Annual Report — Form 10-K
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EXHIBIT 14. CODE OF ETHICS 02/17/04
CITIZENS FIRST NATIONAL BANK OF PRINCETON
PRINCETON, ILLINOIS
POLICY RELATING TO CONFLICT OF INTEREST & CODE OF ETHICS
A. General Statement
-----------------
1. The Directors, Officers and Employees of this Bank have
established a reputation over a long period of years for their
high level of ethical and legal conduct, integrity and sound
judgment. This policy in no way suggests that anyone now
associated with the Bank does not meet these standards; yet,
with changing times and the substantial growth in staff and
services performed, basic policies relating to conflict of
interest, self-dealing and code of ethics need to be
reaffirmed.
2. The long-term success of the Bank is contingent upon the
complete confidence of its customers and the community. This
is an area where there can be no compromise with the highest
standards.
3. A conflict of interest exists where a Director, Officer or
Employee, or a member of their family has a financial
interest, direct or indirect, in a customer, supplier or other
principal, dealing with the Bank, and that interest is of such
extent or nature that it might reasonably affect their
judgment or their decisions exercised on behalf of the Bank.
It is the policy of this Bank that Directors, Officers and
Employees must avoid personal transactions in which their
personal interest will conflict, or appear to conflict, with
the best interest of the Bank or the Bank's customers.
4. Directors, Officers and Employees shall not enter into any
business transaction with a Bank customer or fiduciary in
which they receive a personal benefit to the detriment of the
customer or fiduciary (referred to as self-dealing) due to
knowledge and/or position they have with the Bank.
5. Conflicts of interest may occur in a number of ways. Below are
several statements covering possible situations of conflict;
they are not all-inclusive, but are set out as guides for the
Bank's staff. All potential conflicts of interest must be
disclosed to the CEO.
B. Outside Business Interests
--------------------------
1. Where an Officer or Employee or any member of their immediate
family has a significant financial interest in any business
other than the Bank, they shall report the existence of such
interest to the CEO.
2. No Officer or Employee with a significant financial interest
in a business shall make or
46
approve any bank loan to that business or any bank purchase
from that business or shall exercise any discretionary
authority whatsoever with respect to any other transaction or
course of dealing between the business and the Bank.
3. When requested, Officers and their spouses will submit
detailed combined personal financial statements to the
Directors' Audit Committee and the CEO. Such information will
be confidential and restricted to review by the above
individuals.
C. Outside Business Activities
---------------------------
1. No Officer or Employee shall engage in or continue in any
outside business activity, as an individual owner or as a
principal with others, unless such activity shall have been
reported to and approved by the CEO.
2. No Officer or Employee shall engage in an outside business
activity that is of such nature that participation will be
detrimental to the best interests of the Bank and/or its
customers.
3. Under no circumstances shall any Officer or Employee own or
operate any outside business involving the lending or
investing of money or the rendering of any other service
offered by the Bank, except with approval of the CEO.
D. Outside Employment
------------------
1. In no instance shall an Officer or Employee engage in any
outside employment which might reasonably subject the Bank to
criticism or adverse publicity, or which will encroach on Bank
working time or necessitate such long hours as to affect their
physical or mental effectiveness at the Bank.
2. No Officer or Employee shall be affiliated as an Employee or
any other capacity with any business or financial institution,
which provides services that are in direct competition with
services provided by this Bank.
3. In all instances of existing or proposed outside employment:
a. Officers shall report such to the CEO.
b. Employees shall report to their immediate supervisor.
E. Outside Businesses for Profit Directorships
-------------------------------------------
1. The Bank recognizes the value to itself, to the individual,
and to the outside corporation, of having the Bank's Officers,
Employees and Directors serve as Directors of outside
corporations and has no policy against such directorships
where the circumstances are appropriate and no real or
apparent conflict of interest is involved.
47
CONFLICT OF INTEREST
2. With respect to Officers and Employees, however, all existing
outside directorships shall be reported to the CEO on an
annual basis, and all proposed new directorships must first be
cleared with the CEO before acceptance.
3. No Officer or Employee serving as a Director of an outside
corporation shall make or approve any bank loan to that
corporation or any bank purchase from that corporation or
shall exercise any discretionary authority whatsoever with
respect to any other transaction or course of dealing between
the corporation and the Bank.
F. Bank Bribery Amendments Act of 1985
-----------------------------------
Title 18 U.S.C. S215 states "whoever, as an officer, director,
employee, agent, or attorney of a financial institution, corruptly
solicits or demands for the benefit of any person, or corruptly accepts
or agrees to accept, anything of value from any person, intending to be
influenced or rewarded in connection with any business or transaction
of such institution; shall be fined not more than $1,000,000 or three
times the value of the thing given, offered, promised, solicited,
demanded, accepted, or agreed to be accepted, whichever is greater, or
imprisoned not more than 30 years, or both, but if the value of the
thing given, offered, promised, solicited, demanded, accepted, or
agreed to be accepted does not exceed $1,000, shall be fined under this
title (18) or imprisoned not more than one year, or both."
Directors, Officers and Employees shall not accept anything of value in
connection with a banking transaction. In addition, they shall not
accept anything of value exceeding $50 (including discounts on
merchandise or services) from any person doing business with the Bank.
As an exception to this policy, Directors, Officers and Employees of
the Bank may accept certain discounts from Citizens First National
Investment Services that are generally offered to all such individuals
at locations where Citizens First National Investment Services
maintains an office. Such limitation will allow for those gratuities,
which are generally extended in a normal business/social relationship,
but should serve as a restraint to undue influence upon the bank staff.
If a Director, Officer or Employee is offered or receives something of
value beyond the above limit, then the individual receiving the thing
of value must report the incident to the CEO.
G. Civic, Charitable, Professional and Political Activities
--------------------------------------------------------
1. The Bank encourages its Officers and Employees to participate
in worthy civic, charitable and professional activities.
a. As a general rule, however, no such activity shall be
permitted to infringe on or impair to any significant
extent the time or efficiency of the duties and
services of the participating Officer or Employee
with the Bank.
b. If an assignment with any such activity is likely to
involve any significant amount of Bank time, the
Officer or Employee shall first obtain the approval
of the head of his department before accepting any
such assignment.
2. The Bank also encourages its Officers and Employees to
exercise, as individuals, the prerogatives of good citizenship
and to participate, as individuals, directly or indirectly in
all elective processes at every level of government.
48
CONFLICT OF INTEREST
a. Any Officer or Employee, however, who engages
directly or indirectly in any form of political
activity shall notify the CEO before becoming
involved and shall clearly and publicly do so as an
individual and not as a representative of the Bank.
b. As a general rule, no political activity of any kind
shall be permitted to infringe on or impair to any
significant extent the time or efficiency of the
duties and services of the participating Officer or
Employee with the Bank.
c. No Officer or Employee shall accept a nomination or
appointment to any public office without first
obtaining the approval of the CEO.
H. Compensation for Outside Services
---------------------------------
1. No Officer or Employee may receive compensation for an outside
service if the Bank provides such service, except as hereafter
provided.
2. Officers and Employees may receive outside services
compensation under the following conditions:
a. Income tax service.
b. Bookkeeping and/or accounting work.
c. Clerking public auctions.
Inasmuch as clerking sales has been a service provided through
the Bank by individual Officers for many years after and
during banking hours, Senior Management will determine which
Officers will participate in clerking sales. However, in the
event that individuals from the Bank clerk a sale in which the
customer is a CFNB customer and in financial distress and
there is a danger of loss to the Bank, it is expressly
understood that no clerking fees will be received by any
member of the Bank's staff.
d. Managing farms and other real estate as Trustee or
Fiduciary.
e. Other services as approved by the CEO.
3. Staff members will not actively participate in insurance, real
estate or stock brokerage sales for compensation.
I. Serving as an Individual Fiduciary
----------------------------------
1. No Staff Member shall act solely or in conjunction with anyone
else in a fiduciary capacity except for (a) members of their
immediate family, or (b) with the prior approval of the CEO.
2. In all instances in which a Staff Member has knowledge that
they have been named executor or trustee or in any other
fiduciary capacity, solely or in conjunction with anyone else,
or that they have been named a beneficiary under the will of
any customer that is not a member of
49
CONFLICT OF INTEREST
their family, they shall report such fact promptly to the CEO.
3. Where a Staff Member is authorized to act on behalf of another
in a fiduciary capacity (excluding a member of their immediate
family or a nonprofit community organization) in any dealings
with the Bank, before exercising such authority, they shall
advise the CEO in writing, setting out the nature of the
signing authority, including access to safe deposit boxes and
other areas of authority under which the Officer or Employee
will act.
J. Sale or Purchase of Securities or Other Property
------------------------------------------------
1. No Officer or Employee (or member of their immediate family)
having knowledge of recommendations or proposed action
resulting from the Bank's investment research studies shall
make use of such knowledge in a manner which may affect
adversely the market price or availability of securities which
the Bank or its customers may buy or sell as the result of
such research studies.
2. In purchasing new issues of securities through the Bank, all
needs of the Bank's trust accounts shall be satisfied before
any Officer, Employee or Director, or member of their
immediate family, shall receive any part of his personal
order.
3. Any purchase or sale of securities through the Bank by any
Officer, Employee or Director, or member of their immediate
family, shall be handled in such a way that the broker is
clearly informed that the order is not a Bank or Trust
Department Order. In such instances, however, the name of the
purchaser or seller need not necessarily be revealed to the
broker at the time the order is placed.
K. Purchase of Assets from the Bank
--------------------------------
No Officer, Employee or Director, or member of their immediate family,
shall purchase real or personal property offered for sale by the Bank
individually or in a fiduciary or agency capacity, where such property
is held in a trust account or has been acquired by the Bank by
foreclosure or repossession (whether for the Bank or on behalf of
another Bank).
L. Loans and Other Obligations
---------------------------
1. No Officer or Employee shall borrow money from or become
obligated in any way directly or indirectly, to any of the
Bank's customers or suppliers except for:
a. Loans (at current rates of interest) from other banks
or other public lending institutions.
b. Normal charge accounts or personal bills of a normal
nature arising in a way as if, and subject to the
same terms, conditions, and treatment, no
identification with an Officer or Employee of the
Bank were involved.
c. Other exceptions as approved by the CEO.
2. Loans to Staff Members
50
CONFLICT OF INTEREST
a. Executive Officers may obtain real estate loans from
the Bank, provided they are sold in the secondary
market; however, such borrowings must conform to the
appropriate regulations.
b. Other Officers and Employees may borrow from the Bank
with the approval of the Senior Loan Officer,
Commercial Banking Managers, Senior Vice President -
Consumer Banking, or the CEO. Loans will be granted
only if such requests meet current loan standards as
provided in the Bank loan policy.
c. Assumptions of real estate loans by any Officer or
Employee are authorized providing, however, that any
such assumptions must conform to current regulatory
requirements.
3. Nothing herein shall relieve any Officer of the responsibility
of making a written report to the Board of Directors as
required by Regulatory Agencies stating the date, amount,
security and purpose of any loan obtained by any such Officer
from any other Bank.
4. When acting for the Bank, no Officer or Employee shall make or
approve any loan to or purchase from (1) any member of their
immediate family or (2) any business in which a member of
their immediate family has a significant financial interest,
or shall exercise any discretionary authority whatsoever with
respect to any other transaction or course of dealing between
the Bank and any such family member of business.
M. "Insider Trading" by Officers, Employees & Directors
----------------------------------------------------
1. Care must be taken by every Officer, Employee and Director to
avoid improper actions in buying or selling securities, either
personally or by the Trust Department of the Bank, based on
so-called "insider information" or on other confidential
information which might affect the market price of corporate
securities.
2. No Officer, Employee or Director or member of their immediate
family, shall make use of any significant information coming
to their attention, by virtue of their position with the Bank
about the affairs of Citizens First National Bank, in buying
or selling the stock of Princeton National Bancorp, Inc.,
either personally or for trust accounts or in advising others
to buy or sell such stock, until such information has been
made available generally to the market and all stockholders of
Princeton National Bancorp, Inc.
3. This is not meant to preclude the purchase or sale of
Princeton National Bancorp, Inc. stock by Officers, Directors
and/or Employees that may from time to time be made available
to them in the normal course of business.
N. Use of Bank Services by Officers and Employees
----------------------------------------------
1. When utilizing a type of service provided and offered by
Citizens First National Bank, Officers will, if at all
possible, use the services of the Bank, except in those
situations where the service is of such type that a member of
the family can provide the service.
2. Employees and their families are encouraged to use Bank
services when such services are
51
CONFLICT OF INTEREST
applicable to their needs.
O. Code of Ethics
--------------
A Code of Ethics sets forth a discipline of moral duty and conduct in
support of the demanding standards of a profession. The Bank has a
professional obligation to its customers, directors, and the general
public. This obligation can best be met through adherence to a Code of
Ethics. Individual professional judgment is essential in the
application of this Code.
The Code
1. Discharge your responsibilities with thoroughness, competency,
honesty, and objectivity.
2. Examine and/or review sufficient factual information before
presenting a report or making a decision.
3. Respect the confidentiality and proprietary nature of
information received in the performance of your duties,
refrain from using such information for personal gain and not
knowingly permit any other person to use such information for
personal gain.
4. Refrain from entering into any activity that is in conflict
with the interest of the Bank. Avoid activities or the
acceptance of anything of value that prejudices your ability
to objectively discharge your professional duties and
responsibilities.
5. Report individual misconduct and unlawful practices to an
Executive Officer of the Bank.
6. Strive to enhance the knowledge and skills necessary to
competently and effectively perform your duties.
7. Maintain high standards of ethical conduct and character in
both professional and personal activities.
8. Uphold the standards and responsibilities of Citizens First
National Bank.
P. Directors
---------
Most potential conflict of interest situations occur involving Officers
and Employees; however, where applicable, this policy also applies to
Directors. In addition to the previously stated policies, Directors
also will adhere to the additional:
1. In general, Directors will not receive any special
consideration relative to Bank services normally provided to
Bank customers.
a. Loan standards (quality and terms) using comparable
analysis procedures will be applied to Directors'
loan applications and loans on the same basis as
other loan customers. This does not suggest that the
Bank will not make loans to Directors, but clearly
defines that the Directors will not be granted
preferential status. This policy also applies to the
Directors' immediate families and any partnership or
corporation in
52
CONFLICT OF INTEREST
which the Director owns a substantial interest.
b. Directors shall not be granted preferential interest
rates on loans.
c. All loans and/or lines of credit will be individually
approved by Board action.
2. Bank Directors may not serve as a Director of another
organization that provides services of any type that are
comparable to services provided by the Bank, if the
organization has an office located within the Bank's market
area, unless the organization is an affiliate of the parent
bank holding company.
3. Directors will not utilize any information made available to
them due to position as a Director relative to Bank customers
for personal benefit or benefit to their immediate family or
any organization in which the Director is a substantial owner.
4. Individual Bank Directors will not be in a business that
provides services comparable to any service provided by the
Bank, without prior knowledge and approval of the entire
Board.
5. Directors shall not perform any act or be associated with any
business or organization whereby in doing so the act or
relationship would be obviously detrimental to the welfare of
the Bank.
6. As part of their Board responsibility, Directors will use the
services provided by the Bank and are encouraged not to
utilize similar services provided by other individuals and/or
organizations.
Q. Training
--------
The Bank's Conflict of Interest & Code of Ethics Policy will be
reviewed with new employees during their new employee orientation.
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