FLINT, Mich., Oct. 19 /PRNewswire-FirstCall/ -- Citizens Banking
Corporation (NASDAQ:CBCF) announced net income of $21.0 million for
the three months ended September 30, 2006. This represents an
increase of $0.1 million or 0.4% over the second quarter of 2006
net income of $20.9 million and consistent with the third quarter
of 2005 net income of $21.0 million. Diluted net income per share
was $0.49, consistent with $0.49 for the second quarter of 2006,
and an increase of 1.7% over the $0.48 for the same quarter of last
year. Annualized returns on average assets and average equity
during the third quarter of 2006 were 1.08% and 12.63%,
respectively, compared with 1.09% and 12.96% for the second quarter
of 2006 and 1.06% and 12.71% for the third quarter of 2005. Net
income for the first nine months of 2006 totaled $62.6 million or
$1.46 per diluted share, which represents an increase in net income
of $1.0 million or 1.6% and $0.05 or 3.5% per diluted share over
the same period of 2005. "We are satisfied with this quarter's
results in view of the Midwestern economy and the challenging
banking environment," stated William R. Hartman, chairman,
president and CEO. "We are continuing to grow our commercial loans
and the initiatives we implemented in our branches are resulting in
a slower migration of low-cost deposits to higher-cost products. As
a result, the third quarter of 2006 was the first quarter of
average core deposit growth in six quarters," continued Hartman.
Key Highlights in the Quarter: * Average commercial and commercial
real estate loans for the third quarter of 2006 increased $67.3
million or 2.2% over the average for the second quarter of 2006 and
increased $223.2 million or 7.5% over the average for the third
quarter of 2005. Citizens achieved the seventh consecutive quarter
of growth for these portfolios as a result of strong origination
volume in the Wisconsin and Southeast Michigan markets. * Average
core deposits for the third quarter of 2006 increased $16.2 million
or 0.5% over the second quarter of 2006 as the migration to higher
yield deposit accounts slowed. * Expense management initiatives
introduced in the fourth quarter of 2004 continue to offset
increased expenses relating to growth initiatives in Southeast
Michigan and Wisconsin. Noninterest expense totaled $59.4 million
for the third quarter of 2006, a decrease of $0.7 million or 1.1%
from the second quarter of 2006 and $1.1 million or 1.9% from the
third quarter of 2005. This represents the lowest quarter of
operating expenses since the second quarter of 2003. * Net
charge-offs increased to $2.7 million or 0.19% of average portfolio
loans from the second quarter of 2006 level of $2.0 million or
0.14% of average portfolio loans. The increase was the result of
the seasonally low levels of indirect consumer charge-offs in the
second quarter of 2006 and lower commercial recoveries this
quarter. The provision for loan losses was $1.2 million for the
third quarter of 2006. * Nonperforming assets at September 30, 2006
totaled $40.0 million, an increase from $34.8 million at June 30,
2006, which represented the lowest level in four years. The ratio
of nonperforming assets to portfolio loans plus other assets
acquired increased to 0.69% from 0.61% at June 30, 2006. The
increase reflects higher nonperforming real estate-related credits
in the commercial, consumer and residential mortgage loan
portfolios, as well as higher repossessed assets and nonperforming
small business loans. * On September 29, 2006, Citizens announced
that Citizens Funding Trust I (the "Trust") priced an offering of
$150.0 million aggregate liquidation amount of enhanced trust
preferred securities, with distributions payable quarterly in
arrears at an annual rate of 7.50%. The sale of the securities was
completed on October 3, 2006. The proceeds from the offering will
be used to finance the cash portion of the consideration to be paid
in the merger with Republic Bancorp ("Republic") and for general
corporate purposes. * Integration teams for the pending merger with
Republic have been formed and meet on a regular basis to prepare
for the post-merger integration. The teams, comprised of both
Citizens and Republic staff members, have made and will continue to
make recommendations to the merger executive committee regarding
strategic direction, process design, and best practices to be
implemented at the combined company following the completion of the
merger. Balance Sheet Citizens' total assets at September 30, 2006
were $7.7 billion, a decrease of $65.6 million or 0.8% compared
with June 30, 2006 and a decrease of $102.8 million or 1.3% from
September 30, 2005. Total portfolio loans increased $25.3 million
or 0.4% over June 30, 2006 and $184.1 million or 3.3% over
September 30, 2005. The increases in total portfolio loans were
partially offset by declines in the investment portfolio as a
result of using portfolio cash flow to reduce short-term borrowings
and declines in the direct consumer loan portfolio due to weak
consumer demand in most of Citizens' markets. Commercial and
commercial real estate loans at September 30, 2006 increased $24.4
million or 0.8% from June 30, 2006 to $3.3 billion and increased
$256.9 million or 8.6% compared with September 30, 2005. These
improvements were a result of new relationships in traditional
Michigan and Wisconsin markets and continued strong growth in the
Southeast Michigan market. Residential mortgage loans at September
30, 2006 were $545.2 million, a decrease of $5.9 million or 1.1%
from June 30, 2006 and an increase of $13.2 million or 2.5% over
September 30, 2005. The decrease from June 30, 2006 was the result
of the new alliance with PHH Mortgage implemented in June 2006. As
a result, Citizens now sells substantially all of its origination
volume to PHH Mortgage. The increase over September 30, 2005 was
primarily the result of retaining most new adjustable-rate mortgage
(ARM) production prior to establishing the PHH Mortgage alliance.
Total consumer loans, which are comprised of direct and indirect
loans, were $2.0 billion at September 30, 2006, an increase of $6.8
million or 0.3% from June 30, 2006 and a decrease of $86.1 million
or 4.2% from September 30, 2005. Direct consumer loans, which
include direct installment, home equity, and other consumer loans,
declined by $8.4 million or 0.8% from June 30, 2006 and decreased
$80.6 million or 6.9% from September 30, 2005. The declines were
due to a decrease in historically strong activity where consumers
repay their installment loans using home equity loans and weaker
consumer demand in Citizens' markets. Indirect consumer loans,
which are primarily marine and recreational vehicle loans,
increased $15.2 million or 1.8% from June 30, 2006 as a result of
an increase in seasonal interest for indirect products and were
essentially unchanged from September 30, 2005. Total deposits at
September 30, 2006 decreased $59.2 million or 1.0% from June 30,
2006 to $5.6 billion and increased $398.9 million or 7.6% from
September 30, 2005. Core deposits, which exclude all time deposits,
totaled $3.1 billion at September 30, 2006, a decrease of $135.9
million or 4.2% from June 30, 2006 and a decrease of $247.5 million
or 7.4% from September 30, 2005. The decreases in core deposits
were largely the result of clients migrating from lower cost
savings and transaction accounts into time deposits with higher
yields. Time deposits totaled $2.5 billion at September 30, 2006,
an increase of $76.7 million or 3.1% compared with June 30, 2006
and an increase of $646.3 million or 34.4% over September 30, 2005.
The increases were largely the result of clients migrating their
funds from lower-cost deposits and some new client growth.
Additionally, the increase in time deposits from September 30, 2005
was partially due to an additional $86.6 million in brokered
certificates of deposit, which is one of many wholesale funding
alternatives used by Citizens. Other interest-bearing liabilities,
which include federal funds purchased and securities sold under
agreements to repurchase, other short-term borrowings, and
long-term debt, were $1.4 billion at September 30, 2006, a decrease
of $25.7 million or 1.8% from June 30, 2006 and a decrease of
$511.3 million or 27.1% from September 30, 2005. The decrease was
the result of Citizens' response to the aforementioned loan and
deposit changes as well as the pay down of $104.0 million of
short-term borrowings in the fourth quarter of 2005. Net Interest
Margin and Net Interest Income Net interest margin was 3.78% for
the third quarter of 2006 compared with 3.84% for the second
quarter of 2006 and 3.93% for the third quarter of 2005. The
decreases were due to funds migrating within the deposit portfolio
from lower cost savings and transaction accounts to higher cost
savings and time deposits, continued pricing pressure on loans, and
the continued effects of the interest rate environment. The
decrease in net interest margin compared with the third quarter of
2005 was partially offset by the restructuring of the investment
portfolio and short-term borrowing pay down in the fourth quarter
of 2005 and a shift in asset mix from investment securities to
higher yielding commercial loans. For the nine months ended
September 30, 2006, net interest margin declined to 3.86% compared
with 3.94% for the same period of 2005 as a result of the
aforementioned factors. Net interest income was $65.6 million in
the third quarter of 2006 compared with $66.0 million in the second
quarter of 2006 and $69.6 million in the third quarter of 2005. The
decrease in net interest income compared with the second quarter of
2006 was driven by the decline in the net interest margin,
partially offset by an increase in average earning assets of $38.3
million as growth in the commercial, commercial real estate, and
indirect consumer loan portfolios was partially offset by a decline
in investment portfolio balances. The decrease in net interest
income compared with the third quarter of 2005 resulted from the
decline in the net interest margin and lower average earning assets
of $106.9 million. The decline in average earning assets resulted
from a $244.7 million reduction in the investment portfolio and an
$84.8 million decrease in the mortgage loans held for sale,
residential mortgage, and total consumer loan portfolios, partially
offset by growth of $223.2 million in the commercial and commercial
real estate loan portfolios. The decrease in the investment
portfolio was the result of the fourth quarter of 2005
restructuring and maturing balances not being fully reinvested. For
the nine months ended September 30, 2006, net interest income
totaled $199.1 million, compared with $206.7 million for the same
period of 2005. The decrease was due to the lower net interest
margin and a decrease in average earning assets of $104.7 million.
The decline in average earning assets resulted from a $241.5
million reduction in the investment portfolio and a $45.7 million
decrease in the mortgage loans held for sale, residential mortgage,
and total consumer loan portfolios, partially offset by growth of
$183.4 million in the commercial and commercial real estate loan
portfolios. The decrease in the investment portfolio was the result
of the fourth quarter of 2005 restructuring and maturing balances
not being fully reinvested. Excluding the interest expense related
to the $150.0 million of enhanced trust preferred securities issued
on October 3, 2006, Citizens anticipates net interest income for
the fourth quarter of 2006 will be slightly lower than the third
quarter of 2006 due to anticipated margin compression driven by the
continuation of customers migrating funds from lower yielding
deposit products into higher yielding deposit products. Credit
Quality Nonperforming assets totaled $40.0 million at September 30,
2006, an increase of $5.3 million or 15.1% compared with $34.8
million at June 30, 2006, which represented the lowest level in
four years, and a decrease of $2.6 million or 6.1% compared with
September 30, 2005. Nonperforming assets at September 30, 2006
represented 0.69% of total loans plus other repossessed assets
acquired compared with 0.61% at June 30, 2006 and 0.76% at
September 30, 2005. The increase from June 30, 2006 reflects higher
nonperforming real estate related credits in the commercial,
consumer and residential mortgage loan portfolios, as well as
higher repossessed assets and nonperforming small business loans.
The decrease from the third quarter of 2005 included the effects of
the third quarter of 2005 and second quarter of 2006 sales of
nonperforming commercial loans with aggregate balances of $6.7
million and $4.5 million, respectively. Nonperforming commercial
loan inflows decreased to $7.5 million in the third quarter of
2006, the lowest level in over four years. Nonperforming commercial
loan outflows decreased to $5.0 million for the third quarter of
2006 compared with $13.9 million in the second quarter of 2006 and
$17.3 million in the third quarter of 2005. The decrease from the
second quarter of 2006 included the effects of a second quarter of
2006 nonperforming commercial loan sale with balances of $4.5
million. Net charge-offs increased to $2.7 million or 0.19% of
average portfolio loans in the third quarter of 2006 compared with
$2.0 million or 0.14% of average portfolio loans in the second
quarter of 2006 and $5.3 million or 0.38% of average portfolio
loans in the third quarter of 2005. The increase from the second
quarter of 2006 was primarily due to the seasonally low levels of
indirect consumer charge-offs in the second quarter of 2006 and
lower commercial recoveries this quarter. The decrease from the
third quarter of 2005 was due to lower net charge-offs in all loan
portfolios except residential mortgage. The provision for loan
losses was $1.2 million in the third quarter of 2006 compared with
$1.1 million in the second quarter of 2006 and $4.0 million in the
third quarter of 2005. The decrease from the third quarter of 2005
reflected the lower overall risk profile of portfolio loans. As a
result of the net effect of higher loan portfolio balances as well
as changes in net charge-offs and the provision for loan losses,
the allowance for loan losses totaled $113.1 million or 1.97% of
portfolio loans at September 30, 2006. The allowance for loan
losses decreased by $1.5 million and $5.6 million from June 30,
2006 and September 30, 2005, respectively. Based on seasonal
business trends and the overall risk in the loan portfolio,
Citizens anticipates net charge-offs for the fourth quarter of 2006
will be slightly higher than the third quarter of 2006. Citizens
anticipates provision expense for the fourth quarter of 2006 will
be consistent with the third quarter of 2006. Noninterest Income
Noninterest income for the third quarter of 2006 was $23.5 million,
a decrease of $0.2 million or 0.9% from the second quarter of 2006
and a decrease of $0.4 million or 1.7% from the third quarter of
2005. The decrease from the second quarter of 2006 was the result
of lower trust fees and other income, partially offset by increases
in mortgage and other loan income as well as brokerage and
investment fees. The decrease from the third quarter of 2005 was
primarily the result of decreases in mortgage and other loan
income, ATM network user fees, and other income, partially offset
by increases in service charges on deposit accounts and bankcard
fees. For the first nine months of 2006, noninterest income totaled
$72.9 million, an increase of $3.3 million or 4.8% over the same
period of 2005. The increase was primarily the result of higher
service charges on deposit accounts, trust fees, bankcard fees and
fully recognizing the deferred gain of $2.9 million on the 2004
sale of the former downtown Royal Oak, Michigan office during the
first quarter of 2006, partially offset by decreases in mortgage
and other loan income, brokerage and investment fees, and ATM
network user fees. Service charges on deposit accounts for the
third quarter of 2006 were $9.7 million, an increase of $0.2
million or 1.6% over the second quarter of 2006 and an increase of
$0.3 million or 3.5% over the third quarter of 2005. For the first
nine months of 2006, service charges on deposit accounts totaled
$28.1 million, an increase of $1.6 million or 6.1% over the same
period of 2005. The increases were the result of revenue
enhancement initiatives implemented in the first quarter of 2006.
Trust fees for the third quarter of 2006 were $4.6 million, a
decrease of $0.3 million or 6.8% from the second quarter of 2006
and an increase of $0.1 million or 2.0% over the third quarter of
2005. The decrease from the second quarter of 2006 was the result
of a fee rationalization strategy where Citizens started charging
clients for trust tax preparation services during the second
quarter of 2006. For the first nine months of 2006, trust fees
totaled $14.6 million, an increase of $1.2 million or 8.9% over the
same period of 2005. The increases were attributable to stronger
financial markets, continued execution of the sales management
process and improved pricing discipline, partially offset by
attrition. Total trust assets under administration of $2.6 billion
at September 30, 2006 were essentially unchanged from June 30, 2006
and September 30, 2005. Mortgage and other loan income for the
third quarter of 2006 was $2.3 million, an increase of $0.2 million
or 7.6% over the second quarter of 2006 and a decrease of $0.2
million or 7.5% from the third quarter of 2005. The increase from
the second quarter of 2006 was the result of the new alliance with
PHH Mortgage, where Citizens sells substantially all of its
origination volume to PHH Mortgage. For the first nine months of
2006, mortgage and other loan income totaled $6.4 million, a
decrease of $0.5 million or 7.3% from the same period of 2005. The
decreases reflect the impact of an unfavorable rate environment
since the first quarter of 2005. Brokerage and investment fees for
the third quarter of 2006 were $1.9 million, an increase of $0.2
million or 10.7% over the second quarter of 2006 and a decrease of
$0.1 million or 4.6% from the third quarter of 2005. The increase
from the second quarter of 2006 was the result of momentum from
Citizens' strategy implemented in the first quarter of 2006, which
shifted a large portion of its brokerage fee production from
reliance on referrals from the branch network to its Investment
Center financial consultants. This change supports Citizens'
strategy of growing low-cost deposits, as the financial consultants
increase their focus on attracting funds from new sources outside
of Citizens and the branch network continues to improve on
providing an enhanced client experience. Over 90% of the brokerage
and investment fees recognized in the third quarter of 2006 came
from sources outside of the bank. For the first nine months of
2006, brokerage and investment fees totaled $5.1 million, a
decrease of $0.8 million or 12.9% from the same period of 2005. The
decreases were the result of the transition to the aforementioned
strategy as Citizens' financial consultants adjusted their sales
process to create new opportunities. For the third quarter of 2006,
all other noninterest income categories, which include ATM network
user fees, bankcard fees, fair value change in CD swap derivatives,
other income, and investment securities gains (losses), totaled
$5.1 million, a decrease of $0.4 million or 6.6% from the second
quarter of 2006 and a decrease of $0.5 million or 9.7% from the
third quarter of 2005. The decrease from the second quarter of 2006
was primarily the result of a life insurance policy payout received
in the second quarter of 2006. The decrease from the third quarter
of 2005 was primarily the result of lower ATM network user fees,
lower title insurance fees as a result of lower mortgage
origination volume and closing Citizens' title company in
conjunction with the PHH Mortgage Alliance, and $0.4 million
received in the third quarter of 2005 related to the holding
company's venture capital investment in a limited partnership. For
the first nine months of 2006, all other noninterest income
categories totaled $18.7 million, an increase of $1.8 million or
10.4% over the same period of 2005. The increase was primarily the
result of the aforementioned $2.9 million gain, partially offset by
the effects of three items received in 2005: a performance-related
penalty received from a third party vendor, a preference payment on
Citizens' membership interest in the PULSE ATM network, and income
recognized in conjunction with the aforementioned venture capital
investment by the holding company. Citizens anticipates total
noninterest income for the fourth quarter of 2006 will be
consistent with or slightly higher than the third quarter of 2006
due to anticipated increases in trust income and mortgage and other
loan income. Noninterest Expense Noninterest expense for the third
quarter of 2006 was $59.4 million, a decrease of $0.7 million or
1.1% from the second quarter of 2006 and a decrease of $1.1 million
or 1.9% from the third quarter of 2005. The decrease from the
second quarter of 2006 was the result of lower professional
services, equipment, and other expenses, partially offset by
increases in occupancy, advertising and public relations, and other
loan expenses. The decrease from the third quarter of 2005 resulted
from lower salaries and employee benefits, professional services,
and advertising and public relations, partially offset by increases
in occupancy, data processing, telephone, and other loan expenses.
For the first nine months of 2006, noninterest expense totaled
$181.0 million, a decrease of $1.1 million or 0.6% from the same
period of 2005 as reductions in salaries and employee benefits,
professional services, equipment, and advertising and public
relations were substantially offset by increases in data processing
fees, other loan expenses, and other expenses. Salaries and
employee benefits for the third quarter of 2006 were essentially
unchanged from the second quarter of 2006 at $32.6 million and
decreased $1.5 million or 4.4% from the third quarter of 2005. When
compared with the second quarter of 2006, lower pension expense due
to a reduction in active participants was substantially offset by
an increase in stock-based compensation as a result of the second
quarter of 2005 awards. The decrease from the third quarter of 2005
was the result of lower hospitalization, pension, and employee
post-retirement benefit expenses. Salary costs included $0.3
million in severance for the third quarter of 2006, $0.5 million in
the second quarter of 2006 and $0.4 million in the third quarter of
2005. Citizens had 2,070 full-time equivalent employees at
September 30, 2006, down from 2,107 at June 30, 2006 and down from
2,144 at September 30, 2005. For the first nine months of 2006,
salaries and employee benefits totaled $97.5 million, a decrease of
$2.2 million or 2.3% from the same period in 2005. The decrease was
the result of lower hospitalization, pension, and employee post-
retirement benefit expenses, partially offset by increases in
salary costs due to merit increases awarded in 2006 and higher
stock-based compensation resulting from a 2005 plan enhancement
awarding primarily restricted stock to employees. Occupancy costs
for the third quarter of 2006 increased $0.3 million or 5.9% to
$5.6 million compared with the second quarter of 2006 and increased
$0.4 million or 6.7% from the third quarter of 2005. For the first
nine months of 2006, occupancy costs totaled $16.8 million, an
increase of $0.3 million or 2.0% over the same period of 2005. The
increases were the result of higher seasonal maintenance costs,
higher rent expense associated with new facilities in two Michigan
markets, and higher energy costs incurred at Citizens' properties.
Professional services for the third quarter of 2006 decreased $0.2
million or 5.9% from the second quarter of 2006 and decreased $1.0
million or 22.8% from the third quarter of 2005. For the first nine
months of 2006, professional services totaled $11.3 million, a
decrease of $1.2 million or 9.4% from the same period of last year.
The decreases were the result of several initiatives during late
2005 and early 2006 targeted at developing corporate strategies to
produce enhanced profitability and revenue momentum, enhancing
overall corporate risk management and ensuring regulatory
compliance. Equipment costs for the third quarter of 2006 were
essentially unchanged from the second quarter of 2006 and the third
quarter of 2005. For the first nine months of 2006, equipment costs
totaled $9.7 million, a decrease of $1.7 million or 15.1% from the
same period of 2005. The decrease was due to $1.5 million in
additional depreciation during the second quarter of 2005 as a
result of aligning the service life for these items with the
current capitalization policy. Data processing fees for the third
quarter of 2006 totaled $3.8 million, essentially unchanged from
the second quarter of 2006 and increased by $0.6 million or 18.5%
over the third quarter of 2005. For the first nine months of 2006,
data processing fees totaled $11.2 million, an increase of $1.2
million or 11.7% over the same period of 2005. The increases were
the result of implementing enhanced technology initiatives related
to customer online banking functionality. Advertising and public
relations expense for the third quarter of 2006 increased $0.3
million or 29.6% to $1.2 million compared with the second quarter
of 2006 and decreased $0.5 million or 29.5% from the third quarter
of 2005. For the first nine months of 2006, advertising and public
relations expense totaled $4.2 million, a decrease of $1.1 million
or 20.9% from the same period of 2005. The increase from the second
quarter of 2006 was the result of product campaigns initiated in
the third quarter of 2006. The decreases were the result of media
campaigns conducted during the third quarter of 2005 and an overall
reduction in the amount of market-specific advertising completed in
2006. Other loan expenses for the third quarter of 2006 increased
$0.2 million or 15.5% to $1.4 million compared with the second
quarter of 2006 and increased $0.7 million over the third quarter
of 2005. For the first nine months of 2006, other loan expenses
totaled $3.0 million, an increase of $1.1 million or 54.4% over the
same period of 2005. The increases were the result of higher other
mortgage processing fees due to the alliance with PHH Mortgage and
higher expenses related to processing commercial loans, partially
offset by lower provisioning to fund the reserve for unused loan
commitments, which fluctuates with the amount of unadvanced
customer lines of credit. For the third quarter of 2006, all other
noninterest expense categories, which include postage and delivery,
telephone, stationery and supplies, intangible asset amortization,
and other expenses, decreased $1.1 million or 11.5% from the second
quarter of 2006 to $8.2 million and increased $0.2 million or 2.4%
from the third quarter of 2005. The decrease from the second
quarter of 2006 was due to reductions in travel and training, other
service fees, and non-credit related losses. The increase from the
third quarter of 2005 was the result of higher travel and training
expenses, telephone, expenses related to other real estate owned,
and state taxes, partially offset by lower service fees and
non-credit related losses. For the first nine months of 2006, all
other noninterest expense categories totaled $27.3 million, an
increase of $2.6 million or 10.3% over the same period of 2005. The
increase was primarily the result of the first quarter of 2006 $1.5
million contribution to Citizens' charitable foundation and the
second quarter of 2006 non-credit related losses from a third party
vendor contract and write downs of tax-credit related investments
in low income housing and community development projects. On
October 2, 2006, the Compensation Committee of the Board of
Directors of Citizens Banking Corporation approved various changes
to Citizens' employee benefits programs. Effective December 31,
2006, Citizens' current defined benefit pension plans (the "DB
Plans") will be "frozen," preserving prior earned benefits and
replacing the future accrual of benefits with additional benefits
under the defined contribution plan (the "DC Plan"). All employees
eligible to participate in the Citizens Banking Corporation Amended
and Restated Cash Balance Pension Plan for Employees and the
Citizens Banking Corporation Cash Balance Pension Plan have been
impacted. Citizens is moving proactively to address its escalating
and increasingly volatile pension costs by freezing its DB Plans
while modifying the DC Plan, which is better designed to encourage
employees to save for their retirement. By freezing the DB Plans,
Citizens estimates it will record a net curtailment loss in the
range of $0.8 million to $1.5 million in the fourth quarter of
2006. Citizens estimates total pension expense (defined benefit and
defined contribution) for 2007 will be lower than 2006. Excluding
the pension curtailment expense, Citizens anticipates noninterest
expenses for the fourth quarter of 2006 will be consistent with or
slightly higher than the third quarter of 2006 due to increases in
salaries and employee benefits and advertising and public
relations. Income Tax Provision Income tax provision for the third
quarter of 2006 was $7.6 million, essentially unchanged from the
second quarter of 2006 and a decrease of $0.4 million or 5.3% from
the third quarter of 2005. For the first nine months of 2006,
income tax provision totaled $23.0 million, a decrease of $1.1
million or 4.5% from the same period of 2005. The decreases were
the result of a $1.3 million ($0.8 million after-tax) reduction in
the deferred Wisconsin state income tax asset during the second
quarter of 2005 as a result of the April 2005 merger of the
Michigan and Wisconsin bank charters. The effective tax rate was
26.63% for the third quarter of 2006 compared with 26.72% for the
second quarter of 2006 and 27.70% for the third quarter of 2005.
Citizens anticipates the effective income tax rate for the fourth
quarter of 2006 will be consistent with or slightly lower than the
third quarter of 2006. Citizens Republic Bancorp Update On June 27,
2006, Citizens Banking Corporation and Republic Bancorp (NASDAQ
symbol RBNC) announced that they had agreed to merge Republic into
Citizens to create the new Citizens Republic Bancorp. On August 28,
2006, Citizens filed a Registration Statement on Form S-4 with the
Securities and Exchange Commission (the "SEC"), that included a
preliminary joint proxy statement/prospectus. A definitive proxy
statement/prospectus is expected to be filed with the SEC and sent
to shareholders later this month. Citizens and Republic will each
hold a special shareholders' meeting on November 30, 2006 to
approve the issuance of Citizens stock and to approve and adopt the
merger agreement, respectively. The merger is still expected to be
completed in the fourth quarter of 2006, subject to regulatory and
shareholder approvals and other customary closing conditions. For
more information regarding the upcoming merger, see the June 27,
2006 press release and investor presentation and the preliminary
joint proxy statement/prospectus, located on the Citizens website
at http://www.citizensonline.com/ , under the Investor Relations
section. Other News Citizens Offers Remote Deposit Services During
July 2006, Citizens began offering remote deposit services to
commercial clients. This service provides a convenient way for
commercial clients to deposit checks into their business checking
account without leaving the office, which saves them time and money
while reducing risk. Citizens Appoints Head of Small Business
Banking During August 2006, Citizens appointed Mike Sonego to be
the Head of Small Business Banking. In this position, he will
develop and implement a small business strategy which includes
defining segments across all markets, identifying growth
opportunities and achieving deposit, loan and fee income growth.
Mike was previously Head of Mortgage Banking at Citizens. Citizens
Appoints Chief Marketing and Communications Officer On October 2,
2006, Citizens appointed Sherry Forbes as its chief marketing and
communications officer. Ms. Forbes joins Citizens from SunTrust
Bank, where she served in a variety of positions for over 20 years,
most recently as first vice president and senior strategy manager
for the branch banking division of the retail line of business.
Citizens' Weatherball Celebrates 50 Years During October 2006,
Citizens will celebrate the 50th anniversary of the CB Weatherball
with community events and special promotions. Stock Repurchase
Program In anticipation of the upcoming merger with Republic,
Citizens did not repurchase any shares of its stock during the
third quarter of 2006. As of September 30, 2006 there are 1,093,800
shares remaining to be purchased under the program approved by the
company's Board of Directors on October 16, 2003. Dividend
Announcement The Board of Directors of Citizens Banking Corporation
declared a cash dividend of $0.29 per share of common stock. The
dividend is payable on November 9, 2006, to shareholders of record
on November 1, 2006. Investor Conference Call William R. Hartman,
chairman, president and CEO, Charles D. Christy, CFO, John D.
Schwab, chief credit officer, and Martin E. Grunst, treasurer, will
review the quarter's results in a conference call for investors and
analysts beginning at 10:00am EDT on Friday, October 20, 2006. A
live audio Webcast is available at
http://www.vcall.com/IC/CEPage.asp?ID=109767 . To participate in
the conference call, please call the number below approximately 10
minutes prior to the scheduled conference time: US/Canada Dial-In
Number: (877) 407-0782 International Dial-In Number: (201) 689-8567
Conference ID: 216099 Conference Name: "Citizens Banking
Corporation Third Quarter Earnings Conference Call." RSVP is not
required. A playback of the conference call will be available after
12:00pm EDT through November 7, 2006, by dialing US/Canada Dial-In
Number: (877) 660-6853 or International Dial-In Number: (201)
612-7415, Account Number: 286, Conference ID: 216099. Also, the
call can be accessed via Citizens' Web site, through the Investor
Relations section at http://www.citizensonline.com/ . Corporate
Profile Citizens Banking Corporation is a diversified financial
services company providing a full range of commercial, consumer,
mortgage banking, trust and financial planning services to a broad
client base. Citizens operates 181 branch, private banking, and
financial center locations and 196 ATMs throughout Michigan,
Wisconsin, and Iowa. Safe Harbor Statement Discussions in this
release that are not statements of historical fact (including
statements that include terms such as "will," "may," "should,"
"believe," "expect," "anticipate," "estimate," "intend," and
"plan") are forward-looking statements that involve risks and
uncertainties, and Citizens' actual future results could materially
differ from those discussed. Factors that could cause or contribute
to such differences include, without limitation, adverse changes in
Citizens' loan and lease portfolios resulting in credit
risk-related losses and expenses (including losses due to fraud,
Michigan automobile-related industry changes and shortfalls, and
other economic factors) as well as additional increases in the
allowance for loan losses; fluctuations in market interest rates,
the effects on net interest income of changes in Citizens' interest
rate risk position and the potential inability to hedge interest
rate risks economically; adverse changes in economic or financial
market conditions and the economic effects of terrorist attacks and
potential attacks; Citizens' potential inability to continue to
attract core deposits; Citizens' potential inability to continue to
obtain third party financing on favorable terms; adverse changes in
competition, pricing environments or relationships with major
customers; unanticipated expenses and payments relating to
litigation brought against Citizens from time to time; Citizens'
potential inability to adequately invest in and implement products
and services in response to technological changes; adverse changes
in applicable laws and regulatory requirements; the potential lack
of market acceptance of Citizens' products and services; changes in
accounting and tax rules and interpretations that negatively impact
results of operations or financial position; the potential
inadequacy of Citizens' business continuity plans or data security
systems; the potential failure of Citizens' external vendors to
fulfill their contractual obligations to Citizens; Citizens'
potential inability to integrate acquired operations, including
those associated with the pending merger with Republic Bancorp;
unanticipated environmental liabilities or costs; impairment of the
ability of the banking subsidiaries to pay dividends to the holding
company parent; the potential circumvention of Citizens' controls
and procedures; Citizens' success in managing the risks involved in
the foregoing; and other risks and uncertainties detailed from time
to time in its filings with the SEC. Other factors not currently
anticipated may also materially and adversely affect Citizens'
results of operations. There can be no assurance that future
results will meet expectations. While Citizens believes that the
forward- looking statements in this release are reasonable, you
should not place undue reliance on any forward-looking statement.
In addition, these statements speak only as of the date made.
Citizens does not undertake, and expressly disclaims any obligation
to update or alter any statements, whether as a result of new
information, future events or otherwise, except as required by
applicable law. Additional Information In connection with the
proposed merger, Citizens has filed with the SEC a Registration
Statement on Form S-4 that included a preliminary joint proxy
statement of Citizens and Republic that also constitutes a
prospectus of Citizens. Citizens and Republic will mail the
definitive joint proxy statement/prospectus, when it becomes
available, to their respective shareholders. Investors and security
holders are advised to read the definitive joint proxy
statement/prospectus when it becomes available because it will
contain important information. Investors and security holders may
obtain a free copy of the preliminary joint proxy
statement/prospectus and the definitive joint proxy
statement/prospectus (when available) and other documents filed by
Citizens and Republic with the SEC at the SEC's website at
http://www.sec.gov/ . Free copies of the preliminary joint proxy
statement/prospectus and the definitive joint proxy
statement/prospectus (when available) and each company's other
filings with the SEC may also be obtained by accessing Citizens'
website at http://www.citizensonline.com/ under the Investors
Relations section or by accessing Republic's website at
http://www.republicbancorp.com/ under the Investor Relations
section. Citizens and Republic and their respective directors,
executive officers and other members of their management may be
soliciting proxies from their respective shareholders in favor of
the merger. Information concerning persons who may be considered
participants in the solicitation of Citizens' shareholders under
the rules of the SEC is set forth in the Proxy Statement filed by
Citizens with the SEC on March 22, 2006, and information concerning
persons who may be considered participants in the solicitation of
Republic's shareholders under the rules of the SEC is set forth in
the Proxy Statement filed by Republic with the SEC on March 14,
2006. Additional information regarding the interests of those
participants and other persons who may be deemed participants in
the transaction may be obtained by reading the joint proxy
statement/prospectus regarding the proposed merger when it becomes
available. You may obtain free copies of these documents as
described above. This communication shall not constitute an offer
to sell or the solicitation of an offer to buy securities, nor
shall there be any sale of securities in any jurisdiction in which
such solicitation or sale would be unlawful prior to the
registration or qualification under the securities laws of such
jurisdiction. (Financial highlights follow) Visit our website at
http://www.citizensonline.com/ (Logo:
http://www.newscom.com/cgi-bin/prnh/20050421/DETH014LOGO )
DATASOURCE: Citizens Banking Corporation CONTACT: Charles D.
Christy, Chief Financial Officer, +1-810-237-4200, , Kathleen
Miller, Investor Relations, +1-810-257-2506, , both of Citizens
Banking Corporation Web site: http://www.citizensonline.com/
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