DBRS Confirms Citizens Banking Corporation and Related Entities at BBB (high)

Dominion Bond Rating Service (“DBRS”) has today confirmed its ratings on Citizens Banking Corporation (“Citizens” or the “Company”) and its bank subsidiaries, Citizens Bank and F&M Bank - Iowa, as indicated above. DBRS has also assigned a new rating of BBB to Citizens’ Trust Preferred Securities. The rating action follows a detailed review of the Company’s operating results and financial fundamentals. The trends on all ratings remain Stable.

Citizens’ ratings reflect a Michigan-based, three-state community banking franchise with materially improved credit quality, a focused management team with considerable experience, and a satisfactory financial profile coupled with a conservative corporate culture. The Company’s improving but below peer core profitability with elevated expense levels, an underperforming non-Michigan franchise, and deposit growth challenges are also embedded in the assigned ratings.

In 2005, Citizen’s revenues were flat and earnings grew modestly as reduced provisioning and expenses were offset by increased taxes. Over the past five years the Company has transitioned from being inadequately managed with a higher risk profile to being better-managed with reduced risk. The Company’s capitalization and liquidity remain adequate while credit quality is better than peers rated similarly by DBRS following three years of improvement.

Given Citizens geographic location, exposure to the automobile industry is a moderate concentration at approximately 10% of loans and 91% of tangible common equity. DBRS notes that should domestic auto manufacturers continue to experience economic stress, the Company may experience some earnings pressure from potential revenue and credit losses. DBRS believes, however, that Citizens is adequately reserved and capitalized to absorb those losses.

The Company’s profitability is below peer average due to a decline in revenues and elevated expenses from significant infrastructure investment over the past three years. Additionally, the Wisconsin and Iowa branches have fewer deposits per location that constrain operating leverage. Net interest margin is under pressure but holding stable while fee revenue streams are growing from Citizens’ nascent asset management business. With relatively flat revenues and slight earnings growth, the Company reported a 1.04% return on assets, 1.83% risk adjusted return, and 12.3% return on equity in 2005. DBRS believes that profitability will be flat or improve slightly in 2006 given the expected pressure on funding costs despite modest increases in loan volumes and fee income.

Citizens Banking Corporation, the second largest bank holding company with headquarters in Michigan, is a community financial services company with $7.7 billion in assets and 183 branches operating two banking subsidiaries, Citizens Bank and F&M Bank - Iowa as of March 31, 2006.

Note:
The Trust Preferred Securities for Citizens Banking Corporation contain certain unique covenants that give them some equity-like characteristics.