SANDY SPRING BANCORP, INC.
SANDY SPRING BANK

JOINT AUDIT COMMITTEE CHARTER

I.      Membership

 

A.

The Audit Committee (the "committee") of the Boards of Directors of Sandy Spring Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, Sandy Spring Bank (the “Bank”) shall consist of not less than three members of the Board. Members of the committee shall be "independent” as defined in applicable law, regulations of the Securities and Exchange Commission ("SEC"), the Federal Deposit Insurance Act and related regulations (the “FDIA”), and the listing standards of the NASDAQ Stock Market, Inc. (“Listing Standards”). Members of the committee shall also meet all other applicable requirements of the SEC, FDIA, and Listing Standards for financial, accounting or related expertise. The committee will include one or more members having the qualifications ofan audit committee financial expert, when and as required by applicable SEC regulations or the Listing Standards except as determined by the Board.

 

 

 

 

 

B.

Members of the committee shall be appointed by vote of a majority of the independent directors of the Board for one-year terms. The independent directors of the Board shall designate one member to serve as Chair of the committee.

 

 

 

 

 

C.

Members of the committee shall serve until their resignation, retirement or removal by the Board or until their successors are appointed. No member of the committee shall be removed except by majority vote of the independent directors of the full Board then in office.

II.      Purpose

 

The purpose of the committee is to:

 

 

 

 

A.

assist the Board’s oversight of (1) the Company's accounting and financial reporting processes, (2) the audits of the Company’s financial statements, (3) the Company's compliance with legal and regulatory requirements, (3) the independent auditor's qualifications and independence, and (4) the performance of the Company's internal audit function and independent auditors;

 

 

 

 

 

B.

prepare the report required by the SEC's proxy rules to be included in the Company's annual proxy statement; and

 

 

 

 

 

C.

perform the duties and responsibilities of the committee as specified by law, regulation, the Listing Standards and this charter.

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III.      Meetings

 

The committee shall meet from time to time at the call of the Chair or upon the request of any member, but in no event shall it meet less than four times during each fiscal year of the Company. A majority of the members of the committee shall constitute a quorum.

 

 

 

 

The Committee shall establish reasonable rules for the conduct of meetings and required notice of meetings, subject to oversight by the Board of Directors. The Committee shall meet by conference call or in person, and also may act by consent and, pursuant to section IV.B.3 of this charter, by delegation. Minutes of the Committee are not required, but may be kept. Reports and recommendations to the Board of Directors shall be written. Meetings of the Company and Bank Committees shall be held jointly. Each Board has authority with respect to its Committee. The Committees and the Boards are referred to in the singular in this charter from time to time for convenience.

IV.      Duties and Responsibilities

          

 

A.

Independent Auditors- appointment, compensation, funding and oversight

 

 

 

 

 

 

1.

The independent auditors are ultimately accountable to the Board and the committee, as representative of the shareholders. The committee is directly responsible for the appointment, retention, compensation, evaluation and termination of the Company's independent auditors. The committee is responsible for the resolution of any disagreements between management of the Company and the independent auditors regarding financial reporting. The independent auditors shall report directly to the committee.

 

 

 

 

 

 

 

2.

At least annually, the committee shall review with management and the independent auditors the scope of services required by the audit, major risk factors, significant accounting policies, audit conclusions regarding significant accounting estimates, and the compliance of the audit with the audit procedures required by Section 10A of the Securities Exchange Act of 1934 relating to detection of illegal acts, identification of related party transactions, and evaluation of the Company as a going concern.

 

 

 

 

 

 

 

3.

The committee shall discuss with management and the independent auditors any illegal acts reported by them, and shall take, or shall recommend that the Board take, appropriate remedial action.

 

 

 

 

 

 

 

4.

The Company shall provide for appropriate funding, as determined by the committee, for payment of compensation to the independent auditors employed by the Company for the purpose of rendering an audit report or performing other audit, review, or attest services for the Company and to any advisors employed by the committee and for payment of ordinary administrative expenses of the committee that are necessary or appropriate in carrying out its duties.

 

 

 

 

 

 

 

5.

The committee will also receive and consider a formal written statement from the independent auditor delineating all relationships between the auditor and the Company, as required by Independent Standards Board Standard No. 1, and shall actively engage in a dialogue with the independent auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditors and shall take, or recommend that the board take, appropriate action to oversee the independence of the independent auditor.

 

 

 

 

 

 

 

6.

After review of the statement described in paragraph 3, above, and based on a review of the independent auditors' work through the year, the committee shall evaluate the independent auditors' qualification, performance and independence. This evaluation shall include the evaluation of the lead partner and shall take into account the opinions of management and the Company's internal auditor. The committee shall present its conclusions to the full Board.

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7.

The committee shall meet separately, periodically, with management, with the internal auditors and with the independent auditors.

 

 

 

 

 

 

 

8.

The committee shall review with the independent auditors any audit problems or difficulties and management's response. Among the items the committee may wish to review include, without limitation, any restrictions on audit scope or access to information, any significant disagreements or accounting adjustments proposed by the independent auditor but "passed" by management.

 

 

 

 

 

 

 

9.

The committee shall set clear hiring policies for employees or former employees of the independent auditors.

 

 

 B.

Independent Auditors- audit and non-audit services

 

 

 

 

 

 

1.

All auditing services (which may entail providing comfort or “agreed upon procedures” letters in connection with securities underwritings) and permitted non-audit services, other than as provided by paragraph 2, below, provided to the Company by its independent auditors shall be preapproved by the committee. Approval of the committee may be obtained by majority vote of the committee members at any meeting of the committee or by written consent of a majority of committee members without a meeting of the committee. Approval authority may also be delegated by the committee to a committee member, as provided in paragraph 3.

 

 

 

 

 

 

 

2.

Pre-approval under the preceding paragraph is not required with respect to the provision of non-audit services if:

 

 

 

 

 

 

 

 

 

(i)

the aggregate amount of all such non-audit services provided to the Company constitutes not more than 5 percent of the total amount of revenues paid by the Company to its independent auditors during the fiscal year in which the non-audit services are provided; and

 

 

 

 

 

 

 

 

 

(ii)

such services were not recognized by the Company at the time of the engagement to be non-audit services; and

 

 

 

 

 

 

 

 

 

(iii)

the non-audit services are promptly brought to the attention of the committee and approved prior to the completion of the audit by the committee or by one or more members of the committee to whom authority to grant such approval has been delegated by the committee.

 

 

 

 

 

 

 

3.

The committee may delegate to one or more designated members of the committee the authority to grant preapprovals for audit and non-audit services. The decisions of any member to whom authority is delegated under this paragraph shall be presented to the full committee at the next subsequent meeting of the committee.

 

 

 

 

 

 

 

4.

The Company's independent auditors shall not provide any prohibited non-audit service to the Company. Prohibited non-audit services are defined as follows:

 

 

 

 

 

 

 

 

 

(i)

bookkeeping or other services related to the accounting records or financial statements of the Company;

 

 

 

 

 

 

 

 

 

(ii)

financial information systems design and implementation;

 

 

 

 

 

 

 

 

 

(iii)

appraisal or valuation services, fairness opinions, or contribution-in-kind reports;

 

 

 

 

 

 

 

 

(iv)

actuarial services;

 

 

 

 

 

 

 

 

(v)

internal audit outsourcing services;

 

 

 

 

 

 

 

 

(vi)

management functions or human resources;

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 (vii)

broker or dealer, investment adviser, or investment banking services;

 

 

 

 

 

 

 

 

 (viii)

legal services and expert services unrelated to the audit; and

 

 

 

 

 

 

 

 

(ix)

any other service that is determined by the Public Company Accounting Oversight Board to be impermissible.

 

 

 

 

 

 

 

5.

The Company's independent auditors may be engaged by the committee to perform any non-audit service, including tax services, that is not described in paragraph 4, if that non-audit service is approved in advance by the committee in accordance with paragraph 1.

 

 

 

 

 

 

 

6.

Approval of any non-audit service to be performed by the independent auditor shall be disclosed in the Company's periodic reports, as required under applicable SEC regulation.

 

 

 

 

 

 

 

7.

The committee may, in its discretion, seek exemption authority from the Public Company Accounting Oversight Board ("PCAOB") to permit the independent auditors to perform other non-audit services, subject to applicable law and SEC and PCAOB regulation.

 

 

C.

Financial Reporting Process; Risk Assessment

 

 

 

 

 

 

1.

The Company's independent auditors shall timely report to the committee:

 

 

 

 

 

 

 

 

(i)

all critical accounting policies and practices to be used;

 

 

 

 

 

 

 

 

(ii)

all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management of the Company, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors; and

 

 

 

 

 

 

 

 

 

(iii)

other material written communications between the independent auditors and the management of the Company, such as any management letter or schedule of unadjusted differences.

 

 

 

 

 

 

 

2.

The committee shall review and discuss the Company’s annual audited financial statements and unaudited quarterly financial statements with management and the independent auditors, and the related Management's Discussions and Analysis of Financial Conditions and Results of Operations, prior to their filing in Form 10-K or Form 10-Q.

 

 

 

 

 

 

 

3.

The committee shall recommend to the Board whether the audited financial statements should be included in the Company's Form 10-K.

 

 

 

 

 

 

 

4.

The committee shall prepare the report required by the rules of the SEC to be included in the Company's proxy statement

 

 

 

 

 

 

 

5.

Each year, the committee shall review with management the basis for the annual Management Reports regarding the annual financial statements, internal control structure, procedures for financial reporting, and compliance with laws and regulations relating to safety and soundness required by FDIA; and with the independent auditors the basis for their reports required by the FDIA.

 

 

 

 

 

 

 

6.

The committee shall discuss generally the types of information and type of presentation to be made in earnings press releases as wellas financial information and earnings guidance provided to analysts and rating agencies. The committee need not discuss in advance each earnings release or each instance in which the Company may provide earnings guidance.

 

 

 

 

 

 

 

7.

The committee shall review with management and legal counsel, legal and regulatory matters that may have a material impact on the financial statements.

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8.

The committee shall discuss policies with respect to risk assessment and risk management.

 

 

 

 

 

D.

Conflicts of Interest

 

 

 

 

 

The Committee shall establish procedures for the review of all related party transactions and potential conflicts of interest.

 

 

 

 

 

 E.

Complaint Procedures

 

 

 

 

 

The committee shall establish procedures for (i) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (ii)the confidential, anonymous submission by employees of the Company, of concerns regarding questionable accounting or auditing matters, when and as required by law or the Listing Standards.

          

 

F.

Internal Audit

 

 

 

 

 

1.      The committee shall have direct responsibility for approving the appointment of any accounting firm engaged to perform internal audit functions, and reviewing the fees to be paid to such firm.

 

 

 

 

 

 

2.      The committee shall review and approve the scope of internal audits and significant reports by the internal audit function, and reviewing the effectiveness of the internal audit function in monitoring the system of internal controls.

 

 

 

 

G.      Counsel and Advisers

 

 

 

 

 

 

The committee shall have the authority to engage independent counsel and other advisers, as it determines necessary to carry out its duties.

 

 

 

 

 

 H.

Reports and Evaluations

 

 

 

 

 

 

1.

The Chair of the committee shall report to the Board at the Board meeting next following a committee meeting, and shall present such recommendations for action by the Board, as the committee shall deem appropriate.

 

 

 

 

 

 

 

 

 

 

 

2.

The committee shall conduct an annual evaluation of the committee and shall report the results of such evaluation to the Board.

 

 

 

 

 

 

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