Troubled CF Bank agrees to develop a plan to sell or merge

PORT HURON — State banking regulators say the latest consent order between the financially troubled Citizens First Bancorp, which operates branches in Bad Axe and Harbor Beach, and the Federal Deposit Insurance Corp (FDIC) is not a cause for concern.

“Consent orders are typically road maps to improve a bank’s condition,” said Jason Moon, a spokesman for the state Office of Financial and Insurance Regulation. “The terms of the orders are met by most Michigan Banks and the orders are rescinded.”

Citizens First, which was founded in Port Huron in 1938 and has 24 branches throughout the Thumb, reported its second annual loss Dec. 31. The bank reported a preliminary net loss of $124.0 million, up from a $58.4 million.

The federal Office of Thrift Supervision issued a cease and desist order Sept. 1 that required the bank to file a capital plan by the end of August and prohibited the bank from making “golden parachute” payments to any of its senior executives.

As part of the 16-point consent order, dated March 2, bank officials agreed to come up with a plan within 30 days to sell the bank to or merge with another federally insured financial institution.

Other requirements of the order included:

• Have and retain qualified management,

• Increase the participation of the board of directors in the affairs of the bank,

• Improve the bank’s capital position,

• Implement restrictions on lending activity,

• Reduce the bank’s classified assets,

• Maintain liquidity ratios,

• Refrain from payments of any dividends without the approval of the FDIC or OFIR,

• Improve management practices to assure that its allowance for loan losses is maintained at an appropriate level,

• Adopt and implement a profit plan and budget,

• Develop and implement a strategic plan,

• Adopt and implement a plan to manage concentrations of credit,

• Adopt and implement internal controls for the operations of the bank,

• Correct certain violations of law,

• Comply with the Interagency Policy Statement on Internal Audit Function and its Outsourcing, and

• Have procedures for managing the bank’s interest rate risk that are consistent with the Joint Agency Statement of Policy on Interest Rate Risk and the Joint Supervisory Statement on Investment Securities and End-user Derivative Securities.

FDIC filings show that Douglas E. Brandewie resigned as the president of Mortgage Banking Oct. 1 at the bank and its board named Richard W. Stafford, senior vice president and chief operating officer of the company. Stafford resigned Jan. 13, and the bank announced in its March 2 8-K filing with the Security and Exchange Commission that Matthew Kirst, a director with Naples, Fla.-based QORVA, LLC, had been named the bank’s interim chief operating officer.

Bloomberg Businessweek reported March 4 that the bank announced on Feb. 12 that it would voluntarily delist from NASDAQ.

Moon said he could not comment on the bank’s possible future because “The order is public, but the banking code still requires we keep confidential the information we obtain from our oversight of financial institutions.”

At press time the bank had not responded to a request for comment.