ex10-4.htm


    
      

    

    Exhibit
10.4


    
      	
              UNITED
      STATES OF AMERICA

            
	
              Before
      the

            
	
              OFFICE
      OF THRIFT SUPERVISION

            


    

     

     

    
 

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	 
      	
                                    )

                                  	 
      	 
      
	
                                    In
      the Matter of

                                  	
                                    )

                                  	 
      	
                                    Order
      No.: CN 09-21

                                  
	 
      	
                                    )

                                  	 
      	 
      
	 
      	
                                    )

                                  	 
      	 
      
	
                                    
                                      FIRST
      FEDERAL BANKSHARES, INC.

                                    

                                  	
                                    )

                                  	 
      	
                                    Effective
      Date: July 31, 2009

                                  
	 
      	
                                    )

                                  	 
      	 
      
	
                                    Sioux
      City, Iowa

                                  	
                                    )

                                  	 
      	 
      
	
                                    OTS
      Docket No. H3439

                                  	
                                    )

                                  	 
      	 
      
	 
      	
                                    )

                                  	 
      	 
      


                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

     

    
      ORDER TO CEASE AND
DESIST

      


      


      WHEREAS, First Federal
Bankshares, Inc., Sioux City, Iowa, OTS Docket No. H3439 (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 Central 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, participating in, counseling or the aiding and abetting
the unsafe or unsound practices that resulted in the operation of the Holding
Company with insufficient capital for its risk profile and with inadequate
earnings.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Business
Plan.

       

      2.           (a)   By
August 31, 2009, the Board shall adopt and submit to the Regional Director, for
review and comment, a detailed business plan for enhancing the consolidated
capital and earnings of the Holding Company (Business Plan).  The
Business Plan shall cover the period beginning with the quarter ending June 30,
2009 through the quarter ending December 31, 2011.  At a minimum, the
Business Plan shall address the following components:

       

      
        
          	 	(i) 	Capital
      infusions to attain no later than December 31, 2009 and thereafter
      maintain at the Holding Company’s wholly-owned savings association
      subsidiary, Vantus Bank, Sioux City, Iowa, OTS Docket No. 00190
      (Association): (A) Tier 1 (Core) Capital Ratio of at least eight percent
      (8
      %); and (B) Total Risk-Based Capital Ratio of at least twelve percent (12
      %);
	 	 	 
	 	(ii) 	Specific
      strategies for raising additional capital;
	 	 	 
	
                   
      

                	
                  (iii)

                	
                  Quarterly
      pro forma capital projections taking into consideration the current and
      projected earnings and the risk profile of the consolidated Holding
      Company’s assets;

                


        

      

      
        
          	 	 	 
	
                   
      

                	
                  (iv)

                	
                  Quarterly
      detailed pro forma balance sheets and income statements for a rolling
      three-year period beginning with June 30, 2009 and ending December 31,
      2011; and

                


        

      

      
        
        

      

       

       

      
        
          First
Federal Bankshares, Inc.

        

        Order to
Cease and Desist

        Page 2
of 7

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        
          
          

        

        
          
          

        

        
          	
                   
      

                	
                  (v)

                	
                  

                    Detailed
      descriptions of all relevant assumptions and projections and the
      supporting documentation for all relevant assumptions and
      projections.

                  

                


        

      

       

      (b)   Within thirty (30)
days after receiving any written comments from the Regional Director, the Board
shall revise the Business Plan based on comments from the Regional
Director.  Thereafter, the Board shall adopt and the Holding Company
shall implement and comply with the Business Plan. Within five (5) days of Board
approval of the 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 its adoption to the Regional Director.

       

                    
(c)  Once
the Business Plan is implemented, the Holding Company shall operate within the
parameters of its Business Plan.  Any proposed material deviations
from the Business Plan, including changes proposed by the Holding Company, must
be submitted for the prior, written non-objection of the Regional
Director.  Requests for any material deviations or changes must be
submitted at least sixty (60) days before a proposed change is
implemented.  The Holding Company shall notify the Regional Director
regarding any material event affecting or that may affect the balance sheet,
capital, or the cash flow of the Holding Company within five (5) business days after such
event.

       

      3.            
(a)  On a quarterly basis, beginning with the quarter
ending September 30, 2009, the Holding Company shall prepare and submit to the
Board a report that compares projected operating results contained within the
Business Plan to actual results (Business Plan Variance Report).  The
Board shall review each Business Plan Variance Report and address external and
internal risks that may affect the Holding Company’s ability to successfully
implement the Business Plan.  This review shall include, but not be
limited to, adverse scenarios relating to asset or liability mixes, interest
rates, staffing levels and expertise, operating expenses, marketing costs, and
economic conditions in the markets where the Holding Company is
operating.  The Board’s review of each Business Plan Variance Report
and assessment of the Holding Company’s compliance with the Business Plan shall
be fully documented in the appropriate Board meeting minutes.

       

       

      
        
          First
Federal Bankshares, Inc.

        

        Order to
Cease and Desist

        Page 3
of 7

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

                     
(b)  Within
forty-five (45) days after the close of each quarter beginning with the quarter
ending September 30, 2009, the Board shall provide the Regional Director with a
copy of each Business Plan Variance Report and the Board meeting minutes for the
Board meeting at which such report was discussed.

       

      
        Dividends.

         

      

      4.           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 non-objection of the Regional Director.  The Holding
Company shall submit its written request for non-objection to the Regional
Director at least sixty (60) days prior to the anticipated date of the proposed
dividend, capital distribution, or stock transaction.  The written
request for such notice of non-objection shall: (a) contain current and pro
forma projections regarding the Holding Company’s capital, asset quality, and
earnings and the Association’s capital, asset quality, and earnings; and (b)
address compliance with the Business Plan required by paragraph 2 of this
Order.

       

       

      
        
          First
Federal Bankshares, Inc.

        

        Order to
Cease and Desist

        Page 4
of 7

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Debt
Restrictions.

       

      5.           The
Holding Company shall not, directly or indirectly, incur, renew, roll over, or
increase any debt or commit to do so without the prior written non-objection of
the Regional Director.  The Holding Company’s requests for Regional
Director non-objection to engage in such debt transactions, 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.  For purposes of this paragraph of the Order, 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 of the Order, the
term “debt” does not include liabilities incurred in the ordinary course of
business to acquire goods and services and that are normally recorded as
accounts payable under generally accepted accounting principles.

       

      Severance and
Indemnification Payments.

       

      6.         Effective
immediately, the Holding Company shall not make any golden parachute
payment1 or any
prohibited indemnification payment2 unless, with respect to
each such payment, the Holding Company has complied with the requirements of 12
CFR Part 359.

       

      Directorate and Management
Changes.

       

      7.           Effective
immediately, the Holding Company shall comply with the prior notification
requirements for changes in directors and Senior Executive Officers3 set forth in 12 C.F.R.
Part 563, Subpart H.

       

      
        
          

        

      

      
        1 The term
“golden parachute payment” is defined at 12 C.F.R. § 359.1(f).

        
          2 The term
“prohibited indemnification payment” is defined at 12 C.F.R. §
359.1(l).

        

        
          3 The term
“Senior Executive Officer” is defined at 12 C.F.R. §
563.555.

        

      

       

       

      
        
          First
Federal Bankshares, Inc.

        

        Order to
Cease and Desist

        Page 5
of 7

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Employment Contracts and
Compensation Arrangements.

       

      8.                      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 Officer 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.

       

      Effective Date,
Incorporation of Stipulation.

       

      9.           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.

       

      Duration.

       

      10.           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.

       

      11.           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.

       

      12.           The
Regional Director 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.

       

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

       

       

      
        
          First
Federal Bankshares, Inc.

        

        Order to
Cease and Desist

        Page 6
of 7

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      14.           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

                
	 
      	 
      	
                  Office
      of Thrift Supervision

                
	 
      	 
      	
                  One
      South Wacker Drive, Suite 2000

                
	 
      	 
      	
                  Chicago,
      Illinois 60606

                
	 
      	 
      	
                  Facsimile:
      (312) 917-5001

                
	 
      	 
      	 
      
	 
      	
                  (b)

                	
                  To
      the Holding Company:

                
	 
      	 
      	 
      
	 
      	 
      	
                  Chairman
      of the Board

                
	 
      	 
      	
                  First
      Federal Bankshares, Inc.

                
	 
      	 
      	
                  329
      Pierce Street

                
	 
      	 
      	
                  Sioux
      City, Iowa 51101

                
	 
      	 
      	
                  Facsimile:
      (712) 277-0224

                


        

      

       

    

    No Violations
Authorized.

    
      
        


        15.           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/
      Daniel
      T. McKee

              	 
      
	 
      	 
      	
                Daniel
      T. McKee

              	 
      
	 
      	 
      	
                Regional
      Director, Central Region

              	 
      
	 
      	 
      	 
      	 
      
	 
      	
                Date:
      See Effective Date on page 1

              	 
      


      

       

      
        First
Federal Bankshares, Inc.

      

      Order to
Cease and Desist

      Page 7
of 7