SOURCE: CityFed Financial Corp.

October 20, 2005 15:01 ET

CityFed Financial Begins Restructure

Stephen Lange Ranzini Appointed President

ANN ARBOR, MI and NANTUCKET, MA -- (MARKET WIRE) -- October 20, 2005 -- CityFed Financial Corp. (OTC: CTYF) (OTC: CTYFP) and (OTC: CTYFN) (the "Company") announced that its board has agreed to and implemented a restructuring of the Company and the appointment of Stephen Lange Ranzini as President of the Company to lead the further restructuring of the Company.

Today's restructuring will see the Company's Note Holders take a secured lien against the Company's subsidiary, CFF Services Corp., in exchange for eliminating any recourse against the Company's other assets for their debt. This debt obligation arose originally from funds they had advanced the Company to support the Company's successful defense of various lawsuits including a multi-year lawsuit the Company won at the U.S. Supreme Court, FDIC v. Atherton, which established the standard of care that directors of federally insured financial institutions owe their financial institutions. In FDIC v. Atherton the U.S. Supreme Court opined that unless state law holds directors to a higher standard, the directors of federally insured financial institutions are never personally responsible for the bad things that happen to their financial institutions unless they do something that is actually wrongful. The FDIC was never able to prove that the previous directors of CityFed had done anything wrongful, yet the shareholders of the Company were nearly wiped out by the FDIC's prosecution of the case in coordination with the Office of Thrift Supervision.

Mr. Ranzini commented, "Today's restructuring eliminates the very real risk that the shareholders of the Company would be completely wiped out by the last remaining debt of the Company. The future proposed restructuring that I will lead is intended to result ultimately in one class of equity in the Company, versus the three classes of equity securities the Company has today. While the Common Stock shareholders and Junior Preferred Stock shareholders will be severely diluted in the proposed restructuring, shareholders with 1,000 shares or more will retain at least a portion of their investment in the reorganized Company."

Mr. Ranzini is Chairman of Jove Corporation, which owns 18% of CityFed's senior equity security, the Senior Convertible Series B Preferred Stock, and has served as a director of CityFed since 1990 (the year after City Federal Savings and Loan collapsed) representing the interests of the Senior Convertible Series B Preferred Stock shareholders as one of their two representatives on the Company's board of directors. Mr. Ranzini also serves as President and CEO of NASDAQ listed University Bancorp, Inc., the parent company of University Bank of Ann Arbor, Michigan, which manages a total of $2.9 billion in assets. Mr. Ranzini grew up in Martinsville, New Jersey.

CityFed Financial Corp. (OTC: CTYF) owns 100% of CFF Services Corp., a hard money first and second lien mortgage lender in New England with assets of $5 million and the Company itself holds a portfolio of $450,000 in cash and investment securities. CityFed Financial Corp. was founded as the bank holding company for City Federal Savings & Loan, a $10 billion savings and loan, which was the largest financial institution headquartered in New Jersey and the largest savings and loan east of the Mississippi at the time of its seizure by the Resolution Trust Corporation in 1989 during the Savings & Loan Crisis of the late 1980s. CityFed's demise was primarily caused by the deregulation of bank deposit interest rate ceilings by Congress and by a clause in the 1989 FIRREA Act of Congress that prevented regulatory goodwill that City Federal Savings and Loan held from counting towards regulatory capital. City Federal Savings and Loan had been enticed into acquiring a number of savings and loans in Florida and New Jersey by its primary government regulator, the Federal Home Loan Bank Board, and when Congress changed the rules, the acquisitions proved fatal.

Any prediction of the future is inherently not assured. Investors should be advised that any prediction in this release is intended to be covered by the Safe Harbor provisions of Section 21E of the Securities Exchange Act of 1934.

Contact Information

  • Company Contact:
    Stephen Lange Ranzini
    CityFed Financial Corp.
    Phone: (734) 741-5858 xt 226
    Fax: (734) 741-5859
    Email: Email Contact