First American International Corp. and subsidiaries
Luxury Expenditure Policy
This Policy applies to all employees and directors of First American International Bank (“FAIB”), First American International Corp. (“FAIC”) and all other consolidated subsidiaries of them (collectively, “First American”).
It is the policy of First American that its employees and directors are prohibited from (a) incurring any excessive or luxury expenditures on behalf of First American or (b) from being reimbursed by First American for such expenditures. Excessive or luxury expenditures include all expenses that exceed the prudent and reasonable amounts necessary to further the corporate purposes and operations of First American or that otherwise exceed the guidelines in this Policy.
Major categories of expenses covered by this Policy
Although all excess or luxury expenditures, as defined above, are prohibited under this Policy unless specifically approved, the following major categories of expenses require special discussion and special consideration:
- Entertainment and Related Expenses;
- Office or Facility Renovations;
- Travel and Related Expenses; and
- Automobiles Provided or Subsidized.
Reasonable expenditures may be incurred for business related activities, events and purposes, including, without limitation, legitimate travel and meeting related costs for attendance at conferences and meetings in appropriate locations for professional development, education, training, familiarization with First American’s products and services, and/or networking and best practice sharing across banking related industries; however, such expenditures must conform with this Policy and all other applicable First American policies and procedures.
Entertainment and Related Expenses
All expenditures for entertainment, including, without limitation, tickets to entertainment events and outside meals, must have a legitimate business purpose. Requests for reimbursement for such expenditures must be justified and supported by documentation in accordance with applicable policies and procedures. First American funds may be used for entertainment if there are valid business development purposes relating to current customers, prospective customers or First American’s local community. The purpose must be to further enhance First American’s business or marketing efforts or FAIB’s mission as a Community Development Financial Institution.
All such expenses must be reasonable. A necessary part of the Bank's marketing efforts may include the provision of day trips, golfing opportunities, dinner engagements, sporting and cultural events. Such activities are not deemed to be a violation of this Policy. These expenses should be documented and detailed as to the benefit derived by First American.
Employee holiday parties are part of the employee appreciation process. Holiday parties should be local in geographic nature. Costs should be reasonable and prudent and generally in accordance with past practice, which the Board of Directors has found acceptable.
Office or Facility Renovations
Employees’ offices, including executive offices, shall be appropriate for the employee’s position but not ostentatious in size, furnishings or decoration. Materials used to construct or renovate personal offices and other limited use space shall be selected on the basis of quality, appearance, cost and durability, avoiding opulence. Renovations of facilities and office space should be within the approved capital expenditure budget of the Bank. No renovations shall be done that are or have the appearance of being extraordinarily expensive or excessive from a shareholder perspective.
Travel and Related Expenses
Air travel on First American business shall be by coach class commercial airline, except for upgrades available through the use of the passenger’s personal mileage upgrades at no additional cost to First American.
Air travel by directors who live outside the New York metropolitan area to attend Board and Committee meetings will be subject to these reimbursement rules.
Meals, ground transportation, overnight hotel expenses and other expenses should be reasonable given such considerations as location, cost, availability, business conducted, and other appropriate factors.
Rental cars when travelling for First American business shall be limited to standard-sized vehicles, unless larger vehicles are required to accommodate the number of passengers. Renting luxury or exotic vehicles is prohibited.
Automobiles Provided or Subsidized
Any vehicle provided by First American for use by an officer shall be reasonable in type to the position of the officer and shall be approved by the Board of Directors or its Compensation and Board Development Committee. Lump sum payments in lieu of providing a vehicle shall be subject to the advance approval of the Board of Directors.
First American will generally not reimburse employees, officers and directors for the travel, hotel, attendance or meal costs of spouses or other family members. In rare cases when attendance by a family member is appropriate, such as may be the case when entertaining a client and his or her spouse, First American may reimburse reasonable family expenses if approved in advance by the President or the CFO. Directors should obtain approval of family expense reimbursement from the Chairman of the Board or the Chairman of the Compensation and Board Development Committee.
Any expenditure, whether or not specifically within any of the categories set forth above, that is unreasonably high under the circumstances shall be considered extravagant. No employee or director shall engage in extravagant spending. Violations of this Policy may subject to violator to disciplinary action. In addition to other discipline, violators may be required to reimburse First American for any improper expense.
Procedures for Expenses Requiring Prior Approval or Otherwise as Exceptions to Policy
Expenses requiring advance approval under this Policy, or expenses that are allowed only as an exception to this Policy, must be approved in advance by the President or his designee. A written request for prior approval, including a description of its business purpose, should be submitted to the President. The President will then determine whether to approve the proposed expense as in the best interests of First American. Prior approval requests by the President or directors shall be submitted to the Chairman of the Board for approval.
The Chief Financial Officer or his designee will present a semi-annual report of all such specially approved expense to the Board of Directors. The report will state the amount of each expense and the reason it was incurred.
The President and the Chief Financial Officer shall certify that the approval of any expenditure requiring prior approval under this Policy was properly obtained with respect to each such expenditure.
Reporting of Suspected Violations
Suspected violations of this Policy should be reported to the President, the Chief Financial Officer or the Chairman of the Board. The matter will then be referred to the Compensation and Board Development Committee of the Board for consideration. The Compensation and Board Development Committee should then recommend to the Board what action should be taken, if any, in response to the alleged violation.
Appropriate Reporting and Approval Authority
All references to officers, the Board of Directors or any committee having authority under this Policy shall be deemed to refer to the officers, the Board of Directors or committee of either FAIB or FAIC, as applicable, depending upon which of those two entities is incurring the expense. The appropriate person or representative of FAIC shall have authority with respect to its nonbanking subsidiaries of FAIC and FAIB shall have authority with respect to FAIB’s subsidiaries.
Publication of Policy
Upon approval by the Board of Directors, a copy of this Policy, will be promptly submitted to Treasury, the Bank or Corporation primary regulator and will be posted on the Bank’s website. If this Policy is amended, a copy of the revised Board approved Policy will be promptly submitted to Treasury, the Bank or Corporation primary regulator and the Bank’s website will be updated to reflect such amendments. Note that the Corporation does not maintain a separate website.
This Policy will remain in effect so long as Treasury maintains an investment in FAIC pursuant to the Community Development Capital Initiative (“CDCI”). When FAIC repays in full all funds received from Treasury under the CDCI program and is no longer subject to the CDCI luxury expense policy requirements, then this Policy will terminate and will no longer be in force, unless the Board of Directors determines, in its sole discretion to continue this Policy.
This Policy was formally approved and adopted as of July 24, 2014 by the Bank’s and Corporation Board of Directors.