Effective as of December 18, 2012, Citizens Financial Bank (the "Bank"), a wholly-owned subsidiary of CFS Bancorp, Inc. (the "Company"), and the Office of the Comptroller of the Currency (the "OCC"), the Bank's primary federal regulator, entered into a formal written agreement (the "Agreement"). The Agreement provides that the Bank:

•         adopt and implement certain enhancements to its policies and procedures
          relating to its allowance for loan losses ("ALLL") and the methodology
          related thereto;


•         ensure that its internal credit risk ratings of its commercial loans in
          excess of $250,000 are timely, accurate and consistent with regulatory
          guidance;


•         adopt and implement a written asset diversification program consistent
          with regulatory guidance, including an ongoing analysis of any
          concentrations of credit and a plan to reduce the risks thereof;


•         obtain current appraisals or evaluations, as applicable, of the real
          estate securing each of the commercial loans lacking an appropriate
          appraisal or evaluation and all other real estate owned, and implement
          certain enhancements to its real estate appraisal receipt and review
          processes and its loan risk-assessment procedures in connection with
          the receipt of such appraisals;


•         implement certain enhancements to its review and revaluation of
          collateral securing its real estate loans in connection with the
          ongoing implementation of its problem loan identification, work-out
          strategies, and impairment and ALLL analyses;


•         adopt and implement individual work-out plans for all criticized assets
          that are reviewed on a quarterly basis; and


•         may not extend additional credit to any borrower with an aggregate
          outstanding loan balance of $500,000 that is a criticized asset unless
          approved and deemed by the Bank's Board of Directors to be necessary to
          promote the best interests of the Bank and will not compromise the
          Bank's work-out strategies with respect to such loans.

The Agreement does not require the Bank to maintain any specific minimum regulatory capital ratios and, accordingly, does not change the Bank's "well-capitalized" status as of the date hereof. However, in connection with its most recent examination, the OCC established higher individual minimum capital ratios for the Bank. Specifically, the Bank must maintain a Tier 1 capital to adjusted total assets ratio of at least 8%, and a total risk-based capital to risk-weighted assets ratio of at least 12%. The Bank's Tier 1 capital and total risked-based capital ratios at September 30, 2012 were 8.85% and 13.82%, respectively.
Management and the Bank's Board of Directors are committed to promptly addressing the action items included in the Agreement and believe that the Bank has made significant progress in complying with the terms of the Agreement. The Agreement replaces and supersedes the prior Memorandum of Understanding ("MOU") previously entered into by the Bank with the Office of Thrift Supervision effective March 20, 2009. As previously disclosed, the Company remains subject to an informal regulatory agreement with the Federal Reserve Board.

The foregoing description of the Agreement is qualified in its entirety by reference to the Agreement by and between the Bank and the OCC dated December 18, 2012, which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits.

The following exhibit is filed herewith.

Exhibit Number   Description
  99.1           Agreement by and between Citizens Financial Bank and the
                 Comptroller of the Currency dated December 18, 2012

Forward-Looking Information
Statements contained in this Current Report on Form 8-K which are not historical facts may be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors. Factors which could result in material variations include, but are not limited to, unanticipated events related to the formal agreement or actions by regulators; and the inability of the Bank to comply with the formal agreement. These factors should be considered in evaluating any forward-looking statements and undue reliance should not be placed on such statements.