HomeTown Bank (Bank) requires that each officer, employee, and director (OED) of the Bank meet special, high standards of integrity and ethical conduct. Most are common-sense rules. Some are mandated by law. Each is extremely important and should be reviewed regularly. The following are general guidelines. This policy does not cover every issue that may arise, but it does set out basic principles to guide all directors, officers, and employees of the Bank. If you have a question regarding a specific proposed transaction, discuss it first with senior management.
The purpose of this policy is to:
- Promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships.
- Advocate full, fair, accurate, timely, and understandable disclosure in periodic reports required to be filed by bank personnel.
- Advocate compliance with applicable laws, governmental rules, and regulations.
- Advocate the prompt internal reporting of violations of the Code to an appropriate person or the employee hotline.
- Advocate accountability for adherence to this policy.
Each (OED) of the Bank is expected to maintain the highest ethical standards in dealing with customers, other officers, and employees, as well as the general public. When in doubt, ask yourself this simple question, "Would I be embarrassed to read of my actions on the front page of the local daily paper?"
Remember that this Bank is required by the Federal Deposit Insurance Act to consider ineligible for employment or continued employment any individual who is convicted of an act constituting breach of trust or dishonesty (e.g., theft, fraud, or falsification of Bank records). In addition, the Bank will consider ineligible for continued employment, any individual who fails to fulfill his or her legal and ethical duties and obligations. The Bank will thoroughly investigate the occurrence of any major infraction and discipline appropriately any responsible employee(s), up to and including termination.
Major infractions include, but are not limited to the following:
- Any action that renders an OED an unacceptable security risk, adversely affects the Bank's public image, or causes embarrassment to the Bank or its customers.
- Release of confidential information or use of confidential information for personal gain.
- Unauthorized possession, distribution, or use of any illegal narcotic.
- Inability to perform work due to consumption of alcohol or any other controlled chemical substance.
- Removing or borrowing Bank property without permission.
- Persistent financial irresponsibility.
- Willful failure to follow instructions; insubordination.
- Unauthorized possession of a weapon.
- Willful destruction or waste of property belonging to the Bank, fellow employees, or customers.
- Failure to report to work without proper notification to management or leaving the Bank without proper authority.
Each OED should maintain his or her personal finances in a prudent, business-like manner. Checking accounts for OEDs, are to be handled in a professional manner. No OED accounts may pay any rate higher than what is paid to the general public. Overdrafts are not permitted for executive officers or directors unless there is a prearranged, written, interest-bearing extension of credit plan for such overdrafts. An inadvertent overdraft to such insiders of up to $1,000.00 may be paid provided the executive officer or director repay it within five business days and the usual charges and fees are imposed.
The following activities are prohibited:
- Borrowing from other staff members.
- Borrowing from customers other than those that are lending institutions.
- Borrowing at preferential rates from our Bank because of your position (remember that all loans to executive officers, directors, and principal shareholders must be on the same terms and conditions as those offered to the general public).
In addition, employees should use Bank credit cards, expense account reimbursements, equipment, and supplies (including Bank letterhead) only for official Bank purposes.
OEDs have been and are encouraged to be active and involved participants in the community. Such activities should be limited by the person's own interest and reasonable time requirements. We believe that employment with the Bank is a fulltime career. Thus, your undivided interest and loyalty is important to the continued success of the Bank.
Thus, major outside commitments and employment with outside firms is permitted only if it:
- Will not interfere with work assignments or performance.
- Will not involve the possibility of adverse publicity to the Bank.
- Is not with a competitor, supplier, or customer.
- Does not imply sponsorship by the Bank.
- Does not involve serving as a director, officer, management, or consultant.
- Is approved in advance by the executive management team consisting of the CEO/President, Senior Executive Vice President (SEVP), and Executive Vice President/CFO (EVP/CFO).
The Bank, as a responsible citizen, encourages contribution to worthy charitable, social, and educational causes. However, due to the requirements of the working environment, employee contributions to political or charitable organizations may not be solicited on Bank premises nor during working hours without prior executive management approval. In addition, the Bank will not contribute money, property, or services to any government official, political party, or candidate, whether local, state, or federal. The Bank may not offer or allow the use of its facilities, equipment, or personnel in connection with any federal, state, or local election or campaign.
Customers expect-and deserve-confidentiality with regard to the information they provide to the Bank. Awareness of privacy has been heightened by disclosures under the Gramm-Leach- Bliley Act. Concerns about identity theft have been brought into sharp focus by the media. Thus, it is imperative that each OED and third-party vendor assures that customer information is appropriately protected.
Although federal law has focused on the consumer privacy, commercial customers are no less entitled to assurance that their information be kept confidential. This can include data obtained in the course of evaluating a loan application, servicing a loan, and other information, including financial data, personal information, business plans, forecasts, capabilities, intentions, contingencies, and timing of actions by individual and business clients of the Bank.
Under no circumstances will confidential information be used for one's own benefit or anyone else's personal benefit. To do so violates both regulatory statutes and the policy of this Bank. The general rule is that confidential information will not be divulged to any person outside the Bank, including a family member or associate of any OED.
No financial or other information regarding the Bank itself or any of its activities that could reasonably be expected to affect the Bank's position in the general community is to be relayed to any person not employed by the Bank. Information such as the price of any of the Bank's publicly held securities or any other Bank matter are not to be relayed to any person not an OED, until it has been published in reports to stockholders or otherwise made available to the general public in accordance with applicable disclosure regulations. Examination results, including CAMELS rating, will not be divulged except to the Bank's attorney and accounting firm/external auditors. In addition, you may not take advantage of special information, such as current earnings, proposed major reorganizations, or other transactions, that would significantly affect the value of the Bank's stock in either buying or selling Bank stock. If you are in doubt as to the propriety of your conduct, it is advisable to consult with your own attorney before entering into a stock transaction. Similarly, remember that you may not divulge such information to family, friends, business associates, or others.
Receipt of Gratuities
The following are intended to guide your conduct:
- Benefits of any value, including cash, that are clearly connected or unconnected with any transaction with the Bank may not be accepted from customers, suppliers, or prospective customers by OEDs.
- Gifts, services, or anything of value from customers, suppliers, or prospective customers shall not be solicited or accepted by any OED as a gift or condition in connection with any Bank transaction. Included in this category is the receipt of weekend hunting or fishing trips, scarce or expensive tickets to athletic or theatric events, or any other benefits that serve no demonstrable business purpose.
- You may receive the normal amenities that facilitate the discussion of Bank business, such as a business luncheon from a customer, supplier, or prospective customer. However, even these should be of nominal value.
- You may receive a gift, service, or other thing of value from a Bank customer, supplier, or prospective customer when that individual is a close family relative, such as a parent, child, spouse, grandparent, or grandchild, and such item relates to your relationship and not to a Bank product or service.
- You may receive a gift if it is edible and of nominal value, such as cookies or cupcakes, etc.
- You may not be named as a recipient of a bequest under a customer's will or as a personal representative of a customer's estate, or be listed as POD (payable on death) or executor of someone’s estate unless the customer is an immediate family member, and then it requires advance approval from the executive management team consisting of the CEO/President, SEVP, and EVP/CFO. Any other exception must be approved in advance by the same executive management team. Each employee must complete the form titled “Code of Ethics Annual Declaration of Personal Circumstances-Questionnaire” and disclose any accounts on which the employee is named POD (or any other type of beneficiary) other than their own personal accounts. The employee must also provide a list of all accounts on which they are an authorized signer that are not their own personal accounts. This declaration is to be completed annually. In addition, if at any time during the year the employee is added or deleted as a beneficiary or signatory on an account that is not their own, the employee must complete the “Addendum to Code of Ethics Annual Declaration of Personal Circumstances-Questionnaire” and provide the Bank with their current information. The form can be obtained from the Human Resource Officer.
- You may accept civic, charitable, educational, or religious organization awards for recognition of service and accomplishment. Such awards should be within the scope of normal awards within the community.
If you are offered or receive something of value from a customer outside the scope of what is authorized above, you must disclose that fact to the Bank's executive management team. The executive management team and Human Resource Officer will keep contemporaneous written reports of such disclosures.
Conflicts of Interest
Conflicts of interest between OEDs and customers of the Bank (or their related interests) shall always be avoided. In other words, you may not use your position, influence, confidential information, or company assets for your personal gain. Conflicts of interest include, but are not limited to, compensation from, directorships with, or investments in or with Bank customers or their related interests or the use of privileged information. No lending officer or employee should loan, review a loan, or make any decision regarding a loan of any customer, syndicate, or corporation in which he or she has a present or prospective financial interest. Other examples of interest include selling or leasing goods or services to the Bank without prior disclosure and approval from a majority of disinterested directors. In addition, the terms and condition of such transaction must be not less favorable than those offered to others. The following activities are prohibited:
- A direct or indirect financial interest, including joint ventures or directorship in or with a supplier, customer, or prospective customer without disclosure and approval by the C E O / President, SEVP, and EVP/CFO.
- Personal investment in a customer's or a supplier's business unless the stock is traded on a recognized stock exchange.
- Receiving preferential treatment from customers, suppliers, or prospective customers because of your position with the Bank.
- Receiving discounts on personal purchases from customers or suppliers because of business relationships with the Bank.
- Giving preferential treatment to a customer, supplier, or prospective customer because of any favor, gratuity, or outside business relationship with such customer, supplier, or prospective customer.
- An officer, employee, or director contemplating a transaction that does or mayinvolve a conflict of interest must obtain the prior approval of the President of the Bank.
Officers and directors owe a duty of loyalty to the Bank. If a business opportunity is presented to you that could be a reasonable business opportunity for the institution, your first duty is to report that opportunity to the executive management team consisting of the CEO/President, SEVP, and EVP/CFO. If the Bank does not choose to pursue the business opportunity, such decision should be appropriately documented in writing. At that time, you may pursue the opportunity yourself if it does not reflect poorly upon the Bank or interfere with your duties. No OED shall serve as a director of a board, except of a church or well- known non-profit organization, without the prior approval of executive management.
Penalties for Breach of Code of Ethics
For employees and officers, a breach of this policy shall be subject to sanctions depending on the severity of the breach. Sanctions for minor violations may involve a reprimand and notation in the employee's or officer's personnel file. Violations that are more serious may result in penalties ranging from a 90-day probationary period up to and including dismissal. Serious violations may result in suspension while further investigation is carried out. Any violation by a director shall be reported to the chairman of the board for appropriate action.
Compliance with this policy shall be reviewed by the Bank's internal auditor, who shall monitor for reporting, disclosure, and need for updating of the policy. In addition, the auditor or other appropriate person shall provide periodic training no less than annually for all employees, officers, and directors.
General Statement of Policy
It is the established policy of this Bank to expect from its OEDs their undivided loyalty and standards of behavior that are consistent with the highest ethical principles. Among other things, this means that each OED should avoid any investment, interest, association, or service that interferes, may interfere, or might be thought to interfere with the independent exercise of their judgment in the best interest of the Bank.
It is important to realize that the impartial judgment of even the most well-meaning person may tend to be swayed (or be believed by others to be swayed) if their personal economic interests, or those of their immediate family, are affected in any way by the business he or she transacts on behalf of the Bank. Therefore, the above examples, as well as other possible conflict situations, should be carefully considered not only with respect to the officer, director, or employee themself, but also with respect to any member of their immediate family.
The Bank requires directors, officers, and employees to observe high standards of business and personal ethics in the conduct of their duties and responsibilities. As employees and representatives of the Bank, we must practice honesty and integrity in fulfilling our responsibilities and comply with all applicable laws and regulations.Reporting Requirements
It is the responsibility of all directors, officers, and employees to comply with the Code of Ethics Policy, and to report violations or suspected violations in accordance with this Whistleblower Policy.No Retaliation
No director, officer, or employee who in good faith reports a violation of the Code of Ethics Policy shall suffer harassment, retaliation, or adverse employment consequence. An employee who retaliates against someone who has reported a violation in good faith is subject to discipline up to and including termination of employment. This Whistleblower Policy is intended to encourage and enable employees and others to raise serious concerns within the Bank rather than seeking resolution outside the Bank.Reporting Violations
The whistleblowing procedure is intended to be used for serious and sensitive issues. Serious concerns relating to financial reporting, unethical, or illegal conduct should be reported in any of the following ways:
- Website: lighthouse-services.com/htbna
- Toll-Free Telephone: English speaking USA and Canada: (833)290-0001;
Spanish speaking USA and Canada: (800)216-1288
- E-mail: firstname.lastname@example.org (must include company name with report)
- Fax: (215)689-3885 (must include company name with report)
Reporters to the hotline will have the ability to remain anonymous if they choose. Please note that the information provided by you may be the basis of an internal and/or external investigation into the issue you are reporting, and your anonymity will be protected to the extent possible by law. However, your identity may become known during the investigation because of the information you have provided. Reports are submitted by Lighthouse to the Bank and may or may not be investigated at the sole discretion of our company.
Employment-related concerns should continue to be reported through normal channels, such as your supervisor or the HR Officer.Timing
The earlier a concern is expressed, the easier it is for us to act.Evidence
Although you are not expected to prove the truth of an allegation, the employee submitting a report needs to demonstrate in their hotline report that there are enough grounds for concern.How the Report will be Handled
The action taken will depend on the nature of the concern.Initial Inquiries
Initial inquiries will be made to determine whether an investigation is appropriate, and the form that it should take. Some concerns may be resolved by agreed upon action without the need for an investigation.Feedback to Reporter
Whether reported directly to the Bank’s personnel or through the hotline, the individual submitting a report will be given the opportunity to receive follow-up on their concern:
- Acknowledging that the concern was received;
- Indicating how the matter will be dealt with;
- Giving an estimate of the time that it will take for a final response;
- Telling them whether initial inquiries have been made; and
- Telling them whether further investigations will follow, and if not, why.
The amount of contact between the individual submitting a report and the body investigating the concern will depend on the nature of the issue, the clarity of information provided, and whether the employee remains accessible for follow-up. Further information may be sought from the reporter.Outcome of an Investigation
At the discretion of the company and subject to legal and other constraints the reporter may be entitled to receive information about the outcome of an investigation.Accounting and Auditing Matters
The Audit Committee of the Board of Directors shall address all reported concerns or complaints regarding bank accounting practices, internal controls, or auditing. The Bank’s internal auditor shall immediately notify the audit committee of any such complaint and work with the Audit Committee until the matter is resolved.Acting in Good Faith
Anyone filing a complaint concerning a violation or suspected violation of the Code of Ethics Policy must be acting in good faith and have reasonable grounds for believing the information disclosed indicates a violation of the policy. Any allegations that prove not to be substantiated and which prove to have been made maliciously or knowingly to be false will be viewed as a serious disciplinary offense.Confidentiality
Every effort will be made to protect the reporter’s identity by our hotline vendor. Please note that the information provided in a hotline report may be the basis of an internal and/or external investigation by the Bank into the issue being reported. It is possible that as a result of the information provided in a report the reporter’s identity may become known to the bank during the course of the investigation.
CODE OF ETHICS
Annual Declaration of Personal Circumstances
Each officer, director, employee, or agent of this Bank accepts a responsibility to the institution and its shareholders and customers. The confidence entrusted to us will not be subjected to personal conflicts of interest.
This year, each of us, by reading and signing this "Code," signify that we acknowledge to the Board of Directors that we accept our individual position of the trust responsibility. Inquire if you have any questions. Be sure to explain any condition or fact that could be construed as a conflict with any statement contained in the Code of Ethics policy.General Statement of Policy
It is the established policy of this Bank to expect from its directors, officers, and employees their undivided loyalty and standards of behavior that are consistent with the highest ethical principles. Among other things, this means that each officer, director, and employee should avoid any investment, interest, association, or service that interferes, may interfere, or might be thought to interfere with the independent exercise of their judgment in the best interest of the Bank.
The Board of Directors has determined that this policy shall be implemented by requiring annually from each officer and each employee whose duties involve responsible judgment in the interest of the Bank a complete disclosure of all interests, activities, and associations of themself or any member of their immediate family (spouse, father, mother, brother, sister, child of either employee or spouse) that might or be thought to give rise to any conflict with the Bank policy outlined above. This obviously involves, at a very minimum, the disclosure by any such officer, director, or employee of any activity participated in by themself or any member of their immediate family, whether alone or with others, through which they or such family member receives a pecuniary advantage that they or such family member would not receive but for their position with the Bank.
The disclosure requirement is not intended to unfairly or unduly restrict the activities of the person affected, and in no way attempts to interfere with an individual's privacy. Very few serious problems exist; solutions generally can be worked out. For the ultimate good of all, full disclosure of any conflict or potential conflict must be made to the Board of Directors each year.
For the guidance of persons affected, the following examples are cited. These examples obviously cannot cover all possible situations and are to be considered only as representative. Where doubts or questions exist, it is suggested that they be resolved in favor of full disclosure.
Examples illustrating, but not limiting, areas of possible conflict that shall be disclosed:
- Receiving anything of value from persons or firms negotiating or contracting with the Bank or likely to have dealings or borrowings with the Bank.
- Participating in any negotiations or dealings on behalf of the Bank with any firm in which such officer, director, or employee directly or indirectly has an interest through stockholding transaction between the bank and such firm would not tend to affect the value of such interest or stockholding. This same principle should apply to negotiations or dealing with any person.
- Rendering services, with or without compensation, as a director, officer, employee, or consultant to any person, firm, or corporation competing, dealing, or seeking to deal with the Bank.
- Using or divulging to others for their own personal profit, or that of an immediate family member, any data, plans, decisions, or other confidential information to which one has access by reason of their position with the Bank.
It is important to realize that the impartial judgment of even the most well-meaning person may be swayed (or may be believed to be swayed) if their own personal economic interests, or those of their immediate family, are affected in any way by the business they transact on behalf of the Bank.
Therefore, the above examples, as well as other possible conflict situations, should be carefully considered with respect not only to the officer, director, or employee themself, but also with respect to any member of their immediate family.Staff Responsibility
It shall continue to be a practice (1) to apprise the Board of Directors, as well as all Bank officers concerned, of the general backgrounds and the specific assignments of individuals who join the Bank at the higher levels of trust, and (2) to hold senior officers responsible for knowing the quality of character and the work of their subordinates, and for taking the appropriate action to direct or remove deviants from either acceptable character or performance s tandards.Instructions
- Please answer each question on the following pages either "Yes" or "No." If "Yes," give full details on a supplementary sheet.
- By "Your family" is meant yourself, your spouse, and the brothers, sisters, and descendants of you and your spouse.
- By "Any interest" is meant any interest, direct or indirect, including that of officer, director,shareholder, partner, proprietor, agent, executor, trustee, or beneficiary.
- By "Any concern" is meant corporation, association, partnership, trust, estate, sole proprietorship, or individual.
CODE OF ETHICS
Annual Declaration of Personal Circumstances – Questionnaire
NOTE: Completion of this questionnaire acknowledges that the undersigned has read in full and understands the Code of Ethics Policy statement adopted by the Board of Directors.
I. Do you or any member of your family have an interest in any concern that:
- Sold, rented, or furnished any goods, properties, or services to this bank during the last twelve (12) months?
- Had any other business connections with this bank, or conducted any personal business activities that could be in conflict or a potential conflict with this bank?
II. Have you received income for services performed from sources other than your full-time employment with this bank?
- If yes, please list all other sources of income from commissions or salaries and the percentage of your time devoted to such activities:
III. Do you or members of your family have a license to sell real estate, insurance, or securities?
- If yes, list the broker or agency with which the license is maintained and whether you have received income from transaction with the Bank during the past year.
IV. Enter a list of all Hometown Bank accounts on which you are an authorized signer that are not your own personal accounts.
V. Enter a list of all accounts at any financial institution on which you are named as POD, Executor or as a beneficiary position of any kind.
VI. Other Disclosures:
Printed Name: _________________