Excessive or Luxury Expenditure Policy
Illinois State Bancorp, Inc.
First Nations Bank, wholly owned Subsidiary
Bank of Bourbonnais, wholly owned Subsidiary
The Board of Directors of Illinois State Bancorp, Inc. (the "Company") adopted this Excessive or Luxury Expenditure Policy ("Policy") to be in compliance with the requirements under the American Recovery and Reinvestment Act of 2009 ("ARRA") enacted February 17, 2009. The ARRA, which amends certain sections of the Emergency Economic Stabilization Act of 2008, requires each recipient of funds under the Capital Purchase Program of the Troubled Assets Relief Program 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.
It is the Company's policy and that of its sole subsidiaries, First Nations Bank and Bank of Bourbonnais (the "Bank"), to prohibit excessive or luxury expenditures on
- entertainment and events,
- office and facility renovations,
- aviation or other transportation services, and
- other activities or events that are not reasonable expenditures for conferences, staff development, reasonable performance incentives, or other similar measures conducted in the normal course of our business operations.
This Policy applies to all employees of the Company and the Bank. Additionally, this Policy specifies prohibited expenditures, approval procedures for expenditures which require prior approval, certification requirements of the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), the reporting of actual or suspected violations, and compliance monitoring.
B. Responsibilities of the Board of Directors and Executive Compensation Committee
Pursuant to the Act and the Rule, this Policy is adopted by the Board of Directors (Board). The Board and the Executive Compensation Committee of the Board are responsible for oversight of the Company’s compliance with the Policy as well as other compensation and corporate governance requirements. In support of their oversight responsibilities, the Board and the Executive Compensation Committee shall have the following responsibilities, among others:
- The Executive Compensation Committee of the Board shall timely review and recommend to the full Board, and upon such recommendation the Board shall approve, any amendments of this Policy as they may deem appropriate or as otherwise required pursuant to any amendments of the Rule.
- The Board shall review any exceptions to this Policy, that may be proposed or approved by Executive Compensation Committee from time to time, at the next regularly scheduled meeting subsequent to the granting of any exception(s). It is anticipated that any such exceptions shall only be approved by Executive Compensation Committee if such expense must be incurred, in it’s reasonable determination, prior to the next Board meeting. In all other cases, such exceptions shall be proposed by Executive Compensation Committee to the Board in advance for approval.
C. Responsibilities of Executive Management
Executive management is responsible for the effective implementation, administration and certification of compliance of the Company with this Policy. To that end, executive management shall:
- Communicate this Policy to all employees to whom it applies.
- Monitor expenditures addressed by this Policy to ensure compliance.
- Document and justify any exceptions to this Policy and submit for approval to the Executive Compensation Committee, and reported to the board as provided above.
- Promptly recommend modifications of this Policy to the Executive Compensation Committee to ensure it remains compliant with the Rule as it may be amended.
- Ensure that this Policy is posted on the Company’s public internet web site (www.fnbwbank.com and www.bankofbourbonnais.com).
The types and categories of expenditures covered by this Policy are as follows:
Entertainment is defined as an activity that an employee or executive officer would use corporate funds for business-development purposes relating to a current customer or prospective customer or to further enhance the Bank's marketing efforts. Our policy is that all expenses incurred by the Bank should be for Bank purposes and used to develop business of the Bank. Occasional events such as taking customers or prospects on trips, playing golf, eating dinner, or taking them to other events the customer/prospect would find pleasurable is a necessary part of the Bank's marketing efforts and not deemed as "luxury" or a violation of this Policy. These expenses should be documented and detailed as to the benefit derived by the Bank through the normal accounts payable process.
We encourage our employees and officers to attend conferences that are appropriate educational opportunities. These conferences must be related to the financial services industry and have a direct correlation to their job. Typically these conferences are sponsored by vendors, banking associations, or other industry-related entities. At times, it may be appropriate that a spouse would travel to these conferences with Bank attendees. The Company normally does not pay the expenses of a spouse, a guest, or a family member accompanying an employee who is attending Company related functions unless the attendance is required or expected (this would normally include only conventions and other major social events). Reimbursement of expenses for spousal, guest, or family member travel must be requested prior to travel and must receive Required Approval in advance.
Employee Recognition/Holiday Parties:
- Employee recognition/holiday parties are part of the Bank's employee appreciation process. These events should be local in geographic nature and reasonable in cost.
- Board/Management Retreats: Retreats shall only be used for educational or business planning purposes. Board education is a vital part of maintaining and keeping a dynamic director base, and this Policy should not limit a retreat that is focused on strategic planning or education.
Office and Facility Renovations:
Renovations of facilities and office spaces should be relative to the approved project and current business plan of the Company. An exception will be permitted to address an emergency situation, such as an act of nature, and the expenditure is necessary to make the facility operational for employee and customer use.
Aviation or Other Transportation Services:
Transportation for Company or Bank staff to outlying locations, including bank locations, conferences, business development purposes, and merger and acquisition research, should be conducted in the most cost appropriate way for the Company. Modes of transportation to be used may consist of vehicle, commercial air, or rail service. The selection of transportation services will factor in cost, efficiency, and timeliness of travel. Expenditures for the use of an automobile by the Bank's officers must be reasonable.
The Company may provide an automobile(s) of an appropriate make, model and age or may provide an appropriate automobile allowance to employees for Bank business. Expenses for employee or director use of personal vehicles for Company business will be reimbursed at a rate that does not exceed the published IRS mileage rate. Documentation in support of such use must be provided in accordance with applicable Company policies and procedures.
The Company may reimburse the Chief Executive Officer and other officers designated by the Executive Compensation Committee, or the Chief Executive Officer with respect to other officers, for annual/monthly dues associated with membership privileges in a country club, city club, or similar club in connection with promoting the Bank and attracting business to the Bank.
E. Prohibited Expenditures
The following expenditures are deemed excessive and are prohibited:
Office and Facility Renovations:
Expenditures for office furnishings, remodeling, or redecoration for any senior executive officer as defined in the EESA ("SEO"), The aggregate cost of which exceeds $25,000. This prohibition does not extend to a corporate relocation or remodeling impacting a majority of the corporate offices or a newly constructed branch, branch renovation, or branch relocation.
Expenditures for the use of a private airplane are prohibited.
F. Expenditures Requiring Prior Approval
The following expenditures require the pre-approval of the Executive Compensation Committee if the amount exceeds $10,000.00 and are not otherwise prohibited by Section C of this Policy:
- entertainment, conferences, board/management retreats, or other events;
- office and facility renovations;
- aviation or other transportation services; and
- other similar items, activities, or events for which the Company may reasonably anticipate incurring expenses or reimbursing an employee for incurring expenses.
Employee Recognition/Holiday Parties:
Any expenditure, regardless of amount, for employee recognition or holiday parties must be approved in advance by the CEO or CFO.
Notwithstanding the foregoing, prior written approval is not required for the following expenditures:
- to remediate emergency or hazardous conditions;
- to comply with building codes and ordinances;
- to satisfy legal, contractual, or regulatory requirements; and
- under the Board-approved annual operating budget.
Within 90 days of the completion of each fiscal year of the Company, the CEO or CFO of the Company shall certify that the Company and its employees have complied with this Policy during the fiscal year or since the date of enactment of this Policy and that any expenses requiring approval were properly approved. This certification shall be provided to the Department of the Treasury.
H. Reporting of Violations
Anyone who becomes aware of a suspected or actual violation of this Policy, whether intentional or inadvertent, shall report such violation in writing to the Chairperson of the Company's Audit Committee. Employees are expected to self-report any violations concerning the employee. The Chairperson will discuss the suspected or actual violation at the next regularly-scheduled meeting of the Audit Committee, who will investigate the suspected or actual violation of this Policy in accordance with its procedures established for investigating complaints regarding improprieties in the Company's accounting, internal accounting controls, or auditing matters, and report to the Board at its next regularly scheduled meeting with respect to any reported violations and any recommended corrective actions.