsidiary debt assumed by the Corporation as part
of the 1997 acquisition consists of a note payable due January 15, 1998.
Interest is payable quarterly at a fixed rate of 6.25%.  Other subsidiary debt
assumed as part of the 1995 and 1997 acquisitions consist of two mortgages due
April 1, 2002 and August 1, 2005.  Interest is payable monthly at a fixed rate
of 14.75% and 75% of the prime rate.

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




- --------------------------------------------------------------
(in thousands)           Parent     Subsidiaries  Consolidated
- --------------------------------------------------------------
                                         
1998                    $   ---       $30,608      $ 30,608
1999                        491        15,027        15,518
2000                     16,500            31        16,531
2001                     16,000        25,036        41,036
2002                        ---           151           151
Over 5 Years                ---         4,321         4,321
                        -------       -------      --------
Total                   $32,991       $75,174      $108,165
                        =======       =======      ========


     NOTE 11. EMPLOYEE BENEFIT PLANS

     The Corporation and its subsidiaries maintain various employee benefit
plans.  Costs of various benefit arrangements charged to operations each year
follow:




- ---------------------------------------------------------------------------------
                                                      Year Ended December 31,
(in thousands)                                        1997      1996      1995
- ---------------------------------------------------------------------------------
                                                              
Defined benefit pension plans:
 Qualified plan - funded:
  Service cost                                      $ 1,848   $ 1,981   $ 1,541
  Interest cost                                       2,817     2,615     2,339
  Actual return on plan assets                       (8,564)   (5,717)   (6,825)
  Net amortization and deferral                       4,330     1,795     2,783
                                                    -------   -------   -------
   Net cost (income)                                    431       674      (162)
 Supplemental plans - unfunded:
  Service cost                                          173       104       103
  Interest cost                                         221       164       119
  Net amortization and deferral                         159       113        38
                                                    -------   -------   -------
   Net cost                                             553       381       260
                                                    -------   -------   -------
   Net pension cost                                     984     1,055        98
Defined contribution retirement and 401(k) plans      2,111     2,446     2,511
                                                    -------   -------   -------
   Total benefit cost                               $ 3,095   $ 3,501   $ 2,609
                                                    =======   =======   =======


PENSION PLANS
The Corporation maintains a qualified defined benefit plan covering
substantially all full-time employees.  Under the plan, benefits are based on
the employee's length of service and average compensation during the highest
consecutive 60 month period out of the final 120 months preceding retirement.
The Corporation's funding policy is to contribute annually an amount sufficient
to meet the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974, plus such additional amounts as the Corporation
may determine to be appropriate.  Contributions are intended to provide for
benefits attributed to past service and for benefits expected to be earned in
the future.
     The funded status and amounts recognized in the Corporation's Consolidated
Balance Sheets for the qualified defined benefit plan follow:


                                   Page 30




   62


- --------------------------------------------------------------------------------
                                                              December 31,
(in thousands)                                          1997              1996
- --------------------------------------------------------------------------------
                                                                                        
Actuarial present value of benefit obligation:
  Vested benefits                                             $30,246   $27,168
  Nonvested benefits                                              740       652
                                                              -------   -------
Accumulated benefit obligation                                 30,986    27,820
Effect of projected future
 compensation levels                                            9,360     8,390
                                                              -------   -------
Projected benefit obligation                                   40,346    36,210
Plan assets at fair value, primarily listed
 stocks and bonds, corporate obligations
 and money market and mutual funds                             52,417    45,638
                                                              -------   -------
Plan assets in excess of projected
 benefit obligation                                            12,071     9,428
Unrecognized net gain                                         (12,223)   (8,964)
Unrecognized prior service cost                                    81        98
Unrecognized net asset at transition
 being recognized over 16 years                                  (723)     (924)
                                                              -------   -------
Accrued pension cost recognized
 in the Consolidated Balance Sheets                           $  (794)  $  (362)
                                                              =======   =======


     Actuarial assumptions used in determining the benefit obligation at
December 31 were:




- ---------------------------------------------------
                                1997   1996   1995
- ---------------------------------------------------
                                     
Weighted average discount rate  7.75%  8.00%  7.75%
Rate of increase in future
 compensation levels              (1)    (1)    (1)
Long-term rate of return        9.25   9.00   9.00


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

   The Corporation also maintains unfunded supplemental benefit plans, which are
nonqualified plans providing certain officers with defined pension benefits in
excess of limits imposed by Federal tax law.  At December 31, 1997, the 
projected benefit obligation for these plans totaled $3.0 million, of which
$575,000 was subject to later amortization. The remaining $2.4 million is
included in other liabilities in the accompanying Consolidated Balance Sheets. 
At December 31, 1996, the projected benefit obligation for these plans totaled
$2.6 million of which $761,000 was subject to later amortization.  The remaining
$1.8 million is included in other liabilities in the accompanying Consolidated
Balance Sheets.

DEFINED CONTRIBUTION PLANS
The Corporation maintains a defined contribution 401(k) savings plan
("Corporate 401(k) Plan") covering substantially all full-time employees.
Under the plan, employee contributions are partially matched by the
Corporation. The employer matching contribution is 75 percent of the first 6%
(100 percent of the first 3% plus 50 percent of the next 3%) of each eligible
employee's qualifying salary contributed to the plan.  In addition, one third
of these matching contributions are used to fund a postretirement medical
savings account established within the plan for each contributing employee.

   Effective July 1, 1997, the Corporation merged the defined contribution
401(k) savings plan of CB Financial Corporation, the "merged bank" into the
Corporate 401(k) Plan.  The plan of the merged bank featured a company matching
contribution of 25% of the first 6% of each eligible employee's qualifying
salary contributed to the plan.
   The merged bank also maintained a defined contribution retirement plan
covering substantially all its full-time employees.  Under this plan, the
company contributed 8% of the qualifying salary for each eligible employee.
This plan was terminated, effective June 30, 1997, by the merged bank.  Plan
assets of $3.2 million at December 31, 1997 will be distributed to eligible
employees pending IRS approval.  The contribution for the defined contribution
retirement plan amounted to $335,000 in 1997, $594,000 in 1996, and $706,000 in
1995.

     NOTE 12. POSTRETIREMENT BENEFIT PLAN

     The Corporation maintains an unfunded postretirement defined benefit plan
offering medical and life insurance benefits.  This plan provides
postretirement medical benefits at its Michigan subsidiary to full-time
employees  who retire at normal retirement age, have attained age 50 prior to
January 1, 1993 and have at least 15 years of credited service under the
Corporation's defined benefit pension plan.  This plan is subject to a vesting
schedule, is contributory and contains other cost-sharing features such as
deductibles and coinsurance.  Retirees not meeting the above eligibility
requirements may participate in the medical benefit provided by the plan, as
amended, at their own cost.  Those retired prior to January 1, 1993 receive
benefits provided by the plan prior to its amendment.  That plan includes
dental care, has some contribution requirements, and has less restrictive
eligibility requirements.  Under either plan, life insurance is provided to all
retirees on a reducing basis for 5 years.
     In addition, the merged bank maintained an unfunded postretirement defined
benefit plan providing subsidized health care to full-time employees hired
before April 1, 1993 who retire at normal retirement age with at least 10 years
of credited service or at age 60 with at least 18 years of credited service.
The Corporation maintains this plan to provide postretirement benefits to
retirees and eligible active employees of the merged bank.  In December 1997,
eligibility requirements for current employees were modified, effective January
1, 1998, to conform with the Corporations' other postretirement plan, as
amended.  This resulted in a curtailment gain of $272,000 which was recognized
through a reduction in 


                                   Page 31


   63
the plans previously unrecognized net deferred loss.
     The following table presents the unfunded status of the plans reconciled
with amounts recognized in the Corporation's Consolidated Balance Sheets at
December 31:




- --------------------------------------------------------------------------------
(in thousands)                                                1997       1996
- --------------------------------------------------------------------------------
                                                                 
Accumulated postretirement
 benefit obligation:
  Retirees                                                  $(13,011)  $(12,367)
  Fully eligible plan participants                               (37)        (5)
  Other active plan participants                                (465)      (535)
                                                            --------   --------
Total unfunded obligation                                    (13,513)   (12,907)
Unrecognized net gain                                         (1,825)    (2,631)
Unrecognized prior service cost                               (1,154)    (1,592)
                                                            --------   --------
Accrued postretirement benefit cost                         $(16,492)  $(17,130)
                                                            ========   ========


     Net periodic postretirement benefit cost includes the following
components:




- --------------------------------------------------------------------------------
                                                      Year Ended December 31,
(in thousands)                                        1997      1996      1995
- --------------------------------------------------------------------------------
                                                               
Service cost                                          $  40     $  32     $ 647
Interest cost                                           995       984       973
Net amortization and deferral                          (565)     (553)     (626)
                                                    -------   -------   -------
Net periodic postretirement benefit cost              $ 470     $ 463     $ 994
                                                    =======   =======   =======


     The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation is 7.75% at December 31, 1997 and was 8.00%
(7.50% for the merged bank plan) at December 31, 1996.  The weighted-average
annual assumed rate of increase in the per capita cost of covered benefits
(i.e., health care cost trend rate) is 7% for 1998 (8% for 1997) and is assumed
to decrease 1% annually to 5% by the year 2000 and remain at that level
thereafter.  Prior to 1997, the merged bank plan health care cost trend rate
(9.9% at December 31, 1996) was assumed to decrease 0.7% annually to 5% by the
year 2004 and remain at that level thereafter.  The health care cost trend rate
assumption has a significant effect on the amounts reported.  For example,
increasing the assumed health care cost trend rates by one percent in each year
would increase the accumulated postretirement benefit obligation as of December
31, 1997 and 1996 by $1.2 and $1.1 million, respectively, and the aggregate of
the service and interest cost components of net periodic postretirement benefit
cost for 1997 by $95,000.




     NOTE 13. INCOME TAXES

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.  Significant components
of the Corporation's deferred tax assets and liabilities as of December 31,
1997 and 1996 follow:




- --------------------------------------------------------------------------------
(in thousands)                                                   1997     1996
- --------------------------------------------------------------------------------
                                                                   
Deferred tax assets:
 Allowance for loan losses                                      $16,069  $14,696
 Accrued postemployment
  benefits other than pensions                                    5,772    6,031
 Accrued restructuring charge                                     1,713      ---
 Other deferred tax assets                                        5,702    5,372
                                                                -------  -------
    Total deferred tax assets                                    29,256   26,099
                                                                -------  -------
Deferred tax liabilities:
 Acquisition premium on loans                                     4,222    2,996
 Tax over book depreciation                                       1,783    2,593
 Net unrealized gains on
  securities                                                      2,079      137
 Other deferred tax liabilities                                   1,682    3,956
                                                                -------  -------
    Total deferred tax liabilities                                9,766    9,682
                                                                -------  -------
    Net deferred tax assets                                     $19,490  $16,417
                                                                =======  =======


     Income tax expense (benefit) consists of the following:




- -------------------------------------------------
                       Year Ended December 31,
(in thousands)         1997      1996      1995
- -------------------------------------------------
                                
Currently payable    $19,255   $19,433   $15,564
Deferred tax credit   (4,714)   (2,391)     (607)
                     -------   -------   -------
 Total income tax
 expense             $14,541   $17,042   $14,957
                     =======   =======   =======


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


<Capion>
- --------------------------------------------------------------------------------
                                                      Year Ended December 31,
(in thousands)                                        1997      1996      1995
- --------------------------------------------------------------------------------
                                                               
Tax at Federal statutory rate
 applied to income before
 income taxes                                       $16,117   $20,813   $18,609
Increase (decrease) in taxes
 resulting from:
  Tax-exempt interest                                (3,534)   (3,887)   (4,024)
  Other                                               1,958       116       372
                                                    -------   -------   -------
  Total income tax
    expense                                         $14,541   $17,042   $14,957
                                                    =======   =======   =======



                                   Page 32


   64
     NOTE 14. EARNINGS PER SHARE

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





- --------------------------------------------------------------------------------
                                                   Year Ended December 31,
(in thousands)                                  1997         1996        1995
- --------------------------------------------------------------------------------
                                                             
Numerator:
  Numerator for basic and dilutive earnings
  per share -- net income available to
  common shareholders                            $31,508     $42,425     $38,211
Denominator:
  Denominator for basic earnings per share
  -- weighted average shares                      27,879      27,845      27,575
  Effect of dilutive securities -- potential
  conversion of employee stock options               541         414         549
                                             -----------  ----------  ----------
Denominator:
  Denominator for diluted earnings per share
    -- adjusted weighted-average shares and
    assumed conversions                           28,420      28,259      28,124
                                             ===========  ==========  ==========
    Basic earnings per share                     $  1.13     $  1.52     $  1.39
                                             ===========  ==========  ==========
    Diluted earnings per share                   $  1.11     $  1.50     $  1.36
                                             ===========  ==========  ==========


At year end 1997, all outstanding employee stock options were dilutive.  For
additional disclosures regarding the employee stock options see Note 15.

     NOTE 15. SHAREHOLDERS' EQUITY

     In October 1997, the Corporation declared a three-for-two stock split
effected in the form of a dividend paid November 18, 1997 to shareholders of
record on October 27, 1997.  All share and per share amounts have been restated
to give effect to the split.

SHAREHOLDERS' RIGHTS PLAN
The Corporation's Shareholders' Rights Plan is designed to provide certain
assurances that all shareholders are treated fairly in connection with certain
types of business transactions involving an attempt to acquire controlling
interest in the Corporation.  Under the plan, one right attaches to each
outstanding share of common stock and represents the right to purchase from the
Corporation 1/100th of a share of a new series of preferred stock at the
initial exercise price of $25.00 per 1/100th of a share.  The rights become
exercisable only if a person or group without Board approval announces an
intention to acquire 15% or more of the Corporation's outstanding common stock
or makes a tender offer for that amount of stock.  Upon the occurrence of such
an event, the right "flips in" and becomes the right to purchase one share of
common stock of the Corporation or the surviving company at 50% of the market
price.  These rights are redeemable by the Board for 1/3 of $0.01 per right and
expire July 20, 2000.  The rights will cause substantial dilution to a person
or entity attempting to acquire the Corporation without conditioning the offer
on the rights being redeemed by the Board.

STOCK REPURCHASE PLAN
The Corporation initiated a stock repurchase program in November 1987.  This
program, which was expanded several times, allowed for the repurchase of
2,400,000 shares.   Effective January 27, 1997, the Corporation's stock
repurchase plan was formally rescinded by its Board of Directors in conjunction
with the agreement to acquire CB Financial Corporation.  A total of 1,891,455
shares were repurchased under the program at an average price of $10.56 per
share.  Shares of common stock in treasury have been accorded the treatment as
if retired.  All shares were reissued in connection with the July 1, 1997
merger.

STOCK OPTION PLAN

     The Corporation's stock option plan, as amended and restated in April 1997,
authorizes the granting of incentive and nonqualified stock options, tandem     
preciation rights, restricted stock and performance share grants to key
employees.  Aggregate grants under the plan may not exceed 3,000,000 shares
within any six year period and are limited annually to 3% of the Corporation's
outstanding common stock as of the first day of the year, plus any unused shares
that first become available for grants in the prior year.  Stock options
outstanding under the plan were granted at a price not less than the fair market
value of the shares on the date of grant.
     Replacement options may be granted upon exercise of a nonqualified stock
option by payment of the exercise price with shares of the Corporation's common
stock.  A replacement option provides the employee with a new option to
purchase the number of shares surrendered at an option price equal to the fair
market value of the Corporation's common stock on the date the underlying
nonqualified stock option is exercised.  During 1997, 1996 and 1995, 167,705,
215,397, and 253,391 shares, respectively, were surrendered by employees for
payment to the Corporation for stock option exercises for which an equal number
of replacement options were granted.
     Options may be granted until January 16, 2002.  The options terminate ten
years from the date of grant and are exercisable beginning six months from the
date of grant or for certain options, granted since April 1992, are exercisable
subject to a predetermined option vesting schedule based on achievement of
certain return on average asset targets.  As of 


                                   Page 33




   65
December 31, 1997, 334,452 options were not exercisable subject to future
achievement of the performance targets.  Canceled or expired options become
available for future grants.
     The Corporation has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options as permitted by
Financial Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation."  Under APB 25, no compensation expense is recognized
by the Corporation because the exercise price of the stock options equals the
market price of the underlying stock on the date of grant.  Although Statement
123 requires certain proforma disclosures regarding net income and earnings per
share, the effect of applying the fair value method of Statement 123 to the
Corporation's stock option awards results in net income and earnings per share
that are not materially different from amounts reported.


     A summary of stock option transactions under the plan for 1997, 1996 and
1995 follows:




- -----------------------------------------------------------------
                          Options               Option Price
                   ----------------------  ----------------------
                   Available                 Per Share
                   for Grant  Outstanding      Range      Average
- -----------------------------------------------------------------
                                              
January 1, 1995     971,202    1,689,983   $6.583-18.167   $11.09
 Authorized         206,195          ---             ---      ---
 Granted           (582,341)     582,341   17.333-20.452    18.15
 Exercised              ---     (561,719)   6.583-17.583    11.79
 Canceled             8,295       (8,295)  14.420-17.333    17.06
                   --------   ----------   -------------  -------
December 31, 1995   603,351    1,702,310    6.583-20.542    13.24
 Authorized         275,700          ---             ---      ---
 Granted           (523,047)     523,047   18.792-20.583    19.64
 Exercised              ---     (417,297)   6.583-20.542    13.86
 Canceled             8,955       (8,955)  17.333-19.583    17.71
                   --------   ----------   -------------  -------
December 31, 1996   364,959    1,799,105    6.583-20.583    14.93
 Authorized         251,401          ---             ---      ---
 Granted           (558,005)     558,005   20.750-22.000    21.73
 Exercised              ---     (477,055)   6.583-20.583    14.91
 Canceled            13,938      (13,938)  17.333-19.583    18.70
                   --------   ----------   -------------  -------
December 31, 1997    72,293    1,866,117    6.583-22.000    16.95
- -----------------  ========   ==========   


     The following table summarizes information on stock options outstanding at
December 31, 1997:




- ----------------------------------------------------------------------------------------------------------
                                  Options Outstanding                           Options Exercisable
                -------------------------------------------------------  ---------------------------------
                             Weighted-Average      Weighted-Average                   Weighted-Average
    Range       Outstanding  Remaining Life        Exercise Price        Exercisable  Exercise Price
- ----------------------------------------------------------------------------------------------------------
                                                                       
 $6.583-11.770      473,856              2.6years                $ 8.45      473,856                $ 8.45
 14.420-22.000    1,392,261              7.3                      19.84    1,057,809                 19.59
                -----------                                              -----------                                 
  6.583-22.000    1,866,117              6.1                      16.95    1,531,665                 16.15
                ===========                                              ===========                         


     NOTE 16. COMMITMENTS AND CONTINGENT LIABILITIES

     The Consolidated Financial Statements do not reflect various loan
commitments (unfunded loans and unused lines of credit) and letters of credit
originated in the normal course of business.  Loan commitments are made to
accommodate the financial needs of clients.  Generally, new loan commitments do
not extend beyond 90 days and unused lines of credit are reviewed at least
annually.  Letters of credit guarantee future payment of client financial
obligations to third parties.  They are issued primarily for services provided
or to facilitate the shipment of goods, and generally expire within one year.


                                   Page 34


   66
     Both arrangements have essentially the same level of credit risk as that
associated with extending loans to clients and are subject to the Corporation's
normal credit policies.  Inasmuch as these arrangements generally have fixed
expiration dates or other termination clauses, most expire unfunded and do not
necessarily represent future liquidity requirements.  Collateral is obtained
based on management's assessment of the client and may include receivables,
inventories, real property and equipment.
     Amounts available to clients under loan commitments and letters of credit
follow:




- --------------------------------------------------------------------------------
                                                               December 31,
                                                          ----------------------
(in thousands)                                               1997        1996
- --------------------------------------------------------------------------------
                                                                
Loan commitments:

 Commercial                                               $  746,926  $  708,719
 Real estate construction                                     32,883      33,718
 Real estate mortgage                                         25,023      24,794
 Credit card and home equity
    credit lines                                             356,535     316,785
 Other consumer                                               21,333      20,751
                                                          ----------  ----------
    Total                                                 $1,182,700  $1,104,767
                                                          ==========  ==========
Standby letters of credit                                 $   32,541  $   27,759
- --------------------------------------------------------------------------------


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

     NOTE 17. FAIR VALUES OF FINANCIAL INSTRUMENTS

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


     The estimated fair values of the Corporation's financial instruments
follow:






- -------------------------------------------------------------------------------------------------
                                                       DECEMBER 31, 1997      December 31, 1996
                                                     ---------------------  ---------------------
                                                     CARRYING   ESTIMATED   Carrying   Estimated
(in thousands)                                        AMOUNT    FAIR VALUE   Amount    Fair Value
- -------------------------------------------------------------------------------------------------
                                                                           
Financial assets:
 Cash and money market investments                   $ 180,573   $ 180,600  $ 200,910   $ 200,900
 Investment securities                                 575,382     575,400    717,058     717,100
 Net loans(1)                                        3,458,024   3,525,600  3,140,470   3,177,300
Financial liabilities:
                                 
 Deposits                                            3,694,346   3,699,200  3,598,751   3,608,100
 Short-term borrowings                                 174,866     174,900    176,805     176,800
 Long-term debt                                        108,165     108,600     86,826      87,000
Off-balance sheet financial instrument liabilities:
 Loan commitments                                          ---       1,614        ---       1,180
 Standby and commercial letters of credit                  ---         173        ---         127
- -------------------------------------------------------------------------------------------------



(1) Excludes lease financing which for purposes of SFAS 107 disclosure is not
considered a financial instrument.



                                   Page 35
   67
     The various methods and assumptions used by the Corporation in estimating
fair value for its financial instruments are set forth below:

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

INVESTMENT SECURITIES (INCLUDING MORTGAGE-BACKED AND ASSET-BACKED SECURITIES)
The carrying amounts reported in the balance sheet for investment securities
approximate those assets' fair values as all investment securities are being
classified in the available-for-sale category.   SFAS 115 requires securities
carried in the available-for-sale category to be carried at fair value.  See
Note 3.  The fair values are based on quoted market prices, where available.
If quoted market prices are not available, fair values are based on quoted 
market prices of comparable instruments.

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

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

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

LONG-TERM DEBT
The carrying value of the Corporation's variable-rate long-term debt
approximates its fair value.  The fair value of its fixed-rate long-term debt
(other than deposits) is estimated using discounted cash flow analyses, based
on the Corporation's current incremental borrowing rates for similar types of
borrowings arrangements.

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

     NOTE 18. REGULATORY MATTERS

     The Federal Reserve Bank requires the Corporation's banking subsidiaries
to maintain certain noninterest-bearing deposits.  These reserve balances vary
depending upon the level of client deposits in the subsidiary banks.  During
1997 and 1996, the average reserve balances were $ 28.8 million and $ 43.0
million, respectively.
     The bank subsidiaries are also subject to limitations under banking laws
on extensions of credit to members of the affiliate group and on dividends that
can be paid to the Corporation.  Generally extensions of credit are limited to
10% to any one affiliate and 20% in aggregate to all affiliates of a subsidiary
bank's capital and surplus (net assets) as defined.  Unless prior regulatory
approval is obtained, dividends declared in any calendar year may not exceed
the retained net profit, as defined, of that year plus the retained net profit
of the preceding two years.  At January 1, 1998, no additional amounts could be
distributed by the bank subsidiaries to the Corporation without regulatory
approval.  Any future earnings will also become 

                                   Page 36

   68
available for such dividends.
     The Corporation and it's banking subsidiaries are subject to various
regulatory capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the financial statements.  Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
specific capital guidelines must be met that involve quantitative measures of
the assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices.  The capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
     Quantitative measures established by regulation to ensure capital adequacy
require the Corporation and it's banking subsidiaries to maintain minimum
amounts and ratios (set forth in the table below) of total and Tier I capital
(as defined in the regulations) to risk-weighted assets (as defined), and of
Tier I capital (as defined) to average assets (as defined).  Management
believes, as of December 31, 1997, that the Corporation and it's banking
subsidiaries meet all capital adequacy requirements to which it is subject.
     As of December 31, 1997, the most recent notification from the Federal
Reserve Board categorized the Corporation and it's banking subsidiaries as well
capitalized under the regulatory framework for prompt corrective action.  To be
categorized as well capitalized the Corporation and it's banking subsidiaries
must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage
ratios as set forth in the table.  There are no conditions or events since that
notification that management believes would result in a change.


     The Corporation and it's significant subsidiary, Citizens Bank, actual
capital amounts and ratios are also presented in the table.




- -----------------------------------------------------------------------------------------------------
                                                                           To Be Well Capitalized
                                               For Capital Adequacy        Under Prompt Corrective
RISK BASED CAPITAL                Actual            Purposes                 Action Provisions
REQUIREMENTS                   --------------  --------------------        --------------------------
(in thousands)                 Amount   Ratio   Amount        Ratio         Amount        Ratio
- -----------------------------------------------------------------------------------------------------
                                                                        
CITIZENS BANKING CORPORATION
AS OF DECEMBER 31, 1997:

 Total Capital(1)             $390,230  11.0%  $283,042        >     8.0%  $353,803        >    10.0%
                                                               -                           -
 Tier I Capital(1)             345,984   9.8    141,521        >     4.0    212,282        >     6.0
                                                               -                           -
 Tier I Leverage(2)            345,984   8.0    173,458        >     4.0    216,823        >     5.0
                                                               -                           -
As of December 31, 1996:
 Total Capital(1)              357,416  11.1    258,887        >     8.0    323,609        >    10.0
                                                               -                           -
 Tier I Capital(1)             318,100   9.8    129,443        >     4.0    194,165        >     6.0
                                                               -                           -
 Tier I Leverage(2)            318,100   7.5    169,181        >     4.0    211,476        >     5.0
                                                               -                           -
CITIZENS BANK
AS OF DECEMBER 31, 1997:
 Total Capital(1)             $388,017  11.7%  $266,192        >     8.0%  $332,740        >    10.0%
                                                               -                           -
 Tier I Capital(1)             346,398  10.4    133,096        >     4.0    199,644        >     6.0
                                                               -                           -
 Tier I Leverage(2)            346,398   8.5    163,783        >     4.0    204,728        >     5.0
                                                               -                           -
As of December 31, 1996:
 Total Capital(1)              356,633  11.9    240,653        >     8.0    300,816        >    10.0
                                                               -                           -
 Tier I Capital(1)             320,161  10.6    120,326        >     4.0    180,490        >     6.0
                                                               -                           -
 Tier I Leverage(2)            320,161   8.1    158,916        >     4.0    198,646        >     5.0
                                                               -                           -
- ----------------------------------------------------------------------------------------------------


(1)  To risk weighted assets.
(2)  To quarterly average assets.

                                   Page 37

   69
     NOTE 19. CITIZENS BANKING CORPORATION (PARENT ONLY) STATEMENTS




- ---------------------------------------------------------------------------------
BALANCE SHEETS
CITIZENS BANKING CORPORATION (PARENT ONLY)                     December 31,
(in thousands)                                             1997            1996
- ---------------------------------------------------------------------------------
                                                                   
ASSETS:
 Cash                                                          $      5  $      5
Interest-bearing deposit with subsidiary bank                     7,000    25,134
 Money market investments                                         1,976     2,043
 Loans - commercial paper                                         2,000    10,000
 Investment securities                                              135        98
Investment in subsidiaries - principally banks                  429,015   411,854
 Goodwill - net                                                   3,449     4,245
 Other assets                                                     3,622     3,515
                                                    -------------------  --------
    TOTAL ASSETS                                               $447,202  $456,894
                                                    ===================  ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
 Long-term debt                                                $ 32,991  $ 59,685
 Other liabilities                                                4,369     5,188
                                                    -------------------  --------
    Total liabilities                                            37,360    64,873
 Shareholders' equity                                           409,842   392,021
                                                    -------------------  --------
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                    $447,202  $456,894
                                                    ===================  ========






STATEMENTS OF INCOME
CITIZENS BANKING CORPORATION (PARENT ONLY)          
- ----------------------------------------------------------------------------------------------
                                                                 Year Ended December 31,
(in thousands)                                               1997          1996          1995
- ----------------------------------------------------------------------------------------------
                                                                               
INCOME                                              
 Dividends from subsidiaries - principally banks           $21,483            $56,487  $27,749
 Interest from bank subsidiary                                 657                794    1,413
 Service fees from bank subsidiaries                         9,467                ---      ---
 Other                                                         254                860    1,605
                                                           -------           --------  -------
    Total                                                   31,861             58,141   30,767
                                                           -------           --------  -------
EXPENSES                                                 
 Interest                                                    2,978              5,594    7,374
 Amortization of goodwill                                      796                796      796
 Salaries and employee benefits                              9,731                867      764
 Service fees paid to subsidiaries                           1,339              1,265    1,054
 Other noninterest expense                                   1,723              1,078      949
                                                           -------           --------  -------
    Total                                                   16,567              9,600   10,937

Income before income taxes and equity in
 undistributed earnings of subsidiaries                     15,294             48,541   19,830
Income tax benefit                                           2,662              3,257    3,195
Equity in undistributed (dividends in excess of) 
  earnings of subsidiaries - principally banks              13,552             (9,373)  15,186
                                                           -------             ------  -------
NET INCOME                                                 $31,508            $42,425  $38,211
                                                           =======            =======  =======



                                   Page 38

   70


- -------------------------------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
CITIZENS BANKING CORPORATION (PARENT ONLY)
                                                                                  Year Ended December 31,
(in thousands)                                                              1997        1996          1995
- -------------------------------------------------------------------------------------------------------------
                                                                                         
OPERATING ACTIVITIES
 Net income                                                            $    31,508   $ 42,425     $   38,211
 Adjustments to reconcile net income to net cash                        
 provided by operating activities:                                      
 Amortization of goodwill                                                      796        796            796
 Dividends in excess of (equity in undistributed) earnings of           
   subsidiaries                                                            (13,552)     9,373        (15,186)
 Other                                                                        (945)     1,244           (967)
                                                                      ------------    -------    -----------
     Net cash provided by operating activities                              17,807     53,838         22,854
                                                                      ------------   --------    -----------
INVESTING ACTIVITIES                                                    
 Net (increase) decrease in interest-bearing deposit at                 
  subsidiary bank                                                           18,134      4,866        (30,000)
                                                                        
 Net (increase) decrease in money market investments                            67     12,501            (33)
 Purchases of investment securities                                            ---         (8)           ---
 Proceeds from sales and maturities of investment securities                    10        136          5,146
 Net (increase) decrease in loans                                            8,000    (10,000)         5,000
 Capital contribution to subsidiary                                           ---        ---         (85,000)
                                                                      ------------   --------   ------------
     Net cash provided (used) by investing activities                       26,211      7,495       (104,887)
                                                                      ------------   --------   ------------
FINANCING ACTIVITIES                                                               
 Proceeds from issuance of long-term debt                                      ---        ---        115,000
 Principal reductions in long-term debt                                    (26,694)   (41,194)       (19,072)
 Cash dividends paid                                                       (19,286)   (17,890)       (16,131)
 Proceeds from stock options exercised                                       1,962      1,523          2,237
 Shares acquired for retirement                                               ---     (3,772)            ---
                                                                      ------------   --------   ------------

     Net cash provided (used) by financing activities                      (44,018)   (61,333)        82,034
                                                                      ------------   --------   ------------
Net increase in cash                                                          ---         ---              1
Cash at beginning of year                                                        5          5              4
                                                                      ------------   --------   ------------
Cash at end of year                                                   $          5   $      5   $          5
                                                                      ============   ========   ============
                                                                 

                                   Page 39

   71
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

BOARD OF DIRECTORS CITIZENS BANKING CORPORATION

We have audited the accompanying consolidated balance sheet of Citizens Banking
Corporation and subsidiaries as of December 31, 1997 and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for the year ended December 31, 1997.  These financial statements are the
responsibility of the Corporation's management.  Our responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Citizens Banking
Corporation and subsidiaries at December 31, 1997 and the consolidated results
of their operations and their cash flows for the year ended December 31, 1997,
in conformity with generally accepted accounting principles.

We previously audited and reported on the consolidated balance sheet at
December 31, 1996 and the related consolidated statements of income, changes in
shareholders' equity, and cash flows of Citizens Banking Corporation and
subsidiaries for the each of the two years in the period ended December 31,
1996 prior to their restatement for the 1997 pooling of interests as described
in Note 2.  The contribution of Citizens Banking Corporation to total assets,
revenues, and net income represented 81%, 82%,  and 88% of the 1996 restated
totals.  Financial statements of the other pooled company included in the 1996
and 1995 restated consolidated statements were audited and reported on
separately by other auditors.  We also have audited, as to combination only,
the accompanying consolidated balance sheet as of December 31, 1996 and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the two years in the period ended December 31, 1996,
after restatement for the 1997 pooling of interests;  in our opinion, such
consolidated financial statements have been properly combined on the basis
described in Note 2 to the consolidated financial statements.


/s/ ERNST & YOUNG LLP


Detroit, Michigan
January 15, 1998

     
                                   Page 40
   72


     REPORT OF MANAGEMENT



MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

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

SYSTEM OF INTERNAL CONTROLS

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

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

AUDIT COMMITTEE OF THE BOARD

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

INDEPENDENT AUDITORS

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




JOHN W. ENNEST                           ROBERT J. VITITO

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



                                   Page 41

   73





                                 (FRONT OF CARD)

                          CITIZENS BANKING CORPORATION
                                FLINT, MICHIGAN


                        PROXY BY THE BOARD OF DIRECTORS
            FOR THE ANNUAL MEETING OF SHAREHOLDERS - APRIL 21, 1998

   
  The undersigned shareholder of Citizens Banking Corporation (the
"Corporation") hereby appoints Victor E. George and Edward P. Abbott or either
of them, my proxies or proxy, with full power of substitution to vote all
shares of stock of the Corporation that the undersigned would be entitled to
vote at the annual meeting of shareholders of the Corporation to be held in the
Michigan Rooms, located in the Harding Mott University Center at the University
or Michigan-Flint, Flint, Michigan, on Tuesday April 21, 1998, at 10:00 a.m. 
local time, and at any adjournments thereof, and upon the matters referred to 
on the reverse side of this proxy, all of which are being proposed by the 
Corporation, and in their discretion, upon such other matters as may properly 
come before the meeting including the election of any person to the Board of 
Directors where a nominee named in the Proxy Statement dated March 16, 1998 is 
unable to serve or, for good cause, will not serve.  THIS PROXY WHEN PROPERLY 
EXECUTED WILL BE VOTED IN THE MANNER DIRECTED.  IF NO DIRECTION IS MADE, THIS 
PROXY WILL BE VOTED FOR EACH NOMINEE NAMED AND FOR THE PROPOSAL LISTED ON THE 
REVERSE SIDE OF THIS PROXY.
    

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

  The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement dated March 16, 1998 and ratifies all that
the proxies or either of them or their substitutes may lawfully do or cause to
be done by virtue hereof and revokes all former proxies.
   74

                                 (BACK OF CARD)

                                                          Please mark
                                                          your votes as
                                                          indicated in   [x]
                                                          this example


1.  ELECTION OF DIRECTORS         THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
                                  EACH OF THE NOMINEES LISTED.

   For all nominees   Withhold    Class III (three year term): Stephen J. 
   listed (except as  Authority   Lazaroff, William F. Nelson Jr., William C. 
   marked to the      as to all   Shedd, James E. Truesdell Jr., Charles R. 
   contrary)          nominees    Weeks and Kendall B. Williams.
                      listed      TO WITHHOLD AUTHORITY TO VOTE FOR ANY 
                                  NOMINEE, DRAW A LINE THROUGH THE NOMINEE'S 
                                  NAME.
     [ ]                [ ]


2.  Proposal to amend Article III of the Corporation's Restated Articles of
    Incorporation to increase the total authorized common shares from
    40,000,000 shares without par value to 100,000,000 shares without par
    value.

                        FOR      AGAINST      ABSTAIN

                        [ ]        [ ]          [ ]

Please sign exactly as name appears hereon.  When shares are held by joint
tenants, both should sign.  When signing as Attorney, Executor, Personal
Representative, Administrator, Trustee or Guardian, please give full title as
such.  If signing on behalf of a corporation please sign in full corporate name
by President or other authorized officer.  If signing on behalf of a
partnership, please sign in partnership name by authorized person.

                                 Dated: _________________________________, 1998.

                                 _______________________________________________
                                                    Signature                   

                                 _______________________________________________
                                              Signature if held jointly