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Excessive Expenditures Policy.

Community Trust Financial Corporation
Excessive Expenditures Policy

Dated: August 31, 2009


As a participant in the Capital Purchase Program (the “CPP”) being administered by the United States Department of the Treasury (“Treasury”), Community Trust Financial Corporation (“CTFC”) 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 Federal Reserve Bank and the text of this Policy will be posted on CTFC’s subsidiary financial institutions’ website, Community Trust Bank [ctbonline.com]. Moreover, CTFC 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 CTFC will provide the amended policy to Treasury and the Federal Reserve Bank and will post the amended policy on Community Trust Banks’ Internet website.

I. INTRODUCTION

It is the overall policy of CTFC 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 CTFC or its subsidiaries business operations: 

-Entertainment or events; 
-Office and facility renovations; 
-Aviation or other transportation services; and 
-Other similar items, activities, or events for which CTFC or its subsidiaries 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 CTFC or its subsidiaries.

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 $50,000.00 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 $100,000.00 per item, activity, or event in which one or more employees participate in the item, activity or event; 
- Office or facility renovations, where the expenditure amount or the annual depreciation charge, exceeds $10,000.00 per employee directly associated with the renovation and considered a resulting beneficiary of the expenditure. 
- Aviation services, where the expenditure amount exceeds $30,000.00 per individual aviation transportation event or per employee associated with the individual aviation transportation event. 
-Other transportation services, where the expenditure amount exceeds $30,000.00 per individual transportation event or per employee associated with the individual transportation 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, where the expenditure amount exceeds $25,000.00 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 $50,000.00 per item, activity, or event in which one or more employees participate in the item, activity or event; 
- Office or facility renovations, where the expenditure amount or the annual depreciation charge, exceeds $7,000.00 per employee directly associated with the renovation and considered a resulting beneficiary of the expenditure. 
-Aviation services, where the expenditure amount exceeds $15,000.00 per individual aviation transportation event or per employee associated with the individual aviation transportation event. 
-Other transportation services, where the expenditure amount exceeds $15,000.00 per individual transportation event or per employee associated with the individual transportation event.

IV. APPROVAL PROCEDURES

For expenditures requiring prior approval noted in Section III above, such prior approval may be obtained by submitting a written request to the Chief Executive Officer of CTFC. In the event the request is generated by the Chief Executive Officer, prior written approval must be obtained by any two of the following:

- Chairman – CTFC Audit Committee
- Chairman – CTFC Finance Committee
- Chairman – CTFC Board of Directors
- Chairman – CTFC Compensation Committee

In the event approval is required under the provisions of this Section, the CEO of CTFC will prepare a written report describing the request, and the circumstances surrounding the request, for review and approval by the full Board of Directors of CTFC at its next regularly scheduled monthly meeting following the request.

V. CEO AND CFO CERTIFICATION OF CERTAIN APPROVALS

With respect to each expenditure requiring the prior approval of (i) any SEO (defined as the CEO; the CFO; the three most highly compensated executive officers other than the CEO and CFO who were serving as executive officers at the end of the last completed fiscal year; and up to two additional individuals who would qualify but for the fact that the individual was not serving as an executive officer at the end of the last completed fiscal year), (ii) any executive officer of a substantially similar level of responsibility, or (iii) CTFC’s Board of Directors (or a committee of the Board), 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 CTFC or its subsidiaries 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