Exhibit10.4

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:

 

 

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.

 

 

 

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:

 

 

 

 

 

(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.

 

 

                (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.

 

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.

 

 

 

 

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.

 

 

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.

 

 

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.

 

 

 

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

 

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: