Code of Conduct and Ethics for TrustAtlantic Financial Corporation
This Code of Conduct and Ethics ("Code") is applicable to all employees, officers and directors of TrustAtlantic Financial Corporation and its subsidiaries including TrustAtlantic Bank. The trust and support of the customers, employees, communities, and shareholders of the Company will be critical to the Bank's business success. The Bank can preserve that trust and support only by maintaining the highest ethical, moral, and legal standards in its business dealings.
Directors and officers of financial institutions are held to higher standards of conduct, by both regulatory agencies and the public, than are the directors and officers of other types of corporations. It is, therefore, important that the directors and officers of the Bank adhere to the same high standards that the Bank imposes on itself. To that end, this Code has been adopted by the Board of Directors of the Bank and its affiliates as a general guide. This document cannot be specific as to cover every possible circumstance nor should it be so rigid as to preclude reasonable, prudent and appropriate interpretations by the Board of Directors of the Bank in the exercise of its fiduciary duties.
Bank: refers collectively to TrustAtlantic Financial Corporation, each of its subsidiary corporations including TrustAtlantic Bank, and each subsidiary of its subsidiaries, if any; a "Director" is any member of the Board of Directors of TrustAtlantic Financial or any such subsidiary corporation; an "Officer" is any person designated an officer of TrustAtlantic Financial or any such subsidiary corporation including TrustAtlantic Bank; and a Director's or Officer's "Related Parties" include any member of the Director's or Officer's immediate family, or any corporation, partnership or other entity owned or controlled by or otherwise affiliated with the Director or Officer.
Control: refers to (i) the direct or indirect ability, or acting through or in concert with one or more persons resulting in the ownership or power, to vote 25% or more of any class of voting securities of an entity; (ii) the ability in any manner to elect a majority of the directors of any entity; or (iii) the power to exercise a controlling influence over management or policies of any entity.
Employee: is any person employed on either a full time or part time basis by the Bank or any of its affiliates or subsidiaries.
Immediate Family: includes the spouse, children or any relative through blood or marriage that shares the primary residence of the Employee, Director or Officer.
Officers: Any person designated an officer by the Board of Directors or any person who performs a major policy making function with respect to the Bank. In addition, certain Officers will be designated by the Board of Directors as Executive Officers. Executive Officers may be subject to additional reporting and compliance.
As a financial institution, there is no principle more critical to maintaining public trust than that of the confidentiality of the Bank's relationship with its customers. In the course of their service, Directors, Officers and Employees routinely obtain information about the Bank's customers and suppliers (including financial information and information about their business activities). While that information is a part of the Bank's business records, it is the Bank's policy that such information be kept in confidence, be used only for the Bank's business purposes, and not be discussed with any person outside the necessary course of the Bank's business. Even within the Bank, such information should be shared or discussed only with those who have a legitimate business need. The improper disclosure of confidential information about a customer or supplier, or the use of any such information to further the personal interest of a Director, Officer or Employee or one of his or her Related Parties, can severely damage the Bank's reputation and, under certain circumstances, may result in the risk of civil liability. All customer information should be properly destroyed or safeguarded to avoid compromising confidential customer information.
By virtue of their positions with the Bank, Directors, Officers and Employees are routinely given financial and other information about the Bank and its business. Frequently, such financial information, or the details of events or trends in the Bank's business, are provided to and discussed with Directors or Officers prior to any disclosure to the Bank's shareholders or to the investing public. The proper management of corporate information and its disclosure to the public is of vital importance to the Bank, and "leaks" or the premature disclosure of confidential information can have a materially adverse impact on the Bank. It is the Bank's policy that all non-public information about the Bank given to or obtained by a Director, Officer or Employee in the course of his service as such must be kept confidential and may not be disclosed to any other person (including his Related Parties and employees of the Bank who are not already privy to such information) under any circumstances. Likewise, Directors, Officers and Employees should not discuss with other persons details of the affairs of the Bank or the substance of events or discussions which transpire at meetings of the Board. Directors, Officers and Employees may discuss with other persons financial and other information which has been publicly disclosed by the Bank in the form of its annual and other periodic reports and press releases, but only to the extent that such information actually has been so disclosed to the public and that such information has had time to be disseminated.
Directors may find that as a result of their status of serving on the Board, that direct or indirect contacts or overtures are made to them individually regarding the position of the Bank as to its independence or its interest in affiliating or merging with some third party. Any such third party inquiries of a Director should be immediately reported to the Chairman and/or the President and Chief Executive Officer ("CEO") and the Director receiving such inquiry should make no statement that can be interpreted to indicate that the Board would have any interest whatsoever in entertaining such discussions, and that the matters should be addressed directly with the Chairman and/or the CEO. Directors should be mindful that their position as a Director of the Bank places them in a position where comments by the Director, either meaningful or otherwise, could signal improperly the stated position of the Board with regard to the Bank's mission and purpose. In addition, non-Officer Directors shall refrain at all times from initiating any contact, directly or indirectly, with any unrelated third party regarding that party's or some other party's interest in engaging in discussions with the Bank to affect a combination, share exchange, merger and the like unless the Director has this responsibility directly delegated to him by the Executive Committee, CEO or the full Board of Directors. The Board of Directors, acting as a corporate body, has the ultimate fiduciary duty to its shareholders in matters of this nature and no individual non-Officer Director should entertain or initiate any discussions that would run counter to the established position of the Board as to the future course of the Bank. In light of the increasing consolidation in the financial services industry, the issue of independence or affiliation has become increasingly sensitive and any breach of this policy should be considered to be a breach of that Director's fiduciary duty to the Bank.
Duty of Loyalty
Among their other duties, Directors and Officers have a "duty of loyalty" under North Carolina law which requires that they act in a manner they reasonably believe to be in the best interests of the Bank. A "conflict of interest" is a situation in which a personal interest of a Director or Officer (or of one of his Related Parties) conflicts with, or appears to conflict with, the interest of the Bank or one of its customers. If the conflict is between the Director's or Officer's interest and the interest of the Bank, the law prohibits the Director or Officer from using his position to further his own personal interest at the expense or to the detriment of the Bank, and a violation by the Director or Officer puts him at risk of liability for damages incurred by the Bank. If the Director's or Officer's interest conflicts with the interest of one of the Bank's customers related to his or its dealings with the Bank, then the Bank's policy of integrity and fairness suggests that the Director or Officer not further his own personal interest to the detriment of the Bank's customer. A violation of such policy does damage to the Bank's reputation for fair dealing with its customers (and, because such conduct may result in the risk of civil liability on the part of the Bank, the Director's or Officer's action also conflicts with the best interest of the Bank).
While all conflicts of interest cannot be avoided, Directors and Officers should attempt to plan their business and personal affairs so as to avoid conflicts (or the appearance of a conflict) to the greatest extent possible, and, in those cases where a conflict cannot be avoided and is material, Directors or Officers should fully disclose the circumstances of the conflict to such committee of the Board that will oversee the transaction giving rise to the conflict and abstain from participation in any decision-making by the Bank in connection with any transaction giving rise to the conflict.
Listed below are certain common examples of situations which may pose a conflict of interest or the appearance of a conflict for a Director or Officer. While these examples by no means are intended as a statement of all situations in which a conflict or the appearance of a conflict will arise, they will provide general guidance as to the types of situations in which Directors must be sensitive to their duties and obligations.
A Director's or Officer's duty of loyalty requires that, at all times, he act in a manner he reasonably believes to be in the best interests of the Bank, and that he not use his position for his own personal gain to the detriment of the Bank. Self dealing by a Director or Officer violates his duty of loyalty and is aggressively dealt with by banking regulators.
Sales of Goods or Services to the Bank. Directors, Officers or their Related Parties often are in the business of supplying goods and services of a type which are used by the Bank. No law prohibits Directors, Officers or their Related Parties from selling goods and services to the Bank; however, such transactions involve an inherent conflict of interest and should be conducted only on the same basis and terms as an unrelated party and in a manner which is fair to the Bank. A Director or Officer should disclose fully to the appropriate committee the nature of his interest in any such transaction with the Bank. Any such transaction which is not routine or conducted in the ordinary course of the Bank's business, or which is material to the Bank, should be approved by the Bank's full Board of Directors before being effected.
Purchases of Property or Assets from the Bank. Purchases of property or assets by a Director, Officer or one of his Related Parties from the Bank should be made on the same basis and terms as an unrelated party and in a manner which is fair to the Bank, and may only be made after full disclosure by the Director or Officer of the nature of his interest in the transaction and after approval of the transaction by the appropriate committee.
Purchases of property or assets of a loan customer of the Bank which are being sold through a foreclosure or repossession sale, or which have been acquired by the Bank at such a sale or otherwise in the course of liquidating a customer's loan are discouraged and should be avoided. However, there are circumstances (such as the lack of other willing purchasers) under which such a purchase may benefit the Bank. In those cases, a purchase by a Director, Officer or his Related Parties may be appropriate, but only after consideration by and the pre-approval of the appropriate committee. The same procedures will apply regarding purchases of assets by a Director, Officer or one of his Related Parties directly from a distressed borrower.
Use of the Bank's Assets, Facilities and Personnel. The Bank's equipment and facilities, and the services of its personnel, are valuable assets. The unauthorized use of such assets by a Director, Officer or one of his Related Parties for personal or other purposes which do not further the business interests of the Bank and without compensation for such use is a misuse of corporate assets. At a minimum, such misuse of assets may constitute a violation of the Director's or Officer's duty of loyalty. At its extreme, such misuse may constitute a misapplication or misappropriation of assets by the Director or Officer. From time to time the Bank may extend the use of certain of its equipment or facilities, or the services of certain of its personnel, to Directors or Officers in the course of their service to the Bank. However, Directors or Officers should avoid any unauthorized use of such assets.
Directors also must be sensitive to "hidden conflicts" which may arise as a result of indirect interests (financial or otherwise) they or their Related Parties have in transactions between the Bank and some other person. In other words, a Director could be perceived as misusing his position in connection with a transaction to further his own personal interest even if he or one of his Related Parties is not involved in the transaction, and even if his personal interest is not of a financial nature. For example, a Director may be considered to have an indirect personal interest in:
- a loan by the Bank to any person which could be said to relate to or facilitate a separate business transaction or business relationship between the loan customer and a Director or one of his Related Parties (such as a loan that will enable the customer to purchase some property or service from, pay a debt owed to, or that otherwise would have some bearing on that person's personal or business dealings with, a Director or one of his Related Parties);
- a loan by the Bank to, or a purchase of property or services by the Bank from, any person with whom a Director or one of his Related Parties has a special personal or other relationship (such as a transaction with a Director's personal friend or business associate, or a loan to a community, charitable or political organization in which a Director is involved); or
- any other loan or business transaction in which a Director or one of his Related Parties will derive some indirect benefit, whether of a financial or personal nature.
While the foregoing examples are not intended to discourage Directors from recommending relationships between the Bank and personal friends, business associates, charities Directors are involved in or the like where the Director may have an indirect personal or financial interest, it should be noted that potential conflicts of interest resulting from such transactions are subject to the same "self dealing" considerations as are those transactions in which a Director is a direct participant or has a direct interest. Directors should fully disclose to the appropriate committee any indirect interest they have in any such transaction, such committee should assess the potential conflict, and, if material, the Director should abstain from participation in the Bank's decision-making process relating to, and should not attempt to influence the terms of, such a transaction.
Directors and Officers should be sensitive to the effect or appearance of an effect that personal investments may have on their actions or judgments as Directors and Officers. As a part of the duty of Directors and Officers to disclose to the Bank their direct and indirect interests in the Bank's business transactions, each Director and Officer should disclose to the appropriate committee of the board the direct or indirect beneficial ownership by him or one or more of his Related Parties of:
- more than 5% of the outstanding shares of any class stock of any publicly traded company; or
- any stock or other equity interest in the business of any customer, supplier or competitor of the Bank (other than interests of less than 5% in publicly traded companies).
A Director's duty of loyalty requires that he not compete with the Bank or engage in activities that adversely affect the Bank's reputation, encroach on the time or attention he devotes to his duties as a Director of the Bank, or adversely affect the quality of service he renders as a Director. While Directors of the Bank are not prohibited from serving as directors of other entities, under certain circumstances such service may pose potential conflicts of interest or violations of the Director's duty of loyalty to the Bank. Directors should notify the Board of Directors or the Executive Committee if they accept a position, or agree to allow their names to be placed in nomination for election, as a director of any other entity (other than charitable, civic or other non-profit entities).
Under most circumstances, Federal law prohibits a Director from serving as a "management official" (including service as an officer, director or advisory director) of any other "depository organization" (including any depository institution or other organization that owns a depository institution).
Compliance with Laws, Rules and Regulations
The Bank is subject to regulation and oversight by various banking and other authorities. Complying with laws and regulations of the industries and states we operate in, is of utmost importance and consistent with the standards of conduct and ethics expected of our Employees, Officers and Directors. Suspected violations of rules, rules or regulations should be reported to the Audit Committee.
Banking, Loan and Business Transactions
It is anticipated that, whenever possible, Directors and Officers will utilize the banking and lending services of the Bank, and that they will recommend the Bank to others, including their Related Parties. While Directors and Officers should expect to be treated as well as any other customer similarly situated, they should not expect or attempt to arrange more favorable treatment for themselves or for their Related Parties. Directors and Officers must be sensitive to and use all best efforts to avoid circumstances in which they may be accused of self dealing or of attempting to misuse their positions or influence. All transactions between the Bank and a Director, Officer or one of his or her Related Parties should be conducted on the same basis and terms as an unrelated party in accordance with the Bank's standard policies and procedures, with full disclosure of the Director's or the Officer's interest, and in such a manner as to avoid the appearance of self dealing. Furthermore, interested Directors should abstain from any participation in the decision-making process related to any such transaction. All loan transactions between the Bank and a Director, Officer or one of his or her Related Parties must be conducted in strict compliance with state and Federal laws and regulations which apply to such loans.
The Bank's Officers and Directors may have business dealing with customers of the Bank in the ordinary course of conducting their business or personal affairs. These transactions should be conducted on the same basis and terms as if the other party was not a customer of the Bank so as to avoid the appearance of self dealing. Officers or Directors involved in the management or approval of transactions involving a customer should exercise particular care and consult with the Chief Executive Officer before entering into any material transaction with such customer.
The Bank requires honest and accurate record-keeping and information reporting in order to make responsible business decisions. All financial records and accounts must accurately reflect transactions and events and conform to applicable accounting principles, laws and regulations and the Bank's system of internal control. Many employees and officers submit expenses for reimbursement and use business credit cards for expenses. All expense reports and reimbursements should be properly supported and submitted timely.
Gifts and Gratuities
The receipt by a Director or a Related Party of any gift or gratuity from an existing or prospective customer or supplier of the Bank may create, at a minimum, the appearance of a conflict of interest and breach of the Director's duty of loyalty, and, at its extreme, a violation of state and Federal laws, including the Bank Bribery Act, which strictly prohibit the acceptance of bribes by bank directors and officers. A "gift" includes any type of gratuity, favor, service, discount or price concession, loan, legacy or inheritance, or any type of compensation or fee, including cash, securities or other property, or any other thing having a monetary value.
Directors, as well as officers, employees, agents and attorneys of the Bank may not:
Solicit anything of value for themselves or for any third party in return for any business, service or confidential information of the Bank.
Accept anything of value (other than their bona fide salary or wages) from anyone in connection with the business of the Bank, either before or after a transaction is discussed or consummated.
Because of this rule, Directors, Officers and their Related Parties should not accept any "gift" from an existing or prospective customer or supplier of the Bank if the gift is in any manner related to or given in connection with the Bank's business with that customer or supplier or if the gift is motivated by a desire to influence the Directors or Officers in connection with the Bank's business activities or a business transaction to which the Bank is or will be a party. It is recognized that some gifts offered to Directors and Officers are not connected with the Bank's business even though they may be given by customers or suppliers, and that Directors and Officers, under appropriate circumstances, should be permitted to accept such gifts. Such circumstances include the following: (1) acceptance of gifts, gratuities, amenities or favors based on obvious family or personal relationships (such as those between the parents, children or spouse of a bank official) where the circumstances make it clear that it is those relationships rather than the business of the bank concerned which are the motivating factors; (2) acceptance of meals, refreshments, entertainment, accommodations or travel arrangements, all of reasonable value, in the course of a meeting or other occasion, the purpose of which is to hold bona fide business discussions or to foster better business relations, provided that the expense would be paid for by the bank as a reasonable business expense if not paid for by another party; (3) acceptance of loans from other banks or financial institutions on customary terms to finance proper and usual activities of bank officials, such as home mortgage loans, except where prohibited by law; (4) acceptance of advertising or promotional material of reasonable value, such as pens, pencils, note pads, key chains, calendars and similar items; (5) acceptance of discounts or rebates on merchandise or services that do not exceed those available to other customers; (6) acceptance of gifts of reasonable value that are related to commonly recognized events or occasions, such as a promotion, new job, wedding, retirement, holiday or birthday (if under $200.00 in value); or (7) acceptance of civic, charitable, educational, or religious organization awards for recognition of service and accomplishment (if under $200.00).
While the acceptance of certain gifts may not be prohibited, the potential for the appearance of a conflict of interest is still present. Any such gift of more than nominal value (more than $200.00) offered to or received by a Director, an Officer or a Related Party from an existing or prospective customer or supplier of the Bank should be disclosed to the CEO or appropriate committee of the Board of Directors. Written records of such reports should be maintained by the Bank, and should be reviewed in order to determine whether or not the gift violates the Bank Bribery Act or poses a threat to the integrity of the Bank.
State and Federal banking laws prohibiting the offer or acceptance of bribes, including the Bank Bribery Act, are aggressively enforced and the penalties for violations are severe. Any offer of a bribe to a Director, Officer or Employee of the Bank should immediately be reported to the Chairman of the Audit Committee.
Civic, Charitable and Political Activities
Directors, Officers and Employees are encouraged to be active citizens in their respective communities and to actively participate in civic, community and charitable affairs, as their good works in those areas reflect favorably on the Bank. However, such activities should be undertaken as private citizens. While the Bank takes seriously its obligations as a corporate citizen and lends its support, financial and otherwise, to make worthwhile civic, community and charitable causes, there are financial and other considerations which must enter into a decision by the Bank to support any such cause. The Bank should not be committed as a sponsor of or a contributor to, or use or commit to the use of the Bank's name, equipment, facilities or personnel on behalf of, any civic, community or charitable cause without the permission of the CEO or other Executive Officer.
State and Federal law strictly prohibits the Bank from using its funds or assets in support of political candidates, campaigns or parties. Except as may be permitted by laws applicable to the activities of a political action fund, in no event may political contributions be made in the Bank's name or with its funds, nor may the Bank's name, equipment, facilities or personnel be used, directly or indirectly, in support of any political candidate, campaign or party. To avoid any appearance of corporate support or endorsement, no Director or Officer should state or imply that the Bank supports or will support, or identify the Bank in any manner with, any political candidate, campaign or party, and any political activities by Directors or Officers should be conducted away from the Bank's premises.