LUXURY EXPENSE POLICY

POLICY STATEMENT

This policy fulfills the requirements under the American Recovery and Reinvestment Act of 2009 (ARRA) enacted February 17, 2009. ARRA requires each recipient of funds under the Capital Purchase Program (CPP) of the Troubled Assets Relief Program (TARP) to have in place a company-wide policy regarding excessive or luxury expenditures, as identified by the Secretary of the Department of the U.S. Treasury.

APPLICABILITY

This policy shall apply to the Company, all of its subsidiaries, and each and every one of the Company’s respective employees, officers and directors, who will each be held accountable for compliance with the Policy.

SPECIFIC GOALS

The Company prohibits excessive expenditures on entertainment and events, office or facility renovations, aviation and other transportation services. The Company's policy is to authorize only reasonable expenses for conferences, staff development, performance incentives or other similar measures conducted in the normal course of business. The policy prohibits expenditures that are of a luxurious, excessive, lavish, exorbitant, extravagant or of a similar nature.

POLICY ELEMENTS

Scope/Duties and Responsibilities

Review: This policy shall be reviewed by the Company's Board of Directors on an annual basis. Any expenditure requiring pre-approval under this Policy will be reviewed with the Company's Board Compensation Committee on a quarterly basis.

Amendments: The Company's Board of Directors must approve any amendments to this policy.

CEO and CFO Certification: The Company's CEO and CFO shall certify that any expenditure requiring pre-approval under this policy was properly obtained.

Approvals

An underlying principle to this policy is that it relies on the good judgment and commonsense of each employee and director. In evaluating the appropriateness of an expenditure, employees and directors should (1) justify every expenditure as having a valid business reason and (2) spend no more than what a reasonable prudent person would spend in any given situation, taking into account the amount spent in relation to the benefit to the Company, and other factors and considerations appropriate to the situation.
Routine expenses incurred during the ordinary course of business do not require explicit pre-approval. Expenditures that are extraordinary, unusual, or specifically identified in this policy must be pre-approved. In determining if pre-approval is required, the Company expects employees and directors to act conservatively and use good judgment and commonsense in such decisions.

Whenever in this policy a pre-approval is required, written requests should be submitted for approval to a member of Executive Management. In the case of a member of Executive Management, requests should be submitted for approval to the Company’s CEO and Chairman of the Board. Requests by the Company’s CEO and Chairman should be submitted to the Company’s Board or the Compensation Committee acting on the Board’s behalf. Failure to obtain pre-approval for an expense when required under this policy may result in the expense being the responsibility and liability of the subject individual and not the Company; and, if the Company has already paid the expense, the individual may be required to immediately reimburse the Company for the amount of the expense.

Authority

Executive management is responsible for the effective implementation of this policy. To that end, executive management shall monitor expenditures addressed by this policy to ensure compliance with this policy; document and justify any exceptions to this policy and report exceptions to the Compensation Committee of the Board; and promptly recommend modifications of this policy to the Compensation Committee to ensure it remains compliant with the TARP Standards for Compensation and Corporate Governance as defined by the Department of the Treasury (31 CFR Part 30) as it may be amended.

Renovations

Renovations of facilities and office spaces should be relative to the approved current five year strategic plan, and tracked within the capital expenditure policy of the Company. An exception to this can be allowed if management must deal with an emergency situation, such as an act of nature, and the expenditure is necessary to make the facility operational for customer use. At no time should renovations be done that would have the appearance of being extraordinary, or excessive from a shareholder perspective. Renovations and decorating expenditures that are outside of the five year strategic plan must be submitted to the CEO for approval.

Entertainment

Entertainment is defined as an activity that an Employee, Executive, or Director would use corporate funds for business development purposes relating to a current customer(s) or prospective customer(s) or to further enhance the Company's marketing efforts. Our expectation is that all expenses incurred to the Bank would be for company purposes, and used to drive business to the bank. Occasional events such as taking customers or prospects on trips, playing golf, eating dinner, taking them to other events that the customer/prospect would find pleasurable is a necessary part of the Company's marketing efforts and is not deemed as "entertainment" or a violation of the Luxury Policy provided that the expenses are reasonable in relation to the value of the business or other relationship to the Company. Expenditures meeting this criterion do not require pre-approval; however, these expenses should be documented and detailed as to the benefit derived by the Bank.

Conferences

We encourage our staff to attend conferences that are appropriate educational opportunities. These conferences should be related to the financial services industry, have a direct correlation to their job, and should not result in unusual or excessive expenses. Attendance at conferences that meet these criteria does not require approval under this Policy, but may require approval under other formal or informal education-related policies in existence at the Company. Conference provided accommodations and discounts should be utilized to the fullest extent possible, and if alternative accommodations and arrangements are available at a lower expense, without a loss of value from not being at the conference site and/or does not create an undue burden, they should be considered. At times it may be appropriate that a spouse would travel to these conferences with Company attendees. The Company does not allow spouse travel to be paid for by the Company without prior approval under this Policy through the appropriate channels. Expenses related to spouse travel are the responsibility of the individual. Typically these conferences are sponsored by vendors, banking associations, or other industry related entities. This Policy would EXCLUDE reward conferences whether paid for by the Company or other vendors as a violation of this policy if the purpose is meant to be a reward, or would have no value of education to the employee or executive.

Holiday Parties

We believe that holiday parties are part of an employee appreciation process. Holiday parties should be local in geographic nature, and should not cost the Company more than an average day's payroll per employee, on average. Events and parties focused on Customers for the purpose of attracting their business would not fall under this category of the policy.

Board Retreats

Board retreats are intended for educational and critical planning purposes for such areas as long-term strategy, budgets and expansion. It is also appropriate for such retreats to be used for director education to maximize the effectiveness of the Board's oversight and policy development roles. This policy should not limit such a retreat provided that all expenses are appropriate and justifiable to shareholders.

Aviation and other Transportation Services

The Company encourages coach travel whenever possible. The Company may from time-to-time pay for first class travel when required for legitimate reasons such as seat availability, to accommodate a disability or special need, or to enable certain employees to remain productive during travel. First class travel not meeting these criteria requires approval under the policy. Accommodations, meals, ground transportation and other expenses should be reasonable given such considerations as location, cost, availability, business conducted, and other appropriate factors.

VIOLATIONS

Every employee shall be required to promptly report any suspected violations of this policy either directly to his or her supervisor or to a member of executive management who shall then report the violation to the CEO or to the Chairman of the Board (if an alleged CEO violation). There shall be no retaliation against any employee for reporting a suspected violation of this policy if brought in good faith and without improper purpose or intent. Any employee or director who engages in extravagant spending shall be subject to discipline up to and including termination of employment or removal from or omission of re-nomination to the Board.

Initially adopted by the Board of Directors on September 10, 2009. Reapproved on October 28, 2010.and March 24, 2011.