The U.S. Department of Justice has reached a $3.6 million settlement agreement with two financial institutions to resolve allegations that they discriminated against African-Americans based on race by improperly favoring white residents in Michigan.

The lawsuit against Citizens Republic Bancorp and its subsidiary Citizens Bank of Flint, Michigan, stemmed from allegations that the banks were expanding branches in white areas while closing them down in Black communities, decreasing access to their services.

“There was a red line drawn around the city of Detroit,” Thomas Perez, the assistant attorney general who heads the DOJ’s Civil Rights Division, said about the complaints that led to the lawsuit.

The settlement, which is subject to court approval, requires that the banks invest $1.625 million in Detroit in neighborhood stabilization by providing existing homeowners with matching grants of up to $5,000 to fund exterior improvements; $1.5 million in a special financing program to increase the amount of credit the banks extend to majority African-American areas in Wayne County; and $500,000 for outreach to potential customers, promotion of their products and services and consumer financial education.

“I am pleased that Citizens Bank approached us to ensure that their contributions were aligned with our neighborhood stabilization initiatives,” said Detroit Mayor Dave Bing. “We welcome them to the growing number of partners who are working with us on behalf of our city and citizens.”

Citizens Bank president and CEO Cathy Nash denies the allegations of discrimination but said that a court fight would have been too costly.

"We've been in negotiations for about two years. To fight in open court is very expensive. If we’re going to settle for millions of dollars, I'd rather actually put the money to good use. It just didn't make sense for us," she told The Detroit News. “I’m not too keen that I had to settle with the Department of Justice on allegations that I don’t agree with, but I'm going to make lemonade out of lemons. I don't like it, but this is the right thing to do for the city.”

(Photo: Bill Pugliano/Getty Images)