MEMORANDUM OF UNDERSTANDING

 

This Memorandum of Understanding (Memorandum) is made effective this 26th day of January 2011 (Effective Date), by the Board of Directors (MHC Board) of Auburn Bancorp, MHC, OTS Docket No. H4505 (MHC). the Board of Directors (Bancorp Board, and collectively with the MHC Board, "the Boards") of Auburn Bancorp, Inc., OTS Docket No. H4506 (Bancorp, and collectively with MHC. "the Holding Companies") and the Office of Thrift Supervision (OTS), a bureau of the United Stales Department of the Treasury, acting through its Northeast Regional Director or his designee (Regional Director). The Boards agree to take the actions set forth below to correct various matters and concerns discussed in the September 7, 2010 Report of Examination of the Holding Companies (2010 ROE) .

 

 

1.           (a)           By February 28, 2011 the Boards shall approve and the Holding Companies shall jointly implement a written plan covering the three year period ending December 31, 2013 (Financial Plan) that is designed to:

 

(i)              support Auburn Savings Bank, FSB (Association) in complying with applicable laws, rules and regulations and all terms and conditions of the Memorandum of Understanding, entered into on January 26, 2011 between the board of directors of the Association and OTS;

(ii)              cause the Holding Companies to have a capital position that is commensurate with their risk profiles and minimize their dependency on capital distributions from the Association; and

(iii)              address the Holding Companies' cash flow needs.

 

(b)           The Financial Plan, shall, at a minimum, address:

(i)                         the Association's and Holding Companies' present and future capital needs, taking into account their respective current and projected earnings performance and risk profiles;

(ii)              comprehensive pro forma capital and cash flow projections, detailing all anticipated sources and uses of funds; and

(iii)              the extent to which Bancorp expects to rely upon capital distributions from the Association, considering the regulatory restrictions set forth in 12 CFR Part 563 Subpart E - Capital Distributions.

 

(c)           To facilitate the Boards' ongoing monitoring of the Holding Companies' future performance in meeting the Financial Plan objectives, the Financial Plan shall include, as exhibits, quarterly financial projections for the three-year term of the Plan (Financial Plan Projections) that include:

(i)                         unconsolidated financial statement projections (i.e. balance sheet, cash flow statement, and statement of income) presented in accordance with generally accepted accounting principles (GAAP); and

 

(ii)              consolidated projections of the Holding Companies' "Proxy Regulatory Capital Calculation1.

 

(d)            The Financial Plan shall be submitted to the OTS by March 5, 2011. The Boards shall promptly consider, and after consultation with the OTS, make such modifications as the Regional Director may require in order to conform the Plan to the specifications set forth in this Paragraph 1 of the Memorandum.

 

(e)            Within forty-five (45) days after the close of each calendar quarter beginning with the quarter ending March 31, 2011, Holding Companies' management shall prepare and submit to the Board quarterly variance reports on the Holding Companies' compliance with the Financial Plan (Quarterly Financial Plan Variance Reports). The Quarterly Financial Plan Variance Reports shall include: (i) actual financial and cash flow statements and capital ratios versus those projected in the Financial Plan Projections; (ii) detailed explanations of any material deviations from the Financial Plan Projections; and (iii) a specific description of the corrective actions or measures that have been implemented, proposed or are under consideration to correct any material deviation.






















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