AGREEMENT BY AND BETWEEN
Severn Savings Bank, FSB
Annapolis, MD
and
The Comptroller of the Currency
 
Severn Savings Bank, FSB ("Association") and the Comptroller of the Currency of
the United States of America ("Comptroller") wish to protect the interests of
the depositors, other customers, and shareholders of the Association, and,
toward that end, wish the Association to operate safely and soundly and in
accordance with all applicable laws, rules and regulations.
The Comptroller, through his authorized representative, has examined the
Association and his findings are contained in the Report of Examination ("ROE")
for the examination that commenced on October 1, 2012. The Comptroller has found
unsafe or unsound banking practices relating to asset quality, management, and
credit risk management.
In consideration of the above premises, it is agreed, between the Association,
by and through its duly elected and acting Board of Directors ("Board"), and the
Comptroller, through his authorized representative, that the Association shall
operate at all times in compliance with the articles of this Agreement, which
supersedes and terminates the Supervisory Agreement entered into between the
Office of Thrift Supervision ("OTS") and the Association on November 23, 2009.
 
ARTICLE I
 
JURISDICTION
 

       (1)           This Agreement shall be construed to be a "written
agreement entered into with the agency" within the meaning of 12 U.S.C. §
1818(b)(1).
 

 
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(2)       This Agreement shall be construed to be a "written agreement between
such depository institution and such agency" within the meaning of 12 U.S.C. §
1818(e)(1) and
12 U.S.C. § 1818(i)(2).
 
(3)         This Agreement shall be construed to be a "formal written agreement"
within the
meaning of 12 C.F.R. § 163.5551. See 12 U.S.C. § 1831i.
 
(4)         This Agreement shall be construed to be a "written agreement" within
the meaning of 12 U.S.C. § 1818(u)(1)(A).
 
(5)         This Agreement shall cause the Association to not be eligible for
"expedited treatment" pursuant to 12 C.F.R. § 116.5, unless otherwise informed
in writing by the Comptroller. Among other things, this means that the
Association shall not declare or pay dividends or make any other capital
distributions, as that term is defined in 12 C.F.R. § 163.141, without first
filing an application pursuant to 12 C.F.R. § 163.143(a) and receiving the prior
written approval of the OCC.
.

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1 In order to facilitate the Office of the Comptroller of the Currency's (OCC)
enforcement and administration of former Office of Thrift Supervision (OTS)
rules and to make appropriate changes to these rules to reflect OCC supervision
of federal savings associations as of the transfer date, the OCC republished,
with nomenclature and other technical changes, the OTS regulations formerly
found in Chapter V of Title 12 of the Code of Federal Regulations. The
republished regulations are codified with the OCC's regulations in Chapter I at
parts 100 through 197 ("Republished Regulations"), effective on July 21, 2011.
The Republished Regulations supersede the OTS regulations in Chapter V for
purposes of OCC supervision and regulation of federal savings associations. OTS
Integration Pursuant to the Dodd-Frank Wall Street Reform and Consumer
Protection Act; Interim Final Rule, 76 Fed.Reg. 48,950 (Aug. 9, 2011).
References in this document are to the Republished Regulations at 12 C.F.R.
Chapter I.

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(6)       All reports or plans which the Association or Board has agreed to
submit to the Assistant Deputy Comptroller pursuant to this Agreement shall be
forwarded to the:

Linda F. Nichols, Assistant Deputy Comptroller Washington DC Field Office
400 7th Street, SW
Mail Stop 2W-11 Washington, DC 20219
ARTICLE II
COMPLIANCE COMMITTEE
 
(1)         Within thirty (30) days of the date of this Agreement, the Board
shall appoint a Compliance Committee of at least three (3) directors, of which
no more than one (1) shall be an employee or controlling shareholder of the
Association or any of its affiliates (as the term "affiliate" is defined. in 12
U.S.C. § 371c(b)(1)), or a family member of any such person. Upon appointment,
the names of the members of the Compliance Committee and, in the event of a
change of the membership, the name of any new member shall be submitted in
writing to the Assistant Deputy Comptroller. The Compliance Committee shall be
responsible for monitoring and coordinating the Association's adherence to the
provisions of this Agreement.
 
(2)         The Compliance Committee shall meet at least monthly.
 
(3)         Within sixty (60) days of the date of this Agreement and within ten
(10) days of the end of each fiscal quarter thereafter, the Compliance Committee
shall submit a written progress report to the Board setting forth in detail:
 
(a)             a description of the action needed to achieve full compliance
with each Article of this Agreement;
(b)             actions taken to comply with each Article of this Agreement; and
(c)             the results and status of those actions.

 

 
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(4)         The Board shall forward a copy of the Compliance Committee's report,
with any additional comments by the Board, to the Assistant Deputy Comptroller
within ten (10) days of receiving such report.
 
ARTICLE III
BOARD TO ENSURE COMPETENT BOARD AND MANAGEMENT
 
(1)         Within sixty (60) days, the Board shall review and assess the
qualifications of each senior executive officer (as the term "senior executive
officer" is defined in 12 C.F.R. § 163.555(4)) and ensure that the Association
has competent management in place on a full-time basis in all senior executive
officer positions, including, but not limited to, its Chief Executive Officer
and Chief Lending Officer, to carry out the Board's policies, ensure compliance
with this Agreement, applicable laws, rules and regulations, and manage the
day-to-day operations of the Association in a safe and sound manner.
 
(2)         If the Board determines that a senior executive officer's depth of
skills needs improvement, the Board will within thirty (30) days of such
determination develop and implement a written program, with specific time
frames, to improve the officer's supervision and management of the Association.
At a minimum the written program shall include:
 
    (a)             an education program designed to ensure that the officer has
skills and abilities necessary to supervise effectively;
    (b)             a program to improve the effectiveness of the officer;
              (c)             objectives by which the officer's effectiveness
will be measured; and
       (d)             a performance appraisal program for evaluating
performance according to the position's description and responsibilities and for
measuring performance against the Association's goals and objectives.

 

 
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Upon completion, a copy of the written program shall be submitted to the
Assistant Deputy Comptroller.
 
(3)         Within sixty (60) days, the Board shall review and assess the
qualifications of each director and ensure that the Association has a competent
Board of Directors in place.
 
(4)         If a position referenced in Paragraph (1) of this Article is vacant
now or in the future, including if the Board realigns an existing officer's
responsibilities and a position referenced in Paragraph (1) of this Article
becomes vacant, the Board shall within sixty (60) days of such vacancy appoint
(subject to the receipt of prior regulatory non-objection under Paragraph (5) of
this Article) a capable person to the vacant position who shall be vested with
sufficient executive authority to ensure the Association's compliance with this
Agreement and the safe and sound operation of functions within the scope of that
position's responsibility.
 
(5)         Prior to the appointment of any individual to a senior executive
officer position or as a director, the Board shall submit to the Assistant
Deputy Comptroller written notice containing the information that 12 U.S.C. §
1831i and 12 C.F.R. Part 163, Subpart H requires for proposed senior executive
officers and proposed directors. The Assistant Deputy Comptroller shall have the
power to disapprove the appointment of the proposed senior executive officer or
the proposed director. However, the failure to exercise such veto power shall
not constitute an approval or endorsement of the proposed executive officer.
 
ARTICLE IV
INTERNAL AUDIT
 
(1)           Within ninety (90) days, the Board shall adopt, implement, and
thereafter ensure Association adherence to an independent, internal audit
program sufficient to:
 
       (a)           detect irregularities and weak practices in the
Association's operations;

 

 
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(b)             determine the Association's level of compliance with all
applicable laws, rules and regulations;
(c)             assess and report the effectiveness of policies, procedures,
controls, and management oversight relating to accounting and financial
reporting;
(d)             evaluate the Association's adherence to established policies and
procedures, with particular emphasis directed to the Association's adherence to
its loan policies concerning underwriting standards, problem loan identification
and classification, transactions with affiliates, conflicts of interests,
Troubled Debt Restructuring, and adherence to OCC Bulletin 2006-46, Interagency
Guidance on Commercial Real Estate (CRE) Concentration Management Practices;
(e)             adequately cover all areas; and
(f)             establish an annual audit plan using a risk based approach
sufficient to achieve these objectives.
 
(2)             As part of this audit program, the Board shall evaluate the
audit reports of any party providing services to the Association, and shall
assess the impact on the Association of any audit deficiencies cited in such
reports.
 
(3)             The Board shall ensure that the Association has processes,
personnel, and control systems to ensure implementation of and adherence to the
program developed pursuant to this Article.
 
(4)             The Board shall ensure that the audit function is supported by
an adequately staffed department or outside firm, with respect to both the
experience level and number of the individuals employed.

 

 
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(5)           The Board shall ensure that the audit program is independent. The
persons responsible for implementing the internal audit program described above
shall report directly to the Board, which shall have the sole power to direct
their activities. All reports prepared by the audit staff shall be filed
directly with the Board and not through any intervening party.
 
(6)           The Board, through its Audit Committee, shall ensure that
immediate actions are undertaken to remedy deficiencies cited in audit reports,
and maintain a written record describing the deficiency, the projected
corrective action, and the status of the corrective action.
 
(7)           The audit staff shall evaluate in writing the effectiveness of the
corrective action and recommend additional corrective actions, as necessary.
 
(8)           The audit staff shall have access to any records necessary for the
proper conduct of its activities. The OCC's examiners shall have access to all
reports and work papers of the audit staff and any other parties working on its
behalf.
 
(9)           Upon adoption, a copy of the internal audit program shall be
promptly submitted to the Assistant Deputy Comptroller.
 
ARTICLE V
CRITICIZED ASSETS
 
(1)           The Association shall take immediate and continuing action to
protect its interest in those assets criticized in the ROE, in any subsequent
Report of Examination, by internal or external loan review, or in any list
provided to management by the OCC's examiners during any examination.
 
(2)           Within ninety (90) days, the Board shall adopt, implement, and
thereafter ensure Association adherence to a written program designed to
eliminate the basis of criticism of assets criticized in the ROE, in any
subsequent Report of Examination, or by any internal or external
 

 

 
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loan review, or in any list provided to management by the OCC's examiners during
any examination as "doubtful," "substandard," or "special mention." This program
shall include, at a minimum:
 
(a)             an identification of the expected sources of repayment;
(b)             the appraised value of supporting collateral and the position of
the Association's lien on such collateral where applicable;
(c)             an analysis of current and satisfactory credit information,
including cash flow analysis where loans are to be repaid from operations; and
(d)             the proposed action to eliminate the basis of criticism and the
time frame for its accomplishment.
 
(3)             Upon adoption, a copy of the program for all criticized assets
equal to or exceeding one hundred and fifty thousand dollars ($150,000) shall be
forwarded to the Assistant Deputy Comptroller.
 
(4)             The Board shall ensure that the Association has processes,
personnel, and control systems to ensure implementation of and adherence to the
program developed pursuant to this Article.
 
(5)             The Board, or a designated committee, shall conduct a review, on
at least a quarterly basis, to determine:
 
        (a)           the status of each criticized asset or criticized portion
thereof that equals or exceeds five hundred thousand dollars ($500,000);
(b)           management's adherence to the program adopted pursuant to this
Article;
(c)           the status and effectiveness of the written program; and
(d)           the need to revise the program or take alternative action.

 

 
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(6)         A copy of each review shall be forwarded to the Assistant Deputy
Comptroller on a quarterly basis (in a format similar to Appendix A, attached
hereto).
 
(7)         The Association may extend credit, directly or indirectly, including
renewals, extensions or capitalization of accrued interest, to a borrower whose
loans or other extensions of credit are criticized in the ROE, in any subsequent
Report of Examination, in any internal or external loan review, or in any list
provided to management by the OCC's examiners during any examination and whose
aggregate loans or other extensions exceed five hundred thousand dollars
($500,000) only if each of the following conditions is met:
 
    (a)             the Board or designated committee finds that the extension
of additional credit is necessary to promote the best interests of the
Association and that prior to renewing, extending or capitalizing any additional
credit, a majority of the full Board (or designated committee) approves the
credit extension and records, in writing, why such extension is necessary to
promote the best interests of the Association; and
    (b)             a comparison to the written program adopted pursuant to this
Article shows that the Board's formal plan to collect or strengthen the
criticized asset will not be compromised.
 
(8)         A copy of the approval of the Board or of the designated committee
shall be maintained in the file of the affected borrower.
 
ARTICLE VI .
LOAN PORTFOLIO MANAGEMENT
 
(1)           Within sixty (60) days, Board shall establish credit risk
management practices that ensure effective credit administration, portfolio
management and monitoring, and risk mitigation.

 

 
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In doing so, the Board shall adopt and the Association (subject to Board review
and ongoing monitoring) shall implement and thereafter ensure adherence to a
written credit policy to improve the Association's loan portfolio management.
The credit policy shall include (but not be limited to):
 
    (a)           revision and/or development of the Association's procedures to
ensure accuracy of risk ratings and proper and timely problem loan
identification, including non-accrual loans;
    (b)           procedures that require ongoing monitoring of borrower ability
to repay the loan through receipt and documented review of current borrower,
principal and guarantor financial information;
    (c)           procedures and controls to periodically verify the existence
and lien position of collateral;
    (d)           procedures that ensure the utilization of interest reserves is
consistent with established controls and clearly defined parameters for
projected costs.
    (e)           credit risk rating definitions consistent with applicable
regulatory  guidance;
    (f)            procedures for early problem loan identification, to ensure
that credits are    accurately risk rated at least monthly;
    (g)           written reports, regularly submitted to the Board, identifying
the aggregate loans and leases not in conformance with the Association's lending
and leasing policies, and exceptions to the Association's lending and leasing
policies;

 

 
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              (h)             a system to effectively monitor previously
charged-off assets and their recovery potential; and
              (i)             a requirement to identify, track and report real
estate loans that exceed the supervisory loan-to-value limits.
 
(2)             The Board shall ensure that Association personnel performing
credit analyses are adequately trained in cash flow analysis, particularly
analysis using information from tax returns, and that processes are in place to
ensure that additional training is provided as needed.
 
(3)             The Board shall ensure that management adequately staffs the
Credit Department with personnel who possess the appropriate expertise relative
to the Association's risk profile.
 
(4)             Within sixty (60) days the Board shall adopt, implement and
ensure Association adherence to a written portfolio stress testing policy that
considers changes in interest rates and appropriate economic factors.
 
(5)             A written report of the stress test results shall be provided to
the Board by Association management at least quarterly.
 
(6)             Within sixty (60) days, the Board shall adopt, implement, and
thereafter ensure Association adherence to written policies and procedures
governing management of matured loans. The policy shall include, among other
things, procedures for active and material reduction in the Association's level
of matured loans, and timely collection and possession of collateral. The policy
shall be consistent with OCC Bulletin 2009-32 (Policy Statement on Prudent
Commercial Loan Workouts) and other applicable regulatory guidance.
 
(7)             On a quarterly basis management will provide the Board with
written reports including, at a minimum, the following information:
 
   (a)             the identification, type, rating, and amount of problem loans
and leases;

 

 
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(b)             the identification and amount of delinquent loans and leases;
(c)             credit and collateral documentation exceptions;
(d)             the identification and status of credit related violations of
law, rule or regulation;
(e)             the identity of the loan officer who originated each loan
reported in accordance with subparagraphs (a) through (d) of this Article and
Paragraph;
(f)             an analysis of concentrations of credit, significant economic
factors, and general conditions and their impact on the credit quality of the
Association's loan and lease portfolios;
(g)             the identification and amount of loans and leases to executive
officers, directors, principal shareholders (and their related interests) of the
Association; and
(h)             the identification of loans and leases not in conformance with
the Association's lending and leasing policies, and exceptions to the
Association's lending and leasing policies.
 
(8)             The Board shall ensure that the Association has processes,
personnel, and control systems to ensure implementation of and adherence to the
program and systems developed pursuant to this Article.
 
ARTICLE VII
ALLOWANCE FOR LOAN AND LEASE LOSSES
 
        (1)           The Board shall review the adequacy of the Association's
Allowance for Loan and Lease Losses ("Allowance") and shall establish a program
for the maintenance of an adequate

 

 
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Allowance. This review and program shall be designed in light of the comments on
maintaining a proper Allowance found in the Federal Financial Institutions
Examination Council (FFIEC) Policy Statement on Allowance for Loan and Lease
Losses Methodologies and Documentation for Banks and Savings Institutions (July
6, 2001), and the Interagency Policy Statement on the Allowance for Loan and
Lease Losses (December 2006), and shall focus particular attention on the
following factors:
 
    (a)           results of the Association's internal loan review;
    (b)           results of the Association's external loan review;
    (c)           an estimate of inherent loss exposure on each significant
credit;
    (d)           an estimate of inherent loss exposure on each credit in excess
of five hundred and thousand dollars ($500,000);
    (e)           loan loss experience;
    (f)           trends of delinquent and nonaccrual loans;
    (g)           concentrations of credit in the Association;
    (h)           enhanced segmentation of 1-4 family residential junior lien
loans and lines of credit, and appropriate ALLL calculations in accordance with
OCC Bulletin 2012-6 (Interagency Guidance on ALLL Estimation Practices for
Junior Liens);
    (i)           present and prospective economic conditions; and
    (j)           appropriate treatment of classified loans pursuant to the
Interagency Policy Statement on the Allowance for Loan and Lease Losses
(December 2006), ASC 450-20 (FAS 5), and ASC 310-10 (FAS 114).

 

 
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(2)         The program shall provide for a review of the Allowance by the Board
at least once each calendar quarter. Any deficiency in the Allowance shall be
remedied in the quarter it is discovered, prior to the filing of the Thrift
Financial Report or Consolidated Report of Condition and Income, by additional
provisions from earnings. Written documentation shall be maintained indicating
the factors considered and conclusions reached by the Board in determining the
adequacy of the Allowance.
 
(3)         The Board shall ensure that the Association has processes,
personnel, and control systems to ensure implementation of and adherence to the
program developed pursuant to this Article.
 
ARTICLE VIII
APPRAISALS OF REAL PROPERTY
 
(1)           Within sixty (60) days, the Board shall ensure the implementation
of policies and controls to ensure full compliance with 12 C.F.R. Part 164. The
policies and controls shall include, but not be limited to:
 
    (a)           compliance with the December 10, 2010 Interagency Appraisal
and Evaluation Guidelines ;
    (b)           a requirement that provides for appraisal reviews to be
conducted by a qualified person who is independent of the loan approval process.
    (c)           a requirement that appraisal reviews appropriately document
the conclusion reached to support the appraiser's valuation;
    (d)           appropriate guidance establishing appraisal standards for
evaluating impaired and collateral dependent loans.
   

 
 
 
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(2)           Within sixty (60) days, the Board shall engage the services of an
independent, professionally certified, or licensed appraiser(s) to provide:
 
    (a)           a written or updated appraisal, in accordance with 12 C.F.R.
Part 164, for each parcel of real property that represents primary collateral
behind any extension of credit where:
    (i)           the loan was criticized (excluding loans classified as
"special mention") in the ROE or by the Association's internal loan review, and
the most recent independent appraisal is more than twelve (12) months old; or
    (ii)           accrued interest or loan fees have been or will be added to
the outstanding principal balance, and the most recent independent appraisal is
more than twelve (12) months old;
    (b)                   a written appraisal on each parcel of Other Real
Estate Owned where it is needed to bring the Association into conformity with
the provisions of 12 C.F.R. Part 164.
 
(3)           The Board shall specifically instruct the appraiser(s) to comply
with the requirements of 12 C.F.R. Part 164. The details surrounding any and all
other instructions given to the appraiser(s) by the Association, whether written
or oral, shall be provided to the Assistant Deputy Comptroller for review prior
to the appraiser(s) undertaking the actual appraisals.
 
(4)           The appraisals shall be completed within sixty (60) days following
the engagement of the appraiser(s), and certification by the Board attesting to
the completion of the appraisals shall be forwarded to the Assistant Deputy
Comptroller within fifteen (15) days after completion of each appraisal.

 

 
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(5)         The Board shall ensure that the Association has processes,
personnel, and control systems to ensure implementation of this Article and the
policies developed pursuant to it.
 
ARTICLE IX
BUDGET/BUSINESS PLAN
 
(1)         Within ninety (90) days of the date of this Order, the Board shall
develop, implement, and thereafter ensure Association adherence to a written
three-year business plan that shall include a projection of major balance sheet
and income statement components. The business plan shall also include a written
profit plan and a detailed budget that specifically takes into account the
Association's increased risk profile and credit risk management deficiencies.
Specifically, the business plan shall describe:
 
    (a)           the Board's general business philosophy, strategic goals and
objectives for the three-year period, and the means by which the Association
will achieve those goals and objectives together with specific time frames;
    (b)           a detailed description of all material activities and related
risks that the Association intends to engage in during the term of the business
plan;
    (c)           a budget that corresponds to the business plan's goals and
objectives, and a system to monitor the Association's performance in comparison
to the budget.
 
(2)         A copy of the plan shall be submitted to the Assistant Deputy
Comptroller for review and prior written determination of no supervisory
objection. Upon receiving a determination of no supervisory objection from the
Assistant Deputy Comptroller, the Bank shall implement and adhere to the
program.

 

 
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(3)           The Association shall submit to the Assistant Deputy Comptroller
for review and prior determination of no supervisory objection, with at least
sixty (60) days advance, written notice, its intent to deviate significantly
from the business plan.
 
    (a)           For purposes of this Article, changes that may constitute a
significant deviation from the business plan include, but are not limited to,
any significant deviations from the Association's business plan relating to: (i)
marketing strategies, marketing partners, acquisition channels; (ii)
underwriting practices and standards, account management strategies and test
programs; (iii) collection strategies, partners or operations; (iv) fee
structure, pricing, or fee application methods; (v) accounting processes and
practices; (vi) funding strategy; or (vii) any other changes in personnel,
operations or external factors that may have a material impact on the
Association's operations or financial performance.
    (b)       Prior to making any changes that significantly deviate from the
Association's business plan, the Board shall perform an evaluation of the
adequacy of the Association's organizational structure, staffing, management
information systems, internal controls and written policies and procedures to
identify, measure, monitor, and control the risks associated with the product or
service. The evaluation shall include an assessment of the impact of such change
on the Association's condition, including a profitability analysis.

 

 
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(4)                The Board shall ensure that the Association has processes,
personnel, and control systems to ensure implementation of and adherence to the
plan developed pursuant to this Article.
 
ARTICLE X
CAPITAL PLAN
 
    (1)         Within ninety (90) days, the Board shall forward to the
Assistant Deputy Comptroller for review a revised, written capital plan for the
Association, consistent with the Association's business plan as required by
Article IX, covering at least a three-year period. At the next Board meeting
following receipt of the Assistant Deputy Comptroller's written determination of
no supervisory objection, the Board shall adopt and the Association (subject to
Board review and ongoing monitoring) shall implement and thereafter ensure
adherence to the capital plan. The capital plan shall include:
 
    (a)             specific plans for the maintenance of adequate capital in
relation to the Association's risk profile;
    (b)             projections for growth and capital requirements, based upon
a detailed analysis of the Association's assets, liabilities, earnings, fixed
assets, and off balance sheet activities;
    (c)              projections of the sources and timing of additional capital
to meet the Association's future needs, as set forth in the business plan;

 

 
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(d)             identification of the primary sources from which the Association
will maintain an appropriate capital structure to meet the Association's future
needs, as set forth in the business plan; and
(e)             contingency plans that identify alternative methods to
strengthen capital, should, the primary source(s) under paragraph (c) of this
Article not be available.
 
(2)             Prior to adoption by the Board, a copy of the capital plan shall
be submitted to the Assistant Deputy Comptroller for a prior written
determination of no supervisory objection. Upon receiving a written
determination of no supervisory objection from the Assistant Deputy Comptroller,
the Board shall adopt and the Association shall immediately implement and adhere
to the capital plan. The Board shall review and update the Association's capital
plan at least annually and more frequently if necessary or if requested by the
Assistant Deputy Comptroller. Revisions to the Association's capital plan shall
be submitted to the Assistant Deputy Comptroller for a prior written
determination of no supervisory objection.
 
ARTICLE XI
LIQUIDITY RISK MANAGEMENT / CONTINGENCY FUNDING PLAN
 
(1) Within ninety (90) days, the Board shall review and revise as necessary, and
thereafter maintain a comprehensive liquidity risk management program,
consistent with guidance set forth in OCC Bulletin 2010-13 and the Interagency
Policy Statement on Funding and Liquidity Risk Management (May 21, 2010), which
assesses, on an ongoing basis, the Association's current and projected funding
needs, and ensures that sufficient funds or access to funds exist to meet those
needs.

 

 
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(2)           Within ninety (90) days, the Board shall review and revise the
Association's Contingency Funding Plan (CFP). The Board shall refer to the OTS
Examination Handbook Section 530 (Liquidity) as well as other current regulatory
materials for guidance. The CFP shall be expanded, at a minimum, to address:
 
(a)             defining responsibilities and decision-making authority for all
personnel in a crisis situation;
(b)             defining and quantifying a liquidity crisis, including early
warning indicators to monitor large changes in sources and uses of funds;
(c)             developing early warning liquidity triggers applicable to the
Association. Examples of warning triggers include but are not limited to:
reduced ability to access wholesale funding, a run on deposits, credit
deterioration, or a decline in your composite CAMELS ratings; and
(d)             documenting and analyzing the amount, availability and
timeliness of obtaining funding sources available to the Association (i.e.,
Federal Home Loan Bank borrowings, Fed discount window, and holding company
capacity) in relation to the various levels of a liquidity crisis.
 
(3)                    Upon adoption, a copy of the enhanced CFP shall be
forwarded to the Assistant Deputy Comptroller for review.
 
ARTICLE XII
CLOSING
 
(1) Although the Board has agreed to submit certain programs and reports to the
Assistant Deputy Comptroller for review or prior written determination of no
supervisory

 

 
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objection, the Board has the ultimate responsibility for proper and sound
management of the Association.
 
(2)           It is expressly and clearly understood that if, at any time, the
Comptroller deems it appropriate in fulfilling the responsibilities placed upon
him/her by the several laws of the United States of America to undertake any
action affecting the Association, nothing in this Agreement shall in any way
inhibit, estop, bar, or otherwise prevent the Comptroller from so doing.
 
(3)           Any time limitations imposed by this Agreement shall begin to run
from the effective date of this Agreement. Such time requirements may be
extended in writing by the Assistant Deputy Comptroller for good cause upon
written application by the Board.
 
(4)           The provisions of this Agreement shall be effective upon execution
by the parties hereto and its provisions shall continue in full force and effect
unless or until such provisions are amended in writing by mutual consent of the
parties to the Agreement or excepted, waived, or terminated in writing by the
Comptroller.
 
(5)           In each instance in this Agreement in which the Board is required
to ensure adherence to, and undertake to perform certain obligations of the
Association, it is intended to mean that the Board shall:
 
    (a)           authorize and adopt such actions on behalf of the Association
as may be necessary for the Association to perform its obligations and
undertakings under the terms of this Agreement;
    (b)           require the timely reporting by Association management of such
actions directed by the Board to be taken under the terms of this Agreement;

 

 
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(c)             follow-up on any non-compliance with such actions in a timely
and appropriate manner; and
(d)             require corrective action be taken in a timely manner of any
non­compliance with such actions.
 
(6)             This Agreement is intended to be, and shall be construed to be,
a supervisory "written agreement entered into with the agency" as contemplated
by 12 U.S.C. § 1818(b)(1), and expressly does not form, and may not be construed
to form, a contract binding on the Comptroller or the United States.
Notwithstanding the absence of mutuality of obligation, or of consideration, or
of a contract, the Comptroller may enforce any of the commitments or obligations
herein undertaken by the Association under his supervisory powers, including 12
U.S.C. § 1818(b)(1), and not as a matter of contract law. The Association
expressly acknowledges that neither the Association nor the Comptroller has any
intention to enter into a contract. The Association also expressly acknowledges
that no officer or employee of the Office of the Comptroller of the Currency has
statutory or other authority to bind the United States, the U.S. Treasury
Department, the Comptroller, or any other federal bank regulatory agency or
entity, or any officer or employee of any of those entities to a contract
affecting the Comptroller's exercise of his supervisory responsibilities. The
terms of this Agreement, including this paragraph, are not subject to amendment
or modification by any extraneous expression, prior agreements or prior
arrangements between the parties, whether oral or written.

IN TESTIMONY WHEREOF, the undersigned, authorized by the Comptroller, has
hereunto set her hand on behalf of the Comptroller.

 

 
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Linda F.
Nichols                                                                                     Date
Assistant Deputy Comptroller
Washington D.C. Field Office

IN TESTIMONY WHEREOF, the undersigned, as the duly elected and acting Board of
Directors of the Association, have hereunto set their hands on behalf of the
Association.

     
 
   
M. Kathleen Sulick
 
Date
           
Konrad M. Wayson
 
Date
           
Raymond S. Crosby
 
Date
           
Alan J. Hyatt
 
Date
           
James H. Johnson, Jr.
 
Date
           
David S. Jones
 
Date
           
Eric M. Keitz
  Date            
John A. Lamon, III
 
Date
           
Al Sheilds
 
Date

 
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APPENDIX A
Severn Savings Bank, FSB
Annapolis, MD

CRITICIZED ASSET REPORT AS OF:                                    
BORROWER(S):                                                                                                                                                                              
ASSET BALANCE(S) AND OCC RATING (SM, SUBSTANDARD, DOUBTFUL OR LOSS):
$                                                                      CRITICISM                                                                          
AMOUNT CHARGED OFF TO
DATE                                                                                                                                                                  
FUTURE POTENTIAL
CHARGE-OFF                                                                                                                                                                 
 
 
                                                                                               

PRESENT STATUS (Fully explain any increase in outstanding balance; include past
due status, nonperforming, significant progress or deterioration, etc.):

 
                                                                                  
FINANCIAL AND/OR COLLATERAL SUPPORT (include brief summary of most current
financial information, appraised value of collateral and/or estimated value and
date thereof, bank's lien position and amount of available equity, if any,
guarantor(s) info, etc.):

                                                                                
PROPOSED PLAN OF ACTION TO ELIMINATE ASSET CRITICISM(S) AND TIME FRAME FOR ITS
ACCOMPLISHMENT:

 
                                                                                
IDENTIFIED SOURCE OF REPAYMENT AND DEFINED REPAYMENT PROGRAM (repayment program
should coincide with source of repayment):

                                                                                 
Use this form for reporting each criticized asset that
exceeds                                                                                               dollars
($                      ) and retain the original in the credit file for review
by the examiners. Submit your reports (monthly/quarterly) until notified
otherwise, in writing, by the Assistant Deputy Comptroller.

 

 
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