Bank PoliciesLuxury Expenditure Policy
I. Statement of Need
The board of directors and executive management of Pacific Commerce Bank are committed to complying fully with the requirements of the Troubled Asset Relief Program (“TARP”) Standards for Compensation and Corporate Governance as defined by the Department of the Treasury (31 CFR Part 30) pursuant to requirements set forth in the Emergency Economic Stabilization Act of 2008 (“EESA”), as amended by the American Recovery and Reinvestment Act of 2009 (“ARRA”) during the period that the Bank participates in the TARP Capital Purchase Program.
II. Policy Objectives
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 TARP to have in place a bank-wide policy regarding excessive or luxury expenditures, as identified by the Secretary of the Department of the U.S. Treasury.
III. Role of the Board of Directors
The board of directors is required by the TARP Standards for Compensation and Corporate Governance as defined by the Department of the Treasury (31 CFR Part 30) to adopt a policy regarding excessive and luxury expenditures. The Board has oversight responsibility for the Bank’s compliance with the requirements of TARP Standards for Compensation and Corporate Governance as defined by the Department of the Treasury (31 CFR Part 30). In support of its oversight responsibilities, the Board shall have the following roles:
The board of directors must review and approve this policy on an annual basis, or, in the event of subsequent amendments to the TARP Standards for Compensation and Corporate Governance as defined by the Department of the Treasury (31 CFR Part 30), in such time frame required by the amendment.
The board shall review any exceptions to this policy at the next regularly scheduled meeting subsequent to the granting of the exception.
IV. Role of Executive Management
Executive management is responsible for the effective implementation of this policy. To that end, executive management shall have the following roles:
V. Policy Statement
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 board.
Promptly recommend modifications of this policy to the board 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.
Ensure that this policy is posted on the bank website.
The board of directors and executive management of Pacific Commerce Bank (“Bank”) prohibits excessive or luxury expenditures on office or facility renovations, entertainment and events, aviation or other transportation services or other activities or events that are not reasonable expenditures for conferences, staff development, reasonable performance incentives or other similar measure conducted in the normal course of business operations of the Bank.
Renovations of facilities and office spaces should be relative to the approved current budget and/or strategic plan, and tracked within the Bank’s Expense Control Policy. At no time should renovations be considered that would have the appearance of being extraordinary, or excessive from a shareholder perspective. 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.
Entertainment is defined as an activity that an employee, officer 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 Bank’s business development efforts.
Our expectation is that all expenses ultimately paid by the Bank would be for Bank purposes, and used to steer and/or increase business to the Bank. As such, membership in country or social clubs should have appropriate business purpose. The cost of membership must be reviewed annually in light of the economic benefit derived from holding such a membership(s). Occasional events such as taking a customer to golf outings, eating dinner, taking them to other events the customer/ prospect would find pleasurable is a necessary part of the Bank’s marketing efforts and is not deemed as “excessive” entertainment or a violation of this policy. Entertainment expenses should be documented on the employee expense reimbursement form. These expenses should be documented and detailed as to the benefit derived by the Bank regardless of the amount.
Entertainment expenses exceeding $150.00 per person should have prior executive management approval.
We encourage our staff to attend conferences that are appropriate educational opportunities. These conferences should 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.
This policy would EXCLUDE reward conferences whether paid for by the Bank or other venders as a violation of this policy if the purpose is meant to be a reward. Any employee, officer, or director attendance at a reward conference would be considered a violation of this policy—again, regardless of who paid—if the conference has no educational value.
The board of directors believes that a company-wide annual holiday party is important in terms of employee appreciation and employee morale. Accordingly, this policy does not prohibit expenditures in conjunction with such events. However, such employee events must be local as neither overnight nor travel expenses will be paid by the Bank and the expenses associated with such an event should not cost the Bank more than approximately an average day’s gross payroll. Other events, such as a company picnic or the occasional department party, should be just a fraction of that cost and deemed reasonable by any appropriate standard.
Board retreats should only be used for educational purposes, and should be kept in consideration, and looked at in the same view and discretion as all other expenses. Board education is a vital part of maintaining, and keeping a dynamic director base, and this Policy should not limit the retreat that is focused on strategic planning or education.
Events and parties focused on customers for the purpose of attracting their business would not fall under this policy.
Aviation or Transportation Services:
Transportation for the 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 Bank. The traveling employee will provide to the accounting department, when appropriate, an analysis of trips to determine which mode of transportation is the most appropriate for the Bank. A determination of transportation analysis will factor in cost, efficiency and timeliness of travel.
All expenses permitted under this policy shall be approved strictly in accordance with the Bank’s Expense Control Policy. Any violations of either policy, in conjunction with the expenditures outlined in this Luxury Expenditures Policy, will be reported to the board on the next regularly scheduled board meeting.
Annually, all senior level employees of the Bank shall certify as to their understanding of and compliance with this policy.
Disciplinary Action / Reporting Violations
An employee or director who learns of a violation of this policy shall promptly report the violation to the Chief Financial Officer, Chief Operations Officer, or the Chairperson of the Audit Committee. Any violations hereof may result in disciplinary action up to and including discharge.
The Board shall have the sole and absolute authority to interpret the provisions of this Policy and their determination as to any matter hereunder shall be final and binding on all relevant parties. No employee, officer or director may be disciplined in retaliation for reporting a violation of this Policy.