CITIZENS BANKING CORP, 10-K405, 1997-03-14

CITIZENS BANKING CORP
10-K405, 1997-03-14
NATIONAL COMMERCIAL BANKS

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<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required] For the fiscal year ended December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
---------------- ----------------

Commission file Number 0-10535
-----------

CITIZENS BANKING CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

MICHIGAN 38-2378932
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

One Citizens Banking Center,
328 S. Saginaw Street, Flint, Michigan 48502
- --------------------------------------- --------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (810) 766-7500
----------------------
Securities registered pursuant to Section 12(b) of the Act: None
--------
Securities registered pursuant to Section 12(g) of the Act:

Common Stock - No Par Value
- --------------------------------------------------------------------------------
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $428,304,762 as of February 27, 1997.

The number of shares outstanding of the registrant's Common Stock (No par
value) was 14,352,107 as of February 27, 1997.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Citizens Banking Corporation Proxy Statement for its annual
meeting of shareholders to be held April 15, 1997 are incorporated by reference
into Part III.

(Exhibit Index - Pages 13 through 15)
<PAGE> 2

CITIZENS BANKING CORPORATION

1996 Annual Report on Form 10-K

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 4. Submission of Matters To a Vote of Security Holders . . . . . . . . . . . . . . . . . 7

PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . 8
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

PART III
Item 10. Directors and Executive Officers of Registrant . . . . . . . . . . . . . . . . . . . 9
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . 9
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . 9

PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . 10

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>

2
<PAGE> 3

Part I

ITEM 1. BUSINESS.

General
Citizens Banking Corporation ("Corporation") was organized January 1, 1982.
It is a multibank holding company registered under the Bank Holding Company Act
of 1956, as amended, and is incorporated in the State of Michigan. On December
31, 1996, the Corporation directly or indirectly owned two banking subsidiaries
and two nonbanking subsidiaries and had 1825 full-time equivalent employees.
Additional information related to the subsidiaries at year-end 1996 is provided
below.

<TABLE>
<CAPTION>
=============================================================================================
Total
Principal Number of Assets Date
Subsidiary Office Offices (in millions) Acquired
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Citizens Bank(1)(2) Flint, MI 90 $3,220.5 01/01/1982
Citizens Bank - Illinois, N.A. Berwyn, IL 3 255.3 05/01/1987
=============================================================================================
</TABLE>

(1) Consolidated totals of Citizens Bank include its wholly owned nonbank
subsidiary, Citizens Commercial Leasing Corporation ("CCLC") based in
Saginaw, MI.
(2) Citizens Bank also owns Lakeshore Insurance Agency, Inc. a wholly owned
nonbank subsidiary established as a "de novo" insurance agency.

The Corporation's subsidiary banks are full service commercial banks
offering a variety of financial services to corporate, commercial,
correspondent and individual bank customers. These services include
commercial, mortgage and consumer lending, demand and time deposits, trust
services, investment services, safe deposit facilities, and other financial
products and services. The bank subsidiaries are wholly owned by the
Corporation and operate through 93 banking offices. The offices are located
along the Interstate 75 corridor within the State of Michigan from northern and
western suburban Detroit to the greater Grayling/Gaylord areas. Expansion
through the acquisition of the four Michigan affiliates of Banc One Corporation
purchased at the close of business on February 28, 1995 established a new
market presence in the central and southwest Michigan areas. 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. Total assets acquired of $670 million
included net loans of $532 million and investment securities and money market
investments of $57 million. The three banking offices in Illinois are located
in the suburban market of Chicago.
In January 1997, the Corporation announced an agreement to acquire CB
Financial Corporation headquartered in Jackson, Michigan. CB Financial
Corporation has a combined asset base of $826 million and operates thirty-nine
offices throughout Michigan. The Corporation will issue approximately 4.2
million shares of its common stock in a tax free exchange for all of the
outstanding stock of CB Financial Corporation. The acquisition will be
accounted for as a pooling of interests and is expected to be completed by the
end of the second quarter of 1997. This transaction is subject to regulatory
and shareholder approval.
Citizens Commercial Leasing Corporation, a wholly owned nonbank
subsidiary of Citizens Bank, engages in direct lease financing of office,
medical and other equipment, and participates in high quality indirect lease
participations.

3
<PAGE> 4

On December 29, 1994 the State of Michigan amended the State's Banking
Code of 1969 to allow banks to engage in the insurance business and to own an
insurance agency. Although the National Bank Holding Company Act prohibits the
holding company from direct ownership of an insurance agency, banks within the
holding company may now do so. In the first quarter of 1996, the Corporation's
lead bank Citizens Bank established a "de novo" insurance agency, Lakeshore
Insurance Agency, Inc.. Through this subsidiary, the Corporation sells life
insurance and annuity products to clients subject to certain restrictions.

Competition
The financial services industry is highly competitive. The banking
subsidiaries compete with other commercial banks, many of which are
subsidiaries of other bank holding companies, for loans, deposits, trust
accounts and other business on the basis of interest rates, fees, convenience
and quality of service. They also actively compete with a variety of other
financial services organizations including savings and loan associations,
finance companies, mortgage banking companies, brokerage firms, credit unions
and other organizations. CCLC, a wholly owned subsidiary of Citizens Bank,
competes directly with other leasing companies.
Loans comprise 73.3% of the Corporation's average assets and are made
in the normal course of business to individuals, partnerships, municipalities
and corporations. Credit is extended to customers within the commercial,
commercial mortgage, real estate construction, real estate mortgage, consumer
and lease financing categories. Consumer loans are primarily composed of
automobile, personal, marine, home equity and bankcard loans and represent
35.0% of the 1996 average loan portfolio. Consumer loans originated follow
strict Corporate credit screening procedures. Real estate mortgage loan
extensions are primarily first liens on one to four family structures and
unless insured by a private mortgage insurance company typically have
traditional loan to appraisal ratios of 80%. Commercial and commercial
mortgage loan originations generally do not rely on the performance of the real
estate market to generate funds for repayment and do not represent a
concentration in any one industry or company. Additional information on the
composition of the loan portfolio and the related nonperforming assets is
incorporated herein by reference from Exhibit 13 of this document on pages 11
to 14 under the captions "Loans" and "Nonperforming Assets".
Mergers between and the expansion of financial institutions both
within and outside of our primary markets of Michigan and Illinois have
provided significant competitive pressure in those markets. In addition, the
passage of federal interstate banking legislation has expanded the banking
market and heightened competitive forces.
On June 1, 1996, the Corporation consolidated its six Michigan
chartered banks into one bank called Citizens Bank. The consolidation further
streamlined operations and reduced certain costs but retained local management
and the respective boards of directors.
Other factors such as employee relations and environmental laws also
impact the Corporation's competitiveness. Presently, none of the Corporation's
employees are covered by collective bargaining agreements and the Corporation
maintains a favorable relationship with it's employees. The impact of
environmental laws is further discussed in "Item 3. Legal Proceedings" of this
document.

4
<PAGE> 5

Supervision and Regulation
Citizens Banking Corporation is subject to supervision and regulation
by the Federal Reserve Board under the Bank Holding Company Act of 1956, as
amended (the "Act"). The Act requires the Corporation to obtain the prior
approval of the Board of Governors of the Federal Reserve System for bank
acquisitions, limits the acquisition of shares of out-of-state banking
organizations unless permitted by state law and prescribes limitations on the
nonbanking activities of the Corporation. As a bank holding company, the
Corporation and its subsidiaries are able only to conduct the business of
banking and activities so closely related to banking or managing or controlling
banks as to be a proper incident thereto.
The Corporation's subsidiary banks are subject to various regulatory
authorities. Citizens Bank is chartered by the State of Michigan and is subject
to supervision, regulation and examination by the Financial Institutions Bureau
of the State of Michigan. Citizens Bank - Illiniois, N.A. is chartered under
federal law and is subject to supervision, regulation and examination by the
Comptroller of the Currency. Both banks are subject to supervision and
examination by the Federal Deposit Insurance Corporation ("FDIC"), as their
deposits are insured by the FDIC to the extent provided by the law. In
addition, both banks are members of the Federal Reserve System. The
Corporation's nonbank company is supervised and examined by the Federal Reserve
System.
Certain regulatory matters concerning capital adequacy guidelines for
the Corporation and its banking subsidiaries, limitations on the payment of
dividends to the Corporation by its banking subsidiaries and maintenance of
minimum average reserve balances by the banking subsidiaries with the Federal
Reserve Bank are incorporated herein by reference from Exhibit 13 of this
document on pages 16 and 36 through 37 under the captions, "Liquidity and Debt
Capacity" and "Note 16. Regulatory Matters", respectively.
The 1994 passage of the federal Riegle-Neal Interstate Banking and
Branching Efficiency Act allows states the ability to enact legislation
permitting interstate branching but have no choice in opting out of provisions
related to interstate banking. The effect of the interstate banking provisions
do not impact Michigan or neighboring states since these states have previously
passed legislation allowing bank holding companies to own bank affiliates in
multiple states. On November 29, 1995 the Michigan legislature passed Public
Act 202 permitting interstate branching. This law allows a bank the ability to
establish branches outside of the State of Michigan provided that state adopts
similar legislation. However, since Citizens is headquartered in Michigan and
currently has only one subsidiary outside of the state this does not
significantly affect the Corporation. The Corporation may be impacted as
states adjacent to Michigan pass similar legislation. The impact of this is not
expected to significantly affect the Corporation's strategic plan, except to
allow potentially greater consolidation benefits if the Corporation acquires
banks outside of Michigan.
The Financial Institutions Reform, Recovery, and Enforcement Act of
1989 ("FIRREA") adopted in August 1989 has significantly affected financial
institutions. Key provisions of FIRREA provide for the acquisition of thrift
institutions by bank holding companies (previously only failing thrifts were
permitted to be acquired), increase deposit insurance assessments for insured
banks, redefine applicable capital standards for banks and thrifts, broaden the
enforcement power of federal bank regulatory agencies, and require that any
FDIC-insured depository institution be held liable for any loss incurred by the
FDIC in connection with the default of any commonly controlled FDIC-insured
depository institution or any assistance provided by the FDIC to any such
institution in danger of default.

5
<PAGE> 6

The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), signed into law on December 19, 1991, imposes on banks relatively
detailed standards and mandates the development of additional regulations
governing nearly every aspect of the operations and management of banks, in
addition to many aspects of bank holding companies. Some of the major
provisions contained in FDICIA includes recapitalization of the Bank Insurance
Fund ("BIF"), a risk-based insurance premium assessment system, a
capital-based supervision system that links supervisory intervention to the
deterioration of a bank's capital level, new auditing and accounting and
examination requirements, and mandated standards for bank lending and
operation.
FDICIA provides the FDIC with the authority to impose assessments on
insured BIF member depository institutions to maintain the fund at the
designated reserve ratio defined in FDICIA. In response to the BIF attaining
the designated reserve ratio in 1995, FDIC assessments were effectively
eliminated in 1996 for banks meeting the requirements of supervisory risk
subgroup 1.A. "well capitalized". Both of the Corporation's subsidiaries have
sufficient captial to maintain this designation (the FDIC's highest rating).
In 1997, banks maintaining the "well capitalized" designation will again have
no FDIC insurance premium requirements except for a special assessment of 1.3
cents per 100 dollars of deposits. This special assessment resulted from the
September 30, 1996 passage of Deposit Insurance Funds Act of 1996 by Congress
and applies to all commercial banks regardless of risk subgroup classification.
Further regulatory changes could impact the amount and type of assessments paid
by the Corporation's subsidiary banks.

Monetary Policy
The monetary and fiscal policies of regulatory authorities, including
the Federal Reserve System, strongly influence the banking industry. Through
open market securities transactions, variations in the discount rate and the
establishment of reserve requirements, the Board of Governors of the Federal
Reserve System exerts considerable influence on interest rates and the supply
of money and credit. The effect of these measures on future business and
earnings of the Corporation cannot be predicted.

Environmental Matters
The Corporation's primary exposure to environmental risk is through
its provision of trust services and its lending activities. In each instance,
the Corporation has policies and procedures in place to mitigate its
environmental risk exposures to the fullest extent possible. With respect to
lending activities, environmental site assessments at the time of loan
origination are mandated by the Corporation to confirm collateral quality as to
commercial real estate parcels posing higher than normal potential for
environmental impact, as determined by reference to present and past uses of
the subject property and adjacent sites. Environmental assessments are also
mandated prior to any foreclosure activity involving non-residential real
estate collateral. In the case of trust services, the Corporation utilizes
various types of environmental transaction screening to identify actual and
potential risks arising from any proposed holding of non-residential real
estate for trust accounts. Consequently the Corporation does not anticipate
any material effect on capital expenditures, earnings or the competitive
position of itself or any of its subsidiaries with regard to compliance with
federal, state or local environmental protection laws or regulations.
Additional information is provided in the "Item 3. Legal Proceedings" section
of this document.

6
<PAGE> 7

ITEM 2. PROPERTIES.

The Corporation's offices are located at One Citizens Banking Center,
328 South Saginaw Street, Flint, Michigan in the main office building of
Citizens Bank, its largest bank subsidiary. The Corporation's subsidiaries
operate through 93 banking offices. Of these, 27 are leased, three are owned
by the banks involved but on leased land, and the remaining are owned. Rent
expense on the leased properties totaled $1,080,000 in 1996.
The banking offices are located in various communities throughout the
State of Michigan and in the Chicago suburbs of Berwyn, Cicero and Elk Grove,
Illinois. At certain Citizens Bank locations a portion of the office building
is leased to tenants.
Additional information related to the property and equipment owned or
leased by the Corporation and its subsidiaries is incorporated herein by
reference from Exhibit 13 on page 28 under the caption "Note 6. Premises and
Equipment" of this document.

ITEM 3. LEGAL PROCEEDINGS.

From time to time, certain of the Corporation's subsidiaries are
notified by applicable environmental regulatory agencies, pursuant to State or
Federal environmental statutes or regulations, that they may be potentially
responsible parties ("PRPs") for environmental contamination on or emanating
from properties currently or formerly owned. Typically, exact costs of
remediating the contamination cannot be fully determined at the time of initial
notification. While, as PRPs, these subsidiaries are potentially liable for
the costs of remediation, in most cases, there are a number of other PRPs
identified as being jointly and severally liable for remediation costs.
Additionally, in certain cases, statutory defenses to liability for remediation
costs may be asserted based on the subsidiaries' status as lending institutions
that acquired ownership of the contaminated property through foreclosure. The
Corporation's management is not presently aware of any environmental
liabilities which pose a reasonable possibility of future material impact on
the Corporation or its earnings. It is the Corporation's policy to establish
and accrue appropriate reserves for all such identified exposures during the
accounting period in which a loss is deemed to be probable and the amount is
determinable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted during the fourth quarter of 1996 to a vote
of security holders through the solicitation of proxies or otherwise.

7
<PAGE> 8

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER'S
MATTERS.

The information required by this item is incorporated herein by
reference from Exhibit 13 on page 18 under the caption "Table 13. Selected
Quarterly Information" of this document.
The approximate number of shareholders of the Registrant's common
stock is 6,700 as of December 31, 1996. This number includes an estimate for
individual participants in the security positions of certain shareholders of
record.
Restrictions on the Registrant's ability to pay dividends is
incorporated herein by reference from Exhibit 13 on pages 36 and 37 under the
caption "Note 16. Regulatory Matters" of this document.

ITEM 6. SELECTED FINANCIAL DATA.

The information required by this item is incorporated herein by
reference from Exhibit 13 on page 1 under the caption "Table 1. Selected
Financial Data" of this document.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Management's Discussion and Analysis of Financial Condition and
Results of Operations required by this item is incorporated herein by reference
from Exhibit 13 on pages 1 through 20 of this document.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Financial Statements are incorporated herein by reference from
Exhibit 13 on pages 21 through 38 of this document.

Supplementary data of the Corporation's quarterly results of
operations required by this item are incorporated herein by reference from
Exhibit 13 on page 18 of this document under the caption "Table 13. Selected
Quarterly Information".

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

8
<PAGE> 9

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required by this item appears in the Corporation's
proxy statement for its annual meeting of shareholders to be held April 15,
1997 ("1996 Proxy Statement"), and is incorporated herein by reference as
follows:

Regulation S-K Item 401 disclosures: Appear under the captions
"Election of Directors" and "Executive Officers" on pages 4 through 7
and on pages 13 through 15, respectively, of the 1996 Proxy Statement.

Regulation S-K Item 405 disclosure: Appears under the caption
"Securities Transactions Reporting" on page 26 of the 1996 Proxy
Statement.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this item appears under the caption
"Compensation of Directors," on pages 9 and 10 and under the captions
"Executive Compensation", "Compensation and Benefits Committee Report on
Executive Compensation", "Shareholder Return", and "Compensation Committee
Interlocks and Certain Transactions and Relationships" on pages 16 through 26
of the Corporation's 1996 Proxy Statement, and is incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this item appears under the captions
"Security Ownership of Certain Beneficial Owners" and "Security Ownership of
Management" on page 2 and on pages 3 and 4, respectively, of the Corporation's
1996 Proxy Statement, and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this item appears under the caption
"Compensation Committee Interlocks and Certain Transactions and Relationships"
on page 26 of the Corporation's 1996 Proxy Statement, and is incorporated
herein by reference.

9
<PAGE> 10

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) 1. Financial Statements:
The following consolidated financial statements of the Corporation and
Report of Ernst & Young LLP, Independent Auditors are incorporated by
reference under Item 8 "Financial Statements and Supplementary Data"
of this document:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors

2. Financial Statement Schedules:
All schedules are omitted -- see Item 14(d) below.

3. Exhibits:
The exhibits listed on the "Exhibit Index" on pages 13 through 15 of
this report are filed herewith and are incorporated herein by
reference.

(b) Reports on Form 8-K
No reports of Form 8-K were filed for the quarter ended December 31,
1996.

(c) Exhibits:
The "Exhibit Index" is filed herewith on pages 13 through 15 of this
report and is incorporated herein by reference.

(d) Financial Statement Schedules:
All financial statement schedules normally required by Article 9 of
Regulation S-X are omitted since they are either not applicable or the
required information is shown in the consolidated financial statements
or notes thereto.

10
<PAGE> 11

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

CITIZENS BANKING CORPORATION
(Registrant)

by /s/Robert J. Vitito Date: March 10, 1997
- -----------------------------
Robert J. Vitito
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Capacity Date
- ------------------------------ ------------------------------------- --------------
<S> <C> <C>
/s/Charles R. Weeks Chairman of the Board and March 10, 1997
- ------------------------------ Director
Charles R. Weeks

/s/Robert J. Vitito President, Chief Executive March 10, 1997
- ------------------------------ Officer and Director
Robert J. Vitito

/s/John W. Ennest Vice Chairman of the Board, March 10, 1997
- ------------------------------ Chief Financial Officer,
John W. Ennest Treasurer and Director

/s/Edward P. Abbott Director March 10, 1997
- ------------------------------
Edward P. Abbott

/s/Hugo E. Braun, Jr. Director March 10, 1997
- ------------------------------
Hugo E. Braun, Jr.

/s/Jonathan E. Burroughs II Director March 10, 1997
- ------------------------------
Jonathan E. Burroughs II
</TABLE>

11
<PAGE> 12

<TABLE>
<CAPTION>
Signature Capacity Date
- ------------------------------ ------------------------------------- --------------
<S> <C> <C>
/s/Joseph P. Day Director March 10, 1997
- ------------------------------
Joseph P. Day

/s/Lawrence O. Erickson Director March 10, 1997
- ------------------------------
Lawrence O. Erickson

/s/Victor E. George Director March 10, 1997
- ------------------------------
Victor E. George

/s/William J. Hank Director March 10, 1997
- ------------------------------
William J. Hank

/s/George H. Kossaras Director March 10, 1997
- ------------------------------
George H. Kossaras

/s/Patricia L. Learman Director March 10, 1997
- ------------------------------
Patricia L. Learman

/s/William F. Nelson, Jr. Director March 10, 1997
- ------------------------------
William F. Nelson, Jr.

/s/Paul A. Rowley Director March 10, 1997
- ------------------------------
Paul A. Rowley

/s/William C. Shedd Director March 10, 1997
- ------------------------------
William C. Shedd

/s/James E. Truesdell, Jr. Director March 10, 1997
- ------------------------------
James E. Truesdell, Jr.

/s/Kendall B. Williams Director March 10, 1997
- ------------------------------
Kendall B. Williams
</TABLE>

12
<PAGE> 13

CITIZENS BANKING CORPORATION
1996 Annual Report on Form 10-K

EXHIBIT INDEX
(FILED AS PART OF THIS REPORT ON FORM 10-K)
<TABLE>
<CAPTION>
Exhibit Form 10-K
No. Exhibit Page No.
- --------- -------------------------------------------------------------------------------------------- ----------
<S> <C> <C>
3(a) Restated Articles of Incorporation, as amended. (incorporated by reference from Exhibit
3(a) of the Corporation's 1995 Annual Report on Form 10K, file number 0-10535).
N/A

3(b) Amended and Restated Bylaws. (incorporated by reference from Exhibit 3(d) of the
Corporation's 1994 Annual Report on Form 10-K, file number 0-10535). N/A

4 Rights Agreement, dated July 20, 1990, between the Corporation and Citizens Bank, as Rights
Agent (incorporated by reference from Exhibit 4(a) of the Corporation's Report on Form
8-K filed July 26, 1990, file number 0-10535). N/A

10(a) Citizens Banking Corporation Stock Option Plan and Citizens Banking Corporation First
Amended Stock Option Plan (incorporated by reference from Exhibit 4(a) of the
Corporation's registration statement on Form S-8 filed November 26, 1986 as amended April
21, 1987--Registration No. 33-10007). N/A

10(b) Citizens Banking Corporation Amended and Restated Section 401(k) Plan. (incorporated by
reference from Exhibit 4a of the Corporation's registration statement on Form S-8 filed
April 26, 1989--Registration No. 33-28354). N/A

10(c) Citizens Banking Corporation Second Amended Stock Option Plan. (incorporated by reference
from Exhibit 4 of the Corporation's registration statement on Form S-8 filed May 5,
1992--Registration No. 33-47686). N/A

10(d) Composite form of "Performance Partnership Program Grant Agreement" executed between the
Corporation and certain executive officers of the Corporation pursuant to the
Corporation's Second Amended Stock Option Plan (incorporated by reference from Exhibit
10(d) of the Corporation's 1992 Annual Report on Form 10-K, file number 0-10535). N/A

10(e) Composite form of "Stock Option Agreement" executed between the Corporation and certain
executive officers of the Corporation pursuant to the Corporation's Second Amended Stock
Option Plan (incorporated by reference from Exhibit 10(e) of the Corporation's 1992
Annual Report on Form 10-K, file number 0-10535). N/A

10(f) Grant Agreement For Charles R. Weeks executed between the Corporation and Charles R. Weeks
pursuant to the Corporation's Second Amended Stock Option Plan (incorporated by reference
from Exhibit 10(f) of the Corporation's 1992 Annual Report on Form 10-K, file number
0-10535). N/A
</TABLE>

13
<PAGE> 14

EXHIBIT INDEX (continued)

<TABLE>
<CAPTION>
Exhibit Form 10-K
No. Exhibit Page No.
- --------- -------------------------------------------------------------------------------------------- ----------
<S> <C> <C>
10(g) Citizens Banking Corporation Management Incentive Compensation Program (incorporated by
reference from page 22 of the Corporation's Proxy Statement for its 1996 Annual Meeting
of Shareholders under the caption "Management Incentive Plan", file number 0-10535).
N/A
10(h) Citizens Banking Corporation Amended and Restated Director's Deferred Compensation Plan.
(incorporated by reference from Exhibit 10(h) of the Corporation's 1994 Annual Report on
Form 10-K, file number 0-10535). N/A

10(i) Deferred Compensation Agreement for Charles R. Weeks, as amended, and related Citizens
Banking Corporation Deferred Benefits Trust Agreement. (incorporated by reference from
Exhibit 10(d) of the Corporation's 1989 Annual Report on Form 10-K, file number 0-10535).
N/A

10(j) Citizens Banking Corporation Supplemental Retirement Benefits Plan for Charles R. Weeks, as
amended. (incorporated by reference from Exhibit 10(e) of the Corporation's 1989 Annual
Report on Form 10-K, file number 0-10535). N/A

10(k) Citizens Bank Supplemental Retirement Benefits Plan for David A. Thomas Jr. (incorporated by
reference from Exhibit 10(f) of the Corporation's 1990 Annual Report on Form 10-K, file
number 0-10535). N/A

10(l) Citizens Banking Corporation Stock Option Plan for Directors (incorporated by reference from
Exhibit 99 of the Corporation's registration statement on Form S-8 filed July 21, 1995--
Registration No. 33-61197). N/A

10(m) Agreement between Charles R. Weeks and Citizens Banking Corporation to continue as Chairman
of the Board of Directors. (1)

10(n) Citizens Banking Corporation Amended and Restated Section 401(k) Plan (incorporated by
reference from Exhibit 99.1 of the Corporation's registration statement on Form S-8 filed
August 2, 1996 -- Registration No. 333-09455). N/A

10(o) Citizens Banking Corporation Supplemental Retirement Benefits Plan for Gary O. Clark. (1)

10(p) Citizens Banking Corporation Supplemental Retirement Benefits Plan for John W. Ennest. (1)

10(q) Citizens Banking Corporation Supplemental Retirement Benefits Plan for Robert J. Vitito. (1)
</TABLE>

14
<PAGE> 15
EXHIBIT INDEX (continued)
<TABLE>
<CAPTION>
Exhibit Form 10-K
No. Exhibit Page No.
- --------- -------------------------------------------------------------------------------------------- ----------
<S> <C> <C>
11 Computation of Per Share Earnings (1)

13 Citizens Banking Corporation 1996 Annual Report (except as to portions expressly
incorporated herein, said Annual Report is included only for information). (1)

21 Subsidiaries of the Corporation (1)

23 Consents of Independent Accountants (1)

27 Financial Data Schedule (1)
</TABLE>

N/A - not applicable, exhibit incorporated by reference.

(1) Exhibit included on the following pages of this Annual Report on Form 10K
filing.

All other Exhibits required to be filed with this Form are not applicable and
have therefore been omitted.

<PAGE> 1
FORM 10K
EXHIBIT 10(m)

April 16, 1996

Mr. Charles R. Weeks
817 Boutell Drive
Grand Blanc, Michigan

Re: Appointment as Chairman of the Board

Dear Chuck:

I am writing on behalf of the Citizens Banking Corporation ("CBC")
Board of Directors to confirm your appointment as Chairman of the Board and to
set forth the parameters of the position.

1. Term. Subject to paragraph 7 below, your term as Chairman of the
CBC Board as governed by the provision of this Agreement will commence May 1,
1996 and end April 30, 1999.

2. Duties. In general, as Chairman, you will fulfill the duties of
that position as set forth in CBC's bylaws. In addition, the Board requests
that you serve as Chairman of the Executive Committee of the Board and of its
Nominating Committee. You also will serve as a director of Citizens Commercial
& Savings Bank. You will be responsible for monitoring and assisting the CBC
Board of Directors in evaluating the performance of CBC's Chief Executive
Officer.

3. Fees. You will be paid an annual fee of $200,000, which is
payable in quarterly installments beginning May 1, 1996. This fee is inclusive
of any other annual retainer or meeting fees otherwise normally paid to
directors of CBC. This fee will be increased 3.0% annually as of May 1,
beginning May 1, 1997. In addition, you will be paid the normal fee for
services as a director of Citizens Commercial & Savings Bank, at the times and
in amounts as established for directors of that bank.

4. Expenses. Upon presentation to CBC's Treasurer of an appropriate
accounting and supporting documentation, you will be reimbursed by CBC for all
reasonable travel and entertainment expenses incurred by you in your capacity
as Chairman.

5. Deferred Fee Plan and Stock Options. You will be eligible to
participate in the Board's deferred fee plan and stock option plan on the same
basis as other non-employee directors of CBC.

1
<PAGE> 2

Mr. Charles R. Weeks
April 16, 1996
Page 2

6. Office Space and Secretarial Assistance. For your convenience, an
office will be made available for your use at CBC's main location, and
reasonable secretarial assistance will be provided at that location. However,
we understand that much of your work will be performed at home or elsewhere;
equipment and clerical service outside the CBC offices will be at your own
expense.

7. Termination. In the event you should fail to be re-elected as a
director of the Corporation prior to the expiration of the term specified in
Paragraph 1. above or you should be removed as Chairman of the Board prior to
the expiration of the term specified in paragraph 1 above, for reasons other
than willful misconduct or negligence in your performance, you will be entitled
to one-half of the annual fees provided in paragraph 3 prorated for the
remainder of the term. If you should voluntarily resign as Chairman of the
Board prior to the expiration of your term, you will forfeit all right to
future payment under this agreement. In the event of your death or permanent
and total disability, your fee for the year will be prorated through the date
of death or permanent and total disability and any unpaid amount will be paid
to you or your estate as the case may be. No payments will be made under this
agreement to your spouse or any other beneficiary.

8. Governing Law. The Board intends that this agreement shall be
governed by Michigan law.

Please acknowledge your acceptance of this Agreement by signing and
returning to me the extra copy of this letter that is enclosed.

Sincerely,

/s/Hugo E. Braun, Jr.
-------------------------------------
Hugo E. Braun, Jr.
for the Citizens Banking Corporation
Board of Directors

Acknowledged and Agreed:

/s/Charles R. Weeks
- --------------------------------
Charles R. Weeks

Dated: April 16, 1996
----------------

<PAGE> 1
FORM 10K
EXHIBIT 10(o)

CITIZENS BANKING CORPORATION
SUPPLEMENTAL RETIREMENT BENEFITS PLAN
FOR GARY O. CLARK

1. ADOPTION OF PLAN. Effective July 19, 1996, Citizens Banking
Corporation ("Corporation") hereby establishes the Supplemental Retirement
Benefits Plan for Gary O. Clark ("Plan").

2. COVERAGE. The coverage of the Plan shall be limited to Gary O.
Clark ("Participant").

3. SUPPLEMENTAL RETIREMENT BENEFIT. Participant shall, subject to
paragraph 4, be entitled to the supplemental retirement benefit described
below:

(a) AMOUNT AT AGE 65. The annual amount of the Supplemental
Retirement Benefit, when expressed in the form of a single life annuity
commencing at age 65, shall be equal to the excess of (i) over (ii), where--

(i) is 55.0% of the highest average base salary paid to
Participant by Corporation during any consecutive five years
out of the final ten years of employment by Corporation, and

(ii) is the sum of Participant's normal retirement benefit
under the Citizens Banking Corporation Pension Plan for
Employees ("Pension Plan") calculated as of his attainment of
age 65, and the Participant's Social Security benefit also
calculated as of age 65, in each case without regard to any
changes in either benefit amount that may occur subsequent to
that age due to increases for cost-of-living or other factors.

(b) AMOUNT AT AGE PRIOR TO AGE 65. If Participant elects
early retirement under the Pension Plan, the annual amount of the Supplemental
Retirement Benefit, when expressed in the form of a single life annuity
commencing at such early retirement date, shall be equal to the excess of (i)
over (ii), where--

(i) is 55.0% of the highest average base salary paid to
Participant by Corporation during any consecutive five years
out of the final ten years of employment by Corporation,
reduced by 5/9ths of 1.0% for each complete calendar month
that the Participant's retirement date precedes his 65th
birthday, and

(ii) is the sum of Participant's early retirement benefit
under the Pension Plan calculated as a Participant's early
retirement age, and the Participant's Social Security benefit
also calculated as of Participant's early retirement age (or,
if later, the earliest age at which the Participant is
entitled to receive a Social Security benefit, but with that
Social Security amount reduced by 5/9th of 1.0% for each
complete calendar month that the Participant's early
retirement date precedes his first eligibility for such
benefit), in each case without regard to any changes in either
benefit amount that may

1
<PAGE> 2

occur subsequent to such age due to increases for
cost-of-living or other factors.

(c) COMMENCEMENT AND FORM OF BENEFIT. Supplemental
Retirement Benefit payments shall be made in monthly installments at the same
time as normal or early retirement benefits, as the case may be, under the
Pension Plan, but in no event earlier than Participant's attainment of age 60.
If Participant is married at the time benefits commence hereunder, the
Supplemental Retirement Benefit shall be converted to and paid in the form of a
50% joint and survivor annuity with Participant's spouse as the joint
annuitant, unless Participant validly elects another form of payment for
benefits under the Pension Plan, in which case the Supplemental Retirement
Benefit shall be converted to and payable in the same form as elected under the
Pension Plan. In all events, all forms of payment of the Supplemental
Retirement Benefit shall be computed using the same formulas and actuarial
factors set forth in the Pension Plan for the determination of optional forms
of benefits. For purposes of this paragraph 3, Participant's "spouse" shall be
determined in accordance with the Pension Plan.

4. CONDITIONS. Payment of benefits under the Plan shall be made only
upon receipt of benefits from the Pension Plan, and only if Participant retires
on or after the date of his attainment of age 60 or such earlier age as may be
determined by resolution of Corporation's Board of Directors. Prior to
Participant's attainment of such age, the benefits under this Plan shall be
forfeitable, unless Participant terminates employment with Corporation
subsequent to a change in control (as defined in Corporation's Second Amended
Stock Option Plan) which occurs subsequent to the effective date of this Plan,
or unless otherwise determined by resolution of Corporation's Board of
Directors.

5. COST OF PLAN.

(a) The entire cost of providing benefits under the Plan
shall be paid by Corporation out of its current operating budget, and
Corporation's obligations under the Plan shall be an unfunded and unsecured
promise to pay. Corporation shall not be obligated under any circumstances to
fund its obligations under the Plan.

(b) Notwithstanding paragraph (a), Corporation may, at its
sole option, or by agreement, informally fund its obligations under the Plan in
whole or in part, through a group or individual rabbi or similar trust
established with a banking institution unaffiliated with Corporation; provided,
however, in no event shall such informal funding be construed to create any
trust fund, escrow account or other security for Participant with respect to
the payment of benefits under the Plan, other than as permitted under Internal
Revenue Service and Department of Labor rules and regulations for unfunded
supplemental retirement plans.

(c) If Corporation decides to fund the Plan informally, in
whole or in part, by procuring, as owner, life insurance for its own benefit on
the life of Participant, the form of such insurance and the amounts thereof
shall be the sole decision of Corporation, and in no event shall Participant or
any beneficiary have any incidents of ownership in any such policies of
insurance. If a physical examination is required for Corporation to obtain
insurance for Participant under this

2
<PAGE> 3

paragraph, Participant agrees to undergo such physical examinations as may be
required by the insurance carrier. Such physical examinations shall be
conducted by a physician approved by Corporation, at the expense of
Corporation.

(d) No contributions by Participant are required or permitted
under the Plan.

(e) All taxes on benefits payable to Participant under the
Plan, except for the employer's share of applicable employment taxes, shall be
the obligation of Participant. To the extent that benefits (or their present
value) become taxable to Participant at any time prior to actual payment of
those benefits, such as in the case of the Medicare tax, and to the extent that
Corporation is required to withhold taxes, those taxes shall be withheld from
other compensation payable by Corporation to Participant.

7. LIMITATION OF PARTICIPANT'S RIGHTS.

(a) The Plan not be deemed to create a contract of employment
between Corporation and Participant and shall create no right in Participant to
continue in Corporation's employment for any specific period of time, or to
create any other rights in Participant or obligations on the part of
Corporation, except as are set forth herein or in any written employment
contract. Nor shall the Plan restrict the right of Corporation to terminate
Participant, or restrict the right of Participant to terminate his employment,
except as otherwise provided by written employment contract.

(b) The rights of Participant or any person claiming through
Participant under the Plan shall be solely those of an unsecured general
creditor of Corporation. Participant, or any person claiming through
Participant, shall have the right to receive from Corporation only those
payments as specified herein. Participant agrees that he or any person
claiming through him shall have no rights or interests in any asset of
Corporation.

(c) Except to the extent provided by paragraph 5(b) and as
permitted by applicable tax law, no asset used or acquired by Corporation in
connection with the liabilities it has assumed under the Plan shall be deemed
to be held under any trust for the benefit of Participant. Nor shall it be
considered security for the performance of the obligations of Corporation,
except as provided by separate agreement and as permitted under Internal
Revenue Service and Department of Labor rules and regulations for unfunded
supplemental retirement plans.

8. PLAN ADMINISTRATOR AND CLAIMS PROCEDURE.

(a) The Plan Administrator and Named Fiduciary of the Plan
for purposes of the Employee Retirement Income Security Act of 1974, as
amended, shall be the Compensation and Benefits Committee of Corporation's
Board of Directors, whose business address is c/o Citizens Banking Corporation,
One Citizens Banking Center, Flint, Michigan 48502-9985, and whose telephone
number is (810) 766-7500. Corporation's Board of Directors shall have the
right to change the Plan Administrator and Named Fiduciary of the Plan at any
time, and to change the address and

3
<PAGE> 4

telephone number of the same. Corporation shall give Participant written
notice of any such change in the Plan Administrator and Named Fiduciary or in
the address or telephone number of the same.

(b) Participant, or other person claiming through
Participant, must file a written claim for benefits with the Plan Administrator
as a prerequisite to the payment of benefits under the Plan. Any denial by the
Plan Administrator of a claim for benefits under the Plan by Participant or
other person (collectively referred to as "claimant") shall be stated in
writing by the Plan Administrator and delivered or mailed to the claimant
within 90 days after receipt of the claim, unless special circumstances require
an extension of time for processing the claim. If such an extension of time is
required, written notice of the extension shall be furnished to the claimant
prior to the termination of the initial 90-day period. In no event shall such
extension exceed a period of 90 days from the end of the initial period. Any
notice of denial shall set forth the specific reasons for the denial, specific
reference to pertinent provisions of the Plan upon which the denial is based, a
description of any additional material or information necessary for the
claimant to perfect his claim, with an explanation of why such material or
information is necessary, and any explanation of claim review procedures under
the Plan, written to the best of the Plan Administrator's ability in a manner
that may be understood without legal or actuarial counsel.

(c) A claimant whose claim for benefits has been wholly or
partially denied by the Plan Administrator may request, within 90 days
following the date of such denial, in a writing addressed to the Plan
Administrator, a review of such denial. The claimant shall be entitled to
submit such issues or comments in writing or otherwise, as he shall consider
relevant to a determination of his claim, and may include a request for a
hearing in person before the Plan Administrator. Prior to submitting his
request, the claimant shall be entitled to review such documents as the Plan
Administrator shall agree are pertinent to his claim. The claimant may, at all
stages of review, be represented by counsel, legal or otherwise, of his choice,
provided that the fees and expenses of such counsel shall be borne by the
claimant. All requests for review shall be promptly resolved. The Plan
Administrator's decision with respect to any such review shall be set forth in
writing and shall be mailed to the claimant not later than 60 days following
receipt by the Plan Administrator of the claimant's request unless special
circumstances, such as the need to hold a hearing, require an extension of time
for processing, in which case the Plan Administrator's decision shall be so
mailed not later than 120 days after receipt of such request. In no decision
or review is rendered within this 120 day period, the claimant's appeal shall
be deemed denied and the Plan Administrator's original denial of the claim
affirmed.

(d) Any claim under this claims procedure must be submitted
within twelve months from the earlier of (1) the date on which the claimant
learned of facts sufficient to enable him to formulate such claim, or (2) the
date on which the claimant reasonable should have been expected to learn of
facts sufficient to enable him to formulate such claim.

(e) The decision of the Plan Administrator upon review of any
claim shall be binding upon the claimant, his heirs and assigns, and all other
persons claiming by, through or under him.

4
<PAGE> 5

(f) The timely filing of a request for review in the manner
specified above shall be a condition precedent to obtaining review before the
Plan Administrator, and the Plan Administrator shall have no jurisdiction to
entertain a request for review unless so filed. A failure to file a claim and
a request for review in the manner and within the time limits set forth above
shall be deemed a failure by the aggrieved party to exhaust his administrative
remedies and shall constitute a waiver of the rights sought to be established
under the Plan.

(g) Any suit brought to contest or set aside a decision of
the Plan Administrator shall be filed in a court of competent jurisdiction
within one year from the date of receipt of written notice of the Plan
Administrator's final decision or from the date the appeal is deemed denied, if
later. No legal action to recover Plan benefits or to enforce or clarify
rights under the Plan shall be commenced until the claimant first shall have
exhausted the claims and review procedures available to him hereunder.

9. INDEPENDENCE OF BENEFITS. Except as otherwise provided herein, the
benefits payable under the Plan shall be independent of, and in addition to,
any other benefits or compensation, whether by salary, or bonus or otherwise,
payable under any employment agreements that now exist or may hereafter exist
from time to time between Corporation and Participant. The Plan does not
involve a reduction in salary or foregoing of an increase in future salary by
Participant. Nor does the Plan in any way affect or reduce the existing and
future compensation and other benefits of Participant.

10. NON-ALIENATION OF BENEFITS. Except in so far as this provision
may be contrary to applicable law, no sale, transfer, alienation, assignment,
pledge, collateralization, or attachment of any benefits under the Plan shall
be valid.

11. RIGHT TO AMEND OR TERMINATE PLAN.

(a) Corporation reserves the right to amend the Plan in any
manner, and Corporation reserves the right to terminate the Plan at any time in
whole or part. Amendment or termination of the Plan shall be accomplished by
resolution of Corporation's Board of Directors.

(b) Notwithstanding paragraph (a), no such amendment or
termination shall reduce or otherwise affect the benefits payable to or on
behalf of Participant that have accrued prior to such amendment or termination
without the written consent of Participant (or beneficiary, if applicable).

12. CONSTRUCTION AND GOVERNING LAW.

(a) Wherever any words are used in the Plan in the masculine
gender, they shall be construed as though they also were used in the feminine
gender in all cases where they would so apply, and wherever any words are used
in the Plan in the singular form, they shall be construed as though they also
were used in the plural form in all cases where they would so apply, and vice
versa.

5
<PAGE> 6

(b) Headings of paragraphs herein are inserted for
convenience of reference. They constitute no part of the Plan and are not to
be considered in the construction of the Plan.

(c) If any provisions of the Plan shall be for any reason
invalid or unenforceable, the remaining provisions nevertheless shall be
carried into effect.

(d) Except in the case of preemption by applicable federal
law, the Plan shall be governed by the laws of the State of Michigan.

It is intended that the Plan shall be unfunded and maintained by
Corporation primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees, so that the Plan is
exempt from the requirements of Parts 2, 3 and 4 of the Employee Retirement
Income Security Act of 1974, as amended. All provisions shall be interpreted
in accordance with such intentions.

Citizens Banking Corporation has caused the Plan to be executed on
July, 1996.

Citizens Banking Corporation

By: /s/ Robert J. Vitito
--------------------------
President and Chief Executive Officer

<PAGE> 1
FORM 10K
EXHIBIT 10(p)

CITIZENS BANKING CORPORATION
SUPPLEMENTAL RETIREMENT BENEFITS PLAN
FOR JOHN W. ENNEST

1. ADOPTION OF PLAN. Effective July 19, 1996, Citizens Banking
Corporation ("Corporation") hereby establishes the Supplemental Retirement
Benefits Plan for John W. Ennest ("Plan").

2. COVERAGE. The coverage of the Plan shall be limited to John W.
Ennest ("Participant").

3. SUPPLEMENTAL RETIREMENT BENEFIT. Participant shall, subject to
paragraph 4, be entitled to the supplemental retirement benefit described
below:

(i) is 50.0% of the highest average base salary paid to
Participant by Corporation during any consecutive five years
out of the final ten years of employment by Corporation, and

(i) is 50.0% of the highest average base salary paid to
Participant by Corporation during any consecutive five years
out of the final ten years of employment by Corporation,
reduced by 5/9ths of 1.0% for each complete calendar month
that the Participant's retirement date precedes his 65th
birthday, and

1
<PAGE> 2

occur subsequent to such age due to increases for
cost-of-living or other factors.

5. COST OF PLAN.

2
<PAGE> 3

(d) No contributions by Participant are required or permitted
under the Plan.

7. LIMITATION OF PARTICIPANT'S RIGHTS.

8. PLAN ADMINISTRATOR AND CLAIMS PROCEDURE.

3
<PAGE> 4

telephone number of the same. Corporation shall give Participant written
notice of any such change in the Plan Administrator and Named Fiduciary or in
the address or telephone number of the same.

(e) The decision of the Plan Administrator upon review of any
claim shall be binding upon the claimant, his heirs and assigns, and all other
persons claiming by, through or under him.

4
<PAGE> 5

11. RIGHT TO AMEND OR TERMINATE PLAN.

12. CONSTRUCTION AND GOVERNING LAW.

<PAGE> 1
FORM 10K
EXHIBIT 10(q)

CITIZENS BANKING CORPORATION
SUPPLEMENTAL RETIREMENT BENEFITS PLAN
FOR ROBERT J. VITITO

1. ADOPTION OF PLAN. Effective July 19, 1996, Citizens Banking
Corporation ("Corporation") hereby establishes the Supplemental Retirement
Benefits Plan for Robert J. Vitito ("Plan").

2. COVERAGE. The coverage of the Plan shall be limited to Robert J.
Vitito ("Participant").

3. SUPPLEMENTAL RETIREMENT BENEFIT. Participant shall, subject to
paragraph 4, be entitled to the supplemental retirement benefit described
below:

(i) is 60.0% of the highest average base salary paid to
Participant by Corporation during any consecutive five years
out of the final ten years of employment by Corporation, and

(i) is 60.0% of the highest average base salary paid to
Participant by Corporation during any consecutive five years
out of the final ten years of employment by Corporation,
reduced by 5/9ths of 1.0% for each complete calendar month
that the Participant's retirement date precedes his 65th
birthday, and

1
<PAGE> 2

occur subsequent to such age due to increases for
cost-of-living or other factors.

5. COST OF PLAN.

2
<PAGE> 3

(d) No contributions by Participant are required or permitted
under the Plan.

7. LIMITATION OF PARTICIPANT'S RIGHTS.

8. PLAN ADMINISTRATOR AND CLAIMS PROCEDURE.

3
<PAGE> 4

telephone number of the same. Corporation shall give Participant written
notice of any such change in the Plan Administrator and Named Fiduciary or in
the address or telephone number of the same.

(e) The decision of the Plan Administrator upon review of any
claim shall be binding upon the claimant, his heirs and assigns, and all other
persons claiming by, through or under him.

4
<PAGE> 5

11. RIGHT TO AMEND OR TERMINATE PLAN.

12. CONSTRUCTION AND GOVERNING LAW.

5
<PAGE> 6

(b) Headings of paragraphs herein are inserted for
convenience of reference. They constitute no part of the Plan and are not to
be considered in the construction of the Plan.

(c) If any provisions of the Plan shall be for any reason
invalid or unenforceable, the remaining provisions nevertheless shall be
carried into effect.

(d) Except in the case of preemption by applicable federal
law, the Plan shall be governed by the laws of the State of Michigan.

Citizens Banking Corporation has caused the Plan to be executed on
July, 1996.

Citizens Banking Corporation

By: /s/ Charles R. Weeks
--------------------------
Chairman of the Board

<PAGE> 1

FORM 10K
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS

Net income per share is computed based on the weighted average number of
shares outstanding, including the dilutive effect of stock options, as follows:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Year Ended December 31,
(in thousands, except per share amounts) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME: $37,421 $33,596 $29,414
======= ======= =======

PRIMARY EARNINGS PER SHARE:
Actual average shares outstanding 14,392 14,213 14,096
Net effect of the assumed exercise of stock options -- based on
the treasury stock method using average market price for the
period 274 362 367
------- ------- -------
Pro forma average shares outstanding 14,666 14,575 14,463
======= ======= =======

Net Income Per Common Share: $ 2.55 $ 2.31 $ 2.03
======= ======= =======

FULLY DILUTED EARNINGS PER SHARE:

Actual average shares outstanding 14,392 14,213 14,096

Net effect of the assumed exercise of stock options -- based on
the treasury stock method using year end market price 305 399 416
------- ------- -------
Pro forma average shares outstanding 14,697 14,612 14,512
======= ======= =======

Net Income Per Common Share: $ 2.55 $ 2.30 $ 2.03
======= ======= =======
</TABLE>

<PAGE> 1
EXHIBIT 13

CITIZENS BANKING CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS
AND
CONSOLIDATED FINANCIAL STATEMENTS

<PAGE> 2

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, 1995
Compared with 1994 ........................... 19

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 ................. 39

V. Report of Management ........................... 40

<PAGE> 3

TABLE 1. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

(in thousands except per share data 1996 1995(4) 1994 1993(2) 1992(1)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Net interest income $ 146,116 $ 137,495 $ 118,400 $ 104,334 $ 99,975
Provision for loan losses 8,334 6,441 5,303 5,597 6,251
Investment securities gains (losses) 101 198 157 763 (17)
Noninterest income 40,429 36,236 33,697 30,452 27,082
Noninterest expense 125,986 121,087 107,245 97,268 92,555
Income taxes 14,905 12,805 10,292 6,914 4,765
Income before cumulative effect
of change in accounting
principle 37,421 33,596 29,414 25,770 23,469
Net income 37,421 33,596 29,414 25,770 10,564
Cash dividends 14,528 12,770 11,557 9,937 9,027

PER COMMON SHARE DATA
Primary:
Income before cumulative
effect of change in accounting
principle $ 2.55 $ 2.31 $ 2.03 $ 1.88 $ 1.77
Net income 2.55 2.31 2.03 1.88 0.79
Fully diluted:
Income before cumulative effect
of change in accounting principle 2.55 2.30 2.03 1.87 1.75
Net income 2.55 2.30 2.03 1.87 0.79
Cash dividends 1.010 0.900 0.820 0.745 0.690
Book value, end of year 21.98 20.73 18.31 18.08 16.73
Market value, end of year 31.50 29.75 27.75 25.00 19.25

AT YEAR END
Assets $3,483,850 $3,463,922 $2,703,823 $2,714,112 $2,498,934
Loans 2,620,731 2,428,513 1,816,221 1,780,180 1,557,423
Deposits 2,864,807 2,864,701 2,252,318 2,246,750 2,086,144
Long-term debt 84,133 105,411 5,249 10,865 15,093
Shareholders' equity 315,242 297,186 258,730 255,163 219,276

AVERAGE FOR THE YEAR
Assets $3,455,290 $3,279,646 $2,710,747 $2,535,068 $2,472,245
Earning assets 3,186,631 3,002,753 2,500,215 2,348,691 2,290,884
Loans 2,532,639 2,302,414 1,797,153 1,643,327 1,539,332
Deposits 2,856,567 2,702,346 2,262,182 2,109,269 2,061,613
Interest-bearing deposits 2,395,818 2,250,711 1,882,451 1,783,718 1,769,078
Repurchase agreements and
other short-term borrowings 161,964 146,000 141,230 138,375 135,624
Long-term debt 83,308 102,813 8,667 13,112 16,965
Shareholders' equity 304,022 277,597 256,607 231,160 210,193

FINANCIAL RATIOS
Return on average:(3)
Shareholders' equity 12.31% 12.10% 11.46% 11.15% 11.17%
Earning assets 1.17 1.12 1.18 1.10 1.02
Assets 1.08 1.02 1.09 1.02 0.95
Average shareholders' equity/ave. 8.80 8.46 9.47 9.12 8.50
assets
Dividend payout ratio (3) 38.83 38.01 39.29 38.56 38.46
Net interest margin (FTE) 4.77 4.77 4.99 4.74 4.71
Tier I leverage 7.33 6.65 9.52 8.90 8.57
Risk-based capital:
Tier I capital 9.39 8.79 13.44 13.12 12.73
Total capital 10.64 10.04 14.69 14.36 13.90
</TABLE>

(1) 1992 income and income per common share were affected by nonrecurring
items. Nonrecurring items included restructuring expenses related to the
leasing subsidiary, employee benefit costs related to adopting the accrual
method of accounting for retiree benefits and a curtailment gain resulting
from modification of retiree benefit plans. If the nonrecurring items had
been excluded from the results of operations for 1992, income before
cumulative effect of change in accounting principle would have been reduced
by $1.152 million or $0.08 per fully diluted share.
(2) 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.
(3) Based on income before cumulative effect of change in accounting principle.
(4) 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.

Page 1

<PAGE> 4
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. Citizens Banking
Corporation earned $37,421,000 or $2.55 per fully diluted share during 1996
compared with $33,596,000 or $2.30 per share in 1995. Net income was up
$3,825,000 or $0.25 per fully diluted share over the prior year and reflected
an 11.4% increase in net income. This marked the Corporation's fourteenth
consecutive year of increased net operating income and ninth consecutive year
of record earnings.
Return on average assets was 1.08% in 1996, a 5.9% increase from 1.02% in
1995. The earnings improvement reflects lower FDIC insurance premiums, the
full year earnings effect of the acquired banks and the efficiencies gained
from the 1995 operational integration and conversion of the acquired banks to
Citizens' corporate systems. Return on average equity improved to 12.31% in
1996 compared with 12.10% last year. Average shareholders' equity was $304.0
million or 8.80% of total average assets for 1996 compared with $277.6 million
or 8.46% for 1995. The Corporation's risk-based capital levels exceeded all
regulatory requirements.
The Corporation's 1996 results reflect a full year of operations compared
with ten months of operations in 1995 for the four Michigan affiliates of Banc
One Corporation purchased at the close of business on February 28, 1995. The
transaction was accounted for as a purchase and the four banks ("acquired
banks") were merged into Citizens Bank headquartered in Flint, Michigan
immediately after the acquisition. Total assets acquired of $670 million
included net loans of $532 million and investment securities and money market
investments of $57 million. Cost-in-excess of the fair value of identifiable
net assets acquired ("intangible assets") of $59.2 million is being amortized
over 15 years.
In January 1997, the Corporation announced an agreement to acquire CB
Financial Corporation headquartered in Jackson, Michigan. CB Financial
Corporation has a combined asset base of $826 million and operates thirty-nine
offices throughout Michigan. The Corporation will issue approximately 4.2
million shares of its common stock in a tax free exchange for all of the
outstanding stock of CB Financial Corporation. The acquisition will be
accounted for as a pooling of interests and is expected to be completed by the
end of the second quarter of 1997.
An analysis of changes in major income statement components in 1996 from
1995 is presented below. Overall, the increase in net income 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. 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.

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
%
(in thousands) 1996 1995 Change
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $255,914 $240,600 6.4%
Interest expense 109,798 103,105 6.5
-------- --------
Net interest income 146,116 137,495 6.3
Provision for loan losses 8,334 6,441 29.4
Noninterest income 40,530 36,434 11.2
Noninterest expense 125,986 121,087 4.0
Income taxes 14,905 12,805 16.4
-------- --------
Net income $ 37,421 $ 33,596 11.4
======== ========
</TABLE>

The following table presents "cash earnings" for the Corporation's most
recent three 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.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
CASH EARNINGS SUMMARY
(in thousands except per share
amounts) 1996 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income $41,449 $37,128 $31,016
Fully diluted earnings per
share 2.82 2.54 2.14

Book value per share 17.46 15.82 17.19

Return on average assets 1.22% 1.15% 1.15%

Return on average equity 17.52 17.18 12.88
- ---------------------------------------------------------------------------------
</TABLE>

Page 2
<PAGE> 5

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

<TABLE>
<CAPTION>
1996 1995 1994
----------------------------- ------------------------------ -----------------------------
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)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Money market investments:
Time deposits with banks $ 1.5 $ 0.1 5.62% $ 4.9 $ 0.3 5.87% $ 5.4 $ 0.2 4.65%
Federal funds sold 41.6 2.2 5.27 74.1 4.4 6.01 43.0 1.9 4.46
Term federal funds sold and
other 23.2 1.2 5.33 47.2 2.7 5.69 5.1 0.3 5.21
Investment securities(3):
Taxable 414.4 24.0 5.80 402.1 22.5 5.60 447.9 22.7 5.07
Nontaxable 172.9 9.1 8.12 175.4 9.4 8.30 208.1 10.6 7.86
Loans(4):
Commercial 970.1 84.2 8.78 902.4 81.9 9.17 756.2 59.7 8.01
Real estate 514.0 42.7 8.30 436.1 36.2 8.29 389.7 31.8 8.16
Consumer installment 994.2 88.7 8.92 900.1 79.0 8.78 569.4 47.3 8.30
Lease financing 54.3 3.7 6.79 63.8 4.2 6.55 81.9 5.5 6.71
-------- ----- -------- ----- -------- -----
Total earning assets(3) 3,186.2 255.9 8.22 3,006.1 240.6 8.20 2,506.7 180.0 7.45

NONEARNING ASSETS
Cash and due from banks 133.3 141.6 124.3
Premises and equipment 62.3 61.9 53.6
Other assets 108.9 102.4 49.8
Allowance for loan losses (35.4) (32.4) (23.7)
-------- -------- --------

Total assets $3,455.3 $3,279.6 $2,710.7
======== ======== ========
INTEREST-BEARING LIABILITIES
Deposits:
Interest-bearing demand $312.7 5.4 1.73 $309.4 5.8 1.87 $256.1 4.4 1.71
Savings 900.9 24.5 2.71 909.7 25.6 2.82 909.4 21.7 2.39
Time 1,182.2 66.2 5.60 1,031.6 56.8 5.50 717.0 29.9 4.17
Short-term borrowings 162.0 7.4 4.61 146.0 7.2 4.95 141.2 5.1 3.62
Long-term debt 83.3 6.3 7.56 102.8 7.7 7.52 8.7 0.5 5.24
-------- ----- -------- ----- -------- -----
Total interest-bearing
liabilities 2,641.1 109.8 4.16 2,499.5 103.1 4.12 2,032.4 61.6 3.03

NONINTEREST-BEARING LIABILITIES
AND SHAREHOLDERS' EQUITY
Demand deposits 460.7 451.6 379.7
Other liabilities 49.5 50.9 42.0
Shareholders' equity 304.0 277.6 256.6
----------- --------- --------
Total liabilities and
shareholders' equity $3,455.3 $3,279.6 $2,710.7
======== ======== ========

NET INTEREST INCOME $ 146.1 $137.5 $ 118.4
======= ====== =======
NET INTEREST INCOME AS A PERCENT
OF EARNING ASSETS 4.77% 4.77% 4.99%
</TABLE>

(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 $5,931,000, $5,983,000 and $6,684,000 for the years ended
December 31, 1996, 1995, and 1994, 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

<PAGE> 6

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 6.1% higher during 1996 compared with 1995.
The composition of average earning assets changed in 1996 as total average
loans increased $230 million to 79.5% of average earning assets from 76.7% in
1995. Average investment securities including money market investments
represented 20.5% of average earning assets in 1996 compared with 23.3% in
1995. Total average interest-bearing liability balances increased 5.7% in 1996
compared to 1995, while average noninterest-bearing deposit balances increased
2.0%.
The average yield on earning assets remained consistent with the prior
year increasing two basis points to 8.22% in 1996. Yields increased up to 24
basis points in all loan categories except commercial which declined 39 basis
points. This decline was primarily due to reductions in the prime lending
rate which occurred in the latter portion of 1995 and early 1996. The cost of
interest-bearing liabilities increased four basis points to 4.16% in 1996 from
4.12% in 1995. This increase was attributable to higher rates on time
deposits and long-term debt partially offset by lower rates on demand, savings
and short-term borrowings. The increased rates on interest bearing liabilities
were partially offset by increased yields on earning assets causing the
interest spread on earning assets (the difference between the average yield on
earning assets and the average rate on interest-bearing liabilities) to
decrease only two basis points. As a result, net interest margin remained
unchanged at 4.77% for both 1996 and 1995.

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

<TABLE>
<CAPTION>
1996 COMPARED TO 1995 1995 Compared to 1994
------------------------------------- ------------------------------------
INCREASE (DECREASE) Increase (Decrease)
Year Ended December 31 DUE TO CHANGE IN Due to Change in
NET ----------------------- Net -----------------------
(in millions) CHANGE(1) RATE (2) VOLUME Change(1) Rate (2) Volume
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Money market investments:
Time deposits with banks $ (0.2) $ (0.0) $ (0.2) $ 0.1 $ 0.1 $(0.0)
Federal funds sold (2.2) (0.3) (1.9) 2.5 1.1 1.4
Term federal funds sold (1.5) (0.1) (1.4) 2.4 0.2 2.2
Investment securities:
Taxable 1.5 0.8 0.7 (0.2) 1.8 (2.0)
Tax-exempt (0.3) (0.2) (0.1) (1.2) 0.5 (1.7)
Loans 18.0 (0.2) 18.2 57.0 16.2 40.8
----- ------ ------ ----- ------ ------
Total 15.3 0.0 15.3 60.6 19.9 40.7
----- ------ ------ ----- ------ ------
INTEREST EXPENSE:
Deposits:
Demand (0.4) (0.4) 0.0 1.4 0.4 1.0
Savings (1.1) (1.5) 0.4 3.9 4.1 (0.2)
Time 9.4 1.0 8.4 26.9 13.2 13.7
Short-term borrowings 0.2 (0.4) 0.6 2.1 1.9 0.2
Long-term debt (1.4) 0.1 (1.5) 7.2 2.3 4.9
------ ------ ------ ----- ------ ------
Total 6.7 (1.2) 7.9 41.5 21.9 19.6
------ ------ ------ ----- ------ ------
NET INTEREST INCOME $ 8.6 $ 1.2 $ 7.4 $19.1 $ (2.0) $ 21.1
====== ====== ====== ===== ====== ======
</TABLE>

(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 rate.

Page 4

<PAGE> 7

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 $8.6 million in 1996 due to volume-related
increases primarily attributable to loan growth partially offset by increased
time deposits. Lower rates for demand and savings deposits and short term
borrowings offset the effect of higher rates on time deposits resulting in a
favorable rate related variance of $1.2 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 1997, 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 1992 through 1996
appears in Table 4.

TABLE 4. SUMMARY OF LOAN LOSS EXPERIENCE

<TABLE>
<CAPTION>
Year Ended December 31 (in thousands) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for loan losses - January 1 $ 34,771 $ 24,714 $ 22,547 $ 19,404 $ 19,759
Allowance of acquired banks --- 7,235 --- 1,642 ---
Provision for loan losses 8,334 6,441 5,303 5,597 6,251
CHARGE-OFFS:
Commercial 4,078 2,971 1,869 2,629 2,781
Real estate(1) 42 69 72 403 946
Consumer 6,505 4,362 3,020 3,182 4,169
Lease financing 70 519 1,153 182 803
---------- ---------- ---------- ---------- ----------
Total charge-offs 10,695 7,921 6,114 6,396 8,699
---------- ---------- ---------- ---------- ----------
RECOVERIES:
Commercial 1,079 1,534 1,390 673 601
Real estate(1) 16 22 4 177 10
Consumer 2,446 2,675 1,510 1,362 1,474
Lease financing 46 71 74 88 8
---------- ---------- ---------- ---------- ----------
Total recoveries 3,587 4,302 2,978 2,300 2,093
---------- ---------- ---------- ---------- ----------
Net charge-offs 7,108 3,619 3,136 4,096 6,606
---------- ---------- ---------- ---------- ----------

Allowance for loan losses - December 31 $ 35,997 $ 34,771 $ 24,714 $ 22,547 $ 19,404
========== ========== ========== ========== ==========

Loans outstanding at year-end $2,620,731 $2,428,513 $1,816,221 $1,780,180 $1,557,423
Average loans outstanding 2,532,639 2,302,414 1,797,153 1,643,327 1,539,332
Ratio of allowance for loan losses
to loans outstanding at year-end 1.37% 1.43% 1.36% 1.27% 1.25%
Ratio of net loans charged off as a
percentage of average loans
outstanding 0.28% 0.16% 0.17% 0.25% 0.43%
</TABLE>

(1) 1996, 1995 and 1994 commercial real estate loan balances and related
charge-offs and recoveries are reflected in the commercial loan category.
Previous years' balances have not been reclassified.

Page 5
<PAGE> 8

Management increased the provision for loan losses in 1996 by $1.9 million
from 1995, primarily due to loan growth of $192.2 million and higher
charge-offs in 1996. Net loan charge-offs were 0.28% of average loans in 1996,
up from 0.16% in 1995. Gross charge-offs increased $2.8 million, or 35.0%
from 1995. Nearly half of this increase is due to the charge-off of a single
commercial credit. Recoveries on loans previously charged off decreased 16.6%
as compared to the prior year due to unusually high recoveries in 1995. At
year end, the allowance for loan losses was $36.0 million or 1.37% of total
loans, up $1.2 million from December 31, 1995.
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 21.7% of total operating income or 1.2%
of average assets in 1996, increasing from 20.9% and 1.1%, respectively, in
1995. Noninterest income is up 11.2% or $4,096,000 in 1996 as compared to 1995
due to significant increases in trust fees, brokerage and investment fees, cash
management and other loan income. A portion of the increase is due to a full
year of operations of the acquired banks as compared to ten months of results
for 1995. An analysis of the components of noninterest income is on the
following page.
Trust fees increased $1,002,000 or 8.9%. The largest increases occurred
in personal trust and employee benefit plan services. The Corporation offers
comprehensive trust services to its clients including investment management
services, in the personal trust, institutional and employee benefit plan market
segments.
Deposit service charges increased 5.4% which is attributable to
standardization of all deposit fees and services offered to our clients. This
change resulted in enhanced fees in several of the Corporation's market
areas and product lines. Brokerage and investment fees increased $635,000 or
57.5% as a result of increased market penetration.
Increased volume and improved pricing strategies resulted in higher ATM
network user fees in 1996 as compared to 1995. Cash management service fees
increased 36.0% in 1996 as compared to the previous year. This increase is
volume related as clients have responded to enhanced investment options which
include various money market funds from which the Corporation receives a
management fee. Safe deposit rental fees increased 9.0% as compared to the
prior year, as a result of pricing increases.
In July 1996, the Corporation announced the sale of its residential
mortgage loan servicing operations to LaSalle Home Mortgage Corporation. The
transaction was completed in September and resulted in an immediate gain of
$1,550,000 related to mortgage loans previously serviced by the Corporation for
other investors. An additional deferred gain of $5.1 million related to
mortgages owned by the Corporation will be recognized over the estimated life
of the loans. Excluding this gain, other loan income declined in 1996
primarily due to the discontinuance of the mortgage servicing function and
fewer sales of mortgage loans into the secondary market.
The Corporation realized net gains on sales of investment securities of
$101,000 during 1996 compared with net gains of $198,000 during 1995. As
presented in Note 3 to the Consolidated Financial Statements, gross realized
gains on sales of investment securities amounted to $103,000 in 1996 while
gross realized losses amounted to $2,000. The comparable amounts in 1995 were
$202,000 and $4,000, respectively. Proceeds from sales of investment
securities during 1996 totaled $2.8 million or 0.5% of total average security
holdings compared with $7.0 million or 1.2% in 1995. The 1996 and 1995 net
gains resulted from the sale of certain securities to reposition the investment
portfolio based on the current rate environment.

Page 6

<PAGE> 9

NONINTEREST INCOME Year Ended
December 31, Changes in 1996
---------------- ------------------
(in thousands) 1996 1995 Amount Percent
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust fees $12,316 $11,314 $1,002 8.9%
Service charges on deposit accounts 10,242 9,717 525 5.4
Bankcard fees 5,968 5,635 333 5.9
Brokerage and investment fees 1,740 1,105 635 57.5
Other loan income 3,166 1,925 1,241 64.5
ATM network user fees 1,993 1,665 328 19.7
Cash management services 1,412 1,038 374 36.0
Safe deposit rentals 1,103 1,012 91 9.0
Investment securities gains 101 198 (97) (49.0)
Other 2,489 2,825 (336) (11.9)
------- ------- ------

Total noninterest income $40,530 $36,434 $4,096 11.2
======= ======= ======
<CAPTION>

Noninterest Expense Year Ended
December 31, Changes in 1996
------------------ ------------------
(in thousands) 1996 1995 Amount Percent
- -------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Salaries and employee benefits $ 68,242 $ 64,357 $ 3,885 6.0%
Equipment 9,804 9,709 95 1.0
Occupancy 9,294 9,000 294 3.3
Intangible asset amortization 5,469 4,687 782 16.7
FDIC insurance premiums 9 3,250 (3,241) (99.7)
Bankcard fees 3,831 3,418 413 12.1
Stationery and supplies 3,649 3,570 79 2.2
Postage and delivery 3,419 3,189 230 7.2
Advertising and public relations 3,247 2,386 861 36.1
Taxes, other than income taxes 2,703 2,448 255 10.4
Consulting and other professional fees 2,783 1,782 1,001 56.2
Legal, audit and examination fees 1,475 1,762 (287) (16.3)
Other loan fees 2,701 1,860 841 45.2
Other 9,360 9,669 (309) (3.2)
-------- -------- -------
Total noninterest expense $125,986 $121,087 $ 4,899 4.0
======== ======== =======
</TABLE>

Page 7

<PAGE> 10

NONINTEREST EXPENSE

The major components of noninterest expense are summarized on the previous
page. Noninterest expense increased $4,899,000, or 4.0% in 1996 as compared
to 1995.

SALARIES AND BENEFITS
Compensation is the Corporation's largest noninterest expense. Total
compensation expense increased 6.0% to $68,242,000 from $64,357,000 in 1995
partially due to the full year effect of the acquired banks. In addition to
the effect of the acquired banks, higher costs for pension, workers
compensation and medical insurance, increased incentive pay and normal merit
increases also contributed to the rise in compensation costs.
The Financial Accounting Standards Board issued Statement No. 123,
"Accounting for Stock Based Compensation" in October 1995, effective for the
Corporation's year end 1996 financial statements. The Corporation did not
adopt the recognition provisions of the Statement but will continue accounting
for stock options in accordance with Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" as permitted by the new Statement.
Therefore, adoption has not materially impacted the Corporation. See Note 13,
Shareholders' Equity in the Notes to the Consolidated Financial Statements for
further discussion.

OTHER NONINTEREST EXPENSES
Noninterest expense excluding salaries and benefits increased 1.8% due in part
to the full year effect of the acquired banks. Other increases were primarily
offset by a decline in FDIC insurance assessment expense to $9,000 in 1996 from
$3,250,000 in 1995. The assessments were essentially eliminated in 1996 as the
FDIC's Bank Insurance Fund maintained a designated reserve to deposit ratio of
at least 1.25%. Beginning in January 1997, the Corporation's two banks will
pay FDIC assessments of approximately $1.3 cents per $100 of deposits.
Consulting and other professional fees, advertising and public relations
and the loan fee expense categories reflect the most significant increases in
1996 as compared to 1995. Deposit and loan product standardization and other
ongoing corporate automation initiatives attributed to the increase in
consulting and other professional services in 1996 as compared to 1995. Higher
mortgage loan volumes resulted in additional mortgage appraisal and processing
fees expense. The additional mortgage costs are more than offset by increases
in mortgage application, origination and processing income collected as a
result of higher loan volumes originated in 1996. This related income is
reflected in the Corporation's net interest income.
In October 1995, the Corporation announced the consolidation of its six
Michigan chartered banks into one bank called Citizens Bank. The
consolidation, which occurred in June 1996, further streamlined operations and
reduced certain costs but retained local management and community boards of
directors. The promotional campaign associated with the consolidation
increased advertising and public relations expenses during 1996 as compared to
the prior year.
Legal, audit and examination fees decreased in 1996 as compared to 1995
primarily due to a reduction in loan collection related expenses and regulatory
examination fees. The examination fees reduction is the result of the
consolidation of the Michigan subsidiaries into one bank in 1996.
Excluding the impact of the first quarter 1995 acquisition, occupancy and
equipment expense declined in 1996 while postage increased a modest 2.7% as
compared to the previous year. These were the result of continued cost
containment efforts. Intangible asset amortization increased $781,000 in 1996
as compared with 1995 as a result of a full year of amortization of intangible
assets acquired associated with the February 28, 1995 acquisition.

FEDERAL INCOME TAXES

Income tax expense was $14,905,000 in 1996, an increase of 16.4% over the
1995 total of $12,805,000. The increase was due to higher pre-tax earnings and
lower tax-exempt interest income in 1996 as compared to 1995.

Page 8
<PAGE> 11

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 security 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 $3.455 billion for 1996, up $175.6
million from 1995, primarily due to loan growth and the full year impact of the
first quarter 1995 acquisition. The ratio of average earning assets to total
average assets during 1996 was 92.2%, compared to 91.6% for 1995. Average
loans and leases comprised 73.3% of total assets during 1996, up from 70.2% in
1995. The ratio of average noninterest-bearing deposits to total deposits
decreased 0.6% to 16.1% as compared to 1995. Interest-bearing deposits
comprised 90.7% of total average interest-bearing liabilities during 1996, up
from 90.0% in 1995. Average long-term debt decreased $19.5 million to 3.2% of
average interest-bearing liabilities as a result of current year principal
payments on the debt associated with the 1995 acquisition.

INVESTMENT SECURITIES AND MONEY MARKET INVESTMENTS
Total investment securities, including money market investments, comprised
20.5% of total average earning assets in 1996, down from 23.3% in 1995. A
summary of average investment security balances during 1996 and 1995 follows:

INVESTMENT SECURITIES

<TABLE>
<CAPTION>
Average Balances(1) Changes in 1996
------------------------- ---------------------
Year Ended December 31 (in thousands) 1996 1995 Amount Percent
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury $182,558 $206,253 $(23,695) (11.5)%
Federal agencies:
Mortgage-backed 91,057 76,324 14,733 19.3
Other 94,704 59,945 34,759 58.0
State and municipal:
Taxable 30,256 42,033 (11,777) (28.0)
Tax-exempt 175,211 177,392 (2,181) (1.2)
Other 13,811 12,201 1,610 13.2
-------- -------- --------
Total $587,597 $574,148 $ 13,449 2.3%
======== ======== ========
</TABLE>

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

Average total investment in U.S. Treasury securities comprised 31.1% of
average total investment securities during 1996, decreasing slightly from 35.9%
in 1995. Average Federal agency mortgage-backed securities, primarily
collateralized mortgage obligations ("CMO's"), and other Federal agency
securities increased 19.3% and 58.0%, respectively, in 1996 as proceeds from
the maturities of other investments were used to purchase additional
securities. The Corporation continues to invest in U.S. Treasury and Federal
agency securities which offer increased creditworthiness and liquidity compared
with other securities, primarily privately issued CMO's.
Total state and municipal securities comprised 35.0% of total average
investment securities during 1996 compared with 38.2% in 1995. Average
tax-exempt state and municipal securities decreased 1.2% from 1995. Purchases
of these securities remain dependent on the Corporation's capacity to
effectively utilize tax-exempt income.
Other securities consisting of Federal Reserve stock, Federal Home Loan
Bank stock ("FHLB"), privately issued CMO's and asset backed securities
increased 13.2%. The increase occurred as a result of one of the Corporation's
subsidiaries membership in the FHLB and the subsequent purchase of its shares.

Page 9
<PAGE> 12

Money market investments, primarily federal funds sold and term federal
funds sold, averaged $66.3 million in 1996, down 59.8% from $126.2 million in
1995. 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, 1996, the estimated aggregate fair value of the Corporation's
investment securities portfolio was $1.4 million above amortized cost. At
December 31, 1996 gross unrealized gains were $4.2 million and gross unrealized
losses were $2.8 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 3 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)
----------------------------- ------------------------------- ------------------------
Amortized Fair Amortized Fair Amortized Fair
(in millions) Cost Value Yield Cost Value Yield Cost Value Yield
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE:
MATURITES AT DECEMBER 31, 1996
DUE WITHIN ONE YEAR $107.5 $107.2 6.01% $ 41.1 $ 41.1 7.89% $ 0.3 $ 0.3 7.86%
ONE TO FIVE YEARS 252.6 251.6 5.86 54.6 56.3 8.80 0.8 0.8 7.89
FIVE TO TEN YEARS 13.9 13.9 7.27 51.7 52.2 8.01 0.3 0.3 7.22
AFTER TEN YEARS 1.9 1.9 7.42 41.4 41.8 8.07 12.7 12.8 7.05
------ ------ ------ ------ ----- -----
TOTAL $375.9 $374.6 5.96 $188.8 $191.4 8.23 $14.1 $14.2 7.12
====== ====== ====== ====== ===== =====
AVERAGE MATURITY 1.72 YRS. 4.83 YRS. 4.08 YRS.

At December 31, 1995
Total $345.6 $346.5 5.63% $209.1 $213.5 8.11% $10.8 $10.9 6.45%
====== ====== ====== ====== ===== =====
Average maturity 1.39 yrs. 4.31 yrs. 1.76 yrs.

At December 31, 1994
Total $346.8 $331.0 5.27% $229.0 $226.4 7.89% $ 6.5 $ 6.6 6.67%
====== ====== ====== ====== ===== =====
Average maturity 2.00 yrs. 4.34 yrs. 3.53 yrs.

<CAPTION>
Total
---------------------------
Amortized Fair
Cost Value Yield
-------- -------- -----
<C> <C> <C>
AVAILABLE-FOR-SALE:
MATURITES AT DECEMBER 31, 1996
DUE WITHIN ONE YEAR $148.9 $148.6 6.53%
ONE TO FIVE YEARS 308.0 308.7 6.38
FIVE TO TEN YEARS 65.9 66.4 7.85
AFTER TEN YEARS 56.0 56.5 7.82
------ ------
TOTAL $578.8 $580.2 6.72
====== ======
AVERAGE MATURITY 2.80 YRS.

At December 31, 1995
Total $565.5 $570.9 6.56%
====== ======
Average maturity 2.94 yrs.

At December 31, 1994
Total $582.3 $564.0 6.32%
====== ======
Average maturity 2.94 yrs.

</TABLE>

(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

<PAGE> 13
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 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's loan
portfolio is widely diversified by borrowers with no concentration within a
single industry that exceeds 10% of total loans. The Corporation's loan
portfolio balances are summarized in Table 6.
Total average loans and leases comprised 79.5% of total average
earning assets during 1996 compared with 76.7% during 1995. As the economy
continued to expand in 1996, the Corporation experienced greater loan
demand with total average loans increasing 10.0% (6.4% excluding the acquired
banks). This growth occurred in all major loan categories except the lease
financing portfolio.
Increased demand for business loans in the Corporation's local
markets and improved economic conditions modestly expanded the commercial and
commercial real estate loan portfolio 6.0% (3.6% excluding the acquired banks)
in 1996 from 1995 levels. Average consumer loan balances increased to
$94.1 million in 1996, or 10.5% (9.1% excluding the acquired banks) compared to
1995. Average mortgage loan balances increased $77.9 million or 17.9% in 1996,
from $46.4 million in 1995 (8.7% excluding the acquired banks).
In May 1995, Financial Accounting Standards Board issued Statement
No. 122 "Accounting for Mortgage Servicing Rights". The Statement
amends FASB Statement No. 65 to require mortgage banking related companies to
recognize as a separate asset the rights to service mortgage loans for others
regardless of how those servicing rights are acquired. This may be through
purchase or origination of the mortgage loans. The Statement is effective for
years beginning after December 15, 1995. In September 1996, the Corporation
sold its residential mortgage loan servicing operations to LaSalle Home Mortgage
Corporation. As a result of the sale, the Statement has no material impact on
the Corporation.

TABLE 6. LOAN PORTFOLIO

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------------- ----------------- ----------------- ------------------ -----------------
December 31 (in millions) AMOUNT PERCENT Amount Percent Amount Percent Amount Percent Amount Percent
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 680.2 26.0% $ 566.9 23.3% $ 461.9 25.4% $ 426.9 24.0% $ 398.7 25.6%
Real estate commercial 295.4 11.3 339.0 14.0 286.4 15.8 286.6 16.1 247.3 15.9
Real estate construction 37.8 1.4 34.0 1.4 24.9 1.4 38.3 2.2 23.4 1.5
Real estate mortgage 541.8 20.7 457.8 18.9 384.4 21.2 398.1 22.3 336.8 21.6
Consumer 1,018.3 38.8 970.7 40.0 581.3 32.0 534.7 30.0 471.4 30.3
Lease financing 47.2 1.8 60.1 2.4 77.3 4.3 95.6 5.4 79.8 5.1
-------- ---- -------- ----- -------- ------ -------- ----- -------- -----
Total $2,620.7 100.0% $2,428.5 100.0% $1,816.2 100.0% $1,780.2 100.0% $1,557.4 100.0%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>

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
$20.4 million as of December 31, 1996, a decrease of 3.4% from the year-end 1995
total of $21.1 million. Nonperforming loans as a percentage of total loans plus
other real estate declined to 0.78% at December 31, 1996 from 0.87% on December
31, 1995, a decrease of 10.3%. The decline resulted from the Corporation's
continued management of loan portfolio quality and favorable economic
conditions. In addition, during 1996 consumer loan balances (which historically
contain lower levels of nonperforming 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 70.7% of the 1996 average balances, an increase from 66.7% over
1995. One to four family residential home loans comprise the majority of the
real estate mortgage balances. The Corporation's commercial real estate
portfolio represents 11.3% of total loans at December 31, 1996 compared to 14.0%
at year end 1995. Within this portfolio, nonperforming loans represented 15.0%
of total nonperforming loans at December 31, 1996 compared with 16.4% at
December 31, 1995. 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
<PAGE> 14

TABLE 7. NONPERFORMING ASSETS AND PAST DUE LOANS

<TABLE>
<CAPTION>
December 31 (in thousands) 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NONPERFORMING LOANS(1),(2)
Nonaccrual(3)
Less than 30 days past due $ 5,531 $ 4,783 $ 5,185 $ 2,518 $ 3,247
From 30 to 89 days past due 1,278 784 1,405 938 1,781
90 or more days past due 10,979 13,057 11,566 17,815 15,731
------- ------- ------- ------- -------
Total 17,788 18,624 18,156 21,271 20,759
90 days past due and still accruing 1,362 432 1,253 155 1,206
Restructured(1) 502 494 299 238 382
------- ------- ------- ------- -------
Total nonperforming loans 19,652 19,550 19,708 21,664 22,347
OTHER REAL ESTATE(3) 749 1,568 2,230 2,185 4,333
------- ------- ------- ------- -------
Total nonperforming assets $20,401 $21,118 $21,938 $23,849 $26,680
======= ======= ======= ======= =======
Nonperforming loans as a percent of total loans 0.75% 0.81% 1.09% 1.22% 1.44%
Nonperforming assets as a percent of total loans
plus other real estate 0.78 0.87 1.21 1.34 1.71
NONPERFORMING LOANS BY TYPE
Commercial $10,797 $13,059 $15,741 $13,034 $10,874
Real Estate(3),(4) 3,269 2,543 1,224 5,232 8,940
Consumer 3,913 2,600 1,174 1,574 1,503
Lease financing 1,673 1,348 1,569 1,824 1,030
------- ------- ------- ------- -------
Total $19,652 $19,550 $19,708 $21,664 $22,347
======= ======= ======= ======= =======
</TABLE>

(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 1996 for
nonaccrual and restructured loans, as of Decmber 31, 1996, assuming
interest had been accrued throughout the year in accordance with original
terms was $1.513 million. The comparable 1995 and 1994 totals were $2.509
million, and $1.879 million, respectively. Interest collected on these
loans and included in income was $0.818 million in 1996, $1.427 million in
1995 and $1.128 million in 1994. Therefore, on a net basis, total income
foregone due to these loans was $0.695 million in 1996, $1.082 million in
1995 and $0.751 million in 1994.
(3) Assets in-substance foreclosed previously reported as other
real estate were reclassified as nonaccrual loans in the fourth quarter
of 1993. Assets in- substance foreclosed totaled $0 at December 31, 1996
and 1995; $0.021 million at December 31, 1994; $1.720 million at
December 31, 1993 and $2.983 million at December 31, 1992.
(4) 1996, 1995 and 1994 nonperforming commercial real estate loan
balances have been reclassified into the nonperforming commercial loan
category. Previous years' balances have not been reclassified.

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, 1996, such loans
amounted to $12.3 million or 0.5% of total loans compared with $10.8 million or
0.5% of total loans as of December 31, 1995. 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
1.25% of total loans as of December 31, 1996 improving from 1.32% as of
December 31, 1995.

Page 12
<PAGE> 15

TABLE 8. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
Amount Allocated by Loan Category
----------------------------------------------------------
December 31 (in millions) 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $10.1 $11.2 $10.6 $ 6.0 $ 6.9
Real estate construction 0.1 0.1 0.1 0.2 0.1
Real estate mortgage(1) 1.3 1.1 1.0 3.2 3.2
Consumer 12.3 13.2 7.0 6.6 5.7
Lease financing 0.5 1.2 1.2 1.1 1.0
----- ------ ----- ----- -----
Total allocated 24.3 26.8 19.9 17.1 16.9
Unallocated 11.7 8.0 4.8 5.4 2.5
----- ------ ----- ----- -----
Total $36.0 $34.8 $24.7 $22.5 $19.4
===== ====== ===== ===== =====
</TABLE>

The allocation of the allowance for loan losses in the above table are
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.
(1) 1996, 1995 and 1994 commercial real estate loan allowance allocations are
reflected in the commercial loan category. Prior years' allowance
allocations have not been reclassified.

The Corporation adopted Financial Accounting Standards Board
Statement ("SFAS") No. 114, "Accounting by Creditors for Impairment of a
Loan" and SFAS 118, "Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosures" effective January 1, 1995. SFAS 114 requires
creditors to establish 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. 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. The adoption of the Statements did not have a material
effect on the Corporation's financial position or results of operations, nor did
it result in additional provisions for loan losses as the Corporation has
historically established valuation allowances based on the fair value of
collateral securing an impaired loan. In addition, as permitted by SFAS 118,
interest income on impaired loans continues to be recognized in a manner
consistent with prior income recognition policies. For all impaired loans,
other than nonaccrual loans, interest income is recorded on an accrual basis.
Interest income on impaired nonaccrual loans is recognized on a cash basis.
Certain of the Corporation's nonperforming loans included in Table 7 are
considered to be impaired under the Statements. 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. In most instances, impairment is measured based on the
fair value of the underlying collateral. Impairment losses are included in the
provision for loan losses. SFAS 114 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 paragraph.
At December 31, 1996, loans considered to be impaired under
the Statements totaled $16.3 million (of which $9.2 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 $18.8 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.

Page 13
<PAGE> 16

At December 31, 1995, loans considered to be impaired under the
Statements 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, 1995 was approximately $19.9 million. For the year ended
December 31, 1995, 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.
The Corporation maintains policies and procedures to identify and
monitor nonaccrual loans. A loan (including a loan impaired under the
Statements) 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.
Other real estate owned is comprised of property acquired through a
foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure and loans
classified as in-substance foreclosure. In accordance with the Statements, a
loan is classified as in-substance foreclosure when the Corporation has taken
possession of the collateral regardless of whether formal foreclosure
proceedings take place. Therefore, these Statements had no effect in 1996 since
the Corporation's policy on in-substance foreclosed assets had been previously
amended in 1993 to comply with new regulatory guidelines.

During 1996, 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.

TABLE 9. AVERAGE DEPOSITS

<TABLE>
<CAPTION>
1996 1995 1994
-------------------- ------------------- ---------------------
AVERAGE AVERAGE Average Average Average Average
Year Ended December 31 (in millions) BALANCE RATE Balance Rate Balance Rate
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand $ 460.8 --- $ 451.6 --- $ 379.7 ---
Interest-bearing demand 312.7 1.73% 309.4 1.87% 256.1 1.71%
Savings 900.9 2.71 909.7 2.82 909.4 2.39
Time 1,182.2 5.60 1,031.6 5.50 717.0 4.17
-------- -------- --------
Total $2,856.6 3.36 $2,702.3 3.26 $2,262.2 2.48
======== ======== ========
</TABLE>

DEPOSITS
The Corporation's average deposit balances and rates for the past three
years are summarized in Table 9. Total average deposits were 5.7% higher (2.6%
excluding the acquired banks) in 1996 compared with 1995. The Corporation
experienced increases in all deposit categories, with the exception of savings,
which reflected a slight decrease of 1.0%. Deposits continued to shift from
savings to time accounts during 1996 reflecting the change in customer
preferences for yield versus liquidity. Noninterest-bearing demand accounts
comprised 16.1% of total average deposits during 1996, compared to 16.7% in
1995. As of December 31, 1996, certificates of deposits of $100,000 or more
accounted for approximately 9.0% of total deposits compared with 7.6% as of
December 31, 1995. The maturities of these deposits are summarized in Table 10.

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

<TABLE>
<CAPTION>
December 31,
(in millions) 1996
- -----------------------------------------------
<S> <C>
Three months or less $157,291
After three but within six months 35,343
After six but within twelve months 35,789
After twelve months 35,089
--------
Total $263,512
========
</TABLE>

The Corporation gathers deposits primarily from the local markets of its
banking subsidiaries and has not relied on brokered deposits. Management
continues to promote core deposit growth and stability through focused marketing
efforts and competitive pricing strategies.

Page 14
<PAGE> 17

BORROWED FUNDS
Total short-term borrowings, primarily federal funds purchased,
securities sold under agreements to repurchase and Treasury Tax and Loan notes,
averaged $162.0 million or 6.1% of total average interest-bearing liabilities
during 1996 compared with $146.0 million or 5.8% during 1995. Long-term debt
accounted for $83.3 million or 3.2% of average interest-bearing funds during
1996, decreasing from $102.8 million or 4.1% in 1995.
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 requires annual principal
payments of $16.5 million with a final payment of $16 million. During
1996, the Corporation prepaid the scheduled 1997 and a portion of the 1998
amounts due. The outstanding balance of $58.4 million at December 31, 1996 has a
fixed interest rate of 7.65%. Of this amount, $51.4 million and $7.0 million
reprice in March 1997 and March 1998, respectively. 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, 1996. A summary of long-term debt balances as of
December 31, 1996 and 1995 appears in Note 9 to the Consolidated Financial
Statements.
In September 1996, one of the Corporation's subsidiaries obtained a $20
million one year borrowing from the Federal Home Loan Bank. The interest rate
is based on the six-month LIBOR rate less three basis points and reprices on
March 24, 1997. At December 31, 1996 the interest rate was 5.82%.

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.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Regulatory Minimum
------------------------ December 31,
"Well -----------------------
Required Capitalized" 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Risk based:
Tier I capital 4.00% 6.00% 9.39% 8.79% 13.44%
Total capital 8.00 10.00 10.64 10.04 14.69

Tier I leverage 4.00 5.00 7.33 6.65 9.52
</TABLE>

The Corporation declared cash dividends of $1.01 per share in 1996, an
increase of 12.2% over 1995 dividends of $0.90 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 maintains a stock repurchase program initiated in
November 1987. During 1996, 128,500 shares were purchased at an average cost of
$29.34 per share. A total of 1,260,970 shares have been purchased under this
program at an average price of $15.84 per share. 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.

NEW ACCOUNTING PRONOUNCEMENTS
In March 1995 the Financial Accounting Standards Board issued Statement
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". The Statement establishes accounting standards for
the impairment of long-lived assets, such as fixed assets; certain identifiable
intangibles, and goodwill related to those assets. It also specifies when
assets should be reviewed for impairment, how to determine whether an asset is
impaired, how to measure an impairment loss and what financial disclosures are
necessary. The Corporation adopted the Statement effective January 1, 1996 and
the impact was not material.
In June 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 will adopt the
Statement effective January 1, 1997 and 1998 as permitted and does not expect
the impact to be material.

Page 15
<PAGE> 18

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 short-term purposes.
Management has not had to rely on borrowings from either the Federal Reserve,
the Federal Home Loan Bank or the sale of investment securities 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, core funding (deposits plus a portion of repurchase
agreements and long term debt less single maturity certificates of deposits) to
total funding (volatile funding plus core funding) and liquid assets to volatile
funding (interest bearing liabilities plus noninterest bearing deposits less
core funding). During 1996, 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 liquidity levels. These ratios are summarized below for the last three
years.

<TABLE>
<CAPTION>
December 31 1996 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Average loans to deposits 88.7% 85.2% 80.0%
Liquid assets to volatile
funding 63.1 108.5 100.9
Core funding to total funding 89.4 88.8 89.2
</TABLE>

The subsidiary banks manage liquidity to meet client cash flow needs while
maintaining funds available for loan and investment opportunities. As discussed
in Note 16 to the Consolidated Financial Statements, the Federal Reserve Bank
requires the Corporation's banking subsidiaries to maintain certain
noninterest-bearing deposits. These balances averaged $34.7 million and $41.2
million during 1996 and 1995, respectively.
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 1996, the Parent company received
$53.1 million in dividends from subsidiaries and paid $14.5 million in dividends
to its shareholders. The amount of the upstream dividends increased $28.7
million in 1996 as compared to 1995 and was attributable in part, to the June 1,
1996 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 16 to the Consolidated
Financial Statements, $2.8 million was available as of January 1, 1997 for
payment to the Parent company as dividends by the Corporation's banking
subsidiaries without further regulatory approval. Amounts earned by
subsidiaries in 1997 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 26.7% as of
December 31, 1996 compared with 35.5% as of December 31, 1995. Decreases in
long-term debt during 1996 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.

Page 16
<PAGE> 19

INTEREST RATE RISK

Interest rate risk generally arises when the maturity or repricing
structure of the Corporation's assets and liabilities differs 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, 1996.

TABLE 11. INTEREST RATE SENSITIVITY

<TABLE>
<CAPTION>
TOTAL
December 31, 1996 1 2 - 3 4 - 6 7 - 12 WITHIN 1-5 Over
(in millions) Month Months Months Months 1 YEAR Years 5 Years Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RATE SENSITIVE ASSETS(3)
Loans and leases $844.6 $ 119.6 $178.4 $ 272.3 $1,414.9 $ 882.6 $323.2 $2,620.7
Investment securities 22.4 48.6 31.6 46.0 148.6 308.7 122.9 580.2
Short-term investments 2.1 10.0 --- --- 12.1 --- --- 12.1
------ ------- ------ ------- -------- -------- ------ --------
Total $869.1 $ 178.2 $210.0 $ 318.3 $1,575.6 $1,191.3 $446.1 $3,213.0
====== ======= ====== ======= ======== ======== ====== ========
RATE SENSITIVE LIABILITIES
Deposits (2) $176.6 $ 258.5 $280.6 $ 470.4 $1,186.1 $1,029.9 $177.0 $2,393.0
Short-term borrowings 176.4 --- --- --- 176.4 --- --- 176.4
Long-term debt 21.2 51.5 0.1 --- 72.8 6.9 4.4 84.1
------ ------- ------ ------- -------- -------- ------ --------
Total $374.2 $ 310.0 $280.7 $ 470.4 $1,435.3 $1,036.8 $181.4 $2,653.5
====== ======= ====== ======= ======== ======== ====== ========

Period GAP (1) $494.9 $(131.8) $(70.7) $(152.1) $ 140.3 $ 154.5 $264.7 $ 559.5
Cumulative GAP 494.9 363.1 292.4 140.3 294.8 559.5
Cumulative GAP to
Total Assets 14.21% 10.42% 8.39% 4.03% 4.03% 8.46% 16.06% 16.06%
Multiple of Rate Sensitive
Assets to Liabilities 2.32 0.57 0.75 0.68 1.10 1.15 2.46 1.21
</TABLE>

(1) GAP is the excess of rate sensitive assets (liabilities).
(2) Includes interest bearing savings and demand deposits without contractual
maturities of $349 million in the less than one year category and $847
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 $140.3 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 declines. 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
<PAGE> 20

TABLE 12. LOAN MATURITIES AND INTEREST RATE SENSITIVITY

<TABLE>
<CAPTION>
Due Within One to After
December 31 (in millions) One Year Five Years Five Years Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial $500.8 $428.1 $46.7 $ 975.6
Real estate-construction 25.6 11.8 0.4 37.8
------ ------ ----- --------
Total $526.4 $439.9 $47.1 $1,013.4
====== ====== ===== ========
Loans above:
With floating interest rates $353.3 $183.7 $36.8 $ 573.8
With predetermined interest rates 173.1 256.2 10.3 439.6
------ ------ ----- --------
Total $526.4 $439.9 $47.1 $1,013.4
====== ====== ===== ========
</TABLE>

TABLE 13. SELECTED QUARTERLY INFORMATION

<TABLE>
<CAPTION>
1996 1995
---------------------------------------- ----------------------------------------
(in thousands except per share data) FOURTH THIRD SECOND FIRST Fourth Third Second First
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $64,632 $64,401 $63,912 $62,969 $63,752 $62,779 $62,248 $51,821
Interest expense 27,827 27,202 27,045 27,724 28,216 27,734 26,887 20,268
Net interest income 36,805 37,199 36,867 35,245 35,536 35,045 35,361 31,553
Provision for loan losses 1,771 3,021 1,771 1,771 1,937 1,504 1,580 1,420
Investment securities gains 21 21 7 52 79 15 13 91
Noninterest income 9,776 11,424 9,741 9,488 9,790 9,586 8,889 7,971
Noninterest expense 31,119 32,190 31,853 30,824 29,952 30,587 32,468 28,080
Net income 9,817 9,603 9,260 8,741 9,759 8,984 7,469 7,384

PER SHARE OF COMMON STOCK
Net income:
Primary 0.67 0.65 0.63 0.60 0.67 0.62 0.51 0.51
Fully diluted 0.67 0.65 0.63 0.60 0.67 0.61 0.51 0.51
Cash dividends declared 0.26 0.26 0.26 0.23 0.23 0.23 0.23 0.21
Market value:(1)
High 32.25 29.50 31.50 31.50 32.50 33.25 31.00 27.00
Low 28.75 27.25 27.50 28.50 29.00 29.25 25.25 24.94
Close 31.50 28.63 29.00 30.50 29.75 30.38 29.75 26.50
</TABLE>

(1) Citizens Banking Corporation common stock is traded on the National
Market tier of the Nasdaq stock market (trading symbol: CBCF). At
December 31, 1996, there were approximately 6,700 shareholders of the
Corporation's common stock.

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.

Page 18

<PAGE> 21

YEAR ENDED DECEMBER 31, 1995 COMPARED WITH 1994

Citizens Banking Corporation earned $33,596,000 or $2.30 per fully diluted
share during 1995 compared with $29,414,000 or $2.03 per share in 1994. Net
income was up $4,182,000 or $0.27 per fully diluted share over the prior year
and reflected a 14.2% increase. Return on assets declined 6.4% from 1.09% in
1994 to 1.02% in 1995. This decline is attributable to additional interest
expense, intangible asset amortization costs and nonrecurring systems
conversion costs associated with the first quarter 1995 acquisition. Overall,
the increase in net income in 1995 reflects improvement in net interest income
and noninterest income offset, in part, by increases in the provision for loan
lossess, noninterest expense and income taxes.
Net interest income for 1995 was $137,495,000, an increase of 16.1% over
1994 net interest income of $118,400,000. This increase resulted from higher
levels of earning assets partially offset by increased interest bearing
liabilities, both attributable to the first quarter 1995 acquisition. Yields on
assets increased 75 basis points in 1995 from 1994. However, rates paid on
funding sources increased 109 basis points due to higher rates paid on time
deposits and long-term debt. As a result, the net interest margin decreased to
4.77% in 1995, a 22 basis point decline from 1994.
The provision for loan losses increased to $6,441,000 in 1995 compared
with $5,303,000 in 1994 as a result of the acquisition. Net loan charge-offs
were 0.16% of average total loans in 1995, down from 0.17% in 1994. As of
December 31, 1995, the ratio of the allowance for loan losses to net
charge-offs improved to 9.6 times compared with 7.9 times as of December 31,
1994.
Noninterest income accounted for 20.9% of total operating income or 1.1%
of average assets in 1995, decreasing from 22.2% or 1.3%, respectively, in
1994. The decline was primarily the result of discontinuing the Travel Banking
product line in early 1995, which provided bankcard merchant fee income. This
decrease was more than offset by reductions in associated operating expenses,
including interchange and other bankcard expenses. Excluding the effects of
the Travel Banking product line and the newly acquired banks, 1995 noninterest
income increased by 2.7% over 1994 levels. Excluding the results of the
acquired banks, trust income increased $246,000 or 2.5%. The largest increases
occurred in employee benefit trust services. Deposit service charges increased
12.7% including the results of the newly acquired banks. Brokerage and
investment fees decreased $196,000, or 13.8%, excluding the impact of the
acquired banks. The decrease in brokerage and investment fees is due to lower
market penetration and a temporary reduction in staff during the first half of
1995. Other loan income increased $615,000 from 1994, primarily attributable
to premiums on the sale of student loans and loan servicing income from the
operations of the acquired banks. Net gains on sale of mortgages were $327,000
in 1995 compared with $255,000 in 1994. Excluding the acquired banks, other
loan income increased $25,900 or 2.0% in 1995 as compared to 1994. ATM fees
increased $222,000, or 16.9%, excluding the impact of the acquired banks, due
to increased volumes. Increases in cash management services, safe deposit and
the other fees resulted primarily from the acquired banks.
Excluding the effects of the acquired banks, noninterest expense decreased
$4,143,100, or 3.9% in 1995, from 1994 primarily due to a reduction in the FDIC
insurance assessments paid by the Corporation's banks for the last seven months
of 1995 and the discontinuance of the Travel Banking product line. FDIC
insurance assessments decreased by $1,800,000, or 35.6% in 1995 as compared to
1994. The decline resulted from a new rate schedule implemented by the FDIC
partially offset by an increase in the Corporation's deposit base due to the
purchase of the acquired banks.
Compensation is the Corporation's largest noninterest expense. Excluding
the impact of the acquired banks, total compensation expense increased 0.2% in
1995 as compared to 1994. This modest increase was primarily due to continued
health care benefit cost containment and declines in the number of full-time
equivalent employees, offset in part by higher incentive compensation and merit
increases.
Excluding the impact of the acquired banks, occupancy expense declined
$326,000, or 4.0% and equipment expense increased $119,000 or 1.4% compared to
the previous year. Intangible asset amortization increased $3,085,000 in 1995
compared with 1994 as a result of the February 28, 1995 acquisition. During
the second and third quarters of 1995, the Corporation completed all system
integration and conversions for the acquired banks to operate within Citizens'
corporate systems. This conversion allowed the Corporation to realize cost
savings from the consolidated operating systems beginning in the fourth
quarter of 1995.

Page 19
<PAGE> 22

Excluding the impact of the acquired banks, bankcard processing expense
declined $2,882,000 or 50.3% as compared to 1994, primarily due to the
discontinuance of the Travel Banking product line in early 1995 which had
previously generated significant amounts of interchange and other bankcard
expense.
Income tax expense for 1995 increased 24.4% compared with 1994. This
increase resulted from higher pretax earnings combined with lower tax-exempt
interest income.
The Corporation had total average assets of $3.280 billion in 1995, up
from 1994 average assets of $2.711 billion, primarily due to the acquisition.
Average loans and leases comprise 76.7% of total earning assets in 1995, up
from 71.9% in 1994. Much of this growth occurred in the consumer and
commercial loan portfolios due to improved economic conditions and the
acquisition. Average money market investment balances, primarily federal funds
sold and Eurodollar time deposits increased $72.7 million in 1995 from 1994
levels.
Total average deposits were 19.5% higher in 1995 compared with 1994,
primarily due to the acquisition. Customer preferences resulted in deposit
balance shifts from savings to time accounts in 1995 as indicated by average
savings deposits remaining nearly unchanged despite the acquisition. Average
short-term borrowings, comprised primarily of securities sold under agreements
to repurchase, decreased slightly to 5.9% of average interest-bearing
liabilities in 1995 compared with 6.9% in 1994.
Long-term debt accounted for $102.8 million or 4.1% of average
interest-bearing funds during 1995, increasing from $8.7 million or 0.4% in
1994. To finance the acquisition of the acquired banks, the Corporation's
Parent company obtained a $115 million seven year amortizing revolving credit
facility. The Parent company services the debt's principal and interest
payments with dividends from the subsidiary banks. Average shareholders'
equity was $277.6 million at December 31, 1995, an 8.2% increase over the 1994
average of $256.6 million.

Page 20

<PAGE> 23

CONSOLIDATED BALANCE SHEETS
CITIZENS BANKING CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
December 31,
(in thousands except share amounts) 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 137,867 $ 172,754
Money market investments:
Interest-bearing deposits with banks 84 10,090
Federal funds sold --- 50,000
Term federal funds sold and other 12,043 89,744
---------- ----------
Total money market investments 12,127 149,834
Investment securities available-for-sale (amortized cost
$578,788 in 1996; $565,547 in 1995) 580,171 570,912
Loans:
Commercial 975,628 905,947
Real estate construction 37,803 33,984
Real estate mortgage 541,809 457,758
Consumer 1,018,318 970,755
Lease financing 47,173 60,069
---------- ----------
Total loans 2,620,731 2,428,513
Less: Allowance for loan losses (35,997) (34,771)
---------- ----------
Net loans 2,584,734 2,393,742
Premises and equipment 61,331 63,147
Intangible assets 64,916 70,385
Other assets 42,704 43,148
---------- ----------
Total assets $3,483,850 $3,463,922
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $ 471,780 $ 506,116
Interest-bearing deposits 2,393,027 2,358,585
---------- ----------
Total deposits 2,864,807 2,864,701
Federal funds purchased and securities sold
under agreements to repurchase 146,903 130,556
Other short-term borrowings 29,515 15,468
Other liabilities 43,250 50,600
Long-term debt 84,133 105,411
---------- ----------
Total liabilities 3,168,608 3,166,736
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 - 14,340,020 in 1996; 14,333,920 in 1995 89,231 91,480
Retained earnings 225,112 202,219
Net unrealized gain on securities available-for-sale, net of tax 899 3,487
---------- ----------
Total shareholders' equity 315,242 297,186
---------- ----------
Total liabilities and shareholders' equity $3,483,850 $3,463,922
========== ==========
</TABLE>

See Notes to Consolidated Financial Statements.

Page 21

<PAGE> 24

CONSOLIDATED STATEMENTS OF INCOME
CITIZENS BANKING CORPORATION AND SUBSIDIARIES

(in thousands except share amounts) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $219,266 $201,242 $144,263
Interest and dividends on investment securities:
Taxable 24,048 22,531 22,725
Nontaxable 9,085 9,403 10,568
Money market investments 3,515 7,424 2,433
-------- -------- --------
Total interest income 255,914 240,600 179,989
-------- -------- --------
INTEREST EXPENSE
Deposits 96,035 88,157 56,020
Short-term borrowings 7,466 7,221 5,115
Long-term debt 6,297 7,727 454
-------- -------- --------
Total interest expense 109,798 103,105 61,589
-------- -------- --------
NET INTEREST INCOME 146,116 137,495 118,400
Provision for loan losses 8,334 6,441 5,303
-------- -------- --------
Net interest income after provision for loan losses 137,782 131,054 113,097
-------- -------- --------
NONINTEREST INCOME
Trust fees 12,316 11,314 9,697
Service charges on deposit accounts 10,242 9,717 8,619
Bankcard fees 5,968 5,635 7,694
Other loan income 3,166 1,925 1,310
Investment securities gains 101 198 157
Other 8,737 7,645 6,377
-------- -------- --------
Total noninterest income 40,530 36,434 33,854
-------- -------- --------
NONINTEREST EXPENSE
Salaries and employee benefits 68,242 64,357 55,722
Equipment 9,804 9,709 8,505
Occupancy 9,294 9,000 8,050
Intangible asset amortization 5,469 4,687 1,602
FDIC insurance premiums 9 3,250 5,050
Bankcard fees 3,831 3,418 6,095
Stationery and supplies 3,649 3,570 2,762
Postage and delivery 3,419 3,189 2,359
Advertising and public relations 3,247 2,386 1,717
Other 19,022 17,521 15,383
-------- -------- --------
Total noninterest expense 125,986 121,087 107,245
-------- -------- --------
INCOME BEFORE INCOME TAXES 52,326 46,401 39,706
Income taxes 14,905 12,805 10,292
-------- -------- --------
NET INCOME $ 37,421 $ 33,596 $ 29,414
======== ======== ========
Net Income Per Share:
Primary $ 2.55 $ 2.31 $ 2.03
Fully diluted $ 2.55 $ 2.30 $ 2.03
Average shares outstanding:
Primary 14,666,146 14,574,871 14,463,068
Fully diluted 14,696,805 14,611,736 14,511,706
</TABLE>

See Notes to Consolidated Financial Statements.

Page 22

<PAGE> 25

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

Common Retained Unrealized
(in thousands except per share amounts) Stock Earnings Gain (Loss) Total
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE - JANUARY 1, 1994 $ 91,627 $163,536 $ --- $255,163

Net income 29,414 29,414
Exercise of stock options, net of
shares purchased 1,602 1,602
Cash dividends-$0.82 per share (11,557) (11,557)
Shares acquired for retirement (3,986) (3,986)
Effect on January 1, 1994 of change in
accounting for investment
securities, net of
deferred tax of $3,544 6,582 6,582
Net unrealized loss on securities
available-for-sale,
net of tax effect of $9,955 (18,488) (18,488)
-------- -------- ------- --------
BALANCE - DECEMBER 31, 1994 89,243 181,393 (11,906) 258,730

Net income 33,596 33,596
Exercise of stock options, net of
shares purchased 2,237 2,237
Cash dividends-$0.90 per share (12,770) (12,770)
Net unrealized gain on securities
available-for-sale,
net of tax effect of $8,289 15,393 15,393
-------- -------- ------- --------
BALANCE - DECEMBER 31, 1995 91,480 202,219 3,487 297,186

Net income 37,421 37,421
Exercise of stock options, net of
shares purchased 1,523 1,523
Cash dividends-$1.01 per share (14,528) (14,528)
Shares acquired for retirement (3,772) (3,772)
Net unrealized loss on securities
available-for-sale,
net of tax effect of $1,394 (2,588) (2,588)
-------- -------- ------- --------
BALANCE - DECEMBER 31, 1996 $ 89,231 $225,112 $ 899 $315,242
======== ======== ======= ========
</TABLE>

See Notes to Consolidated Financial Statements.

Page 23

<PAGE> 26

CONSOLIDATED STATEMENTS OF CASH FLOWS
CITIZENS BANKING CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(in thousands) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 37,421 $ 33,596 $29,414
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 8,334 6,441 5,303
Depreciation 7,178 7,272 6,228
Amortization of goodwill and other intangibles 5,469 4,687 1,602
Deferred income taxes (credit) (1,168) 73 (171)
Net amortization on investment securities 1,484 3,019 3,232
Investment securities gains (101) (198) (157)
Other (4,344) 132 (2,260)
-------- --------- --------
Net cash provided by operating activities 54,273 55,022 43,191
-------- --------- --------
INVESTING ACTIVITIES:
Net (increase) decrease in money market investments 137,707 (21,599) (19,035)
Securities available-for-sale:
Proceeds from sale 2,783 6,980 190,275
Proceeds from maturity 374,675 172,975 187,561
Purchase (392,082) (130,782) (312,969)
Net increase in loans and leases (199,326) (87,272) (39,177)
Purchases of premises and equipment (5,362) (6,583) (4,772)
Net cash used for acquisition of subsidiary --- (59,434) ---
-------- --------- --------
Net cash provided (used) by investing activities (81,605) (125,715) 1,883
-------- --------- --------
FINANCING ACTIVITIES:
Net decrease in demand and savings deposits (64,178) (81,726) (29,513)
Net increase in time deposits 64,284 153,423 35,081
Net increase (decrease) in short-term borrowings 30,394 (45,415) (12,296)
Proceeds from issuance of long-term debt 20,000 115,000 ---
Principal reductions in long-term debt (41,278) (19,394) (5,616)
Cash dividends paid (14,528) (12,770) (11,557)
Proceeds from stock options exercised 1,523 2,237 1,602
Shares acquired for retirement (3,772) --- (3,986)
-------- --------- --------
Net cash provided (used) by financing activities (7,555) 111,355 (26,285)
-------- -------- --------
Net increase (decrease) in cash and due from banks (34,887) 40,662 18,789
Cash and due from banks at beginning of year 172,754 132,092 113,303
-------- -------- --------
Cash and due from banks at end of year $137,867 $172,754 $132,092
======== ======== ========

Supplemental Cash Flow Information:
Interest paid $112,522 $95,267 $61,257
Income taxes paid 16,250 12,580 10,235

</TABLE>

See Notes to Consolidated Financial Statements.

Page 24
<PAGE> 27
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 adopted Financial Accounting Standards Board Statement
("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan" and SFAS
118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition
and Disclosures" effective January 1, 1995. The statements require creditors
to establish 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.
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. Prior to 1995, the allowance for loan losses related to these loans
was based on the undiscounted cash flows or the fair value of the collateral
for collateral dependent loans.

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
if the facts and information supporting the initially recorded amount changes.
If the review indicates 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.

Page 25
<PAGE> 28

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 under SFAS 114) are placed on nonaccrual status, all 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
Primary and fully diluted net income per share are computed based on the
weighted average number of shares outstanding in each period and dilutive
common stock equivalents outstanding in each period. Common stock equivalents
consist of common stock issuable under the assumed exercise of stock options
granted under the Corporation's stock option plans, using the treasury stock
method.

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. ACQUISITIONS

At the close of business on February 28, 1995, the Corporation purchased
the four Michigan affiliates of Banc 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. Total assets acquired of $670 million included net loans of
$532 million, investment securities and money market investments of $57
million and deposits of $541 million. Cost-in-excess of the fair value of
identifiable net assets acquired was $59.2 million and is being amortized over
15 years.
In January 1997, the Corporation announced an agreement to acquire CB
Financial Corporation headquartered in Jackson, Michigan. CB Financial
Corporation has a combined asset base of $826 million and operates thirty nine
offices throughout Michigan. The Corporation will issue approximately 4.2
million shares of stock in a tax free exchange for all of the outstanding stock
of CB Financial Corporation. The acquisition will be accounted for as a
pooling of interests and is expected to be completed by the end of the second
quarter of 1997.

NOTE 3. INVESTMENT SECURITIES

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

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 December 31, 1995
-------------------------------------------- --------------------------------------------
ESTIMATED GROSS GROSS Estimated Gross Gross
AMORTIZED FAIR UNREALIZED UNREALIZED Amortized Fair Unrealized Unrealized
(in thousands) COST VALUE GAINS LOSSES Cost Value Gains Losses
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $162,217 $161,409 $402 $1,210 $197,872 $198,462 $958 $367
Federal agencies:
Mortgage-backed 116,038 115,976 451 513 77,349 77,477 471 343
Other 97,645 97,232 112 525 70,436 70,546 135 25
State and municipal 188,793 191,373 3,128 548 209,068 213,491 5,183 760
Mortgage and asset-backed 1,486 1,518 32 -- 4,090 4,149 58 --
Other 12,609 12,663 54 -- 6,732 6,787 55 --
-------- -------- ------ ------ -------- -------- ------ ------
Total $578,788 $580,171 $4,179 $2,796 $565,547 $570,912 $6,860 $1,495
======== ======== ====== ====== ======== ======== ====== ======
</TABLE>

Page 26
<PAGE> 29

The amortized cost and approximate fair value of debt securities at
December 31, 1996, by contractual maturity, are shown below. Actual maturities
may differ from contractual maturities due to prepayment or early call
privileges of the borrower.

<TABLE>
<CAPTION>
- ------------------------------------------------------------
Estimated
Amortized Fair
(in thousands) Cost Value
- ------------------------------------------------------------
<S> <C> <C>
Due within one year $ 47,687 $ 47,593
One to five years 293,585 293,783
Five to ten years 65,975 66,855
After ten years 41,408 41,783
-------- --------
448,655 450,014
Equity securities 12,609 12,663
Mortgage and asset-backed securities 117,524 117,494
-------- --------
Total $578,788 $580,171
======== ========
</TABLE>

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

<TABLE>
<CAPTION>
- -----------------------------------------------
Year Ended December 31,
(in thousands) 1996 1995 1994
- -----------------------------------------------
<S> <C> <C> <C>
Securities gains $103 $202 $326
Securities losses (2) (4) (169)
---- ---- ----
Net gain $101 $198 $157
==== ==== ====
</TABLE>

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. 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 $249.6 million at December 31, 1996, and
$278.2 million at December 31, 1995, 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, 1996
or 1995.

NOTE 4. 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 has limited 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 a 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:

<TABLE>
<CAPTION>
- ---------------------------------------------------
December 31,
(in thousands) 1996 1995
- ---------------------------------------------------
<S> <C> <C>
Nonperforming loans:
Nonaccrual $17,788 $18,624
Loans 90 days past due
(still accruing) 1,362 432
Restructured 502 494
------- -------
Total nonperforming loans 19,652 19,550
Other real estate 749 1,568
------- -------
Total nonperforming assets $20,401 $21,118
======= =======
</TABLE>

Page 27

<PAGE> 30

The effect of nonperforming loans on interest income follows:

<TABLE>
<CAPTION>
- ------------------------------------------------------------
Year Ended December 31,
(in thousands) 1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
At original contract rates $ 1,513 $2,509 $ 1,879
As actually recognized 818 1,427 1,128
------- ------ --------
Interest foregone $ 695 $1,082 $ 751
======= ====== ========
</TABLE>

There are no significant commitments outstanding to lend additional funds
to clients whose loans were classified as nonaccrual or restructured at
December 31, 1996.
At December 31, 1996, loans considered to be impaired under the Statements
totaled $16.3 million (of which $9.2 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 $18.8 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.
At December 31, 1995, 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, 1995
was approximately $19.9 million. For the year ended December 31, 1995, 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 subsidiaries. Total
loans to these clients aggregated $27.5 million and $11.2 million at December
31, 1996 and 1995, respectively. During 1996, new loans of $22.0 million were
made and repayments totaled $5.7 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.
In May 1995, Financial Accounting Standards Board issued Statement No. 122
"Accounting for Mortgage Servicing Rights". The Statement amends FASB
Statement No. 65 to require mortgage banking related companies to recognize as
a separate asset the rights to service mortgage loans for others regardless of
how those servicing rights are acquired. This may be through purchase or
origination of the mortgage loans. The Statement is effective for years
beginning after December 15, 1995. In September 1996, the Corporation sold its
residential mortgage loan servicing operations and as a result of the sale, the
Statement has no material impact on the Corporation.

NOTE 5. ALLOWANCE FOR LOAN LOSSES

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

<TABLE>
<CAPTION>
- -------------------------------------------------------------
(in thousands) 1996 1995 1994
- -------------------------------------------------------------
<S> <C> <C> <C>
Balance - January 1 $ 34,771 $ 24,714 $ 22,547
Allowance of acquired banks -- 7,235 --
Provision for loan losses 8,334 6,441 5,303
Charge-offs (10,695) (7,921) (6,114)
Recoveries 3,587 4,302 2,978
-------- -------- --------
Net charge-offs (7,108) (3,619) (3,136)
-------- -------- --------
Balance - December 31 $ 35,997 $ 34,771 $ 24,714
======== ======== ========

</TABLE>

NOTE 6. PREMISES AND EQUIPMENT

A summary of premises and equipment follows:

<TABLE>
<CAPTION>
- ------------------------------------------------------
December 31,
(in thousands) 1996 1995
- ------------------------------------------------------
<S> <C> <C>
Land $ 10,750 $ 10,792
Buildings 73,256 71,363
Leasehold improvements 3,416 3,391
Furniture and equipment 66,133 63,843
-------- --------
153,555 149,389
Accumulated depreciation
and amortization (92,224) (86,242)
-------- --------
Total $ 61,331 $ 63,147
======== ========
</TABLE>

Certain branch facilities and computer equipment are leased under various
operating leases. Total rental expense, including expenses related to these
operating leases, was $2.4 million in 1996; $2.1 million in 1995 and $1.8
million in 1994. Future minimum rental commitments under noncancelable
operating leases, net of sublease payments, are as follows at December 31,
1996: $1.1 million in 1997; $1.0 million in 1998; $0.9 million in 1999; $0.7
million in 2000; $0.5 million in 2001, and $1.1 million after 2001.

Page 28
<PAGE> 31

NOTE 7. DEPOSITS

A summary of deposits follows:

<TABLE>
<CAPTION>
- ---------------------------------------------------------
(in thousands) 1996 1995
- ---------------------------------------------------------
<S> <C> <C>
Noninterest-bearing demand $ 471,780 $ 506,116
Interest-bearing demand 311,690 318,390
Savings 884,550 907,691
Time deposits over $100,000 263,512 219,158
Other time deposits 933,275 913,346
---------- ----------
Total $2,864,807 $2,864,701
========== ==========
</TABLE>

Excluded from total deposits are demand deposit account overdrafts which
have been reclassified as loans. At December 31, 1996 and 1995, these
overdrafts totaled $0.8 million and $2.7 million, respectively. Time deposits
with remaining maturities of one year or more are $242.4 million at December
31, 1996. The maturities of these time deposits are as follows: $162.9
million in 1998, $51.3 million in 1999, $12.8 million in 2000, $13.6 million in
2001, and $1.8 million after 2001.

NOTE 8. 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 demand notes to the U.S. Treasury.
Information relating to federal funds purchased and securities sold under
agreements to repurchase follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------
(in thousands) 1996 1995 1994
- ----------------------------------------------------------
<S> <C> <C> <C>
At December 31:
Balance $146,903 $130,556 $125,581
Weighted average
interest rate paid 4.43% 4.74% 4.39%

During the year:
Maximum outstanding
at any month-end $154,160 $146,429 $129,846
Daily average 144,732 128,141 120,356
Weighted average
interest rate paid 4.50% 4.83% 3.63%

</TABLE>

NOTE 9. LONG-TERM DEBT

A summary of long-term debt follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------
December 31,
(in thousands) 1996 1995
- ----------------------------------------------------------
<S> <C> <C>
Citizens Banking Corporation
(Parent only):
Floating rate term notes:
Maturing October 1997 $ 1,250 $ 2,500
Revolving credit facility:
Maturing December 2001 58,435 98,378
------- --------
Total 59,685 100,878
Subsidiaries:
FHLB Note 20,000 --
Subordinated debt 4,118 4,057
Nonrecourse lease financing --- 36
Other 330 440
------- --------
Total 24,448 4,533
------- --------
Total long-term debt $84,133 $105,411
======= ========
</TABLE>

The floating rate term note matures in October 1997. Interest is payable
quarterly at a rate selected by the Corporation from certain indices available
under the agreement. At December 31, 1996, the rate was 5.84%.
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, 1996, the Corporation has repaid the scheduled 1997 and a portion
of the 1998 amount due. The outstanding balance of $58.4 million at December
31, 1996 has a fixed rate of 7.65%. Of this amount, $51.4 million reprices in
March 1997 and $7.0 million in March 1998. 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 covenents as of December 31, 1996.
In September 1996, one of the Corporation's subsidiaries borrowed $20
million on a one year note from the Federal Home Loan Bank. The interest rate
is based on the six-month LIBOR rate less three basis points and reprices on
March 24, 1997. At December 31, 1996 the interest rate was 5.82%.

Page 29
<PAGE> 32

The subordinated debt was assumed by the Corporation as part of the 1995
acquisition. The total subordinated debt is payable on April 15, 2003.
Interest is payable semiannually at a fixed rate of 6.72%. Other subsidiary
debt also assumed as part of the acquisition consists of an EDC mortgage due
April 1, 2002. Interest is payable monthly at an interest rate of 75% of the
prime rate.
Nonrecourse lease financing represents borrowings from unaffiliated
lenders against future lease payments. These borrowings were paid in full as
of December 31, 1996.

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

<TABLE>
<CAPTION>
- -----------------------------------------------------------
(in thousands) Parent Subsidiaries Consolidated
- -----------------------------------------------------------
<S> <C> <C> <C>
1997 $ 1,194 $20,110 $21,304
1998 9,491 --- 9,491
1999 16,500 --- 16,500
2000 16,500 --- 16,500
2001 16,000 --- 16,000
Over 5 Years --- 4,338 4,338
------- ------- -------
Total $59,685 $24,448 $84,133
======= ======= =======
</TABLE>

NOTE 10. EMPLOYEE BENEFIT PLANS

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

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Year Ended December 31,
(in thousands) 1996 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Defined benefit pension plans:
Qualified plan - funded:
Service cost $ 1,981 $ 1,541 $ 1,534
Interest cost 2,615 2,339 2,188
Actual return on plan assets (5,717) (6,825) 281
Net amortization and deferral 1,795 2,783 (4,014)
------- ------- -------
Net cost (income) 674 (162) (11)
------- ------- -------
Supplemental plans - unfunded:
Service cost 104 103 105
Interest cost 164 119 106
Net amortization and deferral 113 38 58
------- ------- -------
Net cost 381 260 269
------- ------- -------
Net pension cost 1,055 98 258
Defined contribution 401(k) plan 1,760 1,738 1,431
------- ------- -------
Total benefit cost $ 2,815 $ 1,836 $ 1,689
======= ======= =======
</TABLE>

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:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
December 31,
(in thousands) 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits $27,168 $21,281
Nonvested benefits 652 623
------- -------
Accumulated benefit obligation 27,820 21,904
Effect of projected future
compensation levels 8,390 12,257
------- -------
Projected benefit obligation 36,210 34,161
Plan assets at fair value, primarily listed
stocks and bonds, corporate obligations
and money market and mutual funds 45,638 41,483
------- -------
Plan assets in excess of projected
benefit obligation 9,428 7,322
Unrecognized net gain (8,964) (6,001)
Unrecognized prior service cost 98 115
Unrecognized net asset at transition
being recognized over 16 years (924) (1,125)
------- -------
Prepaid (accrued) pension cost recognized
in the Consolidated Balance Sheets $ (362) $ 311
======= =======
</TABLE>

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

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average discount rate 8.00% 7.75% 8.50%
Rate of increase in future
compensation levels (1) (1) (1)
Long-term rate of return 9.00 9.00 9.00

</TABLE>

(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, 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.
At December 31, 1995, the projected benefit obligation for these plans totaled
$1.7 million of which $113,000 was subject to later amortization. The
remaining $1.6 million is included in other liabilities in the accompanying
Consolidated Balance Sheets.

Page 30
<PAGE> 33

DEFINED CONTRIBUTION PLAN
The Corporation maintains a defined contribution 401(k) savings 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 base 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.

POSTEMPLOYMENT BENEFITS
Effective January 1, 1994, the Corporation adopted Financial Accounting
Standards Board Statement No. 112, "Employers' Accounting for Postemployment
Benefits." It requires, under certain circumstances, accrual of the estimated
cost of benefits provided to former or inactive employees after employment but
before retirement. Such benefits (referred to as postemployment benefits)
include, but are not limited to, salary continuation, supplemental unemployment
benefits, severance benefits, disability-related benefits, job training and
counseling, and continuation of benefits such as health care and life insurance
coverage. The unrecorded liability for these accrued benefits at adoption and
at year-end 1996 and 1995 was not material.

NOTE 11. POSTRETIREMENT BENEFIT PLAN

The Corporation maintains an unfunded postretirement defined benefit plan
offering medical and life insurance benefits. This plan, as amended effective
January 1, 1993, 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.
The following table presents the plan's unfunded status reconciled with
amounts recognized in the Corporation's Consolidated Balance Sheets at December
31:

<TABLE>
<CAPTION>
- --------------------------------------------------------------
(in thousands) 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ (9,697) $(10,073)
Fully eligible plan participants (5) --
Other active plan participants (213) (218)
-------- --------
Total unfunded obligation (9,915) (10,291)
Unrecognized net gain (3,021) (2,878)
Unrecognized prior service cost (1,745) (2,200)
-------- --------
Accrued postretirement benefit cost $(14,681) $(15,369)
======== ========
</TABLE>

Net periodic postretirement benefit cost includes the following
components:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Year Ended December 31,
(in thousands) 1996 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 11 $ 10 $ 48
Interest cost 769 761 896
Net amortization and deferral (578) (643) (455)
----- ----- -----
Net periodic postretirement
benefit cost $ 202 $ 128 $ 489
===== ===== =====
</TABLE>

The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 8.00% and 7.75% at December 31, 1996 and
1995, respectively. The weighted-average annual assumed rate of increase in
the per capita cost of covered benefits (i.e., health care cost trend rate) is
8% for 1997 (9% for 1996) and is assumed to decrease 1% annually to 5% by the
year 2000 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, 1996 and 1995 by $957,000 and $962,000, respectively, and the aggregate of
the service and interest cost components of net periodic postretirement benefit
cost for 1996 by $76,000.

Page 31
<PAGE> 34

NOTE 12. 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,
1996 and 1995 follow:

<TABLE>
<CAPTION>
- -------------------------------------------------------------
(in thousands) 1996 1995
- -------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $12,599 $12,091
Accrued postemployment
benefits other than pensions 5,138 5,379
Mortgage servicing release
premium 1,566 --
Other deferred tax assets 3,077 3,472
------- -------
Total deferred tax assets 22,380 20,942
------- -------
Deferred tax liabilities:
Acquisition premium on loans 2,652 2,076
Tax over book depreciation 2,207 1,965
Net unrealized gains on
securities 484 1,878
Other deferred tax liabilities 3,658 3,661
------- -------
Total deferred tax liabilities 9,001 9,580
------- -------
Net deferred tax assets $13,379 $11,362
======= =======

</TABLE>

Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
- ------------------------------------------------------------
Year Ended December 31,
(in thousands) 1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
Currently payable $16,073 $12,732 $10,463
Deferred taxes (credit) (1,168) 73 (171)
------- ------- -------
Total income tax
expense $14,905 $12,805 $10,292
======= ======= =======
</TABLE>

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

<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Year Ended December 31,
(in thousands) 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Tax at Federal statutory rate
applied to income before
income taxes $18,314 $16,240 $13,897
Increase (decrease) in taxes
resulting from:
Tax-exempt interest (3,454) (3,539) (4,045)
Other 45 104 440
------- ------- -------
Total income tax
expense $14,905 $12,805 $10,292
======= ======= =======
</TABLE>

NOTE 13. SHAREHOLDERS' EQUITY

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 1/100 of a share of a new series of preferred stock at the initial
exercise price of $37.50. 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 $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 maintains a stock repurchase program initiated in November
1987. This program, which has been expanded several times, allows for the
repurchase of 1,600,000 shares. As of December 31, 1996, a total of 1,260,970
shares have been repurchased under the program at an average price of $15.84
per share. Shares of common stock in treasury are accorded the treatment as if
retired; however, such shares remain available for reissue. 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.

Page 32
<PAGE> 35

STOCK OPTION PLAN
The Corporation's stock option plan, as amended and restated in April 1992,
authorizes the granting of incentive and nonqualified stock options, tandem
stock appreciation rights, restricted stock and performance share grants to key
employees. Aggregate grants under the plan may not exceed 2,000,000 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 1996, 1995 and 1994, 143,598,
168,927, and 114,398 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 December 31, 1996, 232,422
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 1996, 1995 and
1994 follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Options Option Price
------------------------- -----------------------
Available Per Share
for Grant Outstanding Range Average
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 1, 1994 485,541 1,249,084 $ 9.875-26.000 $15.13
Authorized 331,000 -- -- --
Granted (172,098) 172,098 23.250-27.250 25.40
Exercised -- (291,502) 9.875-21.630 15.35
Canceled 3,025 (3,025) 17.655-21.630 19.26
--------- --------- -------------- ------
December 31, 1994 647,468 1,126,655 9.875-27.250 16.63
Authorized 137,463 -- -- --
Granted (388,227) 388,227 26.000-30.813 27.22
Exercised -- (374,479) 9.875-26.375 17.68
Canceled 5,530 (5,530) 21.630-26.000 25.60
--------- --------- -------------- ------
December 31, 1995 402,234 1,134,873 9.875-30.813 19.86
Authorized 183,800 -- -- --
Granted (348,698) 348,698 28.188-30.875 29.46
Exercised -- (278,198) 9.875-30.813 20.79
Canceled 5,970 (5,970) 26.000-29.375 26.57
--------- --------- -------------- ------
December 31, 1996 243,306 1,199,403 9.875-30.875 22.40
========= =========
</TABLE>

Page 33
<PAGE> 36

The following table summarizes information on stock options outstanding at
December 31, 1996:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------------------------- ------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Range Outstanding Remaining Life Exercise Price Exercisable Exercise Price
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$9.875-17.655 454,779 3.6 years $13.22 454,779 $13.22
21.630-30.875 744,624 7.5 28.01 486,867 27.99
--------- ------- -----
9.875-30.875 1,199,403 6.0 22.40 941,646 20.86
========= =======
</TABLE>

NOTE 14. 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.
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:

<TABLE>
<CAPTION>
- --------------------------------------------------------
December 31,
(in thousands) 1996 1995
- --------------------------------------------------------
<S> <C> <C>
Loan commitments:
Commercial $639,765 $ 735,513
Real estate construction 14,501 19,675
Real estate mortgage 18,592 17,850
Credit card and home equity
credit lines 292,179 281,233
Other consumer 13,401 11,323
-------- ----------
Total $978,438 $1,065,594
======== ==========
Standby letters of credit $ 25,425 $ 42,981
Commercial letters of credit -- 3,257

</TABLE>

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 15. 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
the case 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.

Page 34
<PAGE> 37

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:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 December 31, 1995
------------------------ -----------------------
CARRYING ESTIMATED Carrying Estimated
(IN THOUSANDS) AMOUNT FAIR VALUE Amount Fair Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and money market investments $ 149,994 $ 150,000 $ 322,588 $ 322,600
Investment securities 580,171 580,200 570,912 570,900
Net loans(1) 2,537,561 2,572,600 2,333,799 2,360,400
Financial liabilities:
Deposits 2,864,807 2,869,700 2,864,701 2,874,000
Short-term borrowings 176,418 176,400 146,024 146,000
Long-term debt 84,133 84,600 105,411 106,600
Off-balance sheet financial instrument liabilities:
Loan commitments -- 1,180 -- 1,224
Standby and commercial letters of credit -- 127 -- 231

</TABLE>

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

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.

Page 35
<PAGE> 38

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 16. 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
1996 and 1995, the average reserve balances were $34.7 million and $41.2
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, 1997, the bank subsidiaries could
distribute to the Corporation approximately $2.8 million in dividends without
regulatory approval. Their 1997 net income will also become 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, 1996, that the Corporation and it's banking
subsidiaries meet all capital adequacy requirements to which it is subject.
As of December 31, 1996, 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.

Page 36
<PAGE> 39

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

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
RISK BASED CAPITAL To Be Well Capitalized
REQUIREMENTS Under Prompt
For Capital Adequacy Corrective Action
Actual Purposes Provisions
----------------- ---------------------- ------------------------
(IN THOUSANDS) Amount Ratio Amount Ratio Amount Ratio
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CITIZENS BANKING CORPORATION
AS OF DECEMBER 31, 1996:

Total Capital(1) $282,674 10.6% $212,559 > 8.0% $265,699 > 10.0%
- -
Tier I Capital(1) 249,427 9.4 106,280 > 4.0 159,419 > 6.0
- -
Tier I Leverage(2) 249,427 7.3 136,149 > 4.0 170,186 > 5.0
- -
As of December 31, 1995:

Total Capital(1) 255,119 10.0 203,319 > 8.0 254,148 > 10.0
- -
Tier I Capital(1) 223,313 8.8 101,659 > 4.0 152,489 > 6.0
- -
Tier I Leverage(2) 223,313 6.7 134,359 > 4.0 167,949 > 5.0
- -

CITIZENS BANK(3)
AS OF DECEMBER 31, 1996:

Total Capital(1) $281,891 11.6% $194,325 > 8.0% $242,906 > 10.0%
- -
Tier I Capital(1) 251,488 10.4 97,163 > 4.0 145,744 > 6.0
- -
Tier I Leverage(2) 251,488 8.0 125,852 > 4.0 157,315 > 5.0

As of December 31, 1995:

Total Capital(1) 170,822 12.2 111,451 > 8.0 139,313 > 10.0
- -
Tier I Capital(1) 153,386 11.0 55,725 > 4.0 83,588 > 6.0
- -
Tier I Leverage(2) 153,386 7.8 78,965 > 4.0 98,706 > 5.0
- -

</TABLE>

(1) To risk weighted assets.
(2) To quarterly average assets.
(3) During 1996 the Corporation's six Michigan banking subsidiaries were
merged into the lead bank and it's name was subsequently changed to
Citizens Bank. 1995 information reflects the information for the lead
bank.

NOTE 17. CITIZENS BANKING CORPORATION (PARENT ONLY) STATEMENTS

- ----------------------------------------------------------------------------------------
BALANCE SHEETS
CITIZENS BANKING CORPORATION (PARENT ONLY) December 31,
(IN THOUSANDS) 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash $ 5 $ 5
Interest-bearing deposit with subsidiary bank 25,134 30,000
Money market investments 2,043 14,544
Loans - commercial paper 10,000 --
Investment securities 98 218
Investment in bank subsidiaries 335,075 348,676
Goodwill - net 4,245 5,041
Other assets 3,515 4,890
-------- --------
TOTAL ASSETS $380,115 $403,374
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Long-term debt $ 59,684 $100,878
Other liabilities 5,189 5,310
Total liabilities 64,873 106,188
Shareholders' equity 315,242 297,186
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $380,115 $403,374
======== ========
</TABLE>

Page 37
<PAGE> 40
<TABLE>
<CAPTION>

- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF INCOME
CITIZENS BANKING CORPORATION (PARENT ONLY)
Year Ended December 31,
(IN THOUSANDS) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Dividends from bank subsidiaries $53,125 $24,388 $24,211
Interest from bank subsidiary 794 1,413 150
Other 860 1,605 646
------- ------- -------
Total 54,779 27,406 25,007
------- ------- -------
EXPENSES
Interest 5,594 7,374 371
Amortization of goodwill 796 796 856
Salaries and employee benefits 867 764 780
Service fees paid to subsidiaries 1,265 1,054 879
Other noninterest expense 1,078 949 1,564
------- ------- -------
Total 9,600 10,937 4,450
------- ------- -------
Income before income taxes and equity in undistributed earnings of subsidiaries 45,179 16,469 20,557
Income tax benefit 3,257 3,195 809
Equity in undistributed (dividends in excess of) earnings of bank subsidiaries (11,015) 13,932 8,048
------- ------- -------
NET INCOME $37,421 $33,596 $29,414
======= ======= =======
</TABLE>

- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
CITIZENS BANKING CORPORATION (PARENT ONLY)
Year Ended December 31,
(IN THOUSANDS) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 37,421 $ 33,596 $ 29,414
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of goodwill 796 796 856
Dividends in excess of (equity in undistributed) earnings of subsidiaries 11,015 (13,932) (8,048)
Other 1,244 (967) 1,658
-------- -------- --------
Net cash provided by operating activities 50,476 19,493 23,880
-------- -------- --------
INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing deposit at subsidiary bank 4,866 (30,000) --
Net (increase) decrease in money market investments 12,501 (33) 1,410
Purchases of investment securities (8) -- (18,646)
Proceeds from maturities of investment securities 136 5,146 16,748
Net (increase) decrease in loans (10,000) 5,000 (5,000)
Capital contribution to subsidiary -- (85,000) --
-------- -------- --------
Net cash provided (used) by investing activities 7,495 (104,887) (5,488)
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt -- 115,000 --
Principal reductions in long-term debt (41,194) (19,072) (4,450)
Cash dividends paid (14,528) (12,770) (11,557)
Proceeds from stock options exercised 1,523 2,237 1,602
Shares acquired for retirement (3,772) -- (3,986)
-------- -------- --------
Net cash provided (used) by financing activities (57,971) 85,395 (18,391)
-------- -------- --------
Net increase in cash 0 1 1
Cash at beginning of year 5 4 3
-------- -------- --------
Cash at end of year $ 5 $ 5 $ 4
======== ======== ========

</TABLE>

Page 38
<PAGE> 41
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

BOARD OF DIRECTORS CITIZENS BANKING CORPORATION

We have audited the accompanying consolidated balance sheets of Citizens
Banking Corporation and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996.
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 audits.

We conducted our audits 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 a 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 audits provide 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, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.

/s/Ernst & Young, LLP

Detroit, Michigan
January 15, 1997

Page 39
<PAGE> 42

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.

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

Page 40

<PAGE> 1

FORM 10-K
EXHIBIT 21

SUBSIDIARIES OF
CITIZENS BANKING CORPORATION

<TABLE>
<CAPTION>
Jurisdiction or
Incorporation of
Organization
----------------
<S> <C>
Direct Bank Subsidiaries (all wholly owned)

Citizens Bank Michigan
Citizens Bank - Illinois, N.A. National Association

Indirect Nonbank Subsidiary (all wholly owned)
Citizens Commercial Leasing Corporation Michigan
Lakeshore Insurance Agency, Inc. Michigan
</TABLE>

<PAGE> 1

FORM 10-K
EXHIBIT 23

CONSENTS OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in (1) the Registration Statement
(Form S-8 No. 33-28354 dated April 26, 1989), pertaining to the Citizens
Banking Corporation Amended and Restated Section 401(k) Plan; (2) the
Registration Statement (Form S-8 No. 33-10007 dated November 26, 1986)
pertaining to the Citizens Banking Corporation Stock Option Plan and the
Citizens Banking Corporation First Amended Stock Option Plan; (3) the
Registration Statement (Form S-8 No. 33-47686 dated May 5, 1992) pertaining to
the Citizens Banking Corporation Second Amended Stock Option Plan; (4) the
Registration Statement (Form S-8 No. 33-61197 dated July 21, 1995) pertaining
to the Citizens Banking Corporation Stock Option Plan for Directors; and (5)
the Registration Statement (Form S-8 No. 333-09455 dated August 2, 1996)
pertaining to the Citizens Banking Corporation Amended and Restated Section
401(k) Plan in the related Prospectus of our report dated January 15, 1997,
with respect to the consolidated financial statements of Citizens Banking
Corporation included in the annual report (Form 10-K) for the year ended
December 31, 1996.

/s/ Ernst & Young

Detroit, Michigan
March 11, 1997

<ARTICLE> 9
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 OCT-01-1996
<PERIOD-END> DEC-31-1996 DEC-31-1996
<CASH> 137,867 137,867
<INT-BEARING-DEPOSITS> 84 84
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 580,171 580,171
<INVESTMENTS-CARRYING> 0 0
<INVESTMENTS-MARKET> 0 0
<LOANS> 2,620,731 2,620,731
<ALLOWANCE> 35,997 35,997
<TOTAL-ASSETS> 3,483,850 3,483,850
<DEPOSITS> 2,864,807 2,864,807
<SHORT-TERM> 176,418 176,418
<LIABILITIES-OTHER> 43,250 43,250
<LONG-TERM> 84,133 84,133
0 0
0 0
<COMMON> 89,231 89,231
<OTHER-SE> 226,011 226,011
<TOTAL-LIABILITIES-AND-EQUITY> 3,483,850 3,483,850
<INTEREST-LOAN> 219,266 55,676
<INTEREST-INVEST> 36,648 8,956
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 255,914 64,632
<INTEREST-DEPOSIT> 96,035 24,280
<INTEREST-EXPENSE> 109,798 27,827
<INTEREST-INCOME-NET> 146,116 36,805
<LOAN-LOSSES> 8,334 1,771
<SECURITIES-GAINS> 101 21
<EXPENSE-OTHER> 125,986 31,119
<INCOME-PRETAX> 52,326 13,712
<INCOME-PRE-EXTRAORDINARY> 37,421 9,817
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 37,421 9,817
<EPS-PRIMARY> 2.55 .67
<EPS-DILUTED> 2.55 .67
<YIELD-ACTUAL> 8.22 8.22
<LOANS-NON> 17,788 17,788
<LOANS-PAST> 1,362 1,362
<LOANS-TROUBLED> 502 502
<LOANS-PROBLEM> 12,300 12,300
<ALLOWANCE-OPEN> 34,711 35,337
<CHARGE-OFFS> 10,695 2,073
<RECOVERIES> 3,587 962
<ALLOWANCE-CLOSE> 35,997 35,997
<ALLOWANCE-DOMESTIC> 24,298 24,298
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 11,699 11,699

</TABLE>