Exhibit 10.1
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
AND
STATE OF MICHIGAN
OFFICE OF FINANCIAL AND INSURANCE REGULATION
LANSING, MICHIGAN

                   
 
)      
In the Matter of
)     CONSENT ORDER
 
)      
 
)      
COMMUNITY SHORES BANK
)      
MUSKEGON, MICHIGAN
)     FDIC-10-397b
 
)      
 
)      
(STATE CHARTERED
)      
INSURED NONMEMBER BANK)
)      
 
)                

     Community Shores Bank, Muskegon, Michigan (“Bank”), having been advised of
its right to a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound
banking practices alleged to have been committed by the Bank, and of its right
to a hearing on the charges under section 8(b) of the Federal Deposit Insurance
Act (“Act”), 12 U.S.C. § 1818(b), and under section 2304 of the Banking Code of
1999, Mich. Comp Laws § 487.12304, regarding hearings before the Office of
Financial and Insurance Regulation for the State of Michigan (“OFIR”), and
having waived those rights, entered into a STIPULATION TO THE ISSUANCE OF A
CONSENT ORDER (“STIPULATION”) with representatives of the

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Federal Deposit Insurance Corporation (“FDIC”) and the OFIR dated August 25th,
2010, whereby, solely for the purpose of this proceeding and without admitting
or denying the charges of unsafe or unsound banking practices relating to
capital, asset quality, and earnings, the Bank consented to the issuance of a
CONSENT ORDER (“ORDER”) by the FDIC and OFIR.
     The FDIC and the OFIR considered the matter and decided to accept the
STIPULATION.
     Having determined that the requirements for issuance of an order under 12
U.S.C. § 1818(b), and Mich. Comp Laws § 487.12304 have been satisfied, the FDIC
and the OFIR HEREBY ORDER, that the Bank, its institution-affiliated parties, as
that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its
successors and assigns, take affirmative action as follows:
MANAGEMENT
     1. (a) Within one hundred twenty (120) days from the effective date of this
ORDER, the Bank shall have and retain qualified management. Management shall be
provided the necessary written authority to implement the provisions of this
ORDER. The qualifications of management shall be assessed on its ability to:

  (i)   Comply with the requirements of this ORDER;     (ii)   Operate the Bank
in a safe and sound manner;

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    (iii)   Comply with applicable laws, rules, and regulations; and     (iv)  
Restore all aspects of the Bank to a safe and sound condition, including capital
adequacy, asset quality, management effectiveness, earnings, liquidity, and
sensitivity to interest rate risk.

     (b) During the life of this ORDER, prior to the addition of any individual
to the board of directors or the employment of any individual as a senior
executive officer, the Bank shall request and obtain the written approval of the
Regional Director of the FDIC’s Chicago Regional Office (“Regional Director”)
and the OFIR’s Chief Deputy Commissioner (“Chief Deputy Commissioner”). For
purposes of this ORDER, “senior executive officer” is defined as in section 32
of the Act (“section 32”), 12 U.S.C. § 1831(i), and section 303.101(b) of the
FDIC Rules and Regulations, 12 C.F.R. § 303.101(b).
MANAGEMENT PLAN
     2. (a) Within thirty (30) days from the effective date of this ORDER, the
Bank shall retain an independent third party acceptable to the Regional Director
and Chief Deputy Commissioner, who will develop a written analysis and
assessment of the Bank’s management needs (“Management Study”) for the

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purpose of providing qualified management for the Bank.
     (b) The Bank shall provide the Regional Director and Chief Deputy
Commissioner with a copy of the proposed engagement letter or contract with the
independent third party for review.
     (c) The Management Study shall be developed within ninety (90) days from
the effective date of this ORDER. The Management Study shall include, at a
minimum:

  (i)   Identification of both the type and number of senior executive officer
positions needed to properly manage and supervise the affairs of the Bank;    
(ii)   Evaluation of all senior executive officers to determine whether these
individuals possess the ability, experience and other qualifications required to
perform present and anticipated duties, including adherence to the Bank’s
established policies and practices, and restoration and maintenance of the Bank
in a safe and sound condition;     (iii)   A plan, if necessary, to recruit and
hire any additional or replacement personnel with the requisite ability,
experience and other qualifications to fill those senior executive officer
positions identified by this paragraph of this ORDER.

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          (d) The plan required by this paragraph shall be submitted to the
Regional Director and Chief Deputy Commissioner for review and comment. Within
thirty (30) days of receipt of any comments from the Regional Director or Chief
Deputy Commissioner, the Bank shall incorporate any changes required by the
Regional Director or Chief Deputy Commissioner and thereafter adopt, implement,
and adhere to the plan.
BOARD PARTICIPATION
     3. (a) As of the effective date of this ORDER, the board of directors shall
continue its participation in the affairs of the Bank, assuming full
responsibility for the approval of sound policies and objectives and for the
supervision of all of the Bank’s activities, consistent with the role and
expertise commonly expected for directors of Banks of comparable size. This
participation shall include meetings to be held no less frequently than monthly
at which, at a minimum, the following areas shall be reviewed and approved:
reports of income and expenses; new, overdue, renewal, insider, charged off, and
recovered loans; investment activity; adoption or modification of operating
policies; individual committee reports; audit reports; internal control reviews
including management’s responses; and compliance with this ORDER. Board minutes
shall document these reviews and approvals, including the names of any
dissenting directors.

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          (b) Within fifteen (15) days from the effective date of this ORDER,
the Bank’s board of directors shall have in place a program that will provide
for monitoring of the Bank’s compliance with this ORDER.
          (c) Following the required date of compliance with subparagraph
(a) above, the Bank’s board of directors shall review the Bank’s compliance with
this ORDER and record its review in the minutes of each regularly scheduled
monthly board of directors’ meeting.
LOSS CHARGE-OFF
     4. As of the effective date of this Order, the Bank shall charge off from
its books and records any asset classified “Loss” in the Report of Examination
dated March 1, 2010 (“ROE”) that has not been previously collected or charged
off, and shall further charge off any loan classified “Loss” at subsequent
examinations or visitations during the life of this Order within ten (10) days
of receipt of the report.
PROHIBITION OF ADDITIONAL LOANS TO CLASSIFIED BORROWERS
     5. (a) As of the effective date of this ORDER, the Bank shall not extend,
directly or indirectly, any additional credit to, or for the benefit of, any
borrower who is already obligated in any manner to the Bank on any extensions of
credit (including any portion thereof) that has been charged off the books of
the

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Bank or classified “Loss” in the ROE, so long as such credit remains
uncollected.
          (b) As of the effective date of this ORDER, the Bank shall not extend,
directly or indirectly, any additional credit to, or for the benefit of, any
borrower whose loan or other credit has been classified “Substandard”,
“Doubtful”, or is listed for Special Mention in the ROE, and is uncollected
unless the Bank’s board of directors, or its designated committee, has adopted,
prior to such extension of credit, a detailed written statement giving the
reasons why such extension of credit is in the best interest of the Bank. A copy
of the statement shall be incorporated in the minutes of the applicable meeting
of the board of directors or its designated committee. A copy of the statement
shall be placed in the appropriate loan file.
     REDUCTION OF DELINQUENCIES AND CLASSIFIED ASSETS
     6. (a) Within ninety (90) days from the effective date of this ORDER, the
Bank shall implement and adhere to, a written plan to reduce the Bank’s risk
position in each asset in excess of $250,000 which is more than ninety (90) days
delinquent or classified “Substandard” in the ROE. Each action plan shall
include, but not be limited to, provisions which:

  (i)   Prohibit an extension of credit for the payment of interest, unless the
Board, or its designated committee, provides, in

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      writing, a detailed explanation of why the extension is in the best
interest of the Bank;     (ii)   Provide for review of the current financial
condition of each delinquent or classified borrower, including a review of
borrower cash flow and collateral value;     (iii)   Delineate areas of
responsibility for loan officers;     (iv)   Establish dollar levels to which
the Bank shall reduce delinquencies and classified assets within 6 and 12 months
from the effective date of this ORDER; and     (v)   Provide for the submission
of monthly written progress reports to the Bank’s board of directors, or its
designated committee, for review and notation in minutes of the meetings of the
board of directors or its designated committee.

     (b) As used in this paragraph, “reduce” means to: (1) collect; (2) charge
off; (3) sell; or (4) improve the quality of such assets so as to warrant
removal of any adverse classification by the FDIC and the OFIR.
     (c) A copy of each action plan required by this paragraph

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shall be submitted to the Regional Director and Chief Deputy Commissioner.
     (d) While this ORDER remains in effect, each action plan shall be revised
to include assets of $250,000 or more which become more than ninety (90) days
delinquent after the effective date of this ORDER or are adversely classified at
any subsequent examinations.
LENDING AND COLLECTION POLICIES
     7. Within sixty (60) days from the effective date of this ORDER, the Bank
shall adopt and implement a floor plan lending policy to address the
recommendations in the ROE, and shall improve specific procedures for valuing
loans and other real estate that are collateralized by residential plat
developments. Copies of the policies and procedural revisions thereto required
by this paragraph shall be submitted to the Regional Director and Chief Deputy
Commissioner.
CAPITAL
     8. (a) Within ninety (90) days from the effective date of this ORDER, the
Bank shall have and maintain its level of Tier 1 capital as a percentage of its
total assets (“capital ratio”) at a minimum of eight and one half (8.5%) percent
and its level of qualifying total capital as a percentage of risk-weighted
assets (“total risk based capital ratio”) at a minimum of eleven (11%) percent.
For purposes of this ORDER, Tier 1

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capital, qualifying total capital, total assets, and risk-weighted assets shall
be calculated in accordance with Part 325 of the FDIC Rules and Regulations
(“Part 325”), 12 C.F.R. Part 325.
     (b) If, while this ORDER is in effect, the Bank increases capital by the
sale of new securities, the board of directors of the Bank shall adopt and
implement a plan for the sale of such additional securities, including the
voting of any shares owned or proxies held by or controlled by them in favor of
said plan. Should the implementation of the plan involve public distribution of
Bank securities, including a distribution limited only to the Bank’s existing
shareholders, the Bank shall prepare detailed offering materials fully
describing the securities being offered, including an accurate description of
the financial condition of the Bank and the circumstances giving rise to the
offering, and other material disclosures necessary to comply with Federal
securities laws. Prior to the implementation of the plan and, in any event, not
less than 20 days prior to the dissemination of such materials, the materials
used in the sale of the securities shall be submitted to the FDIC Registration
and Disclosure Section, 550 17th Street, N.W., Washington, D.C. 20429 and to the
Commissioner, Office of Financial and Insurance Regulation for the State of
Michigan, 611 Ottawa Street, Lansing, Michigan 48933, for their review.

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Any changes requested to be made in the materials by the FDIC or the OFIR shall
be made prior to their dissemination.
          (c) In complying with the provisions of this paragraph, the Bank shall
provide to any subscriber and/or purchaser of Bank securities written notice of
any planned or existing development or other changes which are materially
different from the information reflected in any offering materials used in
connection with the sale of Bank securities. The written notice required by this
paragraph shall be furnished within ten (10) calendar days of the date any
material development or change was planned or occurred, whichever is earlier,
and shall be furnished to every purchaser and/or subscriber of the Bank’s
original offering materials.
DIVIDEND RESTRICTION
     9. As of the effective date of this ORDER, the Bank shall not declare or
pay any dividend without the prior written consent of the Regional Director and
Chief Deputy Commissioner.
PROFIT PLAN AND BUDGET
     10. (a) Within ninety (90) days from the effective date of this ORDER, the
Bank shall adopt, implement, and adhere to a written profit plan and a
realistic, comprehensive budget for all categories of income and expense for
calendar year 2011. The plan required by this paragraph shall contain formal
goals and strategies, consistent with sound banking practices, to

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reduce discretionary expenses and to improve the Bank’s overall earnings, and
shall contain a description of the operating assumptions that form the basis for
major projected income and expense components, and identify the major areas in,
and means by which, earnings will be improved.
     (b) At each monthly board meeting following completion of the profit plan
and budget required by this paragraph, the Bank’s board of directors shall
evaluate the Bank’s actual performance in relation to the plan and budget,
record the results of the evaluation, and note any actions taken by the Bank in
the minutes of the board of directors’ meeting at which such evaluation is
undertaken.
     (c) A written profit plan and budget shall be prepared for each calendar
year for which this ORDER is in effect.
     (d) Copies of the plans and budgets required by this paragraph shall be
submitted to the Regional Director and Chief Deputy Commissioner.
ALLOWANCE FOR LOANS AND LEASE LOSSES
     11. (a) After the effective date of this ORDER, and prior to the submission
of all Reports of Condition and Income required by the FDIC, the board of
directors of the Bank shall review the adequacy of the Bank’s ALLL, provide for
an adequate ALLL, and accurately report the same. The minutes of the board
meeting at which such review is undertaken shall indicate the

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findings of the review, the amount of increase in the ALLL recommended, if any,
and the basis for determination of the amount of ALLL provided. In making these
determinations, the board of directors shall consider the FFIEC Instructions for
the Reports of Condition and Income and any analysis of the Bank’s ALLL provided
by the FDIC or OFIR.
          (b) ALLL entries required by this paragraph shall be made prior to any
capital determinations required by this ORDER.
LIQUIDITY PLAN
     12. Within ninety (90) days of the effective date of this ORDER, the Bank
shall adopt a written contingency funding plan (“Liquidity Plan”). The Liquidity
Plan shall identify sources of liquid assets to meet the Bank’s contingency
funding needs over time horizons of six (6) months, twelve (12) months, and
eighteen (18) months. At a minimum, the Liquidity Plan shall be prepared in
conformance with the Liquidity Risk Management Guidance found at FIL-84-2008 and
include provisions to address the issues identified in the ROE. The plan
required by this paragraph shall be submitted to the Regional Director and Chief
Deputy Commissioner for review.
REDUCTION OF BROKERED DEPOSITS
     13. Within sixty (60) days, the Bank will formulate and submit to the
Regional Director and Chief Deputy Commissioner for review a written plan to
reduce the Bank’s reliance on

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brokered deposits as defined in Part 337 of the FDIC Rules and Regulations. Such
plan shall detail the volume and maturities of the Bank’s existing brokered
deposits. The plan shall include, but not be limited to:

  (i)   Target dollar levels for each quarter over the next eight (8) quarters;
    (ii)   Specific strategies for funding the existing brokered deposits as
they mature; and     (iii)   Provision for the submission of monthly written
progress reports to the Bank’s board of directors for review and notation in the
minutes of the board of directors’ meetings.

STRATEGIC PLAN
     14. (a) Within ninety (90) days from the effective date of this ORDER, the
Bank shall formulate, adopt, and implement a realistic, comprehensive strategic
plan. The plan required by this paragraph shall contain an assessment of the
Bank’s current financial condition and market area, and a description of the
operating assumptions that form the basis for major projected income and expense
components. The written strategic plan shall address, at a minimum:

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  (i)   Strategies for pricing policies and asset/liability management; and

  (ii)   Financial goals, including pro forma statements for asset growth,
capital adequacy, and earnings.

          (b) Within thirty (30) days from the end of each calendar quarter
following the effective date of this ORDER, the Bank’s board of directors shall
evaluate the Bank’s actual performance in relation to the strategic plan
required by this paragraph and record the results of the evaluation, and any
actions taken by the Bank, in the minutes of the board of directors’ meeting at
which such evaluation is undertaken.
          (c) The strategic plan required by this ORDER shall be revised thirty
(30) days prior to the end of each calendar year during which this ORDER is in
effect. Thereafter the Bank shall approve the revised plan, which approval shall
be recorded in the minutes of a board of directors’ meeting, and the Bank shall
implement and adhere to the revised plan.
          (d) Copies of the plan and revisions thereto required by this
paragraph shall be submitted to the Regional Director and the Chief Deputy
Commissioner for review.
NOTIFICATION TO SHAREHOLDER
     15. Within thirty (30) days from the effective date of this ORDER, the Bank
shall send a copy of this ORDER, or otherwise furnish a description of this
ORDER, to its parent

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holding company. The description shall fully describe the ORDER in all material
aspects.
PROGRESS REPORTS
     16. Within thirty (30) days from the end of each calendar quarter following
the effective date of this ORDER, the Bank shall furnish to the Regional
Director and Chief Deputy Commissioner written progress reports approved by the
board of directors, or its designated committee, detailing the actions taken to
secure compliance with the ORDER and the results thereof.
     The effective date of this ORDER shall be the date of issuance by the FDIC
and the OFIR.
     The provisions of this ORDER shall be binding upon the Bank, its
institution-affiliated parties, and any successors and assigns thereof.

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     The provisions of this ORDER shall remain effective and enforceable except
to the extent that, and until such time as, any provision has been modified,
terminated, suspended, or set aside by the FDIC and the OFIR.
     Pursuant to delegated authority.
     Dated: September 2, 2010.

         
/s/ M. Anthony Lowe
      /s/ Stephen R. Hilker
 
       
M. Anthony Lowe
      Stephen R. Hilker
Regional Director
      Chief Deputy Commissioner
Chicago Regional Office
      Office of Financial and
Federal Deposit Insurance
      Insurance Regulation for the
Corporation
      State of Michigan

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