Citizens Banking Corporation Reports Special Charge and Third Quarter 1997 Results.FLINT flint, mineral flint, variety of quartz that commonly occurs in rounded nodules and whose crystal structure is not visible to the naked eye. Flint is dark gray, smoky brown, or black in color; pale gray flint is called chert. , Mich.--(BUSINESS WIRE)--Oct. 10, 1997--Citizens Banking Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CBCF CBCF Canadian Breast Cancer Foundation CBCF Congressional Black Caucus Foundation CBCF Community Based Corrections Facilities CBCF Commander, Base Communications Facility ) announced a special charge of $17.3 million, after tax, (of which approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $9 million is non-cash) related to its July July: see month. 1, 1997, merger with CB Financial Corporation and the reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. of Citizens' information technology operations Information technology operations, or IT operations, are the superset of all processes and services that are both provisioned by an IT staff to their internal or external and used by themselves, to run themselves as a business. . As a result, Citizens recorded a net loss of $4,951,000 or $0.27 per share for the third quarter of 1997. Earnings for the third quarter before the special charge were $12,312,000 or $0.65 per share, representing an increase in net income of 7.1% over the same period in 1996. Returns on average assets and average equity before the special charge were 1.10% and 11.99%, respectively, compared with 1.09% and 11.98%, respectively, in the third quarter of 1996. The increase in net income before the special charge is the result of improved net interest income and lower operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. partially offset by higher loan loss provision, investment securities losses and lower noninterest income. The increased loan loss provision was due to higher net charge-offs and a desire to maintain loan loss reserves at levels consistent with Citizens' historical coverage ratios, subsequent to the CB Financial merger. The securities losses were the result of repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. the investment portfolio to take advantage of market opportunities to improve balance sheet structure and enhance investment yields. Noninterest income declined due to a $1.6 million gain on the sale of the servicing rights on Citizens' mortgage portfolio in the third quarter of last year. During the third quarter, Citizens acquired CB Financial Corporation in a stock-for-stock merger transaction accounted for as a pooling of interests Pooling of Interests An accounting method, used in mergers and acquisitions, where the balance sheet items of the two companies are simply added together. Notes: The opposite of pooling of interests is the purchase acquisition method. . As such, financial data have been restated to include the historical results of operations of both entities. The special charge includes $12.3 million, after tax, of merger-related expenses, comprised of $5.8 million of direct merger and restructuring-related charges and a $6.5 million write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of goodwill and core deposit intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. related to previous acquisitions of CB Financial. The $5.8 million of merger-related expenses reflect the cost of integrating and consolidating branch network and administrative facilities, severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when arrangements, professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. and other expenses directly related to the merger. Also during the third quarter, Citizens entered into a strategic arrangement with M & I Data Services of Milwaukee, Wisconsin For other places with the same name, see Milwaukee (disambiguation). Milwaukee is the largest city within the state of Wisconsin and 25th largest (by population) in the United States. , as part of its efforts to upgrade its information technology operations. This arrangement will provide Citizens with the professional expertise and technological resources necessary to improve its competitive position in a rapidly changing technological environment and to address Year 2000 information systems-related issues. Citizens also believes it will enhance its position to quickly respond to the demands of its markets and support future strategic initiatives. The third quarter special charge includes expenses of $5.0 million, after tax, related to this arrangement, comprised of up-front up-front or up·front Informal adj. 1. Straightforward; frank. 2. Paid or due in advance: up-front cash. adv. conversion and reorganization costs. Citizens anticipates that the merger and reorganization will have a positive effect on its future operating performance. "While the special charge impairs earnings for the third quarter, this is a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. event and an expected occurrence after a merger of this type," noted Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. J. Vitito, President & Chief Executive Officer. "The charge will not adversely affect our dividend. We remain a financially stable, well-capitalized banking organization." For the first nine months of 1997, net income was $17,253,000 or $0.91 per share. Excluding the special charge, year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. earnings totaled $34,516,000 or $1.82 per share, compared with $32,183,000 or $1.71 per share during the first nine months of 1996. The increase in net income before the special charge is primarily the result of improved net interest income and operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. control offset, in part, by higher loan loss provision and investment securities losses. Returns on average assets and average equity for the nine months ended September September: see month. 30, 1997, before the special charge were 1.06% and 11.53%, respectively, compared with 1.03% and 11.35%, respectively, for the same period in 1996. Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: assets at September 30, 1997, were $4.413 billion, an increase of 2.5% from December December: see month. 31, 1996. Total loans increased 8.3% from year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 1996, while total deposits improved 2.7%. Total shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. on September 30, 1997, was $399,105,000, compared with $392,021,000 as of year-end 1996. This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. about expected savings and effects of the merger and other initiatives 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. Citizens Banking Corporation is a diversified financial The diversified financial services segment includes a range of consumer and commercially-oriented companies offering a wide variety of products and services, including various lending products (such as home equity loans and credit cards), insurance, and securities and investment services company providing a full range on commercial, consumer, mortgage banking, trust and financial planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against services to a broad client base. Citizens operates 128 offices throughout Michigan Michigan (mĭsh`ĭgən), upper midwestern state of the United States. It consists of two peninsulas thrusting into the Great Lakes and has borders with Ohio and Indiana (S), Wisconsin (W), and the Canadian province of Ontario (N,E). and in suburban Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. , Illinois Illinois, river, United States Illinois, river, 273 mi (439 km) long, formed by the confluence of the Des Plaines and Kankakee rivers, NE Ill., and flowing SW to the Mississippi at Grafton, Ill. It is an important commercial and recreational waterway. . (Financial highlights follow) -0-
____________________________________________________________________
Consolidated Balance Sheets (Unaudited)
Citizens Banking Corporation and Subsidiaries
September 30, December 31,
(in thousands) 1997 1996
____________________________________________________________________
Assets
Cash and due from banks $ 150,163 $ 182,039
Money market investments:
Interest-bearing deposits with banks 75 83
Federal funds sold 34,500 4,500
Term federal funds and other 2,514 14,288
___________ ___________
Total money market investments 37,089 18,871
Securities available-for-sale:
U.S. Treasury and
federal agency securities 393,336 502,042
State and municipal securities 176,263 200,835
Other securities 18,507 14,181
___________ ___________
Total investment securities 588,106 717,058
Loans:
Commercial 1,257,001 1,177,098
Real estate construction 66,865 71,125
Real estate mortgage 777,086 744,606
Consumer 1,355,227 1,189,807
Lease financing 40,349 47,173
___________ ___________
Total loans 3,496,528 3,229,809
Less: Allowance for loan losses (46,041) (42,166)
___________ ___________
Net loans 3,450,487 3,187,643
Premises and equipment 71,628 74,859
Intangible assets 61,402 73,684
Other assets 54,559 51,819
___________ ___________
Total assets $ 4,413,434 $ 4,305,973
___________ ___________
___________ ___________
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 598,615 $ 580,742
Interest-bearing 3,096,685 3,018,009
___________ ___________
Total deposits 3,695,300 3,598,751
Federal funds purchased
and securities sold
under agreements to repurchase 116,303 146,903
Other short-term borrowings 53,766 29,902
Other liabilities 54,094 51,570
Long-term debt 94,866 86,826
___________ ___________
Total liabilities 4,014,329 3,913,952
Shareholders' Equity
Preferred stock - No par value -- --
Common stock - No par value 119,031 118,312
Retained earnings 276,778 273,484
Net unrealized gain on securities
available-for-sale, net of tax 3,296 225
___________ ___________
Total shareholders' equity 399,105 392,021
___________ ___________
Total liabilities and
shareholders' equity $4,413,434 $4,305,973
___________ ___________
___________ ___________
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Consolidated Statements of Income (Unaudited)
Citizens Banking Corporation and Subsidiaries
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 1997 1996 1997 1996
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Interest Income
Interest and fees
on loans $75,292 $ 67,740 $217,646 $196,500
Interest and dividends
on investment
securities:
Taxable 8,035 8,176 25,033 25,687
Nontaxable 2,140 2,455 6,710 7,333
Money market investments 181 393 482 2,863
------- ------- ------- -------
Total interest income 85,648 78,764 249,871 232,383
------- ------- ------- -------
Interest Expense
Deposits 33,133 29,861 95,733 88,481
Short-term borrowings 2,297 2,068 7,025 5,722
Long-term debt 1,473 1,380 4,349 4,920
------- ------- ------- -------
Total interest expense 36,903 33,309 107,107 99,123
------- ------- ------- -------
Net Interest Income 48,745 45,455 142,764 133,260
Provision for loan losses 5,245 3,593 12,197 7,980
------- ------- ------- -------
Net interest income
after provision for
loan losses 43,500 41,862 130,567 125,280
------- ------- ------- -------
Noninterest Income
Trust fees 3,858 3,561 11,672 10,820
Service charges
on deposit accounts 3,129 3,240 9,163 9,323
Bankcard fees 1,917 1,835 5,271 4,971
Other loan income 521 1,965 1,152 3,061
Investment securities
gains (losses) (755) 134 (812) 570
Other 2,997 2,551 8,108 7,638
------- ------- ------- -------
Total noninterest income 11,667 13,286 34,554 36,383
------- ------- ------- -------
Noninterest Expense
Salaries and
employee benefits 19,986 20,567 60,778 60,872
Equipment 3,069 3,119 9,428 9,241
Occupancy 2,820 3,013 8,700 9,042
Intangible asset
amortization 1,386 1,663 4,712 4,975
Bankcard fees 1,579 1,299 3,757 3,375
Stationery and supplies 968 1,074 3,076 3,090
Postage and delivery 1,116 1,107 3,305 3,252
Advertising and
public relations 911 893 3,351 3,259
Special charge 23,734 -- 23,734 --
Other 5,771 6,245 18,845 19,342
------- ------- ------- -------
Total noninterest expense 61,340 38,980 139,686 116,448
------- ------- ------- -------
Income (loss) before
income taxes (6,173) 16,168 25,435 45,215
Income taxes (1,222) 4,670 8,182 13,032
------- -------- -------- --------
Net Income (Loss) $ (4,951) $ 11,498 $ 17,253 $ 32,183
-------- -------- -------- --------
-------- -------- -------- --------
Primary and Fully
Diluted Income (Loss)
Per Share $ (0.27) $ 0.61 $ 0.91 $ 1.71
------- ------- ------- -------
------- ------- ------- -------
Average Shares Outstanding:
Primary 18,996 18,850 18,893 18,856
Fully Diluted 19,056 18,852 19,016 18,856
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Selected Quarterly Information
Citizens Banking Corporation and Subsidiaries
---------------------------------------------------------------------
3rd Qtr 2nd Qtr 1st Qtr
1997 1997 1997
---------------------------------------------------------------------
Summary of Operations (thousands)
Interest income $85,648 $83,996 $80,227
Interest expense 36,903 35,858 34,346
Net interest income 48,745 48,138 45,881
Provision for loan losses 5,245 3,742 3,210
Net interest income
after provision for
loan losses 43,500 44,396 42,671
Investment securities
gains (losses) (755) (33) (24)
Noninterest income 12,422 11,575 11,369
Noninterest expense
before special charge 37,606 39,729 38,617
Special charge, net of tax 17,263 --- ---
Income taxes 5,249 4,894 4,510
Net income (loss) (4,951) 11,315 10,889
Net income before special charge 12,312 (a) 11,315 10,889
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At Period End (millions)
Total assets $4,413 $4,436 $4,328
Total earning assets 4,122 4,125 4,002
Total loans 3,497 3,380 3,264
Total deposits 3,695 3,657 3,630
Total shareholders' equity 399 406 395
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Average Balances (millions)
Total assets $4,422 $4,368 $4,293
Total earning assets 4,124 4,071 3,991
Total loans 3,431 3,336 3,255
Total deposits 3,687 3,628 3,574
Total shareholders' equity 407 399 394
Shareholders' equity / assets 9.21 % 9.13 % 9.17 %
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Credit Quality
Statistics (thousands)
Nonaccrual loans $20,251 $19,426 $21,111
Loans 90 or more days
past due and still accruing 662 716 1,477
Restructured loans 487 498 425
------- --------- --------
Total nonperforming loans 21,400 20,640 23,013
Other repossessed assets acquired 3,766 4,679 3,899
------- --------- --------
Total nonperforming assets $25,166 $25,319 $26,912
======= ========= ========
Allowance for loan losses ratio 1.32 % 1.34 % 1.34 %
Allowance for loan losses as
a percent of nonperforming assets 182.95 178.51 162.65
Allowance for loan losses as a
percent of nonperforming loans 215.14 218.98 190.21
Nonperforming assets as
a percent of total loans
plus OREO 0.72 0.75 0.82
Nonperforming assets as
a percent of total assets 0.57 0.57 0.62
Net loans charged off as a
percent of average
loans (annualized) 0.51 0.28 0.20
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Per Common Share Data
Net Income (loss):
Primary and
fully diluted ($0.27) $0.60 $0.58
Fully diluted
before special charge 0.65 (a) 0.60 0.58
Dividends 0.285 0.285 0.260
Market Value:
High $44.13 $35.75 $33.50
Low 33.50 30.50 30.00
Close 44.00 34.25 33.00
Book value 21.45 21.89 21.30
Shares outstanding,
end of period (000) 18,603 18,561 18,532
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Performance Ratios (annualized)
Net interest margin (FTE) 4.86 % 4.88 % 4.78 %
Return on average assets 1.10 (a) 1.04 1.03
Return on average
shareholders' equity 11.99 (a) 11.37 11.21
4th Qtr 1996 3rd Qtr 1996
------------ ------------
Summary of Operations (thousands)
Interest income $79,952 $78,764
Interest expense 34,568 33,309
Net interest income 45,384 45,455
Provision for loan losses 4,146 3,593
Net interest income
after provision for loan losses 41,238 41,862
Investment securities
gains (losses) 41 134
Noninterest income 11,581 13,152
Noninterest expense
before special charge 38,608 38,980
Special charge, net of tax --- ---
Income taxes 4,010 4,670
Net income (loss) 10,242 11,498
Net income before
special charge 10,242 11,498
------------------------------------ ----------------------
At Period End (millions)
Total assets $4,306 $4,252
Total earning assets 3,966 3,917
Total loans 3,230 3,166
Total deposits 3,599 3,531
Total shareholders' equity 392 387
------------------------------------ ----------------------
Average Balances (millions)
Total assets $4,276 $4,212
Total earning assets 3,967 3,889
Total loans 3,189 3,130
Total deposits 3,554 3,522
Total shareholders' equity 390 382
Shareholders' equity / assets 9.11 % 9.06 %
------------------------------------ ----------------------
Credit Quality
Statistics (thousands)
Nonaccrual loans $19,781 $17,570
Loans 90 or more days
past due and
still accruing 1,874 1,299
Restructured loans 502 520
-------- ----------
Total nonperforming loans 22,157 19,389
Other repossessed assets acquired 3,118 3,183
-------- ----------
Total nonperforming assets $25,275 $22,572
======== ==========
Allowance for loan
losses ratio 1.31 % 1.25 %
Allowance for loan losses as
a percent of
nonperforming assets 166.83 175.34
Allowance for loan losses as a
percent of nonperforming loans 190.31 204.12
Nonperforming assets as
a percent of total loans
plus OREO 0.78 0.71
Nonperforming assets as
a percent of total assets 0.59 0.53
Net loans charged off as a
percent of average
loans (annualized) 0.20 0.42
------------------------------------ ----------------------
Per Common Share Data
Net Income (loss):
Primary and fully diluted $0.54 $0.61
Fully diluted before
special charge 0.54 0.61
Dividends 0.260 0.260
Market Value:
High $32.25 $29.50
Low 28.75 27.25
Close 31.50 28.63
Book value 21.18 20.82
Shares outstanding,
end of period (000) 18,511 18,571
------------------------------------ ----------------------
Performance Ratios (annualized)
Net interest
margin (FTE) 4.74 % 4.83 %
Return on average assets 0.95 1.09
Return on average
shareholders' equity 10.46 11.98
------------------------------------------------------------------
(a) Operating income before special charge associated with CB
Financial Corporation merger and information technology
operations reorganization.
--------------------------------------------------------------------
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Financial Summary and Comparison
Citizens Banking Corporation and Subsidiaries
Nine Months Ended
September 30
---------------------------------------------
1997 1996 % Change
---------------------------------------------------------------------
Summary of Operations (thousands)
Interest income $249,871 $232,383 7.5 %
Interest expense 107,107 99,123 8.1
Net interest income 142,764 133,260 7.1
Provision for loan losses 12,197 7,980 52.8
Net interest income after
provision for loan losses 130,567 125,280 4.2
Investment securities
gains (losses) (812) 570 (b)
Noninterest income 35,366 35,813 (1.2)
Noninterest expense
before special charge 115,952 116,448 (0.4)
Special charge, net of tax 17,263 --- (b)
Income taxes 14,653 13,032 12.4
Net income 17,253 32,183 (46.4)
Net income before special charge 34,516 (a) 32,183 7.3
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At Period End (millions)
Total assets $4,413 $4,252 3.8 %
Total earning assets 4,122 3,917 5.2
Total loans 3,497 3,166 10.4
Total deposits 3,695 3,531 4.7
Total shareholders' equity 399 387 3.2
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Average Balances (millions)
Total assets $4,362 $4,191 4.1 %
Total earning assets 4,062 3,857 5.3
Total loans 3,341 3,019 10.7
Total deposits 3,630 3,503 3.6
Total shareholders' equity 400 379 5.5
Shareholders' equity / assets 9.17 % 9.03 % 1.6
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Per Common Share Data
Net Income:
Primary and fully
diluted $0.91 $1.71 (46.8) %
Fully diluted before
special charge 1.82 (a) 1.71 6.4
Dividends 0.830 0.750 10.7
Market Value:
High $44.13 $31.50 40.1
Low 30.00 27.25 10.1
Close 44.00 28.63 53.7
Book value 21.45 20.82 3.0
Shares outstanding,
end of period (000) 18,603 18,571 0.2
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Cash Earnings Summary (a)
Net Income $38,011 $35,879 5.9 %
Fully diluted earnings per share 2.00 1.90 5.1
Tangible Book value per share 18.15 16.76 8.3
Return on average assets 1.18 % 1.17% 1.7
Return on average equity 15.43 15.92 (3.1)
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Performance Ratios (annualized)
Net interest margin (FTE) 4.84 % 4.78 % 1.3 %
Return on average assets 1.06 (a) 1.03 2.9
Return on average shareholders' equity 11.53 (a) 11.35 1.6
Net loans charged off as
a percent of average loans 0.33 0.31 6.5
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(a) Operating income before special charge associated with CB
Financial Corporation merger and information technology
operations reorganization.
(b) Not meaningful.
CONTACT: Citizens Banking Corporation John W. Ennest, 810/257-2557 |
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