REPUBLIC BANCORP, INC. AUDIT COMMITTEE CHARTER

 

(Adopted by the Board of Directors at a meeting held on March 18, 2004)

 

Purpose of the Audit Committee

 

The Audit Committee is appointed by the (the “Board”) of Republic Bancorp Inc. (the company) to assist the Board in monitoring the integrity of the financial statements of the Company, the independent public accountant’s qualifications, independence and performance, the performance of the Company’s Internal Audit function and the compliance by the Company with legal and regulatory requirements.

 

Composition of the Audit Committee

 

The Audit Committee shall be comprised of no fewer than three members of the Board.  The members of the Audit Committee shall meet the independence and experience requirement of the NASDAQ, Section 10A(m)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and regulations of the Securities and Exchange Commission (the “Commission”).  Upon determination by the Board that any member of the Board who meets the independence and experience requirements described in the preceding sentence fully qualifies as an “audit committee financial expert” as defined by the Commission, at least one such member will be appointed to the Audit Committee.  Audit Committee members shall not serve on the audit committees of more than two other public companies.  The members of the Audit Committee shall be appointed by the Board and may be replaced or removed with or without cause by the Board.  Resignation or removal from the Board, for whatever reason, shall automatically and without any further action constitute resignation or removal, as applicable from the Audit Committee.  Any vacancy on the Audit Committee, occurring for whatever reason may be filled only by the Board.  

 

Compensation

 

A member of the Audit Committee may not, other than in his or her capacity as a member of the Audit Committee, the Board or any other committee established by the Board, receive directly or indirectly from the Company any consulting, advisory or other compensatory fee from the Company.  A member of the Audit Committee may receive additional directors’ fees to compensate such member for the significant time and effort expended by such member to fulfill his or her duties as an Audit Committee member.

 

Meetings of the Audit Committee

 

The Audit Committee shall meet four times annually, or more frequently if circumstances dictate, to carry out its responsibilities under this charter, including without limitation to discuss with management the annual audited financial statements and quarterly financial results and the required certifications of the CEO and CFO.  At least annually, the Audit Committee should meet separately

 

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with the internal auditor and the independent external auditor, without any members of management being present, to discuss any matters that the Audit Committee or any of these persons or firms believes should be discussed privately.

 

The Audit Committee may request any officer or employee of the Corporation, or the Corporation’s independent counsel, or independent external auditors to attend a meeting of the Audit Committee or to meet with any members of or consultants to the Audit Committee.

 

A majority of the members of the Audit Committee shall constitute a quorum for purposes of holding a meeting and the Audit Committee may act by a vote of a majority of the members present at such meeting.  In lieu of a meeting, the Audit Committee may act by unanimous written consent.

 

Members of the Audit Committee may participate in a meeting of the Audit Committee by means of conference call or similar communications equipment by means of which all persons participating in the meeting can hear each other.

 

Responsibilities of the Audit Committee

 

The Audit Committee shall prepare the report required by the rules of the Commission to be included in the Company’s annual proxy statement.

 

The Audit Committee shall have the sole authority to appoint, retain, terminate or replace the independent public accountant (subject, if applicable, to shareholder ratification).  The Audit Committee shall be directly responsible for the compensation and oversight of the work of the independent public accountant (including resolution of disagreements between management and the independent public accountant regarding financial reporting) engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company.  The Audit Committee may consult with management in fulfilling these duties, but may not delegate these responsibilities to management.  The Audit Committee shall instruct the independent public accountant that the independent public accountant shall report directly to the Audit Committee.

 

The Audit Committee shall pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent public accountant, subject to the de minimus exceptions for non-audit services described in Section 10A(1)(B) of the Exchange Act which are approved by the Audit Committee prior to the completion of the audit.  The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting.

 

The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain independent legal, accounting or other advisors, and, if such counsel or other advisors are engaged, shall determine the compensation or fees payable to such counsel or other advisors.  The Audit Committee is authorized to incur such ordinary administrative expenses as are necessary or appropriate in carrying out its duties.  The Company shall provide for appropriate funding, as

 

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determined by the Audit Committee, for payment of compensation to the independent public accountant for the purpose of rendering or issuing an audit report and to any advisors engaged by the Audit Committee and for any ordinary administrative expenses.

 

The Audit Committee shall make regular reports to the Board.  The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.  The Audit Committee shall annually review the Audit Committee’s own performance.

 

The Audit Committee shall conduct an appropriate review of all related party transactions for potential conflict of interest situations on an ongoing basis, and the approval of the Audit Committee shall be required for all such transactions (other than transactions governed by Regulation O of the Board of Governors of the Federal Reserve System, which have received the approval of the Board of Directors of one of the Company’s bank subsidiaries).

 

Financial Statement and Disclosure Matters

 

The Audit Committee shall:

 

Review and discuss with management and the independent public accountant the annual audited financial statements, including disclosures made in management’s discussion and analysis.

 

Review and discuss with management and the independent public accountant the Company’s quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent public accountant’s review of the quarterly financial statements, disclosures made in management’s discussion and analysis, and such issues as may be brought to the Audit Committee’s attention by the independent public accountant pursuant to Statement on Auditing Standards No. 100.

 

Discuss with management and the independent public accountant any significant financial reporting issues that have arisen and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles, any major issues as to the adequacy of the Company’s internal control over financial reporting and any special steps adopted in light of material control deficiencies.

 

Review and discuss quarterly reports required to be delivered by the independent public accountants pursuant to Section 10A(k) of the Exchange Act on:

 

                  All critical accounting policies and practices

                  All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent public accountant.

                  Other material written communications between the independent public accountant and management, such as any management letter or schedule of unadjusted differences.

 

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Discuss with management the Company’s earnings press releases, including the use of “pro forma” or “adjusted” non-GAAP information as permissible, as well as financial information and earnings guidance provided to analysts and rating agencies.  Such discussion may be done generally (to consist of discussing the types of information to be disclosed and the types of presentation to be made).

 

Discuss with management and the independent public accountant the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company’s financial statements.

 

Discuss with management, the internal auditor and the independent public accountant the major financial risks and exposures and the steps management has taken to monitor, minimize or control such risks or exposures, including the Company’s risk assessment and risk management policies.

 

Discuss with the independent public accountant the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, restriction on the scope of activities or access to requested information, and any significant disagreements with management.

 

Review and discuss with the independent public accountant (outside of the presence of management) how the independent public accountant plans to handle its responsibilities under the Private Securities Litigation Reform Act of 1995, and request assurance from the auditor that Section 10A of the Private Securities Litigation Reform Act of 1995 has not been implicated.

 

Review disclosures made to the Audit Committee by the Company’s CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, within the time periods specified in the Commission’s rules and forms and any fraud involving management or other employees who have a significant role in the Company’s internal control over financial reporting.  In the event of financial information restatement due to material noncompliance as a result of misconduct, the Audit Committee will establish procedures that address forfeiture of bonuses and profits for the CEO/CFO.

 

Based on the Audit Committee’s review and discussions (1) with management of the audited financial statements, (2) with the independent public accountant of the matters required to be discussed by SAS 61, and (3) with the independent public accountant concerning the independent public accountant’s independence, make a recommendation to the Board as to whether the Company’s audited financial statements should be included in the Company’s Annual Report on Form 10-K for the last fiscal year.

 

Oversight of the Company’s Relationship with the Independent Public Accountant

 

The Audit Committee shall request that the independent public accountant provide the Audit

 

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Committee with the written disclosures and the letter required by Independence Standards Board Standard No. 1, as modified or supplemented, require that the independent public accountant submit to the Audit Committee on a periodic basis a formal written statement delineating all relationships between the independent public accountant and the Company, discuss with the independent public accountant any disclosed relationships or services that may impact the objectivity and independence of the independent public accountant, and based on such disclosures, statement and discussion take or recommend that the Board take appropriate action in response to the independent public accountant’s report to satisfy itself of the independent public accountant’s independence.

 

The Audit Committee shall evaluate the independent public accountants’ qualifications, performance and independence, and shall present its conclusions with respect to the independent public accountants to the full Board.  As part of such evaluation, at least annually, the Audit Committee shall:

 

                  Obtain and review a report from the independent public accountant regarding (a) the independent public accountant’s internal quality-control procedures, (b) any material issues raised by the most recent internal quality-control review, or peer review, of the 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 firm, (c) any steps taken to deal with any such issues and (d) all relationships between the independent public accountant and the Company.

 

                  Evaluate the qualifications, performance and independence of the independent public accountant and the lead partner (and the Audit Committee may review and evaluate the performance of other members of the independent public accountant’s audit staff), including considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence, and taking into account the opinions of management and internal auditors.

 

The Audit Committee shall ensure the rotation of the lead audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law.

 

The Audit Committee may recommend to the Board policies for the Company’s hiring of employees or former employees of the independent public accountant who participated in any capacity in the audit of the Company.

 

The Audit Committee may meet with the independent public accountant prior to the audit to discuss the scope and staffing of the annual audit plan.

 

The Audit Committee shall:

 

Oversight of the Company’s Internal Audit Function

 

                  Ensure that the internal audit department functionally reports directly to the Audit

 

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Committee.

                  Review the appointment and replacement of the chief audit executive.

                  Review the significant reports to management prepared by the internal auditing department and management’s responses.

                  Discuss with the independent public accountant and management the internal audit department responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audit.

 

Oversight of the Company’s SEC Compliance Function

 

                  Obtain from the independent public accountant assurance that Section 10A(b) of the Exchange Act has not been implicated.

                  Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

                  Discuss with management and the independent public accountant any correspondence with regulators or governmental agencies and any published reports which raise material issues regarding the Company’s financial statements or accounting policies.

                  Discuss with the Company’s General Counsel legal matters that may have a material impact on the financial statements or the Company’s compliance policies.

                  Perform any other activities consistent with this charter, the Corporation’s Bylaws and governing laws and regulations as the Audit Committee or the Board deems necessary or appropriate.

 

Limitation of Audit Committee’s Role

 

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations.  These are the responsibilities of management and the independent public accountant.   In addition, it is not the duty of the Audit Committee to conduct investigations or to ensure compliance with laws and regulations.