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Excessive Expenditure Policy

The First Bancshares, Inc.
Excessive Expenditures Policy

Approved by Board: June 17, 2010

As a participant in the Capital Purchase Program (the “CPP”) being administered by the United States Department of the Treasury (“Treasury”), The First Bancshares, Inc. is adopting this Excessive Expenditures Policy (this “Policy”) pursuant to the requirements of the American Recovery and Reinvestment Act of 2009, as implemented by the Interim Final Rule published June 15, 2009, by Treasury. Once this Policy has been adopted, a copy of this Policy will be provided to Treasury and the Office of the Comptroller of Currency and the text of this Policy will be posted on The First, A National Banking Association’s internet website. Moreover, The First Bancshares, Inc. will maintain this Policy during the remainder of its CPP participation, and, in the event the Board of Directors adopts any material amendment to this Policy, within 90 days of such amendment The First Bancshares, Inc. will provide the amended policy to Treasury and the Office of the Comptroller of Currency and will post the amended policy on The First, A National Banking Association’s internet website.

I. INTRODUCTION

It is the overall policy of The First Bancshares, Inc. to prohibit 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 First Bancshares, Inc. or The First, A National Banking Association’s business operations:

  • Entertainment or events;
  • Office and facility renovations;
  • Aviation or other transportation services; and
  • Other similar items, activities, or events for which The First Bancshares, Inc. or The First, A National Banking Association may reasonably anticipate incurring expenses, or reimbursing an employee for incurring expenses.

This Policy is not intended to apply to bona fide business development or marketing expenditures, provided that the expenditure in question does not involve the conferring of a significant benefit on any employee or group of employees of The First Bancshares, Inc. or The First, A National Banking Association.

The following policies and procedures shall govern such expenditures.

II. PROHIBITED EXPENDITURES

The following types or categories of expenditures are prohibited:

  • Entertainment, where the expenditure amount exceeds $25,000 per item, activity, or event or per employee receiving the item or participating in the activity or event;
  • Events or sponsorship of events, where the expenditure amount exceeds $25,000 per item, activity, or event or per employee receiving the item or participating in the activity or event;
  • Office or facility renovations (excludes construction of new banking facility), where the expenditure amount exceeds $250,000 per item, activity, or event or per employee receiving the item or participating in the activity or event;
  • Aviation services, where the expenditure amount exceeds $1,500 per item, activity, or event or per employee receiving the item or participating in the activity or event;
  • Other transportation services, where the expenditure amount exceeds $1,500 per item, activity, or event or per employee receiving the item or participating in the activity or event.

III. EXPENDITURES REQUIRING PRIOR APPROVAL

The following types or categories of expenditures require prior approval (in accordance with the procedures described in part III below):

  • Entertainment, including football box and baseball suite related expenditures that are non-contractual, where the expenditure amount exceeds $500 per item, activity, or event or per employee receiving the item or participating in the activity or event;
  • Events or sponsorship of events, where the expenditure amount exceeds $500 per item, activity, or event or per employee receiving the item or participating in the activity or event;
  • Office or facility renovations, where the expenditure amount exceeds $10,000 per item, activity, or event or per employee receiving the item or participating in the activity or event;
  • Aviation services, where the expenditure amount exceeds $1,000 per item, activity, or event or per employee receiving the item or participating in the activity or event;
  • Other transportation services, where the expenditure amount exceeds $1,000 per item, activity, or event or per employee receiving the item or participating in the activity or event.

IV. APPROVAL PROCEDURES

For expenditures requiring prior approval, such prior approval may be obtained by submitting a written request to the following person(s):

  • Where the amount of the proposed expenditure is greater than to $500 but less than $20,000, the written request must be approved by an appropriate superior holding the office of CFO or higher with The First Bancshares, Inc. or The First, A National Banking Association, as applicable.
  • Where the amount of the proposed expenditure is greater than or equal to $20,000, the written request must be approved by the Board of Directors of The First Bancshares, Inc. or The First, A National Banking Association, as applicable.

V. CEO AND CFO CERTIFICATION OF CERTAIN APPROVALS

With respect to each expenditure requiring prior approval, the CEO and the CFO will both certify in writing that the approval of such expenditure was properly obtained.

VI. PROMPT REPORTING OF, AND ACCOUNTABILITY FOR, VIOLATIONS

If any employee of The First Bancshares, Inc. or The First, A National Banking Association becomes aware of a violation of this Policy, he or she must promptly report the violation to the Auditor.  Upon receiving such a report, the Auditor must then conduct a discreet investigation, preliminary in nature, of the facts and circumstances giving rise to the allegation.  If, after an appropriate investigation, the Auditor concludes there is a substantial likelihood that a violation has occurred, then the Auditor must submit to the Audit Committee of the Board of Directors a written report describing (i) the alleged violation, (ii) the Auditor’s preliminary investigation into the allegation, and (iii) the reasons for the Auditor’s conclusion that there is a substantial likelihood that a violation of this Policy has occurred.  Upon receiving this written report, the Audit Committee will conduct a full inquiry into the facts and circumstances giving rise to the allegation.

If, after conducting a full inquiry into the facts and circumstances giving rise to the allegation, the Audit Committee determines that a violation of this Policy has occurred, the offending employee must be appropriately held accountable for the violation, in accordance with existing disciplinary policy.

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