SECURITY BANCSHARES, INC.
SECURITY BANK OF PULASKI COUNTY, INC.

EXCESSIVE OR LUXURY EXPENDITURE POLICY
Adopted – September 10, 2009

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. Treasury.

Security Bancshares, Inc. and Security Bank of Pulaski County, Inc., 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.

Renovations:

Renovations of facilities and office spaces should be relative to the approved project and current profit plan of the Company. An exception to this can be allowed if management must deal with an emergency, such as an act of nature, and the expenditure is necessary to make the facility operational for customer use. At no time should renovations be done that would have the appearance of being extraordinary, or excessive from a shareholder perspective.

Entertainment:

Entertainment is defined as an activity that an Employee or Executive would use corporate funds for business development purposes relating to a current customer or prospective customer, or to further enhance the Company’s marketing efforts.

Our policy is that all expenses incurred to the Bank should be for Company purposes and used to drive business to the Bank. Occasional events such as taking customers or prospects on trips, playing golf, eating dinner, or taking them to other events the customer/prospect would find pleasurable is a necessary part of the Company’s marketing efforts and is not deemed as “luxury” or a violation of this Policy. These expenses should be documented and detailed as to the benefit derived by the Bank through the normal accounts payable process.

Legitimate expenditures for entertainment and events may include, but are not limited to, the following:

• Investor relations trips, conferences and meetings.
• Annual shareholders meetings.
• Board of directors’ meetings, both on and offsite.

Management or employee meetings called by appropriate Company personnel for legitimate business purposes

• Conferences, schools, or other professional development activities.
• Training and staff development meetings to improve participants’ skills and/or their familiarity with the Company’s products or services, procedures and policies, and corporate values.
• Employee recognition programs to motivate and reward employees for achievement and/or productivity.
• Customer meetings or Company sponsored event to offer the Company’s products or services, obtain feedback, show appreciation to customers or for other legitimate business purposes.
• Company sponsored events, typically within local markets, that advance charitable or civic purposes where the Company can enhance its public image while supporting the local community and fulfilling its obligation for good corporate citizenship.
• Employee meetings as a result of Company mergers and/or acquisitions.

All such expenditures must be for legitimate business purposes and reasonable in nature and amount.

All entertainment and/or event expenses shall be properly documented. The more substantial the expenditure, the more thorough the documentation required. All expenditures above $5,000 shall be supported by a written proposal identifying the specific business purpose or purposes and the anticipated benefits to the Company, which written proposal shall be submitted to the board of directors for approval before such expenditure is incurred. Any entertainment and/or event expense that does not serve a legitimate business purpose or is not reasonable in nature and amount shall not be approved under any circumstance.

Conferences:

We encourage our staff to attend conferences that are appropriate educational opportunities. These conferences must 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. Additional travel expenses incurred on behalf of a spouse or other non-staff will be at the expense of the staff member. Typically, these conferences are sponsored by vendors, banking associations, or other industry related entities.

Employee Recognition/Holiday Parties:

We feel that employee recognition/holiday parties are part of an employee appreciation process. These events should be local in geographic nature and may not cost the Bank more than an average day’s payroll per employee, on average. (Example: If the payroll is $5.5m annually divided by 260 days, equals $21k in expense available for an appropriate holiday party.)

Board/Management Retreats:

Retreats shall only be used for educational or business planning 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 a retreat that is focused on strategic planning or education.

Aviation Services and Other Transportation Services:

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. Modes of transportation to be used may consist of vehicle, commercial air or rail service. The selection of transportation services will factor in cost, efficiency and timeliness of travel. Private air services are not allowed without the approval of the Board of Directors.

Other Activities or Events:

Other similar items, activities or events for which the Company may incur expenses, or reimburse an employee for incurring expenses, which are not specifically addressed elsewhere in this policy (e.g. performance incentives) shall be for legitimate business purposes and reasonable in nature and amount.

• Generally, the Company does not grant performance incentives in the form of travel or entertainment. However, if granted, such performance incentives must not encourage or promote excessive or unnecessary risk-taking or manipulation of financial results. Any performance incentive granted in the form of travel or entertainment must be approved by the CEO or the CFO.
• All meetings or events attended by senior executives (as defined by applicable Treasury Department guidelines) and/or board members shall be devoted to specific business purposes and well-documented. Participating senior executives and board members shall be responsible for any expenses incurred for non-business-related activities and shall promptly reimburse Company for any such expenses if paid by Company.

Administration:

The CFO is responsible for the day-to-day administration of this Policy, and the CEO is accountable for overall adherence to this Policy and must approve any exceptions. Strict adherence to this Policy in mandated for all Company employees. Violations of this Policy shall be promptly reported to the Board of Directors. Violations of the policy will result in action being taken appropriate to the violation of this policy such as counseling, reprimand, reimbursement to the bank or termination of employment. Following any approval of private air services by the Chairman, the CFO and the CEO shall certify that such approval was obtained, and such certification shall be maintained in the Company’s corporate records.

This Policy, and any amendments hereto, shall be posted on the Company’s Internet website and provided to the U.S. Department of the Treasury and FDIC.