It is the policy of Paragon Bank to conduct the business of the bank in full compliance with all applicable laws, rules and regulations and to adhere to the highest ethical standards. To these ends, the directors and staff of the bank are expected and directed to manage the business of the bank with complete honesty, candor and integrity and in conformity with The Code of Ethics, hereinafter “The Code”.
The Code represents an overview of the corporate policies that should govern the actions of all employees, officers and directors of Paragon Bank. It is not a replacement for policies and procedures that address the specifics of our business or which may impose stricter or more detailed requirements. No code can cover every potential situation. The Code is designed to provide written standards to promote honest and ethical conduct, compliance with law, and a vehicle for prompt internal reporting and accountability to assure adherence to the Code. It is therefore, your responsibility to apply the principles set forth in this Code in a responsible fashion and with the exercise of good business judgment.
2. Public communication involving Paragon by employees must have prior clearance from a member of executive management or such officer's designee.
Directors and employees are prohibited from:
1. Accepting employment or engaging in a business (including consulting and similar arrangements or arrangements with competitors) that may conflict with the performance of their duties or Paragon's interest.
2. Taking for themselves personally opportunities that are discovered through the use of Paragon property, information, or position, using corporate property, information or position for personal gain, or competing with Paragon.
3. Taking unfair advantage of any customer, supplier, competitor, or other Paragon employee through manipulation, concealment, abuse of privileged information, misrepresentation of material fact, or any other unfair dealing practice.
4. Soliciting or demanding, or accepting or agreeing to accept, anything of value from any person in conjunction with the performance of their duties to Paragon.
5. Accepting personal fees, commissions, other compensation paid, or expenses paid or reimbursed from others, not in the usual course of Paragon's business, in connection with any business or transaction involving Paragon.
6. Acting on behalf of Paragon in any transaction involving others with whom employees or their immediate families have any significant direct or indirect financial interest.
7. Using confidential information about Paragon or its businesses, employees, or customers, consumers or suppliers for personal benefit or disclosing such information to others outside of job duties.
8. Misusing Paragon's electronic message communications system.
9. Permitting Paragon property (including data transmitted or stored electronically and computer resources) to be damaged, lost, or used in an unauthorized manner.
10. Making any political contribution of money or other property on behalf of Paragon that would violate federal or state law.
11. Doing any of the above actions indirectly through another person.
Employees are prohibited from:
1. Borrowing money from customers or suppliers unless the customer or supplier is a financial institution that makes such loans in the ordinary course of its business.
2. Purchasing property, whether real, personal or intangible, from Paragon without the approval of the executive management officer responsible for the employee's business unit or such executive management member's designee unless Paragon makes a general offer of extraneous company property to employees on a non-discriminatory basis. Property obtained by Paragon through repossession or foreclosure and sold by Paragon, however, may under no circumstances, be purchased by an employee or any member of an employee's immediate family.
3. Selling property or services to Paragon unless in an annual amount of not more than $500 and approved by a member of executive management.
4. Providing Paragon customers with legal, tax or investment advice; or recommending attorneys, accountants, securities dealers, insurance agents, brokers, real estate agents, or other service providers if the advising employee receives a personal reciprocal benefit for the referral from the service provider.
5. Engaging or investing in any business which directly or indirectly competes with services provided by Paragon or any subsidiary of Paragon, except where such an investment represents insignificant ownership in a publicly traded company. The making of any investment is subject to Section A.1 of the Code of Ethics.
6. Engaging in excessive speculation, borrowing or gambling.
7. Doing any of the above actions indirectly through another person.
An employee may accept normal business amenities that facilitate the discussion of business, foster good business relations, or serve some other demonstrable business purpose. Gifts of nominal value may be accepted from present or prospective customers, suppliers, or vendors with whom an employee maintains an actual or potential business relationship, but generally must not exceed, in the aggregate, $200 in value, from any one individual/entity in any one calendar year unless approval is obtained from the employee's immediate supervisor and a member of executive management. Discounts and price reductions not generally available to others are considered gifts. Employees may not accept cash gifts in any amount and must report any such attempted gift to their immediate supervisor. Further, employees are expressly prohibited from soliciting, demanding or accepting anything of value with the intent to be influenced or rewarded in connection with any business transaction or relationship involving Paragon. The term "gift" does not include any discounts or programs that are available to all employees under a general offer that has been approved by Paragon's Human Resources Manager.
Reasonable entertainment may be engaged in between an employee and present or prospective customers, suppliers or vendors. However, the value of such entertainment may not exceed, in the aggregate, $200 per calendar year unless the customer, supplier, or vendor is present. For purposes of this Code of Ethics, "reasonable entertainment" means entertainment, the purpose of which is to hold bona fide business discussions, and for which the expense would be paid by Paragon as a reasonable business expense if Paragon had paid the expense itself.
If there is any question about the propriety or reasonableness of any entertainment, such as when the host will not be present, the employee should secure the approval of the employee's immediate supervisor and a member of executive management. A waiver from the employee's immediate supervisor and a member of executive management is also required for any entertainment in excess of $200 in value if customer, supplier or vendor is not present or for any gift in excess of $200 in value. Approval of the employee's immediate supervisor and a member of executive management is required for all out-of-town sporting or other social events even if the customer, vendor, or supplier will be present, and the employee may accept only the ticket to the event and any meals and entertainment served or provided in conjunction with the event. In the event that an employee is offered or receives something of value beyond what is authorized in this Code, the employee must promptly disclose such fact to a member of executive management. An employee must report to a member of executive management any potential bequest in excess of $200 to the employee under the will or trust instrument of a customer, vendor or supplier of Paragon, whether or not Paragon is the fiduciary named under such instrument, unless the customer, vendor, or supplier is a member of the employee's immediate family. Bequests in excess of $200 shall be subject to a waiver from the employee's immediate supervisor and a member of executive management.
No loans shall be made to any director or employee other than in the ordinary course of business by Paragon or any of its subsidiaries. All directors and executive officers of Paragon and any bank subsidiaries are subject to the provisions of Regulation O of the Federal Reserve Board of Governors with regard to all extensions of credit from Paragon and all directors and executive officers of Paragon are subject to the provisions of the Sarbanes-Oxley Act of 2002 for extensions of credit made or arranged by Paragon or its subsidiaries.
In certain circumstances, Paragon employees are prohibited from accessing or viewing personal information of customers or consumers of another Paragon affiliate, from sharing non-public information about Paragon customers or consumers with unaffiliated third parties, and from marketing to Paragon customers or prospective customers. For specific information about customer privacy requirements, see Paragon's Privacy Guidelines.
All employees are expected to demonstrate the ability to properly manage their personal finances, particularly the prudent use of credit. Employees who encounter personal financial problems are encouraged to obtain counseling through the Employee Assistance Program.
C. Holding Office/Appointments
1. The written approval of a member of executive management responsible for the employee's business unit, or such management member's designee and the supervisor of the employee, is needed before an employee may become a director, officer, or partner of any business organized for profit. If such service is on behalf of Paragon, the employee must turn over all compensation received by the employee for such service to Paragon other than reimbursement of out-of-pocket expenses.
2. Employees are encouraged to participate in organizations that are involved in charitable, educational, or community activities, and no approval is needed for involvement with such organizations. Employees may receive indemnification or insurance protection from Paragon for such activities if they are not of a personal nature. Contact Michael Erhardt to discuss indemnification or insurance for your activity.
3. Employees are encouraged to participate in civic and political activities. An employee may hold a part-time elective or appointive office provided the employee receives the written approval of his or her immediate supervisor and a member of executive management with full disclosure concerning the time involved and the compensation, if any, to be received. When an employee seeks a political office, the employee must obtain an opinion from the political entity's legal counsel stating that the employee's candidacy is not prohibited and that the employee's election or appointment will not bar the political entity from doing business with Paragon.
4. Employees must avoid appointments, including fiduciary appointments, which may conflict with the performance of their duties for Paragon or otherwise interfere with their employment relationship with Paragon. All fiduciary and other appointments, except those on behalf of the employee's immediate family members, must be approved by the employee's supervisor and a member of executive management prior to the employee's acceptance of the appointment.
5. If prior to the next certification period, the employee's responsibilities within Paragon change, the employee must repeat any required approval process with the new manager even though a position/appointment was approved by the employee's former manager.
D. Internal Controls
It is the legal responsibility of Paragon to develop and maintain systems of internal controls that permit the preparation of its financial statements in accordance with applicable laws, rules, and accounting principles.
Employees, officers and directors must comply with all internal control procedures established by the Paragon for the safeguarding of assets and proper reporting and disclosure of financial information.
No one shall, directly or indirectly, knowingly falsify or cause to be falsified any book, record or account of Paragon. This includes expense accounts, approval of invoices submitted by vendors, records of transactions with customers, records of disposition of company assets, records of consumers, or any other record.
Any employee who becomes aware, directly or indirectly, of inadequate controls, a failure of controls, or a circumvention of controls, or that transactions, or other items, are improperly recorded on Paragon's books or records, must promptly report the situation to the chairperson of Paragon's Audit and Compliance Committee:
E. Ensuring the Integrity of Records
Glenn W. Cofield
322 St. Andrews Fairway
Memphis, TN 38111
Records and accounting information must be accurate and maintained with reliability and integrity. Transactions must be reflected in an accurate and timely manner. Policies should prohibit false entries and activities that result in false entries.
F. Questionable Accounting or Auditing Matters
Any employee who is concerned about an accounting or auditing matter involving Paragon that the employee believes is questionable may anonymously contact the chairperson of the Paragon Audit and Compliance Committee:
Glenn W. Cofield
322 St. Andrews Fairway
Memphis, TN 38111
The report will be treated confidentially.
G. Trading in Paragon Stock
No director or employee shall buy, sell, donate, or otherwise participate in a transaction involving Paragon stock while in possession of information concerning Paragon which has not been released to the general public, but which when released may have an impact on the market price of Paragon stock. Any question concerning the propriety of participating in a Paragon stock transaction should be directed to Lewis Perkins, Chief Financial Officer, at 273-2906.
H. Trading in the Stock of Paragon Customers, Suppliers, or Vendors
1. No employee may invest in the securities of a customer of Paragon if the employee participates in or is expected to participate in or is responsible for extensions of credit to the customer or if the customer's securities are publicly traded and the employee has nonpublic information concerning the customer at the time of the proposed investment. If the employee participates in or is responsible for decisions involving non-credit business transactions with the customer, the employee must comply with any investment policy applicable to the employee's line of business before making an investment in the customer's securities. In no case may the employee invest in the customer's securities until after making disclosure of the proposed investment to the employee's immediate supervisor, to the person approving the transaction with the customer, and to a member of executive management.
Supplier or Vendor Securities
2. No employee may invest in the securities of a supplier or vendor if the employee participates or is expected to participate in or is responsible for decisions involving business transactions with the supplier or vendor or if the securities are publicly traded and the employee has nonpublic information about the supplier or vendor at the time of the proposed investment. If an employee has an existing investment in the securities of a supplier or vendor of Paragon and such employee participates or is expected to participate in or is responsible for decisions involving business transactions with the vendor or supplier, the employee shall promptly disclose the investment to his or her immediate supervisor and to a member of executive management and shall refrain from further participation in such decisions unless expressly authorized in writing by his or her immediate supervisor and member of executive management. An employee may make an insubstantial investment in the publicly traded securities of a supplier or vendor even though such employee participates or is expected to participate in or is responsible for decisions involving the supplier or vendor if the employee obtains the prior approval of the employee's immediate supervisor and a member of executive management.
I. Full and Fair Disclosure
Employees, officers, and directors are required to make full, fair, accurate, timely, and understandable disclosure in reports and documents that Paragon files with, or submits to any regulator agency and in other public communications made by Paragon.
All employees, officers, and directors are required to respond honestly and candidly when dealing with the bank’s independent and internal auditors, regulators and attorneys.
1. Each director and employee of Paragon shall act on Paragon's behalf in a manner that complies with all laws, rules, and regulations under which Paragon must operate. (As an example, Paragon is required to report large cash transactions and certain types of monetary instruments as a means of preventing crimes such as money laundering and tax evasion. See Paragon's policy and procedure on the Bank Secrecy Act.) Any employee who becomes aware, either directly or indirectly, of a Paragon employee's violation of a law involving a breach of trust must report the violation promptly to Paragon's Security Officer, Paragon's Auditor, or a member of executive management.
2. If an employee becomes aware of or suspects embezzlement, false entries in Paragon's records, false statements to Paragon's regulators, false statements by customers or consumers (where the employee knows that the statement is false or has reason to inquire as to its falseness), or any fraud or potential fraud, or other criminal violation involving Paragon, its employees or customers, such employee must immediately contact Paragon’s security officer, Paragon's Auditor, or a member of executive management
3. An employee who is convicted of a crime, including a crime involving a breach of trust or a crime classified as a felony, has entered into a pretrial diversion or similar program in connection with such offense, or who becomes subject to a suspension or removal order by a bank regulatory agency, must report the event to the employee's immediate supervisor.
1. It is the responsibility of each supervisor to train and supervise employees so that they are able to perform their jobs in a competent manner and in conformity with Paragon's policies, including the Code of Ethics. When assigning responsibilities to an employee, it is the supervisor's responsibility to ensure that the employee has demonstrated the capability to discharge the assigned responsibility in conformity with the Code of Ethics. It is also the supervisor's responsibility to ensure that all employee questions concerning the operation and requirements of the Code of Ethics are fully addressed and understood by each employee. Whenever an employee violates the Code of Ethics, the adequacy of the employee's training and supervision will be reviewed.
1. Whenever a disclosure, approval, or waiver is required by the Code of Ethics, employees shall promptly make a written report with a full account of the circumstances to their immediate supervisor and a member of executive management.
2. New employees shall either receive a printed copy or be directed to review an electronic version of the Code of Ethics as a part of their Paragon employee orientation.
3. All supervisors are responsible for reviewing the Code of Ethics with their subordinates each time a new edition of the Code is published.
4. Each employee is responsible for reporting to either Paragon's Auditor or a member of executive management any activity that may violate the Code, whether the activity involves the employee or another Paragon employee. Paragon will not permit any retaliation against an employee who reports the activity, nor will the employee be subject to discipline, absent a knowingly false report.
5. The Code of Ethics is part of Paragon's personnel policies so that employees who violate the Code are subject to the disciplinary measures set forth in those policies up to and including termination.
6. Waivers to Paragon directors and executive officers of any provision of the Code of Ethics shall only be granted by the Paragon Audit and Compliance Committee and may be disclosed to Paragon shareholders.
7. Management will provide periodic training regarding the Code of Ethics.
8. Employees, officers, and directors will annually acknowledge that they are in compliance with this Code of Ethics.
9. The internal auditor will include adherence to this Code as part of its annual audit program.