Corporate Governance
The board of directors of Patriot Bank have adopted corporate governance practices designed to promote the effective functioning of the boards, their committees, and the Company. The Company expects and requires that its directors, officers, and employees observe absolute integrity in the conduct of its business.

The Company's corporate governance practices exceed all regulatory requirements and highlights of our practices include the following:

• All directors of the Company and the Bank other than the Chairman and the Chief Executive Officer are independent, as measured by the applicable standards and affirmatively determined by the boards. The new requirements demand only that a majority be independent.
• The Company and the Bank have a strict and detailed Code of Conduct and Ethics. All employees and directors are required to certify their compliance with the Code at the inception of their employment and each year thereafter.
• The Bank makes available a telephone based reporting system that assures the anonymity of the person making a report of an ethics or accounting irregularity. All personnel are encouraged to utilize the system in reporting concerns about questionable accounting or auditing matters, fraud, violations of the Code of Conduct and Ethics, or other violations of law.
• The Internal Audit Department of the Bank monitors our compliance with appropriate banking and accounting practices and reports directly to the independent Audit Committee of the Company board.

Excessive or Luxury Expenditure Policy
September 14, 2009

This policy is designed to fulfill certain requirements under the under the American Recovery and Reinvestment Act of 2009 ("ARRA") enacted February 17, 2009 related to expenditures, ARRA requires each recipient of funds under the U.S. Treasury's Capital Purchase Program ("CPP") to put in place a company-wide policy regarding excessive or luxury expenditures. Therefore, as a participant in the CPP, Patriot Bancshares, Inc. (the "Company") is required to establish an excessive or luxury expenditure policy.

General Policy Statement:
It is the policy of the Company that all employees and directors of the Company are prohibited from making any excessive or luxury expenditures. The term "excessive or luxury expenditures" is defined as excessive expenditures on entertainment or events, office and facility renovations, aviation or other transportation services, as well as other similar items, activities or events. Reasonable expenses may be incurred for items, activities and events including, but not limited to, legitimate travel expenses, professional and staff development, training, education, networking and other similar purposes conducted in the normal course of business operations. However, such expenditures must be business-related, and taken with the goal of contributing to the Company's stability, advancement, and positioning for long-term growth. The overall control for expenditures will be conducted through the Company's annual budgeting and planning process and accounts payable approval process.

Entertainment and Events:
Entertainment is defined as any activity financed through the use of corporate resources for business development of current or prospective customers or to enhance the Company's marketing efforts. All expenses incurred by the Company should be for business purposes and must not be extravagant. These entertainment expenses must be the result of efforts to attract business to the Company and to increase its overall value. Any such expenditure should be supported by documentation.

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, however, the costs for the spouse would not be paid by the Company. Typically these conferences are sponsored by vendors, banking associations, or other industry related entities.

Office and Facility Renovations:
Renovations to employee's offices, must be appropriate for the employee's position, but may not be grandiose in size, furnishing or decoration. The materials selected to be used for such renovations must be selected with consideration to its cost, quality, appearance, and durability. Additionally, the concept of grandiose renovations should be considered from the shareholder's perspective. An exception for necessity to this limitation can be allowed if the Company must address an emergency situation, such as an act of nature, and the expenditure is required to ensure the facility is operational and available for employee and customer use.

Aviation or Other Transportation Services:
Transportation for Company or Bank staff to outlying locations, including bank locations, conferences, and business development purposes, 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. Expenditures for the use of an automobile by the Bank's officers must be reasonable. Additionally, whenever multiple Company employees are traveling together, every effort to share vehicles and carpool should be made.

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. However, any such events should be reasonable in cost.

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 would include costs for such things as service awards and nominal door prizes. Any employee recognition or holiday event should be reasonable in cost.

Other Items, Activities or Events:
Any other similar items, activities, purposes, or events for which the Company may incur expenses, or reimburse an employee for incurring expenses, which are not specifically addressed in this policy, must be reasonable in nature and amount and for a legitimate business purpose.

Required Reporting and Accountability:
The Board of Directors is required by the TARP Standards for Compensation and Corporate Governance as defined by the Department of the Treasure (31 CFR Part 30) to adopt a policy regarding excessive and luxury expenditures. The Board has oversight responsibility for the Company's compliance with requirements of TARP Standards for Compensation and Corporate Governance as defined by the Department of the Treasury (31 CFR Part 30). The Board of Directors must review and approve this Policy on an annual basis, or, in the event of subsequent amendments to the TARP Standards for Compensation and Corporate Governance as defined by the Department of the Treasury (31 CFR Part30), in such time frame required by the amendment. The Board of Directors must ensure that the Chief Executive Officer and Chief Financial Officer have complied with the certification requests as it relates to this Policy.

At least annually, the Chief Executive Officer and Chief Financial Officer must certify to the Audit Committee of the Company's Board of Directors that the approval of any expenditure under this policy requiring the prior approval of an executive officer was properly obtained, and that the Company has maintained compliance with this policy.

Any employee of the Company that becomes aware of a violation of, or deviation from, this policy is required to promptly report in writing such violation to the Chairperson of the Company's Audit Committee. The Company's full adherence to this policy shall be monitored by the Company's Chief Financial Officer. Any violation of this policy will subject an employee to discipline up to and including termination.

Policy Compliance:
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. The CEO and CFO will annually review this policy and certify compliance. Strict adherence to this Policy is mandated for all Patriot Bank employees and directors. Violations of this Policy shall be promptly reported to the Audit Committee and all such violations shall be reported to the Board of Directors at its next subsequent meeting. Violations of this Policy may result in disciplinary action against those accountable for policy adherence, up to and including termination of employment. Any expenditures outside the guidelines outlined herein, must be approved in advance by the CEO.