Western Illinois Bancshares Inc.

Excessive & Luxury Expenditure Policy

The Board of Directors and Executive Management of Western Illinois Bancshares Inc., (“the Company”) and its subsidiaries’, are committed to complying fully with the requirements of the TARP (Troubled Asset Relief Program) Standards for Compensation and Corporate Governance as defined by the Department of the Treasury pursuant to requirements set forth in the Emergency Economic Stabilization Act of 2008 (“EESA”), as amended by the American Recovery and Reinvestment Act of 2009 (“ARRA”) during the period that the Company participates in the TARP Capital Purchase Program.

The objective of this policy is to fulfill the Company’s requirement pursuant to the TARP Standards for Compensation and Corporate Governance to have in place a company-wide policy regarding excessive or luxury expenditures as defined by the Department of the Treasury pursuant to EESA and ARRA.

The Board of Directors is required by the TARP Standards for Compensation and Corporate Governance to adopt a policy regarding excessive and luxury expenditures. The Board has oversight responsibility for the Company’s compliance with the requirements of TARP Standards for Compensation and Corporate Governance as defined by the Department of the Treasury. In support of its oversight responsibilities, the Board shall have the following roles:

· The Board 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, in such time frame required by the amendment.

· The Board shall review any exceptions to this policy at the next regularly scheduled meeting subsequent to the granting of the exception.

Executive management is responsible for the effective implementation of this policy. To that end, executive management shall have the following roles:

· Monitor of all expenditures addressed by this policy to ensure compliance with this policy.

· Document and justify any exceptions to this policy and report exceptions to the Board.

· Promptly recommend modifications of this policy to the Board to ensure it remains compliant with the TARP Standards for Compensation and Corporate Governance as defined by the Department of the Treasury as it may be amended.

· Ensure that this policy is posted on the Company’s website.

It is the policy of the Company that excessive or luxury expenditures on office and facility renovations, entertainment or events, conferences, holiday parties, director education, and aviation or other transportation services, and other similar items, activities or events for which the Company may reasonably anticipate incurring expenses or reimbursing an employee for incurring expenses are prohibited to the extent that such expenditures are not reasonable expenditures for staff development, reasonable performance incentives, or other similar reasonable measures conducted in the normal course of business.

Renovations: Renovations of facilities and office spaces should be relative to the approved annual budget. 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 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 associate would use corporate funds for business development purposes relating to a current customer(s) or prospective customer(s) or to further enhance the Bank’s marketing efforts. Our expectation is that all expenses incurred to the Bank would be for company purposes and used to drive business to the Bank.

Conferences: The Company values growth and development of our employees and provide them with appropriate educational opportunities, including conferences. These conferences should be related to the financial services industry and have a direct correlation to their job. Typically these conferences are sponsored by vendors, banking associations, or other industry related entities.

Holiday Parties: Holiday parties are part of an employee appreciation process. These events should be local in geographic nature, and costs should be in line with the approved annual budget.

Director Education: 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.

Aviation Services: Transportation for associates, including conferences and business development purposes should be conducted in the most cost appropriate way for the Bank. The employee will provide the Accounting Department, when appropriate; an analysis of trips to determine which mode of transportation is the most appropriate for the Bank. Modes of transportation to be used for the analysis, for example, may consist of vehicle and commercial air service. A determination of transportation analysis will factor in cost, efficiency, and timeliness of travel.

POLICY APPROVED ON 8/23/09

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