Audit Committee

Purpose

To assist Board of Directors in fulfilling its oversight responsibilities for financial reporting process, system of internal controls, and internal and external audit process, and the company's process for monitoring compliance with laws and regulations and the code of conduct.

Authority

Audit Committee has authority to conduct or authorize investigations into any matters within its scope of responsibility. It is empowered to:

• Appoint, compensate, and oversee work of any registered public accounting firm employed by the organization.
• Resolve disagreements between management and auditor regarding financial reporting.
• Pre-approve all auditing and non-audit services.
• Assume an ongoing investigation or conduct an investigation without the Auditor or Ethics Committee participation
• Retain independent counsel, accountants, or others to advise Committee or assist in investigation as considered necessary.
• Seek any information it requires from employees-all of whom are directed to cooperate with Committee's requests-or external parties.
• Meet with company officers, external auditors, or outside counsel, as necessary.

Composition

Audit Committee will consist of at least three and no more than six members of Board of Directors. Board or its Nominating Committee will appoint Committee members and Committee chair. Each Committee member will be both independent and financially literate.

Meetings

Committee will meet at least four times a year, with authority to convene additional meetings, as circumstances require. Committee members are expected to attend each meeting. Committee will invite members of management, auditors or others to attend meetings and provide pertinent information, as necessary. Committee will hold private meetings with auditors and have executive sessions. Meeting agendas will be prepared and provided in advance to members, along with appropriate briefing materials. Minutes will be prepared.

Responsibilities

Committee will carry out the following responsibilities:

Financial Statements

• Review significant accounting and reporting issues, including complex or unusual transactions and highly judgmental areas, and recent professional and regulatory pronouncements, and understand their impact on financial statements.
• Review with management and external auditors results of audits.
• Review process of completion of annual financial statements, and consider whether statements are complete and consistent with information known to committee members.
• Review process of completion of other annual report sections and related regulatory filings before release.
• Review with management and external auditors all matters required to be communicated to Committee under Generally Accepted Auditing Standards.
• Understand how management develops interim financial information, and nature and extent of internal and external auditor involvement.
• Review process of completion of interim financial reports with management and external auditors before filing with regulators, and consider whether they are complete and consistent with information known to Committee.

Internal Control

• Consider effectiveness of company's internal control system, including information technology security and control.
• Understand scope of internal and external auditors' review of internal control over financial reporting, and obtain reports on significant findings and recommendations, together with management's responses.

Internal Audit

• Review with management and chief audit executive charter, plans, activities, staffing, and organizational structure of internal audit function.
• Ensure there are no unjustified restrictions or limitations, and review and concur in appointment, replacement, or dismissal of chief audit executive.
• Review effectiveness of internal audit function, including compliance with The Institute of Internal Auditors' Standards for the Professional Practice of Internal Auditing.
• On a regular basis, meet separately with chief audit executive to discuss any matters that Committee or internal audit believes should be discussed privately.
• Determine hiring, retaining or dismissing a chief internal audit executive as well as proposed performance evaluations and compensation changes.
• Delegate to chief audit executive receipt and handling of complaints related to accounting, internal accounting controls, and auditing matters. Oversee reports of complaints by reviewing preliminary, ongoing, and completed investigations making recommendations for outside counsel. Participate in investigation process as needed.

External Audit

• Review external auditors' proposed audit scope and approach, including coordination of audit effort with internal audit.
• Review performance of external auditors, and exercise final approval on appointment or discharge of auditors.
• Review and confirm independence of external auditors by obtaining statements from auditors on relationships between auditors and bank, including non-audit services, and discussing relationships with auditors.
• On an annual basis, meet separately with external auditors to discuss any matters that Committee or auditors believe should be discussed privately.

Compliance

• Review effectiveness of system for monitoring compliance with laws and regulations and results of management's investigation and follow-up (including disciplinary action) of any instances of noncompliance.
• Review findings of any examinations by regulatory agencies, and any auditor observations.
• Review process for communicating the code of conduct to company personnel, and for monitoring compliance therewith.
• Obtain regular updates from management regarding compliance matters.

Reporting Responsibilities

• Regularly report to Board of Directors concerning Committee activities, issues, and related recommendations.
• Provide an open avenue of communication between internal audit, external auditors, and Board of Directors.
• Review other reports bank issues that relate to Committee responsibilities.

Other Responsibilities

• Perform other activities related to Committee Charter as requested by Board of Directors.
• Institute and oversee special investigations as needed.
• Review and assess adequacy of Committee Charter annually, requesting Board approval for proposed changes; ensure appropriate disclosure as may be required by law or regulation.
• Confirm annually that all responsibilities outlined in this charter have been carried out.
• Evaluate Committee and individual member performance on a regular basis and report results to Corporate Governance Committee.
• Committee Chairman will read annual OCC exam to identify issues referenced in the Report which relate to oversight responsibilities of the Committee. Committee will discuss with management resolution of any identified issues or findings.