The Audit Committee (the "Committee") shall:
Provide assistance to the Board
of Directors in fulfilling its responsibility to the shareholders,
potential shareholders and investment community with respect to its
The quality and integrity of the corporation's financial
The corporation's compliance with legal and regulatory
The independent auditor's qualifications and
The performance of the corporation's internal audit
function and independent auditors.
Prepare the report that SEC rules require be included in
the corporation's annual proxy statement.
II. STRUCTURE AND OPERATIONS
The Committee shall be comprised of three or more members of the Board
of Directors, each of whom is determined by the Board of Directors to be
"independent" under the rules of the New York Stock Exchange,
Inc. and the Sarbanes-Oxley Act. No member of the Committee may serve on
the audit committee of more than three public companies, including the
corporation, unless the Board of Directors (i) determines that such
simultaneous service would not impair the ability of such member to
effectively serve on the Committee and (ii) discloses such determination in
the annual proxy statement.
All members of the Committee shall have a working familiarity with basic
finance and accounting practices (or acquire such familiarity within a
reasonable period after his or her appointment) and at least one member
must be a "financial expert" under the requirements of the
Sarbanes-Oxley Act. Committee members may enhance their familiarity with
finance and accounting by participating in educational programs conducted
by the corporation or by an outside consultant.
No member of the Committee shall receive compensation other than (i)
director's fees for service as a director of the corporation, including
reasonable compensation for serving on the Committee and regular benefits
that other directors receive and (ii) a pension or similar compensation for
The members of the Committee shall be appointed by the Board of
Directors and shall serve until such member's successor is duly elected and
qualified or until such member's earlier resignation or removal. The members
of the Committee may be removed, with or without cause, by a majority vote
of the Board of Directors.
Unless a Chairman is elected by the full Board of Directors, the members
of the Committee shall designate a Chairman by the majority vote of the
full Committee membership. The Chairman shall be entitled to cast a vote to
resolve any ties. The Chairman will chair all regular sessions of the
Committee and set the agendas for Committee meetings.
The Committee shall meet at least quarterly, or more frequently as
circumstances dictate. As part of its goal to foster open communication,
the Committee shall periodically meet separately with the director of the
internal auditing department and the independent auditors to discuss any
matters that the Committee or each of these groups believe would be
appropriate to discuss privately. In addition, the Committee should meet
with the independent auditors and management quarterly to review the
corporation's financial statements in a manner consistent with that
outlined in Section IV of this Charter. The Chairman of the Committee or
any member of the Committee may call meetings of the Committee. All
meetings of the Committee may be held telephonically.
Additionally, the Committee may invite to its meetings any director,
management of the corporation and such other persons as it deems
appropriate in order to carry out its responsibilities. The Committee may
also exclude from its meetings any persons it deems appropriate in order to
carry out its responsibilities.
IV. RESPONSIBILITIES AND
The following functions shall be the common recurring activities of the
Committee in carrying out its responsibilities outlined in Section I of
this Charter. These functions should serve as a guide with the
understanding that the Committee may carry out additional functions and
adopt additional policies and procedures as may be appropriate in light of
changing business, legislative, regulatory, legal or other conditions. The
Committee shall also carry out any other responsibilities and duties
delegated to it by the Board of Directors from time to time related to the
purposes of the Committee outlined in Section I of this Charter.
The Committee, in discharging its oversight role, is empowered to study
or investigate any matter of interest or concern that the Committee deems
appropriate. In this regard, the Committee shall have the authority to
retain outside legal, accounting or other advisors for this purpose,
including the authority to approve the fees payable to such advisors and
any other terms of retention.
The Committee shall be given full access to the corporation's internal
audit group, Board of Directors, corporate executives and independent
accountants as necessary to carry out these responsibilities. While acting
within the scope of its stated purpose, the Committee shall have all the
authority of the Board of Directors.
Notwithstanding the foregoing, the Committee is not responsible for
certifying the corporation's financial statements or guaranteeing the
auditor's report. The fundamental responsibility for the corporation's
financial statements and disclosures rests with management and the
Review with management and the
independent auditors prior to public dissemination the corporation's
annual audited financial statements and quarterly financial statements,
including the corporation's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and a discussion with the independent auditors of the
matters required to be discussed by Statement of Auditing Standards No.
Review and discuss with
management and the independent auditors the corporation's earnings press
releases paying particular attention to the use of any "pro
forma" or "adjusted" non-GAAP information. The Committee's
discussion in this regard may be general in nature (i.e., discussion of
the types of information to be disclosed and the type of presentation to
be made) and need not take place in advance of each earnings release.
Perform any functions required
to be performed by it or otherwise appropriate under applicable law,
rules or regulations, the corporation's by-laws and the resolutions or
other directives of the Board, including review of any certification
required to be reviewed in accordance with applicable law or regulations
of the SEC, review of the internal auditor's annual plan and oversight of
the Bank's risk management process and internal controls system.
Retain and terminate independent
auditors and approve all audit engagement fees and terms.
Inform each registered public
accounting firm performing financial audit work for the corporation that
such firm shall report directly to the Committee.
Oversee the work of any
registered public accounting firm performing financial audit work for the
corporation, including the resolution of any disagreement between
management and the auditor regarding financial reporting, for the purpose
of preparing or issuing an audit report or related work.
Approve in advance any
significant audit or non-audit engagement or relationship between the
corporation and the independent auditors, other than "prohibited
The following shall be "prohibited non-auditing services": (i)
bookkeeping or other services related to the accounting records or
financial statements of the audit client; (ii) financial information
systems design and implementation; (iii) appraisal or valuation services,
providing fairness opinions or preparing contribution-in-kind reports;
(iv) actuarial services; (v) internal audit outsourcing services; (vi)
management functions or human resources; (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
the Public Company Accounting Oversight Board prohibits through
Notwithstanding the foregoing, pre-approval is not necessary for minor
audit services if: (i) the aggregate amount of all such non-audit
services provided to the corporation constitutes not more than five
percent of the total amount of revenues paid by the corporation to its
auditor during the fiscal year in which the non-audit services are
provided; (ii) such services were not recognized by the corporation at
the time of the engagement to be non-audit services; and (iii) such
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 who are members of the Board to whom
authority to grant such approvals has been delegated by the Committee.
The Committee may delegate to one or more of its members the authority to
approve in advance all significant audit or non-audit services to be
provided by the independent auditors so long as it is presented to the
full Committee at a later time.
Review, at least annually, the
qualifications, performance and independence of the independent auditors.
In conducting its review and evaluation, the Committee should:
(a) Obtain and review a report by the
corporation's independent auditor describing: (i) the auditing firm's
internal quality-control procedures; (ii) any material issues raised by
the most recent internal quality-control review, or peer review, of the
auditing firm, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years, respecting one
or more independent audits carried out by the auditing firm, and any
steps taken to deal with any such issues; and (iii) to assess the
auditor's independence, all relationships between the independent auditor
and the corporation;
(b) Ensure the rotation of the lead audit
partner at least every five years, and consider whether there should be
regular rotation of the audit firm itself.
(c) Confirm with any independent auditor
retained to provide audit services for any fiscal year that the lead (or
coordinating) audit partner (having primary responsibility for the
audit), or the audit partner responsible for reviewing the audit, has not
performed audit services for the corporation in each of the five previous
fiscal years of that corporation.
(d) Take into account the opinions of
management and the corporation's internal auditors (or other personnel
responsible for the internal audit function).
In consultation with the
independent auditors, management and the internal auditors, review the
integrity of the corporation's financial reporting processes, both
internal and external. In that connection, the Committee should obtain
and discuss with management and the independent auditor reports from
management and the independent auditor regarding: (i) all critical
accounting policies and practices to be used by the corporation; (ii)
analyses prepared by management and/or the independent auditor setting
forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, including
all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with the
corporation's management, the ramifications of the use of the alternative
disclosures and treatments, and the treatment preferred by the
independent auditor; (iii) major issues regarding accounting principles
and financial statement presentations, including any significant changes
in the corporation's selection or application of accounting principles;
(iv) major issues as to the adequacy of the corporation's internal
controls and any specific audit steps adopted in light of material
control deficiencies; and (v) any other material written communications
between the independent auditor and the corporation's management.
Review periodically the effect
of regulatory and accounting initiatives, as well as off-balance sheet
structures, on the financial statements of the corporation.
Review with the independent
auditor (i) any audit problems or other difficulties encountered by the
auditor in the course of the audit process, including any restrictions on
the scope of the independent auditor's activities or on access to
requested information, and any significant disagreements with management
and (ii) management's responses to such matters. Without excluding other
possibilities, the Committee may wish to review with the independent
auditor (i) any accounting adjustments that were noted or proposed by the
auditor but were "passed" (as immaterial or otherwise), (ii)
any communications between the audit team and the audit firm's national
office respecting auditing or accounting issues presented by the
engagement and (iii) any "management" or "internal
control" letter issued, or proposed to be issued, by the independent
auditor to the corporation.
Review and discuss with the
independent auditor the responsibilities, budget and staffing of the
corporation's internal audit function.
Review periodically, with the
corporation's counsel, any legal matter that could have a significant
impact on the corporation's financial statements.
Discuss with management and the
independent auditors the corporation's guidelines and policies with
respect to risk assessment and risk management. The Committee should
discuss the corporation's major financial risk exposures and the steps
management has taken to monitor and control such exposures.
Set clear hiring policies for
employees or former employees of the independent auditors. At a minimum,
these policies should provide that any registered public accounting firm
may not provided audit services to the corporation if the CEO,
controller, CFO, chief accounting officer or any person serving in an
equivalent capacity for the corporation was employed by the registered
public accounting firm and participated in the audit of the corporation
within one year of the initiation of the current audit.
Establish procedures for: (i)
the receipt, retention and treatment of complaints received by the
corporation regarding accounting, internal accounting controls, or
auditing matters; and (ii) the confidential, anonymous submission by
employees of the corporation of concerns regarding questionable
accounting or auditing matters.
Prepare all reports required to
be included in the corporation's proxy statement, pursuant to and in
accordance with applicable rules and regulations of the SEC.
Report regularly to the full
Board of Directors with respect to any issues that arise with respect to
the quality or integrity of the corporation's financial statements, the
corporation's compliance with legal or regulatory requirements, the
performance and independence of the corporation's independent auditors or
the performance of the internal audit function and any other matters as
are relevant to the Committee's discharge of its responsibilities. The
Committee shall provide such recommendations as the Committee may deem
appropriate. The report to the Board of Directors may take the form of an
oral report by the Chairman or any other member of the Committee
designated by the Committee to make such report.
Maintain minutes or other
records of meetings and activities of the Committee.
V. ANNUAL PERFORMANCE
The Committee shall perform a review and evaluation, at least annually,
of the performance of the Committee and its members, including by reviewing
the compliance of the Committee with this Charter. In addition, the
Committee shall review and reassess, at least annually, the adequacy of
this Charter and recommend to the Board of Directors any improvements to
this Charter that the Committee considers necessary or valuable. The
Committee shall conduct such evaluations and reviews in such manner as it