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Executive Officer Code of Ethics

OVERVIEW:

The honesty, integrity and sound judgment of the Chief Executive Officer and Executive Officers is fundamental to the reputation and success of The Bank of the Pacific and its parent company Pacific Financial Corporation (jointly referred to as “Bank”). The Bank has a Code of Business Conduct Policy applicable to all directors, officers, and employees. The Chief Executive Officer and Executive Officers are required to adhere to that Code of Business Conduct at all times as set forth therein. In addition, the Chief Executive Officer and all Executive Officers, as defined below, are required to adhere to an additional Code as set forth below (the “Executive Officer Code of Ethics”). By their written acknowledgment of their receipt and understanding of the terms and provisions of the Executive Officer Code of Ethics, each of them agrees to observe, perform and keep the terms and provisions thereof.

 

EXECUTIVE OFFICER CODE OF ETHICS

APPLICABILITY AND PURPOSE:

This Executive Officer Code of Ethics applies to the Chief Executive Officer and all Executive Officers. The Bank’s Executive Officers are the Chief Financial Officer, the Chief Credit Officer and the Cashier/Controller.

This Executive Officer Code of Ethics is intended to deter wrongdoing and to promote:

1. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

2. Full, fair, accurate, timely, and understandable disclosure in all public communications made by the Bank and in all reports and documents that the Bank files with, or submits to, State or Federal regulatory agencies;

3. Compliance with applicable governmental laws, rules and regulations;

4. The prompt internal reporting of violations of this Executive Officer Code of Ethics to an appropriate person or persons identified in this Executive Officer Code of Ethics; and

5. Accountability for adherence to this Executive Officer Code of Ethics.

 

REQUIREMENTS FOR CHIEF EXECUTIVE OFFICER AND EXECUTIVE OFFICERS:

1. The Chief Executive Officer and Chief Financial Officer are responsible for full, fair, accurate, timely, and understandable disclosure in the periodic reports required to be filed by the Bank with State and Federal regulatory agencies and Proxy Statements. Accordingly, the Chief Executive Officer and each Executive Officer shall promptly bring to the attention of the Audit Committee any material information of which he or she may become aware that affects the disclosures made by the Bank in its public filings and to otherwise assist the Audit Committee in fulfilling its responsibilities.

 

In addition, in order to cultivate full, fair, accurate, timely, and understandable disclosure in all public communications made by the Bank and in all reports and documents that the Bank files with, or submits to, State and Federal regulatory agencies, the Chief Executive Officer and each Executive Officer must:

(a) Act in good faith, with due care, competence and diligence, without misrepresenting material facts or allowing independent judgment to be subordinated;

(b) Provide colleagues with information that is accurate, complete, objective, relevant, timely and understandable; and

(c) Share knowledge and maintain skills necessary and relevant to the Bank’s needs.

 

2. The Chief Executive Officer and Executive Officers must act at all times in an honest and ethical manner. The Chief Executive Officer and each Executive Officer shall promptly bring to the attention of the Audit Committee any information he or she may have concerning:

(a) significant deficiencies or material weaknesses in the design or operation of internal controls which could adversely affect the Bank’s ability to record, process, summarize and report financial information or;

(b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the Bank’s financial reporting, disclosures or internal control over financial reporting.

 

3 The Chief Executive Officer and each Executive Officer must avoid actual or apparent conflicts of interest, including those arising in personal and professional relationships. The Chief Executive Officer and each Executive Officer shall promptly bring to the attention of the Audit Committee or the Chief Executive Officer and, if not promptly and appropriately acted upon, then to the Chairman of the Board any information he or she may have that impacts the full, fair, accurate, timely, and understandable disclosure in the periodic reports required to be filed by the Bank with State or Federal regulatory agencies and in other public communications made by the Bank or that impacts the Bank’s internal controls, including any actual or apparent conflicts of interest between personal and professional relationships involving any management or other employees who have a significant role in the Bank’s financial reporting, disclosures or internal control over financial reporting.

 

4. The Chief Executive Officer and each Executive Officer must comply with applicable governmental laws, rules and regulations. The Chief Executive Officer and each Executive Officer shall promptly bring to the attention of the Audit Committee or the Chief Executive Officer and, if not promptly and appropriately acted upon, then to the Chairman of the Board any information he or she may have concerning evidence of a material violation of the securities or other laws, rules or regulations applicable to the Bank and the operation of its business, by the Bank or any agent thereof, or of violation of this Executive Officer Code of Ethics.

 

5. The Chief Executive Officer and Chief Financial Officer bear particular responsibility for the compliance by the Bank with the financial reporting requirements of the securities laws to which the Bank is subject. Accordingly, and in compliance with Section 304 of the Sarbanes-Oxley Act of 2002, if the Bank is required to prepare an accounting restatement due to the material noncompliance of the Bank, as a result of misconduct, with any financial reporting requirement under the securities laws, the Chief Executive Officer and Chief Financial Officer shall each reimburse the Bank for (a) any bonus or other incentive-based or equity-based compensation received by him or her from the Bank during the 12-month period following the first public issuance or filing with State or Federal regulatory agencies (whichever occurs first) of the financial document embodying such financial reporting requirement, and (b) any profits realized from the sale of securities of the Bank during that 12-month period. The provisions of this paragraph are not exclusive and apply in addition to any other remedies the Bank may have, whether by law, agreement, policy, or otherwise, against either of the Chief Executive Officer and Chief Financial Officer as a result of any misconduct by him or her related to such an accounting restatement or the circumstances giving rise to such an accounting restatement.

 

6. The Chief Executive Officer and each Executive Officer agree not to become employees of the Bank’s independent auditing firm for a period of one (1) year following termination of employment with the Bank, or such other period as may be prescribed from time to time by the Securities and Exchange Commission as the requisite “cooling-off” period under its rules regarding auditor independence, in order to ensure the continued independence of such firm.

 

ADMINISTRATIVE MATTERS:

1. The Audit Committee shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of this Executive Officer Code of Ethics by the Chief Executive Officer or any Executive Officer. The Audit Committee shall design such actions to reasonably deter wrongdoing and to promote accountability for adherence to this Executive Officer Code of Ethics, and may include written notice to the individual involved that the Committee has determined that there has been a violation, censure by the Committee, demotion or re-assignment of the individual involved, suspension with or without pay or benefits (as determined by the Committee), and termination of the individual’s employment. In determining what action is appropriate in a particular case, the Audit Committee or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action and whether or not the individual in question had committed other violations in the past.

 

2. The Bank will make this Executive Officer Code of Ethics available to the public through one or more of the following methods:

(a) Filing as an exhibit to the Bank’s Annual Report on Form 10-K beginning with the year ended December 31, 2003 (the “2003 Annual Report”); or

(b) Posting on the Bank’s Internet website (www.BankofthePacific.com ) together with disclosure in the Bank’s 2003 Annual Report, of the Internet website address and the fact that the Bank has posted this Executive Officer Code of Ethics on its Internet website.

 

3. The Audit Committee shall have the sole and absolute discretionary authority to approve any deviation or waiver from this Executive Officer Code of Ethics. Any waiver, including an implicit waiver, shall be promptly disclosed to the full Board. Such disclosure shall include a brief description of the nature of the waiver, the name of the person to whom the waiver was granted, and the date of the waiver. For purposes of such disclosure, the term “waiver” means the approval by the Audit Committee of a material departure from a provision of this Executive Officer Code of Ethics, and the term “implicit waiver” means the Audit Committee’s failure to take action within a reasonable period of time regarding a material departure from a provision of this Executive Officer Code of Ethics that has been made known to an executive officer of the Bank.