Exhibit 10.2

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).
 
Financial Plan.
 
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
 

 
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(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.
 
(f)            The Boards shall conduct a diligent review of the Quarterly
Financial Plan Variance Reports each quarter, assess Holding Companies'
implementation of and compliance with the Financial Plan and adopt appropriate
corrective actions. The Boards' review of the Quarterly Financial Plan Variance
Report and assessment of compliance shall be fully documented in the appropriate
Board meeting minutes.
 
Debt Restriction.
 
2.           Neither of the Holding Companies, nor any nonbank subsidiary of the
Holding Companies shall directly or indirectly incur, modify, increase, or
guarantee any debt without the prior written non-objection of the Regional
Director; provided, however, that neither the Holding Companies nor any nonbank
subsidiaries are restricted from incurring expenses and/or nominal and
immaterial indebtedness in the ordinary course of business in connection with
day to day operations, consistent with past practice. All requests for
non-objection shall be provided at least thirty (30) days prior to the
anticipated date of any such proposed action and include, at a minimum, a
statement regarding the purpose of the debt, the terms of the debt, the planned
source(s) for debt repayment, and an analysis of the cash flow resources
available to meet such debt.
 
Capital Distributions.
 
3.           The Holding Companies shall not make any Capital Distribution2
without the prior written non-objection of the Regional Director. A request for
non-objection shall be submitted to the Regional Director at least thirty (30)
days prior to any declaration of dividends or any other form of Capital
Distribution restricted herein.

1 Calculated in accordance with the "Proxy Formula" set forth in OTS's Holding
Companies Handbook at p. 300.8, using information that is properly reported on
TFR, Schedule HC.

2 The term "Capital Distribution" shall have the meaning specified in 12 C.F.R.
§563,141(a) - (c).
 

 
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4.           Bancorp shall not receive from the Bank any cash, property,
dividend, payment, extension of credit or other distribution that is subject to
12 C.F.R. § 563.140-146 (Subpart E of Part 563 of Title 12 of the Code of
Federal Regulations) unless Bancorp has determined that the Association has
complied with that Subpart E.
 
Allocation of Expenses.
 
5.           By February 28, 2011, the Holding Companies shall conduct a
documented analysis to ensure that expenses are properly allocated between the
Bank and the Holding Companies and conform to the regulations governing
transactions with affiliates set forth at 12 C.F.R. § 563.41 (TWA Rules). No
expenses shall be allocated to the Association unless the Holding Companies
demonstrate, to the satisfaction of the Regional Director, that the expense
sharing arrangement fully comports with the TWA Rules.
 
Financial Information on Reports H-(b)11.
 
6.           The Holding Companies shall file the financial statements required
by the OTS Report H-(b)11, including the requirement set forth in Item 5.A.2. of
that report to provide unaudited consolidating schedules on a quarterly basis.
 
Separate Meetings and Minutes Required.
 
7.           Each of the Boards shall have meetings, and record minutes from
such meetings, that are separate from those of the Association.
 
Compliance with Memorandum of Understanding.
 
8.           (a)           The Boards and officers of the Holding Companies
shall take prompt and ongoing action to cause the Association to comply with the
terms of this Memorandum. All actions required to be taken by the Boards shall
be duly recorded in the minutes of the meeting at which the action was taken.
 
(b)            Within 45 days after the end of each calendar quarter, commencing
with the quarter
ending March 31, 2011, the Boards shall:
 
(i)             Adopt a resolution (Compliance Resolution) which
(A)            addresses whether, following a diligent inquiry (which shall
include the review of management reports and all other relevant information), to
the best of their knowledge and belief, during the immediately preceding
quarter, the Holding Companies complied with each provision of the Memorandum
then in effect; and
(B)            specifies in detail how, if at all, full compliance was
determined not to exist and identifies all written notices of exemption issued
by OTS that were outstanding when the Compliance Resolution was adopted; and
(ii)             Provide OTS with a certified copy of the Compliance Resolution.
 
(c)            All policies, procedures, corrective actions, programs, and
reviews required by this Memorandum (collectively, Plans and Policies) shall
conform to all applicable statutes, regulations, written policy and guidance
that OTS has published or distributed to OTS-regulated institutions.
 

 
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The Boards shall revise Plans and Policies as required by the Regional Director
in order to conform to regulatory standards. The Holding Companies shall comply
with all Plans and Policies, including any revisions or amendments required by
the Regional Director.
 
Effective Date.
 
9.           This Memorandum is effective on the Effective Date as shown on the
first page. The requirements imposed herein are effective immediately unless
otherwise specified.
 
Duration.
 
10.           This Memorandum shall remain in effect until terminated, modified
or suspended, by written notice of such action by OTS, acting by and through its
authorized representatives.
 
Time Calculations/Exceptions.
 
11.           Calculation of time limitations for compliance with the terms of
this Memorandum 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, or permit
exceptions to any of the limitations, set forth in the provisions of this
Memorandum upon written request by the Holding Companies that includes reasons
in support for any extension or exception. Any OTS extension or exception shall
be set forth in writing.
 
Submissions and Notices.
 
13.           Except as otherwise provided herein, all submissions, requests,
communications, consents or other documents relating to this Memorandum 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:
 
(a) To the OTS:

Original to:
 
Copy to:
Michael E. Finn
Regional Director
Office of Thrift Supervision
Harborside Financial Center Plaza Five
Suite 1600
Jersey City, NJ 07311
 
John F. Burke
Assistant Director
Office of Thrift Supervision
35 Braintree Hill Office Park
Suite 201
Braintree, MA 02184

 
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(b) To the Holding Companies:

Board of Directors
Auburn Bancorp, MHC
Board of Directors
c/o Allen T. Sterling, President & CEO
Auburn Savings Bank, FSB
256 Court St.
Auburn, ME 04210-5402
 
Board of Directors
Auburn Bancorp, Inc.
Board of Directors
c/o Allen T. Sterling, President & CEO
Auburn Savings Bank, FSB
256 Court St.
Auburn, ME 04210-5402

 
No Violations Authorized/OTS Authority Not Affected.
 
14.           Nothing in this Memorandum shall be construed as allowing the
Association or the Holding Companies, their Boards, officers or employees to
violate any law, rule, or regulation. Nothing in this Memorandum shall inhibit,
estop, bar or otherwise prevent OTS from taking any other action affecting the
Association or Holding Companies if at any time OTS deems it appropriate to do
so to fulfill the responsibilities placed upon OTS by law.
 
Miscellaneous.
 
15.           All references to OTS in this Memorandum shall also mean any of
OTS' predecessors, successors, and assigns.
 
16.           The section and paragraph headings in this Memorandum are for
convenience only and shall not affect the interpretation of this Memorandum.
 
Counterparts.
 
17.           This Memorandum may be executed in separate counterparts, each of
which shall be an original and all of which, taken together, shall constitute
one and the same instrument. Facsimile signatures are acceptable.
 
[Remainder of Page Intentionally Left Blank]

 
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WHEREFORE, OTS, acting by and through its Regional Director, and the Boards of
the Holding Companies hereby execute this Memorandum.

By:  AUBURN BANCORP, MHC

/s/ Claire D. Thompson 
 
/s/ Thomas J. Dean                                                      
Claire D. Thompson, Chairman of
 
Thomas J. Dean, Director
the Board
         
/s/ Philip R. St. Pierre 
 
/s/ M. Kelly Matzen                                                      
Philip R. St. Pierre, Vice Chairman
 
M. Kelly Matzen, director
of the Board
         
/s/ Bonnie G. Adams                                                      
 
/s/ Sharon A. Millet                                                      
Bonnie G. Adams, Director
 
Sharon A. Millet, Director
     
/s/ Peter E. Chalke                                           
 
/s/ Allen T. Sterling                                                      
Peter E. Chalke, Director
 
Allen T. Sterling, Director

BY:  AUBURN BANCORP, INC.

/s/ Claire D. Thompson 
 
/s/ Thomas J. Dean                                                      
Claire D. Thompson, Chairman of
 
Thomas J. Dean, Director
the Board
         
/s/ Philip R. St. Pierre 
 
/s/ M. Kelly Matzen                                                      
Philip R. St. Pierre, Vice Chairman
 
M. Kelly Matzen, director
of the Board
         
/s/ Bonnie G. Adams                                                      
 
/s/ Sharon A. Millet                                                      
Bonnie G. Adams, Director
 
Sharon A. Millet, Director
     
/s/ Peter E. Chalke                                           
 
/s/ Allen T. Sterling                                                      
Peter E. Chalke, Director
 
Allen T. Sterling, Director

   
OFFICE OF THRIFT SUPERVISION
       
By:
/s/ Michael E. Finn                                                      
   
Michael E. Finn
   
Regional Director, Northeast Region
       
Date:
See Effective Date on page 1

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