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Area bank gets FDIC order

The Federal Deposit Insurance Corporation has issued an order to cease and desist against Hudson-based Citizens State Bank, 2212 Crest View Drive.

"We are in agreement with these goals and are taking all the necessary steps to meet the requirements set forth by the regulators," said President and CEO of Citizens State Bank Gene Haberman.

Haberman said the action is not as serious as it sounds and vowed that the bank will overcome the problems and continue to offer quality service to customers.

"We have confidence that we will work through these challenges and emerge an even stronger financial institution," Haberman said. "For our customers, it's basically business as usual. They shouldn't be concerned.

"They can count on the same quality service they have always received. We're still opening accounts, making loans and serving our customers. Customer deposits are fully guaranteed under the same expanded coverage limits that apply to all FDIC insured institutions. We remain committed to our customers and the communities we serve," he said.

The FDIC processed a total of 64 bank matters in July, including 22 cease and desist orders. Essentially a cease and desist order requires the bank's board of directors and management to resolve management issues, resolve problem loans and improve its capital position.

Haberman said Citizens State Bank, like many other banks across the nation, was active in commercial real estate lending and business lending.

"Many of our customers have suffered significant financial challenges due to the prolonged recession, affecting their ability to repay their loans," Haberman said. "We have been working, and will continue to work closely, with our borrowers to address these issues. We've already made significant progress in several areas under the agreement."

The FDIC language is quite stern and orders the bank to "cease and desist" from eight "unsafe or unsound" banking practices. The list touched a variety of banking issues, including management, policies, board of directors, inadequate capital, inadequate policies, loans or assets, delinquent loans, excessive credit, inadequate earnings and inadequate liquidity.

The FDIC also offered a long list of remedies to improve the bank's situation. Many of the stipulations must be fulfilled within 30 to 60 days.

One of the biggest challenges may come in raising additional capital. Although not spelled out in a specific dollar amount, the FDIC said tier 1 capital must be at least equal to 8 percent of total assets, and total risk-based capital at least equal to 11 percent of total risk-weighted assets. The bank has not disclosed where those numbers now stand.

Haberman said, however, that the bank has been improving its asset quality for the past three years.

"We're closing the gap," Haberman said.

He said the bank is actually considered adequately capitalized by FDIC standards. The bank is raising additional capital to support the bank's current and future needs.

"It is our goal to exceed the 'adequately capitalized' threshold," said Haberman.

He said the bank has stayed in communication with its customers and employees through the FDIC process.

"We've talked to over 300 businesses and individuals and sent letters to all customers," Haberman said. "We've had great feedback -- customers have been supportive and understanding."

He emphasized that the cease and desist order does not put Citizens State Bank on the same track as Mainstreet Bank, which closed last week.

"Our capital position is much stronger -- we will not be in the Mainstreet Bank situation," Haberman said.

Citizens State Bank has assets of $180 million. In addition to its base in Hudson, the bank has offices in Roberts, Woodville, Glenwood City, Elmwood and Menomonie.