Citizens reports record earnings for first six months.

PROVIDENCE, R.I.--(BUSINESS WIRE)--May 7, 1997-- Citizens Financial Group Inc. ("Citizens") today reported record half-year net income of $97.1 million for the six-month period ending March 31, 1997, compared with $77.8 million over the six-month period ending March 31, 1996, a 25 percent increase. The current period results reflect a $45 million gain on the sale of mortgage servicing, while the results for the same period last year included $52 million of investment gains and loan loss recapture.

The increase in net income in the first six months of the year also resulted from core earnings improvement related to loan and deposit growth, completion of the acquisitions of Farmers and Mechanics Bank of Middletown, CT, in November and Grove Bank of Newton and Brookline, MA in March, and the acquisition in April 1996 of the former First NH Bank.

Total assets at March 31 were $15.5 billion, compared with assets of $10.2 billion at March 31, 1996, an increase reflecting completion of the First NH, Farmers and Mechanics, and Grove transactions in the last year. In April, the company announced the acquisition of BNH Bancshares, parent of Bank of New Haven, a move which will increase the company's assets to some $16 billion.

Citizens is among the 50 largest commercial bank holding companies in the nation, and the fastest growing in New England, having grown from $4.4 billion in 1992. Citizens has approximately 5,000 employees, 260 branch offices and nearly 400 ATMs in Massachusetts, Connecticut, New Hampshire and Rhode Island.

"Our core earnings growth reflects the strength of our supercommunity franchise and the aggressive marketing of new deposit and loan products that have become immensely popular among a consumer base looking for the best priced products in banking," said Citizens Chairman, President and Chief Executive Officer Lawrence K. Fish.

"We also continue to reap the benefits from acquisitions of well- run institutions in markets contiguous to our existing franchise," he added.

For the six-month period ending March 31, cash return on assets was 1.61 percent, cash return on equity was 28.4 percent, and the efficiency ratio before the cost of one-time items associated with the Farmers and Mechanics, and Grove acquisitions was 62.3 percent.

Net interest income for the six-month period was $275.6 million, up 51 percent, or $93.4 million over the first half of last year. The provision for possible credit losses totaled $14.4 million for the first half, compared with the release in last year's period of $22.6 million in provisioning after a review of the loan portfolio.

Noninterest income for the first half of the year was up 66 percent to $126.2 million over the previous year. The increase included a one-time gain on the previously announced sale of mortgage servicing, and increases in fee income from the sale of mutual funds and annuities, trust services, and other banking operations. Income of $13.0 million from mortgage banking activities was $4.7 million less than the first half last year, reflecting the company's decision to focus on mortgage sales through its core New England franchise. Citizens realized investment gains of $7.3 million in the first half of the year, compared with gains of $26.0 million over the same period last year.

Noninterest expense increased $79.2 million to $226.7 million for the six months ended March 31, reflecting Citizens' growth through acquisition, one-time costs associated with three acquisitions, and an increase to $20.7 million in the amortization of goodwill.

Credit quality remained strong with nonperforming assets totaling $109 million at March 31, 0.70 percent of total assets. The loan loss reserve at March 31 was $186 million, 193 percent of nonperforming loans.

The leverage capital ratio at March 31 was 6.63 and the total risk-based capital ratio was 12.01 percent, both greater than regulatory minimum requirements.

Citizens Financial Group, Inc. is a New England based financial services company. Citizens is 76.5 percent owned by The Royal Bank of Scotland plc and 23.5 percent owned by Bank of Ireland.

CONTACT: Citizens Financial Group Inc.

Arlene Fortunato

617/422-8391