Luxury Expenditure Policy

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 Troubled Assets Relief Program (TARP) 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.

Carrollton Bank (Company) and its subsidiaries, prohibit excessive or luxury expenditures on entertainment and events, office or facility renovations, 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 Carrollton Bank.

Travel Expenses

Transportation for Company 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. The accounting department will maintain, when appropriate, an analysis of trips to determine which mode of transportation is the most appropriate for the Company and its Shareholders. Modes of transportation to be used for the analysis, for example may consist of vehicle, train, commercial air service and private air service. A determination of transportation analysis will factor in cost, efficiency and timeliness of travel.

• Procedure for Reimbursement. All travel related expenses incurred by a director in the ordinary course of business shall be submitted to the Chief Financial Officer (CFO) (“Policy Officer”) on an employee expense report. The Policy Officer will be responsible for making sure all documentation is appropriately completed and will submit all approved expenses to Accounts Payable for reimbursement.
  
  All travel related expenses incurred by an employee (“employee” refers to all employees including corporate officers) in the ordinary course of business shall be submitted by the employee on an employee expense report and approved by such employee’s supervisor before being submitted to Accounts Payable for reimbursement. Reimbursement requests by the Chief Executive Officer (“CEO”) must be approved by the Chairman of the Audit Committee or his designee.
  
  Any travel expenditures that are not covered by the foregoing provisions must be approved in writing by the Chairman of the Audit Committee or his designee (if requested by a director or the CEO) or the employee’s supervisor (if requested by an employee) prior to being incurred.
  
  
• Automobile and Mileage Related Expense. The standard rate for mileage reimbursement for directors and employees using their personal vehicles for business purposes is the IRS guideline in effect at the time of travel. Mileage should be tracked from the beginning point of travel (home or office) to the point of destination for business of the Bank less the employee’s normal commute miles. Directors and employees will be reimbursed for parking and tolls when these expenses are required in the course of business related travel.
  
  The CEO and certain senior executives are provided a Company car for their use. Personal use of the vehicle is calculated and added to the employee’s W-2 wages (a non-cash entry).
   
• Lodging. Employees and directors are encouraged to avoid overnight stays when one way travel time for a one day meeting is two hours or less. Exceptions are conferences, group meetings, etc. that have been previously approved by the employee’s supervisor or the CEO. When possible, all lodging should be booked through the appropriate personnel with knowledge of any corporate rates or discounts the Bank has negotiated with selected hotels. Expenses such as spas, fitness facilities, in-room movies, laundry and dry cleaning services, etc., must be paid personally by the employee or director and will not be reimbursed by the Bank.
   
• Meals. The Bank will reimburse directors and employees for reasonable meal expenses
  that are incurred during business related travel. The maximum reimbursement for meals is $60 per day when incurred during out-of-town business travel that includes overnight lodging. The maximum reimbursement for meals per day when an overnight stay does not occur is $35. Receipts will be required on meals of $25 or more. The cost of alcoholic drinks will not be reimbursed.
  
  
• Commercial Airlines and Trains. Use of commercial airlines and trains must be approved by the Chairman of the Audit Committee or his designee, the CEO or the employee’s supervisor, as applicable. All plane fares and reservations should be booked through the appropriate personnel in order to obtain the lowest reasonable rate.
   
• Rental Cars. The use of rental cars for business purposes may be necessary under certain circumstances. Reservations for car rentals should be made through the appropriate personnel in order to obtain the lowest reasonable rate.
   
• Taxi. Taxi fares will be reimbursed if incurred during the normal course of business. Receipts should be submitted on a personal expense voucher.
   
• Charter Aircraft. The Company does not charter aircraft. If a charter aircraft would be required, the employee or director must obtain the express consent of the Chairman of the Audit Committee or his designee prior to chartering the aircraft.
   
• Spouse/Travel Expenses. The Bank does not pay the expenses of a spouse, a guest or a family member accompanying a director or employee who is attending Bank related functions unless the attendance is required or expected (this would normally include only conventions and other major social events.) Reimbursement of these expenses must be requested and approved prior to the convention or event by the Chairman of the Audit Committee or his designee, the CEO or the employee’s supervisor, as applicable.

Events and Entertainment

All proposed meetings and events organized by the Bank must serve one or more legitimate
business purposes. Each proposed meeting or event with a cost exceeding $5,000 must be supported by a written business case identifying the specific business purpose and approved by the CEO (if an employee or senior executive officer meeting or event) or the Chairman of the Audit Committee or his designee (if a director or CEO meeting or event).

Customer Entertainment:

We typically participate in events with customers or prospects in playing golf, eating dinner, or taking them to other events. These are considered a necessary part of the Company’s marketing efforts. Events and Parties focused on Customers for the purpose of attracting their business would not fall under this policy. These expenses are documented and detailed as to the benefit derived by the Bank.

If a guest or customer is being entertained, the individual’s name, affiliation, place of meeting
or entertainment, and business reason for the entertainment must be included on the personal expense voucher that is submitted for reimbursement.

Employee Entertainment:

The CEO may establish reasonable entertainment allowances for employees, and the Board may
establish such an allowance for the CEO. In the absence of such an allowance, all reimbursements for employee entertainment expenses exceeding $1,000 must be approved by the CEO, and CEO entertainment expenses exceeding $2,000 must be approved by the Chairman of the Audit Committee or his designee.

Conferences:

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. At times it may be appropriate that a spouse would travel to these conferences with Company attendees. 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 Company or other vendors as a violation of this policy if the purpose is meant to be a reward and has no educational value to the employee or executive.

Holiday Parties:

The Company does not typically have holiday parties. However, we feel that holiday parties could be part of an employee appreciation process. Our holiday parties would not cost the Company more than an average day’s payroll per employee, on average.

Board Retreats:

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.

Other Activities

All other activities or events that are not reasonable expenditures for staff development, performance incentives in accordance with written plans and policies or other similar expenditures incurred in the normal course of business must be approved by the CEO and the Board.

Renovations:

Renovations of facilities and office spaces should be relative to the approved current year capital expenditures budget, and tracked within the capital expenditure policy of the Company. 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 operation for customer use.
At no time should renovations be done that would have the appearance of being extraordinary, or excessive from a shareholder perspective. All proposed office and facility capital improvements and/or renovations with a cost exceeding $25,000 must be approved in writing by the CEO prior to the commencement of any such activities. Such proposed expenditures by the CEO, if not in the current year capital expenditures budget, must be approved by the Facilities Committee of the Board.

Reporting of Violations

Any individual who violates this Policy, or knows of any such violation by any other individual, must report the violation immediately to such individual’s supervisor who shall then report the violation to the CEO or to the Chairman of the Audit Committee (if an alleged CEO violation). Any employee or director who engages in extravagant spending shall be subject to discipline up to and including termination of employment or removal from or omission of nomination to the Board.

Certification

The CEO and the Chief Financial Officer of the Bank shall certify to the Board at least annually that the provisions of this Policy are being enforced and are sufficient to provide reasonable assurance that the Bank’s expenditures for such purposes are not excessive