SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 10, 2009
FIRST FEDERAL BANKSHARES, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-25509 42-1485449
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(State or Other Jurisdiction) (Commission File No.) (I.R.S. Employer
of Incorporation) Identification No.)
329 Pierce Street, Sioux City, Iowa 51101
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (712) 277-0200
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Not Applicable
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 8.01. Other Events
In recent weeks, Moody's Investor Service downgraded seven of the Company's
fourteen trust preferred CDO securities and Fitch Ratings downgraded the
remaining seven trust preferred CDO securities to speculative grade. As a result
of these downgrades, Vantus Bank, the Company's bank subsidiary (the "Bank"),
was required to apply a higher "risk weighting formula" to these securities when
calculating its regulatory capital ratios. The formula calls for increasing the
Bank's risk-weighted assets for these securities to $433.8 million, well above
the $65.0 million in original par value held by the Company. Upon applying the
higher level of risk weighted assets to the Bank's regulatory capital ratios,
the calculated ratios as of March 31, 2009 were as follows: Tier I leverage
ratio of 7.58% (which is above the adequately capitalized threshold of 4.00%); a
Tier I risk-based capital ratio of 4.80% (which is above the adequately
capitalized threshold of 4.00%); and a total risk-based capital ratio of 5.31%
(which is below the adequately capitalized threshold of 8.00%).
As a result of these developments, the Company received notification on May 10,
2009 from the OTS that the Bank is considered significantly undercapitalized
under the Prompt Corrective Action (PCA) capital categories and that the Bank
must increase its capital and return to adequately capitalized status. The
notification directed the Bank to prepare and submit a capital restoration plan
to the OTS by June 15, 2009 that would return the Bank to adequately capitalized
status by September 30, 2009. The Company must guarantee that the Bank will
comply with its capital restoration plan until the Bank is adequately
capitalized for four consecutive quarters. In addition, pursuant to the
notification, the OTS imposed on the Bank a number of operating restrictions,
including the following:
o The Bank cannot make or pay any capital distributions without the
prior written approval of the OTS;
o The Bank's average total assets in any calendar quarter cannot exceed
average assets during the preceding quarter unless the increase in
assets in consistent with a capital restoration plan that has been
accepted by the OTS;
o The Bank may not acquire any interest in any company or insured
depository institution, establish a new branch office, or engage in
any new line of business;
o The Bank may not accept, renew or roll over any brokered deposit; and
o The Bank may not pay any bonus to a senior executive officer or
provide compensation to any senior executive officer exceeding that
officer's average rate of compensation (excluding bonuses, stock
options, and profit sharing) during the preceding 12 months, without
prior written approval from the OTS.
A PCA Directive and a consent order formalizing the foregoing are expected from
the OTS in the near future.
As part of its plan to improve its regulatory capital ratios, the Bank has
engaged Sandler O'Neill & Partners, an investment banking firm, to advise the
Company and the Bank with respect to strategic alternatives, including selected
asset and branch sales, and capital raising initiatives. With respect to capital
raising initiatives, the Company has engaged in substantive discussions with
several private equity groups related to a potential equity investment in the
Company. The Company has signed a letter of intent with one private equity group
pursuant to which the group would make a significant equity investment in the
Company. However, there can be no assurance that the Company will succeed in
negotiating a definitive agreement for such a transaction. In addition, an
investment in the Company by one or more private equity investors would result
in substantial dilution to existing stockholders of the Company.
The Company anticipates a delay in the filing of its Quarterly Report on Form
10-Q for the period ended March 31, 2009. The delay is due to additional time
needed by the Company to assess the impact on the Company's financial statements
of the downgrades of the trust preferred CDO securities and the issuance of the
PCA notification. However, the Company anticipates that the downgrades will have
a material adverse impact on its operating results for the period ended March
31, 2009. The Company intends to file the Form 10-Q immediately following the
completion of its assessment.
Item 9.01. Financial Statements and Exhibits
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
(d) Exhibit. None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
FIRST FEDERAL BANKSHARES, INC.
DATE: May 15, 2009 By: /s/ Levon Mathews
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Levon Mathews
President and Chief Executive Officer