Exhibit10.1 UNITEDSTATES OF AMERICA

WHEREAS, First Home Savings Bank, Mountain Grove, Missouri, OTS Docket No. 05233 (Association), 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 Association, 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 association has consented to the issuance of an order.

participating in, counseling or the aiding and abetting the unsafe or unsound banking practices that resulted in an increasing level of classified assets, poor earnings, and inadequate risk management practices at the Association and violations of the following regulations:

 

	(a) 12 C.F.R. § 560.160 (failure to classify all assets and implement a policy for the establishment of allowances in accordance with generally accepted accounting principles (GAAP) and the guidelines of the Federal banking agencies);
	(b) 12 C.F.R. § 560.170(d) (failure to properly administer loans);
	(c) 12 C.F.R. §§ 562.1 and 562.2 (failure to file accurate Thrift Financial Reports (TFRs)); and
	(d) 12 C.F.R. § 563.161(a) (failure to adopt updated financial policies).

 

2.   By September 30, 2009, the Board shall submit to the Regional Director for review and written notice of non-objection a revised comprehensive budget and business plan for the third and fourth quarters of 2009, and calendar years 2010 and 2011 for the Association and its Subsidiaries1 (Business Plan). The Business Plan, at a minimum, shall: (a) set forth an analysis of the profitability of all existing and projected business lines; (b) set forth an analysis of the profitability of branches and loan production offices; (c) set forth realistic and well-supported and realistic strategies to improve earnings and the net interest margin; (d) incorporate cash flow projections consistent with the Association's revised Liquidity Policy, dated July 2009; (e) maintain capital levels commensurate with the Association's risk profile and business strategy; and (f) include the supporting documentation for all relevant assumptions and projections.

3.   The Business Plan, at a minimum, also shall include the following: (a) the submission of

pro forma financial statements, including, but not limited to projected core and risk-based capital ratios for the third and fourth quarters 2009, and calendar years 2010 and 2011, that are based on realistic and well-supported assumptions; and (b) a description of all assumptions that were used to prepare the pro forma statements, including, but not limited to: (i) the assumed interest rate scenarios; (ii) assumptions used for noninterest income and noninterest expenses; (iii) assumptions used to determine the ALLL; (iv) loan origination rates, using current rates and taking into consideration current national and regional economic conditions; and (v) assumptions used to support the cost of funds projections.

4.   Within fifteen (15) days after receiving the Regional Director's written comments or written notice of non-objection, the Board shall make any revisions to the Business Plan required by the Regional Director and adopt the Business Plan. From the date of the adoption of the Business Plan, the Association shall implement and comply with the Business Plan. Within five (5) days after Board approval, the Board shall send a copy of the final Business Plan adopted by the Board to the Regional Director and a copy of the minutes of the Board meeting reflecting the Board's discussion and action.

5.   Within thirty (30) days after the end of each quarter, beginning with the quarter ending September 30, 2009, the Board shall submit to the Regional Director a quarterly variance report that: (a) compares actual earnings, capital, and other operating projections and budgeted projections in the Association's Business Plan; (b) sets forth a detailed explanation of any material variances from the Business Plan; (c) sets forth any actions taken to enhance earnings or to initiate earnings strategies or plans during the preceding calendar quarter; and (d) discusses any changes required in the Association's business strategy or earnings enhancement plan due to a change in market conditions or other factors (Quarterly Variance Report).

6.   For purposes of Paragraphs 4 and 5 of this Order, a deviation shall be considered material when the Association engages in any material activity, line of business, or operation that is inconsistent with the Business Plan. A deviation also shall be considered material when the Association: (a) exceeds the level of any activity or growth contemplated in the Business Plan by more than ten percent (10%); or (b) falls below or fails to meet the target amounts established in the Business Plan by more than ten percent (10%). Notwithstanding the foregoing, none of the following deviations shall be deemed to be material: (a) a change of One Million Dollars ($1.0 million) or less in any balance sheet category, or (b) a change of ten percent (10%) or less in any income statement category. For the purposes of this Paragraph, a "balance sheet" category is defined as cash and investments, mortgage loans, commercial nonmortgage loans, consumer loans, real estate owned, fixed assets, deposits, borrowings, other liabilities, and equity capital. For purposes of this Paragraph, an "income statement" category is defined as interest income, interest expense, provision for loan losses, noninterest income, noninterest expense, extra ordinary items, and net income.
7.   Within thirty (30) days after the end of the quarter, beginning with the quarter ending September 30, 2009, the Board shall review and address external and internal risks that may affect the Association's ability to 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 Association is operating. The Board's review of the Business Plan and Quarterly Variance Reports shall be fully documented in the Board minutes, a copy of which shall be submitted to the Regional Director, along with the Quarterly Variance Report submitted pursuant to Paragraph 5 of this Order.

9.   Effective immediately, the Association is subject to, and shall comply with the requirements and provisions of OTS Regulatory Bulletin 3b. Without the prior written notice of non-objection of the Regional Director, the Association shall not increase its total assets during any quarter, beginning with the quarter ending June 30, 2009, in excess of an amount equal to net interest credited on deposit liabilities during the quarter. The growth restriction imposed by this Paragraph shall remain in effect until the Association receives the Regional Director's written notice of non-objection of its Business Plan under Paragraph 4 of this Order. Any request for growth in assets, including any growth proposed in the Business Plan, shall address: (a) the source, volatility, and use of the funds that support asset growth; (b) any increase in concentration, credit risk, or interest rate risk due to growth; and (c) the effect of such growth on the Association's capital.

10.  Effective immediately, the Association shall pay no dividends or make any other capital distribution, as that term is defined in 12 C.F.R. § 563.141, without receiving the prior written approval of the Regional Director. The Association's written request for written approval shall be submitted to the Regional Director at least thirty (30) days prior to the anticipated date of the proposed dividend payment or distribution of capital. The written request for such approval shall

 

also include: (a) contain current and one-year pro forma projections regarding the Association's capital, asset quality, and earnings; and (b) address the Association's compliance with the Business Plan required by Paragraph 2 of this Order.

11.   Effective immediately, the OTS hereby directs the Association not to increase the dollar amount of brokered deposits existing as of March 5, 2009, excluding interest credited, without the prior written notice of non-objection of the Regional Director. Within thirty (30) days prior to the anticipated date of acceptance of such brokered deposits, the Association shall submit a request for such non-objection to the Regional Director.

12.   By September 30, 2009, the Board shall submit a revised Asset Classification Policy to the Regional Director for review and written notice of non-objection. The revised Asset Classification Policy shall provide for the evaluation and classification of the Association's assets:

(a) consistent with 12 C.F.R. § 560.160; OTS Examination Handbook § 260 (Classification of Assets) and § 261 (Adequacy of Valuation Allowances); Section II.G of Appendix A to 12 C.F.R. Part 570; OTS CEO Letter No. 250, entitled "Interagency Policy Statement on the Allowance for Loan and Lease Losses and Questions and Answers on Accounting for Loan and Lease Losses," dated December 13, 2006 (2006 ALLL Policy Statement); OTS CEO Letter No. 304 entitled "ALLL - Observed Thrift Practices Including Sound Practices;" and Statement of Financial Accounting Standards No. 5 and No. 114;

(b) setting forth the revised methodology for determining general ALLL percentages;

 

13.   Within thirty (30) days after receiving the Regional Director's written comments or written notice of non-objection, the Board shall make any revisions required by the Regional Director and adopt the Asset Classification Policy. From the date of the adoption of the Asset Classification Policy, the Association shall implement and comply with the Asset Classification Policy.

14.   By September 30, 2009 and the end of each quarter thereafter, the Board shall submit to the Regional Director a detailed written status report on each nonhomogeneous3 classified asset equal to or greater than Two Hundred Fifty Thousand Dollars ($250,000) (Quarterly Classified Asset Report). The Quarterly Classified Asset Report shall include for each identified classified asset:

15.  By September 30, 2009 and the end of each quarter thereafter, the Board shall retain a qualified independent third party to undertake its own review of the nonhomogeneous loans described in Paragraph 14 of this Order and prepare its own Quarterly Classified Asset Report as set forth in Paragraph 14 of this Order (Third Party Quarterly Classified Asset Report) that shall be submitted to the Regional Director, along with the Quarterly Classified Asset Report required

Asset Reduction Plan to the Regional Director within sixty (60) days prior to the proposed date of implementation of the amendment or revision to the Classified Asset Reduction Plan. The Association shall comply with the Classified Asset Reduction Plan, including all revisions or amendments approved by the Regional Director.

19.   Within thirty (30) days after the end of each quarter, beginning with the quarter ending September 30, 2009, the Board shall provide to the Regional Director a written status report regarding the implementation of the Classified Asset Reduction Plan (Quarterly Classified Asset Reduction Report). Each Quarterly Classified Asset Reduction Report shall: (a) set forth the Association's efforts to reduce the Association's level of classified assets during that quarter; and (b) report and explain in detail the variances of actual operating results from the targets set forth in the Quarterly Classified Asset Reduction Plan. The Board's review of the Quarterly Classified Asset Reduction Report shall be fully documented in the Board minutes and shall include a discussion of the variances between actual operating results from the targets set forth in the Classified Asset Reduction Plan and measures that have been implemented or are proposed to address such variances if the actual operating results have not satisfied such targets.

20.   By September 30, 2009, the Board shall submit to the Regional Director for review and written notice of non-objection a Concentration Plan (Concentration Plan) that addresses: (a) the reduction of the Association's concentration in its nonhomogeneous loan portfolio to a level and within a time frame satisfactory to the Regional Director, and supporting documentation for all assumptions and projections; and (b) the assessment, monitoring, and control of the risks associated with the Association's commercial real estate portfolio in accordance with the guidelines in OTS CEO Letter No. 252, entitled "Guidance on Commercial Real Estate (CRE)

 

Concentration Risks," and OTS CEO Letter No. 245, entitled "Updated Director's Responsibility Guide and Guide to Management Reports." The Concentration Plan, at a minimum, shall address the following:

 

	(a)  identification and quantification of the nature and level of risk presented by the concentrations in the Association's nonhomogeneous loan portfolio, including, but not limited to speculative residential construction loans, developed building lot loans, and land, acquisition, and development loans;
	(b)  delineation of an acceptable level of concentration risk of speculative residential construction loans, developed building lot loans, and land, acquisition, and development loans in the Association's portfolio, including, but not limited to, limits on certain types of borrowers or property types to reflect the level of risk acceptable to the Board based on the Association's market position, historical experience, trade area, probable future loan and funding trends, staff capabilities, and technological resources;
	(c)  specific targets for the reduction of the types of nonhomogeneous loans that constitute the greater percentage of classified assets and special mention assets and that are based on a percentage of Tier 1(Core) Capital and ALLL by loan type;
	(d)  establishment of the timeframe for each such target set forth in Paragraph 20(c) of this Order;
	(e)  a description of the manner of, and methods for, reducing the Association's level of nonhomogeneous loans to the targets set forth therein;
	(f)  establishment of internal controls to monitor compliance with the concentration limits and the Association's loan policy and lending strategies;

 

 

21.   Within thirty (30) days after receipt of the Regional Director's written comments or written notice of non-objection, the Board shall make any revisions to the Concentration Plan required by the Regional Director and adopt the Concentration Plan. From the date of the adoption of the Concentration Plan, the Association shall implement and comply with the Concentration Plan.

22.   If the Board determines that an amendment or revision to the Concentration Plan is warranted, the Board shall submit the proposed amendment or revision to the Concentration Plan to the Regional Director within sixty (60) days prior to the proposed date of implementation of

the proposed amendment or revision. The Association shall comply with the Concentration Plan, including all revisions or amendments thereto as approved by the Regional Director.

23.   By September 30, 2009, the Association shall obtain the results of its first scheduled stress testing of the Association's commercial real estate portfolio conducted by a qualified independent outside consultant or a qualified independent employee pursuant to the Association's requirements of the Concentration Plan and submit a report setting forth the findings to the Regional Director. Within thirty (30) days after the completion of each stress testing conducted pursuant to the requirements of the Concentration Plan, the Board shall review the findings of the stress testing and determine whether the Association's exposure limits, concentration risks, limits on certain types of borrowers or property types, loan policies, or credit review function should be revised. The Board's review shall be fully documented in the Board minutes. Within five (5) days after the Board meeting at which the results of each stress test is reviewed, the Board shall submit a copy of the Board meeting minutes reflecting its review and any corrective actions directed to the Regional Director.

24.   Within thirty (30) days after the end of each quarter, beginning with the quarter ending September 30, 2009, the Board shall provide to the Regional Director a written report (Quarterly Concentration Reduction Report) that: (a) summarizes the Association's efforts to reduce the Association's concentration in the types of nonhomogeneous loans that constitute the greater proportion of classified and criticized assets; (b) reports and explains in detail the variances of actual operating results from the targets set forth in the Concentration Plan for the reduction of the specific concentrations, as a percentage of Tier 1 (Core) Capital and ALLL, and the timeframes for the reduction of each such target; and (c) the measures that have been

 

 

implemented or are proposed to address such variances if the actual operating results have not satisfied such targets.

25.   Effective immediately, the Association shall not make any golden parachute payment4 unless, with respect to each such payment, the Association has complied with the requirements of 12 C.F.R. Part 359.

26.   Effective immediately, the Association shall not order a prohibited indemnification payment unless, with respect to each such payment, the Association has complied with the requirements of 12 C.F.R. Part 359 and, 12 C.F.R. § 545.121.

27.   Effective immediately, the Association 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.

28.   Effective immediately, the Association shall not enter into, renew, extend, or revise any contractual arrangement relating to compensation or benefits for any Senior Executive Officer or director of the Association, unless it first provides the Regional Director with not less than thirty (30) days prior written notice of the proposed transaction. The written 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 officer

30.   Effective immediately, the Association shall not enter into any arrangement or contract with a third party service provider that is significant to the overall operation or financial condition of the Association5 or outside the Association's normal course of business unless, with respect to each such contract, the Association has: (a) provided the Regional Director with a minimum of thirty (30) days prior written notice of such arrangement or contract; (b) determined that the arrangement or contract complies with the standards and guidelines set forth in Thrift Bulletin 82a and OTS Examination Handbook § 310; and (c) received a written notice of non-objection from the Regional Director.

31.   By October 31, 2009, unless otherwise provided by this Order, the Board shall ensure that each violation of law, rule, or regulation; noncompliance with applicable OTS and Interagency Guidelines;, and any other deficiency and weakness discussed in the Association's

33.   Within sixty (60) days after receipt of any subsequent report of examination, internal audit report, independent external audit report, information technology audit, or other report prepared by the Association's employees, agents, and/or independent contractors, which cites or discusses any weakness, deficiency, or noncompliance with applicable OTS and Interagency Guidelines, or any violation of law, rule, or regulation, the Board shall require that Management: (a) take actions to correct each such weakness, deficiency, instance of noncompliance, or violation by a specific time frame; (b) develop specific procedures to prevent future weakness, deficiency, instance of noncompliance, or violation; and (c) provide reports regarding the status of the corrective actions and implementation of procedures to the Board. The Board shall also ensure that the Association and Management comply with such actions and procedures.

 

 

36.   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.