exv10w1






Exhibit 10.1




FEDERAL DEPOSIT INSURANCE CORPORATION




WASHINGTON, D.C.



AND



STATE OF MICHIGAN


OFFICE OF FINANCIAL AND INSURANCE REGULATION



	 	 	 	 	 	 	 
	 

	 	 	)	 	 	 
	In the Matter of

	 	 	)	 	 	CONSENT ORDER
	 

	 	 	)	 	 	 
	CF BANCORP

	 	 	)	 	 	FDIC-09-676b
	PORT HURON, MICHIGAN

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	(STATE CHARTERED

	 	 	)	 	 	 
	          INSURED NONMEMBER BANK)

	 	 	)	 	 	 
	 

	 	 	)	 	 	 






     CF Bancorp, Port Huron, Michigan (“Bank”), having been advised of its right to a NOTICE
OF CHARGES AND OF HEARING detailing the unsafe or unsound banking practices and violations of law
or regulation 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), 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 Federal Deposit Insurance
Corporation (“FDIC”) and the OFIR, dated
                    ,
                    ,
whereby, solely for the purpose of this proceeding and without admitting or denying any charges of unsafe or unsound banking practices relating to
asset quality, management or earnings, or violations of law or regulation, the Bank consented to
the issuance of a CONSENT ORDER (“ORDER”) by the FDIC and the OFIR.


     The FDIC and the OFIR considered the matter and determined to accept the
STIPULATION.



     Having also determined that the requirements for issuance of an order under 12 U.S.C. §
1818(b) and section 2304 of the Banking Code of 1999, Mich. Comp. Laws § 487.12304, have been met,
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) During the life 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:



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	 	(i)	 	Comply with the requirements of this ORDER;
	 
	 	(ii)	 	Operate the Bank in a safe and sound manner;
	 
	 	(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 Chief Deputy Commissioner of the OFIR (“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. § 1831i, and section 303.101(b) of the FDIC Rules and
Regulations, 12 C.F.R. § 303.101(b).


BOARD PARTICIPATION


     2. (a) As of the effective date of this ORDER, the board of directors shall increase its
participation in the


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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.



          (b) Within 30 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.




CAPITAL




     3. (a) Within 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 9 percent and its level



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of qualifying total capital as a percentage of risk-weighted assets (“total risk based
capital ratio”) at a minimum of 12 percent. For purposes of this ORDER, Tier 1 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


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submitted to the FDIC Registration and Disclosure Section, 550 17th Street, N.W., Washington,
D.C. 20429 and to the Office of Financial and Insurance Regulation, 611 West Ottawa Street,
Lansing, Michigan, 48933, for their review. 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 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.




SALE OR MERGE PLAN




     4. (a) Within 30 days from the effective date of this ORDER, the Bank shall develop,
adopt and implement a plan to sell itself or to merge itself into a federally insured financial
institution.



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          (b) The plan required by this paragraph shall be acceptable to the Regional Director of
the Chicago Regional Office of the FDIC (“Regional Director”) and the Chief Deputy Commissioner.




LOSS CHARGE-OFF




     5. As of the effective date of this Order the Bank shall charge off from its books and
records any asset classified “Loss” in the July 13, 2009 Joint Report of Examination (“ROE”).



PROHIBITION OF ADDITIONAL LOANS TO CLASSIFIED BORROWERS




     6. (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 extension of credit (including any portion thereof)
that has been charged off the books of the 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 who is already obligated
in any manner to the Bank on any extension of credit (including any portion thereof) that has been
classified “Substandard”, “Doubtful”, or is listed




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for Special Mention in the ROE, and is uncollected unless the Bank’s board of directors has
adopted, prior to such extension of credit, a detailed written statement giving the reason why such
extension of credit is in the best interest of the Bank. A copy of the statement shall be signed
by each Director, and incorporated in the minutes of the applicable board of directors’ meeting. A
copy of the statement shall be placed in the appropriate loan file.




REDUCTION
OF DELINQUENCIES AND CLASSIFIED ASSETS


     7. (a) Within 60 days from the effective date of this ORDER, the Bank shall adopt,
implement, and adhere to, a written plan to reduce the Bank’s risk position in each asset in excess
of $1,000,000 which is more than 90 days delinquent or classified “Substandard” or “Doubtful” in
the ROE. The plan shall include, but not be limited to, provisions which:




	 	(i)	 	Prohibit an extension of credit for the payment of interest, unless
the Board provides, in 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;





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	 	(iii)	 	Delineate areas of responsibility for loan officers;
	 
	 	(iv)	 	Ensure all commercial purpose credits are
managed by the commercial loan department and included, as
appropriate, on the Bank’s watch list;
	 
	 	(v)	 	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
	 
	 	(vi)	 	Provide for the submission of monthly
written progress reports to the Bank’s board of directors for review
and  notation in minutes of the meetings of the board of directors.





          (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 OFIR.


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          (c) A copy of the plan
required by this
paragraph shall be submitted to the Regional Director and the Chief Deputy Commissioner.




          (d) While this ORDER remains in effect, the plan shall be revised to include assets which
become more than
90 days delinquent after the effective date of this ORDER or are adversely classified at any
subsequent examinations.




LIQUIDITY




     8. On each Friday the Bank is open for business during the life of this ORDER, the Bank
shall submit to the Regional Director and the Chief Deputy Commissioner a liquidity analysis
report, in a format that is acceptable to the Regional Director and the Chief Deputy Commissioner.



DIVIDEND RESTRICTION




     9. As of the effective date of this ORDER, the Bank shall not declare or pay any cash
dividend without the prior written consent of the Regional Director and the Chief Deputy
Commissioner.


ALLOWANCE FOR LOAN AND LEASE LOSSES




     10. (a) Within 30 days of the effective date of this ORDER the Bank shall increase its
Allowance for Loan and Lease Losses (“ALLL”) with an additional provision of $48,300,000.



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          (b) Prior to submission or publication of all Reports of Condition and Income required
by the FDIC after the effective date of this ORDER, 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 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.


PROFIT PLAN AND BUDGET


     11. (a) Within 30 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 2010. The plan required by this paragraph shall
contain formal goals and strategies, consistent with sound banking practices, to reduce
discretionary expenses and to improve


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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. In
addition, the written profit plan shall identify the major areas in, and means by which,
earnings will be improved.




          (b) Within 30 days from the end of each calendar quarter following completion of the profit
plans and budgets 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 the Chief Deputy Commissioner.




STRATEGIC PLAN




     12. (a) Within 90 days from the effective date of this ORDER, the Bank shall formulate adopt,
and implement a realistic, comprehensive strategic plan. The plan required



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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:





	 	(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 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 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’




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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.




CONCENTRATIONS OF CREDIT




     13. (a) Within 30 days from the effective date of this Order, the Bank shall formulate,
adopt and implement a written plan to manage each of the concentrations of credit identified on
pages 86 through 87 of the ROE in a safe and sound manner. At a minimum, the plan must provide for
written procedures for the ongoing measurement and monitoring of the concentrations of credit, and
a limit on concentrations commensurate with the Bank’s capital position, safe and sound banking
practices, and the overall risk profile of the Bank.



          (b) A copy of the plan required by this
paragraph shall be submitted to the Regional Director and the Chief Deputy Commissioner.




INTERNAL ROUTINE AND CONTROLS




     14. (a) Within 60 days from the effective date of this ORDER, the Bank shall adopt,
implement, and adhere to a policy for the operation of the Bank in such a manner as



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to provide adequate internal routine and controls consistent with safe and sound
banking practices.




          (b) A copy of the policy required by this paragraph shall be submitted to the Regional
Director and the Chief Deputy Commissioner.




CORRECTION OF VIOLATIONS




     15. Within 60 days from the effective date of this ORDER, the Bank shall eliminate and/or
correct all violations of law, rule, and regulations listed on pages 41 through 45 of the ROE.



INTERNAL AUDIT




     16. Within 60 days from the effective date of this ORDER, the Bank’s board of directors
shall comply with the Interagency Policy Statement on Internal Audit Function and its Outsourcing.
Changes made by the Bank in its audit program as a result of complying with this paragraph shall be
recorded in the applicable board of directors’ minutes and forwarded to the Regional Director and
the Chief Deputy Commissioner.



INTEREST RATE RISK




     17. (a) Within 60 days of the effective date of this Order the Bank shall have procedures
for managing the Bank’s sensitivity to interest rate risk. The procedures shall comply with the
Joint Agency Statement of Policy on



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Interest Rate Risk (June 26, 1996), and the Joint
Supervisory Statement on Investment Securities
and End-user Derivative Activities (April 23, 1998) and address the exceptions noted on pages 33,
39 and 46 of the ROE.


          (b) A copy of the policy revisions and
procedures required by this paragraph shall be submitted to the Regional Director and the Chief
Deputy Commissioner.




NOTIFICATION TO SHAREHOLDER




     18. Following the effective date of this ORDER, the Bank shall send to its shareholder a
copy of this ORDER:
(1) in conjunction with the Bank’s next shareholder communication; or (2) in conjunction with
its notice or proxy statement preceding the Bank’s next shareholder meeting.



PROGRESS REPORTS




     19. Within 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 the Chief Deputy Commissioner
written progress reports signed by each member of the Bank’s board of directors, 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 its issuance by the FDIC and OFIR.



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     The provisions of this ORDER shall be binding upon the Bank, its institution-affiliated
parties, and any successors and assigns thereof.



     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 OFIR.



     Pursuant
to delegated authority.


               Dated:                                         ,
                    .



	 	 	 	 	 	 	 
	 

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





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