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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

     [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

             For the fiscal year ended March 31, 2001

OR

     [   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934

             For the transition period from _________ to __________

Commission File Number: 0-32041

CITIZENS FIRST BANCORP, INC.
(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (810) 987-8300
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 per share
(Title of Class)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes   X           No     (2) Yes  X              No    

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. _____

     The aggregate market value of the voting and non-voting common equity held by non-affiliates was $135.3 million, based upon the closing price of $14.20 as quoted on the Nasdaq National Market on June 15, 2001. Solely for purposes of this calculation, the shares held by the directors and officers of the registrant are deemed to be held by affiliates.

     As of June 15, 2001, the registrant had 9,526,761 shares of common stock outstanding.

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INDEX

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PART I

ITEM 1.  BUSINESS

General

     Citizens First Bancorp, Inc. (the “Company” or “Citizens First Bancorp”) was organized as a Delaware business corporation at the direction of Citizens First Savings Bank (“Citizens First” or the “Bank”) in October 2000 to become the holding company for Citizens First upon completion of the conversion from the mutual to stock form of ownership. The Conversion was completed on March 7, 2001. In connection with the Conversion, the Company sold 8,821,075 shares of its common stock, par value $0.01 per share (the “Common Stock”) at a purchase price of $10 per share to depositors of the Bank in a subscription offering raising approximately $85.1 in net conversion proceeds. In addition, the Company issued an additional 705,686 shares, representing 8% of the shares sold in the subscription offering, to Citizens First Foundation, a charitable foundation established by the Bank. The Company has no significant assets, other than all of the outstanding shares of the Bank and the portion of the net proceeds it retained from its initial public offering, and no significant liabilities. Management of the Company and the Bank are substantially similar and the Company neither owns nor leases any property, but instead uses the premises, equipment and furniture of the Bank. Accordingly, the information set forth in this report, including the consolidated financial statements and related financial data, relates primarily to the Bank.

     Citizens First is regulated by the Michigan Office of Financial and Insurance Services and the Federal Deposit Insurance Corporation. Citizens First’s deposits are insured to the maximum allowable amount by the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation. Citizens First has been a member of the Federal Home Loan Bank System since 1938.

     Citizens First operates as a community-oriented financial institution, specializing in the acceptance of retail deposits from the general public in the areas surrounding its 14 full-service banking offices and using those funds, together with funds generated from operations and borrowings, to originate loans. The principal lending activity of Citizens First is the origination of mortgage loans for the purpose of purchasing or refinancing one- to four-family residential property. Citizens First also originates commercial real estate loans, construction loans, commercial loans, automobile loans, home equity loans and lines of credit and a variety of consumer loans. Citizens First currently originates one- to four-family mortgage loans primarily for sale in the secondary market, while generally retaining the servicing rights. Citizens First’s revenues are derived principally from the generation of interest and fees on loans originated and, to a lesser extent, interest and dividends on investments. Citizens First’s primary sources of funds are deposits, principal and interest payments on loans and investments and advances from the Federal Home Loan Bank of Indianapolis.

Market Area

     Citizens First’s main office is in Port Huron, Michigan in St. Clair County. Citizens First’s primary deposit gathering and lending areas are concentrated in and around the communities surrounding its 14 full-service offices located in St. Clair, Sanilac, Huron and Lapeer Counties, Michigan. However, Citizens First also makes some loans beyond these areas throughout southeastern Michigan.

     Port Huron, the population center for St. Clair county, is located approximately sixty miles northeast of Detroit and sixty miles east of Flint. St. Clair County, is bounded by the counties of Macomb to the south and west, Lapeer to the west and Sanilac to the north. The eastern boundary of the county is the St. Clair river and Canada. Almost half of the county’s total land area is rural and approximately one-third of the resident labor force commutes to jobs outside of the county. As of 2000, St. Clair County had a population of approximately 163,870, while the other three counties in its primary market area had a population of approximately 169,730. The largest employment sectors in this area are manufacturing, services, retail and government. Citizens First’s market area has a higher per capita median household income when compared to Michigan and the United States.

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Competition

     Citizens First faces intense competition for the attraction of deposits and origination of loans in its market area. Its most direct competition for deposits has historically come from the several financial institutions operating in Citizens First’s market area and, to a lesser extent, from other financial service companies, such as brokerage firms, credit unions and insurance companies. Citizens First’s competition for loans comes primarily from financial institutions in its market area, and to a lesser extent from other financial service providers, such as mortgage companies and mortgage brokers. Additionally, competition for loans may increase due to the increasing number of non-depository financial service companies entering the mortgage market, such as insurance companies, securities companies and specialty finance companies. Citizens First expects competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Technological advances, for example, have lowered barriers to market entry, allowed banks to expand their geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks. The Gramm-Leach-Bliley Act, which permits affiliation among banks, securities firms and insurance companies, also has changed the competitive environment in which Citizens First conducts business. Some of the institutions with which Citizens First competes are significantly larger than Citizens First and, therefore, have significantly greater resources. Competition for deposits and the origination of loans could limit Citizens First’s growth in the future.

Lending Activities

     General. Citizens First’s loans are subject to federal and state laws and regulations. Interest rates charged by Citizens First on loans are affected principally by Citizens First’s current asset/liability strategy, the demand for various types of loans, the supply of money available for lending purposes and the rates offered by competitors. These factors are, in turn, affected by general and economic conditions, monetary policies of the federal government, including the Federal Reserve Board, legislative tax policies and governmental budgetary matters.

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     Loan Portfolio Analysis. The following table sets forth the composition of Citizens First’s loan portfolio in dollar amounts and as a percentage of the portfolio at the dates indicated.

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     Maturity of Loan Portfolio. The following table presents certain information at March 31, 2001 regarding the dollar amount of loans maturing in Citizens First’s portfolio based on their contractual terms to maturity or scheduled amortization, but does not include potential prepayments. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as becoming due in one year or less. Loan balances do not include undisbursed loan proceeds, net deferred loan origination costs and allowance for loan losses.

     Scheduled contractual principal repayments of loans do not reflect the actual life of the loans. The average life of a loan is substantially less than its contractual term because of prepayments. In addition, due-on-sale clauses on loans generally give Citizens First the right to declare loans immediately due and payable if, among other things, the borrower sells the real property with the mortgage and the loan is not repaid. The average life of a mortgage loan tends to increase, however, when current mortgage loan market rates are substantially higher than rates on existing mortgage loans and, conversely, tends to decrease when rates on existing mortgage loans are substantially higher than current mortgage loan market rates.

     The following table sets forth, at March 31, 2001, the dollar amount of loans contractually due after March 31, 2002, and whether such loans have fixed interest rates or adjustable interest rates.

     One- to Four-Family Loans. Citizens First’s primary lending activity is the origination of loans secured by one- to four-family residences located in its market area. Citizens First offers various types of adjustable-rate mortgage loans and fixed-rate mortgage loans. At March 31, 2001, 46.4% of Citizens First’s residential mortgage loans had fixed interest rates and 53.6 had adjustable interest rates.

     Citizens First originates fixed-rate fully amortizing loans with maturities of 10, 15, 20 and 30 years. Management establishes the loan interest rates based on market conditions, with consideration given to the type of the loan and the quality and liquidity of the collateral securing the loan. Citizens First offers mortgage loans that generally conform to Freddie Mac guidelines, as well as jumbo loans, which currently are loans in amounts over $275,000. Fixed-rate conforming loans are generally originated for sale in the secondary market while primarily retaining the servicing rights. Citizens First will underwrite one- to four-family owner-occupied residential mortgage loans with a loan to value

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ratio of 97%, provided that private mortgage insurance will generally be required on loans that exceed 80% of the lower of the appraised value or the purchase price of the real estate. In limited instances, Citizens First will originate loans with a loan to value ratio of 103% to sell in the secondary market, with servicing released. Citizens First also offers a seven year balloon mortgage loan, in which the borrower pays a fixed monthly payment for the first seven years, at which point the entire balance of the loan becomes due.

     Citizens First currently also offers adjustable-rate mortgage loans, with an interest rate based on the U.S. Treasury securities index, which adjust annually after a one, three, five or seven year initial fixed period and with terms of up to 30 years. The maximum amount by which the interest rate may be increased or decreased on such loans is generally 2% per year and no more than 5% over the life of the loan. Additionally, Citizens First offers an adjustable-rate loan where the borrower has the option to convert the loan to a fixed rate after a predetermined period of time, without refinancing costs.

     Adjustable-rate mortgage loans help reduce Citizens First’s exposure to changes in interest rates. There are, however, unquantifiable credit risks resulting from the potential of increased costs to be paid by the borrower due to changed rates. During periods of rising interest rates the risk of default on adjustable-rate mortgage loans increases as a result of repricing and the increased payments required by the borrower. In addition, although adjustable-rate mortgage loans help make Citizens First’s asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits. Because of these considerations, yields on adjustable-rate mortgage loans may not be sufficient to offset increases in Citizens First’s cost of funds during periods of rising interest rates.

     Citizens First requires all properties securing its mortgage loans to be appraised by an approved independent state-licensed appraiser. Citizens First also requires that fire, casualty, title, hazard and, if appropriate, flood insurance be maintained on most properties securing real estate loans made by Citizens First.

     In an effort to provide financing for low- and moderate-income families, Citizens First offers Federal Housing Authority and Veterans Administration residential mortgage loans to qualified individuals with adjustable- and fixed-rates of interest and terms of up to 30 years. Such loans are secured by one- to four-family residential property and are underwritten using modified underwriting guidelines.

     Residential Construction Loans. Citizens First originates construction loans to individuals for the construction of one- to four-family residences. Citizens First’s residential construction loans generally provide for the payment of interest only during the construction phase, which is usually between six and twelve months. At the end of the construction phase, the loan converts to a permanent mortgage loan. Loans can be made with a maximum loan to value ratio of 95%, provided that the borrower obtains private mortgage insurance on the loan if the loan balance exceeds 80% of the appraised value or sales price, whichever is less, of the secured property. Citizens First will also originate residential construction loans to builders with which Citizens First has an established relationship. Construction loans to individuals are generally made on the same terms as Citizens First’s one- to four-family mortgage loans. At March 31, 2001, the largest outstanding residential construction loan commitment was for $1.5 million, all of which was outstanding. This loan was performing according to its terms at March 31, 2001.

     Before making a commitment to fund a construction loan, Citizens First requires an appraisal of the property by an independent licensed appraiser. Citizens First also reviews and inspects each property before disbursement of funds. Loan proceeds are disbursed after each stage of work is completed. The final 10% of the loan is held until the house is completed.

     Construction lending generally involves a higher degree of risk than single-family permanent mortgage lending because of the greater potential for disagreements between borrowers and builders and the failure of builders to pay subcontractors. Additional risk often exists because of the inherent difficulty in estimating both a property’s value and the estimated cost of the property. If the estimate of construction cost proves to be inaccurate, Citizens First may be

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required to advance funds beyond the amount originally committed to protect the value of the property. If the estimate of value upon completion proves to be inaccurate, Citizens First may be confronted with a property whose value is insufficient to assure full repayment.

     Commercial and Multi-Family Real Estate Loans. Citizens First originates commercial real estate loans that are generally secured by properties used for business purposes such as small office buildings, industrial facilities or retail facilities primarily located in Citizens First’s primary market area, under the direction of an experienced staff of commercial loan officers. Citizens First also, to a lesser extent, originates multi-family loans that are generally secured by five or more unit apartment buildings in Citizens First’s primary market area.

     Most of the commercial and multi-family loans originated by Citizens First are fully amortizing loans with terms of up to twenty years. Generally, the maximum loan-to-value ratio for such a loan is 80%. In reaching its decision on whether to make a commercial or multi-family real estate loan, Citizens First considers the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property. In addition, with respect to commercial real estate rental properties, Citizens First will also consider the term of the lease and the quality of the tenants. Citizens First has generally required that the properties securing these real estate loans have debt service coverage ratios (the ratio of earnings before debt service to debt service) of between 1.10x and 1.30x. Citizens First requires written appraisals prepared by a certified independent appraiser of all properties securing commercial or multi-family real estate loans greater than $250,000, or as required by FIRREA. Additionally, environmental surveys are required prior to funding of certain larger commercial real estate in excess of $1.0 million and may be required on commercial real estate loans greater than $500,000 or where a risk of contamination exists. At March 31, 2001, Citizens First’s largest commercial or multi-family real estate loan had an outstanding balance of $3.6 million. The loan is secured by vacant land and was performing according to its terms at March 31, 2001.

     Citizens First also makes construction loans for commercial development projects, including multi-family, commercial properties, single-family subdivisions and condominiums. These loans generally have an interest-only phase during construction then convert to permanent financing. The permanent mortgage loan must be approved at the time the initial approval is made. Disbursement of funds are at the sole discretion of Citizens First and are based on the progress of construction. The maximum loan to value ratio for these loans depends upon the type of commercial development project being undertaken, but generally will not exceed 80%. At March 31, 2001, the largest outstanding commercial construction loan was $3.8 million. This loan was performing according to its terms at March 31, 2001.

     Multi-family and commercial real estate lending affords Citizens First an opportunity to receive interest at rates higher than those generally available from one- to four-family residential lending. However, loans secured by these properties usually are greater in amount and are more difficult to evaluate and monitor and, therefore, involve a greater degree of risk than one- to four-family residential mortgage loans. Because payments on loans secured by income producing properties are often dependent on the successful operation and management of the properties, repayment of these loans may be affected by adverse conditions in the real estate market or the economy. Citizens First seeks to minimize these risks by generally limiting the maximum loan-to-value ratio to 80% for commercial and multi-family real estate loans and by strictly scrutinizing the financial condition of the borrower, the cash flow of the project, the quality of the collateral and the management of the property securing the loan.

     Consumer Loans. Citizens First offers a variety of consumer loans, including home equity loans and lines of credit, automobile loans, mobile home loans, other secured loans, collateral loans, personal loans and unsecured loans.

     Citizens First offers home equity loans and lines of credit secured by owner-occupied one- to four-family residences. At March 31, 2001, home equity loans and lines of credit totaled $69.4 million, or 10.1% of Citizens First’s total loans and 51.3% of consumer loans. Additionally, at March 31, 2001, the unadvanced amounts of home equity lines of credit totaled $12.8 million. The underwriting standards employed by Citizens First for home equity loans and lines of credit include a determination of the applicant’s credit history, an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan and the value of the collateral securing the loan. Home equity

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loans will not be made if the borrower’s outstanding monthly debt exceeds 40% of the borrower’s gross monthly income. Loan to value ratios and the maximum loan amounts vary depending on the amount of insurance coverage on the underlying property. Generally, home equity loans are made with fixed interest rates and with terms up to 15 years.

     Home equity lines of credit have adjustable rates of interest which are indexed to the prime rate as reported in The Wall Street Journal. Generally, the maximum combined loan-to-value ratio on home equity lines of credit is 85% and loans may be made up to $500,000. A home equity line of credit may be drawn down by the borrower for an initial period of five years from the date of the loan agreement. During this period, the borrower has the option of paying, on a monthly basis, either principal and interest or only the interest. If not renewed, the borrower has to pay back the amount outstanding under the line of credit over a term not to exceed 15 years, beginning at the end of the five year period.

     Citizens First offers fixed-rate automobile loans on a direct and indirect basis with terms of up to 72 months. Citizens First will generally make such loans up to 100% of the retail price for new cars and up to 90% of the retail value as stated in the NADA Used Car Guide for used cars. The interest rates offered depend on the age of the automobile, market conditions and current interest rates.

     In March 1999, Citizens First commenced an indirect consumer lending program, which is managed by an experienced consumer loan officer. Citizens First originates automobile loans through approximately 31 automobile dealers in its primary market area. These dealers provide Citizens First applications to finance new and, to a lesser extent, used vehicles sold by their dealerships. Citizens First has the opportunity to accept or reject each loan. Generally, Citizens First pays a fee to the automobile dealer based on the interest rate on the loan. This fee, or dealer reserve, is paid to the dealer monthly. If a loan is paid off or charged off within a specified time period, Citizens First is credited with 100% of the dealer reserve, which it may withhold from the dealer’s account or credit against future payments to the dealer. For fiscal 2001 and 2000, Citizens First originated $32.9 million and $39.7 million of automobile loans, respectively, of which 89.0% and 90.0% were originated indirectly. At March 31, 2001, Citizens First held $41.7 million of indirect auto loans, or 6.1% of total loans and 30.8% of consumer loans.

     Citizens First also originates consumer loans secured by mobile homes. Historically, such loans were primarily originated indirectly through dealer relationships. However, in recent years management has decided to stop originating such loans on an indirect basis, which has reduced the amount of mobile home originations. As a result, mobile home loans have declined from $33.3 million, or 7.6% of total loans and 45.7% of consumer loans to $10.4 million, or 1.5% of total loans and 7.7% of consumer loans at March 31, 2001. Citizens First originates loans on new or used mobile homes (up to fifteen years old) with terms ranging from seven to fifteen years and with fixed interest rates. Citizens First generally will finance up to a maximum of 90% of the purchase price of the mobile home unit or the retail value as stated in the NADA book, whichever is less.

     Citizens First also originates consumer loans secured by boats, motorcycles, campers and other recreational vehicles. These loans have fixed interest rates and terms ranging from a maximum of five years to fifteen years depending on the type of collateral securing the loan.

     Citizens First offers collateral loans, personal loans and unsecured loans. Collateral loans are generally secured by a savings account or a certificate of deposit. Personal loans generally have a borrowing capacity of $5,000 and a maximum term of four years. Citizens First also makes unsecured personal loans to individuals who have been homeowners for at least four years. These loans will be made up to $10,000 with terms of up to seven years.

     Citizens First believes that it will benefit from the higher yields earned on consumer loans and that the shorter duration of consumer loans will improve Citizens First’s interest rate risk position. However, consumer loans entail greater risk than do residential mortgage loans, particularly in the case of loans that are unsecured or secured by rapidly depreciating assets such as automobiles. In these cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of

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damage, loss or depreciation. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Citizens First expects that it will increase its allowance for loan losses as its consumer loan portfolio grows by charging a provision for loan losses against income.

     Commercial Loans. Citizens First, under the direction of an experienced staff of commercial loan officers, makes commercial business loans primarily in its market area to a variety of professionals, sole proprietorships and small businesses. Citizens First offers a variety of commercial lending products, including term loans for fixed assets, working capital, lines of credit and loans with a single principal payment at maturity. Additionally, Citizens First originates Small Business Administration guaranteed loans. Citizens First offers secured commercial term loans, with terms of up to ten years and the payment of which is dependent on future earnings. Business lines of credit have adjustable rates of interest with terms of up to three years. Loans that require a one-time payment of principal at its termination will be originated on terms of up to three years provided the borrower is paying interest at least semi-annually or up to one year if the borrower will pay all of the interest due upon maturity. Business loans with variable rates of interest are generally indexed to the prime rate as reported in The Wall Street Journal. Citizens First also makes unsecured commercial loans. At March 31, 2001, such loans totaled $11.3 million, or 28.8% of commercial loans. At March 31, 2001, Citizens First’s largest outstanding commercial loan was a $2.5 million unsecured line of credit. Additionally, at March 31, 2001, Citizens First’s largest outstanding commercial loan commitment was a $5.0 million line of credit, secured by certificates of deposit. Both of these loans were performing according to their terms at March 31, 2001.

     When making commercial business loans, Citizens First considers the financial statements of the borrower, Citizens First’s lending history with the borrower, the debt service capabilities of the borrower, the projected cash flows of the business, and the value of the collateral. Commercial business loans are generally secured by a variety of collateral, primarily accounts receivable, inventory and equipment, and are generally supported by personal guarantees. Depending on the collateral used to secure the loans, commercial loans are made in amounts of up to 100% of the value of the collateral securing the loan.

     Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

     Loans to One Borrower. The maximum amount that Citizens First may lend to one borrower is limited by regulation. At March 31, 2001, Citizens First’s regulatory limit on loans to one borrower was $14.2 million or $23.7 million for loans approved by two-thirds of the Board of Directors. At that date, Citizens First’s largest amount of outstanding loans to one borrower, including the borrower’s related interests, was approximately $19.3 million and consisted of twelve term loans and one construction loan. Additionally, at March 31, 2001, Citizens First’s largest outstanding commitment to one borrower was approximately $20.7 million, approximately $19.3 million of which was outstanding, and consisted of twelve term loans and one construction loan. All of these loans were performing according to their original terms at March 31, 2001.

     Loan Approval Procedures and Authority. Citizens First’s lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures established by Citizens First’s Board of Directors and management.

     Residential real estate loans greater than $700,000 require the approval of the Board of Directors. Additionally, various officers and underwriters of Citizens First have been delegated authority to approve different types of real estate

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loans. The approval authorities range from the authority of certain staff underwriters to approve residential mortgage loans up to $100,000 to the authority of the President and Chief Executive Officer to approve any real estate loan up to $700,000. The Senior Vice President, Retail Banking may approve any type of loan up to $400,000. In addition, certain employees may combine their authority to jointly approve a loan that exceeds their individual lending authority.

     Consumer loans greater than $700,000 require the approval of the entire Board of Directors. Additionally, various bank personnel have been delegated authority to approve consumer loans. The President and Chief Executive Officer may individually approve any consumer loan up to $700,000. The Senior Vice President, Retail Banking may approve loans up to $400,000. The Vice President, Consumer Loans may approve loans up to $100,000. Two assistant vice presidents in the consumer loan department and the consumer department lenders may each approve loans up to $50,000.

     All commercial and commercial real estate loans in excess of $3.0 million require the approval of the Board of Directors. Commercial and commercial real estate loans between $1.0 and $3.0 million require the approval of the Directors Loan Committee, which consists of three directors, the President and Chief Executive Officer and the Senior Vice President, Commercial Banking. Commercial and commercial real estate loans between $500,000 and $1.0 million require the approval of the Officers Credit Committee, which consists of the President and Chief Executive Officer, the Senior Vice President, Commercial Banking, certain commercial officers and other officers as designated. Additionally, various bank personnel have been delegated authority to approve loans less than $500,000. Officers may combine their authority to jointly approve a loan that exceeds their individual lending authority.

     Loan Originations, Purchases and Sales. Citizens First lending activities are conducted by its salaried and commissioned loan personnel and through its relationship with dealers. Currently, Citizens First has contractual relationships with approximately 38 vehicle dealers, approximately 31 of which originate automobile loans for Citizens First. Citizens First underwrites and funds such loans. These automobile dealers accounted for approximately 41.0% and 45.0% of the consumer loans originated by Citizens First in fiscal 2001 and 2000, respectively. The automobile dealers are compensated based on the interest rate on the loan offered. This fee, or dealer reserve, is paid to the dealer monthly.

     Except in connection with its indirect automobile lending, Citizens First relies on advertising, referrals from realtors and customers, and personal contact by Citizens First’s staff to generate loan originations. Citizens First does not use loan correspondents or other third-parties to originate loans. Citizens First generally does not purchase either participation interests in loans or whole loans. Citizens First’s ability to originate adjustable-rate and fixed-rate loans is dependent upon the relative customer demand for such loans, which is affected by the current and expected future level of interest rates.

     Generally, all fixed-rate loans which conform to the underwriting standards specified by Freddie Mac are originated for sale in the secondary market to Freddie Mac, and to a lesser extent private investors. Additionally, Citizens First was recently approved to sell loans in the secondary market to Fannie Mae. To date, no loans have been sold to Fannie Mae. Citizens First generally retains the servicing rights on the loans sold. Citizens First currently has a best efforts contract with a third party, under which Citizens First is not required to replace loans which fail to close for any reason. Additionally, Citizens First has entered into forward contracts with Freddie Mac in the past and at March 31, 2001, Citizens had outstanding forward contracts to sell loans of approximately $7.9 million. Sales of loans are made without recourse to Citizens First in the event of default by the borrower. Citizens First generally originates adjustable-rate loans for its portfolio but will from time to time sell such loans in the secondary market based on prevailing market interest rate conditions, liquidity needs and Citizens First’s interest rate risk position.

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     The following table sets forth Citizens First’s loan originations, sales and principal repayments for the periods indicated: