Code of Ethics & Conflicts of Interest Policy

 

ADOPTED BY THE BOARD OF DIRECTORS
EFFECTIVE JANUARY 1, 2004

INTRODUCTION

The reputation and successful operation of Community First, Inc., and Community First Bank & Trust (collectively, “Community First”) is built upon Community First's business philosophy and the ethical conduct of Community First and its directors, officers, and employees (the “Representatives”). Financial institutions depend upon the public's trust. The preservation of that trust and of Community First’s reputation for excellence requires close observance of both the letter and spirit of relevant laws and regulations, and also continuing and careful regard for the high standards of conduct set forth in the policy statements which follow.

 

These policies and statements will address the subjects of legal and ethical standards in our conduct of business, conflict of interest, and compliance with antitrust law. The Chief Executive Officer (the “CEO”), the President and the Board of Directors are responsible for the administration of this Code of Ethics and Conflicts of Interest Policy (the “Code”).

 

Community First expects its Representatives to conduct business and business-related dealings in accord with the intent of all applicable laws, whether local, state, or federal, and to refrain from any form of dishonest or unethical conduct.

 

In all situations, including those where there are no applicable legal principles or the law is unclear or in conflict, our Representatives are expected to exercise good judgment and conduct their business in such a manner that such action can be supported without reservation or apology.

 

Compliance with this Code is the responsibility of every Representative, and failure to comply with this Code can result in disciplinary actions, including without limitation, oral or written reprimands, suspension or termination of employment or potential legal actions against violators of this Code. The following guidelines will aid our employees in determining what conduct is expected of them.

POLICIES ON LEGAL AND ETHICAL STANDARDS

 

Confidentiality of Customer Information

It is the policy of Community First that information with respect to our customers acquired by an employee through his or her employment is considered to be held in the strictest confidence. Except where legally required, in no instance shall such information be transmitted to unauthorized persons outside Community First, including family and associates, or other Representatives of Community First who do not need to know the information.


Financial Privacy

All customer records are protected under federal and state law. All employees are expected to maintain the privacy of all customers and no information is permitted to be disclosed to any person that is not authorized to receive the information.

 

All governmental requests for information are to be directed immediately to the Chief Executive Officer or to the President.

 

All requests for credit related information are to be directed to the Senior Credit Officer or designee and only experience by Community First is permitted to be disclosed as allowed under the Fair Credit Reporting Act.

 

Fair Credit Reporting Act

Credit reports are obtained for permissible purposes for legitimate business transactions initiated by the consumer as directed under the Fair Credit Reporting Act. Information contained in these reports is confidential and are not to be distributed in any manner to a third party.

 

Proprietary Information

With respect to corporate information regarding Community First, confidentiality is essential. Information of a financial, technical, or business nature regarding Community First is not to be released to any outside person unless it has been made available to the public and approved by the CEO or the President.

 

Gifts Received by Employees

No Representative should give or accept any cash, gifts exceeding a retail value of $25.00, special accommodations, favors, or the use of property or facilities to or from anyone with whom such person is doing, negotiating, soliciting, or being solicited for business on behalf of Community First. It should be understood that under some circumstances a gift may be considered an illegal "kickback" which is a crime under federal and state law.


Giving of Gifts

Direct or indirect gifts, offer, or promises of any gift, bribe, kickback, favor, loan, service, or anything else of value to any individual, business entity, organization, governmental unit, public official, political party or other person by an employee on behalf of Community First in connection with any transaction or business for the purpose of influencing the action of the recipient is expressly prohibited. This standard of conduct is not meant to prohibit normal business practices such as providing entertainment, meals, favors, discounts, tickets to cultural and sporting events, gifts given as a token of friendship or for special occasions as long as the gift is of nominal and reasonable value under the circumstances and promotes legitimate business development.

 

Preferential Treatment

Representatives shall not purchase or appropriate to their own personal use, any corporate property, service, or profit opportunity in the basis of or under situation not otherwise available to members of the public with the exception of:

 

1. Special employee programs and services; or

2. Purchase of property from Community First provided the purchase price is at fair market value, such valuation having been properly documented; or

 

Representatives may be asked for legal or tax advice or are asked for a referral to an attorney, tax expert, accountant, real estate agent, etc. The law generally prohibits Representatives from offering legal and tax advice, but Representatives may provide referrals to experts in various fields.


Political Contributions

Although recent decisions by the Federal Election Commission liberalize certain restraints on banks and corporations supporting political action committees, it remains illegal to use corporate or bank funds for the purpose of making contributions or expenditures in connection with elections to any local, state, or federal office. However, federal election laws do permit the use of corporate funds and assets for certain limited political purposes such as:

 

1. Establishing political action committees to solicit contributions to separate political funds to be utilized for political purposes; or

2. Communicating direct political messages to shareholders; or

3. Implementing non-partisan voter registration or to "get-out-the-vote" campaigns.

 

Each Representative is free to decide if and to whom personal political contributions will be made. Directors, officers and supervisors are prohibited from placing any pressure, either direct or indirect, on employees regarding their personal political contributions.

 

Improper Transaction and Payments

It is commonly recognized that there is a direct correlation between illegal and otherwise improper payments and inaccurate books and records. To ensure the integrity of Community First's books and records, the following principles should be followed:

 

1. All transactions or conduct of business must be properly reflected in Community First's books and records; and

2. No secret or unrecorded fund of money or other assets may be established or maintained; and

3. Any payment is prohibited if no record of its disbursement is entered in Community First's accounting record; and

4. Making false or fictitious entries in the books or records of Community First or issuing false or misleading documents is prohibited and in most instances will constitute a criminal offense; and

5. A Representative should avoid processing transactions for the Representative’s own personal account, an account on which the Representative signs with another person, and accounts belonging to members of a Representative’s family; and

6. Representatives must also avoid participating in transactions, which give the appearance of circumventing established Bank policies. Any transaction that gives the appearance of circumventing established Bank policies may be considered a violation of the code of conduct. Transactions include but are not limited to deposits, processing of payments, waiving fees or charges, making loans, etc.; and

7. Representatives and their immediate families, acting either individually or as a fiduciary, may not sell assets to or purchase assets from Community First unless the purchase or sell is at a fair market value price, documentation is maintained, and prior approval is granted by the CEO or the President.

Improper conduct involving Community First, regardless of the amount, is a federal offense and is and shall be reported to the proper authority.

 

Computer and Equipment Use

Selected Representatives may have access to the internet for general research and related purposes. These persons may also have access to e-mail via the internet. No employee may utilize e-mail for purposes of sending any information that is protected under the privacy laws or any other information that is considered private. In addition, these employees are strongly discouraged from accepting “cookies” via the internet. Cookies are devices used in the technology environment to collect data from the end-users computer.

E-mail is not a secure transmission medium. The transmission of any Community First record data is prohibited using internet e-mail to any person.

 

CONFLICT OF INTEREST

 

Corporate Policy

It is the policy of Community First that all Representatives must avoid potential conflicts of interest.

A potential conflict of interest exists whenever a Representative has an outside interest, direct or indirect, which might either conflict with the individual's duty to Community First or adversely affect the individual's judgment in the discharge of his or her responsibilities to Community First.

In the event a potential conflict does arise, its nature and extent should be fully disclosed immediately to the CEO or the President (or the Board of Directors in the event of a potential conflict of interest involving the CEO or the President), who, after making a thorough review of the circumstances, will determine appropriate action. A written report of the disposition of the matter will be retained if deemed appropriate by the reviewing officer.

 

Fiduciaries and Legacies

Except with respect an employee’s immediate family (parents, spouse, children), relatives or any other persons related to the employee, no employees may accept an appointment or continue to act as a fiduciary or co-fiduciary of any estate, trust, agency, guardianship, or custodianship account of a Community First customer unless authorized by the Board of Directors.

No employee of any Community First trust activity should receive, directly or indirectly, any substantial legacy from a Community First customer, except:

1. Where such customer is a relative or the person involved; or

2. The employee named in the legacy has never dealt with the grantor as a representative of Community First.

Whenever an individual becomes aware of being named as a beneficiary in a will or trust or upon first learning of the fact after the death of a grantor, the employee should immediately notify the CEO or the President for a determination as to whether the employee should continue as a beneficiary of legatee.

 

Lending

It is the position of Community First that lending services be available to serve the legitimate and deserving credit needs of all customers on equal basis. Loan terms and conditions shall be based upon a borrower's creditworthiness.

Lending officers are not permitted to extend credit to relatives, unless approved by the CEO, the President or the Senior Credit Officer.

Extending credit to companies in which the lending officer has a controlling interest or in which a relative of the lending officer has such an interest, is not permitted, unless approved by the CEO, the President or the Senior Credit Officer.

Community First seeks business relationships with businesses and individuals, however, those persons or businesses providing professional services, for example, accountants, attorneys, appraisers, etc., shall not be extended loans or obtain deposits on a preferential basis.


Outside Employment

Full-time Community First employees should carefully scrutinize outside employment, including the performing of any service for compensation, to avoid potential conflicts of interest and excessive demands on one's time.

Outside employment may be undertaken, unless objected to by the CEO or the President on the grounds that such outside employment interferes with job performance or is not consistent with the mutual best interests of the employee and Community First.

 

Participation in Public Affairs

It is the philosophy of Community First to encourage its employees to have an awareness of their responsibility and to participate in civic and political activities. Each employee is free to support community activities or the political process as he or she desires.

Voluntary efforts for civic or political activity normally take place outside of regular business hours. If voluntary work requires Community First time, prior approval should be obtained from the CEO or the President.

In all cases, employees in civic or political activities do so as individuals and not as representatives of Community First.

 

Corporate Directorships, Public Office, and Commissions

Election or appointment to public office, commissions, boards, or as an officer or director of a nonprofit corporation, may be accepted by the employee. Participation in such activities should be undertaken only if the time required will not unduly encroach on normal working time or necessitate such long hours as to impair the employee's ability to meet regular job responsibilities.

 

Election or appointment as a director of a business corporation must be approved in advance by the CEO or the President. To avoid the problem of interlocking directorships or management interlocks prohibited by applicable antitrust or banking laws, any question concerning service with any financial services institution shall be referred to the CEO or the President who will confer with Community First's attorneys.


Approval to serve in such activities shall not imply that Community First employee is serving at the direction or desire of Community First. If indemnity or coverage under the Company's Directors and Officers Liability Insurance Policy is desired with respect to such service, the specific written approval of the CEO or President must be obtained. No request for indemnification or insurance coverage will be considered until the Board of Director of Community First entity involved approves such request by resolution referring explicitly to the office and the individual. A copy of each such resolution shall be forwarded to the Secretary of Community First’s Board of Directors.

 

Unless specifically approved by the Board of Directors, no Representative shall serve on the Board of Directors of any non-Bank entity which:

 

1. Competes with Community First; or

2. Is in default to Community First or any loan, contract or other obligation; or

3. Is involved in a controversy or litigation with Community First.

In like manner, no employee, officer, director or substantial shareholder of another company shall serve as a director of Community First where such circumstances exist.

 

Unusual Business Transactions

No Community First employee, directly or through a controlled entity, shall be a regular supplier to, or purchaser from, Community First of goods or services apart from usual banking services offered to the general public without written approval of the CEO or the President. In the event the transaction exceeds $5,000, disclosure for an approval from the Board of Directors shall also be required. All such transactions, including purchases or sales of goods, property or services, shall be for full and fair value.

 

SECURITIES AND DISCLOSURES

 

Accounting Policies

Community First and each of its subsidiaries, if any, will make and keep books, records and accounts, which in reasonable detail accurately and fairly present the transactions and disposition of the assets of Community First.

 

All directors, officers, employees and other persons are prohibited from directly or indirectly falsifying or causing to be false or misleading any financial or accounting book, record or account. You and others are expressly prohibited from directly or indirectly manipulating an audit, and from destroying or tampering with any record, document or tangible object with the intent to obstruct a pending or contemplated audit, review or federal investigation. The commission of, or participation in, one of these prohibited activities or other illegal conduct will subject you to federal penalties, as well as punishment of up to and including termination of employment.

No director, officer or employee of Community First may directly or indirectly:

 

 

in connection with the audit of financial statements by independent accountants, the preparation of any required reports whether by independent or internal accountants, or any other work which involves or relates to the filing of a document with the Securities and Exchange Commission (the “SEC”) or any other governmental agency.

 

Disclosure Policies and Controls

The continuing excellence of Community First’s reputation depends upon our full and complete disclosure of important information about Community First that is used in the securities marketplace. Our financial and non-financial disclosures and filings with the SEC or other governmental agency must be transparent, accurate and timely. Proper reporting of reliable, truthful and accurate information is a complex process involving cooperation between many departments and disciplines. We must all work together to insure that reliable, truthful and accurate information is disclosed to the public.

 

Community First must disclose to the SEC or other governmental agency, current security holders and the investing public information that is required, and any additional information that may be necessary to ensure the required disclosures are not misleading or inaccurate. Community First may require you to participate in the disclosure process, which is overseen by the Board of Directors, the CEO, the President or the Chief Financial Officer (“CFO”). The disclosure process is designed to record, process, summarize and report material information as required by all applicable laws, rules and regulations. Participation in the disclosure process is a requirement of a public company, and full cooperation and participation by the Board of Directors, CEO, the President, CFO and, upon request, other employees in the disclosure process is a requirement of this Code.

Officers, directors and employees must fully comply with their disclosure responsibilities in an accurate and timely manner or be subject to discipline of up to and including termination of employment.

 

Insider Trading or Tipping

Directors, officers and employees who are aware of material, non-public information from or about Community First (an “insider”), are not permitted, directly or through family members or other persons or entities, to:

 

Such buying, selling or trading of securities may be punished by discipline of up to and including termination of employment; civil actions, resulting in penalties of up to three times the amount of profit gained or loss avoided by the inside trade or stock tip; or criminal actions, resulting in fines and jail time.

Examples of information that may be considered material, non-public information in some circumstances are:

 

 

Another Company’s Securities

The same policy also applies to securities issued by another company if you have acquired material, nonpublic information relating to such company in the course of your employment or affiliation with Community First.

 

Trades Following Disclosure

When material information has been publicly disclosed, each insider must continue to refrain from buying or selling the securities in question until the third business day after the information has been publicly released to allow the markets time to absorb the information.

 

ANTITRUST COMPLIANCE AND RELATIONS WITH COMPETITORS

In offering its full range of financial services, Community First engages in vigorous yet fair and open competition. All Representatives are expected to observe the highest standards of ethical conduct in relationships with competitors. This dissemination of rumors or disparaging statements regarding competitors is inappropriate and unethical. It is Community First's policy to emphasize the quality and competence of its own services and staff, rather than to criticize those competitors.

 

Employees are prohibited from entering into arrangements with competitors for the purpose of setting or controlling prices, rates, trade practices or marketing policies, or disclosing to competitors future plans of Community First which have not been disclosed generally to the public.

 

Antitrust laws require that the company may not in any manner extend credit, lease or sell property of any kind, furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement that:

 

The customer obtain some additional credit, property or service other than a loan, discount, deposit, or trust service; or

 

1. That the customer obtain any additional service from another Community First subsidiary; or

2. That the customer provide some additional service to Community First; or

3. That the customer shall not obtain some other service other than loans from a competitor of Community First.

 

ADMINISTRATION, REPORTING OF VIOLATIONS AND AMENDMENT

The CEO and the President shall bear primary responsibility for ensuring that the Representatives comply with this Code.

 

The Board of Directors has adopted this Code and delegated to management the responsibility for its administration throughout Community First. It shall be management's responsibility to disseminate this Code to all affected parties and to adopt appropriate procedures to review compliance throughout Community First. This Code shall be delivered to each Representative and the office of Human Resources shall retain the acknowledgement signed by the Representative.

It is the responsibility of each Representative to be familiar with this Code and to abide by the letter and spirit of its provisions at all times.

 

Amendments and Modifications of this Code

There shall be no amendment or modification to this Code except by a vote of the Board of Directors or a designated board committee that will ascertain whether an amendment or modification is appropriate.

In case of any amendment or modification of this Code that applies to an officer or director of Community First, the amendment or modification shall be posted on Community First’s website within two days of the board vote or shall be otherwise disclosed as required by applicable law or rules. Notice posted on the website shall remain there for a period of 12 months or made available in accordance with applicable laws and regulations and shall be retained in Community First’s files as required by law.

 

Non-retaliation for Reporting

In no event will Community First take or threaten any action against you as a reprisal or retaliation for making a complaint or disclosing or reporting information in good faith. However, if a reporting individual was involved in improper activity the individual may be appropriately disciplined even if he or she was the one who disclosed the matter to Community First. In these circumstances, we may consider the conduct of the reporting individual in reporting the information as a mitigating factor in any disciplinary decision.

We will not allow retaliation against any employee for reporting a possible violation of this Code in good faith. Retaliation for reporting a federal offense is illegal under federal law and prohibited under this Code. Retaliation for reporting any violation of a law, rule or regulation or a provision of this Code is prohibited. Retaliation will result in discipline up to and including termination of employment and may also result in criminal prosecution.

 

Reporting of Code Violations

You should be alert and sensitive to situations that could result in actions that might violate federal, state, or local laws or the standards of conduct set forth in this Code. If you believe your own conduct or that of a fellow employee may have violated any such laws or this Code, you have an obligation to report the matter in a timely fashion.

 

Generally, Representatives should raise such matters first with an immediate supervisor. However, if you are not comfortable bringing the matter up with your immediate supervisor, or do not believe the supervisor has dealt with the matter properly, then you should raise the matter with the CEO or the President. Directors and executive officers should report any potential violations of this Code to the Board of Directors. The most important point is that possible violations should be reported and we support all means of reporting them.

 

Waivers

There shall be no waiver of any part of this Code for any director or officer except by a vote of the Board of Directors or a designated board committed that will ascertain whether a waiver is appropriate under all the circumstances. In case a waiver of this Code is granted to a director or officer, the notice of such waiver shall be posted on our website within five days of the Board of Director’s vote or shall be otherwise disclosed as required by applicable law or rule. Notices, if any, posted on our website shall remain there for a period of 12 months or as otherwise required by applicable laws and regulations and shall be retained in Community First’s files as required by applicable law.

 

The above Code of Conduct and Ethics and Conflict of Interest is required to be certified by all officers and directors on an annual basis.