Citizens Banking Corporation Announces Fourth Quarter 2004 Results

Business Wire, Jan 20, 2005

FLINT, Mich. -- Citizens Banking Corporation (NASDAQ:CBCF) announced a net income increase of $2.2 million or 12.2% to $20,286,000 for the three months ended December 31, 2004, compared with net income of $18,074,000 in the same quarter of 2003. This represents an increase of $0.6 million or 3.3% over the net income of $19,646,000 in the third quarter of 2004. Diluted net income per share was $0.46, compared to $0.41 per diluted share for the same quarter of last year and $0.45 per diluted share for the third quarter of 2004. Annualized returns on average assets and average equity during the fourth quarter were 1.05% and 12.43%, respectively, compared with 0.93% and 11.45% in the fourth quarter of 2003. Annualized returns on average assets and average equity for the fourth quarter of 2004 were an improvement over the third quarter of 2004 returns of 1.02% and 12.27%, respectively.

For the year ended December 31, 2004, net income was $76,097,000 or $1.74 per diluted share compared with net income of $65,951,000 or $1.51 per diluted share for the same period of 2003, an increase of 15.4% in net income and 15.2% in diluted net income per share.

"This quarter represents the third consecutive quarter of earnings per share increases and was highlighted by improved performances from many areas of our company," stated William R. Hartman, Chairman, President and CEO. "Citizens showed continued improvement in credit quality, continued growth in consumer loans and core deposits, and improvement in our fee-based businesses. We believe we are well positioned for continued earnings improvement in 2005."

Key Highlights in the Quarter:

--Nonperforming assets continued to decline to their lowest level in more than three years, decreasing $1.5 million or 2.9% to $50.8 million at December 31, 2004 compared with September 30, 2004 and decreased $26.2 million or 34.0% compared with December 31, 2003. The allowance for loan losses as a percent of nonperforming loans is now 285% compared to 290% in the third quarter of 2004 and 179% in the fourth quarter of 2003.

--The fourth quarter 2004 provision for loan losses of $4.6 million was $0.4 million less than the third quarter of 2004 and $3.4 million or 42.5% less than the fourth quarter of 2003. Net charge-offs declined to $4.6 million in the fourth quarter of 2004 compared with $5.0 million in the third quarter of 2004 and $7.7 million in the fourth quarter of 2003.

--Total bank core deposit balances increased by $25.6 million in the fourth quarter compared to the third quarter of 2004, representing the fifth consecutive quarter of core deposit growth. The growth has been driven by increases in noninterest bearing deposits and a new market rate savings product introduced in the fourth quarter of 2003.

--Our Oakland County initiative generated an increase in total loans outstanding of $96.3 million and an increase of total core deposits within the market of $65.5 million during the fourth quarter of 2004 over the third quarter of 2004.

--Citizens introduced another new suite of checking products during the fourth quarter of 2004, specifically targeted for the public funds sector. Coupled with the business checking product suite introduced earlier this year, over 4,150 business and public fund accounts totaling over $27.8 million have been opened since April 2004. The success of these new products has significantly contributed to the $24.8 million increase in commercial checking balances since December 2003.

Balance Sheet

Citizens' total assets at December 31, 2004 were $7.7 billion, a decrease of $5.0 million or 0.1% compared with December 31, 2003 and an increase of $46.6 million or 0.6% from September 30, 2004. Material factors contributing to these changes included the sale of our Illinois Bank subsidiary in the third quarter of 2004 ($173.2 million in assets at the date of sale), declines in both the investment portfolio and mortgage loans held for sale, and growth in total portfolio loans. Portfolio loans increased $145.5 million or 2.8% compared with year end 2003 and $89.9 million or 1.7% compared with September 30, 2004 as both consumer and commercial loans increased.

Consumer loans, excluding mortgage loans, increased $231.4 million or 13.1% at December 31, 2004 compared with December 31, 2003 due to a well executed sales process and a number of successful sales campaigns, slightly offset by the reduction of $23.2 million as a result of the Illinois Bank sale completed in the third quarter of 2004. Total consumer loans, excluding mortgage loans, increased $24.2 million or 1.2% since September 30, 2004. Since December 31, 2003, direct consumer loans increased $149.3 million or 14.6% due to the success of the home equity product while indirect loans increased $82.0 million or 11.0% due to growth in the recreational vehicle and marine segments from continued emphasis on service and maintaining strong relationships with existing dealers.

Portfolio mortgage loans were $508.2 million at December 31, 2004, an increase of $11.5 million or 2.3% compared with December 31, 2003 and an increase of $5.5 million or 1.1% from September 30, 2004. The increase in the mortgage portfolio occurred due to slower refinance activity. Citizens continues to sell most new production into the secondary market. Closed mortgage loan volume declined to $132.9 million in the fourth quarter of 2004 compared with $154.7 million in the fourth quarter of 2003.