cdhc.htm


    Exhibit
10.3

    UNITED
STATES OF AMERICA

    Before
the

    OFFICE
OF THRIFT SUPERVISION

     

     

    
      


    

     

    
      
        	
              	 	 	 
	 	In the Matter
      of 	) 	Order No.:
      WN-09-024  
	 	 	) 	 
	 	 	) 	 
	 	FIRST BANCSHARES,
      INC.	) 	Effective
      Date: August 17, 2009
	 	 	) 	 
	 	
                Mountain
      Grove, Missouri 

                OTS Docket No. H2220 

              	
                )

                ) 

              	 
	 	
                 

              


      

    

    


    ORDER TO CEASE AND
DESIST

     

    WHEREAS, First Bancshares,
Inc., Mountain Grove, Missouri, OTS Docket No. H2220 (Holding Company), by and
through its Board of Directors (Board), has executed a Stipulation and Consent
to the Issuance of an Order to Cease and Desist (Stipulation); and

    WHEREAS, the Holding Company,
by executing the Stipulation, has consented and agreed to the issuance of this
Order to Cease and Desist (Order) by the Office of Thrift Supervision (OTS)
pursuant to 12 U.S.C. § 1818(b); and

    WHEREAS, pursuant to delegated
authority, the OTS Regional Director for the Western Region (Regional Director)
is authorized to issue Orders to Cease and Desist where a savings and loan
holding company has consented to the issuance of an order.

    NOW, THEREFORE, IT IS ORDERED
that:

    Cease and
Desist.

    1.   The
Holding Company and its directors, officers, employees, and agents shall cease
and desist
from any action (alone or with another or others) for or toward causing,
bringing about,

     

    
      First
Bancshares, Inc.

      Order to
Cease and Desist

      Page 1 of
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    participating
in, counseling or the aiding and abetting the unsafe or unsound practices that
resulted in an increasing level of classified assets, poor earnings, and
inadequate risk management practices of its subsidiary, First Home Savings Bank,
Mountain Grove, Missouri, OTS Docket No. 05233 (Association).

    Business
Plan.

    2.  By September 31, 2009,
the Board shall submit to the Regional Director, for a written notice of
non-objection, a detailed business plan for enhancing the consolidated earnings
and operations of the Holding Company and the Association for the third and
fourth quarters of 2009 and calendars years 2010 and 2011 (Business Plan). The
Business Plan, at a minimum, shall address the following
components:

    
      	 	
              (a)  specific
      strategies for strengthening and improving the Association's operations
      and for preserving the Association's financial resources to support its
      risk profile; 

            
	 	
              (b)  specific
      strategies for raising additional capital for operations and making
      capital infusions into the Association, if necessary, taking into
      consideration the impact of at least three different forward-looking
      scenarios involving progressively stressed economic environments,
      including, but not limited to, the cessation of capital distributions from
      the Association; 

            
	 	
              (c)  comprehensive
      pro forma capital and earnings projections, taking into consideration the
      Association's current and projected earnings and the Association's risk
      profile; 

            
	 	
              (d)  comprehensive
      pro forma cash flow projections for the Holding Company only, detailing
      all anticipated sources and uses of funds, including but not limited to:
      (i) capital distributions, and (ii) operating expenses, including, but not
      limited to, payments required 

            


    

     

    
      First
Bancshares, Inc.

      Order to
Cease and Desist

      Page 2 of
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      	 	under the tax
      sharing agreement with the Association and the reimbursement of the
      Association for expenses and services rendered pursuant to a written
      agreement between the Holding Company and the Association;
    and 
	 	(e)  detailed description of all
      assumptions and the support for such assumptions used to
      prepare the Business Plan. 


    

    3.   Within
fifteen (15) days after receiving the Regional Director's written comments or
written notice of non-objection, the Board shall make any changes, if any,
required by the Regional Director and adopt the Business Plan. Thereafter, the
Holding Company shall implement and comply with the final Business Plan. Within
five (5) days of Board approval of the final Business Plan, the Holding Company
shall send a copy of the final Business Plan adopted by the Board, along with
the Board meeting minutes reflecting the Board's adoption of the final Business
Plan.

    4.   Once the
Business Plan is implemented, the Holding Company must operate within the
parameters of its Business Plan. If the Board determines that an amendment or a
revision to the Business Plan is appropriate, the Board shall submit the revised
Business Plan to the Regional Director for review and written notice of
non-objection at least sixty (60) days before a proposed change is implemented.
The Holding Company shall comply with the Business Plan, including all revisions
or amendments thereto required by the Regional Director.

    5.   Within
five (5) days after a material event that affects or would affect the balance
sheet or the cash flow of the Holding Company, the Holding Company shall submit
a written notification to the Regional Director of such material
event.

    6.   Within
thirty (30) days after the end of each quarter, beginning with the quarter
ending September 30, 2009, the Board shall submit a quarterly variance report to
the Regional Director

    
      First
Bancshares, Inc.

      Order to
Cease and Desist

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      describing any material
deviation or variance from the Business Plan and setting forth corrective
actions taken to address the material deviation. For the purposes of this
Paragraph, a deviation may be considered material: (a) if the Holding Company's
performance falls below or fails to meet target amounts in the Business Plan by
more than ten percent (10%) or $1.0 million, whichever is greater; or (b) when
the Holding Company engages in any material activity, line of business, or
operation that is inconsistent with the Business Plan. The Board's review of the
Business Plan and the quarterly variance reports shall be fully documented in
the minutes of the Board meeting.

    

    Dividends.

    7.   Effective
immediately, the Holding Company shall not declare, make, or pay any dividends
or other capital distributions or purchase, repurchase or redeem or commit to
purchase, repurchase, or redeem any Holding Company's common shares without the
prior written notice of non-objection of the Regional Director. The Holding
Company shall submit its written request for written notice of non-objection to
the Regional Director at least thirty (30) days prior to the anticipated date of
the proposed dividend payment, capital distribution, or stock transaction. The
written request for such non-objection shall: (a) contain current and one-year
pro forma projections regarding the Holding Company's capital, earnings, and
cash flow and the Association's capital, asset quality, and earnings; and (b)
address compliance with the Business Plan required by Paragraph 2 of this
Order.

    8.   Effective
immediately, the Holding Company shall not accept nor request that the
Association make or pay any capital distributions, as that term is defined in 12
C.F.R. § 563.141, or commit to make or pay dividends or any other capital
distributions, without the prior written notice of non-objection of the Regional
Director. The Holding Company shall submit its written

     

     

    
      First
Bancshares, Inc.

      Order to
Cease and Desist

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    request for written notice
of non-objection to the Regional Director at least thirty (30) days prior to the
anticipated date of the proposed capital distribution. The written request for
such non-objection shall: (a) contain current and one-year pro forma projections
regarding the Holding Company's capital, earnings, and cash flow and the
Association's capital, asset quality, and earnings; and (b) address compliance
with the Business Plan required by Paragraph 2 of this Order.

    Debt
Restrictions.

    9.  Effective
immediately, the Holding Company and its subsidiary, other than the Association,
shall not incur, issue, renew, or rollover any debt or debt securities, increase
any current lines of credit, guarantee the debt of any entity, or otherwise
incur any additional debt or commit to do so without the prior written notice of
non-objection of the Regional Director. For purposes of this Paragraph, the
term, "debt", includes, but is not limited to, loans, bonds, cumulative
preferred stock, hybrid capital instruments such as subordinated debt or trust
preferred securities, and guarantees of debt. For purposes of this Paragraph,
the term, "debt," does not include liabilities incurred in the normal course of
business to acquire goods and services and that are normally recorded as
accounts payable under generally accepted accounting principles. All written
requests to engage in a debt transaction, at a minimum, shall: (a) describe the
purpose of the proposed debt; (b) set forth and analyze the terms of the
proposed debt and covenants; (c) analyze the Holding Company's current cash flow
resources available to satisfy such debt repayment; and (d) set forth the
anticipated source(s) of repayment of the proposed debt. The Holding Company
shall submit its written request for such non-objection to the Regional Director
at least thirty (30) days prior to incurring, issuing, rolling over any debt,
increasing any current lines of credit, or guaranteeing the debt of any
entity.

     

    
      First
Bancshares, Inc.

      Order to
Cease and Desist

      Page 5 of
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    Transactions with
Affiliates.

    10.   Effective
immediately, the Holding Company shall not enter into any transaction or
otherwise engage in any action that would cause the Association to violate 12
C.F.R. Part 223 and 12 C.F.R. § 563.41.

    Oversight of
Association.

    11.   Effective
immediately, the Holding Company shall ensure the Association's compliance with
applicable laws, rules, regulations, and agency guidance and all the terms of
the Order to Cease and Desist issued by the OTS against the Association on
August 17, 2009.

    Employment Contracts and
Compensation Arrangements.

    12.   Effective immediately,
the Holding Company shall not enter into, renew, extend, or revise any
contractual arrangement related to compensation or benefits with any director or
Senior Executive Officer1 of the Holding Company, unless it first
provides the Regional Director with not less than thirty (30) days prior written
notice of the proposed transaction. The notice to the Regional Director shall
include a copy of the proposed employment contract or compensation arrangement,
or a detailed written description of the compensation arrangement to be offered
to such director or officer, including all benefits and perquisites. The Board
shall ensure that any contract, agreement, or arrangement submitted to the
Regional Director fully complies with the requirements of 12 C.F.R. Part
359.

    Severance
Payments.

    13.   Effective
immediately, the Holding Company shall not make any golden
parachute

     

    


     

    
      	___________________________ 
	1 The term
      "Senior Executive Officer" is defined at 12 C.F.R. §
      563.555. 


    

     

      
      First
Bancshares, Inc.

      Order to
Cease and Desist

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    payment2 unless, with respect to each such payment, the
Holding Company has complied with the requirements of 12 C.F.R. Part
359.

    Directorate and Management
Changes.

    14.   Effective
immediately, the Holding Company shall comply with the prior notification
requirements for changes in directors and Senior Executive Officers set forth in
12 C.F.R. Part 563, Subpart H.

    Compliance with
Order.

    15.   Within
thirty (30) days after the end of each quarter, beginning with the quarter
ending September 30, 2009, the Board shall adopt a board resolution (Compliance
Resolution): (a) formally resolving that the Board conducted a diligent inquiry
of relevant information, including reports from the Senior Executive Officers,
regarding compliance with the Order during the immediately preceding quarter;
(b) detailing the compliance with the provisions of this Order; (c) identifying
each instance of noncompliance; and (d) setting forth, in detail, additional
corrective actions or steps adopted or required by the Board to address each
instance of noncompliance. Within five (5) days of the meeting of the Board at
which each Compliance Resolution was adopted, the Holding Company shall provide
to the Regional Director a copy of each Compliance Resolution and any compliance
reports from Management that were reviewed during the Board
meeting.

    Effective Date,
Incorporation of Stipulation.

    16.   This Order is effective
on the Effective Date as shown on the first page. The Stipulation is made a part
hereof and is incorporated herein by this reference.

     

    


     

    
      	______________________________ 
	2 The term
      "golden parachute payment" is defined at 12 C.F.R. §
      359.1(f). 


    

     

     

      
      First
Bancshares, Inc.

      Order to
Cease and Desist

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     Duration. 

    17.   This
Order shall remain in effect until terminated, modified, or suspended by written
notice of such action by the OTS, acting by and through its authorized
representatives. 

    Time
Calculations.

    18.   Calculation
of time limitations for compliance with the terms of this Order run from the
Effective Date and shall be based on calendar days, unless otherwise
noted.

    19.   The
Regional Director, or an OTS authorized representative, may extend any of the
deadlines set forth in the provisions of this Order upon written request by the
Holding Company that includes reasons in support for any such extension. Any OTS
extension shall be made in writing.

    Submissions and
Notices.

    20.   All
submissions, including any reports, to the OTS that are required by or
contemplated by this Order shall be submitted within the specified
timeframes.

    21.   Except as
otherwise provided herein, all submissions, requests, communications, consents,
or other documents relating to this Order shall be in writing and sent by first
class U.S. mail (or by reputable overnight carrier, electronic facsimile
transmission, or hand delivery by messenger) addressed as follows:

    
    

     

    
      	
               (a)        
      

            	To the
      OTS: 
	 	 
	 	 
	 	Regional Director C.K.
      Lee 
	 	Attn: Dennis R. Havener,
      Assistant Director  
	 	225 E. John Carpenter Freeway,
      Suite 500  
	 	
              Irving,
      Texas 75062-5217

              Facsimile:
      (972) 277-9501 

            


    

     

     

    
      First
Bancshares, Inc.

      Order to
Cease and Desist

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      	 	With a copy
      to: 
	 	 
	 	 
	 	Don
    Kramer 
	 	Field
      Manager 
	 	Office of Thrift
      Supervision 
	 	
              P.O.
      Box 24401 

            
	 	
              Overland
      Park, Kansas 66283-4401 

            
	 	 
	
               (b)        
      

            	To the Holding
      Company: 
	 	 
	 	Attn: Thomas M. Sutherland,
      Chief Executive Officer  
	 	First Bancshares,
      Inc. 
	 	142 East First
      Street 
	 	
              Mountain Grove, Missouri
      65711-1742 

            
	 	Facsimile: (417)
      926-5151 


    

     

    No Violations
Authorized.

    22.  Nothing in this Order or
the Stipulation shall be construed as allowing the Holding Company,
its Board, officers, or employees to violate any law, rule, or regulation.


    IT IS SO ORDERED.

     

    
    

     

    
      	 	OFFICE OF THRIFT
      SUPERVISION 
	 	 
	 	 
	 	By: /s/C.K.
      Lee                                                    
       
	 	      
      C.K. Lee 
	 	       Regional
      Director, Western Region 
	 	 
	 	Date: See Effective
      Date on page 1 


    

     

     

     

    First
Bancshares, Inc.

    Order to
Cease and Desist

    Page 9 of
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