April 25, 2008
Securities and Exchange Commission
Division of Corporation Finance
100 F Street NE
Mail Stop 4561
Washington, DC 20549
Attn: Mr. John A. Spitz, Senior Staff Accountant
Re: First Federal Bankshares, Inc.
Item 4.02 Form 8-K
Filed February 25, 2008
File Number: 000-25509
Dear Mr. Spitz:
We are writing to respond to your letter dated April 22, 2008, transmitting the
remaining comment of the staff of the Securities and Exchange Commission related
to the Form 8-K filed by First Federal Bankshares, Inc. (the "Company") on
February 25, 2008.
As noted in the Form 8-K, the Company has been advised by the Office of Thrift
Supervision ("OTS") that the Company's portfolio of trust-preferred pooled
securities ("TPSs") exceed OTS regulatory guidelines. As further noted in the
Form 8-K, the OTS requested that the Company file with the OTS by March 15, 2008
a plan to come into compliance with such regulatory guidelines. Subsequent to
the filing of the Form 8-K, the Company requested and the OTS agreed to extend
the deadline for the Company to file its plan to May 15, 2008. The Company
intends to disclose this new deadline in a Form 8-K that will be filed in
connection with its regular quarterly earnings release.
In its plan, the Company expects to request OTS approval to retain its TPS
portfolio, notwithstanding the regulatory guidelines, based on (among other
things) federal law and applicable regulations, which generally permit such
investments. The OTS has the statutory authority to approve this request and the
Company believes it has a sound basis for its request. Based on the foregoing,
the Company concluded that its ability and intent to retain its TPS portfolio
until anticipated recovery or redemption/maturity had not been compromised. As
of December 31, 2007, March 15, 2008 and March 31, 2008 (the dates cited in the
staff's comment), there had been no events that would cause a change to this
conclusion.
As requested in the comment, we provide below additional details of
communications between the OTS staff and Company management related to the TPS
portfolio.
In a regular examination report received from the OTS in June 2007, OTS staff
members first advised Company management of their belief that the Company's TPS
portfolio may exceed certain limits specified in regulatory guidelines. Company
management objected to these findings both verbally and in writing, laying out
certain applicable exceptions in the regulatory guidelines. The OTS staff
requested, and the Company agreed, to suspend the purchase of additional TPS
securities while the staff considered management's response. At the time, the
OTS issued no other directive relating to the Company's aggregate investment in
these securities. The Company had no other communications with the OTS regarding
its aggregate investment in TPSs until February 13, 2008, as more fully
described below.
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In consideration of the staff's position on the TPS portfolio, the Company
informally explored the possible sale of an immaterial portion of its TPS
portfolio during the latter half of 2007, but was unable to obtain satisfactory
price indications. The OTS was kept informed of the Company's informal sales
efforts on this portion of the portfolio and granted extensions and/or did not
object to the Bank's continued investment in these particular securities.
On February 13, 2008, the Company was advised in writing by the OTS that they
believed the Company's aggregate investment in TPSs exceeded limits specified in
OTS regulatory guidelines. In that letter, the OTS requested the Company to
"conform to those limits as soon as practical given the current market
conditions" (direct quote) and requested the Company submit the plan for
compliance that is described above. The letter contained no other directives.
Company management had several informal discussions with OTS staff following
receipt of the letter to discuss, among other things, the "current market
conditions" referred to in the OTS letter and the impact of such conditions on
the potential disposition of all or part of the TPS portfolio. As noted above,
none of the communications with the OTS staff has changed or compromised the
Company's ability and intent to retain its TPS portfolio until anticipated
recovery or redemption/maturity.
We trust this letter addresses the staff's comment. Please do not hesitate to
contact me at 712-277-0222 or mdosland@vantusbank.com if there are additional
questions or comments.
Sincerely,
/s/ Michael W. Dosland
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Michael W. Dosland
President and Chief Executive Officer
cc: Registrant Legal Counsel
Registrant Independent Auditors
Registrant Board of Directors
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