Investor Relations
Mercantile Bancorp, Inc. Audit Committee Charter
The primary purpose of the Audit Committee ("the Committee") of Mercantile Bancorp, Inc. ("the Company") is to assist the Board of Directors ("the Board") in fulfilling its responsibility to oversee management's conduct of the Company's financial reporting process. This is to be accomplished through overseeing the integrity of financial reports and other financial information provided by the Company to governmental or regulatory bodies, the public or other users thereof, the Company's systems of internal accounting and financial controls, the annual independent audit of the Company's financial statements, the Company's legal compliance and ethics programs as established by management and the Board, and the Company's compliance with laws, regulations, and policy.
In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities, and personnel of the Company and to retain outside counsel, auditors, or consultants, or incur other expenses for this purpose. The Committee will use and receive appropriate funding for the payment of compensation of outside legal, accounting, or other advisors and staff employed by the Committee, as determined necessary by the Committee to carry out its duties. Any persons engaged will work directly for the Committee, and will not be accountable to Company management.
The Board and Committee are in place to represent the Company's shareholders. The Company's outside auditor is ultimately accountable to the Committee. The Committee shall have the ultimate authority and responsibility to select, evaluate, compensate, and, where appropriate, replace the outside auditor.
The Committee shall review and reassess the adequacy of this Charter and the Internal Audit Policy on an annual basis and recommend any proposed changes to the full board for approval.
MEMBERSHIP
The Committee members shall be appointed by the Board of Directors annually, will serve at the discretion of the Board of Directors, and will be comprised of not less than three (3) independent directors of the Board. Members shall meet the following criteria:
1. The Committee's composition shall meet the independence and experience requirements of the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), the NYSE Amex, LLC ("AMEX") and the Securities and Exchange Commission ("SEC"). Members will have no relationship to the Company that may interfere with the exercise of their independence from management and the Company.
2. Each member will be able to read and understand fundamental financial statements, including the Company's balance sheet, income statement, and cash flow statement.
3. At least one member of the Committee shall have had past employment experience in finance or accounting, requisite certification in accounting, or other comparable experience or background that results in the individual's financial sophistication. This could include having been a chief executive officer, chief financial officer, or other senior officer with financial oversight responsibilities. This member shall qualify as an "Audit Committee financial expert" as defined by the SEC rules and regulations.
MEETINGS
The committee shall meet at least quarterly with the Company's President and CEO, EVP CFO, VP Internal Audit VP Loan Review/Compliance, SVP Risk Management, and external auditors. The Committee shall meet in executive session for a portion of each meeting, with participants, as it may deem necessary.
At any meeting of the Committee, a majority of the Committee shall constitute a quorum and affirmative vote of a majority of that quorum shall be necessary to pass any resolution.
Telephone and special meetings can be called as necessary. The same quorum and minute requirements will apply to these meetings, as well.
The Committee shall report regularly to the Board of Directors. Minutes of all meetings of the Committee will be submitted to the Board of Directors. The minutes of the meeting shall contain a record of the persons present, significant matters discussed, and resolutions adopted. Minutes of the meetings shall be preserved by the Company in minute books in the custody of the Company's Internal Auditor.
KEY RESPONSIBILITIES
The Audit Committee shall:
1. Facilitate communication among the Board of Directors, the Company's internal and external auditors, and Company management. The committee shall meet and review with management, internal and external auditors the following:
a. The scope and plan, and coordination of audit efforts, to include staffing and supervision. Any changes required in the planned scope of the audit;
b. The adequacy of internal controls that could significantly affect the Company's financial statements;
c. Review and discuss with management and the independent auditor the annual audited financial statements, including disclosures made in management's discussion and analysis, and recommend to the Board whether the audited financial statements should be included in the Company's Form 10-K;
d. The Audit Committee Chair, the Chief Executive Officer, and the Chief Financial Officer should review and discuss with management and the independent auditor the Company's quarterly financial statements prior to the filing of the Company's Form 10-Q, including the results of the independent auditor's procedures with respect to the quarterly financial statements;
e. Audit problems, including differences in opinion in accounting and reporting, including any disagreements with management or restrictions on the scope of activities or access to requested information and responses thereof;
f. Critical accounting policies and practices and any analysis prepared of significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements. Review alternative accounting treatments, reasons for selecting such policies, procedures or analysis and their impact on the fairness of the Company's financial statements;
g. Significant estimates made by management in preparation of the financial reports, all alternative treatments of financial information within generally accepted accounting principals and ramifications of the use of such alternative disclosures and treatments. The auditor's reasoning in determining appropriateness of changes in accounting practices and policies, estimates, judgments, uncertainties, and unusual transactions relating to significant financial statement items.
h. Off-balance sheet transactions, joint ventures, contingent liabilities or derivative transactions and their impact on the fairness of the financial statements;
i. Any accounting adjustments that were noted or proposed by the auditors, but were passed on (as immaterial or otherwise.);
j. Material communications between auditors and management, including any management letters;
k. Material legal matters that may impact the financial statements; and
l. The overall opinions of management and the independent auditors on the fairness of the financial statements. The auditor's judgments about the quality, not just the acceptability of accounting principals applied in the Company's financial reporting, including consistency of accounting policies and clarity and completeness of financial statements and disclosures.
2. The Committee shall review with the Chief Executive Officer and Chief Financial Officers, the certifications that are required under section 302 and 906 of Sarbanes-Oxley.
3. The committee shall discuss generally with management concerns regarding earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.
4. The Committee shall have the sole authority to appoint, retain, or replace the independent auditor (subject, if applicable, to shareholder ratification). The Committee shall be directly responsible for the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditor shall report directly to the Committee. The Committee shall obtain from the auditors information regarding the auditor's compliance with applicable independence requirements, including auditor rotation rules, scope of services rules, and audit compensation rules. In addition, the independent auditor's internal quality-control procedures and issues raised by recent review shall be reviewed and discussed.
5. Review with the independent auditor other communications as required by Statement of Auditing Standards (SAS) No. 61 as amended by SAS No. 90 relating to the conduct of the annual audit.
6. Review the scope and general extent of the external auditor's annual audit plan as well as any significant changes to the audit plan. Monitor the accomplishments of the audit plan. Review management's response and implementation of corrective action to findings. Ensure a risk management approach is applied to the determination of audit scope.
7. The Committee will pre-approve non-audit services to be performed in independent audits. This may include establishment of a pre-approved category of services. One or more Committee members may be delegated to approve such services, provided timely reporting is made to the full Committee.
8. Prepare the report required by the rules of the SEC to be included in the Company's annual proxy statement.
9. Ensure no restrictions are placed on either the internal or external auditors' scope in completion of their evaluations.
10. Inquire and discuss with management, independent auditors, and internal auditors issues related to risk assessment and risk management, including major financial risk and the steps management has taken to monitor and control such risk.
11. Review security for computer systems and back-up systems, through the contracted external audit reviews performed over Data Processing Operations and Security.
12. The Committee will set hiring polices for employees or former employees of the independent auditors. These policies will take into account auditor independence in hiring such personnel.
13. Review managements monitoring of compliance with the Company's Standard of Conduct and Code of Ethics. Be aware and, if necessary, oversee any investigations of conflict of interest or other unethical conduct that has occurred.
14. The Committee is responsible for establishing procedures to promote and protect employee reporting of suspected fraud or wrongdoing through the receipt, retention, and treatment of complaints from Company employees on accounting, internal accounting controls, or auditing matters, as well as for confidential, anonymous submissions by Company employees of concerns regarding questionable accounting or auditing matters. This includes protecting reporting employees from retaliation.
15. Review and approve all related party transactions, including, but not limited to, those disclosable under Item 404(a) of Regulation S-K.
16. Review and evaluate the Company's loan portfolio, including but not limited to, the status, risk, and documentation thereof and adequacy of reserves thereof.
17. The Committee shall review the appointment, performance, retention and replacement of the Company's Internal Auditor and internal audit staff annually. A review should be performed of the significant reports to management prepared by the internal audit department and management's responses and follow-ups to these reports. Also, discuss with the independent auditor and management the internal audit department responsibilities, budget, and staffing, and any recommended changes in the planned scope of the internal audit. Also, ensure no restrictions are placed on the internal audit staff in carrying out their duties.
18. The Committee may engage independent counsel and other advisors and establish compensation for such advisors, as it determines necessary to carry out its duties.
19. Annually, the Committee shall evaluate its effectiveness in performing its duties and responsibilities.
Written record of all communications will be maintained. Periodically, separate executive session meetings may be held with each individual party.
COMPENSATION
Members of the Committee shall receive such fees, if any, for their services as Committee members, as may be determined by the Board of Directors in its sole discretion. Such fees may include retainers or per meeting fees.
Members of the Committee may not receive any compensation from the Company except the fees that they receive for service as a member of the Board of Directors or any committee thereof.
AUDIT COMMITTEE SERVICES AGREEMENT WITH AFFILIATES
Audit Committee Services Agreements detailing the duties of the Committee for the subsidiaries of the Company will be obtained for each subsidiary overseen by the Committee. Agreements will be approved by the subsidiary bank boards and signed by each subsidiary bank president and the Committee chair.
The establishment of subsidiary bank Audit Committees will not replace duties and responsibilities of MBI Audit Committee.
Charter of the Audit Committee of the Board of Directors of Mercantile Bancorp, Inc.
Adopted June 21, 2004; Most Recently Amended and Re-adopted June 16, 2009.
Investor Relations
