As a participant in the Emergency Capital Investment Program (ECIP recipient, as defined at 31 CFR 35.21), NMB Financial Corporation (together with its subsidiaries and affiliates, referred to hereafter as the Organization) is required to establish and maintain policies designed to prohibit excessive or luxury expenditures.
This policy will be posted on the Organization’s website, and will be submitted to the Department of the Treasury and to the Organization’s Appropriate Federal Banking Agency.
Excessive or Luxury Expenditures Policy
The purpose of this policy is to establish parameters and internal controls governing the expenditures of the Organization. Expenditures of the Organization should be customary, prudent, consistent with applicable laws and regulations, and reasonably related to the Organization’s business objectives and needs. This policy identifies expenditures that are excessive or luxury expenditures, creates processes that are reasonably designed to prevent such expenditures, and establishes accountability for compliance.
This policy establishes a prohibition on expenditures that are excessive or luxury expenditures as required by the Department of the Treasury’s Emergency Capital Investment Program regulations (31 CFR Part 35), and as may be required by other statutes and regulations.
This policy is the responsibility of the Organization’s board of directors (board). The board has approved this policy and will review compliance with this policy no less frequently than annually, and summary data on excessive or luxury expenditures will be reported to the board as part of the compliance review.
This policy applies to all employees, officers, and directors of the Organization with regard to any expenditure of the Organization. In making any expenditure on behalf of the Organization, employees, officers, and directors should consider whether the expenditure is an excessive or luxury expenditure that is prohibited under this policy.
E. Excessive or Luxury Expenditures
“Excessive or luxury expenditures” means excessive expenditures on any of the following to the extent such expenditures are not reasonable expenditures for staff development, reasonable performance incentives, or other similar reasonable measures conducted in the normal course of the Organization’s business operations:
(1) Entertainment or events.
Entertainment is defined as activities for which an employee or officer would use corporate funds for business development, customer retention and team development purposes relating to current or prospective customers and staff or to enhance the perception of the Organization in the market. This category includes fees, dues, tickets costs related to social, athletic, artistic and dining clubs, activities, and similar expenditures for entertainment purposes. Expenditures for charitable contributions and charitable events are not prohibited under this policy. Entertainment expenditures anticipated to be in excess of $5,000 per individual, per instance must be reviewed with and approved by a member of executive management. Our expectation is that all expenses incurred for these activities would be for corporate purposes. Expenditures for these purposes in the normal course of business are a necessary part of the marketing and team building efforts of the Organization and are not deemed as “luxury” or a violation of this policy. Prior approval of expenditures for this purpose, that are consistent with Company’s prior practices and customary in the finance industry is not required. These expenses should continue to be documented and detailed as to the benefit derived by the Organization and approved through the normal accounts payable process.
Events are defined to include meetings, conferences and employee recognition events that are intended to provide the board, management and employees with opportunities for individual and team education, development and recognition, business planning, market and industry networking and related business purpose objectives. Meetings may include both those that are internally organized as well as those organized by other banks, trade associations, vendors and similar organizations. Occasionally, meetings are held in restaurants and hotels in order to accommodate the size of the group, facilitate better delivery of the meeting or provide participants with a venue that is most conducive for the meeting’s purpose. Directors, management and employees may also participate in meetings hosted by other business partners that have a clear business purpose. The costs associated with meetings must be approved by a member of executive management. Conferences typically offer educational, skill development and industry networking opportunities that enhance participant performance. These conferences should be related to the financial services industry and have a direct correlation to attendee’s job. At times it may be appropriate that a spouse would travel to these conferences with Organization attendees. Conference participation is subject to approval by a member of executive management. Employee recognition meetings, dinners and events are held occasionally to recognize the contribution of an individual, team or all employees. The cost of such meetings must be approved in advance by a member of executive management.
(2) Office and facility renovations. This category includes costs and allowances for office renovation, including expenditures related to furniture, art, office personalization, interior finishing, design and decoration, and similar expenditures. Office and facility renovations should be designed to: enhance operational efficiency; comply with applicable fire codes and ADA requirements; maintain a safe, sanitary and clean working environment; enhance the public image of the Organization; improve employee morale; or such other worthwhile purpose as may be identified by the Organization. All office and facility renovations are permitted only for approved projects that are part of the board-approved annual financial plan or are otherwise approved by the board or executive management. Renovations must be in all regards consistent with the Organization’s historical standards of utility and finish.
(3) Aviation or other transportation services. This category includes charter fees, tickets, slip or docking fees, vehicle installment payments, reservation and travel agent expenses, and similar expenditures associated with transportation services (e.g., airline, train, rental cars, or vans). Aviation and other transportation services for staff to outlying locations, including for conferences, business development purposes and other purposes should be conducted in an efficient and customary manner with all factors considered. Permitted modes of transportation include automobiles and commercial or [[private]] air, bus or rail service. The selection of transportation services should include assessment of cost, efficiency and timeliness of travel. Use of Organization’s owned, leased, or other interest in car or aircraft are allowed if approved by executive management, and customary in the finance industry.
Expenses for employee use of personal vehicles for Organization’s business will be reimbursed at a rate that does not exceed the published Internal Revenue Service mileage rate. Documentation in support of such use must be provided in accordance with applicable policies and procedures. [[The Organization’s lease, ownership and use of an interest in an aircraft in a manner consistent with historic and/or customary practice and in accordance with applicable regulations is permitted under this policy as reasonable and customary expenditures for business development and customer/staff retention.]]
(4) Tax gross-ups. This category includes any reimbursement of taxes owed with respect to any compensation. This category does not apply to tax equalization agreements for employees subject to tax from a non-U.S. jurisdiction.
(5) Other similar items, activities, or events for which the Organization may reasonably anticipate incurring expenses, or reimbursing an employee for incurring expenses.
All expenditures covered by this policy shall be documented, reported, supported and subject to audit in accordance with the Organization’s policies and procedures.
Capital investments, including investments in technology, equipment, and similar items that expand the long-term capability of the Organization to provide products and services to its customers and community are not excessive or luxury expenditures. The chief executive officer may establish or delegate to an appropriate executive officer the authority to establish processes for the evaluation and approval of expenditures in the preceding categories. These processes must be reviewed by executive management no less frequently than annually, as well as any additional threshold expenditure amounts per item, activity, or event, or a threshold expenditure amount per employee receiving the item or participating in the activity or event under this policy. Such approvals must be reported to the board of directors (which may be in an appropriate summary form) no less frequently than annually.
F. Exceptions or Violations
Any exception or violation of this policy must be promptly reported to the Organization’s (i) chief executive officer, (ii) officer with primary responsibility for the Organization’s compliance function, or (iii) officer designated with primary responsibility for overseeing the administration, monitoring, and compliance with this policy. Exceptions and violations must be reported to the board of directors no less frequently than annually, or more frequently as the nature and severity of violation may warrant. All employees, officers, and directors of the Organization must adhere to this policy and will be held accountable for compliance.
Any employee or officer who violates this policy may be subject to disciplinary action up to and including termination of employment. Any employee or officer that is aware of any circumstance that may indicate a violation of this policy is required to report such circumstance to their supervisor or the Organization’s principal compliance officer or compliance group. The Organization prohibits retaliation against any employee or officer for making a good faith report of actual or suspected violations of this policy. A finding of retaliation against any such employee or officer may result in disciplinary action up to and including termination. Failure to promptly report known violations by others may also be deemed a violation of the Organization’s code of conduct.
Employees and officers may ask questions, raise concerns, or report instances of non-compliance with this policy by contacting the following:
James Ryu, SVP/COO or Frank J. Gleeson, SVP/CFO.
On an annual basis, the Organization will deliver to the Department of the Treasury a certification, executed by two senior executive officers (one of which must be either the Organization’s Chief executive officer or Chief financial officer) certifying that (i) the Organization is in compliance with this policy and (ii) the approval of any expenditure requiring the prior approval of any senior executive officer, any executive officer of a substantially similar level of responsibility, or the board of directors (or a committee of such board), was properly obtained with respect to each such expenditure.